Exhibit 10.29


 





















 


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.


 


US
MANUFACTURING AND PACKAGING AGREEMENT


 


between


 


WARNER-ELEKTRA-ATLANTIC
CORPORATION (“WEA”)


 


and


 


CINRAM
MANUFACTURING, INC. (“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) WEA
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.


 


(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 WEA’s election, more than the Specified Percentage) of
Products in accordance with the terms hereof. WEA 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 WEA’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 by Company for WEA under this Agreement (and/or by
WEA on its own behalf, if applicable) during the twelve (12) complete calendar
months immediately preceding the RMMT Effective Date (the “WEA Output”);
and (B) the denominator of which shall be the WEA 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 WEA Output no
units manufactured or packaged by the Company (and/or WEA, if applicable) for
WHV or its affiliates shall be included.


 





















 


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


 


(c) Reports.
Company shall prepare for WEA all of the same production, shipments and
inventory reports in the same format and detail that WEA’s systems provided as
of the date of this Agreement (it being understood that Company shall not be
required to prepare for WEA any reports that would require Company to incur
additional out-of-pocket expenses in order to provide them, unless WEA agrees
to pay any such actual out-of-pocket expenses) and shall supply WEA 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 WEA’s
request, provide such more detailed reports to WEA hereunder as of the date
that Company commences providing such more detailed reports to such other party
by 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 WEA or WEA’s
affiliates. Company acknowledges that Products (including all intellectual
property contained therein and relating thereto) are protected under copyright
laws and that WEA 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 WEA’s written approval, and any distribution of any
such materials in the Territory without WEA’s written approval, is an
infringement of WEA’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
WEA shall bear the risk of loss for any units of Products in transit for which
WEA 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;


 


(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 [*].


 


2





















 


[*]. This
Paragraph 3(a)(ii) shall not require that Company provide WEA with the
automated services provided in Company’s Huntsville Facility or otherwise
require Company to provide any new services to WEA if the cost of providing
such services would be similarly unreasonably burdensome to Company; provided,
however, that nothing in this sentence shall limit Company’s obligations
set forth in Paragraph 6;


 


(iii) shall
be rendered in at least the same manner, subject to at least the same standards
and in at least the same quality as was provided to WEA’s affiliates at the
Acquired Facilities for the products of WEA’s affiliates immediately prior to
the commencement of the Term;


 


(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 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. WEA 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 therefor. WEA 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 manufactured and technologies used to WEA on a monthly basis to
facilitate the administration of the copy protection and digital rights
management license fees. Company shall assist WEA in assessing and testing new
copy protection and digital rights management technologies, and on [*] 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


 


3





















 


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 WEA shall reimburse Company for any such excess (but solely
to the extent that WEA 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, WEA’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 WEA 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.


 


(c) Fees.
M&P Services shall be furnished at the prices set forth on Schedules C and
H 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 “Fees”). [*].


 


(d) Subcontracting.
Company may subcontract a portion of its obligations under this Agreement to
any one or more of the subcontractors on Schedule D hereto (each an “Approved
Subcontractor”). Company may subcontract to a subcontractor that is not an
Approved Subcontractor only with the prior consent of WEA. 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. WEA may from time to time
designate organizations


 


4





















 


as prohibited subcontractors
under this Agreement if WEA 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 E hereto.


 


(f) Delivery
of Source Materials. WEA shall, at WEA’s sole expense, deliver to Company
(or to such suppliers as Company may designate) all Source Materials. WEA 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 WEA so as to be able to receive Source
Materials in digital form and online, which shall include metadata and digital
proofs.


 


(g) Ordering.


 


(i) It shall be WEA’s responsibility to determine its production
requirements and to order units of Components and Products. All Orders for
units of Components and Products shall be evidenced by a written purchase
order. Orders must include all information necessary to properly identify the
Components and Products to be manufactured and packaged, including artist,
title, catalog number and quantity. Company shall use the entire UPC or EAN
codes to identify all Components and Products.


 


(ii) Prior to manufacture, and Order must be Workable. Company shall
deliver finished goods units of Components and Products to WEA’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 Components and for units of
Products in each configuration, respectively, and are measured from the time
the Order is Workable.


