Definition of Gross Receipts after Breakeven

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This Definition of Gross Receipts After Breakeven provides a definition for how gross receipts are calculated for a motion picture. This form is designed for use in all states and is available for immediate download.

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This Definition of Gross Receipts After Breakeven defines how gross receipts will be distributed after a motion picture has reached “breakeven.” This form sets out the definitions of studio, participant, breakeven and gross receipts. This form is a definition only and does not require a signature.

This Definition of Gross Receipts After Breakeven includes the following:
  • Definition of Parties: This provision contains definitions for studio, participant, breakeven and gross receipts;
  • Distribution Fees and Expenses: Sets out how fees and expenses will be distributed;
  • Film Rentals: Sets out how film rentals will be determined;
  • Cost of Production: Interest: Defines costs of production and any interest charges.

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This attorney-prepared packet contains:
  1. General Information
  2. Definition of Gross Receipts After Breakeven
State Law Compliance: This form complies with the laws of all states
This is the content of the form and is provided for your convenience. It is not necessarily what the actual form looks like and does not include the information, instructions and other materials that come with the form you would purchase. An actual sample can also be viewed by clicking on the "Sample Form" near the top left of this page.
 
 
 
DEFINITION OF
GROSS RECEIPTS AFTER BREAKEVEN 
 
   1.  Definition of Parties:  “Studio” means ________________, a ______________ corporation, and its subsidiaries engaged in the business of distributing motion pictures for exhibition in theatres and for broadcasting over television stations, but shall not include any other persons, firms or corporations licensed by Studio to distribute motion pictures in any part of the world. Nor shall such term include: any person, firm or corporation distributing the Picture for purposes other than exhibition in theatres or by television stations; exhibitors or others who may actually exhibit the Picture to the public; radio or television broadcasters; cable operators; manufacturers, wholesalers or retailers of video discs, cassettes or similar devices; book or music publishers; phonograph record producers or distributors; merchandisers, etc., whether or not any of the foregoing are subsidiaries of Studio. As used herein, a “subsidiary” of Studio refers to an entity in which Studio has at least a 50% interest.
 
   “Participant” means the party under the foregoing agreement who or which is entitled to participate in the gross receipts of the Picture in excess of breakeven, and the successors and permitted assigns of such party.
 
   2.  Breakeven:  As between Studio and Participant, the Picture shall be deemed to have reached “breakeven” at such time as the gross receipts (as defined in 3 hereof) of the Picture shall equal the following:
 
   (a) Studios distribution fees set forth in 4 hereof.
 
   (b) Studios expenses in connection with the distribution of the Picture, as set forth in 5 hereof.
 
   (c) The cost of production of the Picture, plus an amount equal to interest thereon, all as provided for in 9 hereof, and plus such other costs, if any, as may have been incurred in connection with the financing of the cost of production of the Picture. Said interest and other costs shall be recouped before said cost of production.
 
   3.  “Gross Receipts” of the Picture means the aggregate of:
 
     (a) All film rentals actually received by Studio from parties exhibiting the Picture in theatres and on television where Studio distributes directly to such parties (hereinafter referred to as “exhibitors”).
 
   (b) Where Studio grants theatrical distribution rights to a subdistributor on a basis requiring it to account to Studio with respect to film rentals, either: (i) the film rentals received by such subdistributor  from exhibitors which Studio accepts for the purpose of its accountings with such subdistributor; or (ii) Studios share (actually received) of film rentals received by such subdistributor; whichever Studio elects from time to time as to each subdistributor.
   (c) In respect of licenses of exhibition or distribution rights by means of video discs, cassettes or similar devices, an amount equal to 20% of (i) the gross wholesale rental income therefrom and (ii) the gross wholesale sales income therefrom less a reasonable allowance for returns.
 
   (d) All amounts actually received by Studio from the following: (i) trailers (other than trailers advertising television exhibitions of the Picture); (ii) licenses of theatrical distribution rights for a flat sum; (iii) licenses of exhibition or distribution rights other than those referred to in (a), (b), (c) and (d) (ii) of this 3, specifically including licenses to cable operators; (iv) the lease of positive prints (as distinguished from the licensing thereof for a film rental); and from the sale or licensing of advertising accessories, souvenir programs and booklets; and (v) recoveries by Studio for infringement of copyrights of the Picture.
 
   (e) All monies actually received by Studio on account of direct subsidies, aide or prizes relating specifically to the Picture, net of an amount equal to income taxes based thereon imposed by the country involved, if any. If local laws require use of such monies as a condition to the grant of such subsidy or aide, such monies shall not be included in gross receipts until actually used.
 
   (f) All amounts required to be included under Exhibits “1,“2” and “3” hereof.
 
   All costs incurred in connection with any of the foregoing shall be deemed and treated as recoupable distribution expenses. In no event shall rentals from the exhibition of the Picture which are contributed to charitable organizations be included in gross receipts.
 
   Notwithstanding anything herein contained, after the Picture shall be deemed to have reached “breakeven” as defined in 2 above, gross receipts shall be as defined and this Exhibit shall otherwise be modified as set forth in Schedule 1 attached hereto and incorporated herein by this reference.
 
   4.  Distribution Fees:  Studios distribution fees shall be as follows:
 
   (a) ________________________% of the gross receipts of the Picture derived by Studio from all sources in the United States and Canada.
 
