Exhibit 10.10
*
January 20, 1999
Mr. Xxxx Xxxxxx
Executive Vice President
General Merchandising Manager
Blockbuster Inc.
0000 Xxx Xxxxxx
Xxxxxx, XX 00000
RE: VHS REVENUE SHARING * AGREEMENT
Dear Xxxx:
The following (the "Letter Agreement") sets forth the terms of the license
agreement (the "License") between * and Blockbuster Inc. ("Blockbuster") for
revenue sharing on * Rental Picture output.
1. TERM: * year period commencing upon the "Street Date" of the first "Rental
Picture" (as such terms are defined below) released by * on or after March
1, 1999.
2. TERRITORY: United States only; provided, however, Blockbuster shall have
the option to enter into an agreement with * (Canada) on substantially the
same terms and conditions, and for a term coextensive with the Term
hereof, upon one hundred and eighty (180) days prior written notice to *.
3. DEFINITIONS AND CALCULATIONS:
a. *
(i) *
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* Pages where confidential treatment has been requested are stamped
"Confidential material omitted and separately filed with the Commission
under an application for confidential treatment", and the confidential
section has been marked with a star (*).
(A) *
(B) *
(C) *
(D) *
(E) *
(F) *
(ii) *
b. *
c. *
d. "Guarantee Program" shall mean the program under which Blockbuster
nationally advertises a money-back guarantee or free rental to
consumers if videocassettes of certain titles are not available for
rental from the Stores or another comparable program.
e. *
f. "Month" shall be defined as set forth on Exhibit 3(e) attached
hereto and by this reference made a part hereof.
g. "Picture Term" means for each Rental Picture the first 26 weeks of
rental release beginning with Street Date.
h. "Rental Picture" means each and every new release on videocassette
of a feature motion picture for which * owns or controls home video
distribution rights in the Territory (subject to any and all
approvals required by any third party) of not
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fewer than seventy (70) minutes in length, priced for rental in the
retail market; provided, however, the following shall be
specifically excluded from Rental Pictures: (i) * distributed lines
(unless and until the terms of this Letter Agreement are accepted
and agreed by any such distributed line), (ii) product controlled by
third parties who do not approve of the terms hereof and (iii)
videocassettes of sports events, concert footage, stage plays,
documentaries, video or theatrical re-releases, foreign language
titles or product rated NC-17 or more restrictive by the MPAA, or
library titles.
i. *
(i) *
(ii) *
(iii) "Taxes" shall mean any and all sales, excise, value added or
other taxes which meet the following qualifications: (A) the
taxes are separately stated, (B) the taxes are required by law
to be collected from Blockbuster's customers, and (C) the
taxes are actually paid by Blockbuster to taxing authorities.
j. "Stores" shall mean (i) all Blockbuster-owned rental retail stores,
(ii) any and all Blockbuster franchises that elect to participate
in, and comply with, the obligations set forth under this Letter
Agreement and any other obligations that Blockbuster may impose to
administer the terms hereof with respect to any such franchisees,
and (iii) Blockbuster-owned alternative direct-to-consumer VHS
rental distribution systems by which Blockbuster rents VHS
videocassettes to consumers for home use and/or sells PVTs to
consumers via internet, vending machines and/or kiosks
(collectively, "Alternative Distribution Systems"). * All
franchisees that participate shall be treated as Blockbuster Stores
for the purposes of this Letter Agreement, and the actual rental
transactions of such franchisees on Measurement Titles shall be
included in Blockbuster's total rental transactions. In the event
that there is insufficient historical data, the parties shall use
good faith efforts to agree on estimated rental transactions for
such franchisees. "Stores" shall specifically exclude any new store
or stores owned or controlled by Blockbuster operating under any
name other than Blockbuster. The parties agree
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that with respect to stores and/or chains of stores acquired by
Blockbuster during the Term, such stores shall be eligible to assume
the rights and obligations set forth hereunder provided Blockbuster
shall report for such new stores through its existing established
reporting mechanism, and, any existing revenue sharing agreement of
any such store with * shall terminate. Upon the addition or
acquisition of stores, Blockbuster shall notify * immediately in
writing, and the parties shall begin good faith discussions to
immediately increase the number of Base Units to reflect such store
acquisitions and/or additions.
k. "Street Date" means the first day retailers are permitted by * to
make a title available for rental to consumers.
