Product and Support Agreement - Hollywood Entertainment Corp., Hollywood Management Co. and Boards Inc.
PRODUCT AND SUPPORT AGREEMENT
THIS PRODUCT AND SUPPORT AGREEMENT, effective as of January 25, 2001,
is by and between Hollywood Entertainment Corporation, an Oregon corporation
("HEC"), Hollywood Management Company, an Oregon corporation and HEC's wholly
owned subsidiary ("HMC" and collectively with HEC, as appropriate,
"Hollywood"), and Boards, Inc., an Oregon corporation ("Boards").
INTRODUCTION
Mark Wattles, the chief executive officer, director and majority
shareholder of Boards, is the president and chief executive officer and a
director of both HEC and HMC.
HEC, HMC, and Boards have entered into a License Agreement of even date
herewith in the form attached hereto as Exhibit A (the "License Agreement")
pursuant to which Boards will license certain trademarks, trade names and
trade dress of HMC and its affiliates in connection with Boards' operation
of video and game stores and the sale and rental of goods relating thereto.
In connection with the License Agreement and the operation by Boards
of such video and game stores and the license fee paid under the License
agreement, Hollywood is willing to sell to Boards certain products,
accessories and supplies (collectively, the "Products") and to provide Boards
with certain operational support services ("Support Services") and Boards
desires to have access to the Products and Support from Hollywood.
In the event Boards desires to take advantage of the purchase of
Products and/or Support Services, the parties desire to set forth the terms
and conditions that will apply.
AGREEMENT
In consideration of mutual promises contained herein, the parties agree
as follows:
1. PURCHASE RIGHTS
1.1 Acquisition of Products.
(a) Hollywood agrees that so long as the License Agreement is in
effect, Boards may acquire from Hollywood Products that are to be rented or
sold by Boards at Boards' Stores.
(b) Boards agrees that Products acquired by it from Hollywood shall
be subject to any restrictions or limitations on such Products that Hollywood
may be subject to (including, but not limited to, receiving, handling,
storage, display, marketing, transfer, rental, sale, or return requirements).
1.2 Hollywood's Trademark Labeling. Boards agrees that the labeling of
Products will be governed by the License Agreement.
2. PRICING
2.1 Pricing. Any acquisition of Products by Boards shall be at the prices
and subject to the terms and conditions agreed to by Hollywood and Boards.
The price of Products supplied by Hollywood to Boards shall be Hollywood's
cost (labor, handling, and materials included).
2.2 Shipping Charges. All prices are F.O.B. Boards' warehouse or store.
2.3 Taxes. Prices for all Products are exclusive of all federal, state and
local excise, sales, use and similar taxes. Boards agrees that it shall have
sole responsibility for the payment of such taxes.
3. INVOICE TERMS; SECURITY INTEREST.
3.1 Due Date. Payment to Hollywood shall be net 30 days after date of
invoice.
3.2 Charges; Rights on Late Payment.
(a) All payments are to be made in full, on the due date, in United
States dollars to Hollywood at its address set forth in this Agreement, and
with interest at the rate of 1.5% per month on any overdue payments. If
payment is not made when due, Hollywood shall send by mail or facsimile to
Boards a written notice of nonpayment.
(b) Section 3.4 notwithstanding, in case any payment shall not be
paid by Boards within 10 days of a written notice of nonpayment, all sums
owing under this Agreement become due at once irrespective of the terms of
sale, and Hollywood may defer shipment under this Agreement and any other
agreements between Boards and Hollywood until such sums shall have been paid.
3.3 If, in the reasonable judgment of Hollywood, the financial condition
of Boards at any time does not justify continuation of delivery on the terms
of payment specified herein, Hollywood may require full or partial payment
in advance, and, in addition, in the event any proceeding is brought by or
against Boards under any bankruptcy or insolvency laws, Hollywood shall be
entitled to cancel any Orders then outstanding.
3.4 Independence of Transactions. Each shipment shall be considered a
separate and independent transaction, and payment therefor shall be made
accordingly.
3.5 Security Interest.
(a) Hollywood retains a security interest in each Product shipped
pending receipt of full payment therefor.
(b) Boards shall execute, upon request by Hollywood, financing
statements deemed necessary or desirable by Hollywood to perfect such
security interests.
(c) Boards hereby authorizes Hollywood to file a copy of this
Agreement, any relevant related agreements or such financing statements with
the appropriate governmental authorities at any time in order to perfect such
security interests.
