4
Exhibit 4
J-Bird Music Group Ltd.
Form 10-SB, Amendment No. 1
File No. 0-24449
NAVARRE CORPORATION
NATIONAL DISTRIBUTION AND WAREHOUSING
AGREEMENT
This Agreement is entered into by the parties hereof as of the
21st day of November, 1997.
NAVARRE CORPORATION ("NAVARRE") is an experienced wholesale
distributor of musical, literary, and artistic recordings on
various recording media.
The company listed below ("LABEL") has released, and will release
during the term of this Agreement, certain Recordings for sale
and distribution in the United States through NAVARRE.
J BIRD RECORDS. INC.
LABEL Name
000 Xxxxxxx Xxxx
Xxxxxx Xxxxxxx
Xxxxxx. XX 00000
City/State/Zip Code
DEFINITIONS:
"Actual Price" shall mean the Base Price adjusted for Growth
Incentive Rebates and the discounts and rebates described in
Schedule A hereto.
"Base Price" shall mean the price of the Recordings to NAVARRE,
as set forth on Schedule A hereto.
"Contract Year" shall mean each January 1through December 31
during the term of this Agreement.
"Recordings" means and includes all of LABEL's musical sound
recordings on various recording media (including but not limited
to compact disks, cassettes and DVD). A partial listing of the
LABEL's catalog of Recordings is shown in Schedule B to this
Agreement.
1. APPOINTMENT AND SCOPE.
1.1 This Agreement will be effective as of November 21,1997.
The initial term will be for approximately three years ending
December 31, 2000. Therefore, this Agreement will automatically
renew for successive one-year periods unless terminated as
provided in Section 11.
1.2 Except as described in Schedule 1.2 hereof, LABEL appoints
NAVARRE as its exclusive distributor in the United States for
sales and the distribution of all of LABEL's content or
recordings, through all wholesale and retail sales channels.
Distribution rights outside the United States may be granted by
LABEL to NAVARRE upon mutual agreement of both parties. LABEL
represents that all of its current labels are listed on Schedule
A hereto. If LABEL markets its Recordings under more than one
label, the current labels as shown in Schedule A, and all
additional labels created during the term of this Agreement, are
included under this appointment. This appointment includes,
without limitation, sales to retail outlets, one stops, rack
jobbers, military, wholesale clubs, and sales to subdistributors
as provided by this Agreement, as well as electronic transfers to
a retail outlet.
2. PRICING: PAYMENT.
2.1 In consideration of the rights granted hereunder and the
obligations and covenants of the parties set forth herein,
NAVARRE shall pay LABEL a variable cost for each recording
calculated in accordance with Schedule A hereto.
2.2 The current suggested retail prices charged by LABEL for
Recordings are shown in Schedule A. LABEL may change the
suggested retail price on a prospective basis by issuing new
pricing sheets to NAVARRE to reflect price changes and new
releases.
2.3 NAVARRE will provide LABEL on a weekly basis with total
shipments, by SKU, and also carrying inventory figures through
the last business day of the week (normally Friday). This
information will be transmitted in electronic form, by title and
customer, on the following business day (normally Monday). If
electronic link is not possible, hard copies of reports will be
mailed each Monday.
2.4 During the period September I through December 25 of each
year, NAVARRE shall be entitled to retain 20% of the Base Price
of all copies of Christmas Recordings sold by NAVARRE during such
period as a reserve for returns. This reserve will be reconciled
and paid by NAVARRE to LABEL by April 30 of the following year.
2.5 Invoices will be issued weekly by LABEL to NAVARRE from the
net total on the Weekly Invoice reports which correspond to each
week ending Saturday. Payment terms to LABEL are two percent
(2%), sixty (60). Payments will be sent to the LABEL at the end
of each week, corresponding to the invoice which comes due on its
sixtieth day during that week.
