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EXHIBIT 10.5
FULFILLMENT SERVICES AGREEMENT
This Fulfillment Services Agreement (the "Agreement"), dated as of September
11, 1999, is between Professional Marketing Associates, Inc., an Arizona
corporation ("Professional Marketing Associates") and Genius Products, Inc.
(formerly International Trading & Manufacturing Corporation) (the "Company"
&/or "Client").
WHEREAS, Professional Marketing Associates has the capability to provide
certain order entry and fulfillment services for the Company's direct response
offerings.
WHEREAS, the Company's use of Professional Marketing Associates order entry and
fulfillment services shall be under the terms and conditions set forth in this
Agreement.
Therefore, Professional Marketing Associates and the Company agree as follows:
1. Merchandise ownership.
A. For the purposes of this Agreement, "merchandise" means all products
provided by the Company for sale or delivery to Company's customers
pursuant to this Agreement. The Company shall retain ownership of all
merchandise covered by this Agreement and risk of loss at all times.
Legal title to the merchandise remains with the Company until the
merchandise is shipped for delivery to the Company's customer.
B. Professional Marketing Associates makes no claim of ownership of the
merchandise and shall act only as the Company's independent
contractor for the purposes of order entry, order processing,
warehousing and distribution of merchandise.
C. Customer orders for the merchandise are with the Company and the
Company is the seller of the merchandise.
2. Order entry and processing.
A. Professional Marketing Associates shall accept and process customer
orders for merchandise received by all media designated by the
Company.
B. For each customer order taken, Professional Marketing Associates
shall enter all or any part of the following information into its
information systems: customer name, address, city, state, zip code and
telephone number, description and quantity of merchandise ordered,
price, method of payment, advertising source codes, shipping
instructions, and company specific messages. The Company shall own all
rights, title and interest in such information, all of which shall be
deemed Confidential Information for the purposes of Section 14.
C. Except as provided in Subsection D of this section, Professional
Marketing Associates shall promptly process all qualified requests
and use its best efforts to cause the order to be shipped to the
customer within three (3) business days after receipt of the order.
D. The Company shall provide sufficient advance notice of all media
promotions to enable Professional Marketing Associates to implement an
order fulfillment program appropriate for the Company's projected
response forecast. Professional Marketing Associates hereby
acknowledges that the Company has given notice of a national TV
promotion scheduled for September 14, 1999, the projected response of
which is likely to be very high.
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3. Sales price of merchandise.
A. For all orders processed pursuant to this Agreement, Professional
Marketing Associates shall charge the Company's customers the
Company's designated unit price, plus applicable sales and use taxes
and other charges designated by the Company.
B. The company shall notify Professional Marketing Associates of any
change in the unit price at least forty-eight (48) hours in advance of
the date the price change takes effect, and shall subsequently confirm
the change in writing. Price changes may include quantity discounts,
promotion and advertised specials, coupons, rebates or any other
change to the unit price designated by Company.
4. Sales and use taxes.
A. Since title to the merchandise remains with the Company at all times,
the Company is liable and responsible to remit all sales and use taxes
to the appropriate taxing authorities. Professional Marketing
Associates assumes no liability for payment of sales and use tax.
B. Professional Marketing Associates shall charge the Company's customers
for sales and use taxes as directed in writing by the Company and
furnish the Company with monthly reports stating the taxable revenues,
taxes collected and tax rates effective for each jurisdiction for
which taxes must be paid.
C. Professional Marketing Associates assumes no responsibility for
determining whether sales of the Company's merchandise are taxable in
a given jurisdiction, or that the rate or method of calculating any
such taxes is correct. Professional Marketing Associates agrees only
to use reasonable care and skill in calculating and collecting taxes
due based on the rates and methods supplied by the Company.
D. The Company shall indemnity, defend and hold harmless Professional
Marketing Associates, its officers, directors, and managing officers
from and against all claims, suits or liabilities and expenses,
including reasonable legal fees, for the Company's failure to remit to
the appropriate authorities any sales or use taxes claimed to be due
and owing by reason of the Company's sale of merchandise to its
customers; provided that Professional Marketing Associates has
fulfilled its obligation to collect and result sales tax reports in
the manner specified in writing by the Company.
