PAY TELEVISION LICENSE AGREEMENT
AMENDED & RESTATED
AMENDMENT TO PAY TELEVISION LICENSE AGREEMENT
This Amended & Restated Amendment to Pay Television License Agreement (this “Amended & Restated Amendment”) is entered into as of February 9, 2009 (the “Amended & Restated Amendment Date”) between STARZ ENTERTAINMENT, LLC, formerly known as STARZ ENCORE MEDIA GROUP, LLC, located at 8900 Liberty Circle, Englewood, Colorado 80112-7057 (“STE”), and SONY PICTURES ENTERTAINMENT INC., located at 10202 West Washington Boulevard, Culver City, California 90232 (“Licensor”).
RECITALS
WHEREAS, Licensor and STE are parties to that Pay Television License Agreement, dated January 26, 2000, as amended (“Original Agreement”);
WHEREAS, Licensor has assigned the Original Agreement to Sony Corporation of America (“SCA”), and SCA has re-assigned the Original Agreement to Licensor;
WHEREAS, Licensor and STE have entered into that Amendment to Pay Television License Agreement (“Amendment”), as of December 26, 2008 (the “Amendment Date”), which, effective as of the Amendment Date, amends the terms of the Original Agreement and terminates that Letter Agreement with respect to Starz Ticket & VONGO, dated as of September 1, 2006 (“VONGO Letter Agreement”); and
WHEREAS, Licensor and STE desire to amend and restate the Amendment in its entirety.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is acknowledged by the signing and delivery hereof, the parties agree to amend and restate the Amendment as of the Amended & Restated Amendment Date, as follows:
1. Definitions.
a) “Additional Element” with respect to a motion picture means any of the following:
i) 50% or more of the total P&A Expenses for such motion picture was incurred by, or the payment of which is otherwise the responsibility of, any SPE Group Member(s), either directly or via third party financiers or investors.
ii) Such motion picture arises out of a script, screenplay or underlying property that was developed by any SPE Group Member.
iii) Such motion picture was produced under the control, direction or supervision of any SPE Group Member.
iv) An SPE Group Member(s) was responsible for, or guaranteed a sum equal to, at least 25% or more of the Negative Costs for such motion picture.
v) Such motion picture is based in whole or in part on an underlying property owned or controlled by any SPE Group Member.
vi) At the time of Initial Theatrical Release, substantially all of the U.S. Home Video and Television rights to such motion picture were owned or controlled by any SPE Group Member.
b) “Adult Program” shall mean any motion picture that has either been rated (i) NC-17 or successor rating (or if unrated would likely have received a rating of NC-17 if it had been submitted to the MPAA for rating), other than a title released by any Major Studio, or a title otherwise deemed not to be an Adult Program by Licensor in its sole discretion or (ii) X (or is unrated and would have likely received an X if it had been submitted to the MPAA for rating).
c) “‘A’ Film” means any Qualifying Film that is so designated by Licensor and satisfies at least one Additional Element and at least one Minimum Requirement, is Theatrically Released By an SPE Group Member, and is released on no less than 800 screens at its widest point of theatrical release; provided, however, that the foregoing 800 screen requirement shall not apply to any SPC Film designated as an “A” Film by Licensor pursuant to Section 4(a)(i)(B), or to up to 3 Qualifying Films per Year designated by Licensor; provided, however, that each of such 3 Qualifying Films shall have either (i) P&A greater than $20 million or (ii) a theatrical release on no less than 550 screens at its widest point of theatrical release in the Territory. Notwithstanding the foregoing, any Qualifying Film that satisfies only the Additional Element set forth under 1(a)(vi) (and no other Additional Elements) and which is produced by any Major Studio, Lionsgate or The Weinstein Company, or any company which owns at least 50% of the capital stock or similar equity interests of a major Home Video distribution entity (i.e., entity is the sole distributor of such company’s Home Video product (including Physical Medium product) in the Territory, has direct accounts with major retailers (e.g. Wal-mart), has revenue share relationships with rentailers, conducts full sales and marketing for products being distributed, and has an annual home video revenue for the Territory of at least $250 million), shall not be an “A” Film, but shall be a Sony Rent-A-System Film, and shall be subject to the limitations on such films as set forth in Section 4.
d) “Availability Date” shall mean the first day of each Picture’s First License Period, as set forth in Section 3(a)(i) below.
e) “‘B’ Film” means any Qualifying Film that is so designated by Licensor and satisfies at least one Additional Element and at least one Minimum Requirement and is Theatrically Released By an SPE Group Member. In addition, “B” Films shall expressly include Third Party Rent-A-System Films (even though such films do not satisfy any Additional Element and are not Theatrically Released By an SPE Group Member), and Sony Rent-A-System Films (even though such films do not satisfy any Additional Element).
f) “Digital Cinema” shall mean the exhibition in a theater intended primarily for the exhibition of motion pictures of an intangible, digital or electronic format embodying a motion picture.
g) “DSL” means the technology that provides digital transmission over twisted pair copper wire telephone lines which may in some cases be delivered from a central hub known as a digital subscriber line access multiplier (DSLAM). For the avoidance of doubt, DSL is not Fiber.
h) “DSL A La Carte Package SLP” means the greater of (a) the Open Internet A La Carte SLP then in effect plus the monthly DSL Base Tier SLP or (b) $10.98 with respect to the period beginning January 1, 2009 and ending on December 31, 2012 or $12.98 with respect to the period beginning January 1, 2013 and ending on the last day of the last License Period hereunder.
i) “DSL Base Tier” shall mean with respect to DSL the least expensive package of Internet access, but in no event less than the DSL Base Tier SLP, that offers a speed that would permit streaming video image quality consistent with the then-current feature film Internet VOD standards.
j) “DSL Base Tier SLP” shall mean $4.99 per month.
k) “DSL Bundle” shall mean a bundled offering by a telephone company of an STE Service together with DSL service and any other products or services commonly bundled with DSL services as of the date of the offering to the consumer (e.g., anti-spyware), provided that such other products or services are the same as or comparable to those commonly bundled with DSL services as of the Amendment Date.
l) “DSL Bundle SLP” shall mean $33.00 per month; provided, however, that such price may be adjusted as provided in Section 2(c)(iii)(C).
m) “DSL Bundle Amount SLP” shall mean the greater of (a) an amount greater than the Open Internet A La Carte SLP then in effect plus the monthly price for the DSL Base Tier and (b) the DSL Bundle SLP.
n) “DVD functionality” with respect to any Picture means the capability of a customer to perform any or all of the following functions with respect to the viewing of such Picture: stop, start, pause, play, rewind, fast forward and (provided that Licensor shall have final approval over chapter break points) chaptering, but not recording.
o) “Entry-Level Video Package” shall mean a subscription package of video programming (containing only video programming and not containing any Adult Program) for a price equal to at least $4.99 per month.
p) “Exhibition Day” shall mean with respect to each Picture and each channel of the STE Pay Television Services a period of twenty-four (24) consecutive hours during which such Picture may be exhibited up to three (3) times, provided, that only one exhibition per Exhibition Day may commence between the hours of 7:00 p.m. and 11:00 p.m. and in no event shall two exhibitions in an Exhibition Day be scheduled on a back-to-back basis. Exhibitions on separate channels of the STE Pay Television Services shall count as separate Exhibition Days. The following shall not be counted as incremental Exhibition Days:
i) Exhibition of a Picture on different time zone feeds of the same channel of an STE Pay Television Service, and, provided the following are Mirror Services of each other, exhibition of a Picture in different formats (e.g., digital and analog, English and Spanish, standard and high-definition) on the STE Pay Television Service. “Mirror Service” shall mean channels on a Pay Television Service with substantially identical programming schedules (e.g., HBO Latino).
ii) Exhibition of a Picture on MOVIEplex, so long as MOVIEplex continues to be programmed and operated in substantially the same manner as it is as of the Amendment Date (i.e., a channel devoted to repeating the programming schedule of various channels on the STE Pay Television Services); or
iii) Viewings on a Subscription-On-Demand basis.
q) “Feature-Length” means a running time of not less than 75 minutes, inclusive of credits.
r) “Fiber” means delivery of Internet service via passive optical network (PON) over fiber to the premises (FTTP) (as it is commonly understood as of the Amendment Date) or fiber to the node (FTTN) (as it is commonly understood as of the Amendment Date); provided, however that FTTN requires the node to be within 2,000 to 3,000 feet of the home on average.
s) “Film Rentals” shall mean all sums billed and received by, owing to or credited to the account of the theatrical distributor from its exploitation of the Picture in the Territory as tabulated periodically on the theatrical distributor’s regular domestic film rental report during the period commencing on such Picture’s Initial Theatrical Release and continuing until the first anniversary of such Picture’s Initial Theatrical Release (the “Film Rentals Measurement Period”); provided, that with respect to any amounts billed for which Licensor accepts a settlement of less than full payment, the settlement amounts actually accepted by Licensor, rather than the amounts originally billed, shall constitute “Film Rentals” for purposes of this provision. Film Rentals shall include all monies due from the exploitation of the Picture via direct projection means, regardless of whether such direct projection involves physical print materials or Digital Cinema (but specifically excluding Home Theater, Home Video and Television); provided, that, with respect to all exhibitions on a “four wall” basis, all box office admission amounts received by the theatrical distributor shall be included in “Film Rentals” and all costs of operating such theater which are paid for or assumed by the theatrical distributor in connection with its taking over of such theater for such “four wall” engagement shall be deducted from “Film Rentals” and any transaction with a Licensor Affiliate shall be on an arms-length basis. Film Rentals shall not include any monies (A) owed to, retained by or paid to a theatrical exhibitor, other than monies otherwise payable to the theatrical distributor but rightfully retained by such exhibitor for co-op advertising incurred and actually spent on behalf of such theatrical distributor; (B) received for Television broadcast, including but not limited to, Home Theater, Pay-Per-View, Video-On-Demand, free Television, Pay Television or subscription Television, Sell Through Electronic Video or Internet transmission; (C) attributable to any sales, admission or similar taxes or governmental fees deriving from or otherwise imposed upon Licensor’s use of the Picture or its positive prints thereof; (D) received from Non-Theatrical Exhibition; (E) received from Licensor’s exploitation of subsidiary rights from the Picture, such as (without being exhaustive) merchandising, music, music publishing, publishing, soundtrack and recording rights and (F) earned and retained from Licensor’s exploitation of the Picture after the Film Rentals Measurement Period.
t) “General Theatrical Release” of a Picture shall mean the first day on which the Picture has been released cumulatively on 100 or more screens within the Territory. Test and marketing previews and so-called “sneak” previews, free and/or charitable screenings, private, limited screenings and releases made on no more screens and for no longer than required in order to comply with Academy Award qualification rules shall not be taken into account in determining whether a General Theatrical Release has occurred, regardless of whether an admission fee is charged.
u) “Home Theater” shall mean the transmission of a single motion picture transmitted by Television by either VOD or PPV, which PPV or VOD transmission occurs (i) from as early as 4 weeks prior to the Initial Theatrical Release for such motion picture until as late as the conclusion of the 4th week after Initial Theatrical Release for such motion picture for a retail price equal to at least 300% of the Average Theatrical Admissions (as defined below), or (ii) during a 60-day period that begins at any time between the day after the conclusion of the 4th week after Initial Theatrical Release for such motion picture and the Initial Home Video Release of such motion picture for a retail price equal to at least 200% of the Average Theatrical Admissions. For purposes hereof, "Average Theatrical Admissions" means the average non-discounted retail price of theatrical admissions during the first week of theatrical exhibition of first-run motion pictures in New York City, Los Angeles, Providence, RI, Atlanta, Dallas, Detroit, Denver, Greensboro, NC, Fresno, CA and Spokane, WA (as measured as of January 15 of the Year in which occurs the earlier of such motion picture’s Initial Theatrical Release or such picture’s Initial Pay-Per-View Release or Initial Video-On-Demand Release).
v) “Home Video” shall mean the exploitation of a motion picture embodied in a Physical Medium that is rented or sold for the sole purpose of private viewing where no admission fee is charged with respect to such viewing. In addition, for the purposes of this Amended & Restated Amendment, Home Video shall expressly include Sell-Through Electronic Video, Manufacture-On-Demand, and In-Store Digital Download.
w) “Initial Home Video Release” of a Picture shall mean the first day of its initial Home Video release to the general public within the Territory, but specifically excluding (i) any releases of a Home Video product embodying a Picture and bundled with or embedded in a hardware product only to the extent such products are bundled with hardware branded with a Licensor Affiliate brand and such hardware has a retail price of at least $100 per unit and (ii) Limited Home Video Releases; provided, however, that if any such release of a Picture is made greater than 30 days prior to the applicable Initial Home Video Release of such Picture, then the date of such release shall count as the Initial Home Video Release with respect to such Picture notwithstanding the above exceptions.
x) “Initial Pay-Per-View Release” of a Picture shall mean the first day of its initial residential Pay-Per-View release to the general public within the Territory.
y) “Initial Theatrical Release” of a Picture shall mean the first day of its initial theatrical release anywhere within the Territory, but specifically excluding film festivals, test and marketing previews, so-called “sneak” previews, free and/or charitable screenings, private, limited screenings, and releases made on no more screens and for no longer than required in order to comply with Academy Award qualification rules, regardless of whether an admission fee is charged.
z) “Initial Video-On-Demand Release” of a Picture shall mean the first day of its initial residential Video-On-Demand release to the general public within the Territory.
aa) “In-Store Digital Download” shall mean the transmission or distribution of a motion picture for which a transaction charge is made to the customer for the privilege of downloading the particular motion picture on a per-transaction basis by any means in any intangible, digital or electronic form now known or hereafter devised from an apparatus in a fixed location outside of a customer’s residence (e.g., a kiosk in a retail store), whether such motion picture is stored in the apparatus or delivered to the apparatus from an off-site server, to any Storage Device. For purposes hereof, In-Store Digital Download shall be deemed to be included in the definition of Home Video. For the avoidance of doubt, In-Store Digital Download shall not include operating on a subscription basis for which a periodic fee is charged until the end of the First License Period for a Picture; provided, however, that two-for-one discounts, bundled or installment sales shall not constitute operating on a subscription basis.
ab) “Internet” shall mean the non-licensed, open access, open to the general public (as opposed to an intranet), data delivery network or networks for point-to-point or point-to-multipoint transfer of digital information (including but not limited to video, audio and text) using open protocols (e.g., TCP or IP), wired or wireless, to any device capable of accommodating open protocol, including TV’s, PC’s, set-top boxes and other Internet-enabled devices.
ac) “Internet Subscriber” shall mean each consumer that subscribes to or is authorized to access an STE Service delivered via the Internet (regardless of technology used), whether on an a la carte or bundled basis. For clarity, IPTV is not the Internet and a consumer that subscribes to an STE Service delivered solely via IPTV (and not the Internet) shall not be an Internet Subscriber.
ad) “IPTV” shall mean all forms of delivery of basic cable programming to subscribers over a closed system or other form of private network (and not over the publicly available Internet) employing open protocols (e.g., TCP/IP technology) and which are sourced by the same network operator that owns or directly controls the "Final Mile" to the consumer's premises. Examples of IPTV providers include Verizon’s Fios service and AT&T’s U-verse service.
ae) “License Period” for each Picture shall mean the First License Period and Second License Period of such Picture, collectively, as set forth in Section 3 below.
af) “Licensor Affiliate” means Sony Corporation and each present or future subsidiary thereof other than Licensor.
ag) “Limited Home Video Release” of a Picture shall mean limited releases of Home Video product (other than DVD, Blu-ray and Sell-Through Electronic Video) by Licensor on a format or formats that collectively generates for Licensor in the Territory net revenues in the Year prior to the release of no more than an amount equal to 20% of total net revenues generated for Licensor in such prior Year in the Territory for DVD, Blu-ray and Sell-Through Electronic Video distribution, where “net revenues” mean gross revenues less returns.
ah) “Live Event Program” means a recorded live event (i.e., concerts, stage plays, musicals, dance performances and sporting events), but not including any motion picture adaptations of, or motion pictures based on, the foregoing events. For clarity, any of the events listed above may still be Qualifying Films hereunder provided that they are not recorded live, but rather are dramatizations or documentaries pertaining to the subject matter thereof.
ai) “Major Studio” shall mean any of the following entities: (i) Warner Bros., Paramount Pictures Corporation, Twentieth Century Fox Film Corp., Sony Pictures Entertainment Inc., Walt Disney Company, Universal Studios, Inc., Dreamworks, and Metro-Goldwyn-Mayer, Inc., and any successors thereto if operating in substantially the same manner as such entities operate as of the Amendment Date, and (ii) any future MPAA member company; provided, that with respect to any entity covered by the foregoing subclause (ii) (and not subclause (i) above) (A) no such entity shall be considered a “Major Studio” unless in the Year prior to the Year in which the applicable determination of Major Studio is required under this Amended & Restated Amendment such entity had gross domestic box office revenues of at least $250 million but, (B) with respect to any such entity that is newly created, such entity shall qualify for “Major Studio” status hereunder (even if it doesn’t otherwise qualify under the foregoing subclause (A)) during the calendar year in which it commences operations and the calendar year following immediately thereafter, so long as such entity is party to an Output Agreement with any of STE, HBO or Showtime.
aj) “Manufacture-On-Demand” means a method of distributing video programming on a Physical Medium embodying such video programming whereby such Physical Medium is manufactured upon a customer’s order and purchase of such Physical Medium, and then delivered either to the customer directly or to a retailer for in-store pick-up by the customer. For purposes hereof, Manufacture-On-Demand shall be deemed to be included in the definition of Home Video.
ak) “Minimum Requirements” with respect to a motion picture means that such motion picture:
i) has P&A Expenses equal to or in excess of $250,000 and a theatrical release on no less than 20 screens at its widest point of theatrical release in the Territory; or
ii) has Negative Costs equal to or in excess of $4,500,000.
al) “Multiplier” means, with respect to each percentage decrease specified in the left hand column below, the amount corresponding to such percentage decrease set forth in the right hand column below.
% Decrease from the applicable SLP Multiplier
Greater than 0 and less than or equal to 10 1.75
Greater than 10 and less than or equal to 20 2.5
Greater than 20 and less than or equal to 50 3.25
Greater than 50 and less than or equal to 80 4
Greater than 80 and less than or equal to 100 10
Notwithstanding anything to the contrary herein, an Internet Subscriber that would otherwise be subject to a Multiplier pursuant to the terms herein shall not be subject to such Multiplier (and shall only count as 1 Internet Subscriber towards the Internet Cap) if (i) such Internet Subscriber is obtaining the STE Service in question at the price that triggered the applicability of the Multiplier from any Licensor Affiliate so long as it remains a Licensor Affiliate or (ii) the licensee of STE that offers the price that triggered the applicability of the Multiplier is only offered to a non-current customer of a licensee for a Promotion which is offered for no more than the initial 3 months of such customer’s access to the STE SOD Services and the price to the consumer after the promotional period is at least as much as the amounts set forth in the relevant SLP.
am) “Negative Cost(s)” means, with respect to a motion picture, the aggregate sum of all direct costs and expenses paid or incurred by any person in connection with the development, preparation, production, post-production, and completion and delivery of such motion picture, and shall specifically exclude bond fees, financing costs, interest and overhead.
an) “Negative Option Basis” shall mean a fee arrangement whereby a consumer is charged alone, or in any combination, a service charge, a separate charge or other charge but is entitled to a reduction or series of reductions thereto on a program-by-program basis or service-by-service basis, as the case may be, in the event such consumer affirmatively notifies the distributor of such consumer’s determination not to receive or have available for reception such particular program or such particular service, as the case may be.
ao) “New Media” shall mean any means of delivery (including delivery over mobile/cellular networks) other than cable, satellite, IPTV or the Internet.
ap) “Non-Theatrical Exhibition” shall mean the exhibition of a motion picture in educational and institutional facilities, airlines in flight, oil rigs, public transportation, corporate locations, ships-at-sea, U.S. military bases, nursing homes, hospitals, hotels, motels, prisons and other similar locations or forms of transportation, regardless of the technology used for, and the origin of, such delivery, in public, common areas of such locations and forms of transportation and in non-public, non-common areas of such locations and forms of transportation. Notwithstanding the foregoing, the exhibition of motion pictures at college campuses and dormitories by Swank in the manner that it is delivering such exhibition as of the Amendment Date (i.e., direct to dormitory rooms and college apartments via closed-circuit delivery for a subscription fee included in the room rate) shall be considered to be included in the definition of Non-Theatrical Exhibition for so long as at least 2 Major Studios (which may not include Licensor, and one of which must be Walt Disney Company, Universal Studios, Warner Bros. or Twentieth Century Fox Film Corp.) are licensing first run theatrical motion pictures to such Non-Theatrical service.
aq) “Open Internet A La Carte SLP” shall mean (i) $5.99 with respect to the period commencing on the Amendment Date and ending December 31, 2012, and (ii) $7.99 with respect to the period commencing January 1, 2013 and ending on the last day of the last License Period hereunder.
ar) “Open Internet A La Carte Package SLP” shall mean the greater of (i) the Open Internet A La Carte SLP then in effect plus the monthly price of an applicable Entry-Level Video Package over which the STE Service is offered and (ii) $10.98 with respect to the period commencing on the Amendment Date and ending December 31, 2012 and $12.98 with respect to the period commencing January 1, 2013 and ending on the last day of the last License Period.
as) “Open Internet Bundle SLP” shall mean (i) $13.99 with respect to the period commencing on the Amendment Date and ending December 31, 2012, and (ii) $16.99 with respect to the period commencing January 1, 2013 and ending on the last day of the last License Period hereunder.
at) “Open Internet Service” shall mean any service or website that offers an STE Service over the Internet other than such service or website that is owned (at least 50% of the equity), controlled or operated by a telephone company offering DSL Internet service and access to such service or website is limited solely to such telephone company’s DSL Internet service customers.
au) “Open Internet Subscriber” shall mean each consumer that subscribes to an Open Internet Service, whether on an a la carte or bundled basis other than TV ISP Exception Subscribers.
av) “P&A Expenses” means, with respect to a motion picture, all costs and expenses paid or incurred by any person in connection with the theatrical release of such motion picture in the Territory, including, without limitation, the costs of creating and implementing a marketing campaign for such motion picture, costs of advertising such motion picture in various media, costs of printing and distributing promotional materials, costs of manufacturing, packaging, shipping, insuring, delivering and storing release prints and other film and sound materials and costs relating to Digital Cinema (e.g., virtual print fees and electronic transmission costs), and shall specifically exclude bond fees, financing costs, interest and overhead.
aw) “Pay-Per-View” or “PPV” shall mean the transmission of a single motion picture transmitted by means of Television, on a linear pre-scheduled basis where the start time is scheduled by the distributor and not by the consumer and for which a transactional charge is made to the consumer for the privilege of viewing the particular motion picture on a per-exhibition basis. PPV may be offered on a multiple channel basis with varying scheduling patterns and may offer multiple exhibitions of a single motion picture over a period of time not to exceed 72 hours, but not on a Negative Option Basis. In addition, special limited promotional offers (including two-for-one discounts, give-away coupons, free buys, extended viewing opportunities and the like) shall nevertheless constitute PPV; provided, that no such offer may be made available to any individual consumer for more than 60 days per year. For this purpose, PPV does not include operating on a subscription basis and, therefore, shall not include any service for which a consumer is charged a “club” or other similar “access” fee (which shall not, for the purposes of this definition, be deemed to include any basic cable, digital/data plan or Internet access fee) solely for the privilege of being able to view motion pictures via PPV, unless such “club” or similar access fee is a nominal sum (i.e., an annual fee not to exceed $10) that is non-creditable against any per exhibition consumer transaction fees and in all events is a charge that is more than merely a fee to gain access to the PPV motion pictures alone. However, PPV may include a service where a consumer is required to pay an equipment rental fee or to purchase equipment in order to obtain such service, provided, that no part of such equipment rental fee or purchase price, as applicable, is credited or paid directly or indirectly to Licensor, and provided further that Licensor, when acting as a retailer and not a wholesaler, may receive an equipment rental fee or purchase price, as applicable, and such equipment rental fee or purchase price shall not count as a “club” or similar access fee, if a majority of Major Studios, when acting as a retailer and not a wholesaler, are also receiving an equipment rental fee or purchase price. For purposes of clarification, Licensor shall not be deemed to have “indirectly” received an equipment rental fee or purchase price if such equipment rental fee or purchase price is received by a Licensor Affiliate that is not an SPE Group Member, including without limitation Sony Corporation of America and Sony Electronics. PPV shall not include transmissions on a Sell-Through Electronic Video basis or exhibitions via Digital Cinema. Home Theater is a form of PPV (or VOD) but for the pricing and timing restrictions thereon. For purposes of clarification, (i) the 72 hour period shall commence at the time the motion picture is exhibited for more than five continuous minutes and (ii) if the recipient is able to make a copy of the applicable PPV transmission of the motion picture and does so by taking independent action in addition to ordering the applicable PPV transmission. The fact that such recipient may be able to view such copy beyond the expiration of the aforesaid 72 hour period shall not cause such mode of exhibition to fall outside this definition of “PPV.”
ax) “Pay Television” shall mean transmissions or exhibitions by any form of Television (including, without limitation, the right to authorize transmission by third parties, including, without limitation, carriers such as cable systems, master antenna systems, direct satellite systems, IPTV systems, Internet connectivity providers and Open Internet Service providers) to subscribers of a Programming Service upon payment by such subscribers of a periodic subscription fee charged on a not less than monthly subscription basis except as set forth in Section 16(c) and Section 2(a)(iii). All such Pay Television channels or services shall be (i) encrypted at all times (except as set forth in Section 16(c)), (ii) on a commercial-free, non-advertiser supported basis, (iii) offered to such subscribers for an additional charge (for a single channel or service or group of channels or services) over and above the obligatory basic cable subscription charge; provided, however, that the requirement in subclause (iii) shall not apply to transmissions or exhibitions of an STE Service over the Internet that are subject to the requirements of Sections 2(c)(ii), 2(c)(iii) or 2(c)(iv) hereof. Notwithstanding the foregoing, the parties agree that the tier of programming over which STE Pay Television services are commonly delivered via satellite and IPTV providers as of the Amendment Date (e.g, “Essentials from Fios TV” from Verizon and the “Choice package” from DirecTV) shall be sufficient to satisfy the “basic cable” requirement set forth in subclause (iii) above with respect to those providers. For purposes of clarification, “home-shopping” segments and “infomercials” (as such terms are commonly understood as of the Amendment Date) shall each be considered advertiser-supported activities, but (A) billboards and signboards within a given program (which may include the name and/or logo of a third-party commercial entity and/or product), provided, that ads in such billboards and signboards are not served via dynamic insertion, and (B) product placements that are contained in any program (e.g., clothing worn by sports figures) shall not be considered advertiser-supported activities.