 


(iii) At the times that WEA submits Orders, to the extent that an Order
is for multiple selections, WEA 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:


 


5





















 


	
  Order Size in Units

  	
   

  	
  Deviation for

  Catalog Titles

  	
   

  	
  Deviation for

  New Releases

  	
   

  
	
  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 WEA 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, WEA 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: (i) any distribution or warehouse Facility; and
(ii) from any distribution or warehouse Facility to any other distribution or
warehouse Facility, so long as such movement described in (ii) above is at the
direction of Company in its own discretion. Except as otherwise specifically
provided herein, WEA 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 WEA but are actually paid by Company, WEA 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 WEA within [*]
business days following Company’s rendition of such invoice to WEA (but in no
event shall WEA be required to make any such payment of such invoice prior to
Company’s payment of such invoice to such shipping agent). If WEA is
responsible for shipping expenses, should WEA so elect, WEA 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 WEA any
proposed shipping agent(s) which Company wishes to utilize hereunder for WEA’s
prior written approval. If, in a particular instance, WEA is not responsible
for shipping expenses or WEA 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 WEA 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 WEA 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


 


6





















 


location designated by WEA in
such order; and (iii) upon WEA’s request from time to time, Company shall
deliver to WEA 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 WEA’s reasonable request, Company shall provide WEA 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 WEA on a non-exclusive basis only (and
only to the extent that WEA so requests any such services) and, to the extent
so requested, shall be provided to WEA [*]. Notwithstanding this
Paragraph 3(k), Company shall only be required to provide such services if
either WEA (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 WEA
requests such services and Company is not contractually prohibited from providing
such services to WEA, they shall be provided to WEA on the same terms and
conditions as are provided to such other party).


 


4. Company’s
Financial Obligations.  WEA 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.


 


5. Other
Obligations. (a) Storage of Source Materials, Components and Finished
Units of Products.  Company shall
accept and store all Source Materials and Inventory 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 Inventory than is necessary to satisfy the next [*] demand
(such determination as to what constitutes [*] demand shall be made jointly be
WEA and Company based, where possible, upon actual, gross units ordered during
the prior [*] and shall be made for all Source Materials and Inventory 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
Inventory so determined to be in excess of a [*] demand therefor, Company shall
notify WEA of the specific Source Materials and/or Inventory constituting such
excess and within [*] following WEA’s receipt of such notice, WEA shall (in
WEA’s sole discretion) either: (i) remove such excess Source Materials
and/or Inventory (at WEA’s expense); (ii) direct Company to destroy such
excess Source Materials and/or Inventory (at WEA’s expense); or
(iii) direct Company to store such excess either (x) at a Facility at
a cost to WEA of


 


7





















 


[*] or (y) offsite at
Company’s or Company’s affiliates’ leased facility approved in advance, in
writing by WEA and the actual, documented, out-of-pocket expense charged by
such facility to Company for such storage shall be reimbursed to Company by
WEA.  Amounts owing under this Paragraph 5(a)
shall be invoiced by Company at month end and shall be payable sixty (60) days
from the date of the rendition of such invoice; [*]. All Source Materials and
all Inventory shall be WEA’s property and shall be kept segregated from any
other property. Upon receipt of a written request from WEA, Company shall
return to WEA, at WEA’s cost, any materials supplied by WEA 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
Inventory 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 WEA 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 and as set forth
on Schedule F hereto. WEA 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,
Inventory or elements derived therefrom without prior written authorization
from WEA; 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 Materials and derivatives in an organized environment to
allow for easy access by both Company and WEA.


 


(b)  Insurance. During the Term, Company
shall: (i) comply with all provisions set forth on Schedule F 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 F 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 WEA be able to
monitor daily shipments, receipt, production and inventory activity in
connection with Components and Products, Company shall give WEA access to
Company’s computer system for the purpose of providing WEA 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 WEA with all of the same types of reports and information currently
provided by, and as may be available from, Company’s computer


 