   (b) ________________________% of the gross receipts of the Picture derived by Studio from all sources in the United Kingdom.
 
   (c) ________________________% of the gross receipts of the Picture derived by Studio from all sources other than those referred to in (a) and (b) above.
 
   (d) Notwithstanding the foregoing; (i) with respect to sums included in the gross receipts pursuant to 3(b)(ii) and 3(d)(ii) hereof, Studios distribution fee shall be 15% of such sums; (ii) if Studio shall license the exhibition of the Picture on free television, the aforesaid percentages as to amounts received and collected by Studio from sources in the United States, shall be 30% if collected from a network for national network telecasts in prime time; and 35% in all other instances; and, as to amounts received and collected by Studio from sources outside the United States 40%; (iii) no distribution fee shall be charged on gross receipts referred to in 3(e) hereof.
 
   All distribution fees shall be calculated on the full gross receipts without any deductions or payments of any kind whatsoever, except as  specifically hereinafter provided.
 
   Notwithstanding anything herein contained, it is agreed that for the accounting period in which the Picture shall first reach breakeven, the distribution fees for the purpose of calculating breakeven shall be calculated only on that portion of the gross receipts in respect of such accounting period which is equal to the sum of the following:
 
   (a) An amount equal to the sums specified in subparagraphs (b) and (c) of paragraph 2 of this Exhibit which are recouped or paid in respect of such accounting period; and
 
   (b) An amount equal to the distribution fees on gross receipts equal to the sum of said deductible items, plus the distribution fees on gross receipts equal to such distribution fee.
 
   5.  Distribution Expenses:  Studios deductible distribution expenses in connection with the Picture shall include all costs and expenses incurred in connection with the distribution, advertising, exploitation and turning to account of the Picture of whatever kind or nature, or which are customarily treated as distribution expenses under customary accounting procedures in the motion picture industry. If Studio reasonably anticipates that additional distribution expenses will be incurred in the future, Studio may, for a reasonable time, set up appropriate reserves therefor. Without limiting the generality of the foregoing, the following particular items shall be included in distribution expenses hereunder:
 
   (a) The cost and expense of all duped and dubbed negatives, sound tracks, prints, release prints, tapes, cassettes, duplicating material and facilities and all other material manufactured for use in connection with the Picture, including the cost of inspecting, repairing, checking and renovating film, reels, containers, cassettes, packing, storing and shipping and all other expenses connected therewith and inspecting and checking exhibitors projection and sound equipment and facilities. Studio may manufacture or cause to be manufactured as many or as few duped negatives, positive prints and other material for use in connection with the Picture as it, in its sole discretion, may consider advisable or desirable.
 
   (b) All direct costs and charges for advertisements, press books, artwork, advertising accessories and trailers (other than (i) prints of trailers advertising free television exhibition of the Picture, and (ii) the trailer production costs which are included in the cost of production of the Picture), advertising, publicizing and exploiting the Picture by such means and to such extent as Studio may, in its uncontrolled discretion, deem desirable, including, without limitation, pre-release advertising and publicity, so-called cooperative and/or theatre advertising, and/or other advertising engaged in with or for exhibitors, to the extent Studio pays, shares in, or is charged with all or a portion of such costs and all other exploitation costs relating to such theatre exhibition. Any re-use fees and costs of recording and manufacturing masters for phonograph records, which Studio shall advance in order to assist in the advertising and exploitation of the Picture, shall be treated as costs hereunder to the extent unrecouped by the record company. Where any Studio advertising or publicity employee (other than an executive supervisory employee) or facility is used for the Picture, the salary of such employee and the cost of such facility (while so used for the Picture) shall be direct costs hereunder. Any costs and charges referred to in this (b) (and not included in the cost of production of the Picture), expended or incurred prior to delivery of the Picture, shall be included in direct costs under this (b). There shall also be included as an item of cost a sum equal to 10% of all direct costs referred to in this (b)  to cover the indirect cost of Studios advertising and publicity departments, both domestic and foreign.
 
   (c) All costs of preparing and delivering the Picture for distribution (regardless of whether such costs are the salaries and expenses of Studios own employees or employees or parties not regularly employed by Studio), including, without limitation, all costs incurred in connection with the production of foreign language versions of the Picture, whether dubbed, superimposed or otherwise, as well as any and all costs and expenses in connection with changing the title of the Picture, recutting, re-editing or shortening or lengthening the Picture for release in any territory or for exhibition on television or other media, or in order to conform to the requirements of censorship authorities, or in order to conform to the peculiar national or political prejudices likely to be encountered in any territory, or for any other purpose or reason. The costs referred to in this (c) shall include all studio charges for facilities, labor and material, whether or not incurred at a studio owned or controlled by Studio.
 
