<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 6, 2000
REGISTRATION NO. 333-32864
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
KOZMO.COM, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 5961 13-3956223
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization Classification Code Number)
</TABLE>
------------------------
80 BROAD STREET, 18(TH) FLOOR
NEW YORK, NEW YORK 10004
(212) 797-1330
(Address and telephone number of Registrant's principal executive offices)
------------------------------
GERARDO BURDO
CHIEF FINANCIAL OFFICER
KOZMO.COM, INC.
80 BROAD STREET, 18(TH) FLOOR
NEW YORK, NEW YORK 10004
(212) 797-1330
(Name, address and telephone number of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
RICHARD B. VILSOET, ESQ. STEPHEN H. COOPER, ESQ.
SPENCER D. KLEIN, ESQ. WEIL, GOTSHAL & MANAGES LLP
SHEARMAN & STERLING 767 FIFTH AVENUE
599 LEXINGTON AVENUE NEW YORK, NEW YORK 10153
NEW YORK, NEW YORK 10022 (212) 310-8000
(212) 848-4000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (1) PER SHARE (2) OFFERING PRICE (2) FEE
<S> <C> <C> <C> <C>
Common Stock, par value
$0.001 per share.............. $ $150,000,000 $39,600
</TABLE>
(1) Includes shares that the Underwriters have the option to purchase to cover
over-allotments, if any.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o) under the Securities Act of 1933.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This Amendment No. 1 is being filed solely for the purpose of filing certain
exhibits to the Registrant's Statement Registration No. 33-32864. This Amendment
No. 1 does not contain copies of the Prospectus included in the Registration
Statement or Part II thereof, which are unchanged from the Registration
Statement filed on March 21, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York, on the 5th day of April, 2000.
<TABLE>
<S> <C> <C>
KOZMO.COM, INC.
By: *
-----------------------------------------
Name: Joseph Park
Title: Chairman of the Board and Chief
Executive Officer
</TABLE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-1 HAS BEEN SIGNED BELOW
BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
*
------------------------------------------- Chairman of the Board and April 5, 2000
Name: Joseph Park Chief Executive Officer
/s/ YONG KANG
- ------------------------------------------- President and Director and April 5, 2000
Name: Yong Kang Attorney-in-Fact
*
------------------------------------------- Chief Financial Officer and April 5, 2000
Name: Gerardo Burdo Attorney-in-Fact
*
------------------------------------------- Director April 5, 2000
Name: Hugh Evans
*
------------------------------------------- Director April 5, 2000
Name: Robert Greene
*
------------------------------------------- Director April 5, 2000
Name: Seth Goldstein
*
------------------------------------------- Director April 5, 2000
Name: Jerry Gallagher
*
------------------------------------------- Director April 5, 2000
Name: Jack Chen
</TABLE>
II-6
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
1.1* Form of Underwriting Agreement
3.1** Amended and Restated Certificate of Incorporation of
Kozmo.com, Inc.
3.2** Amended and Restated By-Laws
4.1** Registration Rights Agreement
4.2* Form of Common Stock Certificate
5.1* Opinion of Shearman & Sterling, including consent
10.1+ Strategic Agreement between Starbucks Corporation and
Kozmo.com, Inc. dated February 12, 2000
10.2+ Supply and Delivery Agreement between Amazon.com LLC and
Kozmo.com, Inc. dated March 13, 2000
10.3+ Right of use agreement between Warner Home Video and
Kozmo.com, Inc. dated February 28, 2000
10.4+ Letter agreement between Columbia TriStar Home Video, Inc.
and Kozmo.com, Inc. dated March 10, 2000
10.5** Employment Agreement with Joseph Park dated October 4, 1999
10.6** Employment Agreement with Yong Kang dated October 4, 1999
10.7** Letter Agreement with Gerardo Burdo effective November 1,
1999
10.8** Letter Agreement with Kenneth "Skip" Trevathan effective
November 15, 1999
10.9** Letter Agreement with Christopher Shimojima effective
December 20, 1999
10.10** Letter Agreement with William Herald effective February 14,
2000
10.11** Kozmo.com, Inc. 1999 Incentive Stock Option Plan
10.12** Kozmo.com, Inc. 1999 Stock Option Plan
10.13** Kozmo.com, Inc. 1997 Stock Option Plan
23.1** Consent of Independent Auditors
23.2* Consent of Counsel (Included in Exhibits 5.1)
24.1** Power of Attorney (see page II-6)
27.1** Financial Data Schedule
</TABLE>
- ------------------------
* to be filed by amendment.
** Previously Filed.
+ Confidential Treatment Requested.
<PAGE>
Exhibit 10.1
"Pages where confidential treatment has been requested are stamped 'Confidential
Treatment Requested and the Redacted Material has been separately filed with the
Commission', and the confidential section has been marked in the margin with a
star (*)."
STRATEGIC AGREEMENT
BETWEEN
STARBUCKS CORPORATION AND
KOZMO.COM, INC.
This Strategic Agreement ("Agreement") is made and entered into on February 12,
2000 by and between Starbucks Corporation, a Washington corporation
("Starbucks") and Kozmo.com, Inc., a Delaware corporation ("Kozmo").
BACKGROUND
A. Kozmo currently provides same-day delivery of videos, DVDs, video games,
convenience foods and other items which are ordered by its customers over the
Internet and delivered by Kozmo to customers at their homes or places of
business. Kozmo intends to expand its Internet-based, same-day delivery business
to sell additional items including without limitation, books, compact discs,
magazines and electronics. Kozmo desires to provide convenient locations for its
customers to return to Kozmo videos, DVDs and video games (collectively, "Video
Products") and to possibly return to Kozmo certain other items purchased from
Kozmo.
B. Kozmo currently intends to expand its same-day delivery service business into
the Expansion Cities in the manner and in accordance with the timeline set forth
in Schedule A attached hereto, which may be revised by Kozmo at any time upon
notice to Starbucks.
C. Starbucks operates retail coffee stores throughout the United States and
Canada. In addition, Starbucks sells, both in its stores and through other means
of distribution, coffee, tea and other related products, including but not
limited to compact discs and other music items sold by Starbucks through its
Hear Music division ("Starbucks' Retail Products").
D. Starbucks has a valuable network of stores, a substantial customer base, and
certain other intangibles to which Kozmo desires access.
E. Starbucks has considerable expertise in a variety of areas, including without
limitation, branding, marketing, customer relations, real estate and employee
training ("Starbucks' Expertise").
F. Starbucks wishes to lease from Kozmo Drop-boxes to place in its stores to
permit the collection of the Video Products and certain other items purchased
from Kozmo. Kozmo further wishes to distribute to its customers certain
Starbucks' Retail Products.
G. Kozmo wishes to obtain assistance from Starbucks in the areas of Starbucks'
Expertise on terms mutually agreeable to the parties hereto; provided, however,
Starbucks will not charge Kozmo for its time.
H. Starbucks and Kozmo desire to enter into a strategic relationship to
undertake certain joint marketing efforts in-store, online and through
traditional marketing media.
<PAGE>
AGREEMENT
The parties agree as follows:
1. DROP-BOX.
1.1 STARBUCKS' RESPONSIBILITIES.
1.1.1 Within ten (10) days following the execution of this
Agreement, Starbucks will deliver to Kozmo a list showing the location
of each of its retail coffee stores wholly-owned and operated by
Starbucks ("Starbucks Stores") located in each city in the United States
and Canada in which Kozmo operates its Internet-based, same-day delivery
business. As Kozmo expands its business into additional U.S. or Canadian
cities ("Expansion Cities"), Starbucks will provide a list showing the
location of each of its Starbucks Stores located in the Expansion Cities
within thirty (30) days following written notification from Kozmo of its
intention to commence operations in such cities. On a quarterly basis
throughout the Term of this Agreement, Starbucks will provide Kozmo with
a list for each of the cities in which Kozmo operates that sets forth
(a) new Starbucks Stores that have opened since the date of the last
quarterly report, and (b) new Starbucks Stores that Starbucks expects to
be opened during the next calendar quarter.
* 1.1.2 Starbucks will locate a Drop-box (as defined below) to
be used by customers of Kozmo for the return to Kozmo of the Video
Products and, subject to the provisions of SECTION 1.4, the Kozmo Items
(as defined below) in those Starbucks Stores [*]
---------
* Confidential Treatment Requested and the Redacted Material has been
separately filed with the Commission.
<PAGE>
1.1.3 Starbucks will allow Kozmo's employees who comply with the
requirement of SECTION 1.2.4 below, to enter each Starbucks Store containing a
Drop-box to collect the Video Products and Kozmo Items during such store's
normal business hours, as may be modified by Starbucks from time to time in its
sole discretion, at such times as may be mutually agreed upon by Starbucks and
Kozmo.
1.1.4 Starbucks will not have any responsibility or liability for the
condition of Video Products or Kozmo Items returned to the Drop-boxes, nor will
Starbucks be responsible to accept or hold for collection by Kozmo any Video
Product or Kozmo Item which will not fit in the Drop-box for any reason. Kozmo
will bear all risk of loss relating to the Video Products and the Kozmo Items.
1.1.5 Starbucks will notify Kozmo by telephone of any problems with or
damage to a Drop-box in a Starbucks Store of which Starbucks becomes aware;
provided, however, that Starbucks will not have any duty or obligation to
inspect or monitor the Drop-boxes.
1.1.6 Starbucks reserves the right to require by written notice to
Kozmo that Kozmo remove a Drop-box from any Starbucks Store if, at any time, the
criteria set forth in SECTIONS 1.1.2 (c), (d) AND (e) are not being met. Upon
the removal of a Drop-box from a Starbucks Store, Kozmo will, at its sole cost
and expense, use commercially reasonable efforts to notify its customers that
they will no longer be able to return Video Products or Kozmo Items to the
applicable Starbucks Store.
1.2 KOZMO RESPONSIBILITIES.
1.2.1 Kozmo will collect all Video Products and Kozmo Items from the
Drop-boxes located at each Starbucks Store in such a manner so as to assure that
such Drop-boxes do not overflow, or more frequently as mutually agreed upon by
Starbucks and Kozmo. Kozmo will collect items from the Drop-boxes at such times
as is agreed to by the parties so as to not interfere with Starbucks' normal
business operations.
1.2.2 Kozmo will use commercially reasonable efforts to maintain the
Drop-boxes in good condition and appearance at all times during this Agreement.
1.2.3 Kozmo will provide each Starbucks Store with a toll free customer
service number staffed by one or more Kozmo customer service representatives
during normal business hours for Starbucks' employees to contact Kozmo, or to
provide to Kozmo's customers, for questions regarding returns, problems with or
damage to the Drop-boxes, and to request additional pick-up from the Drop-boxes.
1.2.4 Kozmo employees collecting the Video Products and Kozmo Items
from the Starbucks Stores' Drop-boxes will at all times be professional in
appearance and manner, be
<PAGE>
appropriately identified as a Kozmo employee, not interfere with the
normal operations of any such Starbucks Store and comply with all
procedures, requirements and protocol as Starbucks may reasonably impose
from time to time.
1.3 DROP-BOX DEVELOPMENT. Kozmo will, with input and approval
from Starbucks, design, develop, manufacture and pay for drop-boxes for
the return of Video Products and Kozmo Items by Kozmo's customers
("Drop-boxes") for placement in the Starbucks Stores. Kozmo's current
Drop-box will be used until a new design is agreed upon by the parties.
The dimensions of the current Drop-boxes are 12" x 16" x 32" and the
current Drop-box includes a slanted cover with a slot the size of a VHS
video tape for the return of items and a combination lock on the front
of the box. Any modification to the size or design of the Drop-box must
be approved in advance by Starbucks, in its reasonable discretion, prior
to being placed in any Starbucks Store. Kozmo will own the design and
all proprietary rights relating to the Drop-boxes and will own each of
the Drop-boxes located in the Starbucks Stores. Kozmo will lease the
Drop-boxes to be located in Starbucks Stores to Starbucks, for the Term
of this Agreement, for the rental payment of $1.00 per Drop-box per
year, pursuant to the terms of an equipment lease to be agreed upon by
the parties (the "Equipment Lease").
1.4 KOZMO ITEMS. The Drop-boxes will be used for the purpose of
returning Kozmo Items, only if the return of such items does not
interfere with Starbucks normal business operations and does not
materially interrupt or interfere with the regular duties of Starbucks'
employees in the Starbucks Stores. Starbucks will not be responsible or
liable for paying any amounts to any Kozmo customer for the return of a
Kozmo Item. "Kozmo Items" shall mean non-perishable items sold and
delivered by Kozmo which are of a size that will easily fit into the
Drop-box and which are of the type of items listed on the attached
SCHEDULE B as may be amended from time to time upon the mutual written
consent of the parties.
1.5 EXCLUSIVITY OF KOZMO. Kozmo agrees that, during the Term,
it will not allow its Video Products or Kozmo Items to be collected in
Drop-boxes or similar receptacles located in any store of a Retail
Chain, other than Starbucks, whose primary business is the sale of
coffee or tea products; provided, however that Kozmo will not be
required to remove any drop boxes currently located in a Retail Chain
whose primary business is the sale of coffee or tea products. For the
purposes of this Agreement, a "Retail Chain" shall mean any entity which
owns or operates five (5) or more retail operations in the United States
and/or Canada under the same or substantially the same tradename or any
five (5) or more stores operating in the United States and/or Canada
under the same or substantially the same tradename pursuant to a
franchise, license, partnership or joint venture arrangement.
* 1.6 [*]
---------
* Confidential Treatment Requested and the Redacted Material has been
separately filed with the Commission.
<PAGE>
2. SALE OF STARBUCKS' RETAIL PRODUCTS.
2.1 DISTRIBUTION OF RETAIL PRODUCTS. Kozmo will distribute to
its customers those Starbucks Retail Products identified by Starbucks
and agreed to by Kozmo from time to time, including but not limited to
compact discs and other music items sold by Starbucks through its Hear
Music division, pursuant to a supply agreement to be agreed upon by the
parties (the "Supply Agreement"). Kozmo also agrees to enter into
additional supply agreements on commercially reasonable terms reasonably
acceptable to Kozmo with suppliers of Frappuccino(R) bottled beverages
and Starbucks(R) ice cream.
2.2 PRODUCTS EXCLUSIVITY. Kozmo agrees that during the Term of
this Agreement, it will not (a) promote, sell, offer for sale or deliver
to its customers any non-Starbucks brand of coffee or tea products, or
any other products if the primary purpose of such product is to promote
non-Starbucks brands of coffee or tea products; or (b) promote a Retail
Chain whose primary business is the sale of coffee or tea products.
3. JOINT MARKETING AND WEBSITE DEVELOPMENT.
3.1 JOINT MARKETING.
3.1.1 Starbucks and Kozmo, together with the Marketing
Managers (as defined below) will develop an annual joint marketing
strategy ("Annual Strategy") which more clearly defines the
opportunities and roles of the parties, and includes a jointly-developed
business plan and budget covering cost, general and administrative
expenses and other financial arrangements. Such Annual Strategy will be
reviewed, updated and approved by each party on a quarterly basis.
Examples of possible joint marketing activities will include developing
joint messaging for in-store materials, collateral and signage and other
programs as set forth on the attached SCHEDULE C.
* 3.1.2 [*]
---------
* Confidential Treatment Requested and the Redacted Material has been
separately filed with the Commission.
<PAGE>
3.1.3 Any and all such joint marketing materials, campaigns
and other joint promotions of Starbucks and Kozmo must be approved in writing by
representatives of both Starbucks and Kozmo, in each party's reasonable
discretion and it is recognized and agreed that such items shall not include
exterior signage at the Starbucks Stores. Interior signage at the Starbucks
Stores must conform to the requirements of the applicable lease and applicable
laws, rules and regulations, ordinances and permits. In addition, Starbucks must
consent, in its reasonable discretion consistent with Starbucks standards in its
stores, to the use and content of any Kozmo-only marketing materials to be
displayed or distributed in the Starbucks Stores.
3.1.4 Starbucks will pay for and be solely responsible for
Starbucks-only marketing expenses and costs and Kozmo will pay for and be solely
responsible for Kozmo-only marketing expenses and costs. The payment obligations
with respect to marketing expenses of each party are listed as current
understandings on SCHEDULE C.
3.2 WEB SITE DEVELOPMENT.
3.2.1 Each party will establish and maintain Internet
hypertext links ("Links") on its web site to facilitate click through to the
other party's web site by such party's customers and end-users. Each party will
cooperate with the other to identify appropriate areas within such party's web
site to place the Links and to identify the most appropriate pages within such
party's web site with which to Link; provided, however that each such party will
maintain full control over its own web site and as to the location of such
Links.
3.2.2 Each party retains the right, in its sole discretion, to
immediately cease linking to the other party's web site, if such party has
reasonable grounds to believe in good faith, that the other party' web site
infringes on the proprietary rights of any third party, violates any applicable
law or regulation or is defamatory, obscene or patently offensive.
Notwithstanding any exercise of, or failure to exercise, such right, each party
will have the sole and exclusive responsibility for its respective web sites.
3.2.3 Each party will bear its own costs for development,
hosting and maintenance of its own web sites. Either party may change the URL's
of its web site for which it is responsible hereunder upon ten (10) days'
advance written notice. Each party will retain sole editorial control of and
responsibility for information presented on its web site and will not interfere
with the other party's editorial control of such content, except as expressly
stated otherwise herein.
3.2.4 Each party will promptly inform the other of (a) any
information related to its web site that could reasonably lead to a claim,
demand or liability of or against the other party by any third party, and (b)
any changes to its web site that would substantially change the content in any
area to which the other party has linked.
3.2.5 Starbucks may collect data on end users' access and use
of its web site. All data collected by Starbucks shall be owned exclusively by
Starbucks. Kozmo may collect
<PAGE>
data on end users' access and use of its web site. All data collected by Kozmo
shall be owned exclusively by Kozmo.
3.3 LICENSES.
3.3.1 Each party ("Licensor") grants to the other party
("Licensee") during the Term of this Agreement a non-exclusive,
non-transferable, revocable upon termination of this Agreement subject to the
terms hereof license to use the Marks (as defined below) provided by Licensee to
Licensor in compliance with this Agreement and with any reasonable guidelines
which may be provided by Licensor from time to time. The parties may only use
the Marks in connection with the joint marketing materials, for the purposes
contemplated herein. The parties each agree to cooperate with the other in
facilitating the monitoring and control of the other party's Marks. Licensor may
terminate the Agreement and the Licensee's license to use the Marks upon five
(5) days' written notice if Licensor reasonably believes that such use dilutes
or tarnishes the value of the Marks; provided, however, such notice will include
specific reasons of Licensor for its belief and provided further that if
Licensee takes such action which reasonably satisfies Licensor that the Marks
are no longer being diluted or tarnished within such five (5) day period or if
it is not commercially reasonable to fully remedy the dilution or tarnishment
within the five (5) day period then if Licensee uses commercially reasonable
efforts, and cures such dilution or tarnishment no later than fifteen (15) days
after such notice, then Licensor will not terminate this Agreement and the
Licensee's license to use the Marks at such time. Licensee agrees not to take
any action inconsistent with the Licensor's ownership of the Marks (including a
claim of any interest in the other party's Marks) and agrees that any benefits
accruing from use of such Marks will automatically vest in the Licensor.
Licensee will place a "(R)" or a "TM" (as appropriate) with the Marks as
requested by Licensor. Nothing in this Agreement will be deemed to grant to
Licensee any ownership interest in the Licensor's Marks. For the purposes of
this Agreement, "Marks" will mean the trade names, trademarks, service names and
service marks of a party (including, without limitation, the party's name,
domain name and logos) which are designated by such party for use in connection
with this Agreement.
3.3.2 Licensee acknowledges that Licensor, or a subsidiary of
Licensor, is the owner of the Marks. Licensee will not at any time do or suffer
to be done any act or thing which will in any way impair the rights of Licensor
or its subsidiary in and to the Marks or the goodwill inherent in such Marks.
