EXHIBIT 10.31
DIGITAL CINEMA SERVICE AGREEMENT
THIS DIGITAL CINEMA SERVICE AGREEMENT (this "Agreement") is made and
entered into as of December __, 2005 (the "Effective Date") by and between
CARMIKE CINEMAS, INC., a Delaware corporation ("Customer"), and CHRISTIE DIGITAL
SYSTEMS USA, INC., a California corporation ("Christie").
RECITALS
A. Concurrently with the execution of this Agreement, Customer and
Christie/AIX, Inc., a Delaware corporation ("Licensor"), have entered into a
Master License Agreement of even date herewith (the "Master License Agreement"),
pursuant to which Licensor will deliver Digital Systems (as defined in the
Master License Agreement) to Customer cineplex sites and license such Digital
Systems to Customer for use in accordance with the Master License Agreement.
B. As required under the Master License Agreement, Customer and
Christie have entered into this Agreement to provide for installation,
maintenance and other services with respect to Digital Systems licensed by
Licensor to Customer under the Master License Agreement and Carmike's 35mm
systems (as hereinafter defined).
NOW, THEREFORE, for and in consideration of the mutual covenants set forth
below, and for other valuable consideration received, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby mutually agree
as follows:
1. Engagement. On the terms and conditions of this Agreement, Customer
hereby engages Christie, and Christie hereby accepts such engagement, to provide
the services described below.
2. Service Sites. "Service Sites" means each of the cineplex sites at
which Digital Systems licensed by Licensor to Customer under the Master License
Agreement are installed. Any Service Site which is more than a two hour drive
from a location at which Christie maintains one or more customer service
engineers is sometimes referred to below as a "Non-Local Site," and any Service
Site which is within a two hour drive from a location at which Christie
maintains one or more customer service engineers is sometimes referred to below
as a "Local Site."
3. Project Services.
3.1 Project Management. Christie will serve as project manager for
the installation of Digital Systems licensed by Customer from Licensor under the
Master License Agreement. Christie's service as project manager will include the
performance of site surveys at each of the Service Sites in preparation for
installation of Digital
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Systems, coordination with Customer on site readiness matters, working with
Customer on the development of an installation schedule, installation of Digital
Systems in accordance with the installation schedule agreed upon between
Christie and Customer, provision of all network cabling and other parts and
services (other than necessary HVAC, electrical or audio upgrades (collectively
"Customer Items") required in connection with the installation of Digital
Systems and demonstration of the operability of installed Digital Systems upon
completion of installation. An "Audio Upgrade" shall consist of equipment
required to bring the existing audio system in an auditorium up to Six (6) track
capability. Based on the premise, as hereby agreed between that parties, that
Digital Systems will replace and be substituted for 35mm projection systems
currently in use (except in the case of new construction), Christie acknowledges
that Customer's site readiness obligations for the installation of Digital
Systems will be limited to the Customer Items, and Christie agrees to be
responsible for all other preparations required for installation of Digital
Systems except as may relate to satellite or other content delivery systems and
except for the connection contemplated by Section 4.5(b). Christie further
agrees that it will furnish and install for any Customer screen which has a Six
(6) track system or better a converter necessary to operate the Digital System.
3.2 Training Services. In connection with the installation of a
Digital System at any Service Site, Christie will provide up to three (3)- four
(4) hour training sessions at each Service Site to train Customer's employees in
the use of the Digital System. Christie will from time to time, at Customer's
request, provide additional training to Customer's employees in the use of
Digital Systems, such training to be provided on no more than two (2) occasions
in any calendar year at such times as are mutually agreed between Christie and
Customer.
3.3 User Manuals. Christie will provide to Customer reasonable
quantities of user manuals for Digital Systems.
4. Maintenance and Other Support Services.
4.1 Helpdesk Services. Christie will, from 5:00 a.m. Pacific Time
to 2:00 a.m. Pacific Time the following day, seven days a week, provide
troubleshooting and technical assistance by telephone, generally within thirty
(30) minutes after Customer's request for such assistance.