ay) “Physical Medium” means a tangible recording or storage medium now known or hereafter devised, including videotape, video disks, video cassette, laser video disc, standard, HD and Blu-ray DVD, hard drive, portable media devices, flash drives, memory sticks, floppy disks, zip drives and portable storage devices.
az) “Programming Service” shall mean a linear, streamed, regularly scheduled Television programming service predominately delivered via broadcast, cable or satellite transmission; provided, however, that the number of Internet Subscribers shall not be considered for purposes of this definition and the only limitation on the number of Internet Subscribers shall be as set forth in Section 2(c)(vi) below.
ba) “Promotion” shall mean, with respect to an STE Service, a promotion that meets all of the following qualifications: (i) a promotion that is, and is clearly communicated as being, targeted at non-current customers and upgrades wherein the current customers do not have such STE Service prior to the upgrade, (ii) a promotion that is, and is clearly communicated as being, available for a limited time only, the end date of which shall be clearly communicated and (iii) the full price that such STE Service shall be reset to after the promotion is over is clearly communicated.
bb) “Provider DSL Index Price” shall mean the weighted average price paid by all subscribers for any given provider of DSL in the US for the DSL Base Tier or any higher tier video quality DSL (with quality at least equal to the quality of the DSL Base Tier).
bc) “Qualifying Films” means all Feature-Length motion pictures (other than Live Event Programs), rated “R” or less restrictive that have their Initial Theatrical Release during the Term; provided, that, other than any Home Theater exhibitions, no general public commercial exhibition of such motion pictures has occurred in the Territory prior to such motion pictures’ respective Initial Theatrical Releases. For the purposes of determining whether a motion picture is eligible to be a Qualifying Film hereunder, if the MPAA’s (of any successor entity’s) rating system is generally abandoned and no equivalent rating system exists which is generally accepted by STE and the Major Studios, then Licensor and STE shall negotiate a reasonable means of determining the eligibility of motion pictures with respect to the content thereof, based on criteria similar to the MPAA system existing as of the Amendment Date.
bd) “Sell-Through Electronic Video” means the electronic transmission of a digital file embodying a motion picture for which (as a general commercial matter) a per-transaction charge is made to the consumer for the purchase or rental of such digital file, and that is authorized for retention by the recipient by means of a Storage Device for a period of more than 72 hours commencing at the time the motion picture is exhibited for more than five continuous minutes (and not at the time the file is received by the recipient), and which shall be deemed to be included within the definition of Home Video for the purposes hereof. The parties acknowledge that Sell-Through Electronic Video may be used by consumers for the purpose of “library-building,” in that a consumer may permanently store a motion picture received by means of Sell-Through Electronic Video on Storage Devices. For the avoidance of doubt, Sell-Through Electronic Video shall not include operating on a subscription basis for which a periodic fee is charged, it being agreed that two-for-one discounts, bundled or installment sales shall not constitute operating on a subscription basis.
be) “SLP” shall mean a suggested list price and, for the purposes of this Amended & Restated Amendment, shall include any of Open Internet A La Carte SLP, Open Internet Bundle SLP, Open Internet A La Carte Package SLP, DSL Base Tier SLP, DSL A La Carte Package SLP and DSL Bundle SLP.
bf) “Sony Rent-A-System Film” means a Qualifying Film so designated by Licensor that is Theatrically Released By an SPE Group Member, satisfies at least one of the Minimum Requirements, and that does not satisfy any of the Additional Elements. Notwithstanding anything to the contrary herein, all Sony-Rent-A-System Films shall be deemed to be “B” Films hereunder (notwithstanding the failure of any such films to satisfy an Additional Element).
bg) “SPC Film” means any Qualifying Film that is so designated by Licensor, satisfies at least one Additional Element and at least one of the Minimum Requirements, and is Theatrically Released By an SPE Group Member under the label of Sony Pictures Classics (or any successor to the theatrical distribution operations thereof) or similar “art house” theatrical releasing labels of any SPE Group Member.
bh) “SPE Group Member” means Licensor and any entity for which Licensor, either directly or through an unbroken chain of Controlled Entities:
i) owns at least 50% of the capital stock or similar equity interests of such entity;
ii) owns or has sufficient interest in any class or classes of securities or other equity interests, individually or collectively, to possess the right, or through any contractual arrangement possesses the right, to elect, designate or remove a majority of such entity’s directors or like governing officers, except in the event such election, designation or removal rights are exercisable as a result of (A) the bankruptcy or insolvency of such entity or (B) the default provisions of the governing instrument evidencing such securities or equity interests or the default provisions of the agreement(s) giving rise to the aforesaid contractual arrangement (but this exception (B) shall apply only during the 18 month period following the default event giving rise to such election, designation or removal right and any continuous period thereafter during which any SPE Group Member is actively attempting to dispose of its interest in such entity).
iii) For purposes hereof, an entity shall be considered a “Controlled Entity” of another entity (the “Controlling Entity”) only if such Controlling Entity owns or has sufficient interest in any class or classes of securities or other equity interests, individually or collectively, to possess the right, or through any contractual arrangement possesses the right, to elect, designate or remove a majority of the Controlled Entity’s directors or like governing officers, except in the event such election, designation or removal rights are exercisable as a result of (A) the bankruptcy or insolvency of the Controlled Entity or (B) the default provisions of the governing instrument evidencing such securities or equity interests or the default provisions of the agreement(s) giving rise to the aforesaid contractual arrangement (but this exception (B) shall apply only during the 18 month period following the default event giving rise to such election, designation or removal right and any continuous period thereafter during which the Controlling Entity is actively attempting to dispose of its interest in such Controlled Entity).
bi) “STE Pay Television Services” shall mean any of the Pay Television services, without regard to the number of channels of such services, that are operated or managed by STE and for which STE owns at least 50% of the equity or other ownership interest of such service, each of which shall be offered on a not less than monthly subscription basis (other than as specified in Sections 2(a)(iii) and 16(c)), which shall be subject to the limitations set forth in Section 1(jjj), 2(c) and 2(d) below, and which shall be available solely to subscribers in the Territory.
bj) “STE Services” shall mean the STE Pay Television Services and the STE SOD Services, either singly or collectively. Except as otherwise provided above, no STE Service shall be permitted to direct viewers to, or include “click-through” options directly to, an Internet web-site or similar Internet or intranet location other than: (i) an Internet web-site or similar Internet or intranet location of STE or any controlled affiliate of STE, provided, that such Internet web-site or similar Internet or intranet location is “branded” and operated by STE or such controlled affiliate and is predominantly focused on STE’s or such controlled affiliate’s owned and operated Pay Television businesses and provided further that such STE Internet web-site or similar Internet or intranet location may be branded or labeled with a reference to Liberty Media Corporation (“LMC”) or the then-current parent company of STE; (ii) a Licensor-approved Internet web-site or similar Internet or intranet location; (iii) the Internet web-site or similar Internet or intranet location for a particular program or program provider, to the extent that the particular program (as delivered to STE by the applicable provider) itself contains the applicable reference (e.g., if STE exhibits a motion picture, such motion picture’s end credits can contain a reference to an Internet web-site for such motion picture or for such motion picture’s provider); and (iv) the Internet web-site or similar Internet or intranet location for a particular third party program or a third party program provider, to the extent that a making-of or similar promotional content therefor (as delivered to STE by the applicable provider) or any promotion created by any party for such motion picture itself contains the applicable reference (e.g., if STE exhibits a “making of” feature or other promotion regarding a particular third party’s motion picture, such “making of’ can contain a reference to an Internet web-site for such motion picture or for such third party).
bk) “STE SOD Service” shall mean any SOD service that is operated or managed by STE and for which STE owns at least 50% of the equity or other ownership interest of such service, which shall be subject to the limitations set forth in Sections 1(jjj), 2(c) and 2(d) and which shall be available solely to subscribers in the Territory. The STE SOD Services (except those delivered via the Internet) shall be an enhancement to the STE Pay Television Services.
bl) “Storage Device” means any storage technology as may be in use from time-to-time from and after the Amendment Date, including without limitation Physical Medium and intangible storage technologies such as remote DVRs and “sky lockers.”
bm) “Subscription-On-Demand” or “SOD” means a method of viewing motion pictures and other programming with or without DVD functionality at a start time selected by the viewer. An SOD service is not considered Pay Television hereunder, but must otherwise itself satisfy all of the requirements for a Pay Television channel (e.g., commercial-free, non-advertiser supported), other than the requirement that a Pay Television channel be a linear, regularly scheduled service and, provided that the SOD service is delivered over the Internet, the requirement that it be made available to a subscriber of a Programming Service. No “per transaction” or “per exhibition” charge may be made to subscribers as a condition of receiving and/or viewing any particular programming by means of SOD, provided, that an SOD service that is not offered as an enhancement to a Pay Television service for which the viewer is already paying a periodic subscription fee charged no more frequently than monthly shall be required to charge a periodic subscription fee no more frequently than monthly for such SOD service (provided, that in no event shall an SOD service be made available on a Negative Option Basis).
bn) “Television” shall mean all forms of transmission of video signals from a distance by any means now known or hereafter devised, including without limitation Internet and New Media, to a consumer in a home or other non-public venue, or to a consumer’s personal portable device or Storage Device in the ordinary course of viewing, for personal use. Television shall not include any form of Home Video (including, without limitation, Sell-Through Electronic Video, In-Store Digital Download and Manufacture-On-Demand), Digital Cinema or Non-Theatrical Exhibition hereunder.
bo) “Territory” shall mean the United States, and its territories, possessions, trusteeships and instrumentalities, including Puerto Rico, Guam and U.S. Virgin Islands, and Bermuda; provided, that Licensor shall use good faith efforts to obtain Pay Television rights in the Bahamas (whether on an exclusive or non-exclusive basis), and provided further, the occasional failure of Licensor (or any SPE Group Member) to obtain Pay Television rights in Bermuda for any Pictures that are not produced by an SPE Group Member shall not be deemed a breach hereunder.
bp) “Theatrically Released By an SPE Group Member” with respect to a motion picture, means that such motion picture was theatrically released in the Territory under any theatrical releasing label of any SPE Group Member and that an SPE Group Member did any 3 or more of the following in connection with such release:
i) Booked theaters in the U.S. for the theatrical exhibitions of such motion picture.
ii) Selected the U.S. release date(s) for the theatrical exhibitions of such motion picture.
iii) Controlled and had primary responsibility for collecting 100% of the Film Rentals for an SPE Group Member in connection with the U.S. theatrical exhibitions of such motion picture.
iv) Controlled and had final approval over marketing plan(s) with respect to the U.S. theatrical release of such motion picture.
v) Controlled and had primary responsibility for ad buys in connection with the U.S. theatrical release of such motion picture.
Without limiting the foregoing, an SPE Group Member may engage third parties to perform the activities set forth in subclauses (iii), (iv) and (v) so long as such SPE Group Member maintains control over such activities.
bq) “Third Party Rent-A-System Film” means a Qualifying Film that is so designated by Licensor and that satisfies at least one of the Minimum Requirements, is not Theatrically Released By an SPE Group Member and does not satisfy any of the Additional Elements. Notwithstanding anything to the contrary herein, all Third Party Rent-A-System Films shall be deemed to be a “B” Films hereunder (notwithstanding the failure of any such films to satisfy an Additional Element and be Theatrically Released By an SPE Group Member).
br) “TV ISP Exception Subscriber” shall mean a subscriber to a TV ISP Open Internet Service that receives access to such service by means of such subscriber’s subscription to the cable modem Internet service, satellite delivered Internet service or Internet service via Fiber, as the case may be, from the TV ISP that owns, controls or operates such TV ISP Open Internet Service.
bs) “TV ISP Open Internet Service” shall mean any Open Internet Service owned (at least 50% of the equity), controlled or operated by a TV ISP, a supermajority of the subscribers of which obtain TV ISP Internet Services from such TV ISP.
bt) “US DSL Index Price” shall mean the weighted average price paid by all subscribers for the DSL Base Tier or any higher tier video quality DSL (with quality at least equal to the quality of the DSL Base Tier) for all providers of DSL across the United States.
bu) “Video-On-Demand” or “VOD” shall mean the transmission of a single motion picture transmitted via any form of Television where the start time is scheduled by the consumer and not the distributor, where the consumer can view the motion picture over a period of time not to exceed 72 hours and for which a transactional charge is made to the consumer for the privilege of viewing the particular motion picture on a per-exhibition basis, but not on a Negative Option Basis. In addition, special limited promotional offers (including two-for-one discounts, give-away coupons, free buys, extended viewing opportunities and the like) shall nevertheless constitute VOD; provided, that no such offer may be made available to any individual consumer for more than 60 days per year. For this purpose, VOD does not include operating on a subscription basis and, therefore, shall not include any service for which a consumer is charged a “club” or other similar “access” fee (which shall not, for the purposes of this definition, be deemed to include any basic cable, digital/data plan or Internet access fee) solely for the privilege of being able to view motion pictures via VOD, unless such “club” or similar access fee is a nominal sum (i.e., an annual fee not to exceed $10) that is non-creditable against any per exhibition consumer transaction fees and in all events is a charge that is more than merely a fee to gain access to VOD motion pictures alone. However, VOD may include a service where a consumer is required to pay an equipment rental fee or to purchase equipment in order to obtain such service, provided, that no part of such equipment rental fee or purchase price, as applicable, is credited or paid directly or indirectly to Licensor, and provided further that Licensor, when acting as a retailer and not a wholesaler, may receive an equipment rental fee or purchase price, as applicable, and such equipment rental fee or purchase price shall not count as a “club” or similar access fee, if a majority of Major Studios, when acting as a retailer and not a wholesaler, are also receiving an equipment rental fee or purchase price. For purposes of clarification, Licensor shall not be deemed to have “indirectly” received an equipment rental fee if such equipment rental fee or purchase price is received by a Licensor Affiliate that is not an SPE Group Member, including without limitation Sony Corporation of America and Sony Electronics. VOD shall not include transmissions on a Sell-Through Electronic Video basis. Home Theater is a form of VOD (or PPV) but for the pricing and timing restrictions thereon. For purposes of clarification, (i) the 72 hour period shall commence at the time the motion picture is exhibited for more than five continuous minutes (and not at the time the motion picture is received by the recipient) and (ii) if the recipient is able to make a copy of the applicable VOD transmission of the motion picture and does so by taking independent action in addition to ordering the applicable VOD transmission, the fact that such recipient may be able to view such copy beyond the expiration of the aforesaid 72 hour period shall not cause such mode of exhibition to fall outside this definition of “VOD”.
bv) “Year” shall mean calendar year unless otherwise specified.
bw) Other Definitions. The following terms will have the meaning set forth in the Section indicated:
|Term |Section |
|Account |Schedule U |
|Adjusted License Fee |4(e)(i) |
|Affiliate Technology |2(b)(i) |
|Amended & Restated Amendment |Preamble |
|Amended & Restated Amendment Date |Preamble |
|Amendment |Recitals |
|Amendment Date |Recitals |
|Animated/Restricted Picture |4(e)(ii) |
|APS |Exhibit C |
|Arbitrator Determined Weighted Average Retail Price(s) |2(b)(ii) |
|Approved Licensor Auditor |28(a)(i) |
|Average Theatrical Admissions |1(u) |
|Content Protection System |Exhibit C |
|Content Usage Model |Exhibit C |
|Controlled Entity |1(hhh) |
|Controlling Entity |1(hhh) |
|Copy Control Information or CCI |16(b)(i)(A) |
|CSPs |Exhibit C |
|Delayed Release Picture |4(e)(i) |
|Disney |2(c)(vii)(B) |
|DTCP |Exhibit C |
|DVI |Exhibit C |
|Eligible Production Company |4(k) |
|Encore Channel |2(d)(i) |
|Excess “A” Films |4(a)(i) |
|Excess “B” Films |4(a)(i) |
|Excess SPC Films |4(a)(i) |
|Film Rentals Measurement Period |1(s) |
|First License Period |3(a)(i) |
|First PPV/VOD Window |2(b)(ii)(A) |
|FN/FR Film |4(a)(ii) |
|Free Preview |16(c)(i) |
|HDCP |Exhibit C |
|High Definition |Exhibit C |
|Holiday Themed Picture |3(a)(i) |
|Internet Cap |2(c)(vi) |
|Internet License Fees |Exhibit A |
|Laboratory |Exhibit B |
|Later Acquired Significant Service |2(f) |
|License Fees |6(a) |
|Licensor |Preamble |
|Licensor MFN Provisions |28(a)(i) |
|LMC |1(jjj) |
|Making Of |20(a)(i) |
|Master |Exhibit B |
|Minimum Output Number of Pictures |4(k) |
|Mirror Service |1(p)(i) |
|MFN Terms |2(c)(vii)(C) |
|Netflix Amount |Exhibit A |
|Netflix Expiration Date |2(c)(vii)(C) |
|Netflix Released Claims |Exhibit A |
|New Version |9 |
|Objectionable Restriction |4(g) |
|Output Agreement |2(b)(v)(B) |
|Picture; Pictures |4 |
|Playback Clients |Schedule U |
|Pre-Approved DRM |Exhibit C |
|Rate Card |Exhibit A |
|Reinstatement Notice |16(b)(ii)(B) |
|Re-Set Minimum Retail Figures |2(b)(ii) |
|Restricted Materials |9 |
|Right of First Negotiation and First Refusal |4(a)(ii) |
|SCA |Recitals |
|Second License Period |3(b) |
|Second PPV/VOD Window |2(b)(ii)(C) |
|Section 4(g) More Favorable Terms |4(g)(iii) |
|Side Loading |Exhibit C |
|Standard Definition |Exhibit C |
|Starz Channel |2(d)(i) |
|STE |Preamble |
|Studio Industry |16(b)(i)(A)(I) |
|Suspension |16(b)(ii)(B) |
|Suspension Notice |16(b)(ii)(B) |
|Term |5 |
|Third Party Offer |4(a)(ii) |
|TV ISP’s |2(c)(ii) |
|Video Reproductions |Exhibit B |
|VONGO Letter Agreement |Recitals |
|Withdrawal Causes |15 |
2. License. Licensor hereby licenses the Pictures to STE under copyright for exhibition on the STE Services in the Territory during the License Periods on the terms and conditions contained herein. STE agrees to pay Licensor the License Fees specified in Section 6 herein for each Picture, whether or not such Picture is exhibited.
a) Rights and Limitations.
i) STE shall have the right to deliver the STE Services by any means by which Pay Television can be delivered, for private use in non-public venues and to a consumer’s personal portable device or, with respect to an STE SOD Service only, any Storage Device within the Territory, subject to each of the provisions of this Amended & Restated Amendment, including without limitation Sections 14 and 16 hereof. STE’s right to deliver Pictures over the Internet or New Media shall be conditioned upon STE using security provisions that are equally effective and equally robust as those used by Licensor or any other permitted exhibitor in delivering Pictures or comparable (in terms of age and color/black and white) theatrical motion pictures over the Internet (including, without limitation, copy protection technology as required pursuant to Section 16); provided, however, STE shall be required to comply, at a minimum, with the other provisions set forth in Section 16.
ii) Additionally, STE shall be authorized by Licensor to exhibit or license the exhibition of the Pictures only as part of the STE Services on any and all systems available hereunder to STE or utilized by other Pay Television services in the Territory which service temporary or other transient living accommodations including hotels and motels, military bases, prisons, ships, dormitories and the like, Ronald McDonald Houses, oil rigs, and hospitals, provided, that this license does not authorize exhibition in common or public areas.
iii) In addition to sales on a not less than monthly subscription basis, STE shall be authorized to sell and to allow affiliated delivery systems to sell the STE Services (including STE SOD Services) on a pay-per-stay basis in hotels, motels, resorts, time-shares and other temporary lodging facilities only, as follows: The subscriber shall have the right to purchase only the STE Services, in the same form and on the same schedule as their distribution to not less than monthly subscribers, for not less than twenty four hours of continuous service, for a fee separate and apart from fees or charges the consumer pays for other programming, products or services.
iv) The rights granted herein do not include the right of STE or its affiliates to sub-distribute, sublicense, or “white label” (i.e., provide to a third party platform that brands such services as their own; e.g., the Yahoo Store), or “power” (e.g., “Yahoo! Video Store powered by Starz” is not permitted, but “Starz Play powered by Verizon” is permitted) the Pictures without Licensor’s prior written approval. For clarity, subject to the other requirements and provisions of this Amended & Restated Amendment, STE may allow a licensee such as Netflix to offer its service on a platform (e.g. Xbox Live), but STE may not allow its licensee to subdistribute. For example, subject to the other requirements and provisions of this Amended & Restated Amendment, Netflix is permitted to offer the Netflix service (including Starz Play) on Xbox if the only Xbox users who have access to such service are the ones that have a Netflix subscription that qualifies them to obtain Starz Play. Netflix and STE are not permitted to offer Starz Play to Xbox users who can access it using only their Xbox account/credentials. For the avoidance of doubt, nothing contained herein limits STE’s ability to have a direct relationship with the third party with whom STE’s pre-existing licensee may also have a relationship; for example, STE may have its own relationship with Xbox, in addition to any relationship Netflix may have with Xbox contemporaneously. Additionally, the parties agree that engaging in a relationship with a trade organization (e.g., NCTC, NRTC) to license the STE Services to members of such trade organizations shall not be considered sub-distribution hereunder, and is expressly permitted.
b) Exclusivity and Holdbacks. Prior to and during the First License Period, and during the Second License Period of any Picture, Licensor shall not license or authorize any Television exhibition (other than on the STE Services) of such Picture or the promotion of any Television exhibition (other than promotion of exhibition on the STE Services) of such Picture to any party in the Territory; provided, however, pre-promotion of an immediately following non-Pay Television exhibition may be allowed during the final 30 days of the Second License Period. In addition to the foregoing, Licensor shall not license any Picture to, or authorize the promotion of (1) the exhibition of any Picture by, any Pay Television service exhibited in the Territory (other than STE) or (2) electronic transmission (other than In-Store Digital Download) or exhibition of an intangible format embodying a Picture on a subscription, commercial free basis until after the Second License Period, except as set forth below. Licensor shall not license or authorize the distribution of any Picture via In-Store Digital Download on a subscription basis prior to the end of the First License Period for such Picture.
i) Notwithstanding Section 2(b) above, (A) Licensor may exhibit (and authorize the exhibition of) the Pictures by PPV and VOD, and promote (and authorize the promotion of) such exhibition, in the Territory at any time other than during the License Periods, (B) during the entirety of the License Periods, Licensor may exhibit (and authorize the exhibition of) the Pictures in the Territory by PPV and VOD, but only via Internet and New Media and promote (and authorize the promotion of) such exhibition, and (C) during the last three months of the License Periods, Licensor may exhibit (and authorize the exhibition of) the Pictures in the Territory by PPV and VOD via any means and promote (and authorize the promotion of) such exhibition. However, Licensor will not exploit such Internet rights or New Media rights through HBO or Showtime (and their related web-sites) or any of their respective affiliates, subsidiaries or successors and assigns if the applicable PPV/VOD service is branded with a name that includes the “HBO”, “Showtime”, “Cinemax” and/or “The Movie Channel” name(s). Moreover, Licensor shall not be permitted to exploit such Internet rights or New Media rights through a web-site owned, operated, managed or controlled by HBO or Showtime, regardless of the name of such web-site. For purposes of clarification, the parties acknowledge that, provided Licensor’s PPV and VOD exhibitions are available on the Internet, then the fact that consumers can access such Internet exhibitions through an intranet shall not cause such exhibitions to be in violation of Licensor’s Internet rights set forth in this Section. Further, for purposes of clarification, the parties acknowledge that during the License Periods, provided that the PPV or VOD exhibition is purchased for initial delivery to a customer via the Internet or New Media delivery means, the fact that such customer can subsequently access such exhibition and cause it to be redelivered via any means of delivery (e.g., PPV or VOD exhibition is delivered initially via Internet and stored in a “sky locker” and subsequently redelivered via Internet to a Storage Device) shall not cause such exhibitions to be in violation of Licensor’s Internet or New Media rights set forth in this Section; provided, however, that during the License Periods (other than the final three months of each License Period) Licensor shall not enter into a commercial agreement with any cable, satellite or telephone company that carries an STE Service for the re-delivery of PPV and VOD programs from a “sky locker” or remote DVR to a set top box or other comparable in-home unit that a consumer may use to access the services of such cable, satellite or telephone company’s video services, including without limitation a cable or satellite enabled television, DVR, etc. (“Affiliate Technology”), but Licensor may enter into a commercial agreement with a cable, satellite or telephone company to permit sales of PPV and VOD from such company’s web site, where PPV and VOD is delivered initially via the Internet and stored in a “sky locker” or remote DVR, and is subsequently redelivered to the consumer via any other means of delivery other than Affiliate Technology, as set forth above. Licensor shall not be permitted to exploit a Picture on an “intranet” only basis during such Picture’s License Periods and Licensor acknowledges that all permitted intranet delivery in the Territory during the License Periods (regardless of whether the consumer accesses such delivery via the Internet or an intranet) shall be subject to the pricing restrictions set forth below.
ii) Licensor remains free at all times to unilaterally determine and set the license fee that Licensor receives for the Internet and New Media PPV and VOD rights. Licensor and STE, however, acknowledge the unusual nature of allowing Licensor to retain these rights during STE’s First License Period and Second License Period and the potential economic effects of that retention. As such, Licensor and STE agree that Licensor’s Internet and New Media PPV and VOD rights to the Pictures during STE’s Pay Television License Periods, and Licensor’s PPV and VOD rights by any means during the last three months of each License Period for each Picture, will be subject to Licensor receiving the following amounts per consumer transaction set forth below:
A) during the first 8 months of the First License Period (the first 9 months with respect to the up to three Pictures per release Year that have an 18 month First License Period), if Licensor is the wholesaler, not less than 75% of the weighted average wholesale price per consumer transaction which it received from third party distributor(s) for comparable (in terms of time from initial theatrical release) motion pictures during the PPV/VOD window immediately preceding STE’s First License Period, but excluding any VOD window applicable solely to VOD exhibitions that occur as part of a Home Theater exhibition (“First PPV/VOD Window”) and, if Licensor is the retailer, subject to subsection (b)(iii) below, the lower of 75% of the weighted average retail price per consumer transaction for comparable (in terms of time from initial theatrical release) motion pictures during the First PPV/VOD Window and $2.63;
B) during the second 8 months of the First License Period (the second 9 months with respect to the up to three Pictures per release Year that have an 18 month First License Period), if Licensor is the wholesaler, not less than 65% of the weighted average wholesale price per consumer transaction which it received from third party distributor(s) for comparable (in terms of time from initial theatrical release) motion pictures during the First PPV/VOD Window and, if Licensor is the retailer, subject to subsection (b)(iii) below, not less than the lower of 65% of the weighted average retail price per consumer transaction for comparable (in terms of time from initial theatrical release) motion pictures during the First PPV/VOD Window and $2.00 per consumer transaction; and
C) during the Second License Period, if Licensor is the wholesaler, not less than 75% of the weighted average wholesale price per consumer transaction which it received from third party distributor(s) for comparable (in terms of time from initial theatrical release) motion pictures during the next PPV/VOD window after the First PPV/VOD Window (“Second PPV/VOD Window”) and, if Licensor is the retailer, subject to subsection (b)(iii) below, not less than the lower of 75% of the weighted average retail price per consumer transaction for comparable (in terms of time from initial theatrical release) motion pictures during the Second PPV/VOD Window and $1.00 per consumer transaction.
