Revenue Sharing Agreement - Buena Vista Home Entertainment Inc. and Blockbuster Video Inc.
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.
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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 (*).
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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) *
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(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
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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).
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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
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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.
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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.
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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.
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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;
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(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
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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
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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
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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
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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
*
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* "Confidential material omitted and separately filed with the Commission
under an application for confidential treatment".