Distribution Agreement

EXHIBIT 10.2


DISTRIBUTION AGREEMENT


AGREEMENT made as of this 28th day of July, 1999, by and between SHERIDAN SQUARE ENTERTAINMENT, L.L.C. D/B/A ARTEMIS RECORDS, of 130 Fifth Avenue, 7th Floor, New York, New York 10011 ("Distributor") and Antra Music Group, Inc., d/b/a ANTRA RECORDS, of 1515 Locust Street, 4th Floor, Philadelphia, Pennsylvania 19102 ("you").


1. TERM.


1.01. The term of this Agreement (the "Term"), with respect to an album by Korupt and an album by either Rosco or by Korupt and Daz (each an "Applicable Album" and, collectively, the "Applicable Albums"), all master recordings contained on the Applicable Albums and all Records derived in their entirety from any Applicable Album (collectively, "Related Records") shall be a period of three (3) years commencing on the date hereof, and unless terminated or extended as provided herein, ending on July 27, 2002.


1.02. You shall have the right to release (or license to third parties) up to two (2) Master Recordings embodied on each of the Applicable Albums for inclusion in compilation albums and/or soundtrack albums, provided that such Master Recordings shall only be used by you or your licensee within nine (9) months after such Master Recording has commenced being commercially distributed hereunder.


1.03 As used herein, "Contract Year" shall mean the twelve month period commencing on the date of the initial commercial release of an Applicable Album and ending on the same day and month of the following year.


2. APPOINTMENT.


2.01. (a) You hereby appoint Distributor as your sole and exclusive distributor of the Applicable Albums and Related Records through all channels and methods of distribution now or hereafter known, including, but not limited to, Normal Retail Channels, throughout the Territory, during the Term, and grant Distributor the exclusive right and license to distribute and sell the Applicable Albums and Related Records through such channels and methods in the Territory during the Term.


(b) During the Term, neither you nor any Affiliate shall, directly or indirectly, distribute the Applicable Albums or Related Records in the Territory, or otherwise license, authorize or permit any other Person other than Distributor to so distribute the Applicable Albums or Related Records.


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2.02. Notwithstanding anything to the contrary contained herein, Distributor shall not be obligated to distribute (or, if distribution has already commenced, may cease to distribute) any Applicable Album or Related Record embodying any Recording or other material which, in Distributor's good faith judgment: (i) infringes upon the rights of any other Person or is in contravention of law or advocates illegal activity; (ii) constitutes a breach by you of any warranty, representation or covenant contained herein; (iii) denigrates a given race, religion, ethnic background or sexual orientation in a manner not subject to excuse or explanation by virture of the fact that the performer shares the same race, religion, ethnic background or sexual orientation, or (iv) is rejected for distribution by RED Distribution, Inc. (`RED") based on any of the foregoing criteria. If Distributor so elects not to distribute (or to cease to distribute) a Record, it shall promptly notify you and you shall have the right to distribute, or cause a third party to distribute, such Record; provided, however, with respect to any Record which Distributor elects not to distribute pursuant to clauses (i) or (ii) above, prior to distributing or authorizing a third party to distribute such Record, you shall first make a good faith effort to remove or modify the Recording or other material in question in order to satisfy Distributor's objections, and you shall re-submit such Record (as modified) to Distributor hereunder. Distributor's distribution of a Record shall not constitute approval of or a waiver with respect to the Recordings or other material embodied therein.


2.03. During the Term, Distributor shall have the right to publicly perform, and to authorize the public performance of, the Recordings and Records hereunder, for the purpose of promoting and marketing such Recordings and Records.


3. DISTRIBUTOR'S SERVICES.


3.01. During the Term, Distributor will solicit and fulfill orders and distribute Records on your behalf through Normal Retail Channels in the Territory. Without limiting the generality of the foregoing, Distributor's services shall include the following: billing and collecting from Distributor's customers, warehousing of your inventory of Records, acceptance and processing of returns of Records distributed hereunder and such other customary distribution services, if any, as Distributor provides for its other distributed labels.


