DISTRIBUTION AGREEMENT

Exhibit 10.5

 

DISTRIBUTION AGREEMENT

 

between

 

DREAMWORKS L.L.C.

 

and

 

DREAMWORKS ANIMATION SKG, INC.

 

dated as of October 7, 2004

DISTRIBUTION AGREEMENT dated as of October 7, 2004 (this “Agreement”), by and between DreamWorks Animation SKG, Inc. (“DWA”) and DreamWorks L.L.C. (“Distributor”).

 

WHEREAS DWA is principally devoted to developing, producing and acquiring feature-length theatrical animated motion pictures and other animated productions;

 

WHEREAS Distributor is engaged, inter alia , in the business of distributing feature length theatrical motion pictures and other productions in all media throughout the world; and

 

WHEREAS DWA desires to grant to Distributor a license to distribute and exploit Licensed Pictures (as defined hereunder), and Distributor desires to enter into such license on the terms and conditions contained herein;

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, DWA and Distributor hereby agree as follows:

 

Section 1. Definitions and Usage

 

1.1 Definitions :

 

Accepted Additional Picture(s) shall mean an Additional Picture with respect to which Distributor has licensed certain Distribution Rights pursuant to Section 2.1.c. below.

 

Additional Picture(s) shall mean (i) all Animated Motion Pictures and Hybrid Motion Pictures intended for initial Theatrical Exhibition (a) that do not fully satisfy each of the specifications set forth in Section 3.2.b. below, but (b) that are either (1) produced by DWA or any controlled Affiliate (solely or in conjunction with another entity) and available for Delivery prior to expiration of the Output Term, or (2) acquired by DWA or any controlled Affiliate, available for Delivery prior to expiration of the Output Term and for which any Distribution Rights have been obtained by DWA for the Territory; (ii) all DTV Productions (a) that do not fully satisfy each of the specifications set forth in Section 3.2.c. below, but (b) that are either (1) produced by DWA or any controlled Affiliate (solely or in conjunction with another entity) and available for Delivery prior to expiration of the Output Term, or (2) acquired by DWA or any controlled Affiliate, available for Delivery prior to expiration of the Output Term and for which any Distribution Rights have been obtained by DWA for the Territory; and (iii) any Motion Pictures or other audiovisual programs that Distributor is required to license or otherwise provide rights to a party to a DWA-approved Distribution Servicing Agreement.

 

Control when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

 

Affiliate of Any Person shall mean any other Person controlling, controlled by or under common control with such Person. For purposes of this Agreement, Distributor and DWA are not Affiliates of each other.

 

Animated Motion Picture(s) shall mean any Motion Picture that is created predominantly by one or more non-live action production methods (e.g., hand-drawn animation [such as Prince of Egypt ], CGI [such as Shrek ], stop-motion [such as Chicken Run ] and/or motion capture [such as Polar Express ]) (each, an “Animation Method”). However, a Motion Picture shall not be deemed to be an Animated Motion Picture if digital Animation Method(s) are used, in whole or in part, to create photorealistic characters that interact with live-action characters in live-action settings. (Photorealistic characters include both “real world” characters modified by an Animation Method [e.g., Babe the pig in Babe ] and characters that are invented but which are depicted in a “real world” manner by an Animation Method [e.g., Yoda in Star Wars II: Attack of the Clones , Gollum in Lord of the Rings , the dinosaurs in Jurassic Park , the robots in I, Robot , the toy soldiers in Small Soldiers ].)

 

Business Day shall mean a day other than a Saturday, Sunday or other day on which financial institutions in Los Angeles, California are authorized or required by law to close.

 

CJ Agreement shall mean collectively the Theatrical Distribution Agreement, amended and restated as of February 10, 1999, between Distributor and Cheil Jedang Corporation (“Cheil”), the Home Video Fulfillment Services Agreement, amended and restated as of February 10, 1999, between Distributor and Cheil, each as may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof, and all related agreements with respect to one or more Licensed Pictures between Distributor and Cheil or CJ Entertainment, Inc. (together with Cheil collectively “CJ Entertainment”).

 

Commercial Tie-in and Promotional Rights shall mean, with respect to each Licensed Picture, the right to use or license the use of characters, designs, visual representations, names, logos, props, physical properties or other elements appearing or used in or in connection with such Licensed Picture or all or any part of the Literary Material in connection with (i) the advertising, publicizing, marketing, promotion and/or packaging of merchandise, products or services and/or (ii) premiums or promotions.

 

Contingent Compensation shall mean, with respect to each Licensed Picture, contractually required payments to or on behalf of any Person providing rights or services, or otherwise involved in the production of such Licensed Picture, payable in respect of such Licensed Picture, which (i) are dependent in whole or in part on box office, gross receipts, net receipts, or a percentage of such gross receipts or net receipts, and are payable in a fixed or allocable amount or as a percentage of such receipts, and/or (ii) are payable in a fixed amount upon the occurrence of a specified event such as receipt of an Academy Award or the sale of a specified number of Video Devices.

 

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Copyright Revenue shall mean, with respect to each Licensed Picture, all royalties, fees and other revenue that DWA, or the registered copyright owner, is otherwise entitled to collect by reason of any statute, governmental regulation or operation of law, based upon or in connection with, in whole or in part, or directly or indirectly, any use of such Licensed Picture from time to time pursuant to any exercise of the Distribution Rights and Licensed Marks, including the retransmission of the signal embodying the Television Exhibition of any such Licensed Picture, commonly referred to as retransmission royalties and/or the sale of blank cassettes and/or recording apparatus for the purpose of recording the signal embodying the Television Exhibition of any such Licensed Picture, commonly referred to as private copy levies and/or from the rental of pre-recorded Video Devices to consumers, commonly referred to as video rental right levies, provided that Copyright Revenue shall in no event include any of the foregoing royalties, fees or revenue arising from the Retained Rights unless any such Retained Rights are required to be included in the Distribution Rights pursuant to any DWA-approved Distribution Servicing Agreement.

 

Delivery shall mean delivery to Distributor of all items referenced in Section 3.2.a. hereof. A Licensed Picture shall be deemed to be Delivered hereunder only upon Distributor’s receipt of all such items (the “Delivery Date”).

 

Distribution Expenses shall mean, with respect to each Licensed Picture, the sum of:

 

All actual, direct out-of-pocket costs, charges and expenses (other than Distributor’s overhead expenses) accrued (i.e. 45 days after being accrued, provided such costs, charges and expenses are paid no more than 30 days thereafter), or otherwise when paid by Distributor or any Affiliate arising out of the exhibition, exploitation and use of such Licensed Picture, and the distribution, advertising, marketing, publicity, promotion, market exploitation, and turning to account of such Licensed Picture whether directed to the public or to exhibitors, retailers or wholesalers dealing with such Licensed Picture in or for any and all Distribution Rights throughout the Territory, including all direct out-of-pocket costs, charges and expenses for:

 

(i)

Marketing Materials (as defined in Section 4.4);

 

(ii)

advertising space in any print or electronic media;

 

(iii)

film festivals, premieres, preview screenings and other “special events” promoting the Licensed Picture, sales presentations, local or regional marketing conventions and marketing presentations for a designated Licensed Picture (or an allocable portion of such costs if other Motion Pictures are also included), talent touring, and all associated expenses incurred in connection with the foregoing, such as travel, living expenses and accommodations of talent or

 

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any of Distributor’s employees (excluding straight time regular salaries but including overtime salaries) and subject to DWA’s prior approval, such expenses of any territory managers and marketing managers of Subdistributors charged as Distribution Expenses pursuant to applicable DWA-approved Distribution Servicing Agreements;

 

(iv)

prints, Video Devices or any other similar devices, including for creation, manufacture, editing dubbing, subtitling, rescoring, delivery and use of the foregoing or any other means of exploitation now known or hereafter devised;

 

(v)

freight, shipping, transportation and storage costs for all prints, Video Devices and Marketing Materials;

 

(vi)

checking and collection of Gross Receipts;

 

(vii)

trade dues and assessments by trade organizations;

 

(viii)

taxes and government fees;

 

(ix)

remittance and conversion of Gross Receipts;

 

(x)

license fees, duties, other fees or any other amounts paid to permit use of the Licensed Picture;

 

(xi)

a proportionate share of errors and omissions insurance in accordance with Section 10.b. below;

 

(xii)

transaction fees imposed on credit card charges purchasing admission to view the Licensed Picture;

 

(xiii)

Home Video Distribution Expenses;

 

(xiv)

the distribution of the Licensed Pictures incurred at the direction of DWA, including any incremental costs to provide DWA-requested distribution services or Information (as defined in Section 4.1.c.) not available in Distributor’s normal course of business;

 

(xv)

the prosecution, defense or settlement of any action directly relating to Distributor’s Exhibition or use of the Licensed Pictures or any element thereof in accordance with the terms of this Agreement, including any interest and penalties, provided that all amounts recovered pursuant to any of the aforementioned shall be included in Gross Receipts pursuant to Section 8.1.f. below; and

 

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(xvi)

anti-piracy and security measures specific and incremental to Licensed Pictures, such as security guards at prerelease screenings and night-vision equipment charges.

 

“Distribution Expenses” shall not include (x) any of the foregoing costs, charges, fees and expenses relating to the Retained Rights, except to the extent such Retained Rights are required to be included in the Distribution Rights pursuant to any DWA-approved Distribution Servicing Agreement, (y) Additional Distribution Expenses (as defined in Section 5.2.), and (z) Residuals and Contingent Compensation. Except for Distribution Expenses incurred in connection with Retained Rights required to be included in the Distribution Rights pursuant to any DWA-approved Distribution Servicing Agreement and Residuals (as more fully set forth in Section 6.2.), Distributor shall have no responsibility for any costs referenced in the foregoing clauses (x), (y) and (z). Distribution Expenses shall be reduced by the net amount of any insurance recoveries attributable thereto to the extent received by Distributor.

