MOBILE LICENSING AND DISTRIBUTION AGREEMENT
MEMORY DEVICE LICENSING AND DISTRIBUTION AGREEMENT
AGREEMENT DATE November __, 2010
LICENSEE Key 1 Entertainment [Key 1 to confirm formal legal name]
[Key 1 to provide address]
Tel : [Key 1 to provide]
Fax : [Key 1 to provide]
LICENSOR Culver Digital Distribution Inc., an affiliate of Sony Pictures Home Entertainment, Inc.
LAUNCH DATE “Launch Date” means April 1, 2011; provided that (a) Licensee, in its sole discretion, may postpone such date up to a maximum of sixty (60) days (i.e., to no later than June 1, 2011) and (b) the Launch Date may be any other date mutually agreed by the Parties in writing. For the avoidance of doubt, Licensee shall not commence manufacturing Units until the Launch Date.
PROGRAMS (a) All Programs with United States box office revenues in excess of $75,000,000 (each, a “Megahit”) that have a DVD Street Date during the Term or a Regional Extension and (b) in each country of the Territory, such other Programs that are mutually agreed by the parties from Availability Lists, but no more than one hundred (100) Programs per country during each twelve (12) month period of the Term or Regional Extension, as applicable, and no more than three hundred fifty (350) Programs in the aggregate throughout the Territory during any twelve (12) month period. For the avoidance of doubt, Licensor may, in its sole discretion, withhold Programs on a title-by-title basis from distribution hereunder on USB Drives (which such holdback shall not affect Licensee’s right to distribute such Program hereunder on Memory Cards).
“Availability Date” means a date determined by Licensor in its sole discretion. Licensee acknowledges and agrees that Availability Dates for Programs will vary by country and language in the discretion of Licensor.
“DVD Street Date” means the date on which the applicable program is first generally made available in the applicable country for sale to the general public in the standard definition DVD format, as determined by Licensor in its sole discretion.
“Program” means a feature-length audio-visual program (a) that is initially released theatrically, direct-to-video or on television in the Territory in effect as of its Availability Date, (b) with an Availability Date during the Term or a Regional Extension, if any, and (c) for which Licensor unilaterally controls without restriction all rights, licenses and approvals necessary to grant the rights granted hereunder (which may vary from country to country within the Territory).
TERRITORY “Territory” means the following regions (each, a “Region”): Launch Region 1, Launch Region 2 and Launch Region 3 (collectively, the “Launch Territory”) and, conditioned on the mutual written agreement of the parties on a Region-by-Region basis: (a) Extension Developed Region 1, Extension Developed Region 2 and Extension Developed Region 3 (the “Extension Developed Territory” and collectively with the Launch Territory, the “Developed Group”), (b) Tier 2 Region 1, Tier 2 Region 2, Tier 2 Region 3 and Tier 2 Region 4 (the “Tier 2 Group”) and (c) the Emerging Market Region/Group (collectively with the Extension Developed Territory and the Tier 2 Group but excluding the Launch Territory, the “Extension Territory”). The Developed Group, the Tier 2 Group and the Emerging Market Region/Group are referenced herein individually each as a “Territory Group” and collectively as the “Territory Groups.” Each Region is defined as follows:
“Launch Region 1” means Italy and Italian-speaking Switzerland.
“Launch Region 2” means France, French-speaking Switzerland, Tunisia, Monaco, Morocco and Algeria.
“Launch Region 3” means Spain and Andorra.
“Extension Developed Region 1” means Germany, Austria and German-speaking Switzerland.
“Extension Developed Region 2” means England, Scotland, Wales, Northern Ireland, the Channel Islands, the Isle of man, Eire, Malta and Gibraltar.
“Extension Developed Region 3” means Belgium, Luxemburg, Holland (Netherlands), Denmark, Finland, Greenland, Iceland, Norway and Sweden.
“Tier 2 Region 1” means Turkey, Albania, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Montenegro, Poland, Romania and Serbia.
“Tier 2 Region 2” means Bahrain, Egypt, Israel, Jordan, Kuwait, Lebanon, Libya, Saudi Arabia, Syria and the United Arab Emirates.
“Tier 2 Region 3” means Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela.
“Tier 2 Region 4” means Hong Kong, Indonesia, Malaysia, Philippines, Singapore, Taiwan and Thailand.
“Emerging Market Region/Group” means China (including Macau), India, Armenia, Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, State Federation of Russia, Tajikistan, Turkmenistan and Ukraine and Uzbekistan.
RIGHTS GRANTED Subject to Licensee’s compliance with the terms and conditions of this Memory Device Licensing and Distribution Agreement (“Agreement”), Licensor grants to Licensee, and Licensee hereby accepts, a non-transferable and limited right and license, solely during the Term and any Regional Extension(s), at all times subject to the Usage Rules and the content protection and DRM specifications set forth in Exhibit A or otherwise agreed by the Parties in writing, to (a) pre-load onto Memory Devices one Program per Memory Device in the Licensed Language in the Approved Format, (b) individually package such Memory Devices (each, as packaged, a “Unit”) for sale to consumers (provided that Licensee shall designate different SKUs to Units on a country-by-country and Program-by-Program basis), (c) distribute Units to retailers located in the applicable Territory for sale to consumers solely in the applicable Territory, and (d) promote the Units in the applicable Territory, provided that, unless Licensor provides written notice to the contrary, Licensee may commence (i) manufacture of Units no earlier than six (6) weeks prior to the Availability Date of the applicable Program, (ii) shipping Units no earlier than two (2) weeks prior to the Availability Date of the applicable Program, (iii) communicating the availability of Units to retailers no earlier than eight (8) weeks prior to the Availability Date of the applicable Program, (iv) promoting Units at retail no earlier than four (4) weeks prior to the Availability Date of the applicable Program and (v) ensuring Units are available to consumers at retail no earlier than the Availability Date of the applicable Program. Licensee shall have the right to engage subdistributors to fulfill the foregoing rights, provided Licensee has given Licensor notice at least ninety (90) days in advance, which such notice shall identify the applicable subdistributor, Memory Devices, Programs, portion of the Territory, scope of exclusivity and such other information reasonably requested by Licensor. For each Program, Licensee shall be solely responsible for all obtaining and complying with all local ratings and government approvals necessary to distribute Units in each country of the Territory.
For the avoidance of doubt, unless Licensor gives its prior written approval on a case-by-case basis (in each such case, Licensee shall submit the applicable request at least thirty (30) days in advance, and in no event shall Licensor’s silence be deemed consent), Licensee shall not have the right (A) to bundle Units together in the same package with any mobile devices, personal computers, other memory devices (i.e., a bundle of a single Unit with one or more other Units or non-Unit memory devices), televisions, Blu-ray and/or DVD players, portable Blu-ray and/or DVD players, satellite navigation systems or other products, (B) to “soft-bundle” Units in connection with any such products (e.g., by offering discounted or free Units in conjunction with the purchase of such products or a coupon for discounted or free Units inside the packaging of such products) or (C) to distribute unpackaged Units.
EXCLUSIVITY In each Region that is part of the Territory, Licensor shall not distribute the Programs preloaded onto Memory Cards during the Term or Regional Extension (but not the Sell-Off Period), as applicable. For the avoidance of doubt, there shall be no restrictions on Licensor’s right to exploit the Program (a) outside the Regions that constitute the Territory, (b) by USB Drives or any other digital storage devices other than Memory Cards (whether inside or outside of the Territory), (c) in any language other than the Licensed Languages or (d) by any other means not expressly granted to Licensee.
FIRST RIGHTS (a) Extension Territory. Before Licensor grants a license to a third party concerning the exclusive or non-exclusive distribution of Programs, on an output or bulk quantity basis, during the Term by means of flash memory cards in any country of a Region that has not been added to the Territory, Licensor shall notify Licensee, and Licensee shall have thirty (30) days to give Licensor notice exercising its right to add the applicable Region to the Territory in accordance with the terms of this Agreement. Upon the expiration of such period, Licensor shall be entitled to grant such rights to the third party.
(b) USB Drive Exclusivity. On a title-by-title basis, before Licensor grants a license to a third party concerning the exclusive or non-exclusive distribution of a Program by means of portable USB flash storage media in any country of the Territory (expressly excluding Regions that have not been added to the Territory) during the Term or a Regional Extension, as applicable, Licensor shall notify Licensee, and Licensee shall have (30) days to make Licensor an offer concerning such rights, which Licensor shall have the right to accept or decline in Licensor’s sole discretion. Upon the expiration of such period (or upon Licensor’s rejection of Licensee’s offer, if earlier), Licensor shall be entitled to grant such rights to the third party.