4. LICENSED RIGHTS:
a. Homevideo Distribution License: * licenses to Blockbuster on a
limited and non-exclusive basis homevideo distribution rights to all
Rental Pictures in the VHS format for rental (i) only to consumers
for home use and (ii) only from Stores in the Territory during the
Term, subject to the terms hereunder.
b. Reservation of Title: Legal title to, and risk of loss of, the
Licensed Units hereunder shall remain vested in *, subject to
disposition of PVTs pursuant to Paragraph 8 below. Blockbuster shall
not permit any encumbrance to attach to any Licensed Units delivered
pursuant to this Letter Agreement.
5. *
a. *
(i) *
(ii) *
b. *
c. *
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6. *
a. *
b. *
c. *
7. STATEMENTS AND PAYMENTS:
a. Statements: On a Monthly basis, * Blockbuster shall provide to *, in
the formats reasonably requested and as periodically amended by *, a
statement (the "Statement") which reflects the rental and related
activities for such Month, *.
b. Payments: For each Rental Picture, to the extent any amounts are due
pursuant to the Statements, Blockbuster shall wire transfer such
amounts to an account designated by * no later than *.
8. DISPOSITION OF PREVIOUSLY VIEWED TAPES:
a. Sale: For each Rental Picture, * may direct Blockbuster, as its
licensee, to sell previously viewed tapes ("PVTs") to consumers
pursuant to the following conditions:
(i) *
(ii) *
(iii) *
(A) *
(B) *
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(iv) No Revenue Share: There shall be no revenue sharing between
Blockbuster and * with respect to the proceeds from sales of
PVTs by Blockbuster *.
(v) *
(vi) In the event * changes its current practice with respect to
directing Blockbuster to sell PVTs consistent with
Subparagraphs (i)-(v) of 8.a. above ("Redirection"), the
parties shall in good faith review and reduce * Revenue Share
effective with any Redirection, if necessary, to provide for
the sharing on a pre-established * basis of revenues generated
by Blockbuster under this Letter Agreement in excess of the
revenues Blockbuster would have earned prior to the parties'
revenue sharing relationship. The calculation of * Revenue
Share shall be based on historical data relating to revenues
generated from the Rental Pictures during the prior year and
shall be subject to audit. The Minimum Share shall be adjusted
on a pro rata basis to reflect any new * Revenue Share
percentage.
b. Other Disposition:
(i) *
(A) *
(B) *
(C) *
(ii) *
c. *
9. PLACEMENT OF LICENSED UNITS: Blockbuster shall place all licensed Units of
each Rental Picture licensed hereunder (except those units out for rental
by consumers) on prominent "new release" display walls or another agreed
equivalent in-store location
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for not fewer than * after Street Date, subject to prior sale pursuant to
the terms of Paragraph 8.a. above.
10. ADVERTISING SUPPORT: * shall provide advertising support to Blockbuster
for Base Units only, consistent with current practices, provided, however,
in the event that any two (2) other major motion picture studios (e.g., *)
(each, a "Major Studio") offer substantially different advertising support
that results in a material change in the video industry, * shall have the
option to modify its advertising support accordingly with respect to the
Rental Pictures hereunder. In such event, Blockbuster shall have the
option to modify the Base Units calculation, provided that, in the event
that Blockbuster modifies the calculation to decrease the Base Units by *
or more, * shall have the option immediately to terminate this Letter
Agreement.
11. DELIVERY: *, at its cost, shall use its reasonable good faith efforts to
deliver product to Blockbuster's distribution center in McKinney, Texas
four (4) weeks prior to Street Date for each Rental Picture. The parties
agree that for each Rental Picture, Blockbuster may retain up to * of the
Base Units at its distribution center for replenishment of defectives (the
"Replenishment Units"), new stores, and unexpected spikes in product
performance. To the extent the Replenishment Units are still in the
distribution center at the end of the applicable Picture Term for each
Rental Picture, such Replenishment Units shall be subject to disposition
pursuant to the terms of Paragraph 8.b. above.
12. INFORMATION TO BE PROVIDED BY BLOCKBUSTER: To the extent reasonably
available to Blockbuster and with respect to * product only, Blockbuster
agrees to provide the following information to * at Blockbuster's expense:
a. Revenue Share Reporting: On a bi-weekly basis, Blockbuster shall
deliver to * reports detailing the number of rental transactions and
gross revenues per Rental Picture for all *-distributed labels
subject to this Letter Agreement.
b. Other Information: Blockbuster and * shall mutually agree on other
information to be provided to * for all *-distributed labels subject
to this Letter Agreement.
