EXHIBIT 10.37
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN REDACTED PROVISIONS OF
THIS AGREEMENT. THE REDACTED PROVISIONS ARE IDENTIFIED BY THREE ASTERISKS
ENCLOSED BY BRACKETS AND UNDERLINED. THE CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
XXX.XXX AND XXXXXX BOOK GROUP
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MEMORANDUM OF UNDERSTANDING
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GENERAL TERMS AND CONDITIONS
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Parties
This Memorandum of Understanding is entered into among Xxx.xxx Inc. ("Xxx.xxx")
and Xxxxxx Book Company ("IBC"), and Xxxxxx Customer Systems Inc. ("ICS"),
collectively ("Xxxxxx").
Internet Distribution Partner
Xxx.xxx will be an Internet Distribution Partner ("IDP") of Xxxxxx and will be
entitled to an IDP enhanced programs and services as outlined in this Agreement.
[***]
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PURCHASE OF PRODUCT
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Discounts and Pricing (Books)
All discounting will be based on publishers' suggested retail prices.
Some publishers establish a Freight-Pass-Through (FPT) price. The FPT price is
higher than the invoice price; this difference reflects the freight expense to
be "passed through" to the consumer. For all programs where Xxx.xxx is eligible
to receive free freight, discounting will be based on the FPT suggested retail
price. For all programs where Xxx.xxx bears the freight expense, discounting
will be based on the lower, or invoice, price.
Order type or program Trade Discount
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Telephone and fax orders [***]
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Electronic shopped orders [***]
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The purchase discounts above are defined as "trade" discounts, and apply to
"trade-discounted" merchandise only; "short" and "long" discount merchandise
will receive earned discount as communicated through IBC's product information
vehicles and as indicated in the titles@xxxxxx database.
Discounts and Pricing (exceptions)
Order type or program Trade Discount
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Spoken Audio [***]
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GreenLight [***]
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Low Price Point [***]
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Gifts [***] per standard terms
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Music [***] per standard terms
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_________________________
[***] Confidential treatment has been requested for the bracketed portions.
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The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
Titles Unlimited
IBC will provide Titles Unlimited to Xxx.xxx as an IDP for the first [***]
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titles ordered. Titles unlimited is a service where IBC searches and attempts to
obtain books IBC does not stock and which are in-print books that are available
through normal wholesale channels in the United States. Multiple copies of one
title ordered at the same time will count as one title for purposes of meeting
the [***] total threshold. Thereafter, IBC may provide this service at a
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commercially, reasonably established price.
Cooperative Advertising
IBC will solicit cooperative advertising funds from publishers on behalf of
Xxx.xxx as an IDP. Both parties agree to use their best efforts to solicit
cooperative advertising funds at [***] of net purchases. [***] Net purchases for
the purposes of this Agreement means Xxx.xxx purchases from IBC at cost less
returns at cost, and will be calculated on a cumulative year-to-date basis. On a
quarterly basis, IBC will submit a Co-op report to Xxx.xxx detailing co-op
collected on its behalf and will pay to Xxx.xxx any deficiency in the [***]
minimum within 30 days of the parties reaching agreement during the quarterly
reconciliation, provided that any amounts not in dispute shall be paid within
thirty (30) days of the end of the quarter.
Payment Terms
Net payment is due on the last day of each calendar month for shipments made
during the previous month. A [***] cash discount may be taken on payments
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received by IBC on or before the 10th day of the following month. The cash
discount is calculated on gross invoice amount. Invoices for fees, handling
charges and freight are not eligible for cash discount.
Marketing Support
As an IDP Xxx.xxx will receive support from IBC's marketing group through
identification of monthly-featured titles and identity of targeted best sellers.
Returnability
Merchandise shipped in error and damaged merchandise may be returned to IBC
within 30 days of shipment for full credit as a "hassle-free" return (defective
merchandise may be returned at any time).
All merchandise purchased from IBC is eligible for overstock return unless
designated non-returnable through IBC product information vehicles. To receive
credit, returned merchandise must be in resaleable condition, and must be
returnable to the publisher.
Resaleable condition shall include hard cover books with dust jackets that are
worn, shopworn or price-stickered; torn shrink wrap; slightly bent corner and/or
spine; imperfect books due to printer or binder's labor, books with author
autograph. Resaleable condition will exclude trade paperback books with store
stickers or sticker residue; faded covers; water damage; ink marks; cut marks;
very bent cover and/or spine; books with bent, crumpled or dirty pages; prepacks
or boxed sets with missing books, toys or audio; multimedia which has been
opened.
For all returned merchandise, credits will be applied to Xxx.xxx's account
within thirty (30) days of receipt by IBC.
