Exhibit 10.2

 

FULFILLMENT SERVICES AGREEMENT

 

between

 

DREAMWORKS ANIMATION HOME ENTERTAINMENT, L.L.C.

 

and

 

PARAMOUNT HOME ENTERTAINMENT, INC.

 

dated as of December 9, 2005

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Table of Contents

 

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Section 1.   Definitions and Usage; Conditions Precedent    1 Section 2.  
Period of Fulfillment Services; Video-on-Demand.    14 Section 3.   Delivery
Requirements    15 Section 4.   Fulfillment Services    15 Section 5.   Home
Video Fulfillment Expenses — Approvals and Controls    30 Section 6.   Home
Video Fulfillment Expenses Accounting    31 Section 7.   Services Fee    32
Section 8.   Home Video Gross Receipts    34 Section 9.   Representations,
Warranties and Agreements    47 Section 10.   Indemnity    49 Section 11.  
Default; Remedies and Termination    51 Section 12.   Copyright    54
Section 13.   Ownership    55 Section 14.   Inventory of Materials    55 Section
15.   Force Majeure    56 Section 16.   Assignment    56 Section 17.   Standard
of Care    57 Section 18.   Distribution Credit    57 Section 19.   Other
Activities    58 Section 20.   Exercise of Discretion    58 Section 21.   No
Partnership or Third Party Benefit    58 Section 22.   Integration/Formalities
   59 Section 23.   Dispute Resolution    59 Section 24.   Severability of
Provisions    60 Section 25.   Waiver    60 Section 26.   Governing Law    60
Section 27.   Confidentiality    60 Section 28.   Notice of Representatives   
61 Section 29.   Paragraph Headings    61 Section 30.   Disclosure, Compliance
and Reporting Obligations    61

 

(i)

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Table of Contents

(continued)

 

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Section 31.   Notices    63 Section 32.   Counterparts    64 Section 33.  
Paramount Affiliates    64

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FULFILLMENT SERVICES AGREEMENT dated as of December 9, 2005 (this “Agreement”),
by and between DreamWorks Animation Home Entertainment, L.L.C. (“DWA”) and
Paramount Home Entertainment, Inc. (“Paramount”).

 

WHEREAS DWA is principally devoted to distributing feature-length animated
motion pictures and other animated productions for Home Video Exhibition;

 

WHEREAS Paramount is engaged, inter alia, in the business of providing home
video fulfillment services and Video-on-Demand services with respect to feature
length motion pictures and other productions throughout the world;

 

WHEREAS DreamWorks Animation SKG, Inc. (“DWA SKG”) and DreamWorks L.L.C. (“DWS”)
entered into that certain Distribution Agreement dated as of October 7, 2004,
with respect to the distribution and exploitation by DWS in certain media
throughout the world of motion pictures produced by DWA (the “Prior Agreement”);

 

WHEREAS Paramount Pictures Corporation (“PPC”) has entered into that certain
purchase agreement dated December 9, 2005 to acquire all of the equity interests
in DWS (the “Purchase Agreement”);

 

WHEREAS, in connection with the consummation of the transactions contemplated by
the Purchase Agreement, DWS and DWA SKG have agreed to terminate the Prior
Agreement as of the Effective Date.

 

WHEREAS DWA desires to engage Paramount to provide certain fulfillment and
ancillary services with respect to the DWA Pictures (as defined hereunder) in
furtherance of DWA’s distribution of DWA Video Devices and the exploitation of
the DWA Pictures via Home Video Exhibition, and Paramount desires to provide
such fulfillment and other services on the terms and conditions contained
herein; and

 

WHEREAS, on the date hereof, DWA SKG and PPC are entering into that certain
Distribution Agreement attached hereto as Exhibit A pursuant to which DWA SKG
grants a license to PPC to distribute and exploit DWA Pictures in certain media
throughout the world (the “Distribution Agreement”);

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, DWA and Paramount hereby agree as follows:

 

Section 1. Definitions and Usage; Conditions Precedent

 

1.1 Definitions:

 

Affiliate of Any Person shall mean any other Person controlling, controlled by
or under common control with such Person. Post-Effective Date, DWS shall be
deemed an Affiliate of Paramount. For the purposes of this Agreement, National
Amusements, Inc., NAIRI, Inc., CBS Corporation and each direct or indirect
subsidiary of CBS Corporation shall not be considered Affiliates of Paramount.

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Animated Motion Picture(s) shall mean any Motion Picture that is created
predominantly by one or more non-live action production methods (e.g.,
hand-drawn animation [such as Prince of Egypt], CGI [such as Shrek], stop-motion
[such as Chicken Run] and/or motion capture [such as Polar Express]) (each, an
“Animation Method”). However, a Motion Picture shall not be deemed to be an
Animated Motion Picture if digital Animation Method(s) are used, in whole or in
part, to create photorealistic characters that interact with live-action
characters in live-action settings. (Photorealistic characters include both
“real world” characters modified by an Animation Method [e.g., Babe the pig in
Babe] and characters that are invented but which are depicted in a “real world”
manner by an Animation Method [e.g., Yoda in Star Wars II: Attack of the Clones,
Gollum in Lord of the Rings, the dinosaurs in Jurassic Park, the robots in I,
Robot, the toy soldiers in Small Soldiers].)

 

Base Films shall mean, initially (i.e., with respect to the first DWA Picture
Delivered following the Effective Date), Shrek, Shark Tale and Madagascar. With
respect to any DWA Picture Delivered thereafter, Base Films shall mean the three
(3) immediately preceding Event Pictures (but excluding Shrek 2 and Wallace &
Gromit: Curse of the Were-Rabbit) released for Theatrical Exhibition in the
Domestic Territory.

 

Business Day shall mean a day other than a Saturday, Sunday or other day on
which financial institutions in Los Angeles, California or New York, New York
are authorized or required by law to close.

 

CJ Agreement shall mean collectively the Theatrical Distribution Agreement,
amended and restated as of February 10, 1999, between DWS and Cheil Jedang
Corporation (“Cheil”), the Home Video Fulfillment Services Agreement, amended
and restated as of February 10, 1999, between DWS and Cheil, each as may be
amended, restated, supplemented or otherwise modified from time to time in
accordance with the terms hereof, and all related agreements with respect to one
or more DWA Pictures between DWS and Cheil or CJ Entertainment, Inc. (together
with Cheil collectively “CJ Entertainment”).

 

Closing Date shall mean the date of the closing of the purchase by PPC of all
the equity interests in DWS pursuant to the Purchase Agreement.

 

Commercial Tie-in and Promotional Rights shall mean, with respect to each DWA
Picture, the right to use or license the use of characters, designs, visual
representations, names, logos, props, physical properties or other elements
appearing or used in or in connection with such DWA Picture or all or any part
of the literary material in connection with (i) the advertising, publicizing,
marketing, promotion and/or packaging of merchandise, products or services
and/or (ii) premiums or promotions.

 

Comparable as used with respect to any Motion Picture shall mean a similar, as
determined on an overall basis, Motion Picture based on a comparison of the
production budgets, cast, genre, ratings, pre-release audience surveys, festival
results, theatrical box office and other performance metrics and established
factors used in the Motion Picture industry in Los Angeles, California to
compare Motion Pictures.

 

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Contingent Compensation shall mean, with respect to each DWA Picture,
contractually required payments to or on behalf of any Person providing rights
or services, or otherwise involved in the production of such DWA Picture,
payable in respect of such DWA Picture, which (i) are dependent in whole or in
part on box office, gross receipts, net receipts, or a percentage of such gross
receipts or net receipts, and are payable in a fixed or allocable amount or as a
percentage of such receipts, and/or (ii) are payable in a fixed amount upon the
occurrence of a specified event such as receipt of an Academy Award or the sale
of a specified number of Video Devices.

 

Control when used with respect to any specified Person means the power to direct
the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms “controlling” and “controlled” have meanings correlative to the foregoing.

 

Copyright Revenue shall mean, with respect to each DWA Picture, all royalties,
fees and other revenue that DWA, the registered copyright owner or other
appropriate entity, is otherwise entitled to collect by reason of any statute,
governmental regulation or operation of law, based upon or in connection with,
in whole or in part, or directly or indirectly, any use of such DWA Picture from
time to time pursuant to the provision of Fulfillment Services with respect to
such DWA Picture and the Licensed Marks relating to such DWA Picture, including
the sale of blank recordable media and/or recording apparatus for the purpose of
recording any such DWA Picture, commonly referred to as private copy levies
and/or from the rental of pre-recorded Video Devices to consumers, commonly
referred to as video rental right levies.

 

Delivery shall mean delivery, or the provision of access, to Paramount of all
items referenced in Section 3 hereof. A DWA Picture shall be deemed to be
Delivered hereunder only upon Paramount’s receipt of all such items (the
“Delivery Date”).

 

DTV Production(s) shall mean all Animated Motion Pictures or Hybrid Motion
Pictures intended for initial Home Video Exhibition.

 

DWA-approved Fulfillment Servicing Agreement shall mean the Cheil Agreement, the
Kadokawa Agreement, each agreement set forth on Schedule 1 hereto, as such
agreement may be amended, restated, supplemented or otherwise modified from time
to time in accordance with the terms hereof, and each Fulfillment Servicing
Agreement approved in writing by DWA in accordance with Sections 4.6.b and 4.13
below. The foregoing Schedule shall be completed by DWA on or before the
Effective Date.

 

DWA-approved Third Party Service Agreement shall mean each agreement set forth
on Schedule 4 hereto, as such agreement may be amended, restated, supplemented
or otherwise modified from time to time in accordance with the terms hereof, and
each Third Party Service Agreement approved in writing by DWA in accordance with
Section 4.11 below. The foregoing Schedule shall be completed by DWA on or
before the Effective Date.

 

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DWA DTV Production shall mean a DWA Picture intended for initial Home Video
Exhibition.

 

DWA Picture shall mean an Animated Motion Picture or Hybrid Motion Picture
(i) that is available for Delivery prior to the expiration of the Output Term;
(ii) the Distribution Rights with respect to which are licensed by DWA SKG to
PPC pursuant to the Distribution Agreement; and (iii) with respect to which DWA
owns or exclusively controls the right to release, distribute, Exhibit and
otherwise exploit such Motion Picture via Home Video Exhibition.

 

DWA Theatrical Picture shall mean a DWA Picture intended for initial Theatrical
Exhibition.

 

DWA Video Device shall mean a Video Device embodying a DWA Picture.

 

Effective Date shall mean the later of the (i) Closing Date; and (ii) date upon
which all of the conditions precedent set forth in Section 1.3 below are
satisfied, or such other date as mutually agreed between DWA and Paramount.

 

Event Picture shall mean any Animated Motion Picture or Hybrid Motion Picture
that (i) is a DWA Theatrical Picture; (ii) is rated “G,” “PG” or “PG-13”; and
(iii) is scheduled to be released for Theatrical Exhibition on not less than two
thousand (2,000) screens in the Domestic Territory (irrespective of the
anticipated theatrical release pattern in the International Territory).

 

Exhibit shall mean transmit, display, exhibit or perform. “Exhibiting” and
“Exhibition” shall have correlative meanings.

 

Existing Picture(s) shall mean the following Animated Motion Pictures: Antz; The
Prince of Egypt; The Road to Eldorado; Chicken Run; Shrek; Spirit: Stallion of
the Cimarron; Sinbad: Legend of the Seven Seas; Shrek 2; Shark Tale; Madagascar;
and Wallace & Gromit: Curse of the Were-Rabbit.

 

Financial Benefit shall mean any and all advances (including sales advances and
signing bonuses), volume and prompt payment discounts, laboratory and other
vendor rebates or adjustments and any other economic consideration or financial
advantages that are (i) attributable in whole or in part to the DWA Pictures and
(ii) offered to, accepted by or otherwise received or credited to the account
of, Paramount, any Paramount Affiliate or any of their respective controlled
Affiliates after the Effective Date in connection with any transaction that
relates to the services of Paramount, any Paramount Affiliate or any of their
respective controlled Affiliates in connection with (x) the DWA Pictures,
(y) the DWA Pictures and other Motion Pictures produced or distributed by
Paramount, any Paramount Affiliate or any of their respective controlled
Affiliates, or (z) the provision of Fulfillment Services hereunder. For the
avoidance of doubt, Financial Benefit shall not include any advances, signing
bonuses or other amounts actually paid to Paramount by any third Person prior to
the Effective Date (unless such amounts, or any portion thereof, were paid to
Paramount by such third Person in contemplation of this Agreement or Paramount’s
provision of Fulfillment Services with respect to the DWA Pictures).

 

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Fulfillment Servicing Agreement(s) shall mean any agreements or arrangements
between Paramount or a Paramount Affiliate, as one party, and any Person,
including any Subcontractor or other third party service provider, as the other
party, with respect to the provision of any fulfillment services for a DWA
Picture, as such agreements may be amended, restated, supplemented or otherwise
modified from time to time in accordance with the terms hereof.

 

GAAP shall mean generally accepted accounting principles in the United States.

 

GAAP Accrual Report shall have the meaning ascribed thereto in Section 8.5.e.
below.

 

Good Faith Dispute shall mean any amount or provision that is the subject in a
bona fide disagreement between the parties.

 

Home Video Exhibition shall mean all existing and future forms of home
entertainment, including the right to manufacture, package, market, sell, rent,
lease, Exhibit, distribute and otherwise exploit all forms of Video Devices, now
known or hereafter devised, including future methods and means of delivering
Video Devices into the home. Home Video Exhibition shall also include the right
to Exhibit a Motion Picture via Video-On-Demand.

 

Home Video Fulfillment Expenses shall mean, with respect to each DWA Picture,
the aggregate of all actual, direct out-of-pocket costs, charges and expenses
(other than PPC’s, Paramount’s or any Affiliate’s overhead expenses) that have
either been paid or incurred (i.e., reported as a liability in the accounts
payable accounting system of PPC, Paramount or such Affiliate and paid within
thirty (30) days thereafter) arising from the manufacture, duplication,
replication, sales, marketing, promotion and other costs associated with
rendering Fulfillment Services. As used in this definition:

 

(i) Manufacturing costs include the manufacture, packaging and shipping of Video
Devices, including costs with respect to re-editing, dubbing, subtitling, closed
captioning and narration for the deaf and blind, licensing and clearance costs
for special features, mastering, duplication, replication, anti-piracy devices
and anti-copy protection, raw material costs including tape, disc, shell, box,
label, sleeves, containers, stickers, packaging materials and services including
plastic wrapping, “pick, pack and ship” and other physical distribution and
handling services, freight, transportation, warehousing, storage, processing of
returns, degaussing and disposal.

 

(ii) Sales and marketing costs include selling, advertising, and promotion of
Video Devices, including design, production, and manufacture (for the purposes
of Home Video Exhibition) of marketing and advertising materials, press kits,
advertising funding and rebates including co-operative advertising and regional
marketing funds, wholesale rebates, direct-to-consumer rebates, display

 

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and point-of-purchase advertising, trailers, screening Video Devices, media
purchases, artwork graphics, fulfillment, promotions, mass merchant advertising,
advertising agency and consultant fees, sales incentive programs, anti-piracy
costs including an allocable portion of the dues and assessments payable with
respect to industry anti-piracy programs relating to Video Devices, research,
public relations fees, trade show and entertainment costs, commercial tie-ins,
mailers and sales commissions.

 

(iii) Development, production and other costs related to the delivery of
so-called DVD extras, bonus and other material included in the Video Devices.

 

(iv) Any of the foregoing costs directly related to delivering a DWA Picture for
Exhibition via VOD.

 

All Home Video Fulfillment Expenses shall be charged by Paramount at rates that
do not exceed the rates charged by Paramount in connection with the Home Video
Exhibition of comparable Motion Pictures exploited by Paramount. “Home Video
Fulfillment Expenses” shall not include (a) Additional Home Video Fulfillment
Expenses (as defined in Section 5.2.), (b) Residuals and Contingent
Compensation, (c) expenses associated with delinquent payments by Paramount
and/or any Paramount Affiliate to suppliers, vendors or other services providers
(e.g., interest or finance charges) except to the extent caused by the actions
or inactions of DWA or its Affiliates, (d) costs of checking and collection of
Home Video Gross Receipts, and (e) trade dues and assessments by trade
organizations. Paramount shall have no responsibility for any costs referenced
in the foregoing clauses (a) and (b). Paramount shall be solely responsible for,
and shall not charge or deduct, any costs referenced in the foregoing clauses
(c), (d) and (e). Home Video Fulfillment Expenses shall be reduced by the net
amount of any insurance recoveries attributable thereto to the extent received
by Paramount.

 

For the avoidance of doubt, in computing Home Video Fulfillment Expenses for
purposes of the GAAP Accrual Reports to be provided to DWA in accordance with
Section 8.5.e below, Home Video Fulfillment Expenses shall be computed and
reported in accordance with GAAP (and not on a “cash basis” as defined herein).

 

Home Video Gross Receipts shall mean with respect to each DWA Picture, the
amounts set forth in Section 8. below, subject to the adjustments and exclusions
as provided therein.

 

Home Video Net Receipts shall mean Home Video Gross Receipts, less the Services
Fees thereon, as reported to DWA pursuant to Section 8.5 below for the
applicable accounting and reporting period.

 

HV Release Date shall mean, with respect to a DWA Picture, the date on which DWA
Video Devices with respect to such DWA Picture are initially made available for
Home Video Exhibition in an applicable portion of the Territory.

 

Hybrid Motion Picture(s) shall mean any Motion Picture that is predominantly
live-action, but in which at least two of the four characters with the most
screen time, or in which a majority of the characters with speaking roles, are
created (non- photorealistically) by an Animation Method. Who Framed Roger
Rabbit, Looney Tunes - Back in Action and Space Jam would be Hybrid Motion
Pictures.

 

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Internet shall have the meaning ascribed thereto in the Distribution Agreement.

 

Interparty Agreement means that certain Interparty Agreement dated as of
October 7, 2004 among DWS, DWA and Universal.

 

Kadokawa Agreement shall mean the Master Agreement dated as of April 22, 2004
among DWS, Kadokawa Entertainment Inc. (“Kadokawa”) and Kadokawa Holdings Inc.,
as Guarantor, including Exhibits A, B, C and D attached thereto, as the same may
be amended, restated, supplemented or otherwise modified from time to time in
accordance with the terms hereof.

 

Licensed Marks shall mean, with respect to each DWA Picture from time to time,
to the extent related to the Fulfillment Services, and to the extent of DWA’s
rights in the Licensed Marks in the Territory, the right to use and sublicense
the use of (i) the title of such DWA Picture (to the extent such title is a
registered trademark) from time to time in any and all print styles and forms in
connection with the rendering of Fulfillment Services with respect to such DWA
Picture, and all goodwill associated therewith or symbolized thereby, and
(ii) the DreamWorks Marks listed and depicted in Schedule A to the Trademark
License Agreement solely in connection with the rendering of Fulfillment
Services with respect to such DWA Picture in accordance with the terms hereof.

 

Linear shall mean the broadcast or exhibition of an audio or audiovisual program
intended for passive viewing in a predetermined order or sequence, subject to
the ability of the end-user or viewer to play, pause, stop, fast forward,
rewind; provided, however, that the setting, progression of actual events as
they occur, outcome, participants and contents of a Linear program cannot be
manipulated or altered by the viewer or end-user. The availability of so-called
“DVD Extras” or bonus features such as deleted scenes or alternative endings
shall not, in and of itself, deem the exhibition of a DWA Picture to be
non-Linear.

 

Major International Video Territory shall mean those territories listed on
Schedule 2 hereto.

 

Major Release shall mean any theatrical Motion Picture rated “G,” “PG,” “PG-13”
or “R” that is scheduled to be released for Theatrical Exhibition on not less
than two thousand (2,000) screens in the Domestic Territory (irrespective of the
anticipated theatrical release pattern in the International Territory).

 

Marketing Implants shall mean (i) agency personnel who, in connection with
Paramount’s, or any Paramount Affiliate’s Motion Pictures (generally), render
specific tasks or perform specific department functions related to marketing and
advertising of such Motion Pictures or render any other services that are
customarily rendered by in-house personnel of major home video services
distributors; and (ii) marketing and advertising agencies who, on an out-sourced
basis, administer the marketing, publicity and promotion of Paramount’s, or such
other Paramount Affiliate’s Motion Pictures (generally) in a portion of the
Territory.

 

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McDonald’s Agreement shall mean the Agreement dated as of July 19, 2005 between
DWA and McDonald’s USA, LLC, McDonald’s Latin America, LLC, McDonald’s Apenea
LLC, McDonald’s International LLC and McDonald’s Europe Inc. (collectively,
“McDonald’s”), as in effect on the date hereof.

 

McDonald’s Interparty Agreement shall mean that certain interparty agreement
dated on or about the date hereof by and between PPC and DWA SKG.

 

Motion Picture(s) shall mean audiovisual product produced and distributed of
every kind and character whatsoever, including all present and future
technological developments, whether produced by means of any photographic,
electrical, electronic, mechanical or other processes or devices now known or
hereafter devised, and their accompanying devices and processes whether
pictures, images, visual and aural representations are recorded or otherwise
preserved for projection, reproduction, exhibition, or transmission by any means
or media now known or hereafter devised in such manner as to appear to be in
motion or sequence, including computer generated pictures and graphics other
than video games.

 

Output Term shall mean the period commencing on the Effective Date and
continuing until the expiration or earlier termination of the “Output Term”
under the Distribution Agreement.

 

Outright Sale shall mean a license from Paramount to a Person to Exhibit a DWA
Picture for a specified period of time in excess of one year, without any
obligations on the part of such Person to account to Paramount for revenue and
expenses received or incurred by such Person.

 

Paramount Affiliate shall mean any Person that qualifies as a controlled
Affiliate of PPC and/or Paramount pursuant to the definitions of Affiliate and
Control set forth above. For the avoidance of doubt, PPC and post-Effective
Date, DWS, shall constitute Paramount Affiliates.

 

Person shall mean any individual, corporation, limited liability company,
estate, partnership, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.

 

Rent-a-System Picture shall mean an Animated Motion Picture or Hybrid Motion
Picture with respect to which DWA acquires only a license to exercise certain
rights pursuant to an arms-length agreement with an unaffiliated third party,
the applicable license agreement does not obligate DWA to pay an advance or
minimum guarantee for such Motion Picture and under the license agreement DWA is
entitled to receive or retain a customary rent-a-system distribution fee and
such unaffiliated third party is obligated either to advance, guarantee or to
pay on a full recourse basis all distribution expenses which may be incurred by
DWA.

 

Required International Territories shall mean those territories listed on
Schedule 5 hereto.

 

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Residuals shall mean, with respect to each DWA Picture, payments to third
parties required (i) pursuant to collective bargaining, union or guild
agreements applicable to DWA for the exploitation of such DWA Picture, including
residuals, pension, health and welfare payments, and employer share of taxes, or
(ii) for performance, synchronization, recording, re-use and video levies,
patent, trademark and similar licenses as governmental requirements, incurred
for the distribution or turning to account of such DWA Picture, or rights
derived therefrom, in the case of each of clauses (i) and (ii) above, for the
Home Video Exhibition of such DWA Picture throughout the Territory.

 

Separation Agreement shall mean the agreement dated as of October 7, 2004 by and
among DWS, DWA SKG and DreamWorks Animation L.L.C. regarding the principal
corporate transactions required to effect DWA SKG’s separation from DWS.