4. SHIPMENT OF PRODUCTS.
4.1 Orders.
(a) Hollywood shall supply the following Products to Boards' stores:
(i) movies and games (including revenue share and non revenue share new
releases and non new releases); (ii) accessories; (iii) concessions; (iv)
marketing promotional materials; and (v) other such products and supplies
customarily provided by Hollywood to its stores (collectively, "Hollywood
Store Products").
(b) Hollywood shall provide Hollywood Store Products to Boards' stores in
quantities agreed to by the parties. Unless otherwise agreed to by the
parties, the amounts of Hollywood Store Products shall be substantially
equivalent, and the amounts of each Product shall be proportionate, to
quantities of Hollywood Store Products provided to Hollywood's stores with
equivalent revenues.
(c) Hollywood Store Products shall be provided to Boards' stores at
substantially the same time as such supplies are customarily provided to
Hollywood's stores.
4.2 Special Orders.
(a) Shipment of Products from Hollywood to Boards other than
Hollywood Store Products shall be made only against duly executed written
orders issued by Boards ("Special Orders"). All Special Orders are subject
to acceptance by Hollywood.
(b) Any Special Order, unless otherwise negotiated and confirmed in
writing by Boards and Hollywood, shall be considered a Special Order under
this Agreement and not as a separate agreement or separate purchase order.
In the event of any conflict between the terms of a Special Order and this
Agreement, this Agreement shall take precedence.
(c) Each Special Order shall specify (i) the number of units to be
delivered and (ii) a preferred delivery date.
(d) Special Orders may be shipped either (i) by Hollywood from its
distribution centers to Boards' stores or (ii) to Boards' stores directly
from Hollywood's vendors.
4.3 Returns; Exchanges.
(a) Boards may exchange defective or damaged copies of videocassettes
or DVDs for a working copy of the same title; provided, however, that Boards
must notify Hollywood promptly after discovery of defective or damaged
copies.
(b) Hollywood is responsible for Product damaged in shipping from
Hollywood to Boards.
5. REVENUE SHARING PRODUCTS.
5.1 Revenue Sharing Product. Hollywood acquires new release movies
pursuant to revenue sharing agreements with various movie studios and may in
the future acquire other products through revenue sharing (the "Revenue
Sharing Agreements"). Acquiring revenue shared product from Hollywood is a
material benefit to Boards of the license agreement. As part of the
Hollywood Store Products, Hollywood agrees to provide Boards with Products
to the extent permissible under the Revenue Sharing Agreements ("Revenue
Sharing Products") and pursuant to the terms, conditions, and limitations set
forth in this Section 5 and, to the extent applicable, Section 4. Hollywood
agrees to make every effort to insure that its Revenue Sharing Agreements
allow Hollywood to provide its revenue shared products to Boards under the
same terms and conditions as Hollywood stores.
5.2 Revenue Sharing Requirements.
(a) Hollywood agrees that it will (i) notify Boards of all specific
requirements set forth in the Revenue Sharing Agreements that affect the
rental, sale, or handling of new release movies, the capturing, storing, and
reporting of store transaction data, and other revenue sharing requirements
which may affect the conduct of Boards' business (the "Revenue Sharing
Requirements") and (ii) update Boards periodically as to any changes in the
Revenue Sharing Requirements.
5.3 Compliance with Revenue Sharing Requirements. For so long as Boards
obtains Revenue Sharing Products through Hollywood, Boards shall promptly and
continually comply with all such Revenue Sharing Requirements, including, but
not limited to:
(a) the display of Revenue Sharing Products on store shelves, street
dates, PV dates;
(b) the provision of store POS transaction data as required by
Hollywood to the extent provided by the POS software provided and used by
Hollywood in its stores. To comply with studio requirements, Hollywood may
modify its reporting requirements from time to time, provided that it
notifies Boards in writing at least ten days in advance of any proposed
modification. Hollywood shall be entitled to use such information internally
for any legitimate business purpose and externally to the extent required to
comply with Revenue Sharing Agreements;
(c) the conduct of promotion and discounts in a manner and with
reporting that complies with all Revenue Sharing Requirements. Boards agrees
to notify Hollywood in advance of all promotions and discounts in order to
confirm compliance with the Revenue Sharing Requirements unless the
promotions or discounts are the same as those used by Hollywood in its
stores; and
(d) the limitations and restrictions set on the sale of all Revenue
Sharing Products applicable to Boards.
