OUTPUT DEAL MEMO
This Output Deal Memo is made as of February 8, 1996, between
LIVE International of 00000 Xxxxxxx Xxx, Xxx Xxxx, Xxxxxxxxxx
00000 U.S.A, Telephone: 0-000-000-0000, Fax: 0-000-000-0000 or
its designated offshore company or other designee ("Licensor"),
and Pioneer LDC, Inc. ("Distributor") of 00-0, Xxxxxxxxxxx
x-Xxxxx, Xxxxxxx-xx, Xxxxx 000 Xxxxx, Telephone: 00-0-0000-0000,
Fax: 00-0-0000-0000.
A. Pictures
All feature-length motion pictures which Licensor or its
Affiliate shall cause to be released theatrically in the
U.S.A. and for which Licensor or its affiliate owns or
controls the Rights in the Territory during the License
Period.
1. Where Licensor or any Affiliate (any company 25% or
more controlled by either LIVE Entertainment or a 50%
or more subsidiary of LIVE Entertainment) owns or
controls the Rights in the Territory.
2. Produced, co-produced, financed, co-financed, or
acquired before or during the Output Term.
3. Provided that principal photography commences prior to
the end of the Output Term.
4. Not to include Pictures licensed in the Territory prior
to the effective date of the Agreement, including
Pictures licensed to Distributor or its affiliates.
5. In addition, Licensor shall have the right, but not the
obligation, to include Pictures having a Final
Production Budget of less than S3 million, provided
that Distributor will not be required to accept more
than three (3) such Pictures during each year of the
Output Term. The process of selecting the three (3)
Pictures will be subject to good faith mutual
agreement.
Licensor will use good faith efforts to acquire the Rights
in the Territory, where they are available.
B. Output Term
The Output Term shall commence on the date of the execution
of the Output Deal Memo and end on December 31, 1998.
C. Territory
The Territory shall mean Japan, and its presently existing
territories and possessions.
D. Authorized Language
Dubbed and Subtitled in Japanese.
E. License Period
The License Period for each Licensed Right for each Picture
subject to the Agreement starts on the date of the execution
of the long form Agreement and ends ten (10) years after
Licensor's Delivery to Distributor. If Distributor has not
recouped the Guarantee of a particular Picture in full on or
before the end of the License Period with respect to such
Picture, then the License Period of such Picture shall
automatically, and without any further notice required, be
extended for an additional period of two (2) years ("License
Period Extension") starting immediately following the
expiration of the original ten (10) year License Period.
F. Rights
Licensors shall grant to Distributor the following Rights in
and to each Picture:
1. Cinematic Rights: Theatrical, NonTheatrical, Public Video
2. Ancillary Rights: Hotel
3. Video Rights Home Video Rental, Home Video
SellThru, Commercial Video in Cassette, Disc,
and Cornpact Disc formats
4. Pay TV Rights: Terrestrial Pay TV, Cable Pay TV,
Satellite Pay TV
5. Free TV Rights: Terrestrial Free TV, Cable Free TV,
Satellite Free TV
G. Guarantee
The "Applicable Percentage" calculated on the lessor of
either (i) the actual negative cost of each Picture, or (ii) the
Final Production Budget of each Picture, plus an amount not to
exceed ten percent (10%) thereof if and to the extent of any
enhancements to the Final Production Budget. The "Applicable
Percentage" shall be ten percent (10%).
The "Final Production Budget" means the sum of all items of
Negative Cost included in the final production budget
approved by Licensor or its Affiliate and The "Negative Cost"
means the sum aggregate of all costs, charges and expenses
accepted by Licensor or its Affiliate as part of the costs of
production of the Picture including each of the following:
1. All direct costs of production (preparation,
development, pre-production, principal
photography, post-production, completion and delivery)
of the Picture, including all budget
items customarily categorized as "above-the-line" and
"below-the-line," costs, including the
acquisition of literary, dramatic and/or musical
material;
2. Included in item 1. above will also be charges
established pursuant to Licensor or its
Affiliate's then-current price schedule for materials,
equipment, facilities, personnel or services
of Licensor or its Affiliate furnished in connection
with the Picture;
3. Costs of completion, daily takes, all risks to the
negative and other insurance including errors
and omissions, production package insurance and
completion guarantee (including the
premium which would have been paid therefore if and to
the extent Licensor or its Affiliate
elects to self-insure any items of risk in connection
with the Picture};
4. All deferments, bonuses, "puts" and participations
(howsoever defined) measured by or due
upon the attainment of Gross Receipts realized prior to
"Break-even" shall be included when
fixed;
5. All financing charges payable to a bank, financial
institution or other lender providing
production financing, including points, interest, legal
fees and costs (including the cost which
would have been paid therefore if and to the extent
Licensor or its Affiliate elects to self-
finance the production of the Picture);
6. Legal, accounting and production auditing costs in
connection with the Picture;
7. The costs of making all Delivery Materials and their
Delivery to Licensor or its Affiliate in the
manner specified in the underlying rights agreement
between Licensor or its Affiliate and the
producer or licensor of the Picture;
8. A contingency of ten percent {10%) of direct costs but
such amount shall be included in the
actual negative cost of the Picture only if and to the
extent expended in connection with the
production of the Picture,
9. An overhead charge of seven and five-tenths percent
(7.5%) of direct costs accruing as and
when each item of direct negative costs is charged.
