DISTRIBUTION AGREEMENT

Exhibit 10.1

 

DISTRIBUTION AGREEMENT

 

among

 

DREAMWORKS ANIMATION SKG, INC.

 

PARAMOUNT PICTURES CORPORATION

 

and

 

DREAMWORKS L.L.C.

 

dated as of December 9, 2005

Table of Contents

 

 

(i)

Table of Contents

(continued)

 

 

(ii)

DISTRIBUTION AGREEMENT dated as of December 9, 2005 (this “ Agreement ”), by and among, DreamWorks Animation SKG, Inc. (“ DWA ”), on the one hand, and Paramount Pictures Corporation (“ Paramount ”) and DreamWorks L.L.C. (“ DWS ”) on the other hand.

 

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

 

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

 

WHEREAS DWA and DWS entered into that certain Distribution Agreement dated as of October 7, 2004 with respect to the distribution and exploitation by DWS in certain media throughout the world of motion pictures produced by DWA (the “ Prior Agreement ”);

 

WHEREAS Paramount has entered into that certain purchase agreement dated December 9, 2005 to acquire all of the equity interests in DWS (the “ Purchase Agreement ”);

 

WHEREAS, in connection with the consummation of the transactions contemplated by the Purchase Agreement, DWS and DWA have agreed to terminate the Prior Agreement as of the Effective Date.

 

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

 

WHEREAS, on the date hereof DreamWorks Animation Home Entertainment, L.L.C. (“ DWA Home Video ”) desires to engage Paramount Home Entertainment, Inc. (“ Paramount Home Entertainment ”) to provide certain fulfillment services to DWA Home Video in furtherance of DWA Home Video’s distribution of Video Devices (as defined below), and Paramount desires to provide such services on the terms and conditions contained herein;

 

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

 

Section 1. Definitions and Usage; Signing Bonus

 

1.1 Definitions :

 

Affiliate of Any Person shall mean any other Person controlling, controlled by or under common control with such Person. Post-Effective Date, DWS shall be deemed an Affiliate of Paramount. For the purposes of this Agreement, National Amusements, Inc., NAIRI, Inc., CBS Corporation and each direct or indirect subsidiary of CBS Corporation shall not be considered Affiliates of Paramount.

 

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 ].)

 

Base Films shall mean, initially (i.e., with respect to the first Licensed Picture Delivered following the Effective Date), Shrek, Shark Tale and Madagascar . With respect to any Licensed Picture Delivered thereafter, Base Films shall mean the three (3) immediately preceding Event Pictures (but excluding Shrek 2 and Wallace & Gromit: Curse of the Were-Rabbit ) released for Theatrical Exhibition in the Domestic Territory.

 

Business Day shall mean a day other than a Saturday, Sunday or other day on which financial institutions in Los Angeles, California or New York, New York 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 DWS and Cheil Jedang Corporation (“ Cheil ”), the Home Video Fulfillment Services Agreement, amended and restated as of February 10, 1999, between DWS 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 DWS and Cheil or CJ Entertainment, Inc. (together with Cheil collectively “ CJ Entertainment ”).

 

Clip Rights shall mean, with respect to each Licensed Picture, the right to use or license clips in any and all media (whether now known or hereafter devised), excerpts and stock footage from such Licensed Picture for use on a stand-alone basis or in connection with other audio or audio-visual productions.

 

Closing Date shall mean the date of the closing of the purchase by Paramount of all of the equity interests in DWS pursuant to the Purchase Agreement.

 

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.

 

Comparable as used with respect to any Motion Picture shall mean a similar, as determined on an overall basis, Motion Picture based on a comparison of the production budgets, cast, genre, ratings, pre-release audience surveys, festival results, theatrical box office and other performance metrics and established factors used in the Motion Picture industry in Los Angeles, California to compare Motion Pictures.

 

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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.

 

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.

 

Copyright Revenue shall mean, with respect to each Licensed Picture, all royalties, fees and other revenue that DWA, the registered copyright owner or other appropriate entity, 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 recordable media and/or recording apparatus for the purpose of recording 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, or the provision of access, to Paramount of all items referenced in Section 3.2.a. hereof. A Licensed Picture shall be deemed to be Delivered hereunder only upon Paramount’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 Paramount’s or any Affiliate’s overhead expenses) that have either been paid or incurred (i.e., reported as a liability in the accounts payable accounting system of Paramount or such Affiliate and paid within thirty (30) days thereafter) 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);

 

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(ii)

advertising space in any print or electronic media;

 

(iii)

subject to DWA’s prior approval in each instance, 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 any of Paramount’s employees (excluding straight time regular salaries but including overtime salaries), and expenses of any territory managers and marketing managers of Subdistributors charged as Distribution Expenses pursuant to applicable DWA-approved Distribution Servicing Agreements; provided , however , that Paramount may not charge as a Distribution Expense any travel, living expenses and accommodations of any Paramount employees other than incremental, Licensed Picture-specific expenses (i.e., Paramount may not allocate a portion of such expenses to the Licensed Pictures if expenses related to other Motion Pictures are included) pre-approved by DWA;

 

(iv)

prints, 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 and Marketing Materials;

 

(vi)

taxes and government fees;

 

(vii)

checking and collection of Gross Receipts in the Domestic Territory, in an amount not to exceed 0.5% of Gross Receipts derived from the Theatrical Exhibition, on a Licensed Picture-by-Licensed Picture basis;

 

(viii)

remittance and conversion of Gross Receipts;

 

(ix)

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

 

(x)

a proportionate share of errors and omissions insurance in accordance with Section 10.2 below;

 

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(xi)

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

 

(xii)

Aviation Expenses;

 

(xiii)

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.e) not available in Paramount’s normal course of business;

 

(xiv)

the prosecution, defense or settlement of any action directly relating to Paramount’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

 

(xv)

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

 

All Distribution Expenses shall be charged by Paramount or DWS, as applicable, at rates that do not exceed the rates charged by Paramount in connection with the distribution of comparable Motion Pictures distributed by Paramount. “Distribution Expenses” shall not include (a) 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, (b) Additional Distribution Expenses (as defined in Section 5.2.), (c) Residuals and Contingent Compensation, (d) expenses associated with delinquent payments by Paramount and/or DWS to suppliers, vendors or other services providers (e.g., interest or finance charges) except to the extent caused by the actions or inactions of DWA or its Affiliates, (e) costs of checking and collection of Gross Receipts in the Domestic Territory in excess of 0.5% of Gross Receipts derived from the Theatrical Exhibition of each Licensed Picture and all checking and collection costs in the International Territory, and (f) trade dues and assessments by trade organizations . 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, Paramount shall have no responsibility for any costs referenced in the foregoing clauses (a), (b) or (c). Paramount shall be solely responsible for, and shall not charge or deduct, any costs referenced in the foregoing clauses (d), (e) and (f). Distribution Expenses shall be reduced by the net amount of any insurance recoveries attributable thereto to the extent received by Paramount.

 

For the avoidance of doubt, in computing Distribution Expenses for purposes of the GAAP Accrual Reports to be provided to DWA in accordance with Section 8.6.e. below, Distribution Expenses shall be computed and reported in accordance with GAAP (and not on a “cash basis” as defined herein).