5.4 Fees, Charges, or Costs or Noncompliance. Boards agrees that, in
addition to any amounts or damages Hollywood may be entitled to recover from
Boards in any way arising out of, resulting from or related to Boards'
failure to adhere to the Revenue Sharing Requirements, Boards agrees to
indemnify and hold harmless Hollywood, its officers, directors, shareholders,
employees, affiliates, agents, and representatives as provided in Section
8.3.
6. OPERATIONAL SUPPORT.
6.1 Types of Support Services. Hollywood agrees to make available to
Boards, at Boards' option, certain Support Services including, but not
limited to, services related to the following:
(a) POS System: Hollywood's proprietary store POS software and
related maintenance, and upgrades.
(b) Bank Card Collections: Settlement, collection and remittance of
credit card payments.
(c) Check Verification: Participation in Hollywood's check
verification process, including check scanning and response
services.
(d) IS Support: POS, FCC and related systems support from Hollywood's
SSC IS staff, including Technical Support access.
(e) Collections Support: Participation in Hollywood's Rental
Recovery process, including Rental Recovery mailings, notices
and calls regarding unreturned product.
(f) Revenue Sharing Accounting: Participation in Hollywood's revenue
sharing accounting process, including tracking, reporting and
accounting for revenue sharing transaction activity and
compliance with studio reporting and payment requirements.
(g) Promotions Support: Participation in Hollywood's promotional and
marketing programs, including receipt of store POP, coupon and
discount materials, and related support.
(h) RSS: Store supplies.
(i) Real Estate and Construction Support: Consultation and
administrative support in the evaluation, location, construction
and opening of new stores.
(j) Facilities Support: Participation in Hollywood's facilities
support process, including call center assess for reporting and
scheduling maintenance and repairs through Hollywood
contractors.
6.2 Support Agreement.
(a) Unless cancelled by Boards, or until this Agreement is otherwise
terminated, the parties agree that Hollywood will provide the Operational
Support as outlined in Section 6.1 above. It is understood and agreed that
the levels of support outlined are intended to be support for base store
operations and do not include costs, expenses, or support associated with
unusual occurrences, including, but not limited to, special projects or
support requirements attributable to licensed store activity or events
outside customary ranges of store operation.
(b) It is understood and agreed that the Operational Support
described above will include the usual and customary levels of support
typically provided by Hollywood to its stores.
7. AUDIT.
During the term of this Agreement and continuing (i) until the date
three years following the date of expiration or earlier termination of this
Agreement or (ii) as may be reasonably necessary in connection with any
studio audit of Hollywood, Boards agrees that Hollywood may conduct, during
normal business hours, audits of Boards' business operations and records
relating to performance under this Agreement at Boards' headquarters as well
as Boards' stores. Any audits conducted pursuant to this section shall
relate to Boards' compliance with the terms of this Agreement and shall not
unreasonably interfere with Boards' daily business operations. The cost of
any such audit shall be borne by Hollywood, provided, however, that if such
audit reveals a discrepancy of more than five percent between amounts
determined pursuant to the audit as compared to that reported by Boards, the
cost of such audit shall be borne by Boards.
8. WARRANTY; HOLD HARMLESS; INDEMNIFICATION
8.1 "As Is"; No Warranty.
The products are provided "as is" and Hollywood makes no warranty,
express or implied, with respect to the products, including but not limited
to any implied warranty or condition of noninfringement, merchantability or
fitness for a particular purpose or arising by statute or otherwise in law
or from a course of dealing or usage of trade.
8.2 Hold Harmless.
(a) Boards acknowledges that Hollywood is providing products
manufactured or produced by third parties and only as an accommodation to
Boards. As a result, Boards agrees that under no circumstances shall
Hollywood have any liability to Boards hereunder arising out of the products
supplied (or the failure to supply). Any claim Boards may have with respect
to the condition of its rights to rent or sell product shall be against the
original manufacturers or suppliers.
(b) In no case shall Hollywood be liable to Boards or any of its
customers for special, indirect, punitive, incidental or consequential
damages, however caused, whether or not foreseeable and whether based on
contract or tort, including negligence. In no event will the aggregate
liability which Hollywood and its related persons may incur in any action or
proceeding exceed the total amount actually paid to Hollywood by Boards for
the specific product that directly caused the damage.
