Please mail comments and analysis to us at the UndesirablePropagationUnit so that we can make this Con tractable. ========================================================================== Mushroom Distribution Services - Distribution Agreement 1996 ========================================================================== vvvvvvvvvvvvvvvvvvvvvvvvvvvv CONTENTS ^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 1. GRANT OF RIGHTS 2. APPLICABLE FEES 3. AUTHORISED AGENT 4. STOCK 5. TITLE IN PROPERTY 6. CONDITIONS OF SALE 7. STOCK TRANSFERS 8. STOCK RISK 9. INSURANCE 10. SALES REPORTS 11. INSPECTION 12. OVERSTOCKS 13. DAMAGED GOODS 14. SALE OR RETURN 15. INVOICES 16. BAD DEBTS AND DEBT RECOVERY 17. ACCOUNTING 18. AUDIT 19. THIRD PARTY ROYALTIES 20. RECORDING COSTS 21. MECHANICAL ROYALTIES 22. MARKETING APPROACH 23. PROMOTION 24. SALES TAX 25. EXPIRATION OF THE TERM 26. BARCODE & LOGO 27. WARRANTIES & REPRESENTATIONS 28. TERMINATION 29. NOTICES 30. MISCELLANEOUS 31. DEFINITIONS 1. GRANT OF RIGHTS ~~~~~~~~~~~~~~~~~~ During the Term, MDS shall have the following rights in the Teritory: a) the exclusive right to distribute and sell Records as Label's sole agent (in accordance with clause 4 below); b) the non-exclusive right to market, advertise and promote the sale of Records; c) the exclusive right (as label's sole agent) to invoice all Customers in relation to sales of Records; d) the right to use the name and approved biography of each artist whose performances are embodied on Records in connection with the advertising, publicising or sale of Records. 2. APPLICABLE FEES ~~~~~~~~~~~~~~~~~~ In consideraion of the services to be rendered to Label by MDS, MDS shall be entitled to the following applicable fees (herinafter referred to as "Applicable Fees") which MDS shall be entitled to retain from all monies received by MDS in respect of Records sold hereunder: a) 25% percent [sic] of the Wholesale Price on one [sic] 100% of paid sales of Records sold by MDS to Customers intended for retail sale in Australia. b) 20% percent [sic] of actual export selling price on 100% of paid sales of Records sold to Customers in Account intended for export outside of Account. c) Such other monies as are defined as "Applicable Fees" in the Agreement. If MDS has not received payment in full for all Applicable Fees in relation to a particular Record within a period of 9 months following the date of its inital release then such fees shall be immediately payable by Label to MDS in full. 3. AUTHORISED AGENT ~~~~~~~~~~~~~~~~~~~ Label shall appoint MDS its sole dult authorised agent for all pruposes connected with the rights granted to MDS by Label. Without limiting the foregoing Label hereby appoints MDS as its sole authorised aggent for the purpose of distributing Records to Customers in accordance with MDS' Terms and Conditions of Sale. 4. STOCK ~~~~~~~~ Label shall be responsible for monitoring stock levels of Records and shall ensure that MDS at all times has adequate supplies to fulfil demand. 5. TITLE IN PROPERTY ~~~~~~~~~~~~~~~~~~~~ Title in the property in Records shall remain vested in Label up to the point at which such Title passes to Customers by virtue of the exercise by MDS of its rights as Label's agent. 6. CONDITIONS OF SALE ~~~~~~~~~~~~~~~~~~~~~ Label agrees that Records shall be distributed and sold to Customers by MDS hereunder pursuant to MDS' standard Terms and Conditions of Sale. 7. STOCK TRANSFERS ~~~~~~~~~~~~~~~~~~ Label shall be entitled to order Records from MDS for promotional use. The costs incurred by MDS for the shipping and handling of such Records (in accordance with Label's instructions) shall be treated as an Applicable Fee and may be deducted from monies due to Label. 8. STOCK RISK ~~~~~~~~~~~~~ The stock risk in Records and associated materials shall pass to MDS upon delivery and acceptance of the same by MDS warehouse in Melbourne and the liability of MDS shall be limited to the extent of the insurance cover afforded to MDS as provided hereunder. 9. INSURANCE ~~~~~~~~~~~~ MDS shall ensure that Records stored at the MDS warehouse are insured under a comprehensive policy covering such Records and associated materials. If Records are lost or damaged in transit by any carrier for MDS then MDS shall ensure that Label shall have the same remedies against such carrier as MDS would have had if the Records lost or damaged had been records distributed by MDS for its own account. 