 

Services Agreement shall mean the agreement dated as of October 7, 2004 between
DWS and DWA SKG whereby (i) DWS has agreed to provide DWA SKG with various
corporate and administrative support services as enumerated therein, and such
additional services that DWS and DWA SKG may identify from time to time in the
future, and (ii) DWA SKG has agreed to provide DWS with certain support services
as enumerated therein.

 

Service Term shall mean:

 

a. With respect to DWA Pictures Delivered to Paramount during the Output Term,
the period commencing on the date such DWA Picture is Delivered to Paramount and
ending the earlier of (i) sixteen (16) years after the DWA Picture’s Theatrical
Release Date in the Domestic Territory, or (ii) seventeen (17) years after
Delivery of the DWA Picture;

 

b. With respect to Existing Pictures, the period commencing on the Effective
Date and ending on the date that is sixteen (16) years after each Existing
Picture’s Theatrical Release Date in the Domestic Territory, as such Theatrical
Release Dates are set forth on Schedule 3;

 

c. With respect to DWA DTV Productions, (i) if the HV Release Date for such DWA
DTV Production occurred prior to the Effective Date, the period commencing on
the Effective Date and ending ten (10) years thereafter, or (ii) if such DWA DTV
Production is Delivered on or after the Effective Date, the period commencing on
the Delivery Date and ending the earlier of (A) ten (10) years after such DWA
DTV Production’s HV Release Date in the Domestic Territory, or (B) 126 months
after such DWA DTV Production is Delivered to Paramount.

 

Notwithstanding the foregoing, the Service Term shall be subject to earlier
termination in accordance with the terms hereof; provided that, subject to
Section 11.2.c. below, (i) (A) the Service Term and this Agreement, as and to
the extent they pertain to such Fulfillment Services to be rendered by Paramount
hereunder that are also subject to any DWA-approved Fulfillment Servicing
Agreement or the requirements of a DWA-approved Third Party Service Agreement,
as applicable, shall continue, and (B) such Fulfillment Services (and only such
Fulfillment Services) shall continue to be rendered by Paramount in accordance
with the terms of this Agreement, until the expiration or termination of each
such DWA-approved Fulfillment Servicing Agreement or DWA-approved Third Party
Service Agreement, as applicable, in accordance with the terms thereof.

 

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Similar DTV Production shall mean any DTV Production that is rated (or is
capable of obtaining a) “PG” or less restrictive rating.

 

Similar Theatrical Motion Picture shall mean any theatrical Motion Picture rated
“PG” or a less restrictive rating.

 

Subcontractor shall mean a Person, other than a Paramount Affiliate, engaged by
Paramount to render fulfillment services for one or more DWA Pictures for a
limited period of time, who (i) has an obligation to account to Paramount on a
revenue and expenses basis with respect to the DWA Pictures, and (ii) is
responsible under Paramount’s supervision for rendering services in the
manufacturing, advertising, promotion, securing and fulfillment of orders, the
collection of revenue and the shipping of Video Devices of such DWA Picture(s).

 

Subsidiary shall mean, as to any Person, a corporation, limited liability
company, partnership or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, limited liability company, partnership or other entity are at the
time owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person.

 

Tangible Film Materials shall mean, with respect to each DWA Picture (excluding
any sets, costumes, props, scenery, vehicles and equipment) and only to the
extent it exists (whether coming into existence before or after such DWA Picture
is Delivered) with respect to such DWA Picture, (i) all tangible physical
embodiments of every kind or nature of or relating to such DWA Picture and all
versions thereof, including, if applicable, the YCM separations, master prints,
exposed film, developed film, positives, negatives, prints, answer prints,
special effects, preprint materials (including interpositives, negatives,
videotapes, duplicate negatives, internegatives, color reversals, intermediates,
lavenders, fine grain master prints and matrices, video masters and all other
forms of preprint elements which may be necessary or useful to produce prints or
other copies or additional preprint elements, whether now known of hereafter
devised), sound tracks, recordings, audio and video tapes and discs of all types
and gauges, cutouts, timers, credit-lists, music licenses, and any and all other
physical properties of every kind and nature relating to each such DWA Picture
in whatever state of completion, and all duplicates, drafts, versions,
variations and copies of each thereof and (ii) to the extent related to or
derived from the delivery, exhibition, distribution or other exploitation of any
DWA Picture, all documents of title, including any bill of lading, dock warrant
or dock receipt, all rights under any laboratory pledgeholder agreement,
laboratory access agreement, warehouse receipt or order for the delivery of
inventory, and also any other document or receipt which in the regular course of
business or financing is treated as adequately evidencing that the Person in
possession of it is entitled to receive, hold and dispose of the document and
the goods it covers.

 

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Tent-Pole Picture shall have the meaning commonly associated therewith in the
theatrical motion picture industry in Los Angeles, California (i.e., the most
significant Motion Picture(s) released by a major Motion Picture studio in a
given calendar year, measured in terms of the key talent associated with the
Motion Picture, the production budget thereof, P&A expenditures and related
marketing and merchandising and the overall box office performance of the
franchise in which such Motion Picture is contained, if applicable). For
purposes of example, Mission Impossible 3 and Beowulf will each constitute a
Tent-Pole Picture. For further clarification, it is acknowledged and agreed that
it is unlikely that Paramount will release more than two (2) Tent-Pole Pictures
in any given calendar year (not including the DWA Pictures).

 

Term shall mean the period commencing on the Effective Date and continuing until
expiration or earlier termination of the Service Term of all DWA Pictures.

 

Territory shall mean the entire universe, including:

 

(i) The “Domestic Territory” shall mean the territorial United States and its
possessions, territories and commonwealths, including the U.S. Virgin Islands,
Puerto Rico, Guam, and the U.S. Trust Territories of the Pacific Islands,
including the Carolina Islands, the Marshall Islands and the Mariana Islands,
Saipan and American Samoa; the Dominican Republic, the British Virgin Islands,
Nassau, Bahamas, Bermuda, Saba Island, St. Eustatius Island, St. Kitts Island,
St. Maarten Island, and Freeport; the Dominion of Canada and its possessions,
territories and commonwealths; and all Army, Navy, Air Force, Red Cross and
other national or governmental installations, diplomatic posts, camps, bases and
reservations of the above mentioned countries, as well as oil rigs (including
Aramco sites) and maritime facilities (and other commercial and/or industrial
installations of the above mentioned countries and territories), wherever any of
the aforementioned facilities or installations are located, to the extent that
sales are made and/or servicing thereof is performed within the geographical
areas set forth above, and all airlines and ships flying the flag of, or having
the registry of, or whose principal office is located in the United States,
Canada or Bermuda and other possessions, territories and commonwealths within
the Domestic Territory.

 

(ii) The “International Territory” shall mean all geographical areas outside of
the Domestic Territory.

 

Theatrical Exhibition shall mean, with respect to each DWA Picture, all forms of
theatrical distribution, including the right to rent, lease, Exhibit, distribute
or otherwise exploit the DWA Picture and any trailers thereof in commercial
motion picture theatres and other venues where persons view the DWA Picture for
an admission fee.

 

Theatrical Release Date shall mean, with respect to a DWA Picture, the date on
which such picture is initially released for Theatrical Exhibition in an
applicable portion of the Territory.

 

Third Party Service Agreement(s) shall mean any and all agreements or
arrangements between Paramount or a Paramount Affiliate and any Person, as a
vendor or supplier of goods and/or services, such as an overall laboratory
agreement or advertising agency

 

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arrangement, that facilitate the services to be provided by Paramount hereunder
as well as the distribution or exploitation of Motion Pictures produced or
distributed by Paramount, as such agreements may be amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms hereof.

 

Trademark License Agreement shall mean the License Agreement effective as of
October 1, 2004 between DWA SKG and DWS with respect to the DreamWorks Marks as
specified therein.

 

Universal shall mean Vivendi Universal Entertainment LLLP and any Affiliate
thereof engaged in the distribution or other exploitation of Motion Pictures.

 

Universal Agreement shall mean the DW/Universal Studios, Inc. Master Agreement
(Amended and Restated as of October 31, 2003), between DWS, Universal Studios,
Inc. (“Universal Studios”) and Universal, as assignee of Universal Studios,
including the Agreement Modules (as defined therein) attached as Exhibits A, B
and D thereto, but excluding the Agreement Module attached as Exhibit C, as the
same may be amended, restated, supplemented or otherwise modified from time to
time, in accordance with the terms hereof.

 

Video Device means a videocassette, laserdisc, cartridge, videogram, tape,
Digital Versatile Disc (“DVD”), Blu-ray disc, HD-DVD disc or any form of
electronic storage or other format, platform or device now known or hereafter
devised, intended for in-home use by members of the public and physically or
electronically transported to the home or mobile device for such use that is
sold or rented and physically or electronically embodies a Motion Picture for
Exhibition by a playback device which causes a visual image of the Motion
Picture to be seen, in a Linear fashion, and which Motion Picture appears on the
screen of a television receiver or other monitor in the home, computer or
comparable device (mobile or not) now known or hereafter devised, including
without limitation, video downloading. CD-ROM, CD-I, video games and interactive
products (including DVD interactive products containing a Motion Picture) or
pictures of any type, are not Video Devices. For the avoidance of doubt, Blu-ray
and HD-DVD discs are Video Devices.

 

Video-on-Demand or “VOD” means the exhibition of a single Motion Picture or
television program distributed via any approved means of transmission (but
specifically excluding Internet delivery), by means of a point-to-point
telecommunications system, originating from a distance or delivered from a
digital storage device and using computer information, storage, retrieval and
management techniques that permit a viewer to stop and start the exhibition of
such program in the discretion of the viewer and/or to view such program in a
non-linear fashion on conventional television sets and/or computer terminals and
where the viewer is charged on a per-program exhibition basis (as opposed to a
per-service charge or subscription fee basis) for his/her election to view such
Motion Picture or television program at a time scheduled by the viewer (i.e.,
the viewer can independently and in the viewer’s sole discretion, select his/her
desired viewing time without reference to a list of possible viewing times
pre-established by the service provider) and accessible by such viewer for a
period of time not to exceed twenty-four (24) hours.

 

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1.2 Terms and Usage Generally.

 

The definitions in Section 1.1. as used herein shall apply equally to both the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. All references herein to Sections and Schedules shall be deemed to
be references to Sections of, and Schedules to, this Agreement unless the
context shall otherwise require. All Schedules attached hereto shall be deemed
incorporated herein as if set forth in full herein. The words “include”,
“includes” and “including” herein and in any Exhibit and Schedule hereto shall
be deemed to be followed by the phrase “without limitation”. All accounting
terms not defined in this Agreement shall have the meanings determined by United
States generally accepted accounting principles as in effect from time to time.
The words “hereof”, “herein” and “hereunder” and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. References to a Person are also to its
permitted successors and permitted assigns. Unless otherwise expressly provided
herein, any agreement, instrument or statute defined or referred to herein or in
any agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.

 

1.3 Conditions Precedent. The effectiveness of this Agreement shall be subject
to and conditioned upon the full satisfaction of each of the following
conditions precedent:

 

a. Closing of the Purchase Agreement. All of the conditions to closing of the
Purchase Agreement have been fully satisfied (without waiver of any of the
conditions set forth in Section 2.02(a)(vii) or 2.02(a)(viii) of the Purchase
Agreement) and the Closing, as defined in the Purchase Agreement, shall have
occurred.

 

b. Termination of Universal Agreement. Exhibit A, Exhibit B and Exhibit D of the
Universal Agreement shall have been terminated (or shall be terminated
immediately following (1) the payment to Universal or its Affiliates of
(A) (i) the Advance Amounts, (ii) the Additional Amounts, (iii) any DW
Adjustment amounts, (iv) the Special Termination Fee, and (v) the Unearned
Exclusivity Fee, (in the case of (i), (ii) and (iii), as defined in the
Interparty Agreement, and in the case of (iv) and (v), as defined in the
Universal Agreement), (B) the Animation Advance, the Animation Additional
Amounts and any DWA Animation adjustment amount (in each case, as defined in the
Interparty Agreement), and (C) the Class U Redemption Amount required to fund
the redemption of the Class U Preferred Stock; and (2) the occurrence of the
Satisfaction Event (as such term is used in the Limited Liability Limited
Partnership Agreement of Holdco, dated as of October 7, 2004, by and among M&J
Dream Partnership, M&J KB Limited Partnership, DG-DW, L.P., DW Lips, L.P., DW
Investment II, Inc., Lee Entertainment, L.L.C. and Vivendi Universal
Entertainment LLLP) with respect to Universal), and all such amounts shall have
been paid.

 

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c. Execution of Certain Agreements. Each of the Fulfillment Services Agreement
and the McDonald’s Interparty Agreement shall have been fully executed by
Paramount.

 

With respect to the foregoing, DWA shall pay all amounts required to be paid to
Universal pursuant to Section 1.3(1)(B) above on the Closing Date (or such other
date directed by Paramount) at the time required by Paramount, subject to DWA’s
prior receipt of the amounts payable to it pursuant to Section 1.3 of the
Distribution Agreement.

 

Section 2. Period of Fulfillment Services; Video-on-Demand.

 

2.1 Period of Fulfillment Services: With respect to each DWA Picture and subject
to the provisions of this Section 2 (including Section 2.3 below), DWA hereby
engages Paramount, on an exclusive basis, to render the Fulfillment Services in
connection with DWA’s Home Video Exhibition of the DWA Pictures in those
portions of the Territory in which DWA owns or controls the Home Video
Exhibition rights during the applicable Service Term, and Paramount hereby
agrees to perform all such Fulfillment Services as and when requested by DWA in
accordance with the terms of this Agreement; provided, that Home Video
Exhibition shall be limited to (i) the exploitation of full-length versions of
the DWA Pictures in their entirety for viewing in a Linear format via Home Video
Exhibition; and (ii) the right to exploit trailers and clips of a DWA Picture in
connection with the advertising, marketing or promotion of such DWA Picture
(including promotional featurettes), subject, in each case, to DWA’s prior
approval. Notwithstanding the foregoing, with respect to DWA Theatrical
Pictures, DWA shall only be obligated to engage Paramount to render the
Fulfillment Services in those portions of the Territory in which PPC exploits
the Theatrical Exhibition rights in and to such DWA Theatrical Picture pursuant
to the Distribution Agreement. To the extent Paramount is engaged to render
Fulfillment Services in connection with any DWA Picture, DWA may elect in its
sole discretion to require Paramount to render Fulfillment Services in
connection with such DWA Picture for the entire initial (as determined by DWA in
its absolute discretion) Home Video Exhibition cycle throughout the Territory
notwithstanding expiration of the Term (in which this Agreement shall remain in
full force with respect to such DWA Picture for such extended period).

 

2.2 Video-on-Demand: In addition to the right and obligation to render
Fulfillment Services in connection with DWA’s Home Video Exhibition of the DWA
Pictures, DWA hereby engages Paramount, on an exclusive basis, to service the
VOD Exhibition of each DWA Picture in those portions of the Territory in which
DWA owns or controls the VOD Exhibition rights during the applicable Service
Term, and Paramount hereby agrees to perform all such services as and when
requested by DWA in accordance with the terms of this Agreement; provided, that
any such VOD Exhibition shall be limited to (i) the exploitation of full-length
versions of the DWA Pictures in their entirety for viewing in a Linear format
via VOD; and (ii) the right to exploit trailers and clips of a DWA Picture in
connection with the advertising, marketing or promotion of such DWA Picture
(including promotional featurettes), subject, in each case, to DWA’s prior
approval. Notwithstanding the foregoing, with respect to DWA Theatrical
Pictures, DWA shall only be obligated to engage Paramount to render the
foregoing services hereunder in those portions of the Territory in which PPC
exploits the Theatrical Exhibition rights in and to such DWA Theatrical Picture
pursuant to the Distribution Agreement.

 

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2.3 Vesting. The appointment of Paramount to render Fulfillment Services
hereunder is expressly subject to any and all rights that Universal may have in
and to the DWA Pictures pursuant to the Universal Agreement or the Interparty
Agreement. The right to render Fulfillment Services with respect to each DWA
Picture that is an Existing Picture released and distributed by DWS pursuant to
the Prior Agreement prior to the Effective Date shall commence and vest in
Paramount as of the Effective Date, subject to any and all mandatory and/or
elective transition periods and provisions under the Universal Agreement. The
right to render Fulfillment Services with respect to any other DWA Pictures
shall commence and vest in Paramount upon the Delivery Date of each such DWA
Picture.

 

2.4 No Other Rights. As between Paramount and DWA, all rights not expressly
granted to Paramount pursuant to this Agreement shall remain vested in DWA,
subject to the terms of the Distribution Agreement.

 

Section 3. Delivery Requirements. DWA shall timely deliver to Paramount at DWA’s
expense all pertinent Tangible Film Materials which DWA reasonably deems
necessary to facilitate Paramount’s servicing obligations hereunder provided
that Paramount shall have no liability whatsoever for any loss, cost or damages
caused by DWA’s failure to provide customary advertising and release materials
in a complete and timely manner, except and to the extent that such failure is
the fault of a Paramount-provided service provider with whom DWA has not
directly contracted for the service provided. DWA will provide Paramount with
any then-available release and advertising materials within sufficient time to
enable Paramount to meet DWA’s advertising and release requirements hereunder.
DWA will deliver to Paramount a fully-executed laboratory access letter for each
DWA Picture to be serviced by Paramount pursuant to this Agreement.

 

Section 4. Fulfillment Services

 

4.1 Level of Services: Paramount’s fulfillment services are set forth in this
Agreement and the schedules and annexes attached hereto, which together with
such ancillary and miscellaneous services reasonably necessary to facilitate the
successful Home Video Exhibition by DWA of the DWA Pictures, shall constitute
Paramount’s obligations hereunder (collectively, the “Fulfillment Services”).
For the avoidance of doubt, all such Fulfillment Services shall be rendered on a
DWA Picture-by-DWA Picture, territory-by-territory basis as requested and
directed by DWA. Paramount, during the applicable Service Term for each DWA
Picture, shall have the obligation to render the Fulfillment Services on a
timely basis in each portion of the Territory designated by DWA in accordance
with Paramount’s prevailing and commercially reasonable practices as applied
generally to all Motion Pictures with respect to which Paramount services Home
Video Exhibition (which, with respect to the Event Pictures, shall be consistent
with Paramount’s Tent-Pole Pictures) under similar circumstances in the
applicable territories, in each case taking into account differences in
production budgets, cast, genre, rating, theatrical box office and other
performance metrics, local tastes and other established factors that Paramount
uses in good faith on a nondiscriminatory basis to make determinations in
connection with the Home Video Exhibition of Motion Pictures with respect to
which Paramount services Home Video Exhibition, excluding in each case, any
Motion Pictures produced or directed by Steven Spielberg. Paramount shall not
have the right to refuse to render Fulfillment Services with respect to a DWA
Picture in any portion of the Territory designated by

 

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DWA. Notwithstanding the foregoing, with respect to each DWA Picture, Paramount
shall provide DWA with a minimum level of support and services, including
publicity, promotion, marketing and advertising support and services, comparable
on an overall basis in quality, level, priority and quantity to the provision of
support and services provided in connection with the Base Films for such DWA
Picture and, to the extent, and so long as applicable and a higher standard,
each DWA Picture shall be serviced consistent with Paramount’s prevailing and
commercially reasonable practices as applied generally to Motion Pictures
produced or distributed by Paramount (which, with respect to DWA Pictures that
are Event Pictures, shall be consistent with Paramount’s Tent-Pole Pictures)
under similar circumstances in the applicable territories and media, in each
case taking into account differences in production budgets, cast, genre, rating,
theatrical box office and other performance metrics, local tastes and other
established factors that Paramount uses in good faith on a nondiscriminatory
basis to make determinations in connection with the exploitation of Motion
Pictures produced or distributed by Paramount, excluding in each case, any
Motion Pictures produced or directed by Steven Spielberg; provided, Home Video
Fulfillment Expenses shall be determined in accordance with Section 5 below. In
addition, Paramount will develop and prepare, after meaningful consultation with
DWA, strategic plans and directions for DWA Video Devices to be mutually
approved by Paramount and DWA, and Paramount will use its commercially
reasonable efforts to render the Fulfillment Services hereunder in accordance
with such mutually-approved strategic plans and directions.

 

Notwithstanding anything to the contrary contained herein, with respect to those
Required International Territories marked with an asterisk on Schedule 5, it is
understood and agreed that, as of the Effective Date, neither Paramount nor any
Paramount Affiliate renders Fulfillment Services with respect to the Home Video
Exhibition of Motion Pictures in such territories and, as such, the parties
hereby agree that Paramount shall not be required to provide Fulfillment
Services in such territories prior to September 1, 2006; provided, that
(a) Paramount shall use commercially reasonable efforts to provide such
Fulfillment Services in one or more of such territories if and to the extent
requested by DWA prior to such date (and otherwise comply with its obligations
hereunder in such territories); and (b) from and after September 1, 2006,
Paramount shall be required to provide Fulfillment Services and otherwise comply
with its obligations hereunder in such territories in accordance with the terms
hereof.

 

In furtherance of the foregoing, Paramount shall render all customary services
required for the Home Video Exhibition of the DWA Pictures throughout the
Territory during the Term in a manner consistent with the terms of this
Agreement, which services shall include, without limitation, the following:

 

a. Domestic Home Video Distribution. Paramount shall provide the services and
information listed in Annex 4.1.a hereto (which shall be negotiated in good
faith by the parties, comparable with the services provided by DWS to DWA prior
to the Effective Date, within ninety (90) days of the Effective Date) in
connection with DWA’s Home Video Exhibition of the DWA Pictures in the Domestic
Territory, and such services and information shall be provided at no cost or
expense to DWA except for Paramount’s retention of the Services Fee. In
addition, with respect to the Domestic Territory, Paramount shall (i) timely
prepare and recommend, in full consultation with DWA, distribution and marketing
plans and budgets, product pricing and sales policies and all other elements of
Paramount’s obligations hereunder as

 

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requested from time to time by DWA for DWA’s approval; provided, however,
Paramount and DWA shall mutually determine Home Video Fulfillment Expenses and
in the event of a disagreement regarding such Home Video Fulfillment Expenses,
Paramount’s decision shall prevail, subject to the requirements of Section 5
below; and (ii) propose, and upon DWA’s timely approval, implement such
distribution and marketing plans, and street date, pricing, period of
availability and applicable sales, credit, rebate, bonus and return policies on
behalf of DWA Video Devices. Recommendations shall be on a DWA Picture-by-DWA
Picture, country-by-country basis and shall be subject to DWA’s timely approval.
Paramount shall procure, supervise and develop all artwork, ads, point of sale
and any other sales or promotional materials, implement the usage thereof
pursuant to the marketing plans approved by DWA, and update such materials from
time to time as reasonably directed by DWA.

