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Exhibit 10.25
[XXXXXX ENTERTAINMENT LETTERHEAD]
August 26, 1997
Mr. Xxxxxxx Xxxxx
Chief Financial Officer
West Coast Entertainment Corporation
Xxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Dear Xxxxxxx:
As per our conversation, the following outlines the agreement reached August 20,
1997.
o AMENDMENT TO AGREEMENT: The July 12, 1995 letter agreement between Xxxxxx
Entertainment Inc. and West Coast Entertainment Corporation (f/k/a RKT
Acquisition Co.), as amended on March 1, 1996 (the "Supply Agreement"), is
further amended as follows:
o Notwithstanding the first sentence of Paragraph 14 of the Supply
Agreement, effective from August 20, 1997 through August 19, 1998, West
Coast Entertainment Corporation agrees to purchase from Xxxxxx
Entertainment Inc. a minimum of 50% of its yearly requirements for
prebooked video rental products, except to the extent it is prevented
from doing so as a result of an insufficient credit line being made
available by Xxxxxx Entertainment Inc. or Xxxxxx Entertainment Inc.'s
ability to fill particular orders.
RENTAL PRICING: Product will continue to be priced at 34.50% discount off
suggested retail on all rental products ($30.00 retail and higher).
ADVERTISING: Co-op on pre-recorded video rental titles will continue to
be handled "in-house" and will be allocated at a rate of 3% for titles
that accrue co-op, following studio guidelines.
GAME BUSINESS: Paragraph 4 of the Supply Agreement will be replaced with
the following:
Xxxxxx Entertainment Inc. will receive a minimum of $2.4
million of Customer Group's game purchases from August 20,
1997 through August 19, 1998, at Xxxxxx Entertainment Inc.'s
gross cost plus 5%. Game product subject to the preceding
sentence is defined as all first and third party releases
from Nintendo, Sony, and Sega and also includes any new game
hardware and software
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(Game Business continued)
platforms introduced to the market place by any vendor during the term
of this Agreement. In the event Xxxxxx Entertainment Inc. is unable to
fill 100% of a Customer Group's prebook order for an individual title(s)
due to an allocation of product from a game supplier, Customer Group may
seek other avenues to secure the shortfall.
TERMS: Terms will continue to be as follows:
Payment terms will be net 60 days from invoice for all rental,
sell-through and game product purchases.
CREDIT LINE: $4,000,000.00, subject to adjustment from time-to-time in
accordance with Xxxxxx Entertainment Inc. guidelines and policies.
- DELINQUENT BALANCE $2,259,716: Xxxxxx Entertainment Inc. has agreed to process
catalog sell-through returns for an amount not to exceed $1,259,716 as
outlined on the attached document (see West Coast Entertainment Corporation
"Catalog Product Returns"). Attached as Exhibit A is a list of invoices in the
total face amount of $1,000,000 (the "Invoice Balance"). West Coast
Entertainment Corporation represents and warrants to Xxxxxx Entertainment Inc.
that each of those invoices is payable in full in the amount set out on
Exhibit A without deduction, setoff, counterclaim, credit, or reduction of any
kind or in any manner (collectively "deductions") and West Coast Entertainment
hereby waives the right to any such deductions which it may have presently or
at any time in the future. In consideration of and in exchange for that
waiver, and for other good and valuable consideration, Xxxxxx Entertainment
Inc. and West Coast Entertainment Corporation agree that the Invoice Balance
will be paid as follows:
1. The $1,000,000 principal amount is payable weekly, beginning September
19, 1997, and continuing on the last day wire transfers may be made
during each subsequent week, in the amount of $19,230.77 per week,
together with interest on the outstanding principal balance at a rate of
3% per annum, calculated on the basis of a 360-day year to the extent
allowed by applicable law; provided, however, that in no event shall the
rate of interest payable on the Invoice Balance exceed the maximum rate
of interest allowed to be charged by applicable law (the "Maximum
Rate").
2. All principal and interest payments required hereunder shall be made by
wire transfer for receipt on the date due, sent per the wire
instructions attached as Exhibit B.
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3. All unpaid principal of the Invoice Balance, together with all accrued and
unpaid interest, shall be immediately due and payable in full on March 6,
1998 (the "Maturity Date"); provided, however, that if such payment is not
made in full on the Maturity Date, the Maturity Date will be automatically
extended to May 29, 1998; provided further that in the event of such
automatic extension, the interest rate payable as set out above will
increase to 9% per annum from 3% per annum.
4. The Invoice Balance may be prepaid, in whole or in part, at any time in
principal amounts which are an integral multiple of $10,000, upon two
business days prior notice. All such prepayments shall be applied first to
all accrued but unpaid interest, with the remainder, if any, being applied
to principal.
5. Any payment not received on its due date shall be subject to a late charge
of 2% of the amount due in order to cover the additional expenses incident
to the handling and processing of delinquent payments.
