Exhibit (10)(hh)
EXCLUSIVE CD MANUFACTURING AGREEMENT
EXCLUSIVE CD MANUFACTURING AGREEMENT, made as of the 12th day
of September 1997, by and between Sofsource, Inc. with offices at 000 Xxxxx
Xxxxxxx, Xxxxxxxx X, Xxxxx 000, Xxx Xxxxxx, Xxx Xxxxxx 00000 ("Sofsource"), and
Allied Digital Technologies Corporation, a Delaware corporation having its
principal place of business at 000 Xxxx Xxxxx, Xxxxxxxxx, Xxx Xxxx 00000
("Allied").
W I T N E S S E T H
WHEREAS, Sofsource desires to appoint Allied as the exclusive
manufacturer of Sofsource's Product Requirement for its Sofsource Division
during the Term, as such capitalized terms are defined herein, and Allied wishes
to serve as the exclusive manufacturer of Sofsource's Product Requirement during
the Term, all on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants contained herein, the parties hereby agree as follows:
1. Definitions. As used herein, the following terms shall have
the respective meanings set forth below:
(a) "Affiliated Entity" shall mean any entity directly or
indirectly owned in whole or in part by Sofsource or any such Affiliated Entity,
including but not limited to Media Safari.
(b) "Allied Notice" shall have the meaning set forth in
Section 9(d).
(c) "Sofsource Group" shall mean the Sofsource Division of
Sofsource and Affiliated Entities and each entity with which Sofsource
currently or during the Term enters into a joint distribution agreement for any
computer disc or for which Sofsource controls or agrees to control the
assignment of manufacturing orders for such discs. Each reference to Sofsource
in this Agreement shall be deemed to include and refer to each member of the
Sofsource Group unless the context otherwise requires.
(d) "Sofsource Notice" shall have the meaning set forth in
Section 9(c).
(e) "Assembly Order" shall have the meaning set forth in
Section 4(d).
(f) "Communications" shall have the meaning set forth in
Section 22.
(g) "Components" shall mean the following with respect to
Product manufactured hereunder, all of which components shall be delivered to
Allied by Sofsource at Sofsource's own expense, and all of which shall be
referenced at the time of delivery to the Replication Order to which such
Components relate:
(1) Mastering discs from a 1630, CD, CD-R, DAT or
8 mm. source master;
(2) Film for two (2) to five (5) color disc
printing, as required;
(3) Booklets/folders and tray liners as appropriate;
and
(4) Special Materials (e.g. stickers, tray cards,
registration cards, inserts, etc.), if applicable.
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(h) "Contract Year" shall mean any twelve-month period of
time during the Term ending on the anniversary of the date of this Agreement
first above stated.
(i) "Fulfillment" shall mean the services described in
Exhibit C attached hereto.
(j) Initial Orders" shall have the meaning set forth in
Section 4(a).
(k) "Inventory" shall have the meaning set forth in Section
11(b).
(l) "Product" shall mean a computer disc ("CD") replicated
from a source master supplied by Sofsource, with materials and services
described in Exhibit A attached hereto and packaged in one of the formats
described in Exhibit B attached hereto.
(m) "Product Requirement" shall mean the aggregate amount of
all Product required by the Sofsource Group in the Territory during the Term.
(n) "Reorders" shall have the meaning set forth in Section
4(b).
(o) "Replication Orders" shall mean an order from Sofsource to
Allied for a specified quantity of Product to be replicated and delivered to the
Warehouse (or other location specified by Sofsource) for which Allied has been
supplied by or on behalf of Sofsource with all required Components.
(p) "Shipping Orders" shall have the meaning set forth in
Section 4(e).
(q) "Standards" shall mean industry CD standards.
(r) "Term" shall have the meaning set forth in Section 3.
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(s) "Third Party Manufacturer" shall have the meaning set
forth in Section 9(c).
(t) "Third Party Offer" shall have the meaning set forth
in Section 9(c).
(u) "Transactional Documents" shall have the meaning set
forth in Section 28.
(v) "Warehouse" shall have the meaning set forth in
Section 4(a).
2. Appointment, Acceptance, Exceptions.
(a) Appointment and Acceptance. Subject to the provisions of
Section 2(b), Sofsource hereby appoints Allied as the exclusive manufacturer of
all the Product Requirement of Sofsource during the Term and Allied hereby
accepts the appointment as the exclusive manufacturer of Product Requirement of
Sofsource during the Term, on the terms and conditions herein provided.
