[THIS DOCUMENT REFLECTS MATERIAL DELETED PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST]
FOURTH AMENDMENT TO LICENSE AND DISTRIBUTION AGREEMENT
This Fourth Amendment to License and Distribution Agreement
("Fourth Amendment") is made and entered into as of May 27, 1995
between LIVE Home Video Inc., LIVE America Inc., Vestron Inc.,
each a Delaware corporation, and LIVE Film and Mediaworks Inc.
(formerly known as International Video Productions Inc.), a
California corporation (all such parties hereinafter individually
and collectively referred to as "Company"), on the one hand, and
Warner-Elektra-Atlantic Corporation, a New York corporation
(hereinafter referred to as "Distributor" and previously referred
to as "WEA Corp." in the Distribution Agreement), on the other
hand, with reference to the following facts:
R E C I T A L S
A. Distributor and Company have entered into that certain
License and Distribution Agreement dated as of May 11, 1992, and
heretofore amended as of June 8, 1992, as of June 23, 1994, and
as of September 1, 1994 ("Distribution Agreement").
B. Pursuant to the Distribution Agreement and that certain
security agreement, dated as of June 8, 1992, between Company, as
debtor, and Distributor, as secured party (the "Original Security
Agreement"), Distributor has been granted a security interest in
certain of Company's rights to manufacture, distribute and
exploit Videocassettes in the Territory for Home Use (as each
such capitalized term is defined in the Distribution Agreement)
relating to the titles listed on Schedule A to the Original
Security Agreement and certain related rights, all as more
specifically described in the Original Security Agreement (the
"Original WEA Collateral").
C. Pursuant to that certain Amended and Restated Loan and
Security Agreement, dated as of November 14, 1994, among Foothill
Capital Corporation ("Foothill"), Company and other affiliated
entities of Company, and as such may be amended, restated,
refinanced or replaced from time to time (the "Credit
Agreement"), Foothill extended certain credit to Company and its
affiliates, which extensions of credit are secured by a first
priority lien on and security interest in all of the assets and
property of Company and its affiliates (the "Foothill
Collateral") provided, however, that pursuant thereto and that
certain intercreditor agreement dated as of November 16, 1994
(the "Original Intercreditor Agreement"), among Foothill and
Distributor, Foothill agreed to subordinate its lien on and
security interest in the Foothill Collateral to Distributor's
first prior lien on and security interest in the Original WEA
Collateral, subject to the terms and provisions of the Original
Intercreditor Agreement.
D. Pursuant to that certain security agreement, dated and
to be executed concurrently herewith between Company, as debtor,
and Distributor, as secured party in the form of Exhibit A
annexed hereto (the "New Security Agreement"), and pursuant to
and subject to the terms and provisions of that certain
intercreditor agreement, dated and to be executed concurrently
herewith between Foothill and Distributor in the form of Exhibit
B annexed hereto (the "New Intercreditor Agreement"), Distributor
agrees to subordinate its security interest in the Original WEA
Collateral and Company agrees to grant to Distributor a second
priority lien on and security interest in the collateral
described in the New Security Agreement.
E. Pursuant to the Distribution Agreement, Distributor has
previously made two (2) advances to Company. The amount of the
first prior advance (hereinafter referred to as the "First
Advance" and heretofore referred to in the Distribution Agreement
as the "Advance") was Twenty Million Dollars ($20,000,000). The
balance (principal and interest) of the First Advance that
remained unrecouped by Distributor as of April 30, 1995 was One
Million One Hundred Eleven Thousand One Hundred Eleven Dollars
($1,111,111). The amount of the second prior advance
(hereinafter referred to as the "Second Advance"and heretofore
referred to in the Distribution Agreement as the "Additional WEA
Advance") was Four Million Nine Hundred Thousand Dollars
($4,900,000). The Second Advance (principal and interest) has
been fully recouped by or repaid to Distributor. Concurrently
upon the execution of this Fourth Amendment to the Distribution
Agreement, Distributor shall make a third advance ("Third
Advance") to Company of Ten Million Dollars ($10,000,000), and,
under certain circumstances as herein provided, Distributor shall
make a fourth advance ("Fourth Advance") to Company of Ten
Million Dollars ($10,000,000). The Third Advance and, if made,
the Fourth Advance shall each be chargeable against and
recoupable by deduction in computing the Net Proceeds payable to
Company in the manner indicated herein. As used herein or in the
Distribution Agreement, "Advances" shall refer to the principal
sum of any and all payments made by Distributor to Company which
are chargeable against and recoupable by deduction in computing
Net Proceeds due and payable to Company pursuant to the
Distribution Agreement. As used herein or in the Distribution
Agreement, "Monthly Deductions" shall mean the base deduction of
principal and interest which Distributor is authorized to charge
against and recoup by deduction in computing Net Proceeds due and
payable to Company in each monthly accounting rendered pursuant
to the Distribution Agreement until the Advances and all
applicable interest thereon are recouped by or repaid to
Distributor in full. A schedule of the Monthly Deductions
(separately specifying principal and interest) anticipated for
each accounting month during the Term of the Distribution
Agreement is attached hereto as Exhibit C.
F. Company and Distributor desire to amend, modify,
supplement and extend the Distribution Agreement upon the terms
and conditions herein contained.
NOW, THEREFORE, for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the
following is hereby agreed to by the parties:
1. Amendment to Distribution Agreement. The Distribution
Agreement is hereby modified and amended as follows:
a. Term.
i. In line three (3) of Paragraph 1(a) of the
Distribution Agreement, the date "May 29, 1998"
shall be substituted in the place and stead of
"May 26, 1995".
ii. The following shall be inserted at the end of
Paragraph 1(b) of the Distribution Agreement:
"'Contract Period' shall mean each period of
not more than eighteen (18) consecutive accounting
months (as such term is hereinafter defined)
during the Term hereof commencing on May 27, 1995.
