“ * *
* * * * * * * * * * * ” DENOTES MATERIAL THAT HAS BEEN OMITTED
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE
24b-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
SECOND AMENDED AND RESTATED
AGENCY AGREEMENT
AGREEMENT made as of October 1, 2004 (this
“Agreement”) by and between DIAMOND COMIC DISTRIBUTORS,
INC. (“Diamond”), a Maryland corporation having an
address at 1966 Greenspring Drive, Timonium, Maryland 21093, and
MARVEL ENTERPRISES, INC. (“Publisher”), a corporation
organized under the laws of the state of Delaware and having an
address at 10 East 40 th Street, New York, New York 10016.
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A.
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On
April 24, 2001, Diamond and Publisher entered into an Agency
Agreement (the “Original Agency Agreement”).
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B.
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On
July 19, 2002, Diamond and Publisher amended the Original
Agency Agreement by means of a letter agreement (the “Letter
Agreement”).
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C.
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On
March 1, 2003, Diamond and Publisher amended and restated the
Original Agency Agreement (as amended by the Letter Agreement) (the
“Amended and Restated Agency Agreement”).
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D.
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Diamond and Publisher now desire to
make further amendments to the Amended and Restated Agency
Agreement, and to restate the Amended and Restated Agency
Agreement, as amended hereby, in its entirety.
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In consideration of the foregoing, and of other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as
follows:
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(a)
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Publisher and Diamond agree that,
effective as of October 1, 2004 (the “Effective
Date”), Diamond is appointed:
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(i)
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Publisher’s (A) exclusive
agent in the US and Canada, and non-exclusive agent throughout the
rest of the world, to perform the services of selling, billing,
warehousing, shipping, returns handling, and all other appropriate
customer services for distribution of Publisher Books (as defined
below) to Direct Market Customers (defined below) and Bookstores
(as defined below), and (B) non-exclusive agent to perform
such services for the distribution of Publisher Books to Specialty
Stores (as defined below; Direct Market Customers, Bookstores, and
Specialty Stores are referred to collectively as
“Distribution Channels”).
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(ii)
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Diamond shall purchase on a
non-returnable, firm-sale basis from Publisher all Publisher Books
intended for Diamond’s distribution and resale to
(A) Distribution Channels located in the United Kingdom and
(B) such other customers serviced by Diamond’s United
Kingdom facility as are listed on Schedule A-1
hereto (collectively, “U.K. Distribution Channels”)
(Publisher Books described in this subparagraph 1(a)(ii) are
referred to as “U.K. Product”) pursuant to the Terms
of Sale to Diamond for U.K. Product attached hereto as
Schedule A-2 and forming a part hereof. In the
event an account located outside the UK Distribution Channels
wishes to buy from Diamond’s UK facility, Diamond will
request permission from Marvel to allow such and this permission
will not be unreasonably withheld. Diamond’s distribution of
all U.K. Product shall be (x) in accordance with the
distribution rights granted to Diamond by Publisher in the
preceding subparagraph 1(a)(i); and (y) limited to
Diamond’s distribution and resale to U.K. Distribution
Channels.
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(iii)
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In
the event that Publisher believes, in good faith, that any customer
listed on Schedule A-1 or Schedule B is acting or has
acted as a distributor (i.e., a seller to anyone but an end-user)
of Publisher Books received from Diamond, then, upon request by
Publisher to Diamond, such customer’s name shall be removed
from such schedule.
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(b)
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As
used herein, the following terms shall mean the
following:
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(i)
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“Comic Books” means all
English-language comic book titles published by Publisher companies
owned at least 51% by Publisher (“Affiliates”) under
the “Marvel” trademark or all comic book titles
published by Publisher companies which are owned 100% by Publisher,
which are intended to be sold through wholesale and retail outlets.
“Trade Paperbacks” means all bound trade paperback
titles currently published by Publisher and its Affiliates and all
bound trade paperback titles published by Publisher and its
Affiliates during the term of this Agreement which are comprised of
collections of Comic Books.
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(ii)
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“Bookstores” means
(A) those customers that are listed on
Schedule C hereto; and (B) all other
retailers, wholesalers and libraries, the business of which is
primarily the sale or distribution of books, periodicals and
book-related products; provided that such term does not include
newsstands, Direct Market Customers and Specialty
Stores.
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(iii)
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“Publisher Books” means
all Comic Books and Trade Paperbacks, games, and all posters, art
books, soft-cover and hardcover books published by Publisher and
its Affiliates under the “Marvel” trademark, and any
other publications mutually agreed upon by the parties that are not
published under the “Marvel” trademark, during the term
of this Agreement, which are intended to be sold through wholesale
and retail outlets, in each case excluding U.K. Product.
