Exhibit 10.26*
*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
SYMBOL "^" HAS BEEN USED IN THE EXHIBIT TO INDICATE WHERE CONFIDENTIAL PORTIONS
OF THE TEXT HAVE BEEN OMITTED FROM THE EXHIBIT AND FILED SEPARATELY, ON A
CONFIDENTIAL BASIS, WITH THE SECURITIES AND EXCHANGE COMMISSION.
March 15, 1996
Xxxx X. Xxxxxxx, Esq.
BMG Video
Vice President, Business and Legal Affairs
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Re: VIDEO DISTRIBUTION AGREEMENT - Deal Memo
Dear Xxxx:
Pursuant to our conversations, the following sets forth the basic terms of our
agreement in connection with a video distribution agreement (the "Agreement")
between Overseas Filmgroup, Inc.("OFG") and BMG Video ("BMG"):
A. TERM: The term of the Agreement shall be one year, commencing on January
1, 1996 and terminating on December 31, 1996 (the "Term"). With respect to each
picture, the Term shall expire five (5) years from the applicable videogram
release date. OFG and BMG shall have the option to extend the Term of this
Agreement for one additional year by mutual consent (the "Extension").
B. TERRITORY/RIGHTS: BMG will be granted video distribution rights (the
"Rights") to the Pictures (as defined in Paragraph C. below) throughout the
United States and its respective territories, commonwealths and possessions,
including Puerto Rico and the United States Virgin Islands (the "Territory").
Video distribution rights shall be defined as the sole and exclusive right to
manufacture, advertise, promote, sell, lease and distribute on a sale or rental
basis, all video product of the Pictures in all linear (non-interactive) formats
intended for home use including, but not limited to, videocassettes, laser
discs, CD-I, CD-ROM, Digital Video Disc and any other video format hereafter
created.
C. PICTURES: The pictures which are part of the Agreement (the "Pictures")
include the titles attached hereto on Exhibits A through L, as well as any
picture delivered to OFG within the Term of the Agreement, excluding only those
pictures which OFG determines to sell all rights in the Territory to one buyer
(an "All Rights Sale Exception") and those pictures which are "Excluded
Pictures" as defined below. With respect to each All Rights Sales Exception
only, BMG shall have a right of first negotiation.
With respect to each Picture, OFG shall inform BMG of its release plans in the
Territory, such release plans will generally fall into two categories. The
first category shall be those Pictures
Xxxx Xxxxxxx, Esq.
March 6, 1996
Page 2
which are expected to be released theatrically as the first window of
exploitation in the U.S., including any Picture released theatrically by OFG
doing business as First Look Pictures (a "Theatrical Release Picture"). The
second category shall be those Pictures which are not expected to be released
theatrically in the U.S. as the first window of exploitation (a "Non-Theatrical
Release Picture").
With respect to each Picture, OFG and BMG shall negotiate in good faith in order
to reach an agreed level of ^ and based upon the ^ as described below, the ^
which OFG shall earn ^. In the event, OFG and BMG cannot agree on the ^ after
good faith negotiation, OFG shall be entitled to remove such picture from the
terms of this Agreement (an "Excluded Picture"). Notwithstanding the foregoing,
OFG agrees that, with respect to any Excluded Picture, OFG will provide to BMG
the significant financial terms of any bona fide third party offer which OFG
intends to accept, if the terms of any such third party offer (the "Qualifying
Third Party Offer") includes a ^ of gross receipts to OFG which is not at least
^ more than the Guarantee (as defined below). BMG will then have the right (the
^ ) to offer distribution of the Excluded Picture on ^ and ^ as the
Qualifying Third Party Offer. The ^ shall be exercised, if at all, by BMG
giving OFG notice within three business days of its receipt of a summary of the
Qualifying Third Party Offer. In the event BMG exercises its ^, OFG shall be
obligated to accept the BMG offer made by way of the ^ . BMG and OFG warrant
and agree to keep the terms of any Qualifying Third Party Offer and the ^ of
this Agreement (as well as any other material business provision of this
Agreement) completely and highly confidential. Additionally, with respect to
any Excluded Picture, in the event BMG has last provided estimates of unit
sales, costs, expenses and ^ more than ^ prior to OFG's receipt of any third
party offer OFG intends to accept, OFG agrees that BMG will be afforded a
reasonable time period to provide updated ^ and ^ prior to OFG's accepting any
third party offer.
