Document:

Ex-10.11

 

2005

UNIVERSAL INTERNATIONAL MUSIC B.V.

and

UNIVERSAL MANUFACTURING & LOGISTICS GMBH

(to be renamed [EDC GERMANY GMBH])

DISTRIBUTION AND RELATED SERVICES AGREEMENT*

	*	A portion of this document is confidential and has been
omitted in accordance with Rule 24b-2 under the
Securities and Exchange Act of 1934. Such omitted confidential material is marked herein as follows: [*****].

 

 

	1.0  	Overview:
	 
	   	This Distribution and Related Services Agreement (“Agreement”) is dated May 31, 2005 and is
between Universal International Music, B.V., a company incorporated in The Netherlands with
registered office at Gerrit van der Veenlaan 4, 3743 DN Baarn, The Netherlands and
registered number 31018439 (“Customer”), and Universal Manufacturing & Logistics GmbH, a
company incorporated in Germany with registered office at Emil Berlinerstrasse 13, 30851
Langenhagen, Germany and registered number HRBS2670 (as such party may be renamed
(“Supplier”)), referred to collectively as the parties (“Parties”) and describes the terms
and conditions concerning the purchase and supply of certain distribution related services
and activities in the Territory.
	 
	2.0  	Definitions: Definitions are set forth out in Schedule 2.0 of this Agreement.
	 
	3.0  	Term:

	 	3.1  	Subject to the termination provisions of this Agreement, this Agreement shall
remain in force from the Effective Date until May 31, 2015 (the “Term”).
	 
	 	3.2  	At least 180 days prior to the expiration of the Term, senior management of
the Parties shall meet in good faith to discuss an extension to the Term.

	4.0  	Customer Purchase Obligation:

	 	4.1  	In each year of the Term and subject to the exclusions set out in this
Section 4.1, Customer shall purchase, and shall cause all members of the Universal
Music Group to purchase, 100% of its and their respective Distribution Requirements
from Supplier, excluding (i) any Distribution Requirements which such Universal Music
Group member is permitted to purchase from a third party under Section 6.10 or 9.3 of
this Agreement; and (ii) any Distribution Requirements of a party who becomes a
Universal Music Group member by acquisition after the Effective Date, but only to the
extent and for the period that such Distribution Requirements are contractually
committed to a third party as of the date of signing of the relevant acquisition
agreement.[*****]
	 
	 	4.2  	At any time during the Term, Customer may designate [*****].
	 
	 	4.3  	[*****]
	 
	 	4.4  	Customer agrees that it will not permit any of the Distribution Requirements
of any member of the Universal Music Group to be exercised by, or transferred to,
another entity outside of the Universal Music Group, without also assigning, in whole
or in part, this Agreement so that any transferred Distribution Requirements continue
to be subject to this Agreement. Nothing contained in this Section is intended to
limit

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	 	   	Vivendi Universal S.A. or any of its operations that are not part of or are
acquired separately from the Universal Music Group, or subject to the limitations in
Section 18, to limit the sale of the equity of, or of all or substantially all of the
assets of a Universal Music Group member; provided such operations or sale are subject
to the assignment obligation described in this Section 4.4.
	 
	 	4.5  	Except as expressly provided in Sections 4.1 and 4.4, Customer shall have no
obligation to conduct its business in a manner that maximizes its demand for DOAs to
be requested from Supplier or minimizes the risks that such DOAs shall not be required
by Customer, including, without limitation, any obligation to extend or renew any
agreements with third parties. Supplier acknowledges that there are no minimum
requirements associated with this Agreement.

	5.0  	Supplier Supply Obligations:

	 	5.1  	Intentionally deleted
	 
	 	5.2  	Supplier will supply the DOAs set out in Schedule 10.1 for all Product
distributed from the Distribution Center as requested by Customer in accordance with
the requirements of this Agreement. These DOAs will at a minimum meet the quality
specifications generally met by Supplier in the twelve months immediately prior to the
Effective Date. In the event that Customer requests that Supplier supply any DOAs
which are not set out in Schedule 10.1, the Parties shall use the procedure set out in
Section 10.5 to resolve the pricing for such requests.
	 
	 	5.3  	Supplier may not refuse (i) a Customer request to provide a DOA for any
Product set forth in Schedule 10.1, or (ii) any DOA not set forth on Schedule 10.1
provided that (A) Customer and Supplier have followed the procedure described in
Sections 10.5.1 through and including 10.5.5, and (B) the requested distribution
service is normally and customarily provided by distributors in businesses
substantially equivalent to Supplier’s business at the time of Customer’s request.
	 
	 	5.4  	Supplier shall be prohibited from subcontracting the [*****]. In relation to
other DOAs Supplier shall not subcontract their performance to third
parties, except (a) for any DOAs which are subcontracted by Supplier in the [*****]
prior to the Effective Date, (b) for any DOAs which Supplier does not have the
capacity to supply without such subcontracting provided that Supplier is using
[*****] of its available capacity as at the Effective Date or as required by
Customer in the immediately proceeding ,[*****] for Customer, and (c) for any DOAs
which Customer consents to being provided by a third party. In the event that
Supplier subcontracts the performance of any DOAs under this Agreement, as
permitted above, Supplier shall subcontract such work to third-party logistics
providers

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	 	   	listed on Schedule 5.4 hereto. Supplier may propose to Customer an
amended Schedule 5.4, adding or deleting subcontractors at any time, and from time
to time, provided that such amendment shall not be effective unless and until
Customer approves such amendment, which approval shall not be unreasonably withheld
or delayed. Customer shall have the right to add or delete previously approved
subcontractors at any time and from time to time, provided that, in the case of
deletions, (i) Customer’s deletion is not unreasonable; (ii) Customer consults with
Supplier prior to the deletion; (iii) Customer provides Supplier with at least
[*****] days prior written notice of the deletion; (iv) Customer permits Supplier,
notwithstanding such deletion, [*****] and (v) after the deletion, a commercially
reasonable number of approved subcontractors, and in any event no less than the
lower of (A) the number of subcontractors qualified to perform the Manufacturing
Services subcontracted, or (B) [*****] remain listed on Schedule 5.4 and any
amendments thereto.

	 	5.4.1  	Any order subcontracted by Supplier shall remain subject to
the terms of this Agreement. Supplier shall inform Customer of any order
subcontracted within two Business Days of subcontracting any order.
	 
	 	5.4.2  	All Supplier’s agreements with subcontractors performing
services for Customer will provide that Customer will have the right to
inspect such subcontractor’s facilities upon reasonable advance written notice
to Supplier, during normal subcontractor hours of operation, without
interference to subcontractor’s operations, and subject to any reasonable
access rules or confidentiality obligations imposed by the subcontractor.
	 
	 	5.4.3  	Supplier shall disclose the existence of all subcontracting
arrangements to Customer within[*****] of their execution.
	 
	 	5.4.4  	Notwithstanding any of the foregoing restrictions in this
Section 5.4 but subject to Section 10.10, Supplier may outsource [*****] of
any hand packaging, refurbishing and other non-automated services.

	 	5.5  	Supplier shall maintain and employ plant security systems and procedures that
are no less effective in preventing theft, pirating, unauthorized exhibition, copying
or duplication of any of Customer’s proprietary audio and/or audio visual product or
other material delivered by Customer to Supplier or its designated subcontractors than
the security systems and procedures disclosed to Supplier in writing prior to the
Effective Date, to the extent such systems and procedures were Prevailing Practices at
the existing Supplier manufacturing facilities as of the Effective Date.

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	 	5.6  	Supplier shall, subject to Section 5.14 comply with all applicable
legislation and formal recommendations from the IFPI which are generally implemented
by IFPI members in each case in respect of the regulation of piracy (including
application of SID codes and/or similar future systems) provided that Supplier shall
have a reasonable time to comply with any such formal recommendations from the IFPI
and to the extent such systems and procedures were Prevailing Practices at the
existing Supplier distribution facilities as of the Effective Date.
	 
	 	5.7  	Supplier confirms that it is aware of the BIEM-IFPI Memorandum of
Understanding of August 1996 on the enforcement of copyrights and neighboring rights
and the IFPI Good Business Practice Guidelines and confirms that it will, subject to
Section 5.14, and throughout the Term, abide by such memorandum and guidelines as if
it were a member of the IFPI and agrees that it will not knowingly distribute from its
facilities sound or other recordings which have not been authorized by the lawful
owners of rights in such recordings. Supplier also recognizes that at the Effective
Date it complies with the SID Code and confirms that to the extent consistent with
Prevailing Practices it will continue to comply with this code or its successor code
as is generally implemented by comparable facilities to the Supplier.
	 
	 	5.8  	Supplier shall at all times during the Term have a fulltime dedicated account
manager with a full time deputy, who are only responsible for the daily liaison with
Customer and who shall be available to Customer daily from 8:00 a.m. to 5:00 p.m.
(Hanover time).
	 
	 	5.9  	The Parties shall meet together at least [*****] at mutually agreeable times
during the Term to review performance of the DOAs and any issues arising under this
Agreement. The Universal Senior Account Manager will arrange and facilitate such
meetings. Such meetings shall include [*****]. On Customer’s reasonable request,
Supplier shall also send the Universal Senior Account Manager to meetings designated
by Customer. [*****].
	 
	 	5.10  	At all times during the Term, Supplier will, to the extent consistent with
Prevailing Practices, maintain for Customer a minimum installed daily capacity to
handle that number of order lines which is equal to the greater
of (a) [*****] and (b) [*****] of the highest daily number of order lines utilized
solely by Customer at Supplier’s Distribution Centers for its Products in the
corresponding month of its most recently completed Customer calendar year.
	 
	 	5.11  	[*****]
	 
	 	5.12  	The Parties hereto acknowledge and agree that, notwithstanding any other
provision of this Agreement, the standards to which Supplier will be held

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	 	   	in connection with the DOAs to be provided by Supplier to Customer hereunder, including
without limitation, quality, turnaround, shipment, security and reporting standards,
shall as of the Effective Date be the standards which Supplier was generally meeting
in the twelve-month period prior to the Effective Date; ; provided, however, that,
prior to adopting any standards pursuant this Section 5.12 or Section 5.15 that vary
from those set forth in this Agreement, Supplier shall first provide written notice to
Customer of such intention with a reasonably detailed description of the standards
Supplier intends to adopt and the basis for doing so (a “Section 5.12 Notice”);
provided, further, that the Parties further acknowledge and agree that notwithstanding
the foregoing, after the [*****] of the Term, Supplier will (a) meet the standards as
set forth herein and established hereunder, and (b) subject to Section 5.14, further
meet industry standards as required by Section 5.13.
	 
	 	5.13  	The Parties hereto acknowledge and agree that the standards applicable to the
DOAs to be provided by Supplier to Customer hereunder, including without limitation,
quality, the nature of services, security standards, IT Systems and support, will
change over the Term. If the standards applicable to similar distribution services
provided by Supplier to any other customer are higher than those applicable to
Customer, those higher standards shall also be applicable to the services provided by
Supplier to Customer. In addition, Supplier shall, to the extent the industry
standards referenced herein or the standards which are generally required by Major
Music Company buyers of services such as those provided by Supplier hereunder,
increase or improve those standards in effect on the Effective Date, upgrade its
operations and services to incorporate such increased or improved standards for the
benefit of Customer. Notwithstanding the foregoing, Supplier shall not be required as
a result of this Section 5.13 to be the first or an early adopter of new standards or
technology, but is required to implement such new standards and technology as and when
they become generally used and available.
	 
	 	5.14  	[*****]
	 
	 	5.15  	Notwithstanding the provisions of Sections 5.5, 5.6, 5.7, , 5.10,
6.5.1-6.5.4, 6.11.1, 7.2.a, 7.2.b, 7.2.c, 7.2.d, 7.2.h, 7.2.j, 7.15.b, 7.15.e, 7.15.h,
and 8.2, on and after the first anniversary of the Effective Date, the
standards set forth in each such Section shall apply without reference to
Prevailing Practices unless Supplier has previously challenged and reasonably
proven, in the manner set forth below, that Prevailing Practices were inconsistent
with the standards otherwise set forth in such Section (such standards,
collectively, the “Specified Standards”). [*****].

	6.0  	DOA Timelines:

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	 	6.1  	Customer shall place DOAs as to Product with Supplier through the Supplier’s
electronic order system (“IT System”) or by fax (each, an “Order”), provided, however,
that Customer shall use commercially reasonable endeavors to transition all orders to
Supplier’s IT System as soon as possible.
	 
	 	6.2  	Any Order for DOAs received prior to the Order deadlines for the destination
of such Order as set out in Schedule 6.5 on a Working Day, local Distribution Center
time, will be deemed placed on that Working Day for purposes of Sections 6.5.1, 6.5.2,
6.5.3 and 6.5.4 hereof; all other Orders made which fail to meet the relevant Order
deadlines set out in Schedule 6.5 [*****] or Orders made on a non-Working Day will be
deemed received on the opening of business the next Working Day for purposes of
Sections 6.5.1, 6.5.2, 6.5.3 and 6.5.4.
	 
	 	6.3  	Intentionally deleted.
	 
	 	6.4  	Intentionally deleted.
	 
	 	6.5  	Provided Customer has met the Order deadlines for each country and region
stipulated in Schedule 6.5, Supplier will, to the extent consistent with Prevailing
Practices, Tender Product to carriers as follows:

	 	6.5.1  	In relation to New Releases which are separately shipped on
Customer’s request pursuant to Section 6.17, [*****]% of Products and [*****]%
or greater in order lines, will be Tendered to carrier by Supplier by the
shipping times required to be met to make each relevant country or region’s
next day delivery;
	 
	 	6.5.2  	In relation to NDU Distribution, [*****] of Products and
[*****]% or greater of order lines will be Tendered to carrier by Supplier by
the shipping times required to be met to make each relevant country or
region’s next day delivery.
	 
	 	6.5.3  	In relation to all other Products excluding Direct Export,
[*****]% of Products and [*****]% of order lines or greater will be Tendered
to carrier by Supplier by the shipping times required
to be met to make each relevant country or region’s next day delivery.
	 
	 	6.5.4  	In relation to all Late Orders (as described in Section
6.11) [*****] of Late Orders should be Tendered to carrier by Supplier by the
shipping times required to be met to make each relevant country or region’s
[*****] delivery.
	 
	 	6.5.5  	Notwithstanding the minimum service levels set out at
Sections 6.5.1 to 6.5.4, above, the Supplier shall use its usual and

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	 	   	customary
endeavors to tender [*****] of Products and order lines on time.

	 	6.6  	The above metrics for each country and region may be evaluated and monitored
by Customer randomly selecting [*****] and determining the actual time and date
tendered to the designated carrier versus Customer’s Order time and specified tender
date.
	 
	 	6.7  	Late Delivery. To the extent consistent with prevailing Supplier practices
as at the Effective Date:

	 	6.7.1  	Promptly after Supplier becomes aware that a shipment will
be late it will notify Customer, Supplier will at start of next Working Day
produce and deliver to Customer on a country and region basis a schedule of
its compliance with the service levels set out at Sections 6.5.1 to 6.5.4.
	 
	 	6.7.2  	Supplier shall evaluate and monitor actual deliveries daily
per country and region, and confirm actual delivery information to Customer
within [*****] of such delivery, on a country by country basis.

	 	6.8  	Customer shall be responsible for ensuring that Supplier has sufficient
Product and/or Universal Materials to fulfill all Orders. To assist Customer with
this obligation, Supplier shall notify Customer as soon as it becomes aware that there
is any significant shortfall in Product and/or Universal Materials. Supplier shall
also notify Customer of any circumstances which might reasonably lead to late
deliveries as soon as it becomes aware of such circumstances and shall act in
accordance with Customer’s reasonable instructions in such situations.
	 
	 	6.9  	If Customer does not provide explicit and timely instructions as to how to
prioritize among Orders, Supplier will automatically prioritize Orders as follows:
	 
	 	   	[*****]
	 
	 	6.10  	Without limitation to Customer’s other remedies, if Supplier is unable or
otherwise fails to fulfill any DOA in accordance with this Agreement within [*****]
days of the date required under this Agreement, then Customer may secure the services
of a third party or parties to fulfill such DOA(s).
	 
	 	6.11  	Required Supplier Actions Concerning Late DOAs:

	 	6.11.1  	Order(s) which are not Tendered to carriers by the deadlines set out in
Schedule 6.5 will be known as “Late Order(s)”. In the event that at
the end of each of [*****] Days there are [*****] or

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	 	   	more Late Order(s)
unshipped, and to the extent consistent with Prevailing Practices, Supplier
must at its own expense schedule all qualified employees, including sufficient
available temporary labor, to work the maximum amount of overtime (either
extended hours in a Working Day or on non-Working Days) permitted under German
law or union agreement(s) until there have been no Late Orders for [*****]
Days. Subject to Section 5.15, Supplier will not charge Customer any amount
over and above the prices shown on Schedule 10.1 for the above. Any Order and
all Late Orders remaining outstanding at the end of [*****]must be shipped
during the immediately [*****] with any incremental expenses due solely to the
lateness of such shipments (including overtime or temporary labor, special
shipping charges, etc.) to be at Supplier’s cost .
	 
	 	6.11.2  	Intentionally deleted.
	 
	 	6.11.3  	In addition to the requirements set out in Section 6.11.1, if as a result of
any Late Order, Customer incurs any incremental difference in costs (e.g.,
late fee penalties imposed by its customers and paid by Customer), Supplier
shall promptly reimburse Customer for the difference in such costs.

