Revenue Sharing Agreement 9/29/98

Exhibit 10.7


REVENUE SHARING AGREEMENT


THIS AGREEMENT (the "Agreement") is made the 29th day of September, 1998 (the "Effective Date").


BETWEEN:


(1) BLOCKBUSTER INC. whose principal place of business is at 1201 Elm Street, Dallas, Texas 75270 (hereinafter referred to as "Blockbuster," which shall be deemed to include its assigns once assigned); and


(2) *


WHEREAS:


(A) Blockbuster and certain of its Affiliates (the terms initially capitalized in this Agreement and not otherwise defined herein shall have the respective meanings set forth in Paragraph 1 of this Agreement), own, operate and franchise retail stores which, among other things, rent, sell and market pre-recorded videocassette tapes to the general public; and


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


(C) Blockbuster is willing to lease from * on a per Participating Store basis a specified number of Copies of each Rental Picture released during the Term as set forth herein; and


(D) * is willing to lease to Blockbuster on a per Participating Store basis a specified number of Copies of each Rental Picture released during the Term as set forth herein; and


(E) Blockbuster is willing to report electronically on an ongoing basis during the Revenue Sharing Period information as to the rental of Copies per Rental Picture as set forth in Exhibit C, attached hereto and made a part hereof.


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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 mutual covenants and agreements contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:


1. DEFINITIONS:


a. "Affiliate" shall mean an entity in which either party has a controlling interest or any entity that has a direct or indirect parent in common.


b. *


c. *


d. "Blockbuster Headquarters" shall mean the corporate office of Blockbuster located at 1201 Elm Street, Dallas, Texas 75270.


e. "Copy(ies)" shall mean VHS videocassettes of the Rental Pictures leased by Blockbuster from * under this Agreement. Other formats, including laserdisc and DVD are not included under this Agreement.


f. "Defective Copies" shall mean those Copies that are mechanically defective, mispackaged or contain extraneous material upon delivery to Blockbuster.


g. "Distribution Center" shall mean Blockbuster's distribution center that is currently in McKinney, Texas. Blockbuster may add two (2) additional delivery points at its option.


h. "Franchise Stores" shall mean Blockbuster franchise stores operated under the Blockbuster trademarks and designated by Blockbuster from time to time as ordering Copies through Blockbuster, subject to Paragraph 4.c. hereof.


i. *


j. "Home Video Distribution" or "Home Video Distribution Rights" shall mean the right to manufacture, record, sell and/or otherwise distribute a motion picture on videocassette.


k. "Month" or "Monthly" shall mean Blockbuster's accounting cycles that is based upon a four week, four week, five week rotation as set forth in Exhibit B, attached hereto and made a part hereof.


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


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l. "Participating Store" shall mean (i) any Video Store in the United States, which at any time during the Term of this Agreement, is wholly owned and/or operated by Blockbuster and/or its Affiliates under the Blockbuster trademarks; and (ii) Franchise Stores subject to Paragraph 4.c. hereof.


m. *


n. "Rental Picture" shall mean each and every feature motion picture for which * owns or controls Home Video Distribution Rights in the Territory, provided such picture: (1) (A) is offered in Copy form to the rental trade by * at a wholesale "rental price" (as opposed to a "sell-through-price") of no less than Thirty-five Dollars (US$35.00) per unit whether purchased as a single unit or in multiple unit quantities; (B) if rated by the MPAA, is not rated NC-17 or more restrictive; and (C) upon initial release in Copy form, is intended by * to be rented rather than sold to consumers, and (2) is either (A) a picture previously released theatrically in the Territory; or (B) if not previously released theatrically, is either a Movie of the Week ("MOW") or Direct to Video ("DTV"), is at least seventy (70) minutes in length, and is not a sports event, documentary or concert film, stage play (i.e., film of an on-stage performance), theatrical re-release, or library film.


o. *


p. "Revenue Sharing Period" shall mean the period commencing upon the first rental of the applicable Rental Picture Copy and running for the twenty-six (26) weeks after the Video Street Date of such Rental Picture.


q. "Rental Transaction" shall mean that period of time that a title is rented to a customer, including any extended viewing period, as defined by Blockbuster's then current practices across all videocassettes available for rental from all videocassette suppliers.


r. "Video Store" shall mean a retail outlet which has at least one thousand five hundred (1,500) square feet that is primarily engaged in the rental of videocassettes to the public for home viewing entertainment purposes.


s. "Video Street Date" shall mean, with respect to any Rental Picture, the first date on which, in the Territory such Rental Picture is authorized by * for Home Video Distribution.


2. AGREEMENT TERM:


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


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The term of this Agreement shall be for * (the "Term"), commencing as of the Effective Date, but * may terminate this Agreement as of December 22, 1999 by giving Blockbuster ninety (90) days prior written notice. However, any Copies in Blockbuster's possession at the time of termination shall continue to be leased under the terms of this Agreement until such Copies are returned to * or sold by Blockbuster.


