Document:

ex10-1.htm

Exhibit 10.1

 

SEVENTH AMENDMENT TO SECURED PROMISSORY NOTE

 

This SEVENTH AMENDMENT TO SECURED PROMISSORY NOTE (this “Amendment”) is made as of August 5, 2010 by and between ImageWare Systems, Inc., a Delaware corporation (“Borrower”), and BET Funding LLC, a Delaware limited liability company (“Lender”).

 

W I T N E S S E T H :

 

A.           On February 12, 2009, Borrower issued to Lender a secured promissory note (the “Original Note”) in the original principal amount of Five Million Dollars ($5,000,000).  On such date, Lender made to Borrower an initial advance under the Note (as defined below) of One Million Dollars ($1,000,000).  The Note and all instruments, documents and agreements executed in connection therewith, or related thereto, are referred to herein collectively as the “Financing Documents”.  All capitalized terms not otherwise defined herein shall have the meaning ascribed thereto in the Note.

 

B.           On June 9, 2009, Borrower and Lender entered into that certain Waiver and Amendment Agreement (the “Waiver and Amendment Agreement”) in order to (i) waive certain existing events of default under the Note and (ii) amend certain terms of the Note.

 

C.           On June 22, 2009, Borrower and Lender entered into that certain Amendment to Promissory Note (the “Second Amendment”) pursuant to which (i) Lender made a subsequent advance to Borrower under the Note in the principal amount of Three Hundred Fifty Thousand Dollars ($350,000) and (ii) certain terms of the Note were amended.

 

D.           On October 5, 2009, Borrower and Lender entered into that certain Third Amendment to Promissory Note (the “Third Amendment”) pursuant to which (i) Lender agreed to make additional advances in an aggregate amount up to One Million Dollars ($1,000,000) to be used for the purpose of compromising certain of Borrower’s outstanding vendor payables or paying for the audit of Borrower’s financial statements, (ii) Lender made an advance of Three Hundred Thousand Dollars ($300,000) of such amount and (iii) certain terms of the Note were amended.

 

E.           On November 11, 2009, Borrower and Lender entered into that certain Fourth Amendment to Secured Promissory Note (the “Fourth Amendment”) pursuant to which (i) Lender made a subsequent advance to Borrower under the Note in the principal amount of Three Hundred Fifty Thousand Dollars ($350,000) (the “Fourth Amendment Advance”), (ii) Borrower assigned to Lender certain of its accounts receivable and (iii) certain terms of the Note were amended.

 

F.           On December 18, 2009, Borrower and Lender entered into that certain Acknowledgment (the “Acknowledgment”) pursuant to which (i) Lender acknowledged full repayment of the advance in the principal amount of the Fourth Amendment Advance and (ii) Lender made a Third Amendment Advance in the principal amount of Three Hundred Twenty-Five Thousand Dollars ($325,000) to Borrower under the Note for the purpose of satisfying certain of Borrower’s outstanding vendor payables.

 

G.           On February 5, 2010, Borrower and Lender entered into that certain Fifth Amendment to Secured Promissory Note (the “Fifth Amendment”) pursuant to which certain terms of the Note were amended.

 

  

 

  

H.           On March 15, 2010, Borrower and Lender entered into that certain Sixth Amendment to Secured Promissory Note (the “Sixth Amendment”) pursuant to which (i) Lender made a subsequent advance to Borrower under the Note in the principal amount of Two Hundred Fifty Thousand Dollars ($250,000), (ii) Borrower assigned to Lender certain of its rights, title and interest in and to after-cost proceeds received in connection with the prosecution of certain commercial tort claims and (iii) certain terms of the Note were amended.  The Original Note, as amended by the Waiver and Amendment Agreement, the Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth Amendment and the Sixth Amendment, is hereinafter referred to as the “Note”.

 

I.           Borrower and Lender have agreed to amend certain terms of the Note pursuant to this Amendment and desire to set forth their agreement in writing.

 

NOW, THEREFORE, with the foregoing background deemed incorporated by reference, and for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto, intending to be legally bound, covenant and agree as follows:

 

SECTION 1.  ACKNOWLEDGMENT OF INDEBTEDNESS, ETC.

 

1.1           Note.  Borrower hereby acknowledges and confirms that as of the close of business on July 31, 2010, Borrower is indebted to Lender, without defense, setoff, claim or counterclaim under the Note, in the aggregate principal amount of $2,252,437.35, together with accrued and unpaid interest in the amount of $236,405.06 and all other fees, costs and expenses (including attorneys’ fees) incurred to date in connection with the Note.

 

1.2           No Defaults.  Upon giving effect to this Amendment, Borrower acknowledges and represents that as of this date no Event(s) of Default or default are outstanding.