 

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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, in any and all languages and versions, including dubbed, subtitled and narrated version, in any form and including:

 

(1) 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.c 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.c, 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;

 

(2) 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 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

 

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(3) 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 (subject to reasonable limits of access and use of master and any protective elements retained by DWA);

 

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 existing as of the Effective Date or subject to the requirements of a DWA-approved Third Party Service Agreement existing as of the Effective Date.

 

Distribution Servicing Agreement(s) shall mean any agreements or arrangements between Paramount or a Paramount Affiliate (including DWS), 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, (iii) the providing of any Fulfillment Services for a Licensed Picture, or (iv) 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.

 

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

 

DWA-approved Distribution Servicing Agreement shall mean the Cheil Agreement, the Kadokawa Agreement, 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, and each Distribution Servicing Agreement approved in writing by DWA in accordance with Sections 4.6.b and 4.13 below.

 

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, and each Third Party Service Agreement approved in writing by DWA in accordance with Section 4.11 below.

 

DWA Change of Control shall mean (a) the acquisition of ownership, directly or indirectly, beneficially or of record, of equity interests in DWA representing more than 35% of either the aggregate voting power or the aggregate equity value represented by the issued and outstanding equity interests in DWA, whether pursuant to merger, consolidation, issuances by DWA of equity securities or otherwise by any Person or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended), (b) the

 

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sale, transfer, contribution or other disposition, directly or indirectly, of all or substantially all of the property, business or assets of DWA or of its Motion Picture division to any Person or (c) the liquidation of DWA.

 

Effective Date shall mean the later of the (i) Closing Date; and (ii) date upon which all of the conditions precedent set forth in Section 1.4 below are satisfied, or such other date as mutually agreed between DWA and Paramount.

 

Event Picture shall mean any Animated Motion Picture or Hybrid Motion Picture that (i) satisfies the criteria set forth in Section 3.2.b. below; (ii) is rated “G,” “PG” or “PG-13”; and (iii) is scheduled to be released for Theatrical Exhibition on not less than two thousand (2,000) screens in the Domestic Territory (irrespective of the anticipated theatrical release pattern in the International Territory).

 

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

 

Existing 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; Shrek 2; Shark Tale; Madagascar ; and Wallace & Gromit: Curse of the Were-Rabbit.

 

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 that are (i) attributable in whole or in part to the Licensed Pictures, and (ii) offered to, accepted by or otherwise received or credited to the account of Paramount, DWS, any Paramount Affiliate, or any or their respective controlled Affiliates after the Effective Date, in connection with any transaction that relates to the services of Paramount, DWS, any Paramount Affiliate or any of their respective controlled Affiliates in connection with (x) the Licensed Pictures, (y) the Licensed Pictures and other Motion Pictures produced or distributed by Paramount, DWS, any Paramount Affiliate or any of their respective controlled Affiliates, or (z) the exploitation of the Distribution Rights hereunder. For the avoidance of doubt, Financial Benefit shall not include any advances, signing bonuses or other amounts actually paid to Paramount by any third Person prior to the Effective Date (unless such amounts, or any portion thereof, were paid to Paramount by such third Person in contemplation of this Agreement or the license of Distribution Rights in and to the Licensed Pictures from DWA to Paramount).

 

Fulfillment Services shall mean the services provided to DWA Home Video by Paramount pursuant to the Fulfillment Services Agreement.

 

Fulfillment Services Agreement shall mean the Fulfillment Services Agreement between DWA Home Video and Paramount Home Entertainment dated as of the date hereof and attached as Exhibit A hereto. DWA shall have full and meaningful prior consultation rights with respect to the worldwide organization and staffing of home video personnel servicing each Licensed Picture. DWA shall designate and approve any and all formats (e.g., Blu-ray, DVD-HD) utilized in connection with the Home Video Exhibition of the Licensed Pictures.

 

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GAAP shall mean generally accepted accounting principles in the United States.

 

GAAP Accrual Report shall have the meaning ascribed thereto in Section 8.6.e below.

 

GAAP Return Reserve shall have the meaning ascribed thereto in the Fulfillment Services Agreement.

 

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.

 

HBO Agreement shall mean, collectively, (i) the License Agreement dated March 7, 1995 and amended as of January 15, 1998, May 3, 2000 and October 27, 2004, between DWS and Home Box Office, as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms thereof; and (ii) the Attornment Agreement dated as of October 27, 2004 between DWA and Home Box Office, as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms thereof.

 

Holiday Period shall mean the period commencing on the Weekend that is six (6) Weekends prior to the Thanksgiving holiday and ending on the Weekend immediately prior to the Thanksgiving holiday, inclusive.

 

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 Video Devices, now known or hereafter devised, including future methods and means of delivering Video Devices into the home. Home Video Exhibition shall also include the right to Exhibit a Motion Picture via Video-On-Demand.

 

Home Video Fulfillment Expenses shall have the meaning given to such term in the Fulfillment Services Agreement.

 

Home Video Gross Receipts shall have the meaning given to such term in the Fulfillment Services Agreement.

 

HV Release Date shall mean the date on which Video Devices embodying a Licensed Picture are initially made available for Home Video Exhibition in an applicable portion of the Territory.

 

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.

 

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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 product 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.

 

Internet Rights shall mean the exclusive right, under copyright and otherwise, to distribute, Exhibit, broadcast and otherwise exploit the Licensed Picture, in its entirety, 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.

 

Interparty Agreement means that certain Interparty Agreement dated as of October 7, 2004 among DWS, DWA and Universal.

 

Kadokawa Agreement shall mean the Master Agreement dated as of April 22, 2004 among DWS, 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.

 

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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 Paramount during the Output Term, the period commencing on the date such Qualified Picture is Delivered to Paramount 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;

 

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

 

c. 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 Paramount.

 

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) (A) the License Term and this Agreement, as and to the extent they pertain to such Distribution Rights licensed to Paramount or DWS, as applicable, 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 (B) such Distribution Rights (and only such Distribution Rights) shall continue to be licensed to Paramount or DWS, as applicable, in accordance with the terms of this Agreement, in each case 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 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 the exploitation of the Distribution Rights to such Licensed Picture,

 

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and 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 (i) all Qualified Pictures; (ii) all Qualified DTV Productions, and (iii) the Existing Pictures.

 

Linear shall mean the broadcast or exhibition of an audio or audiovisual program intended for passive viewing in a predetermined order or sequence, subject to the ability of the end-user or viewer to play, pause, stop, fast forward, rewind; provided, however that the setting, progression of actual events as they occur, outcome, participants and contents of a Linear program cannot be manipulated or altered by the viewer or end-user. The availability of so-called “DVD Extras” or bonus features such as deleted scenes or alternative endings shall not, in and of itself, deem the exhibition of a Licensed Picture to be non-Linear.

 

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.

 

Major Release shall mean any theatrical Motion Picture rated “G,” “PG,” “PG-13” or “R” that is scheduled to be released for Theatrical Exhibition on not less than two thousand (2,000) screens in the Domestic Territory (irrespective of the anticipated theatrical release pattern in the International Territory).