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2
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(iv)
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“Direct Market
Customers” means (A) those customers that are listed on
Schedule B hereto; and (B) Hobby
Shops.
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(v)
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“Hobby Shops” means
customers which are solicited in advance and which purchase 50 or
more comic book titles monthly (as averaged over a three-month
period) from a full-line selection on a non-returnable basis;
provided that such term shall not include newsstands.
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(vi)
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“Specialty Stores” means
stores the primary purpose of which is the sale of music or video
items.
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(vii)
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“Business Day” means any
day other than a day which is a national holiday, a day when
national banks generally are closed, or a day on which banks are
closed in the District of Columbia.
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(c)
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Sales of Publisher Books shall be at
such prices as are determined by Publisher from time to time in its
sole discretion, with such discounts as are determined by Publisher
from time to time in its sole discretion, but after consultation
with Diamond. Reasonable payment and credit terms for customers
shall be established by Diamond, and, because Diamond is
establishing all credit terms, Diamond shall be responsible for the
collection of all accounts receivable related to sales of Publisher
Books by Diamond during the Term and shall assume the
responsibility for the bad debt risk; provided, however, that
Publisher shall have the right, upon notice to Diamond, to require
Diamond to extend credit to a particular customer or to grant such
customer more favorable credit terms than those originally agreed
to by Diamond, as the case may be, on the condition that Publisher
shall assume the entire risk of loss with respect to all sales
thereafter to such customer. Notwithstanding the foregoing,
Publisher shall assume bad debt responsibility and risk of credit
extended for shipping costs in any calendar year for all amounts in
excess of the total fees paid to Diamond in that calendar year
hereunder. Diamond shall have the right to sue or otherwise seek
legal redress against any delinquent customer as to which it has
assumed the responsibility for the bad debt risk and to seek
recovery of amounts owed, and shall have the right to enter into
settlements with such delinquent customer in its reasonable
discretion. The terms and conditions of this paragraph do not apply
to U.K. Product which is governed by the terms and conditions set
forth in the attached Schedule A-2 .
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(d)
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Publisher acknowledges that
Diamond’s customers are free to re-sell copies of the
Publisher Books purchased from Diamond to any customers that they
choose, and such sales, if any, to Diamond’s customers and
resales by them will in no way be deemed a breach of this
Agreement.
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3
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(e)
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Diamond shall accommodate
Publisher’s reasonable EDI software protocols in carrying out
the services to be performed by Diamond pursuant to this Agreement
in the manner such services are currently performed.
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(f)
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Diamond will maintain an on-line
order entry system for use by Direct Market Customers in the manner
currently maintained, subject to modifications made in
Diamond’s discretion which do not adversely affect the
services performed hereunder.
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(g)
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Publisher acknowledges that some of
its operational and business decisions have the potential to impact
Diamond’s costs for performing the services outlined herein,
in a way not contemplated in this agreement. Publisher therefore
agrees, with respect to any operational or business decision that,
to Publisher’s knowledge, is reasonably likely to have a
material impact on Diamond’s costs, to consult with Diamond
so that Diamond may make any suggestions as to how to marginalize
the impact on Diamond. If any such impact so arises where the
reasonable likelihood of its arising was not known, but should have
been known, to Publisher, then such consultation shall occur upon
notice to Publisher of such impact.
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(a)
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The
term of this Agreement (the “Term”) shall commence on
the Effective Date and shall continue until August 16, 2007,
and thereafter shall only be renewed or extended by a writing
executed by both parties. Each consecutive twelve-month period
during the Term commencing on August 17, 2001 (the
“Commencement Date”) or any anniversary of the
Commencement Date is referred to herein as a
“Year.”
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(b)
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Notwithstanding Paragraph 2(a),
this Agreement may be terminated as follows:
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(i)
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Publisher shall have the right to
terminate this Agreement at any time effective after the initial
90 days of this Agreement upon 60 days’ prior
notice; * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
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* * * * * * * * * * * * * * * * *
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(A)
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* *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * *
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(B)
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* *
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* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
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* * * * * *
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* * * * * * * *
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* * * * * * * * * * * *
4
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(ii)
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Without prejudice to any other
rights and remedies available at law or under this Agreement,
either party shall have the right to terminate this Agreement
forthwith if the other party commits a material breach of any of
the provisions of this Agreement (other than the payment of money)
and has not either cured such breach within 28 days after
having been requested to do so in writing or, if such breach is not
reasonably capable of being cured within 28 days, either
(i) has not (X) used best efforts to commence to cure
such breach within such 28-day period and (Y) continued to
diligently pursue such efforts beyond such 28-day period, or
(ii) in any event has not cured such breach within
45 days of having been requested to do so in writing. Either
party shall have the right to terminate this Agreement if the other
party commits a breach of this Agreement involving the payment of
money and has not cured such breach within five (5) days after
having been requested to do so in writing.