   (d) All sums paid or accrued on account of sales, use, receipts, income, excise, remittance and other taxes (however denominated) to any governmental authority assessed upon the negatives, duplicate negatives, prints or sound records of the Picture, or upon the use or distribution of the Picture, or upon the revenues derived therefrom, or any part thereof, or upon the remittance of such revenues, or any part thereof; any and all sums paid or accrued on account of duties, customs and imposts, costs of acquiring permits, “Kontingents,” and any similar authority to secure the entry, licensing, exhibition, performance, use or televising of the Picture in any country or part thereof, regardless of whether such payments or accruals are assessed against the Picture or the proceeds thereof or against a group of motion pictures in which the Picture may be included or the proceeds thereof. In no event shall the deductible amount of any such tax (however denominated) imposed upon Studio, be decreased (nor the gross receipts increased) because of the manner in which such taxes are elected to be treated by Studio in filing net income, corporate franchise, excess profits or similar tax returns. Subject to the foregoing, (i) Studios own United States federal and state income taxes and franchise taxes based on Studios net income; and (ii) income taxes payable to any country or territory by Studio based on the net earnings of Studio in such country or territory and which is computed and assessed solely by reason of the retention in such country or territory by Studio of any portion of the gross receipts shall not be deductible hereunder.
 
   (e) Expenses of transmitting to the United States any funds accruing to Studio from the Picture in foreign countries, such as cable expenses, and any discounts from such funds taken to convert such funds directly or indirectly into U.S. dollars.
 
   (f) All costs and expenses, including reasonable attorneys fees, loss, damage or liability suffered or incurred by Studio in connection with: any action taken by Studio (whether by litigation or otherwise) in copyrighting, protecting and enforcing the copyright of, and other rights and sources of revenue to be derived from, the Picture; reducing or minimizing the matters referred to in (d) and (e) above, the collection of film rentals, and other sums due Studio from exhibitors, subdistributors and others in respect of the Picture or to recover monies due pursuant to any agreement relating to the distribution or the exhibition of the Picture; checking attendance and exhibitors receipts; preventing and/or recovering damages for unauthorized exhibition or distribution of the Picture, or any impairment of, encumbrance  on or infringement upon, the rights of Studio in and to the Picture; prosecuting and defending actions under the antitrust laws, communications laws, and federal, state and local laws, ordinances and regulations (including censorship) affecting the exhibition and/or distribution of the Picture and/or the ability of Studio to derive revenue from the Picture and its component parts and by-products; and auditing of books and records of any exhibitor, subdistributor or licensee.
 
   (g) Royalties payable to manufacturers of sound recording and reproducing equipment and dues and assessments of, and contributions by Studio to, AMPTP, MPAA, MPEA, the Academy of Motion Picture Arts and Sciences and other trade associations or industry groups comprised of a substantial number of motion picture producers and/or distributors, but only for purposes relating to the production, distribution, export, import, advertising, exploitation and general protection and/or promotion of motion pictures.
 
   (h) In the event any person shall make a claim relating to the Picture against Studio or any of its licensees, which claim, in Studios judgment, is of sufficient merit to constitute a reasonable probability of ultimate loss, cost, damage or expense, Studio may deduct under this (h) such amount as Studio may deem necessary to cover any loss, cost, damage or expense which may be suffered as a result thereof. Studio shall have the right to settle and pay any such claim. After the settlement of any such claim, or after the final judicial determination thereof, the amount previously deducted hereunder shall be adjusted accordingly with the next accounting statement rendered hereunder. Nothing herein contained shall be construed as a waiver of any of Participants warranties contained in this Agreement, or a waiver of any right or remedy at law or otherwise which may exist in favor of Studio, including, but not limited to, the right to require Participant to reimburse Studio on demand for any liability, cost, damage or expense arising out of, or resulting from, any breach by Participant of any warranty, undertaking or obligation by Participant, or any right on the part of Studio to recoup or recover any such cost or expense out of Participants share of any monies payable hereunder, rather than treating such costs or expenses as distribution expenses.
 
   (i) All amounts paid or payable to or for the benefit of actors, writers, composers, directors and others, pursuant to applicable collective bargaining agreements and/or any law or governmental regulation or decree now or hereafter in force by reason of, and/or as a condition or consideration for, any exhibition, use, re-use, rerun, performance, sale, license and/or distribution of the Picture and/or copies of all or any part thereof, on television, supplemental markets, or otherwise (all herein called “residuals”), together with all taxes, pension fund contributions and other costs paid or payable in respect of such residuals, and in respect of participations in the gross receipts and net profits of the Picture; provided, however, that if Participant or any principal stockholder of Participant, or any heirs, executors, administrators, successors or assigns of Participant, or any such stockholder, are entitled, either directly or by way of participation in any pension fund, to any such residuals, or to compensation for services rendered beyond any guaranteed period referred to in the foregoing agreement, the amount payable on account thereof shall be treated as an advance against Participants share of the net profits hereunder.
 
   (j) The cost of all insurance (to the extent that the same is not included in the cost of production of the Picture) covering or relating to  the Picture, including, but not limited to, errors and omissions insurance and all insurance on negatives, positive prints, sound materials or other physical property, it being understood, however, that Studio shall not be obligated to take out or maintain any such insurance.
 
   (k) If Studio shall proceed under 3(b)(i) hereof, all items deducted by the subdistributor as distribution expenses, and which Studio accepts for the purpose of its accountings with such subdistributor, shall be treated as Studios expenditures under the corresponding subdivision of this 5.
 