 

b. International Home Video Distribution. Paramount shall provide the services
and information listed in Annex 4.1.b (which shall be negotiated in good faith
by the parties, comparable with the services provided by DWS to DWA prior to the
Effective Date, within ninety (90) days of the Effective Date) hereto in
connection with DWA’s Home Video Exhibition of the DWA Pictures in the
International Territory, and such services and information shall be provided at
no cost or expense to DWA except for Paramount’s retention of the Services Fee.
In addition, for each of the International Territories, Paramount shall
(i) timely prepare and recommend, in full consultation with DWA, distribution
and marketing plans and budgets, product pricing and sales policies and all
other elements of Paramount’s obligations hereunder as requested from time to
time by DWA for DWA’s approval; provided, however, Paramount and DWA shall
mutually determine Home Video Fulfillment Expenses, and in the event of
disagreement regarding such Home Video Fulfillment Expenses, Paramount’s
decision shall prevail, subject to the requirements of Section 5 below; and
(ii) propose, and upon DWA’s timely approval, implement such distribution and
marketing plans, and street date, pricing, period of availability and applicable
sales, credit, rebate, bonus and return policies on behalf of DWA Video Devices.
Recommendations shall be on a DWA Picture-by-DWA Picture, country-by-country
basis and shall be subject to DWA’s timely approval. Paramount shall procure,
supervise and develop all artwork, ads, point of sale and any other sales or
promotional materials, implement the usage thereof pursuant to the marketing
plans approved by DWA, and update such materials from time to time as reasonably
directed by DWA.

 

c. Video-on-Demand. Paramount shall provide the services and information listed
in Annex 4.1.c (which shall be negotiated in good faith by the parties,
comparable with the services provided by DWS to DWA prior to the Effective Date,
within ninety (90) days of the Effective Date) hereto in connection with DWA’s
exploitation of the DWA Pictures via Video-on-Demand in the Territory, and such
services and information shall be provided at no cost or expense to DWA except
for Paramount’s retention of the Services Fee.

 

d. Additional Services. Without limiting anything set forth in this Agreement
and in addition to the services set forth herein and in Annexes 4.1.a, 4.1.b and
4.1.c, Paramount agrees to render the following in connection with DWA’s Home
Video Exhibition of the DWA Pictures:

 

(i) Third Parties. Procure the goods and services of third parties for DWA Video
Devices that are customarily utilized by Paramount for Fulfillment Services in
connection with Video Devices embodying Paramount Motion Pictures.

 

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(ii) Media. Make available Paramount inventoried media pursuant to an approved
marketing plan on behalf of DWA Video Devices, on a non-discriminatory basis as
compared to Motion Pictures owned or controlled by Paramount.

 

(iii) Communications. Set up appropriate direct communication channels and
procedures between DWA and Paramount (and between DWA, on the one hand, and
Paramount’s offices, appropriate management employees and staff, on the other
hand) and with appropriate third parties rendering goods or furnishing services
through Paramount, for and on behalf of DWA Video Devices. Advise officers and
appropriate management employees engaged in any aspect of Paramount’s home video
business that the Fulfillment Services are subordinate to DWA’s rights hereunder
and that they should fully cooperate with DWA’s exercise of such rights.

 

(iv) Pick/Pack/Ship. Paramount will render all so-called “pick/pack/ship”
services required by DWA for DWA Video Devices.

 

e. Information. To the extent it exists, and subject to the requirements of any
applicable law, decree or government regulation and any third party rights,
Paramount shall furnish, and shall cause its Paramount Affiliates to furnish:

 

(i) All Information (as defined below) as to the DWA Pictures, to the extent
similar Information as to Paramount’s Motion Pictures or Motion Pictures
produced by any third party is available to Paramount;

 

(ii) All Information (including Information about the release of other Motion
Pictures in the Territory) that is made generally available to Paramount (by any
Person, including any Subcontractor);

 

(iii) All Information as to Paramount Motion Pictures, to the extent similar
Information is available to Paramount with respect to the DWA Pictures; provided
such Information: (A) shall only be furnished upon written request from DWA;
(B) shall be restricted to Information required by DWA for a bona fide business
purpose under this Agreement (e.g., optimal release scheduling, verification of
most favorable terms as specified in this Agreement, including terms related to
services, pricing, costs, comparable accounts and collection of revenues
therefrom, etc.); and (C) shall not be furnished to DWA if in Paramount’s good
faith business judgment, such disclosure would constitute a violation of any
applicable law, decree, government regulation, or constitute a violation of any
third party right;

 

(iv) All Information as to the DWA Pictures that is available to Paramount
(including from any Subcontractor); and

 

(v) All other Information as may be reasonably required by DWA, including,
without limitation, MPAA, MPA and other trade association publications

 

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and reports (except to the extent distribution to DWA is prohibited by such
trade association); irrespective of whether such Information is customarily
provided by a fulfillment services provider and; provided, however, that if
Paramount is required to incur any additional costs (of which Paramount notifies
DWA in advance) for outside personnel Paramount is required to engage solely in
order to furnish any such additional Information which is not included within
the scope of services to be rendered by Paramount under this Agreement,
Paramount shall not be required to furnish such additional Information unless
DWA pre-approves such costs and agrees to reimburse Paramount for same (subject
to appropriate reduction, to be mutually agreed, if and to the extent that such
additional Information is supplied [subject to DWA’s prior approval] to any
party other than DWA). Any dispute as to whether such additional Information is
within the scope of services to be rendered by Paramount hereunder will be
subject to dispute resolution pursuant to Section 23 of this Agreement.

 

(vi) As used herein, “Information” shall mean all tangible (i.e., excluding only
staff meetings, phone conversations and similar conversations which are not
reduced to written or other tangible form) information, data, reports,
agreements and other documents including, without limitation, all outright sales
proposals for the Outright Sales of a DWA Picture, direct access to the
theatrical database for each DWA Picture on a territory-by-territory basis,
competitive HV Release Dates, advertising expenses, copies of all outside
sourced market surveys, updates and analysis, etc., whether distributed on
paper, electronically and/or through any other means (e.g., DWA shall be put on
the distribution lists for such information). The Information shall be provided
consistent with the frequency and timeliness with which the Information (or
similar material) is created by, or supplied to, Paramount, or otherwise as DWA
shall reasonably request; provided, however, that if Paramount is required to
incur any additional costs (of which Paramount notifies DWA in advance) for
outside personnel Paramount is required to engage solely in order to furnish
Information more frequently or quickly (if possible) than the Information (or
similar material) is supplied to Paramount and such increased frequency or
quickness is not included within the scope of services to be rendered by
Paramount under this Agreement, Paramount shall not be required to furnish such
Information with such increased frequency or quickness as requested unless DWA
pre-approves such costs and agrees to reimburse Paramount for same (subject to
appropriate reduction, to be mutually agreed, if and to the extent that such
increased frequency or quickness is also accorded [subject to DWA’s approval] to
any party other than DWA). Any dispute as to whether such increased frequency or
quickness is within the scope of services to be rendered by Paramount hereunder
will be subject to dispute resolution pursuant to Section 23 of this Agreement.

 

(vii) Notwithstanding anything in this Section 4.1.e. to the contrary, in no
instance shall Information include (and Paramount shall not be required to
provide) (A) internal financial information of Paramount, or (B) Information
that is not related to the exploitation and performance of Motion Pictures or
the costs of distribution.

 

f. Reports: In addition to the Information set forth in Section 4.1.e above, to
the extent available and subject to the requirements of law, Paramount shall
provide DWA with access to all information, data, reports, agreements and other
documents created by Paramount on a state-by-state, country-by-country and
territory-by-territory basis relating to DWA Video Devices (e.g., DWA shall be
put on the regular routing lists for such information)

 

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such that DWA shall receive the same concurrently with Paramount (except only
the internal financial statements of Paramount which do not relate to the sales
or performance of such Video Devices or costs of rendering the Fulfillment
Services) and with such frequency as specified herein or otherwise reasonably
requested by DWA, including with respect to the following general categories:
marketing, distributing, financing and operations. Subject to the foregoing
provisions of this Section 4.1.f, the reports (or similar reports) created by,
or supplied to, Paramount, include, but are not limited to, the following
reports:

 

(i) Trade Reports. Monthly Trade Reports from the National Association of Video
Dealers and all other reports and information which relate, in whole or in part,
to the manufacturing, distribution, advertising and/or exploitation of DWA Video
Devices which are supplied to Paramount from any trade or industry of which
Paramount is a member or subscriber or which otherwise provides such reports and
information by Paramount as and when received by Paramount, except to the extent
distribution to DWA is prohibited by such trade association.

 

(ii) Taxes/Currency Transactions. Reports of any taxes paid on DWA’s behalf
and/or any currency transactions made on DWA’s behalf, in such detail and at
such frequency as DWA shall reasonably require to the extent the same is not
regularly included in Payment Reports;

 

(iii) Currency Exchange. Paramount shall provide to DWA a monthly (or more
frequently as DWA may from time to time require) breakdown of rate of exchange
adjustments to Home Video Gross Receipts on a country-by-country basis;

 

(iv) Legal. Reports or information which pertain to home video security
interests imposed on third parties or reports of audits and the audit itself
conducted directly or indirectly by Paramount with respect to which Paramount
shall, at DWA’s request, include DWA Video Devices.

 

(v) Research Reports. Non-title-specific domestic and/or international market
research studies relating to Home Video Exhibition, if commissioned or performed
by Paramount, shall be paid for by Paramount and shared with DWA. Paramount
shall include DWA Pictures in any family entertainment business home video
market research that Paramount commissions and shall share such research reports
with DWA; provided, that DWA shall reimburse Paramount for any incremental costs
expended by Paramount, with the prior approval of DWA, that relate solely to the
inclusion of any DWA Pictures in such research reports.

 

(vi) Additional Documents. Paramount shall furnish, and cause its Paramount
Affiliates to furnish, such additional information and documents as may be
reasonably required by DWA.

 

g. MTV Networks Promotion. Each DWA Picture shall be promoted, marketed and
advertised on the MTV Networks (including, without limitation, Nickelodeon) in
accordance with Paramount’s then prevailing practices as applied generally to
all Motion Pictures produced or distributed by Paramount or any Paramount
Affiliate (which, with respect to the

 

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Event Pictures, shall be consistent with Paramount’s Tent-Pole Pictures). The
rates charged by the MTV Networks for such promotion, marketing and advertising
shall be ***

 

h. Premiums; Promotional Items. Notwithstanding anything to the contrary in this
Agreement, DWA retains (and reserves for itself) the right to render, or cause
to be rendered, all fulfillment services and related activities in connection
with its right to sell or otherwise distribute DWA Video Devices as promotional
or premium items in connection with a so-called commercial tie-in arrangement or
otherwise (including, but not limited to, sale of DWA Video Devices at a fast
food restaurant such as McDonald’s or Burger King, or at any other business not
regularly in the business of selling or renting Video Devices, whether or not
the purchaser of such DWA Video Device must also purchase one of such business’
normal products); or for use in or by schools, or community, religious or
charitable institutions; or for use in so-called award campaigns, and any
amounts received in connection therewith shall be excluded from Home Video Gross
Receipts; provided, however, that DWA may in its sole discretion delegate in
writing to Paramount the rendering of the Fulfillment Services in connection
with these rights, in which event Paramount shall carry out DWA’s instructions
and any amounts received which are directly attributable to such Fulfillment
Services shall be included in Home Video Gross Receipts. If Paramount renders
Fulfillment Services per the preceding sentence in connection only with part of
a premium or promotional deal, as requested by DWA, then Paramount’s Service
Fees shall be calculated only on that portion of the Home Video Gross Receipts
directly attributable to Paramount’s rendition of Fulfillment Services.

 

4.2 Approvals and Controls:

 

a. HV Release Dates / Home Video Exhibition: DWA shall have the right to
designate and approve the HV Release Date in the Domestic Territory for each DWA
Picture and shall approve the HV Release Date for each DWA Picture in each of
the Required International Territories. DWA shall notify Paramount of the
provisional HV Release Date for each DWA Picture in the Domestic Territory at
least twelve (12) months prior to such HV Release Date (or such shorter period
if the provisional HV Release Date is within twelve (12) months from the
Effective Date). Paramount shall be kept fully informed of any proposed or
scheduled change in any provisional HV Release Date and shall receive not less
than four (4) months notice of the designated HV Release Date in the Major
International Video Territory. Once DWA has designated an HV Release Date for a
DWA Picture in the Domestic Territory (whether tentative or firm), Paramount
shall provide DWA with a schedule of proposed HV Release Dates for such DWA
Picture in each of the Required International Territories within thirty
(30) days of DWA’s designation of the Domestic Territory HV Release Date for
such DWA Picture. Paramount shall provide DWA with no less than three (3) days
prior written notice of its intent to designate a HV Release Date for a Tent
Pole Picture and shall consult with DWA during such three (3) day period.
Paramount shall not designate a HV Release Date for any such Tent Pole Picture
until the expiration of such three (3) day period. Upon the expiration of such
period, Paramount may designate and publicly announce a HV Release Date for such

 

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*** Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested by DreamWorks
Animation SKG, Inc. with respect to the omitted portions.

 

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Tent Pole Picture, subject to the terms of Section 4.2.b. below, and once
Paramount has so designated and publicly announced a HV Release Date for such
Tent Pole Picture, DWA shall not schedule an HV Release Date for any DWA Picture
in any portion of the Territory that would conflict with the holdback
restrictions set forth in Section 4.2.b. as they pertain to such Tent Pole
Picture in the applicable portion(s) of the Territory. Once an HV Release Date
is designated by DWA in any portion of the Territory, Paramount shall ensure
that such Release Date is not moved for any reason without DWA’s prior approval.

 

b. Holdbacks: Paramount agrees not to commence or authorize the commencement of
the initial Home Video Exhibition of any Similar Theatrical Motion Picture or
Similar DTV Production in the Domestic Territory and in each of the Major
International Video Territories during the “HV Release Week” in which the
applicable HV Release Date occurs for each DWA Picture in the Domestic Territory
and in each of the Major International Video Territories. “HV Release Week” with
respect to HV Release Dates shall mean the period Monday through Sunday,
inclusive. In addition, DWA further acknowledges that the holdback restrictions
applicable to the HV Release Date in each of the Major International Video
Territories may be inappropriate or impracticable to enforce because of the
contractual rights of third parties pursuant to DWA-approved Fulfillment
Servicing Agreements or DWA-approved Third Party Service Agreements, as
applicable, or the inability of Paramount to enforce such holdbacks because of
established custom and practice and historical course of dealing under
DWA-approved Fulfillment Servicing Agreements or DWA-approved Third Party
Service Agreements, as applicable (in each case existing as of the Effective
Date). In such event, Paramount shall keep DWA fully informed of all proposed
home video release dates for its Similar Theatrical Motion Pictures and Similar
DTV Productions, if applicable, to enable DWA to schedule HV Release Dates for
its DWA Pictures in each of the Major International Video Territories.

 

c. No Editing: Except as set forth below and subject to each DWA-approved
Fulfillment Servicing Agreement and DWA-approved Third Party Service Agreement,
Paramount shall not have the right to cut, alter, edit or change any DWA Picture
(or its title) for Home Video Exhibition without the prior consent of DWA.
Subject to any third party contractual restrictions and applicable guild
requirements, Paramount may alter or edit each DWA Picture and its title solely
to the extent necessary to comply with import, censorship or legal requirements
in each country or region in the Territory. DWA shall have first opportunity to
alter or edit each DWA Picture and shall exercise its approval rights hereunder
in a manner so as not to frustrate the provision of Fulfillment Services by
Paramount hereunder. Nothing herein shall require Paramount or any Subcontractor
to violate any applicable law or governmental regulation anywhere in the
Territory. In no event shall Paramount delete contractual credits or any DWA
Picture’s copyright notice. Paramount shall not add trailer, commercial or other
material to any DWA Video Devices without DWA’s prior written consent.

 

d. Multiple Picture Agreements; Output Agreements. Paramount shall use all
commercially reasonable efforts to include the DWA Pictures in joint, multiple
picture, output, and package service agreements entered into by Paramount with
respect to other Motion Pictures owned or controlled by Paramount. DWA shall
have the right to approve any joint, multiple pictures, output or package
service agreements that include one or more DWA

 

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Pictures or one or more Motion Pictures. Paramount shall fully consult with DWA
prior to commencing negotiations for any such service agreements. If Paramount
proposed to include one or more DWA Pictures in a group with other Motion
Pictures and DWA objects to the terms applicable to the DWA Picture(s), then
notwithstanding DWA’s objection, Paramount shall have the right to consummate
such transaction, provided DWA may elect to exclude the DWA Picture(s)
therefrom. If the DWA Pictures are not included in any such joint, multiple
picture, output or package service agreement, Paramount shall nevertheless be
obligated to render the Fulfillment Services with respect to the applicable DWA
Pictures in accordance with the terms of this Agreement and Paramount shall use
all commercially reasonable efforts, on an on-going basis, to conclude one or
more agreements for the servicing of the applicable Fulfillment Services to the
applicable DWA Pictures in the applicable portions of the Territory in a timely
fashion.

 

e. Release Requirements. Paramount shall render Fulfillment Services with
respect to each DWA Picture in each portion of the Territory in a manner so as
to satisfy the obligations of, and qualify each DWA Picture for inclusion under,
each DWA-approved Fulfillment Services Agreement and each DWA-approved Third
Party Service Agreement. Without limiting the generality of the foregoing, with
respect to DWA-approved Fulfillment Services Agreement and DWA-approved Third
Party Service Agreements entered into by DWS prior to the Effective Date,
Paramount shall render Fulfillment Services with respect to each DWA Picture in
strict accordance with the terms thereof.

 

f. Outright Sales. No Outright Sale with respect to any DWA Picture is permitted
hereunder without DWA’s prior written consent.

 

g. Exercise of DWA Approvals: For each DWA Picture, DWA’s approval rights shall
include the right to approve: servicing and marketing plans; product pricing and
sales policies; street date, period of availability and applicable sales,
credit, rebate, bonus and return policies; packaging; arrangement with third
party suppliers, such as laboratory, dubbing, duplication, manufacturing,
advertising, marketing, publicity and packaging arrangements, printers,
designers, production houses and related vendors and suppliers; and compression
and authoring; and all creative matters relating to the development, production
and distribution of the DWA Pictures, including any and all Marketing Materials
(such as trailer and advertising content, key artwork, bonus materials for Video
Devices, clips to be included in any product reels. DWA shall designate and
approve any and all formats (e.g., Blu-ray, DVD-HD) utilized in connection with
the Home Video Exhibition of the DWA Pictures. Notwithstanding anything to the
contrary contained in this Agreement, including this Section 4, once DWA
provides its approval over a certain matter (whether related to an agreement,
deal parameters, release methodology, HV Release Date, release pattern, budget,
edit, cut, preview, version, sales policy, supplier, marketing or promotional
campaign, or otherwise), Paramount shall have the right to fully rely on such
approval (unless prior to such reliance DWA notifies Paramount in accordance
with Section 31. below that such approval is withdrawn), and Paramount shall not
be deemed in breach of this Agreement for any act or omission of Paramount (or
any Affiliate, Subcontractor or licensee) that is materially consistent with any
approval (that is not timely withdrawn) provided by DWA.

 

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4.3 Advertising and Credits: To the extent credits are used in publicity and
advertising under the control of Paramount in connection with a DWA Picture,
Paramount agrees to accord credit to those Persons to which DWA is contractually
obligated to accord credit, in such form as DWA may direct consistent with
applicable guild and union requirements; provided, credits for each DWA Picture
shall include all credits required pursuant to the DWA-approved Fulfillment
Servicing Agreements and DWA-approved Third Party Service Agreements. Paramount
agrees to honor and to use commercially reasonable best efforts to cause its
respective Subcontractors and third party service providers to honor and comply
with all such contractual credit obligations. Paramount shall not alter the
credits on the DWA Pictures without DWA’s prior written approval.

 

4.4 Trailers and Publicity Materials: Paramount shall be solely responsible for
the creation and preparation of all home video trailers, and all other
advertising, marketing, publicity and promotional materials (“Marketing
Materials”) for the DWA Pictures. All basic Marketing Materials, including all
key-art, creative campaigns and content thereof, in-store creative, value-added
content, coop media plans and advertising, television and print spots, media
buys, ads, point of sale and any other sales and promotional materials, and all
communications to the press and press releases, shall be submitted to DWA for
its timely suggestions and approvals. Paramount shall not be liable for any
losses, claims or damages suffered by DWA as a direct result of DWA’s failure to
timely provide such suggestions and approvals. Paramount agrees that DWA shall
have the right to access and use such Marketing Materials, without charge, for
such use as DWA may reasonably request in connection with its reporting to
investors, institutional publicity and similar matters; provided, that DWA shall
reimburse Paramount for the direct incremental costs of additional copies of
such Marketing Materials arising from such request that Paramount would not
otherwise have incurred. Paramount shall secure copyright in the name of DWA and
Paramount (or a Paramount Affiliate designated by Paramount) for Marketing
Materials prepared by Paramount and/or any Paramount Affiliate for any DWA
Picture. DWA shall approve the use of home video trailers from the DWA Pictures
on other Motion Pictures serviced by Paramount and vice-versa.

 

4.5 Marketing Restrictions: Without DWA’s prior consent, Paramount shall not
engage in any cross-marketing, cross-promotion, cross-merchandising, joint
advertising, joint marketing, Commercial Tie-In and Promotional Rights
arrangements, product placement or joint servicing activities (including with
respect to home video incentive programs or home video marketing programs)
(collectively “Cross-Promotional Campaigns”) in connection with any element of a
DWA Picture and any other Motion Picture or product owned or serviced by
Paramount or by any third party. Notwithstanding the foregoing, Paramount and
its Subcontractors and third party service providers shall have the right (i) to
include the DWA Pictures in Cross-Promotional Campaigns consistent with prior
practices, e.g., marketing reels, trade conventions and trade promotions such as
those involving the Existing Pictures, and (ii) to employ Cross-Promotional
Campaigns solely in connection with two (2) or more DWA Pictures. In addition to
the foregoing, Paramount shall not use any elements or characters from the DWA
Pictures for any corporate promotional purposes or to advertise or promote any
business or activity of Paramount not directly related to the DWA Pictures
without DWA’s prior written approval.

 

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4.6 Subcontracting:

 

a. Paramount may render the Fulfillment Services with respect to the DWA
Pictures either directly, through Paramount Affiliates or subject to DWA’s prior
written approval (not to be unreasonably withheld) in each instance, through
Subcontractors and other third party service providers; provided that Paramount
agrees that it will not engage a Subcontractor or third party service provider
(i) in the United States; or (ii) in any portion of the Territory, unless
Paramount subcontracts fulfillment services for all or substantially all of its
own Motion Pictures (including Tent-Pole Pictures) in such portion of the
Territory. If, pursuant to a DWA-approved Fulfillment Servicing Agreement, a DWA
Picture is not designated by such Subcontractor or third party service provider
for Home Video Exhibition in any portion of the Territory (e.g., is determined
not to be financially viable for Home Video Exhibition in a specific country),
Paramount shall use all commercially reasonable efforts, on an ongoing basis, to
engage a substitute Subcontractor or third party service provider in a timely
fashion to service the DWA Picture in the applicable portion of the Territory;
provided, however, the terms of such Fulfillment Servicing Agreement shall be
subject to DWA’s prior approval.

 

b. DWA shall have the right to approve the duration and terms of any and all
Subcontracting and third party service agreements entered into by Paramount,
whether with a Paramount Affiliate or any other Person. If DWA does not approve
the terms of such agreement applicable to the DWA Pictures, Paramount may enter
into such agreement with respect to its own Motion Pictures but such
arrangements will not apply to the DWA Pictures. The CJ Agreement, the Kadokawa
Agreement, and the Fulfillment Servicing Agreements with Subcontractors and
third party service providers listed on Schedule 1 are preapproved by DWA. For
the avoidance of doubt, DWA shall have the right to approve any amendment,
restatement, replacement, extension (including the exercise of any option) or
other modification of any DWA-approved Fulfillment Servicing Agreement.

