PAY TELEVISION LICENSE AGREEMENT
PAY TELEVISION LICENSE AGREEMENT
This Pay Television License Agreement (this “Agreement”) is entered into as of December [12], 2008 (the “Agreement Date”), between STARZ ENTERTAINMENT, LLC, 5445 DTC Parkway, Suite 600, Englewood, Colorado 80111 (“STE”) and SONY PICTURES ENTERTAINMENT INC., 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 and STE have entered into an agreement to terminate the Original Agreement concurrently herewith; and
WHEREAS, Licensor and STE desire to enter into a new agreement with respect to certain television rights and programming.
NOW, THEREFORE, for the good and valuable consideration, the receipt and sufficiency of which is acknowledged by the signing and delivery hereof, the parties agree as follows:
1. Definitions.
a) “Additional Element” with respect to a motion picture means each of the following:
i) 50% or more of the total P&A Expenses for such motion picture was incurred by Licensor or any SPE Group Member, either in its own right or via third party financiers or investors.
ii) Such motion picture was developed in-house by Licensor or any SPE Group Member. [Matthew—need more detail around this]
iii) Such motion picture was produced by Licensor. [Matthew—need more detail around this]
iv) 25% or more of the Negative Costs for such motion picture was incurred by Licensor or any SPE Group Member, either in its own right or via third party financiers or investors.
v) Such motion picture originated from property owned or controlled by Licensor or any SPE Group Member.
vi) Substantially all of the [U.S. Home Video and Television rights to such motion picture are owned or controlled by Licensor or any SPE Group Member] OR [all of the following U.S. rights: free television, basic television, pay television, PPV, VOD, Sell-Through Video, _________]. [RT to provide language regarding home video divisions].
b) “A Film” means any Qualifying Film that is designated by Licensor and satisfies at least one Additional Element.
c) “B Film” means any Qualifying Film that is designated by Licensor and satisfies at least one Additional Element. In addition, B Category Films shall expressly include Third Party Rent-A-System Films and Sony Rent-A-System Films though such films are not required to satisfy any Additional Element.
d) “Availability Date” shall mean the first day of each Picture’s First License Period, as set forth in Section 3(a)(i)3(a)(i) below.
e) “Digital Cinema” shall mean the playback by a theatrical exhibitor of a digital file embodying a motion picture on a digital projection system from an on-site projection booth, which playback requires activation from an on-site location.
f) “Exhibition Day” shall mean with respect to each Picture and each channel of the STE 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 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 the STE Service;
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 date hereof; or
iii) Viewings on a Subscription-On-Demand basis.
g) “Feature-Length” means a running time of not less than 75 minutes, inclusive of credits.
h) “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 an affiliate of Licensor 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 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.] [AL to get Theatrical Finance’s input.]
i) “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, so-called “sneak” previews and releases made in order to qualify for award consideration (e.g., Academy Awards) shall not be taken into account in determining whether a General Theatrical Release has occurred, regardless of whether an admission fee is charged.
a) “Home Theater” shall mean the transmission of a motion picture directly to homes or other non-public venues 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 of Average Theatrical Admissions (as defined below), or (ii) from as early as 60 days prior to the Initial Home Video Release for such motion picture until as late as [_________] [Chris and Thanda to determine end date] 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] [Chris and Thanda to update, if necessary] (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).
j) “Home Video” shall mean the exploitation of a motion picture embodied in a video device which is a physical entityphysical medium (including, without limitation video cassette, laser video disc and standard and Blu-ray DVD) 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, Home Video shall expressly include Sell-Through Video, Manufacture-On-Demand, and In-Store Digital Download.
k) “Initial Home Video Release” of a Picture shall mean the first day of its initial standard DVD rental Home Video release to the general public within the Territory not in connection with a stunt or promotion conducted with any of Licensor’s affiliates.
l) “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 not in connection with a stunt or promotion conducted with any of Licensor’s affiliates.
m) “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 and releases made in order to qualify for award consideration (e.g., Academy Awards), regardless of whether an admission fee is charged, free and/or charitable screenings and private, limited screenings.
n) “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 not in connection with any stunt or promotion conducted with any of Licensor’s affiliates.
o) “In-Store Digital Download” shall mean the transmission or distribution of a motion picture by any means in any intangible, digital or electronic form now known or hereafter devised from a storage apparatus (e.g., a kiosk) in a fixed location outside of a customer’s residence (e.g., in a retail store) to any video or storage device now known or hereafter devised, including without limitation portable media devices, flash drives, memory sticks and portable storage devices, that enables the customer to view such program on such device or on any other viewing device now known or hereafter devised, including without limitation televisions, computers, cell phones, personal or digital assistants and game devices.
p) “Internet” shall mean [the non-licensed, open access, open to the general public (as opposed to an intranet), and free of charge to the consumer (other than common carrier charges) 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) to any device capable of accommodating open protocol, including TV’s, PC’s, set-top boxes and other Internet-enabled devices.] [AL to check definition of Jill Cohen.].
q) “License Period” for each Picture shall mean each of the the First License Period and Second License Period of such Picture, collectively, as set forth in Section 33 below.
r) “Major Studio” shall mean any of the following entities: (i) Warner Bros., New Line, Paramount Pictures Corporation, Twentieth Century Fox Film Corp., Sony Pictures Entertainment Inc., Walt Disney Company, Universal Studios, Inc., Dreamworks, Metro-Goldwyn-Mayer, Inc., The Weinstein Company and Lionsgate, and any successors thereto if operating in substantially the same manner as such entities operate as of the date hereof, and (ii) any future MPAA member company; provided, that with respect to any entity covered by the foregoing clause (ii) (and not clause (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 Agreement 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 clause (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.
s) “Manufacture-On-Demand” means any service whereby a physical medium (including, without limitation, videocassette, laser video disc and standard and Blu-ray DVD) embodying video programmingdevice which is a physical entity (including, without limitation, videocassette, laser video disc and standard and Blu-ray DVD) is manufactured upon a customer’s order and purchase of such video device physical medium and then delivered either to the customer directly or to a retailer for in-store pick-up by the customer.
t) “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 an Initial Theatrical Release on 20 or more screens contemporaneously within the Territory; or
ii) has production costs [Should we define “production costs” (broadly)?] equal to or in excess of $4,500,000. [Matthew please review]
u) “Negative Cost” means[, with respect to a motion picture, the aggregate sum of all direct costs and expenses paid or fixed payment obligations incurred by any person in connection with the development, preparation, production and completion of such motion picture]. [Matthew please review.]
v) “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.
w) “P&A Expenses” means[, with respect to a motion picture, all direct costs incurred or accrued 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 and of printing and distributing promotional materials, and costs of making, packaging, shipping, insuring, delivering and storing release prints and other film and sound materials]. [Matthew please review.]
