DW/UNIVERSAL STUDIOS, INC. MASTER AGREEMENT
AMENDED AND RESTATED AS OF OCTOBER 31, 2003
This agreement was entered into as of June 14, 1995, was amended and
restated as of June 20, 2001, and is amended and restated herein as of October
31, 2003 by and between DreamWorks L.L.C. ("DW"), a Delaware limited liability
company, with its principal offices at 0000 Xxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxx
00000, Universal Studios, Inc. ("Universal"), a Delaware corporation, with its
principal offices at 000 Xxxxxxxxx Xxxx Xxxxx, Xxxxxxxxx Xxxx, Xxxxxxxxxx 00000,
and Vivendi Universal Entertainment LLLP, a Delaware limited liability limited
partnership ("VUE") as assignee of Universal, with its principal offices at 000
Xxxxxxxxx Xxxx Xxxxx, Xxxxxxxxx Xxxx, Xxxxxxxxxx 00000.
PRELIMINARY STATEMENT
WHEREAS, DW and MCA, INC. ("MCA") (currently known as Universal),
entered into the DW/MCA Master Agreement dated as of June 14, 1995, which by its
terms incorporated therein each "Agreement Module" (as defined and set forth
below), all as amended, modified or supplemented from time to time in accordance
therewith;
WHEREAS, in June 2001 DW and Universal agreed to amend and restate
the Master Agreement and to extend and amend the terms thereof and to make
certain amendments to Exhibit A and Exhibit B as defined therein (as so amended
and restated, the "2001 Master Agreement");
WHEREAS, after the 2001 Master Agreement DW and Universal entered
into certain other amendments to the Master Agreement and/or to Exhibits A and B
thereto, and Universal assigned its rights and obligations thereunder to VUE;
WHEREAS, effective as of October 31, 2003, DW and Universal have
agreed to amend the 2001 Master Agreement, including to extend the term thereof
and to make certain amendments to Exhibits A and B;
WHEREAS, effective as of October 31, 2003, DW has agreed to make
certain amendments (the "Class U Amendment") to the Sixth Amended and Restated
Limited Liability Agreement of DreamWorks L.L.C. dated as of March 21, 2003 (the
"Prior LLC Agreement") (the Prior LLC Agreement as amended by the Class U
Amendment is the "LLC Agreement");
NOW, THEREFORE, DW and Universal hereby agree as follows:
I. GENERAL
1. In consideration of the mutual covenants and undertakings
contained herein, Universal and DW agree as follows.
a. DW Representations. DW represents as follows: DW has received
all required consents to enter into this Master Agreement and
the LLC Agreement from (i) its lenders under DW's First
Refinancing Credit Facility (as defined in the LLC Agreement);
and (ii) its lenders under that DW Funding LLC Film
Securitization Facility dated as of October 15, 2002; and
(iii) the requisite equity holders whose consent is required
under the LLC Agreement. DW further represents that its
execution and delivery of, and its performance under this
Agreement does not and will not conflict with, or result in
the breach of, constitute a default or require a consent
under, nor will it result in the termination, cancellation,
modification, violation or acceleration (whether after giving
notice or the lapse of time or both) of any right or
obligation of DW under any material contract, deed, instrument
or other agreement.
b. NBC Consent. Universal represents that it has received the
consent of National Broadcasting Company, Inc. ("NBC") to the
form and substance of this Master Agreement and the LLC
Agreement.
c. Class U Amendment. On or prior to the Restatement Effective
Date (as defined below) the LLC Agreement shall have been
executed and delivered by DW, Universal and the other parties
thereto and shall have become effective.
d. Effective Date. The business day after all of the consents
listed above have been received and circulated to each of DW
and Universal is the "Restatement Effective Date."
2. Notwithstanding anything to the contrary set forth in this
Agreement, Amendment No. 2 to Exhibit B to the Master Agreement ("Amendment No.
2") shall remain in full force and effect and is not amended by this Restated
Master Agreement.
II. TERM; CONTRACT YEAR
a. The Term of this Master Agreement shall continue until
termination of all of the Agreement Modules. The term of each
of Exhibit A and Exhibit B is hereby amended to continue to
December 31, 2010, unless extended in accordance with the
following two sentences, or unless otherwise extended or
terminated in accordance with the terms of this Master
Agreement. Universal shall have the right, at its sole option,
to extend the Term of both of Exhibit A and Exhibit B by
written notice to DW delivered on or after January 2, 2010 and
prior to February 1, 2010 to (x) December 31, 2011, if Total
Fees Payable (as defined below) to Universal are *** or (y)
December 31, 2012 if Total Fees Payable after the Restatement
Effective Date are ***. In addition, the Terms of each of
Exhibit A and Exhibit B shall automatically be extended on any
otherwise scheduled expiration date for a three-month period
from such scheduled expiration date if, on any scheduled
expiration date, all of the Preferred
2
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
shall not have been redeemed in cash, and all accrued and
unpaid cash and non-cash distributions thereon not paid in
cash in accordance with Section 8.01 of the LLC Agreement;
provided, that from and after September 30, 2008 the period of
such extensions shall be as set forth in Section
8.01(a)(vi)(y)(B) of the LLC Agreement. "Total Fees Payable"
shall mean the sum of (i) Aggregate Fees paid to Universal and
its Affiliates during the period from November 1, 2003 through
December 31, 2009, (ii) Aggregate Fees accrued but not yet
paid to Universal and its Affiliates during the period from
November 1, 2003 through December 31, 2009, and (iii) as an
estimate of Aggregate Fees expected to be paid or become
payable to Universal and its Affiliates during the period from
January 1, 2010 to December 31, 2010, the lesser of (A)
Aggregate Fees used in the calculation of the Pipeline
Estimate and the Animation Pipeline Estimate for such period
and (B) *** times the Aggregate Fees paid to Universal and its
Affiliates during the period from December 31, 2008 to
December 31, 2009. For purposes of clarification, under this
Agreement, (i) if the Preferred shall be converted or
exchanged into a debt instrument, the "redemption" amounts and
"distributions" required to be paid shall be deemed to mean
the principal and interest of such debt instrument, and (ii)
in any instance in which Universal has the right to terminate
Exhibit A or Exhibit B but the term of that agreement extends
automatically (notwithstanding a termination notice) because
DW is required to redeem the Preferred together with all
accrued and unpaid cash and non-cash distributions and has
failed to do so, Universal (but not DW) can voluntarily waive
the benefits of such provision and terminate the applicable
agreement notwithstanding the failure to redeem (see, e.g.,
Paragraph XII.3.e.).
b. Effective as of January 1, 2004, the "contract year" as
defined under each of Exhibit A and Exhibit B shall be revised
to be the calendar year, and a new contract year shall
commence on January 1, 2004 for purposes of both Exhibit A and
Exhibit B.
III. DEFINITIONS
Capitalized terms used in this Master Agreement but not referenced below or
otherwise defined herein shall have the meanings assigned thereto in the
Agreement Modules. For convenience, Schedule III attached hereto contains a
table of defined terms.
1. AFFILIATE: "Affiliate" (collectively "Affiliates") of any
specified Person shall refer to any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with such specified
Person.
2. AGREEMENT: "Agreement" shall refer collectively to the "Master
Agreement" and all of the "Agreement Modules."
3
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
3. AGREEMENT MODULE: "Agreement Module" shall refer to each of
Exhibits A, B, C and D of the DW/MCA Master Agreement, as amended, modified or
supplemented from time to time in accordance therewith.
4. MASTER AGREEMENT: "Master Agreement" shall refer solely to this
amended and restated DW/Universal Studios, Inc. Master Agreement without
consideration of the Agreement Modules attached hereto.
5. PARTIES: "Parties" (individually "Party") shall refer to
Universal and DW.
6. PAYMENT DEFAULT: A failure by DW to pay any Advance Amount,
Animation Advance Amount, Additional Amount, Animation Additional Amount, DW
Adjustment, or redemption or distribution amount payable under the LLC
Agreement, in each case on the date due.
7. PERSON: "Person" shall refer to any individual, firm,
corporation, partnership, limited liability company, trust, joint venture,
governmental authority or other entity.
8. PREFERRED: "Preferred" shall refer to all outstanding shares of
DW's Class U Preferred Stock.
9. SUBSCRIPTION AGREEMENT: "Subscription Agreement" shall refer to
the Subscription Agreement dated as of April 15, 2001 between DW and Universal
pertaining to the purchase by Universal of DW's Class U Preferred Stock, as more
specifically set forth therein.
IV. FOREIGN THEATRICAL MOTION PICTURE DISTRIBUTION
Exhibit A shall refer to the agreement dated as of June 14, 1995
between DW and Universal City Studios, Inc. ("Distributor"), regarding, among
other things, the distribution by Distributor of DW's Pictures within the
Territory during the Term (as such capitalized terms are defined in Exhibit A,
as amended hereby), as more specifically set forth therein, as amended as of the
Restatement Effective Date by this Master Agreement including the terms and
conditions attached hereto as Schedule A-TC (which was effective prior to the
date of the 2003 amendment and restatement of the Master Agreement and is
continued in effect by this amended and restated Master Agreement), which is by
this reference incorporated into Exhibit A. Other than as expressly amended in
this Master Agreement, Exhibit A (including Schedule A-TC) remains in full force
and effect as of the Restatement Effective Date.
1. All references to "MCA" in Exhibit A shall mean Universal
Studios, Inc. and all references to MCA shall be to Universal Studios, Inc. The
Parties acknowledge and agree that Universal has assigned its obligations and
rights under the Master Agreement to VUE and services under the Master Agreement
and Exhibit A may be provided by VUE (or its successor).
2. Paragraph 10 of Exhibit A is deleted and amended to read in full
as follows, and all references in Exhibit A to Paragraph 10 shall mean such
Paragraph 10 as amended:
4
The introduction to Paragraph 10 shall read: In all events under this Paragraph
10, and notwithstanding any provision of this Agreement to the contrary, no
termination of either Exhibit A or Exhibit B shall be effective unless and until
(i) all Advance Amounts, Animation Advance Amounts, Additional Amounts and
Animation Additional Amounts have been paid in full, (ii) the Special
Termination Fee has been paid in full, and (iii) the Preferred together with all
accrued and unpaid cash and non-cash distributions thereon is redeemed and the
redemption price has been paid in full in cash in accordance with Section
8.01(a) of the LLC Agreement.
a. Termination Without Cause.
(i) [Purposely left blank]
(ii) This Exhibit A (and Exhibit B, if DW determines in its
sole discretion) may be terminated by DW, in its
entirety upon the happening of any of the following
circumstances: If UIP "restructures" (i.e., if UIP
ceases to be the primary foreign distribution entity for
either or both of the UIP Owners); provided, however,
that DW shall be entitled to terminate pursuant to this
provision on the first anniversary of the date of such
"restructuring" (the "UIP Termination Date") provided it
provides not less than 15 days written notice of its
election to terminate this Exhibit A prior to such UIP
Termination Date. DW may terminate prior to the UIP
Termination Date if UIP (or Universal) materially
changes the manner in which the Pictures are
theatrically distributed internationally and this change
has or would have a material adverse impact on DW's
international theatrical revenues (a "Material
International Change"). For the period of time prior to
DW's exercise of its rights under this clause (ii), and
if DW does not exercise its termination right under this
clause (ii), so long as there is not a Material
International Change, UIP's (or Universal's) performance
shall be deemed consistent with Universal's obligations
hereunder, it being acknowledged that DW may nonetheless
thereafter choose to exercise its termination right
under this subparagraph. Not later than the termination
of Exhibit A under this clause (ii), DW shall redeem all
of the Preferred in cash, together with all accrued and
unpaid cash and non-cash distributions pursuant to
Section 8.01(a) of the LLC Agreement. DW may not after
notice of its election to terminate Exhibit A and prior
to redemption in full of the Preferred enter into any
agreement which would have the effect of prohibiting or
restricting its redemption of all of the Preferred in
cash, together with all accrued and unpaid cash and
non-cash distributions.
(iii) DW shall have the right to terminate this Exhibit A
and/or Exhibit B (but not Exhibit C and/or Exhibit D),
as DW determines in its sole discretion, subject to the
further provisions of this provision
5
on a VUE Change of Control. DW may not exercise its
rights under this Paragraph 10.a.(iii) at any time prior
to the earlier of October 8, 2004 and the NBC Closing
(as defined in the Master Agreement). After the earlier
of October 8, 2004 and the NBC Closing, DW may exercise
its rights to terminate during the 90 days following the
first public announcement after such date of Vivendi
Universal S.A.'s (or, if the NBC Closing has occurred,
General Electric Company's ("GE")) intention to enter
into a definitive agreement with a specific named third
party for a transaction that would effect a "VUE Change
Of Control" (as hereafter defined) under clauses (A) or
(C) of such definition, and (B) at any time during the
90 days following a VUE Change of Control under clause
(B) of such definition. In either case, such notice of
termination shall be effective as to the Exhibit(s)
being terminated 180 days after the receipt of such
notice subject to the requirements of the Master
Agreement, including without limitation Paragraph VIII.8
thereof, and to Section 8.01(a) of the LLC Agreement. No
termination by DW shall be effective under this clause
a.(iii) unless and until DW shall have redeemed all of
the Preferred together with all accrued and unpaid cash
and non-cash distributions thereon, in cash, in
accordance with Section 8.01(a) of the LLC Agreement. A
"VUE Change of Control" means (A) the acquisition,
directly or indirectly, of (i) more than 50% of the
voting power or aggregate equity value represented by
the issued and outstanding ordinary equity interests (or
preferred equity interests carrying voting power or
consent rights substantially similar to ordinary equity
interests) or (ii) actual managerial control (whether
through the appointment, or ability to veto the
appointment, of key executive officers or at least a
majority of the members of the board of directors or
equivalent governing body, or otherwise) of VUE or its
motion picture studio division, whether pursuant to
merger, consolidation, acquisition, share exchange,
issuances of equity securities or otherwise, by any
person or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934, as
amended), in each case, other than by Vivendi Universal
S.A. and/or any of its majority owned subsidiaries or GE
and/or any of its majority owned subsidiaries, (B) the
filing of a registration statement for an initial public
offering of 20% or more of the voting power or aggregate
equity value represented by the issued and outstanding
ordinary equity interests (or preferred equity interests
carrying voting power or consent rights substantially
similar to ordinary equity interests) of VUE (or any
corporation into which VUE may be reconstituted or the
substantial asset of which is equity interests in VUE),
as a result of which Vivendi Universal S.A. (and/or its
majority owned subsidiaries) or GE (and/or its majority
owned
6
subsidiaries) is not expected to retain actual
managerial control (whether through the ability to elect
at least a majority of the members of the board of
directors or equivalent governing body or otherwise) of
VUE or its motion picture studio division, or (C) the
sale, transfer, contribution or other disposition,
directly or indirectly, of (i) all or substantially all
of the property, business or assets of VUE or (ii) 50%
or more of the property, business or assets of the
motion picture studio division of VUE, to any person or
group (as defined above) (excluding internal
reorganizations and transactions effected to
reconstitute VUE as a corporation, so long as the
successor assumes the obligations of VUE under the
Master Agreement) excluding in each case (y) the NBC
Closing, and (z) after the NBC Closing, other sales,
transfers, contributions or other dispositions to GE
and/or any of its majority owned subsidiaries.
b. Termination With Cause.