10. SALES REPORTS ~~~~~~~~~~~~~~~~~ MDS shall promptly prepare and supply to Label free of charge any reasonable sales, inventory, or other reportsas are routinely available to any of MDS's distributed labels. Any other data or reporting systems required by Label shall by provided at the discretion of MDS and at Label's cost. 11. INSPECTION ~~~~~~~~~~~~~~ Label shall be permitted once every 6 months, at reasonable times during normal working days, to check the stock held at the MDS warehouse provided Label shall have given MDS reasonable notice of its intention to do so and provided such inspection does not cause any unreasonable disruption to MDS. 12. OVERSTOCKS ~~~~~~~~~~~~~~ MDS shall have no obligation to store Overstock Records. "Overstock Records" shall mean each Record which sell [sic] less than 5% percent of the number of units of such Record stored at MDS in any calendar month. If MDS agrees to store Overstock Records for Label then Label shall be charged a fee of 2 cents per unit per month. Such fee shall be deemed an Applicable Fee and may be deducted from the monies payable to the Label. 13. DAMAGED GOODS ~~~~~~~~~~~~~~~~~ In respect of Cassette or CD versions of Records which have been returned to MDS by reason of standard cases being cracked or damaged (but otherwise in saleable condition), MDS shall replace the cracked or damaged case with a new "standard" case and return the re-packaged Record to inventory. If MDS undertakes such replacement service then MDS shall charge Label an Applicable Fee of $0.50c [sic] for each Cassette or CD case corresponding to a Record which is replaced on Label's behalf. 14. SALE OR RETURN ~~~~~~~~~~~~~~~~~~ a) Label shall not reach any agreement with Customers which would allow for any "sale or return" scheme to be employed. b) MDS shall have the right to accept all returns of Records. With respect to returns of Records which are not sent in error, faulty or damaged, MDS shall not be obliged to accept such returns. c) MDS shall, when rendering an Accounting to Label (as defined herein) deduct the value of all actual returns including without limitation returns which are sent in error or which are faulty or damaged. 15. INVOICES ~~~~~~~~~~~~ MDS shall prepare invoices to Customers in respect of all Records distributed pursuant to this Agreement and shall use its best endeavours to collect amounts due from such Customers pursuant to all such invoices in accordance with its standard collection policy for invoices relating to records. 16. BAD DEBTS AND DEBT RECOVERY ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ a) MDS shall not be responsible for any bad debts arised out of non-payment of an invoice or part thereof from a Customer relating to the sales of Records. b) If MDS is unable, for reasons beyond its control, to receive payment of an invoice from a Customer relating to the sales of Records, MDS shall have the right to commence legal action against that Customer. If such an invoice is paid (whether in part or in full) then such monies (less the administratio costs) relating thereto and the legal costs and expenses of recovering the same shall be credited to Labels account. 17. ACCOUNTING ~~~~~~~~~~~~~~ a) MDS shall account to Label for Records sold by MDS hereunder by rendering a statement after 90 days after the end of each quarterly period ending March 31 (an "Accounting") showing all payments of invoices from Customers relating to sales of Records during that 3 month period together with the Apllicable Fees dues to MDS in respect of its services to Label. b) When rendering such Accounting MDS shall pay to Label the balance of the monies MDS has actually received from Customers in relation to sales of Records after the deduction of Applicable Fees and any other permissable offsets including without limitation, mechanical royalties, sales tax and the value of any returns of any description. 18. AUDIT ~~~~~~~~~ At any time within 2 years after an accounting statement is delivered to Label, Label shall have the right (after giving MDS reasonable notice) to examine the sales records of MDS with respect to such Accounting statement. Such examination shall be at Label's sole cost and expense, by an accountant designated by Label, and shall be made during the usual business hours of MDS and limited to sales records which relate to Label. 19. THIRD PARTY ROYALTIES ~~~~~~~~~~~~~~~~~~~~~~~~~ Label shall pay all royalties and other payments which may become due to Artists, producers and any third parties entitled to payment with repect to Records distributed or sold hereunder. 20. RECORDING COSTS ~~~~~~~~~~~~~~~~~~~ Label shall be responsible for the payment of all Record costs whatsoever in respect of the sound recordings embodied on each Record. 21. MECHANICAL ROYALTIES ~~~~~~~~~~~~~~~~~~~~~~~~ With respect to Records distributed or sold by MDS hereunder which embody copyrighted material, MDS (on Label's behalf) shall pay or cause to be paid directly to the proprietors of such copyrighted material, or to their duly authorised agents, all mechanical royalties which may be due or become due under and in in accordance with the applicable licences or the applicable laws. Such payments shall be treated as Applicable Fees and may be deducted from monies due to Label hereunder. 