(b) Notwithstanding the provisions of Section 2(a), it is
agreed as follows:
(i) Sofsource may utilize other entities for packaging and
Fulfillment of CD's replicated by Allied except that Allied shall exclusively
Fulfill jewel-cased Product at the Warehouse; (it is anticipated that multi-CD
sets in ROM boxes will be assembled and Fulfilled by JVC in Atlanta, Georgia for
at least the first year of this Agreement); and
(ii) with respect to Replication Orders for one-hundred
thousand (100,000) or more units of the Products, Sofsource may request Allied
in its Replication Order for such Products to notify Sofsource as to how many of
such units Allied will be able to deliver within the time specified in such
Replication Order (which time, at the minimum
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shall be within the parameters set forth in Section 4(a) hereof). Upon receipt
of any such request Allied shall promptly notify Sofsource of its delivery
capabilities and, to the extent Allied notifies Sofsource that it is not capable
of delivering all of the number of units of Products within the timeframe
designated by Sofsource, Sofsource shall be free to have such number of units
that Allied is unable to so deliver manufactured by another manufacturer and
such Replication Order shall be deemed to be a Replication Order only for the
number of units of Products which Allied notifies Sofsource that it is capable
of delivering.
3. Term. The initial term of this Agreement shall
commence as of the date hereof and shall end on July 14, 2000, unless sooner
terminated pursuant to the provisions of this Agreement. The term of this
Agreement will be renewed for additional one year terms unless either party
gives notice of non-renewal to the other party at least ninety (90) days before
the end of the initial term or the then current one-year renewal term. (The
initial term and each one year renewal term in effect are referred to as the
"Term" as applicable).
4. Orders and Delivery Schedule.
(a) Replication Orders. Sofsource shall deliver written
Replication Orders to Allied from time to time. Replication Orders for
selections of Product which have not been delivered previously by Allied to
Sofsource Group hereunder ("Initial Orders") shall be filled and delivered to
Allied's warehouse in Clinton Tennessee, to such other fulfillment facility
designated by Allied (either, a "Warehouse") or to such other location specified
by Sofsource, not later than seven (7) business days after the receipt by Allied
of all
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Components of such Replication Orders. In the event that Sofsource shall
designate a location for delivery of a Replication Order other than a Warehouse,
the time for delivery shall be extended by the difference in carrier's time
between delivery to Clinton, Tennessee and such other location.
(b) Reorders. Replication Orders for selections of Product
which have been delivered previously by Allied to Sofsource hereunder
("Reorders") shall be filled and delivered to the Warehouse, not later than five
(5) business days after the receipt by Allied of all Components of such
Replication Orders, with deliveries to other than a Warehouse to be subject to a
similar extended delivery time as provided in Section 4(a) above.
(c) Replication Order and Reorder Contents. Each Replication
Order and Reorder shall include the following:
(1) Sofsource purchase order number;
(2) the quantity and description of the Product ordered;
(3) the Sofsource applicable catalog designation, if any;
(4) the selection number of each unit of Product ordered
and the unit replication price therefor, as determined in accordance with
Section 10 hereof;
(5) shipping instructions if applicable;
(6) delivery date(s) consistent with Section 4(a) and
4(b) above; and
(7) any other special instructions applicable to such
Replication Order.
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(d) Assembly Orders. Sofsource through its authorized
personnel, shall deliver written assembly orders to Allied from time to time,
specifying in detail the assembly and packaging format to be used with specific
numbers of specific items of Product which have been Replicated and are
maintained in Inventory at a Warehouse. The designated format shall be one of
the formats described in Exhibit B hereto, at the price therein designated
("Assembly Orders"). All Assembly Orders shall be fulfilled within three (3)
business days after receipt by Allied of all Components of such Assembly Orders.
(e) Shipping Orders. All Inventory (as defined in Section
11(b) hereof) stored by Allied at the Warehouse for and on behalf of Sofsource,
shall be shipped by Allied within thirty six (36) hours of receipt of written
shipping orders ("Shipping Orders") received by Allied from Sofsource personnel
authorized to place such Shipping Orders and containing at least the following
information: Sofsource shipping order number; name and address of customer to
whom shipped; method of shipment and identity of carrier; quantity and identity
of each Product to be shipped. Except as may be required pursuant to Section
9(e) hereof, all prices described in the Exhibits hereto are F.O.B. the
Warehouse. Allied shall use its best efforts to complete and ship orders in
accordance with the priority and delivery schedules requested by Sofsource.
(f) Minimum Orders. All Initial Orders shall be for a minimum
quantity of 5,000 units and all Reorders shall be for a minimum quantity of
1,000 units.
