AGREEMENT
by and between
NIMBUS CD INTERNATIONAL, INC., NIMBUS MANUFACTURING INC.
and
Stream International Holdings Inc.
dated as of 28 March 1997
TABLE OF CONTENTS
Page
ARTICLE I
MANUFACTURER AND MARKETING OF CDs
1.1 Requirements of NMI 5
1.2 Minimum Quantity 6
1.3 Compensatory Payments and Rebate Payments 7
1.4 Prices 8
1.5 Payment 8
1.6 Forecast 9
1.7 Orders 9
1.8 Input Materials 9
1.9 Production and Delivery 9
1.10 Quality 10
1.11 Defective Copies 10
1.12 Technical and Sales Support and Cooperation 11
ARTICLE II
FACILITIES
2.1 [Intentionally Deleted] 11
2.2 Capacity 11
2.3 Security 11
2.4 Output of Designated Facility 12
2.5 Operating Committee 12
ARTICLE III
NEW TECHNOLOGY AND NON-U.S. SERVICES
3.1 New Services 12
3.2 New Media and Processes 12
ARTICLE IV
RESTRICTIONS ON CERTAIN CONDUCT
4.1 Nondisclosure 13
4.2 No Hiring or Solicitation of Employees 14
ARTICLE V
REPRESENTATIONS OF NIMBUS AND NMI
5.1 Organizational Status 15
5.2 Corporate Authority 15
5.3 Authorization of the Transaction 15
5.4 Validity 15
5.5 Noncontravention 15
ARTICLE VI
REPRESENTATION OF STREAM
6.1 Organizational Status 16
6.2 Corporate Authority 16
6.3 Authorization of the Transaction 16
6.4 Validity 16
6.5 Noncontravention 16
ARTICLE VII
TERM
7.1 Term and Renewal 17
7.2 Termination 17
ARTICLE VIII
INDEMNIFICATION AND DAMAGES
8.1 Intellectual Property 17
8.2 Sales and Use Tax 17
8.3 Other Indemnity by Stream 18
8.4 Other Indemnity by Nimbus and NMI 18
8.5 Limitation of Damages 18
8.6 Exclusive Remedy 19
ARTICLE IX
ENFORCEMENT
9.1 No Implied Waiver 19
ARTICLE X
DISPUTES
10.1 Attorneys' Fees 19
10.2 Arbitration 19
ARTICLE XI
NOTICES
11.1 Delivery of Notice 20
11.2 Change of Address 21
ARTICLE XII
GENERAL PROVISIONS
12.1 No Third-Party Beneficiaries 21
12.2 Relationship of Parties 21
12.3 Amendment and Waiver 21
12.4 Counterparts 21
12.5 Parties in Interest 22
12.6 Entire Agreement and Transaction; Release 22
12.7 Applicable Law 22
12.8 Headings 23
12.9 Expenses 23
12.10 Severability 23
12.11 Construction 23
12.12 Conflicts 23
12.13 Time of Essence 23
ANNEXES
A Glossary
B Supplemental Services
C Standard Form of Terms and Conditions
D Input Material Guidelines
AGREEMENT
THIS AGREEMENT is made and entered into as of the ________ day of March, 1997 by
and between NIMBUS CD INTERNATIONAL, INC., a Delaware corporation ("Nimbus"),
NIMBUS MANUFACTURING INC., a Virginia corporation and a wholly owned subsidiary
of Nimbus ("NMI"), and Stream International Holdings Inc., a Delaware
corporation ("Stream"). Capitalized terms used herein shall have the meanings
ascribed to them in the Glossary which is Annex A hereto.
WHEREAS, Nimbus is engaged through NMI in the United States and through other
subsidiaries in certain other areas of the world in the production and sale of
digitally encoded nonphotographic laser scanned optical information storage
media meeting certain established industry specifications, commonly known as
compact discs ("CDs") and in the providing of services related to such
production and sale;
WHEREAS, Stream is engaged in the production and distribution of information in
print and other media and in the business of acquiring rights -- whether as
creator, purchaser, licensee or otherwise -- to proprietary information and
marketing that information, together with information in the public domain, in a
variety of formats, including CD ROM and other CD formats;
WHEREAS, Nimbus and NMI, desiring to have the benefit of Stream's marketing
expertise, and Stream, as successor-in-interest to X.X. Xxxxxxxxx & Sons Company
("Donnelley"), desiring to have the benefit of NMI's manufacturing expertise,
each as it relates primarily to CD ROM, entered into a certain Agreement dated
as of April 6, 1994, which they subsequently amended by the First Amendment and
Restatement Agreement dated as of April 1, 1995 (the "Original Agreement"), both
of which they each, respectively, now desire to cancel (except for the
obligations of the parties thereto to make payments for products delivered or
services rendered thereunder which are unpaid at the date hereof) and replace
with this AGREEMENT;
NOW, THEREFORE, in consideration of the above premises, the cancellation of the
Original Agreement and the representations and agreements herein contained, the
parties hereto mutually agree as follows:
ARTICLE I
MANUFACTURE AND MARKETING OF CDs
1.1 Requirements of NMI.
1.1.1. During the Term, NMI will supply Stream with certain of its CD
Requirements on the terms and conditions set forth herein. NMI's obligation to
supply CDs shall be suspended for the duration of any event of Force Majeure or
any failure of Stream to comply with its obligations under Section 1.8 hereof.