The Guarantee is a minimum net amount from which there may
be no offsets or deductions of any sort,
except for any applicable withholding taxes required by Law;
provided, if there should be any such deductions therefrom
Distributor shall promptly furnish to Licensor or its Affiliate
all relevant documents evidencing Distributor's payment of such
taxes and as necessary for Licensor or its Affiliate to claim the
proper deduction therefor from its U.S. income taxes.
H. Payment Terms of the Guarantee (all by wire transfer)
Distributor will pay the Guarantee of each Picture due to
Licensor as follows:
1. 20% on Licensor's written Notification to Distributor
of the Start of Principal Photography of each Picture.
2. 80% on Licensor's Delivery to Distributor of each Picture.
I. Cross-Collateralization
There will be no cross-collaterization amongst Pictures. The
Recoupable Distribution Costs and Gross Receipts applicable
to any particular Picture will be cross-collateralized only as
permitted under Section J.
J. Disposition of Gross Receipts
1. Cinematic and Ancillary Costs-Off Deal
Distributor will make continuing payments and
recoupments in the following order of priority
from the Gross Receipts for all Cinematic Licensed
Rights and all Ancillary Licensed Rights
of each Picture.
a. Recoupment of Recoupable Distribution Costs
100% of Cinematic and Ancillary Gross Receipts to
Distributor to recoup Recoupable Cinematic and Ancillary
Distribution Costs, including fees paid by
Distributor to Non-Affiliated Theatrical
Subdistributors, not to exceed 20% thereof.
(First, Distributor may use all of Cinematic and
Ancillary Gross Receipts to recoup
the Recoupable Cinematic and Ancillary
Distribution Costs which for purposes of
this paragraph and all it subclauses shall be
deemed to include all fees paid by
Distributor to Non-Affiliated Theatrical
Subdistributors, not to exceed 20%.)
b. Recoupment of the Guarantee
100% of the remaining Cinematic and Ancillary
Gross Receipts to Distributor to
recoup the Guarantee. (Next, Distributor may use all of
the remaining Cinematic and Ancillary Gross
Receipts to recoup the Guarantee.)
c. Sharing After Recoupment of the Guarantee
60% of remaining Cinematic and Ancillary Gross
Receipts to Licensor. 40% of remaining Cinematic and
Ancillary Gross Receipts to Distributor.
(Next, Distributor will pay to Licensor, and may
retain for itself, the indicated
percentages of its Cinematic and Ancillary Gross
Receipts left after recoupment of the Guarantee.)
d. If and to the extent the Recoupable Cinematic and
Ancillary Distribution Costs and/or the Guarantee are not
recouped as indicated above, then the amount of the
deficit shall be referred to hereinbelow as the
"Shortfall" which shall be recoupable
from Licensor's share of the Home Video Gross
Receipts, Commercial Video Gross Receipts, Pay TV Gross
Receipts and/or Free TV Gross Receipts in the manner
provided below. No interest shall accrue on the Shortfall.
2. Video Royalty Deal
Distributor will make the following continuing payments and
recoupments in the following order of priority from the Gross Receipts
derived for the Video Licensed Rights designated below.
a. Licensor's Royalty
30% of Home Video Rental Gross Receipts and Commercial
Video Gross Receipts to Licensor until Distributor has achieved net
rental sales of 35,000 units. Thereafter, 35% of Home Video Rental
Gross Receipts and Commercial Video Gross Receipts to Licensor.
20% of Home Video SellThru Gross Receipts to Licensor.
