exv10w37



 





EXHIBIT 10.37




EXECUTION COPY




MASTER DISTRIBUTION AGREEMENT



This MASTER DISTRIBUTION AGREEMENT (“Agreement”) is entered into as of May 25, 2007 by and
between Lions Gate Films Inc., a Delaware corporation (“Distributor” or “LGF”), and
LG Film Finance I, LLC, a Delaware limited liability company (“FilmCo”). Capitalized terms
not otherwise defined herein shall have the meanings set forth in Schedule A hereto, the
terms of which are hereby incorporated by reference.




RECITALS




     WHEREAS, FilmCo and LGF have entered into that certain Master Covered Picture Purchase
Agreement, dated as of even date herewith (the “Master Picture Purchase Agreement”),
pursuant to which FilmCo has agreed to acquire Rights in and to Covered Pictures from LGF on the
terms set forth therein;



     WHEREAS, Distributor desires to be the exclusive distributor of the Distribution Rights to
the Funded Pictures on the terms and conditions set forth herein, and FilmCo is willing to grant
the Distribution Rights to Distributor in consideration of Distributor’s undertaking the
obligations set forth herein;



     NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this
Agreement and for other good and valuable consideration (the receipt and sufficiency of which is
hereby acknowledged by each of the parties hereto), the parties hereby agree as follows:



1. DEFINITIONS AND ACCOUNTING TERMS.




     1.1 Defined Terms. As used in this Agreement the following terms shall have the
respective meanings set forth in this Section 1.1.



     “Additional Delivery Items” has the meaning set forth in Section 8.1 hereof.



     “Collection Accounts” has the meaning set forth in the Intercreditor Agreement.



     “Distribution Records” has the meaning set forth in Section 7.5 hereof.



     “FilmCo Event of Default” has the meaning set forth in Section 11.2 hereof.



     “FilmCo Obligations” has the meaning set forth in Section 6.2 hereof.



     “FundCo Estimated Share” has the meaning set forth in Section 6.3.1 hereof.



     “Gross Receipts” has the meaning set forth in Schedule C attached hereto.



     “LGF Master Collection Account” means the deposit account (account number 2330720026)
(ABA #071000013) in the name of the Distributor and maintained by the Distributor at JPMorgan Chase
Bank, N.A.



 









 





     “Non-Discriminatory Basis” has the meaning set forth in Section 10.3.3 hereof.



     “Physical Properties” has the meaning set forth in Schedule C, Section
4.B.



     “Preliminary Allocation Period” has the meaning set forth in Section 6.3.1
hereof.



     “Preliminary Estimated Allocation Statement” has the meaning set forth in Section
6.3.1 hereof.



     “Required Delivery Items” has the meaning set forth in Section 8.1 hereof.



     “Settlement Report” has the meaning set forth in Section 7.2 hereof.



     “Short Form License Agreement” has the meaning set forth in Section 10.2
hereof.



     “Term” means, with respect to a Funded Picture, the term of the Rights acquired by
FilmCo with respect to such Funded Picture (or, if earlier, the date on which FilmCo resells such
Funded Picture to LGF under the Master Picture Purchase Agreement).



     “Third Party Payments” has the meaning set forth in Section 6.1 hereof.



     “True-Up Statement” has the meaning set forth in Section 7.2 hereof.



2. GRANT OF RIGHTS.




     2.1 FilmCo hereby grants and licenses to Distributor, as of the date on which FilmCo acquires
a Funded Picture, the sole and exclusive, irrevocable (except to the extent expressly set forth
herein) right, under copyright and otherwise, to advertise, publicize, promote, market, access
Physical Properties, distribute, subdistribute, license and sublicense, and otherwise use and/or
Exploit all of the Distribution Rights owned or controlled by FilmCo with respect to such Funded
Picture in all media now or hereafter known or devised by any manner or method now known or
hereafter devised in the Distribution Territory for such Funded Picture, during the Term. FilmCo
shall not exercise any of the rights granted to Distributor prior to a Distribution Termination
Event and shall not release or disclose any information, advertising or publicity relating to any
Funded Picture in the Distribution Territory without Distributor’s prior written approval.



     2.2 Distributor and FilmCo acknowledge and agree that this Agreement evidences the grant of a
license of the Distribution Rights to each Funded Picture acquired by FilmCo under the Master
Picture Purchase Agreement. If the license granted under this Agreement is characterized as
anything other than a license of the Distribution Rights from FilmCo to Distributor, and so long as
Distributor has any Distribution Rights granted hereunder, Distributor will nevertheless make all
payments required under this Agreement and will otherwise comply with its obligations hereunder, it
being agreed that the making of such payments and the compliance with such obligations by
Distributor are essential elements of the transactions evidenced by this Agreement and the other
Transaction Documents. The parties acknowledge and agree that the Distribution Rights and license
granted under this



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Agreement by FilmCo to Distributor do not and shall not be deemed to be a sale by FilmCo of
the Funded Pictures or of the Distribution Rights thereto.



3. EXPLOITATION OF DISTRIBUTION RIGHTS.




     3.1 Subject to the other terms hereof, including Section 10.3.3., Distributor shall
have the sole right, in its sole discretion to make all decisions concerning the Exploitation of
the Rights in each Funded Picture, including the right to release and distribute (and/or refrain
from releasing and distributing) each Funded Picture in any manner and media, and through such
releasing or distribution entity or entities (and/or to engage such subdistributors or licensees)
as it determines in its sole discretion. Without limiting the foregoing (but subject in each
instance to any restrictions on the Distribution Rights as acquired by FilmCo under the Master
Picture Purchase Agreement), Distributor may, without limitation:



          3.1.1 at its sole discretion, prepare closed-captioned versions of the Funded Pictures and use
excerpts, clips and trailers thereof for advertising and promotional purposes;




          3.1.2 incorporate onto Videograms of a Funded Picture (A) preceding and/or following the main
and end titles of such Funded Picture, Distributor’s or any of Distributor’s, sublicensees’,
affiliates’ and affiliated licensees’ names, trademarks, logos, trailers, clips, (B) excerpts of
other Motion Pictures, (C) Distributor’s standard “opening” and “closing” sequences, including an
introductory visual “logo” with or without music, (D) any legal notices or other information which
Distributor determines is necessary, (E) paid advertising provided monies received from such paid
advertising shall be included in Gross Receipts, (F) any so-called “making of” or “behind the
scenes” documentary footage or programming, including, without limitation, any part of the
electronic press kits, featurettes, interviews, television specials and publicity clips prepared in
connection with such Funded Picture, and (G) such other materials or credits as it, in its sole
discretion, deems appropriate;




          3.1.3 incorporate trailers, clips or excerpts of a Funded Picture on Videograms of other
Motion Pictures and may incorporate trailers, clips or excerpts of other motion pictures on
Videograms of a Funded Picture;




          3.1.4 have the right, at its sole discretion, to make any and all changes and modifications,
edits, or additions in or to a Funded Picture (including its title) which Distributor shall
determine to be necessary or desirable including by reason of censorship, registration (i.e.
ratings) or other requirements of governmental or other authorities or Law, or platform
requirements, all at FilmCo’s sole cost and expense as part of the Distribution Costs and Expenses
of such Funded Picture. FilmCo agrees to cooperate with Distributor as required for Distributor to
clear customs, registrations and censorship or similar authorities and any fees associated
therewith shall be part of the Distribution Costs and Expenses of such Funded Picture. Distributor
shall have the right to select, designate or change the title of a Funded Picture in its discretion
and to release or not release such Funded Picture in any or all parts of the Distribution Territory
for such Funded Picture under such title or titles as Distributor may designate;




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          3.1.5 include Distributor’s (or one or more of Distributor’s or any of Distributor’s
sublicensees’, affiliates’ and affiliated licensees’ names) name, logo, trademark or emblem in such
manner, position, form and substance as Distributor may elect on the prints of the Funded Pictures,
and on all advertising and publicity materials for the Funded Pictures (including any trailers of
the Funded Pictures), together with such words as Distributor may elect indicating that such Funded
Pictures are being distributed by Distributor or any of Distributor’s sublicensees’, Affiliates’
and affiliated licensees’ names, and




          3.1.6 allow any of the foregoing rights to be exercised by or grant any of the foregoing
rights to a sublicensee or an affiliate.




