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Product Distribution Agreement

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Sectors: Specialty Retail
Effective Date: January 01, 2000
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This Distribution Agreement ("Agreement") is made as of January 1, 2000 by and between Integrity Incorporated, 1000 Cody Road, Mobile, Alabama 36695 a Delaware Corporation ("INTEGRITY") and Word Entertainment (a division of Word Music Group, Inc.), 25 Music Square West, Nashville, Tennessee 37203 ("WORD").


RECITALS


WHEREAS, INTEGRITY is engaged in the business of acquiring and producing audio and video masters and manufacturing phonograph records, tapes, and printed musical products (including but not limited to audio cassettes, compact discs, accompaniment tracks, video cassettes, and other recorded and printed music products derived therefrom); and


WHEREAS, INTEGRITY desires WORD to distribute throughout the United States, Guam, Puerto Rico and A.F.E.S. and other military purchasing groups which serve military bases across the world, ("the Territory") through normal retail channels and wholesale outlets in the Christian bookstore market ("CBA Marketplace") and general/secular markets (e.g., record stores and mass merchandisers) ("General Marketplace") recorded product and musical print products related thereto manufactured by or for INTEGRITY.


NOW, THEREFORE, the parties hereto agree as follows;


1. GRANT OF RIGHTS. INTEGRITY hereby authorizes and appoints WORD to be
INTEGRITY's exclusive distributor to normal retail outlets in the CBA
Marketplace and General Marketplace (exclusive of those markets
retained by INTEGRITY pursuant to Paragraph 2 hereunder) during the
term hereof in the Territory of all audio and video recordings derived
from audio and video masters now or hereafter owned or controlled by
INTEGRITY (such masters hereinafter the "Masters," and the recordings
derived therefrom hereinafter "Records") and all choral and consumer
printed products (hereinafter "Print Products") whether or not on the
"Integrity Music" label (such Records and Print Products collectively
hereinafter referred to as the "Products.") A listing of all current
INTEGRITY labels is attached hereto as "Exhibit A". Such distribution
rights shall include the right to distribute to wholesalers which
distribute records and print products to such normal retail outlets in
the CBA Marketplace and General Marketplace. INTEGRITY may not sell,
license, or otherwise distribute Records or manufacturing overruns of
Records derived from the Products to any person, firm, association,
corporation, or entity other than WORD for sale through normal retail
channels in the CBA Marketplace and General Marketplace in the
Territory during the term of this Agreement.


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2. RIGHTS RESERVED BY INTEGRITY. Notwithstanding anything contained
herein to the contrary, WORD hereby acknowledges that INTEGRITY has
specifically reserved its right to distribute Products for sale in
remaining markets of any kind or nature not specifically granted to
WORD hereunder as well as all rights whatsoever outside the Territory,
including, but not limited to:


a. All mail order, television and radio promotion, record clubs,
budget and mid-price sales, "K-Tel"-type sales, and
non-phonograph record exploitation, such as films or
television;


b. Special markets, including but not limited to Christian Book
Distributors, Avon, Publisher's Clearing House, Books R Fun,
and any other direct to consumer catalog account;


c. All so-called international rights without limitation;


d. The right to sell Products directly to churches and
individuals, whether in the Territory or elsewhere throughout
the world;


e. All Internet, E-commerce, digital transmissions of any
nature, or by any technological means not specifically
granted to WORD hereunder;


f. General Market place sales for print products. If INTEGRITY
shall not have previously assigned such rights to any third
party, and INTEGRITY and WORD shall mutually desire for
INTEGRITY's Print Products to be distributed by WORD's
General Marketplace print distributor, WORD shall assume such
rights at a rate to be mutually negotiated in good faith.


g. All Choral Clubs rights. Each party shall maintain its own
Choral Clubs, and there shall be no right or responsibility
of either party to participate in the other's Choral Club,
except where the parties mutually agree. The parties
acknowledge that pursuant to WORD's current agreement with
PraiseGathering Publications, WORD currently handles the
subscription and fulfillment services for INTEGRITY's Choral
Club, however Word's right or obligation to deliver such
services is not a condition or term of this Agreement.


h. The right to sell Products directly to bookstore accounts
which primarily serve the Catholic Church market.


