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EXHIBIT 10.16
CO-PRODUCTION AGREEMENT
XXXX DISNEY PICTURES AND TELEVISION
AND
PIXAR
FEBRUARY 24, 1997
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CO-PRODUCTION AGREEMENT
TABLE OF CONTENTS
Page
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1. Pictures.......................................................................1
2. Term...........................................................................1
3. Creative Controls..............................................................1
a. Treatments............................................................1
b. Development and Production............................................2
c. Final Cut.............................................................3
d. Ancillary Rights......................................................3
4. Production.....................................................................4
a. Production Control....................................................4
x. Xxxxxx Representative.................................................5
5. Computational Resources........................................................5
a. Computational Resources...............................................5
b. Acquisition and Funding of Computational Resources....................5
c. Use On other Projects.................................................5
d. Buy Out...............................................................6
6. Distribution...................................................................6
a. Initial Release.......................................................6
b. Release Period........................................................6
c. [*]...................................................................6
d. Xxxx Disney Pictures Brand............................................7
e. Distribution and Marketing............................................7
f. Consultation with Pixar...............................................7
g. Pixar Representative..................................................7
h. [*] Licensing.........................................................8
i. Short Subjects........................................................8
j. Subdistributors and Flat Sales........................................8
k. "Making of" Films.....................................................8
7. Financing of Development and Production........................................9
8. Budgets........................................................................9
a. Treatment Budget......................................................9
b. Development Budgets...................................................10
c. Picture Budgets.......................................................10
d. [*]...................................................................11
9. Definition of Gross Receipts...................................................11
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x. Xxxxx Receipts........................................................12
b. Exclusions from Gross Receipts........................................12
c. Ancillary Rights......................................................13
d. Home Video............................................................13
e. Affiliates............................................................13
10. Division of Gross Receipts.....................................................14
a. Division..............................................................14
b. Separate Accounting Units.............................................14
c. Statements............................................................14
d. Audit Rights..........................................................15
e. Payments..............................................................16
11. Distribution Costs.............................................................16
a. Definition............................................................16
b. Exclusions............................................................17
c. Cross Promotions......................................................17
x. Xxxxxx Responsible....................................................17
e. Accrual...............................................................18
12. Brand/Credit...................................................................18
a. On Screen Credits.....................................................18
b. Paid Advertising......................................................18
c. Packaging.............................................................19
d. Billing Block.........................................................19
e. Stationary Logo.......................................................19
f. [*]...................................................................20
g. Credits...............................................................20
h. Prospective Cure......................................................20
13. Proprietary Rights.............................................................20
a. Pictures and Ancillary Rights.........................................20
b. Corporate Promotional Use.............................................21
c. Pixar Technology......................................................21
d. Treatments............................................................22
14. Defense of Claims..............................................................22
a. By Disney.............................................................22
b. By Pixar..............................................................22
15. Derivative Works...............................................................23
a. Definition of Derivative Works........................................23
b. Decision to Produce...................................................23
c. Theatrical Motion Pictures............................................24
d. Made-for-Home Video Productions.......................................24
e. Television Productions................................................25
f. Interactive Works.....................................................26
g. Live Entertainment....................................................26
h. Location Based Entertainment..........................................27
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i. All Other Works Other Than Theme Parks................................27
j. Theme Parks...........................................................27
k. Creative Control of Derivative Works Not Produced by Pixar............27
16. Toy Story......................................................................28
a. Derivative Works......................................................28
b. Toy Story Agreement...................................................28
c. Ancillary Rights......................................................28
17. Exclusivity....................................................................28
a. No Other Feature Length Animated Theatrical Motion Pictures...........28
b. Theme Parks...........................................................28
c. First Look at TV Productions and Home Video Productions...............29
d. No Material Interference..............................................29
e. Employment Agreement with Xxxx Xxxxxxxx...............................29
18. Exchange of Information........................................................29
19. Publicity and Confidentiality..................................................30
a. Publicity.............................................................30
b. Confidentiality of Terms of Agreement.................................30
c. Protection of Confidential Information................................30
20. Non-Solicitation...............................................................31
21. Assignment.....................................................................31
22. Change of Control of Pixar.....................................................31
23. Termination....................................................................31
24. Interest On Late Payments......................................................32
25. Governing Law..................................................................32
26. General Provisions.............................................................32
a. Right to Cure.........................................................32
b. Remedies..............................................................32
c. Force Majeure.........................................................33
d. No Waivers............................................................33
e. No Violation of Law...................................................34
f. Notice................................................................34
27. Entire Agreement...............................................................34
28. Execution in Counterparts......................................................34
Exhibit A - Certain Entertainment Companies....................................37
Exhibit B - Distribution Costs.................................................38
Appendix - Glossary of Terms...................................................42
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CO-PRODUCTION AGREEMENT
This Co-Production Agreement ("Agreement") is entered into as of February 24,
1997, by and between Pixar, a California corporation ("Pixar), and Xxxx Disney
Pictures and Television, a California corporation ("Disney").
1. PICTURES.
Pixar and Disney agree to develop, produce, finance and distribute five
(5) computer-animated feature-length theatrical motion pictures ("Picture(s)")
pursuant to the terms of this Agreement. Pixar and Disney hereby designate the
picture currently entitled Bugs as the first Picture hereunder.
2. TERM.
The term of this Agreement ("Term") shall commence upon the execution
hereof and shall continue until Delivery to Disney of the fifth Picture produced
and financed hereunder. For purposes of this Agreement, "Delivery" shall mean
delivery pursuant to terms to be mutually agreed upon by Pixar and Disney no
later than six (6) months before the delivery of Bugs. The provisions of
paragraphs 5(d), 6, 9 through 16, 17(a), and 18 through 28 of this Agreement
shall survive expiration of the Term.
3. CREATIVE CONTROLS.
Pixar and Disney shall collaborate in the creative process of
developing and producing the Pictures, as follows:
a. Treatments.
(i) For each of the four remaining Pictures, Pixar shall
submit one or more Treatments for Disney's consideration as the basis for the
Picture ("Treatment"). Each Treatment shall be either (a) a written treatment of
not less than three pages in length setting forth a story to be used as the
basis for the screenplay or (b) an oral presentation of not more than one (1)
hour, accompanied by rough sketches, conceptual art and rudimentary story boards
sufficient to communicate the essential idea for the Picture comparable to the
presentation previously made for Bugs and the first presentation for the second
Picture. Each such Treatment shall be based on a new idea and not be a sequel,
prequel or remake of a prior picture. Treatments may be submitted by Pixar
singly or in one or more groups. Disney shall accept or reject each Treatment
within forty-five (45) days after such Treatment
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is submitted by Pixar. [*] for [*] of the [*] within [*] by [*] of the [*], then
[*], whether or not it [*], to [*], by giving written notice of [*] at any time
[*] unless [*] the parties have [*] or [*] this Agreement under the provisions
of subparagraph (ii) below:
(A) [*] of the [*] as the [*] for a [*], provided in the
event of [*] under this subparagraph A the [*] to [*] and [*] shall be [*]
(unless [*] to [*] and with the [*] specified in [*], or
(B) in the case of [*] of the [*] as the [*] for such
[*] and in the event of [*] under this subparagraph B [*] and [*] shall be [*]
(unless [*] to [*]) and with the [*] specified in [*].
(ii) In the event that no Treatment has been approved or
selected under the provisions of subparagraph 3(a)(i) above within one (1) year
after the initial theatrical release of the last Picture for which a Treatment
has previously been approved or selected, then Disney shall be entitled to
terminate this Agreement upon thirty (30) days written notice to be served on
Pixar not more than sixty (60) days after the end of such one (1) year period,
unless within such thirty day notice period either; (A) the parties have
mutually approved a Treatment for a Picture or (B) [*] has [*] under the
provisions of subparagraph 3(a)(i)(A) or (if still applicable) subparagraph
3(a)(i)(B), provided that Pixar has otherwise satisfied the conditions in
paragraph 3(a)(i) above for such selection under subparagraph 3(a)(i)(A) or
3(a)(i)(B) above. In the event of such termination, the provisions of paragraph
23 shall apply.
b. Development and Production. After approval or selection of a
Treatment, Disney and Pixar shall have mutual creative control of the further
development, pre-production and production of each Picture, provided that in the
event of a disagreement with respect to any particular creative matter in such
Picture final creative control with respect to such creative matter shall be as
follows:
(i) [*] shall have [*] in any of the Pictures which [*];
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(ii) [*] shall have [*] in any of the [*] have previously
[*] for [*] with [*]; or
(iii) if neither subparagraph (i) or (ii) is applicable, the
[*] and [*] shall have [*] of such [*]. The [*] shall be [*] so long as [*] is
[*] (unless [*] , on [*] or [*] to [*]); otherwise [*] shall appoint the [*], or
if [*] is no longer employed by [*] will [*] the [*] . The [*] shall be [*] so
long as [*] is [*] (and not [*]); otherwise [*] (or if [*] is no longer employed
by [*], the [*] of [*]) shall appoint the [*].
c. Final Cut/Rating. Disney and Pixar shall have mutual control over the
final cut of each Picture, provided that each party shall exercise its final cut
rights in good faith and so not to frustrate or delay the release of the
Picture. Each Picture shall be produced hereunder so as to receive a G rating
(or substitute equivalent). If for any reason a G rating (or substitute
equivalent) is not received or the Picture does not qualify for such rating,
Pixar agrees to make such changes as necessary to obtain or qualify for such
rating prior to Delivery. Within a reasonable time after completion of the final
cut as provided herein, Pixar shall deliver the Picture to Disney.
d. Ancillary Rights.
(i) Disney and Pixar shall have mutual creative control with
respect to the creation and design of any Ancillary Rights, provided that in the
event of a disagreement Disney's decision shall govern.
(ii) For purposes of this Agreement, the terms "Ancillary
Rights", "Merchandising Rights" and "Interactive Works" shall have the following
meanings:
(A) "Ancillary Rights" means items created in the
exercise of Merchandising Rights, literary publishing, soundtrack and publishing
rights in and to any of the Pictures, any Derivative Works or, subject to the
provisions of paragraph 16, Toy Story. Ancillary Rights does not include any
works within the scope of Derivative Works, as defined in paragraph 15 below,
but does include any items created in the exercise of Merchandising Rights,
literary publishing, soundtrack and publishing rights in and to any Derivative
Works.
(B) "Merchandising Rights" means the right to make, use,
sell, exercise or otherwise exploit and license or authorize others to make,
use, sell, exercise or otherwise exploit tangible personal property, of any and
all kinds, based upon, utilizing or
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embodying any Picture or Derivative Work or subject to the provisions of
paragraph 16, Toy Story, or any of the characters or story or other unique
elements thereof, including without limitation any unique names, likenesses or
characteristics of any character portrayed therein other than pre-existing
Disney characters, or any unique title, catch word, slogan, situations, designs,
equipment or events depicted therein, or any trademark, trade name or copyright
related thereto other than pre-existing Disney marks; provided that
Merchandising Rights shall not include Interactive Works.
