EXHIBIT 10.15
NOTE: PORTIONS OF THIS EXHIBIT INDICATED BY "[***]" ARE SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST, AND HAVE BEEN OMITTED FROM THIS EXHIBIT.
COMPLETE, UNREDACTED COPIES OF THIS EXHIBIT HAVE BEEN FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION AS PART OF THIS COMPANY'S CONFIDENTIAL TREATMENT
REQUEST.
MANUFACTURING AND DISTRIBUTION AGREEMENT, dated as of April 1, 2005,
between SIRIUS SATELLITE RADIO INC., a Delaware corporation ("SIRIUS"), and
DIRECTED ELECTRONICS, INC., a California corporation ("DIRECTED").
WHEREAS, Sirius operates a satellite digital entertainment service (the
"SIRIUS SERVICE");
WHEREAS, Sirius has developed technology and designs for Sirius Receivers
(as defined below) and related products for use in receiving the Sirius Service;
WHEREAS, Sirius desires to expand its current distribution for the sale of
Sirius Receivers and related products;
WHEREAS, Directed is engaged in the business of designing, developing,
marketing, distributing and selling consumer electronics products and has
established relationships with many independent, regional and national retailers
and new car dealers;
WHEREAS, Directed desires to perform warehousing, distribution, logistics
and related services with respect to certain Sirius Receivers, accessories, and
related products, and desires a limited license to design, develop and
manufacture accessory products for use with Sirius Receivers and the Sirius
Service.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Directed and Sirius agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINED TERMS. Capitalized terms used herein and not
otherwise defined herein shall have the meaning assigned to such below
"Accessory Products" means the accessory products listed in Exhibit
B hereto and other accessory products that connect with or otherwise enhance
Sirius Receivers and are approved by Sirius for sale by Directed (including
Directed/Sirius Accessory Products).
"Activation Fee" has the meaning assigned to such term in Section
4.02(a).
"Agreement" means this Manufacturing and Distribution Agreement,
together with any exhibits and schedules attached hereto, as amended,
supplemented or otherwise modified from time to time in accordance with the
terms hereof.
"Approved Dealer" has the meaning assigned to such term in Section
3.02(a).
"Authorized Manufacturers" has the meaning assigned to such term in
Section 3.03(a).
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REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
[***] has the meaning assigned to such term in Section 3.07(a).
"Business Day" means a day other than Saturday, Sunday or other day
on which commercial banks in New York City are authorized or required to close.
"Competitor" means any person or entity (other than Sirius) in the
business of providing a satellite digital audio radio service within the United
States, including without limitation, XM Satellite Radio Holdings Inc., XM
Satellite Radio Inc. and their subsidiaries and affiliates.
"Dealer Payment" has the meaning assigned to such term in Section
4.02(a).
"Defaulting Party" has the meaning assigned to such term in Section
9.02.
"Directed" has the meaning assigned to such term in the preamble to
this Agreement.
"Directed Marks" has the meaning assigned to such term in Section
7.01(c).
"Directed/Sirius Accessory Products" has the meaning assigned to
such term in Section 2.01(a).
"Disclosing Party" has the meaning assigned to such term in Section
11.01(a).
"Discontinued Product" has the meaning assigned to such term in
Section 3.01(b).
"Discontinuance Date" has the meaning assigned to such term in
Section 3.01(b).
"Existing Intellectual Property" has the meaning assigned to such
term in Section 7.02.
"Group A Dealers" means the entities set forth on Exhibit A hereto.
"Head Unit" means a device, which is integrated into the dashboard
of a vehicle, which provides the user interface for the reception of radio
signals and, in some cases, the playback of recorded media, such as cassette
tapes, compact discs, minidiscs and DVDs.
"Information" has the meaning assigned to such term in Section
11.01(a). "Licensed IP" means all intellectual property owned by Sirius which
relates to the connection of an accessory product to a Sirius Receiver or (b)
the use of an accessory product to enhance the performance of Sirius Receivers
or the reception of the Sirius Service.
"Licensed IP" means all intellectual property owned by Sirius which
relates to (a) the connection of an accessory product to a Sirius Receiver or
(b) the use of an accessory product to enhance the performance of Sirius
Receivers or the reception of the Sirius Service.
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"Net Sales" means, with respect to a Directed/Sirius Accessory
Product during any month, (a) the customer invoice price of such product times
(b) the difference between the quantity of such product shipped to customers
during the applicable month minus the quantity of such product returned to
Directed during the applicable month.
"New Intellectual Property" has the meaning assigned to such term in
Section 7.03.
"Parties" or "Party" means Sirius and/or Directed, as the context
may require.
"Products" shall mean the products listed on Exhibit B hereto or
such other products approved by Sirius in writing for distribution by Directed.
"Receiving Party" has the meaning assigned to such term in Section
11.01(a).
"Sirius" has the meaning assigned to such term in the preamble to
this Agreement.
"Sirius Marks" has the meaning assigned to such term in Section
7.01(a).
"Sirius Receiver" means a device that receives and processes the
Sirius signal, either as a result of circuitry included in the unit itself or in
another device, and which is capable of providing the user interface for the
Sirius Service.
"Sirius Service" has the meaning assigned to such term in the first
recital to this Agreement.
"Special Marketing Program" has the meaning set forth in Section
4.08(b).
"Subscriber" means a paying subscriber to the Sirius Service.
"Support Materials" has the meaning assigned to such term in Section
305(a).
"Term" has the meaning assigned to such term in Section 8.01.
"Type Acceptance Requirements" means Sirius' performance,
environmental and other requirements for Accessory Products as published by
Sirius from time to time.
