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|   | (a) | "Minimum Guarantee" means the minimum amount committed to producer which is conditional upon Producer satisfying all of its obligations hereunder, Daval agrees to pay One Hundred Thousand Canadian dollars ($100,000) as a minimum guarantee for the Film, recoupable in accordance with the terms, as more particularly set out in Article 8.1 herein; |
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|   | (b) | "Agreement" means this distribution agreement, including the schedules hereto, and any and all amendments made by written agreement among the parties hereto; |
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|   | (c) | "Ancillary Rights" means all merchandising rights, commercial tie-in rights, soundtrack album rights, interactive, multi-media and electronic rights, toys, home video rights, theme park and virtual reality-type entertainment rights and all other ancillary rights in and to the Picture and all characters, situations, objects or events depicted, described, portrayedor appearing therein in all media now or hereafter known; |
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|   | (e) | "Cash Flow Schedule" means the cash flow schedule for the Picture which is attached hereto as Schedule "B"; |
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|   | (f) | "Collateral" means all Distribution Rights in and to the Picture, and all proceeds and collections thereof, all guarantees and other security therefor, or any such instruments or chattel paper and the proceeds thereof', Producer's share of Net Receipts and all of Producer's books and records relating to Collateral; |
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|   | (g) | "Delivery" means the receipt and acceptance by the Distributor of the Delivery Materials; |
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|   | (h) | "Delivery Date" means on or about March 30, 2009, or such other date as may be mutually agreed to by the parties; |
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|   | (i) | "Delivery Materials" means the delivery materials described in Schedule “A” hereto to be delivered to the Distributor; |
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|   | (k) | "Distribution Rights" means the right to lease, license, distribute, sub-distribute and otherwise exploit the Picture, all as more particularly described in Article 2.1 herein; |
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|   | (1) | "Future Productions" means all sequels, prequels, remakes or television movies based on or adapted for or in any way derived from the Picture; |
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|   | (m) | "Gross Receipts" means all monies actually received by the Distributor or Distributor's parents, subsidiaries or affiliates or by any third party for the benefit of or at the direction of the Distributor derived from the exhibition, distribution and exploitation of the Picture or any rights therein or elements thereof in the Territory, or refundable advancesand deposits until earned or forfeited. Without limiting the generality of the foregoing, Gross Receipts shall include any cable retransmission royalties from the exploitation of the Picture and proceeds of litigation with respect thereto. |
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|   | (i)any amounts collected by any author's rights organization, performing rights society or governmental agency which amounts are paid to authors, producers or distributors and which arise from royalties, compulsory license, cable re-transmission income, tax credits and/ or rebates, exhibition surcharges or the like, which sums, as between Producer and Distributor shall be Producer's property; |
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|   | (ii)recoupable advances or security deposits until such time as the same are earned or forfeited, except if any such advances or deposits are non-returnable/non-recoupable advances or deposit, in which event such non-returnable/non-recoupable advances shall be credited to Gross Receipts at the time of receipt by Distributor; |
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|   | (iii) | any amounts collected and paid by Distributor as taxes or for payment of taxes such as admission, sales and value-added taxes, provided, however, that, to the extent any such monies are collected by Distributor and included in Gross Receipts because they have not been paid to the appropriate authorities as of the time Distributor renders an accounting statement to Producer hereunder, and such sums are subsequentlypaid to the appropriate authorities, such sums shall be deducted as Distribution Expenses. |
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|   | (n) | "Incidental Rights" means, subject to the terms and conditions of this Agreement, the following rights: |
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|   | (i) | To use the title or titles by which the Picture is or maybe known or identified and to change the title of the Picture, subject to obtaining proper legal clearance for any changes at Distributor's sole expense, subject to Producer's approval, such approval not to be unreasonably withheld. |
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|   | (ii) | To permit, authorize and license others to exercise and sub-license all or any of Distributor's rights and licenses hereunder and to distribute, exhibit, advertise, publicize and exploit the Picture under any term or terms and in such manner as Distributor may deem proper or expedient. |
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|   | (iii) | To make such dubbed or subtitled versions of the Picture and the trailer thereof, including but not limited to, cut-in, synchronized and superimposed versions thereof in any and all languages used in the Territory as Distributor may deem advisable and the right to use any such versions now in existence or hereafter prepared by Producer or any of its licensees. |
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|   | (iv) | To permit commercial messages to be broadcast or telecast before, during and after exhibition of the Picture. |
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|   | (v)To use the name, service mark(s) and trademark(s) of Distributor or any of its subsidiaries on the positive prints of the Picture and in the trailer thereof and in all advertising and publicity relating thereto, in such manner, position, form and substance as Distributor may elect. Distributor shall also have the right to indicate on all positive prints of the Picture and in the trailer and in other advertisingand publicity that it or one of its sub-distributors is the distributor of the Picture in such manner and position and by the use of such words and phrases as it shall determine. |
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|   | (vi) | To make such changes, additions (including, but not limited to, narration), alterations, cuts, interpolations and eliminations as Distributor may require in order to adapt and to make the Picture suitable for exhibition in any and all parts of the Territory, to meet time segment requirements to television stations, to comply with the censorship requirements of any governmental body or to comply with any legal impedimentsto the exhibition of the Picture. Nothing herein shall be deemed to relieve Distributor from the warranties and representations made herein. |
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|   | (vii) | To publicize, advertise and exploit the Picture throughout the Territory during the Term and to cause or permit others to do so, including without limitation, the exclusive right in the Territory in connection with, and for the purpose of advertising, publicizing and exploiting the Picture to: |