APPROVED FORMAT “Approved Format” means a compressed digital file containing a Program in Standard Definition, in 8 Mbps MPEG2 or 20 Mbps MPEG2 format, in Licensee’s proprietary format and DRM known as K1CP - Key 1 Content Protection in accordance with the specifications set forth in Exhibit B and encrypted in accordance with the content protection requirements set forth in Exhibit A. “Standard Definition” shall mean any resolution equal to or less than 480 lines of vertical resolution (and equal to or less than 720 lines of horizontal resolution).
MEMORY DEVICES “Memory Devices” means (a) NAND flash memory cards (“Memory Cards”), including without limitation SD, Micro SD, Mini SD, CompactFlash, Smart Media, Multi-Media Card and xD memory cards and (b) portable NAND-flash-based USB storage media (“USB Drives”), in each case solely to the extent they (i) are compatible with the applicable Approved Devices in the Territory, (ii) support the Approved Format and (iii) are branded with Licensee’s “Key 1” branding and, unless Licensor gives its prior written approval on a case-by-case basis (in each such case, Licensee shall submit the applicable request at least thirty (30) days in advance, and in no event shall Licensor’s silence be deemed consent), are not co-branded. For the avoidance of doubt, Memory Devices expressly exclude hard drives.
APPROVED DEVICES “Approved Devices” means any device compatible with Memory Cards or USB Drives that supports the Approved Format (in the case of Memory Cards, including via an adapter to such a device).
LICENSED
LANGUAGES “Licensed Languages” means the original language of each Program with subtitles or dubbing, to the extent available, in (a) Italian for exploitation in Launch Region 1, (b) French for exploitation in Launch Region 2, (c) Spanish for exploitation in Launch Region 3, and (d) mutually-agreed languages applicable to each country of each other Region added to the Territory hereunder.
TERM The term during which Licensor may exercise the “Rights Granted” in the Launch Territory, and each Region of the Extension Territory added before the Launch Date, shall commence on the Launch Date (provided that no Unit may be manufactured prior to the Launch Date and no Unit may be made available to consumers prior to the Availability Date of the Program thereon) and shall terminate twenty-four (24) months thereafter (the “Initial Term”), unless earlier terminated in accordance with the terms of this Agreement. Licensor shall have the sole option, in its sole discretion, to extend the Initial Term on a Region-by-Region basis for one additional two-year period (the “Extension Period”), and shall exercise such option, if at all, by written notice to Licensee no later than thirty (30) days prior to the expiration of the Initial Term. For the Launch Territories and each Extension Territory Region added before the Launch Date, the Initial Term and the Extension Period, if any, shall together be the “Term,” and each 12-month period during the Term, commencing on the Launch Date, shall be a “Term Year.”
The term during which Licensor may exercise the “Rights Granted” in each Region of the Extension Territory added after the Launch Date but during the Term shall commence on the Regional Extension Date (provided that no Unit may be made available to consumers prior to the Availability Date of the Program thereon) and shall terminate twenty-four (24) months thereafter (each, if any, a “Regional Extension Initial Term”), unless earlier terminated in accordance with the terms of this Agreement. “Regional Extension Date” means, for a Region, the date such Region was added to the Territory hereunder (which such date, if not set forth in writing mutually agreed by the parties, shall be determined by Licensor). Licensor shall have the sole option, in its sole discretion, to extend each Regional Extension Initial Term on a Region-by-Region basis for one additional two-year period (the “Regional Extension Renewal Period”), and shall exercise such option, if at all, by written notice to Licensee no later than thirty (30) days prior to the expiration of the Regional Extension Initial Term. For each applicable Region, the Regional Extension Initial Term and the Regional Extension Renewal Period, if any, shall together be the “Regional Extension,” and each 12-month period during a Regional Extension, commencing with the Regional Extension Date, shall be a “Regional Year.”
Absent any breach of this Agreement by Licensee, (a) for a twelve (12) month period (“Sell-Off Period”) after the expiration of the Term and each Regional Extension (and not in the event of termination by Licensor by reason of Licensee’s breach), Licensee shall have the non-exclusive right to continue shipping its existing inventory of Units in the applicable Region(s) of the Territory (subject to the terms of this Agreement including, without limitation, payment of all License Fees); provided Licensee shall not advertise Units in such Region(s) during the last six (6) months of the Sell-Off Period or manufacture Units during the Sell-Off Period for shipping (or retail distribution) in such Region(s), and (b) provided Licensee has paid the applicable License Fees, Licensee shall have no obligation to recall Units that Licensee shipped to retailers during the Term, Regional Extension(s) or Sell-Off Period in accordance with the terms of this Agreement.
ANNUAL MINIMUMS For each Term Year and Regional Year, Licensee shall (a) manufacture and ship in each applicable Region the minimum number of Current Units and Library Units set forth in the table below, which such amounts are in the aggregate for all applicable Programs and not per Program, and (b) pay Licensor the applicable per-Region minimum guarantee set forth in the table below in the “Annual Regional MG” column (each, a “Annual Regional MG”). Such annual minimum quantities and minimum guarantees are crossable within a single Territory Group, but not across Territory Groups (e.g., the aggregate annual minimum quantities and minimum guarantees for each Region in the Developed Group can be crossed within the Developed Group but not crossed with the Tier 2 Group or the Emerging Market Region/Group), and shall not be subject to deduction for returns or any other reason. For the avoidance of doubt, no Annual Regional MG or minimum number of Current Units or Library Units shall arise in connection with a Region’s Sell-Off Period.
For the purpose of illustration, if the Territory on the Launch Date consists of the Launch Territory, Extension Developed Region 1 and Tier 2 Region 1, then the Annual Regional MGs for Term Year 1 are ($435,000 x 4) + ($435,000 x 1) = $2,175,000. In the Developed Group, the minimum number of Current Units for Term Year 1 is (50,000 x 4) = 200,000, and the minimum number of Library Units for Term Year 1 is (25,000 x 4) = 100,000, which in each case may be apportioned solely among the three Launch Territory Regions and Extension Developed Region 1. In the Tier 2 Group, the minimum number of Current Units for Term Year is (50,000 x 1) = 50,000, and the minimum number of Library Units for Term Year 1 is (25,000 x 1) = 25,000, which must be shipped (and sold at retail) solely in Tier 2 Region 1.
For the avoidance of doubt, the aggregate Annual Regional MGs for the three Regions in the Launch Territory for Term Year 1 is $1,305,000, and the aggregate Annual Regional MGs for the three Regions in the Launch Territory for Term Year 2 is $2,137,300. For each Term Year of the Extension Period, if any, the amounts set forth in the table shall be mutually agreed by the parties but in no event less than the amounts for Term Year 2.
“Current Unit” means a Unit manufactured by Licensee within the first twelve (12) months following the DVD Street Date of the Program contained on such Unit.
“Library Unit” means a Unit that is not a Current Unit.
|Territory Group |Term Year or |Minimum Number of |Minimum Number of |Annual Regional MG |
| |Regional Year |Current Units |Library Units |(per Region) |
| | |(per Region) |(per Region) | |
|Developed Group |1 |50,000 |25,000 |US$435,000 |
|(6 possible Regions) | | | | |
| |2 |83,000 |41,000 |US$712,433 |
|Tier 2 Group |1 |50,000 |25,000 |US$435,000 |
|(4 possible Regions) | | | | |
| |2 |83,000 |41,000 |US$712,433 |
|Emerging Market Region/Group |1 |100,000 |50,000 |US$435,000 |
|(1 Region) | | | | |
| |2 |166,000 |82,000 |US$720,600 |
MEGAHIT MINIMUMS For each Megahit that has a DVD Street Date during the Term or a Regional Extension, Licensee shall manufacture and ship within each Territory Group (to the extent such Territory Group is part of the Territory as of such DVD Street Date) at least thirty thousand (30,000) Current Units containing such Megahit, which such Current Units may be apportioned in Licensee’s discretion among each Region of such Territory Group (to the extent such Region is part of the Territory as of such DVD Street Date) but shall not be apportioned across Territory Groups. A “Megahit MG” shall accrue each time a Megahit has a DVD Street Date during the Term or a Regional Extension and shall be calculated, for each Territory Group is part of the Territory as of such DVD Street Date, as the product of the following: (a) thirty thousand (30,000) multiplied by (b) $7.20 for the Developed Group, $4.90 for the Tier 2 Group and (iii) $3.60 for the Emerging Market Region/Group. Current Units containing Megahits may be applied against the per-Region annual minimum Current Unit quantities set forth in the “Annual Minimum” section above. Megahit MGs are crossable with, and not cumulative with, Annual Regional MGs, meaning Licensee shall be obligated to pay Licensor Megahit MGs only to the exent the aggregate amount of Megahit MGs at any given time exceed the aggregate amount of Annual Regional MGs payable as of such time. For the avoidance of doubt, for each Territory Group in which the only Region(s) that are part of the Territory as of a Megahit’s DVD Street Date are in the Sell-Off Period, no Megahit MG or minimum number of Megahit Current Units shall arise.
