FIFTH AMENDMENT TO LICENSE AND DISTRIBUTION AGREEMENT
This Fifth Amendment to License and Distribution Agreement
("Fifth Amendment") is made and entered into as of May 7, 1996
between LIVE Film and Mediaworks Inc. (formerly LIVE Home Video
Inc. and successor in interest to LIVE Film and Mediaworks Inc.,
a California corporation), LIVE America Inc. and Vestron Inc.,
each a Delaware corporation (all such parties hereinafter
individually and collectively referred to as "Company"), on the
one hand, and Warner-Elektra-Atlantic Corporation, a New York
corporation (hereinafter referred to as "Distributor" and
previously referred to as "WEA Corp." in the Distribution
Agreement), on the other hand, with reference to the following
facts:
R E C I T A L S
A. Distributor and Company have entered into that certain
License and Distribution Agreement dated as of May 11, 1992, and
heretofore amended as of June 8, 1992, as of June 23, 1994, as of
September 1, 1994, and as of May 27, 1995 ("Distribution
Agreement").
B. Company and Distributor desire to amend, modify and
supplement the Distribution Agreement upon the terms and
conditions herein contained.
NOW, THEREFORE, for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the
following is hereby agreed to by the parties:
1. Amendment to Distribution Agreement. The Distribution
Agreement is hereby modified and amended as follows:
a. Sales and Fulfillment Services. Notwithstanding
anything to the contrary contained in the Distribution
Agreement:
i. Pursuant to Paragraph 28 of the Distribution
Agreement, Company has exercised its option to
elect to assume full responsibility for all sales
and sales solicitation, including pre-order
tracking, of Videocassettes and Interactive CDs
embodying Company Product ('Revised Sales
Services') effective as of the Reversion Date,
which services were formerly the responsibility of
Distributor under the Distribution Agreement.
During the Third Contract Period, Distributor
shall continue to perform the Sales Services other
than the Revised Sales Services (i.e., all order
entry services consistent with the order entry
services performed by Distributor during the First
Contract Period); provided, however, Company
reserves the right at any time upon prior written
notice to Distributor to elect to assume full
responsibility of order entry services, using
Distributor's then-existing computer, computer
programming and management information systems,
effective at the beginning of Distributor's first
accounting month that is at least sixty (60) days
following its receipt of such notice.
ii. All notices required of Company pursuant to the
Distribution Agreement to effect the reversion of
Sales Services effective as of the Reversion Date
shall be deemed to have been timely and properly
received by Distributor.
iii. The Reversion Date shall be deemed to occur on
June 29, 1996.
b. Distribution Fee. Notwithstanding anything to the
contrary contained in the Distribution Agreement:
i. Notwithstanding the total net amounts invoiced by
Distributor under the Distribution Agreement
during the First Contract Period, the Fulfillment
Distribution Fee and the Additional Distribution
Fee, inclusive of any Applicable Volume Discounts,
each calculated on the net amounts invoiced under
the Distribution Agreement during the First
Contract Period, shall equal two and five-tenths
percent (2.5%) and five and seventy five-
hundredths percent (5.75%), respectively.
ii. Commencing June 29, 1996 and continuing through
and including November 29, 1996, the Additional
Distribution Fee shall equal four and seventy
five-hundredths percent (4.75%).
iii. Commencing November 30, 1996 and continuing
throughout the remainder of the Third Contract
Period, the Additional Distribution Fee shall
equal three and five-tenths percent (3.5%).
c. Payment Terms. Paragraph 4(a)(i)(F) of the
Distribution Agreement is hereby deleted in its
entirety and substituted in its place and stead shall
be the following:
"Except as provided in the next sentence of this
Paragraph 4(a)(i)(F), shipments of Videocassettes
or Interactive CDs embodying Company Product made
by Distributor to its customers during any
accounting month, Contract Year or Contract
Period, as the case may be, shall be deemed to
have been invoiced in such accounting month,
Contract Year or Contract Period, as the case may
be. An "Early Shipment" is the shipment of
Videocassettes embodying Company Product in one
accounting month when the street date for such
Videocassettes is in the next subsequent
accounting month. An Early Shipment shall, for
purposes of this Paragraph 4(a), be deemed to be a
shipment of such Videocassettes in the accounting
month in which such street date occurs if (1)
Distributor offers its customers payment terms
that consider such shipment as occurring in the
accounting month of the street date, and (2) for
purposes of payment to its Related Entities and
the majority of its other clients (i.e., other
than its Related Entities and Company) to whom
Distributor then-currently provides distribution
services for Videocassettes, such clients also
deem any similar shipment of Videocassettes
containing their product to have occurred in the
accounting month in which such street date occurs.
In the case of any shipment other than an Early
Shipment, Distributor shall send invoices to its
customers in respect of Videocassettes or
Interactive CDs embodying Company Product
immediately following the shipment thereof; in the
case of an Early Shipment, Distributor shall send
invoices to its customers in respect of such early
shipped Videocassettes immediately following the
street date for such Videocassettes.