22. MARKETING APPROACH ~~~~~~~~~~~~~~~~~~~~~~ Prior to the release of each Record, Label shall consult with MDS with respect to the marketing approach to be used in connection with such Record provided that Label's decision with respect to such marketing shall be conclusive. 23. PROMOTION ~~~~~~~~~~~~~ Label shall be responsible for all advertising and promotional material in connection with the sale of Records including all associated costs. If MDS, in conjunction with Label, chooses to pay any promotional costs then such costs shall be treated as Applicable Fees and may be deducted from monies due to Label hereunder. 24. SALES TAX ~~~~~~~~~~~~~ Label shall be solely responsible for any sales or exise taxes resulting from the promotion or sale of Records. However MDS on Label's behalf shall collect any sales taxes resulting from the sale by MDS of Records and shall pay such taxes directly to the Australian Taxation Office. For the avoidance of doubt, MDS shall not be responsible for the payment of any taxes incurred by Label from the promotion of Records. 25. EXPIRATION OF THE TERM ~~~~~~~~~~~~~~~~~~~~~~~~~~ Provided that MDS receives full payment for any outstanding Applicable Fees which may be due, all Records remaining in the possession of MDS upon the expiration of the Term, shall at Label's option and expense and upon Label's written instructions either be a) destroyed b) returned to Label 26. BARCODE & LOGO ~~~~~~~~~~~~~~~~~~ Label shall ensure that all Records shall bear a barcode, and where possible, the credit "Distributed by MDS" and the MDS logo. 27. WARRANTIES & REPRESENTATIONS ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Label represents and warrant to MDS that: a) there are not nor will there be any liens, encumbrances and/or obligations upon or in connection with the sound recordings contained on each Record and Label have the right, power and authority to enter into and fully perform this Agreement; b) Label will at all times defend, indemnify and hold MDS harmless from and against any and all claims, damages, liabilities, costs and expenses, arising out of any breach by Label of any warranty, representation or agreement made by Label under this Agreement, Label will reimburse MDS on demand for any payment made at any time in respect of any liability or claim in respect of which MDS shall be entitled to be indemnified. 28. TERMINATION ~~~~~~~~~~~~~~~ Either party may immediately terminate this Agreement without notice in the event of: a) the liquidation or bankruptcy of the other party, either voluntary or compulsory; b) the appointment of a receiver, liquidator, manager or trustee in bankruptcy of the other party; and c) a breach by the other party of any of the terms or conditions of this Agreement which breach is not remedied within 60 days of notice being given to that party to remedy such breach. 29. NOTICES ~~~~~~~~~~~ All notices to be given by either party hereto shall be in writing and shall be delivered by registered mail (postage prepaid) or facsimile. any notice which is so mailed or faxed shall be conclusively deemed to have been given 72 hours after the date of mailing. The addresses of the parties, until further written notice to the contrary, shall be the addresses set forth at the head of this Agreement. In order for any notice to MDS to be valid and binding upon MDS it must be served simultaneously on each of the following persons: i) the Managing Director, Mushroom Exports PTY LTD; and ii) the Business Affairs Director, Mushroom Group of Companies. 30. MISCELLANEOUS ~~~~~~~~~~~~~~~~~ a) Either party may assign this Agreement with the prior written consent of the other party b) This Agreement is governed by the laws of the State of Victoria, Australia and the parties agree to submit to the jurisdiction of the appropriate Courts of that State. c) The captions herein are for convenience only, do not constitute a part of this Agreement and are not to be used in the construction hereof. 31. DEFINITIONS ~~~~~~~~~~~~~~~ As used in this Agreement, the following terms shall have the meanings indicated: a) "Customer" shall mean each retailer and wholesaler or any other party to whom Records are shipped hereunder. b) "Records" shall mean each compact disc, cassette or phonograph record derived from the album entitled "****" embodying the performance of ****. c) "Teritory" shall mean the countries of Australia and New Zealand. d) "Term" shall mean a period of 2 years commencing on the date hereof. The Term shall be extended in accordance with Clause 26 or 27 above, if applicable. e) "Wholesale Price" shall mean the dealer price of each Record as advised by Label less sales tax. EXECUTED AS AN AGREEMENT: xxx signed for and on behalf of MUSHROOM EXPORTS PTY LTD xxx signed by **** on behalf of ****