EXHIBIT 10.64
ARTISAN PICTURES INC.
0000 XXXXXXXX XXX., 0XX XXXXX
XXXXX XXXXXX, XX 00000
As of May 9, 2003
Top Secret Productions, LLC
0000 Xxxxxx Xxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
RE: "STEP INTO LIQUID"/ACQUISITION OF RIGHTS
Ladies and Gentlemen:
This letter agreement ("Agreement") sets forth the agreement between ARTISAN
PICTURES INC. ("ARTISAN") and "Licensor" (defined in paragraph 1 below)
confirming ARTISAN's acquisition of certain rights in and to the motion picture
described below. For good and valuable consideration, the parties agree as
follows:
1. LICENSOR: Top Secret Productions, LLC
2. CONDITION PRECEDENT: ARTISAN shall have no obligation to Licensor hereunder
unless and until ARTISAN approves, in its sole discretion, the following
elements:
(a) The chain of title documentation of the rights granted to ARTISAN
herein, approves all agreements with respect thereto and receives all
assignments and releases which it requires in connection therewith.
(b) Licensor shall procure and maintain in full force and effect
standard producer's liability (errors and omissions) insurance issued by a
nationally recognized insurance carrier covering the Picture with minimum limits
of at least one million dollars ($1,000,000) for any claim arising out of a
single occurrence and three million dollars ($3,000,000) for all claims in the
aggregate. Such insurance:
(i) shall be written on either (i) an occurrence basis, in
which event it shall remain in full force and effect for a period of three (3)
years from the commencement of principal photography and may not be permitted to
lapse, or (ii) a claims-made basis, in which event it shall remain in full force
and effect for a period of three (3) years from the commencement of principal
photography, shall cover any claims made at any time during the term thereof and
may not be permitted to lapse; and
(ii) may not be canceled without thirty (30) days prior
written notice to ARTISAN; and (iii) shall not carry a deductible larger than
ten thousand dollars ($10,000); and
(iv) shall name ARTISAN its parent, subsidiaries and related
companies, its licensees and affiliates and its officers, directors, agents,
attorneys and employees, as additional insureds; and
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(v) shall provide coverage for the Picture, and advertising
and promotion materials with respect thereto, and shall be primary and not
contributing to or in excess of any such insurance maintained by ARTISAN with
regard to all of the Rights Granted; and
(vi) shall include all media, title and music coverage.
3. PICTURE: A feature-length motion picture tentatively entitled "Step Into
Liquid," with a running time of not less than 85 minutes, but no more than 120
minutes including main titles and end credits (the "Picture").
4. TERRITORY: United States of America and the Dominion of Canada, Province of
Xxxxxx Xxxxxx Island, Northwest Territories and Yukon Territories and
"Television Rights" (as defined below) in Bermuda (collectively, the
"Territory"). The Territory shall include the territories, possessions,
commonwealths and trusteeships of each country therein (including, without
limitation, Puerto Rico, Guam, Saipan, the U.S. Virgin Islands, the Xxxxxxxx
Islands, Midway Island, Xxxxxxxx Islands and American Samoa,), and all ships and
aircraft for which the principal business office is located in any country
comprising part of the Territory and/or flying the flag of any country
comprising part of the Territory, and industrial and marine installations
(including oil rigs, drilling platforms and construction sights, company
theaters, etc.), wherever located, owned by any company whose principal place of
business is located in any country in the Territory, and all military bases
and/or diplomatic installations wherever situated where forces of any country
comprising any part of the Territory are stationed.
5. RIGHTS: Licensor hereby grants to ARTISAN exclusively all rights in and to
the Picture under copyright in any and all media now known or hereafter devised
(excluding the "Reserved Rights", as defined below), languages and versions,
throughout the Territory, including but not limited to the following
(collectively, "Rights Granted"):
(a) VIDEO RIGHTS: The sole and exclusive right to manufacture,
advertise, promote and distribute on a sale or rental basis on its own or
through licensees, videocassettes, cartridges, DVD's, tape, video discs, laser
discs, 8mm recordings (in whatever form), or any other visual or optical
recording devices (including, but not limited to, CD-I, CD ROM, DVD) and all
other optically read media now known or hereafter discovered, containing any and
all language versions of the Picture for use by consumers and the right to
exploit the Picture by means of "Video-On-Demand" (collectively, "Videograms")
throughout the Territory during the Term (defined below). "Video-On-Demand"
shall mean the transmission or download of a selected video picture from a
central video library via a television, cable, satellite, internet or related
electronic system where reception or download of said video picture at a time
selected by the viewer in the viewer's discretion is available only upon payment
of a separate, discreet charge therefor (such as a per program or per day fee);
(b) NON-THEATRICAL RIGHTS: The sole and exclusive right to exploit the
Picture in non-theatrical markets, i.e., schools, libraries, hospitals, hotels,
airlines, military or armed services installations, ships at sea and aircraft
and other institutions that typically license recorded entertainment materials
from programming suppliers throughout the Territory during the Term
(collectively, "Non-Theatrical");
(c) THEATRICAL RIGHTS: The sole and exclusive right to rent, lease,
license, exhibit, distribute and otherwise deal in and with the Picture on any
and all sizes and gauges of film and in any and all languages or versions in the
theatrical field for viewing by the public, including, without limitation, to
make rentals, leases and licenses respecting all theaters or other places of
public viewing, throughout the Territory during the Term (collectively,
"Theatrical");
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(d) TELEVISION RIGHTS: The sole and exclusive right to exploit the
Picture through all television media now known or hereafter developed,
including, but not limited to, "Cable" or "Pay Television" (which shall mean
exhibition over a service for which subscribers pay a premium for the
programming transmitted), "Pay-Per-View" (which shall mean exhibition or
transmission over a service for which subscribers pay a premium on a per-picture
basis for each picture which they choose to receive), and "Free Television"
(which shall mean exhibition over television broadcast stations, whether network
stations or independent stations, where no charge is made to the viewer and/or
exhibition by means of satellite or cable television for which subscribing
members of the public may pay for the transmission service provided by the
satellite or cable system, but do not otherwise pay a premium for the
programming transmitted by the satellite or cable system and/or any other
delivery system now known or hereafter devised) throughout the Territory during
the Term (collectively, "Television");
(e) SEQUELS/REMAKES: During the Term, if Licensor, or its licensee,
intends to produce a sequel or remake of the Picture, then Licensor shall so
notify ARTISAN and thereafter negotiate with ARTISAN with respect to the grant
to ARTISAN of the same rights for the Territory granted herein to ARTISAN. If
such negotiations do not result in the execution of a deal memo between Licensor
and ARTISAN within a period of thirty (30) days from commencement of such
negotiations, then Licensor shall be free thereafter to accept an offer from a
third party with respect to the licensing of such rights, provided that such
third party offer is on terms more favorable to Licensor than the terms offered