1.1.2. Affiliates of Stream shall be entitled to purchase Basic Services
and Supplemental Services from NMI on the terms and conditions set forth herein.
1.2 Minimum Quantity.
1.2.1. Stream agrees to purchase and pay for when due and Nimbus agrees to
deliver in accordance with the terms hereof the following number of CDs during
the period specified (the "Minimum Quantity"):
Production Period Quantity-U.S.
1.2.1(a) From April 1, 1997
through March 31, 1998 27,500,000 units
1.2.1(b) From April 1, 1998
through December 31, 1998 20,625,000 units
"U.S." quantities refers to CDs produced for Stream's United States operations.
1.2.2. Subject to the provisions of Section 1.3, Stream must purchase and pay
for when due in accordance with the terms hereof a minimum number of CDs during
each calendar month period (the "Minimum Monthly Requirement"), as follows: for
CDs, the Minimum Monthly Requirement with respect to U.S. quantities shall be
2,291,667 units commencing on April 1, 1997. Only CDs produced for Stream's
United States operations shall count against the Minimum Quantity and the
Minimum Monthly Requirement for U.S. quantities.
1.2.3. The following shall count toward Stream satisfying the Minimum
Quantity and the Minimum Monthly Requirement:
(a) all CDs produced as U.S. quantities during the Production Period for
Stream or any Affiliate of Stream;
(b) all CDs purchased by Stream or any Affiliate of Stream in accordance
with the provisions of Subsection 1.9.5 or 1.9.6;
(c) DVD/DVD-ROM units purchased by Stream from Nimbus during the Pro-
duction Period;
(d) All CDs produced at the Designated Facility from the Designated
Capacity for NMI customers as permitted under the last sentence of
Section 2.4.1 hereof.
1.2.4. The following shall not count toward Stream satisfying the Minimum
Quantity or the Minimum Monthly Requirement:
(a) to the extent that Stream's order for delivery of CDs in any
calendar month exceeds the Agreed Capacity and NMI does not have the
capacity in the Designated Facility to satisfy the order.
1.2.5. For purposes of determining whether the Minimum Quantity or Minimum
Monthly Requirement has been purchased pursuant to this Section 1.2, the Minimum
Quantity or Minimum Monthly Requirement for the applicable Production Period
shall be reduced to the extent (and in proportion to the duration of the period)
that Stream is unable to purchase the Minimum Quantity or Minimum Monthly
Requirement as the result of:
(a) an event of Force Majeure;
(b) functional or quality problems discovered with respect to CDs
produced by NMI; or
(c) manufacturing delays occasioned by the failure of NMI to
comply with its delivery obligations under this Agreement.
1.2.6. Such Minimum Quantity or Minimum Monthly Requirement will not be
reduced as a result of:
(a) delivery delays or functional or quality problems that arise
from Input Materials supplied by Stream; or
(b) delays resulting from Stream's failure to meet its forecasting
or other obligations under this Agreement.
1.3 Compensatory Payments and Rebate Payments.
1.3.1. The number of CDs purchased by Stream from NMI as U.S. quantities (i.e.
CDs delivered during such calendar month which are paid for when due in
accordance with the provisions hereof) shall be recorded on a calendar month
basis. At the end of each calendar quarter, the monthly purchases as recorded
shall be aggregated and if, with respect to the Monthly Minimum Requirement,
there is a
(a) net deficit for the quarter, Stream shall pay to NMI, as a
compensatory payment ("Compensatory Payment"), an amount equal
to:
(i) the difference between 6,875,000 units minus the
actual number of Raw Discs produced during such
quarter multiplied by;
(ii) $0.29 for the Production Period from April 1, 1997 through
March 31, 1998 and $0.25 for the Production Period from April
1, 1998 through December 31, 1998;
(b) net surplus for the quarter, NMI shall rebate to Stream, as a
rebate payment ("Rebate Payment"), an amount equal to:
(i) the difference between the actual number of Raw
Discs produced during such quarter minus 6,875,000
units, multiplied by
(ii) $0.29 for the Production Period from April 1, 1997
through March 31, 1998 and $0.25 for the
Production Period from April 1, 1998 through
December 31, 1998;
provided, however, that the Rebate Payments to be made by NMI to Stream shall
not exceed the aggregate of all Compensatory Payments theretofore received by
NMI from Stream less the aggregate amount of Rebate Payments theretofore made by
NMI to Stream.
1.3.2. Notwithstanding the foregoing, no Compensatory Payment and no Rebate
Payment shall be due with respect to any Production Period for which the Minimum
Quantity is purchased and paid for when due. Any Compensatory Payments and
Rebate Payments made during such Production Period for which the Minimum
Quantity is purchased shall be refunded to the party making such payment at the
end of such Production Period.
1.4 Prices.
1.4.1. The price for Basic Services in respect of U.S. quantities (i.e., the
production of Raw Discs) for the Production Period commencing April 1, 1997
shall be $.47 per unit for the first 24,000,000 units. For all other units, the
price will be $.46 per unit.
1.4.2. The price for Basic Services in respect of U.S. quantities (i.e.,
the production of Raw Discs) for the Production Period commencing April 1, 1998
through December 31, 1998 shall be $.41 per unit.
