DISTRIBUTION AND FULFILLMENT AGREEMENT
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This DISTRIBUTION AND FULFILLMENT AGREEMENT (the "Agreement") is made as of
May 12, 2000 (the "Effective Date") by and between XXX.XXX INC., a Delaware
corporation, with its principal place of business at 00 Xxxxxxxxxx, Xxxxx Xxxxx,
XX 00000 (the "Seller"), and XXXXXX ENTERTAINMENT INC., a Tennessee corporation,
with its principal place of business at Xxx Xxxxxx Xxxxxxxxx, Xx Xxxxxx,
Xxxxxxxxx 00000 (the "Distributor").
1. Definitions.
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1.1 "Back Ordered Products" means Products that Distributor does not
have in stock in its shipping facilities at the time an Order is submitted
for them.
1.2 "Business Day" means a day on which Distributor regularly
conducts business, excluding holidays.
1.3 "Customer" means a person in the United States, its territories
and protectorates, who orders Products from Seller's online retail store.
1.4 "Damaged Products" means Products shipped by Distributor which
are damaged during shipment to Customers to the extent that the Products
cannot be used for their intended purpose. Products damaged while in the
care, custody, or control of the Customer are not Damaged Products for
purposes of this Agreement.
1.5 "Defective Products" means Products shipped by Distributor which
contain manufactured defects which prevent them from being used for their
intended purpose.
1.6 "EDI" means the EDI/X.12 based order delivery format for
transmitting data between computers via a value-added network (mailbox
service provider) or via the Internet.
1.7 "Electronic Report" means information provided electronically.
1.8 "FTP" means file transfer protocol utilized to provide
information necessary for placing orders with Distributor via a value-added
network or the Internet.
1.9 "Inserts" means custom insertions acceptable to Distributor which
Seller delivers to Distributor at no expense to Distributor and which
Seller requests to be included with Shipments.
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1.10 "Order" means a Product order placed by Seller in accordance with
this Agreement.
1.11 "Priority Order" means an Order to be shipped via overnight or
second day air freight.
1.12 "Products" means Distributor's (or its vendors') products Seller
may purchase pursuant to this Agreement.
1.13 "Shipment" means a shipment of Product by Distributor in response
to an Order.
1.14 "Shipping Facilities" means Distributor facilities in the United
States designated from time-to-time by Distributor as direct-to-consumer
distribution facilities.
1.15 "Standard Order" means an Order other than a Priority Order.
1.16 "Unmerchandisable Products" means Products shipped by
Distributor which are shopworn and/or soiled.
2. Electronic Data Transmission. Electronic data transmissions between
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Distributor and Seller shall be via EDI. Distributor will furnish Seller the
specifications for FTP and any other means of electronic data transmission
(other than EDI). Distributor may change those specifications from time-to-time
on not less than 30 days prior written notice to Seller.
3. Fulfillment Services.
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3.1 Orders. Seller will transmit Orders to Distributor via
electronic data transmission. Seller will use commercially reasonable
efforts to send Orders to Distributor in continuous serial transmissions in
intervals of no less than one hour. Distributor will use commercially
reasonable efforts to service Priority Orders and Standard Orders as set
out in Section 3.2 below. Each Order shall contain the following
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information: (a) the Customer's name and complete shipping address; (b) the
Distributor-approved shipping method to be used; (c) the text of any
special messages to the Customer; and (d) the Products to be shipped and
their quantity.