4.2 Scheduled Maintenance Services. Christie will, at times
scheduled in advance by Christie and Customer, on a twice yearly basis at
approximately six (6) month intervals, perform the following on-site maintenance
services for Digital Systems:
(a) Change each projector lamp and filter, to be completed
as determined by Christie within Christie recommended
lamp life (if Customer chooses not to purchase
replacement lamps from Christie, an appropriate number
of spare lamps and filters per Cineplex must be made
reasonably available to Christie for use in making lamp
and filter changes and replenished by Customer after
use).
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(b) Align and color balance the image, to be completed at
lamp change or as required by component replacement.
(c) Ripple adjustment.
(d) Install hardware, software or firmware upgrades or
releases made commercially available by Licensor or
Christie without charge.
(e) Replace any malfunctioning part or component
(refurbished parts or components may be used for such
replacement).
(f) Miscellaneous minor repairs identified by Customer and
not requiring replacement of a malfunctioning part or
component.
4.3 Emergency Services. Christie will provide on-site emergency
service for Digital Systems, generally within four (4) hours after Customer's
request for emergency service at any Local Site, and as promptly as reasonably
possible, and in any event within 24 hours, after Customer's request for
emergency service at any Non-Local Site. Emergency services include any service
necessary to restore full operation to any Digital System, or component thereof,
which becomes inoperable by reason of system defects or problems.
4.4. Parts.
(a) During the initial ten (10) year period of this
Agreement, Christie will, at its expense, provide all parts (other than lamps
and filters) required in connection with the performance of maintenance services
and emergency services under Sections 4.2 and 4.3, except that where any such
items are required by reason of casualty, natural disaster, accident, misuse,
use of improper power sources or repair other than by Christie service personnel
or other service personnel authorized by Christie, then Christie will invoice
Customer for such items at such prices as may be agreed to between Christie and
Customer from time to time. At Customer's request, Christie will sell and supply
lamp and filter packs to Customer at such prices as may be agreed to between
Christie and Customer from time to time.
(b) Customer may, at its option and upon payment of
additional service fees as agreed between Customer and Christie, extend the
provisions of Section 4.4(a) for one or more extension periods provided that,
prior to the expiration of the initial ten (10) year period and each subsequent
extension period, as applicable, Customer and Christie have agreed in writing on
the duration of the extension period and the additional service fees to be paid
by Customer in respect of such extension period. In the event the provisions of
Section 4.4(a) are not so extended at the expiration of the initial ten (10)
year period or any subsequent extension period, then Christie will thereafter
invoice Customer, at such prices as may be agreed to between Christie and
Customer from time to time, for all parts required in connection with the
performance of maintenance services and emergency services under Sections 4.2
and 4.3.
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(c) Payment terms for all items invoiced to Customer under
this Section 4.4 are net thirty (30) days from the date of invoice.
4.5. Remote Monitoring Services.
(a) Subject to paragraph (b), Christie, through its Network
Operations Center ("NOC"), will provide the following remote monitoring
services:
(i) monitoring of Digital System operation;
(ii) error and status data collection for Digital
System operation; and
(iii) alerting Customer and Christie service engineers
of Digital System problems requiring attention.
(b) Customer must, at its sole cost and expense, maintain a
suitable connection between the NOC and each Digital System.
4.6 Upgrade Services. In the event Licensor makes available any
upgrades for installed Digital Systems, Christie will install such upgrades
(except that Christie will not be required under this Section 4.5 to install
audio system equipment.
4.7 Servicing of Non-Digital 35MM Projectors. During Service Site
visits to perform scheduled maintenance services for Digital Systems, Christie
will perform maintenance service as described on Schedule 4.6 attached hereto on
all 35mm projectors then in service at such Service Site, provided that Customer
will be responsible for either furnishing needed service parts required for such
maintenance or purchasing same at such prices as may be agreed to between
Christie and Customer from time to time for any such parts supplied by Christie.