 

Distribution Rights shall mean the following rights, collectively, with respect to a Motion Picture:

 

a. The right to release, distribute, Exhibit, collect receipts with respect to, and exploit, such Motion Picture during the applicable License Term, throughout the applicable Territory or, with respect to any Motion Picture acquired for Exhibition, in the territories and for the time periods set forth in any applicable acquisition agreement, and in all media and by whatever means whether now known or hereafter devised or created (including Internet Rights, but excluding the Retained Rights), including in each case above with respect to such Motion Picture and trailers thereof and excerpts and clips therefrom and featurettes based thereon, in any and all languages and versions, including dubbed, subtitled and narrated version, in any form and including:

 

(i) in connection with the marketing, distribution and exploitation of such Motion Picture from time to time, the right: (A) to use and to authorize others to use the title of such Motion Picture or to change such title (as approved by DWA, except as otherwise provided in Section 4.2.d. below); (B) to use and perform and to authorize others to use and perform any musical material contained in such Motion Picture; and (C) subject to the requirements and restrictions set forth in Section 4.2.d., any applicable acquisition agreement and agreements with talent, including actors, producers and directors with respect to any Motion Picture, to cut, edit, dub, subtitle and alter such Motion Picture or any parts thereof as necessary for the effective marketing, distribution and exploitation of such Motion Picture or to conform to censorship, import permit and other legal requirements or to conform to time segment or exhibition standards of distributors and exhibitors or to create foreign language versions;

 

(ii) for purposes of advertising and publicizing such Motion Picture from time to time in connection with the marketing, distribution and exploitation of such Motion Picture, the right on a not for sale basis (other than customary “for-sale” programs, e.g. customary souvenir programs in connection with Theatrical Exhibition in

 

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Japan): (A) to publish and license and authorize others to publish in any language, in any media and in such form as any distributors and exhibitors deem advisable, synopses, summaries, adaptations, resumes and stories of and excerpts from such Motion Picture and from any literary, dramatic or musical material in such Motion Picture or upon which such Motion Picture is based; (B) subject to any applicable acquisition agreement and any agreements with talent with respect to such Motion Picture, to use and authorize others to use the name, voice and likeness (and any simulation or reproduction thereof) of any person appearing in or rendering services in connection with such Motion Picture; (C) to exhibit and authorize others to exhibit in any language by any media, including radio and television, excerpts and clips from such Motion Picture and from any literary, dramatic or musical material in such Motion Picture or upon which such Motion Picture is based; and (D) subject to DWA’s prior approval (not to be unreasonably withheld) and licenses granted to any Person in connection with the exploitation of DWA’s Commercial Tie-In and Promotional Rights, to use and authorize others to use the rights described above and Licensed Marks in the manufacture and distribution of t-shirts, sweatshirts, posters and postcards and other items for theatrical and other media promotions and publicity purposes only; and

 

(iii) the right to use and authorize others to use all Tangible Film Materials or, with respect to a Motion Picture acquired for Exhibition, all Tangible Film Materials owned or otherwise available to DWA under the applicable acquisition agreement;

 

b. The right to receive all Copyright Revenue, and the right to receive or to arrange for the collection of Copyright Revenue resulting from the secondary transmission or retransmission of such Motion Picture; and

 

c. All distribution rights required to be granted to any Person pursuant to a DWA-approved Distribution Servicing Agreement or subject to the requirements of a DWA-approved Third Party Service Agreement.

 

Distribution Servicing Agreement(s) shall mean any agreements or arrangements between Distributor or a Distributor Affiliate, as one party, and any Person, including any Subdistributor or licensee, as the other party, with respect to (i) the Exhibition of one or more Licensed Pictures, (ii) the exploitation of any Distribution Rights in a Licensed Picture, or (iii) the exploitation of any Retained Rights as authorized or permitted by DWA with respect to one or more Licensed Pictures, as such agreements may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof.

 

Distributor Affiliate shall mean any Person that qualifies as a controlled Affiliate of Distributor pursuant to the definitions of Affiliate and Control set forth above.

 

DTV Production(s) shall mean all Animated Motion Pictures or Hybrid Motion Pictures intended for initial Home Video Exhibition.

 

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DWA – approved Distribution Servicing Agreement shall mean the Cheil Agreement, the Kadokawa Agreement, the Universal Agreement and each agreement set forth on Schedule 1 hereto, as such agreement may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof.

 

DWA-approved Third Party Service Agreement shall mean each agreement set forth on Schedule 5 hereto, as such agreement may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof.

 

Effective Date shall mean the first day of the calendar quarter preceding the Closing Date as defined in the Separation Agreement, or such other date as mutually agreed between DWA and Distributor.

 

Exhibit shall mean transmit, display, exhibit or perform. “Exhibiting” and “Exhibition” shall have correlative meanings.

 

Financial Benefit shall mean any and all advances, volume and prompt payment discounts, laboratory and other vendor rebates or adjustments and any other economic consideration or financial advantages offered to or accepted by Distributor in connection with any transaction that relates to the services of Distributor in connection with (i) the Licensed Pictures, (ii) the Licensed Pictures and other Motion Pictures produced or distributed by Distributor, or (iii) the exploitation of the DWA Distribution Rights hereunder.

 

Good Faith Dispute shall mean any amount or provision that is the subject in a bona fide disagreement between the parties.

 

Gross Receipts shall mean with respect to each Licensed Picture, the amounts set forth in Section 8. below, subject to the adjustments and exclusions as provided therein.

 

Home Video Distribution Expenses shall mean with respect to each Licensed Picture, the aggregate of all actual, direct out-of-pocket costs, charges and expenses (other than Distributor’s overhead expenses) arising from the manufacture, duplication, replication, sales, marketing, promotion and other costs associated with exploitation and distribution of Video Devices. As used in this definition:

 

(i) Manufacturing costs include the manufacture, packaging and shipping of Video Devices, including costs with respect to re-editing, dubbing, subtitling, closed captioning and narration for the deaf and blind, mastering, duplication, replication, anti-piracy devices and anti-copy protection, raw material costs including tape, disc, shell, box, label, sleeves, containers, stickers, packaging materials and services including plastic wrapping, “pick, pack and ship” and other physical distribution and handling services, freight, transportation, warehousing, storage, processing of returns, degaussing and disposal.

 

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(ii) Sales and marketing costs include selling, advertising, and promotion of Video Devices, including design, production, and manufacture (for the purposes of Home Video Exhibition) of marketing and advertising materials, press kits, advertising funding and rebates including co-operative advertising and regional marketing funds, wholesale rebates, direct-to-consumer rebates, display and point-of-purchase advertising, trailers, screening Video Devices, media purchases, artwork graphics, fulfillment, promotions, mass merchant advertising, advertising agency and consultant fees, sales incentive programs, anti-piracy costs including an allocable portion of the dues and assessments payable with respect to industry anti-piracy programs relating to Video Devices, research, public relations fees, trade show and entertainment costs, commercial tie-ins, mailers and sales commissions.

 

Home Video Exhibition shall mean all existing and future forms of home entertainment, including the right to manufacture, package, market, sell, rent, lease, Exhibit, distribute and otherwise exploit all forms of home video, including videocassettes, cartridges, laserdiscs, videograms, tapes, CD-Rom, CD-I, DVD, VCD, near video-on-demand, subscription-video-on-demand, video-on-demand and any other format, platform or device (collectively “Video Devices”), now known or hereafter devised, intended primarily for use in the home in conjunction with a reproduction apparatus or delivery system that causes a visual image (whether or not synchronized with sound) to be viewed on the screen of a television receiver, television monitor, computer or comparable device now known or hereafter devised, including future methods and means of delivering Video Devices into the home.

 

Hybrid Motion Picture(s) shall mean any Motion Picture that is predominantly live-action, but in which at least two of the four characters with the most screen time, or in which a majority of the characters with speaking roles, are created (non-photorealistically) by an Animation Method. Who Framed Roger Rabbit, Looney Tunes - Back in Action and Space Jam would be Hybrid Motion Pictures.

 

Interactive Rights shall mean the interactive use of any portion or element of the Licensed Picture in any packaged product in digital electronic entertainment software formats and configurations only in which the user interacts with the game for amusement purposes (as opposed to informational or educational purposes), including: (a) in video game or activity formats, including those designed or created for handheld electronic devices (e.g., Game Boy Color), or for platforms such as personal computers, personal digital assistants, console game machines, PC based games, games playable via DVD and similar micro-processor based devices, and all other handheld electronic devices and all other platforms now known or hereafter devised, and (b) in games, activities or other content available for use on a generally accessible or proprietary network such as the Internet and other digital delivery systems (e.g., online shopping, online gaming, multi-player gaming), or a delivery service over cable lines, telephone lines, microwave signals, radio waves, satellite, wireless or any other service or method now known or hereafter invented available for the delivery or transmission of interactive entertainment software products.

 

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Internet Rights shall mean the exclusive right, under copyright and otherwise, to distribute, Exhibit, broadcast and otherwise exploit the Licensed Picture by means of one or more wired and wireless electronic or electromagnetic networks (including fiber optic, microwave, twisted pair copper wires, coaxial cable, satellite, cellular networks and any combinations thereof) and collections thereof now or hereafter existing for the transmission of digital and/or optical data (e.g., text information, graphics, audio, video and combinations thereof) through the use of any protocols or standards now existing or hereafter devised (including Transmission Control Protocol/Internet Protocol or other architecture, and any subsequent extensions, modifications and refinements to the foregoing, from or to electronic devices (e.g., computers, set-top boxes, handheld devices, cable modems, personal digital assistants, cellular telephones, televisions) capable of receiving digital and/or optical data or information wherever located, whether open or proprietary, public or private and whether or not a fee is charged or a subscription or membership is required in order to access such networks. The Internet includes the computer network comprising inter-connected networks commonly referred to as the “Internet” and the “World Wide Web”, whether using means, methods, processes, media or technology now or hereafter existing. It is specifically acknowledged and agreed that Internet Rights shall include the right to “download” (as such term is used in the Internet industry) the Licensed Picture as well as the right to “stream” (as such term is used in the Internet industry) the Licensed Picture, whether at a time determined by the end user or any third party.