For the purpose of illustration, if the Territory on the Launch Date consists of the Launch Territory, Extension Developed Region 1 and Tier 2 Region 1, and 6 Megahits have DVD Street Dates during Term Year 1, then the Megahit MG during Term Year 1 would be (6 x 30,000 x ($7.20 + $4.90)) = $2,178,000, and the minimum number of Current Units containing each such Megahit would be 30,000 in the Developed Group (to be apportioned solely among the three Launch Territory Regions and Extension Developed Region 1) and 30,000 in the Tier 2 Group (to be shipped (and sold at retail) solely in Tier 2 Region 1). Such Current Units would apply against the annual minimum Current Unit quantities for such Regions. Because the Annual Regional MGs for such Regions would be $2,175,000, the payable portion of the Megahit MG would be $3,000.
LICENSE FEE For each Term Year and Regional Extension, Licensee shall pay Licensor (a) the greater of (i) the sum of the applicable Annual Regional MGs and (ii) the sum of the Megahit MGs for such Term Year and Regional Extension and (b) beginning with the first month in which an Overage occurs and for each month thereafter, such Overage and any subsequent Overages.
“Overage” means, for each Region, the amount, if any, by which (a) the product of (i) the applicable Per-Unit License Fee set forth in the table below multiplied by (ii) the number of Units (in the aggregate across all Program titles) shipped by Licensee in the applicable Region during a Term Year or Regional Year exceeds (b) the greater of (i) the sum of the Megahit MGs for such Term Year or Regional Year (to the extent not previously recouped against Current Units shipped in other Regions) and (ii) the applicable Annual Regional MG. Such Per-Unit License Fees are graduated such that each Unit up to a certain threshold accrues a certain License Fee, and each Unit beyond such threshold accrues a lower License Fee (without reducing the Per-Unit License Fee accruing for Units below the threshold); and the threshold quantities of Units are determined on an annual basis for the applicable Term Year, Regional Extension or Sell-Off Period.
For the purpose of illustration, for Current Units shipped in Launch Region 1 in Term Year 1, the first 250,000 of such Current Units each accrues a Per-Unit License Fee of $7.20, each such Current Unit between 250,001 and 700,000 accrues a License Fee of $6.70 (and does not reduce the Per-Unit License Fee for the first 250,000 of such Current Units to $6.70), and so on; and the Per-Unit License Fee for the each of the first 250,000 Current Units shipped in Launch Region 1 in Term Year 2 shall revert to $7.20. Similarly, without regard to how many Current Units are shipped in Launch Region 1 in Term Year 2, the Per-Unit License Fee for the each of the first 250,000 Current Units shipped in Launch Region 1 in the Sell-Off Period shall revert to $7.20.
Overages shall accrue no later than sixty (60) days after the date the applicable Units have been shipped, shall be calculated on a monthly basis and shall be paid as set forth in the “Payment Terms” section below. No deductions of any kind are permitted before remitting payment to Licensor (including any tax, levy or charge, the payment of which shall be the responsibility of Licensee), except that, beginning with the first month in which an Overage occurs and for each month thereafter, Licensee may establish a reasonable reserve for returns on a Region-by-Region basis, provided that (a) such reserve shall not exceed twenty percent (20%) of the Overage for such Region for the applicable month, (b) for a Program shipped on both Current Units and Library Units, each return shall be applied against such reserve at the Per-Unit License Fee for Library Units until the number of such returns exceeds the number of Library Units containing such Program, (c) within the applicable category of Units (i.e., Current Units and Library Units), each return shall be applied against such reserve at the Per-Unit License Fee in effect when such return is calculated (e.g., if 250,010 Current Units had been shipped to date in Term Year 1 in Launch Region 1, the first 10 applicable Unit returns would be applied at $6.70 per Unit, and subsequent returns at $7.20 per Unit), (d) Licensee shall report to Licensee on a monthly basis the number of returned Units broken down by account, by Region, by Program and (e) any such reserve shall be liquidated, to the extent not used, upon the earlier of (i) one year from its establishment or (ii) the expiration or termination of this Agreement. For each returned Unit, Licensee shall either (A) repurpose such Unit for re-shipping (whereupon the applicable Per-Unit License Fee shall accrue) or (B) permanently wipe the Program from such Unit (whereupon Licensee shall provide Licensor with a certificate of destruction). To the extent Licensor approves Units containing more than one Program, the applicable Per-Unit License Fees shall accrue for each such Program. All amounts set forth in this Agreement are in United States dollars. For the avoidance of doubt, the price charged by Licensee for each Unit shall be established by Licensee in its sole discretion.
|Territory Group |Type of Unit |Number of Units |Per-Unit License Fee |
|Developed Group |Current Units |0 - 250,000 |$7.20 |
| | |250,001 - 700,000 |$6.70 |
| | |700,001 - 1,300,000 |$6.00 |
| | |1,300,001 - 1,750,000 |$5.00 |
| | |1,750,001+ |$4.10 |
| |Library Units |0 - 250,000 |$3.00 |
| | |250,001 - 700,000 |$2.80 |
| | |700,001 - 1,300,000 |$2.40 |
| | |1,300,001 - 1,750,000 |$1.90 |
| | |1,750,001+ |$1.30 |
|Tier 2 Group |Current Units |0 - 250,000 |$4.90 |
| | |250,001 - 700,000 |$4.50 |
| | |700,001 - 1,300,000 |$4.00 |
| | |1,300,001 - 1,750,000 |$3.40 |
| | |1,750,001+ |$2.90 |
| |Library Units |0 - 250,000 |$2.50 |
| | |250,001 - 700,000 |$2.30 |
| | |700,001 - 1,300,000 |$2.10 |
| | |1,300,001 - 1,750,000 |$1.75 |
| | |1,750,001+ |$1.50 |
|Emerging Market Group |Current Units |0 - 250,000 |$3.60 |
| | |250,001 - 700,000 |$3.35 |
| | |700,001 - 1,300,000 |$3.00 |
| | |1,300,001 - 1,750,000 |$2.50 |
| | |1,750,001+ |$2.05 |
| |Library Units |0 - 250,000 |$1.50 |
| | |250,001 - 700,000 |$1.40 |
| | |700,001 - 1,300,000 |$1.20 |
| | |1,300,001 - 1,750,000 |$0.95 |
| | |1,750,001+ |$0.65 |
PAYMENT TERMS For Term Year 1, Licensee shall pay (a) fifty percent (50%) of the aggregate Annual Regional MGs for the Launch Territory and each Region, if any, added to the Territory before the Launch Date (“First MG Payment”) no later than February 1, 2010 and (b) the remaining fifty percent (50%) of such aggregate Regional Aggregate MGs (“Second MG Payment”) no later than August 1, 2010. For each other Term Year, Licensee shall pay (A) fifty percent (50%) of the applicable aggregate Annual Regional MGs no later than the applicable anniversary of the First MG Payment and (B) the remaining fifty percent (50%) of such aggregate Annual Regional MGs no later than the applicable anniversary of the Second MG Payment. For each Region, if any, added to the Territory after the Launch Date, Licensee shall pay (I) fifty percent (50%) of the aggregate Annual Regional MGs for Regional Year 1 no later than the applicable Regional Extension Date, (II) the remaining fifty percent (50%) of such aggregate Annual Regional MGs for Regional Year 1 no later than six (6) months after such date, (III) fifty percent (50%) of the aggregate Annual Regional MGs for each other Regional Year no later than the applicable anniversary of the applicable Regional Extension Date and (IV) the remaining fifty percent (50%) of such aggregate Annual Regional MGs for such other Regional Year no later than six (6) months after such date. Licensee shall pay all Overages, if any, and all amounts by which the aggregate Megahit MGs exceed the aggregate Annual Regional MGs, if any, within ninety (90) days after they accrue. Each payment hereunder shall be to Licensor in accordance with wire transfer instructions provided by Licensor in writing.
REPORTING On a fortnightly basis and a monthly basis, Licensee shall provide to Licensor a statement in electronic form, which shall include on a Program-by-Program basis separately by country of retail distribution: (i) the quantity of Units manufactured during such time period, (ii) the quantity of Units sold during such time period, (iii) the quantity of Units shipped during such time period, (iv) the reserve for returns, (v) the quantity of Units returned during such time period, and action taken against the reserve (including whether such returned Units are repurposed or wiped), (vi) the License Fee per Unit, (vii) a calculation of the aggregate License Fees due for such time period, (viii) the applicable Annual Regional MGs and Megahit MGs, along with calculations of the recoupment thereof against the License Fees, (ix) a calculation of Overages, if any, during such time period, (x) the date of the statement and (xi) such other information and in such format as Licensor may reasonably request.