 

Marketing Implants shall mean (i) agency personnel who, in connection with Paramount’s, DWS’s or any other Paramount Affiliate’s Motion Pictures (generally), render specific tasks or perform specific department functions related to marketing and advertising of such Motion Pictures or render any other services that are customarily rendered by in-house personnel of major studio distributors; and (ii) marketing and advertising agencies who, on an out-sourced basis, administer the marketing, publicity and promotion of Paramount’s, DWS’s or such other Paramount Affiliate’s Motion Pictures (generally) in a portion of the Territory.

 

McDonald’s Agreement shall mean the Agreement dated as of July 19, 2005 between DWA and McDonald’s USA, LLC, McDonald’s Latin America, LLC, McDonald’s Apenea LLC, McDonald’s International LLC and McDonald’s Europe Inc. (collectively, “ McDonald’s ”), as in effect on the date hereof.

 

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McDonald’s Interparty Agreement shall mean that certain interparty agreement dated on or about the date hereof by and between Paramount and DWA.

 

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.

 

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, hotels, 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

 

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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 thirteen (13) Qualified Pictures (that satisfy the criteria set forth in Section 3.2.b below) to Paramount (not including the Existing Pictures), and (ii) December 31, 2012. The Output Term shall be subject to earlier termination in accordance with the terms hereof.

 

Outright Sale shall mean a license from Paramount 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 Paramount for revenue and expenses received or incurred by such Person.

 

Paramount Affiliate shall mean any Person that qualifies as a controlled Affiliate of Paramount pursuant to the definitions of Affiliate and Control set forth above. For the avoidance of doubt, UIP and post-Effective Date, DWS shall constitute Paramount Affiliates.

 

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.

 

Qualified DTV Production(s) shall mean a DTV Production (i) released prior to the Effective Date and designated as a Qualified DTV Production hereunder, or (ii) that will be initially released or available for release during the Output Term, and that is (A) financed or produced by DWA or any controlled Affiliate (solely or in conjunction with another Person) and available for Delivery to Paramount 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. 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 are either (i) 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 (ii) 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.

 

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

 

Reimbursable Amounts shall mean (a) $*** for ***; (b) $*** for ***; (c) $*** for ***; (d) $*** for ***; and (e) $*** per *** through the earlier of (i) the expiration or early termination of the Output Term (prorated on a quarterly basis for any partial years) or (ii) the end of ***.

 

***	Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested by DreamWorks Animation SKG, Inc. with respect to the omitted portions.

 

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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.

 

Required International Territories shall mean those territories listed on Schedule 6 hereto.

 

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, Paramount 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, Paramount 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; (xii) all rights not expressly granted to Paramount pursuant to this Agreement; (xiii) Home Video Exhibition; (xiv) in the case of DTV Productions licensed hereunder, Theatrical Exhibition, which shall not be exploited by DWA during the applicable License Term without Paramount’s prior written consent, and (xv) Clip Rights. Notwithstanding the foregoing, if Paramount 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 Paramount such rights solely and to the most limited extent required under such DWA-approved Distribution Servicing Agreement.

 

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Return Reserve shall have the meaning ascribed thereto in the Fulfillment Services Agreement.

 

Separation Agreement shall mean the agreement dated as of October 7, 2004 by and among DWS, DWA and DreamWorks Animation L.L.C. regarding the principal corporate transactions required to effect DWA’s separation from DWS.

 

Services Agreement shall mean the agreement dated as of October 7, 2004 between DWS and DWA whereby (i) DWS has agreed to provide DWA with various corporate and administrative support services as enumerated therein, and such additional services that DWS and DWA may identify from time to time in the future, and (ii) DWA has agreed to provide DWS with certain support services as enumerated therein.

 

Services Fee shall have the meaning given to such term in the Fulfillment Services Agreement.

 

Similar Theatrical Motion Picture shall mean any theatrical Motion Picture rated “PG” or a less restrictive rating.

 

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 words “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 a Paramount Affiliate, licensed by Paramount 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

 

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license from Paramount, has an obligation to account to Paramount 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 a sales agent ( provided that such sales agent accounts for revenue and expenses to Paramount in accordance with the foregoing).

 

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 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.

 

Summer Period shall mean the period commencing on the second full Weekend in May and concluding on the first full Weekend in July of a given calendar year, inclusive.

 

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, viewing device 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,

 

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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 Video-On-Demand, which shall be 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.

 

Tent-Pole Picture shall have the meaning commonly associated therewith in the theatrical motion picture industry in Los Angeles, California (i.e., the most significant Motion Picture(s) released by a major Motion Picture studio in a given calendar year, measured in terms of the key talent associated with the Motion Picture, the production budget thereof, P&A expenditures and related marketing and merchandising and the overall box office performance of the franchise in which such Motion Picture is contained, if applicable). For purposes of example, Mission Impossible 3 and Beowulf will each constitute a Tent-Pole Picture. For further clarification, it is acknowledged and agreed that it is unlikely that Paramount will release more than two (2) Tent-Pole Pictures in any given calendar year (not including the Licensed Pictures).

 

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.

 

Territory shall mean the entire universe, including:

 

(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.

 

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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 Paramount, DWS or a Paramount Affiliate 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 Paramount, 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 DWS with respect to the DreamWorks Marks as specified therein.

 

UIP shall mean United International Pictures, B.V., a company incorporated in the Netherlands, and any entity which it controls or owns in whole or in part.

 

Universal shall mean Vivendi Universal Entertainment LLLP and any Affiliate thereof engaged in the distribution or other exploitation of Motion Pictures.

 

Universal Agreement shall mean the DW/Universal Studios, Inc. Master Agreement (Amended and Restated as of October 31, 2003), between DWS, Universal Studios, Inc. (“ Universal Studios ”) and Universal, as assignee of Universal Studios, 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.

 

Video Device means a videocassette, laserdisc, cartridge, videogram, tape, Digital Versatile Disc (“DVD”), Blu-ray disc, HD-DVD disc or any form of electronic storage or other format, platform or device now known or hereafter devised, intended for in-home use by members of the public and physically or electronically transported to the home or mobile device for such use that is sold or rented and physically or electronically embodies a Motion Picture for Exhibition by a playback device which causes a visual image of the Motion Picture to be seen, in a Linear fashion, and which Motion Picture appears on the screen of a television receiver or other monitor in the home, computer or comparable device (mobile or not) now known or hereafter devised, including without limitation, video downloading. CD-ROM, CD-I, video games and interactive products (including DVD interactive products containing a Motion Picture) or pictures of any type, are not Video Devices. For the avoidance of doubt, Blu-ray and HD-DVD discs are Video Devices.