1.4.3. The prices for Supplemental Services in respect of U.S. quantities shall
be as set forth in Annex B for the Production Period beginning April 1, 1997.
New prices shall be established at the beginning of the Production Period
beginning April 1, 1998 as mutually agreed by the parties.
1.4.4. NMI presently pays $0.094 U.S. royalties to certain third parties for
intellectual property associated with the manufacture of CDs. If, during the
term of the Agreement, such royalties decline by more than $0.03/unit, the
prices set forth in Sections 1.4.1 and 1.4.2 shall be reduced by one-half of the
amount of the decline over $0.03/unit.
1.5 Payment.
Payment for all CDs shall be due 60 days from the later of (a) the delivery of
such CDs or (b) the date on any NMI invoice for such CDs. Compensatory and
Rebate Payments are due within 30 days of receipt of invoice. A late charge at
the rate of one percent (1%) per month (12% annually) will be charged for all
amounts not paid when due.
1.6 Forecast.
Within thirty (30) days in advance of each calendar quarter, Stream shall
deliver to NMI a forecast, on a monthly basis, of its anticipated monthly
requirements for CDs and Masterings during the following twelve (12) months.
Such forecast shall not be binding on either party, but shall represent Stream's
best estimate when provided of its anticipated requirements.
1.7 Orders.
1.7.1. Stream shall from time to time place orders for CDs, DVDs and Masterings
with NMI pursuant to a purchase order, provided, however, that no order shall be
for less than 200 CDs and DVDs, except at mutually agreed pricing, and provided
further, however, that all orders shall include packaging in at least one of the
packaging formats (or any mutually agreed additions or substitutions) listed on
Annex B attached hereto.
1.7.2 The Standard Terms and Conditions of Sale governing each order shall be
those of NMI which are then in effect at the beginning of each Production Period
and shall be in substantially the form of Annex C attached hereto. To the extent
that there is any conflict between the terms in the body of this Agreement and
the Standard Terms and Conditions which is an Annex hereto, the provisions set
forth in the body of this Agreement shall apply.
1.8 Input Materials.
Stream shall provide to NMI, in a timely manner to permit NMI to satisfy the
requested delivery schedule of CDs in a commercially reasonable manner, all
Input Material conforming to the Standard Terms and Conditions of Sale and NMI's
general Guidelines for Input Materials from time to time established by NMI, the
current form of which is included herein by reference as Annex D hereto. (See
Annexes C and D.)
1.9 Production and Delivery.
1.9.1. All CDs shall be manufactured in respect of the U.S. quantities (unless
Stream shall otherwise approve) at the Designated Facility; provided, however,
that the number of CDs which Stream may request annually to be produced at NMI's
Other Facilities and counted toward satisfying Stream's Minimum Quantity for
such Production Period shall be as mutually agreed between NMI and Stream
annually. To the extent capacity is not available at the requested facility,
then NMI shall have the obligation to fill the order from its other facilities
if capacity is available and shall use commercially reasonable efforts to make
such capacity available.
1.9.2. NMI shall be permitted to ship, and Stream shall be obligated to pay
for, the following:
(a) for orders of 2,000 CDs or less, no less than 100% and no more
than 103% of the number ordered (excluding any defective CDs);
(b) for orders of 2,001 to up to 10,000 CDs, no less than 100% and
no more than 102% of the number ordered (excluding any
defective CDs); and
(c) for orders in excess of 10,001 CDs, no less than 100% and no
more than 101% of the number ordered (excluding any defective
CDs).
1.9.3. NMI acknowledges the importance to Stream's business of the timely
delivery of non-defective CDs and DVDs to meet marketing requirements and
customer demand, and Stream acknowledges the importance to NMI's business of
Stream's timely delivery of Input Materials and the timely giving of notices so
as to permit timely performance of NMI's obligations hereunder.
1.9.4. NMI shall use commercially reasonable efforts to meet Stream's re-
quirements with respect to timely delivery.
1.9.5. Without limiting any other remedy which may be available to Stream, if
NMI fails or is unable to fulfill any order submitted by Stream hereunder,
Stream may secure the services of any source to fulfill such order.
1.9.6. On order entry, NMI will notify Stream if the specified delivery
requirements cannot be met, in which case the parties will consult to work out a
mutually agreed delivery schedule. In the event a delivery schedule cannot be
agreed on, Stream shall place the order with another vendor and the order will
be counted towards Stream's Minimum Quantity or Minimum Monthly Requirement up
to, and to the extent that, the order would not cause NMI to exceed the
Designated Capacity computed on a monthly basis.
1.10 Quality.
1.10.1. All CDs and DVDs shall conform to the quality of the Input Material
provided by Stream with regard to signal quality and, in addition, shall conform
to NMI's then prevailing quality standards, which shall be at least comparable
to Philips Electronics, N.V. specifications for CD-ROM ("Yellow Book") or such
then current standards for DVD as specified by Nimbus.
1.10.2. NMI agrees to use commercially reasonable efforts to maintain the
Designated Facility in conformance with all requirements for ISO 9002.