 

1.3           Fees and Expenses.  Borrower acknowledges and agrees that it is liable for all fees, costs and expenses (including attorneys’ fees) incurred by Lender in connection with the documentation, preparation, interpretation and negotiation of this Amendment and the Financing Documents, and any amendment, modification or supplement to this Amendment or to the Financing Documents, the consummation and administration of the transactions contemplated hereby and thereby and the enforcement, preservation, protection or defense of any of Lender’s rights and remedies hereunder and under the Financing Documents, including, without limitation any costs for appraisals, searches or filing fees incurred by Lender.  All such fees, costs and expenses are referred to herein as “Expenses.”  All Expenses will be payable within fifteen (15) days after Lender gives notice thereof or, at the election of Lender, added to the principal balance of the Obligations in accordance with the terms of the Note.  Borrower acknowledges and agrees that $20,000 shall be added to the principal amount of the Note on the date hereof (so that the principal balance is now $2,272,437.35) to reflect Lender’s costs and expenses incurred in connection with the preparation of this Amendment.

 

  

2

  

 

SECTION 2.  AMENDMENT FEE

 

2.1           Amendment Fee.  Borrower shall pay to Lender on or before September 15, 2010 a non-refundable fee in connection with this Amendment in the principal amount of $50,000.00 (the “Amendment Fee”) in immediately available funds, which fee is fully earned as of the date hereof.  The Amendment Fee shall be added to the principal balance of the Note as of the date hereof and shall accrue interest at the applicable rate provided for in the Note until paid in full.

 

SECTION 3.  AMENDMENT TO NOTE

 

3.1           Section 1(t) of the Note.  Section 1(t) of the Note is hereby amended by replacing the date “June 30, 2010” set forth therein with the date “September 15, 2010”.  The foregoing amendment shall be retroactive from February 12, 2009, the date of the Note.

 

3.2           Section 2(a) of the Note.  Section 2(a) of the Note is hereby amended by adding the following sentence at the end thereof:

 

“To the extent that (x) the Company delivers to Lender at any time after August 4, 2010 but before the Maturity Date a binding contract (or contracts) with a customer (or customers) acceptable to Lender, in its sole discretion, for the provision of goods or services by the Company sufficient to generate aggregate revenue of not less than Twenty Five Million Dollars ($25,000,000) and (y) the repayment of all amounts hereunder is not otherwise required under clause (i) or (ii) above, then the Company shall have a grace period of sixty (60) days commencing on the Maturity Date to repay all amounts due and owing hereunder; provided that interest shall accrue during such grace period on the unpaid principal balance hereunder at the annual rate of eighteen percent (18%).”

 

3.3           Section 2(c) of the Note.  Section 2(c) of the Note is hereby amended by replacing “for the ten (10) trading day period immediately preceding the date of the payment of such interest amount” set forth in clause (ii) therein with “for the five (5) highest Closing Prices for the Common Stock during the period from February 12, 2009 to the Maturity Date; provided, however, that in the event that such average of the five (5) highest Closing Prices for the Common Stock is in excess of $1.00, the average shall be deemed to be equal to $1.00 for purposes of the calculation herein (i.e., the maximum amount payable under this Section 2(c) shall be $2,200,000)”.  The foregoing amendment shall be retroactive from February 12, 2009, the date of the Note.

 

3.4           Incorporation of Amendment into Note.  Borrower hereby directs Lender to attach an original counterpart of this Amendment to the Note.  The Note and this Amendment shall be deemed to constitute a single instrument.

 

SECTION 4.  COLLATERAL

 

4.1           Affirmation of Existing Collateral.  Borrower covenants, confirms and agrees that as security for the repayment of the Obligations, Lender has, and shall continue to have, and is hereby granted a continuing, perfected lien on and security interest in the Collateral, all whether now owned or hereafter acquired, created or arising, together with all proceeds, including insurance proceeds thereof.  Borrower acknowledges and agrees that nothing herein contained in any way impairs Lender’s existing rights and priority in the Collateral.

 

  

3

  

4.2           Further Assurances.  Upon execution of this Amendment, and thereafter as Lender may from time to time request, Borrower shall further assist Lender in effectuating the terms and intent of this Amendment and the Financing Documents and in assuring continued, effective and proper perfection of Lender’s liens and security interests in the Collateral.  Borrower hereby authorizes Lender to sign (if necessary) on Borrower’s behalf and/or file, from time to time, without signature of Borrower, any financing statements as Lender may reasonably deem necessary to perfect, or maintain perfection, of Lender’s security interests.