Further, with respect to each of the Theatrically Released Pictures and the Non-
Theatrically Released Pictures OFG and BMG agree as follows:
(1) ^ PICTURE(S) With respect to each ^ Picture:
a) Fee: BMG shall be entitled to a distribution fee of ^ of
all gross receipts generated from exploitation of the Rights
until such time as the share of such gross receipts payable
to OFG is equal to ^ of the ^ . Thereafter, BMG shall be
entitled to a distribution fee of ^ of all gross receipts
^ to the ^ of gross receipts payable only from gross
receipts in ^ of ^ of the ^ and only until such time as
gross receipts ^ to OFG is ^ to ^ of the ^. Thereafter, BMG
shall be entitled to a ^ distribution fee of ^ of all
gross receipts
Xxxx Xxxxxxx, Esq.
March 6, 1996
Page 3
generated from exploitation of the Rights in ^ of those
needed to pay OFG ^ of the ^ .
b) Guarantee: BMG guarantees the ^ from the exploitation of the
Rights shall not be ^ than ^ of ^ of the ^ .
Notwithstanding the foregoing, the ^ for the Theatrical
Release Pictures named in Exhibits A through D (the "Initial
Theatrical Release Picture(s)") shall be as provided in each
of Exhibits A through D.
c) P & A Commitment: With respect to each Theatrical Release
Picture, OFG and BMG shall negotiate in good faith to arrive
at an agreed minimum theatrical print and advertising
commitment to be made by OFG (the "Minimum P & A
Commitment"). OFG shall determine the Minimum P & A
Commitment prior to BMG providing its final estimates of
units sales, costs, expenses and the Theatrical Release
Picture Guarantee with respect to a particular Theatrical
Release Picture. With respect to the Initial Theatrical
Release Picture(s), the Minimum P & A Commitment is provided
on Exhibits A through D.
(2) ^ PICTURE(S): With respect to each ^ Picture:
a) Fee: BMG shall be entitled to a distribution fee of ^ of
all gross receipts generated from exploitation of the Rights
until such time as the share of such gross receipts ^ to OFG
is ^ to ^ of the ^ . Thereafter, BMG shall be entitled to
a distribution fee of ^ of all gross receipts ^ in ^ of
^ of the ^ . At such time as the share of gross receipts ^
to OFG equals ^ of the ^ , BMG shall be entitled to a
distribution fee ^ of all gross receipts ^ to the ^ of
gross receipts but payable only from gross receipts in ^
of ^ of the ^ .
b) Guarantee: BMG shall guarantee OFG's share of gross receipts
from the exploitation of the Rights shall ^ be ^ than ^ .
Notwithstanding the foregoing, the ^ for the ^ named in
Exhibits E through L shall be as provided in each of Exhibit
E through L.
Each of the ^ and the ^ shall sometimes be referred to as a "Guarantee" and
each Guarantee shall be paid ^ days following the video release of the
respective Picture. With respect to the ^ and the ^ , OFG and BMG acknowledge
and confirm their agreement on estimated ^ , the ^
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March 6, 1996
Page 4
or ^ and, if applicable, the Minimum P & A Commitment.
D. ^ BMG shall pay OFG an ^ of ^ which shall be payable (i) ^ upon signature
by OFG of this Agreement and delivery to BMG of a finished and edited D-2
Master of at least ^ Pictures; and (ii) ^ upon signature by OFG of a ^ and
delivery of certain ^ to be specified within the ^ . The ^ shall be ^ by
BMG both (i) by applying any ^ of actual receipts payable to OFG based on
the distribution of a particular Picture and the ^ paid, which ^ , if any,
shall be ^ upon the ^ accounting period with respect to each Picture, and
(ii) against any amounts payable to OFG with respect to any Picture in ^ of
any ^ paid. Should, at the end of the Term, any portion of the ^ be ^ as
provided above ^ such ^ shall be available to be ^ to Pictures becoming a
part of this Agreement during the Extension, if any.
