EXHIBIT 10.1
October 27, 1998
Mr. Dick Rademaker
President and CEO
LRG
Licensing Resource Group
426 Century Lane, Suite 100
Holland, MI
49423
Dear Dick:
This letter sets forth the revised agreement between Power Photo Enterprises
Inc. (PPE) and Licensing Resource Group Inc. (LRG) - collectively, the
"Parties". This agreement replaces all other letters and agreements between the
two parties and in particular, the March 16, 1998 correspondence from LRG to
TPE, and the July 15th amendment from PPE to LRG.
1.0 LRG understands that Sony of Canada Ltd. ("Sony") has developed a Retail
Digital Imaging System, currently referred to as the "Sticket" (the
"Technology"), which produces an image of the user which is digitally
affixed to stock images which the user selects in order to create a
customized keepsake ("Products").
2.0 PPE represents and warrants that Sony has granted PPE th non-exclusive and
assignable right to design, manufacture, distribute and market the
Technology in the United States of America. LRG represents and warrants
that they have longstanding expertise in the USA college and university
(collectively, "Universities") fields of licensing, distribution and
marketing of products, trademarks, copyrights and related services (the
"Expertise").
LRG as licensing agent
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3.1 PPE hereby grants to LRG the exclusive right execute and administer
licenses in the Territory, defined as the Universities in the USA, during
the Term (as defined below) for use of the Technology on Products which
bear the Name, Trademark(s), and/or Logo(s) of the Universities.
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3.2 LRG shall have the exclusive marketing rights for the Technology and the
Products in the Territory. PPE retains all other rights. LRG shall have the
exclusive right to franchise Universities communities and distribute to
Universities' bookstores as identified in the National Association of
College Stores ("NACS").
3.3 All Technology licensing agreements with Universities in the Territory
shall be signed by PPE or, as PPE may agree, by LRG as agent for PPE,
provided that all such agreements shall be in form, and substance
pre-approved by PPE, including payment by the Universities as determined by
the Parties.
3.4 For all sales made by LRG in the Territory, LRG shall receive a commission
of $750 per kiosk payable within thirty days of the installation and
payment in full of each kiosk.
3.5 For the duration of each franchise agreement sold by LRG LRG will receive a
royalty on each image transaction at each kiosk. This royalty will be
calculated at 5(cent) per piece of media (Sony Sticket photographic paper)
on a quarterly basis, with payment due 30 days after the end of each
quarter.
LRG as Distributor
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4.0 LRG as Distributor. LRG desires to become PPE's exclusive distributor in
certain defined market segments or territories in the United States of
America. These market segments or territories are identified and defined in
the attached addendum to this agreement. Each addendum identifies the
market segment/territory and the associated marketing plan. The marketing
plan outlines the expected sales volume, sales methodology and time lines
agreed upon by both LRG and PPE. These marketing plans will identify
minimum performance criteria which will form the basis of LRG retaining the
exclusive distribution rights to each identified market segment.
4.1 PPE will grant LRG the first right of refusal regarding the expansion of
LRG's exclusive distribution right to include new market segments. These
additional market segments will be defined and become part of this
agreement by their addition as addenda from time to time as both parties
agree.
4.2 For all sales made by LRG in the Territory, LRG shall receive a commission
of $750 on each kiosk sold payable within thirty days of the installation
and payment in full of each kiosk.
4.3 On each sheet of paper media sold by PPE and used to complete a transaction
at each kiosk in the territory or market segment defined in this agreement,
LRG will receive a royalty on each image transaction at each kiosk. This
royalty will be calculated at 5(cent) per piece of media (Sony Sticket
photographic paper) on a quarterly basis, with payment due 30 days after
the end of each quarter.
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5.0 LRG will receive a 5% equity position in Power Photo Enterprises Inc.
6.0 It is expected that variances to the general agreement will occur and these
will be handled by the parties in a way that is conducive to the overall
sales objectives of PPE. Some general guidelines follow:
6.1 It is expected that LRG will use the services of other distributors, agents
and sales reps to sell the kiosks. It is also anticipated that volume sales
will require a discounted price structure. Sub-distributors, agents, sales
reps, etc. will be paid by LRG. PPE will provide a pricing structure which
will enable LRG to obtain profit margins necessary to offset the cost of
the sub-distributors, etc. PPE will also support LRG's sales efforts
through reduced pricing for volume orders or special market penetration.