(i) This Exhibit A (and Exhibit B, if DW determines in its
sole discretion) may be terminated by either party, only
in its entirety, without prejudice to any other rights
or remedies available to it, upon the happening of any
of the following circumstances, and subject to the
Master Agreement and Section 8.01(a) of the LLC
Agreement:
(1) If the other party shall fail to make any payment
when due hereunder, provided that if the parties
are in dispute over whether a payment is due, that
portion of the payment in dispute shall not be
deemed due unless and until the parties mutually
agree or five business days after a final binding
determination of the issue is made and noticed to
the parties (provided that the non-terminating
party shall have a period of 30 days, following
written notice thereof, to cure) and provided
further that an election to terminate under this
subparagraph b.(i)(1) must be made, if at all,
within 90 days of the date the payment was due and
not paid; or
(2) If the non-terminating party shall make any
assignment for the benefit of creditors, file a
petition for bankruptcy, be judged bankrupt or
become insolvent.
(ii) This Exhibit A (and Exhibit B, if DW determines in its
sole discretion) may be terminated by DW, only in its
entirety without prejudice to any other rights or
remedies available to it, upon the happening of any of
the following circumstances: If more than 3 times during
any 12-month period during the Term or an aggregate of 7
times during any consecutive five-year period commencing
7
after June 20, 2001 (provided that DW shall have given
Universal reasonably prompt (but in no event to exceed
90 days after the date DW knew or reasonably should have
known) written notice of each such alleged event and/or
non-performance and that UIP shall have failed to cure
the same within 5 days, or such shorter period as
reasonably required by DW, following DW's written notice
thereof to cure) UIP fails to release the Pictures
pursuant to plan on dates and for durations for the
release of the Pictures and in the theaters approved by
DW, subject to customary force majeure events (provided,
in the event of a delay caused by a force majeure event,
DW shall be permitted to distribute, or cause the
distribution of, such Picture(s) as provided in
Paragraph 2.c. above if DW reasonably determines that
UIP will not be available to release the Pictures as and
when required by DW) and provided further that such
alleged event or non-performance (y) is attributable
primarily to UIP's actions or failures to act and is not
directly attributable to any of DW's actions or failures
to act, and (z) affects portions of the Territory (not
less than two countries) representing in the aggregate
not less than 20% of all Territory Receipts for all
Pictures distributed by UIP in the preceding year. UIP's
failure to meet plan shall not be attributable primarily
to its actions or failures to act if DW's plan is
broadly inconsistent with past plans for comparable
motion pictures, for example, requiring an "art film" to
be released on a majority of the screens in a particular
country.
(iii) Notwithstanding anything in this Exhibit A or the Master
Agreement to the contrary, the only events permitting a
termination of this Exhibit A for cause shall be those
expressly set forth in this Paragraph 10.b.
c. Other Terminations. This Exhibit A (and Exhibit B, if DW
determines in its sole discretion) may be terminated by DW (a)
in any country(ies) or Region(s) where the applicable event or
nonperformance has occurred (and either entirely in such
country[ies] or Region[s]), or (b) only with respect to any
Picture(s) affected by such event or non-performance in such
country[ies] or Region[s]); and/or (c) in the entire Territory
with respect to a Picture(s) materially affected by such event
or non-performance, all as the terminating party determines in
its sole discretion without prejudice to any other rights or
remedies available to it, upon the happening of any of the
following circumstances: If more than 3 times during any
12-month period during the Term or an aggregate of 7 times
during any consecutive five-year period commencing after June
20, 2001 (provided that DW shall have given Universal
reasonably prompt written notice (but in no event to exceed 90
days after the date DW knew or reasonably should have known)
of each such alleged event and/or non-
8
performance and that UIP shall have failed to cure the same
within 5 days, or such shorter period as reasonably required
by DW, following DW's written notice thereof to cure) UIP
fails to release the Pictures pursuant to plan on dates and
for durations for the release of the Pictures and in the
theaters approved by DW, subject to customary force majeure
events (provided, in the event of a delay caused by a force
majeure event, DW shall be permitted to distribute, or cause
the distribution of, such Picture(s) as provided in Paragraph
2.c. above if DW reasonably determines that UIP will not be
available to release the Pictures as and when required by DW)
and provided further that such alleged event or
non-performance is attributable primarily to UIP's actions or
failures to act. Notwithstanding anything to the contrary in
the Master Agreement or this Exhibit A, a termination under
this clause (c) shall not be deemed a termination for cause of
this Exhibit A, Exhibit B or the LLC Agreement. UIP's failure
to meet plan shall not be attributable primarily to its
actions or failures to act if DW's plan is broadly
inconsistent with past plans for comparable motion pictures,
for example, requiring an "art film" to be released on a
majority of the screens in a particular country.
d. Upon the effective termination date of this Exhibit A, DW
shall have the right (but not the obligation) to order the
immediate cessation of any or all distribution of the Pictures
and the immediate return of any or all prints and related
materials, or, at DW's election, to require Universal to
continue distribution (subject to continuation of Distribution
Fees on such Picture[s]) of some or all Pictures previously
delivered and either in release or ready for release as and
for the duration of the initial period (as determined by DW in
its absolute discretion) of theatrical distribution, and in
those parts of the Territory designated by DW in its absolute
discretion (though DW shall not be obligated to deliver any
additional Pictures subsequent to termination of this
agreement); provided that Universal and UIP shall have the
right to honor all then-existing DW-approved contractual
commitments in connection with the exercise of rights granted
hereunder. Universal will remain obligated to make all
accountings and payments set forth herein with respect to
motion pictures distributed by it (or UIP). On expiration or
other effective termination of the Term, Universal will
(subject to Paragraph XII.2 of the Master Agreement and the
reasonable approval of Universal's counsel) immediately
execute such quitclaims and other documents as DW's counsel
deems necessary or advisable to evidence the termination of
all Universal's rights with respect to some or all of the
Pictures. Any disputes with respect to such quitclaim and
other documents shall be resolved as set forth in the Master
Agreement. In the event no timely objection is made or such
objection is resolved, and Universal fails to execute
immediately any document useful or necessary to effectuate the
confirmation or implementation of the provisions hereof, DW
shall be irrevocably appointed as Universal's
9
attorney-in-fact for such purpose. It is acknowledged said
appointment power is coupled with an interest.
e. Not later than the effective termination date of the term of
this Exhibit A (or of Exhibit B), DW shall make a special
termination fee payment to Universal (the "Special Termination
Fee"), which shall be due and payable in the event of a
termination for any reason (i) prior to October 31, 2007, in
the amount of ***, (ii) on and after October 31, 2007 and
prior to April 30, 2010, in the amount of *** minus an amount
equal to *** times the number of full calendar months that
have elapsed since October 31, 2007 (e.g., if either agreement
terminated at April 30, 2008 the amount would be ***), and
(iii) on and after April 30, 2010, ***. The Parties
acknowledge and agree that the Special Termination Fee is
reasonable in light of the circumstances at the time it was
negotiated and agreed to, has been negotiated and agreed to as
part of the Parties' mutual expectation that Universal would
continue as DreamWorks' theatrical distributor and home video
fulfillment service provider through at least April 30, 2010,
and that in light of such expectation, Universal has extended
certain terms to DW in the Agreement, including without
limitation the Advance reduction in Paragraph VIII.3., and
Universal has made or will make certain additional investments
in reliance on that expectation. In the event that, for any
reason, the term of Exhibit A and Exhibit B or of either of
them terminates prior to April 30, 2010, the losses and other
adverse consequences to Universal would be considerable and
difficult to quantify, Universal's ability to recoup its
investments made in expectation of that term would be
adversely affected, and the concessions made by Universal in
this Agreement would be inequitable. A termination even for
the purported breach or other action or inaction of Universal
would carry similar consequences, including significant costs
and foregone opportunities, the costs of which the parties
agree Universal should not bear and which would be difficult
to calculate. In all circumstances where either Exhibit A or
Exhibit B terminates prior to April 10, 2010, the Special
Termination Fee is a bargained for alternative. For purposes
of clarity, only one Special Termination Fee in the relevant
amount set forth above is due on the termination of Exhibit A
and/or Exhibit B prior to April 30, 2010 (e.g., if a Special
Termination Fee has been paid pursuant to Exhibit B, no
Special Termination Fee shall be payable on the simultaneous
or subsequent termination of this Exhibit A). In the event of
a breach by Universal which is the basis for a termination of
this Exhibit by DW, the payment to Universal pursuant to this
Paragraph 10.e shall be without prejudice to DW's right to
recover damages from Universal in accordance with this Exhibit
A.
f. The parties acknowledge that if and to the extent DW
terminates for cause Universal's services under Paragraph
10.b., Universal shall not be entitled to any Distribution
Fees thereafter with respect to any terminated
10
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
territory(ies) and/or Pictures (i.e., if DW terminates
Universal's services hereunder with respect to a particular
territory(ies) and/or Picture(s), Universal's Distribution Fee
will be calculated on Receipts attributable to other than such
terminated territory(ies) and/or Picture(s)).
g. At the expiration or effective termination of the Term, DW
shall advise UIP to either return or destroy all materials in
its possession in connection with the Pictures, as DW shall
instruct. Such action shall be at DW's expense in the event of
expiration of the Term or termination for cause by Universal,
and at Universal's expense in the event of termination for
cause by DW.
3. Paragraph 5.b. of Exhibit A is deleted and amended to read in
full as follows, and all references in Exhibit A to Paragraph 5.b. shall mean
such Paragraph 5.b. as amended:
a. AMOUNT PAYABLE TO DW: Subject to Paragraph 5.c.iii. below,
Universal shall pay or cause to be paid to DW or, at DW's
election, to a DW-related entity, an amount equal to 100% of
the aggregate of the Gross Receipts, less the following in the
order listed:
(i) Distribution Fees to be retained by Universal of an amount
equal to:
(1) *** of 100% of Gross Receipts paid to, or credited
against uncontested outstanding sums owed to Universal
by, DW until Gross Receipts equal ***;
(2) *** of 100% of Gross Receipts paid to, or credited
against uncontested outstanding sums owed to Universal
by, DW for to DW from the point that Gross Receipts
exceed *** until Gross Receipts equal ***;
(3) *** of 100% of Gross Receipts paid to, or credited
against uncontested outstanding sums owed to Universal
by, DW for to DW from the point that Gross Receipts
exceed ***;
(ii) Notwithstanding the foregoing clause b.(i), if a Payment
Default (as defined in the Master Agreement) exists, for the
period of time commencing 15 days after the date the relevant
payment is due to the date such Payment Default is paid in
full, each distribution fee percentage then in effect shall be
increased by ***. This distribution fee adjustment shall apply
separately to each Payment Default (i.e., in the event of two
different concurrent Payment Defaults, each distribution fee
percentage would increase by ***, provided that the maximum
increase hereunder shall be *** and shall decrease on the date
the applicable Payment Default is paid in
11
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
full (e.g., if there are two Payment Defaults and one is
cured, on the date of such cure one *** distribution fee
increase shall terminate).
(iii) All "Distribution Expenses" (as defined below) accrued by
Universal on behalf of DW calculated in accordance with
Paragraph 5.d. below, subject to adjustment for Distribution
Expenses accrued but not paid, in the same fashion as for UIP
Owners.
4. For purposes of clarity, the Parties agree that the election DW
has under Paragraph l.c. of Schedule A-TC of Exhibit A to exclude either Japan
or the "German Territory" permits DW to exclude one or the other, but not both
concurrently, from the "Territory" as defined in Exhibit A. The Parties hereby
amend Paragraph 1.c. of Schedule A-TC to provide that after the first such
election, no such election to exclude Japan or the German Territory shall be
effective prior to the 180th day after the delivery by DW to Universal of notice
of such election (and that no such election shall be effective unless and until
the prior election is no longer in effect as to Pictures not previously released
for theatrical exhibition on or before the date of termination of the
agreement(s) governing the prior election).
5. A new Paragraph 6 shall be added to Schedule A-TC, prior to the
last (unnumbered) paragraph of Schedule A-TC, to read in full as follows:
6. Staffing. Distributor shall hire or cause UIP to hire two new
fully dedicated employees, one as a director level media planner and one as a
publicity manager with start dates on or before April 1, 2004 (provided, if such
hires are by Distributor, such persons shall have qualifications substantially
comparable to what "director level" and "manager" level employees in such
positions at UIP would have). UIP shall have the option to designate existing
UIP employees for the positions, subject to Distributor's mutual approval.
Notwithstanding the foregoing, DW and Distributor will work together prior to
April 1, 2004 on an interim staffing plan to be implemented initially for a
trial period. If the parties agree on an interim staffing plan subject to a
trial period, such interim staffing plan shall be implemented by April 1, 2004.
If, however, after the implementation of any such interim plan DW determines
that the proposal is not effectively staffing the DW Pictures business, in whole
or in part, DW shall notify Distributor in writing of the positions affected and
which requirements of the first sentence of this Paragraph 6 shall be
instituted. If, 30 days after such notice, the parties have not come to an
agreement that the issues have been otherwise resolved, Universal shall be
required to implement the staffing contemplated by the first sentence of this
Paragraph 6 as expeditiously as is practicable, provided Distributor and UIP
shall mutually approve the selection and hiring of the foregoing employees. If
Distributor and UIP mutually determine that any of the foregoing employees
referenced in this Paragraph 6 are not needed to service DW Pictures, either in
whole or in part, such employee capacity can be used by Universal. In addition,
commencing April 1, 2005, Universal shall be entitled to review, at the
beginning of each quarter, on a rolling 12-month basis, whether the augmented
staff levels set forth above are required given the historical and expected DW
revenues, it being acknowledged and agreed by the parties that if the Gross
Receipts collected by Universal have not increased above 2003 levels, or (if
they have risen)
12
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
have reduced to 2003 levels, such employee service levels are not required to be
maintained. None of these new employees or staffing changes will change the
allocation of duties as between DreamWorks and Universal set forth in this
Exhibit A except as expressly set forth above.