x) “Pay-Per-View” or “PPV” shall mean the viewing of a single motion picture, whether transmitted via digital, analog, over-the-air, cable, optical fiber, closed circuit, Internet, satellite, telephony, microwave, laser, cellular/mobile or any other means devised, 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 (i.e., a fee arrangement whereby a consumer is charged alone, or in any combination, a service charge, a separate Pay-Per-View charge or other charge but is entitled to a reduction or series of reductions thereto on a program-by-program basis in the event such consumer affirmatively notifies the PPV distributor of such consumer’s determination not to receive or have available for reception such particular program). In addition, special limited promotional offers by a PPV distributor (including two-for-one discounts, give-away coupons, 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 clarity, be deemed to include any basic cable fee or digital/data plan fee charged by a cable, satellite or mobile/cellular service provider) 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. 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 an affiliate of Licensor 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 Video basis. 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 PPV transmission of the motion picture, 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.” Home Theater exhibitions shall not constitute “PPV” hereunder.
y) “Pay Television” shall mean transmissions or exhibitions by any means or technology, including, without limitation, the Internet, direct satellite delivery or transmission by third party carriers such as cable systems or master antenna systems, to subscribers of a Programming Service upon payment by such subscribers of a separate and allocable monthly subscription fee, except as set forth in Section 16(c). Without limiting the requirements of Exhibit C, Aall such Pay Television channels or services shall be encrypted at all times (except as set forth in Section 16(c)16(c)) and shall be on a commercial-free, non-advertiser supported basis for which there is an additional charge for such channel or service over and above the obligatory basic cable subscription charge. fee charged for a package of linear ad-supported programs. For purposes of clarification, “home-shopping” segments and “infomercials” (as such terms are commonly understood as of the date of this Agreement) shall be considered advertiser- supported activities. [Do we want to clarify that the charge for the pay service must be on the same bill as the charge for basic cable?]..
z) “Programming Service” shall mean a linear, streamed, regularly scheduled Television programming service. For purposes hereof, a programming service that primarily offers viewers the ability to experience an interactive or other enhanced exhibition of another linear, regularly scheduled Television programming service shall not constitute a “Programming Service” hereunder.
aa) “Qualifying Films” means all Feature-Length motion pictures (other than motion pictures that are filmed live events such as concerts, stage plays, musicals, dance performances or sporting events) rated “R” or less restrictive that meet at least one of the Minimum Requirements, and are Theatrically Released by Sony in the Territory which and have their Initial Theatrical Release during the Term; provided, that 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 date hereof.
ab) “Sell-Through Video” means the delivery of a digital file embodying a motion picture for which (as a general commercial matter) a per-transaction charge is made to the consumer and that is authorized for retention by the recipient by means of a hard drive or such other storage technology as may be in use from time-to-time from and after the date hereof (collectively, “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 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 Video on Storage Devices, including without limitation recordable DVDs and CDs, videotape, video disks, “floppy” disks and “zip” drives. For purposes of clarification, a Sell-Through Video consumer transaction may result in the delivery of multiple Pictures, provided, that, during any License Period for any Picture included in such consumer transaction, Licensor must receive an aggregate sum which is not less than the per-motion picture price as set forth in Section 2(b)(iv)2(b)(iv) multiplied by the number of motion pictures included in such consumer transaction. In addition, special limited promotional offers (including two-for-one discounts, give-away coupons, extended viewing opportunities and the like) shall nevertheless constitute Sell-Through Video; provided, that no such offer may be made available to any individual consumer for more than 60 days per year.
ac) “Sony Rent-A-System Film” means any motion picture designated by Licensor that is a Qualifying Film but does not meet any of the Additional Elements. Notwithstanding anything to the contrary herein, all Sony-Rent-A-System Films shall be deemed to be a B Film hereunder.
ad) “SPC Film” means any Qualifying Film that is designated by Licensor, satisfies at least one Additional Element, and is theatrically released under the label of Sony Pictures Classics (or any successor to the theatrical distribution operations thereof) or similar “art house” theatrical releasing labels of Licensor or a SPE Group Member.
ae) “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).
af) “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 not be offered on less than a monthly subscription basis (other than as specified in Sections 2(a)(ii)2(a)(iii) and 16(c)16(c)), which shall be subject to the limitations set forth in Section 1(hh) and in 02(d) below, and which shall be available solely to subscribers in the Territory.
ag) “STE Services” shall mean the STE Pay Television Services and the STE SOD Services. 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 third party program or a third party 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 Universal motion picture, such motion picture’s end credits can contain a reference to an Internet web-site for such motion picture or for Universal); 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 Universal motion picture, such “making of’ can contain a reference to an Internet web-site for such motion picture or for Universal).
ah) “STE SOD Services” shall mean the 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(hh), 2(c) and 02(d) and which shall be available solely to subscribers in the Territory.
ai) “Subscription-On-Demand” or “SOD” is a Television service by which a subscriber can elect to view motion pictures and other programming with or without VCR functionality at a start time selected by such subscriber. A SOD service must 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. 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 not delivered via the Internet, provided, that STE may, but is not required to an SOD service that is not offered as an enhancement to a Pay television service shall be required to charge a fee for such SOD service on a not less than monthly basis (provided, that in no event shall a SOD service available on a “negative option basis” as that term is defined in Sections 1(o)(r), 1Error! Reference source not found.(z)(ii) and 1(dd)(aa) of this Agreement). SOD delivered via the Internet is subject to the pricing and other conditions set forth in Section 2 hereof.
aj) “Television” shall mean all forms of transmission of video signals from a distance to a consumer in a home or other non-public venue (including transmission over a cellular/mobile network to a mobile phone), but shall not include any form of Home Video, Digital Cinema, Sell-Through Video, In-Store Digital Download, Manufacture-On-Demand or Non-Theatrical Exhibition.
ak) “Territory” shall mean the United States, its territories, possessions, trusteeships and instrumentalities (including Puerto Rico, Guam and the U.S. Virgin Islands) and, subject to Licensor having Pay Television rights, Bermuda.
al) “Theatrically Released By Sony” with respect to a motion picture, means that such motion picture was theatrically released under any theatrical releasing label of Licensor or a SPE Group Member [in first position (regardless of whether such label appears alone or together with a third party theatrical releasing label)] and that Licensor or any SPE Group member did any 3 or more of the following: [Matthew please review]
i) Booked theaters for the theatrical exhibitions of such motion picture.
ii) Selected the release date(s) for the theatrical exhibitions of such motion picture.
iii) Collected revenue in connection with the theatrical exhibitions of such motion picture;
iv) Oversaw the marketing plan with respect to the theatrical release and exhibitions of such motion picture.
v) Oversaw the ad buys in connection with the theatrical release of such motion picture.
am) “Third Party Rent-A-System Film” means any motion picture designated by Licensor that would otherwise be a Qualifying Film but for it not being Theatrically Released By Licensor or any SPE Group Member, and that 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 Film hereunder.
an) “Video-On-Demand” or “VOD” shall mean the method of viewing a single motion picture, whether transmitted via digital, analog, over-the-air, cable, optical fiber, closed circuit, Internet, satellite, telephony, microwave, laser, cellular/mobile or any other means devised, 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 (i.e., a fee arrangement whereby a consumer is charged alone, or in any combination, a service charge, a separate Video-On-Demand charge or other charge but is entitled to a reduction or series of reductions thereto on a program-by-program basis in the event such consumer affirmatively notifies the VOD operator of such consumer’s determination not to receive or have available for reception such particular program). In addition, special limited promotional offers by a VOD operator (including two-for-one discounts, give-away coupons, 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 clarity, be deemed to include any basic cable fee or digital/data plan fee charged by a cable, satellite or mobile/cellular service provider) 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. 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 an affiliate of Licensor 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 Video basis. 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, 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”.
