EXHIBIT 10.2
LICENSE AND DISTRIBUTION AGREEMENT
(MANUFACTURING RIGHTS)
(2005 - 2007)
This License and Distribution Agreement (this "AGREEMENT") is entered
in as of March 29, 2004 by and between Riverdeep Inc., A Limited Liability
Company, a limited liability company organized in Delaware ("RIVERDEEP"), and
Encore Software, Inc., a Minnesota corporation ("DISTRIBUTOR").
WHEREAS, Riverdeep is engaged in the business of developing, licensing
and publishing computer software programs, including the Products (as
hereinafter defined);
WHEREAS, Distributor is engaged in the business of selling and
marketing goods in the Territory (as hereinafter defined), including products
similar or related to the Products; and
WHEREAS, Riverdeep and Distributor wish to enter into an agreement
pursuant to which Distributor will manufacture, sell, and distribute the
Products for sale in the Channel (as hereinafter defined) within the Territory.
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS.
1.1 "ADJUSTMENT DATE" means 30 days after the commencement of each
Sales Year.
1.2 "CHANNEL" shall mean all retail accounts, whether sold to
directly or through distributors, including, without limitation, brick and
mortar stores and Internet-based retailers (such as Xxxxxx.xxx); provided
however, that Riverdeep shall have the right to sublicense Products to
sublicensees that will in turn sell and distribute them into small retail
accounts pursuant to (i) the sublicenses set forth on Exhibit C attached hereto
provided that copies of the same have been furnished to Distributor prior to the
Commencement Date, and (ii) such future sublicenses as the parties shall
mutually agree to not to be unreasonably withheld or delayed, it being agreed
that Riverdeep shall not amend or modify such sublicenses to add new products
thereto or to expand the channel thereof without Distributor's consent, not to
be unreasonably withheld or delayed; and provided further, that notwithstanding
anything to the contrary in this Agreement, nothing contained herein shall limit
Distributor's parent company from selling or distributing the Products to its
retail customers through such parent company's website. At Riverdeep's request,
no more frequently than on a quarterly basis, Distributor shall provide to
Riverdeep a list of current accounts into which Distributor sells or distributes
the Products. The Channel specifically excludes Riverdeep's channels of
distribution other than the retail channel, including, without limitation, (a)
sales directly to end users (including, without limitation, through television,
magazine, catalog, continuity club, mail, door-to-door, email, web, and
telemarketing offers), (b) sales through the OEM channel and, (c) sales in the
educational/schools channel. Distributor shall not distribute Products to any
account that intends, or is reasonable likely, to resell the Products outside of
the Channel or Territory.
1.3 "COMMENCEMENT DATE" shall mean March 31, 2005.
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1.4 "DELIVERABLES" shall have the meaning ascribed to such term in
Section 2.9.
1.5 "DOCUMENTATION" shall mean all printed booklets, pamphlets,
user manuals, maintenance manuals, end user license agreements, registration
cards, promotional materials and any other materials which are distributed with
the Products. Such Documentation shall not be modified, translated, supplemented
or omitted without Riverdeep's prior written approval (not to be unreasonably
withheld or delayed) and any such modifications, translations or supplements
shall remain the property of Riverdeep.
1.6 "END USERS" shall mean the customers of Distributor's
Retailers (as hereinafter defined) to whom such Retailers sell Products for use
and not for re-sale.
1.7 "EXCLUDED PRODUCTS" means (i) genealogy-based and
language-based software programs unless otherwise consented to by Distributor in
its sole discretion; (ii) Products that have been terminated pursuant to Section
10.1.4 hereof; and (iii) such individual SKU's as to which Distributor
determines in its sole discretion it will no longer ship or fulfill retail
orders and notifies Riverdeep of such determination in writing.
