\n i. All Other Works Other Than Theme Parks…………………………..27
\n j. Theme Parks…………………………………………………..27
\n k. Creative Control of Derivative Works Not Produced by Pixar…………27<\/p>\n16. Toy Story…………………………………………………………….28
\n a. Derivative Works………………………………………………28
\n b. Toy Story Agreement……………………………………………28
\n c. Ancillary Rights………………………………………………28<\/p>\n
17. Exclusivity…………………………………………………………..28
\n a. No Other Feature Length Animated Theatrical Motion Pictures………..28
\n b. Theme Parks…………………………………………………..28
\n c. First Look at TV Productions and Home Video Productions……………29
\n d. No Material Interference……………………………………….29
\n e. Employment Agreement with John Lasseter………………………….29<\/p>\n
18. Exchange of Information………………………………………………..29<\/p>\n
19. Publicity and Confidentiality…………………………………………..30
\n a. Publicity…………………………………………………….30
\n b. Confidentiality of Terms of Agreement……………………………30
\n c. Protection of Confidential Information…………………………..30<\/p>\n
20. Non-Solicitation………………………………………………………31<\/p>\n
21. Assignment……………………………………………………………31<\/p>\n
22. Change of Control of Pixar……………………………………………..31<\/p>\n
23. Termination…………………………………………………………..31<\/p>\n
24. Interest On Late Payments………………………………………………32<\/p>\n
25. Governing Law…………………………………………………………32<\/p>\n
26. General Provisions…………………………………………………….32
\n a. Right to Cure…………………………………………………32
\n b. Remedies……………………………………………………..32
\n c. Force Majeure…………………………………………………33
\n d. No Waivers……………………………………………………33
\n e. No Violation of Law……………………………………………34
\n f. Notice……………………………………………………….34<\/p>\n
27. Entire Agreement………………………………………………………34<\/p>\n
28. Execution in Counterparts………………………………………………34
\n Exhibit A – Certain Entertainment Companies………………………………37
\n Exhibit B – Distribution Costs………………………………………….38
\n Appendix – Glossary of Terms……………………………………………42
\n<\/c><\/c><\/s><\/table>\n
iii<\/p>\n
5
\n CO-PRODUCTION AGREEMENT<\/p>\n
This Co-Production Agreement (“Agreement”) is entered into as of February 24,
\n1997, by and between Pixar, a California corporation (“Pixar), and Walt Disney
\nPictures and Television, a California corporation (“Disney”).<\/p>\n
1. PICTURES.<\/p>\n
Pixar and Disney agree to develop, produce, finance and distribute five
\n(5) computer-animated feature-length theatrical motion pictures (“Picture(s)”)
\npursuant to the terms of this Agreement. Pixar and Disney hereby designate the
\npicture currently entitled Bugs as the first Picture hereunder.<\/p>\n
2. TERM.<\/p>\n
The term of this Agreement (“Term”) shall commence upon the execution
\nhereof and shall continue until Delivery to Disney of the fifth Picture produced
\nand financed hereunder. For purposes of this Agreement, “Delivery” shall mean
\ndelivery pursuant to terms to be mutually agreed upon by Pixar and Disney no
\nlater than six (6) months before the delivery of Bugs. The provisions of
\nparagraphs 5(d), 6, 9 through 16, 17(a), and 18 through 28 of this Agreement
\nshall survive expiration of the Term.<\/p>\n
3. CREATIVE CONTROLS.<\/p>\n
Pixar and Disney shall collaborate in the creative process of
\ndeveloping and producing the Pictures, as follows:<\/p>\n
a. Treatments.<\/p>\n
(i) For each of the four remaining Pictures, Pixar shall
\nsubmit one or more Treatments for Disney’s consideration as the basis for the
\nPicture (“Treatment”). Each Treatment shall be either (a) a written treatment of
\nnot less than three pages in length setting forth a story to be used as the
\nbasis for the screenplay or (b) an oral presentation of not more than one (1)
\nhour, accompanied by rough sketches, conceptual art and rudimentary story boards
\nsufficient to communicate the essential idea for the Picture comparable to the
\npresentation previously made for Bugs and the first presentation for the second
\nPicture. Each such Treatment shall be based on a new idea and not be a sequel,
\nprequel or remake of a prior picture. Treatments may be submitted by Pixar
\nsingly or in one or more groups. Disney shall accept or reject each Treatment
\nwithin forty-five (45) days after such Treatment <\/p>\n
-1-
\n 6
\nis submitted by Pixar. [*] for [*] of the [*] within [*] by [*] of the [*], then
\n[*], whether or not it [*], to [*], by giving written notice of [*] at any time
\n[*] unless [*] the parties have [*] or [*] this Agreement under the provisions
\nof subparagraph (ii) below:<\/p>\n
(A) [*] of the [*] as the [*] for a [*], provided in the
\nevent of [*] under this subparagraph A the [*] to [*] and [*] shall be [*]
\n(unless [*] to [*] and with the [*] specified in [*], or<\/p>\n
(B) in the case of [*] of the [*] as the [*] for such
\n[*] and in the event of [*] under this subparagraph B [*] and [*] shall be [*]
\n(unless [*] to [*]) and with the [*] specified in [*].<\/p>\n
(ii) In the event that no Treatment has been approved or
\nselected under the provisions of subparagraph 3(a)(i) above within one (1) year
\nafter the initial theatrical release of the last Picture for which a Treatment
\nhas previously been approved or selected, then Disney shall be entitled to
\nterminate this Agreement upon thirty (30) days written notice to be served on
\nPixar not more than sixty (60) days after the end of such one (1) year period,
\nunless within such thirty day notice period either; (A) the parties have
\nmutually approved a Treatment for a Picture or (B) [*] has [*] under the
\nprovisions of subparagraph 3(a)(i)(A) or (if still applicable) subparagraph
\n3(a)(i)(B), provided that Pixar has otherwise satisfied the conditions in
\nparagraph 3(a)(i) above for such selection under subparagraph 3(a)(i)(A) or
\n3(a)(i)(B) above. In the event of such termination, the provisions of paragraph
\n23 shall apply.<\/p>\n
b. Development and Production. After approval or selection of a
\nTreatment, Disney and Pixar shall have mutual creative control of the further
\ndevelopment, pre-production and production of each Picture, provided that in the
\nevent of a disagreement with respect to any particular creative matter in such
\nPicture final creative control with respect to such creative matter shall be as
\nfollows:<\/p>\n
(i) [*] shall have [*] in any of the Pictures which [*];<\/p>\n
——-
\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
-2-<\/p>\n
7<\/p>\n
(ii) [*] shall have [*] in any of the [*] have previously
\n[*] for [*] with [*]; or<\/p>\n
(iii) if neither subparagraph (i) or (ii) is applicable, the
\n[*] and [*] shall have [*] of such [*]. The [*] shall be [*] so long as [*] is
\n[*] (unless [*] , on [*] or [*] to [*]); otherwise [*] shall appoint the [*], or
\nif [*] is no longer employed by [*] will [*] the [*] . The [*] shall be [*] so
\nlong as [*] is [*] (and not [*]); otherwise [*] (or if [*] is no longer employed
\nby [*], the [*] of [*]) shall appoint the [*].<\/p>\n
c. Final Cut\/Rating. Disney and Pixar shall have mutual control over the
\nfinal cut of each Picture, provided that each party shall exercise its final cut
\nrights in good faith and so not to frustrate or delay the release of the
\nPicture. Each Picture shall be produced hereunder so as to receive a G rating
\n(or substitute equivalent). If for any reason a G rating (or substitute
\nequivalent) is not received or the Picture does not qualify for such rating,
\nPixar agrees to make such changes as necessary to obtain or qualify for such
\nrating prior to Delivery. Within a reasonable time after completion of the final
\ncut as provided herein, Pixar shall deliver the Picture to Disney.<\/p>\n
d. Ancillary Rights.<\/p>\n
(i) Disney and Pixar shall have mutual creative control with
\nrespect to the creation and design of any Ancillary Rights, provided that in the
\nevent of a disagreement Disney’s decision shall govern.<\/p>\n
(ii) For purposes of this Agreement, the terms “Ancillary
\nRights”, “Merchandising Rights” and “Interactive Works” shall have the following
\nmeanings:<\/p>\n
(A) “Ancillary Rights” means items created in the
\nexercise of Merchandising Rights, literary publishing, soundtrack and publishing
\nrights in and to any of the Pictures, any Derivative Works or, subject to the
\nprovisions of paragraph 16, Toy Story. Ancillary Rights does not include any
\nworks within the scope of Derivative Works, as defined in paragraph 15 below,
\nbut does include any items created in the exercise of Merchandising Rights,
\nliterary publishing, soundtrack and publishing rights in and to any Derivative
\nWorks.<\/p>\n
(B) “Merchandising Rights” means the right to make, use,
\nsell, exercise or otherwise exploit and license or authorize others to make,
\nuse, sell, exercise or otherwise exploit tangible personal property, of any and
\nall kinds, based upon, utilizing or <\/p>\n
——-
\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
-3-<\/p>\n
8
\nembodying any Picture or Derivative Work or subject to the provisions of
\nparagraph 16, Toy Story, or any of the characters or story or other unique
\nelements thereof, including without limitation any unique names, likenesses or
\ncharacteristics of any character portrayed therein other than pre-existing
\nDisney characters, or any unique title, catch word, slogan, situations, designs,
\nequipment or events depicted therein, or any trademark, trade name or copyright
\nrelated thereto other than pre-existing Disney marks; provided that
\nMerchandising Rights shall not include Interactive Works.<\/p>\n
(C) “Interactive Work” means any audio-visual work or
\nother work, regardless of the physical medium in which the work is fixed
\n(including without limitation CD ROMs, DVDs, video games and arcade games), now
\nknown or hereafter coming into being, which work is designed with a primary
\npurpose of permitting the viewer to modify or control the sequence or
\nperformance of the presentation in a non-linear fashion.<\/p>\n
4. PRODUCTION.<\/p>\n
a. Production Control. Subject to the provisions of paragraph 3 above and
\nthis paragraph 4, Pixar shall control the production of each Picture. Pixar, or
\nat Pixar’s option an entity established and controlled by Pixar, shall serve as
\nthe production entity, provided that none of the entities described in Exhibit A
\nmay own any interest in the production entity. Pixar may also establish a
\nseparate entity (which may or may not be owned by Pixar but over which Pixar
\nshall exercise production control by contract or otherwise) for purposes of
\nundertaking all or certain portions of production services, such as hiring
\nvoice, writers and other artistic talent, provided that none of the entities
\ndescribed in Exhibit A may own any interest in such separate entity. Pixar shall
\ndesignate and approve all production personnel. Pixar shall consult with Disney
\nconcerning the selection of the producers and directors for each Picture,
\nprovided that in the event of disagreement the decision of Pixar shall govern.