The first Contract Period ('First Contract
Period') hereunder shall start on May 27, 1995 and
end on the earlier of either (i) November 29,
1996, (ii) the Early Termination Date (as such
capitalized term is defined in Xxxxxxxxx 00
xxxxx), xx (xxx) the Reversion Date (as such
capitalized term is defined in Paragraph 28
below). If the Early Termination Date shall occur
prior to November 30, 1996, there shall not be a
second or third Contract Period hereunder. If the
Reversion Date, but not the Early Termination
Date, were to occur prior to November 30, 1996,
there shall not be a second Contract Period but
there shall be a third Contract Period hereunder.
The second Contract Period ('Second Contract
Period') hereunder, if any, shall start on
November 30, 1996 and end on the earlier of either
(i) May 29, 1998, (ii) the Early Termination Date,
or (iii) the Reversion Date. The third Contract
Period ('Third Contract Period') hereunder, if
any, shall start on the Reversion Date and end on
the earlier of either (i) May 29, 1998 or (ii) the
Early Termination Date. For purposes of
clarification, the Third Contract Period is not
dependent on there being a Second Contract Period
hereunder, and may immediately follow the First
Contract Period."
iii. The following shall be inserted at the end of
Paragraph 1(h) of the Distribution Agreement:
"From and after October 1, 1995,
"Videocassettes" shall also be deemed to mean five
inch (5") diameter compact discs utilizing the
standard for compression of full motion video
promulgated by the Motion Picture Experts Group
("MPEG") and, as of the date of the Fourth
Amendment, generally referred to as MPEG 2, as
such standard may be further developed, enhanced
and improved, solely intended for Home Use and
designed to be used in conjunction with a
reproduction apparatus, including, without
limitation, disc player and personal computer,
that causes a motion picture to be visible on the
screen of a monitor or television receiver for
viewing in a substantially linear manner ("Digital
Video Discs" or "DVDs"). DVDs shall not include
twelve inch (12") diameter laser videodiscs or
compact discs of any size designed pursuant to the
Red, Green or White Book standards promulgated by
MPEG. Notwithstanding anything herein to the
contrary, Distributor shall have the right to
distribute a particular Company Product in the DVD
format during the Term hereunder only if, as and
when Company shall elect to have such particular
Company Product distributed in the DVD format in
the Territory except if Company shall elect to
engage or appoint Pioneer Laser Corp. ("Pioneer")
or an affiliate of Pioneer to distribute DVDs of
such particular Company Product in the Territory
on Company's behalf."
iv. A new Paragraph 26 shall be added to the
Distribution Agreement, as follows:
"26. Company's Option to Terminate Term.
(a) In addition to any other rights or
remedies of Company under this Agreement, Company
shall have the option to cause the early
termination of the Term of this Agreement by
giving Distributor written notice to that effect
at any time after September 1, 1995 and on or
before November 30, 1997 ('Notice of
Termination'), in which event the Term shall end
on the Early Termination Date. As used herein,
the 'Early Termination Date' shall mean the later
of either (i) February 23, 1996, or (ii) the last
Friday of the sixth full calendar month following
the date the Notice of Termination is delivered to
Distributor, or (iii) the last Friday of any given
month which is specified in the Notice of
Termination to be the last month of the Term
(provided Company shall not be obliged to specify
any such date in the Notice of Termination);
provided, that in each case such Early Termination
Date shall be subject to automatic extension as
provided in Paragraph 26(b) hereof. Following
delivery of the Notice of Termination, Distributor
shall take all reasonable steps required in its
judgment for the transition of the distribution of
Company Product from Distributor to Company or its
designee to take effect as of the Early
Termination Date.
(b) If Company exercises its option to cause
the early termination of the Term, then,
notwithstanding anything to the contrary contained
in Paragraphs 4(j) or 4(k) hereof, that portion of
the total aggregate amount representing principal
of the Monthly Deductions which otherwise would
have been amortized by Distributor between the
Early Termination Date and the last day of the
Term plus interest thereon, plus any other amounts
due and payable by Company to Distributor
hereunder shall be recouped in five (5)
consecutive monthly deductions (the 'Additional
Monthly Deductions') from Net Proceeds otherwise
due Company hereunder, with the first Additional
Monthly Deduction to be made against Net Proceeds
which shall become due and payable to Company for
the fifth accounting month preceding the Early
Termination Date, and the last Additional Monthly
Deduction to be made against Net Proceeds which
shall become due and payable to Company for the
accounting month immediately preceding the Early
Termination Date (e.g., if the Early Termination
Date were to occur on November 28, 1997, then the
Early Termination Notice would have been required
to be delivered on or before May 31, 1997 and the
Additional Monthly Deductions would be made
against Net Proceeds payable to Company on the
five monthly accountings for Company Product
distributed hereunder during the period beginning
May 31, 1997 and ending October 31, 1997). All
five (5) Additional Monthly Deductions shall
consist of equal payments of principal plus
accrued interest at the Interest Rate. For
purposes of clarification, both the Additional
Monthly Deduction and the Monthly Deduction shall
be made against Net Proceeds payable to Company
for each of said five (5) accounting months. If
in any of said accountings the amount of Net
Proceeds payable to Company is less than the
amount which Distributor is permitted to deduct
and offset pursuant to this Paragraph 26(b), then
Distributor may deduct the full amount of such
shortfall in any succeeding accounting month.
