[Letterhead of Allied Digital Technologies Corp.]
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AGREEMENT
BETWEEN
ANCHOR BAY ENTERTAINMENT
AND
ALLIED DIGITAL TECHNOLOGIES CORP.
FOR
VIDEOTAPE DUPLICATION
AND
ORDER FULFILLMENT
DATED: JUNE 16, 1995
Table of Contents
1. SERVICES 1
2. PAYMENT/TERMS 2
3. SHIPPING 2
4. OWNERSHIP OF MATERIAL 2
5. STORAGE OF ANCHOR BAY'S MATERIALS: 2
6. CONDITION OF ANCHOR BAY'S MATERIALS: 2
7. THIRD PARTY AUTHORIZATION: 3
8. STANDARD LEADERS/COLOR BARS: 3
9. EXAMINATION OF RECORDS BY ANCHOR BAY: 3
10. INSURANCE: 3
a. ANCHOR BAY TO INSURE: 3
b. ALLIED's NEGLIGENCE 4
11. GENERAL CONDITIONS: 4
a. TERM: 4
b. INDEMNIFICATION: 4
c. DEFAULT OR BREACH: 5
d. STANDARD OF PERFORMANCE: 6
e. WARRANTY OF SERVICES: 7
i. DEFINITIONS: 7
ii. WARRANTY: 7
iii. CORRECTION OF DEFECT: 8
iv. COMPLAINTS: 8
f. FORCE MAJEURE: 8
g. SUBCONTRACTING: 8
h. ANCHOR BAY'S FURNISHED MATERIAL: 8
i. CAPTIONS: 8
j. WAIVER: 9
k. GOVERNING LAW: 9
1. UNENFORCEABLE CLAUSES: 9
Table of Contents
Page 2
m. ASSOCIATION: 9
n. ASSIGNMENT: 9
o. NOTICES AND CONSENT: 9
12. INTEGRATION 9
VIDEOTAPE DUPLICATION
AGREEMENT entered into as of _______________ between ALLIED DIGITAL TECHNOLOGIES
TECHNOLOGIES with offices at 0000 Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000
("ALLIED"), and ANCHOR BAY ENTERTAINMENT with offices at 000 Xxxxx Xxxxxxxxx,
Xxxx, Xxxxxxxx 00000, ("ANCHOR BAY") regarding the use of the Custom Duplication
Department (videotape duplication services) of ALLIED, as set forth in this
Agreement.
1. SERVICES: ALLIED agrees to provide the followings ervices to ANCHOR BAY
upon receipt of ANCHOR BAY's written purchase order and shipping request:
a) DUPLICATION: ALLIED shall duplicate, package and label videocassette
in the quantities and formats and at the prices set forth on Schedule
A. ANCHOR BAY shall provide ALLIED with technically acceptable master
elements. ALLIED shall not duplicate video tapes in quantities other
than as specifically requested by ANCHOR BAY.
b) ORDER FINISHING: ALLIED shall provide to ANCHOR BAY the finishing
services set forth on Schedule B at the prices indicated for such
services. ALLIED shall furnish packing materials which shall be
consistent with accepted standards and practices in the industry for
the shipment of products described herein. ALLIED shall quote, as
needed, the cost for any packing materials necessary to ship items not
standard or not as specified in Schedule B.
i. ANCHOR BAY will direct all requests for video tapes or related
services to ALLIED by mail addressed to 370 X.X. Xxxxxxx
Industrial Parkway, Clinton, Tennessee, 37716, or via ALLIED's
fax (000) 000-0000, or via EDI transmission.
ii. All lists, names and records are the sole property of ANCHOR BAY
and shall be maintained in confidence by ALLIED. ALLIED shall not
divulge to others (except with ANCHOR BAY's prior written
approval) any information it may receive in connection with its
performance hereunder.
iii. ALLIED will inspect returned tapes upon receipt of shipment from
ANCHOR BAY's customers and report any damage or quantity
discrepancy to ANCHOR BAY in accordance with the guidelines
outlined in Schedule B.
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2. PAYMENT/TERMS: Invoicing will be on an order basis on completion. ALLIED
will submit: itemized invoices for services rendered and copies of freight
reports. ANCHOR BAY will initiate payment procedures upon receipt of
detailed invoices. Payment terms for all charges incurred by ANCHOR BAY
shall be 2% 30 days, net 60 days.
3. SHIPPING: All deliveries to ANCHOR BAY shall be F.O.B., Clinton,
Tennessee. In the absence of any other instructions by ANCHOR BAY, ALLIED
will make all shipments via carriers of its selection. ANCHOR BAY will
request in writing any special method of shipping or insurance (see,
Schedule B attached).