ao) “Year” shall mean calendar Year unless otherwise specified.
ap) Other Definitions. The following terms will have the meaning set forth in the Section indicated:
|Term |Section |
|Arbitrator Determined Retail Price(s) |2(b)(ii)2(b)(ii) |
|Approved Licensor Auditor |2(b)(v)(E)2(b)(v)(C) |
|Controlled Entity |1(w)(iii)(v)(iii) |
|Controlling Entity |1(w)(iii)(v)(iii) |
|Copy Protection Technology |16(b)(i) |
|Eligible Production Company |4(m)4(k) |
|Encore Channel |2(c)(i) |
|Film Rentals Measurement Period |1(d) |
|First License Period |3(a)(i) |
|First PPV/VOD Window |2(b)(ii)(A) |
|Free Previews |16(c) |
|Laboratory |Exhibit B |
|Later Acquired Significant Service |2(e) |
|License Fees |6(a) |
|License Period |2(b) |
|Licensor |Preamble |
|LMC |1(q) |
|Low Volume Rate Card |Exhibit A |
|Making Of |20(b) |
|Master |Exhibit B |
|Minimum Output Number of Pictures |4(m) |
|New Entity |4(k) |
|New Version |9 |
|Objectionable Restrictions |4(g) |
|Output Agreement |2(b)(vi)(B) |
|Picture; Pictures |4 |
|Re-Set Fixed Retail Minimum Figures |2(b)(ii) |
|Restricted Materials |9 |
|Second License Period |3(b) |
|Second PPV/VOD Window |2(b)(ii)(C) |
|Section 4(e) More Favorable Terms |4(e)(iii) |
|Section 4(g) More Favorable Terms |4(g)(iii) |
|Sell-Through Video |1(u)(i) |
|STE |Preamble |
|STARZ! Channel |2(c)(i) |
|Storage Device |1(x)(i) |
|Term |5 |
|Video Reproduction |Exhibit B |
|Volume Rate Card |Exhibit A |
|Withdrawal Causes |15 |
2. License. Licensor hereby licenses the Pictures to STE under copyright for exhibition on the Pay Television services defined as the STE Services in the Territory on the terms and conditions contained herein. STE agrees to pay Licensor the License Fees specified in Section 66 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, subject to each of the provisions of this Agreement, including without limitation Sections 1414 and 1616 hereof, for private use in non-public venues within the Territory.
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 regular monthly subscription basis, STE shall be authorized to sell and to allow affiliated delivery systems to sell the STE Services (other than any SOD service) 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, and not any SOD service, in the same form and on the same schedule as their distribution to regular 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.
b) Exclusivity and Holdbacks. Prior to and during the First License Period, and during and for 30 days following 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. In addition to the foregoing, Licensor shall not license any Picture to, or authorize the promotion of the exhibition of any Picture by, any Pay Television service in the Territory (other than STE) until 30 days after the Second License Period. [Additionally, Licensor shall not exhibit any Picture by means of Non-Theatrical Exhibition during such Picture’s License Periods in non-public, non-common areas of hotels, motels and hospitals.] [Still relevant?]
i) Notwithstanding Section 2(b)(b) above, 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. During the License Periods, Licensor may exhibit (and authorize the exhibition of) the Pictures in the Territory by PPV and VOD, but only via the Internet and via a mobile/cellular network, and promote (and authorize the promotion of) such exhibition. [Consider whether we should have the right to exhibit on all PPV/VOD regardless of deliver (i.e., cable, satellite, broadcast) during license periods in light of the new Internet rights we are giving.] However, Licensor will not exploit such Internet rights or mobile/cellular 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 mobile/cellular 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, provided that the PPV or VOD exhibition is purchased for initial delivery to a customer via the Internet or mobile/cellular network, then the fact that such customer can subsequently access such exhibition and cause it to be redelivered via any means other than the Internet or mobile/cellular network (e.g., redelivery of a PPV or VOD exhibition delivered initially via Internet and stored in a “sky locker” and subsequently access and redelivered to a set-top box via satellite transmission) shall not cause such exhibitions to be in violation of Licensor’s Internet or cellular/mobile rights set forth in this Section. 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’s Internet and cellular/mobile PPV and VOD rights to the Pictures during STE’s Pay Television License Periods will be subject to Licensor receiving the following minimums 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 preceding STE’s First License Period, but excluding any PPV/VOD window applicable solely to PPV/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, 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 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 average weighted wholesale or retail prices, Home Theater exhibitions, exhibitions on a special limited promotional offer basis (including two-for-one discounts, give-away coupons, extended viewing opportunities and the like), permitted club or access fees and permitted equipment rental fees shall be excluded.
The parties acknowledge that the 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 date of this Agreement. If, at any time during any License Period hereunder, 75% or 65%, as applicable, of the actual average weighted 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] 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 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%) of the actual weighted average retail prices determined by the arbitrator (the “Arbitrator Determined 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 fixed retail minimum figures set forth in (A), (B) and (C) above shall be reset to $2.63 x (Arbitrator Determined Retail Price for the window set forth in (A) divided by $3.50), $2.00 x (Arbitrator Determined Retail Price for the window set forth in (B) divided by $3.08), and $1.00 x (Arbitrator Determined Retail Price for the window set forth in (C) divided by $1.33)(as applicable, the “Re-Set Fixed Retail Minimum Figures”). Thereafter, such Arbitrator Determined Retail Price(s) shall be substituted for the [$3.50, $3.08 and $1.33] retail price figures set forth above and any further “re-set” of the Re-Set Fixed Retail Minimum 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 Retail Price(s) (in which case a re-set similar to that set forth above shall be implemented). [Such arbitration shall be conducted before a single neutral arbitrator in accordance with the rules of the American Arbitration Association in Los Angeles, California.] [MA sent email to Len and Kathleen re arbitration provision.]
iii) If Licensor is the retailer in any Internet or mobile/cellular 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 (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 Video basis, Licensor’s Internet Sell-Through Video rights to the Pictures during each of STE’s Pay Television License Periods will be subject to Licensor receiving not less than $6.95 during the First License Period and not less than $3.475 during the Second License Period, as applicable, per retail or wholesale Sell-Through Video consumer transaction, provided, that Licensor may receive less than $6.95 during the First License Period and $3.475 during the Second License Period, as applicable, per retail Sell-Through 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 $3.475, as applicable, and the actual amount received by Licensor per such lower-priced consumer transaction. For purposes of clarification, a Sell-Through Video consumer transaction (whether wholesale or retail) may result in the delivery of multiple Pictures, provided, that Licensor must receive not less than $6.95 or $3.475, as applicable, multiplied by the number of Pictures included in such transaction.
v) MFN.
A) If, subsequent to the Agreement 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, VOD or Sell-Through Video than the terms contained in Sections 2(b)(i), 2(b)(ii), 2(b)(iii) or 2(b)(iv), 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 Agreement is modified to incorporate all, but not less than all, of such PPV and VOD-related terms, effective on the date which is the effective Pay Television availability date of the first motion picture under such Output Agreement.
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-Agreement 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 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.
