CONFIDENTIAL
Sony Pictures Releasing International Corporation
Sony Version 3.0 (February 4, 2013)
DIGITAL CINEMA DEPLOYMENT AGREEMENT
THIS DIGITAL CINEMA DEPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of [______, 2013] (“Execution Date”), by and between SONY PICTURES RELEASING INTERNATIONAL CORPORATION, a Delawarecorporation (“Sony”) and[INSERT LEGAL NAME OF ENTITY], [INSERT ADDRESS] (“Deploying Entity”). Each of Sony and Deploying Entity will individually be referred to herein as a “Party” and collectively, as the “Parties.”
WHEREAS, Deploying Entity is in the business of deploying and securing financing for the deployment of Digital Systems (as defined below) for theatrical presentations in the Territory (as defined below);and
WHEREAS, Sony produces and distributes Content (as defined below) and is interested in distributing digital versions of Content to achieve, among other things, improved security, quality, anti-piracy enforcement, access to on-screen and security information, and delivery efficiencies.
NOW, THEREFORE, in consideration of the mutual covenants and, as the case may be, agreements contained in this Agreement, and for other good and valuable consideration, the sufficiency of which the Parties acknowledge, the Parties agree as follows:
1.AGREEMENT STRUCTURE; DEFINITIONS.
(a)Agreement Structure. This Agreement sets forth the terms and conditions under which (i) Deploying Entity will Deploy Projection Systems inthe Republic of Korea(the“Country”) and (ii) Sony will have the right to have its Booked Digital Content exhibited through such Projection Systems. The terms of the understanding between Sony and Deploying Entity will consist of the terms of this Agreement, the terms set forth in the Master Schedule attached hereto as Attachment 1 (the “Master Schedule”) and the terms set forth in the attachments to the Master Schedule attached hereto (each, an “Attachment”, and together with the Master Schedule and this Agreement, shall be referred to as a “Schedule”). The initial Schedule is attached hereto, and the Parties may add additional Schedules, subject to mutual written agreement (it being understood that neither Party has any obligation to agree to any additional Schedules, and that any additional Schedules will be subject to each Party’s willingness, in its sole discretion, to enter into additional Schedules on terms that are acceptable to the other Party).
(b)Defined Terms. The following terms will have the following meanings.
“Affiliate” means, with respect to any entity, any person or other entity which Controls, is under the Control of, or is under common Control with such entity.
“Book” or “Booking” means a written license agreementbetween Sony or a Sony Distribution Entity on the one hand and Exhibitor on the other hand where Exhibitor agrees to exhibit Sony Content for a period of time at a Complex on a specified Screen or Screens, it being understood that an item of Sony Content could include multiple UUIDsand versions (e.g., where Sony Content is provided in multiple languages or in both 2D and 3D formats, etc., it constitutes one Booking for a specified Screen and/or nonconcurrent exhibitions on multiple Screens). For the avoidance of doubt, if an Exhibitor exhibits an item of Sony Content on a Screen without Sony’s prior written consent (e.g., an unauthorized expansion), such expansion will not be deemed a Booking (or will be deemed an unauthorized Booking), even if Sony’s Booking system is updated to reflect such exhibition (e.g., for purposes of ensuring Sony receives its applicable revenue share from the Exhibitor).
“Change of Control” means any event or series of events resulting directly or indirectly in a change in the management or Control of Deploying Entity. Without limiting the generality of the foregoing, a Change of Control shall include(i) a single person or entity or a group having direct or indirect Control or majority ownership of Deploying Entity ceasing to have such Control or ownership, or (ii) a change in the beneficial ownership of more than fifty percent (50%) (or such lesser percentage that constitutes Control) of the combined voting power of the then-outstanding voting securities of Deploying Entity entitled to vote generally in the election of directors or their equivalent.
“Commercially Available” means, with respect to hardware, software or firmware, that such hardware, software or firmware is available for lease, license or purchase.
