As of April 1, 1995
Cinergi Productions N.V. Inc.
Polarisweg 35. St. 6
Willemstad, Curacao
Netherlands, Antilles
Gentlemen:
The following sets forth the principal terms of the agreement between Buena
Vista International, Inc. ("BVI") and Cinergi Productions N.V. Inc. ("Cinergi")
with respect to the acquisition of exclusive distribution and other rights by
BVI to the full length theatrical motion picture tentatively entitled "Nixon"
(the "Picture").
1. INTENTIONALLY OMITTED.
2. DISTRIBUTION:
a. Cinergi does hereby irrevocably grant, assign and license to BVI
the exclusive right, title and interest in and to the Picture and each of its
elements and all exclusive rights to distribute, exhibit, market and exploit the
Picture in any and all manner and in all media, now known or hereafter devised
including, without limitation, theatrical, non-theatrical, all forms of home
video cassettes/discs, cartridges, video on demand (i.e. the exploitation by
per-exhibition charge of a motion picture which is delivered by means of a point
to point telecommunication system from a digital storage device at a time chosen
by the viewer ["Video On Demand"]), tapes or similar devices, near video on
demand, formats or delivery systems now known or hereafter devised to be used in
conjunction with a reproduction apparatus which causes the picture to be visible
on the screen of a television receiver, television monitor or comparable device
now known or hereafter devised in a private residence for viewing at the place
of origin of such exhibition ("Home Video Devices") and all forms of television
including, without limitation, standard, non-standard, subscription, pay
television, cable and basic cable, satellite, etc. (including pay-per-view),
fiber optic and digital delivery systems, etc. ("Television"); the right to
advertise, publicize and promote the Picture including, without limitation, the
right to excerpt and/or synopsize the Picture and/or screenplay for the Picture
[provided, that any such excerpt and/or synopsis shall not exceed Two Thousand
Five Hundred (2,500) words in length]; commercial tie-ins (subject to [x] the
applicable terms of existing agreements between Cinergi and distributors in the
BVI Territory and [y] the rights of principal talent under their respective
agreements with Cinergi [all relevant portions of which Cinergi agrees to
deliver pursuant to the delivery
1
provisions of subparagraph 3.a. below]); subject to the prior consent of
Cinergi, the right to change the title of the Picture; the right to finance
and/or produce (if none currently exists) and distribute a "making of"
promotional film (subject to the rights and approvals of all persons who provide
services to the Picture [of which Cinergi shall deliver a written account
pursuant to the delivery provisions of subparagraph 3.a. below], and applicable
guild and union requirements); the right to cut or edit the Picture for legal
and censorship reasons, time parameters and standards and practices requirements
of airlines, television stations and broadcasters (subject to the terms of
Paragraph 4. below); the right to subtitle and dub the Picture into the foreign
languages specified in this subparagraph 2.a. (as well as those of Japan and
China); the right with respect to all persons appearing in the Picture or
performing production services therein to issue and authorize publicity
concerning such persons and the right to use, reproduce, transmit, broadcast,
exploit, publicize and exhibit their names and likenesses (subject to third
party agreements with Cinergi, of which Cinergi shall deliver a written account
of pertinent points pursuant to the delivery provisions of subparagraph 3.a.
below) in transcriptions, advertising, distribution and exploitation of the
Picture in the following territories: (i) German-speaking Europe (including,
without limitation, German language rights in all media in Switzerland); (ii)
Switzerland (in the Italian, English and French languages, excluding Italian and
French language Home Video Device rights and Italian and French language
Television rights); (iii) Japan; (iv) China; and (v) all of the respective
territories, protectorates and possessions of each of the aforementioned,
including planes and ships flying the flag of any of the respective nations,
wherever situated (altogether, the "BVI Territory"). For purposes of clarity,
the parties agree that the rights granted to BVI by Cinergi herein shall not
include "video" or computer games for platforms such as SEGA Genesis, Nintendo
SNES, 3DO Multiplayer system or any similar or new platform formats in relation
to which the user (x) is given interactive control over "virtual" actors and
surroundings, and/or (y) engages in contests of dexterity]. BVI acknowledges
that Cinergi has the right to distribute the Picture in all media, throughout
the world, except for the BVI Territory, subject to the terms of the agreement
between Cinergi and Buena Vista Pictures Distribution, Inc. ("BVD"), dated as of
July 9, 1990, as amended ("BVD Agreement")("Cinergi Territory"). Each party
shall be solely responsible for all distribution costs and expenses in
connection with the Picture in its respective territory including, without
limitation, advertising costs and costs associated with the manufacture of
prints and Home Video Devices. For purposes of reference herein, the BVI
Territory shall be comprised of the "BVI Territory "A"", "BVI Territory "B"",
"BVI Territory "C"" and "BVI Territory "D"". As used herein, the term "BVI
Territory "A"" shall refer to the following: (i) Germany; (ii) Austria; and
(iii) all of the respective territories, protectorates and possessions of each
of
2
the aforementioned, including planes and ships flying the flag of any of the
respective nations, wherever situated. The parties agree that exploitation of
broadcast television rights in Alto Aldige hereunder by BVI shall be restricted
to such broadcasts as are simultaneous with BVI broadcasts of the Picture in
Germany and/or Austria. As used herein, the term "BVI Territory "B"" shall
refer to the following: (i) Switzerland (in the German, Italian, English and
French languages); and (ii) all of the respective territories, protectorates and
possessions of the aforementioned, including planes and ships flying the flag of
such nation, wherever situated. The parties agree that the initial theatrical
release of the Picture in the French language by BVI in Switzerland shall not
occur prior to the initial theatrical release of the Picture in France.
