EXHIBIT 99.12
FOURTH AMENDMENT TO MARKETING AGREEMENT
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This Fourth Amendment to Marketing Agreement (this "Amendment"), effective
as of April 12, 2001, is made and entered into by and between America Online,
Inc. ("AOL"), a Delaware corporation, with offices at 00000 XXX Xxx, Xxxxxx,
Xxxxxxxx 00000, and eMachines, Inc. ("eMachines"), a Delaware corporation, with
offices at 00000 Xxxxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000. AOL and
eMachines may be referred to individually as a "Party" and collectively as
"Parties."
INTRODUCTION
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WHEREAS, AOL and eMachines have entered into that certain Marketing
Agreement, dated June 17, 1999, as amended (including all exhibits thereto, the
"Original Agreement"); and
WHEREAS, the Parties desire to amend and supplement the terms of the
Original Agreement to implement a new promotional program pursuant to the terms
provided below.
NOW, THEREFORE, in consideration of the terms and conditions set forth in
this Amendment and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, AOL and eMachines hereby agree to
amend and supplement the Original Agreement in accordance with the following
terms and conditions:
TERMS
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1. 6 Month AOL Offer. The Original Agreement is hereby amended by adding a
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new Section 24 as follows:
"24. Direct Channel 6 Month Bundle Offer. During the period from May 1,
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2001 through July 31, 2001, eMachines and AOL hereby agree to participate
in a new program offering consumers six (6) months of AOL only through
eMachines' infomercial, that is entitled "eMachines Infomercial No. 1", and
Internet web page direct sales initiative in accordance with the terms and
conditions set forth on Exhibit F attached hereto (the "6 Month Bundle
Offer"). Irrespective of the 6 Month Bundle Offer, AOL and eMachines shall
continue to engage in all other distribution and promotional programs set
forth in the Original Agreement, as it is now, or subsequently shall be,
amended. The 6 Month Bundle Offer is in addition to and in no way modifies
or replaces all other distribution and promotional programs set forth in
the Original Agreement, as it is now, or subsequently shall be, amended."
2. Definitions. Capitalized terms used but not defined herein shall have the
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meanings given thereto in the Original Agreement.
3. Original Agreement. Except as specifically amended and supplemented
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hereby, the Original Agreement remains in full force and effect.
4. Counterparts. This Amendment may be executed in counterparts, each of which
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will be deemed an original and all of which together will constitute one and the
same document.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
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IN WITNESS WHEREOF, the Parties hereto have executed this Amendment as of
the date first above written.
AMERICA ONLINE, INC. EMACHINES, INC.
By: /s/ XXXX X. XXXXXX By: /s/ XXX XXXXXXXXX
________________________________ ___________________________
Print Name: Xxxx X. Xxxxxx Print Name: Xxx Xxxxxxxxx
________________________ __________________
Title: Senior Vice President Title: EVP & CEO
______________________________ ________________________
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Exhibit F
Direct Channel 6 Month Bundle Offer
1. eMachines' Distribution of the AOL Software. During the 6 Month Offer Term,
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defined in Section 5 below, eMachines and AOL agree that the AOL Classic
Service shall be promoted via eMachines' infomercial and Internet web page
direct sales initiative (the "Direct Channel") and distributed on all
eMachines' eMonster and eTower desktop computers sold through the Direct
Channel (the "Offer Products") under a new program that will entitle the
end user to six (6) months of the AOL Classic Service at no cost to the end
user (not including phone charges) upon registration in accordance with the
terms and conditions set forth below (the "6 Month Bundle Offer").
1.1 Preferred Interactive Service. eMachines agrees to make the AOL
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Classic Service and the 6 Month Bundle Offer, respectively, the sole
Interactive Service and sole special offer for Interactive Services
bundled, distributed and promoted on all Offer Products and throughout
all Direct Channel marketing and sales efforts. eMachines' agreement
to solely distribute and promote the AOL Classic Service and the 6
Month Bundle Offer during the 6 Month Offer Term shall supercede any
conflicting provisions contained in Section 2 of the Original
Agreement. Notwithstanding the requirement in the first sentence of
this Section 1.1, with respect to the AOL Classic Service's right to
be the sole Interactive Service on all Offer Products and in the
Direct Channel, the Parties acknowledge and agree that eMachines may
bundle and distribute on the Offer Products the following two specific
non-AOL Interactive Services: (a) xXxxxxxxx.xxx and (b) Microsoft
Internet Explorer and any Interactive Services sponsored by Microsoft
only to the extent eMachines is so obligated under agreements in
connection with its use of Microsoft Windows and the license of the
Microsoft operating system (the "Microsoft Agreements"). With respect
to eMachines' obligations under the Microsoft Agreement to promote
certain other Interactive Services on the Offer Products and with
respect to xXxxxxxxx.Xxx, eMachines agrees that the AOL Services shall
be promoted no less favorably than such Interactive Services on the
Offer Products.