V. HOME VIDEO FULFILLMENT SERVICES
Exhibit B shall refer to the agreement dated as of June 14, 1995
between DW and Universal City Studios, Inc. (as Fulfillment Services Provider
("FSP")) regarding FSP rendering Fulfillment Services to DW in connection with
DW's distribution of Pictures throughout the world during the Term (as such
capitalized terms are defined in Exhibit B, as amended hereby), as more
specifically set forth therein, as amended as of the Restatement Effective Date
by this Master Agreement, Amendment No. 2 and the amended and supplemental terms
and conditions attached hereto as Schedule B-TC (which was effective prior to
the date of the 2003 amendment and restatement of the Master Agreement and is
continued in effect by this amended and restated Master Agreement), which is by
this reference incorporated into Exhibit B. Other than as expressly amended in
this Master Agreement, Exhibit B (including Schedule B-TC) remains in full force
and effect as of the Restatement Effective Date.
1. All references to "MCA" in Exhibit B shall mean Universal
Studios, Inc. and all references to MCA shall be to Universal Studios, Inc. The
parties acknowledge and agree that Universal's international fulfillment
services shall be provided through Universal Pictures International Ltd.
("UPI"). The Parties acknowledge and agree that Universal has assigned its
obligations and rights under the Master Agreement to VUE and services under the
Master Agreement and Exhibit B may be provided by VUE (or its successor). The
parties also acknowledge and agree (including, without limitation, under
Paragraph 7.B(ii)(a) of Exhibit B) that VUE may provide the fulfillment services
required to be provided by it under Exhibit B (i) domestically, directly or
through any wholly-owned subsidiary of VUE, provided that the subsidiary
distributes or provides fulfillment services for VUE's Videograms in the
Domestic Territory, and (ii) otherwise through UPI, provided UPI distributes or
provides fulfillment services for VUE's Videograms in the Foreign Territory. In
each of clauses (i) and (ii) above, "VUE's Videograms" shall mean Videograms of
theatrical motion pictures produced and released under the "Universal Studios"
label, to the extent distributed by VUE or one of its affiliates (it being
acknowledged and agreed that nothing in this Exhibit B requires Universal or any
of its affiliates to retain any distribution rights in any territory or any
media to any theatrical motion picture), and provided, further, that if more
than one VUE entity distributes "Universal Studios" theatrical motion pictures,
DW Videograms shall be distributed by the primary VUE distribution entity for
"Universal Studios".
2. The definitions of "Domestic Territory" and the "Foreign
Territory" shall be amended to read as set forth in Schedule B-TC. For purposes
of clarity, the Parties agree that the election DW has under Paragraph 1.b.iii.
of Schedule B-TC of Exhibit B to exclude either Japan or the "German Territory"
permits DW to exclude one or the other, but not both concurrently, from the
"Foreign Territory" as defined in Exhibit B. The Parties hereby amend Paragraph
l.b.iii. of Schedule B-TC to provide that after the first such election, no such
election to exclude Japan or the German Territory shall be effective prior to
the 180th day after the delivery by DW to Universal of notice of such election
(and that no such election shall be
13
effective unless and until the prior election is no longer in effect as to DW
Videograms not previously distributed by DW in the applicable territory subject
to the agreement(s) governing the prior election).
3. Paragraph 7 of Exhibit B is deleted and amended to read in full
as follows, and all references in Exhibit B to Paragraph 7 shall mean such
Paragraph 7 as amended:
The introduction to Paragraph 7 shall read: In all events under this Paragraph
7, and notwithstanding any provision of this Agreement to the contrary, no
termination of either Exhibit A or Exhibit B shall be effective unless and until
(i) all Advance Amounts, Animation Advance Amounts, Additional Amounts and
Animation Additional Amounts have been paid in full, (ii) the Special
Termination Fee has been paid in full, and (iii) the Preferred together with all
accrued and unpaid cash and non-cash distributions thereon is redeemed and the
redemption price has been paid in full in cash in accordance with Section
8.01(a) of the LLC Agreement.
a. Termination Without Cause.
(i) [Purposefully left blank]
(ii) DW shall have the right to terminate this Exhibit B
and/or Exhibit A (but not Exhibit C and/or Exhibit D),
as DW determines in its sole discretion, subject to the
further provisions of this provision on a VUE Change of
Control. DW may not exercise its rights under this
Paragraph 7.a.(ii) at any time prior to the earlier of
October 8, 2004 and the NBC Closing (as defined in the
Master Agreement). After the earlier of October 8, 2004
and the NBC Closing, DW may exercise its rights to
terminate during the 90 days following the first public
announcement after such date of Vivendi Universal S.A.'s
(or, if the NBC Closing has occurred, General Electric
Company's ("GE")) intention to enter into a definitive
agreement with a specific named third party for a
transaction that would effect a "VUE Change Of Control"
(as hereafter defined) under clauses (A) or (C) of such
definition, and (B) at any time during the 90 days
following a VUE Change of Control under clause (B) of
such definition. In either case, such notice of
termination shall be effective as to the Exhibit(s)
being terminated 180 days after the receipt of such
notice subject to the requirements of the Master
Agreement, including without limitation Paragraph VIII.8
thereof, and to Section 8.01(a) of the LLC Agreement. No
termination by DW shall be effective under this clause
a.(ii) unless and until DW shall have redeemed all of
the Preferred together with all accrued and unpaid cash
and non-cash distributions thereon, in cash, in
accordance with Section 8.01(a) of the LLC Agreement. A
"VUE Change of Control" means (A) the acquisition,
directly or indirectly, of (i) more than 50% of the
voting power or aggregate equity value represented by
14
the issued and outstanding ordinary equity interests (or
preferred equity interests carrying voting power or
consent rights substantially similar to ordinary equity
interests) or (ii) actual managerial control (whether
through the appointment, or ability to veto the
appointment, of key executive officers or at least a
majority of the members of the board of directors or
equivalent governing body, or otherwise) of VUE or its
motion picture studio division, whether pursuant to
merger, consolidation, acquisition, share exchange,
issuances of equity securities or otherwise, by any
person or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934, as
amended), in each case, other than by Vivendi Universal
S.A. and/or any of its majority owned subsidiaries, or
GE and/or any of its majority owned subsidiaries, (B)
the filing of a registration statement for an initial
public offering of 20% or more of the voting power or
aggregate equity value represented by the issued and
outstanding ordinary equity interests (or preferred
equity interests carrying voting power or consent rights
substantially similar to ordinary equity interests) of
VUE (or any corporation into which VUE may be
reconstituted or the substantial asset of which is
equity interests in VUE), as a result of which Vivendi
Universal S.A. (and/or its majority owned subsidiaries)
or GE (and/or its majority owned subsidiaries) is not
expected to retain actual managerial control (whether
through the ability to elect at least a majority of the
members of the board of directors or equivalent
governing body or otherwise) of VUE or its motion
picture studio division, or (C) the sale, transfer,
contribution or other disposition, directly or
indirectly, of (i) all or substantially all of the
property, business or assets of VUE or (ii) 50% or more
of the property, business or assets of the motion
picture studio division of VUE, to any person or group
(as defined above) (excluding internal reorganizations
and transactions effected to reconstitute VUE as a
corporation, so long as the successor assumes the
obligations of VUE under the Master Agreement),
excluding in each case (y) the NBC Closing, and (z)
after the NBC Closing, other sales, transfers,
contributions or other dispositions to GE and/or any of
its majority owned subsidiaries.
b. Termination With Cause.
(i) This Exhibit B (and Exhibit A, if DW determines in its
sole discretion) may be terminated by the terminating
party, solely in its entirety without prejudice to any
other rights or remedies available to it, upon the
happening of any of the following circumstances, and
subject to the Master Agreement and Section 8.01(a) of
the LLC Agreement:
15
(1) If the other party shall fail to make any payment
when due hereunder, provided that if the parties
are in dispute over whether a payment is due, that
portion of the payment in dispute shall not be
deemed due unless and until the parties mutually
agree or five business days after a final binding
determination of the issue is made and noticed to
the parties (provided that the non-terminating
party shall have a period of 30 days, following
written notice thereof to cure a breach) and
provided further that an election to terminate
under this subparagraph b.(i)(1) must be made, if
at all within 90 days of the date the payment was
due and not paid; or
(2) If the non-terminating party shall make any
assignment for the benefit of creditors, file a
petition for bankruptcy, be judged bankrupt or
become insolvent,
(ii) This Exhibit B (and Exhibit A, if DW determines in its
sole discretion) may be terminated by DW, solely in its
entirety, without prejudice to any other rights or
remedies available to it, under any of the following
circumstances:
(1) If Universal ceases to be the distributor in the
Domestic Territory for its Videograms and/or if
UPI ceases to be the primary distributor of
Videograms for Universal in the Foreign Territory;
or
(iii) If more than 3 times during any 12-month period during
the Term or an aggregate of 7 times during any
consecutive five year period commencing after June 20,
2001 (provided that DW shall have given Universal
reasonably prompt written notice (but in no event to
exceed 90 days after the date DW knew or reasonably
should have known) of each such alleged breach and/or
non-performance and that Universal shall have failed to
cure the same within 5 days, or such shorter period as
reasonably required by DW, following DW's written notice
thereof to cure a breach) Universal fails to release the
DW Videograms pursuant to plan on dates and for
durations for the release of the DW Videograms approved
by DW and with the content and materials provided by DW,
except only if and to the extent that any changes are
required to be made on an immediate basis (i.e., during
which Universal does not have sufficient time to obtain
DW's approval) due to censorship requirements and
subject to customary force majeure events (provided, in
the event of a delay caused by a force majeure event, DW
shall be permitted to render fulfillment services, or
cause fulfillment services to be rendered, for such DW
Videogram(s) as
16
provided in Paragraph 2.C. above if DW reasonably
determines that UPI will not be available to release the
DW Videograms as and when required by DW) and provided
further that such alleged event or non-performance (y)
is attributable primarily to UPI's actions or failures
to act, and is not directly attributable to any of DW's
actions or failures to act and (z) affects portions of
either the Domestic Territory representing not less than
*** of all Domestic Territory Receipts for all DW
Videograms for which Universal provided fulfillment
services in the preceding year, or of portions of the
Foreign Territory (not less than two countries)
representing in the aggregate not less than *** of all
Foreign Territory Receipts for all DW Videograms for
which UPI provided fulfillment services in the preceding
year. UPI's failure to meet plan shall not be
attributable primarily to its actions or failures to act
if DW's plan is broadly inconsistent with past plans for
comparable Videograms, for example, requiring an "art
film" to be broadly marketed and placed in a majority of
retail video outlets in a particular country.
(iv) Notwithstanding anything in this Exhibit B or the Master
Agreement to the contrary, the only events permitting a
termination of this Exhibit B for cause shall be those
expressly set forth in this Paragraph 7.b.
c. Other Terminations.
(i) This Exhibit B (and Exhibit A, if DW determines in its
sole discretion) may be terminated by DW (a) in any
country(ies) or Region(s) where the applicable event or
nonperformance has occurred (and either entirely in such
country[ies] or Region[s]), or (b) only with respect to
any DW Videogram(s) affected by such event or
non-performance in such country[ies] or Region[s]);
and/or (c) in the entire Territory with respect to a DW
Videogram(s) materially affected by such event or
non-performance, all as the terminating party determines
in its sole discretion without prejudice to any other
rights or remedies available to it, upon the happening
of any of the following circumstances: If more than 3
times during any 12-month period during the Term or an
aggregate of 7 times during any consecutive five year
period commencing after June 20, 2001 (provided that DW
shall have given Universal reasonably prompt written
notice (but in no event to exceed 90 days later) of each
such alleged breach and/or non-performance and that
Universal shall have failed to cure the same within 5
days, or such shorter period as reasonably required by
DW, following DW's written notice thereof to cure a
breach) Universal fails to release the DW Videograms
17
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
pursuant to the plan on dates and for durations for the
release of the DW Videograms approved by DW and with the
content and materials provided by DW, except only if and
to the extent that any changes are required to be made
on an immediate basis (i.e., during which Universal does
not have sufficient time to obtain DW's approval) due to
censorship requirements and subject to customary force
majeure events (provided, in the event of a delay caused
by a force majeure event, DW shall be permitted to
render fulfillment services, or cause fulfillment
services to be rendered, for such DW Videogram(s) as
provided in Paragraph 2.C. above if DW reasonably
determines that UPI will not be available to release the
DW Videograms as and when required by DW) and provided
further that such alleged event or non-performance is
attributable primarily to UPI's actions or failures to
act and not directly attributable to DW's actions or
failures to act. UPI's failure to meet plan shall not be
attributable primarily to its actions or failures to act
if DW's plan is broadly inconsistent with past plans for
comparable Videograms, for example, requiring an "art
film" to be broadly marketed and placed in a majority of
retail video outlets in a particular country.
(ii) DW may terminate this Exhibit B and/or Exhibit A if DW,
in its sole discretion, determines that Universal and/or
UPI rendering the fulfillment services will be more
expensive with respect to out-of-pocket costs (but not
necessarily with respect to Service Fees) to DW than if
DW were to render such services itself or through an
affiliated entity provided that no such termination
shall be effective unless all of the Preferred and all
accrued and unpaid cash and non-cash distributions
thereon shall have been redeemed in cash in accordance
with Section 8.01(a) of the LLC Agreement.
(iii) If DW believes that Universal has materially changed the
manner in which it renders fulfillment services to DW or
substantially alters the manner in which it distributes
its Videograms, and that such changes have or reasonably
would be expected to have a material adverse impact on
DW sales, costs and/or collection of revenues (any such
event, a "Material Change"), then the following
procedures shall apply. DW shall notify Universal in
writing of any such Material Change not later than 60
days after the date on which DW knew or should have
known of such Material Change and the nature of the
material adverse impact, in sufficient detail and with
reasonable support of the nature and extent of the
impact. The parties shall promptly meet to discuss a
remedy for such impact and Universal shall have 30 days
to suggest and begin implementation of a cure therefor.