Licensee agrees not to challenge the validity of the Marks or to set up any
claim adverse to Licensor or its subsidiary with respect to such challenge.
3.3.3 Licensee will comply with the conditions set forth in
this Agreement and with any reasonable guidelines provided to Licensee by
Licensor, as amended from time to time, or as reasonably directed by Licensor
with respect to the style, color, appearance and manner of use of the Marks.
Prior to producing, distributing or displaying any advertising or other material
containing the Marks, Licensee will obtain prior written approval from Licensor,
which may be held in Licensor's sole discretion. Licensee is solely responsible
for ensuring that any uses of the Marks in any advertising or promotional
materials or otherwise is approved by Licensor. Licensor will use commercially
reasonable efforts to provide either approval or rejection of Licensee's
materials within two (2) weeks of Licensee's written request for approval;
provided, however, the failure of Licensor to make such approval or rejection
within the two week period shall not be deemed, in any way, to be an approval of
such materials.
<PAGE>
3.4 MARKETING AND OPERATIONS MANAGER.
3.4.1 Within thirty (30) days of this Agreement, or at such
other time as is agreed by the parties hereto, each party will commence
activities and will use commercially reasonable efforts to hire a management
level employee (each a "Marketing Manager") to manage the design of Drop-boxes,
the placement of Drop-boxes in the Starbucks Stores, to develop, manage and
coordinate the joint marketing efforts of the parties, to develop web site
enhancements and modifications, to manage the operations of the Drop-box
pick-up, to develop an approval process for marketing materials and proposals
for the use of the Marks and to perform such other tasks and duties related to
the relationship between Starbucks and Kozmo as may be assigned to him or her by
his or her respective employer.
3.4.2 Each party will be solely responsible for the costs and
expenses related to the hiring and payment of the Marketing Manager hired by
such party.
3.4.3 Such employee will, at all times, be under the complete
control and supervision of the party employing such employee, and such party
will have the ability to reprimand or dismiss such employee.
3.5 FUTURE OPPORTUNITIES. The parties agree to explore and evaluate, in
each party's sole discretion, the feasibility and desirability of certain future
joint business opportunities which may include but are not limited to the
opportunities described on the attached SCHEDULE D; provided, however, that
neither party shall have any obligation to proceed with or expend any funds in
relation to such future opportunities. In the event the parties agree to proceed
with one or more future business opportunities, the parties will enter into a
written agreement relating to such business endeavor, on terms reasonably
acceptable to each party. Nothing in this provision precludes either party from
exploring such future opportunities alone or with other entities provided that
each party shall comply with its all of its obligations under this Agreement.
4. CONSIDERATION. Kozmo will pay to Starbucks up to an aggregate of One Hundred
Fifty Million Dollars ($150,000,000) ("Royalty") payable over the Term of this
Agreement as follows:
------------------------- -----------------------
Year 1 $15,000,000
------------------------- -----------------------
Year 2 $25,000,000
------------------------- -----------------------
Year 3 $35,000,000
------------------------- -----------------------
Year 4 $35,000,000
------------------------- -----------------------
Year 5 $40,000,000
------------------------- -----------------------
Each annual Royalty will be payable, in advance, in four quarterly equal
installments with the first such payment to be made on March 1, 2000 ("Initial
Payment Date") and subsequent payments to be made on the first day of June,
September, December and March thereafter; provided, however, that the first
four quarterly Royalty payments will be paid by Kozmo in
<PAGE>
advance on March 1, 2000 and thereafter, regular payments of the quarterly
Royalty will be made beginning on March 1, 2001.
5. TERM. The Term of this Agreement will commence on the date of this
Agreement and continue in full force and effect until the earlier of (a) the
fifth anniversary of Initial Payment Date (the "Term"); or (b) a termination
pursuant to SECTION 6 of this Agreement.
6. TERMINATION.
6.1 TERMINATION BY STARBUCKS.
6.1.1 In the event Kozmo fails to make any payment when due
under this Agreement, Starbucks may, but is not obligated to terminate this
Agreement upon five (5) days written notice to Kozmo, provided however that such
termination shall not be effective if Kozmo cures such breach within such five
(5) day period.
6.1.2 In the event Kozmo breaches any other material term or
covenant of this Agreement, Starbucks may terminate this Agreement upon thirty
(30) days written notice to Kozmo, provided however that such termination shall
not be effective if Kozmo cures such breach within such thirty (30) day period.
6.1.3 Starbucks may terminate this Agreement upon thirty (30)
days written notice in the event Kozmo promotes, sells, offers for sale or rent
or delivers to its customers any items or materials which violate any applicable
law or regulation, firearms or other weapons ("Prohibited Items"), or actively
promotes pornographic materials; provided however that Starbucks shall not
terminate this Agreement if within such thirty (30) day period, Kozmo ceases to
promote, sell, rent, offer for sale or rent, or deliver such Prohibited Items or
ceases to actively promote pornographic materials.
6.1.4 Starbucks may terminate this Agreement upon thirty (30)
days written notice in the event Kozmo places its Drop-boxes or otherwise allows
Video Products or Kozmo Items to be collected in pawn shops, adult book stores,
adult movie stores, gun shops or adult theme exotic entertainment facilities
("Prohibited Establishments"); provided, however that Starbucks shall not
terminate this Agreement if, within such thirty (30) day period, Kozmo removes
the Drop-boxes from such Prohibited Establishments and ceases to collect Video
Products or Kozmo Items from such Prohibited Establishments.
6.1.5 Starbucks may terminate this Agreement upon thirty (30)
days written notice to Kozmo, if any assignment for the benefit of its creditors
is made by Kozmo, or if a voluntary or involuntary petition in bankruptcy or for
reorganization, or if an arrangement is filed by or against Kozmo (which
petition is not discharged within thirty (30) days), or if Kozmo is adjudicated
bankrupt or insolvent, or if a receiver is appointed for Kozmo or for all or a
substantial part of its assets and/or operations.
6.2 TERMINATION BY KOZMO.
6.2.1 In the event Starbucks breaches any material term or
covenant of this Agreement, Kozmo may terminate this Agreement upon thirty (30)
days written notice to
<PAGE>
Starbucks, provided however that such termination shall not be effective if
Starbucks cures such breach within such thirty (30) day period.
6.2.2 Kozmo may terminate this Agreement upon thirty (30) days
written notice to Starbucks, if any assignment for the benefit of its creditors
is be made by Starbucks, or if a voluntary or involuntary petition in bankruptcy
or for reorganization, or if an arrangement is filed by or against Starbucks
(which petition is not discharged within thirty (30) days), or if Starbucks is
adjudicated bankrupt or insolvent, or if a receiver is appointed for Starbucks
or for all or a substantial part of its assets and/or operations.
6.3 SURVIVAL UPON TERMINATION. SECTIONS 6.4, 7, AND 10 THROUGH 14
inclusive will survive the termination or expiration of this Agreement.
6.4 EFFECT OF TERMINATION. Upon the termination or expiration of this
Agreement, (a) each party will promptly return all confidential and proprietary
information and other information, documents, equipment and other materials
belonging to the other party; (b) each party will (i) upon the expiration of
this Agreement immediately cease using all Marks of the other Party, in any form
or (ii) upon the termination of this Agreement, cease using all Marks of the
other Party, in any form as soon as reasonably practicable, but in any event no
later than forty-five (45) days after the termination of this Agreement; (c)
each Party will immediately terminate all web site Links established pursuant to
this Agreement; (d) subject to SECTION 6.4(b)(ii), all licenses granted herein
and the Equipment Lease and Supply Agreement will terminate; (e) as soon as
commercially practical upon the termination of this Agreement, but in any event
no later than forty-five (45) days after termination or immediately upon the
expiration of this Agreement, Kozmo will, at its sole cost and expense, remove
all Drop-boxes from the Starbucks Stores; provided that if Kozmo fails to remove
the Drop-boxes from the Starbucks Stores within such time period, Starbucks may
remove such Drop-boxes and Kozmo will reimburse Starbucks for any costs or
expenses incurred by Starbucks for such removal; and (f) Kozmo will, at its sole
cost and expense, use commercially reasonable efforts to promptly notify its
customers that they can no longer return Video Products to Drop-boxes in
Starbucks Stores. Upon termination, each party shall have no further financial
obligation to the other; provided that nothing herein shall relieve either party
from its obligation to pay any amount which accrued prior to the effective date
of termination. Notwithstanding the foregoing, nothing herein shall restrict the
rights or remedies of either Party to pursue its rights or remedies at law or in
equity.
7. CONFIDENTIAL INFORMATION. Confidential Information (as defined in the
Confidentiality Agreement) disclosed pursuant to this Agreement and the
activities contemplated herein, shall be governed by the Mutual Confidentiality
Agreement ("Confidentiality Agreement") entered into between the parties
effective as of February 10, 2000 and incorporated herein by reference.
8. REPRESENTATIONS AND WARRANTIES.
8.1 STARBUCKS' REPRESENTATIONS AND WARRANTIES.
8.1.1 Starbucks' agreement to perform the obligations and
duties required of it under this Agreement does not violate any agreement or
obligation between Starbucks and a
<PAGE>
third party, subject to the provisions of the lease agreements for each
Starbucks Store and Starbucks' right to require the removal of Drop-boxes
pursuant to SECTION 1.1.6;
8.1.2 Starbucks has the right to grant the license contained
in SECTION 3.3.
8.1.3 Starbucks will not make any warranty, guaranty or
representation, whether written or oral, on Kozmo's behalf.
8.2 KOZMO'S REPRESENTATIONS AND WARRANTIES.
8.2.1 Kozmo's agreement to perform the obligations and duties
required of it under this Agreement does not violate any agreement or obligation
between Kozmo and a third party;
8.2.2 Kozmo will not make any warranty, guaranty or
representation, whether written or oral, on Starbucks' behalf; and
8.2.3 Kozmo will operate its delivery service and perform its
obligations hereunder in a safe and professional manner and in accordance with
the service standards established by Kozmo and subject to Starbucks' approval
within sixty (60) days of the date of this Agreement.
9. INSURANCE. Kozmo agrees to maintain during the Term of this Agreement
(a) commercial general liability insurance, including product liability
coverage, in minimum amounts of $2,000,000 per occurrence for damage, injury
and/or death to persons and $1,000,000 per occurrence for damage and/or injury
to property and (b) product recall insurance in a minimum amount of $2,000,000
per occurrence and with a deductible of not more than $10,000. Kozmo further
agrees to require all of its delivery personnel to be licensed to drive, whether
they are employees or independent contractors. All policies of liability
insurance required to be effected by Kozmo shall cover Kozmo's employees,
agents, and independent contractors and shall include Starbucks as an additional
insured, and in addition shall contain cross liability and severability clauses
protecting Starbucks with respect to claims by Kozmo or other persons as if
Starbucks were separately insured. The insurance coverage required herein shall
be provided by an insurance company or companies acceptable to Starbucks in its
reasonable business judgment. Upon execution of this Agreement, and annually
thereafter, Kozmo shall promptly provide Starbucks with certificates of
insurance evidencing such coverage and each certificate shall indicate that the
coverage represented thereby shall not be canceled nor modified until at least
thirty (30) days prior written notice has been given to Starbucks. Upon
Starbucks request, Kozmo will provide Starbucks with copies of its insurance
policies.
10. INDEMNITY.
10.1 MUTUAL INDEMNIFICATION. Each party will indemnify the other party,
the other party's affiliates, directors, officers and employees and will hold
them harmless from any and all liability, loss damages, claims or causes of
action, including reasonable legal fees and expenses that may be incurred by the
other party, arising out of or related to the indemnifying party's breach of any
of the foregoing representations or warranties or otherwise arising out of such
party's performance under this Agreement.
<PAGE>
10.2 KOZMO'S INDEMNIFICATION. Kozmo will indemnify Starbucks and
Starbucks' affiliates, directors, officers and employees, and will hold them
harmless, from any and all liability, loss, damages, claims or causes of action,
including reasonable legal fees and expenses that may be incurred by Starbucks
arising out of or related to Kozmo's delivery of its services or other actions
or omissions relating thereto provided that Kozmo shall have no obligation to
indemnify Starbucks for Claims that would not have occurred except for Starbucks
negligence or willful misconduct.
10.3 STARBUCKS INDEMNIFICATION. Starbucks will indemnify Kozmo and
Kozmo's affiliates, directors, officers and employees, and will hold them
harmless, from any and all liability, loss, damages, claims or causes of action
("Claims"), including reasonable legal fees and expenses that may be incurred by
Kozmo arising out of or related to (a) Starbucks operation of its retail stores
or (b) the sale or use of Starbucks products or other actions or omissions
relating thereto; provided that Starbucks shall have no obligation to indemnify
Kozmo for Claims that would not have occurred except for Kozmo's negligence or
willful misconduct.
10.4 INTELLECTUAL PROPERTY INDEMNIFICATION. Each party will indemnify
the other party, and the other party's affiliates, directors, officers and
employees and will hold them harmless from any and all liability, loss damages,
claims or causes of action, including reasonable legal fees and expenses that
may be incurred by the other party (a) arising out of any claims or causes of
action brought against the indemnified party to the extent such claim or cause
of action is based on the infringement by the indemnifying party's patents,
copyrights, or Marks, of a third party's patents, copyrights, marks or other
proprietary rights, and (b) arising out of the unaltered content or marketing
materials provided by the indemnifying party for use in the joint marketing
efforts of the parties.
11. LIMITATION OF LIABILITY.
11.1 LIABILITY. Neither party will be liable to the other party for any
indirect, incidental, consequential, special or exemplary damages (even if that
party has been advised of the possibility of such damages) arising from this
Agreement, such as, but not limited to, loss of revenue or anticipated profits
or lost business.
11.2 NO ADDITIONAL WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, NEITHER PARTY MAKES, AND EACH PARTY HEREBY SPECIFICALLY DISCLAIMS,
ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING ANY MATTER
SUBJECT TO THIS AGREEMENT, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR IMPLIED WARRANTIES ARISING FROM COURSE OF
DEALING OR COURSE OF PERFORMANCE.
<PAGE>
12. DISPUTE RESOLUTION. The parties desire to attempt to resolve disputes
arising out of this Agreement without litigation. Accordingly, except for action
seeking a temporary restraining order or injunction related to the purposes of
this Agreement, or suit to compel compliance with this dispute resolution
process, the parties agree to follow the dispute resolution procedures set forth
in this SECTION 12 with respect to any controversy or claim arising out of or
relating to this Agreement or its breach.
12.1 At the written request of either party, Starbucks and Kozmo will
appoint knowledgeable, responsible representatives to meet and negotiate in good
faith to resolve any dispute arising under this Agreement. The parties intend
that these negotiations be conducted by non-lawyer, business representatives.
The location, format, frequency, duration and conclusion of these discussions
will be left to the discretion of the representatives. Discussion and
correspondence among the representatives for the purposes of these negotiations
will be treated as confidential information developed for the purposes of
settlement, exempt from discovery and production, which will not be admissible
in any litigation described below. Documents identified in or provided with such
communications, which are not prepared for purposes of the negotiations, are not
so exempted and may, if otherwise admissible, be admitted in evidence in any
such litigation.
12.2 If the negotiations set forth in SECTION 12.1 do not resolve the
dispute within sixty (60) days of the initial written request, then either party
may pursue to litigate the claim or dispute.
12.3 If such dispute is commenced by Kozmo, then such dispute will be
resolved in a court of appropriate jurisdiction located in King County,
Washington. If such dispute is commenced by Starbucks, then such dispute will be
resolved in a court of appropriate jurisdiction located in New York City, New
York. Each of Starbucks and Kozmo hereby consents and submits to the personal
jurisdiction of the state and federal courts located in King County, Washington
and New York City, New York.
13. LATE FEES AND INTEREST. If any portion of the Royalties remains unpaid for
five (5) or more calendar days after the date on which such amount is due, Kozmo
shall pay to Starbucks interest on such delinquent amount equal to eighteen
percent (18%) per annum from the date such delinquent amount is due until paid;
provided, however, that in no event shall such interest charged be greater than
that permitted by applicable state law. This SECTION 13 shall not relieve Kozmo
of its obligation to pay the Royalty when due and in the manner herein
specified. Acceptance by Starbucks of the interest on such delinquent amount
shall not constitute a waiver of Kozmo's default with respect to said delinquent
payments, nor prevent Starbucks from exercising any other rights or remedies
available to Starbucks under this Agreement or at law or in equity.
14. MISCELLANEOUS.
14.1 ENTIRE AGREEMENT; AMENDMENT. This Agreement and other agreements
expressly referenced herein, including but not limited to the Supply Agreement,
the Equipment Lease for the Drop-boxes and the Confidentiality Agreement,
constitute the entire agreement between the parties concerning the subject
matter hereof and supersede any prior agreements,
<PAGE>
representations, statements, negotiations, understandings, proposals or
undertakings, oral or written, with respect to the subject matter expressly set
forth herein. Any amendment or supplement to this Agreement must be in writing
and duly executed by the party against whom enforcement is sought. If any
provision of this Agreement is held to be illegal, invalid or unenforceable,
each party agrees that such provision will be enforced to the maximum extent
permissible so as to effect the intent of the parties, and the validity,
legality and enforceability of the remaining provisions of this Agreement will
not in any way be affected or impaired thereby.
14.2 EXPENSES. Each party will pay all costs and expenses that it incurs
with respect to the negotiation, execution, delivery and performance of this
Agreement and the other agreements described herein.
14.3 CHOICE OF LAW. This Agreement is to be construed in accordance with
and governed by the internal laws of the State of New York, without giving
effect to choice of law.
14.4 NOTICES. Any notice or other communication under this Agreement
will be given in writing and will be deemed to have been delivered and given (a)
on the delivery date if delivered by electronic mail with an electronically
generated return receipt or if delivered personally to the intended recipient;
(b) one (1) business day after deposit with a commercial overnight carrier with
written verification of receipt; or (c) three (3) business days after the
mailing date if sent by U.S. mail, return receipt requested, postage and charges
prepaid, or any other means of repaid mail delivery for which acknowledgement of
receipt is required. Any notices or other communications to be given under this
Agreement will be sent to the following persons:
For Starbucks: Starbucks Corporation
2401 Utah Ave. S.
Seattle, WA 98134-1431
Attn: President, North American Operations
With a copy to:
Vice President and Assistant General Counsel
With a Copy to: Davis Wright Tremaine, LLP
1300 SW 5th Avenue, Suite 2300
Portland, OR 97201
Attn: Benjamin G. Wolff
For Kozmo: Kozmo.com, Inc.
80 Broad Street
New York, New York 10004
Attn: President and Chief Executive Officer
With a Copy to: Greenberg Traurig
Met Life Building
200 Park Avenue
New York, NY 10166
Attn.: Alan N. Sutin, Esq.
<PAGE>
14.5 ASSIGNMENT. Except as otherwise provided in SECTION 4, neither
party may assign or transfer all or any part of its rights or obligations under
this Agreement without the prior written consent of the other party, which
consent may be given or withheld for any reason. For the purposes of this
Agreement, a change of control, merger, sale of substantially all of the assets
or any other similar corporate reorganization of Kozmo ("Change of Control
Event") will constitute an assignment that is subject to consent pursuant to
this SECTION 14.5. Starbucks will not unreasonably withhold consent upon a
Change of Control Event, provided, that it shall not be unreasonable to withhold
consent if a Change of Control Event results in a transfer to a direct
competitor of Starbucks, circumstances in which the Starbucks brand would be
adversely affected, such as transfer to a tobacco company or pornography company
or circumstances where Starbucks would then be in material breach of a material
agreement.
14.6 ATTORNEYS' FEES. If any suit or action arising out of or related to
this Agreement is brought by any party, the prevailing party or parties shall be
entitled to recover its costs and fees including without limitation reasonable
attorneys' fees, the fees and costs of experts and consultants, copying, courier
and telecommunication costs, and deposition costs and all other costs of
discovery incurred by such party or parties in such suit or action, including
without limitation any post-trial or appellate proceeding, or in the collection
or enforcement of any judgment or award entered or made in such suit or action.