3.2 Fulfillment. After receipt of an Order, Distributor will: (a)
fill the Order from Products in stock at the Shipping Facilities; (b) print
all packing slips excluding Inserts; (c) insert all packing slips and
Inserts; (d) print and affix shipping labels on Shipments; (e) when made
available by Distributor, print the text of any reasonable special message
acceptable to Distributor on the standard packing slip requested by Seller
in the Order; (f) ship the Order to the Customer; (g) order from the vendor
any Back Ordered Products and notify Seller that the
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Back Ordered Products are backordered and the expected arrival date if
available (in which case Seller may, via electronic data transmission to
Distributor, or other mutually agreed method of communication, elect to
terminate the Order with respect to the Back Ordered Products or in total);
and (h) if not terminated as described in clause (g), ship any Back Ordered
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Products following their receipt by Distributor at the Shipping Facilities
in accordance with the terms of this Section. Provided Distributor receives
a Priority Order and the related picking ticket is printed no later than
[***], Central Time on a Business Day, Distributor will use commercially
reasonable efforts to ship the Order [***]. If a Priority Order is received
and the related picking ticket is printed after [***], Central Time on a
Business Day, Distributor will use commercially reasonable efforts to ship
the Order [***]. Provided Distributor receives a Standard Order and the
related picking ticket is printed no later than [***], Central Time, on a
Business Day, Distributor will use commercially reasonable efforts to ship
the order [***]. If a Standard Order is received and a related picking
ticket is printed after [***], Central Time, on a Business Day, Distributor
will use commercially reasonable efforts to ship the Order [***]. If
Distributor does not ship an Order as provided above, Distributor will
notify Seller no later than [***], and Seller may without obligation cancel
the Order by notice to Distributor via electronic data transmission. Seller
will also have the right to cancel an Order by notice to Distributor via
electronic data transmission (or other mutually agreed method of
communication) [***] with respect to that Order. Seller will not be
invoiced for cancelled Orders. Seller will notify Customers of Order
cancellations. For any Orders not sent in a continuous serial transmission
in intervals of no less than [***], Distributor will use commercially
reasonable efforts to ship the Order within the later of [***] of the Order
being received by Distributor and being available to be printed in
Distributor's warehouse, or [***].
3.3 Packing Slips. Packing slips printed and inserted in Shipments
by Distributor will be agreed upon in "look and feel" by Distributor and
Seller, based on Seller's specifications and Distributor's capability.
3.4 Shipment. Distributor will use commercially reasonable efforts
to ship Products in accordance with the Distributor-approved shipping
methods specified by Seller in the Order. Distributor will use
commercially reasonable efforts to package all Shipments in a manner to
prevent damage during shipment, the "look and feel" of which packaging will
be agreed upon by Distributor and Seller, based on Seller's specifications
and Distributor's capability. Distributor will cooperate with Seller in
tracking any lost shipments and filing any related carrier claims. Except
as specifically set out in this Agreement, all shipping shall be at the
expense of Seller, or, if paid by Distributor, reimbursed by Seller at
Distributor's cost (including discounts). In the event of a planned system
shutdown during a Business Day exceeding [***] or a physical inventory that
delays shipments for more than [***], Distributor shall, at no cost to
Seller,
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[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
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[***]. The risk of loss for Products shall pass from Distributor when the
Products are delivered to the carrier for shipment to the Customers.
Distributor shall provide Seller a [***] of net purchases per month credit,
which Seller and Distributor hereby agree will be deemed to compensate
Seller for any mis-shipments by Distributor.
3.5 Master Database License Agreement. Distributor and Seller hereby
ratify and affirm the terms and conditions of the Master Database License
Agreement between Seller and XXXXXXXXXX.XXX INC., dated December 3, 1998,
as to which Seller is the successor to XXXXXXXXXX.XXX INC. (the "Database
License"). The Database License describes the Products as of the most
recent update of the Xxxxxx Entertainment Inc. Master Database (the "Master
Database") made available to Seller. Distributor makes no representation or
warranty as to the availability of any of the Products, whether or not
included in the Master Database.
3.6 Reports to Seller.
(a) [***], Distributor will furnish Seller Electronic Reports of
the following: (A) all Shipments made that Business Day by Order
number and tracking number (if available), all Products contained in
each Order, and all Back Ordered Products by order number, and (B)
Orders received, but not shipped, and the status of each such Order;
and (C) all Product returns (identified by Return Authorization
Number) processed by Distributor indicating quantity and item(s)
received and other information in reasonably sufficient detail (i.e.
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Customer and invoice number) to allow Seller to properly credit
Customers for such returns.
(b) [***], Distributor shall provide a statement of account which
details (i) all invoices sent to Seller during the prior calendar
month; (ii) all payments received from Seller during the prior
calendar month, and other credits made against Seller's payment
obligations; and (iii) all unpaid invoices.
3.7 License. Seller hereby grants to Distributor the license to (a)
distribute the Inserts in connection with the Products, and (b) use Seller's
trademarks in accordance with Seller's specifications on Product invoices and
other materials provided to Customers.
3.8 Non-Exclusive Dealing. Nothing in this Agreement requires
Distributor to deal exclusively with Seller in any capacity or Seller to deal
exclusively with Distributor in any capacity.
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[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
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4. Returns.