   6.  Film Rentals:  “Film Rentals” shall be determined after all refunds, credits, discounts, allowances and adjustments granted to exhibitors, whether occasioned by condemnation by boards of censorship, settlement of disputes or otherwise. Until earned, forfeited or applied to the Picture, neither advance payments nor security deposits shall be included in film rentals. No cost (regardless of how incurred, paid or allowed) of Studios share of cooperative and/or theater advertising shall be deducted in determining film rentals. Where allowances are granted and paid on account of Studios share of cooperative theatre or joint advertising, such payments shall not be deducted in determining film rental, and where Studios share of cooperative theater or joint advertising is deducted by the exhibitor Studios share of cooperative theater or joint advertising shall be added back into the film rental received from such exhibitor, and all such costs, payments, discounts and allowances shall be treated as distribution expenses. Wherever Studio exhibits the Picture in a theatre or over a television station owned or controlled by Studio, or licenses the Picture or rights connected therewith to theaters, television stations or other agencies in which Studio has an interest, directly or indirectly, or to which Studio is obligated to pay a fixed sum for exhibiting the Picture or for the use of its premises or facilities, Studio shall include in the film rentals of the Picture such sums, determined in good faith, as may be reasonable and consistent with Studios usual practice in such matters.
 
   7.  Allocations:  Wherever Studio (i) receives from any license either a flat sum or a percentage of the receipts, or both, for any right to a group of motion pictures (including the Picture) under any agreement (whether or not the same shall provide for the exhibition, lease or delivery of positive prints of any of said motion pictures) which does not specify what portion of the license payments apply to the respective motion pictures in the group (or to such prints or other material, if any, as may be supplied), or (ii) receives foreign currency under 8 hereof relating to a group of motion pictures (including the Picture), then in any and all such situations Studio shall include in, or deduct from, the gross receipts, as the case may be, such sums, determined in good faith, as may be reasonable and consistent with Studios usual practice in such matters. All costs described in 5 hereof (and, after breakeven, all deductible items set forth in Schedule 1 hereto) shall be fairly apportioned to the Picture if incurred or expended on an industry basis, or in conjunction with other motion picture producers and/or distributors, or with respect to the Picture and other motion pictures distributed by Studio.
 
   8.  Foreign Receipts:  No sums received by Studio relating to the Picture shall be included in gross receipts hereunder unless and until such sums have been (i) received by Studio in U.S. dollars in the United States; or (ii) used by Studio for the production or acquisition of motion pictures or television films which can be lawfully removed from the country or territory involved, in which event they shall be included in gross receipts for the accounting period during which an amount (computed at the official or  unofficial rate of exchange, as Studio may elect) equal to the amount expended for such production or acquisition, plus interest thereon, as herein provided, has been recouped by Studio (in excess of normal distribution fees and distribution expenses) from distribution thereof outside the country or territory involved; or (iii) used by Studio for acquisition of tangible personal property which can be and is lawfully exported from the country or territory involved, in which event the U.S. dollar equivalent of the currency utilized to acquire such property shall be included in gross receipts hereunder for the accounting period during which such property was so exported, such U.S. dollar equivalent to be computed at the official or unofficial rate of exchange, as Studio may elect, in effect on the date of export. Studio will, promptly after receipt of a written request from Participant (but not more frequently than annually) advise Participant in writing as to foreign revenues not included in gross receipts as aforesaid, and Studio shall, at the written request and expense of Participant (subject to any and all limitations, restrictions, laws, rules and regulations affecting such transactions), deposit into a bank designated by Participant in the country involved, or pay to any other party designated by Participant in such country, such part thereof as would have been payable to Participant hereunder. Such deposits or payments to or for Participant shall constitute due remittance to Participant, and Studio shall have no further interest therein or responsibility therefor. Studio makes no warranties or representations that any part of any such foreign currencies may be converted into U.S. dollars or transferred to the account of Participant in any foreign country. In no event shall Studio be obligated to apply gross receipts of any country not actually received by Studio in U.S. dollars in the United States to the recoupment of any costs or expenses incurred with respect to the Picture (or, after breakeven, of any deductible items set forth in Schedule 1 hereto) in any other country.
 
   9.  Cost of Production; Interest:
 
   (a) The “cost of production” of the Picture means the total direct cost of production of the Picture, including the cost of all items listed on Studios standard Delivery Schedule, computed and determined in all respects in the same manner as Studio then customarily determines the direct cost of other motion pictures distributed and/or financed by it, plus Studios overhead charge. The determination of what items constitute direct charges and what items are within said overhead charge shall be made in all respects in the same manner as Studio customarily determines such matters. The full amount of all direct costs of production of the Picture (whether payable in cash, deferred or accrued) shall be included in the direct cost of the Picture at the time liability therefor is incurred or contracted, regardless of whether the same has actually been paid to the party or parties entitled thereto at the time involved. Deferments and participations in gross receipts of the Picture consented to by Studio (however defined) shall be treated as direct costs of production, whether the same shall be in a definite amount or based on a percentage of the gross receipts, and whether the same are fixed obligations or are contingent upon receipts of the Picture; provided, however, contingent participations based on a percentage of gross receipts as defined in the applicable agreement shall not be included in the direct cost of production beyond recoupment under 2(c) hereof.
 