If the parties disagree about whether there has been a
Material Change or
18
whether an adequate cure has been suggested and/or
effectuated, the matter shall be submitted to expedited
binding alternative dispute resolution following the
procedures set forth in Paragraph XII.13 of the Master
Agreement, but the timeframes for such proceeding shall
be compressed so that the dispute resolution is
concluded within 45 days. If it is finally determined
(including through appeal, if applicable) through the
dispute resolution process that (i) there is an impact
as the result of a Material Change that reduces DW's net
revenues by *** in the territory in question, or by ***,
whichever is less, and (ii) that the material adverse
impact to DW has not and cannot be remedied, DW may
terminate as to the affected country within a territory,
region, or if the entire domestic or international
territory is affected, then DW may terminate Exhibit B
in its entirety and, if it terminates Exhibit B, may
also terminate Exhibit A provided that it must make such
election(s) within 10 business days of such
determination. If it is determined (by mutual agreement
of the Parties or through the dispute resolution
process) that the material adverse impact can be
effectively addressed by a cure Universal can effect, DW
shall not have the right to terminate Exhibit B in its
entirety (or the right to terminate Exhibit A) under
this subparagraph (iii) unless Universal fails promptly
to commence and implement such cure within 30 days of
the mutual agreement or final determination that through
the dispute resolution process provided that DW must
make such election within 10 business days of the date
on which DW is or should have become aware of such
failure. If the General Counsel of Universal agrees in
writing that a Material Change has occurred and that
Universal cannot or will not cure such Material Change,
DW may terminate within 10 business days after receiving
such written notice. The Parties have agreed that the
changes in Brazil from the CIC joint venture to UPI was
not an event that allows for termination of Exhibit B.
DW may not after notice of its election to terminate
Exhibit B and prior to redemption in full of the
Preferred in accordance with Section 8.01(a) of the LLC
Agreement enter into any agreement which would have the
effect of prohibiting or restricting its redemption of
all of the Preferred in cash, together with all accrued
and unpaid cash and non-cash distributions.
(iv) Notwithstanding anything to the contrary in the Master
Agreement or this Exhibit B, a termination under this
clause c. shall not be deemed a termination for cause of
this Exhibit B, Exhibit A or of the LLC Agreement.
d. Termination Effects.
19
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
(i) The parties acknowledge that if and to the extent DW
terminates for cause Universal's fulfillment services
hereunder, subject to the next paragraph below,
Universal shall not be entitled to any Service Fee
thereafter with respect to any terminated territory(ies)
and/or DW Videograms (i.e., if DW terminates Universal's
fulfillment services hereunder with respect to a
particular territory(ies) and/or DW Videogram(s),
Universal's Service Fee will be calculated solely on
Receipts attributable to other than such terminated
territory[ies] and/or DW Videogram[s]).
(ii) Upon the effective termination or expiration of
Universal's right to provide fulfillment services (in
whole or in part under this Exhibit B), DW shall have
the option, at its sole discretion, to elect to (i)
require Universal to continue to render fulfillment
services for any or all of the DW Videograms (subject to
continuation of Service Fees on such DW Videogram[s]) as
and for the duration of the initial period (as
determined by DW in its absolute discretion but not to
exceed 180 calendar days following such expiration or
effective termination date) of Videogram distribution,
and during which Universal has committed to render
fulfillment services as provided in this Exhibit B and
in those parts of the Territory, designated by DW in its
absolute discretion, (ii) permit Universal to sell off
its then-existing inventory of DW Videograms upon the
same terms and conditions as provided herein for a
period not to exceed 180 calendar days following the
date of expiration or effective termination hereof,
(iii) require Universal to return its then-existing
inventory of DW Videograms and all related materials to
DW (such return to be at DW's cost and expense in the
event of expiration, termination without cause by DW or
termination for cause by Universal, or at Universal's
cost and expense in the event of termination without
cause by Universal or termination for cause by DW), (iv)
immediately destroy or demagnetize Universal's
then-existing inventory of DW Videograms, at Universal's
sole cost and expense, in which event Universal shall
promptly (but in no event more than 10 business days
following destruction or demagnetization) xxxxxxx XX
with certificates of destruction or proof of
demagnetization, as the case may be, or (v) any
combination of the above. In addition, Universal shall
promptly provide DW with a list of all outstanding
orders for the DW Videograms. On expiration or other
effective termination of the Term, subject to Paragraph
XII.2 of the Master Agreement, Universal will
immediately execute such quitclaims and other documents
as DW's counsel reasonably deems necessary or advisable
to evidence the termination of all Universal's rights
with respect to some or all of the DW Videograms. Any
disputes with respect thereto shall be resolved as set
forth in the Master
20
Agreement. In the event no timely objection is made or
such objection is resolved, and if Universal fails to
execute immediately any document useful or necessary to
effectuate the confirmation or implementation of the
provisions hereof, DW shall be irrevocably appointed as
Universal's attorney-in-fact for such purpose. It is
acknowledged that said appointment power is coupled with
an interest.
e. Not later than the effective termination date of the term of
this Exhibit B (or of Exhibit A), DW shall make a special
termination fee payment to Universal (the "Special Termination
Fee"), which shall be due and payable in the event of a
termination for any reason (i) prior to October 31, 2007, in
the amount of ***, (ii) on and after October 31, 2007 and
prior to April 30, 2010, in the amount of *** minus an amount
equal to *** times the number of full calendar months that
have elapsed since October 31, 2007 ***, and (iii) on and
after April 30, 2010, ***. The Parties acknowledge and agree
that the Special Termination Fee is reasonable in light of the
circumstances at the time it was negotiated and agreed to, has
been negotiated and agreed to as part of the Parties' mutual
expectation that Universal would continue as DreamWorks'
theatrical distributor and home video fulfillment service
provider through at least April 30, 2010, and that in light of
such expectation, Universal has extended certain terms to DW
in the Agreement, including without limitation the Advance
reduction in Paragraph VIII.3., and Universal has made or will
make certain additional investments in reliance on that
expectation. In the event that, for any reason, the term of
Exhibit A and Exhibit B or of either of them terminates prior
to April 30, 2010, the losses and other adverse consequences
to Universal would be considerable and difficult to quantify,
Universal's ability to recoup its investments made in
expectation of that term would be adversely affected, and the
concessions made by Universal in this Agreement would be
inequitable. A termination even for the purported breach or
other action or inaction of Universal would carry similar
consequences, including significant costs and foregone
opportunities, the costs of which the parties agree Universal
should not bear and which would be difficult to calculate. In
all circumstances where either Exhibit A or Exhibit B
terminates prior to April 10, 2010, the Special Termination
Fee is a bargained for alternative. For purposes of clarity,
only one Special Termination Fee in the relevant amount set
forth above is due on the termination of Exhibit A and/or
Exhibit B prior to April 30, 2010 (e.g., if a Special
Termination Fee has been paid pursuant to Exhibit A, no
Special Termination Fee shall be payable on the simultaneous
or subsequent termination of this Exhibit B). In the event of
a breach by Universal which is the basis for a termination of
this Exhibit by DW, the payment to Universal pursuant to this
Paragraph 7.e shall be without prejudice to DW's right to
recover damages from Universal in accordance with this Exhibit
B.
21
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
4. Clause (ii) in Paragraph 8.A. of Exhibit B is deleted and amended
to read in full as follows, and all references to such clause (ii) in Exhibit B
shall mean such clause (ii) as amended: "(ii) the services provided by any
Subdistributor will be in the aggregate substantially equivalent in quantity,
level and priorities to the industry standard for subdistributors providing
substantially similar services."
5. Paragraph 2 of Schedule II of Exhibit B is deleted and amended to
read in full as follows, and all references to such Paragraph 2 shall mean such
Paragraph 2 as amended:
2. DOMESTIC SERVICE FEES.
DW shall pay Universal the following (in the order
listed) domestic service fees ("Domestic Service Fee") of an amount equal to:
a. *** of 100% of Domestic Receipts paid to, or credited against
uncontested outstanding sums owed to Universal, by DW in any
contract year until Domestic Receipts equal ***;
b. *** of 100% of Domestic Receipts paid to, or credited against
uncontested outstanding sums owed to Universal, by DW in any
contract year from the point that Domestic Receipts exceed ***
until Domestic Receipts equal ***; and
c. *** of 100% of Domestic Receipts paid to, or credited against
uncontested outstanding sums owed to Universal, by DW in any
contract year from the point that Domestic Receipts exceed
***.
d. In no event shall the Domestic Service Fee be less favorable
to DW than the service fees paid to or retained by Universal
and/or UPI in connection with Universal's (or UPI's) overall
domestic fulfillment services in connection with Videograms
produced by any party other than an affiliate of Universal, it
being agreed that for the purpose of determining whether
Universal and UPI have complied with this "favored nations"
assurance, Universal's or UPI's receipt of a service fee plus
any other consideration (in any form, e.g. non-monetary
consideration such as other rights granted to Universal or UPI
at the time) shall be taken into account, so that the
determination is an "apples-to-apples" comparison, as much as
possible and, in any event, one-picture deals shall be
excluded.
e. Notwithstanding the foregoing, if a Payment Default (as
defined in the Master Agreement) exists, for the period of
time commencing 15 days after the date the relevant payment is
due to the date such Payment Default is paid in full, each
Domestic Service Fee percentage then in effect shall be
increased by ***. This Domestic Service Fee adjustment shall
apply separately to each Payment Default (i.e., in the event
of two different Payment Defaults, each Domestic Service Fee
percentage would increase by ***) provided that the maximum
increase hereunder shall be *** and
22
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
shall decrease on the date the applicable Payment Default is
paid in full (e.g., if there are two Payment Defaults and one
is cured, on the date of such cure one *** distribution fee
increase shall terminate).
Paragraph 5 of Schedule II of Exhibit B is deleted and amended to read in full
as follows, and all references to such Paragraph 5 shall mean such Paragraph 5
as amended:
5. FOREIGN SERVICE FEES.
DW shall pay Universal the following (in the order
listed) foreign service fees ("Foreign Service Fee") of an amount equal to:
a. *** of 100% of Foreign Receipts paid to, or credited against
uncontested outstanding sums owed by, DW in any contract year
until Foreign Receipts equal ***;
b. *** of 100% of Foreign Receipts paid to, or credited against
uncontested outstanding sums owed by, DW in any contract year
from the point that Foreign Receipts exceed *** until Foreign
Receipts equal ***; and
c. *** of 100% of Foreign Receipts paid to, or credited against
uncontested outstanding sums owed by, DW in any contract year
from the point that Foreign Receipts exceed ***.
d. In no event shall the Foreign Service Fee be less favorable to
DW than the service fees paid to or retained by Universal
and/or UPI in connection with Universal's (or UPI's) overall
foreign fulfillment services in connection with Videograms
produced by any party other than a Universal affiliate, it
being agreed that for the purpose of determining whether
Universal and UPI have complied with this "favored nations"
assurance, Universal's or UPI's receipt of a service fee plus
any other consideration (in any form, e.g. non-monetary
consideration such as other rights granted to Universal or UPI
at the time) shall be taken into account, so that the
determination is an "apples-to-apples" comparison, as much as
possible and in any event, one-picture deals shall be
excluded.
e. Notwithstanding the foregoing, if a Payment Default exists,
for the period of time commencing 15 days after the date the
relevant payment is due to the date such Payment Default is
paid in full, each Foreign Service Fee percentage then in
effect shall be increased by ***. This Foreign Service Fee
adjustment shall apply separately to each Payment Default
(i.e., in the event of two different Payment Defaults, each
Foreign Service Fee percentage would increase by ***) provided
that the maximum increase hereunder shall be *** and shall
decrease on the date the applicable Payment Default is paid in
full (e.g., if there are two Payment Defaults and one is
cured, on the date of such cure one *** distribution fee
increase shall terminate).
23
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
6. Employees.
a. Paragraph 1.E. of Exhibit FS to Exhibit B to the Master
Agreement is deleted and amended to read in full as follows,
and all references to such Paragraph 1.E. shall mean such
Paragraph 1.E. as amended:
E. Staffing - Commitment to adequately staff with dedicated
and shared personnel to effectively service the size and scope
of DW's Videogram business. Fully dedicated or primarily
dedicated staffing shall consist of those positions set forth
on Schedule 1.E attached hereto, subject to the remainder of
this Paragraph 1.E. and except as mutually agreed otherwise.
Notwithstanding the foregoing, Universal and DW agree that
domestic Product Development, worldwide Promotions,
Publicity/Special Events, Media Buys, and Retail Marketing,
and international Research shall be performed by DW. Universal
shall remit to DW the amount of *** per year (pro rated for
partial years), as a deduction from Universal's expenses, ***
on a quarterly basis until March 31, 2004. On and after April
1, 2004, for so long as DW employs persons to fill the two
positions identified on Schedule 1.E. as the head of domestic
marketing (SVP Marketing/Sales) and the head of domestic sales
positions (Sales VP), Universal shall remit to DW the amount
of *** per year (pro rated for partial years), and up to ***
per year (which shall reflect the actual market rate for such
two hires)(pro rated for partial years and which shall be
adjusted for inflation on a yearly basis), as a deduction from
Universal's expenses, which amounts shall be payable *** per
quarter.
"Primarily dedicated" employees shall mean employees who shall
in any situation where they do not have adequate time for all
their duties, place all duties for DW prior to any other
duties.
Schedule 1.E. contemplates that certain changes in staffing
will occur; however, the parties have agreed that certain of
such changes will be subject to a "trial period." For each
change that is subject to a trial period, the parties have
agreed that Universal's proposals of October 2003 regarding
headcount and operating structure shall be implemented
initially rather than the changes for that position reflected
on Schedule 1.E. If, however, after the implementation of the
Universal proposal DW determines that the proposal is not
effectively staffing the DW Videogram business, in whole or in
part, DW shall notify Universal in writing of the positions
affected and the portion(s) of Schedule 1.E. to be instituted.
If, 30 days after such notice, the parties have not come to an
agreement that the issues have been otherwise resolved,
Universal shall be required to implement the portions of
Schedule 1.E. specified in the notice as expeditiously as is
practicable.
24
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
If any of the foregoing employees referenced in this Paragraph
1.E. are not needed to service DW Videograms, either in whole
or in part, such employee capacity can be used by Universal.
