GAMES WORKSHOP S 2013 NORTH AMERICAN RETAILER POLICY

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1 GAMES WORKSHOP S 2013 NORTH AMERICAN RETAILER POLICY EFFECTIVE: June 15, 2013 ISSUED BY: GAMES WORKSHOP RETAIL INC (hereinafter collectively GAMES WORKSHOP ) This 2013 North American Retailer Policy (the POLICY ) applies to all Retailers of GAMES WORKSHOP products (as defined herein) located in the United States or Canada. For purposes of this Policy, the term Retailers includes: (i) trade accounts supplied directly by GAMES WORKSHOP ( Trade Accounts ) and (ii) indirectly-supplied retailers in the United States who purchase GAMES WORKSHOP products from an Authorized Distributor (as defined in GAMES WORKSHOP S 2013 Authorized Distributor Policy). INTRODUCTION The success of GAMES WORKSHOP depends not only upon the sale of quality products, but the long-term promotion and preservation of the hobby and culture of game enthusiasts. GAMES WORKSHOP strives to meet the expectations of consumers or other end-users ( Consumers ) looking for high quality and imaginative models and game products, and the enjoyment and social interaction of collecting the models and playing the games. To meet these expectations, GAMES WORKSHOP invests heavily in the continuing design and development of new and imaginative models, games, artwork, and imagery that are consistent with the high standards of quality and innovation that have become synonymous with the GAMES WORKSHOP brand. GAMES WORKSHOP then looks to market these products through distribution and retail channels that promote and preserve GAMES WORKSHOP S brand image, as well as the hobby culture of game enthusiasts. Promotion and preservation of the GAMES WORKSHOP brand depends, in large part, upon the protection of the substantial intellectual property invested in our models, games and other products. Copyright and trademark protected rules, figures, artwork and imagery are the essential elements of our products and create our brand s image and recognition in the marketplace. Infringement and dilution of copyrights and trademarks, therefore, presents an unacceptable threat to a business that, if left unchecked, can cripple the success of a product line to the detriment of not only the manufacturer, but its distributors and Retailers as well. Equally important to the success of GAMES WORKSHOP is a vibrant network of Retailers committed to preserving the integrity of the GAMES WORKSHOP brand and the promotion of the hobby that it serves. As a result, GAMES WORKSHOP has long supported and encouraged brickand-mortar Retailers who have invested time, effort and money in building their businesses by supporting and selling the GAMES WORKSHOP hobby. In-store retail sales by properly stocked and committed Retailers remain the primary vehicle through which GAMES WORKSHOP seeks to market and promote its products in North America. 1

2 In furtherance of these principles, GAMES WORKSHOP in the United States adopted an Amended and Restated Distributor and Retailer Policy effective July 15, 2003 (the 2003 Policy ). In that 2003 Policy, GAMES WORKSHOP recognized that the online retail sale of its products did not provide the same level of support for the hobby as in-store marketing and required none of the additional investment necessary to operate a brick-and-mortar retail facility. In addition, GAMES WORKSHOP was concerned by unauthorized and improper copying and misuse of GAMES WORKSHOP trademarks, copyrighted artwork and imagery, and other brand indicators by some online retailers To prevent online retailers from free-riding on the significant investment made by in-store Retailers in promoting the hobby, and to better protect its intellectual property, therefore, GAMES WORKSHOP adopted its 2003 Policy. In that 2003 Policy, GAMES WORKSHOP reserved online retail sales of its products to GAMES WORKSHOP S own corporate website and prohibited the on-line sale of its products by United States Retailers. The 2003 Policy also set forth General Requirements for in-store retail operations and further established clear directives for the use of approved advertising and promotional materials for GAMES WORKSHOP products. The 2003 Policy was a great success in the United States. Over the ten-year period since GAMES WORKSHOP adopted the 2003 Policy, the number of in-store Retailers in the United States has increased substantially and the hobby culture that those Retailers support and promote has continued to grow and flourish throughout the United States. Also, by establishing clear criteria for in-store retail operations and for the use of approved advertising and promotional materials, the 2003 Policy provided direction to Retailers as to what GAMES WORKSHOP expects of its Retailers and how to best promote the GAMES WORKSHOP brand and hobby culture. Given this success, we at GAMES WORKSHOP have looked for ways to improve the 2003 Policy and to expand its reach beyond the United States to our Trade Accounts in Canada. As part of a broader process of integration of the United States and Canadian businesses, therefore, GAMES WORKSHOP now announces this new POLICY. This POLICY applies to all Retailers operating in the United States and Canada. This new POLICY supersedes and replaces the old 2003 Policy and any other previous policies issued by GAMES WORKSHOP. This POLICY reflects the unilateral decision of GAMES WORKSHOP after a careful review designed to assess and pursue the best interests of GAMES WORKSHOP S business and its brand. In issuing this new POLICY, GAMES WORKSHOP is not seeking your agreement to the requirements outlined below. The decision to comply with this POLICY is left to each individual Retailer. However, GAMES WORKSHOP does reserve the right, pursuant to this POLICY, to terminate sales of GAMES WORKSHOP products to any Trade Account who chooses to violate this POLICY or any Authorized Distributor supplying a Retailer that chooses to resell in violation of this POLICY. This POLICY becomes effective June 15, 2013 and may be changed at any time by GAMES WORKSHOP, in the exercise of its sole discretion. 2