BMG shall pay OFG an additional ^, less any ^, if any, ^ on December 30,
1996, (OFG hereby acknowledges that BMG will not be in breach so long as
actual payment of the ^ is received by ^ ) should both OFG and BMG ^ to the ^
of the ^ of this Agreement for an additional one year period, which ^ shall
be ^ against Pictures becoming a part of the Agreement (which OFG warrants
shall be ^ than ^ additional Pictures) during the Extension and which ^
shall be ^ in the same manner and on the same basis as the ^ but against such
future pictures only.
E. EXPLOITATION DECISIONS: OFG shall name a person (the "Point Person")
who will be the primary contact with respect to exploitation decisions
with respect to the Pictures. This Point Person may be changed by OFG
at its sole election and at such times as OFG shall determine.
Initially, XX Xxxxxx shall be such Point Person. Where OFG is
provided certain consultation rights under this paragraph, the Point
Person will be the primary party to which BMG shall provide such
rights.
With respect to each Picture, OFG is hereby given the right to seriously and
meaningfully consult (the "Consultation Right") with respect to all areas of
the marketing and distribution of the Pictures as provided under this
Agreement. Such Consultation Right will apply to projected unit sales,
selling price per unit, budgeted levels of marketing, selling and
manufacturing costs, video release dates, marketing plans (including
selection of third party creative designers, the purchase of video
distributor and trade advertising, the creation of key art and "box" art to
be used, any sales incentive plans to be used, any marketing development
funds ("MDF's"), so called "spiffs", packaging of units, the design and
implementation of promotional campaigns) and all other material marketing and
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March 6, 1996
Page 5
sales decisions. BMG agrees to provide ongoing information, both written and
oral, to OFG throughout all planning, marketing and distribution phases of
each Picture and specifically to provide OFG with multiple designs of artwork
intended for use as both key art and "box" art prior to BMG's final
selection. In addition, OFG shall be given notice of and allowed, as
appropriate, to participate in all meetings (both held internally and with
outside vendors, if any) with respect to areas of planning, marketing and
distribution of each Picture. Nothing contained in this paragraph is meant
to provide an undue burden on BMG in providing OFG with this Consultation
Right.
F. REPORTING: With respect to each Picture, beginning with the fiscal quarter
(based upon BMG's fiscal year end) of the videogram release date of such
Picture, BMG shall issue to OFG a true and correct statement of accounting
within 60 days following each fiscal quarter for the first two years following
the video release of such Picture. Thereafter, BMG shall account to OFG on a
semiannual basis. Such accountings shall include units sold, price per unit,
gross receipts, sales, marketing and manufacturing costs, a reserve for returns,
and OFG's share of gross receipts. The report shall also reflect the ^ paid
and any application of the ^ or the ^ . Payment of any amounts owing to OFG
shall be made and included with each accounting. At OFG's request, BMG will
provide supporting information and documentation (including third party
invoices) with respect to any area outlined above.
The foregoing is meant only to summarize the principle business points between
OFG and BMG. OFG and BMG intend to enter into a long form agreement in a
reasonable time period following the execution of this Agreement which long form
agreement shall set forth the remaining terms of this agreement and which long
form agreement will be subject to good faith negotiations between OFG and BMG,
however, until such time as the long form agreement is executed this Agreement
shall be binding upon both parties.
Very truly yours,
/s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx Xxxxxxx
COO/CFO
Overseas Filmgroup, Inc.
Agreed to this 20th day of March, 1996
Xxxx Xxxxxxx, Esq.
March 6, 1996
Page 6
BMG VIDEO
By: /s/ Xxx Xxxxxxx
Its: General Manager
Xxxx Xxxxxxx, Esq.