14.7 PUBLICITY. Without the prior approval of the other party, none of
the parties hereto will disclose to the public or to any third party any
information concerning the transactions contemplated hereby, other than
disclosures to their financial, legal and other advisors and to governmental
authorities or the public as may, in the opinion of counsel, be required by law.
Notwithstanding the foregoing, Starbucks and Kozmo will be permitted to disclose
such details of the transaction contemplated herein as may be required by law;
provided that Starbucks and Kozmo will each have the right to review and comment
thereon prior to any such disclosure, which review and comment will be given in
a timely manner.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement on the
date first written above.
STARBUCKS CORPORATION KOZMO.COM, INC.
By: /s/ Howard Schultz By: /s/ Joseph Park
------------------------------------ --------------------------------
Howard Schultz Joseph Park
chairman and chief executive officer Chief Executive Officer
<PAGE>
SCHEDULE A
* LAUNCH SCHEDULE
[*]
- ---------
* Confidential Treatment Requested and the Redacted Material has been separately
filed with the Commission.
<PAGE>
SCHEDULE B
KOZMO ITEMS
- VHS video tapes
- DVD cartridges/tapes
- Video game cartridges
- CD's
- Books
- Small electronics
<PAGE>
SCHEDULE C
* JOINT MARKETING STRATEGY
[*]
- ---------
* Confidential Treatment Requested and the Redacted Material has been separately
filed with the Commission.
<PAGE>
SCHEDULE D
* FUTURE BUSINESS OPPORTUNITIES
[*]
- ---------
* Confidential Treatment Requested and the Redacted Material has been separately
filed with the Commission.
<PAGE>
Exhibit 10.2
"Pages where confidential treatment has been requested are stamped 'Confidential
Treatment Requested and the Redacted Material has been separately filed with the
Commission', and the confidential section has been marked in the margin with a
star (*)."
SUPPLY AND DELIVERY AGREEMENT
This Agreement ("Agreement"), dated as of March 13, 2000 ("Effective
Date"), is made and entered into by and between Amazon.com LLC (doing business
in Washington state as Amazon.com Washington LLC), a Delaware limited liability
Company ("LLC"), and Kozmo.com, Inc., a Delaware corporation ("Company"). LLC
and Company are sometimes referred to collectively herein as the "Parties" and
individually as a "Party."
RECITALS
A. LLC is engaged in the business of selling book, music and toy
products over the Internet and desires to purchase such products from Company
for delivery to LLC's customers.
B. Company wishes to provide such products to LLC on the terms and
conditions set forth in this Agreement.
LLC and Company agree as follows:
SECTION 1. DEFINITIONS
Whenever used in this Agreement with initial letters capitalized, the
following terms shall have the following specified meanings:
"AFFILIATE" means, with respect to any person or entity (including
either Party), any other person or entity that directly or indirectly controls,
is controlled by or is under common control with that person or entity, or which
that person or entity beneficially owns at least fifty percent (50%) of the
equity interests therein (provided, however, that with respect to the Parties,
no individual or entity as to which the ultimate parent entity of a Party does
not directly or indirectly control the operations or management thereof (e.g.,
in the case of LLC as of the date of this Agreement, Gear.com, Inc.) shall be
deemed to be an Affiliate of such Party for purposes of this Agreement).
"CHANGE OF CONTROL" means, with respect to Company, a transaction or
series of related transactions that results in (a) a sale of all or
substantially all of the assets of Company, (b) the transfer of fifty percent
(50%) or more of the outstanding voting power of Company (other than directly or
indirectly to a parent or wholly-owned subsidiary of Company), or (c) the
acquisition by a person or entity, by reason of any contractual arrangement or
understanding with one or more persons or entities, of the right or power to
directly or indirectly appoint or cause to be appointed a majority of the
directors or officers of Company.
"CLAIM" means claim, action or proceeding instituted by a third party
(other than an Affiliate of a Party), including, without limitation, any
governmental authority.
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<PAGE>
"COMPANY DERIVATIVE WORK" means any Derivative Work (whether created
by LLC, Company, or the Parties jointly) of any Company Existing Intellectual
Property or Company Future Intellectual Property.
"COMMENCEMENT DATE" means the earlier of (a) the date on which the
Parties agree to the contents of Exhibits A, B and C, and (b) 90 days after the
Effective Date.
"COMPANY DELIVERY OPTION" means the Company Service as made available
through the LLC Site as an option for delivery of Exclusive Products pursuant to
the terms and conditions of this Agreement.
"COMPANY EXISTING INTELLECTUAL PROPERTY" means, collectively, all of
the following existing as of the Effective Date: (a) the Trademarks of Company
and its Affiliates; (b) the Company Site, including, without limitation, any and
all content, data, URLs, domain names, technology, software, code, user
interfaces, "look and feel," Trademarks and other items posted thereon or used
in connection or associated with any of the foregoing.
"COMPANY FUTURE INTELLECTUAL PROPERTY" means, collectively, all of the
following which are invented, created, developed or first reduced to practice by
Company or its Affiliates after the Effective Date without the participation of
LLC or its Affiliates and without use of or reference to any LLC Confidential
Information, LLC Existing Intellectual Property and/or LLC Future Intellectual
Property: (a) any Trademarks; and (b) any content, data, URLs, domain names,
technology, software, code, user interfaces, "look and feel" or other items (but
excluding any LLC Derivative Works).
"COMPANY INTELLECTUAL PROPERTY" means, collectively, any Company
Existing Intellectual Property, Company Future Intellectual Property, and
Company Derivative Works, but excluding any Joint Works.
"COMPANY SERVICE" means Company's one-hour delivery service (whether
accessed through the Company Site, the LLC Site, any third party Web Site or any
other means), through which customers may order products for hand delivery
(including any successor, replacement or enhancement to or of such service).
"COMPANY SITE" means that Web Site, the primary Home Page for which is
identified by the URL www.kozmo.com (and any successor or replacement Web Site).
"CONFIDENTIAL INFORMATION" means, with respect to either Party, all
information relating to such Party or its Affiliates that is designated as
confidential or that, given the nature of the information or the circumstances
surrounding its disclosure, reasonably should be considered as confidential.
Confidential Information includes, without limitation, (a) all information
relating to a Party's or its Affiliates' technology, customers, business plans,
promotional and marketing activities, finances and other business affairs and
(b) all third party information that a Party or its Affiliates is obligated to
keep confidential. Confidential Information may be contained in tangible
materials, such as drawings, data, specifications,
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<PAGE>
reports and computer programs, or may be in the nature of unwritten knowledge.
Confidential Information does not include any information that (i) has become
publicly available without breach of this Agreement, (ii) can be shown by
documentation to have been known to the Receiving Party at the time of its
receipt from the Disclosing Party or its Affiliates without a breach of
confidentiality or other improper means, (iii) is received from a third party
who did not acquire or disclose such information by a wrongful or tortious act
or (iv) can be shown by documentation to have been independently developed by
the Receiving Party without use of or reference to any Confidential Information
of the Disclosing Party.
"DERIVATIVE WORK" means any adaptation, modification, enhancement,
improvement or derivative work.
"DISCLOSING PARTY" means a Party that discloses Confidential
Information to the other Party in connection with this Agreement.
"EXCLUSIVE PRODUCTS" means book, music and toy products (of any type,
and in any format or medium, including in the case of toy products, video games
and video game platforms).
"HOME PAGE" means, with respect to a Web Site, the Web page designated
by the operator of the Web Site as the initial and primary end user interface
for the Web Site
"JOINT WORK" means any content, data, URLs, domain names, technology,
software, code, user interfaces, "look and feel" or other items which are
invented, created, developed or first reduced to practice jointly by the Parties
after the Effective Date, are protected or protectable by any Intellectual
Property Rights and either: (a) include or incorporate both LLC Existing
Intellectual Property, LLC Future Intellectual Property and/or LLC Derivative
Works, on the one hand, and/or Company Existing Intellectual Property, Company
Future Intellectual Property and/or Company Derivative Works, on the other hand;
or (b) include or incorporate no LLC Existing Intellectual Property or LLC
Derivative Works, on the one hand, or Company Existing Intellectual Property or
Company Derivative Works, on the other hand; provided, however, that
notwithstanding any other provision of this Agreement, to the extent that any
such items incorporate in whole or in part any technology, software, code, user
interfaces, "look and feel" or other item which is used in or associated with
any LLC Site Functionality, such items shall be deemed LLC Derivative Works in
their entirety and not Joint Works or Company Intellectual Property.
"LLC DERIVATIVE WORK" means any Derivative Work (whether created by
LLC, Company, or the Parties jointly) of any LLC Existing Intellectual Property
or LLC Future Intellectual Property.
"LLC EXISTING INTELLECTUAL PROPERTY" means, collectively, all of the
following existing as of the Effective Date: (a) the Trademarks of LLC and its
Affiliates; and (b) the LLC Site, including, without limitation, any and all
content, data, URLs, domain names, technology, software, code, user interfaces,
"look and feel", LLC Site Functionality,
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<PAGE>
Trademarks and other items posted thereon or used in connection or
associated with any of the foregoing.
"LLC FUTURE INTELLECTUAL PROPERTY" means, collectively, all of
the following which are invented, created, developed or first reduced to
practice by LLC or its Affiliates after the Effective Date without the
participation of Company or its Affiliates and without use of or
reference to any Company Confidential Information, Company Existing
Intellectual Property and/or Company Future Intellectual Property: (a)
any Trademarks; and (b) any content, data, URLs, domain names,
technology, software, code, user interfaces, "look and feel," LLC Site
Functionality and other items (but excluding any Company Derivative
Works).
"LLC INTELLECTUAL PROPERTY" means, collectively, any LLC
Existing Intellectual Property, LLC Future Intellectual Property and LLC
Derivative Works, but excluding any Joint Works.
"LLC PRODUCTS" means any products available through the LLC
Site which LLC elects to make available for delivery via the Company
Delivery Option.
"LLC SITE" means that Web Site, the primary home page of which
is identified by the URL www.amazon.com (and any successor or
replacement Web Site).
"LLC SITE FUNCTIONALITY" means, collectively: (a) tab, search
and browse functionality available to users for navigating through the
LLC Site (including, without limitation, the layout and design thereof);
(b) payment and transaction functionality available to users of the LLC
Site for purchasing products (including, without limitation, "shopping
cart" and "Payment with 1-Click" functionality), (c) any other
functionality available on the LLC Site which LLC may make available to
Company from time to time, and (d) any future equivalents, improvements
and enhancements of any of the foregoing.
* "INCENTIVE OFFER" means either (a) [*] or (b) a
substantially equivalent benefit upon purchase of a product from or
through the LLC Site if delivery is taken via the Company Delivery
Option.
"INTELLECTUAL PROPERTY RIGHT" means any patent (including
all reissues, divisions, continuations and extensions), copyright,
trademark, service marks, trade dress, trade name or trade secret right,
as well as all applications for any and all of the foregoing, and any
other intellectual property or proprietary right together with the
goodwill in connection with all of the foregoing.
"LAW" means any law, ordinance, rule, regulation, order,
license, permit and other requirement, now or hereafter in effect, of
any governmental authority of competent jurisdiction.
---------
* Confidential Treatment Requested and the Redacted Material has been
separately filed with the Commission.
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<PAGE>
"RECEIVING PARTY" means a Party that receives Confidential Information
from the other Party in connection with this Agreement.
"REFERRAL INFORMATION" means any information disclosing that a
specific end-user utilized the Company Delivery Option (however obtained),
disclosing any products purchased by any user of the LLC Site, or other
personally-identifying information regarding users of the LLC Site.
"SHIPMENT TERRITORY" means any and all areas serviced by the Company
Service.
"SITE" means either the LLC Site, on the one hand, or the Company
Site, on the other hand, as required by the context.
"TERM" means the term of this Agreement as defined in Section 11.
"TRADEMARK" means any trademark, service mark, trade name, trade
dress, proprietary logo or insignia or other product, source or business
identifier.
"WEB SITE" means any point of presence maintained on the Internet or
on any other public data network. With respect to any Web Site maintained on the
World Wide Web or any successor public data network, such Web Site includes all
HTML pages (or similar unit of information presented in any relevant data
protocol) that are identified by the same second-level domain (such as
http://www.amazon.com) or by the same equivalent level identifier in any
relevant address scheme.
"YEAR" means any period of twelve (12) consecutive months commencing
on the Commencement Date.
SECTION 2. LLC PURCHASE OF PRODUCTS
2.1 IN GENERAL. Following the Commencement Date and until the end of
the Term, LLC agrees to buy and Company agrees to sell Exclusive Products with
respect to which the Company Delivery Option has been requested in such
quantities as may be ordered by LLC from time to time. Company will keep
adequate inventories of Exclusive Products on hand in such quantities as will
allow Company to fulfill and ship orders in accordance with the mutually agreed
upon customer service requirements specified in Exhibit A.
2.2 PACKAGING, LABELING AND SHIPPING. Company shall provide for the
invoicing, labeling and packaging of Exclusive Products as mutually agreed upon
by the Parties in writing and the delivery of Exclusive Products to LLC
customers through the Company Delivery Option at the applicable locations within
the Shipment Territory. The details concerning invoicing, labeling and packaging
shall be set forth in Exhibit A hereto. LLC shall have the right, at its own
cost and expense, to require the use of LLC branded invoicing, labeling and
packaging, subject to approval by the Company in its reasonable
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<PAGE>
discretion. Title to the Exclusive Products shipped by Company shall
pass to LLC and such Products shall be shipped by Company, F.O.B., LLC's
specified destination. Immediately upon LLC's taking title to any
Exclusive Product shipped by Company, LLC shall transfer title to the
customer who ordered such Exclusive Product from LLC, contingent upon
such customer's payment of the applicable fees therefor and satisfaction
of such other conditions of sale as LLC may impose upon its customers.
SECTION 3. LLC SITE
* 3.1 LLC SITE. In those areas of the Shipment Territory where
the Company Service is available, subject to the Parties' mutual
agreement of Exhibits A, B and C, and to the other terms of this
Agreement, (a) LLC shall present the Company Delivery Option on the LLC
Site as an available method of delivery for Exclusive Products purchased
through the LLC Site, and (b) LLC shall feature in a reasonably
prominent manner on the LLC Site, one or more buttons or text links
("Placements") identifying the existence of a one-hour delivery option
(which may or may not contain Company branding as provided by Company
which, if included, shall be subject to the final approval of LLC, such
approval not to be unreasonably withheld or delayed) and containing a
hypertext link to an area of the LLC Site which shall, except as
provided in Section 10, [*] such approval not to be unreasonably
withheld or delayed. Subject to the above, LLC will determine the
content, appearance, functionality and all other aspects of the LLC Site
in its sole discretion.
* 3.2 IMPLEMENTATION OBLIGATIONS. The parties will implement and
integrate the Company Delivery Option into the LLC Site as provided in
Section 5. Company will use commercially reasonable efforts to ensure
that (a) the Company Delivery Option is substantially equivalent (or
superior) in terms of ease of use, delivery times, delivery areas and
schedules to the Company Service as made available by Company through
any means other than the LLC Site, (b) for so long as the Company
Delivery Option is the exclusive option under Section 3.1 for LLC
customers to purchase Exclusive Products with a one-hour delivery
option,[*] and (c) promotions provided by Company and related to
products offered through the Company Delivery Option (including, without
limitation, discounts, free products with a purchase and "points" or
other customer loyalty programs), are equal to any such promotions
offered by Company in connection with the
---------
* Confidential Treatment Requested and the Redacted Material has been
separately filed with the Commission.
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provision of the Company Service to the customers of any third party commercial
partner in a manner substantially equivalent to the Company Service offered to
LLC customers hereunder, it being understood that no such promotions shall be
specifically directed at LLC customers without LLC's prior written consent.
Company shall not, unless otherwise directed by LLC, include any advertisements
or promotional or marketing materials for Company or its Affiliates with any
Exclusive Products delivered to customers who select the Company Delivery
Option.
3.3 NO FRAMING. Neither Party will use or authorize or assist any
third party to use in connection with any links on its Site any framing
techniques, interstitial advertisements, pop-up windows, new consoles or other
items or techniques which would alter the appearance or presentation of the
other party's Site from that seen by users hand-entering the applicable URL into
their browser. Without limiting the generality of the foregoing, each Party
specifically acknowledges that it will not cause or permit any new browser
window to open upon any user's clicking on any link on its Site to the other
Party's Site.
3.4 CUSTOMER SERVICE. Each Party, as applicable, will at all times
comply with the customer service requirements (including, without limitation,
user privacy policies, delivery standards, return policies and customer
satisfaction service levels) to be mutually agreed upon by the Parties and, once
agreed, attached hereto as Exhibit A. The Parties will use commercially
reasonable efforts to agree upon such customer service requirements within sixty
(60) days after the Effective Date. Without limiting the generality of the
foregoing, Company will at all times use commercially reasonable efforts to
conduct its dealings with users of the LLC Site in a professional and courteous
manner which reflects favorably upon LLC and its Affiliates and the LLC Site,
and will in any event ensure that the customer service provided by Company to
users of the Company Delivery Option (including, without limitation, in regard
to product fulfillment and responsiveness to customer inquiries relating to the
delivery of the Exclusive Products) is of as high a standard as is commercially
reasonably possible for Company, and in any event, that the same is at least of
as high a standard as that provided by Company with respect to the services and
products made available by Company through any other means, compared on a
category-to-category basis (e.g., customer service with respect to books shall
be compared to customer service with respect to books, but not other products).
3.5 REFERRAL INFORMATION. Customers who purchase products through the
LLC Site shall be deemed to be customers of LLC for all purposes. LLC shall not
be required to disclose any Referral Information to Company except to the extent
necessary to permit Company to perform its obligations under this Agreement.
Company will not disclose any Referral Information to any third party, or permit
any third party to use any Referral Information to target communications
specifically to users of the LLC Site, except as necessary to perform its
obligations under this Agreement or as permitted by LLC in writing (provided,
however, that nothing in the foregoing shall prohibit Company from contacting
its own customers generally, so long as such contacts are not specifically and
intentionally
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directed at users of the LLC Site, or prohibit Company from using or
disclosing non-personal statistical or demographic information regarding
such users in the aggregate for any purpose without LLC's consent).
SECTION 4. PROMOTIONAL ACTIVITIES
4.1 PRESS RELEASES. Both Parties will issue mutually agreeable
press releases describing the nature of their relationship promptly
following the Effective Date and at such other times as the Parties may
mutually agree. Neither Party will issue any other press releases, make
any other disclosures regarding this Agreement or its terms or the
relationship between the parties, or use the other Party's Trademarks
(except as permitted by Section 7), without the other Party's prior
written consent, except that, each Party may, without the other Party's
prior consent: (y) distribute or issue public relations materials or
press releases that contain a description of the relationship of the
Parties, provided that such description has been approved in advance in
writing by such other Party (which approval shall not be unreasonably
withheld or delayed); and (z) speak in public regarding disclosures made
pursuant to the first sentence of this Section 4.1.
* 4.2 AMAZON.COM CUSTOMER BASE. From the Commencement Date
until the end of the Term, LLC will exert commercially reasonable
efforts to introduce, as specifically provided herein, the Company Site
to LLC's and its Affiliates' customer base within the areas of the
Shipment Territory within the United States. LLC and/or its Affiliates
will advertise the Company Service to selected members of such customer
base via electronic mail and/or product shipments, the specific nature,
timing, manner, scope, duration and cost of which shall be as mutually
agreed upon by the Parties in writing from time to time; provided, that
each individual communication shall in any event include an Incentive
Offer having a value to the potential customer of at least [*] Assuming
mutual agreement of the Parties as set forth above, LLC agrees that it
will send (a) the following minimum number of e-mail advertisements:
Year 1 [*]; Year 2 [*]; and Year 3 [*], and (b) the following minimum
number of product shipment advertisements: Year 2 [*]and Year 3 [*].