SECTION 1.02. Other Definitional Matters. Definitions in this Agreement
apply equally to the singular and plural forms of the defined terms. The words
"Include" and Including" shall be deemed to be followed by the phrase "without
limitation" when such phrase does not otherwise appear. The terms "herein,"
"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular section, paragraph or
subdivision. All article, section, paragraph, clause, exhibit or schedule
references not attributed to a particular document shall be references to such
parts of this Agreement.
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ARTICLE II
LICENSE
SECTION 2.01. License Grant. (a) Subject to the terms and conditions of
this Agreement, Sirius hereby grants to Directed a non-exclusive,
non-transferable license to use the Licensed IP solely for the purposes of
designing, developing, manufacturing, marketing and selling accessory products
that connect with or otherwise enhance the Sirius Service (such accessory
products designed and developed by Directed, "DIRECTED/SIRIUS ACCESSORY
PRODUCTS").
(b) Directed shall not, without the prior written consent of Sirius, use
the Licensed IP to design, develop, manufacture, market and sell any product
capable of receiving a satellite radio service offered by a Competitor or
capable of working with receivers for a satellite radio service offered by a
Competitor.
(c) Directed shall not copy, modify, translate, de-compile, disassemble or
otherwise reverse engineer or determine or attempt to determine source code,
object code, executable code or protocols from the Licensed IP without the
express written consent of Sirius. Directed shall not create any derivative
works based on the Licensed IP and shall not permit or authorize any third party
to create any such derivative works without the express written consent of
Sirius. Any such derivative works based on the Licensed IP shall be the sole and
exclusive property of Sirius; provided that Sirius shall grant Directed a
nonexclusive, royalty free license to any such derivative works developed with
the consent of Sirius.
(d) The license granted under Section 2.01(a) shall not be sold, assigned,
sublicensed or otherwise transferred (by operation of law or otherwise) without
the prior written consent of Sirius, which may be withheld by Sirius in its sole
discretion. Any sale, assignment, sublicense or other transfer of such license
without the prior written consent of Sirius shall be null and void.
SECTION 2.02. Product Development. Directed shall propose new ideas for
Directed/Sirius Accessory Products by delivering to Sirius a written proposal,
including a detailed product description and business model and such other
information as Sirius may reasonably request. Directed shall not design and
develop any such new Directed/Sirius Accessory Product unless such product
concept has been approved in writing by Sirius.
SECTION 2.03. Type Acceptance. Directed shall not manufacture, market or
sell any Directed/Sirius Accessory Product unless such product has, in Sirius'
reasonable opinion, satisfied the applicable Type Acceptance Requirements or has
otherwise been approved for sale in writing by Sirius. Directed shall provide
Sirius with design verification samples of each Directed/Sirius Accessory
Product, in a quantity reasonably requested by Sirius and at no cost to Sirius,
for Sirius' use in determining whether such product satisfies the applicable
Type Acceptance Requirements. Directed shall also provide Sirius with twelve
production samples of each Directed/Sirius Accessory Product, at no cost to
Sirius, for Sirius' use in: (a) determining whether such Accessory satisfies the
Type Acceptance
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Requirements, (b) advertising and promotional materials and (c) such other uses
reasonably determined by Sirius.
ARTICLE III
PRODUCTS; SERVICES; EXCLUSIVITY
SECTION 3.01. Products. (a) Sirius hereby authorizes Directed to market
and sell the Products in accordance with the terms and conditions of this
Agreement.
(b) Notwithstanding anything herein to the contrary, Sirius may, from time
to time, notify Directed in writing that a thirty party-branded Product or a
Product capable of interfacing with a third party Head Unit shall be distributed
solely through such third party and not through Directed (the applicable
Product, the "DISCONTINUED PRODUCT"). Following receipt of such notification,
Directed shall no longer place new orders for Discontinued Products and shall
use commercially reasonable efforts to cancel any pending orders for
Discontinued Products. Directed shall, within ninety days of such notification
(such ninetieth day, the "DISCONTINUANCE DATE"), discontinue all sales,
marketing and related services with respect to the Discontinued Products. Sirius
shall purchase from Directed, or shall cause the applicable third party to
purchase from Directed, any such Discontinued Products remaining in Directed's
inventory as of the Discontinuance Date at the landed cost paid by Directed for
such Discontinued Products (including customs, duties and shipping costs).
Sirius shall be responsible for all costs associated with Discontinued Products
returned to Directed by any Approved Dealer after the Discontinuance Date,
SECTION 3.02. Approved Dealers: Credit and Collection. (a) Except as set
forth in Section 3.02(b), Directed shall market and sell the Products only to
the dealers set forth on Exhibit A and Directed's active independent retail
accounts, in each case, located in the contiguous United States (the "APPROVED
DEALERS"). Sirius may, at any time upon written notice to Directed, modify
Exhibit A to include additional dealers. Sirius may, in its sole discretion,
assist Directed in marketing Products to regional and national retail dealers
that are Approved Dealers.
(b) Directed shall be entitled to market and sell Accessory Products to
any dealer or other entity located in the contiguous United States, other than
telecommunications companies.
(c) Directed shall have full authority to qualify and accept or reject any
account. Directed shall be responsible for all credit and collection services
related to its sale of the Products, including determination of credit lines and
credit terms, billing, resolution of discrepancies and collection of accounts
receivable.
