Exhibit 10.30


 





















 


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 PICK, PACK AND SHIPPING
SERVICES AGREEMENT


 


between


 


WEA INTERNATIONAL INC. (“WMI”)


 


AND


 


WARNER MUSIC MANUFACTURING EUROPE GmbH (to be
renamed CINRAM

GmbH) COMPANY (“Company”)


 


Dated as of October 24, 2003


 


Capitalized terms not defined where they appear in the text are defined
in Paragraph 13.


 


1.  Appointment.  (a)


 


(i)  WMI
hereby appoints Company to render, and Company shall render, PP&S Services
for one hundred percent (100%) of Products for direct shipment to retail
customers in the Exclusive Territory in accordance with the terms hereof.  Additionally, Company shall have
non-exclusive rights to render and shall, at the request of WMI, render
PP&S Services for Records intended for sale or other disposition in the
Non-Exclusive Territory in accordance with the terms hereof.


 


(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, PP&S Services for at least the Specified
Percentage (and, at WMI’s election, more than the Specified Percentage) of
Products in the Exclusive Territory in accordance with the terms hereof.  WMI shall, use commercially reasonable
efforts to provide that the Combined Entity’s use of PP&S Services
hereunder (i.e., mix of New Releases and Catalog Titles) following the RMMT
Effective Date remains generally consistent with WMI’s use of PP&S Services
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 Unites of Products picked, packed and shipped for sale in the
Exclusive 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 physical formats picked, packed and shipped for sale in the
Exclusive 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 of
Products picked, packed and shipped by Company (and/or WMI, if applicable) for
WHV or its affiliates shall be included.[*]


 


(iv) 
WMI and its affiliates shall be solely responsible for: (A) all sales
solicitation of Products; (B) processing of all orders of Units of Products by
customers; (C) invoicing and collection of customer accounts; and (D)  the processing and issuance of credits to
customers.


 


(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 and its
affiliates the shipments, returns 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 or its affiliates’ request, provide such more detailed reports
to WMI and its affiliates 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


 


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provided
to such other party (e.g., any additional fees or amounts charged to such party
for such more detailed reports).  Monthly
and quarterly shipments and return reports shall include at least the following
information:  selection number, artist
name, selection title, product configuration, gross units shipped, units
actually returned, net units and Fees. 
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.


 


(d)  Facilities.  Company shall utilize “first-class”
facilities either directly or, subject to WMI’s prior approval, by subcontract,
for the prompt, timely, and satisfactory performance of the PP&S Services
committed hereunder.  All distribution
center locations used by Company in connection with Products shall be subject
to WMI’s prior approval (which approval shall not be unreasonably
withheld).  WMI hereby acknowledges that
those distribution facilities owned and/or leased by WMI in the Territory
immediately prior to the commencement of the Term and which are being acquired
by Company pursuant to the Stock Purchase Agreement currently constitute “first-class”
facilities and shall be deemed approved by WMI for Company’s use hereunder in
connection with Products.


 


(e)  Company’s Undertakings.


 


(i)  Company shall render Services for WMI to all
locations throughout the territory for all orders for Products as designated by
WMI.  The Services:  (A) shall be rendered on a so-called “label
blind” basis; (B) 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 products are
distributed by Company in the Territory, [*] (D) shall be rendered in accordance with “first-class”
standards that meet the highest quality available in the industry; and (E)
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”); provided,


 


3





















 


however,
that, to the extent that the standards set forth in clauses (B) and (D) of this
Paragraph are not being met as of the commencement of the Term, Company shall
have a period of [*] from the
commencement of the Term in which to meet such standards.


 


(ii)  Company
shall ship each product without alteration in the same configuration and format
designated by WMI.


 


(iii)  Company
shall accept the return of all Units of Products previously distributed by or
on behalf of WMI in the Territory prior to the commencement of the Term.


 


(f)  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 B hereto.


 


(g)  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.


 


(h)  Shipping.  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 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.


 


(i)
 Additional Services.  At WMI’s reasonable request, Company shall
provide WMI with assembly, packing, and shipping 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 1(i), 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 if Company then-currently provides such
services to any party (in which case, if WMI requests such services and


 


4





















 


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 PP&S Agreement, then Company shall provide such
Services to WMI hereunder but only to the extent that is reasonably feasible
for Company to do so.


