PHV/Blockbuster
Revenue Sharing
TERM SHEET
(As of July 29, 1999)
1. License PHV hereby grants and BB accepts a license to sell and rent *
VHS Units of PHV rental Titles on a revenue sharing basis in
the Territory during the Term subject to the terms and
conditions set forth herein.
2. *
3. Unit Fee BB shall pay to PHV as a Unit Fee * for each Base Unit (which,
for the avoidance of doubt, shall be included in the *, Base
Multiple Unit and Enhanced Multiple Unit. BB shall pay to PHV
* for each Hyper-Buy Unit up to a multiple of * and * for each
Hyper-Buy Unit at a multiple of * or above [* of each Unit Fee
shall be denominated as the 'Buy-Out-Fee.'] For example, if
the Grid provides for a purchase of * Base Unit and a multiple
of * applies, BB would pay a * of * (or *), and * in total for
Unit Fees for the Units in excess of the Base Unit (* Units in
total).
4. Splits With respect to each Title BB shall pay to PHV:
(A) * of * rental revenues derived from such Title during
weeks * of its License Period; and
(B) * of * rental revenues derived from such Title during
weeks * of its License Period; and
5. Split Notwithstanding the splits described in Section 4 above, the
Adjustment following adjustment may apply if the corresponding conditions
are met.
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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 (*).
PHV/Blockbuster
Revenue Sharing
TERM SHEET
(As of July 29, 1999)
'A' Tranches will consist of * consecutive Titles with US/Can
gross box office equal to or in excess of * each. 'B' Tranches
will consist of * consecutive Titles with US/Can gross box
office less than * each.
*
6. PVT BB shall have the right, as consignee, to sell previously
viewed Units ('PVTs') in accordance with the following:
A. With respect to each Title, BB shall not sell any PVT
Units prior to * after its street date and then only
subject to its standard *.
BB shall not sell PVT Units * computed for all PHV Units
sold during each * period starting with the Commencement
Date and BB shall not market or sell PVT Units of PHV
Titles for * the PVT Units of titles from *. For the
avoidance of doubt and without limiting anything else in
this section 6A, BB shall have the right * based on BB's
marketing and sales needs and the performance of
individual titles as determined by BB.
B. Subject to 6A above, after the License Period BB shall
have the right to keep or sell all Base and Base
Multiple Units and retain all
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* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
Page 2
PHV/Blockbuster
Revenue Sharing
TERM SHEET
(As of July 29, 1999)
proceeds from such sales.
C. Subject to 6A above, after the License Period * as a PVT
Unit, BB keeps all proceeds from such sale.
D. Subject to 6A above, after the License Period *, PHV
shall have the option to instruct BB to (i) * (ii) to
keep such Unit and to the extent BB sells such Unit as
PVT Unit, BB keeps all proceeds from such sale.
E. Notwithstanding 6 B, C and D above, *
F. *. Major Studio in this Term Sheet shall mean: Disney,
Universal, Warner Bros., Twentieth Century Fox, Sony,
MGM, Dreamworks including any of their successors or
affiliates.
G. In all instances in this Section 6 where PHV *, such
notification shall be made on or before the order
cut-off date for such Units.
H. BB shall be permitted to offer PVT Units to ultimate
consumers in the Territory by means of advertising on
the internet (i.e., no sales to wholesalers, middlemen
or brokers) all in accordance with the terms of this
Agreement.
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* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
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PHV/Blockbuster
Revenue Sharing
TERM SHEET
(As of July 29, 1999)
7. * BB shall pay to PHV the * fees for each transaction:
Price Per
Transaction For theatrical Titles with US/Can gross box office receipts
greater than *:
*
For theatrical Titles with US/Can gross box office receipts
equal to or less than * and non-theatrical Titles:
*
Throughout the Term BB shall apply credits and bad debts to
PHV product in a manner consistent with the way BB applies
credit and bad debt with respect to the product of the other
Major Studios.
8. Recoupability With respect to each Title, BB shall have the right to recoup
from the * the revenues due to PHV from its share of rental
revenues for such Title. (For the avoidance of doubt, there is
no recoupment from Unit Fees other than Bases Unit Fees,
which are included in the *.)
9. Payment BB shall pay monies due to PHV in accordance with the
Schedule following schedule:
*: Due and payable no later than *
Unit Fees: Due and payable no later than *
PHV's Share of Rental Revenues: Due and payable no later than
*
10. Territory United States. Canada will be included using separate Units
Per Store Grids for US, English-speaking Canada and
French-speaking Canada. Terms for Canada will be on the same
economic basis factoring in
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* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
Page 4
PHV/Blockbuster
Revenue Sharing
TERM SHEET
(As of July 29, 1999)
currency exchange and cost of goods differences (if any) to
be determined and discussed by PHV and BB.