Assuming mutual agreement of the Parties as set forth above, Company
will pay all reasonable out-of-pocket costs actually incurred by LLC and
its Affiliates in connection with the advertising to be provided
pursuant to this Section 4.2, including without limitation the costs of
design, production, printing, mailing, and any Incentive Offers
("Advertising Expenses"). LLC will invoice Company on a monthly basis
for the Advertising Expenses actually incurred by LLC and its Affiliates
and include supporting documentation therefor substantiating the amounts
due, and Company will pay LLC the invoiced sums within thirty (30) days
after receipt of the applicable invoice. Any payment not received within
this thirty (30) day period will accrue interest at a rate of one and
one-half percent (1 1/2%) per month from the expiration of such thirty
(30) day period, or the highest rate allowed by applicable law,
whichever is lower.
4.3 ADDITIONAL PROMOTIONAL ACTIVITIES. In addition to LLC's
promotional obligations set forth in Section 4.2, as the Parties may
mutually agree from time to time
---------
* Confidential Treatment Requested and the Redacted Material has been
separately filed with the Commission.
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following the Commencement Date until the end of the Term, LLC may
engage in other promotional activities related to the Company Service
and/or Company Site (which may include, for example, providing
promotional placements relating to the Company Service and/or Company
Site on the home page of the LLC Site or in "thank you" pages displayed
to users of the LLC Site who elect to have Products delivered through
the Company Delivery Option and delivering physical mailings to segments
of LLC's customer base).
* 4.4 CONTENT SOURCING. As mutually agreed upon by the Parties
from time time to time following the Commencement Date and until the end
of the Term, LLC may provide [*] for use on the Company Site pursuant to
the license granted in Section 7.2 below (collectively referred to as
the "LLC Licensed Content").
* 4.5 [*]. As mutually agreed upon by the Parties from time to
time following the Commencement Date and until the end of the Term, LLC
will use commercially reasonable efforts [*]
SECTION 5. TECHNICAL IMPLEMENTATION
5.1 COMPANY DELIVERY OPTION; COMPANY SITE.
5.1.1 COMPANY DELIVERY OPTION. The Parties will use
all commercially reasonable efforts to perform, in a timely and
professional manner, all technical work necessary to integrate the
Company Service into the LLC Site pursuant to specifications and
schedules (the "Development Plan") that shall be developed by LLC in
consultation with Company and mutually agreed upon by the Parties, which
specifications and schedules, once agreed, shall be attached hereto as
Exhibit B. The Parties will use commercially reasonable efforts to agree
upon the Development Plan within sixty (60) days after the Effective
Date. LLC will provide Company with reasonable consultation regarding
appropriate information technology infrastructure and supply chain
management related thereto.
5.1.2 COMPANY SITE. As mutually agreed upon by the
parties from time to time following the Commencement Date and until the
end of the Term, LLC may provide to Company certain consulting services,
know-how and expertise related to technology development and deployment
on the Company Site, merchandising and marketing of Exclusive Products
and general logistics and operational techniques and strategies.
5.2 ACCOUNT MANAGERS. Each Party will assign an account
manager (which manager shall be subject to change from time to time by
the assigning Party upon notice to
---------
* Confidential Treatment Requested and the Redacted Material has been
separately filed with the Commission.
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the other Party) to oversee the performance of such Party's obligations
under this Agreement and to facilitate coordination of the Parties'
performance of their respective obligations. The account managers will
meet at least once every three (3) months after the Effective Date and
until the end of the Term to review the implementation of this Agreement
and to explore methods for improving performance.
5.3 REGULATORY COMPLIANCE.
5.3.1 Each Party will comply, and will ensure that
their respective information, products and services and all other
activities undertaken through or in connection with this Agreement
(including, without limitation, any implementation of the Company
Delivery Option as contemplated by this Agreement) comply with all
applicable Laws. Each Party will execute and furnish to the other Party
on reasonable request all certifications, guarantees and other documents
regarding compliance with such Laws.
5.3.2 Company will provide reasonable assistance to
LLC and LLC's Affiliates in all regulatory compliance activities
required in connection with the advertising and offering of the Company
Delivery Option, including, but not necessarily limited to, assisting
LLC in identifying, obtaining and maintaining in force any and all
licenses and permits necessary for LLC and its Affiliates in connection
with any of the foregoing. In connection with the foregoing regulatory
compliance activities, Company will reimburse LLC for any reasonable
costs (including legal costs) incurred by LLC or its Affiliates in
connection with identifying and obtaining any and all such licenses and
permits provided the Company has already identified and obtained such
licenses and permits. For the avoidance of doubt, LLC acknowledges and
agrees that Company shall have no obligation to assist LLC in any
regulatory compliance activities related to, or reimburse LLC for any
costs incurred by LLC or its Affiliates in connection with identifying
or obtaining any licenses or permits required in connection with, any
advertising, operation, maintenance or sale of any products sold or
services made available by LLC or its Affiliates independently through
the LLC Site without the participation of Company.
* SECTION 6. [*] PAYMENTS
6.1 PAYMENTS. Subject to LLC's obligation under Section 4.5,
following the Commencement Date and until the end of the Term, Company
shall purchase in advance the Exclusive Products to be sold by LLC and
delivered by Company through the Company Delivery Option. Promptly upon
arranging for the purchase of any Exclusive Products, Company shall
notify LLC of the Exclusive Product Cost (as hereinafter defined) for
such products. Company shall own and be responsible for the risk of loss
associated with all inventory of such Exclusive Products until title is
passed to LLC pursuant to Section 2.2.
6.1.1 LLC shall purchase Exclusive Products from
Company for resale to
---------
* Confidential Treatment Requested and the Redacted Material has been
separately filed with the Commission.
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LLC's customers at the product cost ("Exclusive Product Cost")
paid by Company for the Exclusive Products to be delivered by
Company through the Company Delivery Option. In the event the
Exclusive Product Cost for any Exclusive Product sold by Company
to LLC hereunder exceeds the cost LLC would have paid or
otherwise been able to pay if LLC was purchasing such Exclusive
Product directly from LLC's vendors and distributors
("LLC Cost"), LLC shall have the right to exclude or delete such
Exclusive Products from the group of Exclusive Products for which
the Company Delivery Option is available, in which case Company
shall be under no obligation to deliver such Exclusive Products
via the Company Delivery Option. In the event LLC does not do the
foregoing, LLC shall pay Company for the LLC Cost plus fifty
percent (50%) of the difference in price between the Exclusive
Product Cost and the LLC Cost with respect to such Exclusive
Product (the "Differential Cost") In the event that the
application of this payment method would result in LLC paying any
Differential Cost in excess of the lesser of $1.50 or 10% of the
Exclusive Product Cost on a per item basis (the "50% Payment
Limit"), LLC shall pay Company an amount equal to the LLC Cost
plus the Differential Cost minus the 50% Payment Limit. The
Parties may mutually agree in writing to any alteration of the
above arrangements with respect to any Exclusive Products at any
time.
* 6.1.2 [*]
---------
* Confidential Treatment Requested and the Redacted Material has been
separately filed with the Commission.
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6.1.3 All payments due from LLC to Company under this
Section 6.1 shall be payable by LLC monthly in arrears on or before
the twentieth (20) day of the calendar month following the month for
which payment is due. Any such payment shall be accompanied by a
report in a mutually agreed upon format which shall provide details
of the calculation of the monthly payment. Such report shall provide
information detailing the number and type of Exclusive Products
purchased by LLC customers utilizing the Company Delivery Option, the
date of purchase and the LLC Cost for such Exclusive Products, and
any other information relating to each Order which is reasonably
requested by Company or otherwise required by Company to perform its
obligations hereunder. Any payment not received within this twenty
(20) day period will accrue interest at a rate of one and one-half
percent (1 1/2%) per month from the expiration of such twenty (20)
day period, or the highest rate allowed by applicable law, whichever
is lower. All payments due under this Agreement shall be calculated
in accordance with US generally accepted accounting principles. The
customer service requirements to be attached hereto as Exhibit A
shall include details regarding the handling of returns, defective
products and wrong shipments, including the adjustments or offsets,
if any, to be made to the payments described above. The Parties shall
use commercially reasonable efforts to agree upon more complete terms
related to the payment, accounting and tax aspects of the
transactions contemplated by this Agreement within sixty (60) days of
the Effective Date, which terms shall be incorporated into Exhibit C
and attached hereto.
6.2 GENERAL. Except as specifically set forth in this Agreement, each
Party remains responsible for establishing its own prices and charges to end
users, customers, subscribers or otherwise in connection with its own offerings,
products and/or services available in the commercial marketplace. Furthermore,
except as otherwise provided herein or subsequently mutually agreed upon in
writing, each Party bears its own expenses and costs associated with performing
its obligations under this Agreement.
6.3 RIGHT TO AUDIT. Each Party shall maintain complete and accurate
books and records to substantiate and document the amounts due to the other
Party hereunder. Each Party ("Auditing Party") is entitled, once every twelve
(12) months during the Term on reasonable notice to the other Party ("Audited
Party"), to audit or have its external auditors audit the Audited Party's
records, which relate to the payments due to the Auditing Party hereunder. Any
such audit will be conducted during the Audited Party's normal business hours
and at the Audited Party's location where the relevant records are kept in the
normal
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course of business and shall be conducted to minimize any disruption to the
Audited Party's business activities. Any information obtained during the course
of any such Audit shall be treated as Confidential Information. In the event
that any such audit reveals that the Audited Party has underpaid any amounts due
to the Auditing Party under this Agreement, the Audited Party will immediately
pay the difference (required payment minus actual payment) to the Auditing
Party. In the event that any such audit reveals that the Audited Party has
underpaid any amounts due to the Auditing Party under this Agreement by more
than five (5%) percent, (a) the Audited Party will immediately pay the
difference (required payment minus actual payment) to the Auditing Party
together with the reasonable cost of such audit, and (b) the twelve (12) month
stand-off period referenced above shall not apply with respect to the next
audit.
SECTION 7. PROPRIETARY RIGHTS
7.1 OWNERSHIP.
7.1.1 As between the Parties, LLC reserves all right, title
and interest in and to the LLC Intellectual Property, along with all
Intellectual Property Rights associated therewith and no title to or ownership
of any of the foregoing is transferred or, except as expressly set forth in
Section 7.2, licensed to Company or any other person or entity pursuant to this
Agreement.
7.1.2 As between the Parties, Company reserves all right,
title and interest in and to the Company Intellectual Property, along with all
Intellectual Property Rights associated therewith and no title to or ownership
of any of the foregoing is transferred or, except as expressly set forth in
Section 7.3, licensed to LLC or any other person or entity pursuant to this
Agreement.
7.1.3 To the maximum extent permitted by applicable Laws,
any LLC Derivative Works or Company Derivative Works, to the extent created by
or for the other Party, shall be deemed "works made for hire", and all right,
title and interest therein shall vest in LLC (in the case of LLC Derivative
Works) or Company (in the case of Company Derivative Works) immediately upon
creation thereof. To the extent that any such LLC Derivative Works or Company
Derivative Works are not "works made for hire", Company hereby assigns and
agrees to assign to LLC (or such of its Affiliates as it may designate) all
right, title and interest to all LLC Derivative Works and all associated
Intellectual Property Rights, and LLC hereby assigns and agrees to assign to
Company (or such of its Affiliates as it may designate) all right, title and
interest in and to all Company Derivative Works and all associated Intellectual
Property Rights. Each Party shall take, at the other Party's expense, any
actions (including, without limitation, execution and delivery of affidavits and
other documents) reasonably requested by such other Party to effect, perfect or
confirm its or its designee's ownership rights as set forth in this Section
7.1.3.
7.1.4 To the extent that any Joint Works are created in the
course of performance of this Agreement, each party shall own a joint, equal and
undivided ownership
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interest in and to such Joint Works and the associated Intellectual Property
Rights, with no duty on the part of either Party to account to the other with
respect to its use and exploitation of the same. Each Party shall own all right,
title and interest in and to any Derivative Works of any Joint Works created by
or for such Party and all Intellectual Property Rights associated therewith (to
the extent not also associated with the Joint Works). Without limiting the
generality of the foregoing, either Party may, without any duty to account to
the other (including, without limitation, any duty to pay, share or account for
any royalties):
(a) make, manufacture, assemble, produce, market, sell,
distribute, transfer, use, license and otherwise commercially and
non-commercially exploit and deal with the Joint Works; provided, that
neither party shall seek or obtain any registration of any
Intellectual Property Rights associated with the Joint Works without
the other Party's prior written consent;
(b) make, manufacture, assemble, produce, market, sell,
distribute, transfer, use, license, seek and obtain registrations of
Intellectual Property Rights (subject to paragraph (a) above) and
otherwise commercially and non-commercially exploit and deal with
Derivative Works of any Joint Works created by or for such Party,
whether or not competitive with any items created by or for the other
party; and
(c) authorize any third party to take any action described
in (a) or (b) above.
7.2 LLC LICENSE. LLC hereby grants to Company, during the Term, a
royalty-free, non-exclusive, non-transferable (except in accordance with Section
12.7) license, which Company may sublicense only to its Affiliates, to use the
LLC Intellectual Property supplied by LLC to Company as is reasonably necessary
to perform its obligations under this Agreement; provided, however, that Company
shall not use LLC's Trademarks, including in any advertising, without LLC's
prior written consent, unless such use conforms to a written Trademark use
policy previously furnished by LLC to Company and not subsequently modified or
revoked. All goodwill arising out of any use of any of LLC's or its Affiliates'
Trademarks by, through or under Company will inure solely to the benefit of LLC
and its Affiliates.
7.3 COMPANY LICENSE. Company hereby grants to LLC, during the Term, a
royalty free, non-exclusive, non-transferable (except in accordance with Section
12.7) license, which LLC may sublicense only to its Affiliates, to use the
Company Intellectual Property supplied by Company to LLC as is reasonably
necessary to perform its obligations under this Agreement; provided, however,
that LLC shall not use Company's Trademarks, including in any advertising,
without the Company's prior written consent, unless such use conforms to a
written Trademark use policy previously furnished by Company to LLC and not
subsequently modified or revoked. All goodwill arising out of any use of any of
Company's Trademarks by, through or under LLC will inure solely to the benefit
of Company.
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7.4 NON-DISPARAGEMENT. Neither Company nor LLC will use the other
Party's Trademarks in a manner that disparages the other Party or its products
or services, and/or portrays the other Party or its products or services in a
false, competitively adverse or poor light. Each of Company and LLC will comply
with the other Party's requests as to the use of the other Party's Trademarks
and will avoid knowingly taking any action that diminishes the value of such
Trademarks.
SECTION 8. REPRESENTATIONS; INDEMNITY
8.1 REPRESENTATIONS. Each Party represents and warrants to the other
that: (a) it has the full corporate right, power and authority to enter into
this Agreement and perform its obligations hereunder; (b) its performance of
this Agreement, and the other party's exercise of such other party's rights
under this Agreement, will not conflict with or result in a breach or violation
of any of the terms or provisions or constitute a default under any agreement by
which it is bound; (c) when executed and delivered, this Agreement will
constitute its legal, valid and binding obligation enforceable against it in
accordance with its terms; and (d) it will comply with all applicable Laws in
its performance of its respective obligations this Agreement.
8.2 INDEMNITY. Each Party (as applicable, the "Indemnifying Party")
will indemnify and hold harmless the other Party (the "Indemnified Party") and
its Affiliates (and their respective employees, directors and representatives)
from and against any and all claims, costs, losses, damages, judgments and
expenses (including reasonable attorneys' fees) arising out of any Claim, to the
extent it is based on (a) the operation or content of the Indemnifying Party's
Site (other than any items or materials supplied by the Indemnified Party or
services offered or performed by the Indemnified Party), (b) the offer,
marketing, sale or provision of any products or services by the Indemnifying
Party, (c) any actual or alleged breach of the Indemnifying Party's
representations or warranties set forth in Section 8.1 above and its respective
obligations under Section 5.3 above, or (d) any actual or alleged infringement
of any Intellectual Property Rights by any content, items or materials provided
by the Indemnifying Party to the Indemnified Party for its use as permitted
under this Agreement. Subject to Section 8.3, the Indemnifying Party will pay
any award against the Indemnified Party and its Affiliates (and their respective
employees, directors or representatives) and any costs and attorneys' fees
reasonably incurred by them resulting from any such Claim.
8.3 PROCEDURE. In connection with any Claim described in this Section
8, the Indemnified Party will (a) give the Indemnifying Party prompt written
notice of the Claim, (b) cooperate with the Indemnifying Party (at the
Indemnifying Party's expense) in connection with the defense and settlement of
the Claim, and (c) permit the Indemnifying Party to control the defense and
settlement of the Claim, provided that the Indemnifying Party may not settle the
Claim without the Indemnified Party's prior written consent (which will not be
unreasonably withheld). Further, the Indemnified Party (at its cost) may
participate in the defense and settlement of the Claim with counsel of its own
choosing.
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Unless the Indemnifying Party notifies the Indemnified Party in writing within
five (5) days of its receipt of any Claim that it irrevocably elects not to
assume the defense of such Claim, the Indemnifying Party shall be deemed to have
irrevocably elected to assume the defense of such Claim. If the Indemnifying
Party elects not to assume the defense of any Claim as provided in the preceding
sentence, the Indemnifying Party shall be deemed to have irrevocably waived any
right to participate in or control the defense or settlement of such Claim and
the Indemnified Party shall be entitled to sole control of the defense and
settlement of such Claim (without limitation of the Indemnifying Party's
indemnity obligations under this Section 8).
SECTION 9. DISCLAIMERS, LIMITATIONS AND RESERVATIONS
9.1 DISCLAIMER OF WARRANTIES. EXCEPT AS PROVIDED IN SECTION 8.1 ABOVE,
NEITHER PARTY MAKES, AND EACH PARTY HEREBY WAIVES AND DISCLAIMS, ANY
REPRESENTATIONS OR WARRANTIES REGARDING THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY, INCLUDING (WITHOUT LIMITATION) ANY IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT OR IMPLIED
WARRANTIES ARISING OUT OF COURSE OF DEALING, COURSE OF PERFORMANCE OR USAGE OF
TRADE. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EACH PARTY SPECIFICALLY
DISCLAIMS ANY REPRESENTATION OR WARRANTY REGARDING (A) THE AMOUNT OF SALES
REVENUES THAT MAY OCCUR DURING THE TERM, AND (B) ANY ECONOMIC OR OTHER BENEFIT
THAT THEY MIGHT OBTAIN THROUGH ITS PARTICIPATION IN THIS AGREEMENT.
9.2 NO CONSEQUENTIAL DAMAGES. EXCEPT TO THE EXTENT AWARDED TO A THIRD
PARTY IN A JUDGMENT AGAINST WHICH A PARTY IS ENTITLED TO INDEMNIFICATION
PURSUANT TO SECTION 8.2, OR TO THE EXTENT ARISING OUT OF ANY BREACH OF SECTION
12.3, NEITHER PARTY WILL BE LIABLE (WHETHER IN CONTRACT, WARRANTY, TORT
(INCLUDING, BUT NOT LIMITED TO, NEGLIGENCE), PRODUCT LIABILITY OR OTHER THEORY),
TO THE OTHER PARTY OR ANY OTHER PERSON OR ENTITY FOR COST OF COVER OR FOR ANY
INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING WITHOUT
LIMITATION DAMAGES FOR LOSS OF PROFIT, REVENUE, BUSINESS OR DATA) ARISING OUT OF
THIS AGREEMENT, EVEN IF SUCH PARTY HAS BEEN ADVISEDOF THE POSSIBILITY OF SUCH
COSTS OR DAMAGES.
