printer-friendly

Sample Business Contracts

Revenue Sharing Agreement - Buena Vista Home Entertainment Inc. and Blockbuster Video Inc.

Sponsored Links

                            REVENUE SHARING AGREEMENT

THIS AGREEMENT (the "Agreement") is made the 21st day of November, 1997.

BETWEEN:

(1)   BUENA VISTA HOME ENTERTAINMENT, INC. whose principal place of business
      is at 3900 West Alameda Avenue, Burbank, California 91521 (hereinafter
      referred to as "BVHE," which shall be deemed to include its permitted
      assigns); and

(2)   BLOCKBUSTER VIDEO INC. whose principal place of business is at 1201 Elm
      Street, 31st Floor, Dallas, Texas 75270 (hereinafter referred to as
      "Blockbuster," which shall be deemed to include its permitted assigns).

WHEREAS:

(A)   Blockbuster and certain of its Affiliates own, operate and franchise
      retail stores throughout the United States and Canada which, among other
      things, rent, sell and market pre-recorded videocassette tapes to the
      general public; and

(B)   BVHE and certain of its Affiliates acquire, produce, license market and
      sell motion pictures on pre-recorded videocassette tapes; and

(C)   Blockbuster is willing to purchase on a per Store (the terms initially
      capitalized in this Agreement and not otherwise defined herein shall have
      the respective meanings set forth in Paragraph 19 of this Agreement) basis
      a specified number of videocassette copies of each Rental Picture; and

(D)   Blockbuster is willing to provide various marketing, advertising and
      promotional services and activities in support of the Rental Pictures; and

(E)   Blockbuster is willing to report electronically on an ongoing basis
      information as to the rental and sales of Rental Pictures.

----------

*     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 (*).
<PAGE>

                                       2


NOW THEREFORE, based on the above premises and in consideration of the covenants
and agreements contained herein, the parties agree as follows:

1. AGREEMENT TERM:

      The term of this Agreement shall be for five (5) years (the "Term"),
commencing as of the date of this Agreement. Each year of the Term, as
measured from the date of this Agreement, is a "Contract Year."

2. TERRITORY:

      The territory for purposes of this Agreement with respect to each
Picture shall be the United States and Canada, their territories and
possessions (the "Territory"), except with respect to those Pictures for
which BVHE has only United States Home Video Distribution Rights, in which
case, the Territory with respect to such Pictures shall be limited to the
United States and, if and to the extent BVHE owns or controls such rights, to
territories and possessions of the United States (the "U.S. Territory").

3. BLOCKBUSTER COMMITMENTS:

      Beginning as of the date of this Agreement for Stores located in the
United States, for Stores located in Canada within three (3) calendar months
hereafter, and for Participating Franchises within twelve (12) calendar months
hereafter, Blockbuster agrees as follows:

            a. Purchasing: The following purchasing requirements shall apply to
      all Stores and Participating Franchises (as defined in Paragraph 3.c.
      below):

                  (1)   RENTAL PICTURES: For each and every Rental Picture
      with a Gross Box Office of * or more, released by BVHE in the Territory,
      Blockbuster agrees to order for each Store, * and purchase, and BVHE
      agrees to sell to Blockbuster, at least * of that number of Copies set
      forth in the Buy Matrix attached hereto as Exhibit "A" which is
      incorporated by this reference. For each and every Rental Picture with a
      Gross Box Office of less than * released by BVHE in the Territory,
      Blockbuster agrees to order for each Store, and *, and BVHE agrees to
      sell to Blockbuster, at least * of that number of Copies set forth in the
      Buy Matrix. Blockbuster further agrees that it will order and purchase
      for each Store on a calendar month basis at least * of that number of
      Copies set forth in the Buy Matrix across all Rental Pictures released
      by BVHE in the Territory in each respective calendar month. There shall
      be no cross collateralization of the purchase requirement from
      month to month.

                  (2)   PURCHASE PRICE: The purchase price of each videocassette
      purchased by Blockbuster hereunder shall be an amount (the "Purchase
      Price") equal to the sum of (i) * plus (ii) an amount equal to the
      relevant percentages of the Rental Revenue (as defined below) generated
      during the Revenue Sharing Period (the "Revenue Percentage") by the
      relevant title.*


                  (3)   RENTAL REVENUE: The Rental Revenue shall be defined *

            (a) During the first * calendar days of the Revenue Sharing Period,
       * of the Rental Revenue *.

            (b) During the next * calendar days of the Revenue Sharing Period *
       calendar day following the Video Street Date, *.

            (c) *

----------

*     Confidential material omitted and separately filed with the Commission
      under an application for confidential treatment.
<PAGE>

                                       3






                  (4) Missing Copies: For each Copy that is lost, stolen or
            otherwise not reasonably accounted for, for more than thirty (30)
            calendar days during the period commencing upon delivery to
            Blockbuster's distribution center and ending on the last day of the
            relevant Revenue Sharing Period (each, a "Missing Copy"),
            Blockbuster shall pay to BVHE BVHE's *. For any such Missing Copy
            recovered by Blockbuster or BVHE, BVHE will reimburse Blockbuster
            the applicable distribution wholesale price less the applicable
            average Purchase Price received by BVHE.