“Complex” means all Screens contained in a building or buildings (including multiple independent theaters) owned, operated and/or controlled by an Exhibitorwhere either (i) all the Screens in such building or buildings are treated by Sony for Booking purposes as part of a single theater, or (ii) anExhibitor “plays off” or moves Content from building to building as a continuation of run of such Content (such combinations are referred to herein as “Special Complexes”). For purposes of the Schedule, any combinations of buildings or locations specifically identified in such Schedule as part of a single Complex shall be deemed a single Complex, provided that any such list will not be deemed exhaustive.
“Content” means all audio/visual content, including on-screen advertising and pre-show programs motion pictures, trailers and alternative content (e.g., television programs, sporting events, stage productions, religious services, concerts, educational classes or presentations, live events, speeches, meetings, teleconferencing, and video gaming).
“Control” of an entity means the power (through security ownership, economic interest, contractual entitlement, arrangement, understanding, relationship or any other means), direct or indirect, to determine the policies or management of such entity, whether through the power to elect, appoint or approve, directly or indirectly, the directors, officers, managers or trustees of such entity or otherwise.
“Covered System” means a Projection System (together with its accompanying Digital System) which was Deployed or acquired during the Term in the Country and in compliance with the terms of this Agreement, or is otherwise deemed Deployed pursuant to this Agreement or otherwise designated as a Covered System (inter alia pursuant to Sections3(b) and 3(c)). Projection Systems will be deemed Covered Systems as and in the order they are Deployed or acquired.
“DCI” means Digital Cinema Initiatives, LLC or any successor.
“DCI Compliance Test Plan” means a test developed and approved by DCI for purposes of verifying that a Projection System (or any component(s) thereof if only such component(s) is/are being tested) complies with the DCI Spec, as such test may be amended from time to time. For the avoidance of doubt, “DCI Compliance Test Plan” shall include any tests or related procedures that are developed and approved by DCI and are documented by means of addenda to the DCI Compliance Test Plan,any other formally adopted DCI governing documents or similar DCI-approved document(e.g., “DCI Compliance Test Plan” will include any formally adopted policy letters, “CTP Addenda on Testing,” etc.).
“DCI Spec” means, (i) the Digital Cinema Specification v1.2 issued March 7, 2008by DCI, including the Stereoscopic Digital Cinema Addendum version 1.0 issued by DCI on July 11, 2007, (ii) any amendmentor errata thereto or new version thereof which is issued by DCI, and (iii)any applicable standards or specifications with respect to any of the foregoing which are formally approved and adopted by SMPTE technology committees.
“DCI Spec Compliant” means a Projection System (or any component(s) thereof if only such component(s) is/are being addressed) complies with the requirements of this Agreement, including Section 4, with respect to compliance with the DCI Spec and the DCI Spec Compliance Test Plan.
“Deployed” or “Deployment” means, with respect to each Projection System, that Deploying Entity has deployed such Projection System in a Complex and such Projection System is (i) capable of exhibiting Digital Content, (ii) available for Booking Digital Content, and (iii) fully operational. Each such Projection System will be deemed so Deployed when Deploying Entity provides Sony with proper notice that such Deployment is complete, which notice will contain such information as required by the Deployment Report in Exhibit B (Reports). Additionally, except as otherwise expressly provided for herein, Other Systems will be deemed “Deployed” under this Agreement when they become Covered Systems.
“Deployment Agreement” means any agreement, arrangement or series of agreements or arrangements (and in each case including any amendments, modifications, supplements and ancillary documents thereto such as side agreements) in respect of substantially the same subject matter as this Agreement.
“Digital Content” means Content in a digital form that is capable of being exhibited on a Projection System.
“Digital Conversion Fee” or “DCF”means fees payable pursuant to Section6 for promotion of the new delivery format Digital Systems that are intended to deliver, among other things, a higher quality viewing experience.