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4.1 Returns Generally. Return allowance rights of Seller with respect
to particular Products are set out in Exhibit A. In order for returned
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Products (including Defective Products, Unmerchandisable Products, Damaged
Products, and Products erroneously shipped to Customers) to be eligible for
credit pursuant to this Agreement, Seller agrees to the following
procedures:
(i) Seller must furnish Distributor a request for return
authorization (RMA) no later than [***] after shipment of the relevant
Products to a Customer;
(ii) Seller will furnish the Customer desiring to return
Products a return authorization (RA) number of no more than eight
characters, all of which must be alpha numeric; and
(iii) Seller will furnish to Distributor Seller's RA number
furnished to the Customer; the Seller's account number for that
Customer; the item number(s) or UPC number(s) of the Products being
returned; the quantity of each Product being returned; Seller's
invoice number to which the return is to be applied; and the reason
for the Product return (carrier damage, shipped in error, defective,
Customer error, Customer change in preference, etc.).
Seller will be issued a credit by Distributor for [***] for the returned
Products (excluding freight and handling fees) or, [***]; provided,
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however, that if Seller furnishes Distributor the applicable invoice number
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and the returned Products have been received by Distributor no more than
[***] after the invoice date, such credit will be equal to [***] shown on
that invoice. In the event of the return by Customers of Defective
Products, Unmerchandisable Products, Products shipped erroneously to
Customers, and/or Damaged Products, the credit set out in this paragraph
will include [***]. Distributor will provide Seller with information in
reasonably sufficient detail (i.e. Seller's RA number and invoice number
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(if provided by Customer)) to allow Seller to properly credit Customers for
such returns. Credit memos for returns will be processed by Distributor and
delivered to Seller within [***] after Distributor's receipt of the
returned Product. Credits issued to Seller under any such credit memos will
be applied [***]. Seller will reimburse Distributor per normal payment
terms set out in Section 5.3 for any freight costs charged to Distributor
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by the carrier due to Customer refusal to accept delivery of Products
correctly shipped to the Customer which are then returned by the carrier to
Distributor. Except as set out in Section 3.4, Distributor's sole liability
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for any Defective Products, Unmerchandisable Products, Products erroneously
shipped to Customers, and/or Damaged Products will be acceptance of their
return and issuance of the credit set out in this
____________________
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
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paragraph. If Seller desires replacement of any of the four types of
Products described in the preceding sentence, Seller will initiate a new
order for the replacement Products.
4.2 Limitation on Return of Defective Products, Unmerchandisable
Products, and Damaged Products. On a category-by-category basis, using the
categories set out in Exhibit A, the return rights of Seller with respect
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to Defective Products, Unmerchandisable Products, and Damaged Products will
be limited, on a monthly basis, to [***], on a title-by-title basis, of net
units purchased, plus pass through of any additional damaged/defective
return privileges granted by the studio or other manufacturer for that
particular title.
4.3 Mint, Resalable Condition. All Product returned to Distributor
(except for returns of Defective Products, Unmerchandisable Products, or
Damaged Products) must be with the original packaging intact (including
manufacturer's shrink wrap) and otherwise in mint, resalable condition. No
credit will be issued for any returned Product not in mint, resalable
condition with the original packaging intact, except as set forth above.
5. Payment.
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5.1 Prices. Product and service prices to be paid by Seller to
Distributor are set forth on Exhibit A.
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5.2 Fees. Fees for services provided by Distributor to Seller are
set forth on Exhibit A.
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5.3 Payment Terms. Distributor will invoice Seller upon shipment of
Product. All invoices shall be due and payable [***] from invoice date.
Seller understands that if a credit line with Distributor is established,
it may be modified from time-to-time based upon Distributor's credit review
and credit policies. Any amounts not paid when due will be subject to a
late charge of [***] per month ([***] per annum) on the overdue balance
(or, if less, the maximum amount permitted by applicable law). Disputed
amounts are limited to incidents where an incorrect price has been charged,
Distributor has failed to comply with Seller's shipping instructions, or
duplicate orders were issued by Distributor. If an item is disputed, both
parties will work in good faith to resolve the disputed item within [***]
and the item will not accrue late charges during that time. If the parties
cannot resolve the disputed item within the [***] time frame, said disputed
amount will start accruing late charges on [***] at the rate set forth
above until resolved. Payments received from Seller will be credited first
to unpaid interest.
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[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
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5.4 Advertising. Advertising is addressed in Exhibit A.