                  (5) Payment: Blockbuster shall pay the Upfront Price within
            * calendar days following the *, but no sooner than receipt of the
            Copies. Blockbuster shall pay the *, unless specified otherwise, on
            a calendar monthly basis within * days following the end of the
            relevant calendar month *.

                  (6) Remedy: The parties acknowledge and agree that if
            Blockbuster fails to order the number or Copies required under this
            Paragraph 3, Blockbuster shall pay to BVHE, as liquidated damages,
            an amount equal to * for each Copy which Blockbuster failed to
            order. If BVHE fails to deliver the number or Copies ordered by
            Blockbuster under this Paragraph 3, BVHE shall pay to Blockbuster,
            as liquidated damages, an amount equal to * for each Copy which BVHE
            failed to deliver. The parties hereto expressly agree and
            acknowledge that actual damages for purposes of this Subparagraph
            would be difficult to ascertain and that the amount set forth above
            represents the parties' reasonable estimate of such damages.

            b. Marketing:

                  (1) Blockbuster agrees to provide advertising in measured
            media to advertise the availability of Rental Pictures in Stores
            in the amount of * of the Purchase Price of * of the Copies required
            to be purchased in accordance with the Buy Matrix as set forth in
            Paragraph 3.a. above. With respect to said advertising of Rental
            Pictures, Blockbuster agrees to consult with BVHE and to keep BVHE
            reasonably apprised of its marketing plans and activities and to
            comply with BVHE's then-current customary marketing support policies
            and practices to the extent they are reasonable and practicable.
            BVHE shall have the right to approve such plans, and Blockbuster
            shall provide a meaningful

----------

*     Confidential material omitted and separately filed with the Commission
      under an application for confidential treatment.
<PAGE>

                                       4


            and timely opportunity for said approval by BVHE. BVHE shall
            exercise its approval rights in a timely and reasonable manner.

                  (2) Should BVHE fail to comply in good faith with its
            obligations under Paragraph 3.b.(1), Blockbuster shall be entitled
            to give written notice to BVHE of such failure. If BVHE fails
            to remedy such failure to Blockbuster's satisfaction within *
            calendar days following receipt of such notice, Blockbuster shall be
            relieved from its obligation *. In no event shall Blockbuster be
            obligated to provide such advertising which it would otherwise have
            been obligated to provide during such time as Blockbuster's
            obligations hereunder were suspended because of BVHE's failure to
            fulfill its obligations under this Paragraph 3.b.(1).

            c. Participating Franchises: While Blockbuster cannot guarantee that
      its Franchises will adopt the Agreement, Blockbuster will use good faith
      commercially reasonable efforts to recommend adoption of the Agreement to
      its Franchises and anticipates a high level of adoption thereby.
      Blockbuster hereby agrees that each Participating Franchise shall execute
      a letter agreement, which has been approved by BVHE in form and substance,
      in favor of BVHE, agreeing to be bound by the terms and conditions of this
      Agreement as if it were a party hereto (the "Participating Franchise").
      Blockbuster shall be liable for each Participating Franchise's performance
      of its financial obligations hereunder as if such Participating Franchise
      were a Store. BVHE shall have the right to proceed against Blockbuster for
      money only for any failure of a Participating Franchise to fully perform
      the financial terms and conditions of this Agreement. Participating
      Franchises shall be subject to the same terms and conditions under the
      Agreement as Stores, unless specifically designated otherwise.
      Implementation of the Agreement at the Franchise level and Franchise
      payments thereunder will be administered by Blockbuster.

            d. Overage: Blockbuster may, subject to the written consent of
      BVHE, which consent would not be unreasonably withheld, purchase a
      quantity of Copies in excess of * of the Buy Matrix required to be
      purchased on a monthly basis ("Overage"). *, Overage shall be subject
      to the same terms and conditions as the Copies.

            e. Placement: Blockbuster shall exercise good faith commercially
      reasonable efforts to maximize Rental Revenue on the Rental Pictures. At
      all times during the entire Revenue Sharing Period, Blockbuster shall
      display for rental at each Store all of the Copies of the Rental Picture
      purchased for such Store, which are not currently being rented, in the
      "New Releases" rental section of such Store (or another section of such
      Store which has been preapproved by BVHE).

----------

*     Confidential material omitted and separately filed with the Commission
      under an application for confidential treatment.
<PAGE>

                                       5


            f. Sell-Off: At the expiration of * calendar days, a Store may
      sell *. At the expiration of the relevant Revenue Sharing Period,
      Blockbuster may sell the remaining Copies. Said sell-off Copies may be
      sold either by self-liquidation, i.e., to individual customers via
      in-store retail sales, or by selling the Copies to its Franchises for
      the sole purpose of stocking New Blockbuster Stores, *. In no event
      shall Blockbuster knowingly sell any Copy or Copies to any third-party
      reseller, including, but not limited to, brokers, liquidators, or other
      wholesale video distributors. All sell-off copies will be prominently
      labeled as "Previously Viewed Rental Product." Sell-off revenue is not
      included in Rental Revenue.