	 	6.12  	No additional or conflicting terms and conditions on any purchase orders or
other documentation provided by Customer or any other Universal Music Group member
incident to any Orders hereunder shall form any part of any agreement between the
parties, including this Agreement, except for purchase order quantities and
descriptions.
	 
	 	6.13  	Customer requests to Supplier to scrap Product from stock will be completed
by Supplier within [*****] Days. Supplier will provide a prompt report on all Product
scrapped. Once Customer requests scrapping any SKU these SKU’s will be excluded from
the SKU stock-holding tariff.
	 
	 	6.14  	Intentionally deleted
	 
	 	6.15  	Supplier will provide at a minimum, the value-added services referred to in
Section 7.3(a). Supplier will coordinate with Customer to ensure that enough daily
capacity for each of these activities will be available based on historic figures and
on major expected changes in demand which Customer will notify to Supplier as soon as
such information becomes available to it.
	 
	 	6.16  	Intentionally deleted.
	 
	 	6.17  	Supplier will, on Customer request, pick, pack and ship New Release Orders
separately from other Orders. Outer packaging will clearly indicate the New Release
character of such Orders. The separate processing of

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	 	   	New Release Orders will be
performed at [*****] cost to Customer. If no separate New Release handling is
required for certain Products, countries or customers, Customer will inform Supplier
accordingly.

	7.0  	Specific Related Services:

Supplier will provide the services to support the Distribution Orders/Activities that are
set forth in this Article 7.0 (the “Specific Related Services”). Except as expressly
provided herein the Specific Related Services will be performed by Supplier at no
additional charge. Specific Related Services shall be substantially similar to the current
prevailing Supplier practices immediately prior to the Effective Date, and shall include:

	 	7.1  	Order Processing:

	 	(a)  	Orders shall specify all Customer requirements for Product in
a format and level of detail materially applied at the Effective Date.
	 
	 	(b)  	The IT System will accept Orders placed by the Customer’s
customer, Customer or Universal Music Group companies or its or their
designees for Universal Product.
	 
	 	(c)  	As set forth in Section 7.4, Customer shall define a credit
limit for all Direct Export customers and shall advise Supplier, in advance of
Supplier’s fulfillment of any order, of the approved credit limit for each of
Customer’s customers. Supplier shall not fulfill any order for any Direct
Export customer if it has not been credit checked against the available
balance of the approved credit limit advised to Supplier, nor shall Supplier
fulfill any order (or series of orders) to any Direct Export customer for an
aggregate amount in excess of the approved credit limit for that customer.
Should Supplier fulfill an order in breach of this Section it shall be liable
to reimburse the Customer the incremental amount in excess of the approved
credit limit.
	 
	 	(d)  	For the avoidance of doubt, the trading terms agreed between
Customer and its customers shall apply to all Orders for Product and
Universal Materials accepted by Supplier and Supplier shall have no authority
to change those trading terms.
	 
	 	(e)  	Supplier shall have the capacity to receive Orders by
telephone between [*****] Days and by electronic means at any time. Supplier
shall accept and acknowledge, without unreasonable delay, Orders sent to it
by a customer or by the Customer. Supplier shall clarify all unclear orders,
with whoever placed the order as soon as practicable but in any event not
later than working hours of receipt. All Customer data required to process
Orders

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	 	   	(including, without limitation, [*****]) shall be received by Supplier
and accepted into its IT System as [*****].
	 
	 	(f)  	If a customer has multiple Orders pending at one time, such
Orders shall not be combined for processing or shipping without Customer’s
prior approval. Customer shall use its reasonable efforts to minimize the
number of customer Orders that must be processed and shipped separately under
this Section 7.1(f).
	 
	 	(g)  	If an Order cannot be fulfilled in whole or part from stock
(the portion of such Order which cannot be fulfilled, a “Back Order”),
Supplier shall notify Customer. Customer will advise Supplier on a customer
by customer basis as to whether Back Orders should be cancelled or retained
and fulfilled when stock becomes available.

	 	7.2  	Product Receipt and Storage:

	 	(a)  	Customer shall cause to be delivered to Supplier sufficient
quantities of Product to be distributed hereunder together with all Materials
whether required in connection therewith or otherwise and Supplier shall store
the same, at no additional charge, in a secure, protected and temperature
controlled location until the time of shipment to third parties (“Distribution
Components”). [*****]. Customer will review all stocks of Distribution
Components at least [*****], and will propose to Supplier Customer’s desired
disposition (e.g., scrapping) of all such stocks (e.g., scrapping) which have
not been the subject of Orders in the last [*****] months, and shall work with
Supplier in good faith to resolve any storage issues faced by Supplier if not
resolved pursuant to such disposition instructions. All Distribution
Components held by Supplier shall remain the property of Customer. Supplier
will provide Customer daily electronic information regarding inventory
activity consistent with Prevailing Practices as at the Effective Date.
	 
	 	(b)  	To the extent consistent with Prevailing Practices, all
Distribution Components shall be clearly and effectively cataloged and
Supplier will maintain and provide to Customer on hand inventory balance
information and will employ systems and procedures no less effective as those
generally used by Supplier during the 12 months prior to the Effective Date
such that, at any given time, [*****]% of said balances per Distribution
Component are within +/- [*****]% of the actual amount on hand. On receipt of
deliveries, Supplier shall verify the contents of the delivery of Product
and/or Universal Materials and reconcile them against the accompanying
delivery documents and ordered quantities.

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	 	(c)  	With respect to all Distribution Components for which
Supplier has received an ASN, Supplier will, to the extent consistent with
Prevailing Practices, Book-On all such Distribution Components received from
its manufacturing facilities or received by it from a third party within
[*****] hours of arrival, unless it is prioritized Product, in which case it
shall be Booked-On within [*****] hours. Customer shall have at any time the
right to prioritize among the deliveries made to the Distribution Center on
[*****] for purposes of the preceding sentence, provided that (i) [*****].
[*****]. Notwithstanding the other provisions of this Section 7.2(c), in the
case that extra handling or repacking of such Distribution Components is
required, the foregoing time periods shall not apply and Supplier will
undertake to Book-On the Product in the most time efficient manner
practicable. If Supplier has not received an ASN as to the delivery of
Distribution Components, Supplier shall notify Customer immediately of such
delivery, move such Distribution Components into a clearance zone, and follow
Customer’s reasonable instructions as to the disposition of such Distribution
Components.
	 
	 	(d)  	Distribution Components which are not Booked-On in the
timescales described in Section 7.2(c), above will be known as “Late
Book-On’s”. In the event that at the end of each of [*****] there are
[*****] or more Late Book-On’s, Supplier must, to the extent consistent with
Prevailing Practices, at its own expense schedule all qualified employees,
including sufficient available temporary labor, to work the maximum amount of
overtime (either extended hours in a Working Day or on non-Working Days)
permitted under German law or union agreement(s) until there have been no Late
Book-On’s for [*****]. This will include night and Saturday shifts. Except
as provided in Section 5.15, Supplier will not charge Customer any amount over
and above the prices shown on Schedule 10.1 for the above. Any and all Late
Book-On’s remaining outstanding at the end of [*****] must be Booked-On during
the immediately succeeding weekend, with any additional expenses related to such shipments (including overtime or
temporary labor, special shipping charges, etc.) to be at Supplier’s cost.
	 
	 	(e)  	Customer can require that certain Distribution Components are
prioritized and Supplier shall also on request produce goods receipts
documents.
	 
	 	(f)  	In the event of any discrepancies or in the event of any
Product and/or Universal Materials being damaged upon receipt, Supplier will
notify Customer as soon as possible and provide Customer with evidence of such
discrepancies and/or damage.

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	 	(g)  	[*****]
	 
	 	(h)  	To the extent consistent with Prevailing Practices, Supplier
shall undertake a cycle count to maintain an Inventory Location Accuracy Level
of [*****]% or greater. The monthly cycle count program will review on a
random basis a minimum of [*****]% of all warehouse locations in a manner such
that each location is checked at least [*****] per year. In addition Supplier
will check all inventory locations with [*****] stock level whenever this
occurs. Supplier will provide Customer with the resulting monthly inventory
report and [*****] stock check results. If the Inventory Location Accuracy
Level falls below %, Customer may conduct an audit of no less than [*****]
locations. If the Inventory Location Accuracy Level of those locations is
under [*****]%, Customer may require Supplier to complete a full physical
inventory within [*****] days of notification. Said physical inventory will
be completed at Supplier’s expense which Customer may observe at its expense.
Customer may amend the stock control procedure to reflect the express
requirements of its auditors from time to time, or as reasonably required to
address any failure to meet the standards set forth in Section 7.2(h). All
adjustments of inventory records resulting from the cycle count shall be
reported by the Supplier to the Customer within [*****] days from month end.
	 
	 	(i)  	Permit Customer to carry out an audit of all Distribution
Components and all other materials owned by Customer in the custody of
Supplier at any time at Customer’s cost, provided that Customer (i) gives
Supplier at least two weeks advance notice; (ii) conducts the audit during
normal business hours; (iii) conducts any such audit without interference to
Supplier’s business operations; and (iv) conducts such an audit no more than
once per year. Supplier shall supply all documentation, logistical and
administrative support reasonably requested by Customer for such audit.
Notwithstanding the above, Customer shall be entitled to
make a visual inspection of the general storage conditions of the
Distribution Components at any time.
	 
	 	(j)  	To the extent consistent with Prevailing Practices, Supplier
shall at Customer’s request pay Customer its cost for, any Lost Inventory of
Customer-owned printed or other components in its possession exceeding
[*****]% per SKU of the amount of such inventory delivered to Supplier.
Notwithstanding the foregoing, for certain non-standard, high cost items (by
way of example, for purposes of clarity but without limitation, non-standard,
high cost items including multi-disc box sets and multi-disc booklets)
specified from time to time by Customer, Supplier shall pay for Lost Inventory
exceeding [*****]% per SKU of the amount of such

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	 	   	inventory delivered to
Supplier. In the event that Customer’s Distribution Components inventory is
damaged or unaccounted for, as presented through inventory adjustments or
physical inventory results, Supplier will reimburse Customer at the current
manufacturing price for all units greater than a net impact of [*****] units
annually.
	 
	 	(k)  	Supplier shall for all shipments, in and outside the
Territory, complete and provide all required custom documentation as
applicable from time to time, and include such documentation in shipments, if
required, so that no shipments are delayed by missing or erroneous required
paperwork.
	 
	 	(l)  	In addition to meeting the agreed lead times and cut off
times for shipment as described in Section 6.5 and Schedule 6.5, Supplier’s
obligation with respect to shipment includes loading the lorry and the
coordinating and interfacing with the Transportation Services vendors to
ensure that the terms agreed with such Transportation Services vendors
provides for delivery on the required delivery date and at the required times,
specified by Customer, per customer and/or country.
	 
	 	(m)  	Supplier will maintain the stock reservation and country
entitlement systems in effect as of the Effective Date, provided that the
Customer shall have the right to update and amend the provisions of each from
time to time on written notice to Supplier.
	 
	 	(n)  	At least twice per Working Day, provide Customer
electronically (a) on hand inventory balances by SKU and (b) receipts by SKU
from Customer’s vendors. To the extent that any Customer changes to any
Customer computer systems would cause Supplier to incur any significant
out-of-pocket costs in connection with adapting to, conforming to, custom
programming for, or otherwise interfacing with such systems in order to
facilitate the efficient
performance of its obligations under this Agreement, including without
limitation, this Section 7.2 (n), Supplier shall notify Customer of such
out-of-pocket costs and the reasons therefor, and Customer shall within a
reasonable time period approve such costs or work with Supplier to reduce
or eliminate such costs. Customer shall reimburse Supplier for all
approved costs chargeable to Customer pursuant to this Section 7.2(n).

	 	7.3  	Pick, Pack, Ship:

	 	(a)  	Supplier shall pick, pack and ship the Product and/or
Materials to Customer and/or Customer’s customers in fulfillment of the
Orders. [*****]. In the event that Customer requires the building

-13-

 

	 	  	of “pre-packs” and/or multi-packs and such tariffs are not included in Schedule
10.1, and such building results in incremental out of pocket costs to
Supplier, then the Parties shall negotiate in good faith fees applicable to
the building of such pre-packs or multi-packs and shall agree such fees prior
to Supplier undertaking any work.
	 
	 	(b)  	Supplier shall verify each shipment against the relevant
Order and shall prepare all necessary delivery and shipment documentation and
shall ensure that the labels on shipped parcels fulfill carrier requirements
in the most effective way.
	 
	 	(c)  	Supplier shall, no later than the [*****] Day, notify
Customer by exception report of any orders lines placed which are out of stock
at the relevant delivery deadline and if there is a discrepancy between actual
stock and book stock, Supplier shall notify Customer of such discrepancy as
soon as it becomes apparent. Supplier shall also notify Customer of any
circumstances which might reasonably lead to late deliveries as soon as it
becomes aware of such circumstances and shall act in accordance with
Customer’s reasonable instructions in such situations.
	 
	 	(d)  	Supplier shall be responsible for responding promptly to all
delivery inquiries from customers in connection with Orders for and shipments
of Product and/or Materials hereunder.
	 
	 	(e)  	Supplier shall ensure that the Product and/or Material is
shipped to Customer’s customers within the time periods set out in Schedule
6.5. Supplier shall load the lorries and coordinate and interface with the
Transportation Services vendors, including tracking and tracing activity to
track satisfaction of such vendors’ delivery obligations both within and
outside the Territory (to the extent the selected carriers provide such
service). Supplier shall respond to and manage any complaints made by
Customer’s customers in
relation to the Transportation Services and shall notify Customer of all
such complaints or similar issues. Each shipment of Product and/or
Materials hereunder shall be accompanied by Supplier’s dispatch note in a
form pre-approved by Customer and/or customs documents. Supplier shall be
responsible for obtaining or causing the freight carrier(s) to obtain the
customer’s signature on the carrier’s proof of delivery. The carrier’s
proof of delivery shall be held by Supplier for the longer of six (6)
years after delivery date or such period as is required by applicable laws
and regulations in each country of the Territory and Customer shall be
provided with originals if it so requests.

-14-

 

	 	(f)  	Product will be dispatched in parcels only with other Product
of Customer. Packaging will be of equivalent form and quality to that applied
to Product by Supplier immediately prior to the Effective Date and Supplier
shall not vary such packaging, including closure tape, without Customer’s
prior written approval.
	 
	 	(g)  	Supplier will, upon shipment of any Distribution Orders,
transmit an advance shipping notice (“ASN”) by electronic means to the
applicable customer (on Customer’s request) and to the applicable Universal
Music Group member, which ASN shall contain information as to the quantities
shipped (including reference numbers and dates), on an SKU-by-SKU basis, and
the contents of the individual palettes.

	 	7.4  	Invoicing and Credit Control:

	   	In relation to Direct Export distribution customers:

	 	(a)  	Supplier will, as agent for Customer, invoice customers in
connection with all shipments of Product and/or Materials hereunder and in
accordance with the instructions of Customer. The invoices will contain
[*****].
	 
	 	(b)  	Customer will perform an advance credit check of Direct
Export customers and advise Supplier of the approved credit line for each such
Direct Export customer. Supplier will perform such other credit control
functions as Customer will from time to time require of them to include
without limitation collection of accounts as and when they become due,
reconciliation of debtors’ accounts, maintenance of customer files and
debtors’ accounts, allocation of payments received and credit notes (via
autogiro, transfers from banks or such other method as from time to time
designated by Customer), mailing of monthly debtors’ statements, mailing of
dunning letters and interest invoices, and at Customer ‘s request and expense,
and subject in all respects to Customer ‘s prior written
approval, arranging legal action at Customer’s expense for collection of
overdue accounts. For the avoidance of doubt, both Parties agree that all
invoices for Products and/or Materials will be produced by the IT System
and will be quoted in Euros unless Customer explicitly requests an
alternative currency.
	 
	 	(c)  	In relation to NDU Distribution customers, Supplier will
perform all of the invoicing and credit control functions at the pricing set
forth in subsections [*****].
	 
	 	(d)  	Customer may, for any reason, at any time elect to perform
all or any portion of the invoicing and credit control functions set forth

-15-

 

	 	   	in this Section 7.4 itself. In the event Customer elects to perform such
functions itself, (a) Supplier will cease performing such functions as of the
effective date of such change, (b) Customer shall provide Supplier with
[*****] days written notice of its intention to implement this change, (c)
Customer shall reimburse Supplier,[*****] and (d) Supplier and Customer shall
agree to a reduction in the prices on Schedule 10.1 to equitably reflect the
corresponding decrease in Supplier’s ongoing costs. Supplier shall consult
with Customer prior to incurring any costs referred to in (c) above and shall
use its best endeavors to minimize any resulting cost to the Customer under
this Section 7.4(d).
	 
	 	(e)  	In relation to Retail Distribution customers, Supplier will
not invoice such customers, nor perform related credit control functions, but
instead will send, as soon as practicable, such Order shipment information to
the Universal Music Group company making the relevant Order sufficient for
such Universal Music Group company to carry out invoicing and credit
collection directly with the customer.

