Revenue Sharing Agreement 8/25/98

Exhibit 10.8


REVENUE SHARING AGREEMENT


THIS AGREEMENT (the "Agreement") is made the 25th day of August, 1998 (the "Effective Date").


BETWEEN:


(1) BLOCKBUSTER VIDEOS, INC. whose principal place of business is at 1201 Elm Street, Dallas, Texas 75270 (hereinafter referred to as "Blockbuster," which following assignment shall include its actual assigns); 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, license, market and sell motion pictures on pre-recorded videocassette tapes; and


(C) * is willing to provide Copies of each Rental Picture and each * to Blockbuster; and


(D) Blockbuster is willing to obtain, on the terms and subject to the conditions hereinafter set forth, a specified number of Copies of each Rental Picture and each * distributed by * during the Term; and


(E) Blockbuster is willing and has the operational capacity 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.


- ---------- * 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 (i) in the case of *; and (ii) in the case of Blockbuster or Blockbuster Entertainment Inc., all companies which are controlled by Blockbuster and/or Blockbuster Entertainment Inc. or which have a common direct or indirect parent.


b. *


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


d. "Copy(ies)" shall mean VHS videocassettes of the Rental Pictures and * obtained by Blockbuster from * for Home Video Distribution. Other formats, including, without limitation, laserdisc and DVD, are not included under this Agreement.


e. *


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


g. *


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


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Video Distribution Rights in the Territory that fails to satisfy the requirements set forth in this subparagraph shall not be subject to this Agreement.


h. "Franchise Stores" shall mean Blockbuster franchise stores that are operated pursuant to binding franchise agreements. If designated by Blockbuster as ordering Copies through Blockbuster, such Franchise Store shall become a Participating Store.


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. *


l. "Missing Copies" shall mean those Copies of a particular Rental Picture that are unaccounted for due to theft or loss occurring outside of the ordinary course of business. Blockbuster, in its good faith discretion, will determine if a Copy is lost or stolen.


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


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


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n. "Participating Store" shall mean (i) any Video Store in the United States, which at the relevant time during the Term of this Agreement, is wholly owned and/or operated by Blockbuster and/or its Affiliates under the Blockbuster trademarks; (ii) if designated by Blockbuster as ordering Copies through Blockbuster, any Video Store in the United States, which at the relevant time during the Term of this Agreement, is wholly owned and/or operated by Blockbuster and/or its Affiliates not under the Blockbuster trademarks which elect to participate pursuant to the terms and conditions hereof; and (iii) Franchise Stores which elect to participate pursuant to the terms and conditions hereof. For Copy quantity allocation purposes, Kiosks and Video Vending Machines (the "Special Formats") shall not be included in the definition of "Participating Stores."


o. *


p. "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) is at least seventy (70) minutes in length; (2) is within Blockbuster's guidelines of the MPAA rating system (i.e., Blockbuster does not make available for rental to its customers pictures which are not rated or which have a rating of NC17 or more restrictive); (3) is not a documentary, foreign language film (excepting those qualifying under subparagraph g. of this Paragraph 1), sports event, concert film, stage play, video or theatrical re-release, or library/category film; and (4) is one theatrically distributed, which when initially released on videocassette is priced and distributed by * at a "rental price" and no less than a "net effective unit price" of at least *, as such terms are generally understood in the home video industry in Los Angeles, California. "Net effective unit price" shall mean the price invoiced and accrued (before adjustment for any marketing support funds) for each Copy of a specific Rental Picture by the videocassette distributor, supplies and/or retail/rental outlet which purchases videocassettes directly from * other than through leasing and/or "buy back" programs. *. Every other feature motion picture for which * owns or controls Home Video Distribution Rights in the Territory that is priced and distributed by * that fails to satisfy the requirements set forth in this subparagraph shall not be subject to this Agreement.


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


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q. *


r. "Revenue Sharing Period" shall mean the period commencing on the Video Street Date of the relevant Rental Picture and running through the end of twenty-six (26) weeks immediately thereafter.


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


t. "Video Street Date" shall mean, with respect to any Rental Picture, the first date on which, in the Territory, both: (i) such Rental Picture is authorized by * for Home Video Distribution, and (ii) Copies of such Rental Picture are actually available to the general public at Participating Stores.


2. AGREEMENT TERM:


The term of this Agreement shall be for * (the "Term"), commencing as of September 1, 1998.


