Via Facsimile (212) 995-0483 September 11, 1995 Roland Betts Silver Screen Management, Inc. 936 Broadway New York, New York 10011 Re: Disney-Silver Screen Partners II Joint Venture Dear Roland: Enclosed please find the Terms and Conditions which reflect the business deal with respect to the buyout by Disney of Silver Screen Partners II, L.P.'s ("Silver Screen II") interest in the Disney-Silver Screen Partners II Joint Venture. Please indicate your acceptance of and agreement to the enclosed Terms and Conditions by countersigning and returning to us a copy of this letter no later than September 29, 1995. Upon receipt of such countersignature, Disney and Silver Screen II will promptly prepare and execute a long-form purchase agreement (the "Purchase Agreement") giving effect to the agreement of the parties in accordance with the enclosed Terms and Conditions. Until such time as the Purchase Agreement is executed, the enclosed Terms and Conditions shall constitute a binding agreement of the parties with respect to the subject matter therein as of the date of your acceptance of the Terms and Conditions. Very truly yours, /s/ Robert S. Moore Robert S. Moore cc: Stephen Bollenbach Sandy Litvack Ted Philip BUYOUT OF SILVER SCREEN PARTNERS II, L.P. TERMS AND CONDITIONS PURCHASER: The Walt Disney Company or (subject to the provisions under "Assignment" below) an affiliate ("Disney"). SELLER: Silver Screen Partners II, L.P. ("Partnership"). PURCHASE PRICE: $45 million, in cash in immediately available funds (subject to any Purchase Price Adjustment). BUYOUT: Purchase by Disney of all of Partnership's rights and interests in, to and under (i) the Joint Venture Agreement dated as of April 29, 1985 (the "Joint Venture Agreement") between The Walt Disney Company and Silver Screen Partners II, L.P., as amended, (ii) the Distribution Agreement, dated as of April 29, 1985 (the "Distribution Agreement") between Disney-Silver Screen II Joint Venture (the "Joint Venture") and Buena Vista Distribution Co., Inc. ("BVD"), as amended, (iii) the Loan Agreement dated as of April 29, 1985 (the "Loan Agreement") between The Walt Disney Company and Silver Screen Partners II, L.P., as amended, (iv) the Completed Pictures Distribution Agreement dated as of April 29, 1985 (the "Completed Pictures Distribution Agreement", together with the Distribution Agreement, the "Distribution Agreements) between The Walt Disney Company and Buena Vista Distribution Co., Inc., as amended, (v) the Silver Screen II films and (vi) Partnership's general partner interest in the Joint Venture (collectively, the "Partnership's Interest"). All of the foregoing agreements are sometimes collectively referred to as the "Agreements". Closing of the Buyout shall occur on the Payment Date (as defined below). PAYMENT DATE: January 2, 1996 (or such later date as mutually agreed to by the parties), on which date after payment of the Purchase Price, all right, title and interest in the Partnership's Interest shall be automatically transferred to Disney, and Partnership shall not be entitled to receive any revenues from, shall have no further right, title or interest in, and shall have no further obligations or liabilities with respect to, the Partnership's Interest. Prior to the Payment Date, Disney will not assert any ownership interest in the Partnership's Interest for any purpose, including for any tax purpose. Disney agrees that it shall have no right to set-off, counterclaim or other similar remedy with respect to its payment obligations hereunder. PURCHASE PRICE ADJUSTMENT: The Purchase Price will be reduced, dollar-for-dollar, by each dollar which Partnership receives under the Joint Venture Agreement or the Loan Agreement during the period from October 1, 1995 to the Payment Date from any exploitation of the films "The Black Cauldron" and "The Great Mouse Detective". DOCUMENTATION: The parties will prepare, execute and deliver a long-form purchase agreement (the "Purchase Agreement") as soon as practicable which will document the terms and conditions set forth herein. In addition to the terms and conditions set forth herein, the Purchase Agreement will contain (a) representations and warranties of Disney and Partnership as to: (i) due execution of the Purchase Agreement, (ii) due authorization to enter into and perform under the Purchase Agreement, (iii) enforceability of the Purchase Agreement, and (iv) in the case of Partnership, -1- (x) right, title and interest in and to the Partnership's Interest free and clear of all liens and encumbrances other than any lien or encumbrance arising out of actions of Disney and other than as provided hereunder and (y) Partnership not having taken any action or entered into any agreement to bind the Joint Venture or Disney or which would constitute a violation or infringement of the rights granted to the Joint Venture or Disney under the Joint Venture Agreement; and (b) the following conditions to the parties' respective obligations to consummate the Buyout: (i) no provision of any applicable law prohibits the closing of the Buyout, (ii) no order, judgment or injunction prohibits the closing of the Buyout, (iii) any applicable waiting period under the HSR Act (as defined below) shall have expired or been terminated, (iv) absence of any pending litigation or proceeding before any court, or governmental or administrative body which seeks to prohibit closing of the Buyout and which has a substantial likelihood of success on the merits, (v) accuracy of representations and warranties in all material respects, and (vi) as a condition to Disney's obligation to close, a