4. OWNERSHIP OF MATERIAL:
a) ANCHOR BAY represents that it is the sole owner, licensee, or
authorized agent of the owner(s) of the materials delivered to ALLIED
for services of any kind, and that ANCHOR BAY is the owner, licensee,
or authorized agent of the owner(s) of all rights in connection with
such materials, including copyrights and literary, photographic and
musical rights. ANCHOR BAY further represents that the above materials
are free of any lien or encumbrance.
b) Title to video tapes produced by ALLIED or shipped to ALLIED to
fulfill ANCHOR BAY needs shall remain at all times wANCHORCHOR BAY.
5. STORAGE OF ANCHOR BAY'S MATERIALS: ALLIED will store ANCHOR BAY's materials
during the time that ANCHOR BAY owns the rights of such materials during
the term of the contract with ALLIED at no charge.
6. CONDITION OF ANCHOR BAY's MATERIALS:
a) Prices for ALLIED's products and services are predicated on ANCHOR BAY
supplying materials deemed by Allied to be compatible with standard
laboratory processing, editing, duplication or handling procedures.
Because video tape duplication masters develop normal wear and display
dropouts with repeated use, ALLIED may require new duplication masters
from time to time and Allied will replace these duplication masters at
its own expense.
b) ALLIED will keep ANCHOR BAY advised concerning the technical quality
and physical condition of all materials received by ALLIED for
processing and/or duplication. ALLIED shall periodically inspect video
tape duplication masters in its possession and notify ANCHOR BAY of
any defects in a timely manner.
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7. THIRD PARTY AUTHORIZATION:
a) No work will be performed on ANCHOR BAY's materials except by direct
order from ANCHOR BAY's authorized representative(s) or in accord with
this Agreement.
8. STANDARD -LEADERS/'COLOR BARS: Video tape duplication masters submitted to
ALLIED for the purpose of duplication must contain color bars and audio
tone per ANSI V98.9. These will be the determining guidelines for picture
and sound quality.
9. EXAMINATION OF RECORDS BY ANCHOR BAY:
a) ALLIED agrees that ANCHOR BAY or any of its duly authorized
representatives shall, until the expiration of 3 years after final
payment under this contract, have access to and the right to examine
any books, documents, papers, or records of ALLIED involving
transactions related to this contract, and to make copies and extracts
thereof. This audit right shall include the right to inspect and take
inventory of all materials supplied by ANCHOR BAY or held on behalf of
ANCHOR BAY. If a discrepancy exceeding 5 % of the price paid to ALLIED
for the period audited is discovered, ALLIED shall reimburse ANCHOR
BAY for the cost of such audit.
b) The periods of access and examination described in (a) above, for
records which relate to litigation or the settlement of claims arising
out of the performance of this contract, or costs and expenses of this
contract as to which exception has been taken by ANCHOR BAY or any of
its duly authorized representatives, shall continue until such
appeals, litigation, claims, or exceptions have been disposed of.
10. INSURANCE:
a) ANCHOR BAY TO INSURE: ALLIED will not insure ANCHOR BAY'S material
while in the possession of ALLIED or while in transit to and from
ALLIED. All such materials delivered to ALLIED are accepted by ALLIED
with the express understanding and condition that ANCHOR BAY will
carry the insurance coverage ANCHOR BAY deems necessary to protect
against loss or damage suffered whether or not ANCHOR BAY's material
is in ALLIED's care, custody, or control.
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b) ALLIED's NEGLIGENCE: Notwithstanding the provisions of clause 10.a.
above, in the event of loss, damage or destruction of any of ANCHOR
BAY's material as a result of ALLIED's willful misconduct or
negligence or in any other circumstance in which ANCHOR BAY's casualty
insurance does not apply, ALLIED shall be obligated to reimburse
ANCHOR BAY in a timely manner for its damages in connection with any
loss, damage or destruction of ANCHOR BAY's material, including
without limitation: 1) the cost of any raw materials that are lost,
damaged or destroyed; 2) for the cost of duplication, packaging, and
miscellaneous services for which ANCHOR BAY has already paid ALLIED,
relating to materials lost, damaged or destroyed (provided that in the
case of inventory shrinkage, ALLIED will have the opportunity to
re-make product at its expense); and 3) any lost profits or royalties
payable with respect to any unauthorized distribution of any of ANCHOR
BAY's products.
If after review of both parties' inventory records an inventory
shrinkage exists, ALLIED will have the opportunity to re-make product
at its expense.
11. GENERAL CONDITIONS:
a) TERM: The initial term of this Agreement shall run for a period of
FIVE (5) year(s), commencing JULY 15, 1995 and expiring JULY 14, 2000.
The Agreement can be renewed for additional one (1) year terms upon
mutual agreement of both parties.
This Agreement between ALLIED and ANCHOR BAY is an exclusive one in
which ALLIED will duplicate all of ANCHOR BAY's video cassette
requirements, including expected growth, with the following
exceptions:
1. Up to 350,000 units may be duplicated with Xxxxxxxxx'x
affiliate operation in Mexico.
