Document:

f10q0109ex10i_natlampoon.htm

    
       

      EXHIBIT
10.1

       

      
        	  

                SECURED
      PROMISSORY NOTE

                 

              

      

       

    

    
 

    $600,000

     

    November
7, 2008

     

    Due
June 30, 2010

     

    FOR VALUE
RECEIVED, the undersigned,. 301
PRODUCTIONS, INC., a California corporation ("Borrower"), promises to pay
to the order of VS INVESTMENT
B, LLC ("Lender"), at Lender's principal place of business at 1829 North
Orleans Street, Chicago, Illinois 60614 or such other place as Lender may
designate from time to time hereafter, the principal sum of SIX HUNDRED THOUSAND
AND 00/100 Dollars ($600,000.00). Such total principal sum hereunder shall be
due and payable in full, together with all accrued interest thereon, on June 30,
2010. Borrower's obligations and liabilities to Lender under this Note shall be
defined and referred to herein as "Borrower's Liabilities."

     

    The
unpaid principal balance of Borrower's Liabilities hereunder shall bear interest
from the date of disbursement until June 30, 2010 at the rate of ten percent
(10%) per annum (computed on the basis of a 360 day year and actual days
elapsed). The unpaid principal balance of Borrower's Liabilities due hereunder
shall bear interest from June 30, 2010 until paid at the rate of eighteen
percent (18%) per annum (computed on the basis of a 360 day year and actual days
elapsed).

     

    Any
deposits or other sums at any time credited by or payable or due from Lender to
Borrower, or any monies, cash, cash equivalents, securities, instruments,
documents or other assets of Borrower in the possession or control of Lender or
its bailee for any purpose, may be reduced to cash and applied by Lender to or
setoff by Lender against Borrower's Liabilities.

     

    The debt
evidenced by this Note is secured by a lien on the Collateral granted to Lender
pursuant to a Security Agreement of even date herewith by and among Borrower,
National Lampoon, Inc. ("NL") and Lender (the "Security Agreement"), and
pursuant to any other agreement, document or instrument delivered to Lender by
or on behalf of Borrower.

     

    Borrower
warrants and represents to Lender that Borrower shall use the proceeds
represented by this Note solely for proper business purposes in accordance with
the Security Agreement and consistently with all applicable laws and
statutes.

     

    Borrower
may prepay all or any portion of Borrower's Liabilities hereunder without
prepayment penalty.

     

    The
occurrence of any one of the following events shall constitute a default by the
Borrower ("Event of Default") under this Note: (a) if Borrower fails to pay any
scheduled principal or interest payment or fails to pay any other of Borrower's
Liabilities when due and payable or declared due and payable (whether by
scheduled maturity, required payment, acceleration, demand or otherwise as
provided for in this Note or under applicable law); (b) if Borrower fails or
neglects to perform, keep or observe any term, provision, condition, covenant,
warranty or representation contained in this Note or the Security Agreement; (c)
occurrence of a default or Event of Default under any other agreement
heretofore, now or at any time hereafter delivered by or on behalf of Borrower
to Lender; (d) if the Collateral or any other of Borrower's assets are attached,
seized, subjected to a writ, or are levied upon or become subject to any lien or
come within the possession of any receiver, trustee, custodian or assignee for
the benefit of creditors; (e) if a notice of lien, levy or assessment is filed
of record or given to Borrower with respect to all or any of Borrower's assets
by any federal, state, or local department or agency; (f) if a petition under
Title 11 of the United States Code or any similar law or regulation is filed by
or against Borrower or NL, if Borrower or NL shall make an assignment for the
benefit of creditors, if any case or proceeding is filed by or against Borrower
or NL for its dissolution or liquidation, or if Borrower or NL is enjoined,
restrained or in any way prevented by court order from conducting all or any
material part of its business affairs; 

     

    
      
        
        

      

      
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    (g) the
dissolution of Borrower or NL, or the appointment of a conservator for all or
any portion of Borrower's assets or the Collateral; (h) if a contribution
failure occurs with respect to any pension plan maintained by Borrower or any
corporation, trade or business that is, along with Borrower, a member of a
controlled group of corporations or controlled group of trades or businesses (as
described in Sections 414(b) and (c) of the Internal Revenue Code of 1986 or
Section 4001 of ERISA) sufficient to give rise to a lien under Section 302(f) of
ERISA; (i) if Borrower is in default in the payment of any obligations,
indebtedness or other liabilities to any third party and such default is
declared and is not cured within the time, if any, specified therefor in any
agreement governing the same; or (j) if any material, representation, statement,
report or certificate made or delivered to Lender by Borrower, NL or any of
their partners, officers, employees or agents is not true and
correct.

