Exhibit 10.1
[*] Confidential portions of this Agreement have been omitted and filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
February 28, 2000
Mr. Bo Loyd
Sr. Vice President of Merchandising
M.G.A., Inc.
739 West Main
Dothan, AL 36301
Re: Amended and Restated Supply Agreement between Ingram Entertainment
Inc. and Home-Vision Entertainment Inc. dated September 21, 1995 (the
"Home-Vision Agreement")
Dear Mr. Loyd:
This will embody in writing the agreement (the "Supply Agreement") between
M.G.A., Inc. ("M.G.A.") and Ingram Entertainment Inc. ("Ingram") to the terms
and conditions of the 1999 Business Proposal (the "Proposal") attached to this
letter as follows:
1. The Home-Vision Agreement has, by operation of law or by agreement, or
both, been assumed by or otherwise become the valid, legal, and
binding obligation of M.G.A.
2. The terms and conditions set out in the Proposal are binding upon both
M.G.A., for itself and as successor to Home-Vision Entertainment Inc.
("Home Vision"), and Ingram, subject to the provisions set out in this
letter. In the event of any inconsistency between this letter and the
Proposal, the terms of this letter will control. The term "Supply
Agreement" refers to the Proposal as modified by this letter.
3. This Supply Agreement supercedes the Home-Vision Agreement and governs
all purchases by M.G.A. from Ingram. It incorporates all
understandings of the parties with respect to its subject matter and
may only be amended in writing signed by both parties.
4. The term of this Supply Agreement will run from the date of this
letter through February 7, 2002, but may be terminated by Ingram after
giving 30 days advance written notice to M.G.A. upon the occurrence of
an Extraordinary Transaction (other than an Extraordinary Transaction
to which exceptions (x) or (y) of Item 6 below apply). M.G.A. shall
have the right to terminate this Agreement after giving Ingram 30 days
advance written notice. If M.G.A. terminates this Agreement as
provided herein, it shall be obligated to pay to Ingram the prorated
fees as described in Section 6.
5. M.G.A. agrees to purchase from Ingram [*] of each of the following as
supplied to M.G.A. through wholesale distribution: pre-recorded video
rental product ("Distribution Video Product") and interactive media
game software rental product ("Distribution Game Product"). M.G.A.
also agrees to use Ingram to [*] of each of the following purchased
directly from the studio and/or the manufacturer: pre-recorded video
rental product ("Direct Video Product") and interactive media game
software rental product ("Direct Game Product"). The above
requirements for Distribution Video Product and Distribution Game
Product are subject to the following exceptions:
Mr. Bo Loyd
Page 2
February 28, 2000
(a) [*]
(b) [*]
(c) [*]
(d) [*]
6. The occurrence of any one of the following events shall be deemed an
"Extraordinary Transaction" for purposes of this Item 6:
(a) consummation of a sale or other disposition of [*] by M.G.A.
other than in the ordinary course of business, [*] within [*]
of such transaction (an "Asset Sale");
(b) consummation of a merger or consolidation of, into, or
involving M.G.A., in which M.G.A. is not the surviving
corporation; or
(c) a breach by M.G.A. of any of the requirements of Item 5 above
which is not cured, within 30 days of written notice from
Ingram to M.G.A., by payment to Ingram of the following
amounts, as applicable:
(i) with respect to Distribution Video Product, an amount
equal to [*] of Distribution Video Product from Ingram
during such calendar year;
(ii) with respect to Distribution Game Product, an amount
equal to [*] of Distribution Game Product from Ingram
during such calendar year;
(iii)with respect to Direct Video Product, an amount equal
to [*] of Direct Video Product M.G.A. purchased
directly from the manufacturer during such calendar
year, as such [*] is reasonably demonstrated by Ingram;
and
(iv) with respect to Direct Game Product, an amount equal to
[*] of Direct Game Product M.G.A. purchased directly
from the manufacturer during such calendar year, as
such [*] is reasonably demonstrated by Ingram.
In the case of (i) through (iv) above, the intent of the
parties is to put Ingram into the same economic position in
which it would have been had M.G.A. fulfilled its [*] set
out above.
(d) A material breach of any other provision of this Agreement
which is not cured within 30 days of written notice from
Ingram to M.G.A., or the filing of any bankruptcy petition or
other seeking of relief from creditors by or with respect to
M.G.A., voluntary or involuntary, which is not dismissed
within 60 days of filing.
