Exhibit
10.31


 





















 


EXECUTION COPY


 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY ASTERISKS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.


 


INTERNATIONAL
MANUFACTURING AND PACKAGING AGREEMENT




between


 


WEA
INTERNATIONAL INC.  (“WMI”)


 


and


 


WARNER
MUSIC MANUFACTURING EUROPE GmbH (to be renamed

CINRAM GmbH) (“Company”)


 


Dated
as of October 24, 2003


 


Capitalized terms not defined where they
appear in the text are defined in Paragraph 14.


 


1.                                       Appointment.  (a)


 


(i)  WMI hereby appoints Company to render, and
Company shall render, M&P Services for one hundred percent (100%) of
Products in accordance with the terms hereof. 
Additionally, Company shall have non-exclusive rights to render and
shall, at the request of WMI, render M&P Services for Products for WMI and
WMI’s affiliates located outside the Territory.


 


(ii)  Notwithstanding anything to the contrary
contained in Paragraph 1(a)(i), from and after the effective date of a Recorded
Music Major Transaction (the “RMMT Effective Date”), the appointment of
Company hereunder shall instead be to render, and Company shall render, M&P
Services for at least the Specified Percentage (and, at WMI’s election, more
than the Specified Percentage) of Products in accordance with the terms hereof.  WMI shall use commercially reasonable efforts
to provide that the Combined Entity’s ordering of units of Products and
Components hereunder (i.e., mix of New Releases and Catalog Titles and special
packaging orders) following the RMMT Effective Date remains generally
consistent with WMI’s ordering of units of Products and Components hereunder
prior to the RMMT Effective Date.  The “Specified
Percentage” equals the fraction, expressed as a percentage: (A) the
numerator of which shall be one hundred percent (100%) of the number of units
of Products manufactured and packaged for sale in the Territory by Company for
WMI under this Agreement (and/or by WMI on its own behalf, if applicable)
during the twelve (12) complete calendar months immediately preceding the RMMT
Effective Date (the “WMI Output”); and (B) the denominator of which
shall be the WMI Output plus one hundred percent (100%) of the number of
units of Records, in any Optical Disc format, manufactured and packaged for
sale in the Territory by or for


 





















 


the recorded music business of the applicable
Major during the same twelve (12)-month period. 
For the avoidance of doubt, in calculating the WMI Output no units
manufactured or packaged by Company (and/or WMI, if applicable) for WHV or its
affiliates shall be included.


 


(iii)  Notwithstanding Paragraphs 1(a)(i) and
1(a)(ii), in relation to Excluded Products WMI shall be entitled to appoint a
third party manufacturer and packager.  WMI
shall include Company in the tender process.


 


(b)  Reservation
of Rights.  WMI hereby reserves all
rights in and to Products not otherwise expressly granted to Company herein.


 


(c)  Reports.  Company shall prepare for WMI the production,
shipments and inventory reports in the same format and details as were received
by WMI or its affiliates prior to this Agreement and shall supply WMI and its
affiliates with such reports on at least a monthly basis during the Term.  If Company provides more detailed reports to
any other party during the Term, Company shall, at WMI’s request, provide such
more detailed reports to WMI hereunder as of the date that Company commences
providing such more detailed reports to such other party but subject to the
same terms and conditions under which such reports are provided to such other
party (e.g., any additional fees or amounts charged to such party for
such more detailed reports).  Nothing in
such reports shall impart any competitively-sensitive information about
Company, Company’s affiliates or any third parties for which Company renders
any services or any personal data possessed by Company.


 


2.                                       Title.  Title to units of Components and Products
manufactured and packaged hereunder (including all copyrights and trademarks
contained therein) shall remain in WMI or WMI’s affiliates.  Company
acknowledges that Products (including all intellectual property contained
therein and relating thereto) are protected under copyright laws and that WMI
is the rightful owner or license holder of such copyrights.  Company acknowledges that any removal of any
such materials from Company’s approved facilities without WMI’s written
approval, and any distribution of any such materials in the Territory without
WMI’s written approval, is an infringement of WMI’s copyright.  Company shall bear the risk of loss for units
of Products in Company’s possession, under Company’s control or in transit from
Company or its designees to any Facility, provided, however, that
WMI shall bear the risk of loss for any units of Products in transit for which
WMI is responsible for paying the shipping.


 


3.                                       Services.  (a)  Level
of Services.  [*]  In addition, the Services:


 


(i)  shall
be rendered on a so-called “label blind” basis;


 


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(ii)  shall be rendered in at least the same
general manner, subject to at least the same general standards and in at least
the same general quality as provided by Company to all other parties whose
Records are manufactured and/or packaged by Company in the Territory,  [*]. This Paragraph 3(a)(ii) shall not
require that Company provide any new services to WMI if the cost of providing
such services would be unreasonably burdensome to Company; provided, however,
that nothing in this sentence shall limit Company’s obligations set forth in
Paragraph 6;


 


(iii)  [*]


 


(iv)  shall be rendered in accordance with “first-class”
standards that meet the highest quality available in the industry;


 


(v)  shall be rendered in accordance with, or
exceed, each of the service level requirements set forth on Schedule A
hereto (the requirements set forth on Schedule A hereto being the “Service
Level Requirements”); and


 


(vi)  shall, to the extent rendered for the
production of Products in CD or DVD format, be rendered in accordance with the
technical specifications set forth on Schedule B hereto (the requirements
set forth on Schedule B hereto being the “Technical Specifications”).


 


Notwithstanding the foregoing, to the extent
that the standards set forth in clauses (ii) and (iv) above are not being met
as of the commencement of the Term, Company shall have a period of ninety (90)
days from the commencement of the Term in which to meet such standards.


 


(b)  Copy
Protection and Digital Rights Management. 
WMI may from time to time require the integration of copy protection and
digital rights management technology into certain Products.  Company shall use its commercially reasonable
efforts to ensure that it is equipped to provide such technology and shall
obtain necessary licenses from the supplier therefore.  WMI shall, unless otherwise agreed, be
responsible for the copy protection or digital rights management technology
license fees and the cost of any packaging adaptation necessary to provide notification
of the use of such technology as may be required by the applicable law in the
country of sale, and (except as otherwise expressly set forth in this Paragraph
3(b)) all other costs relating to copy protection and digital rights management
shall be borne by Company.  Company shall
report units


 


3





















 


manufactured and technologies used to WMI on a monthly basis to
facilitate the administration of the copy protection and digital rights
management license fees.  Company shall
assist WMI in assessing and testing new copy protection and digital rights
management technologies, and on forty-five (45) days’ notice will make
provision for new copy protection and digital rights management technologies to
be implemented, but only so long as such new technologies are available to
Company for use.  To the extent that the
actual, documented, out-of-pocket, non-overhead cost to Company for the
assessment, testing and implementation of such new copy protection and digital
rights management technologies exceeds [*] in the aggregate in respect of any
Contract Year, then WMI shall reimburse Company for any such excess (but solely
to the extent that WMI requested that Company assess, test or implement such
new technology).  To the extent that any
other parties serviced by Company actually utilize any such new copy protection
and digital rights management technology, WMI’s obligation to reimburse Company
for any such excess shall be reduced pro rata based on the total number of
Company’s customers utilizing the new copy protection and digital rights
management technology.  If WMI has
already reimbursed Company pursuant to the preceding sentence and subsequently
is entitled to a pro rata reduction as provided herein, Company shall refund
such amount within thirty (30) days of the date such other party begins
utilizing such new copy protection
and digital rights management technology. 
Implementation of copy protection or digital rights management
technology shall not be considered a factor that shall impact capacity or
production time downstream of the mastering process.  WMI and Company further agree that pursuant
to Article 6.4 Directive 2001/29/EC on the Harmonization of Certain
Aspects of Copyright and related Rights in the Information Society, each will
accommodate statutory privileges relating to use regardless of the use of any
such copy protection technology or digital rights management technology.


 


(c)  Fees.  The Packaging Services shall be furnished at
the prices set forth on Schedule C and Schedule D hereto and as set
forth in this Paragraph 3(c), as they may be modified from time to time by
operation of Paragraphs 12 and 15 (the “Printing and Packaging Fees”),
and the Manufacturing Services shall be furnished at the prices set forth on Schedule D
hereto and as set forth in this Paragraph 3(c), as may be modified from time to
time by operation of Paragraphs 12 and 15 (the “Manufacturing Fees” and,
together with the Printing and Packaging Fees, the “Fees”).  Unless otherwise indicated, all amounts set
forth in this Agreement
including the Schedules hereto are denominated in Euros.  [*]


 


4





















 


[*]


 


(d)  Subcontracting.  Company may subcontract a portion of its
obligations under this Agreement to any one or more of the subcontractors on Schedule E
hereto (each an “Approved Subcontractor”).  Company may subcontract to a subcontractor
that is not an Approved Subcontractor only with the prior consent of WMI.  Any such subcontracting by Company shall not
relieve Company of its obligations hereunder. 
Orders hereunder shall not be subcontracted to a greater degree than any
other orders.  In addition, Company shall
ensure that any subcontractors comply with all obligations of Company hereunder.  WMI may from time, to time designate
organizations as prohibited subcontractors under this Agreement if WMI
reasonably believes such organizations would not be likely to be able to adhere
to the provisions of this Agreement.


 


(e)  Compliance with Law; Code
of Conduct.  Company shall comply (i)
with all laws and regulations in connection with Company’s undertakings under
this Agreement, except where the failure to do so individually or in the
aggregate is immaterial; and (ii) subject to relevant local laws including
privacy laws, with the code of conduct attached as Schedule F hereto.


 


(f)  Delivery of Source
Materials.  (i)  WMI or its affiliates shall, at WMI’s sole
expense, deliver to Company (or to such suppliers as Company may designate) all
Source Materials.  WMI shall retain title
to all Source Materials supplied to Company or its designees, including all
digital files derived from such Source Materials.  Company shall maintain systems at no charge
to WMI so as to be able to receive Source Materials, metadata and digital
proofs in digital form and online, which shall include Wamnet.


 


(ii)  All products ordered by WMI or its affiliates
and manufactured and finished by Company shall be delivered at Company’s
expense to Company’s central warehouse located in Alsdorf, Germany, or to the
extent that Company elects to re-locate such Facility, then to such relocated
Facility.


 


(g)  Ordering.  (i)  It
shall be WMI’s responsibility to determine its production requirements and to
order Units of Products.  All Orders for
Units of Products shall be evidenced by a written purchase order and may be
placed by WMI or any of its affiliates or any third party licensees.  Orders must include all information necessary
to properly identify the Products to be manufactured and packaged, including artist, title,
catalog number, full UPC/EAN and quantity. 
Company shall use the entire UPC or EAN codes to identify all Products.


 


(ii)  Prior to manufacture, an Order must be
Workable.  Company shall deliver Units of
Products to WMI’s designated locations within the applicable time periods set
forth on Schedule A hereto.  All of
the time periods set forth on Schedule A
hereto are referred to as the applicable Turnaround Times for the manufacture
of Units of Products in each


 


5





















 


configuration, respectively, and are measured
from the time the Order is Workable.


 


(iii)  At the times that WMI submits Orders, to the
extent that an Order is for multiple selections, WMI shall have the right to
determine the priority in which the Orders should be filled (that is, it shall
have the right to determine and designate which part of the Order is to be
delivered within the shorter of the applicable Turnaround Times and which part
of the Order is to be delivered within the longer of the applicable Turnaround
Times).


 


(iv)  For each item (i.e., a particular Product) in
an Order, there shall be an allowable fulfillment deviation as set forth below:


 


	
  Order Size in Units

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  
	
  0-10,000

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  
	
  10,001-50,000

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  
	
  50,001-300,000

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  
	
  300,001 and
  up

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  



 


Orders filled within such deviation shall be
deemed to be satisfied, and WMI shall pay Company on the actual number of units
delivered at the rate(s) charged by Company pursuant to the original Order to
which such deviation relates.


 


(h)  Quarterly
Meetings.  At least once every
calendar quarter, WMI may meet with Company’s Chief Executive Officer (or
equivalent) and Chief Financial Officer (or equivalent) to assess Company’s performance
under this Agreement and its ongoing ability to perform its obligations under
this Agreement.