     

    Upon the
occurrence of an Event of Default, at Lender's option, without notice by Lender
to or demand by Lender of Borrower: (i) all of Borrower's Liabilities shall be
immediately due and payable; (ii) Lender may exercise any one or more of the
rights and remedies accruing to a secured party under the Uniform Commercial
Code of the relevant jurisdiction and any other applicable law upon default by a
debtor; (iii) Lender may enter, with or without process of law and without
breach of the peace, any premises where the Collateral is or may be located, and
may seize or remove the Collateral from said premises and/or remain upon said
premises and use the same for the purpose of collecting, preparing and disposing
of the Collateral; and/or (iv) Lender may sell or otherwise dispose of the
Collateral at public or private sale for cash or credit, provided, however, that
Borrower shall be credited with the net proceeds of any such sale only when the
same are actually received by Lender.

     

    Upon an
Event of Default, Borrower, immediately upon demand by Lender, shall assemble
the Collateral and make it available to Lender at a place or places to be
designated by Lender which is reasonably convenient to Lender and
Borrower.

     

    All of
Lender's rights and remedies under this Note are cumulative and non-exclusive.
The acceptance by Lender of any partial payment made hereunder after the time
when any of Borrower's Liabilities become due and payable will not establish a
custom or waive any rights of Lender to enforce prompt payment hereof. Lender's
failure to require strict performance by Borrower of any provision of this Note
shall not waive, affect or diminish any right of Lender thereafter to demand
strict compliance and performance therewith. Any waiver of an Event of Default
hereunder shall not suspend, waive or affect any other Event of Default
hereunder. Borrower and every endorser waive presentment, demand and protest and
notice of presentment, protest, default, non-payment, maturity, release,
compromise, settlement, extension or renewal of this Note, and hereby ratify and
confirm whatever Lender may do in this regard. Borrower further waives any and
all notice or demand to which Borrower might be entitled with respect to this
Note by virtue of any applicable statute or law (to the extent permitted by
law).

     

    Borrower
agrees to pay, immediately upon demand by Lender, any and all costs, fees and
expenses (including reasonable attorneys' fees, costs and expenses) incurred by
Lender (i) in enforcing any of Lender's rights hereunder, and (ii) in
representing Lender in any litigation, contest, suit or dispute, or to commence,
defend or intervene or to take any action with respect to any litigation,
contest, suit or dispute (whether instituted by Lender, Borrower or any other
person) in any way relating to this Note or Borrower's Liabilities or the
Collateral, and to the extent not paid the same shall become part of Borrower's
Liabilities.

     

    This Note
shall be deemed to have been submitted by Borrower to Lender and to have been
made at Lender's principal place of business. This Note shall be governed,
controlled, construed and enforced in accordance with the laws of the State of
California applicable to instruments and agreements made and to be performed
entirely within that State, without regard to any choice of law or conflict of
law provision or rule (whether of such state or any other jurisdiction) that
would cause the application of the law of any jurisdiction other than the State
of California.

     

    
      
        
        

      

      
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    TO INDUCE
LENDER TO ACCEPT THIS NOTE, BORROWER IRREVOCABLY AGREES THAT, SUBJECT TO
LENDER'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY,
MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS NOTE OR THE
COLLATERAL SHALL BE LITIGATED EXCLUSIVELY IN COURTS HAVING SITUS WITHIN THE CITY
OF LOS ANGELES, STATE OF CALIFORNIA. BORROWER HEREBY IRREVOCABLY CONSENTS TO THE
EXERCISE OF JURISDICTION OVER ITS PERSON AND PROPERTY BY, AND VENUE IN, ANY
COURT OF COMPETENT JURISDICTION SITUATED IN THE CITY OF LOS ANGELES, STATE OF
CALIFORNIA (WHETHER IT BE A COURT OF SUCH STATE, OR A COURT OF THE UNITED STATES
OF AMERICA SITUATED IN SUCH CITY AND STATE), AND IN CONNECTION THEREWITH, AGREES
TO SUBMIT TO, AND BE BOUND BY, THE JURISDICTION AND VENUE OF SUCH COURT, ANY
OBJECTION TO SUCH JURISDICTION AND VENUE BEING EXPRESSLY WAIVED HEREBY. BORROWER
HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY
LITIGATION BROUGHT AGAINST BORROWER BY LENDER IN ACCORDANCE WITH THIS
PARAGRAPH.