   (b) Studios overhead charge shall be in an amount equal to ________% of the direct cost of production of the Picture, with the understanding that any production facilities, equipment or personnel supplied by Studio or by a studio owned or controlled by Studio, or in which Studio has a substantial  financial interest (and which are not furnished within the overhead charge), shall be supplied at Studios usual rental rates charged for such items, and such charges shall be treated as direct costs of production of the Picture and shall bear said ________% overhead charge. Studios overhead charge shall accrue and be included in the cost of production of the Picture concurrently with the incurring of the respective items of direct cost to which it applies.
 
   (c) The amount equal to interest provided for in 2(c) hereof shall be calculated at a rate per annum equal to ________% of the rate announced from time to time by the First National Bank of Boston as its prime rate on unsecured loans to its preferred customers. Said amount shall be calculated from the respective dates that each item is charged to the Picture until the close of the accounting period during which the cost of production is recouped under 2(c) hereof, except that interest on deferred amounts shall be calculated from the date of payment.
 
   (d) Concurrently with delivery to Participant of the first earnings statement hereunder, Studio will (subject to revisions and correction) deliver to Participant an itemized summary of the cost of production of the Picture. Participant shall have the right to audit such statement in accordance with 11 hereof.
 
   (e) If the final cost of production shall exceed the budgeted cost by 5% or more, then for the purposes of 2(c) hereof there shall be added to the actual cost of production of the Picture an amount equal to the amount by which the final direct cost exceeds 105% of the budgeted direct cost. For the purposes of this subdivision (e), the final direct cost shall not include costs incurred solely by reason of force majeure events, union increases not reflected in the budget, and overbudget costs incurred at the request of an officer of Studio having the rank of Vice President or higher over the written objection of Participant.
 
   10.  Earnings Statements:  Studio shall render to Participant periodic statements showing, in summary form, the appropriate calculations under this Agreement. Statements shall be issued for each calendar quarter until the Picture has been in release for 4 years from and including the quarter in which the Picture was first released, and thereafter annually. Each such quarterly or annual period, as the case may be, is herein referred to as an “accounting period.” No statements need be rendered for any accounting period during which no receipts are received. Statements rendered by Studio may be changed from time to time to give effect to year-end adjustments made by Studios Accounting Department or Public Accountants, or to items overlooked, to correct errors and for similar purposes. If Studio shall extend credit to any licensee with respect to the Picture and if such credit has been included in the gross receipts, and if, in the opinion of Studio, any such indebtedness shall be uncollectible, the uncollected amount may be deducted in any subsequent earning statement. Should Studio make any overpayment to Participant hereunder for any reason, Studio shall have the right to deduct and retain for its own account an amount equal to any such overpayment from any sums that may thereafter become due or payable by Studio to Participant or for Participants account, or may demand repayment from Participant, in which event Participant shall repay the same when such demand is made. Any U.S. dollars due and payable to Participant by Studio pursuant to any such statement shall be paid to Participant simultaneously with the rendering of such statement; provided, however, that all amounts payable to Participant hereunder shall be subject to all laws and regulations now or hereafter in existence requiring deductions or withholdings for income or other taxes  payable by or assessable against Participant. Studio shall have the right to make such deductions and withholdings and the payment thereof to the governmental agency concerned in accordance with its interpretation in good faith of such laws and regulations, and shall not be liable to Participant for the making of such deductions or withholdings or the payment thereof to the governmental agency concerned. In any such event Participant shall make and prosecute any and all claims which it may have with respect to the same directly with the governmental agency having jurisdiction in the premises. The right of Participant to receive, and the obligation of Studio to account for, any share of the gross receipts of the Picture shall terminate if the Picture has been made available for exhibition on syndicated television in the U.S.A., and if the first earnings statement issued thereafter shows a deficit under 2 hereof such that at least $500,000 of gross receipts would be required before Participant would be entitled to receive any gross receipts hereunder. In the event a new medium of exhibition shall thereafter be developed and there shall be substantial exhibition and distribution of the Picture by such new medium which is likely to generate gross receipts of $500,000 or the amount of the deficit, whichever is larger, Participant may audit Studios records for the purpose of determining whether the Picture has earned, or is likely to earn, any gross receipts in excess of breakeven, and if, as a result of such audit, it is determined by mutual agreement, or in the event of dispute appropriate legal proceedings, that the Picture has earned, or is likely to earn, gross receipts in excess of breakeven as herein defined, accountings hereunder and payments, if required, shall be reinstated.
 
   11.  Accounting Records re Distribution; Audit Rights:  Studio shall keep books of account relating to the distribution of the Picture, together with vouchers, exhibition contracts and similar records supporting the same (all of which are hereinafter referred to as “records”), which shall be kept on the same basis and in the same manner and for the same periods as such records are customarily kept by Studio. Participant may, at its own expense, audit the applicable records at the place where Studio maintains the same in order to verify earnings statements rendered hereunder. Any such audit shall be conducted only by a reputable public accountant during reasonable business hours in such manner as not to interfere with Studios normal business activities. In no event shall an audit with respect to any earnings statement commence later than 24 months from the rendition of the earnings statement involved; nor shall any audit continue for longer than 30 consecutive business days; nor shall audits be made hereunder more frequently than once annually; nor shall the records supporting any earnings statement be audited more than once. All earnings statements rendered hereunder shall be binding upon Participant and not subject to objection for any reason unless such objection is made in writing, stating the basis thereof and delivered to Studio within twenty-four (24) months from rendition of the earnings statement, or if an audit is commenced prior thereto, within thirty (30) days from the completion of the relative audit. If Studio, as a courtesy to Participant, shall include cumulative figures in any earnings or other statement, the time within which Participant may commence any audit or make any objection in respect of any statement shall not be enlarged or extended thereby. Participants right to examine Studios records is limited to the Picture, and Participant shall have no right to examine records relating to Studios business generally or with respect to any other motion picture for purposes of comparison or otherwise; provided, however, that where any original income or expense document with third parties relates to the Picture  and to other motion pictures, Participant shall have the right to examine the entire document without deletions therefrom.
 