1.11 Defective Copies.
1.11.1. NMI warrants that CDs and DVDs shipped to Stream shall be substantially
free of manufacturing defects as defined by NMI's then prevailing quality
standards. In the event such CDs and DVDs should not conform to such NMI
standards, Stream may return defective CDs and DVDs to NMI and NMI shall inspect
such CDs and DVDs and, at Stream's discretion:
(a) credit Stream for returned defective CDs and DVDs in accord-
ance with its prevailing practices; or
(b) replace the defective CDs and DVDs to satisfy the customer's
order requirements unless otherwise specified by Stream.
1.11.2. Stream shall pay NMI $.01 for each CD and DVD returned to NMI as
defective which, after inspection, NMI determines, subject to Stream's
verification upon Stream's reasonable request:
(a) not to be a CD or DVD produced pursuant to this Agreement;
(b) not to be defective; or
(c) to be defective for a reason other than a manufacturing
defect.
1.11.3. To the extent that Stream is required by its Customer to warrant the
quality of a CD or DVD, then NMI will issue to Stream for transfer to the Stream
Customer a mutually agreed warranty substantially in conformance with the
warranty given by NMI to Stream for a period not to exceed 30 years.
1.12 Technical and Sales Support and Cooperation.
During the Term, NMI shall provide technical and sales support in the field to
Stream on the same basis as provided by NMI to its own sales force. Such
technical and sales support is to be administered on a schedule from time to
time agreed to between NMI and Stream. Stream shall reimburse NMI for all
reasonable out of pocket travel and service costs incurred by NMI in providing
the technical training but not the mutually agreed upon travel associated with
normal business.
ARTICLE II
FACILITIES
2.1 [Intentionally Deleted]
2.2 Capacity.
2.2.1. The Designated Capacity of the Designated Facility is 32,000,000 Raw
Discs on an annualized basis (assuming relatively level monthly demand for Raw
Discs).
2.3 Security.
NMI shall employ security systems and procedures which are equal to standards
prevailing at other First Class Facilities, to prevent theft, pirating,
unauthorized exhibition, copying or duplication of any Stream material delivered
to NMI or manufactured by NMI hereunder. Stream agrees that it will not prevent
NMI from complying with NMI's requirement under this Section 2.3 in the
Designated Facility, and NMI agrees that authorized Stream personnel will have
access to the Designated Facility to conduct normal business.
2.4 Output of Designated Facility.
2.4.1. Stream will have first call on the output with respect to the Designated
Capacity subject to the restrictions of this Agreement. NMI shall be free to
utilize in its sole discretion and without any restriction as to customers
served or other limitation of any kind, all capacity in excess of the Designated
Capacity. Additionally, upon approval by Stream, NMI may utilize such portion of
the Designated Capacity as from time to time is not required to satisfy the
requirements of Stream.
2.4.2. To the extent that Stream requests product to be produced at NMI's Other
Facilities, NMI and its subsidiaries may take similar quantities of product from
the Designated Capacity.
2.5 Operating Committee.
During the Term, NMI agrees to operate the Designated Facility consistent with
its normal operating procedure under the supervision of an Operating Committee,
consisting of three representatives of NMI and three representatives of Stream
(in each case such representatives must be reasonably acceptable to the other
party). The Operating Committee shall meet in person or by conference telephone
call at least monthly and as necessary for the purpose of reviewing the
operations with respect to the Designated Facility and the current production
schedule.
ARTICLE III
NEW TECHNOLOGY AND NON-U.S. SERVICES
3.1 New Services.
NMI shall offer to provide to Stream any mastering or replication services using
new technologies or new media (including, but not limited to, DVD) and
holographic technologies that NMI may from time to time hereinafter offer to its
other customers on the same terms and conditions by NMI to its other customers.
Subject to the foregoing, should Stream elect to have NMI provide to it such
services using such new technologies or media, pricing shall be as mutually
agreed.
3.2 New Media and Processes.
Each of Stream and NMI shall regularly consult with and advise the other as to
the emergence in the marketplace of any demand for information media in the
Territory in addition to CD ROM. If Stream shall in the future require the
production of any non-proprietary, digitally encoded information media in
addition to CDs, Stream shall notify NMI of such need and shall offer NMI the
opportunity to submit a proposal to Stream to incorporate that manufacturing
capability into its then current facilities which would enable NMI to produce
such new media for Stream. If NMI shall in the future offer production services
of any non-proprietary digitally encoded information media in addition to CDs,
NMI shall notify Stream of such services and shall offer Stream the opportunity
to utilize such services at the Designated Facility at the same terms and
conditions offered by NMI to its other customers.
3.3 DVD. Should Stream wish to order DVD or DVD ROM units in volume from NMI,
Stream DVD units will be made available subject to mutual agreement on prices,
terms and capacity provided that the prices and terms offered by NMI shall be
market prices and terms as mutually agreed by NMI and Stream.
3.4 Basic Services Outside U.S. Stream and Nimbus acknowledge that Stream may
purchase 2,500,000 Raw Discs from Nimbus for its operations outside the United
States during the Production Period. In that regard, Stream and Nimbus shall
endeavor to determine a mutually agreeable market price for Basic Services
outside the United States. Stream and Nimbus agree that quotations based on
similar terms and conditions from MPO, Sonopress and CD Plant will be acceptable
quotations as a basis for determining market price.