3 I. General Requirements The following General Requirements apply to all Retailers of GAMES WORKSHOP products in the United States and Canada. GAMES WORKSHOP may conduct unannounced, anonymous surveys and/or spot checks to assess compliance with these requirements. Noncompliance may result in suspension or termination of authorization of a Trade Account (or distributor supplying a Retailer) to sell GAMES WORKSHOP products. The GAMES WORKSHOP brand is a unique and exclusive symbol of quality. The familiar GAMES WORKSHOP trademarks and colors on its products assure Consumers of GAMES WORKSHOP quality products. This continuing quality assurance demands GAMES WORKSHOP S vigilance to maintain consistent quality standards for both the products and the services through which the products are sold. Therefore, GAMES WORKSHOP holds its Retailers to high standards of excellence, requiring that they consistently meet or exceed the expectations of all Consumers, be they adult or children, experienced game enthusiasts or first-time customers. GAMES WORKSHOP S selective retail strategy helps ensure that Consumers of its products are satisfied with the entire purchase experience. All Retailers of GAMES WORKSHOP products must meet the following General Requirements: United States Retailers must be (i) incorporated, organized and/or licensed to do business in the United States; (ii) have a brick-and-mortar retail presence in the United States; and (iii) must operate their businesses in accordance with all applicable state and federal laws of the United States. Canadian Retailers must be (i) incorporated, organized and/or licensed to do business in Canada; (ii) have a brick-and-mortar retail presence in Canada; and (iii) must operate their businesses in accordance with all applicable provincial and federal laws of Canada. Retailers are permitted to resell GAMES WORKSHOP products to Consumers only. Retailers are prohibited from reselling GAMES WORKSHOP products to other Retailers, distributors or any other non-consumer customers. GAMES WORKSHOP does not operate a franchise and Retailers are not franchisees. Retailers are not permitted to represent themselves (directly or indirectly) as a franchise of GAMES WORKSHOP. Retailers must comply with the applicable In-Store Retail Requirements set forth Section II below. Retailers must comply with the specific Retailer Policies set forth in Section III below. 3