SECTION 3.03. Product Sourcing and Pricing. Directed shall purchase
Products (other than Directed/Sirius Accessory Products) from third party
manufacturers authorized by Sirius ("AUTHORIZED MANUFACTURERS"). [***]
Authorized Manufacturers to sell such Products to Directed at costs no higher
than the costs set forth on Exhibit B. Directed and Sirius shall work together
to establish mutually acceptable dealer costs and suggested retail prices for
such Products that are competitive with the costs and retail prices of similar
products marketed and sold by third parties, which costs and prices may
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change from time to time due to market conditions. Directed shall publish
documents for its dealers that contain such dealer costs and suggested retail
prices.
SECTION 3.04. Product Branding; Packaging. (a) Sirius shall design the
packaging and manuals for all Products other than Accessory Products [***].
(b) Sirius and Directed acknowledge that the Accessory Products shall be
branded by Directed; provided that such Accessory Products, whether designed by
Sirius or Directed, shall contain the Sirius logo or another Sirius Xxxx
designated by Sirius. Directed shall design the packaging and manuals for all
Accessory Products [***].
(c) The packaging for the Products (other than Accessory Products) shall
include a statement that such products are "distributed by Directed"; provided
that Sirius shall determine, in its sole discretion, the size and placement of
such statements. The packaging for Accessory Products may, at Directed's option,
include a statement indicating that such products are "distributed by Directed".
SECTION 3.05. Sales Support Services. (a) Directed shall provide full
sales and marketing services to all Approved Dealers and all purchasers of
Accessory Products, including distribution of point of sale materials, technical
product support, installation support and product training materials (such
materials, "SUPPORT MATERIALS"). Directed and Sirius shall work together in good
faith to develop appropriate Support Materials. Sirius may, in its sole
discretion, assist Directed in providing such Support Materials and services to
Approved Dealers.
(b) All point of sale materials, other marketing materials and product
manuals for the Products shall be subject to the prior written approval of
Sirius, which approval shall not be unreasonably withheld. Sirius acknowledges
that Directed may identify in such materials that such Products are "distributed
by Directed".
(c) Directed shall use commercially reasonable efforts to cause Approved
Dealers to prominently display, in a high traffic area at each of its locations,
point of sale materials approved by Sirius. Directed shall not, and shall use
commercially reasonable efforts to cause Approved Dealers not to, (i) promote
Subscriptions on terms other than the terms designated by Sirius, (ii) represent
that any Subscription may be obtained on terms or rates other than those
designated by Sirius or (iii) impose any additional terms or conditions in
connection with any Subscription.
SECTION 3.06. No Bundling. Directed shall not, and shall use commercially
reasonable effort to cause its customers not to, advertise, market or sell any
Products as part of a bundle with any other products or services without the
express written consent of Sirius, which may be withheld in Sirius' sole
discretion.
SECTION 3.07. Forecasting: Order Placement. (a) For the period from
Directed's initial order for any new Product (other than any Accessory Product)
and continuing for six months following Directed's first shipment of such
Product [***], Sirius shall provide Directed with reasonable assistance in
forecasting
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sales of the applicable Product. On a monthly basis thereafter, Directed shall
provide Sirius with a six-month rolling forecast and a three-month purchase plan
for the Product, broken out by distribution channel, including such information
as Sirius may reasonably request. Upgraded, revised or modified Products (i.e.,
Sportster 1A) shall not be considered new Products for purposes of this Section
3.07 and there shall be no [***] with respect to such upgraded, revised or
modified Products.
(b) During the [***] with respect to any Product, Directed shall place
orders with Authorized Manufacturers for a quantity of such Product as [***] in
its sole discretion, is necessary to fulfill customer demand. In the event that
any such Products ordered by Directed are not shipped to a customer within
ninety days of receipt by Directed, Sirius shall [***]. Directed shall segregate
such Products in its warehouse in a manner that clearly indicates that [***].
Directed shall hold such Products on [***] pending orders from customers or
other instructions [***] immediately upon receipt of a customer order for such
Products. Directed shall fulfill all customer orders on a first in - first out
basis.
(c) Following the conclusion of the [***] with respect to any Product,
Directed shall be solely responsible for determining the quantities of such
Product to be ordered from Authorized Manufacturers; provided that Directed and
Sirius shall mutually determine the most efficient allocation of such Products
to customers.
(d) Notwithstanding anything herein to the contrary, throughout the Term,
Directed shall be solely responsible for determining the quantities of Accessory
Products to be ordered from Authorized Manufacturers.
SECTION 3.08. Warehousing. Directed shall store all Products ordered by it
in one or more of its warehouses, and shall provide all related warehousing and
order fulfillment services.
SECTION 3.09. Returns. (a) Except as set forth in Section 3.09(b),
Directed shall process Products returned to it under warranty for defects and
shall segregate all returned Products found to be defective from returned
Products found to be non-defective. To the extent applicable, Directed shall use
commercially reasonable efforts to restore the reception of Channel 184 of the
Sirius Service in such returned Products. Directed shall, at its sole cost and
expense, ship any such Products that are defective to a location designated by
Sirius. Directed shall return to the Authorized Manufacturer for re-packaging
any such Products that are non-defective and, to the extent required by
applicable law, shall identity such Products as refurbished. Sirius may design
and provide to Directed or the Authorized Manufacturer the packaging to be used
for non-defective returned Products. Directed may use Products identified as
refurbished for warranty exchange purposes or may resell such Products at a
reduced cost for special promotional and sales events approved in writing by
Sirius. Sirius shall provide reasonable assistance to Directed to promote the
sate of refurbished Products; provided that Sirius shall have no responsibility,
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financial or otherwise, for the identification of Products as refurbished or the
distribution of refurbished Products.
(b) Directed shall negotiate return arrangements with respect to Accessory
Products directly with the applicable Authorized Manufacturers.