ARTICLE IV
RESTRICTIONS ON CERTAIN CONDUCT
4.1 Nondisclosure.
The parties hereto shall regard all the terms of this Agreement and all
information relating to their respective operations as confidential information
received in trust and shall not use the other party's customer information to
gain a competitive advantage over the other. Neither party shall disclose,
reveal, publish, report or transfer any such confidential information to any
person or entity including any non-operating owner, shareholder, partner or
director except:
(a) to such employees of each party in their capacity as such,
such information as may be required for the performance of
their responsibilities hereunder;
(b) to the extent necessary to comply with law or the valid order
of a court of competent jurisdiction, in which event the party
making such disclosure shall so notify the other and shall
seek confidential treatment of such information;
(c) as part of each party's normal reporting or review procedure
to its parent company, its auditors and its attorneys
(provided that such auditors and attorneys agree to be bound
by the provisions of this Article IV);
(d) in order to enforce the rights of each party pursuant to this
Agreement; and
(e) to third parties as part of a due diligence process in
connection with any assignment permitted by Section 12.5
hereof.
The provisions of this Article IV shall not apply after all or any portion of
such confidential information has been voluntarily disclosed to the public by
the party originally possessing such information or independently disclosed by
other or has otherwise entered into the public domain through lawful means;
provided, however, that such exception shall only apply to the portion of such
confidential information so disclosed. Failure by either party to comply in all
material respects with the provisions of this Section 4.1 shall constitute a
material breach of this Agreement.
4.2 No Hiring or Solicitation of Employees.
Except as the parties may mutually agree, during the Term of this Agreement and
for a period of eighteen (18) months thereafter, neither party shall, nor shall
it permit its affiliates to, directly or indirectly, whether as an individual,
partner, principal, agent, employee officer, director, shareholder or in any
other capacity:
(a) employ any person who is then, or within the prior eighteen (18)
months was, employed as a manager or sales representative by the other or any
affiliate of the other.
(b) solicit for employment any person who is then, or within the
prior eighteen (18) months was, employed by the other party or
any affiliate of the other party, or request, influence or
advise any person who is now or shall be at the time of the
solicitation employed by or in the service of the other party
or any affiliate of the other party to leave such employment
or service of the other party or any affiliate of the other
party; or
(c) influence or advise any competitor of or anyone intending to
compete with the other party or any affiliate of the other
party to employ or otherwise engage the services of any person
who is now or shall be at the time of the solicitation
employed by or in the service of the other party or any
affiliate of the other party.
ARTICLE V
REPRESENTATIONS OF NIMBUS AND NMI
As an inducement to Stream to enter into this Agreement, Nimbus and NMI hereby
represent to Stream, as of the date of the Agreement, as to the matters set
forth in Sections 5.1 through 5.5.
5.1 Organizational Status.
5.1.1. Nimbus is a validly existing corporation and in good standing under the
laws of the State of Delaware. Nimbus has the corporate power and authority
required to carry on its activities as they are now conducted and to own the
stock of NMI.
5.1.2. NMI is a validly existing corporation and in good standing under the
laws of the State of Virginia. NMI has the corporate power and authority
required to carry on its activities as they are now conducted.
5.2 Corporate Authority.
Nimbus and NMI have full legal right and corporate power, without the Consent of
any other Person, to execute, deliver and to perform their obligations under
this Agreement.
5.3 Authorization of the Transaction.
All corporate and other actions required to be taken by Nimbus and NMI 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 Nimbus or NMI in connection with the valid execution and delivery of
this Agreement or the performance by Nimbus of any of its obligations hereunder
or by NMI of any of its obligations hereunder.
5.4 Validity.
This Agreement has been duly executed and delivered by Nimbus and NMI and is a
lawful, valid and legally binding obligation of Nimbus and NMI, enforceable
against each of Nimbus and NMI in accordance with its terms and conditions,
except to the extent limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally or by general
equitable principles.
5.5 Noncontravention.
The execution, delivery and performance of this Agreement are not prohibited by,
do not violate or conflict with any provision of, or result in a default (or, to
the knowledge of Nimbus and NMI, an event which with notice or lapse of time or
both, would become a default) under or a breach of:
(a) the Certificate or Articles of Incorporation or By-laws of
Nimbus and NMI;
(b) any regulation, order, decree or judgment of any court or
governmental agency; or
(c) any law applicable to Nimbus or NMI.
ARTICLE VI
REPRESENTATION OF STREAM
As an inducement to Nimbus and NMI to enter into this Agreement, Stream hereby
represents to Nimbus and NMI, as of the date of this Agreement, to the matters
set forth in this Article VI.
6.1 Organizational Status.
Stream is a validly existing corporation and in good standing under the laws of
the State of Delaware. Stream has the corporate power and authority required to
carry on its activities as they are now conducted.
6.2 Corporate Authority.
Stream has full legal right and authority, without the Consent of any other
Person, to execute, deliver and to perform its obligations under this Agreement.
6.3 Authorization of the Transaction.
All corporate and other actions required to be taken by Stream 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
Stream in connection with the valid execution and delivery of this Agreement, or
the performance by Stream of any of its obligations hereunder.
6.4 Validity.
This Agreement has been duly executed and delivered by Stream and is a lawful,
valid and legally binding obligation of Stream, enforceable against Stream in
accordance with its terms and conditions, except to the extent limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by general equitable principles.