Notwithstanding the foregoing, if a shortfall
shall exist for any of said five (5) accounting
months (or any accounting month in which this
Agreement would terminate as a result of an
extension of the Early Termination Date pursuant
to the first proviso of this sentence), and if and
to the extent Distributor has not recouped such
shortfall from Net Proceeds, if any, payable to
Company for the next succeeding accounting month,
then Company shall repay to Distributor the amount
of such shortfall within five (5) business days
following the end of such accounting month;
provided, however, that Company's failure to repay
any such shortfall to Distributor in accordance
with the foregoing requirements shall result in
the automatic and continued extension of the Early
Termination Date until the last Friday of the
accounting month immediately succeeding the
accounting month in which the Early Termination
Date would have occurred if the shortfall had not
occurred; provided, further, that if Company shall
pay any such amounts to Distributor in full during
the aforesaid five (5) business day cure period,
then, for purposes hereof, the payment of such
amounts shall be deemed to have been received by
Distributor during the accounting month
immediately preceding the start of such cure
period. Company and Distributor agree that if and
to the extent Company fails to repay any such
shortfall to Distributor in accordance with the
foregoing requirements, then Distributor shall
only have recourse for recoupment of such
shortfall to the rights granted to Distributor
under the New Security Agreement to the collateral
described therein, and Distributor shall have no
right to proceed against Company for payments of
any such deficiency. Immediately following
Distributor's recoupment or Company's repayment of
any such shortfall and all other amounts due and
payable by Company to Distributor hereunder and
under the New Security Agreement, Distributor
shall terminate its lien on and security interest
in the collateral described in the New Security
Agreement and shall execute and deliver to Company
any documents reasonably necessary to effectuate
such termination. Provided that the Additional
Monthly Deductions are recouped by or repaid to
Distributor in the manner hereinabove provided,
Distributor shall not exercise any Distribution
Rights for Company Product for which initial
shipments are scheduled on or after the Early
Termination Date, as the same may have been
extended as herein provided."
b. Company's Tradenames and Logos. The following shall be
added at the end of Paragraph 1(i) of the Distribution
Agreement:
"Notwithstanding anything to the contrary
contained herein, Distributor's use of the
"Carolco Home Video" tradename and logo shall be
limited to use in packaging, advertising and
promotional materials that pertain to
Videocassettes which Company has, prior to the
date of the Fourth Amendment, chosen or shall,
after the date of the Fourth Amendment, choose to
market bearing the "Carolco Home Video" tradename
and logo. Company acknowledges that it intends to
market Videocassettes embodying the motion picture
tentatively titled "Cutthroat Island" bearing the
"Carolco Home Video" tradename and logo, provided
that any failure or inability of Company to do so
shall not constitute a default hereunder."
c. Interactive CDs.
i. Paragraph 1 of the Distribution Agreement is
hereby amended by the insertion of a new
subparagraph (l), as follows:
"(l) 'Interactive CDs' shall mean five inch
(5") diameter CD-Roms (compact discs - read only
memory) solely intended for Home Use and designed
to be used solely in conjunction with the CD-Rom
drive of personal computers, which embody an
original expression of authorship in the literary,
scientific or artistic domain (whatever may be the
mode or form of its expression) consisting
primarily of a presentation communicated to a user
through the combination of two or more media of
expression, whether textual, audio, pictorial,
graphical or audiovisual, where a significant
characteristic of the presentation is the ability
of the user to manipulate the content of the
presentation by means of a computing device in
real time and in a nonlinear fashion. Interactive
CDs shall not include any laser or capacitance
disc or comparable optical or mechanical storage
device nor any optical and electronic storage
device (e.g., videodisc, compact disc, DVD)
designed to be used in conjunction with a
reproduction apparatus, including, without
limitation, videodisc player, CD-I player and
personal computer, that causes a motion picture to
be visible on the screen of a monitor or
television receiver for viewing in a substantially
linear manner."
ii. A new Paragraph 27 shall be added to the
Distribution Agreement, as follows:
"Interactive CDs.
(a) During the Term of this Agreement,
Company shall have the option ('CD Option') to
include within its license hereunder all the
Interactive CDs which Company shall first make
available for sale or rental in retail outlets in
the Territory at anytime during the Term following
the exercise by Company of the CD Option. Company
may exercise the CD Option by sending Distributor
written notice to that effect (the, 'CD Option
Notice') at any time during the Term. With
respect to each Interactive CD embodying Company
Product, Company shall also inform Distributor in
writing whether or not Company chooses to have
Distributor perform technical support services for
that particular title. Upon delivery of the CD
Option Notice, if ever, Distributor shall, as soon
as reasonably practicable, undertake to perform
(i) all distribution services reasonably required
to support Distributor's sales operations in the
Territory on behalf and for the account of
Company, including each and every service
specifically described in Paragraph 2 hereof which
can be reasonably performed with regards to
Interactive CDs, and, at Company's choosing with
respect to any particular Interactive CD embodying
Company Product, (ii) all technical support
services by such methods or manners (e.g., via
toll-free telephone, on-line services or
otherwise) which Company reasonably requires
Distributor to make available to the purchasers
(end users) of any such Interactive CD; provided
that Distributor shall not be required to perform
any technical support services by any method or
manner which it does not then offer to provide to
any third parties for whom Distributor distributes
Interactive CDs (other than an Affiliate of
Distributor (as the term "Affiliate" is defined in
Rule 1-02 of Regulation S-X under the Securities
Act of 1933, as amended)). Notwithstanding
anything contained herein to the contrary, the
right to distribute Interactive CDs embodying
Company Product for Home Use by means of
transmissions over the Internet, on-line services,
telecommunications, coaxial or fiber-optic cable,
or similar means of delivery, or for any purpose
other than Home Use, is expressly reserved to
Company.