8





















 


systems in connection with
other products and components manufactured and/or packaged by Company. In
connection therewith, Company shall work with WEA to ensure that WEA is
provided with at least the same level of reports and information that WEA’s own
systems provided as of the commencement of the Term. Nothing 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 WEA [*] 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, WEA shall have the right to inspect each WEA 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 WEA’s own employees, third party advisers or representatives, insurers,
or other experts retained by WEA). WEA may conduct such inspections of each WEA
Facility or other facility up to [*]. During any such inspection, WEA may
conduct physical inventories of units of Components and Products in Company’s
possession or control. WEA 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 WEA Facilities for property of WEA and throughout the WEA 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 WEA. Company’s security procedures shall be subject to WEA’s prior
written approval. Company shall maintain such procedures as approved by WEA 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


 


9





















 


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
Source Materials or Inventory, Company shall notify WEA as soon as reasonably
possible, and in any event within [*] following such discovery, and shall include in such notification
sufficient detail to allow WEA 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 WEA, Company shall be
liable as provided herein for the loss, damage, theft, disappearance,
destruction or unauthorized usage of any property of WEA.


 


(f) Salvage. At all
times and regardless of whether Company or its insurers are required to
compensate WEA for loss as required under this Agreement, WEA 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 WEA’s prior written consent.


 


(g) WEA Employees.
Company shall throughout the Term, at the request of WEA, provide up to a
maximum of [*] full-time
employees of WEA or its affiliates (the “WEA Employees”) with, at
Company’s expense: (i) reasonable office accommodations at such WEA
Facilities utilized for manufacturing and/or packaging as may be specified from
time to time by WEA; (ii) individual computers; (iii) copy services
and any other similar office services in order to permit them to carry out
their functions; and (iv) 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 WEA Employee, and WEA 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; [*]. WEA shall be responsible for the direction
of, and all compensation and related obligations for, the WEA Employees. The
WEA Employees shall operate in accordance with WEA’s code of conduct and
Company’s standard code of conduct contained in its employee policy manual at
the applicable WEA Facility (which code of conduct shall be subject to WEA’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 WEA Employees shall not have access to any
competitively-sensitive information relating to any other party’s products or
any personal data possessed by Company.


 


10





















 


6. Technology.
Throughout the Term, Company shall reasonably update its manufacturing and
packaging lines at the WEA 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 WEA Facilities, at
Company’s cost, to meet reasonable WEA requirements and maintain competitive
services for WEA and its customers. [*]


 


7. Invoices and Payments.
(a) Rendition of Invoices. During the Term, Company shall prepare and
render invoices to WEA with respect to each shipment of units of Components and
Products Ordered hereunder. Except with respect to shipping charges to be borne
by WEA as provided in Paragraph 3(i), the amount due to Company pursuant
to each such invoice shall be due and payable by WEA to Company in
US dollars on or before [*] following Company’s rendition of such invoice;
[*]. Such invoices 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. The aforementioned invoices shall be denominated in
US dollars. Company shall submit all such invoices to WEA electronically
pursuant to reasonable instructions given by WEA to Company from time to time
(and in paper form, to the extent WEA so requests) and to the extent that
Company’s and WEA’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 WEA starting upon the commencement of the Term to create a system
whereby all such invoices can be submitted electronically to WEA. For the
avoidance of doubt, WEA shall only be liable for payments hereunder if WEA (or
WEA’s designee) has received the shipment of the relevant finished units of
Components and Products reflected in such invoice.


 


(b) Audits. WEA shall
have the right, at WEA’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 WEA’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 by
WEA or its affiliates by any such independent third party auditors shall impart
to WEA 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 WEA and/or WEA’s


 


11





















 


affiliates have been overcharged, Company
shall reimburse WEA in the amount of the overcharge. If any such audit reveals
that WEA has been overcharged by an amount exceeding [*] for the audit period, Company shall
reimburse WEA in the amount of the overcharge plus all fees paid by WEA
to the auditors concerned in connection with such audit and any other actual,
documented, out-of-pocket expense incurred by WEA in connection with such
audit. [*]. Regardless of the
number of audits conducted hereunder revealing the same specific overcharge to
WEA, Company shall not be required to repay to WEA the amount of any such
overcharge more than once. WEA’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 WEA 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 WEA [*] before the intended date of destruction. WEA
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 WEA (but excluding information related to other customers of Company)
at WEA’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 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 WEA’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 WEA 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 WEA 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,
WEA shall remove from the


 


12





















 


Facilities, at WEA’s expense,
or order at WEA’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 destroy such items shall be made by WEA in WEA’s sole discretion.