3. TERM. The term ("Term") of this Agreement shall commence on January 1,
2000 and shall continue for an initial period of four (4) years,
ending December 31, 2003. The initial twelve (12) months of the Term
and each consecutive twelve (12) month period thereafter


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is referred to herein as a "contract year." Execution of this
Agreement shall result in the early termination of the existing
agreement between the parties related to the subject matter hereof,
and dated April 1, 1996; provided that fees with respect to sales
occurring through December 31, 1999 shall be paid according to the
terms of the prior agreement.


4. INTEGRITY'S RESPONSIBILITIES. INTEGRITY shall be solely responsible
for, and shall pay all costs in connection with:


a. All activities and costs in connection with the Masters or
the Products, including without limitation all costs arising
out of the creation of, and/or the acquisition of INTEGRITY's
rights in, the Masters or the Products.


b. All activities and costs in connection with the manufacture
of finished Products, including without limitation, all
jackets, sleeves, inserts, engravings and other components of
the finished Records and Print Products, and delivery of
finished product to WORD's designated warehouse(s).


c. Obtaining all necessary mechanical, synchronization and print
licenses and paying all license fees; filing copyright
registration on all Masters or Products subject to copyright;
obtaining all consents, authorizations and clearance with
respect to the reproduction, use and commercial exploitation
of the Masters or the Products; and obtaining all consents,
authorizations and clearances with respect to the services,
names, and likenesses of any person whose performances and/or
services are embodied in any Products distributed hereunder.
INTEGRITY shall hold WORD harmless from its failure to take
such actions.


d. INTEGRITY will be solely responsible for and shall pay any
and all artists' royalties, producers' royalties, musicians,
copyright, publishers' and/or writers' mechanical and
synchronization royalties, and any and all other royalties or
similar payments as may be or become payable in connection
with the Masters, the Products, the Compositions, the
Materials, and/or earnings of WORD, which may be payable by
reason of the manufacture, sale, and distribution of the
Products in the Territory. INTEGRITY shall hold WORD harmless
from the obligation to pay such royalties.


e. Subject to the rights reserved by INTEGRITY hereunder,
INTEGRITY agrees that neither INTEGRITY nor any person, firm
or corporation acting for INTEGRITY or with INTEGRITY's
authorization or acquiescence (other than WORD) will
distribute the Products for sale through normal retail
channels in the CBA Marketplace and General Marketplace
throughout the Territory except as otherwise provided herein.


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5. INTEGRITY'S WARRANTIES. INTEGRITY represents and warrants to WORD as
follows:


a. INTEGRITY is the sole owner, or the exclusive licensee of the
sole owner, for the Territory of the Masters and Products, of
all performances embodied therein, all records, compact
discs, tapes, videos and reproductions derived therefrom, and
all sound recording copyrights therein. Subject to any rights
reserved by INTEGRITY hereunder, no other person, firm or
corporation has any rights in or to the Masters, the
Products, the performances embodied therein or any copy
thereof in the Territory.


b. INTEGRITY is duly qualified to do business in the State of
Alabama and has the full right, power and authority to enter
into this Agreement; and INTEGRITY has not done or permitted
to be done anything which may curtail or impair any of the
rights given or granted herein.


c. INTEGRITY has and will have the right to record and reproduce
all musical compositions (the "Compositions") embodied in the
Products.


d. None of the Masters, the Records, the Compositions, the Print
Products, or any other materials or services supplied by
INTEGRITY hereunder including, without limitation, album
jackets or other packaging, artwork liner notes, advertising,
promotion and merchandising materials and advertising
marketing services (the "Materials"), violate or infringe, or
will violate or infringe, any statute or law, or any common
law or statutory rights of any person or entity whatsoever,
including, without limitation, contractual rights,
copyrights, trademarks, rights of privacy and publicity, and
obscenity laws.


e. There is not any claim, demand, or any form of litigation or
other judicial or regulatory proceeding whatsoever pending or
threatened with respect to any of the Masters, the Records,
the Print Products, the Compositions, or the Materials.


f. All other costs and expenses in connection with the recording
and printing of the Products have been and will be paid, and
all necessary licenses, consents or clearances have been
and/or will be obtained.