BONUS MATERIAL At Licensor’s discretion on a case-by-case basis, Licensee may include on each Unit containing a certain Program bonus material (e.g., “making of”, extra footage and/or promotional content) related to such Program (“Bonus Material”), to the extent such Bonus Material is available, clear for such use and approved by Licensor in its sole discretion.
MATERIALS Subject to full execution of this Agreement, Licensor shall deliver to Licensee a Master (as defined in the STAC) of each Program dubbed in the Licensed Languages (to the extent available), subtitles data in the Licensed Languages (to the extent available) and, as applicable, Bonus Material, all in accordance with delivery dates estimated by Licensor in its sole discretion which, for each Program, may vary by country; provided that Licensor’s delay in delivery shall not constitute a breach of this Agreement (and delivery within eight (8) weeks after Licensee’s selection thereof from an Availability List identifying an Availability Date for such Program in the applicable country shall in no event be deemed untimely). Licensor will provide Licensee access to an Internet site that makes available digital image data for use in packaging and promotional materials for the Units. For the avoidance of doubt, as between Licensor and Licensee, Licensee shall be solely responsible for converting each Master into the Approved Format, inserting subtitles, encrypting all content in accordance with Licensor’s DRM specifications, manufacturing or procuring the Memory Devices, pre-loading such content onto the Memory Devices to create Units, creating promotional materials for the Units and distributing and promoting the Units.
APPROVALS Licensee shall not load the Programs onto any Memory Devices until Licensor has approved the quality of Licensee’s applicable replication master in the Approved Format. Licensee shall not load third party audiovisual content, including trailers and other promotional material, or multiple Programs onto any Units without Licensor’s prior written approval on a case-by-case basis. All promotional materials and packaging for Units shall be subject to Licensor’s prior approval in accordance with Section 4 of the STAC, and shall not be co-branded without Licensor’s prior approval. All approval requests shall be sent to Licensor for the attention of Pete Wood, Vice President International Business Development Digital Media, Sony Pictures Home Entertainment, 2nd Floor, 25 Golden Square, London, United Kingdom, W1F 9LU, Pete_Wood@spe., (Tel) +44 (0)207 533 1434, (Fax) +44 (0)207 533 1254, unless otherwise instructed by Licensor.
AVAILABILITY LISTS “Availability List” means a list provided by Licensor identifying, on a country-by-country basis for the then-applicable Territory, (a) programs available for selection as Programs, (b) the availability date for each such program (which such availability dates are subject to change at Licensor’s sole discretion) and (c) the DVD Street Date and/or threshold date distinguishing Current Units from Library Units. Licensor shall provide Availability Lists on a monthly basis sixty (60) days in advance of the applicable month. For each country added to the Territory after the Agreement Date, the Availability Lists shall commence identifying program information applicable to such country within a reasonable time (provided that commencement of such information within eight (8) weeks after the addition of such country to the Territory shall in no event be deemed untimely).
STANDARD TERMS This Agreement comprises the above terms and conditions and the STAC and exhibits attached hereto. All capitalized terms used herein shall have the definitions set out above and if the definition is not contained herein shall have the definition set out in the STAC. In the event of any inconsistency between the STAC or an exhibit and the principal terms set forth above, then the principal terms set forth above shall prevail.
AGREED TO AND ACCEPTED:
|Key 1 Entertainment |Culver Digital Distribution Inc. |
| | |
|By _________________________________ |By ________________________________ |
| | |
|Title ________________________________ |Title ________________________________ |
1. DEFINITIONS.
“DRM” means a technology designed to protect digital content and the copyrights therein by enabling secure distribution and implementing usage rules that define the viewing rights associated with such content.
“End User” means any consumer who purchases or otherwise receives from Licensee a Unit.
“Master” shall mean an original language version of the applicable Program in digital format which Licensee can use to replicate such Program and associated DRM onto Memory Devices pursuant to the terms of this Agreement.
“Promotional Elements” means art, images and graphics provided by Licensor that are based on the Programs and/or the Proprietary Subject Matter related to such Programs, which items may be used by Licensee to create advertising or promotional materials (subject to Licensor’s prior written approval) only in connection with Licensee’s distribution of Units.
“Proprietary Subject Matter” means the title, trademarks, logos, characters, storylines, plots, designs, artwork and other creative elements contained in or related to Programs embodied in the Units.
2. PRICING; PAYMENT TERMS.
A. Licensee agrees to pay Licensor, on a non-refundable basis, the License Fees set forth in this Agreement. All fees shall be paid without set-off of any amount whatsoever whether based upon any actual or claimed debt or liability of Licensor to Licensee. All late payments shall bear interest at a rate of 1.5% per month during the time which any sums were owed and unpaid, or the highest rate allowed by law, whichever is lower. Unless otherwise instructed by Licensor, all payments shall be sent by electronic funds transfer to the account specified in the principal terms of this Agreement.
B. All applicable taxes, including but not limited to sales/use/value added taxes, transaction privilege taxes, gross receipts taxes, and other charges such as duties, customs, tariffs, imposts, and government imposed surcharges shall be stated separately in the principal terms of this Agreement. Licensor shall remit all such charges to the appropriate tax authority unless Licensee provides sufficient proof of tax exemption. In the event that Licensee is prohibited by law from making payments to Licensor unless Licensee deducts or withholds taxes therefrom and remits such taxes to the local taxing jurisdiction, then Licensee shall duly withhold such taxes and shall pay to Licensor the remaining net amount after the taxes have been withheld.
C. Licensee shall keep and maintain complete and accurate books of account and records at its principal place of business in connection with each of the Programs and pertaining to Licensee’s compliance with the terms hereof, including, without limitation, copies of the statements referred to in the “Reporting” section of the principal terms of this Agreement. Upon three (3) business days notice, Licensor shall have the right during business hours to audit and check at Licensee’s principal place of business Licensee’s books and records pertaining to the accuracy of the statements and other financial information delivered to Licensor by Licensee and the amount of the License Fees paid or payable hereunder. The exercise by Licensor of any right to audit or the acceptance by Licensor of any statement or payment, whether or not the subject of an audit, shall not bar Licensor from thereafter asserting a claim for any balance due, and Licensee shall remain fully liable for any balance due under the terms of this Agreement. If an examination establishes an error in Licensee’s computation of License Fees due with respect to the Programs, Licensee shall immediately pay the amount of underpayment plus interest thereon from the date such payment was originally due at a rate equal to the maximum rate permitted by applicable law. If such error is in excess of ten percent (10%) of such License Fees due for the period covered by such audit, Licensee shall, in addition to making immediate payment of the additional License Fees due, plus interest in accordance with the previous sentence, pay to Licensor (i) the costs and expenses incurred by Licensor for any audit and (ii) reasonable attorneys’ fees incurred by Licensor in enforcing the collection thereof.
3. ACCEPTANCE. All items shall be deemed accepted on delivery to Licensee or its designee; provided that if the items delivered hereunder are found to be materially defective as delivered, then during a period of thirty (30) days from the date of delivery, Licensor shall at its sole cost and expense, promptly replace defective item(s) returned by Licensee. In no event shall Licensor replace items (i) damaged by Licensee, Licensee’s employees or representatives, and/or (ii) produced by Licensee or its vendor(s). The foregoing warranty shall only extend to the Master and shall not apply to any Units manufactured by Licensee.
4. PROMOTIONS AND ADVERTISING; LICENSOR APPROVAL.
A. During the license term set forth in Section 7, below, Licensee may use Promotional Elements provided or made available by Licensor solely for the purpose of advertising, promoting and publicizing the distribution and/or availability of the Units. Licensee understands and agrees that Promotional Elements may not be available for every Program and that the type and quality of Promotional Elements may vary on title-by-title basis.
B. Licensee shall advertise the availability of Units for sale or promotional distribution only in the Territory.
C. Licensee covenants and warrants that (i) it shall fully comply with all instructions furnished in writing to Licensee by Licensor with respect to materials used by Licensee in connection with this Section 4 (including size, prominence and position), and (ii) the same shall not be used in a manner that may constitute an endorsement, express or implied, of any party, product or service. Notwithstanding the foregoing, Licensee may promote the availability of the Programs embodied on Units for viewing on selected Approved Devices in connection with promotional activities approved by Licensor. All packaging, advertising or promotional material created by or on behalf of Licensee that incorporates the Promotional Elements or promotes the availability of Units shall require the prior written approval of Licensor.