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|   | (a) | publish and to license and authorize others to publish in any language used in the Territory and in such forms as Distributor may deem advisable synopses, summaries, resumes and stories of and excerpts [not to exceed seven thousand five hundred (7,500) words] from the Picture and from any literary or dramatic material included in the Picture or upon which the Picture is based, in newspapers, magazines, trade periodicals,booklets, pressbooks and any other periodicals and in any and all other types of advertising and publicity now known or hereafter created or devised, in any and all media; |
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|   | (b) | broadcast by radio and television and to license and authorize others to so broadcast, without further financial consideration, in any language used in the Territory, the Picture or any parts or portions thereof, and any literary or dramatic material included in the Picture or upon which the Picture is based, and to use in conjunction therewith any other literary, dramatic or musical material; |
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|   | (viii) | To cause trailers of the Picture to be made (should Distributor desire to make trailers) and prints thereof and of the Picture to be manufactured, exhibited and distributed by every means, method and device now or hereafter known. Producer shall be provided with a copy of all such trailers. |
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|   | (ix) | To order and procure from Producer directly from any laboratory holding pre­print or other material (including any dubbed, titled, narrated or other versions thereof) of the Picture, at Distributor's cost, such number of release prints, sound recordings, pre-print material and any part or parts of any thereof as Distributor may, from time to time, require, in any and all sizes and gauges, for the exercise ofits rights hereunder, and to cause the performances of such laboratory or other work (including but not limited to manufacture of dubbed, re-dubbed, titled, sub-titled, narrated and any and all language versions of the Picture used in the Territory). Producer will, as one of the items of delivery to be made pursuant to this Agreement, deliver to Distributor a statement setting forth the details of any and all pre-print materials relating to the Picture together with the name and address of the laboratories havingpossession thereof. Further, Producer will, as one of the delivery items hereunder, furnish to Distributor laboratory access agreements in a form satisfactory to Distributor signed by the laboratories having possession of said materials, and by Producer and by any other party whose consent may be necessary or required. |
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|   | (x) | The right to use or exercise any and all rights which Producer may now or hereafter acquire and which Distributor may acquire to use the names, likeliness', voices and persona of all artists in connection with the advertising or exploitation of the Picture, including any commercial tie-ups. Distributor may license, sub-license and/or assign all or any part of the rights granted to Distributor under this Agreementto the sub-distributors, licensees or sub-licensees. |
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|   | (xi) | To assert, prosecute, handle and settle in any and all parts of the Territory all claims or actions or causes of action against any and all persons for the unauthorized or illegal use, copying, reproduction, release, distribution, exhibition or performance of the Picture or any part or versions thereof, or of the literary, dramatic or musical material upon which the Picture is based or which are used therein, orany part or version hereof, or for the enforcement or protection all or any rights herein granted or purported to be granted to Distributor together with full and complete authority and power of attorney in name of Producer or otherwise to do all or any of the foregoing and to execute, acknowledge, verify and deliver any and all consents, documents, releases or other papers or documents of any kind pertaining thereto or any part thereof in the name of or on behalf of Producer. |
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|   | (xii) | If the Picture has not been registered for copyright and if application for copyright can be properly be made, Distributor shall have the right, at its election (but not the obligation) to cause the Picture to be registered for copyright in Producer's name. Distributor shall be under no liability of any kind in the event there shall be failure to secure any such copyrights or the event of any defect in any such copyrights.The Picture or any material upon which it is based or which is contained therein or is used or synchronized therewith, is copyrighted in any part of the Territory, and the Term extends into any term of renewal of any such copyrights, the grant herein made shall continue for and during such term of renewal or extended copyright, and Distributor is hereby constituted and appointed attorney-in-fact of Producer to apply and obtain in the name of Producer, any such renewals or extensions of copyright, and to do allthings and acts necessary or desirable in connection therewith, including, without limitation, the execution, acknowledgement, delivery and filing of any and all applications or assignments or other acts which Distributor may deem necessary or advisable to accomplish any of the foregoing. Nothing herein contained shall be deemed to require Distributor to apply for renewal of copyright or take any other action to comply with any statutory formality, it being understood that Distributor's right to do so is entirelydiscretionary. |
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|   | (xiii) | The right to manufacture, distribute, license, sell or otherwise exploit characters, names and events appearing in or used in connection with the Picture. |
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|   | (xiv) | The right to distribute and sell the Picture in all electronic media including all forms of computer assisted, optically driven or interactive media, including CD-ROM, CDI/DO, MMCD, DVD, DVI, 3DO or any similar media, including all rights to transmit the Picture on the internet and broadcast on the internet, subject to British Columbia Film’s InterimInternet Policy. |
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|   | (xv) | The right to sell and/or license the Picture in the ancillary markets, including but not limited to in-flight airplanes, hotels, trains, ships, military installations, prisons, schools, colleges and other educational institutions. |
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|   | (xvi) | The right to distribute and sell any soundtrack of the music composed or licensed to the Picture together with the synchronization and the performing rights in and to all music and musical compositions contained in the Picture for all purposes of exploitation of the Picture in a Territory for the Term. |
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|   | (o) | "Rights" means an undivided 100% ownership interest in all right, title and interest in and to the Picture; |
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|   | (p)"Term" means the term of license of this Agreement as established in Article 3.1 hereof; and |
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|   | (q) | "Territory" As used in this Agreement, "Territory" shall mean Canada (i.e. the ten provinces, the Yukon, Northwest, and Nunavut territories of Canada, and any successor countries occupying in whole or in part the Geographic territory known as Canada as of the date of this Agreement), and the possessions and commonwealths, and ships and aircraft registered inand/or flying the flag of Canada, marine installations including oil rigs serviced from any jurisdiction comprising part of Canada as described above, military installations wherever situated at which armed forces of Canada are stationed, and any other governmental installations of Canada wherever situated throughout the universe.. |
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----

