EXHIBIT 10.41
STANDARD REVENUE SHARING
OUTPUT LICENSE TERMS
(RETAILER)
As of July 22, 1998
The following (the "Agreement") sets forth the terms of the license agreement
(the "License") between * and the retailer set forth on the cover letter
attached hereto (the "Retailer") for revenue sharing on * Rental Picture output
(as defined below).
1. TERM: * period commencing upon the date first set forth above. After the
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first six (6) months of the Term, the parties agree to evaluate the
commercial feasibility and benefits of revenue sharing.
2. TERRITORY: United States and its territories and possessions only.
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3. DEFINITIONS AND CALCULATIONS:
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a. *
(i) *
(ii) *
(iii) *
(iv) *
(A) *
(B) *
(C) *
(D) *
(E) *
(F) *
(G) *
(H) *
*Confidential material omitted and separately filed with the Commission under an
application for confidential treatment.
(I) *
(J) *
b. *
c. *
d. *
e. "Month" shall be defined as each calendar Month, and each Month shall
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end on the last day of such Month.
f. "Picture Term" means for each Rental Picture the first 26 weeks of
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rental release beginning with Street Date.
g. "Rental Picture" means each and every new release on videocassette of
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a feature motion picture for which are (A) produced, financed, owned
or controlled by * and (B) for which * owns or controls home video
distribution rights in the Territory (subject to any and all approvals
required by any third party) of not fewer than seventy (70) minutes in
length, priced for rental in the retail market; provided, however the
following shall be specifically excluded from Rental Pictures: (i) *
distributed lines, (ii) product controlled by third parties who do not
approve of the terms hereof and (iii) videocassettes of sports events,
concert footage, stage plays, documentaries, video or theatrical re-
releases, or library titles.
h. *
(i) *
(ii) "Taxes" shall mean any and all sales, excise, value added or
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other taxes which meet the following qualifications: (A) the
taxes are separately stated, (B) the taxes are required by law to
be collected from Retailer's customers, and (C) the taxes are
actually paid by Retailer to taxing authorities.
i. "Stores" shall mean all Retailer-owned rental retail stores and any
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and all Retailer franchisees that elect to participate in, and comply
with, the obligations set forth under this Agreement and any other
obligations that Retailer may impose to administer the terms hereof
with respect to any such franchisees. All franchisees that
participate shall be treated as Retailer Stores for the purposes of
this Agreement, and the actual rental transactions of such franchisees
on Measurement Titles shall be included in Retailer's total rental
transactions. In the event that there is insufficient historical
data, the parties
*Confidential material omitted and separately filed with the Commission under an
application for confidential treatment.
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shall use good faith efforts to agree on estimated rental transactions
for such franchisees. "Stores" shall specifically exclude any new
store or stores owned or controlled by Retailer operating under any
name other than Retailer's name. The parties agree that with respect
to stores and/or chains of stores acquired by Retailer during the
Term, such stores shall be eligible to assume the rights and
obligations set forth hereunder provided Retailer shall report for
such new stores through its existing established reporting mechanism,
and, any existing revenue sharing agreement of any such store with *
shall terminate. Upon the addition or acquisition of stores, Retailer
shall notify * immediately in writing, and the parties shall begin
good faith discussions to immediately increase the number of Base
Units to reflect such store acquisitions and/or additions.
j. "Street Date" means the first day retailers are permitted by * to make
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a title available for rental to consumers.
4. LICENSED RIGHTS:
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a. Homevideo Distribution License: * licenses to Retailer on a limited
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and non-exclusive basis homevideo distribution rights to the Rental
Pictures in VHS format only for rental only in Stores in the retail
market in the Territory during the Term, subject to the terms
hereunder and subject to Retailer's agreement to accept all Rental
Pictures offered by * pursuant to the terms hereunder.
b. Credit Approval: * and Retailer agree that this License is and shall
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during the Term be conditioned upon and subject to (i) Retailer's
credit approval by * or its designee and (ii) maintenance of such
level of credit worthiness during the Term, which level may be
evaluated periodically by * or its designee at any time during the
Term.
c. Reservation of Title: Legal title to, and risk of loss of, the
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Licensed Units hereunder shall remain vested in *, subject to
disposition of PVTs pursuant to Paragraph 8 below. Retailer shall not
permit any encumbrance to attach to any Licensed Units delivered
pursuant to this Agreement.
5. *
a. *
(i) *
(ii) *
b. *
*Confidential material omitted and separately filed with the Commission under an
application for confidential treatment.