2. If ANCHOR BAY makes any acquisitions during the contract
period with expected annual volumes under 3.0 million units,
then it becomes part of this contract. For acquisitions over
3.0 million units annually, ANCHOR BAY reserves the right to
go elsewhere for duplication. ALLIED will have the right to
bid for units over 3.0 million units. ANCHOR BAY retains the
sole right to choose the duplicator.
b) INDEMNIFICATION: ALLIED shall indemnify, save, and hold harmless
ANCHOR BAY from and against any and all damages, penalties, fines,
liabilities, claims, losses, and expenses (including reasonable
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legal fees and costs incurred in connection with the investigation of
any threatened claim) arising out of or in connection with ALLIED's
performance of duplication and fulfillment services set forth herein
or out of any breach of ALLIED's obligations hereunder; PROVIDED
HOWEVER, that ANCHOR BAY shall be responsible for the content and
copyright of all ANCHOR BAY videotapes. If the facts giving rise to
the right of indemnification under this paragraph involve any actual
or threatened claim or demand by any third party against ANCHOR BAY or
any possible claim by ANCHOR BAY against any third party ("Third Party
Claim"), and if, within 15 days after receipt of notice of the claim,
ALLIED gives ANCHOR BAY an agreement in writing, in form and substance
reasonably satisfactory to ANCHOR BAY, agreeing to indemnify and hold
ANCHOR BAY harmless from all costs and liability arising from such
ThirdParty Claim (and including, if required by ANCHOR BAY, adequate
assurances of ALLIED's ability to meet its obligations under this
paragraph), ALLIED may at its own expense undertake full
responsibility for the defense or prosecution of such Third Party
Claim and may contest or settle it on such terms as it may choose. If
ALLIED fails to deliver such an agreement of indemnity to ANCHOR BAY,
(1) ANCHOR BAY will be entitled to defend or prosecute such Claim with
counsel of its own choice (the reasonable fees and costs of such
defense or prosecution being indemnified under this paragraph), (2)
ALLIED at its own expense may nevertheless participate with ANCHOR BAY
in the defense or prosecution of such Third-Party Claim and any
settlement negotiations with respect thereto, and ANCHOR BAY may
settle the Third Party Claim on such terms as it may choose, although
it will not reach such a settlement until is has consulted in good
faith with ALLIED, ALLIED's defense or prosecution of, or
participation in, a ThirdParty Claim will not in any manner relieve
ALLIED of its obligations to indemnify ANCHOR BAY under this
paragraph.
C) DEFAULT OR BREACH: In the event that either party is (a) in default or
commits a material breach of the terms of this Agreement; or, (b)
files a petition in bankruptcy, is adjudicated a bankrupt, becomes
insolvent, makes an assignment for the benefit of creditors, or if a
receiver, liquidator, or trustee is appointed for its business or
assets, or otherwise takes advantage of any insolvency laws; and if
such default or breach shall not be cured within thirty (30) calendar
days after written notice of such default or breach is given by the
non-defaulting party to the defaulting party, then at any time after
the expiration of such thirty (30) calendar days, the non-defaulting
party may give written notice to the defaulting party of its election
to terminate this Agreement. Thereupon the
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Agreement shall terminate on the date specified in such notice, which
shall not be less than thirty (30) calendar days following the receipt
of such written notice. Notwithstanding, however, that either party
may not be required to provide the foregoing notice if an event set
forth in (b) above occurs or there is a default that by its nature
cannot be cured in thirty (30) calendar days, and the Agreement shall
be deemed terminated on the date of the event set forth in (b) above
or the date of such default, as the case may be. Such right of
termination shall not be exclusive of any other remedies or means of
redress to which the non-defaulting party may be lawfully entitled.
d) STANDARD OF PERFORMANCE: ALLIED agrees to perform its services with
that standard of care, skill, and diligence normally provided by a
professional organization in the performance of similar services.
ALLIED is given notice that ANCHOR BAY will be relying on the
accuracy, competence, and completeness of ALLIED's services.
i. ALLIED has committed to the following timetable for performance:
a). Duplication - Manufacturing order complete in five working
days after receipt of order. All ANCHOR BAY supplied
components to complete order must be in inventory. The day
the order is received does not count.
b). Fulfillment - Shipping complete in 48 hours after receipt of
order. Finished goods must be in inventory.
c). Returns - Return orders complete in 10 working days after
receipt in year one. Return orders complete in five working
days after receipt in years two through five.
Penalties will apply if the above performance standards are not met as
follows:
a). Up to five duplication orders (title/units) per month can
exceed the five-day window. On the sixth and subsequent
orders, a penalty of $.50/unit will apply for all units
outside of the five-day window.
Minimum order quantity is 100 units or one pancake. Orders
less than 100 units or one pancake will carry a $.50 per
unit surcharge.