 


(i)  Shipping
Costs.  Company shall bear the cost
and expense of shipping of any and all units of Products, Components or other
materials manufactured hereunder from the point of manufacture to Company’s
central Facility located in Alsdorf, Germany or to the extent that Company
elects to re-locate such Facility, then to such other new Facility.  Company shall also be solely responsible for
the cost and expense of any shipping between any of Company’s Facilities, so
long as such movement is at the direction of Company in its own discretion.  Except as otherwise specifically provided
herein, WMI shall be responsible for the cost and expense of all other shipments
hereunder.  To the extent that any
shipping costs hereunder are to be borne by WMI but are actually paid by
Company, WMI shall only be required to pay Company’s actual, documented,
out-of-pocket costs charged by such shipping agent for the shipment of units of
Products and/or other materials hereunder and, such costs shall be reimbursed
to Company by WMI within [*] following Company’s rendition of such invoice to
WMI (but in no event shall WMI
be required to make any such payment of such invoice prior to Company’s payment
of such invoice to such shipping agent). 
If WMI is responsible for shipping expenses, should WMI so elect, WMI
shall have the right to: (i) select the shipping agent(s) utilized by Company
for shipping of units of Products and/or other materials hereunder (and, in
doing so, assume the risk of loss for such units


 


6





















 


of Products in transit); or (ii) in lieu of selecting such shipping
agent(s), require that Company submit to WMI any proposed shipping agent(s)
which Company wishes to utilize hereunder for WMI’s prior written approval. 
If, in a particular instance, WMI is not responsible for shipping
expenses or WMI does not exercise its rights pursuant to the preceding
sentence, Company shall utilize the same shipping agent(s) utilized by Company
for the shipping of a majority of the other products shipped by or on behalf of
Company.


 


(j)  No
Unauthorized Manufacture.  Company
acknowledges that WMI may suffer substantial damages as a result of the
unauthorized manufacture of Components or Products.  Therefore, Company agrees that: (i) Company
shall produce only those quantities of units of Components and Products as are
specified in a written Order issued by WMI and subject to the terms set forth
herein; (ii) Company shall deliver the units of Components and Products
specified in each Order only to the recipient and location designated by WMI in
such order; and (iii) upon WMI’s request from time to time, Company shall
deliver to WMI separate written confirmation of each manufacturing run made of
each Product and Component pursuant to each Order, including the date of the
manufacturing run and the number of units produced during the run.


 


(k)  Additional
Services.  At WMI’s reasonable
request, Company shall provide WMI with manufacturing and packaging services
for “point of sale,” promotional and merchandising materials to be utilized in
connection with Products.  Such services
shall be provided by Company to WMI on a non-exclusive basis only (and only to
the extent that WMI so requests any such services) and, to the extent so
requested, shall be provided to WMI [*]. 
Notwithstanding this Paragraph
3(k), Company shall only be required to provide such services if either
WMI (either itself or through any of its affiliates) provided such services on
its own behalf prior to the commencement of the Term or Company then-currently
provides such services to any party (in which case, if WMI requests such
services and Company is not contractually prohibited from providing such
services to WMI, they shall be provided to WMI on the same terms and conditions
as are provided to such other party).  If
Company provides any Services to WEA under the US Manufacturing Agreement, then
Company shall provide such Services to WMI hereunder but only to the extent
that it is reasonably feasible for Company to do so at the WMI Facilities.


 


4.                                  Company’s
Financial Obligations.  WMI shall not
be responsible for payment of any of Company’s (or Company’s affiliates’)
indirect or general overhead charges or the salaries of Company’s (or Company’s affiliates’) employees or
agents.  All costs associated with the
rendering of Services shall be borne by Company.  Such costs to be borne by Company include any
patent royalties or other similar royalties or license fees payable in
connection with the manufacture of Products and Components (subject to the
provisions of Paragraph 3(c)(i)), which costs, for the avoidance of doubt,
exclude mechanical royalties, record royalties and copy protection and digital
rights management (i.e., DRM) technology license fees.


 


7





















 


5.                                  Other
Obligations.  (a)  Storage of Source Materials and Components.  Company shall accept and store all Source
Materials and units of Components delivered to or otherwise held by Company
hereunder at no charge; provided, however, that with respect to
any particular Product, Company shall not be required to store more Source
Materials or units of Components than is necessary to satisfy the next [*]
demand (such determination as to what constitutes [*] demand shall be made
jointly by WMI and Company based, where possible, upon actual, gross units
ordered during the prior [*] period and shall be made for all Source Materials
and Components no more frequently than semi-annually during the Term commencing
no sooner than [*] after the commencement of the Term).  With respect to Source Materials and units of
Components so determined to be in excess of a [*] demand therefor, Company
shall notify WMI of the specific Source Materials and/or units of Components
constituting such excess and within [*] following WMI’s receipt of such notice,
WMI shall (in WMI’s sole discretion) either: (i) remove such excess Source
Materials and/or units of Components (at WMI’s expense); (ii) direct Company to
destroy such excess Source Materials and/or units of Components (at WMI’s
expense); or (iii) direct Company to store such excess: either (x) at a
Facility at a cost to WMI of [*] or (y) offsite at Company’s or Company’s
affiliates’ leased facility approved in advance, in writing by WMI and the
actual, documented, out-of-pocket expense charged by such facility to Company
for such storage shall be reimbursed to Company by WMI.  Amounts owing under this Paragraph 5(a) shall
be invoiced by Company at month end and shall be payable [*] from the date of
the rendition of such invoice; [*]. All Source Materials and all units of
Components shall be WMI’s property and shall be kept segregated from any other
property.  Upon receipt of a written
request from WMI, Company shall return to WMI, at WMI’s cost, any materials
supplied by WMI which have not been utilized in the manufacture or packaging of
units of Components or Products or otherwise pursuant to this Agreement and which
are then in Company’s possession or control. 
The risk of loss, due to any reason, of Source Materials or units of
Components in Company’s possession or control shall be borne by Company, as
further described herein; provided, however, that to the extent
any such loss was directly caused by a WMI Employee, Company shall not bear the
risk of loss, except to the extent such loss is or would have been covered by
Company’s property insurance as required under this Agreement as set forth on Schedule G
hereto.  WMI shall own all manufacturing
parts (for Components and Products) and all derivatives and/or duplicates
thereof fabricated in connection with the production process, including all
Components, photographic films and color keys, if any, duplicate audio tapes
(analog or digital), glass Masters and running Masters and all digital files
derived from any of the foregoing.  Company
shall not destroy any of the Source Materials, units of Components or elements
derived therefrom without prior written authorization from WMI; provided,
however, that Company may destroy certain such derived elements (i.e.,
glass Masters and metal parts) to the extent that such elements are generally
destroyed by Company in the ordinary course of production.  Company shall also, at Company’s cost,
maintain, protect and backup any and all Source


 


8





















 


Materials and derivatives in an organized environment to allow for easy
access by both Company and WMI.


 


(b)  Insurance.  During the Term, Company shall: (i) comply
with all provisions set forth on Schedule G hereto; and (ii) at Company’s
sole cost and expense, maintain adequate insurance coverage for: (A) all Source
Materials and Inventory while such items are in Company’s possession, under Company’s
control or in transit to or from Company or its designees to any Facility; and
(B) the other matters set forth on Schedule G hereto.  The insurance required under this Paragraph 5(b) is not intended to
limit Company’s liability as otherwise provided in this Agreement.


 


(c)  Computer
Access.  In order that WMI and its
affiliates are able to monitor daily shipments, receipt, production and
inventory activity in connection with Components and Products, Company shall
give WMI access to Company’s computer system for the purpose of providing WMI
with real-time information stored therein relating to Components and Products
at Company’s expense (but no access shall be allowed to information relating to
any other party’s products or any personal data possessed by Company).  Such system shall provide WMI with all of the
same types of reports and information currently provided by, and as may be
available from Company’s computer systems in connection with other products and
components manufactured and/or packaged by Company.  In connection therewith, Company shall work
with WMI to ensure that WMI is provided with at least the same level of reports
and information that WMI’s own systems provided as of the commencement of the
Term.  Nothing in such reports or information
provided shall impart any competitively-sensitive information about Company,
Company’s affiliates or any third parties for which Company renders any
services or any personal data possessed by Company.  Such access shall be available to WMI [*] at
all times during the Term.  Notwithstanding
anything herein to the contrary, Company may perform system maintenance and
upgrades during which such systems may not be available; provided, however,
that such downtime does not exceed [*]


 


(d)  Inspection.  Subject to the provisions set forth below,
during the Term and for a period of [*] following the expiration or termination
of the Term, WMI shall have the right to inspect each WMI Facility and any
other facility utilized by Company in connection with Components or Products or
the provision of Services hereunder, during regular business hours (utilizing
either WMI’s own employees, third party advisers or representatives, insurers,
or other experts retained by WMI).  WMI
may conduct such inspections of each WMI Facility or such other facility up to [*].


 


9





















 


[*] During any such inspection, WMI may conduct physical inventories of
units of Components and Products in Company’s possession or control.  WMI shall not have access to any
competitively-sensitive information relating to any other party’s products, or
any personal data possessed by Company, during the inspections permitted under
this Paragraph 5(d).


 


(e)  Security.  Company shall maintain security standards that
are at least equivalent to those provided by other “first-class” manufacturers
and packagers in the Territory, both in the segregated area of the WMI
Facilities for property of WMI and throughout the WMI Facilities, and shall at
all times employ the utmost care and diligence to prevent loss, damage, theft,
disappearance, unauthorized destruction or usage of such property of WMI.  Company’s security procedures shall be
subject to WMI’s prior written approval. 
Company shall maintain such procedures as approved by WMI and as may
reasonably be given to Company from time to time throughout the Term.  Notwithstanding the foregoing, Company’s
security measures (which shall include closed-circuit television monitoring,
pass-protected access, employee checking and spot searching, etc.) shall be
sufficient to ensure that all Source Materials and Inventory and the
intellectual property embodied in such Source Materials and Inventory are in no
way compromised, stolen, “leaked” to the public (e.g., copying of
recordings embodied on Products which may lead to the availability of such
recordings to the public via the Internet or similar means) or otherwise made
available to any unauthorized parties; provided, however, that
for a period of [*] from the commencement of the Term, such security measures
need be no more stringent than those currently in place at the Acquired
Facilities.  Upon discovery of: (i) loss,
damage, theft, disappearance, or destruction of Source Materials or Inventory
exceeding [*] or (ii) any unauthorized usage of Inventory, Company shall notify
WMI as soon as reasonably possible, and in any event within [*] following such
discovery, and shall include in such notification sufficient detail to allow
WMI to investigate such discovery (each, a “Security Breach Notice”).  Regardless of Company’s compliance with all
security measures set forth herein or with procedures approved by WMI, Company
shall be liable as provided herein
for the loss, damage, theft, disappearance, destruction or unauthorized usage
of any property of WMI.


 


(f)  Salvage.  At all times and regardless of whether
Company or its insurers are required to compensate WMI for loss as required
under this Agreement, WMI shall retain the sole right to salvage for damaged
Inventory.  Company shall not surrender
damaged Inventory to insurers or any other party for destruction or disposal
without obtaining WMI’s prior written consent.


 


(g)  WMI
Employees.  Company shall throughout
the Term, at the request of WMI, provide up to a maximum of [*] full-time
employees of WMI or its affiliates (the “WMI Employees”) with, at
Company’s expense: (i) reasonable office accommodations at such Facilities of
Company utilized for manufacturing and/or


 


10





















 


packaging in the Territory as may be specified from time to time by
WMI; (ii) individual computers; (iii) copy services and any other similar
office services in order to permit them to carry out their functions; (iv)
office meal/pantry/refreshment and recreational and similar facilities similar
to those provided to Company’s employees at such facilities; and (v) all other
reasonable support functions as provided to them as of the date of this
Agreement.  Company shall also provide
telephone, Internet and fax access for each WMI Employee, and WMI shall
reimburse Company for Company’s actual, documented, out-of-pocket costs
therefor.  Amounts owing under this
Paragraph 5(g) shall be invoiced by Company at month end and shall be payable [*]
from the date of the rendition of such invoice; [*]  WMI shall be responsible for the direction
of, and all compensation and related obligations for, the WMI Employees.  The WMI Employees shall operate in accordance
with WMI’s code of conduct and Company’s standard code of conduct contained in
its employee policy manual at the applicable WMI Facility (which code of
conduct shall be subject to WMI’s reasonable approval) and all other lawful
policies adopted by Company from time to time governing the conduct of all of
its employees and contractors.  In the
performance of their tasks, the WMI Employees shall not have access to any
competitively-sensitive information relating to any other party’s products or
any personal data possessed by Company.