5. Processing payments.
A. Professional Marketing Associates shall process payments considered
acceptable. A payment is considered acceptable if it is for the full
amount of the sale, and in cash or by a designated credit card.
Designated credit cards include Visa, MasterCard, Discover Card,
Diners Club and American Express and any other credit cards which the
Company and Professional Marketing Associates mutually agree to
accept. The Company shall designate in writing a maximum permitted
amount or percentage of underpayment which is considered acceptable to
the Company, and for which an order may be shipped. This allowance is
not a discount and applies only to those transactions in which the
customer fails to remit a correct payment to Professional Marketing
Associates.
B. Professional Marketing Associates shall receive, control, process and
report incoming cash, checks, credit card and balance due payments on
a daily basis. Professional Marketing Associates shall promptly
deposit all payments it receives within two (2) business days of
shipment of product.
C. Professional Marketing Associates shall process refunds and credits
for returned merchandise pursuant to the Company's written policies
and applicable state and federal regulations.
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6. Delivery.
Professional Marketing Associates shall ship merchandise to customers by
United Parcel Service (UPS), the United States Post Office (USPS) or
equivalent delivery service consistent with Company's requirements for
shipping and delivery of merchandise.
7. Customer services.
A. Professional Marketing Associates shall provide trained
representatives to respond to mail or other inquiries by the Company's
customers for merchandise information, order status, order changes,
cancellations, returns or billing problems.
B. Professional Marketing Associates shall send back - order notices and
process customer return cards in accordance with applicable federal,
state and local laws. It shall also respond to customer complaints,
process rejected credit card charges, and issue refunds or merchandise
credits.
C. Professional Marketing Associates shall issue appropriate UPS call
tags, request proof of delivery, and process all necessary tracers and
claims for non-delivery or damage on behalf of Company. Professional
Marketing Associates shall provide Company with proof of shipments but
is not responsible in any way for credit card charge-backs.
Professional Marketing Associates shall pick up all mail relating to
the fulfillment services provided under this Agreement at designated
Post Office addresses once each day.
D. Professional Marketing Associates acknowledges that the satisfaction
of the Company's customers is of paramount importance to the Company
and that the Company is entering into this Agreement in reliance on
Professional Marketing Associate's undertaking to deliver the services
hereunder to the highest professional standard. The protocol and
content of customary and usual written or oral communications between
Professional Marketing Associates and the Company's customers shall be
subject to the Company's prior approval.
8. Returns.
Professional Marketing Associates shall instruct customers on the
appropriate procedure for returning merchandise and inspect all returned
merchandise. Professional Marketing Associates shall inspect and repackage
all undamaged or unused merchandise and return it to inventory for resale.
Professional Marketing Associates shall repackage all damaged or
unsalvageable merchandise, and process such merchandise in any manner
designated by the Company at the Company's expense.
9. Operating reports.
A. Professional Marketing Associates shall provide the Company with
standard system reports on a regular basis for all services provided
pursuant to this Agreement. Standard system reports include a
compilation of customer order information and monthly sales and tax
reports upon written request from the Company.
B. If special reports not provided as part of the standard reporting
system are required, the Company shall pay Professional Marketing
Associates for any programming expenses incurred. Professional
Marketing Associates shall provide the Company with a written
estimate of expected programming charges, and obtain written
authorization from the Company for such modifications before
proceeding with the programming development of special reports.
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10. Compensation and payment.
A. The Company agrees to pay Professional Marketing Associates the rates
prescribed in the Services Fees as set forth in Exhibit "A" attached
hereto and incorporated herein. If other services not specifically
defined in this Agreement are requested by the Company in writing, the
compensation to Professional Marketing Associates shall be the hourly
rate prescribed in the Service Fees.