(g) Authorized Personnel. Sofsource shall designate, from time
to time, by written notice to Allied, the names of its personnel who are
authorized to place Replication
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Orders, Assembly Orders and Shipping Orders for Product. Allied will accept
Replication Orders, Assembly Orders and Shipping Orders only from such
designated personnel. Replication Orders, Assembly Orders and Shipping Orders
shall be given in writing; provided that in cases of emergency, any of such
Orders may be given by telephone. Replication Orders given by telephone shall
include all information required by Section 4(c), Assembly Orders given by
telephone shall include all information required by Section 4(d) and Shipping
Orders given by telephone shall include all information required by Section 4(e)
and each shall be confirmed by a written Replication Order, Assembly Order
and/or Shipping Order, as the case may be, delivered to Allied within
twenty-four (24) hours thereof, by personal delivery or by telex or telecopier.
(h) Variance of Quantity. Replication Orders shall be
manufactured, delivered and billed within a variance of plus or minus ten
(plus minus 10%) percent of the quantities set forth in Sofsource's Replication
Orders, but in no event more than two thousand (2,000) units as to any
Replication Order.
5. Customer Service Representative. Allied shall employ, at
its sole cost and expense, a Customer Service Representative whose primary
responsibility shall be to facilitate Allied's performance under this Agreement
with respect to day-to-day operational matters. Such person may be given other
duties provided they do not prevent his or her ability to perform the foregoing
services. Such person shall be available to Sofsource during normal business
hours to discuss Allied's performance under this Agreement. If Sofsource, in
good faith, becomes dissatisfied with such person, Sofsource may request a
substitution
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and Allied shall comply with such request by appointing a new Customer Service
Representative within a reasonable time after such request.
6. Startup. At Sofsource's costs and expense, it will
expeditiously arrange to deliver to Allied premises at Hauppauge, New York and
to the Warehouse, its current inventory of Components and Products and Allied
shall cooperate with Sofsource in scheduling the receipt of such items at its
appropriate location.
7. Quality of Product.
The quality of Product manufactured by Allied for Sofsource,
and all of the materials supplied by Allied in connection with the manufacture
of Product hereunder, shall meet or exceed the Standards.
8. Exclusivity. Except as provided in Section 2 hereof,
Sofsource shall purchase from Allied not less than one hundred percent (100%) of
Sofsource's Product Requirement.
9. Allied's Right of First Refusal on New Products.
(a) New Media Products. During the Term, Sofsource
agrees that it will not place Replication Orders with any manufacturer other
than Allied for Sofsource's requirements of any new product requiring new media
(e.g. DVD) unless it has first complied with the provisions of this Section 9.
(b) Solicitation of Orders. If, during the Term,
Sofsource requires the manufacture of any product requiring new media, including
but not limited to DVD, then Sofsource may solicit bids from other manufacturers
of such product for the purpose of
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obtaining the lowest cost for the manufacture of such new product, consistent
with acceptable quality standards as set forth in this Agreement.
(c) Notice of Offers. If, after such solicitation
Sofsource receives and intends to accept a written bona fide offer (the "Third
Party Offer") from a reputable manufacturer of such new product (the "Third
Party Manufacturer") to manufacture such new product for Sofsource in accordance
with such quality standards, then, before accepting such Third Party Offer
Sofsource shall first give Allied written notice thereof, which notice (the
"Sofsource Notice") shall include a copy of the Third Party Offer and shall set
forth all of the material terms and conditions of such Third Party Offer,
including but not limited to all of the elements relating to the price, quantity
and delivery schedules of the new product to be manufactured pursuant to such
Third Party Offer.
(d) Right of First Refusal. Allied shall have the right
and option to manufacture for and sell to Sofsource the new product specified in
the Sofsource Notice, in the quantities and at the same price as set forth in
the Third Party Offer and otherwise on the terms and conditions set forth in
this Agreement, by so notifying Sofsource via telecopier or in writing, within
seventy-two (72) hours of Allied's receipt of the Sofsource Notice (the "Allied
Notice").
(e) Consummation of Right of First Refusal. If Allied
timely delivers the Allied Notice, then Sofsource shall provide Allied with
Replication Orders for the new product specified in the Sofsource Notice and
Allied shall, subject to the terms and
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conditions of this Agreement, manufacture such new product at the price set
forth in the Sofsource Notice.
