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Exhibit 10.22
METACREATIONS/MODUS MEDIA
TURNKEY/INVENTORY AGREEMENT
PARTIES:
This working agreement is made and entered into between MetaCreations
Corporation. ("MetaCreations"), 0000 Xxxxxxxxxxx Xxx., Xxxxxxxxxxx, XX 00000 and
Modus Media International, Inc. ("Modus Media"), 000 Xxxxxxxx Xx., Xxxxxxxx, XX
00000.
TERM:
The term of this agreement is from June 1, 1997 through May 31, 1998 and will be
reviewed annually.
TERMINATION:
This agreement can be canceled by either party with 90 calendar days written
notice and agreed to disposition of inventories.
DISPUTES:
Both parties agree to negotiate disputes in good faith and to submit to
arbitration should they fail to reach agreement.
PURPOSE:
To award MetaCreations turnkey deliverable requirements to Modus Media in
accordance with the provisions and prices in this agreement.
COMPONENT AND RAW MATERIAL PROCUREMENT:
Under written authorization from MetaCreations, Modus Media will produce or
procure components and raw material and retain ownership of these components on
MetaCreations
MetaCreations agrees to take ownership or dispose of all authorized materials
following the terms and conditions set forth in this document.
PURCHASE ORDER RELEASE:
Modus Media will require a hard copy Purchase Order prior to final assembly or
final shipment of products. These purchase orders will be consistent with the
price quotation which Modus Media will develop from the most current
specifications and requested quantities provided by MetaCreations. Purchase
Orders will be delivered in hard copy, fax, or electronic mail. At a
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minimum, purchase orders will consist of purchase order number, PO line number
parts, prices, and delivery dates.
This authorization may take the form of, but is not limited to, purchase order
releases, data downloads, electronic mail messages, MetaCreations generated
forecasts (interim), demand forecasts, or MetaCreations sign-off on production
planning or MRP sheets.
PURCHASE ORDERS:
Modus Media will require a blanket Purchase Order prior to final assembly or
final shipment of products. Purchase Orders will be delivered in hard copy, fax,
or electronic mail. At a minimum, purchase orders will consist of purchase order
number, PO line number parts, prices, and delivery dates.
Once purchase orders and delivery schedules have been mutually accepted,
subsequent changes in quantities, specifications, or delivery schedules will be
subject to price adjustments and production schedule changes under the terms of
this Agreement. Modus Media will make every effort to maintain price consistency
and reduce purchase price variance for MetaCreations in these situations. Modus
Media may invoice all completed kits authorized by MetaCreations purchase order
releases.
FORECASTS:
MetaCreations requirements typically call for shipment of product in a timeframe
that is shorter than the required components can be effectively procured or
produced. MetaCreations-generated forecasts will be used for component and raw
material procurement or production authorization. MetaCreations agrees to
provide Modus Media a 90 day rolling forecast on the last Tuesday of the
preceding month. This process will include Modus Media determining an economic
order quantity, not to exceed the MRP sign off quantity. Materials (components
and raw materials) will be purchased by Modus Media on MetaCreations behalf
using a net MRP process.
The MRP sheets will display the total forecasted demand and will be forwarded to
Summary/Demand Manager for sign off approval.
Two weeks safety stock levels for all finished goods will be maintained and work
orders will be placed for finished goods replenishment one the safety stock
level has been reached. MRP sheets stating this demand and a finished goods
usage report will be forwarded to MetaCreations for sign off approval.
Safety stock levels for components are (based on procurement lead times):
Component Description Safety Stock Level
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1C Black, one page printed matter On-Demand (as needed)
Disks and disk label imprinting On-Demand (as needed)
Complex Print (packaging) 11 Days
CD-ROM Media 15 Days
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DELIVERY:
All fulfillment orders will be shipped within 24 hours of receipt of electronic
file. Fulfillment orders will be shipped via the MetaCreations designated
carrier unless otherwise specified. Bulk orders will be shipped as specified on
the bulk special shipment request.