March 6, 1996
Page 7
EXHIBIT "A"
TITLE: "ANTONIA'S LINE"
CATEGORY: Theatrical Release Picture
ESTIMATED UNITS: ^
ESTIMATED OFG GROSS RECEIPTS: ^
GUARANTEE: ^
MINIMUM P & A COMMITMENT: ^
Xxxx Xxxxxxx, Esq.
March 6, 1996
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EXHIBIT "B"
TITLE: "INFINITY"
CATEGORY: Theatrical Release Picture
ESTIMATED UNITS: ^
ESTIMATED OFG GROSS RECEIPTS: ^
GUARANTEE: ^
MINIMUM P & A COMMITMENT: ^
Xxxx Xxxxxxx, Esq.
March 6, 1996
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EXHIBIT "C"
TITLE: "THIS IS THE SEA"
CATEGORY: Theatrical Release Picture
ESTIMATED UNITS: ^
ESTIMATED OFG GROSS RECEIPTS: ^
GUARANTEE: ^
MINIMUM P & A COMMITMENT: ^
Xxxx Xxxxxxx, Esq.
March 6, 1996
Page 10
EXHIBIT "D"
TITLE: "BODY OF A WOMAN"
CATEGORY: Theatrical Release Picture
ESTIMATED UNITS: ^
ESTIMATED OFG GROSS RECEIPTS: ^
GUARANTEE: ^
MINIMUM P & A COMMITMENT: ^
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March 6, 1996
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EXHIBIT "E"
TITLE: "MANHATTAN MERINGUE"
CATEGORY: Non-Theatrical Release Picture
ESTIMATED UNITS: ^
ESTIMATED OFG GROSS RECEIPTS: ^
GUARANTEE: ^
Xxxx Xxxxxxx, Esq.
March 6, 1996
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EXHIBIT "F"
TITLE: "FIST OF THE NORTH STAR"
CATEGORY: Non-Theatrical Release Picture
ESTIMATED UNITS: ^
ESTIMATED OFG GROSS RECEIPTS: ^
GUARANTEE: ^
Xxxx Xxxxxxx, Esq.
March 6, 1996
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EXHIBIT "G"
TITLE: "ONE GOOD TURN"
CATEGORY: Non-Theatrical Release Picture
ESTIMATED UNITS: ^
ESTIMATED OFG GROSS RECEIPTS: ^
GUARANTEE: ^
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March 6, 1996
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EXHIBIT "H"
TITLE: "MAD DOGS AND ENGLISHMEN"
CATEGORY: Non-Theatrical Release Picture
ESTIMATED UNITS: ^
ESTIMATED OFG GROSS RECEIPTS: ^
GUARANTEE: ^
Xxxx Xxxxxxx, Esq.
March 6, 1996
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EXHIBIT "I"
TITLE: "DOWNHILL XXXXXX"
CATEGORY: Non-Theatrical Release Picture
ESTIMATED UNITS: ^
ESTIMATED OFG GROSS RECEIPTS: ^
GUARANTEE: ^
Xxxx Xxxxxxx, Esq.
March 6, 1996
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EXHIBIT "J"
TITLE: "BOSTON KICKOUT"
CATEGORY: Non-Theatrical Release Picture
ESTIMATED UNITS: ^
ESTIMATED OFG GROSS RECEIPTS: ^
GUARANTEE: ^
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March 6, 1996
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EXHIBIT "K"
TITLE: "BACK TO BACK"
CATEGORY: Non-Theatrical Release Picture
ESTIMATED UNITS: ^
ESTIMATED OFG GROSS RECEIPTS: ^
GUARANTEE: ^
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March 6, 1996
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EXHIBIT "L"
TITLE: "SHORTCUT TO PARADISE"
CATEGORY: Non-Theatrical Release Picture
ESTIMATED UNITS: ^
ESTIMATED OFG GROSS RECEIPTS: ^
GUARANTEE: ^