6. In the event there is a non-payment of any part of interest or principal
due under this Agreement; if West Coast Entertainment Corporation makes a
general assignment for the benefit of creditors, or files a voluntary
petition of bankruptcy, or a petition for reorganization under any
bankruptcy law; if a petition in bankruptcy is filed against West Coast
Entertainment Corporation; if a receiver or trustee is appointed for all or
any part of the property or assets of West Coast Entertainment Corporation;
or if any levy, attachment or garnishment is issued, or any lien filed,
against the property of West Coast Entertainment Corporation and not
satisfied or released within 30 days after filing; then in any such case,
the entire unpaid principal amount of the Invoice Balance, together with
all accrued by unpaid interest, shall, at the option of Xxxxxx
Entertainment, Inc., without notice, become due and payable immediately,
and shall thereafter bear interest until paid at an annual rate (the
"Default Rate") equal to lesser of (a) 12.5% per annum, or (b) the Maximum
Rate, regardless of whether or not there has been an acceleration of the
payment of principal as set forth herein. All such interest shall be paid
at the time of and as a condition precedent to the curing of any such
default. Failure to accelerate the maturity of the Invoice Balance, or
indulgence granted from time to time, shall in no event be considered as a
waiver of the right of acceleration or stop Xxxxxx Entertainment Inc. from
exercising that right.
7. If for any reason whatsoever the interest of loan charges paid or
contracted to be paid in respect of the Invoice Balance shall exceed the
maximum amounts collectible under applicable laws in effect from time to
time, the obligation to pay such interest and/or loan charges shall be
reduced to the maximum amounts collectible under applicable laws in effect
from time to time, and any amounts collected that exceed such maximum
amounts shall be applied to reduction of the principal of the Invoice
Balance remaining unpaid and/or
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refunded to West Coast Entertainment Corporation so that at no time
shall the interest or loan charges paid or payable in respect of the
Invoice Balance exceed the maximum amounts permitted from time to time
by applicable law.
8. The above provisions regarding the Invoice Balance shall be governed by
the laws of the State of Tennessee. All disputes regarding the Invoice
Balance shall be resolved in the federal or state courts sitting in
Nashville, Tennessee and the parties submit to the non-exclusive
jurisdiction of those courts. XXXXXX ENTERTAINMENT INC. AND WEST COAST
ENTERTAINMENT CORPORATION WAIVE TRAIL BY JURY WITH RESPECT TO ANY SUCH
DISPUTE. In the event of litigation, the party not prevailing will pay
all reasonable attorneys fees and related expenses and all court costs
of the prevailing party.
In the event Xxxxxx Entertainment Inc. does not find $1,259,716 worth of
acceptable catalog returns, West Coast Entertainment Corp. will make payment
on demand, in full, of the shortfall between the $1,259,716 return level and
the inventory Xxxxxx Entertainment Inc. finds acceptable.
I believe this is an accurate representation of our discussion. This agreement
differs from the original supply agreement with respect to purchase volume
percentage (50%), adding 42.4 million minimum volume level on the game
business, and addressing the $2,259,716 delinquent balance. The amendments to
the Supply Agreement will remain effective through August 19, 1998, after which
date our supply and purchase relationship will be governed by the July 12,
1995 letter agreement as amended on March 1, 1996.
Please sign below acknowledging your acceptance of the changes set forth in this
document and return an original copy to may attention. If you have any
questions regarding this document please call me at your earliest convenience.
Sincerely,
/s/ Xxxx Xxxxx
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Xxxx Xxxxx
Accepted by:
West Coast Entertainment Corporation
By: /s/ Xxxxxxx Xxxxx
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Xxxxxxx Xxxxx
Chief Financial Officer
Date: 9/11/97
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WEST COAST ENTERTAINMENT CORPORATION
"CATALOG PRODUCT RETURNS"
* Maximum amount of returns to be processed $1,259,716.
* Return Authorization Numbers will be assigned to each location and must be
written on the outside of each box. Boxes must be marked 1 of X from each
location.
1. Individual stores will fax copies of the product being returned to our
Customer Service Department, at 515.254.7016, prior to shipment of
product. West Coast Entertainment will provide a list of stores returning
product and the estimated number of units.
* West Coast Entertainment agrees to the following:
1. All returns will be shipped from its retail locations no later than
September 15, 1997.
2. All returns will be shipped to Xxxxxx Entertainment's Savage distribution
center.
Xxxxxx Entertainment Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxx, XX 00000
* Xxxxxx Entertainment will process the returns received and identify the
product it will accept and that which it will reject to West Coast
Entertainment. Xxxxxx Entertainment will accept product that can be
sold to other customers or returned to the manufacturers within a
reasonable amount of time. The decision to accept or reject product is
at the sole discretion of Xxxxxx Entertainment.
* Product we will accept will be credited to your account at Xxxxxx
Entertainment's replacement cost, product being rejected will be
returned to West Coast Entertainment's warehouse on completion of
processing.
* West Coast Entertainment will be responsible for freight charges on all
shipments to Xxxxxx Entertainment and will reimburse Xxxxxx
Entertainment for the freight charges on products returned to West
Coast Entertainment.
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WEST COAST CATALOG RETURNS
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3. West Coast Entertainment will not take deductions for these returns, due to
the special nature of this return.
4. Xxxxxx Entertainment will issue credit at its replacement cost. The handling
fees outlined below will be charged back to West Coast Entertainment once
all of the returns have been completely processed:
* A restocking fee of 3% of Xxxxxx Entertainment's replacement cost will be
charged for the product Xxxxxx Entertainment keeps in its inventory.
* A restocking fee of 5% of Xxxxxx Entertainment's replacement cost will be
charged for the product Xxxxxx Entertainment rejects to West Coast
Entertainment.
* Restocking fee charges will be billed separately and spread out over a
five-month period.
Upon receipt of acceptance of the terms and conditions outlined, return
authorizations will be issued and returns will be accepted.
West Coast Entertainment Corporation
By: /s/ Xxxxxxx Xxxxx
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Xxxxxxx Xxxxx
Chief Financial Officer
Date: 7/11/97