 


(j)
 Location of Company’s Distribution Facility.  Any change of location of WMI’s current
distribution facility located in Alsdorf, Germany (the “Alsdorf Facility”)
shall require the prior written approval of WMI (such approval not to be
unreasonably withheld); [*].


 


(k)
 Enhanced Services.  Company shall work with WMI to provide
cost-effective solutions to the increasing demands of WMI’s business.  These currently include shelf-ready product,
consolidation of direct distribution to other territories, distribution
services inclusive of certain generic charges such as copyright and/or royalty,
local language packing slips and enhancement of customer requested data.


 


2.  Title. 
Title to Units of Products 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 during any shipping of Products between Facilities (to the extent
that Company is responsible for paying such shipping expenses).


 


3.  Ordering Products.  WMI and its affiliates shall cause the
manufacture of and delivery to Company of such stocks of Products as shall be
determined by WMI in WMI’s sole discretion.


 


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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.  All charges for all packaging materials
(including boxes and filler materials) are at the cost of Company.  All actual, out-of-pocket, non-overhead
freight charges incurred by or on behalf of Company for shipping of Units of
Products from Company’s distribution warehouse facilities to WMI’s customers or
otherwise at WMI’s request shall be borne by WMI.  To the extent that any shipping costs
hereunder are to be borne by WMI, WMI shall only be required to pay Company’s
actual, documented, out-of-pocket costs charged by such shipping company for
the shipment of Units of Products and/or other materials hereunder and such
costs shall be reimbursed to Company within [*] following Company’s rendition of such
invoice to WMI (but in no event shall WMI be required to make any such payment
prior to Company’s payment of such invoice to such shipping agent).  Company shall be solely responsible for all
costs or expense’s related to the shipping of Units of Products between
Facilities to the extent that such movements were made at Company’s own request
or direction.


 


5.
 Terms of Sale of Products.  WMI shall determine all terms of sale for
Products.


 


6.
 Other Obligations.  (a)  Storage.  Company shall accept and store all Units of
Products delivered to or otherwise held by Company hereunder in accordance with
the provisions of Schedule C hereto. 
Products shall be kept segregated from all of Company’s other products
or merchandise.  The risk of loss, due to
any reason, of Units of Products 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 required under this Agreement and
as set forth on Schedule D hereto.


 


(b)
 Insurance.  During the Term, Company shall: (i) comply
with all provisions set forth on Schedule D hereto; and (ii) at Company’s sole
cost and expense, maintain adequate insurance coverage for: (A) all Products
while such Products 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 D hereto. 
The insurance required hereunder 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 of
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
Products at Company’s expense (but no access shall be allowed to information
relating to any other party’s products or any


 


6





















 


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 distributed 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
twenty-four (24) hours a day, seven (7) days a week, 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 six (6) hours per week.  Throughout the Term, Company shall, at
Company’s cost, reasonably maintain and enhance its IT services so as to be of
a comparable standard to those offered by “first-class” distributors in the
Territory.


 


(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 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 Facility or such other facility up to [*]. 
During any such inspection, WMI may conduct physical inventories of
Units of Products in Company’s possession or under Company’s 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 6(d).


 


(e)
 Security.  Company shall maintain security standards that
are at least equivalent to those provided by other “first-class” distributors,
both in the segregated area of the WMI Facilities for Products 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 Products.  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


 


7





















 


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 Products and the intellectual property
embodied in such Products 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 Alsdorf Facility.  Upon discovery of: (i) loss, damage, theft,
disappearance, or destruction of Products exceeding [*]; or (ii) any unauthorized usage of Products,
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 incident (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 Products.


 


(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
Products.  Company shall not surrender
damaged Products 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” ) who are responsible for stock control with, at
Company’s expense: (i) reasonable office accommodations at such Facilities
utilized for distribution and/or warehousing 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 by 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
therefore.  Amounts owing under this
Paragraph 6(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 WMI Employees.  WMI shall retain the right of direction of
the employees, and such employees shall not be integrated into the Company’s
business.  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


 


8





















 


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.


 


[*]


 


7.
 Technology.  Company shall reasonably update the WMI
Facilities at Company’s cost to keep up with new technology requirements,
including investing in technology, systems, equipment and processes to automate
distribution processes, packaging and assembly to provide at least the same
level of quality and service provided by other “first-class” distributors of
Records in the Territory.  In the event
that any investment in a fundamental new technology (e.g., the
conversion to automated systems) results in a decrease in Company’s net costs
(i.e., taking into account the cost of Company’s said investment in
implementing such new technology) by more than ten percent (10%), the Fees
shall be adjusted so that the net cost benefit is shared equally between WMI
and Company. [*]


 


8.
 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 15th day of
each such month setting forth all Fees owed by WMI hereunder with respect to
such affiliates and 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


 


9





















 


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.