\n[*] shall [*] talent [*] the [*] then [*] by [*] for [*] in [*] (as defined in
\nparagraph 6(c) below). In contracting with third parties in connection with the
\nproduction of each Picture, Pixar shall, in addition to following the other
\nterms of this Agreement, follow Disney’s then customary policies for Premiere
\nDisney Movies with respect to the scope of any grant of rights for use in the
\nPicture ( and the exercise of Ancillary Rights or Derivative Works derived
\ntherefrom) obtained from such third parties, provisions limiting such third
\nparties’ right to interfere with distribution or other exploitation of the
\nPicture and product placement in the Picture.<\/p>\n
b. Disney Representative. Disney may designate a Disney representative
\n(the “Disney Production Representative”), who shall be subject to the reasonable
\napproval of Pixar. The Disney Production Representative shall be entitled to
\nmaintain an office at Pixar’s facilities, to monitor production of the Pictures,
\nto review production and production finance books, records and documentation,
\nincluding creative materials (e.g. dailies, story boards and scripts), to have
\naccess to Pixar production personnel and production meetings solely relating to
\nthe Pictures on a regular basis, and to receive periodic briefings from Pixar on
\nproduction and production finance issues. Pixar will also furnish the Disney
\nProduction Representative, <\/p>\n
——-
\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
-4-<\/p>\n
9
\nupon request, weekly cost reports, production reports and backup data with
\nrespect to carrying costs incurred by Pixar relating to the retaining of
\nemployees for production purposes. The Disney Production Representative shall
\nnot have decision-making authority over Pixar, and shall not have access to
\nPixar Technology (as defined in paragraph 13(c)). The Disney Production
\nRepresentative shall have entered into a confidentiality agreement with Disney
\nwhich covers and protects Pixar Confidential Information as provided in this
\nAgreement or shall enter into a confidentiality agreement with Pixar. The salary
\nand expenses of the Disney Production Representative shall not be included in
\nthe Picture Budget and shall be the sole responsibility of Disney. Pixar
\npreapproves [*] as the Disney Production Representative.<\/p>\n
5. COMPUTATIONAL RESOURCES.<\/p>\n
Pixar shall have control over the selection, acquisition, placement and
\nuse of Computational Resources as provided in this paragraph 5.<\/p>\n
a. “Computational Resources” means all workstations, servers and other
\ncomputers, network and networking equipment, storage systems and other
\ncomputational equipment and third party software used by Pixar to develop and
\nproduce the Pictures or any Derivative Works, other than any such equipment and
\nsoftware owned or controlled by Disney (and not financed by Pixar) used by Pixar
\nat Pixar’s request to develop or produce the Pictures or Derivative Works.<\/p>\n
b. Acquisition and Funding of Computational Resources. Pixar shall pay
\nfifty percent (50%) and Disney shall pay fifty percent (50%) of the purchase
\nprice of all such Computational Resources as provided in paragraph 7. Pixar (or
\na production entity established by Pixar) shall convey to Disney an undivided
\nfifty percent (50%) interest in all Computational Resources co-funded by Disney
\nimmediately upon acquisition and funding by Disney of such Computational
\nResources. The purchase price of Computational Resources shall be determined net
\nof any discounts or rebates, but before the application of any credits granted
\nto Pixar unrelated to the Pictures (e.g. equipment credits granted to Pixar in
\nconnection with its patent license agreement with Silicon Graphics Inc.). Pixar
\nshall have the right to attempt to secure Computational Resources at less than
\nmarket costs in exchange for providing to the supplier any of the following
\npromotional or marketing consideration relating to one or more Pictures: (i)
\nprivate screenings of the Picture(s), (ii) permitting the supplier to mention
\nthe Picture(s) in its advertisements and marketing materials, (iii) in the case
\nof a supplier who contributes Computational Resources or provides equipment
\ncredits worth U.S.$[*] or more (at list price), [*] for use of such
\nComputational Resources in the Picture(s), and (iv) in the case of a supplier
\nwho contributes Computational Resources or provides equipment credits worth
\nU.S.$[*] or more (at list price), providing [*] from the Picture(s) for
\nunaltered use after the initial theatrical release of the Picture in the [*]
\nwhich mention the Picture, provided that such [*] do not mention a competing
\nmotion picture and are in circulation for no more than a [*] from initial use.<\/p>\n
——-
\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
-5-
\n 10<\/p>\n
c. Use on Other Projects. Pixar shall have the right to use Computational
\nResources for Pixar productions and activities not covered by the terms of this
\nAgreement, provided that such productions and activities are not prohibited by
\nthe terms of this Agreement. Pixar shall reimburse Disney a reasonable amount in
\nproportion to Pixar’s use of the Computational Resources on non-Disney
\nproductions and activities, except for network and networking equipment,
\nincluding wires, routers and other dedicated network equipment and networked
\nfile servers, for which no such reimbursement shall be due.<\/p>\n
d. Buy-Out. Pixar shall have the right at any time to purchase Disney’s
\ninterest in any Computational Resource for a buy-out price equal to fifty
\npercent (50%) of the greater of (A) the depreciated book value of such resource,
\ncalculated using a three (3) year straight line depreciation schedule or (B) ten
\npercent (10%) of the original purchase price of such resource.<\/p>\n
6. DISTRIBUTION.<\/p>\n
Disney shall have control over all decisions relating to the marketing,
\npromotion, publicity, advertising and distribution of each Picture, subject to
\nthe following:<\/p>\n
a. Initial Release. Disney shall initially release each Picture
\ntheatrically in the United States within twelve (12) months, or if the Picture
\nis a holiday-themed motion picture (e.g. A Christmas Carol), fifteen (15)
\nmonths, after Delivery of the Picture by Pixar. Disney shall release each
\nPicture in the home video market in the United States within fifteen (15) months
\nafter the initial United States theatrical release date of the Picture. The
\nexact release dates shall be determined by Disney, subject to the provisions of
\nthis paragraph 6, in consultation with Pixar.<\/p>\n
b. Release Period. Disney shall initially release each Picture
\ntheatrically in the United States either during the period from May 15 to August
\n15 (“Summer Period”) or during the period from November 15 to December 31
\n(“Holiday Period”).<\/p>\n
c. [*].<\/p>\n
(i) Neither Disney nor any of its Affiliates shall [*] any [*]
\n(other than [*] shown with a [*] any of the following [*]:<\/p>\n
(A) during the [*] before and [*] after the initial
\ntheatrical release of the Picture;<\/p>\n
(B) during a [*] in which a [*] is [*]; or<\/p>\n
-6-
\n——-
\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.
\n 11<\/p>\n
(C) during the period commencing [*] before a [*] or [*]
\nafter [*], and ending at the end of [*] in which a Picture is [*], except that
\nDisney may [*] or [*] another [*] during such period provided that [*] and is
\nnot [*] or [*] until at least [*] after the [*] of such Picture in the [*]. For
\npurposes of this Agreement, [*] means a premiere animated feature-length
\ntheatrical motion picture (e.g. [*] or [*] and not [*] or [*]) fully financed
\nand distributed by Disney.<\/p>\n
(ii) Neither Disney nor any of its Affiliates shall [*] or [*]
\nany Disney branded or G-rated live action motion picture distributed by Disney
\nor its Affiliates (e.g. [*] or [*]) during the period commencing [*] before and
\nending [*] after the [*] of the Picture, or ending [*] after the [*] of the
\nPicture in the case of a Picture [*].<\/p>\n
(iii) For purposes of this Agreement, “Affiliate” means any
\nperson or entity (i) in which Disney owns or controls directly or indirectly at
\nleast a 25% ownership interest, (ii) which owns or controls directly or
\nindirectly at least a 25% ownership interest in Disney, or (iii) in which a
\nperson or entity owns or controls directly or indirectly at least a 25%
\nownership interest that also owns or controls directly or indirectly a 25%
\nownership in Disney.<\/p>\n
d. Walt Disney Pictures Brand. Each Picture shall be distributed and
\nmarketed under the Walt Disney Pictures brand (or the then current Disney brand
\nfor Premiere Disney Movies) and with the credits and branding specified in
\nparagraph 12.<\/p>\n
e. Distribution and Marketing. Each Picture shall be distributed and
\nmarketed by Disney in all markets and media and on a worldwide basis in a manner
\nsimilar to that in which Disney then currently distributes and markets[*].<\/p>\n
f. Consultation with Pixar. Disney shall consult with Pixar relating to
\nall such major marketing and distribution decisions including, without
\nlimitation, the initial release plan of each Picture in each primary market
\n(i.e., theatrical, non-theatrical, pay-per-view, pay televisions, network, first
\ncycle free television syndication and home video), any theatrical re-release,
\nthe initial advertising campaign, home video pricing and commercial tie-ins and
\ncross-promotion deals, provided that Disney shall have the final decision on
\nsuch matters. Upon request by Pixar, Disney shall [*] with [*] and [*], provided
\nthat at Disney’s option such [*] and [*] may be in either [*] or [*].<\/p>\n
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\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
-7-
\n 12<\/p>\n
g. Pixar Representative. Pixar may designate a representative (the
\n“Pixar Marketing and Distribution Representative”), who shall be subject to the
\nreasonable approval of Disney. The Pixar Marketing and Distribution
\nRepresentative shall be [*] to monitor marketing and distribution of the
\nPictures, Ancillary Rights and Derivative Works and the Distribution Costs
\nrelated thereto, to review marketing and distribution and Distribution Cost [*],
\nto have access to Disney’s marketing and distribution personnel and marketing
\nand distribution [*] solely related to the Pictures on a regular basis, and to
\nreceive periodic briefings from Disney on marketing and distribution issues.
\nDisney will also furnish the Pixar Marketing and Distribution representative,
\nupon request, [*] relating to anticipated [*] and [*] relating to the Pictures,
\nAncillary Rights and Derivative Works. The Pixar Marketing and Distribution
\nRepresentative shall not have decision-making authority over Disney. The Pixar
\nMarketing and Distribution Representative shall have entered into a
\nconfidentiality agreement with Pixar which covers and protects Disney
\nConfidential Information as provided in this Agreement or shall sign a
\nconfidentiality agreement with Disney. The salary and expenses of the Pixar
\nMarketing and Distribution Representative shall not be included in Distribution
\nCosts and shall be the sole responsibility of Pixar.<\/p>\n
h. [*] Licensing. Disney shall not have the right to [*] (including
\nwithout limitation per-pay-view distribution) if such Picture has [*], without
\nthe prior written consent of Pixar. If any Picture [*] within [*] after its
\ninitial United States theatrical release, Disney shall have the right to [*],
\nprovided that any such [*] shall be consistent with Disney’s standard [*]
\npractices and terms for all of its own animated motion pictures of similar
\nperformance. Any payments received by Disney attributable to [*] motion picture
\nor television program shall be fairly [*] among such [*].<\/p>\n
i. Short Subjects. Disney may not exhibit a short subject motion
\npicture with any Picture without the prior written consent of Pixar, unless
\nrequired to do so by local law or the Picture is less than seventy (70) minutes
\nin length. If Disney determines to exhibit a short subject with such Picture in
\naccordance with this paragraph, Disney shall consult with Pixar with respect to
\nusing a Pixar motion picture as such short subject, but Disney’s decision shall
\ngovern.<\/p>\n
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\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
-8-
\n 13
\n j. Subdistributors and Flat Sales . Disney shall have the right to
\nutilize a subdistributor in connection with the initial release or other
\ndistribution of a Picture in any medium in any territory only if, at the time
\nsuch [*] is to be made, Disney [*] utilizes a subdistributor in connection with
\nthe [*] of its own motion pictures in such medium and\/or territory, including
\n[*]. Disney shall have the right to conclude a “flat sale” of a Picture in any
\nmedium and\/or territory only if, at the time such license is to be made, Disney
\n[*] in connection with the [*] of [*] in such medium and\/or territory, including
\n[*].<\/p>\n
k. “Making of” Films. The parties shall have [*] over the development
\nand production of any “making of” or other promotional films relating to any of
\nthe Pictures, provided that [*]. The costs of developing and producing such
\nfilms shall be included within Distribution Costs, and any [*] (to the extent a
\n[*] can be attributed to such [*]) actually [*], or [*], Disney and its
\nAffiliates (including any Affiliates acting as subdistributors) from the
\nexploitation of such films [*], of such Picture.<\/p>\n
7. FINANCING OF DEVELOPMENT AND PRODUCTION.<\/p>\n
Pixar (or a production entity established by Pixar in accordance with
\nthis Agreement) shall finance or cause to be financed fifty percent (50%) and
\nDisney shall finance or cause to be financed fifty percent (50%) of all costs
\nand expenses incurred by Pixar directly related to or fairly allocable to the
\ncreation, development, pre-production, production, post-production and delivery
\nto Disney of the Pictures (“Production Costs”). Production Costs shall include
\nwithout limitation (a) the costs of all Treatments prepared by Pixar for
\nsubmission to Disney under this Agreement, (b) all carrying costs incurred by
\nPixar for retaining of employees for production purposes under this Agreement
\nand the overhead attendant thereto, (c) all costs of Computational Resources,
\nand (d) fair allocations of all costs and expenses of Pixar associated with or
\nbenefiting the Picture, including research and development, general and
\nadministrative and overhead expenses and facilities. All such Production Costs
\nshall be financed by Pixar and Disney on a current, as needed basis. Without
\nlimiting the generality of the foregoing, Disney’s share of the costs of
\npurchasing Computational Resources shall be paid at the time of purchase of such
\nComputational Resources, and Disney’s share of carrying costs and other costs
\nshall be paid on an on-going basis as Pixar incurs such arrying osts and other
\ncosts. Disney and Pixar shall establish a mutually acceptable funding mechanism
\nto ensure that sums will be available in a timely manner to finance all such
\nexpenditures pursuant to a cash flow projections prepared and updated from time
\nto time by Pixar.<\/p>\n
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\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
-9-<\/p>\n
14
\n8. BUDGETS.<\/p>\n
a. Treatment Budget. Pixar and Disney shall mutually agree on a budget
\nfor the creation of Treatments (“Treatment Budget”) for each Picture, which
\nshall be separate from and not include carrying costs or the costs of
\nComputational Resources. If Pixar and Disney are unable to reach agreement on a
\nTreatment Budget for a Picture within forty-five (45) days after submission by
\nPixar of a proposed budget, the decision of Pixar as to such Treatment Budget
\nshall govern, so long as such Treatment Budget does not exceed [*] dollars
\n(U.S.$[*]) for the second Picture. Such amount shall increase by [*] percent
\n([*]%) for each subsequent Picture. The Treatment Budget shall be based on the
\nassumption that as many as three (3) Treatments will be created by Pixar in
\nconnection with such Picture. If more than three Treatments are created by
\nPixar, the Treatment Budget shall be increased by an amount equal to [*] of the
\nTreatment Budget for each Treatment above three created by Pixar. If a Treatment
\nwith respect to such Picture is approved or selected under paragraph 3(a), any
\nunused portion of the Treatment Budget shall be applied to the Development
\nBudget for such Picture.<\/p>\n
b. Development Budgets. Pixar and Disney shall mutually agree on a
\ndevelopment budget for the costs and expenses of the creation, development,
\npre-production and production of each Picture (after Bugs) after approval or
\nselection of the Treatment and prior to the approval of the Picture Budget for
\nsuch Picture (“Development Budget”). The Development Budget shall be separate
\nfrom and not include carrying costs or the costs of Computational Resources.