C) If, subsequent to January 26, 2000January 26, 2000 and prior to the end of the 1st anniversary of the Agreement Date, STE enters into or amends any agreement under which STE is permitted to exploit distribution of motion pictures via the Internet, and such agreement contains more favorable (to the licensor) (i) financial remuneration (including without limitation, bonuses, license fees, revenue share, financial guarantees, etc.), (ii) settlement amounts with respect to Netflix, Verizon and/or Qwest or other similar disputes, (iii) caps or other restrictions on the number of subscribers or households permitted to access the Starz Internet servicservices or e, (iv) pricing structure or other conditions or limitations on access to the Starz Internet service, 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 financial remuneration terms must be taken as a whole if at all.
D) If any affiliate of Licensor desires to license an SOD service and/or Programming Service containing the Pictures from STE at any time after the Agreement Date and prior to [provide Netflix expiration date], STE shall offer to license such SOD service and/or Programming Service to such affiliate on terms (the “Affiliate MFN Terms”) that are no less favorable (to such affiliate) than the terms offered by STE to any third party with regard to licensing of an SOD service and/or Programming Service for Internet exploitation within the year prior to when such affiliate first requested to begin discussions with STE; provided, however, that if no such third party licensing agreement was entered into by STE within such one year period, then STE shall offer to such affiliate the terms of the last such third party licensing agreement entered into by STE. STE shall only be required to grant such affiliate the Affiliate MFN Terms for the duration during which such terms are in effect for the third party to whom such terms were originally granted. If such affiliate desires to accept the Affiliate MFN Terms, it must do so on an all or nothing basis. Notwithstanding the foregoing, STE shall proportionately adjust the pricing (up or down) offered to such affiliate to take into consideration any differences in the number of subscribers between the third party licensee and such affiliate. Such adjustment would be calculated by determining a license fee per subscriber given access to the STE service through the third party licensee and applying such fee per subscriber to the number of subscribers proposed to be given access to the STE service through the Licensor affiliate. The parties agree to enter into good faith negotiations to discuss any further equitable adjustments that should be made to the Affiliate MFN Terms.
E) Licensor, through its outside auditor, which shall be subject to STE’s approval (with STE hereby pre-approving the so-called “Big 5” 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 whether STE is in compliance with this Agreement, including this Section 2(b)(v)(v). 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 (I) at any time within five business days after receipt of a notice delivered to Licensor in accordance with Section 2(b)(v)(A) and/or (II) not more than once per Year if Licensor reasonably believes that its rights under Section 2(b)(v)(A)(A) may have been triggered notwithstanding Licensor’s failure to have received a notice in accordance with Section 2(b)(v)(A) above. 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 2(b)(v)(C) (“Approved Licensor Auditor”) during reasonable business hours upon reasonable prior notice and shall not last on-site for more than 10 consecutive business days, provided STE and its affiliates have supplied within a reasonable period of time all information necessary to conduct such audit. All information received by Licensor as a result of any audit permitted hereunder shall be subject to the confidentiality provisions of Section 25 hereof. Additionally, any audit performed as a result of Licensor’s exercise of its rights under Section 2(b)(v)(C)(I) 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 Section 2(b)(v)(A) have not been triggered, the Approved Licensor Auditor shall so inform Licensor and STE and no other information shall be provided to Licensor; (3) if the Approved Licensor Auditor believes, following such audit, that Licensor’s rights under Section 2(b)(v)(A) 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 Section 2(b)(v)(A) 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 Section 2(b)(v)(A) have been triggered or are unable to agree as to whether Licensor’s rights under Section 2(b)(v)(A) 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 Section 2(b)(v)(A). 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 subsection 2(b)(v)(C)(l) if and when appropriate.
vi) Licensor may exhibit or authorize the exhibition of a Picture on any form of Television other than Pay Television at any time between the License Periods. Notwithstanding the foregoing sentence or Section 2(b)(b) above, during each Year Licensor shall have the right to exhibit (or authorize the exhibition of) up 6 Pictures, each with a domestic box office below $50 million and selected by Licensor in its sole discretion, at any time between their respective License Periods but for no longer than 2 months per Picture on any Licensor-branded and programmed SOD services delivered only via the Internet and mobile/cellular networks, and on any Licensor-branded and programmed Pay Television services delivered only via mobile/cellular networks.
vii) Notwithstanding anything to the contrary herein, Licensor may exhibit up to 2 Pictures per release Year by free Television (and authorize the exhibition of) and promote (and authorize the promotion of) such exhibition, in the Territory at any time; provided, that such exhibitions shall be reasonably limited in scope and duration and tied to the promotion of a product or service of an affiliate of Licensor that is generally premium in nature (e.g. Bravia televisions, Bravia Internet Video Link, Playstations, Playstation Network).
viii) Notwithstanding Section 2(b)(b) above, Licensor may exhibit any Picture that is originally filmed in any language other than English by any form of Television, [other than Pay Television], during the First and Second License Periods.
c) Limitations on Internet Delivery [and other Means of Delivery].
i) Marketing Restrictions. STE shall not, and shall cause its affiliates and licensees to not, refer to any STE Pay Television Service or STE SOD Service as being “free”, “at no additional cost” or the like in any marketing, advertising, promotion or other public communication. [Should this apply to all means of delivery or just Internet delivery?] STE shall cause any STE SOD Service or STE Pay Television Service exhibition any of the Pictures to be clearly branded as an STE Service (e.g. ”STARZ”) on the sign up screen of the applicable website offering such service and on any other written sign up materials. STE shall use its reasonable efforts to also include its logo in such places. The “STARZ” logo and brand shall appear on all title detail pages with respect to the Pictures and on pre-roll advertising space. 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. All title art that appears on any Internet service shall be marked with “STARZ” logo and branding. STE shall use its reasonable efforts to include its logo and branding on all title listings as well. STE shall use its reasonable efforts to cause its logo and branding to appear prominently and persistently above the fold in the main “Watch Instantly” launch page on Netflix and on equivalent webpages of all other video services delivering the STE Services).
ii) Cable Restrictions. STE may license to cable operators the right to deliver via the Internet the STE SOD Service and/or STE Pay Television Service to such operators’ Internet access subscribers regardless of whether such subscribers also subscribe to their basic cable Television service; provided, however, that such subscribers must pay a monthly subscription fee for such STE SOD Service and/or STE Pay Television Service over and above the fee charged by such cable operator for Internet access. Notwithstanding the foregoing, STE shall not, and shall cause its affiliates and licensees to not, market, advertise, promote or publicly communicate the availability of the aforementioned STE Services as being part of a bundle or package offered by a cable operator that does not include the basic cable Television service or other video programming content. In addition, STE shall cause its cable operator licensees to make available to all their subscribers the option of obtaining the STE SOD Service and/or the STE Pay Television Services 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 price that is no less than $7.99 (not including the price for Internet access or any other services) and such option must be made reasonably obvious within such cable operators’ package descriptions and website.