	 	7.5  	Cash Collection:

	 	(a)  	Supplier shall further be responsible for the collection of
monies payable by customers hereunder where an invoice is denominated “payment
on delivery”. Supplier or its designated carrier shall collect “cash on
delivery” payments on delivery of orders and Supplier shall submit such
payments to Customer within [*****] Day of Supplier’s receipt of such monies
from its carrier. Any late payment is subject to interest in accordance with
Section 10.3.1.
	 
	 	(b)  	Where invoices are to be paid on delivery, Customer shall
inform its customers that Supplier is authorized to collect checks made
payable only to Customer and crossed “account payee only” or its equivalent in
the Territory.

	 	7.6  	Intentionally deleted.
	 
	 	7.7  	Customer Care Helpline:

	   	Supplier shall provide a telephone support helpline, consistent with current Supplier
practices in place prior to the Effective Date, for all customers located in Germany. For
customers outside Germany but within the Territory, Supplier shall have a similar service
at least with respect to delivery information and delivery times. Such helplines shall be
available at a minimum between 9:00 a.m. to 6:00 p.m. (Hanover time) on Business Days, but
for the months of October to December inclusive in each year, everyday between the hours of
8:00 a.m. to 7:00 p.m. (Hanover time), and shall be staffed by trained, multi-lingual and

-16-

 

	   	knowledgeable personnel dedicated to customers. All relevant customers (including all
customers in Germany) shall be informed of the relevant helpline number and its hours of
operation. Such helpline will deal with queries concerning without limitation order
status, delivery times, invoicing and collection problems not taken care of by the Customer
itself.

	 	7.8  	Intentionally deleted.
	 
	 	7.9  	Supplier shall maintain the IT System and interfaces such that any Universal
Member Group company making Orders to Supplier shall have access to it at all times.
To the extent that any substantial Customer changes to the IT System or any other
Customer computer system would cause Supplier to incur any out of pocket costs
incremental to those applicable at the Effective Date in connection with adapting to,
conforming to, custom programming for, or otherwise interfacing with such systems in
order to facilitate the efficient performance of its obligations under this Agreement,
including without limitation, Section 6.1, 7.1(b) or (e), or this Section 7.9,
Supplier shall notify Customer of such costs before incurring them and if Customer
approves such expenditure, Customer shall reimburse Supplier for all such costs.
Should Customer not approve such expenditure Supplier shall not be in breach of its
obligations to maintain the IT System hereunder to the extent such breach results from
the lack of approved expenditure.
	 
	 	7.10.1  	Supplier will, at no additional charge, provide and maintain
certain reports and electronic data feeds on a country by country basis to the
extent available to Customer as of the Effective Date, including but not
limited to:
	 
	 	   	[*****]
	 
	 	   	Supplier will supply Customer with access to such information as Customer shall
reasonably require to [*****] Supplier will in coordination with Customer define a
series of reports within [*****] months of the
Effective Date to evaluate and control the service levels provided for under this
Agreement.
	 
	 	   	Supplier will provide such additional reports and electronic data feeds as Customer
shall reasonably require, and the parties shall mutually agree upon how additional
costs, if any are actually incurred by Supplier for any such reports or electronic
data feeds, will be shared or allocated.
	 
	 	7.10.2  	Supplier shall, also provide the following IT services:
	 
	 	   	[*****]
	 
	 	7.11  	Intentionally deleted.

-17-

 

	 	7.12  	Transportation Management Services:

	 	(a)  	Transport costs charged to Supplier in relation to
distribution of Product and Materials (“Transport Services”) shall be charged
to Customer [*****] and on the same payment terms as are provided by the
Transport Services provider to Supplier (“Transport Charges”). Supplier will
charge Customer the .[*****]. Customer will be invoiced by Supplier
separately for the Transport Charges on a country by country basis [*****] per
month at the end of Customer’s calendar month, provided that the transport
provider’s payment terms are no less that [*****] days. In any event and
payment terms for Transport Charges are such that Customer is obliged to pay
Supplier a minimum of [*****] days prior to the date Supplier must meet its
payment obligations to transport providers for Transport Charges.
	 
	 	(b)  	Supplier will supply Customer on request with copies of the
invoices relating to Transport Charges per carrier split on a country by
country basis at the time of their receipt by Supplier.
	 
	 	(c)  	Subject to Section 7.12(d), Supplier shall at Customer’s
written request negotiate and contract with transport providers in relation to
the distribution of product and will use its reasonable endeavors to ensure
that the net Transport Charges will be at the lowest levels practicable given
the volume and make-up of dispatched product and to consolidate manufacturing
and distribution shipments where practicable.
	 
	 	(d)  	Shipments of Product and Universal Materials shall be made by
carrier(s) pre-approved by Customer on a country by country basis, provided,
however, that Customer shall have the right, in its sole discretion, to
designate an alternative carrier in the event of Customer’s dissatisfaction
with any carrier’s services. Customer and Supplier shall consult in relation
to all agreements with
transport providers for distribution of Product and/or Materials, provided
that Customer has absolute discretion to approve all material terms of
such agreements. Supplier is acting as Customer’s agent in connection
with all agreements, arrangements and dealings with such transport
providers.

	 	7.13  	Except as otherwise expressly set forth herein, the prices set out in
Schedule 10.1 include, without limitation, compensation for the following items
rendered by Supplier pursuant to this Agreement:
	 
	 	   	[*****]

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	 	7.14  	Supplier will receive and process specific Customer shipping instructions
that are directed to Supplier’s DJ Promo Department. Supplier will store the
equivalent volume of DJ Promo Input Materials on hand [*****] months prior to the
Effective Date at [*****] additional cost to the Customer. If the volume of the DJ
Promo Input Materials increases above this volume, Supplier will either continue to
store the materials at a monthly fee as noted in Schedule 10.1, destroy the materials
or ship them to a Customer-designated location via a Customer-designated carrier, as
directed by Customer. Customer is responsible for any carrier fees associated with
DJ Promo distribution services.
	 
	 	7.15  	Returns Processing:

	 	(a)  	Supplier will process returns of Products in accordance with
this Section 7.15.
	 
	 	(b)  	To the extent consistent with Prevailing Practices, Supplier
shall accept all returns of Products except those which Customer expressly
instructs Supplier not to accept. Customer Pre-Authorized Return Products
will be processed in a manner such that an electronic file is made available
to Customer within [*****] Days of receipt of returned Products save for in
the period 20th December to March 31st in which period
the electronic file may be made available to Customer within [*****] Working
Days of receipt of returned Products. Said electronic file shall contain at a
minimum the information provided by the current Supplier return processing
system (i.e., prior to the Effective Date), including but not limited to:
customer number, customer’s reference number, selection number returned,
quantity returned per selection number and any other information Customer
requires to adequately process any credit note.
	 
	 	(c)  	In the event that a return is not a Customer Pre-Authorized
Return Product, Supplier shall (i) notify Customer immediately (within the
same day) of such fact as set forth in subsection (b) above, (ii)
move such Product into a “clearance zone” in the Distribution Center, and
follow Customer’s reasonable instructions as to the disposition of such
Products. Once Customer has given its instructions Supplier will process
the returns in accordance with (b) above or Customer’s other instructions.
	 
	 	(d)  	In processing returns, Supplier shall follow Customer’s
returns policy as it existed immediately prior to the Effective Date, which
may differ on a country-by-country or customer basis. Customer may, from time
to time, and with reasonable advance notice, alter such policy, provided,
however, that to the extent any such

-19-

 

	 	   	changes cause Supplier to incur any
incremental out-of-pocket costs, Customer shall bear such costs.
	 
	 	(e)  	To the extent consistent with Prevailing Practices,
Customer’s policy shall clearly indicate, per country and/or customer, which
returned Products must be scrapped, put back into its shippable inventory,
have to be reworked before being put back into stock, or be sold as special
sales. Returned Products which are to be reworked shall be reworked and
available to return to shippable inventory within [*****] Working Days after
Customer’s indication of such disposition. If reworking or repackaging is
required the other pricing provisions of this Agreement shall apply.
	 
	 	(f)  	Customer may at any time request Supplier to prioritize
returns of certain individual customers or certain Products to make them
available for shipping and/or customer returns more quickly than other
returned Product and Supplier, subject to its capacity, shall prioritize such
processing.
	 
	 	(g)  	Customer may at any time request Supplier to delay the
returns processing, in which event no such delays shall be a breach of the
time parameters set forth in this Section 7.15.
	 
	 	(h)  	To the extent consistent with Prevailing Practices, Returns
of overstocks from NDU Distribution will be booked on as available shippable
inventory within [*****] after receipt, provided the returned Products are
returned [*****] do not need any reworking and are notified to Supplier by ASN
[*****] day before their receipt. These overstock returns are processed
[*****] to Customer. If reworking or repackaging is required the other pricing
provisions of this Agreement shall apply.

	 	7.16  	Planning:

	 	(a)  	Supplier will carry out Product stock planning in accordance
with Schedule 7.16 (“Stock Planning”). Should the Customer order
Product itself (as opposed to the Supplier ordering Product on the
Customer’s behalf) and therefore defines the order quantity itself, such
quantity will prevail over any quantity resulting from the process
described in Schedule 7.16. The orders referred to in this clause are
orders for Finished Product.
	 
	 	(b)  	Customer may, for any reasonable business purpose of
Customer, at any time elect to carry out Stock Planning itself. In the event
Customer elects to do so, (a) Customer shall provide Supplier with [*****]
days written notice of its intention to implement such change, (b) Customer
shall reimburse Supplier for [*****] and (c)

-20-

 

	 	   	Supplier and Customer shall agree
to an equitable adjustment in the prices on Schedule 10.1 to reflect the
corresponding decrease in Supplier’s ongoing costs. Supplier shall consult
with Customer prior to incurring any costs referred to in (b) above and shall
use commercially reasonable efforts to minimize any resulting cost to the
Customer under this Section 7.16 (a).

	 	7.17  	Claims Administration. Customer’s customers may report freight
damage or undelivered product to Customer. The following process will be used by
Customer and Supplier to resolve these freight claims, and Supplier will act as
described in 7.17.3 through 7.17.5.

	 	7.17.1  	Customer will submit detailed claim reports to Supplier within [*****] of
original date of shipments. Information provided will be in a form to be
agreed to by the Customer and Supplier.
	 
	 	7.17.2  	Supplier will make normal and customary attempts to collect claims payments
from carriers. However, Supplier will not be liable for any claim in part or
in whole that is not approved by the carrier.
	 
	 	7.17.3  	All proceeds collected in settlement of Customer’s reported claims will be
paid to Customer within [*****] days of receipt by Supplier.
	 
	 	7.17.4  	Supplier will provide Customer with documentation as to the cause regarding
any claim that is denied or not paid in full.

	8.0  	Shipping Quality:

	 	8.1  	Supplier will prepare Product and Material for shipping in a manner
consistent with the current Supplier practices prior to the Effective Date to minimize
damage during transport, and otherwise conform with the quality standards as required
by the applicable Transport Service provider.
	 
	 	8.2  	To the extent consistent with Prevailing Practices, Supplier will perform a
weight control on all packages before tendering and a random check on [*****]% of all
packages before tendering and will maintain an order line accuracy level of [*****]%
or greater. If the line item inspected has the correct item and quantity, it will be
measured as accurate. Supplier will provide Customer with monthly results of these
inspections. If accuracy falls below [*****]%, Customer at its sole reasonable
discretion may require Supplier to increase the quantity of shipments and lines
inspected. Customer shall have the right to require Supplier to perform an
inspections for accuracy on [*****] of the deliveries to specific customers over a
period of time, provided that inaccuracies identified as a result shall be excluded
for KPI calculations.

	9.0  	Key Failures:

-21-

 

	 	9.1  	A “Key Failure” is an occurrence of any of the events identified as a “KPI
Repeated Failure Event” on Schedule 9.1 of this Agreement. As soon as it becomes
aware of a Key Failure, Customer or Supplier shall notify the other of the Key
Failure, specifying the nature of the Key Failure and the data sources used to
identify such Key Failure (each such notice is a “Failure Notice”).
	 
	 	9.2  	Any Key Failure which is not cured in accordance with this Section 9.2 is an
“Uncured Key Failure,” provided that Customer has provided Supplier (or Supplier has
provided Customer) with an associated Failure Notice within [*****] days of the Key
Failure. A Key Failure which is cured under this Section 9.2 shall not relieve
Supplier of any other remedies to which Customer may be entitled under this Agreement.
In order to cure a Key Failure, Supplier must do each of the following:

	 	9.2.1  	Within seven calendar days of receipt of a Failure Notice
identifying such Key Failure from Customer, or delivery of a Failure Notice by
Supplier, after consultation with Customer, provide to Customer a detailed,
written correction action plan (“CAP”), with defined and traceable milestones,
metrics and timelines which address the causes of the Key Failure and
describes how Supplier will monitor and manage the relevant business
practices/processes to ensure that the causes of the Key Failure are
successfully addressed;
	 
	 	9.2.2  	During the six-week period following the date of Supplier’s
receipt or sending of the Failure Notice (the “Cure Period”), on each Tuesday,
provide Customer with a written report describing the progress on the CAP and
any Key Failures during the
preceding Work Week (ending on the immediately preceding Saturday); and
	 
	 	9.2.3  	By the end of the Cure Period, successfully address the
causes of the Key Failure, and provide Customer with a written report of the
relevant business practices/process implemented.

	 	9.3  	The effects of Key Failures and Uncured Key Failures shall be as follows:

	 	9.3.1  	On the first Uncured Key Failure with respect to which
Supplier has received or delivered a Failure Notice during any [*****]-year
period, Customer shall have the right, as Supplier’s sole liability and as
Customer’s sole remedy for such Key Failure(s), to either (a) source up to
[*****]% of its DOAs and/or at the option of the Customer up to [*****]% of
the manufacturing services for the SKUs whose DOAs are outsourced (such
combination of DOA and manufacturing services as elected by Customer, the
“Elected Services”) with any other entity or

-22-

 

	 	   	entities for a period of [*****]
months, or (b) receive from Supplier liquidated damages in the amount of
[*****] payable in the form of a monthly credit towards Customer’s accounts
payable to Supplier in the amount of [*****].
	 
	 	9.3.2  	On the second Uncured Key Failure with respect to which
Supplier has received or delivered a Failure Notice during any [*****]-year
period, Customer shall have the right, as Supplier’s sole liability and as
Customer’s sole remedy for such Key Failure(s), to either (a) source up to
[*****]% of its Elected Services with any other entity or entities for a
period of [*****] months, or for an additional [*****]-month period in the
event that Customer is then-currently exercising a prior sourcing right under
any subsection of Section 9.3, or (b) receive from Supplier liquidated damages
in the amount of [*****] payable in the form of a monthly credit towards
Customer’s accounts payable to Supplier in the amount of [*****].
	 
	 	9.3.3  	Notwithstanding Section 9.3.2, if two Key Failures under “On
Time Tendering” on Schedule 9.1 with respect to which Supplier has received or
delivered a Failure Notice occur between September 15th and December 31st of
the same calendar year, and whether cured or not, Customer shall have the
right, as Supplier’s sole liability and as Customer’s sole remedy for such Key
Failure(s), to either (a) source up to [*****]% of its Elected Services with
any other entity or entities for a period of [*****] months, or for an
additional [*****] month period in the event that Customer is then currently
exercising a prior sourcing right under any sub-section of Section 9.3, or (b)
receive from Supplier
liquidated damages in the amount of [*****]Euros payable in the form of a
monthly credit towards Customer’s accounts payable to Supplier in the
amount of [*****].
	 
	 	9.3.4  	If three Key Failures of the same category (e.g., Picking
Accuracy) with respect to which Supplier has received or delivered a Failure
Notice occur during any rolling [*****]-year period, whether cured or not,
Customer shall have the right, as Supplier’s sole liability and as Customer’s
sole remedy for such Key Failure(s), to either (a) source up to [*****]% of
the DOAs with any other entity or entities for the remainder of the Term, or
(b) terminate this Agreement, or (c) receive from Supplier liquidated damages
in the amount of [*****] Euros payable in the form of a monthly credit towards
Customer’s accounts payable to Supplier in the amount of [*****].
	 
	 	9.3.5  	On the fourth Key Failure with respect to which Supplier has
received or delivered a Failure Notice during any rolling [*****]

-23-

 

	 	   	year period,
whether cured or not, Customer shall have the right, as Supplier’s sole
liability and as Customer’s sole remedy for such Key Failure(s), to either (a)
source up to [*****]% of the DOAs with any other entity or entities for a
period of [*****] months, or for an additional [*****]-month period in the
event that Customer is then current exercising a prior sourcing right under
any sub-section of this Section 9.3, (b) terminate this Agreement, or (c)
receive from Supplier liquidated damages in the amount of [*****] Euros
payable in the form of a monthly credit towards Customer’s accounts payable to
Supplier in the amount of.[*****].
	 
	 	9.3.6  	On the fifth key failure with respect to which Supplier has
received or delivered a Failure Notice during any rolling [*****] year period,
whether cured or not, Customer shall have the right, as Supplier’s sole
liability and as Customer’s sole remedy for such Key Failure(s), to either (a)
source up to [*****] of the DOAs with any other entity or entities for the
remainder of the Term, (b) terminate this Agreement, or (c) receive from
Supplier liquidated damages in the amount of [*****] Euros payable in the form
of a monthly credit towards Customer’s accounts payable to Supplier in the
amount of [*****].
	 