4 II. IN-STORE RETAIL REQUIREMENTS A. Minimum In-Store Requirements for all Retailers. In-store retail sales of GAMES WORKSHOP products by properly stocked and committed Retailers are the primary vehicle through which GAMES WORKSHOP seeks to market and promote its products and the hobby they serve. GAMES WORKSHOP looks to market its products to the Consumer through in-store Retailers committed to selling GAMES WORKSHOP products in a safe, age appropriate retail environment that promotes the GAMES WORKSHOP hobby. Accordingly, to qualify as a Retailer of GAMES WORKSHOP products, a Retailer must meet the following Minimum In-Store Requirements: United States Retailers must operate at least one brick-and-mortar retail store location in the United States where GAMES WORKSHOP products are displayed and sold to Consumers. Canadian Retailers must operate at least one brick-and-mortar retail store location in Canada where GAMES WORKSHOP products are displayed and sold to Consumers. All brick-and-mortar retail locations must be located in commercial zoned areas. Retailers must provide clearly-marked GAMES WORKSHOP shelf-space. o GAMES WORKSHOP products should be segregated in the store and not intermingled with other product brands. GAMES WORKSHOP products should not be displayed in stores where other products deemed obscene or inappropriate for customers under 18 years of age are displayed or sold. GAMES WORKSHOP products should never be sold in a location physically unsafe for Consumers to visit or shop. GAMES WORKSHOP accepts no liability in association with Retailer store locations. B. Additional In-Store Requirements for Trade Accounts Only In selecting its directly supplied Trade Accounts, GAMES WORKSHOP has greater requirements. In addition to the Minimum In-Store Requirements set forth in Section II(A) above, Trade Accounts must meet the following Additional In-Store Requirements: Each Trade Account retail store location must have hours of operation of at least 20 hours. Each United States Trade Account must maintain a stockholding of GAMES WORKSHOP products of no less than U.S. $500 in value (as per Trade Account pricing). Each Canadian Trade Account must maintain a stockholding of GAMES WORKSHOP products of no less than CA. $500 in value (as per Trade Account pricing). 4

5 III. Specific Policies A. POLICY REGARDING ONLINE SALES AND ADVERTISING OF GAMES WORKSHOP PRODUCTS (Applies to All Retailers) The following policy regarding online sales and advertising of GAMES WORKSHOP products applies to all Retailers of GAMES WORKSHOP products. 1. Online Sales Reserved To Games Workshop: For the reasons set forth below, GAMES WORKSHOP believes that its best interests are served by reserving online retail sales of its products in North America to GAMES WORKSHOP S own corporate website. GAMES WORKSHOP does not permit the online retail sale of its products by Retailers located in the United States or Canada. By way of illustration, but not limitation, North American Retailers are not permitted to sell GAMES WORKSHOP products on any website, webportal, third-party web-portal or other Internet-based platform of any kind. This prohibition includes any form of online shopping cart that would enable a Consumer to order or purchase GAMES WORKSHOP products on-line. 2. Reasons for Policy Prohibiting Online Retail Sales As referenced above, online sales of GAMES WORKSHOP products by independent Retailers can have an adverse commercial impact on GAMES WORKSHOP S distribution and retail network and its intellectual property portfolio. In light of this impact, and in careful consideration of GAMES WORKSHOP S vital interests in the promotion of its products and the hobby they serve, GAMES WORKSHOP has concluded that the business is best served by: (a) encouraging the instore retail sale of its products by independent brick-and-mortar Retailers; and (b) reserving and vesting all online retail sales of GAMES WORKSHOP products via GAMES WORKSHOP S corporate website. Among the compelling business reasons supporting this decision are the following: In-Store Display and Sales Support: The in-store retail environment provides a Consumer (whether a first-time customer or game enthusiast) with the ability to see, touch, and feel GAMES WORKSHOP products before making a purchasing decision. Instore displays of product enhance the retail purchasing experience and help introduce and grow the hobby. Community Support: The in-store retail environment further enhances the hobby by providing a place for Consumers to interact with one another and the hobby they share. The hobby is best supported by brick-and-mortar retail locations that allow hobbyists to interact with each other through playing the games, sharing of painting and modeling techniques and the formation of face-to-face interactive clubs. Brick-and-mortar Retailers are the preferred, and in some geographic areas, the only method of such interaction to sustain and grow the hobby. GAMES WORKSHOP s Online Promotion of the Hobby: GAMES WORKSHOP S corporate website provides a number of features and links that serve to promote the hobby, as well as the products. GAMES WORKSHOP S corporate website provides an online complement to, not a substitution for, the in-store promotion of the hobby in a way that is consistent with the company s brand and Consumer expectations. By reserving online sales to GAMES WORKSHOPS corporate website, GAMES WORKSHOP can present 5