iii) Digital Subscriber Line (DSL) Restrictions. STE may license to telephone companies the right to deliver via the Internet the STE SOD Service and/or STE Pay Television Service to such telephone companies’ DSL subscribers regardless of whether such subscribers also subscribe to basic cable subject to the following pricing conditions. If such STE SOD Service and/or STE Pay Television Service is offered to DSL subscribers on an à la carte basis, the total monthly price to subscribers for such service(s) together with DSL service (the “à la carte package price”) must be at least equal to the greater of (a) $7.99 over and above the price charged by the telephone company for its lowest priced broadband tier [(Internet access with a bandwidth of at least 768Kbps)] [should this be adjustable depending on where the market goes in the future as everything gets faster?] made generally available to (and prominently disclosed to) the public (“Base Tier”) or (b) $12.98; provided, however, that STE may allow a telephone company to charge less than the à la carte package price upon payment to Licensor by STE of a monthly amount equal to the number of DSL subscribers obtaining such lower-priced subscription offering multiplied by 75% of the difference between the à la carte package price and the actual amount charged by the telephone company for such lower-priced subscription offering. If such STE SOD Service and/or STE Pay Television Service is offered by a telephone company in a bundle or package containing DSL service or any other products or services, the total monthly price to subscribers for such STE SOD Service and/or STE Pay Television Service together with such DSL service or other products or services (the “Bundle Price”) must be greater than the amount that is the greater of (a) $7.99 plus the price for the Base Tier and (b) $33; provided, however, that STE may allow a telephone company to charge less than the Bundle Price upon payment to Licensor by STE of a monthly amount equal to the number of DSL subscribers obtaining such lower-priced subscription offering multiplied by 75% of the difference between the Bundle Price and the actual amount charged by the telephone company for such lower-priced subscription offering. [In addition to the foregoing, STE shall not, and shall cause its affiliates and licensees to not, market, advertise, promote or publicly communicate the availability of the aforementioned STE SOD Service and/or STE Pay Television Service as being part of a bundle or package offered by a telephone company that does not include basic cable or other video programming content.] [Was this only applicable to cable because cable didn’t have any pricing restrictions on it?] In addition, STE shall cause its telephone company licensees to make available to all their subscribers the option of obtaining the STE SOD Service and/or STE Pay Television Service via the Internet on an à la carte basis at a price that is no less than $7.99 (not including the price for Internet access or any other products or services) and such option must be made reasonably obvious within such telephone companies’ package descriptions and websites.
iv) Alternative Internet Access Technologies Restrictions. If STE licenses SOD rights delivered via the Internet to the providers of any alternative Internet access technologies (e.g. WiMAX or Broadband over Power Lines (BPL)) (“Alternate Internet Services”), such licenses shall be subject to the same restrictions as set forth above with respect to DSL. [Is this true—we never discussed this.] [What about future delivery methods that do not exist today and are not the Internet? Do they have rights to do SOD in same manner as we are requiring for Internet or do we want to leave it silent and rely on the Pay Television definition? It will be hard to say they don’t have the rights to do it given the breadth of the grant of rights.]
v) Open Internet Restrictions. STE may license the right to deliver via the Internet the STE SOD Service and/or STE Pay Television Service to any service or website (“Open Internet Service”) that is not owned and operated by a multichannel video programming distributor (as defined by the FCC) to be offered to such Open Internet Service’s subscribers subject to the following pricing conditions. If such Open Internet Service offers to the public a subscription package of video programming (containing only video programming) for a price equal to at least $4.99 per month (a “Basic Video Package”), then STE may allow the Open Internet Service to offer to subscribers of such Basic Video Package the STE SOD Service and/or STE Pay Television Service on an à la carte basis for a price to subscribers equal at least $7.99 over and above the price charged for the Basic Video Package; provided, however, that STE may allow an Open Internet Service to charge less than such $7.99 price upon payment to Licensor by STE of a monthly amount equal to the number of subscribers obtaining such lower-priced subscription offering multiplied by 75% of the difference between $7.99 and the actual amount charged by the telephone company for such lower-priced subscription offering. However, if such Open Internet Service does not offer a Basic Video Package, then STE may allow the Open Internet Service to offer to its subscribers the STE SOD Service and/or STE Pay Television Service on an à la carte basis for a price to subscribers equal at least $16.99; provided, however, that STE may allow an Open Internet Service to charge less than such $16.99 price upon payment to Licensor by STE of a monthly amount equal to the number of subscribers obtaining such lower-priced subscription offering multiplied by 75% of the difference between $16.99 and the actual amount charged by the Open Internet Service for such lower-priced subscription offering. If such STE SOD Service and/or STE Pay Television Service is offered by an Open Internet Service in a bundle or package containing other video programming (but no other products or services), the total monthly price to subscribers for such STE SOD Service and/or STE Pay Television Service together with such other video programming (the “Open Internet Bundle Price”) must be greater than $16.99; provided, however, that STE may allow an Open Internet Service to charge less than the Open Internet Bundle Price upon payment to Licensor by STE of a monthly amount equal to the number of subscribers obtaining such lower-priced subscription offering multiplied by 75% of the difference between the Open Internet Bundle Price and the actual amount charged by the Open Internet Service for such lower-priced subscription offering. In addition, STE shall cause its Open Internet licensees that offer bundled packages to make available to all their subscribers the option of obtaining the STE SOD Service and/or STE Pay Television Service via the Internet on an à la carte basis at a price that is no less than $7.99 (not including the price for other content) and such option must be made reasonably obvious within such Open Internet Service’s package descriptions and websites. For the avoidance of doubt, in no event may an Open Internet Service bundle the STE SOD Service and/or STE Pay Television Service with anything other than video programming and in no event may the Basic Video Package contain anything other than video programming.
vi) Netflix Exception. Notwithstanding the foregoing, Netflix shall be permitted to bundle the STE SOD Service and/or STE Pay Television Service with its DVD delivery service at the $13.99 tier or offer STE SOD Service and/or STE Pay Television Service on an à la carte basis over and above the $4.99 tier (but not without such $4.99 tier) for a total price of $12.98. The parties acknowledge that Netflix is not in compliance with these pricing requirements as of the Agreement Date and that Netflix shall be required to meet the above requirements within 90 days after the Agreement Date. In addition, immediately following the Agreement Date Netflix shall be required to cease offering its current pricing for the STE SOD Service and/or STE Pay Television Service to new customers and cease marketing the availability of lower pricing for the STE SOD Service and/or STE Pay Television Service.
vii) Cap on Internet Subscribers. STE shall not be permitted to deliver (or license others to deliver) the STE SOD Service and/or STE Pay Television Service via the Internet (regardless of whether such delivery is done by cable modem, DSL or other technologies) to more than the following aggregate numbers of subscribers during each of the following calendar yYears:
Subscribers in millions Calendar Year
35 2009
40 2010
45 2011
50 2012
50 2013
d) Other SOD Restrictions. SOD rights may only be made available to subscribers subject to the following limitations.
i) Subscribers to (A) the linear-scheduled STE Service currently known as STARZ! or a comparable STE Service (in terms of when, within their first Pay Television “window,” motion pictures are scheduled for Pay Television exhibition and pricing to STE affiliates) (each, a “STARZ! Channel”) shall have the right to access via SOD any Picture scheduled on any STE Service, 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) to which such subscriber subscribes and Pictures scheduled on any other STE Service other than a STARZ! Channel 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 Service in accordance with this clause (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 Service known as STARZ! (as of the date of this Agreement) is priced (as of the date of this Agreement) and offering, as a general scheduling practice, initial Pay Television exhibitions of first-run motion pictures on dates earlier than the initial Pay Television exhibitions of first-run motion pictures on all other STE Services, other than any other STARZ! Channel), (B) a linear-scheduled STE Service which is scheduled in a manner comparable to the STE 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 affiliates) (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 and (C) a STE 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 Service(s) 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 SOD service in any calendar quarter.