(C) "Interactive Work" means any audio-visual work or
other work, regardless of the physical medium in which the work is fixed
(including without limitation CD ROMs, DVDs, video games and arcade games), now
known or hereafter coming into being, which work is designed with a primary
purpose of permitting the viewer to modify or control the sequence or
performance of the presentation in a non-linear fashion.
4. PRODUCTION.
a. Production Control. Subject to the provisions of paragraph 3 above and
this paragraph 4, Pixar shall control the production of each Picture. Pixar, or
at Pixar's option an entity established and controlled by Pixar, shall serve as
the production entity, provided that none of the entities described in Exhibit A
may own any interest in the production entity. Pixar may also establish a
separate entity (which may or may not be owned by Pixar but over which Pixar
shall exercise production control by contract or otherwise) for purposes of
undertaking all or certain portions of production services, such as hiring
voice, writers and other artistic talent, provided that none of the entities
described in Exhibit A may own any interest in such separate entity. Pixar shall
designate and approve all production personnel. Pixar shall consult with Disney
concerning the selection of the producers and directors for each Picture,
provided that in the event of disagreement the decision of Pixar shall govern.
[*] shall [*] talent [*] the [*] then [*] by [*] for [*] in [*] (as defined in
paragraph 6(c) below). In contracting with third parties in connection with the
production of each Picture, Pixar shall, in addition to following the other
terms of this Agreement, follow Disney's then customary policies for Premiere
Disney Movies with respect to the scope of any grant of rights for use in the
Picture ( and the exercise of Ancillary Rights or Derivative Works derived
therefrom) obtained from such third parties, provisions limiting such third
parties' right to interfere with distribution or other exploitation of the
Picture and product placement in the Picture.
x. Xxxxxx Representative. Disney may designate a Disney representative
(the "Disney Production Representative"), who shall be subject to the reasonable
approval of Pixar. The Disney Production Representative shall be entitled to
maintain an office at Pixar's facilities, to monitor production of the Pictures,
to review production and production finance books, records and documentation,
including creative materials (e.g. dailies, story boards and scripts), to have
access to Pixar production personnel and production meetings solely relating to
the Pictures on a regular basis, and to receive periodic briefings from Pixar on
production and production finance issues. Pixar will also furnish the Disney
Production Representative,
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upon request, weekly cost reports, production reports and backup data with
respect to carrying costs incurred by Pixar relating to the retaining of
employees for production purposes. The Disney Production Representative shall
not have decision-making authority over Pixar, and shall not have access to
Pixar Technology (as defined in paragraph 13(c)). The Disney Production
Representative shall have entered into a confidentiality agreement with Disney
which covers and protects Pixar Confidential Information as provided in this
Agreement or shall enter into a confidentiality agreement with Pixar. The salary
and expenses of the Disney Production Representative shall not be included in
the Picture Budget and shall be the sole responsibility of Disney. Pixar
preapproves [*] as the Disney Production Representative.
5. COMPUTATIONAL RESOURCES.
Pixar shall have control over the selection, acquisition, placement and
use of Computational Resources as provided in this paragraph 5.
a. "Computational Resources" means all workstations, servers and other
computers, network and networking equipment, storage systems and other
computational equipment and third party software used by Pixar to develop and
produce the Pictures or any Derivative Works, other than any such equipment and
software owned or controlled by Disney (and not financed by Pixar) used by Pixar
at Pixar's request to develop or produce the Pictures or Derivative Works.
b. Acquisition and Funding of Computational Resources. Pixar shall pay
fifty percent (50%) and Disney shall pay fifty percent (50%) of the purchase
price of all such Computational Resources as provided in paragraph 7. Pixar (or
a production entity established by Pixar) shall convey to Disney an undivided
fifty percent (50%) interest in all Computational Resources co-funded by Disney
immediately upon acquisition and funding by Disney of such Computational
Resources. The purchase price of Computational Resources shall be determined net
of any discounts or rebates, but before the application of any credits granted
to Pixar unrelated to the Pictures (e.g. equipment credits granted to Pixar in
connection with its patent license agreement with Silicon Graphics Inc.). Pixar
shall have the right to attempt to secure Computational Resources at less than
market costs in exchange for providing to the supplier any of the following
promotional or marketing consideration relating to one or more Pictures: (i)
private screenings of the Picture(s), (ii) permitting the supplier to mention
the Picture(s) in its advertisements and marketing materials, (iii) in the case
of a supplier who contributes Computational Resources or provides equipment
credits worth U.S.$[*] or more (at list price), [*] for use of such
Computational Resources in the Picture(s), and (iv) in the case of a supplier
who contributes Computational Resources or provides equipment credits worth
U.S.$[*] or more (at list price), providing [*] from the Picture(s) for
unaltered use after the initial theatrical release of the Picture in the [*]
which mention the Picture, provided that such [*] do not mention a competing
motion picture and are in circulation for no more than a [*] from initial use.
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c. Use on Other Projects. Pixar shall have the right to use Computational
Resources for Pixar productions and activities not covered by the terms of this
Agreement, provided that such productions and activities are not prohibited by
the terms of this Agreement. Pixar shall reimburse Disney a reasonable amount in
proportion to Pixar's use of the Computational Resources on non-Disney
productions and activities, except for network and networking equipment,
including wires, routers and other dedicated network equipment and networked
file servers, for which no such reimbursement shall be due.
d. Buy-Out. Pixar shall have the right at any time to purchase Disney's
interest in any Computational Resource for a buy-out price equal to fifty
percent (50%) of the greater of (A) the depreciated book value of such resource,
calculated using a three (3) year straight line depreciation schedule or (B) ten
percent (10%) of the original purchase price of such resource.
6. DISTRIBUTION.
Disney shall have control over all decisions relating to the marketing,
promotion, publicity, advertising and distribution of each Picture, subject to
the following:
a. Initial Release. Disney shall initially release each Picture
theatrically in the United States within twelve (12) months, or if the Picture
is a holiday-themed motion picture (e.g. A Christmas Xxxxx), fifteen (15)
months, after Delivery of the Picture by Pixar. Disney shall release each
Picture in the home video market in the United States within fifteen (15) months
after the initial United States theatrical release date of the Picture. The
exact release dates shall be determined by Disney, subject to the provisions of
this paragraph 6, in consultation with Pixar.
b. Release Period. Disney shall initially release each Picture
theatrically in the United States either during the period from May 15 to August
15 ("Summer Period") or during the period from November 15 to December 31
("Holiday Period").
c. [*].
(i) Neither Disney nor any of its Affiliates shall [*] any [*]
(other than [*] shown with a [*] any of the following [*]:
(A) during the [*] before and [*] after the initial
theatrical release of the Picture;
(B) during a [*] in which a [*] is [*]; or
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(C) during the period commencing [*] before a [*] or [*]
after [*], and ending at the end of [*] in which a Picture is [*], except that
Disney may [*] or [*] another [*] during such period provided that [*] and is
not [*] or [*] until at least [*] after the [*] of such Picture in the [*]. For
purposes of this Agreement, [*] means a premiere animated feature-length
theatrical motion picture (e.g. [*] or [*] and not [*] or [*]) fully financed
and distributed by Disney.
(ii) Neither Disney nor any of its Affiliates shall [*] or [*]
any Disney branded or G-rated live action motion picture distributed by Disney
or its Affiliates (e.g. [*] or [*]) during the period commencing [*] before and
ending [*] after the [*] of the Picture, or ending [*] after the [*] of the
Picture in the case of a Picture [*].
(iii) For purposes of this Agreement, "Affiliate" means any
person or entity (i) in which Disney owns or controls directly or indirectly at
least a 25% ownership interest, (ii) which owns or controls directly or
indirectly at least a 25% ownership interest in Disney, or (iii) in which a
person or entity owns or controls directly or indirectly at least a 25%
ownership interest that also owns or controls directly or indirectly a 25%
ownership in Disney.
d. Xxxx Disney Pictures Brand. Each Picture shall be distributed and
marketed under the Xxxx Disney Pictures brand (or the then current Disney brand
for Premiere Disney Movies) and with the credits and branding specified in
paragraph 12.
e. Distribution and Marketing. Each Picture shall be distributed and
marketed by Disney in all markets and media and on a worldwide basis in a manner
similar to that in which Disney then currently distributes and markets[*].
f. Consultation with Pixar. Disney shall consult with Pixar relating to
all such major marketing and distribution decisions including, without
limitation, the initial release plan of each Picture in each primary market
(i.e., theatrical, non-theatrical, pay-per-view, pay televisions, network, first
cycle free television syndication and home video), any theatrical re-release,
the initial advertising campaign, home video pricing and commercial tie-ins and
cross-promotion deals, provided that Disney shall have the final decision on
such matters. Upon request by Pixar, Disney shall [*] with [*] and [*], provided
that at Disney's option such [*] and [*] may be in either [*] or [*].
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g. Pixar Representative. Pixar may designate a representative (the
"Pixar Marketing and Distribution Representative"), who shall be subject to the
reasonable approval of Disney. The Pixar Marketing and Distribution
Representative shall be [*] to monitor marketing and distribution of the
Pictures, Ancillary Rights and Derivative Works and the Distribution Costs
related thereto, to review marketing and distribution and Distribution Cost [*],
to have access to Disney's marketing and distribution personnel and marketing
and distribution [*] solely related to the Pictures on a regular basis, and to
receive periodic briefings from Disney on marketing and distribution issues.
Disney will also furnish the Pixar Marketing and Distribution representative,
upon request, [*] relating to anticipated [*] and [*] relating to the Pictures,
Ancillary Rights and Derivative Works. The Pixar Marketing and Distribution
Representative shall not have decision-making authority over Disney. The Pixar
Marketing and Distribution Representative shall have entered into a
confidentiality agreement with Pixar which covers and protects Disney
Confidential Information as provided in this Agreement or shall sign a
confidentiality agreement with Disney. The salary and expenses of the Pixar
Marketing and Distribution Representative shall not be included in Distribution
Costs and shall be the sole responsibility of Pixar.
h. [*] Licensing. Disney shall not have the right to [*] (including
without limitation per-pay-view distribution) if such Picture has [*], without
the prior written consent of Pixar. If any Picture [*] within [*] after its
initial United States theatrical release, Disney shall have the right to [*],
provided that any such [*] shall be consistent with Disney's standard [*]
practices and terms for all of its own animated motion pictures of similar
performance. Any payments received by Disney attributable to [*] motion picture
or television program shall be fairly [*] among such [*].
i. Short Subjects. Disney may not exhibit a short subject motion
picture with any Picture without the prior written consent of Pixar, unless
required to do so by local law or the Picture is less than seventy (70) minutes
in length. If Disney determines to exhibit a short subject with such Picture in
accordance with this paragraph, Disney shall consult with Pixar with respect to
using a Pixar motion picture as such short subject, but Disney's decision shall
govern.