 

Kadokawa Agreement shall mean the Master Agreement dated as of April 22, 2004 among Distributor, Kadokawa Entertainment Inc. (“Kadokawa”) and Kadokawa Holdings Inc., as Guarantor, including Exhibits A, B, C and D attached thereto, as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof.

 

Legitimate Stage Rights shall mean the right to present Literary Material upon the spoken stage with live performers appearing and speaking in the immediate presence of the viewing audience. The right to present Literary Material upon the spoken stage with live performers appearing and speaking, whether or not in the immediate presence of a viewing audience, for the primary purpose of photographing and recording such presentation for use in or in connection with a Licensed Picture or for the promotion or publicity of a Licensed Picture is an exercise of rights with respect to such Licensed Picture and not an exercise of Legitimate Stage Rights.

 

License Term shall mean:

 

a. With respect to Qualified Pictures Delivered to Distributor during the Output Term, the period commencing on the date such Qualified Picture is Delivered to Distributor and ending the earlier of (i) sixteen (16) years after the Qualified Picture’s Release Date in the Domestic Territory, or (ii) seventeen (17) years after Delivery of the Qualified Picture;

 

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b. With respect to Prior Pictures, the period commencing on the Effective Date and ending on the date that is sixteen (16) years after each Prior Picture’s Release Date in the Domestic Territory, as such Release Dates are set forth on Schedule 4 ;

 

c. With respect to Accepted Additional Pictures (excluding DTV Productions licensed as Accepted Additional Pictures hereunder) Delivered to Distributor during the Output Term, the period commencing on the date such Accepted Additional Picture is Delivered to Distributor and ending on the date which is the earlier of (i) sixteen (16) years after the Accepted Additional Picture’s Release Date in the Domestic Territory, or (ii) seventeen (17) years after the Delivery of the Accepted Additional Picture; or (iii) the full term of Distribution Rights owned or controlled by DWA or any controlled Affiliate and licensed to Distributor hereunder with respect to such Accepted Additional Picture;

 

d. With respect to Accepted Additional Pictures that are also DTV Productions Delivered to Distributor during the Output Term, the period commencing on the date such DTV Production is Delivered to Distributor and ending on the date which is the earlier of (i) ten (10) years after such DTV Production’s HV Release Date in the Domestic Territory, or (ii) 126 months after such DTV Production is Delivered to Distributor, or (iii) the full term of Distribution Rights owned or controlled by DWA or any controlled Affiliate and licensed to Distributor hereunder with respect to such DTV Production.

 

e. With respect to Qualified DTV Productions, (i) if the HV Release Date for such Qualified DTV Production occurred prior to the Effective Date, the period commencing on the Effective Date and ending ten (10) years thereafter, or (ii) if such Qualified DTV Production is Delivered on or after the Effective Date, the period commencing on the Delivery Date and ending the earlier of (A) ten (10) years after such Qualified DTV Production’s HV Release Date in the Domestic Territory, or (B) 126 months after such Qualified DTV Production is Delivered to Distributor.

 

Notwithstanding the foregoing, the License Term shall be subject to earlier termination in accordance with the terms hereof; provided that, subject to Section 11.2.c. below, (i) the License Term and this Agreement, as and to the extent they pertain to such Distribution Rights licensed to Distributor that are also subject to any DWA-approved Distribution Servicing Agreement or the requirements of a DWA-approved Third Party Service Agreement, as applicable, shall continue, and (ii) such Distribution Rights (and only such Distribution Rights) shall continue to be licensed to Distributor in accordance with the terms of this Agreement until the expiration or termination of each such DWA-approved Distribution Servicing Agreement or DWA-approved Third Party Service Agreement, as applicable, in accordance with the terms thereof.

 

Licensed Marks shall mean, with respect to each Licensed Picture from time to time, to the extent related to the Distribution Rights and to the extent of DWA’s rights in the Licensed Marks in the Territory, the right to use and sublicense the use of (i) the title of such Licensed Picture (to the extent such title is a registered trademark) from time to time in any and all print styles and forms in connection with the distribution, marketing and promotion of such Licensed Picture, and all goodwill

 

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associated therewith or symbolized thereby, and (ii) the DreamWorks Marks listed and depicted in Schedule A to the Trademark License Agreement solely in connection with (x) the exploitation of the Distribution Rights to such Licensed Picture, and (y) the distribution, marketing and promotion of such Licensed Picture in accordance with the terms hereof; provided the foregoing shall not permit or authorize the use of the title of such Licensed Picture or the DreamWorks Marks in connection with the exploitation of the Retained Rights.

 

Licensed Picture(s) shall mean the Qualified Picture(s), the Prior Picture(s), the Qualified DTV Production(s) and the Accepted Additional Picture(s).

 

Literary Material shall mean written matter, whether published or unpublished, in any form, including a novel, book, article, treatment, outline, poem, screenplay, teleplay, story, manuscript, letter, play or otherwise, which may be included in or upon which a Licensed Picture may be based in whole or in part.

 

Literary Publishing Rights shall mean, with respect to each Licensed Picture, the right to publish, distribute and sell to the public hardcover or soft-cover printed publications (and electronic copies of such printed publications) of all or any part of the Literary Material or other material (excluding music and/or lyrics) created for or produced in connection with such Licensed Picture, including artwork, logos or photographic stills (but solely to the extent that the right to make such use of such other material has been separately obtained from the owner thereof), other than the publications included within Merchandising Rights.

 

Merchandising Rights shall mean, with respect to each Licensed Picture, the right to license, manufacture, distribute and sell articles of merchandise and/or products (including toys, board and video games, novelties, trinkets, souvenirs, wearing apparel, fabric, foods, beverages and cosmetics) and the right to license, distribute and sell services that embody on or in such merchandise, products or services Licensed Marks, characters, designs, visual representations, names, likenesses and/or characteristics of actors, physical properties or other materials appearing or used in or in connection with such Licensed Picture or all or any part of the Literary Material and the right to publish, distribute, and sell souvenir programs, picture books, comic books, sing-along records and books, post cards, novelizations, photo novels, illustration books, and activity books or booklets which embody on or in the foregoing any or all of the characters, designs, visual representations, names, likenesses and/or characteristics of actors, physical properties or other materials appearing or used in or in connection with such Licensed Picture or all or any part of the Literary Material.

 

Motion Picture(s) shall mean audiovisual product produced and distributed of every kind and character whatsoever, including all present and future technological developments, whether produced by means of any photographic, electrical, electronic, mechanical or other processes or devices now known or hereafter devised, and their accompanying devices and processes whether pictures, images, visual and aural representations are recorded or otherwise preserved for projection, reproduction, exhibition, or transmission by any means or media now known or hereafter devised in such manner as to appear to be in motion or sequence, including computer generated pictures and graphics other than video games.

 

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Music Publishing Rights shall mean, with respect to each Licensed Picture, the right to register (in the name of the copyright owner) the copyright of musical compositions created for such Licensed Picture, copy, publish, distribute, license or sell the music and/or lyrics of musical compositions and to license the right to make Sound Records of musical compositions and to make Sound Records of musical compositions in synchronization or timed relation with motion pictures and to license the performance of musical compositions.

 

New Media Rights shall mean, with respect to each Licensed Picture, the right to exploit such Licensed Picture in linear form, or any part thereof in connection with advertising, marketing or promotion of such Licensed Picture for distribution or exploitation, by any means, methods, processes, media or technology now known (if not generally available or used as a means of distribution to the general public) or hereafter developed as a means of Exhibition or transmission in any form. For avoidance of doubt, Internet Rights are not within the scope of New Media Rights.

 

Non-Theatrical Exhibition shall mean, with respect to each Licensed Picture, all forms of non-theatrical distribution, including the right to Exhibit such Licensed Picture (i) on airplanes, trains, ships and other common carriers, (ii) in schools, colleges and other educational institutions, libraries, governmental agencies, business and services organizations and clubs, churches and other religious oriented groups, museums, and film societies (including transmission of such Licensed Picture by closed circuit within the immediate area of the origin of such exhibition), and (iii) in permanent or temporary military installations, shut-in institutions, prisons, retirement centers, industrial sites, offshore drilling rigs, logging camps, and remote forestry and construction camps (including transmission of such Licensed Pictures by closed circuit within the immediate area of the origin of such exhibition).

 

Output Term shall mean the period commencing on the Effective Date and continuing until the later of (i) Delivery of twelve (12) Qualified Pictures to Distributor, and (ii) December 31, 2010. The Output Term shall be subject to earlier termination in accordance with the terms hereof; provided , however , subject to Section 11.2.c. below, the Output Term for Motion Pictures produced or acquired by DWA or any controlled Affiliate shall extend as and to the extent required pursuant to any DWA-approved Distribution Servicing Agreement or the requirements of any DWA-approved Third Party Service Agreement, and the Distribution Rights to such Motion Pictures, including the Licensed Pictures hereunder, shall continue to be licensed to Distributor in accordance with the terms of this Agreement as and to the extent Distributor is required to provide such Motion Pictures to any Person pursuant to any DWA-approved Distribution Servicing Agreement or DWA-approved Third Party Service Agreement, as applicable, until the expiration or termination thereof.

 

Outright Sale shall mean a license from Distributor to a Person to Exhibit a Licensed Picture for a specified period of time in excess of one year, without any obligations on the part of such Person to account to Distributor for revenue and expenses received or incurred by such Person.

 

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Person shall mean any individual, corporation, limited liability company, estate, partnership, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof.

 

Prior Picture(s) shall mean the following Animated Motion Pictures: Antz ; The Prince of Egypt; The Road to Eldorado ; Chicken Run ; Shrek ; Spirit : Stallion of the Cimarron ; Sinbad: Legend of the Seven Seas ; and Shrek 2 .