            g. Packing and Shipping: Blockbuster will be solely responsible for
      making the Copies ready for consumer rental and for shipping the Copies
      from its distribution center to its Stores.

            h. Delivery: As between BVHE and Blockbuster, title in and to the
      Copies and risk of loss shall pass upon delivery of the Copies to
      Blockbuster's distribution center in accordance with Paragraph 4.b.

            i. Returns/Exchanges: The purchase requirements set forth in this
      Paragraph 3 shall not be subject to any returns by Blockbuster. BVHE will
      exchange defective or damaged Copies for a working Copy of the same title.
      Defective Copies shall mean those videocassettes which are mechanically
      defective, mispackaged or contain extraneous material. Damaged Copies
      shall mean those videocassettes which become materially damaged by Store
      personnel, customers or otherwise, during the first * calendar days of the
      Revenue Sharing Period. Blockbuster shall report defective or damaged
      Copies to BVHE promptly following discovery of such defect or damage.

            j. Store Count: Blockbuster will report to BVHE on a calendar month
      basis the number of currently operating Stores, including Participating
      Franchises, non-participating Franchises, New Blockbuster Stores and
      recently store closed locations.

            k. Demographic Information: Blockbuster will provide to BVHE, on an
      ongoing basis, information regarding the demographic make-up generally of
      those customers renting the Copies.

4. BVHE COMMITMENTS:

            a. Marketing Support: In lieu of specific marketing support programs
      such as rebate, co-op and MDF programs, and as payment for services and in
      consideration for the various other services and activities which
      Blockbuster has agreed to perform hereunder for the benefit of BVHE, such
      as sales and rental reporting functions, BVHE agrees to credit on a per
      Rental Picture basis (on the relevant invoice) Blockbuster with marketing

----------

*     "Confidential material omitted and separately filed with the Commission
      under an application for confidential treatment".
<PAGE>

                                       6


      support funds ("Marketing Support Funds") in the amount of * of the
      Purchase Price generated by a Rental Picture for BVHE, excluding any
      Purchase Price generated by Overage Copies. Marketing Support Funds shall
      not be used to advertise, promote or otherwise market product not
      distributed by BVHE. In addition to Marketing Support Funds, BVHE shall
      continue to provide Blockbuster with BVHE's standard in-store point of
      purchase marketing materials as customarily utilized by Blockbuster.

                  (1) Blockbuster shall use * of the Marketing Support Funds to
            advertise in measured media the availability of Rental Pictures in
            Stores. With respect to said advertising of Rental Pictures,
            Blockbuster agrees to consult with BVHE and to keep BVHE reasonably
            apprised of its marketing plans and activities and to comply with
            BVHE's then-current customary marketing support policies and
            practices to the extent that they are reasonable and practicable.
            BVHE shall have the right to approve such plans, and Blockbuster
            shall provide a meaningful and timely opportunity for said approval
            by BVHE. BVHE shall exercise approval rights in a timely and
            reasonable manner.

                  (2) With respect to * of the Marketing Support Funds, BVHE and
            Blockbuster shall jointly determine how said monies will be used to
            advertise, promote or otherwise market the Rental Pictures.

                  (3) Blockbuster shall use * of the Marketing Support Funds for
            in-store Rental Picture specific marketing and promotion.

                  (4) Should Blockbuster fail to comply in good faith with its
            obligations under paragraphs 4.a (1), (2) and (3), BVHE shall be
            entitled to give written notice to Blockbuster of such failure. If
            Blockbuster fails to remedy such failure to BVHE's satisfaction
            within ten (10) calendar days following receipt of such notice,
            BVHE shall be relieved of its obligations to provide Marketing
            Support Funds, until such time as Blockbuster complies in good
            faith with its obligations under this Paragraph 4.a. In no event
            shall Blockbuster be entitled to receive Marketing Support Funds
            which would otherwise have accrued during such time as
            Blockbuster's rights hereunder were suspended because of its
            failure to fulfill its obligations under this Paragraph 4.a.

----------

*     Confidential material omitted and separately filed with the Commission
      under an application for confidential treatment.
<PAGE>

                                       7


            b. Shipping: BVHE will deliver the Copies to one (1) primary
      distribution center in the United States, currently in McKinney, Texas, at
      least ten (10) calendar days prior to Street Date and will use good faith
      efforts to deliver the Copies fourteen (14) calendar days prior to Street
      date.

            c. Withdrawal Rights: BVHE shall have the right to withdraw any
      Rental Picture from further distribution under this Agreement. In such
      event, BVHE shall give Blockbuster written notice of such withdrawal
      and Blockbuster shall not sell or rent any videocasettes of the withdrawn
      Rental Picture after its receipt of such notice. It is expressly
      understood and agreed that such notice shall be given by BVHE if, and
      only if, BVHE shall simultaneously withdraw the Picture from all other
      Home Video distribution outlets. If BVHE subsequently makes such Rental
      Picture available in any other outlet of Home Video distribution in the
      Territory during the Term, then it shall simultaneously also make such
      Rental Picture available to Blockbuster hereunder. If BVHE withdraws
      any Rental Picture from further distribution and does not, within sixty
      (60) calendar days thereafter, make such Rental Picture available to
      Blockbuster, BVHE shall reimburse Blockbuster any portion of the
      Upfront Price, paid by Blockbuster to BVHE for Copies of said Rental
      Picture, which has not been recouped by Blockbuster out of their relevant
      share of the Rental Revenue.