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|   | (a) | Organization. The Producer is a corporation incorporated, organized and subsisting under the laws of the jurisdiction of its incorporation and is empowered to conduct its business in every jurisdiction in which it carries on business; |
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|   | (b) | Authority. The Producer has the full right and power to enter into this Agreement and to grant, assign, transfer and convey the Distribution Rights to the Distributor in accordance with the terms set forth herein; |
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|   | (c) | No Other Assignment. The Producer has not been a party to any assignment, transfer or conveyance of the Distribution Rights or any part thereof to any party other than pursuant to this Agreement and the Producer is not presently a party to any agreements similar to this Agreement, in respect of the Territory, with any person whatsoever and the Producer is underno obligation that might interfere with the performance by the Producer of its obligations or the Distributors' rights hereunder or the grant of rights contained herein; |
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|   | (d) | Due Execution and Enforceability. This Agreement has been duly executed and delivered by the Producer and constitutes a legal, valid and binding obligation of the Producer enforceable against it in accordance with its terms, subject to bankruptcy, insolvency and arrangement laws, given the parties' intention stated in Article 1.2 hereunder, as well as the lawsgenerally affecting the enforceability of creditors' rights (other than those pertaining to fraudulent assignments and preferences) and the availability, in the discretion of a court of competent jurisdiction, of equitable remedies; |
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|   | (e) | Ownership. The Producer owns all of the Rights with a good, valid and marketable title thereto and the Producer has the absolute right to grant the Distribution Rights to the extent transferred to the Distributor hereunder which shall be enjoyed by the Distributor free from any interruption or disturbance other than as expressly provided for herein; |
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|   | (f) | No Infringement. To the best of Producer's knowledge and belief after reasonable inquiry, the Producer is not infringing or deemed to be infringing on the rights of any third party with respect to its dealings with the Distribution Rights; |
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|   | (g) | Approval. The Distributor, uniquely through its representative, shall have the right to approve of the director (Mark Tuit is hereby pre-approved), the Budget (as defined below) and the lead actors (Aaron Douglas, Kim Coates, Emily Perkins, Christa Campbell, Jennifer Sciole etc. are hereby pre-approved), the screenplay (the version of the screenplay dated November8, 2006 written by Mark Tuit is hereby pre-approved) and any replacements thereof with respect to the Picture (collectively the "Approved Elements"), and it is understood that such approval is not to be unreasonably withheld; |
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|   | (h) | Budget. The Picture shall have a Budget of no less than $1,000,000 (CDN); |
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|   | (i) | Distributor's Financing. The Distributor shall pay the Advance in accordance with the Cash Flow Schedule; |
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|   | (j) | Production Requirements. The Picture shall be produced in accordance with the Budget and the Approved Elements; |
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|   | (k) | Quality. The Picture shall be technically first-class and of not less than 90 minutes in running time, produced in the English language, in colour; |
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|   | (l) | Principal Photography. Principal photography of the Picture shall commence on or about March 13, 2007 and shall be completed and delivered to the Distributor by the Delivery Date, subject to Events of Force Majeure; |
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|   | (m) | Costs. There will not be any rerun, reuse, residual or other fees or payments due or required to be paid (the "Residuals") by the Distributor in perpetuity of its exploitation of the Picture in the media permitted hereunder to any union, guild, artist, or any other person, firm or organization as a resultof the Distributor's exercise of any of the rights granted hereunder other than to the screenwriter of the Picture and other than in respect of the possible theatrical use of the Picture in any part of the Territory, provided that the Distributor shall be responsible for any Residuals or other fees following the expiration of the UBCP Ultra-Low Budget Waiver which the Producer has obtained and for any residual payments due to the screenwriter of the Picture or as a result of the theatrical release of the Picturein any part of the Territory. In this regard, the Producer agrees that any such Residuals which shall be payable by the Distributor shall be at the applicable minimum rate required by any applicable guilds; |
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|   | (n) | Permission for Publicity. The Producer has obtained or will obtain all of the rights, permissions and licenses (other than non-dramatic music performance rights or licenses) required to enable to fully exploit the Distribution Rights granted hereunder, including without imitation the right to use the performers' names, likenesses and biographies to advertiseand promote the Picture; |
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|   | (o) | Copyright Notice. The main and end titles of the negative and preprint materials of the Picture shall contain a legally sufficient copyright notice, in the Producer's name, in the form and position authorized by the Universal Copyright Convention, the Berne Convention and the Buenos Aires Convention, including the symbol "©" ("c" in a circle) and the legend"All Rights Reserved" in close proximity to such notice; |
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|   | (p) | Music Rights. The synchronization rights in and to all music and musical compositions contained in the Picture and, if any pre-recorded music is contained in the Picture, reproduction rights to any such pre-recorded music, are or will be owned or licensed by the Producer; |
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|   | (q) | Music Performance Rights. All performing rights in and to all music and musical compositions contained in the Picture will be licensed by SOCAN, or that such music will be in the public domain, or that the Producer will own or control all the performing rights in such music for all purposes of exhibition; |
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|   | (r) | Credit Requirements. The Producer shall not agree with any third parties to any credit requirements or any other contractual restrictions which are outside of industry standards. |
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|   | (a) | Organization. The Distributor is a corporation duly incorporated, organized and subsisting under the laws of the jurisdiction of its incorporation and is empowered to conduct its business in every jurisdiction in which it carries on business; |
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|   | (b) | Corporate Power. The Distributor has the full corporate right and authority to enter into and to perform its obligations under this Agreement; |
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|   | (c) | Due Execution and Enforceability. This Agreement has been duly executed and delivered by the Distributor and constitutes a legal, valid and binding obligation of the Distributor enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, and arrangement laws, given the parties' intention stated in Article 1.2 hereunder, as well asthe laws generally affecting the enforceability of creditors' rights (other than those pertaining to fraudulent assignments and preferences) and the availability, in the discretion of a court of competent jurisdiction, of equitable remedies; |
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|   | (d) | Credit Provisions. The Distributor will ensure that it will abide by the credit provisions provided by the Producer, same conforming with Article 4.1(s) hereinabove on the main and/or end titles of the Picture and in all advertising and publicity with respect to the Picture. The Distributor agrees not to remove the credit of the Producer or the copyright noticefrom the Picture. All claims, actions and causes of action arising as a result of the failure of the Producer to deliver such a statement to the Distributor or arising as a result of compliance with such statement by the Distributor or as a result of any error in any such notice shall be deemed to be claims, actions and causes of action with respect to which the Distributor is to be indemnified by the Producer. No casual or inadvertent failure by the Distributor or any of its sub-distributors or licensees tocomply with the statement of credits shall constitute a breach of this Agreement. In the event of such breach, the Distributor agrees to use its best efforts to cure such breach prospectively. The Distributor agrees to require all sub-distributors and licensees to comply, in writing, with the credit provisions hereof, including without limitation, credits accorded to the Producer; |
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|   | (e) | Credit Obligations. The Distributor shall comply with all credit obligations notified to the Distributor prior to the Delivery Date in respect of screen credits and promotional and advertising credits for the Picture. The Distributor agrees that it shall not have the right to edit the credits on the Picture nor the copyright notice therein. |
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|   | (a) | cause the Indemnifying Party to conduct the defence of such claim or proceeding at its cost; or |
|--------|-----|-------------------------------------------------------------------------------------------------|