2.6 Within 30 days after the end of each Contract Year, any
Growth Incentive Rebate fee payable to LABEL or Charge shall be
calculated in accordance with Schedule A hereof. If additional
money is owed to LABEL, NAVARRE shall pay it within 60 days. If
actual amount paid to LABEL for the calendar year is in excess of
the amount due LABEL hereunder, NAVARRE may, at its option,
either (i) require LABEL to remit the overage to NAVARRE within
60 days or (ii) deduct the overpayment from the next distribution
payment(s) that would otherwise be payable to LABEL.
2.7 LABEL also agrees to participate in the following discount
programs and prices for such recordings shall be correspondingly
reduced from the Base Price described on Schedule A:
(a) A minimum of two (2) of NAVARRE's three (3) scheduled
sell in programs (February/Winter, May/Spring, Fall Buy In). This
participation will be in the form of a discount passed on to
NAVARRE for all of the LABEL's product sold during the program
period. LABEL's participation in such programs shall be at a rate
of up to six (6%) percent off of the Base Price at NAVARRE's
discretion. Any such discount in excess of six (6%) percent off
of the Base Price will have to be agreed to in advance by LABEL
unless otherwise agreed in writing by LABEL.
(b) Standard discounts for NAVARRE's sales to rack jobbers,
which is currently in the amount of five (5%) percent off of the
Base Price.
(c) Standard discounts for NAVARRE's sales to military
bases and installations, which is currently in the amount of ten
(10%) percent off of the Base Price.
2.8 In the event that LABEL reduces the price of any product or
offers the product at a lower price, including raising the
discount offered, to any other party, LABEL shall promptly credit
NAVARRE for the difference between the invoice price charged to
NAVARRE and the reduced price for each unit of product held in
inventory by NAVARRE on the date the reduced price is first
offered. LABEL will also credit NAVARRE for the difference
between the invoice price charged to NAVARRE and the reduced
price for each unit of product held in inventory by NAVARRE's or
its customers on the date the reduced price is first offered by
LABEL `if NAVARRE's customers request a credit resulting from
LABEL's price reduction. Should any of NAVARRE's customers
request a price adjustment as outlined in this section, NAVARRE
shall provide for an independent third party audit of that
customer's inventory upon LABEL's reasonable request and at
LABEL's expense. NAVARRE will use commercially reasonable efforts
to provide inventory reporting of its customer's inventory. Any
such price reduction shall be taken into account in the
calculation of amounts payable hereunder.
2.9 No payment or fees shall be payable to LABEL on copies of
the Recordings furnished free of charge by LABEL or NAVARRE to
third parties for non-resale purposes such as review,
advertising, sample, publicity, promotion or like purposes, or
copies destroyed by fire or water, or on copies sold at or below
the cost of manufacture.
2.10 LABEL shall be responsible for payment directly to the
copyright proprietors of any and all mechanical copyright
royalties on any and all compositions incorporated into the
Recordings at the applicable statutory rates or as provided by
artist LABEL contracts.
2.11 NAVARRE shall provide LABEL with an accounting of all
amounts payable to LABEL hereunder within thirty (30) days of the
end of each Contract Year. All such accountings rendered by
NAVARRE will become final and binding on LABEL and LABEL will
neither have nor make any claim against NAVARRE with respect to
such statement unless prior to 90 days after the rendering of
such statement LABEL advises NAVARRE in writing of any objection
to such statement, setting forth the specific basis for
objection, in which case such statement shall be binding in all
respects except those stated in such written objection.
2.12 LABEL shall have the right, at LABEL's expense, to engage an
independent certified public accountant, not then conducting or
participating in an audit of NAVARRE's books, to audit relevant
portions of NAVARRE's books and records pertaining to monies
payable to LABEL hereunder that have not been rendered
incontestable, but not more than once in any twelve (12) month
period, during normal business hours and upon reasonable notice,
and provided that such audit will not be conducted on a
contingent fee arrangement.
3. NAVARRE OBLIGATIONS.
3.1 NAVARRE shall promote, sell and deliver the Recordings in
the ordinary course of its business.
3.2 NAVARRE shall maintain suitable offices, warehousing
facilities and adequate staffing for the performance of its
duties under this Agreement. NAVARRE shall conduct its business
in its own name and shall pay all of its own costs and expenses.