SECTION 3.10. Exclusivity. (a) During the Term, Sirius shall not
distribute any Products (including Directed/Sirius Accessory Products) through
any entities other than Directed, except as follows:
(i) Sirius may distribute Products branded by a third party
directly through such third party pursuant to Section 3.01(b)
of this Agreement;
(ii) Sirius may distribute Products (other than Directed/Sirius
Accessory Products) directly to consumers; and
(iii) Sirius may distribute Products (other than Directed/Sirius
Accessory Products) to persons or entities that are not
Approved Dealers.
(b) Directed shall not provide any sales, distribution or related services
with respect to satellite radio products offered by a Competitor.
ARTICLE IV
FINANCIAL MATTERS; REPORTS
SECTION 4.01. Reports. (a) Within two Business Days of the end of each
calendar month, Directed shall provide a report to Sirius, in an electronic
format designated by Sirius, identifying (i) the quantity of Directed/Sirius
Accessory Products produced during the previous month, broken out by product,
(ii) the quantity and, if applicable, electronic serial numbers of all Products
shipped by Directed to customers during the preceding month, broken out by
product model and customer, and (iii) the quantity and, if applicable,
electronic serial numbers of all Products returned to Directed during the
preceding calendar month, broken out by product model and customer.
(b) Within two Business Days of the end of each calendar month, Directed
shall provide a report to Sirius that sets forth in reasonable detail all
forecasts and orders for Products received by it during the preceding month.
SECTION 4.02. Activation Payments. (a) Sirius shall pay Directed an
activation fee of [***] (an "Activation Fee") and a dealer payment of [***] (a
"Dealer Payment") for the initial activation by a Subscriber of any Product that
is a Sirius Receiver and was sold by Directed to an Approved Dealer, provided
that Sirius shall not pay any Activation Fees or Dealer Payments for activations
of Sirius Receivers sold by Directed to any of the dealers set forth on Exhibit
A hereto (as amended from time to time in accordance with Section 3.02) or any
other dealer that receives a commission or similar payment directly from Sirius.
Directed shall use each Dealer Payment to fund a [***] commission to the
Approved Dealer that sold the applicable Sirius Receiver. Sirius may change the
amount of the Activation Fee and Dealer Payment at any time upon ninety days
prior written notice to Directed (such ninetieth
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day, the "Change Date"); provided that (i) such new Activation Fees and Dealer
Payments shall be paid only with respect to activations of Products that occur
on or after the Change Date and (ii) Directed may terminate this Agreement by
providing written notice to Sirius within thirty days of receiving notice of
such change.
(b) All Activation Fees and Dealer Payments shall be based on a full
uninterrupted purchase of the Sirius Service by a Subscriber for a period of 270
days from the date of activation. If any subscription to the Sirius Service is
terminated, cancelled or disconnected (whether by the Subscriber of Sirius)
prior to the end of such period, or the Subscriber fails to pay Sirius to full
price of a subscription during such period, Sirius shall charge back to Directed
a portion of the Activation Fee and Dealer Payment corresponding to the unused
or unpaid portion of such period as follows:
Cancellation, Disconnection or Chargeback percentage:
Nonpayment Occurs:
Within first [***] days of activation [***]
Between [***] days of activation
Between [***] days of activation
(c) Subject to Directed providing the reports described in Section 4.01 in
a timely manner Sirius shall pay Activation Fees and Dealer Payments to
Directed, net of any chargebacks pursuant to Section 4.02(b), within [***] days
of the end of the month in which the applicable activation occurs. Together with
such payment, Sirius shall provide a report setting forth (i) the electronic
serial number of each Product that is a Sirius Receiver and for which Sirius is
charging back payments pursuant to Section 4.02(b); (iii) the name of the
Approved Dealer that sold such Sirius Receiver, (iv) the Sirius corporate
identification number for such Approved Dealer, and (v) and the amount paid or
charged back.
SECTION 4.03. Royalties. (a) On a monthly basis, Directed shall pay Sirius
royalties [***] Directed/Sirius Accessory Products during the applicable month.
Directed shall pay such royalties within [***] of the end of each calendar
month.
(b) Together with each royalty payment, Directed shall deliver to Sirius a
statement, signed and certified by an officer of Directed, setting forth a
reasonably detailed calculation of the Net Sales of Directed/Sirius Accessory
Products during the applicable month (including the quantity of Directed/Sirius
Accessory Products sold and returned during such month, by SKU) and the related
royalties.
SECTION 4.04. Audit Rights. (a) Directed shall create books and records
relating to its orders and sales of Products and shall maintain such books and
records for a minimum of three years after their creation. Directed shall keep
such books and records at its principal place of business. Sirius may, at any
time after providing at least ten business days prior written notice and during
regular business hours, inspect such books and records for compliance hereunder.
If any such audit reveals material discrepancies [***] for any annual period,
Directed shall reimburse Sirius for the reasonable out-of-pocket costs incurred
by Sirius in connection with such audit.
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(b) Sirius shall create books and records relating to its payment of
Activation Fees and shall keep such books and records for a minimum of three
years after their creation. Sirius shall keep such books and records at its
principal place of business. Directed may, at any time after providing at least
ten business days prior written notice and during regular business hours,
inspect such books and records for compliance hereunder. If any such audit
reveals material discrepancies [***] for any annual period, Sirius shall
reimburse Directed for the reasonable out-of-pocket costs incurred by Directed
in connection with such audit.
(c) This Section 4.04 shall survive the expiration or earlier termination
of this Agreement.