1.2 6 Month Bundle Offer Packages. eMachines shall bundle an AOL-supplied
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diskette or CD-ROM containing the special AOL Classic Software
containing the 6 Month Bundle Offer and related promotional and
packaging materials (the "6 Month Offer Package") with each Offer
Product by placing the 6 Month Offer Package inside the cardboard box
packaging of each Offer Product. The AOL Software to be bundled shall
be the then-current version of the AOL Classic Service (as modified by
the 6 Month Bundle Offer). eMachines shall have the right to approve
the size of the 6 Month Offer Package so that it fits in the box
without modification of the existing box. The 6 Month Offer Package
combined with the Offer Product is referred to herein as a "6 Month
Bundled Product."
1.3 AOL Deliverables. AOL shall, at its expense, provide and deliver to
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eMachines the 6 Month Offer Packages to the distribution center
specified by eMachines, it being understood that eMachines does not
intend to specify more than two different locations during the Term.
eMachines shall provide AOL a written or emailed request for a
sufficient quantity of 6 Month Offer Packages to meet its production
expectations, which request shall be sent by eMachines to specified
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contact person(s) provided in writing or e-mail by AOL to eMachines,
which contact person(s) may change from time to time at AOL's sole
discretion so long as AOL provides eMachines with reasonable prior
notice. eMachines acknowledges and agrees that AOL may require up to
thirty (30) days to complete the preparation and delivery of such
quantity of 6 Month Offer Packages to eMachines. If AOL does not
distribute sufficient 6 Month Offer Packages to eMachines within
thirty (30) days of a written request for such packages, then
eMachines shall not have any obligation with respect to those Offer
Products for which there are no 6 Month Offer Packages. In the event
that eMachines instructs AOL to deliver the 6 Month Offer Packages to
a destination outside the United States, then AOL shall be permitted
forty-five (45) days to deliver the 6 Month Offer Packages, before
eMachines shall be relieved of its obligation to bundle such packages
as set forth in Section 1.2.
1.4 General Distribution Obligations. eMachines shall not bundle the 6
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Month Offer Packages or promote the 6 Month Bundle Offer with any
other products other than the Offer Products or otherwise distribute
the AOL Software or 6 Month Offer Packages in a manner not expressly
set forth herein. eMachines may, however, request in writing that AOL
permit eMachines to bundle the AOL Software and 6 Month Offer Packages
or distribute the AOL Software and 6 Month Offer Packages in a manner
not provided for in this Exhibit F so long as any such request is made
at least thirty (30) calendar days in advance of any such desired
bundling or distribution arrangement. eMachines may also request to
offer different promotions through the Direct Channel. Any request not
affirmatively approved by AOL in writing and received by eMachines
within five (5) business days of the request from eMachines shall be
deemed denied.
2. eMachines Promotion of the 6 Month Bundle Offer. In addition to the
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distribution obligations and agreement to primarily promote the AOL Classic
Service and 6 Month Bundle Offer during the 6 Month Offer Term in Section 1
above, eMachines shall promote the 6 Month Bundle Offer as follows:
2.1 Infomercial. eMachines, at its sole cost, shall promote the 6 Month
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Bundle Offer on its infomercial scheduled to begin airing on May 4,
2001. The promotions to be performed during the infomercials (a) shall
include AOL logos, and (b) may include, but not be limited to,
integration of AOL visuals and testimonials, voice-overs promoting the
6 Month Bundle Offer, repeated and highlighted messaging of the 6
Month Bundle Offer and listing of the 6 Month Bundle Offer as part of
the Offer Product specifications. AOL shall have final approval rights
over the infomercials as they relate to AOL's brand, logo, and
trademarks, the AOL Software, the 6 Month Bundle Offer, and the AOL
Classic Service.
2.2 Customer Service Representatives/After Market Touch Points. eMachines
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shall promote the 6 Month Bundle Offer during the sales and order
intake process for each Offer Product sold during the 6 Month Offer
Term via an eMachines provided and AOL approved sales script. Such
approval shall not be unreasonably withheld or delayed. Also,
eMachines shall use commercially reasonable efforts to encourage
registrations under the 6 Month Bundle Offer through promotional
efforts undertaken by eMachines' customer service representatives who
intake orders for the Offer Products (the "CSRs") and other mutually
agreed upon after market touch points, such as "caller-on-hold" music
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or messages played on its Direct Sales telephone system. The Parties
agree to develop a written marketing plan no later than May 1, 2001,
that shall set forth (a) the mutually agreed upon sales script, (b)
the Parties' basic understanding as to the promotional efforts to be
performed by eMachines' CSRs, and (c) which other after market touch
points will contain 6 Month Bundle Offer messaging, and details
regarding the form of such messaging.
2.3 General Marketing. eMachines, at its sole cost and at its sole
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discretion, shall promote the 6 Month Bundle Offer and the AOL Classic
Service on offline and online advertising and marketing. In the event
eMachines conducts such discretionary marketing activity, AOL shall
have final approval rights over the marketing and promotional
materials as they relate to AOL's brand, logo, and trademarks, the AOL
Software, the 6 Month Bundle Offer, and the AOL Classic Service. Such
approval shall not be unreasonably withheld or delayed.