 

“ Video-on-Demand ” or “ VOD ” means the exhibition of a single Motion Picture or television program distributed via any approved means of transmission (but specifically excluding Internet delivery), by means of a point to point telecommunications system, originating from a distance or delivered from a digital storage device and using computer information, storage, retrieval and management techniques that permit a viewer to stop and start the exhibition of such program in the discretion of the viewer and/or to view such program in a

 

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non-linear fashion on conventional television sets and/or computer terminals and where the viewer is charged on a per-program exhibition basis (as opposed to a per-service charge or subscription fee basis) for his/her election to view such Motion Picture or television program at a time scheduled by the viewer (i.e., the viewer can independently and in the viewer’s sole discretion, select his/her desired viewing time without reference to a list of possible viewing times pre-established by the service provider) and accessible by such viewer for a period of time not to exceed twenty-four (24) hours.

 

Weekend shall mean the period Wednesday through Sunday, inclusive.

 

The following terms shall be used herein with the meanings given to them in the indicated Section:

 

 

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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.

 

1.3 Advance Amounts . Paramount shall pay to DWA, in immediately available funds, an amount equal to Seventy Five Million United States Dollars ($75,000,000) on the Closing Date.

 

1.4 Conditions Precedent . The effectiveness of this Agreement shall be subject to and conditioned upon the full satisfaction of each of the following conditions precedent:

 

a. Closing of the Purchase Agreement . All of the conditions to closing of the Purchase Agreement have been fully satisfied (without waiver of any of the conditions set forth in Section 2.02(a)(vii) or 2.02(a)(viii) of the Purchase Agreement) and the Closing, as defined in the Purchase Agreement, shall have occurred.

 

b. Termination of Universal Agreement . Exhibit A, Exhibit B and Exhibit D of the Universal Agreement shall have been terminated (or shall be terminated immediately following (1) the payment to Universal or its Affiliates of (A) (i) the Advance Amounts, (ii) the Additional Amounts, (iii) any DW Adjustment amounts, (iv) the Special Termination Fee, and (v) the Unearned Exclusivity Fee, (in the case of (i), (ii) and (iii), as defined in the Interparty Agreement, and in the case of (iv) and (v), as defined in the Universal

 

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Agreement), (B) the Animation Advance, the Animation Additional Amounts and any DWA Animation adjustment amount (in each case, as defined in the Interparty Agreement), and (C) the Class U Redemption Amount required to fund the redemption of the Class U Preferred Stock; and (2) the occurrence of the Satisfaction Event (as such term is used in the Limited Liability Limited Partnership Agreement of Holdco, dated as of October 7, 2004, by and among M&J Dream Partnership, M&J KB Limited Partnership, DG-DW, L.P., DW Lips, L.P., DW Investment II, Inc., Lee Entertainment, L.L.C. and Vivendi Universal Entertainment LLLP) with respect to Universal), and all such amounts shall have been paid.

 

c. Execution of Certain Agreements . Each of the Fulfillment Services Agreement and the McDonald’s Interparty Agreement shall have been fully executed by Paramount.

 

With respect to the foregoing, DWA shall pay all amounts required to be paid to Universal pursuant to Section 1.4.b(1)(B) above on the Closing Date (or such other date directed by Paramount) at the time required by Paramount, subject to DWA’s prior receipt of the amounts payable to it pursuant to Section 1.3 above.

 

Section 2. Grant of Rights; Period of Distribution; Termination of Prior Distribution Arrangements .

 

2.1 Grant of Rights :

 

a. Subject to the terms and conditions hereof (including Section 2.1.b, 2.1.c, 2.1.d and 2.1.e below), DWA grants, licenses, and assigns to Paramount, 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 by means of Theatrical Exhibition, Non-Theatrical Exhibition, Television Exhibition, Internet Rights and New Media Rights. As between Paramount and DWS, on the one hand, and DWA, on the other, all rights not expressly granted to Paramount or DWS pursuant to this Agreement, including the Retained Rights, shall remain vested in DWA.

 

b. Subject to the terms and conditions hereof (including 2.1.a above and 2.1.c and 2.1.d below), DWA grants, licenses, and assigns to DWS, 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 those specific Distribution Rights (including, as applicable, rights of Theatrical Exhibition, Non-Theatrical Exhibition, Television Exhibition, Internet Rights and New Media Rights) that are expressly subject to DWA-approved Distribution Servicing Agreements existing as of the Effective Date and DWA-approved Third Party Service Agreements existing as of the Effective Date, as applicable. In each instance any rights licensed to DWS under this Section 2.1.b shall automatically terminate upon the expiration or termination of the DWA-approved Distribution Servicing Agreement(s) and/or DWA-approved Third Party Service Agreement(s) to which such Distribution Rights are subject to and, effective on such termination, such Distribution Rights shall thereafter be automatically licensed to Paramount pursuant to Section 2.1.a above for the remainder of the

 

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applicable License Term. If DWS has the right, but not the obligation, to include a Licensed Picture in a DWA approved Distribution Servicing Agreement or a DWA approved Third Party Service Agreement, as applicable, DWS shall provide written notice to DWA informing DWA of such election right. DWA shall have ten (10) Business Days from its receipt of such written notice from DWS to instruct DWS whether or not to include such Licensed Picture in such agreement. If DWA fails to respond to DWS within such ten (10) Business Day period, DWS shall include such Licensed Picture in the applicable agreement only to the extent the immediately preceding Licensed Picture was included in such agreement.

 

c. The license herein granted to Paramount and DWS to exploit the Distribution Rights with respect to the Licensed Pictures shall be limited to (i) the right to exploit full-length versions of the Licensed Pictures in their entirety for viewing in a Linear format; (ii) the right to exploit trailers and clips of a Licensed Picture in connection with the advertising, marketing or promotion of such Licensed Picture (including promotional featurettes), subject, in each case, to DWA’s prior approval; and (iii) with respect to Internet Rights and New Media Rights, the right to exploit full-length versions of the Licensed Pictures in a Linear format (A) to the extent required under any DWA-approved Distribution Servicing Agreement; and/or (B) by those means of exploitation then generally utilized by Paramount with respect to its own Tent-Pole Pictures.

 

d. The licenses herein granted to Paramount and DWS are expressly subject to any and all rights that Universal may have in and to the Licensed Pictures pursuant to the Universal Agreement or the Interparty Agreement. The license herein granted with respect to each Existing Picture and DTV Production released and distributed by DWS pursuant to the Prior Agreement prior to the Effective Date shall commence and vest in Paramount and DWS as of the Effective Date, subject, on a Licensed Picture-by-Licensed Picture, territory-by-territory and media-by-media basis, to any and all mandatory and/or elective transition periods and provisions under the Universal Agreement. The license herein granted with respect to any other Licensed Pictures shall commence and vest in Paramount and DWS upon the Delivery Date of each such Licensed Picture.

 

e. If DWA elects, in its sole discretion, to engage a third party distributor to exploit its Clip Rights (whether to one or more than one Licensed Pictures), DWA agrees to negotiate exclusively and in good faith with Paramount for a period of thirty (30) days with respect to such distribution. Such negotiations shall commence on a date to be reasonably determined by DWA. If the parties have not reached a definitive agreement with respect to the applicable rights by the expiration of the thirty (30) day period, DWA shall thereafter be free to engage any third party distributor in its sole discretion and without any further obligation to Paramount. Paramount’s rights and the procedures set forth in this Section 2.1.e are sometimes referred to herein as a “ Right of First Negotiation ”. For the sake of clarity, nothing contained in this Section 2.1.e shall in any way limit DWA’s right to directly exploit Clip Rights by way of direct license to or joint venture with any end-user entity (e.g., a telecommunications company).