 


[*]


 


6.                                       Technology.  Throughout
the Term, Company shall reasonably update its manufacturing and
packaging lines at the WMI Facilities at Company’s cost to keep up with new
technology requirements and to maintain at least the same level of technology
utilized by other “first-class” manufacturers and packagers of Records in the
Territory, including machinery and equipment that is reasonably available to
provide automated assembly of packaging, inclusion of inserts and application
of stickers, shrinkwrap and security materials. 
Company shall maintain and update its information and technology
capabilities at the WMI Facilities, at Company’s cost, to meet reasonable WMI
requirements and maintain competitive services for WMI and its customers.  [*]


 


7.                                       Invoices
and Payments.  (a)  Rendition of Invoices.  Except with respect to shipping charges to be
borne by WMI as provided
in Paragraph 3(i), in the
case of WMI affiliates and licensees for each month of the Term, Company shall
prepare and render invoices in Euros to such WMI affiliates and licensees on
the [*] of each such month setting forth all Fees owed by WMI hereunder with
respect to such affiliates and


 


11





















 


licensees.  The amount due to Company pursuant to each
such invoice shall be due and payable in Euros by the WMI affiliates and
directly by licensees to Company on or before [*] following Company’s rendition
of such invoices [*]. At WMI’s sole election, Company shall prepare and render
invoices in Euros to such nominated WMI affiliates and licensees with respect
to each completed and shipped Order of Products setting forth all Fees owed by
WMI hereunder with respect to such nominated affiliates and licenses.  The amount due to Company pursuant to each
such invoice shall be due and payable in Euros by the WMI affiliates and
directly by licensees to Company on or before [*] following Company’s rendition
of such invoices [*]. If any WMI affiliate or licensee disputes an amount
contained in an invoice but has already paid to Company such amount, the WMI
affiliate or licensees may withhold the disputed amount from amounts otherwise
owed to Company hereunder during the pendency of such dispute.  The invoices for all units hereunder will
follow the same format as current invoices but at a minimum shall contain “per
SKU” line item detail with special handling or other miscellaneous charges
indicated separately in the form and manner consistent with Company’s general
form of invoice.  Company shall submit
all such invoices to WMI electronically pursuant to instructions given by WMI
to Company from time to time (and in paper form, to the extent WMI so requests)
and to the extent that Company’s and WMI’s computer systems do not already
provide for the electronic submission of all such invoices, Company shall use
Company’s reasonable efforts to work with WMI starting upon the commencement of
the Term to create a system whereby all such invoices can be submitted
electronically to WMI.  For the avoidance
of doubt, WMI affiliates shall only be liable for any payments hereunder provided that they have received the
complete Orders for the relevant finished units of Components and Products
reflected in such invoice.


 


(b)  Audits.  WMI shall have the right, at WMI’s sole
expense, to examine (and/or to appoint representatives to examine) Company’s
(and Company’s affiliates’) books and records in order to: (i) verify the
correctness of any invoice prepared and rendered by Company in accordance with Paragraph 7(a); (ii) establish the
applicability of the provisions contained in Paragraphs 10, 12 and/or 15; or
(iii) otherwise establish compliance by Company with its obligations under this
Agreement; provided, however, that only independent, third-party
auditors (i.e., auditors other than WMI’s then-current outside auditor) shall
be utilized for the review of Company’s books and records.  Independent third party auditors shall have
access to all information necessary to perform their duties, however nothing in
any report provided to WMI or its affiliates by any such independent third
party auditors shall impart to WMI or its affiliates any
competitively-sensitive information about Company, Company’s affiliates or any
third parties for which Company renders any services.  If any such audit reveals that WMI and/or WMI’s
affiliates have been overcharged, Company shall reimburse WMI in the amount of
the overcharge.  If any such audit
reveals that WMI or WMI’s affiliates have been overcharged by an amount
exceeding three percent (3%) for the audit period, Company shall reimburse WMI
in the amount of the overcharge plus all fees paid by WMI to the


 


12





















 


auditors concerned in connection with such audit and any other actual,
documented, out-of-pocket expense incurred by WMI in connection with such audit.  [*] Regardless of the number of audits
conducted hereunder revealing the same specific overcharge to WMI, Company
shall not be required to repay WMI the amount of any such overcharge more than
once.  WMI’s audit right shall survive
the expiration or termination of the Term for [*]. Company shall retain all
books and records related to the performance of Services hereunder after the
expiration or termination of the Term for so long as WMI or its affiliates may
need to perform audits hereunder, but in no event for more than [*] the
rendition of the invoice with respect to the Services to which such invoice
relates, provided, however, that before Company destroys any
books or records, Company shall deliver written notice of such intent to
destroy to WMI [*] before the intended date of destruction.  WMI shall [*] after receipt of such notice to
request copies of the books and records to be destroyed, in which case Company
shall make copies of such books and records and deliver the same to WMI (but
excluding information related to other customers of Company) at WMI’s expense
(but at Company’s expense if such copies are of electronic files).  As used herein, “books and records” shall
include, without limitation, physical data and data stored in any electronic,
magnetic or optical format.


 


8.                                  Post-Term
Procedures.  (a)  Upon the expiration or termination of the
Term, Company shall immediately cause the cessation of all Services and shall
have no further rights or obligations with respect to Products except as
provided herein; provided, however, that upon WMI’s request,
Company shall fill any then-currently outstanding orders for units of
Components and Products pursuant to the terms of this Agreement.  Within [*] following the expiration or
termination of the Term, Company shall provide WMI with a list of all Source
Materials and units of Components and Products in Company’s possession or
control on such date.  The mere
expiration or termination of the Term shall not affect any obligation of WMI to
pay for Services rendered by Company prior to such expiration or termination or
any other obligation that is expressly provided herein to survive the
expiration or termination of the Term.


 


(b)  Within
[*] following the expiration of the Term or [*] following the early termination
of the Term, WMI shall remove from the Facilities, at WMI’s expense, or order
at WMI’s expense the destruction of: (i) all units of Components and Products
in Company’s possession or control; and (ii) all Source Materials in Company’s
possession or control.  The determination
whether to remove or


 


13





















 


destroy such items shall be made by WMI in WMI’s sole discretion.  Any Source Materials to be returned shall be
returned to WMI, at WMI’s cost, and the cost of any return of any Components to
be returned shall be the subject of negotiation between the parties hereto
unless such Components were supplied by WMI,
in which case such Components shall be returned without charge.


 


9.                                  Warranties,
Representations, Covenants and Indemnities. 
(a)  Company warrants, represents
and/or covenants, as the case may be, that: (i) Company has the right, power
and authority to enter into and fully perform this Agreement; (ii) no agreement
of any kind heretofore entered into by Company shall interfere in any manner
with the complete performance of this Agreement; and (iii) subject to WMI’s
rights in the Products and Components and WMI’s warranties and representations
set forth below, any items prepared by or otherwise furnished by Company in
connection with Components or Products and Company’s performance of the
Services hereunder will not violate any law or infringe upon the rights of any
party.


 


(b)  Company
agrees to and does hereby indemnify, save and hold WMI and its affiliates, and
each of their respective officers, directors and employees (collectively, for
the purposes of this Paragraph 9(b)
only, “WMI”) harmless to the maximum extent permitted by law from any
and all loss and damage (including court costs and reasonable attorneys’ fees
as and when incurred) arising out of, connected with or as a result of: (i) any
inaccuracy, inconsistency with, failure of, or breach or threatened breach by
Company of any warranty, representation, agreement, undertaking or covenant
contained in this Agreement; and/or (ii) any and all damages or injuries of any
kind or nature whatsoever (including death resulting therefrom) to any persons,
whether employees of Company or otherwise, and to any property caused by,
resulting from, arising out of or occurring in connection with the execution of
the work under this Agreement (including as a result of products liability
claims), whether such damages or injuries are or are alleged to be based upon
Company’s active or passive negligence or participation in the wrong or upon
any breach of any statutory duty or obligation on the part of Company (except
to the extent such damages or injuries directly result from any act of WMI’s
employees located at Company’s facilities and are not otherwise covered by the
property insurance Company is required to maintain hereunder as set forth on Schedule G
hereto, or result from a breach of any warranty, representation, agreement,
undertaking or covenant of WMI contained herein).  The foregoing indemnity shall be applicable
only to such claims as have been reduced to judgment or settled with Company’s
written approval.  WMI shall give Company
prompt notice of any claim to which the foregoing indemnity applies and Company
shall assume the defense of any such claim through counsel of Company’s choice
and at Company’s sole expense; provided, however, that the
relevant law on Civil Procedure provides for this procedure.  WMI shall have the right to participate in
such defense through counsel of WMI’s choice and at WMI’s expense; provided,
however, that the relevant law on Civil Procedure provides for this
procedure.


 


(c)  WMI
warrants, represents and/or covenants, as the case may be, that: (i) WMI has
the right, power and authority to enter into and fully perform this Agreement;


 


14





















 


(ii) no agreement of any kind heretofore entered into by WMI shall
interfere in any manner with the complete performance of this Agreement; and
(iii) Material embodied in Products and Components as supplied by WMI shall not
violate any law or infringe upon the rights of any third party.  As used herein “Material” shall include all
musical compositions, names, biographical materials and likenesses,
photographic, video or motion picture images, sound recordings, intellectual
properties, packaging and artwork.


 


(d)  WMI
agrees to and does hereby indemnify, save and hold Company and its affiliates,
and each of their respective officers, directors and employees (collectively,
for the purposes of this Paragraph 9(d) only, “Company”) harmless to the
maximum extent permitted by law from any and all loss and damage (including
court costs and reasonable attorneys’ fees as and when incurred) arising out
of, connected with or as a result of: (i) any inaccuracy, inconsistency with,
failure of, or breach or threatened breach by WMI of any warranty,
representation, agreement, undertaking or covenant contained in this Agreement;
and/or (ii) any and all damages or injuries of any kind or nature whatsoever
(including death resulting therefrom) to any persons, whether employees of
Company or otherwise, and to any property caused by, resulting from, arising
out of or occurring in connection with any act of WMI’s employees located at
Company’s facilities, except to the extent such damages and injuries are
covered by the property insurance Company is required to maintain hereunder at
set forth on Schedule G hereto.  The
foregoing indemnity shall be applicable only to such claims as have been
reduced to judgment or settled with WMI’s written approval.  Company shall give WMI prompt notice of any
claim to which the foregoing indemnity applies and WMI shall assume the defense
of any such claim through counsel of WMI’s choice and at WMI’s sole expense; provided,
however, that the relevant law on Civil Procedure provides for this
procedure.  Company shall have the right
to participate in such defense through counsel of Company’s choice and at
Company’s expense; provided, however, that the relevant law on
Civil Procedure provides for this procedure.


 


10.                            Breach,
Cure and Termination.  (a)  WMI may terminate the Term by written notice
to Company following either: (i) a breach of this Agreement by Company that is
specified in Paragraph 10(b); or (ii) any other material breach of this Agreement
by Company.  [*]  There shall be a cure period of [*] following
written notice to Company, for any breach referred to in Paragraph 10(a)(ii) .


 


(b)  The
breaches of this Agreement referred to in Paragraph 10(a)(i) are any of the
following:


 


[*]


 


15





















 


 


[*]


 


(viii)  any willful and malicious breach by Company
of any material provision hereof.


 


(c) In addition, WMI may terminate the Term:


 


(i)  by written notice to Company within [*]
following the later of: (A) a Change of Control; and (B) written notice to WMI
from Company that a Change of Control has occurred;


 


(ii)  by written notice to Company following an
Insolvency Event; and


 


(iii)  by written notice to Company following
either: (A) the termination of the term of the International PP&S Agreement
or the International Administrative Services Agreement, other than (x) as a
result


 


16





















 


of a breach by WMI or the expiration of the
term thereunder by passage of time or (y) the termination of the term of the
International PP&S Agreement under Paragraph 11(c)(iv) thereof; or (B) any
material breach by Company under the International PP&S Agreement (i.e., a
breach which would then-currently permit WMI to terminate the term thereof and
with respect to which WMI’s right to terminate has not been waived).


 


(d)  Any
termination of this Agreement under this Paragraph 10 will not relieve Company
of liability for breaches hereof arising prior to such termination nor shall it
relieve WMI from any liability to pay for Services rendered prior to such
termination.


