EXHIBITOR SERVICES AGREEMENT DATED AS OF FEBRUARY 13, 2007

Exhibit 10.2

NOTE: THIS DOCUMENT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST PURSUANT TO RULE 24b-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. PORTIONS OF THIS DOCUMENT FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED HAVE BEEN REDACTED AND ARE MARKED HEREIN BY “***”. SUCH REDACTED INFORMATION HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO THE CONFIDENTIAL TREATMENT REQUEST.

 

EXHIBITOR SERVICES AGREEMENT

BETWEEN NATIONAL CINEMEDIA, LLC AND

AMERICAN MULTI-CINEMA, INC.

DATED AS OF FEBRUARY 13, 2007

 

TABLE OF CONTENTS

 

 

i

 

ii

EXHIBITS AND SCHEDULE

 

 

iii

EXHIBITOR SERVICES AGREEMENT

THIS EXHIBITOR SERVICES AGREEMENT (this “Agreement”) is entered into and effective as of February 13, 2007 (the “Effective Date”) by and between National CineMedia, LLC, a Delaware limited liability company (“LLC”), and American Multi-Cinema, Inc., a Missouri corporation (“AMC,” and with LLC, each a “Party” and collectively, the “Parties”).

BACKGROUND

WHEREAS, AMC, Regal CineMedia Holdings, LLC (“RCH”) and Cinemark Media, Inc. (“Cinemark Media”), are parties to that certain Third Amended and Restated Limited Liability Company Operating Agreement, dated of even date herewith (the “LLC Agreement”), which shall govern the rights and obligations of AMC, RCH and Cinemark Media (collectively, the “Founding Members”) and National CineMedia, Inc. (“National CineMedia”) as Members in LLC and their ownership of certain Common Units (as defined in the LLC Agreement) in LLC; and

WHEREAS, pursuant to the LLC Agreement, LLC will operate a Digital Content Network (as defined below), which has the capabilities to provide the Founding Members the Digital Content Service, the Digital Programming Services and the Meeting Services (each as defined below) pursuant to the terms and conditions herein; and

WHEREAS, AMC participates in the Digital Content Network through its Theatres; and

WHEREAS, LLC and AMC desire to enter into a service arrangement pursuant to which LLC will provide the Advertising Services (as defined below), including the Digital Content Service and the Traditional Content Program, the Digital Programming Services and the Meeting Services to AMC theatres, and AMC will accept the Advertising Services, the Digital Programming Services and the Meeting Services in such theatres, all on the terms and conditions set forth herein; and

WHEREAS, LLC and AMC anticipate that this service arrangement will, among other accomplishments, improve both the movie-going experience of theatre patrons and the ability of national, regional and local advertisers to reach their target consumers.

NOW, THEREFORE, in consideration of the premises and mutual covenants in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, and, intending to be legally bound hereby, the Parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

Section 1.01 Definitions . Within the context of this Agreement, the following terms shall have the following meanings:

“ 4.03 Revenue ” has the meaning assigned to it in Section 4.03.

“ Acceptance Notice ” has the meaning assigned to it in Section 9.03(c).

“ Acquisition Theatre(s) ” has the meaning assigned to it in Section 2.02(b).

“ Additional Lobby Promotion ” has the meaning assigned to it in Section 4.02(a)(i).

“ Administrative Agent ” means Lehman Commercial Paper Inc., as administrative agent under the LLC Credit Agreement and any successors and assignees in accordance with the terms of the LLC Credit Agreement.

“ Administrative Fee ” means the fee for services provided by LLC as requested by AMC in connection with delivery of content to Theatres.

“ Advertising Services ” means the advertising and promotional services (including the Digital Content Service, the Digital Carousel, the Traditional Content Program, Lobby Promotions and Event Sponsorships) as described in Part A of Exhibit A hereto.

“ Affiliate ” means with respect to any Person, any Person that directly or indirectly, through one or more intermediaries Controls, is Controlled by or is under common Control with such Person. Notwithstanding the foregoing, (i) no Member shall be deemed an Affiliate of LLC, (ii) LLC shall not be deemed an Affiliate of any Member, (iii) no stockholder of REG, or any of such stockholder’s Affiliates (other than REG and its Subsidiaries) shall be deemed an Affiliate of any Member or LLC, (iv) no stockholder of Marquee Holdings, or any of such stockholder’s Affiliates (other than Marquee Holdings and its Subsidiaries) shall be deemed an Affiliate of any Member or LLC, (v) no stockholder of Cinemark Holdings, or any of such stockholder’s Affiliates (other than Cinemark Holdings and its Subsidiaries) shall be deemed an Affiliate of any Member or LLC, (vi) no stockholder of National CineMedia shall be deemed an Affiliate of National CineMedia, and (vii) National CineMedia shall not be deemed an Affiliate of any stockholder of National CineMedia.

“ Aggregate Advertising Revenue ” means, for the applicable measurement period, the total revenue, in the form of cash and non-cash consideration, payable to LLC for Advertising Services, excluding revenue payable to LLC related to (i) Event Sponsorship, (ii) Advertising Services provided to third parties that are not Founding Members, and (iii) Advertising Services provided to Founding Members outside the provisions of this Agreement pursuant to a written agreement between LLC and such Founding Members.

“ Agreement ” has the meaning assigned to it in the preamble of this Agreement, as the same may be amended, supplemented or otherwise modified from time to time.

“ Alternative Agreement ” has the meaning assigned to it in Section 9.03(a).

“ AMC ” has the meaning assigned to it in the preamble of this Agreement.

“ AMC Derived Works ” has the meaning assigned to it in Section 13.02(b).

 

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“ AMC Equipment ” means the Equipment owned by AMC.

“ AMC Information ” means all Confidential Information supplied by AMC and its Affiliates.

“ AMC Initial ESA Modification Payment ” has the meaning assigned to it in Section 2.05(a)(i).

“ AMC Legacy Agreement(s) ” means all pre-Effective Date agreements of AMC or its Affiliates, including without limitation such agreements relating to the purchase of advertising in Acquisition Theatres, pursuant to which services which fall within the definition of Advertising Services are provided and which are expected to result in the generation of revenue payable to AMC or its Affiliates on and after the Effective Date, but excluding the Beverage Agreement, agreements with third-party cinema advertising service providers (which give rise to Run-Out Obligations pursuant to Section 4.08) and agreements between AMC or its Affiliates and any theatres owned by third parties (including other Members or their Affiliates) regarding the exhibition of content, advertisements or promotions in such third-party theatres.

“ AMC Marks ” means the trademarks, service marks, logos, slogans and/or designs owned by AMC or otherwise contributed by AMC for use under this Agreement, in any and all forms, formats and styles, including as may be used in the Brand (as defined herein), as may be modified from time-to-time all as notified to LLC from time-to-time by AMC.

“ AMC Property ” has the meaning assigned to it in Section 13.01(b).

“ AMC Quality Standards ” has the meaning assigned to it in Section 7.03(c).

“Assignment and Assumption” has the meaning assigned to it in Section 15.08.

“ Bankruptcy Code ” means Title 11 of the United States Code (11 U.S.C. §101 et seq.), as amended from time to time.

“ Beverage Agreement ” means the Marketing, Advertising and Brand Presence Agreement by and between AMC and The Coca-Cola Company, dated as of January 1, 2005, and all exhibits and amendments thereto, as such agreement may be amended from time to time, and any subsequent agreements entered into by AMC and its beverage concessionaires at the expiration or termination of the agreement referenced above which is in effect on the Effective Date.

“ Beverage Agreement Advertising Rate ” has the meaning assigned to it in Section 4.06(a).

“ Beverage Compliance Report ” has the meaning assigned to it in Section 4.10(b)(i).

“ Brand ” has the meaning assigned to it in Section 4.05.

“ Branded Slots ” has the meaning assigned to it in Section 4.05.

 

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“Church Worship Service” means a Meeting Event sold to a non-profit religious organization.

“ Cinemark ” means Cinemark USA, Inc., a Texas corporation.

“ Cinemark Exhibitor Agreement ” means the Exhibitor Services Agreement between LLC and Cinemark, dated of even date herewith, as the same may be amended, supplemented or otherwise modified from time to time.

“ Cinemark Holdings ” means Cinemark Holdings, Inc. or its successor or any Person that wholly owns Cinemark Holdings, directly or indirectly, in the future.

“ Cinemark Media ” has the meaning assigned to it in the recitals to this Agreement.

“Cinemark Theatre” means any “Theatre” as defined in the Cinemark Exhibitor Agreement.

“ Client Limitation ” has the meaning assigned to it in Section 4.07(b)(i).

“Common Unit Adjustment” has the meaning assigned to it in the LLC Agreement.

“Common Units” has the meaning assigned to in the LLC Agreement.

“ Concessions ” means popcorn, candy, and other food and beverage items sold at the concession stands in Theatres.