In the event such service parts are not available during the Service Site visit,
Customer will pay Christie the reasonable costs of a second visit. In addition,
Christie will provide non-exclusive on-site emergency service on an as called,
as needed basis for 35mm projectors in service at any Service Site where
Christie provides maintenance services for Digital Systems under this Agreement,
generally within four (4) hours after Customer's request for emergency service
at any Local Site, and as promptly as reasonably possible, and in any event
within 24 hours, after Customer's request for emergency service at any Non-Local
Site. The cost of such emergency service shall be as agreed between the parties.
4.8 Limited Audio Service. Christie will provide reasonable
routine maintenance of "in-the-booth" components of audio systems at Service
Sites where Christie performs maintenance services under this Agreement,
provided that Customer will be responsible for either furnishing needed
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service parts required for such maintenance or purchasing same at such prices as
may be agreed to between Christie and Customer from time to time for any such
parts supplied by Christie. In the event such service parts are not available
during the Service Site visit, Customer will pay Christie the reasonable costs
of a second visit to install such parts. Christie will have no responsibility
for speaker or screen components of any audio system.
5. Service Hours. Regular maintenance services, emergency services and
special equipment upgrade services will be performed during the hours of 8:00 am
to 1:00 am, local time, seven days a week, for the relevant Service Site. Any
request for emergency services received after 11:00 pm local time will be
treated as a request for maintenance services the following morning.
6. Other Services. Christie will perform for Customer such services not
otherwise provided for in this Agreement as may be agreed to between Christie
and Customer from time to time. Rates or charges for providing any such other
services will be as agreed to between Christie and Customer in each instance.
7. Excluded Services. For clarity, services to be provided under this
Agreement do not include any service with respect to satellite dishes, satellite
receivers, cache servers or any other system components of any satellite
delivery system, or, except as otherwise provided in Section 4.7, with respect
to any audio system or audio system components. Customer may make separate
arrangement with Christie under section 6 for services relating to audio system
or audio system components.
8. Annual Service Fee.
8.1 Annual Service Fee. Subject to Section 8.2, Customer will pay
to Christie an annual service fee in the amount of $2,250.00 per annum per
screen for each screen served by a Digital System, under this Agreement. The
annual service fee includes all services and parts set forth in Sections 3 and 4
(except as otherwise set forth therein) and travel related charges for visits to
Local Sites. The annual service fee does not include travel related charges for
visits to Non-Local Sites, and all such reasonable excess travel related charges
will be billed to Customer at Christie's cost.
8.2 CPI Adjustment. Commencing in 2008, the annual service fee
provided for in Section 8.1 will be subject to annual adjustment to reflect any
increase of the Consumer Price Index-All Urban Consumers-All Items as published
by the Bureau of Labor Statistics ("CPI") over the CPI for calendar year 2005
("CPI Base Year"). In 2007 and each calendar year thereafter, Christie will,
after the CPI for the prior year has become available, compare the CPI for the
prior year against the CPI for the CPI Base Year and adjust the amount of the
annual service fee provided for in Section 8.1 upward to correspond to the
percentage increase (if any) of the CPI for the prior year over the CPI for the
CPI Base Year; provided however, that for any calendar year the annual service
fee may not be increased by more than two percent (2%) over the annual service
fee in effect for the immediately preceding calendar year. In the event the
Bureau of Labor Statistics ceases to publish the CPI, then the parties shall use
any similar index
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which is reasonably comparable to the CPI, applied in such manner as shall
reasonably accomplish the purpose of this Section 8.2.
8.3 Payment. Christie will invoice Customer for the annual service
fee, and payment shall be made quarterly, with the first payment due ninety (90)
days from the date of invoice. For Digital Systems which are installed and
operational at the commencement of any calendar year, Christie will invoice the
annual service in advance for such year. Where screens are enabled with Digital
Systems during any calendar year, Christie will invoice Customer for a pro rata
portion of the annual service fee which is proportionate to the number of full
calendar months remaining in such calendar year at the time the screen is
enabled.