Furthermore, the parties agree that the initial theatrical release of the
Picture in the Italian language by BVI in Switzerland shall not occur prior to
the initial theatrical release of the Picture in Italy. As used herein, the
term "BVI Territory "C"" shall refer to the following: (i) Japan; and (ii) all
of the respective territories, protectorates and possessions of the
aforementioned, including planes and ships flying the flag of such nation,
wherever situated. As used herein, the term "BVI Territory "D"" shall refer to
the following: (i) China; and (ii) all of the respective territories,
protectorates and possessions of the aforementioned, including planes and ships
flying the flag of such nation, wherever situated.
b. The term of this Agreement (the "Term") shall commence as of the
date hereof and terminate Nineteen (19) years from the initial theatrical
release of the Picture in any country of the BVI Territory. In the event that
BVI has not recouped its Advance (as defined below), together with all other
recoupable sums hereunder (all of the foregoing, "Recoupable Sums") prior to the
expiration of the Term, the Rights Granted in the BVI Territory shall
automatically be extended on a year to year basis until the close of the
accounting period in which the amount of revenues received by BVI from the
exercise of the Rights Granted (as defined below) in the BVI Territory hereunder
("Recoupment Date") is equal to a sum which is One Hundred percent (100%) of the
Recoupable Sums, net of payments made to you by BVI hereunder pursuant to the
terms of subparagraph 3.b. below ("Extended Term"); provided, that the length of
the Extended Term shall not exceed a period of three (3) years. Furthermore,
Cinergi grants BVI a right of first negotiation to extend the Term in the BVI
Territory pursuant to the provisions of Paragraph 12. below.
c. BVI agrees to comply with the credit and billing requirements
specified by Cinergi, subject to applicable guild requirements (it is understood
and agreed that BVI will abide by any and all third party credit restrictions of
which it receives written notice, which Cinergi agrees to provide pursuant to
the delivery provisions of subparagraph 3.a. below). In the BVI
3
Territory, the Picture shall include the following presentation credit: either
"Cinergi presents" or "Andrew G. Vajna presents" with a separate title card
which includes a logo, as determined by BVI. In the BVI Territory, Cinergi
agrees that the Picture may include, prior to the aforementioned presentation
credit, a BVI distributor's credit in a form to be determined by BVI in its sole
discretion on a separate title card which also includes a BVI logo (i.e. the
credit and logo for BVI shall be on one [1] card). BVI may use the
aforementioned distributor's credit both on-screen and in advertising and
promotion for the Picture. Cinergi agrees that a subdistributor in the BVI
Territory may include a distributor's credit on a separate title card which also
includes a logo selected by such subdistributor. Cinergi may not use the BVI
name, or the name of any parent, subsidiary or affiliate of BVI in connection
with Cinergi's distribution and/or exploitation of the Picture in the Cinergi
Territory. BVI may not use the Cinergi name, or the name of any parent,
subsidiary or affiliate of Cinergi in connection with BVI's distribution and/or
exploitation of the Picture in the BVI Territory (except as otherwise provided
herein). No casual or inadvertent failure by BVI or any of its subdistributors
or licensees to comply with the credit and billing requirements specified by
Cinergi shall constitute a breach of this Agreement.
d. Except as specifically set forth in Paragraph 2. above, all other
rights in the Picture are retained by Cinergi including, without limitation: (i)
literary publishing rights; (ii) soundtrack rights; (iii) music publishing
rights; (iv) the right to exploit so-called merchandising rights; and (v) theme
park attractions ("Reserved Rights"); provided, however, that BVI (and
affiliates) shall have the right to purchase and/or create promotional aids,
point of purchase materials, etc., to sell or give away in conjunction with the
marketing and publicizing of the Picture as contemplated hereunder; provided,
further, that BVI shall not have the right to sell such materials to the general
public.
e. BVI shall not authorize the exhibition of the Picture anywhere in
the world including, without limitation, film festivals and public previews at
any time prior to the initial general U.S. theatrical release of the Picture
without the prior approval of Oliver Stone ("Stone"), not to be unreasonably
withheld.
f. The rights granted by Cinergi to BVI in this Paragraph 2. shall
be referred to herein as the "Rights Granted".
g. BVI acknowledges the Home Video Device and Television holdbacks
specified in subparagraph 5.b. of the BVD Agreement. BVI shall be bound by such
holdbacks, subject only to obtaining permission from BVD to exempt certain
countries in the BVI Territory from the provisions of such holdbacks (in
4
which event BVI shall have the right to release the Picture in accordance with
the terms of such permission from BVD).
3. COMPENSATION TO CINERGI:
a. ADVANCE: Provided that Cinergi makes Complete Delivery (as
defined below) of the Picture to BVI in accordance with Exhibit "DR" (free and
clear of any claims, liens or encumbrances, except as otherwise agreed to by the
parties hereto in advance and in writing) on or before the Delivery Date (as
defined below), BVI agrees to pay Cinergi and Cinergi agrees to accept as full
consideration for the rights granted to BVI by Cinergi herein an amount equal to
Eight Million Eight Hundred Seventy Five Thousand Dollars ($8,875,000)
("Advance"). The Advance shall be allocated in accordance with the following:
(i) Four Million Seven Hundred Seventy Five Thousand Dollars ($4,775,000) shall
be allocated to BVI Territory "A" together with BVI Territory "B" ("BVI
Territory "A/B" Advance"); (ii) Four Million One Hundred Thousand Dollars
($4,100,000) shall be allocated to BVI Territory "C" ("BVI Territory "C"
Advance"); and (iii) Zero Dollars ($0.00) shall be allocated to BVI Territory
"D". The Advance (together with interest thereon, which interest shall accrue at
the rate specified in Exhibit "NP" and shall be computed as provided for in
subparagraph V.C. of Exhibit "NP") shall be recouped by BVI pursuant to the
terms of subparagraphs 3.b., 3.c. and 3.d. below and Exhibit "NP", which is
attached hereto and incorporated herein by this reference (references to Exhibit
"NP" shall be deemed to include Rider "NP", which is attached hereto and
incorporated herein by this reference). The interest which accrues on the
Advance shall be allocated in accordance with the following: (i) interest on the
BVI Territory "A/B" Advance (""A/B" Interest"); and (ii) interest on the BVI
Territory "C" Advance (""C" Interest"). The Advance shall be payable to Cinergi
by BVI in accordance with the following: One Hundred percent (100%) on complete
execution of this Agreement by both parties.