     

    BORROWER
IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM
OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION WITH
THIS NOTE OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH
MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR (II) ARISING FROM ANY
DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS NOTE OR ANY SUCH
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT, AND AGREES THAT ANY SUCH ACTION,
SUIT, COUNTERCLAIM OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY.

     

    

    

     

    
 

    
      
         

      

      
        Page 3of
3f10q0109ex10ii_natlampoon.htm

    EXHIBIT
10.2

    PROFIT
PARTICIPATION AGREEMENT

     

    THIS
PROFIT PARTICIPATION AGREEMENT (as amended, restated or otherwise modified from
time to time, the "Participation
Agreement") is entered into as of the 7th day of November, 2008, by and
among 301 PRODUCTIONS, INC., a California corporation (the "Grantor"). VS
INVESTMENT B, LLC (referred to as the "Grantee"), and
National Lampoon, Inc. ("NL"). The Grantor, Grantee and NL are sometimes
referred to herein collectively as the "Parties" and each
individually as a "Party".

    

     

    RECITALS

     

    WHEREAS,
simultaneously herewith, the Grantee is making a loan in the principal amount of
$600,000 (the "Loan"), evidenced by that Secured Promissory Note of Grantor
dated as of November 7, 2008 (the "Secured Promissory
Note"), the proceeds of which will be used to fund the production,
marketing and distribution of the motion picture currently titled "National
Lampoon's The Legend of Awesomest Maximus" (the "Picture").

     

    WHEREAS,
simultaneously herewith, the Grantee, Grantor and NL are entering into that Loan
and Security Agreement dated November 7, 2008 (the "Security Agreement")
pursuant to which Grantor and NL agreed to enter into this
Agreement.

     

    WHEREAS,
NL controls and owns all of the issued and outstanding equity securities of
Grantor, and NL and Grantor have entered into that certain Worldwide
Distribution Agreement dated as of November 7, 2008 (the "NL Distribution
Agreement") pursuant to which Grantor has appointed NL as the worldwide
distributor of the Picture.

     

    WHEREAS,
NL is receiving direct benefits as the result of the Loan and under the Security
Agreement, and Grantee is not willing to make the Loan unless NL enters into
this Agreement.

     

    NOW,
THEREFORE, as a further inducement to the Grantee to make the Loan evidenced by
the Secured Promissory Note and the Security Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties agree as follows:

    

    
      
        
        

      

      
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    1.
PARTIAL ASSIGNMENT OF PROFIT PARTICIPATION. NL shall pay, or cause to be paid,
to Grantee, an amount equal to Fifteen and Four-Tenths percent (15.4%) of One
Hundred Percent (100%) of all Net Profits, as defined below (the "Participation
Amount").

    

    As used
herein, the term "Net
Profits" shall mean the sum of all Gross Proceeds (defined below) minus
the sum of the following:

     

    (i)
Distribution and sales fees, which shall not exceed 20% (inclusive of any NL
override fee);

     

    (ii)
Actual, direct, out of pocket sales, marketing or distribution expenses,
and
out-of-pocket costs of manufacturing or delivery of the Picture incurred by NL
or Grantor,
if any, which expenses and costs have been approved by Grantee and Grantor in
writing,
in advance;

    

     

    (iii) All
guild residuals and deferred compensation paid directly by Grantor
(and not included in "negative costs" pursuant to clause (v) below) to any
person providing
rights or services in connection with production of the Picture;

    

    (iv) Financing
costs, including interest, paid by Grantor to all third party lenders,
but excluding payment of amounts to any such lenders or other financing sources
that are
in the nature of profits interests or participations, equity participations or
are otherwise
contingent or based on profits of the Picture;

    

    (v) the
8% royalty payable to NL with respect to its license of intellectual
property
in accordance with the terms of the NL Distribution Agreement; and

    

    (vi) Negative
cost, which shall mean the direct, out-of-pocket cost of producing
the Picture, which shall not exceed the amount of the Final Budget (as defined
in the
Security Agreement), and which shall not include any item included under any of
the
foregoing clauses (i) through (v).

    

    As used
herein, the term "Gross Receipts" with
respect to the Picture shall mean one hundred (100%) percent of all sums
received by or on behalf of, or credited to, NL (or any affiliate), or Grantor,
directly or indirectly from the sale, distribution or exploitation of the Rights
(as defined in the NL Distribution Agreement) and/or the Picture, with no
deduction therefrom other than withholding tax, sales tax or other similar taxes
or levies charged on the exhibition, distribution or exploitation of the
Picture, and specifically excluding any corporate income or similar taxes levied
against NL, Grantor or any of their affiliates. For the avoidance of doubt Gross
Receipts shall include income derived from so-called 'outright licenses',
non-returnable advances, tax credits, subsidies or guarantees (whether or not
earned) paid to NL (or any affiliate) or Grantor and all other revenues
howsoever earned by NL (or any affiliate) or Grantor in respect of the Rights
and/or the Picture.