     3.2 Release Obligations.



          3.2.1. Notwithstanding Section 3.1, Distributor shall cause the Theatrical Exhibition
in the United States of each Funded Picture, and, provided, further, that:




          (a) of the first twenty-three (23) Funded Pictures Delivered to Distributor, a minimum of
***** (to be determined by Distributor in its sole discretion) shall be Theatrically
Exhibited in the United States on at least ***** screens, provided that, in the event
that less than twenty-three (23) Funded Pictures are Delivered to Distributor during the
Contribution Period as a result of a FundCo Default or a Permitted FundCo Non-Contribution, the
thirteen (13) Funded Picture requirement shall be adjusted downward pro-rata based on the total
number of Funded Pictures actually Delivered to Distributor during the Contribution Period; and




          (b) Distributor shall, on a picture-by-picture basis, spend at least ***** Dollars
($*****) in P&A Costs on the Theatrical Exhibition in the United States of a minimum of
***** of the first twenty-three (23) Funded Pictures the Distribution Rights for which are
granted to Distributor hereunder, provided that, in the event that less than twenty-three (23)
Funded Pictures are Delivered to Distributor during the Contribution Period as a result of a FundCo
Default or a Permitted FundCo Non-Contribution, the ***** Funded Picture requirement shall
be adjusted downward pro-rata based on the total number of Funded Pictures actually Delivered to
Distributor during the Contribution Period.



The obligations described in this Section 3.2.1 are the “Release Obligations.”




          3.2.2 With respect to each Funded Picture, Distributor shall notify FilmCo if the Initial
Theatrical Release Date of such Funded Picture does not occur within ***** days of the
Initial Investment Date for such Funded Picture.




     3.3 Services Included Without Additional Cost. Distributor shall provide to FilmCo,
directly or through its Affiliates, distribution services and facilities as it and its Affiliates
historically have provided in the distribution of Motion Pictures acquired or produced by LGF or
its Affiliates, and agrees that it shall utilize the distribution services and facilities of LGF
and/or its Affiliates (rather than Third Party services and facilities) to the same extent it would
generally utilize such services and facilities for other Motion Pictures of



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LGF or its Affiliates. FilmCo acknowledges and agrees that such distribution services and
facilities provided by Distributor and its Affiliates to FilmCo shall vary from Funded Picture to
Funded Picture. Distributor shall not charge Purchaser any overhead of LGF or an Affiliate or add
to any invoice any overhead of LGF or an Affiliate.



     3.4 Copyright Protections and Notice. Distributor shall take all actions reasonably
sufficient to secure copyright protection for each Funded Picture throughout the applicable
Distribution Territory for such Funded Picture in a manner consistent with its past practice for
its own Motion Pictures. Distributor shall register for copyright the Motion Picture in the United
States Copyright Office if not previously registered. All such costs and expenses shall be a
Distribution Cost and Expense. Distributor shall include in the Funded Pictures in the forms and
media distributed by it a copyright notice in conformity with the Laws of the United States and the
Universal Copyright Convention designating FilmCo as copyright proprietor.



4. DISTRIBUTION FEE. 




     4.1 In connection with Distributor’s exploitation of the Distribution Rights, Distributor
shall retain a distribution fee, as determined pursuant to this Section 4.



     4.2 All Forms of Distribution. Subject to Section 4.3, Distributor shall be
entitled to retain as its base distribution fee ***** of Gross Receipts (the
“Base Distribution Fee”).



     4.3 Adjustment to the Distribution Fee. If LGE fails to exercise its Repurchase
Option within two (2) years after the date on which such Repurchase Option first becomes
exercisable under the terms and conditions of the FilmCo Operating Agreement, the Base Distribution
Fee shall be adjusted for all Gross Receipts reported in Settlement Reports for each Accounting
Period commencing on or after the eighth (8th) anniversary of the Closing Date, to ***** of such Gross Receipts (the “Reduced Distribution Fee”). The Base
Distribution Fee or the Reduced Distribution Fee, as applicable, may be referred to herein as the
“Distribution Fee.”



5. DISTRIBUTION COSTS AND EXPENSES. 




     5.1 All Distribution Costs and Expenses paid or incurred in connection with Distributor’s
exercise and Exploitation of the Distribution Rights for each Funded Picture in the applicable
Distribution Territory shall be advanced by Distributor in accordance with the terms of this
Agreement and recouped as provided in Section 6 or Section 7 below, or paid as part
of the Initial Purchase Price pursuant to the terms of the Master Picture Purchase Agreement.



6. ALLOCATION OF GROSS RECEIPTS.




     6.1 Third Party Payments. All Third Party Participations (other than advances
included in Direct Costs), Residuals, music synchronization, performance and other mechanical fees,
and any other license fees (including, without limitation, all literary, all EU



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copyright directives, artistic, musical, technological and/or intellectual property rights
fees) in connection with each Funded Picture (collectively, “Third Party Payments”) shall
be advanced by Distributor on behalf of FilmCo and recouped by Distributor as a Distribution Cost
and Expense. Distributor shall be entitled to fully recoup all Third Party Payments.



     6.2 Paymaster Services. So long as Distributor has Distribution Rights with respect
to a Funded Picture, then with respect to each such Funded Picture during the Term, Distributor
agrees to (i) provide to FilmCo paymaster services in connection with the payment of Third Party
Payments for such Funded Picture with regard to its Distribution Rights and (ii) advance on behalf
of FilmCo the Third Party Payments and all other Distribution Costs and Expenses (the “FilmCo
Obligations”). Distributor shall prepare all statements with respect to Third Party
Participations in accordance with the applicable participant’s agreement, provide such statements
to participants, and manage any participant audits. Distributor shall be entitled to recoup amounts
advanced in respect of FilmCo Obligations as set forth in this Agreement.



     6.3 Allocation of Gross Receipts.



          6.3.1 Distributor shall collect and account for all Gross Receipts on a Funded
Picture-by-Funded Picture basis, and deposit all such Gross Receipts, when received, in the LGF
Master Collection Account or the Collection Accounts. On Thursday of each week (if a Business Day
and if not then on the next succeeding Business Day), Distributor shall deliver to FilmCo a
preliminary allocation statement (each, a “Preliminary Estimated Allocation Statement”)
which shall set forth Distributor’s estimated good faith allocation of the FundCo Estimated Share
of Gross Receipts for the seven day period ending on such day (the “Preliminary Allocation
Period”) held in the LGF Master Collection Account or the Collection Accounts, on a Funded
Picture-by-Funded Picture basis. “FundCo Estimated Share” shall mean an amount equal to
the estimated Adjusted Receipts for a Funded Picture for the applicable Preliminary Allocation
Period multiplied by a percentage equal to FundCo’s Allocable Share in such estimated Adjusted
Receipts calculated in accordance with Section 6.3.2. On the due date for each Preliminary
Estimated Allocation Statement, on a Funded Picture-by-Funded Picture Basis, Distributor shall pay
over to the FilmCo Separate Account an amount equal to the FundCo Estimated Share held in the LGF
Master Collection Account or the Collection Accounts. Interest earned by FilmCo on all amounts
paid over to the FilmCo Separate Account pursuant to a Preliminary Estimated Allocation Statement
for a Funded Picture from the date paid over to the due date of the next Settlement Report for such
Funded Picture shall be paid over by FilmCo to Distributor on each Settlement Date. FilmCo
acknowledges that the Preliminary Estimated Allocation Statement is an estimate, that actual
amounts may vary from such statement, that such Preliminary Estimated Allocation Statement shall
not be binding for any purpose, and that Distributor shall have no liability for such estimates.