\nPixar and Disney shall seek to reach mutual agreement on the Development Budget
\nfor each Picture. If Pixar and Disney are unable to reach agreement on a
\nDevelopment Budget for a Picture within forty-five (45) days after approval or
\nselection of the Treatment for such Picture, the decision of Pixar as to such
\nDevelopment Budget shall govern, so long as such Development Budget does not
\nexceed [*] dollars (U.S.$[*]) for the second Picture. Such amount
\nshall increase by [*] percent ([*]) or each subsequent Picture.<\/p>\n
c. Picture Budgets.<\/p>\n
(i) Approval of Picture Budgets. A budget for each Picture
\n(the “Picture Budget”) shall be established as provided in this subparagraph
\n(c). Pixar shall be responsible for proposing a Picture Budget and submitting it
\nto Disney. The Development Budget for the Picture shall be included in the
\nPicture Budget for the Picture. Pixar and Disney will seek to reach mutual
\nagreement on the Picture Budget within sixty (60) days after submission by
\nPixar. If Pixar and Disney are unable to reach agreement on the Picture Budget
\nwithin that period of time, the decision of Pixar as to the Picture Budget shall
\ngovern, so long as such Picture Budget does not exceed [ * ]
\npercent ([*]%) of the largest Picture Budget for any prior Picture (determined
\non the basis of the originally approved Picture Budget for such Picture plus
\n[*] percent ([*]%) of any approved increases or overages in such Picture
\nBudget), whether released or in production, provided that the facilities<\/p>\n
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\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions. <\/p>\n
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\n 15
\nallocation in such budget shall not exceed [*] percent ([*]%) of the facilities
\nallocation in the Picture Budget for the immediately preceding Picture. The
\nPicture Budget may be revised from time to time during production of the Picture
\nupon written mutual agreement of Disney and Pixar, and when so revised such
\nrevised Picture Budget shall be deemed the Picture Budget of such Picture. No
\ncharges for Disney services or personnel shall be charged to the Picture except
\nthose services or personnel separately contracted for by Pixar (or the
\nproduction entity established by Pixar).<\/p>\n
(ii) Contents of Picture Budgets. Each Picture Budget
\nshall include the following items:<\/p>\n
(A) All direct costs and expenses previously incurred or
\nto be incurred in the creation, development, pre-production, production,
\npost-production and delivery to Disney of the Picture, including the cost of the
\nTreatment used as the basis for the screenplay funded under the Treatment Budget
\nfor such Picture and the costs and expenses of creation, development,
\npre-production and production funded under the Development Budget for such
\nPicture;<\/p>\n
(B) All carrying costs incurred by Pixar for retaining
\nof employees for production purposes under this Agreement for the applicable
\nPicture and the overhead attendant thereto;<\/p>\n
(C) Fair allocations of all costs and expenses of Pixar
\nassociated with or benefiting the Picture, including research and development,
\ngeneral and administrative and overhead expenses and facilities;<\/p>\n
(D) All Picture – specific costs, or fair allocations of
\nall costs, as applicable, of Computational Resources used in connection with
\ndevelopment or production of the Picture; and<\/p>\n
(E) A [*] in the amount of [*] percent ([*]%) of the
\nsum of [*] and [*] under subparagraphs ([*]) through ([*])(the “[*]”).<\/p>\n
(iii) Production Costs To Be Within Budget. Pixar shall have
\nthe right to reallocate costs among individual budget categories in the Picture,
\nsubject to the following: (1) Pixar shall advise the Disney Production
\nRepresentative of any reallocation within the Picture Budget and shall obtain
\nDisney’s written approval for any reallocation which exceeds [*] percent ([*]%)
\nin any budget category; and (2) use of the Contingency shall be subject to
\nwritten mutual approval of Pixar and Disney, except that Pixar may, without
\nprior approval of Disney, apply the Contingency to cover increases in salary,
\nbenefits and other compensation paid to personnel included within the Picture
\nBudget (but not to increase the number of such personnel) up to a total of
\n[*] percent ([*]%) of the costs of salary, benefits and other compensation
\nfor such personnel included within items (A) through (D) of <\/p>\n
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\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
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\n 16
\nsuch Picture Budget. Any expenditures in excess of the Picture Budget for such
\nPicture shall be subject to mutual written approval.<\/p>\n
d. [*]. All [*] must be jointly approved in writing by Disney and
\nPixar. Disney will account for and pay all [*] other than those paid to Pixar
\nemployees, which Pixar will account for and pay, subject to recoupment as
\nprovided in paragraph 10(a). For purposes of this Agreement, “[*]” means all
\nmutually approved [*] or other [*] to [*] of [*] of the Pictures or Ancillary
\nRights, excluding [*] as defined in Exhibit B. [*] payable to [*] for [*] of [*]
\npursuant to the agreement in effect as of the date of this Agreement between
\nDisney and [*], if the parties mutually agree to use [*] on a Picture, and [*]
\npayable to [*] pursuant to the [*] entered or to be entered under paragraph [*]
\nbetween Pixar with [*] are deemed jointly approved by Disney and Pixar under
\nthis paragraph.<\/p>\n
9. DEFINITION OF GROSS RECEIPTS.<\/p>\n
a. “Gross Receipts”. Except as otherwise expressly provided in this
\nparagraph 9, “Gross Receipts” shall include one hundred percent (100%) of all
\nrevenues, money or other consideration (to the extent a cash value can be
\nattributed to such other consideration) actually received by, or credited to,
\nDisney and its Affiliates (including any Affiliates acting as subdistributors)
\nfrom the exploitation of (i) the Picture, or any elements or portions thereof,
\nin any and all media and markets throughout the universe (including without
\nlimitation, theatrical, non-theatrical, home video and all forms of television),
\nwhether now known or hereafter devised, and (ii) all Ancillary Rights relating
\nto such Picture or to any Derivative Works based on such Picture. Without
\nlimiting the generality of the foregoing, Gross Receipts shall include, but not
\nbe limited to, [*], revenue generated from [*] which [*] (or the [*] if such [*]
\nmore than one [*]) and income received for [*] on or in [*] of any of the
\nPictures. With respect to [*] not yet known or devised, any other [*] not
\ncurrently being [*] or [*] shall be included within Gross Receipts if, and to
\nthe extent, such inclusion is consistent with the provisions of this Agreement.
\nGross Receipts shall be calculated using the [*] so [*] (to the extent [*]) are
\n[*] if the [*] has not yet occurred for the [*] Disney may establish [*] only
\nfor [*] and [*] for [*] and [*] (subject to paragraph 11(e) below), provided
\nthat (1) such [*] do not [*] of the Gross Receipts from [*] less any [*] or [*]
\nof the Gross Receipts from [*] less any [*], (2) such [*] are [*] within a
\nreasonable time not to exceed [*] for [*] and [*] for [*], and (3) [*] shall [*]
\non any [*] portion of [*], at the rate specified in paragraph 24, from the
\nmid-point of the applicable <\/p>\n
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\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
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17
\nmonth or quarter in which [*] until such [*] is [*]. To the extent that [*]
\nreceive an [*] shall [*] on [*] from the date [*] until [*] is either [*] in
\nGross Receipts, at the rate specified in paragraph 24.<\/p>\n
b. Exclusions from Gross Receipts. Notwithstanding anything to the
\ncontrary in this Agreement, Gross Receipts shall not include:<\/p>\n
(i) [*] of any [*] for [*] of the Pictures [*],<\/p>\n
(ii) receipts of [*] (including without limitation
\n [*]) for the [*] of the Pictures or the [*] thereof
\n [*],<\/p>\n
(iii) receipts of [*], including without limitation
\n [*] in [*] (as defined in paragraph [*])[*],<\/p>\n
(iv) receipts from [*] (as defined in paragraph [*]),<\/p>\n
(v) amounts [*] or for [*] or [*], and similar [*],<\/p>\n
(vi) amounts [*] on or for [*] or any portion
\n thereof, or the [*] or [*] of [*], including any [*],<\/p>\n
(vii) receipts from the [*] except as specified in
\n this paragraph or in paragraph [*],<\/p>\n
(viii) receipts from [*] contributed to [*], and<\/p>\n
(ix) [*] including [*].<\/p>\n
c. Ancillary Rights. Subject to the exclusions set forth in paragraph
\n9(b) and the provisions of this paragraph 9(c), an amount equal to one hundred
\npercent (100%) of all revenues, money or other consideration (to the extent a
\ncash value can be attributed to such other consideration) actually received by,
\nor credited to, Disney and its Affiliates (including any Affiliates acting as
\nsubdistributors) with respect to Ancillary Rights [*] shall be [*] Gross
\nReceipts, and not [*]. In the case of Ancillary Rights which are [*] or [*]
\nfor <\/p>\n
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\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
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\n 18
\n[*], the amount included in Gross Receipts shall be [*] or the [*] received by
\n[*] for [*] of its [*] of [*] of the [*] of such items.<\/p>\n
d. Home Video. With respect to the home video exploitation of the
\nPicture, subject to the exclusions set forth in paragraph 9(b) [*] percent
\n([*]%) of all [*] or [*] (to the extent a [*] can be attributed to such [*]) [*]
\n(including any [*]) [*] shall be included in Gross Receipts, and not [*].<\/p>\n
e. Affiliates. Gross Receipts shall be calculated by aggregating the
\nGross Receipts of all Affiliates, subject to the exclusions set forth in
\nparagraph 9(b). Any license or distribution agreement entered into by Disney (or
\nany Affiliate) with any Affiliates serving as [*] (e.g. [*]) shall be on terms
\n[*] of the following, in each case taking into account applicable windows, runs
\nand the box office performance of the respective works: (i) terms obtained by
\nDisney (or any Affiliate) from such [*] for [*], (ii) terms given by such [*] to
\n[*] for [*], and (iii) terms given by [*] other than [*], (e.g. [*]) for [*]. In
\nthe case where the same items or license rights are made available to both
\nAffiliates and non-Affiliates, the [*] or other [*] to Affiliates for purposes
\nof determining Gross Receipts shall be [*] or other [*] charged by Disney or its
\nAffiliates to [*] for the [*] or [*] at [*].<\/p>\n
10. DIVISION OF GROSS RECEIPTS.<\/p>\n
a. Division. Gross Receipts from each Picture and all Ancillary Rights
\nrelating thereto, shall be disbursed in the following order, on a continuing and
\ncumulative basis:<\/p>\n
(i) To Disney, a distribution fee (“Distribution Fee”) equal
\nto [*] of Gross Receipts excluding any Gross Receipts consisting of interest
\nor insurance recoveries.<\/p>\n
(ii) To Disney and Pixar, on a prorata basis, an amount equal
\nto any [*] paid on behalf of the production entity) for such Picture and related
\nAncillary Rights as pro-rata recoupment by Disney and Pixar for any [*] paid by
\neach such party.<\/p>\n
(iii) To Disney, an amount equal to its “Distribution Costs”
\nas defined in paragraph 11 with respect to such Picture and related Ancillary
\nRights; and<\/p>\n
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\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
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\n 19<\/p>\n
(iv) All remaining Gross Receipts shall be disbursed fifty
\npercent (50%) to Pixar and fifty percent (50%) to Disney.<\/p>\n
b. Separate Accounting Units. Each Picture and the Ancillary Rights
\nrelating thereto shall be treated as a separate accounting unit and there shall
\nbe no cross-collateralization of the Gross Receipts or Distribution Costs, as
\ndefined in paragraph 11 below, among the Pictures hereunder or between the
\nPictures and any Derivative Works. Cross-collateralization of Gross Receipts and
\nDistribution Costs in different markets and media (including home video and
\nAncillary Rights) within each Picture is permissible.<\/p>\n
c. Statements. Disney shall render detailed statements to Pixar of
\nGross Receipts, Distribution Costs and Distribution Fees with respect to each
\nPicture and its Ancillary Rights, together with payment of Pixar’s share of such
\nGross Receipts, monthly (on a calendar month basis), within forty-five (45) days
\nafter the end of the calendar month, for the first three (3) years commencing
\nwith the first month in which there are Gross Receipts from such Picture, and
\nthereafter quarterly (on a calendar quarter basis), within forty-five (45) days
\nafter the end of the quarter. Each statement shall include a statement of the
\napplicable Gross Receipts, and the manner in which they have been disbursed, and
\nan itemization of the Distribution Costs paid during the applicable period.