 

SECTION 5.  EFFECTIVENESS CONDITIONS

 

5.1           Conditions.  Lender’s undertakings hereunder are subject to satisfactory completion, as determined by Lender in its sole discretion (all documents to be in form and substance satisfactory to Lender and its counsel) of the following conditions (the “Effectiveness Conditions”):

 

(a)           Borrower’s execution and delivery of this Amendment;

 

(b)           Borrower shall have delivered to Lender resolutions of the Board of Directors of Borrower authorizing the execution and delivery of this Amendment and the transactions herein contemplated;

 

(c)           assuming the effectiveness of this Amendment, no default or Event of Default  shall have occurred and be continuing under the Financing Documents; and

 

(d)           all expenses incurred by Lender shall have been paid by Borrower when due.

 

SECTION 6.  REPRESENTATIONS, WARRANTIES AND COVENANTS

 

Borrower represents, warrants and covenants to Lender that:

 

6.1           Prior Representations.  By execution of this Amendment, except as otherwise expressly set forth herein, Borrower reconfirms all representations and warranties made to Lender under the Financing Documents and restates such representations and warranties as of the date hereof, all of which shall be deemed continuing until all of the Obligations are paid and satisfied in full.

 

6.2           No Conflict.  The execution and delivery by Borrower of this Amendment and the performance of the obligations of Borrower hereunder and the consummation by Borrower of the transactions contemplated hereby: (i) are within the corporate powers of Borrower; (ii) are duly authorized by the Board of Directors of Borrower and, if necessary, its stockholders; (iii) are not in contravention of the terms of the articles or certificate of incorporation or bylaws of Borrower or of any indenture, contract, lease, agreement instrument or other commitment to which Borrower is a party or by which Borrower or any of its property are bound; (iv) do not require the consent, registration or approval of any Governmental Authority or any other Person; (v) do not contravene any statute, law, ordinance regulation, rule, order or other governmental restriction applicable to or binding upon Borrower; and (vi) will not, except as contemplated herein for the benefit of Lender, result in the imposition of any Liens upon any property of Borrower.

 

  

4

  

6.3           Stockholder Authorization.  Neither the execution, delivery or performance by Borrower of this Amendment nor the consummation by it of the transactions contemplated hereby requires any consent or authorization of Borrower’s stockholders.

 

6.4           Valid, Binding and Enforceable.  This Amendment and any assignment or other instrument, document or agreement executed and delivered in connection herewith will be valid, binding and enforceable in accordance with their respective terms with respect to Borrower upon the execution and delivery by Borrower thereof.

 

SECTION 7.  BORROWER’S EXISTING COVENANTS

 

7.1           Existing Covenants.  Borrower covenants that on and after the date of execution of this Amendment and until the Obligations are indefeasibly paid and satisfied in full that, except as expressly modified hereby, Borrower shall continue to observe and maintain compliance with all covenants, representations and warranties contained in, or arising in conjunction with, the Financing Documents.

 

SECTION 8.  ADDITIONAL AGREEMENTS

 

8.1           SEC Filings; Press Releases.  Borrower covenants that it will provide Lender with a copy of any current report on Form 8-K with the Securities and Exchange Commission or any press release or any other form of public statement or communication to the general public relating to this Amendment or Lender at least 48 hours before the filing or release of such information and allow Lender to provide comments with respect thereto.

 

8.2           Relief from Automatic Stay.  In the event Borrower shall (i) file with any bankruptcy court of competent jurisdiction or be the subject of any petition under the United States bankruptcy code (the “Bankruptcy Code”), (ii) be the subject of any order for relief issued under the Bankruptcy Code, (iii) file or be the subject of any petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future federal or state act or law relating to bankruptcy, insolvency or other relief for debtors, (iv) have sought or consented to or acquiesced in the appointment of any trustee, receiver, conservator or liquidator, or (v) be the subject of any order, judgment or decree entered by any court of competent jurisdiction approving a petition filed against such party for any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future federal or state act or law relating to bankruptcy, insolvency or other relief for debtors, then, subject to court approval, Lender shall thereupon be entitled and Borrower irrevocably consents to relief from automatic stay imposed by Section 362 of the Bankruptcy Code, or otherwise, on or against the exercise of the rights and remedies otherwise available to Lender as provided in the Financing Documents and this Amendment and as otherwise provided by law, and Borrower hereby irrevocably waives its rights to object to such relief.

 

  

5

  

8.3           No Contest.  In consideration of this Amendment, Borrower hereby agrees that it will not contest the exercise of Lender’s rights to foreclose or otherwise take action with respect to the liens on and security interests of Lender in and to the Collateral, or contest the appointment of any receiver in connection of the operation of any of such property and assets, pursuant to terms of the Financing Documents.

 

8.4           No Coercion.  Borrower hereby represents and warrants that it is fully aware of the terms set forth in this Amendment and has voluntarily, and without coercion or duress of any kind, entered into this Amendment intending to be legally bound by its terms.