          6.3.2 On or before each Settlement Date for an Accounting Period during the Contribution
Period, LGF shall, on a Funded Picture by Funded Picture basis, deduct and retain from Gross
Receipts collected by (or credited to) it in the applicable Accounting Period the following
amounts, in the following order (the “Distributor Waterfall”):




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	 	(i)	 	First, amounts due to Distributor for payment
of its Distribution Fee with respect to Gross Receipts received with
respect to such Funded Picture in the applicable Accounting Period as set
forth in the applicable Settlement Report; and
	 
	 	(ii)	 	Second, amounts due to Distributor as
reimbursement of or payment for Distribution Costs and Expenses with
respect to such Funded Picture in such Accounting Period or a prior
Accounting Period or payable by Distributor within thirty (30) days from
the end of the most recent Accounting Period to the extent not previously
recouped by Distributor or paid directly by FilmCo, all as set forth in
the applicable Settlement Report.




Amounts, if any, remaining from the Gross Receipts after the deductions described in the
Distributor’s Waterfall are “Adjusted Receipts,” and the amount thereof shall be set forth
in the applicable Settlement Report. During the Contribution Period, all Adjusted Receipts shall
be paid by Distributor to the FilmCo Separate Account on the Settlement Date.



After the Contribution Period, LGF shall, for all Funded Pictures, deduct and retain from Gross
Receipts in the applicable Accounting Period the following amounts in the following order (the
“Post-Contribution Period Waterfall”):





	 	(iii)	 	First, amounts due to Distributor for
payment of its Distribution Fee with respect to Gross Receipts received
with respect to all Funded Pictures in the applicable Accounting Period or
a prior Accounting Period as set forth in the applicable Settlement
Reports and not previously repaid or recouped;
	 
	 	(iv)	 	Second, amounts due to Distributor as
reimbursement of or payment for Distribution Costs and Expenses with
respect to all Funded Pictures in such Accounting Period or a prior
Accounting Period or payable by Distributor within thirty (30) days from
the end of the most recent Accounting Period to the extent not previously
recouped by Distributor or paid directly by FilmCo, all as set forth in
the applicable Settlement Reports; and
	 
	 	(v)	 	Third, amounts due to Distributor as the
result of any overpayment as set forth in Section 7.2 of this
Agreement.




Amounts, if any, remaining from the Adjusted Receipts after the deductions described in the
Post-Contribution Period Waterfall and all True-Up Credits payable to FilmCo after the Contribution
Period shall be paid by Distributor to the FilmCo Separate Account on the Settlement Date.




     6.4 Calculation of Estimated P&R Liability. Each Settlement Report for a Funded
Picture shall be accompanied by an Ultimates Statement and a Cumulative Aggregate Ultimates
Statement. If the cumulative aggregate Estimated Net Receipts for all Funded Pictures as of such
Settlement Date shown on the Cumulative Aggregate Ultimates Statement



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is a negative amount (a “P&R Reserve Triggering Event”), FilmCo shall cause to be paid
over to the P&R Reserve Account an amount for the applicable Accounting Period calculated as set
forth in Section 8.6.5 of the FilmCo Operating Agreement.



     6.5 Calculation of the FilmCo Distribution Costs Reserve Amount. Each Settlement
Report for a Funded Picture Delivered after the last day of the Contribution Period shall be
accompanied by an Ultimates Statement and a Cumulative Aggregate Ultimates Statement. If the
cumulative aggregate Estimated Net Receipts for all Funded Pictures as of such post Contribution
Period Settlement Date shown on the Cumulative Aggregate Ultimates Statement is a negative amount
(a “DC Reserve Triggering Event”), FilmCo shall cause to be paid over to its FilmCo
Distribution Costs Reserve Account an amount for the applicable Accounting Period calculated as set
forth in Section 8.6.6 of the FilmCo Operating Agreement.



7. ACCOUNTING / SETTLEMENT REPORTS / TRUE-UP STATEMENTS / AUDIT.




     7.1 Accounting Period. Distributor shall account to FilmCo with respect to each
Funded Picture distributed by Distributor hereunder for each Accounting Period. Each party hereto
acknowledges and agrees that Distributor follows a calendar year for accounting purposes in which
each month is either four or five weeks in duration, which months always end on a Saturday, and
that such accounting period end dates do not necessarily (and in most cases will not) coincide with
calendar month-end dates or calendar quarter-end dates.



     7.2 Settlement Reports; True-Up Statements. On or before each Settlement Date,
Distributor shall render to FilmCo (with a courtesy copy to FundCo) a settlement report for each
Funded Picture in substantially the form of Exhibit 7.2(a) attached hereto (each, a
“Settlement Report”) and, for each Settlement Report due prior to the last day of the
Contribution Period, a true-up statement in substantially the form of Exhibit 7.2(b) hereto
(each, a “True-Up Statement”). Each Settlement Report for each Accounting Period shall be
delivered by Distributor to FilmCo (with a courtesy copy to FundCo) not later than each Settlement
Date together with any sums being shown due to FilmCo, which Distributor shall pay to the FilmCo
Separate Account by wire transfer of immediately available funds. Settlement Reports rendered by
Distributor may be changed from time to time to give effect to year-end adjustments made by
Distributor’s accounting department or public accountants, to items overlooked, to correct errors,
or to reflect any indebtedness which may become uncollectible. Should Distributor make any
overpayment to FilmCo hereunder for any reason, Distributor shall have the right to deduct and
retain for its own account an amount equal to any such overpayment from any sums that may
thereafter become due or payable by Distributor to FilmCo or for FilmCo’s account or if there are
insufficient amounts to repay such overpayment as reflected in the next succeeding Settlement
Report then (a) for amounts required to be repaid during the Contribution Period, FilmCo shall make
a True-Up Payment for such amounts, and (b) for amounts required to be repaid after the
Contribution Period, Distributor shall recoup such amounts as set forth in the Post-Contribution
Period Waterfall. Should Distributor make any underpayment to FilmCo hereunder for any reason,
Distributor shall on the next succeeding Settlement Date pay to FilmCo an amount equal to any such
underpayment.



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     7.3 True-Up Payments and Credits. Within five (5) Business Days following the
delivery to FilmCo of a Settlement Report and True-Up Statement due during the Contribution Period,
(i) FilmCo shall pay or cause to be paid to LGF under the Master Picture Purchase Agreement with
respect to Direct Costs and to LGF as Distributor with respect to Direct Costs, and Distribution
Costs and Expenses incurred by it (in each case, without duplication and not otherwise recouped or
repaid) any and all True-Up Payments due to Distributor, as reflected on the applicable Settlement
Report and True-Up Statement, and (ii) LGF (as to Direct Costs paid to it) or Distributor, as
applicable shall pay to FilmCo any and all True-Up Credits due to FilmCo as reflected on the
applicable Settlement Report and True-Up Statement. No True-Up Payments shall be required from
FilmCo for any Settlement Report due after the last day of the Contribution Period.