certificate from Partnership as to (x) right, title and interest in and to the Partnership's Interest free and clear of all liens and encumbrances other than any lien or encumbrance arising out of the actions of Disney and other than as provided hereunder and (y) Partnership not having taken any action or entered into any agreement to bind the Joint Venture or Disney or which would constitute a violation or infringement of the rights granted to the Joint Venture or Disney under the Joint Venture Agreement. In the event that no Purchase Agreement is executed by the parties, these Terms and Conditions will govern the closing of the Buyout. AGREEMENTS: Upon acceptance of these Terms and Conditions by the parties: (1) Disney shall have the right in perpetuity to enter into distribution, licensing or other arrangements with respect to the exploitation of Silver Screen II films in any media now known and unknown and by any means and/or devices now known and unknown for any period of time, without the prior approval of Partnership. Subject to the preceding sentence, Disney agrees that until the closing of the Buyout, the Silver Screen II films will continue to be exploited in accordance with the Distribution Agreements. (2) BVD will account for and will make payments to the Joint Venture as required by the Distribution Agreements, with respect to receipts received by BVD from the Silver Screen II films through November 30, 1995 (including revenues from the arrangements referred to in clause (1) above). A final payment will be made by the Payment Date, or earlier, to Partnership of its share of Joint Venture revenues payable as of November 30, 1995. BVD agrees to use methods and procedures in its calculation of revenues payable to the Joint Venture consistent with methods and procedures utilized by BVD in the past with respect to accountings and payments previously made by BVD to the Joint Venture in connection with the Silver Screen II films. Partnership waives all rights to audits and all audit claims arising from or under the terms of the Agreements whether currently outstanding, now existing or hereafter arising, and all statements with respect to payments due to the Joint Venture will be binding upon Partnership absent manifest error, except that Partnership will have the right to audit future statements solely for the purpose of ensuring that BVD is in compliance with this clause (2) and that no manifest error exists in the -2- statements. Such limited audit right must be exercised by Partnership within 30 days after receipt by Partnership of such statement or such right shall be deemed waived. (3) (a) Subject to subclause (d) below of this clause (3), Disney irrevocably releases Partnership and its affiliates from, any claims, known and unknown, which Disney may have now or in the future against Partnership, arising from any acts, omissions or conduct of Partnership during the course of the Agreements; provided, however, that this release does not include (i) any breach of these Terms and Conditions or the Purchase Agreement, if applicable, and (ii) any breach of Paragraph 31 of the Joint Venture Agreement by Partnership, it being understood that the provisions of such Paragraph 31 shall survive the closing of the Buyout. (b) Subject to subclause (d) below of this clause (3), Partnership irrevocably waives, and releases Disney and its affiliates from, any rights and claims, known and unknown, which Partnership may have now or in the future, with respect to its interest in the Joint Venture and the Silver Screen II films, other than its continued right to receive accountings and payments in accordance with (2) above through and until the Payment Date (for receipts from Silver Screen II films through and including November 30, 1995) and except as expressly provided in these Terms and Conditions (including clause (4) below). Partnership's waived rights and claims include, without limitation (except as otherwise provided in these Terms and Conditions): -- all rights to audits and all audit claims except to the extent provided in (2) above -- rights and claims to any revenues or royalties, whether or not explicitly expressed in the Agreements, with respect to stage plays, ice shows, new technologies, or any other exploitation or payments derived therefrom or with respect to any revenues or royalties derived from rights not previously exploited or from rights previously exploited but not previously accounted for to Partnership -- any rights or claims with respect to home video royalty re-negotiations (c) Although the foregoing respective releases by Disney and by Partnership as the releasing party (the "Releasing Party") is not a general release, as to matters being released, each Releasing Party expressly waives and relinquishes all rights and benefits afforded by Section 1542 of the Civil Code of the State of California, which provides: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." (d) If the Buyout fails to close on the Payment Date as a result of any breach by a party of these Terms and Conditions or of the Purchase Agreement, or as a result of a -3- failure to satisfy a condition precedent to closing because of any act or omission of a party, nothing contained herein or in the Purchase Agreement will limit any rights or obligations of the parties existing at law or in equity. Furthermore, it is understood and agreed that if the Buyout shall fail to close on the Payment Date for any reason other than the breach of these Terms and Conditions or of any provision contained in the Purchase Agreement by Partnership, or the failure of a condition precedent