13. SHARING OF COSTS: * shall reimburse Blockbuster for a portion of its
reasonable, out-of-pocket, third party costs for the following: (i) making
the Bonus Units rental-
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ready; (ii) shipping the Bonus Units to the Stores; and (iii) purchasing
Amaray boxes for the Bonus Units. Such reimbursement amount shall be * for
each Bonus Unit.
14. AUDIT RIGHTS: Upon not less than fourteen (14) days advance written
notice to Blockbuster, *, or its representatives or designees, shall have
the right during normal business hours, but not more than two (2) times
during each calendar year of the Term and one (1) time after the
expiration or earlier termination of the Term, to inspect, audit and make
extracts of the books and records of Blockbuster insofar as said books and
records relate to the calculation or determination by Blockbuster of (a)
Revenue, (b) * Revenue Share, (c) Credit, (d) Bad Debt, and (e) the rights
licensed hereunder as they relate to *; provided, however, * shall have
the right to conduct store audits as reasonably required throughout the
Term. Such rights of audit shall continue for a period of two (2) years
following the expiration of all Picture Terms as provided for under this
Letter Agreement. The parties agree that Blockbuster shall have the right
reasonably to approve independent auditors hired by * to conduct an audit,
provided that the internal auditors of * and/or * and the accounting firm
of * or * then existing auditors shall be deemed pre-approved for any and
all audits conducted pursuant hereto. Notwithstanding the foregoing, the
parties agree that no * or * employees shall have direct or indirect
access to Blockbuster's information relating to * competitors or
Blockbuster's aggregate market data; provided, however, * auditors shall
have the right to review Blockbuster's aggregate market data subject to
executing a confidentiality agreement.
15. CONFIDENTIALITY: Each of * and Blockbuster acknowledges that all
information and data (including, without limitation, rental and revenue
forecasts, projections and estimates and actual results, in whatever form
or medium) (collectively, the "Confidential Information") provided by each
party to the other under this Letter Agreement is highly proprietary and
confidential. Each of * and Blockbuster agrees that it shall not use
(other than in (a) connection with the performance of its obligations
under this Letter Agreement, or (b) the exercise of its rights, under this
Letter Agreement, or (c) as required by law, but only to the extent the
law so requires, or (d) unless compelled by subpoena or court order) or
disclose to any person (other than its officers, employees, agents,
representatives, licensors and participants on a need-to-know basis only
and who agree to be bound by the confidentiality obligations hereunder)
any such Confidential Information. * This Paragraph 15 shall survive
expiration or earlier termination of this Letter Agreement.
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16. INDEMNIFICATION:
a. Indemnification by Blockbuster: Except as otherwise provided in
Paragraph 16.b. below, Blockbuster shall defend, indemnify and hold
*, its parent company, their affiliates and subsidiaries, and the
officers, directors, agents and employees of each, free and harmless
from all suits, claims, demands and other liabilities and expenses
(including reasonable attorneys' fees) (each, a "Claim") which may
arise directly or indirectly out of or by reason of (i) the
unauthorized use by Blockbuster of any patented invention, or of any
copyrighted material provided by *, (ii) a Claim from a customer
arising out of Blockbuster's rental or retail practices or course of
dealing with respect to such customer, and/or (iii) a breach or
violation of this Letter Agreement by Blockbuster.
b. Indemnification by *: Except as otherwise provided in Paragraph
16.a. above, * shall defend, indemnify and hold Blockbuster, its
parent company, their affiliates, subsidiaries, and franchisees, and
the officers, directors, agents, and employees of each, free and
harmless from all Claims (including reasonable attorneys' fees)
which may arise directly or indirectly out of or by reason of (i)
copyright infringement by, or other third party Claim against, *
with respect to the content of any Rental Picture, provided such
Claim or infringement is not the result of the negligence of
Blockbuster or any employee or agent of Blockbuster, (ii) a physical
defect in any Licensed Unit provided to Blockbuster hereunder by *,
provided such defect was not caused by the negligence of Blockbuster
or any employee or agent of Blockbuster, and/or (iii) a breach or
violation of this Letter Agreement by *.
17. REMEDIES: Each of * and Blockbuster acknowledge and agree that a material
breach by either party of any of its obligations under this Letter
Agreement, gives the other party the right to terminate this Letter
Agreement upon * prior written notice. Blockbuster waives any rights to
seek injunctive relief with respect to the sale, license and/or other
distribution of any Rental Picture, provided that Blockbuster does not
waive any right it may have to seek specific performance under this Letter
Agreement with respect to any Rental Picture being distributed by *. The
termination of this Letter Agreement shall not relieve the parties of any
obligations incurred prior to such termination.