     7.4 Withholdings. All amounts payable to FilmCo under this Agreement shall be subject
to all Laws and regulations now or hereafter in existence requiring the deduction or withholding of
payments for income or other taxes payable by or assessable against FilmCo arising out of or in
accordance with this Agreement. Distributor shall have the right to make such deductions and
withholdings, and the payment thereof to the governmental agency concerned in connection with
Distributor’s interpretation in good faith of such Laws and regulations shall constitute payment
hereunder to FilmCo. In the event FilmCo disputes the imposition or amount of any tax paid by
Distributor on its behalf, FilmCo shall make and prosecute any and all claims that it may have (and
which it desires to make and prosecute) with respect to the same directly with the governmental
agency having jurisdiction in the premises. FilmCo shall deliver to Distributor within ten (10)
days following the date of this Agreement and at such other times as may be necessary in the
determination of Distributor, original copies of Internal Revenue Service Form W-9, completed and
executed by FilmCo, and such other documentation required under the Internal Revenue Code and
reasonably requested by Distributor to establish that FilmCo is not subject to deduction or
withholding of United States federal income tax with respect to any payments or distributions made
hereunder. All amounts payable to Distributor under this Agreement shall be subject to all Laws
and regulations now or hereafter in existence requiring the deduction or withholding of payments
for income or other taxes payable by or assessable against Distributor arising out of or in
connection with this Agreement. Distributor shall deliver to FilmCo within ten (10) days following
the date of this Agreement and at such other times as may be necessary in the determination of
FilmCo, original copies of Internal Revenue Service Form W-9, completed and executed by
Distributor, and such other documentation required under the Internal Revenue Code and reasonably
requested by FilmCo to establish that Distributor is not subject to deduction or withholding of
United States federal income tax with respect to any payments or distributions made to Distributor
hereunder. Other than foreign withholding taxes, no income or other taxes measured by income and
payable by or assessable against Distributor or any of its Affiliates arising out of or in
connection with this Agreement shall be withheld by Distributor from Gross Receipts, and no such
taxes are recoupable hereunder, whether as Distribution Costs and Expenses or otherwise. Neither
Distributor, with respect to FilmCo, nor FilmCo, with respect to Distributor, shall have nor does
it agree to have any liability for the tax obligations of the other, provided Distributor shall pay
over all amounts withheld by it pursuant to this Section 7.4 to the applicable taxing
authority.



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     7.5 Accounting Records. Books of account in respect of the distribution of each
Funded Picture (which books of account are hereinafter referred to collectively as the
“Distribution Records”), shall be kept at Distributor’s offices in the United States and
for each of Distributor’s Affiliates, in such office where generated or customarily kept, for as
long as such Distribution Records are customarily retained by such office (provided,
however, that Distributor shall not be required to make the books of accounts of any Third
Party subdistributors of a Motion Picture, to which Distributor does not have access or which it
does not control, available hereunder) and in the form customarily maintained by Distributor or
such Affiliates. Distributor shall use its commercially reasonable efforts to require its
sublicensees and subdistributors to make their respective books of accounts available to
Distributor for its audit and to FilmCo’s auditors for any audit conducted by FilmCo (or by FundCo
as permitted under Section 7.6). Distributor shall provide to FilmCo and to FundCo copies
of any audits performed by it and related to any Funded Picture (including related to Gross
Receipts or Distribution Costs and Expenses) promptly after its receipt thereof, provided FilmCo
and FundCo shall agree to the same confidentiality restrictions, if any, as are applicable to
Distributor with respect thereto.



     7.6 Audits. FilmCo shall have the right, at its own expense, but not more than once
during each twelve consecutive month period to audit the Distribution Records in order to verify
any information related to Gross Receipts or Distribution Costs and Expenses or any payments made
to or from FilmCo hereunder. Distributor shall cooperate with such audit, and shall endeavor to
minimize the cost thereof by causing Distribution Records to be made available at one office
located in the United States, if reasonable and practicable. Any such audit shall be conducted
only during reasonable business hours and in such manner as not to interfere with Distributor’s
normal business activities. FilmCo shall use all reasonable efforts to cause each such audit to
not exceed thirty (30) consecutive days. Any such audits shall be conducted only by a Pre-Approved
Auditor (compensated on a non-percentage of recovery basis). Distributor acknowledges and agrees
that if FilmCo fails to conduct an annual audit of the Distribution Records, FundCo shall be
entitled to exercise FilmCo’s rights under this Section 7.6. FilmCo shall not have the
right to examine or inquire into any matters or items which are contained in any such Settlement
Report after the expiration of thirty-six (36) months from and after the date of mailing of such
Settlement Report, and such Settlement Report shall be final and conclusive upon FilmCo upon the
expiration of such thirty-six (36) month period notwithstanding that the matters or items embraced
by or contained therein may later be contained or referred to in a cumulative statement pertaining
to more than one Accounting Period, provided that if FilmCo notifies Distributor within thirty-six
(36) months that it intends to audit such Settlement Report, FilmCo shall be entitled to conduct an
audit of such Settlement Report provided such audit commences within thirty (30) days of the date
on which a Pre-Approved Auditor is engaged by FilmCo to audit such Settlement Report.



     7.7 Interest on Underpayments. To the extent that the results of an audit of the
Distribution Records reveal that additional Gross Receipts are due FilmCo, or that FilmCo made an
overpayment of any amount, Distributor agrees to pay such sums to FilmCo together with interest
thereon at the Applicable Rate accruing from the date such amount should have been paid to (or was
paid by) FilmCo, and to the extent that the results of such



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audit reveal that Distributor was underpaid by any amount due to it hereunder, FilmCo agrees
to pay such sums to Distributor with interest thereon at the Applicable Rate accruing from the date
such amount should have been paid to Distributor.



     7.8 Statements and Payments. All statements and payments contemplated by this
Agreement shall be sent to the respective parties’ addresses as set forth in Section 16
(Notice).



8. DELIVERY.




     8.1 Definition and Procedures. The “Delivery” of a Funded Picture shall mean delivery
to Distributor of the items (“Required Delivery Items”) delivered by LGF under the Master
Picture Purchase Agreement to FilmCo in connection with such Funded Picture. LGF shall be deemed
to have under the Master Picture Purchase Agreement taken Delivery of all such items on behalf of
FilmCo on the Initial Investment Date for such Funded Picture. FilmCo shall have no liability or
obligation for any failure to effect Delivery to Distributor other than, if and to the extent any
materials required by Distributor for Exploitation of the Distribution Rights for a Funded Picture
(“Additional Delivery Items”) are not delivered to Distributor, Distributor shall have the
right to create such Additional Delivery Items and the costs therefor shall be deemed Distribution
Costs and Expenses. For the avoidance of doubt, FilmCo shall hold legal title to and the ownership
rights in and to all Required Delivery Items and Additional Delivery Items. To the extent any
Required Delivery Items or Additional Delivery Items are held by a laboratory or storage facility,
FilmCo will execute an access letter in favor of Distributor in respect of each Funded Picture,
which access letter shall be substantially in the form of Exhibit 8.1 attached hereto.



9. REPRESENTATIONS AND WARRANTIES.




     9.1 Representations and Warranties by each Party. Each of Distributor and FilmCo
hereby severally represents, warrants and agrees to the other as follows:



          9.1.1 Organization and Related Matters. Such party (i) is duly organized, validly
existing and in good standing under the Laws of the applicable state and/or country in which it is
organized; (ii) has all necessary power and authority to carry on its business as now being
conducted; and (iii) has the necessary power and authority to execute, deliver and perform this
Agreement and any related agreements to which it is a party.