 

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

 

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2.3 Termination of Prior Agreement . As of the Effective Date, the Prior Agreement shall be terminated and have no further force and effect. Notwithstanding the foregoing, the Prior Agreement shall continue to govern the obligations of DWA and DWS with respect to the pre-Effective Date exploitation of the Licensed Pictures (including all reporting and payment obligations with respect to the pre-Effective Date exploitation of the Licensed Pictures and DWA’s direct and indirect audit rights in connection therewith); provided , that DWS shall have no obligation to return to DWA or destroy the Tangible Film Materials pursuant to Section 15 of the Prior Agreement.

 

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

 

3.1 Development, Production and Acquisition; Payment Obligations :

 

a. As between DWA on the one hand, and Paramount and DWS, on the other hand, 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. Except as provided herein, neither DWA nor any controlled Affiliate shall sell, license or otherwise alienate any Distribution Rights in and to any Animated Motion Picture or Hybrid Motion Picture (i) produced or acquired by DWA or any controlled Affiliate, (ii) scheduled or available for Delivery during the Output Term, and (iii) which would otherwise fully satisfy all of the specifications set forth in Section 3.2(b) (each a “ Subject Picture ”). Notwithstanding the foregoing, DWA and its controlled Affiliates shall have the right to:

 

(i) dispose of its right, title and interest in and to any Subject Picture 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 Subject Picture;

 

(ii) sell, license or otherwise alienate Distribution Rights to any Subject Picture so long as subsequent to such sale, license or other alienation, such Subject Picture continues to satisfy the specifications set forth in Section 3.2(b); and

 

(iii) sell, license or otherwise alienate any Distribution Rights to any Subject Picture in order to obtain co-financing for the production or acquisition of such Subject Picture; provided , that Paramount shall have a Right of First Negotiation (as defined in and pursuant to the procedures set forth in Section 2.1.e above) to provide any such co-financing; and, provided , further, that neither DWA nor any controlled Affiliate shall so sell, license or

 

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otherwise alienate any Distribution Rights to any Subject Picture in a given calendar year to the extent such sale, license or other alienation would cause DWA to Deliver to Paramount less than two (2) Event Pictures in such calendar year.

 

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. For the avoidance of doubt, nothing contained in this Section 3.1.b or in Section 3.1.c below shall prohibit or in any way restrict DWA or its Affiliates from acquiring less than all of the available Distribution Rights to any Motion Picture (including, without limitation, in connection with co-productions, split-rights transactions, etc.). 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 Subject Picture or any other Motion Picture hereunder to the extent such divestiture would cause Paramount 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, Paramount and DWS acknowledge and agree 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 Paramount from lenders or financiers and otherwise reasonably acceptable to Paramount.

 

3.2 Delivery Requirements :

 

a. Tangible Film Materials . Subject to Section 8.9. below, DWA shall Deliver each Licensed Picture to Paramount at DWA’s sole cost and expense. All Tangible Film Materials set forth on Schedule 3 -Delivery Requirements shall be delivered or made available to Paramount in sufficient time to enable Paramount 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. The parties shall negotiate the contents of Schedule 3 in good faith prior to the Delivery of the first Licensed Picture (excluding the Existing Pictures) under this Agreement (and in no event later than ninety (90) days following the Effective Date). Prior to Delivery of each Licensed Picture and upon Paramount’s timely notice of its proposed prerelease schedule for advertising, publicity and promotional campaigns, DWA will provide Paramount with any then-available Tangible Film Materials, as may be reasonably required by Paramount, to enable Paramount to timely prepare customary advertising, publicity and promotional materials (e.g., teasers, trailers, television spots, electronic press kits, one-sheets and teaser print ads). Paramount shall provide DWA with access to all such advertising, publicity and promotional materials for use by DWA in connection with its exploitation of the Retained Rights. To the extent that any materials required to be delivered to Paramount hereunder are held by a laboratory or storage facility, DWA will deliver to Paramount a fully-executed access letter for each Licensed Picture. To the extent that DWA itself maintains possession of any Tangible Film Materials, Paramount shall have the same

 

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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 Paramount, 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 Paramount with respect to each Licensed Picture hereunder a duly executed Instrument of Transfer in substantially the form of Exhibit B hereto. DWA acknowledges and consents to DWS’s delivery to Paramount of all Tangible Film Materials held by DWS with respect to any Licensed Picture, and agrees that DWS may assign to Paramount (and DWA consents to the assignment by DWS to Paramount) of all of DWS’s rights and obligations under each Instrument of Transfer provided to DWS by DWA prior to the Effective Date, except for those continuing rights and obligations relating to the rights licensed to DWS pursuant to Section 2.1(b) above and those rights and obligations relating to the Home Video Exploitation of the Existing Pictures.

 

b. Qualified Picture Specifications : For a Qualified Motion Picture to count towards the minimum number of Qualified Pictures for purposes of determining the Output Term, such Qualified 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 Existing 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 DWS (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 shall include, at a minimum, the following rights (collectively, the “ Minimum 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 );

 

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(vii) Minimum License Term . The Minimum Rights will be owned or controlled by DWA or any controlled Affiliate (and licensed to Paramount 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 Paramount hereunder, is intended and available for initial Theatrical Exhibition;

 

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

 

Any disputes as to whether a Qualified 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 : Paramount, 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 each portion of the Territory and in each media and in each format designated by DWA in accordance with past practices used to service the distribution of comparable Existing Pictures, and to the extent, and as long as, applicable and a higher standard, each Licensed Picture shall be distributed consistent with Paramount’s prevailing and commercially reasonable practices as applied generally to all Motion Pictures produced or distributed by Paramount (which, with respect to the Event Pictures, shall be consistent with Paramount’s Tent-Pole Pictures) 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 Paramount uses in good faith on a nondiscriminatory basis to make determinations in connection with the exploitation of Motion Pictures produced or distributed by Paramount, excluding in each case, any Motion Pictures produced or directed by Steven Spielberg. Paramount shall not have the right to decline to distribute a Licensed Picture in any portion of the Territory and/or in any media designated by DWA. Notwithstanding the foregoing, solely with respect to each Qualified Picture, Paramount 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 Base Films for such Qualified Picture and, to the extent, and so long as applicable and a higher standard, each Qualified Picture shall be distributed consistent with Paramount’s prevailing and commercially reasonable practices as applied generally to Motion Pictures produced or distributed by Paramount (which, with respect to the Event Pictures, shall be consistent with Paramount’s Tent-Pole Pictures) 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 Paramount uses in good faith on a nondiscriminatory basis to make determinations in connection with the exploitation of Motion Pictures produced or distributed by Paramount, 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.

