“PRINCE & ME II: THE
ROYAL WEDDING”
This agreement
(the “Agreement”) is made and entered into as of
December 6, 2005 by and between Sobini Films, a California
Corporation (“Grantor”), whose address is 2700 Colorado
Avenue, Suite 510B, Santa Monica, California, 90404, and Lions Gate
Films Inc. (“LGF”), whose principal address is 2700
Colorado Avenue, Second Floor, Santa Monica, California, 90404,
with respect to that certain motion picture presently entitled
“Prince & Me II: The Royal Wedding”.
1.
Picture: The “Picture” shall mean that certain
motion picture presently entitled “Prince & Me II:
The Royal Wedding” and any and all versions thereof and all
“bloopers”, footage, trims and outtakes thereof
(including, without limitation, the Director’s Cut and the
Final Cut and any and all versions of each of the foregoing, all
versions rated by the Motion Picture Association of America and
unrated versions of the Picture, “behind the scenes”,
“making of” and any and all other documentary or short
films concerning the Picture, and all footage,
“bloopers”, trims and out-takes of each of the
foregoing), produced by on behalf of or at Grantor’s
direction, in the year 2005.
2.
Territory: The “Territory” shall mean the
Universe, excluding only the Reserved Territory. As used herein,
the “Reserved Territory” shall mean the United States
and Canada, and each of their territories, possessions,
trusteeships and commonwealths.
a. Rights
Granted to LGF: Grantor hereby grants to LGF on an exclusive
basis, all distribution rights in and to the Picture and the
underlying material with respect thereto, under copyright and
otherwise, throughout the Territory, in all languages and in all
media, whether now known or hereafter devised, including, without
limitation, all Theatrical, Non-Theatrical, Home Video, Television,
and ancillary and derivative rights in and to the Picture, by all
methods of delivery, whether now know or hereafter devised,
including without limitation, all Internet Delivery Mechanisms, all
as such rights may be more specifically defined in Schedule
“A”, which is attached hereto and incorporated herein
by this reference (collectively, the “Rights”),
excluding only the sequel, prequel and remake rights in and to the
Picture. Without limiting the generality of the foregoing, the
Rights granted to LGF hereunder shall include, without limitation,
the exclusive right to market, advertise, promote and publicize the
Picture in all media, whether now known or hereafter
devised.
b.
Remakes Prequels & Sequels: LGF shall have a right of
first refusal (a “Right of First Refusal”) with respect
to worldwide distribution rights in any motion picture produced by
Grantor alone or in conjunction with others during the Term (a
“Qualifying Picture”) to the extent that Grantor
controls the licensing of such distribution rights, provided, that
such Right of First Refusal shall not apply to any rights to
distribute a Qualifying Picture which has been licensed,
transferred or otherwise disposed of prior to the time that Grantor
controls the licensing
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& Me II: The Royal Wedding”
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of such
distribution rights unless at such later time Grantor has obtained
the control of the Subject Distribution Rights. Such a Right of
First Refusal shall apply to all rights to distribute the
Qualifying Picture in the United States (“U.S. Rights”)
and to all rights to distribute the Qualifying Picture outside of
the United States (“Foreign Rights”). The rights as to
which LGF has the Right of First Refusal set forth in this
paragraph shall be referred to herein as “Subject
Distribution Rights”.
i. Grantor
shall notify LGF in writing of any Qualifying Picture (a
“First Refusal Notice”) setting forth a description of
the Material Elements. For purposes of this Agreement,
“Material Elements” shall mean the proposed director,
lead actor and amount of the budget for the Qualifying Picture. LGF
shall have until 5:00 p.m. on the eighth (8
th ) business day following provision of the First
Refusal Notice by Grantor (the “Exercise Period”) to
notify Grantor in writing (an “Exercise Notice”) that
LGF is exercising its right to negotiate in good faith to acquire
the U.S. Rights and/or the Foreign Rights. If LGF so exercises its
Right of First Refusal with respect to the U.S. Rights and/or with
respect to the Foreign Rights, LGF shall thereupon be obligated to
negotiate with Grantor in good faith for a period of ten
(10) business days (“Negotiation
Period”).
ii. If the
parties fail to reach agreement ( or are deemed to fail to reach
agreement) prior to the expiration of the Negotiation Period with
respect to U.S. Rights and/or Foreign Rights, subject to and in
accordance with subsections (iv) and (v) below, Grantor
may accept any third party offer to acquire U.S. rights and/or
Foreign Rights on monetary terms or conditions materially more
favorable to Grantor that the monetary terms and conditions last
offered by LGF to Grantor during the Negotiation Period and/ or may
sell or license Foreign Rights on a territory-by territory basis
without any further obligation to LGF.
