not form any part of the receipts or royalties from the Canadian or foreign exploitation of such photoplays, and the Producer shall not participate in any amount so received by the Distributor.

(e) It is further mutually agreed that in the event that a new law be enacted imposing any tax upon the manufacture, sale or rental of motion pictures or motion picture film, whether raw or printed, and prohibiting the passing of such tax to the exhibitor, then and in that event the Producer agrees to pay to Distributor, in addition to the price of........Dollars ($...) per reel hereinabove provided for, a sum equivalent to the amount of any tax which the Distributor may be required to pay on any raw or printed positive film used in the manufacture of positive prints of the aforesaid photoplays or upon the manufacture, sale, or rental of such positive prints, it being mutually agreed that the passage or enactment of any law providing for such tax shall automatically increase the price of positive prints to be manufactured by Distributor hereunder by an amount equivalent to such tax and that the payment by the Producer of such increased price shall not be construed as payment of the tax by the Producer but as an increase in the purchase price of positive prints only.

6. The Distributors agree to exploit said photoplays elsewhere than in the United States, through its agents, correspondents, representatives or franchise holders by outright sale or on a royalty basis. The Distributor shall have the right at its option to discontinue the exploitation of any photoplays in the United States of America upon the expiration of two (2) years following its first release date. The Distributor is hereby granted the right to reissue any of said photoplays during any unexpired part of the term of the grant of


Period and Method of Exploitation.

rights with respect thereto as in clause........

set forth.

7. (a) The Distributor agrees to advance or to procure to be advanced to the Producer and to pay or cause to be paid to the Producer within ten (10) days after the delivery of each feature unit, as hereinabove provided, the certified negative cost of such photoplay, calculated as hereinafter provided, and not in excess of the sum of........

for each photoplay. Such advances shall be paid in the following manner: ....

(b) Distributor hereby agrees to advance to or on account of the Producer, a sum not to exceed

........Dollars ($___) for trade-paper, billboard, magazine, campaign books and/or other advertising of each of the photoplays.

8. Distributor further agrees to cause lithographs, posters, slides, photographs and other appropriate advertising material to be supplied and issued in connection with each photoplay, without expense to the Producer, it being mutually agreed that the Producer shall not receive or participate in any sum of money collected by Distributor or its distributing agency as the proceeds of the sale or rental of such advertising material. - 9. (a) The cost of production of each photoplay shall be not less than.........Dollars ($......) and not more than.........Dollars ($......) and in no event shall more than........Dollars

($......) be advanced as the cost of production pursuant to the previous clause of this agreement, or reimbursed to Producer as hereinafter provided.

(b) The Producer agrees to deliver to Distributor concurrently with the delivery of the respective feature unit an itemized statement of the cost of production of such photoplay, verified as to accuracy by an executive officer of the Producer and by the bookkeeper in charge of the

Advance Against Negatives.

Advanees for Advertising, etc.

Posters and Advertising Accessories.

Cost of Production

Statement of Production Cost.

Producer's accounts, and the Producer agrees that if such statement shall be unsatisfactory to Distributor, Distributor shall have the right to have the books and accounts of the Producer audited by a certified public accountant, and to that end the Producer hereby agrees to keep and maintain books, accounts, vouchers, receipts, etc., that will accurately show all items of expense charged against the cost of the respective productions and that such books, accounts and records shall at all reasonable times be open to inspection and audit by Distributor and its duly authorized representative.

(c) The Producer agrees that all items of cost charged against the respective feature unit shall be charged at the actual cost price to the Producer after the deduction of all discounts and/or rebates; that only such proportion of each item of expense as has been actually incurred in connection with the respective feature unit shall be charged against such feature unit; that the total of the expense incurred under the heading "Overhead" shall in no event exceed........per cent. (___%) of the cost of the respective feature unit, exclusive of the expenditures under the heading "Overhead "; that all salaries paid to any persons directly or indirectly engaged in the production of any feature unit hereunder who may at the same time be engaged or employed in or in connection with the production of any other photoplay or in the performance of any other duties shall be prorated according to the time actually spent in such engagement or employment in connection with the respective feature unit.

(d) The cost of production shall not include royalties paid to authors based upon the earnings of any of said photoplays; individual advertising of any person appearing in any of said photoplays; advertising publicity, or exploitation expenses

Method of Calculating Cost.

Excluded Items incurred in connection with any of said photoplays; bonuses or commissions to either officers or employees of the Producing Company or artists appearing in any of said photoplays; or expenses of any kind or character incurred by the officers or any employees of the Producer, except those directly connected with or incident to the production of the respective photoplay.