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b). Up to 10 fulfillment orders/month may exceed the 48 hours
service window. On the 11th and subsequent orders in any
month exceeding 48 hours, then a penalty of $.50/unit will
apply.
C). Up to 10 return authorizations may be outside of the 10-day
service window in any month. On the 11th and subsequent
return orders in any month exceeding the 10-day service
window, then a penalty of $.25/unit will apply. In years two
through five, the service window will be five days.
The penalty provisions as outlined above do not supersede the
provisions of the Force Majeure (10f).
ii. ALLIED shall comply with all municipal, county, state, and
federal laws and regulations bearing on the performance of its
obligations under this Agreement.
e) WARRANTY OF SERVICES:
i. DEFINITIONS: "Acceptance", as used herein, means the act of an
authorized representative of ANCHOR BAY by which ANCHOR BAY
approves specific services, as partial or complete performance of
the contract. "Correction", as used herein, means the elimination
of a defect.
ii. WARRANTY: Notwithstanding inspection and acceptance by ANCHOR BAY
or any provision concerning the conclusiveness thereof, ALLIED
warrants that all services performed under this contract will, at
the time of delivery, be free from defects in workmanship and
conform to the requirements of this contract. ANCHOR BAY shall
give written notice of any defect or nonconfor-xxxxx to ALLIED
within 60 calendar days from the date of delivery to ANCHOR BAY.
This notice shall state either: (1) that ALLIED shall correct or
perform any defective or nonconforming services; or (2) that
ANCHOR BAY does not require correction or re-performance. Total
defects from all manufacturing causes will be less than one/half
percent (.5%) of duplicates shipped.
A credit memo will be issued monthly amounting to 0. 5 % of sales
for that month exclusive of freight. ANCHOR BAY at its option can
elect to be reimbursed for the actual cost of defectives.
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iii. CORRECTION OF DEFECT: If ALLIED is required to correct or
re-perform, it shall be at no cost to ANCHOR BAY, and any
services corrected or re-performed by ALLIED shall be subject to
this Agreement to the same extent as work initially performed. If
ALLIED fails or refuses to correct or re-perform, ANCHOR BAY may,
by contract or otherwise, correct or replace similar services and
charge to ALLIED the cost occasioned to ANCHOR BAY thereby, or
make an equitable adjustment in the invoice price.
iv. COMPLAINTS: ALLIED shall maintain a file of all complaints
related to services performed under this Agreement, and shall
include in that file a record of actions taken to rectify each
complaint. ANCHOR BAY's right to examine and copy records shall
extend to these files.
f) FORCE MAJEURE: Neither party shall have any liability to the other for
any loss of any kind whatsoever due to delays or failure to perform
caused directly or indirectly by the laws, regulations, acts, demands,
orders or interpositions, or any government or any subdivision or
agent thereof, or by acts of God, strikes, floods, weather, war,
rebellion, insurrection, failure of transportation agencies, shortages
of labor or material, damage or accident to machinery or equipment,
electric power failure, or any other causes beyond the control of
either party. Allied will endeavor to fulfill its obligations at one
or more of its other plants within 10 calendar days. If this cannot be
done, ANCHOR BAY shall be entitled, notwithstanding anything to the
contrary contained in paragraph one, to engage the services of a third
party to fulfill the services described herein.
g) SUBCONTRACTING: ALLIED shall not enter into any subcontracts for any
of the work under this contract without obtaining the prior written
approval of ANCHOR BAY.
h) ANCHOR BAY'S FURNISHED MATERIAL: Title to furnished material shall
remain in ANCHOR BAY. ALLIED shall use said material only in
connection with this Agreement. Upon completing this Agreement, ALLIED
shall follow the instructions of ANCHOR BAY regarding the disposition
of all ANCHOR BAY'S furnished material.
i) CAPTIONS- The captions and headings contained in this Agreement have
been inserted for reference and convenience only and in no way define,
limit or describe the text of this Agreement or the intent of any
provision.
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j) WAIVER: The waiver by any party of a breach or default of any
provision of this Agreement by the other party shall not constitute a
waiver by such party of any succeeding breach of the same or other
provision; nor shall any delay or omission on the part of either party
to exercise or avail itself of any right, power or privilege that it
has or may have hereunder, operate as a waiver of any such right,
power or privilege by such party.
k) GOVERNING LAW: This Agreement shall be governed by, subject to and
construed under the laws of the State of Michigan.
1) UNENFORCEABLE CLAUSES: In the event that any term, clause or provision
of this Agreement shall be construed to be or adjudged invalid, void
or unenforceable, such term, clause or provision shall be construed as
severed from this Agreement, and the remaining terms, clauses and
provisions shall remain in effect.
m) ASSOCIATION: The parties, by this Agreement, do not intend to create a
partnership, principal/agent, master/servant, or joint venture
relationship, and nothing in this Agreement shall be construed as
creating such a relationship between the parties.
n) ASSIGNMENT: This Agreement may not be assigned by either party without
the written consent of the other party.