 

8.5           Lender Reliance.  Borrower expressly understands and further agrees that Lender is relying on all terms, covenants, conditions, warranties and representations set forth in this Amendment as a material inducement to Lender to enter into this Amendment.

 

8.6           Disgorgement.  If Lender is, for any reason, compelled to surrender or disgorge any payment, interest or other consideration described hereunder to any person or entity because the same is determined to be void or voidable as a preference, fraudulent conveyance, impermissible set-off or for any other reason, such Obligation or part thereof intended to be satisfied by virtue of such payment, interest or other consideration shall be revived and continue as if such payment, interest or other consideration had not been received by Lender, and Borrower shall be liable to, and shall indemnify, defend (engaging counsel acceptable to Lender) and hold Lender harmless for, the amount of such payment or interest surrendered or disgorged.  The provisions of this Section 8.6 shall survive execution and exchange or this Amendment.

 

SECTION 9.  MISCELLANEOUS

 

9.1           Default.

 

(a)           In addition to each of the Events of Default set forth in the Financing Documents, the (i) failure of Borrower to comply with its representations, warranties, covenants or other undertakings under this Amendment, or (ii) occurrence or institution of any action or proceeding which may adversely affect Borrower’s ability to perform under this Amendment (as determined by Lender in its discretion), shall be an Event of Default under the Financing Documents and upon such failure, Lender’s undertakings under this Amendment may, at Lender’s discretion and without notice to Borrower, immediately terminate and Lender may exercise its rights and remedies as granted under the Financing Documents and under applicable law or in equity.

 

(b)           Any default by Borrower under any of the Financing Documents shall be considered a default and an Event of Default under all of the Financing Documents and upon such default, Lender’s undertakings under this Amendment may, at Lender’s discretion and without notice to Borrower, immediately terminate and Lender may exercise its rights and remedies as granted under the Financing Documents and under applicable law or in equity.

 

9.2           Integrated Agreement.  This Amendment shall be deemed incorporated into and made a part of the Financing Documents.  The Financing Documents and this Amendment shall be construed as integrated and complementary of each other, and as augmenting and not restricting Lender’s rights, remedies and security.  If, after applying the foregoing, an inconsistency still exists, the provisions of this Amendment shall control.

 

  

6

  

9.3           Non-Waiver.  No omission or delay by Lender in exercising any right or power under this Amendment, or the Financing Documents or any related agreement will impair such right or power or be construed to be a waiver of any default or Event of Default or an acquiescence therein, and any single or partial exercise of any such right or power will not preclude other or further exercise thereof or the exercise of any other right, and no waiver will be valid unless in writing and signed by Lender and then only to the extent specified.  Lender’s rights and remedies are cumulative and concurrent and may be pursued singly, successively or together.

 

9.4           Headings.  The headings of any paragraph of this Amendment are for convenience only and shall not be used to interpret any provision of this Amendment.

 

9.5           Survival.  All warranties, representations and covenants made by Borrower herein, or in any agreement referred to herein or on any certificate, document or other instrument delivered by it or on its behalf under this Amendment, shall be considered to have been relied upon by Lender.  All statements in any such certificate or other instrument shall constitute warranties and representations by Borrower hereunder.  All warranties, representations, and covenants made by Borrower hereunder or under any other agreement or instrument shall be deemed continuing until the Obligations are indefeasibly paid and satisfied in full.

 

9.6           Successors and Assigns.  This Amendment shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto.  No delegation by Borrower of any duty or obligation of performance may be made or is intended to be made to Lender.  No rights are intended to be created hereunder or under any related instruments, documents or agreements for the benefit of any third party donee, creditor, incidental beneficiary or affiliate of Borrower.

 

9.7           GOVERNING LAW.  THIS AMENDMENT, AND ALL MATTERS ARISING OUT OF OR RELATING TO THIS AMENDMENT, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.  THE PROVISIONS OF THIS AMENDMENT, THE OTHER FINANCING DOCUMENTS AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO HEREIN ARE TO BE DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION SHALL NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL CONTINUE IN FULL FORCE AND EFFECT.

 

9.8           CONSENT TO JURISDICTION.  BORROWER AND LENDER HEREBY IRREVOCABLY CONSENT TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN THE STATE OF DELAWARE IN ANY AND ALL ACTIONS AND PROCEEDINGS WHETHER ARISING HEREUNDER OR UNDER ANY OTHER AGREEMENT OR UNDERTAKING.  BORROWER WAIVES ANY OBJECTION TO IMPROPER VENUE AND FORUM NON-CONVENIENS TO PROCEEDINGS IN ANY SUCH COURT AND ALL RIGHTS TO TRANSFER FOR ANY REASON.  BORROWER IRREVOCABLY AGREES TO SERVICE OF PROCESS BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED TO THE ADDRESS OF THE APPROPRIATE PARTY SET FORTH HEREIN.