b. CONTINGENT COMPENSATION FOR BVI TERRITORY "A", BVI TERRITORY "B"
AND BVI TERRITORY "C": "A/B/C Gross Receipts" shall be defined pursuant to the
applicable provisions of Exhibit "NP" throughout the BVI Territory "A", BVI
Territory "B" and BVI Territory "C". A/B/C Gross Receipts, which shall include
the Home Video Receipts, as set forth in subparagraphs 3.c. and 3.d. below,
shall be subject to the exclusions and deductions set forth in Exhibit "NP"
(provided, that for purposes of this Paragraph 3., Home Video Receipts shall
not be deemed to include receipts by BVI from distribution of the Picture
hereunder in the Video on Demand medium). BVI shall deduct and retain the
following from A/B/C Gross Receipts in the following order of priority and on a
continuing basis:
5
(i) BVI shall first deduct and retain for its own account the
following distribution fees from the A/B/C Gross Receipts:
(A) Theatrical/Non-Theatrical -
FOR BVI TERRITORY "A" AND BVI TERRITORY "B"
Theatrical distribution fees shall be calculated according to Film Rentals, as
such term is defined in Exhibit "NP" with respect only to Theatrical/Non-
theatrical exhibitions, and shall include third party distribution fees, if any.
On Film Rentals received from the Theatrical/Non-theatrical exhibition of the
Picture in the BVI Territory "A" and BVI Territory "B" less than or equal to
Three Million Dollars ($3,000,000), BVI shall deduct and retain Twenty Five
percent (25%); on Film Rentals greater than Three Million Dollars ($3,000,000)
but less than or equal to Six Million Dollars ($6,000,000), BVI shall deduct and
retain Twenty Seven and One half percent (27.5%); on Film Rentals greater than
Six Million Dollars ($6,000,000), BVI shall deduct and retain a Thirty percent
(30%) distribution fee.
FOR BVI TERRITORY "C"
Theatrical distribution fees shall be calculated according to Film Rentals, as
such term is defined in Exhibit "NP" with respect only to Theatrical/Non-
theatrical exhibitions, and shall include third party distribution fees, if any.
On Film Rentals received from the Theatrical/Non-theatrical exhibition of the
Picture in the BVI Territory "C" less than or equal to Three Hundred Million Yen
(Y.300,000,000), BVI shall deduct and retain Twenty Five percent (25%); on Film
Rentals greater than Three Hundred Million Yen (Y.300,000,000) but less than or
equal to Five Hundred Million Yen (Y.500,000,000), BVI shall deduct and retain
Twenty Seven and One half percent (27.5%); on Film Rentals greater than Five
Hundred Million Yen (Y.500,000,000), BVI shall deduct and retain a Thirty
percent (30%) distribution fee.
The parties agree that all revenues received by BVI hereunder from the sale of
theatrical souvenir programs for the Picture in BVI Territory "C" shall be
contributed to Theatrical Gross Receipts and shall be deemed a part thereof.
(B) All Television - Twenty-Five percent (25%).
(C) Home Video Device - Zero percent (0%).
(D) Video on Demand - Thirty percent (30%).
6
The respective distribution fees provided for in subparagraphs 3.b.(i)(A) and
3.b.(i)(B) above shall include all third party distributor fees, if any. By way
of example only, for Theatrical/Non-Theatrical distribution of the Picture in
BVI Territory "A", the maximum amount of distribution fees deducted and retained
by BVI and subdistribution fees retained by a third party distributor when Film
Rentals is greater than Six Million Dollars ($6,000,000) shall not exceed Thirty
percent (30%) of the A/B/C Gross Receipts derived from such Theatrical/Non-
Theatrical exploitation of the Picture in BVI Territory "A". Notwithstanding the
foregoing, the distribution fee provided for in subparagraph 3.b.(i)(B) above as
applied to BVI Territory "A" and to BVI Territory "B" shall be capped at Thirty
Two and One Half percent (32.5%) in the event of third party subdistribution of
Free Television product; provided, that BVI's fee shall in no event be less than
Ten percent (10%)(net of any third party subdistributor)(provided, that such cap
of Thirty Two and One Half percent [32.5%] is applied to the sum of the fees to
BVI on the one hand and to a third party distributor on the other hand for Free
Television product); provided, further, that the distribution fee provided for
in subparagraph 3.b.(i)(B) above as applied to BVI Territory "C" shall be capped
at Thirty Five percent (35%) in the event of third party subdistribution of
Television product. Notwithstanding the foregoing, the distribution fee
provided for in subparagraph 3.b.(i)(D) above as applied to BVI Territory "A"
and to BVI Territory "B" shall be capped at Thirty Seven and One Half percent
(37.5%) in the event of third party subdistribution of Video on Demand product;
provided, that BVI's fee shall in no event be less than Ten percent (10%)(net of
any third party subdistributor)(provided, that such cap of Thirty Seven and One
Half percent [37.5%] is applied to the sum of the fees to BVI on the one hand
and to a third party distributor on the other hand for Video on Demand product);
provided, further, that the distribution fee provided for in subparagraph
3.b.(i)(D) above as applied to BVI Territory "C" shall be capped at Forty Five
percent (45%) in the event of third party subdistribution of Video on Demand
product.