0) NOTICES AND CONSENT: Any legal notices or written consent required
hereunder shall be in writing and deemed delivered upon receipt of
such notice when sent by certified mail, return receipt requested,
postage prepaid, to the following:
ANCHOR BAY ENTERTAINMENT ALLIED DIGITAL TECHNOLOGIES
ATTN: Xxxxxx X. Xxxx ATTN: Xxxxx X. Xxxxxx
000 Xxxxx Xxxxxxxxx 0000 Xxxxxxxx Xxxxxx
Xxxx, Xxxxxxxx 00000 Xxxxxxx, XX 00000-0000
12. INTEGRATION: This Agreement, including Exhibits A and B, and the Addendums
One through Six, hereto, constitutes the entire Agreement between the
parties relating to the subject matter hereof. All prior negotiations,
representations, agreements and understandings are merged into,
extinguished by and completely expressed by it. Neither party shall be
bound by any definition, condition, warranty, representation, amendment,
modification, consent or waiver, other than as expressly stated herein,
unless set forth in a writing executed by the party to be bound.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their authorized representatives as of the day and year first written above.
ALLIED DIGITAL TECHNOLOGIES ANCHOR BAY ENTERTAINMENT
By_________________________ _________________________
Xxxxx X. Xxxxxx Xxxxxx X. Xxxx
President/CEO President
Allied Digital Technologies Anchor Bay Entertainment
0000 Xxxxxxxx Xxx. 000 Xxxxx Xxxxxxxxx
Xxxxxxx, XX 00000 Xxxx, Xxxxxxxx 00000
EXHIBIT A
MANUFACTURING
Duplication
ALLIED hereby proposes to provide duplication services in accordance with the
prices set forth in Exhibit A of the Agreement. Said prices are based upon
ANCHOR BAY's projected requirements of 12 mivideocassettesettes during each year
of the Agreement.
The prices set forth in Exhibit A shall apply to the following types of orders:
A. Trailers and Screeners
ALLIED can provide chyron imprinting of trailer/screener information
at intervals as determined by ANCHOR BAY. Such product will be shipped
to individual key accounts either upon request or from a promotional
list provided by ANCHOR BAY, and shall be shipped in the manner
prescribed by ANCHOR BAY within three (3) working days or receipt of
purchase order, contingent upon test approval and component
availability.
Trailers, screeners and/or promotional product requirements can also
be serviced from ALLIED's Detroit facility, to provide more localized
access for ANCHOR BAY.
B. New Release Cassettes
Purchase orders for new release selections which represent a minimum
of 50% of ANCHOR BAY's initial anticipated requirements should be
placed with ALLIED ten (10) working days prior to order close.
Additional new release orders taken after the last order date shall be
available within five (5) working days of purchase order placement,
contingent upon test approval and component availability.
C. Catalog Videocassettetes
ALLIED shall duplicate, package and make available for shipment any
catalog orders for ANCHOR BAY selections within five (5) working days
of receipt of purchase order, contingent upon component availability.
ANCHOR BAY may request expedited service as needed, whereupon ALLIED
will respond by providing its best effort to comply with any and all
such requests-
Duplication orders shall be subject to a four (4%) percent overrun/underrun
policy for all catalog orders. For new releases, the overrun limitation on
initial orders in excess of 25,000 units per selection shall be two (2%)
percent, and the underrun quantity for all new releases shall be zero (O%)
percent.
Exhibit A - Manufacturing
Page 2
Packaging
ALLIED will store reasonable inventories of component parts, display or
promotional material, and printed matter at no charge to ANCHOR BAY.
ALLIED will assemble and package ANCHOR BAY video product in accordance with the
prices listed in Exhibits A and B of the Agreement.
Auxiliary Services
A. Mastering
ALLIED will create a duplicate running master from each of ANCHOR
BAY's supplied master tapes, and store the original masters in a
secured vault, at no charge.
ALLIED can supply duplicate masters at ANCHOR BAY's request for
charges as listed in Exhibit B of the Agreement.
B. Fulfillment
ALLIED shall prepare all bulk orders for shipment at no charge to
ANCHOR BAY.
ALLIED shall fulfill new release and catalog shipping orders within
forty-eight (48) hours from receipt of order, contingent upon finished
goods availability. Order availability will be confirmed within
twenty-four (24) hours.
ALLIED will ship all product as instructed by ANCHOR BAY. If ANCHOR
BAY does not designate a carrier, then ALLIED will ship orders on a
least-cost basis. Confirmation of order shipment will be transmitted
to ANCHOR BAY no later than 12 noon on the day following the shipment.