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j. Subdistributors and Flat Sales . Disney shall have the right to
utilize a subdistributor in connection with the initial release or other
distribution of a Picture in any medium in any territory only if, at the time
such [*] is to be made, Disney [*] utilizes a subdistributor in connection with
the [*] of its own motion pictures in such medium and/or territory, including
[*]. Disney shall have the right to conclude a "flat sale" of a Picture in any
medium and/or territory only if, at the time such license is to be made, Disney
[*] in connection with the [*] of [*] in such medium and/or territory, including
[*].
k. "Making of" Films. The parties shall have [*] over the development
and production of any "making of" or other promotional films relating to any of
the Pictures, provided that [*]. The costs of developing and producing such
films shall be included within Distribution Costs, and any [*] (to the extent a
[*] can be attributed to such [*]) actually [*], or [*], Disney and its
Affiliates (including any Affiliates acting as subdistributors) from the
exploitation of such films [*], of such Picture.
7. FINANCING OF DEVELOPMENT AND PRODUCTION.
Pixar (or a production entity established by Pixar in accordance with
this Agreement) shall finance or cause to be financed fifty percent (50%) and
Disney shall finance or cause to be financed fifty percent (50%) of all costs
and expenses incurred by Pixar directly related to or fairly allocable to the
creation, development, pre-production, production, post-production and delivery
to Disney of the Pictures ("Production Costs"). Production Costs shall include
without limitation (a) the costs of all Treatments prepared by Pixar for
submission to Disney under this Agreement, (b) all carrying costs incurred by
Pixar for retaining of employees for production purposes under this Agreement
and the overhead attendant thereto, (c) all costs of Computational Resources,
and (d) fair allocations of all costs and expenses of Pixar associated with or
benefiting the Picture, including research and development, general and
administrative and overhead expenses and facilities. All such Production Costs
shall be financed by Pixar and Disney on a current, as needed basis. Without
limiting the generality of the foregoing, Disney's share of the costs of
purchasing Computational Resources shall be paid at the time of purchase of such
Computational Resources, and Disney's share of carrying costs and other costs
shall be paid on an on-going basis as Pixar incurs such arrying osts and other
costs. Disney and Pixar shall establish a mutually acceptable funding mechanism
to ensure that sums will be available in a timely manner to finance all such
expenditures pursuant to a cash flow projections prepared and updated from time
to time by Pixar.
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8. BUDGETS.
a. Treatment Budget. Pixar and Disney shall mutually agree on a budget
for the creation of Treatments ("Treatment Budget") for each Picture, which
shall be separate from and not include carrying costs or the costs of
Computational Resources. If Pixar and Disney are unable to reach agreement on a
Treatment Budget for a Picture within forty-five (45) days after submission by
Pixar of a proposed budget, the decision of Pixar as to such Treatment Budget
shall govern, so long as such Treatment Budget does not exceed [*] dollars
(U.S.$[*]) for the second Picture. Such amount shall increase by [*] percent
([*]%) for each subsequent Picture. The Treatment Budget shall be based on the
assumption that as many as three (3) Treatments will be created by Pixar in
connection with such Picture. If more than three Treatments are created by
Pixar, the Treatment Budget shall be increased by an amount equal to [*] of the
Treatment Budget for each Treatment above three created by Pixar. If a Treatment
with respect to such Picture is approved or selected under paragraph 3(a), any
unused portion of the Treatment Budget shall be applied to the Development
Budget for such Picture.
b. Development Budgets. Pixar and Disney shall mutually agree on a
development budget for the costs and expenses of the creation, development,
pre-production and production of each Picture (after Bugs) after approval or
selection of the Treatment and prior to the approval of the Picture Budget for
such Picture ("Development Budget"). The Development Budget shall be separate
from and not include carrying costs or the costs of Computational Resources.
Pixar and Disney shall seek to reach mutual agreement on the Development Budget
for each Picture. If Pixar and Disney are unable to reach agreement on a
Development Budget for a Picture within forty-five (45) days after approval or
selection of the Treatment for such Picture, the decision of Pixar as to such
Development Budget shall govern, so long as such Development Budget does not
exceed [*] dollars (U.S.$[*]) for the second Picture. Such amount
shall increase by [*] percent ([*]) or each subsequent Picture.
c. Picture Budgets.
(i) Approval of Picture Budgets. A budget for each Picture
(the "Picture Budget") shall be established as provided in this subparagraph
(c). Pixar shall be responsible for proposing a Picture Budget and submitting it
to Disney. The Development Budget for the Picture shall be included in the
Picture Budget for the Picture. Pixar and Disney will seek to reach mutual
agreement on the Picture Budget within sixty (60) days after submission by
Pixar. If Pixar and Disney are unable to reach agreement on the Picture Budget
within that period of time, the decision of Pixar as to the Picture Budget shall
govern, so long as such Picture Budget does not exceed [ * ]
percent ([*]%) of the largest Picture Budget for any prior Picture (determined
on the basis of the originally approved Picture Budget for such Picture plus
[*] percent ([*]%) of any approved increases or overages in such Picture
Budget), whether released or in production, provided that the facilities
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allocation in such budget shall not exceed [*] percent ([*]%) of the facilities
allocation in the Picture Budget for the immediately preceding Picture. The
Picture Budget may be revised from time to time during production of the Picture
upon written mutual agreement of Disney and Pixar, and when so revised such
revised Picture Budget shall be deemed the Picture Budget of such Picture. No
charges for Disney services or personnel shall be charged to the Picture except
those services or personnel separately contracted for by Pixar (or the
production entity established by Pixar).
(ii) Contents of Picture Budgets. Each Picture Budget
shall include the following items:
(A) All direct costs and expenses previously incurred or
to be incurred in the creation, development, pre-production, production,
post-production and delivery to Disney of the Picture, including the cost of the
Treatment used as the basis for the screenplay funded under the Treatment Budget
for such Picture and the costs and expenses of creation, development,
pre-production and production funded under the Development Budget for such
Picture;
(B) All carrying costs incurred by Pixar for retaining
of employees for production purposes under this Agreement for the applicable
Picture and the overhead attendant thereto;
(C) Fair allocations of all costs and expenses of Pixar
associated with or benefiting the Picture, including research and development,
general and administrative and overhead expenses and facilities;
(D) All Picture - specific costs, or fair allocations of
all costs, as applicable, of Computational Resources used in connection with
development or production of the Picture; and
(E) A [*] in the amount of [*] percent ([*]%) of the
sum of [*] and [*] under subparagraphs ([*]) through ([*])(the "[*]").
(iii) Production Costs To Be Within Budget. Pixar shall have
the right to reallocate costs among individual budget categories in the Picture,
subject to the following: (1) Pixar shall advise the Disney Production
Representative of any reallocation within the Picture Budget and shall obtain
Disney's written approval for any reallocation which exceeds [*] percent ([*]%)
in any budget category; and (2) use of the Contingency shall be subject to
written mutual approval of Pixar and Disney, except that Pixar may, without
prior approval of Disney, apply the Contingency to cover increases in salary,
benefits and other compensation paid to personnel included within the Picture
Budget (but not to increase the number of such personnel) up to a total of
[*] percent ([*]%) of the costs of salary, benefits and other compensation
for such personnel included within items (A) through (D) of
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such Picture Budget. Any expenditures in excess of the Picture Budget for such
Picture shall be subject to mutual written approval.
d. [*]. All [*] must be jointly approved in writing by Disney and
Pixar. Disney will account for and pay all [*] other than those paid to Pixar
employees, which Pixar will account for and pay, subject to recoupment as
provided in paragraph 10(a). For purposes of this Agreement, "[*]" means all
mutually approved [*] or other [*] to [*] of [*] of the Pictures or Ancillary
Rights, excluding [*] as defined in Exhibit B. [*] payable to [*] for [*] of [*]
pursuant to the agreement in effect as of the date of this Agreement between
Disney and [*], if the parties mutually agree to use [*] on a Picture, and [*]
payable to [*] pursuant to the [*] entered or to be entered under paragraph [*]
between Pixar with [*] are deemed jointly approved by Disney and Pixar under
this paragraph.
9. DEFINITION OF GROSS RECEIPTS.
a. "Gross Receipts". Except as otherwise expressly provided in this
paragraph 9, "Gross Receipts" shall include one hundred percent (100%) of all
revenues, money or other consideration (to the extent a cash value can be
attributed to such other consideration) actually received by, or credited to,
Disney and its Affiliates (including any Affiliates acting as subdistributors)
from the exploitation of (i) the Picture, or any elements or portions thereof,
in any and all media and markets throughout the universe (including without
limitation, theatrical, non-theatrical, home video and all forms of television),
whether now known or hereafter devised, and (ii) all Ancillary Rights relating
to such Picture or to any Derivative Works based on such Picture. Without
limiting the generality of the foregoing, Gross Receipts shall include, but not
be limited to, [*], revenue generated from [*] which [*] (or the [*] if such [*]
more than one [*]) and income received for [*] on or in [*] of any of the
Pictures. With respect to [*] not yet known or devised, any other [*] not
currently being [*] or [*] shall be included within Gross Receipts if, and to
the extent, such inclusion is consistent with the provisions of this Agreement.