“ Confidential Information ” means all documents and information concerning any other Party hereto furnished it by such other Party or its representatives in connection with the transactions contemplated by this Agreement (together with confidential information, including but not limited to Intellectual Property and other Proprietary Information of the other Members and LLC), and shall include, by way of example and not limitation, the LLC Property, the AMC Property, the LLC Derived Works and the AMC Derived Works. Confidential Information shall also include all Confidential Information supplied by the Members and their Affiliates. Notwithstanding the foregoing, Confidential Information shall not include any information that can be shown to have been (i) previously known by the Party to which it is furnished lawfully and without breaching or having breached an obligation of such Party or the disclosing Party to keep such documents and information confidential, (ii) in the public domain through no fault of the disclosing Party, or (iii) independently developed by the disclosing Party without using or having used the Confidential Information.

“ Control ” (including the terms “ Controlled by ” and “ under common Control with ”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise.

“ Costs ” has the meaning assigned to it in Section 11.01(a).

 

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“ CPI ” means the monthly index of the U.S. City Average Consumer Price Index for Urban Wage Earners and Clerical Workers (All Items; 1982-84 equals 100) published by the United States Department of Labor, Bureau of Labor Statistics or any successor agency that shall issue such index. In the event that the CPI is discontinued for any reason, LLC shall use such other index, or comparable statistics, on the cost of living for urban areas of the United States, as shall be computed and published by any agency of the United States or, if no such index is published by any agency of the United States, by a responsible financial periodical of recognized authority.

“ CPI Adjustment ” means the quotient of (i) the CPI for the month of January in the calendar year for which the CPI Adjustment is being determined, divided by (ii) the CPI for January of 2007.

“ Creative Services ” has the meaning assigned to it in Exhibit B .

“ Designated Services ” has the meaning assigned to it in Section 9.03(a).

“ Digital Carousel ” means a loop of slide advertising with minimal branding and entertainment content which (i) is displayed before the Pre-Feature Program in Digitized Theatres via the Digital Content Network and (ii) is displayed before the Traditional Content Program in Non-Digitized Theatres via a non-digital slide projector.

“ Digital Cinema Services ” means services related to the digital playback and display of feature films at a level of quality commensurate with that of 35 mm film release prints that includes high-resolution film scanners, digital image compression, high-speed data networking and storage, and advanced digital projection.

“ Digital Content Network ” means a network of LLC Equipment and third-party equipment and other facilities which provides for the electronic transmission of digital content, directly or indirectly, from a centrally-controlled location to Theatres, resulting in the “on-screen” exhibition of such content in such Theatres, either in Theatre auditoriums or on Lobby Screens.

“ Digital Content Service ” means the Pre-Feature Program, Policy Trailer, Event Trailer and the Video Display Program.

“ Digital Event Peak Season ” has the meaning assigned to it in Exhibit B .

“ Digital Films ” has the meaning assigned to it in Exhibit B .

“ Digital Programming ” means the content of Digital Programming Services.

“Digital Programming EBITDA Threshold” has the meaning assigned to it in Section 9.01(b).

“Digital Programming Renewal Term” has the meaning assigned to it in Section 9.01(b).

 

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“ Digital Programming Services ” has the meaning assigned to it in Part B of Exhibit B .

“Digital Programming Term” has the meaning assigned to it in Section 9.01(b).

“ Digital Screen ” means a screen in an auditorium of a Digitized Theatre.

“ Digitized Theatres ” means all Theatres that are connected to the Digital Content Network, as of the Effective Date, and all Theatres that subsequently connect to the Digital Content Network, as of the date such connection is established .

“ Disposition ” (including the term “ Disposed ”) has the meaning assigned to it in Section 2.03.

“ EBITDA ” means, for the applicable measurement period, earnings before interest, taxes, depreciation and amortization, all as defined by GAAP.

“ Effective Date ” has the meaning assigned to it in the preamble of this Agreement.

“ Encumbered Theatres ” has the meaning assigned to it in Section 4.08(a).

“ Equipment ” means the equipment and cabling, as prescribed by the terms of this Agreement, which is necessary to schedule, distribute, play, reconcile and otherwise transmit and receive the Services delivered by LLC pursuant to the terms of this Agreement, and a complete list of all such equipment located inside or on any Theatre building and the ownership thereof as of the date hereof is set forth in the Specification Documentation, as may be amended from time to time at the request of either Party.

“ ESA-Related Tax Benefit Payments ” has the meaning assigned to it in Section 1.1 of the Tax Receivable Agreement.

“ Event Sponsorship ” has the meaning assigned to it in Part A of Exhibit A .

“ Event Trailer ” has the meaning assigned to it in Section 6.03(a).

“ Excluded Theatres ” has the meaning assigned to it in Section 4.13(a).

“ Flight ” has the meaning assigned to it in Section 4.01(a).

“ Founding Members ” has the meaning assigned to it in the recitals to this Agreement and shall include their respective Affiliates.

“ Future Theatres ” has the meaning assigned to it in Section 3.01.

“ GAAP ” means United States generally accepted accounting principles, consistently applied.

 

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“ Governmental Authority ” means any nation or government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“ Group ” has the meaning used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934.

“ IMAX Screens ” has the meaning assigned to it in Section 4.13(b).

“ Indemnifying Party ” has the meaning assigned to it in Section 11.01(c).

“ Infringement ” has the meaning assigned to it in Section 12.02.

“Initial Digital Programming Term” has the meaning assigned to it in Section 9.01(b).

“Initial Meeting Services Term” has the meaning assigned to it in Section 9.01(c).

“ Initial Term ” has the meaning assigned to it in Section 9.01(a).

“ Intellectual Property ” means all intellectual property, including but not limited to all U.S., state and foreign (i) (A) patents, inventions, discoveries, processes and designs; (B) copyrights and works of authorship in any media; (C) trademarks, service marks, trade names, trade dress and other source indicators and the goodwill of the business symbolized thereby, (D) software; and (E) trade secrets and other confidential or proprietary documents, ideas, plans and information; (ii) registrations, applications and recordings related thereto; (iii) rights to obtain renewals, extensions, continuations or similar legal protections related thereto; and (iv) rights to bring an action at law or in equity for the infringement or other impairment thereof.

“ Inventory ” means any advertising or other content.

“ License Agreement ” means that certain Second Amended and Restated Software License Agreement, dated of even date herewith, among LLC, AMC, Cinemark and Regal, as applicable, and as such agreement may be amended, supplemented or otherwise modified from time to time.

“ LLC Agreement ” has the meaning assigned to it in the recitals to this Agreement.

“ LLC Credit Agreement ” means the Credit Agreement dated as of February 13, 2007 among LLC, the several lenders from time to time parties thereto, JPMorgan Chase Bank, N.A., as syndication agent, Credit Suisse (USA) LLC and Morgan Stanley Senior Funding, Inc., as co-documentation agents and the Administrative Agent, as amended, modified or supplemented from time to time and any extension, refunding, refinancing or replacement (in whole or in part) thereof.

“ LLC Derived Works ” has the meaning assigned to it in Section 13.02(a).

 

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“ LLC Equipment ” means the Equipment owned by LLC pursuant to the terms of this Agreement.

“ LLC Marks ” means the trademarks, service marks, logos, slogans and/or designs owned by LLC or otherwise contributed by LLC for use under this Agreement, in any and all forms, formats and styles, including as may be used in the Brand (as defined herein), as may be modified from time-to-time all as notified to AMC from time to time by LLC.

“ LLC Property ” has the meaning assigned to it in Section 13.01(a).

“ LLC Quality Standards ” has the meaning assigned to it in Section 7.02(c).

“ Lobby Promotions ” has the meaning assigned to it in Part A of Exhibit A.

“ Lobby Screen” means a plasma, LED or other type of screen displaying digital or recorded content that is located inside a Theatre and outside the auditoriums, or any other type of visual display mechanism that replaces such a screen. Lobby Screens shall not include, however, digital poster cases, digital animated poster cases , ATM or ticket kiosk screens (or such items that may replace digital poster cases or ATM or ticket kiosk screens in the future) or other substantially similar display mechanisms that display Theatre Advertising or promotional material that may include some or all of the following types of content: isolated images or still scenes from feature films, full motion elements that are not a movie trailer, interactive elements, audio elements and motion sensors and which content, considered singularly and collectively, is sufficiently limited in playtime and complexity such that it cannot reasonably be considered equivalent to a movie trailer.

“ Loews Theatres ” mean the theatres acquired (and not divested under government order) by AMC Entertainment Inc. in connection with its merger with Loews Cineplex Entertainment Corporation completed on January 26, 2006.

“ Marketing Materials ” has the meaning assigned to it in Section 7.02(a).

“ Marquee Holdings ” means Marquee Holdings Inc. (a holding company that conducts business through its subsidiary AMC Entertainment Inc.) or its successor or any Person that wholly owns Marquee Holdings, directly or indirectly, in the future.

“Meeting Services” has the meaning assigned to it in Part C of Exhibit A .

“Meeting Services EBITDA Threshold” has the meaning assigned to it in Section 9.01(c).

“Meeting Services Renewal Term” has the meaning assigned to it in Section 9.01(c).

“Meeting Services Term” has the meaning assigned to it in Section 9.01(c).

“Meeting With a Movie” means a Meeting Services event at which a feature film is shown and for which tickets are sold.

 

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“Meeting Without a Movie” means a Meeting Services event at which no feature film is shown.

“ Member ” means each Person that becomes a member, as contemplated in the Delaware Limited Liability Act, of LLC in accordance with the provisions of the LLC Agreement and has not ceased to be a Member pursuant to the LLC Agreement.

