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MACROVISION-Registered Trademark- Macrovision Corporation
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Letter Agreement - Confidential
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14 January 1997 VIA FAX TO ▇▇▇-▇▇▇-▇▇▇▇ (5 PAGES TOTAL)
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Senior Vice President
Worldwide Operations and Logistics
Buena Vista Home Video
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Dear ▇▇▇▇▇:
We present below the key business terms related to Disney/Buena
Vista Home Video's application of Macrovision's copy protection
process to videocassettes and digital video discs ("DVDs") during
the period beginning March 1, 1997 and ending February 28, 2000.
1. MINIMUM FEES AND COPY PROTECTION MAXIMUMS
Disney/Buena Vista Home Video ("Buena Vista") agrees to pay
Macrovision a Minimum Guaranteed Application Fee of [ * * ] the
period March 1, 1997 through February 28, 1998, [ * * ] for the
period March 1, 1998 through February 28, 1999, and [ * * ] for
the period March 1, 1999 through February 28, 2000. These fees
shall entitle Buena Vista to apply Macrovision copy protection to
a maximum number of videocassettes and DVD titles in all Category
A countries (as listed on Exhibit 1) combined, as follows:
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Maximum
Minimum Guaranteed Maximum Number of Number of
Year Ended Application Fee Videocassettes DVD Titles
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2/28/98 [ * * ]
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2/28/99
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2/28/00
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There shall be no carry over from any year to subsequent years in
the event that Buena Vista does not apply copy protection to the
Maximum Number of Videocassettes or DVD titles in any particular
year. It is Buena Vista's intention to apply copy protection to
substantially all videocassettes which are produced in
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Category A countries. Buena Vista's failure to apply copy
protection as provided herein shall not constitute a breach of
this agreement.
Countries in Category B would not be covered the Minimum
Guaranteed Application Fee. Category C and D countries (as
listed on Exhibit 1) would INITIALLY not be covered by the
Minimum Guaranteed Application Fee but would automatically
convert to Category A countries (and therefore be covered by the
Minimum Guaranteed Application Fee) if and when Buena Vista
undertakes to distribute videocassettes directly in any such
Category C or Category D country. For example, if Buena Vista
decided to go direct in Brazil, and terminated its home video
distribution license with Abril, the volume of Buena Vista-direct
cassettes in Brazil effective as of the date Buena Vista went
direct in Brazil could be copy protected without payment of an
additional fee to Macrovision. "Buena Vista-direct" means any
territory where Buena Vista or other wholly owned Disney entity
operates either directly or via a joint venture or other entity
in which Disney holds at least a 40% ownership interest.
Category E countries will be addressed as described in Exhibit 1.
One half of each years' Minimum Guaranteed Application Fee shall
be payable on March 1 of each year and the other half shall be
payable on September 1 of each year. The following table
presents the payment schedule:
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PAYMENT PAYMENT AMOUNT
DATE
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3/1/97
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9/1/97
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3/1/98 [ * * ]
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9/1/98
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3/1/99
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9/1/99
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2. ADDITIONAL FEES - VIDEOCASSETTES
If, in any of the three years ending February 28, 1998, February
28, 1999, or February 28, 2000 (each, a "Contract Year") Buena
Vista applies copy protection to a total number of videocassettes
which is greater than the Maximum Number of Videocassettes for
such Contract Year, Buena Vista agrees to pay to Macrovision an
additional fee of [ * * ] for each such videocassette to which
copy protection is applied above the maximum. Each payment for
such additional videocassettes will be due and payable no later
than 30 days following the close of each Contract Year. [ * * ]
Buena Vista agrees to provide Macrovision
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with written notice on September 1, 1997, September 1, 1998, and
September 1, 1999 as to whether it is likely that Buena Vista will
apply copy protection to a higher number of videocassettes than
the maximum for that Contract Year, and if so, what the total
number of copy protected cassettes is likely to be for that full
Contract Year. Macrovision shall keep such a report confidential
and not disclose such information to third parties and shall use
such a report only for purposes of its internal planning and
budgeting and for no other purpose. Such report shall not
represent a binding commitment on the part of Buena Vista to
actually apply copy protection to any particular number of
videocassettes in excess of the maximum for that Contract Year.
3. ADDITIONAL FEES - DVD TITLES
Prior to applying copy protection to more than [ * * ] DVD
titles in any Contract Year, Buena Vista agrees to so notify
Macrovision and both Buena Vista and Macrovision agrees to enter
into good faith negotiations regarding the per-unit fee which
Buena Vista would pay to Macrovision for DVD titles to which copy
protection is applied in excess of [ * * ] titles per year.
4. COMMITMENT TO REQUIRE NORTH AMERICAN LICENSEES TO APPLY COPY
PROTECTION
It is Buena Vista's intention to require all Buena Vista home
video licensees in North America (such as Columbia House) to copy
protect, using Macrovision's copy protection technology or any
comparable copy protection technology which in Buena Vista's
judgment provides equal or better effectiveness and playability,
substantially all Buena Vista titles which they produce
(including Touchstone, Hollywood Pictures, Disney, Miramax and
other Buena Vista home video labels) and to pay copy protection
fees for such titles directly to Macrovision or to such other
copy protection supplier, as appropriate. Macrovision shall
charge such Buena Vista licensees not more than 6 cents per unit
for the application of the Macrovision copy protection process to
Buena Vista videocassettes or DVDs. Buena Vista's failure to
require such copy protection shall not constitute a breach of
this Agreement.