8.4 Taxes. The annual service fee provided for in this Agreement
is exclusive of any applicable sales, use, excise or other similar taxes, all of
which shall be payable by Licensor.
9. Deinstalled Equipment.
9.1 35mm System. As used in this Agreement, "35mm System" means a
35 mm projection system consisting of not less than a 35mm projector, a xenon
lamp house, a platter and all associated lenses.
9.2 Transfer of Deinstalled Equipment. Subject to and in
accordance with the provisions of this Section 9, Customer shall sell and
transfer to Christie, and Christie shall purchase and remove from the relevant
Service Sites, up to 1000 35mm Systems which on or before December 31, 2006 are
deinstalled and replaced by Digital Systems installed by Christie under this
Agreement. The purchase price for all 35mm Systems purchased and sold pursuant
to this Section 9.2 shall be $1.00 for each 35mm System.
9.3 Excluded Equipment.
(a) Customer and Christie shall not have any obligation
under Section 9.2 with respect to any 35mm System which, if sold by Customer to
Christie for a purchase price of $1.00, would result in a loss to Customer for
accounting purposes based upon Customer's then existing book value for such
system.
(b) Customer shall have the right to retain three (3)
deinstalled 35mm Systems at each Service Site. Customer shall, to the extent
reasonably possible, select for such purposes only 35mm Systems which, if sold
by Customer to Christie for a purchase price of $1.00, would result in a loss to
Customer for accounting purposes, and which at the time of deinstallation have a
book value in excess of $2500.
9.4 Option to Purchase Certain Excluded Equipment. When any 35mm
System is deinstalled and replaced by a Digital System installed by Christie
under this Agreement, and at the time of deinstallation such 35mm System is
excluded by application of Section 9.3(a) but the book value of such 35mm System
is $2500 or less,
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and Customer does not select such 35mm System for retention under Section
9.3(b), then Customer shall offer to sell such 35mm System to Christie for book
value. Christie shall be free to accept or reject such offer, at its discretion.
In the event Christie does not accept any such offer within thirty (30) days
after such offer is made, such offer shall lapse and be of no further effect and
Customer shall retain said system.
9.5 Notification. Upon the deinstallation of each 35mm System at
any Service Site, Christie shall identify the deinstalled 35mm Systems to
Customer in writing, and within three (3) business days after receiving such
notification from Christie, Customer shall identify which of such deinstalled
35mm Systems are excluded under Section 9.3(a), which are to be retained under
Section 9.3(b), which are eligible to be sold to Christie pursuant to Section
9.4, and which are to be sold to Christie pursuant to Section 9.2.
9.6 Inclusion of Previously Excluded Equipment. When any 35mm
System is deinstalled and replaced by a Digital System installed by Christie
under this Agreement, and at the time of deinstallation such 35mm System is
excluded by application of Section 9.3(a) but prior to December 31, 2006 Section
9.3(a) ceases to apply to such 35mm System, and Customer does not select such
35mm System for retention under Section 9.3(b), and Christie has not purchased
such 35mm System under Section 9.4, then Customer shall so notify Christie and
sell such 35mm System to Christie pursuant to and in accordance with Section
9.2.
9.7 Terms of Sale. (We are working on Lender approval re this
Section as to release of liens) All 35mm Systems transferred or sold by Customer
to Christie under this Section 9 shall be transferred and sold free and clear of
all security interests, liens, encumbrances and adverse claims, shall be in
operational condition, and otherwise shall be transferred or sold "AS IS, WHERE
IS," without any representations or warranties. Christie shall be responsible
for all transportation, freight or insurance charges incurred in connection with
removing such 35mm Systems from their then location at the time of title
transfer, and shall be responsible for any sales taxes, use taxes or other
similar taxes, if any, applicable to any such transfer or sale. At Christie's
request, Customer shall provide to Christie a suitable xxxx of sale evidencing
the transfer of title of any 35mm System pursuant to this Section 9.