Notwithstanding any other provision of this
Paragraph 4(a), with respect to Interactive CDs
embodying Company Product, Distributor shall be
under no obligation to render accountings to
Company with respect to sales of such Interactive
CDs, nor to remit any amounts to Company with
respect to such sales, until thirty (30) days
following Distributor's collection of payment for
such Interactive CDs from Distributor's customers;
provided Distributor will do all things reasonably
necessary to maximize such collections from its
customers as quickly as is possible consistent
with Distributor's collection efforts on behalf of
any Related Entities or other clients to whom
Distributor then-currently provides distribution
services of Interactive CDs containing their
product."
d. Discontinued Sales: In subparagraph (i) of Paragraph
4(f) of the Distribution Agreement, effective as of the
date of this Fifth Amendment, the phrase "ninety (90)"
shall be stricken and substituted in its place and
stead shall be the word "one hundred eighty (180)".
e. Advance(s). Paragraph 4(k) of the Distribution
Agreement is hereby deleted in its entirety and
substituted in its place and stead shall be the
following:
"So long as (i) Distributor shall have not
received a Notice of Termination, (ii) a Default by
Company shall not have occurred and be continuing under
this Distribution Agreement, and (iii) an Event of
Default (as defined in the Credit Agreement) by Company
shall not have occurred and be continuing under the
Credit Agreement, on or before five (5) business days
following the full execution of this Fifth Amendment by
Company and Distributor, Distributor shall advance to
Company the sum of Ten Million Dollars ($10,000,000) as
an additional advance chargeable against and to be
recouped by deduction in computing the Net Proceeds
becoming due and payable to Company hereunder in the
manner described below (the 'Fourth Advance'). The
Fourth Advance and interest thereon shall be recouped
in twenty one (21) consecutive Monthly Deductions from
Net Proceeds otherwise due Company hereunder, with the
first Monthly Deduction by Distributor to be made
against Net Proceeds which shall become due and payable
to Company on October 25, 1996, and the last Monthly
Deduction to be made against Net Proceeds which shall
become due and payable to Company on June 26, 1998.
All twenty one (21) Monthly Deductions shall consist of
equal payments of principal plus accrued interest at
the Interest Rate. The initial Interest Rate shall be
the applicable Interest Rate on the date Distributor
pays the Fourth Advance to Company hereunder which
shall thereafter be adjusted on the first day of each
calendar quarter during the Term commencing January 1,
1997, to take account of any changes in Libor or the
Prime Rate."
f. Credit Risk. Notwithstanding anything to the contrary
contained in the Distribution Agreement:
i. Pursuant to the Distribution Agreement,
Distributor is fully responsible for the billing
and collection of receivables (with all credit
risk being borne by Distributor). For purposes of
clarification, "credit risk" shall mean any
receivable which cannot be collected by
Distributor due to a particular customer's
inability to pay for any reason. However, "credit
risk" shall not include any receivable which
cannot be collected by Distributor from a customer
because of any bona fide disputes between Company
and such customer over marketing or sales issues
such as co-op advertising, returns or price
protection (a "bona fide disputed receivable"),
provided that, Distributor has sent to Company, to
the attention of Company's Chief Financial
Officer, a reasonably detailed written advice of
each such bona fide disputed receivable and,
provided also that, as of the date of Company's
Chief Financial Officer receipt of Distributor's
written advice of any such bona fide disputed
receivable, the particular customer is able to pay
all its outstanding balances due Distributor.
Furthermore, if and to the extent a bona fide
disputed receivable relates to any inventory of
Company Product in the possession or constructive
possession of a customer which such customer seeks
to return, "credit risk" shall not include such
receivable up to the amount of such inventory of
Company Product which such customer is able to
return to Distributor without any restriction or
limitation as of the date of Company's Chief
Financial Officer's receipt of Distributor's
written advice thereof. Distributor agrees to
give to Company, to the attention of its Chief
Financial Officer, prompt written advice of each
and every bona fide disputed receivable.