Gross Receipts shall be calculated using the [*] so [*] (to the extent [*]) are
[*] if the [*] has not yet occurred for the [*] Disney may establish [*] only
for [*] and [*] for [*] and [*] (subject to paragraph 11(e) below), provided
that (1) such [*] do not [*] of the Gross Receipts from [*] less any [*] or [*]
of the Gross Receipts from [*] less any [*], (2) such [*] are [*] within a
reasonable time not to exceed [*] for [*] and [*] for [*], and (3) [*] shall [*]
on any [*] portion of [*], at the rate specified in paragraph 24, from the
mid-point of the applicable
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month or quarter in which [*] until such [*] is [*]. To the extent that [*]
receive an [*] shall [*] on [*] from the date [*] until [*] is either [*] in
Gross Receipts, at the rate specified in paragraph 24.
b. Exclusions from Gross Receipts. Notwithstanding anything to the
contrary in this Agreement, Gross Receipts shall not include:
(i) [*] of any [*] for [*] of the Pictures [*],
(ii) receipts of [*] (including without limitation
[*]) for the [*] of the Pictures or the [*] thereof
[*],
(iii) receipts of [*], including without limitation
[*] in [*] (as defined in paragraph [*])[*],
(iv) receipts from [*] (as defined in paragraph [*]),
(v) amounts [*] or for [*] or [*], and similar [*],
(vi) amounts [*] on or for [*] or any portion
thereof, or the [*] or [*] of [*], including any [*],
(vii) receipts from the [*] except as specified in
this paragraph or in paragraph [*],
(viii) receipts from [*] contributed to [*], and
(ix) [*] including [*].
c. Ancillary Rights. Subject to the exclusions set forth in paragraph
9(b) and the provisions of this paragraph 9(c), an amount equal to one hundred
percent (100%) of all revenues, money or other consideration (to the extent a
cash value can be attributed to such other consideration) actually received by,
or credited to, Disney and its Affiliates (including any Affiliates acting as
subdistributors) with respect to Ancillary Rights [*] shall be [*] Gross
Receipts, and not [*]. In the case of Ancillary Rights which are [*] or [*]
for
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[*], the amount included in Gross Receipts shall be [*] or the [*] received by
[*] for [*] of its [*] of [*] of the [*] of such items.
d. Home Video. With respect to the home video exploitation of the
Picture, subject to the exclusions set forth in paragraph 9(b) [*] percent
([*]%) of all [*] or [*] (to the extent a [*] can be attributed to such [*]) [*]
(including any [*]) [*] shall be included in Gross Receipts, and not [*].
e. Affiliates. Gross Receipts shall be calculated by aggregating the
Gross Receipts of all Affiliates, subject to the exclusions set forth in
paragraph 9(b). Any license or distribution agreement entered into by Disney (or
any Affiliate) with any Affiliates serving as [*] (e.g. [*]) shall be on terms
[*] of the following, in each case taking into account applicable windows, runs
and the box office performance of the respective works: (i) terms obtained by
Disney (or any Affiliate) from such [*] for [*], (ii) terms given by such [*] to
[*] for [*], and (iii) terms given by [*] other than [*], (e.g. [*]) for [*]. In
the case where the same items or license rights are made available to both
Affiliates and non-Affiliates, the [*] or other [*] to Affiliates for purposes
of determining Gross Receipts shall be [*] or other [*] charged by Disney or its
Affiliates to [*] for the [*] or [*] at [*].
10. DIVISION OF GROSS RECEIPTS.
a. Division. Gross Receipts from each Picture and all Ancillary Rights
relating thereto, shall be disbursed in the following order, on a continuing and
cumulative basis:
(i) To Disney, a distribution fee ("Distribution Fee") equal
to [*] of Gross Receipts excluding any Gross Receipts consisting of interest
or insurance recoveries.
(ii) To Disney and Pixar, on a prorata basis, an amount equal
to any [*] paid on behalf of the production entity) for such Picture and related
Ancillary Rights as pro-rata recoupment by Disney and Pixar for any [*] paid by
each such party.
(iii) To Disney, an amount equal to its "Distribution Costs"
as defined in paragraph 11 with respect to such Picture and related Ancillary
Rights; and
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(iv) All remaining Gross Receipts shall be disbursed fifty
percent (50%) to Pixar and fifty percent (50%) to Disney.
b. Separate Accounting Units. Each Picture and the Ancillary Rights
relating thereto shall be treated as a separate accounting unit and there shall
be no cross-collateralization of the Gross Receipts or Distribution Costs, as
defined in paragraph 11 below, among the Pictures hereunder or between the
Pictures and any Derivative Works. Cross-collateralization of Gross Receipts and
Distribution Costs in different markets and media (including home video and
Ancillary Rights) within each Picture is permissible.
c. Statements. Disney shall render detailed statements to Pixar of
Gross Receipts, Distribution Costs and Distribution Fees with respect to each
Picture and its Ancillary Rights, together with payment of Pixar's share of such
Gross Receipts, monthly (on a calendar month basis), within forty-five (45) days
after the end of the calendar month, for the first three (3) years commencing
with the first month in which there are Gross Receipts from such Picture, and
thereafter quarterly (on a calendar quarter basis), within forty-five (45) days
after the end of the quarter. Each statement shall include a statement of the
applicable Gross Receipts, and the manner in which they have been disbursed, and
an itemization of the Distribution Costs paid during the applicable period.
Notwithstanding the foregoing, starting three (3) years after the initial
theatrical release of a Picture, Disney shall not be required to render
statements with respect to such Picture (and its Ancillary Rights) for any
quarter in which Gross Receipts are less than $200,000 or in which no net
payment is due to Pixar after division of Gross Receipts as provided in this
Agreement, unless Pixar requests Disney in writing to render such statements
such request to be made not more than once per year.
d. Audit Rights.
(i) General. Pixar shall have the right to audit Disney's and
its Affiliates' books and records (other than tax returns) relating to the
Pictures and Ancillary Rights, such audit to be conducted during normal business
hours by a certified public accountant selected by Pixar. Each audit shall be
completed within one (1) year from the time such audit commences. Only one such
audit may be conducted with respect to any one statement of Disney. Pixar shall
not have the right to commence an audit of any statement after the expiration of
thirty-six (36) months after the receipt of such statement by Pixar, but shall
be entitled to complete any audit of such statements commenced prior to the
expiration of such period. Disney shall be entitled to receive a copy of any
report of the audit furnished by the auditors to Pixar. [*] of any audit of
Disney, unless the audit reveals an underpayment by Disney of amounts payable
under this Agreement for any period of more than five percent (5%)(excluding any
subjective accounting judgments, such as subjective judgments as to allocation
of costs or revenues, with respect to which there is a good faith dispute
between the parties), [*]. Disney shall designate [*] one employee in its
finance department who shall be available
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[*] to provide information to Pixar or its auditor, but who may also perform
other duties when not requested for such assistance by Pixar and its auditor.
Pixar shall also [*] its subdistributors and agents, the costs of which shall be
included in Distribution Costs (as defined in paragraph 11).
(ii) [*]. If so required by its contract with [*] (or [*])
Pixar's audit under subparagraph (i) above, if any, of Disney's contract with
[*] (or [*]) will be separate from the general audit rights set forth above and
will subject to the following additional conditions: the audit must be conducted
by Disney's auditor from Price Waterhouse, and the auditor will confirm in
writing the following:
"We have examined the calculation of Disney's
Distribution Costs reported on the participated
statement rendered for the period __________ with
respect to the motion picture entitled
"_________________". Our examination was performed in
accordance with standards established by the American
Institute of Certified Public Accountants and,
accordingly, included such procedures as we
considered necessary in the circumstances.
In our opinion, in so far as the "Distribution Costs"
referred to above relate to amounts paid to
[*] (or [*]) such Distribution Costs were calculated
and reported on the participation statement rendered
for the period _____________ in conformity with the
terms of the Agreement between Disney and Pixar dated
______________________
e. Payments. All payments to Pixar shall be in U.S. dollars, and shall
be converted by Disney from any currency other than U.S. dollars into U.S.
dollars at the exchange rate at which such currency is converted by Disney for
its internal accounting purposes (with respect to Disney's other revenue and
expenses). Sums derived outside the United States which are not remittable to
Disney in the United States in U.S. dollars by reason of currency or other
government restrictions shall be deemed "Blocked Funds" for purposes of this
Agreement. With respect to such portion of the Blocked Funds as would have been
payable to Pixar hereunder, Disney shall deposit such portion into a Pixar
interest bearing bank account in the same bank as Disney uses in the applicable
jurisdiction. To the extent Disney or its Affiliates expend or utilize any
Blocked Funds, including without limitation as a loan, Disney shall credit Gross
Receipts with the amount of Blocked Funds so expended or utilized.
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11. DISTRIBUTION COSTS.
a. Definition. For purposes of this Agreement, "Distribution Costs"
shall include only:
(i) all out-of-pocket costs paid (or subject to paragraph
11(e) accrued for payment) to third parties by Disney and its Affiliates (other
than Affiliates whose receipts are not included in the computation of Gross
Receipts) net of discounts, credits, refunds and rebates, provided that such
out-of-pocket costs are directly related or fairly allocable to distribution of
a Picture in any and all media and markets and the Ancillary Rights relating
thereto and are either:
(A) [*] or
(B) for [*] undertaken for the sole purpose of [*] or
[*] or [*] to [*] of a Picture in [*] not utilized by [*] as of the date of
this Agreement, provided that the [*] by this subparagraph (B) shall not [*] of
the Distribution Costs of such Picture [*];
(ii) [*] for each Picture as the [*] for the services of
[*].
b. Exclusions. No payments by Disney or any Affiliate to Disney or any
Affiliate, [*], shall be included within Distribution Costs, except that
Distribution Costs otherwise within the definition of Distribution Costs may
include payments to an Affiliate for [*] or [*] hereafter acquired by Disney for
[*] from a [*]. The payments for such [*] or [*] must be [*] as though based on
an [*] and in no event [*] the [*] of the rate [*] for similar services for
other [*] or the rate charged by such [*] to [*] for similar services for [*].
Except as included in the payments for the services covered by the preceding
sentence, [*] or other [*] or its [*] (including without limitation [*] of [*]
and [*] shall be included in Distribution Costs beyond the [*] specified in item
[*] above. Distribution Costs shall not include any financing costs [*]. Any
Distribution Costs allocable to more than one motion picture shall be [*] to the
Picture, with no [*]. Distribution Costs shall not include any
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amounts related to creation, development, pre-production, production,
post-production or delivery to Disney of any of the Pictures or any
Participations.
c. Cross Promotions. Cross promotion within the Theme Parks or other
Disney attractions or with another product distributed by Disney (e.g.
advertisement on a videocassette of another motion picture) will not be included
in Distribution Costs. Special projects (e.g. [*]) and promotional activities
related to a Picture (e.g. [*]) shall not be included in Distribution Costs
unless they are constructed or undertaken for the sole purpose of marketing and
promoting a Picture. Thus, for example, the cost of a [*] in a [*] relating to a
Picture would not be included in Distribution Costs because such [*] also serves
to promote the [*]. If a special project included in Distribution Costs in
accord with this paragraph is later used in a [*] at any time after sixty (60)
days following the release of the video release of such Picture or for other
purposes other than solely promotion of a Picture, the costs of such special
project shall be deducted from Distribution Costs. One hundred percent (100%) of
all costs of relocating or reconstructing such special projects shall be
excluded from Distribution Costs.
x. Xxxxxx Responsible. As between Disney and Pixar, Disney shall be
responsible for financing one hundred percent (100%) of the costs and expenses
of marketing, promotion, publicity, advertising and distribution (including
costs of goods) of each Picture and all Ancillary Rights relating thereto,
including without limitation all items listed in Exhibit B and all
Participations, subject to recoupment of Distribution Costs and Participations
as provided in paragraph 10, and Pixar shall not be responsible or liable for
any costs, expenses or losses incurred in connection therewith.
e. Accrual. Distribution Costs shall be calculated based on [*] and [*]
(applying generally accepted accounting principles), provided that commencing
[*] after [*] and [*] may be [*] only if such [*] by an [*] or other [*] and are
payable within [*] following the end of the period covered by the statement to
Pixar [*], are payable within [*] following the end of such period) and are paid
within such [*] or [*], respectively.