6 and offer the complete breadth and depth of its product line to online Consumers. The GAMES WORKSHOP brand represents more than just one or two of its most popular items. Uniform Presentation of the Brand on the Internet: It is important that the GAMES WORKSHOP brand be presented with a single, clear online focus. By reserving online sales activity to GAMES WORKSHOP S corporate website, the one site allows GAMES WORKSHOP to present and develop a uniform online image for the brand that can be more readily and easily changed as new products are added and the brand evolves. Enhance Online Consumer Tracking: By focusing all online Consumers on one sales website, GAMES WORKSHOP is able to improve tracking and understanding of GAMES WORKSHOPS customer base. Better Consumer information and feedback will enable us to better predict trends and Consumer preferences, so that we can conform our product lines to meet Consumer demand. Protection of GAMES WORKSHOP Intellectual Property: Online sales and marketing of GAMES WORKSHOP products by independent Retailers can lead to increased instances of misuse and infringement of GAMES WORKSHOP S trademarks and copyrights. By reserving online retail sales to itself, and providing the guidelines set forth below for online advertising of products available for sale in the retail stores of its Retailers, GAMES WORKSHOP believes it can maintain better control over its marks and its brand. Prevention of Free-Riding: One of the central business considerations supporting GAMES WORKSHOP S decision to reserve online retail sales to its own corporate website is to prevent free-riding by online retailers. Brick-and mortar Retailers committed to the promotion of the hobby make significant investments including, among other things, a physical location for Consumers to shop for the products, knowledgeable and well-trained in-store staffing and, in certain instances, in-store gaming areas for game enthusiasts. Internet retailers do not make the same investment in promoting the hobby, yet have the ability to siphon off well-educated and serviced customers and potential customers by selling the same products over the Internet. Besides the inherent unfairness of this freerider effect, GAMES WORKSHOP remains concerned that if this disparity were permitted to exist, it would undermine the investment made by our in-store Retailers, discourage future similar investments by new Retailers, and substantially impair the in-store retail method of sale most effective for our products. Online Privacy: Consumers who are reluctant to purchase online often cite privacy as a major reason for the reluctance to embrace e-commerce. Focusing Consumers to one online site will allow GAMES WORKSHOP to have consistent information collection and use practices that preserve consumer privacy, and communicate those practices, clearly and persuasively to Consumers. GAMES WORKSHOP believes that this level of privacy protection will encourage greater participation in the hobby. 3. Permitted Online Advertising by Retailers While this Policy reserves all on-line retail sales activity to GAMES WORKSHOP S corporate website, it does not preclude authorized Retailers from advertising on the Internet that they carry and sell GAMES WORKSHOP products. GAMES WORKSHOP understands and appreciates that many of its Retailers promote their businesses by advertising on their own websites. GAMES WORKSHOP welcomes and encourages such advertising; provided, however, that: (1) any such advertising by a Retailer clearly states that such products are available for purchase at the Retailer s brick-andmortar store location; (2) the advertising is consistent with the GAMES WORKSHOP brand image and does not dilute or infringe upon GAMES WORKSHOP S intellectual property rights; (3) such advertisements use only approved product descriptions, artwork, imagery, insignia, logos and marks supplied by GAMES WORKSHOP; and (4) complies with GAMES WORKSHOP s Intellectual Property Policy which can be found at: or on request. 6