3.02. Distributor will bear the credit risk for its customers, it being agreed that the decision as to whether or not to extend credit to any customer (and the amount of credit so extended) shall be determined by Distributor in its sole discretion.


3.03. At your request, Distributor will administer coop advertising for your Records hereunder up to an amount mutually approved by you and Distributor. You hereby request and irrevocably authorize Distributor to pay third parties on your behalf up to four (4%) percent of Gross Sales hereunder on coop advertising for Records hereunder. You agree to pay Distributor for all costs incurred in connection with such coop advertising.


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3.04. (a) Distributor shall accept and store at its (or its designee's) warehouse(s) all Records ordered by Distributor for distribution hereunder. The risk of loss due to obsolescense for such Records shall be yours. Distributor shall not be responsible for inventory shrinkage of up to two (2%) percent of the number of Records received in any year of the Term (determined on an overall basis and not on a title-by-title basis). With respect to shrinkage in excess of that amount, Distributor's liability shall be limited to the replacement cost of such Records.


(b) Within twenty (20) days after Distributor's request, you shall, at your sole cost, remove from Distributor's (or its designee's) warehouses, or order the destruction of, any "surplus" Records (i.e., that amount of Records in excess of Distributor's then-current generally applicable retention policy). All Records so removed shall be defaced or otherwise marked by you, at your expense, in a manner subject to Distributor's reasonable approval in order to ensure that they are not returned to Distributor. If you do not timely so remove surplus Records, you shall be deemed to have ordered the destruction of such surplus, and Distributor may so destroy such Records, at your sole cost.


(c) During the Term, you may, at your sole cost and expense and no more than once in any twelve-month period, conduct your own physical inventory of Records in Distributor's (or its designee's) warehouse(s). Any such physical inventory shall be conducted on reasonable notice to Distributor and during Distributor's regular business hours.


3.05. During the Term, Distributor will accept and process returns of Records in accordance with its then-current policies and practices (which you acknowledge may include the scrapping of certain Records, such as "single" Records within twenty (20) days after giving you notice to remove such Records from Distributor's (or its designees) warehouses at your sole cost). Following the expiration or earlier termination of the Term, Distributor shall not be obligated to accept or process returns of Records distributed hereunder or otherwise. You shall at all times during and after the Term, remain solely financially responsible for all returns of Records distributed hereunder.


3.06. Distributor shall furnish you with monthly sales and inventory reports regarding your Records and such other periodic reports as Distributor generally makes available to its other distributed labels and to its own label(s).


3.07. Intentionally deleted


3.08. You shall at all times retain title to the Records delivered hereunder until sold. As between you and Distributor, all Recordings, artwork, trademarks (other than Distributor's trademarks) and other material embodied on or in the Records, including the copyrights therein, shall remain your property.


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3.09. Distributor shall have the right to cause some or all of its services hereunder to be performed on its behalf by one or more third parties (each, a "Subdistributor"). You hereby acknowledge that, as of the commencement of the Term, certain of Distributor's services (including, without limitation, fulfillment of orders, billing and collecting) are being performed on its behalf by RED Distribution, Inc.


4. YOUR OBLIGATIONS.


4.01. You solely shall be responsible for, and shall pay all costs in connection with, each of the following:


(a) The creation and production of all Recordings embodied in the Records and all artwork and other materials embodied in the packaging for all Records, and the acquisition of all rights in connection therewith.


(b) The securing, in writing, of all necessary licenses, consents and permissions required for the distribution of Records hereunder, including, without limitation, from recording artists, producers, other performers, music publishers, unions and guilds, and other Persons rendering services or granting rights in connection with the Recordings and the Records.


(c) The marketing, advertisement and promotion of the Records and the Recordings including, without limitation, the payment of independent promotion fees and costs related to so-called "street teams", the preparation of all materials used in connection with such activities, and special programs in connection with the Records hereunder.


(d) The payment of all property taxes relating to the Records, where applicable, and any sales, use, excise, VAT or similar taxes which may now be or hereafter become applicable to the services rendered by Distributor hereunder or to the transactions contemplated by this Agreement. If any such taxes are assessed to Distributor, then the amount thereof shall be added to the charges to be paid by you.