6.5 Noncontravention.
The execution, delivery and performance of this Agreement are not prohibited by,
do not violate or conflict with any provision of, or result in a default under
or a breach of:
(a) Stream's Certificate of Incorporation or By-laws;
(b) any regulation, order, decree or judgment of any court or
governmental agency; or
(c) any law applicable to Stream.
ARTICLE VII
TERM
7.1 Term and Renewal.
The Term of this Agreement shall commence on April 1, 1997 and shall continue
until December 31, 1998 unless terminated in accordance with 7.2 below.
7.2 Termination.
The Term of this Agreement may be terminated at any time:
(a) by mutual consent of the parties; or
(b) by either party upon 90 days' written notice of a material
breach of a material provision hereof which has not been
reasonably cured within such 90 days period.
ARTICLE VIII
INDEMNIFICATION AND DAMAGES
8.1 Intellectual Property.
8.1.1. Stream shall indemnify and hold harmless Nimbus and NMI against any and
all losses, damages, costs, expenses, attorneys' fees or other liabilities,
including, without limitation, costs incurred in successfully asserting the
right to indemnification hereunder which arise out of or are founded on any
claim that NMI's replication or packaging of any CD for Stream or any of its
Affiliates violates the property, personal, copyright or other rights, of any
Person.
8.1.2. Nimbus and NMI shall indemnify and hold harmless Stream against any and
all losses, damages, costs, expenses, attorneys' fees or other liabilities,
including, without limitation, costs incurred in successfully asserting the
right to indemnification hereunder which arise out of or are founded on any
claim that the production process used by NMI or the electronic format of the
CDs produced thereby violates the property, personal, copyright or other rights
of any Person.
8.2 Sales and Use Tax.
8.2.1. Stream shall indemnify and hold Nimbus and NMI harmless against any and
all losses, damages, costs, expenses, attorneys' fees or other liabilities
including, without limitation, costs incurred in successfully asserting the
right to indemnification hereunder, which arise out of or are founded on any
claim against Nimbus or NMI for any sales or use tax liability incurred by
Nimbus or NMI as a result of, or at the order of sales to Stream or its
Affiliates.
8.2.2. Stream shall, upon request of NMI, defend Nimbus and NMI in any audit or
other proceeding brought by the taxing authority in any jurisdiction with
respect to sales and use tax.
8.3 Other Indemnity by Stream.
8.3.1. Stream represents and warrants that, to the best of Stream's knowledge,
by entering into this Agreement it will not be in violation of any term or
provision of any other agreement to which Stream is a party (collectively, the
"Stream Agreements").
8.3.2. Stream shall indemnify and hold each of Nimbus and NMI harmless against
any and all Damages which arise out of or relate to any Claim by any party to
the Stream Agreements which is based or founded on the Stream Agreements or
which are the result of the non-truthfulness of any of Stream's representations
and warranties herein.
8.4 Other Indemnity by Nimbus and NMI.
8.4.1. Nimbus and NMI represent and warrant that, to the best of their
knowledge, by entering into this Agreement they will not be in violation of any
term or provision of any other agreement to which they are a party
(collectively, the "Nimbus Agreements").
8.4.2. Nimbus and NMI shall indemnify and hold Stream harmless against any and
all Damages which arise out of or relate to any Claim by any party to the Nimbus
Agreements which is based or founded on the Nimbus Agreements or which are as a
result of the non-truthfulness of any of Nimbus' and NMI's representations and
warranties herein.
8.4.3. THE WARRANTIES, SET FORTH IN THIS AGREEMENT ARE IN LIEU OF, TO THE
EXTENT PERMITTED BY LAW, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE.
8.5 Limitation of Damages.
Notwithstanding any other provision herein, neither party shall be liable to the
other for any lost profits or other consequential damages, whether foreseeable
or unforeseeable, arising out of such party's inability, as determined by law,
to perform their respective obligations under this Agreement.
8.6 Exclusive Remedy.
NMI's and Nimbus' sole and exclusive remedy, whether in contract or in tort,
arising out of or relating to any failure by Stream to purchase the Minimum
Quantity or the Monthly Minimum Requirement are the Compensatory Payments set
forth in Section 1.3.
ARTICLE IX
ENFORCEMENT
9.1 No Implied Waiver.
No course of dealing between the parties and no delay in exercising any right,
power or remedy conferred hereby or now or hereafter existing at law, in equity,
by statute or otherwise, shall operate as a waiver of, or otherwise prejudice,
any such right, power or remedy.
ARTICLE X
DISPUTES
10.1 Attorneys' Fees.
In the event of any suit or other proceeding 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
court may award, be entitled to recover attorneys' fees, expenses and costs of
investigation, all as actually incurred, including, without limitation,
attorneys' fees, expenses and costs of investigation incurred in appellate
proceedings or in any action or participation in, or in connection with, any
case or proceeding under any bankruptcy, insolvency or reorganization
proceeding.