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18. DEFECTIVES: The parties agree that there shall be no replacements of, or
credits or set-offs against the Initial Payment, overages, or any other
amounts owed to * by Blockbuster for, defective Licensed Units. For each
Rental Picture, to the extent defectives exceed * of the total number of
Licensed Units delivered to Blockbuster during the first thirty (30) days
after Street Date, Blockbuster may exchange defectives for new videos from
* to be delivered within a reasonable time thereafter, which reasonable
time shall be within seventy-two (72) hours, provided that Blockbuster
utilizes * eight hundred (800) number defective replacement system.
19. MISCELLANEOUS:
a. Amendment and Waiver: Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Letter
Agreement shall be effective against any party unless such
modification, amendment or waiver is approved in writing by
Blockbuster and *. The failure of any party to enforce any of the
provisions of this Letter Agreement shall in no way be construed as
a waiver of such provisions and shall not affect the right of such
party thereafter to enforce each and every provision of this Letter
Agreement in accordance with its terms.
b. Severability: Whenever possible, each provision of this Letter
Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Letter
Agreement is held to be invalid, illegal or unenforceable in any
respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any
other provision or any other jurisdiction, but this Letter Agreement
shall be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision had never been
contained herein.
c. Entire Agreement: Except as otherwise expressly set forth herein,
this document embodies the complete agreement and understanding
between the parties hereto with respect to the subject matter hereof
and supersedes and preempts any prior understandings, agreements or
representations by or between the parties, written or oral, which
may have related to the subject matter hereof in any way.
d. Assignment:
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(i) Blockbuster Assignment: This Letter Agreement shall not be
assigned by Blockbuster without the prior written consent of
*, except (a) to any corporation or entity with which
Blockbuster is merged or consolidated, or (b) to any
corporation or entity which succeeds to all or substantially
all of Blockbuster's assets, or (c) to any corporation or
entity which controls, is controlled by, or under common
control with Blockbuster. All the foregoing exceptions shall
be subject to (1) written notice to * on or before assignment,
(2) Paragraph 3.i. above with respect to non-Blockbuster
stores, (3) *.
(ii) *Assignment: This Letter Agreement shall not be assigned by *
without the prior written consent of Blockbuster, except (a)
to any corporation or entity with which * is merged or
consolidated, or (b) to any corporation or entity which
succeeds to all or substantially all of * assets, or (c) to
any corporation or entity which controls, is controlled by, or
under common control with * (in each instance, an "Excluded
Assignment"); provided, however, the assignee continues to
distribute the Rental Pictures under the * or similar name and
logo. To the extent a non-Excluded Assignment by * results in
a material change in the mix of Rental Pictures or a material
decrease in the number of Rental Pictures, Blockbuster shall
have the option to terminate this Letter Agreement upon
written notice to *.
(iii) Purchase of Blockbuster by a Major Studio or Retailer:
(A) Purchase By Major Studio: In the event a Major Studio
enters into an agreement to acquire Blockbuster, * shall
be given prompt notice of such agreement and shall have
the option to terminate this Letter Agreement
immediately upon written notice to Blockbuster. Promptly
following such notice of acquisition agreement,
Blockbuster, in consultation with *, shall undertake to
provide adequate assurance in writing to * that
proprietary and confidential information of * shall not
be disclosed to, or otherwise made accessible to, the
management or other employees of such Major Studio
following such acquisition. As used in this Paragraph
19.d.(iii) (A), the term "Major Studio" shall (i) also
include, without limitation, (x) * and (y) the
respective affiliated
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corporations which control, are controlled by, or are
under common control with, each Major Studio and (ii)
exclude Viacom and the affiliated corporations which
control, are controlled by, or are under common control
with Viacom. The term "control" shall refer to the
ownership of at least fifty percent (50%) of the
outstanding voting power of the corporation or entity
which is subject to such "control".
(B) Purchase By/of Retailer: In the event a retailer enters
into an agreement to acquire Blockbuster or Blockbuster
enters into an agreement to acquire a retailer, * and
Blockbuster agree that in such event, the terms of this
Letter Agreement shall apply only (i) to already
existing Blockbuster stores and (ii) to any new stores
which operate under the Blockbuster name at the retail
level, and/or to the extent such new stores are capable
of reporting through Blockbuster's established reporting
mechanism.