_________________________
[***] Confidential treatment has been requested for the bracketed portions.
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The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
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Returns Credit
Xxx.xxx may return up to [***] of all purchases on a penalty-free basis.
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Returns in excess [***] will be credited at a [***] discount off of suggested
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retail price for trade-discounted books and purchase discount less [***] short
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discount books.
Hassle-free returns (including defective merchandise) shall not count toward
this [***] return credit limit.
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Advanced Ordering
As an IDP, Xxx.xxx will be able to advance order inventory on a [***] in advance
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of receipt by Xxxxxx. Such advanced order inventory quantities will be
established by mutual consent of both parties. Additionally, such advanced
order inventory will be reviewed monthly for release back to stock by Xxxxxx and
Xxx.xxx's mutual consent. Fulfillment of orders will be conditioned upon
Xxxxxx'x receipt of the titles from its publishers. Xxxxxx, if requested by
Xxx.xxx, will advance order titles [***] not similarly situated in operations
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and volumes.
Quarterly Meetings
Xxx.xxx and IBC will schedule quarterly meetings with Xxx.xxx to discuss
outstanding business issues. Such meetings will be held on a rotating basis at
the offices of Xxx.xxx and IBC, or such other location as the parties may
mutually agree.
Communications and Account Management Requirements
IBC agrees to conduct quarterly planning meetings with Xxx.xxx to insure that it
carries sufficient inventories to meet Xxx.xxx's inventory and replenishment
needs.
IBC will assign staff at appropriate levels of its organization to work with,
and on behalf of, Xxx.xxx's staff. IBC's account team will be led at a Senior
Management level, and will provide the responsiveness and sense of urgency that
Xxx.xxx's business requires.
As an IDP, IBC will additionally assign an Account Manager to assist Xxx.xxx
with efficient flow of order management, advance ordering and back-order
research.
Xxx.xxx will continue to provide the following financial information to IBC:
*Annual audited financial statements
*Quarterly balance sheets with year-to-date income statements
*Financial meetings, as necessary, with Financial and other Management.
Reporting Requirements
A variety of performance measurement and sales reports will be sent to Xxx.xxx
on a regular, agreed-upon basis and as requested by Xxx.xxx and where such
reports are able to be produced by Xxxxxx.
DATABASE
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Xxx.xxx is granted a limited, non-exclusive non-transferable license solely to
use the Database as defined below, in the course of its business as a Web Store
on a single CPU computer system owned and operated by Xxx.xxx utilizing the
World Wide Web service to sell books and book product. For purpose of this
section, said license will be granted to Xxx.xxx subsidiaries and affiliates
which are at least [***] and execute a license agreement with ICS. Buyer shall
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safeguard all information relating to the Database and will not sell, give,
lend, disclose, or otherwise make the software, including machine-readable
reproductions or any other forms thereof, available to others other than in the
course of its business as stated herein.
The Database is defined as: titles@xxxxxx, images@xxxxxx, table of
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contents@xxxxxx, annotations@xxxxxx, themes@xxxxxx, family@xxxxxx, first
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chapter@xxxxxx, publisher marketing@xxxxxx, bibles@xxxxxx, themes@xxxxxx,
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waves@SpringArbor, songs@SpringArbor and any
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_________________________
[***] Confidential treatment has been requested for the bracketed portions.
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The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
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other @Xxxxxx, @SpringArbor or other database that is developed and licensed
non-exclusively to others during the term of this agreement. See Exhibit A for a
summary description of the Database.
As an IDP, no [***] will be due from Xxx.xxx during the term of this agreement.
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Additionally, as an IDP, Xxx.xxx will have direct access to Xxxxxx'x database
development team. During the term of this Agreement, Xxx.xxx shall have the
right to request that Xxxxxx'x database development team develop new [***] for
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use by Xxx.xxx in its business, and upon such request, Xxxxxx shall use its best
efforts to develop and make available to Xxx.xxx such requested [***]. Xxx.xxx
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shall have the exclusive right during the term of this Agreement to use any
[***] for which it provided the initial development request and for which [***]
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was not previously under planning or development by ICS or is an obvious use
[***].
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The Database shall at all times remain the property of ICS. Xxx.xxx acknowledges
that ICS has proprietary rights in and retains title to the Database including
monthly update data, and that Xxx.xxx acquires only the license to the Database
as set forth in this Agreement. The Database supplied by ICS is copyrighted by
ICS. This agreement limits the use of the Database to such hardware
configurations as are necessary to provide the services offered by the Xxx.xxx
to its customers, including electronic bulletin board systems and the Internet
through on-line search and query systems as appropriate to encourage the resale
of book products in the Database. The license shall not include and expressly
prohibits the right to copy, distribute, or sell the Database or portions
thereof.