C. Inventory Reporting
ALLIED will provide customized reporting information for ANCHOR BAY,
including a Stock Status Report detailing finished goods availability;
Component Reports providing counts on sleeves, labels and inserts;
Receiving Reports showing inbound shipments of components; a Shipping
Activity Report; a detailed account of ANCHOR BAY's outbound product
shipments; and a Product Returns Report indicating items and
quantities returned, R/A numbers, and processing status of the return.
For Reports, see Addendum Five.
Exhibit A - Manufacturing
Page 3
D. Order Processing
ALLIED is capable of electronic data transmission via computer
interface (EDI). Direct entry access is available via modem, and
orders can be printed on-site at ALLIED for duplication and/or
shipping.
Additionally, direct inquiry capability can be made available upon
determination of systems compatibility. ALLIED will confer with ANCHOR
BAY's Operations and Data Processing personnel to assess requirements
for the most effective method of XXX.
Returns Processing
ALLIED shall issue a monthly credit to ANCHOR BAY equal to one-half of one
percent (0. 5 %) of the value of duplication completed in that month exclusive
of freight. This defect allowance is intended to reimburse ANCHOR BAY in advance
for any and all process defects in product manufactured under the Agreement
which do not result in a major manufacturing recall. Any pervasive manufacturing
defect of a title or titles shall be fully credited and replaced by ALLIED,
exclusive of, and in addition to, the procedure outlined above.
In consideration of ALLIED granting the defect allowance to ANCHOR BAY, ANCHOR
BAY will allow ALLIED to unpackage, de-label, degauss and dispose of any product
returned to ALLIED by ANCHOR BAY that is deemed by ANCHOR BAY to be defective,
provided the product was manufactured by ALLIED.
Processing charges for surplus inventory to be returned to stock are listed in
Exhibit B, Section 7.
Returns processing for contract year one shall be completed in ten (10) working
days and five (5) days for years two to five.
Quality Control
See Quality Standards Addendum 2 for all technical specification.
Physical Inventory
ALLIED shall provide one annual physical inventory of ANCHOR BAY-owned
finished goods and component stock located at its premises, at ALLIED's sole
expense. ANCHOR BAY may furnish, at its own expense, a representative or
representatives to monitor the inventory activity. ALLIED shall furnish a
complete copy of the inventory to ANCHOR BAY promptly upon completion, but no
later than five (5) days after the inventory is completed. Any adjustments to
the counts will be mutually agreed upon by ANCHOR BAY and ALLIED, whereupon all
inventory counts will be accepted as valid.
Exhibit A - Manufacturing
Page 4
Security
ALLIED will be patrolled by a security force 24 hours a day. All entrances and
exits will be monitored by closed-circuit video surveillance equipment.
All employees and visitors will be required to sign in and out of the video
areas, and access to the master tape vault is limited only to the tape
librarians.
Account Supervision
ALLIED will assign a full-time customer service supervisor to ANCHOR BAY's
account. This person will be responsible for such activities as coordination of
all manufacturing and shipping orders; processing of regular reporting data such
as activity reports, shipping documentation and order confirmations; the overall
internal management of all goods and services provided by ALLIED on behalf of
ANCHOR BAY, to the complete satisfaction of the client. ALLIED will replace its
customer service supervisor assigned to the ANCHOR BAY account if ANCHOR BAY
requests such action.
ALLIED will provide two office cubicles and pay for temporary housing for up to
two ANCHOR BAY employees. ANCHOR BAY pays salaries, living expenses, travel,
etc.
Payment Terms
ANCHOR BAY duplication orders will be invoiced upon transfer from ALLIED's
Packaging Department into the finished goods warehouse.
ALLIED is pleased to offer a payment program of 2@c. 30 days/Net 60 days
from the date of invoice.
Duplication Pricing-
A. Videocassette
Prices are based upon an estimated annual requirement of twelve (12)
million units.
Exhibit A - Manufacturing
Page 5
B. Standard Play Duplication
Five million units annually.
Program Length Unit Cost
-------------- ---------
20:00 $ .98
25:00 $1.02
30:00 $1.06
35:00 $1.11
40:00 $1.16
45:00 $1.21
50:00 $1.28
55:00 $1.35
60:00 $1.42
65:00 $1.48
70:00 $1.53
75:00 $1.58
80:00 $1.64
85:00 $1.70
90:00 $1.76
95:00 $1.81
100:00 $1.86
105:00 $1.92
110:00 $1.98
115:00 $2.04
120:00 $2.10
125:00 $2.17
130:00 $2.24
135:00 $2.30
Exhibit A - Manufacturing
Page 6
C. Extended Play Duplication
Seven million units annually.