12. BRAND/CREDIT.
It is the parties' intent that the Pixar brand be established
as a co-equal brand to the Disney brand in connection with the Pictures,
Ancillary Rights and Derivative Works. To this end, the Pixar logo, animated
logo and credit as specified by Pixar from time to time shall be used in a
manner which is [*] (as defined in subparagraph (f) below) to the Disney logo,
animated logo and credit, in connection with all Pictures, Ancillary Rights and
Derivative Works, subject where applicable to the requirements set forth below.
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a. On Screen Credits. With respect to theatrical motion
pictures and made for home video productions, screen credits to Pixar and Disney
shall be in the main titles, in the following order of appearance and on
separate cards: (A) opening credit - the Xxxx Disney Pictures animated logo; (B)
the Pixar animated logo, for the same duration accorded Disney's animated logo;
(C) a credit in the form "Xxxx Disney Pictures Presents"; (iv) a credit in the
form "A Pixar Animation Studio Film" or "A Pixar Film", as Pixar may timely
elect; for each Picture, for the [*] and in an [*] than the [*] utilized for [*]
and in an [*] than [*] of the [*] used to display the [*], and (E) the title of
the Picture. With respect to television productions, the on screen credits shall
be the last two credits of the program, each on a separate card, as follows: (A)
the Pixar logo, which may be animated, for the [*] accorded the [*], and (B) the
Disney (or Xxxx Disney Television) logo, which may be animated. Credits in
compliance with this subparagraph (a) shall be deemed [*].
b. Paid Advertising
(i) With respect to all paid advertising within Disney's
control relating to the distribution or exploitation of the Pictures and
Derivative Works (other than as specified in subparagraph (ii) below), the
credits shall be, in order of appearance: (A) first line- "Xxxx Disney
Pictures"; (B) second line - "Presents"; (C) third line - "A Pixar Film"; and
(D) fourth line - the artwork title of the Picture. Pixar's credit shall be [*]
in size to the [*] credit.
(ii) With respect to so called "teaser" and "trailers"
or other similar advertising (including promotional films) within Disney's
control, on the screen or by radio or television, the credits accorded to the
parties shall be as set forth in subparagraph (a), provided that if Disney
elects not to display its animated logo, Pixar shall not be entitled to an
animated logo. Notwithstanding the foregoing, if only a verbal credit is
utilized, the credit shall contain references to both parties in similar fashion
(e.g. "From Disney and Pixar" or "Xxxx Disney Pictures Presents a Pixar Film")
immediately before the title, with the [*] made with [*] and [*] to the Disney
credit.
(iii) Each party will insure (to the extent within its
control) that any publicity relating to the Pictures, Derivative Works and
Ancillary Rights shall reflect the co-equal brand established hereunder.
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c. Packaging.
(i) With respect to packaging of home video devices, the
credit sets forth in subparagraph (b) (i) shall apply.
(ii) With respect to packaging of Ancillary Rights
(including without limitation, so called hang tags on merchandising items), the
credits shall be in order of appearance: (A) first line - the artwork title of
the Picture, it being understood that there should be no above title credit
unless otherwise mutually agreed and (B) second line - "A Disney/Pixar
Production", provided that Pixar's credit shall be [*] in size to the [*]
credit.
(iii) With respect to the packaging of Interactive
Works, the credits shall be in order of appearance: (A) "Disney Interactive and
Pixar Animation Studios Presents" or "Disney Interactive and Pixar Presents", as
Pixar may timely elect for each Interactive Work and (B) the artwork title of
the product provided that Pixar's credit shall be [*] in size to the Disney
credit.
d. Billing Block. Wherever a billing block is utilized in paid
advertising or packaging hereunder, the credits shall be, in order of
appearance: (A) a credit in the form "Xxxx Disney Pictures Presents"; (B) a
credit in the form " A Pixar Film", immediately following and on the same line
as the Disney presentation credit, in an average size of type [*] of the
average size of type used to display the [*] of the Picture and in an average
size of type [*] the average size of type utilized for the [*]; and (C) the
regular title of the Picture.
e. Stationary Logo. Wherever Disney accords a stationary logo
credit in paid advertising or packaging hereunder, Pixar shall also be accorded
a stationary logo credit (side by side), which logo credit shall be [*] in size
to the Disney credit.
f. [*]. "[*]" shall mean that Pixar's credit shall [*] appear
[*] to the [*] when [*] in context, even if they are [*] in [*]. For example,
the parties agree that a logo [*] than the same logo [*] with [*] letters, and
that a credit positioned [*] of [*] may [*]. These [*] effects shall be included
in any assessment to determine the [*] of each party's credit.
If the parties cannot agree as to the [*] of a credit, then
[*] and [*] (or their replacements as determined under paragraph 3.b. above)
shall decide the issue. If they are unable to decide for any reason, then each
party shall select one individual and those two individuals shall select a third
individual mutually
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acceptable to both parties, and such three individuals shall decide the issue.
No individual which has or had a commercial tie to either party during the
preceding five years may be selected.
g. Credits. Pixar shall have the right, in consultation with
Disney, to designate all credits in the Pictures; provided that the types and
placement of credits shall be materially consistent with the then current Disney
credit policy. Disney shall comply with any such credits of which Pixar advises
Disney in writing. Disney acknowledges that Xxxx Xxxxxxxx will receive Executive
Producer credit on all Pictures on which he renders such services.
h. Prospective Cure. In the event of failure by a party to
accord credit or branding in accordance with the terms of this paragraph 12,
such party shall upon receipt of written notice promptly cure the failure on a
prospective basis, it being understood that Disney will correct all prints in a
manner which will not materially interfere with the distribution of the Picture.
Disney will use good faith efforts to correct any material failure with respect
to any existing packaging within Disney's control. The foregoing shall not be
deemed a [*] of any other [*] of Pixar in the event of a breach of this
paragraph, other than as set forth in paragraph 26(b) below. The credits and
branding contained in any Completed Work (as defined in paragraph 26(b) below)
delivered to Pixar by Disney shall be deemed approved by Pixar for such work.
13. PROPRIETARY RIGHTS.
a. Pictures and Ancillary Rights. The copyright, trademarks and other
intellectual property rights in and to the Pictures, all new and unique
characters and story elements thereof and the audio-visual images thereof, and
the Ancillary Rights relating thereto, excluding Pixar Technology as defined in
subparagraph (c) below and further excluding any trademarks and other
intellectual property rights not uniquely associated with the Pictures or
Ancillary Rights related thereto owned by Pixar (e.g. "Pixar") or Disney (e.g.
"Disney"), shall be jointly owned by Disney and Pixar on an undivided 50/50
basis, provided, however, that Disney shall have (i) the sole and exclusive
right and obligation to register, administer and enforce such jointly-owned
copyrights, trademarks and other intellectual property rights in the joint name
of Pixar and Disney, and (ii) exclusive distribution and exploitation rights to
the Pictures, Derivative Works and Ancillary Rights relating thereto in
perpetuity in any and all media now known or unknown and by any and all means or
devices now known or unknown throughout the universe, subject to the provisions
of this Agreement. Upon request, Pixar will cooperate with Disney in connection
with the registration, administration and enforcement of such rights. The
parties will execute, promptly upon request, all further reasonable and
necessary documents to effectuate the provisions of this paragraph 13.
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b. Corporate Promotional Use. Each party shall have the right to use
the characters, trademarks and all unique story elements of the Pictures and of
Toy Story and excerpts of the Pictures and Toy Story not more than five (5)
minutes in length for purposes of corporate identification and marketing,
including without limitation in or on any of the following: corporate
advertising and promotional materials, stationery, stock certificates, business
cards, annual reports and other shareholder materials, recruiting materials,
press kits (multimedia and printed), corporate trade shows, Internet web pages
and in corporate facilities. Pixar shall include a copyright notice in the form
"O Pixar" on all such materials of Pixar, and Disney shall include a copyright
notice in the form "O Disney" on all such materials of Disney. [*] any new
characters of a Picture under this paragraph 13(b) [*] the initial theatrical
release of the Picture and [*] a [*] throughout its corporate identification and
marketing over [*] in such manner as to create the [*] that [*] is its [*]. Each
party will grant the other party access to any key advertising artwork and
materials for the foregoing purposes.
c. Pixar Technology. As between Disney and Pixar, Pixar shall own the
copyright and all other intellectual property rights in and to all computer
programs, computer models, software, data, tools, algorithms, inventions, film
scanning and film recording technology and other technology developed or
discovered by Pixar before, during or after the Term of the Agreement, including
without limitation all computer programs, computer models, software, data,
tools, algorithms, inventions, film scanning and film recording technology and
other technology discovered or developed by Pixar in developing or producing any
of the Pictures or Derivative Works or used to produce images included in any of
the Pictures or Derivative Works (collectively, "Pixar Technology").
Notwithstanding any other provision of this Agreement, no license is granted to
Disney under this Agreement to use or to authorize the use of Pixar Technology
in any manner. Nothing in this Agreement shall be deemed to grant a license by
Disney to Pixar of any technology owned by Disney or to amend or supersede any
existing end user license by Pixar to Disney of Pixar's Renderman product or
other software product. Nothing in this Agreement shall prevent or restrict
Pixar from using Pixar Technology (but not the unique characters or story
elements of the Pictures) in non-Disney projects, subject to the provisions of
paragraph 17. If Pixar grants a security interest or other lien in Pixar
Technology to a third party, it will require the third party to enter into a
non-disturbance agreement under which the third party agrees not to foreclose or
otherwise enforce its security interest or lien in such a manner as to prevent
Pixar from completing and delivering the Pictures or frustrate the distribution
or other exploitation of the Pictures under this Agreement.
d. Treatments . To the extent Pixar develops any Treatments based on a
Pixar original idea, an idea acquired by Pixar or a public domain idea (but not
an original idea or material assigned by Disney to Pixar, which idea or material
shall be owned by Disney) which were rejected by Disney pursuant to the
procedure set forth in paragraph 3 above, [*] shall [*] all [*] in and to
such Treatments. Pixar shall have the right to
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continue to develop and use such Treatments subject to the provisions of
paragraph 17(a) below, provided that for any Treatment which Pixar uses as the
basis for a motion picture, Pixar shall reimburse Disney upon commencement of
production animation for the amount paid by Disney for such Treatment, with
interest at the Bank of America reference rate plus 125 basis points from the
date of Disney's payment. Nothing in this provision shall be deemed to place
either party in a worse position with respect to use of public domain ideas and
public domain materials than a member of the general public.