There are no warranties, expressed or implied, of the products or services
furnished under this license. ICS disclaims any implied warranty or
merchantability or fitness for a particular purpose. The Database is gathered
from many sources, so in some instances there may be inconsistencies in prices,
book types, abbreviations, publishers, series names or authors. The Database may
contain, as part of the title, codes meaningful to Xxxxxx Book Group associates.
ICS disclaims the completeness or accuracy of the information contained within
the Database. ICS also disclaims any claims that the Database will be compatible
for use with any other software.
ICS shall provide telephone support during normal business hours in order to
document errors. ICS shall use its reasonable best efforts to promptly correct
any operational error or operational bug in the Database. At its option, but
without obligation to do so, ICS may furnish a new copy of a portion of the
Database that incorporates the fix as well as other enhancements. ICS does not
guarantee the effectiveness of efforts to fix errors and does not warrant that
all errors will be corrected.
Initial Public Offering
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In the event that Xxx.xxx has not made an Initial Public Offering on or before
December 15, 2001, then Xxx.xxx will repay to Xxxxxx the [***] outlined herein
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as an IDP within 30 days thereof.
MISCELLANOUS
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Term
This agreement sets forth the terms between the parties and is effective through
September 30, 2003.
Liability
Xxxxxx and Xxx.xxx will have no liability to the other under the terms of this
agreement, or for any alleged breach thereof, for indirect, punitive,
consequential, or special damages, including damages for lost profits.
Attorneys' Fees
If any action at law or in equity is necessary to enforce or interpret the terms
of this Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements, in addition to any other
relief to which the party may be entitled.
_________________________
[***] Confidential treatment has been requested for the bracketed portions.
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The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
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Assignment
This Agreement may not be assigned by either party without the prior written
consent of the other party, provided, however, either party may assign this
Agreement without such consent to (i) any person or entity that acquires its
business or substantially all of its assets, by merger, stock sale, or other
means or, (ii) to a subsidiary or an affiliate which is at least 50% owned and
controlled by assignor. This Agreement will be binding on and inure to the
benefit of Xxx.xxx, IBC, and ICS and their respective permitted successors and
permitted assigns.
Entire Agreement: Waiver. This agreement sets forth the entire understanding
of the parties with respect to the subject matters hereof. No modification or
amendment or waiver of any of the provisions of this agreement will be effective
unless in writing and signed by the parties affected.
Confidentiality Clause
IBC, ICS and Xxx.xxx agree to keep the terms of this Agreement confidential.
Additionally, in performing its obligations under this Agreement, IBC, ICS or
xxx.xxx may receive other confidential information about each other, which may
include but not limited to financial information, business plans, technical
data, and identity of Xxx.xxx's customers. IBC, ICS and xxx.xxx will respect
the confidentiality of such confidential information and will make no disclosure
thereof to third parties or use it for its own purposes, except upon written
permission of the disclosing party. This obligation does not apply to any
information, which is publicly available. IBC, ICS and Xxx.xxx will cause its
employees to comply with this section. This Section will survive any
termination or expiration of this Agreement for a period of two years.
Notwithstanding the foregoing, a party shall have the right to disclose the
terms of this Agreement if upon the advice of its counsel, disclosure is
required pursuant to court order, applicable law, or regulatory authority.
However, the parties agree to use best reasonable efforts to limit disclosure
and will notify the other party prior to any disclosure. In the event of any
disclosure required or desired to be made to the Securities and Exchange
Commission ("SEC") with respect to this Agreement or the terms hereof, the
parties agree that Xxx.xxx shall file a confidential treatment request with
respect thereto and that Xxxxxx shall have the right to participate in the
drafting of, and any discussions or meetings with the SEC with respect to, such
request.
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Representations
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Xxx.xxx and IBC represent and warrant that they each have the authority to enter
into this Agreement and to perform their respective obligations hereunder. IBC
further represents and warrants that all new products sold hereunder are new and
of merchantable quality and that title to all products sold to Xxx.xxx hereunder
will pass to Xxx.xxx free and clear of all encumbrances or liens of any kind.
Accepted by:
_________________________________ _____________________________________
Xxx.xxx Inc. Xxxxxx Book Company
Print Name:______________________ Print Name:__________________________
_________________________________ _____________________________________
Title Title
_________________________________ _____________________________________
Date Date
_________________________________
Xxxxxx Customer Systems Inc.
Print Name:______________________
_________________________________
Title
_________________________________
Date
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