 

Qualified DTV Production(s) shall mean all Animated Motion Pictures or Hybrid Motion Pictures intended for initial Home Video Exhibition (i) released prior to the Effective Date and designated as a Qualified DTV Production hereunder, or that will be initially released or available for release during the Output Term, (ii) that are either (A) financed or produced by DWA or any controlled Affiliate (solely or in conjunction with another Person) and available for Delivery prior to expiration of the Output Term, or (B) acquired by DWA or any controlled Affiliate, available for Delivery prior to expiration of the Output Term and for which DWA or any controlled Affiliate has obtained any Distribution Rights in the Territory, and (iii) fully satisfy all of the specifications set forth in Section 3.2.c. below. Joseph: King of Dreams is designated as a Qualified DTV Production hereunder.

 

Qualified Picture(s) shall mean all Animated Motion Pictures and Hybrid Motion Pictures intended for initial Theatrical Exhibition that (i) are either (a) produced by DWA or any controlled Affiliate (solely or in conjunction with another entity) and available for Delivery prior to the expiration of the Output Term, or (b) acquired by DWA or any controlled Affiliate and available for Delivery prior to expiration of the Output Term and for which any Distribution Rights have been obtained for the Territory; and (ii) fully satisfy all of the specifications set forth in Section 3.2.b. below. Distributor and DWA acknowledge and agree that the Animated Motion Picture currently entitled Shark Tale shall constitute one of the twelve (12) Qualified Pictures hereunder.

 

Radio Rights shall mean the right to transmit sound alone by means of radio devices.

 

Rent-a-System Picture shall mean an Animated Motion Picture or Hybrid Motion Picture with respect to which DWA acquires only a license to exercise certain rights pursuant to an arms-length agreement with an unaffiliated third party, the applicable license agreement does not obligate DWA to pay an advance or minimum guarantee for such Motion Picture and under the license agreement DWA is entitled to receive or retain a customary rent-a-system distribution fee and such unaffiliated third party is obligated either to advance, guarantee or to pay on a full recourse basis all distribution expenses which may be incurred by DWA.

 

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Residuals shall mean, with respect to each Licensed Picture, payments to third parties required (i) pursuant to collective bargaining, union or guild agreements applicable to DWA for the exploitation of such Licensed Picture, including residuals, pension, health and welfare payments, and employer share of taxes, or (ii) for performance, synchronization, recording, re-use and video levies, patent, trademark and similar licenses as governmental requirements, incurred for the distribution or turning to account of such Licensed Picture, or rights derived therefrom, in the case of each of clauses (i) and (ii) above, for use of such Licensed Picture in any and all media, including Theatrical Exhibition, Television Exhibition and Home Video Exhibition or any format or version of such Licensed Picture, throughout the Territory.

 

Retained Rights shall mean, with respect to each Licensed Picture, (i) the exclusive ownership rights set forth in Section 14. below, including all pre-existing DWA characters, properties or other elements owned or controlled by DWA or any controlled Affiliates; (ii) rights in acquired Licensed Pictures retained by the previous owners and/or producers thereof or previously granted to third parties; (iii) all rights to Subsequent Productions, unless and until any such Subsequent Production becomes a Licensed Picture hereunder in accordance with the terms hereof; (iv) Commercial Tie-in and Promotional Rights (subject to Section 4.14. below); (v) Merchandising Rights; (vi) Interactive Rights; (vii) Literary Publishing Rights; (viii) Music Publishing Rights and Soundtrack Recording Rights, provided in connection with the Distribution Rights, Distributor shall have an irrevocable license during the License Term of each Licensed Picture to exploit musical works solely as embodied in such Licensed Picture, and as may be reasonably necessary to market, advertise and promote the Licensed Picture; (ix) Radio Rights, provided in connection with the Distribution Rights, Distributor shall have the right during the License Term of each Licensed Picture to transmit sound alone excerpts from the Licensed Picture by means of radio devices solely for purposes of advertising, publicizing, marketing and promoting the Licensed Picture; (x) Legitimate Stage Rights; (xi) Theme Park Rights (subject to Section 4.15. below); (xii) all rights not expressly granted to Distributor pursuant to this Agreement; and (xiii) in the case of DTV Productions licensed hereunder, Theatrical Exhibition, which shall not be exploited by DWA during the applicable License Term without Distributor’s prior written consent. Notwithstanding the foregoing, if the Distributor is required to license or otherwise provide rights that would otherwise constitute Retained Rights hereunder to a party to a DWA-approved Distribution Servicing Agreement, then DWA shall license to Distributor such rights solely and to the most limited extent required under such DWA-approved Distribution Servicing Agreement.

 

Separation Agreement shall mean the agreement dated as of              , 2004 by and among Distributor, DWA and DreamWorks Animation L.L.C. regarding the principal corporate transactions required to effect DWA’s separation from Distributor.

 

Services Agreement shall mean the agreement dated as of              , 2004 between Distributor and DWA whereby (i) Distributor has agreed to provide DWA with various corporate and administrative support services as enumerated therein, and such additional services that Distributor and DWA may identify from time to time in the future, and (ii) DWA has agreed to provide Distributor with certain support services as enumerated therein.

 

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Sound Records shall mean sound recordings and reproductions of every kind and character, including all present and future developments of the sound recording and motion picture industries, whether produced by means of any electrical, electronic, mechanical or other process or device now known or hereafter devised, and any accompanying process or device whereby sound may be recorded for later transmission or playback, whether or not simultaneously or in synchronization or timed relation with Licensed Pictures.

 

Soundtrack Recording Rights shall mean, with respect to each Licensed Picture, the right to license, manufacture, distribute or sell (i) Sound Records made from the soundtrack of such Licensed Picture or (ii) Sound Records embodying re-recordings of score and/or musical compositions contained on the soundtrack of the Licensed Picture and marketed to the public with the works “contains music from” or “inspired by” with respect to such Licensed Picture, or similar wording, which records are not the official soundtrack recordings from the Licensed Picture. Soundtrack Recording Rights also includes the right to select the record distributor that will release any soundtrack albums derived from the Licensed Picture.

 

Subsequent Productions shall mean, with respect to each Licensed Picture, any Motion Picture (i) based upon or derived from some portion of the plot or story line from the Licensed Picture, or (ii) in which one or more of the principal characters or elements appearing in the Motion Picture is taken from the Licensed Picture, whether or not the Motion Picture depicts the same or new and different events and situations as depicted in the Licensed Picture, including any prequels, sequels and remakes of the Licensed Picture.

 

Subdistributor shall mean a Person, other than an Affiliate of Distributor, licensed by Distributor to render services appropriate for the distribution of one or more Licensed Pictures for a limited period of time in territories, country, or media who, pursuant to such license from Distributor, has an obligation to account to Distributor on a revenue and expenses basis with respect to the Licensed Picture(s) (as opposed to accounting on a royalty or similar basis). A Subdistributor for purposes only of this Agreement shall be deemed to include (i) a sales agent ( provided that such sales agent accounts for revenue and expenses to Distributor in accordance with the foregoing) and (ii) a fulfillment services provider, i.e., a Person, other than an Affiliate of Distributor, licensed by Distributor, who has an obligation to account to Distributor on a revenue and expenses basis with respect to Video Devices of one or more Licensed Pictures and is responsible under Distributor’s supervision for services in the manufacturing, advertising, promotion, securing and fulfillment of orders, the collection of revenue and the shipping of Video Devices of such Picture(s).

 

Subsidiary shall mean, as to any Person, a corporation, limited liability company, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests

 

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having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, limited liability company, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person.

 

Tangible Film Materials shall mean, with respect to each Licensed Picture (excluding property used exclusively in connection with the exploitation of Retained Rights and any sets, costumes, props, scenery, vehicles and equipment) and only to the extent it exists (whether coming into existence before or after such Licensed Picture is Delivered) with respect to such Licensed Picture, (i) all tangible physical embodiments of every kind or nature of or relating to such Licensed Picture and all versions thereof, including the YCM separations, master prints, exposed film, developed film, positives, negatives, prints, answer prints, special effects, preprint materials (including interpositives, negatives, videotapes, duplicate negatives, internegatives, color reversals, intermediates, lavenders, fine grain master prints and matrices, video masters and all other forms of preprint elements which may be necessary or useful to produce prints or other copies or additional preprint elements, whether now known of hereafter devised), sound tracks, recordings, audio and video tapes and discs of all types and gauges, cutouts, timers, credit-lists, music licenses, and any and all other physical properties of every kind and nature relating to each such Licensed Picture in whatever state of completion, and all duplicates, drafts, versions, variations and copies of each thereof and (ii) to the extent related to or derived from the delivery, exhibition, distribution or other exploitation of any Licensed Picture, all documents of title, including any bill of lading, dock warrant or dock receipt, all rights under any laboratory pledgeholder agreement, laboratory access agreement, warehouse receipt or order for the delivery of inventory, and also any other document or receipt which in the regular course of business or financing is treated as adequately evidencing that the Person in possession of it is entitled to receive, hold and dispose of the document and the goods it covers.

 

Television Exhibition shall mean, with respect to each Licensed Picture, all existing and future forms of television, regardless of the delivery system or payment system (if any) involved, including all rights to transmit, broadcast and Exhibit the Licensed Picture by means of free, toll, pay and subscription television, Community Antenna Systems, Telstar-type, all other forms of satellite and relay television, pay-per-view television, any and all other kinds of open or closed circuit systems and electronic or digital delivery systems, including all future methods and means of delivery analogous to the transmission, retransmission, broadcast or exhibition of the Licensed Picture on the screen of a television receiver, monitor or comparable devices now known or hereafter devised. For avoidance of doubt, Television Exhibition shall not include near-video-on-demand, subscription-video-on-demand, or video-on-demand, all of which are included in Home Video Exhibition as more fully set forth above, and shall not include any transmission or broadcast by open or closed circuits to any theatre or other place where an admission fee is charged to view the broadcast or transmission of the Licensed Picture.