 

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In furtherance of the foregoing, Paramount shall render all customary services required to distribute the License Pictures throughout the Territory during the Term in a manner consistent with the terms of this Agreement, which services shall include, without limitation, the following:

 

a. Domestic Theatrical Distribution . Paramount shall provide the services listed in Annex 4.1.a hereto (which shall be negotiated in good faith by the parties, comparable with the services provided by DWS to DWA prior to the Effective Date, within ninety (90) days of the Effective Date) for Theatrical Exhibition in the Domestic Territory, at no cost or expense to DWA except for Paramount’s retention of the Distribution Fee. In addition, Paramount shall timely prepare for the Domestic Territory a marketing and distribution plan and budget (which shall specify category-by-category expenditures) for each Licensed Picture intended for initial Theatrical Exhibition. Each marketing and distribution plan and budget shall be prepared in full consultation with DWA for DWA’s approval; provided , however, Paramount and DWA shall mutually determine Distribution Expenses and in the event of disagreement regarding the budget and such Distribution Expenses, Paramount’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, Paramount’s decision shall prevail (subject to the requirements of Section 5. below).

 

b. International Theatrical Distribution . Paramount shall provide the services listed in Annex 4.1.b hereto (which shall be negotiated in good faith by the parties, comparable with the services provided by Universal to DWA prior to the Effective Date, within ninety (90) days of the Effective Date) in connection with the distribution of Licensed Pictures for Theatrical Exhibition in the International Territory, at no cost or expense to DWA except for Paramount’s retention of the Distribution Fee. In addition, Paramount shall timely prepare for each of the International Territories marketing and distribution plan and budget (which shall specify category-by-category expenditures) for each Licensed Picture intended for initial Theatrical Exhibition. Each marketing and distribution plan and budget shall be prepared in full consultation with DWA for DWA’s approval; provided , however, Paramount and DWA shall mutually determine Distribution Expenses and in the event of disagreement regarding the budget and such Distribution Expenses, Paramount’s decision shall prevail (subject in the case of each Qualified Picture to the requirements of Section 5. below). Paramount shall commence preparation of such plans and other items immediately following receipt of pertinent materials and information provided by DWA, and in any event, such plans and items will be delivered to DWA no less than sixty (60) days prior to the initial theatrical release date in the applicable portion of the Territory for each Licensed Picture. 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

 

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require DWA’s approval; provided , however, in the event of any disagreement regarding any such change in the budget, Paramount’s decision shall prevail (subject to the requirements of Section 5. below).

 

c. Worldwide Non-Theatrical Distribution . Paramount shall provide the services listed in Annex 4.1.c hereto (which shall be negotiated in good faith by the parties, comparable with the services provided by DWS to DWA prior to the Effective Date, within ninety (90) days of the Effective Date) in connection with the distribution of Licensed Pictures for Non-Theatrical Exhibition in the Territory, at no cost and expense to DWA except for Paramount’s retention of the Distribution Fee.

 

d. Worldwide Television Distribution . Paramount shall provide the services listed in Annex 4.1.d hereto (which shall be negotiated in good faith by the parties, comparable with the services provided by DWS to DWA prior to the Effective Date, within ninety (90) days of the Effective Date) in connection with the distribution of Licensed Pictures for Television Exhibition in the Territory, at no cost and expense to DWA except for Paramount’s retention of the Distribution Fee.

 

e. Information . To the extent it exists, and subject to the requirements of any applicable law, decree or government regulation and any third party rights, Paramount shall furnish, and shall cause DWS, its Paramount Affiliates and, as applicable, UIP and Universal, to furnish:

 

(i) All Information (as defined below) as to the Licensed Pictures distributed by Universal or UIP in the International Territories, to the extent similar Information as to Paramount’s Motion Pictures is made available by Universal or UIP to Paramount;

 

(ii) All Information as to Universal’s Motion Pictures to the extent such Information is made available by Universal or UIP to Paramount; and all Information (including, without limitation, Information about the release of other motion pictures in the Territory) that is made generally available to Paramount (including by UIP, Universal or any other Subdistributor);

 

(iii) All Information as to Paramount Motion Pictures, to the extent similar Information is available to Paramount 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 revenues therefrom, etc.); and (C) shall not be furnished to DWA if in Paramount’s good faith business judgment, such disclosure would constitute a violation of any applicable law, decree, government regulation, or constitute a violation of any third party right;

 

(iv) All Information as to the Licensed Pictures that is available to Paramount (including from any Subdistributor); and

 

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(v) Scheduled Release Dates for other Motion Pictures in the International Territories;

 

(vi) All other Information as may be reasonably required by DWA, including, without limitation, MPAA, MPA and other trade association publications and reports (except to the extent distribution to DWA is prohibited by such trade association); irrespective of whether such Information is customarily provided by a distributor and; provided, however, that if Paramount is required to incur any additional costs (of which Paramount notifies DWA in advance) for outside personnel Paramount is required to engage solely in order to furnish any such additional Information which is not included within the scope of services to be rendered by Paramount under this Agreement, Paramount shall not be required to furnish such additional Information unless DWA pre-approves such costs and agrees to reimburse Paramount for same (subject to appropriate reduction, to be mutually agreed, if and to the extent that such additional Information is supplied [subject to DWA’s prior approval] to any party other than DWA). Any dispute as to whether such additional Information is within the scope of services to be rendered by Paramount hereunder will be subject to dispute resolution pursuant to Section 24 of this Agreement.

 

(vii) As used herein, “ Information ” shall mean all tangible (i.e., excluding only staff meetings, phone conversations and similar conversations which are not reduced to written or other tangible form) information, data, reports, agreements and other documents including, without limitation, all outright sales proposals for the Outright Sales of a Licensed Picture, direct access to the theatrical database for each Licensed Picture on a territory-by-territory basis, daily box office reports, competitive release dates, advertising expenses, copies of all outside sourced market surveys, updates and analysis, etc., whether distributed on paper, electronically and/or through any other means (e.g., DWA shall be put on the distribution lists for such information). The Information shall be provided consistent with the frequency and timeliness with which the Information (or similar material) is created by, or supplied to, Paramount, or otherwise as DWA shall reasonably request; provided, however, that if Paramount is required to incur any additional costs (of which Paramount notifies DWA in advance) for outside personnel Paramount is required to engage solely in order to furnish Information more frequently or quickly (if possible) than the Information (or similar material) is supplied to Paramount and such increased frequency or quickness is not included within the scope of services to be rendered by Paramount under this Agreement, Paramount shall not be required to furnish such Information with such increased frequency or quickness as requested unless DWA pre-approves such costs and agrees to reimburse Paramount for same (subject to appropriate reduction, to be mutually agreed, if and to the extent that such increased frequency or quickness is also accorded [subject to DWA’s approval] to any party other than DWA). Any dispute as to whether such increased frequency or quickness is within the scope of services to be rendered by Paramount hereunder will be subject to dispute resolution pursuant to Section 24 of this Agreement.

 

(viii) Notwithstanding anything in this Section 4.1.e. to the contrary, in no instance shall Information include (and Paramount shall not be required to provide) (A) internal financial information of Paramount, UIP or Universal, or (B) Information that is not related to the exploitation and performance of Motion Pictures or the costs of distribution.