In addition, commencing April 1, 2005, Universal shall be
entitled to review, at the beginning of each quarter, on a
rolling 12-month basis, whether the augmented staff levels set
forth above (including in Schedule 1.E.) are required given
the historical and expected DW revenues, it being acknowledged
and agreed by the parties that if Domestic Receipts and
Foreign Receipts collected by Universal have not increased
above 2003 levels, or (if they have risen) have reduced to
2003 levels, such employee service levels are not required to
be maintained, it being understood and agreed that a decrease
only in one area (e.g. Domestic Receipts) shall be considered
independently from the other area and can result in a decrease
in staffing in only that area. None of these new employees or
staffing changes will change the allocation of duties as
between DW and Universal set forth in this Agreement except as
expressly set forth above (including Schedule 1.E.).
VI. AMBLIN PROIECTS
Exhibit C, which is by this reference incorporated herein, shall
refer to the agreement dated as of June 14, 1995 between DW and Universal
regarding the disposition of certain assets of Amblin' Entertainment and related
and miscellaneous issues, as more specifically set forth therein.
VII. THEME PARK RIGHTS
Exhibit D, which is by this reference incorporated herein, shall
refer to the letter agreement dated as of July 31, 1995 between DW and Universal
regarding the utilization of certain DW projects as the basis for theme park and
other attractions, as more specifically set forth therein. Notwithstanding the
foregoing or anything in this Master Agreement to the contrary, Paragraph 9 of
Exhibit D of the Master Agreement shall govern the assignment of such Exhibit D
agreement.
VIII. ADVANCE
1. Additional Definitions.
"Advance Amount" at any time of determination, shall be equal to the
Advance, plus all Universal Adjustments, less all DW Adjustments and less the
advance adjustment effected under Paragraph VIII.3, if and when such adjustment
occurs.
"Advance Maximum Amount" shall mean (i) until the NBC Closing, ***,
and (ii) on and after the NBC Closing, ***.
"Aggregate Expenses" shall equal the sum of (x) Distribution
Expenses (as defined in Exhibit A) and (y) Service Expenses (as defined in
Exhibit B).
25
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
"Aggregate Fees" shall equal the sum of (x) Distribution Fees (as
defined in Exhibit A) and (y) Service Fees (as defined in Exhibit B).
"Aggregate Receipts" shall equal the sum of (x) Gross Receipts (as
defined in Exhibit A) and (y) Service Receipts (as defined in Exhibit B).
"Animation Advance Amount" at any time of determination, shall be
equal to the Initial Animation Advance, plus all Universal Animation
Adjustments, less all DW Animation Adjustments.
"Animated Pictures" shall mean any theatrical motion picture in
which a substantial portion of the characters, creatures and environments are
created using animation techniques, including those techniques commonly referred
to as traditional hand-drawn animation, stop motion animation, claymation,
computer-generated animation or a similar or new method of animation now known
or hereafter devised; provided, however, that a theatrical motion picture shall
not be deemed an Animated Picture solely (i) because parts of its action are
created by animation intended to appear as live action, (ii) due to the
inclusion of incidental animation, or (iii) because it contains limited amounts
of animation presented in conjunction (whether or not in the same frame) with
live action (e.g., "Who Framed Xxxxx Rabbit" would not be an Animated Picture).
"Animation Pipeline Estimate" as of the end of any fiscal quarter
shall be equal to a commercially reasonable estimate, based on revenue figures
in ultimates, of Aggregate Receipts in the Territory for (i) Sinbad (to the
extent Distributor or FSP has been granted rights thereto pursuant to the
Agreement) and (ii) for all other Animated Pictures for which Distributor or FSP
has been granted rights pursuant to the Agreement (a) which had their initial
public release (whether in theatres in the Domestic Territory or the Foreign
Territory, on home video or otherwise) prior to the end of such quarter
("Animation Pipeline Released Pictures") and on or after November 1, 2003, and
(b) which are not Animated Pictures ultimates for which are included in the
Pipeline Estimate, and (c) that were placed in production or pre-production
(using estimates based on breakeven ultimates for such Pictures after
capitalized interest and overhead) prior to the end of such quarter (provided
that, with respect to any Picture described in clause (c), DW shall (I) be
firmly committed to the production of such Picture, without any third party
conditions, (II) have approved the preliminary budget and screenplay for such
Picture, and (III) have reasonably scheduled such Animated Picture for initial
domestic theatrical release within 18 months of the last day of such quarter)
less (x) Aggregate Fees which would be retained by Distributor and FSP based on
such estimated Aggregate Receipts, (y) estimated Aggregate Expenses attributable
to such Animated Pictures and (z) Aggregate Receipts for such Animated Pictures
actually paid to DW by Distributor and FSP prior to the end of such quarter. For
further clarity, once an Animated Picture has had its initial public release, it
shall only be factored in clause (ii)(a) above and shall no longer be factored
in clause (ii)(c). DW's independent auditors will certify that the ultimates for
Animated Pictures referred to in clause (ii)(a) above and for Sinbad are the
same figures used to prepare and review DW's quarterly, and prepare and audit
DW's annual, financial statements for the applicable fiscal period.
26
"Pipeline Estimate" as of the end of any fiscal quarter shall be
equal to a commercially reasonable estimate, based on revenue figures in
ultimates, of Aggregate Receipts in the Territory for all Pictures for which
Distributor or FSP has been granted rights pursuant to the Agreement (a) which
had their initial public release (whether in theatres in the Domestic Territory
or the Foreign Territory, on home video or otherwise) prior to the end of such
quarter ("Pipeline Released Pictures"), (b) which are Animated Pictures which
had their initial public release prior to November 1, 2003 (other than Sinbad),
and (c) that were placed in production or pre-production (using estimates based
on breakeven ultimates for such Pictures after capitalized interest and
overhead) prior to the end of such quarter (provided that, with respect to any
Picture described in clause (c), DW shall (i) be firmly committed to the
production of such Picture, without any third party conditions, (ii) have
scheduled principal photography to commence within eight weeks of such
quarter-end, (iii) have binding commitments from the director and two principal
cast members for such Picture and (iv) have approved the preliminary budget and
screenplay for such Picture) less (x) Aggregate Fees which would be retained by
Distributor and FSP based on such estimated Aggregate Receipts, (y) estimated
Aggregated Expenses attributable to such Pictures and (z) Aggregate Receipts for
such Pictures actually paid to DW by Distributor and FSP prior to the end of
such quarter. For further clarity, once a Picture has had its initial public
release, it shall only be factored in clause (a) above and shall no longer be
factored in clause (c). DW's independent auditors will certify that the
ultimates for Pictures referred to in clause (a) above are the same figures used
to prepare and review DW's quarterly, and prepare and audit DW's annual,
financial statements for the applicable fiscal period.
"Pipeline Required Amount" shall mean (i) until the NBC Closing,
***, and (ii) on and after the NBC Closing, ***.
"Termination Date" shall mean the date either or both of Exhibit A
or Exhibit B terminates, for any reason, or expires.
2. Outstanding Advance. Effective as of the Restatement Effective
Date, the Advance is in the stated amount of *** (the "Advance").
3. Advance Adjustment. Effective as of the consummation of the
transactions contemplated by the Business Combination Agreement dated as of
October 8, 2003 by and among GE, National Broadcasting Holding, Inc., National
Broadcasting Company Inc., Vivendi Universal S.A. and Universal Studios Holding
III Corp. (the "NBC Closing"), *** of the Advance shall be forgiven and the
stated amount of the Advance shall be ***.
4. Further Advance Adjustments. Not later than 45 days following the
end of each of the first three fiscal quarters of DW (commencing with the fiscal
quarter ending March 31, 2002) and 90 days following the end of each fiscal
year-end of DW (commencing with the fiscal year ending December 31, 2002) (each,
an "Estimate Date"), DW shall deliver to Universal a schedule containing DW's
good faith estimate of the Pipeline Estimate as of such Estimate Date (the
"Periodic Pipeline Schedule" and, collectively the "Pipeline Schedules"),
including reasonably detailed supporting documentation for such computation.
Within 5 business days following each Estimate Date:
27
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
(i) if the Pipeline Estimate in respect of such Estimate
Date is less than the Pipeline Required Amount and less
than the Pipeline Estimate in respect of the most recent
preceding Estimate Date (or the Initial Estimate Date,
in the case of the first Estimate Date), DW shall pay
Universal in cash by wire transfer in immediately
available funds an amount (a "DW Adjustment") equal to
*** of the difference between (x) the lesser of (A) the
Pipeline Required Amount and (B) the Pipeline Estimate
in respect of the most recent preceding Estimate Date,
and (y) the Pipeline Estimate on such Estimate Date; or
(ii) if the Pipeline Estimate in respect of such Estimate
Date is greater than the Pipeline Estimate in respect of
the most recent preceding Estimate Date (or the Initial
Estimate Date, in the case of the first Estimate Date)
and the Pipeline Estimate in respect of such preceding
Estimate Date was less than the Pipeline Required
Amount, Universal shall pay DW (a "Universal
Adjustment") in cash by wire transfer in immediately
available funds an amount equal to *** of the difference
between (x) the lesser of (A) the Pipeline Required
Amount and (B) the Pipeline Estimate in respect of such
Estimate Date and (y) the Pipeline Estimate on the most
recent preceding Estimate Date provided in no instance
under this Agreement shall Universal be required to have
outstanding as an advance to DW more than the Advance
Maximum Amount, or to make any payment in respect of a
Universal Adjustment if DW is then in default under its
bank agreements or there is a Payment Default.
5. Animation Advance and Adjustments. On the Restatement Effective
Date, DW shall deliver to Universal a schedule containing DW's good faith
computation of the Animation Pipeline Estimate for the most recently ended
fiscal quarter (the "Initial Animation Pipeline Schedule"), including reasonably
detailed supporting documentation for such computation. Within five business
days following the delivery to Universal of the Initial Animation Pipeline
Schedule (the date such payment is made, the "Initial Animation Advance Payment
Date"), provided DW is not then in default under its bank agreements and no
Payment Default exists, Universal shall advance to DW by wire transfer in
immediately available funds an amount (the "First Animation Advance") in cash
equal to the lesser of (x) *** and (y) *** of the Animation Pipeline Estimate in
the Initial Animation Pipeline Schedule. On the later of the Restatement
Effective Date and February 28, 2004, provided DW is not then in default under
its bank agreements, no Payment Default exists, and DW has provided an Animation
Pipeline Schedule for the fiscal quarter ended December 31, 2003, Universal
shall advance to DW by wire transfer in immediately available funds an amount in
cash which, together with the First Animation Advance, equals the lesser of (x)
*** and (y) *** of the Animation Pipeline Estimate for the fiscal quarter ended
December 31, 2003 (such amount, together with the First Animation Advance, the
"Initial Animation Advance"). Not later than 45 days following the end of each
of the first three fiscal quarters of DW (commencing with the fiscal quarter
ending December 31,
28
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
2003 or, if later, the first fiscal quarter ended after the Restatement
Effective Date) and 90 days following the end of each fiscal year-end of DW
(commencing with the fiscal year ending December 31, 2003 unless the Restatement
Effective Date is after December 31, 2003 in which case commencing with the
fiscal year ending December 31, 2004) (each, an "Animation Estimate Date"), DW
shall deliver to Universal a schedule containing DW's good faith estimate of the
Animation Pipeline Estimate as of such Estimate Date (the "Periodic Animation
Pipeline Schedule" and, collectively with the Initial Animation Pipeline
Schedule, the "Animation Pipeline Schedules"), including reasonably detailed
supporting documentation for such computation. Within 5 business days following
each Animation Estimate Date:
(i) if the Animation Pipeline Estimate in respect of such
Animation Estimate Date is less than *** and less than
the Animation Pipeline Estimate in respect of the most
recent preceding Animation Estimate Date (or the Initial
Animation Estimate Date, in the case of the first
Animation Estimate Date), DW shall pay Universal in cash
by wire transfer in immediately available funds an
amount (a "DW Animation Adjustment") equal to *** of the
difference between (x) the lesser of (A) *** and (B) the
Animation Pipeline Estimate in respect of the most
recent preceding Animation Estimate Date, and (y) the
Animation Pipeline Estimate on such Animation Estimate
Date; or
(ii) if the Animation Pipeline Estimate in respect of such
Animation Estimate Date is greater than the Animation
Pipeline Estimate in respect of the most recent
preceding Animation Estimate Date (or the Initial
Animation Estimate Date, in the case of the first
Animation Estimate Date) and the Animation Pipeline
Estimate in respect of such preceding Animation Estimate
Date was less than *** Universal shall pay DW (a
"Universal Animation Adjustment") in cash by wire
transfer in immediately available funds an amount equal
to *** of the difference between (x) the lesser of (A)
*** and (B) the Animation Pipeline Estimate in respect
of such Animation Estimate Date and (y) the Animation
Pipeline Estimate on the most recent preceding Animation
Estimate Date provided in no instance under this
Agreement shall Universal be required to have
outstanding as an Animation Advance to DW more than ***
(prior to the later of the Restatement Effective Date
and February 28, 2004) or *** (on and after the later of
the Restatement Effective Date and February 28, 2004) or
to make any payment in respect of a Universal Animation
Adjustment if DW is then in default under its bank
agreements or there is a Payment Default.