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c. *
6. *
a. *
c. *
6A. FREIGHT AND HANDLING: For each Rental Picture, Retailer shall pay to * *
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per Licensed Unit for freight and handling (the "Freight Fee").
7. STATEMENTS AND PAYMENTS:
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a. Statements: On a Monthly basis, within seven (7) business days after
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the Month, for each Rental Picture, Retailer shall provide to *, in
the formats reasonably requested and as periodically amended by *, a
statement (the "Statement) which reflects the rental and related
activities for such Month, including, without limitation, Initial
Payment, * Revenue Share, sales of PVTs (as defined below in Paragraph
8), and actual Bad Debt.
b. Payments: For each Rental Picture, to the extent any amounts are due
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pursuant to the Statements, * or its designee shall invoice Retailer,
with such amounts due and payable the tenth of the second month
following to an account designated by *.
8. DISPOSITION OF PREVIOUSLY VIEWED TAPES:
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a. Sale: For each Rental Picture, * may direct Retailer, as its agent,
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to sell previously viewed tapes ("PVTs") to consumers pursuant to the
following conditions:
(i) *
(ii) *
(iii) *
(A) *
(B) *
b. Other Disposition:
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(i) *
(A) *
*Confidential material omitted and separately filed with the Commission under an
application for confidential treatment.
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(B) *
(C) *
(ii) *
d. *
9. PLACEMENT OF LICENSED UNITS: Retailer shall place all Licensed Units of
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each Rental Picture licensed hereunder on prominent "new release" display
walls or another agreed equivalent in-store location for not fewer than *
after Street Date, subject to prior sale pursuant to the terms of Paragraph
8(a) above.
10. ADVERTISING SUPPORT: * may elect from time to time to provide advertising
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support funds in a lawful, fair and proportional manner to be used by
Retailer with respect to the Rental Pictures licensed hereunder.
11. DELIVERY: *, at its cost, shall use its reasonable good faith efforts to
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deliver product to a distribution center designated by Retailer in a timely
manner prior to Street Date for each Rental Picture. The parties agree
that for each Rental Picture, Retailer may retain up to * of the Base Units
at its distribution center for replenishment of defectives (the
"Replenishment Units"), new stores, and unexpected spikes in product
performance. To the extent the Replenishment Units are still in the
distribution center at the end of the applicable Picture Term for each
Rental Picture, such Replenishment Units shall be subject to disposition
pursuant to the terms of Paragraph 8(b) above.
12. INFORMATION TO BE PROVIDED BY RETAILER: To the extent reasonably available
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to Retailer and with respect to * product only, Retailer agrees to provide
the following information to * at Retailer's expense:
a. Revenue Share Reporting: On a weekly basis, no later than Tuesday
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morning for activity through the previous Sunday, Retailer shall
deliver to * * reports detailing the number of rental transactions and
gross revenues per Rental Picture, per Store, by market.
b. Other Information: Retailer and * shall mutually agree on other
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information to be provided to *.
13. AUDIT RIGHTS: Upon not less than fourteen (14) days advance written notice
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to Retailer, *, or its representatives or designees, shall have the right
during normal business hours, but not more than three (3) times during the
Term and all the Picture Terms and one (1) time after the expiration or
earlier termination of the Term and all the Picture Terms, to inspect,
audit and make extracts of the books and records of Retailer insofar as
said books and records relate to the calculation or determination
*Confidential material omitted and separately filed with the Commission under an
application for confidential treatment.
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by Retailer of (a) Revenue, (b) * Revenue Share, (c) Credit, (d) Bad Debt,
and (e) the rights licensed hereunder. Such rights of audit shall continue
for a period of two (2) years following the expiration of all Picture Terms
as provided for under this Agreement. The parties agree that Retailer shall
have the right reasonably to approve independent auditors hired by * to
conduct an audit, provided that the internal auditors of * and/or * and the
accounting firm of * or * then existing auditors shall be deemed pre-
approved for any and all audits conducted pursuant hereto. Notwithstanding
the foregoing, the parties agree that no * or * employees shall have direct
access to Retailer's information relating to * competitors or Retailer's
aggregate market data.
14. CONFIDENTIALITY: Each of * and Retailer acknowledges that (i) the terms
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and conditions of this Agreement, and (ii) all information and data
(including, without limitation, rental and revenue forecasts, projections
and estimates and actual results, in whatever form or medium)
(collectively, the "Confidential Information") provided by each party to
the other under this Agreement are highly proprietary and confidential.