10. Prices and Payment. The unit cost of replication for
each unit of Product replicated hereunder is set forth in Exhibit A attached
hereto and includes the services and materials therein described except to the
extent to be supplied by Sofsource. The unit cost of package assembly for each
unit, multiple unit or long box package, for Product to be sold hereunder is set
forth in Exhibit B attached hereto and includes the services and materials
therein described except registration cards and security stickers. The prices
for Allied's services related to Shipping (fulfillment) are set forth in Exhibit
C attached hereto.
(a) Reduction in Product Ordered, Failure by Sofsource to
Deliver All Components for Replication Order or Assembly Order. In the event
Sofsource reduces the quantity of a Product ordered at any time after a
Replication Order relating to such Product has been accepted by Allied, or in
the event Sofsource fails to deliver to Allied all of the Components necessary
to complete a Replication Order or Assembly Order after Allied has commenced
production of the Products required pursuant thereto and otherwise incurred
costs in connection therewith, then Sofsource shall reimburse Allied promptly
for any and all actual and documented costs incurred by Allied as a result of
such reduction or failure to deliver, which costs shall be set forth in the form
of an invoice from Allied to Sofsource therefor, payable on demand.
(b) Customer Returns and Defective Product.
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Allied agrees to receive all returns of Products made by Sofsource's customers
and all allegedly defective Product at the Warehouse and to process same as
described in Exhibit C hereof, within five (5) business days of receipt of same.
The price for such services shall be the prices set forth in Exhibit C hereof,
to be invoiced weekly. Allied shall furnish a report to Sofsource of all such
activity and its disposition of such Products at least once each calendar week.
(c) Payment. Except as otherwise expressly provided
herein, payment for all Product and any other service performed by Allied which
is invoiced hereunder shall be due and payable sixty (60) days from the date of
Allied's invoice therefor with a two percent (2%) discount for payment within
thirty (30) days after the invoice date, and shall be made by check payable to
Allied delivered to Allied at the address set forth above or at such other
address as may be designated in writing from time to time by Allied or by wire
transfer pursuant to then current wiring instructions furnished by Allied to
Sofsource. Allied shall invoice Sofsource for Product manufactured and packaged
in jewel boxes hereunder upon the delivery by Allied of such Product to the
Warehouse and shall invoice all other charges as provided in this Agreement or
as and when incurred.
(d) Credit. Should Sofsource claim that it is entitled
to an adjustment or credit on any invoice, it shall do so promptly, in writing,
but in no event later than sixty (60) days after Sofsource's receipt of such
invoice.
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11. Copyrights, Title and Inventory.
(a) Copyrights. Allied acknowledges that the copyright
in all Components delivered by Sofsource to Allied, including without
limitation, all masters, and the copyright in all completed Product manufactured
hereunder, shall at all times be owned or controlled by Sofsource. Any rights
not specifically licensed to Allied pursuant to the terms of this Agreement are
hereby expressly reserved to Sofsource except to the extent required by Allied
to perform its obligations hereunder.
(b) Title. Title to all Components furnished by
Sofsource at all times during the manufacturing process, and title to all
Product upon completion of replication thereof, (the foregoing, collectively,
"Inventory") shall at all times reside in Sofsource and, upon the execution of
this Agreement, Sofsource shall execute and deliver to Allied a letter agreement
in the form of Exhibit D hereto pursuant to which Sofsource acknowledges (i)
that title to Product passes to Sofsource upon completion of replication
thereof, notwithstanding that such Product may not yet have been shipped to the
Warehouse or to Sofsource and (ii) that each invoice sent by Allied to Sofsource
with respect to such Product represents a definitive and final sale of such
Product to Sofsource and Sofsource shall pay the same when due.
(c) Product and Component Storage and Charges. Allied
shall store Inventory at the Warehouse (except that Components may be stored at
Hauppauge, New York) at no additional charge other than as follows: commencing
with the first calendar month next following the date which is three (3) months
from the date of this Agreement,
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Allied shall be entitled to charge and Sofsource will pay upon demand, a charge
of $6.50 per calendar month per pallet or partial pallet of any Product which is
in a retail package or of any Component, in excess of an average sixty (60) day
requirement thereof, determined as follows: (i) with respect to a Product in a
retail package, Allied shall maintain a continuous rolling three (3) most recent
calendar month record of shipment of such Product and two- thirds (2/3) of the
number of such Product shipped during the latest such three (3) month period
shall be deemed to be the average sixty (60) day requirement of such Product at
the end of such period; and (ii) with respect to a Component, Allied shall
maintain a continuous rolling three (3) most recent calendar month record of
replication of Products requiring such Component and two thirds (2/3) of the
number of such Product replicated during the latest such three (3) month period
shall be deemed to be the average sixty (60) day requirement of such Component
at the end of such period.