	 	9.3.7  	For purposes of clarity, the parties agree that where the
provisions of more than one sub-section of Section 9.3 would provide Customer
with a remedy with respect to any new Key event, Customer may elect only one
of such remedies. In addition, to the extent that an event that would
constitute a Key Failure under “Picking Accuracy” on Section 9.1 is uncured
and continuing during the applicable Cure Period, such event may not
constitute another Key Failure until the end of the applicable Cure
Period in accordance with Section 9.2.
	 
	 	9.3.8  	Customer’s right to invoke any remedy available to Customer
under the provisions of any sub-section of Section 9.3 shall be exercised, if
at all, in writing and within [*****] days after the date upon which such
right first accrues to Customer (e.g., at the end of the cure period or on the
occurrence of a Key Failure and receipt of a Failure Notice, as applicable),
and any period of loss of exclusive volume under any sub-section of Section
9.3 shall commence upon such date, except in the case where a period of loss
of exclusive volume under any sub-section of this Section 9.3 is currently
running, in which case the new period shall commence upon the expiration of
the current period.
	 
	 	9.3.9  	In the event that Customer exercises any right to source any
volumes with third parties under any sub-section of this Section

-24-

 

	 	   	9.3, Customer
shall provide Supplier with timely notice of such third-party sourcing, and
Supplier’s capacity commitments under this Agreement shall be reduced by the
amount of such third-party sourcing. Upon the conclusion of any period in
which Customer has elected to outsource exclusive volume pursuant to Sections
9.3.1 through 9.3.6, such exclusive volume shall automatically revert to
Supplier. If Customer elects to source [*****] of the Manufacturing Services
with another entity or entities for the remainder of the Term under Section
9.3.4 or Section 9.3.6, Supplier shall be relieved of its capacity and similar
commitments under this Agreement for the remainder of the Term.

	 	9.4  	Notwithstanding any other provision of this Agreement, any failure of
Supplier to perform any of its obligations under this Agreement shall not be
considered a default, breach, Key Failure or Uncured Key Failure to the extent that
such failure is caused by (a) any Customer breach of, or noncompliance with this
Agreement; (b) the failure of Customer to timely provide any required consents,
approvals, instructions or assistance; or (c) any Customer Affiliate breach of, or
noncompliance with, either the Transition Services Agreements, the International
Manufacturing Agreement, the Share Purchase Agreement or the Lease Agreement.

	10.0  	Pricing:

	 	10.1  	Base Pricing:

	 	10.1.1  	Schedule 10.1 contains the prices for DOAs. These prices are fixed through
the Term, with the exception(s) described in this Agreement, including
pursuant to Sections 10.5 and 10.6. The Parties agree that Supplier will not
charge, and Customer will not pay for, any service or activity that is not
listed on Schedule 10.1 or elsewhere referenced, excluding prices for
Transportation Services which are described in Section 10.2 or included in
this Agreement unless Customer has approved such services and charges in
writing. The prices in Schedule 10.1 and elsewhere in this Agreement are
exclusive of any applicable VAT or sales tax, which shall be stated separately
on each invoice at the applicable rate and shall be payable by Customer to
Supplier at the same time each such invoice is payable. All prices and other
amounts hereunder are to be charged and paid in Euros unless expressly stated
otherwise herein or as otherwise agreed in writing by the Parties.

	 	10.2  	Intentionally deleted.

-25-

 

	 	10.3  	Supplier may invoice Customer [*****]. Such invoices shall reflect the
prices contemplated by Section 10.1, or as may be agreed upon by the Parties or
determined pursuant to this Agreement. Each Customer invoice shall identify all
modular charges from Schedule 10.1 and any additional charges agreed upon by the
Parties which are applied to the DOAs and shall apportion such charges on a
country-by-country basis.

	 	10.3.1  	Customer shall pay interest on any amounts (excluding those disputed in good
faith, including without limitation, where the late payment is the result of
Supplier’s action or inaction, e.g. Supplier’s warehouse receipt does not
match Supplier’s invoice) past due under this Agreement at a monthly rate
equal to the lesser of (a) the London Interbank Offered Rate (“LIBOR”)
+ 0.5% or (b) the maximum rate permitted by law.
	 
	 	10.3.2  	If Customer becomes delinquent in the payment of any amount (excluding
amounts disputed in good faith) in excess of ,[*****] Supplier shall have the
right to suspend some or all shipments hereunder pending such payment, and any
such failure to make shipments will not be a default, breach, Key Failure or
Uncured Key Failure under this Agreement and will not entitle Customer to
terminate this Agreement or to any other damages or remedy.
	 
	 	10.3.3  	In the case of a disputed invoice, Customer will pay the undisputed amount
of the invoice and Customer and Supplier will work together in good faith to
resolve the disputed amount. In the event an agreement cannot be reached on
the disputed amount within [*****] days of the invoice due date, either
Supplier or
Customer may submit the matter to arbitration as provided in Article 14.0
“Dispute Resolution” to resolve the disputed amount, but without the need
for or right to preliminary discussions provided for in Article 14.0.
Upon resolution of the dispute, Customer will pay the Supplier the
amount, if any, determined to be due to Supplier.
	 
	 	10.3.4  	All prices will be Free Carrier (FCA) International Chamber of Commerce
(ICC) International Commercial Terms (INCOTERMS 2000) from Supplier’s
distribution location. However, if Product is sourced from a manufacturing or
distribution location that results in a higher transportation cost than if
produced or stored at the Hanover location, Supplier will issue a credit to
Customer equal to the additional costs to deliver the product to the
Distribution Center.

	 	10.4  	Intentionally deleted

-26-

 

	 	10.5  	In the event a DOA which is not listed on Schedule 10.1 is required by
Customer or any Universal Music Group member, the following procedure will be followed
by Customer and Supplier to establish a price for said DOAs.

	 	10.5.1  	Customer will request the DOA from Supplier in writing.
	 
	 	10.5.2  	Supplier will propose a price equal to its [*****].
	 
	 	10.5.3  	Customer may accept or reject Supplier’s proposed price.
	 
	 	10.5.4  	In the event Customer accepts Supplier’s proposed price, such DOA and
associated price shall be added to Schedule 10.1.
	 
	 	10.5.5  	In the event Customer rejects Supplier’s proposed price, Customer
may [*****]. All such information constitutes confidential information of
Supplier.
	 
	 	10.5.6  	An audit may include a [*****]. All such information constitutes
confidential information of Supplier.
	 
	 	10.5.7  	“Market Pricing Information” means the individual prices for each new DOA
obtained within [*****] days before the submission of the Market Pricing
Information from [*****] Qualified Distributors, based on substantially
equivalent volume of Customer’s volume in the previous [*****] months and in
relation to order lot sizes and lead times similar to Customer’s.
	 
	 	10.5.8  	Supplier shall have [*****] days after receipt of the Market Pricing
Information to object to such Market Pricing Information,
provided the only grounds for such objection can be that the Proposed
Prices do not meet [*****]. If Supplier makes such an objection, the
matter shall be subject to arbitration as set forth in Section 10.5.11
below and Section 23.
	 
	 	10.5.9  	Following either the audit and/or the submission of the Market Pricing
Information, the Parties will meet and engage in good faith negotiations to
agree on the proposed price, provided that in no event may the price for the
new DOA exceed the Average Market Price.
	 
	 	10.5.10  	“Average Market Price” for each new DOA means the average of each Qualified
Distributor’s price, as included in the Market Pricing Information.
	 
	 	10.5.11  	In the event an agreement cannot be reached on the proposed price within
[*****] days of Supplier’s proposal of a price, either Supplier or Customer
may invoke Article 14.0 “Dispute

-27-

 

	 	   	Resolution” to determine the price for the
DOA not contained in Schedule 10.1, provided that solely for purposes of
resolving a dispute under this Section 10.5, the procedures set forth in
Section 14.0 shall not be used and the following shall apply (A) there shall
be one arbitrator only who shall be a Certified Public accountant (or
equivalent) based in London, England and then in practice at a recognized
public accounting firm which firm shall be selected by the Parties mutually,
and which shall be asked to name the person so to act; (B) there shall be no
discovery, (C) each Party shall submit, on the [*****] business day after the
arbitrator is named, its proposed price and any support it has for the price
as proposed (including, e.g., any documentation submitted under Sections
10.5.2 and 10.5.5 and the results of any audit under Section 10.5.5), and (D)
the arbitrator shall determine, within [*****] business days of the
submissions under clause (C) the price which is the lower of that resulting
from the formula set forth in Section 10.5.2 as audited pursuant to Sections
10.5.5 and 10.5.6 and the Average Market Price. Once such price is
determined, such DOA and associated price shall be added to Schedule 10.1.
	 
	 	10.5.12  	The price of a new DOA, whether determined at arbitration or by agreement
pursuant to this Section shall be effective as of the date the Supplier
provided the new DOA.

	 	10.6  	The Parties agree and understand that subsequent to the Effective Date, but
within the Term, Customer may have access to DOA volumes other than for Universal
Music Group Distribution Requirements for distribution in the Territory, including
volumes (a) from non-Universal Music Group
companies or labels with which it currently has no written agreements; and (b) from
a party who becomes a Universal Music Group member by acquisition after the
Effective Date to the extent and for the period that such party’s volumes are
contractually committed to the third party as of the date of signing of the
relevant acquisition agreement. All and any such DOAs, to the extent for
distribution in the Territory, will be hereafter referred to as “Incremental
Volumes”.
	 
	 	   	On each occasion on which Customer gains access to any Incremental Volumes which
would, if controlled by Customer, be required to be fulfilled through Supplier
(i.e., DOAs to be performed within the Territory), Customer shall notify Supplier
of the volumes and service requirements (including those which may be country or
deal-specific, e.g., landed lead-times), and any other relevant information related
to such Incremental Volume necessary for Supplier to prepare a proposal to supply
such Incremental Volume to Customer (each such notice, an “Incremental Volume
Offer”). Notwithstanding anything to the contrary in this Agreement, however,
Customer shall not be required to offer any

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	 	   	DOA Incremental Volumes unless (i) the
DOAs are to be performed within the Territory (e.g. P&D Agreements requiring
Distribution Services outside the Territory are not required to be notified by
Customer to Supplier), and (ii) Customer can also offer Supplier the associated
manufacturing as “Incremental Volume” under the International Manufacturing
Agreement. Within [*****] days of its receipt of an Incremental Volume Offer,
Supplier must advise Customer of its interest in supplying such Incremental Volume
which is the subject of the Incremental Volume Offer, and set forth in such
acceptance its proposal all the necessary terms for such acceptance, which shall
include all the terms set forth in the Incremental Volume Offer (each such
acceptance, the “Supplier Incremental Volume Proposal”). Supplier’s decision not
to submit, or its failure to provide a Supplier Incremental Volume Proposal within
the [*****] days, shall mean that, notwithstanding Section 4.1, Customer may take
the Incremental Volume subject to the Incremental Volume Offer to any entity.
Notwithstanding the foregoing, Supplier must advise Customer within [*****] Days of
its interest in supplying Incremental Volume for Special Projects.
	 
	 	   	[*****]
	 
	 	10.7  	Intentionally deleted
	 
	 	10.8  	Intentionally deleted
	 
	 	10.9  	Either Party shall have the right to dispute the accuracy of the Aggregate
2003 Distribution Costs, as a whole, or the Allocated 2003 Distribution Costs, on a
line item basis, as follows:

	 	10.9.1  	Either Party may notify the other Party of an error or omission in the
Aggregate 2003 Distribution Costs or any Allocated 2003 Distribution Costs in
writing within [*****] months of the Effective Date and request an adjustment
of the Aggregate 2003 Distribution Costs and/or any Allocated Distribution
Costs, either up or down, as required to accurately reflect the Euro amount of
such error(s) or omission(s) (any such requested adjustments, the
“Requested Cost Adjustment”). A requested Cost Adjustment may only be
requested to the extent it relates to a variance in costs at the Supplier’s
Hanover facility in 2003.
	 
	 	10.9.2  	Within [*****] days of receiving notification of a Requested Cost
Adjustment, Customer and Supplier will meet and conduct good faith
negotiations and attempt to reach agreement on whether such adjustments are
appropriate and in the correct amount. Either Party may audit the other’s
books, records and supporting documentation supporting the calculation of the
data in, or the data used in preparing, Schedule 10.1 and the

-29-

 

	 	   	Requested Cost
Adjustment. Such audits shall be performed with reasonable advance written
notice, during normal business hours, and in a manner not disruptive of the
audited Party’s operations. Once a Requested Cost Adjustment has been agreed
or determined hereunder (the “Final Cost Adjustment”), the Aggregate 2003
Distribution Costs and the Allocated 2003 Distribution Costs shall be modified
as follows:
	 
	 	10.9.3  	If the dispute involves an error in the allocation of the Allocated 2003
Distribution Costs, the Final Cost Adjustment shall be added to or subtracted
from the existing cost allocation for any and each disputed line item which
contains the cost item and the amount of the Final Cost Adjustment shall be
offset by a subtraction (in the case of an addition above) or addition (in the
case of a subtraction above) for one or more other cost items in the relevant
line items in which such other cost items are contained such that, had the
adjusted costs been used to calculate the Aggregate 2003 Distribution Costs,
based on the 2003 Distribution Mix, the Aggregate 2003 Distribution Costs
would not have changed.
	 
	 	10.9.4  	If the dispute involves increasing or adding a cost item or amount to the
Aggregate 2003 Distribution Costs, the Final Cost Adjustment for such cost
item shall be added to the Aggregate 2003 Distribution Costs, and to the
relevant line items of the Allocated 2003 Distribution Costs such that, had
the adjusted costs been used to calculate the Aggregate 2003 Distribution
Costs, based on the 2003 Distribution Mix, the Aggregate 2003
Distribution Costs would have increased by the amount of the Final Cost
Adjustment.
	 
	 	10.9.5  	If the dispute involves reducing or removing a cost item or amount from the
Aggregate 2003 Distribution Costs, the Final Cost Adjustment for such cost
item shall be subtracted from the Aggregate 2003 Distribution Costs, and from
the relevant line items of the Allocated 2003 Distribution Costs such that,
had the adjusted costs been used to calculate the Aggregate 2003 Distribution
Costs, based on the 2003 Distribution Mix, the Aggregate 2003 Distribution
Costs would have decreased by the amount of the Final Cost Adjustment.
	 
	 	10.9.6  	Once a Final Cost Adjustment has been made to the Allocated 2003
Distribution Costs as described in Section 10.9.2, the Parties shall adjust
the prices [*****] shown on Schedule 10.1 to take into account the adjustments
described in Sections 10.9.2.1 through 10.9.2.3. In the event an agreement
cannot be reached on any cost changes or any changes in Schedule 10.1 within

-30-

 

	 	   	[*****] weeks of the commencement of negotiations under Section 10.9.2, either
Party may invoke Section 14.0 (Dispute Resolution) to determine the
appropriate Schedule 10.1 prices, provided that solely for purposes of
resolving disputes under this Section 10.9, Section 14.0 procedures shall not
apply and the following shall apply: (A) there shall be one arbitrator only
who shall be a certified public accountant (or equivalent) based in London,
England and then in practice at a recognized public accounting firm selected
by the Parties mutually, and the firm shall nominate such person to be the
arbitrator, (B) there shall be no discovery (other than that which has
occurred pursuant to Section 10.9.2), (C) each Party shall submit, on the
tenth business day after the arbitrator is named, its proposal on price
adjustments and any support it has for its position (including, e.g., any
documentation submitted under Section 10.9.1 and the results of any audit
under Section 10.9.2), and the arbitrator shall make a determination, within
10 days of such submissions, of how the prices on Schedule 10.1 shall be
adjusted, provided that such determination must comply with the parameters set
forth in this Section 10.9. If the Parties fail to invoke the arbitration
provision, the prices on Schedule 10.1 shall remain unadjusted, and if one
Party fails to submit its proposal timely to the named arbitrator, the
arbitrator shall accept the other Party’s proposal, provided such proposal
meets the parameters set forth in this Section 10.9. Once the prices for all
DOAs are agreed or determined pursuant to this Section 10.9, such new prices
shall be deemed to amend Schedule 10.1 accordingly, and shall be applied both
retroactively (to the Effective Date) and
prospectively, and all amounts owing from one Party to the other as a
result of such adjustment shall be paid within [*****] days of the final
determination of the changes in such prices.
	 
	 	10.9.7  	Recourse to the procedures and remedies set forth in this Section 10.9 shall
be Customer’s sole liability, and Supplier’s sole remedy, in the event of a
breach by Customer of its representation and warranty in Section 12.2(D).

	 	10.10  	Supplier will use its reasonable endeavors to obtain the lowest and best net
price from any third party providers of products and services required under this
Agreement, including transport services and hand packing, refurbishment and other
non-automated services and the cost of any such services shall be charged by Supplier
to Customer at cost. Capacity and resource permitting, Supplier shall undertake
non-automated DOA’s performed for Customer in-house and shall perform such activities
for Customer in-house in priority to any third party customer.

	11.0  	Intentionally deleted.

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	12.0  	Representations of the Parties:

	 	12.1  	Representations of Supplier: As of the Effective Date, and at all
times during the Term, Supplier represents and warrants as follows:

	 	(a)  	Supplier is a valid existing private limited liability stock
company (GmbH) and in good standing under the laws of Germany. Supplier has
the corporate power and authority required to carry on its activities as they
are now conducted.
	 