Licensor shall have the burden of proof as to what the weighted average retail price or wholesale price, as applicable, is in the respective windows. For purposes of determining the weighted average wholesale or retail prices, Home Theater exhibitions, exhibitions on a special limited promotional offer basis (including two-for-one discounts, give-away coupons, free buys, extended viewing opportunities and the like), permitted club or access fees and permitted equipment rental fees or purchase price shall be excluded.
The parties acknowledge that the initial weighted average retail prices for the windows set forth in (A), (B) and (C) above are $3.50, $3.08 and $1.33, as of the Amendment Date. If, at any time during any License Period hereunder, 75% or 65%, as applicable, of the actual weighted average retail price for PPV or VOD transactions in the Territory for the windows set forth in (A), (B) and (C) above differs by more than 20% from 75% or 65%, as applicable, of the $3.50, $3.08 and $1.33 initial retail prices specified in the immediately preceding sentence, Licensor and STE shall each have the right to request binding arbitration for the purpose of resetting the weighted average retail price or the minimum per consumer transaction fees set forth in (A), (B) or (C) above to reflect such change in market conditions. In the context of any such arbitration involving transactions where Licensor is acting as the wholesaler, the sole function of the arbitrator shall be to verify the actual weighted average wholesale price for PPV or VOD transactions in the windows set forth in (A), (B) and/or (C). The first time, if ever, that 75% or 65%, as applicable, of the actual weighted average retail prices determined by the arbitrator (the “Arbitrator Determined Weighted Average Retail Price(s)”) differs by more than 20% from 75% or 65%, as applicable, of the $3.50, $3.08 and $1.33 retail prices specified above, the $2.63, $2.00 and $1.00 minimum retail figures set forth in (A), (B) and (C) above shall be reset to $2.63 x (Arbitrator Determined Weighted Average Retail Price for the window set forth in (A) divided by $3.50), $2.00 x (Arbitrator Determined Weighted Average Retail Price for the window set forth in (B) divided by $3.08), and $1.00 x (Arbitrator Determined Weighted Average Retail Price for the window set forth in (C) divided by $1.33)(as applicable, the “Re-Set Minimum Retail Figures”). Thereafter, such Arbitrator Determined Weighted Average Retail Price(s) shall be substituted for the $3.50, $3.08 and $1.33 weighted average retail figures set forth above and any further “re-set” of the Re-Set Minimum Retail Figures (and the right to request binding arbitration for purposes of any such “re-set”) shall be triggered only if 75% or 65%, as applicable, of the actual weighted average retail price for PPV or VOD transactions in the windows set forth in (A), (B) and/or (C) differs by more than 20% from 75% or 65%, as applicable, of the Arbitrator Determined Weighted Average Retail Price(s) (in which case a re-set similar to that set forth above shall be implemented). Such arbitration shall be conducted in accordance with Section 22(b).
iii) If Licensor is the retailer in any Internet or New Media PPV or VOD consumer transaction during STE’s Pay Television License Periods, it may receive an average per transaction amount which is less than the amounts set forth in subsections (b)(ii)(A), (b)(ii)(B) or (b)(ii)(C) above, upon payment to STE of an amount equal to the number of consumer transactions at such lower price multiplied by 75% of the difference between the relevant amount as determined pursuant to subsections (b)(ii)(A), (b)(ii)(B) or (b)(ii)(C) above and the actual amount received by Licensor per such lower-priced consumer transaction.
iv) Without limiting the generality of Licensor’s right to exhibit (and right to authorize the exhibition of) Pictures at any time on a Sell-Through Electronic Video basis, Licensor’s Internet Sell-Through Electronic Video rights to the Pictures during each of STE’s Pay Television License Periods will, given the unusual nature of retaining this right, also be subject to Licensor receiving not less than $6.95 during the First License Period and not less than $3.48 during the Second License Period, as applicable, per retail or wholesale Sell-Through Electronic Video consumer transaction, provided, that Licensor may receive less than $6.95 during the First License Period and $3.48 during the Second License Period, as applicable, per retail Sell-Through Electronic Video consumer transaction upon payment to STE of an amount equal to the number of consumer transactions at such lower price multiplied by 75% of the difference between $6.95 and $3.48, as applicable, and the actual amount received by Licensor per such lower-priced consumer transaction. For purposes of clarification, a Sell-Through Electronic Video consumer transaction (whether wholesale or retail) may result in the delivery of multiple Pictures (on a non-subscription basis), provided, that Licensor must receive not less than $6.95 or $3.48, as applicable, multiplied by the number of Pictures included in such transaction. Notwithstanding the above, Licensor shall at all times remain free to unilaterally determine and set its license fee(s) for Sell-Through Electronic Video rights.
v) PPV and VOD MFN for Licensor.
A) If, subsequent to the Amendment Date and prior to the end of the Term, STE enters into or amends any Output Agreement (as defined below) under which agreement or amendment the licensor thereunder is permitted to exploit motion pictures licensed thereunder during STE’s Pay Television “windows” by way of PPV or VOD, and such Output Agreement contains terms more favorable to the licensor thereunder with respect to delivery of motion pictures by such licensor by means of PPV or VOD than the terms contained in Sections 2(b)(i), 2(b)(ii) or 2(b)(iii), as applicable, are to Licensor, or such Output Agreement contains terms more favorable to the licensor thereunder with respect to limitations on “club” or similar access fees for PPV or VOD than the terms hereof are to Licensor, then STE shall so notify Licensor of the terms of such Output Agreement related to such rights within 60 days of the execution of such Output Agreement or amendment thereof Licensor shall then have the right, exercisable by written notice within five (5) business days after receipt of such notification (or within 5 days within completion of an audit, if applicable), to inform STE that this Amended & Restated Amendment is modified to incorporate all, but not less than all, of such PPV or VOD -related terms, as applicable, effective on the date which is the effective Pay Television availability date of the first motion picture under such Output Agreement or the effective date of such amendment, as the case may be.
B) An “Output Agreement” shall mean an agreement pursuant to which a Major Studio licenses motion pictures to STE for Pay Television exhibition that (i) is applicable or, after giving effect to any post-Amendment Date amendment contemplated by Section 2(b)(v)(A) above, becomes applicable (or that, in either case, upon the exercise of one or more options may be applicable) to substantially all motion pictures which have an Initial Theatrical Release during any portion of the Term and (ii) is for a period of more than one year.
vi) At any time between the License Periods, Licensor may exhibit or authorize the exhibition of a Picture on any form of Television other than (i) Pay Television or (ii) on a subscription, commercial free basis, any electronic transmission or exhibition of an intangible format embodying a Picture, provided that the foregoing shall not prohibit In-Store Digital Download on a subscription basis at any time after the end of the First License Period. Notwithstanding the foregoing sentence or Section 2(b) above, during each Year Licensor shall have the right to exhibit (or authorize the exhibition of) up to 6 Pictures over Pay Television and/or electronic transmission or exhibition on a subscription, commercial free basis, each with domestic box office receipts (as published in Variety or, if no longer published in Variety, another mutually agreed upon public source) no greater than $50 million as of the end of the Film Rental Measurement Period and selected by Licensor in its sole discretion, at any time between their respective License Periods but only one Picture at any given time, and for no longer than two months per Picture per Year on any Pay Television services owned at least 50% (of equity) by Licensor and delivered only via mobile/cellular communications networks; provided that should Licensor exhibit any Picture in accordance with the foregoing, Licensor shall notify STE thereof as early as possible, but in no case later than 4 months prior to the two month exhibition period for such Picture, and STE shall have the right, subject to the other terms and conditions of this Amended & Restated Amendment, to exhibit such Picture over Pay Television on STE Pay Television Services delivered only via mobile/cellular communications networks during the same period that Licensor exhibits such Picture.
vii) Notwithstanding anything to the contrary herein, Licensor may exhibit up to 2 Pictures per Year on a free on-demand basis (and authorize the exhibition of) and promote (and authorize the promotion of) such exhibition, in the Territory at any time only in accordance with the following: (A) the exhibition of any single Picture pursuant to this subsection shall be no more than 2 months in length; and (B) such exhibition must be packaged with the purchase of a consumer electronics product or service of a Licensor Affiliate (e.g. Bravia television, Bravia Internet Video Link, PlayStation) with a retail price of not less than $100 in a single transaction.
c) Limitations on Internet Delivery.
i) Marketing Restrictions. STE shall cause any STE Service exhibiting any of the Pictures via the Internet to be clearly and prominently branded as an STE Service (e.g., “Starz”) prior to subscription to the STE Service on the applicable website offering such service. The “Starz” logo or other form of STE Service branding shall appear on all title detail pages with respect to the Pictures and on a pre-roll “bumper” prior to the commencement of playback of a Picture. STE shall use its reasonable efforts to place the “Starz” logo on the downloaded player (as applicable). STE shall have a dedicated “Starz” branded environment/web page on each Internet service enabling users to browse only the programs exhibited on the STE Service, including the Pictures; and shall be permitted to include the Pictures in all applicable categories and listings of content available on a third party website (including, without limitation, general categories such as “All Pictures” and genres and sub-genres of motion pictures such as comedy, action, drama, and in mixed results of a search); provided, that STE shall not be permitted to list Pictures with any Adult Program (other than Adult Programs that have been or are exhibited on any of the services currently known as HBO, Cinemax, Showtime or The Movie Channel), and provided, further, that all title listings (or rollover of a title listing) and title art that appears on any Internet service combined with third party content shall be marked with the “Starz” logo and/or other comparable branding for the STE Service. STE shall use commercially reasonable efforts to cause its logo or comparable branding to appear prominently and persistently in the main “Watch Instantly” interface of the Netflix website, or on similar entry-level webpages of all other services delivering the STE Services). Unless otherwise set forth above, in each place that any Picture is listed or displayed, Starz shall use its commercially reasonable efforts to cause the Starz branding and/or logo to be prominently displayed.
ii) TV ISP Restrictions. This subsection 2(c)(ii) applies only to cable operators that offer Internet access service via cable modem, satellite operators that offer Internet access service via satellite, and telephone companies that offer Internet access service via Fiber, in each case that also deliver basic cable to a supermajority of its customers who obtain such Internet access service (collectively, “TV ISP’s”). STE may license to TV ISP’s an STE Service to be delivered via the Internet only to subscribers of the Internet access services referenced above regardless of whether such subscribers also subscribe to basic cable from such operator subject to the conditions in this Section 2(c)(ii). Notwithstanding the foregoing, STE shall not, and shall cause its licensees to not, market, advertise, promote or publicly communicate the availability of the aforementioned STE Service as being part of a bundle or package offered by an operator that does not include basic cable. For the avoidance of doubt, STE shall not be deemed in breach hereof if such STE Services are made available as part of a bundle that does not include basic cable but such bundles are not advertised or promoted (e.g., the customer learns of the bundle by speaking to a sale representative). In addition, if STE’s operator licensees offer an STE Service via the Internet on an à la carte basis (i.e. offered on a stand-alone basis and not bundled with any other service or product) at a monthly price that is less than the Open Internet A La Carte SLP then in effect (not including the price for Internet access or any other services), then STE shall cause its licensees to prominently display the Open Internet A La Carte SLP as a “suggested list price.” STE shall require all TV ISPs to make an à la carte option for all STE Services available to their customers and such option must be described prominently within such operators’ package descriptions and website.
iii) DSL Restrictions. STE may only license to telephone companies the right to deliver an STE Service over the Internet via DSL to such telephone companies’ DSL subscribers (regardless of whether such subscribers also subscribe to basic cable from such telephone companies) subject to the following conditions. Such companies may only offer an STE Service on an à la carte basis or in a DSL Bundle, in each case as set forth below. Notwithstanding anything to the contrary herein, STE and its licensees shall at all times remain free to unilaterally determine and set their license fee(s) and retail prices for STE Services.
A) A La Carte. If an STE Service is offered to DSL subscribers on an à la carte basis, it must be over and above the DSL Base Tier or a higher tier. The total monthly “à la carte DSL package price” (the cost of the DSL Base Tier plus the cost of the STE Service) to a subscriber is suggested to be the DSL A La Carte Package SLP. If any à la carte DSL package price is less than the DSL A La Carte Package SLP, then each subscriber that pays for or is otherwise authorized to access such lower priced STE Service shall be subject to the relevant Multiplier for purposes of determining STE’s compliance with the Internet Cap as described below.
B) Bundle. If an STE Service is offered by a telephone company in a DSL Bundle, the monthly price to subscribers for such DSL Bundle is suggested to be equal to or greater than the DSL Bundle Amount SLP. If any monthly DSL Bundle price is less than the DSL Bundle Amount SLP, then each subscriber who pays or is otherwise authorized to access such lower priced STE Service bundle shall be subject to the relevant Multiplier for purposes of determining STE’s compliance with the Internet Cap as described below.
C) Adjustments to the DSL Bundle SLP. Within 90 days of the Amendment Date, the parties will determine the US DSL Index Price and the Provider DSL Index Price for the top two DSL providers in each major market in the Territory in effect as of the Amendment Date. The parties shall determine the US DSL Index Price by any one of the following to be agreed upon by the parties: (i) averaging such price reported by two nationally recognized research sources agreed upon by the parties (e.g., SNL Kagan and Screen Digest), (ii) jointly commissioning (and funding) customized research by a nationally recognized expert in the field or (iii) any other method mutually agreed upon by the parties or determined by an arbitrator if the parties are unable to agree. The parties shall also establish a methodology for arriving at the US DSL Index Price and the Provider DSL Index Price for each of the top two DSL providers. Once a methodology is established, the same methodology shall be applied consistently across all subsequent periods unless mutually agreed by the parties. Every six months (starting with the calculation for June 30, 2009) the parties will update the US DSL Index Price and the Provider DSL Index Prices for each of the two largest US DSL providers by recalculating them using one of the methods approved above. If at any time the price for the DSL Base Tier or some higher tier (which price, for the purposes of this paragraph only, shall mean a broadly marketed non-promotional, non-discounted price) sold by either of the two largest U.S. DSL providers changes by more than 30%, either party can, at their own expense, determine an updated US DSL Index Price under the methods outlined above. If any updated US DSL Index Price is lower than the previous US DSL Index Price, then the DSL Bundle SLP shall be reduced by the same percentage as the percentage decrease in the US DSL Index Price and such reduced DSL Bundle SLP shall become effective immediately. If any updated US DSL Index Price is greater than the previous US DSL Index Price and the difference between the Provider DSL Price Index of the two largest DSL providers is (a) no more than 30%, then the DSL Bundle SLP shall increase by the same percentage as the increase in the US DSL Index Price or (b) more than 30%, then the DSL Bundle SLP shall increase by the same percentage as the increase in the US DSL Price Index of whichever of the two largest providers whose price increased the least, provided however that the DSL Bundle SLP will not decrease in a period when the US DSL Index Price has increased. Any such increases in the DSL Bundle SLP shall not become effective until three months following the determination of such increases and such increases in the DSL Bundle SLP shall only apply on a prospective basis to new Internet Subscribers following the time at which the increase become effective. Notwithstanding the foregoing, in no event may the DSL Bundle SLP be below $20.00 per month.
D) In addition, if STE’s operator licensees offer an STE Service via the Internet on an à la carte basis at a monthly price that is less than the DSL A La Carte Package SLP then in effect (not including the price for Internet access or any other services), then the subscribers that pay for such STE Service or are otherwise authorized to access such STE Service shall be subject to the relevant Multiplier for purposes of determining STE’s compliance with the Internet Cap as described below. STE shall require all TV ISPs to make an à la carte option for all STE Services available to their Internet customers and such option must be described prominently within such operators’ package descriptions and website.
E) The terms contained in this Section 2(c)(iii) do not apply to DSL service that is sold to customers by satellite operators, cable operators and telephone operators who also deliver to such customers basic cable and bill such customers for the DSL service and basic cable service on the same invoice each month; provided, however, that the restrictions afforded in Section 2(c)(i), 2(c)(ii) and the other provisions of this Amended & Restated Amendment shall govern delivery and licenses to such customers.
iv) Open Internet Restrictions. STE may only license the right to deliver an Open Internet Service via the Internet subject to the following conditions. Notwithstanding anything to the contrary in this Section 2(c)(iv), none of the provisions of this Section 2(c)(iv) shall apply to delivery of an STE Service to TV ISP Exception Subscribers, which delivery shall be governed by the provisions set forth in Section 2(c)(i), 2(c)(ii) and the other terms and conditions set forth in this Amended & Restated Amendment. For clarity, the provisions of this Section 2(c)(iv) shall apply to delivery of a TV ISP Open Internet Service to Open Internet Subscribers.
A) A La Carte. If an STE Service is offered to subscribers of an Open Internet Service on an à la carte basis, it must be offered over and above an Entry-Level Video Package. The total monthly “à la carte open Internet package price” (the cost of the Entry Level Video Package plus the cost of the STE Service) to a subscriber is suggested to be the Open Internet A La Carte Package SLP. If any à la carte open Internet package price is less than the Open Internet A La Carte Package SLP, then each subscriber that pays for or is otherwise authorized to access such lower priced STE Service package shall be subject to the relevant Multiplier for purposes of determining STE’s compliance with the Internet Cap as described below. In no event may STE allow an Open Internet Service to offer an STE Service on an à la carte basis unless such offering is in accordance with this Section 2(c)(iv) .
B) No Entry-Level Video Package. If an Open Internet Service does not offer an Entry-Level Video Package, then STE may only allow such Open Internet Service to offer to its subscribers an STE Service on an à la carte basis or (subject to the requirements of Section 2(c)(iv)(C) below) bundled with other services, provided that more than 50% of such Open Internet Service’s business is comprised of the delivery of video programming (not including Adult Programs) to its customers over the Internet. In such cases, the price to subscribers for such à la carte STE Service or STE Service bundle is suggested to be at least equal to the Open Internet Bundle SLP then in effect (not including any price to the subscriber for Internet access, if any). If any such à la carte STE Service or STE Service bundle is offered at a price below the Open Internet Bundle SLP (not including any price to the subscriber for Internet access, if any), then each subscriber who pays for or is otherwise authorized to access such lower priced STE Service shall be subject to the relevant Multiplier for purposes of determining STE’s compliance with the Internet Cap as described below.
C) In no event may an Open Internet Service bundle any STE Service with anything other than video programming alone or, provided that a supermajority of the value of the bundle (which must be at least equal to the Open Internet Bundle SLP or be subject to the Multiplier as described in Section 2(c)(iv)(B) above) is driven by the video programming, video programming together with video games and/or music. In no event may the Entry-Level Video Package contain anything other than video programming. STE shall have the burden of proof with respect to establishing that the supermajority of the value of any bundle is driven by the video programming.
D) If any STE Service is offered on an Open Internet Service on an à la carte basis over and above an Entry-Level Video Package at a price (not including the price for the Entry-Level Video Package and the price for Internet access) that is below the Open Internet A La Carte SLP then in effect, then each subscriber that pays for or is otherwise authorized to access such lower priced STE Service shall be subject to the relevant Multiplier for purposes of determining STE’s compliance with the Internet Cap as described below. The price for such à la carte option must be described prominently within such Open Internet Service’s package descriptions and websites.
v) Netflix and Verizon Exceptions. The parties acknowledge that Netflix is offering STE Services at prices below the relevant SLPs as of the Amendment Date and that Netflix shall be required to meet the relevant SLPs or be subject to the Multiplier associated with such lower prices not later than June 30, 2009; provided, however, that to the extent Netflix offers an STE Service in a bundle at a price below the $8.99 tier or on an a la carte basis at a price below $7.99, in either case, at any time prior to June 30, 2009, then a Multiplier shall immediately apply to such Netflix subscribers using $8.99 and $7.99, respectively, as the relevant reference prices. For example, if Netflix offers an STE Service bundled with a $6.99 tier, then a 3.25x Multiplier would apply (based on a $2.00 discount representing a 22% discount to the $8.99 price). In light of the fact that prior to the Amendment Date STE entered into an agreement with Verizon that does not expire until December 31, 2013, prior to the expiration of such agreement, the DSL Bundle SLP applicable to such Verizon subscribers shall in no event exceed $29.99.
vi) Cap on Internet Subscribers. STE shall not deliver (or authorize the delivery of) STE Services via the Internet (regardless of whether such delivery is done by cable modem, satellite, DSL or other technologies) to more than the following aggregate numbers of Internet Subscribers in any given month during each of the following Years:
Internet Subscribers in millions Year
35 2009
40 2010
45 2011
50 2012
50+* 2013
* In 2013, the cap on Internet Subscribers shall increase based on the rate of growth of high speed Internet households in the Territory. The growth for 2013 shall be determined by multiplying the percentage growth for 2012 by the cap for 2012. For example, for 2013 the cap shall be equal to the sum of (A) 50 million plus (B) 50 million multiplied by the percentage growth in high speed Internet households in the Territory for 2012. If such growth is 3%, the new cap would be 51.5 million (50 million + (50 million x 3%) = 50 million + 1.5 million = 51.5 million). The percentage growth in the high speed Internet households in the Territory shall be determined by taking the average of such numbers reported by SNL Kagan and Forrester Research (or, if either research company no longer exists at the time of the determination or do not reliably or consistently measure this statistic, another research company of similar stature in the media and/or technology industry and employing a similar methodology for determining high speed Internet households in each relevant year). The foregoing maximum numbers of Internet Subscribers shall be referred to collectively herein as the “Internet Cap.” Each Internet Subscriber shall count towards the Internet Cap as 1 subscriber unless such Internet Subscriber is subject to the Multiplier, in which case, such Internet Subscriber shall be count toward the Internet Cap as the number of Internet Subscribers equal to the product of 1 multiplied by the Multiplier.
vii) Internet Delivery Representations, MFN and Rights Negotiation .
A) STE represents and warrants that, since August 1, 1999, neither STE nor any of its affiliates has entered into any agreements with any other Major Studio with respect to the right of STE to deliver via the Internet motion pictures licensed from such Major Studio containing terms more favorable (to the licensor) with respect to (i) financial remuneration related specifically to such Internet rights (including without limitation, bonuses, license fees, revenue share, or minimum guarantees related solely to such Internet rights), (ii) amounts to be paid with respect to any licenses for Internet exploitation of any motion pictures of such Major Studio that were granted by STE, or any disputes in connection therewith, whether in the form of a settlement or otherwise (e.g., Vongo, Verizon, Qwest and Netflix), (iii) caps (other than any cap related to “predominately delivered”) or other restrictions on the number of subscribers or households authorized to access the STE SOD Service over the Internet or (iv) pricing structure or other conditions or limitations on consumer subscription access to Internet-delivered STE Services, in each case with respect to Internet rights only.
B) If, subsequent to the Amendment Date, and prior to the 1st anniversary of the Amendment Date, STE or any of its affiliates enters into or amends any multiple picture agreement or series of agreements with the Walt Disney Company or any of its subsidiary or affiliated entities (“Disney”) under which STE is permitted to exploit distribution of Disney’s motion pictures via the Internet, and such agreement contains terms more favorable (to the licensor) with respect to the following (solely with respect to STE’s Internet rights): (i) financial remuneration related specifically to such Internet rights (including without limitation, bonuses, license fees, revenue share, or minimum guarantees related solely to such Internet rights), (ii) amounts to be paid with respect to any licenses for Internet exploitation of any of Disney’s motion pictures that were granted by STE prior to the Amendment Date, or any disputes in connection therewith, whether in the form of a settlement or otherwise (e.g., Netflix), (iii) caps or other restrictions on the number of subscribers or households authorized to access the Starz Internet services or (iv) pricing structure or other conditions or limitations on consumer subscription access to Internet-delivered STE Services, in each case with respect to Internet rights only, then STE shall so notify Licensor of the terms of such agreement related to such rights within 60 days of the execution of such agreement or amendment thereof. Licensor shall then have the right, exercisable by written notice within five (5) business days after receipt of such notification (or within 5 days within completion of an audit, if applicable), to inform STE which of the above listed terms Licensor desires to adopt; provided, however, that all terms from (i), (iii) and (iv) must be taken as a whole, if at all. The above listed terms (other than the terms in subclause (ii) above) offered to Licensor shall be adjusted in good faith by STE with respect to any conditions or terms that Licensor cannot reasonably meet. Notwithstanding the foregoing, if STE or any of its affiliates enters into any agreement with Disney that is more favorable to Disney with respect to the terms in subclause (ii) above prior to the 1st anniversary of the Amendment Date, then STE shall offer such terms to Licensor retroactive to when such terms were first offered to Disney.