14. DEFENSE OF CLAIMS.
a. By Disney. Disney shall defend, and pay any judgment or settlement
of, any claims or actions asserted by any third party against Disney, its
Affiliates, Pixar, any production entity established by Pixar or any of their
respective officers, directors, employees, agents or representatives, arising
out of or in connection with the Pictures or any Ancillary Rights relating
thereto, or the development, production, distribution, exploitation or
exhibition thereof, including without limitation any claim or actions alleging
that any Picture or any element or part thereof, or the reproduction,
distribution, exploitation or exhibition thereof, infringes the copyright,
publicity rights or other intellectual property rights of any person or entity,
other than those claims or actions which Pixar is required to defend under
paragraph 14(b). Disney shall pay all expenses, court costs and outside
attorneys' fees incurred in connection with any of the foregoing claims or
actions. [*] shall obtain [*] to any [*], which [*] shall not be [*]. Any
amounts paid to third parties by Disney in connection with such claims or
actions shall be recoupable by Disney as [*] as provided in
paragraphs [*].
b. By Pixar. Pixar shall defend, and pay any judgment or settlement of,
any claims or actions asserted by any third party against Disney, its
Affiliates, Pixar, any production entity established by Pixar or any of their
respective officers, directors, employees, agents or representatives, arising
out of or in connection with personal injury, property damage or breach of
contract in connection with the development or production of the Pictures,
excluding any claim or action relating in whole or part to distribution,
exploitation or exhibition of any of the Pictures or alleging infringement of
copyright, publicity rights or other intellectual property rights. Pixar shall
pay all expenses, court costs and outside attorneys' fees incurred in connection
with any of the foregoing claims or actions. [*] shall obtain [*] to any [*] or
[*], which [*] shall not be [*]. Any amounts paid to third parties by Pixar in
connection with such claims or actions shall be considered [*] to be [*] and
[*] under the provisions of [*].
15. DERIVATIVE WORKS.
a. Definition of Derivative Works. For purposes of this Agreement,
"Derivative Works" means any work based upon any of the Pictures or Toy Story,
or any original
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characters therefrom or story or other elements thereof, including without
limitation sequels, prequels, remakes, made-for-home video productions,
television productions, Interactive Works, shorts, commercials and interstitial
works, stage plays, [*], Internet websites, [*], [*] and [*].
b. Decision to Produce.
(i) Subject to the provisions of this paragraph 15, Disney and
Pixar shall have mutual control of whether or not to develop, produce or
otherwise exploit any Derivative Works (or transfer or license any rights to
exploit any Derivative Works) during the Term or thereafter. Within a reasonable
time after request of Disney or Pixar, Disney and Pixar will seek to reach
agreement on the terms of development and production of any Derivative Work. In
the event of a disagreement of whether or not to develop, produce or otherwise
exploit any Derivative Work, Disney's decision shall govern, [*]. Prior to
commencement of the development or production of any Derivative Work (or
transfer or license of any rights to exploit any Derivative Work), Disney shall
notify Pixar and afford Pixar the opportunity to make its election with respect
to such work as provided in this paragraph 15. Pixar shall notify Disney of its
applicable election as set forth in the following paragraphs, within thirty (30)
days after written notice from Disney specifying the Derivative Work to be
developed and produced. Disney will consult with Pixar during this thirty (30)
day period in order to discuss the proposed Derivative Work in order to assist
Pixar in making its election. If Pixar fails to notify Disney of its election
within such thirty (30) period, Disney may serve on Pixar a notice demanding
Pixar to make its election, and if Pixar fails to make its election within
fifteen (15) days after such demand notice, Pixar shall be deemed to have
elected to participate on a passive financial basis under the terms provided in
this paragraph 15.
(ii) If any Picture [*] or more in domestic box office
receipts, [*] with a made-for-home video sequel or prequel of such Picture under
the terms set forth in paragraph (d)(i) below, [*] within [*] after the end of
the statement period in which such Picture [*], subject to the following: Upon
request by Disney, Pixar and Disney will discuss during the sixty (60) days
following such [*] whether the sequel or prequel should be a made-for-home video
or a theatrical motion picture. Following such discussion, the [*] whether to
proceed with such sequel or prequel in the form of a made-for-home video [*]
that in the case of one but only one such sequel or prequel, [*] that the sequel
or prequel be a [*].
c. Theatrical Motion Pictures. In the case of any Derivative
Work which is a theatrical motion picture, including a sequel, prequel or
remake, whether during the Term or thereafter, Pixar shall be entitled, at its
election, to do any one of the following:
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(i) Co-finance and produce such Derivative Work. If Pixar
elects to co-finance and produce such work, such motion picture shall be added
to the definition of Pictures produced and financed hereunder and all the
provisions of this Agreement shall apply to such motion picture, subject to the
following: Such Derivative Work shall not count toward the five Pictures to be
produced under this Agreement. Disney shall be entitled to approve the
Treatment. The provisions of paragraphs) 3(a)(i) and (ii) shall not apply to
such Derivative Work.
(ii) Participate on a passive financial basis in such
Derivative Work. If Pixar elects to participate on a passive financial basis,
Pixar shall be entitled to a participation equal to [*] of the Gross Receipts
of such motion picture, permanently escalating on a prospective basis to [*] of
Gross Receipts at Cash Breakeven, and permanently escalating on a prospective
basis to [*] of Gross Receipts at Second Cash Breakeven. For purposes of this
Agreement, "Cash Breakeven" means the first accounting period in which
cumulative Gross Receipts equal or exceed the sum of Distribution Costs and
Distribution Fees with respect to the applicable work and the direct cost of
production of the applicable work, and "Second Cash Breakeven" means the first
accounting period in which the cumulative Gross Receipts equal or exceed the sum
of Distribution Costs and Distribution Fees computed as if Distribution Fees
were [*] with respect to the applicable work and the direct cost of production
of the applicable work. If Pixar elects to participate on a passive financial
basis with a theatrical motion picture under this provision, it shall not be
entitled thereafter to elect to co-finance and produce a subsequent theatrical
motion picture or made-for-home video production based upon the same Picture.
d. Made-for-Home Video Productions. In the case of any
Derivative Work which is a made-for-home video production, including a sequel,
prequel or remake, whether during the Term or thereafter, Pixar shall be
entitled, at its election, to do any one of the following:
(i) Co-finance and produce such Derivative Work. If Pixar
elects to co-finance and produce such work, the terms and conditions of this
Agreement shall apply or be extended to cover such work, and the provisions of
this Agreement shall apply to such work in the same manner as they apply to
Pictures, subject to following: Disney shall be entitled to approve the
Treatment. Creative control shall be governed by the terms of this Agreement as
if such work were a Picture. Pixar and Disney shall mutually agree on a Picture
Budget for such Derivative Work. If Pixar and Disney are unable to reach
agreement on the Picture Budget for such Derivative Work within sixty (60) days
after submission by Pixar of a proposed budget and the domestic box office
receipts of the Picture on which such Derivative Work is based are $[*] million
or more, the decision of Pixar as to such budget shall govern, so long as such
Picture Budget does not exceed $[*] million (including the Treatment Budget for
such Derivative Work but excluding voice talent). Disney shall release such
video within six (6) months after delivery of the work to Disney by Pixar; the
work shall be distributed and marketed by Disney, under the Disney brand if the
work is G-rated and the Picture on which
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it is based was distributed and marketed by Disney under the Disney brand, and
with the credits and branding specified in paragraph 12, throughout the universe
in a [*] that in which [*] and [*] (e.g. [*]) financed and distributed by
Disney. The [*] under [*] as the [*] for Disney's [*] department in connection
with such Derivative Work shall be [*] dollars ($[*]). Disney agrees that it and
its Affiliates will not [*] any other made-for-home video within the [*] or the
[*] the [*] of such work. The following provisions of this Agreement shall not
apply to such Derivative Work: 3(a)(i), 3(a)(ii), 6(a), 6(b), 6(c), 6(d), and
6(e). Pixar and Disney hereby designate the made-for-home video sequel to Toy
Story as a video production Derivative Work which Pixar has elected to
co-finance and produce under this subparagraph.
(ii) Participate on a passive financial basis in such
Derivative Work. If Pixar elects to participate on a passive financial basis,
Pixar shall be entitled to a royalty equal to [*] of the Gross Receipts of
such made-for-home video production, permanently escalating on a prospective
basis to [*] of Gross Receipts at Cash Breakeven. If Pixar elects to
participate on a passive financial basis with a made-for-home video production
under this provision, it shall not be entitled thereafter to elect to
co-finance and produce a subsequent theatrical motion picture or made-for-home
video production based upon the same Picture.
e. Television Productions. In the case of any Derivative Work
which is a television production (including without limitation any series,
specials, "movie of the week" or mini-series), whether during the Term or
thereafter, Pixar shall be entitled, at its election, to do any one of the
following:
(i) Co-finance and produce such Derivative Work. If Pixar
elects to co-finance and produce such work, the parties shall mutually agree
upon the terms and conditions under which such work shall be financed, produced
and distributed, subject to the following: The Treatment for such television
production (or the pilot thereof in the case of a series) shall be subject to
mutual approval; the parties will have mutual creative control of the work; the
financial terms (including the financing of production and division of Gross
Receipts) shall be the same as under this Agreement, and the branding and
credits for such work shall be consistent with the terms of paragraph 12.
(ii) Participate on a passive financial basis in such
Derivative Work. If Pixar elects to participate on a passive financial basis,
Pixar shall be entitled to a royalty equal to (A) $[*] per episode plus
[*] of [*] of the net profits (the definition of which will be negotiated in
good faith by the parties in accordance with Disney's customary parameters
for deals of this kind) in the case of a television production which is
broadcast only during non-prime time, and (B) an amount to be mutually agreed
in advance in the case of any other television production.