B. If in the event The Company ceases selling the product and requests
inventory to be returned to them, then Professional Marketing
Associates shall waive any monthly minimum fee beginning with the next
calendar month until the termination of the Agreement. If, the Company
then proceeds to market the product again during the term of the
Agreement, any minimum charge agreed by the parties in writing shall
again commence beginning on the first day of the calendar month the
marketing and/or selling begins, and shall continue until the
termination of the Agreement.
C. Any and all financial arrangements not covered in this contract must
be agreed upon and attached to this contract.
11. Compliance with laws.
The Company shall comply with all applicable laws, regulations and
requirements of the Federal Trade Commission, the Food and Drug
Administration, and any other state or federal agency which might have
jurisdiction over the Company's merchandise or sales transactions. The
Company shall monitor compliance under such laws, regulations and
requirements, and shall promptly notify Professional Marketing Associates
of any special compliance issues raised by the offer or sale of the
Company's merchandise or sales or promotional activities in a particular
state.
12. Indemnification.
(a) The Company shall indemnify and hold harmless Professional Marketing
Associates and its employees from and against all claims, damages, losses
and expenses, including reasonable legal fees and costs of suit, arising
out of or relating to any defects in the merchandise or from the Company's
negligent or culpable acts or omissions.
(b) Professional Marketing Associates shall indemnify and hold harmless
the Company and its employees from and against all claims, damages, losses
and expenses, including reasonable legal fees and costs of suit, arising
out of or relating to (1) any damage caused to the merchandise by the gross
negligence or willful misconduct by Professional Marketing Associates while
such merchandise is in its custody, (2) from the Professional Marketing
Associates' negligent or culpable acts or omissions or (3) third party
claims arising as a result of a material breach of this Agreement by
Professional Marketing Associates.
13. Insurance.
The Company shall provide, at its own expense, all necessary insurance for
product damage loss through fire or other casualty while the merchandise is
in the custody of Professional Marketing Associates, or in transit to or
from any location.
14. Confidentiality.
Material or information which the Company gives or divulges to Professional
Marketing Associates or which comes into the possession or knowledge of
Professional Marketing Associates and which relates to the Company and its
business operations, such as financial information, marketing data,
customer
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lists and pricing policies, is confidential and proprietary data.
Professional Marketing Associates shall hold this information or material
in confidence and shall not reveal the information or material without the
consent of the Company. On termination of this Agreement, Professional
Marketing Associates shall immediately deliver this information or material
to the Company on request if all invoices and outstanding debts to
Professional Marketing Associates have been paid.
15. Use of Company name.
Except to the extent necessary to perform its services under this
Agreement, Professional Marketing Associates shall not use the Company's
name or any derivation of the Company's name for advertising or trade
purposes without the Company's prior written permission. Notwithstanding
this prohibition, Professional Marketing Associates may list the Company
among its clients in any brochure, business plan or other document
describing the business and clients of Professional Marketing Associates.
16. Programming ownership.
Professional Marketing Associates is the exclusive owner of all
internally-designed or developed computer programming utilized for
processing, tracking, fulfilling, analyzing or reporting orders of the
Company's merchandise. The Company shall not, directly or indirectly,
divulge, disclose or communicate to any other person or company who is
not a party to this Agreement information concerning programming or
systems designed or utilized by Professional Marketing Associates.
17. Audit and inventory.
A. Upon reasonable advance written notice and during normal business
hours, the Company or the Company's authorized representatives may
inspect, audit, and copy excerpts from books, records, contracts and
data processing procedures created or maintained by Professional
Marketing Associates that relate to the reconciliation of invoices to
the Company and to this Agreement. This audit or inspection shall take
place at the offices of Professional Marketing Associates or such
other place as the parties mutually agree. The Company shall pay all
direct and indirect costs of any such inspection or audit, except the
salaries of Professional Marketing Associates' employees, and those
costs reasonably incurred by Professional Marketing Associates in
cooperating with such inspection or audit. Professional Marketing
Associates shall pay all of the Company's direct and indirect costs of
any such inspection or audit if amounts invoiced to the Company exceed
105% of the audited amounts payable by the Company over the audit
period.