   12.  Ownership:  Participant expressly acknowledges that Participant has and will have no right, title or interest of any kind or character whatsoever in or to the Picture, and no lien thereon or other rights in or to the gross receipts or net profits of the Picture; and that the same shall be and remain Studios sole and exclusive property, and Studio shall not be obligated to segregate the same from its other funds, it being the intent and purpose hereof that the gross receipts in excess of breakeven of the Picture are referred to herein merely as a measure in determining the time and manner of payment to Participant; and that Studio shall not be deemed a trustee, pledgeholder or fiduciary. Participant shall have no right, title or interest of any kind or character whatsoever in or to the literary, dramatic or musical material upon which the Picture is based, or from which it may be adapted; and Studio shall have the sole and exclusive right to utilize, sell, license or otherwise dispose of all or any part of its rights in such material upon such terms and conditions as it may deem advisable, all without consulting or advising Participant and without accounting to Participant in any manner with respect thereto.
 
   13.  Distribution:  As between Participant and Studio, Studio shall have complete authority to distribute the Picture and to license the exhibition thereof throughout the world in accordance with such sales methods, policies and terms as it may, in its uncontrolled discretion, determine. Studio shall have the broadest possible latitude in the distribution of the Picture, and the exercise of its judgment in good faith in all matters pertaining thereto shall be final. Studio has not made any express or implied representation, warranty, guarantee or agreement as to the amount of proceeds which will be derived from the distribution of the Picture, nor has Studio made any express or implied representation, warranty, guarantee or agreement that there will be any sums payable to Participant hereunder, or that the Picture will be favorably received by exhibitors or by the public, or will be distributed continuously. In no event shall Studio incur any liability based upon any claim that Studio has failed to realize receipts or revenue which should or could have been realized. Studio may distribute the Picture either itself or through such distributors, subdistributors and other parties as Studio may, in its uncontrolled discretion, determine, and Studio may refrain from releasing and/or distributing the Picture in any territory for any reason whatsoever. Studio may license the Picture or rights connected therewith to any and all theatres or other agencies in which Studio may have an interest directly or indirectly upon such terms and rentals as Studio may deem fair and proper under the circumstances. Nothing herein contained shall be construed as a representation or warranty by Studio that it now has or will hereafter have or control any theatres or agencies in the United States or elsewhere.
 
   14.  Sale of Picture:  Studio shall have the right at any time after completion of the Picture to sell, transfer or assign all or any of its rights in and to the Picture and the negative and copyright thereof. Any such sale, transfer or assignment shall be subject to Participants rights hereunder, and upon the purchaser, transferee or assignee assuming performance of this agreement in place and stead of Studio, Studio shall be released and discharged of and from any further liability or obligation hereunder. No part of any sale price or other consideration received by, or payable to, Studio shall be included in the gross receipts hereunder and Participant shall have no rights in respect of any thereof.
 
    15.  Assignments, etc.:  Participant shall have the right to sell, assign, transfer or hypothecate (all herein called “assign”) all or any part of Participants right to receive the monies payable to Participant hereunder. Any such assignment shall be subject to all pertinent laws and governmental regulations and to the rights of Studio hereunder. In the event of any such assignment by Participant, a Notice of Irrevocable Authority and Distributors Acceptance in Studios usual form shall be executed by Participant and by the transferee and delivered to Studio. If at any time more than three parties shall be entitled to receive payments, which under the terms hereof are to be paid to or for the account of Participant, Studio may, at its option, require that all such parties execute and deliver an agreement in Studios usual form appointing a disbursing agent for all such parties.
Schedule 1
 
   1.  “Gross Receiptsof the Picture means the aggregate of:
 
(a) All film rentals actually received by Studio from parties exhibiting the Picture in theatres and on television where Studio distributes directly to such parties (hereinafter referred to as “exhibitors”);
 
(b) In respect of licenses of exhibition or distribution rights by means of video discs, cassettes or similar devices, an amount equal to 20% of (i) the gross wholesale rental income therefrom and (ii) the gross wholesale sales income therefrom less a reasonable allowance for returns;
 
(c) All sums actually received by Studio from grants or licenses of distribution rights in and to the Picture (in any and all gauges of film, tape and other material) from sources other than those referred to in (a) and (b) above;
 
(d) All net earnings of Studio from trailers of the Picture (other than trailers advertising the television exhibition of the Picture); and the lease of positive prints, tapes and other material (as distinguished from the licensing thereof for a film rental); and from the sale or licensing of advertising accessories, souvenir programs and booklets;
 