SECTION 4.05. Extraordinary Expenses. (a) Sirius shall fully reimburse
Directed for all reasonable out-of-pocket costs incurred by Directed in
connection with excessive Product failure, including but not limited to costs
related to Product rework, Product recalls and Product shipping, to the extent
such costs were approved in writing by Sirius prior to being incurred by
Directed. Directed shall invoice Sirius for such costs, together with reasonable
supporting documentation, and Sirius shall pay such invoices within thirty days.
Sirius shall use commercially reasonable efforts to expedite remittance of such
invoices.
(b) From time to time Sirius may offer an Approved Dealer a special
in-store pallet program or other special marketing program (such programs
"SPECIAL MARKETING PROGRAMS"). Sirius shall promptly notify Directed of any
Special Marketing Program. Sirius shall fully reimburse Directed for all
reasonable out-of-pocket costs incurred by Directed in connection with a Special
Marketing Program, to the extent such costs were approved in writing by Sirius
prior to being incurred by Directed. Directed shall invoice Sirius for such
costs, together with reasonable supporting documentation, and Sirius shall pay
such invoices within thirty days. Sirius shall use commercially reasonable
efforts to expedite.
ARTICLE V
TRAINING; TECHNICAL SUPPORT
SECTION 5.01. Training. (a) Sirius shall provide, at no cost to Directed,
one training session to Directed's technical service personnel, at a time and
location to be mutually agreed by Sirius and Directed. Such training session
shall cover such topics as Sirius reasonably deems necessary to enable
Directed's technical service personnel to provide technical support and service
with respect to the Products.
(b) Sirius shall provide, at no cost to Directed, one installation
training session to Directed's technical specialists, at a time and location to
be mutually agreed by Sirius and Directed. Such training session shall cover
such topics as Sirius reasonably deems necessary to enable Directed's technical
specialists to provide installation training to Directed's customers. Directed
shall incorporate Product installation training into training programs that it
provides to its customers.
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(c) Upon Directed's reasonable request from time to time, Sirius shall
from time to time attend Directed's sales meetings and provide sales training
for the Products, at no cost to Directed.
(d) In connection with the foregoing training programs, Sirius shall
provide Directed, at no cost, with available printed Product information and
training materials; provided that Sirius shall not be required to produce any
new printed Product information or training materials.
SECTION 5.02. Technical Support. Directed shall handle all technical
service requests related to the Products from its customers. Directed shall
provide its customers with customer service telephone numbers for purposes of
making such requests.
ARTICLE VI
PROMOTIONS
SECTION 6.01. Trade Show Events. Sirius and Directed shall attend mutually
acceptable trade show events to promote the Products. Sirius shall display
Directed/Sirius Accessory Products at such events in a manner similar to the
manner in which it displays its other partners' brands. Directed shall display
Sirius-branded Products at such events in a manner similar to the manner in
which it displays its other partners' brands.
SECTION 6.02. Demonstration Subscriptions. Sirius shall provide Directed,
at no cost, [***] to the Sirius Service to be used solely to demonstrate the
Products to customers and potential customers. Such subscriptions shall be
cancelled by Sirius upon the expiration or earlier termination of this
Agreement.
SECTION 6.03. Friends and Family Programs. Sirius and Directed shell each
offer a reasonable "friends and family" program for the purchase of its products
and services, at a discounted rate, by employees of the other.
ARTICLE VII
INTELLECTUAL PROPERTY
SECTION 7.01. Use of Trademarks. (a) Sirius shall provide Directed with
guidelines for the use of Sirius' service marks, trademarks, logo, and other
commercial symbols (the "SIRIUS MARKS"). Directed shall use shall use the Sirius
Marks only in accordance with such specifications and only in connection with
the performance of its obligations under this Agreement. Notwithstanding the
foregoing, Directed shall obtain Sirius' written approval prior to any use of
the Sirius Marks. Directed acknowledges Sirius' ownership of and exclusive right
in the Sirius Marks. Directed acknowledges the validity of any trademark
registration relating to the Sirius Marks, and agrees that it will not claim any
right, title, or interest in or to the Sirius Marks. Upon termination or
expiration of this Agreement; Directed shall promptly discontinue the use of the
Sirius Marks.
(b) Directed acknowledges and agrees that it has no rights to use the
trademarks, service marks, logos or other commercial symbols of any content,
programming, distribution
-11-
(other than Directed itself), retail or other partner of Sirius, except as
expressly authorized in writing by Sirius.
(c) Directed shall provide Sirius with guidelines for the use of
Directed's service marks, trademarks, logos, and other commercial symbols (the
"DIRECTED MARKS"). Sirius shall use the Directed Marks only in accordance with
such specifications. Notwithstanding the foregoing, Sirius shall obtain
Directed's written approval prior to any use of the Directed Marks. Sirius
acknowledges Directed's ownership of and exclusive right in the Directed Marks.
Sirius acknowledges the validity of any trademark registration relating to the
Directed Marks, and agrees that it will not claim any right, title, or interest
in or to such Directed Marks. Upon termination or expiration of this Agreement,
Sirius shall promptly discontinue the use of the Directed Marks.
SECTION 7.02. Existing Intellectual Property. All intellectual property
developed or created prior to the date of this Agreement (the "EXISTING
INTELLECTUAL PROPERTY") is and shall remain the property of the Party which
made, developed or created or presently owns such Existing Intellectual Property
and, unless otherwise expressed in this Agreement, no license is implied or
granted herein to any Existing Intellectual Property by virtue of this
Agreement.
