EXHIBIT 10
MOVIE GALLERY, INC.
AGREEMENT
MAJOR VIDEO CONCEPTS, INC.
INDIANAPOLIS, IN
AUGUST 15, 1997
** - EXECUTIVE VICE PRESIDENT
** - BRANCH MANAGER
**Confidential portions of this agreement have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
1
Major Video Concepts, Inc. (MVC) hereby agrees to fulfill all of Movie Gallery's
needs of product and services referred to below during the term of this
agreement.
Movie Gallery agrees to make MVC the primary distributor of video rental and
sell-thru product during the term of this agreement.
Pricing:
- - ** for new release rental cassettes and video games. Movie Gallery cost
is calculated by **.
- - New feature sell-thru titles (limited to first time releases that have
theatrical box office) **. New feature sell-thru titles can be stock balanced
at ** of MVC's and Movie
Gallery's agreed upon quantity ordered for unopened and factory sealed
product.
- - ** on Touch-Tell orders and year-round rack/new tape inventory. Movie Gallery
cost is calculated by **.
Pre-pack Pricing:
If a price break is available on a per-pack versus single units, **.
**
Inventory:
Catalog product is purchased weekly by MVC's product managers. Inventory levels
will be customized to fit Movie Gallery's needs.
Premiums:
Promotions offered by the studios or MVC will be honored and administered by
MVC. Customized premiums can be produced as part of Movie Gallery's advertising
program.
Terms:
- - ** days on PVT rack program and "Plan O Gram" catalog (initial order). - **
days on everything else from invoice date (see Attachment I).
- - **
- - Payable **
Freight:
MVC will prepay UPS, GPS, or RPS ground shipping charges on **. Prepaid freight
includes shipments from any of MVC's shipping locations.
**Confidential portions of this agreement have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
2
Shipping arrangements can be made so that your new release product will arrive
at your stores **.
Rental Ready Processing:
Should you desire, MVC is prepared to ship your product ready for rental
according to your specifications. **
Returns:
Catalog titles ($29.99 retail or less) can be stock balanced at ** of MVC's and
Movie Gallery's agreed upon quantity ordered for unopened and factory sealed
product. Stock balancing should be exercised within ** days of purchase. Event
titles should be returned within ** days of purchase.
Manufacturer's defective product will be replaced one for one within the time
constraints imposed upon MVC by the studios. MVC will honor No-Fault Return
Policies as offered by the studios. Return authorization numbers will be
assigned immediately upon notification of a defective tape and replacement
product will be shipped. **
Employees:
In house sales rep $**/year
Advertising Assistant $**/year
Movie Gallery Special Account Rep $**/year
Interviewing and job description will be agreed upon by both parties.**
Co-op Advertising:
**co-op on "co-opable" new release, catalog or event title product. MDF will be
secured by Movie Gallery. **
Advertising claims will be **.
P.O.P. Materials:
P.O.P. material will be shipped monthly **.
Annual Meeting:
MVC will contribute $** during the length of this contract for **.
New Release Orders:
A disk with Movie Gallery's new release orders would need to be given to ** so
that we could upload the pre-orders. We would also like to have a disk to input
your store ship-to locations. An Excel/Lotus spreadsheet or ASCII file will work
for these files. The files could also be transmitted via modem, eliminating the
mailing of a disk.
**Confidential portions of this agreement have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
3
Additional Features from MVC's Spotlight Program:
"Diamonds In The Rough"
A bi-monthly program of 8 - 10 secondary titles that are selected by the
MVC sales force according to quality, genre, star-power, and rentability.
Purchase a minimum number of six titles and receive one scratch off card
per unit purchased. Currently, the winning cards reveal a 20" TV/VCR combo,
RCA stereo VCR, Sharp facsimile machine, or Sony Playstation that will be
sent to you within 15 days.
Touch-Tell
We would set up one master account for billing purposes. Each store would
have its own open to buy and catalog account numbers under the master
account. A credit line of $**/month will be established for each Movie
Gallery's open to buy account.
MVC and Movie Gallery are currently set up to service ** stores. ** stores
will be active by September 1. All stores will be sent MVC current catalog.
Buy Back Program:
MVC and Movie Gallery will discuss opportunities for both companies.
World Wide Web Site (Optional):
MVC will create and maintain a web site for each of your stores - all
updated weekly - for a $10 set-up fee and $10 a month. Your page will
feature your store logo, store information, location, rental rates and your
e-mail address (optional). Your web page will also provide new release
information, titles coming soon, top 40 videos, special orders, listing of
DVD titles for sale, and a special kids page. You will also receive a
counter card telling your customers to visit you on your web site.
Internet Broadcast or Majorfax:
Receive daily information on PPV windows, weekend box office hits, TV
movies, video games, etc.
Weekly Magazine:
MVC produces one of the best and most respected weekly magazines in the
industry.
Spotlight on Video Hits Consumer Flyers:
MVC provides month in-store flyers cross-promoting current video new
releases with similar catalog favorites to produce incremental rentals and
increase consumer satisfaction.
Length of Program:
We request that Movie Gallery commit to MVC beginning ** and ending **.