3.3 NAVARRE shall respect the musical, dramatic, artistic and
literary rights of LABEL and the property rights of the LABEL,
the artists, producers and others in the Recordings, the trade
names, trademarks, logos and other information supplied with or
that is a part of the Recordings or promotional materials for the
Recordings.
3.4 NAVARRE shall promptly pay LABEL according to the payment
provisions of this Agreement.
3.5 NAVARRE shall make available to LABEL manufacturing of all
forms of CD's, DVD and cassettes upon the pricing and terms
established from time to time by separate agreement between the
parties.
4. LABEL'S OBLIGATIONS.
4.1 LABEL shall provide NAVARRE with a minimum of 16 releases
annually during the term of this contract.
4.2 LABEL shall accept orders from NAVARRE for the consignment
of recordings, and shall promptly deliver against those orders.
Recordings will be supplied in industry acceptable packaging with
the appropriate UPC sticker or labeling.
4.3 LABEL shall provide NAVARRE with reasonable quantities of
no-charge promotional and advertising materials for the
recordings, but in no event shall LABEL be required to provide
promotional goods, at no charge, in excess of limitations on
LABEL as provided in recording Agreements with Artists signed to
LABEL.
4.4 LABEL shall consign an inventory of recordings to NAVARRE
sufficient to allow both parties to comply with the terms of this
Agreement.
4.5 If at any time, for any reason, LABEL has a debit balance
with NAVARRE, LABEL will pay NAVARRE the debit balance within
sixty (60 days). If all or any portion of the balance remains
unpaid after 60 days, NAVARRE shall be entitled, at its option,
to (i) withhold future payments due LABEL until such debit
balance is paid, and/or (ii) liquidate any inventory of LABEL in
the possession or control of NAVARRE and/or (iii) apply any
proceeds received from such liquidation towards LABEL's debit
balance and/or (iv) manufacture and sell additional Recordings at
prices determined by NAVARRE, in its discretion, in quantities
sufficient to fully repay all amounts owed by LABEL to NAVARRE
and/or (v) immediately terminate this Agreement without further
notice.
4.6 All new pressings covered under the terms of this contract
shall include the statement "Distributed by Navarre Corporation,
Xxxxxxxxxxx, XX 00000."
5. CONSIGNMENT OF INVENTORY.
5.1 LABEL will deliver on consignment to NAVARRE's warehousing
facilities an inventory of recordings requested by NAVARRE in
amounts determined by NAVARRE. LABEL and NAVARRE shall consult
regarding the timing and size of manufacturing orders for
purposes of coordinating availability of adequate inventory in
accordance with the terms and conditions of this Agreement, but
NAVARRE shall at all times have the sole authority to determine
the amount of inventory stored at its premises, and any excess
inventory shall be returned to LABEL or destroyed pursuant to
Section 7.2 hereof.
5.2 NAVARRE assumes the risk of loss or damage to consigned
recordings from the time of delivery to NAVARRE, until sold or
returned to LABEL. If NAVARRE provides manufacturing services to
LABEL pursuant to Section 2.7 of this Agreement, NAVARRE shall
assume the risk of loss of consigned goods from the time that
LABEL becomes liable to pay the cost of manufacturing such goods.
5.3 NAVARRE will pay all expenses incurred after delivery for
the protection, sale, warehousing and shipment of recordings.
5.4 LABEL will be responsible for payment of shipping costs for
delivery of the recordings to NAVARRE, and the LABEL shall pay
for shipping costs for any authorized returns to LABEL (returns
will be shipped freight collect).
5.5 NAVARRE will keep books and records showing the transactions
made pursuant to this Agreement. NAVARRE's books and records
supporting receipts of recordings, shipments of recordings, and
all charges applicable to LABEL will be open to inspection upon
reasonable advance notice by LABEL during NAVARRE's normal
business hours.
5.6 NAVARRE will provide LABEL with a physical inventory,
supervised by NAVARRE's CPA firm (currently Ernst & Young), every
six months (January and July unless otherwise agreed). LABEL
shall also have the right to make its own physical inspection of
inventory, upon reasonable advance notice, during NAVARRE's
normal business hours.