SECTION 7.03. New Intellectual Property. Any new intellectual property
that is developed or created by Directed for use in, or in connection with,
Sirius Receivers or the Sirius Service (the "NEW INTELLECTUAL PROPERTY") shall
be the joint property of Sirius and Directed. Each Party shall be free to use
and exploit such New Intellectual Property without restriction and without
accounting in any way to the other Party; provided that Directed shall not
license or provide such New Intellectual Property to, or otherwise utilize any
such Intellectual Property for the benefit of, a Competitor. This Section 7.03
shall in no way be construed as an obligation on Directed or Sirius to develop
New Intellectual Property.
SECTION 7.04. Survival. This Article VI shall survive the expiration or
earlier termination of this Agreement.
ARTICLE VIII
TERM
SECTION 8.01. Term. The term of this Agreement (the "TERM") shall commence
on the date hereof and shall extend until the third anniversary of the date
hereof. On or before the second anniversary of the date hereof, Sirius and
Directed shall commence good faith discussions regarding extension of the Term
beyond such third anniversary and any related amendments to the terms and
conditions contained herein. Sirius and Directed shall use commercially
reasonable efforts to execute written documentation of any mutually agreeable
extension at least six months prior to the expiration of the Term.
-12-
ARTICLE IX
TERMINATION
SECTION 9.01. Special Termination Events. (a) Either Party may terminate
this Agreement immediately, without notice to the other party, upon the
occurrence of any of the following events: (i) the other Party becomes the
subject of a bankruptcy petition filed in a court in any jurisdiction, whether
voluntary or involuntary (which petition, if involuntary, is not dismissed
within ninety days of such filing), (ii) a receiver or a trustee is appointed
for all or a substantial portion of the other Party's assets or (iii) the other
Party makes an assignment for the benefit of its creditors.
(b) Directed may terminate this Agreement upon thirty days written notice
to Sirius pursuant to Section 4.02(a).
SECTION 9.02. Termination for Breach. Either party may terminate this
Agreement in the event that the other Party (the "DEFAULTING PARTY") breaches or
fails to perform any material covenant or obligation contained in this
Agreement, or any representation or warranty made by the Defaulting Party under
this Agreement ceases to be true and correct in all material respects and such
breach, failure or cessation continues uncured for a period of fifteen days
after the Defaulting Party receives notice thereof from the non-Defaulting Party
or, if the same cannot be cured within such fifteen day period, the Defaulting
Party fails within such period to commence action reasonably likely to cure such
breach, failure or cessation or thereafter fails to diligently pursue such
action or in any event does not in fact cure such breach, failure or cessation
within thirty days of receiving notice thereof.
SECTION 9.03. Effect of Termination. (a) Upon termination of this
Agreement, (i) Sirius and Directed shall each be entitled to retain any
documents or materials reflecting New Intellectual Property; (ii) Sirius shall
be responsible for all Product warranties, warranty processing and cost,
associated with returned Product as of the date of termination; and (iii) Sirius
shall accept the transfer of all purchase orders placed by Directed to
Authorized Manufacturers for Products that could not be cancelled.
(b) Sirius and Directed shall work together in good faith to facilitate an
efficient transition after the termination date in an effort to minimize any
adverse impact on Approved Dealers and Authorized Manufacturers.
ARTICLE X
REPRESENTATIONS AND WARRANTIES
SECTION 10.01. Representations and Warranties of Sirius. Sirius represents
and warrants to Directed that:
(a) Sirius is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Sirius has the power and
authority and all governmental licenses, authorizations, consents and approvals
to perform its obligations under this Agreement. Sirius is duly qualified as a
foreign corporation and in good standing under the laws of each jurisdiction
where its ownership, lease or operation of property or the conduct of its
business requires such qualification.
-13-
(b) The execution, delivery and performance by Sirius of this Agreement
has been duly authorized by all necessary corporate action, and does not and
will not contravene the terms of Sirius's Amended and Restated Certificate of
Incorporation or Amended and Restated By-Laws, conflict with, or result in any
breach or contravention of, any contractual obligation to which Sirius is a
party or any order, injunction, writ or decree of any governmental authority to
which Sirius or its property is subject or violate any requirement of law.
(c) This Agreement constitutes the legal, valid and binding obligation of
Sirius, enforceable against Sirius in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
SECTION 10.02. Representations and Warranties of Directed. Directed
represents and warrants to Sirius that:
(a) Directed is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Directed has the
power and authority and all governmental licenses, authorizations, consents and
approvals to own its assets, carry on its business and to execute, deliver and
perform its obligations under this Agreement. Directed is duly qualified as a
foreign corporation and in good standing under the laws of each jurisdiction
where its ownership, lease or operation of property or the conduct of its
business requires such qualification.
(b) The execution, delivery and performance by Directed of this Agreement
has been duly authorized by all necessary corporate action, and does not and
will not contravene the terms Directed's Articles of Incorporation or By-Laws,
conflict with, or result in any breach or contravention of, any contractual
obligation to which Directed is a party or any order, injunction, writ or decree
of any governmental authority to which Directed or its property is subject or
violate any requirement of law.
(c) This Agreement constitutes the legal, valid and binding obligation of
Directed, enforceable against Directed in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
(d) Directed shall comply with all customs, technology transfer and other
applicable import and export laws, regulations and controls.