**Confidential portions of this agreement have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
4
Account Representation:
MVC offers the following personnel to assist your needs: - ** (President),
Indianapolis, IN - ** (Executive Vice President, Sales), Indianapolis, IN - **
(Senior Vice President, Marketing), Indianapolis, IN - ** (Senior Vice
President, Operations and Purchasing), Indianapolis, IN - ** (Vice President,
Controller), Indianapolis, IN - ** (National Credit Manager), Indianapolis, IN -
** (Branch Manager), Birmingham, AL - ** (Advertising Coordinator), Birmingham,
AL - ** (Account Executive), Birmingham, AL
Business Interruption Clause:
If MVC fails to delivery new release rental and special event titles by street
date,**. If our shipping company, studios, or inclement weather causes late
arrival of new release rental and special event titles, **.
The above paragraph is not enforceable during the current UPS strike. MVC will
attempt to do everything within reason (postal service, truck line, will call)
to get Movie Gallery their product by street date. Once the UPS strike ends,
this paragraph becomes void.
Breach of Agreement:
If either party breaches or fails to adhere to the terms of this agreement, the
party who has breached or failed to adhere to the said terms will be notified in
writing via certified mail by the other party as to the nature of the said
offense.
The party who has breached the terms of this agreement shall have ** days from
the date of notification to correct said offense. If the said breach has not
been corrected within the ** days, the opposing party shall have the right to
terminate this agreement.
Agreed and accepted this 19th day of August, 1997 by:
MOVIE GALLERY, INC. and MAJOR VIDEO CONCEPTS, INC.
MGA, INC.
/s/ J. T. Malugen /s/ Douglas B. Meadows
- ----------------------------- ------------------------------
J. T. Malugen, Chairman and Douglas B. Meadows - President
Chief Executive Officer
/s/ J. S. Roy /s/ Eric H. Smith
- ----------------------------- ------------------------------
J. S. Roy, Sr. Vice President Eric H. Smith -
and Chief Financial Officer Executive Vice President
**Confidential portions of this agreement have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
5
EXAMPLES OF PRICING
Schedule A: Rental Product**
Retail Price Dealer Price MGA Price
Father's Day NSRP $79.50 $**
McHale's Navy NSRP $79.50 $**
Saint, The NSRP $79.25 $**
Silent Trigger NSRP $79.50 $**
Commandments NSRP $79.50 $**
English Patient NSRP $81.75 $**
Selena NSRP $79.50 $**
B.A.P.S. NSRP $79.00 $**
Volcano NSRP $79.25 $**
Anaconda NSRP $81.75 $**
That Old Feeling NSRP $79.50 $**
Grosse Point Blank NSRP $79.50 $**
Night Falls on Manhattan NSRP $76.50 $**
Sixth Man NSRP $79.50 $**
Addicted to Love NSRP $79.50 $**
Austin Powers NSRP $80.50 $**
Fifth Element NSRP $81.75 $**
Schedule B: Sell-Thru Event Title Pricing
Sleeping Beauty $26.99 $20.25 $**
Casper: A Spirited Being $19.98 $15.25 $**
Warriors of Virtue $19.98 $15.25 $**
Liar, Liar $22.98 $17.25 $**
Babes in Toyland $19.98 $15.25 $**
Hercules and Xena $19.98 $15.25 $**
Jungle Book $26.99 $20.25 $**
Jingle All the Way $19.98 $15.25 $**
Schedule C: Buy Back Pricing Examples
MGAPrice Buy Back MGA Net Price
Father's Day $** $** $**
McHale's Navy $** $** $**
Saint, The $** $** $**
Silent Trigger $** $** $**
Commandments $** $** $**
English Patient $** $** $**
Selena $** $** $**
B.A.P.S. $** $** $**
Volcano $** $** $**
Anaconda $** $** $**
That Old Feeling $** $** $**
Grosse Point Blank $** $** $**
Night Falls on Manhattan $** $** $**
Sixth Man $** $** $**
Addicted to Love $** $** $**
Austin Powers $** $** $**
Fifth Element $** $** $**
**Confidential portions of this agreement have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
6
ATTACHMENT 1
PAYMENT INV. START INV.END HIGH DAYS LOW DAYS AVERAGE DAYS
**
Average Days **
**Confidential portions of this agreement have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
7
(MVC Letterhead)
August 20, 1997
Mr. Joe Malugen
Movie Gallery Inc. Via Fax
Dear Joe:
This letter shall constitute an addendum to the agreement between Major Video
Concepts, Inc. (MVC) and Movie Gallery, Inc. dated August 19, 1997 to add the
following items:
1) All returns on product sold to Movie Gallery **. All other returns would
be**. In those situations where product is re-priced by the vendor, MVC will **.
If Movie Gallery does not return all affected product, **
2) Both parties agree to maintain strictest confidentiality of this agreement.
Only those within each organization that are involved in the execution of this
agreement or those with a need to know shall be advised of the terms of this
agreement.
3) Movie Gallery agrees to mail to **, CFO for MVC, their quarterly financial
statements within 45 days of the end of their fiscal quarters. Movie Gallery
will send their year-end financial statements to John White within 90 days of
the end of their fiscal calendar year.
4) MVC is establishing a credit line of $** for Movie Gallery which will allow
them to purchase product at their current purchasing levels. Any request for a
higher credit line during this agreement will be reviewed by MVC.
**
In all other respects the agreement is hereby reaffirmed according to its terms.
/s/ Douglas B. Meadows /s/ J. T. Malugen
- ------------------------------ --------------------
Douglas B. Meadows, President Joe Malugen
Movie Gallery Inc.
/s/ Eric H. Smith
- ------------------------------
Eric H. Smith,
Executive Vice President
**Confidential portions of this agreement have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
8