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6. Disclaimer. DISTRIBUTOR PROVIDES ALL PRODUCTS, MATERIALS AND SERVICES
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TO SELLER AND ITS CUSTOMERS "AS IS," AND DISTRIBUTOR DISCLAIMS ALL WARRANTIES
AND CONDITIONS, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED
WARRANTIES OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY, AND FITNESS FOR A
PARTICULAR PURPOSE. However, the foregoing disclaimer does not limit any
warranties provided by Product vendors to either Seller or its Customers. To the
extent any Order includes a message from the Customer to the recipient of the
Order, Seller acknowledges that Distributor will not screen or review any such
message and Seller agrees to indemnify and hold harmless Distributor from and
for any claim allegation, cost, loss, or liability of Distributor related to any
such message or its inclusion in any order. Each party acknowledges that it has
not entered into this Agreement in reliance upon any warranty or representation
except as specifically set forth herein. DISTRIBUTOR HAS NOT LICENSED OR
PROVIDED AND DOES NOT HEREBY LICENSE OR PROVIDE SELLER THE RIGHT TO USE ANY
LOGO, TRADEMARK, OR OTHER INTELLECTUAL PROPERTY OF DISTRIBUTOR, ANY SUPPLIER OR
VENDOR, OR ANY OTHER PARTY.
7. Limitation of Liability. NEITHER DISTRIBUTOR NOR SELLER SHALL BE
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LIABLE FOR PUNITIVE, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST
PROFITS (INCLUDING DUE TO NEGLIGENCE) ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT, EVEN IF SUCH PARTY HAS NOTICE OF THE POSSIBILITY OF SUCH DAMAGES.
THE ONLY LIABILITY DISTRIBUTOR WILL HAVE WITH RESPECT TO ANY DEFECTIVE PRODUCTS,
DAMAGED PRODUCTS, UNMERCHANDISABLE PRODUCTS, AND/OR PRODUCTS ERRONEOUSLY SHIPPED
WILL BE THE RETURN RIGHTS OF CUSTOMERS AND THE OBLIGATION TO PROVIDE THE CREDITS
DESCRIBED IN THIS AGREEMENT. IN THE EVENT OF AN ALLEGED BREACH OF THIS
AGREEMENT BY DISTRIBUTOR, THE MAXIMUM LIABILITY OF DISTRIBUTOR TO SELLER SHALL
NOT EXCEED $1,000,000. IN THE EVENT OF AN ALLEGED BREACH OF THIS AGREEMENT BY
SELLER, THE MAXIMUM LIABILITY OF SELLER TO DISTRIBUTOR, IN ADDITION TO PAYMENT
OF ALL AMOUNTS DUE TO DISTRIBUTOR UNDER SECTION 5, SHALL NOT EXCEED $1,000,000.
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THE PRECEDING TWO SENTENCES SHALL NOT APPLY TO ANY BREACHES OF SECTIONS 9, 11,
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12.11, OR 12.12.
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8. Term and Termination.
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8.1 Term. Unless earlier terminated as specified below, this
Agreement expires December 2, 2001; provided, however, that Distributor may
terminate this Agreement immediately in the event Seller becomes more than
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[***] past due or otherwise violates its credit terms with Distributor.
This Agreement shall automatically renew for additional one year terms
unless one party provides the other written notice of non-renewal [***]
prior to the expiration of the initial or any renewal term. During any
renewal term this Agreement may be terminated by either party at any time
for any reason on [***] prior written notice to the other.
8.2 Event of Default. Either party may terminate this Agreement
immediately upon the occurrence of an Event of Default by the other party.
As used herein, an "Event of Default" means the defaulting party's failure
to cure, after receipt of not less than 30 days' prior written notice from
the non-defaulting party, any of the following: (a) failure of the
defaulting party to observe or perform any condition or obligation imposed
on the defaulting party under this Agreement (including payment
obligations); (b) breach of any warranty made by the defaulting party under
this Agreement; or (c) filing of a voluntary petition in bankruptcy or
having an involuntary petition filed against the defaulting party, or the
execution of an assignment for the benefit of creditors of the defaulting
party. The option to terminate this Agreement shall be in addition to, and
not in lieu of, any other remedy available to the terminating party under
this Agreement or at law or equity, all such remedies being cumulative.