 


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 WEA’s rights in the Products and Components and WEA’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 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 WEA and its affiliates, and
each of their respective officers, directors and employees (collectively, for
the purposes of this Paragraph 9(b) only, “WEA”) harmless to the maximum
extent permitted by law from any and all loss and damage (including court costs
and reasonable attorneys’ fees 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 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 any 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 WEA’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 F hereto, or
result from a breach of any warranty, representation, agreement, undertaking or
covenant of WEA 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. WEA 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.
WEA shall have the right to participate in such defense through counsel of WEA’s
choice and at WEA’s expense.


 


(c) WEA
warrants, represents and/or covenants, as the case may be, that: (i) WEA
has the right, power and authority to enter into and fully perform this
Agreement; (ii) no agreement of any kind heretofore entered into by WEA shall
interfere in any manner with the complete performance of this Agreement; and
(iii) Material embodied in Products and Components as supplied by WEA
shall not violate any law or


 


13





















 


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) WEA 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 WEA 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 WEA’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 F hereto. The foregoing indemnity shall be
applicable only to such claims as have been reduced to judgment or settled with
WEA’s written approval. Company shall give WEA prompt notice of any claim to
which the foregoing indemnity applies and WEA shall assume the defense of any
such claim through counsel of WEA’s choice and at WEA’s sole expense. Company
shall have the right to participate in such defense through counsel of
Company’s choice and at Company’s expense.


 


10. Breach,
Cure and Termination. (a) WEA 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 is no cure period associated with any
breach referred to in Paragraph 10(a)(i). There shall be a cure period of [*]
days, 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:


 


[*]


 


14





















 


[*]


 


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


 


(c) In
addition, WEA 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 WEA 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 US PP&S Agreement, other than (x) as a
result of a breach by WEA or the expiration of the term thereunder by passage
of time or (y) the termination of the term of the US PP&S Agreement
under Paragraph 11(c)(iv) thereof; or (B) any material breach by
Company under the US PP&S Agreement (i.e., a breach which would
then-currently permit WEA to terminate the term thereof and with respect to
which WEA’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


 


15





















 


shall it relieve WEA 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 WEA written notice, to suspend its obligations under this
Agreement affected by such Force Majeure Event, effective upon receipt by WEA
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, WEA 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, WEA 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 to terminate the Term
of this Agreement by notice in writing to Company unless prior to the date of
such termination Company has by notice in writing to WEA ended the suspension
of Company’s obligations under this Agreement. For the avoidance of doubt,
should WEA 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 directly affected by a Force Majeure Event,
shall be in any way limited or forgiven as a result of any Force Majeure Event.


 


(ii) In addition, within [*] of becoming aware of any circumstance or
event which may reasonably be anticipated to cause or constitute a Force
Majeure Event, Company shall notify WEA 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,


 


16





















 


WEA 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 WEA to obtain the services required to fulfill any such Order(s). Once WEA
is reasonably satisfied that Company is again able to provide the required
Services, WEA 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 WEA has made
to the applicable third party that such Services would remain with such third
party for a period of time. Company shall reimburse WEA upon demand for any and
all incremental out-of-pocket charges that WEA reasonably incurs as a result of
transferring its Services under this Paragraph 10(e)(iii).


 


(f) If WEA
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 WEA 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 WEA, 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 WEA.


 


11. Anti-Piracy
Activities. Company (and WEA, 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.
[*]


 


17





















 


[*]


 


(d) [*]


 


18





















 


[*]


 


(e) [*]


 


19





















 


(g) Each
of WEA 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 WEA 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(g), 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.


 


20





















 


13. Confidentiality.
(a) Each of Company and WEA 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
WEA 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 WEA 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 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. WEA 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


 


21





















 


(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, WEA 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 WEA 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 WEA
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 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 this Transaction) regarding the
tax treatment or tax structure of the Transaction.


 


14. Definitions. (a) Certain
Terms.


 


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


 


22





















 


(ii)
“Armed Forces Post Exchanges” shall mean United States military posts,
ships’ stores or other United States armed forces facilities.