7 B. POLICY REGARDING ORIGINAL PACKAGING AND LABELING All GAMES WORKSHOP products (including all game kits, sprues, rulebooks, components and accessories) are only to be resold in their original packaging. The original packaging and labeling, which bears GAMES WORKSHOP s trademarks, logos and copyrighted imagery, is specifically designed to appeal to the Consumer of the product and to inform the Consumer as to the contents, quality and safety of the product he or she is purchasing. GAMES WORKSHOP s packaging and labeling typically contain important information about the proper use, quality, and safety of GAMES WORKSHOP products. For the reasons set forth below, Retailers are not permitted to remove GAMES WORKSHOP product from its original packaging or otherwise break such products into components prior to resale. In recent years, GAMES WORKSHOP has observed a practice among some Retailers in which GAMES WORKSHOP products are removed from their original packaging for the purpose of reselling separately individual, unmarked components. This practice is now prohibited for the following business reasons: Protection of Brand Image: GAMES WORKSHOP s original packaging, which bears GAMES WORKSHOP S trademarks and copyrighted imagery, is specifically designed to be consistent with GAMES WORKSHOP s established brand image. The resale of GAMES WORKSHOP products (or components thereof) in unmarked or generic packaging is inconsistent with that brand image and can serve to devalue the product. Protection of GAMES WORKSHOP S Intellectual Property: Through its use of GAMES WORKSHOP s trademarks and copyrighted imagery, the original packaging provides clear and reliable identification of the product as a genuine GAMES WORKSHOP product. The sale of GAMES WORKSHOP products (or components thereof) in unmarked or generic packaging, if left unchecked, can be injurious to GAMES WORKSHOP s intellectual property rights. Avoidance of Confusion: The resale of GAMES WORKSHOP products (or components thereof) in unmarked or generic packaging also can lead to confusion as to whether the product being sold is a genuine GAMES WORKSHOP product or a generic imitation. Such confusion is detrimental to the GAMES WORKSHOP brand and the intellectual property rights that protect it. Ensuring Proper Labeling: GAMES WORKSHOP s packaging and labeling is specifically designed to inform the Consumer as to the contents, quality and safety of the product he or she is purchasing. When GAMES WORKSHOP products (or components thereof) are sold separately in unmarked or generic packaging, the Consumer does not receive this valuable labeling information at the point of sale. Preservation of the original packaging and labeling prior to resale, therefore, ensures that the Consumer is receiving accurate and reliable product information. Uniformity in Product Configurations: GAMES WORKSHOP products are packaged and sold in certain configurations designed to appeal to the Consumer and maximize the marketability of the products. Such configurations are an integral part of GAMES WORKSHOP S marketing strategies that drive consumer expectations. The resale of components in unmarked or generic packaging undermines those strategies and the ability of GAMES WORKSHOP to offer a uniform line of products to the marketplace. 7

8 To the extent GAMES WORKSHOP, in its sole discretion, should manufacture, package and label individual product components, GAMES WORKSHOP may make available such individual components for resale only as originally packaged and labeled by GAMES WORKSHOP. For the reasons explained above, Retailers are prohibited from removing any individually packaged and labeled GAMES WORKSHOP components from their original packaging for the purpose of reselling such individual components to Consumers. C. POLICY REGARDING DOMESTIC SALES ONLY North American Retailers are only authorized to resell GAMES WORKSHOP products domestically in their respective countries of origin. Accordingly, United States Retailers are prohibited from exporting GAMES WORKSHOP products for purposes resale to Consumers located outside of the United States. Similarly, Canadian Retailers are prohibited from exporting GAMES WORKSHOP products for purposes resale to Consumers located outside of Canada. Foreign sales of GAMES WORKSHOP products by Retailers can be disruptive to GAMES WORKSHOP S vertical distribution networks in other countries. D. POLICY REGARDING NEW RELEASES From time-to-time, GAMES WORKSHOP will schedule New Releases for its products. The timing and disclosure of New Releases is often accompanied by targeted advertising and marketing of the New Releases designed to create excitement in the marketplace and to have a positive impact on sales of the New Releases. To the extent that such New Releases are made available to Retailers, Retailers are not permitted to: (1) communicate information or make such products available for resale to Retailers prior to the Advance Order Date set by GAMES WORKSHOP for the New Release; or (2) sell the New Releases prior to the Global Release Date set by GAMES WORKSHOP for the New Release. GAMES WORKSHOP, in sole exercise of its discretion, may issue updates to this New Releases Policy from time-to-time. E. POLICY REGARDING AGE-SPECIFIC PRODUCTS Certain GAMES WORKSHOP products are classified (where relevant) as products to only be sold to Consumers meeting minimum age requirements. Each Retailer is responsible for ensuring that Games Workshop products are only sold to Consumers meeting the age requirements specified on the product itself, any associated packaging and local legislative requirements in the relevant state or province of sale to the Consumer (such local legislative requirements taking precedence in all circumstances). 8

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