by ARTISAN;
(f) RESERVED RIGHTS: Licensor hereby reserves unto itself the right to
exploit by any means in its sole discretion all so-called "ancillary rights" in
and to the Picture throughout the Territory during the Term, including, without
limitation, merchandising, print publishing, novelization rights, the right to
produce soundtrack albums based upon the Picture and all music publishing rights
in the music for the Picture (the "Reserved Rights"); and
(g) INCIDENTAL RIGHTS: The Rights Granted also include all usual and
customary incidental rights which ARTISAN requires or desires for the purpose of
exploiting the Rights Granted, including ARTISAN'S right to the following,
subject to any restrictions or approvals that are set forth in this Agreement:
(i) to make or use advertising, publicity, promotional
and packaging materials relating to the Picture, and
all such materials created by ARTISAN shall become
the sole property of ARTISAN;
(ii) to include in all such advertising, publicity,
promotional or packaging materials, any artist's
identification (E.G., the name, biographical
information, photographs, likeness, voice and other
sound effects as well as recordings, transcriptions,
films and other reproductions thereof, of any person
or character appearing in the Picture or any person
furnishing materials or services in the Picture) but
not as a direct endorsement for any product or
service other than the Picture, provided such use is
consistent with the paid advertising requirements
submitted by Licensor as part of Delivery;
(iii) subject to the terms of the music licenses for the
Picture, to use and perform all music, lyrics, scores
and musical works incorporated in the soundtrack of
the Picture, including in-context and out-of-context
use thereof in advertising and promotional materials
relating to the Picture including trailers,
television and radio spots, music video clips and
electronic press kits;
(iv) subject to Licensor's approval, such approval not to
be unreasonably withheld and shall be deemed approved
if not disapproved by Licensor within five (5)
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business days after such approval is requested in
writing by ARTISAN, to make cross-promotions and
commercial tie-ins with products and services and
other sponsorship arrangements;
(v) to make or exploit any version of the Picture and
trailers thereof (i.e., in addition to the original
version of the Picture and trailers, if any, as
supplied to ARTISAN hereunder), including the right
to add "chapter stops" or other addressable locator
codes of any kind in any Videogram, or the inclusion
of expository materials and interviews with
directors, filmmakers, or any other third party
contained on a separate audio or audiovisual track in
any Videogram;
(vi) subject to the terms and conditions of this
Agreement, to cause trailers and other advertising
and promotional materials relating to the Picture to
be manufactured, exhibited and distributed;
(vii) to couple and embody the Picture with other motion
pictures, including motion pictures of the same
serial or series (if applicable), onto the same copy
and to remove therefrom any duplicate on-screen
titles, credits and notices;
(viii) to use all tradename(s), trademark(s) and logo(s) of
ARTISAN, whether now or hereafter used, in such
manner, position and type as ARTISAN may in its sole
discretion elect;
(ix) to use all tradename(s), trademark(s) and logo(s) of
Licensor, whether now or hereafter used, in such
manner, position and type as ARTISAN may in its sole
discretion elect;
(x) to publish and license and authorize others to
publish in any language, in any media and in such
form as deemed advisable, synopses, summaries,
adaptations, resumes and stories of and excerpts from
the Picture and from any literary, dramatic or
musical material in the Picture or upon which the
Picture is based; and
(xi) subject to Licensor's approval, such approval not to
be unreasonably withheld and shall be deemed approved
if not disapproved by Licensor within five (5)
business days after such approval is requested in
writing by ARTISAN, to exhibit and authorize others
to exhibit in any language and in any media,
including radio and television, excerpts and clips
from the Picture and from any literary, dramatic or
musical material in the Pictures or upon which the
Picture are based, subject to length limits
consistent with guild obligations and otherwise
standard in the entertainment industry for similar
product, but in no event longer than three (3)
minutes in length, and any revenues derived therefrom
shall be included in Defined Gross.
6. HOLDBACKS: Licensor agrees that it will not exploit the Picture and will not
permit the exploitation of the Picture in any medium (e.g., theatrical, video,
television, etc.) outside the Territory until two (2) months after ARTISAN's
initial release of the Picture in such medium in the Territory. Licensor shall
not, without ARTISAN's prior written approval, (a) preview or otherwise publicly
exhibit the Picture in the Territory until after the initial release of the
Picture in the Territory, or (b) exhibit the Picture at a film festival in the
Territory prior to the initial release of the Picture in the Territory by
ARTISAN (ARTISAN hereby pre-approves the exhibition of the Picture at the Maui
and Los Angeles film festivals). Licensor agrees that it will advise ARTISAN
when it proposes to exhibit the Picture at any film festivals outside the
Territory. In addition, Licensor agrees to observe all reasonable border
protection requirements which ARTISAN notifies Licensor.
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7. TERM: The term of this Agreement shall begin on the date hereof and continue
for ten (10) years following ARTISAN's initial theatrical release of the
Picture. Following the expiration of the Term, ARTISAN shall have a six (6)
month non-exclusive Video sell-off period.
8. EXPLOITATION DECISIONS:
(a) Subject only to subparagraphs (b)-(g) below, ARTISAN shall have
absolute discretion concerning the exploitation of the Picture in the Territory
and in any and all media. The business judgment of ARTISAN and its sublicensees
regarding any matter affecting the exploitation of the Picture shall be binding
and conclusive upon Licensor. Except as otherwise provided herein, ARTISAN shall
have the sole discretion whether to release the Picture in a given media and/or
territory.
(b) At ARTISAN's election and expense, the main titles shall contain
the ARTISAN logo which shall be furnished by ARTISAN (such expense shall be
treated as a Distribution Expense).
(c) ARTISAN shall spend or cause to be spent no less than Five Hundred
Thousand Dollars (US$500,000) exclusively on prints and advertising in
connection with the initial theatrical release of the Picture in the Territory
(the "P&A Commitment"). The P&A Commitment shall be exclusive of any potential
monetary contribution to the advertising for the Picture from Microsoft.
(d) Licensor shall have approval over the marketing materials used for
the promotion of the Picture, such approval not to be unreasonably withheld and
shall be deemed approved if not disapproved by Licensor within five (5) business
days after such approval is requested in writing by ARTISAN.
(e) ARTISAN shall coordinate with Licensor to incorporate elements of
Licensor's Hawaii distribution strategy into ARTISAN's marketing campaign for
the Picture, as may be practical.
(f) ARTISAN shall utilize Licensor's representative in connection with
a "grass roots" advertising campaign in connection with the theatrical release
of the Picture, and shall bear all reasonable costs associated with such
campaign. Any such costs shall be recouped by ARTISAN as Distribution Expenses
hereunder.
(g) Subject to Licensor's timely Delivery of the Picture pursuant to
the terms of Paragraph 11 below, ARTISAN shall cause the theatrical release of
the Picture during August 2003.