8.3 Effect of Termination. Upon expiration or termination, at Seller's
option, Distributor will either (a) fulfill all pending Orders in
accordance with their terms, in which case all applicable covenants and
licenses under this Agreement shall survive to the limited extent necessary
to fulfill such Orders, or (b) cancel all pending Orders and immediately
refund any payments already made for such pending Orders and any credits
due. Absent election by Seller, Distributor may elect (a) or (b). Further,
the parties will promptly reconcile accounts payable and receivable and
bring the balance owed, if any, current. Sections 2, 4, 6, 7, 8.4, 9, 10,
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11, and 12 shall survive termination or expiration.
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9. Confidentiality. The parties agree, during the term of this Agreement
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and for the five year period following its termination or expiration, to keep
strictly confidential and not disclose to any party, other than its agents,
employees, contractors, or advisors, and then only on a need to know basis after
having informed such individuals of the confidential nature of the information
and such party's obligation to protect that confidentiality and not to disclose
such information except as set out herein, the following: (a) any term or
condition of this Agreement or of any transaction entered into pursuant to it,
or (b) any information about the other party or its business, operations,
products, finances, customers, distributors, systems, budgets, or liabilities
obtained in connection with this Agreement or the transactions contemplated by
it. The provisions of this Section shall not apply to information which (v) is
already known to the receiving party or is publicly available at the time of
disclosure; (w) becomes publicly available after disclosure through no act of
the receiving party; (x) is disclosed
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[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
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by the disclosing party without an obligation or reasonable expectation of
confidentiality; (y) is required by law or governmental agency to be disclosed
(after providing the disclosing party the opportunity to seek a protective order
or confidential treatment at its expense), or (z) is required by the Securities
and Exchange Commission. Neither party shall issue any press release or similar
publicity statement concerning this Agreement's existence or terms without both
parties' prior approval.
10. Compliance with Laws. At its own expense, each party will comply with
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all applicable laws and regulations regarding its activities related to this
Agreement.
11. Taxes.
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11.1 Generally. Seller is the seller of the Products to its Customers
and shall be solely responsible for any and all sales and similar taxes
arising from such sales. Subject to Section 11.2, SELLER SHALL FOREVER
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DEFEND, INDEMNIFY, AND HOLD HARMLESS DISTRIBUTOR AND ITS AFFILIATES, AND
THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AND CONTRACTORS, FROM ANY
AND ALL SALES, USE, AND SIMILAR TAX LIABILITY, INCLUDING INTEREST,
PENALTIES, AND RELATED CHARGES, ARISING FROM THE SALE OF THE PRODUCTS TO
CUSTOMERS OR THE SHIPMENT OF PRODUCTS BY DISTRIBUTOR TO CUSTOMERS
(COLLECTIVELY, "TAXES"), EXCEPT TO THE EXTENT SUCH TAXES ARE LEVIED ON THE
INCOME DISTRIBUTOR DERIVES FROM SALES TO SELLER (THE "TAX INDEMNIFICATION
OBLIGATION"). The Tax Indemnification Obligation shall be increased by and
include interest on any sum not paid when due, at the rate of [***] per
annum, compounded annually, until paid. Distributor represents and warrants
as of December 28, 2000, that no state has notified Distributor of, or
assessed Distributor for, any Taxes which would give rise to a Tax
Indemnification Obligation.
11.2 Nexus States. With respect to Taxes imposed by any state listed
on Exhibit B (each a "Nexus State"), the Tax Indemnification Obligation
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shall be limited to Taxes in connection with Orders received by Distributor
from Seller [***]. Distributor will establish a reserve equal to [***] (the
"After-Tax Reserve"). To the extent, on January 1, 2005, the After-Tax
Reserve exceeds the total of any and all liability of Distributor for Taxes
paid or incurred to each Nexus State in connection with Orders received by
Distributor from Seller on or after [***], that excess shall be applied to
any unpaid Tax Indemnification Obligation. To the extent any balance of the
After-Tax Reserve still remains, that balance will be paid to Seller, plus
interest on that balance from [***], to the date of payment, calculated at
[***] per annum, compounded annually. Distributor shall have no obligation
to hold the After-Tax Reserve in any fund,
____________________
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
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separate or otherwise, and, except as set out above, shall have no
obligation to pay Seller any interest or other income in connection with
the After-Tax Reserve.
12. General Provisions.
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12.1 Governing Law/Forum Selection. This Agreement will be governed
and construed in accordance with the laws of the State of Tennessee without
giving effect to conflict of laws principles. Both parties submit on a non-
exclusive basis to the jurisdiction and venue of the federal and state
courts sitting in Nashville, Tennessee or in Orange County, California, and
further agree that any cause of action arising under this Agreement may be
brought in such courts.