5. ELECTRONIC REPORTING:

      At no cost or expense to BVHE, Blockbuster will provide to BVHE,
electronically, daily access to all BVHE Rental Picture information along
with weekly summaries, in such form as may be reasonably specified by BVHE
from time to time, of all performance information as to Blockbuster's rental
of the Rental Pictures, including, but not limited to, daily rental turn
data, daily inventory and daily Rental Revenue from each Store on a Store by
Store, Rental Picture by Rental Picture, Copy by Copy basis. In addition,
during the Term and for * after the termination or expiration of the
Agreement whichever occurs first, BVHE shall have *. BVHE shall be entitled
to use such information internally for any legitimate business purpose so
long as it complies with its obligations of confidentiality and
non-disclosure as set forth in Paragraph 10 below. At no cost or expense to
Blockbuster, BVHE will, through SuperComm, assist in data collection services
and facilitate electronic reporting.

6. REVIEW:

      Within thirty (30) calendar days following the end of each Contract
Year, the parties shall meet and in good faith review the terms of this
Agreement. Should no agreement be reached between the parties with respect to
adjusting or amending the terms of the Agreement, the then current terms of
the Agreement shall remain in full force and effect. Within the thirty (30)
calendar days following the end of the forty-second (42nd) month of the Term,
either party may give six (6) months' notice to terminate the Agreement. If
such notice is given by either party, from such notification forward,
Blockbuster shall have no right or obligation to purchase additional Rental
Pictures under this Agreement and BVHE shall be relieved of any right or
obligation to sell Rental Pictures to Blockbuster under this Agreement.

----------

*     Confidential material omitted and separately filed with the Commission
      under an application for confidential treatment.
<PAGE>

                                       8


7.   PORNOGRAPHIC MATERIAL:

       BVHE shall not sell to Blockbuster and Blockbuster shall not at any
time in any Store during the Term engage in any manner whatsoever, in the
production, license, advertisement, manufacture, promotion, distribution or
other commercial exploitation of Pornographic Material. In the event a
dispute arises between the parties concerning whether BVHE or Blockbuster is
involved in the production, license, advertisement, manufacture, promotion,
distribution or other commercial exploitation of Pornographic Material, such
dispute shall be resolved by an independent third party arbitrator to be
agreed upon between the parties, the findings of whom shall be binding upon
the parties. Should the arbitrator conclude that BVHE has breached this
provision, Blockbuster shall not be obligated to order or purchase any Copies
of said Pornographic Material. Should the arbitrator conclude that
Blockbuster has breached this provision, Blockbuster shall promptly cease its
commercial exploitation of said Pornographic Material. There shall be no
other remedy available to either party for a breach of this provision.

8.    TERMINATION:

            a. The following transactions or occurrences shall constitute
      material events of default (each an "Event of Default") by the applicable
      party (the "defaulting party") hereunder such that, in addition to and
      without prejudice to or limiting any other rights and remedies available
      to the non-defaulting party at law or in equity the non-defaulting party
      may elect to immediately and prospectively terminate this Agreement at the
      sole discretion of the non-defaulting party by giving written notice
      thereof to the other party at any time after the occurrence of an Event of
      Default setting forth sufficient facts to establish the existence of such
      Event of Default:

                  (1) A material breach by a party of any material covenant,
            material warranty, or material representation contained herein,
            where such defaulting party fails to cure such breach within thirty
            (30) calendar days after receipt of written notice thereof, or
            within such specific cure period as is expressly provided for
            elsewhere in this Agreement; or

                  (2) A party makes an attempt to make any arrangement for the
            benefit of creditors, or a voluntary or involuntary bankruptcy,
            insolvency or assignment for the benefit of creditors of a party or
            in the event any action or proceeding is instituted relating to any
            of the foregoing and the same is not dismissed within thirty (30)
            calendar days after such institution; or

                  (3) A failure by either party to make payment of any monies
            payable pursuant to this Agreement as and when due.

            b. Should BVHE terminate this Agreement pursuant to Paragraph 9.a.,
      BVHE shall immediately be relieved from any further obligations under
      Paragraph 4 of this Agreement.

<PAGE>

                                       9


            c. Except as otherwise provided herein, no termination of this
      Agreement for any reason shall relieve or discharge any party hereto from
      any duty, obligation or liability hereunder which was accrued as of the
      date of such termination.