Each of * and Retailer agrees that it shall not use Confidential
Information (other than in connection with the performance of its
obligations under this Agreement or the exercise of its rights under this
Agreement) or disclose Confidential Information to any person (other than
its officers, employees, agents, representatives and licensors on a need-
to-know basis only and who agree to be bound by the confidentiality
obligations hereunder) or unless compelled by subpoena or court order or
state or federal securities laws to disclose any such Confidential
Information. This Paragraph 14 shall survive expiration or earlier
termination of this Agreement.
15. INDEMNIFICATION:
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a. Indemnification by Retailer: Except as otherwise provided in
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Paragraph 15(b) below, Retailer shall defend, indemnify and hold *,
its parent company, their affiliates and subsidiaries, and the
officers, directors, agents and employees of each, free and harmless
from all suits, claims, demands and other liabilities and expenses
(including attorneys' fees) (each, a "Claim") which may arise directly
or indirectly out of or by reason of (i) the unauthorized use by
Retailer of any patented invention, or of any copyrighted material
provided by *, (ii) a Claim from a customer arising out of Retailer's
rental or retail practices or course of dealing with respect to such
customer, and/or (iii) a breach or violation of this Agreement or any
obligation, covenant, representation or warranty made hereunder by
Retailer.
b. Indemnification by *: Except as otherwise provided in Paragraph 15(a)
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above, * shall defend, indemnify and hold Retailer, its parent
company, their affiliates, subsidiaries, and franchisees, and the
officers, directors, agents, and employees of each, free and harmless
from all Claims (including reasonable attorneys' fees) which may arise
directly or indirectly out of or by reason of (i) copyright
infringement by, or other third party Claim against, * with
*Confidential material omitted and separately filed with the Commission under an
application for confidential treatment.
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respect to the content of any Rental Picture, provided such Claim or
infringement is not the result of the negligence of Retailer or any
employee or agent of Retailer, (ii) a physical defect in any Licensed
Unit provided to Retailer hereunder by *, provided such defect was not
caused by the negligence of Retailer or any employee or agent of
Retailer, and/or (iii) a breach or violation of this Agreement or any
obligation, covenant, representation or warranty made hereunder by *.
16. REMEDIES: Each of * and Retailer acknowledge and agree that a material
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breach by either party of any of its obligations under this Agreement,
gives the other party the right to terminate this Agreement upon * prior
written notice. Retailer waives any rights to seek injunctive relief with
respect to the sale, license and/or other distribution of any Rental
Picture, provided that Retailer does not waive any right it may have to
seek specific performance under this Agreement with respect to any Rental
Picture being distributed by * in the rental retail marketplace. The
termination of this Agreement shall not relieve the parties of any
obligations incurred prior to such termination.
17. DEFECTIVES: The parties agree that there shall be no replacements of, or
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credits or set-offs against the Initial Payment, overages, or any other
amounts owed to * by Retailer for, defective Licensed Units. For each
Rental Picture, to the extent defectives exceed * of the total number of
Licensed Units delivered to Retailer during the first thirty (30) days
after Street Date, Retailer may exchange defectives for new videos from *
to be delivered within a reasonable time thereafter, which reasonable time
shall be within seventy-two (72) hours, provided that Retailer utilizes *
eight hundred (800) number defective replacement system.
18. REPRESENTATIONS AND WARRANTIES:
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a. Representations and Warranties of Retailer: Retailer hereby agrees,
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warrants and represents that Retailer has full authority, capacity and
ability to execute this Agreement and to perform all of its
obligations hereunder.
b. Representations and Warranties of *: * hereby agrees, warrants and
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represents that * has full authority, capacity and ability to execute
this Agreement and to perform all of its obligations hereunder.
19. MISCELLANEOUS:
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a. Amendment and Waiver: Except as otherwise provided herein, no
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modification, amendment or waiver of any provision of this Agreement
shall be effective against any party unless such modification,
amendment or waiver is approved in writing by Retailer and *. The
failure of any party to enforce any of the provisions of this
Agreement shall in no way be construed as a waiver of such provisions
and shall not affect the right of such party
*Confidential material omitted and separately filed with the Commission under an
application for confidential treatment.
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thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
b. Severability: Whenever possible, each provision of this Agreement
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shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be
invalid, illegal, or unenforceable in any respect under any applicable
law or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any other
jurisdiction, but this Agreement shall be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
c. Entire Agreement: Except as otherwise expressly set forth herein,
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this document embodies the complete agreement and understanding
between the parties hereto with respect to the subject matter hereof
and supersedes and preempts any prior understandings, agreements or
representations by or between the parties, written or oral, which may
have related to the subject matter hereof in any way.
d. Assignment:
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(i) Retailer Assignment: This Letter Agreement shall not be
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assigned by Retailer without the prior written consent of *.