 

  

7

  

9.9           WAIVER OF JURY TRIAL.  BORROWER AND LENDER HEREBY WAIVE ANY AND ALL RIGHTS THEY MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION COMMENCED BY OR AGAINST LENDER WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO OR UNDER THE FINANCING DOCUMENTS, WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE.

 

9.10           RELEASE.  AS FURTHER CONSIDERATION FOR LENDER’S AGREEMENT TO GRANT THE EXTENSION, ACCOMMODATIONS AND WAIVER SET FORTH HEREIN, BORROWER HEREBY WAIVES AND RELEASES AND FOREVER DISCHARGES LENDER AND ITS MEMBERS, MANAGERS, OFFICERS, ATTORNEYS, AGENTS AND EMPLOYEES FROM ANY LIABILITY, DAMAGE, CLAIM, LOSS OR EXPENSE OF ANY KIND THAT BORROWER MAY NOW OR HEREAFTER HAVE AGAINST LENDER ARISING OUT OF OR RELATING TO THE OBLIGATIONS, THIS AMENDMENT OR THE FINANCING DOCUMENTS.

 

9.11           Waivers.

 

(a)           Borrower will not, directly or indirectly, do any act or fail to do any act, which would impair or affect Lender’s security interest in any Collateral, nor will Borrower, upon any default or Event of Default under this Amendment or the other Financing Documents, contest Lender’s right to obtain judgment against Borrower or to foreclose upon any Collateral pledged to Lender, nor will Borrower move to vacate or enjoin such judgment or foreclosure.

 

(b)           Borrower waives and renounces all rights which are waivable under Article 9 of the Uniform Commercial Code as such rights relate to Borrower’s relationship with Lender, whether such rights are waivable before or after default, including, without limitation, those rights with respect to compulsory disposition of collateral (U.C.C. §§9610, 9615 and 9620), any right of redemption under U.C.C. §9623, and any right to notice relating to disposition of collateral under U.C.C. §9611.

 

9.12           Advice of Counsel.  Borrower acknowledges that it has consulted with independent legal counsel concerning this Amendment and specifically regarding the effect and implications of Sections 9.8, 9.9, 9.10 and 9.11 above, and Borrower knowingly and voluntarily hereby waives the rights described therein or affected thereby.

 

9.13           Signatories:  Each individual signatory hereto represents and warrants that he or she is duly authorized to execute this Amendment on behalf of his or her principal and that he or she executes the Amendment in such capacity and not as a party.

 

9.14           Duplicate Originals.  Two or more duplicate originals of this Amendment may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument.  This Amendment may be executed in counterparts, all of which counterparts taken together shall constitute one completed fully executed document.  Signature by facsimile or PDF shall bind the parties hereto.

 

  

8

  

9.15           Effect of Amendment.  Except as expressly stated herein, (i) the Financing Documents are and shall be unchanged and remain in full force and effect, and (ii) this Amendment shall not constitute a waiver of any default or Event of Default or a waiver of the right of Lender to insist upon compliance with any term, covenant, condition or provision of the Note and the other Financing Documents, as amended hereby.  Except as specifically stated herein, the execution and delivery of this Amendment shall in no way release, diminish, impair, reduce or otherwise affect the respective obligations and liabilities of Borrower or any other Person under any of the Financing Documents, all of which as amended hereby, shall continue in full force and effect.  Borrower hereby ratifies and confirms the existence of each of the Financing Documents to which it is a party, each of the Liens created pursuant to each such Financing Document and each and every term, condition, obligation, liability, undertaking and covenant therein contained.  Each of the Financing Documents is hereby amended and modified to the extent necessary (and without any further action on behalf of Borrower, Lender or any other Person) in order to give full force and effect to this Amendment.  This Amendment constitutes a Financing Document.  All references in each of the Financing Documents to the “Note” (or other similar term) shall refer to the Note as amended by this Amendment, and as further amended from time to time hereafter, and as further amended from time to time.

 

[Signature Page Follows]

 

  

9

  

 

IN WITNESS WHEREOF, the undersigned parties have executed this Seventh Amendment to Secured Promissory Note as of the day and year first above written.

 

BORROWER:

IMAGEWARE SYSTEMS, INC.,

a Delaware corporation

By:           ______________________________

Name:   Wayne Wetherell

Title:     SVP and CFO

Address for Notices:

ImageWare Systems, Inc.