5. "CP" LOGO COMMITMENT
Buena Vista agrees to use its reasonable efforts to use the
triangular "cp" logo in substantially all of its trade
advertisements for rental and sell-through videocassettes and DVD
titles. ▇▇▇▇▇▇▇▇▇▇▇ agrees that Buena Vista's inadvertent
omission of the "cp" logo in any particular ad or ads or Buena
Vista's failure to notify trade publications in any country as to
Buena Vista's copy protection policy will not be considered a
material breach of this agreement.
6. LONG FORM AGREEMENT
Upon acceptance of Buena Vista, this Letter Agreement shall
represent a binding agreement between Buena Vista and Macrovision
which reflects substantially all fee-related economic terms
related to Buena Vista's application of Macrovision's copy
protection process to Videocassettes and DVD titles, until such
time as a long form agreement incorporating the terms and
conditions of this Letter Agreement has been executed by the
parties. Macrovision and Buena Vista shall use their reasonable
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efforts to negotiate in good faith and prepare and execute within
sixty days of acceptance by Buena Vista of this Letter Agreement
such long-form agreement.
Buena Vista acknowledges that, due to the "mechanics" of actually
applying copy protection to DVDs, Macrovision requires DVD
authoring facilities and DVD replicators to sign license
agreements with Macrovision which grant them the rights to set
Macrovision's copy protection trigger bits to their "on" position
for DVD titles and/or replicate DVDs for which Macrovision's copy
protection trigger bits have been set to their "on" position.
Macrovision agrees that, with respect to Buena Vista DVDs to
which copy protection is applied in connection with this Letter
Agreement, such licenses will not require such authoring
facilities or replicators to pay fees of any kind to Macrovision.
▇▇▇▇▇, if the above terms are acceptable to Buena Vista, please
confirm this by having the appropriate Buena Vista official sign
in the space provided below and return this Letter Agreement to
me via FAX. We can then task our respective legal
representatives with drafting the long form agreement as
described above.
Best Regards,
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President, Copy Protection Group
MSB:dh
Attachment (Exhibit 1 - Countries by Category)
Accepted and Agreed by Buena Vista Home Video
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/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 1/15/97
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By (Signature) Date
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Senior Vice President
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Printed Name Title
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EXHIBIT 1
COUNTRIES BY CATEGORY
CATEGORY A - EXISTING BUENA VISTA-DIRECT TERRITORIES COVERED IN
THE CURRENT AGREEMENT, PLUS MEXICO
- Countries Included: United States, Canada, Australia,
Austria, Benelux, Denmark, Finland, France, Germany, Italy,
Japan, Mexico, New Zealand, Switzerland, Sweden, Norway, Spain
and the United Kingdom
- Status: Covered by the Minimum Guaranteed Application Fee
CATEGORY B - MACROVISION MASTER LICENSEE TERRITORIES
- Countries Included: Korea, Egypt, Hungary, Poland
- Status: Not covered by the Minimum Guaranteed Application
Fee. Business relationship to be between Macrovision licensee
and Buena Vista or the Buena Vista licensee.
CATEGORY C - BUENA VISTA LICENSEE TERRITORIES WITH PRE-EXISTING
MACROVISION RELATIONSHIPS
- Countries Included: Brazil, South Africa, Israel, Portugal,
Iceland
- Status: INITIALLY not covered by the Minimum Guaranteed
Application Fee. Business relationship to be between
Macrovision or its licensed duplicator and the Buena Vista
licensee. Convertible to Category A if/when Buena Vista
operates directly in the Category C country and so notifies
Macrovision in writing.
CATEGORY D - EXISTING MACROVISION LICENSEE TERRITORIES WHERE
BUENA VISTA NEITHER OPERATES DIRECTLY NOR HAS A LICENSEE
- Countries Included: Bulgaria, Croatia, Slovenia
- Status: INITIALLY not covered by the Minimum Guaranteed
Application Fee. Business relationship to be between Macrovision
and the Buena Vista licensee. Convertible to Category A if/when
Buena Vista operates directly in the Category D country and so
notifies Macrovision in writing.
CATEGORY E - ALL OTHER COUNTRIES
- At Buena Vista's request, Macrovision will install one
videocassette copy protection processor unit to support Buena
Vista duplication at Buena Vista's chosen duplicator on a country-
by-country basis. Each of these installations would involve a
three-party agreement between Macrovision, the licensed
duplicator, and Buena Vista or its home video licensee and a one
time advance payment of [ * * ] from Buena Vista to Macrovision
which would be recoupable against copy protection service fees in
the relevant country. The fee payable to Macrovision for
application of the copy protection process in any Category E
country shall be [ * * ] per cassette. Installation of
Macrovision processors in Taiwan is subject to an appropriate
legal framework being in place to control black boxes.
Installation of Macrovision processors in Hong Kong is subject to
satisfactory resolution (as relates to the protection of
intellectual property) of Hong Kong's incorporation into the
People's Republic of China and the related impact on the economic
and legal climate.