6. Dispute Resolutions.
29
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
a. If Universal delivers written notice to DW setting forth a
description of Universal's objections to any Pipeline Estimate
or Animation Pipeline Estimate, and the amount of the
adjustment that Universal believes should be made to each item
in respect of such objection (an "Objection Notice") no later
than ten days following receipt of such Pipeline Estimate or
Animation Pipeline Estimate (and associated supporting
documentation), the Parties hereto shall follow the resolution
procedure described below.
b. No later than ten days following receipt of an Objection
Notice, the Designated Officer of each of DW and Universal
shall meet and negotiate in good faith to resolve any items
set forth in the Objection Notice. "Designated Officer" shall
mean its chief financial officer, in the case of DW and its
Chief Financial Officer, in the case of Universal, or such
other senior executive of such Party as shall be reasonably
acceptable to the other Party.
c. If the Designated Officers are unable to resolve all the
objections set forth in any Objection Notice within ten days,
they shall jointly appoint Xxxxxxxx Xxxxx Xxxxxx & Xxxxx (the
"Neutral Expert") within three business days after the end of
such ten-day period. The Neutral Expert, acting as experts and
not as arbitrators, shall review the objections set forth in
the Objection Notice which were not resolved pursuant to the
procedure in clause (b) above. The Neutral Expert shall
determine, based on the requirements set forth in this
Agreement and only with respect to objections submitted to the
Neutral Expert, whether and to what extent the applicable
Pipeline Estimate or Animation Pipeline Estimate requires
adjustment. Universal and DW shall each pay 50% of the fees
and disbursements of the Neutral Expert in respect of such
engagement. Universal and DW shall, and shall cause their
representatives to, provide to the Neutral Expert full
cooperation. The Neutral Expert's resolution shall be
conclusive and binding upon the Parties.
d. The Pipeline Estimate or Animation Pipeline Estimate, as
applicable, for any quarter shall be deemed to reflect any
objections thereto resolved pursuant to the foregoing
procedure and any necessary adjustment to the amount of the
Advance or Animation Advance, as applicable, resulting from
such resolution shall be made within 5 days in accordance with
the procedures of Paragraphs VIII.4 and VIII.5 above.
e. Notwithstanding the foregoing, Universal shall not be entitled
to deliver an Objection Notice and trigger the procedures
described above if any Pipeline Estimate or Animation Pipeline
Estimate provided by DW reflects (solely for Pipeline Released
Pictures or Animation Pipeline Released Pictures, as
applicable) (i) as to the Pipeline Estimate, a Pipeline
Estimate greater than or equal to *** prior to the NBC Closing
and after
30
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
the NBC Closing, a Pipeline Estimate greater than or equal to
***, or (ii) as to the Animation Pipeline Estimate, greater
than or equal to ***.
f. In the event that the NBC Closing does not occur on or before
October 8, 2004, DW and Universal acknowledge and agree that
they will come to a mutually satisfactory alternative
arrangement as to the advance adjustment described in
Paragraph VIII.3 above (and corollary changes, e.g., to
definitions and other provisions of this Agreement).
7. Additional Payment Obligation.
a. On the last day of each fiscal quarter and on the first
Termination Date, through and including the last day of the
fiscal quarter in which the Advance and Animation Advance are
both repaid in full (each such date, a "Payment Date"), DW
shall pay to Universal by wire transfer in immediately
available funds an amount in cash equal to (i) the Additional
Amount (as defined below) for each date from and including the
preceding Payment Date until but excluding such Payment Date,
and (ii) the Animation Additional Amount (as defined below)
for each date from and including the preceding Payment Date
(or if none the Initial Animation Advance Payment Date) until
but excluding such Payment Date. In addition, all accrued and
unpaid Additional Amounts or Animation Additional Amounts
shall accrue (y) until the NBC Closing at a rate of *** per
year and (z) on and after such NBC Closing shall accrue at a
rate of *** per year. For purposes hereof, (I) the "Additional
Amount" means an amount equal to an annualized rate on the
Advance Amounts outstanding from time to time of *** per year
until the NBC Closing, and on and after the date of such NBC
Closing means an amount equal to an annualized rate on the
Advance Amounts outstanding of *** per year, and (II) the
"Animation Additional Amount" means an amount equal to an
annualized rate on the Animation Advance Amount outstanding
from time to time of *** until the NBC Closing, and on and
after the date of such NBC Closing means an amount equal to an
annualized rate on the Animation Advance Amount of *** per
year. Without limitation of its other rights and remedies
hereunder, Universal shall be entitled to set off and apply an
amount equal to any DW Adjustment if not paid when due and/or
any accrued but unpaid Additional Amounts or Animation
Additional Amounts not paid when due against, and recoup such
DW Adjustment amount, Additional Amounts or Animation
Additional Amounts from, any amounts owed to DW in accordance
with the Agreement; provided, however, that any DW Adjustment
or Additional Amounts may be recouped only against Aggregate
Receipts for Pictures other than Animated Pictures, and that
any DW Animation Adjustment or Animation Additional Amounts
may be recouped only against Aggregate Receipts for Animated
Pictures.
31
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
b. Not later than sixty (60) days after (i) December 31 of each
calendar year which ends on or after December 31, 2006 and
during the Term of Exhibit A or Exhibit B, and (ii) the end of
the Term of Exhibit A or Exhibit B (if such Term ends after
December 31, 2006 other than on the last day of a year), the
cumulative Aggregate Fees paid to Universal since January 1,
2006 through the end of such calendar year or end of the Term
of Exhibit A or Exhibit B, as applicable, shall be calculated.
Each such calculation shall be an "Interest Credit
Calculation" and the period covered by such Interest Credit
Calculation is the "Interest Credit Calculation Period."
(i) If at the time of any Interest Credit Calculation, the
cumulative Aggregate Fees for the relevant Interest
Credit Calculation Period are in excess of the product
of *** times the number of calendar years in such
Interest Credit Calculation Period (including any
partial year in the case of a termination other than at
the end of a calendar year) (such amount for the
relevant Interest Credit Calculation Period, the
"Interest Threshold Amount"), the amount in excess of
the Interest Threshold Amount (less any amount of such
excess previously credited pursuant to this Paragraph
VIII.7.b. and not previously repaid) shall be credited
on a dollar for dollar basis against Additional Amounts
and Animation Additional Amounts (collectively, "AAA
Amounts") paid or payable during the applicable Interest
Credit Calculation Period (the amount of any such credit
determined as a result of the foregoing is the "Interest
Credit"). Notwithstanding the foregoing, the maximum
aggregate amount of all Interest Credits which can be
earned under this Paragraph VIII.7.b. shall not exceed
the Interest Credit Cap. The "Interest Credit Cap" is a
dollar amount equal to *** per annum of the Advances
outstanding from time to time during the relevant
Interest Credit Calculation Period.
(ii) If at the time of any Interest Credit Calculation any
Interest Credits are outstanding (i.e., have previously
been made and not reversed), and the cumulative Interest
Credit determined for such Interest Credit Calculation
Period is less than the cumulative Interest Credit
determined for the immediately preceding Interest Credit
Calculation Period (or, no Interest Credit is available
under the most recent Interest Credit Calculation), DW
shall be entitled to retain only that amount of
outstanding Interest Credits, if any, also available
under the most recent Interest Credit Calculation and
shall repay to Universal (in addition to any other AAA
Amounts due and payable at such time) an amount equal to
the difference between the Interest Credit (if any)
calculated for the most recent Interest Credit
Calculation Period and the Interest Credit previously
credited for the immediately preceding Interest Credit
Calculation Period.
32
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
By way of illustration of this Paragraph VIII.7.b.:
- If as shown in Interest Credit Calculation for the Interest
Credit Calculation Period ended December 31, 2006, Universal
has received *** in Aggregate Fees for such Interest Credit
Calculation Period, DW would be entitled to a *** Interest
Credit against the 2006 AAA Amount. This would either be
credited against any 2006 AAA Amount payable to Universal or
if all such AAA Amounts have already been paid, Universal
would repay *** to DW. (Since the *** Interest Credit would
not exceed the Interest Credit Cap, the entire *** is
available.)
- If as shown in the Interest Credit Calculation for the
Interest Credit Calculation Period ended December 31, 2007,
Universal has received the *** in cumulative Aggregate Fees
for such Interest Credit Calculation Period, the *** Interest
Credit previously received for the Interest Credit Calculation
Period ended December 31, 2006 would be reversed and DW would
pay Universal *** corresponding to such reversal, in addition
to all AAA Amounts due in 2007.
- If as shown in the Interest Credit Calculation for the
Interest Credit Calculation Period ended December 31, 2008,
Universal has received *** in cumulative Aggregate Fees for
such Interest Credit Calculation Period, DW would be entitled
to a *** Interest Credit against AAA Amounts paid or payable
by DW for 2008 and against previous years' AAA Amounts to the
extent necessary, but subject in all cases to the Interest
Credit Cap.
8. Repayment of Advance Amount, Animation Advance Amount, Additional
Amounts, Animation Additional Amounts. The Advance Amount, the Animation Advance
Amount, plus all accrued and unpaid AAA Amounts shall become immediately due and
payable upon the date (the "Due Date") which is the earliest to occur of (x) the
first Termination Date, (y) December 31, 2010 and (z) the 90th day after a
Payment Default (if such Payment Default has not been cured by such date).
Following the Due Date, Universal shall have no further obligations to DW in
respect of this Paragraph VIII. provided if the Due Date arises as a result of
the preceding clause (z) and the Payment Default is subsequently cured in full,
Universal's obligations to make Advances to DW under this Paragraph VIII. shall
be reinstated. Upon (a) notification by either DW or Universal to the other
Party of such Party's intention to terminate either Exhibit A or Exhibit B in
accordance with its respective terms, (b) the expiration or termination of any
Agreement Module in accordance with its terms prior to the stated expiration
date of December 31, 2010, or (c) the Due Date, then Universal shall be entitled
to set off and apply the Advance Amount, Animation Advance Amount, plus any
accrued but unpaid Additional Amounts or Animation Additional Amounts against,
and recoup the Advance Amount, Animation Advance Amount, Additional Amounts and
Animation Additional Amounts from, any amounts owed to DW in accordance with the
Agreement, provided that in no instance shall Universal be entitled (i) to
recoup Advance Amounts or Additional Amounts from Aggregate Receipts for
Animated Pictures included in the Animated Pipeline Estimate, or (ii) to recoup
Animated Advance Amounts or Animation Additional Amounts from Aggregate Receipts
33
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
for Pictures included in the Pipeline Estimate. Any remaining Advance Amount,
Animation Advance Amount, Additional Amounts, and Animation Additional Amounts
after giving effect to such application shall, upon Universal's election (in its
sole discretion), convert into shares representing Preferred at a price of ***
per share. Any such amounts that Universal does not elect to convert to equity
pursuant to the foregoing sentence shall continue to be due and payable and
shall continue to accrue Additional Amounts or Animation Additional Amounts, as
applicable.
Notwithstanding the foregoing, if both Exhibit A and Exhibit B
expire at their stated expiration date of December 31, 2010 (and only in such
case)(the "Special Repayment Case"), *** of the Advance outstanding on such date
and *** of the Animation Advance outstanding on such date shall be due and
payable June 30, 2011 together with all Additional Amounts and Animation
Additional Amounts accrued with respect thereto, and the remaining Advance and
the remaining Animation Advance shall be payable December 31, 2011, together
with all Additional Amounts and Animation Additional Amounts accrued with
respect thereto. In the Special Repayment Case, Universal shall be entitled to
set off the Advance, Animation Advance, Additional Amount and Animation
Additional Amounts against, or recoup such amounts from the amounts owed to DW
under this Agreement only against amounts received by Universal after December
31, 2010 and to the extent such amounts are recouped through the set off, shall
reduce DW's payment obligations under the preceding sentence. (Notwithstanding
the foregoing, in no instance shall Universal be entitled (i) to recoup Advance
Amounts or Additional Amounts from Aggregate Receipts for Animated Pictures
included in the Animated Pipeline Estimate, or (ii) to recoup Animated Advance
Amounts or Animation Additional Amounts from Aggregate Receipts for Pictures
included in the Pipeline Estimate.) Unless and until the Advance, Animation
Advance, Additional Amounts and Animation Additional Amounts are recouped or
repaid in full, Universal shall retain all distribution and fulfillment rights
it holds as of December 31, 2010 to Pictures then in release (theatrically or as
Videograms) or revenues for which have been in either the Pipeline Estimate or
the Animation Pipeline Estimate prior to December 31, 2010. In the Special
Repayment Case, DW shall have the right but not the requirement after December
31, 2010, to prepay all or any portion of the Advance Amount, Animation Advance
Amount, Additional Amounts and Animation Additional Amounts and on the payment
in full of all such amounts (whether by prepayment, set off, or payment) all of
Universal's distribution and fulfillment rights under Exhibit A and Exhibit B
shall terminate.
IX. MEDIA BUYS
Until the later of (x) completion of all distribution by Distributor
pursuant to Exhibit A and (y) completion of all Fulfillment Services by FSP
pursuant to Exhibit B (the "Post-Term Period"), Universal shall cooperate with,
and consult with DW on such Media purchases as DW may require from time-to-time,
with the intent that to the extent not inconsistent with Universal's agreements
(and without detriment to Universal (e.g., Universal is not required to make
limited Media space available to DW which Universal intends to utilize for its
own purposes)), Universal will attempt to permit DW to utilize Universal's Media
rates (net of all discounts, rebates and adjustments) for such Media to the
extent such rates are better than DW's rates. Universal shall have no obligation
under this Paragraph IX. to provide services to
34
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
DW, including in connection with identifying such potential opportunities or
making any Media buys, or to bear any costs in connection therewith. If DW has
the opportunity to utilize Universal's Media rates, DW shall bear all costs in
connection therewith. Media includes: all television (e.g. network, cable,
syndication and spot); radio (e.g., network and spot); print such as newspaper
advertisements, cable guides, magazines, periodicals, circulars, college print,
military print; outdoor such as billboards, bus shelters, bus sides, phone
kiosks, premiere squares; trade publications; internet and new media as they
evolve.
X. FILM LIBRARY; TRANSFER OF PICTURES, DW REORGANIZATION
a. Film Library Assets. It is the general understanding of the
Parties that until all of the Agreement Modules have been
terminated in accordance with their respective terms, DW will
notify Universal in advance of entering into substantive
negotiations concerning a transaction in which a third party
would acquire all or a substantial portion of DW's film
library (or a controlling equity interest therein); provided,
however, that the foregoing shall not apply to any proposed
transaction involving the acquisition of *** or more of the
equity interests in DW or significant assets of DW in addition
to its film library assets.
b. Transfer of Pictures; DW Reorganization. Notwithstanding
anything to the contrary in this Agreement, but subject to the
last sentence of this subsection X.b., if revenues from
theatrical distribution of, or from Videogram distribution of,
a Picture have been included in either the Pipeline Advance or
the Animation Pipeline Advance, Universal's rights under
Exhibit A and Exhibit B to distribute such Pictures and to
provide fulfillment services for any Videograms for such
Pictures shall survive any transfer of any rights in such
Picture to any Person (including any Affiliate). For purposes
of clarity, DW may transfer a Picture, or any rights therein,
provided any such transfer shall not abrogate, impair or
adversely affect, the rights to distribute or provide
fulfillment services which Universal holds under this
Agreement. If a Picture or any rights to receive revenues from
a Picture under this Agreement are transferred, the transferee
shall expressly acknowledge in writing Universal's rights to
distribute and provide fulfillment services in accordance with
this Agreement (a "Subject Picture Transfer"). DW shall notify
Universal of each Subject Picture Transfer not later than 30
days after consummation of such Subject Picture Transfer, and
deliver therewith the transferee's written acknowledgement
referenced in the prior sentence. Universal shall continue to
be entitled to deal solely with, and rely on DW's instructions
and directions in respect of any Pictures or Videograms
covered by a Subject Picture Transfer. In the event that DW
reorganizes or restructures in a way which includes the
transfer of portions of its film business to another entity
which is an Affiliate of DW, such entity (and its pictures and
videograms) shall be subject to Exhibit A and Exhibit B,
respectively, to the same extent as such pictures and
videograms would have been had
35
***Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
DW had rights to such pictures and videograms and the
transferee acknowledges in writing Universal's rights to
distribute in accordance with this Agreement (an "Affiliate
Picture Transfer"). DW shall notify Universal of each
Affiliate Picture Transfer not later than 30 days after
consummation of such Affiliate Picture Transfer, and deliver
therewith the transferee's written acknowledgement referenced
in the prior sentence. Universal acknowledges that the
provisions of this subsection X.b. do not restrict DW's rights
to exclude either the Japan or the "German Territory" in
accordance with this Agreement, or DW's right to
self-distribute or to otherwise transfer, assign or license
rights in and to any Picture where and to the extent UIP
declines to distribute such Picture, or to exercise other
express rights set forth in this Agreement pursuant to which
DW may distribute Pictures or provide fulfillment services
itself.