          9.1.2 Authorization. The execution, delivery and performance of this Agreement and
any related agreements by such party has been duly and validly authorized by all necessary action
on the part of such party. This Agreement constitutes the legal, valid and binding obligation of
such party, enforceable against such party in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar Laws and equitable principles relating to or limiting creditors’ rights generally.




          9.1.3 No Conflicts. The execution, delivery and performance of this Agreement and any
related agreements by such party will not violate or constitute a breach or default (whether upon
lapse of time and/or the occurrence of any act or event or




11









 







otherwise) under (i) the charter documents of such party; (ii) any Law to which such party is
subject; or (iii) any contract to which such party is a party that is material to the financial
condition, results of operations or conduct of the business of such party.




     9.2 Representations and Warranties of FilmCo. FilmCo makes the following
representation and warranty to Distributor: Except as set forth in the Transaction Documents,
FilmCo has not entered into any agreement with or made any Obligations to any third party that
might conflict or interfere with or adversely affect any of the provisions of this Agreement or the
Rights granted to Distributor. Except as set forth in Section 9.1 and this Section
9.2, FilmCo makes no other representations or warranties to Distributor, whether express or
implied.



     9.3 Representations and Warranties of Distributor. Distributor represents, warrants
and agrees to FilmCo as follows:



          9.3.1 The execution and delivery by Distributor of this Agreement and the performance by
Distributor of its obligations hereunder will not result in or require the creation of any
Encumbrance on or with respect to any of the Funded Pictures or Distribution Rights licensed to
Distributor hereunder, other than Permitted Liens.




          9.3.2 Distributor is duly qualified or licensed and in good standing as a foreign corporation
in each jurisdiction in which it owns or leases property or in which the conduct of its business
requires it to be so qualified or licensed and in good standing, except, in each case, to the
extent the failure to be so qualified or licensed and in good standing would not have a material
adverse effect on Distributor or on Distributor’s ability to meet its obligations hereunder.




          9.3.3 No Stop Funding Event or Distribution Termination Event has occurred.




10. COVENANTS.




     10.1 Covenants Applicable to Each Party. Each party to this Agreement hereby
covenants to the other that it will at all times during the term of this Agreement:



          10.1.1 Compliance with Laws, Etc. Comply in all material respects with all applicable
Laws.




          10.1.2 Preservation of Existence, Etc. (i) Preserve and maintain its corporate
existence, (ii) qualify and remain qualified in good standing as a foreign corporation or limited
liability company under the Laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification except where the failure to be
so qualified or in good standing would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, and (iii) take all reasonable action to maintain all
rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct
of its business.




12









 








     10.2 Covenants of FilmCo. FilmCo hereby covenants to Distributor that (i) it will on
request of Distributor execute and deliver to Distributor a short form license agreement
substantially in the form of Exhibit 10.2 attached hereto (each, a “Short Form License
Agreement”) with respect to each Funded Picture, (ii) it shall not create any Encumbrance on
any Funded Picture, other than Permitted Liens, and (iii) it will execute any access letters as may
be requested by the Distributor to allow the Distributor to access the Physical Materials.



     10.3 Covenants of Distributor. Distributor will at all times, unless consented to in
writing by FilmCo (which consent shall be given or not given by FundCo on FilmCo’s behalf):



          10.3.1 Allocated Costs and Financial Benefits. Whenever Distributor makes any
expenditures or incurs any liability in respect of a group of Motion Pictures which includes one or
more of the Funded Pictures, such expenditure or liability shall be allocated on a fair and
reasonable basis among all such Motion Pictures, provided no such allocation shall be made with
respect to Funded Pictures if the costs or expense would not otherwise be chargeable to FilmCo
under this Agreement. Distributor shall disclose all revenues or other consideration received from
any Person (including licensees, vendors and suppliers) received for or in connection with the
distribution of Motion Pictures including the Funded Pictures, including, without limitation,
advances, volume and prompt payment discounts, laboratory and other vendor rebates and adjustments
(“Financial Benefits”), provided all Rebates shall be disclosed, allocated and subject to
review in accordance with the terms of and pursuant to Section 4.3 of the Master Picture
Purchase Agreement. All such Financial Benefits shall be allocated to the Funded Pictures on a
fair, and reasonable basis among all Motion Pictures to which such Financial Benefit applies, and
on a Non-Discriminatory Basis.




          10.3.2 Allocations of Revenue. Distributor shall disclose to FilmCo only the
aggregate amount received with respect to contracts pursuant to which Distributor receives from any
licensee either a flat sum or a percentage of the receipts, or both, for any right to a group of
Motion Pictures which includes any of the Funded Pictures, under any agreement (whether or not the
same shall provide for the exhibition, sale, lease or delivery of positive prints of any of said
Motion Pictures) which does not specify what portion of the license payments apply to the
respective Motion Pictures in the group (or to such prints or other material, if any, as may be
supplied). Distributor shall allocate such revenue among all the Motion Pictures licensed
(including the Funded Pictures) on a fair, reasonable and Non-Discriminatory Basis using its good
faith business judgment.




          10.3.3 Manner of Distribution. Distributor shall have complete and exclusive
discretion and control (which it shall exercise in accordance with its customary business practices
and in good faith) as to the time, manner, terms and extent of distribution, exhibition, and
Exploitation of each Funded Picture, in accordance with such policies, terms and conditions and
through such Persons as the Distributor in its business judgment (which it shall make on a
Non-Discriminatory Basis, in accordance with its customary business practices and in good faith)
may determine proper or expedient. Distributor’s obligation to distribute each Funded Picture on a
“Non-Discriminatory Basis” means distribution shall be commensurate with the treatment of Motion
Pictures owned or controlled solely by




13









 







Distributor using its good faith business judgment, taking into account, among other things,
the genre, quality, budget, marketplace, strength of competition, time of the year, the director,
the rating and NRG index scores of such Funded Picture; provided, however,
Distributor is making no representation, warranty or guaranty that any receipts received with
respect to any Funded Picture from any media or territory will be comparable to the receipts
received for any other Motion Picture distributed by Distributor in such media or territory. The
determination whether a Funded Picture has been distributed on a Non-Discriminatory Basis will be
made based upon the overall treatment of the applicable Funded Picture over all media and
territories, rather than on a media by media or territory by territory basis. Distributor shall
have the right to sell, subdistribute or license any Distribution Rights with respect to any Funded
Pictures in Distributor’s sole discretion and no such decision to sell or subdistribute rights
shall be deemed to breach Distributor’s Non-Discriminatory Basis obligations. Distributor shall
include the Funded Pictures in all output agreements entered into by Distributor or its Affiliates
with respect to Motion Pictures produced and distributed by Distributor including Distributor’s
agreement with Showtime (if in effect), if and to the extent such Funded Pictures qualify for
inclusion under such output agreement based on picture criteria and release date. FilmCo agrees to
be bound by the terms of any Third Party arms’ length subdistribution agreement prior to and
following a Distribution Termination Event. Except as permitted under or as contemplated by the
Transaction Documents, to the extent that Distributor enters into any transactions under this
Agreement with Affiliates, Distributor shall do so only on arms-length terms and conditions.




     10.4 Reporting. Distributor shall promptly notify FilmCo: (i) of the occurrence of
any event which is, or which with the giving of notice or the lapse of time, or both, would
constitute, a Distribution Termination Event or Stop Funding Event, setting forth the details of
such event and (iii) the action (if any) taken by Distributor with respect thereto.