Program Length Unit Cost
-------------- ---------
30:00 $ .72
35:00 $ .75
40:00 $ .78
45:00 $ .80
50:00 $ .84
55:00 $ .87
60:00 $ .90
65:00 $ .92
70:00 $ .94
75:00 $ .96
80:00 $ .98
85:00 $ .99
90:00 $1.02
95:00 $1.04
100:00 $1.07
105:00 $1.10
110:00 $1.13
120:00 $1.20
130:00 $1.25
140:00 $1.29
150:00 $1.33
160:00 $1.37
170:00 $1.41
180:00 $1.38
190:00 $1.40
200:00 $1.43
210:00 $1.45
220:00 $1.48
230:00 $1.50
240:00 $1.53
250:00 $1.55
260:00 $1.58
270:00 $1.59
280:00 $1.61
290:00 $1.63
300:00 $1.65
310:00 $1.68
320:00 $1.70
330:00 $1.72
340:00 $1.74
350:00 $1.75
360:00 $1.76
Exhibit A - Manufacturing
Page 7
Program Length Unit Cost
-------------- ---------
370:00 $1.78
380:00 $1.80
390:00 $1.82
400:00 $1.85
410:00 $1.88
The prices listed on the previous pages include the following materials and
services:
* Custom-length loading of standard-grade tape stock into a VHS shell
that meets or exceeds JVC standards.
* Duplication from a full-edited 1 ", D-2.or Betacam SP source master
supplied by ANCHOR BAY.
* Creation of a duplicate running master (SP) or mirror mother master
(EP) for use in actual duplication.
* Provision of a test cassette accompanied by a master tape evaluation
form, for approval by ANCHOR BAY prior to commencement of initial
duplication.
* Application of a face label provided by ANCHOR BAY or Rotoscreen
imprinting of label copy information, from mechanical artworks
provided by ANCHOR BAY.
* Collation into a bottom-load sleeve supplied by ANCHOR BAY.
Shrinkwrapping Packing into a standard 10-count, 30-count, or 50-count
master carton.
* Application of a thermal bar-code label onto each master carton.
* Picking, packing, and shipping of all ANCHOR BAY's sales orders.
EXHIBIT B
VIDEO SUPPLEMENTAL PRICING SCHEDULE
SUPPLEMENTAL VIDEO SERVICES
(All charges are per cassette except where other-wise noted)
1. JACKET PACKAGING
A. CLIENT SUPPLIED JACKET PACKAGING
1. Slipcase (Bottom Load) No Charge
2. Clamshell with wrap $.10
B. NON STANDARD PACKAGING
1. Shrinkwrap 2 Videos Together $.050
2. Shrinkwrap 3 Videos Together $.100
3. Shrinkwrap 4 Videos Together $.120
Note: Must shrink 4 videos in 2x2
configuration. 2 and 3 videos
can be front to back
Charges also apply to multi-cassette titles in single
slipcases - two-packs, etc.
C. ALLIED SUPPLIED JACKET PACKAGING
1. Slipcases
x. Xxxxx Universal Slipcase $.100
x. Xxxxx Universal Die-Cut Slipcase $.120
c. Black Universal Slipcase $.160
d. Black Universal Die-Cut Slipcase $.180
2. Universal Library Case
a. Full White Universal Case $.550
b. Full Black Universal Case $.550
c. 1/3 Black Universal Case $.550
d. 1/3 White Universal Case $.550
e. Special Colors Special Quote
3. Clamshell
x. Xxxxx Universal Clamshell $.60
b. Black Universal Clamshell $.60
D. RE-PACKAGING
1. Remove video cassette, discard $.10
old package, insert into new
package, shrinkwrap, return to
stock (up to 3 inserts).
Exhibit B
Page 2
2. STICKER APPLICATION (SLIPCASE)
A. Any combination of 3
stickers or inserts No Charge
Note: Stickers must be printed
on for automated
application, to Allied
specifications
B. Additional Stickers or inserts $.015 each
3. LABEL APPLICATION
A. Face Labels
1. Client Supplied
a. Automatic No Charge
b. Manual $.040
2. ALLIED Supplied (includes application)
x. Xxxxx computer generated $.050
b. Commercially printed $.02
Xxxxxx face labels - 2/C
Minimum initial
order - 10,000 per
selection, ALLIED
maintains label
inventory, and will
invoice as part of
duplication cost.
3. Rotoscreen Printing No Charge
a. Plate charge Paid by ALLIED
B. Jacket Labels
1. Client Supplied
a. Standard $.040
b. Manual - Wraparound Special Quote
2. ALLIED Supplied (includes application)
x. Xxxxx Computer generated $.080
b. Commercially printed Special Quote
c. Manual - Wraparound Special Quote
C. Spine Labels
1. Client Supplied $.030
2. ALLIED Supplied (includes application)
x. Xxxxx computer generated $.050
b. Commercially printed Special Quote
4. INSERTION*
A. Any combination of 3 stickers No Charge
or inserts
B. Additional inserts $.02
* All inserts must be received prefolded
to a size of not greater than 26 1/4
square inches (maximum 3 3/4" x 7").