 


(e)


 


(i)  If because of an “act of God”, inevitable
accident, fire, lockout, strike or other labor dispute, riot or civil
commotion, act of public enemy or other cause of a similar nature not
reasonably within Company’s control (a “Force Majeure Event”), Company
is materially hampered in the performance of its obligations under this
Agreement, or its normal business operations are delayed or become impossible
or commercially impracticable, then Company shall have the option, by giving
WMI written notice, to suspend its obligations under this Agreement affected by
such Force Majeure Event, effective upon receipt by WMI of such notice, for the
duration of any such contingency.  Should
Company suspend its obligations under this Agreement pursuant to this Paragraph
10(e), such suspension shall not constitute a breach hereunder and Company
shall not be subject to price rebates under Paragraph 15 with respect to any
occurrences during the pendency of such suspension.  Immediately upon Company’s assertion of its
right to suspend its obligations under this Agreement, WMI shall have the right
to manufacture and/or package Products itself or through third parties during
the pendency of such suspension.  Further,
should Company suspend its obligations under this Agreement, WMI shall, on and
from the date which is [*] after the occurrence of (which may be earlier than
Company’s assertion of suspension under) a Force Majeure Event, have the right,
in its sole discretion, to: (i) terminate the Term of this Agreement by notice
in writing to Company; or (ii) require Company to implement its Disaster
Recovery Plan; in each case unless Company has previously by notice in writing
to WMI ended the suspension of Company’s obligations under this Agreement.  For the avoidance of doubt, should WMI
exercise its right of termination under this Paragraph 10(e), no cure period
shall be associated with Company’s failure to perform its obligations hereunder.  No liability or obligation of Company under
any provision hereof, other than those affected by a Force Majeure Event
hereunder, shall be in any way limited or forgiven as a result of any Force
Majeure Event.


 


17





















 


(ii)  In addition, [*] of becoming aware of any
circumstance or event which may reasonably be anticipated to cause or
constitute a Force Majeure Event, Company shall notify WMI of such circumstance
or event.  For the avoidance of doubt,
such notice shall not constitute an assertion by Company of its right to
suspend its obligations hereunder.


 


(iii)  If for any reason, Company is unable to
provide any Services hereunder in connection with any Order(s) for a period
exceeding [*] and such inability is reasonably likely to result in Company
being unable to meet the Service Level Requirements set forth herein, WMI shall
have the right to immediately contract with a third party to provide all or any
portion of such services for such period of time as may be reasonably necessary
for WMI to obtain the services required to fulfill any such Order(s).  Once WMI is reasonably satisfied that Company
is again able to provide the required Services, WMI shall return the contracted
Services to Company as soon as it is reasonably able to do so; provided,
however, that the return of such Services to Company shall be subject to
any reasonable commitment WMI has made to the applicable third party that such
Services would remain with such third party for a period of time.  Company shall reimburse WMI upon demand for
any and all incremental out-of-pocket charges that WMI reasonably incurs as a
result of transferring its Services under this Paragraph 10(e)(iii).


 


(f)  If
WMI purports to terminate this Agreement under this Paragraph 10, each party
hereto shall have the right to seek any remedy or other relief available under
applicable law (except as limited by Paragraph 16(n)), and each party hereto
shall have the right to assert any defenses available under applicable law; provided,
however, that under no circumstances shall any party from whom WMI
obtains services in substitution for any or all Services to be provided
hereunder have any liability whatsoever to Company arising out of or related to
any actual or purported termination of this Agreement by WMI, even if in
violation of this Agreement and Company shall take no action against any such
party in connection with the provision of such services by such party to WMI.


 


11.                            Anti-Piracy
Activities.  Company (and WMI, to the
extent applicable to a content provider) shall at all times use commercially
reasonable efforts to comply with industry standard procedures associated with
anti-piracy activities including: (i) the IRMA anti-piracy compliance program;
(ii) the IFPI anti-piracy compliance program; and (iii) all other measures and
procedures described in the RIAA Draft CD Plant Good Business Practices set
forth therein.


 


12.                            Adjustments.  (a)  [*]


 


18





















 


[*]


 


(b)  [*]


 


(c)  [*]


 


19





















 


[*]


 


20





















 


conditions applicable to such other party (e.g., order volumes,
quality requirements and materials used).


 


(e)  Each
of WMI and Company agrees to negotiate in good faith to attempt to resolve any
disagreement which may arise in connection with the implementation or
interpretation of the terms and provisions of this Paragraph 12.  In the event that such good faith negotiation
does not result in the resolution of any such disagreement within a fifteen
(15)-day period, the parties shall retain an arbitrator to make a fair and
reasonable determination as to any such disagreement (the “Arbitrator”).  The Arbitrator shall be a retired executive
or attorney with substantial experience in the field of manufacturing,
preferably in the manufacturing of Optical Discs, shall be independent of each
of WMI and Company, and shall endeavor to provide a determination of any
dispute among the parties within thirty (30) days of being retained, but in
each case, as quickly as possible.  The
parties shall jointly appoint the Arbitrator and the identity of the Arbitrator
shall be satisfactory to each of the parties. 
The parties shall share equally in the cost and expense of retaining the
Arbitrator.  If the parties cannot agree
upon a person to act as the Arbitrator within thirty (30) days of the expiry of
the fifteen (15)-day negotiation period specified in this Paragraph 12(e), then
the Arbitrator shall be selected by the American Arbitration Association.  Any arbitration hereunder shall be conducted
in conformance with the rules established by the American Arbitration
Association.  Any determination made by
the Arbitrator shall be final and binding on each of the parties.


 


13.                            Confidentiality.  (a)  Each
of Company and WMI shall, and shall cause its affiliates, and its and its
affiliates’ directors, officers, employees and agents (each, a “Recipient”)
to, maintain in confidence the material terms of this Agreement, except that
WMI may disclose this Agreement on a confidential basis in connection with a
potential Recorded Music Major Transaction, to a potential assignee under
Paragraph 16(c) or to third parties and WMI affiliates as may be necessary in
the ordinary course of business (provided, that any such disclosure shall be
limited to those persons who agree to be bound by the provisions of this
Paragraph).  The restriction in the
preceding sentence shall not apply to information that: (i) becomes generally
available to the public other than as a result of disclosure by such Recipient
contrary to this Agreement; (ii) was available to such Recipient on a
non-confidential basis prior to its disclosure to such Recipient; (iii) becomes
available to such Recipient on a non-confidential basis from a source other
than any other Recipient unless such Recipient knows that such source is bound
by a confidentiality agreement or is otherwise prohibited from transmitting the
information to such Recipient by a contractual obligation; (iv) is
independently developed by such Recipient without reference to confidential
information received from any other party; (v) is required to be disclosed by
applicable law or legal process, provided that any Recipient disclosing
pursuant to this clause (v) shall notify the other party at least five (5) days
prior to such disclosure so as to allow such other party an opportunity to
protect such information through protective order or otherwise; (vi) is
required to be disclosed by any listing agreement with, or the rules or
regulations of, any security exchange on which securities of such Recipient or
any of its affiliates are listed or traded; or (vii) is required to be
disclosed by a party in order to perform its obligations under the Agreement; provided,
that any such disclosure shall be limited to those persons


 


21





















 


who have a need to know such information and who agree to be bound by
the provisions of this Paragraph 13.  No
party hereto shall make a press release or public announcement concerning this
Agreement without the prior written consent of the other party hereto.


 


(b)  Company
shall, and shall cause its affiliates, and its and its affiliates’ directors,
officers, employees and agents to, maintain in confidence all information that:
(i) is in its or their possession by reason of Company’s performance of
Services hereunder; and (ii) relates to the Products.  WMI shall, and shall cause its affiliates,
and its and its affiliates’ directors, officers, employees and agents to,
maintain in confidence all information that: (x) is in its or their possession
by reason of Company’s performance of Services hereunder; and (y) relates to
the pricing, methods of manufacture or other proprietary information of Company.  The restrictions in the two preceding
sentences shall not apply to information that: (A) becomes generally available
to the public other than as a result of disclosure by such Recipient contrary
to this Agreement; (B) was available to such Recipient on a non-confidential
basis prior to its disclosure to such Recipient; (C) becomes available to such
Recipient on a non-confidential basis from a source other than any other
Recipient unless such Recipient knows that such source is bound by a
confidentiality agreement or is otherwise prohibited from transmitting the
information to such Recipient by a contractual obligation; (D) is independently
developed by such Recipient without reference to confidential information
received from any other party; (E) is required to be disclosed by applicable
law or legal process, provided that any Recipient disclosing pursuant to this
clause (E), shall notify the other party at least five (5) days prior to such
disclosure so as to allow such other party an opportunity to protect such
information through protective order or otherwise; or (F) is required to be
disclosed by any listing agreement with, or the rules or regulations of, any
security exchange on which securities of such Recipient or any of its
affiliates are listed or traded.  Notwithstanding
anything to the contrary above, WMI and its affiliates shall be permitted to
disclose any information on a confidential basis in connection with a potential
Recorded Music Major Transaction, to a potential assignee under Paragraph 16(c)
or to third parties and WMI affiliates as may be necessary in the ordinary
course of business (provided,  that any such  disclosure shall  be
limited to those persons who  agree to be  bound by the
provisions of this Paragraph).


 


(c)  The
obligations of WMI and Company under Paragraphs 13(a) and 13(b) shall survive
for [*] following the expiration or termination of the Term.


 


(d)


 


(i)  Notwithstanding anything to the contrary set
forth in this Paragraph 13, the parties hereby agree that, as of the earliest
of: (A) the date of the public announcement of discussions relating to the
transactions contemplated by the Stock Purchase Agreement (the “Transaction”);
(B) the date of the public announcement of the Transaction; and (C) the date of
the execution of an agreement (with or without conditions) to enter into the
Transaction, each party (and each employee, representative or other agent of
such party) may disclose to any and all persons, without


 


22





















 


limitation of any kind, the tax treatment and
tax structure of the Transaction and all materials of any kind (including
opinions or other tax analyses) that are provided to such party relating to
such tax treatment and tax structure.


 


(ii)  The parties acknowledge that: (A)(x) the
identity of any existing or future party (or any affiliate of such party) to
the Transaction; and (y) any specific pricing information or other commercial
terms, including the amount of any fees, expenses, rates or payments arising in
connection with the Transaction, are not included in the meaning of the terms “tax
treatment” and “tax structure” as referred to in clause (i) of this Paragraph
13(d); and (B) nothing in this Agreement shall in any way limit any party’s
ability to consult any tax advisor (including a tax advisor independent from
all other entities involved in the Transaction) regarding the tax treatment or
tax structure of the Transaction.


 


14.                            Definitions.  (a)  Certain Terms.


 


(i)  “Acquired Facility” shall mean any of
the facilities located in Alsdorf, Germany which are being acquired by  Company
in connection with the Stock Purchase Agreement.


 


(ii)  “Catalog Titles” shall mean any
Product (or Component thereof) following such Product’s “street date.”


 


(iii)  “CD Discs” shall mean Optical Discs
which are in the CD format.


 


(iv)  “Change of Control” shall mean (i) any
merger or consolidation of Company or Parent with a Major or its affiliates or
any sale, transfer, issuance or other disposal (in one transaction or in a
series of transactions) of all or more than [*] of the shares of capital stock,
partnership interests, membership interests in a limited liability company or
other equity ownership interests (“Equity Interests”) of Parent or
Company (or any subsidiary of Parent or Company engaged in the business of
providing M&P Services, whether now owned or hereafter acquired) to a Major
or its affiliates; (ii) the failure by Parent to own, directly or indirectly,
beneficially and of record, Equity Interests in Company representing at least [*]
of each of the aggregate ordinary voting power and aggregate equity value
represented by the issued and outstanding Equity Interests in Company; (iii)
Parent or Company sells all or substantially all of its assets; or (iv) any
other event which results in Parent no longer controlling the direction or
management of Company.


 


(v)  “Combined Entity” shall mean the
entity or entities formed as a result of any Recorded Music Major Transaction.


 


23





















 


(vi)  “Components” shall
mean the packaging or promotional elements included in the Containers or
utilized in connection therewith, including inserts, booklets and inlay cards
and stickers.


 


(vii)  “Containers”
shall mean the containers (e.g., jewel boxes and snapper boxes) into
which Records are collated.


 


(viii) 
“Contract Year” shall mean each separate, consecutive one
(1)-year period of the Term, the first such period to commence on the first day
of the Term.


 


(ix)  “Excluded Products” shall mean the
following Products:


 


(a)  single and maxi single configurations in all
formats, and


 


(b)  premium configurations in all formats.


 


(x)  “Facility”
shall mean any facility owned and/or leased and controlled by Company or one of
Company’s affiliates.


 


(xi)  “Hit
Titles” shall mean Catalog Titles designated by WMI as such based upon
current or anticipated sales and delivery requirements.


 


[*]


 


(xiii)  “International Administrative Services
Agreement” shall mean the International Administrative Services Agreement
between WMI and Company dated as of the date hereof.


 


24





















 


(xiv)  “International PP&S Agreement”
shall mean the International Pick, Pack and Shipping Services Agreement between
WMI and Company dated the date hereof.


 


(xv)  “Inventory” shall
mean all inventory of units of Components and finished units of Products stored
in any Facility.