10883 Thornmint Road

San Diego, CA 92127

Attn: Mr. Wayne Wetherell

Telephone: 858-673-8600

Facsimile:  858-673-0291

 

LENDER:

BET FUNDING LLC,

a Delaware limited liability company

By:           ______________________________

Name:   Douglas Topkis

Title:     Member

Address for Notices:

BET Funding LLC

250 Gibraltar Road

Horsham, PA  19044

Telephone: 215-938-8000

Facsimile:  215-938-8019mobi_ex101.htm

EXHIBIT 10.1

 

ROYALTY RIGHTS AGREEMENT

 

This Royalty Rights Agreement (“Agreement”) is made and entered into this ____ day of ________________, 2010, by and between Moving Box Entertainment, LLC, its successors and assigns, a North Carolina limited liability company of 222 East Jones Avenue, Wake Forest, North Carolina 27587 (“Moving Box”), and Garrett, LLC, its successors and assigns, a Kentucky limited liability company of 3505 Castlegate Court, Lexington, Kentucky 40502, Ian McKinnon, #2302, 4801 Bonita Bay Boulevard, Bonita Springs, Florida 34134, and Brad Miller, PO Box 487, Hamilton, Indiana 47642 (Garrett, LLC, Ian McKinnon, and Brad Miller are hereinafter collectively referred to as “Investors”).

WHEREAS, Moving Box is a production company in the business of producing, developing and exploiting various media projects such as movies, documentaries, television programs, and audio programs for use and application in the entertainment marketplace; and

WHEREAS, Moving Box desires to produce a movie entitled “A Box for Rob”, and further desires to sell, lease, license, distribute and syndicate the movie and develop other related media products and platforms related to “A Box For Rob” as a for-profit enterprise (the movie and development of other related media products and platforms and the, sale, lease, license, distribution, and syndication for profit are hereinafter collectively referred to as the “Project”); and

WHEREAS, Moving Box desires to grant and convey royalty rights in and to the  Project in return for funding; and

WHEREAS, the Investors desire to provide funding for the Project in return for royalty rights in and to the Project, all under the terms and conditions set forth herein.

NOW, THEREFORE, for an in consideration of the funds provided by the Investors and the royalty granted by Moving Box, and in further consideration of the mutual covenants and agreements set forth herein, the receipt and sufficiency of which is hereby acknowledged by all parties, Moving Box and the Investors agree as follows:

1. FUNDING AND INVESTORS.   As of the execution of this Agreement, the Investors have paid Moving Box the sum of $154,000.00 for use in the Project, the receipt of which is acknowledged by Moving Box.

 

1.1. Royalty Ownership. The Royalty reserved and granted in § 2.2 herein shall be owned and divided among the Investors, their heirs, executors, administrators, successors and assigns as follows:

 

  

1

  

 

	Name and Address	Contribution	Royalty Percentage Interest
	 	 	 
	GARRETT, LLC	$25,000	16.23%
	3505 Castlegate Court	 	 
	Lexington, Kentucky 40502	 	 
	 	 	 
	Ian McKinnon	$104,000	67.53%
	#2302, 4801 Bonita Bay Boulevard	 	 
	Bonita Springs, Florida 34134	 	 
	 	 	 
	Brad Miller	$25,000 	16.23%
	PO Box 487	 	 
	Hamilton, Indiana 47642	 	 

                                                                                        

 

     2. REPAYMENT TO INVESTORS AND GRANT OF ROYALTY. Moving Box hereby agrees, represents and warrants to the Investors that it shall repay the Investors the amount of their contribution or investment and grants to the Investors the royalty under the terms set forth herein.

2.1. Definitions.  The following terms are defined for purposes of this Agreement as follows:

a. Content.       Any materials, products or assets relating to the Project which are or may be utilized or applied on any media platform and sold worldwide including, but not limited to, movies, DVDs, plays, soundtracks, storylines or screenplays, articles, adaptations, internet use or revenue, cell phone or mobile technologies or applications, books, games, articles or other written product, logos, images or taglines for use in merchandising, any form of merchandise, all rights, licenses, renewals, reissues and adaptations of the story or ideas relating to the movie or the Project in any media form, whether foreign or domestic, and including production or filming credits or incentives, recordings, and money received from any source, in any way related to “A Box For Rob” or concerning the Project during the term of this Agreement and including any and all reissues and releases.

b. Revenue.  All monies received by Moving Box from the worldwide sale, lease, license, release, distribution, syndication, theatrical release, theatrical and box office sales, residuals, renewals, reproductions in any format, pay-per-view, internet and mobile licensing fees or revenue, merchandising sales or licenses in any way related to the Content or Project.