(C) Definition of "Purchase": For purposes of this
Subparagraph 19.d.(iii) the term "Purchase" shall
include acquisition, merger and/or other consolidation.
e. Counterparts. This Letter Agreement may be executed in separate
counterparts each of which shall be an original and all of which
taken together shall constitute one and the same agreement.
f. Due Authorization. Each of * and Blockbuster represents and warrants
that the officer executing this Letter Agreement has been duly
authorized and that this Letter Agreement when executed and
delivered shall be valid and binding and enforceable in accordance
with its terms.
g. Notices. All notices provided for in this Letter Agreement shall be
in writing and shall be either personally delivered, or mailed first
class mail (postage prepaid) or sent by reputable overnight courier
service (charges prepaid) to the parties at the following address:
If to Blockbuster:
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Blockbuster Inc.
0000 Xxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx Xxxxxx, Executive Vice President
General Merchandising Manager
Xx Xxxxx, Executive Vice President and General Counsel
If to *
*
h. Governing Law. This Letter Agreement and all matters or issues
material thereto shall be governed by the laws of the *, applicable
to contracts performed entirely therein. * and Blockbuster hereby
agree that all actions, proceedings or litigation relating to this
Letter Agreement shall be instituted and prosecuted solely within
the * and each party hereby consents to the jurisdiction of the *
and the * with respect to any matter arising out of or relating to
this Letter Agreement.
i. Descriptive Headings. The descriptive headings of this Letter
Agreement are inserted for convenience only and do not constitute a
part of this Letter Agreement.
j. Relationship of Parties. Nothing contained herein shall constitute a
partnership, joint venture, association or principal and agent
relationship or be construed to evidence the intention of the
parties to constitute such. Blockbuster and * are independent
contractors and neither has any authority to act on the other's
behalf or to bind the other in any way.
k. Force Majeure. Whenever performance by any party of its obligations
under this Letter Agreement, other than any of Blockbuster's payment
obligations hereunder, is substantially prevented by reason of any
act of God, strike, lock-out, or other industrial or
transportational disturbance, fire, lack of materials, law,
regulation or ordinance, war or war conditions, or by reason of any
other matter beyond such party's reasonable control, then such
performance shall be excused and this Letter Agreement shall be
deemed suspended during the continuation of such
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prevention, and the term shall be extended for a period equal to the
time of such suspension.
l. Third Parties. None of the provisions of this Letter Agreement is
intended for the benefit of or shall be enforceable by any third
party including creditors of Blockbuster or *.
In WITNESS WHEREOF, this Letter Agreement was executed by the parties on the
date first written above.
BLOCKBUSTER INC. ("Blockbuster") *
By: /s/ Xxxxxx X. Xxxxx By: /s/ *
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Its: EVP Its: *
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Exhibit 3(a)(i)
BLOCKBUSTER REVENUE SHARE AGREEMENT EXHIBIT
*
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* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
Exhibit 3(a)(i)(B)
BLOCKBUSTER REVENUE SHARE AGREEMENT EXHIBIT
*
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* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
Exhibit 3(a)(i)(F)
*
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* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
Exhibit 3(b)
*
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* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
*
January 20, 1999
Mr. Xxxx Xxxxxx
Senior Vice President
General Merchandising Manager
Blockbuster, Inc.
0000 Xxx Xxxxxx
Xxxxxx, XX 00000
RE: VHS REVENUE SHARING * AGREEMENT - *
Dear Xx. Xxxxxx:
Reference is hereby made to that certain Revenue Sharing * Agreement (the
"Agreement") dated January 20, 1999 by and between * and Blockbuster Inc.
("Blockbuster") for VHS revenue sharing on *'s Rental Picture output.
Capitalized terms used herein and not otherwise defined shall have the same
meaning as in the Agreement.
Pursuant to Paragraph 3 of the Agreement, the parties agree that the term
"Rental Pictures" shall include all * titles distributed by *, subject to the
exclusions set forth in Paragraph 3.h. of the Agreement.
Except as otherwise modified herein, all other terms and conditions of the
agreement are hereby ratified and shall remain in full force and effect.
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IN WITNESS WHEREOF, this letter agreement was executed by the parties on the
date first written above.
*
By: /s/ *
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Its: *
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BLOCKBUSTER INC. ("Blockbuster")
By: /s/ Xxxxxx X. Xxxxx
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Its: EVP
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