11. EVENT OF DEFAULT / REMEDIES.




     11.1 Event of Default By Distributor.



          11.1.1 Distribution Termination Event. Upon the occurrence of a Distribution
Termination Event, then in addition to FilmCo’s remedies set forth in Section 11.2 and
Section 13 hereof at Law or in equity, FilmCo shall have the right to terminate this Agreement
and on such termination, all Distribution Rights shall revert to FilmCo. Any such termination
shall be effective upon receipt of a Notice of termination. Notwithstanding the foregoing, in the
event of such a termination, Distributor shall be entitled to its Distribution Fees on Gross
Receipts received by or payable to Distributor prior to the date of Notice of termination and to
recoup any and all of its Distribution Costs and Expenses, including, without limitation, Residuals
and Third Party Payments paid by Distributor and to receive payment for any True-Up Statements that
had been issued but not yet paid and shall be entitled to issue a True-Up Statement for the
applicable Accounting Period up to and including the date of termination. Following a Notice of
termination, FilmCo agrees to abide by and honor the terms of any subdistribution agreement entered
into by Distributor prior to the date of such Notice of termination, subject to all the rights and
remedies contained therein in the event of a subdistributor’s breach, and FilmCo shall be solely
liable for




14









 







payment of Third Party Participations and Residuals accrued but unpaid prior to the Notice of
termination and payable or accruing after the Notice of termination.




          11.1.2 Limitation of FilmCo’s Remedies. Other than as set forth in Section
11.1.1 with respect to a Distribution Termination Event, FilmCo’s sole and exclusive remedy for
any breach or default by Distributor of this Agreement shall be to bring an action at Law to
recover any actual damages incurred by FilmCo as a result of such Distributor breach or default.
Notwithstanding anything to the contrary herein, FilmCo shall not be entitled to any form of
equitable relief, including any injunctive relief, and in no event shall FilmCo or a party
transferring rights or rendering services in connection with a Funded Picture, be entitled to
terminate or rescind this Agreement or Distributor’s rights with respect to a Funded Picture or
enjoin or restrain or otherwise interfere with Distributor’s production, distribution or exhibition
of the Funded Picture, its exercise or exploitation of the Distribution Rights, or Distributor’s
use, publication or dissemination of any advertising issued in connection with the Funded Picture.
In furtherance of and without limiting the foregoing, FilmCo agrees that it shall not interfere or
authorize or cause any other party to interfere with the rights of Distributor and its
subdistributors to quietly and peacefully enjoy and possess all Distribution Rights in the Funded
Pictures.




     11.2 Event of Default By FilmCo. Upon the occurrence and during the continuance of a
breach or default by FilmCo (other than as the result of any Lions Gate Company’s (as the Manager
of FilmCo) action or failure to act, or any Lions Gate Company’s failure to comply with its
obligations (as a Member of FilmCo) under the FilmCo Operating Agreement) of any of its agreements,
representations, warranties or covenants set forth herein (each a “FilmCo Event of
Default”), and without limiting any other remedies available to it under this Agreement or by
Law, Distributor shall have the right to withhold and reserve from any monies whatsoever payable to
FilmCo or its designee hereunder, sums reasonably sufficient to secure Distributor from and against
such breach of any of FilmCo’s obligations under this Agreement.



12. INDEMNIFICATION.




     12.1 Indemnification. Each party (“Indemnifying Party”) hereby indemnifies,
defends and holds harmless the other party and its successors, licensees, assigns, and employees,
officers and directors (collectively for the purposes of this Section “Indemnified Party”) from and
against any and all liability, loss, damage, cost and expense, including, without limitation,
reasonable attorney’s fees (but excluding lost profits or consequential damages of such party)
(“Losses”) arising out of or related to any claim by a third party arising out of or
related to the breach or alleged breach of any warranty, representation or agreement made by the
Indemnifying Party herein. The Indemnified Party shall promptly notify the Indemnifying Party of
any claim to which the foregoing indemnification applies and the Indemnifying Party shall
undertake, at its own cost and expense, the defense thereof. The Indemnified Party may, at its
option and expense, engage its own counsel. If the Indemnifying Party fails to promptly appoint
competent and experienced counsel, the Indemnified Party may engage its own counsel and the
reasonable charges in connection therewith shall promptly be paid by the Indemnifying Party.



15









 





     12.2 Action or Proceeding. Promptly after receipt by an Indemnified Party of notice
of the commencement of any Action or Proceeding involving a claim referred to in Section
12.1 above, such Indemnified Party shall promptly give notice to the Indemnifying Party of the
commencement of such Action or Proceeding; provided, however, that the failure of
such Indemnified Party to give any such notice shall not (i) relieve the Indemnifying Party of its
obligations, except to the extent that such failure results in the forfeiture of rights or defenses
and the Indemnifying party incurs an increased obligation to such Indemnified Party on account of
such failure, and (ii) in any event relieve the Indemnifying Party from any liability with respect
to the Indemnified Party which the Indemnifying Party may have otherwise on account of this
Agreement or any other Transaction Document. If any such action or proceeding is brought against
an Indemnified Party, unless in the reasonable opinion of counsel for such Indemnified Party a
conflict of interest between Indemnified Party and the Indemnifying Party may exist in respect of
such Action or Proceeding and representation of both would be inappropriate, the Indemnifying Party
shall be entitled to participate in and to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party. The Indemnifying Party shall not, without the prior written
consent of the Indemnified Party, effect any settlement of any such pending or threatened action or
proceeding, unless such settlement includes (x) an unconditional release of the Indemnified Party
from all liability on Claims that are the subject matter of such Action or Proceeding, (y) no
admission or acknowledgment of culpability or wrongdoing by the Indemnified Party, and (z) no
provision for any non-monetary relief to any Person to be performed by the Indemnified Party. If
the Indemnified Party settles any such suit, claim or proceeding, the amount thereof shall be
charged to the Indemnifying Party only if the Indemnifying Party’s prior approval has been
obtained.



     12.3 Specific Indemnified Matters. Without limiting any other rights of FilmCo
hereunder or under applicable Law, Distributor shall indemnify, defend and hold harmless FilmCo and
FundCo, and each of their respective members, managers, officers, directors, and employees
(collectively, the “FilmCo Indemnified Parties”) from and against losses actually incurred
by such FilmCo Indemnified Parties from any third person’s (not FilmCo or any party asserting the
rights of FilmCo) Action, including, without limitation, reasonable attorney’s fees (“FilmCo
Losses”) arising out of, or related to, or in connection with:



          12.3.1 Distributor’s exercise or other exploitation of the Distribution Rights;




          12.3.2 any claim alleging that any material (including advertising, publicity, promotional
trailers) added to or used by the Distributor in connection with a Funded Picture, or any change
made by the Distributor to a Funded Picture or to any such materials (e.g., a change in title,
editing changes) to the extent any are supplied by or at the request or direction of or on behalf
of Distributor, violates or infringes upon the trademark, trade name, patent, copyright, literary,
dramatic, musical, artistic, personal, privacy, publicity, civil, property or contract rights, the
moral rights of artists or any other right of any Person;




16









 








          12.3.3 any claim alleging that Distributor is in breach of its obligations to any Person
(including any sublicensee or subdistributor) (other than its obligations to FilmCo under this
Agreement); and




          12.3.4 the failure of Distributor or any of its Affiliates to comply with applicable Law.




     12.4 Other Indemnified Matters; Control of Certain Matters. Without limiting any
other rights of the FilmCo Indemnified Parties hereunder or under applicable Law, Distributor shall
indemnify, defend and hold harmless the FilmCo Indemnified Parties from and against any FilmCo
Losses arising out of, related to, or in connection with third party claims as a result of any
breach by LGF of its representations and warranties in Section 6.2.4 of the Master Picture
Purchase Agreement with respect to a Funded Picture (the “Specified Claims”),
provided, however, Distributor shall be entitled to recoup as Distribution Costs
and Expenses all out-of-pocket costs and expenses incurred by it on behalf of the FilmCo
Indemnified Parties under this Section 12.4, and the out-of-pocket third party costs and
expenses incurred by it and arising out of, related to, or in connection with the Specified Claims,
from the Gross Receipts from such Funded Picture. The foregoing rights and remedies are in
addition to and not in lieu of the rights and remedies otherwise available to FilmCo under the
Master Picture Purchase Agreement.