	 	(b)  	Supplier has full legal right and corporate power, without
the consent of any other person to execute, deliver and to perform its
obligations under this Agreement.
	 
	 	(c)  	All corporate and other actions required to be taken by
Supplier to authorize the execution, delivery and performance of this
Agreement and all transactions contemplated hereby have been duly and properly
taken. No consent, approval or authorization of, or filing of any
certificate, notice application, report or other document with any
governmental authority is required on the part of Supplier in connection with
the valid execution and delivery of this Agreement or the performance by
Supplier of any of its obligations hereunder.

	 	12.2  	Representations of Customer: As of the Effective Date, and at all
times during the Term, Customer represents and warrants as follows:

	 	(a)  	It is a valid existing limited liability stock company and in
good standing under the laws of the Netherlands. It has the corporate power
and authority required to carry on its activities as they are now conducted.
	 
	 	(b)  	It has full legal right and corporate power, without the
consent of any other person to execute, deliver and to perform its obligations
under this Agreement.
	 
	 	(c)  	All corporate and other actions required to be taken by it to
authorize the execution, delivery and performance of this Agreement and all
transactions contemplated hereby have been duly and properly taken. No
consent, approval or authorization of, or filing of any certificate, notice
application, report or other document with any governmental authority is
required on the part of it in connection with its valid execution and delivery
of this Agreement or the performance by it of any of its obligations
hereunder.
	 
	 	(d)  	The Aggregate 2003 Distribution Costs accurately reflect
Supplier’s actual, recurring, aggregate stand-alone cost of

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	 	   	providing the DOAs
for total Supplier distribution volume in 2003 (“Total Volume”), after certain
adjustments mutually agreed upon by Customer and Supplier, as set forth on
Schedule 12.2(d).
	 
	 	(e)  	The Allocated 2003 Distribution Costs accurately reflects the
allocation of the Aggregate 2003 Distribution Costs allocated over the DOA’s
for the Total Volume as set forth in Schedule 12.2(e).
	 
	 	(f)  	Customer has the right to authorize Supplier to perform the
Distribution Services on Customer’s and the Universal Music Group’s behalf
(including, without limitation, the purchase of materials and components on
behalf of Customer and the Universal Music Group).

	 	12.3  	Warranty Disclaimers:

EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, ALL WARRANTIES AND CONDITIONS,
WHETHER EXPRESS OR IMPLIED BY STATUTE, COMMON LAW OR OTHERWISE (INCLUDING, BUT NOT
LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
NON-INFRINGEMENT) ARE HEREBY EXCLUDED.

	13.0  	Termination:

	 	13.1  	This Agreement may be terminated:

	 	(a)  	By mutual written consent of the Parties at any time;
	 
	 	(b)  	By Customer pursuant to Section 9.3.4 or Section 9.3.6;
	 
	 	(c)  	In the event there is a Change of Control during the Term,
notwithstanding any other provision of this Agreement, Customer may terminate
this Agreement upon 90 calendar days written notice to Supplier, which notice
may only be served in the period from such Change of Control to three months
of Supplier’s written notice to Customer of such Change of Control;
	 
	 	(d)  	By Customer in the event Supplier is adjudged insolvent,
makes a general assignment for the benefit of its creditors, or files a
petition for relief under applicable bankruptcy or insolvency law; or a
receiver is appointed on account of Supplier’s insolvency; or
	 
	 	(e)  	By Customer, if Supplier has materially breached its
obligations under any of Sections 5.5 or 5.7, without cure (after written
notice by Customer and opportunity to do so) of such breaches, [*****] or more
times in any [*****] month period; provided that with respect to 5.7 Supplier
shall have [*****] Days to cure such

-33-

 

	 	  	breaches. For the purposes of this
Section 13.1(e), “cure” shall mean undertaking the same cure process as is set
forth in Sections 9.2.1 through 9.2.3 for Key Failures. For purposes of this
Section 13.1(e) “material breach” shall mean that such breach resulted in a
material loss to Customer or UMG.
	 
	 	(f)  	By Customer, if Supplier has materially breached its
obligations under Section 18 (with respect to assignment to a Competitor),
without cure (after written notice by Customer and reasonable opportunity to
do so) of such breaches.

	 	13.2  	Effect of Manufacturing Agreement Termination:

In the event that the International Manufacturing Agreement is terminated by
Customer during the Term due to Supplier’s breach, Customer shall have the right to
terminate this Agreement unless Supplier agrees, and does, reimburse Customer for
any additional costs incurred by virtue of the separation of Supplier’s
manufacturing facilities and its Distribution Center.
	 
	 	13.3  	Upon any termination or expiration of this Agreement, all of the provisions
of this Agreement will terminate, except for the following provisions, which will
survive in perpetuity: Sections 13.2, 13.3, 14.0,
15.0, 20.0, 21.0, 24.0 and 31.0. No termination or expiration of this Agreement
will relieve Customer or Supplier of any payment obligations outstanding at the
time of such termination or expiration.
	 
	 	13.4  	At the expiration of the Term or upon earlier termination, Customer will be
entitled to repossess all of its property, including finished goods and packaging
components provided (or paid for) by it to Supplier over the Term. Supplier will pack
such property appropriately and make it available for pick up by Customer with a clear
dispatch and content note per shipment in agreement with Customer. Customer commits
to take back such property within 120 days after the expiration of the Term or earlier
termination. In the event of termination as a result of Supplier’s breach, Supplier
shall bear any packaging, retrieval or storage costs incurred by Supplier for this
service during this period. In the event of any other expiration or termination,
Supplier shall notify Customer of all such costs prior to incurring them, and Customer
and Supplier shall split all such costs equally.

	14.0  	Dispute Resolution:
	 
	   	During the pendency of any dispute, this Agreement shall continue to be in force and the
Parties shall abide by all terms of this Agreement. Any dispute concerning the
interpretation of this Agreement or any Party’s performance under any provision of this
Agreement shall be discussed by the Parties, and if the

-34-

 

	   	Parties are unable to reach
agreement concerning such matter, the dispute shall be settled by arbitration in London by
three arbitrators (the “Arbitral Tribunal”) appointed in accordance with the UNCITRAL
Arbitration Rules (the “UNCITRAL Rules”) in force at the time of commencement of the
arbitration. The language of the arbitration shall be English. The number of arbitrators
selected shall be three. Each Party shall select one arbitrator and the two arbitrators
selected by the Parties shall select the third arbitrator, who shall act as chairman and
shall be a practicing solicitor or barrister admitted in New York and/or England and Wales
for a continuous period of at least 10 years as at the date of commencement of the
arbitration. The arbitration shall take place in New York or London. Any court of
applicable jurisdiction may grant interim relief as set forth in Section 14.1
(notwithstanding any provision of the UNCITRAL Rules to the contrary). The Arbitral
Tribunal, once fully constituted, shall have the power to order on a provisional basis any
relief which it would have power to order in a final award. The Arbitral Tribunal shall
apply New York law to any questions regarding the validity of this clause (insofar as any
such questions are separable from questions as to the validity of the agreement of which
this clause forms part) including but not limited to any question as to the authority of
the signatories to this Agreement. The IBA Rules on the Taking of Evidence in
International Commercial Arbitration (the “IBA Rules of Evidence”) shall apply to any
arbitration in accordance with this clause. In case of any inconsistency
with any clause of this Agreement or with the UNCITRAL Rules, the IBA Rules of Evidence
shall prevail but solely as regards the presentation and reception of evidence. Judgment
upon any arbitration award may be entered in any court of competent jurisdiction.
Arbitration shall occur over consecutive business days and in no event shall an arbitration
procedure continue for more than two weeks.

	 	14.1  	Notwithstanding the foregoing, either Party may pursue the remedy of specific
performance of any provision contained herein, or seek a preliminary or permanent
injunction against the breach of any such provision or in aid of the exercise of any
power granted herein, or any combination thereof, in any court having jurisdiction
thereof without resort to arbitration.
	 
	 	14.2  	In the event of any arbitration between the Parties hereto with respect to
any of the transactions contemplated herein or the subject matter hereof, the
prevailing Party shall, in addition to such other relief as the arbitrators may award,
be entitled to recover reasonable attorney’s fees, expenses and costs of
investigation, all as actually incurred, including without limitation, attorneys’
fees, expenses and costs of investigation incurred in any case or proceeding under any
bankruptcy, insolvency or reorganization proceeding.

	15.0  	Retention of Rights:
	 
	   	All finished goods, packaging and other materials provided by Customer in connection
herewith, and all rights therein, shall remain the exclusive property of

-35-

 

	   	Customer.
Customer shall not provide Supplier with any original or irreplaceable materials under this
Agreement. Notwithstanding the above, to the extent Customer nevertheless provides
Supplier with any such original or irreplaceable materials, Supplier shall use commercially
reasonable endeavors to ensure the safety and security of such materials but shall not be
liable for any damages other than those specified in Section 21.1 below, in the event that
such materials are lost, damaged, destroyed or stolen.
	 
	16.0  	Binding Effect and No Other Agreements:
	 
	   	This Agreement and the International Manufacturing Agreement together constitute the entire
agreement between the Parties on the subjects herein contained and supersede, cancel and
terminate all other understandings between the parties with respect to the subject matter
hereof.
	 
	17.0  	Amendments:
	 
	   	No modification of or supplement to this Agreement shall be effective unless signed in
writing by each Party.
	 
	18.0  	Successors and Assigns; Assignment:
	 
	   	The rights and obligations of the Parties hereunder shall attach to their successors and
permitted assigns. Supplier shall have the right to assign this Agreement or any of the
rights granted to Supplier hereunder, including without limitation, the right to assign any
interests under this Agreement to (a) lenders providing financing to Supplier from time to
time and (b) to any third party acquiring all or substantially all of Supplier’s assets or
equity, provided that such third party is not a Competitor and agrees in writing to assume
all of Customer’s obligations hereunder. Except as provided herein, Supplier shall not
assign, or grant any lien or encumbrance on, any property of Customer (including finished
goods). Customer shall not have the right, without Supplier’s prior written consent, which
consent shall not be unreasonably withheld, conditioned or delayed, to assign this
Agreement or any of the rights, obligations or interests of Customer hereunder, in whole or
in part, by operation of law, pursuant to a change of control, or otherwise; provided,
however, that Customer shall have the right without Supplier’s consent to assign its rights
and obligations under this Agreement to any Affiliate of Parent or to any third party
acquiring all or substantially all of Customer’s assets or equity, provided that (i) such
Affiliate or third party agrees in writing to assume all of Customer’s obligations
hereunder, and (ii) Customer and such third party have confirmed in writing to Supplier
that (A) it then currently has Distribution Requirements substantially similar to or
greater than Customer’s then current Distribution Requirements, and (B) its then current
forecasts for Distribution Requirements for the remainder of the Term are substantially
similar to or greater than Customer’s then current forecasts for Distribution Requirements
for the remainder of the Term. Notwithstanding the foregoing, in the event a non-Affiliate
third party acquires all or substantially all

-36-

 

	  	of Customer’s assets or equity, such third
party shall thereafter only be bound by the purchase commitment in Section 4.1 for the DOAs
that are Customer’s and any other member of the Universal Music Group’s DOAs (i.e., no
Customer Affiliate not part of the Universal Music Group immediately prior to the
transaction shall be bound by this Agreement).
	 
	19.0  	Compliance:
	 
	   	Any waiver by any Party of any breach hereof by the other Party shall not be deemed a
waiver of such Party’s obligation for future compliance with the terms and conditions in
this Agreement, notwithstanding any custom, practice or course of dealing to the contrary.
	 
	20.0  	Confidentiality:
	 
	   	Except as may be required by law, no Party shall disclose to any third party any
confidential information on business or technology of any other Party obtained in
connection with this Agreement for three years from the date of the disclosure of any such
confidential information without the prior written consent of the other Party.
Notwithstanding the foregoing, except as may be required by law, Supplier agrees to keep
confidential (a) all Customer-specific product specifications, and (b) all Customer order
information, in perpetuity.
	 
	21.0  	Indemnification:
	 
	   	Each Party (the “Indemnifying Party”) hereto agrees to and does hereby indemnify, defend
and hold harmless, the other party and its parent, subsidiaries, affiliated companies, and
its and their shareholders, officers, employees and agents (“Indemnified Party”) from any
and all third party claims, demands, causes of action, liability, judgments, damages, costs
and expense (including reasonable attorney’s fees) asserted against, imposed upon or
suffered by an Indemnified Party to the extent any such claims are caused by the
Indemnifying Party’s performance of this Agreement, including but not limited to any claims
for bodily injury, death or property damage, product liability and any infringement of any
proprietary right, patent copyright or trademark.

	 	21.1  	Subject to Section 7.2(i), Supplier agrees to be expressly and solely
responsible for any property of Customer while such property is in the care or custody
of or under the control of Supplier, whether or not such possession constitutes a
legal bailment, and in the event of any damage to or loss of such property while in
the possession of Supplier, if the property is not an original or irreplaceable item
or items, Supplier shall promptly pay Customer the full replacement value of such
property or the costs to repair the damage or restore the loss to any such property,
as applicable, regardless of cause. If, notwithstanding Section 15.0, Customer has
provided Supplier with original or irreplaceable items which are damaged or lost while
in possession of Supplier, Supplier shall be liable only for the

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	 	   	cost of repair or
replacement as if the lost or damaged original were a copy.

	22.0  	Favored Nations:

	 	22.1  	As to Significant Companies. In the event Supplier sells any DOAs to
a Significant Company under similar or more favorable (to the other customer) terms
and conditions to those described in Sections 1.0 through
10.0, 13, 21 and 25 herein for net prices for such DOAs (including all discounts,
rebates and all other economic-related considerations) lower than those then in
effect for Customer under Section 10.0 and this Section 22.1, Supplier will lower
Customer’s prices for such DOAs such that they are equivalent to the prices paid by
said Significant Company effective as of the date of the first invoice to the
Significant Company, and for the duration that such Significant Customer receives
such lower prices.
	 
	 	22.2  	As To Other Customers. In the event Supplier sells any DOAs under
similar or more favorable terms and conditions to those described in Sections 1.0
through 10.0, 13, 21 and 25 herein to a customer other than a Significant Company (an
“MFN Customer”) for net prices for such DOAs (including all discounts, rebates, and
all other economic related considerations) lower than those then in effect for
Customer under Section 10.0 and Section 22.1 (said lower configuration price(s) called
the “MFN Configuration Price”), Supplier will:

	 	(a)  	immediately notify Customer in writing of such sale and the
pricing therefor; and
	 
	 	(b)  	15 days following the end of each calendar quarter during
which the MFN Customer receives the MFN Configuration Price, issue the
Customer a credit to Customer’s payables equal to the number of units for each
configuration sold to the MFN Customer(s) multiplied times the MFN Factor
shown in Schedule 22.0.

	 	22.3  	For purposes of clarity, only Section 22.1 or Section 22.2 shall apply to any
one sale to another customer, but each section may be used multiple times, whether for
the same or different customers, and both sections may be operative at the same time
(e.g., (1) if Significant Company A receives a lower price than Customer, Customer’s
prices shall be adjusted under Section 22.1, and if Significant Company B receives an
even lower price than Customer’s adjusted prices, Customer’s prices shall be reduced
again; (2) If MFN Customer I receives a lower price than Customer, Customer shall
receive a rebate as to MFN Customer I under Section 22.2, and if MFN Customer II
receives a lower price than Customer (but not as low as MFN Customer I), Customer
shall also receive a rebate as to MFN Customer II under Section 22.2(calculated for
that MFN Customer II), and (3) if Customer’s prices are lowered as a result of Section
22.1, and then

-38-

 

	 	   	an MFN Customer receives an even lower price, Customer shall retain the
prices set pursuant to Section 22.1, and shall be entitled to the rebate set forth in
Section 22.2 for the latter sale).

	   	Notwithstanding any other provision of this Section 22, Customer shall receive no price
adjustment or other benefit under this Section 22: (a) with respect to orders from other
Supplier customers which are Spot Market Orders, or (b) with respect to orders from other
Supplier customers which are not Significant Companies and
which are fulfilled using assets and facilities other those purchased or leased by Supplier
from Customer under the Share Purchase Agreement or Lease Agreement, or (c) with respect to
orders from a Significant Company if such orders are fulfilled using assets and facilities
purchased by Supplier from such Significant Company.
	 
	23.0  	Audit Rights:

	 	(a)  	Customer shall have the right to inspect Supplier’s books and
records related to its performance under this Agreement, including Section
22.0 hereof, provided such right shall not be exercised more than once per
calendar year and provided, further, that any information subject to a
confidentiality agreement with a third party shall only be subject to
inspection by an independent third party auditor hired by Customer that enters
into a confidentiality agreement with Supplier that maintains the
confidentiality of third party information and permits the auditor to report
on Supplier’s performance to Customer. Such audits shall be performed with
reasonable advance written notice, during normal business hours, and in a
manner not disruptive of Supplier’s operations.
	 
	 	(b)  	Supplier shall have the right to inspect Customer’s books and
records related to its performance under Section 4.1 of this Agreement,
provided such right shall not be exercised more than once per calendar year
and provided, further, that any information subject to a confidentiality
agreement with a third party shall only be subject to inspection by an
independent third party auditor hired by Supplier that enters into a
confidentiality agreement with Customer that maintains the confidentiality of
third party information and permits the auditor to report on Customer’s
performance to Supplier. Such audits shall be performed with reasonable
advance written notice, during normal business hours, and in a manner not
disruptive of Customer’s operations.