|   | (b) | defend such claim or proceeding, with all costs and expenses of such Indemnified Party to be borne by the Indemnifying Party; |
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| (a)   | $50,000.00 upon screening and acceptance of the director’s cut of the film; |
|-----------------|-----------------------------------------------------------------------------------|

| (b)   | $50,000.00 upon approval by Distributor of the creative elements for the Picture described herein. |
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|   | (a) | Taxes. All taxes, imposts, duties, tariffs and governmental fees of any nature, however denominated or characterized, imposed by any taxing authority in any territory, directly or indirectly, on any receipts (irrespective of character or origin) derived from the exhibition, distribution and exploitation of the Picture, save and except for income or franchisetaxes. |
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|   | (b) | Collection Costs. All costs reasonably incurred in connection with the collection of any portion of the Gross Receipts, including reasonable fees of lawyers and auditors. |
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|   | (c) | Costs of Prints and Other Materials. All costs incurred in the manufacture, preparation, duplication or delivery of positive prints of the Picture or positive film in any gauge, video or electronic tape recording, cassette, disc or other physical material or substance of any kind produced by means of any photographic, electrical, electronic, mechanical or otherprocess or device now known or hereafter devised, on or with respect to which the Picture or any part thereof is printed, imprinted, recorded, reproduced, duplicated or otherwise preserved (the "Materials"), or any facility or similar quality designated by the Distributor to be utilized in connection with the Picture, including without limitation, the following: |
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|   | (i) | Material Costs. All costs of manufacture of positive prints or other materials, including laboratory, labour, service, materials and facilities, and costs in connection therewith. |
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|   | (ii) | Re-Editing Costs. All costs incurred to recur, re-edit, re-record, restore, remix and redub the Picture, including changes, eliminations and additions with respect to the Picture for any use of the Picture and conforming (voluntarily or involuntarily) the Picture to requirements of censorship, classification and rating by government or other community organizationsor other persons, including exhibitors and religious and ethnic groups, and to the national and/or political regulations of any territory. |
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|   | (iii) | Transportation and Inspection Costs. All transportation, shipping, packing, delivery and inspection charges on all positive prints or other materials. |
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|   | (iv) | Foreign Version Costs. All costs incurred to make and deliver foreign language versions of the Picture. |
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|   | (d) | Marketing and Advertising Costs. All reasonable costs incurred in marketing, advertising, promoting and exploiting Picture throughout the Territory, as applicable, including but not limited to premieres, screenings, television advertising and independent advertising agents' commissions and attending sales markets, allocated on a reasonable basis consistentlyfor all productions in a group. |
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|   | (e)Administrative Costs. All costs or charges incurred in connection with administering sub-distribution and broadcast agreements up to an amount equal to five percent (5%) of Gross Receipts, whether such costs or charges are incurred directly by Distributor or charged by an affiliate of Distributor. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (f) | Miscellaneous Costs. All other costs incurred in connection with the exploitation of the Picture throughout the Territory, as applicable, including, without limitation, the following: |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | Royalties. The cost of all licenses required to permit exhibition, distribution or other use of the Picture, trailers and prints thereof, including fees for use of any patented equipment or processes; synchronization, recording and performing royalties and fees with respect to performance of lyrics and music and literary material; and any re-use fees and costsadvanced by the Distributor and any other similar fees and/or amounts to be incurred by Distributor pursuant to Article 4.1(n) hereof or otherwise as contemplated in this Agreement. |
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|   | (ii) | Insurance Costs. All costs for insurance coverage for any and all risks of loss with respect to the Picture and any components thereof, including errors and omissions insurance and loss or damage to prints and physical material insurance. |
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|   | (iii) | Copyrighting Costs. All costs and expenses of registering copyright in the Picture for the benefit of the copyright holders thereof and their assigns and the extension and renewal thereof, and other similar protection throughout the Territory, wherever and whenever incurred, within the Distributor's sole discretion. |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | Copyright Infringement Costs. All costs incurred in protecting the copyright in the Picture for the benefit of a copyright holders thereof and their assigns and preventing any infringement of copyright or violation of rights in and to the Picture or any elements thereof (whether by litigation or otherwise), including reasonable fees of counsel in connectiontherewith. |
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|   | (v) | Claims and Litigation Costs All costs incurred by reason of claims asserted by third parties which arise from the production, distribution, exhibition and/or exploitation of the Picture (including, without limitation, claims of infringement, unfair competition, violation of any right of privacy, defamation or breach of contract). |
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|   | (vi) | Marketing Costs. All expenses incurred with respect to marketing the Picture at the various film and television markets and all film festivals, including a share of the costs of attending such markets and festivals. |
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|   | (vii) | Other Costs. Any residual or music payments due or paid by Distributor, or any other deferred payments or participation obligations payable in connection with the Picture. |
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|   | ARTICLE 9 |
|--------|-----------|