5.7 The consigned recordings will be safely stored at NAVARRE's
warehousing facilities, and will not be removed except upon their
sale or return. NAVARRE will keep the inventory adequately
insured at its expense against loss or damage, and will have
LABEL named as an additional insured.
5.8 Subject to Section 4.5 hereof, title to the consigned
recordings shall be and remain in LABEL until sold.
5.9 Shipment discrepancies between the invoice/xxxx-of-lading
provided by LABEL and any damage in transit will be promptly
reported.
6. SALES BY NAVARRE.
6.1 NAVARRE is authorized to sell the consigned inventory to its
accounts in the United States.
6.2 NAVARRE shall be free to establish, with respect to its
agents and distributors, the terms of sale, and cost prices at
NAVARRE's discretion.
6.3 LABEL will reorder recordings for delivery, to NAVARRE, as
reasonably required to maintain adequate inventory, based on the
shipping report issued each week and the order requests issued to
LABEL by NAVARRE.
7. RETURNS.
7.1 All defective recordings, either identified upon receipt
from LABEL, or determined to be defective when returned from
NAVARRE's customers or subdistributors, will be reported to LABEL
and placed at its disposition. LABEL shall advise NAVARRE
regarding the disposition of defective recordings within 14 days
after receipt of notice of defects from NAVARRE. Otherwise, the
defective product will be destroyed, at NAVARRE's option. LABEL
shall bear all expenses regarding the destruction or other
disposition of defective recordings.
7.2 Due to the nature of the consignment, NAVARRE may return for
full credit up to 100% of all conforming sound Recordings
received from LABEL. Such returns shall be limited to once per
month, and shall be made with advance notice to LABEL as to
estimate arrival date. Upon advance notice of returns, LABEL
shall provide Return Authorization within seven (7) days of
notice. NAVARRE shall bear expense and risk of loss of return
shipment. LABEL shall issue payment to NAVARRE for such returned
products if no balance is then outstanding. If at any time LABEL
refuses to accept returns from NAVARRE, NAVARRE may, at its
option, destroy the product or arrange for transportation and
storage at another location. All costs relating to destruction,
transportation and storage of such product shall be paid by
LABEL.
7.3 LABEL shall issue an immediate credit for purchase price
plus all return freight charges for defective product, and
products returned as defective by NAVARRE customers. Upon LABEL
recall of products due to defects, NAVARRE shall provide
reasonable assistance, at LABEL's expense, in such recall.
7.4 NAVARRE's right to return products shall survive the term
and termination of this Agreement. Should NAVARRE have a balance
due upon reconciliation of the account for product returns,
freight chargebacks, advertising credits, or other upon end of
term or termination, LABEL shall issue payment therefore within
forty-five (45) days of such term or termination. NAVARRE shall
use best efforts to return all unsold products within one hundred
eighty (180) days of termination of the Agreement.
7.5 NAVARRE will provide LABEL with weekly customer returns
report identifying quantities and titles. All non-defective
returns will be processed by NAVARRE, and placed in inventory for
resale or returned to LABEL.
8. ADVERTISING AND MARKETING.
8.1 LABEL agrees to conduct marketing and promotional efforts
supporting the sale of recordings at its expense. This includes.
but is not limited to, advertising in trade and consumer
publications, in-store or media promotions, all costs relating to
in-store appearances, and promotions for radio airplay.
8.2 LABEL shall provide suitable advertising allowances that can
be claimed by NAVARRE or its customers.
8.3 LABEL shall provide to NAVARRE camera ready artwork, free of
charge, to be used in advertisements, and other suitable
promotional materials for NAVARRE and its customers.
8.4 NAVARRE or its customers may produce their own
advertisements or promotional materials for LABEL's recordings,
so long as such advertisements and promotional material, or the
use thereof, have been approved in advance by LABEL. Such
approval will not be unreasonably withheld, with decisions being
made within five workings days of receipt of written request by
NAVARRE.