3. TERRITORY:


The territory for purposes of this Agreement with respect to each Rental Picture shall be the United States, its territories and possessions, if any to the extent * owns or controls such rights to territories and possessions of the United States (the "Territory"). Blockbuster and * agree to discuss the inclusion of Canada, its provinces, territories and possessions in the Territory in accordance with the terms and conditions of this Agreement or comparable terms mutually agreed upon by the parties; provided however, that neither party shall have any obligation to agree to such inclusion.


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


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4. BLOCKBUSTER COMMITMENTS:


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


a. The following terms shall apply to Rental Pictures:


(1) *


(2) *


(3) *


Blockbuster may retain up to * of the Revenue Share Copies of each
Rental Picture (including * ) and up to * at its Distribution Center
for replenishment, new Participating Stores and unexpected spikes in
product performance (the "Replenishment Copies").


(4) *


(5) *


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


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(6) *


(7) *


(8) *


(a) *


(b) *


(c) *


(9) Payment.-Blockbuster shall pay: *


b. Participating Franchisees: Blockbuster may distribute Copies of the
Rental Pictures received under this Agreement to its Franchise Stores
which have elected to be governed by the terms and conditions of this
Agreement for all Rental Pictures whose


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


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Video Street Dates fall within a consecutive period of no less than six
(6) months, provided however, that if a Franchise Store elects to
discontinue participation hereunder, any Rental Pictures for which orders
have been placed or in its possession shall continue to be subject to the
terms of this Agreement for the applicable Revenue Sharing Period until
such Copies are returned to * or sold by Blockbuster (in accordance with
Paragraph 4.c below) and all parties shall remain obligated to perform
their respective obligations with respect thereto under this Agreement.
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 under this Agreement, such Franchise Store
shall be considered a Participating Store. For the purposes of payment
only and in the event that a Franchise Store which has elected to
participate hereunder is unable to pay when due any amounts due and owing
to *, Blockbuster shall pay * any undisputed amount pursuant to Paragraph
4.a(9) of this Agreement.


c. *


d. Packing and Shipping: Blockbuster will be responsible for making the
Copies ready for consumer rental and for shipping the Copies for its
Distribution Center to its Participating Stores.


e. Missing Copies: During the first sixty (60) days of the applicable
Revenue Sharing Period, Blockbuster agrees to pay to * less the Upfront
Price and revenue share amounts already paid to * for any Missing Copy.
Blockbuster shall notify * of any theft or loss of any Copy that occurs
outside of the ordinary course of business at the time Blockbuster
discovers the same.


f. Damaged/Defective: "Damaged Copies" shall mean those videocassettes
which become materially damaged by Participating Store personnel,
customers, or otherwise, during the Revenue Sharing Period. "Defective
Copies" shall mean those Copies that are


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


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mechanically defective, mispackaged or contain "extraneous material" (as
defined in Paragraph 9(i) below). * shall deliver to Blockbuster, at no
cost, additional Copies of each Rental Picture in the amount of * of the
Base Buy Copies as set forth on Exhibit A for Blockbuster to retain at its
Distribution Center and to use solely, in its discretion, as replacement
of Defective Copies and Damaged Copies; provided however, that if any of
these Copies are placed in the Participating Stores, * shall receive its
share of the Rental Revenue for the Copy used to replace the Damaged or
Defective Copy since no Rental Revenue will thereafter be generated from
the Damaged or Defective Copy.


g. *


5. * COMMITMENTS:


a. Grant: * grants Blockbuster the right, and Blockbuster hereby obligates
itself, to distribute the Revenue Share Copies of the Rental Pictures
(excluding Replenishment Copies) for placement on the shelves of its
Participating Stores during the applicable Revenue Sharing Period, for the
transfer of possession on a temporary or permanent basis consistent with
this Agreement to members of the general public for home viewing purposes.
* is obligated to ship the Copies to Blockbuster pursuant to the terms and
conditions of this Agreement.


b. Marketing-Support: In lieu of specific marketing support programs and
as payment for services and in consideration for the various other
services and activities which Blockbuster has agreed to perform hereunder,
* agrees that Blockbuster shall accrue on a Qualified Rental Picture basis
marketing support funds (the "Marketing Support Funds") in a minimum
amount of * of the Minimum Guarantee for each Qualified Rental Price.
Blockbuster shall use the Marketing Support Funds to advertise the Rental
Pictures in its ...