(d) Protection, Insurance. Allied shall exercise
reasonable care and diligence to protect the Inventory and shall obtain
insurance coverage with sufficient policy limits to cover the replacement, at
cost, of any Inventory stored at the Warehouse. Such insurance coverage shall
name Sofsource as an additional insured and, upon the reasonable request of
Sofsource, Allied shall deliver to Sofsource a certificate evidencing such
coverage. In addition, Allied shall notify Sofsource of any material changes in
such coverage as it relates to Inventory stored at Allied's facilities.
Notwithstanding the foregoing, in no event shall Allied be liable to Sofsource
for incidental or consequential damages (including without limitation, lost
profits) resulting from the loss of or damage to any such Inventory.
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(e) Physical Inventory. Once during each Contract Year,
Allied shall, at the request of Sofsource, at Allied's expense, take a physical
inventory of all of Sofsource's Inventory located at Allied's premises.
Sofsource shall have the right, at its own expense, to have a designated
representative present at the taking of such physical inventory for the purpose
of verifying the accuracy thereof. Allied shall furnish a copy of the physical
inventory report to Sofsource promptly after its completion, but not later than
fifteen (15) business days after the completion of the taking of the physical
inventory. As soon as possible, but in no event later than sixty (60) days after
Sofsource's receipt of such report, Sofsource shall propose to Allied, in
writing and accompanied by appropriate documentation, any adjustments thereto
which Sofsource, in good faith, believes to be necessary. If Sofsource shall
fail to do so, then Allied's report shall be binding upon Sofsource. If Allied,
within twenty (20) days after its receipt of any such proposed adjustments,
shall not dispute the same in good faith, then such proposed adjustments shall
be binding upon Allied. If, as a result of the foregoing procedure, it shall
appear that on an overall basis there is a shortfall in physical inventory with
respect to either Sofsource's Components or Product, then Allied shall pay
Sofsource an amount equal to such overall shortfall. The amount of any shortfall
shall be calculated at Sofsource's actual out-of-pocket costs of manufacture for
each Component and unit of Product.
12. Allied's Representations and Warranties. Allied hereby
represents and warrants to Sofsource as follows:
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(a) Power and Authority. Allied has all requisite power
and authority to enter into, execute and deliver this Agreement and to perform
fully its obligations hereunder.
(b) Enforceability. Allied has taken all actions
necessary to authorize it to enter into and perform its obligations under this
Agreement and to consummate the transactions contemplated herein. This Agreement
is the legal, valid and binding obligation of Allied, enforceable in accordance
with its terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally and subject to the availability of equitable
remedies.
(c) No Conflicts. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated herein
will, to the knowledge of Allied, violate, conflict with, or constitute a
default under any material contract or other agreement or instrument to which
Allied is a party or by which it or its property is bound.
(d) No Editing of Discs. Allied shall not edit, change
nor add any material to any CD manufactured hereunder pursuant to the terms of a
Replication Order except pursuant to written instructions from Sofsource.
13. Sofsource's Representations and Warranties. Sofsource
hereby represents and warrants to Allied as follows:
(a) Power and Authority. Sofsource has all requisite
power and authority to enter into, execute and deliver this Agreement and to
perform fully its obligations hereunder.
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(b) Enforceability. Sofsource has taken all actions
necessary to authorize it to enter into and perform its obligations under this
Agreement and to consummate the transactions contemplated herein. This Agreement
is the legal, valid and binding obligation of Sofsource, enforceable in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally and subject to the availability of
equitable remedies.
(c) No Conflicts. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated herein
will, to the knowledge of Sofsource, violate, conflict with, or constitute a
default under any material contract or other agreement or instrument to which
Sofsource is a party or by which it or its property is bound.
(d) No Infringement. Sofsource has all rights necessary
to grant Allied the rights granted herein for the replication, processing,
manufacturing and packaging of Product hereunder and the Product replicated,
processed, manufactured and packaged by Allied hereunder does not and will not
infringe upon any statutory or common law copyright, or infringe the right of
privacy of any person, or contain any obscene, slanderous or libelous material
or any material otherwise unlawful or in contravention of the rights of any
person.
14. Royalty Payments. Sofsource shall be solely
responsible for and shall pay any and all royalty payments due third parties by
Sofsource in respect of Product manufactured hereunder and Allied shall have no
responsibility or liability therefor whatsoever.