    

    
      
        
        

      

      
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    2.
ACCOUNTING & PAYMENT. NL shall pay to Grantee, at the address for notices to
Grantee pursuant to Section 5 below, all sums constituting a portion of the
Participation Amount which are received or credited during any calendar quarter
ending after the date hereof within thirty (30) days following the end of such
quarter ("Quarterly Payments"). Together with each Quarterly Payment, NL shall
deliver to Grantee a true and accurate accounting statement for the quarter,
showing all inputs to the calculation of Gross Proceeds, Net Profits and the
amount payable to Grantee, all as calculated in accordance with this Agreement.
If no Quarterly Payment is due to Grantee for the subject calendar quarter, NL
shall not be required to provide a statement of accounting unless it is
requested in writing by Grantee. Without limiting the foregoing, After five (5)
years following the date on which the first such quarterly statement is
provided, accounting statements will be provided to Grantee one (1) time per
year unless a Quarterly Payment is due for a calendar quarter. Without limiting
Grantee's rights under the Security Agreement or under any other document or
instrument, no more frequently than once per calendar year, and upon reasonable
prior written notice, Grantee may, at its sole and own expense, audit NL's
records, solely as they pertain to the Picture. Any such audit will be conducted
upon reasonable notice to NL during NL's normal business hours as scheduled by
NL and shall not last more than ten (10) days. Any auditor used by NL and/or
Grantee shall specialize in entertainment industry audits.

     

    3. NO CROSS
COLLATERALIZATION. Grantee acknowledges that this Participation Agreement is to
be binding only upon Participation due and payable from the Picture. At no time
will NL cross collateralize with or set-off against any amounts for any other
motion picture distributed by NL.

     

    4. ASSIGNMENT.
This Participation Agreement and all obligations of NL hereunder shall be
binding upon the successors and assigns of NL (including any
debtor-in-possession on behalf of Grantor) and shall, together with the rights
and remedies of Grantee hereunder, inure to the benefit of Grantee, all future
holders of any instrument evidencing any of the Obligations and its respective
successors and assigns. Grantee may assign its interest or any portion of its
interest hereunder by providing thirty (30) days written notice to Grantor and
to NL.

     

    5. NOTICES.
All notices must be in writing and sent to a Party at its address hereunder by
fax or first class mail. Notices may be sent by email but will not be effective
until recipient acknowledges receipt. All notices sent to Grantor must be
addressed to:

     

    301
Productions, Inc.

    ATTN:
Lorraine Evanoff 

    8228
Sunset Boulevard 

    Los
Angeles, California 90046 

    F:
310-474-1219

    

     

    If to
NL:

    National
Lampoon, Inc. 

    ATTN:
Lorraine Evanoff 

    8228
Sunset Boulevard 

    Los
Angeles, California 90046 

    F:
310-474-1219

    

    If to
Grantee: 

    VS
Investment B, LLC 

    1829
North Orleans Street 

    Chicago,
Illinois 60614 

    F:
773-409-5662

     

    
      
        
        

      

      
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    6.
MODIFICATION.   No modification to this Participation Agreement
is effective unless the modification is in writing and signed by all
Parties.

     

    7. ADDITIONAL
DOCUMENTS. Upon reasonable request, each Party will execute and deliver such
additional documents necessary to evidence, effectuate or confirm this
Participation Agreement.

     

    8. GOVERNING
LAW. This Agreement will be governed by and interpreted under the laws of the
state of California. The Parties agree that all disputes under this Agreement
will be resolved in Los Angeles, California.

    

    IN
WITNESS WHEREOF, each of the parties hereto has caused this Participation
Agreement to be executed and delivered by its duly authorized officer as of the
date first set forth above.

     

    GRANTOR

    301
Productions, Inc.

     

    
      
        	
                By:
      

              	/s/ 
      Daniel S. Laikin	 
	 	Daniel
      S. Laikin	 
	 Its:	CEO
      and President	 
	 	 	 

      

    

    

    

     

    NL

    National
Lampoon, Inc.

     

    
      	
              By:
      

            	/s/ 
      Daniel S. Laikin	 
	 	Daniel
      S. Laikin	 
	Its:	CEO
      and President	 
	 	 	 

    

     

     

    GRANTEE

    VS Investment B,
LLC

     

    
      	
              By:
      

            	 	 
	 	 	 
	Its:	 	 
	 	 	 

    

     

     

    4

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