ii) A Picture may be made available for viewing by subscribers by SOD and, if delivered for retention 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 linear-scheduled STE Service, provided, (i) that a Picture may premiere as an SOD exhibition on the STE 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 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. STE hereby represents that at least one Major Studio (in addition to Licensor) has granted STE the right to exhibit motion pictures via SOD pursuant to an Output Agreement between STE and such other Major Studio and covenants that (Y) the rights granted by such Major Studio shall remain in effect during the term of such Major Studio’s Output Agreement with STE and (Z) that at all times prior to the expiration of the Term hereunder, STE shall possess the right from at least one Major Studio (in addition to Licensor), pursuant to an Output Agreement with such other Major Studio, to exhibit the “first-run” motion pictures which are the subject of such Output Agreement via SOD.
iii) All exhibitions of Pictures by SOD shall be subject to the provisions of this Agreement including without limitation those contained in Sections 14 and 16.
iv) In order to control accessibility to Pictures delivered via SOD, STE agrees that, following the initial receipt and storage on a subscriber’s in-home (or other location permitted in Section 2(a)(ii)) 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” within a subscriber’s home (or other location permitted in Section 2(a)(ii)) that is necessary to enable the subscriber to view such Picture in the ordinary course as permitted under this Agreement 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 for time-shifting purposes, by means of an independent action taken by the subscriber, the uncompressed signal being transmitted to such subscriber’s in-home (or other location permitted in Section 2(a)(ii)) television or other in-home (or other location permitted in Section 2(a)(ii)) monitor in the ordinary course of such subscriber’s viewing of such Picture.
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 of the following names (or variations of such names, e.g., Fox or WB): [Twentieth Century Fox, Universal, MGM, Warner Bros., Paramount or Walt Disney]. [Do we want to broaden to “any name of another Major Studio (or variation of such names)”?]
f) Exhibitions on Showtime or HBO Service: If, from and after the date hereof, 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.
[To discuss with Thanda and Chris.]
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] [an unlimited number of] [Did we agree to unlimited number?] channels of the STE Services (for purposes of clarification, SOD services shall not count as channels) during the 16-month period (“First License Period”) commencing on its Availability Date. The Availability Date for each Picture other than a Holiday Themed Picture (as defined below) shall be no later than the earliest to occur of 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, at Licensor’s election, no later than 12 months after such Holiday Themed Picture’s General Theatrical Release or no later than 18 months after such Holiday Themed Picture’s General Theatrical Release. Notwithstanding anything to the contrary in this Agreement, 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 by 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 this 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. [Note: STE wants to increase to 5 per Year.]
b) Second License Period. STE shall have the exclusive right to exhibit each Picture licensed hereunder for 120 Exhibition Days (in the aggregate) on [an unlimited number of] channels of the STE Services (for purposes of clarification, SOD services shall not count as channels) during a twelve month period (“Second License Period”) which shall commence between one year and six years 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 Licensor’s First License Period for a single exhibition on any Television service (other than a Pay Television service) that Licensor or any of its affiliates operates or manages, provided, that Licensor or such 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 Sections 2(e), 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 Sections 2(e). 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.
d) Solely with respect to the Picture entitled “Facing the Giants,” there shall be an extra 1-month license period commencing July 27, 2008 and ending August 26, 2009, in addition to the First License Period and Second License Period. Notwithstanding anything to the contrary set forth in Section 2(b) above, during such extra license period, Licensor shall not license or authorize any Television exhibition (other than on STE Services) of “Facing the Giants” or the promotion of any Television exhibition (other than the promotion of exhibitions on the STE Services) of “Facing the Giants” to any party in the Territory. Without limiting, and in addition to, STE’s exhibition rights set forth in Sections 3(a) and 3(b) above, STE shall have the exclusive right to exhibit “Facing the Giants” for 8 Exhibition Days (in the aggregate) on up to 10 channels of the STE Services (for purposes of clarification, SOD services shall not count as channels) during such extra license period.
4. Picture Qualifications. “Picture” or “Pictures” shall mean, individually or collectively as the context requires, all Qualifying Films and RF/FR Films licensed in accordance with this Section 4. [Note: Need to consider how the new picture qualification criteria affect the existing criteria and/or carveouts (i.e., subsections (d) through (m)).]
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 to be released per Year, (ii) all SPC Films, subject to a cap of not more than 15 such films to be released per Year; and (iii) all B Films, subject to a cap of not more than 10 per such films to be released per Year Year, of which not more than 4 shall be Third Party Rent-A-System Films acquired from no more than single source, and not more than 6 shall be Sony Rent-A-System Films acquired from no more than 2 sources (with no more than 3 such Sony Rent-A-System Films being from any single source).
b) Designation. Licensor shall designate the A Films, SPC Films, and B Films to be licensed by STE in accordance with Section 4(b)(i) below; provided, that the top 10 domestic box office ‘A’ Films (reduced proportionally if the total number of A Films in such release Year is less than 25), the top 5 domestic box office SPC Films (reduced proportionally if the total number of SPC Films in such release Year is less than 15), 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 for each release Year. Any A Films, SPC Films, and B Films in excess of the applicable caps (after completing the designation process set forth above) shall be referred to herein as “Excess A Films,” “Excess SPC Films,” and “Excess B Films,” respectively.
i) [Thanda: How do you want to handle the designation process?].
ii) Notwithstanding Section 4(a) above, Licensor may use Excess A Films in any release Year to:
A) First, fill any remaining SPC Film slots in such release Year; and
B) Second, 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)(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.
iii) Notwithstanding anything to the contrary in Section 4(a), Licensor may use Excess SPC Films in any release Year to:
A) First, fill any remaining A Film slots in such release Year; and
B) Second, 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)(ii)(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.
c) Right of First Negotiation and First Refusal. STE shall have a Right of First Negotiation and First Refusal to license hereunder: (A) any Excess A Films, Excess SPC Films, and Excess B Films (except for Sony Rent-A-System Films or Third Party Rent-A-System Films) not otherwise licensed pursuant to Section 4(b)(ii) or 4(b)(iii) 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 Sony (e.g., Third Party Rent-A-System Films), any Sony Rent-A-System Films, or any motion pictures for which Licensor or any SPE Group Member does not own or control the U.S. 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 or any motion pictures that are filmed live concerts, stage plays, musicals, dance performance or sporting events. A “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. If the parties cannot reach a mutually satisfactory agreement within 7 days of STE’s receipt of the screening copy for such FN/FR Film, 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 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. 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 on the terms and conditions no more favorable to such other party than those notified to STE.
d) Notwithstanding the first sentence of this Section 4, 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 a 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 included hereunder (unless a SPE Group Member subsequently obtains such U.S. Pay Television rights and a 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).
e) Notwithstanding the first sentence of this Section 4, 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 a 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 a SPE Group Member subsequently obtains such U.S. Pay Television rights and a 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 Agreement 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.