(b) If Company chooses to have Distributor
perform technical support services for any
particular Interactive CD embodying Company
Product, then Company may at any time thereafter
cause Distributor to discontinue performing such
technical support services for that particular
title by sending to Distributor not less than
thirty (30) days advance written notice to that
effect; provided that any amounts owed by Company
to Distributor pursuant to the Technical Support
Surcharge (as defined herein) shall have been
recouped by or repaid to Distributor in full.
(c) If Company exercises the CD Option, then
Company may at any time thereafter terminate its
license hereunder with respect to all the
Distribution Rights to all Interactive CDs
embodying Company Product by sending to
Distributor not less than six (6) months advance
written notice to that effect (the, 'CD
Termination Notice'); it being understood and
agreed that Company shall not be obligated to
include in its license hereunder any Interactive
CDs embodying Company Product which Company shall
first make available for sale or rental in retail
outlets in the Territory on or after the date the
CD Termination Notice is delivered to Distributor
unless Distributor shall have commenced sales
solicitation of any such Interactive CD prior to
the date the CD Termination Notice is delivered.
During the six (6) months from and after the date
the CD Termination Notice is delivered,
Distributor shall only have the right to
distribute the Interactive CDs embodying Company
Product which Company first made available for
sale or rental in retail outlets in the Territory
prior to the date the CD Termination Notice is
delivered or for which Distributor had commenced
sales solicitation prior to the date the CD
Termination Notice is delivered.
(d) Nothing contained herein shall be
construed as to require Company to grant and
license to Distributor any Distribution Rights to
Interactive CDs embodying Company Product unless
and until Company shall exercise the CD Option.
However, for purposes of construing each party's
rights and obligations with respect to those
Interactive CDs embodying Company Product which
Company elects to include in its license
hereunder, the parties agree that the words 'or
Interactive CDs' shall be deemed to be inserted
immediately following the word 'Videocassettes'
wherever such word appears in this Agreement
except in Paragraph 1(h), 4(a)(i)(A) and this
Paragraph 27.
(e) If at any time prior to the expiration
or termination of the Term hereof, Distributor has
entered or shall enter into any Interactive CD
distribution agreement or arrangement (whether
written or oral) with any third party other than a
Related Entity of Distributor, and in the event
any such agreement or arrangement contains any
fees for the provision of distribution services
(i.e., the Fulfillment Services and Additional
Services when taken as a whole) or any fees or
charges for the provision of technical support
services which are more favorable to such third
party than the Distribution Fee or Technical
Support Surcharge pursuant to Paragraph 4(a)(i)(B)
hereof, then Distributor shall immediately notify
Company of any such more favorable fees or charges
(irrespective of whether Company has theretofore
exercised the CD Option) and Company shall have
the right, but not the obligation, to modify this
Agreement to include such more favorable fees or
charges retroactively to the later of either the
date upon which Distributor shall have commenced
distribution of Interactive CDs embodying Company
Product hereunder or the date upon which such more
favorable provisions first became effective in any
such agreement."
d. Distribution Fee. Effective as of the accounting month
beginning May 28, 1995, Paragraph 4(a)(i) of the
Distribution Agreement shall be deleted in its entirety
and substituted in its place and stead shall be new
Paragraphs 4(a)(i)(A), (B), (C), (D) (E), (F), (G) and
(H) as follows:
"4(a)(i)(A) With respect to Videocassettes
distributed hereunder, a Fulfillment Distribution Fee
equal to [MATERIAL DELETED PURSUANT TO CONFIDENTIAL
TREATMENT REQUEST] percent ([MATERIAL DELETED PURSUANT
TO CONFIDENTIAL TREATMENT REQUEST]%) plus an Additional
Distribution Fee equal to [MATERIAL DELETED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST] percent ([MATERIAL
DELETED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST]%)
except as provided in Paragraph 4(a)(i)(G) below, each
calculated on the net amounts invoiced hereunder during
each accounting month.
(B) With respect to Interactive CDs
distributed hereunder, a Fulfillment Distribution Fee
equal to [MATERIAL DELETED PURSUANT TO CONFIDENTIAL
TREATMENT REQUEST] ([MATERIAL DELETED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST]%) plus an Additional
Distribution Fee equal to [MATERIAL DELETED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST] percent ([MATERIAL
DELETED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST]%)
except as provided in Paragraph 4(a)(i)(G) below, each
calculated on the net amounts invoiced hereunder during
each accounting month. Distributor shall additionally
charge and deduct an amount equal to [MATERIAL DELETED
PURSUANT TO CONFIDENTIAL TREATMENT REQUEST] percent
([MATERIAL DELETED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST]%) of the net amounts invoiced hereunder during
each accounting month only with respect to those
Interactive CDs distributed hereunder for which
Distributor performs technical support services for
such particular Interactive CD ('Technical Support
Surcharge').
(C) If the total net amounts invoiced
by Distributor hereunder in any Contract Period exceed
[MATERIAL DELETED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST] Dollars ($[MATERIAL DELETED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST]), then the Additional
Distribution Fee shall be subject to reduction by
certain volume discounts, if applicable ('Applicable
Volume Discounts'), as follows: A discount of
[MATERIAL DELETED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST] percent ([MATERIAL DELETED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST]%) on all net amounts
invoiced in any Contract Period from [MATERIAL DELETED
PURSUANT TO CONFIDENTIAL TREATMENT REQUEST] Dollars
($[MATERIAL DELETED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST]) to [MATERIAL DELETED PURSUANT TO CONFIDENTIAL
TREATMENT REQUEST] Dollars ($[MATERIAL DELETED PURSUANT
TO CONFIDENTIAL TREATMENT REQUEST]), and a discount of
[MATERIAL DELETED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST] percent ([MATERIAL DELETED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST]%) on all net amounts
invoiced during any Contract Period in excess of
[MATERIAL DELETED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST] Dollars ($[MATERIAL DELETED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST]).