 

c. The breach by a Subcontractor or third party service provider (or any
successor to any Subcontractor or third party service provider) of any
(i) DWA-approved Fulfillment Servicing Agreement entered into after the
Effective Date; or (ii) DWA-approved Fulfillment Servicing Agreement entered
into in any territory previously distributed by or on behalf of Universal
(irrespective of the date of such agreements), shall constitute a breach by
Paramount of this Agreement only if such breach by such Subcontractor or third
party service provider is not cured by such Subcontractor or third party service
provider (or by Paramount on behalf of such Subcontractor or third party service
provider) within the applicable cure periods set forth in Section 11.1 below
with respect to a breach by Paramount. No breach by a Subcontractor or third
party service provider (or any successor to any Subcontractor or third party
service provider) of any other DWA-approved Fulfillment Servicing Agreement
existing as of the Effective Date shall constitute a breach by Paramount of this
Agreement; provided, however, DWA shall have the right to take such action as
set forth in Section 4.13 below with respect to such breach by a Subcontractor
or third party service provider.

 

d. DWA shall have the right, but not the obligation, to designate the Universal
Agreement, and/or any transition services agreement entered with Universal (by
DWS or directly by DWA or DWA SKG) in connection with the termination of the
Universal Agreement, as a Fulfillment Servicing Agreement and to require
Paramount to service such Fulfillment Servicing Agreement in accordance with the
terms of this Agreement for the duration of any such transition period.

 

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4.7 Servicing Costs: Except as expressly provided herein, including Section 5.2
with respect to Additional Home Video Fulfillment Expenses and Section 6.2 with
respect to Residuals and Contingent Compensation, Paramount shall be solely
responsible for advancing all costs of advertising, promoting, marketing,
manufacturing, shipping and servicing the DWA Pictures, including all service
fees paid to Subcontractors and all Home Video Fulfillment Expenses.

 

4.8 DWA Consultation Rights: Paramount shall fully consult with (or seek
approval from DWA [if applicable as set forth herein]) and give due
consideration to the reasonable requests of DWA concerning advertising,
marketing, publicity and Fulfillment Services matters in connection with each
DWA Picture. Without limiting the generality of the foregoing, DWA and Paramount
shall have mutual approval over the worldwide organization and staffing of home
video personnel servicing each DWA Picture. The foregoing approval and
consultation rights and conditions are in addition to and do not derogate,
impair, restrict or otherwise adversely affect any of DWA’s approvals and
controls set forth in this Agreement. All services arrangements with respect to
the DWA Pictures shall be made in a manner consistent with Paramount’s good
faith business practices as applied generally to comparable Motion Pictures
serviced by Paramount under similar circumstances in the applicable territories
and on a nondiscriminatory basis, excluding in each case, any Motion Pictures
directed by Steven Spielberg.

 

4.9 DWA Fulfillment Services Representative: DWA shall have the right to appoint
one or more individuals to serve as a fulfillment services representative (the
“DWA Representative[s]”) to: (i) monitor the marketing and servicing of the DWA
Pictures and the expenditure of Home Video Fulfillment Expenses; (ii) access and
review Paramount’s books and records relating to the servicing of the DWA
Pictures; (iii) monitor Paramount’s compliance with DWA’s approvals,
consultation rights, designations and controls; (iv) meet regularly with
Paramount’s marketing and fulfillment services personnel; (v) attend regularly
scheduled marketing meetings related to the DWA Pictures; and (vi) engage in
related activities. Paramount will provide DWA Representatives with periodic
briefings on marketing matters and upon request, shall provide DWA
Representatives with full and complete information relating to anticipated Home
Video Gross Receipts, marketing costs and budgets, expenditures of Home Video
Fulfillment Expenses and market research studies relating to the DWA Pictures.
Paramount shall provide the DWA Representatives with suitable offices at
Paramount’s company facilities without charge to DWA. DWA shall be solely
responsible for the salary, fringes and expenses of the DWA Representatives. DWA
shall not appoint more than five (5) individuals to concurrently serve as the
DWA Representatives without obtaining Paramount’s prior consent.

 

4.10 Direct Access to Personnel. DWA and the DWA Representatives shall have the
right to access and to communicate directly with (i) all of Paramount’s
management staff and employees engaged in any aspect of providing the
Fulfillment Services in connection with DWA’s Home Video Exhibition of the DWA
Pictures anywhere in the Territory, and (ii) to the same extent as Paramount and
subject to the terms of each applicable DWA-approved

 

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Fulfillment Servicing Agreement or DWA-approved Third Party Service Agreement,
as applicable, all officers, management staff and employees of Subcontractors or
third party service providers engaged in any aspect of providing the Fulfillment
Services in connection with DWA’s Home Video Exhibition of the DWA Pictures
anywhere in the Territory, including in each case any personnel or
representatives based in local, regional or international exchanges or offices
in all regions of the Domestic Territory and in each country in the
International Territory (collectively “Servicing Personnel”). Paramount shall
endeavor (and shall cause the Servicing Personnel) to convene regular (i.e., no
less frequently than weekly) meetings with DWA personnel and be available to
consult with DWA and the DWA Representatives at reasonable times for purposes of
formulating, coordinating and implementing the marketing, servicing and other
plans and strategies pertaining to the DWA Pictures, (y) to cooperate fully with
DWA and the DWA Representatives and (z) to provide DWA with all Information
available to such Servicing Personnel pursuant (and subject) to Section 4.1.e.
DWA will endeavor in good faith to keep Paramount fully informed of, and
involved in, all direct communications with Subcontractors or third party
service providers.

 

4.11 Vendor/Supplier Arrangements:

 

a. Paramount shall have the right and (to the extent entitled to do so pursuant
to the applicable third-Person contracts) obligation to cause the DWA Pictures
to be included in any DWA-approved Third Party Service Agreement. DWA shall have
the right of prior reasonable approval of the duration and terms of each Third
Party Service Agreement as they pertain to the DWA Pictures. In the event DWA
does not approve of any such Third Party Service Agreement, Paramount shall have
the right (and obligation) in accordance with the terms of this Agreement, on an
ongoing basis, to use all commercially reasonable efforts, to enter into a
substitute Third Party Service Agreement in a timely fashion with respect to the
provision of the applicable Fulfillment Services for such DWA Picture(s). The
Third Party Service Agreements (and the duration and terms thereof) listed on
Schedule 4 are preapproved by DWA. Any amendment or modification of a
DWA-approved Third Party Service Agreement that materially affects one or more
DWA Pictures, and any extension of a DWA-approved Third Party Service Agreement
that includes one or more DWA Pictures shall require DWA’s prior written
approval. Subject to the foregoing, the DWA Pictures shall be included in such
DWA-approved Third Party Service Agreements on a non-discriminatory basis as
compared to comparable Motion Pictures with respect to which Paramount renders
fulfillment services under similar circumstances in the applicable territories,
excluding only Motion Pictures directed or produced by Steven Spielberg. Any
allocations between Paramount’s Motion Pictures and the DWA Pictures shall be
made in accordance with and pursuant to Section 8.4.c below.

 

b. Paramount shall enter into contracts with respect to DWA Video Devices in its
own name (subject to DWA’s right to approve the terms of such contracts) or as
otherwise requested by DWA, with intermediary distribution entities (e.g.,
SuperComm and Rentrak) and retail accounts (e.g., video chains and stores),
general merchandise stores (e.g., Wal-Mart, K-Mart, supermarkets) and similarly
situated parties who are or may reasonably be expected to be Video Device
customers of Paramount. All revenue directly attributable to the actual sale of
DWA Video Devices pursuant to such contracts shall be included in Home Video
Gross Receipts for the purpose of determining Paramount’s Service Fees;
provided, however, that with respect to sale advances, Paramount shall be
entitled to its Service Fee, as applicable, to the extent such advance is earned
out by the actual sale of DWA Video Devices.

 

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4.12 Distribution Arrangements: Paramount will use its commercially reasonable
best efforts to cause all business arrangements between Paramount and third
parties (e.g., retailers, wholesalers, vendors, suppliers or intermediary
suppliers of Video Devices), pertaining in whole or in part to the DWA Pictures
to “piggyback” on the terms and conditions applicable to Motion Pictures owned
or controlled by Paramount, and at a minimum to be no less favorable generally
than the terms and conditions applicable to comparable Motion Pictures serviced
by Paramount. All such business arrangements shall be applied to the DWA
Pictures on a nondiscriminatory basis. Motion Pictures directed or produced by
Steven Spielberg are excluded from the foregoing requirements, as are premiums,
or other consideration applicable to specific categories of Motion Pictures set
forth in any DWA-approved Fulfillment Servicing Agreements or DWA-approved Third
Party Service Agreements, as applicable.

 

4.13 Fulfillment Servicing Agreement: Paramount shall have the right (and
obligation) to enter into Fulfillment Servicing Agreements and to include the
DWA Pictures in any such arrangement; provided subject to Section 7.5 below, DWA
shall have the right of prior reasonable approval of the duration and terms of
each Fulfillment Servicing Agreement as it pertains to the DWA Pictures. DWA
hereby approves the CJ Agreement, the Kadokawa Agreement, and the Fulfillment
Servicing Agreements listed on Schedule 1, including the duration and terms of
each such Fulfillment Servicing Agreement. Any amendment or modification of a
DWA-approved Fulfillment Servicing Agreement that materially affects one or more
DWA Pictures, and any extension of a DWA-approved Fulfillment Servicing
Agreement that includes one or more DWA Pictures shall require DWA’s prior
written approval. All such arrangements that apply, in whole or in part, to the
DWA Pictures shall be substantially equivalent on an overall basis to the terms
and conditions applicable to Motion Pictures owned or controlled by Paramount,
which generate (or at the time such business relationship[s] were made, were
projected based on established forecast methodology to generate) comparable
theatrical box office revenue or otherwise produce comparable revenue under
similar circumstances in the applicable territories. Paramount shall be
responsible for any third party breach of any (i) DWA-approved Fulfillment
Servicing Agreement entered into after the Effective Date; or (ii) DWA-approved
Fulfillment Servicing Agreement entered into in any territory previously
distributed by or on behalf of Universal (irrespective of the date of such
agreements). Notwithstanding the foregoing, Paramount shall not be responsible
for any third party breach of any other DWA-approved Fulfillment Servicing
Agreement entered into prior to the Effective Date; provided that any claims,
losses or causes of action (collectively “Claims”) arising from such breach and
related to a DWA Picture shall, subject to the terms of the applicable
DWA-approved Fulfillment Servicing Agreement, be assigned to DWA, or DWA shall
have the right (at DWA’s expense) to cause Paramount to take such action as DWA
deems reasonably necessary to resolve such Claims. Paramount shall notify DWA of
any breach or alleged breach of any DWA-approved Fulfillment Servicing Agreement
and any bankruptcy filings of any party to a DWA-approved Fulfillment Servicing
Agreement, promptly following Paramount becoming aware of any such event. Any
recoveries (net of expenses) from the prosecution or settlement of any Claims
that would have been accounted for pursuant to the terms of a DWA-approved
Fulfillment Servicing Agreement shall be included in Home Video Gross Receipts,
provided no Services Fee shall be charged on any recoveries (e.g. punitive

 

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damages) that would not otherwise constitute revenue derived from Home Video
Exhibition of the DWA Pictures. In connection with each DWA Picture and subject
to the terms of each DWA-approved Fulfillment Servicing Agreement, DWA and
Paramount shall jointly exercise any approval and consultation rights available
to Paramount under such DWA-approved Fulfillment Servicing Agreement; provided,
the foregoing shall not impair, restrict or derogate from the rights of
Paramount as set forth in this Agreement, including Paramount’s right to
mutually approve (and its tie breaker rights with respect to) Home Video
Fulfillment Expenses hereunder. In connection with each DWA Picture and subject
to the terms of each DWA-approved Fulfillment Servicing Agreement: (i) in
accordance with Section 4.10 above, DWA shall have the right to communicate
directly with, and have full access to, all officers, appropriate management
employees, staff and personnel engaged in any aspect of servicing the DWA
Pictures as provided to Paramount under each DWA-approved Fulfillment Servicing
Agreement; (ii) DWA shall receive in a timely fashion all Home Video Exhibition
information and other materials pertaining in whole or in part to the DWA
Pictures that are received by Paramount from Subcontractors and other parties to
the DWA-approved Fulfillment Servicing Agreements; and (iii) Paramount, in the
exercise of its good faith business discretion, shall use commercially
reasonable best efforts to audit the accountings or financial records provided
or available under each DWA-approved Fulfillment Servicing Agreement and the
reasonable out-of-pocket audit costs shall be charged as Home Video Fulfillment
Expenses hereunder; provided, in the event such audit involves one or more DWA
Pictures and other Motion Pictures produced or distributed by Paramount, DWA
shall only bear its proportionate share of the costs thereof. Paramount shall
have the right to appropriately redact from any information provided to DWA
under this Agreement (including under this Section 4.13) information relating to
any Motion Pictures other than the DWA Pictures. The foregoing does not limit
Paramount’s obligation to issue Payment Reports, Interim Reports or make
payments to DWA, as more fully set forth in Section 8.5. DWA shall cooperate
with Paramount and, at Paramount’s request and expense, shall take such actions
that are reasonably necessary or desirable to ensure that Paramount is able to
perform its obligations relating to the DWA Pictures under the DWA-approved
Fulfillment Servicing Agreements and the DWA-approved Third Party Service
Agreements.

 

4.14 Exploitation of Commercial Tie-In and Promotional Rights: DWA retains the
right to exploit Commercial Tie-In and Promotional Rights in connection with
each DWA Picture; provided, that in furtherance of Paramount’s Fulfillment
Services obligations hereunder, DWA shall undertake commercially reasonable
efforts in full consultation with Paramount to consummate Commercial Tie-In and
Promotional Rights arrangements for each DWA Picture that on an overall basis
shall be consistent with the marketing and promotion of the Base Films, if any,
for such DWA Picture. Notwithstanding DWA’s retention of Commercial Tie-In and
Promotional Rights, DWA acknowledges that in connection with its rendering of
the Fulfillment Services in the International Territory, Paramount, its
Subcontractors and third party service providers shall have the right, subject
at all times to the McDonald’s Agreement and to coordination with DWA, to
negotiate and consummate Commercial Tie-In and Promotional Rights arrangements
for each DWA Picture on a country-by-country or regional basis in the same
manner conducted in connection with the Existing Films, provided that Paramount,
its Subcontractors and third party service providers shall be obligated to
obtain DWA’s prior written approval of any such Commercial Tie-In and
Promotional Rights arrangements, which approval shall not be unreasonably
withheld. Paramount shall endeavor in good faith, and commensurate with DWS’s
past conduct and practices in distributing comparable Existing Pictures, to
cause

 

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such arrangements to be on an overall basis comparable to the marketing and
promotion of the Base Films determined at the time of such arrangement and in
each case, subject to the prior Commercial Tie-In and Promotional Rights
arrangements consummated by DWA in connection with the applicable DWA Picture.
Any amounts received by Paramount pursuant to arrangements entered into by
Paramount in connection with such Commercial Tie-In and Promotional Rights
arrangements shall be deemed Home Video Gross Receipts.

 

Section 5. Home Video Fulfillment Expenses — Approvals and Controls

 

5.1 Expenditure Commitment: Paramount and DWA shall mutually determine the
amount of Home Video Fulfillment Expenses to be incurred with respect to the
initial Home Video Exhibition of each DWA Picture in the Domestic Territory and
in each of the Required International Territories, including all manufacturing,
duplication and replication costs, advertising campaign creation costs, media
buys, including remainder media buys; provided that in the event of
disagreement, Paramount’s decisions based on its good faith business judgment
shall prevail. Notwithstanding the foregoing, unless otherwise agreed between
Paramount and DWA, the aggregate amount of Home Video Fulfillment Expenses to be
incurred by Paramount to service the Home Video Exhibition with respect to each
Event Picture hereunder throughout the Territory shall not be less than ninety
percent (90%) of the average amount of Home Video Fulfillment Expenses incurred
to service the Home Video Exhibition with respect to the Base Films throughout
the Territory (such amounts, “Minimum Home Video Fulfillment Expenses”);
provided, however, that the Minimum Home Video Fulfillment Expenses may be
adjusted by Paramount, after meaningful consultation with DWA, on an DWA
Picture-by-DWA Picture basis taking into consideration (i) the Domestic
Territory and Required International Territory performance of the two (2) most
recent Base Films released for Home Video Exhibition, (ii) the portion of the
Territory for which Home Video Exhibition is available for servicing (i.e.,
Minimum Home Video Fulfillment Expenses shall be reduced to the extent Paramount
has not been engaged to provide Fulfillment Services in the entire Territory),
(iii) minimum release requirements set forth in applicable DWA-approved
Fulfillment Servicing Agreements, (iv) the post release home video performance
of the DWA Picture, (v) Paramount’s reasonable projections for gross shipments
of Video Devices embodying the DWA Picture and (vi) Paramount’s good faith
business judgment based on empirical projections and established forecast
methodology that Home Video Gross Receipts will be less than the cumulative
Services Fee and Home Video Fulfillment Expenses for the applicable DWA Picture.
Except as otherwise provided in this Section 5.1, the Minimum Home Video
Fulfillment Expenses for each Event Picture, including expenses on a territory
by territory basis, must be reasonably consistent with the corresponding
expenditures for the applicable Base Films.

 

If Paramount desires to spend Home Video Fulfillment Expenses in excess of the
Minimum Home Video Fulfillment Expenses in connection with a DWA Picture, such
additional expenditures shall be subject to the mutual approval of Paramount and
DWA; provided, that Paramount may elect to incur Home Video Fulfillment Expenses
in excess of the Minimum Home Video Fulfillment Expenses (over DWA’s objection)
if in its good faith business judgment, incremental Home Video Gross Receipts
generated by such additional expenditures are projected to exceed the sum of the
Services Fee thereon and the additional Home Video Fulfillment Expenses so
incurred with respect to the applicable DWA Picture.

 

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5.2 DWA Home Video Fulfillment Expenses: In the event DWA determines in its good
faith business judgment that Home Video Gross Receipts of a DWA Picture will be
materially enhanced by expending additional Home Video Fulfillment Expenses in
excess of the amount determined pursuant to Section 5.1., then DWA may cause
Paramount to expend such additional Home Video Fulfillment Expenses (“Additional
Home Video Fulfillment Expenses”), provided that DWA shall be solely responsible
for all Additional Home Video Fulfillment Expenses and shall pay to Paramount
all Additional Home Video Fulfillment Expenses in advance of Paramount incurring
such Additional Home Video Fulfillment Expenses. If DWA does not promptly
advance such amounts, Paramount shall have the right, but not the obligation, to
incur such Additional Home Video Fulfillment Expenses, and DWA shall reimburse
Paramount for such Additional Home Video Fulfillment Expenses within five
(5) Business Days after receipt of Paramount’s invoice therefor. If such amount
remains unpaid ten (10) Business Days after DWA’s receipt of Paramount’s invoice
therefor and notwithstanding any prohibition against cross-collateralization or
offset contained in this Agreement, upon prior notice to DWA, Paramount shall
have the right (without limiting any of it other rights hereunder, at law or in
equity) to offset such amounts, including interest thereon, against any amounts
otherwise due to DWA hereunder.

 

5.3 Standard of Compliance: Notwithstanding anything to the contrary contained
in Section 4, Section 5 or elsewhere in this Agreement, it is understood and
agreed that Paramount shall not be in breach or default hereof with respect to
compliance with approved marketing and distribution plans and budgets as long as
Paramount substantially complies with the DWA approved marketing and
distribution plans and budgets. For purposes of example and without limitation,
it is understood and agreed that because of the difficulty in stopping the
amount of Home Video Fulfillment Expenses expended at a specific level,
Paramount shall not be in default or otherwise in breach hereof if the amount of
Home Video Fulfillment Expenses actually expended by Paramount does not conform
to or exceeds the budget therefore and all such Home Video Fulfillment Expenses
shall be fully recoupable by Paramount out of applicable Home Video Gross
Receipts; provided, in each case that such expenditures substantially comply
with the approved marketing and servicing plans and budgets.

 

5.4 Subcontractor Home Video Fulfillment Expenses: For purposes of this
Section 5., Home Video Fulfillment Expenses shall include all costs, charges and
expenses of providing fulfillment services (excluding service fees) charged to,
and undisputed by, Paramount in its accountings with Subcontractors with respect
to the applicable DWA Picture(s).

 

Section 6. Home Video Fulfillment Expenses Accounting

 

6.1 Calculation of Home Video Fulfillment Expenses: Home Video Fulfillment
Expenses shall be deducted on a DWA Picture-by-DWA Picture basis by Paramount
from Home Video Gross Receipts and shall be calculated after taking into account
the following items to the extent they are directly attributable to the DWA
Pictures: all discounts, rebates and refunds actually received that serve to
reduce the amount of Home Video Fulfillment Expenses. For the avoidance of
doubt, Home Video Fulfillment Expenses shall be reduced by any tax credits,
refunds or rebates received or utilized by, or credited to, Paramount directly
attributable to the DWA Pictures, such as rebates for any remittance or
withholding taxes. No item of cost shall be included more than once in
calculating Home Video Fulfillment Expenses. Home Video

 

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Fulfillment Expenses incurred in respect of DWA Pictures which are released for
Home Video Exhibition with trailers or short subjects and which are subject to
allocations of revenue pursuant to Section 8.4.c. shall be allocated in the same
manner as revenue thereunder where appropriate.

 

6.2 Payment of Residuals and Contingent Compensation:

 

a. Residuals: DWA shall be responsible for calculating and paying all Residuals
due and owing relating to the DWA Pictures. At DWA’s request, Paramount will
provide DWA with all necessary and appropriate information, on a DWA
Picture-by-DWA Picture basis, to enable DWA to calculate and pay, as and when
due, all Residuals arising from the Home Video Exhibition of the DWA Pictures
hereunder.

 

b. Contingent Compensation: DWA shall be responsible for issuing Contingent
Compensation statements to third parties and for paying all Contingent
Compensation amounts due and owning to such third parties. At DWA’s request,
Paramount will provide DWA with all necessary and appropriate information, on a
DWA Picture-by-DWA Picture basis, to facilitate DWA’s calculation of Contingent
Compensation arising from the Home Video Exhibition of the DWA Pictures
hereunder.

 

6.3 Marketing Implant Cap: Paramount shall not have the right to charge, as a
Home Video Fulfillment Expense, those costs and expenses incurred and paid in
connection with Marketing Implants. All costs and expenses incurred or paid by
or on behalf of Paramount for Marketing Implants shall not be charged or
deducted as a Home Video Fulfillment Expense by Paramount, and Paramount shall
absorb all such costs and expenses as part of its Services Fee.

 

6.4 Private Air Travel: Paramount will advance the costs of all private jet
travel incurred by DWA executives in connection with the advertising, promotion
and marketing of a DWA Picture for Home Video Exhibition (“Aviation Expenses”).
Such Aviation Expenses shall constitute Home Video Fulfillment Expenses for such
DWA Picture. DWA will endeavor to provide Paramount with notice when booking
private jet travel for the purpose of advertising, promoting and marketing of a
DWA Picture for Home Video Exhibition.