	24.0  	Notice:
	 
	   	All notices, requests, claims, demands and other communications hereunder shall be in
writing (in the English language) and shall be given or made (and shall be deemed to have
been duly given or made upon receipt) by delivery in person, by

-39-

 

	   	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 Section 24.0):
	 
	   	If to CUSTOMER:
	 
	   	Universal International Music, B.V.

Gerrit van der Veenlaan 4

3743 DN Baarn

The Netherlands

Attn: The Directors

Fax: 31 35 6245 796
	 
	   	With a copy to:
	 
	   	General Counsel

Universal Music International Ltd

8 St. James’s Square

London SW1Y 4JU

England

Fax: 44 20 7747 4473
	 
	   	If to SUPPLIER:

Entertainment Distribution Company LLC

c/o Glenayre Technologies, Inc.

11360 Lakefield Drive

Duluth, Georgia 30097

Attn: Chief Financial Officer

Fax: (770) 497-3992
	 
	   	With copies to:
	 
	   	Entertainment Distribution Company LLC

360 Madison Avenue

Suite 500

New York, NY 10017

Attn: Chief Financial Officer

Fax: (212) 869-6418
	 
	   	and
	 
	   	Greenberg Traurig, LLP

3290 Northside Parkway, N.W.

Suite 400

Atlanta, GA 30327

Attn: James Altenbach

Fax: (678) 553-2212

-40-

 

	25.0  	Force Majeure:

	 	25.1  	Notwithstanding any provision hereof to the contrary, Supplier shall not be
liable for any damages incurred by Customer or any late fees or credits hereunder
whatsoever due to delays or failures in Supplier’s performance of its obligations
under this Agreement due to a Force Majeure Event, and such delays or failures shall
not be deemed a breach of this Agreement.
	 
	 	25.2  	Immediately upon becoming aware of the Force Majeure Event, Supplier will (a)
use commercially reasonable efforts to end or circumvent the Force Majeure Event, (b)
keep Customer apprised of those efforts on a timely basis, and (c) communicate with,
coordinate with and assist Customer in resolving any impact on Customer caused by the
Force Majeure Event.
	 
	 	25.3  	If a Force Majeure Event continues for a period longer than [*****] business
days, then Customer shall have the right to place orders for DOAs during the pendency
of such Force Majeure Event with other distribution companies, provided that (a) such
orders shall not be for volumes in excess of the volumes Customer would ordinarily
contract for during such period, and (b) upon notice from Supplier that Supplier can
resume performance under the terms of this Agreement, Customer shall cease placing
such orders with such third parties and place them with Supplier under the terms of
this Agreement.
	 
	 	25.4  	Notwithstanding the [*****] business day period in Section 25.3, if there
would be no doubt in the mind of a reasonable person that Supplier would be unable to
resume performance under the terms of this Agreement within [*****] business days of
the Force Majeure Event, then Customer shall have the right to immediately seek the
remedy provided under Section 25.3, without waiting for the [*****] business day
period to elapse; provided, however, that Customer shall consult with Supplier and
coordinate its activities with Supplier’s in such circumstance.

	26.0  	Designated Person:
	 
	   	Customer and Supplier each agree that each will designate a single organization,
department, and/or person to be the primary point of contact with the other with the
ability to take action as may be required pursuant to this Agreement.
	 
	27.0  	Intentionally deleted.
	 
	28.0  	Intentionally deleted.
	 
	29.0  	Consents and Approvals:

-41-

 

	   	Neither Party shall unreasonably withhold, condition or delay any consents, authorizations
or approvals required under this Agreement.
	 
	30.0  	Employee Purchase Program:
	 
	   	Supplier’s employees located in Hanover will have the benefit of the employee product
purchase plan in effect as of the Effective Date unless and until modified by Customer.
All orders and sales of Product pursuant to such employee product purchase plan shall be
made through Supplier, which shall be responsible for all payments therefor. Customer
shall not be required to pay any fee in connection with such sales.
	 
	31.0  	Governing Law:
	 
	   	The Agreement shall be governed by the laws of the State of New York without giving effect
to any applicable conflict of laws provisions.
	 
	32.0  	Counterparts:
	 
	   	This Agreement may be executed in one or more counterparts (and by facsimile), all of which
shall be considered one and the same agreement, and shall become effective when one or more
counterparts have been signed by each of the Parties and delivered to the other Parties.
	 
	33.0  	Enforcement:
	 
	   	Customer shall be entitled to enforce the provisions of this Agreement on behalf of each
member of the Universal Music Group who places orders for DOAs with Supplier. Customer
shall be responsible for all actions or omissions by such parties as if such actions or
omissions were Customer’s hereunder.

	 	 	 	 	 	 	 
	Supplier	 	Customer
	 
	 	 	 	 	 	 
	By:
	 	/s/ Yorek Koehn      /s/ B. Weichmann	 	By:	 	/s/ C. Van Dijk      /s/ Thi Roos
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Its:

	 	Yorek Koehn       Dr. Bodo Weichmann	 	Its:	 	Director
      Director
	

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Date: May 31, 2005	 	Date: May 31, 2005

-42-

 

SCHEDULE 2.0

Definitions

The following capitalized terms shall have the meanings attributed to such terms in the following
subsections.

“2003 Distribution Mix” means, the Universal Music Group’s 2003 Distribution Requirements
expressed as a breakdown of DOAs on a DOA-by-DOA basis and included on Schedule 10.1.

“Affiliate” means, as to any person or entity, any person or entity controlling, under
common control with or controlled by such person or entity.

“Aggregate 2003 Distribution Costs” means the aggregate cost data, after certain
adjustments mutually agreed between the Parties, and set forth on Schedule 12.2(d).

“Allocated 2003 Distribution Costs” means the Aggregate 2003 Distribution Costs allocated
on a DOA-by-DOA basis over Total Volume , and set forth in Schedule 12.2(e).

“Book On” means to book onto Supplier’s warehousing computer systems and make available for
pick, pack and ship activities.

“Business Day” means any weekday on which banks in the federal state of Lower Saxony,
Germany are open.

“Catalog” means any packaged item or SKU that is not a New Release.

“Change of Control” means the acquisition by a Competitor, directly or indirectly, and
whether by sale, pledge, proxy agreement or otherwise, of [*****]% or more of the voting or
equity economic interests in Supplier, or the sale of all or substantially all of
Supplier’s assets to a Competitor.

“Competitor” means any entity owned or controlled by a Major Music Company or one of its
Affiliates.

“Customer Pre-Authorized Return Products” means all returned Products other than those
Customer instructs Supplier not to accept pursuant to Section 7.15(b).

“Direct Distributions” has the meaning defined in Section 7.2 of the International
Manufacturing Agreement.

“Direct Export” means distribution of Products to entities which are non-Universal Music
Group members directly to addresses outside of the Territory.

-43-

 

“Distribution Center” means a distribution center owned, controlled or managed by Supplier
in the Territory and used to provide DOAs under this Agreement which shall initially be the
RSC.

“Distribution Orders/Activities” or “DOAs” means any specific related service identified in
Section 7, and any service or activity priced on Schedule 10.1.

“Distribution Requirements” means, as applied to a member of the Universal Music Group, all
requirements by the member of the Universal Music Group for DOAs for its own account or for
a third party’s account (for so long as the Universal Music Group member has the
contractual right to order such third party requirements from Supplier, and such right
exists as of the Effective Date) with respect to all Products (a) manufactured or procured
by Supplier under the International Manufacturing Agreement, except for (i) Special
Projects, and (ii) Direct Distributions; or (b) procured by Customer or Supplier for stock
at the Distribution Center. In addition, if the procurement service under Section 7.7 of
the International Manufacturing Agreement is terminated by Customer, Customer’s subsequent
orders for such Other Existing Formats within the Territory shall be included in the
Distribution Requirements.

“Effective Date” means the date of the Closing of the Share Purchase Agreement, as such
term is defined in the Share Purchase Agreement.

“Facility Fixed Costs” means all fixed cost categories referred to in the Aggregate 2003
Distribution Costs.

“Force Majeure Event” means fire, flood, storm, earthquake, landslide, volcanic activity or
other acts of God; acts of terrorism or vandalism; riot, war, civil disturbance or
insurrection; strikes, lockout or other labor unrest; power, transportation, Internet or
other utility or carrier delays or outages, interference by any governmental authority, or
any other event(s) beyond the reasonable control of Supplier (including a computer virus
beyond a party’s reasonable control).

“International Manufacturing Agreement” means that certain International Manufacturing and
Related Services Agreement, by and between Supplier and Customer and entered into on the
Effective Date.

“Inventory Location Accuracy Level” means the number of inventory locations in which the
amount physically counted or verified at a given inventory location equals the amount shown
on an on-hand inventory report for that location, divided by the total number of inventory
locations counted.

“IT System” means the sales order processing system and the system’s supporting software
and operating systems, as such system may be amended, replaced or otherwise modified.

“Lease Agreement” means that certain Lease Agreement as defined in the Share Purchase
Agreement.

-44-

 

“Lost Inventory” shall be calculated on a component reference number by component reference
number basis (each such unique component an “Inventory Component”), subtracting as of a
particular date the Amount Distributed of such Inventory Components and the Actual
Inventory of such Inventory Component from the Amount Delivered, where (i) “Amount
Distributed” means the quantity of such Inventory Components distributed by Supplier
pursuant to a Customer Order prior to the particular date, (ii) “Amount Delivered” means
the quantity of such Inventory Components delivered by Supplier’s manufacturing facility or
Customer’s vendor to Supplier (based on Customer Orders received by Supplier) prior to the
particular date, and (iii) “Actual Inventory” means the quantity of such Inventory
Components on-hand as determined by a physical count as of the particular date.

“Major Music Company” means means Sony-BMG Music Entertainment, Inc, EMI Group Plc and
Warner Bros. Records, Inc , or any of their successors.

“Materials” means point-of-sale advertising and marketing materials supplied by or on
behalf of Customer to Supplier and related to Product.

“NDUs” means a distribution facility in any location owned and/or used by the Universal
Music Group.

“NDU Distribution” means distribution to an NDU of Product.

“New Release” means any packaged item or stock keeping unit not yet available for sale by
Customer’s customers in any country in the Territory.

“Other Existing Formats” means means LP vinyl, music cassette, VHS, DVD-Audio, SACD and
Dual Disc and other carriers of audio or audio visual material as required by Customer from
time to time.

“P&D Agreement” means a production and distribution agreement between Universal Music Group
and a non-Universal Music Group third party entered into after the Effective Date, or any
other agreement between Universal Music Group and a non-Universal Music Group third party
entered into after the Effective Date under which Universal may or does direct the sourcing
of any DOA’s for any such third party.

“Parcel Service” means NDU Distributions made for direct shipment to customers of the
Universal Music Group member outside of the Territory.

“Parent” means Universal Music Group, Inc.

“Prevailing Practices” means the procedures, timeframes, service levels or response times
generally followed and with respect to section 6.5 generally and in aggregate equivalent to
those followed by Supplier during the 12 months prior to the Effective Date.

-45-

 

“Product” means all audio or audio-visual carriers (whether optical disc or otherwise) and
their packaging subject to Orders under this Agreement.

“Qualified Distributors” means any company [*****].

“Regional Music Company” means as to each country in the Territory, any recorded music
company whose market share in such country is 35% or more of the Universal Music Group’s
market share for music in such country, in each case as measured in the most recently ended
calendar year.

“Retail Distribution” means distribution of Products directly to customers of Universal
Music Group members at addresses within the Territory.

“RSC” means the Distribution Center located as of the Effective Date at Hanover, Germany.

“Significant Customers” means the entities listed on Schedule 35.

“SKUs” means stock keeping units.

“Special Projects” means (a) joint venture repertoire product which involves a profit
sharing arrangement with any non-Universal Music Group member third party ([*****]); (b) so
called non-traditional product such as kiosk sales, premiums, cover mounts, give-aways and
music club product, which are (i) generally distributed outside normal Universal Music
Group retail or wholesale channels, and (ii) distributed in the Territory; and (c)
non-commercial promotional product for distribution in territories outside Germany.

“Share Purchase Agreement” means that certain Share Purchase Agreement entered into between
Blitz 05-107 GmbH, Supplier and Universal Music GmbH.

“Tender” means making Optical Discs available to RSC or to the selected carrier for
distribution from the Supplier’s facilities and coordinating with and assisting such
carrier, in a manner consistent with Supplier’s prevailing practices, but does not include
actual transportation of the Optical Discs from the Supplier’s facility.

“Territory” means Germany, Austria, Switzerland, Czech Republic, Slovak Republic, The
Netherlands, Belgium and Luxemburg.

“Transition Services Agreements” means the Bilateral Information Technology Transition
Services Agreement between Supplier and Universal Music International Ltd..

“Universal Music Group” means (i) Parent, (ii) Customer, (iii) each subsidiary or
Affiliate, directly or indirectly, more than [*****]% owned by Parent or Customer (or any
of their respective successors or assigns. For purposes of clarity, (i) no entity whose
Products are distributed by a member of the Universal Music Group (but which is not
directly or indirectly more than [*****]% owned

-46-

 

by Parent or Customer) shall be a member of the Universal Music Group, and (ii) on the date
on which an entity is no longer directly or indirectly more than [*****] owned by Parent or
Customer, or their respective successors or permitted assigns, it shall cease to be a
member of the Universal Music Group.

“Working Day” means those days as agreed by Customer and Supplier set forth at the
commencement of the Term as Schedule 2.11 hereto and updated as mutually agreed upon by
Customer and Supplier.

“Work Week” means a seven-day period commencing on each Sunday during the term and ending
at 11:59 p.m. the next Saturday (regardless of whether any day therein is a Working Day or
Business Day).

-47-

 

The following terms have the meanings set forth in the Sections indicated.

	 	 	 	 	 
	Term	 	Section	 
	AAA
	 	 	14.0	 
	Additional Territories
	 	 	4.2	 
	Agreement
	 	 	1.0	 
	CAP
	 	 	9.2.1	 
	Carrier
	 	 	10.2.6	 
	Cure Period
	 	 	9.2.2	 
	Customer
	 	 	1.0	 
	Elected Services
	 	 	9.3.1	 
	Excess Order
	 	 	6.10	 
	Failure Notice
	 	 	9.1	 
	Incremental Volume Offer
	 	 	10.6	 
	Incremental Volumes
	 	 	10.6	 
	Indemnified Party
	 	 	21.0	 
	Indemnifying Party
	 	 	21.1	 
	Key Failure
	 	 	9.1	 
	Late Orders
	 	 	6.11	 
	LTL
	 	 	7.7	 
	New Transportation Prices
	 	 	10.2.3	 
	Parties
	 	 	1.0	 
	Specific Related Services
	 	 	7.0	 
	Supplier Incremental Volume Proposal
	 	 	10.6	 
	Supplier
	 	 	1.0	 
	Term
	 	 	3.1	 
	Transportation Services
	 	 	10.2.1	 
	Uncured Key Failure
	 	 	9.2	 