9.3 LIMITATION OF DAMAGES. EXCEPT FOR LIABILITIES UNDER SECTION 8.2,
AND DAMAGES RESULTING FROM EITHER PARTY'S BREACH OF ITS OBLIGATIONS UNDERSECTION
12.3, INSTANCES OF WILLFUL MISCONDUCT AND GROSS NEGLIGENCE OF A PARTY AND/OR
PERSONAL INJURY OR TANGIBLE PROPERTY DAMAGE CAUSED BY A PARTY, NEITHER PARTY'S
AGGREGATE LIABILITY ARISING OUT OF OR IN CONNECTION WITH THIS
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AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, WHETHER IN CONTRACT, TORT
(INCLUDING NEGLIGENCE), WARRANTY OR OTHERWISE, SHALL EXCEED THE AGGREGATE
AMOUNTS ACTUALLY PAID PURSUANT TO THE PAYMENT PROVISIONS SET FORTH IN SECTION
6.1 AND EXHIBIT C DURING THE TERM OF THE AGREEMENT.
9.4 RESPONSIBILITY FOR WEB SITES. Subject to the express terms of this
Agreement, each Party will remain solely responsible for, and retains sole
control over, the programming, content and conduct of transactions on its Site.
In the event that either Party receives from a third party a BONA FIDE claim of
infringement concerning any advertising materials or other content supplied by
the other Party, such Party may upon notice to the other Party immediately
remove such materials or content from its Web Site at its sole discretion,
pending receipt of non-infringing replacement materials or content or
satisfactory resolution of such claim, and any such removal shall not constitute
a breach of this Agreement, provided such removal of the foregoing materials is
completed in good faith and in accordance with the terms and conditions herein.
SECTION 10. EXCLUSIVITY AND NON-SOLICITATION.
10.1 COMPANY SERVICE.
10.1.1 Subject to the terms and conditions of Section 10.1.2
and 10.2, Company will not: (a) offer or provide the Company Service with
respect to any Exclusive Products on behalf of any person or entity other than
LLC or its Affiliates; provided, however, nothing contained in this Agreement
shall be construed as prohibiting Company itself in any way from providing,
promoting or otherwise making the Company Service or any other Company or third
party information, products or services available to its customers on or through
the Company Site or, except as provided in Section 9.1 (b), providing, promoting
or otherwise making the Company Service available with respect to any
non-Exclusive Products on behalf of any third party; (b) advertise or promote in
any manner (including, without limitation, on or through the Company Site) any
person or entity which derives more than 10% of its gross revenues from the sale
of any one category of Exclusive Products (i.e., books, music or toys) or 15% of
its gross revenues from the sale of all categories of Exclusive Products in the
aggregate ("LLC Competitor"), provided, however, that Company shall be entitled
to advertise or promote any such LLC Competitor so long as it is exclusively in
connection with the advertising or promotion of the sale by such LLC Competitor
of a non-Exclusive Product, or the availability of the Company Service with
respect to such non-Exclusive Products offered on behalf of such LLC Competitor;
and (c) advertise or promote in any manner (including, without limitation, on or
through the Company Site) the availability or sale of any Exclusive Product by
any person or entity other than the Company or LLC or its Affiliates. Company
will use commercially reasonable efforts to train Company delivery personnel to
avoid any direct solicitation of any LLC customer to become a Company customer,
whether by way of product or service advertisements or solicitations delivered
verbally or in writing at the time of interface
-17-
<PAGE>
between such Company delivery personnel and the LLC customers, or
otherwise. Company will not advertise or promote the Company Site or the
Company Service specifically in preference to the LLC Site or the
Company Delivery Option (e.g., without limitation, "come to Kozmo.com
for free delivery rather than Amazon.com which charges a delivery fee").
Company will discuss in good faith with LLC from time to time the
possibility of exclusively sourcing products other than Exclusive
Products from LLC or its suppliers for delivery via the Company Service.
Company agrees that it will not enter into any agreement pursuant to
which Company exclusively offers or delivers products provided by any
third party if such products are then offered by LLC or its Affiliates
without first offering to negotiate with LLC (or such of its Affiliates
as LLC may designate) an agreement granting such rights to LLC (or such
Affiliate) (any such agreement, an "Exclusive Sourcing Agreement"). If
LLC rejects such offer, or does not respond to Company's offer to
negotiate a Exclusive Sourcing Agreement within five (5) business days,
Company will be free to enter into the applicable transaction with the
third party without restriction. If LLC indicates that it wishes to
negotiate an Exclusive Sourcing Agreement with Company within five (5)
business days of its receipt of Company's offer, the Parties will
attempt in good faith to negotiate a Exclusive Sourcing Agreement.
Either Party may terminate such negotiations at any time, and following
any such termination, Company shall be free to negotiate and enter into
the applicable transaction with the applicable third party without
restriction.
10.1.2 EXCEPTIONS TO COMPANY'S EXCLUSIVITY
OBLIGATIONS. Notwithstanding anything to the contrary set forth in
Section 10.1, Company shall not be precluded from providing any
Exclusive Product through the Company Service for any third party
provided that the Company's total annual revenue for the provision of
such Exclusive Product through the Company Service for such third
parties does not exceed five percent (5%) of the Company's total annual
revenue for the provision of such Exclusive Product through the Company
Service for all third parties, including LLC.
* 10.2 LLC SITE. In those areas of the Shipment Territory where
the Company Delivery Option is presented as the exclusive delivery
option in accordance with the terms of Section 3.1, except as provided
below, [*]Notwithstanding the foregoing, in the event LLC desires to
advertise, promote or make available on the LLC Site or otherwise the
one-hour delivery option or service for Exclusive Products [*] in any
one or more areas of the Shipment Territory where the Company Delivery
---------
* Confidential Treatment Requested and the Redacted Material has been
separately filed with the Commission.
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<PAGE>
* Option is presented as an available delivery option in accordance with
the terms of Section 3.1, LLC shall have the right to do so provided
that it gives at least ninety (90) days written notice to Company, which
notice shall specify [*]. Upon the expiration of such notice period, (a)
the Company's exclusivity obligations set forth in Sections 10.1(a), (b)
and (c) with respect to the particular areas of the Shipment Territory
identified in the above-described notice shall cease, and Section 3.1,
(b) LLC shall continue to feature the Placements on the LLC Site as set
forth in but LLC's obligation \ under Section 3.1 to present the Company
Delivery Option as the exclusive one-hour delivery option for Exclusive
Products shall be converted to a reduced obligation to [*]; provided,
however, that the Company branding associated with the Company Delivery
Option shall not be removed in its entirety and shall continue to be as
provided by Company, subject to the final approval of LLC, such approval
not to be unreasonably withheld or delayed. In the event Company fails
to materially comply with the service levels and customer service
requirements set forth in Exhibit A in any area or areas of the Shipment
Territory, LLC shall be entitled to give written notice of this fact to
Company (which notice shall specify the problem and cure with reasonable
particularity), and Company shall have sixty (60) days to remedy the
same from the date of receipt of such notice. In the event Company is
unable to cure the problem in any area or areas of the Shipment
Territory by substantially conforming to the applicable service levels
and customer service requirements within such time period, LLC shall be
entitled to use [*] for one-hour deliveries of Exclusive Products in
such areas of the Shipment Territory without causing termination of the
Company's exclusivity obligations set forth in Sections 10.1(a), (b) and
(c) in such areas. If Company later demonstrates to LLC's reasonable
satisfaction that it is able to substantially conform to the applicable
service levels and customer service requirements set forth in Exhibit A
in such area or areas of the Shipment Territory, LLC shall either (x)
cease using Company Competitors in such area or areas of the Shipment
Territory within ninety (90) days, or (y) be deemed to agree to the
termination of Company's exclusivity obligations set forth in Sections
10.1 (a),(b) and (c) with respect to such area or areas of the Shipment
Territory.
10.3 OTHER OBLIGATIONS NON-EXCLUSIVE. Except as expressly
provided in Section 10.1 and 10.2 above, the rights and obligations of
the Parties under this Agreement shall be non-exclusive, and either
party shall be free to enter into any transactions and agreements with
third parties (whether or not similar to or competitive with the
transactions and agreements specified in this Agreement or the business
of the other Party), so long as the same do not breach any express
provision of this Agreement.
---------
* Confidential Treatment Requested and the Redacted Material has been
separately filed with the Commission.
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<PAGE>
SECTION 11. TERM AND TERMINATION
11.1 TERM. The term of this Agreement will start on the
Effective Date, and unless earlier terminated as provided elsewhere in
this Agreement, will end three (3) years following the Commencement Date.
11.2 TERMINATION FOR BREACH. Without limiting any other rights
or remedies (including, without limitation, any right to seek damages
and other monetary relief and LLC's rights under Section 11.3 or
Company's rights under Section 11.4) that either Party may have in law
or otherwise, either Party may terminate this Agreement if the other
Party materially breaches its obligations hereunder, provided that (a)
the non-breaching Party sends written notice to the breaching Party
describing the breach, and (b) the breaching Party does not cure the
breach within thirty (30) days following its receipt of such notice.
11.3 LLC TERMINATION. In the event that: (a) Company at any
time engages in any criminal conduct, fraud, dishonesty or other
behavior that LLC reasonably and in good faith determines is materially
harming or is likely to materially harm the goodwill or reputation of
LLC or its Affiliates or the LLC Site; (b) LLC reasonably and in good
faith determines that Company has consistently failed to abide by LLC's
reasonable requests with respect to the establishment of technical and
customer service requirements or its obligations to integrate the
Company Service into the LLC Site as required hereunder; or (c) Company
consistently fails to pay BONA FIDE debts as they legally come due,
institutes or has instituted against it any bankruptcy, reorganization,
debt arrangement, assignment for the benefit of creditors, or other
proceeding under any bankruptcy or insolvency Law or dissolution,
receivership, or liquidation proceeding (and, if such proceeding is
instituted against it, such proceeding is not dismissed within one
hundred twenty (120) days), the same shall be deemed a material breach
of this Agreement which is not susceptible to cure, and LLC shall be
entitled to terminate this Agreement upon written notice to Company. In
addition, in the event that any Change of Control involving an LLC
Competitor occurs with respect to Company, LLC shall be entitled to
terminate this Agreement upon written notice to Company, LLC
acknowledging, however, that the occurrence of a Change of Control shall
not be deemed to be a breach of this Agreement in and of itself, and
(bb) without terminating the Agreement in whole, LLC may terminate this
Agreement with respect to any one or more areas of the Shipment
Territory if the Company materially breaches its obligations hereunder
with respect to any such area or areas and LLC follows the same
procedures related to such breach or breaches that would be required to
terminate the Agreement in its entirety.
* 11.4 COMPANY TERMINATION. In the event that [*]
---------
* Confidential Treatment Requested and the Redacted Material has been
separately filed with the Commission.
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<PAGE>
[*] (c) LLC consistently fails to pay its BONA FIDE debts as they legally come
due, institutes or has instituted against it any bankruptcy, reorganization,
debt arrangement, assignment for the benefit of creditors, or other proceeding
under any bankruptcy or insolvency Law or dissolution, receivership, or
liquidation proceeding (and, if such proceeding is instituted against it, such
proceeding is not dismissed within one hundred twenty (120) days), the same
shall be deemed a material breach of this Agreement which is not susceptible
to cure, and Company shall be entitled to terminate this Agreement upon
written notice to LLC. In addition, in the event that any Change of Control
involving a Company Competitor occurs with respect to LLC, Company shall be
entitled to terminate this Agreement upon written notice to LLC, Company
acknowledging, however, that the occurrence of a Change of Control shall not
be deemed to be a breach of this Agreement in and of itself.
11.5 EFFECT OF TERMINATION.
11.5.1 GENERAL. Upon termination of this Agreement, each
Party in receipt, possession or control of the other Party's intellectual or
proprietary property, information and materials (including any Confidential
Information) pursuant to this Agreement must return to the other Party (or at
the other Party's written request, destroy and certify in writing such
destruction) such property, information and materials and all copies thereof,
regardless of the form, format or media. Sections 7 through 9, 11 and 12 and any
other provision of this Agreement which must survive the termination or
expiration of this Agreement in order to give effect to its meaning, will
survive the termination or expiration of this Agreement.
11.5.2 USER TRANSITION. Upon any expiration of the Term, or
a termination of the Term as a result of Company's material breach of the
Agreement, the Parties will cooperate in good faith to promote a smooth customer
transition, and in any event, Company will, at LLC's option, continue to offer
the Company Delivery Option in accordance with the terms of this Agreement for a
period of up to four (4) months following such termination, provided, however,
that Company's exclusivity obligations contained in Section 10 of the Agreement
shall not apply during this transition period.
SECTION 12. MISCELLANEOUS
12.1 TAXES. The Parties acknowledge and agree that notwithstanding any
other provision of this Agreement, LLC shall have no obligation to offer or
promote (or to continue to offer or promote) the Company Delivery Option in any
jurisdiction in the Shipment Territory if LLC determines, in its reasonable and
good faith discretion, that such offer or promotion may create any jurisdiction
or authority for any governmental authority to impose material additional
obligations to collect sales tax, use tax or similar tax in connection with any
sales of Exclusive Products by LLC or its Affiliates. Each Party specifically
acknowledges and agrees that this Agreement and the transactions contemplated
hereby are not intended to create any jurisdiction or authority for any
governmental authority to impose any obligation to collect any sales tax, use
tax or similar tax in connection with any sales of
- ---------
* Confidential Treatment Requested and the Redacted Material has been separately
filed with the Commission.
-21-
<PAGE>
products by LLC or its Affiliates. Accordingly, Company agrees to take such
action as LLC may reasonably request in compliance with all Laws, at LLC's sole
cost and expense, (including, without limitation, execution of affidavits and
other documents) to avoid or limit the imposition, by reason of this Agreement
or the transactions contemplated hereby, of any such obligation on LLC or its
Affiliates, or the establishment of a nexus for tax purposes sufficient to grant
any jurisdiction the authority to levy any sales tax, use tax or similar tax on
sales of products by LLC or its Affiliates in connection with this Agreement.
12.2 INSURANCE. Company, at its sole cost and expense, shall procure
and maintain in effect during the term of this Agreement and for a period of
twelve (12) months thereafter, the following insurance policies: (a) commercial
general, umbrella and/or excess liability insurance with limits of at least
$25,000,000 per occurrence (which insurance shall include, but not be limited
to, products, products/completed operations, bodily injury, personal injury,
broad form property damage and broad form contractual and advertising injury)
and (b) such other policy or policies of insurance as is or are commercially
reasonable for the transactions and business contemplated by this Agreement. As
soon as is reasonably practicable following the Effective Date, and from time to
time upon the reasonable request of LLC, Company shall furnish to LLC a
certificate of insurance and any other relevant documentation as evidence of
said insurance policy or policies. Company agrees to consult with LLC from time
to time regarding the adequacy of Company's insurance coverage. LLC and
Amazon.com, Inc. shall at all times be named as an "additional insureds" under
such policy or policies, or any renewals or replacements thereof, and such
policies shall contain a waiver of subrogation against LLC and Amazon.com, Inc.
12.3 INDEPENDENT CONTRACTORS. The Parties are entering this Agreement
as independent contractors, and this Agreement will not be construed to create a
partnership, joint venture or employment relationship between them. Neither
Party will represent itself to be an employee or agent of the other or enter
into any agreement or legally binding commitment or statement on the other's
behalf of or in the other's name.
12.4 NONDISCLOSURE. Each Party will protect the Confidential
Information of the other Party from misappropriation and unauthorized use or
disclosure, and at a minimum, will take precautions at least as great as those
taken to protect its own confidential information of a similar nature, but in no
event with less than reasonable care. Without limiting the foregoing, the
Receiving Party will: (a) use such Confidential Information solely for the
purposes for which it has been disclosed; and (b) disclose such Confidential
Information only to those of its and its Affiliates' employees, agents, and
consultants who have a need to know the same for the purpose of performing this
Agreement and who are informed of and agree to a duty of nondisclosure. The
Receiving Party may also disclose Confidential Information of the Disclosing
Party to the extent necessary to comply with applicable Law or legal process or
pursuant to a registration report or exhibits thereto filed or to be filed with
the Securities and Exchange Commission, listing agency or any stock
-22-
<PAGE>
securities commission, or any other associated filings, provided that the
Receiving Party uses gives the Disclosing Party not less than ten (10) days'
prior written notice thereof and complies with all reasonable requests of the
Disclosing Party to minimize the extent or scope of any such disclosure. Upon
request of the other Party, or in any event upon any termination or expiration
of the Term, each Party shall return to the other or destroy (and certify in
writing such destruction) all materials, in any medium, which contain, embody,
reflect or reference all or any part of any Confidential Information of the
other Party.
12.5 COSTS. Except as expressly provided herein, each Party will be
responsible for all costs and expenses incurred by it in connection with the
negotiation, execution, delivery and performance of this Agreement.
12.6 NOTICES. Any notice or other communication under this Agreement
given by either Party to the other Party will be in writing and, to be
effective, must be sent to the intended recipient by prepaid registered letter,
receipted commercial courier, or electronically receipted facsimile transmission
(acknowledged in like manner by the intended recipient) at its address specified
below its signature at the end of this Agreement, and in the case of LLC, with a
copy to Amazon.com, Inc., 1200 12th Avenue South, Suite 1200, Seattle, WA 98144,
USA, Facsimile: (206) 266-7010 Attn: General Counsel and in the case of Company,
with a copy to Greenberg Traurig, 200 Park Avenue, New York, NY 10166, Facsimile
(212-801- 6400), Attn: Daniel Schnapp, Esq.; provided, that no notice of
termination of this Agreement shall be deemed properly given unless sent by
prepaid registered mail to such address(es) and to the attention of such
officer(s). Either Party may from time to time change such address or individual
by giving the other Party notice of such change in accordance with this Section
12.6.
12.7 ASSIGNMENT. Except as set forth below, neither Party may assign,
transfer or subcontract this Agreement and/or any rights and/or obligations
hereunder, without the written consent of the other and any attempt to do so
shall be void. Notwithstanding the foregoing, either party may assign this
Agreement to an Affiliate or in connection with a merger, sale, transfer,
conveyance, acquisition or other corporate reorganization or change in control
or ownership relating to all or any material portion of its stock, assets,
operations or business, other than a Change of Control involving an LLC
Competitor or a Company Competitor, provided that the assignee agrees in writing
to be bound by all of the terms and conditions of this Agreement. Subject to the
foregoing, this Agreement will be binding on and enforceable by the Parties and
their respective successors and permitted assigns.
12.8 NONWAIVER. To be effective, any waiver by a Party of any of its
rights or the other Party's obligations under this Agreement must be made in a
writing signed by the Party to be charged with the waiver. No failure or
forbearance by either Party to insist upon or enforce performance by the other
Party of any of the provisions of this Agreement or to exercise any rights or
remedies under this Agreement or otherwise at law or in equity shall be
construed as a waiver or relinquishment to any extent of such Party's right to
assert or rely
-23-
<PAGE>
upon any such provision, right, or remedy in that or any other instance; rather
the same shall be and remain in full force and effect.
12.9 COUNTERPARTS; TRANSMITTED COPIES. This Agreement may be executed
in any number of counterparts, each of which will be deemed an original, but all
of which taken together will constitute one and the same instrument. To expedite
the process of entering into this Agreement, the parties acknowledge that
Transmitted Copies of the Agreement shall be equivalent to original documents
until such time (if any) as original documents are completely executed and
delivered. "Transmitted Copies" shall mean copies which are reproduced or
transmitted via facsimile, or another process of complete and accurate
reproduction and transmission.
12.10 HEADINGS. The headings of sections and subsections of this
Agreement are for convenience of reference only and are not intended to
restrict, affect or otherwise influence the interpretation or construction of
any provision of this Agreement.
12.11 CHOICE OF LAW. This Agreement will be interpreted, construed and
enforced in accordance with the Laws of the State of Washington, without
reference to its choice of Laws rules.
12.12 VENUE. Company hereby irrevocably consents to non-exclusive
personal jurisdiction and venue in the state and federal courts located in King
County, Washington with respect to any claim, action or proceeding arising out
of or related to this Agreement and agrees not to commence or prosecute any such
claim, action or proceeding other than in the aforementioned courts.