“ National CineMedia ” has the meaning assigned to it in the recitals to this Agreement.

“ Newbuild Theatre(s) ” has the meaning assigned to it in Section 2.02(a).

“ Non-Assignable Legacy Agreement ” has the meaning assigned to it in Section 4.06(b)(ii).

“ Non-Digitized Theatres ” means Theatres that are not Digitized Theatres.

“ Party ” has the meaning assigned to it in the preamble of this Agreement.

“ Permitted Transfer ” means:

(a) by operation of law or otherwise, the direct or indirect change in control, merger, consolidation or acquisition of all or substantially all of the assets of LLC or AMC, as applicable, or the assignment of this Agreement by Circuit A to an Affiliate,

(b) with respect to the rights and obligations of LLC under this Agreement, (i) the grant of a security interest by LLC in this Agreement and all rights and obligations of LLC hereunder to the Administrative Agent, on behalf of the Secured Parties, pursuant to the Security Documents, (ii) the assignment or other transfer of such rights and obligations to the Administrative Agent (on behalf of the Secured Parties) or other third party upon the exercise of remedies in accordance with the LLC Credit Agreement and the Security Documents and (iii) in the event that the Administrative Agent is the initial assignee or transferee under the preceding clause (ii), the subsequent assignment or other transfer of such rights and obligations by the Administrative Agent on behalf of the Secured Parties to a third party, or

(c) in the event that LLC becomes a debtor in a case under the Bankruptcy Code, the assumption and/or assignment by LLC of this Agreement under section 365 of the Bankruptcy Code, notwithstanding the provisions of section 365(c) thereof.

“ Person ” means any individual, corporation, limited liability company, partnership, trust, joint stock company, business trust, unincorporated association, joint venture, Governmental Authority or other entity or organization of any nature whatsoever or any Group of two or more of the foregoing.

“ Play List ” has the meaning assigned to it in Section 4.01(a).

“ Policy Trailer ” has the meaning assigned to it in Section 4.05(b).

 

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“ Pre-Feature Program ” means a program of digital content of between twenty (20) and thirty (30) minutes in length that is distributed by LLC through the Digital Content Network for exhibition in Digitized Theatres prior to Showtime, or that is distributed non-digitally by some other means, including DVD, for exhibition prior to Showtime in Non-Digitized Theatres.

“ Pre-Feature Programming Schedule ” means the schedule for the Pre-Feature Program as developed from time to time by LLC after consultation with AMC.

“ Proprietary Information ” means all Intellectual Property, including but not limited to information of a technological or business nature, whether written or oral and if written, however produced or reproduced, received by or otherwise disclosed to the receiving Party from or by the disclosing Party that is marked proprietary or confidential or bears a marking of like import, or that the disclosing Party states is to be considered proprietary or confidential, or that a reasonable person would consider proprietary or confidential under the circumstances of its disclosure.

“PSA Trailer” means up to 30 seconds for AMC approved fundraising and that may contain the display of any trademark, service mark, logo or other branding of the charitable organizations sponsoring such fundraising that is exhibited in the Theatres after Showtime.

“ RCH ” has the meaning assigned to it in the recitals to this Agreement.

“ REG ” means Regal Entertainment Group or its successor or any Person that wholly owns REG, directly or indirectly, in the future.

“ Regal ” means Regal Cinemas, Inc., a Tennessee corporation.

“ Regal Exhibitor Agreement ” means the Exhibitor Services Agreement between LLC and Regal, dated of even date herewith, as the same may be amended, supplemented or otherwise modified from time to time.

“Regal Theatre” means any “Theatre” as defined in the Regal Exhibitor Agreement.

“ Renewal Term ” has the meaning assigned to it in Section 9.01(a).

“ Representatives ” has the meaning assigned to it in Section 11.01(a).

“ ROFR Notice ” has the meaning assigned to it in Section 9.03(a).

“ ROFR Period ” has the meaning assigned to it in Section 9.03(a).

“ ROFR Response ” has the meaning assigned to it in Section 9.03(c).

“ ROFR Response Period ” has the meaning assigned to it in Section 9.03(c).

“ Run-Out Obligations ” has the meaning assigned to it in Section 4.08.

“ Secured Parties ” means the “Secured Parties” (or any analogous concept) as defined in the LLC Credit Agreement.

 

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“ Security Documents ” means the “Security Documents” as defined in the LLC Credit Agreement and any amendment, modification, supplement or replacement of such Security Documents.

“Service” means the Advertising Services and, for the duration of the Meeting Services Term and the Digital Programming Term, the Meeting Services and the Digital Programming Services, respectively, all as set forth on Exhibit A and as applicable.

“Showtime” means the advertised showtime for a feature film.

“ Software ” means the software owned by, and/or licensed to, LLC or its direct or indirect Subsidiaries and which is installed on either LLC Equipment or AMC Equipment and used in connection with delivery of the Digital Content Service, the Digital Carousel, the Digital Programming Services and the Meeting Services.

“ Special Promotions ” has the meaning assigned to it in Section 4.14.

“Specification Documentation” means documentation as specified herein, relating to technical specifications or other matters relating of this Agreement, that is delivered and agreed upon by the Parties on the Effective Date of this Agreement.

“ Strategic LEN Promotion ” has the meaning assigned to it in Section 4.07(b)(ii).

“ Strategic Lobby Promotion ” has the meaning assigned to it in Section 4.07(b)(iii).

“ Strategic Programs ” has the meaning assigned to it in Section 4.07(b).

“ Strategic Relationship ” has the meaning assigned to it in Section 4.07(b).

“ Subsidiary ” means, with respect to any Person, (i) a corporation a majority of whose capital stock with the general voting power under ordinary circumstances to vote in the election of directors of such corporation (irrespective of whether or not, at the time, any other class or classes of securities shall have, or might have, voting power by reason of the happening of any contingency) is at the time beneficially owned by such Person, by one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries thereof or (ii) any other Person (other than a corporation), including a joint venture, a general or limited partnership or a limited liability company, in which such Person, one or more Subsidiaries thereof or such Person and one or more Subsidiaries thereof, directly or indirectly, at the date of determination thereof, beneficially own a majority ownership interest entitled to vote in the election of directors, managers or trustees thereof (or other Persons performing such functions) or act as the general partner or managing member of such other Person.

“ Supplemental Theatre Access Fee ” has the meaning assigned to it in Schedule 1.

“ Tax Receivable Agreement ” means that certain Tax Receivable Agreement by and among National CineMedia, LLC, RCH, AMC, Cinemark Media, Cinemark, and Regal, and to be dated as of the date hereof.

 

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“ Term ” has the meaning assigned to it in Section 9.01(a).

“ Territory ” means the 50 states of the United States of America and the District of Columbia.

“ Theatre Access Fee ” has the meaning assigned to it in Schedule 1.

“Theatre Advertising” means advertisement of one or more of the following activities associated with operation of the Theatres of AMC or its Affiliates: (A) Concessions or Concession promotions, (B) AMC’s gift cards, loyalty programs and other items related to AMC’s business in the Theatres, (C) events presented by AMC pursuant to Section 6.05, or (D) vendors of services (other than film-related vendors) provided to the Theatres, provided such promotion is incidental to the vendor’s service such as, but without limitation, online or telephone ticketing or other alternative delivery sources for the same, credit cards, bank cards, charge cards, debit cards, gift cards and other consumer payment devices. Theatre Advertising includes the display of concession menus, movie listings, Showtimes and pricing information.

“ Theatres ” means from time-to-time, as applicable, all theatres in the Territory owned by AMC or an Affiliate of AMC or as to which AMC or an Affiliate of AMC has a controlling interest or operational control, including both Digitized and Non-Digitized Theatres, except as provided in Sections 2.02(b), 4.08 and 4.13 or as may be mutually agreed by the Parties in writing. The foregoing notwithstanding, no motion picture theatre located outside of the Territory shall be a Theatre without LLC’s prior written consent. Theatre includes all parts of the physical facilities inside a theatre building to which the public has access.

“Third Party Theatre Agreement” means an agreement between LLC and a third party that gives LLC a right to provide Advertising Services with respect to the Theatres being Disposed of by a Founding Member to such third party and that meets the following minimum requirements: (i) the third party grants LLC exclusive access to and the exclusive right to provide Advertising Services with respect to the Theatres; (ii) the Third Party Theatre Agreement incorporates content standards no more restrictive than as set forth in section 4.03 of this Agreement; (iii) the fee payable by LLC to the third party for the Advertising Services does not exceed *** of LLC’s total revenue attributable to such Advertising Services; (iv) the term of the Third Party Theatre Agreement (excluding extensions) is for the shorter of (A) the term of the longest lease (excluding extensions) being Disposed of by the Founding Member in the transaction, or (B) ***; (v) LLC has substantially similar penalties upon a breach of the Third Party Theatre Agreement by such third party than as set forth in this Agreement for breaches by such Founding Member; and (vi) in all other material respects, the Third Party Theatre Agreement imposes obligations upon the third party that are substantially similar to the obligations imposed upon the Founding Member in this Agreement, except that obligations arising exclusively from such Founding Member’s status as a Founding Member shall be inapplicable to the third party.