|   | ALLOCATION OF GROSS RECEIPTS |
|--------|------------------------------|

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| (a)   | Firstly, Distributor shall retain 50% of the Film Rentals; |
|-----------------|------------------------------------------------------------|

| (b)   | Secondly, Distributor shall recoup its P&A Expenditures from the Film Rentals; |
|-----------------|------------------------------------------------------------------------------------|

| (c)   | Thirdly, Producer shall recoup any union residuals from the Film Rentals; and |
|-----------------|-------------------------------------------------------------------------------|

| (d)   | Lastly, following the deductions stated above, the balance of the Film Rentals shall be paid to Producer. |
|-----------------|-----------------------------------------------------------------------------------------------------------|

| (a)   | Firstly, Distributor shall retain 50% of the Videogram Net Revenue; |
|-----------------|---------------------------------------------------------------------|

| (b)   | Secondly, Distributor shall recoup its Videogram Distribution Expenses (“Videogram Distribution Expenses” shall be defined as all amounts incurred by DR in connection with the DVD release of each Picture, which shall be capped at 20% of Gross Revenue (the “VideogramDistribution Expense Cap”) EXCEPT THAT the Videogram Distribution Expense Cap shall not apply to any replication and packaging cost); |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c)   | Thirdly, Distributor shall recoup its P&A Expenditures from the Videogram Net Revenue; |
|-----------------|--------------------------------------------------------------------------------------------|

| (d)   | Fourthly, Producer shall recoup any union residuals from the Videogram Net Revenue; and |
|-----------------|-----------------------------------------------------------------------------------------|

| (e)   | Lastly, following the deductions stated above, the remaining Videogram Net Revenue shall be paid to Producer. |
|-----------------|---------------------------------------------------------------------------------------------------------------|

| (a)   | Firstly, Distributor shall retain 50% of Gross Revenue; |
|-----------------|---------------------------------------------------------|

| (b)   | Secondly, Distributor shall recoup its Distribution Expenses (“Distribution Expenses” as defined in Exhibit “B” attached hereto and incorporated herein by this reference, which shall be capped at 5% of Gross Revenue); |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c)   | Thirdly, Distributor shall recoup its P&A Expenditures and any unrecouped Videogram Distribution Expenses from Gross Revenue; |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------|

| (d)   | Fourthly, Producer shall recoup any union residuals paid from Gross Revenue; and |
|-----------------|----------------------------------------------------------------------------------|

