Time Warner to Pay Pathe for Video Rights : Entertainment: The two companies also agree to settle a lawsuit over Pathe’s bid for MGM/UA.

Time Warner Inc. agreed to back Pathe Communications Corp.’s bid for MGM/UA Communications Co. by advancing the independent film company $125 million in return for long-term video rights to Pathe and MGM/UA movies.

Time Warner and its Warner Bros. unit also agreed to settle their litigation with Pathe. The companies had sued each other in Los Angeles Superior Court after Time Warner dropped an earlier plan to provide $650 million in backing for the $1.3-billion MGM/UA purchase.

The current agreement, which had been rumored for a week, gives Warner Bros. worldwide video distribution rights to the existing MGM/UA and Pathe libraries and to new films to be produced by the merged companies for the next 12 1/2 years.

Last Sunday, Pathe announced a similar agreement under which Turner Broadcasting System Inc. acquired television distribution rights to MGM/UA’s 1,000-film library for the next 10 years.

Warner Bros., under its agreement, will make additional payments as each new MGM/UA film begins production for the life of the agreement. The arrangement will give MGM/UA funds to restart production, which has ground to a virtual halt since Pathe announced its buyout bid last March.

Pathe has already completed nearly a dozen films that will be released to theaters under the MGM/UA logo, before their release on videocassettes by Warner Bros. The films include “The Russia House,” starring Sean Connery and Michelle Pfeiffer, and “Not Without My Daughter,” starring Sally Field.

“Rocky V,” an MGM/UA film set for release next month, will also be released on cassettes by Warner Bros.

Pathe and its president, Giancarlo Parretti, have said they plan to complete the acquisition of MGM/UA under their $21.50-a-share bid by Friday. A $4-a-share portion of the price has already been paid to shareholders.

An MGM/UA spokesman said Tuesday that the company’s board met to review progress of the buyout, and will reconvene today for a vote on whether to approve Pathe’s financing package.