(D) Notwithstanding the provisions of
Paragraph 4(a)(i)(C) hereof and in lieu of Distributor
deducting the Applicable Volume Discounts from the
Additional Distribution Fee in the manner indicated
therein, solely for purposes of interim accountings,
the parties shall assume that the total net amounts
invoiced during each Contract Period shall equal or
exceed [MATERIAL DELETED PURSUANT TO CONFIDENTIAL
TREATMENT REQUEST] Dollars ($[MATERIAL DELETED PURSUANT
TO CONFIDENTIAL TREATMENT REQUEST]) and that during
each Contract Year the Applicable Volume Discounts will
be earned to their fullest possible extent.
Accordingly, there shall be an average volume discount
('Average Volume Discount') of [MATERIAL DELETED
PURSUANT TO CONFIDENTIAL TREATMENT REQUEST] percent
([MATERIAL DELETED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST]%) on all net amounts invoiced by Distributor
hereunder during each Contract Period. The Average
Volume Discount shall be deducted from the Additional
Distribution Fee in each accounting month during each
Contract Period. However, if the total net amounts
invoiced by Distributor hereunder for any Contract
Period shall not equal or exceed [MATERIAL DELETED
PURSUANT TO CONFIDENTIAL TREATMENT REQUEST] Dollars
($[MATERIAL DELETED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST]), then Distributor may deduct from Net
Proceeds becoming due and payable to Company in any
succeeding accounting month, if any, an amount equal to
the difference between (i) the amount of the total
Applicable Volume Discounts which would otherwise have
been deducted from the Additional Distribution Fee
based on the total net amounts invoiced by Distributor
hereunder during such Contract Period, and (ii) the
amount of the total Average Volume Discount deducted
from the Additional Distribution Fee based on the total
net amounts invoiced by Distributor hereunder during
such Contract Period. Notwithstanding the foregoing,
following the termination or expiration of the Term of
this Agreement, within five (5) business days following
such termination, Company shall repay to Distributor an
amount equal to the difference between (i) and (ii)
above only if and to the extent Distributor has not
recouped such difference from Net Proceeds.
(E) As used herein, the term
'Fulfillment Distribution Fee' shall refer to the fee
charged by Distributor for the provision of the each of
the following services hereunder: order entry; customer
service; warehousing and inventory management; picking
and packing for shipment; transhipping and freight
between Distributor's branch warehouses; shipping and
freight of Videocassettes or Interactive CDs embodying
Company Product and 'point-of-purchase' materials to
customers; billing and collection of receivables
including credit checking and assuming the risk of bad
debts; taking physical inventories and similar
fulfillment services performed by Distributor hereunder
('Fulfillment Services'). Company and Distributor
agree that the amount of the Fulfillment Distribution
Fee fairly and reasonably represents the actual costs
and expenses, excluding overhead expenses, which
Distributor incurs with respect to the provision of
Fulfillment Services. As used herein, the term
'Additional Distribution Fee' shall refer to the fee
charged by Distributor for the provision of all
services hereunder except for technical support
services for Interactive CDs, if applicable, and
Fulfillment Services and is inclusive of a charge for
Distributor's overhead expenses and profit. As used
herein, the terms 'Fulfillment Distribution Fee' and
'Additional Distribution Fee' shall refer to the
Fulfillment Distribution Fee or the Additional
Distribution Fee, as the case may be, applicable to the
distribution hereunder of either Videocassettes or
Interactive CDs, as the context shall require. As used
herein, the term 'Distribution Fee' shall refer to the
Fulfillment Distribution Fee, the Additional
Distribution Fee and, if applicable, the Technical
Support Surcharge, combined. Distributor shall
separately account for the total Fulfillment
Distribution Fee, the total Additional Distribution
Fee, the total Average Volume Discount and, if
applicable, the total Technical Support Surcharge in
each monthly accounting.
(F) Shipments of Videocassettes or
Interactive CDs embodying Company Product made by
Distributor to its customers during any accounting
month, Contract Year or Contract Period, as the case
may be, shall be deemed to have been invoiced in such
accounting month, Contract Year or Contract Period, as
the case may be. Distributor shall send invoices to
its customers in respect of Videocassettes or
Interactive CDs embodying Company Product immediately
following shipment thereof.
(G) The parties have identified and, in
accordance with the last sentence of this Paragraph,
may from time to time hereafter identify, in Exhibit D
annexed hereto, certain customers by name ("Special
Accounts"). Distributor acknowledges that Company
performs significant and extraordinary sales services
in connection with the distribution of Videocassettes
or Interactive CDs embodying Company Product to Special
Accounts. In recognition thereof, effective as of the
accounting month beginning May 28, 1995, the Additional
Distribution Fee on the net amounts invoiced to Special
Accounts during any accounting month shall be reduced
to [MATERIAL DELETED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST] percent ([MATERIAL DELETED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST]%). At the request of
either party, but neither party shall have the right to
make any such request more frequently than once every
six months, the parties make a good faith determination
whether any customers should be added to or stricken
from Exhibit D; provided, however, that any changes to
Exhibit D shall require the parties' mutual consent and
shall be effective only on a prospective basis. For
the avoidance of doubt, the parties agree that this
Paragraph shall not apply to any Videocassettes or
Interactive CDs embodying Company Product which Company
distributes to any of the Special Accounts in the
exercise of any of Company's reserved rights set forth
in Paragraph 8 hereof even if Company desires to ship
any such Videocassettes or Interactive CDs directly
from Distributor's warehouses to any of the Special
Accounts, in which event the provisions of Paragraph
8(c) hereof shall apply.