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15. Taxes. Sofsource shall be solely responsible for and
shall pay when due all sales, use and gross receipt taxes, however designated,
arising from the sale by Allied to Sofsource or by Sofsource to third parties,
of Product manufactured hereunder, other than income taxes of Allied. If any
taxing authority shall levy an assessment against Allied for such taxes, Allied
shall notify Sofsource thereof and Sofsource shall remit promptly all such
amounts to Allied, including penalties and interest, if any. Sofsource will
furnish Allied with its sales tax resale number and any other similar evidence
of its right to purchase Product from Allied free of sales taxes.
16. Indemnification.
(a) Indemnification by Sofsource. Sofsource hereby agrees
to indemnify and hold harmless Allied and each of its officers, directors,
employees, agents and affiliates, from and against any and all claims, demands,
causes of action, liabilities, actual loss or damage, costs and expenses
(including reasonable attorney's fees and disbursements and court costs)
asserted against or incurred by Allied by reason of, arising out of or in
connection with (i) a breach of any representation or warranty of Sofsource or
(ii) the failure of Sofsource to perform any obligation required by this
Agreement to be performed by it. Notwithstanding anything to the contrary
contained in this Agreement, Allied makes no warranties, express or implied, as
to the Products and all such warranties are waived, except that Allied warrants
that the Products will be free from material defects and will conform to the
masters submitted by Sofsource at the time of shipment thereof. Allied's sole
obligation and liability for defective or non-conforming Products shall be to
replace such
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defective or non-conforming Products at no additional charge to Sofsource and
Sofsource shall have no right to any damages from or any other right or remedy
whatsoever against Allied.
(b) Indemnification by Allied. Allied hereby agrees to
indemnify and hold harmless Sofsource and each of its officers, directors,
employees, agents and affiliates, from and against any and all claims, demands,
causes of action, liabilities, actual loss or damage, costs and expenses
(including reasonable attorney's fees and disbursements and court costs)
asserted against or incurred by Sofsource by reason of, arising out of or in
connection with (i) a breach of any representation or warranty of Allied as set
forth in this Agreement or (ii) the failure of Allied to perform any obligation
required by this Agreement to be performed by it.
(c) Notice; Defense of Claims. The parties shall give prompt
written notice to each other of each claim for indemnification hereunder,
specifying the amount and nature of the claim, and of any matter which in the
opinion of such party is likely to give rise to an indemnification claim. If the
party who is indemnifying the other acknowledges in writing that it is so
indemnifying the other, the indemnifying party shall have the right, at its own
expense and with counsel of its choice, to take over the defense of such matter
so long as such defense is expeditious. Notwithstanding the foregoing, (i) each
party shall have the right to participate at its own expense in the defense of
any such matter or its settlement, and (ii) no claim shall be settled without
the consent of the indemnified party if in the reasonable opinion of such party
its financial condition or business would be materially
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impaired thereby. The failure by either party to notify the other of a claim for
indemnification hereunder shall not relieve the indemnifying party from any
obligation that it may have hereunder, except to the extent that it has been
prejudiced in any material respect by such failure, or from any obligation or
liability that it may otherwise have to the indemnified party.
17. Force Majeure. In the event of any act of God or force
majeure, such as strikes, lock-outs, accidents, fires, delays of carriers,
delays in delivery of materials, labor controversies, breakdowns in key
equipment, government actions, war or any other causes beyond the control of the
parties hereto, neither party shall be responsible for delay in performance
hereunder nor shall it incur liability to the other due to the resulting
inability to perform; provided that the party relying on such events of force
majeure gives notice to the other party of the cause and anticipated duration
within thirty (30) days of the occurrence. If for any of the foregoing reasons,
Allied is unable to perform its obligations hereunder, Sofsource may obtain
Product from other sources during the period Allied is unable to perform.
18. Termination. Either party hereto shall have the right,
in addition to any other rights it may have hereunder, at law or otherwise, to
terminate the Term by giving written notice to the other party with immediate
effect in any of the following events:
(a) Material Breach. The failure of the other party to
rectify a material breach of this Agreement within thirty (30) days after the
delivery of written notice from the non-breaching party specifying the nature of
such breach.
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(b) Force Majeure. An event of force majeure, as described in
Section 17 above, which continues for a period of more than ninety (90) days.