9. INTELLECTUAL PROPERTY.
9.1 LABEL grants to NAVARRE the transferable right to use, in
connection with sales of Recordings the trademarks and trade
names listed in Schedule 9. 1. NAVARRE shall have no right to
remove or cover such marks on the products and the marks and
names shall remain the exclusive property of LABEL.
9.2 LABEL warrants that the recordings, the sale of recordings
and the intended use of recordings does not infringe the patent,
copyright, trademark or trade name of any third party. LABEL will
indemnify and defend NAVARRE against all damages and costs
incurred by NAVARRE due to claims of infringement of any patents,
copyrights, trademarks, trade secrets, or other proprietary
rights in the manufacture or marketing of product. Upon claim of
infringement, NAVARRE may, at its option, immediately cease
manufacture, sale and distribution of the recordings. Also, LABEL
may, at its expense and option, either procure the right to
continue using any part of product, replace same with non-
infringing product, or modify product to make it non-infringing;
should LABEL be unable or unwilling to replace, modify, or
procure right to continued use of product within thirty (30) days
of claim notification, NAVARRF_ may, at its option, return
product for a full cash refund or credit provided there is a
balance due LABEL of all amounts paid by NAVARRE to LABEL for
such Recordings.
9.3 NAVARRE agrees to respect and abide by the terms and
conditions of the licensed or transferred use of applicable
patents, copyrights, trademarks and trade names for purposes of
this Agreement. NAVARRE will indemnify and hold LABEL harmless
against claims by third parties respecting breaches of this
Agreement by NAVARRE.
10. REPRESENTATIONS AND WARRANTIES.
10.1 As an inducement for NAVARRE to enter into this Agreement,
LABEL hereby warrants and represents to NAVARRE as follows:
(a) Corporate Existence, Power and Authority. LABEL is a
corporation duly organized and validly existing in the State of
Connecticut, and is fully qualified to do business and in good
standing in the State of Connecticut and in every other
jurisdiction wherein the nature of its businesses or the
character of its properties makes such qualification necessary,
and has all requisite power and authority to carry on its
businesses as now conducted and as presently proposed to be
conducted. LABEL has full power and authority to execute and
deliver this Agreement, and all other documents contemplated
herein and therein, and to incur and perform its obligations
hereunder and thereunder.
(b) Licenses: Royalties and Infringement. LABEL possesses
adequate licenses, permits, franchises, patents, copyrights,
trademarks and trade names, or rights thereto, to conduct its
respective business substantially as now conducted and as
presently proposed to be conducted. There does not exist and
there is no reason to anticipate that there may exist, any
liability to LABEL with respect to any claim of infringement
regarding any patent, copyright, trademark, trade name or other
intellectual property right relating to the releases. LABEL is
current on all license and royalty payments owed, including,
without limitation, artist royalties and mechanicals.
(c) Default. LABEL is not in default of a material
provision under any material agreement, instrument, decree or
order to which it is a party or by which it or its respective
property is bound or affected.
(d) Consents. No consent, approval, order or authorization
of any governmental authority or any third party is required in
connection with the execution and delivery of this Agreement, or
any of the agreements or instruments herein mentioned or the
carrying out or performance of any of the transactions required
or contemplated hereby or thereby or, if required, such consent,
approval, order or authorization has been obtained by LABEL prior
to the date hereof.
(e) Ownership. The shareholders, officers and directors of
LABEL are listed on Schedule 10. 1 (e) hereto. Except as
described on Schedule 10. 1 (e), none of the persons listed owns,
controls, is employed by or affiliated with any recording company
or label other than LABEL.
11. TERMINATION.
11.1 The initial term of this Agreement shall be three (3) years.
Thereafter, shall automatically renew for additional one (1) year
periods.
11.2 LABEL may terminate this Agreement, without cause, if it has
been in effect for a period of at least one-year. LABEL must give
NAVARRE at least ninety (90) days advance written notice of
termination. Upon such notice, NAVARRE shall not be required to
make further payments to LABEL for a period of one hundred eighty
(180) days after the date the termination is effective.