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| (e)   | Lastly, following the deductions stated above, the remaining Gross Revenue shall be paid to Producer. |
|-----------------|-------------------------------------------------------------------------------------------------------|

|   | ARTICLE 10 |
|--------|------------|

|   | FINANCIAL REPORTS AND PAYMENTS |
|--------|--------------------------------|

|   | 10.1 | Statements. |
|--------|------|-------------|

|   | (a) | The Distributor agrees to render to the Producer periodic statements (the "Statements") showing in summary form the calculation of any sums due to the Producer under this Agreement including, but not limited to, Gross Receipts, permitted expenses and fees hereunder. Statements shall be rendered with respect to each of the following periods (the "Periods") andshall be delivered not later than forty-five (45) days after each such Period to the Producer: |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | the end of each calendar quarter period ending the thirty-six (36) month period commencing after the Delivery of the Picture; and |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | in the event that the Distributor has not recouped the full amount of the Advance plus the applicable interest within the first thirty-six (36) months after Delivery, the Distributor shall continue to provide the statements on a quarterly basis for the first sixty (60) months after Delivery. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Thereafter, the Distributor shall deliver such Statements to the Producer no later than sixty (60) days after each semi-annual calendar period. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | (a) | An Inspection shall be conducted only by a certified qualified chartered accountant or a firm of certified public accountants. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | An Inspection (i) shall be conducted only once with respect to each Statement, only during normal business hours in such a manner as to not unreasonably interfere with the Distributor's normal business activities and only at such places as the Participation Account are kept, (ii) shall not continue for more than five (5) consecutive business days, and (iii) shall not be conducted more than once in any twelve (12)month period. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | Each Statement (and all items and information contained therein) shall be deemed correct and shall be conclusive and binding on the Producer and not subject to objection or contest for any reason, unless the Distributor shall receive from the Producer an objection, in writing, specifying in detail the items or transactions which the Producer contests, on or before the last day of the 36th full calendar month nextsucceeding the date the applicable Statement is received by the Producer. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| (a) | If either party shall claim that the other party has breached this Agreement (the “Defaulting Party”), the claimant shall give the Defaulting Party written notice thereof, and the parties shall endeavour to resolve the matter on an amicable basis. The Defaulting Party receiving such notice shall not be deemed in breach of this Agreement unless theparties are unable to amicably resolve the matter in dispute within the hereinafter described period of fifteen (15) days, or the Defaulting Party receiving such notice shall fail to cure such breach within fifteen (15) days after the date such notice is received by it, provided however that said fifteen (15) day period shall be shortened to the extent necessary to avoid interference with the production of the Picture. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | Any dispute, controversy or claim arising out of or in connection with or relating to this Agreement or any breach or alleged breach hereof, which the parties are unable to resolve after consultation with each other, shall be determined and settled by arbitration at Vancouver, British Columbia in accordance with the provisions of the Commercial Arbitration Rules ofthe American Arbitration Association which presently exist or as same may be amended. The parties agree to abide by the decision rendered and further agree that any such determination or settlement shall be final and conclusive upon the parties and any judgment thereon may be entered in any Court having jurisdiction. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | (a) | any termination, expiration, revocation, cancellation, recission, repudiation, abrogation or failure of any aspect of this Agreement, occurring for any reason whatsoever, shall so far as Producer is concerned, subject to and in no way affect any distribution or license agreements (or any provisions thereof or authorizations granted pursuant thereto) entered into by Distributor in respect of the Distribution Rights(such distribution and license agreements and authorizations defined hereinafter as "License Agreements") regardless of (inter alia) the length of the remaining term of any such License Agreements, and Producer shall undertake all the obligations, rights and benefits of Distributor thereunder in such event; |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Producer shall do nothing to disturb or interfere in any way with any rights under the License Agreements; |
|--------|-----|------------------------------------------------------------------------------------------------------------|

|   | (c) | all sales, assignments, pledges, encumbrances or other transfers or any nature whatsoever, made at any time whatsoever by, on behalf of or under the authority of Producer of all or any part of Producer’s rights and the Picture shall be subject to all such License Agreements; and |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | if by operation of law or otherwise any rights and such License Agreements revest in or revert to Producer, then Producer will grant to such persons as Distributor may designate effective immediately upon any such revesting or reverting all such rights under the effective License Agreements as necessary, appropriate or convenient in Distributor's sole discretion, and Producer hereby irrevocably appoints Distributoras Producer's exclusive attorney-in-fact which appointment shall be deemed a power coupled with an interest, for its use and benefit with power of delegation and substitution and re-substitution, for the purpose of executing, acknowledging, filing and recording of all documents and instruments and doing all other acts necessary or advisable to further accomplish the purposes aforesaid, as power of attorney to survive the dissolution or bankruptcy or legal capacity of Producer. Distributor shall give Producerfive (5) business days notice before exercising such rights. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | (a) | becomes insolvent or fails to pay its debts when due; or |
|--------|-----|----------------------------------------------------------|

|   | (b) | makes an assignment for the benefit of creditors or seeks relief under any bankruptcy law or similar law for the protection of debtors or suffers a bankruptcy petition to be filed against it or a receiver or trustee is appointed for substantially all of its assets, and the same is not removed within thirty (30) days. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | makes any assignment for the benefit of creditors, or seeks relief under any bankruptcy law or similar law for the protection of debtors or suffers a bankruptcy petition to be filed against it or a receiver or trustee is appointed for substantially all of its assets, and the same is not removed within thirty (30) days. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| To the Producer: | PACIFIC GOLD ENTERTAINMENT INC. |
|------------------|---------------------------------|

| To the Distributor: | DAVAL RELEASING INC. |
|---------------------|----------------------|