3. TERRITORY:


The territory for the purposes of this Agreement with respect to each Rental Picture shall be the United States, its territories and possessions, if and to the extent * owns or controls such rights to territories and possessions of the United States (the "Territory").


4. BLOCKBUSTER COMMITMENTS:


Beginning as of the date of this Agreement, Blockbuster agrees as follows:


a. Ordering Requirements: Blockbuster shall timely submit orders of
Copies of Rental Pictures in compliance with this Agreement. Blockbuster
may purchase or otherwise obtain VHS videocassettes of Rental Pictures
from sources other than * (the "Excess Copies"). All such Excess Copies,
regardless of how obtained, shall be deemed to be "Copies" and reported
and * share of Rental Revenue and PVT Share paid as if such VHS
videocassettes were obtained under this Agreement unless * has materially
breached its obligations under Paragraph 5.c. hereof. In such event,
Blockbuster shall not be obligated under the Agreement for any such Excess
Copies.


b. Lease: The following terms shall apply to Rental Pictures:


(1) *


(2) *


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


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(3) *


a. *


b. *


(4) *. If Blockbuster fails to provide * with all information
required by Exhibit C when due, then Blockbuster shall provide a
good faith estimate of all such information so that * can generate
appropriate invoices. Following delivery of all information required
by Exhibit C to * shall reconcile the information estimated by
Blockbuster with the actual information, * shall promptly issue
appropriate invoices and/or credits to Blockbuster. Nothing herein
shall serve to limit * remedies regarding Blockbuster's failure to
provide * with all information required by Exhibit C when due.


c. Participating Franchisees: Blockbuster may distribute Copies of
the Rental Pictures received under this Agreement to its Franchise Stores
that have elected to participate for at least the lesser of six (6) months
or the remaining Term of this Agreement, provided however, that Franchise
Stores who elect to participate may not start and stop more than one time
each. Subject to the requirements of this Paragraph 4.c., terms for
implementation of this Agreement at the franchise level and franchise
payments thereunder will be controlled and administered by Blockbuster.
For purposes of this Agreement and to the extent a Franchise Store elects
to participate hereunder, such Franchise Store shall be considered a
Participating Store. Blockbuster agrees that Franchise Stores shall be
obligated to Blockbuster to perform to terms that will provide *


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


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with all of the benefits of this Agreement, including, without limitation,
with respect to *'s audit rights under Paragraph 6 hereof.


d. *


e. Packing and Shipping: Promptly upon receipt of any Copies at the
Distribution Center and prior to any shipment to another location or
rental or sale thereof, Blockbuster shall barcode each Copy. Thereafter,
Blockbuster shall make all Copies (including Replenishment Copies) ready
for consumer rental and shall ship such Copies (except for Replenishment
Copies) to all Participating Stores for rental to members of the public
beginning no sooner and no later than the Video Street Date. Promptly upon
receipt of any Copies at a Participating Store and prior to any rental or
sale thereof, each Participating Store shall enter all applicable barcodes
and related information in such Participating Store's POS system.
Blockbuster shall comply with all generally applicable Video Street Date
policies of *, shall not copy any Copies or related marketing materials
nor rent any Copies to any customer it has knowledge intends to copy such
Copies. Blockbuster shall not cause or permit Copies to be sold, leased or
otherwise transferred to or by distributors, sub-distributors or Video
Stores other than Participating Stores, except as permitted in Paragraph
4.c. and 4.d. hereof. Blockbuster shall maintain and/or store all Copies
only at the Participating Store to which they were originally delivered,
except as follows: (i) during rentals to the public or following PVT sales
as permitted under Paragraph 4.c. and 4.d. hereof; (ii) during viewing by
employees of Blockbuster, provided such viewing is accounted for on a
dated employee checkout log or in accordance with Blockbuster's ordinary
checkout procedure for employees; or (iii) following shipment from one
Participating Store to another, provided that each such shipment and the
location of all Copies shipped is reported to * at all times during the
applicable Revenue Sharing Period pursuant to Exhibit C. Except as
required by Paragraph 4.d. hereof, Copies shall not be shipped from a
Participating Store to the Distribution Center at any time during the
Revenue Sharing Period, unless such Copies are Defective Copies.
Blockbuster shall be responsible for all physical distribution of Copies
following delivery by * to the Distribution Center, including shipment,
return and replacement of Defective Copies and non-defective Copies to and
from each Participating Store.


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


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f. Rental and Sale of Copies: (i) Blockbuster shall consult with *
with respect to all of Blockbuster's plans for marketing, advertising and
promotion of each Rental Picture Title, if any, including, without
limitation, all expenditures to be reimbursed by * pursuant to this
Agreement; (ii) Blockbuster shall display Revenue Share Copies of each
Rental Picture in the "new release" or equivalent section of each
Participating Store for at least the period commencing upon the applicable
Video Street Date and ending fourteen (14) weeks thereafter; and (iii)
prior to December 22 ...