3. 6 Month Bundle Offer Promotional Materials. All visuals, logos, artwork,
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and copy used in marketing, advertising, or other materials related to the
6 Month Bundle Offer shall be provided by AOL at AOL's expense. AOL and
eMachines shall have approval rights (which shall not be unreasonably
withheld or delayed) over any and all advertising programs related to the 6
Month Bundle Offer. Without limiting the foregoing, eMachines agrees that
the 6 Month Bundle Offer shall be offered as being brought to you by
eMachines (e.g. "compliments of eMachines") not by AOL. eMachines
acknowledges and agrees that they shall not promote the 6 Month Bundle
Offer using the term "Free".
4. Payments. A "Qualified 6 Month Member" shall be any person or entity who
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registers for the AOL Classic Service through a unique promo code
identifier specific to eMachines and associated with the 6 Month Bundle
Offer, and who pays the then-standard fees required for membership to such
service through at least two (2) consecutive billing cycles after the six
(6) months of the AOL Classic Service included at no cost upon registration
has been completed. AOL shall pay eMachines a promotional bounty for each
Qualified 6 Month Member. The promotional bounties set forth in this
Section 4 shall be the only payments made by AOL to eMachines for any 6
Month Bundled Products sold under this 6 Month Bundle Offer. The amount of
the promotional bounty paid for each Qualified Registered Program Member
shall vary, based on the number of Qualified 6 Month Members (not gross
registrations) that registered in each specific calendar month during the 6
Month Offer Term (not cumulative Qualified 6 Month Members) as set forth in
the following schedule:
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Number of Qualified 6 Month Members who Bounty Payment per Qualified 6 Month Member
registered during each specific calendar that registered in a specific month
month (not cumulative Qualified 6 Month
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Members)
0 -5,000 $20.00
5,001 - 7,500 $35.00
7,501 - 10,000 $45.00
10,001 - 12,500 $55.00
12,501 and over $65.00
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All such bounty payments earned by eMachines in Section 4 shall be paid by
AOL within thirty (30) days of the end of the month in which any Qualified
6 Month Members qualify
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as such. In addition, both Parties agree and acknowledge that the foregoing
bounty payment amounts and schedule were based upon eMachines' estimate of
up to 25,000 Offer Products being sold each month through the Direct
Channel. Within thirty (30) days of the end of the 6 Month Offer Term (or
some other mutually agreed upon date), the Parties shall determine if
eMachines' actual sales of Offer Products through the Direct Channel
exceeded an average of 25,000 units per month during the 6 Month Offer Term
(the "True Up Determination"), and if so, then the Parties shall mutually
agree upon a reasonable reduction in the bounty payment amounts or a
modified schedule with higher Qualified 6 Month Members requirements for
each bounty payment tier. Any bounty payment amount reduction or modified
schedule shall apply retroactively to any amounts paid to eMachines under
this 6 Month Bundle Offer, and any resulting reimbursement owed to AOL
shall be paid by eMachines within thirty (30) calendar days of such True Up
Determination.
5. 6 Month Offer Term. The term of the 6 Month Bundle Offer shall be from May
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1, 2001 until July 31, 2001 (the "6 Month Offer Term"). Upon mutual written
agreement, the 6 Month Offer Term may be extended to December 31, 2001.
Notwithstanding the foregoing, AOL shall have the right to terminate the 6
Month Bundle Offer at any time upon reasonable written notice to eMachines
if it determines that the 6 Month Bundle Offer is not resulting in
sufficient registrations to justify the cost of the promotional program,
such determination to be reasonably made by AOL. In the event that AOL
terminates the 6 Month Bundle Offer prior to July 31, 2001, the 6 Month
Offer Term shall end on such date of termination and AOL and eMachines
agree that the Parties shall continue to engage in all other distribution
and promotional programs set forth in the Original Agreement, as it is now,
or subsequently shall be, amended. Notwithstanding the above, AOL shall
honor all 6 Month Bundle Offers that have been bundled on Products prior to
termination of the 6 Month Offer Term and shall make payments pursuant to
Section 4 related thereto, through the term of the Original Agreement.
6. Reports. AOL shall provide eMachines with monthly reports that sets forth
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the amount to be paid to eMachines and the number of Qualified 6 Month
Members acquired by AOL through the distribution of the 6 Month Bundled
Products within thirty (30) days of the end of each month during which any
new member qualifies as a Qualified 6 Month Member. From time to time upon
AOL's request (but no more than once every month), eMachines shall provide
AOL with a report, in a detailed format reasonably satisfactory to AOL,
setting forth (i) the total number of 6 Month Bundle Products distributed
and sold, and (ii) future forecasts regarding distribution and sales of 6
Month Bundle Products.
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