12.13 ENTIRE AGREEMENT. The Exhibits, materials, information and
documents attached, referred to or specified in this Agreement are incorporated
by reference and constitute a part of this Agreement as if fully set forth
herein. This Agreement (a) represents the entire agreement between the Parties
with respect to the subject matter hereof and supersedes any previous or
contemporaneous oral or written agreements regarding such subject matter and (b)
may be amended or modified only by a written instrument signed by a duly
authorized agent of each Party. No breach of this Agreement by either Party
shall affect the rights or obligations of either Party under any other Agreement
between the Parties; rather, the same will remain in full force and effect.
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<PAGE>
LLC COMPANY:
AMAZON.COM LLC KOZMO.COM, INC.
By: F/ By: /s/ Jeff Yolen
----------------------------- -----------------------------
Title: Vice President Title: Vice President
-------------------------- --------------------------
Date: March 13, 2000 Date: March 13, 2000
--------------------------- ---------------------------
Notice Address: Notice Address:
Amazon.com LLC KOZMO.COM, INC.
1200 12th Avenue South, Suite 1200 80 BROAD STREET
Seattle, WA 98144-2734 NEW YORK, NY 10004
Facsimile: 206-266-7010 FACSIMILE: 212-797-1400
Attn: General Counsel, Amazon.com, Inc. ATTN: JEFF YOLEN, VP BUSINESS
DEVELOPMENT
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<PAGE>
EXHIBIT A
CUSTOMER SERVICE REQUIREMENTS
<PAGE>
EXHIBIT B
DEVELOPMENT PLAN
<PAGE>
EXHIBIT C
PAYMENT TERMS AND CONDITIONS
<PAGE>
Exhibit 10.3
"Pages where confidential treatment has been requested are stamped 'Confidential
Treatment Requested and the Redacted Material has been separately filed with the
Commission', and the confidential section has been marked in the margin with a
star (*)."
REVENUE SHARING
OUTPUT LICENSE TERMS
As of February 28, 2000
The following (the "Agreement") sets forth the terms of the license agreement
(the "License") between Warner Home Video ("WHV"), a division of Time Warner
Entertainment Company, L.P. and Kozmo.com (the "Retailer") for revenue sharing
on WHV's Rental Picture output (as defined below).
1 . TERM: Five (5) year period commencing upon the "Street Date" of the first
"Rental Picture" (as such terms are defined below) released by WHV on or
after May 16, 2000 (subject to change by Retailer upon notice to WHV).
2. TERRITORY: United States and its territories and possessions only.
3. DEFINITIONS:
a. "LICENSED UNITS" shall mean the total number of units (VHS and DVD)
licensed to Retailer hereunder.
b. "MONTH" shall be defined as each calendar Month, and each Month shall
end on the last day of such Month.
c. "PICTURE TERM" means for each Rental Picture the first twelve (12)
months following the initial release of a title in either the VHS or
DVD format.
d. "RENTAL PICTURE" means each and every "New Release" on videocassette
and DVD of a feature motion picture distributed by WHV in the
Territory (subject to any and all approvals required by any third
party, including, without limitation, New Line and HBO) of not fewer
than seventy (70) minutes in length, provided, however, that product
controlled by third parties who do not approve of the terms hereof
shall be specifically excluded from Rental Pictures. "New Release"
refers to the initial release of a title in either the VHS or DVD
format. WHV reserves its right, upon notice to Retailer, prospectively
to withdraw any Rental Picture or distributed line from the terms
hereof in the event WHV ceases to own or control homevideo
distribution in the Territory with respect thereto.
e. "REVENUE" means all consumer-generated videocassette rental revenue,
related extended viewing fees, lost unit fees, and any other fees, and
any and all interest accruing thereon per rental transactions, of all
Licensed Units, less actual Bad Debt (as
<PAGE>
defined below), if applicable, and net of any and all Taxes (as
defined below). The parties agree that Retailer's calculation of Bad
Debt and Taxes shall be subject to review and verification by WHV.
(i) "BAD DEBT" shall mean, for purposes hereof (A) Retailer's total
gross rental revenues (including extended viewing fees) relating
to WHV Rental Picture product multiplied by (B) the quotient of
(x) actual net write-offs by Retailer on an annual basis divided
by (y) Retailer's total gross rental revenues (including extended
viewing fees) chain-wide, provided that in no event shall
Retailer's Bad Debt exceed 10% of Retailer's total gross rental
revenues relating to WHV Rental Picture product.
(ii) "TAXES" shall mean any and all sales, excise, value added or
other taxes which meet the following qualifications: (A) the
taxes are separately stated, (B) the taxes are required by law to
be collected from Retailer's customers, and (C) the taxes are
actually paid by Retailer to taxing authorities.
f. "STREET DATE" means the first day retailers are permitted by WHV to
make a title available for rental to consumers or, for purposes
hereof, in the case of DVD product, the first day Retailers are
permitted to make a title available to consumers.
g. "TURN" shall mean one (1) actual rental transaction generated by a
Licensed Unit. The parties acknowledge and agree that invoicing and/or
payment of extended viewing fees, lost unit fees or other similar fees
shall be considered a part of the Turn with which it is associated and
shall not be considered a separate transaction or Turn.
4. LICENSED RIGHTS:
a. HOMEVIDEO DISTRIBUTION LICENSE: WHV licenses to Retailer on a limited
and non-exclusive basis homevideo distribution rights to the Rental
Pictures in VHS and DVD formats only for rental only in the retail
market in the Territory during the Term, subject to the terms
hereunder and subject to Retailer's agreement to accept all Rental
Pictures offered by WHV pursuant to the terms hereunder and to acquire
sufficient quantities of such Rental Pictures to support the marketing
efforts of WHV and Retailer contemplated hereby, subject to Paragraph
5(a) below.
b. CREDIT APPROVAL: WHV and Retailer agree that this License is and shall
during the Term be conditioned upon and subject to (i) Retailer's
credit approval by WHV or its designee and (ii) maintenance of such
level of credit worthiness during the Term, which level may be
evaluated periodically by WHV or its designee at any time during the
Term.
c. RESERVATION OF TITLE: Legal title to, and risk of loss of, the
Licensed Units hereunder shall remain vested in WHV, subject to
disposition of Licensed Units pursuant to
-2-
<PAGE>
Paragraph 8 below. Retailer shall not permit any encumbrance to attach
to any Licensed Units delivered pursuant to this Agreement.
d. LIMITATIONS ON BUNDLING: In the event Retailer elects to bundle Rental
Pictures with any other of Retailer's products, the effective retail
price of the Rental Picture(s) shall be proportionate to the effective
rental and/or retail price of each of the other products in the
bundle, subject to WHV's minimum Revenue Share, pursuant to Paragraph
6.a. below.
5. INITIAL PAYMENT TO WHV:
a. INITIAL PAYMENT: For each Rental Picture licensed hereunder, Retailer
shall advance to WHV a non-refundable aggregate amount (the "Initial
Payment") as follows:
* (i) MUTUAL DETERMINATION: [***] per Licensed Unit, with WHV and
Retailer mutually determining the number of Licensed Units per
Rental Picture and WHV's decision final; or
* (ii) RETAILER'S DETERMINATION: [***] per Licensed Unit, with Retailer
unilaterally determining the number of Licensed Units per Rental
Picture.
b. PAYMENT TERMS. For each Rental Picture, if applicable, the Initial
Payment shall be due and payable by Retailer sixty (60) days after
Street Date.
c. RECOUPMENT: Retailer shall recoup each Initial Payment from WHV's
Revenue Share on a Rental Picture-by-Rental Picture basis. No Initial
Payment or any other amount due or owing on any Rental Picture shall
be cross-collateralized with the Initial Payment or any other amount
due or owing on any other Rental Picture(s).
6. REVENUE SHARING: For each Rental Picture, subject to
Paragraph 5.c. above, WHV's share of the Revenue shall be
calculated as follows:
* a. DURING THE PICTURE TERM: During the Picture Term, on an average
aggregate basis per Licensed Unit per Turn, WHV's Revenue Share shall
equal the greater of (i) [***] of Revenue or (ii) U.S.$[***] which is
net of Bad Debt and Taxes as defined in Paragraph 3.e. above.
b. POST-PICTURE TERM: After the Picture Term, Retailer retains all
revenue.
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* Confidential Treatment Requested and the Redacted Material has been separately
filed with the Commission.
-3-
<PAGE>
7. STATEMENTS AND PAYMENTS:
a. STATEMENTS: On a Monthly basis, within ten (10) business days after
the Month, for each Rental Picture, Retailer shall provide to WHV, in
the formats reasonably requested and as periodically amended by WHV, a
statement (the "Statement") which reflects the rental and related
activities for such Month, including, without limitation, Initial
Payment, WHV's Revenue Share, (as defined below in Paragraph 8) and
actual Bad Debt.
b. PAYMENTS: For each Rental Picture, to the extent any amounts are due
pursuant to the Statements, such amounts shall be due and payable
within ten (10) business days following Month-end.
8. DISPOSITION OF LICENSED UNITS AFTER PICTURE TERM:
a. NO SALES: Retailer shall not sell any Licensed Units.
b. TREATMENT OF LICENSED UNITS AFTER PICTURE TERM: For each Rental
Picture, at the expiration of the Picture Term, Retailer, upon written
notice to WHV by the expiration of the Picture Term, may elect to keep
some or all of the Licensed Units for purposes of renting such units
to consumers for up to two (2) additional years (the "Additional
Period"). At the end of the Additional Period, or in the event
Retailer does not elect to retain some or all Licensed Units for all
or part of the Additional Period, WHV, at its option, shall instruct
Retailer to return or destroy such Licensed Units, subject to
Paragraph 8.c. below.
* c. RETAILER'S RENTAL INVENTORY: For each Rental Picture, Retailer may
elect to keep up to [***] of the Licensed Units, per format, for
rental inventory ("Rental Inventory).
* d. RENTAL INVENTORY PAYMENT: For each Licensed Unit retained as "Rental
Inventory" within ten (10) business days after the end of the
Additional Period (or if there is no Additional Period, at the end of
the Picture Term), Retailer shall pay to WHV the non-recoupable sum of
$[***] per unit.
e. EFFECT OF NON-COMPLIANCE: The parties agree that failure by Retailer
to comply with this Paragraph 8 shall constitute a material breach of
this Agreement.
*9. MARKETING/PROMOTION: [***] Retailer agrees that this positioning shall be
no worse than the positioning for the video product of any other Studio (as
defined below). Both parties agree to review Retailer's marketing/promotion
of WHV's product on an on-going basis during the Term.
*10. ADVERTISING SUPPORT: WHV shall provide advertising support funds to
Retailer [***] on a by-Rental Picture basis, with media to be pre-approved
by WHV. [***]
- ---------
* Confidential Treatment Requested and the Redacted Material has been separately
filed with the Commission.
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<PAGE>
11. DELIVERY: WHV, at its cost, shall use its good faith reasonable efforts to
deliver product to a distribution center designated by Retailer not less
than ten (10) business days prior to Street Date for each Rental Picture,
subject to timely placement of purchase orders by Retailer (i.e., by
standard order due date).
12. INFORMATION TO BE PROVIDED BY RETAILER: To the extent reasonably available
to Retailer and with respect to WHV product only, Retailer agrees to
provide the following information to WHV at Retailer's expense:
a. REVENUE SHARE REPORTING: On a weekly basis, no later than Tuesday
morning for activity through the previous Sunday, Retailer shall
deliver to WHV, via EDI or hard copy as reasonably requested by WHV,
reports detailing the number of copies, the number of rental
transactions and gross revenues per Rental Picture, in each instance,
by format, by warehouse, provided that for the first ninety (90) days
of the Term, the parties will work together to establish an
appropriate reporting system for Retailer.
b. OTHER INFORMATION: Retailer and WHV shall mutually agree on other
information, reporting formats and/or tracking or information formats
and systems to be provided to each other.
13. AUDIT RIGHTS: Upon not less than seven (7) days advance written notice to
Retailer, WHV, or its representatives or designees, shall have the right
during normal business hours, but not more than one (1) time per year
during the Term and all the Picture Terms and one (1) time after the
expiration of the Term and all the Picture Terms (but not the Additional
Period), to inspect, audit and make extracts of the books and records of
Retailer insofar as said books and records relate to the calculation or
determination by Retailer of (a) Revenue, (b) WHV's Revenue Share, (c) Bad
Debt, and (d) the rights licensed hereunder. Such rights of audit shall
continue for a period of one (1) year following the expiration of all
Picture Terms, (but not the Additional Period) as provided for under this
Agreement. For purposes of clarification, there shall be no more than one
(1) audit per year during the auditable period. The parties agree that
Retailer shall have the right reasonably to approve independent auditors
hired by WHV to conduct an audit, provided that the internal auditors of
WHV and/or Time Warner and the accounting firm of Ernst & Young or WHV's
then existing auditors shall be deemed pre-approved for any and all audits
conducted pursuant hereto.
14. SELL-THROUGH PRODUCT: WHV agrees to offer sell-through product (including
catalog) to Retailer at WHV's best cost price for Retailer's category.
15. EQUITY POSITION: In partial consideration for the rights granted hereunder,
Retailer agrees to give WHV or its designee $10 million in Retailer's
Series F Convertible Preferred.
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<PAGE>
Stock ("Stock") to be issued in its private placement. The parties agree to
execute and deliver any and all documentation required to effect such stock
conveyance.
16. CONFIDENTIALITY: Each of WHV and Retailer acknowledges that (i) the terms
and conditions of this Agreement, and (ii) all information and data
(including, without limitation, rental and revenue forecasts, projections
and estimates and actual results, in whatever form or medium)
(collectively, the "Confidential Information") provided by each party to
the other under this Agreement are highly proprietary and confidential.
Each of WHV and Retailer agrees that it shall not use Confidential
Information (other than in connection with the performance of its
obligations under this Agreement or the exercise of its rights under this
Agreement) or disclose Confidential Information to any person (other than
its officers, employees, agents, representatives and licensors and
licensees on a need-to-know basis only and who agree to be bound by the
confidentiality obligations hereunder) or unless compelled by subpoena or
court order or state or federal securities laws to disclose any such
Confidential Information. This Paragraph 16 shall survive expiration or
earlier termination of this Agreement.
17. INDEMNIFICATION:
a. INDEMNIFICATION BY RETAILER: Except as otherwise provided in Paragraph
17.b. below, Retailer shall defend, indemnify and hold WHV, its parent
company, their affiliates and subsidiaries, and the officers,
directors, agents and employees of each, free and harmless from all
suits, claims, demands and other liabilities and expenses (including
reasonable attorneys' fees) (each, a "Claim") which may arise directly
or indirectly out of or by reason of (i) the unauthorized use by
Retailer of any patented invention, or of any copyrighted material
provided by WHV, (ii) a Claim from a customer arising out of
Retailer's rental or retail practices or course of dealing with
respect to such customer, and/or (iii) a breach or violation of this
Agreement or any obligation, covenant, representation or warranty made
hereunder by Retailer.
b. INDEMNIFICATION BY WHV: Except as otherwise provided in Paragraph
17.a. above, WHV shall defend, indemnify and hold Retailer, its parent
company, their affiliates, subsidiaries, and franchisees, and the
officers, directors, agents, and employees of each, free and harmless
from all Claims (including reasonable attorneys' fees) which may arise
directly or indirectly out of or by reason of (i) copyright or
trademark infringement by, or other third party Claim against, WHV or
Retailer with respect to the content of any Rental Picture, provided
such Claim or infringement is not the result of the negligence of
Retailer or any employee or agent of Retailer, (ii) a physical defect
in any Licensed Unit provided to Retailer hereunder by WHV, provided
such defect was not caused by the negligence of Retailer or any
employee or agent of Retailer, and/or (iii) a breach or violation of
this Agreement or any obligation, covenant, representation or warranty
made hereunder by WHV.
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<PAGE>
18. REMEDIES:
a. GENERAL: Each of WHV and Retailer acknowledge and agree that a
material breach by either party of any of its obligations under this
Agreement, gives the other party the right to terminate this Agreement
upon thirty (30) days prior written notice; provided that in the event
the breaching party cures such breach within the notice period, the
termination notice shall be void with respect to such cured breach
only. Retailer waives any rights to seek injunctive relief with
respect to the sale, license and/or other distribution of any Rental
Picture, provided that Retailer does not waive any right it may have
to seek specific performance under this Agreement with respect to any
Rental Picture being distributed by WHV in the rental retail
marketplace. The termination of this Agreement shall not relieve the
parties of any obligations incurred prior to such termination.
* b. LIQUIDATED DAMAGES: In the event of termination by Retailer due to
a material breach by WHV of any of its obligations under this
Agreement, WHV shall pay Retailer liquidated damages [***]. At
WHV's option, in lieu of paying liquidated damages to Retailer
pursuant to the foregoing and subject to applicable securities laws
and regulations, WHV may convey back to Retailer for no
consideration that number of shares of Stock [***]. The parties
agree that in the event of liquidated damages or reconveyance of
Stock hereunder, the number of shares shall be adjusted as
appropriate to reflect conversion and/or reverse splits of such
shares. Nothing contained in this paragraph 18.b. shall preclude
Retailer from seeking other remedies as permitted under this
Agreement.
19. REPRESENTATIONS AND WARRANTIES:
a. REPRESENTATIONS AND WARRANTIES OF RETAILER:
(i) AUTHORITY: Retailer hereby agrees, warrants and represents that
Retailer has full authority, capacity and ability to execute this
Agreement and to perform all of its obligations hereunder.
* (ii) [***]
b. REPRESENTATIONS AND WARRANTIES OF WHV: WHV hereby agrees, warrants and
represents that WHV has full authority, capacity, ability and right to
execute this Agreement, to perform all of its obligations hereunder
and to license the rights to Retailer hereunder pursuant to Paragraph
4 above.
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* Confidential Treatment Requested and the Redacted Material has been separately
filed with the Commission.
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<PAGE>
20. MISCELLANEOUS:
a. AMENDMENT AND WAIVER: Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement
shall be effective against any party unless such modification,
amendment or waiver is approved in writing by both Retailer and WHV.
The failure of any party to enforce any of the provisions of this
Agreement shall in no way be construed as a waiver of such provisions
and shall not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its
terms.
b. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable
law or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any other
jurisdiction, but this Agreement shall be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
c. ENTIRE AGREEMENT. Except as otherwise expressly set forth herein, this
document embodies the complete agreement and understanding between the
parties hereto with respect to the subject matter hereof and
supersedes and preempts any prior understandings, agreements or
representations by or between the parties, written or oral, which may
have related to the subject matter hereof in any way.
d. ASSIGNMENT:
(i) RETAILER ASSIGNMENT: This Letter Agreement shall not be assigned
by Retailer without the prior written consent of WHV, which
consent shall not be unreasonably withheld or delayed, provided
that WHV has the right not to approve an assignment in the event
of a sale of Retailer to a Studio (as defined below) or to a
Third Party Retailer (as defined below).
(ii) WHV ASSIGNMENT: This Letter Agreement shall not be assigned by
WHV without the prior written consent of Retailer, except to any
corporation or entity which controls, is controlled by, or under
common control with WHV.
(iii) PURCHASE OF RETAILER BY A STUDIO OR THIRD PARTY RETAILER.
(A) PURCHASE BY STUDIO: In the event a motion picture studio or
a company which produces or acquires theatrical or
non-theatrical product for release into the homevideo market
in VHS, DVD laser disc, and/or
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<PAGE>
other video formats, either directly to retailers or through
wholesalers (for purposes hereof, in each instance, a
"Studio") enters into an agreement to acquire Retailer, WHV
shall be given prompt notice of such agreement and shall
have the option to terminate this Agreement immediately upon
written notice to Retailer. Promptly following such notice
of acquisition agreement, Retailer, in consultation with
WHV, shall undertake to provide adequate assurance in
writing to WHV that proprietary and confidential information
of WHV shall not be disclosed to, or otherwise made
accessible to, the management or other employees of such
Studio following such acquisition. As used in this Paragraph
20.d.(iii)(A), the term "Studio" shall also include, without
limitation, the respective affiliated corporations which
control, are controlled by, or are under common control
with, any such Studio. The term "control" shall refer to the
ownership of at least fifty percent (50%) of the outstanding
voting power of the corporation or entity which is subject
to such "control".