iii. LGF’s
failure to provide an Exercise Notice prior to the expiration of
the Exercise Period shall be deemed an election by LGF to not
exercise its Right of First Refusal to acquire any of the Subject
Distribution Rights. In the event LGF fails to provide an Exercise
Notice within the applicable Exercise Period or fails to negotiate
with Grantor during the appropriate Negotiation Period, Grantor
shall have the right to dispose of the Subject Distribution Rights
with respect to Qualifying Picture without any further obligation
to LGF.
iv. Subject
to paragraph 3(b)(v) hereinbelow, if at any time there is a
substantial change in the Material Elements pertaining to a
Qualifying Picture, Grantor shall within ten (10) business
days following such change to provide a First Refusal Notice to LGF
describing such change of Material Elements. The Exercise Period,
Negotiation Period and the mechanics for LGF’s exercise or
deemed election not to exercise its rights under any such First
Refusal Notice shall be the same as set forth above. For purposes
of this Agreement a “substantial change” in the
Material Elements pertaining to a Qualifying Picture shall mean
(A) any change in the proposed director or lead actor or
(B) a decrease of more than ten percent (10%) in the amount of
the proposed budget.
v. Notwithstanding
anything to the contrary in this Agreement, if Grantor enters into
an agreement with a third party regarding the U.S. Rights or the
Foreign Rights in Qualifying Picture, thereafter there is a
substantial change in Material Elements pertaining to
such
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& Me II: The Royal Wedding”
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Qualifying
Picture, and Grantor has theretofore compiled with his first
refusal obligations as set forth herein, LGF’s Right of First
Refusal shall not apply to such Qualifying Picture. By way of
clarification, in such event, Grantor would, among other things,
not be required to provide a subsequent First Refusal Notice to LGF
with respect to a Qualifying Picture, even if the Material Elements
of such Qualifying Picture were to change substantially subsequent
to the time such agreement is entered into.
a.
Term: The “Term” of this Agreement (i.e., that
period of time under which LGF shall have the right to license the
Picture for distribution hereunder) shall commence as of the date
first written above and shall terminate seven (7) years from
the earlier of (i) the date of complete Delivery (and
LGF’s acceptance) of the Picture to LGF in accordance with
the Delivery Schedule, (ii) the date LGF first issues a Notice
of Delivery to any third party with respect to the Picture, and
(iii) the date LGF first issues a Notice of Availability to
any third party with respect to the Picture. Without limiting the
generality of the foregoing, LGF shall have a right of first
negotiation (for a period of ten (10) business days commencing
on Grantor’s receipt of LGF’s written notice of its
intent to commence such negotiations, which notice shall be
Delivered to Grantor no later than the last day of the
Term).
b.
License Periods: LGF shall have the right to enter into
distribution agreements concerning the Picture with “License
Periods” (i.e., that period of time under which such
distributor may distribute the Picture) of up to fifteen
(15) years in duration in the “major” territories
(i.e., Germany, the United Kingdom, France, Italy, Spain, Benelux,
Scandinavia, Latin America, Japan, South Korea, Australia and New
Zealand) and of up to ten (10) years in all other parts of the
Territory. Notwithstanding the foregoing, if LGF enters into a
license agreement concerning the Picture with the same licensee
that licensed that certain motion picture presently entitled
“The Prince and Me”, then LGF shall have the right, but
not the obligation, to enter into license agreements concerning the
Picture with License Periods that are equal to or shorter in
duration than those license periods entered into with respect to
“The Prince and Me”. Any proposed License Period that
is for a duration that is longer than the time periods set forth
herein shall require Grantor’s prior, written approval in
each instance, which approval shall not be unreasonably withheld or
untimely delayed and shall be deemed given if not rejected within
ten (10) business days of Grantor’s receipt of LGF’s
written request for approval, except during festivals and markets,
during which Grantor’s approval shall be deemed given if not
rejected within two (2) days of Grantor’s receipt of
LGF’s written request for approval.
5. Minimum
Guarantee: None.
6.
Grantor’s Participation; Distribution Fees:
a.