(e) All net sums derived by Studio from distribution of the Picture on a “road show”, “reissue” and “four wall” basis, as such terms are commonly understood in the motion picture industry, whether on fixed or percentage engagements. The term “net sums” means Studios receipts less all advertising, publicity and other distribution costs incurred directly in connection therewith;
 
(f) All amounts required to be included under Exhibits X, Y and Z hereof.
 
less the aggregate of:
 
(i) All sums paid or accrued on account of sales, use, receipts, income, excise, remittance and other taxes (however denominated) to any governmental authority assessed upon the negatives, duplicate negatives, prints or sound records of the Picture, or upon the use or distribution of the Picture, or upon the revenues derived therefrom, or any part thereof, or upon the remittance of such revenues, or any part thereof; any and all sums paid or accrued on account of duties, customs and imposts, costs of acquiring permits, “Kontingents,” and any similar authority to secure the entry, licensing, exhibition, performance, use or televising of the Picture in any country or part thereof, regardless of whether such payments or accruals are assessed against the Picture or the proceeds thereof or against a group of motion pictures in which the Picture may be included or the proceeds thereof. In no event shall the deductible amount of any such tax (however denominated) imposed upon Studio, be decreased (nor the gross receipts increased) because  of the manner in which such taxes are elected to be treated by Studio in filing net income, corporate franchise, excess profits or similar tax returns. Subject to the foregoing, (i) Studios own United States federal and state income taxes and franchise taxes based on Studios net income; and (ii) income taxes payable to any country or territory by Studio based on the net earnings of Studio in such country or territory and which is computed and assessed solely by reason of the retention in such country or territory by Studio of any portion of the gross receipts shall not be deductible hereunder.
 
(ii) Expenses of transmitting to the United States any funds accruing to Studio from the Picture in foreign countries, such as cable expenses and any discounts from such funds taken to convert such funds directly or indirectly into U.S. dollars.
 
(iii) The cost of reducing or minimizing the matters referred to in (i) or (ii) above, which costs shall be fairly apportioned to the Picture if done on an industry basis or with respect to motion pictures distributed by Studio generally.
(iv) All costs of cooperative or other advertising or promotion (excluding trade and institutional advertising or promotion) incurred in connection with exhibitions of the Picture in theatres (or other places where an admission is charged) where Studio pays, shares in or is charged with all or a portion of the promotional or advertising costs relating to any such exhibitions.
 
(v) All amounts paid or payable to or for the benefit of actors, writers, composers, directors and others, pursuant to applicable collective bargaining agreements and/or any law or governmental regulations or decree now or hereafter in force by reason of, and/or as a condition or consideration for, any exhibition, use, re-use, rerun, performance, sale, license and/or distribution of the Picture and/or copies of all or any part thereof, on television, supplemental markets, or otherwise (all herein called “residuals”), together with all taxes, pension fund contributions and other costs paid or payable in respect of such residuals, and in respect of participations in the gross receipts and net profits of the Picture; provided, however, that if Participant or any principal stockholder of Participant, or any heirs, executors, administrators, successors or assigns of Participant, or any such stockholder, are entitled, either directly or by way of participation in any pension fund, to any such residuals, or to compensation for services rendered beyond any guaranteed period referred to in the foregoing agreement, the amount payable on account thereof shall be treated as an advance against Participants share of the gross receipts hereunder, and conversely, any gross receipts paid to Participant hereunder shall (to the extent permissible under applicable collective bargaining agreements) constitute an advance against such residuals payable to or for the benefit of Participant or any principal stockholder of Participant, or any such heirs, executors, administrators, successors or assigns.
 
(vi) Dues and assessments of and contributions by Studio to AMPTP, MPAA, MPEA, the Academy of Motion Picture Arts and Sciences, and other trade associations or industry groups comprised of a substantial number of motion picture producers and/or distributors, but only for purposes relating to the production, distribution, export, import, advertising, exploitation and general protection, including actions under the antitrust laws, and/or promotion of motion pictures.
 
   In no event shall rentals from the exhibition of the Picture which are contributed to charitable organizations be included in gross receipts. If  Studio reasonably anticipates taxes, residuals, uncollectible accounts, or any matters relating to the Picture, which, if and when determined, will be deductible hereunder, Studio may, for a reasonable time, set up appropriate reserves therefor.
 
   2.  Film Rentals:  In paragraph 6 of the foregoing Exhibit for purposes of computing gross receipts under this Schedule 1, the third and fourth sentences are deleted, and the following substituted: Where the film rental is computed on the basis of box-office receipts of the Picture, any expenses incurred in checking attendance and/or receipts of such engagements shall be deducted in determining film rentals hereunder. There shall be deducted from film rentals expenses incurred in the collection thereof.
 
Music Publishing Income
   In the event the party entitled to share in gross receipts or net profits of the Picture under the foregoing agreement is not entitled to share directly in publishing revenues, there shall also be included in gross receipts of the picture:
 
   A sum equal to ________% of the “publishers share” of mechanical reproduction and performing fees received in U.S. currency by Studios subsidiary or affiliated publisher with respect to music and lyrics written specifically for and synchronized in the picture as released, provided such publisher is vested with all rights therein and all of the “publishers share” of the receipts therefrom, and provided the party entitled to share in gross receipts or net profits of the picture under the foregoing agreement is not entitled to receive composers or lyricists royalties in respect of such music or lyrics. The “publishers share” of mechanical reproduction fees shall be the full amount paid by the licensee, less composers share of such fees and less the charges of the publisher or any agent, trustee or administrator acting for the publisher for the collection of such fees, not to exceed 5% thereof. Mechanical reproduction fees do not include synchronization fees.
 