“ Traditional Content Program ” means advertising and other promotional content which is displayed on 35 mm film prior to Showtime.

 

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“ Trailer ” means a promotion secured by AMC or its designee (which retains the exclusive rights to so secure for all of its Theatres) for a feature film that is exhibited in the Theatres after Showtime.

“ Unit Adjustment Agreement ” means that certain Common Unit Adjustment Agreement of even date herewith among National CineMedia, LLC, RCH, AMC, Cinemark Media, Cinemark, and Regal, and to be dated as of the date hereof.

“ Upgrade Request ” has the meaning assigned to it in Section 3.05.

“ Video Display Program ” means a program of digital content shown on Lobby Screens which is distributed by LLC through the Digital Content Network for exhibition in Digitized Theatres, and which is distributed non-digitally by some other means, including DVD, for exhibition in Non-Digitized Theatres.

ARTICLE 2

PARTICIPATION AND FEES

Section 2.01 Theatre Service Participation . From the Effective Date and during the Term, LLC shall provide all aspects of the Service to AMC and AMC shall exhibit and otherwise participate in such aspects of the Service, on the terms and conditions set forth herein. Subject to the provisions of Section 4.08 (AMC Run-Out Obligations), during the Term all Theatres will participate in the Service either as Digitized Theatres or Non-Digitized Theatres.

(a) Digitized Theatres . As of the Effective Date and during the Term, pursuant to the terms of Section 4.01 (Content and Distribution of the Digital Content Service and Traditional Content Program), LLC will provide the following Services to the Digitized Theatres, and all Digitized Theatres will, subject to the terms of Section 4.12 (Access to Pre-Feature Program), participate in (i) the Digital Carousel during the period beginning after the preceding feature film (or, in the case of the first feature film of the day, beginning after the opening of the auditorium doors for that film) until the beginning of the Pre-Feature Program, (ii) the Pre-Feature Program, (iii) the Policy Trailer and (iv) the Video Display Program.

(b) Non-Digitized Theatres . As of the Effective Date and during the Term, pursuant to the terms of Section 4.01 (Content and Distribution of the Digital Content Service and Traditional Content Program), LLC will provide the following Services to the Non-Digitized Theatres, and all Non-Digitized Theatres will, subject to the terms of Section 4.12 (Access to Pre-Feature Program), participate in, (i) the Digital Carousel during the period beginning after the preceding feature film (or, in the case of the first feature film of the day, beginning after the opening of the auditorium doors for that film) until the beginning of the Traditional Content Program, (ii) the Traditional Content Program, (iii) the Policy Trailer and (iv) the Video Display Program, but with respect to participation of Non-Digitized Theatre’s participation in the Video Display Program, only to the extent that a Non-Digitized Theatre has at least one Lobby Screen and has the requisite equipment necessary to participate in the Video Display Program. No Non-Digitized Theatre will be obligated to participate in, nor will LLC be obligated to provide to any Non-Digitized Theatre, the Pre-Feature Program.

 

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(c) Lobby Promotions . LLC shall provide Lobby Promotions to Theatres and Theatres shall participate in Lobby Promotions as described in Section 4.02.

(d) Events and Meetings . LLC shall provide Digital Programming Services (including Event Trailers) and Meeting Services to Theatres and Theaters shall participate in Digital Programming and Meeting Services as described in Article 6.

(e) Modifications . The Parties agree that the rights and obligations to provide and participate in elements of the Service, as set forth immediately above, may be modified during the Term upon mutual written agreement of the Parties.

(f) Conversion of Theatres . No Digitized Theatre shall become a Non-Digitized Theatre without the mutual agreement of AMC and LLC. AMC will determine from time to time which Non-Digitized Theatres will be converted to Digitized Theatres.

(g) Rights to Transfer Theatres . The Parties agree that nothing in this Agreement is intended to, nor shall, bind or otherwise limit AMC’s or its Affiliates’ rights and abilities in its sole discretion from time to time to close, sell, acquire or otherwise transfer any interest in (including by mortgage or otherwise) any theatre.

Section 2.02 Addition of Theatres .

(a) Newbuild Theatres . Except as provided in Section 4.13 (Excluded Theatres; IMAX Screens) or as mutually agreed by the Parties in writing, any theatre in the Territory newly built by AMC or an Affiliate of AMC following the Effective Date (“Newbuild Theatres”) shall be equipped to receive the Digital Content Service via the Digital Content Network, shall be a Digitized Theatre, and shall participate in the Digital Content Service on the terms set forth in Section 2.01. LLC agrees to provide all aspects of the Service to Newbuild Theatres on the terms and conditions set forth herein.

(b) Acquisition Theatres . Any theatre in the Territory of which AMC or an Affiliate of AMC obtains control of the advertising, promotional or event activities therein after the Effective Date (excluding any Newbuild Theatres and any Loews Theatre) shall be an “Acquisition Theatre(s)”. Subject to Sections 4.08 and 4.13, LLC shall provide all aspects of the Service to such Acquisition Theatres and AMC shall cause such Acquisition Theatres to exhibit and participate in the Service on the terms and conditions set forth herein. The Parties agree that AMC may obtain operational control of an Acquisition Theatre but not obtain any or all rights necessary to receive or display any or all aspects of the Service or control over advertising, promotions or events but not over all of the foregoing, and, in such circumstances AMC shall use its commercially reasonable efforts to have as much of the Service received or displayed in such Acquisition Theatres as is within its control, or if not, then as reasonably practicable. The Parties agree that it may not be commercially reasonable to equip each Acquisition Theatre to receive the Digital Content Service and the Digital Programming Services and Meeting Services via the Digital Content Network. Therefore, the Parties agree, subject to Sections 4.08 and 4.13, that every Acquisition Theatre that is a Digitized Theatre shall participate in the Digital Content

 

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Service via the Digital Content Network on the terms set forth in Section 2.01, but that AMC retains sole discretion as to if, when and which Acquisition Theatres AMC converts to Digitized Theatres. Upon AMC’s decision to convert an Acquisition Theatre to a Digitized Theatre, the Parties agree to discuss in good faith the appropriate schedule for equipping such Acquisition Theatre to receive the Digital Content Service, the Digital Programming Services and Meeting Services via the Digital Content Network. Upon agreeing upon the schedule to conduct such equipping, LLC shall diligently prosecute such work until completion.

(c) Common Unit Adjustment . Any adjustment of Common Unit ownership by the Members related to Newbuild Theatres and Acquisition Theatres shall be addressed in the Unit Adjustment Agreement.

Section 2.03 Disposition of Theatres .

(a) Disposition . AMC shall provide LLC prompt written notice after the sale, transfer, permanent closure or other disposition of a Theatre (other than as the result of a Permitted Transfer) or the permanent loss of any Theatre lease (a “Disposition”). The decision to sell, close or otherwise dispose of any Theatre shall be in AMC’s sole and absolute discretion. Any such Theatre shall cease to be a Theatre for all purposes under this Agreement; and, if so determined by AMC and agreed by LLC (which agreement shall not be unreasonably or untimely withheld), then unless LLC and the applicable third party(ies) enter into a Third Party Theatre Agreement, then the Parties will agree on a date and time at which LLC shall be permitted to enter the affected Theatre(s) and remove any LLC Property (as defined in Section 13.01). In the event LLC fails to remove any LLC Property within the timeframe the Parties agree upon for such removal, AMC or such third party transferee shall have the right to remove and dispose of such LLC Property in its sole discretion; provided that any Software included in the LLC Property shall be removed and returned to LLC at LLC’s expense.

(b) Common Unit Adjustment . Any adjustment of Common Unit ownership by the Members related to Disposition of Theatres shall be addressed in the Unit Adjustment Agreement.

Section 2.04 Mandatory Participation . During the Term, except as expressly provided in this Agreement, including Sections 4.05 (Brand; Policy Trailer; Branded Slots), 4.06(a) (Beverage Agreements), 4.07 (Other AMC Advertising Agreements), 4.08 (AMC Run-Out Obligations), 4.13 (Excluded Theatres; IMAX Screens), 4.14 (Grand Openings; Popcorn Tubs; Employee Uniforms); 6.07 (Use of Digital Content Network) and Exhibit A , AMC shall subscribe for and LLC shall be the exclusive provider to the Theatres of the services specifically set forth in the definition of the “Service.” Except as expressly provided in this Agreement, during the Term, AMC shall neither engage nor permit a third party (excluding third party designees of LLC as provided hereunder) to provide, or itself provide, to a Theatre any of the services specifically set forth in the definition of Service. Nothing in this Agreement shall limit or affect (i) LLC’s ability to contract or enter into any relationship with any Person or entity for any product, service, or otherwise, whether or not similar to any products or services provided by LLC under this Agreement, or (ii) AMC’s ability to contract or enter into any relationship with any Person or entity for any product, service, or otherwise, other than the services that will be

 

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provided exclusively by LLC as set forth in this Section 2.04. All rights with respect to advertising and promotions not explicitly granted hereunder are reserved to AMC, including without limitation AMC’s ability to offer and sell advertising to any third party on any website on the Internet, its telephone ticketing service or other alternative media sources used for ticketing.

Section 2.05 ESA Modification Payments; Theatre Access Fees .