 

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f. Print and Trailer Information : In connection with the Theatrical Exhibition of the Licensed Pictures, Paramount shall provide the following:

 

(i) Print inventories (features and trailers) together with an analysis of print storage costs by title and quantity, not less than on a quarterly basis.

 

(ii) Print orders for the Territory, for the initial Release Date and for the date thirty (30) days thereafter.

 

(iii) In the Domestic Territory and each International Territory in which Paramount directly distributes the Licensed Pictures (including, for purposes of this Section 4.1.f, those territories in which Universal or UIP is distributing the Licensed Pictures), trailer release dates, on a monthly basis for the period commencing with the first release of the trailer through thirty (30) days after initial Release Date in each such territory.

 

g. Media Buys . Until completion of all distribution by Paramount pursuant to this Agreement, Paramount shall cooperate with, and consult with DWA on such Media purchases as DWA may require from time-to-time, with the intent that to the extent not inconsistent with Paramount’s agreements (and without detriment to Paramount (e.g., Paramount is not required to make limited Media space available to DWA which Paramount intends to utilize for its own purposes)), Paramount will permit DWA to utilize Paramount’s Media rates (net of all discounts, rebates and adjustments) for such Media to the extent such rates are better than DWA’s rates. Paramount shall have no obligation under this Section 4.1.g to provide services to DWA, including in connection with identifying such potential opportunities or making any Media buys, or to bear any costs in connection therewith. If DWA has the opportunity to utilize Paramount’s Media rates, DWA shall bear all costs in connection therewith. For purposes of this Section 4.1.g., “ Media ” includes: all television (e.g., network, cable, syndication and spot); radio (e.g., network and spot); print, such as newspaper advertisements, cable guides, magazines, periodicals, circulars, college print, military print; outdoor such as billboards, bus shelters, bus sides, phone kiosks, premiere squares; trade publications; internet and new media as they evolve.

 

h. Publicity Tours / International Publicists . Paramount agrees to conduct and support star talent publicity tours, road show presentations and regional conferences (collectively, “ Publicity Tours ”), as well as to provide publicity services rendered by special publicists (as designated by DWA) (“ Publicity Services ”), comparable on an overall basis in quality, level, priority and quantity to those Publicity Tours conducted and Publicity Services provided in connection with the Base Films. Any costs of such Publicity Tours and Publicity Services that are allocated to the Licensed Pictures shall be allocated in accordance with Section 8.5.c. For the sake of clarity, Paramount may only charge the costs of Publicity Tours and Publicity Services as Distribution Expenses hereunder to the extent such costs are Licensed Picture-specific and incremental to costs associated with publicity for Paramount’s own Motion Pictures.

 

i. MTV Networks Promotion . Each Licensed Picture shall be promoted, marketed and advertised on the MTV Networks (including, without limitation, Nickelodeon) in accordance with Paramount’s then prevailing practices as applied generally to all

 

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Motion Pictures produced or distributed by Paramount or any Paramount Affiliate (which, with respect to the Event Pictures, shall be consistent with Paramount’s Tent-Pole Pictures). The rates charged by the MTV Networks for such promotion, marketing and advertising shall be ***

 

j. Nickelodeon Animation Rights / Promotion: Subject to the terms and conditions of this Section 4.1(j), DWA grants, licenses and assigns to Paramount (on behalf of Nickelodeon), 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 Animated Television Production Rights, subject at all times to any and all existing limitations and restrictions thereon and the rights of third parties related thereto. For purposes of this Section 4.1.j., the terms below shall have the following meanings:

 

“ Animated Television Production ” 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”) and that is intended for initial exhibition by means of Television Exhibition, including made-for-television movies, television miniseries, and episodic television series. However, an Animated Television Production shall not be deemed to include Motion Pictures in which 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 ].)

 

“ Animated Television Production Rights ” shall mean (a) the exclusive right, subject at all times to DWA’s rights under subsection (iii) of this Section 4.1.j, for Nickelodeon to develop and produce an Animated Television Production based upon a Licensed Picture, including any characters and elements contained therein, and (b) the exclusive right, under copyright and otherwise, in perpetuity throughout the universe, for Nickelodeon to use or exploit such Animated Television Production, including the right to broadcast, license, promote and otherwise exploit such Animated Television Production and elements thereof in accordance with the terms hereof.

 

“ Animated Television Production Term ” shall mean the period from the Effective Date until and including December 31, 2007 (“ First Term ”), but shall automatically be extended for consecutive additional terms of two calendar years each thereafter (each an “ Additional Term ”) if, and only if, during the First Term and each Additional Term thereafter, Nickelodeon commences production on, or enters into a bona fide unqualified commitment to produce (and such Animated Television Production actually commences production no later than 90 days after the end of the applicable First Term or Additional Term), a new Animated Television Production based upon a

 

***	Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested by DreamWorks Animation SKG, Inc. with respect to the omitted portions.

 

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Licensed Picture. Notwithstanding the foregoing, in no event shall the Animated Television Production Term extend beyond the effective date of termination or expiration of the Output Term. For clarity, if during any Additional Term, other than the First Term, a new Animated Television Production is not placed into production, the Animated Television Production Term shall terminate and Nickelodeon shall cease to have the right to develop or produce any Animated Television Production based on any Licensed Picture, provided , Nickelodeon shall have the right to continue the production of any Animated Television Production that commenced production prior to termination of the Animated Television Production Term.

 

(ii) Nickelodeon shall have the right to commence production on not more than one new Animated Television Production based upon a Licensed Picture (subject, at all times, to DWA’s approval rights set forth in subsection (iii) below) in the First Term and each Additional Term thereafter.

 

(iii) DWA shall have the right (but not the obligation) to co-produce any Animated Television Production on terms, to be negotiated in good faith, commensurate with DWA’s stature in the Motion Picture animation industry. In addition, and in furtherance of its intellectual property rights for each and every Animated Television Production, DWA shall retain all customary creative approvals and controls over the Animated Television Production, including selection of the Licensed Picture elements as the basis for any Animated Television Production. DWA shall be entitled to fees and other compensation for the rights licensed pursuant to this Section 4.1.j and for its services. Such approvals, fees and any other compensation shall be negotiated in good faith and commensurate with DWA’s stature in the Motion Picture animation industry.

 

(iv) At all times, Nickelodeon’s rights to promote and otherwise exploit any Animated Television Production shall be subject to DWA’s rights (and any obligations) to fully promote, advertise, market and exploit the Licensed Picture and any derivative productions (e.g., sequels) upon which such Animated Television Production is based. Ancillary rights exploitation (e.g., merchandising) of such Animated Television Production shall be subject to DWA’s ancillary rights exploitation of the applicable Licensed Picture, including derivative productions.

 

(v) Paramount shall cause each Qualified Picture to be promoted, marketed and advertised on the Nickelodeon networks in accordance with Nickelodeon’s then prevailing practices (e.g., “Nicksclusives”) with respect to Nickelodeon branded Motion Pictures. Unless otherwise agreed between Paramount and DWA, in connection with the initial theatrical release of each Qualified Picture, Paramount shall purchase promotion, marketing and advertising services from the Nickelodeon networks having a value up to the average amount paid to Nickelodeon by PPC or DWS in connection with the promotion, marketing and advertising of the Base Films on the Nickelodeon networks. The rates charged by Nickelodeon for such promotion, marketing and advertising shall be ***

 

***	Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested by DreamWorks Animation SKG, Inc. with respect to the omitted portions.