6. PROPRIETARY MATERIALS; BIOGRAPHIES; TRADEMARKS.


a. Subject to any restrictions in INTEGRITY's agreements with
any individual artist or producer of which INTEGRITY shall
notify WORD in writing no later than the date INTEGRITY
delivers the Records containing such artists' performance,
WORD shall have the right to use and publish INTEGRITY's and
each artist's and producer's likeness, name, voice,
trademark, trade name, logo, sound effects and biographical
materials provided by INTEGRITY in connection with WORD's
sale, advertisement


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and distribution of Products hereunder, or to refrain
therefrom. It is understood that INTEGRITY's designated logo
will be used wherever INTEGRITY's Products and/or its artists
or producers are used in advertisement. Further, INTEGRITY
shall have the right to approve all consumer advertising not
supplied by Integrity and containing INTEGRITY's artists,
logos, trademarks or trade names prior to publication.


b. Subject to the foregoing provisions, WORD may use INTEGRITY's
applicable trademark or logo during the Term hereunder at no
additional cost to WORD. WORD will honor the notice
requirement relating to INTEGRITY's trademarks; provided that
any inadvertent failure by WORD to use INTEGRITY's logo shall
not constitute a breach of this Agreement. INTEGRITY warrants
that INTEGRITY has all rights to grant WORD the right to use
such trademarks and logo and shall indemnify and hold WORD
harmless with respect thereto. INTEGRITY's submission of any
material which includes INTEGRITY's and/or any artists'
trademarks and/or logos shall be deemed to be instructions to
WORD to use such trademarks and/or logos, as submitted.


7. WORD'S RESPONSIBILITIES. At WORD's expense, WORD will furnish all
"normal distribution services" as that term is generally understood in
the phonograph record industry subject to the specific business
practices and policies of WORD. Such services shall include, but not
necessarily be limited to:


a. Warehousing of finished Products and, if applicable, finished
jackets, sleeves, inserts and other components ("Inventory")
at its designated Distribution Centers.


b. Selling and shipment of finished goods and merchandising
materials supplied by INTEGRITY to WORD's customers within
the Territory (WORD's salesmen are to receive the same
compensation or commission on sales of Products hereunder as
they are paid for sales of WORD's products).


c. Billing for Products delivered to customers and collection
thereof, with weekly reports (including but not limited to
movement reports and weekly sales summaries) to be promptly
provided to INTEGRITY, including the administration of any
sales and/or discount programs requested by INTEGRITY
pursuant to Paragraph 13(b) herein below, and the absorption
of any "bad debts" and cash discounts (both of which are
WORD's sole responsibility) relating to Products sales
hereunder to such customers in the same manner as WORD deals
with customers of WORD's products.


d. Upon INTEGRITY's request to WORD, WORD will compile, collate,
pack and ship all packets required of INTEGRITY for use at
choral workshops, festivals, and clinics. INTEGRITY will pay
WORD's direct and out-of-pocket costs (including the wages of
hourly employees, but not an allocation of operating
overhead) for


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providing such services within thirty (30) days from receipt
of WORD's invoice for the same. In the event WORD and
INTEGRITY desire to join marketing efforts, the parties shall
jointly determine the extent of the efforts, and shall each
bear the cost incurred proportionate to their participation.


e. Notwithstanding anything to the contrary contained herein,
WORD shall have the right, without liability to INTEGRITY, to
decline to distribute or withdraw from distribution any
Products hereunder if such Products(s) or the materials
contained thereon or therein are deemed, in the opinion of
WORD's counsel, libelous, slanderous or defamatory or
violative of the laws of any jurisdiction or infringe upon
copyrights or trademarks or otherwise violate or infringe
upon the rights of any party or person.


f. WORD warrants and agrees that regular orders shall be
fulfilled out of Inventory on hand within an average of two
business (2) days [such average to be measured during any
continuous 30-day period] after WORD's receipt of an order
from its customer.


g. WORD shall issue a clear and direct clarification to its
General Market distributor of such distributor's rights with
regard to the Products. INTEGRITY shall either prepare or
approve such letter of clarification prior to its issuance.


h. WORD shall cause the WORD logo to be removed from all
Products manufactured for sale by its General Market
distributor, after the execution hereof. Such product shall
bear only the INTEGRITY logo and the logo of the General
Market distributor.


i. WORD shall furnish non-dedicated office space with telephone
privileges in WORD's Nashville building for the use by
INTEGRITY's senior staff when in Nashville.


8. WORD'S WARRANTIES; PERFORMANCE GOAL.


a. WORD warrants and agrees that it shall represent INTEGRITY's
Products in a manner consistent with INTEGRITY's m
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