12.2 Severability; Headings. If any provision herein is held to be
invalid or unenforceable for any reason, the remaining provisions will
continue in full force without being impaired or invalidated in any way.
Headings are for reference purposes only and in no way define, limit,
construe or describe the scope or extent of such section.
12.3 Force Majeure. If performance hereunder is prevented, restricted
or interfered with by any action or condition whatsoever beyond the
reasonable control of a party, the party so affected, upon giving prompt
notice to the other party, shall be excused from such performance to the
extent of such prevention, restriction or interference. Each party shall
use commercially reasonable efforts to mitigate the effect of a force
majeure.
12.4 Independent Contractors. The parties are independent contractors,
and no agency, partnership, joint venture, employee-employer or franchisor-
franchisee relationship is intended or created by this Agreement. Neither
party shall make any warranties or representations on behalf of the other
party.
12.5 Notice. Except as otherwise specified, any notices hereunder
shall be given to the appropriate party at the address specified above or
at such other address as the party shall specify in writing. Notice shall
be deemed given upon personal delivery; if sent by fax, upon confirmation
of receipt; if sent by certified or registered mail, postage prepaid, three
mail delivery days after deposit in the U.S. mail; or if sent by overnight
courier, upon receipt.
12.6 Assignments. Neither party may assign this Agreement or its
rights or obligations under it without the prior written consent of the
other; provided, however, that either party may assign all of its rights
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and obligations under this Agreement without the prior written consent of
the other party if the assignee is (a) an entity which directly or
indirectly controls, is controlled by, or is under common control with the
assigning party, or (b) an acquirer of substantially all of the assets of
the assigning party via merger, stock sale, or other means; provided,
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further, that in each case the assignee expressly agrees in
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writing, for the benefit of the non-assigning party, to be bound by all
terms, conditions, and obligations of the Agreement and the non-assigning
party receives prompt notice of the assignment. In no event may either
party assign this Agreement to a party reasonably deemed a competitor of
the non-assigning party. In the event the assigning party is Seller or an
assignee of Seller, Distributor reserves the right to independently analyze
the credit line, if any, to be granted by Distributor to such assignee.
12.7 Counterparts. This Agreement may be signed in any number of
counterparts, each of which (when executed and delivered) shall constitute
an original instrument, but all of which together shall constitute one and
the same instrument. A telecopy signature shall be deemed an original
signature for the purposes of this Agreement.
12.8 Parties Bound. This Agreement shall be binding upon the parties
and their respective successors and assigns.
12.9 Entire Agreement; Waiver. Effective the Effective Date, the
terms and conditions of this Agreement amend, restate, and supersede those
in the supply agreement between Xxxxxx and XXXXXXXXXX.XXX, INC.,
predecessor to Seller, dated December 3, 1998, as amended by letter dated
August 23, 1999. This Agreement sets forth the entire understanding and
agreement of the parties, and supersedes any and all oral or written
agreements or understandings between the parties, as to the subject matter
of this Agreement. Except as otherwise provided herein, it may be changed
only by a writing signed by both parties. The waiver of a breach of any
provision of this Agreement will not operate or be interpreted as a waiver
of any other or subsequent breach.
12.10 Distributor Indemnification. Distributor agrees to indemnify
and defend Seller against, and hold Seller free and harmless from, any and
all loss, damage, settlement or expense (including reasonable legal
expenses), as incurred, resulting from or arising out of any breach of any
of Distributor's representations and warranties herein, the distribution
and sale of any of the Products, the use thereof, or any Product defects;
provided that Seller immediately notifies Distributor, in writing, of any
notice or claim of such loss, damage or expense of which it becomes aware,
and permits Distributor to control, in a manner not adverse to Seller, the
defense, settlement, adjustment or compromise of any such claim using
counsel reasonably acceptable to Seller; provided further that
Distributor's obligation under this Section 12.10 with respect to the
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representations and warranties in Section 12.13 (a), (b), and (d) or with
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respect to the distribution and sale of any of the Products, the use
thereof, or any Product defects, is additionally limited to
indemnification, defense, and holding free and harmless only to the extent,
if any, that Distributor is so indemnified, defended, and held free and
harmless by its supplier.
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12.11 Customer Data. All Customer information and other Customer data
collected by Seller pursuant to this Agreement shall be the exclusive
property of Seller and be subject to Section 9 of this Agreement. Such
information and data shall not be provided or disclosed to Distributor
except as reasonably necessary to perform its obligations under this
Agreement and may be used by Distributor only as reasonably necessary to
perform its obligations under this Agreement.