10.2 Arbitration.
10.2.1. Any controversy or Claim arising out of or relating to this Agreement or
the breach thereof, including any claim or controversy as to the arbitrability
of any claim or controversy and any claim for rescission, shall be settled by
arbitration in New York, New York in accordance with the commercial arbitration
rules of the American Arbitration Association and judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
ARTICLE XI
NOTICES
11.1 Delivery of Notice.
All notices, requests, demands and other communications hereunder shall be in
writing and shall be, personally delivered or sent by facsimile transmission
with confirming copy sent by overnight courier (such as Express Mail, Federal
Express, etc.) and a delivery receipt obtained and addressed to the intended
recipient as follows:
(a) If to Nimbus or NMI:
Nimbus CD International, Inc.
000 Xxxxx Xxx Xxxx, Xxxxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx and L. Xxxxxx Xxxxxx
Telphone: (000) 000-0000
Facsimile: (000) 000-0000
With copies to:
NMI
00 Xxxx Xxx Xxxxxxxxx, Xxxxx, Xxxx 00000
Attention: General Manager
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
White & Case
0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) If to Stream International Holdings Inc.:
Xxxxxxx X. Xxxxx, Chief Executive Officer
Stream International Holdings Inc.
000 Xxxxxxxx Xxxx, Xxxxxxxx, Xxxx. 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With copies to:
Xxxxxx X. Xxxxxxx, Vice-President & General Counsel
Stream International Holdings, Inc.
000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxx. 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
11.2 Change of Address.
Any party may change its address for receiving notice by giving written notice
to the others named above. All such notices shall be effective immediately upon
confirmation of facsimile or completion of personal delivery.
ARTICLE XII
GENERAL PROVISIONS
12.1 No Third-Party Beneficiaries.
This Agreement constitutes an agreement solely among the parties hereto and is
not intended to and will not confer any rights, remedies, obligations or
liabilities, legal or equitable, on any person other than the parties hereto and
their respective successors or assigns, or otherwise constitute any person a
third party beneficiary under or by reason of this Agreement.
12.2 Relationship of Parties.
Nothing in this Agreement, expressed or implied, is intended to or shall
constitute the parties hereto as partners or participants in a joint venture.
12.3 Amendment and Waiver.
No amendment or waiver of any provision of this Agreement shall in any event be
effective, unless the same shall be in writing and signed by the parties hereto,
and then such amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
12.4 Counterparts.
This Agreement may be executed simultaneously in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and-the same Agreement.
12.5 Parties in Interest.
This Agreement shall bind and inure to the benefit of the parties named herein,
in each case with respect to the obligations and rights applicable to them, and
their respective, successors and assigns; provided, however, that the parties
hereto shall only be permitted to assign this Agreement as part of the
assignment of substantially all of the assets and liabilities of, in the case of
Stream, its software manufacturing business and in the case of Nimbus and NMI,
the NMI business. In the event of any such assignment, the assignor shall have
no further liability or obligation to the parties to this Agreement and the
assignee shall assume all liabilities and obligations of its assignor.
12.6 Entire Agreement and Transaction; Release.
This Agreement, including the Annexes listed in the Table of Contents in the
forepart hereof and the documents delivered pursuant hereto, together with any
other confidentiality agreements previously entered into between the parties,
constitute the entire agreement among the parties with respect to the
transactions contemplated hereby and supersede all other agreements and
understandings among the parties including the First Amendment and Restatement
dated April 1, 1995 and the Agreement dated April 6, 1994.
Each Party, on behalf of itself, its affiliates, its predecessors in interest,
and its successors and assigns hereby releases the other parties and their
affiliates, predecessors in interest, successors and assigns from any and all
claims, obligations and liabilities, known or unknown, arising out of or related
to the prior agreements between the parties including, without limitation, any
claims, obligations and liabilities arising under the April, 1995 First
Amendment and Restatement or the Original Agreement provided, however, that no
party is released from any obligation to make payments for products delivered or
services rendered under the Original Agreement which are unpaid as of the date
of this Agreement.
Upon the execution of the Agreement by Donnelley as to this Section 12.6, this
release is intended to and will extend on a mutual basis to Donnelley which
signed the Original Agreement; provided, however, that the effectiveness of all
other provisions of this Agreement are not dependent on Donnelley's execution of
the Agreement.
12.7 Applicable Law.
This Agreement shall be governed by and construed in accordance with the
internal substantive laws of the State of New York. Should any provision of this
Agreement be determined to be invalid, void or unenforceable by a court of
competent jurisdiction for any reason, the remaining provisions shall remain in
full force and effect.
12.8 Headings.
The section and other headings contained in this Agreement are for convenience
of reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.9 Expenses.
Each party to this Agreement shall pay its own costs and expenses in connection
with the transactions contemplated hereby.
12.10 Severability.
Any term or provision of this Agreement which is held invalid or unenforceable
by a court of competent jurisdiction, shall be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable the
remaining rights of the Person intended to be benefited by such provision and
provisions of this Agreement.
12.11 Construction.
This Agreement has been negotiated by the parties hereto, and legal or equitable
principles that might require the construction of this Agreement or any
provision hereof against the party drafting this Agreement shall not apply in
any construction or interpretation of this Agreement.
12.12 Conflicts.
If there is any conflict or inconsistency between a provision in this Agreement
and that of an Annex, the provision of this Agreement shall prevail.
12.13 Time of Essence.
Time is of the essence in this Agreement.