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f. Interactive Works. In the case of Derivative Work which is an
Interactive Work, including without limitation any interactive CD ROM-based and
DVD-based products, whether during the Term or thereafter, Pixar shall be
entitled, at its election, to do any one of the following:
(i) Co-finance and produce such Interactive Work. If Pixar
elects to co-finance and produce such work, the parties shall mutually agree
upon the terms and conditions under which such work shall be financed, produced
and distributed, subject to the following. Disney shall be entitled to approve
the Treatment, and subject to Disney's approval of the Treatment, Pixar [*]
with respect to such Derivative Work. The parties shall mutually agree upon a
budget for such work. The financial terms (including the financing of production
and division of Gross Receipts) shall be the same as under this Agreement,
except that the parties shall mutually agree upon a budget for Distribution
Costs and there shall be no distribution fee. Disney shall release such work
within six (6) months after delivery of the work to Disney by Pixar; the work
shall be distributed and marketed by Disney, under the Disney Interactive brand,
and with the branding and credits specified in paragraph 12, in all markets and
media throughout the universe in a [*] Interactive Works financed and
distributed by Disney based upon [*].
(ii) Participate on a passive financial basis in such
Interactive Work. If Pixar elects to participate on a passive financial basis,
Pixar shall be entitled to a royalty equal to [*] of the Gross Receipts of
such Interactive Work.
g. Live Entertainment. In the case of any Derivative Work which is a
live entertainment, including without limitation stage plays and [*], whether
during the Term or thereafter, Pixar shall be entitled to participate on a
passive financial basis in such Derivative Work as follows: In the case of a
stage play, Pixar shall receive [*] of the gross weekly box office receipts. In
the case of an [*], Pixar shall receive a fee of [*] dollars ($[*]) per year on
a title by title basis (pro rated if other non-Pixar characters are also used in
the production). In the case of other live entertainment, Pixar shall receive a
participation in an amount to be mutually agreed in advance. Notwithstanding the
foregoing, if an [*] or other live entertainment (other than a stage play ) is
fully financed and produced under license from Disney by a third party which is
not Disney or an Affiliate of Disney, the proceeds from such license shall be
split [*], after deducting a distribution fee for Disney of [*].
h. Location Based Entertainment. In the case of all Derivative Works
which are venues, retail operations or location-based entertainment which use
unique characters or other elements of any of the Pictures or Toy Story as their
primary theme ("Picture-Themed Location-Based Entertainment"), Pixar shall be
entitled either to [*] or to [*], upon terms and conditions to be mutually
agreed in advance by the parties. If a venue, retail operation or location-based
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entertainment uses some unique characters or other elements of any of the
Pictures or Toy Story in combination with other characters or elements such that
the unique characters or other elements of the Pictures or Toy Story are not the
primary theme, such venue, retail operation or location-based entertainment
shall be treated pursuant to subparagraph (j) below. By way only of example, a
[*] would be a Picture-Themed Location-Based Entertainment, but a [*] which
included a [*] area along with substantial other areas themed from other
characters or elements not based on any of the Pictures or Toy Story would not
be a Picture-Themed Location-Based Entertainment.
i. All Other Works other than Theme Parks. Except as otherwise provided
in subparagraph (h) below, in the case of all Derivative Works not covered by
subparagraphs 15(c) through (h), including shorts, commercials, Internet
websites, interstitial works and radio productions, whether during the Term or
thereafter, Pixar shall be entitled to [*] in such work and receive a [*] to
be [*] agreed if the work is a revenue-producing work, provided that if Pixar
requests to produce such work, or elements thereof, the parties will negotiate
in good faith within sixty (60) days appropriate terms under which Pixar may
do so.
j. Theme Parks. Disney shall have the sole and exclusive right in
perpetuity to use each Picture, the characters therefrom and unique story
elements thereof (excluding Pixar Technology) and/or footage from each Picture
[*] in any of the following: (i) venues, retail operations and location-based
entertainment which are not Picture-Themed Location-Based Entertainment,(ii)
Disney's major theme parks currently in Anaheim, California; Orlando, Florida;
Paris, France; and Tokyo, Japan, or future Disney theme parks of similar
magnitude (collectively "Theme Parks"), and (iii) cruise ships throughout the
universe (collectively "Theme Park Rights") with no financial obligation to
Pixar. Such use may include use of the characters from the Pictures and unique
story elements thereof (excluding Pixar Technology) as so called "walking
characters", or in parades, stage shows or similar activities therein, as
elements thereof (e.g., standees, props, etc.) , and as rides and attractions.
Disney shall consult with Pixar as to the exploitation of the said Theme Park
Rights, but Disney's decision shall govern.
k. Creative Control of Derivative Works Not Produced by Pixar. In the
case of all Derivative Works not produced by Pixar, Disney shall have creative
control over the development and production of the work, provided that Disney
and Pixar shall [*] of any 3D computer animation embodied or used in production
of such work but in the event of disagreement the [*].
16. TOY STORY.
a. Derivative Works. The parties acknowledge that any Derivative Works
based on Toy Story including, without limitation, a theatrical motion picture
sequel, a made-for-home video sequel, a television production, or a third or
subsequent CD-ROM product, but excluding the first and second Interactive Works
developed under the CD-ROM
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Development and Publishing Agreement dated as of August 24, 1995 between Disney
Interactive and Pixar (the "CD ROM Agreement"), shall be governed by this
Agreement and treated in accordance with paragraph 15 above.
b. Toy Story Agreement. Upon execution of this Agreement, the parties
agree that the agreement between Disney and Pixar dated as of May 3, 1991, as
amended, ("1991 Agreement") shall apply only to the rights and obligations of
the parties relating to the financial participation in and the production and
distribution of the theatrical motion picture Toy Story and to financial
participation in Ancillary Rights related to Toy Story as provided in paragraph
(c) below, and shall have no further force nor effect and that this Agreement
shall supersede the terms thereof with respect to Pixar's arrangement with
Disney relating to future services and productions. The CD ROM Agreement shall
remain in full force and effect with respect to the first and second Interactive
Works developed under that agreement.
c. Ancillary Rights. For purposes of this Agreement, Gross Receipts for
any Toy Story sequel or prequel shall include Gross Receipts from Ancillary
Rights based upon Toy Story, and unique characters or story or other elements
thereof, only to the extent that such Gross Receipts exceed, in any [*] of the
total amount of Gross Receipts from Toy Story Ancillary Rights in the [*] period
commencing [*] before and ending [*] before the initial release of the sequel or
prequel of Toy Story. The remaining Gross Receipts from Toy Story Ancillary
Rights shall continue to be accounted for under the 1991 Agreement. Distribution
Costs relating to Toy Story Ancillary Rights shall be apportioned between this
Agreement and the 1991 Agreement in the same proportion as Gross Receipts from
such Ancillary Rights are apportioned between this Agreement and the 1991
Agreement.
17. EXCLUSIVITY.
a. No Other Feature Length Animated Theatrical Motion Pictures. Pixar
agrees that it will not release or authorize the release of any feature length
animated theatrical motion picture produced by Pixar other than the Pictures and
Derivative Works, produced by Pixar hereunder until a date which is twelve (12)
months from delivery of the fifth Picture hereunder. Pixar further agrees that
it will not enter into an agreement with any third party for the development,
production or distribution of any feature length animated theatrical motion
picture until after Pixar has delivered the third Picture to Disney hereunder.
b. Theme Parks. Pixar agrees that it will not develop or produce any
rides or attractions for use in major theme parks not owned or operated by
Disney (e.g. Universal Studios or Six Flags). Nothing in this paragraph (b)
shall prohibit [*] from [*] for [*] not used in any such [*] not [*], subject to
the terms and conditions of this Agreement.
c. First Look at TV Productions and Home Video Productions. Pixar will
give Disney advance notice of any animated television production or animated
made-for-home
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video production owned and controlled by Pixar that Pixar proposes to produce
during the term of this Agreement before commencing production thereof. Disney
shall notify Pixar within thirty (30) days after Pixar's notice whether Disney
wishes to obtain distribution rights to such television production or home video
production. If Disney notifies Pixar that it does wish to obtain such rights,
Disney and Pixar shall negotiate in good faith to reach mutually agreeable terms
under which Disney may do so. If for any reason the parties have failed to reach
mutual agreement on such terms within sixty (60) days after such original
notice, Pixar shall have no further obligation to Disney with respect to the
work which was the subject of such notice.
d. No Material Interference. Pixar agrees that non-Disney activities
undertaken by Pixar will be managed so as not to materially interfere with
Pixar's obligations to Disney under this Agreement.
e. Employment Agreement with Xxxx Xxxxxxxx. Pixar shall enter into a
new exclusive agreement for a period of seven (7) years from the commencement
date of the Term for the services of Xxxx Xxxxxxxx; provided that Pixar shall
have no liability for Xxxxxxxx'x failure to render services under such agreement
due to his default, disability or death. Pixar shall not terminate Xxxxxxxx'x
employment without cause without Disney's approval. Without limiting any other
rights or remedies, if any, of Disney, Disney shall be free, notwithstanding the
provisions of paragraph 20, to seek to employ Xxxxxxxx after termination of his
employment by Pixar, whether such termination is with or without cause; provided
that Disney shall not solicit or offer employment to Xxxxxxxx prior to such
termination. Pixar agrees that Xxxxxxxx will direct one of the remaining four
Pictures under this Agreement after Bugs. Disney acknowledges and agrees that
Xxxxxxxx will be rendering services at Pixar for non-Disney projects, provided
that Pixar agrees that Xxxxxxxx'x first priority during his employment at Pixar
will be rendering services for Disney-related projects. Xxxxxxxx'x salary and
signing bonus (other than any Pixar stock) shall be allocated to the Production
Costs of the Pictures and Derivative Works in development or production at the
time paid, and Disney shall fund Disney's fifty-percent (50%) share of such
salary and signing bonus as part of such Production Costs.
18. EXCHANGE OF INFORMATION.
In order for the parties to exercise effectively their rights
hereunder, and to the extent the same would not violate Disney's or Pixar's
confidentiality obligations to third parties, the parties shall provide, upon
request, [*] relating to [*] relating to the Pictures, provided that nothing in
such disclosed information shall constitute or be deemed to be a representation,
warranty or covenant by either party with respect to such matters. Such
information may be furnished orally.
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19. PUBLICITY AND CONFIDENTIALITY.
a. Publicity. Within seven (7) days after execution of this Agreement,
Disney and Pixar will make a joint press announcement concerning this Agreement,
which will be mutually agreed upon by the parties.
b. Confidentiality of Terms of Agreement. Disney and Pixar shall be
free to disclose the terms of this Agreement to third parties, except that each
party shall limit disclosure of the provisions of [*] to substantially the
information to be mutually agreed by the parties.
c. Protection of Confidential Information.
(i) For purposes of this Agreement, "Confidential Information"
shall mean all information which is received by one party (the "Recipient") from
the other (the "Discloser") under or in the course of performance of this
Agreement.
(ii) The Recipient shall maintain Confidential Information in
confidence, shall not disclose Confidential Information, or any portion thereof,
to any third party except as permitted by this Agreement or as reasonably
necessary to carry out the provisions of this Agreement, and shall protect
Confidential Information with at least the same degree of care as the Recipient
uses in maintaining as secret its own confidential and proprietary information,
but in no case less than a reasonable degree of care.