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SCHEDULE 2.11

Working Days

Universal Manufacturing & Logistics GmbH

Hanover

Working days Distribution Plan CY 2004

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Working Days
	 	 	JAN	 	 	FEB	 	 	MAR	 	 	APR	 	 	MAY	 	 	JUN	 	 	JUL	 	 	AUG	 	 	SEP	 	 	OCT	 	 	NOV	 	 	DEC	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Monthly
	 	 	 	31	 	 	 	 	29	 	 	 	 	31	 	 	 	 	30	 	 	 	 	31	 	 	 	 	30	 	 	 	 	31	 	 	 	 	31	 	 	 	 	30	 	 	 	 	31	 	 	 	 	30	 	 	 	 	31	 	 	 	Total	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Of it:
	 	 	 	5.0	 	 	 	 	4.0	 	 	 	 	4.0	 	 	 	 	4.0	 	 	 	 	5.0	 	 	 	 	4.0	 	 	 	 	5.0	 	 	 	 	4.0	 	 	 	 	4.0	 	 	 	 	5.0	 	 	 	 	4.0	 	 	 	 	4.0	 	 	 	 	52.0	 	 
	 	- Saturdays
	 	 	 	4.0	 	 	 	 	5.0	 	 	 	 	4.0	 	 	 	 	4.0	 	 	 	 	5.0	 	 	 	 	4.0	 	 	 	 	4.0	 	 	 	 	5.0	 	 	 	 	4.0	 	 	 	 	5.0	 	 	 	 	4.0	 	 	 	 	4.0	 	 	 	 	52.0	 	 
	 	- Sundays
	 	 	 	21.0	 	 	 	 	20.0	 	 	 	 	23.0	 	 	 	 	20.0	 	 	 	 	19.0	 	 	 	 	22.0	 	 	 	 	22.0	 	 	 	 	22.0	 	 	 	 	22.0	 	 	 	 	21.0	 	 	 	 	22.0	 	 	 	 	23.0	 	 	 	 	257.0	 	 
	 	- Regular working days
	 	 	 	1.0	 	 	 	 	 	 	 	 	 	 	 	 	 	 	2.0	 	 	 	 	2.0	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	5.0	 	 
	 	- Holiday
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Other downtimes,
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1.0	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0.3	 	 	 	 	 	 	 	 	 	 	 	 	 	 	4.3	 	 	 	 	7.8	 	 
	 	adjustments
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	2.3	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Plant holidays
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Working on holidays
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Adjustment working day
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1.3	 	 	 	 	1.3	 	 
	 	Holidays on Saturdays
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1.0	 	 	 	 	1.0	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	2.0	 	 	 	 	4.0	 	 
	 	Holidays on Sundays
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1.0	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1.0	 	 	 	 	2.0	 	 
	 	Employee meeting
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0.3	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0.3	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0.5	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Available working days
	 	 	 	30.0	 	 	 	 	29.0	 	 	 	 	31.0	 	 	 	 	25.8	 	 	 	 	28.0	 	 	 	 	30.0	 	 	 	 	31.0	 	 	 	 	31.0	 	 	 	 	29.8	 	 	 	 	31.0	 	 	 	 	30.0	 	 	 	 	21.7	 	 	 	 	353.2	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Regular working days
	 	 	 	21.0	 	 	 	 	20.0	 	 	 	 	23.0	 	 	 	 	19.8	 	 	 	 	19.0	 	 	 	 	22.0	 	 	 	 	22.0	 	 	 	 	22.0	 	 	 	 	21.8	 	 	 	 	21.0	 	 	 	 	22.0	 	 	 	 	2.0	 	 	 	 	255.2	 	 
	 	Saturdays
	 	 	 	5.0	 	 	 	 	4.0	 	 	 	 	4.0	 	 	 	 	4.0	 	 	 	 	4.0	 	 	 	 	4.0	 	 	 	 	5.0	 	 	 	 	4.0	 	 	 	 	4.0	 	 	 	 	5.0	 	 	 	 	4.0	 	 	 	 	3.0	 	 	 	 	48.0	 	 
	 	Sundays
	 	 	 	4.0	 	 	 	 	5.0	 	 	 	 	4.0	 	 	 	 	5.0	 	 	 	 	5.0	 	 	 	 	4.0	 	 	 	 	4.0	 	 	 	 	5.0	 	 	 	 	4.0	 	 	 	 	5.0	 	 	 	 	4.0	 	 	 	 	 	 	 	 	 	50.0	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Shifts beyond 5 days
operation time a week:
	 	 	 	5.0	 	 	 	 	4.0	 	 	 	 	4.0	 	 	 	 	3.0	 	 	 	 	4.0	 	 	 	 	4.0	 	 	 	 	5.0	 	 	 	 	4.0	 	 	 	 	4.0	 	 	 	 	5.0	 	 	 	 	5.0	 	 	 	 	5.0	 	 	 	 	52.0	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	on Saturdays
	 	 	 	5.0	 	 	 	 	4.0	 	 	 	 	4.0	 	 	 	 	3.0	 	 	 	 	4.0	 	 	 	 	4.0	 	 	 	 	5.0	 	 	 	 	4.0	 	 	 	 	4.0	 	 	 	 	4.0	 	 	 	 	4.0	 	 	 	 	2.0	 	 	 	 	48.0	 	 
	 	on Sundays
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1.0	 	 	 	 	3.0	 	 	 	 	4.0	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Operational working day
	 	 	 	22.7	 	 	 	 	21.3	 	 	 	 	24.3	 	 	 	 	20.8	 	 	 	 	20.3	 	 	 	 	23.3	 	 	 	 	23.7	 	 	 	 	23.3	 	 	 	 	23.1	 	 	 	 	22.7	 	 	 	 	23.7	 	 	 	 	23.3	 	 	 	 	272.5	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

		
	Remark: 	Saturdays are planned with one early shift. These can be
cancelled on a week by week basis.

Sundays are planned for the last four weeks before Christmas.

-49-

 

SCHEDULE 5.4

Pre-Approved Subcontractors

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	Sorting for Waste	 	 	Off Site Storage	 
	 	Legal Name of	 	 	 	 	 	 	 	 	Disposal / Recycling	 	 	Price per Pallet	 
	 	Company	 	 	Address	 	 	Hand packing (€)	 	 	(€)	 	 	and Month in €	 
	 	

[*****]

	 	 	

[*****]
	 	 	

[*****]
	 	 	 	 	 	

[*****]	 
	 	

[*****]

	 	 	

[*****]
	 	 	 	 	 	 	 	 	

[*****]	 
	 	

[*****]

	 	 	

[*****]
	 	 	

[*****]	 	 	 	 	 	 	 
	 	

[*****]

	 	 	

[*****]
	 	 	 	 	 	

[*****]	 	 	 	 
	 	

[*****]1)

	 	 	

[*****]
	 	 	

[*****]
	 	 	 	 	 	

[*****]	 
	 

	1)	 	“Hourly rate depends on the volume of hours purchased per annum; over [*****] hours
the rate will go down. The pallet store of [*****] can only be used as interim and in the case
[*****] is full.”

-50-

 

SCHEDULE 6.5

Order and Tender Deadlines

[*****]

-51-

 

SCHEDULE 7.16

Finished Product Stock Planning

Supplier will plan Customers International Products for stockholding in RSC, based on the following
principles.

Excluded from this process will be those Products as indicated by Customer and for which customer
will order and re-order all orders during a specific period of time (as per Effective Date these
Products are directly controlled by Customer’s Virtual Factory department (“VF Products”)).

Initial Quantities all Products

For all Products, Customer will determine and order the initial quantities and Supplier will order
from the relevant suppliers such quantities. As clarification all Products do include International
and National Products.

Re-Ordering for National Products

Customer will determine order quantities and Supplier will order these quantities on behalf of
Customer at the relevant supplier.

Re-Ordering for International Products (Stockholding at RSC)

Except for VF Products, for which Customer shall determine the order quantities, Supplier shall
plan re-orders, on behalf and for the account of Customer, for all other Customers International
Products in accordance with the principles below:

Re-Ordering (manual in first
[*****] days)
Policy:

	 	•  	[*****] weeks stock ratio A items
	 
	 	•  	[*****] weeks stock ratio B/C items
	 
	 	•  	Minimum order size [*****] units

Re-Ordering (SAP R.3 Forecast)

(First system calculated
forecast available [*****])

	 	   	Following parameters are used by Supplier for Customer’s Business
	 
	 	•  	Product Classification (A, B, C items regarded to shipment)
	 
	 	•  	Service degree (x %) (Product availability)
	 
	 	•  	Stock Ratio (x weeks) (Stock Level)
	 
	 	•  	Safety Stock (machine calculated) (Stock Level)
	 
	 	•  	Re-ordering Quantity (machine calculated)
	 
	 	•  	Forecasting Model: Exponential smoothing

Customer and Supplier shall continuously evaluate these re-order parameters and algorithm in order
to achieve the optimal balance between lowest stocks levels and obsolescence and highest Product
availability. As from Effective Date the initial parameters to be used will be those in place just
before.

-52-

 

SCHEDULE 9.1

Key Failure Events (Distribution)

	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	Definition As Described	 	 	KPI Repeated Failure	 
	 	KPI	 	 	in Contract Section:	 	 	Event	 
	 	Picking Accuracy

	 	 	 	8.2	 	 	 	Monthly order line
accuracy is below
[*****] for more than
[*****] month in a
[*****] month rolling
period	 
	 	On Time Tendering

	 	 	6.5.1

6.5.2

6.5.3

6.5.4
	 	 	On time tendering falls
below the required rate
for any Product type
more than [*****] in a
rolling [*****] month
period OR on time
tendering is below
[*****] for any Product
type in a rolling
[*****] month period	 
	 	Booking-On On Time

	 	 	 	7.2	(c)	 	 	Supplier fails to
Book-On [*****]% of the
Distribution Components
within the time
requirements of Section
7.2(c) in any given
[*****] and for more
than [*****]1	 
	 	Return Processing

	 	 	7.15 (b)

7.15 (e)

7.15 (h)
	 	 	Supplier fails to make
electronic file
available to Customer
within time frame
stipulated in Section
7.15(b) more than
[*****] a rolling
[*****] month period.
Supplier fails to take
returns back into stock
within time frame
stipulated in Section
7.15(e) more than
[*****] in a rolling
[*****] month period.
Supplier fails to take
NDU overstock returns
back into stock within
time frame stipulated in
Section 7.15(h) more
than [*****] in a
rolling [*****] month
period.	 
	 	Stock Security

	 	 	7.2 (b)

7.2 (h)
	 	 	Accuracy of inventory
balance falls below
level stipulated more
than [*****] in any
rolling [*****] month
period.
Inventory Location
Accuracy Level falls
below level stipulated
more than [*****] in any
rolling [*****] month
period.	 
	 

	1	 	A KPI Repeated Failure Event in relation to
Booking-On will not have occurred to the extent such failure results solely
[*****].

-53-

 

SCHEDULE 10.1

Pricing

	 	 	 	 	 	 	 
	[*****]	 	 	 	 	 	 

-54-

 

SCHEDULE 12.2d

[*****]

-55-

 

SCHEDULE 12.2e

[*****]

-56-

 

SCHEDULE 35

Significant Companies

Each Major Music Company

Each Regional Music Company

-57-<PAGE>

                                                                  EXHIBIT 4.3(c)

               THIRD AMENDMENT AND CONSENT TO FINANCING AGREEMENT

            THIRD AMENDMENT AND CONSENT TO FINANCING AGREEMENT, dated as of May
30, 2005 (this "Amendment"), to the Amended and Restated Financing Agreement,
dated as of September 4, 2003, as amended by the First Amendment to Financing
Agreement, dated as of November 23, 2004, and the Second Amendment to Financing
Agreement, dated as of April 13, 2005 (such agreement as amended, and as further
amended, restated or otherwise modified from time to time, being hereinafter
referred to as the "Financing Agreement"), by and among Allied Holdings, Inc., a
Georgia corporation (the "Parent"), Allied Systems, Ltd. (L.P.), a Georgia
limited partnership ("Allied Systems" and together with the Parent, each a
"Borrower" and collectively, the "Borrowers"), each subsidiary of the Parent
listed as a "Guarantor" on the signature pages thereto, the lenders from time to
time party thereto (each a "Lender" and collectively, the "Lenders"), Ableco
Finance LLC, a Delaware limited liability company, as collateral agent for the
Lenders (in such capacity, the "Collateral Agent") and Wells Fargo Foothill,
Inc., a California corporation, formerly known as Foothill Capital Corporation,
as administrative agent for the Lenders (in such capacity, the "Administrative
Agent" and, together with the Collateral Agent, each an "Agent" and
collectively, the "Agents").

                              W I T N E S S E T H:

            WHEREAS, the Borrowers have requested that the Required Lenders
amend the Financing Agreement to modify (i) the multiplier
contained in Section 2.04(b)(iv) of the Financing Agreement for the period
beginning on the date hereof and ending on June 22, 2005 and (ii) the minimum
Consolidated EBITDA contained in Section 7.03(b) of the Financing Agreement for
the twelve (12) consecutive months ending on April 30, 2005 and May 31, 2005,
and the Required Lenders are willing to so amend the Financing Agreement, but
only subject to the terms and conditions set forth in this Amendment.

            NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, agreements and conditions hereinafter set forth, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

            1. Definitions. All terms used herein that are defined in the
Financing Agreement and not otherwise defined herein are used herein as defined
therein.

            2. Amendments to Financing Agreement.

            (a) Section 2.01(b)(iv) of the Financing Agreement is hereby amended
and restated in its entirety to read as follows:

                  "The aggregate principal amount of the Loans and Letter of
                  Credit Obligations shall not at any time exceed (A) an amount
                  equal to (x) three and one quarter (3.25) multiplied by (y)
                  the Consolidated EBITDA of the Parent and its Subsidiaries for
                  the most recently completed twelve months after giving effect,
                  if any, to the pro forma adjustments set forth in Schedule
                  2.01(b)(iv) or (B) the

<PAGE>

                  maximum principal amount of Indebtedness which is permitted to
                  be incurred by the Parent and its Subsidiaries under clause
                  (i) of the second paragraph of Section 4.09 of the Indenture
                  less all outstanding Capital Lease Obligations (as defined in
                  the Indenture) incurred under such clause (i), provided,
                  however, that solely for the period commencing on May 1, 2005
                  and ending on June 22, 2005, the aggregate principal amount of
                  the Loans and Letter of Credit Obligations shall not at the
                  end of any Business Day exceed (A) an amount equal to (x) four
                  (4.00) multiplied by (y) the Consolidated EBITDA of the Parent
                  and its Subsidiaries for the most recently completed twelve
                  months after giving effect, if any, to the pro forma
                  adjustments set forth in Schedule 2.01(b)(iv) or (B) the
                  maximum principal amount of Indebtedness which is permitted to
                  be incurred by the Parent and its Subsidiaries under clause
                  (i) of the second paragraph of Section 4.09 of the Indenture
                  less all outstanding Capital Lease Obligations (as defined in
                  the Indenture) incurred under such clause (i)."

            (b) Section 7.03(b) of the Financing Agreement is hereby amended and
restated in its entirety to read as follows:

                  "Permit Consolidated EBITDA of the Parent and its Subsidiaries
                  for the twelve (12) consecutive months ending on the last day
                  of each month to be less than $50,000,000; provided, however,
                  that Consolidated EBITDA of the Parent and its Subsidiaries
                  for the twelve (12) consecutive months ending on April 30,
                  2005 and May 31, 2005 shall not be less than $44,844,000."

            3. Other Agreements. Without any prejudice or impairment whatsoever
to any of the rights and remedies of the Agents or the Lenders contained in the
Financing Agreement or in any other Loan Documents, the Loan Parties covenant
and agree with the Agents and the Lenders (the occurrence of, the failure to
comply with, or the inaccuracy thereof (as applicable), shall constitute an
immediate Event of Default) that:

            (a) As of June 1, 2005, the outstanding aggregate principal amount
of the Loans is equal to $134,087,462.30 of which $20,449,146.12 constitutes
Revolving Loans, $68,638,316.23 constitutes the Term Loans, $20,000,000
constitutes the Supplemental Term Loans and $25,000,000 constitutes the
Additional Supplemental Term Loans, and the outstanding, aggregate amount of
Letter of Credit Obligations is equal to $43,695,036.45;

            (b) (i) for the period commencing May 30, 2005 through and including
June 8, 2005, the aggregate outstanding principal amount of Revolving Loans as
of the end of each Business Day shall not exceed $21,295,000; (ii) for the
period commencing June 9, 2005 through

                                       2
<PAGE>

and including June 12, 2005, the aggregate outstanding principal amount of
Revolving Loans as of the end of each Business Day shall not exceed $17,588,000;
and (iii) for the period commencing June 13, 2005 through and including June 22,
2005, the aggregate outstanding principal amount of Revolving Loans as of the
end of each Business Day shall not exceed $19,623,000, and for the period
commencing on the date of this Amendment through and including June 22, 2005,
the Agents and the Lenders shall have no obligation to make any additional Loans
in excess of the amount for the period specified in this clause (b), and the
making of any additional Loans or other extensions of credit to any Loan Party
in excess of such amounts for the applicable period specified in this clause
(b), if any, shall be at the sole and absolute discretion of each of the Agents
and the Lenders;

            (c) commencing on the date hereof and continuing until June 22,
2005, the Letter of Credit Obligations shall not exceed $43,695,036.45 and the
Agents and the Lenders shall have no obligation to issue or otherwise establish
(or assist in establishing) any additional Letters of Credit (including any
renewals, increases in or other extensions of any existing Letters of Credit);

            (d) for the period commencing on the date of this Amendment until
the earlier of June 22, 2005 and the occurrence of any Event of Default, all of
the Obligations shall accrue at a rate of interest per annum equal to the rate
of interest otherwise in effect from time to time pursuant to the terms of the
Financing Agreement plus 3.0%, or, if a rate of interest is not otherwise in
effect, interest at the highest rate specified therein for any Loan then
outstanding prior to an Event of Default plus 3.0%;

            (e) each of the following events shall constitute an additional
Event of Default under the Financing Agreement: (i) since December 31, 2004, the
occurrence of any of the following (to the extent not otherwise disclosed by the
Parent to the Agents in writing prior to the Third Amendment Effective Date):
any material adverse effect on any of (A) the operations, business, assets,
properties, prospects or condition (financial or otherwise) of any Borrower or
of the Loan Parties taken as a whole, as determined by any Agent in its sole
discretion or (B) the industries, businesses or markets within which Parent or
any of its Subsidiaries or its customers operate or otherwise conduct business,
in each case, as determined by any Agent in its sole discretion, (ii) since
December 31, 2004, the occurrence of any of the following (to the extent not
otherwise disclosed by the Parent to the Agents in writing prior to the Third
Amendment Effective Date): any material disruption or general adverse
developments in the financial, banking or capital markets, as determined by any
Agent in its sole discretion, and (iii) any Loan Party or any Affiliate thereof
or any Person or entity claiming by or through such Loan Party or other Person
joins in, assists, cooperates or participates as an adverse witness (except
under subpoena) in any suit or other judicial proceeding against any Agent or
Lender or any of their Affiliates relating to the Obligations or any amounts
owing in connection with or related to any of the transactions contemplated by
the Financing Agreement, this Amendment or the other Loan Documents or any
document, agreement, or instrument executed in connection with any of the
foregoing;

            (f) commencing June 6, 2005 and through and including June 22, 2005,
the Parent will, on each Business Day at the earlier of (x) 12:00 noon (New York
City time) and (y) the delivery of a Notice of Borrowing, deliver to the Agents,
a certificate from the Chief

                                       3
<PAGE>

Executive Officer, the Chief Financial Officer, the Treasurer, or any Vice
President of the Parent, certifying as to the aggregate outstanding principal
amount of the Revolving Loans and the Letter of Credit Obligations and the Term
Loan, the Supplemental Term Loan and the Additional Supplemental Term Loan, as
of the end of business on the immediately preceding Business Day, and containing
such detail and other information as any Agent may request from time to time;

            (g) the Loan Parties shall comply with all of the terms, covenants
and provisions contained in the Financing Agreement and the other Loan Documents
(subject to any applicable grace periods set forth in the Financing Agreement),
as such terms, covenants and provisions are expressly modified by this Amendment
upon the terms set forth herein; and

            (h) the Loan Parties shall at any time and from time to time execute
and deliver such further instruments and take such further action as any Agent
may reasonably request to effect the purposes of this Amendment, the Financing
Agreement and the other Loan Documents.