C) If any Licensor Affiliate that offers goods or services in the Territory that are of a quality that is on par with other current licensees of STE desires to license any STE Services distributed via the Internet at any time after the Amendment Date and prior to February 28, 2012 (the “Netflix Expiration Date”), STE shall offer to license such STE Service to such Licensor Affiliate on terms (the “MFN Terms”) that are no less favorable to such Licensor Affiliate as compared to any third party with a comparable technical implementation, under the same market conditions and overall economic remuneration with whom STE has entered into a licensing agreement with within the year prior to when such Licensor Affiliate first requested to begin discussions. If no such comparable third party licensing agreement was entered into by STE within such one year period, then STE shall offer to the Licensor Affiliate the terms of the last such comparable licensing agreement entered into by STE prior to such period. STE shall only be required to grant such Licensor Affiliate the MFN Terms on an all or nothing basis and only for so long as such terms are in effect for the third party to whom such terms were originally granted but in no case later than the Netflix Expiration Date. The MFN Terms offered to such Licensor Affiliate shall be adjusted in good faith by STE with respect to any conditions or terms that Licensor cannot reasonably meet or for any other differentiating factors (such as differences in numbers of subscribers, adoption rates, technical implementation costs, back-office support costs, and differences in whether the Licensor Affiliate is a carrier for such STE Services). Notwithstanding anything to the contrary above, the provisions of this Section shall not become effective until such time as STE either enters into another license with an Open Internet Service (other than Netflix) or STE extends the term of its current license agreement with Netflix beyond July 31, 2012; provided, however, that if STE does not enter into any such other license or extension prior to the Netflix Expiration Date and if Licensor is unable to license the STE Services from Netflix on reasonable terms, then beginning on the earlier of (a) September 30, 2009 and (b) three months after the date that STE completes any amendment to its current agreement with Netflix, STE shall be required to offer the terms of its then current Netflix agreement to Licensor specifically for PlayStation-branded services, adjusted in good faith by STE with respect to any conditions or terms that such PlayStation-branded service cannot reasonably meet or for any other differentiating factors (such as differences in numbers of subscribers, adoption rates, technical implementation costs, back-office support costs, and that such is not a carrier for such STE Services). If Licensor notifies STE that it wishes to invoke its rights under this clause, then STE shall notify Licensor of the terms of such agreement related to such rights within 60 days of receiving such notification. Licensor (or the relevant Licensor Affiliate) shall then have 10 business days to inform STE which of the terms it wishes to adopt and request reasonable clarification and documentation. STE shall have 10 business days to respond to such request. Licensor (or the relevant Licensor Affiliate) shall then have 10 business days from the date of receipt of such additional information in which to accept such terms as a whole, and if Licensor (or the relevant Licensor Affiliate) does not so accept, then STE’s obligations under this subsection are satisfied, and it shall have no further obligation or liability under this subsection.
viii) Internet and New Media Marketing Restrictions. From and after the Amendment Date, (a) STE shall not, and shall contractually bind its licensees to not, refer to any STE Pay Television Service or STE SOD Service delivered via the Internet as being any form of “free,” in any marketing, advertising, promotion or other public communication except as a part of a Promotion and (b) STE shall not, and shall use commercially reasonable efforts to contractually bind its licensees to not, refer to any STE Pay Television Service or STE SOD Service delivered via the Internet as being offered “at no additional cost” and the like. For clarity, messages where consumers are being encouraged to subscribe to an STE Service in order to get something else for free are permissible.
d) Other SOD Restrictions. STE SOD Services (regardless of means of delivery, unless otherwise expressly stated) may only be made available to subscribers, subject to the following limitations.
i) STE SOD Services (other than those delivered over the Internet pursuant to Section 2(c)) must only be made available to subscribers of a STE Pay Television Service. In each calendar month, subscribers to (A) the STE Pay Television Service currently known as Starz or a comparable STE Pay Television Service (in terms of when, within their first Pay Television “window,” motion pictures are scheduled for Pay Television exhibition and pricing to STE licensees) (each, a “Starz Channel”) shall have the right to access via SOD any Picture scheduled on any STE Pay Television Service during such month, provided, that, if at any time there is more than one Starz Channel, then a subscriber shall be able to access via SOD only the Pictures scheduled on the Starz Channel(s) during such month to which such subscriber subscribes and Pictures scheduled on any other STE Pay Television Service other than a Starz Channel during such month to which such subscriber does not subscribe (provided, that the ability of a subscriber to a Starz Channel to be able to access via SOD Pictures scheduled on any other permitted STE Pay Television Service in accordance with this subsection (A) shall be conditioned upon such Starz Channel being and continuing to be priced in a manner comparable to the manner in which the STE Pay Television Service known as Starz (as of the Amendment Date) is priced (as of the Amendment Date) and offering, as a general scheduling practice, initial Pay Television exhibitions of first-run feature-length motion pictures on dates earlier than the initial Pay Television exhibitions of first-run motion pictures on all other STE Pay Television Services, other than any other Starz Channel), (B) an STE Pay Television Service which is scheduled in a manner comparable to the STE Pay Television Service currently known as Encore (in terms of when, within their first Pay Television ‘window,” motion pictures are scheduled for Pay Television exhibition and pricing to STE licensees) (each, an “Encore Channel”) shall have the right to access via SOD only those Pictures which are scheduled on the Encore Channel and its multiplexes during such month and (C) a STE Pay Television Service other than the Starz Channel or the Encore Channel shall have the right to access via SOD only those Pictures which are scheduled on the STE Pay Television Service(s) during such month to which a consumer subscribes. Additionally, all exhibitions via SOD shall be subject to and in accordance with the other limitations set forth herein. The Pictures shall constitute not more than one-half of the total number of motion pictures on any single STE SOD Service in any calendar quarter. STE represents and warrants that more than one-half of any single STE SOD Service on which Pictures are exhibited shall be comprised at all times of theatrically released motion pictures. If at any time during the Term STE is party to an Output Agreement with any other Major Studio, then STE shall possess the right from such Major Studio to exhibit “first-run” motion pictures on an SOD basis delivered over the Internet and New Media and such rights shall remain in effect until at least the end of the term of such Output Agreement.
ii) A Picture may be made available for viewing by subscribers by SOD on an STE SOD Service and, if electronically downloaded on a subscriber’s Storage Device by SOD, may be accessed from such Storage Device, only during each month of a License Period for such Picture in which such Picture is scheduled on the applicable STE Pay Television Service, provided, (i) that a Picture may premiere as an SOD exhibition on the STE SOD Service after the 20th day of a month of such title’s License Period without a linear exhibition occurring during such month if a linear exhibition on the STE Pay Television Service occurs no later than the 15th day of the following month; and (ii) that each Picture may be available for SOD viewing for no more than seventy-two percent (72%) of the number of days comprising such Picture’s License Period. For the avoidance of doubt, in no event shall any Picture delivered by electronic downloading to a Storage Device be accessible (i.e., viewable) on such Storage Device after the last day of the License Period during which such Picture was initially delivered.
iii) All exhibitions of Pictures by SOD shall be subject to the provisions of this Amended & Restated Amendment including without limitation those contained in Sections 14 and 16.
iv) In order to control accessibility to Pictures delivered via SOD on an STE SOD Service, STE agrees that, following the initial receipt and storage on a subscriber’s Storage Device of a SOD transmission of a Picture, such SOD transmission shall not be capable of being retransmitted, transferred or otherwise copied to any other recording device or Storage Device, provided, that a temporary “caching” or “buffering” that is necessary to enable the subscriber to view such Picture in the ordinary course as permitted under this Amended & Restated Amendment shall not be prohibited; provided, that, subject to any further restrictions arising under Section 16 below, the foregoing shall not be construed to require STE to preclude a subscriber from being able to copy onto a digital video recorder for time-shifting purposes, by means of an independent action taken by the subscriber, the uncompressed signal being transmitted to such subscriber’s television or other monitor in the ordinary course of such subscriber’s viewing of such Picture. For the avoidance of doubt, in no event shall any Picture recorded by a subscriber on a digital video recorder remain accessible (i.e., viewable) on such digital video recorder after the last day of the License Period during which such Picture was initially delivered and STE shall only enable such personal video recorder functionality where the foregoing restriction can be enforced. In no event shall Pictures delivered via SOD on an STE SOD Service be transferred from a Storage Device to any other device; it being acknowledged that STE may “side load” digital files to an end user’s Storage Device from a personal computer to the extent permitted under, and subject to, Exhibit C and Schedule U.
e) Exhibition Limitations on Major Studio-Named Channels. STE shall not be permitted to exhibit any of the Pictures on any channel that contains in its name any name of another Major Studio, Lionsgate, or The Weinstein Company (or variation of such names).
f) Exhibitions on Showtime or HBO Service: If, from and after the Amendment Date, STE shall acquire a fifty percent (50%) or greater ownership interest in, and shall operate or manage, either of the Pay Television services currently known as “Showtime,” “HBO,” “Cinemax,” or “The Movie Channel” (“Later Acquired Significant Service”), STE shall have the right either to:
i) exhibit a Picture on such Later Acquired Significant Service in which case the License Fee for each Picture that is exhibited on such Later Acquired Significant Service shall be equal to the License Fee for such Picture as set forth on Exhibit A multiplied by:
A) 105%, if the Later Acquired Significant Service is any of the services currently known as “Showtime” or “The Movie Channel”; or
B) 110%, if the Later Acquired Significant Service is any of the services currently known as “HBO” or “Cinemax”.
For purposes of clarification, the highest license fee per Picture set forth on Exhibit A shall also be increased for an applicable Picture by the relevant amount set forth above.
or
ii) not exhibit a Picture on such Later Acquired Significant Service, notwithstanding its status as a STE Service, in which case the License Fee for such Picture will be as set forth on Exhibit A.
3. Exhibition Rights.
a) First License Period.
i) STE shall have the exclusive right to exhibit each Picture licensed hereunder for 120 Exhibition Days (in the aggregate) on up to 10 channels of the STE Pay Television Services (for purposes of clarification, SOD services shall not count as channels and multiple time zone feeds and Mirror Services shall count as a single channel) for the First License Period. As used herein, the “First License Period” means for theatrical releases prior to January 1, 2009, a 15 month period, and, for theatrical releases on January 1, 2009 or later, a 16 month period, in each case, commencing on its Availability Date. The Availability Date for each Picture that has an Initial Theatrical Release on or after January 1, 2009 other than a Holiday Themed Picture (as defined below) shall be determined by Licensor in its sole discretion and be no later than the earliest to occur of 13 months after such Picture’s Initial Theatrical Release, or 10 months after such Picture’s General Theatrical Release, 3 ½ months after its Initial Pay-Per-View Release or Initial Video-On-Demand Release, and 4 ½ months after such Picture’s Initial Home Video Release. The Availability Date for each Holiday Themed Picture shall be determined by Licensor in its sole discretion and be a date no earlier than a date which would permit STE to exhibit such Picture over two relevant holidays (i.e., two Thanksgivings if a Thanksgiving-themed Picture, and two Christmases if a Christmas-themed Picture); provided, that in no event shall such Availability Date be later than 24 months following the General Theatrical Release. Notwithstanding anything to the contrary in this Amended & Restated Amendment, for purposes of Sections 3(a)(i) and 3(a)(ii), all references to a Picture’s Initial Video-On-Demand Release and Initial Pay-Per-View Release shall expressly exclude any PPV/VOD exhibitions that occur as part of a Home Theater exhibition). A “Holiday Themed Picture” shall mean any Picture with a General Theatrical Release occurring in November or December with specific references to Thanksgiving, Christmas or Hanukkah.
ii) Notwithstanding Section 3(a)(i), for up to one Picture per Year that is a re-release and up to two other Pictures per Year, the First License Period may commence on a date which is the earliest of 18 months after such Picture’s Initial Theatrical Release, or 15 months after such Picture’s General Theatrical Release, or eight months after such Picture’s Initial Video-On-Demand Release, or six months after such Picture’s Initial Home Video Release or Initial Pay-Per-View Release.
iii) Notwithstanding Section 3(a)(i), for up to three Pictures per Year, such Pictures to be selected by STE in its sole discretion within the time period set forth below, the First License Period shall be an eighteen month period commencing on the date as determined in accordance with Section 3(a). STE shall make its selection of the up to three Pictures per Year within 30 days of Licensor’s delivery to STE of Licensor’s designation of the Availability Date for a Picture pursuant to a notice as provided for in Section 27; provided, that Licensor shall have the right to request, in writing, that STE make such selection prior to Licensor’s delivery to STE of Licensor’s designation of the Availability Date for a Picture pursuant to a notice as provided for in Section 27. In such event, STE shall make its selection earlier, and within the requested response time set forth in Licensor’s applicable request, which response time may be as short as five business days from the date of STE’s receipt of such request in the case of a request that immediately precedes or follows the Initial Theatrical Release of such Picture; provided, that in no event shall STE have any obligation to respond prior to the first Friday after the first Monday following the relevant Picture’s Initial Theatrical Release. STE’s failure to provide Licensor of STE’s decision with respect to a particular Picture within the applicable response period shall be deemed to be STE’s election that such Picture shall not have an extended First License Period under this Section 3(a)(iii).
b) Second License Period. STE shall have the exclusive right to exhibit each Picture licensed hereunder for 120 Exhibition Days (in the aggregate) on up to 10 channels of the STE Pay Television Services (for purposes of clarification, SOD services shall not count as channels) during a 13-month period (“Second License Period”) which shall commence between one year and six years and one month after the end of the First License Period. Licensor shall notify STE in writing of the commencement date of the Second License Period at least one hundred fifty (150) days prior to such date. Notwithstanding the foregoing, if Licensor fails to notify STE by two years after the end of the First License Period for a Picture that Licensor has entered into one or more permitted Television license agreements with respect to such Picture, and Licensor fails to so notify STE within 10 days after receipt by Licensor of a notice from STE informing Licensor of such failure, then the Second License Period for such Picture shall commence five months after the date of STE’s notice to Licensor of such failure.
c) Window Interruptus. For up to two Pictures per release Year, which Pictures for such release Year shall not be among the top three box office Pictures to be licensed hereunder for such release Year, Licensor may interrupt STE’s First License Period for a single exhibition on any Television service (other than a Pay Television service) in the Territory that Licensor or any Licensor Affiliate operates or manages, provided, that Licensor or such Licensor Affiliate, as applicable, must have an ownership interest in such service, with a corresponding extension of STE’s First License Period. Such interruption shall occur no earlier than the 12th month of the First License Period and shall last no longer than three months within such interruption period. Licensor shall notify STE in writing if a Picture’s First License Period is to be interrupted not later than the end of the sixth month of such Picture’s First License Period. No promotion of such exhibition of such Picture may occur until the interruption period begins. The License Fee for a Picture whose First License Period is interrupted pursuant to this Section 3(c) which is exhibited only in the Spanish language shall be 75% of the License Fee determined pursuant to Exhibit A after giving effect, if any, to the operation of the provisions of Section 2(f) and the License Fee for a Picture whose First License Period is interrupted pursuant to this Section 3(c) which is exhibited in the English language shall be 66% of the License Fee determined pursuant to Exhibit A after giving effect, if any, to the operation of the provisions of Section 2(f). If a Picture’s First License Period is interrupted in accordance with the terms of this Section, the amount by which the License Fee for such Picture is reduced shall be deducted by STE from each payment made to Licensor after the date of determination of the amount of reduction until such amount has been fully recouped by STE.
4. Picture Qualifications. “Picture” or “Pictures” shall mean, individually or collectively as the context requires, all Qualifying Films (including Sony Rent-A-System Films and Third Party Rent-A-System Films) and FN/FR Films (as defined below) licensed in accordance with this Section 4(a).
a) Commitment. STE shall license from Licensor hereunder the following: (i) all “A” Films, subject to a cap of not more than 25 such films released per Year, (ii) all SPC Films, subject to a cap of not more than 15 such films released per Year; and (iii) all “B” Films, subject to a cap of not more than 10 such films released per Year, of which not more than 4 shall be Third Party Rent-A-System Films acquired from no more than a single source per Year, and not more than 6 shall be Sony Rent-A-System Films acquired from no more than 2 sources per Year including MGM. Notwithstanding the foregoing, if an MGM franchise film is designated as a Sony Rent-A System Film in any particular Year, then Licensor shall be permitted to acquire Rent-A-System Films from 3 sources during such Year. The caps for each of the categories have been determined with reference to the average number of motion pictures Theatrically Released By an SPE Group Member with Initial Theatrical Releases in the three Year period consisting of 2006, 2007 and 2008, provided that such caps represent no more than a 28% increase over such average.
i) Designation. Licensor shall designate the “A” Films, SPC Films, and “B” Films to be licensed by STE up to the caps set forth on Section 4(a) above no later than 120 days prior to such film’s Availability Date; provided, that, unless otherwise excluded by Licensor pursuant to subsections (b), (c), (j) or (k) of this Section 4, the top 10 domestic box office “A” Films released in each Year, the top 5 domestic box office SPC Films released in each Year, and any SPC Film receiving an Academy Award nomination in the category of best foreign language film, best documentary, best film, best director, best actress or best actor, shall be deemed automatically included in Licensor’s designation. Additionally, with respect to Third Party Rent-A-System Films, Licensor shall periodically (e.g., quarterly) as mutually agreed confer with STE with respect to the Third Party Rent-A-System Films anticipated to be made available as Pictures and shall make reasonable efforts to tentatively notify STE of each Third Party Rent-A-System Film no later than 30 days prior to each such title’s Initial Theatrical Release; provided that the final designation of each Third Party Rent-A-System Film shall occur not later than 30 days after such film’s Initial Theatrical Release, rather than the designation date for other films as set forth in this Section. Any “A” Films, SPC Films, and “B” Films in excess of the applicable caps (after completing the designation process set forth in this Section 4(a)(i)) shall be referred to herein as “Excess “A” Films,” “Excess SPC Films,” and “Excess “B” Films,” respectively. If Licensor reasonably believes that any Qualifying Films will fail to meet at least one of the Minimum Requirements, Licensor shall provide STE with a notice setting forth such information within 30 days of such Qualifying Film’s Initial Theatrical Release. Licensor shall designate in writing each Picture to be licensed by STE hereunder no later than 120 days prior to such Picture’s Availability Date.
A) Notwithstanding Section 4(a) above, Licensor may designate Excess “A” Films in any release Year to fill any remaining “B” Film slots in such release Year; provided, that for each Excess “A” Film licensed by STE pursuant to this Section 4(a)(i)(A) STE shall pay to Licensor a license fee equal to sixty-five percent (65%) of the applicable License Fee set forth on Exhibit A.
B) Notwithstanding Section 4(a) above, Licensor may designate Excess SPC Films in any release Year to either (I) fill any remaining “A” Film slots in such release Year; or (II) fill any remaining “B” Film slots in such release Year; provided, that for each Excess SPC Film licensed by STE pursuant to this Section 4(a)(i)(B), STE shall pay to Licensor a license fee equal to sixty-five percent (65%) of the applicable License Fee set forth on Exhibit A.
ii) Right of First Negotiation and First Refusal. STE shall have a Right of First Negotiation and First Refusal to license the following motion pictures hereunder, subject to subsections (b) through (k) of this Section 4: (A) any Excess “A” Films, Excess SPC Films, and Excess “B” Films (except for Third Party Rent-A-System Films) not otherwise licensed pursuant to Section 4(a)(i)(A) or 4(a)(i)(B) above, and (B) any motion pictures that would have otherwise qualified as an “A” Film, SPC Film, or “B” Film but for its failure to meet the Feature-Length requirement or at least one of the Minimum Requirements (“FN/FR Film”). For clarity, the Right of First Negotiation and First Refusal shall not apply to any motion picture that is not Theatrically Released By an SPE Group Member (e.g. Third Party Rent-A-System Film), any motion picture for which Licensor or any other SPE Group Member does not own or control the Pay Television rights, nor does the Right of First Negotiation and First Refusal apply to any motion pictures that are initially released in the Territory direct-to-video or on television (but not otherwise theatrically released in the Territory), Live Event Programs, and any motion pictures that are excluded pursuant to subsection (b), (c), (e), (h), (i), (j) or (k) of this Section 4. “Right of First Negotiation and First Refusal” with regard to any FN/FR Film means that prior to soliciting and/or accepting any offers from third parties for the licensing of such FN/FR Film for Television exhibition during its first Pay Television “window,” Licensor shall negotiate in good faith with STE for the licensing of such FN/FR Film hereunder. STE shall have until 7 business days from receiving the screening copy for such FN/FR Film from Licensor to make an offer with respect to the licensing of such FN/FR Film. If STE fails to make any offer during such time period, Licensor shall be free thereafter to solicit and/or accept offers from any other party. If STE makes an offer and the parties are unable to agree to terms on such FN/FR Film during the 7 day period, then Licensor shall be free thereafter to solicit and/or accept offers from third parties with respect to such FN/FR Film (“Third Party Offer”); provided, that prior to accepting any Third Party Offer that is less than 110% of STE’s offer for such FN/FR Film (or, if the Third Party Offer is with respect to a package of films that includes such FN/FR Film, less than 200% of STE’s offer for such FN/FR Film) and is for the exhibition of such FN/FR Film within 18 months of its Initial Theatrical Release, Licensor must notify STE of the terms thereof and allow STE to match such offer by giving written notice to Licensor no later than 5:00 pm (Eastern Time) the following business day, but in no event less than 24 hours after STE’s receipt of such notice. If STE matches such Third Party Offer, including all terms and conditions thereof, within the time period provided above, such FN/FR Film shall be licensed as a Picture hereunder in accordance with the terms hereunder that do not conflict with the terms of such Third Party Offer. The license of such FN/FR Film shall be memorialized in a separate writing signed by the parties. If STE declines to match such Third Party Offer or fails to respond within the time period provided above, Licensor shall have the right to license such FN/FR Film to such other third party or any other third party on the terms and conditions no more favorable to such other party than those notified to STE.
b) Notwithstanding anything to the contrary herein, if, at the time that a particular theatrical motion picture that could qualify as a Picture hereunder is (or any relevant distribution rights thereto are) first offered to an SPE Group Member, the U.S. Pay Television rights of which are subject to a bona fide pre-existing commitment, then for up to eight motion pictures during any two successive release Years (but no more than five motion pictures during any one release Year), provided, that, for one two-Year period during the Term, for up to nine motion pictures (but in no case more than four times “x” motion pictures in the aggregate, where “x” equals the number of release years covered by the Term), such motion picture shall not be required by Licensor to be included hereunder (unless an SPE Group Member subsequently obtains such Pay Television rights and an SPE Group Member theatrically releases such motion picture in the U.S.; provided, that if the application of this subsection is triggered as a result of Licensor’s acquisition of a third party entity, then, solely for purposes of this parenthetical, the term “SPE Group Member” shall not include such third party entity).
c) Notwithstanding anything to the contrary herein, with respect to a motion picture that could qualify as a Picture hereunder, if, at the time that such motion picture is (or any relevant distribution rights thereto are) acquired by an SPE Group Member, the person or entity from whom the SPE Group Member is acquiring its rights is unwilling or unable to license the U.S. Pay Television rights to such SPE Group Member notwithstanding such SPE Group Member’s good faith efforts to obtain the same, then for up to one motion picture during each release Year that is produced or directed by Steven Spielberg or George Lucas or a producer or director of comparable stature in the industry, such motion picture shall not be included hereunder (unless an SPE Group Member subsequently obtains such U.S. Pay Television rights and an SPE Group Member theatrically releases such motion picture in the U.S.; provided, that if the application of this subsection is triggered as a result of Licensor’s acquisition of a third party entity, then, solely for purposes of this parenthetical, the term “SPE Group Member” shall not include such third party entity). Additionally, not more than every other release Year, Licensor shall be have the right to exclude from this Amended & Restated Amendment one motion picture produced or directed by any person, provided, that such exclusion shall be in place of, and not in addition to, the one motion picture per release Year referenced in the immediately preceding sentence.
d) If Licensor exceeds either of the limits set forth in Sections 4(b) or 4(c) above, Licensor shall pay to STE $20 million for each motion picture in excess of such limits, provided that if such payment relates to motion pictures with a General Theatrical Release (or if no General Theatrical Release is conducted) then an Initial Theatrical Release, in 2012 or 2013, then such amount shall be $17.5 million, within 30 days of the date on which each such motion picture would have had an Availability Date had such motion picture been included as Picture hereunder. For purposes of clarification, a motion picture shall not be counted against the limits set forth in Sections 4(b) or 4(c): (i) with respect to Section 4(b), if the pre-existing commitment that prevents Licensor from obtaining the Pay Television rights to a motion picture results in such motion picture being licensed to STE; and (ii) with respect to Section 4(c), if STE obtains at any time the Pay Television rights to a motion picture for which Licensor is unable to obtain such Pay Television rights, provided, that STE is permitted to exhibit such motion picture within 15 months of such motion picture’s initial theatrical release in the Territory. Additionally, the payment set forth in this Section shall be applicable only to motion pictures excluded from this Amended & Restated Amendment pursuant to Sections 4(b) and 4(c) above, and not to any motion picture excluded from this Amended & Restated Amendment pursuant to any other provisions in this Section 4.