ARTICLE XI
CONFIDENTIALITY; DELIVERY OF INFORMATION
SECTION 11.01. General. (a) All information furnished or disclosed by
either Sirius or Directed (a "DISCLOSING PARTY") to the other (a "RECEIVING
Party") which is (i) marked with
-14-
a restrictive notice or otherwise designated in writing as proprietary, (ii)
stated to be proprietary at the time of disclosure or (iii) would logically be
considered confidential by virtue of its relation to the work contemplated by
this Agreement (collectively, "INFORMATION") shall be deemed the property of the
Disclosing Party and shall be returned (along with all copies and other
reproductions thereof) to the Disclosing Party promptly upon request. All
information provided to Directed by Sirius which relates to the Sirius Service,
Sirius Receivers, Products or Sirius' business plans, results, forecasts or
strategies shall be considered information, whether or not marked as provided
above. Unless such information: (i) was previously known to the Receiving Party
free of any obligation to keep it confidential, (ii) has been or is subsequently
made public by the Disclosing Party or a third party under no obligation of
confidentiality, or (iii) is independently developed by the Receiving Party,
then the Receiving Party shall, for a period ending three years after the end of
the Term, use the same degree of care, but no less than a reasonable standard of
care, as it uses with regard to its own proprietary information to prevent
disclosure, use or publication thereof. Except as set forth in paragraph (b)
below, information furnished hereunder may be used by a Receiving Party solely
for performance of its obligations under this Agreement and may be used for
other purposes only upon such terms and conditions as may be agreed upon by the
Disclosing Party in writing.
(b) Neither Sirius nor Directed shall disclose any of the terms and
conditions of this Agreement without the prior written consent of the other
Party unless such disclosure is required by law. Notwithstanding the foregoing,
each Party agrees that the other may disclose this Agreement in its reports,
registration statements and other documents required to be filed with the SEC
and may file this Agreement as an exhibit to such reports and as otherwise may
be required by the rules and regulations of the SEC, any other applicable
regulatory agencies or any national securities exchange.
(c) The Parties agree that their obligations under this Section 11.01
shall survive any termination of this Agreement.
ARTICLE XII
INDEMNIFICATION; LIMITATION ON LIABILITY; INSURANCE
SECTION 12.01. Indemnity. (a) Subject to the limitations set forth in
Section 12.02, Directed shall defend, indemnify and hold harmless Sirius, its
affiliates and their respective employees, officers and directors from and
against any and all third party claims and resulting damages, costs, and other
liabilities and expenses (including reasonable attorneys' fees and expenses)
arising out of: (i) Directed's breath of any of its obligations under this
Agreement; (ii) Directed's negligence or other wrongful conduct related to this
Agreement; or (iii) the development, manufacturing, distribution, marketing or
sale of Directed/Sirius Accessory Products.
(b) Subject to the limitations set forth in Section 12.02, Sirius shall
defend, indemnify and hold harmless Directed, its affiliates and their
respective employees, officers and directors from and against any and all third
party claims and resulting damages, costs, and other liabilities and expenses
(including reasonable attorneys' fees and expenses) arising out of: (i) Sirius'
breach of any of its obligations under this Agreement; or (ii) Sirius'
negligence or other wrongful conduct related to this Agreement.
-15-
(c) Sirius shall defend, indemnify and hold harmless Directed, Directed,
its affiliates and their respective employees, officers and directors from and
against any and all damages, costs and other liabilities and expenses (including
reasonable attorneys' fees and expenses) arising out of or in connection with a
third party claim that any Product based on a Sirius reference design (other
than any Directed/Sirius Accessory Product) infringes any third party legal
right or misappropriates any trade secret. Notwithstanding the terms of this
Section 12.01(c), Sirius shall have no indemnification obligation with respect
to any claim of any kind to the extent it results from: (i) modification of the
applicable Product by a person or entity other than Sirius or its Authorized
Manufacturers; or (ii) Directed's failure to use updated or modified Products
provided by Sirius or its Authorized Manufacturers.
(d) A Party wishing to be indemnified under this Section 12.01 must: (i)
promptly notify the indemnifying Party in writing of the claim; (ii) grant the
indemnifying Party sole control of the defense and settlement of the claim; and
(iii) provide the indemnifying Party with all assistance, information and
authority reasonably required for the defense and settlement of the claim, at
the indemnifying Party's expense.
SECTION 12.02. Limitation of Liability. NEITHER PARTY SHALL BE LIABLE FOR
ANY INDIRECT, SPECIAL, PUNITIVE, EXEMPLARY, INCIDENTAL OR CONSEQUENTIAL DAMAGES
OF THE OTHER PARTY OR ANY THIRD PARTY, WHETHER FORESEEABLE OR NOT AND WHETHER
BASED ON NEGLIGENCE OR OTHERWISE.
SECTION 12.03. Insurance. (a) Directed shall secure and maintain in full
force and effect at all times during the Term and for two years thereafter:
(i) comprehensive general liability insurance in the minimum
amount $5,000,000 per occurrence, with aggregate coverage of
at least $5,000,000; and
(ii) (i) umbrella insurance in the minimum amount $3,000,000 per
claim, with aggregate coverage of at least $5,000,000.
Directed shall name Sirius as an additional insured and loss payee on each
insurance policy. Directed shall ensure that each insurance policy contains an
endorsement deleting the condition thereof entitled "OTHER INSURANCE" as to any
insurance in force for or in the name of Sirius. Directed shall ensure that each
insurance policy includes a provision requiring the insurance company issuing
such insurance policy to give Sirius prompt notice of any revision or
modification to any insurance policy affecting Sirius' rights or any
cancellation of any such insurance policy.
(b) Sirius shall secure and maintain in full force and effect at all times
during the Term and for two years thereafter:
(i) comprehensive general liability insurance in the minimum
amount $5,000,000 per occurrence, with aggregate coverage of
at least $5,000,000; and
(ii) umbrella insurance in the minimum amount $3,000,000 per claim,
with aggregate coverage of at least $5,000,000.