B. On reasonable advance written notice from the Company, Professional
Marketing Associates shall perform a physical inventory of the
Company's merchandise entrusted to Professional Marketing Associates
at reasonable times during normal business hours at no cost to the
Company at a rate of 1 per physical year. The Company shall compensate
Professional Marketing Associates as prescribed in the Service Fees
section of this Agreement for all costs incurred in conducting
additional inventories per physical year.
16. Shrinkage
A. Professional Marketing Associates will take reasonable and prudent
precautions to preserve and protect Client's property, including all
property that is returned by buyers. Provided that such precautions
are taken by Professional Marketing Associates, Professional Marketing
Associates shall not be responsible or liable for, and CLIENT agrees
to hold Professional Marketing Associates harmless from property
losses or shrinkage under the acceptable annual rate of 1.5% of the
wholesale value.
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B. Professional Marketing Associates is not responsible for any shrinkage
incurred prior to receipt by Professional Marketing Associates or any
hidden shrinkage or shortage not visibly apparent at time of receipt.
19. Reserve for shipping costs and customer refunds.
At all times during the term of this Agreement, the Company shall provide
Professional Marketing Associates with sufficient funds to cover all
delivery service shipping costs.
20. Return of merchandise to the Company.
A. Professional Marketing Associates shall, within thirty (30) days after
termination of this Agreement, deliver all the remaining merchandise
entrusted to it by the Company to a location specified by the Company
on a freight-collect basis. The Company shall also have the option to
arrange for the delivery of the product themselves.
B. Professional Marketing Associates assumes no responsibility for any
perishable or date-sensitive merchandise remaining in its custody
after the termination of this Agreement. Absent other instructions
from Company, Professional Marketing Associates may, within sixty (60)
days after the Company ceases to market any merchandise covered by
this Agreement, charge appropriate storage fees until product is
dispersed to destination designated by the Company.
C. Professional Marketing Associates shall charge the Company the hourly
rates prescribed in the Service Fees section of this Agreement to
cover the direct cost of labor and administrative and systems support
services for relocation of merchandise or return of merchandise to the
Company.
21. Default, termination, and renewal.
Either Professional Marketing Associates or the Company may terminate this
Agreement:
A. Upon not less than 30 days' prior written notice;
B. Immediately if either party fails to pay any sum due to the other
party within five (5) business days after receiving written notice
that payment is past due; or
C. Immediately if either party files a petition in bankruptcy, is
declared bankrupt or insolvent, makes any assignment for the benefit
of creditors or is placed in trustee or receivership.
This Agreement shall be renewed automatically at the end of each term, at
the rates then prevailing for Professional Marketing Associates' services,
unless either party gives written notice to the other of its intent not to
renew at least thirty (30) days prior to the end of each term.
22. Force Majeure.
Either party's failure to perform any of its obligations under this
Agreement, except its payment obligations, is excused due to any cause or
event beyond the parties' reasonable control including, without limitation,
strikes, lockouts or other labor disputes, other than by employees by the
affected
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party, acts of God, fire, other casualty, civil insurrections, actions or
orders of any governmental or other lawful authority or similar events.
23. Assignment.
Neither Professional Marketing Associates nor the Company may assign its
interests in this Agreement without the prior written consent of the other
party to this Agreement. Such consent shall not be unreasonably withheld.
24. Arbitration.
A. Any dispute or claim arising out of or relating to this Agreement, or
the performance of any obligations created or imposed by this
Agreement, shall be resolved by arbitration before the American
Arbitration Association (AAA), through its office in Phoenix, Arizona.
A single independent arbitrator shall be selected by the AAA, and all
proceedings shall be conducted, according to the AAA's Commercial
Arbitration Rules. The arbitrator's decision and award shall be final
and binding, and it shall have the force and effect of a judgment when
filed with any court of competent jurisdiction.
B. The cost of the arbitration procedure shall be borne by the losing
party or, if the decision is not clearly in favor of one party or the
other, then the costs shall be borne as determined by such arbitration
procedure.