\nNotwithstanding the foregoing, starting three (3) years after the initial
\ntheatrical release of a Picture, Disney shall not be required to render
\nstatements with respect to such Picture (and its Ancillary Rights) for any
\nquarter in which Gross Receipts are less than $200,000 or in which no net
\npayment is due to Pixar after division of Gross Receipts as provided in this
\nAgreement, unless Pixar requests Disney in writing to render such statements
\nsuch request to be made not more than once per year.<\/p>\n
d. Audit Rights.<\/p>\n
(i) General. Pixar shall have the right to audit Disney’s and
\nits Affiliates’ books and records (other than tax returns) relating to the
\nPictures and Ancillary Rights, such audit to be conducted during normal business
\nhours by a certified public accountant selected by Pixar. Each audit shall be
\ncompleted within one (1) year from the time such audit commences. Only one such
\naudit may be conducted with respect to any one statement of Disney. Pixar shall
\nnot have the right to commence an audit of any statement after the expiration of
\nthirty-six (36) months after the receipt of such statement by Pixar, but shall
\nbe entitled to complete any audit of such statements commenced prior to the
\nexpiration of such period. Disney shall be entitled to receive a copy of any
\nreport of the audit furnished by the auditors to Pixar. [*] of any audit of
\nDisney, unless the audit reveals an underpayment by Disney of amounts payable
\nunder this Agreement for any period of more than five percent (5%)(excluding any
\nsubjective accounting judgments, such as subjective judgments as to allocation
\nof costs or revenues, with respect to which there is a good faith dispute
\nbetween the parties), [*]. Disney shall designate [*] one employee in its
\nfinance department who shall be available <\/p>\n
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\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
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\n 20
\n[*] to provide information to Pixar or its auditor, but who may also perform
\nother duties when not requested for such assistance by Pixar and its auditor.
\nPixar shall also [*] its subdistributors and agents, the costs of which shall be
\nincluded in Distribution Costs (as defined in paragraph 11).<\/p>\n
(ii) [*]. If so required by its contract with [*] (or [*])
\nPixar’s audit under subparagraph (i) above, if any, of Disney’s contract with
\n[*] (or [*]) will be separate from the general audit rights set forth above and
\nwill subject to the following additional conditions: the audit must be conducted
\nby Disney’s auditor from Price Waterhouse, and the auditor will confirm in
\nwriting the following:<\/p>\n
“We have examined the calculation of Disney’s
\n Distribution Costs reported on the participated
\n statement rendered for the period __________ with
\n respect to the motion picture entitled
\n “_________________”. Our examination was performed in
\n accordance with standards established by the American
\n Institute of Certified Public Accountants and,
\n accordingly, included such procedures as we
\n considered necessary in the circumstances.<\/p>\n
In our opinion, in so far as the “Distribution Costs”
\n referred to above relate to amounts paid to
\n [*] (or [*]) such Distribution Costs were calculated
\n and reported on the participation statement rendered
\n for the period _____________ in conformity with the
\n terms of the Agreement between Disney and Pixar dated
\n ______________________<\/p>\n
e. Payments. All payments to Pixar shall be in U.S. dollars, and shall
\nbe converted by Disney from any currency other than U.S. dollars into U.S.
\ndollars at the exchange rate at which such currency is converted by Disney for
\nits internal accounting purposes (with respect to Disney’s other revenue and
\nexpenses). Sums derived outside the United States which are not remittable to
\nDisney in the United States in U.S. dollars by reason of currency or other
\ngovernment restrictions shall be deemed “Blocked Funds” for purposes of this
\nAgreement. With respect to such portion of the Blocked Funds as would have been
\npayable to Pixar hereunder, Disney shall deposit such portion into a Pixar
\ninterest bearing bank account in the same bank as Disney uses in the applicable
\njurisdiction. To the extent Disney or its Affiliates expend or utilize any
\nBlocked Funds, including without limitation as a loan, Disney shall credit Gross
\nReceipts with the amount of Blocked Funds so expended or utilized.<\/p>\n
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\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
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\n 21
\n 11. DISTRIBUTION COSTS.<\/p>\n
a. Definition. For purposes of this Agreement, “Distribution Costs”
\nshall include only:<\/p>\n
(i) all out-of-pocket costs paid (or subject to paragraph
\n11(e) accrued for payment) to third parties by Disney and its Affiliates (other
\nthan Affiliates whose receipts are not included in the computation of Gross
\nReceipts) net of discounts, credits, refunds and rebates, provided that such
\nout-of-pocket costs are directly related or fairly allocable to distribution of
\na Picture in any and all media and markets and the Ancillary Rights relating
\nthereto and are either:<\/p>\n
(A) [*] or<\/p>\n
(B) for [*] undertaken for the sole purpose of [*] or
\n[*] or [*] to [*] of a Picture in [*] not utilized by [*] as of the date of
\nthis Agreement, provided that the [*] by this subparagraph (B) shall not [*] of
\nthe Distribution Costs of such Picture [*];<\/p>\n
(ii) [*] for each Picture as the [*] for the services of
\n[*].<\/p>\n
b. Exclusions. No payments by Disney or any Affiliate to Disney or any
\nAffiliate, [*], shall be included within Distribution Costs, except that
\nDistribution Costs otherwise within the definition of Distribution Costs may
\ninclude payments to an Affiliate for [*] or [*] hereafter acquired by Disney for
\n[*] from a [*]. The payments for such [*] or [*] must be [*] as though based on
\nan [*] and in no event [*] the [*] of the rate [*] for similar services for
\nother [*] or the rate charged by such [*] to [*] for similar services for [*].
\nExcept as included in the payments for the services covered by the preceding
\nsentence, [*] or other [*] or its [*] (including without limitation [*] of [*]
\nand [*] shall be included in Distribution Costs beyond the [*] specified in item
\n[*] above. Distribution Costs shall not include any financing costs [*]. Any
\nDistribution Costs allocable to more than one motion picture shall be [*] to the
\nPicture, with no [*]. Distribution Costs shall not include any<\/p>\n
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\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
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\n 22
\namounts related to creation, development, pre-production, production,
\npost-production or delivery to Disney of any of the Pictures or any
\nParticipations.<\/p>\n
c. Cross Promotions. Cross promotion within the Theme Parks or other
\nDisney attractions or with another product distributed by Disney (e.g.
