Opinion ID: 604801
Heading Depth: 2
Heading Rank: 2

Heading: The Revised Agreements.

Text: 8 The film project soon encountered delays and financial setbacks. By early 1979, though only 32 of the 104 episodes had been completed, the original investment funds had been virtually exhausted. In order to rescue the project and complete the films to Rey's satisfaction, LHP offered to arrange additional financing. In consideration, LHP insisted that the Milktrain Agreement be revised to permit LHP to assume control of the film production process and to receive higher royalties on the completed episodes. Milktrain assented to these revisions, and the revised Milktrain Agreement (hereinafter: the Revised Milktrain Agreement or RMA) was signed on November 5, 1979. 9 As prelude to its description of the new obligations between Milktrain and LHP, the RMA recited that Milktrain and LHP owned the rights to Curious George which have been obtained from ... Rey under the Rey License. The RMA further stated that: 10 Investors acquiring the episodes shall acquire all right, title and interest therein, without limitation or reserve, including the original negative.... 11 LHP shall have the right to participate on an equal basis with [Milktrain] in their right of first refusal after the present agency rights expire to undertake the exploitation of other rights to Curious George, including manufacturing, food, licensing and the publication of the 104 episodes in book form ... in accordance with the rights granted to [Milktrain] and LHP [by Rey] in [the Revised Rey License]. 1 12 Simultaneously with the negotiation of the RMA, LHP proposed several changes in the Rey License, including language which would have granted LHP the immediate right to undertake the exploitation of other rights to 'Curious George,' including manufacturing, food, licensing and the publication of the 104 episodes in book form. Rey rejected the LHP proposal in a letter to Richard G.D. Lafferty (president and C.E.O. of LHP): I have repeatedly stated to Milktrain and to you that I will not consider negotiating such rights before the films are done. Rey did consent, however, to certain changes to the royalty arrangements, whereby Rey would receive a 10% share of film revenues only after the investors have recouped [their investment] and certain soft dollar commitments ... have been paid. 13 On November 5, 1979, concurrently with the execution of the Revised Milktrain Agreement, a revised version of the Rey License (hereinafter: the Revised Rey License or RRL) was executed, incorporating these changes, and superseding the original Rey License. The RRL recited that the original Rey License had granted Milktrain and LHP the right to produce and distribute animated Curious George films for television viewing, but made no mention of the ancillary product rights unsuccessfully sought by LHP. 14 As agreed, LHP undertook to arrange further financing to complete the film project. On November 23, 1979, LHP released another prospectus (hereinafter: the 1979 Private Placement Memorandum) to which it attached the Revised Milktrain Agreement. The 1979 Private Placement Memorandum again stressed the prospect of eventual revenues from ancillary products but noted that these rights have yet to be negotiated with Rey. 15