12.12 Records/Audit Rights. During the term of this Agreement,
Distributor shall keep and maintain detailed and accurate books and records
with regard to Product prices, Product costs, and shipping costs at such
address(es) as it shall notify Seller of in writing from time to time.
Seller or its representatives shall be entitled to review and audit such
books and records and/or compliance with the terms of this Agreement during
normal business hours upon reasonable notice to Distributor, as applicable,
and copy pertinent materials from such books and records relating to the
audit. Any information provided by Distributor in compliance with this
Section, and any notes, extracts, compilations or copies of it shall be
held in strict confidence by Seller and its representatives, be subject to
Section 9 of this Agreement, and be used only as reasonably necessary to
monitor compliance with this Agreement. The provisions of the preceding
sentence shall survive termination of this Agreement.
12.13 Distributor Representations and Warranties. Distributor
represents and warrants to Seller:
(a) that it has the rights and licenses (including without
limitation appropriate sublicense rights) necessary to permit Seller
to market, resell, and distribute the Products;
(b) that the manufacturers and vendors of the Products do not
prohibit Xxx.Xxx from allowing the resale of such Products via the
Internet;
(c) that (i) it has the full authority and legal right to carry
out the terms of this Agreement; (ii) it has taken all action
necessary to authorize the execution and delivery of this Agreement;
(iii) this Agreement is a legal, valid, and binding obligation of
Distributor enforceable in accordance with its terms, except as
limited by bankruptcy and other laws of general application relating
to or affecting the enforcement of creditors' rights; and (iv) it has
not entered into and is not currently a party to any agreement that
conflicts with the terms of this Agreement; and
(d) that the Products (i) shall be free and clear of all liens
and encumbrances and (ii) shall be free from defects (including
without limitation in workmanship, material, manufacture and design).
12
12.14 Seller Representations and Warranties. Seller represents and
warrants to Distributor that (a) it has the full authority and legal right
to carry out the terms of this Agreement; (b) it has taken all action
necessary to authorize the execution and delivery of this Agreement; (c)
this Agreement is a legal, valid, and binding obligation of Seller
enforceable in accordance with its terms, except as limited by bankruptcy
and other laws of general application relating to or affecting enforcement
of creditors' rights; and (d) it is not entered into and is not currently a
party to any agreement that conflicts with the terms of this Agreement.
12.15 Seller Indemnification. Seller agrees to indemnify and defend
Distributor against, and hold Distributor free and harmless from, any and
all loss, damage, settlement or expense (including reasonable legal
expenses), as incurred, resulting from or arising out of any breach of any
of Seller's representations and warranties herein, provided that
Distributor immediately notifies the Seller, in writing, of any notice or
claim of such loss, damage or expense of which it becomes aware and permits
Seller to control, in a manner not adverse to Distributor, the defense,
settlement, or compromise of any such claim using counsel reasonably
acceptable to Distributor.
"SELLER" "DISTRIBUTOR"
XXX.XXX INC. XXXXXX ENTERTAINMENT INC.
By:__________________________ By:____________________________
Print Name:__________________ Print Name: W. Xxxxxx Xxxxxx
Title:_______________________ Title: Senior Vice President, Finance
and Administration, Chief
Financial Officer, and Treasurer
13
EXHIBITS
--------
A. Pricing
B. Nexus States
14
EXHIBIT A
---------
It is intended by Distributor and Seller that the pricing and related terms and
conditions (including freight, and advertising) between them for the products
covered by this Agreement be [***]./__/ Thus, the prices and related terms and
conditions set out below will be reviewed and modified to the extent necessary
for Seller to obtain [***].
1. Rental Pricing:
Seller will receive [***] pricing on all rental videocassette product
(suggested retail price of [***] and higher). Gross cost is defined as
Distributor's actual replacement cost. Seller will receive [***] on single
purchases of multi-pack titles.
2. Sell-through Pricing:
Seller will receive [***] pricing, on all sell through videocassette
product, (suggested retail price of [***] and under) with the exception of
"Feature Sellthrough". Seller will receive [***] on Feature Sellthrough.
Feature Sellthrough is defined as, any new or re-release, with a suggested
retail price of $29.99 and under, in which the studio has set a national
sales goal of 2 million or more units. Feature Sellthrough titles will
revert to non feature pricing 30 days after release date.