11. Output The product licensed hereunder shall be all product which PHV
distributes * for the VHS rental market (i.e., with a net
effective wholesale price of * and above) for which it
unilaterally controls the rights necessary to grant the rights
hereunder.
Notwithstanding the above, the following product is not
licensed hereunder.
o less than 70 minutes in duration;
o rated NC-17 or unrated;
o live sports programs;
o musical concerts;
o stage plays which are filmed;
o theatrical re-releases; and
o catalog titles at rental prices.
In addition, BB shall license *, which are distributed by PHV
hereunder except that BB shall not be required to license in
excess of * such title in the aggregate per year. If PHV
releases more than * such titles in any year, BB shall have
the right to choose which * titles per year it shall license.
With respect to all such such * the * (inclusive of the Unit
fee) for each Base Unit.
Note that titles which may contain non-substantial amounts of
documentary footage, live sports footage, musical concert
footage or excerpts of live stage plays shall not be excluded
under this sub-paragraph.
12. Term This Agreement shall apply with respect to Units with
Street Dates after July 26, 1999 and before August 1, 2003.
(For the avoidance of doubt, this Agreement begins with the
street date for PAYBACK and runs for 4 years.)
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* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
Page 5
PHV/Blockbuster
Revenue Sharing
TERM SHEET
(As of July 29, 1999)
13. License With respect to each Title the license period shall be
Period 26 weeks commencing on the Street Date for such Title.
14. Grid BB commits to license a Minimum Number of Base Units per
store in accordance with the following:
a. July 1, 1999-June 30, 2000 - Grid 'A' (attached)
b. July 1, 2000-June 30, 2001 - Grid 'B' (attached)
c. July 1, 2001-end of Term - Grid 'C' (attached)
*
Multiples are in three brackets (see attached Matrix);
A. Base Multiple with ranges from *;
B. Enhanced Multiple which at BB's sole option allows BB to
increase any buy to a * multiple wherever it is below
that threshold (high end films) provided that on or
after January 1, 2000 * then the reference to * shall be
increased to *;
C. Hyper-buys with mutual approval, allows BB to raise its
buy to as high as a * multiple wherever it is below that
level.
15. Advertising With respect to each Title PHV shall grant to BB an
Allowances advertising allowance of * of gross rental revenues generated
by such Title.
16. Audit PHV shall have the right to audit BB's performance hereunder
at BB's headquarters as well as a reasonable number of stores
and participating franchises provided that PHV shall not have
access to data concerning its competitors. Data, to the
extent needed to verify PHV's results, shall be audited by a
third party auditor, which
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* Confidential material omitted and separately filed with the Commission
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PHV/Blockbuster
Revenue Sharing
TERM SHEET
(As of July 29, 1999)
shall advise PHV only whether BB is in compliance or not.
17. In Store PHV products shall be placed in the new release section or its
Placement equivalent of each store and PHV product *
18. Participa- BB shall have the right to distribute PHV product in all
ting retail store locations owned and operated by BB and all
Stores participating franchises. To participate, franchises must
Franchises commit for minimum * periods and allow PHV its audit
hereunder. BB shall be financially responsible for each
participating franchisee's payment to PHV.
19. Lost Units With respect to each Title, if any Units are not traceable at
any time during the License Period (up to * of total Units for
that Title) BB shall pay PHV an amount equal to the average
per Unit rental revenue generated by the Units of such Title
which were not lost less any earned revenues from the
applicable Unit prior to its being lost (so long as such
revenues are paid). It will be a material breach of this
Agreement if Units in excess of * for any Title are not
traceable at any time during the license period.
20. Computer & BB must have the minimum levels of electronic reporting
Administrative capabilities required by PHV pursuant to the attached exhibit.
Requirements
21. Program While participating in revenue sharing with PHV, BB must not
Restriction obtain any PHV Rental Titles licensed hereunder through any
other means, including any other distributor or program, in
any of its store locations, including participating
franchisees.
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* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment.
Page 7
GRID 'A' - REMAINING 1999
BLOCKBUSTER VIDEO MATRIX
PARAMOUNT PROPOSAL 7/15/99
GRID 'A' - REMAINING 1999
*
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* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment. Two pages have been
omitted from Grid 'A'.
GRID 'B' - REMAINING 2000
BLOCKBUSTER VIDEO MATRIX
PARAMOUNT PROPOSAL 7/15/99
GRID 'B' - REMAINING 2000
*
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* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment. Two pages have been
omitted from Grid 'B'.
GRID 'C' - REMAINING 2001
BLOCKBUSTER VIDEO MATRIX
PARAMOUNT PROPOSAL 7/15/99
GRID 'C' - REMAINING 2001
*
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* Confidential material omitted and separately filed with the Commission
under an application for confidential treatment. Two pages have been
omitted from Grid 'C'.
Revenue Sharing Term Sheet - Paramount Home Video and Blockbuster Inc.
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