e) Notwithstanding anything to the contrary herein:
i) For any motion picture, other than an Animated/Restricted Picture (defined below), which otherwise qualifies as a Picture hereunder but which has its Initial Theatrical Release more than twenty-four months but less than thirty-six months after the completion of principal photography (a “Delayed Release Picture”), STE shall be required to license such Delayed Release Picture hereunder pursuant to the following terms: (1) such Delayed Release Picture’s License Fee shall be an amount equal to the License Fee otherwise applicable to such motion picture as set forth on Exhibit A, less an amount equal to thirty-two percent (32%) of such License Fee (the “Adjusted License Fee”) and (2) the Adjusted License Fee for such Delayed Release Picture shall be further reduced as follows: (A) for each month beyond the twenty-fourth month after the completion of principal photography (commencing on the last day of the twenty-fourth month), the Adjusted License Fee shall be further reduced per month until the thirty-sixth month by an amount equal to one and one-half percent (1.5%) of the otherwise applicable License Fee for such Delayed Release Picture as set forth on Exhibit A, for a total reduction (on the last day of the thirty-sixth month) in the Adjusted License Fee of fifty percent (50%) of the License Fee otherwise applicable to such Delayed Release Picture as set forth on Exhibit A. For each Delayed Release Picture which has its Initial Theatrical Release more than thirty-six months following the completion of principal photography, STE shall have neither the right nor the obligation to license such motion picture hereunder.
ii) STE shall have the right and obligation to license an Animated/Restricted Picture only if its Initial Theatrical Release occurs no later than thirty-six months after completion of principal photography. As used herein, an “Animated/Restricted Picture” is a motion picture that otherwise qualifies as a Picture hereunder and comprises a substantial amount of animation, computer graphics and/or special effects and/or is subject to talent restrictions regarding its Initial Theatrical Release.
f) Notwithstanding anything to the contrary herein, a motion picture which would otherwise qualify as a Picture hereunder but which is exhibited by PPV or VOD (but not any other form of exhibition) by Licensor during the Term in the Territory up to 30 days prior to or concurrently with its Initial Theatrical Release shall be included as a Picture hereunder.
g) Notwithstanding anything to the contrary herein, with respect to a motion picture which would otherwise qualify as a Picture hereunder but for which Licensor has delivered to STE obligations or restrictions that (i) are beyond the scope and nature of restrictions on exhibitions/promotional rights that can be found in contracts with “A+” talent (whether, in the case of an actor, such “A+” talent is appearing prominently in the applicable motion picture or in a more limited or “cameo” role), (ii) are not otherwise required under any guild or union agreement to which the applicable Picture is subject and (iii) materially frustrate STE’s ability to enjoy its rights hereunder with respect to such Picture (any such restrictions and obligations that meet the test in each of (i)-(iii) above, if any, shall hereinafter be referred to as an “Objectionable Restriction”), STE shall not be required to license such motion picture hereunder and shall have the option to license such motion picture in accordance with the following provisions:
i) With respect to any such motion picture, Licensor shall deliver a notice of such obligations or restrictions and a screener to STE not later than 60 days after such motion picture’s Initial Theatrical Release;
ii) STE shall have 30 days after the receipt of both such notice and screener in which to notify Licensor in writing whether STE elects to license such motion picture under the terms and conditions of this Amended & Restated Amendment or to notify Licensor in writing of the different terms and conditions on which STE would be willing to license such motion picture. If STE offers such different terms and conditions, the parties shall then negotiate for a 30 day period with respect to the licensing of such motion picture.
iii) If STE does not affirmatively elect to license said motion picture on the basis set forth in subsection (ii), Licensor shall have the right to license such motion picture in the Territory to a third party without any further obligation to STE hereunder, subject only to the two immediately succeeding sentences. If Licensor offers such motion picture for Pay Television exhibition on terms and conditions more favorable to the applicable Pay Television offeree than those contained herein, or in such final offer, as applicable (as applicable, “Section 4(g) More Favorable Terms”), then Licensor shall again offer such motion picture to STE and STE shall have 10 days after receipt of such offer to notify Licensor in writing that STE elects to license such motion pictures on such Section 4(g) More Favorable Terms. For purposes of clarification, but without limiting the generality of the foregoing provisions, if Licensor obtains an offer from a Pay Television service to license such motion picture, and such offer is subject to all the terms and conditions hereof, including the Objectionable Restrictions, or is subject to all the terms and conditions of STE’s final offer, as applicable, but has a license fee higher than that contained herein or offered by STE, then Licensor shall be free to license such motion picture to such Pay Television service without first again offering such motion picture to STE.
h) It is understood that Licensor will not modify its policies in connection with U.S. Pay Television rights to first-run feature-length motion picture primarily for purposes of frustrating STE’s rights hereunder.
i) If Licensor or any Licensor Affiliate actively seeks to acquire or otherwise does acquire any (or a significant equity interest in a) Major Studio then, in any pursuit of such Major Studio, Licensor covenants that, if Licensor or any Licensor Affiliate is acquiring the U.S. theatrical distribution rights to such Major Studio’s motion pictures, Licensor or such Licensor Affiliate will put forth its reasonable efforts to obtain Pay Television rights for such Major Studio’s motion pictures, subject to pre-existing Pay Television license agreements, and additionally, provided, that Licensor or such Licensor Affiliate can do so without violating any applicable law and/or the rights of any third party and/or any fiduciary duty that Licensor or such Licensor Affiliate may have to third parties (provided, that any such rights created under an agreement between Licensor or such Licensor Affiliate, on the one hand, and any third party, on the other hand, are a result of a bona fide agreement negotiated in good faith and in the ordinary course of business dealing), shall use its reasonable efforts to prevent any new Pay Television agreements or any extension or change to existing Pay Television agreements of such Major Studio in the period prior to closing. If, notwithstanding the attempts of Licensor or such Licensor Affiliate using reasonable efforts, Licensor or such Licensor Affiliate is unsuccessful in obtaining such Pay Television rights or in preventing an extension or change in an existing agreement, it shall not be prohibited from theatrically distributing such motion picture(s), and such motion pictures (regardless of whether their respective Initial Theatrical Release occurs during the Term) shall not be licensed hereunder. Further, if Licensor or such Licensor Affiliate does not go forward with the intended acquisition, all of such party’s obligations, duties and undertakings in favor of STE under this Section in connection with such intended acquisition shall cease and Licensor or such Licensor Affiliate shall be released from any obligations, duties and undertakings that it might have otherwise had to STE under this Section in connection with such intended acquisition, unless Licensor or such Licensor Affiliate again seeks to acquire such Major Studio, in which case the provisions of this Section shall again apply.
j) If Licensor or a Licensor Affiliate divests itself of the controlling interest in any SPE Group Member (other than the then primary distribution arm of Licensor), then any motion picture produced or acquired by such divested entity that is Theatrically Released By any entity or person that is not an SPE Group Member shall not be eligible to be included as a Picture hereunder. For purposes of clarification, any motion picture that is produced by such divested entity but is Theatrically Released By an SPE Group Member shall continue to be subject to the terms and conditions hereof.
k) In addition to the number of motion pictures that can be excluded from this Amended & Restated Amendment pursuant to Section 4(b), Licensor shall have the right to exclude from this Amended & Restated Amendment motion pictures Theatrically Released By an SPE Group Member that are produced by one Eligible Production Company that is acquired by an SPE Group Member after the Amendment Date. An “Eligible Production Company” shall mean a production company that has, as of the date an SPE Group Member acquires its ownership thereof, been an active operating entity for at least two years and that has produced at least one motion picture that has been theatrically released in the Territory, and that has a pre-existing, as of the date that an SPE Group Member first commences substantive negotiations to acquire such production company, Pay Television output agreement for the Territory, which output agreement does not encumber such production company’s motion pictures for more than five years (based on Pay Television availability dates) after the date such production company is acquired by an SPE Group Member (or which output agreement does not extend more than five years (based on Pay Television availability dates) into the Term, with respect to a production company acquired by an SPE Group Member prior to the commencement of the Term). If Licensor acquires an Eligible Production Company, Licensor shall be required to deliver to STE not less than the Minimum Output Number of Pictures in each Year during the Term in which such Eligible Production Company’s output agreement remains in effect. The “Minimum Output Number of Pictures” shall be determined by taking the total number of motion pictures theatrically released by the primary theatrical distribution arm of Licensor and licensed by Licensor for Pay Television exhibition during the three Years prior to the year in which an SPE Group Member acquires such Eligible Production Company, dividing such number by three and then subtracting two from the result and rounding such result to a whole number (decimals up to .5 shall be rounded down and decimals .5 and over shall be rounded up). With respect to each Year during the Term in which the Eligible Production Company’s output agreement remains in effect, not later than 30 days after the end of such Year, Licensor shall pay to STE an amount equal to $20 million (provided, that if such payment relates to any motion picture with an Initial Theatrical Release in 2012 or 2013, such amount shall be equal to $17.5 million) multiplied by the difference between the Minimum Output Number of Pictures and the actual number of Pictures theatrically released by the primary theatrical distribution arm of Licensor that have their First License Period commence in such Year, provided, that no such payment will be due if (i) the number of Pictures that have their First License Period commence in such Year is equal to or more than the Minimum Output Number of Pictures and/or (ii) if the number of theatrical motion pictures produced by such Eligible Production Company that have a Pay Television availability date in such Year is zero.
5. “Term” shall mean the period commencing on January 1, 2005 and terminating on (but including) December 31, 2013.
6. License Fees.
a) Consideration. For Pictures licensed hereunder, STE shall pay to Licensor the license fees as set forth on Exhibit A (“License Fees”).
b) Payment Terms. STE shall pay the License Fee for each Picture 60 days after the start of the First License Period by, at STE’s election, check delivered to Licensor at the address and to the account set forth in subsection (i) below or by wire transfer delivered to the account set forth in subsection (ii) below:
i)
|If sent via regular mail: |If sent via Fed Ex or courier: |
|MELLON CLIENT SERVICE CENTER |MELLON CLIENT SERVICE CENTER |
|Sony Pictures Television, Inc. |Sony Pictures Television, Inc. |
|c/o Sony Pictures Entertainment |500 Ross Street |
|500 Ross Street |Room # 154-0455 |
|PO Box 371273 |PO BOX 371273 |
|Room 154-0455 |Pittsburgh, Pa 15262-0001 |
|Pittsburgh, Pa 15251-7273 |Bank phone 412-234-4381 |
|Bank phone 412-234-4381 | |
ii) Mellon Client Service Center
Pittsburgh, PA 15262
ABA # 043-000-261
Credit: Sony Pictures Television, Inc.
Sony Pictures Entertainment
Acct # 093-9923
Bank Phone: (412) 234-4381
The Internet License Fees (as defined in Exhibit A) shall be paid in accordance with the instructions above and Exhibit A. The Netflix Amount (as defined in Exhibit A) shall be paid in accordance with Exhibit A and the instructions above.
c) STE shall be solely responsible for any taxes lawfully imposed on STE by any taxing authority which are incurred or arise in connection with or related to the license of the Pictures under this Amended & Restated Amendment. STE shall pay to Licensor any sales, use or value added taxes that are imposed on Licensor arising from the terms of this Amended & Restated Amendment and which are required to be collected from STE by Licensor under applicable law. STE may provide to Licensor a valid exemption certificate in which case Licensor shall not collect the taxes covered by such certificate.
7. Advertising and Publicity. All advertising and publicity issued by STE for each Picture shall comply with all of Licensor’s credit and other third party obligations (including all Objectionable Restrictions if STE has elected to license a Picture with Objectionable Restrictions in accordance with the terms of Section 4(g)) for each Picture, provided, that Licensor gives STE written notice of all such obligations no later than the time of delivery of each Picture; provided, that if Licensor shall thereafter notify STE of any additional or different obligations, STE shall comply with the same, on a prospective basis only. Licensor shall not promote or publicly announce or authorize such promotion or announcement of, any exhibition(s) of the Pictures to the extent they are precluded by STE’s right to exclusivity as set forth in Section 2 above, by any party other than STE (including Licensor) to the general public or the trade earlier than the expiration of STE’s First License Period (specifically excluding, however, the initial press release announcing Licensor’s consummation of a license arrangement with respect to the applicable Picture). STE may advertise, promote and publicize the exhibition of each Picture on the STE Services in any and all media, and authorize third parties to do so; such advertising, promotion and publicity may include synopses or excerpts of such Picture (and/or of trailers or other promotional materials furnished to STE by Licensor hereunder), prepared or excerpted (as applicable) by STE and/or such third parties, subject to guild and contractual restrictions of which Licensor timely notifies STE in writing as provided in the following sentence; provided, that STE shall not exhibit excerpts from any Picture licensed hereunder in excess of two minutes of continuous footage or in excess of four minutes of non-continuous footage and provided further that STE shall indemnify Licensor for any residual, re-use or similar payment obligations under any applicable guild agreement which arise as a result of any excerpts created and exhibited by STE. STE may use and authorize third parties to use the name, likeness and voice of, and biographical information relating to, anyone who rendered services or granted rights in or in connection with any Picture solely for the purpose of advertising, promoting or publicizing exhibitions of the Picture(s) hereunder, but not so as to constitute an endorsement of any product or service, including the STE Services, subject to guild and contractual restrictions of which Licensor timely notifies STE in writing, such notice to be delivered not later than one hundred twenty (120) days prior to the commencement of the Picture’s First License Period; provided, that if Licensor shall thereafter notify STE of any additional or different obligations, STE shall comply with the same, on a prospective basis only. Licensor acknowledges (with respect to SPE Group Members only and not for any third party) that any implied endorsement of the STE Services as a result of any advertising and publicity permitted hereunder shall not be a breach hereof. STE may exercise its rights under this Section 7 in connection with its Pay Television and SOD rights hereunder (i) upon a Picture’s Initial Theatrical Release for trade advertising and (ii) commencing ninety (90) days prior to the commencement of each License Period for consumer advertising and promotion.
8. Reserved Rights. All rights not specifically granted to STE hereunder are hereby reserved by Licensor.
9. Delivery Requirements. Licensor shall routinely provide STE access to, at the Laboratory, tape elements or mezzanine level files of a 4:3 aspect ratio standard definition transfer and 16:9 aspect ratio high definition transfer of each Picture’s theatrically released version(s) in both English (if the original language is not English, dubbed in English) and Spanish and with English-language closed-captions and screeners and all available promotional materials not later than the date set forth in Exhibit B in accordance with the technical specifications attached hereto as Exhibit B. All Picture transfers shall be in full-frame format, provided that the full frame 16:9 format is subject to contractual restrictions. Upon STE’s request, Licensor shall deliver or provide STE access to a chaptered version of each Picture if such version is in Licensor’s possession or control. Notwithstanding the foregoing, with respect to a foreign language Picture that is not produced by an SPE Group Member and is theatrically released in the United States by an SPE Group Member other than the primary theatrical distribution arm of Licensor, if an English-language dubbed version of such Picture is not available to Licensor and, provided that Licensor has used good faith efforts to obtain the same, STE shall accept an English-language subtitled version therefor. Notwithstanding the foregoing, with respect to a foreign language Picture that is not produced by an SPE Group Member and is theatrically released in the United States by an SPE Group Member other than the primary theatrical distribution arm of Licensor, Licensor shall be required to provide a Spanish language version of such Picture only if available to Licensor provided, that, if a Spanish language version of such Picture is not provided, STE shall have the right, subject to contractual restrictions, to create such version at its cost and Licensor shall provide reasonable cooperation in the creation of such Spanish language version, if requested by STE. STE shall have the right to exhibit such STE-created Spanish language version in accordance with the terms and conditions of this Amended & Restated Amendment. Additionally, STE shall have access to (a) all versions theatrically released in the Territory and, (b) subject to Licensor’s approval and any contractual restrictions, any other English or Spanish version released in other media in the Territory for which Licensor has the requisite rights, including Ietterbox versions, “director’s cuts” and “special editions” but excluding airline, edited and foreign language versions other than Spanish. STE shall have the right to access each of the versions set forth in subsections (a) and (b) immediately upon such version’s release in the medium for which such version is created (subject to, only with respect to versions listed in subsection (b), any contractual restrictions and subject to, with respect to all such versions, the restrictions on exhibitions and promotions set forth in this Amended & Restated Amendment, including without limitation those set forth in the immediately succeeding provisos to this sentence); provided, that STE’s right to exhibit a version described in subsection (b) that is different from the original theatrically released version (i.e., a version of a Picture that has been reedited from its original theatrically released version, but not a Picture that has been merely restored or a letterbox version) (a “New Version”) which Licensor intends to utilize exclusively on any non-Theatrical or non-Television form(s) of media shall be subject to Licensor’s right to withhold from STE such New Version (and the right to promote the exhibition of such New Version) for up to six months after such version’s release in the medium for which such version is created, and if the end date of such withholding is after the last day of the relevant License Period for such Picture, then STE shall have no rights with respect to such New Version; provided further that the aggregate Exhibition Days for the original version of a Picture and any New Version(s) of a Picture shall not exceed 120 in any single License Period of a Picture. STE shall also have access to any and all so-called “bonus material” or “special features” produced for any medium or form of exhibition in the Territory for which Licensor has the requisite rights, subject to contractual restrictions and subject to Licensor’s right to withhold any such materials which it intends to utilize exclusively on any non-Television form(s) of media (“Restricted Materials”), for the duration of such Licensor-determined exclusive period, provided that Licensor shall provide on average not less than three so-called “bonus material” or “special features” of high quality comprising not less than 10 minutes aggregate run-time with respect to any Picture in the top 10 box office for the relevant Year. Licensor’s right to prohibit STE’s access to Restricted Materials shall in no way relieve Licensor of its obligation to provide all marketing materials related to a Picture as provided in Section 7. Upon request of STE for access to any version set forth in (a) or (b) above or any bonus materials or special features, other than any Restricted Materials, Licensor shall notify STE if any such version, material or feature is extant, along with any contractual restrictions related to such version, material or feature, and STE shall have the right to assume any third party costs necessary in order to obtain access to such version, material or feature. STE shall pay the cost of delivery of the Video Reproduction to STE, but shall not be responsible for any payments with respect to the creation of any Master created by (or on behalf of) Licensor. The occasional and inadvertent failure to timely deliver any materials or other elements required to be delivered hereunder to STE shall not constitute a breach of contract provided that Licensor acts in good faith to promptly remedy any such failure.
10. Licensor Warranties, Representations and Covenants. Licensor warrants, represents and covenants that:
a) it has or will secure all rights necessary to enter into this Amended & Restated Amendment and to perform all of its obligations hereunder and the execution, delivery and performance of this Amended & Restated Amendment has been duly authorized by all necessary corporate action on the part of Licensor and constitutes a valid and legally binding agreement of Licensor enforceable against Licensor in accordance with its terms;
b) Licensor will not take or authorize any action by which any of the rights in any Picture granted herein have been or may be materially impaired in any way;
c) nothing contained in the Pictures or in the additional material to be supplied to STE hereunder nor the entering into or performing of this Amended & Restated Amendment nor the exercise by STE of any of its rights hereunder will violate or infringe upon the rights of any third parties;
d) all non-dramatic performing rights in musical compositions contained in each Picture are controlled by ASCAP, BMI or SESAC, are in the public domain, or are controlled by Licensor;
e) Licensor has paid or will pay all amounts that have been or may become owed in connection with the Pictures or the exercise of any rights granted herein (other than those costs assumed by STE under Section 7 above and Section 13(b) below), and there are no pending claims, liens, charges, restrictions or encumbrances on the Pictures or on such rights that impair the rights granted hereunder;
f) each Picture is and will be protected by copyright in the U.S. throughout the duration of each Picture’s License Periods;
g) none of the Pictures shall, prior to their license to STE hereunder, have been exhibited by means of free Television or basic cable Television within the Territory;
h) the Pay Television rights to all the Pictures contemplated to be exhibited on the STE Services hereunder are or will be owned or controlled by Licensor or another SPE Group Member; and
i) nothing contained in this Amended & Restated Amendment shall cause Licensor to be in breach of any other agreement to which Licensor is a party.
11. STE Warranties and Representations. STE warrants and represents that:
a) it has all rights necessary to enter into this Amended & Restated Amendment and to perform all of its obligations hereunder, and the execution, delivery and performance of this Amended & Restated Amendment has been duly authorized by all necessary limited liability company action on the part of STE and constitutes a valid and legally binding obligation of STE enforceable against STE in accordance with its terms;
b) it shall not use or authorize the use of the Pictures or the additional material to be supplied by Licensor to STE hereunder except as authorized by this Amended & Restated Amendment; and
c) the making or performance of this Amended & Restated Amendment does not and will not cause STE to be in breach of a third party agreement.
12. Indemnification.
a) Licensor agrees to indemnify and hold STE, its subsidiary and affiliated companies and their respective officers, agents, directors and employees, harmless from any and all claims, damages, liabilities, costs and expenses (including reasonable attorneys fees) arising out of the breach by Licensor of any warranty, representation or other term or provision of this Amended & Restated Amendment. STE shall promptly notify Licensor in writing of any third party claim or litigation to which this indemnification applies, and Licensor shall assume the defense of any such claim or litigation (and STE shall have the right to engage separate counsel of its choice and participate in the defense, negotiation and settlement of such action or proceeding, but shall bear the fees and expenses of such separate counsel retained by STE and STE shall cooperate with Licensor in the defense of such claim at no cost or charge to Licensor, other than for performing such acts as Licensor shall request). If, for any reason, Licensor shall fail to appoint counsel on a timely basis or otherwise fails timely to confirm its assumption of the defense of any applicable claim, STE may engage its own counsel and the reasonable costs and expenses made in connection therewith shall be paid by Licensor. Licensor shall have the right to approve or disapprove the settlement or disposition of any such claim or litigation proposed by STE, which right shall expire twenty (20) business days following Licensor’s receipt of written notice with respect thereto. Licensor shall not have the right to enter into any settlement or compromise unless, in connection therewith, it shall obtain from the claimants a full release of all related claims against STE.
b) STE shall indemnify and hold Licensor, its parent, subsidiary and affiliated companies and their respective officers, agents, directors and employees, harmless from any and all claims, damages, liabilities, costs and expenses (including reasonable attorneys fees) arising out of the breach by STE of any warranty, representation or other term or provision of this Amended & Restated Amendment. Licensor shall promptly notify STE in writing of any third party claim or litigation to which this indemnification applies, and STE shall assume the defense of any such claim or litigation (and Licensor shall have the right to engage separate counsel of its choice and participate in the defense, negotiation and settlement of such action or proceeding, but shall bear the fees and expenses of such separate counsel retained by Licensor and Licensor shall cooperate with STE in the defense of such claim at no cost or charge to STE, other than for performing such acts as STE shall request). If, for any reason, STE shall fail to appoint counsel on a timely basis or otherwise fails timely to confirm its assumption of the defense of any applicable claim, Licensor may engage its own counsel and the reasonable costs and expenses made in connection therewith shall be paid by STE. STE shall have the right to approve or disapprove the settlement or disposition of any such claim or litigation proposed by Licensor, which right shall expire twenty (20) business days following STE’s receipt of written notice with respect thereto. STE shall not have the right to enter into any settlement or compromise unless, in connection therewith, it shall obtain from the claimants a full release of all related claims against Licensor.
13. Guild Payments.
a) Licensor shall be responsible for making all payments which may become due to any union or guild and to any person or persons who rendered services or granted rights in or in connection with the production of the Pictures by virtue of the use made of the Pictures hereunder, including without limitation, all residual, reuse, rerun, pension and health and welfare fund, and payroll tax payments, provided, that Licensor shall not be responsible for any such payments which are required pursuant to Section 7 or due to STE’s failure to comply with written notices provided to it.
b) STE shall bear all costs and expenses incurred by it for the exhibition of (and the promotion of the exhibition of) the Pictures as authorized herein, including without limitation any ASCAP, BMI or SESAC licenses which may be required.
14. Security Measures.
STE shall employ reasonable security measures to prevent pirating of any material furnished by Licensor; the foregoing shall be in addition to STE’s obligations under Section 16 below. Not more than once per Year (unless Licensor has reasonable cause to believe that STE’s security measures are not providing adequate protection) during the Term, STE shall provide Licensor with reasonable access, during STE’s normal business hours, to STE’s facilities solely for the purpose of reviewing STE’s security measures.
15. Withdrawal. Licensor shall have the right to withdraw any Picture because of loss or impairment of rights, unavailability of necessary materials, potential infringement of the rights of third parties, any pending or threatened claim, judicial proceeding or regulatory proceeding, or because Licensor in its reasonable good faith business judgment deems it necessary in order to prevent potential litigation or arbitration in order to minimize or avoid a liability to Licensor (all of the foregoing being collectively “Withdrawal Causes”); provided, that such Withdrawal Cause is not primarily the result of Licensor or any Licensor Affiliate entering into an agreement in breach of another provision hereof. Licensor shall, in such event, give STE written notice of such withdrawal and set forth in reasonable detail the Withdrawal Cause. If the applicable Picture has been exhibited on the STE Services one or more times prior to such withdrawal, the parties will negotiate in good faith regarding an appropriate adjustment to the License Fee. If the parties are unable to reach agreement as to the amount of such adjustment within a thirty day negotiation period, the issue of such adjustment shall be presented to arbitration before a single neutral arbitrator experienced in the entertainment industry. Such arbitration shall be conducted in accordance with Section 22(b).
16. Encryption, Copy Protection; Previews.
a) Encryption. The license granted hereunder, except as expressly stated in Section 16(c) or in an independent writing signed by Licensor and STE, is for encrypted transmission only.
b) Copy Protection.
i) For Cable/Satellite/IPTV. STE’s right to deliver the STE Services over cable, satellite and IPTV shall be subject to the following copy protection requirements:
A) Future Contingency. Subject to subsections (I) through (IV) below, STE agrees to carry and, if applicable, encode and embed the Pictures with information pertaining to copy protection (“Copy Control Information” or “CCI”), and/or initiate or associate (“turn on”) CCI in or with the Pictures, in each case, as requested by Licensor.
I) Either (aa) a majority of Major Studios (which may include Licensor), (bb) Licensor, Paramount, and Warner Bros., or (cc) three Major Studios (in addition to Licensor and including at least one other Major Studio that is, at the time of the initial request for implementation of CCI and/or a copy protection technology(ies), a party to a U.S. Pay Television Output Agreement with STE) (as applicable, “Studio Industry”) have approved and agreed upon CCI and/or a copy protection technology(ies);
II) Such technology and/or CCI, with respect to STE and its licensees and end users, does not interfere with or degrade the functional quality of any equipment or devices in connection with the distribution of the Pictures to subscribers (as such functional quality is viewed by the average subscriber);
III) The use of such technology and/or CCI by STE or its licensees will not cause STE or its licensees to incur any cost (other than an immaterial cost(s)), including without limitation any cost in the nature of a royalty. Notwithstanding the above, in the event the parties agree, or if an arbitrator rules that such costs are not immaterial, Licensor shall have the option to pay, or if applicable, reimburse STE for such costs, in which case the condition set forth in this Section shall be deemed satisfied; and
IV) The use of such technology and/or CCI has been or will immediately be instituted by the Studio Industry in a Television window prior to STE’s.