 


(xvi)  “Key Release” shall
mean a New Release of which greater than two hundred and fifty thousand
(250,000) units and less than five hundred thousand (500,000) units have been
Ordered.


 


(xvii)  “Key Release Date”
shall mean the date by which the Orders for a Key Release are required to be
shipped pursuant to Schedule A hereto.


 


(xviii) “M&P Services” shall mean Manufacturing Services and
Packaging  Services.


 


(xix)  “Major” shall mean
any one of the following companies: Sony Music Entertainment Inc., Bertelsmann
Music Group, EMI Group plc or Universal Music Group (or their successors).


 


(xx)  “Manufacturing Services”
shall mean: (i) selected pre-production services (as detailed on Schedule A);
(ii) selection of suppliers; (iii) ordering raw materials (including
Components) from various suppliers such as pressing plants, duplicators and
printers; (iv) assembly; (v) arranging shipment of Components to various
points; (vi) arranging shipment of finished units from point of manufacture to
WMI’s distributor and to other shipment locations identified by WMI; and (vii)
inventory control with respect to the foregoing, all of the foregoing for Optical
Discs only.


 


(xxi)  “Manufacturing Source
Materials” shall mean, collectively, all materials (other than raw
materials such as plastic) necessary to manufacture finished units including  Masters
and Components, whether  in physical or electronic form (as
determined by WMI).


 


(xxii)   “Master” shall mean any recording
embodied in any form from which Records may be derived.


 


(xxiii)  “New Release” shall mean any Product
(or Component thereof) prior to and including such Product’s “street date.”


 


(xxiv)  “Optical Disc” shall mean any kind of
optical disc now known or hereafter devised, including a compact disc in any of
its forms and a Digital Versatile Disc in any of its forms and any other
high-density optical disc.  For the
purposes of this definition, a compact disc includes


 


25





















 


audio CD,
CD-ROM, Video CD, CD-I, CD-R, CD-RW, Photo CD, Enhanced CD and CD+G, as each
such term is commonly used and understood. 
For the purposes of this definition, a Digital Versatile Disc includes
DVD-Audio, DVD-Video, DVD-ROM, DVD-R, DVD-RW and DVD-RAM, as each such term is
commonly used and understood.  “Optical
Disc” shall not include so-called “high definition” Digital Versatile Discs (“HD-DVDs”);
provided, however, that if WMI’s total production of units of
Products in HD-DVD format for any Contract Year exceeds [*] of WMI’s total
production of units of Products in all formats for such Contract Year
(including units of Products in HD-DVD format), then thereafter during the Term,
on a prospective basis, HD-DVDs shall be deemed to be “Optical Discs”
hereunder.


 


(xxv)   “Order” shall
mean a request made by WMI for the manufacture and/or packaging of units of
Products, Components or any other materials hereunder.  An “Order” may be for individual Products,
Components or other materials, may be for multiple Products, Components or
other materials and may specify multiple quantities of the same Product,
Component or other materials to be produced for delivery to single and/or multiple
locations.  An “Order” shall wherever
possible include a “bill of materials” or “BOM” as said term is utilized in the
manufacturing industry.


 


(xxvi)  “Packaging Services”
shall mean (i): selected pre-production services (as detailed on Schedule A);
(ii) selection of raw material suppliers; (iii) ordering raw materials from
various suppliers; (iv) assembly; (v) arranging shipment of finished units of
Components from point of manufacture to shipment locations identified by WMI;
and (vi) inventory control with respect to the foregoing, all of the foregoing
for Optical Discs only.


 


(xxvii)  “Packaging Source
Materials” shall mean, collectively, all materials (other than raw
materials such as ink and  paper) necessary to manufacture
Components, whether in physical or electronic form (as determined by WMI).


 


(xxviii) “Parent” shall mean
Cinram International Inc.


 


(xxix) 
“Platinum Release” shall mean a New Release for which greater
than [*] units have been Ordered.


 


(xxx)  “Platinum
Release Date” shall mean the date by which the Orders for a Platinum
Release are required to be shipped pursuant to Schedule A hereto.


 


(xxxi)  “Products” shall mean all Records
intended for sale in the Territory for which WMI requires M&P Services to
be performed during the Term and for which WMI has the unilateral right to
control the identity


 


26





















 


of the party who renders such M&P
Services.  Following a Recorded Music
Major Transaction, “Products” shall mean all Records intended for sale in the
Territory for which the Combined Entity requires M&P Services to be
performed during the Term in the Territory and for which the Combined Entity
has the unilateral right to control the identity of the party who renders such
M&P Services.  “Products” shall be
deemed to include Hybrid CD/DVD configurations or any other new physical
formats of Optical Discs; provided, however, [*].  It has been WMI’s general custom to use its
commercially reasonable efforts to acquire the unilateral right to control the
identity of the party who renders M&P Services in connection with Records.  WMI shall continue to do so during the Term,
in accordance with past practice.  To the
extent that WMI or WMI’s affiliates request M&P Services hereunder for
Records intended for sale outside the Territory pursuant to Paragraph 1(a)(i)
hereof, such Records shall also constitute “Products” hereunder.  In every instance, “Products” shall not
include the “Excluded Products”.  Records
sold through so-called “kiosks” shall not constitute “Products” hereunder.


 


(xxxii)  “Recorded Music Major Transaction”
shall mean a joint venture, merger, or other combination of all or a
substantial portion of the recorded music businesses of Warner Music Group with
all or a substantial portion of the recorded music businesses of any Major.


 


(xxxiii)  “Records” shall mean all physical
forms of recording and reproduction by which sound may be recorded now known or
which may hereafter become known, manufactured or sold primarily for home use,
jukebox use, or use on or in means of transportation, including magnetic
recording tape, film, electronic video recordings and any other physical medium
or device for the production of artistic performances manufactured or sold
primarily for home use, jukebox use or use on or in means of transportation,
whether embodying: (i) sound alone; or (ii) sound synchronized with visual
images, e.g., “sight and sound” devices, but only so long as such forms
of recording and reproduction  contain performances of works by
recording artists.


 


(xxxiv)  “Services” shall mean the M&P
Services and all other services to be provided by Company under this Agreement.


 


(xxxv)  “Source Materials” shall mean
Manufacturing Source Materials and Packaging Source Materials.


 


(xxxvi)  “Stock Purchase Agreement” shall mean
the Stock Purchase Agreement among AOL Time Warner Inc., Parent and Company
dated as of July 18, 2003.


 


27





















 


(xxxvii)  “Term” shall mean the [*] commencing
on the Closing Date, as such term is defined in the Stock Purchase Agreement,
subject to earlier termination in accordance with Paragraph 10.


 


(xxxviii)  “Territory”
shall mean wholly-owned WMI affiliate companies located in Austria, Belgium,
Denmark, Eire, Finland, France, Germany, Greece, Italy, Netherlands, Norway,
Portugal, Spain, Sweden, Switzerland and the United Kingdom.


 


(xxxix)  “Turnaround Times”
shall mean the elapsed time between receipt of an order for a workable product
and the time of receipted delivery of all the finished units of the complete
order by the delivery point designated by WMI.


 


(xl)  “Unit” shall mean a
finished product in a form that is delivered to end consumers, carries a unique
identifier code (UPC/EAN/promo no.) and is warehoused as a Stock Keeping Unit
(SKU).


 


(xli)  “US Manufacturing
Agreement” shall mean the US Manufacturing and Packaging Agreement between
WEA and Company dated as of the date hereof.


 


(xlii) 
“US PP&S Agreement” shall mean the US Pick, Pack and Shipping
Services Agreement between WEA and Company dated as of the date hereof.


 


(xliii)  “WEA” shall mean
Warner-Elektra-Atlantic Corporation.


 


(xliv)  “WHV” shall mean Warner Home Video
Inc.


 


(xlv)  “WMI Facility”
shall mean any Facility at which Company provides or has provided Services to WMI
hereunder.


 


(xlvi)  “WMME” shall mean
Warner Music Manufacturing Europe GmbH.


 


(xlvii) “Workable” shall mean:
(i) for orders of Manufacturing Services, an Order for which all of the items
to be furnished by WMI (such as Source Materials and similar materials)
reasonably necessary to complete manufacturing of finished units of Products
have been received by Company in reasonably  sufficient quantities; and (ii) for
orders of Packaging Services, an Order for which all of the items to be
furnished by WMI (such as Source Materials and similar materials) reasonably
necessary to complete manufacturing of Components have been received by Company
in reasonably sufficient quantities.


 


(b)  Other
Definitional and Interpretative Provisions.


 


28





















 


(i)  The words “hereof”, “herein” and “hereunder”
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
Paragraph and Schedule references are to this Agreement unless otherwise
specified.


 


(ii)  The meanings given to terms defined herein
shall be equally applicable to both the singular and plural forms of such
terms.


 


(iii)  Unless the context requires otherwise, other
grammatical forms of defined words or expressions used herein have
corresponding meanings.


 


15.                            [*]


 


(b)  [*]
This Paragraph 15 shall not limit WMI’s other rights against Company for breach
hereof, but any amounts paid by Company pursuant to this Paragraph 15 shall reduce
any amounts otherwise payable by Company with respect to such breach.


 


16.                            Miscellaneous.  (a)  Entire
Agreement, Modification.  This
Agreement contains the entire understanding of the parties hereto relating to
the subject matter hereof and supersedes all previous agreements or
arrangements between the


 


29





















 


parties, both written and oral, hereto relating to the subject matter
hereof, except that nothing in Paragraph 3 shall limit the obligations of Company
under the International PP&S Agreement. 
This Agreement cannot be changed except by an instrument signed by the
authorized signatories of the parties hereto.


 


(b)  Waiver.  Any party to this Agreement may: (i) extend
the time for the performance of any of the obligations or other acts of the
other party hereto; (ii) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document delivered by
the other party pursuant hereto; or (iii) waive compliance with any of the
agreements or conditions of the other party hereto contained herein.  Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party to be bound
thereby.  Any waiver of any term or
condition shall not be construed as a waiver of any subsequent breach or
subsequent waiver of the same term or condition, or a waiver of any other term
or condition of this Agreement.  The
failure of either hereto party to assert any of its rights hereunder shall not
constitute a waiver of any of such rights.


 


(c)  Assignment.  Company shall not have the right without WMI’s
prior written consent (which consent may be granted or withheld in the sole
discretion of WMI) to assign this Agreement or any of the rights granted to
Company hereunder; provided, however, that Company shall be
permitted to assign this Agreement to its Parent or any wholly owned subsidiary.  WMI shall have the right without Company’s
consent to assign this Agreement, in whole or in part, to any subsidiary,
parent company or affiliate of WMI, or to any third party acquiring all or
substantially all of WMI’s assets or equity; provided, however,
that in each case, notwithstanding such assignment, WMI at all times shall
remain directly and fully liable to Company for the performance of the
obligations of WMI hereunder.


 


(d)  Further
Assurances.  Company and WMI each
agree to execute and deliver all such other and additional instruments and
documents and to do such other acts and things as may be necessary to more
fully effectuate this Agreement.


 


(e)  Successors
and Assigns.  This Agreement shall be
binding upon and inure to the benefit of, and shall be enforceable by, each of
the parties hereto and their respective permitted assigns.


 


(f)  Notices.  All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by telecopy or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Paragraph 16(f)):


 


30


















 


	
  WMI:

  	
   

  	
  WEA
  International Inc.

  
	
   

  	
   

  	
  c/o Warner
  Music Group Inc.

  
	
   

  	
   

  	
  75
  Rockefeller Plaza

  
	
   

  	
   

  	
  New York,
  New York 10019

  
	
   

  	
   

  	
  Attn: EVP
  & General Counsel

  
	
   

  	
   

  	
  Fax: (212)
  258-3092

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy
  to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Warner Music
  International Services Ltd.

  
	
   

  	
   

  	
  83 Baker
  Street

  
	
   

  	
   

  	
  London W1U
  6LA

  
	
   

  	
   

  	
  Attention:
  SVP of Business & Legal Affairs

  
	
   

  	
   

  	
  Fax: 44 207
  535 9050

  
	
   

  	
   

  	
   

  
	
  Company:

  	
   

  	
  Cinram
  International Inc.