9. MINIMUM GUARANTEE:
(a) ARTISAN shall pay to Licensor a non-returnable, recoupable and
cross-collateralized minimum guarantee of Fifty Thousand Dollars (US$50,000),
payable 50% (i.e., US$25,000) upon full execution of this Agreement and
satisfaction of the conditions precedent in Paragraph 2 above and 50% (i.e.,
US$25,000) upon Delivery and acceptance of the Picture (the "Minimum
Guarantee"). ARTISAN hereby acknowledges that the timely payment of the payments
described in this Paragraph 9 are of the essence of this Agreement.
(b) ARTISAN shall pay to Licensor the following bonuses, contingent and
payable, if at all, within ten (10) business days after the theatrical box
office receipts of the Picture, as reported in Variety, equal or exceed the
applicable box office levels listed below. Such bonuses, if any, shall be fully
recoupable, cross-collateralized additional minimum guarantees:
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(i) Seventy-Five Thousand Dollars (US$75,000) for every
One Million Dollars (US$1,000,000) in box office
receipts, as reported in Variety;
(c) ARTISAN shall pay to Licensor the following bonuses, contingent and
payable, if at all, within ten (10) days from the date on which the sales levels
can be confirmed by ARTISAN. All sales unit levels referred to in this Paragraph
9(c) refer to cumulative sales commencing from the initial video street date of
the Picture. Such bonuses, if any, shall be fully recoupable,
cross-collateralized additional minimum guarantees:
(i) For all units sold and not returned (in excess of the
reserve) at the initial Suggested Retail Price ("SRP"), which initial SRP shall
be no less than Twenty Dollars (US$20.00), ARTISAN shall pay to Licensor the
following bonuses:
(A) Fifty Cents (US$0.50) for every unit sold in
excess of 100,000 units, but less than
225,001 units ("Level One");
(B) One Dollar (US$1.00) for every unit sold in
excess of 225,000 units, but less than
350,001 units ("Level Two"); and
(C) One Dollar and Fifty Cents (US$1.50) for
every unit sold in excess of 350,000 units
("Level Three").
(ii) For all units sold and not returned (in excess of the
reserve) with an SRP greater than or equal to Fifteen Dollars (US$15.00) but
less than Twenty Dollars (US$20.00), ARTISAN shall pay to Licensor the following
bonuses:
(A) Thirty-Five Cents (US$0.35) for each Level
One unit;
(B) Seventy-Five Cents (US$0.75) for each Level
Two unit; and
(C) One Dollar (US$1.00) for each Level Three
unit.
(iii) For all units sold and not returned (in excess of the
reserve) with an SRP greater than or equal to Ten Dollars (US$10.00) but less
than Fifteen Dollars (US$15.00), ARTISAN shall pay to Licensor the following
bonuses:
(A) Twenty-Five Cents (US$0.25) for each Level
One unit;
(B) Fifty Cents (US$0.50) for each Level Two
unit; and
(C) Seventy-Five Cents (US$0.75) for each Level
Three unit.
(iv) For all units sold and not returned (in excess of the
reserve) with an SRP less than Ten Dollars (US$10.00), ARTISAN shall pay to
Licensor the following bonuses:
(A) Fifteen Cents (US$0.15) for each Level One
unit;
(B) Thirty-Five Cents (US$0.35) for each Level
Two unit; and
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(C) Fifty Cents (US$0.50) for each Level Three
unit.
(d) Notwithstanding the foregoing, ARTISAN shall pay the outstanding
music license fees for the Picture and offset such payments against all monies
owing to Licensor under this Agreement, including, the Minimum Guarantee, the
theatrical bonuses (if any), the video bonuses (if any) and any Defined Proceeds
payable to Licensor.
10. DEFINED PROCEEDS: Licensor shall be entitled to 100% of the ARTISAN Defined
Proceeds for the Picture as set forth in Exhibit "A" (subject to any
modifications in Rider "A-1" and Rider "A-2" to Exhibit "A" and the Rider to
Rider "A-1") attached hereto. For purposes of calculating ARTISAN Defined
Proceeds, the following modifications to Exhibit "A" shall be made:
(a) ARTISAN's Distribution Fees shall be as follows:
(i) Theatrical: 25%
(ii) Television:
(A) Pay Cable: 25%
(B) Basic Cable: 25%
(C) Broadcast: 25%
(iii) Video: 25%
(b) The "cost of production" shall be equal to the Minimum
Guarantee.
(c) ARTISAN agrees that, with respect to any sublicensing of the Rights
Granted to the Picture in Canada (ARTISAN sublicenses all of its rights in
Canada to Alliance Atlantis), the maximum combined distribution fee retained by
ARTISAN and any applicable sublicensee shall not exceed 50% for Theatrical and
Television Rights and shall not exceed 35% for Video Rights.
11. DELIVERY: "Delivery" shall mean ARTISAN's receipt of the items listed in
Exhibit "B," attached hereto, and ARTISAN's Approval (as defined below) of such
items according to the procedures set forth below. At Licensor's sole cost and
expense, Licensor shall deliver the items listed on Exhibit "B" immediately.
Notwithstanding the foregoing, the final completed picture elements shall be
delivered immediately upon completion of the tape to film transfer but in no
event later than July 15, 2003. If Licensor shall fail to deliver the required
items by the aforesaid time (subject to Force Majeure and subject to the terms
of Paragraph 11(a) below), ARTISAN shall have the right to (i) itself supply the
items at Licensor's cost, deducting the amount thereof from outstanding balance
of the Minimum Guarantee and the theatrical and video bonuses (set forth in
Paragraph 9), or to require Licensor promptly to supply such items, or (ii)
terminate this Agreement upon written notice to Licensor, and upon such
termination, ARTISAN shall be (A) relieved of all obligations to Licensor
hereunder, and (B) Licensor shall reimburse ARTISAN for all out-of-pocket costs
theretofore incurred under this Agreement.
(a) If any of the Delivery items are incomplete or technically
unacceptable, ARTISAN shall notify Licensor in writing specifying the defects
for the non-physical delivery items, or shall present a defect notice by the
laboratory for the physical delivery items ("Defect Notice"). Such Defect
Notices shall be delivered within ten (10) days of receipt of the delivery
items, except with respect to items that require quality control testing, for
which such Defect Notices shall be delivered within (20) days of receipt of such
items. If Licensor fails to cure the specified defects within seven (7) days of
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receipt of the Defect Notice, ARTISAN may secure acceptable replacements, and
deduct such costs from the Minimum Guarantee and the theatrical and video
bonuses (set forth in Paragraph 9), or, if ARTISAN is unable to secure
acceptable replacements, or if ARTISAN determines in its good faith business
judgment that it is economically unfeasible to secure acceptable replacements,
then ARTISAN may, at its option, terminate this Agreement upon written notice to
Licensor, and upon such termination, ARTISAN shall be (A) relieved of its
obligations hereunder, and (B) Licensor shall reimburse ARTISAN for all
out-of-pocket costs theretofore incurred under this Agreement. If ARTISAN has
not sent a Defect Notice within twenty (20) days of receipt of a delivery item,
then such delivery item shall be deemed approved ("Approval"). In addition, all
delivery documents shall be delivered to ARTISAN in English. If any documents
are not delivered in English, then ARTISAN shall have such documents translated
and all costs associated therewith shall be treated as a recoupable Distribution
Expenses. All cure periods contained in this Paragraph 11 are in lieu of any
cure periods provided in Paragraph 16 below.