(ii) BVI shall next deduct and retain all Distribution Costs
paid or incurred by BVI in commercially exploiting the Picture including,
without limitation, residuals, so-called "off the tops", print and advertising
costs, delivery costs paid or incurred by BVI, subtitling and dubbing costs, and
all other customary Distribution Costs, as defined in Paragraph IV of Exhibit
"NP";
(iii) BVI shall next deduct and retain amounts equal to the
following: (x) the "A/B" Interest, as set forth in subparagraph 3.a. above; and
(y) the "C" Interest, as set forth in subparagraph 3.a. above; and
(iv) BVI shall next deduct and retain the Advance as set forth
in subparagraph 3.a. above.
7
The A/B/C Gross Receipts remaining after continuing deduction of the amounts set
forth in subparagraphs 3.b.(i) through 3.b.(iv) above, if any, after BVI has
deducted its Distribution Fees, Distribution Costs, Interest and the Advance on
a continuing basis in accordance with Exhibit "NP", shall be payable One Hundred
percent (100%) to Cinergi. Cinergi shall be accorded audit and accounting
rights as set forth in Exhibit "NP". Accordingly, Cinergi agrees that it shall
not have the right to audit Home Video Device distribution costs under this
Agreement (including, without limitation, home video disc distribution
costs)(provided, that BVI shall upon request issue Cinergi an affidavit signed
by a Financial Officer of BVI with respect to such manufacturing and
distribution costs).
c. HOME VIDEO RECEIPTS FOR BVI TERRITORY "A" AND BVI
TERRITORY "B":
(i) With respect to sums actually received by or credited to
BVI or any subsidiary or affiliated company of BVI (less taxes actually paid
[excluding income taxes], credits, returns and a reasonable reserve for returns,
which shall be liquidated within Twelve (12) months in each instance) from the
distribution in the rental market of Home Video Devices embodying the Picture in
the BVI Territory "A" and BVI Territory "B", there shall be included in the
A/B/C Gross Receipts a royalty rate calculated in accordance with the following:
Units Royalty Rate
----- ------------
- 6,000 30%
6,001 - 10,000 32.5%
10,001 - 15,000 35%
15,001 - 20,000 37.5%
20,001 - 40%
(ii) With respect to sums actually received by or credited to
BVI or any subsidiary or affiliated company of BVI from the sales of Home Video
Devices embodying the Picture in the BVI Territory "A" and BVI Territory "B" in
the rental market by third party licensees, Fifty percent (50%) of revenues less
actual costs incurred by BVI or its affiliates, if any (e.g. mastering, artwork,
duplication, etc., but excluding all marketing, video duplication costs and
third party distribution fees)(such actual costs to be deducted "off the top"),
shall be included in the A/B/C Gross Receipts. Notwithstanding the foregoing,
contributions to the A/B/C Gross Receipts of revenue received by BVI or its
affiliates from such third party licensees shall in no event exceed the amount
which would be contributed by application of the royalty rates specified in the
immediately preceding subparagraph.
8
(iii) With respect to sums actually received by or credited to
BVI or any subsidiary or affiliated company of BVI (less taxes actually paid
[excluding income taxes], credits, returns and a reasonable reserve for returns,
which shall be liquidated within Twelve (12) months in each instance) from the
distribution in the sell-through or repriced rental market of Home Video Devices
embodying the Picture in the BVI Territory "A" and BVI Territory "B", there
shall be included in the A/B/C Gross Receipts (without any deduction of a
distribution fee) a royalty rate equal Fifteen percent (15%).
(iv) With respect to sales of Home Video Devices embodying the
Picture in the BVI Territory "A" and BVI Territory "B" in the sell-through or
repriced rental market by third party licensees, Fifty percent (50%) of revenues
less actual costs incurred by BVI or its affiliates, if any (e.g. mastering,
artwork, duplication, etc., but excluding all marketing, video duplication costs
and third party distribution fees) (such actual costs to be deducted "off the
top"), shall be included in the A/B/C Gross Receipts. Notwithstanding the
foregoing, contributions to the A/B/C Gross Receipts of revenue received by BVI
from such third party licensees shall in no event exceed the amount which would
be contributed by application of the royalty rate specified in the immediately
preceding subparagraph.
d. HOME VIDEO RECEIPTS FOR BVI TERRITORY "C":
(i) With respect to sums actually received by or credited to
BVI or any subsidiary or affiliated company of BVI (less taxes actually paid
[excluding income taxes] credits, returns and a reasonable reserve for returns,
which shall be liquidated within Twelve (12) months in each instance) from the
distribution in the rental market of Home Video Devices embodying the Picture in
the BVI Territory "C", there shall be included in the A/B/C Gross Receipts a
royalty rate calculated in accordance with the following:
Units Royalty Rate
----- ------------
- 40,000 32.5%
40,001 - 65,000 35%
65,001 - 75,000 37.5%
75,001 40%
(ii) With respect to sums actually received by or credited to
BVI or any subsidiary or affiliated company of BVI from the sales of Home Video
Devices (including, without limitation, home video discs) embodying the Picture
in the BVI Territory "C" in the rental market by third party licensees, Fifty
percent (50%) of revenues less actual costs incurred by BVI or its affiliates,
if any (e.g. mastering, artwork, duplication, etc., but excluding all marketing,
video
9
duplication costs and third party distribution fees) (such actual costs to be
deducted "off the top"), shall be included in the A/B/C Gross Receipts.
Notwithstanding the foregoing, contributions to the A/B/C Gross Receipts of
revenue received by BVI from such third party licensees shall in no event exceed
the amount which would be contributed by application of the royalty rates
specified in the immediately preceding subparagraph.