 

Section 7. Services Fee

 

7.1 Services Fee: As consideration for the provision of Fulfillment Services and
the other obligations of Paramount hereunder in respect of the DWA Pictures,
Paramount shall be entitled to retain on a DWA Picture-by-DWA Picture basis
off-the-top services fees (“Services Fee”) of an amount equal to eight percent
(8%) of one hundred percent (100%) of the Home Video Gross Receipts (as defined
in Section 8. below) less any applicable Return Reserves; provided, with respect
to Home Video Gross Receipts received from Subcontractors and in lieu of
calculating the foregoing Services Fee on such Home Video Gross Receipts,
Paramount shall retain Services Fees in an amount equal to eight percent (8%) of
one hundred percent (100%) of the Subcontractor’s gross revenue reported to, and
undisputed by, Paramount in such Subcontractor’s accountings to Paramount.
Similarly, if fees or commissions of sales agents are deducted from Home Video
Gross Receipts, such amounts shall be added back (without duplication of amounts
added back pursuant to Section 8.1.f below) to Home Video Gross Receipts for the
purpose of calculating the amount of Services Fee to be retained by

 

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Paramount hereunder. For avoidance of doubt, the Services Fee retained by
Paramount shall be inclusive of any and all (x) servicing fees that are charged
to, and undisputed by, Paramount in its accountings with any Subcontractor and
(y) any fees or commissions retained by or payable to any sales agent, and the
fees and commissions in clauses (x) and (y) herein shall be subject to
Section 8.1.f below.

 

7.2 Calculation of Services Fee: No Services Fee shall be payable to Paramount
until concurrent payment or crediting to DWA of the Home Video Gross Receipts,
if any, upon which such Services Fees are charged. For the avoidance of doubt
and notwithstanding anything to the contrary contained herein, Service Fees
shall be calculated on Home Video Gross Receipts less any applicable Return
Reserves permitted to established hereunder. In the event of any adjustment as
provided in Section 8. below, the Services Fee shall be similarly recalculated
and adjusted.

 

7.3 No Cross-Collateralization: The Home Video Gross Receipts, Return Reserves,
Services Fees and Home Video Fulfillment Expenses relating to each DWA Picture
shall not be cross-collateralized or offset against the Home Video Gross
Receipts, Return Reserves, Services Fee and Home Video Fulfillment Expenses
relating to any other DWA Picture (or any other Motion Picture serviced by
Paramount).

 

7.4 Additional Services Fee: In the event (i) DWA is in default pursuant to the
terms of this Agreement, (ii) such DWA default causes Paramount to be in default
pursuant to the terms of any DWA-approved Fulfillment Servicing Agreement, and
(iii) as a result of such default there is an increase in the fees paid to or
deducted by a Subcontractor, sales agent or third party service provider under
the applicable DWA-approved Fulfillment Servicing Agreement, then Paramount also
shall be entitled to retain from Home Video Gross Receipts the amount of such
additional fees paid to the Subcontractor.

 

7.5 Substitution of DWA-approved Fulfillment Servicing Agreements: In the event
the Home Video Exhibition with respect to one or more DWA Pictures is not
serviced pursuant to a DWA-approved Fulfillment Servicing Agreement, and such
failure to service is not the result of Paramount’s breach or default under the
terms of the applicable DWA-approved Fulfillment Servicing Agreement, Paramount
shall have the right (and obligation) in accordance with the terms of this
Agreement, on an ongoing basis, to use all commercially reasonable efforts, to
enter into a substitute Fulfillment Servicing Agreement in a timely fashion with
respect to the provision of the applicable Fulfillment Services for such DWA
Picture(s). DWA shall have the right to approve the substitute or replacement
Subcontractor or third party service provider, and any terms of the substitute
Fulfillment Servicing Agreement in accordance with Section 4.13 above. Any
substitute Fulfillment Servicing Agreement entered into by Paramount in
accordance with this Section 7.5 shall constitute a DWA-approved Fulfillment
Servicing Agreement.

 

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Section 8. Home Video Gross Receipts

 

8.1 Home Video Gross Receipts: Home Video Gross Receipts shall consist of:

 

a. Home Video Exhibition:

 

(i) All amounts (including returnable and non-returnable advances) received by
or credited to the account of Paramount or any Paramount Affiliate from any
Person, including Subcontractors, in connection with the provision of
Fulfillment Services with respect the DWA Pictures or as subsidies, prizes or
aid. For the avoidance of doubt, Gross Receipts shall not include any amounts
received by or credited to the account of DWA relating to any Commercial Tie-In
and Promotional Rights agreements made directly between DWA and any third
Person.

 

(ii) All Home Video Gross Receipts shall be reported to DWA hereunder based on
“Deemed Receipts” rather than actual cash collections. Home Video Gross Receipts
for DWA Video Devices shall be deemed paid to Paramount, and therefore reported
and payable to DWA as follows: 50% on the last day of the second fiscal month
commencing after the fiscal month in which the effective invoice date occurs and
the remaining 50% on the last day of the third fiscal month commencing after
such effective invoice date. For purposes of this Section 8.1.a.ii, “effective
invoice date” shall mean the actual invoice date after shipment date, except for
initial shipments, for which the effective invoice date shall be the street
date. As an example, if units are shipped in January and invoiced in February
prior to the February invoice cutoff date, 50% would be reported and paid on the
last day of April and the remaining 50% would be reported and paid on the last
day of May, subject to the next sentence. Each of the payment due dates set
forth in the preceding sentence shall be extended by any DWA-approved additional
terms or dating. “Deemed Receipts” shall be defined as gross shipments, less
actual returns, permitted reserves, sales allowances, and discounts (provided
that Paramount shall promptly notify DWA of the same and the parties shall
negotiate in good faith the appropriate accounting and settlement of the same).

 

b. VOD Exhibition: All amounts (including returnable and non-returnable
advances) received by or credited to the account of Paramount or any Paramount
Affiliate from any Person, including Subcontractors, in connection with the
servicing by Paramount of DWA’s VOD Exhibition of each DWA Picture. Gross
Receipts shall be deemed “received” when booked as a receivable, subject to
later adjustment for amounts not received. For the avoidance of doubt, Gross
Receipts shall not include any amounts received by or credited to the account of
DWA relating to any Commercial Tie-In and Promotional Rights agreements made
directly between DWA and any third Person.

 

c. Copyright Revenue: All amounts constituting Copyright Revenue received by
Paramount or any Paramount Affiliate from any Person, including any
Subcontractor, in connection with the Home Video Exhibition and provision of
Fulfillment Services with respect to the DWA Pictures.

 

d. Recoveries: All amounts received by Paramount or any Paramount Affiliate from
any Person with respect to claims or infringement of rights involving the DWA
Pictures, including copyright infringement, trademark infringement, piracy,
misappropriation, unfair competition and similar claims brought by Paramount, a
Paramount Affiliate or any Person pursuant to a DWA-approved Fulfillment
Servicing Agreement, less all permitted costs and expenses.

 

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e. All Other Sources: All amounts received by Paramount or any Paramount
Affiliate from any Person derived from the Home Video Exhibition and provision
of Fulfillment Services with respect to the DWA Pictures and not enumerated
above and all other sources not specifically excluded pursuant to Section 8.2.

 

f. Addback of Subcontractor Fees, Sales Agent Fees and Commissions: Services
fees that are charged to, and undisputed by, Paramount or any Paramount
Affiliate, as applicable, in its accountings with any Subcontractors and the
fees or commissions retained by or payable to any sales agents shall be deemed
Home Video Gross Receipts hereunder and notwithstanding retention by, or payment
to, such Subcontractor or sales agent, such servicing fees of Subcontractors and
such fees or commissions of sales agents shall constitute Home Video Gross
Receipts for all purposes hereunder. In no event shall any such servicing fees
payable to or retained by a Subcontractor or any such fees or commissions
retained by or payable to any sales agent reduce or otherwise be deducted from
Home Video Gross Receipts hereunder.

 

g. Deemed Receipts: Amounts received by Paramount or a Paramount Affiliate shall
be deemed to include any amounts that any such party does not receive in respect
of such party’s provision of Fulfillment Services with respect to the DWA
Pictures from any Subcontractors, sales agents or third party service providers
as the result of the deduction of any amounts referred to in Section 8.1.f above
or to pay Home Video Fulfillment Expenses or any deductions, offsets or
reductions not related to the provision of Fulfillment Services with respect the
DWA Pictures.

 

h. Home Video Gross Receipts Adjustments: Paramount shall give DWA prompt
written notice of all adjustments (e.g. bad debt) or other changes in any
receivables or payables on the books and records of Paramount or any Paramount
Affiliate that affect Home Video Gross Receipts or Home Video Fulfillment
Expenses hereunder. DWA shall have the right to approve all adjustments,
settlements, rebates, credits, allowances, write-offs or refunds granted by
Paramount or any Paramount Affiliate to any Person, which reduce Home Video
Gross Receipts and any such adjustments, settlements, rebates, credits,
allowances, write-offs and refunds that do not relate exclusively to a DWA
Picture(s) shall be allocated to the DWA Pictures on a non-discriminatory basis
and in a manner that is no less favorable to DWA than the allocations to Motion
Pictures owned or controlled by Paramount under similar circumstances.

 

8.2 Exclusions: Notwithstanding anything herein to the contrary, the following
shall be excluded from Home Video Gross Receipts:

 

(i) Amounts collected as taxes or for payment of taxes such as admission, sales,
use or value added taxes;

 

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(ii) Amounts earned, collected or received by DWS in connection with the Home
Video Exhibition of the DWA Pictures prior to the Effective Date (which amounts
shall be accounted for and paid in accordance with the Prior Agreement); and

 

(iii) Amounts collected or received by any electronic transmission systems
(including cable, direct broadcast satellite, microwave and master antenna),
program delivery services and radio stations (and all other exhibitors of Motion
Pictures to viewers by any means now known or hereafter devised), or
laboratories producing and/or distributing Motion Picture copies, or
merchandisers, manufacturers, sellers, wholesale dealers or retail dealers of
Video Devices or of any other products, or pay-television/VOD marketers,
internet access providers, theme/amusement park operators or any Persons similar
to any of the foregoing Persons (whether or not any of the foregoing Parties are
Subsidiaries or Affiliates of Paramount, or are owned, operated, managed or
controlled by Paramount).

 

8.3 Reserves:

 

a. Except as otherwise expressly provided in this Section 8.3, and with respect
to the GAAP Accrual Reports, Section 8.5.e below, no reserves of any kind may be
established by Paramount or any Paramount Affiliate in connection with Home
Video Gross Receipts, Services Fees, Home Video Fulfillment Expenses, Residuals
and Contingent Compensation or for any other reason.

 

b. In preparing the Payment Reports required to be furnished to DWA under
Section 8.5.c, Paramount shall be entitled to establish a reasonable,
non-discriminatory cash reserve against Home Video Gross Receipts then payable
for each DWA Picture for returns of Video Devices for such DWA Picture (each a
“Returns Reserve”), taking into consideration the following (to the extent
applicable): historical return experience with respect to comparable DWA
Pictures, current economic trends, projection of consumer demand for the
applicable DWA Picture, point of sale data as available from retailers and other
reasonable and appropriate factors (including any requirements under GAAP and
applicable law) utilized in the Motion Picture industry in Los Angeles,
California for establishing return reserves. Notwithstanding anything to the
contrary contained in this Agreement, the amount of any Return Reserve
established pursuant to this Section 8.3.b for a DWA Picture with respect to a
given accounting period on a cumulative inception-to-date basis, shall in no
event exceed the amount of the GAAP Return Reserve established pursuant to
Section 8.5.e.(v) with respect to such DWA Picture for such applicable
accounting period on a cumulative inception-to-date basis. Cash basis Return
Reserves shall be liquidated, to the extent not utilized, within a reasonable
period of time following the establishment of such Return Reserves (which in no
event shall exceed three (3) months).

 

c. Beginning in the last six (6) months of the Service Term for each DWA
Picture, Paramount shall have the right to establish reasonable reserves for
Home Video Fulfillment Expenses reasonably anticipated to be incurred by
Paramount during the remainder of the applicable Service Term and for a
reasonable period thereafter, including costs reasonably anticipated to be
incurred in connection with the transition and return of materials to DWA (each
an “End of Term Reserve”). All such End of Term Reserves shall be liquidated and
paid pursuant to the Final Payment Report in accordance with Section 8.5.f
below, together with accrued interest on such amount, if any, of End of Term
Reserves paid to DWA, computed from inception of the End of Term Reserve at the
rate specified in Section 8.5.g below.

 

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8.4 Finance/Audits:

 

a. Advances/Rebates: Paramount shall disclose to DWA and include in Home Video
Gross Receipts all Financial Benefit accorded Paramount or any Paramount
Affiliate by any Person, which results from or is related to Paramount’s or such
Paramount Affiliate’s services in connection with the DWA Pictures or the
provision of Fulfillment Services hereunder, whether or not specifically
allocated to the DWA Pictures, including the DWA Pictures, which are not
specifically allocated or credited to the Home Video Exhibition of specific DWA
Pictures consistent with this Agreement, provided, however, Paramount shall not
be obligated to disclose any Financial Benefit from transactions that do not
involve any DWA Picture(s) hereunder. All such Financial Benefit will be
allocated to the DWA Pictures in accordance with the terms of the agreements in
question, or if such agreements do not provide a means of allocation, on a fair
and reasonable basis, and in Paramount’s good faith business judgment taking
into account, if applicable, one or more factors such as, among others, box
office or unit sales performance, cast, and genre. All allocations shall be made
on a nondiscriminatory basis as to the DWA Pictures, and Paramount shall not
change any agreed upon allocation methodology without obtaining DWA’s prior
consent. DWA acknowledges and confirms its agreement to all allocations on the
books and records of DWS as of the Effective Date (but specifically excluding
any allocations under the Universal Agreement, which allocations remain subject
to DWA’s audit rights) or set forth in the DWA-approved Fulfillment Servicing
Agreements and DWA-approved Third Party Service Agreements, in each case,
existing as of the Effective Date. DWA shall have full access to any agreement
that provides for any such Financial Benefit, subject to the confidentiality
restrictions contained in any such agreement.

 

b. Local Currency: Other than amounts which cannot legally be remitted from the
country in which they are earned (“Blocked Currency”), all amounts payable
hereunder shall be paid in the same manner as Paramount receives revenue from
Motion Pictures owned or controlled by Paramount, in either U.S. currency or the
currency of the country where such Home Video Gross Receipts are received by
Paramount. Foreign currency amounts received by Paramount and subsequently paid
to DWA in U.S. currency shall be converted, using the same weighted average
exchange rate for Home Video Fulfillment Expenses and Home Video Gross Receipts,
on specified dates of which Paramount shall notify DWA on an ongoing basis and
which shall be the same dates and rates used for Motion Pictures owned or
controlled by Paramount; provided, if amounts are not converted directly from
the foreign currency in which they were received to U.S. currency (e.g., if
intermediary conversion to any other currency[ies] is utilized), then Paramount
shall bear all risk from fluctuation of such intermediary currencies unless such
intermediary conversion was undertaken at DWA’s direction. In the case of
Blocked Currency, DWA shall have the right to elect from time to time whether to
receive some or all of the Blocked Currency, as it becomes payable hereunder, in
the country where it is located or to make any other arrangements with respect
to some or all of the Blocked Currency as are available to Paramount in the
applicable country. To facilitate DWA’s management of Blocked Currency,
Paramount shall specify on each “Payment Report” (as defined below) all Home
Video Gross Receipts that are in Blocked Currency; and upon written instructions
from

 

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DWA (subject to any and all limitations, restrictions, laws, rules and
regulations affecting such transaction), Paramount shall deposit Blocked
Currency into a bank designated by DWA in the applicable country, or pay Blocked
Currency to any Person designated by DWA in such country. Such deposits or
payments to or for DWA shall constitute due remittance to DWA, and Paramount
shall have no further responsibility therefor. At DWA’s election, Paramount
shall convert Blocked Currency into U.S. dollars to the same extent and in the
same manner and proportion that Paramount is permitted to convert Blocked
Currency derived from Motion Pictures owned or controlled by Paramount. Solely
for purposes of this Section 8.4.b., DWA Pictures shall not constitute Motion
Pictures owned or controlled by Paramount.

 

c. Allocations:

 

(i) Whenever Paramount makes an allocation of revenue hereunder with respect to
one or more DWA Pictures and/or other Motion Pictures, trailers or short
subjects, Paramount shall make such allocation on a reasonable
non-discriminatory basis, taking into account all relevant factors such as,
among others, box office and unit sales performance, cast, and genre, and in the
case of a revenue allocation to trailers and/or short subjects, Paramount shall
make such allocation taking into account such factors as, among others, cost and
running time.

 

(ii) Without limiting the generality of the foregoing, all allocations of
revenue, expenses and Financial Benefit shall be made on a reasonable
nondiscriminatory basis as to the DWA Pictures and the allocation methodology
applied to the DWA Pictures shall be on a basis and in a manner that is no less
favorable to DWA than the application of such methodology to Motion Pictures
owned or controlled by Paramount under similar circumstances (excluding Motion
Pictures produced or directed by Steven Spielberg). DWA acknowledges and
confirms its agreement to all allocations on the books and records of DWS as of
the Effective Date (but specifically excluding any allocations under the
Universal Agreement, the CJ Agreement and the Kadokawa Agreement, which
allocations remain subject to DWA’s audit rights) or set forth in those
DWA-approved Fulfillment Servicing Agreements existing as of the Effective Date.

 

d. Bonuses:

 

(i) “Bonus Plan” means the payment of any bonuses, compensation or consideration
of any kind (including discretionary bonuses) based upon, tied or related in any
fashion, in whole or in part, directly or indirectly, to revenue generation in
connection with the Home Video Exhibition or servicing of Motion Pictures.

 

(ii) “Bonus Plan Participants” means (i) Paramount’s staff and other employees,
and (ii) any other persons or entities rendering services on or in connection
with the Home Video Exhibition or servicing of Motion Pictures in general owned
or controlled by Paramount or any Paramount Affiliate which persons and entities
are eligible to participate in the Bonus Plan.

 

(iii) To the extent Paramount or any Paramount Affiliate institutes, maintains
or participates in a Bonus Plan, such Bonus Plan shall be designed and

 

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implemented so as not to have an unfair or discriminatory impact on the DWA
Pictures, as compared to Motion Pictures owned, controlled or serviced by
Paramount and the DWA Pictures shall be included in such Bonus Plan(s) so as to
provide the Bonus Plan Participants with an equal incentive with respect to the
DWA Pictures, as compared to other Motion Pictures owned or controlled by
Paramount. Payments made pursuant to any Paramount Bonus Plan to any employees
of Paramount shall not constitute Home Video Fulfillment Expenses hereunder and
shall be the sole responsibility of Paramount.

 

e. Electronic Reporting: All revenue and expenses on a per DWA Picture basis
shall be reported electronically to DWA, and DWA shall have (i) access to
Paramount’s global information system, as and when the same becomes operational;
and (ii) full access to all data pertaining to or generated in connection with
the DWA Pictures, including all raw data (i.e. data not processed or reduced)
whether segregated as to the DWA Pictures or generated in connection with data
pertaining to other Motion Pictures, sales information, point of sales data and
other performance information regarding DWA Pictures and other Motion Pictures
owned or controlled by Paramount. As soon as practicable after the Effective
Date, Paramount shall make available to DWA access to such Information and data
as is required to be provided to DWA pursuant to this Agreement (including the
Annexes, Schedules and Exhibits).

 

f. Withholding and Corporate Taxes: Paramount shall be entitled to charge
withholding taxes and deduct withholding taxes as a Home Video Fulfillment
Expense, provided, however, in the event Paramount or any Paramount Affiliate
actually receives a rebate of or reimbursement for any such withholding taxes,
Paramount shall be obligated to credit such amount to Home Video Fulfillment
Expenses in the calendar month received. Notwithstanding the foregoing,
Paramount shall be obligated to rebate to DWA fifty percent (50%) of any
remittance taxes at the end of the calendar year in which they are withheld, and
the remaining fifty percent (50%) at the end of the following year. DWA shall
not be responsible for, and Paramount shall indemnify DWA from, any
corporate-level tax or other tax liability which may arise from Paramount’s
rendering of Fulfillment Services in the Territory (other than DWA’s own income
tax liabilities).

 

g. Paramount Owned Businesses: With respect to the rendering of Fulfillment
Services pursuant to this Agreement, any agreement with any supplier or other
business or entity owned in whole or in part, directly or indirectly, by
Paramount or any Paramount Affiliate, shall be fair and reasonable in the
marketplace and on an arms-length basis. All such agreements shall be subject to
the accounting, access and audit rights provisions set forth in Sections 8.5 and
8.6 below.

 

8.5 Accountings:

 

a. On a cumulative and continuous basis, with respect to each DWA Picture,
Paramount shall first deduct Return Reserves from Home Video Gross Receipts,
then deduct and retain its Services Fee from Home Video Gross Receipts, as
provided in Section 7, and thereafter recoup Home Video Fulfillment Expenses
from Home Video Gross Receipts, as provided in Section 6. Any remaining Home
Video Gross Receipts shall be reported to DWA on a monthly basis in accordance
with this Section 8 and paid in accordance with the Distribution Agreement.

 

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b. Paramount shall furnish to DWA, on a monthly basis, within 30 days from the
end of each fiscal month, revenue and payment detail reports (the “Payment
Reports”) in a format approved by DWA, which format may change from time to time
in DWA’s good faith reasonable discretion. Home Video Gross Receipts, Returns
Reserves, Services Fees, Home Video Fulfillment Expenses and all other revenue
and payment detail shall be reported on a combined inception-to-date basis,
including all prior inceptions to date information to support current Payment
Reports, for each DWA Picture. Payment Reports shall be dated as of the “Report
Closing Date”. Report Closing Date means the end of the fiscal month prior to
the date the Payment Report is due to DWA. The Payment Reports shall, among
other things, indicate with specificity on a country-by-country basis (to the
extent available from Subcontractors) all Home Video Gross Receipts received by
Paramount for each DWA Picture, all Return Reserves established for each DWA
Picture, all Services Fees retained from Home Video Gross Receipts, all Home
Video Fulfillment Expenses paid for each DWA Picture and the remaining Home
Video Gross Receipts. Home Video Gross Receipts, Return Reserves, Services Fees
and Home Video Fulfillment Expenses shall be stated in U.S. Dollars. Each DWA
Picture shall be separately accounted for hereunder as a single accounting unit
and all Home Video Gross Receipts, Return Reserves, Services Fees and Home Video
Fulfilment Expenses reported hereunder for a given accounting period shall be
aggregated with all Gross Receipts, Reserves, Distribution Fees and Distribution
Expenses for such accounting period for such DWA Picture under the Distribution
Agreement in accordance with Section 8.6.b thereof. Any amounts shown to be due
and payable pursuant to such Section 8.6.b of the Distribution Agreement shall
be paid to DWA in accordance therewith. For the avoidance of doubt, Home Video
Gross Receipts, Return Reserves, Services Fee and Home Video Fulfillment
Expenses relating to each DWA Picture shall not be cross-collateralized or
applied against the Home Video Gross Receipts, Return Reserves, Services Fee and
Home Video Fulfillment Expenses relating to any other DWA Picture hereunder or
any other Motion Picture owned or controlled by Paramount or any Paramount
Affiliate. Home Video Gross Receipts, Return Reserves, Services Fee and Home
Video Fulfillment Expenses relating to any Subcontracting of Fulfillment
Services hereunder shall be designated separately. Payment Reports may be
corrected, adjusted or supplemented by Paramount from time to time to reflect
adjustments, uncollectible amounts and errors.