IN WITNESS WHEREOF, each of the parties have caused this Agreement to be duly
executed, all as of the date first written above.
NIMBUS CD INTERNATIONAL, INC. STREAM INTERNATIONAL HOLDINGS
INCORPORATED
By:______________________________ By:_________________________________
Name: ___________________________ Name: ______________________________
Title: ____________________________ Title: _______________________________
As to Section 12.6 only:
NIMBUS MANUFACTURING INC. X. X. XXXXXXXXX & SONS COMPANY
By: _____________________________ By:________________________________
Name: ___________________________ Name:______________________________
Title: ____________________________ Title:_______________________________
ANNEX A
GLOSSARY
As used in the Agreement and the Annexes thereto, the following terms shall have
the meanings as set forth herein:
Affiliate: Affiliate of any Person shall mean any other Person which, directly
or indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any commitment with responsibility for
administering, any Pension Plan). A Person shall be deemed to be "controlled by"
any other Person if such other Person possesses, directly or indirectly, power:
(i) to vote 90% or more of the securities (on a fully diluted basis) having
ordinary voting power for the election of directors or managing general
partners; or (ii) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
Agreed Capacity: 2,666,667 CDs per month.
Agreement: The Agreement effective March 1, 1997.
Basic Services: The production of Raw Discs.
CD Requirements: Stream's requirements during the Term for CDs for Stream
customers.
CD ROM: A nonprogrammable, read only memory, CD capable of storing and
outputting data, image, and audio signals conforming to established industry
specifications.
Claim: A claim, demand, action, cause of action, suit, charge or Proceeding for
Damages or equitable relief.
Commencement Date: Opening of business on the date of the Agreement.
Compact Disc (CD): Digitally encoded nonphotographic laser scanned optical
information storage media meeting established industry specifications.
Consent: Any approvals, consents and acknowledgments required by any third
party or governmental authority or instrumentality whether written or oral.
Damages: All losses, liabilities, obligations and damages together with costs
and expenses (including court costs and reasonable attorneys' fees, expenses
related to investigation and expert assistance and amounts paid in settlement).
Designated Capacity: 32,000,000 raw discs on an annualized basis.
Designated Facility: Leased facilities located in Provo, Utah.
DVD: Digital Versatile Disc. A high density, digitally encoded, nonprogram-
xxxxx, read only memory, CD capable of storing and outputting data, image, and
audio signals conforming to established industry specifications for DVD.
First Class Facilities: Means facilities performing the same or similar level of
services of comparable quality as those performed by NMI for Stream.
Force Majeure: Force Majeure as used herein shall mean the following:
(i) acts of God; (ii) strikes, lockouts, industrial or labor disturbances;
(iii) act of the public enemy, wars, blockades, insurrections, riots; (iv)
epidemics; (v) landslides, lightning, earthquakes, fires, storms, floods,
wash-outs, tornadoes, hurricanes, windstorms; (vi) civil disturbances; (vii)
boycotts; (viii) explosions and breakage or accident to machinery or equipment
that is not principally caused by or attributable to the negligence of the
Person experiencing the Force Majeure; (ix) the unavailability of raw materials
used in the manufacture of CDs; and any other causes similar to those above,
which are not within the reasonable control of the Person claiming Force Majeure
and which by the exercise of due diligence such Person is unable to overcome.
Glossary: Glossary attached as Annex A to the Agreement.
Input Materials: The information to be republished in any CD format and the
media containing such information, together with all label film and print
material.
Mastering: The supply of glass mastering services as it relates to the produc-
tion of Compact Discs.
Minimum Monthly: The number of CDs specified in Subsection 1.2.2 of Requirement
this Agreement.
Minimum Quantity: The number of CDs specified in Subsection 1.2.1 of the
Agreement.
Nimbus: Nimbus CD International, Inc., a Delaware corporation.
NMI: Nimbus Manufacturing Inc., a Virginia corporation and wholly-owned sub-
sidiary of Nimbus.
Original Agreement: The Original Agreement by and among Nimbus, NMI and
Donnelley dated as of April 6, 1994 as amended and restated by the First
Amendment and Restatement dated as of April 1, 1995.
Other Facilities: NMI's facilities, other than the Designated Facility,
including the facilities located in Ruckersville, Virginia, Sunnyvale
California, Cwmbran, Wales and Foetz, Luxembourg.
Person: Any individual or corporation, partnership, trust or other entity.
Proceedings: Any suit or any other action, proceeding, investigation or legal,
administrative, arbitration or other method of settling disputes or
disagreements or governmental investigation by or before any federal, state or
local governmental or non-governmental court, department, commission, board,
bureau, agency or instrumentality.
Production Period: The period specified in Subsection 1.2.1 of this Agreement.
Raw Discs: CDs with two color printing.
Stream Customers: Any Person for which Stream provides services which include
production or distribution of information in CD ROM format.
Subsidiary: A corporation of which a Person and/or their respective
Subsidiaries, as the case may be, own directly or indirectly, such number of
shares as have more than 50% of the ordinary voting power for the election of
directors.
Supplemental Services: Other services in addition to Basic Services (including,
without limitation, the services described in Article III hereof).
Term: The period specified in Section 7.1 of this Agreement.
ANNEX B
CURRENT FORM OF STANDARD TERMS AND CONDITIONS