\nadvertisement on a videocassette of another motion picture) will not be included
\nin Distribution Costs. Special projects (e.g. [*]) and promotional activities
\nrelated to a Picture (e.g. [*]) shall not be included in Distribution Costs
\nunless they are constructed or undertaken for the sole purpose of marketing and
\npromoting a Picture. Thus, for example, the cost of a [*] in a [*] relating to a
\nPicture would not be included in Distribution Costs because such [*] also serves
\nto promote the [*]. If a special project included in Distribution Costs in
\naccord with this paragraph is later used in a [*] at any time after sixty (60)
\ndays following the release of the video release of such Picture or for other
\npurposes other than solely promotion of a Picture, the costs of such special
\nproject shall be deducted from Distribution Costs. One hundred percent (100%) of
\nall costs of relocating or reconstructing such special projects shall be
\nexcluded from Distribution Costs.<\/p>\n
d. Disney Responsible. As between Disney and Pixar, Disney shall be
\nresponsible for financing one hundred percent (100%) of the costs and expenses
\nof marketing, promotion, publicity, advertising and distribution (including
\ncosts of goods) of each Picture and all Ancillary Rights relating thereto,
\nincluding without limitation all items listed in Exhibit B and all
\nParticipations, subject to recoupment of Distribution Costs and Participations
\nas provided in paragraph 10, and Pixar shall not be responsible or liable for
\nany costs, expenses or losses incurred in connection therewith.<\/p>\n
e. Accrual. Distribution Costs shall be calculated based on [*] and [*]
\n(applying generally accepted accounting principles), provided that commencing
\n[*] after [*] and [*] may be [*] only if such [*] by an [*] or other [*] and are
\npayable within [*] following the end of the period covered by the statement to
\nPixar [*], are payable within [*] following the end of such period) and are paid
\nwithin such [*] or [*], respectively.<\/p>\n
12. BRAND\/CREDIT.<\/p>\n
It is the parties’ intent that the Pixar brand be established
\nas a co-equal brand to the Disney brand in connection with the Pictures,
\nAncillary Rights and Derivative Works. To this end, the Pixar logo, animated
\nlogo and credit as specified by Pixar from time to time shall be used in a
\nmanner which is [*] (as defined in subparagraph (f) below) to the Disney logo,
\nanimated logo and credit, in connection with all Pictures, Ancillary Rights and
\nDerivative Works, subject where applicable to the requirements set forth below.<\/p>\n
[*] – Confidential treatment requested.<\/p>\n
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\n 23<\/p>\n
a. On Screen Credits. With respect to theatrical motion
\npictures and made for home video productions, screen credits to Pixar and Disney
\nshall be in the main titles, in the following order of appearance and on
\nseparate cards: (A) opening credit – the Walt Disney Pictures animated logo; (B)
\nthe Pixar animated logo, for the same duration accorded Disney’s animated logo;
\n(C) a credit in the form “Walt Disney Pictures Presents”; (iv) a credit in the
\nform “A Pixar Animation Studio Film” or “A Pixar Film”, as Pixar may timely
\nelect; for each Picture, for the [*] and in an [*] than the [*] utilized for [*]
\nand in an [*] than [*] of the [*] used to display the [*], and (E) the title of
\nthe Picture. With respect to television productions, the on screen credits shall
\nbe the last two credits of the program, each on a separate card, as follows: (A)
\nthe Pixar logo, which may be animated, for the [*] accorded the [*], and (B) the
\nDisney (or Walt Disney Television) logo, which may be animated. Credits in
\ncompliance with this subparagraph (a) shall be deemed [*].<\/p>\n
b. Paid Advertising<\/p>\n
(i) With respect to all paid advertising within Disney’s
\ncontrol relating to the distribution or exploitation of the Pictures and
\nDerivative Works (other than as specified in subparagraph (ii) below), the
\ncredits shall be, in order of appearance: (A) first line- “Walt Disney
\nPictures”; (B) second line – “Presents”; (C) third line – “A Pixar Film”; and
\n(D) fourth line – the artwork title of the Picture. Pixar’s credit shall be [*]
\nin size to the [*] credit.<\/p>\n
(ii) With respect to so called “teaser” and “trailers”
\nor other similar advertising (including promotional films) within Disney’s
\ncontrol, on the screen or by radio or television, the credits accorded to the
\nparties shall be as set forth in subparagraph (a), provided that if Disney
\nelects not to display its animated logo, Pixar shall not be entitled to an
\nanimated logo. Notwithstanding the foregoing, if only a verbal credit is
\nutilized, the credit shall contain references to both parties in similar fashion
\n(e.g. “From Disney and Pixar” or “Walt Disney Pictures Presents a Pixar Film”)
\nimmediately before the title, with the [*] made with [*] and [*] to the Disney
\ncredit.<\/p>\n
(iii) Each party will insure (to the extent within its
\ncontrol) that any publicity relating to the Pictures, Derivative Works and
\nAncillary Rights shall reflect the co-equal brand established hereunder.<\/p>\n
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\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
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\n 24
\n c. Packaging.<\/p>\n
(i) With respect to packaging of home video devices, the
\ncredit sets forth in subparagraph (b) (i) shall apply.<\/p>\n
(ii) With respect to packaging of Ancillary Rights
\n(including without limitation, so called hang tags on merchandising items), the
\ncredits shall be in order of appearance: (A) first line – the artwork title of
\nthe Picture, it being understood that there should be no above title credit
\nunless otherwise mutually agreed and (B) second line – “A Disney\/Pixar
\nProduction”, provided that Pixar’s credit shall be [*] in size to the [*]
\ncredit.<\/p>\n
(iii) With respect to the packaging of Interactive
\nWorks, the credits shall be in order of appearance: (A) “Disney Interactive and
\nPixar Animation Studios Presents” or “Disney Interactive and Pixar Presents”, as
\nPixar may timely elect for each Interactive Work and (B) the artwork title of
\nthe product provided that Pixar’s credit shall be [*] in size to the Disney
\ncredit.<\/p>\n
d. Billing Block. Wherever a billing block is utilized in paid
\nadvertising or packaging hereunder, the credits shall be, in order of
\nappearance: (A) a credit in the form “Walt Disney Pictures Presents”; (B) a
\ncredit in the form ” A Pixar Film”, immediately following and on the same line
\nas the Disney presentation credit, in an average size of type [*] of the
\naverage size of type used to display the [*] of the Picture and in an average
\nsize of type [*] the average size of type utilized for the [*]; and (C) the
\nregular title of the Picture.<\/p>\n
e. Stationary Logo. Wherever Disney accords a stationary logo
\ncredit in paid advertising or packaging hereunder, Pixar shall also be accorded
\na stationary logo credit (side by side), which logo credit shall be [*] in size
\nto the Disney credit.<\/p>\n
f. [*]. “[*]” shall mean that Pixar’s credit shall [*] appear
\n[*] to the [*] when [*] in context, even if they are [*] in [*]. For example,
\nthe parties agree that a logo [*] than the same logo [*] with [*] letters, and
\nthat a credit positioned [*] of [*] may [*]. These [*] effects shall be included
\nin any assessment to determine the [*] of each party’s credit.<\/p>\n
If the parties cannot agree as to the [*] of a credit, then
\n[*] and [*] (or their replacements as determined under paragraph 3.b. above)
\nshall decide the issue. If they are unable to decide for any reason, then each
\nparty shall select one individual and those two individuals shall select a third
\nindividual mutually <\/p>\n
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\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
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\n 25
\nacceptable to both parties, and such three individuals shall decide the issue.
\nNo individual which has or had a commercial tie to either party during the
\npreceding five years may be selected.<\/p>\n
g. Credits. Pixar shall have the right, in consultation with
\nDisney, to designate all credits in the Pictures; provided that the types and
\nplacement of credits shall be materially consistent with the then current Disney
\ncredit policy. Disney shall comply with any such credits of which Pixar advises
\nDisney in writing. Disney acknowledges that John Lasseter will receive Executive
\nProducer credit on all Pictures on which he renders such services.<\/p>\n
h. Prospective Cure. In the event of failure by a party to
\naccord credit or branding in accordance with the terms of this paragraph 12,
\nsuch party shall upon receipt of written notice promptly cure the failure on a
\nprospective basis, it being understood that Disney will correct all prints in a
\nmanner which will not materially interfere with the distribution of the Picture.
\nDisney will use good faith efforts to correct any material failure with respect
\nto any existing packaging within Disney’s control. The foregoing shall not be
\ndeemed a [*] of any other [*] of Pixar in the event of a breach of this
\nparagraph, other than as set forth in paragraph 26(b) below. The credits and
\nbranding contained in any Completed Work (as defined in paragraph 26(b) below)
\ndelivered to Pixar by Disney shall be deemed approved by Pixar for such work.<\/p>\n
13. PROPRIETARY RIGHTS.<\/p>\n
a. Pictures and Ancillary Rights. The copyright, trademarks and other
\nintellectual property rights in and to the Pictures, all new and unique
\ncharacters and story elements thereof and the audio-visual images thereof, and
\nthe Ancillary Rights relating thereto, excluding Pixar Technology as defined in
\nsubparagraph (c) below and further excluding any trademarks and other
\nintellectual property rights not uniquely associated with the Pictures or
\nAncillary Rights related thereto owned by Pixar (e.g. “Pixar”) or Disney (e.g.
\n“Disney”), shall be jointly owned by Disney and Pixar on an undivided 50\/50
\nbasis, provided, however, that Disney shall have (i) the sole and exclusive
\nright and obligation to register, administer and enforce such jointly-owned
\ncopyrights, trademarks and other intellectual property rights in the joint name
\nof Pixar and Disney, and (ii) exclusive distribution and exploitation rights to
\nthe Pictures, Derivative Works and Ancillary Rights relating thereto in
\nperpetuity in any and all media now known or unknown and by any and all means or
\ndevices now known or unknown throughout the universe, subject to the provisions
\nof this Agreement. Upon request, Pixar will cooperate with Disney in connection
\nwith the registration, administration and enforcement of such rights. The
\nparties will execute, promptly upon request, all further reasonable and
\nnecessary documents to effectuate the provisions of this paragraph 13.<\/p>\n
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\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
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26
\n b. Corporate Promotional Use. Each party shall have the right to use
\nthe characters, trademarks and all unique story elements of the Pictures and of
\nToy Story and excerpts of the Pictures and Toy Story not more than five (5)
\nminutes in length for purposes of corporate identification and marketing,
\nincluding without limitation in or on any of the following: corporate
\nadvertising and promotional materials, stationery, stock certificates, business
\ncards, annual reports and other shareholder materials, recruiting materials,
\npress kits (multimedia and printed), corporate trade shows, Internet web pages
\nand in corporate facilities. Pixar shall include a copyright notice in the form
\n“O Pixar” on all such materials of Pixar, and Disney shall include a copyright
\nnotice in the form “O Disney” on all such materials of Disney. [*] any new
\ncharacters of a Picture under this paragraph 13(b) [*] the initial theatrical
\nrelease of the Picture and [*] a [*] throughout its corporate identification and
\nmarketing over [*] in such manner as to create the [*] that [*] is its [*]. Each
\nparty will grant the other party access to any key advertising artwork and
\nmaterials for the foregoing purposes.<\/p>\n
c. Pixar Technology. As between Disney and Pixar, Pixar shall own the
\ncopyright and all other intellectual property rights in and to all computer
\nprograms, computer models, software, data, tools, algorithms, inventions, film
\nscanning and film recording technology and other technology developed or
\ndiscovered by Pixar before, during or after the Term of the Agreement, including
\nwithout limitation all computer programs, computer models, software, data,
\ntools, algorithms, inventions, film scanning and film recording technology and
\nother technology discovered or developed by Pixar in developing or producing any
\nof the Pictures or Derivative Works or used to produce images included in any of
\nthe Pictures or Derivative Works (collectively, “Pixar Technology”).