(a) ESA Modification Payments.

(i) AMC Initial ESA Modification Payment . As of the date hereof, and in consideration for AMC’s agreement to use a Theatre Access Fee calculation and payment mechanism (as described in Section 2.05(b)) in connection with LLC’s utilization of the Theatres on and after the date of this Agreement, LLC will pay to AMC $231,309,506 (such amount being the “ AMC Initial ESA Modification Payment ”).

(ii) ESA-Related Tax Benefit Payments . After the date hereof, and in consideration for AMC’s agreement to use a Theatre Access Fee calculation and payment mechanism (as described in Section 2.05(b)) in connection with LLC’s utilization of the Theatres on and after the date of this Agreement, LLC will also pay any ESA-Related Tax Benefit Payments to AMC, pursuant to the terms of the Tax Receivable Agreement.

(iii) Adjustments . The AMC Initial ESA Modification Payment will be subject to contingent and ongoing adjustments, pursuant to the Unit Adjustment Agreement.

(b) Theatre Access Fees.

(i) Calculation . In consideration for utilization of the Theatres pursuant to the terms hereof, LLC shall calculate and AMC shall be entitled to receive a Theatre Access Fee, as set forth in Schedule 1, which shall be paid based on AMC’s attendance for the relevant fiscal month in which LLC provides the Services and number of Digital Screens during the fiscal month in which LLC provides the Services (calculated as the average between the number of Digital Screens on the last day of the fiscal month preceding the relevant fiscal month in which LLC provides the Services and the last day of the fiscal month in which LLC provides the Services), and which shall include the amount of 4.03 Revenue allocated to Circuit A for the same fiscal month.

(ii) Payment . LLC shall pay AMC its Theatre Access Fees on or before the last day of LLC’s fiscal month following the fiscal month in which Services are provided by LLC; provided that AMC has, by the fourteenth day of LLC’s fiscal month following the month in which Services are provided by LLC, given LLC the data regarding attendance and number of Digital Screens necessary for LLC to calculate the Theatre Access Fee. If AMC has not, by the fourteenth day of LLC’s fiscal month following the month in which Services are provided by LLC, given LLC the data regarding attendance and number of Digital Screens necessary for LLC to calculate the Theatre Access Fee, the due date of the Theatre Access Fee payment shall be extended by one day for each day that AMC is late in providing such data. LLC shall provide AMC with a detailed accounting of the calculation of Theatre Access Fees pursuant to Schedule 1, which report shall accompany each such payment.

 

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(iii) Supplemental Theatre Access Fee . If applicable, LLC shall pay AMC a Supplemental Theatre Access Fee, as set forth in Schedule 1, on or before the last day of LLC’s fiscal month following the end of LLC’s applicable fiscal year.

Section 2.06 Non-Cash Consideration . Any Aggregate Advertising Revenue, revenue related to Event Sponsorship, revenue related to Digital Programming Services or revenue related to Meeting Services that LLC receives in the form of non-cash consideration shall be valued as revenue in accordance with GAAP. If LLC’s value of non-cash consideration received under any arrangement exceeds $500,000 but is not greater than $5 million from any party in a single transaction or series of related transactions, such value shall be confirmed by National CineMedia, if it is LLC’s managing member, or LLC’s then managing member. If LLC’s value of non-cash consideration received under any arrangement exceeds $5 million from any party in a single transaction or series of related transactions, LLC shall engage an independent qualified appraiser to determine the fair market value of such non-cash consideration. Notwithstanding the foregoing, no confirmation or appraisal of value shall be required for LLC’s acquisition of tickets from Founding Members at their published group sale price in exchange for advertising at LLC’s rate card rate.

ARTICLE 3

EQUIPMENT

Section 3.01 Procurement; Cost; Specifications . The Parties agree that all Theatre-level Equipment required to exhibit and otherwise participate in the Service on the terms and conditions set forth herein has been installed in all Theatres as of the Effective Date. With respect to all Newbuild Theatres, Acquisition Theatres, and Theatres which are converted from Non-Digitized Theatres to Digitized Theatres or from Digitized Theatres to Non-Digitized Theatres after the Effective Date (collectively, the “Future Theatres”), LLC shall, except as provided in Section 3.03, be solely responsible for procuring any Equipment for such Theatres. LLC shall bear the cost of all Equipment for use outside the Theatres, as well as Equipment installed in the Theatres for maintenance purposes (if any) (a description of such LLC Equipment installed in the Theatres is included in the Specification Documentation; which may be amended by mutual written agreement of the Parties) and the Software. AMC shall reimburse LLC, at LLC’s cost, for all other Equipment to be installed at or within any Future Theatres (a description of such AMC Equipment is included in the Specification Documentation; which may be amended by mutual written agreement of the Parties) within thirty (30) days after (i) the installation of such Equipment by AMC or LLC in accordance with Section 3.04 and (ii) the delivery of invoices by LLC to AMC supporting the expenses for which reimbursement is sought. All Theatre-level operational costs associated with AMC’s use of Equipment located in the Theatres, such as the cost of electricity, shall be borne exclusively by AMC. LLC shall assure that the Equipment purchased by LLC satisfies AMC’s specifications for such equipment, including the communication interface between LLC Equipment and AMC Equipment.

 

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Section 3.02 Ownership of Equipment . As between the Parties, each Party will own the Equipment it pays for or reimburses the other Party for, whether pursuant to Section 3.01 or Section 3.03. To the extent possible, LLC agrees to assign to AMC any manufacturer warranties applicable to AMC Equipment procured by LLC pursuant to Section 3.01. If for any reason the aforementioned warranties are not assignable, upon written request of AMC, LLC shall use commercially reasonable efforts to enforce the warranties on behalf of AMC. Notwithstanding anything to the contrary herein, any LLC Equipment placed or installed in a Theatre for maintenance purposes may, upon termination of this Agreement or deletion of a particular Theatre as provided herein, as applicable, be removed by LLC and held for its sole benefit.

Section 3.03 AMC Equipment . AMC shall be permitted to furnish any of the Equipment, at its sole cost and expense, upon consultation with LLC, and provided such Equipment satisfies LLC’s specifications for such Equipment (including compatibility with the Digital Content Network). LLC agrees to cooperate with AMC in good faith to permit the procurement by AMC of Equipment in lieu of procurement of such Equipment by LLC and reimbursement by AMC pursuant to Section 3.01.

Section 3.04 Installation .

(a) Performance . AMC and/or its subcontractors shall be solely responsible for the installation of all Equipment purchased pursuant to Section 3.01 or Section 3.03, as well as for ancillary services such as reporting, software integration and system cutover; provided , however , that AMC may elect to have LLC perform such services, and LLC shall then assume the responsibility for installation of all Equipment. If AMC elects for LLC to assume the responsibility for installation of all Equipment, (i) AMC shall reimburse LLC for the cost of installing AMC Equipment as set forth in the Specification Documentation, (ii) LLC will not issue invoices for any Equipment cost, or installation services related to such Equipment until the completion of such installation services, and (iii) LLC shall ensure that Equipment installed pursuant to this section is made functional in accordance with any installation rollout schedule agreed to by the Parties, as may be amended from time to time upon mutual agreement of the Parties or as circumstances warrant.

(b) Consultation; Landline . The Parties agree to consult with each other with respect to any modifications to Theatre premises necessary for receipt of the Service. LLC shall use commercially reasonable efforts to limit the size and number of satellite dishes that are required as part of the Equipment. AMC shall be solely responsible for obtaining any consents required for the installation or use of any Equipment at any Theatre, including without limitation governmental and landlord consents, provided LLC reasonably cooperates with AMC at AMC’s request in obtaining such consents. If AMC cannot obtain consent to installation of a satellite dish at a Theatre because of technical, landlord or legal restrictions, AMC and LLC shall work together in good faith to establish a landline connection to such location for the Digital Content Network. All costs of the landline connection, which shall be maintained with sufficient bandwidth for delivery of the Digital Content Service, shall be borne by LLC with respect to delivery of content from LLC to AMC’s wide area network and by AMC with respect to delivery of content from AMC’s wide area network to the applicable Theatres.

 

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(c) Coordination . All installation, maintenance and other services provided by LLC to the Theatres hereunder shall be performed in a manner reasonably expected not to disrupt AMC’s operations and, except where no practical alternative exists, shall be provided outside of Theatre business hours, as mutually determined by the Parties in their reasonable discretion. Subject to the preceding sentence and upon advance written notice, LLC and its vendors or subcontractors shall be provided reasonable access to the Theatres and such other support services as reasonably required to install and inspect the Equipment, for such fees as provided in the Specification Documentation, and otherwise as required to perform LLC’s obligations under this Agreement. In addition to the foregoing, and with respect to the installation of Equipment in Newbuild Theatres only, LLC agrees (i) to cooperate with AMC in coordinating the installation of Equipment with the construction schedule for such Newbuild Theatres, and (ii) to consult with AMC prior to subcontracting the performance of Equipment installation so as to permit a determination of whether AMC might itself perform such Equipment installation.