 

It being understood that a particular Motion Picture (e.g., Shark Tale) may be
defined as a “Licensed Picture” for purposes of the Distribution Agreement and
as a “DWA Picture” hereunder. Notwithstanding the definitional distinction, each
particular Motion Picture shall constitute a single accounting unit under both
respective agreements.

 

c. Home Video Gross Receipts received by Paramount or any Paramount Affiliate
from a Subcontractor and received at any time preceding the last three
(3) Business Days of each fiscal month shall be accounted for on an interim
basis (each an “Interim Report”). Paramount shall issue each Interim Report
within three (3) Business Days after receipt of the applicable Home Video Gross
Receipts from a Subcontractor, and shall concurrently with each Interim Report
reconcile such Interim Report with the last aggregate Payment Report issued to
DWA pursuant to the Distribution Agreement and any Interim Reports then required
to be provided under the Distribution Agreement in order to determine amounts,
if any, then due to DWA.

 

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d. In addition to the Payment Reports, Paramount shall furnish to DWA, on a
monthly basis, within three (3) calendar days from the end of each fiscal month,
a detailed, DWA Picture-by-DWA Picture, territory-by-territory, media-by-media,
monthly and cumulative revenue and cost report, in a format approved by DWA,
prepared on an accrual basis in accordance with GAAP in sufficient detail to
enable DWA to record DWA Picture revenue and expenses on an accrual basis in
accordance with GAAP (the “GAAP Accrual Report”), which format may change from
time to time in DWA’s good faith discretion. Home Video Gross Receipts, GAAP
Return Reserves, Services Fee, Home Video Fulfillment Expenses and all other
revenue and expense detail shall be reported on a combined inception-to-date
basis, including all prior inception to date information to support current
accrual reporting. Without limiting the generality of the foregoing, the parties
agree as follows with respect to the GAAP Accrual Reports:

 

(i) All amounts shall be stated in U.S. Dollars;

 

(ii) The GAAP Accrual Reports shall include all pertinent information from the
DWA-approved Fulfillment Servicing Agreements received by Paramount through end
of the applicable fiscal month, but in no event shall Paramount be required to
include in such reports any information that is not available to Paramount under
the DWA-approved Fulfillment Servicing Agreements;

 

(iii) Reporting may be corrected, adjusted or supplemented by Paramount in
accordance with the terms of Section 8.1.h above. Adjustments to Home Video
Gross Receipts, Home Video Fulfillment Expenses or other changes in any
receivables or payables on the books and records of Paramount or any Paramount
Affiliate will require a supplemental disclosure in the corresponding GAAP
Accrual Report. Such supplemental disclosure should be allocated to specific DWA
Picture(s) and be broken down by territory and by media; and

 

(iv) Any long term receivables (i.e., amounts due any payable outside of twelve
(12) months) should be discounted in accordance with GAAP and amortized into
interest income. The resulting interest income should be reported separately
from the underlying receivable and the applicable GAAP Accrual Report should
provide detail relating to such interest income on a DWA Picture-by-DWA Picture,
territory-by-territory and media-by-media basis.

 

(v) In preparing the reports required to be furnished to DWA under this
Section 8.5.e, Paramount shall be entitled to establish a reasonable,
non-discriminatory reserve against accrued Home Video Gross Receipts then
payable for returns of Video Devices for such DWA Picture in accordance with
GAAP (a “GAAP Return Reserve”), taking into consideration the following (to the
extent applicable): historical return experience with respect to comparable DWA
Pictures, current economic trends, projection of consumer demand for the
applicable DWA Picture, point of sale data as available from retailers and other
reasonable and appropriate factors (including any requirements under GAAP and
applicable law) utilized in the Motion Picture industry in Los Angeles,
California for establishing such reserves. Reserves shall be liquidated, if not
utilized, within a reasonable period of time following the establishment of such
reserves.

 

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e. Within one-hundred eighty (180) days following the expiration or termination
of the Service Term for a given DWA Picture, Paramount will prepare and render
to DWA a report (the “Final Payment Report”) for such DWA Picture setting forth,
in the same form and level of detail as the periodic Payment Reports provided by
Paramount over the course of the Service Term for such DWA Picture, the
following information: (i) the cumulative final Home Video Gross Receipts,
Services Fee and Home Video Fulfillment Expenses for such DWA Picture, (ii) the
amount of any unliquidated End of Term Reserve for such DWA Picture; and
(iii) the net amount payable by Paramount to DWA (or DWA to Paramount, if
applicable) (the “Final Payment Amount”). The Final Payment Amount hereunder
shall be aggregated and combined, on a DWA Picture-by-DWA Picture basis with the
like amounts calculated pursuant to Section 8.6.f of the Distribution Agreement
to determine, on a DWA Picture-by-DWA Picture basis, what amounts, if any, are
payable to DWA or Paramount, as applicable (which amounts shall be paid in
accordance with the terms of the Distribution Agreement).

 

f. Any payments hereunder to DWA or Paramount, as the case may be, shall be made
by wire transfer or such other method as DWA or Paramount, as the case may be,
shall approve. Payments to DWA shall be to DWA or any entity designated from
time to time by DWA. Interest shall be charged on any amount which is not paid
when due (from the date due until the date of payment) hereunder by either party
at the 30-day LIBOR from time to time in effect, but shall be waived if payment
of the amount owing is made within five (5) Business Days after the due date.
Such interest shall be paid at the same time as the associated principal payment
shall be made.

 

g. DWA shall be entitled to all audit results respecting the DWA Pictures as and
when received by Paramount or any other Paramount Affiliate, including original
audit reports and supporting materials. Paramount or other applicable Paramount
Affiliate shall audit the DWA Pictures on not less than the same basis and
frequency as it audits Motion Pictures owned or controlled by Paramount or other
applicable Paramount Affiliate, as performed by internal and external auditors.

 

h. Paramount shall continue to provide, without adjustment other than
adjustments made in the ordinary course of business permitted by this Agreement,
all Payment Reports and GAAP Accrual Reports consistent with the pre-Effective
Date reporting from DWS to DWA. Paramount shall use best efforts to ensure that
DWA accounting in not interrupted and that there is a timely and accurate
transition for reporting, to allow DWA to report within all statutory reporting
deadlines.

 

i. If Paramount is required to incur any new additional direct out-of-pocket
costs or expenses (of which Paramount notifies DWA in advance) solely in order
to re-format any Payment Reports or GAAP Accrual Reports pursuant to a request
by DWA after the Effective Date, Paramount shall not be required to furnish such
re-formatted Payment Reports or GAAP Accrual Reports unless DWA preapproves such
costs and expenses and agrees to reimburse Paramount for all such costs and
expenses (subject to appropriate reduction, to be mutually agreed, if and to the
extent the revised format is used for similar reports provided to any Person
other than DWA); provided, that Paramount hereby approves the form of Payment
Reports and GAAP Accrual Reports prepared and rendered by DWS to DWA under the
Prior Agreement and acknowledges that any reimbursement obligation described in
this Section 8.5.i shall only apply to any DWA request for re-formatting after
the Effective Date.

 

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j. Paramount acknowledges the importance to DWA (as a public company with
Securities and Exchange Commission reporting obligations) of Paramount’s
obligations to report to DWA, or to provide DWA with access to, certain
information in accordance with the terms of this Agreement. With respect to
Section 4.1.e.(vi), the scope of the electronic reporting requirements set forth
in Section 8.4.e., the timing for delivery of the Interim Reports set forth in
8.5.c. and the number of days following the fiscal month closing in which the
GAAP Accrual Reports can be delivered under 8.5.d., the parties acknowledge that
Paramount will use its commercial best efforts to fully satisfy its obligations
to DWA thereunder but that Paramount has not yet confirmed that Paramount and/or
the Paramount Affiliates will be able to satisfy such obligations in the exact
manner and within the exact time periods specified therein. To the extent that
Paramount determines following its further review of such obligations (which
review Paramount shall complete as promptly as possible but, in any event, no
later than the Effective Date) that Paramount and/or the Paramount Affiliates
will not be able to fully and completely satisfy one or more of foregoing
obligations in the exact manner or within the exact time periods currently
required by such Sections of this Agreement, the parties shall negotiate in good
faith possible changes to such obligations and/or time periods; provided,
however, that any such changes shall be the minimum necessary for Paramount
and/or the Paramount Affiliates to fully satisfy all such obligations and to
fully effect the intent of the parties and the reporting requirements of DWA.

 

8.6 Access and Audit Rights:

 

a. Paramount shall keep (and shall cause other applicable Paramount Affiliates
to keep) full, true and complete records and books of accounts together with all
supporting vouchers, invoices, books of account, computer or data base
information, correspondence and documents relating to the servicing of the DWA
Pictures hereunder (collectively, “Records”), and maintain, for a period of
seven (7) years following DWA’s receipt of a Payment Report and all Records
relevant thereto. Notwithstanding the foregoing, Paramount shall (and shall
cause other applicable Paramount Affiliates) in any event keep and maintain (or
deliver to DWA) or deliver all of the above mentioned materials for any longer
period required to complete an open audit for which DWA gives notice or in the
event of an unresolved dispute with any participant or third party related to a
DWA Picture for which DWA gives notice.

 

b. Paramount grants DWA and its agents, employees and representatives the right,
from time to time at all times during the Term and for a period of thirty-six
(36) months after the later of (i) the expiration of the Term and (ii) the
delivery of the last Payment Report hereunder, upon reasonable prior notice to
Paramount to examine, audit and take excerpts from (and subject to third party
confidentiality rights, to request that Paramount provide copies of) any such
Records and all other documents related to the provision of Fulfillment Services
with respect to the DWA Pictures or to the calculation of amounts due to or from
DWA hereunder; provided, however, transactions will not be subject to audit more
than five (5) years after delivery to DWA of the Payment Report in which such
transactions are initially reported. Notwithstanding the foregoing, DWA shall
only be entitled to confidential

 

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third party information to the extent the same is reasonably necessary to
resolve any issue(s) under audit. DWA’s audit rights hereunder shall include the
right to examine and inspect (x) Records pertaining to Motion Pictures exploited
by Paramount for Home Video Exhibition in order for DWA to verify the fair and
reasonable allocation of any Financial Benefit to the DWA Pictures, and (y) all
inventory of the DWA Pictures in the possession or control of Paramount and any
Subcontractors and/or the duplication, printing and storage facilities used by
Paramount. DWA shall have the right to conduct any audit at Paramount’s
corporate headquarters and/or at Paramount’s branch offices, and to obtain
access to supporting documentation through Paramount’s corporate headquarters’
staff and/or Paramount’s branch offices. DWA shall be solely responsible for all
costs and expenses in connection with such audits, except as further provided in
Section 8.6.c below.

 

c. If an audit discloses any inaccuracies or discrepancies in the Records with
respect to the provision of Fulfillment Services with respect to the DWA
Pictures hereunder or the amounts payable to or from DWA (and Paramount agrees
with the audit findings or the findings are confirmed by the arbitrator pursuant
to Section 23 below), then Paramount shall cure such inaccuracies and
discrepancies within thirty (30) calendar days following notice thereof. In the
event an audit shall uncover a deficiency (and Paramount agrees with the audit
findings or the findings are confirmed by the arbitrator pursuant to Section 23
below), as of the end of the period audited, or for any period of at least six
(6) months during the period audited, in each case equal to or greater than five
percent (5%) of the net amount paid to DWA for the period audited, Paramount
shall immediately pay DWA (i) said deficiency in full, together with interest
thereon, with interest computed at the 30-day LIBOR plus 100 basis points as of
the applicable Payment Report date, computed from the date such amounts were
otherwise due and (ii) all costs and expenses in connection with such audit,
including auditor fees, hotel and travel expenses.

 

d. Subject in all cases to Paramount’s confidentiality obligations, DWA shall
have the right at DWA’s sole expense, to elect (i) to require Paramount to
audit, to the extent of Paramount’s right to conduct such audit, or (ii) to
audit directly, where Paramount may grant such right and to the extent of
Paramount’s right to conduct such audit, the records of any Subcontractor or
party to a DWA-approved Fulfillment Servicing Agreement or DWA-approved Third
Party Service Agreement pertaining to the DWA Pictures, provided that such right
may not be assigned to any other Person.

 

e. In the event of an audit, Paramount shall provide DWA and its agents,
employees and representatives with reasonable and suitable physical conditions
in which to conduct such audit, including a desk and chair, telephone, adequate
lighting and suitable ventilation. Subject to the applicable DWA-approved
Fulfillment Servicing Agreement or DWA-approved Third Party Service Agreement,
Paramount shall cause each Subcontractor or party to a DWA-approved Fulfillment
Servicing Agreement or DWA-approved Third Party Service Agreement to comply with
the foregoing.

 

f. Each of Paramount, any Subcontractor or party to a DWA-approved Fulfillment
Servicing Agreement or DWA-approved Third Party Service Agreement and DWA shall
use reasonable efforts to conduct any audit in an expeditious manner. DWA and
Paramount shall mutually agree on an audit schedule pertaining to the DWA
Pictures. Any audit settlement including the DWA Pictures shall be subject to
DWA’s prior written approval.

 

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8.7 Tax Reporting:

 

a. General: Paramount shall supply DWA with such information and/or
documentation available to Paramount as DWA may require in order to take
advantage of any tax credits, deductions, exclusions and/or reductions,
including the Extra-territorial Income Exclusion (“EIE”) that may be available
to DWA in any jurisdiction of the Territory. Paramount shall have no liability
hereunder to DWA with respect to or arising out of such information and/or
documentation or DWA’s ability or inability to take advantage of any such tax
credits, deductions, exclusions and/or reductions, and DWA’s indemnification of
Paramount and related parties set forth in Section 10 below shall apply to any
third party claims by reason of any such tax credits, deductions, exclusions
and/or reductions.

 

b. Records: Paramount shall maintain and provide DWA with access to any books
and records necessary to prepare any federal, state and foreign, if any, tax
filings.

 

c. Tax Filings: Paramount shall be responsible for any foreign tax filings, such
as withholding tax, VAT, etc., and shall indemnify and hold DWA harmless from
any interest, penalties or similar assessments resulting from errors and/or
failures to file any required tax returns.

 

d. Other Tax Information: To the extent such information is in Paramount’s
possession or is available to Paramount or DWS, and provided that Paramount is
not prohibited from providing such information to DWA by law, regulation or
contract, Paramount will provide DWA with such additional information as DWA any
request with respect to tax matters, including information required to take
advantage of tax credits and related matters. Such information will be provided
to DWA within five (5) Business Days following DWA’s request therefor.

 

e. Tax Information/Additional Costs: If DWA requires any information and/or
documentation pursuant to this Section 8.7 that is not reasonably available to
Paramount, Paramount shall not be required to supply such information and/or
documentation unless DWA agrees to reimburse Paramount for any additional direct
out-of-pocket costs preapproved by DWA and incurred by Paramount to supply such
information and/or documentation.

 

8.8 Operations:

 

a. Secured Locations: Paramount shall maintain all Video Devices embodying, and
transfers of, the DWA Pictures, all other related Tangible Film Materials and
all intellectual property of DWA under Paramount’s control in a secure location
at all times during the Term. At all times hereunder, as between DWA and
Paramount, DWA shall retain sole and exclusive ownership of the copyrights and
all other intellectual property rights in and to the DWA Pictures and all
Tangible Film Materials, provided Paramount shall own the physical items
constituting Tangible Film Materials created by Paramount in accordance with
this Agreement and Tangible Property created or produced by DWS under the Prior
Agreement. Tangible Film

 

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Materials shall be held in Paramount’s name for the benefit of DWA at each
secured location and laboratory, and DWA shall have unfettered and unrestricted
access to any Tangible Film Materials wherever located, including the right to
access such Tangible Film Materials and any Marketing Materials created or
produced by Paramount.

 

b. Video Devices: Paramount shall catalog and track (in a manner acceptable to
DWA) Video Devices and advertising material and implement with DWA’s approval
storage and retrieval procedures and procedures for the destruction of Video
Devices and for issuance of a certificate of destruction evidencing same.

 

c. Laboratories: DWA shall comply with DWS’s existing film and laboratory
agreements with Technicolor Inc. and Affiliates. The DWA Pictures shall be
included in the foregoing agreements on a nondiscriminatory basis. Such
agreements constitute DWA-approved Third Party Service Agreements and, as such,
are subject to the provisions of Section 4.11 above.

 

d. Documentation: To the extent Tangible Film Materials, Marketing Materials or
any versions of the DWA Pictures are in the possession of any Person, Paramount
shall provide DWA with any written authorizations, access letters and
permissions required to allow DWA to fully access such materials.

 

e. Security/Anti-Piracy Measures: Paramount shall maintain (and shall cause or
obligate its Subcontractors to maintain) security and anti-piracy measures
consistent with the highest level of security and anti-piracy measures
maintained for Motion Pictures and DTV Productions owned or controlled by
Paramount and such Subcontractor in the applicable portions of the Territory for
such media to prevent unauthorized distribution or copying, or infringement of
any of DWA’s rights. If DWA desires security and anti-piracy measures beyond
those provided by Paramount (or its Subcontractors) per the preceding sentence,
it may require Paramount to provide same (or DWA may make its own third party
arrangements for such services) at DWA’s sole cost and expense. Each party shall
immediately notify the other of any unauthorized copying, distribution,
exhibition or other exploitation of the DWA Pictures and of any of the
infringements or violations of DWA’s copyrights, trademarks and other rights in
the DWA Pictures of which such party has knowledge. DWA shall take such actions
as it deems appropriate with respect thereto. To the extent appropriate,
Paramount may join in any actions and cooperate (at DWA’s expense) in any
litigation or other proceedings to protect the DWA Pictures and to prevent
unauthorized distribution or copying, or infringement of any of DWA’s rights. If
DWA elects to proceed alone directly through its own counsel, DWA shall bear the
costs thereof, and DWA shall be entitled to retain any recovery. If DWA does not
elect to proceed as provided in the preceding sentence, Paramount shall have the
right, but not the obligation, to proceed either in DWA’s name or in Paramount’s
name, in which event all recovery reasonably allocated to the DWA Pictures shall
be included in Home Video Gross Receipts and all reasonable, actual direct third
party expenses reasonably allocated to protecting the DWA Pictures shall be a
Home Video Fulfillment Expense. DWA shall cooperate fully therewith, and if
recovery is through MPAA or MPA actions, any financial recovery shall be applied
consistent with MPAA or MPA practices. To the extent Paramount pays direct
additional costs related to piracy, copyright or trademark infringement or other
violations of DWA’s rights in the DWA Pictures, such costs (to the extent
pre-approved by DWA), including

 

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anti-piracy print coding, MPAA piracy programs, and other anti-infringement
activities, shall be payable by DWA. Notwithstanding the foregoing, DWA may
elect not to have the DWA Pictures included in such MPAA, MPA, piracy, copyright
or trademark infringement or other actions.

 

f. Deductibility of Section 8 Costs and Expenses: For the avoidance of doubt,
except as specifically provided herein, all actual, direct third-party
out-of-pocket costs and expenses (other than Paramount’s overhead expenses)
incurred by Paramount in connection with the matters described in this Section 8
shall constitute Home Video Fulfillment Expenses deductible against applicable
Home Video Gross Receipts hereunder. The parties acknowledge that nothing
contained in this Section 8.8.f shall be construed to in any way expand or
modify the definition of “Home Video Fulfillment Expenses” hereunder.

 

Section 9. Representations, Warranties and Agreements

 

9.1 DWA represents, warrants and agrees that:

 

a. As of the dates Paramount commences to render Fulfillment Services with
respect to each DWA Picture, there shall be no claims, liens, encumbrances or
licenses in or to the DWA Picture that would limit or interfere with the ability
of Paramount to render such Fulfillment Services.

 

b. All DWA Tangible Film Materials to be delivered or made available to
Paramount will be of a quality suitable for the manufacturing of technically
acceptable Video Devices of the DWA Pictures and related Marketing Materials.

 

c. Unless DWA notifies Paramount in writing to the contrary, there will be no
restrictions that would prevent Paramount from rendering the Fulfillment
Services with respect to the DWA Pictures consistent with the provisions of this
Agreement. There will not be any payments which must be made by Paramount to any
actors, musicians, directors, writers or other persons who participated in the
DWA Pictures, or to any union, guild or other labor organization for any right
to Exhibit the DWA Pictures or as compensation in connection with the Home Video
Exhibition or for any other use of the DWA Pictures or any of the rights therein
and thereto; provided, that DWA shall not be obligated to supply any performing
rights license (e.g., SESAC) which may be required in connection with exhibition
of any DWA Picture, except only to the extent as customary in the motion picture
business for so-called “major” studios. Applicable payments to performing rights
societies (e.g., SESAC), which Paramount is required to pay, shall be charged as
Home Video Fulfillment Expenses hereunder. If DWA has not supplied all music
licenses necessary to exhibit a DWA Picture, then Paramount shall have the
option of obtaining the required licenses (and charge the cost thereof as Home
Video Fulfillment Expenses) or to forego provision of Fulfillment Services with
respect to the DWA Picture in the affected portion of the Territory until such
licenses are obtained by DWA.

 

d. The DWA Pictures (including any elements thereof) and any material supplied
by DWA to Paramount will not violate or infringe any trademark, trade name,
contract, agreement, copyrights (whether common law or statutory), patent,
literary, artistic, dramatic, personal, private, civil, property, or privacy
right or moral rights of authors or any

 

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other right, or slander or libel any Person; provided, that the foregoing shall
not apply to any material which is created by or supplied by Paramount, except
to the extent such material created by or supplied by Paramount incorporates
elements from any DWA Picture or any elements supplied by DWA to Paramount.

 

e. It has the full right, power, and authority to enter into and fully perform
this Agreement and to comply with all of its obligations hereunder; DWA is and
will be duly organized and validly existing under the laws of its state of
formation, and is and will be duly qualified to transact business under the laws
of each state where the failure to do so would have a material adverse effect on
either the conduct of its business or its ability to perform this Agreement. DWA
has or at all relevant times hereunder shall have the full, complete and
unfettered rights, power and authority to bind conclusively any and all of its
controlled Affiliates to each and every term, covenant and condition of this
Agreement relating to or involving any of its controlled Affiliates.

 

f. All actions taken by DWA in connection with this Agreement shall be taken in
full compliance with all applicable statutory, administrative and/or court-made
laws, rules and regulations of any jurisdiction, and those of any other
governmental body (including those relating or pertaining to the manufacture,
production, distribution, exhibition, sale, advertising, promotion and other use
of intellectual properties and/or consumer products or services).

 

g. As of the Effective Date, no litigation, proceeding or claim is pending or
threatened against DWA that is reasonably likely to have a material adverse
effect on DWA’s ability to perform its obligations under this Agreement or any
Fulfillment Services relating to the DWA Pictures.