Upon termination by LABEL without cause, it shall pay to NAVARRE
for the loss of the rights granted under this Agreement, as
liquidated damages and not as a penalty, a dollar amount derived
from the gross margins that would have been realized by NAVARRE
during the remaining term of this Agreement. For this
calculation, the "gross margin percentages" realized by NAVARRE
from the shipment and sale of recordings over the six month
period preceding the giving of notice will be used to determine
the average gross margin dollars realized per month. This dollar
amount will then be multiplied by the months remaining in the
term of the Agreement. NAVARRE's invoice for this amount shall
include documentation to support its calculation. Payment shall
be made within 30 days. LABEL shall have the right to audit
NAVARRE's books and records to confirm the accuracy of NAVARRE's
calculation of a basis for this payment, provided that LABEL
shall place the amount of such payment in an escrow account
pending verification of the amount of the audit. As used herein,
"gross margin percentage" is defined as the sell price NAVARRE
charges its customers minus the Base Price NAVARRE pays LABEL (as
defined in Schedule A) divided by the sell price NAVARRE charges
its customers.
11.3 NAVARRE may terminate this Agreement, without cause, by
giving LABEL 90 days notice of its intent to terminate. Both
parties agree to as smooth a transition as possible.
11.4 This Agreement may be terminated for cause upon the material
breach by LABEL or NAVARRE of any obligation created hereunder.
Except as otherwise provided in this Agreement, such termination
shall be effected by the giving of 30 days written notice of the
intent to terminate. The notice must give details of the claimed
breach, and the party given the notice shall have the 30-day
period to cure before the termination will be effective.
11.5 In the event either NAVARRE or LABEL files or becomes
subject to a petition in bankruptcy, or other assignment for the
benefit of creditors, such event may constitute a material breach
and may be cause for termination of this Agreement under the
standard termination clause contained herein. In such event, all
consigned goods held by NAVARRE shall be delivered to LABEL, or
held for LABEL's benefit at a location designated by LABEL.
11.6 At the end of term or termination of this Agreement for any
reason, NAVARRE may return products in lieu of payment on account
for one hundred eighty (180) days. At the end of the one-hundred
eighty (180) days, NAVARRE may keep products and pay LABEL
therefor. Prices and payment schedule for such products shall be
as mutually agreed at that time. If LABEL and NAVARRE are unable
to agree upon such prices and payment schedule within ten (10)
days following the expiration of said one hundred eighty (180)
day period, NAVARRE will return all products for credit, or if
there is a balance owed to NAVARRE, LABEL shall pay NAVARRE
within thirty (30) days.
12. RELATIONSHIP OF THE PARTIES.
12.1 Neither party to this Agreement is the employee, agent or
legal representative of the other for any purpose whatsoever.
13. GENERAL PROVISIONS.
13.1 This Agreement shall be governed by the laws of the state of
Minnesota. Any dispute arising out of this Agreement shall be
brought and prosecuted in a court within Hennepin County
Minnesota. For this purpose, LABEL, appoints the Secretary of
State of Minnesota as its agent for services of process in the
event that NAVARRE is unable to serve process on LABEL at its
last known business address.
13.2 This Agreement may be assigned by either party subject to
the written consent of both parties and said consent will not be
unreasonably withheld. Said assignment shall not unreasonably
impair the rights of the non-assigning party and shall not be on
terms less favorable than the terms set forth in this Agreement.
13.3 This Agreement supersedes all prior oral or written
proposals and communications between the parties related to this
Agreement, and shall not be modified, rescinded, waived or
otherwise changed except with the written consent of the parties.
This contract sets forth the entire Agreement between the parties
with respect to the subject matter hereof.
13.4 Each party confirms that no inducements, promises or
representations, not written herein, caused it to enter into this
Agreement.
The parties, by the actions of their authorized representatives,
have executed this Agreement, including the attached Schedules,
as of the date first mentioned above.
LABEL: NAVARRE:
NAVARRE CORPORATION
/s/ Xxx Xxxxxxxx, President /s/ Xxx X. Xxxxxxx, COO