Section 3.05 Upgrades and Modifications . In order to ensure compatibility with, and optimum performance and robustness of, the Digital Content Network and the LLC Equipment (including hardware and software), LLC reserves the right to request of AMC the replacement, upgrade or modification of any AMC Equipment installed at any Theatre or the assistance with an upgrade to Software on AMC Equipment; provided that such requests are equally and timely communicated to each of AMC, Cinemark and Regal (the “Upgrade Request”). In the event of an Upgrade Request, LLC shall provide AMC as much written notice as is reasonably practicable under the circumstances, but in no event less than ten (10) business days written notice. LLC and AMC will negotiate with each other in good faith on the terms of any Upgrade Requests, including cost sharing terms, if any. If LLC and AMC are not able to come to agreement about an Upgrade Request, LLC may elect to pay for the replacements, upgrades or modifications contained in the Upgrade Request including all reasonable incidental and incremental costs to AMC, and AMC shall be obligated to permit LLC to perform all necessary work to fulfill the Upgrade Request, provided (i) there is no additional unreimbursed cost to it to accept such replacement, upgrade or modification and (ii) that such replacement, upgrade or modification does not unreasonably interfere with AMC’s theatre operations and does not include any replacement, upgrade or modification of AMC software without AMC’s express prior written consent. LLC agrees that, to the extent practicable, it will develop a system that seeks to minimize the need to enter the Theatres in order to update the Software.

Section 3.06 Network Integration . The Parties shall use commercially reasonable efforts to ensure that the Digital Content Network will be integrated with any network for delivery of Digital Cinema Services such that the Services can be delivered over such network.

Section 3.07 Training . To the extent necessary, LLC and AMC, respectively, will provide training services to AMC’s support staff and customer service and other employees and agents on terms as mutually agreed by the Parties in their reasonable discretion. LLC agrees that it will pay for these training services and they will be adequate to permit AMC to train its own employees and agents as required to perform under this Agreement. AMC agrees to provide training services according to any reasonable standards as may be promulgated by LLC in consultation with AMC. LLC agrees to provide training services, at its cost, to AMC’s support staff and other employees with respect to any Equipment or Software upgrades or modifications prior to implementation.

 

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Section 3.08 Equipment Maintenance Standard .

(a) Standard; Replacement . During the Term, the Parties shall each use their commercially reasonable efforts (i) to ensure there is no unauthorized access, loss or damage to or theft of Equipment hereunder, and (ii) to prevent piracy or other theft of Inventory exhibited through the use of such Equipment or otherwise in its possession or control. AMC further agrees to keep all AMC Equipment, including without limitation Lobby Screens, clean, and to promptly notify LLC if any AMC Equipment is not functioning properly. AMC shall promptly arrange to repair or replace any Equipment in its possession (provided the damage interferes with the delivery of the Service) that is lost, stolen, damaged or otherwise fails to function or becomes inoperable, other than because of LLC’s failure to properly maintain the Equipment as set forth in Section 3.08(b).

(b) Performance of Repair and Replacement . Subject to the terms of this Section 3.08(b) and of Section 3.08(c) below regarding cost, the repair and replacement of Equipment shall be performed by LLC until such time as AMC elects to assume this responsibility by giving written notice to LLC. For purposes of this Agreement, AMC has assumed the responsibility for maintenance of all AMC Equipment in its Theatres. Subject to mutual agreement of AMC and LLC, the Parties may later provide for LLC to assume responsibility of repair and replacement of Equipment in the Theatres, consistent with LLC’s practice with the other Founding Members. If AMC assumes this responsibility to perform replacement or repair but fails to maintain the AMC Equipment at a performance level substantially similar to the LLC Equipment, then LLC shall promptly provide AMC written notice of such failure and if such failure is not cured within 30 days, LLC shall be entitled to repair, or if repair is not reasonably possible, replace such LLC Equipment not so maintained and deduct the cost of such replacement from AMC’s Theatre Access Fees.

(c) Repair Costs . So long as LLC is performing repair and replacement of Equipment, LLC shall pay the costs of repair (but not replacement, which is the responsibility of AMC). Notwithstanding anything to the contrary in this Section 3.08, LLC shall not be required or requested to make any expenditures that (i) would constitute a capital expenditure for LLC under GAAP or (ii) would have otherwise been payable by AMC’s insurance provider; provided , however , LLC shall be responsible for all costs to repair or replace Equipment to the extent damaged as a result of the negligence or misconduct of LLC and/or its subcontractors.

(d) Condition . Subject to the foregoing, for purposes of ongoing maintenance, LLC shall keep and maintain Equipment installed in the Theatres in good condition and repair at its sole expense (with the exception of projector bulb replacement and equipment replacement, the cost of which shall be borne by AMC), and in a manner consistent with the Service Level Agreement set forth in the Specification Documentation and as may be reasonably amended by mutual agreement of LLC and AMC from time to time. In the event that LLC and AMC agree that LLC should assume responsibility for maintenance of AMC Equipment pursuant to Section 3.08(b), the Service Level Agreement shall be amended substantially in the

 

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form of the Service Level Agreement used by LLC with other parties for whom LLC maintains in-Theatre Equipment. The Parties agree to consult with each other on a regular basis during the Term in an attempt to reduce maintenance costs arising from redundancies in the Parties’ respective service fleets. Upon advance notice to AMC, AMC shall provide LLC and/or its subcontractors reasonable access to the Equipment and such other support services as LLC and/or its subcontractors reasonably require to provide maintenance and repair services as required hereunder.

ARTICLE 4

DELIVERY OF THE SERVICE

Section 4.01 Content and Distribution of the Digital Content Service and Traditional Content Program .

(a) Distribution; Quality . On the Effective Date, LLC will commence distribution of the Digital Carousel, the Digital Content Service and the Traditional Content Program to the Digitized Theatres and Non-Digitized Theatres, all as set forth above in Article 2 . With respect to Digitized Theatres, content shall be distributed through the Digital Content Network, via either LLC’s satellite network or by LLC’s or exhibitor’s landline network. Each of the Pre-Feature Program and the Video Display Program shall consist of Inventory comprising a single play list (“Play List”). The Play List will be refreshed during the Term when and as determined by LLC but not less frequently than 12 times per year (each a “Flight”). The Digital Carousel, the Digital Content Service (including the Pre-Feature Programming Schedule) and the Traditional Content Program will be substantially similar in nature, quality, and scope to the corresponding advertising, promotional and other content, as received by the Theatres immediately prior to the Effective Date, and will in addition be delivered pursuant to the service levels included in the Specification Documentation, as applicable. In addition, LLC agrees that the quality of the advertising, promotions and entertainment programming content delivered to each of the Founding Members will be consistent throughout the Term.

(b) Pre-Feature Program . As of the Effective Date, the Pre-Feature Program shall consist of four (4) or more elements, including: (i) commercial advertising; (ii) promotions for the AMC brand (including the Brand and Branded Slots), Concessions sold and services used by AMC and other products and services in accordance with Section 4.05; (iii) interstitial content; and (iv) other entertainment programming content which, while promotional of businesses or products, shall be primarily entertaining, educational or informational in nature, rather than commercially inspired.

(c) Video Display Program . The elements of the Video Display Program shall be, generally, the same as those for the Pre-Feature Program, and will include the Brand and the Branded Slots. LLC specifically agrees that the Video Display Program will contain only material that has received, or had it been rated would have received, an MPAA “G” or “PG” rating. In addition, LLC shall not restrict the sale of Inventory from the Video Display Program for promotions of feature films. Lobby Screens displaying the Video Display Program shall be located in areas of Theatres of LLC’s choosing (subject to AMC’s reasonable operational

 

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constraints and provided relocation of existing Lobby Screens is not required). AMC is obligated to provide at least one Lobby Screen per Digitized Theatre with ten or fewer screens, two Lobby Screens per Digitized Theatre with eleven to twenty screens and three Lobby Screens per Digitized Theatre with more than twenty screens; provided , however , that AMC shall have no obligation to increase the number of Lobby Screens in any Theatre that has at least one Lobby Screen that is capable of receiving the Video Display Program as of the Effective Date. When a Theatre has more than the minimum number of Lobby Screens required, AMC may, at its discretion, elect to display on such excess Lobby Screens (i) the Video Display Program or (ii) internal programming (including Theatre Advertising) that does not include third-party advertising and/or third-party mentions for products and services (other than Theatre Advertising); provided , however , AMC shall provide at least 30 days advance notice prior to an initial election of either (i) or (ii) in any such Theatre, and at least 60 days advance notice prior to any subsequent change in election.

Section 4.02 Delivery of Lobby Promotions, Digital Programming Services and Meeting Services .

(a) Lobby Promotions . On the Effective Date, LLC will make available to the Theatres the Lobby Promotions, and AMC will accept such Lobby Promotions on the terms and conditions set forth herein.

(i) Lobby Promotions shall satisfy the guidelines and specifications set forth herein and as may be provided by AMC to LLC pursuant to Section 4.02(a)(ii). The Inventory of Lobby Promotions for each Theatre that AMC covenants to display pursuant to this Agreement is set forth in Exhibit A-1 . LLC may provide additional Lobby Promotions (“Additional Lobby Promotions”), subject to approval by AMC. LLC will take all other actions necessary and prudent to ensure the delivery of Lobby Promotions as required under the terms hereof. LLC will inform AMC of the length of time that Lobby Promotions and Additional Lobby Promotions are to be displayed.