9. PUBLIC DISCLOSURE AND CONFIDENTIALITY:

            a. Public Disclosure: Each party agrees that no press release or
      public announcement relating to the existence or terms of this Agreement
      (including within the context of a trade press or other interview or
      advertisement in any media) shall be issued without the express prior
      written approval of the other party hereto.

            b. Confidential Information: During the Term and for a period of
      three (3) years thereafter, Blockbuster and BVHE shall hold, and shall
      cause each of their directors, officers, employees and agents to hold in
      confidence the terms of this Agreement (including the financial terms and
      provisions hereof and all information received pursuant to, or developed
      in accordance with, this Agreement) specifically including but not limited
      to the *. Blockbuster and BVHE hereby acknowledge and agree that all
      information contained in, relating to or furnished pursuant to this
      Agreement, not otherwise known to the public, is confidential and
      proprietary and is not to be disclosed to third parties without the prior
      written consent of both Blockbuster and BVHE. Neither Blockbuster nor
      BVHE shall disclose such information to any third party (other than to
      officers, directors, employees, attorneys, accountants and agents of
      Blockbuster and BVHE or the affiliates of either, who have a business
      reason to know or have access to such information, and only after each of
      whom agrees to being bound by this paragraph) except:

                  (1) To the extent necessary to comply with any Law or the
            valid order of a governmental agency or court of competent
            jurisdiction or as part of its normal reporting or review procedure
            to regulatory agencies or as required by the rules of any major
            stock exchange on which either party's stock may be listed;
            provided, however, that the party making such disclosure shall seek,
            and use reasonable efforts to obtain, confidential treatment of said
            information and shall promptly, to the greatest extent practicable,
            notify the other party in advance of such disclosure;

----------

*     Confidential material omitted and separately filed with the Commission
      under an application for confidential treatment.
<PAGE>

                                       10


                  (2) As part of the normal reporting or review procedure by its
            parent company, its auditors and its attorneys;

                  (3) To the extent necessary to obtain appropriate insurance,
            to its insurance agent or carrier, that such agent or carrier agrees
            to the confidential treatment of such information; and

                  (4) To actual or potential successors in interest, provided,
            however, that such person or entity shall have first agreed in
            writing to the confidential treatment of such information.

10. NO RIGHT TO USE NAMES:

            a. Neither Blockbuster nor Stores nor Participating Franchises shall
      acquire any right to use, nor shall the same use any copyrights,
      trademarks, characters or designs owned or controlled by Disney or any of
      its Affiliates, including without limitation, the names Disney, Buena
      Vista, Walt Disney, Touchstone, Hollywood, Miramax, Dimension, ABC or
      ESPN, alone or in conjunction with other words or names, in any
      advertising, publicity or promotion, either express or implied, without
      BVHE's prior consent in each case, and in no case shall any Blockbuster
      or Store advertising, publicity, or promotion, express or imply any
      endorsement of the same.

            b. BVHE shall not acquire any right to use, nor shall the same use,
      the name Blockbuster alone or in conjunction with other words or names,
      or any copyrights, trademarks, characters or designs of the same in any
      advertising, publicity or promotion, either express or implied, with
      Blockbuster's prior consent in each case, and in no case shall any BVHE
      advertising, publicity, or promotion, express or imply any endorsement of
      the same.

11. ASSIGNMENT:

      This Agreement and the rights and licenses granted hereunder are personal
and neither party shall have the right to sell, assign, transfer, mortgage,
pledge nor hypothecate (each an "Assignment") any such rights or licenses in
whole or in part without the prior written consent of the non-assigning party,
nor will any of said rights or licenses be assigned or transferred to any third
party by operation of law, including, without limitation, by merger or
consolidation or

<PAGE>

                                       11


otherwise; provided, however, that an Assignment pursuant to or resulting
from a sale of all or substantially all of the assets or all or a majority of
the equity of Blockbuster to any Person or Persons or any other form of
business combination, such that the Blockbuster business as currently
existing remains substantially intact, including, without limitation, a sale
to the public, shall not require such consent so long as such Assignment is
not to an unaffiliated motion picture studio; and provided further that any
Assignment by (i) Blockbuster, to any Affiliate of Viacom or (ii) BVHE to any
Affiliate of Disney, where such Affiliate has access to the Disney library of
films generally equivalent to that of BVHE at the time of this Agreement,
shall also not require consent. In the event that Blockbuster or BVHE assigns
its rights or interest in or to this Agreement in whole or in part, the
assigning party will nevertheless continue to remain fully and primarily
responsible and liable to the other party for prompt, full, complete and
faithful performance of all terms and conditions of this Agreement.

12. AUDIT RIGHTS:

            a. During the Term and continuing until the date six (6) months
      following the date of expiration or earlier termination of this Agreement
      BVHE may, audit the financial books, information systems and records
      of Blockbuster as reasonably necessary to verify Blockbuster's
      compliance with its obligations under this Agreement; provided,
      however, that (a) such audit shall be at the sole cost and expense of
      BVHE (unless such audit reveals that payments due to BVHE for any
      twelve (12) month period were understated by more than five percent
      (5%), in which case, in addition to all other rights which BVHE may
      have, Blockbuster shall promptly reimburse BVHE to the extent of its
      reasonable out-of-pocket costs of such audit), (b) BVHE may not audit
      more than twice per year (and no such audit shall continue for more
      than thirty (30) calendar days from the date the auditors are given
      access to the applicable records), and (c) any such audit shall be
      conducted only during regular business hours and in such a manner as
      not unreasonably to interfere with the normal business activities of
      Blockbuster. Blockbuster shall keep and maintain complete and accurate
      books of account and records in connection with its obligations under
      this Agreement at its principal place of business until the date
      thirty-nine (39) months following the date of rendering of the initial
      statement reflecting such records unless a legal action with regard
      thereto is commenced during such period.