(iii) With respect to sums actually received by or credited to
BVI or any subsidiary or affiliated company of BVI (less taxes actually paid
[excluding income taxes], credits, returns and a reasonable reserve for returns,
which shall be liquidated within Twelve (12) months in each instance) from the
distribution in the sell-through or repriced rental market of Home Video Devices
embodying the Picture in the BVI Territory "C", there shall be included in the
A/B/C Gross Receipts (without any deduction of a distribution fee) a royalty
rate equal Fifteen percent (15%).
(iv) With respect to sums actually received by or credited to
BVI or any subsidiary or affiliated company of BVI from the sales of Home Video
Devices (including, without limitation, home video discs) embodying the Picture
in the BVI Territory "C" in the sell-through or repriced rental market by third
party licensees, Fifty percent (50%) of revenues less actual costs incurred by
BVI or its affiliates, if any (e.g. mastering, artwork, duplication, etc., but
excluding all marketing, video duplication costs and third party distribution
fees)(such actual costs to be deducted "off the top"), shall be included in the
A/B/C Gross Receipts. Notwithstanding the foregoing, contributions to the A/B/C
Gross Receipts of revenue received by BVI from such third party licensees shall
in no event exceed the amount which would be contributed by application of the
royalty rate specified in the immediately preceding subparagraph.
e. CONTINGENT COMPENSATION FOR BVI TERRITORY "D":
(i) "D Gross Receipts" shall be defined pursuant to the
applicable provisions of Exhibit "NP" throughout the BVI Territory "D". D Gross
Receipts, which shall include the Home Video Receipts (but shall exclude
receipts from the exploitation by BVI [or subsidiary or licensee of BVI] of home
video discs embodying the Picture in BVI Territory "D"), as set forth in this
subparagraph 3.e.(i), shall be subject to the exclusions and deductions set
forth in Exhibit "NP". BVI shall deduct and retain the following from D Gross
Receipts in the following order of priority and on a continuing basis:
(x) BVI shall deduct and retain all Distribution Costs
paid or incurred by BVI in commercially exploiting the Picture in BVI Territory
"D" (excluding the D Disc Rights [as defined below]) including, without
limitation,
10
residuals, so-called "off the tops", print and advertising costs, delivery costs
paid or incurred by BVI, subtitling and dubbing costs, all Home Video Device
(excluding home video discs) distribution costs (including, without limitation,
all actual and direct costs incurred in relation to the duplication, sales,
distribution, creative costs, marketing, advertising and publicity of home video
devices embodying the Picture in the Territory [including third party
distribution fees]), all costs, fees, commissions and taxes withheld at the
source, and all other customary Distribution Costs, as defined in Paragraph IV
of Exhibit "NP".
The D Gross Receipts remaining after continuing deduction of the amounts set
forth in subparagraph 3.e.(i)(x) above, if any, after BVI has deducted its
Distribution Costs on a continuing basis in accordance with Exhibit "NP", shall
be payable as follows: Sixty percent (60%) to Cinergi and Forty percent (40%)
to BVI. Cinergi shall be accorded audit and accounting rights as set forth in
Exhibit "NP". Accordingly, Cinergi agrees that it shall not have the right to
audit Home Video Device distribution costs hereunder (including, without
limitation, home video disc distribution costs)(provided, that BVI shall upon
request issue Cinergi an affidavit signed by a Financial Officer of BVI with
respect to such manufacturing and distribution costs).
(ii) "D Gross Receipts" with respect to exploitation by BVI (or
subsidiary or licensee of BVI) of the Rights Granted with respect to the sale
and distribution of home video discs embodying the Picture in BVI Territory "D"
(such rights, the "D Disc Rights"), shall be defined pursuant to the applicable
provisions of Exhibit "NP" throughout the BVI Territory "D" ("D Gross Disc
Receipts"). D Gross Disc Receipts, as set forth in this subparagraph 3.e.(ii),
shall be subject to the exclusions and deductions set forth in Exhibit "NP".
BVI shall deduct and retain the following from D Gross Disc Receipts in the
following order of priority and on a continuing basis:
(x) BVI shall next deduct and retain all Distribution
Costs paid or incurred by BVI in exercising the D Disc Rights including, without
limitation, residuals, so-called "off the tops", print and advertising costs,
delivery costs paid or incurred by BVI, subtitling and dubbing costs, all
distribution costs (including, without limitation, all actual and direct costs
incurred in relation to the duplication, sales, distribution, creative costs,
marketing, advertising and publicity of home video discs embodying the Picture
in the Territory [including third party distribution fees]), all costs, fees,
commissions and taxes withheld at the source, and all other customary
Distribution Costs, as defined in Paragraph IV of Exhibit "NP"
The D Gross Receipts remaining after continuing deduction of the amounts set
forth in subparagraph 3.e.(ii)(x) above, if any, after BVI has deducted its
Distribution Costs on a continuing
11
basis in accordance with Exhibit "NP", shall be payable as follows: Fifty
percent (50%) to Cinergi and Fifty percent (50%) to BVI. Cinergi shall be
accorded audit and accounting rights as set forth in Exhibit "NP". Accordingly,
Cinergi agrees that it shall not have the right to audit Home Video Device
distribution costs hereunder (including, without limitation, home video disc
distribution costs)(provided, that BVI shall upon request issue Cinergi an
affidavit signed by a Financial Officer of BVI with respect to such
manufacturing and distribution costs).