 

9.2 Paramount represents, warrants and agrees that:

 

a. It will not suffer or authorize any lien, encumbrance, pledge or mortgage
(each, a “Lien” hereunder) to attach to any DWA Picture or to any materials
furnished by DWA relating to the DWA Pictures, provided the foregoing shall not
apply to any Lien created, authorized or caused by DWA, and any Lien created
pursuant to the terms of any DWA-approved Fulfillment Servicing Agreement or
DWA-approved Third Party Service Agreement.

 

b. No material (including advertising, publicity, promotional, trailers, etc.)
added to the DWA Pictures or used in connection therewith by it violates or will
violate, or infringes or will infringe, any trademark, trade name, contract,
agreement, copyright (whether common law or statutory), patent, literary,
artistic, dramatic, personnel, private, civil, property, or privacy right or
“moral rights of authors” or any other right, or slander or libel any Person,
provided that the foregoing shall not apply to any material that is created by
or supplied by DWA or incorporates elements from any DWA Picture.

 

c. It has or will have written agreements with each Subcontractor hereunder to
comply with the terms and conditions of this Agreement. The foregoing shall not
apply to the CJ Agreement, the Kadokawa Agreement or any of the DWA-approved
Fulfillment Servicing Agreements listed on Schedule 1 hereto, nor to any
DWA-approved Third Party

 

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Service Agreement or any Fulfillment Servicing Agreement that DWA later approves
and which does not contain such a requirement. Such agreements will be made
available to DWA promptly upon its request.

 

d. It has the full right, power, and authority to enter into and fully perform
this Agreement and to comply with all of its obligations hereunder; it is and
will be duly organized and validly existing under the laws of its state of
formation, and is and will be duly qualified to transact business under the laws
of each state where the failure to do so would have a material adverse effect on
either the conduct of its business or its ability to perform this Agreement. It
has or at all relevant times hereunder shall have the full, complete and
unfettered rights, power and authority to bind conclusively any and all of its
controlled Affiliates to each and every term, covenant and condition of this
Agreement relating to or involving any of its controlled Affiliates.

 

e. In the provision of Fulfillment Services and otherwise in the fulfillment of
its obligations pursuant to this Agreement, it will not engage in any act that
violates any law, rule, act or regulations of any governmental authority. All
actions taken by Paramount in connection with this Agreement shall be taken in
full compliance with all applicable statutory, administrative and/or court-made
laws, rules and regulations of any jurisdiction, and those of any other
governmental body (including those relating or pertaining to the manufacture,
production, distribution, exhibition, sale, advertising, promotion and other use
of intellectual properties and/or consumer products or services).

 

f. All consideration to be provided by it pursuant to each third party business
arrangement, including the DWA-approved Fulfillment Servicing Agreements and
DWA-approved Third Party Service Agreements, to which it is a party and all of
the terms, covenants and conditions provided to be kept or performed by it
pursuant to each such third party business arrangement will be paid, kept,
performed and discharged in full by it unless excused by the other party thereto
or by operation of law. There currently is no breach or other act of default,
and in the future there will be no breach or other act of default by it under
any of such third party business arrangements, that would have a material
adverse affect on its business or its ability to perform under this Agreement.
Subject to any limitations and restrictions contained in the DWA-approved
Fulfillment Servicing Agreements or the DWA-approved Third Party Service
Agreements, it is not a party to any third party business arrangement that will
conflict with any of DWA’s approval rights, and it has the full right, power and
authority in all of its third party business arrangements to comply fully with
all of DWA’s approvals and rights as set forth in this Agreement.

 

g. As of the Effective Date, no litigation, proceeding or claim is pending or
threatened against it that is reasonably likely to have a material adverse
effect on its ability to perform its obligations under this Agreement or render
the Fulfillment Services with respect to the DWA Pictures.

 

Section 10. Indemnity

 

10.1 Indemnity Obligations: Each party (“Indemnitor”) shall at its own cost and
expense indemnify, defend and hold the other party, its and their parents and
affiliates, and

 

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their respective employees, agents, managers, Subcontractors, directors and
shareholders (collectively, “Indemnitee”) harmless from and against any and all
loss, liability or expense resulting from any claim, demand or suit which may be
made or brought against Indemnitee by reason of any claim by any third party
that (a) (i) a DWA Picture, or any element thereof, including the sound and
music synchronized therewith; (ii) any material (including advertising,
publicity, promotional trailers, etc.) added to the DWA Picture or used in
connection therewith, to the extent any of the above are supplied by or at the
request or direction of or on behalf of Indemnitor, or to the extent any of the
above are added by the Indemnitor without Indemnitee’s knowledge, violates or
infringes upon the trademark, trade name, patent, copyright, literary, dramatic,
musical, artistic, personal, private, publicity, civil, property or contract
right, right of privacy, the moral rights of authors or any other right of any
Person; or (b) notwithstanding anything to the contrary contained in
Section 11.1.e., a breach of any representation, warranty or agreement by the
Indemnitor hereunder. Notwithstanding the foregoing, (a) DWA shall so indemnify
Paramount and the other Paramount Indemnitees as set forth above with respect to
third party claims arising out of material created by or supplied by Paramount
to the extent such claims are based upon elements from any DWA Picture
incorporated in such material, or any material supplied by DWA to Paramount and
used by Paramount in a manner authorized by DWA. Paramount will not be entitled
to any indemnity hereunder to the extent that losses arise or result because
Paramount fails to cease servicing any DWA Picture which is the basis of any
such claim from Home Video Exhibition promptly as, when and to the extent so
instructed by DWA and therefore, DWA cannot promptly withdraw such DWA Picture
from Distribution; however, Paramount will be entitled to an indemnity hereunder
if Paramount honored an instruction from DWA not to cease servicing such DWA
Picture from Home Video Exhibition.

 

10.2 Insurance: DWA shall maintain and cause Paramount to be added as an
additional insured (without responsibility for premiums or deductibles) with
respect to the DWA Pictures under DWA’s Errors and Omissions policy (to the
extent commercially available) pertinent to Home Video Exhibition and VOD
exploitation of the DWA Pictures in the Territory. Such policy shall be for a
term, in amounts and containing a deductible and notice provision as is
customary in the motion picture industry. All such insurance coverage shall be
primary to any other coverage maintained by Paramount. Upon request by
Paramount, DWA shall promptly forward to Paramount Certificates of Insurance
evidencing DWA’s coverage. Notwithstanding the foregoing, DWA may elect in its
sole discretion to self-insure. Paramount shall be fully responsible for the
loss or destruction of any DWA Pictures, Tangible Film Materials or Marketing
Materials in Paramount’s possession or control, unless and to the extent that
the negligent or wrongful conduct of DWA and/or a third party with whom DWA
contracts directly results in such loss or destruction (and further provided
that such negligent or wrongful conduct is not of the type for which Paramount
would be responsible under industry customs). Paramount shall secure and
maintain at its sole cost and expense and add DWA as an additional insured with
respect to the DWA Video Devices under Paramount’s property casualty and
liability policies pertinent to Home Video Exhibition or fulfillment services
and all inventory and handling of the DWA Video Devices and related physical
elements in the Territory (and each country therein). Such policies shall be for
a term, in amounts and containing a deductible and notice provision as
customarily required in the Video Device industry. All such insurance coverage
shall be primary to any other coverage maintained by DWA. Notwithstanding the
foregoing, Paramount may elect in its sole discretion to self-insure. All such
insurance coverage shall be primary to any other coverage maintained by DWA.
Upon request by DWA, Paramount shall promptly forward to DWA Certificates of
Insurance evidencing Paramount’s coverage.

 

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Section 11. Default; Remedies and Termination

 

11.1 Default: A party shall be deemed in default of this Agreement upon the
happening of any of the following:

 

a. Such party fails to make any payment when due hereunder or to render any
statement when required hereunder. The defaulting party shall have five
(5) Business Days to cure such default after receiving written notice from or on
behalf of the non-defaulting party that such payment or statement has not been
made or rendered within the required time;

 

b. Such party, or any controlled Affiliate of such party (which, with respect to
Paramount, shall include PPC): (i) commences a voluntary case or proceeding with
respect to any or all of its assets or business under any Bankruptcy Law;
(ii) is the subject of an involuntary case or petition with respect to any or
all of its assets or business under any Bankruptcy Law and the involuntary case
or petition is not dismissed or withdrawn within 30 days after its filing;
(iii) consents to the commencement or pendency of a case or proceeding with
respect to any or all of its assets or business under any Bankruptcy Law;
(iv) seeks the appointment of a trustee, receiver, liquidator or other custodian
of any or all of its assets or business under any Bankruptcy Law; (v) consents
to the appointment of a trustee, receiver, liquidator or other custodian of any
or all of its assets or business under any Bankruptcy Law; (vi) is the subject
of an order of any court, agency or other governmental authority directing the
appointment of a trustee, receiver, liquidator or other custodian of any or all
of its assets or business under any Bankruptcy Law; (vii) seeks an order from
any court, agency or other governmental authority directing the liquidation,
sale, rehabilitation, reorganization or other disposition of any or all of its
assets or business; (viii) is the subject of any order of a court, agency or
other governmental authority directing the liquidation, sale rehabilitation,
reorganization or other disposition of any or all of its assets or business;
(ix) is, or admits that it is, generally not paying its debts as the debts
become due; (x) is, or admits that it is, insolvent; or (xi) makes an assignment
of any or all of its assets or business for the benefit of its creditors. For
purposes of this paragraph, “Bankruptcy Law” means: the United States Bankruptcy
Code (11 U.S.C. § 101 et seq.); and all other liquidation, dissolution,
rehabilitation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, extension, rearrangement, receivership, insolvency,
reorganization or any other similar debtor relief laws of any applicable
jurisdiction from time-to-time in effect that affects the rights of creditors
generally;

 

c. Any DWA Picture or any material portion thereof is attached or levied upon as
a consequence of the action or inaction of such party in violation of its
representations or warranties hereunder, and such attachment or levy has a
material adverse effect on the ability to render Fulfillment Services with
respect to the DWA Picture, and the same is not released or dissolved within
thirty (30) days thereafter;

 

d. Substantially all of the assets of such party are attached or levied upon and
the same is not released or dissolved within thirty (30) days thereafter;

 

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e. Such party otherwise is in breach of a material provision of this Agreement,
including a breach of any material representation or warranty hereunder that has
a material adverse effect on the ability to render Fulfillment Services with
respect to the DWA Pictures hereunder. For the avoidance of doubt, violation of
a third party right (as set forth in Sections 9.1.d and 9.2.b), or violation of
any other representation or warranty in Section 9. above that does not have a
material adverse effect on the ability to render Fulfillment Services with
respect to the DWA Pictures hereunder, shall not constitute a default pursuant
to this Section 11., provided the indemnity obligations in Section 10.1. shall
be fully applicable to the representations, warranties and covenants set forth
in Section 9. The party in breach shall have five (5) Business Days to cure such
breach after receiving written notice of such breach from or on behalf of the
non-breaching party or, if a cure cannot reasonably be effected within such
period, such party must begin to cure such breach within five (5) Business Days
and to prosecute the same diligently thereafter;

 

f. In the case of Paramount: Paramount is in breach or default under any
DWA-approved Fulfillment Servicing Agreement or a Third Party Service Agreement,
and such breach or default has or will have a material adverse affect on
Paramount’s ability to render Fulfillment Services with respect to the DWA
Pictures in accordance with this Agreement;

 

g. In the case of DWA: If DWA fails to Deliver a DWA Picture in accordance with
this Agreement and Paramount had theretofor incurred Home Video Fulfillment
Expenses or bona fide binding commitments for Home Video Fulfillment Expenses in
connection with such DWA Picture, provided that Paramount’s sole remedy for
DWA’s failure to Deliver in the aforementioned circumstances shall be to require
DWA (and DWA shall be obligated) to repay to Paramount all such Home Video
Fulfillment Expenses, together with interest on such paid amounts calculated at
the rate specified in Section 8.5.g. If DWA fails to Deliver such DWA Picture,
DWA shall retain all rights to perform Fulfillment Services with respect thereto
subject to the terms of this Agreement.

 

Notwithstanding anything to the contrary contained in this Section 11., if there
is any matter giving rise to a right of termination hereunder which is then the
subject of a Good Faith Dispute, (i) no party shall be considered in default of
this Agreement with respect to such matter during the pendency thereof, (ii) no
party shall attempt to terminate this Agreement or any of Paramount’s rights to
render Fulfillment Services hereunder during the pendency thereof with respect
to such matter, (iii) each party shall continue to perform its obligations in
accordance with the terms hereof, and (iv) the cure periods provided herein
above shall toll and be available following the resolution of such Good Faith
Dispute (whether resolved by mutual agreement, arbitration or otherwise).

 

11.2 Remedies and Termination:

 

a. DWA Termination Right.

 

(i) In the event of a default by Paramount (as determined pursuant to
Section 11.1. above), DWA shall have the right to terminate this Agreement (and
the Distribution Agreement, if DWA determines in its sole discretion), including
the right (but not obligation) (x) to order the immediate cessation of any or
all Fulfillment Services with

 

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respect to the DWA Pictures and the immediate return of any or all Tangible Film
Materials (in accordance with Section 14 below), or (y) at DWA’s election, to
terminate the Output Term (and the Output Term as defined under the Distribution
Agreement, if DWA determines in its sole discretion), but require Paramount to
continue rendering Fulfillment Services in accordance with the terms of this
Agreement (subject to Sections 11.2.c. and 11.2.d. below) with respect to some
or all DWA Pictures previously delivered and either in home video release or
ready for home video release as and for the duration of the applicable Service
Term. In the event Paramount is permitted to continue rendering Fulfillment
Services with respect to some or all of the previously delivered DWA Pictures,
Paramount will remain obligated to make all accountings and payments set forth
herein with respect to such DWA Pictures, and Paramount and DWA shall continue
to perform all of their respective other obligations hereunder with respect to
such DWA Pictures.

 

(ii) For the avoidance of doubt, DWA shall have no obligation to repay or refund
any unrecouped Home Video Fulfillment Expenses whether upon the expiration or
early termination of the Service Term or otherwise for any DWA Picture for any
reason whatsoever.

 

b. Paramount Termination Right. In the event of a default by DWA (as determined
pursuant to Section 11.1. above), Paramount shall have the right to terminate
this Agreement (and DWA shall, in its sole discretion, have the right to
terminate the Distribution Agreement), including the right (but not the
obligation) to immediately cease rendering Fulfillment Services with respect to
the DWA Pictures and to immediately deliver to DWA any and all Tangible Film
Materials (in accordance with Section 14 below) relating thereto to DWA, at
DWA’s sole cost and expense.

 

c. Existing Third Party Agreements. Subject to the provisions of this
Section 11.2.c., notwithstanding the expiration or termination of this
Agreement, or the Output Term or the Service Term of each DWA Picture hereunder,
Paramount shall have the right and obligation to honor all then-existing
contractual commitments with respect to current and prospective DWA Pictures.
DWA shall cooperate with Paramount and, at Paramount’s request and expense,
shall take such actions that are reasonably necessary or desirable to ensure
that Paramount is able to perform its obligations under all then-existing
contractual commitments with respect to current and prospective DWA Pictures.
Notwithstanding any other provision in this Agreement, the continuation of this
Agreement or any such extension of this Agreement, or the Output Term or the
Service Term of any DWA Picture as contemplated by this Agreement in connection
with any DWA-approved Fulfillment Servicing Agreements and Third Party Service
Agreements shall be expressly subject to and conditioned upon Paramount
continuing to pay DWA all amounts required to be paid to DWA pursuant to this
Agreement and Paramount continuing to perform all of its other obligations
hereunder in accordance with the terms hereof with respect to such DWA-approved
contractual commitments. Subject to the foregoing:

 

(i) Irrespective of any termination pursuant to this Section 11, this Agreement,
solely as it relates to those Fulfillment Services subject to DWA-approved
Fulfillment Servicing Agreements and Third Party Service Agreements, shall
remain in place and such Fulfillment Services shall continue to be rendered by
Paramount hereunder and in accordance with the terms of this Agreement until the
expiration of each DWA-approved

 

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Fulfillment Servicing Agreement or Third Party Service Agreement, as applicable;
provided, Paramount may elect to waive its Services Fee, in which event the last
sentence of Section 7.1 above shall not apply. Paramount shall have the right to
endeavor to cause its Subcontractors and any Person to release Paramount from
its obligations under the applicable DWA-approved Fulfillment Servicing
Agreement(s) and Third Party Service Agreement(s) with respect to the DWA
Picture and to enter into a direct agreement(s) with DWA with respect thereto.
If any such Subcontractor or Person is willing to enter into a direct agreement
with DWA, on terms and conditions no less favorable to DWA than those contained
in the DWA–approved Fulfillment Servicing Agreement or Third Party Service
Agreement, as applicable, DWA shall be obligated to enter into such agreement
with such Subcontractor or Person.

 

(ii) The parties acknowledge that the termination of this Agreement shall not
automatically terminate the DWA-approved Fulfillment Servicing Agreements or the
Third Party Service Agreements then in effect. Each DWA-approved Fulfillment
Servicing Agreement and Third Party Service Agreement shall terminate with
respect to the DWA Pictures and the Fulfillment Services subject thereto in
accordance with the terms thereof, unless any such agreement terminates by its
terms concurrently with termination of this Agreement.

 

d. Continuation of Services Fee and Home Video Fulfillment Expenses. For the
avoidance of doubt, Paramount shall remain entitled to charge its Services Fee
and recoup its Home Video Fulfillment Expenses on DWA Picture(s) for any period
during which the subject Fulfillment Services are rendered by Paramount.

 

e. Further Documents. On expiration or other termination of each Service Term,
or the Term, Paramount will immediately execute such other documents as DWA’s
counsel deems necessary or advisable to evidence the termination of its right to
render Fulfillment Services with respect to each DWA Picture.

 

f. Remedies Not Exclusive. The foregoing rights and remedies are in addition to
and not in lieu of or in derogation of the rights and remedies otherwise
available to Paramount or to DWA in the event of default by the other party.

 

Section 12. Copyright

 

12.1 Protection and Notice: DWA at its sole expense shall take all actions
reasonably sufficient to secure copyright protection for the DWA Pictures.
Paramount will cooperate as reasonably required by DWA in connection with
actions undertaken by DWA to protect and enforce copyrights, trademarks, etc.
DWA shall include in the DWA Pictures as delivered to Paramount a copyright
notice in conformity with the laws of the United States and the Universal
Copyright Convention designating as copyright proprietor such entity as DWA
shall determine. Such copyright notice shall appear on all DWA Video Devices.

 

12.2 Notice of Claims; Infringements: Paramount and DWA shall promptly notify
the other of any claims against or violations or infringement of any right to
render Fulfillment Services hereunder, or of any claim against any copyright
with respect to any DWA Picture, which come to such party’s attention.
Paramount, at DWA’s instruction and at DWA’s

 

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sole cost and expense, shall take all reasonable steps by action at law or
otherwise to prevent any unauthorized exhibition or distribution of the DWA
Pictures in violation of Paramount’s right to render Fulfillment Services
hereunder or to prevent impairment, encumbrance or infringement of any right to
render Fulfillment Services hereunder or of the copyright.

 

Section 13. Ownership. Subject to the rights expressly licensed to Paramount
herein, as between DWA and Paramount, DWA shall be the sole and exclusive owner
of all rights, title and interest in and to the DWA Pictures at all times. DWA’s
ownership includes all copyrights, trademarks, patents, titles, designs,
artwork, characters, stills, drawings, literary material, film materials,
computer models, logos, stories, plots and any other intellectual properties and
rights in, to, or arising out of the DWA Pictures or any element thereof
regardless of whether created by DWA or by any other person on DWA’s behalf.
Paramount shall not have any ownership or security interest in, lien on, or
other creditor’s rights with respect to the DWA Pictures, any elements or
components thereof (excluding only Paramount’s ownership rights and interests in
and to the Tangible Film Materials and Marketing Materials created or produced
by Paramount in accordance with this Agreement), any of the literary, dramatic,
musical or other materials upon which the DWA Pictures are based or which are
contained in the DWA Pictures, or any of the copyrights, trademarks, computer
models, design patents, technology or similar or analogous rights in or to the
DWA Pictures or any of the foregoing.

 

Section 14. Inventory of Materials

 

14.1 Return / Destruction of Tangible Film Materials. Subject to Section 14.2.
below, upon expiration or termination of (i) each Service Term, or (ii) this
Agreement, all Tangible Film Materials relating to the applicable Fulfillment
Services and DWA Picture(s) shall become the property of DWA, free and clear of
all claims, liens, encumbrances or other interests. Within sixty (60) days after
the expiration or termination of each Service Term, Paramount shall furnish DWA
with a complete written inventory with respect to each territory, listing all
Tangible Film Materials then in the possession or under the control of
Paramount, a Paramount Affiliate, a Subcontractor or any Person pursuant to a
DWA-approved Fulfillment Servicing Agreement or Third Party Service Agreement.
Within thirty (30) days following DWA’s receipt of the foregoing written
inventory, DWA shall notify Paramount in writing regarding which of the Tangible
Film Materials listed in such written inventory are to be delivered to DWA and
which of the Tangible Film Materials listed in such written inventory are to be
destroyed. Further in this regard:

 

a. If designated by DWA, Paramount shall deliver to DWA (within thirty [30] days
following receipt of notice from DWA as set forth above) all Tangible Film
Materials that are then within the possession or under the control of Paramount,
a Paramount Affiliate, a Subcontractor or any Person pursuant to a DWA-approved
Fulfillment Servicing Agreement. Paramount’s direct third party costs of
complying with this Section 14.1.a. shall be included in Home Video Fulfillment
Expenses, provided such delivery shall be at Paramount’s sole cost and expense
in the event of termination for a Paramount default.

 

b. Unless designated otherwise by DWA, all or any portion of the Tangible Film
Materials set forth in Paramount’s written inventory that DWA has not instructed
Paramount to deliver to DWA shall be destroyed. Paramount shall furnish DWA
(within thirty

 

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[30] days following receipt of notice from DWA as set forth above) with an
affidavit of such destruction, and shall furnish such additional verification of
such destruction as DWA shall designate. Paramount’s direct costs of complying
with this Section 14.1.b. shall be included in Home Video Fulfillment Expenses,
provided such destruction shall be at Paramount’s cost and expense in the event
of termination for a Paramount default.

 

c. With respect to Paramount’s then existing inventory of DWA Video Devices, DWA
shall have the option, in its sole discretion, to either: (i) permit Paramount
to sell off its then-existing inventory of DWA Video Devices upon the same terms
and conditions as provided herein for a period not to exceed 180 calendar days
following such termination date (subject to appropriate adjustments to outside
date for Paramount’s provision of the Final Payment Report for the applicable
DWA Picture); (ii) require Paramount to deliver its then-existing inventory of
DWA Video Devices and all related materials to DWA (such delivery to be at
Paramount’s sole cost and expense in the event of a termination for a Paramount
default, otherwise such delivery shall be at DWA’s sole cost and expense);
(iii) immediately destroy or demagnetize Paramount’s then-existing inventory of
DWA Video Devices (such destruction to be at Paramount’s cost and expense in the
event of a termination for a Paramount default, otherwise such destruction shall
be at DWA’s sole cost and expense), in which event Paramount shall promptly (but
in no event more than ten (10) Business Days following destruction or
demagnetization) furnish DWA with certificates of destruction or proof of
demagnetization, as the case may be; or (iv) any reasonable combination of the
foregoing. In addition, Paramount shall promptly provide DWA with a list of all
outstanding orders for DWA Video Devices.