 


(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
8(a); (ii) establish the applicability of the provisions contained in
Paragraphs 11 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 and/or its affiliates have been overcharged by an amount exceeding [*] for the audit period, Company shall
reimburse WMI in the amount of the overcharge plus all fees paid by WMI
to the 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 to WMI the amount of any such
overcharge more than once.  WMI’s audit
right shall survive the expiration or termination of the Term for [*].


 


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[*].  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 [*] after 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 have [*] 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.


 


9.
 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 Products
pursuant to the terms of this Agreement.  Within ten (10) business days following the
expiration or termination of the Term, Company shall provide WMI with a list of
all Units of Products in Company’s possession or control on such date.  The mere expiration or termination of the Term
shall not affect any obligations 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, or order at WMI’s expense the destruction
of all Units of Products in Company’s possession or control.  The determination whether to remove or destroy
such Units of Products shall be made by WMI in WMI’s sole discretion.


 


10.
 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 WMI’s warranties and
representations set forth below, any items prepared by or otherwise furnished
by Company in connection with Products and Company’s performance of Services hereunder
will not violate any law or infringe upon the rights of any party.


 


11





















 


(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 10(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
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 D 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; (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 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 10(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; (ii) any and all damages
or injuries of any kind or nature whatsoever


 


12





















 


(including
death resulting there from) 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 as set forth on
Schedule D hereto; and/or (iii) any products liability claims for manufacturing
defects directly related to Products not manufactured by Company, any affiliate
of Company or on behalf of Company.  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.


 


11.
 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 11(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
11(a)(ii).


 


(b)
The breaches of this Agreement referred to in Paragraph 11(a)(i) are any of the
following:


 


[*]


 


13





















 


[*]


 


(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 nine (9)
months 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;


 


(iii)  by written notice to Company following
either: (A) the termination of the term of the International Manufacturing
Agreement or the International Administrative Services Agreement, in each case
other than as a result of breach by WMI or the expiration of the term
thereunder by passage of time; or (B) any material breach by Company under the
International Manufacturing 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); and


 


(iv)  upon [*] written notice to Company, following the occurrence of a Recorded
Music Major Transaction; provided, however, that in no event
shall any termination under this clause (iv) be effective prior to the date
which is [*] from the
commencement of the Term.


 


14





















 


(d)  Any termination of this
Agreement under this Paragraph 11 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 to such termination.


 


(e)


 


(i)  If because 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
11(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 distribute 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: (A) terminate the Term of this Agreement by notice in
writing to Company; or (B) 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 11(e), no cure period
shall be associated with Company’s failure to perform its obligations
hereunder.


 


(ii)  In addition, within [*] becoming aware of any circumstances 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


 


15





















 


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 11(e)(iii).


 


(f)  If WMI purports to terminate this Agreement
under this Paragraph 11, each party hereto shall have the right to seek any
remedy or other relief available under applicable law (except as limited by
paragraph 15(o)), 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.


 


12.  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 15(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


 


16





















 


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) its 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 who have a need to know such information and who
agree to be bound by the provisions of this Paragraph 12.  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 (including, without limitation, shipment and return
volumes, shipping destinations, pricing information and other terms of sale);
WMI shall, and shall cause its affiliates, and their 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 distribution 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 Recipient unless such Recipient knows that such
source is bound by 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 15(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 12(a) and 13(b) shall survive for [*] following the expiration or termination of
the Term.


 


(d)


 


17





















 


(i)  Notwithstanding
anything to the contrary set forth in this Paragraph 12, 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 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 12(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.


 


13.
 Definitions. (a)  Certain Terms.


 


(i)  “Business
Days” shall mean Monday through Friday inclusive except for any public
holiday which shall fall on any of those days.


 


(ii)  “Change
of Control” shall mean (A) 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 Company engaged in the
business of providing PP&S Services, in each case, whether now owned or
hereafter acquired) to a Major or its affiliates; (B) 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; (C)
Parent or Company sells all or substantially all of its assets; or (D) any
other event which results in Parent no longer controlling the direction or
management of Company.