B) Other Limitations.
I) Licensor agrees that Licensor shall not encode or embed CCI in the elements delivered to STE or to require STE to encode or embed CCI or to initiate or associate (“turn on”) CCI in or with the Pictures more restrictive than “copy once” for time shifting purposes on a temporary basis and not for archival purposes (it being understood and agreed that (a) initial storage on either a subscriber’s Storage Device or personal portable device (the latter by means of a single side-load) as permitted in Section 2(a)(i), or (b) initial storage on a subscriber’s Storage Device in other locations permitted in Section 2(a)(ii), constitutes one copy for purposes of this Section and that “copy once” may also include “no retransmission”); provided that, notwithstanding the foregoing, Licensor may require more restrictive CCI than those set forth above in connection with delivery of the Pictures via the Internet or New Media, including STE’s exercise of SOD rights, so long as the Licensor imposes the same CCI requirements on VOD distribution of the Pictures within the Territory.
II) In the event that HBO and/or Showtime have implemented a copy protection scheme, to the extent STE, for any reason, has not implemented as restrictive CCI or as effective and/or robust copy protection technology as HBO or Showtime, STE will not seek to market the comparative absence of such feature(s) as a means of attracting or obtaining subscribers to the STE Services.
III) STE shall have no liability in connection with the exhibition of the Pictures for any “hacks” of or “spoofing attacks” against the CCI or copy protection technology as implemented by STE in accordance with Licensor’s request. In this connection, the provisions of Section 12(a) shall be applicable.
C) Pass-Through. Subject to subsections (b)(i)(A)(I) through (b)(i)(A)(IV) above, in the event Licensor embeds or encodes or otherwise inserts or, if applicable, associates CCI in or, if applicable, with, the Pictures prior to delivery to STE, STE agrees to “pass through” to its affiliated systems (or to subscribers where delivering directly to subscribers) such CCI without alteration, modification or degradation in any manner.
D) SOD Downloading. In connection with STE’s offering non-Internet or non-New Media SOD downloading services to its subscribers, STE shall implement such CCI and copy protection technology(ies) that are being implemented pursuant to the Studio Industry standard in connection with non-Internet or non-New Media VOD or PPV downloading. In the event, and so long as, there is no Studio Industry standard, STE shall implement (and, in connection with SOD, shall require those entities directly or indirectly providing SOD services to end users to implement) from time to time such CCI and/or copy protection technology(ies) that are designed effectively to frustrate attempts to defeat or circumvent the copy protection provisions and other limitations set forth in this Amended & Restated Amendment.
E) Notice. Prior to implementing any particular CCI and/or copy protection technology(ies), STE shall consult with Licensor regarding such matters and give good faith consideration to Licensor’s input in connection therewith; provided, that the foregoing shall not be construed so as to require STE to violate any confidentiality obligations that it might owe to third parties.
F) Purported Violation; Arbitration. If at any time during any License Period hereunder Licensor has a reasonable belief that STE is in violation of the provisions of this Section 16(b)(i), Licensor shall provide STE notice of such purported violation. Beginning 60 days after the date of STE’s receipt of such notice, if STE and Licensor have not resolved such purported violation, then until the resolution of such purported violation, Licensor shall not be required to deliver Pictures hereunder. Upon receipt by STE of a notice of a purported violation of the provisions of this Section 16(b)(i), STE shall attempt to resolve such purported violation. Additionally, in addition to any other remedies either party may have at law or in equity, at any time beginning 30 days after receipt by STE of such notice, either party may submit such matter to binding arbitration on an expedited basis. Such expedited arbitration shall be conducted before a single neutral arbitrator in accordance with Section 22(b).
ii) For Internet and New Media.
A) STE’s right to distribute the STE Services over the Internet and New Media shall be subject to STE utilizing, and requiring any entity distributing the STE Services over the Internet or New Media to implement, at all times content protection technology on the Pictures that are no less stringent or robust than the standards set forth on Exhibit C hereto and incorporated herein by this reference, and the usage model set forth on Schedule U hereto and incorporated herein by this reference.
B) Suspension. If Licensor has reasonable cause to believe that STE’s security measures or Internet/New Media copy protection technology are not providing adequate protection with respect to the delivery of the Pictures over the Internet or New Media, Licensor shall have the right to suspend the availability via the Internet or New Media (“Suspension”) of any one or all of the Pictures on the STE Services by delivering a notice to Licensee of such suspension (“Suspension Notice”). Upon receipt of a Suspension Notice, STE shall take steps immediately to remove the Pictures or make the Pictures inaccessible via the Internet or New Media from the STE Services as soon as commercially feasible (but in no event more than seven (7) calendar days after receipt of such notice or, if applicable, such response). If the cause that gave rise to a Suspension is corrected, repaired, solved or otherwise addressed in the reasonable satisfaction of Licensor, the Suspension shall terminate upon Licensor’s delivery to STE of a notice thereof (“Reinstatement Notice”). For clarity, no period of Suspension shall extend the applicable License Periods for any Pictures in time, and upon a notice that a Suspension has ended, the License Period(s) shall end as otherwise provided herein. In no case may Licensor suspend STE’s rights hereunder unless it issues similar suspension notices to all licensees of Licensor that are affected by the security breach that caused Licensor to issue a Suspension Notice to STE, including without limitation all Licensor Affiliates, provided, that all such licensees are distributing substantially similar content (in terms of the window, format (i.e., HD/SD) and run time) over the Internet or New Media.
c) Previews. Subject to the limitations of this Section 16, unencrypted transmission of the Pictures during Free Previews held for the purpose of promoting STE’s Services to non-subscribers shall be permitted only as follows:
i) On the STE Services, STE shall be entitled to unrestricted local previews, which shall last not longer than 60 consecutive days, and up to four (4) national previews per Year, which shall last not longer than five consecutive days (each, a “Free Preview”), provided, that all such Free Previews shall only be transmitted via a platform on which the STE Service is, or is going to be within 60 days of such preview, transmitted in accordance with the terms of this Amended & Restated Amendment. No Picture may be exhibited on more than four Exhibition Days on a Territory-wide basis during a single Free Preview. No Pictures may be exhibited during a free preview unless included in an unencrypted exhibition of the entire channel of the STE Service. For purposes of clarification, STE shall have the right to offer a preview of the SOD service only if (A) such preview is concurrent with a preview of the STE Pay Television Service to which such SOD service relates or (B) such preview is offered only to consumers that are already subscribers to the STE Service to which such preview relates.
ii) All exhibitions during Free Previews shall be subject to the limitations on the license of that Picture set forth above.
iii) Notwithstanding anything to the contrary in this Section 16(c), unencrypted exhibitions of Free Previews over the Internet or New Media is expressly prohibited.
17. Insurance. Licensor shall procure and maintain at its own cost and expense the following insurance policies for the duration of the Amended & Restated Amendment:
a) Commercial General Liability including blanket contractual for the limits of $1,000,000 each occurrence and $2,000,000 in the aggregate.
b) Producer's Errors & Omissions or Media Liability for the usual and customary coverages of such policies for the limits of $3,000,000 per claim and $5,000,000 in the aggregate. A claims-made policy will be acceptable providing that there is no lapse in coverage.
c) The above policies referenced in Sections 17(a) and 17(b) are to be endorsed to show STE , its parent, subsidiary and affiliated companies, its licensees, and the officers, directors, agents and employees as additional insureds; have a Severability of Interest clause; a prior thirty (30) days written notice of cancellation and that the above liability policies are primary and any insurance maintained by STE is non-contributory.
d) All of the insurance carriers of Licensor will be licensed to do business in the states and/or countries where operations or services of the Licensor are performed or provided. All of Licensor’s insurance carriers will have an A.M. Best Guide rating of at least A- or better.
e) Certificate(s) of insurance and the additional insured endorsement will be delivered to STE as soon as practicable after the execution of the Amendment. Licensor has the option to self insure provided that such party complies with all self insurance governmental regulations and remains financially stable. Licensor is responsible for all deductibles and/or self insured retentions under Licensor’s insurance program.
18. Notification. All notices hereunder shall be in writing and shall be sent by certified (return receipt requested) or registered mail, by air courier service, by personal delivery, or by facsimile confirmed by mail (provided, that, notices of breach hereunder may not be made by facsimile) to the address (or fax number) of the party for whom it is intended as set forth at the head of this Amended & Restated Amendment, and
a) in the case of Licensor to:
Sony Pictures Entertainment Inc.
10202 West Washington Boulevard
Culver City, CA 90232
Fax: 310-244-0510
Tel: 310-244-4692
Attention: General Counsel
with copies to:
Sony Pictures Television Inc.
10202 West Washington Boulevard
Culver City, CA 90232
Fax: 310-202-3700
Tel: 310-202-3777
Attention: President
and:
Sony Pictures Television Inc.
10202 West Washington Boulevard
Culver City, CA 90232
Fax: 310-244-1798
Tel: 310-244-8239
Attention: President, Distribution
b) and in the case of STE to:
Starz Entertainment, LLC
8900 Liberty Circle
Englewood, CO 80112-7057
Fax: 720-852-6245
Attention: Executive Vice President, Programming
with copies to:
Starz Entertainment, LLC
8900 Liberty Circle
Englewood, CO 80112-7057
Fax: 720/852-6279
Attention: General Counsel
and:
Starz Entertainment, LLC
8900 Liberty Circle
Englewood, CO 80112-7057
Fax: 720/852-6249
Attention: Senior Vice President, Business Affairs, Programming
or to such other address (or fax number) as any party may hereafter specify in a notice sent in accordance with the foregoing. A notice shall be deemed delivered five (5) business days after mailing (other than mailings confirming a telefax); all telecopied materials shall be deemed delivered on the business day on which they are received by the addressee as evidenced by a copy of the confirmation sheet showing the time and date of the transmission thereof if such telefax was also sent by mailing; and all materials personally delivered shall be deemed served when received by the party to whom they are addressed. Courier notices shall be deemed served one (1) business day after sender’s timely delivery to the express mail and courier company.
19. Guaranty. Nothing in this Amended & Restated Amendment shall amend, void or otherwise affect that certain Guarantee and Indemnity Agreement, dated as of January 26, 2000, made by Liberty Media Corporation, and such Guarantee shall continue to remain in full force and effect in accordance with the terms thereof.
20. Other Matters.
a) “Making of …” Programs.
i) With respect to the Pictures, STE shall have the following rights and obligations with respect to any “Making of” program which relates to any motion picture theatrically distributed in the Territory by an SPE Group Member (each, a “Making Of”). Licensor shall notify STE in writing if Licensor intends to or has produced a Making Of not less than six months prior to the then scheduled Initial Theatrical Release, if Licensor desires that any party exhibit such Making Of. STE shall then notify Licensor not later than ten days after receipt by STE of such notice whether or not STE will exhibit such Making Of, provided, that STE shall be required to comply with the annual volume requirements set forth below. If STE notifies Licensor that STE will not exhibit such Making Of (or if STE fails to provide notification to Licensor within such ten day period), Licensor shall have the right to license such Making Of to any other Television service. With respect to the Pictures, STE shall be obligated to accept, during each Year, and thereafter exhibit in accordance with the requirements hereinafter set forth, (a) the lesser of 10 Making Ofs per Year that relate to Pictures theatrically released by a theatrical distribution arm of Licensor (other than “Sony Pictures Classics”), or the total number of Making Ofs for such Year that relate to Pictures theatrically released by a theatrical distribution arm of Licensor (other than “Sony Pictures Classics”) and (b) the lesser of six Making Ofs per Year that relate to Pictures theatrically released by “Sony Pictures Classics”, or the total number of Making Ofs for such Year that relate to Pictures theatrically released by “Sony Pictures Classics”. STE shall in no case be obligated to exhibit more than two Making Ofs (that have not been previously exhibited on a STE Service) per month.
ii) With respect to each Making Of exhibited by STE, STE shall have the following rights and obligations: STE shall have the exclusive right (as against Television services in the Territory) to exhibit such Making Of from the first day of the month prior to such motion picture’s scheduled initial theatrical release until the last day of the second month after such motion picture’s scheduled initial theatrical release, and during such motion picture’s first Pay Television license period (either hereunder or under any applicable Pay Television agreement relating to such motion picture), and during such motion picture’s second Pay Television license period (either hereunder or under any applicable Pay Television agreement relating to such motion picture), provided, that Licensor shall have the right to exhibit such Making Of during any Pay Television license period only via a form of exhibition by which Licensor would be permitted to exhibit such motion picture during such period. There shall be no License Fee for any Making Of. With respect to a Making Of that relates to a motion picture theatrically released in the Territory by an SPE Group Member (other than “Sony Pictures Classics”), STE shall exhibit such Making Of for not less than six exhibitions, at least two of such exhibitions shall be between the hours of 6:00 p.m. and midnight (one of which two prime-time exhibitions shall be on the channel currently known as Encore or Starz) and at least four of such exhibitions shall occur during the 28 day period commencing two weeks prior to such motion picture’s scheduled initial theatrical release and ending two weeks thereafter. With respect to a Making Of that relates to a “Sony Pictures Classics” release, STE shall exhibit such Making Of for not less than nine exhibitions, at least three of such exhibitions shall be between the hours of 6:00 p.m. and midnight and at least four of such exhibitions shall occur during the 28 day period commencing two weeks prior to such motion picture’s scheduled initial theatrical release and ending two weeks thereafter. Inadvertent failure by STE to comply with the exhibition requirements set forth in this Section 20(a) shall not be deemed a breach of this Amended & Restated Amendment. Additionally, the periods during which STE is permitted and required to exhibit each Making Of shall be based upon the scheduled initial theatrical release date and STE shall not be in breach of this Amended & Restated Amendment as a result of any violation of this Section caused by a change in the initial theatrical release date if such change in initial theatrical release date occurs less than 100 days prior to the originally scheduled initial theatrical release date.
iii) Each Making Of shall have a run time of either 15 or 24 minutes, as determined in Licensor’s sole discretion, and shall be closed captioned, if available. STE shall have the right to place the logo of any STE Service in the opening and closing credits of each Making Of in connection with the exhibition of such Making Of on the STE Services.
b) Library and Other Amendments and Future Library Agreement. The parties shall enter into an amendment to the existing Library Agreement and all other existing agreements between the parties wherein Licensor is licensing motion pictures to an STE Service to conform them wherever applicable to this Amended & Restated Amendment; provided that the foregoing shall not alter the License Periods, Exhibition Days, financial terms or any other inapplicable provisions. For the avoidance of doubt, Licensor’s delivery obligations under the Library Agreement shall be negotiated in good faith. After the full execution of the Amendment by both parties, the parties shall negotiate in good faith to enter into a new Library Agreement based on the terms and conditions agreed to herein, other than financial terms.
21. Miscellaneous.
a) This Amended & Restated Amendment and the Exhibits hereto constitute the entire understanding of the parties hereto relating to the subject matter hereof and supersede all previous understandings, commitments or representations concerning the subject matter hereof. This Amended & Restated Amendment may not be modified, nor may any provision be waived, except in a writing signed by the party to be charged therewith. No payment under this Amended & Restated Amendment shall operate as a waiver of any provision hereof. No waiver of any breach or default under this Amended & Restated Amendment shall operate as a waiver of any preceding or subsequent breach or default. The parties each acknowledge that the other party has not made any representations other than those which are contained herein or therein. Without limiting the generality of the foregoing, it is expressly agreed that no changes, deletions or additions to any draft of this Amended & Restated Amendment shall be utilized in any manner in interpreting the intent of the parties with respect to the final executed Amended & Restated Amendment.
b) The parties shall promptly execute, acknowledge and deliver to one another all other documents which either party may reasonably require to effectuate any of the purposes and intents of this Amended & Restated Amendment.
c) Any ambiguities shall be resolved without reference to which party may have drafted this Amended & Restated Amendment.
22. Governing Law; Arbitration; Venue; Jurisdiction. This Amended & Restated Amendment and all matters collateral hereto shall be construed and enforced in accordance with the laws of the State of California applicable to contracts executed and performed entirely therein.
a) Each of the parties hereby irrevocably agrees that the state and federal courts located in Los Angeles, California shall have sole jurisdiction over any suit or other proceeding arising out of or based upon this Amended & Restated Amendment (other than disputes that are related to provisions that are subject to arbitration as set forth herein and disputes arising in connection with provisions related specifically to STE’s Internet rights hereunder), and each party hereto hereby waives any claim that it is not subject personally to the jurisdiction of said courts or that any such suit or proceeding is brought in an inconvenient forum or improper venue. Each of the parties hereto irrevocable agrees that service of process in any such suit or other proceeding shall be properly made if delivered to the addresses set forth in Section 18.
b) Each of the parties hereby irrevocably agree that any dispute, claim or controversy arising out of or relating to the Internet rights and obligations of the parties under this Amended & Restated Amendment, or the breach, enforcement, interpretation or validity of such Internet rights, including the scope or applicability of this Amended & Restated Amendment to arbitrate such disputes, and that the issues as provided in Sections 2(b)(ii), 15 and 16(b)(i)(F) shall be determined by binding arbitration in Los Angeles, California, before one arbitrator that is a retired judge on JAMS’ panel. The arbitration shall be administered by JAMS for binding arbitration under its Comprehensive Arbitration Rules and Procedures if the matter in dispute exceeds $500,000 in value, or under its Streamlined Arbitration Rules and Procedures if the matter in dispute is less than $500,000 in value, each in accordance with the provisions below.
i) The parties shall be entitled to conduct discovery in accordance with Section 1283.05 of the California Code of Civil Procedure, provided that (a) the arbitrator must authorize all such discovery in advance based on findings that the material sought is relevant to the issues in dispute and that the nature and scope of such discovery is reasonable under the circumstances, and (b) discovery shall be limited to depositions and production of documents unless the arbitrator finds that another method of discovery (e.g., interrogatories) is the most reasonable and cost efficient method of obtaining the information sought.
ii) Judgment on the arbitration award may be entered in any court having jurisdiction. The arbitrator shall be empowered to consider and enter provisional remedies. The arbitrator may, in the arbitration award, allocate all or part of the costs of the arbitration, including the fees of the arbitrator and the reasonable attorneys’ fees of the prevailing party.
c) Neither party shall be entitled or permitted to commence or maintain any action in a court of law with respect to any issue in this Amended & Restated Amendment which is subject to arbitration hereunder until such matter shall have been submitted to arbitration as herein provided and then only for the enforcement of the arbitrator’s award; provided, that prior to the appointment of the arbitrator, or for remedies beyond the jurisdiction of an arbitrator, at any time, either party may seek pendente lite relief, including a temporary restraining order or preliminary injunction in Los Angeles, California, without thereby waiving its right to arbitration of the dispute or controversy under this Section 22.
23. No Editing. STE shall exhibit each Picture in its entirety including all titles, credits and copyright notices, and shall not cut or delete from any Picture without the express written consent of Licensor. Subject to guild and contractual restrictions, STE shall be permitted to time-compress any Picture at a rate no faster than 25 frames per second (based on a normal running time of 24 frames per second). If STE desires to time compress a Picture, it shall first notify Licensor and request a time-compressed version of such Picture. If Licensor fails to deliver to STE a time compressed version of such Picture within 30 days of receipt of such notice, STE may create such version, subject to contractual restrictions. All costs to create such time compressed versions/masters (e.g., editing, duplication, encoding/transcoding) and delivery shall be STE’s sole responsibility. Inadvertent failure to air any Picture in its entirety as specified above shall not be considered a breach of the Amended & Restated Amendment, but STE shall nevertheless indemnify Licensor (and the other parties identified in Section 12(b) above) against any resulting claims, losses, etc. Subject to third party restrictions, STE shall have the right to include an intermission in all Pictures with a running length of two and one half (2 1/2) hours or longer.
24. Breach and Cure. In the event a party breaches a representation, warranty or undertaking under this Amended & Restated Amendment, it shall have the right to cure such breach within 30 days of the delivery of notice of such breach from the non-breaching party (provided, that STE shall have ten days from receipt of notice from Licensor to cure a failure to make a payment when due under this Amended & Restated Amendment). In addition to such rights and remedies under law or equity, and not by way of limitation thereof or election with respect thereto, if STE fails to make a payment when due to Licensor, after notice and the expiration of the ten day cure period referred to in the first sentence of this Section 24 Licensor may (x) terminate this Amended & Restated Amendment including all licenses granted by it hereby, (y) promptly retrieve the physical materials delivered by it pursuant hereto and/or (z) maintain an action at law for damages against STE.
a) It shall also be an event of default hereunder if any proceeding shall be instituted by or against STE (constituting an event of default by STE) or Licensor (constituting an event of default by Licensor) seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for its or for substantially all of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 60 days, or any of the actions sought in such proceeding shall occur; or STE or Licensor, as applicable, or its parent(s) shall take any corporate or limited liability company action to authorize any of the actions set forth above in this Section.
b) In the event of any uncured breach of this Amended & Restated Amendment by either party, the other party shall be entitled to seek, in addition to any other remedies that it may have pursuant to this Amended & Restated Amendment or at law or in equity, injunctive relief or an order of specific performance. No failure or delay by either party in exercising any right, power or privilege hereunder will operate as a waiver thereof, nor will any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.
25. Confidentiality. It is acknowledged that neither Licensor nor STE shall disclose to any third party (other than its respective employees, directors and officers, in their capacity as such, on a need-to-know basis), any information with respect to the provisions and financial terms of this Amended & Restated Amendment except:
a) to the extent necessary to comply with law or the valid order of a court of competent jurisdiction, in which event(s) the party making such disclosure shall so notify the other as promptly as practicable and (if possible, prior to making such disclosure) shall seek confidential treatment of such information, it being understood that the parties will cooperate in obtaining such protective orders or other actions as may be deemed necessary to protect the confidentiality hereof,
b) to the extent necessary to comply with S.E.C. or similar disclosure requirements, in which event(s) the party making such disclosure shall so notify the other as promptly as practicable and (if possible, prior to making such disclosure) shall seek confidential treatment of such information, it being understood that the parties will cooperate in obtaining such protective orders or other actions as may be deemed necessary to protect the confidentiality hereof,
c) to its parent or affiliated companies, their banks, auditors and attorneys and similar professionals, provided, that such companies, banks, auditors and attorneys and similar professionals agree to be bound by the provisions of this Section 25,
d) in order to enforce in court its rights pursuant to this Amended & Restated Amendment,
e) license fee information to profit participants,
f) window information (start and end date) and holdback information to other “licensees”
g) to a bona fide prospective buyer or financier, provided, that any such person or entity first executes a written confidentiality agreement pursuant to which the person or entity agree(s) to be bound by the provisions of this Section 25.
26. Canada, Mexico.
a) Licensor shall not authorize any Pay Television exhibition of any Picture in Canada or Mexico prior to the Availability Date of such Picture hereunder.
b) Prior to the conclusion of STE’s First License Period, Licensor shall not authorize the exhibition of any Picture by any Canadian or Mexican Television free broadcast station which can be received over-the-air in the Territory or any Canadian or Mexican Television station or Television service that is retransmitted on any cable system or other Television system in the Territory; provided, that with respect to any Picture for which STE’s First License Period is 18 months (in accordance with the provisions of Section 3(a)(iii) above), the foregoing “holdback” shall expire on the date that is sixteen months after the commencement of STE’s First License Period.
27. Licensor Certification. Licensor shall provide STE with the following notices and certifications, each of which shall be executed by an officer of Licensor or an officer of Sony Pictures Television Inc.:
a) Within 30 days of the date on which Licensor sets the first to occur of each Picture’s Initial Home Video Release, Initial Video-On-Demand Release, or Initial Pay-Per-View Release, but in no case later than the earliest to occur of any of such dates, Licensor shall provide STE with a notice setting forth such Picture’s date of Initial Theatrical Release, General Theatrical Release (if applicable), the date of completion of principal photography, Availability Date and estimated Film Rentals. Additionally, the notice required pursuant to the foregoing sentence shall be delivered for each “A” Film, SPC Film and “B” Film designated by Licensor pursuant to Section 4(a)(i) not later than 120 days prior to the Availability Date for the motion picture to which such notice relates.
b) Within fifteen days after each Picture’s Availability Date, Licensor shall provide STE with a statement setting forth such Picture’s actual Film Rentals.
c) Additionally, if, at the time of theatrical release of a Qualifying Film that is Theatrically Released By an SPE Group Member during the Term, Licensor reasonably believes that such motion picture will not meet at least one of the Minimum Requirements, or if such motion picture will be released by means of Home Theater, Licensor shall provide STE a notice setting forth such information within 30 days of such motion picture’s Initial Theatrical Release. Notwithstanding any notice delivered under this subsection (c) which indicates that a motion picture will not meet at least one of the Minimum Requirements, if Licensor subsequently determines that such motion picture will qualify as a Picture hereunder, Licensor shall so notify STE by providing the notices set forth in subsections (a) and (b) above within the time frames set forth therein.
d) Licensor shall provide notice to STE upon Licensor’s release of any Picture for Limited Home Video Release.