D. The rights granted in this Section 4 shall be subject to, and Licensee shall comply with, any and all restrictions or regulations of any applicable guild or union and any third party contractual provisions with respect to the advertising and billing of the Programs on Units in accordance with such instructions as Licensor may advise Licensee from time to time. In no event shall Licensee be permitted to use any excerpts from a Program, if at all, other than as provided and approved by Licensor in writing.
E. Notwithstanding the foregoing, Licensee shall not, without the prior written consent of Licensor, (a) modify, edit or make any changes to the Promotional Elements, or (b) promote the availability of Units by means of contest or giveaway. Appropriate copyright notices shall at all times accompany all Promotional Elements.
F. The names and likenesses of the characters, persons and other entities appearing in or connected with the production of the Programs shall not be used separate and apart from the Units or related Promotional Elements, which will be used solely for the purpose of advertising of the availability of such Units. No such name or likeness shall be used so as to constitute an endorsement or testimonial, express or implied, of any party, product or service, by “commercial tie-in” or otherwise. Licensee shall not use Licensor’s (or its affiliates’ or licensors’) name or logo or any Programs or Promotional Elements related thereto as an endorsement or testimonial, express or implied, by Licensor (or its affiliates), for any party, product or service provided by Licensee.
G. Within 30 calendar days after the last day of the license or distribution term for each Program, Licensee shall destroy (or at Licensor’s request, return to Licensor) all Promotional Elements which have been supplied by Licensor hereunder with respect to such Program and certify to Licensor in writing that such items have been destroyed.
H. Promotions related to the availability of movies or other content on Units may portray the availability of Programs for viewing on Approved Devices in a positive light, but in no event shall any such promotion contain negative messages about other means of programming distribution or claim that viewing programs on Approved Devices is superior to or better than any other means of programming distribution.
5. CUSTOMER SUPPORT. As between the parties, Licensee shall be solely responsible for, and shall bear the cost of, providing customer support to End Users. Licensee support shall include responding to End User inquiries related to the Units as well as the process of accessing the Programs contained therein on the End User’s Approved Device. Licensee will provide customer support pursuant to and consistent with Licensee’s then-existing customer support practices, which will include responding to End User inquiries via telephone and/or email, and which support will be of a nature, scope and quality that is at least equal to that which is customary for major electronics manufacturers and distributors in the Territory. Licensee shall provide contact information and hours of operation for Licensee’s customer support services in each country of the Territory and promptly inform Licensee of any changes thereto.
6. USAGE RULES, SPECIFICATIONS & SECURITY.
A. Usage Rules & Specifications. Programs pre-recorded or pre-loaded on Units and protected by the corresponding DRM must not be viewable on devices other than the Approved Devices. The Unit containing a Program must be inserted into an Approved Device in order for the End User to be able to view the Program loaded thereon. Pursuant to its associated DRM, Content must be tethered to the Unit onto which it was recorded. Any attempt by an End User or any other person to copy, delete, move or otherwise transfer the Program from the Unit must render such Program unviewable. Licensor shall not be responsible for any intentional or unintentional deletion or removal of Programs from Units by Licensee or End Users. An End User may not output, move or otherwise transfer Programs from such End User’s Approved Device to any other device or store or record any Programs on such End User’s Approved Device or other device. Licensee will inform End Users of the foregoing usage rules.
B. Security. Licensee shall store and transport the Materials in guarded and secure environments in accordance with the highest industry standards. Without limiting the foregoing or any other provision of this Agreement, Licensee shall: (a) take commercially reasonable measures to protect the Materials; (b) store the Materials in a secure environment at all times; (c) limit access to the Materials to employees and agents of Licensee who require such access for the performance of this Agreement; (d) store the Materials separately and as readily identifiable as Licensor’s property; (e) not destroy, deface or obscure any identifying mark on or relating to the Materials and (f) maintain the Materials in the condition in which they were delivered. Licensee shall further notify Licensor immediately in writing if it becomes aware of any information or the occurrence of any event relating to the loss of or tampering with any Materials or any unauthorized use of any Materials and shall cooperate with and assist Licensor in any action in relation to the infringement of Licensor’s rights in the Materials.
7. TERMINATION. Licensee’s license to use the materials licensed hereunder will terminate if Licensee breaches any provision of this Agreement if Licensee does not remedy such breach within fifteen (15) days of written notice of breach from Licensor. Upon termination, Licensee must destroy and/or return, at Licensor’s option, all Units and other items licensed by Licensor hereunder that are in Licensee’s possession as of the effective date of termination. In addition to any other remedy hereunder or at law or in equity, upon notice to Licensee, Licensor may terminate this Agreement, effective immediately upon delivery of such notice or such other date as set forth in the notice, if Licensee (other than as part of an out-of-court reorganization on a solvent basis) makes an assignment for the benefit of creditors, commences or files a petition in bankruptcy or consents to, or there is a request for, the appointment of a receiver, trustee, administrator, custodian, liquidator, or similar person or entity to take control over all or a majority of its assets or operations, if an involuntary bankruptcy petition is filed against Licensee, if the equivalent of any of the foregoing proceedings or acts referred to in this section, though known or designated by some other name or term, occurs, or if Licensee admits it is unable to pay its debts as they come due, becomes unable to pay its debts as they become due, or is otherwise insolvent.
8. RESERVATION OF RIGHTS; OWNERSHIP. All licenses, rights, and interest in, to and with respect to the Programs, Promotional Materials, the Proprietary Subject Matter, the elements and parts thereof, and the media of exhibition and exploitation thereof, not specifically granted herein to Licensee shall be and are specifically and entirely reserved by and for Licensor. As between the parties, Licensor reserves all copyrights in the Programs and all the other rights in the images and sound embodied therein, other than the limited rights expressly licensed to Licensee in this Agreement. Licensor retains the right to fully exploit the Programs and Licensor’s rights therein without limitation by any means and in any media.
9. REPRESENTATIONS AND WARRANTIES; DISCLAIMER.
A. Licensee’s Representations and Warranties. Licensee represents and warrants to Licensor that: (a) it has the full right, power and authority to enter into, and perform its obligations under, this Agreement; (b) its web site(s), promotional materials and packaging created in connection with Licensee’s promotion of the Units will not (i) infringe on any third party’s intellectual property rights or other proprietary rights or right of publicity or privacy; or (ii) violate any law, statute, ordinance or regulation; and (c) it shall not use, or authorize the use of, the Programs, Materials, Units or Promotional Elements except as authorized by this Agreement. Licensee further represents and warrants that it shall distribute the Units in the exact form and format such Units were provided or approved in writing by Licensor.
B. Licensor’s Representations and Warranties. Licensor represents and warrants to Licensee that it has the full right, power and authority to enter into, and perform its obligations under, this Agreement. Licensor further represents and warrants that the performing and mechanical reproduction rights to any musical works contained in the Programs are either (a) controlled by ASCAP, BMI or SESAC or similar music rights organizations, collections societies or governmental entities having jurisdiction in the Distribution Territory, (b) controlled by Licensor to the extent required for the licensing of the Programs in accordance herewith, or (c) in the public domain. If a performing rights royalty, mechanical rights royalty or license fee is required to be paid in connection with the exhibition of the Programs embodied on Units, Licensee shall be responsible for the payment thereof and shall hold Licensor harmless therefrom.
C. Disclaimer. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY MADE IN THIS AGREEMENT, EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL REPRESENTATIONS OR WARRANTIES TO THE OTHER PARTY, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
10. INDEMNIFICATION.
A. Indemnification by Licensor. Licensor shall defend, indemnify and hold harmless Licensee and any of its parents, subsidiaries, affiliates, officers, directors, shareholders, principals, employees, agents, successors, assigns, and representatives (collectively “Licensee’s Indemnified Parties”) from and against all third party claims, liabilities, damages, judgments, losses and expenses of any kind or nature whatsoever (including reasonable attorneys’ fees and costs) (collectively, “Claims”) which may be sustained or suffered by or secured against Licensee or Licensee’s Indemnified Parties by any third party, to the extent such Claims arise out of (i) the breach or alleged breach of Licensor’s representations, warranties or agreements herein; or (ii) an allegation that the Programs or Promotional Elements when used by Licensee in strict accordance with the terms of this Agreement, under United States law infringe on any third party’s copyright, trademark or right of publicity or privacy. Licensor will have no liability or obligation to Licensee hereunder for any infringement to the extent such Claim arises out of or relates to Licensee’s use or distribution of the Programs, Units or Promotional Elements in a manner other than as expressly permitted by Licensor pursuant to this Agreement.