C. The arbitration procedure provided herein shall be the sole and
exclusive remedy to resolve any controversy or dispute between the
parties to this Agreement, and the proper venue for such arbitration
proceeding and any legal action to enforce such arbitration award
shall be Maricopa County, Arizona. The parties to this Agreement
hereby expressly consent to the jurisdiction and venue of Maricopa
County Superior Court.
25. Attorneys' Fees.
If any arbitration proceeding or action shall be brought to recover any
amount due under this Agreement, or for or on account of any breach of or
to enforce or interpret any of the terms, covenants, or conditions of this
Agreement, the prevailing party shall be entitled to recover from the other
party, as part of prevailing party's costs, a reasonable attorneys' fee,
the amount of which shall be fixed by the arbitrators or by the Court and
shall be made a part of any judgment or award rendered.
26. Notice.
All notices under this Agreement shall be in writing, shall be effective
when received, and shall be given by personal service, by facsimile
transmission with suitable proof of receipt, or by certified or registered
mail, return receipt requested, to the addresses set forth below or at such
other addresses which may be specified in writing to all parties hereto.
Professional Marketing Associates, Inc. Genius Products, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇ Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
27. Number and gender.
Whenever the context of this Agreement requires, the singular shall
include the plural, the masculine shall include the feminine, and personal
pronouns shall include corporations, firms, partnerships, or other forms of
association.
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28. Captions.
Titles or captions contained in this Agreement are inserted only as a
matter of convenience and for reference, and in no way define, limit,
extend, or describe the scope of this Agreement of the intent of any of its
provisions.
29. Governing law and successors.
This Agreement, and any dispute, claim or defense arising out of or
relating to this Agreement, shall be governed and construed in accordance
with the laws of the State of Arizona. This Agreement shall be binding upon
and inure to the benefit of the parties, their heirs, legal
representatives, successors and assigns.
30. Entire agreement.
This instrument contains the entire agreement of the parties, and no
representations, warranties or inducements have been made by any of the
parties hereto, except as expressly set forth herein.
31. Term of Agreement.
The Term of this Agreement shall be for a period of six (6) months and
shall be renewed automatically at the end of each term pursuant to
Section 21E.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day,
month and year first above written.
Professional Marketing Associates, Inc. Genius Products, Inc.
BY: /s/ ▇▇▇ ▇▇▇▇▇ BY: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
TITLE: SVP Marketing & Production
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Exhibit "A"
SERVICES LISTING
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PROCESSING COST PER ORDER: $1.65 (W.B.)
$1.25 (2CD SET)
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1. Receive and stock merchandise
2. Warehouse all merchandise
3. Receive orders via Electronic Transfer and process
4. Maintain customer database and products shipping labels
5. Insert pre-printed return forms and all bounce back materials
6. Pick, pack and ship merchandise
7. Provide reports and inventory counts as determined by The Company
8. Receive return packages
9. Inspect returned merchandise
10. Issue customer credits
11. Restock undamaged return merchandise
12. Answer customer service phone calls (included in per order costs.)
13. Open, edit, enter data and prepare shipping labels for money
order/check orders
14. Process credit card orders via The Company's merchant processing
center
15. Mail credit card decline letters (The Company to provide and pay
postage)
16. Mail back-order merchandise letters (The Company to provide and pay
postage)
17. Communicate with merchant bank for charges, credits and inquiries
18. Reply to merchant bank in the event of charge-backs
19. Make daily deposits
20. Initiate tracers and claims
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When The Company's weekly volume of orders received reaches 5,000 orders, the
cost per order as set forth above for all orders received during that week will
be reduced by 10%. Additional 10% discounts (to a maximum of a 50% discount)
will be given for each additional increment of 5,000 orders received during the
week.
PMA will assist The Company in the setup of UPS and USPS accounts with funds
paid directly to the supplier by The Company. PMA will also help establish and
set up the link with a merchant bank. Also, at The Company discretion, PMA will
obtain packaging with payment made directly to the supplier.
Processing Costs and USPS charges are to be paid in advance by The Company to
PMA by weekly deposits.
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