 

Term shall mean the period commencing on the Effective Date and continuing until expiration or earlier termination of the License Term of all Licensed Pictures; provided , however, if the Effective Date does not occur on or before December 31, 2005 this Agreement shall terminate without taking effect.

 

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Territory shall mean the entire universe.

 

(i) The “Domestic Territory” shall mean the territorial United States and its possessions, territories and commonwealths, including the U.S. Virgin Islands, Puerto Rico, Guam, and the U.S. Trust Territories of the Pacific Islands, including the Carolina Islands, the Marshall Islands and the Mariana Islands, Saipan and American Samoa; the Dominican Republic, the British Virgin Islands, Nassau, Bahamas, Bermuda, Saba Island, St. Eustatius Island, St. Kitts Island, St. Maarten Island, and Freeport; the Dominion of Canada and its possessions, territories and commonwealths; and all Army, Navy, Air Force, Red Cross and other national or governmental installations, diplomatic posts, camps, bases and reservations of the above mentioned countries, as well as oil rigs (including Aramco sites) and maritime facilities (and other commercial and/or industrial installations of the above mentioned countries and territories), wherever any of the aforementioned facilities or installations are located, to the extent that sales are made and/or servicing thereof is performed within the geographical areas set forth above, and all airlines and ships flying the flag of, or having the registry of, or whose principal office is located in the United States, Canada or Bermuda and other possessions, territories and commonwealths within the Domestic Territory.

 

(ii) The “International Territory” shall mean all geographical areas outside of the Domestic Territory.

 

Theatrical Exhibition shall mean, with respect to each Licensed Picture, all forms of theatrical distribution, including the right to rent, lease, Exhibit, distribute or otherwise exploit the Licensed Picture and any trailers thereof in commercial motion picture theatres and other venues where persons view the Licensed Picture for an admission fee.

 

Theme Park Rights shall mean the right to use characters and other elements from the Licensed Pictures in any theme park activities, including theme, amusement, tour and/or similar tourist park attractions.

 

Third Party Service Agreement(s) shall mean any and all agreements or arrangements between Distributor or an Affiliate of Distributor and any Person, as a vendor or supplier of goods and/or services, such as an overall laboratory agreement or advertising agency arrangement, that facilitate the distribution or exploitation of Motion Pictures produced or distributed by Distributor, as such agreements may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof.

 

Trademark License Agreement shall mean the License Agreement effective as of October 1, 2004 between DWA and Distributor with respect to the DreamWorks Marks as specified therein.

 

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Universal Agreement shall mean the DW/Universal Studios, Inc. Master Agreement (Amended and Restated as of October 31, 2003), between Distributor, Universal Studios, Inc. (“Universal”) and Vivendi Universal Entertainment LLLP, as assignee of Universal, including the Agreement Modules (as defined therein) attached as Exhibits A, B and D thereto, but excluding the Agreement Module attached as Exhibit C, as the same may be amended, restated, supplemented or otherwise modified from time to time, in accordance with the terms hereof.

 

1.2 Terms and Usage Generally.

 

The definitions in Section 1.1. as used herein shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. All references herein to Sections and Schedules shall be deemed to be references to Sections of, and Schedules to, this Agreement unless the context shall otherwise require. All Schedules attached hereto shall be deemed incorporated herein as if set forth in full herein. The words “include”, “includes” and “including” herein and in any Exhibit and Schedule hereto shall be deemed to be followed by the phrase “without limitation”. All accounting terms not defined in this Agreement shall have the meanings determined by United States generally accepted accounting principles as in effect from time to time. The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. References to a Person are also to its permitted successors and permitted assigns. Unless otherwise expressly provided herein, any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein.

 

Section 2. Grant of Rights; Period of Distribution

 

2.1 Grant of Rights :

 

a. Subject to the terms and conditions hereof, DWA grants, licenses, and assigns to Distributor, to the full extent of the rights owned or controlled by DWA or any controlled Affiliate thereof in and to each Licensed Picture, the sole and exclusive right and license under copyright, during the License Term with respect to such Licensed Picture, throughout the Territory to exploit the Distribution Rights, including all rights of Theatrical Exhibition, Non-Theatrical Exhibition, Home Video Exhibition, Television Exhibition, Internet Rights and New Media Rights. As between Distributor and DWA, all rights not expressly granted to Distributor pursuant to this Agreement, including the Retained Rights, shall remain vested in DWA.

 

b. The license herein granted with respect to each Prior Picture and Qualified DTV Production released prior to the Effective Date shall commence and vest in Distributor as of the Effective Date. The license herein granted with respect to all other Licensed Pictures shall commence and vest in Distributor upon the Delivery Date of each such Licensed Picture.

 

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c. During the Output Term, DWA shall submit to Distributor for possible license to Distributor, in accordance with Section 2.1.a above, all Additional Pictures that DWA or any controlled Affiliate intends to produce or acquire for distribution. DWA’s submission to Distributor shall occur prior to any sale, license or other alienation of any Distribution Rights to such Additional Picture and shall include no less than the following with respect to each Additional Picture: (i) a current script, storyboards, cast, production plan and schedule; (ii) for acquired Additional Pictures, a print, other working copy, or any available film footage if production has not been completed; (iii) a description of the Distribution Rights to be owned or controlled by DWA or any controlled Affiliate upon Delivery; (iv) estimated production budget or acquisition cost; and (v) any other information reasonably requested by Distributor (collectively, the “Submission Materials”). Within ten (10) Business Days of DWA’s provision of the Submission Materials to Distributor, Distributor shall prepare and submit to DWA a preliminary good faith estimate of proposed initial expenditures for prints and advertising (“P&A Spend”) for the initial Theatrical Exhibition of the Additional Picture in the Domestic Territory. If DWA disapproves and no agreement can be reached between DWA and Distributor within five (5) Business Days thereafter, DWA shall have the right to license the Distribution Rights to such Additional Picture to third parties, subject to the Changed Elements provisions set forth in Section 2.1.d. below and to DWA’s obligation to resubmit all rights initially offered to the Additional Picture to Distributor if DWA is unable to obtain a binding P&A Spend commitment from a third party distributor which is 110% or more than the P&A Spend proposed by Distributor. If DWA approves the P&A Spend, Distributor shall have the right, but not the obligation, within five (5) Business Days after DWA’s approval of the P&A Spend, to license all of the available Distribution Rights in and to such Additional Picture by providing written notice to DWA of its intent to so license. If Distributor provides such notice and elects to license the Distribution Rights in and to the Additional Picture, then such Additional Picture shall constitute an Accepted Additional Picture to the extent of the Distribution Rights licensed to Distributor, and Distributor shall distribute such Accepted Additional Picture in accordance with the terms and conditions of this Agreement. If Distributor elects not to license all of the available Distribution Rights in and to an Additional Picture then, subject to the Changed Elements provisions set forth in Section 2.1.d. below, DWA shall be free to license the Distribution Rights to such Additional Picture to third parties, without further obligation to Distributor with respect to such Additional Picture.

 

d. Notwithstanding Section 2.1.c. above, at any time prior to DWA entering into a firm binding commitment with one or more third parties who commit to acquire any of the Distribution Rights to any Additional Picture rejected by Distributor, DWA shall have the continuing obligation to re-submit such Additional Picture to Distributor for consideration if there is any material change, deletion or addition to the Submission Materials (“Changed Elements”). DWA shall promptly notify Distributor of any Changed Elements and Distributor shall have the right, but not the obligation, by providing notice to DWA given within ten (10) Business Days from receipt of notice

 

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from DWA, in which to accept said re-submission and license all of the Distribution Rights available at the time of the first submission of such Additional Picture to Distributor hereunder. If the Distributor provides such notice and elects to license such Distribution Rights, then the applicable Additional Picture shall constitute an Accepted Additional Picture to the extent of the Distribution Rights licensed to Distributor. DWA’s obligation to notify Distributor with respect to any Changed Elements for any Additional Picture and Distributor’s right to accept such re-submission under this Agreement shall be repeated each time there are any Changed Elements to such Additional Picture prior to DWA entering into a firm binding commitment with one or more third parties who commit to acquire any of the Distribution Rights to such Additional Picture.

 

2.2 Period of Distribution : With respect to each Licensed Picture, Distributor shall have the right and obligation to exploit the Distribution Rights granted pursuant to Section 2.1 above during the applicable License Term.

 

Section 3. Development, Production, Acquisition, Payment Obligations and Delivery

 

3.1 Development, Production and Acquisition; Payment Obligations :

 

a. As between DWA and Distributor, DWA shall be solely responsible for the development, production or acquisition of the Licensed Pictures, including the payment of all acquisition and productions costs, and subject to the provisions of Section 6.2. below, DWA shall be solely responsible for the cost of all Residuals and Contingent Compensation. DWA retains the exclusive right in its sole discretion to make all decisions and to initiate any action with respect to the development, production or acquisition of each Licensed Picture, including (i) the right at any time in DWA’s sole discretion to abandon the development or production of each Licensed Picture, and (ii) the right to control all creative matters, including the right to exercise final cut or to delegate final cut to the director of any Licensed Picture.