CANCELLATIONS:
Should MetaCreations decide to cancel purchase orders, forecasts, or deliveries,
discontinue work, or reduce total quantities, MetaCreations agrees to give Modus
Media written notice. This notice shall be in the form of an updated forecast,
purchase change order or electronic mail. In addition, MetaCreations agrees to
pay the material and labor at the stated selling price for work completed and in
process as of the date and time Modus Media receives notification of
cancellation. This payment may include manufacturing costs which are incurred by
Modus Media.
Modus Media agrees to work in good faith to limit the potential chargeable costs
by rescheduling piece part procurement, deliveries, manufacturing and assembly
as long as is reasonably possible and cost effective. Interrupted but completed
work and non-standard material may be invoiced in normal billing cycles once
MetaCreations has been informed. MetaCreations agrees to provide a revised
Purchase Order for the work completed at the time of cancellation.
EXCESS MATERIAL:
Excess material will be defined as the quantity of any given material
(components and customer specific raw material) which has been on-hand at Modus
Media for longer than 90 calendar days but not over 180 days. Modus Media's and
MetaCreations joint objective will be to consume or dispose of this material
prior to 180 days from its receipt in order to avoid storage charges. The
details of storage charges are described below. Modus Media may invoice for all
material on hand over 180 days.
SURPLUS MATERIAL:
Surplus material will be defined as the quantity of any given material
(components and customer specific raw material) which has been on-hand at Modus
Media for longer than 180 calendar days. Beginning on the 181st day this
inventory will be assessed a carrying and storage change equal to [**]% of the
Modus Media selling price/month or $[**] per pallet for consigned material.
Modus Media will notify MetaCreations monthly of any excess material. These
costs will be invoiced on the first day of each month. MetaCreations agrees to
provide a Purchase Order to cover these costs. Modus Media may invoice
components and customer specific raw material at the earlier of the termination
of this Agreement. MetaCreations agrees to pay carrying and storage charges
until the material is physically disposed of. All surplus material will be
dispositioned in the month in which it becomes identified as surplus.
[*] Confidential treatment requested
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Disposition involves:
1. The surplus material is consumed in the manufacturing process.
2. The surplus material is shipped "as is" to a destination of
MetaCreations choice.
3. The surplus material is scrapped at MetaCreations direction.
4. Upon disposition, Modus Media will invoice MetaCreations for any/all
dispositioned components at a mutually agreed price.
OBSOLETE MATERIAL:
Obsolete material will be defined as the quantity of any given material
(components and customer specific raw material) meeting any of the following
conditions:
1. All related top level SKU's are no longer being sold through normal
distribution channels.
2. It has been replaced by new or updated versions through a revision or
specification change process.
3. It has been eliminated from all applicable MetaCreations product
specifications.
As of the date material is identified as obsolete, it will be assessed storage
and carrying costs as described under "Surplus" above. MetaCreations agrees to
dispose of or consume all obsolete material also as outlined above.
In no event will Modus Media charge MetaCreations for materials Modus Media
elected to produce in excess of MetaCreations authorized component levels set
out in MetaCreations forecast. Modus Media assumes all risks of producing
material in excess of these authorized component levels. Only material which is
of a quality suitable for its original use may be classified as excess or
obsolete.
INVENTORY MANAGEMENT:
In order to assist MetaCreations in limiting obsolescence exposure and storage
charges, Modus Media agrees to utilize Inventory Management procedures as below:
Modus Media will maintain a maximum of one month supply of finished goods in
MetaCreations distribution inventory at any given time. Minimum finished levels
will be set by Modus Media in conjunction with MetaCreations management and will
be based on assembly lead-time and forecasted demand. Modus Media will be
responsible for monitoring finished goods minimum levels and replenishing to
preset maximums at appropriate times.
Modus Media will purchase component materials in economic order quantities. In
most cases these quantities will be less than 91 days forecasted demand.
Modus Media will monitor component inventory levels via Modus Media's MRP
system. Modus Media will load MetaCreations rolling 90 day forecast into the MRP
system each month. The system will net on-hand quantities against projected
demand. Modus Media purchasing will calculate economic order quantities from the
MRP net requirements, ensuring minimum inventory levels and continuity of
supply.