            b. During the Term and continuing until the date six (6) months
      following the date of expiration or earlier termination of this Agreement,
      BVHE may inspect and audit

<PAGE>

                                       12


      the books, records and store premises of Stores and Participating
      Franchises as reasonably necessary to verify compliance with this
      Agreement; provided, however, that (a) such audit shall be at the sole
      cost and expense of BVHE (unless such audit reveals that payments due
      to BVHE for any twelve (12) month period were understated by more than
      five percent (5%), in which case, in addition to all other rights which
      BVHE may have, Blockbuster shall promptly reimburse BVHE to the extent
      of its reasonable out-of-pocket costs of such audit), and (b) any such
      audit shall be conducted only during regular business hours and in such
      a manner as not unreasonably to interfere with the normal business
      activities of Store or Participating Franchises.

13. BVHE'S REPRESENTATIONS AND WARRANTIES:

      BVHE represents and warrants that:

            a. It is a corporation organized and existing under the laws of the
      State of California with its principal place of business in the State
      of California;

            b. The undersigned has the full right, power and authority to sign
      this Agreement on behalf of BVHE;

            c. The execution, delivery and performance of this Agreement does
      not and will not, violate any provisions of BVHE's articles or
      certificates or incorporation and bylaws, or any contract or other
      Agreement to which BVHE is a party;

            d. There is no broker, finder or intermediary involved in connection
      with the negotiations and discussions incident to the execution of this
      Agreement, and no broker, finder, agent or intermediary who might be
      entitled to a fee, commission or any other payment upon the consummation
      of the transactions contemplated by this Agreement;

            e. This Agreement has been duly executed and delivered and
      constitutes the legal, valid and binding obligation of BVHE,
      enforceable in accordance with its terms, except as enforceability may
      be limited by bankruptcy, insolvency, reorganization, moratorium or
      other similar laws now or hereinafter in effect, affecting the
      enforcement of creditors' rights in general and by general principles
      of equity, regardless of whether such enforceability is considered in a
      proceeding in equity or at law; and

<PAGE>

                                       13


            f. Copies shall be new and unused and comparable in quality to other
      videocassette units being sold by BVHE in rental distribution channels.

14. BLOCKBUSTER'S REPRESENTATIONS AND WARRANTIES:

      Blockbuster represents and warrants that:

            a. It is a corporation organized and existing under the laws of the
      State of Delaware with its principal place of business in the State of
      Texas;

            b. The undersigned has the full right, power and authority to sign
      this Agreement on behalf of Blockbuster;

            c. There is no broker, finder or intermediary involved in connection
      with the negotiations and discussions incident to the execution of this
      Agreement, and no broker, finder, agent or intermediary who might be
      entitled to a fee, commission or any other payment upon the consummation
      of the transactions contemplated by this Agreement;

            d. This Agreement has been duly executed and delivered and
      constitutes the legal, valid and binding obligation of Blockbuster
      enforceable in accordance with its terms, except as enforceability may be
      limited by bankruptcy, insolvency, reorganization, moratorium or other
      similar laws now or hereinafter in effect, affecting the enforcement of
      creditors' rights in general and by general principles of equity,
      regardless of whether such enforceability is considered in a proceeding in
      equity or at law; and

            e. The execution, delivery and performance of this Agreement does
      not, and will not, violate any provisions of Blockbuster's articles or
      certificates of incorporation and bylaws, or any contract or other
      Agreement to which Blockbuster is a party.

15. FORCE MAJEURE:

      The duties and obligations of the parties hereunder may be suspended upon
the occurrence and continuation of any "Event of Force Majeure" which inhibits
or prevents performance hereunder, and for a reasonable start-up period
thereafter. An "Event of Force Majeure" shall mean any act, cause, contingency
or circumstance beyond the reasonable control

<PAGE>

                                       14


of such party (whether or not reasonably foreseeable), including, without
limitation, to the extent beyond the reasonable control of such party, any
governmental action, nationalization, expropriation, confiscation, seizure,
allocation, embargo, prohibition of import or export of goods or products,
regulation, order or restriction (whether foreign, federal or state), war
(whether or not declared), civil commotion, disobedience or unrest,
insurrection, public strike, riot or revolution, lack or shortage of, or
inability to obtain, any labor, machinery, materials, fuel, supplies or
equipment from normal sources of supply, strike, work stoppage or slowdown,
lockout or other labor dispute, fire, flood, earthquake, drought or other
natural calamity, weather or damage or destruction to plants and/or equipment,
commandeering of vessels or other carriers resulting from acts of God, or any
other accident, condition, cause, contingency or circumstances including
(without limitation, acts of God) within or without the United States. Neither
party shall, in any manner whatsoever, be liable or otherwise responsible for
any delay or default in, or failure of, performance resulting from or arising
out of or in connection with any Event of Force Majeure and no such delay,
default in, or failure of, performance shall constitute a breach by either party
hereunder. As soon as reasonably possible following the occurrence of an Event
of Force Majeure, the affected party shall notify the other party, in writing,
as to the date and nature of such Event of Force Majeure and the effects of
same. If any Event of Force Majeure shall prevent the performance of a material
obligation of either party hereunder, and if the same shall have continued for a
period of longer than 180 days, then either party hereto shall have the right to
terminate this Agreement by written notice to the other party hereto.