1.8 "INTELLECTUAL PROPERTY RIGHTS" means patent rights and
registrations and applications, renewals and extensions therefor, copyright
(including, but not limited to, ownership rights in all titles, computer code,
themes, objects, characters, character names, stories, dialog, catch phrases,
locations, concepts, artwork, animation, sounds, musical compositions,
audio-visual effects and methods of operation, moral rights and any related
documentation), copyright registrations and applications, renewals and
extensions therefor, trademark registrations and applications, renewals and
extensions therefor, rights in trade dress and packaging, trade secrets and
other intellectual property rights recognized by U.S. laws and applicable
foreign and international laws, treaties and conventions.
1.9 "LICENSED MEDIA" shall mean all (i) computer-readable magnetic
media storage devices for the PC, including CD-Rom and DVD-Rom, (ii) DVD's, and
(iii) electronic learning aids (such as, Leapster and Leapad); provided however,
in the case of DVD's and electronic learning aids, Distributor shall only have
exclusive rights only on a Product-by-Product basis and only if Riverdeep is
able to retain such distribution rights in any negotiations involving the
development of the applicable product, it being understood that Riverdeep shall
use good faith commercially reasonable efforts to retain such rights.
Interactive online (unless otherwise a part of the Product itself) and
electronic download are excluded.
1.10 "LOSS EVENT" means, with respect to any Product under this
Agreement or the Prior Agreement, (i) a loss of rights the effect of which
limits or precludes Riverdeep licensing such Product to Distributor under this
Agreement without a default by Riverdeep hereunder; (ii) Riverdeep's failure to
initially procure rights to such Product; (iii) Riverdeep's failure to make such
Product available to Distributor hereunder; (iv) Riverdeep's failure to provide
the Deliverables for such Product as and when required hereunder; or (v)
Riverdeep's decision to discontinue such Product, or (vi) any other event or
occurrence the effect of which limits or impairs the rights granted to
Distributor hereunder in respect of such Product.
1.11 "MEDIATOR" means a mediator to be chosen by the parties from
time to time to resolve specific disputes hereunder pursuant to a mediation
procedure to be mutually agreed upon by the parties within 30 days after the
Commencement Date.
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1.12 "NPD INDEX" means on each Adjustment Date, the size, in US
Dollars, of the market for retail sell-through of software in the United States,
as published in the NPD Techworld database, for the 12-month period ending on
the first day of the current Sales Year. On each Adjustment Date, the NPD Index
will be determined by inserting the following search query into such database:
(i) the Category shall be determined by mutual agreement of the parties within
seven (7) days after the date hereof ; (ii) the existing data shall be
extrapolated to 100% of the market using the NPD "100%" function; (iii) the
result shall be based on dollar sales (as opposed to unit sales); and, (iv) the
period covered shall be the prior full 12-month period. If at any time after the
Commencement Date the format or components of the NPD Index (or any of the
individual indices from which it is compiled) are materially changed, or if the
NPD Index (or any of the individual indices from which it is compiled) is no
longer published, either party may send written notification to the other party,
whereupon the parties shall have a period of thirty (30) days to attempt to
agree upon a substitute method for measuring the size of the market previously
measured by the NPD Index. If, by the end of such time, the parties are unable
to agree upon a substitute method, the parties shall assign a mathematical
formula to the line that best fits the five years of data from the NPD Index (or
any of the individual indices from which it is compiled) preceding the
applicable Adjustment Date and, using such formula, shall extrapolate the NPD
Index for each of the subsequent Adjustment Dates.
1.13 "OEM" shall mean: original equipment manufacturers selling
hardware, Non-Traditional OEM's, and Similar Distributors. As used herein, (i)
"Non-Traditional OEM's" shall mean distributors who manufacture Product(s), and
do not sell the Products in the retail channel; and, "Similar Distributors"
shall mean distributors (including entities acting on behalf of Similar
Distributors in licensing software from Riverdeep and other sources) which
advertise, market, distribute and sell products through after-purchase programs
for goods, other than Products, sold in any channel, loyalty programs (defined
as special offers presented to end users who purchase goods from Similar
Distributors, e.g. Frequent Flier Programs, mailers inserted into bills, etc.),
fundraising programs, or direct mail programs, but in any event not selling or
distributing any Product through or into the Channel unless pursuant to a
sublicense approved under Section 1.2 above. As used herein, "after-purchase
programs" shall mean marketing programs through which an end user may receive
the Product for a fee after purchasing another product.