(Distributor will pay to Licensor as a royalty the indicated
percentage of 100% of the Gross Receipts from exploitation
of the indicated Video Licensed Right. All remaining Gross Receipts
for such Video Licensed Right will be for the account of
Distributor, subject to the provisions below. All Video Distribution
Costs will be recouped by Distributor solely from Distributor's share
of Video Gross Receipts.)
b. Recoupment of Shortfall (if any)
100% of Shortfall recouped by Distributor;
(First Distributor may recoup from Licensor's royalties the
Shortfall, if any.)
c. Licensor's Royalty After Recoupment of the Shortfall (if any)
30% of Home Video Rental Gross Receipts and Commercial Video Gross
Receipts to Licensor until Distributor has achieved net rental sales
of 35,000 units. Thereafter, 35% of Home Video Rental Gross Receipts
and Commercial Video Gross Receipts to Licensor. 20% of remaining
Home Video SellThru Gross Receipts to Licensor. (Next Distributor
will pay the aforesaid royalties to Licensor after recoupment of the
Shortfall, if any.)
d. Additional Video Deal Terms
Distributor and Licensor agree to negotiate and mutually agree upon
the minimum and maximum pricing terms for Video Rental and Sell-Thru
prior to the Video Release(s). Distributor and Licensor agree to a
Free Goods Limit of not more than three percent (3%) for Rental Units
and three percent (3%) for SellThru Units. Distabutor and Licensor
agree to a six (6) month Sell-Off Period.
3. Pay TV & Free TV Deal
Distributor will make continuing payments and recoupments in
the following order of priority from the Gross Receipts for all Pay TV
Licensed Rights and all Free TV Licensed Rights.
a. Sharing Until Recoupment of the Shortfall (if any)
75% of remaining Pay TV and Free TV Gross Receipts to Licensor until
100% of applicable Shortfall, if any, is recouped.
25% of remaining Pay TV and Free TV Gross Receipts to Distributor
until 100% of applicable Shortfall, if any, is recouped.
(First Distributor will credit to Licensor, and retain for itself,
the indicated percentage of the Pay TV and Free TV Gross Receipts
until the Shortfall, if any, is recouped. The Shortfall will be
recouped from payments otherwise due Licensor for the Pay TV
and Free TV Licensed Rights.)
b. Sharing After Recoupment of the Shortfall (if any)
75% of remaining Pay TV and Free TV Gross Receipts to Licensor.
25% of remaining Pay TV and Free TV Gross Receipts to Distributor.
(Next Distributor will pay to Licensor, and may retain for itself,
the indicated percentages of its Pay TV and Free TV Gross Receipts
left after recoupment of the Shortfall, if any.)
K Delivery
The following items will be available for delivery per Paragraph 11 of
the Standard Terms.
1. Feature Internegative - 35 mm
2. Feature Optical Sound - 35 mm
3. Feature M&E Track - 35 mm
4. Feature Textless Titles - 35 mm
5. Trailer Internegative - 35 mm
6. Trailer Optical Sound - 35 mm
7. Trailer M&E Track - 35 mm
8. Trailer Textless Titles - 35 mm
9. D-2 NTSC Tape Master
10. Black & White Still Photo Negative of the International Billing Block
X. Xxxxx Receipts (as excerpted from the "Wagons East" Agreement)
1. Gross Receipts: Gross Receipts shall be calculated on a cash
basis as received by Distributor.
2. Gross Receipts - Defined: Gross Receipts means the sum on a
continuous basis of the following amounts derived with respect to
each and every Licensed Right:
a. All monies or other consideration of any kind (including all
amounts from advances, guarantees, security deposits, awards,
subsidies, and other allowances) received by, used by or
credited to Distributor or any Distributor Affiliates or any
approved subdistributors or agents from the license, sale,
lease, rental, lending, barter, distribution, diffusion,
exhibition, performance, exercise or other exploitation of each
Licensed Right in the Picture, all without any deductions; and
b. All monies or other consideration of any kind received by, used
by or credited to Distributor or any Distributor Affiliates or
any approved subdistributors or agents as recoveries for the
infringement of any Licensed Right in the Picture; and
c. All monies or other consideration of any kind received by, used
by or credited to Distributor or any Distributor Affiliates or
any approved subdistributors or agents from any authorized
dealing in trailers, posters, copies, stills, excerpts,
advertising accessories or other materials used in connection
with the exploitation of any Licensed Right in the Picture or
contained on Videograms embodying the Picture.
3. Gross Receipts Calculated at Source: No Distributor Affiliates or
any subdistributors or agents may deduct any fee from Gross Receipts
in calculating all amounts due Licensor. For the purpose of
determining Licensor's share of Gross Receipts, all Gross Receipts
must be calculated at "source". This means that Gross Receipts
derived from the exploitation of any the following Licensed Rights
must be calculated at the following levels: (i) for any Theatrical
Licensed Right, at the level at which payments are remitted by
theaters; (ii) for any NonTheatrical or Ancillary Licensed Right, at
the level at which payments are remitted by hotels or other entities
that exhibit or make the Picture available directly to their patrons
or customers, (iii) for any Home Video Licensed Right, at Wholesale
Level or Direct Consumer Level as applicable calculated on 100% of
gross sales net of actual returns and rebates; (iv) for any
Commercial Video or Public Video Licensed Right at the level at
which payments are remitted by local exhibitors of the Picture;
and (vi) for any Television Licensed Right, at the level at which
payments are remitted by terrestrial stations, cable systems,
satellite telecasters or telephone systems that broadcast,
cablecast or transmit the Picture.