Grantor’s Participation: From One Hundred Percent
(100%) of all monies received by LGF on a non-refundable basis from
the exploitation of the Picture in all media throughout the
Territory, LGF shall be entitled to deduct the following on a
continuing basis and in the following order: (i) LGF’s
Distribution Fee for all media; and (ii) LGF’s
Distribution Expenses (as that term is defined hereinbelow). All
revenues remaining after the foregoing deductions shall
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& Me II: The Royal Wedding”
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be referred to
herein as “AGR”. 100% of the AGR shall be allocated to
Grantor. That portion of the AGR allocated to Grantor pursuant to
this paragraph shall be referred to herein as
“Grantor’s Participation”. LGF shall be entitled
to cross-collateralize all revenues received by LGF from the
exploitation of the Picture in all media throughout the Territory
for the purposes of recouping LGF’s recoupable Distribution
Expenses. LGF shall not be entitled to cross-collateralize revenues
received by LGF from the exploitation of the Picture with revenues
received by LGF from the exploitation of any other motion picture
or property distributed by LGF for any recoupment purposes,
including, but not limited to, the recoupment of Distribution
Expenses. The Picture shall not be treated as a “loss
leader” by LGF. If LGF includes the Picture in a package of
motion pictures licensed to a third party, then the price allocated
to the Picture shall be on the basis of a reasonable allocation of
revenues in light of the commercial worth of the motion pictures in
the package as determined by LGF in the exercise of its reasonable
good faith business judgment.
b.
Distribution Fees: LGF’s “Distribution
Fee” shall equal Fifteen Percent (15%) of One Hundred Percent
(100%) of all Gross Receipts received by LGF from the exploitation
of the Picture in all media throughout the Territory.
Notwithstanding the foregoing, at such time, if ever, as the
aggregate of all Gross Receipts received by LGF with respect to the
Picture in all media throughout the Territory equals One Million
Dollars ($1,000,000.00), LGF’s Distribution Fee shall
increase, on a prospective basis, to Twenty Percent (20%) of One
Hundred Percent (100%) of all Gross Receipts received by LGF from
the exploitation of the Picture in all media throughout the
Territory.
c.
Distribution Expenses: As used herein, “Distribution
Expenses” shall mean, with respect to all rights granted to
LGF hereunder, one hundred percent (100%) of the aggregate of all
actual, direct, out-of-pocket, third party costs expended or
incurred by LGF in direct connection with the distribution and
exploitation of the Picture throughout the Territory in all media,
including, without limitation, all DLT Creation Costs, and all
conversion, manufacturing, duplication, shipping, marketing,
advertising, promotion and publicity costs, all Residual Payments,
and all costs to complete Delivery of the Picture (to the extent
(i) LGF elects to cure any failure of Grantor to complete
Delivery of the Picture in accordance with the Delivery Schedule
and/or (ii) LGF is required to take “access” to
any Delivery Materials pursuant to the Delivery Schedule; and/or
(iii) Grantor is not required to deliver such elements under
the Delivery Schedule). LGF’s recoupment of its Distribution
Expenses is subject to the Expense Cap set forth in paragraph 6(d)
hereinbelow.
d.
Expense Cap: LGF’s Distribution Expenses concerning
the Picture shall not exceed One Hundred Thousand Dollars
($100,000.00) (the “Expense Cap”) without
Grantor’s prior, written approval (which approval shall not
be unreasonably withheld or untimely delayed and shall be deemed
rejected if not given within ten (10) business days of
Grantor’s receipt of LGF’s written request for
approval); provided that the following Distribution Expenses shall
not be subject to the Expense Cap and shall be recoupable by LGF in
addition thereto: (i) all actual, direct, out-of-pocket, third
party costs of taking Delivery of the Picture, (ii) all
actual, direct, out-of-pocket, third party costs of making Delivery
of the Picture to LGF’s licensees, (iii) all actual,
direct, out-of-pocket, third party Residual Payments, (iv) all
actual, direct, out-of-pocket, third party participation payments,
and (v) all actual, direct, out-of-pocket third party legal
costs.
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& Me II: The Royal Wedding”
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e.
Residuals: Grantor represents and warrants that Grantor no
residual buy-outs were capable of being obtained with respect to
any guild or union affiliated with the Picture or those individuals
rendering services in connection therewith (the “Residual
Buy-Out”). Without limiting the generality of the foregoing,
Grantor shall be responsible for any and all residual and other
additional or supplemental payments required to be made by reason
of the distribution or other exploitation of the Picture in the
Territory. Notwithstanding the foregoing, LGF represents and
warrants that it shall pay any residual payments Grantor is
required to pay as a result of LGF’s exploitation of the
Picture in the Territory other than the Residual Buy-Out (each, a
“Residual Payment”) and, if reques
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