“Digital System” means a DCI Spec Compliant digital projection system which consists of, collectively: (i) one or more Projection Systems within a Complex; (ii) a central storage server networked with all Projection Systems in Complexes with three (3) or more Projection Systems(as well as in such other Complexes as Deploying Entityor an Exhibitor may elect in their discretion); (iii) a theater management system; (iv) if Deploying Entity maintains a network operating center, connectivity between the Complex and a network operating center operated by Deploying Entity to support the Projection Systems; (v) persistent electronic delivery methods in the form of (a) an internet connection capable of establishing a secure FTP serveror another secure protocolor solution that is accepted as standard industry practice for secure sharing or transfer of information of type to be shared or transferred hereunderand (b) an email address unique for each Complex using the Exhibitor’s domain name (i.e., ); (vi) hardware and software to both receive Keys within such Complex and to transmit such Keys to each Projection System; (vii) all other hardware, software, LAN and other materials or resources that are necessary for such system to be DCI Spec Compliant and/or to receive or exhibit Digital Content on Projection Systems; and (viii) any other optional equipment or software installed in connection with the foregoing, in all cases which are Deployed by Deploying Entity.
“DLP Cinema® Series 1 Security Enclosure” means a physical tamper protection cover manufactured by either Texas Instruments or the applicable Projection System manufacturer (or, in either case, the subcontractor thereof) that is (i) applied to the Series 1 Interface Board and (ii) continuously monitored by an electronic circuit to prevent unauthorized physical access to the link decryption keys.
“Exhibitor” means the owner or operator of one or more Complexesand includes its Affiliates, representatives and agents.“FixedMasking Optical Technical Solution” means an optical technical solution (such as a lens extender or movable top and/or bottom masking) used to ensure that a DCI Spec Compliant image resolution (i.e., 2K or 4K) is projected at all times, except as otherwise provided in Section 4(d)(i).
“Forensic Marking” means DCI Spec Compliant audio and video fingerprinting (a type of watermarking) which occurs at the time of playout.
“Government Subsidies” means any subsidies or other form of financial assistance (including, without limitation, any tax credits, tax benefits, or preferential financing ratesprovided by any governmental or quasi-governmental entity in connection with, related to, or to otherwise aide or promote the conversion from 35mm format to digital format in the theatrical distribution industry, that is made available, directly or indirectly, to Deploying Entity, an Exhibitor or an Affiliate of either. For the avoidance of doubt, any such financial assistance, to the extent made available, for which any of the foregoing entities is or becomes eligible and would receive if applied for, shall be treated as a Government Subsidy hereunder whether or not such entity chooses to apply for it;provided, however, if such entity cannot take advantage of such financial assistance for which it is otherwise eligible or where the reasonable costs connected with any application for such financial assistance will be greater than the financial assistance applied for, it will not be treated as a Government Subsidy hereunder (e.g., if an Exhibitor cannot avail itself of a tax credit due to current net operating losses, such tax credit will not be treated as a Government Subsidy hereunder).
“Holiday” means a day observed as a public holiday in the state or province in which the Complex is located, or under the federal laws of Koreathe Country.
“Keys” means key delivery messages as defined in the DCI Spec.
“Major Studio”means any of the following entities, and any of their Affiliates (each of the following and its Affiliates will, taken together, be a single Major Studio): (a) any Major US Studio, (b) Metro-Goldwyn-Mayer Studios,Lions Gate Entertainment Corp.,and the studios known as CJ Entertainment and Lotte Entertainment,(c) any other studio identified as a Major Studio in a Schedule, (d) any other entity that, directly or through any Affiliate, is engaged in the production and/or theatrical distribution of motion pictures with average worldwide theatrical box office receipts in excess of US$100 million per calendar year for the two most recently completed calendar years (calculated by adding the aggregate worldwide theatrical box office receipts for the two most recently completed calendar years (whether for motion pictures initially released theatrically in such calendar years or previously) and dividing by two)and (e) any other entity that, directly or through any Affiliate, is engaged in the production and/or theatrical distribution of motion pictures with average theatrical box office market share in the Country of five percent (5%) or more over the two most recently completed calendar years.
“Major US Studio” means Universal City Studios LLP, Warner Bros. Entertainment Inc., Sony, Twentieth Century Fox Film Corporation, Paramount Pictures Corporation, The Walt Disney Company, each taken together with its respective Affiliates and its authorized agent (so long as such agency extends to distribution and digital cinema deployment matters).