(c) Insolvency. The occurrence of any of the following events
in respect of either party:
(1) the commencement against such party of an
involuntary case under the Federal Bankruptcy Code or any
similar law affecting creditors' rights which is not dismissed
within ninety (90) days, or in any such involuntary case, the
approval of the petition by such party as properly filed, or
the admission by such party of material allegations contained
in the petition; or
(2) the execution by such party of a general
assignment for the benefit of creditors; or
(3) the commencement by such party of a
voluntary case under the Federal Bankruptcy Code or any
similar law affecting creditors' rights; or
(4) the appointment of a receiver for such party
or for all or a substantial part of the assets of such party
and, in the event that such receivership proceedings were not
commenced by such party, such receivership proceedings are not
dismissed within ninety (90) days after the receiver's
appointment; or
(5) the commencement by such party of
liquidation, dissolution or winding-up proceedings, or the
commencement against such party of a
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proceeding to liquidate, wind-up or dissolve such party, which
proceeding is not dismissed within ninety (90) days.
19. Allied's Obligations Upon Expiration or Termination.
Upon the expiration or termination of this Agreement, for any reason whatsoever,
Allied shall, at the option of Sofsource to be exercised in writing within sixty
(60) days following the effective date of such expiration or termination, and
upon condition that Sofsource shall have paid to Allied all sums owed to Allied,
either (a) deliver, at Sofsource's expense, all or any part of the Inventory in
Allied's possession, including, without limitation, masters, Components and
Product, to such places and parties as Sofsource shall designate, or (b) destroy
all or any part of such Inventory. Allied shall deliver to Sofsource appropriate
documentation reasonably satisfactory to Sofsource with respect to such
destruction. If Sofsource does not make an appropriate election as to all of the
Inventory within the foregoing time period, then Allied thereafter shall be
authorized to destroy all of the Inventory as to which no election was made and
shall have no further responsibility to Sofsource therefor whatsoever, other
than furnishing to Sofsource, upon Sofsource's request, reasonably acceptable
documentation of such destruction.
20. Inspection of Manufacturing Facilities. Allied agrees to
provide access, upon reasonable advance notice, to its facilities to Sofsource
personnel who shall have the right of visiting within the various facilities
where Product is being manufactured or materials or Inventory are stored. Any
confidential information relating to Allied or any of its customers, other than
Sofsource, gained as a result of such access shall be held in strict
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confidence and Sofsource and any such customer shall execute such documents
evidencing such obligations as Allied's counsel may reasonably request.
21. Confidentiality. The terms of this Agreement shall
not be publicly disseminated by either party, either by oral or written
disclosure, without the written consent of both parties, except as may be
necessary to comply with applicable law, governmental regulation or judicial or
legal process. The provisions of this paragraph 22 shall survive any termination
of this Agreement and shall be binding upon the parties and their respective
agents, successors and assigns.
22. Notices. All notices, consents, statements and other
communications required or permitted hereunder (all of the foregoing hereinafter
collectively referred to as "Communications") shall be in writing and shall be
deemed to have been duly given and received: upon receipt, if delivered
personally with receipt acknowledged; three (3) business days after mailing by
registered or certified mail or equivalent, return receipt requested, postage
prepaid; one (1) business day after mailing by overnight courier for next day
delivery, in each case addressed to the parties at their respective addresses
set forth below or to such other address as either party shall hereafter specify
by Communication to the other party; or one (1) business day after telecopying
to the number set forth below or to such changed number as either party shall
hereafter specify by Communication to the other party; provided, however, that
any notice of change of address or telecopier number shall be effective only
upon receipt and a copy of any notice sent by telecopier shall also be sent by
registered or certified mail or equivalent, return receipt requested, postage
prepaid:
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If to Sofsource to: Sofsource, Inc.
000 Xxxxx Xxxxxxx Xxxxxxxx
X, Xxxxx 000
Xxx Xxxxxx, Xxx Xxxxxx 00000
Att: Xxxxxx X. Xxxx, General Manager
Telecopier No.: (000) 000-0000
with a copy to: Mr. Xxxxxx Xxxxx
Sofsource, Inc.
000 Xxxxx Xxxxxxx
Xxxxxxxx X, Xxxxx 000
Xxx Xxxxxx, Xxx Xxxxxx 00000
If to Allied to: Allied Digital Technologies Corporation
000 Xxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attn: Chief Financial Officer
Telecopier No.: (000) 000-0000
with a copy to: Xxxxxxx Xxxxxxxx Xxxxx
Xxxxxxxxxxx & Kuh, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxxx X. Xxxxxxxx, Xx., Esq.