\nNotwithstanding any other provision of this Agreement, no license is granted to
\nDisney under this Agreement to use or to authorize the use of Pixar Technology
\nin any manner. Nothing in this Agreement shall be deemed to grant a license by
\nDisney to Pixar of any technology owned by Disney or to amend or supersede any
\nexisting end user license by Pixar to Disney of Pixar’s Renderman product or
\nother software product. Nothing in this Agreement shall prevent or restrict
\nPixar from using Pixar Technology (but not the unique characters or story
\nelements of the Pictures) in non-Disney projects, subject to the provisions of
\nparagraph 17. If Pixar grants a security interest or other lien in Pixar
\nTechnology to a third party, it will require the third party to enter into a
\nnon-disturbance agreement under which the third party agrees not to foreclose or
\notherwise enforce its security interest or lien in such a manner as to prevent
\nPixar from completing and delivering the Pictures or frustrate the distribution
\nor other exploitation of the Pictures under this Agreement.<\/p>\n
d. Treatments . To the extent Pixar develops any Treatments based on a
\nPixar original idea, an idea acquired by Pixar or a public domain idea (but not
\nan original idea or material assigned by Disney to Pixar, which idea or material
\nshall be owned by Disney) which were rejected by Disney pursuant to the
\nprocedure set forth in paragraph 3 above, [*] shall [*] all [*] in and to
\nsuch Treatments. Pixar shall have the right to<\/p>\n
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\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
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\n 27
\ncontinue to develop and use such Treatments subject to the provisions of
\nparagraph 17(a) below, provided that for any Treatment which Pixar uses as the
\nbasis for a motion picture, Pixar shall reimburse Disney upon commencement of
\nproduction animation for the amount paid by Disney for such Treatment, with
\ninterest at the Bank of America reference rate plus 125 basis points from the
\ndate of Disney’s payment. Nothing in this provision shall be deemed to place
\neither party in a worse position with respect to use of public domain ideas and
\npublic domain materials than a member of the general public.<\/p>\n
14. DEFENSE OF CLAIMS.<\/p>\n
a. By Disney. Disney shall defend, and pay any judgment or settlement
\nof, any claims or actions asserted by any third party against Disney, its
\nAffiliates, Pixar, any production entity established by Pixar or any of their
\nrespective officers, directors, employees, agents or representatives, arising
\nout of or in connection with the Pictures or any Ancillary Rights relating
\nthereto, or the development, production, distribution, exploitation or
\nexhibition thereof, including without limitation any claim or actions alleging
\nthat any Picture or any element or part thereof, or the reproduction,
\ndistribution, exploitation or exhibition thereof, infringes the copyright,
\npublicity rights or other intellectual property rights of any person or entity,
\nother than those claims or actions which Pixar is required to defend under
\nparagraph 14(b). Disney shall pay all expenses, court costs and outside
\nattorneys’ fees incurred in connection with any of the foregoing claims or
\nactions. [*] shall obtain [*] to any [*], which [*] shall not be [*]. Any
\namounts paid to third parties by Disney in connection with such claims or
\nactions shall be recoupable by Disney as [*] as provided in
\nparagraphs [*].<\/p>\n
b. By Pixar. Pixar shall defend, and pay any judgment or settlement of,
\nany claims or actions asserted by any third party against Disney, its
\nAffiliates, Pixar, any production entity established by Pixar or any of their
\nrespective officers, directors, employees, agents or representatives, arising
\nout of or in connection with personal injury, property damage or breach of
\ncontract in connection with the development or production of the Pictures,
\nexcluding any claim or action relating in whole or part to distribution,
\nexploitation or exhibition of any of the Pictures or alleging infringement of
\ncopyright, publicity rights or other intellectual property rights. Pixar shall
\npay all expenses, court costs and outside attorneys’ fees incurred in connection
\nwith any of the foregoing claims or actions. [*] shall obtain [*] to any [*] or
\n[*], which [*] shall not be [*]. Any amounts paid to third parties by Pixar in
\nconnection with such claims or actions shall be considered [*] to be [*] and
\n[*] under the provisions of [*].<\/p>\n
15. DERIVATIVE WORKS.<\/p>\n
a. Definition of Derivative Works. For purposes of this Agreement,
\n“Derivative Works” means any work based upon any of the Pictures or Toy Story,
\nor any original <\/p>\n
[*] – Confidential treatment requested.<\/p>\n
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\n 28
\ncharacters therefrom or story or other elements thereof, including without
\nlimitation sequels, prequels, remakes, made-for-home video productions,
\ntelevision productions, Interactive Works, shorts, commercials and interstitial
\nworks, stage plays, [*], Internet websites, [*], [*] and [*].<\/p>\n
b. Decision to Produce.<\/p>\n
(i) Subject to the provisions of this paragraph 15, Disney and
\nPixar shall have mutual control of whether or not to develop, produce or
\notherwise exploit any Derivative Works (or transfer or license any rights to
\nexploit any Derivative Works) during the Term or thereafter. Within a reasonable
\ntime after request of Disney or Pixar, Disney and Pixar will seek to reach
\nagreement on the terms of development and production of any Derivative Work. In
\nthe event of a disagreement of whether or not to develop, produce or otherwise
\nexploit any Derivative Work, Disney’s decision shall govern, [*]. Prior to
\ncommencement of the development or production of any Derivative Work (or
\ntransfer or license of any rights to exploit any Derivative Work), Disney shall
\nnotify Pixar and afford Pixar the opportunity to make its election with respect
\nto such work as provided in this paragraph 15. Pixar shall notify Disney of its
\napplicable election as set forth in the following paragraphs, within thirty (30)
\ndays after written notice from Disney specifying the Derivative Work to be
\ndeveloped and produced. Disney will consult with Pixar during this thirty (30)
\nday period in order to discuss the proposed Derivative Work in order to assist
\nPixar in making its election. If Pixar fails to notify Disney of its election
\nwithin such thirty (30) period, Disney may serve on Pixar a notice demanding
\nPixar to make its election, and if Pixar fails to make its election within
\nfifteen (15) days after such demand notice, Pixar shall be deemed to have
\nelected to participate on a passive financial basis under the terms provided in
\nthis paragraph 15.<\/p>\n
(ii) If any Picture [*] or more in domestic box office
\nreceipts, [*] with a made-for-home video sequel or prequel of such Picture under
\nthe terms set forth in paragraph (d)(i) below, [*] within [*] after the end of
\nthe statement period in which such Picture [*], subject to the following: Upon
\nrequest by Disney, Pixar and Disney will discuss during the sixty (60) days
\nfollowing such [*] whether the sequel or prequel should be a made-for-home video
\nor a theatrical motion picture. Following such discussion, the [*] whether to
\nproceed with such sequel or prequel in the form of a made-for-home video [*]
\nthat in the case of one but only one such sequel or prequel, [*] that the sequel
\nor prequel be a [*].<\/p>\n
c. Theatrical Motion Pictures. In the case of any Derivative
\nWork which is a theatrical motion picture, including a sequel, prequel or
\nremake, whether during the Term or thereafter, Pixar shall be entitled, at its
\nelection, to do any one of the following:<\/p>\n
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\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
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\n 29
\n (i) Co-finance and produce such Derivative Work. If Pixar
\nelects to co-finance and produce such work, such motion picture shall be added
\nto the definition of Pictures produced and financed hereunder and all the
\nprovisions of this Agreement shall apply to such motion picture, subject to the
\nfollowing: Such Derivative Work shall not count toward the five Pictures to be
\nproduced under this Agreement. Disney shall be entitled to approve the
\nTreatment. The provisions of paragraphs) 3(a)(i) and (ii) shall not apply to
\nsuch Derivative Work.<\/p>\n
(ii) Participate on a passive financial basis in such
\nDerivative Work. If Pixar elects to participate on a passive financial basis,
\nPixar shall be entitled to a participation equal to [*] of the Gross Receipts
\nof such motion picture, permanently escalating on a prospective basis to [*] of
\nGross Receipts at Cash Breakeven, and permanently escalating on a prospective
\nbasis to [*] of Gross Receipts at Second Cash Breakeven. For purposes of this
\nAgreement, “Cash Breakeven” means the first accounting period in which
\ncumulative Gross Receipts equal or exceed the sum of Distribution Costs and
\nDistribution Fees with respect to the applicable work and the direct cost of
\nproduction of the applicable work, and “Second Cash Breakeven” means the first
\naccounting period in which the cumulative Gross Receipts equal or exceed the sum
\nof Distribution Costs and Distribution Fees computed as if Distribution Fees
\nwere [*] with respect to the applicable work and the direct cost of production
\nof the applicable work. If Pixar elects to participate on a passive financial
\nbasis with a theatrical motion picture under this provision, it shall not be
\nentitled thereafter to elect to co-finance and produce a subsequent theatrical
\nmotion picture or made-for-home video production based upon the same Picture.<\/p>\n
d. Made-for-Home Video Productions. In the case of any
\nDerivative Work which is a made-for-home video production, including a sequel,
\nprequel or remake, whether during the Term or thereafter, Pixar shall be
\nentitled, at its election, to do any one of the following:<\/p>\n
(i) Co-finance and produce such Derivative Work. If Pixar
\nelects to co-finance and produce such work, the terms and conditions of this
\nAgreement shall apply or be extended to cover such work, and the provisions of
\nthis Agreement shall apply to such work in the same manner as they apply to
\nPictures, subject to following: Disney shall be entitled to approve the
\nTreatment. Creative control shall be governed by the terms of this Agreement as
\nif such work were a Picture. Pixar and Disney shall mutually agree on a Picture
\nBudget for such Derivative Work. If Pixar and Disney are unable to reach
\nagreement on the Picture Budget for such Derivative Work within sixty (60) days
\nafter submission by Pixar of a proposed budget and the domestic box office
\nreceipts of the Picture on which such Derivative Work is based are $[*] million
\nor more, the decision of Pixar as to such budget shall govern, so long as such
\nPicture Budget does not exceed $[*] million (including the Treatment Budget for
\nsuch Derivative Work but excluding voice talent). Disney shall release such
\nvideo within six (6) months after delivery of the work to Disney by Pixar; the
\nwork shall be distributed and marketed by Disney, under the Disney brand if the
\nwork is G-rated and the Picture on which<\/p>\n
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\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
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\n 30
\nit is based was distributed and marketed by Disney under the Disney brand, and
\nwith the credits and branding specified in paragraph 12, throughout the universe
\nin a [*] that in which [*] and [*] (e.g. [*]) financed and distributed by
\nDisney. The [*] under [*] as the [*] for Disney’s [*] department in connection
\nwith such Derivative Work shall be [*] dollars ($[*]). Disney agrees that it and
\nits Affiliates will not [*] any other made-for-home video within the [*] or the
\n[*] the [*] of such work. The following provisions of this Agreement shall not
\napply to such Derivative Work: 3(a)(i), 3(a)(ii), 6(a), 6(b), 6(c), 6(d), and
\n6(e). Pixar and Disney hereby designate the made-for-home video sequel to Toy
\nStory as a video production Derivative Work which Pixar has elected to
\nco-finance and produce under this subparagraph.<\/p>\n
(ii) Participate on a passive financial basis in such
\nDerivative Work. If Pixar elects to participate on a passive financial basis,
\nPixar shall be entitled to a royalty equal to [*] of the Gross Receipts of
\nsuch made-for-home video production, permanently escalating on a prospective
\nbasis to [*] of Gross Receipts at Cash Breakeven. If Pixar elects to
\nparticipate on a passive financial basis with a made-for-home video production
\nunder this provision, it shall not be entitled thereafter to elect to
\nco-finance and produce a subsequent theatrical motion picture or made-for-home
\nvideo production based upon the same Picture.<\/p>\n
e. Television Productions. In the case of any Derivative Work
\nwhich is a television production (including without limitation any series,
\nspecials, “movie of the week” or mini-series), whether during the Term or
\nthereafter, Pixar shall be entitled, at its election, to do any one of the
\nfollowing:<\/p>\n
(i) Co-finance and produce such Derivative Work. If Pixar
\nelects to co-finance and produce such work, the parties shall mutually agree
\nupon the terms and conditions under which such work shall be financed, produced
\nand distributed, subject to the following: The Treatment for such television
\nproduction (or the pilot thereof in the case of a series) shall be subject to
\nmutual approval; the parties will have mutual creative control of the work; the
\nfinancial terms (including the financing of production and division of Gross
\nReceipts) shall be the same as under this Agreement, and the branding and
\ncredits for such work shall be consistent with the terms of paragraph 12.<\/p>\n
(ii) Participate on a passive financial basis in such
\nDerivative Work. If Pixar elects to participate on a passive financial basis,
\nPixar shall be entitled to a royalty equal to (A) $[*] per episode plus
\n[*] of [*] of the net profits (the definition of which will be negotiated in
\ngood faith by the parties in accordance with Disney’s customary parameters
\nfor deals of this kind) in the case of a television production which is
\nbroadcast only during non-prime time, and (B) an amount to be mutually agreed
\nin advance in the case of any other television production.<\/p>\n
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\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
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\n 31
\n f. Interactive Works. In the case of Derivative Work which is an
\nInteractive Work, including without limitation any interactive CD ROM-based and
\nDVD-based products, whether during the Term or thereafter, Pixar shall be
\nentitled, at its election, to do any one of the following:<\/p>\n
(i) Co-finance and produce such Interactive Work. If Pixar
\nelects to co-finance and produce such work, the parties shall mutually agree
\nupon the terms and conditions under which such work shall be financed, produced
\nand distributed, subject to the following. Disney shall be entitled to approve
\nthe Treatment, and subject to Disney’s approval of the Treatment, Pixar [*]
\nwith respect to such Derivative Work. The parties shall mutually agree upon a
\nbudget for such work. The financial terms (including the financing of production
\nand division of Gross Receipts) shall be the same as under this Agreement,
\nexcept that the parties shall mutually agree upon a budget for Distribution
\nCosts and there shall be no distribution fee. Disney shall release such work
\nwithin six (6) months after delivery of the work to Disney by Pixar; the work
\nshall be distributed and marketed by Disney, under the Disney Interactive brand,
\nand with the branding and credits specified in paragraph 12, in all markets and
\nmedia throughout the universe in a [*] Interactive Works financed and
\ndistributed by Disney based upon [*].<\/p>\n
(ii) Participate on a passive financial basis in such
\nInteractive Work. If Pixar elects to participate on a passive financial basis,
\nPixar shall be entitled to a royalty equal to [*] of the Gross Receipts of
\nsuch Interactive Work.<\/p>\n
g. Live Entertainment. In the case of any Derivative Work which is a
\nlive entertainment, including without limitation stage plays and [*], whether
\nduring the Term or thereafter, Pixar shall be entitled to participate on a
\npassive financial basis in such Derivative Work as follows: In the case of a
\nstage play, Pixar shall receive [*] of the gross weekly box office receipts. In
\nthe case of an [*], Pixar shall receive a fee of [*] dollars ($[*]) per year on
\na title by title basis (pro rated if other non-Pixar characters are also used in
\nthe production). In the case of other live entertainment, Pixar shall receive a
\nparticipation in an amount to be mutually agreed in advance. Notwithstanding the
\nforegoing, if an [*] or other live entertainment (other than a stage play ) is
\nfully financed and produced under license from Disney by a third party which is
\nnot Disney or an Affiliate of Disney, the proceeds from such license shall be
\nsplit [*], after deducting a distribution fee for Disney of [*].<\/p>\n
h. Location Based Entertainment. In the case of all Derivative Works
\nwhich are venues, retail operations or location-based entertainment which use
\nunique characters or other elements of any of the Pictures or Toy Story as their
\nprimary theme (“Picture-Themed Location-Based Entertainment”), Pixar shall be
\nentitled either to [*] or to [*], upon terms and conditions to be mutually
\nagreed in advance by the parties. If a venue, retail operation or location-based<\/p>\n
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\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
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\n 32
\nentertainment uses some unique characters or other elements of any of the
\nPictures or Toy Story in combination with other characters or elements such that
\nthe unique characters or other elements of the Pictures or Toy Story are not the
\nprimary theme, such venue, retail operation or location-based entertainment
\nshall be treated pursuant to subparagraph (j) below. By way only of example, a
\n[*] would be a Picture-Themed Location-Based Entertainment, but a [*] which
\nincluded a [*] area along with substantial other areas themed from other
\ncharacters or elements not based on any of the Pictures or Toy Story would not
\nbe a Picture-Themed Location-Based Entertainment.<\/p>\n
i. All Other Works other than Theme Parks. Except as otherwise provided
\nin subparagraph (h) below, in the case of all Derivative Works not covered by
\nsubparagraphs 15(c) through (h), including shorts, commercials, Internet
\nwebsites, interstitial works and radio productions, whether during the Term or
\nthereafter, Pixar shall be entitled to [*] in such work and receive a [*] to
\nbe [*] agreed if the work is a revenue-producing work, provided that if Pixar
\nrequests to produce such work, or elements thereof, the parties will negotiate
\nin good faith within sixty (60) days appropriate terms under which Pixar may
\ndo so.<\/p>\n
j. Theme Parks. Disney shall have the sole and exclusive right in
\nperpetuity to use each Picture, the characters therefrom and unique story
\nelements thereof (excluding Pixar Technology) and\/or footage from each Picture
\n[*] in any of the following: (i) venues, retail operations and location-based
\nentertainment which are not Picture-Themed Location-Based Entertainment,(ii)
\nDisney’s major theme parks currently in Anaheim, California; Orlando, Florida;
\nParis, France; and Tokyo, Japan, or future Disney theme parks of similar
\nmagnitude (collectively “Theme Parks”), and (iii) cruise ships throughout the
\nuniverse (collectively “Theme Park Rights”) with no financial obligation to
\nPixar. Such use may include use of the characters from the Pictures and unique
\nstory elements thereof (excluding Pixar Technology) as so called “walking
\ncharacters”, or in parades, stage shows or similar activities therein, as
\nelements thereof (e.g., standees, props, etc.) , and as rides and attractions.