4 Wholesale Level: The Wholesale Level means the level of Videogram
distribution from which Videograms are shipped directly to retailers
for ultimate sale or rental to the paying public. The Wholesale
Level may include intermediate distribution levels between the
manufacturer and the retailer, such as rack jobbers and the like,
if such distribution is performed by a Distributor Affiliate, or if
Distributor participates in the profits from such intermediate
distribution, but then only to the extent of such participation.
5. Direct Consumer Level: The Direct Consumer Level means the level of
Videogram distribution at which Videograms are sold or rented
directly to the paying public. The "Direct Consumer Level" includes
the sale or rental of Videograms by means of retail outlets, mail
order, video clubs, and similar methods. Where Commercial Video or
Public Video rights are licensed, the Direct Consumer Level also
includes the authorized public performance, exhibition, or diffusion
of Videograms in accordance with the such Licensed Right. Distributor
will not be deemed to be engaged in distribution at the Direct
Consumer Level unless such distribution is performed by a Distributor
Affiliate, or unless Distributor participates in the profits from such
distribution, and then only to the extent of such participation.
6. Royalty Income: All amounts collected by any collecting society,
authors' rights organization, performing rights society or
governmental agency that are payable to authors, producers,
performers or other Persons and that arise from royalties, compulsory
licenses, cable retransmission income, music performance royalties,
tax rebates, exhibition surcharges, levies on blank Videograms or
hardware, rental or lending royalties, or the like, will as between
Licensor and Distributor be the sole property of Licensor and will not
be included in or credited to any Gross Receipts. Licensor has the
sole right to apply for and collect all these amounts. If any of them
are paid to Distributor then Distributor will receive them as
Licensor's agent and will immediately remit them to Licensor with an
appropriate statement identifying the payment.
7. Rebates and Subsidies: The following amounts, if received by used by
or credited to Distributor, any Distributor Affiliate or any
approved subdistributor or agent with respect to any exploitation of
the Cinematic & Ancillary Rights to a Picture, will not be included
in Cinematic & Ancillary Gross Receipts for that Picture but will be
used to reduce Cinematic & Ancillary Recoupable Distribution Costs:
(i) print, publicity and similar subsidies for the cost of releasing,
advertising or publicizing the Picture; (ii) income from publicity
tie-ins; or (iii) freight, print, trailer, advertising and other cost
recoveries, rebates, refunds or discounts from exhibitors, approved
subdistributors or other Persons.
M. Statements - When Rendered (as excerpted from the "Wagons East"
Agreement) During the Agreement Term and as long thereafter as Gross
Receipts are derived by distributor from the Picture, Distributor will
render statements with respect to each calendar quarter, or other
quarterly accounting periods as Licensor may designate in writing,
provided that Distributor shall provide Licensor with monthly
statements regarding estimated box office receipts during the period
of the Theatrical Release of the Picture. Each statement must be
delivered to Licensor within three (3) months after the end of the
period for which it is rendered, provided that the monthly statements
regarding estimated box office receipts must be delivered to Licensor
within two (2) weeks after the end of the period for which it is
rendered. Each statement must be accompanied by payment or' all monies
then due Licensor. The timely and complete rendition of accounting
statements together with al} monies due Licensor thereunder is the
essence of this Agreement.
N. Additional Deal Term (as excerpted from the "Wagons East' Agreement)
With respect to exploitation of Satellite Pay and Free TV Rights,
Distributor will only make a down link broadcast of a copy of the
Picture to satellite reception dishes in the Territory if such signal
is encoded and capable of viewing only through use of a decoding device.
O. Other Terms
All defined terms not defined in this Summary, as well as the other
standard terms and conditions of the Agreement, will be subject to good
faith negotiation between the parties. The parties will use their
best efforts to incorporate the terms previously negotiated in the
"Wagons East" agreement if and to the extent such terms do not expressly
or by necessary implication conflict with the terms and conditions
contained in this Output Deal Memo.
IN WITNESS WHEREOF, Licensor and Distributor have executed this
Output Deal Memo as of the date first written above to constitute
a binding contract between them.
Licensor Distributor
LIVE INTERNATIONAL or its Designee PIONEER LDC, IN
By: ___________________________ By:__________________________
An Authorized Signatory An Authorized Signatory