1.14 "PREVIOUSLY-RELEASED PROPERTIES" means interactive software
(and all updates, upgrades, or other modifications thereto) owned or controlled,
or that was owned or controlled, by Riverdeep that is obsolete and no longer
distributed in the Channel.
1.15 "PRODUCT" or "PRODUCTS" shall mean those computer software
product lines of Riverdeep consisting of the individual SKU's for such lines
listed on Exhibit A, as the same may be amended from time to time in accordance
with the provisions of Section 2.6 and 2.7, together with the "Products" as
defined in the Prior Agreement; provided however, that such Products under the
Prior Agreement (whether or not listed on Exhibit A attached hereto) shall not
be deemed to constitute "Products" hereunder until the earlier of (i) the date
upon which Distributor shall have fully recouped the Guaranteed Royalty under
the Prior Agreement; and (ii) the termination of the Prior Agreement pursuant to
Section 12.14 of this Agreement; and provided further, that any Consent-Required
Product shall not constitute a Product hereunder until Riverdeep notifies
Distributor that it has received the corresponding Third Party Consent therefor,
whereupon the same shall constitute a Product hereunder. Riverdeep shall have
the right upon 30 days' prior written notice to Distributor to modify, alter,
improve, change, add to or discontinue any or all the Products in accordance
with the provisions of Section 2.6 and 2.7. Notwithstanding anything to the
contrary in this Agreement, including Exhibit A, in no event shall the Products
include any Excluded Products or Previously-Released Properties. References to
"Products"
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herein shall be deemed to include all SKU's within such Product other than
Previously-Released Properties.
1.16 "PRIOR AGREEMENT" means that certain License and Distribution
Agreement (Manufacturing Rights) (2004 - 2005), of even date herewith entered
into between the parties, as the same shall have been amended or modified in
writing between the parties from time to time.
1.17 "RETAILERS" shall mean the business entities in the Channel
and Territory to which Distributor markets and distributes, either directly or
through distributors, Products for resale.
1.18 "REVISION EVENT" shall mean, on each of June 30, 2005, and
June 30, 2006, a failure by Riverdeep for any reason to revise (i.e., "rev") any
seven of the ten highest revenue generating Products over the prior 12-month
period, five of which must be the five highest revenue generating Products over
the prior 12-month period.
1.19 "SALE" of any Product shall mean the granting of a license to
use such Product and the "purchase" of any Product shall mean the obtaining of a
license to use such Product.
1.20 "SALES DISCOUNTS" shall mean price discounts and price
protection.
1.21 "SALES YEAR" means each twelve-month period during the Term
commencing on the Commencement Date and each anniversary thereof.
1.22 "TERM" shall mean that period of time specified in Section 9
of the Agreement.
1.23 "TERRITORY" shall mean the United States.
2. DISTRIBUTION RIGHTS.
2.1 Rights Granted to Distributor. Riverdeep hereby grants to
Distributor the exclusive right and license to replicate, publish, market, sell,
and distribute the Products on the Licensed Media in the Channel in the
Territory. Riverdeep hereby grants to Distributor a non-exclusive,
non-transferable license to use the names of the Products as well as, where
applicable, the "The Learning Company," "Broderbund," "Edmark," and "Riverdeep"
trademarks, all subject to Riverdeep's standard policies and the approval
processes specified herein. Except as expressly provided herein, Distributor
shall have no right to sublicense or otherwise transfer any of the rights
granted under this Agreement. Distributor may not create derivative works of the
software in the Products, nor may it alter or modify such software in any way.