 

b. Neither DWA nor any controlled Affiliate shall sell, license or otherwise alienate any Distribution Rights in and to any Animated Motion Picture, Hybrid Motion Picture or DTV Production (i) produced or acquired by DWA or any controlled Affiliate, (ii) scheduled or available for Delivery during the Output Term, and (iii) which (A) would otherwise fully satisfy all of the specifications for a Qualified Picture or Qualified DTV Production (each a “Prospective Qualified Picture”) or (B) has been accepted by Distributor as an Accepted Additional Picture; provided , however , notwithstanding the foregoing, DWA shall have the right to dispose of its right, title and interest in and to any Prospective Qualified Picture or an Accepted Additional Picture that has been acquired by DWA after development thereof has been completed (e.g., completion of screenplay, storyboards and visual development), at any time prior to the initial exploitation of the Distribution Rights so long as neither DWA nor any controlled Affiliate retains any ownership rights therein, or retains any financial interest in such

 

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Prospective Qualified Picture or such Accepted Additional Picture. Without limiting the foregoing, DWA shall not sell, license or otherwise alienate any Distribution Rights to any Prospective Qualified Picture in order to obtain co-financing for the production or acquisition of a Prospective Qualified Picture; provided , upon request from DWA specifying the terms of any proposed co-financing arrangement, Distributor shall give good faith consideration to permitting DWA to enter into such co-financing arrangement, but Distributor’s good faith business judgment not to permit such co-financing arrangement shall be final and binding. DWA hereby waives, and shall not assert, any claim against Distributor based upon any alleged failure of Distributor to consider such request in good faith, or rejection by Distributor of, DWA’s request to enter into a co-financing arrangement. In no event shall any sale, license or other alienation under this Section 3.1.b. cause a Prospective Qualified Picture to fail to meet the Qualified Picture specifications set forth in Section 3.2.b. below or the Qualified DTV Production specifications set forth in Section 3.2.c. below. The foregoing provisions of this Section 3.1.b. shall not affect, impair or otherwise limit the terms of any agreements between DWA and Aardman Animations Ltd. in effect as of the Effective Date. Subject to Section 11.2.c. below, under no circumstances shall DWA divest itself of any Distribution Rights or other rights in and to a Prospective Qualified Picture or any other Motion Picture hereunder to the extent such divestiture would cause Distributor to be in violation of any DWA-approved Distribution Servicing Agreement or DWA-approved Third Party Service Agreement.

 

c. Notwithstanding the provisions of Section 3.1.b. hereof, Distributor acknowledges and agrees that DWA or any controlled Affiliate shall have the right in connection with any current or future financing arrangements, including tax advantaged financing, so-called sale-leaseback transactions, or off-balance sheet financing requirements to mortgage, pledge, grant or assign as security, all or any portion of DWA’s right, title and interests or the right, title and interests of any controlled Affiliate of DWA in and to any Motion Pictures hereunder for the benefit of its lenders and financiers, provided such lenders and financiers execute customary nondisturbance agreements with respect to the covered Distribution Rights in form and substance consistent with prior nondisturbance agreements obtained by Distributor from lenders or financiers and otherwise reasonably acceptable to Distributor.

 

3.2 Delivery Requirements :

 

a. Tangible Film Materials . Subject to Section 8.9. below, DWA shall Deliver each Licensed Picture to Distributor at DWA’s sole cost and expense. All Tangible Film Materials set forth on Schedule 3 -Delivery Requirements shall be delivered to Distributor consistent with the past conduct and practices of DWA and Distributor in delivering the Prior Pictures, provided DWA shall deliver the requisite Tangible Film Materials in sufficient time to enable Distributor to (i) make full and timely delivery of the Licensed Pictures and elements thereof to third parties, (ii) satisfy the marketing and distribution plan as approved pursuant to this Agreement, and (iii) meet all Release Dates and HV Release Dates. Prior to Delivery of each Licensed Picture and upon Distributor’s timely notice of its proposed prerelease schedule for advertising, publicity and promotional campaigns, DWA will provide Distributor with any then-available

 

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Tangible Film Materials, as may be reasonably required by Distributor, to enable Distributor to timely prepare customary advertising, publicity and promotional materials (e.g., teasers, trailers, television spots, electronic press kits, one-sheets and teaser print ads). Any so-called “bonus materials” and “DVD Extras”, which DWA in its sole discretion elects to make available on Video Devices embodying the Licensed Pictures, shall be delivered to Distributor at DWA’s sole cost and expense. To the extent that any materials required to be delivered to Distributor hereunder are held by a laboratory or storage facility, DWA will deliver to Distributor a fully-executed access letter for each Licensed Picture. To the extent that DWA itself maintains possession of any Tangible Film Materials, Distributor shall have the same right of access thereto as it would have under the above-referenced laboratory or storage-facility access letter had such Tangible Film Material been held at a laboratory or storage facility. Upon reasonable notice, DWA agrees to either deliver to Distributor, or provide access to, such then-available Tangible Film Materials sufficient to manufacture screening prints for marketing purposes. Prior to completion of Delivery, DWA agrees to deliver to Distributor with respect to each Licensed Picture hereunder a duly executed Instrument of Transfer in substantially the form of Exhibit “A” hereto.

 

b. Qualified Picture Specifications : For a Motion Picture to qualify as a Qualified Picture hereunder, such Motion Picture must fully satisfy each of the following:

 

(i) General . Be in color (using 35mm film) and sound, and in the English language;

 

(ii) Running Time . Have a running time of not less than 75 minutes (including main and end titles) and not more than the maximum running time, if any, specified in the DWA-approved Distribution Servicing Agreements;

 

(iii) Format/Production Value . Be an Animated Motion Picture or a Hybrid Motion Picture of comparable production values and animation quality on an overall basis as the Prior Pictures; provided , that if the proposed Motion Picture is a Hybrid Motion Picture, then such Motion Picture must be of comparable production values and animation quality as those Hybrid Motion Pictures previously released by Distributor (e.g. Small Soldiers ) or previously released by senior management of DWA (e.g., Who Framed Roger Rabbit );

 

(iv) Rating . Qualify for a rating of “G”, “PG” or “PG-13” (or equivalent substitute rating) from the Rating Code Administrator of the Motion Picture Association of America (“MPAA”);

 

(v) Title . Have a title designated by DWA, subject only to legal requirements and clearance by the Title Registration Bureau of the MPAA;

 

(vi) Minimum Rights . The Distribution Rights owned or controlled by DWA or any controlled Affiliate that will be licensed to Distributor hereunder shall include, at a minimum, the following rights (collectively, the “Minimum

 

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Rights”): Theatrical Exhibition, Home Video Exhibition and Television Exhibition rights in the Domestic Territory or Theatrical Exhibition, Home Video Exhibition and Television Exhibition rights in not less than ten (10) of the Major International Territories (as identified on and adjusted in accordance with Schedule 2 );

 

(vii) Minimum License Term . The Minimum Rights will be owned or controlled by DWA or any controlled Affiliate (and licensed to Distributor hereunder) for a period of not less than the full contemplated License Term for a “Qualified Picture”, as set forth in Section 1.1. above (not taking into consideration any early termination);

 

(viii) Theatrical Release . The Motion Picture, at the time of its license to Distributor hereunder, is intended and available for initial Theatrical Exhibition in the Territory;

 

(ix) No Universal Rejection . Universal has not refused to provide fulfillment services in connection with the distribution of the Motion Picture in the Domestic Territory or to distribute the Motion Picture in a substantial portion of the International Territory pursuant to the terms of the Universal Agreement; and

 

(x) Rent-a-System Picture . The Motion Picture is not a Rent-a-System Picture.

 

Any disputes as to whether a Motion Picture satisfies each of the aforementioned specifications shall be subject to the provisions of Section 24 below.

 

c. Qualified DTV Productions Specifications : For a Motion Picture to qualify as a Qualified DTV Production hereunder, such Motion Picture must fully satisfy each of the following:

 

(i) General . Be in color and sound, and in the English language;

 

(ii) Resolution . Have a resolution equal to or greater than D-5 high definition and filmed with an aspect ratio of 16:9;

 

(iii) Running Time . Have a running time between 70-75 minutes (including main and end titles);

 

(iv) Format/Production Value . Be an Animated Motion Picture or a Hybrid Motion Picture of comparable production values and animation quality on an overall basis as (A) Joseph: King of Dreams if the Animation Method is hand-drawn animation, (B) “Father of the Pride” television episodes if the Animation Method is computer generated animation, (C) “A Grand Day Out”, “The Wrong Trousers” and “A Close Shave” shorts produced by Aardman Animations Limited if the Animation Method is stop-motion animation, and (D) other equivalent first-class DTV Productions in the marketplace and released by U.S. major motion picture studios if the Animation Method is any other form of animation;

 

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(v) Rating . Qualify or be capable of qualifying for a rating of “G”, “PG” or “PG-13” (or equivalent substitute rating) from the Rating Code Administrator of the MPAA;

 

(vi) Title . Have a title designated by DWA, subject only to legal requirements;

 

(vii) Minimum Rights . The Distribution Rights owned or controlled by DWA or any controlled Affiliate that will be licensed to Distributor hereunder shall include, at a minimum, Home Video Exhibition in the Domestic Territory (“Minimum DTV Rights”);

 

(viii) Minimum License Term . The Minimum DTV Rights will be owned or controlled by DWA or any controlled Affiliate (and licensed to Distributor hereunder) for a period of not less than the full contemplated License Term for Qualified DTV Productions, as set forth in Section 1.1. above (not taking into consideration any early termination);

 

(ix) Home Video Release . The Motion Picture at the time of its license to Distributor hereunder, is intended and available for initial Home Video Exhibition in a portion of the Territory sufficient to satisfy Minimum DTV Rights;

 

(x) No Universal Rejection . Universal has not refused to provide fulfillment services in connection with the distribution of the Motion Picture in the Domestic Territory or a substantial portion of the International Territory pursuant to the terms of the Universal Agreement; and

 

(xi) Rent-a-System Picture . The Motion Picture is not a Rent-a-System Picture.

 

Any disputes as to whether a Motion Picture satisfies each of the aforementioned specifications shall be subject to the provisions of Section 24. below.