c. Costs.  Out-of-pocket expenses and third party fees incurred by Moving Box for the manufacturing, distribution, syndication, sale, leasing or licensing of the Content, including third party distributor fees, manufacturing costs for DVD’s or other product, publication fees, and sales fees incurred by Moving Box and related to the manufacturing, distribution and syndication of the Content.  The term “Costs” excludes all production costs, wages and salaries in any form, including, but not limited to (i) actor and cinematography expenses, wages or fees, (ii) payments to contractors and related wages, salaries or expenses (iii) expenses related in any way to set production, rentals, equipment fees, equipment rentals, costume design, production, purchase or rental (iv) set, or prop rentals, (v) and any other costs or expenses related to the production of the movie and the Project. The term “Costs” shall further exclude any payment or obligation of Moving Box to the Investors or other persons or entities providing funds or loaning money to Moving Box or for the Project, or any other creditors of Moving Box, and excludes any and all salaries or distributions or any payments to Moving Box, its officers, owners, or directors.

d. Net Revenue.  Net Revenue means the Revenue less the Costs.

 

  

2

  

2.2. Repayment to Investors.  The Investors shall be repaid the amount of their investment by Moving Box, before payment to any other investors or creditors of Moving Box, the first $154,000.00 in Net Revenue received by Moving Box. The Investors shall be repaid simultaneously in accordance with, and in proportion to, their contribution and percentage of ownership set forth in § 1.1 of this Agreement.  Repayment to the Investors shall be made monthly and begin immediately upon the receipt of Net Revenue by Moving Box.

2.3. Royalty.  During the term of this Agreement, Moving Box hereby grants to the Investors collectively, an exclusive, worldwide and royalty bearing right and license to 40% of the Net Revenue derived, or in any way generated by, or related to, the Content and Project (“Royalty”).  Following the repayment to the Investors’ as set forth in § 2.2 above, Moving Box shall thereafter on a monthly basis pay and distribute the Royalty to the Investors in proportion to each investor’s contribution and percentage of ownership in the Royalty as set forth in § 1.1. Each Investors’ ownership interest or share in the Royalty shall be severable, alienable, inheritable, and assignable.

 3. REPORTS.  On or before the 10th day of each month during the term of this Agreement, Moving Box shall furnish each of the Investors at the place then fixed for the payment of the Royalty, a statement of Net Revenue and calculation of the Royalty paid for the preceding calendar month.

 

On or before the 10th day following each calendar quarter, Moving Box shall submit a statement to each of the Investors, satisfactory to the Investors in form and substance, and certified as correct by Moving Box’s president or chief executive officer, showing the amount of Revenue for such quarterly period, together with an itemization of all claimed Costs deducted therefrom in calculating the Net Revenue paid as Royalty during said quarter.  Said Quarterly statements shall be furnished to each of the Investors at the place then fixed for the payment of Royalties.

 Moving Box shall furnish to each of the Investors annual statements for said preceding calendar year, satisfactory to the Investors in form and substance, showing the amount of Revenue for such period together with an itemization of all claimed Costs deducted therefrom in calculating Net Revenue for purposes of the Royalty payments.  Said annual statements shall be furnished to each of the Investors at the place then fixed for the payment of royalties on or before the 30th day following the end of each calendar year.

 

  

3

  

 4. AUDIT RIGHTS.  Moving Box shall prepare and keep at its principal place of business for a period of not less than three (3) years (i) adequate books and records (conforming to generally accepted accounting practices, consistently applied) showing the Revenue, Costs, and Net Revenue for each month through the term of this Agreement, and (ii) all documents and data supporting the books and records of Moving Box including, but not limited to, receipts, invoices, cancelled checks, ledgers, account books, or any other supporting documentation or data.  The Investors, or their duly-authorized representative, may, during regular business hours, inspect the records of Moving Box concerning the Revenue, Costs, and calculation of Net Revenue and the Royalty payments, provided such inspection is commenced within three years after the receipt by the Investors of a certified quarterly statement or annual statement hereinabove required.  If the audit shall disclose a deficiency in Royalty payments for such period audited of less than 5%, Moving Box shall promptly pay to the Investors the Royalty due as a result of such deficiency, if any.  If such audit shall disclose a deficiency in Royalty payments of 5% or more, then Moving Box shall promptly pay the Investors the Royalty due on such deficiency, if any, together with interest at 8% per annum and Moving Box shall pay the costs and fees of such audit.

 5. TERM.  The term of this Agreement shall begin on the date of execution and shall continue for the full term of all applicable copyrights and trademarks, and all extensions and renewals thereof, concerning or in any way related to the Project or the Content, or for so long as the Project or Content produces any Revenue, whichever occurs last.