Mr. Bo Loyd
Page 3
February 28, 2000
Upon the termination of this Agreement by Ingram due to the
consummation or occurrence of an Extraordinary Transaction or upon the
termination of this Agreement by M.G.A. prior to [*], M.G.A. shall
immediately pay Ingram in cash the following amounts (the "Termination
Payment"):
Extraordinary Transaction Date Termination Payment Due
------------------------------ -----------------------
On or before [*] [*]
On or before [*] [*]
On or before [*] [*]
On or before [*] [*]
After [*] [*]
The parties have agreed to the above payments in lieu of a formula
designed to calculate the discounted present value of anticipated
annual future payments under this Supply Agreement, due to the
uncertainty inherent in any such formula calculation.
The following shall apply notwithstanding the above:
(x) in the event of an Asset Sale of less than [*] of M.G.A., the
payment set out above shall be prorated based upon the required
payments made to Ingram under this Supply Agreement by M.G.A., with
respect to the locations so sold, during the 12 months preceding the
Extraordinary Transaction, prorated for any partial year of the
unexpired term of this Supply Agreement; and
(y) in the event of an Extraordinary Transaction in which this Supply
Agreement is assigned to and assumed by a third party of credit
quality at least equal to that of M.G.A. on terms and conditions
reasonably acceptable to Ingram, M.G.A. will not be required to make
any Termination Payment unless and until subsequent annual payments by
the assignee to Ingram under this Supply Agreement in each 12 month
period after the Extraordinary Transaction ("Subsequent Annual
Payments") fail to equal or exceed required payments made or required
to be made to Ingram under this Supply Agreement during the 12 months
preceding the Extraordinary Transaction ("Prior Annual Payments"). If
in any such 12 month period Subsequent Annual Payments are less than
the Prior Annual Payments (a "Shortage Period"), M.G.A. shall pay to
Ingram a pro rata portion of the Termination Payment determined by
multiplying the Termination Payment due as if the Extraordinary
Transaction had occurred at the beginning of the Shortage Period by a
fraction, the numerator of which is the amount of Subsequent Annual
Payments and the denominator of which is the amount of Prior Annual
Payments.
7. M.G.A. shall maintain true and complete records in connection with its
calendar year purchases from all sources of Distribution Video Product
and Distribution Game Product, all direct purchases of Direct Video
Product and Direct Game Product in each calendar year from all
Mr. Bo Loyd
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February 28, 2000
sources, and all transactions related thereto, and shall retain all
such records for at least 24 months after the end of each applicable
calendar year. Ingram may from time to time and at any time, during
the term of this Supply Agreement and during the 24 month period
following the termination of this Supply Agreement, audit any and all
such records with its own or third party auditors so as to determine
compliance by M.G.A. with this Supply Agreement. In addition to any
Termination Payment, M.G.A. shall promptly reimburse Ingram for the
reasonable costs of any such audit in the event it reveals an
Extraordinary Transaction has occurred or said audit reveals a
variance or discrepancy of M.G.A.'s purchase requirements as set forth
in Section 5 of greater than 5%. If said audit does reveal a
discrepancy of greater than 5% then M.G.A. will have 30 days to
rectify the same.
8. M.G.A. may not assign this Supply Agreement without the express
written consent of Ingram.
Ingram Entertainment Inc. M.G.A., Inc.
By: /s/ John Reding By: /s/ Bo Loyd
------------------------------ ----------------------------
Print Name: John Reding Print Name: Bo Loyd
Title: Vice President of Sales Title: Senior Vice President-Purchasing
1999 Business Proposal
M.G.A.
I. Pricing and Special Terms
Traditional Rental and Sell-Through Pricing:
M.G.A., Inc. ("M.G.A." or "you") will receive Ingram Entertainment
Inc.'s [*] plus the [*] set out below, pricing on pre-recorded video
products:
New release and catalog rental product : [*]
(Product with [*] and higher which
is inclusive of [*].)
New release feature sell-through product : [*]
purchased for rental use. (Product with
[*] and lower with National Goals
of [*]) ***
New release feature sell-through product : [*] *
purchased for sale to the consumer.