(iii) This Agreement imposes no obligation on the Recipient
with respect to any portion of Confidential Information which (A) was generally
available to the public prior to Discloser's first disclosure thereto to
Recipient or subsequently becomes generally available to the public through no
fault of the Recipient; (B) was in Recipient's possession prior to receipt from
Discloser and not acquired directly or indirectly from Discloser; (C) is
lawfully received by the Recipient from a third party not directly or indirectly
associated with Discloser and having no obligation of confidentiality with
respect thereto; or (D) is independently developed by the receiving party
without the benefit of the other party's Confidential Information; provided that
each party shall use reasonable efforts to instruct its employees not to confirm
or otherwise respond to Confidential Information or an inquiry about same
presented by a third party.
(iv) Nothing in this Agreement shall prohibit the Recipient
from disclosing Confidential Information (a) as required to prepare and report
financial statements in accordance with generally accepted accounting principles
or (b) if legally required to do so, by statute, regulation, judicial or
Governmental order or by deposition, interrogatory, request for documents,
subpoena, civil investigative demand or similar process in a judicial or
Governmental proceeding.
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20. NON-SOLICITATION.
During the Term and continuing for a period of two (2) years
thereafter, Pixar and Disney shall not engage the services of any person who was
employed by Pixar or Disney, as the case may be, during the prior six (6) months
before such engagement, without prior approval of the applicable party.
21. ASSIGNMENT.
Neither party may assign its rights or obligations under this Agreement
without the consent of the other party except as follows:
a. Either party may freely assign its rights to payments from the other
party hereunder, but such assignment will be made pursuant to Disney's customary
notice of irrevocable authority and acknowledgement of such notice.
b. Either party may assign or delegate any of its rights or obligations
under this Agreement to any entity with or into which such party may merge or
consolidate, or which may succeed to all or substantially all of such party's
assets related to the subject matter of this Agreement, subject to the
provisions of paragraph 23.
x. Xxxxxx may enter into subdistribution agreements for sale or
distribution of the Pictures or Ancillary Rights related thereto; provided that
such agreements are subject to and consistent with the terms and conditions of
this Agreement.
22. CHANGE OF CONTROL OF PIXAR.
In the event that any entity described in Exhibit B directly or
indirectly acquires or controls fifty percent (50%) or greater ownership
interest in Pixar or Pixar merges or consolidates into such an entity, or such
an entity succeeds to all or substantially all of Pixar's assets related to the
subject matter of this Agreement, Disney shall be entitled to terminate this
Agreement upon thirty (30) days written notice to Pixar given not later than ten
(10) days after notice from Pixar of such event. In the event of such
termination, the provisions of paragraph 23 shall apply.
23. TERMINATION.
a. Effect of Termination. Upon termination of this Agreement by Disney
under paragraphs 3(a)(ii) or 22, the terms and conditions of this Agreement
shall continue to apply to Pictures, Ancillary Rights and Derivative Works which
have been delivered by Pixar to Disney as of the date of such termination, or
are at Disney's option delivered by Pixar to Disney under the terms of this
subparagraph 23(b) after such termination, and to all future Ancillary Rights
and future Derivative Works relating thereto. Upon such termination, this
Agreement shall terminate as to any Pictures which have not been delivered to
Disney as of
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the date of such termination and which Disney does not elect to have completed
under the terms of this subparagraph 23(b), whether or not in development or
production ("Uncompleted Pictures") and to all future Ancillary Rights and
future Derivative Works relating thereto. Upon such termination, Pixar shall own
all copyright, trademark and other intellectual property rights in and to
Uncompleted Pictures, including the Treatments on which such Uncompleted
Pictures are or would be based, and all unique character and story elements
thereof and the audio visual images thereof, and the Ancillary Rights and
Derivative Works relating thereto. Nothing in this provision shall be deemed to
place either party in a worse position with respect to use of public domain
ideas and public domain materials than a member of the general public. If at any
time after such termination Pixar elects to complete and release or have an
Uncompleted Picture released or to use the Treatment thereof as the basis for
any motion picture, Pixar shall so notify Disney and reimburse Disney, no later
than ninety (90) days after Pixar's notice of election, for the amount paid by
Disney for such Uncompleted Picture, with interest at the Bank of America
reference rate plus 125 basis points from the date of Disney's payment of such
amounts . Upon such termination, the provisions of paragraphs 1, 2 and 17 shall
terminate and be of no further force or effect.
b. Completion of Works in Production. If any Picture is within [*] of
its target delivery date as of the date of such termination, Disney shall be
entitled at its option to have Pixar proceed to complete production and delivery
of such Picture under the terms of this Agreement, and in such event this
Agreement shall continue to apply to such Picture, and to all Ancillary Rights
and Derivative Works relating thereto. If Pixar has as of the date of such
termination elected to co-finance and produce a Derivative Work and a budget for
such Derivative Work has been approved under this Agreement as of the date of
such termination, Pixar shall complete and deliver such Derivative Work to
Disney and Disney shall finance and distribute such work in accordance with the
terms of this Agreement.
24. INTEREST ON LATE PAYMENTS.
Any late payments (including as a result of any inaccurate accounting)
owed by either party to the other party hereunder shall bear interest from the
date such payment was due until paid. The applicable interest rate shall be Bank
of America's reference rate plus 125 basis points in effect on the first day of
each calendar month, which rate shall apply for the calendar month.
25. GOVERNING LAW
This Agreement shall be governed by the laws of State of California
without regard to its conflict of law principles.
26. GENERAL PROVISIONS
a. Right to Cure. No act or omission of any party shall constitute an
event of default or breach by such party of the Agreement unless the
non-breaching party shall first
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notify such party in writing setting forth such alleged breach or default and
such party shall not cure the same within thirty (30) days after receipt of such
notice.
b. Remedies.
(i) Notwithstanding any provision of this Agreement to the
contrary, after production of a Picture or a Derivative Work is completed, if
Pixar claims that Disney has breached this Agreement with regard to any such
completed Picture or completed Derivative Work or completed Ancillary Right
relating thereto ("Completed Work"), Pixar shall not be entitled to seek and/or
obtain equitable or injunctive relief to enjoin or restrain the distribution,
exhibition, advertising or any other means of exploitation by Disney of such
Completed Work. To be considered "completed", a Picture, Derivative Work or
Ancillary Right must in the case of any works produced by Pixar have been
completed and delivered by Pixar to Disney under this Agreement. Nothing in this
paragraph shall [*] from [*] to comply with the terms and conditions of this
Agreement in connection with the distribution, exhibition, advertising and other
means of exploitation of such Completed Work ; provided that [*] shall [*]
distribution, exhibition, advertising or any other means of exploitation by
Disney of any such Completed Work. Nothing in this paragraph shall apply to, or
be construed to limit in any way [*] with respect to distribution, exhibition,
advertising or any other form of exploitation of any work other than a Completed
Work.
(ii) Subject to subparagraph (b)(i). above, if either party
claims the other party has breached this Agreement, then before the party
claiming such breach seeks [*] against the other party, the claiming party must
notify the other party. For a period of [*] after such notice is given (the
"Resolution Period"), both parties shall attempt to cure (if curable) or
otherwise resolve the claim. During such Resolution Period either party may [*]
the claim. If after expiration of the Resolution Period the parties are not able
to resolve such claim, the claiming party may [*] against the other party,
subject to any and all claims and/or defenses of the other party and to
subparagraph (b)(i).
(iii) Nothing under this paragraph shall prevent or limit
either party from [*] of the copyright or other rights in a Picture or
Derivative Work to the extent any such [*] would be a breach of this Agreement.
c. Force Majeure. No party shall be liable to the other party because
of any failure to perform hereunder caused by any cause beyond said party's
control, including without limitation fire, earthquake, flood, epidemic,
accident, explosion, casualty, strike, lockout, labor controversy, riot, civil
disturbance, act of public enemy, embargo, war, act of God or law, except as
expressly provided herein to the contrary.
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d. No Waivers. No waiver by either party hereto of any breach of this
Agreement shall be deemed to be a waiver of any preceding or succeeding breach
of the same or any other provision hereof. The exercise of any right granted to
either party hereunder shall not operate as a waiver.
e. No Violation of Law. Nothing contained in this Agreement shall be
construed so as to require the commission or any act contrary to law, and
wherever there is any conflict between any provisions of this Agreement and any
material statute, law or ordinance contrary to which the parties have no legal
right to contract, the latter shall prevail, but in such event the provision of
this Agreement affected shall be curtailed and limited only to the extent
necessary to bring it within the legal requirements.
f. Notice. Any notices required or permitted by this Agreement shall be
in wirting and shall be delivered either by personal delivery or by overnight
commercial delivery service, such as Federal Express or DHL, addressed as
follows:
If to Disney: Xxxx Disney Pictures and Television
000 Xxxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Senior Vice President - Legal and Business
Affairs
With copies to: Senior Vice President-Legal and Business Affairs
Xxxx Disney Feature Animation
000 Xxxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
Senior Vice President - Finance
Xxxx Disney Feature Animation
000 Xxxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
If to Pixar: Pixar Animation Studio
0000 X. Xxxxxxx Xxxx.
Xxxxxxxx, XX 00000
Attention: Chief Financial Officer
With copies to: Ziffren, Brittenham, Branca & Xxxxxxx
0000 Xxxxxx xx xxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attn: Xxx Xxxxxxx, Esq.
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McCutchen, Doyle, Xxxxx & Xxxxxxx
Three Xxxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxx, Esq.
Either party shall be entitled to change its address for purposes of
this section by notice to the other. Notices shall be effectiive upon receipt.
g. Headings. The headings in this Agreement are solely for convenience
of reference and shall not effect its interpretation.
27. ENTIRE AGREEMENT.
This Agreement, including its exhibits, constitutes the entire
agreement between the parties with respect to the subject matter hereof, and
supersedes and replaces any prior correspondence, negotiations, agreements,
understandings and representations with respect thereto, except for the 1991
Agreement and the CD ROM Agreement to the extent provided in paragraph 16(b).
This Agreement may not be modified or amended unless in a writing signed by both
parties.
28. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in counterparts and transmitted by
facsimile copy, each of which shall constitute an original and which taken
together shall constitute the Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
PIXAR XXXX DISNEY PICTURES
AND TELEVISION
By: /s/ XXXXXXXX X. XXXX By: /s/ XXXXXX XXXXX
---------------------------- ---------------------------
Name: Xxxxxxxx X. Xxxx Name: Xxxxxx Xxxxx
Title: Executive VP & CFO Title: Executive VP & CFO
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