(H) Effective from and after the first
accounting rendered after the execution of the Fourth
Amendment to this Agreement, in each monthly
accounting, the amount of the Additional Distribution
Fee shall be reduced by the sum of [MATERIAL DELETED
PURSUANT TO CONFIDENTIAL TREATMENT REQUEST] Dollars
($[MATERIAL DELETED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST])."
e. Warehousing Fee. The following shall be inserted at
the end of Paragraph 4(a)(iv) of the Distribution
Agreement: "Seasonal inventory shall be exempted from
the aforesaid warehousing fee."
f. P.O.P. Freight Costs. Effective from and after the
first accounting rendered after the execution of the
Fourth Amendment to this Agreement, the words "...in
excess of [MATERIAL DELETED PURSUANT TO CONFIDENTIAL
TREATMENT REQUEST] Dollars ($[MATERIAL DELETED PURSUANT
TO CONFIDENTIAL TREATMENT REQUEST])..." in the first
and second lines of Paragraph 4(a)(vi) of the
Distribution Agreement shall be stricken.
g. Shipping Costs. Effective as of the accounting month
beginning May 28, 1995, Paragraph 5(b) of the
Distribution Agreement shall be amended by striking in
the first sentence thereof beginning with the word
"reimburse," and ending with the word "incremental" in
the eighth line thereof, and substituting in its place
and stead, the following: "...pay or reimburse Company
for any and all... Additionally, the following shall
be added at the end of Paragraph 5(b) of the
Distribution Agreement:
"If Distributor shall elect to ship Videocassettes
to its customers directly from Company's plant (which,
as of the date of the Fourth Amendment, Distributor is
contemplating doing with regards to initial shipments
of rental Videocassettes of Company Product), then the
risk of loss shall remain with the Company until
Videocassettes leave the Company's plant (at which
point Distributor shall bear the risk of loss) and
Distributor shall solely be responsible for any
freight, insurance and handling charges attendant to
the shipment of such Videocassettes to any locations
from Company's plant."
h. Cooperative Advertising Credit. Effective as of the
accounting month beginning May 28, 1995, Paragraph 4(b)
of the Distribution Agreement shall be deleted in its
entirety.
i. Advance(s).
i. All references to "the Advance" or the
"Additional WEA Advance" in the Distribution
Agreement shall refer to the First Advance and the
Second Advance, respectively.
ii. Paragraph 4(d) of the Distribution Agreement shall
be deleted in its entirety and substituted in its
place and stead shall be the following:
"If Distributor does not recoup any
recoupable amount in any accounting month, such
unrecouped amount shall be added to the amount
recoupable in the next accounting month or any
subsequent accounting month. Except as provided
in Paragraph 26(b) hereof, Company shall repay to
Distributor the unrecouped amount in any
particular accounting month (including any
accounting month in which this Agreement would
terminate as a result of an extension of the Term
pursuant hereto) within five (5) business days
following the end of such accounting month, only
if and to the extent (i) Distributor has not
recouped such amount from the Monthly Deductions
for the next succeeding accounting month or (ii)
the entire amount of all Advances together with
all applicable interest thereon, has not been
recouped from the Monthly Deduction in the last
and final accounting month during the Term. If
Company fails to repay all or any portion of such
unrecouped amounts to Distributor in accordance
with the foregoing requirements, then, in addition
to whatever rights or remedies Distributor may
have at law, in equity or otherwise, the Term
shall be automatically extended to the last Friday
of the accounting month immediately succeeding the
accounting month in which the Termination Date
would have occurred if the shortfall had not
occurred; provided, further, that if Company shall
pay any such amounts to Distributor in full during
the aforesaid five (5) business day cure period,
then, for purposes hereof, the payment of such
amounts shall be deemed to have been received by
Distributor during the accounting month
immediately preceding the start of such cure
period."
iii. Paragraph 4(e) of the Distribution Agreement shall
be deleted in its entirety and substituted in its
place and stead shall be the following:
"Distributor hereby acknowledges that the
Second Advance and all applicable interest thereon
has been recouped by or repaid to Distributor in
full and that Distributor's lien on and security
interest in the Additional WEA Security has
terminated. Unless Distributor has done so
already, immediately following the execution of
the Fourth Amendment to this Agreement,
Distributor shall execute UCC termination
statement(s) and/or a termination of mortgage of
copyright with respect thereto. Company shall pay
all reasonable expenses incident to the
preparation, recordation and/or filing of any such
instruments."
iv. Paragraph 4 of the Distribution Agreement is
hereby amended by the insertion of a new
subparagraph (j), as follows:
"(j) Conditioned upon (i) Distributor's prior
receipt of a fully executed copy of (A) the New
Security Agreement as described in the recitals in
the Fourth Amendment to this Agreement and all
representations and warranties set forth therein
being true and correct as of the date thereof, and
(B) the New Intercreditor Agreement as described
in the recitals in the Fourth Amendment to this
Agreement, and (ii) Company having taken all
action then required of Company under the New
Security Agreement, Distributor shall advance to
Company upon the execution of the Fourth Amendment
to this Agreement the sum of Ten Million Dollars
($10,000,000) as an additional advance chargeable
against and to be recouped by deduction in
computing the Net Proceeds becoming due and
payable to Company hereunder in the manner
described below (the 'Third Advance').