f. CROSS-COLLATERALIZATION: All sources of revenue from all
countries in the BVI Territory "A" and BVI Territory "B" shall be fully cross-
collateralized from and against the Distribution Fees and Distribution Costs
from BVI Territory "A" and BVI Territory "B", the BVI Territory "A/B" Advance
and the "A/B" Interest. All sources of revenue from the BVI Territory "C" shall
be fully cross-collateralized from and against the Distribution Fees and
Distribution Costs from BVI Territory "C", the BVI Territory "C" Advance and the
"C" Interest; provided, up to Six Hundred Thousand Dollars ($600,000) from any
and all sources of revenue from all countries in the BVI Territory "A" and BVI
Territory "B" shall be fully cross-collateralized from and against the
Distribution Costs in Territory "C", the BVI Territory "C" Advance and the "C"
Interest. Cinergi agrees that all sources of revenue from BVI Territory "D"
shall be fully cross-collateralized from and against the Distribution Costs
incurred by BVI in BVI Territory "D" pursuant to the terms of subparagraphs
3.e.(i)(x) and 3.e.(ii)(x) above. The cross-collateralization allowed under
this Agreement shall be that specified in this subparagraph 3.f.
g. THIRD PARTY PARTICIPATIONS: Cinergi shall be solely responsible
for the preparation of accounting statements and payments and other required
documentation and the issuance of payments to third parties in connection with
all executory obligations of the Picture, including, without limitation, the
payment of all applicable profit participations, deferments, credit bonuses,
corporate and income taxes and the like derived from the pre-production,
production, and post-production (except as otherwise provided above) of the
Picture. Cinergi agrees that no third parties shall have the right to audit
and/or otherwise examine BVI's books and records for any purpose whatsoever.
The parties agree that BVI shall be responsible for making all applicable guild,
residuals and performing rights payments with respect to the BVI Territory
during the period of BVI's exploitation of the Picture, and such payments shall
be deemed Distribution Costs hereunder.
h. DELIVERY: "Complete Delivery" shall include delivery by Cinergi
and acceptance by BVI of all items in Exhibit "DR" and Exhibit "P" ("Complete
Delivery"), which are attached hereto and incorporated herein by this reference.
Cinergi agrees that it shall, at its own cost and expense,
12
deliver to BVI all materials required to make Complete Delivery. In accordance
with Exhibit "NP", any delivery costs incurred by BVI in connection with the
delivery of the Picture shall be deemed a Distribution Cost and shall be
recouped in the manner set forth in subparagraphs 3.b. and 3.e. above. Cinergi
agrees that as part of Complete Delivery it shall tender to BVI executed copies
of Exhibit "A" and Exhibit "B", which are attached hereto and incorporated
herein by this reference. Cinergi agrees (subject to the limits of pertinent
rights under contract) to grant BVI access to any dubbed or subtitled versions
of the Picture in any and all languages spoken in the BVI Territory as and when
such foreign language dubbed or subtitled versions are available including,
without limitation, the French and Italian languages; provided, that BVI shall
to pay all of its own access and duplication costs incurred in accessing the
materials.
4. BVI DISTRIBUTION CONTROL: BVI shall have, subject to the terms of
this Agreement, complete, exclusive and unqualified discretion and control as to
the time, manner and terms of distribution, exhibition and exploitation of the
Picture, separately or in connection with other motion pictures, in accordance
with such policies, terms and conditions and through such parties as BVI in its
sole business judgment may determine proper or expedient and the decision of BVI
in all such matters shall be binding and conclusive upon Cinergi. BVI
acknowledges that it is BVI's general intent that the Picture shall be
distributed by BVI in the BVI Territory (taking into account, among other
things, such factors as the applicable budget, genre, release date, market
conditions, quality, performance, etc. of the Picture), subject to BVI's
customary and reasonable business practices with respect thereto. Subject to
the foregoing, BVI grants Cinergi a right of prior and meaningful consultation
with respect to BVI's general initial theatrical release plans for the Picture
in the BVI Territory. BVI shall make no "flat sale" of the Picture in Germany
until five (5) years after the initial general theatrical release of the Picture
by BVI in the BVI Territory (unless BVI determines in the exercise of BVI's good
faith business judgment to distribute substantially all of BVI's motion pictures
in such manner). Except as expressly set forth herein, BVI makes no express or
implied representation or warranty as to the manner or extent of any
distribution or exploitation of the Picture nor as to any maximum or minimum
amount of monies to be expended in connection therewith. BVI does not guarantee
the performance by any subdistributor, licensee or exhibitor of any contract
regarding the distribution and exploitation of the Picture. Cinergi shall on
request use its best efforts to provide BVI such documents as may be necessary
or desirable for BVI to secure licenses and permits for the importation,
exportation and distribution of the Picture. During the theatrical exhibition
of the Picture in the BVI Territory, Cinergi may request and receive copies of
applicable box office and flash reports. BVI
13
agrees that with respect to Alto Adige, BVI shall use reasonable efforts to
cause the broadcast television exhibition, if any, of the German language
version of the Picture in Alto Adige to occur simultaneously with the broadcast
television exhibition of the German language version of the Picture in Germany
and/or Austria.