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(iii)
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Either party shall have the right to
terminate this Agreement immediately in the event that the other
party is adjudicated as a bankrupt or insolvent, institutes
voluntary proceedings for bankruptcy or reorganization, makes an
assignment for the benefit of creditors, applies for or consents to
the appointment of a receiver for it or a substantial portion of
its property, or admits in writing its inability to pay debts as
they become due. Any such termination shall not release either
party of any accrued obligations hereunder, including
Diamond’s right of offset pursuant to paragraph 2(e)
hereafter.
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(c)
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Promptly upon termination of this
Agreement, Publisher will remove at its own expense the inventory
of the Publisher Books from Diamond’s distribution center. If
Publisher fails to remove such inventory within sixty
(60) days after the later of the termination of this Agreement
and written demand from Diamond that such inventory be removed,
Diamond shall have the right either to dispose of such inventory as
it deems best or to destroy such inventory. Except as specifically
provided for herein, upon termination of this Agreement for any
reason, all distribution rights granted by Publisher to Diamond
hereunder shall revert to Publisher.
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5
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(d)
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In
the event of expiration or termination of this Agreement by either
party, Diamond shall accept returns of Publisher Books distributed
to Bookstores (excluding U.K. Products) for sixty (60) days
following the effective date of termination (the “Returns
Period”). In no event shall Diamond have any right or
obligation to accept any returns after the Returns Period. Diamond
may withhold, from amounts otherwise due with respect to sales of
Publisher Books to Bookstores made in each of the three
(3) full calendar months immediately preceding the effective
date of termination or expiration, a percentage of such amounts
otherwise due, such percentage to serve as a reserve for returns
(the “Return Reserve”) that Diamond may receive from
Bookstores during the Returns Period. The percentage referred to in
the preceding sentence shall be equal to the following
fraction:
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(i)
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returns of Publisher Books, based on
credit value, for the twelve (12) months immediately prior to
the effective date of termination or expiration;
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(ii)
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gross sales to Bookstores for such
twelve-month period.
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Any
portion of the Return Reserve that is not applied to credits issued
for actual returns received by Diamond during the Returns Period
shall be owed to Publisher, and any amount by which the Return
Reserve is insufficient to cover credits issued for actual returns
received by Diamond during the Returns Period shall be owed to
Diamond. Diamond shall produce a final settlement statement within
sixty (60) days after the end of the Returns Period and the
appropriate party will settle the balance within sixty
(60) days after such final statement is sent by Diamond. After
the Returns Period, Publisher shall pay Diamond any amounts which
any customer refuses to pay to Diamond on account of Publisher
Books shipped to such customer by Diamond due to any deduction
claimed by such customer for returns which such customer makes
after the Returns Period or in connection with any dispute over the
customer’s right to return any Publisher Books after the
Returns Period, but only to the extent that Diamond has not been
able to recoup such amount from the Return Reserve or through a
credit against amounts due to Publisher from Diamond.
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(e)
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In
the event of termination of the Agreement by either party, Diamond
shall have the right to offset any amount owed to Publisher under
this Agreement against any amounts owed to Diamond or any affiliate
of Diamond under any other agreements with Publisher or its
Affiliates. Diamond shall have the right to sell all U.K. Product
in accordance with the provisions of this Agreement for a period of
180 days following any termination of this Agreement (the
“Sell-Off Period”). After the Sell-Off Period,
Publisher shall have the option for 90 days thereafter to
purchase from Diamond any and all remaining U.K. Products at their
invoiced cost plus any freight costs relating thereto.
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(a)
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Diamond shall provide, on a one time
basis and at its own expense, trucks to transfer the existing
inventory of Publisher Books located at the warehouses of Client
Distribution Services, Inc. (“CDS”) in Jackson
Tennessee, Publisher’s previous distributor of Publisher
Books to Bookstores, and deliver such inventory to Diamond’s
distribution centers (the “Distribution Centers”) as
soon as practicable after the Effective Date of this
Agreement.
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(b)
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Publisher will deliver to
Diamond’s Distribution Centers sufficient copies of Publisher
Books to meet the demand therefor as estimated by Publisher from
time to time after consultation with Diamond. * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
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* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
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* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * Diamond, during each given month of the Term,
shall pick up from any Publisher supplier or printer that is * * *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
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* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * In
the event either Quebecor or Solisco qualifies as a “no
cost” printer, Marvel will be res
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