 


18





















 


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


 


(iv)  “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.


 


(v)  “Exclusive
Territory” shall mean Germany, Austria, Switzerland, Netherlands, Denmark,
Belgium and Czech Republic.


 


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


 


(vii)  “Fees”
shall mean the pick, pack and ship fees and the various amounts set forth on
schedule C hereto, in each case, subject to adjustment as provided in this
Agreement.


 


[*]


 


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


 


(x)  “International
Manufacturing Agreement” shall mean the International Manufacturing and
Packaging Agreement between WMI and Company dated as of the date hereof.


 


19





















 


(xi)  “Key
Release” shall mean a New Release of which greater than fifty thousand
(50,000) and less than one hundred thousand (100,000) Units have been ordered.


 


(xii)  “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.


 


(xiii)  “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).


 


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


 


(xv)  “Non-Exclusive
Territory” shall mean the territories as set forth on Schedule E hereto.


 


(xvi)  “Order”
shall mean a request made by WMI for the rendering of any PP&S Services in
connection with Units of Products or other materials hereunder.  An “Order” may be for individual Products or
other materials may be for multiple Products or other materials and may specify
multiple quantities of the same Product or other materials to be delivered to
single and/or multiple locations.


 


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


 


(xviii)  “Platinum
Release” shall mean a New Release for which greater than [*] Units have been ordered.


 


(xix)  “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.


 


(xx)  “PP&S
Services” shall mean services provided by Company to WMI from approved
locations which shall include: (i) warehousing and storage, (ii) goods inward
services; (iii) order processing, picking and packing activities; (iv)
dispatch; (v) transportation and shipping; (vi) returns processing; and (vii)
additional activities as requested and approved by WMI to all locations in the
Territory as designated by WMI.  These
services are set out more fully in Schedule F hereto. “PP&S Services” shall
also be deemed to include those specialist services currently known as Indent,
Down2one and Pre-Packed Order.  For the
avoidance of doubt, all determinations regarding the handling of Units Products
and other materials hereunder, including the handling of returns, stickering,


 


20





















 


preparation
for shipment (e.g., boxing, etc.) and shipment of Units of Products
shall be made solely by WMI.


 


(xxi)  “Products”
shall mean all Records for which WMI requires PP&S Services to be performed
during the Term and for which WMI requires PP&S Services to be performed
during the Term and for which WMI has the unilateral right to control the
identity of the party who renders such PP&S Services.  Following a Recorded Music Major Transaction, “Products”
shall mean all Records for which the Combined Entity requires PP&S Services
to be performed during the Term and for which the Combined Entity has the
unilateral right to control the identity of the party who renders such PP&S
Services.  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 PP&S Services in
connection with Records.  WMI shall
continue to do so during the Term, in accordance with past practice.


 


(xxii)  “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.


 


(xxiii)  “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.


 


(xxiv)  “Services”
shall mean the PP&S Services and all other series to be provided by Company
under this Agreement.


 


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


 


(xxvi)  “Term”
shall mean the [*]
commencing on the Closing Date, as such term in the Stock Purchase Agreement,
subject to earlier termination in accordance with Paragraph 11.


 


21





















 


(xxvii)  “Territory”
shall mean the Exclusive Territories and the Non-Exclusive Territories.


 


(xxviii)  “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).


 


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


 


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


 


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


 


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


 


(xxxiii)  “WMI
Facility” shall mean any Facility at which Company provides Services to WMI
hereunder.


 


(b)
 Other Definitional and Interpretative
Provisions.


 


(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.


 


14.
 [*] (a)  [*]


 


22





















 


[*]


 


(c)
 [*]  This Paragraph 14 shall not
limit WMI’s other rights against Company for breach hereof, but any amounts
paid by Company pursuant to this Paragraph 14 shall reduce any amounts
otherwise payable by Company with respect to such breach.


 


15.
 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 parties, both
written and oral, hereto relating to the subject matter hereof, except that
nothing in Paragraph 1 shall limit the obligations of Company under the
International Manufacturing Agreement. 
This Agreement cannot be changed except by and 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 a 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 Parent and any wholly owned subsidiary of
Parent.  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


 


23





















 


times
shall remain directly and fully liable to Company for the performance of the
obligations of WMI hereunder.


 


[*]


 


(e)
 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.