All other rights not granted herein to Distributor are reserved. Distributor is
not authorized to sell the Products for delivery outside the Territory or for
re-sale outside the Territory. Distributor shall have the right, but not the
obligation, to manufacture the Products and may use third-party manufacturers
for such manufacturing. Such third party manufacturers shall be subject to
Licensor's prior written approval, it being agreed that Riverdeep has approved
all of the third party manufacturers set forth on Exhibit E. All rights granted
herein are specifically subject to the additional covenants, terms and
conditions set forth in Exhibit B attached hereto.
2.2 Documentation. Each Product distributed by Distributor under
this Agreement shall be the full retail version of such Product and shall
include a complete copy of the Product's original Documentation (such
Documentation shall not vary with current Riverdeep practices or future industry
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standards), including an end-user license agreement mutually agreed to by the
parties between Riverdeep and such end-users but incorporating Distributor's
warranty and return policy, provided such items are furnished to Distributor on
a timely basis prior to manufacturing of the applicable Products; provided
however, that any items provided by Distributor shall be subject to Riverdeep's
packaging approval requirements provided herein. Riverdeep shall provide an end
user warranty for the Products of form and substance approved by Distributor and
consistent with Distributor's end user return policy. Notwithstanding anything
to the contrary in this Agreement, Distributor shall not be obligated to pay for
any inserts or other promotions for the Products requested by Riverdeep, it
being understood that the manual shall not constitute an insert for purposes of
this sentence. Distributor may, in its sole discretion and expense, put inserts
and promotions into packaging for Products and retain any revenue derived
therefrom, subject to Riverdeep's reasonable approval.
2.3 Assortments, Bundles and Premiums. The license granted herein
shall include the right to sell and/or distribute the Products: (i) as
individual stand-alone units, including jewel case; (ii) as part of an
Assortment (as used herein, "Assortment" shall mean that a Product (or
portion/component of a Product) is sold with another software product or
products, but such Product is not physically packaged with such other
product(s)); and (iii) as bundles where a Product(s) (or portion/component of a
Product) is physically packaged or included on the same physical media with
other products ("Bundle"). Assortments or Bundles that contain software or
components other than Products shall be referred to as "Mixed Assortments" and
"Mixed Bundles." All jewel case, Bundles and Assortments shall be subject to
Riverdeep's prior written approval, not to be unreasonably withheld or delayed.
"Premiums" shall mean extra item(s) provided to an end user who has purchased
goods, said extra item(s) to be provided for no or nominal additional
compensation. Distributor shall not distribute the Products as Premiums, for
promotional purposes, or in any other manner so as to diminish, tarnish or
otherwise derogate the Riverdeep brands. Distributor will not port or otherwise
transfer Product intended for use on one Licensed Media onto another Licensed
Media without Riverdeep's prior consent, which may be given or withheld in
Riverdeep's sole discretion.
2.4 Support. During the Term, Distributor shall provide customer
support and technical support via email, telephonic, or online in a manner
consistent with other products distributed by Distributor and industry
standards. On Riverdeep's request, Distributor shall use commercially reasonable
efforts to provide quarterly status reports regarding customer and technical
support, in an agreed format subject to Distributor's existing data limitations,
including such information as number of calls per sku, customer feedback, nature
of bug or other problem. Such delivery shall be made within fifteen (15) days of
request.
2.5 Expenses. Except to the extent elsewhere provided in this
Agreement, Distributor will bear all costs and expenses incurred by Distributor
in manufacturing, promoting, channel marketing and distributing the Products,
including but not limited to manufacturing, shipping, handling and warehousing
costs, channel marketing expenditures, price protections and returns.
2.6 Changes to the Product List and Products. Riverdeep shall not
have the right to make any changes to the list of Products licensed hereunder to
Distributor except as set forth in this Section.