  
	
   

  	
   

  	
  2255 Markham
  Road

  
	
   

  	
   

  	
  Scarborough,
  Ontario M1B 2W3

  
	
   

  	
   

  	
  Canada

  
	
   

  	
   

  	
  Attn: Dave
  Rubenstein, President

  
	
   

  	
   

  	
  Fax: (416)
  298-0612

  
	
   

  	
   

  	
   

  
	
  with a copy
  to

  	
   

  	
   

  
	
   

  	
   

  	
  Ervin, Cohen
  & Jessup LLP

  
	
   

  	
   

  	
  9401
  Wilshire Boulevard, 9th Floor

  
	
   

  	
   

  	
  Beverly
  Hills, California 90212

  
	
   

  	
   

  	
  Attn: Howard
  Z. Berman, Esq.

  
	
   

  	
   

  	
  Fax: (310)
  859-2325

  
	
   

  	
   

  	
   

  



 


(g)  Headings.  The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.


 


(h)  Severability.  If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any federal,
state, local or foreign statute, law, ordinance, regulation, code, order, other
requirement or rule of law or by public policy, all other terms and provisions
of this Agreement shall nevertheless remain in full force and effect so long as
the economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party hereto.  Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties hereto as closely as possible in an
acceptable manner in, order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.


 


31





















 


(i)  No Agency.  WMI and Company each shall have the status of
an independent contractor and nothing herein contained shall contemplate or
constitute WMI as Company’s agent or employee or Company as WMI’s agent or
employee.  This Agreement does not
constitute or acknowledge any partnership or joint venture between WMI and
Company.


 


(j)  No
Third Party Beneficiaries.  Except
for the provisions of Paragraphs 9(b) and 9(d) relating to indemnified parties,
this Agreement shall be binding upon and inure solely to the benefit of the
parties hereto and their permitted assigns and nothing herein, express or
implied, is intended to or shall confer upon any other party any legal or equitable
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.


 


(k)  GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, APPLICABLE TO
CONTRACTS EXECUTED IN AND TO BE PERFORMED ENTIRELY WITHIN THAT STATE.  EXCEPT AS PROVIDED IN PARAGRAPH 12(e) OR SCHEDULE G
HERETO, ALL ACTIONS AND PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT SHALL BE HEARD AND DETERMINED IN ANY NEW YORK STATE OR FEDERAL COURT
SITTING IN THE CITY OF NEW YORK, AND THE PARTIES HERETO HEREBY IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS IN ANY SUCH ACTION OR
PROCEEDING AND IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING. 
EACH PARTY HERETO IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL
PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH
PROCESS TO SUCH PARTY AT ITS ADDRESS SPECIFIED IN PARAGRAPH 16(f).  THE PARTIES HERETO AGREE THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW.  NOTHING IN THIS
PARAGRAPH 16(k) SHALL AFFECT THE RIGHT OF EITHER PARTY HERETO TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. 
THE CONSENTS TO JURISDICTION SET FORTH IN THIS PARAGRAPH 16(k) SHALL NOT
CONSTITUTE GENERAL CONSENTS TO SERVICE OF PROCESS IN THE STATE OF NEW YORK AND
SHALL HAVE NO EFFECT FOR ANY PURPOSE EXCEPT AS PROVIDED IN THIS PARAGRAPH 16(k)
AND SHALL NOT BE DEEMED TO CONFER RIGHTS ON ANY PARTY OTHER THAN THE PARTIES
HERETO.


 


(l)  WAIVER OF
JURY TRIAL.  EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY
ARISING OUT OF, UNDER OR IN


 


32





















 


CONNECTION WITH THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.  EACH
PARTY HERETO: (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER;
AND (ii) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS PARAGRAPH 16(l).


 


(m)  Consents.  Except as specifically provided to the
contrary herein, if any consent, approval or authority is required from either
party hereto, such consent, approval or authority shall not be unreasonably
withheld or delayed.


 


[*]


 


(o)  Counterparts.  This Agreement may be executed in one or more
counterparts, and by the parties hereto in separate counterparts, each of which
when executed shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.


 


33





















 


If the foregoing is acceptable, please
acknowledge the same by signing in the appropriate places below.


 


	
   

  	
  WEA INTERNATIONAL INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David H. Johnson

  	
   

  
	
   

  	
  Name:

  	
  David H. Johnson

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WARNER MUSIC MANUFACTURING

  EUROPE GMBH (TO BE RENAMED
CINRAM GMBH)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lewis Ritchie

  	
   

  
	
   

  	
  Name:

  	
  Lewis Ritchie

  
	
   

  	
  Title:

  	
  Authorized Signatory

  
					



 





















 


List of Attached Schedules


 


 


	
  Schedule A:

  	
  Service Level Requirements

  
	
  Schedule B:

  	
  Technical Specifications

  
	
  Schedule C:

  	
  Additional Printing and Packaging Charges

  
	
  Schedule D:

  	
  Manufacturing Charges

  
	
  Schedule E:

  	
  Approved Subcontractors

  
	
  Schedule F:

  	
  Code of Conduct for Manufacturers

  
	
  Schedule G:

  	
  Insurance Coverage

  



 


34





















 


Schedule A


 


[*]


 





















 


[*]


 


2





















 


[*]


 


3





















 


[*]


 


4





















 


[*]


 


5





















 


[*]


 


6





















 


[*]


 


7





















 


[*]


 


8





















 


[*]


 


9





















 


[*]


 


10





















 


[*]


 


11





















 


Schedule B




Technical Specifications


 





 


 


WIMME Technical Standards &
Specifications




 


CD / DVD


 


 


V1.0   July 2003


 





















 


A)           CD - Formats


 


AA)                         Discs


 


AA 1)     5” (12cm) Ø CD


 


1.     Physical dimensions discs


 


	
  Diameter

  	
  120 mm

  	
  + 0,3

  	
  mm

  
	
  Centerhole

  	
  15 mm

  	
  + 0,1/- 0

  	
  mm

  
	
  Thickness

  	
  1,2 mm

  	
  + 0,3 / - 0,1

  	
  mm

  
	
   

  
	
  Disc shape
  see technical standards

  



 


2.     Materials


 


Standard


 


	
  a)

  	
  Carrier

  	
  :

  	
  clear
  polycarbonate

  	
  dimensions
  see 1.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  b)

  	
  reflective
  layer

  	
  :

  	
  Aluminium

  	
  Inner Ø

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
  outer Ø

  	
  118

  
	
  c)

  	
  protective
  layer 

  	
  :

  	
  clear
  coating lacquer

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Specials

  
	
   

  
	
  a)

  	
  carrier

  	
  :

  	
  coloured
  polycarbonate

  	
  • on
  specific request

  
	
  b)

  	
  reflective
  layer

  	
  :

  	
  •

  	
  other
  materials

  	
  • on
  specific request

  
	
   

  	
   

  	
   

  	
  •

  	
  different
  masking shapes

  	
  • on
  specific request

  
								



 


3.     Technical
Specifications


 


	
  CD Audio

  	
  =>

  	
  see SONY / PHILIPS

  	
   Red Book

  
	
  CD ROM

  	
  =>

  	
   “

  	
  “

  	
   Yellow Book

  
	
  Enhanced CD-Audio

  	
  =>

  	
   “

  	
  “

  	
   Enhanced Music CD Specs.

  



 


2





















 


4.     Maximum
Playing time


 


	
  Standard

  	
   

  	
   

  
	
  CD-Audio

  	
  :

  	
  78 min

  
	
  CD-ROM

  	
  :

  	
  850 MByte

  
	
   

  	
   

  	
   

  
	
  Specials

  	
   

  	
   

  
	
  CD-Audio

  	
  :

  	
  extended playing time up to max. 79:30 min

  



 


5.     Copy
Control Technologies


 


Application of copy control technologies technically means leaving the
SONY / PHILIPS Red Book standard for CD-Audio and depending on applied
technology entering into mixed CD-Audio / CD-ROM formats    =>
Enhanced CD-Audio


 


Copy control technologies are subject to specific license agreements /
fees available copy control technologies and max.  playing times for CD-Albums:


	
  •

  	
  MACROVISION CDS 200 69 min + 128 k bit
  quality compressed audio

  
	
  •

  	
  MACROVISION CDS 100 74 min

  	
  (without compressed audio for PC
  playability)

  
	
   

  	
   

  	
   

  
	
  other copy control technologies

  	
  • on
  specific request

  
				



 


5.    Labelartwork


 


	
  Surface for labelartwork

  	
   

  
	
  inner Ø

  	
  21 mm

  
	
  outer Ø

  	
  116 mm

  
	
  with
  non-printed ring-shaped segment (stacking ring area)

  
	
  Ø min.

  	
  33,9 mm

  
	
  Ø max.

  	
  35,2 mm

  
	
   

  	
   

  
	
  Standard Labelprint

  	
   

  
	
  a)screen print

  	
  4 standard colours PANTONE

  
	
  b)offset print

  	
  white ground + 4 standard CMYK offset
  colours

  



 


Specials


•              5th
colour


•              6th
colour (screen print only)


•              special
colours                 (i.e.  metallic, dayglow)


•              varnish


•              special
requests


 


3





















 


AA 2) 3” (8 cm) Ø CD


 


NOT AVAILABLE


 


B)            DVD - Formats


 


BA)         Discs


 


BA 1) 5” (12 cm) Ø DVD


 


1.     Physical
dimensions discs


 


	
  Diameter

  	
  120

  	
  mm

  	
  + 0,3

  	
  mm

  
	
  Centerhole

  	
  15

  	
  mm

  	
  + 0,1/ - 0 

  	
  mm

  
	
  Thickness

  	
  1,2

  	
  mm

  	
  + 0,3/ - 0,1

  	
  mm

  
	
   

  
	
  Disc shape

  	
  see DVD physical specifications

  	
   

  
							



 


2.     Materials


 


	
  Standard

  	
   

  	
   

  
	
  carrier

  	
  :

  	
  clear polycarbonate

  
	
  reflective layer

  	
  :

  	
  dimensions

  	
  inner Ø

  	
  38

  
	
   

  	
   

  	
   

  	
  outer  Ø

  	
  118

  
	
   

  	
   

  	
  material

  	
  DVD5

  
	
   

  	
   

  	
   

  	
  DVD10

  
	
   

  	
   

  	
   

  	
  DVD9

  	
  aluminium / silver or silicon

  (semi-reflective layer)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Specials

  	
   

  	
   

  
	
  NOT YET AVAILABLE

  	
   

  
							



 


3.     Technical
Specifications


 


	
  DVD physical specification

  	
  =>

  	
  DVD specifications for Read only discs, Part 1

  
	
  DVD logical specification

  	
  =>

  	
  DVD-Video / DVD-Audio / DVD-ROM Specifications

  



 


4





















 


4.     Max.  Data Capacity


 


	
  DVD5

  	
  4,7 GByte

  
	
  DVD10

  	
  2 x 4,7GByte

  
	
  DVD9

  	
  8,5 GByte

  



 


5.     Copy
Control Technologies


 


copy control technologies are subject to specific license agreements /
fees 


	
  Standard

  	
   

  
	
  •

  	
  MACROVISION

  	
  analog  video copy protection for
  DVD-Video

  
	
  •

  	
  CSS

  	
  digital content copy protection for DVD-Video

  
	
  •

  	
  CPPM

  	
  digital content copy protection for DVD-Audio

  
	
   

  
	
  Specials 

  	
   

  
	
  NOT YET AVAILABLE

  	
   

  
				



 


5.     Labelartwork


 


	
  a) surface / dimensions for labelartwork

  
	
  DVD5 and DVD9

  	
  Ø inner

  	
  18 mm

  
	
   

  	
  Ø outer

  	
  116 mm

  
	
  DVD10

  	
  Ø inner

  	
  38 mm

  
	
   

  	
  Ø outer

  	
  44 mm

  
	
   

  
	
  b) labelartwork technologies

  



 


	
  Standards

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  DVD5

  	
  :

  	
  -

  	
  pitart

  
	
   

  	
   

  	
  or

  	
   

  
	
   

  	
   

  	
  -

  	
  screen print

  	
  4 standard colours PANTONE

  
	
   

  	
   

  	
  or

  	
   

  
	
   

  	
   

  	
  -

  	
  offset print

  	
  white ground +4 standard offset
  CMYK colours

  
	
   

  	
   

  	
   

  	
   

  
	
  DVD10

  	
  :

  	
  -

  	
  screen print ‘donut type’ on
  both sides max. 3 colours/side, standard colours PANTONE

  
	
   

  	
   

  	
   

  	
   

  
	
  DVD9

  	
  :

  	
  -

  	
  screen print

  	
  4 standard colour PANTONE

  
	
   

  	
   

  	
  or

  	
   

  
	
   

  	
   

  	
  -

  	
  offset print

  	
  white ground + 4 standard offset
  CMYK colours

  



 


5





















 


	
  Specials

  
	
  •

  	
  5th colour

  
	
  •

  	
  6th colour

  	
  (screen print only)