 

14.2 Post Service Term Collections / Returns: Notwithstanding the expiration of
the Service Term for a given DWA Picture, for a period of six (6) months
thereafter Paramount shall continue to use its commercially reasonable best
efforts to continue to collect all Home Video Gross Receipts and to process and
administer any returns of DWA Video Devices of such DWA Picture sold to video
suppliers and/or video retailers but returned during such period. For the
avoidance of doubt, Paramount shall remain entitled to take a Services Fee on,
and recoup its Home Video Fulfillment Expenses in connection with, any such Home
Video Gross Receipts and shall be entitled to recoup its Home Video Fulfillment
Expenses in connection with returns of DWA Video Devices. DWA and Paramount
shall cooperate fully and in good faith with each other to achieve a smooth
transition at the end of the Service Term, and DWA shall request that any
successor distributor do so as well.

 

Section 15. Force Majeure. No party shall be liable to the other because of any
failure to perform hereunder caused by any cause beyond its control, including
fire, earthquake, flood, epidemic, accident, explosion, casualty, strike,
lockout, labor controversy, riot, civil disturbance, act of a public enemy,
embargo, war, act of God or law, except as expressly provided herein to the
contrary; provided, that Paramount shall not be required to accede to or to
cause any Paramount Affiliate to accede to the demands of any guild, union or
similar organization in order to bring to an end a strike, lockout or labor
controversy, or to accede to the demands of any suppliers or others not a party
hereto which Paramount considers unreasonable. This Section 15. shall not
diminish or impair the payment obligations of any party hereunder.

 

Section 16. Assignment. This Agreement may not be assigned by Paramount or DWA
(1) without the simultaneous assignment of the Distribution Agreement in
conjunction

 

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with such assignment; and (2) (a) without the prior written consent of the other
party, except that without securing the prior written consent of the other party
but subject to Section 4.6 above, DWA may from time to time assign its rights
hereunder to one or more wholly-owned Subsidiaries of DWA SKG and Paramount may
(without diminishing its obligations hereunder) from time to time assign or
delegate any or all of its rights and obligations hereunder to one or more
Paramount Affiliates and (b) Paramount may assign to a Successor Entity (as
defined below) all of its rights hereunder in the event Paramount is acquired by
or merged into another entity, or in connection with a sale or assignment of all
or substantially all of its theatrical distribution business to another entity
(each, a “Successor Entity”); provided, that in the case of (b) above
(i) Paramount and such assignee or successor shall have executed such
instruments, agreements or documents as DWA may reasonably request to ensure the
legal and binding assumption by the assignee or successor of Paramount’s
obligations hereunder, and (ii) Paramount shall remain liable for all of its
obligations hereunder. Nothing contained in this Section 16. shall (i) prohibit
or limit Paramount’s right to assign or delegate any or all of its
responsibilities hereunder to one or more Paramount Affiliates or to engage
Subcontractors, or (ii) prohibit or limit Paramount’s sale or transfer of its
assets (other than its rights under this Agreement) in the ordinary course of
business. Paramount shall remain liable for all of its obligations hereunder
notwithstanding any such assignment, unless such assignment is to (A) another
U.S. major motion picture studio or (B) a financially responsible Person
approved by DWA. In any event, the entity responsible for rendering the
Fulfillment Services with respect to the DWA Pictures shall be the same entity
that is performing similar services with respect to Paramount’s Tent-Pole
Pictures following any such permitted assignment.

 

Section 17. Standard of Care. Except as otherwise specifically directed or
approved in writing by DWA, in all actions under this Agreement, Paramount shall
act, in accordance with at least that standard of care that it exercises with
respect to the servicing of comparable Motion Pictures owned or controlled by
Paramount under similar circumstances in the applicable territories and media,
taking into account differences in production budgets, cast, genre, rating,
theatrical box office and other performance metrics, local tastes and other
established factors that Paramount uses in good faith on a nondiscriminatory
basis to make determinations in connection with the exploitation of Motion
Pictures produced or distributed by Paramount, excluding in each case, any
Motion Picture produced or directed by Steven Spielberg. Without limiting the
generality of the foregoing, Paramount will use its commercially reasonable best
efforts to ensure that the services provided to DWA hereunder by Paramount will
be no less than substantially equivalent in overall quantity, level and
priorities to the services provided by Paramount under similar circumstances in
connection with the servicing of comparable Motion Pictures owned or controlled
by Paramount with similar Domestic Territory theatrical box office grosses (or,
as applicable, were anticipated to have similar box office grosses at the time
any such services were contracted for or provided), excluding in each case, any
Motion Pictures produced or directed by Steven Spielberg. In addition, the terms
on which the fulfillment services for the DWA Video Devices are rendered,
including, without limitation, terms applicable to collections and selection of
retail accounts and home video release dates shall be no less favorable than
similar terms applicable to Video Devices embodying Paramount Motion Pictures.

 

Section 18. Distribution Credit. Paramount shall comply with DWA’s credit
requirements respecting the DWA Video Devices, and, in this regard, it is agreed
that DWA shall receive credit in the form “Dream Works Animation Home Video” or
such other form as DWA

 

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designates from time-to-time on screen and in packaging and advertising and that
DWA shall have the right to designate all other credits on the DWA Video Devices
(and that Paramount shall not be entitled to receive any credit in connection
with same). Any Third Party Service Agreement or Fulfillment Servicing Agreement
for the DWA Video Devices shall provide that the third party contracting with
Paramount is contractually bound to abide by all such credit obligations.

 

Section 19. Other Activities. Subject to the provisions hereof and Section 6 of
the Separation Agreement, nothing herein shall limit in any way the right of
DWA, Paramount or any Paramount Affiliate to engage in business activities or
endeavors of any kind or nature, including:

 

(i) Motion Picture production, distribution and related businesses;

 

(ii) Television production and distribution and merchandising (including video
and computer games), including exploiting the DWA Pictures by DWA;

 

(iii) Advertising;

 

(iv) Publishing;

 

(v) Interactive Media;

 

(vi) The sale or license of designs, stories, characters, trademarks, trade
names or other rights or properties;

 

(vii) Ancillary market activities;

 

(viii) The co-financing or co-production or acquisition of any other interest of
any nature in any Motion Picture or other property; and

 

(ix) The exercise of any right not expressly granted hereunder.

 

Section 20. Exercise of Discretion. Any consultations, consents and approvals
between the parties shall be performed in good faith and no party shall
unreasonably withhold, condition or delay any approval or consent hereunder;
provided, however, any determinations, discretion, designations, elections,
instructions and approvals granted to or retained by DWA solely with respect to
creative matters relating to the development, production and distribution of the
DWA Pictures, including any and all Marketing Materials (such as trailer and
advertising content, key artwork, bonus materials for Video Devices, clips to be
included in any product reels), may be exercised by DWA in its sole and absolute
discretion.

 

Section 21. No Partnership or Third Party Benefit. This Agreement does not
constitute Paramount and DWA as partners, joint venturers, or as each other’s
agents or representatives (except as may be herein otherwise expressly
provided). This Agreement is not for the benefit of any third party and shall
not give any right or remedy to any such third party whether or not referred to
hereunder.

 

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Section 22. Integration/Formalities. This Agreement (including the Schedules,
Annexes and Exhibits) contains the entire agreement and understanding between
the parties relating to the subject matter hereof and supersedes, cancels and
replaces any prior understanding, writing or agreement between the parties
relating to such subject matter, including, without limitation, the Prior
Agreement. This Agreement may not be amended, modified or altered except by an
instrument in writing duly executed by the parties. The parties acknowledge that
each was represented by counsel in the negotiation and execution of this
Agreement. No provision herein shall be construed against any party by virtue of
the activity of that party, through its counsel or otherwise, in negotiating and
drafting this Agreement.

 

Section 23. Dispute Resolution.

 

a. The parties agree that any dispute to interpret or enforce, or otherwise
arising out of or relating to, this Agreement shall be determined by binding
arbitration according to the Commercial Arbitration Rules of the American
Arbitration Association (“AAA”), provided always that: (a) the arbitration shall
be conducted before a single neutral arbitrator with at least ten (10) years
experience in the theatrical Motion Picture industry, appointed by mutual
agreement of the parties within five (5) business days from the date the notice
of arbitration is delivered by the petitioning party; (b) the parties shall be
entitled to discovery as provided in California Code of Civil Procedure sections
1283.05 and 1283.1; (c) in deciding any such matter, the arbitrator shall follow
the substantive law of the State of California as it would be applied by
California courts; (d) either party may, without waiving its right to
arbitration, seek preliminary or interlocutory relief from a court of competent
jurisdiction; (e) all arbitration proceedings (including any discovery and other
evidence in connection therewith) shall be closed to the public and shall remain
confidential; and (f) arbitration awards hereunder may be entered and enforced
as provided in California Code of Civil Procedure sections 1285 et seq. If the
arbitrator is not selected by mutual consent within five (5) business days from
the date the notice of arbitration is delivered by the petitioning party, the
rules of the AAA with respect to the selection of an arbitrator shall apply.
Notwithstanding the foregoing, before proceedings are initiated hereunder, the
Chief Executive Officer or Chief Operating Officer of DWA and Distributor, or
their designated representatives shall meet and in good faith attempt to resolve
the dispute.

 

b. Notwithstanding the foregoing:

 

(i) Any disputes submitted to binding arbitration pursuant to Section 23.a.
above that affect the timely release of a DWA Picture for initial Home Video
Exhibition in any portion of the Territory shall commence within seven
(7) Business Days from the date the notice is delivered by the petitioning party
and the arbitrator shall rule not later than ten (10) Business Days after the
date the notice is delivered. The hearing shall be conducted by the arbitrator
for as many days as the arbitrator determines to allow; provided, that the
hearing shall conclude, and the arbitrator shall rule, not later than ten
(10) Business Days after the date the notice is delivered.

 

c. NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT TO THE CONTRARY, AND
EXCEPT AS PROVIDED BELOW, IN NO EVENT WILL EITHER PARTY BE LIABLE FOR PUNITIVE
DAMAGES SUFFERED BY

 

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AN INDEMNITEE, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, IN CONNECTION WITH
ANY DAMAGES ARISING HEREUNDER; PROVIDED, HOWEVER, THAT TO THE EXTENT EITHER
PARTY IS REQUIRED TO PAY (A) ANY AMOUNT ARISING OUT OF THE INDEMNITY SET FORTH
IN SECTION 10 AND/OR (B) ANY PUNITIVE DAMAGES, IN EACH CASE, TO A THIRD PARTY IN
CONNECTION WITH A THIRD PARTY CLAIM, SUCH DAMAGES WILL CONSTITUTE DIRECT DAMAGES
AND WILL NOT BE SUBJECT TO THE LIMITATION SET FORTH IN THIS SECTION 23.c.

 

Section 24. Severability of Provisions. If any provision in this Agreement shall
be held by any court of competent jurisdiction to be illegal, invalid or
unenforceable, such provision shall be of no force or effect while such
infirmity shall exist, but such infirmity shall have no effect whatsoever upon
the binding force or effectiveness of any other provisions hereof unless the
parties otherwise agree. The parties shall endeavor in good faith negotiations
to replace the illegal, invalid or unenforceable provision with a valid
provision the economic effect of which comes as close as possible to that of the
illegal, invalid or unenforceable provision.

 

Section 25. Waiver. No delay or failure to exercise any right hereunder shall
constitute a waiver of such right except in those instances where this Agreement
provides for specific notice and a period of time thereafter within which to
exercise a right, in which case failure to exercise such right within the
specified time period shall constitute a waiver thereof.

 

Section 26. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the state of California, applicable to contracts
entered into and to be fully performed in said state by residents thereof. For
purposes of enforcing, confirming or vacating an award under Section 23. above,
or in the event the provisions of Section 23. shall be held invalid or
unenforceable, only the California courts (state and federal) shall have
jurisdiction over controversies regarding or arising under this Agreement, and
if there is any matter which might be subject either to state or federal
jurisdiction, the parties agree that the matter shall be submitted to federal
jurisdiction. The parties specifically agree that the Superior Court of the
State of California, County of Los Angeles and the United States District Court
for the Central District of California shall have the personal jurisdiction over
them, and each of them, notwithstanding the fact that they may be citizens of
other states or countries. In this regard the parties agree that Los Angeles
County is a convenient forum.

 

Section 27. Confidentiality. Except as may be required by law or NASD or stock
exchange rules, each party shall keep confidential all terms and conditions
contained herein. Paramount and DWA acknowledge that they will, during the Term
hereof, have access to, and acquire knowledge from, materials, data and other
information which is not accessible or known to the general public
(“Confidential Information”). Except as required by law or NASD or stock
exchange rules, or as may be required for the preparation of tax returns or
other government or legally required documents, or as reasonable necessary to
employees, agents, lawyers, accountants, auditors, bankers, consultants,
representative or investors of Paramount or DWA or their Affiliates for a bona
fide business purpose (who shall be similarly bound by these confidentiality
provisions), neither the Confidential Information nor any knowledge acquired by
Paramount or DWA, as the case may be, from such Confidential Information or
otherwise through its engagement hereunder shall be used, publicized or divulged
by the other to any other

 

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Person without the prior written consent of the applicable party obtained in
advance and in each instance. Nothing herein shall prevent a party, or any
employees, agents, lawyers, accountants, auditors, bankers, consultants,
representatives or investors of such party or its Affiliates (the “Receiving
Party”) from using, disclosing, or authorizing the disclosure of any information
it receives in the course of performance of the Agreement which:

 

a. was known to the Receiving Party prior to its disclosure by the other party;

 

b. is or becomes publicly available without default hereunder by the Receiving
Party;

 

c. is lawfully acquired by the Receiving Party from a source which is not an
agent or representative of the Receiving Party and is not under any obligation
to the other party regarding disclosure of such information;

 

d. is independently developed by the Receiving Party without use of any of the
other party’s confidential information; or

 

e. is disclosed by the applicable party hereto to unaffiliated third parties
without confidential undertakings.

 

For the avoidance of doubt, Confidential Information as defined in this
Section 27. shall not include any Information that the applicable party is
obligated to make available to any third party(ies) in the course of fulfilling
its obligations under this Agreement (e.g., Contingent Compensation statements).

 

Section 28. Notice of Representatives. DWA will give Paramount reasonable notice
of DWA’s appropriate contact person(s). Paramount will give DWA reasonable
notice of Paramount’s appropriate contact person(s).

 

Section 29. Paragraph Headings. Paragraph headings and titles are solely for
convenience of reference and are not a part of this Agreement, nor are they
intended to aid or govern the interpretation of this Agreement.

 

Section 30. Disclosure, Compliance and Reporting Obligations.

 

a. No later than 45 days after the end of each 12-month period specified in
Section 31.b. below (the “Test Period”), Paramount shall cause its independent
public accountants (the “Paramount Auditors”), which must be a Qualifying
Auditing Firm, to provide to DWA a SAS 70 Type II Report with respect to the
internal controls of Paramount and each Paramount Affiliate that relate to the
services required to be provided to DWA under this Agreement. The specified
control objectives of DWA for each Test Period to be addressed in the SAS 70
Type II Report for such Test Period shall be designated by DWA. Each SAS 70 Type
II Report delivered by the Paramount Auditors hereunder shall (i) state that the
internal controls of Paramount and the applicable Paramount Affiliates were
suitably designed to achieve the specified control objectives of DWA referenced
therein, (ii) state that such internal controls of Paramount and the applicable
Paramount Affiliates had been placed in operation as of the dates

 

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specified therein, (iii) state that such internal controls of Paramount and the
applicable Paramount Affiliates were operating with sufficient effectiveness to
provide reasonable assurance that the related control objectives were achieved
during the period to which such SAS 70 Type II Report relates and contain such
other statements and opinions as are reasonably necessary under the standards of
the Public Company Accounting Oversight Board (United States) (“PCAOB”) and the
Exchange Act for (A) the independent public accountants of DWA (the “DWA
Auditors”) to conduct an audit of the consolidated financial statements of DWA
for such fiscal year and (B) for the management of DWA to assess (and for the
DWA Auditors to attest to and report on such assessment) the effectiveness of
the internal control over financial reporting of DWA in accordance with
Section 404 of SOX (or any successor provision). Further, to the extent that,
with respect to the most recent Test Period, Paramount or any Paramount
Affiliate becomes aware of any significant deficiency or material weakness after
the last date of such Test Period and before the last day of the fiscal year of
Paramount in which such Test Period occurs, Paramount or the applicable
Paramount Affiliate, as applicable, will communicate such deficiency or weakness
to DWA within 2 business days after becoming aware of such significant
deficiency or material weakness. To the extent that the effectiveness of the
internal controls of Paramount or any Paramount Affiliate that are the subject
of a SAS 70 Type II Report are dependent upon the internal controls of a
provider of services under any DWA-approved Fulfillment Servicing Agreement or
DWA-approved Third Party Service Agreement, Paramount shall cause such service
provider to comply with the provisions of this Section 30.a.

 

b. Each SAS 70 Type II Report delivered pursuant to this Section 30 shall cover
a consecutive period of 12 calendar months ending on September 30 of each fiscal
year.

 

c. Without limiting the generality of Section 4 or Section 8 of this Agreement
and any Annexes related thereto, Paramount shall, and shall cause its Paramount
Affiliates and the Paramount Auditors to, provide DWA with such access as is
reasonably requested by DWA to such Records and other documents (including to
examine, audit, take excerpts from and make photocopies thereof), information
and personnel to perform procedures with respect to any SAS 70 Type II Report
delivered pursuant to this Section 30 and the internal controls to which such
report relates as may be necessary under the standards of the Public Company
Accounting Oversight Board (United States) and Section 404 of SOX (or any
successor provision), including for purposes of designating or modifying the
specified control objectives of DWA to be addressed in any SAS 70 Type II
Report. To the extent that the effectiveness of the internal controls of
Paramount or any Paramount Affiliate that are the subject of a SAS 70 Type II
Report are dependent upon the internal controls of a provider of services under
any DWA-approved Fulfillment Servicing Agreement or DWA-approved Third Party
Service Agreement, Paramount shall cause such service provider to comply with
the provisions of this Section 30.c.

 

d. For purposes of this Section 30:

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“internal control over financial reporting” shall have the meaning ascribed to
such term in Rule 13a-15(f) of the Exchange Act, it being understood that such
term shall also include internal controls that relate to computer and
application controls, entity level controls and business process controls.

 

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“Qualifying Auditing Firm” means a nationally recognized accounting firm
recognized by the Public Accounting Oversight Board.

 

“SAS 70” shall mean AU Section 314, Service Organizations, as adopted by the
PCAOB in its Rule 3200T, as such statement may be amended, supplemented,
modified or replaced from time to time.

 

“SAS 70 Type II Report” shall mean a “report on the controls placed in operation
and tests of operating effectiveness” (as such term is defined in SAS 70) that
is prepared in accordance with the requirements of SAS 70.

 

“SOX” shall mean the Sarbanes-Oxley Act of 2002, as amended.

 

“specified control objectives” shall have the meaning ascribed to such term in
SAS 70.

 

e. All out of pocket costs and expenses relating to the preparation of any SAS
70 Type II Report required pursuant to this Section 30 shall be at the expense
of DWA. Prior to the commencement of each Test Period, Paramount will provide
DWA with a cost estimate for the preparation and delivery of the SAS 70 Type II
Report for the applicable Test Period, and Paramount shall promptly notify DWA
during the applicable Test Period to the extent such cost estimate changes for
any reason. DWA shall have the opportunity to meet with Paramount and Paramount
Auditors prior to, and during, each applicable Test Period to discuss potential
cost-saving measures that can be implemented to reduce the amounts charged to
DWA for the preparation of the SAS 70 Type II Report. DWA shall always have the
right to elect not to require the preparation and delivery of a SAS 70 Type II
Report for any given Test Period. All direct and indirect costs of Paramount,
the Paramount Affiliates and the Paramount Auditors to comply with Paramount’s
obligations to cooperate with, provide access to and otherwise assist DWA
pursuant to this Section 30 (including the time spent by employees or Paramount
and Paramount Affiliates) shall be borne by Paramount.

 

f. If (i) Paramount Auditor fails to deliver the SAS 70 Type II Report with
respect to any fiscal year that complies in all respects with the requirements
of, and is delivered within the time periods specified in, this Section 30, or
(ii) Paramount fails to comply in all respects with the provisions of
Section 30.c., either such failure shall constitute a material default by
Paramount and, notwithstanding anything to the contrary contained in this
Agreement, DWA shall have the automatic and immediate right to terminate this
Agreement in accordance with Section 11.2.a.(i) above.

 

Section 31. Notices. All notices hereunder shall be in writing and shall be
served by private delivery services, and shall be deemed given on the date
delivered to the following addresses (or such other addresses as such party may
hereafter designate in writing):

 

(i) If to DWA:

 

DreamWorks Animation Home Entertainment, L.L.C.

1000 Flower Street

Glendale, California 91201

Attention: General Counsel

 

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(ii) If to Paramount:

 

Paramount Home Entertainment, Inc.

5555 Melrose Avenue

Los Angeles, California 90038

Attention: President, Worldwide Home Entertainment

cc: Executive Vice President, Business and Legal Affairs,

Worldwide Pay-TV and Home Entertainment

 

Section 32. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which, taken
together, shall constitute one and the same instrument, which may be
sufficiently evidenced by one counterpart.

 

Section 33. Paramount Affiliates. To the extent any rights granted by DWA
hereunder are exercised by a Paramount Affiliate, the following shall apply in
each instance:

 

33.1 Paramount shall be the representative on behalf of any such Paramount
Affiliate vis-à-vis DWA. Without limiting the generality of the foregoing,
Paramount shall be responsible, on behalf of its Paramount Affiliates, for the
communication and coordination of all matters regarding to the DWA Pictures.

 

33.2 Paramount Affiliates shall, mutatis mutandis, be bound by and subject to
all the same obligations, restrictions, limitations and remedies that apply to
Paramount pursuant to this Agreement. Paramount shall be fully responsible for
the performance by its Paramount Affiliates of all such obligations and for the
observance of all limitations on the rights granted by DWA under this Agreement.
In the event any Paramount Affiliate fails to perform any such obligation or
observe any such limitation, DWA shall have the right to proceed directly
against Paramount for any remedy available without any requirement to seek any
such remedy from the applicable Paramount Affiliate.

 

33.3 For the avoidance of doubt and without limiting the generality of this
Section 33, any act or omission by a Paramount Affiliate that would have
constituted a breach of this Agreement had Paramount so acted or failed to act,
shall be considered a breach of this Agreement by Paramount. Paramount shall
include in its agreements with its Paramount Affiliates specific provisions as
are necessary and appropriate to ensure that DWA is a third party beneficiary
thereunder with the right to enforce any provision thereof directly against any
such Paramount Affiliate, including by seeking injunctive or other relief before
any competent court or authority. DWA’s exercise (or lack thereof) of any of its
direct rights against a Paramount Affiliate shall in no way limit DWA’s rights
or remedies against Paramount under this Agreement in respect of any actions or
omissions of any Paramount Affiliate.

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of the date first written above.

 

Paramount Home Entertainment, Inc. By  

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Its  

 

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DreamWorks Animation Home Entertainment, L.L.C. By  

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Its    

 

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