10. Performance Standard. Christie will perform services under this
Agreement in a competent and professional manner, consistent with the highest
quality standards prevailing in the industry. In the event Christie fails to
meet the performance standard set forth in this Section 10, and does not cure
such failure within sixty (60) days after written notice of such failure is
given by Customer to Christie, with a copy to Licensor, Customer's sole remedy
shall be to transition services to be provided under this Agreement in respect
of Digital Systems to another service provider reasonably acceptable to Licensor
and to Licensor's lenders, and, upon completion of such transition, to terminate
this Agreement.
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11. Relationship of Parties. The relationship of the parties to this
Agreement is that of independent contractors, and neither party is or shall be
deemed to be a partner, joint venture partner, agent or employee of the other.
No agency relationship is created by this Agreement, and neither party shall
have the right by reason of this Agreement to act for or bind the other in any
manner whatsoever.
12. Warranty Disclaimer. In connection with the services to be provided
by Christie to Customer under this Agreement, CHRISTIE MAKES NO WARRANTIES,
WRITTEN OR ORAL, EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE,
ALL OF WHICH ARE HEREBY EXPRESSLY DISCLAIMED.
13. Limitation of Liability. NEITHER PARTY SHALL HAVE ANY LIABILITY TO
THE OTHER FOR ANY CONSEQUENTIAL, INCIDENTAL, SPECIAL, EXEMPLARY OR PUNITIVE
DAMAGES, INCLUDING WITHOUT LIMITATION ANY LIABILITY FOR LOST PROFITS OR LOST
DATA, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED THAT SUCH DAMAGES MAY OCCUR.
CHRISTIE'S MAXIMUM LIABILITY HEREUNDER WILL BE FOR THE AMOUNT OF SERVICE FEES
PAID BY CUSTOMER TO CHRISTIE IN RESPECT OF ANY SERVICE WHICH IS THE SUBJECT OF
ANY PARTICULAR CLAIM.
14. Term. Unless earlier terminated under Section 10, the term of this
Agreement shall commence from the Effective Date and continue until the
expiration of the initial term of the Master License Agreement; provided
however, that this Agreement shall terminate upon any termination of the Master
License Agreement.
15. Entire Agreement. This Agreement is the entire agreement of the
parties with respect to the subject matter hereof. This Agreement supersedes all
prior agreements, if any, between the parties with respect to such subject
matter. This Agreement may not be amended except by a written amendment executed
by both parties.
16. Attorneys' Fees. In the event any action, suit or proceeding is
commenced with respect to any matter relating to this Agreement, the prevailing
party shall be entitled to have and recover from the other party its costs of
suit, including reasonable attorneys' fees.
17. Assignment. Neither party may assign any of its rights or delegate
any of its duties under this Agreement without the prior written consent of the
other party; provided, however, that either party may assign its rights or
delegate its duties to the surviving entity in the case of a merger or business
combination or the purchasing entity in the case of a sale of all of its assets;
and provided further that in the event the Master License Agreement is assigned
by Licensor to any Financing Party (as defined in the Master License Agreement),
Christie may assign this Agreement, in whole or in part, to such other qualified
service provider as such Financing Party may designate, and, upon
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any such assignment by Christie and the assumption of this Agreement by such
other qualified service provider, Christie shall have no further obligations
under this Agreement and Customer shall look solely to such other qualified
service provider for performance under this Agreement. Also, Customer shall be
entitled to assign its rights and interests hereunder to its existing lenders
and replacements thereof without the necessity of Christie's consent.
18. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California, without regard
to principles of conflicts of law.
19. Binding Effect. This Agreement is binding on and inures to the
benefit of the parties hereto, and their respective successors and permitted
assigns.
20. Capitalized Terms. All capitalized terms which are not defined
herein shall be defined as set forth in the Master License Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CHRISTIE DIGITAL SYSTEMS USA, INC.
("Christie")
By:
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Its:
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CARMIKE CINEMAS, INC.
("Customer")
By:
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Its:
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