  
	
  •

  	
  special colours

  	
  (i.e. metallic, dayglow)

  
	
  •

  	
  varnish

  
	
  •

  	
  special requests

  



 


BA 2) 3” (8 cm) Ø DVD


 


NOT AVAILABLE


 


AB)        Printcomponents


 


all print
component dimensions + 0,5 mm printing / finishing tolerances


 


AB 1)      “CD Audio Single”


 


	
  Cardboard sleeve (as combined print and packaging component)

  
	
  Dimensions

  	
  :

  	
  123,0 x 123,0 mm

  
	
  Paper

  	
  :

  	
  250 g/m2

  
	
  colours

  	
  :

  	
  4 colours, CMYK + waterbased varnish

  



 


AB 2)      “CD Audio MaxiSingle”


 


	
  Insert

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  dimensions

  	
  :

  	
  120,5 x 155,0 mm

  	
  without flap

  
	
  Paper

  	
  :

  	
  160 g/m2

  
	
  colours

  	
  :

  	
  4/4, CMYK

  	
  (without varnish)

  



 


AB 3) “CD Audio Album”


 


	
  a) 

  	
  inlay

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  dimensions

  	
  :

  	
  117,5 x 151,0 mm

  
	
   

  	
  paper

  	
  :

  	
  160 g/m2

  
	
   

  	
  colours

  	
  :

  	
  4/4, CMYK

  	
  (without varnish)

  



 


6





















 


b)
booklet


 


	
  dimensions

  	
  :

  	
  119,5
  x 120,5 mm

  
	
  standard productsfor machine packaging

  
	
  pages

  	
  :

  	
  up
  to 32 pages, stapled

  
	
  paper

  	
  :

  	
  outer
  pages

  	
  :

  	
  160
  g/m2, coated paper

  
	
   

  	
   

  	
  inner
  pages

  	
  :

  	
  100
  g/m2, coated paper

  
	
  colours

  	
  :

  	
  4/4,
  CMYK (without varnish)

  
	
   

  	
   

  	
   

  
	
  special products

  	
  folded

  
	
  paper

  	
  :

  	
   

  	
  160
  g/m2, 135 g/m2,100 g/m2 

  
	
   

  	
   

  	
   

  	
  depending
  on specific type of folding

  
	
   

  	
   

  	
   

  	
  (i.e.
  concertina fold, cross fold, ...)

  
	
  colours

  	
  :

  	
   

  	
  4/4,
  CMYK (without varnish)

  
	
   

  	
   

  	
   

  	
   

  
	
  other specials

  	
  •              more than 32 pages

  
	
   

  	
   

  	
   

  	
  •              special
  colours

  
	
   

  	
   

  	
   

  	
  •              hot
  foil

  
	
   

  	
   

  	
   

  	
  •              varnish

  
	
   

  	
   

  	
   

  	
  •              special
  paper quality

  
						



 


AB
4) “CD Audio Double Album”


 


	
  print
  components

  	
  see
  AB 3)

  



 


BB)   Printcomponents


 


	
  BB  1) “DVD Audio” in SJB Plus

  	
  (manual
  packaging)

  



 


	
  a)

  	
  inlay

  	
  dimensions

  	
  151,6 x 162,6 mm

  
	
   

  	
   

  	
  paper

  	
  160
  g/m2 coated paper

  
	
   

  	
   

  	
  colours

  	
  4/4,
  CMYK

  
	
   

  	
   

  	
   

  	
   

  
	
  b)

  	
  booklet

  	
  dimensions

  	
  140,5
  x 120,0 mm

  
	
   

  	
   

  	
  paper

  	
  outer
  pages 160 g/m2

  
	
   

  	
   

  	
   

  	
  inner
  pages min. 100 g/m2, coated

  
	
   

  	
   

  	
  pages

  	
  max.
  32, stapled

  
	
   

  	
   

  	
  colours

  	
  4/4,
  CMYK

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  special products

  	
  folded

  	
   

  
	
   

  	
  paper

  	
  :

  	
  160
  g/m2, 135 g/m2,100 g/m2

  
	
   

  	
   

  	
  depending
  on specific type of folding

  
	
   

  	
   

  	
  (i.e.  concertina fold, cross fold, ...)

  
	
   

  	
  colours

  	
  :

  	
  4/4, CMYK (without varnish)

  



 


7





















 


	
   

  	
  specials

  	
  •              more
  than 32 pages

  	
   

  
	
   

  	
   

  	
  •              special
  colours

  	
   

  
	
   

  	
   

  	
  •              hot
  foil

  	
   

  
	
   

  	
   

  	
  •              varnish

  	
   

  
	
   

  	
   

  	
  •              special
  paper quality

  	
   

  



 


BB  2) “DVD Video in Amaray style box”


 


	
  a)

  	
  slipsheet

  	
  dimensions

  	
  183
  x 272 mm

  
	
   

  	
   

  	
  paper

  	
  160 g/m2

  
	
   

  	
   

  	
  colours

  	
  up
  to 4/4, CMYK

  
	
   

  	
   

  	
   

  	
   

  
	
  b)
  

  	
  booklet

  	
  dimensions

  	
  120
  x 178 mm

  
	
   

  	
  standard products

  	
  for machine packaging

  	
   

  
	
   

  	
   

  	
  pages

  	
  up
  to 32, stapled

  
	
   

  	
   

  	
  paper

  	
  outer
  pages 160 g/m2 

  
	
   

  	
   

  	
   

  	
  inner
  pages min 100 g/m2

  
	
   

  	
   

  	
  colours

  	
  up
  to 4/4, CMYK

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  special products

  	
  folded

  	
   

  
	
   

  	
  paper

  	
   

  	
  :

  	
  160
  g/m2, 135 g/m2,100 g/m2

  
	
   

  	
   

  	
   

  	
  depending
  on specific type of folding

  
	
   

  	
   

  	
   

  	
  (i.e.  concertina fold, cross fold, ...)

  
	
   

  	
  colours

  	
   

  	
  :

  	
  4/4,
  CMYK (without varnish)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  specials

  	
   

  	
  •              more
  than 32 pages

  
	
   

  	
   

  	
   

  	
  •              special  colours

  
	
   

  	
   

  	
   

  	
  •              hot
  foil

  
	
   

  	
   

  	
   

  	
  •              varnish

  
	
   

  	
   

  	
   

  	
  •              special
  paper quality

  
						



 


BB  3) Cardboards for Snapper Type Packaging


 


	
   

  	
  4 panel

  	
  dimensions

  	
  187,5
  x 289,5 mm

  
	
   

  	
   

  	
  paper

  	
   

  	
  330
  g/m2

  
	
   

  	
   

  	
  colours

  	
   

  	
  4/0,
  CMYK

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6 panel

  	
  dimensions

  	
  187,5 x 289,5 mm

  
	
   

  	
   

  	
  paper

  	
   

  	
  330
  g/m2

  
	
   

  	
   

  	
  colours

  	
   

  	
  4/4, CMYK

  



 


8





















 


C)
Packaging Element Standards for machine packaging


 


all products
to be assembled by machine can be supplied with / without 25 m
foil thickness cellophane wrap.


 


	
  C
  1) 2-piece Jewelbox

  	
  typically
  for CD-Audio Maxi

  



 


	
   

  	
   

  	
   

  	
   

  
	
   

  	
  material

  	
   

  	
  polystyrene

  
	
   

  	
  dimensions

  	
   

  	
  142
  x 125 x 7 mm

  
	
   

  	
  colours

  	
  standard

  	
  clear

  
	
   

  	
   

  	
  special

  	
  other
  colours– on specific request

  



 


C
2) Standard Jewelbox


 


	
   

  	
  material

  	
   

  	
  polystyrene

  
	
  a) box

  	
  dimensions

  	
   

  	
  142
  x 125 x 10 mm

  
	
   

  	
  colours

  	
  standard

  	
  clear

  
	
   

  	
   

  	
   

  	
  with
  / without - Logo

  
	
   

  	
   

  	
  special

  	
  other
  colours – on specific request

  
	
   

  	
   

  	
   

  	
   

  
	
  b) tray

  	
   

  	
  standard

  	
  black
  or clear

  
	
   

  	
   

  	
   

  	
  with
  / without - Logo

  
	
   

  	
   

  	
  special

  	
  other
  colours – on specific request

  



 


C
3) Slimline Double Jewelbox


 


	
   

  	
  material

  	
   

  	
  polystyrene

  
	
  a) box

  	
  dimensions

  	
   

  	
  142
  x 125 x 10 mm

  
	
   

  	
  types

  	
   

  	
  hinge
  right or left

  
	
   

  	
   

  	
   

  	
  with
  / without - Logo

  
	
   

  	
  colours

  	
  standard

  	
  clear

  
	
   

  	
   

  	
  special

  	
  other
  colours – on specific request

  
	
   

  	
   

  	
   

  	
   

  
	
  b) tray

  	
  colours

  	
  standard

  	
  black
  or clear

  
	
   

  	
   

  	
   

  	
  with
  / without imprint “2 CD”

  
	
   

  	
   

  	
  special

  	
  other
  colours – on specific request

  



 


	
  C 4) Soft Box

  	
  (Amaray
  Style Box)

  



 


	
   

  	
  material

  	
   

  	
  polypropylene

  
	
   

  	
  dimensions

  	
   

  	
  190
  x 135 x 14 mm

  
	
   

  	
  colours

  	
  standard

  	
  grey
  or clear

  
	
   

  	
   

  	
  special

  	
  other
  colours– on specific request

  



 


9





















 


C
5) Double Slim Soft Box (Amaray Style Box)


 


	
   

  	
  material

  	
   

  	
  polypropylene

  
	
  a)
  box

  	
  dimensions

  	
   

  	
  190
  x 135 x 14 mm

  
	
   

  	
  colours

  	
  standard

  	
  grey
  or clear

  
	
   

  	
   

  	
  special

  	
  other
  colours – on specific request

  
	
   

  	
   

  	
   

  	
   

  
	
  b)
  tray

  	
  to
  be inserted in hinge, box spine

  
	
   

  	
  colours

  	
  standard

  	
  grey
  or clear

  
	
   

  	
   

  	
  special

  	
  other
  colours – on specific request

  



 


C
6) Tray for Snapper Packaging


 


	
   

  	
  material

  	
   

  	
  polypropylene

  
	
   

  	
  dimensions

  	
   

  	
  190
  x 141 x 113 mm

  
	
   

  	
  colours

  	
  standard

  	
  grey
  or clear

  
	
   

  	
   

  	
  special

  	
  other
  colours – on specific request

  



 


10





















[*]


 





















 


[*]


 


2





















 


Schedule E


 


Approved Subcontractors


 


Denon


JVC


Sony


Sonopress


Deluxe/Disctronics


MPO


OK
Media


Universal





















 


Schedule F


 


Code Of Conduct For Manufacturers


 


At Warner Music International, we are committed to:


 


•                  a
standard of excellence in every aspect of our business and in every corner of
the world;


•                  ethical
and responsible conduct in all of our operations;


•                  respect
for the rights of all individuals; and


•                  respect
for the environment.


 


We expect these same commitments to be shared by all manufacturers of
Warner Music’s products and merchandise. 
At a minimum, we require
that all manufacturers of WMI products and merchandise meet the following
standards:


 


	
  Child Labor

  	
  Manufacturers will not use child labor.

  
	
   

  	
   

  
	
   

  	
  The Term “child” refers to a person younger than 15 (or 14 where
  local law allows) or, if higher, the local legal minimum age for employment
  or the age for completing compulsory education.

  
	
   

  	
   

  
	
   

  	
  Manufacturers employing young persons who do not fall within the
  definition of “children” will also comply with any laws and regulations
  applicable to such persons.

  
	
   

  	
   

  
	
  Involuntary Labor

  	
  Manufacturers will not use any forced or involuntary labor, whether
  prison, bonded, indentured or otherwise.

  
	
   

  	
   

  
	
  Coercion and Harassment

  	
  Manufacturers will treat each employee with dignity and respect, and
  will not use corporal punishment, threats
  of violence or other forms of physical,
  sexual, psychological or verbal harassment or abuse.

  
	
   

  	
   

  
	
  Nondiscrimination

  	
  Manufacturers will not discriminate in hiring and employment
  practices, including salary, benefits, advancement, discipline, termination
  or retirement, on the basis of race, religion, age, nationality, social or
  ethnic origin, sexual orientation, gender, political opinion or disability.

  
	
   

  	
   

  
	
  Association

  	
  Manufacturers will respect the rights of employees to associate,
  organize and bargain collectively in a lawful and peaceful manner, without
  penalty or interference.