   The “publishers share” of performing fees shall be the net amount actually received by the publisher from any performing rights society in respect of the music and lyrics involved; or, if Studio or the publisher shall administer the collection of all or any part of performance fees, the full amount of all performance fees collected by Studio or the publisher, less the composers share of such fees and all reasonable costs and expenses in administering the collection of such fees.
 
   If the agreement or Exhibit to which this Exhibit is attached provides for distribution fees, no distribution fees shall be charged on amounts included in gross receipts pursuant to this Exhibit.
 
Sound Track Record Income
 
   In the event the party entitled to share in the gross receipts or net profits of the picture under the foregoing agreement is not entitled to receive any artists royalties in respect of phonograph records derived from the sound track of the picture, then Studio agrees to include in the gross receipts of the picture royalties on sound track records, as herein defined, computed at the applicable royalty rate.
 
   As used herein:
 
   The term “sound track records” means and refers to phonograph records, tapes, or other sound recordings which contain either (i) portions of the sound track transferred directly to phonograph record masters from sound records which form a part of the sound track of the picture; or (ii) sound recordings recorded separately but utilizing substantially the same musical score, parts and instrumentation, and essentially the same artists, music  and/or dialogue and/or sound effects as is contained in the sound track of the picture; or (iii) a combination of (i) and (ii). Sound track records do not, however, include any recordings produced solely for the purpose of advertising and exploiting the picture and copies of which are not distributed to the public.
 
   The term “applicable royalty rate” means and refers to the following percentages of the prevailing retail price but in no event more than the net royalty actually received and retainable by Studio for its own account with respect to the sale of any particular copies: 5% of 90% in respect of sound track records sold in the United States; 2 1/2 of 90% in respect of sound track records sold outside the United States except that as to sound track records sold pursuant to mail order or “club” plans, the royalty rate shall be one-half of the rate otherwise applicable.
 
   If any sound track records contain selections from other sources, the applicable royalty rate hereunder shall be prorated on the basis of the total number of minutes of selections from the sound track compared to the total number of minutes on such records.
 
   In determining the net royalty retainable by Studio, all royalties payable to artists, conductors and other third parties in respect to such sound track records shall be deducted from the aggregate royalty payable to Studio under the applicable distribution agreement.
 
   The term “prevailing retail price” means and refers to the price generally prevailing in the country of manufacture or sale (as determined by the Record Company), less all taxes, duties and charges for containers.
 
   There shall be deducted from amounts included in gross receipts hereunder a pro rata share of re-use fees and costs of recording and manufacturing masters advanced by Studio or the Record Company. Sales shall be determined on the basis of the number of records sold and for which the Record Company has been paid in U.S. currency, after allowing for all returns, cancellations, exchanges, applicable discounts, etc. and reasonable reserves which may be established therefor. No sums shall be included in gross receipts with respect to records given away or sold at less than the Record Companys cost or for promotional purposes, or as sales inducements or otherwise.
 
   If the agreement or Exhibit to which this Exhibit is attached provides for distribution fees, no distribution fees shall be charged on amounts included in gross receipts pursuant to this Exhibit.
 
Merchandising Income
 
   In the event the party entitled to share in gross receipts or net profits of the picture under the foregoing agreement is not entitled to share directly in merchandising revenue, there shall be included in gross receipts of the picture:
 
   (a) A sum equal to 50% of all license fees (in excess of all royalties and participations) received by Studio directly as a result of the exercise by Studio itself of merchandising license rights. If, however, Studio shall sublicense or subcontract any of such merchandising license rights, Studio shall include in the gross receipts hereunder, at its election, either a sum equal to (i) 85% of the net sums (in excess of all royalties and participations) received from such sub-licensee; or (ii) 50% of such sub-licensees license fees from the exercise of such licensing rights (from which there shall be deducted all royalties and participations), and out of the remaining 50% thereof Studio shall pay and discharge the fees of its sublicensee.
 
    (b) If the publication rights to the underlying literary material were owned or controlled by the party entitled to share in gross receipts or net profits of the picture under the foregoing agreement (herein called “participant”) prior to the execution of this agreement, and were acquired by Studio pursuant to or in connection with this agreement, then (i) all net sums received by Studio from nonaffiliated or nonsubsidiary publishers from the publication of such underlying literary material and of novelizations of the screenplay of the picture, and (ii) a sum equal to 5% of the net receipts of Studios subsidiary or affiliated publishers from the publication of such material and novelizations, less, in either case, royalties paid out of (i) or (ii) to the writers of such material and novelizations.
 
   If the agreement or Exhibit to which this Exhibit is attached provides for distribution fees, no distribution fees shall be charged on amounts included in gross receipts pursuant to this Exhibit.
Number of Pages17
DimensionsDesigned for Letter Size (8.5" x 11")
EditableYes (.doc, .wpd and .rtf)
UsageUnlimited number of prints
Product number#28001
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