12. MATERIALS:
(a) PICTURE ELEMENTS: At Licensor's cost and expense, Licensor shall
provide to ARTISAN (without payment of any permission or similar fees by ARTISAN
to Licensor or to any third party) unrestricted access to all of the elements of
the English language version of the Picture listed in Exhibit "B" ("Picture
Elements"). Licensor shall provide access to the Picture Elements to ARTISAN at
a laboratory acceptable to ARTISAN through a laboratory access letter for the
Picture acceptable to ARTISAN, which laboratory access letter is attached hereto
as Schedule 1 and is incorporated by this reference herein. Licensor shall not
remove the Picture Elements from such laboratory during the Term of this
Agreement without ARTISAN's prior written approval.
(b) PICTURE CHANGES: ARTISAN shall have the right to change and modify
the Picture solely to: (i) add the names and/or logos of ARTISAN, any
subdistributor(s) or any exhibitor(s); (ii) meet the length requirements and
satisfy the standards and practices of television exhibition; (iii) meet
censorship requirements of governmental or other authorities; (iv) add any
anti-piracy warnings, trailers or other promotional materials, closed-captioned,
descriptive video or other encoding or encrypting, (v) dub and subtitle the
Picture; (vi) create foreign language translations of the title of the Picture;
(vii) to meet the running time requirements set forth in Paragraph 3; (viii)
make changes required to meet the MPAA requirements to obtain a rating not more
restrictive than "R"; and (ix) if in the reasonable opinion of ARTISAN's legal
counsel it is necessary to do so for legal reasons. The cost of such changes
shall be paid by ARTISAN and accounted for as a Distribution Expense.
(c) FOREIGN LANGUAGE VERSIONS: If Licensor has prepared versions of the
Picture in any of the languages of the Territory, ARTISAN shall have
unrestricted access to any such dubbed or subtitled tracks of the Picture
without payment of a permission, use or performance fee (including residuals or
any mechanical fees) by ARTISAN to Licensor or any third party (although ARTISAN
shall advance the cost of any orders for prints placed with the laboratory with
respect to such dubbed or subtitled tracks). ARTISAN shall have no obligation as
to any performance fees, residuals or any mechanical fees with regard to
Licensor's use of such dubbed or subtitled versions.
(d) ADVERTISING AND PUBLICITY: Licensor shall deliver to ARTISAN at an
address designated by ARTISAN (without payment of any manufacturing,
duplicating, delivery, permission or other fee by ARTISAN) all materials listed
in Exhibit "B" as well as sample artwork and advertising and publicity materials
for all advertising campaigns for the Picture. ARTISAN agrees that it shall
afford Licensor and Licensor's foreign distirbutors with reciprocal access to
advertising and publicity materials (including, without limitation, key art,
sample artwork, advertising and publicity materials (including, without
limitation the EPK, trailer and promotional elements) for the Picture) which
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access shall be free of charge if intended for personal use or, if such access
is in connection with the exploitation of the Picture outside the Territory,
such access shall be subject to an access fee in an amount equal to twenty-five
percent (25%) of ARTISAN's cost to create each element Licensor, or its foreign
distributors, desires access to.
13. RESIDUALS/THIRD PARTY PAYMENTS: All profit participations, residuals, music
synchronization, performance and other mechanical fees, and any other license
fees (including, without limitation, all literary, artistic, musical,
technological and/or intellectual property rights fees) in connection with the
Picture shall be the obligation of Licensor and shall not be the obligation of
or paid for by ARTISAN ("Third Party Payments"). Licensor shall deliver the
Picture free and clear of any claims, liens or encumbrances. ARTISAN shall have
the right, but not the obligation, to make such Third Party Payments on behalf
of Licensor and recoup such costs as Distribution Expenses from any amounts then
owing to Licensor.
14. REPRESENTATIONS AND WARRANTIES:
(a) Licensor represents and warrants that:
(i) it is a corporation duly formed and validly existing in
good standing under the laws of Delaware and has the full right, power, legal
capacity and authority to enter into and carry out the terms of this Agreement;
(ii) it has no agreement with or obligations to any third
party with respect to the Picture which might conflict or interfere with any of
the provisions of this Agreement or the use or enjoyment by ARTISAN of any of
the Rights Granted;
(iii) it has secured and will maintain all rights necessary
for ARTISAN to use and enjoy the Rights Granted without ARTISAN being required
to make any payments except as specifically provided herein;
(iv) ARTISAN has acquired the valid and exclusive rights to
exhibit, distribute and exploit the Picture in the media as provided in
Paragraph 5, above, during the Term and in the Territory;
(v) On or before Delivery, all of the following will have been
fully paid or discharged:
(A) except as to customary residual payments and
payments due to performing rights societies, all claims and rights of owners of
copyright in literary, dramatic, musical rights and other property or rights in
or to all stories, plays, scripts, scenarios, themes, incidents, plots,
characters, dialogue, music, words and other material of any nature whatsoever
appearing, used or recorded in the Picture;
(B) all claims and rights with respect to the use,
distribution, performances, exhibition and exploitation of the Picture, and any
music contained therein, throughout the Territory,
(C) all costs of producing and completing the
Picture, except for profit participations not yet due which Licensor represents
and warrants are solely the responsibility of Licensor.
(vi) Except with respect to any laboratory liens that are
imposed as a result of ARTISAN's or its licensees actions, there are not, and
there will not be outstanding at any time during the Term hereof, liens, claims,
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charges, encumbrances, restrictions, agreements, commitments, arrangements
whatsoever with any person, firm or corporation, or any obligation (past,
present or future), or any defaults under, or breaches of, any contract, license
or agreement which can, or will, in any way interfere with, impair, abrogate, or
adversely or otherwise affect any of the rights granted to ARTISAN under this
Agreement, and that there are not and will not be any payments of any kind
required to be made by ARTISAN in respect, or as a result, of any use of the
Picture pursuant to the rights and licenses herein granted to ARTISAN.
(vii) Neither the Picture nor any part thereof, nor any
materials contained therein or synchronized therewith, nor the title thereof,
nor the exercise of any right, license or privilege herein granted, violates or
will violate, or infringes or will infringe, any trademark, trade name,
servicemark contract, agreement, copyright (whether common law or statutory),
patent, literary, artistic, dramatic, personal, private, civil or property
right, right of privacy, right of publicity or "moral rights of authors" or any
other rights whatsoever, or unfairly competes with, or slanders or libels (or
constitutes a trade disparagement of), any person, firm, corporation or
association whatsoever.
(viii) Licensor has not sold, assigned, transferred or
conveyed, and will not sell, assign, transfer or convey, to any party any right,
title or interest in and to the Picture or any part thereof, or in and to the
dramatic or literary material upon which it is based, adverse to or in
derogation of the rights granted to ARTISAN.