B. Indemnification by Licensee. Licensee shall defend, indemnify and hold harmless Licensor and any of its parents, subsidiaries, affiliates, officers, directors, shareholders, principals, employees, agents, successors, assigns, and representatives (collectively “Licensor’s Indemnified Parties”) from and against all Claims which may be sustained or suffered by or secured against Licensor or Licensor’s Indemnified Parties by any third party to the extent such Claims arise out of (i) the use, display, exhibition, transmission or reproduction of any materials created by Licensee (except to the extent caused by the Programs or Promotional Elements); or (ii) the breach or alleged breach of Licensee’s representations, warranties or agreements herein; or (iii) Licensee’s use of the Programs or Promotional Elements in a manner other than as expressly permitted by this Agreement.
11. LIMITATION OF LIABILITY. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, NEITHER PARTY WILL UNDER ANY CIRCUMSTANCES BE LIABLE FOR ANY SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES WHATSOEVER (INCLUDING, BUT NOT LIMITED TO, DAMAGES FOR LOSS OF PROFITS, FOR BUSINESS INTERRUPTION, FOR LOSS OF PRIVACY, FOR FAILURE TO MEET ANY DUTY, INCLUDING OF GOOD FAITH OR OF REASONABLE CARE, FOR NEGLIGENCE, AND FOR ANY OTHER PECUNIARY OR OTHER LOSS WHATSOEVER) ARISING OUT OF IN CONNECTION WITH THIS AGREEMENT, REGARDLESS OF WHETHER SUCH LIABILITY ARISES IN TORT, (INCLUDING NEGLIGENCE), STRICT LIABILITY, BREACH OF CONTRACT OR BREACH OF WARRANTY, AND REGARDLESS OF WHETHER EITHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. The total, AGGREGATE liability of Licensor TO LICENSEE arising from or related to this Agreement will in no event exceed the fees paid or PAYABLE by LICENSEE to Licensor under THIS AGREEMENT. LICENSEE ACKNOWLEDGES THAT THE COMPENSATION PAYABLE HEREUNDER REFLECTS THE ALLOCATION OF RISK SET FORTH IN THIS AGREEMENT AND THAT LICENSOR WOULD NOT ENTER INTO THIS AGREEMENT WITHOUT THESE LIMITATIONS ON LIABILITY.
12. CONFIDENTIALITY AND PUBLICITY. Each party agrees to maintain the terms of this Agreement in confidence and limit disclosure on a need to know basis, to take all reasonable precautions to prevent unauthorized disclosure, and to treat such Information as it treats its own information of a similar nature, until the information becomes rightfully available to the public through no fault of the receiving party. Neither party may use the other party’s name or trademarks in any type of advertisement materials, web sites. press releases, interviews, articles brochures, business cards, project reference or client without the other’s prior written consent.
13. GOVERNING LAW; DISPUTE RESOLUTION. This Agreement shall be construed and enforced in accordance with the laws of the State of California without regard to the choice of law principles thereof. All actions or proceedings arising in connection with, touching upon or relating to this Agreement, the breach thereof and/or the scope of the provisions of this provision shall be submitted to JAMS for final and binding arbitration under its Comprehensive Arbitration Rules and Procedures if the matter in dispute is over $250,000 or under its Streamlined Arbitration Rules and Procedures if the matter in dispute is $250,000 or less, to be held in Los Angeles County, California, before a single arbitrator who shall be a retired judge, in accordance with California Code of Civil Procedure §§ 1280 et seq. The arbitrator shall be selected by mutual agreement of the parties or, if the parties cannot agree, then by striking from a list of arbitrators supplied by JAMS. The arbitration shall be a confidential proceeding, closed to the general public. The arbitrator shall issue a written opinion stating the essential findings and conclusions upon which the arbitrator’s award is based. The arbitrator shall have the power to enter temporary restraining orders and preliminary and permanent injunctions. Neither party shall be entitled or permitted to commence or maintain any action in a court of law with respect to any matter in dispute until such matter shall have been submitted to arbitration as herein provided and then only for the enforcement of the arbitrator’s award; provided, however, that prior to the appointment of the arbitrator or for remedies beyond the jurisdiction of an arbitrator, at any time, Licensor may seek pendente lite relief in a court of competent jurisdiction in Los Angeles County, California or such other court that may have jurisdiction over Licensee, without thereby waiving its right to arbitration of the dispute or controversy under this provision.
14. COMPLIANCE WITH LAWS. Licensee shall comply with all national, state, and local laws and regulations governing the manufacture, transportation, import, export, and/or sale of Units. Without limiting the foregoing, Licensee shall comply with all applicable anti-corruption and anti-bribery laws (collectively, "Anti-Corruption Laws"), including, without limitation, regulations prohibiting payments or giving anything of value to foreign officials to obtain business or a competitive advantage. If Licensor determines in its sole discretion that Licensee has violated any Anti-Corruption Laws, either in connection with this Agreement or otherwise, Licensor may terminate this Agreement immediately upon notice to Licensee.
15. WAIVER, REMEDIES. No waiver of any breach hereof shall be held to be a waiver of any other or subsequent breach. If any provision of this Agreement is determined to be invalid, illegal or unenforceable, such determination shall not affect the validity of the remaining provisions. Licensor’s rights and remedies herein are in addition to any other rights and remedies provided by law or in equity.
16. INJUNCTIVE RELIEF. It is understood and agreed that, notwithstanding any other provisions of this Agreement, breach of the provisions of this Agreement by Licensee will cause Licensor irreparable damage for which recovery of money damages would be inadequate, and that Licensor shall therefore be entitled to obtain timely injunctive relief, in accordance with Section 13, in addition to any and all remedies available at law. Notwithstanding anything in this Agreement to the contrary, Licensee hereby irrevocably waives any right to seek and/or obtain equitable and/or injunctive relief related to Licensor or its affiliates’ production, distribution, license and/or exploitation of any motion picture, television program, commercial and/or digital content; and Licensee’s sole and exclusive remedy in connection therewith shall be an action for damages.
17. SURVIVAL. The provisions of the United Nations Convention on Contracts for the International Sale of Goods shall not apply to this Agreement. The following Sections shall survive the termination or expiration of this Purchase Order: 1, 5, 6, 8-16, and 18-22. In addition, any right or legal obligation of a party that by its express term or nature would reasonably extend beyond the term of this Agreement shall survive for such extended period.
18. INDEPENDENT CONTRACTOR. In performing services under this Agreement, each party is an independent contractor and its personnel and other representatives shall not act as nor be agents or employees of the other party.
19. SEVERABILITY. If any portion of this Agreement is invalid or unenforceable, such portion(s) shall be limited or excluded from the Agreement to the minimum extent required and the balance of the Agreement shall remain in full force and effect.
20. ASSIGNMENT. Licensee shall not assign this Agreement, nor any of its respective obligations or benefits hereunder, either in whole or in part, without the prior written consent of Licensor. This Agreement is made solely and specifically between and for the benefit of the parties hereto, and their respective successors and permitted assigns, and is not intended to confer benefits upon, or create new rights in favor of any person other than the parties hereto.
21. NOTICES. All notices required or permitted to be given by one party to the other under this Agreement must be in writing and shall be sufficient if sent by either overnight delivery, facsimile or hand delivery to the parties at the respective addresses set forth below or to such other address as the party to receive the notice has designated by notice to the other party:
If to Licensor: Culver Digital Distribution Inc.
10202 West Washington Boulevard
Culver City, CA 90232, U.S.A.
Attention: Executive Vice President
Fax No.: 310-244-0244
With a copy to:
Sony Pictures Television
10202 West Washington Boulevard
Culver City, CA 90232, U.S.A.
Attn: Executive Vice President, Legal Affairs
Fax no.: +1-310-244-6353
With a copy to:
Sony Pictures Entertainment Inc.
10202 West Washington Boulevard
Culver City, CA 90232 U.S.A.
Attn: General Counsel
Fax No.: +1-310-244-0510
If to Licensee: Address specified on the first page of the Agreement.
All notices shall be effective (i) when delivered personally, (ii) the business day when delivered by an internationally recognized courier (e.g. Federal Express, DHL), or (iii) the business day on which facsimile transmittal is complete before 5:00 p.m.
22. FORCE MAJEURE. Neither party shall be responsible for its failure to perform due to causes beyond its reasonable control such as acts of God, fire, theft, war, riot, embargoes or acts of civil or military authorities.