f) 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 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 Agreement pursuant to Sections 4(b) and 4(c) above, and not to any motion picture excluded from this Agreement pursuant to any of Sections 4(a), 4(e), 4(g), 4(i), 4(j), 4(k) or 4(I).
g) Notwithstanding the first sentence of this Section 4:
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.
h) Notwithstanding the first sentence of this Section 4, 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.
i) Notwithstanding the first sentence of this Section 4, 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 Agreement 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 clause (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.
j) 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.
k) If Licensor 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 is acquiring the U.S. theatrical distribution rights to such Major Studio’s motion pictures, Licensor 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 can do so without violating any applicable law and/or the rights of any third party and/or any fiduciary duty that Licensor may have to third parties (provided, that any such rights created under an agreement between Licensor and any third party 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 Licensor’s attempts using reasonable efforts, Licensor 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 does not go forward with the intended acquisition, all of Licensor’s obligations, duties and undertakings in favor of STE under this Section in connection with such intended acquisition shall cease and Licensor 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 SPE again seeks to acquire such Major Studio, in which case the provisions of this Section shall again apply.
l) If Licensor 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 a 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 a SPE Group Member shall continue to subject to the terms and conditions hereof.
m) In addition to the number of motion pictures that can be excluded from this Agreement pursuant to Section 4(b), Licensor shall have the right to exclude from this Agreement motion pictures theatrically released by a SPE Group Member that are produced by one Eligible Production Company that is acquired by a SPE Group Member after the date hereof. An “Eligible Production Company” shall mean a production company that has, as of the date a 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 a 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 a 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 a 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 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 a 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 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, 2009 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 clause (i) below or by wire transfer delivered to the account set forth in clause (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 within [60 days] following the execution of each license agreement pertaining to Internet distribution of any Picture that generates any such Internet License Fees. The Netflix Settlement Amount (as defined in Exhibit A) shall be paid in accordance with Exhibit A and the instructions above.
c) Audit Rights. [Need to conform audit rights]
i) STE Audit Rights. STE, through its outside auditor, which shall be subject to Licensor’s approval (with Licensor hereby pre-approving the so-called ‘Big 5” accounting firms and any non-afffiliated 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 Agreement, including but not limited to Sections 3(b), 4, 15, 20(c), 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 since a 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 6(c) 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) Audit Report. STE shall, upon completion of any audit, furnish Licensor with a copy of the resulting audit report.
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.
iv) Time Period/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 incontestabilty provision shall supercedesupersede any otherwise applicable statute of limitations.
v) Confidentiality. All information received by STE as a result of any audit permitted hereunder shall be subject to the confidentiality provisions of Section 25 hereof.
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’s 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 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 full-frame standard definition transfer of each Picture’s theatrically released version(s) in both English and Spanish and with English-language closed-captions 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. 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 a 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 Agreement. Additionally, STE shall, subject to Licensor’s approval and any contractual restrictions, have access to (a) all versions theatrically released in the Territory, (b) 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, and (c) a HDTV version of each Licensed Picture (with respect to any permitted HDTV version of a Picture), provided such HDTV version is made available for Home Video or Television windows earlier than STE’s or, provided Licensor has reasonable time to make a television version in time for delivery to STE, a Television window or Home Video window concurrent with STE’s. STE shall have the right to access each of the versions set forth in clauses (a), (b) and (c) immediately upon such version’s release in the medium for which such version is created (subject to any contractual restrictions and subject to the restrictions on exhibitions and promotions set forth in this Agreement, 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 either of clauses (a) and (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-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 the time periods set forth in Section 3(a)(i); 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 100 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. 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), (b) or (c) 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.
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 Agreement and to perform all of its obligations hereunder and the execution, delivery and performance of this Agreement 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 Agreement 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] [Define?] 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 Agreement 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 Agreement and to perform all of its obligations hereunder, and the execution, delivery and performance of this Agreement 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 Agreement; and
c) the making or performance of this Agreement does not and will not cause STE to be in breach of a third party agreement.
[AL considering whether Internet-specific reps and warranties necessary.]
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 Agreement. 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 Agreement. 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. [Add take-down rights from Vongo?]
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 of its affiliates 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 the rules of the American Arbitration Association before a single arbitrator in Los Angeles, California.
16. Encryption, Copy Protection; Previews. [MA sent email to Rich/Mitch/Dave regarding content protection on 12/1/08.]
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) STE agrees to utilize at all times content protection technology (“Copy 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.
ii) Other Limitations.
A) 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 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.
B) STE shall have no liability in connection with the exhibition of the Pictures for any “hacks” of or “spoofing attacks” against the Copy Protection Technology as implemented by STE in accordance this Section 16(b). In this connection, the provisions of Section 12(a) shall be applicable.
iii) Notice. Prior to implementing any particular Copy Protection Technology, 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.
iv) 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), 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), 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 the rules of the American Arbitration Association in Los Angeles, California.
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 Agreement. 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 linear scheduled STE 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) STE shall have the right to include a Picture in a “Free Preview” over the Internet only if Licensor offers such Picture to consumers for “free” exhibition via the Internet.
[AL to discuss above with Len.]
17. Insurance. [Note: Language change requested by Donna—are we ok making these changes?]
a) Licensor’s Insurance. Licensor shall procure and maintain at its own cost and expense the following insurance policies for the duration of the Agreement:
i) Commercial General Liability including blanket contractual for the limits of $1,000,000 each occurrence and $2,000,000 in the aggregate.
ii) 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.
iii) The above policies referenced in Sections 17(a)(i) and 17(a)(ii) are to be endorsed to show SEMG, 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.
iv) 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.
v) Certificate(s) of insurance and the additional insured endorsement will be delivered to STE as soon as practicable after the execution of this Agreement. Licensor has the option to self insure provided that Licensor 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.
b) STE’s Insurance. STE shall procure and maintain at its own cost and expense the following insurance policies for the duration of the Agreement:
i) Commercial General Liability including blanket contractual for the limits of $1,000,000 each occurrence and $2,000,000 in the aggregate.
ii) 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.
iii) The above policies referenced in Sections 17(b)(i) and 17(b)(ii) are to be endorsed to show Licensor, its parent(s), subsidiaries 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 Licensor is non-contributory.
iv) All of the insurance carriers of STE will be licensed to do business in the states and/or countries where operations or services of STE are performed or provided. All of STE’s insurance carriers will have an A.M. Best Guide rating of at least A- or better.
v) Certificate(s) of insurance and the additional insured endorsement will be delivered to Licensor as soon as practicable after the execution of this Agreement. STE has the option to self insure provided that STE complies with all self insurance governmental regulations and remains financially stable. STE is responsible for all deductibles and/or self insured retentions under STE’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 Agreement, and
a) in the case of Licensor to:
Sony Pictures Television Inc.
10202 West Washington Boulevard
Culver City, CA 90232
Fax: 310-244-[_____]
Tel: 310-244-[_____]
Attention: President
with copies to:
Sony Pictures Television Inc.
10202 West Washington Boulevard
Culver City, CA 90232
Fax: 310-244-1798
Tel: 310-244-8239
Attention: President, Distribution
and:
Sony Pictures Entertainment, Inc.