     12.5 Control of Litigation. Distributor shall (i) have the right to assume the
defense of any claim made by a Third Party and arising from a breach or alleged breach of any
representation, warranty or agreement of FilmCo hereunder or that otherwise may be subject to the
indemnity set forth in Section 12.1 above, and (ii) shall assume the defense of any claim
for which FilmCo or the FilmCo Indemnified Parties are indemnified under Section 12.1,
Section 12.3, or Section 12.4 above. FilmCo shall have the right as well as the
obligation to consult and cooperate with Distributor in connection with any such claim and, upon
Distributor’s request, to furnish Distributor with any and all evidence, materials or other
information relevant thereto. FilmCo shall have the right (at FilmCo’s sole expense) to have
FilmCo’s own counsel present in connection with the defense of any such claim, provided that such
counsel fully cooperates with Distributor’s counsel and in no way interferes with the handling of
the case by Distributor’s counsel. FilmCo understands and agrees that all aspects of the defense
of any such claim, whether as part of any litigation, negotiations or otherwise (excluding any
decision regarding any settlement as provided below), shall be controlled by Distributor,
Distributor shall be free to use counsel of Distributor’s choice in connection therewith, and such
control shall in no way abrogate or diminish FilmCo’s obligations under Section 12.1 above.
Distributor shall not, without the prior written consent of the FilmCo Indemnified Parties (which
shall not be unreasonably withheld or delayed) effect any settlement or any pending or threatened
claim unless such settlement includes (x) no admission of wrongdoing or culpability by any FilmCo
Indemnified Party, (y) no provision for non-monetary relief to be performed by any FilmCo
Indemnified Party, and (z) if Distributor (or any of its Affiliates) is released, an unconditional
release of the FilmCo Indemnified Parties from all liability on the claims that are the subject
matter of such claim or proceeding. No amounts paid or payable in connection with



17









 







Distributor’s indemnity obligations under Section 12.1 and Section 12.3 shall
be recoupable by Distributor hereunder, whether as Distribution Costs and Expenses or otherwise.



13. ARBITRATION; LIMITATION ON DAMAGES.




     13.1 Set forth on Schedule B are the procedures agreed by the parties for resolution
of all Proceedings under this Agreement, the breach thereof and/or the scope of the provisions of
this Section 13. Distributor acknowledges and agrees that in the event of any Claim by
FilmCo against Distributor or its Affiliates under this Agreement, FundCo shall have the sole
right, on behalf of FilmCo, to cause FilmCo to bring such Claim and to make all decisions and to
cause FilmCo to take (or not take) all actions related thereto.



     13.2 IN NO EVENT SHALL A PARTY HERETO (OR ANY AFFILIATE OF A PARTY HERETO) BE LIABLE FOR ANY
CONSEQUENTIAL DAMAGES OR LOSS WHICH THE OTHER PARTY HERETO (OR ANY OF ITS AFFILIATES) MAY SUFFER OR
SUSTAIN AS A RESULT OF ANY BREACH BY SUCH FIRST-MENTIONED PARTY (OR AN AFFILIATE OF SUCH
FIRST-MENTIONED PARTY HERETO) OF THIS AGREEMENT. IN NO EVENT SHALL A PARTY HERETO (OR ANY
AFFILIATE OF A PARTY HERETO) BE LIABLE FOR PUNITIVE DAMAGES, THE RIGHT TO WHICH IS EXPRESSLY WAIVED
BY EACH PARTY HERETO.



14. WAIVER/ GOVERNING LAW / PROCEEDINGS.




     14.1 No Waiver. No waiver of any default or breach of this Agreement by either party
shall be deemed a continuing waiver or a waiver of any other breach or default, no matter how
similar.



     14.2 Governing Law. The Laws of the State of New York and the United States of
America applicable to contracts made and performed entirely in New York shall govern (i) the
validity and interpretation of this Agreement, (ii) the performance by the parties of their
respective obligations hereunder, and (iii) all other causes of action (whether sounding in
contract or in tort) arising out of or relating to this Agreement, or the termination of this
Agreement.



     14.3 Legal Proceedings. Distributor, its successors and assigns, are hereby empowered
to bring, prosecute, defend and appear in Proceedings of any nature under or concerning
infringement of or interference with any of the Distribution Rights granted. Distributor will
notify FilmCo in writing prior to commencement of any suit, action or proceedings. FilmCo may
participate in any suit, action or proceeding using counsel of its choice at its sole expense.
FilmCo’s expenses will be reimbursed from any recovery in equal proportion with Distributor’s
expenses. If Distributor fails to take necessary action, FilmCo (at FundCo’s sole direction and
control) may, but will not be obligated to, take such action in FilmCo’s or Distributor’s name with
all recoveries belonging to FilmCo. In all other instances, all recoveries, net of third party
out-of-pocket expenses incurred for such Proceedings shall be deemed to be part of Gross Receipts.



15. INSURANCE. 




18









 








     15.1 Distributor shall procure and maintain in full force and effect standard distributor’s
liability (errors and omissions) insurance issued by a nationally recognized insurance carrier
covering the Funded Pictures with minimum limits of at least $1,000,000 for any claim arising out
of a single occurrence and $3,000,000 for all claims in the aggregate, which shall provide coverage
for distribution of each Funded Picture, and the advertising and promotion materials with respect
thereto. Such insurance may not be canceled without 30 days prior written notice to Distributor
and FilmCo. Any proceeds received under such insurance policy with respect to any Funded Picture
shall be credited as set forth in Schedule C, Section 2.G.



16. NOTICE. 




     16.1 Any notice or demand which any party is required, or may desire, to give to the other
parties shall be in writing and shall be given by addressing the same to the other parties at the
address hereinafter set forth, or at such other address as may be designated in writing by any such
party by notice given to the other in the manner prescribed in this Section 16 and shall be
deemed effective (i) when delivered personally during normal business hours, (ii) on the date of
receipt specified in any return receipt if it shall have been deposited postage prepaid in the
United States mail (certified or registered with return receipt requested), (iii) on the second
Business Day after dispatch by Federal Express, DHL, Airborne or other recognized international
courier service, or (iv) when sent by facsimile transmission, if, and only if, such facsimile
transmission is followed within two (2) Business Days by a written notice sent in accordance with
clauses (i), (ii) or (iii) above, whichever of the foregoing shall first occur; provided, however,
that any notice alleging a default must be given by the means set forth in clauses (i), (iii) or
(iv) above.


Any notice or demand to Distributor shall be addressed as follows:



Lions Gate Films Inc.

2700 Colorado Avenue, Suite 200

Santa Monica, California 90404

Attn: General Counsel

Telephone: (310) 449-9200

Facsimile: (310) 255-3840



With a courtesy copy to:



Liner Yankelevitz Sunshine & Regenstreif LLP

1100 Glendon Avenue, 14th Floor

Los Angeles, California 90024

Attn: Joshua B. Grode, Esq.,

Telephone: 310-500-3500

Facsimile: 310- 500-3501



Any notice or demand to FilmCo shall be addressed as follows:



LG Film Finance I, LLC




19









 







2700 Colorado Avenue, Suite 200

Santa Monica, California 90404

Attn: President

Telephone: (310) 449-9200

Facsimile: (310) 255-3840



With a courtesy copy to:



Morgan, Lewis & Bockius LLP

101 Park Avenue

New York, New York 10178

Attn: Kristy Wagner, Esq.