(e) The payment and accounting of all advances and royalties with respect to the Records hereunder.


(f) The production of any and all audiovisual recordings related to the Records.


4.02. You will prepare and submit in a timely manner, from time-to-time, material for inclusion in Distributor's sales publications.


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4.03. You shall, at your sole cost and expense, procure from a nationally recognized insurance carrier and maintain in full force and effect at all times during the Term a liability (errors and omissions) insurance policy having a limit of at least $1,000,000 per claim and $3,000,000 in the aggregate, covering claims arising in connection with Distributor's distribution of Records hereunder. Such policy shall cover claims, regardless of when raised, based on occurrences or claims made relating in any way to the Records distributed hereunder. You shall cause Distributor to be named as an additional insured under such policy. You shall deliver to Distributor upon execution of this Agreement evidence satisfactory to Distributor of such coverage in the form of a valid insurance certificate. Your failure to obtain or maintain such a policy shall constitute a material breach hereof.


4.04. If you are not a member of the Recording Industry Association of America ("RIAA") throughout the Term hereof and Distributor is required to pay dues to the RIAA (or Distributor is charged by another member for a share of such other member's dues) based on sales of the Records, then Distributor shall have the right to charge you with a proportionate share of Distributor's dues (or its share of such other member's dues).


5. SALE OF RECORDS.


5.01. (a) Subject to Distributor's reasonable approval, you shall determine the retail list price (or, if with respect to a particular configuration, Distributor does not maintain a retail list price, then the wholesale list price) category (the "List Price Category") for each Record from among the List Price Categories then being offered by Distributor to its customers. You may change the List Price Category for a particular Record on at least ninety (90) days notice to Distributor (which change shall be subject to Distributor's reasonable approval). With respect to Records for which Distributor does not have a standard List Price Category (such as a "box set"), you and Distributor shall mutually determine the List Price Category.


(b) Distributor and you shall mutually determine the selling price of Records to its customers, based upon the designated List Price Category, which selling price shall be consistent with the selling price for other records distributed by Distributor in the same List Price Category.


5.02. Distributor shall determine the terms of sale of Records to its customers, including, without limitation, cash discounts, discounts and free goods, credit and dating, returns policy and advertising allowances. Without limiting the generality of the foregoing, Distributor shall have the right to sell Records at such discounts as Distributor and you shall mutually determine. Distributor shall have the right to change its discount policies from time to time, but it shall advise you of any changes. In addition to any regular, "standard" discount programs, Distributor shall have the right, with your approval (such approval not to be unreasonably withheld), to offer non-standard discount programs of limited duration, but the dollar amount of discounts pursuant to such a discount program shall not be deducted in calculating "Net Sales" unless you have consented to such program.


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5.03. If you and Distributor agree to extend to Distributor's customers any "special dating" program (i.e., the granting of payment terms beyond Distributor's then-current terms), Distributor shall charge you for the cost thereof (which cost shall be equal to interest accrued on the aggregate Gross Sales subject to the special dating at the rate of one (1%) percent above the prime rate of interest as announced by Citibank, N.A. in New York City, for the period of time that Distributor's standard payment terms are extended [the "Interest Rate"]).


5.04. You and Distributor shall mutually determine the release date of each title hereunder.


5.05. (a) You shall have the right, by notice to Distributor, to delete Records from your catalog in accordance with Distributor's standard policies relating to deletions. Distributor shall cease manufacturing any Records which have been deleted. Any remaining inventory of Records that have been deleted may be scrapped or sold by you as "closeouts" or "cutouts" only, and all such Records shall be defaced at your expense in order to prevent their return to Distributor. All costs incurred in connection with such scrapping, defacing and/or sale shall be your sole responsibility. If you request and Distributor agrees, Distributor shall arrange for the sale of such "closeouts" or "cutouts" on your behalf, and Distributor shall charge you its standard fees and charges theref ...