28. Audit.
a) Licensor’s Audit Rights.
i) Licensor, through its outside auditor, which shall be subject to STE’s approval (with STE hereby pre-approving the so-called “Big 4” accounting firms and any non-affiliated entity that is at the time of an audit permitted hereunder providing audit services for Licensor) shall have the right to inspect and audit STE’s books and records required to verify information relevant to, and to determine whether STE is in compliance with, this Amended & Restated Amendment, including, but not limited to, Sections 2(b)(v) and 2(c)(vii) (“Licensor MFN Provisions”), Section 2(c) and Section 6. The parties acknowledge that STE shall not be required to disclose any documents subject to attorney/client privilege or other evidentiary legal privilege to Licensor in the course of such audit. Licensor may elect to conduct such audit (A) at any time within five business days after receipt of a notice delivered to Licensor in accordance with a the applicable Licensor MFN Provisions and (B) no more than one time during any Year and such audits shall not cover time periods previously audited except to review additional information not available at the time of such prior audit. Any audit shall be conducted at STE’s home office and shall be made by such person or persons Licensor shall designate in accordance with the first sentence of this Section 28(a)(i) (“Approved Licensor Auditor”) during reasonable business hours upon reasonable prior notice and shall not last on-site for more than 20 consecutive business days, provided STE and its affiliates have supplied within a reasonable period of time all information necessary to conduct standard auditing procedures.
ii) Additionally, any audit performed as a result of Licensor’s exercise of its rights under Section 28(a)(i)(A) above shall be subject to the following conditions: (1) prior to performing such audit, the Approved Licensor Auditor shall enter into a confidentiality agreement with Licensor and STE, pursuant to which the Approved Licensor Auditor shall agree to not disclose any information to Licensor other than in accordance with the conditions set forth herein; (2) if the Approved Licensor Auditor determines, following such audit, that Licensor’s rights under the applicable Licensor MFN Provision(s) have not been triggered, the Approved Licensor Auditor shall so inform Licensor and STE and no other information shall be provided to Licensor in respect of such audit; (3) if the Approved Licensor Auditor believes, following such audit, that Licensor’s rights under the applicable Licensor MFN Provision(s) have been triggered, the Approved Licensor Auditor shall so inform only STE, and the Approved Licensor Auditor and STE shall attempt to resolve such apparent trigger; (4) if the Approved Licensor Auditor and STE, after discussions, determine that Licensor’s rights under the applicable Licensor MFN Provision(s) have not been triggered, the Approved Licensor Auditor shall so inform Licensor and STE and no other information shall be provided to Licensor; (5) if the Approved Licensor Auditor and STE, after discussions, either determine that Licensor’s rights under the applicable Licensor MFN Provision(s) have been triggered or are unable to agree as to whether Licensor’s rights under the applicable Licensor MFN Provision(s) have been triggered, the Approved Licensor Auditor shall provide to Licensor only such information as directly pertains to such trigger and the exercise of Licensor’s rights under the applicable Licensor MFN Provision(s). For the purposes of clarification, no audit performed under this Section shall relieve STE of its obligation to continue to provide notices to Licensor under the Licensor MFN Provision(s) if and when appropriate.
b) STE’s Audit Rights.
i) STE, through its outside auditor, which shall be subject to Licensor’s approval (with Licensor hereby pre-approving the so-called “Big 4” accounting firms and any non-affiliated entity that is at the time of an audit permitted hereunder providing audit services for either STE or LMC) shall have the right to inspect and audit Licensor’s books and records required to verify information relevant to this Amended & Restated Amendment, including but not limited to Sections 3(b), 4, 15 and Licensor’s domestic film collection and billing reports (and any settlements related thereto) relating to the exploitation of each Picture commencing upon Licensor’s notification to STE of each Picture’s Availability Date. The parties acknowledge that Licensor shall not be required to disclose any documents that are subject to attorney/client privilege (or other evidentiary legal privilege) to STE in the course of such audit. STE may conduct such audits no more than one time during any Year and such audits shall not cover time periods previously audited except to review additional information not available at the time of such prior audit. Any audit shall be conducted at Licensor’s home office and shall be made by such person or persons STE shall designate in accordance with the first sentence of this Section 28(b)(i) during reasonable business hours upon reasonable prior notice and shall not last on-site for more than 20 consecutive business days, provided Licensor and its affiliates have supplied within a reasonable period of time all information necessary to conduct standard auditing procedures.
ii) Incontestability. STE may not conduct an audit which covers a time period more than two and one-half years earlier than the date of notification of intent to audit. All information becomes incontestable if not objected to in writing within 30 months of issuance to STE of the relevant Film Rental statement delivered pursuant to Section 27(b), and, if timely objected to, becomes incontestable unless STE initiates formal legal proceedings (assuming no “settlement”) within 12 months of submitting its written objection. This incontestability provision shall supersede any otherwise applicable statute of limitations.
iii) Disputed Fees. Any disputed License Fee for any Picture licensed hereunder shall not cause a delay to the timely payment of the License Fee. Agreed upon adjustments to the total License Fee will be made against any amounts owed on subsequent Pictures or reimbursed by Licensor. If a determination of an overpayment or underpayment of any License Fee is agreed to by the parties or by adjudication, interest shall accrue on such amount from the date paid or due, as applicable, at the prime rate as published from time to time in The Wall Street Journal, plus one percent.
c) Audit Report. Except as otherwise set forth in this Section 28, the auditing party shall, upon completion of any audit, furnish the audited party with a copy of the resulting audit report.
d) Tolling. If there is an audit (other than by STE or Licensor, as applicable) already in the process or that has been scheduled during the time period that STE or Licensor, as applicable, has requested, then STE and Licensor shall reschedule STE or Licensor’s, as applicable, audit to commence, unless otherwise mutually agreed by the parties, no later than sixty (60) days from the requested audit start date and STE or Licensor’s, as applicable, time period to commence the requested audit for such period shall be tolled if necessary for an equivalent period of time.
e) Confidentiality. All information received by the auditing party as a result of any audit permitted hereunder shall be subject to the confidentiality provisions of Section 25 hereof.
f) Reporting. If STE has a reasonable basis to believe that it has a number of Internet Subscribers, including Multiplier effects, equal to at least 75% of the then applicable Internet Cap, then STE shall deliver written reports to Licensor on a quarterly basis with respect to the number of Internet Subscribers it has in relation to the Internet Cap. Once STE is required to deliver a report, STE shall continue to report each quarter. Such reports shall set forth STE’s total number of Internet Subscribers and sufficient information to allow Licensor to determine how STE arrived at such number. In addition, each time that STE remits payment with respect to Internet License Fees, STE shall submit a statement to Licensor and sufficient information to allow Licensor to determine how STE arrived at the Internet License Fees; provided, however, that STE shall not be required to submit a statement to Licensor with respect to explaining the basis for its calculations with respect to the Netflix Amount (as defined in Exhibit A). In addition to the above and Licensor’s audit rights hereunder, Licensor shall have the right to request up to two extra written reports per year with regard to any of the items described in this Section 28(f); provided, however, that Licensor shall not have the right to request such extra reports once quarterly reporting has begun.
29. Program Guides. STE shall provide Licensor with copy(s) of STE’s program guide contemporaneously with delivery of such guides to STE’s customers, provided, that occasional failure to timely deliver such program guides shall not be deemed a material breach hereunder provided that STE acts with good faith to remedy such failure.
30. Assignment. This Amended & Restated Amendment may only be assigned by either party hereto, without the consent of the other party, to a party’s parent, subsidiary or affiliated entity. No such assignment shall be effective until any such assignee shall expressly assume in writing all of the assignor’s obligations. Notwithstanding the foregoing, in the event that Licensor (or its then primary theatrical distribution arm, provided, that in such case its primary production arm is also merged or consolidated in the same transaction) or STE is merged or consolidated with and into, or transfers all or substantially all of its assets to any other entity, Licensor or STE, as applicable, may and shall assign this Amended & Restated Amendment and its rights hereunder to such entity and cause such entity to assume its obligations hereunder, provided that with respect to any assignment to an entity other than a Licensor Affiliate, any provision of this Amended & Restated Amendment relating to Licensor Affiliates shall be of no further force or effect, and that any agreements with a Licensor Affiliate entered into pursuant to this Amended & Restated Amendment shall be terminated as of the effective date of such assignment. In addition, Licensor may assign mortgage or hypothecate its rights to receive all or portion of the License Fee payments due from STE hereunder, provided, that (i) a copy of such assignment, mortgage or hypothecation is delivered to STE, (ii) STE shall not be obligated to make payments or disbursements to more than one entity, (iii) such assignment, mortgage or hypothecation is duly acknowledged by an authorized officer of Licensor; further, provided, that the applicable assignee, mortgagee or hypothecee provides STE with a non-disturbance letter which is reasonably acceptable to STE, STE agrees to make the License Fee payments to such assignee, mortgagee or hypothecee without offset, deduction, counter-claim or other credits which STE may have or claim to have against any SPE Group Member except for any offset, deduction, counter-claim or other credits which may arise under the terms of this Amended & Restated Amendment. Any assignment of this Amended & Restated Amendment by either party shall not affect or otherwise discharge such party’s obligations hereunder to the other party, and the assigning party agrees to provide its written acknowledgement thereof in connection with any such assignment. Any purported assignment or transfer by either party of any of its rights or obligations under this Amended & Restated Amendment other than in accordance with the provisions of this Section 30 shall be void.
31. Press Release. Licensor and STE shall mutually agree as to the form, content and release date of any press release related to this Amended & Restated Amendment, provided, that the parties agree to issue a press release announcing the Amendment within a reasonable period of time after the later of execution of the Amendment or the Amendment Date.
32. Counterparts. This Amended & Restated Amendment may be executed in counterparts, each of which signed shall constitute an original, and all such counterparts shall constitute one and the same instrument.
33. Severability. If any provision of this Amended & Restated Amendment is, for any reason, held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Amended & Restated Amendment, but this Amended & Restated Amendment shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. If, moreover, any restriction or provision of this Amended & Restated Amendment is, for any reason, held to be too broad as to duration, scope, activity or subject, it shall be construed by limiting and reducing such provision or restriction so as to be enforceable to the extent compatible with applicable law, although Licensor and STE hereby agree that said restrictions and other provisions of this Amended & Restated Amendment are fair and reasonable as of the Amendment Date. In any such event, Licensor and STE shall endeavor in good faith to replace any invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. By way of clarification, a provision shall not be considered “illegal”, “unenforceable” or “invalid” for purposes of (or for purposes of giving rise to the application of) this Section 33 if such provision is held to be “illegal”, “unenforceable” or “invalid” against a party hereto by reason of such party’s bankruptcy, insolvency, receivership, dissolution, liquidation, winding up or termination or cessation of existence or otherwise by reason of something that is personal to such party (i.e., such provision is held to be “illegal”, “unenforceable” or “invalid” based upon circumstances that are applicable only to such party).
34. Effect of Amended & Restated Amendment.
a) The VONGO Letter Agreement shall be terminated as of the Amendment Date and shall be of no further force or effect.
b) All rights and obligations set forth under this Amended & Restated Amendment pertaining to Picture qualifications, designation and caps (Section 4(a)), the Availability Date, delivery requirements (Section 9), First License Period (Section 3(a)(i)), and the financial obligations set forth in Exhibit A related thereto, shall be effective for all Pictures with Initial Theatrical Releases on or after January 1, 2009, provided that with respect to any Second License Period that commences after January 1, 2009, the delivery requirements herein shall apply to any Picture for which delivery has not already been made. All other rights with respect to all Pictures which are currently under license to STE under the Original Agreement shall be as set forth herein beginning as of the Amendment Date. All rights, remedies and obligations of the parties pursuant to the Original Agreement with respect to any period prior to the Amendment Date shall continue in full force and effect except as set forth in Exhibit A hereto with respect to the Netflix Released Claims.
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IN WITNESS WHEREOF, the parties have executed this Amended & Restated Amendment as of the Amended & Restated Amendment Date.
STARZ ENTERTAINMENT, LLC
By:
Robert Clasen
Its: Chief Executive Officer
SONY PICTURES ENTERTAINMENT INC.
By:
Leah E. Weil
Its: Senior Executive Vice President & General Counsel
EXHIBIT A
RATE CARD
I. LICENSE FEE
Subject to the exceptions set forth in Section 1(B) of this Exhibit A, the License Fee for each Picture shall be based on the tables below (“Rate Card”). The final License Fee is calculated from the percentage of the incremental US. theatrical Film Rentals at each level:
A. Rate Card
1. For Pictures with General Theatrical Release (or, if no General Theatrical Release has occurred, Initial Theatrical Release) in Years 2009, 2010 and 2011:
| |Incremental |Cumulative Fee at |
|Film Rentals: |Percentage: |Highest Point in Range: |
| $207.34 million |0% |$22.5 million |
2. For Pictures with General Theatrical Release (or, if no General Theatrical Release has occurred, Initial Theatrical Release) in Years 2012 and 2013:
| |Incremental |Cumulative Fee at |
|Film Rentals: |Percentage: |Highest Point in Range: |
| $207.34 million |0% |$19.69 million |
B. Exceptions.
1. With respect to two Pictures with a General Theatrical Release (or, if no General Theatrical Release has occurred, Initial Theatrical Release) in each of Years 2009, 2010 and 2011(but not Year 2012 or 2013), which two Pictures shall be the two Pictures with the highest Film Rentals for such release Year for which the License Fee would be higher if computed in accordance with the table below (in lieu of the table above), the final License Fee shall be calculated in accordance with the following table:
| |Incremental |Cumulative Fee at |
|Film Rentals: |Percentage |Highest Point in Range: |
| $191.67 million |0% |$22.5 million |
2. Up to one Picture with a General Theatrical Release (or, if no General Theatrical Release has occurred, Initial Theatrical Release) in each of 2012 and 2013 may have a License Fee of greater than $15.44 million, but in no case more than $19.69 million, in each case as determined in accordance with the rate card under I.A.2 above.
3. For each “B” Film licensed by STE hereunder, STE shall pay to Licensor a license fee equal to sixty-five percent (65%) of the applicable License Fee set forth on this Exhibit A, provided, however, that in no event shall such license fee be greater than Seven Million Dollars ($7,000,000) for any Third Party Rent-A-System Film.
II. INTERNET LICENSE FEES
In addition to the amounts set forth above, STE shall pay to Licensor the amounts per Open Internet Subscriber to an STE Service set forth below (collectively, the “Internet License Fees”) (other than Netflix until the Netflix Expiration Date); provided, however, that in no event shall STE be required to pay Licensor more than an aggregate of $20 million per Year in Internet License Fees. The aggregate number of Open Internet Subscribers who subscribed to or were authorized to access the STE Service shall be calculated as the average number of Open Internet Subscribers over each Year (determined by taking the average number of Open Internet Subscribers each month (provided the same day is used consistently for each month on a licensee-by-licensee basis) and dividing by 12) at the end of each Year and the Internet License Fees due to Licensor with respect thereto shall be paid to Licensor no later than 60 days following the end of such Year.
|Aggregate Number of Open Internet Subscribers to all STE |Amount per Open Internet |
|Services*: |Subscriber: |
|0 to 10 million |$.33 |
|10 – 15 million |$.50 |
|15 – 20 million |$.75 |
|20 – 25 million |$1.00 |
| 25 – 30 million |$1.25 |
*Open Internet Subscriber numbers do not take into consideration the number of Open Internet Subscribers who actually use the service. Open Internet Subscriber numbers also do not take into consideration any Multiplier effects for purposes of calculating the Internet License Fees. Any consumer that is an Open Internet Subscriber as a result on subscribing to any STE service via a Licensor Affiliate shall not be counted as an Open Internet Subscriber, for purposes of determining the Internet License Fee. For clarity, the Internet License Fee is a “per subscriber” fee, and not a “per picture” fee, and as such the Internet License Fee set forth in this Amended & Restated Amendment shall cover all motion pictures licensed from Licensor under any agreement.
Calculation Example: If STE signs an agreement to license an STE Service to an Open Internet Service and there are 15 million Open Internet Subscribers to such service that have purchased such STE Service or are otherwise authorized to access it, then Licensor would be owed $5,800,000. (10 million Open Internet Subscribers at $.33 per Open Internet Subscriber) $3,300,000 + (5 million Open Internet Subscribers at $.50 per Open Internet Subscriber) $2,500,000 = $5,800,000.
STE shall pay to Licensor the amounts of $2 million on January 15, 2009, $2 million on January 15, 2010 and $2 million on January 15, 2011 (such aggregate amount, the “Netflix Amount”) in connection with the Internet exploitation by STE until the Netflix Expiration Date of any motion picture licensed to STE by Licensor under any agreement through the Netflix service on an SOD basis and on the Starz Play linear service in accordance with the terms of this Amended & Restated Amendment. If STE’s relationship with Netflix is terminated in 2009, then no payments shall be made hereunder in Years 2010 and 2011. Without conceding liability or making an admission of guilt or responsibility, the amounts paid hereunder shall be in full and complete satisfaction of any claim made by Licensor in connection with STE’s relationship with Netflix and the Netflix service as of the Amendment Date (the “Netflix Released Claims”). The parties hereby release, acquit, and forever discharge each other and any person related to or in privity with each other, from any and all claims, demands, rights, liabilities, and causes of action of any kind or nature whatsoever, known or unknown, foreseen or unforeseen, arising out of, by virtue of, or in connection with the Netflix Released Claims. Notwithstanding the foregoing, nothing in the foregoing is intended to waive or limit Licensor’s rights or remedies relating to or arising from any breach of this Amended & Restated Amendment by STE with respect to Netflix or its licensees or affiliates that may occur on or after June 30, 2009.
Waiver of California Civil Code Section 1542. To effect a full and complete general release as described with respect to the Netflix Released Claims, Licensor expressly waives and relinquish all rights and benefits of section 1542 of the Civil Code of the State of California, and does so understanding and acknowledging the significance and consequence of specifically waiving section 1542. Section 1542 of the Civil Code of the State of California states as follows:
A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.
Thus, notwithstanding the provisions of section 1542, and to implement a full and complete release and discharge of the Netflix Released Claims Licensor expressly acknowledges that the releases and waivers it gives in connection with the Netflix Released Claims are intended to include in their effect, without limitation, all claims and obligations as described above that Licensor does not know or suspect to exist in its favor at the time of signing the Amendment, and that this Amended & Restated Amendment contemplates the extinguishment of any such claims and obligations. Licensor acknowledges that it may later discover facts different from or in addition to those it now knows or believes to be true regarding the matters released or described with respect to the Netflix Released Claims, and even so agrees the releases contained with respect to the Netflix Released Claims shall remain effective in all respects notwithstanding any later discovery of any different or additional facts. Licensor assumes any and all risk of any mistake in connection with the true facts involved in the matters, disputes, or controversies described with respect to the Netflix Released Claims or with regard to any facts now unknown to Licensor relating to those matters.
III. BONUS.
In addition to the amounts set forth above, STE shall pay to Licensor the amounts set forth below on the dates set forth below:
|Payment Amount: |Payment Due Date: |
|$47.5 million |January 15, 2010 |
|$47.5 million |January 15, 2011 |
|$47.5 million |January 15, 2012 |
|$47.5 million |January 15, 2013 |
|$47.5 million |January 15, 2014 |
EXHIBIT B
TECHNICAL SPECIFICATIONS
With respect to each Picture:
(A) Licensor shall permit access to a standard definition and high definition video master or mezzanine level file free of scratches, splices, dirt and other visual defects of technical quality in accordance with Television SMPTE standards and suitable for exhibition on Pay Television in the Territory in accordance with STE’s standards (as set forth in Section L below) (“Master”) at a laboratory designated by Licensor (“Laboratory”), of a closed-captioned English language version and a Latin American Spanish language version of each Picture for tape-to-tape transfer for Exhibition by Pay Television as specified in this Exhibit. Delivery of the Master(s) to the Laboratory shall take place not later than four months prior to such Picture’s First License Period. Any fees or expenses to produce a Master shall be payable solely by Licensor. Each closed-captioned version of each Picture shall be in compliance with the minimum specifications set by the National Captioning Institute as of the date of delivery.
(B) Each Master shall be made available to STE at the Laboratory for the purpose of preparing, at STE’s cost and expense and for STE’s use as provided for in this Amended & Restated Amendment, the number of videocassettes and videotapes or the mezzanine level files (or such other medium as is the then current standard within the Pay Television industry) of such Picture(s) required and ordered by STE hereunder (“Video Reproductions”). Licensor shall execute the Laboratory Access Letter attached as Schedule 1 to this Exhibit B, and thereby authorize the Laboratory to prepare for and release to STE such Video Reproductions. Licensor shall deliver such executed Laboratory Access Letter to the Laboratory and to STE’s “Traffic Coordinator” no later than four months prior to such Picture’s First License Period. At the time of delivery of the Laboratory Access Letter to the Laboratory and STE, Licensor shall provide written notice of the measured action-to-action running time of such Picture.
(C) Each Master that Licensor shall deliver to the Laboratory shall be a full-frame panned and scanned NTSC component digital master (digital betacam, or mezzanine level file, or equivalent) created from any one of the following (in order of STE’s preference), free of all commercial breaks, black spaces or slugs and, except as otherwise specified in the Amended & Restated Amendment and except for watermarks, all encoding technologies, including, without limitation, any technology which would prevent copying or duplication by recipients of the Service:
(i) a 35mm interpositive made from the original final-cut theatrical negative, timed and color-corrected; or
(ii) a 35mm internegative made from a timed, color-corrected interpositive; or
(iii) a 35mm color reversal intermediate negative made from the original final-cut theatrical negative, timed and color-corrected; or
(iv) a 35mm composite print, printed three points light overall, on Eastman Kodak low contrast film stock (or film stock of quality comparable in STE’s sole discretion) made from the original final-cut theatrical negative; or
v) a 35mm composite print, printed three points light overall, on Eastman Kodak low contrast film stock (or film stock of quality comparable in STE’s sole discretion) made from a first generation color reversal intermediate or first generation internegative.
Notwithstanding the foregoing, if technology is used by Licensor to “film” a motion picture, which technology does not use 35mm film (e.g., digital cameras), then the component digital master preferred by STE shall be made from the highest quality digital source available.
(D) Each Master shall include audio in perfect synchronization from a 5.1 digital audio master (or level copy) or a Lt-Rt (2 track Dolby Surround Matrix Encoded) digital audio master (or level copy), providing the sound for such picture was produced in 5.1; or solely a Lt-Rt digital audio master (or level copy) providing sound for such picture was produced only in Lt-Rt; or solely a standard stereo digital audio master (or level copy) if the sound for such picture was produced only as standard stereo; or solely a monaural audio master (or level copy), with the mono signal present on two tracks in perfect phase if the sound for such picture was produced only as monaural. With respect to any Picture originally produced in a foreign language or for which Licensor has available only a foreign language version, Licensor shall deliver to the Laboratory a Master or mezzanine file meeting the requirements and specifications of this Exhibit B, either dubbed into the English language or subtitled in English, provided that if Licensor has both a dubbed and subtitled version of such Picture, STE shall have the right to access both versions. With respect to any Picture that contains text or voice-over, Licensor shall also provide, if requested by STE, textless background material and audio material free of voice-overs, if available.
(E) The main and end titles, subtitles and title inserts for such Picture shall be in the English language and within the television safe area so that all lettering shall fully appear on the television screen.
(F) Licensor shall deliver to STE correct and complete copies of music cue sheets for each Picture, if available.
(G) STE shall inform Licensor if materials are not deemed acceptable no later than 45 days following STE’s receipt of the Video Reproduction and shall return such unacceptable materials to the Laboratory; provided, that, if STE fails to order a Video Reproduction within 30 days of the date specified in Section B, then its initial rejection of the materials shall occur no later the first to occur of 45 days following STE’s receipt of the Video Reproduction or 120 days prior to the first day of the License Period for a Picture. Licensor shall deliver (at its cost) to STE replacement materials within 30 days of receipt by Licensor of the unacceptable materials. If STE does not notify Licensor that any materials delivered hereunder are unacceptable within the time periods set forth in this Section G, STE shall continue to have the right to reject such materials, provided, that the License Period for such Picture to which such delivery relates shall not be adjusted.
(H) Within 90 days after the end of the last License Period for each Picture, STE shall degauss the Video Reproduction of such Picture and furnish Licensor with an appropriate certificate of destruction signed by an officer of STE. If STE does not degauss a Video Reproduction of a Picture after such Picture’s First License Period, STE shall store such Video Reproduction in a secure facility. Notwithstanding the foregoing, STE may, at its option, degauss the Video Reproduction of a Picture at the end of any of such Picture’s First License Period and request access to such Picture prior to such Picture’s subsequent License Period in accordance with the terms of this Exhibit B. If any material, or part thereof, is lost, stolen or destroyed, STE shall furnish Licensor with an appropriate certificate of destruction signed by an officer of STE.
(I) With respect to a foreign language Picture for which Licensor is not required to provide a Spanish language version, and does not provide a Spanish language version, STE shall have the right to create a Spanish language version, subject to Licensor’s approval and contractual restrictions, at STE’s cost and Licensor shall provide reasonable cooperation in the creation of such Spanish language version. In such case, Licensor shall deliver, upon request of STE, a separate stereo M&E track (or mono if stereo not available) and a final shooting script (in English) for such Picture.
(J) All costs (including shipping and forwarding charges and insurance) of transporting the Video Reproductions of any Picture within the continental U.S. shall be borne by STE and all costs (including shipping and forwarding charges and insurance) of transporting and returning the Master to the Laboratory shall be borne by Licensor.
(K) With respect to HDTV, Licensor shall provide a “clone” directly to STE in accordance with the technical specifications set forth in this Exhibit B. STE shall pay the cost of creating such “clone”, but not the cost of creation of any materials necessary to create such “clone. For purposes hereof, Licensor’s direct cost to create such “clone” shall not include any cost of corporate overhead or any research and development cost.
(L) STE shall have the right to reject a Video Reproduction for technical reasons if the Video Reproduction contains any of the following, or similar, technical problems; provided, that Video Reproductions shall not be considered rejectable if issues are related to creative intent or if issues are inherent to the original capture device and cannot be corrected.
|Video Dropouts |Audio Dropouts |Excessive scratching — more than one |
| | |continuous minute |
|Excessive Vertical or Horizontal Scratching |Moderate to Excessive picture jitter or weave |Faded/washed out colors that are not |
| | |representative of the theatrical version |
|Poor Audio Mix (Uneven Levels) |Moderate to excessive dirt/dust in quantity and |Excessive audio hiss/crackle from optical |
| |duration |tracks |
|Tape Creases |Blanking Shifts |Text out of TV safe zone |
|Moderate to excessive video noise (screen door |Excessive grain |Uncorrected or degraded color |
|effect) | | |
|Visible time code |Video pulls |Excessive color breathing |
|Video Color Banding |Stereo film delivered in mono |Video distortion |
|Video Artifacting |Poor pan and scan (excessive movement, characters|Slice cement/tape |
| |out of frame) | |
|Film tears |Splice lines |Sprocket holes/damage |
|Freeze frames |Moderate to excessive chemical stains |Color/Element separation |
|Out of synch audio |Video stutters |Time Compressed (if not requested) |
(M) Notwithstanding Licensor’s ability to designate the Laboratory, Licensor agrees that it shall reasonably cooperate with STE to resolve problems that arise as a result of such Laboratory’s pricing policies and personnel.