(ii) LLC covenants and agrees that Lobby Promotions provided pursuant to this Agreement will conform to all standards and specifications of which AMC provides LLC reasonable notice during the Term, including without limitation standards and specifications with respect to manufacturers and suppliers, sizing (e.g., cup and popcorn tub sizing), timing of delivery of concession supplies to Theatres, reimbursement of incremental costs (e.g., cups, floor mats, plates) and the like. LLC further covenants that the Lobby Promotions will not diminish or tarnish the reputation of AMC or unreasonably disrupt Theatre operations, including, without limitation, traffic flow or noise level, each as determined in AMC’s reasonable discretion, and that Lobby Promotions will comply with the content standards set forth in Section 4.03. LLC specifically agrees (i) that Lobby Promotions will contain only material that has received, or had it been rated would have received, an MPAA “G” or “PG” rating, (ii) that the only type of sampling that will be permitted is exit sampling, (iii) to refrain from distributing chewing gum as part of any Lobby Promotion, other than attended sampling as patrons are exiting the Theatre, (iv) not to permit a Lobby Promotion that would distribute or sample any item that is the same as or substantially similar to any item sold at the Theatre’s concession stand and (v) not to permit a Lobby Promotion involving fund raising on Theatre property.

 

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(iii) LLC will be responsible for all costs and expenses associated with sourcing, production, delivery and execution of Lobby Promotions to the Theatres, including incremental costs actually incurred by the Theatres in connection with Lobby Promotions. In its discretion, AMC may make employees available to assist in Lobby Promotions requiring exit sampling; provided that LLC shall reimburse AMC for the employees’ time used to conduct the exit sampling at their customary wage.

(b) Digital Programming Services and Meeting Services . On the Effective Date, LLC will make available to Digitized Theatres all Digital Programming Services and Meeting Services as set forth in Article 6.

Section 4.03 Content Standards . The Parties agree that (unless mutually agreed by the Parties with respect to clauses (i), (iii), (iv), (v) or (vi)) all content within the Service (including content for display in Digital Programming or Meeting Services) will not contain content or other material that: (i) has received, or had it been rated would have received, an MPAA “X” or “NC-17” rating (or the equivalent), (ii) promotes illegal activity, (iii) promotes the use of tobacco, sexual aids, birth control, firearms, weapons or similar products; (iv) promotes alcohol, except prior to “R”-rated films in the auditorium; (v) constitutes religious advertising (except on a local basis, exhibiting time and location for local church services); (vi) constitutes political advertising or promotes gambling; (vii) promotes theatres, theatre circuits or other entities that are competitive with AMC or LLC; (viii) would violate any of AMC’s Beverage Agreements or the exclusive contractual relationships identified in the Specification Documentation (including renewals and extensions of the foregoing, but excluding any amendments or modifications thereto as such relate to such content standards) and any subsequent exclusive arrangement entered into by LLC with respect to the Theatres; or (ix) otherwise reflects negatively on AMC or adversely affects AMC’s attendance as determined in AMC’s reasonable discretion. AMC may, without liability, breach or otherwise, prevent and/or take any other actions with respect to the use or distribution of content that violates the foregoing standards; provided , that with respect to Section 4.03(ix), AMC may opt out of such content in the Services only with respect to Theatres in the geographic locations identified, which may include all of AMC’s Theatres. If the Digital Content Service contains any content that violates the foregoing standards, LLC must remove such content as soon as reasonably practical, but no later than within 48 hours (until such time as AMC completes the necessary software upgrades to permit LLC to remove such content within 24 hours) of AMC notifying LLC of such violation. If LLC fails to remove such content within such 48-hour period, AMC may discontinue the Digital Content Service in such auditoriums where such content is shown until the violating content is removed and shall have no liability for such discontinuation. If any other elements of the Service contain any content that violates the foregoing standards, LLC shall at AMC’s request, or AMC acting on its own behalf may, upon giving written notice to LLC, remove such content immediately. If any Founding Member opts out of any Lobby Promotion or other advertising pursuant to Section 4.03(viii) or (ix) of this Agreement, the Cinemark Exhibitor Agreement or the Regal Exhibitor Agreement (as applicable) or out of any Video Display Program because of lack of equipment to display such content, or if any Founding

 

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Member does not agree to exhibit any content of the Advertising Services subject to Section 4.03(i), (iii), (iv), (v) or (vi), then LLC shall apply any revenue it is entitled to receive from such Advertising Services (“4.03 Revenue”) to adjust payments of the Theatre Access Fee as set forth in Schedule 1.

Section 4.04 Development of the Service . All operational costs associated with LLC’s procurement, preparation and delivery of the Service (including Inventory and other promotional materials as provided herein) to the Theatres shall be borne exclusively by LLC. Except as provided herein, all in-Theatre operational costs associated with AMC’s receipt and exhibition of the Service within the Theatres shall be borne exclusively by AMC; provided that, upon prior written notice to and consultation with LLC, LLC shall reimburse AMC for its reasonable incremental out-of-pocket third party costs incurred in connection with receipt and exhibition of the Service within the Theatres. Any excess on-screen Inventory which may be made available to AMC in LLC’s discretion pursuant to Section 5.04 or otherwise, and any other on-screen Inventory provided by AMC pursuant to Section 4.05, will be subject to both Parties’ review and approval, which will not be unreasonably withheld. LLC will provide at its own expense all creative and post-production services necessary to ingest, encode and otherwise prepare for distribution all other on-screen Inventory as part of the Digital Content Service. All on-screen Inventory provided by AMC for inclusion in the Digital Content Service must (i) be submitted to LLC for review for compliance with (ii) and (iii) below as LLC may reasonably request, but in any event at least twenty (20) business days before scheduled exhibition (unless otherwise previously approved by LLC), (ii) satisfy the content restrictions enumerated in Section 4.03(i) through (vii) hereof, and (iii) be fully produced in accordance with LLC’s technical specifications as promulgated by LLC from time to time (all as provided in written or electronic form to AMC in a reasonable time period prior to implementation, including any amendments thereto; and which are equally applied to all exhibitors), ready for exhibition, as well as in accordance with applicable LLC commercial standards and operating policies, and all applicable federal, state and local laws and regulations. LLC must reject or approve all Inventory provided by AMC within five (5) business days. Any such Inventory provided by AMC and not rejected within such time frame shall be deemed approved and incorporated into the Service. Any Inventory provided by AMC for review and approval by LLC need not, once approved by LLC, be resubmitted by AMC for approval in connection with any future use.

Section 4.05 Brand; Policy Trailer; Branded Slots .

(a) Branded Content . LLC agrees to create, in conjunction with and subject to AMC’s prior approval, a AMC brand identity (the “Brand”) that will surround, or “house,” the Digital Content Service and include interstitial messaging (“bridges and bumps”), throughout the Play List and in the Policy Trailer, to reinforce the Brand. The interstitial messaging shall include a Pre-Feature Program introduction and close containing content branded with the AMC Marks. The close shall also include content branded with the marks of AMC’s beverage concessionaire. The Brand shall not contain the display of any trademark, service mark, logo or other branding of a film, film studio(s), distributor(s), or production company(ies). In addition to the interstitial messaging, the Digital Content Service will feature (i) up to two (2) minutes for the promotion of AMC’s internal business (the “Branded Slots”) in each Play List, (ii) the Policy Trailer, to be created by LLC at the direction of AMC as part of the Creative Services, (iii) the Event Trailer, and (iv) any other content as may be agreed between AMC and LLC. The Parties hereby acknowledge that AMC has the right to exhibit the PSA Trailer after Showtime.

 

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(b) Policy Trailer . The policy trailer will be (i) up to 60 seconds, (ii) exhibited in the Theatres after Showtime, and (iii) used to feature content relating to Theatre policy and operations, and may include (w) a policy service announcement that promotes appropriate theatre behavior, (x) promotions of AMC Concessions, (y) the display of any trademark, service mark, logo or other branding of a film studio(s), distributor(s), or production company(ies) and (z) upon prior written approval of AMC, other promotional materials of third-party products for which LLC sells advertising and is paid a fee (the “Policy Trailer”).

(c) Branded Slot . Each Branded Slot may only exhibit Theatre Advertising. LLC is required to include no less than forty-five (45) seconds of Branded Slots within the final fifteen (15) minutes of the Play List, fifteen (15) seconds of which shall be included within the final eleven (11) minutes of the Play List; provided , that LLC may begin these Branded Slots up to one minute earlier when LLC expands the amount of advertising units that follow these Branded Slots through the sale of additional advertising to third parties. LLC shall not exhibit any advertising relating to LLC after AMC’s Branded Slot placement referred to in this Section 4.05(c).

(d) Restrictions . Other than as permitted in Sections 4.05(a), (b), (c) or Section 4.07, the Brand, the Policy Trailer or the Branded Slot will not include third-party advertising and/or third-party mentions for products and services, without LLC’s prior written approval.

(e) Creative Services . The Brand messaging, Policy Trailer and Branded Slots may be created and edited by LLC as part of the Creative Services, in consultation with AMC, subject to final, mutual agreement of the Parties. LLC will provide AMC with up to 1,000 hours of Creative Services annually at no cost. Time spent on Creative Services and costs after the initial 1,000 hours shall be determined as described in Exhibit B . AMC may use other vendors for creative services at AMC’s cost and subject to LLC’s production standards.