(B) PURCHASE BY/OF THIRD PARTY RETAILER: Subject to Paragraph
20.d.(i) above, in the event a third party retailer (a
"Third Party Retailer") enters into an agreement to acquire
Retailer, or Retailer enters into an agreement to acquire a
Third Party Retailer, then WHV and Retailer agree that in
such event, the terms of this Agreement shall apply only to
Retailer, unless and until WHV approves in writing inclusion
of such Third Party Retailer hereunder.
(C) DEFINITION OF "PURCHASE": For purposes of this Subparagraph
20.d.(iii) the term "Purchase" shall include acquisition,
merger and/or other consolidation.
e. COUNTERPARTS. This Agreement may be executed in separate counterparts
each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
f. DUE AUTHORIZATION. Each of WHV and Retailer represents and warrants
that the officer executing this Agreement has been duly authorized and
that this Agreement when executed and delivered shall be valid and
binding and enforceable in accordance with its terms.
g. NOTICES. All notices provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed first
class mail (postage prepaid) or sent by reputable overnight courier
service (charges prepaid) to the parties as follows:
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<PAGE>
If to Retailer:
Kozmo.com
80 Broad Street, 18th Floor
New York, NY 10004
Attention: Yong Kang, President and C.A.O.
Gerry Burdo, C.F.O.
Cindy Holland, V.P. Business Development
with a copy to Alan Sutin, Esq.
Greenberg and Traurig
200 Park Ave.
New York, NY 10166
If to WHV:
Warner Home Video
4000 Warner Boulevard
Burbank, CA 91522
Attention: Jim Cardwell, Executive Vice President
North American Operations
Beth Baier, Senior Vice President, Business
and Legal Affairs and General Counsel
h. GOVERNING LAW. This Agreement and all matters or issues material
thereto shall be governed by the laws of the State of California,
applicable to contracts performed entirely therein.
i. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this
Agreement.
j. RELATIONSHIP OF PARTIES. Nothing contained herein shall constitute a
partnership, joint venture, association or principal and agent
relationship or be construed to evidence the intention of the parties
to constitute such. Retailer and WHV are independent contractors and
neither has any authority to act on the other's behalf or to bind the
other in any way.
k. FORCE MAJEURE. Whenever performance by any party of its obligations
under this Agreement, other than any of Retailer's payment obligations
hereunder, is substantially prevented by reason of any act of God,
strike, lock-out, or other industrial or transportational disturbance,
fire, lack of materials, law, regulation or ordinance, war or war
conditions, or by reason of any other matter beyond such party's
reasonable control, then such performance shall be excused and this
Agreement shall be deemed suspended during the continuation of such
prevention, and the term shall be extended for a period equal to the
time of such suspension.
l. THIRD PARTIES. None of the provisions of this Agreement is intended
for the benefit of or shall be enforceable by any third parties,
including creditors of Retailer or WHV.
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<PAGE>
In WITNESS WHEREOF, this Agreement was executed by the parties on the date first
written above.
RETAILER WARNER HOME VIDEO, a division of
Time Warner Entertainment Company,
L.P. ("WHV")
By: /s/ illegible By: /s/ illegible
------------------------------ ------------------------------
Its: Its:
----------------------------- -----------------------------
Retailer:
------------------------
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<PAGE>
Exhibit 10.4
"Pages where confidential treatment has been requested are stamped 'Confidential
Treatment Requested and the Redacted Material has been separately filed with the
Commission', and the confidential section has been marked in the margin with a
star (*)."
As of March 10, 2000
KOZMO.COM
80 Broad Street, 18th Floor
New York, NY 10004
Attn: _____________
This letter agreement ("AGREEMENT") sets forth the terms of the agreement
between Kozmo.com ("KOZMO") and Columbia TriStar Home Video, Inc. ("CTHV") in
connection with (i) Kozmo's ordering of certain VHS "Videocassettes" and "DVDs"
(as such terms are defined below) for, and Kozmo's and CTHV's participation in a
"Revenue Sharing Program" (as defined below) for the "Rental Pictures" (as
defined below) covered by this Agreement; and (ii) Kozmo's issuing to CTHV
certain equity in Kozmo.
A. CONDITIONS PRECEDENT: All of CTHV's obligations under this Agreement are
subject to the satisfaction of the following conditions precedent
("CONDITIONS PRECEDENT"): (i) Kozmo's willingness and operational capability
to electronically report to CTHV (utilizing an electronic reporting system
approved by CTHV [CTHV hereby preapproves SuperComm]) point-of-sale
information with respect to Rental Pictures on an ongoing basis; and (ii)
CTHV's receipt of this Agreement executed by Kozmo.
1. TERM: The term of this Agreement shall be for a period of five years
commencing on May 16, 2000 (or such earlier date as
elected by Kozmo upon 21 days prior written notice to CTHV
or up to 21 days later upon such written notice) and ending
on the date that is the earlier of (a) 5 years thereafter or (b) May 15,
2000 (the "Term") unless earlier terminated pursuant to the terms hereof.
Each year of the Term shall be hereinafter referred to as a "CONTRACT
YEAR," with the first year being referred to as the "FIRST CONTRACT YEAR,"
etc.
2. TERRITORY: The territory of the rights granted hereunder shall be and be
limited to the United States and its territories and possessions (the
"TERRITORY"). In the event that Kozmo services customers in Canada during
the Term, the Territory will be expanded to include Canada; provided, that
all monetary components of the Agreement will be adjusted based on CTHV's
product prices in Canada and applicable currency conversion rates.
3. RENTAL PICTURES:
a. DEFINITION: For purposes of this Agreement, "Rental Picture" shall be
defined as each and every feature motion picture for which CTHV owns or
controls home entertainment distribution rights in the Territory
(specifically including "Direct to Video Pictures," as defined below) which
CTHV intends to release to consumers in the Territory during the Term on a
"rental basis," as
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opposed to a "sell-through basis," on (i) "Videocassette" (as defined
below) format and which has an intended initial "Street Date" (as defined
below) during the Term and/or (ii) "DVD" (as defined below) and which has
an intended initial Street Date during the Term that is either (A) the
first date that such motion picture is available for rental to the general
public for home entertainment purposes or (B) within 6 months of the Street
Date for Videocassettes of such motion picture. For purposes of this
Agreement, "DIRECT TO VIDEO PICTURES" shall mean each and every feature
motion picture that is initially made available for viewing in the
Territory to consumers in Videocassette and/or DVD format or premium cable
premiere format and which otherwise fits within the description of a Rental
Picture. A "VIDEOCASSETTE" shall mean a prerecorded VHS videocassette
format. A "DVD" shall mean a digital versatile disc (or otherwise known as
"digital video disc") format and shall include all sub-formats thereof.
Videocassettes and DVDs shall be hereinafter collectively referred to as
"RENTAL PRODUCT."
4. ORDER REQUIREMENTS. Kozmo agrees to order each and every Rental Picture
from CTHV. In connection with each such order, the following shall apply:
a. VIDEOCASSETTE AND DVD ORDER REQUIREMENTS: Kozmo agrees to order and CTHV
agrees to provide (provided Kozmo is not in breach hereunder), a specified
number of Videocassettes and DVDs for such Rental Picture determined as
follows:
* i. [***], shall order such quantity of Videocassettes and DVDs as
mutually determined by CTHV and Kozmo on a Rental Picture-by-Rental Picture
basis.
* ii. [***] Kozmo agrees to order such quantity (which quantity will be
sufficient to cover consumer demand for Rental Pictures in each geographic
region where Kozmo operates its business) of Videocassettes and DVDs as
shall be set forth in a matrix to be mutually determined by CTHV and Kozmo.
Such matrix will be based on a regression model correlating factors such as
domestic box office performance and "star" presence against Kozmo's
historical purchase patterns and/or revenue performance. Such matrix will
also take into consideration factors such as the competition in the
marketplace, Kozmo's expansion rates and the growth (or contraction) of the
home entertainment business.
* iii. [***] Kozmo agrees to order such quantity of Videocassettes and
DVDs as shall be set forth in a subsequent matrix created in the manner set
forth in subparagraph 4.a.ii. above.
* b. COPY DEPTH: The minimum quantity of Videocassettes or DVDs, as
applicable, required to be ordered by Kozmo hereunder (whether determined
pursuant to mutual agreement or pursuant to a matrix as set forth above) on
a Rental Picture-by-Rental Picture basis shall be hereinafter referred to
as the "BASE BUY COPIES." [***]
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* Confidential Treatment Requested and the Redacted Material has been separately
filed with the Commission.
2
<PAGE>
*5. VIDEOCASSETTES OF CATALOG/"DIRECT-TO-SELL-THROUGH PICTURES": CTHV agrees to
offer to Kozmo, [***] in quantities as mutually determined by CTHV and
Kozmo on a title-by-title basis, for rental and/or sale (as new or
previously viewed product) to Kozmo's customers, Videocassettes of all: (i)
"Direct-To-Sell-Through Pictures" and (ii) catalog motion pictures for
which CTHV owns or controls home video entertainment distribution rights in
the Territory ("Catalog Pictures"). "DIRECT-TO-SELL-THROUGH PICTURES" shall
mean each and every theatrical motion picture which has an initial intended
Street Date during the Term and for which CTHV owns or controls home
entertainment distribution rights in the Territory, provided such picture,
when initially released during the Term on Videocassette is priced and
distributed by CTHV at a "sell-through price" (as opposed to a "rental
price"). Any such orders will be separately presented to CTHV and will not
be included in the purchase order(s) referenced in Paragraph 4. above.
*6. DVD NEW RELEASE AND CATALOG PICTURES: [***] in quantities as mutually
determined by CTHV and Kozmo on a title-by-title basis, solely for sale
to Kozmo's customers as new product (I.E., not previously viewed), DVDs
of all: (i) "new release" motion pictures for which CTHV owns or
controls home entertainment distribution rights in the Territory and
(ii) catalog motion pictures for which CTHV owns or controls home
entertainment DVD distribution rights in the Territory. Any such orders
will be separately presented to CTHV and will not be included in the
purchase order(s) referenced in Paragraph 4. above.
7. STREET DATE/ORDERING OF COPIES/DISTRIBUTION OF COPIES: With respect to each
of the Rental Pictures, CTHV shall specify the date for the first Rental
Product rental of such Rental Picture to the general public for home
entertainment purposes (the "STREET DATE"). Kozmo shall place its orders
with CTHV for each Rental Picture, in accordance with the Paragraph 4.a.
above ("INITIAL ORDER"), not later than 21 days prior to the Street Date
for such Rental Picture. Kozmo acknowledges and agrees that if Kozmo does
not place its order within such 21 day period, CTHV can not guarantee
timely delivery of such Rental Product. Kozmo shall cause all of the Rental
Product comprising the Initial Order to be made available for rental to its
customers; provided, however, CTHV acknowledges that Kozmo may, from time
to time, place orders for geographical locations in which Kozmo's service
is not available to Kozmo's customers immediately upon the Street Date. In
such event, Kozmo will make the Rental Product available to its customers
in such geographical location as soon as possible.
8. "REVENUE SHARING PROGRAM": Each and every Rental Picture hereunder shall be
ordered by Kozmo and shall be provided by CTHV pursuant to a "REVENUE
SHARING PROGRAM". The consideration payable by Kozmo for the right to
participate in the Revenue Sharing Program with respect to any particular
Rental Picture shall consist, in whole or in part, of a percentage of the
"Rental Revenues" (as defined below) earned by Kozmo from the rental of the
Rental Product of such Rental Picture.
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* Confidential Treatment Requested and the Redacted Material has been separately
filed with the Commission.
3
<PAGE>
9. "REVENUE SHARING PERIOD":
* a. The "VIDEOCASSETTE REVENUE SHARING PERIOD" for each Rental Picture
[***]. The Revenue Sharing Period for each applicable Rental Picture
shall commence on the Street Date for the applicable Rental Picture.
Subject to Paragraph 11 below, Kozmo shall ensure that all
Videocassettes of the Rental Pictures remain available for rental during
the entire Videocassette Revenue Sharing Period.
* b. The "DVD REVENUE SHARING PERIOD" for each Rental Picture [***]. The
Revenue Sharing Period for each applicable Rental Picture shall commence
on the Street Date for the applicable Rental Picture. Subject to
Paragraph 11 below, Kozmo shall ensure that all DVDs of the Rental
Pictures remain available for rental during the entire DVD Revenue
Sharing Period.
10. PROGRAM PRICE: In consideration for the rights granted hereunder, for each
Videocassette and/or DVD of a Rental Picture ordered by Kozmo, Kozmo shall
pay CTHV the applicable "Program Price" as set forth below.
a. VIDEOCASSETTE: For each Videocassette ordered by Kozmo, Kozmo shall pay
a "Video Program Price" as follows:
* i. "VIDEOCASSETTE UPFRONT PRICE": [***] ordered by Kozmo
("VIDEOCASSETTE UPFRONT PRICE"); plus
* ii. "VIDEOCASSETTE REVENUE PERCENTAGE PAYMENT": A share of Rental
Revenue derived from the rental of Videocassettes ("VIDEOCASSETTE REVENUE
PERCENTAGE PAYMENT"), determined as follows: [***]
* iii. "VIDEOCASSETTE END-OF-PERIOD PAYMENT": A payment ("VIDEOCASSETTE
END-OF-PERIOD PAYMENT") [***]
The Videocassette Upfront Price, the Videocassette Revenue Percentage
Payment and the Videocassette End-of-Period Payment shall be hereinafter
referred to as the "Videocassette Program Price."
b. DVD: For each DVD ordered by Kozmo, Kozmo shall pay a "DVD Program
Price" as follows:
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* Confidential Treatment Requested and the Redacted Material has been separately
filed with the Commission.
4
<PAGE>
* i. "DVD UPFRONT PRICE": [***] Kozmo ("DVD UPFRONT PRICE"); plus
* ii. DVD REVENUE PERCENTAGE PAYMENT: A share of Rental Revenue derived
from the rental of DVDs ("DVD REVENUE PERCENTAGE PAYMENT") determined as
follows: [***]
The DVD Upfront Price and the DVD Revenue Percentage Payment shall be
hereinafter referred to as the "DVD Program Price," and, collectively with
the Videocassette Program Price, the "Program Price."
c. DEFINITIONS.
i. A "RENTAL TRANSACTION" shall mean each and every time a
Videocassette or DVD, as applicable, is rented to a customer. Kozmo shall
independently determine and charge its customers whatever Rental
Transaction price it determines is in its own best business interests and
without agreement with CTHV. CTHV does not suggest any particular Rental
Transaction price.
* ii. "RENTAL REVENUES" shall mean the aggregate of all revenues
generated [***] in connection with Rental Transactions occurring during the
Revenue Sharing Period, including any collected extended viewing fees and
any amounts charged to customer credit cards [***], excluding sales taxes
and any other government levied transaction fees.
Kozmo shall be solely obligated to pay all taxes, fees or governmental
charges required to be paid by Kozmo in connection with Kozmo's activities
undertaken pursuant to this Agreement. Kozmo shall pay all such taxes
within the applicable time periods.
11. DESTRUCTION/RETURN/"SELL-OFF" OF RENTAL PRODUCT:
* a. VIDEOCASSETTES. Kozmo agrees not to sell any of the Videocassettes of
the Rental Pictures [***] without the prior consent of CTHV. During the
remainder of the applicable Videocassette Revenue Sharing Period, Kozmo
may make such percentage of the "Left on Shelf" Videocassettes of the
applicable Rental Picture available for sale to consumers as may be
mutually determined by CTHV and Kozmo. For purposes of this Agreement,
"Left on Shelf" Videocassettes shall be defined as the least number of
Videocassettes "left on the shelf" at a location to be mutually
determined by CTHV and Kozmo on the close of business on a day during
applicable Revenue Sharing Period as mutually determined by Kozmo and
CTHV. CTHV shall not be entitled to share in the revenues collected from
the sales of Videocassettes in accordance with the terms hereof. Kozmo
may sell (in accordance with the terms hereof) Videocassettes to any
individual end-user consumer via direct mail, or Kozmo's direct Internet
site. Kozmo may not sell such Videocassettes to any third-party vendors,
including brokers, liquidators or other wholesale distributors.
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* Confidential Treatment Requested and the Redacted Material has been separately
filed with the Commission.
5
<PAGE>
* b. DVDS. At such time as Kozmo orders DVDs of a particular Rental Picture
pursuant to the terms hereof, CTHV shall elect one of the following: (i) at
the end of the applicable DVD Revenue Sharing Period for such Rental
Picture, such DVDs shall be destroyed by Kozmo at CTHV's cost and expense
(and in such a manner as CTHV may so direct); or (ii) at the end of the
applicable DVD Revenue Sharing Period for such Rental Picture, such DVDs
shall be returned to CTHV at CTHV's cost and expense (and in such a manner
as CTHV may so direct). [***]
12. BASE BUY ADVANCE.
a. VIDEOCASSETTES. All Videocassette orders made by Kozmo pursuant to this
Agreement shall be subject to the following:
* i. [***]
* (1) [***]
* (2) [***]
* ii. [***] Prior to the expiration [***] CTHV and Kozmo shall
negotiate in good faith to mutually determine Videocassette Base Buy
Advances for the Fourth and Fifth Contract Years. In the event that CTHV
and Kozmo are unable to reach an agreement regarding such Videocassette
Base Buy Advances, CTHV may elect, in its sole discretion, to obligate
Kozmo to continue to perform under the terms and conditions of the
Agreement (including, without limitation, the Videocassette Base Buy
Advances set forth in subparagraphs 12.a.i.(1) and 12.a.i.(2));
provided, however, if CTHV elects to continue to obligate Kozmo to
continue to perform under the terms and conditions of the Agreement
(including, without limitation, the Videocassette Base Buy Advances set
forth in subparagraphs 12.a.i.(1) and 12.a.i.(2)), Kozmo may thereafter
elect [***] to terminate the Agreement. Any termination of the Agreement
shall be deemed a termination "without cause." Any and all Rental
Pictures ordered by Kozmo as of the date of such termination shall
continue to be governed by the terms and conditions of this Agreement.
The Videocassette Revenue Percentage Payment and the Videocassette
End-of-Period Payment shall be applicable against and credited to the
Videocassette Base Buy Advance.
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* Confidential Treatment Requested and the Redacted Material has been separately
filed with the Commission.
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b. DVDS. All DVD orders made by Kozmo pursuant to this Agreement shall be
subject to the following:
* i. [***]
* ii. [***] Prior to the expiration of [***] CTHV and Kozmo shall
negotiate in good faith to mutually determine Base Buy Advances for the
Fourth and Fifth Contract Years. In the event that CTHV and Kozmo are
unable to reach an agreement regarding such Base Buy Advances, CTHV may
elect, in its sole discretion, to obligate Kozmo to continue performing
under the terms and conditions of the Agreement; provided, however, that
the DVD Base Buy Advance for Rental Pictures ordered by Kozmo after such
[***] however, if CTHV elects to continue to obligate Kozmo to continue
to perform under the terms and conditions of the Agreement (including,
without limitation, the Base Buy Advances set forth in subparagraphs
12.b.i.(1) and 12.b.i.(2)), Kozmo may thereafter elect [***] to
terminate the Agreement. Any termination of the Agreement shall be
deemed a termination "without cause." Any and all Rental Pictures
ordered by Kozmo as of the date of such termination shall continue to be
governed by the terms and conditions of this Agreement.
The DVD Upfront Price and the DVD Revenue Percentage Payment shall be
applicable against and credited to the DVD Base Buy Advance.