23. WITHDRAWAL OF PROGRAMS. Licensor may withdraw any Program and/or related materials at any time because of (a) an event of force majeure, loss of rights, evidence of a “hack” to the DRM, delivery system or other protections contemplated by this Agreement, unavailability of necessary materials or any pending or potential litigation, judicial proceeding or regulatory proceeding or in order to minimize the risk of liability, or (b) upon thirty days’ prior written notice, if Licensor or its affiliates elect to theatrically re-release or reissue such Program or make a theatrical, direct-to-video or television remake or sequel thereof. Licensor shall provide a comparable replacement for any withdrawn Program or provide Licensee with a refund (negotiated in good faith) of the fees paid for the Program actually withdrawn.
Content Protection Requirements And Obligations
General Content Security & Service Implementation
Content Protection System. All content delivered to, output from or stored on a 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 approved in writing by Licensor (including any upgrades or new versions, which Licensee shall submit to Licensor for approval upon such upgrades or new versions becoming available),
ii) be fully compliant with all the compliance and robustness rules associated therewith, and
iii) use only those rights settings, if applicable, that are approved in writing by Licensor.
iv) be considered to meet sections 1 (“Encryption”), 2 (“”Key Management”), 3 (“Integrity”), 5 (“Digital Rights Management”), 10 (“Protection against hacking”), 11 (“License Revocation”), 12 (“Secure Remote Update”), 16 (“PVR Requirements”), 17 (“Copying”) of this schedule if the Content Protection System is an implementation of one the content protection systems approved by the Digital Entertainment Content Ecosystem (DECE), and said implementation meets the compliance and robustness rules associated with the chosen DECE approved content protection system. The DECE approved content protection systems are:
a. Marlin Broadband
b. Microsoft Playready
c. CMLA Open Mobile Alliance (OMA) DRM Version 2 or 2.1
d. Adobe Flash Access 2.0 (not Adobe’s Flash streaming product)
e. Widevine Cypher ®
1. Encryption.
1. The Content Protection System shall use cryptographic algorithms for encryption, decryption, signatures, hashing, random number generation, and key generation and the utilize time-tested cryptographic protocols and algorithms, and offer effective security equivalent to or better than AES 128 (as specified in NIST FIPS-197) or ETSI DVB CSA3.
2. The content protection system shall only decrypt streamed content into memory temporarily for the purpose of decoding and rendering the content and shall never write decrypted content (including, without limitation, portions of the decrypted content) or streamed encrypted content into permanent storage..
3. Keys, passwords, and any other information that are critical to the cryptographic strength of the Content Protection System (“critical security parameters”, CSPs) may never be transmitted or permanently or semi-permanently stored in unencrypted form. Memory locations used to temporarily hold CSPs must be securely deleted and overwritten as soon as possible after the CSP has been used.
4. If the device hosting the Content Protection System allows download of software then decryption of (i) content protected by the Content Protection System and (ii) CSPs (as defined in Section 2.1 below) related to the Content Protection System shall take place in an isolated processing environment and decrypted content must be encrypted during transmission to the graphics card for rendering
5. 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.
2. Key Management.
1. The Content Protection System must protect all 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 or transmitted to unauthenticated recipients (whether users or devices.
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 is in the form of client software, and is copied or transferred from one device to another device, it will not work on such other device without being uniquely individualized.]
4. The Licensed Service shall prevent the unauthorized delivery and distribution of Licensor’s content (for example, user-generated / user-uploaded content) and shall use reasonable efforts to filter and prevent such occurrences.
Digital Rights Management
5. Any Digital Rights Management used to protect Licensed Content must support the following:
1. A valid license, containing the unique cryptographic key/keys, other necessary decryption information, and the set of approved 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 in accordance with the approved usage rules.
3. Licenses bound to individual end user devices shall be incapable of being transferred between such devices.
4. Licenses bound to a domain of registered end user devices shall ensure that such devices are only registered to a single domain at a time. An online registration service shall maintain an accurate count of the number of devices in the domain (which number shall not exceed the limit specified in the usage rules for such domain). Each domain must be associated with a unique domain ID value.
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. Secure Clock. For all content which has a time-based window (e.g. VOD, catch-up, SVOD) associated with it, 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.
Conditional Access Systems
6. Any Conditional Access System used to protect Licensed Content must support the following:
1. Content shall be protected by a robust approved scrambling or encryption algorithm in accordance section 1 above.
2. ECM’s shall be required for playback of content, and can only be decrypted by those Smart Cards or other entities that are authorized to receive the content or service. Control words must be updated and re-issued as ECM’s at a rate that reasonably prevents the use of unauthorized ECM distribution, for example, at a rate of no less than once every 7 seconds.
3. Control Word sharing shall be prohibited, The Control Word must be protected from unauthorized access.
Streaming
7. Generic Streaming Requirements
The requirements in this section 7 apply in all cases where streaming is supported.
1. Streams shall be encrypted using AES 128 (as specified in NIST FIPS-197) or other robust, industry-accepted algorithm with a cryptographic strength and key length such that it is generally considered computationally infeasible to break.
2. Encryption keys shall not be delivered to clients in a cleartext (un-encrypted) state.
3. The integrity of the streaming client shall be verified by the streaming server before commencing delivery of the stream to the client.
4. Licensee shall use a robust and effective method (for example, short-lived and individualized URLs for the location of streams) to ensure that streams cannot be obtained by unauthorized users.
8. Flash Streaming Requirements
The requirements in this section 8 only apply if the Adobe Flash product is used to provide the Content Protection System.
1. Adobe RTMPE is approved for streaming using the following Adobe product versions or later:
1. Client side: Flash Player 10.0.22
2. Server side: FMS 3.51 and FMS 3.03
2. Licensee will make reasonable commercial efforts to stay up to date with the “then current” versions of the above Adobe products.
3. Progressive downloading of licensed content is prohibited.
4. Flash Encoded Content (including FLV and F4V file formats) must be streamed using Adobe RTMP-E protocol.
5. Flash servers shall be configured such that RTMP-E is enabled, and RTMP is disabled. No content shall be available through both RTMP and RTMP-E.
6. Flash Media Servers shall be configured such that SWF Verification is enabled.
7. Licensee’s and/or its designated CDN shall implement “Token Authentication”, i.e. mechanism that creates a short-lived URL (approx 3-5 minutes) for content by distributing a “token” to the client only at such a time it is authorized to receive the VOD Stream.
8. Licensee must migrate from RTMP-E (stream encryption) to Adobe DRM i.e. Flash Media Rights Management Server successor “Flash Access 2.0” (file-based encryption) or other DRM approved by Licensor in writing within 6 months of the commercial launch of Flash Access 2.0 and be in full compliance with all content protection provisions herein;.
9. Licensee must make reasonable commercial efforts to comply with Adobe compliance and robustness rules for Flash Server products at such a time when they become commercially available.
9. Microsoft Silverlight
The requirements in this section 9 only apply if the Microsoft Silverlight product is used to provide the Content Protection System.
1. Microsoft Silverlight is approved for streaming if using Silverlight 2 or later version.
2. When used as part of a streaming service only (with no download), Playready licenses shall only be of the the SimpleNonPersistent license class.
3. Within 6 months of the commercial launch of Silverlight 4, Licensee shall migrate to Silverlight 4 and be in full compliance with all content protection provisions herein or;.
1. Within 6 months of the commercial launch of Silverlight 4, Licensee shall migrate to alternative, Licensor-approved DRM/streaming protection technology in full compliance with content protection requirements herein.
Protection Against Hacking
10. Any system used to protect Licensed Content must support the following:
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).
3. The Content Protection System shall be designed, as far as is commercially and technically reasonable, to be resistant to “break once, break everywhere” attacks.
4. The Content Protection System shall employ tamper-resistant software. Examples of tamper resistant software techniques include, without limitation:
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.
5. The Content Protection System shall implement secure internal data channels to prevent rogue processes from intercepting data transmitted between system processes.
6. 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).
REVOCATION AND RENEWAL
11. License Revocation. The Content Protection System shall provide mechanisms that revoke, upon written notice from Licensor of its exercise of its right to require such revocation in the event any CSPs are compromised, (a) the instance of the Content Protection System with the compromised CSPs, and (b) any and all playback licenses issued to (i) specific individual end user device or (ii) domain of registered end user devices.
12. Secure remote update. The Content Protection System shall be renewable and securely updateable in event of a breach of security or improvement to the Content Protection System.
13. The Licensee shall have a policy which ensures that clients and servers of the Content Protection System are promptly and securely updated in the event of a security breach (that can be rectified using a remote update) being found in the Content Protection System and/or its implementations in clients and servers.
14. Without any impact to Licensor’s rights to Suspension, if Licensor has reasonable concerns that a particular implementation K1CP used to protect Licensor content has or is about to be published or compromised, Licensor shall be able to issue a written instruction to Licensee requiring Licensee to cease distributing Licensor content under the protection of said implementation as soon as possible and to only re-commence distribution once the a new implementation of K1CP that is not vulnerable to any known attacks has been developed and tested and is available for protection of Licensor content.