 

Section 4. Distribution

 

4.1 Obligation to Exploit : Distributor, during the applicable License Term for each Licensed Picture, shall have the right and obligation to advertise, publicize, promote, distribute and exploit each Licensed Picture and the applicable Distribution Rights thereto in accordance with Distributor’s past practices used to service the distribution of comparable Prior Pictures, and to the extent, and as long as, applicable and a higher standard, each Licensed Picture shall be distributed consistent with Distributor’s prevailing and commercially reasonable practices as applied generally to Motion Pictures produced or distributed by Distributor under similar circumstances in the applicable territories and media, in each case taking into account differences in production budgets, cast, genre, rating, prerelease audience surveys and test results, theatrical box office and other performance metrics, local tastes and other established factors that Distributor uses in good faith on a nondiscriminatory basis to make determinations in connection with the exploitation of Motion Pictures produced or

 

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distributed by Distributor, excluding in each case, any Motion Pictures produced or directed by Steven Spielberg. Distributor shall not have the right to decline to distribute a Licensed Picture hereunder if such action would constitute a breach under any DWA-approved Distribution Servicing Agreements, provided that Distributor shall be obligated to timely notify DWA of its intention not to distribute a Licensed Picture in a specific country in sufficient time to enable DWA to cause the distribution of such Licensed Picture on the date contemplated for initial release in the applicable country, or to promptly notify DWA following Distributor’s receipt of notice from a party to a DWA-approved Distribution Servicing Agreement that such party does not intend to release such Licensed Picture in the applicable country. Notwithstanding the foregoing: (x) solely with respect to each Qualified Picture and any unexploited Distribution Rights to each Prior Picture, Distributor shall provide DWA with a minimum level of distribution support and services, including publicity, promotion, marketing and advertising support and services, comparable on an overall basis in quality, level, priority and quantity to the provision of distribution support and services provided in connection with the exploitation of Distribution Rights to the four (4) most recent Qualified Pictures (or until such time as there are four [4] Qualified Pictures, a combination of the four [4] most recent Qualified Pictures and Prior Pictures) initially released by Distributor for Theatrical Exhibition), taking into account differences in production budgets, cast, genre, rating, prerelease audience surveys and test results, theatrical box office and other performance metrics, local tastes and other established factors that Distributor uses in good faith on a nondiscriminatory basis to make determinations in connection with the exploitation of Motion Pictures produced or distributed by Distributor, excluding in each case, any Motion Pictures produced or directed by Steven Spielberg; provided , Distribution Expenses shall be determined in accordance with Section 5. below; and (y) solely with respect to each Qualified DTV Production, Distributor shall provide DWA with a minimum level of distribution support and services, including sales and marketing expenditures, comparable on an overall basis to such distribution support and services provided in connection with the Home Video Exhibition of DTV Productions produced or distributed by Distributor and for which Distributor projected (by using its then customary forecast methodology, including prospective retail orders) gross shipments of Video Devices equivalent to or substantially commensurate with projected gross shipments of Video Devices embodying the Qualified DTV Production.

 

In furtherance of the foregoing, and expressly subject to the applicable terms and conditions of the Universal Agreement in connection with Theatrical Exhibition in the International Territory and Home Video Exhibition in the Territory, Distributor shall:

 

a. Theatrical Distribution . In accordance with past practices used to service the distribution of comparable Prior Pictures, timely prepare for the Domestic Territory and for the Major International Territories (as designated on Schedule 2 ) and such other countries as reasonably requested by DWA, a country-by-country marketing and distribution plan and budget for each Licensed Picture intended for initial Theatrical Exhibition, including proposed exhibition dates. Each marketing and distribution plan and budget shall be prepared in full consultation with DWA for DWA’s approval; provided , however , Distributor and DWA shall mutually determine

 

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Distribution Expenses and in the event of disagreement regarding the budget and such Distribution Expenses, Distributor’s decision shall prevail, subject in the case of each Qualified Picture to the requirements of Section 5. below. Distribution of each Licensed Picture shall be in accordance with the approved marketing and distribution plan and budget; it being acknowledged that such plans and budgets may require change due to the performance of each Licensed Picture. All material changes in the marketing and distribution plan and budget shall require DWA’s approval; provided , however, in the event of any disagreement regarding any such change in the budget, Distributor’s decision shall prevail subject to the requirements of Section 5. below.

 

b. Home Video Distribution . In accordance with past practices used to service the distribution of comparable Prior Pictures, timely prepare and recommend, in full consultation with DWA, distribution and marketing plans and budgets, product pricing and sales policies and all other elements of Distributor’s distribution obligations hereunder as requested from time to time by DWA for DWA’s approval; provided , however , Distributor and DWA shall mutually determine Home Video Distribution Expenses and in the event of disagreement regarding such Home Video Distribution Expenses, Distributor’s decision shall prevail, subject to the requirements of Section 5. below. Propose, and upon DWA’s timely approval, implement street date, pricing, period of availability and applicable sales, credit, rebate, bonus and return policies on behalf of DWA Video Devices. Recommendations shall be on a Licensed Picture-by-Licensed Picture, country-by-country basis and shall be subject to DWA’s timely approval. Distributor shall procure, supervise and develop all artwork, ads, point of sale and any other sales or promotional materials, implement the usage thereof pursuant to the marketing plans approved by DWA, and update such materials from time to time as reasonably directed by DWA. Distributor’s failure to strictly conform to the distribution and marketing plans and budgets shall not constitute a breach of this Agreement by Distributor.

 

c. Information . Subject to the requirements of applicable law, timely provide to DWA all pertinent materials and Information with respect to the marketing and distribution of each Licensed Picture to enable DWA to timely exercise its consultation and approval rights hereunder. Such Information shall include:

 

(i) All Information pertaining to the Licensed Pictures to the extent such Information is available to Distributor, and all Information pertaining to the Licensed Pictures to the extent similar Information is available to Distributor with respect to Motion Pictures produced or distributed by Distributor;

 

(ii) All Information pertaining to the release of other Motion Pictures in the Territory to the extent such Information is available to Distributor, provided such Information shall not be furnished to DWA if in Distributor’s good-faith business judgment, such disclosure would constitute a violation of any third party right, a violation of any applicable law, decree or government regulation, or an inappropriate business practice;

 

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(iii) All Information as to Motion Pictures produced or distributed by Distributor, to the extent similar Information is available to Distributor with respect to the Licensed Pictures; provided such Information (A) shall only be furnished upon written request from DWA; (B) shall be restricted to Information required by DWA for a bona fide business purpose under this Agreement (e.g. optimal release scheduling, verification of most favorable terms as specified in this Agreement, including terms related to services, pricing, costs, comparable accounts and collection of revenue therefrom, etc.) and (C) shall not be furnished to DWA if in Distributor’s good-faith business judgment, such disclosure would constitute a violation of any third party right, a violation of any applicable law, decree or government regulation, or an inappropriate business practice;

 

(iv) All Information as to the Licensed Pictures that is available to any Subdistributor from Distributor or all Information that Distributor receives from any Subdistributor (subject always to Section 4.1.c.(iii)(C));

 

(v) All other Information as may be reasonably required by DWA (subject always to Section 4.1.c.(iii)(C)), including trade association publications and reports (unless distribution to DWA is prohibited by such trade association), access to all data for each Licensed Picture on a country-by-country basis, daily box office reports, competitive release dates, advertising expenses, copies of all outsourced market surveys, updates and analysis, marketing reports (setting forth all marketing terms and conditions relating to DWA Video Devices), sales reports (setting forth sales of DWA Video Devices on a Licensed Picture-by-Licensed Picture, country-by-country basis, specifying quantity, price, rental or sell-through, and retail account), and expense reports (setting forth all expenses paid by Distributor comparing budgeted and actual expenses on a Licensed Picture-by-Licensed Picture and country-by-country basis), and legal reports or information (setting forth home video security interests imposed on third parties or reports of audits and the audit itself conducted directly or indirectly by Distributor, with respect to which Distributor, upon DWA’s request, shall include DWA Licensed Pictures or Video Devices). The Information shall be provided to DWA consistent with the frequency and timeliness with which the Information (or similar material) is created by, or supplied to, Distributor or by Distributor to any Subdistributor, or otherwise as DWA shall reasonably request. If any Information provided by Distributor is insufficient or inadequate for DWA to exercise its approval rights, then Distributor shall provide additional or revised Information to the extent available, as DWA reasonably requests; and

 

(vi) As used herein, “Information” shall mean all tangible information, data, reports, agreements and other documents whether distributed on paper, electronically and/or through other means.

 

(vii) Notwithstanding anything in this Section 4.1.c. to the contrary, in no instance shall Information include (and Distributor shall not be required to provide) (A) internal financial information of Distributor not related to Licensed Pictures, or (B) Information that is not related to the exploitation and performance of Motion Pictures or the costs of distribution, or (C) Information that is

 

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withheld from Distributor or otherwise not available to Distributor under DWA-approved Distribution Servicing Agreements or DWA-approved Third Party Service Agreements, provided DWA shall have the right (at DWA’s expense) to cause Distributor to take such reasonable action as DWA deems reasonably necessary to attempt to obtain such withheld Information.

 

(viii) If Distributor is required to incur any new additional direct-out-of-pocket costs or expenses (of which Distributor notifies DWA in advance) solely in order to furnish any additional information that heretofore was not provided by Distributor in connection with the distribution of the Prior Pictures, or to furnish information more frequently or expeditiously than such information is customarily supplied with respect to the Licensed Pictures or Motion Pictures produced or distributed by Distributor, Distributor shall not be required to furnish such information, or to furnish such information more frequently or expeditiously, as applicable, unless DWA preapproves such costs and expenses and agrees to reimburse Distributor therefor (subject to appropriate reduction, to be mutually agreed, if and to the extent Distributor uses such additional information, or increase in the frequency of supplying such information, or the expediting of such information in connection with the exploitation of other Motion Pictures produced or distributed by Distributor).

 

4.2 Distribution Approvals and Controls : Notwithstanding anything in this Agreement to the contrary, all DWA approvals and controls in this Agreement with respect to Theatrical Exhibition in the International Territory and Home Video Exhibition in the Territory are expressly subject to the terms and conditions of the Universal Agreement. For the avoidance of doubt, to the extent either (a) Distributor is not contractually entitled to exercise certain approvals or controls over the activities of Universal; or (b) if, as a matter of custom and practice and historical course of dealing, Distributor does not exercise certain approval or controls to which it is contractually entitled under the Universal Agreement, Distributor shall not be required to attempt to amend the Universal Agreement to expand its contractual approval or control rights to be consistent with those set forth herein, nor shall Distributor be required to alter its custom and practice and historical course of dealing with Universal under the Universal Agreement to comply with the approvals and controls afforded to DWA hereunder. In either event, Distributor’s only obligation to DWA with respect thereto shall be to exercise its contractual rights with respect to the Licensed Pictures in accordance with Distributor’s past practices used to service the distribution of comparable Prior Pictures, and to the extent, and as long as, applicable in a manner consistent with the exercise of such rights with respect to comparable Motion Pictures produced or released by Distributor under similar circumstances in the applicable territories.