5. INTENTIONALLY OMITTED.
6. REPRESENTATIONS AND WARRANTIES:
a. Cinergi hereby represents and warrants that: (i) it owns or
controls all distribution rights in and to the Picture in the BVI Territory and
all literary, dramatic and original musical material contained therein; (ii)
neither the Picture nor any part thereof nor the exercise by an authorized party
of any right granted to BVI hereunder will violate or infringe the copyright,
trademark, trade name, patent or any literary, dramatic, musical, artistic,
personal, private, civil or property right or right of privacy, right of
publicity, or any other right of any person, firm or corporation or constitute
unfair competition or defame any person, firm or corporation; (iii) Cinergi has
not entered into and will not enter into any agreement which is inconsistent
with any of the provisions of this Agreement and will not exercise any right or
take any action or license or authorize any other person to exercise any right
or take any action or license which conflicts with or knowingly prejudices the
rights herein granted to BVI; (iv) the negative cost of the Picture is an "all
in" figure of not less than Thirty Million Dollars ($30,000,000); (v) BVI shall
not be obligated to make payments to any third party except with respect to
music public performance fees calculated and due in the particular country and
as specifically provided in subparagraph 3.e. above; (vi) the choice of the
Director of the Picture shall be subject to prior written approval of BVI (Stone
is hereby approved by BVI); (vii) Cinergi shall deliver all items specified in
Exhibit "DR", at its cost; (viii) the Picture shall be shot in color and on 35
millimeter or 70 millimeter film stock, suitable for first class theatrical
distribution; (ix) the Picture has an MPAA (or successor organization) rating no
more restrictive than "R" rating ; (x) the Picture will be delivered by Cinergi
to BVI by no later than December 31, 1995 (subject to force majeure)("Delivery
Date"); (xi) the Picture will be no less than Ninety (90) minutes and not more
than One Hundred Fifty (150) minutes including credits; (xii) in the BVI
territory, BVI will be named jointly with Cinergi in any public relations,
advertising, promotional and trade announcement covering the Picture; (xiii)
Cinergi shall obtain all synchronization, performance and master use music
licenses reasonably required by BVI on a buy-out basis for all media to exercise
any and all of the rights granted in this Agreement including the right to
advertise and promote the Picture without payment by BVI to any third party,
excluding performing rights
14
payments (BVI shall pay such obligations to local performance societies as arise
from BVI's exercise of the Rights Granted; provided, that all such amounts paid
shall be deemed Distribution Costs pursuant to the terms of subparagraph
3.b.(ii) above); (xiv) subject to applicable guild restrictions and to the
extent permitted by pertinent talent agreements (which Cinergi agrees to deliver
pursuant to the terms of subparagraph 3.a. above), with respect to all persons
appearing in the Picture, or performing production services therein, BVI has the
right to issue and authorize publicity concerning such persons and the right to
use, reproduce, transmit, broadcast, exploit, publicize and exhibit their names,
likenesses, transcriptions, films and other reproductions thereof in connection
with the distribution, exhibition, advertising and exploitation of the Picture
including the right to exhibit trailers and excerpts from the Picture; (xv) the
Picture is unpublished and capable of copyright protection in the BVI Territory,
subject to the agreement by BVI not to copyright the Picture in its own name;
and (xvi) the Picture as delivered to BVI shall be free and clear of any claims,
liens or encumbrances except those expressly permitted hereunder (or as
expressly approved in writing by BVI).
b. Cinergi agrees to indemnify and hold BVI harmless from any and all
claims, actions or proceedings of any kind and from any and all damages,
liabilities, costs and expenses (including reasonable attorney's fees and costs)
relating to or arising: (i) out of any breach of any of the warranties,
representations and/or agreements made by Cinergi contained in this Agreement;
(ii) out of any claim alleging facts which if true would constitute such a
material breach of this Agreement by Cinergi, if and to the extent that such
claim is of a type not ordinarily covered by so-called errors and omissions or
producer's liability insurance policies; and/or (iii) in connection with the
pre-production, production and/or post-production of the Picture, including, but
not limited to, Cinergi's failure to supply BVI with a complete list of the
Picture's credits.
c. BVI agrees to indemnify and hold Cinergi harmless from any and
all claims, actions, proceedings of any kind and from any and all damages,
liabilities, costs and expenses (including reasonable attorney's fees and costs)
relating to or arising: (i) out of any breach of any of the warranties,
representations and/or agreements made by BVI contained in this Agreement; (ii)
out of any claim alleging facts which if true would constitute such a material
breach of this Agreement by BVI, if and to the extent that such claim is of a
type not ordinarily covered by so-called errors and omissions or producer's
liability insurance policies.
7. PUBLICITY RESPONSIBILITIES OF CINERGI: Cinergi agrees to use its
reasonable efforts make Stone available for press and
15
interviews in the BVI Territory at a reasonable time prior to the initial
theatrical release of the Picture in the BVI Territory.
8. COPYRIGHT: Cinergi represents and warrants that the copyright(s) in
the Picture and in the literary, dramatic and musical material upon which it is
based or which are contained therein will be valid and subsisting during the
Term and during the maximum period of copyright in the United States and those
countries party to the Universal Copyright Convention, and that Cinergi has not
done or permitted any act or omission which would impair or diminish the
validity or duration of such copyright. Cinergi further represents and warrants
that no part of the Picture (other than clips and music of which BVI is given
written notice at the time of delivery of the Picture) or any such literary or
dramatic material or musical material provided by Cinergi in connection with the
Picture is or will be in the public domain during the maximum period of
applicable copyright as a result of any act or omission by BVI. The Picture
when delivered to BVI shall contain a copyright notice in compliance with the
Universal Copyright Convention in the BVI Territory and the Copyright Law of the
United States. Cinergi agrees to secure or have secured and register such
copyright in the Picture and related properties as BVI reasonably requests with
respect to copyrights which are eligible for copyright registration prior to
delivery of the Picture in the BVI Territory. BVI shall not be liable to
Cinergi for any action or failure to act on behalf of Cinergi within the scope
of authority conferred on BVI pursuant to this Paragraph 8. BVI agrees to give
Cinergi timely notice of any legal challenges to Cinergi's copyright in the
Picture in the BVI Territory in which BVI is duly served as a party.
9. PRESS ANNOUNCEMENTS AND PREVIEWS: Cinergi shall not (and Cinergi
shall not authorize any person to) release information concerning the Picture to
the press in the BVI Territory or preview the Picture in the BVI Territory
either before or after delivery of the Picture to BVI without the express prior
written consent of BVI; provided, however, that BVI and Cinergi shall issue a
joint press release with respect to the Picture, the time and place of which
shall be mutually determined by the parties. Cinergi and BVI agree that the
initial press announcement regarding BVI's acquisition of the Picture shall be
subject to the mutual prior approval of the parties hereunder. BVI acknowledges
that certain press in the Cinergi Territory are effectively pan-European in
scope.