\nDisney shall consult with Pixar as to the exploitation of the said Theme Park
\nRights, but Disney’s decision shall govern.<\/p>\n
k. Creative Control of Derivative Works Not Produced by Pixar. In the
\ncase of all Derivative Works not produced by Pixar, Disney shall have creative
\ncontrol over the development and production of the work, provided that Disney
\nand Pixar shall [*] of any 3D computer animation embodied or used in production
\nof such work but in the event of disagreement the [*].<\/p>\n
16. TOY STORY.<\/p>\n
a. Derivative Works. The parties acknowledge that any Derivative Works
\nbased on Toy Story including, without limitation, a theatrical motion picture
\nsequel, a made-for-home video sequel, a television production, or a third or
\nsubsequent CD-ROM product, but excluding the first and second Interactive Works
\ndeveloped under the CD-ROM <\/p>\n
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\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
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\n 33
\nDevelopment and Publishing Agreement dated as of August 24, 1995 between Disney
\nInteractive and Pixar (the “CD ROM Agreement”), shall be governed by this
\nAgreement and treated in accordance with paragraph 15 above.<\/p>\n
b. Toy Story Agreement. Upon execution of this Agreement, the parties
\nagree that the agreement between Disney and Pixar dated as of May 3, 1991, as
\namended, (“1991 Agreement”) shall apply only to the rights and obligations of
\nthe parties relating to the financial participation in and the production and
\ndistribution of the theatrical motion picture Toy Story and to financial
\nparticipation in Ancillary Rights related to Toy Story as provided in paragraph
\n(c) below, and shall have no further force nor effect and that this Agreement
\nshall supersede the terms thereof with respect to Pixar’s arrangement with
\nDisney relating to future services and productions. The CD ROM Agreement shall
\nremain in full force and effect with respect to the first and second Interactive
\nWorks developed under that agreement.<\/p>\n
c. Ancillary Rights. For purposes of this Agreement, Gross Receipts for
\nany Toy Story sequel or prequel shall include Gross Receipts from Ancillary
\nRights based upon Toy Story, and unique characters or story or other elements
\nthereof, only to the extent that such Gross Receipts exceed, in any [*] of the
\ntotal amount of Gross Receipts from Toy Story Ancillary Rights in the [*] period
\ncommencing [*] before and ending [*] before the initial release of the sequel or
\nprequel of Toy Story. The remaining Gross Receipts from Toy Story Ancillary
\nRights shall continue to be accounted for under the 1991 Agreement. Distribution
\nCosts relating to Toy Story Ancillary Rights shall be apportioned between this
\nAgreement and the 1991 Agreement in the same proportion as Gross Receipts from
\nsuch Ancillary Rights are apportioned between this Agreement and the 1991
\nAgreement.<\/p>\n
17. EXCLUSIVITY.<\/p>\n
a. No Other Feature Length Animated Theatrical Motion Pictures. Pixar
\nagrees that it will not release or authorize the release of any feature length
\nanimated theatrical motion picture produced by Pixar other than the Pictures and
\nDerivative Works, produced by Pixar hereunder until a date which is twelve (12)
\nmonths from delivery of the fifth Picture hereunder. Pixar further agrees that
\nit will not enter into an agreement with any third party for the development,
\nproduction or distribution of any feature length animated theatrical motion
\npicture until after Pixar has delivered the third Picture to Disney hereunder.<\/p>\n
b. Theme Parks. Pixar agrees that it will not develop or produce any
\nrides or attractions for use in major theme parks not owned or operated by
\nDisney (e.g. Universal Studios or Six Flags). Nothing in this paragraph (b)
\nshall prohibit [*] from [*] for [*] not used in any such [*] not [*], subject to
\nthe terms and conditions of this Agreement.<\/p>\n
c. First Look at TV Productions and Home Video Productions. Pixar will
\ngive Disney advance notice of any animated television production or animated
\nmade-for-home <\/p>\n
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\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
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34
\nvideo production owned and controlled by Pixar that Pixar proposes to produce
\nduring the term of this Agreement before commencing production thereof. Disney
\nshall notify Pixar within thirty (30) days after Pixar’s notice whether Disney
\nwishes to obtain distribution rights to such television production or home video
\nproduction. If Disney notifies Pixar that it does wish to obtain such rights,
\nDisney and Pixar shall negotiate in good faith to reach mutually agreeable terms
\nunder which Disney may do so. If for any reason the parties have failed to reach
\nmutual agreement on such terms within sixty (60) days after such original
\nnotice, Pixar shall have no further obligation to Disney with respect to the
\nwork which was the subject of such notice.<\/p>\n
d. No Material Interference. Pixar agrees that non-Disney activities
\nundertaken by Pixar will be managed so as not to materially interfere with
\nPixar’s obligations to Disney under this Agreement.<\/p>\n
e. Employment Agreement with John Lasseter. Pixar shall enter into a
\nnew exclusive agreement for a period of seven (7) years from the commencement
\ndate of the Term for the services of John Lasseter; provided that Pixar shall
\nhave no liability for Lasseter’s failure to render services under such agreement
\ndue to his default, disability or death. Pixar shall not terminate Lasseter’s
\nemployment without cause without Disney’s approval. Without limiting any other
\nrights or remedies, if any, of Disney, Disney shall be free, notwithstanding the
\nprovisions of paragraph 20, to seek to employ Lasseter after termination of his
\nemployment by Pixar, whether such termination is with or without cause; provided
\nthat Disney shall not solicit or offer employment to Lasseter prior to such
\ntermination. Pixar agrees that Lasseter will direct one of the remaining four
\nPictures under this Agreement after Bugs. Disney acknowledges and agrees that
\nLasseter will be rendering services at Pixar for non-Disney projects, provided
\nthat Pixar agrees that Lasseter’s first priority during his employment at Pixar
\nwill be rendering services for Disney-related projects. Lasseter’s salary and
\nsigning bonus (other than any Pixar stock) shall be allocated to the Production
\nCosts of the Pictures and Derivative Works in development or production at the
\ntime paid, and Disney shall fund Disney’s fifty-percent (50%) share of such
\nsalary and signing bonus as part of such Production Costs.<\/p>\n
18. EXCHANGE OF INFORMATION.<\/p>\n
In order for the parties to exercise effectively their rights
\nhereunder, and to the extent the same would not violate Disney’s or Pixar’s
\nconfidentiality obligations to third parties, the parties shall provide, upon
\nrequest, [*] relating to [*] relating to the Pictures, provided that nothing in
\nsuch disclosed information shall constitute or be deemed to be a representation,
\nwarranty or covenant by either party with respect to such matters. Such
\ninformation may be furnished orally.<\/p>\n
——-
\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
-30-<\/p>\n
35
\n 19. PUBLICITY AND CONFIDENTIALITY.<\/p>\n
a. Publicity. Within seven (7) days after execution of this Agreement,
\nDisney and Pixar will make a joint press announcement concerning this Agreement,
\nwhich will be mutually agreed upon by the parties.<\/p>\n
b. Confidentiality of Terms of Agreement. Disney and Pixar shall be
\nfree to disclose the terms of this Agreement to third parties, except that each
\nparty shall limit disclosure of the provisions of [*] to substantially the
\ninformation to be mutually agreed by the parties.<\/p>\n
c. Protection of Confidential Information.<\/p>\n
(i) For purposes of this Agreement, “Confidential Information”
\nshall mean all information which is received by one party (the “Recipient”) from
\nthe other (the “Discloser”) under or in the course of performance of this
\nAgreement.<\/p>\n
(ii) The Recipient shall maintain Confidential Information in
\nconfidence, shall not disclose Confidential Information, or any portion thereof,
\nto any third party except as permitted by this Agreement or as reasonably
\nnecessary to carry out the provisions of this Agreement, and shall protect
\nConfidential Information with at least the same degree of care as the Recipient
\nuses in maintaining as secret its own confidential and proprietary information,
\nbut in no case less than a reasonable degree of care.<\/p>\n
(iii) This Agreement imposes no obligation on the Recipient
\nwith respect to any portion of Confidential Information which (A) was generally
\navailable to the public prior to Discloser’s first disclosure thereto to
\nRecipient or subsequently becomes generally available to the public through no
\nfault of the Recipient; (B) was in Recipient’s possession prior to receipt from
\nDiscloser and not acquired directly or indirectly from Discloser; (C) is
\nlawfully received by the Recipient from a third party not directly or indirectly
\nassociated with Discloser and having no obligation of confidentiality with
\nrespect thereto; or (D) is independently developed by the receiving party
\nwithout the benefit of the other party’s Confidential Information; provided that
\neach party shall use reasonable efforts to instruct its employees not to confirm
\nor otherwise respond to Confidential Information or an inquiry about same
\npresented by a third party.<\/p>\n
(iv) Nothing in this Agreement shall prohibit the Recipient
\nfrom disclosing Confidential Information (a) as required to prepare and report
\nfinancial statements in accordance with generally accepted accounting principles
\nor (b) if legally required to do so, by statute, regulation, judicial or
\nGovernmental order or by deposition, interrogatory, request for documents,
\nsubpoena, civil investigative demand or similar process in a judicial or
\nGovernmental proceeding.<\/p>\n
——-
\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
-31-<\/p>\n
36<\/p>\n
20. NON-SOLICITATION.<\/p>\n
During the Term and continuing for a period of two (2) years
\nthereafter, Pixar and Disney shall not engage the services of any person who was
\nemployed by Pixar or Disney, as the case may be, during the prior six (6) months
\nbefore such engagement, without prior approval of the applicable party.<\/p>\n
21. ASSIGNMENT.<\/p>\n
Neither party may assign its rights or obligations under this Agreement
\nwithout the consent of the other party except as follows:<\/p>\n
a. Either party may freely assign its rights to payments from the other
\nparty hereunder, but such assignment will be made pursuant to Disney’s customary
\nnotice of irrevocable authority and acknowledgement of such notice.<\/p>\n
b. Either party may assign or delegate any of its rights or obligations
\nunder this Agreement to any entity with or into which such party may merge or
\nconsolidate, or which may succeed to all or substantially all of such party’s