(Product with [*] and lower with
National Goals of [*]) ***
* M.G.A. will qualify for a [*]
Catalog Sell-Through Product : [*]**
** M.G.A. will qualify for a [*]
Special Sell-Through Provision:
*** Existing Inventory: M.G.A. will process overstock returns on
feature and catalog sell-through titles to its current supplier of
these products. Future returns of product to Ingram Entertainment of
products not purchased through Ingram Entertainment will be credited
at Ingram Entertainment's gross replacements cost for that product.
Sell-Through Special Orders Process:
Ingram Entertainment will provide a designated 800 number established
for M.G.A.. Stores calling in special orders on this number would be
routed to the Ingram National Sales Center and will be handled by a
group of individuals familiar with your account. Special orders can be
shipped to the store for the customer to collect on their next visit
or can be shipped directly to the consumer's home for an additional
handling charge of [*]
We would suggest sourcing special orders from our Memphis facility and
having all special order back-orders shipped from this facility as
well. We can process special orders on a fill or kill basis or hold
back-orders for any number of days between 1 and 120.
DVD Pricing:
DVD Product New Release and Catalog [*]
Interactive Media Game Software Pricing / Co-op:
Rental Product ([*] and higher) [*]
Sell-Through ([*] and lower) [*]
Rental Advertising Game Software [*]
Sell-through Advertising Game Product [*]
Advertising dollars earned on Sell-Through interactive media/game
software purchases must be spent on Sell-Through games.
Direct Deal - Distribution Fee:
Ingram Entertainment will provide [*] Freight will be [*] M.G.A. will
be responsible for [*] Provided M.G.A. [*] there will be no fee for
processing returns. If Ingram Entertainment processes returns [*]
Distribution Fee Payment Terms will be [*]
Products purchased under this option do not qualify for [*]
II. General Terms
Prepacks:
M.G.A. will receive pricing and premium benefits offered by
manufacturers on units purchased in prepack form. Product will be
broken-down and delivered to individual locations when a prepack
consists of multiple units of one title. If the prepack offered
contains multiple titles, M.G.A.'s orders must be in the same multiple
as the titles offered in a prepack.
Premiums:
M.G.A. will be eligible to receive premium items offered directly from
the manufacturer and delivered to one location at Ingram
Entertainment's cost.
Payment Terms and Credit Limit:
Payment terms will be [*] on all purchases, including distribution fee
charges. Late fees will be assessed to invoices exceeding the agreed
upon terms.
Credit limit will be established following Ingram Entertainment's
analysis of updated financials from time-to-time in accordance with
Ingram Entertainment policies.
Floor Planning:
M.G.A. is eligible to participate in the Video Financial Service Inc.
("VFS") "Floor Plan" program which offers 150 day terms on select
secondary titles and from time to time other product lines. There is
no additional charge for the extended terms; however, a separate VFS
credit application is required for participation. VFS will communicate
these titles to M.G.A. on a regular basis.
Freight:
Product will be shipped to M.G.A. retail locations prepaid freight on
shipments of [*] In the event new release product arrives late to
Ingram Entertainment warehouse facilities, Ingram Entertainment will
use commercially reasonable efforts to ship the product in a manner
that will have the product arrive by street date; provided that Ingram
Entertainment can recover the additional freight charges from the
supplier of the product.
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Returns:
Overstock - [*] M.G.A. agrees to cooperate with Ingram Entertainment
to [*] Defectives - [*] Return authorizations must be requested within
[*] and product must be returned to our facility within [*] of being
authorized for return.
Business Interruption:
None
Account Representation:
Dedicated sales representation for Pre-recorded Videocassette, DVD and
Games.
Pre-Recorded Video Software Advertising:
M.G.A. will earn co-op advertising dollars at a rate of [*] M.G.A.
will earn [*] Ingram Entertainment will assist M.G.A. in the
acquisition of Market Development Funds from each supplier, to the
extent available. Not available on direct purchases.
M.G.A. has the option of having its advertising handled by Ingram
Entertainment's Ad Placement Department. Ingram Entertainment's Ad
Placement staff will handle placement with media sources, payment and
studio chargebacks. Not available on direct purchases.
P.O.P:
P.O.P materials will be provided at no charge, however, M.G.A. will be
responsible for freight charges related to the delivery of the P.O.P.
materials.
Annual Meeting:
Ingram will assist in accumulation of funding and processing of
authorizations and assistance can be provided on coordinating the
M.G.A. event if Ingram Entertainment has been named the primary
supplier of pre-recorded video products.
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