10. ERRORS AND OMISSIONS INSURANCE: Cinergi agrees that BVI shall be an
additional named insured on any and all Errors and Omissions insurance policies
issued to Cinergi in connection with the Picture, subject to applicable policy
conditions, terms and restrictions, for at least three (3) years following
complete delivery of the Picture to BVI and liability limits of
16
One Million Dollars ($1,000,000) per claim and Three Million Dollars
($3,000,000) in the aggregate, with a Ten Thousand Dollar ($10,000) deductible.
Nothing contained in this Paragraph 10 shall modify or otherwise affect any
representation or warranty made by Cinergi hereunder.
11. SECURITY INTEREST/COPYRIGHT MORTGAGE/COMPLETION BOND:
a. Cinergi shall grant and assign to BVI a continuing first priority
lien and security interest in and to and copyright mortgage on the Picture and
all underlying materials, elements, properties, contract rights, inventories,
accounts and general intangibles associated with the Picture, all the foregoing
only to the extent needed by BVI to exercise the distribution rights in the
Picture granted herein by Cinergi to BVI ("Picture Items") in the BVI Territory,
in a form to be mutually agreed to by the parties hereto and subject to the
Interparty Agreement.
b. Prior to complete delivery of the Picture by Cinergi to BVI
pursuant to the terms of Paragraph 3. above, any such security interest of BVI
shall be subordinate to any security interest granted by Cinergi to any bank or
financial institutions or other persons providing financing for the Picture
("Financier[s]") and to any completion bond company; provided, that any such
Financier(s) or completion bond company shall acknowledge that the respective
lien(s) and/or security interest(s) in the Picture, shall at all times be
subject to this Agreement and any and all of BVI's rights under this Agreement.
BVI's acknowledgment of the foregoing security interest shall be conditioned
upon the above-referenced lienholders agreeing that if any or all of them
foreclose on their respective liens, that they and/or any purchaser of the
Picture will be subject to terms of this Agreement and that BVI shall quietly
and peacefully enjoy and possess, during the entire period of its exclusive
rights hereunder, all of the distribution and other rights herein granted and
agreed to be granted to BVI.
c. Subsequent to payment by BVI to Cinergi of the sum specified in
subparagraph 3.a. above, and pursuant to the terms of the Interparty Agreement
(as defined below), the security interest of the Financier(s) in the Picture
Items shall be subordinate to the security interest of BVI.
d. It is the intention of BVI to enter into an agreement with the
aforementioned Financier(s) in order to effect the terms of this Paragraph 11
("Interparty Agreement").
e. Cinergi agrees to obtain a completion bond with
respect to the Picture.
17
f. BVI shall enter into a distributor's assumption agreement with
any of the applicable unions or guild, if required.
12. FIRST NEGOTIATION TO EXTEND TERM: Cinergi hereby grants to BVI a
Right of First Negotiation to extend the Term in the BVI Territory in accordance
with the following provisions: If, at the end of the Term, Cinergi desires to
grant any of the Rights Granted to a third party other than BVI, then Cinergi
shall, by written notice within three (3) months prior to the expiration of the
Term, notice BVI of such desire and immediately thereafter negotiate with BVI
with respect to such rights and if, after the expiration of three (3) months
following such notice from Cinergi to BVI, no agreement shall have been reached,
then Cinergi shall be free to negotiate elsewhere with respect to such of the
aforementioned Rights Granted.
13. WAIVER OF INJUNCTIVE RELIEF: As between Cinergi and BVI, Cinergi
hereby waives any right to injunctive relief or rescission of rights, and hereby
agrees that Cinergi's sole and exclusive remedy in the event of any breach or
alleged breach of this Agreement by BVI and/or its parent and/or subsidiaries of
its parent shall be solely an action for damages; provided, however, that the
terms of this Paragraph 13. are subject to the terms of the Interparty Agreement
and/or Intercreditor Agreement.
14. NO THIRD PARTY BENEFICIARIES: This Agreement is not made and shall
not inure to the benefit of any person not a party hereto and shall not be
deemed to give any right or remedy to any third party (including any audit
rights).
15. GOVERNING LAW: This Agreement shall be governed by the laws of the
State of California applicable to agreements executed and to be wholly performed
therein. Cinergi's consent to such jurisdiction is with respect to this
Agreement only.
16. ASSIGNMENT: BVI shall have the right to assign this Agreement in
whole or in part only to affiliates, subsidiaries and corporations owning all
the stock of BVI.
17. CONFIDENTIALITY: BVI and Cinergi mutually agree that the terms
of this Agreement are confidential and shall not, without the prior written
consent of the applicable party, be disclosed to any unauthorized person(s),
firm(s), corporation(s) or other entity, all of whom shall be informed of
the confidential nature of this Agreement and shall agree to be bound by the
terms and conditions of this Agreement including, without limitation, this
Paragraph 17.
18
18. PAYMENTS: All payments to Cinergi hereunder shall be made care of the
following address:
Cinergi Production N.V. Inc.
2308 Broadway
Santa Monica, CA 90404
Attention: Erick Feitshans
19. EXHIBIT "NP": In the event that the terms of this Agreement conflict
with the terms of Exhibit "NP", the terms set forth in the Agreement will
control.
Please confirm your acceptance of the foregoing by signing in the space provided
below.
BUENA VISTA INTERNATIONAL, INC.
By: /s/ Jeffery S. Graup
---------------------------
Its: Sr. VP
---------------------------
ACCEPTED AND AGREED TO:
CINERGI PRODUCTIONS N.V. INC.
By: /s/ Erick J. Feitshans
------------------------------
Erick J. Feitshans
Its: Vice President
------------------------------
I.D.#
----------------------------
19