3. Videocassette Returns:
Seller will receive a [***] return allowance on all unopened videocassette
product in mint, resalable condition.
4. Video Games:
Seller will receive [***] pricing on video game rental and sell-through
titles. Seller will receive a [***] title-by-title return allowance on all
unopened video game sell-through product in mint, resalable condition.
5. DVD:
Seller will receive [***] pricing on DVD purchases and a [***] return
allowance on all unopened DVD product in mint, resalable condition.
6. Audio Books:
Seller will receive a [***] discount off suggested retail price on audio
book product purchases. Seller will receive a [***] return allowance on all
unopened product in mint, resalable condition.
7. Previously Viewed Video Product:
Seller will receive [***] pricing on previously viewed video product
purchases. [***].
____________________
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
15
8. Multimedia:
Seller will receive [***] pricing on CD ROM product. Seller will receive a
[***] return allowance on all unopened product in mint, resalable
condition.
9. Accessories:
Seller will receive [***] pricing on all accessories. Seller will receive a
[***] return allowance on all unopened accessory product in mint, resalable
condition.
10. Special Handling:
For special handling (e.g. inserts), Seller and Distributor shall agree in
----
advance on the pricing to be offered to Seller.
11. Advertising:
Distributor agrees to assist Seller through December 2, 2001, on a best
efforts basis, in the sale of advertising spaces on the BuyVideos and
BuyGames web sites (the "Advertising Spaces"). Distributor's assistance
shall include, but not be limited to, introductions to marketing personnel
within the various studios, help in devising strategies for solicitation of
the Advertising Spaces, participation in two annual Seller vendor events,
and Seller's participation as a featured retailer at Distributor's annual
video sales conference and key game retailer meetings.
Distributor earns co-op advertising dollars on purchases of certain
products from studios. Each title released has a different co-op program,
with current customary programs providing for co-op accrual rates from
[***] of product cost. Accrual of co-op advertising dollars by Distributor
is based on the price Distributor pays to the studio for the product
purchased, rather than on the price paid for the products by the retailer
to Distributor. Through December 2, 2001, on a monthly basis, Distributor
will directly pass-through funds to Seller in an amount equal to [***] of
(a) the gross cost to Distributor of its products sold to Seller, less (b)
the gross cost to Distributor of products returned by Seller to Distributor
in that month, for use in advertising video and game products for sale on
the Seller web sites.
Seller will spend the amounts received from Distributor pursuant to the
preceding paragraph on advertising video and game products on the Seller
web sites and/or other advertising programs involving video and game
products. Product selection and Seller pricing will be determined by Seller
and will not affect amounts paid by Distributor pursuant to the preceding
paragraph. By [***] Distributor will provide Seller with a report showing
the previous month's sales by Distributor to Seller and returns by Seller
to Distributor, together with a breakdown by product category of accrued
pass-through funds. Seller will xxxx Distributor by [***] for the Seller
advertising during that preceding month. Included in the Seller billing
package will be proof of performance such as screen shots. All billing will
be based on Seller's then current rate card. Amounts owed to Seller by
Distributor
____________________
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
16
shall be credited via credit memo against any amount owed to Distributor by
Seller for products purchased by Seller. These amounts will be credited to
Seller within [***] of the billing date. Amounts owed by Seller to
Distributor for the purchase of products pursuant to this Agreement shall
be due and payable irrespective of Distributor's payment of pass-through
funds to Seller. Pass-through funds owed by Distributor to Seller pursuant
to this Agreement shall be due and payable irrespective of Seller's payment
for product purchased under this Agreement. Payments made pursuant to this
paragraph are considered by the parties to be material to this Agreement.
Breach by a party of the payment terms of this paragraph shall entitle the
non-breaching party to terminate this Agreement after providing the
breaching party with a 15-day notice to cure the breach.
From time to time, Seller may receive marketing funds directly from studios
and other vendors. Seller's receipt of such funds shall not affect the
amounts paid by Distributor to Seller pursuant to this Agreement. In
addition, any MDF and/or co-op funding negotiated by Seller with any vendor
will not affect the amounts paid by Distributor to Seller pursuant to this
Agreement.
12. Handling Fee:
Seller will pay Distributor [***] handling fee for all units for which
Distributor furnishes fulfillment services under this Agreement. These
fees will be paid per Section 5.3 of the Agreement.
-----------
____________________
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
17
EXHIBIT B
---------
[***]
____________________
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
18