 

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(vi) Notwithstanding the foregoing, it is understood and agreed by the parties that DWA has not conducted a review of its rights and obligations with respect to the Animated Television Production Rights related to the Licensed Pictures and, as such, DWA does not herein make any representations and warranties regarding its rights or obligations with respect thereto.

 

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 Distribution Rights subject to a DWA-approved Distribution Servicing Agreement or a DWA-approved Third Party Service Agreement, in each case existing as of the Effective Date, are expressly subject to the terms and conditions of such DWA-approved Distribution Servicing Agreement or DWA-approved Third Party Service Agreement, as applicable. For the avoidance of doubt, to the extent either (a) DWS is not contractually entitled to exercise certain approvals or controls over the activities of a Subdistributor or such third party; or (b) if, as a matter of custom and practice and historical course of dealing, DWS does not exercise certain approval or controls to which it is contractually entitled under such existing DWA-approved Distribution Servicing Agreement or such existing DWA-approved Third Party Service Agreements, DWS shall not be required to attempt to amend any such existing DWA-approved Distribution Servicing Agreement or such existing DWA-approved Third Party Service Agreements to expand its contractual approval or control rights to be consistent with those set forth herein, nor shall DWS be required to alter its custom and practice and historical course of dealing with such Subdistributors or other third parties to comply with the approvals and controls afforded to DWA hereunder. In either event, DWS’s only obligation to DWA with respect thereto shall be to (x) use its reasonable efforts to cause such Subdistributors or other third parties to comply with DWA’s approval rights hereunder, and (y) exercise its contractual rights with respect to the Licensed Pictures in accordance with DWS’s past practices used to service the distribution of comparable Existing Films, 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 DWS under similar circumstances in the applicable territories. DWS shall not be in breach of this Agreement if such Subdistributors or other third parties do not comply with DWA’s approval rights provided that DWS used such reasonable efforts.

 

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 Required International Territories. DWA shall use reasonable efforts to notify Paramount of the scheduled Release Date for each Qualified Picture in the Domestic Territory at least eighteen (18) months prior to such Release Date. DWA shall not schedule more than one Release Date in the Domestic Territory in a given year during each of (i) the Holiday Period and (ii) the Summer Period, unless the additional Release Date(s) are mutually approved by Paramount and DWA. If DWA and Paramount cannot agree on a second Release Date within such Holiday Period or Summer Period, as applicable, then DWA shall have the right, in accordance with the terms of this Agreement, to designate the Release Date for such Qualified Picture outside the Holiday Period or Summer Period, as applicable, in its sole discretion. Once DWA has designated a Release Date for a Qualified Picture in the Domestic Territory (whether tentative or firm), Paramount shall provide DWA with a schedule of proposed Release Dates for such Qualified Picture in each of the Required International Territories within

 

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thirty (30) days of DWA’s designation of the Domestic Territory Release Date for such Qualified Picture. Paramount shall provide DWA with no less than three (3) days prior written notice of its intent to designate a Release Date for a Tent Pole Picture and shall consult with DWA during such three (3) day period. Paramount shall not designate a Release Date for any such Tent Pole Picture until the expiration of such three (3) day period. Upon the expiration of such period, Paramount may designate and publicly announce a Release Date for such Tent Pole Picture, subject to the term of Section 4.2.b. below, and once Paramount has so designated and publicly announced a Release Date for such Tent Pole Picture, DWA shall not schedule a Release Date for any Qualified Picture in any portion of the Territory that would conflict with the holdback restrictions set forth in Section 4.2.b. as they pertain to such Tent Pole Picture in the applicable portion(s) of the Territory. DWA shall keep Paramount fully advised of the anticipated Delivery Date of each Qualified Picture. Once a Release Date is designated by DWA in any portion of the Territory, Paramount shall ensure that such Release Date is not moved for any reason; provided , that, subject to the McDonald’s Interparty Agreement, Release Dates are subject to postponement and extension due to events of Force Majeure, 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) and as may be required by McDonald’s pursuant to the McDonald’s Agreement. In the event a Release Date, in any portion of the Territory, is postponed or otherwise moved due to an event of Force Majeure or DWA implemented creative changes, DWA will provide notice to Paramount and designate an alternative Release Date that shall not cause Paramount to be in breach of the holdback restrictions set forth in Section 4.2.b. below as they pertain to any Similar Motion Picture or Major Release then scheduled (i.e., publicly announced) for Theatrical Exhibition by Paramount in the applicable portion of the Territory. In the event a Release Date in any portion of the Territory is required to be postponed or otherwise moved pursuant to the McDonald’s Agreement, DWA will provide notice to Paramount and designate an alternative Release Date in accordance with the terms of the McDonald’s Agreement in the applicable portion of the Territory. If any alternative Release Date mandated by the McDonald’s Agreement would cause Paramount to be in violation of the holdback restrictions set forth in Section 4.2.b below, DWA shall nonetheless be entitled to require the release of such Qualified Picture on such McDonald’s mandated Release Date but shall be deemed to have waived the holdback restrictions with respect to such Qualified Picture in the applicable portion of the Territory.

 

b. Holdbacks : As additional consideration for the Distribution Rights: (i) Paramount and DWS agree 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 Required International Territories during the period commencing the Weekend prior to the Release Date for any Event Picture in each applicable territory and continuing throughout and including the Weekend following the scheduled Release Date for such Event Picture in the applicable territory, and (ii) Paramount and DWS agree not to commence or authorize the commencement of the initial Theatrical Exhibition of a Major Release in the Domestic Territory and in each of the Required International Territories on the same Weekend as the Release Date in each such portion of the Territory for an Event Picture. In addition, Paramount agrees that it will consult in good faith with DWA prior to scheduling the initial Theatrical Exhibition of a Motion Picture that is rated “PG-13” in the Domestic Territory and any of the Required International Territories during the period one (1) Weekend on either side of the applicable Release Date of each Event Picture in the Domestic Territory and in each of the

 

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Required International Territories, respectively; provided, that if Paramount determines in its good faith business judgment to proceed with the initial Theatrical Exhibition of such Motion Picture during such period, it will not violate the provisions of this Section 4.2.b or otherwise constitute a breach of this Agreement by Paramount. 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 Paramount 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 each case existing as of the Effective Date). In such event, Paramount shall keep DWA fully informed of all proposed release dates for its Similar Theatrical Motion Pictures, if applicable, to enable DWA to schedule Release Dates for its Qualified Pictures in the International Territory. For the avoidance of doubt, in the event DWA initially designates a Release Date for an Event Picture, on a date that would cause Paramount or DWS to be in violation of the holdback provisions of this Section 4.2(b), due to a previously scheduled Release Date for a Paramount or DWS Motion Picture, then, except with re