(ix) Licensor owns and controls, without any limitations or
restrictions whatsoever, all motion picture performance, synchronization,
mechanical license and all other rights granted hereunder and all subsidiary
rights embodied therein and has obtained all necessary licenses required for the
exhibition, performance, duplication, distribution, marketing and exploitation
of the Picture hereunder (including the music contained therein) throughout the
Territory and during the Term, for any and all purposes licensed hereunder and
by every means, method and device now or hereafter known or required for the
full, complete and unlimited exercise and enjoyment by ARTISAN of each and all
of the Rights granted in this agreement. The performing rights to all musical
compositions in the Picture are controlled by Licensor or their affiliates or
are in the public domain or are controlled by the Society of European State
Authors and Composers, Inc., American Society of Composers, Authors and
Publishers (ASCAP), Broadcast Music, Inc. (BMI), or their affiliates to the
extent required for the purpose of this Agreement.
(x) There are no restrictions which would or could prevent
ARTISAN from distributing the Picture by any of the media or means for which
rights are granted to ARTISAN hereunder and there are not and will not be any
payments (out of any part of any revenues from the distribution of exploitation
of the Picture or otherwise) which must be made by ARTISAN to any actors,
musicians, directors, writers or to other persons who participated in the
Picture, or to any union, guild or other labor organization for any right to
exhibit the Picture or as compensation in connection with such exhibition or for
any other use of the Picture or any of the rights therein and thereto granted
hereunder, and ARTISAN does not hereby become obligated to any guild,
organization and any other third party.
(xi) On or before Delivery, the Picture will have been duly
and properly registered (and, if appropriate, renewed) for copyright in the
United States or can be so registered (and if appropriate, renewed), and the
copyrights in the Picture and the literary, dramatic and musical materials upon
which the Picture is based, or which are contained in the Picture, are and will
be valid and subsisting during the Term throughout the Territory, and no part is
or will be in the public domain during the Term.
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(xii) There is not now outstanding any litigation or
threatened arbitration or litigation or arbitration, or any claims, demands,
investigations or threats of claims, with respect to the Picture, the literary,
dramatic or musical material upon which the Picture is based or which is used
therein, or the physical properties thereof.
(xiii) Upon Delivery, the Picture will have a running time of
at least 85 minutes, but not more than 120 minutes (including main titles and
end credits) in both its Theatrical and Television versions and both such
versions will be fully synchronized with sound and dialogue in the English
language. Upon Delivery, the original negative of the Picture is free of cracks,
tears, scratches abrasions, and may be used for the purpose of making pre-print
material of acceptable fidelity (image, sound and color), to enable the
manufacture of 16mm and 35mm prints and Videograms. All negatives,
internegatives, interpositives and other pre-print materials of the Picture to
be delivered or made available to ARTISAN are and will be of a quality suitable
for the manufacture therefrom of commercially acceptable positive release prints
and Videograms of the Picture and the trailer thereof. The Television version of
the Picture to be delivered hereunder will conform to censorship requirements
and broadcasting standards and practices for broadcasting and exhibition in all
of the media and all pre-print materials to be delivered hereunder are and will
remain, during the Term, free and clear of all liens, claims, debts and charges
insofar as ARTISAN's rights are concerned.
(xiv) Upon Delivery, the main and end titles of the negative
and pre-print materials of the Picture will contain all necessary and proper
credits for the actors, directors, writers and all other persons appearing in or
connected with the production of the Picture who are entitled to receive the
same.
(xv) Upon Delivery, the Picture will contain a copyright
notice in the name of the copyright proprietor which conforms to and complies
with the requirement of the Universal Copyright Convention.
(xvi) Upon Delivery, the Picture will have received a rating from the Code and
Rating Administration of the Motion Picture Association of America for U.S.
theatrical release which is not more restrictive than "R." Notwithstanding the
foregoing, ARTISAN shall arrange for the Picture to be rated and shall recoup
any costs associated therewith as Distribution Expenses hereunder.
(b) ARTISAN warrants and represents that it is a corporation with full
right, power, legal capacity and authority to enter into and carry out the terms
of this Agreement.
15. INDEMNIFICATION: Each party ("Indemnifying Party") hereby indemnifies,
defends and holds harmless the other party and its successors, licensees,
assigns, and employees, officers and directors (collectively for the purposes of
this Paragraph, "an Indemnified Party") from and against any and all liability,
loss, damage, cost and expense, including, without limitation, reasonable
outside attorney's fees (but excluding lost profits or consequential damages)
arising out of any breach or alleged breach, or claim by a third party with
respect to any warranty or representation made by the Indemnifying Party herein.
The Indemnified Party shall promptly notify the Indemnifying Party in writing of
any claim to which the foregoing indemnification applies and the Indemnifying
Party shall undertake, at its own cost and expense, the defense thereof. The
Indemnified Party may, at its option and expense, engage its own counsel. If the
Indemnifying Party fails to promptly appoint competent and experienced counsel,
the Indemnified Party may engage its own counsel and the reasonable charges in
connection therewith shall promptly be paid by the Indemnifying Party. If the
Indemnified Party settles or compromises any such suit, claim or proceeding, the
amount thereof shall be charged to the Indemnifying Party, provided that the
Indemnifying Party's reasonable prior approval has been secured.
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16. REMEDIES: Except as otherwise specifically provided for herein, if either
party is in default or in breach of any of the material provisions of this
Agreement, including, but not limited to, the representations and warranties
made by it herein, or in the case of ARTISAN, the failure to make any payment
provided for herein at the time and in the manner herein required, and such
party shall fail to cure such default or breach within thirty (30) days after
written notice from the other party, or one party becomes insolvent, executes an
assignment for the benefit of creditors, or takes advantage of any applicable
insolvency or any other like statute, or a petition under any bankruptcy or
liquidation act is filed by or against it, or a receiver is appointed for the
assets of such party (each of the above acts being hereinafter referred to as an
"Event of Default") then the non-defaulting party may, and shall be limited to,
bringing an action at law to recover damages. In no event shall Licensor or any
party transferring rights or rendering services in connection with the Picture
be entitled by reason of any breach of this Agreement whatsoever, to terminate
or rescind this Agreement or to enjoin or restrain or otherwise interfere with
the distribution or exhibition of the Picture or any part or element thereof, or
the use, publication or dissemination of any advertising issued in connection
with the Picture.
17. NOTICE: Any notice or communications provided for hereunder must be in
writing and delivered either personally, by telecopy, telex or by registered
mail, postage prepaid to the following addresses (or to such other address as
specified by like notice):
(a) for Licensor:
Top Secret Productions, LLC
0000 Xxxxxx Xxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
Attn: Xxxx Xxxxxx
(b) for ARTISAN:
Artisan Pictures Inc.