16. INDEMNIFICATION:

      Each party (the "Indemnifying Party") shall indemnify and hold the other
party and its affiliates and their respective employees, officers, agents,
attorneys, stockholders and directors, and their respective permitted
successors, licensees and assigns (the "Indemnified Party(ies)") harmless from
and against (and shall pay as incurred) any and all claims, proceedings,
actions, damages, costs, expenses and other liabilities and losses (whether
under a theory of strict liability, or otherwise) of whatsoever kind or nature
("Claim(s)") incurred by, or threatened, imposed or filed against, any
Indemnified Party (including, without limitation, (a) actual and reasonable
costs of defense, which shall include without limitation court costs and
reasonable attorney and other reasonable expert and reasonable third party fees;
and (b) to the extent permitted by Law, any fines, penalties and forfeitures) in
connection with any proceedings against an Indemnified Party caused by any
breach (or, with respect to third party claims only, alleged breach) by the
Indemnifying Party of any representation, term, warranty or agreement hereunder.
Neither party shall settle, compromise or consent to the entry of any judgment
in or otherwise seek to terminate any pending or threatened Claim in respect of
which the Indemnified Party is entitled to indemnification hereunder (whether or
not the Indemnified Party is a party thereto), without the prior written consent
of the other party hereto; provided, however, that the Indemnifying Party shall
be entitled to settle any claim without the written consent of the Indemnified
Party so long as such settlement only involves the payment of money by the
Indemnifying Party and in no way affects any rights of the Indemnified Party.

<PAGE>

                                       15

17. REMEDIES:

      No remedy conferred by any of the specific provisions of this Agreement is
intended to be exclusive of any other remedy which is otherwise available at
law, in equity, by statute or otherwise, and except as otherwise expressly
provided for herein, each and every other remedy shall be cumulative and shall
be in addition to every other remedy given hereunder or now or hereafter
existing at law, in equity, by statute or otherwise and no provision hereof
shall be construed so as to limit any party's available remedies in the event of
a breach by the other party hereto. The election of any one or more of such
remedies by any of the parties hereto shall not constitute a waiver by such
party of the right to pursue any other available remedies.

18. DEFINITIONS:

            a. "Affiliate" shall mean an entity in which either party has a
      controlling interest.

            b. "Copy" or "Copies" shall mean VHS videocassette units. Other
      formats, including laserdisc and DVD are not included under this
      Agreement.

            c. *

            d. "Franchises" shall mean all Blockbuster stores which Blockbuster
      informs BVHE are Franchises.

            e. "Gross Box Office" ("GBO" as used in the Buy Matrix) shall
      mean the box office gross receipts earned by a Picture in the United
      States and Canada measured from the Picture's initial theatrical
      release in the Territory until the * of such Picture, as reported by
      VARIETY or THE HOLLYWOOD REPORTER.

            f. "Home Video" shall mean the providing of motion pictures and
      other programming to members of the general public by means of the
      temporary or permanent transfer of physical possession of a VHS
      videocassette for non-public viewing on a home television receiver.

            g. "Home Video Distribution Rights" shall mean the right to record
      and distribute a motion picture on videocassette.

----------

*     Confidential material omitted and separately filed with the Commission
      under an application for confidential treatment.
<PAGE>

                                       16


            h. "Laws" shall mean all international, federal, national, state,
      provincial, municipal or other laws, ordinances, orders, statutes, rules
      or regulations.

            i. "New Blockbuster Store" shall mean a Store which Blockbuster or
      any of its Franchisees first owns or operates after the commencement date
      of this Agreement, excluding Blockbuster's acquisition of franchised
      Blockbuster Stores.

            j. "Non-Theatrical Pictures" shall mean audio-visual Pictures
      initially distributed in the Territory via a medium other than theatrical
      release (e.g., via Home Video, cable, pay or free television exhibition)
      and which are being distributed to all rental channels of home video
      distribution.

            k. "Picture" shall mean any motion picture, including but not
      limited to live-action, animated or other medium, or any other
      programming for which BVHE owns or controls Home Video Distribution Rights
      in the Territory or in the U.S. Territory as applicable. Further, BVHE
      shall exercise equivalent practices relating to the acquisition and
      distribution of Rental Pictures throughout the Term of this Agreement
      as it does currently. Every Picture for which The Walt Disney Company
      or its Affiliates has home video distribution rights in the Territory
      and elects to distribute as a Rental Picture in the Territory shall be
      made available to Blockbuster under the terms of this Agreement.

            l. "Pornographic Material" shall mean X-rated, NC-17 rated and/or
      unrated motion pictures or printed materials which either party shall in
      good faith determine contain explicit sexual and/or violent scenes and
      excluding (x) NC-17 Rated or unrated motion pictures of an artistic nature
      and (v) motion pictures rated "R" by the Motion Picture Association of
      America.

            m. "Prebook Date" shall mean, with respect to any Picture, the date
      specified by BVHE's, in its sole discretion, when BVHE videocassette
      orders are due for all channels of distribution.

            n. "Rental Picture" shall mean each and every Picture provided such
      Picture is at least seventy (70) minutes in length and is not a sports
      event, concert film, stage play, video or theatrical re-release or library
      film, distributed by BVHE, which when initially released on videocassette
      is priced by BVHE at a "rental price" (as opposed to a "sell-through
      price"), as such terms are generally understood in the Home Video industry
      in Los Angeles, California.