XI. ADDITIONAL SERVICES
During the Term and the Post-Term Period, DW and Universal will work
together to reduce overhead of both companies through the provision of common
services as may be mutually agreed from time to time, provided that neither
party shall be under any obligation to agree to any agreement related to or
designed to reduce overhead, and the terms of any agreement which the parties do
enter into related to the reduction of overhead shall be within each party's
sole discretion and control.
XII. MISCELLANEOUS PROVISIONS
1. Conflicting Provisions: In the event of a conflict between
anything contained in this Master Agreement and any provisions contained
elsewhere in the Agreement, this Master Agreement shall control.
2. Further Acts and Documents: The Parties each will perform such
other and further acts and execute, acknowledge and deliver such other and
further documents to evidence their respective rights and obligations under the
Agreement as may reasonably be necessary or appropriate to carry out the intent
hereof. Such documents shall be provided, or such acts taken, promptly upon the
receipt of written notice thereof given in accordance with the provisions of
Paragraph XII.20 below, unless the Party of whom such request is made submits,
within ten (10) business days (or, if specified in such written notice, such
shorter period as exigencies require) following receipt of such notice, a
written statement of its reason(s) for failing to comply therewith. In that
event, the Parties shall resolve such dispute in the same manner as any other
dispute which may arise under the Agreement. In the event no timely objection is
made or such objection is resolved, and the required Party fails to promptly
provide such documents or perform such acts, the requesting Party irrevocably
shall be appointed as the required Party's attorney-in-fact for such purpose. It
is acknowledged said appointment power is coupled with an interest.
3. Termination.
36
a. Exhibits C and/or D, as applicable, may be terminated by the
Terminating Party without prejudice to any other rights or
remedies available to it, under any of the following
circumstances:
(i) Upon the occurrence of a material breach by the other
Party ("Breaching Party") of any portion of Exhibit C
and/or D, as applicable (i.e., a breach of Exhibit C
only shall not itself entitle the Terminating Party to
terminate Exhibit D, and vice versa), provided that, as
to a non-recurring breach which is capable of being
cured, the Terminating Party shall have first given
written notice within a reasonably prompt period after
discovery of the alleged breach specifying in reasonable
detail the alleged breach and the action(s) necessary to
cure and the Breaching Party shall have failed to so
cure the alleged material breach within 30 days (or such
shorter period as may be reasonably required) of receipt
of said notice; or
(ii) If the other Party makes an assignment for the benefit
of creditors, files or has filed against it a petition
for bankruptcy (which proceeding is not dismissed,
bonded or discharged within 60 days of filing), becomes
insolvent or is adjudged bankrupt; or
(iii) If the other Party restructures (other than an internal
corporate reorganization, merger or consolidation, or
with the prior written consent of the non-restructuring
Party in its absolute sole discretion) in a manner that
has or may have a significant impact on either Party's
performance under the Agreement or dissolves. Any
dispute as to whether a restructuring has or may have a
significant impact on either Party's performance under
the Agreement shall be subject to dispute resolution
under Paragraph XII.13 below.
b. [Purposely left blank]
c. Any claimed right of termination of Exhibit(s) A, B, C and/or
D shall be subject to dispute resolution under Paragraph
XII.13 below. In the event of a termination of the Agreement,
or any Agreement Module(s) or portion thereof, DW shall retain
ownership of and all rights of every nature in and to its
"Pictures" and "Videograms" (as those capitalized terms are
defined and set forth in Exhibits A and B), provided that the
rights of the Parties with respect to any motion pictures or
television project subject to Exhibit C (whether in
development, production, distribution or otherwise) shall
continue and remain unchanged except to the extent otherwise
specifically provided therein. The following rights and
obligations shall survive termination of the Agreement, in
addition to any rights or obligations which any Agreement
Module provides will survive termination of the
37
Agreement or of such Agreement Module: (i) all
representations, warranties and indemnities; (ii) all
reporting and record keeping obligations; (iii) all of
Universal's rights to receive accountings and payments; (iv)
all of Universal's rights under Paragraphs VIII. and X.
hereof; and (v) any provision respecting the confidentiality
of information.
d. Upon the occurrence of a Limitation Event (as defined in the
LLC Agreement), DW shall provide prompt written notice of such
Limitation Event to Universal. Universal shall have the
option, exercisable by written notice to DW within ninety (90)
calendar days following receipt of such notice of Limitation
Event from DW, to terminate the Master Agreement and/or
Exhibit A and/or Exhibit B and/or Exhibit D, and, if such
notice is provided, the Company shall redeem the Preferred in
full, in cash, together with all accrued and unpaid cash and
non-cash distributions thereon, in accordance with and on the
date required under Section 8.01(a) of the LLC Agreement.
Notwithstanding any provision of the Agreement to the
contrary, neither Exhibit A nor Exhibit B shall terminate on a
Limitation Event, whether after Universal's option is
exercised or otherwise, unless and until the Advance,
Animation Advance, AAA Amounts have been repaid and the
Preferred shall have been redeemed in full, in cash, in
accordance with Section 8.01(a)(iv) of the LLC Agreement and
all accrued and unpaid cash and non-cash distributions thereon
have been paid.
e. DW shall have the right to terminate Exhibit A and Exhibit B
by providing written notice (a "Termination Notice") to
Universal no later than thirty (30) calendar days following a
Company Change of Control (as defined below), and Exhibits A
and B shall thereupon terminate on the date upon which the
Advance, Animation Advance, and AAA Amounts have been paid and
the Preferred shall have been redeemed in accordance with
Section 8.01(a)(iv) of the LLC Agreement and all accrued and
unpaid cash and non-cash distributions paid in full. If DW has
not provided a Termination Notice to Universal within thirty
(30) calendar days of a Company Change of Control, Universal
shall have the right to terminate the Agreement by providing a
Termination Notice to DW within fifteen (15) calendar days of
the later of (i) the expiration of such thirty (30) day
period, and (ii) the date on which the General Counsel of
Universal shall have actual knowledge of such Company Change
of Control, and this Agreement shall thereupon terminate on
the later of (x) 180 calendar days following the date of the
receipt of the Termination Notice by DW and (y) the date upon
which the Preferred shall have been redeemed in accordance
with Section 8.01(a)(iv) of the LLC Agreement and all accrued
and unpaid cash and non-cash distributions paid in full. In
the event either Party provides a Termination Notice
hereunder, the Company shall (i) repay the Advances, the
Additional Amounts, and the Animation Additional Amounts on or
before the termination of Exhibits A and B, (ii) pay the
38
Special Termination Fee, if applicable, and (iii) redeem the
Preferred in full, in cash, together with all accrued and
unpaid cash and non-cash distributions thereon, on the date
required under Section 8.01(a) of the LLC Agreement. DW shall
provide written notice to Universal of the termination date of
the Agreement pursuant to the preceding sentence no later than
twenty (20) calendar days following the receipt of the
Termination Notice.
A "Company Change of Control" for purposes of this Agreement
means (i) the acquisition of ownership, directly or
indirectly, beneficially or of record, of equity interests in
DW representing more than 50% of either the aggregate ordinary
voting power or of the aggregate equity value represented by
the issued and outstanding equity interests in DW, whether
pursuant to merger, consolidation, issuances by DW of equity
securities or otherwise by any Person or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended) other than any of the
Principals (as defined in the LLC Agreement) or their
Affiliates, if (in each case described in this clause (i)) as
a result of such acquisition or after such acquisition the
Principals no longer exercise actual control over the
management of DW, or (ii) the sale of all or substantially all
of the property, business or assets of DW or of its motion
picture studio division to any Person (excluding internal
reorganizations and transactions effected to reconstitute DW
as a corporation), so long as any such successor assumes the
obligations of DW under the LLC Agreement in respect of the
Preferred.
f. DW shall not have the right to terminate either Exhibit A or
Exhibit B as the result of any offering of securities by DW or
by any subsidiary of DW, or on any restructuring of DW or of
any subsidiary of DW. Notwithstanding the foregoing, if DW or
a subsidiary of DW consummates a registered public offering of
securities and thereafter the entity (DW or such subsidiary)
holding all or substantially all of the DW assets related to
the "live action" motion picture business sells such assets,
DW may elect, on not less than 180 days' notice, to have
Exhibit A and Exhibit B be inapplicable to such "live action"
Pictures included in such sale (but not any Animated Pictures)
effective on the date of consummation of the sale provided
that not later than such sale consummation date DW repays the
Advance, all Additional Amounts and the Preferred in full, in
cash, together with all accrued and unpaid cash and non-cash
distributions thereon (and, in the case of the Preferred, in
accordance with Section 8.01(a)(iv) of the LLC Agreement).
4. Warranties and Representations: Each Party warrants and
represents that:
a. It is an entity duly authorized to do business, and in good
standing, in the state of California and in the state in which
it is organized.
39
b. It has the power and authority to enter into the Agreement and
to perform in accordance with the terms thereof.
c. The Agreement and the execution thereof have been duly
authorized, and when executed and delivered the Agreement will
be a legally valid and binding obligation of each Party,
enforceable against each Party in accordance with its terms.
d. The execution, delivery and performance of the Agreement will
not violate any agreement, instrument or undertaking to which
such Party is a party or by which such Party or any of its
property is bound, except to the extent such violation could
not reasonably be expected to have a material adverse effect
on such Party.
5. Indemnity. In addition to, and without limiting, each Party's
indemnities under the Agreement Modules: (a) each Party ("Indemnitor") shall, at
its own cost and expense, indemnify, defend and hold harmless the other Party,
its Affiliates, employees, agents, managers, directors and shareholders
(collectively, "Indemnitee"), from and against all cost, loss (exclusive of
profits), liability, or expense (including reasonable outside attorneys' fees)
arising in connection with Indemnitor's breach of any of the representations,
warranties and agreements contained in the Agreement, or Indemnitor's violation
or alleged violation of any third party's rights and/or Indemnitor's violation
or alleged violation of law; (b) each Indemnitor shall, at its own cost and
expense, indemnify, defend and hold harmless each Indemnitee from and against
all cost, loss (exclusive of profits), liability, or expense (including
reasonable outside attorneys' fees) arising out of or in connection with any
claim by any third party that is in contractual privity with Indemnitor or with
a party engaged by Indemnitor, including co-ventures and Subdistributors as
defined in the Agreement Modules (collectively, a "Third Party"), if such claim
arises out of or in connection with the Agreement (provided that the indemnity
in this Paragraph XII.5 shall not apply to the extent that: (i) such claim is
the result of Indemnitee's breach or alleged breach of its contractual
obligations, if any, to such Third Party which is not caused by any breach or
wrongful act by Indemnitor; and/or (ii) the Indemnitee under this clause (b) is
an Indemnitor under clause (a) with respect to the same claim); and (c)
Universal shall, at its own cost and expense, indemnify, defend and hold
harmless DW, its Affiliates, employees, agents, managers, directors and
shareholders from and against all cost, loss, liability, or expense (including
reasonable outside attorneys' fees) resulting from any injury or loss suffered
by any third party on or in any facility owned by Universal, excluding the
"Premises" (as defined in Exhibit C) but including any "Theme Park" (as defined
in Exhibit D) or arising directly or indirectly out of any the development,
construction or use of any Permanent Attraction, Live Event, Restaurant, Walk
Around, Themed Area, or other use of any DW Element (as those terms are defined
in Exhibit D) in or in connection with any Theme Park. (Nothing in the
immediately preceding sentence shall be deemed to amend or affect the parties'
respective obligations under Paragraphs 8.h. and 8.i. of Exhibit C.) Indemnitee
will give Indemnitor prompt written notice of any such claim or proceeding by a
third party. If Indemnitor does not notify Indemnitee within a reasonable period
after Indemnitor's receipt of notice of such claim or proceeding that Indemnitor
is assuming the defense of Indemnitee, then until such defense is assumed by
Indemnitor and except as set forth below, Indemnitee shall have the right
40
to defend, contest, settle or compromise such claim by a third party in the
exercise of its reasonable judgment and all costs and expenses of such defense,
contest, settlement or compromise (including reasonable outside attorneys' fees
and expenses) shall be reimbursed to Indemnitee by Indemnitor. Upon assumption
of the defense of any such claim or proceeding, Indemnitor shall, at its own
cost and expense, select legal counsel, conduct and control the defense and/or
settlement of any suit or action which is covered by Indemnitor's indemnity.
Indemnitee shall render all cooperation and assistance reasonably requested by
the Indemnitor, and Indemnitor shall keep Indemnitee fully apprised of the
status of any claim or proceeding. Notwithstanding the foregoing, Indemnitee
may, at its election and sole expense, be represented in such action by separate
counsel, and, if Indemnitee thereby waives Indemnitor's indemnity hereunder,
Indemnitee may, at its election and sole expense, assume the defense of any such
action. Unless Indemnitee waives the indemnity hereunder, in no event shall
Indemnitee settle any claim or proceeding covered by this indemnity or stipulate
to, admit or acknowledge any liability or wrongdoing (whether in contract, tort
or otherwise) of any issue which may be covered by this indemnity, in each case
without the consent of the Indemnitor.
6. Publicity. Except as may be required by law or NASD or stock
exchange rules, no press release concerning the Agreement (including its
creation or termination) or any of its terms or conditions, or containing any
other trade secret or confidential information of the other Party, or concerning
any dispute or claim arising under the Agreement, shall be issued by either
Party without the express written consent of the other Party obtained in advance
and in each instance.