0000 X. Xxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxx Xxxxxx, XX 00000
Attn: Xxx Xxxxxxxx and Xxxx Xxxxx
18. FORCE MAJEURE: If either party's performance hereunder is prevented by
reason of an event of Force Majeure, then during the existence of such event,
the effected party shall not be liable for its failure to timely perform its
obligations hereunder and this Agreement shall be extended for a period equal to
the delay caused by the occurrence of the Force Majeure. "Force Majeure" as used
herein shall mean fire, flood, epidemic, earthquake, explosion, accident, labor
dispute or strike, Act of God or public enemy, riot or civil disturbance,
invasion, war (whether declared) or armed conflict, inability to obtain
personnel or facilities, failure of common carriers, any municipal ordinance,
any state or federal law, governmental order or regulation, order of any court
of competent jurisdiction, restriction imposed by the Motion Picture Export
Association of America, Inc. or any other similar thing or occurrence not within
the control of that party. If such delay or interruption continues for more than
six (6) months, ARTISAN may, at its option, terminate this Agreement and shall
be entitled at that time to the return of any unrecouped Minimum Guarantee
payments theretofore made.
19. HOLDING OF MONIES: Licensor expressly acknowledges that Licensor has no
right, title or interest of any kind or character whatsoever in or to the
Defined Gross (or any portion thereof) from the Picture and that the same shall
be and remain ARTISAN's sole and exclusive property, and that ARTISAN shall not
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be obligated to segregate the same from other funds, it being the intent and
purpose hereof that Licensor's share of Defined Gross or Defined Proceeds from
the Picture are referred to herein merely as a measure in determining the time
and manner of payment to Licensor and that ARTISAN shall not be deemed a
trustee, pledgeholder or fiduciary thereof.
20. SECURITY INTEREST: Licensor hereby grants to ARTISAN a first position
security interest ("Security Interest") in the Picture including the right of
access to the Materials ("Collateral") to secure the Minimum Guarantee,
ARTISAN's recoupment rights hereunder and any other monies to be paid to ARTISAN
under this Agreement, and the performance of Licensor's obligations hereunder.
Licensor warrants and represents that it owns all rights in and to the Picture
(including all underlying rights necessary to grant the Rights Granted), it has
not previously assigned, granted or transferred an interest in the Collateral to
any party which would conflict, interfere or be inconsistent with the Security
Interest granted to ARTISAN herein and that the Picture has been registered for
copyright protection in the United States and Canada. Licensor agrees to execute
UCC-1 financing statements, copyright mortgages, laboratory access letters and
any such other document as ARTISAN may require to perfect, protect or evidence
the foregoing Security Interest. Following the execution of this Agreement, if
Licensor fails to deliver such security documents within thirty (30) days after
ARTISAN's request therefor, Licensor irrevocably appoints ARTISAN to execute
such security documents as Licensor's attorney-in-fact, coupled with an
interest.
21. MISCELLANEOUS:
(a) Nothing contained herein shall be deemed to create a relationship
of partnership, joint venture, agency, fiduciary or employment between the
parties.
(b) This Agreement, including any schedules and exhibits attached
hereto, sets forth the entire understanding of the parties regarding the subject
matter hereof and supersedes all prior oral or written agreements between them.
In the event of any inconsistency between the terms in any such schedules or
exhibits and the terms in this Agreement, the terms in this Agreement shall
govern.
(c) No waiver of any default or breach of this Agreement by either
party shall be deemed a continuing waiver or a waiver of any other breach or
default, no matter how similar.
(d) The substantive laws (as distinguished from the choice of law
rules) of the State of California and The United States of America applicable to
contracts made and performed entirely in California shall govern (i) the
validity and interpretation of this Agreement, (ii) the performance by the
parties of their respective obligations hereunder, and (iii) all other causes of
action (whether sounding in contract or in tort) arising out of or relating to
this Agreement, or the termination of this Agreement.
(e) Any dispute under the Agreement will be resolved by final and
binding arbitration under the Rules of Arbitration of the American Film
Marketing Association in effect when the arbitration is filed (the "AFMA
Rules"). Each party waives any right to adjudicate any dispute in any other
court or forum, except that a party may seek interim relief before the start of
arbitration as allowed by the AFMA Rules. The arbitration will be held in Santa
Monica, California. The parties will abide by any decision in the arbitration
and any court having jurisdiction may enforce it. The parties submit to the
jurisdiction of the courts in Santa Monica, California to compel arbitration or
to confirm an arbitration award. The parties agree to accept service of process
in accordance with the AFMA Rules.
(f) This Agreement may not be changed, modified, amended or
supplemented, except in a writing signed by both parties.
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(g) Nothing herein contained shall be binding upon the parties until a
copy of this Agreement has been executed by an officer of each party and has
been delivered to the other party.
(h) Paragraph headings are inserted herein for convenience only and do
not constitute a part of this Agreement.
(i) ARTISAN and its successors and assigns are hereby empowered to
bring, prosecute, defend and appear in suits, actions and proceedings of any
nature under or concerning infringement of or interference with any of the
Rights Granted to it under this Agreement. Licensor may participate in any suit,
action or proceeding using counsel of its choice at its own expense. If Licensor
elects not to participate and Licensor's account hereunder is unrecouped, any
costs in connection therewith shall be paid by ARTISAN at its sole cost (and not
subject to recoupment hereunder) and any recovery shall be the sole property of
ARTISAN. If Licensor elects not to participate and Licensor's account hereunder
is recouped, any recovery shall be deemed to be part of Defined Gross and any
costs in connection therewith shall be treated as Distribution Expenses. If both
parties participate, any recovery shall be deemed to be part of Defined Gross
and any costs in connection therewith shall be treated as Distribution Expenses
(any costs paid by Licensor in connection therewith shall be reimbursed from
such recovery in a pari-passu manner with ARTISAN's costs).
(j) Licensor may not assign this agreement or any of its rights or
obligations under it, including its obligation to Deliver the Picture, provided
that Licensor may assign its right to receive the Minimum Guarantee and any
share of Defined Proceeds becoming due and payable to Licensor hereunder to any
person provided a notice of irrevocable authority and Distributor's Acceptance
in ARTISAN's usual form shall be executed by Licensor and the transferee and
delivered to ARTISAN. ARTISAN shall have the right at any time after completion
of the Picture to sell, transfer or assign all or any of its rights in and to
the Picture and the Rights Granted thereof solely to a parent or subsidiary
company or to a company acquiring all or substantially all of ARTISAN's assets.
No part of any consideration received by or payable to ARTISAN shall be included
in the Defined Gross hereunder and Participant shall have no rights in respect
of any thereof. In the event of any such sale, transfer or assignment by
ARTISAN, ARTISAN shall remain secondarily liable unless the assignee is a major
or mini-major studio which assumes all obligations of ARTISAN in writing.
(k) The Picture will be delivered within the time period specified
herein, time being of the essence and in accordance with all of ARTISAN's
delivery requirements identified in Exhibit "B", attached hereto.