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SKU specific mid-month forecasts will be required for products which are
significantly exceeding forecasted demand or for new product introductions which
were not included in previous forecasts.
PRICING:
Pricing will be based on the following:
1. Assembly, Replication
Assembly and replication pricing is based upon a tiered pricing model (see
pricing tier matrix). MetaCreations will place assembly orders by specific
line SKU's (stock keeping unit) and the quantity ordered will determine the
per touch price.
TIER 1
Quantity of units per order [**]
2/c CD [**]
3.5" Diskette [**]
Assembly [**]
ZIP Assembly [**]
Project Management [**]
Labels [**]
TIER 2
Quantity of units per order [**]
2/c CD [**]
3.5" Diskette [**]
Assembly [**]
ZIP Assembly [**]
Project Management [**]
Labels [**]
TIER 3
Quantity of units per order [**]
2/c CD [**]
3.5" Diskette [**]
Assembly [**]
ZIP Assembly [**]
Project Management [**]
Labels [**]
[*] Confidential treatment requested
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TIER 4
Quantity of units per order [**]
2/c CD [**]
3.5" Diskette [**]
Assembly [**]
ZIP Assembly [**]
Project Management [**]
Labels [**]
2. Project Management
All kits will be assessed a project management fee of $[**]which includes
the following:
Job Engineering Storage (for the first 90 days)
Interplant Freight Dedicated Resources
Inventory Management Account Management
Transaction Reporting Order Processing
3. Distribution
Standard distribution turn time will be 24 hours. All orders received prior
to 5:00pm will be shipped before 5:00pm the following day.
End User: $[**]/order
$[**]/unit
Includes order processing, pick/pack/ship, order confirmation and packing
materials (excluding shipping carton)
Retail: $[**]/unit
Includes order processing, shipping and ship confirmation.
International: $[**]/order*
Includes preparation of export documentation.
*If order is received electronically, price is then reduced to $[**]/order.
Expedite Fees (same day shipment):
Expedites received before 2:00pm: $[**]/unit expedited
Expedites received after 2:00pm: $[**]/unit expedited
Modus Media will allow MetaCreations ten "free" cancellations per month,
after which case a cancellation fee of $[**] per canceled order will be
charged.
Thus cancellation charges are as follows:
0 - 10 cancellations per month: $0.00 (no charge)
11 + cancellations per month: $[**] per canceled order
[*] Confidential treatment requested
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All distribution charges to be invoiced on a monthly basis, based upon
activity.
4. Procured parts
Modus Media will assess a [**]% xxxx-up on all outsourced raw materials
purchased on behalf of MetaCreations.
5. Re-Work Pricing
In the event MetaCreations wishes to re-work current product held in
inventory, Modus Media will use the above tiered table per touch rate to
determine the rework pricing.
6. RMA's
Bulk Returned Material:
All returned material will be assessed a charge of $[**] per order.
End User Returns:
All end user returns will be based upon the following:
Confirm receipt of product
Monthly review and sortation
Detailed report of product status
All returns shipped directly into the Modus Media Fremont,
CA division Cost: $[**]/unit
7. Physical Inventory
One (1) physical inventory will be included in the project management fees
per year at the finished good level.
8. Other Pricing
Pricing for other services including but not limited to Telemarketing
(inbound/outbound). Registration, Technical Support, RMA service and
Software Exchange (OEM direct) is available upon request.
9. Terms of Payment
Net cash 30 days from date of invoice.
FILM, DIGITAL FILES, AND PLATES
All platemaking film made by us will be used solely for MetaCreations work and
become MetaCreations property upon payment of invoices. All film or electronic
files furnished by MetaCreations will be used solely for MetaCreations work and
will remain MetaCreations property. All plates made by us will be used solely
for MetaCreations work but will remain Modus Media's property. All electronic
imposition files we make from MetaCreations furnished
[*] Confidential treatment requested
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digital files, all type fonts used for the production of MetaCreations work, any
storage devices, disks, etc. we use to archive MetaCreations files and any
proprietary software, systems or technology we use to process MetaCreations
files will remain Modus Media's property.