2.6.1 Upon the occurrence of a Loss Event, Riverdeep shall
notify Distributor as soon as possible, and if such Loss Event arises for any
reason other than a default by Riverdeep under Riverdeep's license agreement for
such Product, Riverdeep shall have the right to replace such Product with a
product of comparable market value and saleability to be agreed upon by the
parties. If the parties are able to reach agreement as to an appropriate
replacement product, such product shall
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be deemed a "Product" hereunder, Distributor shall have all rights with respect
thereto as provided with respect to other Products hereunder, and Distributor
shall have no further claim against Riverdeep arising out of the failure to
provide the Product so replaced, it being understood that each party shall
retain its rights and obligations in regard to customer support,
representations, warranties, indemnification, returns, credits, license fees and
royalties due on such Product units already in the Channel. If the parties,
operating in good faith and with commercial reasonableness, are unable to reach
agreement on any replacement product within fifteen (15) days after notification
to Distribution of such Loss Event, or if Riverdeep has lost such rights by
reason of a default under its license agreement for such Product, the Guaranteed
Royalty shall be reduced as set forth in Section 4 and Distributor shall have
all of its rights and remedies hereunder, at law, or in equity; provided
however, that Distributor shall cease further manufacturing, sales, and
distribution of the Product within 15 days after notification of any such Loss
Event, if applicable.
2.6.2 Riverdeep shall have the right at any time to add
products to this Agreement, or to modify, upgrade, improve, or enhance Products
under this Agreement, and promptly upon doing so shall provide Distributor with
a replicatible goldmaster and other applicable materials for Distributor's use
hereunder.
2.7 Publishing Plan. Exhibit A lists the dates by which each
Product will be made available by Distributor for shipment. Distributor shall
have the right to request that Riverdeep revise each of the Products
periodically during the Term, and upon such request, Riverdeep shall not
unreasonably withhold its consent to do so, but in any event the ten highest
revenue generating Products over the preceding 12-month period shall be revised
at least once in each eighteen month period commencing on the Commencement Date.
2.8 Exclusive Distributor. Riverdeep shall not license any
currently existing products or future products for the Licensed Media to any
other Distributor for sale or distribution in the Channel and the Territory,
other than Excluded Products. This Section 2.8 shall not apply to any Products
for which Riverdeep has terminated Distributor's right to distribute pursuant to
Section 10.1.4 herein.
2.9 Deliverables. In respect of each of the Products available as
of the Commencement Date, Riverdeep shall provide to Distributor the
deliverables set forth on Exhibit D attached hereto (collectively, the
"Deliverables") within 10 days after the Commencement Date. In respect of all
other Products, the parties shall mutually agree upon the ship dates therefor,
and thereafter Riverdeep shall provide the Deliverables for such Products no
later than by the dates set forth on Exhibit D. Without implication as to the
materiality of a default in respect of any other Products, Riverdeep's failure
to furnish the Deliverables for the eight highest revenue generating Products
over the preceding 12-month period shall be deemed to constitute a material
default by Distributor hereunder unless cured under the default provisions
hereof. In addition to any other rights and remedies available to Distributor
for a Loss Event arising from Riverdeep's failure to provide the Deliverables
for any Product on a timely basis, the period that Distributor has to meet any
applicable Per Product Market Share Quota shall be extended on a day-for-day
basis for each day of delay, and Riverdeep shall reimburse Distributor for
Distributor's out-of-pocket losses, costs, and expenses incurred or owed by
Distributor arising out of such failure within thirty (30) days after invoicing
Riverdeep therefor.