“New Complex” means a Complex that was not in existence (as evidenced by the commencement of its commercial exhibition-related operations) as of the New Screen Cutoff Date.
“New Screen” means a Screen that was not in existence (as evidenced by the commencement of its commercial exhibition-related operations) as of the New Screen Cutoff Date, including, without limitation, Screens in New Complexes and Screens added to Complexes existing as of the New Screen Cutoff Date.
“New Screen Cutoff Date” means the earlier of (i) January 1, 2012 and (ii) the earliest date agreed to between Deploying Entity and any other Major Studio (in connection with provisions similar to those related to the New Screen Cutoff Date hereunder).
“Other Systems” means any digital projection systems that: (i) constitute Previously Deployed Systems as defined in Section3(b) of this Agreement; or (ii) constitute Acquired Systems as defined in Section3(c) that are deemed Covered Systems pursuant to such Section3(b) or 3(c), as applicable.
“Projection System” means, collectively, for each Screen, a DCI Spec Compliant digital projection system consisting of (i) a 2K or 4K projector, a digital cinema playout system (a server or an integrated media block), a screen management system, each of which shall be covered by an extended warranty (lasting through at least the end of the Term), and (ii) a Fixed Masking Optical Technical Solution, if needed. All references herein to a Projection System will be deemed to include the Digital System of which it is a part.
“Quality Failure” means a “combination” of missed exhibitions of an item of Sony Digital Content caused by either (a) a breach of Deploying Entity’s obligations under this Agreement, or any act or omission of Deploying Entity or any of its Subcontractors or any Exhibitor, or (b) the malfunction of a Digital System, or any part thereof (including any optional (i.e., not required by the DCI Spec) equipment, software or feature that is provided or maintained by Deploying Entity (e.g., 3D capability) or that is installed with Deploying Entity’s permission). Notwithstanding the foregoing, “Quality Failures” under subsection (b) do not include missed exhibitions caused by (i) force majeure events, subject to Section19(c), (ii) power utility outages, (iii) Projection System malfunctions caused by any act or omission by or on behalf of Sony and/or its Affiliates, Sony Distribution Entity or their respective agents or sub-contractors, (iv) Sony Digital Content or Sony Digital Content Key packaging, encryption or delivery errors, (v) failures by third parties (including any Affiliate of Deploying Entity) with whom Sony has contracted directly to provide services necessary to exhibit Sony Digital Content (save that, where Deploying Entityor Exhibitor contracts with such third party to provide such services and as a result Sony is required to contract with such third party to use such services, Sony will not be deemed to have contracted with such third party for purposes of this subsection (v)), or (vi) the failure of any reflector or lamp (where the failure cannot be remedied by replacement of such reflector or lamp). For purposes of this definition, a “combination” of missed exhibitions shall mean: (A) (B)for any item of Sony Digital Content which is Booked, two (2) or more consecutive missed exhibitions or three (3) in the aggregate (i.e., whether consecutive or not).
“Reasonable Efforts” means the steps, and performance thereof, that a well-managed company would take to achieve a particular result desired by such company for itself, assuming such company was acting in a prudent and reasonable manner.
“Release Week” means the seven (7) day period starting on the Content’snational release date in the Country, and each seven (7) day period thereafter.
“Roll Out Period” means the periodending on the earlier of (i) first anniversary of the Execution Date and (ii) December 31, 2013.
“Schedule Execution Date” means the Execution Date for any Schedules which are included in this Agreement as of the Execution Date, and, for any Schedules added after the Execution Date, the date such Schedule (or the amendment incorporating such Schedule) is added by mutual agreement in writing.
“Screen”means a single auditorium where members of the public view Content shown from a projection system.
“SMPTE” means the Society of Motion Picture and Television Engineers.
“Sony Content” means Content that Sony or any Sony Distribution Entity has the right to theatrically distribute in the Country.
“Sony Digital Content” means Digital Content that Sony or any Sony Distribution Entity has the right to theatrically distribute in the Country.