Distributor acknowledges that once Distributor's
lien on and security interest in the Original WEA
Collateral is subordinated, all the Distribution
Rights shall be subject to the first priority lien
and security interest of Foothill in accordance
with and subject to the New Intercreditor
Agreement. The New Security Agreement shall in
all respects supersede the Original Security
Agreement and the New Intercreditor Agreement
shall in all respects supersede the Original
Intercreditor Agreement. Nothing contained in
this Agreement shall in any way limit, restrict or
impair any of Distributor's rights or remedies
under the New Security Agreement or the New
Intercreditor Agreement. In the event that any
provision in this Agreement shall in any way
conflict with any provision of the New Security
Agreement or the New Intercreditor Agreement, the
provision in the latter agreements shall prevail
and be controlling. Subject to the terms and
conditions hereof (including, but not limited to,
those regarding Early Termination), the Third
Advance and interest thereon shall be recouped in
thirty-six (36) consecutive Monthly Deductions
from Net Proceeds otherwise due Company hereunder,
with the first Monthly Deduction by Distributor to
be made against Net Proceeds which shall become
due and payable to Company on July 28, 1995, and
the last Monthly Deduction to be made against Net
Proceeds which shall become due and payable to
Company on June 26, 1998. All thirty-six (36)
Monthly Deductions shall consist of equal payments
of principal plus accrued interest at the Interest
Rate. The initial Interest Rate shall be the
applicable Interest Rate on the date Distributor
pays the Third Advance to Company hereunder which
shall thereafter be adjusted on the first day of
each calendar quarter during the Term commencing
on July 1, 1995, to take account of any changes in
Libor or the Prime Rate."
v. Paragraph 4 of the Distribution Agreement is
hereby amended by the insertion of a new
subparagraph (k), as follows:
"(k) So long as (i) Distributor shall have
not received a Notice of Termination, (ii) a
Default by Company shall not have occurred and be
continuing under this Distribution Agreement, and
(iii) an Event of Default (as defined in the
Credit Agreement) by Company shall not have
occurred and be continuing under the Credit
Agreement, on the first day of the Second Contract
Period, Distributor shall advance to Company the
sum of Ten Million Dollars ($10,000,000) as an
additional advance chargeable against and to be
recouped by deduction in computing the Net
Proceeds becoming due and payable to Company
hereunder in the manner described below (the
'Fourth Advance'). The Fourth Advance and
interest thereon shall be recouped in eighteen
(18) consecutive Monthly Deductions from Net
Proceeds otherwise due Company hereunder, with the
first Monthly Deduction by Distributor to be made
against Net Proceeds which shall become due and
payable to Company on January 31, 1997, and the
last Monthly Deduction to be made against Net
Proceeds which shall become due and payable to
Company on June 26, 1998. All eighteen (18)
Monthly Deductions shall consist of equal payments
of principal plus accrued interest at the Interest
Rate. The initial Interest Rate shall be the
applicable Interest Rate on the date Distributor
pays the Fourth Advance to Company hereunder which
shall thereafter be adjusted on the first day of
each calendar quarter during the Term commencing
on April 1, 1997, to take account of any changes
in Libor or the Prime Rate."
vi. Paragraph 4 of the Distribution Agreement is
hereby amended by the insertion of a new
subparagraph (l), as follows:
"(l) Company and Distributor agree that if
and to the extent the Advances and all applicable
interest thereon has not been recouped by or
repaid to Distributor as of the expiration or
termination of the Term, then, except in the event
Company shall exercise its option to cause the
early termination of the Term in which the
provisions of Paragraph 26(b) shall apply,
Distributor shall only have recourse for
recoupment of the Advances and the interest
thereon to the rights granted to Distributor under
the New Security Agreement to the collateral
described therein, and Distributor shall have no
right to proceed against Company for payment of
such deficiency. Upon the full and complete
recoupment or repayment of the Advances and all
applicable interest thereon, Distributor's second
priority lien on and security interest in such
collateral shall terminate and Distributor shall
execute UCC termination statement(s) and/or a
termination of mortgage of copyright with respect
thereto. Company shall pay all reasonable
expenses incident to the preparation, recordation
and/or filing of any such instruments."
j. Cross Defaults. A new Paragraph 12(a)(iv) shall be
added to the Distribution Agreement, as follows:
"(iv) An Event of Default (as defined in the
Credit Agreement) shall have occurred and be continuing
under the Credit Agreement and either (a) such Event of
Default shall not have been cured or waived by Foothill
within 30 days after the occurrence thereof or (b)
Foothill shall have accelerated the Obligations of the
Borrowers (as such terms are defined in the Credit
Agreement), whichever shall occur first."
k. Acceleration upon Default. Paragraph 13(b) of the
Distribution Agreement shall be deleted in its entirety
and in its place and stead shall be the following:
"(b) Upon a Default (i) by either party, the other
party (or in the case of 12(a)(iii) above, either
party) may, at its option, in addition to whatever
rights or remedies it may have at law, in equity or
otherwise, terminate the Term of this Agreement
effective immediately by sending written notice thereof
to the other party and/or (ii) by Company, Distributor
shall have the right to declare all outstanding
Advances immediately due and payable."
l. Sales and Fulfillment Services. A new Paragraph 28
shall be added to the Distribution Agreement, as
follows:
28. "Sales and Fulfillment Services.