3. OWNERSHIP AND COPYRIGHT AND TRADEMARK NOTICES.
3.1 Riverdeep retains and shall have ownership of all licensed
intellectual property, including registered and unregistered copyrights and
trademarks (and all good will derived therefrom),
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character assets, software code, package design, trade dress and marketing
collateral, and any and all modifications, enhancements and derivative works
thereof and all Intellectual Property Rights embodied therein and related
thereto. All package art and marketing collateral shall be created as a work for
hire, owned by Distributor, except to the extent otherwise required by
Riverdeep's licensors. Distributor shall cooperate with Riverdeep to meet the
requirements of such licensors as pertains to the creation of packaging art and
marketing collateral. Upon Riverdeep's request, no more frequently than once
each quarter during the Term, Distributor shall irrevocably assign and transfer
to Riverdeep in perpetuity and throughout the Universe any and all of
Distributor's right, title and interest (including, without limitation, the
rights generally known as "moral rights" to the extent assignable) in the
packaging art and marketing collateral for the Products created by or on behalf
of Distributor, without representation or warranty other than that Distributor
has not itself theretofore assigned or transferred any rights therein. In
addition, upon and within fifteen (15) days of Riverdeep's request, no more
frequently than once each quarter during the Term, Distributor shall also
provide archived files of all such materials in the same form and format in
which Distributor uses such materials at no cost to Riverdeep. Distributor shall
not create a unitary composite xxxx involving Riverdeep's trademarks or trade
names. Distributor agrees that all use of such Riverdeep trademarks and trade
names shall be pursuant to Riverdeep's use guidelines, shall inure to the
benefit, and be on behalf, of Riverdeep.
3.2 Distributor hereby agrees that at the termination or
expiration of this Agreement, Distributor shall and does assign, transfer and
convey to Riverdeep all trademarks, service marks, copyrights, equities, good
will titles or other rights, titles and interests throughout the world in and to
the Products (including all packaging, marketing collateral and related
materials, but excluding Distributor's logo and other trademarks proprietary to
Distributor and unrelated to the Products) which may have been obtained by
Distributor or which may have vested in Distributor as a result of its
activities under this Agreement, and that Distributor shall immediately execute
any instruments requested by Riverdeep to accomplish or confirm the foregoing.
No consideration other than the mutual covenants and considerations of this
Agreement shall be necessary for any such assignment, transfer, or conveyance.
Distributor expressly understands and agrees that following termination or
expiration of this Agreement it retains no right to exploit or continue to
exploit or in any way deal with copies of, in any fashion and/or by any means,
the Products or any elements thereof, or packaging, promotion or advertising
related thereto or to the Products, and/or other works which embody the Products
in whole or in part which it created pursuant to this Agreement, without
Riverdeep's prior consent.
3.3 Distributor may not adopt any trademark, trade name, design,
logo or symbol, which is similar to or likely to be confused with or to dilute
any Riverdeep xxxx, name, logo or other intellectual property. Any sale of a
Product shall include the copyright, trademark and other proprietary rights
notices as are contained on the masters of such Product (including the
documentation) or as may be specified from time to time by Riverdeep. The
Products shall feature the Riverdeep brands. Distributor shall xxxx all
packaging to indicate itself as the manufacturer and distributor of the
products, under license from Riverdeep Inc., a Limited Liability Company, and
its licensors. All packaging is subject to Riverdeep's approval. Riverdeep's
approval of such packaging shall be deemed to constitute Distributor's
compliance with the packaging requirements of this Agreement.
4. LICENSE FEES; GUARANTEED ROYALTY; THIRD PARTY LICENSING REIMBURSEMENT.
4.1 Earned License Fees. Distributor shall pay Riverdeep the
license fee(s) set forth on Exhibit B of this Agreement according to the terms
set forth on Exhibit B.
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4.2 Guaranteed Royalty.