 


(f)
 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.


 


(g)
 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 15 (g)):


 


	
  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

  



 


24





















 


	
  Company:

  	
  Cinram
  International Inc.

  
	
   

  	
  2255
  Markham Road

  
	
   

  	
  Scarborough,
  Ontario M1B 2W3

  
	
   

  	
  CANADA

  
	
   

  	
  Attn:
  Dave Rubenstein

  
	
   

  	
  Fax:
  (416) 298-0612

  
	
   

  	
   

  
	
   

  	
  with
  a copy to

  
	
   

  	
   

  
	
   

  	
  Ervin,
  Cohen & Jessup LLP

  
	
   

  	
  9401
  Wilshire Boulevard, 9th Floor

  
	
   

  	
  Beverly
  Hills, California 90212

  
	
   

  	
  Attention:
  Howard Z. Berman, Esq.

  
	
   

  	
  Fax:
  (310) 859-2325

  



 


(h)
 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.


 


(i)
 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.


 


(j)
 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.


 


(k)
 No Third Party Beneficiaries.  Except for the provisions of Paragraphs 10(b)
and 10(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


 


25





















 


other
party any legal or equitable right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.


 


(l)
 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 ON SCHEDULE D 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 15(g).  THE
PARTIES HERETO AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDINGS
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 15(l) 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 15(l) 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 15(l) AND SHALL NOT
BE DEEMED TO CONFER RIGHTS ON ANY PARTY OTHER THAN THE PARTIES HERETO.


 


(m)
 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 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 OTHER PARTY HERETO HAVE
BEEN INDUCED TO


 


26





















 


ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS PARAGRAPH 15(m).


 


(n)
 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.


 


[*]


 


(p)
 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.


 


27





















 


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

  



 


28





















 


List
of Attached Schedules


 


	
  Schedule
  A:

  	
  Service
  Level Requirements

  
	
  Schedule
  B:

  	
  WMI’s
  Code of Conduct For Third Party Service Providers

  
	
  Schedule
  C:

  	
  Fee
  Schedule

  
	
  Schedule
  D:

  	
  Insurance
  Coverage

  
	
  Schedule
  E:

  	
  Non-Exclusive
  Territories

  
	
  Schedule
  F:

  	
  PPS
  Services

  



 


29





















 


Schedule A


 


Service Level Requirements


 


[*]


 


30





















 


[*]


 


2





















 


[*]


 


3





















 


[*]


 


4





















 


[*]


 


5





















 


[*]


 


6





















 


Schedule B


 


WMI’s Code of Conduct for Third Party Service Providers


 


1.
 Company will not (without WMI’s written
consent) manufacture merchandise utilizing any properties the copyright or
trademark to which is owned or licensed exclusively by WMI, or its wholly owned
or controlled affiliates other than Products in accordance with this Agreement.


 


2.
 Company shall not use child labor in the
manufacturing, packaging or distribution of Products.  The term “child” refers to a person younger
than the local minimum age for employment or the age for completing compulsory
education, but in no case shall any child younger than fifteen (15) years of
age (or fourteen (14) years of age where local law allows) be employed in the
manufacturing, packaging or distribution of Products.


 


3.
 Company shall only employ persons whose
presence is voluntary.  Company shall not
use any forced or involuntary labor, whether prison, bonded, indentured or
otherwise.


 


4.
 Company shall treat each employee with
dignity and respect, and shall not use corporal punishment, threats of
violence, or other forms of physical, sexual, psychological or verbal
harassment or abuse.


 


5.
 Company shall 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.


 


6.
 Company recognizes that wages are
essential to meeting employees’ basic needs.  Company shall comply, at a minimum, with all
applicable wage and hour laws, including minimum wage, overtime, maximum hours,
piece rates and other elements of compensation, and shall provide legally
mandated benefits.  If local laws do not
provide for overtime pay, Company shall pay at least regular wages for overtime
work.  Except in extraordinary business
circumstances, Company shall not require employees to work more than the lesser
of (a) forty-eight (48) hours per week and twelve (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 in such country
plus twelve (12) hours overtime.  In
addition, except in extraordinary business circumstances, employees will be
entitled to at least one (1) day off in every seven (7)-day period.  Company agrees that, where local industry
standards are higher than applicable legal requirements, it will meet the
higher standards.