 


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


 


(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 thirty percent (30%) 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
provided 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 eighty percent (80%) 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.


 


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


 


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


 


[*]


 


23





















 


[*]


 


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


 


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


 


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


 


(xv)
“Key Release” shall mean a New Release of which greater than [*] and less than [*] units have been Ordered.


 


(xvi)
“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.


 


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


 


(xviii)
“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).


 


(xix)
“Manufacturing Services” shall mean: (i) selected pre-production
services (as reasonably determined by WEA and normally rendered by
manufacturers of Products); (ii) selection of suppliers;
(iii) ordering raw materials (including Components) from various suppliers
such as pressing plants, duplicators and printers; (iv) assembly;


 


24





















 


(v) arranging
shipment of Components to various points; (vi) arranging shipment of
finished units from point of manufacture to WEA’s distributor and to other
shipment locations identified by WEA; and (vii) inventory control, all of
the foregoing for Optical Discs only.


 


(xx) “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 WEA).


 


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


 


(xxii) “New Release” shall mean any Product (or Component
thereof) prior to and including such Product’s “street date.” For the purposes
of Schedule A hereto, all promotional units of Products shall be treated
as New Releases.


 


(xxiii) “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 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 WEA’s total production of
units of Products in HD-DVD format for any Contract Year exceeds [*] of WEA’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. “Optical Disc” shall include the so-called “Hybrid” CD/DVD Disc.


 


(xxiv) “Order” shall mean a request made by WEA 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 include a “bill of materials” or “BOM” as said term is utilized in the
manufacturing industry.


 


(xxv) “Packaging Services” shall mean: (i) selected
pre-production services (as reasonably determined by WEA and normally rendered
by


 


25





















 


packagers of
Records); (ii) selection of raw material suppliers; (iii) ordering
raw materials from various suppliers; (iv) printing of required printed
materials; (v) assembly; (vi) arranging shipment of finished units of
Components from point of manufacture to shipment locations identified by WEA;
and (vii) inventory control, all of the foregoing for Optical Discs only.


 


(xxvi) “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 WEA).


 


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


 


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


 


(xxix) “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.


 


(xxx) “Pre-Production” shall mean all steps that must be taken
in preparation for manufacture once an Order has become Workable.


 


(xxxi) “Production” shall mean both the actual manufacture of
units of Components and/or finished units of Products (as applicable) and the
completed delivery of such units to locations in the Territory designated by
WEA.


 


(xxxii) “Products” shall mean all Records intended for sale in
the Territory for which WEA requires M&P Services to be performed during
the Term and for which WEA has the unilateral right to control the identity 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 and for which the Combined Entity has the unilateral
right to control the identity of the party who renders such M&P Services.
It has been WEA’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. WEA shall continue to do so during
the Term, in accordance with past practice. For the avoidance of doubt, Records
sold through so-called “kiosks” shall not constitute “Products” hereunder.


 


(xxxiii) “Recorded Music Major Transaction” shall mean a joint
venture, merger, or other combination of all or a substantial portion of the


 


26





















 


recorded music
businesses of Warner Music Group with all or a substantial portion of the
recorded music businesses of any Major.


 


(xxxiv) “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.


 


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


 


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


 


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


 


(xxxviii) “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.


 


(xxxix) “Territory” shall mean the United States, its
territories and possessions, including Puerto Rico, and Armed Forces Post Exchanges
serviced from distribution points in the U.S.


 


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


 


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


 


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


 


(xliii) “WMI” shall mean WEA International Inc.


 


(xliv) “Workable” shall mean: (i) for orders of
Manufacturing Services, an Order for which all of the items to be furnished by
WEA (such as Source Materials and similar materials) reasonably necessary to
complete manufacturing of finished units of Products have been received


 


27





















 


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 WEA (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.