MEDIA REPLICATION
For work involving diskette replication, MetaCreations will furnish original and
identical master diskettes or electronic files for each diskette title to Modus
Media's specifications. Diskette masters and copies made from the masters or
files will be used solely for MetaCreations work. Upon MetaCreations request the
master will be returned to MetaCreations, and the copies destroyed. For work
involving CD-ROM replication, all input files, CD-R's or compact discs furnished
by MetaCreations will be used solely for MetaCreations work and remain
MetaCreations property. All tooling, including masters, stampers or any other
tooling made by Modus Media will be used solely for MetaCreations work but will
remain Modus Media's property.
EXPORT REQUIREMENTS
MetaCreations represents to Modus Media that all MetaCreations shipping
instructions to Modus Media will comply with all applicable export laws, rules,
and regulations. Modus Media will not be required to make a particular
distribution if the U.S. government would require an export license for such.
Modus Media performs this work as an agent of MetaCreations and MetaCreations
agrees to indemnify Modus Media against any claims that MetaCreations shipping
instructions violate applicable export requirements.
TERMS OF PAYMENT, INTEREST, COLLECTION COSTS, AND BILLING DISPUTES
The Terms of Payment statement immediately follows the prices. Should any
invoice issued hereunder become past due, MetaCreations agree to pay interest at
the rate of one and one-half percent (1 -1/2%) per month, or the lawful limit if
less, on all amounts past due as well as all the costs of collection, if any,
including, but not limited to, reasonable attorney's fees. Interest will be
calculated from the invoice due date to the date payment is received. Failure to
xxxx for interest due will not constitute a waiver of Modus Media's right to
charge interest. Should any portion of an invoice be disputed, MetaCreations
agree to pay the undisputed portion according to its terms and MetaCreations
will notify us promptly of the dispute. Both parties agree to use their best
efforts to resolve the disputed portion of the invoice within thirty (30) days
of learning of the dispute.
BANKRUPTCY
If either party shall be adjudicated a bankrupt, institute voluntary proceedings
for bankruptcy or reorganization, make an assignment for the benefit of its
creditors, apply for or consent to the appointment of a receiver for it or its
property, or admit in writing its inability to pay its debts as they become due,
the other party may terminate this Agreement by written notice. Any such
termination will not relieve either party from any accrued obligations
hereunder.
GUARANTEE AND LIMITATION OF LIABILITY
Modus Media will perform the work in a good workmanlike manner and in accordance
with the specifications and production schedule. In no event the will Modus
Media be liable for special or consequential damages, including, but not limited
to, lost profits or business.
Modus Media will however, replace all defective product due to Modus Media error
or negligence including all reasonable shipping costs.
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RESPONSIBILITY FOR SUBJECT MATTER
In furnishing us matter to reproduce, or distribute, or to have incorporated in
the completed product, MetaCreations represent and warrant that none of such
matter infringes any copyright (either as furnished to Modus Media by
MetaCreations or as altered by us at your direction), or patent, is libelous, or
otherwise violates the rights of or will cause damage or injury to other
persons, and MetaCreations agree to indemnify and save Modus Media harmless from
all losses, damages and expenses, including attorneys' fees, which Modus Media
may suffer as the result of any claim of such violation, damage, or injury.
WORK STOPPAGES
Modus Media will not be liable for delays or non-performance of this Agreement
occasioned by strikes, fires, accidents, or by causes beyond our control
including, but not limited to, the inability to obtain necessary materials or
utilities. In the event of a stoppage or delay resulting from any such cause,
Modus Media will perform such parts of the work as Modus Media are capable of
performing, and in the event MetaCreations place any other part of the work
elsewhere, Modus Media will be entitled to resume the same as promptly as
practicable.
ASSIGNMENT
Neither party to this Agreement will assign any right(s) hereunder without the
prior written consent of the other party, except that we may assign payments due
Modus Media to any affiliated company without consent. Subject to this consent,
this Agreement will inure to the benefit of and will bind the successors and
assigns of the parties hereto.