7.0 Each Party shall have the right, exercisable not more than once in any
calendar year, during regular business hours, at such Party's sold cost and
expense unless an error of five percent (5%) or more is discovered, upon
fifteen (15) days' written notice to the other Party, at the place where
the other Party customarily maintains its books and records, to inspect
those books and records which pertain to the payments due to LRG pursuant
to Paragraph 3.4/3.5 and 4.2/4.3. Any such audit shall be conducted by
representatives of a firm of certified public accountants, shall not
unreasonably interfere with normal course of business and shall be
completed within a reasonable period of time. Such Party shall furnish to
the other Party a copy of such auditor's report within ten (10) days after
the completion of any such audit.
7.1 LRG's responsibilities will include:
(a) obtaining Product and art approval from the Universities and using its
best reasonable business efforts to solicit Universities Agreements;
(b) remitting the proper royalties to participating Universities;
(c) developing and managing special promotions, subject to good faith
consultation with PPE;
(d) abiding by Sony' licensing guidelines and code of ethics, as shall be
provided to LRG from time to time;
(e) LRG will provide practical and consulting support to PPE in developing
US sales agreements, jurisdiction approvals, pricing structures and
other information relative to the US market;
(f) LRG will develop a Marketing/Business Plan for the US as outlined in
paragraph 6.1. LRG will also provide input and information regarding
market trends and
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competitive activity and participate in a meaningful way in monthly
planning and review meetings initially, then evolving to quarterly
meetings in the longer term;
(g) LRG will support PPE's production, planning and inventory procurement
activities by providing sales information (firm; forecast;
projections) in a format and timeframe mutually agreed upon by both
parties.
7.2 LRG hereby undertakes to indemnify and hold PPE, Sony, and their
representatives, employees, shareholders, directors, licensees and assigns
harmless on demand from and against any and all loss, expense, liability
and damage suffered or incurred by any of them as a result of LRG's actual
breach of the foregoing or this Agreement.
8.0 Each sales agreement will outline PPE's commitment to provide warranty,
extended warranty, preventative and remedial maintenance and ongoing
maintenance support for kiosks (that is, freestanding booths) sold. PPE
will also be responsible for supplying paper, operating software and image
packages.
PPE will provide LRG with liability insurance in accordance with
Universities policy and include the Universities & LRG as additional
insureds
8.1 PPE will provide to LRG quarterly payments. PPE will also be responsible
for paying advances against royalties to LRG on behalf of the Universities,
in accordance with the advance policy of the individual Universities, which
policy shall be disclosed and approved by PPE prior to conclusion of the
applicable Universities Agreement.
8.2 PPE hereby undertakes to indemnify and hold LRG and its representatives,
employees, shareholders, directors, licensees, sublicenses and assigns
harmless on demand from and against any and all loss, expense, liability
and damage suffered or incurred by any of them as a result of PPE's actual
breach of this Agreement.
9.0 Subject to the term of the rights that Sony has granted to PPE, this
Agreement will continue until and including June 30, 2003 ("Term"), with
automatic extensions of five (5) year terms, unless written notice of
termination is given by either party one (1) year before the end of the
Term or any extension thereof.
1.10 This Agreement does not create a partnership or joint venture between the
Parties, nor does it make either Party an agent (except as herein expressly
provided) or employee of the other. The Parties agree that they are
independent contractors.
10.1 Subject to written pre-approval of PPE not to be unreasonably withheld, LRG
may perform its obligations and exercise its rights hereunder through
independent representatives, sub- licensees, or through organizations of
its choice, but LRG shall
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remain principally liable for performance of its obligations hereunder. LRG
acknowledges that PPE may perform its obligations and exercise its rights
hereunder through franchisees, but PPE shall remain principally liable for
performance of its obligations hereunder.
11.0 The Parties will amend this Agreement as is necessary an is agreed to by
the Parties.
This letter, when accepted by PPE below, will constitute a binding agreement
between the Parties, enforceable in accordance with the laws of the State of
Michigan. If the foregoing accurately reflects our agreement, kindly date and
sign below and return an accepted counterpart to us by fax; originals will then
follow by mail.
Yours very truly,
/s/ Ron Thompson
Ron Thompson
President
Power Photo Enterprises Inc.
Agreed to and accepted by:
Licensing Resource Group
/s/Dick Rademaker
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Dick Rademaker
President and CEO
11-9-98
Date