-16-
Sirius shall name Directed as an additional insured and loss payee on each
insurance policy. Sirius shall ensure that each insurance policy contains an
endorsement deleting the condition thereof entitled "Other Insurance" as to any
insurance in force for or in the name of Directed. Sirius shall ensure that each
insurance policy includes a provision requiring the insurance company issuing
such insurance policy to give Directed prompt notice of any revision or
modification to any insurance policy affecting Directed's rights or any
cancellation of any such insurance policy.
SECTION 12.04. Survival. This Article XII shall survive the expiration or
earlier termination of this Agreement.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. Notices. All notices and other communications hereunder
shall be in writing, shall be delivered personally, via facsimile or by
reputable international courier and shall be deemed given when delivered
personally, five Business Days after being delivered to a reputable
international courier or when telecopied (with confirmation of the transmission
received by the sender) to the Parties at the following addresses (or at such
other address for a Party as shall be specified by like notice):
If to Sirius, to: If to Directed, to:
Sirius Satellite Radio Inc. Directed Electronics, Inc.
1221 Avenue of the Americas Xxx Xxxxx Xxx
00xx Xxxxx Xxxxx, XX 00000
Xxx Xxxx, Xxx Xxxx 00000 Facsimile No.: (000)000-0000
Facsimile No.: (000) 000-0000 Attention: General Counsel
Attention: General Counsel
Notices by e-mail or other means not expressly permitted by this Agreement shall
be of no force and effect under this Agreement.
SECTION 13.02. Amendment. (a) Neither this Agreement nor any of the terms
hereof may be amended, supplemented, waived or modified except by an instrument
in writing signed by the Party against which the enforcement of such amendment,
supplement, waiver or modification shall be sought.
(b) Prior to the introduction of any new product not covered by this
Agreement, Sirius and Directed shall negotiate in good faith to amend this
Agreement to cover sales by Directed of such products and establish the product
costs, activation fees and other terms that shall apply to such products.
SECTION 13.03. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
principles of conflicts of laws that may require the application of the laws of
another jurisdiction.
-17-
SECTION 13.04. Dispute Resolution. If a dispute arises out of or relates
to this Agreement, or its alleged breach, and if such dispute cannot be settled
through good faith negotiations within ten days, the Parties shall refer such
dispute to their respective chief executive officers or other senior officers
empowered to resolve such dispute. If such officers are unable to resolve such
dispute within ten days (or such longer period as the parties may agree), such
dispute shall be referred to binding arbitration in New York, New York. Any such
arbitration shall be conducted under the rules of the American Arbitration
Association on the most expedited basis permitted under such rules.
SECTION 13.05. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, between the Parties with respect to the subject matter hereof.
SECTION 13.06. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other terms, conditions and provisions of this Agreement
shall nevertheless remain in full force and effect.
SECTION 13.07. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either Party (whether by
operation of law or otherwise) without the prior written consent of the other
Party; provided that such consent shall not be unreasonably withheld or delayed
in the event of a sale or transfer of all or substantially all of the assets of
Directed, a sale or transfer of the controlling interest of all or substantially
all of the outstanding shares of Directed's common stock or the merger of
Directed with another entity that is not a Competitor.
SECTION 13.08. Waiver. The failure of a Party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver nor shall it deprive such Party of the right thereafter to insist upon
strict adherence to such term or any other term of this Agreement. Any waiver,
permit, consent or approval of any kind or character must be in writing, signed
by a senior officer of the applicable Party and shall be effective only to the
extent specifically set forth therein.
SECTION 13.09. Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the Parties and delivered to the other Party. Delivery of an executed
counterpart by facsimile shall be as effective as delivery of a physical
signature page.
-18-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SIRIUS SATELLITE RADIO INC. DIRECTED ELECTRONICS, INC.
By: /s/ Xxxxxx X. Law By: /s/ Xxx Xxxxxxx
------------------------------------------- -------------------
Xxxxxx X. Law Xxx Xxxxxxx
Senior Vice President and General Manager, President and
Consumer Electronics Division Chief Executive Officer
-19-
[***] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
EXHIBIT A
Approved Dealers
________________
[***]
[***] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
EXHIBIT B
Directed Electronics Pricing
________________
PnPs DLPs
--------------------------------------------------------- ------------------------------------
Sportster Starmate
---------------------------------- --------------------- Alpine Kenwood JVC Sirius
Production SP-TK1 SP-R1 SP-C1 SP-H1 XX-X0 XX-0 XX-0 XX-X0 XXX-XXX0 XXX-XXX0 XXX-XXX0 SCFM-1
------ ----- ----- ----- ----- ---- ---- ----- -------- -------- -------- ------
(on or
before (after
4/2/05) 4/2/05)
Cost (FOB
location of
manufacturer) [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
Transportation [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
Duties [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
Additional Fees [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
Landed Cost [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
Accessories
------------------------------------------------------------------
Recep Tec Dot Home Int. Home Ext. FM Extension
Production Car Antenna Antenna Antenna Antenna Modulator Cable
----------- ------- ------- --------- --------- ---------
Part # Part # Part # Part # Part # Part #
----------- ------- ------- --------- --------- ---------
14105 14120 14215 14210 14110 14230
Cost (FOB
location of
manufacturer) [***] [***] [***] [***] [***] [***]
Transportation [***] [***] [***] [***] [***] [***]
Duties [***] [***] [***] [***] [***] [***]
Additional Fees [***] [***] [***] [***] [***] [***]
Landed Cost [***] [***] [***] [***] [***] [***]