(N) If Licensor grants and STE accepts mezzanine level files, Licensor’s standard product metadata will be made available to STE upon request using a mutually agreed upon delivery method. STE will be given access to Licensor’s marketing sites for graphic requirements. In the event of a conflict between any terms of service for such marketing sites and any provisions of this Amended & Restated Amendment, the provisions of this Amended & Restated Amendment shall control.
(O) Licensor shall provide to STE two (2) screeners in DVD or file format no later than the DVD release of such Picture in the U.S. Licensor shall have the right to burn in SMPTE time code on the screeners and/or use other security measures deemed necessary by Licensor.
Schedule I to Exhibit B
LABORATORY ACCESS LETTER
SONY PICTURESENTERTAINMENT
ACCESS AUTHORIZATION FORM
TO: 12/17/99
CONTACT NAME:
PLEASE ACCEPT THIS DOCUMENT AS AUTHORIZATION FOR THE CLIENT(S) LISTED BELOW
TO ACCESS OUR TAPE MASTERS AT YOUR FACILITY. THIS LETTER PERMITS ACCESS UP TO THREE TIMES FOR THE MATERIALS LISTED BELOW.
ACCESS# |CLIENT NAME |TITLE |FEAT |TRLR |TV SPOT |OTHER | | | | | | | | | |
UNLESS OTHERWISE SPECIFIED, COSTS FQR DUPLICATION AND SHIPPING SHQULD BE BILLED
DIRECTLY TO THE CLIENT. EACH CUENT MAY BE ORDERING ADDITIONAL COLUMBIA TRISTAR,
TITLES, HOWEVER, ACCESS WILL BE GRANTED BY THIS OFFICE ON A TITLE BY TITLE BASIS.
IF A TRAILER IS INCLUDED ON OUR MASTER, IT SHOULD NOT BE DUPLICATED UNLESS WE
HAVE GRANTED ACCESS TO IT ABOVE.
CLIENTS SHOULD CONTACT THIS OFFICE IF THEY ENCOUNTER ANY PROBLEMS WITH THE
QUALITY OF THE MATERIAL THEY RECEIVE, OR IF THE ORDER CANNOT BE FILLED ACCORDING
TO THE CLIENTS SPECIFICATIONS.
PLEASE CONFIRM RECEIPT OF ACCESS APPROVAL.
NAME:
DATE:
TEL: 718 868-5815 Thanks,
FAX: 718 668-5911 Sandra Carolin
E-mail Address: sandra_carolin@spe.
CC:STE
EXHIBIT C
Content Protection Requirements And Obligations
This Exhibit C is attached to and a part of that certain Amended & Restated Amendment to Pay Television License Agreement, dated February 9, 2009 (the “Amended & Restated Amendment”), between Starz Entertainment, LLC and Sony Pictures Entertainment Inc. All defined terms used but not otherwise defined herein shall have the meanings given them in the Amended & Restated Amendment.
1. Content Protection System. All digital content delivered, transferred or transmitted via the Internet or New Media to, output from or stored on a Storage Device must be protected by a content protection system that includes digital rights management, conditional access systems and digital output protection (such system, the “Content Protection System”). The Content Protection System shall (i) be fully compliant with all the compliance and robustness rules associated therewith, and (ii) use only those rights settings, if applicable, that are consistent with and enforce the content usage model described in Schedule U (the “Content Usage Model”) attached hereto and incorporated herein by this reference.
2. Pre-Approved DRM.
1. The following DRM are approved by Licensor for streaming or downloading of digital content delivered in strict accordance with the rights granted to STE in the Amended & Restated Amendment and the Content Usage Model: Microsoft Windows Media DRM v 9 or greater, Microsoft Windows Media PlayReady DRM, Sony Marlin DRM, Adobe Flash Media Rights Management FMRMS.1.5 implementing RTMP-E or AIR DRM, and Silverlight implementation of Windows Media DRM and PlayReady DRM (collectively, the “Pre-Approved DRM”), and any future versions thereof, provided such future versions do not (i) materially denigrate or restrict the protections afforded in the current versions thereof; or (ii) alter the Content Usage Model, and only for so long as such DRM continue to implement the content protection requirements set forth in this Exhibit C (to the extent such requirements are implemented at the DRM level). Nothing herein shall be deemed to restrict STE from distributing the STE Services via the Apple iTunes ecosystem employing the Apple Fairplay DRM, provided that such distribution otherwise meets the requirements set forth in this Exhibit C and Schedule U.
2. STE shall be permitted to use any additional DRM that Licensor may approve in writing at any time during the Term for distribution of programs on an SOD basis (provided that if Licensor approves a DRM for distribution of programs on a VOD basis by another licensee and determines in its discretion that such DRM can also robustly support distribution on an SOD basis in a manner consistent with the Content Usage Rules, Licensor shall approve such DRM for use by STE in accordance with this Exhibit C). Upon written request of STE, Licensor agrees to negotiate in good faith the terms under which additional DRM may be approved.
3. Without limiting any of STE’s obligations to implement the content protection requirements and obligations set forth in this Exhibit C, Licensor acknowledges that the current versions of the Pre-Approved DRM that have been commercially released by their respective publishers as of the Amendment Date handle the implementation of the content protection requirements set forth in the following sections of this Exhibit C: 3.1.2, 3.1.3, 3.2, 3.3, 3.4, 3.7, 3.8, and 3.9, and are permitted for use under the terms of the Amended & Restated Amendment. STE and STE’s licensee’s sole responsibility with respect to the aforementioned provisions is to assure that such party employs a form of DRM that affords the protections requested in these provisions (and configures the DRM -- if the applicable DRM allows for different configurations or settings -- in a manner intended to afford such protections).
3. Content Protection System Requirements. With respect to the implementation of Content Protection Systems, the following additional requirements and settings shall also apply to all implementations:
1. Encryption.
1. The Content Protection System shall use cryptographic algorithms for encryption, decryption, signatures, hashing, random number generation, and key generation and the content delivery mechanism shall be nonproprietary, utilize time-tested cryptographic protocols and algorithms, and offer effective security equivalent to or better than AES 128. New keys must be generated each time content is encrypted. A single key shall not be used to encrypt more than one piece of content or more data than is considered cryptographically secure. Keys, passwords, and any other information that are critical to the cryptographic strength of the Content Protection System may never be transmitted or stored in unencrypted form. For the avoidance of doubt, the parties acknowledge that the pairing of a “seed” key and a “private” key for a unique key ID complies with the terms of this provision.
2. Decryption of (i) content protected by the Content Protection System and (ii) CSPs (as defined in Section 3.2.1 below) related to the Content Protection System shall take place in a secure processing environment.
3. The Content Protection System shall encrypt the entirety of the A/V content, including, without limitation, all video sequences, audio tracks, sub pictures, menus, subtitles, and video angles. Each video frame must be completely encrypted.
4. All content shall be transmitted and stored in a secure encrypted form. Content shall never be transmitted to or between devices in unencrypted form.
2. Key Management.
1. The Content Protection System must protect all critical security parameters (“CSPs”). CSPs shall include, without limitation, all keys, passwords, and other information which are required to maintain the security and integrity of the Content Protection System.
2. CSPs shall never be transmitted in the clear, transmitted to unauthenticated recipients, or stored unencrypted in memory.
3. Integrity.
1. The Content Protection System shall maintain the integrity of all protected content. The Content Protection System shall detect any tampering with or modifications to the protected content from its originally encrypted form.
2. Each installation of the Content Protection System on an end user device shall be individualized and thus uniquely identifiable. For example, if the Content Protection System (i.e., client software) is copied or transferred from one device to another device, it will not work on such other device without being uniquely individualized.
4. Secure Clock. The Content Protection System shall implement a secure clock. The secure clock must be protected against modification or tampering and detect any changes made thereto. If any changes or tampering are detected, the Content Protection System must revoke the licenses associated with all content employing time limited license or viewing periods.
5. Licenses.
1. A valid license, containing the unique cryptographic key/keys, other necessary decryption information, and the set of usage rules, shall be required in order to decrypt and play each piece of content.
2. Each license shall bound to either a (i) specific individual end user device or (ii) domain of registered end user devices.
3. Licenses bound to individual end user devices shall be incapable of being transferred between such devices; except where a digital file is transferred from one device to an intended device where it will be actually exhibited (e.g., a version intended for playback on a portable device may be delivered to a personal computer and thereafter transferred to a portable device if such portable version is not authenticated or viewable until it is moved from the personal computer to the portable device) (“Side Loading”).
4. Licensor agrees to discuss with STE in good faith an expansion of the Content Usage Model to include local copying or movement of content within a domain of registered end user devices, with any such expansion subject to Licensor’s prior written approval.
5. If a license is deleted, removed, or transferred from a registered end user device, it must not be possible to recover or restore such license except from an authorized source.
6. The Content Protection System implementations deployed by STE and its licensees shall not import or protect content from untrusted sources.
7. Protection Against Hacking.
1. Playback licenses, revocation certificates, and security-critical data shall be cryptographically protected against tampering, forging, and spoofing.
2. The Content Protection System shall employ industry accepted tamper-resistant technology on hardware and software components (e.g., technology to prevent such hacks as a clock rollback, spoofing, use of common debugging tools, and intercepting unencrypted content in memory buffers). Examples of techniques included in tamper-resistant technology are:
1. Code and data obfuscation: The executable binary dynamically encrypts and decrypts itself in memory so that the algorithm is not unnecessarily exposed to disassembly or reverse engineering.
2. Integrity detection: Using one-way cryptographic hashes of the executable code segments and/or self-referential integrity dependencies, the trusted software fails to execute and deletes all CSPs if it is altered prior to or during runtime.
3. Anti-debugging: The decryption engine prevents the use of common debugging tools.
4. Red herring code: The security modules use extra software routines that mimic security modules but do not have access to CSPs.
3. The Content Protection System shall implement secure internal data channels to prevent rogue processes from intercepting data transmitted between system processes.
8. The Content Protection System shall prevent the use of media player filters or plug-ins that can be exploited to gain unauthorized access to content (e.g., access the decrypted but still encoded content by inserting a shim between the DRM and the player).
9. Revocation and Renewal.
1. The Content Protection System shall provide a mechanism that revokes, upon written notice from Licensor of its exercise of its right to require such revocation in the event any CSPs are compromised, any and all playback licenses issued to (i) specific individual end user device or (ii) domain of registered end user devices.
2. The Content Protection System shall be renewable and securely updateable in event of a breach of security or improvement to the Content Protection System.
3. The Content Protection System shall be upgradeable, allow for backward compatibility if desired and allow for integration of new rules and business models.
4. Content and License Delivery. Content and licenses shall only be delivered from a network service to registered devices associated with an account. For accounts which allow user login the account must be protected with verified credentials. The credentials shall consist of at least a userid and password of sufficient length to prevent brute force attacks or that meets standard industry practice. Access to account credentials shall allow access to active credit card or other financially sensitive information to prevent unwanted sharing of such credentials. Account credentials must be transmitted securely to ensure privacy and protection against attacks. The parties acknowledge and agree that the services delivering of the STE Services via the Internet as of the Amendment Date comply with this requirement. The parties also acknowledge and agree that the billing, authentication and subscriber credentialing processes used by licensees of STE Services who are its usual and customary cable, satellite telephone company customers with respect to delivery of the STE Services on cable, satellite or IPTV platforms (to the extent such customers implement on Internet and New Media delivery the same billing, authentication and subscriber credentialing processes used for cable, satellite or telephone company subscribers), as well as those used by any customers of Licensor for its own VOD, SOD, PPV and Sell Through Electronic Video products and services via the Internet or New Media are deemed to comply with the terms of this provision.
5. Outputs.
1. STE shall use commercially reasonable efforts, should Licensor so request, to enable (and require its licensees to enable) the Macrovision content protection technology (set to “on” through the settings in the DRM) under circumstances where enabling such a setting does not cause a significant number of end users to encounter problems viewing the Pictures (as compared to Pictures that do not contain Macrovision content protection technology) due to performance problems with the STE Services or video players used by end users to view the STE Services, provided that Licensor consistently applies this requirement among all other licensees distributing Pictures using the same DRM or other format approved by Licensor. Licensor shall be responsible for any Macrovision license fees required to enable Macrovision with respect to the Pictures for so long during the Term as STE requires all other feature film licensors to the STE Services who require Macrovision to be responsible for such fees. If STE is required to enable Macrovision and to pay a license fee for Macrovision out of pocket, STE shall be entitled to a credit in the amount of such out of pocket license fees actually paid from the License Fees payable hereunder until such time as such license fees are recouped.
2. The Content Protection System shall use commercially reasonable efforts to enable CGMS-A content protection technology on all analog outputs from end user devices; provided that the application of CGMS-A will not negatively affect the functioning of STE or its licensee’s systems, or degrade the image quality of the Pictures. STE shall pay all royalties and other fees payable in connection with the implementation and/or activation of such content protection technology allocable to content provided pursuant to the Amended & Restated Amendment.
5.3 The Content Protection System shall prohibit digital output of decrypted protected content. Notwithstanding the foregoing, a digital signal may be output if it is protected and encrypted by High Definition Copy Protection (“HDCP”) or Digital Transmission Copy Protection (“DTCP”). For the avoidance of doubt, Pictures in High Definition resolution may only be displayed over HDMI with an HDCP connection enabled. Further, the Content Protection System may implement (i) Digital Video Interface version 1.0 (“DVI”) without HDCP and allow only Standard Definition or scaled Standard Definition output on such interface on personal computer platforms in accordance with the allowances for DVI outputs through the DVD-CCA and/or (ii) an exception for unprotected analog and digital outputs to allow only Standard Definition or scaled Standard Definition output on such interface on personal computer platforms in accordance with the allowances for analog and digital outputs through the DVD-CCA; provided, however, that in the event that the DVD-CCA authorizes an exception to current or future DVD-CCA allowances for any such output for personal computer manufacturers, Licensor acknowledges and agrees that STE shall be entitled to the benefit of such exception. Defined terms used but not otherwise defined in this Section 5.3 shall have the meanings given them in the DTCP or HDCP license agreements, as applicable.
5.3.1 A device that outputs decrypted protected content provided pursuant to the Amended & Restated Amendment using DTCP shall:
Deliver system renewability messages to the source function;
Map the copy control information associated with the program; the copy control information shall be set to “copy never” for EST, SVOD, VOD and PPV content and set to “copy once’ for PAY and FTA content in the corresponding encryption mode indicator and copy control information field of the descriptor (it being acknowledged that STE and STE’s licensees may Side Load a digitial file, and that Side Loading is not a violation of this provision);
Map the analog protection system (“APS”) bits associated with the program to the APS field of the descriptor;
Set the image_constraint_token field of the descriptor as authorized by the corresponding license administrator;
Set the eligible non-conditional access delivery field of the descriptor as authorized by the corresponding license administrator;
Set the retention state field of the descriptor as authorized by the corresponding license administrator;
Deliver system renewability messages from time to time obtained from the corresponding license administrator in a protected manner; and
5.3.2 A device that outputs decrypted protected content provided pursuant to the Amended & Restated Amendment using HDCP shall:
If requested by Licensor, deliver a file associated with the protected content named “HDCP.SRM” and, if present, pass such file to the HDCP source function in the set-top box as a System Renewability Message; and
Verify that the HDCP Source Function is fully engaged and able to deliver the protected content in a protected form, which means:
HDCP encryption is operational on such output,
Processing of the System Renewability Message associated with the protected content, if any, has occurred as defined in the HDCP Specification, and
There is no HDCP Display Device or Repeater on such output whose Key Selection Vector is in such System Renewability Message.
Without limiting any of STE’s obligations to implement the content protection requirements and obligations set forth in this provision, Licensor acknowledges that the DTCP and HDCP handle the implementation of the content protection requirements set forth in this provision, and that the use of HDCP and DTCP are permitted for use under the terms of the Amended & Restated Amendment.
5.4 The Content Protection System shall prohibit recording of protected content onto recordable or removable media.
5.5 Watermarking Requirements.
The Content Protection System or playback device must not remove or interfere with any embedded watermarks in protected content; provided, however, that if such embedded watermarks are altered, modified or degraded resulting from STE’s distribution of protected content in the ordinary course of its operations, such alteration, modification, or degradation shall not be a breach of this provision. Licensor shall use commercially reasonable efforts to ensure that any embedded information will not negatively affect picture or sound quality and will not disrupt or damage equipment or systems used in the ordinary preparation and distribution of content by STE.
STE’s delivery systems shall “pass through” any embedded copy control information without alteration, modification or degradation in any manner; provided, however, that nominal alteration, modification or degradation of such copy control information during the ordinary course of STE’s distribution of protected content shall not be a breach of this Section 5.5.
6. Geofiltering.
1. The Content Protection System shall take affirmative, reasonable measures to restrict access to Licensor’s content to within the territory in which the content has been licensed.
2. Licensee shall periodically review the geofiltering tactics and perform upgrades to the Content Protection System to maintain “industry standard” geofiltering capabilities.
7.0 Network Service Protection Requirements.
Other than Pictures delivered to, and stored by STE in facilities under its control (all of which are delivered by Licensor in an unencrypted format, and securely stored in STE’s facilities in an unencrypted format), all Pictures must be received and stored at content processing and storage facilities of a distributor in a encrypted or otherwise protected format using an approved protection system, it being understood that such distributor is permitted to decrypt the Pictures, where applicable, in order to transcode or otherwise process the Pictures within the distributor’s facilities. For the avoidance of doubt, Pictures distributed to subscribers must be encrypted in accordance with Section 3.1 of this Schedule C.
Documented security policies and procedures shall be in place. Documentation of policy enforcement and compliance shall be continuously maintained.
Access to content in unprotected format must be limited to authorized personnel and auditable records of actual access shall be maintained.
Physical access to servers must be limited and controlled and must be monitored by a logging system.
Auditable records of access, copying, movement, transmission, backups, or modification of content must be securely stored for a period of at least one year.
Content servers must be protected from general Internet traffic by “state of the art” protection systems including, without limitation, firewalls, virtual private networks, and intrusion detection systems. All systems must be updated to incorporate the latest security patches and upgrades.
All facilities within STE’s control which process and store content must be available for Motion Picture Association of America and Licensor audits upon the request of Licensor. STE shall use commercially reasonable efforts to make the facilities of its licensees distributing the STE Services available for similar audits.
Security details of the network services, servers, policies, and facilities shall be provided to and must be explicitly approved in writing by Licensor. Any changes to the security policies, procedures, or infrastructure must be submitted to Licensor for approval.
Content must be returned to Licensor or securely destroyed pursuant to the Amended & Restated Amendment at the end of such content’s license period including, without limitation, all electronic and physical copies thereof.
The parties acknowledge and agree that STE’s delivery of the STE Services via the Internet as of the Amendment Date comply with this requirement. The parties also acknowledge and agree that the facilities and processes of licensees of STE Services over the Internet or New Media who are its usual and customary cable, satellite telephone company licensees (where such licensees use the same infrastructure that is already in place to deliver STE Services via cable, satellite or IPTV, and not, for the avoidance of doubt, new or different infrastructure for delivery of the STE Services over Internet or New Media), as well as any customers of Licensor for its own VOD, SOD, PPV, Sell Through Electronic Video products and services via the Internet or New Media, are deemed to comply with the terms of this Section 7 (it being understood that STE shall pass through the requirements in this Section 7 in all new agreements with licensees with respect to delivery of the STE Services over the Internet or New Media that are entered into after the Amendment Date).
8.0 PVR Requirements. STE shall not authorize STE’s licensees delivering the STE services, nor any subscriber or end user of the STE Services to install or implement personal video recorder software or hardware that allows recording, copying, or playback of any protected content except as explicitly specified in the Content Usage Rules.
9.0 MFN. If, with respect to delivery of programming on an SOD basis over the Internet or New Media, Licensor agrees with another licensee to content protection requirements and obligations more favorable than those set forth herein, or permits its own SOD service to have content protection requirements and obligations more favorable than those set forth in this Exhibit C, Licensor shall promptly notify STE, and STE shall have the benefit of those same terms and conditions.
10.0 High Definition; Standard Definition. For purposes of this Exhibit C, “High Definition” shall mean any video resolution between 720p and 1080p (but no event may the STE Services distribute programming in a resolution greater than 1080p), and “Standard Definition” shall mean any resolution lower than 720p.
SCHEDULE U
Content Usage Model
STE Services delivered over the Internet and New Media (regardless of whether the STE Services are delivered by STE or its licensees) shall be delivered in strict accordance with the following Content Usage Model. An STE SOD Service may implement either the streaming model specified in Section 3 or the download model specified in Section 4.
1. Playback Clients. “Playback Clients” are devices or applications that can play or render Pictures received from the STE Services.
1. Each Playback Client must be uniquely identifiable.
2. Each Playback Client must be registered with a Starz account (or the account for the service of the STE licensee delivering the STE Services) (each an “Account”) prior to receiving content or playback licenses.
3. Each Playback Client must be registered with an Account in good standing in order to play included content.
4. Each playback client may only be associated or registered with a single STE or STE licensee Account at a time.
2. Accounts.
1. Users must have an active Account prior to viewing Programs on the STE Services or the services of the STE licensees delivering the STE Services.
2. All Accounts must be protected via unique account credentials consisting of at least a user id and password.
3. An authenticated session must timeout after 24 hours. The foregoing requirement shall not impact STE or its licensee’s ability to implement a mechanism that allows the service to remember login information or otherwise locally store a subscriber’s account credentials (i.e., by storing a cookie on the subscriber’s personal computer), which is distinct from session authentication.
4. Use of Account credentials must enable users to change password.
5. Each Account can have a maximum of 6 registered playback clients.
6. Playback licenses may be issued in accordance with the two usage models defined below: Section 3 “Playback Licenses – Streaming Model” or Section 4 “Playback Licenses – Download Model.”
3. Playback Licenses – Streaming Model.
1. Only a single playback license shall be issued per content viewing.
2. Each playback license shall be delivered and restricted to only registered playback clients.
3. Playback licenses shall not be transferable or copyable between playback clients.
4. Pictures are not playable without a playback license.
5. Pictures are not playable on a non-registered playback client.
6. Only STE and STE-licensed service providers can provide playback licenses for Pictures.
7. Playback licenses must be acquired at the start of viewing a Picture, and cannot be cached or stored on the applicable Storage Device after the earlier of viewing being stopped or 24 hours after the playback license was issued. [Suggest replacing with: “Playback licenses must be acquired at the start of viewing a Picture, cannot be cached or stored on the applicable Storage Device more than 24 hours after the playback license was issued, and must expire 24 hours after the playback license was issued.”]
8. Playback licenses are only delivered to subscribers with Accounts in good standing.
9. Playback licenses shall expire period within 24 hours of being issued. Resuming playback (after a stop) of a previously viewed (including partially viewed) stream requires acquisition of a new playback license.
10. If a playback client receives a new playback license while it already has a playback license or is playing a Picture authorized by another playback license, any Picture playing shall terminate, and the new playback license shall replace any existing playback licenses.
11. Each playback client may only have a single playback license at a time.
12. Only four playback licenses may be active at one time associated with a single Account. A playback license is considered active once it is issued, and may remain active until it expires 24 hours after being issued.
13. Prior to issuing a playback license, a playback client must be authenticated with its associated Starz Account (or the Account of the STE-licensed service) using the Starz Account credentials (or credentials of the STE-licensed service). For the avoidance of doubt, nothing contained herein shall limit a consumer’s ability to auto-login if such consumer has requested or otherwise consented to having such a feature active on his or her account.
4. Playback Licenses – Download Model.
1. Each playback license shall be delivered and restricted to a maximum of the up to 6 registered playback clients per Account.
2. Playback licenses shall not be transferable or copyable between playback clients; except that STE and its licensees shall be permitted to Side Load digital files embodying Pictures, and playback licenses.
3. Pictures are not playable without a playback license.
4. Pictures are not playable on a non-registered playback client.
5. Only STE and STE-licensed service providers can provide playback licenses for Pictures.
6. Playback licenses may only be cached or stored on a single registered playback client per Account.
7. Playback licenses are only delivered to subscribers with Accounts in good standing.
8. Playback licenses shall expire period within the earlier of:
1. the end of the License Period for the Picture authorized by such playback license; and
2. the end of the subscriber’s paid subscription period.
9. Each playback client may only have a single playback license at a time. For purposes of clarification, STE may implement a license “stacking” mechanism so long as no more than one single playback license is authorized at a time on a playback client and so long as such license delivery mechanism doesn’t violate Section 4.8 of this Schedule U.
10. Prior to issuing a playback license, a playback client must be authenticated with its associated Starz Account (or the Account of the STE-licensed service) using the Starz Account credentials (or credentials of the STE-licensed service). For the avoidance of doubt, nothing contained herein shall limit a consumer’s ability to auto-login if such consumer has requested or otherwise consented to having such a feature active on his or her account.
11. A playback client may be de-registered from an Account only if the following conditions are met:
1. the device is connected to the STE service or STE-licensed service (as applicable) that originally registered the device;
2. the subscriber has successfully authenticated with their Account credentials; and
3. the playback client has not been removed.
12. Upon removal of a playback client, all licensed Pictures thereon are immediately disabled.
5. Fraud Detection.
1. STE and its licensees shall use commercially reasonable efforts to ensure playback licenses for a single account are only delivered to a single household.
2. STE and its licensees shall use appropriate anti-fraud heuristics to prevent unauthorized access of Accounts.
6. MFN.
If, with respect to delivery of programming on an SOD basis over the Internet or New Media, Licensor agrees with another licensee to SOD usage model terms more favorable than those set forth herein or permits its own SOD service to have SOD usage model terms more favorable than those set forth in this Schedule U, Licensor shall promptly notify STE, and STE shall have the benefit of those same terms and conditions.
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