  



 





















 


	
  Health and Safety

  	
  Manufacturers
  will provide employees with a
  safe and healthy workplace in
  compliance with all applicable laws and regulations, ensuring at a minimum
  reasonable access to potable water and sanitary facilities; fire safety; and
  adequate lighting and ventilation. Manufacturers will also ensure that the
  same standard of health and safety are applied in any housing
  that they provide for employees.

  
	
   

  	
   

  
	
  Compensation

  	
  We expect
  manufacturers to recognize that wages are essential to meeting employees’
  basic needs. Manufacturers will, at a minimum, comply with all applicable
  wage and hour laws and regulations, including those relating to a minimum
  wages, overtime, maximum hours, piece rates and other elements of
  compensation, and provide legally mandated benefits. Except in extraordinary
  business circumstances, manufacturers will not require employees to work more
  than the lesser of (a) 48 hours per week and 12 hours overtime or (b) the
  limits on regular and overtime hours allowed by local law or, where local law
  does not limit the hours of work, the regular work week plus 12 hours
  overtime. In addition, except in extraordinary business circumstances,
  employees will be entitled to at least one day off in every seven-day period.

  
	
   

  	
   

  
	
   

  	
  Manufacturers will compensate employees for overtime hours at such premium rate
  as is legally required or, if
  there is no legally prescribed premium rate, at a rate at least equal to the
  regular hourly compensation rate.

  
	
   

  	
   

  
	
   

  	
  Where local
  industry standards are higher than applicable legal requirements, we expect
  manufacturers to meet the higher standards.

  
	
   

  	
   

  
	
  Protection of the Environment

  	
  Manufacturers will comply with all applicable environmental laws and
  regulations

  
	
   

  	
   

  
	
  Other Laws

  	
  Manufacturers
  will comply with all applicable laws and regulations, including those
  pertaining to the manufacture, pricing, sale and distribution of merchandise.
  All references to “applicable laws and regulations” in this Code of Conduct
  include local and national codes, rules and regulations as well as applicable
  treaties and voluntary industry standards.

  
	
   

  	
   

  
	
  Subcontracting

  	
  Manufacturers
  will not use subcontractors for the

  



 


2





















 


	
   

  	
  manufacture
  of Warner Music products and merchandise or components thereof without Warner
  Music International’s express written consent, and only after the
  subcontractor has entered into a written commitment with Warner Music
  International to comply with this Code of Conduct.

  
	
   

  	
   

  
	
  Monitoring and Compliance

  	
  Manufacturers
  will authorize Warner Music International and its designated agents
  (including third parties) to engage in monitoring activities to confirm
  compliance with this Code of Conduct, including unannounced on-site
  inspections of manufacturing facilities and employer-provided housing;
  reviews of books and records relating to employment matters; and private
  interviews with employees. Manufacturers will maintain on site all
  documentation that may be needed to demonstrate compliance with this Code of
  Conduct.

  
	
   

  	
   

  
	
  Publication

  	
  Manufacturers
  will take appropriate steps to ensure that the provisions of this Code of Conduct are communicated to
  employees, including the prominent posting of a copy of this Code of Conduct,
  in the local language and in a place readily accessible to employees, at all
  times.

  



 


3





















 


Schedule G


 


Insurance Coverage


 


NOTE: The following insurance requirements are intended to provide
insurance coverage under this Agreement and each of the other service
agreements being entered into between the parties hereto and their affiliates
as of the date hereof.  Accordingly, to
the extent any such other agreements require insurance coverage thereunder that
is duplicative of the insurance coverage provided for below, such insurance
coverage need not be duplicated under such other agreements.


 


Property Insurance, Including Extra Expense
and Business Interruption: Company at all times and at
its own cost and expense shall insure WMI’s property as defined and required in
this Agreement under so-called “all risk” policies of insurance, including but
not limited to coverage for extended perils, earthquake, windstorm, flood, and
collapse; open cargo, war risk cargo and terrorism.  Company shall purchase an insurance policy
that indemnifies WMI for non-physical damage to source material, if available
on a commercially reasonable basis and is warranted by the risk profile of the
Company.  WMI’s property shall consist of
and not be limited to source material, finished goods and inventory, returned
stock, master recordings, digital files, DVDs, CDs and all printing and
packaging material.


 


Either dedicated policies or portfolio (blanket) coverage forms may
provide the “all risk” property insurance, providing that the per occurrence
limit of insurance available with respect to the WMI property at any Company
location for property damage, business interruption, and extra expense shall
not be less than five hundred million dollars ($500,000,000) except, that
coverage for California Earthquake shall be no less than one hundred fifty
million ($150,000,000) per occurrence and in aggregate; and Terrorism for WMI
Manufacturing Alsdorf shall be no less than two hundred fifty-five million
($255,000,000) per occurrence and in aggregate. 
Further, the limits of insurance applicable to the extended perils and
the perils of earthquake, flood and terrorism shall be an annual aggregate.  The deductible on said policies shall be the
sole responsibility of Company and be of no greater amount than is commercially
reasonable for a company of its financial standing.  These policies shall be primary to any policy
maintained by or on behalf of WMI.  WMI
may, at any time, review the amount of insurance required hereunder, and may,
from time to time, but in no event more than annually, require a lower or
higher amount depending on the best available estimate of the aggregate
exposure to loss arising from damage to WMI’s property under this Agreement.


 


The open cargo and war risk cargo insurance policies shall provide per
shipment limits of indemnity of no less than five million dollars ($5,000,000)
and contain a warehouse coverage endorsement. 
In the event that the five million dollars ($5,000,000) limit of
insurance is not adequate to fully insure any given shipment under this
Agreement, Company shall purchase additional insurance to cover the full
replacement cost of the shipment.  The
deductible on these policies shall be no greater than what is commercially
reasonable for an enterprise with Company’s financial standing.  The


 





















 


deductible shall be the responsibility of Company and this coverage
shall be primary to any coverage maintained by WMI.


 


All policies shall provide for a reimbursement value with respect to
WMI’s property at replacement cost for new property of like kind and quality,
with no deduction for depreciation, and shall include WMI, its partners,
officers, employees, and affiliates as loss payees under the policies as their
interest may appear, and shall provide that no act or omission on the part of
Company as the title insured shall prejudice a direct claim by the additional
insured.  All property policies shall
include a waiver of subrogation in favor of WMI.  Further, Company agrees to secure terms with
its insurer that in the event that Company fails to pay premium resulting in a
cancellation of coverage that WMI will be given the opportunity to maintain
coverage for its insured property under the policy; and Company will reimburse
WMI within ten (10) days of notice for the expense incurred.


 


Public Liability Insurance:
Company shall also be required to obtain and maintain comprehensive general
liability insurance and a follow-form “umbrella liability” policy, providing
insurance against claims for bodily injury, including death, property damage,
personal and advertising injury, blanket contractual liability, broad form
property damage liability, explosion, collapse and underground hazard, and
products and completed operations, for such claims occurring or alleged to have
occurred in the course of any operations or activities contemplated by this
Agreement, in such amounts as from time to time are carried by prudent owners
of comparable operations, but in no event less than twenty five million dollars
($25,000,000) per occurrence and one hundred million dollars ($100,000,000) in
the annual aggregate, and covering as additional insureds all the WMI
individuals and entities for which and to the extent it is responsible under
this Agreement.


 


Workers’ Compensation and Employers’
Liability Insurance:


 


The Workers’ Compensation policy shall include the following coverage:


 


	
  1.

  	
  Coverage A

  	
  Statutory

  
	
  2.

  	
  Coverage B

  	
  Employers’ Liability

  
	
   

  	
   

  	
   

  
	
  Bodily Injury by Accident

  	
  $

  	
  1,000,000 each accident

  	
   

  
	
  Bodily Injury by Disease

  	
  $

  	
  1,000,000 policy limit

  	
   

  
	
  Bodily Injury by Disease

  	
  $

  	
  1,000,000 each employee

  	
   

  



 


Company shall maintain any other employment related insurance coverage
required by any jurisdiction having control over any employees or operations
used in connection with this Agreement.


 


Automobile Liability Insurance:
Company shall purchase and maintain automobile liability and follow-form
“umbrella liability” insurance for all owned, non-owned and hired vehicles with
limits of not less than one hundred million dollars ($100,000,000) combined
single limit for bodily injury and property damage.  This insurance coverage must include all
automotive and truck equipment used in the


 


2





















 


performance of the work under this Agreement, and must include the
loading and unloading of same.


 


Environmental Liability Insurance:
In the event Company encounters and must perform or engage a contractor to
perform work related to the remediation or abatement of “hazardous material”
which includes, without limitation, any flammable explosives, radioactive
materials, hazardous materials, hazardous waste, hazardous or toxic substances,
or related materials defined in the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C.  Section 9601, et seq.), the Superfund
Amendments and Reauthorization Action of 1986 (Pub.  L.  No.
99-499, 100 stat. 1613 (1986)), the Hazardous Material Transportation Act, as
amended (49 U.S.C.  Section 1801, et
seq.) and in the regulations adopted and publications promulgated pursuant
thereto, or any other federal, state or local environmental law, ordinance,
rule, or regulation (or applicable law in any jurisdiction outside the US),
Company, or any contractor performing such work on behalf of Company, shall
provide “contractor’s pollution liability” insurance, as applicable to the work
to be performed, covering claims from third party injury and property damage as
a result of pollution conditions emanating from on-site, under the site, or off
the site arising out of its operations and completed operations.  Completed operations coverage shall remain in
effect for no less than five (5) years after final completion.  Minimum liability limits, including excess
liability coverage, shall be five million dollars ($5,000,000) each occurrence
and ten million dollars ($10,000,000) in the aggregate.


 


The automobile liability insurance must contain provisions for thirty
(30) days prior written notice of cancellation, nonrenewal, material change or
reduction of insurance sent by certified mail return receipt requested, and
waiver of subrogation in favor of WMI, additional insureds and all other such
entities, as may be reasonably requested by WMI.


 


3





















 


Provisions Applicable to All Policies of
Insurance Required Hereunder: Policies of insurance
shall be underwritten by an insurer with an AM Best rating of no less than A-
and a financial size class of VII or better (or an equivalent rating from an
alternate rating agency), and may be an admitted or non-admitted carrier.  Any insurer not meeting these criteria must
be approved in writing by WMI’s risk management department whose authorization
shall not be unreasonably withheld.  Satisfactory
evidence of insurance shall be provided before the commencement of this
Agreement and shall be evidenced at each renewal by a binder and certificate of
insurance at least ten (10) days before expiration of coverage and upon request
of WMI, on an annual basis or as necessitated by a material change in coverage
or legal action.  Company shall forward
to WMI a copy of all required policy forms upon request.  With respect to property located outside the
U.S, any loss payable to WMI shall be adjusted and paid in the currency of the
United States of America, subject to the rate of exchange published in The Wall
Street Journal on the date of the loss.  If
Company elects to maintain insurance for property located outside the US, where
the policy is denominated in a currency other than the US dollar, such policy
limits and deductibles shall at all times be sufficient to meet the US dollar
denominated requirements set forth on this Schedule G.


 


Each of WMI and Company agrees to negotiate in good faith to attempt to
resolve any disagreement which in any way affects any insurance required to be
carried hereunder.  In the event that
such good faith negotiation does not result in the resolution of any such
disagreement within a fifteen (15) day period, the parties shall retain an
arbitrator to make a fair and reasonable determination as to any such
disagreement (the “Insurance Arbitrator”). 
The Insurance Arbitrator shall be a retired executive or attorney with
substantial experience in the insurance industry, preferably in the field of
manufacturing, shall be independent of each of WMI and Company, and shall
endeavor to provide a determination of any dispute among the parties within
thirty (30) days of being retained, but in each case, as quickly as possible.  The parties shall jointly appoint the
Insurance Arbitrator and the identity of the Insurance Arbitrator shall be
satisfactory to each of the parties.  The
parties shall share equally in the cost and expense of retaining the Insurance
Arbitrator.  If the parties cannot agree
upon a person to act as the Insurance Arbitrator within thirty (30) days of the
expiry of the fifteen (15) day negotiation period specified in this Paragarph
6, then the Arbitrator shall be selected by the American Arbitration
Association.  Any arbitration hereunder
shall be conducted in conformance with the rules established by the American
Arbitration Association.  Any
determination made by the Insurance Arbitrator shall be final and binding on
each of the parties.  For the avoidance
of doubt, Company shall at all times including during the pendency of any
dispute and until such time as such dispute is resolved be required to continue
to procure insurance policies as its sole expense in full force and effect as
required in this Agreement and as specified herein.


 


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