4.2.1 *
4.2.2 The Guaranteed Royalty for each Sales Year shall be
fully recoupable by Distributor from royalties earned by Riverdeep on Products
during such year and for three additional months into the following Sales Year
(for an aggregate recoupment period of 15 months); provided however, that if at
the end of any Sales Year, Distributor has not fully recouped the Guaranteed
Royalty for such Sales Year, then Distributor shall have 12 months from the
first ship date of any Product that shipped in the last quarter of such Sales
Year to recoup such Guaranteed Royalty from sales of such Products only;
provided further, that if Riverdeep has failed to provide any Deliverable for a
Product when due, then Distributor shall have 12 months from the first ship date
of any such Product to recoup such Guaranteed Royalty from sales of such
Products only from the Sales Year in which such Product was supposed to have
shipped; and provided further, that Distributor shall have an additional
12-month period to recoup all Guaranteed Royalties from the sales of all of the
Products upon the occurrence of the first Revision Event.
4.2.3 If, on any Adjustment Date, the decline in the NPD
Index (i) from the beginning of the Sales Year under the Prior Agreement until
the end thereof, or (ii) from the beginning of the first Sales Year hereunder
until the end thereof, exceeds thirty (30%) percent, then Distributor shall be
entitled to a credit against next succeeding installment of the Guaranteed
Royalty for the Sales Year in which such Adjustment Date falls and each
installment thereafter until such credit has been fully applied (or if the Term
terminates due to a default by Riverdeep or expires, Distributor shall be
entitled to a cash payment from Riverdeep in the amount of the Applicable
Benchmark Credit for such year) in the amount of the Applicable Benchmark Credit
on each such Adjustment Date. The "Applicable Benchmark Credit" means an amount
equal to the product of the following variables:
(x) the market share of the Products, expressed as a
percentage; times,
(y) the amount, expressed in gross dollars, by which 70%
of the NPD Index at the beginning of the applicable
preceding Sales Year exceeds the NPD Index at the end
of such preceding Sales Year; times
(z) Riverdeep's royalty rate (i.e., *).
4.2.4 In addition, upon the occurrence of a Loss Event,
Distributor shall be entitled to a further credit against the next succeeding
installment of the Guaranteed Royalty for the first and second Sales Years and
each installment thereafter until such credit has been fully applied (or if the
Term terminates due to a default by Riverdeep or expires, Distributor shall be
entitled to a cash payment from Riverdeep in the amount of such credit in such
year) in an amount equal to the Guaranteed Royalty for the most recent 12-month
period (such period and Guaranteed Royalty during the first Sales Year hereunder
referring to the "Guaranteed Royalty" and the "Sales Year" under the Prior
Agreement), multiplied by a fraction, the numerator of which is the gross
revenue generated by the applicable Product as to which such Loss Event occurred
over the preceding 12-month period, and the denominator of which is the gross
revenue generated by all of the Products over the same period (or if such
Product was not released by Riverdeep during such period, the closest like
Product). Upon request, Riverdeep shall provide all such information as may be
necessary or appropriate for Distributor to calculate such credit, including
historical revenue figures
* The material has been omitted pursuant to a request for confidential
treatment and the material has been filed separately with the Office of the
Secretary of the Securities and Exchange Commission.
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and shall make its books and records available to Distributor for such purpose
to the same extent as Distributor would be required to if Riverdeep initiated an
audit hereunder.
4.3 *
5. UNDERTAKINGS OF THE PARTIES.
5.1 Marketing of the Products. Distributor shall use commercially
reasonable efforts to promote the sale of the Products in the Territory and
Channel. Distributor shall undertake channel marketing of the Products
throughout the Territory, consistent with industry standards. Distributor shall
maintain a commercially reasonable sales organization which can be best utilized
for the promotion of the sales of the Products.