Exhibit B
Page 3
5. EDITING CHARGES
A. Editing services (1/2 hour increments) $100.00
per hour
B. Tape Stock (1/2 hour increments per hour)
(1) 3/4 inch $20.00
(2) 1 inch $70.00
(3) D2 $100.00
C. Plastic Master Case $30.00
6. DUPLICATION MASTERS (1")
Program Run Time Unit Cost
---------------- ---------
30 minutes $61.24
35 minutes $75.82
40 minutes $78.83
45 minutes $81.84
50 minutes $84.84
55 minutes $87.85
60 minutes $90.86
65 minutes $112.80
70 minutes $115.81
75 minutes $118.82
80 minutes $121.83
85 minutes $124.83
90 minutes $127.84
95 minutes $140.20
100 minutes $143.1@1
105 minutes $158.05
110 minutes $161.06
115 minutes $164.06
120 minutes $167.07
125 minutes $192.29
130 minutes $195.30
135 minutes $198.31
140 minutes $201.32
145 minutes $204.32
150 minutes $207.33
155 minutes $235.62
160 minutes $238.63
Duplication fees include time, tape and storage cases.
NOTE: 1" with separate PCM Digital Audio tracks requires the
duplication of two masters.
7. RETURNS PROCESSING
A. Factory-Sealed Cartons - No Charge
return to stock
B. Mixed carton-sort and return $.08 each
to stock
Exhibit B
Page 4
8. FULFILLMENT COSTS
A. Carton-lot quantities No Charge
B. Less than car-ton-lot quantity $.03 per unit
C. Display prepacking/assembly $.03 per cassette
Note: This charge applies to standard
24/36-count and 50/75 count displays,
mixed cartons, and 12-count self-shipper
displays.
D. Product received from Mexico $.03 per unit
and fulfilled
ADDENDUM #1
RAW MATERIAL INCREASES
Prices for duplication services will be reviewed every six months and adjusted
by the following methodology:
1) At contract signing ALLIED will submit copies of current
invoices for V-O's and videotape from their current
suppliers.
o V-0 Titron Media and SKC
o Videotape 3M and Saehan Media
This will establish a baseline for V-0 and tape on a cost/100 ft. basis.
Adjustments, at six month intervals will be shared on a 50/50 basis up or down.
[Expected V-0 prices 35-36 cents ea.
Videotape $0.0880/100 ft.]
ADDENDUM #2
SPECIFICATIONS AND QUALITY CONTROL
Been delivered separately.
ADDENDUM #3
SIGNING ALLOWANCE and
OPTION GRANTS
1) ANCHOR BAY, at its option, will select a cash payment or
equivalent free goods per Exhibit A in the amount of
$1,250,000. This signing allowance is payment to ANCHOR BAY
from ALLIED reflecting the difference between ANCHOR BAY's
current cost of inventory, and the cost of replacing that
inventory pursuant to the duplication prices in this
Agreement. A cash payment will be due to ANCHOR BAY on the
first day following the signing of the contract.
2) Options on ALLIED stock for 250,000 shares will be granted
(AMEX-ADK) as additional consideration for the contract. The
option price will be set at the stock price for ALLIED in
accordance with SEC regulations. This is expected to be the
price on, or 1-2 days after the contract signing. The
options will run for five years.
ADDENDUM #4
MOVEMENT OF INVENTORY
ALLIED agrees to reimburse ANCHOR BAY for all transportation costs to move 2.5
million units of finished goods and 10-1 1 million sleeves from Livonia, MI to
Clinton. TN.
It is expected that this will cost between $40-50,000. ANCHOR BAY will supply
ALLIED with actual copies of freight bills.
ADDENDUM #5
REPORTS
ADDENDUM #6
Allied currently supplies materials and services to the following accounts
providing, at times, direct to retail distribution services of video and audio
products:
International Video Network Polygram
Curb Records BMG
Entertainment Central Sony
Gateways to Space CapCities/ABC
Warner Vision Pocketbooks
Genesis Scholastic
Sunwest Media Profile Records
Wellspring Media Atlantic/Elektra
Disney to Disney Stores Capital/EMI
Questar Arista
Mastervision Sparrow
View Video Geffen
Magna Acclaim
Future
Chicago
Capricorn
Ruthless
Sirius
Contentware
Hallmark
In most all cases the direct to retail distribution is a very minor part of
total shipments and usually only for special projects such as custom displays,
pallet displays, etc.
This agreement shall not prohibit Allied from entering into other such
arrangements. In the event Allied does enter into an agreement not currently in
existence, and which customers' direct to retail volume exceeds 2.0 million
units/year, Allied will so notify Anchor Bay and Anchor Bay will be entitled
thereafter to terminate this agreement on sixty (60) days advance written
notice.