Telephone: 212-309-7019

Facsimile: 212-309-6001



Any unintentional failure to deliver courtesy copies as required herein shall not be a breach of
this Agreement.




17. FORCE MAJEURE. 




     17.1 If either party’s performance hereunder is prevented by reason of an event of Force
Majeure, then during the existence of such event, the affected party shall not be liable for its
failure to timely perform its obligations hereunder and this Agreement shall be extended for a
period equal to the delay caused by the occurrence of the Force Majeure.



18. HOLDING OF MONIES. 




     18.1 FilmCo expressly acknowledges that except as expressly set forth herein Distributor shall
not be obligated to segregate Gross Receipts from other funds, it being the intent and purpose
hereof that FilmCo’s or FundCo’s share of Gross Receipts from the Funded Pictures are referred to
herein merely as a measure in determining the time and manner of payment to FilmCo and that
Distributor shall not be deemed a trustee, pledgeholder or fiduciary of FilmCo or FundCo. Nothing
herein shall be deemed to limit or amend the Intercreditor Agreement or the Intercreditor and
Subordination Agreement.



19. SECURITY INTEREST IN FAVOR OF FILMCO. 




          19.1 Distributor will grant and assign to FilmCo, pursuant to a security agreement to be
executed concurrently herewith, a security interest in and to, and copyright mortgage on, the
Distribution Rights as more fully described in such security agreement (collectively,
“Distributor Collateral”) in each Funded Picture in order to secure Distributor’s payment
obligations to FilmCo hereunder. Such security interests and copyright mortgages shall be entitled
to priority over all other security interests in the Distributor Collateral. Distributor will
execute and file or record, as appropriate, any other security agreements, UCC financing
statements, copyright mortgages and other documents, instruments or agreements reasonably necessary
to evidence, perfect and preserve the security interests and copyright mortgages granted to FilmCo
hereunder and under the security agreement. Distributor authorizes




20









 







FilmCo to date such security interest and copyright mortgages, substantially in the form
attached to the FilmCo Security Agreement, as of the date on which Distributor acquires its
Distribution Rights in such Funded Picture, to file such copyright mortgages in the United States
Copyright Office and to file UCC-1 financing statements with respect thereto.




20. ASSIGNMENT.




     20.1 Distributor shall not have the right to assign any of its rights or to delegate any of
its obligations hereunder or any interest herein without the prior written consent of FilmCo,
provided, however, Distributor may, without FilmCo’s consent, assign all of its
rights and obligations hereunder to any Affiliate of LGE which is the primary distributor for LGE’s
Motion Pictures (other than Funded Pictures) and which assumes all obligations hereunder and
executes joinder agreements with respect to the Intercreditor Agreement, and to all security
agreements, security interests and copyright mortgages delivered by Distributor under Section
19 hereof, as required. Notwithstanding the foregoing, Distributor shall have the right to (i)
subdistribute, license, or sublicense any of the Distribution Rights hereunder to one or more Third
Parties, and (ii) Distributor shall be entitled to sell or pre-sell territories in the ordinary
course of its business, provided that all consideration received in connection with such sales
shall be Gross Receipts.



21. AMENDMENTS AND WAIVERS. 




     21.1 Neither this Agreement nor any term hereof may be changed, waived, discharged or
terminated orally or in writing, except that any term of this Agreement may be amended and the
observance of any such term may be waived (either generally or in a particular instance and either
retroactively or prospectively) with (but only with) the written consent of all of the parties
hereto and FundCo; provided, however, that no such amendment or waiver shall extend to or affect
any obligation not expressly waived or impair any right consequent therein. No delay or omission
to exercise any right, power or remedy accruing to any party hereto shall impair any such right,
power or remedy of such party nor be construed to be a waiver of any such right, power or remedy
nor constitute any course of dealing or performance hereunder.



22. MISCELLANEOUS.




     22.1 Notwithstanding anything to the contrary set forth in this Agreement, the following
provisions shall survive the termination of this Agreement: Section 6 (Allocation of Gross
Receipts), Section 7 (Accounting, etc.), Section 9 (Representations and
Warranties), Section 12 (Indemnification), Section 13 (Arbitration), Section
14.2 (Governing Law), Section 16 (Notice), and Section 22 (Miscellaneous).



21









 





     22.2 FundCo shall be a third party beneficiary of this Agreement with respect to Section
21.1 hereof.



     22.3 This Agreement consists of these provisions, the attached exhibits and schedules all of
which exhibits and schedules are herein incorporated by this reference and made a part hereof.
Nothing contained herein shall be deemed to create a relationship of partnership, joint venture,
agency, fiduciary or employment between the parties.



     22.4 This Agreement together with the other Transaction Documents sets forth the entire
understanding of the parties regarding the subject matter hereof and supersedes all prior oral or
written agreements between them.



     22.5 Section headings are inserted herein for convenience only and do not constitute a part of
this Agreement.



     22.6 Neither FilmCo nor Distributor shall disclose to any third party (other than its
respective members, managers, employees, directors and officers, in their capacity as such on a
need-to-know basis), any information with respect to the financial terms and provisions of this
Agreement except: (i) to the extent necessary to comply with the Law or the valid order of a court
of competent jurisdiction, in which event(s) the party making such disclosure shall so notify the
other as promptly as practicable (if possible, prior to making such disclosure) and shall seek
confidential treatment of such information, (ii) to the extent necessary to comply with S.E.C. or
similar disclosure requirements, (iii) to its parent and affiliated companies, their lenders (and
their respective advisors and attorneys), prospective financiers and investors (and such persons’
investment bankers, agents, attorneys, accountants and necessary experts), auditors, investment
bankers, attorneys and similar professionals, provided that such companies, banks, advisors,
financiers, investors, investment bankers, experts, auditors, accountants, attorneys and similar
professionals agree to be bound by the provisions of this subparagraph, and (iv) in order to
enforce its rights pursuant to this Agreement.



     22.7 FilmCo and Distributor shall each execute, acknowledge and deliver any and all further
documents or instruments that are necessary, expedient or proper to implement, administer and
effectuate the purpose and intent of this Agreement. If a party fails to deliver such additional
documents or instruments within thirty (30) days after the other party’s request therefor,
including, without limitation, a Short Form License Agreement with respect to each Funded Picture,
the party required to execute such document or instrument irrevocably appoints the other party to
execute such additional documents as attorney-in-fact, coupled with an interest.



     22.8 The invalidity, illegality or unenforceability of any provision of this Agreement,
pursuant to judicial decree, shall not affect the validity or enforceability of any other provision
of the Agreement, all of which shall remain in full force and effect.



     22.9 This Agreement may be executed in one or more counterparts, each of which, when delivered
to the parties hereto, shall be deemed an original but all of which together



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shall constitute one and the same instrument. Each counterpart may consist of a number of
copies hereof, each signed by less than all, but together signed by all, of the parties hereto.



[Remainder of page intentionally left blank]




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     IN WITNESS WHEREOF, the parties have executed this Master Distribution Agreement as of the
date first above written.



	 	 	 	 	 	 	 	 	 
	 	 	LIONS GATE FILMS INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Wayne Levin	 	 
	 	 	 	 	 	 	 
	 

	 	Name:	 	Wayne Levin	 	 
	 	 	 	 	 	 	 
	 

	 	Title:	 	Vice President	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	LG FILM FINANCE I, LLC	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	Lions Gate Entertainment Inc.,

its Manager	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	/s/ Wayne Levin	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	Wayne Levin	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	General Counsel	 	 
	 

	 	 	 	 	 	 	 	 





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