8.3 Hollywood Indemnification. Boards shall defend, indemnify and hold
harmless Hollywood, its officers, directors, employees, agents, shareholders,
and their respective successors and assigns, from and against any and all
claims, demands, losses, causes of action, liabilities, costs, obligations,
damages, expenses, attorneys' fees, settlements, or any other detriments
arising out of, incurred as a result of, or related to Hollywood's provision
of Products or Support Services to Boards, including but not limited to
Boards' violation of the terms of any Revenue Sharing Agreement. Boards
shall, at its own cost, defend any such matter using attorneys of its own
selection, subject to approval by HMC.
8.4 Boards Indemnification. Hollywood shall defend, indemnify and hold
harmless Boards, its officers, directors, employees, agents, shareholders,
and their respective successors and assigns, from and against any and all
claims, demands, losses, causes of action, liabilities, costs, obligations,
damages, expenses, attorneys' fees, settlements, or any other detriments
arising out of, incurred as a result of, or related to Hollywood's provision
of Products or Support Services to Boards, including but not limited to
Hollywood's violation of the terms of any Revenue Sharing Agreement.
Hollywood shall, at its own cost, defend any such matter using attorneys of
its own selection, subject to approval by Boards.
9. TERM; TERMINATION.
9.1 Term. This Agreement shall remain effective for so long as the License
Agreement, as may be amended from time to time, is in effect between the
parties unless this Agreement is terminated earlier in accordance with the
terms of this section. The terms and conditions of this Agreement shall
continue to apply to any order of Hollywood Store Products or Special Order
until final delivery is made even if such delivery is made after this
Agreement terminates.
9.2 Termination.
(a) Termination of License Agreement. This Agreement shall terminate
immediately upon the termination of the License Agreement.
(b) Termination by Boards. Boards may terminate this Agreement at
any time upon 30 days' prior written notice to Hollywood. Boards may
terminate any or all of the individual services provided by Hollywood under
this agreement upon 30 days' prior written notice to Hollywood without
terminating the other services provided in the agreement or the agreement in
its entirety. As long as the agreement has not been terminated in its
entirety, Hollywood will provide to Boards upon 30 days' prior written notice
to Hollywood any services previously terminated by Boards pursuant to this
paragraph 9.2(b).
(c) Termination by Hollywood. Hollywood may terminate this Agreement
by 30 days' prior written notice to Boards if Boards fails to:
(i) pay invoices submitted by Hollywood in a timely manner
twice in any consecutive 12-month period; a failure will be deemed to have
occurred under this paragraph (i) in any circumstance that Hollywood has the
right to send to Boards a notice of nonpayment as provided in Section 3.2,
whether a notice is actually sent or not;
(ii) comply with any applicable restrictions or limitations
with respect to rental or sale of Product, including the failure to comply
with Revenue Sharing Requirements, which failure to comply causes Hollywood
to be in default of Revenue Sharing Requirements; provided, however, that
Hollywood shall not have the right to terminate this Agreement under this
provision if such default is reasonably curable or otherwise not enforced by
the revenue sharing studio;
(iii) perform any other material provision of this Agreement for
30 days after written notice of such failure has been provided by Hollywood
to Boards; provided, however, that after two failures to peform together with
required notices within a year of other material provisions of this
Agreement, Hollywood may terminate this Agreement upon 30 days' prior written
notice to Boards with no additional failure or notice required.
10. ARBITRATION
10.1 Dispute Resolution. All disputes between the parties arising out of
the subject matter of this Agreement shall be submitted to binding
arbitration, pursuant to the guidelines set forth in Section 10.2.
10.2 Arbitration Guidelines.
(a) The arbitration shall take place in Multnomah County, Oregon,
unless the parties agree to a different location.
(b) Three arbitrators shall be selected by mutual agreement of the
parties. If the parties are unable to agree upon the identity of these
three arbitrators, each party shall select one arbitrator who is not an
employee, counsel, or affiliate of that party, and these arbitrators shall
confer and select a third person to serve as arbitrator.
(c) The arbitrators shall employ the then-current discovery
procedures promulgated under the law of the State of Oregon.
(d) The arbitrators shall employ the then-current trial and
deliberation procedures promulgated by the American Arbitration
Association, but shall not be required to use the services of the American
Arbitration Association unless all parties agree.