10202 West Washington Boulevard
Culver City, CA 90232
Fax: 310-244-0510
Tel: 310-244-4692
Attention: General Counsel
b) and in the case of STE to:
Starz Entertainment, LLC
8900 Liberty Circle
Englewood, CO 80112-7057
Fax: 720-852-6245
Attention: Senior 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.
19. [Intentionally omitted] [Do we need to amend the Guaranty to cover this Amended & Restated agreement for the remainder of the Term?]
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 a 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 all Programming Services in the Territory and any Television service, regardless of whether or not such Television service is a Programming Service) 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 a 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(b) shall not be deemed a breach of this Agreement. 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 Agreement 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 availaleavailable. 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) Amended and Restated Library Agreement. After the full execution of this Agreement by both parties, the parties shall negotiate in good faith to amend and restate the Library Agreement between the STE and Sony Pictures Television Inc., dated as of September 1, 2006, as amended.
21. Miscellaneous.
a) This Agreement and the Exhibits hereto constitute the entire understanding of the parties hereto relating to the subject matter hereof and supercedesupersede all previous understandings, commitments or representations concerning the subject matter hereof. This Agreement 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 Agreement shall operate as a waiver of any provision hereof. No waiver of any breach or default under this Agreement 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 Agreement shall be utilized in any manner in interpreting the intent of the parties with respect to the final executed Agreement.
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 Agreement.
c) Any ambiguities shall be resolved without reference to which party may have drafted this Agreement.
22. Governing Law; Venue; Jurisdiction. This Agreement 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. 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 Agreement (other than disputes that are related to provisions that are subject to arbitration as set forth herein), 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. [MA sent email to Len and Kathleen on 12/1/08.]
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 and Licensor’s approval. 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 Agreement, but STE shall nevertheless indemnify Licensor (and the other parties identified in Section 12(b) above) against any resulting claims, losses, etc. Subject to Licensor approval and 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 Agreement, 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 Agreement). 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 Agreement 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 Agreement by either party, the other party shall be entitled to seek, in addition to any other remedies that it may have pursuant to this Agreement 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.
[MA sent email to Len and Kathleen on 12/1/08.]
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 Agreement 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 Agreement,
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. [AL waiting to hear from John F. regarding free tv holdback.]
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 not later than 180 days prior to the Availability Date for the motion picture to which such notice relates.
b) Within fifteen days after each Pictures 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 motion picture that is theatrically released by a SPE Group Member during the Term, Licensor reasonably believes that such motion picture will not qualify as a Picture hereunder, 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 qualify as a Picture hereunder, 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.
[MA to check with Thanda.]
28. 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 failure to timely deliver such program guides shall not be deemed a material breach hereunder.
29. Assignment. This Agreement 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 Agreement and its rights hereunder to such entity and cause such entity to assume its obligations hereunder. 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 Agreement. Any assignment of this Agreement 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 Agreement other than in accordance with the provisions of this Section 29 shall be void.
Press Release. Licensor and STE shall mutually agree as to the form, content and release date of any press release related to this Agreement, provided, that the parties agree to issue a press release announcing this Agreement within a reasonable period of time after the later of execution of this Agreement or the effective date hereof. [MA to check with Thanda.]
30. Counterparts. This Agreement may be executed in counterparts, each of which signed shall constitute an original, and all such counterparts shall constitute one and the same instrument.
31. Severability. If any provision of this Agreement 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 Agreement, but this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. If, moreover, any restriction or provision of this Agreement 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 Agreement are fair and reasonable as of the date hereof. 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 32 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).
I / /
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Agreement Date.
STARZ ENCORE MEDIA GROUP LLC
By: ENCORE MEDIA CORPORATION
Its: Managing Member
By:
Its:
SONY PICTURES ENTERTAINMENT INC.
By:
Its:
EXHIBIT A
VOLUME 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 (“Volume Rate Card”). The final License Fee is calculated from the percentage of the incremental US. theatrical Film Rentals at each level:
A. Volume Rate Card
1. For Years 2009, 2010, 2011 and 2012:
| |Incremental |Cumulative Fee at |
|Film Rentals: |Percentage: |Highest Point in Range: |
| $207.34 million |0% |$22.5 million |
2. For Year 2013: The License Fee for each Picture released in Year 2013 shall be equal to the license fee determined pursuant to the first table set forth in this Exhibit A, multiplied by 87.5%.
B. Exceptions.
1. With respect to two Pictures released in each of Years 2009, 2010 and 2011(but not Year 2012), 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. If the number of Pictures with Film Rentals over $175 million exceeds 4 over the 5-year period beginning January 1, 2012 and ending December 31, 2016 or exceeds 1 in any Year during such period, then the License Fee for each such excess Picture shall equal the highest possible License Fee for any Picture in the $73.5 ≤ $175 million tier.
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.
4. Notwithstanding anything to the contrary in this Exhibit A, the License Fees with respect to the Pictures entitled “The Take” and “Felon” shall be $30,000 each.
II. INTERNET LICENSE FEES
In addition to the amounts set forth above, STE shall pay to Licensor the amounts per subscriber set forth below (collectively, the “Internet License Fees”) with respect to licenses with Open Internet Services (other than Netflix, Inc.) and Alternate Internet Services; provided, however, that in no event shall STE be required to pay Licensor more than $20 million over the Term. For the avoidance of doubt, no Internet License Fees are due with respect to services offered by cable operators or telephone companies. [Is this cap applicable for both terms combined or is there a $20 million cap for the current term and then an additional $20 million cap for the renewal term?][What about subscribers for technology that has not yet been developed?]
Amounts [Due][Paid] to STE Amount per Subscriber (regardless of actual usage) per Year
$0 to 10 million $.33
$10 – 15 million $.50
$15 – 20 million $.75
$20 – 25 million $1.00
$25 – 30 million $1.25
Calculation Example: If STE signs a deal to license an SOD service to an Open Internet Service entitling it to $15 million in revenues (regardless of whether such compensation is denominated as license fees or bonuses or other amounts), and there are 1000 subscribers to such service that have purchased the SOD service or are otherwise given access to it, then Licensor would be owed $500.
[When do we measure how much money STE earns on the deal? When do we measure how many subscribers have bought it or have been given access to it? When do we get paid?]
STE shall pay to Licensor the amounts of $2 million upon the Agreement Date, $2 million on December 12, 2009 and $2 million on December 12, 2010 (such aggregate amount, the “Netflix Settlement Amount”) as license fees owed to Licensor for the Internet exploitation until [date of expiration of Netflix license] of the Pictures through the Netflix service on an SOD basis and on the StarzPlay linear service in accordance with the terms of this Agreement. [they will want to throw in dispute resolution language which would be ok but it would be their point to propose]
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 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 Paragraph 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 150 days after such Picture’s Initial Theatrical Release. 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 Agreement, 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 150 days after such Picture’s Initial Theatrical Release. 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 Agreement 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, SEMG 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 SEMG, 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 Paragraph 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 135 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 Paragraph 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 Mixing (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, "SPE's standard product metadata will be made available to STE upon request using a mutually agreed upon delivery method. Licensee will be given access to SPE marketing sites for any graphic requirements.
Schedule Ito 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
COPY PROTECTION STANDARDS
[Add Schedule C from Vongo VOD deal?]
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