(f) Traditional Content Program . The Traditional Content Program in Non-Digitized Theatres will contain, at a minimum, promotions for AMC’s beverage and other Concessions.

Section 4.06 Beverage and Legacy Agreements .

(a) Beverage Agreements . LLC shall, through the expiration or other termination of AMC’s Beverage Agreement in effect on the date hereof, display or exhibit, as applicable, as part of the Advertising Services, advertising Inventory meeting any and all specifications and requirements prescribed by the Beverage Agreement, including format, length (not to be longer than ninety (90) seconds), and placement within the Play List, as set forth in the Specification Documentation, with compliance by LLC to be within a reasonable time after such specifications are communicated from time-to-time by AMC to LLC in a written notice. In consideration for the advertising pursuant to the Beverage Agreement, AMC agrees to pay LLC

 

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at the advertising rates set forth on Exhibit B (the “Beverage Agreement Advertising Rate”). The Beverage Agreement Advertising Rate shall be paid on or before the last day of LLC’s fiscal month following LLC’s fiscal month in which the Advertising Services related to the Beverage Agreement were provided. Beginning after AMC’s Beverage Agreement in effect on the date hereof expires or otherwise terminates through the end of the Term, AMC shall have the right to have included in the Advertising Services advertising Inventory for its beverage concessionaires at the then current Beverage Agreement Advertising Rate; provided that AMC (i) keeps LLC apprised of the status of negotiations with the beverage vendor (including likelihood of reaching agreement, advertising length and placement required), from the time such negotiations begin until an agreement is signed, and (ii) provides LLC notice (including advertising length and placement required) within two (2) business days after the date that AMC and its beverage concessionaire agree on terms for a new Beverage Agreement. AMC shall be permitted to prescribe the length and placement within the Play List of on-screen Inventory based on the requirements of the Beverage Agreements which may then be in effect between AMC and such then-applicable beverage concessionaires; provided that such Inventory shall not exceed ninety (90) seconds in length for all such Beverage Agreements. AMC-redacted and/or AMC-selected (by disclosure or summary) contents of the Beverage Agreement shall only be disclosed as, and to the extent, required pursuant to this Agreement, provided such disclosure would not violate the terms of such Beverage Agreement.

(b) AMC Legacy Agreements.

(i) The Specification Documentation sets forth a list of the AMC Legacy Agreements, including the identity of each advertiser. On the Effective Date, AMC shall assign all rights and obligations arising from or out of each AMC Legacy Agreement to LLC.

(ii) This Agreement shall not constitute an assignment or transfer, or an attempted assignment or transfer, of any AMC Legacy Agreement, if and to the extent such agreement is a “Non-Assignable Legacy Agreement,” meaning that the assignment or transfer of such AMC Legacy Agreement would constitute a breach of the terms of such AMC Legacy Agreement. AMC and LLC shall use commercially reasonable efforts to obtain a waiver to assignment of any Non-Assignable Legacy Agreement and in the meantime AMC shall pay to LLC all proceeds from any Legacy Agreement. To the extent that any waiver referred to in this Section 4.06(b) is not obtained by AMC, AMC shall also use commercially reasonable efforts to, at the request of LLC, enforce for the account of LLC any right of AMC arising from any Non-Assignable Legacy Agreement. LLC shall perform the obligations of AMC under or in connection with any Non-Assignable Legacy Agreement, except to the extent that LLC is not provided the benefits thereof in any material respect pursuant to this Section 4.06(b).

Section 4.07 Other AMC Advertising Agreements .

(a) Theatre Advertising . In addition to advertising Inventory referenced above in Sections 4.05 and 4.06, AMC may purchase, on an arm’s length basis and subject to availability, as part of the Advertising Services, advertising Inventory for Theatre Advertising. AMC shall pay for Services pursuant to this Section 4.07(a) on or before the last day of LLC’s fiscal month following LLC’s fiscal month in which the Services were provided.

 

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(b) Non-Theatre Advertising . AMC may enter into a cross-marketing arrangement designed to promote the Theatres and the movie-going experience with a local, regional or nationally-known vendor of products or services that are not of the type described in Theatre Advertising for the purpose of generating increased attendance at the Theatres or increased revenue for AMC (other than revenue from any Service) (the “Strategic Relationship”) with advertising of such products or services being presented in the Theatres (either in the Video Display Program or in Lobby Promotions) (“Strategic Programs”), subject to the terms set forth in this Section 4.07(b). Strategic Programs may not be made on an exclusive basis. AMC covenants that it shall not re-sell any Advertising Services, including those received in connection with Strategic Programs. Strategic Programs shall be subject to the following limitations:

(i) AMC may conduct at no cost with respect to any Strategic Programs no more than (A) two (2) local or regional promotions per Flight per Theatre and (B) four (4) national promotions per year; provided , however , that no more than one national promotion may run at any time (the “Client Limitation”). By means of illustration, the Client Limitation for national promotions are not limited to a Flight, accordingly, one national promotion may run for twelve months, two national promotions may run for six months each provided that they do not run at the same time, four national promotions may run for three months each provided that they do not run at the same time, or another combination of national promotions may be used if there are no more than four promotions within a twelve-month period. For purposes of this Section 4.07(b), each continuously running promotion is counted as one promotion, regardless of whether such promotion is displayed using only one element (e.g., Lobby Screens) or displayed in an integrated basis using multiple elements (e.g., Lobby Screens and Lobby Promotions). Additionally, for purposes of this Section 4.07(b), a local or regional promotion is a promotion that is exhibited in Theatres located within one or two contiguous Designated Marketing Areas (as defined by the term DMA ^® , a registered trademark of Nielsen Marketing Research, Inc.), and a national promotion is a promotion that is exhibited in Theatres located within two (other than two contiguous) or more Designated Marketing Areas.

(ii) With respect to Strategic Programs in the Video Display Program (“Strategic LEN Promotions”), AMC may utilize at no cost up to one minute of time for its Strategic Programs per every thirty (30) minutes of the Video Display Program advertising. AMC may purchase an additional one minute for every thirty (30) minutes of the Video Display Program advertising for use in Strategic Programs at the applicable rate card rate for third-party advertising established by LLC for such Video Display Program advertising inventory. Any purchase of time for Strategic LEN Promotions in excess of the two minutes described above or any utilization of Strategic LEN Promotions in excess of the Client Limitation may be obtained at rate card rates and subject to availability, only with prior written consent of LLC, acting in its sole discretion. Strategic LEN Promotions may not be displayed on any Lobby Screens that, pursuant to Section 4.01(c), are displaying internal programming of AMC and may not be made to promote any film, film studio(s), distributor(s) or production company(ies).

(iii) With respect to Strategic Programs through Lobby Promotions (“Strategic Lobby Promotions”), AMC may utilize only such type and number of Inventory that is available to LLC in the applicable Theatre(s) on a pre-approved basis; provided , however ,

 

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vehicle/motorcycle displays and floor mats will not be available for use in Strategic Lobby Promotions. AMC may purchase an additional amount of Inventory in excess of the Strategic Lobby Promotions described above or in excess of the Client Limitation at rate card rates and subject to availability, only with prior written consent of LLC, acting in its sole discretion.

Section 4.08 AMC Run-Out Obligations .

(a) Encumbered Theatres . AMC agrees to provide LLC written notice as much in advance as is reasonably practicable under the circumstances of, and to furnish LLC true and correct copies (reasonably redacted by AMC and subject to confidentiality) of all documentation evidencing, all valid, pre-existing contractual obligations (the “Run-Out Obligations”) relating to any of the advertising, promotional and event activities and services in any Acquisition Theatres (collectively, the “Encumbered Theatres”); provided such disclosure does not violate the terms of any such agreements.

(i) Agreements with advertisers that purchase advertising are Legacy Agreements and do not create Run-Out Obligations. AMC shall, effective upon acquisition of the Acquisition Theatre, terminate any agreements between AMC and an Affiliate relating to advertising, promotional and event activities and services in any Acquisition Theatre, so that any such agreements do not create Run-Out Obligations.

(ii) AMC and/or its Affiliates (as applicable) shall be permitted to abide by the terms of the Run-Out Obligations; however, AMC agrees, subject to legal constraints (if any), to use commercially reasonable efforts to obtain the termination of such Run-Out Obligations, including without limitation neither extending nor renewing such Run-Out Obligations ( provided that AMC shall have no obligation to make any payment in connection with obtaining the termination of such Run-Out Obligations). AMC further agrees not to enter into any new agreement with any third party with respect to any Encumbered Theatre, or amend or modify any Run-Out Obligation, to the extent such agreement, amendment or modification would be inconsistent with the rights of LLC under Section 2.04 or have the effect of any extension. Prior to the expiration of the Run-Out Obligations, each Encumbered Theatre may, upon the mutual agreement of LLC and AMC, become a Theatre with respect to some or all Services, provided such election does not create a default under any Run-Out Obligation. In any event, except in accordance with Section 4.13 (Excluded Theatres; IMAX Screens) or as may be mutually agreed