13. DELIVERY/SHIPPING: CTHV will cause a third party duplicator/distributor to
undertake direct distribution of all Videocassettes and DVDs ordered by
Kozmo hereunder to no more than 2 distribution centers (which shall be
designated in writing by Kozmo and which may only be changed upon 60 days
prior written notice to CTHV). Kozmo shall be solely responsible for making
all Videocassettes and DVDs "rental ready." CTHV will use reasonable, good
faith efforts to deliver all Videocassettes and DVDs ordered by Kozmo
hereunder to Kozmo's distribution centers 7 days prior to the applicable
Street Date(s) for such Videocassettes and/or DVDs; provided, however, if
Kozmo desires to have Videocassettes and/or DVDs delivered to its
distribution centers 10 days prior to the applicable Street Date(s), then
Kozmo shall place its Initial Order not later than 26 days prior to the
applicable Street Date for Videocassettes and 33 days prior to the
applicable Street Date for DVDs.
14. PAYMENT: Kozmo shall pay: (i) the Videocassette Upfront Price and the DVD
Upfront Price within 30 days following the delivery of such Videocassettes
and/or DVDs (as applicable) to Kozmo; (ii) the Videocassette Revenue
Percentage Payment and the DVD Revenue Percentage Payment within 30 days
following the end of the relevant month in which Rental Revenue for the
applicable Rental Picture is received by Kozmo; (iii) Videocassette
End-of-Period Payment within 30 days following the expiration of the
applicable Revenue Sharing Period; and (iv) the
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* Confidential Treatment Requested and the Redacted Material has been separately
filed with the Commission.
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Videocassette Base Buy Advance and the DVD Base Buy Advance within 60 days
following the applicable Rental Picture's Street Date.
*15. MISSING VIDEOCASSETTES: In the event that Videocassettes and/or DVDs of a
Rental Picture are lost, stolen or otherwise unaccounted for (including,
without limitation, because of a sale) [***] applicable Rental Picture
("Missing Videocassette" or "Missing DVD," as applicable), Kozmo shall
so inform CTHV and shall pay CTHV the following:
* a. VIDEOCASSETTES. [***]
* b. DVD. [***]
The amounts set forth in subparagraphs 15.a. and b. shall be
hereinafter referred to as "MISSING RENTAL PRODUCT FEES." Missing Rental
Product Fees shall be payable to CTHV within 30 days following the end of
the relevant month during which the Revenue Sharing Period for the
applicable Rental Picture expires.
16. REPORTING OBLIGATIONS: Kozmo shall report electronically to CTHV, on a
weekly basis, complete and accurate daily information regarding the rental
of Videocassettes and DVDs of the Rental Pictures acquired under this
Agreement on a location-by-location and Rental Picture-by-Rental Picture
basis, in such format as may be specified by CTHV from time to time. At
CTHV's request, Kozmo shall provide CTHV with a copy of all tracking and
other information obtained by Kozmo, insofar as such information relates to
the Rental Pictures. Notwithstanding the foregoing, the parties hereby
agree to work together during the first 90 days of the Term to set up a
mutually acceptable reporting format; provided, however, that in the event
of any disagreement, CTHV's decision shall prevail.
17. MARKETING SUPPORT: In lieu of specific marketing support programs and as
consideration for services to be performed by Kozmo hereunder, CTHV agrees
that Kozmo shall accrue, on a per-Rental Picture basis, the following
marketing support funds (the "Marketing Support Funds"):
* 1. VIDEOCASSETTE. [***]
* 2. DVD. [***]
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* Confidential Treatment Requested and the Redacted Material has been separately
filed with the Commission.
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3. USE/PAYMENT OF MARKETING SUPPORT FUNDS. Kozmo shall use the Marketing
Support Funds solely for the purpose of advertising and promoting the
Rental Pictures. For clarification purposes, CTHV acknowledges and
agrees such advertising and promotion for the Rental Pictures may
include "tag lines" and other references to Kozmo. Upon CTHV's receipt
of a Marketing Support Fund invoice (and, if required, adequate
assurances that such monies were actually used to advertise and
promote the Rental Pictures), CTHV shall reimburse Kozmo for the
Marketing Support Funds within 60 days of CTHV's receipt of such
invoice (or adequate assurances, as applicable).
18. EQUITY: In partial consideration for the rights granted hereunder, Kozmo
agrees to issue to CTHV, or its designee, $10 million of Series F
Convertible Preferred Stock of Kozmo, which Series F Convertible Preferred
Stock shall be governed by and subject to the terms and conditions of (i)
the Second Amended and Restated Stockholders Agreement dated as of March
13, 2000 among Kozmo and Stockholders of Kozmo and (ii) the Second Amended
and Restated Registration Rights Agreement dated as of March 13, 2000 among
Kozmo and Stockholders of Kozmo. CTHV and Kozmo hereto agree to execute and
deliver all documentation reasonable in form and content to effect the
issuance and sale of the Series F Convertible Preferred Stock hereunder.
19. AUDIT:
* a. Kozmo grants CTHV the right, from time to time during the period
commencing on the date hereof and concluding on the date which is 12 months
after the expiration of the Term, upon not less than 7 business days prior
notice, but no more than twice in any calendar year, to examine and audit
Kozmo's records, invoices, books of account, computer or data base
information which relate to the rental and/or sale of Videocassettes of the
Rental Pictures and/or the Revenue Sharing Program for the then immediately
preceding 12 month period (including, without limitation, all appropriate
information provided to Kozmo by customers, but which shall not include
names, addresses and/or any individual identifying data of such customers).
All such audits shall be conducted by an independent, qualified auditor of
CTHV's choice. All such audits shall be at CTHV's sole cost and expense;
provided however, that in the event such audit shall disclose an error or
errors which in the aggregate [***] hereunder for the period being audited,
Kozmo shall promptly reimburse CTHV for all outside costs and expenses
actually incurred in connection with such audit. CTHV may make copies of
or make excerpts from only such part of Kozmo's records, invoices, books
of account, computer or data base information which relate to matters
and time frames subject to examination as herein provided. Such
examination shall be at such place where the relevant information is
maintained and during reasonable business hours and in such manner so as
not to interfere with Kozmo's normal business activities. Such
examination shall continue for such time as is reasonably necessary (but
in any event not more than 30 consecutive days, provided that CTHV has
been provided with the requisite access and information) for CTHV to
complete the examination. Such right to examine hereunder is limited to
the financial matters in connection with Rental Product of Rental
Pictures and/or the Revenue Sharing Program and/or
Direct-to-Sell-Through Pictures ordered and/or catalog and/or DVDs
purchased hereunder (collectively, "CTHV Product") and under no
circumstances shall CTHV have the right to examine records relating to
Kozmo's business generally
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* Confidential Treatment Requested and the Redacted Material has been separately
filed with the Commission.
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* or with respect to other projects not related to CTHV Product, for purposes
of comparison or otherwise; provided, however, that where any original
income or expense document with third parties relates to CTHV Product and
videocassettes of any third party's titles, CTHV shall have the right to
examine such document; provided, further that any information contained
therein which does not relate to CTHV Product shall be redacted therefrom.
Any amounts determined to be due and owing to CTHV following an audit shall
be paid to CTHV [***] (or the highest rate of interest permissible under
applicable law, if less) from the date the applicable sums should have been
paid to CTHV to the date of payment to CTHV.
b. Kozmo grants CTHV the right to conduct, or to engage an auditor to
conduct, upon 48 hours notice, on-location audits for purposes of
"spot-checking" transaction information relating to the CTHV Product;
provided, that CTHV shall not conduct such audits more than once per month
at any one warehouse or geographical location.
20. NOTICE: Any notice or communications provided for hereunder must be in
writing and delivered either personally, by telecopy, telex or by
registered mail, postage prepaid to the following addresses (or to such
other address as specified by like notice):
For Kozmo:
Kozmo.com
80 Broad Street, 18th Floor
New York, NY 10004
Attention: Yong Kang, President and Chief Administrative Officer
Gerry Burdo, Chief Financial Officer
Cindy Holland, Vice President, Business Development
Facsimile: (212) 797-1400
For CTHV:
Columbia TriStar Home Video, Inc.
10202 West Washington Boulevard, 8th Floor
Culver City, CA 90232
Attention: Robin Russell, Executive Vice President
Facsimile: (310) 244-1289
21. REPRESENTATIONS AND WARRANTIES:
a. CTHV warrants and represents that it is a corporation duly organized and
validly existing in good standing under the laws of the state of Delaware
and has the full right, power, legal capacity and authority to enter into
and carry out the terms of this Agreement.
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* Confidential Treatment Requested and the Redacted Material has been separately
filed with the Commission.
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b. Kozmo warrants and represents that it is a corporation duly organized
and validly existing in good standing under the laws of the state of
Delaware and has the full right, power, legal capacity and authority to
enter into and carry out the terms of this Agreement.
22. INDEMNIFICATION:
a. Kozmo agrees to indemnify and hold CTHV, its parent, subsidiary and
affiliated companies and their respective officers, agents, directors and
employees, harmless from any and all claims, damages, liabilities, costs
and expenses (including reasonable attorneys fees) arising out of the
breach by Kozmo of any warranty, representation or other term or provision
of this Agreement. CTHV shall promptly notify Kozmo in writing of any third
party claim or litigation to which this indemnification applies, and Kozmo
shall assume the defense of any such claim or litigation (and CTHV shall
have the right to engage separate counsel of its choice and participate in
the defense, negotiation and settlement of such action or proceeding, but
shall bear the fees and expenses of such separate counsel retained by CTHV
and CTHV shall cooperate with Kozmo in the defense of such claim at no cost
or charge to Kozmo, other than for performing such acts as Kozmo shall
request). If, for any reason, Kozmo shall fail to appoint counsel on a
timely basis or otherwise fails timely to confirm its assumption of the
defense of any applicable claim, CTHV may engage its own counsel and the
reasonable costs and expenses made in connection therewith shall be paid by
Kozmo. Kozmo shall have the right to approve or disapprove the settlement
or disposition of any such claim or litigation proposed by CTHV, which
right shall expire 20 business days following Kozmo's receipt of written
notice with respect thereto. Kozmo shall not have the right to enter into
any settlement or compromise unless, in connection therewith, it shall
obtain from the claimants a full release of all related claims against
CTHV.
b. CTHV shall indemnify and hold Kozmo, its subsidiary and affiliated
companies and their respective officers, agents, directors and employees,
harmless from any and all claims, damages, liabilities, costs and expenses
(including reasonable attorneys fees) arising out of the breach by CTHV of
any warranty, representation or other term or provision of this Agreement.
Kozmo shall promptly notify CTHV in writing of any third party claim or
litigation to which this indemnification applies, and CTHV shall assume the
defense of any such claim or litigation (and Kozmo shall have the right to
engage separate counsel of its choice and participate in the defense,
negotiation and settlement of such action or proceeding but shall bear the
fees and expenses of such separate counsel retained by Kozmo and Kozmo
shall cooperate with CTHV in the defense of such claim at no cost or charge
to CTHV, other than for performing such acts as CTHV shall request). If,
for any reason, CTHV shall fail to appoint counsel on a timely basis or
otherwise fails timely to confirm its assumption of the defense of any
applicable claim, Kozmo may engage its own counsel and the reasonable costs
and expenses made in connection therewith shall be paid by CTHV. CTHV shall
have the right to approve or disapprove the settlement or disposition of
any such claim or litigation proposed by Kozmo, which right shall expire 20
business days following CTHV's receipt of written notice with respect
thereto. CTHV shall not have the right to enter into any settlement or
compromise unless, in connection therewith, it shall obtain from the
claimants a full release of all related claims against Kozmo.
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23. CONFIDENTIALITY: Other than as may be required (i) by applicable law,
governmental order or regulation or securities laws or by order or decree
of any court of competent jurisdiction, (ii) as part of its normal
reporting requirements or review procedures to its parent company,
auditors, attorneys or other advisors, (iii) in connection with a possible
sale, merger or other consolidation transaction involving it or its parent
company or (iv) in the case of CTHV, as may be disclosed to third party
"profit" participants in connection with the Rental Pictures: neither party
hereto shall divulge or disclose to any third party any of the material
terms and conditions of this Agreement (including, without limitation, the
existence of this Agreement or any reference to Sony Pictures
Entertainment, CTHV, or any affiliated entity), without the prior written
consent of the other party hereto. In the event that disclosure is required
pursuant to clause (i) above, the party so making disclosure shall so
notify the other party (if possible, prior to making such disclosure and in
any event as promptly as practical) and shall seek confidential treatment
of such information. The initial press release regarding the parties
entering into this Agreement (if any) shall require the mutual written
approval of both parties. Notwithstanding anything to the contrary
contained herein, CTHV hereby acknowledges and agrees that Kozmo may be
required to share financial and other reporting information with respect to
the Rental Pictures with the owner/operator of Kozmo's computer program
system and certain data information services in order to allow such
owner/operator and/or such data information service to monitor, update and
approve their program and/or service. In the event Kozmo is required to
share such information, Kozmo shall so inform CTHV and shall, at CTHV's
request, obtain a confidentiality agreement, in a form approved by CTHV,
signed on behalf of such owner/operator and/or data information service.
Without limiting the generality of its obligations under this Paragraph,
Kozmo agrees that it will not share with any third party any financial or
other reporting information with respect to the Rental Pictures which is
kept, maintained or compiled as part of the Revenue Sharing Program, except
as set forth in this Paragraph 23.
24. ASSIGNMENT/CHANGE OF CONTROL:
a. ASSIGNMENT: CTHV shall be free to assign this Agreement and its rights
hereunder, and to delegate its duties at any time and from time to time, in
whole or in part, to any person or entity; provided, however, that CTHV
shall be released from its obligations under this Agreement only if such
assignment is (i) to a person or entity into which CTHV merges or is
consolidated or (ii) to a person or entity which acquires all or
substantially all of CTHV's business and assets or (iii) to a person or
entity which is controlled by, under common control with, or controls CTHV
or (iv) with Kozmo's prior written consent. Kozmo shall not assign this
Agreement nor its rights hereunder, nor delegate its duties under this
Agreement in whole or in part, without CTHV's prior written consent (not to
be unreasonably withheld); provided, however, that an assignment pursuant
to or resulting from a sale, exchange or transfer of all or substantially
all of Kozmo's business and assets to any person or persons or any other
form of business combination, including, without limitation, a
reorganization, merger, consolidation or a sale to the public, shall not
require such consent so long as such assignment is not to a Competing Major
Studio and such party is a financially responsible party capable of
performing all of Kozmo's obligations under this Agreement and which such
party assumes in writing all of Kozmo's rights and obligations hereunder.
In the event that Kozmo or CTHV assigns its rights or interest in or to
this Agreement pursuant to the terms hereof, in whole or in part, the
assigning party will nevertheless continue to remain fully and primarily
responsible and
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liable to the other party for prompt, full, complete and faithful
performance of all terms and conditions of this Agreement. For purposes of
this Agreement, a "Competing Major Studio" shall mean Universal Studios,
Inc., Warner Bros., a division of Time Warner Entertainment Company, L.P.,
MGM, Twentieth Century Fox Film Corporation, The Walt Disney Company, or
Paramount Pictures Corporation, Inc., or any division of any of the
foregoing, or any entity which controls, is controlled by, or is under
common control with any of the foregoing.
b. CHANGE OF CONTROL: For purposes of Paragraph 24.a. hereof, a
"change-of-control" of Kozmo shall be deemed to be an assignment and shall
be subject to the provisions of Paragraph 24.a. For purposes of this
Agreement, a "change-of-control" of Kozmo shall be deemed to have occurred,
if, following the applicable transaction: a Competing Major Studio acquires
25% or more of the equity interests in Kozmo.
25. REMEDIES:
a. In addition to any and all other rights and remedies available to it at
law or in equity, a non-defaulting party shall have the right to terminate
this Agreement for any material breach by a defaulting party (a "MATERIAL
BREACH") and/or in the event of bankruptcy, insolvency, reorganization,
assignment for the benefit of creditors or any such similar proceeding on
the part of either party, or the appointment of a receiver (or similar
proceeding) for any of such party's property (each, an "INSOLVENCY EVENT").
Notwithstanding the foregoing, in the event of a Material Breach, the
non-defaulting party shall notify the defaulting party of such Material
Breach in writing and the defaulting party shall have 30 days to cure such
Material Breach; provided, that in the event of Kozmo's failure to timely
report to CTHV pursuant to Paragraph 16 hereof or to pay CTHV sums due
under this Agreement, Kozmo shall have 14 days to cure such Material
Breach. The non-defaulting party shall have the right to terminate this
Agreement for any such Material Breach that shall remain uncured for 30
(or, if applicable, 14) days following such notice and/or for any
Insolvency Event; provided, that in the event that such Material Breach
(other than nonpayment) is of a nature that reasonably requires more than
30 (or, if applicable, 14) days to cure, and the defaulting party is
diligently in the process of such cure, the non-defaulting party will not
terminate this Agreement unless the cure cannot be accomplished, or
otherwise is not accomplished, in 60 days.
* b. [***]
26. GOVERNING LAW/ALTERNATIVE DISPUTE RESOLUTION:
a. GOVERNING LAW. THE INTERNAL SUBSTANTIVE LAWS (AS DISTINGUISHED FROM THE
CHOICE OF LAW RULES) OF THE STATE OF CALIFORNIA AND THE UNITED STATES OF
AMERICA APPLICABLE TO CONTRACTS MADE AND PERFORMED ENTIRELY IN CALIFORNIA
SHALL GOVERN (i) THE VALIDITY AND
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* Confidential Treatment Requested and the Redacted Material has been separately
filed with the Commission.
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INTERPRETATION OF THIS AGREEMENT, (ii) THE PERFORMANCE BY THE PARTIES OF
THEIR RESPECTIVE OBLIGATIONS HEREUNDER, AND (iii) ALL OTHER CAUSES OF
ACTION (WHETHER SOUNDING IN CONTRACT OR IN TORT) ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TERMINATION OF THIS AGREEMENT.
b. LEGAL PROCEEDINGS. The parties hereto agree that any dispute or
controversy relating to any of the matters referred to in clauses (i), (ii)
and/or (iii) of Paragraph 26.a., above, shall be decided by a Rent-A-Judge,
mutually selected by the parties (or, if they cannot agree, by the
Presiding Judge of the Los Angeles Superior Court) appointed in accordance
with California Code of Civil Procedure Section 638, sitting without a
jury, in Los Angeles County, California, and the parties hereby submit to
the jurisdiction of such court. All such proceedings shall be closed to the
public and confidential and all records relating thereto shall be
permanently sealed.
27. MISCELLANEOUS:
a. Nothing contained herein shall be deemed to create a relationship of
partnership, joint venture, agency, fiduciary or employment between the
parties.
b. This Agreement sets forth the entire understanding of the parties
regarding the subject matter hereof and supersedes all prior oral or
written agreements between them.
c. No waiver of any default or breach of this Agreement by either party
shall be deemed a continuing waiver or a waiver of any other breach or
default, no matter how similar.
d. This Agreement may not be changed, modified, amended or supplemented,
except in a writing signed by both parties.
e. Paragraph headings are inserted herein for convenience only and do not
constitute a part of this Agreement.
f. Kozmo and CTHV shall execute, acknowledge and deliver any and all
further documents that are necessary, expedient or proper to implement,
administer and effectuate the purpose and intent of this Agreement.
g. If any term or provision of this Agreement shall be found to be void or
contrary to law, such term or provision shall, but only to the extent
necessary to bring this Agreement within the requirements of law, be deemed
to be severable from the other terms and provisions of this Agreement, and
the remainder of this Agreement shall be given effect as if the parties had
not included the severed term herein.
//
//
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Please confirm your agreement with the foregoing by signing below, and
return both copies to the undersigned, after which we will return a fully
executed copy to you.
Very truly yours,
COLUMBIA TRISTAR HOME VIDEO, INC.
By: /s/ Illegible
--------------------------------------------
Title: President
-----------------------------------------
AGREED TO AND ACCEPTED THIS 10th DAY OF MARCH, 2000:
KOZMO.COM
By: /s/ Illegible
-----------------------------------
Title: President
--------------------------------
15