Following Company's Chief Financial Officer's
receipt of Distributor's written advice of any
such bona fide disputed receivable, Company shall
diligently pursue resolving the potential dispute
directly with the applicable customer (with
Distributor's cooperation if and to the extent
reasonably requested by Company). Notwithstanding
anything herein contained to the contrary, if,
within the ninety (90) days immediately following
Company's Chief Financial Officer's receipt of
such written advice of any such bona fide disputed
receivable from Distributor, the receivables,
including the bona fide disputed receivable, of
the applicable customer cannot be collected due to
such customer's inability to pay for any reason,
then such bona fide disputed receivable will be
deemed to be a receivable for which all credit
risk is being borne solely by Distributor
hereunder. Furthermore, if and to the extent a
bona fide disputed receivable relates to any
inventory of Company Product in the possession or
constructive possession of a customer which such
customer seeks to return, and if, within ninety
(90) days immediately following Company's Chief
Financial Officer's receipt of such written advice
of any such bona fide disputed receivable from
Distributor, there shall exist any restriction or
limitation upon such customer's ability to return
to Distributor any of such inventory, then the
amount of such bona fide disputed receivable in
excess of the amount of such inventory which is
returnable to Distributor without restriction or
limitation will be deemed to be a receivable for
which all credit risk is being borne solely by
Distributor hereunder. If Company fails or is
unable to resolve any such potential dispute with
the applicable customer within the ninety (90)
days immediately following Company's Chief
Financial Officer's receipt of Distributor's
written advice of any such bona fide disputed
receivable, then Company shall forever be
responsible for resolving any such potential
dispute with such particular customer and
Distributor shall not be responsible for any
inability to collect any or all of such bona fide
disputed receivable provided if and to the extent
Company's Chief Financial Officer was notified
thereof in writing as aforesaid, irrespective of
whether, at any time following said ninety (90)
day period, either (A) the receivables, including
any such bona fide disputed receivable set forth
in Distributor's advice, of the applicable
customer cannot be collected due to such
customer's inability to pay for any reason; or (B)
there are restrictions or limitations put on such
customer's ability to return to Distributor the
entire inventory of Company Product in the
possession or constructive possession of such
customer which is the subject matter of any such
bona fide disputed receivable, if applicable. In
such event, following the expiration of the
aforesaid ninety (90) day period, Distributor
shall unconditionally and irrevocably assign,
transfer and convey to Company all of
Distributor's right, title and interest in and to
that portion of such bona fide disputed receivable
for which Company has responsibility pursuant to
this subparagraph 1(f)(i) and Company shall have
the sole and exclusive right to collect and retain
one hundred percent (100%) of its portion of any
such bona fide disputed receivable from such
customer or to accept returns of Company Product
from such customer that relate to such bona fide
disputed receivable, if applicable. If there is
any such bona fide disputed receivable with any
customer existing as of the date of the execution
of this Fifth Amendment, then promptly following
the execution hereof Distributor shall send
written advice thereof to Company, to the
attention of Company's Chief Financial Officer,
and Company shall have ninety (90) days following
its receipt of such advice to resolve any such
dispute with the particular customer. Distributor
shall be responsible for directly resolving
disputes with its customers over errors by
Distributor in billing, pricing and/or shipments
or similar issues. Nothing contained in this
subparagraph 1(f)(i) shall limit Distributor's
right to accept returns from a customer in
financial distress pursuant to the fifth sentence
of Paragraph 6(a) of the Distribution Agreement
and to credit such returns against the receivable
owed by such customer.
ii. Company shall assume all credit risk for all sales
of Company Product to a particular customer if the
credit limit given by Distributor to such
particular customer is exceeded as the result of
any such sale, provided Company has approved the
sale of such Company Product notwithstanding the
fact that the customer's credit limit has been
exceeded. Distributor agrees to treat Company on
an equal basis with all other companies, including
its Related Entities, for whom Distributor
distributes phonograph record and/or videocassette
products (e.g., on a first ordered, first credit
issued or other equally fair and non-
discriminating basis) in determining which of
Company's such orders are or are not within a
particular customer's credit limit. Distributor
shall promptly advise Company's designated
representatives for this purpose, presently either
Xxxxx Xxxxxxx, Xxx Xxxxxx, Xxxxxx Xxxxxx or Xxxxxx
Xxxxxx, if any sale of Company Product to a
particular customer will cause such customer's
credit limit to be exceeded. Company shall always
have the right to elect not to make such sale
rather than assuming any bad debt risk therefor.
Distributor shall not ship Company Product
pursuant to any order which if fulfilled would
cause Company to bear any potential credit risk
therefor under this subparagraph 1(d)(ii) unless
and until Distributor receives written approval
therefor from one of Company's designated
representatives for this purpose.
2. Miscellaneous. Except as expressly or by necessary
implication modified hereby, the Distribution Agreement
shall remain in full force and effect. This Fifth Amendment
to License and Distribution Agreement may not be modified,
amended or terminated without the written consent of all
parties hereto. This Fifth Amendment to License and
Distribution Agreement may be executed in counterparts, each
of which when taken together shall constitute one and the
same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Fifth Amendment to License and Distribution Agreement as of the
date hereinabove written.
Warner-Elektra-Atlantic Corporation, a New York corporation
By: _______________________________
Its: ______________________________
LIVE Film and Mediaworks Inc., a Delaware corporation
(formerly LIVE Home Video Inc. and
successor-in-interest to LIVE Film and Mediaworks Inc.,
a California corporation)
By: _______________________________
Its: ______________________________
LIVE America Inc., a Delaware corporation
By: _______________________________
Its: ______________________________
Vestron Inc, a Delaware corporation
By: _______________________________
Its: ______________________________
[SMANGEL\AGREEMENTS\WEA.11]