Telecopier No.: (000) 000-0000
23. Entire Agreement and Waiver. This Agreement contains the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all previous agreements or arrangements between the parties
relating to the subject matter hereof, and cannot be modified or amended except
by written agreement signed by both parties. No purported waiver by either party
of any breach
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by the other of any of its obligations, agreements or covenants hereunder, or
any part thereof, shall be effective unless made in writing signed by the party
sought to be bound thereby, and no failure to pursue or elect any remedy with
respect to any default under or breach of any provisions of this Agreement, or
any part thereof, shall be deemed to be a waiver of any other subsequent similar
or different default or breach, or any election of remedies available in
connection therewith, nor shall the acceptance or receipt by any party of any
money or other consideration due to it under this Agreement, with or without
knowledge of any breach hereunder, constitute a waiver of any provision of this
Agreement with respect to such or any other breach.
24. Assignment; Binding Effect. Neither party may assign
this Agreement, nor assign or subcontract any part thereof nor its rights
thereunder, to any person; provided, however, that nothing herein shall be
deemed to prohibit either party from assigning its rights and obligations to its
parent corporation, or to a purchaser or transferee of all or substantially all
of its business and assets, including without limitation, a successor by merger,
provided that it is demonstrated by such party to the reasonable satisfaction of
the other party that such assignee or successor shall have the financial ability
to carry on the business of the assignor or predecessor. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Nothing in this Agreement, express
or implied, is intended to or will confer on any person other than the parties,
and their respective successors and permitted assigns, any benefits, rights,
remedies,
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obligations or liabilities under, or by reason of, this Agreement, or constitute
the parties partners or participants in a joint venture.
25. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of New York applicable to agreements made
and to be performed wholly within such state.
26. Severability. If one or more of the provisions
contained in this Agreement shall be determined to be invalid or unenforceable
by a court of competent jurisdiction or by any other legally constituted body
having the jurisdiction to make such determination, the validity and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision which shall be a reasonable substitute for such invalid or
unenforceable provision in light of the tenor of this Agreement, and, upon so
agreeing, shall incorporate such substitute provision in this Agreement.
27. Headings; Word Meanings. The headings preceding the text
of the various provisions of this Agreement are for convenience of reference
only and are not intended to define, limit or in any other way describe the
scope of this Agreement or the intent of the provisions hereof. The singular
shall include the plural and the masculine gender shall include the feminine and
neuter, and vice versa, unless the context otherwise requires.
28. Purchase Orders and Acknowledgements. In the event that
any purchase orders, acknowledgements or other purchasing forms or documents
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("Transactional Documents") are used in connection with the purchase of Product
pursuant to the provisions of this Agreement, then, not withstanding any
provisions therein contained to the contrary, the terms of all such
Transactional Documents shall be subordinate to and governed by the provisions
of this Agreement and any terms of any Transactional Documents which are
inconsistent with the Terms hereof shall be null and void and shall have no
force or effect whatsoever.
29. Arbitration. Any controversy or claim arising out of
or relating to this Agreement, the making, interpretation or the breach thereof,
shall be settled by arbitration in Suffolk County, New York in accordance with
the commercial rules of the American Arbitration Association which are then
obtaining. Judgment upon the award rendered by the arbitrator or arbitrators may
be entered in any court having jurisdiction thereof and any party to the
arbitration may, if it so elects, institute proceedings in any court having
jurisdiction for the specific performance of any award. The powers of the
arbitrator or arbitrators shall include, but not be limited to, the awarding of
injunctive or other equitable relief but shall not include the power to modify
or amend in any respect the provisions of this Agreement. The arbitrator or
arbitrators shall include in any award the amount of the reasonable attorneys'
fees and disbursements and expenses of the arbitration incurred by the
prevailing party and a direction that it be paid by the other party within
thirty (30) days after the making of such award. In the event that the
arbitrator or arbitrators do not rule in favor of the prevailing party in
respect of all the claims alleged by such party, the arbitrator or arbitrators
shall include in any award the portion of the
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amount of the reasonable attorneys' fees and disbursements and other expenses of
the arbitration incurred by the prevailing party as the arbitrator or
arbitrators deem just and equitable under the circumstances, together with a
direction that such amounts be paid by the other party within thirty (30) days
thereof. Except as provided above, each party shall bear its own attorney's
fees, disbursements and other expenses and the parties shall bear equally all
other costs and expenses of the arbitration.
IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto on the date and year first above written.
SOFSOURCE, INC.
BY: /s/
-------------------------
Title:
----------------------
ALLIED DIGITAL TECHNOLOGIES CORP.
BY: /s/
-------------------------
Title:
----------------------
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