7. Assignment. Subject to any further provisions permitting or
restricting assignment of all or any portion of an Agreement Module that are
expressly set forth in the pertinent Agreement Module:
a. Universal (and/or its Affiliates which are a party to, or are
obligated to perform under, any Agreement Module) shall not
assign the Agreement, or any of its rights or interests
thereunder, except: (a) to an Affiliate of Universal,
including in connection with an internal corporate
reorganization, a merger or consolidation, in each case so
long as such assignment does not relieve the assigning party
of its obligations under this Agreement; or (b) upon the prior
written consent of DW in its absolute sole discretion.
b. DW shall not assign the Agreement, or any of its rights or
interests thereunder, except: (a) to an Affiliate of DW,
including in connection with an internal corporate
reorganization, a merger or consolidation, in each case so
long as such assignment does not relieve the assigning party
of its obligations under this Agreement; or (b) upon the prior
written consent of Universal in its absolute sole discretion.
Notwithstanding the foregoing, DW may not assign to any Person
its right to receive the Advance, the Animation Advance or any
Universal Adjustment or Universal Animation Adjustment
amounts.
41
c. Any attempted assignment in contravention of the foregoing
shall be deemed a material breach of the Agreement. In the
event of a permitted assignment by either Party, the assigning
Party shall nonetheless remain primarily liable hereunder.
d. Notwithstanding the foregoing, either Party may have any
Affiliate perform its obligations under the Agreement, subject
to the terms and conditions of the Agreement; provided that
each Party shall remain responsible for the performance of its
obligations under the Agreement and its Affiliates'
performance.
8. IPO Related Capital Structure Changes. If DW or a subsidiary
of DW which is more than 50% owned by, and is controlled by DW (a "DW
Subsidiary") gives notice to Universal that it intends to file a registration
statement under the Securities Act of 1933, as amended, for the purpose of
registering shares of stock of DW or of such DW Subsidiary, as applicable, for
the first time for sale to the public (an "IPO"), Universal agrees that it will
in good faith discuss changes to the structure of the Preferred and to the
Advance and/or Animation Advance to consummate such IPO provided in no event
shall Universal (i) be required to agree to any changes other than those changes
which are reasonably necessary for consummation of such IPO, or (ii) be required
to compromise its rights or obligations under this Agreement, the LLC Agreement
or with respect to the Preferred in connection with such IPO. Whatever agreement
the parties reach as to changes, if any, shall be effective only upon
consummation of the IPO of DW or such DW Subsidiary.
9. Financial Information. DW shall provide to the outside
auditors of Universal all the information required to be provided to the holder
of the Preferred under Article 3 of the LLC Agreement (subject to such auditors
entering into appropriate confidentiality agreements) until both Exhibits A and
B have terminated, regardless of whether the Preferred is outstanding. All
information provided by DW under this Paragraph XII.9 shall be subject to
Paragraph XII.17 hereof so long as it is Confidential Information as defined
therein, and may not be disclosed by such outside auditors except to persons
entitled to receive such information under Section 3.07 of the LLC Agreement.
10. Active Involvement. DW covenants and agrees that for so long
as any portion of the Animation Advance is outstanding, Xxxxxxx Xxxxxxxxxx will
be actively involved in the management of DW's animated motion picture business.
For purposes of clarity, Xx. Xxxxxxxxxx is not required to be actively involved
if he is incapacitated, and this Paragraph XII.10 shall be of no further force
or effect on Xx. Xxxxxxxxxx'x death.
11. No Partnership or Third Party Benefit. The Agreement does not
constitute the Parties as partners, joint venturers, or as each other's agents
or representatives (except as may be therein otherwise expressly provided). The
Agreement is not for the benefit of any third party and shall not give any right
or remedy to any such third party whether or not referred to therein.
12. Integration/Formalities. This Agreement, Amendment No. 2, the
LLC Agreement and the Subscription Agreement contain the entire agreement and
understanding between the Parties relating to the subject matter hereof and
supersedes, cancels and replaces any
42
prior understanding, writing or agreement between the Parties relating to such
subject matter (including, without limitation, the Film Term Sheet dated as of
October 31, 2003). The Agreement may not be amended, modified or altered except
by an instrument in writing duly executed by both Parties. The Parties
acknowledge that each was represented by counsel in the negotiation and
execution of the Agreement. No provision therein shall be construed against
either Party by virtue of the activity of that Party, through its counsel or
otherwise, in negotiating and drafting the Agreement.
13. Dispute Resolution. Any controversy or dispute between the
Parties arising out of the Agreement or the LLC Agreement or relating in any way
to the rights and obligations of the Parties thereunder, including any
controversy or dispute between the Parties concerning the distribution and other
exploitation of DW's motion pictures, videograms, recordings, or other
intellectual property thereunder, any matter requiring mutual agreement between
the Parties, and accounting and payment obligations shall be resolved by
submitting such controversy or dispute to a "Judge" (as defined below), whose
decision shall be final and binding and enforceable in a court of competent
jurisdiction. The Parties will abide by the following procedures:
a. Before proceedings are initiated hereunder, the CEO or COO or
any of the Presidents of DW (as designated by DW) and the CEO
or COO of Universal shall meet in good faith to attempt to
resolve the dispute.
b. If the dispute is not so resolved, the Parties shall meet
within three (3) business days and shall agree upon a Judge to
whom the dispute will be submitted. "Judge" shall mean a
retired federal court justice or judge, or a retired justice
or judge of the California Supreme Court, Court of Appeals or
Superior Court, who is available to render dispute resolution
services in the County of Los Angeles. In the event that the
Parties cannot, within such three (3) business day period,
agree upon a Judge, either Party may apply to the Superior
Court for the State of California, County of Los Angeles, for
the appointment of a Judge, and upon such appointment, such
Party shall also be awarded its costs and attorneys' fees in
connection with the application; in the event both Parties
jointly or separately apply, no costs and fees will be
awarded.
c. Within fourteen (14) business days of the
selection/appointment of a Judge, the Parties shall submit a
Joint Statement setting forth: (i) a Joint Statement of Facts;
(ii) a summary of each Party's claim or defense, including
factual and legal contentions; and (iii) a joint discovery
plan. Within ten (10) business days of service of the Joint
Statement, the Parties (through their counsel) and the Judge
shall convene in person or by telephone, and at such meeting
the Judge shall order a discovery schedule and set a hearing
date. It is the intent of the Parties hereunder to resolve
disputes as expeditiously as possible, and it is the Parties'
goal that a hearing be held and a decision be rendered within
three (3) months, except in complex cases, in which event a
hearing shall be held and a decision
43
rendered within six (6) months. In the event a Party seeks
preliminary injunctive relief, the Judge shall hold an
expedited hearing on a schedule to be determined by the Judge.
d. The Parties' rights of discovery shall be governed by the
California Rules of Civil Procedure.
e. Except as specifically provided herein, the Judge shall have
the same powers as those of a judge of the United States
District Court for the Central District of California, and
shall render a decision as would a judge of such Court.
Without limitation, such authority includes the power: (i) to
enter and serve a written award within ten (10) business days
after the hearing is concluded and final briefs (if permitted)
submitted, and in this regard shall have specific power to
order injunctive relief (preliminary and permanent) and to
award compensatory (but not punitive) damages, all enforceable
by a court of competent jurisdiction; and (ii) to award costs
and reasonable attorneys' fees to the prevailing party.
f. The Parties reserve their rights to confirm, correct or vacate
the award pursuant to California Code of Civil Procedure
Section 1285, et seq., subject always to the limitations set
forth in subparagraph e. above. If an award is so confirmed,
the prevailing Party shall recover its costs and reasonable
attorneys' fees in connection with such confirmation. A party
shall have the right to appeal the ruling of the Judge to a
panel of three retired judges. A party shall have five
business days after its receipt of the Judge's ruling to serve
notice of its exercise of this right to appeal. The parties
shall use the same procedure for selection of the Judge in
Paragraph XII.13.b. to select the panel of three judges for
the appeal (the "Panel"). The Panel shall use the same
standard of review of the Judge's ruling as if it were a
California Court of Appeal reviewing a trial judge's ruling.
The opening brief of the appealing party shall be due within
20 days of the selection of the Panel, the opposing brief
within 20 days of receipt of the opening brief, and the reply
brief will be due within 10 days of the appealing party's
receipt of the opposing brief. The Panel will hold oral
argument within 20 days of the filing of the final brief, and
issue a written opinion, stating its reasons for its decision,
20 days thereafter.
g. In the event the dispute or controversy involves the rights
and obligations of one or more third parties, the Parties
shall attempt in good faith to have them join in the
proceeding, submit to the jurisdiction of the Judge, and agree
to be bound by the Judge's award. In the event, however, that
there is no such joinder, the Judge shall have authority to
resolve the dispute or controversy as between the Parties
without the participation of any third party.
44
h. Each party shall bear half the costs of the Judge (and any
staff for the proceedings (such as a court reporter), unless
the Judge in his or her discretion awards some or all of such
costs to the prevailing Party.
14. Severability of Provisions. If any provision in the Agreement
shall be held by any court of competent jurisdiction to be illegal, void or
unenforceable, such provision shall be of no force or effect while such
infirmity shall exist, but such infirmity shall have no effect whatsoever upon
the binding force or effectiveness of any of the other provisions thereof.
15. Waiver. No delay or failure to exercise any right hereunder
shall constitute a waiver of such right except in those instances where the
Agreement provides for specific notice and a period of time thereafter within
which to exercise a right, in which case failure to exercise such right within
the specified time period shall constitute a waiver thereof.
16. Governing Law. The Agreement shall be construed and enforced
in accordance with the laws of the state of California, applicable to contracts
entered into and to be fully performed in said state by residents thereof. For
purposes of enforcing, confirming or vacating an award under Paragraph XII.13
above, or in the event the provisions of such Paragraph XII.13 shall be held
invalid or unenforceable, only the California courts (state and federal) shall
have jurisdiction over controversies regarding or arising under the Agreement,
and if there is any matter which might be subject either to state or federal
jurisdiction, the Parties agree that the matter shall be submitted to federal
jurisdiction. The Parties specifically agree that the Superior Court of the
State of California, County of Los Angeles and the United States District Court
for the Central District of California shall have personal jurisdiction over
them, and each of them, notwithstanding the fact that they may be citizens of
other states or countries. In this regard the Parties agree that Los Angeles
County is a convenient forum.
17. Confidentiality. Except as may be required by law or NASD or
stock exchange rules, each Party shall keep confidential all terms and
conditions contained herein. Universal and DW acknowledge that they will, during
the Term have access to, and acquire knowledge from, materials, data and other
information which is not accessible or known to the general public
("Confidential Information"). Except as required by law or NASD or stock
exchange rules, or as may be required for the preparation of tax returns or
other government or legally required documents, or as reasonably necessary to
employees, agents, lawyers, accountants, auditors, bankers, consultants,
representatives or investors of Universal or DW or their Affiliates for a bona
fide business purpose (who shall be similarly bound by these confidentiality
provisions), neither the Confidential Information nor any knowledge acquired by
Universal or DW, as the case may be, from such Confidential Information or
otherwise through its engagement hereunder shall be used, publicized or divulged
by the other to any other Person without the prior written consent of the other
Party obtained in advance and in each instance. Nothing herein shall prevent
either Party, or any employees, agents, lawyers, accountants, auditors, bankers,
consultants, representatives or investors of such Party or its Affiliates (the
"Receiving Party") from using, disclosing, or authorizing the disclosure of any
information it receives in the course of performance of the Agreement which:
45
a. was known to the Receiving Party prior to its disclosure by
the other Party;
b. is or becomes publicly available without default hereunder by
the Receiving Party;
c. is lawfully acquired by the Receiving Party from a source
which is not an agent or representative of the Receiving Party
and is not under any obligation to the other Party regarding
disclosure of such information;
d. is independently developed by the Receiving Party without use
of any of the other Party's confidential information; or
e. is disclosed by the other Party hereto to unaffiliated third
parties without confidential undertakings.
Notwithstanding anything herein to the contrary, any party to the Agreement (and
any employee, representative or other agent of such party) may disclose to any
and all Persons, without limitation of any kind, the tax treatment and tax
structure of the transactions contemplated by the Agreement and all materials of
any kind (including opinions or other tax analyses) that are provided to it
relating to such tax treatment and tax structure, except that (i) tax treatment
and tax structure shall not include the identity of any existing or future party
(or any affiliate of such party) to the Agreement and (ii) this provision shall
not permit disclosure to the extent that nondisclosure is reasonably necessary
in order to comply with applicable securities laws.
18. Notice of Representatives. DW will give Universal reasonable
notice of DW's appropriate contact person(s). Universal will give DW reasonable
notice of Universal's appropriate contact person(s).
19. Paragraph Headings. Paragraph headings and titles are solely
for convenience of reference and are not a part of the Agreement, nor are they
intended to aid or govern the interpretation of the Agreement.
20. Notices. All notices hereunder shall be served by private
delivery service, and shall be deemed given on the date delivered to the
following addresses (or such other addresses as either Party may hereafter
designate in writing):
DW: 0000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Universal: 000 Xxxxxxxxx Xxxx Xxxxx
Xxxxxxxxx Xxxx, XX 00000
46
Attention: Executive Vice President and General
Counsel
After the NBC Closing, with a copy to:
NBC Universal
Attn: General Counsel
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
47
Counterparts. The Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of
which, taken together, shall constitute one and the same instrument,
which may be sufficiently evidenced by One counterpart.
IN WITNESS WHEREOF, the Parties have caused this Master Agreement to
be duly executed as of the date first written above.
DREAMWORKS L.L.C.
By /s/ XXXX XXXXXX
-------------------------------
Its Authorized Signatory
UNIVERSAL STUDIOS, INC.
By _______________________________
Its _______________________________
VIVENDI UNIVERSAL
ENTERTAINMENT LLP, AS ASSIGNEE
By _______________________________
Its _______________________________
48
Counterparts. The Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of
which, taken together, shall constitute one and the same instrument,
which may be sufficiently evidenced by one counterpart.
IN WITNESS WHEREOF, the Parties have caused this Master Agreement to
be duly executed as of the date first written above.
DREAMWORKS L.L.C.
By _______________________________
Its _______________________________
UNIVERSAL STUDIOS, INC.
By /s/ ___________________________
Its _______________________________
VIVENDI UNIVERSAL
ENTERTAINMENT LLP, AS ASSIGNEE
By /s/ ___________________________
Its _______________________________
49