\nassets related to the subject matter of this Agreement, subject to the
\nprovisions of paragraph 23.<\/p>\n
c. Disney may enter into subdistribution agreements for sale or
\ndistribution of the Pictures or Ancillary Rights related thereto; provided that
\nsuch agreements are subject to and consistent with the terms and conditions of
\nthis Agreement.<\/p>\n
22. CHANGE OF CONTROL OF PIXAR.<\/p>\n
In the event that any entity described in Exhibit B directly or
\nindirectly acquires or controls fifty percent (50%) or greater ownership
\ninterest in Pixar or Pixar merges or consolidates into such an entity, or such
\nan entity succeeds to all or substantially all of Pixar’s assets related to the
\nsubject matter of this Agreement, Disney shall be entitled to terminate this
\nAgreement upon thirty (30) days written notice to Pixar given not later than ten
\n(10) days after notice from Pixar of such event. In the event of such
\ntermination, the provisions of paragraph 23 shall apply.<\/p>\n
23. TERMINATION.<\/p>\n
a. Effect of Termination. Upon termination of this Agreement by Disney
\nunder paragraphs 3(a)(ii) or 22, the terms and conditions of this Agreement
\nshall continue to apply to Pictures, Ancillary Rights and Derivative Works which
\nhave been delivered by Pixar to Disney as of the date of such termination, or
\nare at Disney’s option delivered by Pixar to Disney under the terms of this
\nsubparagraph 23(b) after such termination, and to all future Ancillary Rights
\nand future Derivative Works relating thereto. Upon such termination, this
\nAgreement shall terminate as to any Pictures which have not been delivered to
\nDisney as of<\/p>\n
-32-
\n 37
\nthe date of such termination and which Disney does not elect to have completed
\nunder the terms of this subparagraph 23(b), whether or not in development or
\nproduction (“Uncompleted Pictures”) and to all future Ancillary Rights and
\nfuture Derivative Works relating thereto. Upon such termination, Pixar shall own
\nall copyright, trademark and other intellectual property rights in and to
\nUncompleted Pictures, including the Treatments on which such Uncompleted
\nPictures are or would be based, and all unique character and story elements
\nthereof and the audio visual images thereof, and the Ancillary Rights and
\nDerivative Works relating thereto. Nothing in this provision shall be deemed to
\nplace either party in a worse position with respect to use of public domain
\nideas and public domain materials than a member of the general public. If at any
\ntime after such termination Pixar elects to complete and release or have an
\nUncompleted Picture released or to use the Treatment thereof as the basis for
\nany motion picture, Pixar shall so notify Disney and reimburse Disney, no later
\nthan ninety (90) days after Pixar’s notice of election, for the amount paid by
\nDisney for such Uncompleted Picture, with interest at the Bank of America
\nreference rate plus 125 basis points from the date of Disney’s payment of such
\namounts . Upon such termination, the provisions of paragraphs 1, 2 and 17 shall
\nterminate and be of no further force or effect.<\/p>\n
b. Completion of Works in Production. If any Picture is within [*] of
\nits target delivery date as of the date of such termination, Disney shall be
\nentitled at its option to have Pixar proceed to complete production and delivery
\nof such Picture under the terms of this Agreement, and in such event this
\nAgreement shall continue to apply to such Picture, and to all Ancillary Rights
\nand Derivative Works relating thereto. If Pixar has as of the date of such
\ntermination elected to co-finance and produce a Derivative Work and a budget for
\nsuch Derivative Work has been approved under this Agreement as of the date of
\nsuch termination, Pixar shall complete and deliver such Derivative Work to
\nDisney and Disney shall finance and distribute such work in accordance with the
\nterms of this Agreement.<\/p>\n
24. INTEREST ON LATE PAYMENTS.<\/p>\n
Any late payments (including as a result of any inaccurate accounting)
\nowed by either party to the other party hereunder shall bear interest from the
\ndate such payment was due until paid. The applicable interest rate shall be Bank
\nof America’s reference rate plus 125 basis points in effect on the first day of
\neach calendar month, which rate shall apply for the calendar month.<\/p>\n
25. GOVERNING LAW<\/p>\n
This Agreement shall be governed by the laws of State of California
\nwithout regard to its conflict of law principles.<\/p>\n
26. GENERAL PROVISIONS<\/p>\n
a. Right to Cure. No act or omission of any party shall constitute an
\nevent of default or breach by such party of the Agreement unless the
\nnon-breaching party shall first <\/p>\n
——-
\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
-33-<\/p>\n
38
\nnotify such party in writing setting forth such alleged breach or default and
\nsuch party shall not cure the same within thirty (30) days after receipt of such
\nnotice.<\/p>\n
b. Remedies.<\/p>\n
(i) Notwithstanding any provision of this Agreement to the
\ncontrary, after production of a Picture or a Derivative Work is completed, if
\nPixar claims that Disney has breached this Agreement with regard to any such
\ncompleted Picture or completed Derivative Work or completed Ancillary Right
\nrelating thereto (“Completed Work”), Pixar shall not be entitled to seek and\/or
\nobtain equitable or injunctive relief to enjoin or restrain the distribution,
\nexhibition, advertising or any other means of exploitation by Disney of such
\nCompleted Work. To be considered “completed”, a Picture, Derivative Work or
\nAncillary Right must in the case of any works produced by Pixar have been
\ncompleted and delivered by Pixar to Disney under this Agreement. Nothing in this
\nparagraph shall [*] from [*] to comply with the terms and conditions of this
\nAgreement in connection with the distribution, exhibition, advertising and other
\nmeans of exploitation of such Completed Work ; provided that [*] shall [*]
\ndistribution, exhibition, advertising or any other means of exploitation by
\nDisney of any such Completed Work. Nothing in this paragraph shall apply to, or
\nbe construed to limit in any way [*] with respect to distribution, exhibition,
\nadvertising or any other form of exploitation of any work other than a Completed
\nWork.<\/p>\n
(ii) Subject to subparagraph (b)(i). above, if either party
\nclaims the other party has breached this Agreement, then before the party
\nclaiming such breach seeks [*] against the other party, the claiming party must
\nnotify the other party. For a period of [*] after such notice is given (the
\n“Resolution Period”), both parties shall attempt to cure (if curable) or
\notherwise resolve the claim. During such Resolution Period either party may [*]
\nthe claim. If after expiration of the Resolution Period the parties are not able
\nto resolve such claim, the claiming party may [*] against the other party,
\nsubject to any and all claims and\/or defenses of the other party and to
\nsubparagraph (b)(i).<\/p>\n
(iii) Nothing under this paragraph shall prevent or limit
\neither party from [*] of the copyright or other rights in a Picture or
\nDerivative Work to the extent any such [*] would be a breach of this Agreement.<\/p>\n
c. Force Majeure. No party shall be liable to the other party because
\nof any failure to perform hereunder caused by any cause beyond said party’s
\ncontrol, including without limitation fire, earthquake, flood, epidemic,
\naccident, explosion, casualty, strike, lockout, labor controversy, riot, civil
\ndisturbance, act of public enemy, embargo, war, act of God or law, except as
\nexpressly provided herein to the contrary.<\/p>\n
——-
\n[*] Certain information on this page has been omitted and filed
\n separately with the Commission. Confidential treatment has
\n been requested with respect to the omitted portions.<\/p>\n
-34-<\/p>\n
39
\n d. No Waivers. No waiver by either party hereto of any breach of this
\nAgreement shall be deemed to be a waiver of any preceding or succeeding breach
\nof the same or any other provision hereof. The exercise of any right granted to
\neither party hereunder shall not operate as a waiver.<\/p>\n
e. No Violation of Law. Nothing contained in this Agreement shall be
\nconstrued so as to require the commission or any act contrary to law, and
\nwherever there is any conflict between any provisions of this Agreement and any
\nmaterial statute, law or ordinance contrary to which the parties have no legal
\nright to contract, the latter shall prevail, but in such event the provision of
\nthis Agreement affected shall be curtailed and limited only to the extent
\nnecessary to bring it within the legal requirements.<\/p>\n
f. Notice. Any notices required or permitted by this Agreement shall be
\nin wirting and shall be delivered either by personal delivery or by overnight
\ncommercial delivery service, such as Federal Express or DHL, addressed as
\nfollows:<\/p>\n
If to Disney: Walt Disney Pictures and Television
\n 500 South Buena Vista
\n Burbank, CA 91521
\n Attention: Senior Vice President – Legal and Business
\n Affairs<\/p>\n
With copies to: Senior Vice President-Legal and Business Affairs
\n Walt Disney Feature Animation
\n 500 South Buena Vista
\n Burbank, CA 91521<\/p>\n
Senior Vice President – Finance
\n Walt Disney Feature Animation
\n 500 South Buena Vista
\n Burbank, CA 91521<\/p>\n
If to Pixar: Pixar Animation Studio
\n 1001 W. Cutting Blvd.
\n Richmond, CA 94804
\n Attention: Chief Financial Officer<\/p>\n
With copies to: Ziffren, Brittenham, Branca & Fischer
\n 2121 Avenue of the Stars, 32nd Floor
\n Los Angeles, CA 90067
\n Attn: Sam Fischer, Esq.<\/p>\n
-35-
\n 40
\n McCutchen, Doyle, Brown & Enersen
\n Three Embarcadero Center
\n San Francisco, CA 94111
\n Attn: Gary H. Moore, Esq.<\/p>\n
Either party shall be entitled to change its address for purposes of
\nthis section by notice to the other. Notices shall be effectiive upon receipt.<\/p>\n
g. Headings. The headings in this Agreement are solely for convenience
\nof reference and shall not effect its interpretation.<\/p>\n
27. ENTIRE AGREEMENT.<\/p>\n
This Agreement, including its exhibits, constitutes the entire
\nagreement between the parties with respect to the subject matter hereof, and
\nsupersedes and replaces any prior correspondence, negotiations, agreements,
\nunderstandings and representations with respect thereto, except for the 1991
\nAgreement and the CD ROM Agreement to the extent provided in paragraph 16(b).
\nThis Agreement may not be modified or amended unless in a writing signed by both
\nparties.<\/p>\n
28. EXECUTION IN COUNTERPARTS.<\/p>\n
This Agreement may be executed in counterparts and transmitted by
\nfacsimile copy, each of which shall constitute an original and which taken
\ntogether shall constitute the Agreement.<\/p>\n
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
\nfirst written above.<\/p>\n
PIXAR WALT DISNEY PICTURES
\n AND TELEVISION<\/p>\n
By: \/s\/ LAWRENCE B. LEVY By: \/s\/ ROBERT MOORE
\n —————————- —————————
\nName: Lawrence B. Levy Name: Robert Moore
\nTitle: Executive VP & CFO Title: Executive VP & CFO<\/p>\n
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