15. Licensee shall solely control the implementation, robustness and compliance of the K1CP DRM, and shall not license the K1CP DRM to any third parties during the Term for said third parties to implement and control, nor shall Licensee rely on any third parties for the software implementation of the K1CP DRM unless those third parties are completely under the control of Licensee with respect to the software implementations of K1CP produced.
ACCOUNT AUTHORIZATION
16. Content Delivery. Content, licenses, control words and ECM’s shall only be delivered from a network service to registered devices associated with an account with verified credentials. Account credentials must be transmitted securely to ensure privacy and protection against attacks.
17. Services requiring user authentication:
The credentials shall consist of at least a User ID and password of sufficient length to prevent brute force attacks.
Licensee shall take steps to prevent users from sharing account credentials. In order to prevent unwanted sharing of such credentials, account credentials may provide access to any of the following (by way of example):
purchasing capability (e.g. access to the user’s active credit card or other financially sensitive information)
administrator rights over the user’s account including control over user and device access to the account along with access to personal information.
RECORDING
18. PVR Requirements. Any device receiving playback licenses must not implement any personal video recorder capabilities that allow recording, copying, or playback of any protected content except as explicitly allowed elsewhere in this agreement.
19. Copying. The Content Protection System shall prohibit recording of protected content onto recordable or removable media, except as such recording is explicitly allowed elsewhere in this agreement.
Outputs
20. Analogue Outputs.
If the licensed content can be delivered to a device which has analog outputs, the Content Protection System must ensure that the devices meet the analogue output requirements listed in this section.
1. The Content Protection System shall enable Macrovision content protection technology on all analog outputs from end user devices. Licensee 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 Agreement.
2. The Content Protection System shall enable CGMS-A content protection technology on all analog outputs from end user devices. Licensee 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 Agreement.
21. Digital Outputs.
If the licensed content can be delivered to a device which has digital outputs, the Content Protection System must ensure that the devices meet the digital output requirements listed in this section.
1. 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”). Defined terms used but not otherwise defined in this Digital Outputs Section shall have the meanings given them in the DTCP or HDCP license agreements, as applicable.
1. A device that outputs decrypted protected content provided pursuant to the Agreement using DTCP shall:
1. Deliver system renewability messages to the source function;
2. Map the copy control information associated with the program; the copy control information shall be set to “copy never” in the corresponding encryption mode indicator and copy control information field of the descriptor;
3. Map the analog protection system (“APS”) bits associated with the program to the APS field of the descriptor;
4. Set the image_constraint_token field of the descriptor as authorized by the corresponding license administrator;
5. Set the eligible non-conditional access delivery field of the descriptor as authorized by the corresponding license administrator;
6. Set the retention state field of the descriptor as authorized by the corresponding license administrator;
7. Deliver system renewability messages from time to time obtained from the corresponding license administrator in a protected manner; and
8. Perform such additional functions as may be required by Licensor to effectuate the appropriate content protection functions of these protected digital outputs.
2. A device that outputs decrypted protected content provided pursuant to the Agreement using HDCP shall:
1. If requested by Licensor, at such a time as mechanisms to support SRM’s are available, deliver a file associated with the protected content named “HDCP.SRM” and, if present, pass such file to the HDCP source function in the device as a System Renewability Message; and
2. Verify that the HDCP Source Function is fully engaged and able to deliver the protected content in a protected form, which means:
1. HDCP encryption is operational on such output,
2. Processing of the System Renewability Message associated with the protected content, if any, has occurred as defined in the HDCP Specification, at such a time as mechanisms to support SRM’s are available, and
3. There is no HDCP Display Device or Repeater on such output whose Key Selection Vector is in such System Renewability Message at such a time as mechanisms to support SRM’s are available.
22. Exception Clause for Standard Definition, Uncompressed Digital Outputs on Windows-based PCs and Macs running OS X or higher):
HDCP must be enabled on all uncompressed digital outputs (e.g. HDMI, Display Port), unless the customer’s system cannot support HDCP (e.g., the content would not be viewable on such customer’s system if HDCP were to be applied)
23. Upscaling: Device may scale Included Programs in order to fill the screen of the applicable display; provided that Licensee’s marketing of the Device shall not state or imply to consumers that the quality of the display of any such upscaled content is substantially similar to a higher resolution to the Included Program’s original source profile (i.e. SD content cannot be represented as HD content).
Embedded Information
24. Watermarking. The Content Protection System or playback device must not remove or interfere with any embedded watermarks in licensed content.
25. Embedded Information. Licensee’s delivery systems shall “pass through” any embedded copy control information without alteration, modification or degradation in any manner;
26. Notwithstanding the above, any alteration, modification or degradation of such copy control information and or watermarking during the ordinary course of Licensee’s distribution of licensed content shall not be a breach of this Embedded Information Section.
Geofiltering
27. 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.
28. Licensee shall periodically review the geofiltering tactics and perform upgrades to the Content Protection System to maintain “state of the art” geofiltering capabilities.
Network Service Protection Requirements.
29. All licensed content must be received and stored at content processing and storage facilities in a protected and encrypted format using a “state of the art” protection system.
30. Document security policies and procedures shall be in place. Documentation of policy enforcement and compliance shall be continuously maintained.
31. Access to content in unprotected format must be limited to authorized personnel and auditable records of actual access shall be maintained.
32. Physical access to servers must be limited and controlled and must be monitored by a logging system.
33. Auditable records of access, copying, movement, transmission, backups, or modification of content must be securely stored for a period of at least three years.
34. 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 regularly updated to incorporate the latest security patches and upgrades.
35. All facilities which process and store content must be available for Motion Picture Association of America and Licensor audits upon the request of Licensor.
36. At Licensor’s written request, security details of the network services, servers, policies, and facilities that are relevant to the security of the Licensed Service (together, the “Licensed Service Security Systems”) shall be provided to the Licensor, and Licensor reserves the right to subsequently make reasonable requests for improvements to the Licensed Service Security Systems. Any substantial changes to the Licensed Service Security Systems must be submitted to Licensor for approval, if Licensor has made a prior written request for such approval rights.
37. Content must be returned to Licensor or securely destroyed pursuant to the Agreement at the end of such content’s license period including, without limitation, all electronic and physical copies thereof.
High-Definition Restrictions & Requirements
In addition to the foregoing requirements, all HD content is subject to the following set of restrictions & requirements:
38. Personal Computers HD content is expressly prohibited from being delivered to and playable on General Purpose Computer Platforms (e.g. PCs) unless explicitly approved by Licensor. If approved by Licensor, the additional requirements for HD playback on PCs will include the following:
1. Secure Video Paths:
The video portion of unencrypted content shall not be present on any user-accessible bus in any analog or unencrypted, compressed form. In the event such unencrypted, uncompressed content is transmitted over a user-accessible bus in digital form, such content shall be either limited to standard definition (720 X 480 or 720 X 576), or made reasonably secure from unauthorized interception.
2. Digital Outputs:
For avoidance of doubt, HD content may only be output in accordance with Section 22 and Section 23 above.
3. Hardware Root of Trust
The Content Protection System (CPS) and/or the Approved Device on which the CPS executes shall use a hardware means ("Hardware Root of Trust") which prevents compromise via software attacks, of the Content Protection System. For example, the Hardware Root of Trust may provide some or all of the following functions:
• hardware defences against reverse engineering of software
• hardware assisted software tamper resistance
• hardware secure key storage (and or key use)
• hardware assisted verification of software
4. Secure Content Decryption.
Decryption of (i) content protected by the Content Protection System and (ii) CSPs (as defined in Section 2.1 below) related to the Content Protection System shall take place in an isolated processing environment. Decrypted content must be encrypted during transmission to the graphics card for rendering
HD Day & Date Requirements
In addition to the foregoing requirements, all HD content is subject to the following set of content protection requirements:
39. Analogue Sunset.
After December 31, 2011, all Approved Devices shall limit (e.g. down-scale) analog outputs for decrypted protected Included Programs to standard definition at a resolution no greater than 720X480 or 720 X 576.
40. Additional Watermarking Requirements.
At such time as physical media players manufactured by licensees of the Advanced Access Content System are required to detect audio and/or video watermarks during content playback (the “Watermark Detection Date”), Licensee shall require, within two (2) years of the Watermark Detection Date, that any new devices capable of receiving and decrypting protected high definition content from the Licensed Service that can also receive content from a source other than the Licensed Service shall detect and respond to the embedded state and comply with the corresponding playback control rules.
Format and DRM Specifications of Approved Format
[TBD]
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