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|   | (a) | No waiver by any party of any breach hereof shall be deemed a waiver of any preceding, continuing or succeeding breach of the same, or any other time hereof. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Any party may waive the benefit of any term, condition, warranty or covenant in this Agreement or any right or remedy at law or in equity, but only by an instrument in writing signed by the party to be charged. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 17.15   | No Third Party Beneficiary. Nothing in this Agreement, expressed or implied, is intended or shall be construed to confer upon any person other than the parties hereto any right, remedy or claim, legal or equitable, under or by reason of this Agreement or any provision hereof, this Agreement and allof its provisions intended to be and being for the sole and exclusive benefit of the parties hereto. |
|-------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| PACIFIC GOLD ENTERTAINMENT INC.   |   | DAVAL RELEASING INC.               |
|-----------------------------------|--------|------------------------------------|
| Date:                             |   | Date:                              |
| Name: MICHAEL GEORGE              |   | Name:  MICHAEL GRUDMAN   |
| Title:   PRODUCER  |   | Title:  VP Acquisitions  |
| By:  /s/ Michael George |   | By:  /s/ Michael Grudman |

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| 1. | FILM ELEMENTS |
|----|---------------|

| P 1. a) | FEATURE: Delivery of one 35mm Original Picture Negative, with main and end titles and fully edited, and conformed in all respect to the approved final version of the Picture |
|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| P 1. b) | FEATURE: Delivery of one 35mm Textless backgrounds negatives |
|---------|--------------------------------------------------------------|

| P 1. c) | FEATURE: Delivery of one 35mm Original negative and positive prints of all cover material |
|---------|-------------------------------------------------------------------------------------------|

| P 1. d) | FEATURE: Delivery of one 35mm first class Interpositive manufactured from item P 1.a) |
|---------|---------------------------------------------------------------------------------------|

| P 1. e) | FEATURE: Delivery of one 35mm first class internegative manufactured from item P 1. d) |
|---------|----------------------------------------------------------------------------------------|

| P 1. f) | FEATURE: Delivery of one 35mm Low contrast print manufactured from item P 1. e) |
|---------|---------------------------------------------------------------------------------|

| P 1. g) | FEATURE: Delivery of one 35 mm Interpositive of the textless backgrounds for the main and end titles and texted scenes.] |
|---------|--------------------------------------------------------------------------------------------------------------------------|

| P 1. h) | FEATURE: Delivery of one 35 mm Answer print manufactured from item P 1 a) |
|---------|---------------------------------------------------------------------------|

| P 1. I) | FEATURE: Delivery of one 35 mm print from P 1.  e) |
|---------|--------------------------------------------------------------|

| P 1. j) | FEATURE:  Delivery of one  35mm Check Print. |
|---------|------------------------------------------------------------------|

| P1.  k) | FEATURE: Delivery of all out takes and trims. |
|-------------------|-----------------------------------------------|

|   |  | 4 TRACKS + 2 TRACKS ( L C R S  + STEMS +DIAL. MONO PRE-MIX) |
|--------|----------|-----------------------------------------------------------------------|

|   |  | 6 TRACKS ( LEFT+BACK  LEFT +CENTER + RIGHT + BACK RIGHT + SUBW) AND |
|--------|----------|-------------------------------------------------------------------------------|

|   |  | ORIGINAL STEREO MIX |
|--------|----------|---------------------|

|   |  | MUSIC SCORE |
|--------|----------|-------------|

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|   |  | A 35 mm Interpositive, or |
|--------|----------|---------------------------|

|   |  | A 35 mm new print struck from the original negative |
|--------|----------|-----------------------------------------------------|

|   |  V 1. a) | FEATURE:  Delivery of one (1) High Definition Master original aspect ratio anamorphic master manufactured from a 35mm Interpositive. |
|--------|---------------|------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

|  VS 1. a) | Tracks 1 and 2: Stereo Right / Stereo Left - Original language |
|----------------|----------------------------------------------------------------|

|   |   | Tracks 3 and 4: Stereo Right / Stereo Left - Music and Effects |
|--------|--------|----------------------------------------------------------------|

|   |   |
|--------|--------|

| (ii) | An E&O insurance certificate naming the Distributor and its assignees and sub-distributors as additional insured. |
|------|-----------------------------------------------------------------------------------------------------------------------|

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|   | PR 1. h) | B & W STILLS not less than 50 |
|--------|----------|-----------------------------------|

|   | PR 1. i) | Press reviews |
|--------|----------|---------------|

|   | PR 1. j) | COLOR TRANSPARENCY SET not less than 50 |
|--------|----------|-----------------------------------------|

|   | PR 1. l) | 20 x Press books, press kits (as available) |
|--------|----------|---------------------------------------------|

|  PR 1. n) | ORIGINAL DIALOGUE LIST CONTINUITY ON DISKETTE, plus two (2) printed copies. |
|----------------|-----------------------------------------------------------------------------|

| PR 1. q) | MAIN TITLES and END CREDITS |
|----------|-----------------------------|

| SB.1 | SUB -TITLING DISK  ASCII  RATIO /synchronised to the video elements |
|------|-----------------------------------------------------------------------------------------|

|   |  | FEATURE subtitled elements |
|--------|----------|----------------------------|

| LD.1 | a typed statement summarising all restrictions and obligations with respect to advertising and promotion in connection with the Picture (statement to cover restrictions pertaining not only to credits but also to use name and likeness obligations), |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| LD.2 | a copy of the Title Report covering the title of the Picture from a recognised source setting forth prior uses of the same or similar titles, |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| LD.3 | a copy of the executed licence agreement in full force and effect between the Producer and Dolby Laboratories, Inc., |
|------|----------------------------------------------------------------------------------------------------------------------|

| LD.4 | if any clips from other films are used in the Picture, copies of all necessary licenses, or permissions granting the rights to use the clips in the Picture, |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

| LD.5 | typed contact list for all key cast and crew, |
|------|-----------------------------------------------|

| LD.6 | twenty (20) original certificates of Origin for the Picture certifying that the Picture is a picture of Canadian origin, |
|------|--------------------------------------------------------------------------------------------------------------------------|

| LD.7 | Three (3) originals of an Instrument of Transfer in the form attached hereto, signed by the Producer before a person authorised to attest signature, |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------|