 6. MOVING BOX OBLIGATIONS.  Moving Box represents and warrants to the Investors that it shall meet the following responsibilities and obligations.

a. Moving Box shall be solely responsible for the production, sale, leasing, licensing, distribution, and syndication of the Content and all aspects of the Project, and shall be solely responsible for payment to actors, cinematographers, crew, contractors, lenders, governmental taxing authorities or any other creditors of any sort or nature.

b. Moving Box has obtained all rights and licenses to copyrights, trademarks, names and trade names, screenplays, authorship, ideas, intellectual property or work product necessary for the Project and Content.

c. Moving Box shall comply with all applicable laws, rules and codes and shall produce, market, sell, lease, license, promote and distribute the Content and conduct the Project in a professional and workmanlike manner and with due diligence all of a quality that is consistent with other producers or production companies in the industry of like experience and funding.

d. Upon written request from the Investors, Moving Box shall provide Investors with any requested information concerning the liabilities of Moving Box or any threatened liabilities, circumstances, or contingencies that have or may interfere with the Royalty payment to the Investors.

 

  

4

  

e. Upon written request from the Investors, Moving Box shall provide the Investors with written documentation and reports verifying and detailing the progress of the Project, including promotions, screenings, distributions, sales or any other developments concerning the Project, the Content, or otherwise impacting the Royalty due the Investors.

f. Moving Box represents and warrants that it has the right to undertake its obligations contained in this Agreement and to supply the marketplace and worldwide territory contemplated by this Agreement with the Content, and by doing so, does not and will not infringe on the intellectual property rights of any third party.

 7. INDEMNITY TO INVESTORS.  The Investors shall have no liability or responsibility other than the payment of funds to Moving Box as set forth in this Agreement.  Investors shall further have no liability or responsibility for any payments to any third parties or creditors of Moving Box, nor to any third party, contractor or employee for any personal injury or property damage arising out of the Project.  Nothing contained in this Agreement shall be construed to create a relationship between Moving Box and the Investors as a joint venture or partnership, and Moving Box hereby agrees to fully indemnify and hold Investors harmless, and to defend the Investors against any and all claims of any sort or nature arising out of the Project or Content.

 8. SERVICE OF NOTICE.  Any written notice in connection with this Agreement shall be sent by certified mail, return receipt requested, or overnight mail with delivery confirmation to the following addresses.  Nonetheless, a written notice or other communication actually received and verified by the receiving party as having been received shall be adequate written notice or communication to it notwithstanding that it was not sent to or delivered at its chosen address.

Moving Box Entertainment, LLC

222 East Jones Avenue

Wake Forest, North Carolina  27587

Attention:  Michael Davis

Investors:

GARRETT, LLC

3505 Castlegate Court

Lexington, Kentucky 40502

Attention:  Mike Heitz and Cory Heitz

Ian McKinnon

#2302, 4801 Bonita Bay Boulevard

Bonita Springs, Florida 34134

Brad Miller

PO Box 487

Hamilton, Indiana 47642

 

  

5

  

 9. ENTIRE AGREEMENT.  This document contains the entire Agreement between the parties regarding the matters contained herein and constitutes the final, complete and exclusive statement of the Agreement between the parties with respect to the subject matter contained herein.  Nonetheless, this Agreement does not replace or supersede all prior written agreements between the parties except to the extent of a conflict between this Agreement and any other written agreement between the parties. In such case the terms and conditions of this Agreement shall govern and supersede any inconsistent or conflicting terms contained in any other agreement between the parties.

 10. SEVERABILITY.  If any provision of this Agreement is found invalid or unenforceable, that provision will be enforced to the maximum extent permissible, and any other provisions of this Agreement will remain in full force and effect.

 11. JURISDICTION.  This Agreement and all matters or disputes arising therefrom shall be governed and construed in accordance with the laws of the State of North Carolina and venue shall be in the County of Wake or in the Federal Courts applicable to the County of Wake, North Carolina.

 12. SUCCESSORS AND ASSIGNS.  This Agreement shall be binding upon, and shall inure to the benefit of the parties signing this Agreement, as well as their heirs, successors and assigns.

 13. COUNTERPARTS.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one in the same instrument.

 14. TIME IS OF THE ESSENCE.  Time is of the essence for this Agreement and all provisions thereof.

     This Agreement has been executed by the parties either individually or by and through their duly-authorized officers, owners or agents.

 

	 	MOVING BOX ENTERTAINMENT,LLC
	 	By:     ______________________________
	 	Title:  ______________________________

 

	 	
INVESTORS:

	 	 
	 	
GARRETT, LLC

	 	By:     ______________________________
	 	Title:  ______________________________
	 	 
	 	 ____________________________________
	 	IAN MCKINNON
	 	 
	 	 ____________________________________

 

  

6

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00177-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00177-of-00352.parquet"}]]