<PAGE>

                                       17


            o. "Revenue Sharing Period" shall mean the period commencing on the
      Video Street Date of the relevant Picture and running through the end of
      the twenty-sixth (26th) week thereafter.

            p. "Store" shall mean any video store in the United States or
      Canada, which, at any time during the Term of this Agreement, is wholly
      owned and/or operated by Blockbuster, whether or not such store is
      operated under the "Blockbuster" trademarks, excluding only the "Sixteen
      Thousand Video" stores operated by Blockbuster in Florida. Should
      Blockbuster undertake to own or operate retail outlets different than the
      retail outlets it has traditionally operated, such as by way of example,
      kiosks, carts, "stores within a store", "rack jobbing" operations or
      vending machines, the parties shall negotiate in good faith to agree upon
      terms for the inclusion of such retail outlets in this Agreement.

            q. "Video Street Date" shall mean, with respect to any Picture, the
      first date on which, in the Territory, both: (i) such Picture is
      authorized by BVHE for Home Video distribution, and (ii) Home Video copies
      of such Picture are actually available to the general public.

19. MISCELLANEOUS:

            a. This Agreement shall not constitute any partnership, joint
      venture or agency relationship between the parties hereto. The parties
      shall be considered independent contractors.

            b. This Agreement, together with the attached Exhibits, embodies the
      entire understanding of the parties with respect to the subject matter
      hereof and may not be altered, amended or otherwise modified except by an
      instrument in writing executed by both parties.

            c. The headings in this Agreement are for convenience of reference
      only and shall not have any substantive effect.

<PAGE>

                                       18


            d. All rights and remedies granted to the parties hereunder are
      cumulative and are in addition to any other rights or remedies that the
      parties may have at law or in equity.

            e. Should any non-material provision of this Agreement be held to be
      void, invalid or inoperative, as a matter of law the remaining provisions
      hereof shall not be affected and shall continue in effect as though such
      unenforceable provision(s) have been deleted herefrom.

            f. Unless otherwise indicated, all dollar amounts referenced herein
      shall refer to and be paid in United States dollars.

            g. No waiver of any right under or breach of this Agreement shall be
      effective unless it is in writing and signed by the party to be charged.

            h. This Agreement shall be governed by and construed in accordance
      with the internal Laws of the State of California and the United States
      of America, applicable to Agreements entered into and wholly performed
      therein. Blockbuster hereby consents to and submits to the jurisdiction
      of the federal and state courts located in the State of California, the
      United States of America and any action or suit under this Agreement
      may be brought in any federal or state court with appropriate
      jurisdiction over the subject matter established or sitting within the
      State of California.

            i. None of the provisions of this Agreement is intended for the
      benefit of or shall be enforceable by any third parties.

            j. This 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.

            k. All notices shall be in writing and either personally delivered,
      mailed first-class mail (postage prepaid), sent by reputable overnight
      courier service (charges prepaid), or sent by transmittal by any
      electronic means whether now known or hereafter developed, including, but
      not limited to, telex, telecopier or laser transmissions, able to be
      received by the party intended to receive notice, to the parties at the
      following addresses:

<PAGE>

                                       19


      If to Blockbuster:

      Blockbuster Entertainment Inc.
      1201 Elm Street
      31st Floor
      Dallas, Texas  75270
      Attention: John Antioco, Chairman and CEO
                 Edward B. Stead, Executive Vice President and General Counsel

      If to BVHE:

Buena Vista Home Entertainment, Inc.
350 South Buena Vista Street
Burbank, California 91521
Attention: Richard F.X. Clair, Senior Vice President, Business & Legal Affairs
           Mitchell L. Koch, Senior Vice President and General Manager

<PAGE>

                                       20


      IN WHEREOF, the parties have executed this Agreement as of the date and
year first above written.

Buena Vista Home Entertainment, Inc.

       /s/ Michael O. Johnson
       ----------------------------------
By:    Michael O. Johnson

Title: President, Worldwide, Buena Vista Entertainment


BLOCKBUSTER VIDEO INC.


       /s/ Edward B. Stead
       ----------------------------------

By:    Edward B. Stead

Title: Executive Vice President and General Counsel


       /s/ John Antioco
       ----------------------------------

By:    John Antioco

Title: Chairman and Chief Executive Officer

<PAGE>

                                    Exhibit A

                             BLOCKBUSTER BUY MATRIX

                       Copies per Rental Picture per Store
                                         *


----------

*     "Confidential material omitted and separately filed with the Commission
      under an application for confidential treatment".