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| LD.8 | Three (3) copies of the Music Cue Sheet of the Picture, which cue sheet shall specify the author of each musical composition involved, the publishing company and performing rights society controlling the rights in each such piece of music and its specific location in the Picture, the location where the music was recorded, and the names of the composer and the arranger, |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| LD.9 | Laboratory Access Letter(s) signed by the Licensor and each respective Laboratory and/or facility having possession of the preprint and sound materials for the Picture (all versions) and trailer (s), including film, sound and storage facilities, |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| LD.10 | Twenty (20) original notarized short- form licenses, |
|-------|------------------------------------------------------|

| LD.11 | Two (2) credit lists as on screen, |
|-------|------------------------------------|

| LD.12 | Two (2) foreign theatrical advertising credits, |
|-------|-------------------------------------------------|

| LD.13 | One (1) Certificate of Canadian Copyright Registration for the screenplay, or if not yet available, a copy of the application therefore accompanied by the letter of transmittal to the Canadian Copyright Office, |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| LD.14 | One (1) Certificate of Canadian Copyright Registration for the Picture, or if not yet available, a copy of the application therefore accompanied by the letter of transmittal to the Canadian Copyright Office, |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| LD.15 | Final certified Negative Cost Statement certified by the Completion Guarantor (and if no completion guarantor was engaged for the Picture, then by the Producer’s outside certified public accountants as approved by the Distributor) evidencing a Minimum Negative Cost of Seventy Five Thousand (CDN$75,000) (the definition of “negative cost” for the purposes of this agreement shall be subject to thewritten approval of the Distributor, but in no event shall such “negative cost” include the aggregate producer fees or interest and financing charges), |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| LD.16 | MPAA rating certificate reflecting the rating specified in the Exhibit XYZ to the agreement, |
|-------|----------------------------------------------------------------------------------------------|

| LD.17 | All literary and music chain of title and other clearance documentation for the feature in the form and substance satisfactory to the Distributor, |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------|

| LD.18 | Access to and all location of all agreements and documents relating to the picture: e.g. employment agreements, clearances, releases, location agreements and evidence of payment in full with respect thereto) as may be required by Distributor, including but no limited to: |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | a) | Cast/Talent/Personnel Agreements- Fully executed agreements for all cast, crew, and other entities and related personnel who have been accorded paid advertising and /or screen credit whose names are accorded paid advertising credit. (Should agreements for any the cast members not exist, then signed releases for those individuals). |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b) | Releases- Signed releases from all persons identified by name or likeness in the Picture who do not have signed contracts. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------|

|   | c) | Music Licenses- Fully executed synchronization and master use licenses on all media buy-outs basis for each item of licensed music used in the Picture; fully executed agreements for each composer of underscoring on all media buy-out basis; and evidence payment under each composer of underscoring on all media buy-out basis; and evidence of payment under each synchronization and master use license and composer agreement. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| LD.19 | Mortgage of Copyright and Security Agreement- two (2) original of a Mortgage of Copyright and Security Agreement. |
|-------|-------------------------------------------------------------------------------------------------------------------|

| LD.20 | Coverage- If requested, laboratory access to the original negative, answer print, work picture, magnetic or digital soundtracks, filled music, and effect tracks and the original sound recordings, of all alternative takes, cover shots, looped dialogue lines and other materials (collectively referred to as “coverage”) for the purpose of re-transferring and/or conforming to rating requirements, broadcaststandards and practices and censorship. |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| LD.21 | Residuals- Producer shall be responsible for all residuals, but will provide the following information: |
|-------|---------------------------------------------------------------------------------------------------------|

|   | a) | A letter signed and certified to be true and correct, from the producer or director of the Picture, setting forth: |
|--------|----|--------------------------------------------------------------------------------------------------------------------|

|   | (i) | Which, if any, domestic and foreign unions and guilds whose members rendered services on the Picture. |
|--------|-----|-------------------------------------------------------------------------------------------------------|

|   | (ii) | With respect to each such union or guild listed in (i) preceding what, if any, residual obligations exist (with specificity) in connection with Distributor’s exercise of its distribution rights in the Picture; |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | All documents and information necessary for Distributor to comply with the residual obligations stated in (ii) preceding including, without limitation, an itemized statement of the total amounts paid to each director, write, artist, musician, and technician employed or in connection with the Picture together with the number of days worked by each, the social security number (or other applicable documentation) ofeach thereof and the name of the guild or union having jurisdiction; and |
|--------|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | Where worldwide rights in all media have been “bought out” a letter from the Producer or director setting forth with specificity the persons subject to such “buyout” and the method of buyout. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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