            4. Representations and Warranties. Each Loan Party represents and
warrants to the Agents, the Lenders and the L/C Issuer as follows:

            (a) Each Loan Party (i) is a corporation, limited liability company
or limited partnership duly organized, validly existing and in good standing
under the laws of the state, province or other applicable jurisdiction of its
organization, (ii) has all requisite power and authority to conduct its business
as now conducted and as presently contemplated, to execute and deliver this
Amendment and each Loan Document to which it is a party, and to consummate the
transactions contemplated thereby and, in the case of the Borrowers, to make the
borrowings under the Financing Agreement, and (iii) is duly qualified to do
business and is in good standing in each jurisdiction in which the character of
the properties owned or leased by it or in which the transaction of its business
makes such qualification necessary and where the failure to be so qualified
would reasonably be expected to have a Material Adverse Effect.

            (b) The execution, delivery and performance by each Loan Party of
this Amendment and the performance by each Loan Party of the Financing
Agreement, as amended hereby, (i) have been duly authorized by all necessary
action, (ii) do not and will not contravene its charter or by-laws, its limited
liability company or operating agreement or its certificate of partnership or
partnership agreement, as applicable, or any applicable law or any contractual
restriction binding on or otherwise affecting it or any of its properties, (iii)
do not and will not result in or require the creation of any Lien (other than
pursuant to any Loan Document) upon or with respect to any of its properties,
and (iv) do not and will not result in any default, noncompliance, suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to its operations or any of its properties,
which, in the case of this clause (iv), is reasonably expected to have a
Material Adverse Effect.

            (c) No authorization or approval or other action by, and no notice
to or filing with, any Governmental Authority is required as a condition to the
(i) due execution, delivery and performance by any Loan Party of this Amendment
or (ii) performance by each Loan Party of the Financing Agreement, as amended
hereby.

                                       4
<PAGE>

            (d) Each of this Amendment and the Financing Agreement, as amended
hereby, and the other Loan Document to which any Loan Party is or will be a
party, when delivered hereunder, will be, a legal, valid and binding obligation
of such Person, enforceable against such Person in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws and principles of equity.

            (e) The representations and warranties contained herein, in Article
VI of the Financing Agreement and in each other Loan Document are true and
correct on and as of the date hereof as though made on and as of such date,
except to the extent that any such representation or warranty expressly relates
solely to an earlier date (in which case such representation or warranty shall
be true and correct on and as of such earlier date); and no Default or Event of
Default shall have occurred and be continuing on the Third Amendment Effective
Date after giving effect to this Amendment in accordance with its terms.

            5. Effective Date. This Amendment shall be effective at the last to
occur of the following (the first date upon which all such conditions have been
satisfied being herein called the "Third Amendment Effective Date"):

            (a) the date on which counterparts to this Amendment, signed by each
of the Loan Parties and the Required Lenders, have been executed and delivered
to the Collateral Agent;

            (b) the date on which the Collateral Agent shall have received a
certificate of the chief executive officer or the chief financial officer of the
Parent, certifying as to the matters set forth in Section 5(c) hereof;

            (c) each of the following shall be true: (i) the representations and
warranties of each Loan Party contained herein and in the other Loan Documents
shall be true and correct on and as of the Third Amendment Effective Date,
except to the extent such representations and warranties specifically relate to
an earlier date, in which case such representations and warranties shall have
been true and correct on and as of such earlier date, (ii) no Default or Event
of Default shall have occurred after giving effect to this Amendment, and (iii)
since December 31, 2004, except as otherwise disclosed in writing by the Parent
to the Collateral Agent on or prior to the Third Amendment Effective Date, (A)
no Material Adverse Effect shall have occurred and (B) there shall not have
occurred any event that may reasonably be expected to result in any event
described in paragraph 3(e) of this Amendment; and

            (d) the date the Loan Parties shall have paid all fees and expenses
of the Agents related to this Amendment and the administration of the Financing
Agreement and the other Loan Documents, which have been invoiced to the Parent
as of the date hereof.

            6. Ratification and Confirmation.

            (a) Except as otherwise expressly provided herein, (i) the Financing
Agreement and the other Loan Documents are, and shall continue to be, in full
force and effect and are hereby ratified and confirmed in all respects, except
that on and after the Third Amendment Effective Date (A) all references in the
Financing Agreement to "this Agreement",

                                       5
<PAGE>

"hereto", "hereof", "hereunder" or words of like import referring to the
Financing Agreement shall mean the Financing Agreement as amended by this
Amendment and (B) all references in the other Loan Documents to the "Financing
Agreement", "thereto", "thereof", "thereunder" or words of like import referring
to the Financing Agreement shall mean the Financing Agreement as amended by this
Amendment, (ii) to the extent that the Financing Agreement or any other Loan
Document purports to pledge to the Collateral Agent, or to grant to the
Collateral Agent, a security interest in or lien on any collateral as security
for the Obligations or Guaranteed Obligations, such pledge or grant of a
security interest or lien is hereby ratified and confirmed in all respects, and
(iii) except as expressly agreed to in this Amendment, the execution, delivery
and effectiveness of this Amendment shall not operate as an amendment of any
right, power or remedy of the Agents or the Lenders under the Financing
Agreement or any other Loan Document, nor constitute an amendment of any
provision of the Financing Agreement or any other Loan Document.

            (b) Except as expressly set forth herein, this Amendment is not a
waiver of, or consent to, any Default or Event of Default now existing or
hereafter arising under the Financing Agreement or any other Loan Document and
the Agents and the Lenders expressly reserve all of their rights and remedies
under the Financing Agreement and the other Loan Documents, under applicable law
or otherwise.

            7. Release. Each Loan Party hereby acknowledges and agrees that: (a)
neither it nor any of its Affiliates has any claim or cause of action against
any Agent, any Lender or the L/C Issuer (or any of their respective Affiliates,
officers, directors, employees, attorneys, consultants or agents) and (b) each
Agent, each Lender and the L/C Issuer has heretofore properly performed and
satisfied in a timely manner all of its obligations to the Loan Parties and
their Affiliates under the Financing Agreement and the other Loan Documents.
Notwithstanding the foregoing, the Agents, the Lenders and the L/C Issuer wish
(and the Loan Parties agree) to eliminate any possibility that any past
conditions, acts, omissions, events or circumstances would impair or otherwise
adversely affect any of the Agents', the Lenders' and the L/C Issuer's rights,
interests, security and/or remedies under the Financing Agreement and the other
Loan Documents. Accordingly, for and in consideration of the agreements
contained in this Amendment and other good and valuable consideration, each Loan
Party (for itself and its Affiliates and the successors, assigns, heirs and
representatives of each of the foregoing) (collectively, the "Releasors") does
hereby fully, finally, unconditionally and irrevocably release and forever
discharge each Agent, each Lender and the L/C Issuer and each of their
respective Affiliates, officers, directors, employees, attorneys, consultants
and agents (collectively, the "Released Parties") from any and all debts,
claims, obligations, damages, costs, attorneys' fees, suits, demands,
liabilities, actions, proceedings and causes of action, in each case, whether
known or unknown, contingent or fixed, direct or indirect, and of whatever
nature or description, and whether in law or in equity, under contract, tort,
statute or otherwise, which any Releasor has heretofore had or now or hereafter
can, shall or may have against any Released Party by reason of any act, omission
or thing whatsoever done or omitted to be done on or prior to the Third
Amendment Effective Date arising out of, connected with or related in any way to
this Amendment, the Financing Agreement or any other Loan Document, or any act,
event or transaction related or attendant thereto, or the agreements of any
Agent, any Lender or the L/C Issuer contained therein, or the possession, use,
operation or control of any of the assets of any

                                       6
<PAGE>

Loan Party, or the making of any Loans or other advances, or the management of
such Loans or advances or the Collateral.

            8. Indemnity and Expenses. Each Loan Party hereby agrees (a) to
indemnify and hold harmless the Agents, each Lender and their shareholders,
partners, members, officers and representatives (each an "Indemnified Person")
from and against any and all claims, damages, liabilities and expenses,
including, without limitation, attorneys' fees and disbursements, which may be
incurred by or asserted against any such Indemnified Person in any
investigation, litigation, suit or action arising out of or relating to (i) the
release pursuant hereto of any security interest, lien, encumbrance or other
charge granted to the Collateral Agent or (ii) the payment of any of the
Obligations or Guaranteed Obligations as provided herein; (b) to pay all costs
and expenses in connection with the preparation, execution, delivery, filing and
recording of this Agreement, and the performance of any other acts and the
execution of any other documents required to effect the release of any security
pursuant hereto, including, without limitation, the fees and disbursements of
counsel to the Agents; and (c) to pay any and all stamp and other transfer or
filing taxes and fees payable or determined to be payable in connection with the
execution and delivery hereof or any release document pursuant hereto, and to
hold each Indemnified Person harmless from and against any and all liabilities
with respect to or resulting from any delay in paying or omission to pay such
taxes or fees.

            9. Miscellaneous.

            (a) This Amendment may be executed in any number of counterparts and
by the different parties hereto in separate counterparts, each of which shall be
deemed to be an original, but all of which taken together shall constitute one
and the same agreement. Delivery of an executed counterpart of this Amendment by
facsimile or electronic mail shall be equally effective as delivery of an
original executed counterpart.

            (b) Section and paragraph headings herein are included for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.

            (c) This Amendment shall be governed by and construed in accordance
with the law of the State of New York applicable to contracts made and to be
performed within such state.

            (d) The Loan Parties hereby acknowledge and agree that this
Amendment constitutes a "Loan Document" under the Financing Agreement.
Accordingly, it shall be an Event of Default under the Financing Agreement if
(i) any representation or warranty made by the Borrowers under or in connection
with this Amendment shall have been untrue, false or misleading in any material
respect when made, or (ii) the Loan Parties shall fail to perform or observe any
term, covenant or agreement contained in this Amendment.

                [remainder of this page intentionally left blank]

                                       7
<PAGE>

            IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.

                             BORROWERS:

                             ALLIED HOLDINGS, INC.

                             By: _______________________________________________
                                 Name:
                                 Title:

                             ALLIED SYSTEMS, LTD. (L.P.)

                             By: Allied Automotive Group, Inc.

                             By: _______________________________________________
                                 Name:
                                 Title:

                             GUARANTORS:

                             ALLIED AUTOMOTIVE GROUP, INC.
                             ALLIED FREIGHT BROKER, LLC
                             ALLIED SYSTEMS (CANADA) COMPANY
                             AXIS ARETA, LLC
                             AXIS CANADA COMPANY
                             AXIS GROUP, INC.
                             AXIS NETHERLANDS, LLC
                             COMMERCIAL CARRIERS, INC.
                             CORDIN TRANSPORT, LLC
                             CT SERVICES, INC.
                             F.J. BOUTELL DRIVEAWAY LLC
                             GACS INCORPORATED
                             KAR-TAINER INTERNATIONAL, LLC
                             QAT, INC.
                             RMX LLC
                             TERMINAL SERVICE LLC
                             TRANSPORT SUPPORT, LLC

                             By: _______________________________________________
                                 Name:
                                 Title:

                     THIRD AMENDMENT TO FINANCING AGREEMENT

<PAGE>

                             COLLATERAL AGENT AND LENDER:

                             ABLECO FINANCE LLC

                             By: _______________________________________________
                                 Name:
                                 Title:

                     THIRD AMENDMENT TO FINANCING AGREEMENT

<PAGE>

                             ADMINISTRATIVE AGENT AND LENDER:

                             WELLS FARGO FOOTHILL, INC., formerly
                             known as Foothill Capital Corporation

                             By: _______________________________________________
                                 Name:
                                 Title:

                     THIRD AMENDMENT TO FINANCING AGREEMENT

<PAGE>

                             LENDERS:

                             A3 FUNDING LP

                             By: A3 Fund Management LLC,
                                 its General Partner

                             By: _______________________________________________
                                 Name:
                                 Title:

                             STYX INTERNATIONAL, LTD.

                             By: Partridge Hill Overseas Management, LLC,
                                 as Investment Manager

                             By: _______________________________________________
                                 Name:
                                 Title:

                             THE LONG HORIZONS OVERSEAS FUND, LTD.

                             By: Old Stand Management, L.L.C.,
                                 as Investment Manager

                             By: _______________________________________________
                                 Name:
                                 Title:

                     THIRD AMENDMENT TO FINANCING AGREEMENT

<PAGE>

                             A4 FUNDING LP

                             By: A4 Fund Management Inc.,
                                 its General Partner

                             By: _______________________________________________
                                 Name:
                                 Title:

                     THIRD AMENDMENT TO FINANCING AGREEMENT
<PAGE>

                                    ADAMS STREET CBO 1998-1, LTD.

                                    By: ________________________________________
                                        Name:
                                        Title:

                                    1888 FUND, LTD.

                                    By: Guggenheim Investment Management,
                                        LLC as Collateral Manager

                                    By: ________________________________________
                                        Name:
                                        Title:

                                    FORTWIRTH CDO LTD.

                                    By: ________________________________________
                                        Name:
                                        Title:

                                    MAGMA CDO LTD.

                                    By: ________________________________________
                                        Name:
                                        Title:

                     THIRD AMENDMENT TO FINANCING AGREEMENT

<PAGE>

                                    STELLAR FUNDING, LTD.

                                    By: ________________________________________
                                        Name:
                                        Title:

                                    UPPER COLUMBIA CAPITAL COMPANY, LLC

                                    By: ________________________________________
                                        Name:
                                        Title:

                     THIRD AMENDMENT TO FINANCING AGREEMENT

<PAGE>

                                    FORTRESS CREDIT
                                    OPPORTUNITIES I LP

                                    By: Fortress Credit Opportunities I GP LLC,
                                    its general partner

                                    By: ________________________________________
                                        Name:
                                        Title:

                                    DB SPECIAL OPPORTUNITIES LLC

                                    By: Drawbridge Special Opportunities
                                        Advisors LLC, its Authorized Signatory

                                    By: ________________________________________
                                        Name:
                                        Title

                                    FORTRESS CREDIT
                                    OPPORTUNITIES II LP

                                    By: Fortress Credit Opportunities II GP LLC,
                                    its general partner

                                    By: ________________________________________
                                        Name:
                                        Title:

                     THIRD AMENDMENT TO FINANCING AGREEMENT

<PAGE>

                                    CONGRESS FINANCIAL CORPORATION
                                    (CENTRAL)

                                    By: ________________________________________
                                        Name:
                                        Title:

                     THIRD AMENDMENT TO FINANCING AGREEMENT

<PAGE>

                                    STANDARD FEDERAL BANK NATIONAL ASSOCIATION

                                    By: LaSalle Business Credit, LLC, a Delaware
                                        Limited liability company, successor by
                                        merger to LaSalle Business Credit, Inc.,
                                        a Delaware corporation, as Agent

                                    By: ________________________________________
                                        Name:
                                        Title:

                     THIRD AMENDMENT TO FINANCING AGREEMENT

<PAGE>

                                    TEXTRON FINANCIAL CORPORATION

                                    By: ________________________________________
                                        Name:
                                        Title:

                     THIRD AMENDMENT TO FINANCING AGREEMENT

<PAGE>

                                    HCM/Z SPECIAL OPPORTUNITIES LLC,
                                    formerly known as HZ Special Opportunities
                                    LLC

                                    By: Highbridge Capital Management, LLC

                                    By: ________________________________________
                                        Name:
                                        Title:

                     THIRD AMENDMENT TO FINANCING AGREEMENT

<PAGE>

                                    BERNARD GLOBAL LOAN INVESTORS, LTD.,
                                    formerly known as Bernard Leveraged Loan
                                    Investors, Ltd.

                                    By: ________________________________________
                                        Name:
                                        Title:

                                    BERNARD NATIONAL LOAN INVESTORS, LTD.

                                    By: ________________________________________
                                        Name:
                                        Title:

                     THIRD AMENDMENT TO FINANCING AGREEMENT
<PAGE>

                                    BERNARD GLOBAL LOAN INVESTORS, LTD.,
                                    formerly known as Bernard Leveraged Loan
                                    Investors, Ltd.

                                    By: ________________________________________
                                        Name:
                                        Title:

                                    BERNARD NATIONAL LOAN INVESTORS, LTD.

                                    By: ________________________________________
                                        Name:
                                        Title:

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