(l) Neither Licensor nor ARTISAN shall disclose to any third party
(other than its respective employees, directors; and officers, in their capacity
as such on a need-to-know basis), any information with respect to the financial
terms and provisions of this Agreement except: (i) to the extent necessary to
comply with the law or the valid order of a court of competent jurisdiction, in
which event(s) the party making such disclosure shall so notify the other as
promptly as practicable, prior to making such disclosure and shall seek
confidential treatment of such information, (ii) to the extent necessary to
comply with S.E.C. or similar disclosure requirements, (iii) to its parent and
affiliated companies, their banks (and their respective advisors and attorneys),
prospective financiers and investors (and such persons' investment bankers,
agents, attorneys, accountants and necessary experts), auditors, investment
bankers, attorneys and similar professionals, provided that such companies,
banks, advisors, financiers, investors, investment bankers, experts, auditors,
accountants, attorneys and similar professionals agree to be bound by the
provisions of this subparagraph, and (iv) in order to enforce its rights
pursuant to this Agreement.
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(m) Licensor and ARTISAN shall execute, acknowledge and deliver any and
all further documents consistent with this Agreement that are necessary,
expedient or proper to implement, administer and effectuate the purpose and
intent of this Agreement. If Licensor fails to deliver such additional documents
within thirty (30) days after ARTISAN's request therefor, Licensor irrevocably
appoints ARTISAN to execute such additional documents as Licensor's
attorney-in-fact, coupled with an interest.
Please confirm your agreement with the foregoing by signing below, and return
both copies to the undersigned, after which we will return a fully executed copy
to you.
ACCEPTED AND AGREED:
TOP SECRET PRODUCTIONS, LLC TOP SECRET PRODUCTIONS, LLC
By: /s/ Xxxx Xxxx Xxxxxxx By: /s/ Xxxxx Xxxxx
--------------------- ---------------
Print Name: Xxxx Xxxx Xxxxxxx Print Name: Xxxxx Xxxxx
----------------- -----------
Its: Member Its: Member
------ ------
TOP SECRET PRODUCTIONS, LLC TOP SECRET PRODUCTIONS, LLC
By: /s/ Xxxx Xxxxx By: /s/ Xxx Xxxxxxxxxx
-------------- ------------------
Print Name: Xxxx Xxxxx Print Name: Xxx Xxxxxxxxxx
---------- --------------
Its: Member Title: CEO, New Visual
------ Entertainment, Inc.
-------------------
Its: Member
------
TOP SECRET PRODUCTIONS, LLC
By: /s/ Xxxx Xxxxxx
---------------
Print Name: Xxxx Xxxxxx
-----------
Title: Secretary, New Visual
Entertainment, Inc.
-------------------
Its: Member
------
ARTISAN PICTURES INC.
By: /s/ Xxxxx Xxxxx
---------------
Its: President
---------
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SCHEDULE 1
----------
IRREVOCABLE LABORATORY ACCESS LETTER
------------------------------------
Dated __/__/__
To: ____________________________________ ("Laboratory")
___________________________________________________
___________________________________________________
From: Top Secret Productions, LLC ("Producer")
0000 Xxxxxx Xxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
For: Artisan Pictures Inc. ("Distributor")
0000 Xxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Re: Picture: "STEP INTO LIQUID"
Agreement: Agreement dated as of May 9, 2003 between Producer
and Distributor for the Picture.
Expiry Date: Ten (10) years following Distributor's initial
theatrical release of the Picture.
Gentlemen:
Producer and Distributor have entered into an Agreement regarding the
Picture pursuant to which Distributor will have certain rights to exploit the
Picture until the Expiry Date (or in perpetuity if no Expiry Date is listed) all
as identified above. So that laboratory or facility work on the Picture may be
undertaken by Laboratory, Laboratory is instructed and agrees as follows:
1. Laboratory acknowledges for the benefit of Distributor that it has in
its possession in Producer's name of all items and materials for the
Picture identified on the attached Schedule of Materials (the "Picture
Materials").
2. Producer confirms that: (a) the Picture Materials are of a technical
quality sufficient for use in the manufacture of commercially
acceptable release prints and digital magnetic videotape masters of the
Picture; and (b) the Picture reflected in the Picture Materials is in
color and has a running time of not less than eighty-five (85) and not
more than one hundred twenty (120) minutes.
3. None of the Picture Materials will be removed from Laboratory without
the prior written consent of Producer and Distributor until the Expiry
Date identified above, if any.
4. Laboratory is authorized and instructed to accept orders for pre-print
materials, prints, services or materials in connection with the Picture
from Distributor or its authorized licensees, subject to Distributor
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072103 SDW7
making satisfactory credit arrangements with Laboratory. Distributor
will be solely responsible for all costs associated with its orders.
5. Laboratory will not assert any lien or claim against the Picture
Materials or any printing element other than its charges for work done.
Laboratory will not assert any lien or claim against the Picture
Materials due to unpaid charges of Distributor, and will not assert any
lien or claim against any materials manufactured for Distributor due to
any unpaid charges of Producer or Distributor. Laboratory will not
refuse to honor the orders of any one party due to unpaid charges of
another party. All materials made by Laboratory for the account of any
ordering party (other than the Picture Materials) may be removed from
Laboratory at the request of the ordering party.
6. This Access Certificate is irrevocable and may not be modified except
by a writing signed by Producer and Distributor, or their respective
successors or assigns.
Very truly yours,
TOP SECRET PRODUCTIONS, LLC ("Producer)
By: ______________________________________
Its: _____________________________________
ACCEPTED AND AGREED:
[___________________________] ("Laboratory")
By: ______________________________________
Its: _____________________________________
ARTISAN PICTURES INC. ("Distributor")
By: ______________________________________
Its: _____________________________________
SCHEDULE OF MATERIALS
---------------------
(TO BE LISTED ON SEPARATE PAGE)
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RIDER A-2 TO EXHIBIT "A"
------------------------
The following are modifications to Exhibit "A" to the Acquisition of Rights
Agreement dated as of May 9, 2003 between Artisan Pictures Inc. ("Artisan") and
Top Secret Productions, LLC. ("Licensor").
General In the event of any inconsistency between
the terms in Exhibit "A" and the terms in
the Agreement, the terms in the Agreement
shall govern, except for arbitration
procedures related to audit reports, which
shall be governed by the modified Paragraph
11 as set forth in this Rider A-2 to Exhibit
"A" notwithstanding anything to the contrary
herein or in the Agreement or in Exhibit
"A".
Capitalized terms used in Exhibit "A", and
any Riders thereto, without definition shall
have the same meaning as is attributed to
such terms in the Agreement.
The "cost of production" shall be equal to
the Minimum Guarantee.
Paragraphs 3(a)-(d) In each instance where the words
"actually received" appears, the words
"credited to or" is hereby inserted
immediately preceding such words.
Paragraphs 3(a) and (c) In the first line, after the word "cash",
the words "or in kind" are hereby inserted.