 

a. Release Date/Theatrical Exhibition : DWA shall have the right to designate and approve the initial Theatrical Exhibition release date (“Release Date”) for each Qualified Picture in the Domestic Territory and shall approve the Release Date for each Qualified Picture in each of the Major International Territories (it being agreed that Release Dates already scheduled by Distributor for any Qualified Pictures as of the Effective Date are preapproved by DWA), provided , however , if not more than two (2) Qualified Pictures are scheduled for initial Theatrical Exhibition in the Domestic

 

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Territory within a calendar year, then DWA shall not schedule more than one Release Date in the Domestic Territory during each of (i) the annual holiday period (between November 1 ^st and December 31 ^st ) and (ii) the summer period (between May 15 ^th and September 15 ^th ). If DWA schedules more than two (2) Qualified Pictures for initial Theatrical Exhibition in the Domestic Territory within a calendar year, the additional Release Date(s) shall be mutually approved by Distributor and DWA taking into consideration the following periods, which historically have generated optimal theater box office performance: (i) spring; (ii) mid-May through May 31 ^st ; (iii) late June through early July; (iv) early October; and (v) mid-November. DWA shall keep Distributor fully advised of the anticipated Delivery Date of each Qualified Picture and shall provide Distributor with not less than twelve (12) months prior notice of the designated Release Date in the Domestic Territory. Release Dates are subject to postponement and extension due to events of Force Majeure or DWA implemented creative changes that delay Delivery of the Qualified Picture or otherwise substantially and materially affect the orderly release schedule of the Qualified Picture. In the event a Release Date is postponed due to an event of Force Majeure or creative changes, DWA shall propose two (2) alternative Release Dates that shall not cause Distributor to be in breach of the holdback restrictions set forth in Section 4.2.c. below as they pertain to any theatrical Motion Picture then scheduled for Theatrical Exhibition by Distributor. Distributor shall have the option of selecting either Release Date and scheduling the Picture for Theatrical Exhibition on such Release Date.

 

b. Release Dates/Home Video Exhibition : DWA shall have the right to designate and approve the dates (“HV Release Dates”) on which Video Devices embodying the Qualified Pictures, Qualified DTV Productions and any Prior Pictures that have not yet had their initial HV Release Dates are made available for Home Video Exhibition in the Domestic Territory and shall approve the HV Release Dates in each of the Major International Territories (it being agreed that HV Release Dates already scheduled as of the Effective Date by Distributor for any Qualified Pictures, Qualified DTV Productions or Prior Pictures subject to this Section 4.2.b. are hereby preapproved by DWA). DWA shall provide Distributor with not less than twelve (12) months notice of the provisional HV Release Date in the Domestic Territory and in each of the Major International Territories for each Qualified Picture, Qualified DTV Production and Prior Picture subject to this Section 4.2.b. (or such shorter period if the provisional HV Release Date is within twelve [12] months from the Effective Date). Distributor shall be kept fully informed of any proposed or scheduled change in any provisional HV Release Date and shall receive not less than four (4) months notice of the designated HV Release Date in the Domestic Territory and in each of the Major International Territories. HV Release Dates are subject to postponement and extension due to Events of Force Majeure that delay the production, manufacturing, duplication or replication of the applicable Video Devices or otherwise substantially and materially affect any scheduled HV Release Dates.

 

c. Holdbacks : As additional consideration for the Distribution Rights: (i) Distributor agrees not to commence or authorize the commencement of the initial Theatrical Exhibition of any “Similar Theatrical Motion Picture” in the Domestic Territory and in each of the Major International Territories

 

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during the period one (1) week either side of the applicable Release Date of each Qualified Picture in the Domestic Territory and in each of the Major International Territories, respectively; and (ii) Distributor agrees not to commence or authorize the commencement of the initial Home Video Exhibition of any Similar Theatrical Motion Picture or “Similar DTV Production” in the Domestic Territory and in each of the Major International Territories during the “HV Release Week” in which the applicable HV Release Date occurs for each Qualified Picture or each Qualified DTV Production in the Domestic Territory and in each of the Major International Territories. HV Release Week with respect to HV Release Dates shall mean the period Monday through Sunday, inclusive. Similar Theatrical Motion Picture shall mean any theatrical Motion Picture rated “PG” or a less restrictive rating. Similar DTV Production shall mean any DTV Production that is rated (or is capable of obtaining a) “PG” or less restrictive rating. One week either side of the applicable Release Date shall mean seven (7) days before and seven (7) days after, without including the applicable Release Date in the seven (7) day period, e.g., release on a Friday, May 28 ^th would preclude a release on Friday May 21 ^st and Friday June 4 ^th . DWA acknowledges that in certain countries within the International Territory, such holdback restrictions may be inappropriate or impracticable to enforce due to differences in ratings’ categories, or the contractual rights of third parties pursuant to DWA-approved Distribution Servicing Agreements or DWA-approved Third Party Service Agreements, or the inability of Distributor to enforce such holdbacks because of established custom and practice and historical course of dealing under DWA-approved Distribution Servicing Agreements or DWA-approved Third Party Services Agreements, as applicable. In such event, Distributor shall keep DWA fully informed of all proposed release dates for its Similar Theatrical Motion Pictures and Similar DTV Productions, if applicable, to enable DWA to schedule Release Dates and HV Release Dates for its Qualified Pictures and Qualified DTV Productions in the International Territory. In addition, DWA further acknowledges that the holdback restrictions applicable to the HV Release Date in the Domestic Territory may be inappropriate or impracticable to enforce because of the contractual rights of third parties pursuant to DWA-approved Distribution Servicing Agreements or DWA-approved Third Party Service Agreements, as applicable, or the inability of Distributor to enforce such holdbacks because of established custom and practice and historical course of dealing under DWA-approved Distribution Servicing Agreements or DWA-approved Third Party Service Agreements, as applicable. In such event, Distributor shall keep DWA fully informed of all proposed home video release dates for its Similar Theatrical Motion Pictures and Similar DTV Productions, if applicable, to enable DWA to schedule HV Release Dates for its Qualified Pictures and Qualified DTV Productions in the Domestic Territory. Notwithstanding the foregoing, in the event Distributor designates and notifies DWA in accordance with Section 34. below as to a planned release date for the initial Theatrical Exhibition or initial Home Video Exhibition, as applicable, of one of its Similar Theatrical Motion Pictures or Similar DTV Productions in either the Domestic Territory or the International Territory, as applicable, prior to DWA designating a Release Date or HV Release Date, as applicable, for a Qualified Picture or Qualified DTV Production in such territory(ies), (i) Distributor shall not be required to change a previously designated release date(s) for its Similar Theatrical Motion Picture or Similar DTV Production and the initial release by Distributor during the above described

 

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holdback periods of any such Similar Theatrical Motion Picture or Similar DTV Production shall not violate the provisions of this Section 4.2.c. and or otherwise constitute a breach of this Agreement by Distributor; and (ii) DWA shall not schedule a Release Date for a Qualified Picture on the “weekend” of such Release Date or schedule a HV Release Date for a Qualified Picture or Qualified DTV Production, as applicable, during the applicable HV Release Week. Weekend for purposes of scheduling a Release Date shall mean the period Wednesday through Sunday, inclusive, encompassing the Release Date.

 

d. No Editing : Except as set forth below and subject to each DWA-approved Distribution Servicing Agreement and DWA-approved Third Party Service Agreement, Distributor shall not have the right to cut, alter, edit or change any Licensed Picture (or its title) for United States English language Theatrical Exhibition (except in order to secure the required rating) without the prior consent of DWA. Subject to any third party contractual restrictions and applicable guild requirements, Distributor may alter or edit each Licensed Picture and its title solely to the extent necessary to comply with (i) import, censorship or legal requirements in each country or region in the Territory, and (ii) further subject to DWA’s prior approval in each case (a) to comply with applicable distribution or exhibition requirements in each country or region in the Territory, (b) to meet television or other exhibition standards and practices or requirements, (c) to satisfy running time requirements, including the insertion of commercial breaks, and (d) subject to Section 8.9.d. below, to make foreign language dubbed or subtitled versions. DWA shall have first opportunity to alter or edit each Licensed Picture and shall exercise its approval rights hereunder in a manner not to frustrate the exploitation of all Distribution Rights licensed to Distributor hereunder. Nothing herein shall require Distributor or any Subdistributor to violate any applicable law, or governmental regulation anywhere in the Territory. In no event shall Distributor delete contractual credits or the Licensed Picture’s copyright notice.

 

e. Cuts/Previews : DWA shall have the right to preview and screen each Licensed Picture and to cut, alter, edit or change each Licensed Picture as DWA determines in its sole discretion. Upon reasonable prior written notice, Distributor shall be obligated to obtain the theaters designated by DWA for each preview and shall advance all actual, direct out-of-pocket costs, charges and expenses incurred in connection with such previews. Distributor shall be entitled to recoup such preview costs, charges and expenses as Distribution Expenses. A reasonable number of Distributor’s distribution and marketing executives and personnel shall be entitled to attend each preview.

 

f. Theatrical Exhibition . For each Licensed Picture, if and to the extent Theatrical Exhibition is licensed to Distributor hereunder, DWA shall have the right to timely approve: the initial period of Theatrical Exhibition of each Licensed Picture in each country in the Territory; any re-release; the withdrawal or withholding of any Licensed Picture from Theatrical Exhibition; marketing plans, distribution plans; the dates and terms of initial b