USE OF LOGOS
Modus Media shall submit to MetaCreations all advertising, sales promotion,
press releases and other publicity relating to this Agreement or the work
performed hereunder to thereunder, wherein MetaCreations name or xxxx is
mentioned or language from which the connection of said name or xxxx, or the
name of xxxx of any affiliate of MetaCreations, therewith may be inferred or
implied, and Modus Media further agrees not to publish or use such advertising,
sales promotion, press releases, or other publicity with out MetaCreations prior
written approval, provided, however, that if Modus Media does not receive a
response from MetaCreations within (10) business days following such submission,
then such approval shall be presumed.
INSURANCE
Modus Media will carry at our expense fire, sprinkler leakage and extended
coverage insurance, subject to the usual exclusions, limitations, and conditions
of such policies on the actual cash value of all our materials, work in process,
and all production completed and not shipped, and on the actual cash value of
all positives, copy, artwork, paper and other materials furnished by
MetaCreations while in our care, custody and control. If MetaCreations property
is damaged as a result of an insured peril under the applicable insurance
policy, then, at Modus Media's option, Modus Media will either replace
MetaCreations damaged property or reimburse MetaCreations for the actual cash
value of the damaged property. If Modus Media elects to reimburse MetaCreations
for the damaged property's actual cash value, the amount payable to
MetaCreations shall be limited to the proceeds of such policy plus any related
deductible, if any, applied to the claim for damage to MetaCreations property.
For positives and other media Modus Media's insurance coverage and Modus Media's
liability shall be limited to the cost of blank film or other media and the cost
of duplication from an original or other copy.
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Modus Media currently maintains at its sole cost and expense, worker's
compensation insurance as required by applicable law, general liability
insurance with limits of not less than $1,000,000 bodily injury per occurrence
(including death) and $500,000 property damage per occurrence. In addition,
Modus Media currently maintains automobile liability insurance with a limit of
not less than $1,000,000 bodily injury (including death) per occurrence. Modus
Media currently maintains contractual liability coverage. At all times under
this Agreement Modus Media shall maintain appropriate insurance coverage or that
which is required by law for a business of like kind. MetaCreations may at it's
option require Modus Media to obtain and provide to them a certificate of
insurance.
NON-DISCLOSURE
Except as an authorized representative of each party may otherwise consent in
writing, neither party will disclose, duplicate or publish at any time any
proprietary information, knowledge or data of the other that may be obtained
during the term of the Agreement. Each party's obligation hereunder shall be
satisfied if it uses the same degree of care as it does for its own information
of a similar character. The provisions of this section will not apply to either
party's proprietary information (i) which becomes available public knowledge
without the fault of the other, (ii) which becomes available to the other
through a third party, (iii) which has independently developed by the other, or
(iv) of which the other was aware prior to the execution of this agreement.
PASSING OF TITLE
Title and possession will pass to MetaCreations upon delivery or upon date of
final invoicing, whichever is earlier, f.o.b. our final plant of manufacture.
MISCELLANEOUS
Modus Media is an independent contractor and will be free to exercise its
discretion and independent judgment as to the method and means of performance of
the work tasks. Work on this contract will be performed by employees of Modus
Media and any of their subcontractors or consultants. This agreement between
MetaCreations and Modus Media dated hereof contains the entire understanding of
the parties with respect to this matter contained herein.
LIMITATION OF WARRANTY
EXCEPT AS SET FORTH HEREIN, MODUS MEDIA MAKES NO REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE.
GOVERNING LAW
The Agreement will be governed by the laws of the State of California
If this proposal meets with MetaCreations approval, please sign below.
MetaCreations signature below means all the terms and conditions at the bottom
of this page and on the attached pages are incorporated herein and made a part
of this Agreement. Following your approval and upon confirmation by an officer
of Modus Media International Inc., the approved proposal will then constitute a
contract between MetaCreations and Modus Media.
Respectfully submitted,
Modus Media International Inc.
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APPROVED:
MetaCreations
By /s/XXXXXXX X. XXXXXXXXX By /s/XXXX XXXX
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MetaCreations Corporation Modus Media International
Sr. VP and CFO VP Operations - Fremont CA Ops.
Date June 30, 1997
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