Paragraph 5 In lieu of that which is otherwise set forth
in Paragraph 5 with respect to the salaries
and expenses of Artisan's own employees,
Artisan shall be entitled to include as
distribution expenses a reasonably allocated
portion of the salaries of in-house
personnel, excluding all lawyers,
accountants and executives, if the services
rendered by such individuals are customarily
rendered by outside parties and if such
charges are at competitive prices.
No item excluded from Defined Gross shall be
included as an item in Distribution
Expenses. No item included in the Cost of
Production shall be included as an item in
Distribution Expenses. No permitted cost or
item in Distribution Expenses may be
deducted more than once in the calculation
of the sums due Participant hereunder. If
income derived from any exploitation of the
Rights Granted in the Picture is excluded
from Defined Gross, then any costs paid or
incurred by ARTISAN in connection therewith
shall be excluded from Distribution
Expenses.
Artisan's calculation of deductible
Distribution Expenses shall reflect the
benefit of all rebates and discounts
actually received by Artisan.
Paragraph 5(a) In the last line, the word "discretion"
shall be replaced with "good faith business
judgment".
Paragraph 5(b) In the last sentence, such amounts shall be
capped at US$200,000.
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Paragraph 5(f) In the first line, the word "outside"
is hereby inserted before the word
"reasonable".
All checking and collection costs shall be
capped at 2% of Defined Gross.
Paragraph 5(g) All trade association costs shall be
allocated in a fair and reasonable manner
and shall be capped at 2% of Defined Gross.
Paragraphs 5(j)-(i) The amounts in these Paragraphs
shall be deducted if and to the extent they
are applicable.
Paragraphs 9(a), (b) and (d) These paragraphs are hereby deemed deleted.
Paragraph 10 The second and third sentences of this
paragraph are hereby deleted in their
entirety and are replaced with the
following:
Statements shall be issued for each calendar
quarter for the duration of the Term. Each
such quarterly period is herein referred to
as an "accounting period".
Statements shall be issued within sixty (60)
days after the end of the applicable
accounting period.
Paragraph 11 In line ten "24" is hereby replaced by "36".
In the twelfth line, "30" is hereby changed
to "45".
Any inspection by Participant of the books
and records of account shall be at the cost
and expense of the Participant unless any
audit discloses an error in excess of five
percent (5%) of the amount paid to the
Participant in relation to the Picture, in
which event all actual and verifiable costs
and expenses in connection with such
inspection shall be the responsibility of
Artisan. Participant will provide Artisan
with a copy of the audit report and in the
event that the reported underpayment is 5%
or greater, Artisan will pay for the cost of
the audit in addition to the amount of the
underpayment. If the underpayment is less
than 5%, Artisan will not be responsible for
the cost of the audit. Artisan shall have
sixty (60) days after submission of the
audit report to pay any undisputed amounts
or otherwise respond to Participant in
writing that Artisan disputes the audit
report along with written justification for
such dispute. If Artisan fails to pay the
amounts due or otherwise fails to respond to
the audit report within such 60 day period,
Participant shall provide Artisan with a
formal written notice of breach and, unless
same is cured within thirty (30) days
thereafter, may file a demand for
arbitration. Such arbitration shall be
binding and mandatory and be conducted
before a single, retired judge or justice at
JAMS in Los Angeles according to its then
applicable rules. The prevailing party in
any arbitration will be entitled to
attorneys fees and costs. However, should
the arbitrator determine that the amount of
the underpayment made by Artisan was less
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072103 SDW7
than ten percent (10%), the arbitrator shall
not be authorized to award Participant the
recoupment of the arbitrator fees it has
incurred.
Paragraph 12 This Paragraph is deleted in its entirety
and replaced with the following:
"Participant warrants and represents that it
has no lien on the Picture, the Rights
Granted or the Defined Gross derived
therefrom. Participant acknowledges that
ARTISAN shall not be obligated to segregate
the same from its other funds, it being the
intent and purpose hereof that Defined Gross
of the Pictures, including the Defined
Proceeds, is referred to herein merely as a
measure in determining the time and manner
of payment to Participant; and that ARTISAN
shall not be deemed a trustee, pledgeholder
or fiduciary."
Paragraph 13 In line three, the word "world" is replaced
with "Territory".
In line twenty, the words "ARTISAN may deem
fair and proper under the circumstances"
shall be replaced with "are customary in the
industry between arm's length parties".
Paragraph 14 This paragraph is hereby deleted in its
entirety and replaced with the
following:
ARTISAN shall have the right at any time
after completion of the Picture to sell,
transfer or assign all or any of its rights
in and to the Picture and the Rights Granted
thereof solely to a parent or subsidiary
company or to a company acquiring all or
substantially all of ARTISAN's assets. No
part of any consideration received by or
payable to ARTISAN shall be included in the
Defined Gross hereunder and Participant
shall have no rights in respect of any
thereof. In the event of any such sale,
transfer or assignment by ARTISAN, ARTISAN
shall remain secondarily liable unless the
assignee is a major or mini-major studio
which assumes all obligations of ARTISAN in
writing.
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Paragraph 16 This Paragraph is hereby modified and
supplemented to permit the following
exceptions: (i) to the extent necessary to
comply with the law or the valid order of a
court of competent jurisdiction, in which
event(s) the party making such disclosure
shall so notify the other as promptly as
practicable, prior to making such
disclosure) and shall seek confidential
treatment of such information, (ii) to the
extent necessary to comply with S.E.C. or
similar disclosure requirements, (iii) to
its parent and affiliated companies, their
banks (and their respective advisors and
attorneys), prospective financiers and
investors (and such persons' investment
bankers, agents, attorneys, accountants and
necessary experts), auditors, investment
bankers, agents, attorneys and similar
professionals, provided that such companies,
banks, advisors, financiers, investors,
investment bankers, experts, auditors,
accountants, attorneys and similar
professionals agree to be bound by the
provisions of this Paragraph 16, (iv) to the
extent necessary to comply with its
contractual obligations (E.G., to profit
participants) and (v) in order to enforce
its rights pursuant to this Agreement.
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RIDER TO RIDER "A-1"
--------------------
The following are modifications to Rider "A-1" to Exhibit "A" to the Acquisition
of Rights Agreement dated as of May 9, 2003 between Artisan Pictures Inc.
("Artisan") and Top Secret Productions, LLC ("Licensor").
Paragraph 3(b) The inclusion of sums actually received
by or credited to AHE shall refer instead to
the sums actually received by or credited to
AHE and/or any of its affiliated or
subsidiary companies.
Paragraph 3(b)(iii) The second and third sentences are hereby
replaced with the following:
"Said reserve for returns shall be
maintained at 25% and shall be liquidated no
later than nine (9) months following its
establishment; provided, however, that if
ARTISAN's actual returns are greater than
25%, ARTISAN shall have the right to
increase the return reserve accordingly.
Upon Licensor's written request, ARTISAN
shall provide Licensor with reasonable
evidence of its actual returns.".
5
STEP INTO LIQUID
Acquisition of Rights Agreement
072103 SDW7