10.3 Attorney Fees. The unsuccessful party in any action, suit or
arbitration hereunder shall be responsible for the prevailing party's
reasonable attorney fees and expenses in addition to statutory costs as
shall be fixed by the court, or courts, or arbitration panel before which
the action, including any appeal therefrom, is tried, heard or decided.
11. CONFIDENTIAL INFORMATION
11.1 Confidentiality. If either party, at its sole discretion, provides
the other party with any confidential customer lists or other confidential
trade-related data (the "Confidential Information"), the recipient party
acknowledges and agrees that such information is proprietary, confidential
and constitutes trade secrets of the party providing the information and
shall not use, release or distribute such material or information without
the express written consent of the other party.
11.2 Termination. Upon termination of this Agreement, each party shall
return all of the other party's Confidential Information or, if
appropriate, destroy it and notify the other party in writing of its
destruction.
12. STATUS OF THE PARTIES
This Agreement is not intended to create, and shall not be
interpreted or construed as creating, a partnership, joint venture,
agency, employment, franchise, master and servant, or similar relationship
between Hollywood and Boards, and no representation to the contrary shall
be binding on Hollywood.
13. ASSIGNMENT
This Agreement must be and may only be assigned, transferred or
otherwise disposed of by Boards in connection with a permitted transfer of
the License Agreement, as described in Section 1.3 thereof, and to the
party to which the License Agreement is transferred.
14. BINDING EFFECT
This Agreement shall be binding upon and inure to the benefit of
Hollywood and Boards and their respective successors, assigns, personal
representatives, heirs and personal representatives. No purported
assignment or other transfer of Boards' rights shall be valid unless it is
in compliance with the terms of this Agreement and unless all obligations
of Boards hereunder are also assumed by the receiving party.
15. NOTICE
All notices required or permitted to be given under this Agreement
must be in writing and will be deemed served and given upon (i) five
business days after deposit in a depository receptacle under the care and
custody of the United States Postal Service, properly addressed to the
designated address of the addressee as set forth below, postage prepaid,
registered or certified mail with return receipt requested, (ii) delivery
to the designated address of the addressee set forth below by a national,
third-party commercial delivery service, whether by overnight delivery or
by courier, or (iii) receipt at the facsimile-receiving facility of the
addressee if transmitted by facsimile transmission. Notice given in any
other manner will be effective only if and when received by the addressee.
For the purpose of any such notices, the addresses, and facsimile number
of the parties are as follows:
HEC or HMC: General Counsel
9275 S.W. Peyton Lane
Wilsonville, OR 97070-964
Tel.: (503) 570-1600
Fax: (503) 570-1701
Boards: Mark J. Wattles
9275 S.W. Peyton Lane
Wilsonville, OR 97070-9645
Tel.: (503) 570-1601
Fax: (702) 804-5473
16. MISCELLANEOUS
16.1 Severability. The provisions of this Agreement are severable, and
if any provision shall be held illegal, invalid or unenforceable, such
holding shall not affect the legality, validity, or enforceability of any
other provision. Any such illegal, invalid, or unenforceable provision
shall be deemed stricken herefrom as if it had never been contained
herein, but all other provisions shall continue in full force and effect.
16.2 Entire Agreement. This Agreement and the License Agreement between
the parties hereto as of the date hereof contain the entire agreement
between the parties with respect to the subject matter hereof, and
supersede any prior agreements between the parties, written or oral, with
respect to such subject matter, including without limitation the term
sheet regarding employment between HEC and Mark Wattles dated as of
January 25, 2001.
16.3 Amendment. This Agreement may not be amended, modified, or
rescinded except by a writing executed by both parties.
16.4 Governing Law. This Agreement shall be governed and construed in
accordance with the substantive laws of the State of Oregon, exclusive of
conflict of laws provisions.
16.5 Choice of Venue. The sole jurisdiction and venue for any actions
arising out of or relating to this Agreement shall be the Oregon State and
U.S. federal courts located in Multnomah County, Oregon.
[Signature page follows]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized representatives as of the date first
above written.
HOLLYWOOD ENTERTAINMENT CORPORATION
By:___________________________________
Name:________________________________
Title:________________________________
Date:_________________________________
BOARDS, INC.
By:__________________________________
Name:_______________________________
Title:_______________________________
Date:________________________________
HOLLYWOOD MANAGEMENT COMPANY
By:___________________________________
Name:________________________________
Title:________________________________
Date:_________________________________
Signature page for Product and Support Agreement