to be satisfied because of any action or omission of Partnership, then the parties shall negotiate for a period of 60 days (or such longer period as the parties shall agree, the "Workout Period") after the Payment Date to consummate the Buyout. If at the end of the Workout Period the Buyout still has not occurred then (i) the waivers and releases contained in this section captioned "Agreements" shall be void and of no force and effect and Partnership and Disney shall once again have all the rights and claims previously waived or released, (ii) the Agreements shall continue to govern the relationship, rights and obligations of the parties with respect to the Partnership's Interest, except that the relevant dates under Paragraph 16 of the Joint Venture Agreement, Paragraph 7 of the Loan Agreement and Paragraph 20 of the Distribution Agreement shall be tolled until the last day of the Workout Period and the earliest date contained in such Paragraphs shall be revised to be the date which is the first day after the Workout Period and each other date in such Paragraphs shall be revised and extended accordingly, (iii) the term of the Distribution Agreement under Paragraph 1.2 thereof shall be extended until the latest date in Paragraph 20 of the Distribution Agreement as revised and extended in accordance with subclause (ii) above and (iv) any and all distribution, licensing or other arrangements entered into by Disney in accordance with clause (1) above shall remain in full force and effect. (4) Notwithstanding clause (3) above, the following rights and interests of Partnership shall only be irrevocably and automatically waived as of (and shall not be waived prior to) the closing of the Buyout: (i) the right that no amendment or waiver (other than as contemplated hereunder) of the Agreements shall be made without Partnership's consent; (ii) revenues actually received by the Joint Venture with respect to a Silver Screen II film will continue to be allocated in accordance with Paragraph 13 of the Joint Venture Agreement in the case of receipts by the Joint Venture and in accordance with the Distribution Agreement in the case of receipts by BVD (subject to clause (2) above); and (iii) Paragraphs 15, 19.1, 22.4, 24 and 33 of the Joint Venture Agreement. HSR ACT FILINGS: Filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act") will be made by Disney and Partnership and the applicable waiting period will have expired or been terminated prior to the Payment Date. CONFIDENTIALITY: Each of Disney and Partnership agrees to keep confidential and will not disclose the existence of this transaction or the terms hereof to any person, other than its managing partner, officers, employees, directors and advisors, as applicable, who need to know and who are bound by the same confidentiality undertakings and other than as required by applicable law (including securities laws), without the prior written consent of the other party (not to be unreasonably withheld). In connection with any disclosure required by applicable law (including securities laws), the party proposing to make such disclosure shall obtain the prior written approval of the other party (not to be unreasonably withheld) with respect to the proposed disclosure. In addition, -4- each of Disney and Partnership agrees that no public announcement of this transaction or the terms hereof shall be made without the prior written approval of the other party (not be to be unreasonably withheld) and any response to inquiries or other communications with respect to this transaction or the terms hereof shall be limited to the previously approved disclosure hereunder. It is agreed that either party may file these Terms and Conditions and/or the Purchase Agreement as an exhibit to any report filed by such party under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), if so required under the Exchange Act. EXPENSES: Each party shall bear its own costs and expenses (including fees and expenses of counsel and other advisors) incurred in connection with the Buyout. NO RELIANCE: Each party acknowledges and represents that it has independently, and without reliance upon the other party or any of its affiliates, and based on such documents, information and advice of advisors as it has deemed appropriate, made its own analysis and decision to enter into the transaction. CO-OPERATION; Disney and Partnership will co-operate and each FURTHER ASSURANCES: use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under applicable laws and regulations to consummate the transactions contemplated hereby. Disney and Partnership each agree to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable in order to consummate or implement expeditiously the transactions contemplated hereby. GOVERNING LAW: State of California ASSIGNMENT: Neither Partnership nor Disney may assign its rights or obligations under these Terms and Conditions or the Purchase Agreement without the prior written consent of the other party; provided, however, that Disney may assign its rights and obligations hereunder or under the Purchase Agreement to an affiliate so long as The Walt Disney Company remains liable for the payment obligations hereunder. -5- THE TERMS AND CONDITIONS REFERRED TO ABOVE ARE HEREBY ACCEPTED AND AGREED TO ON SEPTEMBER 29, 1995. SILVER SCREEN PARTNERS II, L.P. By: SILVER SCREEN MANAGEMENT, INC., Its Managing Partner By: /s/ Roland W. Betts -------------------------- Roland W. Betts, President THE WALT DISNEY COMPANY By: /s/ David K. Thompson ------------------------------- David K. Thompson Senior Vice President-Assistant General Counsel