 


7.
 Company shall provide employees with a
safe and healthy workplace in compliance with all applicable laws, ensuring, at
a minimum, reasonable access to potable water and sanitary facilities, fire
safety, and adequate lighting and ventilation.  Company


 





















 


also
shall ensure that the same standards of health and safety are applied in any
housing it provides for employees.  Company
shall provide WMI with all information WMI may request about manufacturing,
packaging and distribution facilities for the Products.


 


8.
 Company shall respect the rights of
employees to associate, organize and bargain collectively in a lawful and
peaceful manner, without penalty or interference, in accordance with applicable
laws.


 


9.
 Company shall comply with all applicable
laws, including those pertaining to the manufacture, pricing, sale and
distribution of Products.


 


10.
 Company shall comply with all applicable
environmental laws.


 


2





















 


Schedule C


 


Fee Schedule


 


[*]


 





















 


Schedule D


 


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 [*] except, that coverage for California
Earthquake shall be no less than [*] per occurrence and in aggregate; and Terrorism for WMI Manufacturing
Alsdorf shall be no less than [*]
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 [*] and contain a warehouse coverage
endorsement.  In the event that the [*] 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 [*] 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 product 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 [*]
per occurrence and [*] 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

  	
   

  	
  [*] each accident

  
	
  Bodily Injury by Disease

  	
   

  	
  [*] policy limit

  
	
  Bodily Injury by Disease

  	
   

  	
  [*] 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 [*] combined single limit for bodily injury and
property damage.  This insurance coverage
must include all automotive and truck equipment used in the


 





















 


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 [*]
after final completion.  Minimum
liability limits, including excess liability coverage, shall be [*] each occurrence and [*] 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.


 





















 


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 US, 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 D.


 


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 Paragraph
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 at its sole expense in full force and effect as
required in this Agreement and as specified herein.


 





















 


Schedule E


 


Non-Exclusive Territories


 


Argentina


Australia


Brazil


Canada


Chile


China


Colombia


Eire


Finland


France


Greece


Hong
Kong


Hungary


Indonesia


Italy


Japan


Korea


Malaysia


Mexico


New
Zealand


Norway


Philippines


Poland


Portugal


Singapore


Spain


Sweden


Taiwan


Thailand


UK


Venezuela


Bulgaria


Croatia


Ecuador


Estonia


Ghana


India


Israel


Ivory
Coast


Kenya


Latvia


Lithuania


Mauritius


Romania


Saudi
Arabia


Lebanon


United
Arab Emirates


Slovenia


South
Africa


Turkey


West
Indies


Zimbabwe


 


 


Export
Territories


 


All
locations in the Territory designated by WMI


 





















 


Schedule F


 


PP&S Services


 


 


A.  WAREHOUSE MANAGEMENT ACTIVITIES


 


 


1.  Inbound Logistics Activity


 


[*]


•                  [*]


•                  [*]


•                  [*]


•                  [*]


•                  [*]


•                  [*]


•                  [*]


•                  [*]


 


2.  Custody and Storage
Activities


 


[*]


 


•                  [*]


•                  [*]


•                  [*]


•                  [*]


 





















 


3.  Order Processing Activities


 


[*]


 


•                  [*]


•                  [*]


•                  [*]


•                  [*]


•                  [*]


•                  [*]


•                  [*]


 


4.  Dispatch Activities


 


[*]


 


•                  [*]


•                  [*]


•                  [*]


•                  [*]


•                  [*]


•                  [*]


•                  [*]


 


5.  Returns Processing Activities


 


[*]


 


•                  [*]


•                  [*]


•                  [*]


•                  [*]


 


2





















 


6.  New Releases Processing Activities


 


[*]


 


•                  [*]


•                  [*]


 


7.  Additional Activities


 


[*]


 


•                  [*]


•                  [*]


•                  [*]


•                  [*]


 


8.  Communication Activities


 


[*]


 


•                  [*]


 


B.  TRANSPORTATION SERVICES


 


[*]


 


[*]


 


•                  [*]


•                  [*]


•                  [*]


•                  [*]


 


3





















 


•                  [*]


•                  [*]


•                  [*]


•                  [*]


•                  [*]


•                  [*]


•                  [*]


•                  [*]


•                  [*]


 


C.  SPECIALIST SERVICES


 


[*]


 


[*]


 


Pre
Pack Order


 


[*]


 


[*]


 


[*]


 


D.  PERFORMANCE METRICS


 


[*]


 


4