 


(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) [*]


 


28





















 


limit WEA’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 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 US
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 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
WEA’s prior written consent (which consent may be granted or withheld in the
sole discretion of WEA) to assign this Agreement or any of the rights granted
to Company hereunder; provided, however, that: (i) Company
shall be permitted to assign this Agreement to Parent or any wholly owned
subsidiary of Parent; and (ii) if Company sells all or a majority of
Company’s Equity Interests in Ivy Hill Corporation to a third party (the “Ivy
Purchaser”), then Company shall thereafter have the right to assign to the
Ivy Purchaser by way of an agreement entered into among Company, Ivy Hill
Purchaser and, at WEA’s option, WEA, Company’s rights hereunder to perform the
Packaging Services in connection with printed Components only; provided,
further, that in each case, notwithstanding such assignment, Company at
all times shall remain directly and fully liable to WEA for the performance of
such M&P Services hereunder. WEA 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 WEA, or to any third party acquiring all or
substantially all of WEA’s assets or equity; provided, however,
that in each case, notwithstanding such assignment, WEA at all times shall
remain directly and fully liable to Company for the performance of the
obligations of WEA hereunder.


 


(d)  Further Assurances.  Company and WEA 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.


 


29





















 


(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)):


 


WEA:


 


c/o Warner
Music Group Inc.

75 Rockefeller Plaza

New York, New York 10019

Attn: EVP & CFO

Fax: (212) 258-3121


 


with a copy
to:


 


Warner Music
Group Inc.

75 Rockefeller Plaza

New York, New York 10019

Attention: EVP & General Counsel

Fax: (212) 258-3092


 


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


 


30





















 


(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 thereby are consummated as originally contemplated to the greatest
extent possible.


 


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


 


31





















 


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 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.


 


[*]


 


32





















 


[*]


 


(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.


 


	
   

  	
  WARNER-ELEKTRA-ATLANTIC
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David H.
  Johnson

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  David H.
  Johnson

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  Vice
  President and Secretary

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  CINRAM
  MANUFACTURING INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ LEWIS
  RITCHIE

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  LEWIS
  RITCHIE

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  TREASURER

  	
   

  



 





















 


List of
Attached Schedules


 


Schedule A: Service Level
Requirements


Schedule B: Technical
Specifications


Schedule C: Fees


Schedule D: Approved
Subcontractors


Schedule E: WEA’s Code of
Conduct for Third-Party Service Providers


Schedule F: Insurance Coverage


Schedule G: Contract Year
Global Volume Rebate


Schedule H Additional Pricing
Schedule


Schedule I Additional M&P
Service Prices


 


















Schedule A


 


[*]


 





















 


Schedule B


 


Technical Specifications


 


[*]


 





















 


Schedule C


 


[*]


 





















 


Schedule D


 


Approved Subcontractors


 


 





















 


Schedule E


 


WEA’s Code of Conduct For Third Party Service Providers


 


1.  Company will not (without WEA’s written
consent) manufacture merchandise utilizing any properties the copyright or
trademark to which is owned or licensed exclusively by WEA 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 legal 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 WEA with all information WEA 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 F


 


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.


 


1.  Property Insurance, Including Extra
Expense and Business Interruption: 
Company at all times and at its own cost and expense shall insure WEA’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 WEA
for non-physical damage to source material, if available on a commercially
reasonable basis and is warranted by the risk profile of the Company. WEA’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 WEA 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 WEA 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 WEA. WEA 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 WEA’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 WEA.


 


All policies
shall provide for a reimbursement value with respect to WEA’s property at
replacement cost for new property of like kind and quality, with no deduction
for depreciation, and shall include WEA, 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 WEA.  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 WEA will be given the opportunity to maintain
coverage for its insured property under the policy; and Company will reimburse
WEA within [*] of notice for the expense incurred.


 


2.  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 [*] per occurrence and [*] in the annual aggregate, and
covering as additional insureds all the WEA individuals and entities for which
and to the extent it is responsible under this Agreement.


 


3.  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.


 


4.  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.


 


5.  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 WEA, additional insureds and all other such entities, as may be
reasonably requested by WEA.


 


3





















 


6.  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 WEA’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 WEA, on an annual basis or as necessitated by a material change in coverage
or legal action. Company shall forward to WEA a copy of all required policy
forms upon request. With respect to property located outside the U.S, any loss
payable to WEA 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 F.


 


Each of WEA
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 WEA
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.


 


4





















 


Schedule
G


 


[*]


 


















Schedule H


[*]





















 


Schedule I


Additional M&P Service Prices


[*]