(a) In addition to any other rights or
remedies of Company under the Agreement, Company
shall have the option to elect to assume full
responsibility for the following services which
were formerly the responsibility of Distributor
hereunder: (i) all sales of Videocassettes and
Interactive CDs embodying Company Product and (ii)
administration of order entry using Distributor's
existing systems (collectively, the 'Sales
Services'). Company may exercise such option by
giving Distributor written notice to that effect
at any time on or before November 30, 1997
('Notice to Elect Reversion of Sales Services').
As used herein, the 'Reversion Date' shall mean
the later of either (i) December 1, 1996, (ii) the
last Friday of the sixth full calendar month
following the date the Notice to Elect Reversion
of Sales Services is delivered to Distributor, or
(iii) the last Friday of any given month which is
specified in the Notice to Elect Reversion of
Sales Services to be the last month during which
Distributor shall perform the Sales Services
hereunder (provided Company shall not be obliged
to specify any such date in the Notice to Elect
Reversion of Sales Services). Company shall
assume full responsibility for providing the Sales
Services for all Company Product for which initial
shipments are scheduled during the Third Contract
Period. During the Third Contract Period,
Distributor shall continue to provide all the
services which were the responsibility of
Distributor to provide before the Reversion Date
except for the Sales Services. Distributor's
services during the Third Contract Period shall
include, without limitation, the billing and
collection of receivables, with all credit risk
being borne solely by Distributor; provided,
however, if during the Third Contract Period
Company shall sell Company Product to any
particular customer to whom Distributor then-
currently refrains from distributing (except on a
C.O.D. basis) all its other audio and video
products due to such customer's perceived poor
credit, as determined by Distributor in its
reasonable business judgment, then, unless and
until Distributor commences or resumes its
distribution of any of its other audio and video
products to such customer, Distributor agrees it
shall distribute Company Product to such customer
only conditioned upon Company's prior agreement to
solely bear the credit risk with respect Company's
sales of Company Product to such customer.
(b) Notwithstanding anything to the contrary
contained in Paragraph 4(a)(i)(A) hereof, the
Additional Distribution Fee chargeable on the net
amounts invoiced in any accounting month for all
Company Product distributed hereunder after the
Reversion Date shall be reduced to [MATERIAL
DELETED PURSUANT TO CONFIDENTIAL TREATMENT
REQUEST] percent ([MATERIAL DELETED PURSUANT TO
CONFIDENTIAL TREATMENT REQUEST]%) .
(c) Notwithstanding anything to the contrary
contained in Paragraphs 4(a)(i)(C) or (D) hereof,
the Additional Distribution Fee indicated in
Paragraph 28(b) hereof shall not be subject to
reduction by any volume discounts."
m. Special Customer Services. A new Paragraph 29 shall be
added to the Distribution Agreement, as follows:
"29. Special Customer Services. Company and
Distributor agree that Distributor may, from time
to time, provide and xxxx for special services to
its customers. Such special services may include,
but shall not be limited to, the following:
special price and inventory tagging; direct
Distributor-to-store shipments; special sized
shipments; and related distribution and packaging
services which are not customarily provided to
Distributor's customers ("Special Customer
Services"). Distributor may charge its customers
for Special Customer Services and the charge
therefor shall not be included in the Gross Dealer
Price or Net Proceeds if the following conditions
are met:
(i) Charges for Special Customer Services are maintained in
Distributor's detailed sales records for the transaction which
will be made available from time to time upon request by
Company.
(ii) Such charges are in addition to the price
determined by the Company for sales to the
customer and customers in the same class of trade;
(iii) The Special Customer Services are
provided at the request of the customer;
(iv) The charge for the Special Customer Services
must be applied by Distributor in a non-
discriminatory manner, i.e., the Special Customer
Services must be available to other of
Distributor's customers for the same charge; and
(v) If any of the Special Customer Services for a
customer are provided only for Company Product or
specific titles thereof, then the Company shall
have the right to approve such Special Customer
Services in writing prior to the provision
thereof.
Distributor agrees that upon the permitted return
of any Company Product for which Special Customer
Services were provided, all additional costs and
labor incurred in preparing the Company Product
for resale to other customers shall be borne by
and performed by Distributor. (This provision is
not intended to affect the 5 cents per unit handling
fee allowed pursuant to paragraph 3(a) (iii) of
the Distribution Agreement.) In addition, with
respect to such returned Company Product, any
amounts charged back to the Company shall not
include any charge back of the cost for the
Special Customer Services."
2. Miscellaneous. Except as expressly or by necessary
implication modified hereby, the Distribution Agreement
shall remain in full force and effect. This Fourth
Amendment to License and Distribution Agreement may not be
modified, amended or terminated without the written consent
of all parties hereto. This Fourth Amendment to License and
Distribution Agreement may be executed in counterparts, each
of which when taken together shall constitute one and the
same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Fourth Amendment to License and Distribution Agreement as of the
date hereinabove first written.
Warner-Elektra-Atlantic Corporation
By: __________________________
Its: __________________________
LIVE Home Video Inc.
By: _________________________
Its: _________________________
LIVE America Inc.
By: ________________________
Its: ________________________
LIVE Film and Mediaworks Inc.
(formerly known as International Video Productions Inc.)
By: ________________________
Its: ________________________
Vestron Inc.
By: ________________________
Its: ________________________
M:\G1C\XXXXXX.XXX
Exhibit A
New Security Agreement
Exhibit B
New Intercreditor Agreement
Exhibit C
Anticipated Monthly Deductions
Accounting Month Amount of Monthly
Deduction
Exhibit D
Listing of Special Accounts
As of May 27, 1995
[THIS DOCUMENT REFLECTS MATERIAL DELETED PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST]