(ii) * Assignment: This Letter Agreement shall not be assigned by
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* without the prior written consent of Retailer, except to
any corporation or entity which controls, is controlled by,
or under common control with *.
(iii) Purchase of Retailer by a Studio or Third Party Retailer.
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(A) Purchase by Studio: In the event a motion picture studio
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or home video company (for purposes hereof, in each
instance, a "Studio") enters into an agreement to
acquire Retailer, * shall be given prompt notice of such
agreement and shall have the option to terminate this
Agreement immediately upon written notice to Retailer.
Promptly following such notice of acquisition agreement,
Retailer, in consultation with *, shall undertake to
provide adequate assurance in writing to * that
proprietary and confidential information of * shall not
be disclosed to, or otherwise made accessible to, the
management or other employees of such Studio following
such acquisition. As used in this Paragraph
19(d)(iii)(A), the term "Studio" shall also include,
without limitation, the respective affiliated
corporations which control, are controlled by, or are
under common control with, any such Studio. The term
"control"
*Confidential material omitted and separately filed with the Commission under an
application for confidential treatment.
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shall refer to the ownership of at least fifty
percent (50%) of the outstanding voting power of the
corporation or entity which is subject to such
"control".
(B) Purchase by/of Third Party Retailer: In the event a
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third party retailer enters into an agreement to acquire
Retailer, or Retailer enters into an agreement to
acquire a third party retailer, * and Retailer agree
that in such event, the terms of this Agreement shall
apply only (i) to already existing Retailer Stores and
(ii) to any new stores which operate under the Retailer
name at the retail level, subject to the ability of such
new stores to report through Retailer's established
reporting mechanism.
(C) Definition of "Purchase": For purposes of this
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Subparagraph 19(d)(iii) the term "Purchase" shall
include acquisition, merger and/or other consolidation.
e. Counterparts. This Agreement may be executed in separate counterparts
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each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
f. Due Authorization. Each of * and Retailer represents and warrants
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that the officer executing this Agreement has been duly authorized and
that this Agreement when executed and delivered shall be valid and
binding and enforceable in accordance with its terms.
g. Notices. All notices provided for in this Agreement shall be in
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writing and shall be either personally delivered, or mailed first
class mail (postage prepaid) or sent by reputable overnight courier
service (charges prepaid) to the parties as follows:
If to Retailer:
As set forth in the cover letter attached hereto,
with a copy to the General Counsel.
If to *:
*
*
*
*
*
*
*Confidential material omitted and separately filed with the Commission under an
application for confidential treatment.
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h. Governing Law. This Agreement and all matters or issues material
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thereto shall be governed by the laws of the *, applicable to
contracts performed entirely therein. * and Retailer hereby agree
that all actions, proceedings or litigation relating to this Agreement
shall be instituted and prosecuted solely within the * and each party
hereby consents to the jurisdiction of the * and the * with respect to
any matter arising out of or relating to this Agreement.
i. Descriptive Headings. The descriptive headings of this Agreement are
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inserted for convenience only and do not constitute a part of this
Agreement.
j. Relationship of Parties. Nothing contained herein shall constitute a
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partnership, joint venture, association or principal and agent
relationship or be construed to evidence the intention of the parties
to constitute such. Retailer and * are independent contractors and
neither has any authority to act on the other's behalf or to bind the
other in any way.
k. Force Majeure. Whenever performance by any party of its obligations
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under this Agreement, other than any of Retailer's payment obligations
hereunder, is substantially prevented by reason of any act of God,
strike, lock-out, or other industrial or transportational disturbance,
fire, lack of materials, law, regulation or ordinance, war or war
conditions, or by reason of any other matter beyond such party's
reasonable control, then such performance shall be excused and this
Agreement shall be deemed suspended during the continuation of such
prevention, and the term shall be extended for a period equal to the
time of such suspension.
l. Third Parties. None of the provisions of this Agreement is intended
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for the benefit of or shall be enforceable by any third parties,
including creditors of Retailer or *.
In WITNESS WHEREOF, this Agreement was executed by the parties on the date first
written above.
RETAILER *
By: /s/ Xxxxxx X. Xxxxxx By: /s/ *
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Its: CEO Its: *
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Retailer: Video Update, Inc.
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* Confidential material omitted and separately filed with the Commission under
an application for confidential treatment.
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