5.2 Conduct of Business. Distributor will conduct its business in
a manner that will reflect favorably at all times on the Products and the good
name, goodwill and reputation of Riverdeep; avoid deceptive, misleading or
unethical practices or advertisements that are or might be detrimental to
Riverdeep, the Products, or the public; and not publish or employ or cooperate
in the publication or employment of any misleading or deceptive advertising
materials. Distributor agrees that the Products replicated and distributed by
Distributor shall at all times shall be of high standard and of such style,
appearance and quality as to protect and enhance the Products and the good will
pertaining thereto, shall meet Riverdeep's reasonable quality standards and
specifications as stated herein, and shall be manufactured, sold, distributed
and promoted in accordance with all applicable, Federal, state and local laws
and regulations. Distributor may not sell Products that Distributor knows to be
damaged or defective or which it would reasonably consider to be "seconds" based
on industry standards.
5.3 Compliance with Laws. Distributor will comply in all material
respects with the laws and regulations of all applicable local, state and
federal jurisdictions relating to Distributor's activities hereunder, including,
but not limited to, all state and federal laws and regulations governing product
warranties for the Products.
5.4 Sales Materials. Subject to Riverdeep providing underlying
data for the Sales Materials, Distributor may reproduce sales materials,
including technical specifications, drawings, advertisements and samples
(collectively, "Sales Materials") as reasonably required, provided that all
copyright, trademark and other property markings are reproduced. Such materials
remain the property of Riverdeep, and, except insofar as they are distributed by
Distributor in the course of its performance of its duties under this Agreement,
must be promptly returned to Riverdeep upon the expiration or termination of
this Agreement without charge to Riverdeep.
6. PUBLIC ANNOUNCEMENT; CONFIDENTIALITY OF INFORMATION AND MATERIALS.
Neither party may issue a press release or make other public announcement
regarding the existence of this Agreement, without the express written consent
of the other except to the extent reasonably interpreted to be required by
applicable laws, rules or regulations, and in such case, Distributor shall
endeavor, but shall not be obligated, to provide Riverdeep with notice of such
announcement and an opportunity for review. The parties each shall hold in
strict confidence and shall not disclose to others (except for affiliates,
investors, advisers and consultants on a need to know basis and subject to
confidentiality, or otherwise as required by law) or use, either before or after
termination or expiration of this Agreement, any technical or business
information, manufacturing technique, process, experimental work, trade secret
or other confidential
* The material has been omitted pursuant to a request for confidential
treatment and the material has been filed separately with the Office of the
Secretary of the Securities and Exchange Commission.
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matterrelating to the Products, except to the extent disclosure is reasonably
required in connection with Distributor's marketing activities in the Territory
and except to the extent that Riverdeep may assign the proceeds under this
Agreement as set forth in Section 12.3.
7. REPRESENTATIONS AND WARRANTIES.
7.1 Riverdeep. Riverdeep represents and warrants that (i) it is
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated, and that it has the full rights,
power, legal capacity and authority to enter into this Agreement, and to carry
out the terms hereof; (ii) this Agreement has been executed by its duly
authorized representative and is a valid, legally binding and enforceable
obligation of Riverdeep; (iii) Riverdeep is either the owner of the Products and
all Intellectual Property Rights therein or has procured all necessary rights
and licenses from the owners of such rights to enter into and carry out the
terms of this Agreement; (iv) the Products have not been sold, assigned, leased,
licensed or in any other way disposed of or mortgaged, pledged or encumbered in
a manner that would violate the license granted to Distributor hereunder, and
that it is under no contractual or other legal obligation which would interfere
in any way with the full, prompt, and complete performance of its obligations
pursuant to this Agreement (including with regard to Riverdeep's contracts with
COKeM that relate to the Products); (v) no consent of any person or entity not a
party to this Agreement is required or necessary for Riverdeep to carry out its
obligations hereunder; (vi) there is no litigation, claim or proceeding of any
nature pending or threatened in writing against or relating to the Products or
any Intellectual Property Rights related thereto which would have any material
adverse effect on the rights granted to Licensee hereunder; (vii) no default has
occurred under any agreement or contract to which Riverdeep is a party pursuant
to which Riverdeep licenses any Product from a third party, nor has any event
occurred, which, with the giving of notice or the passage of time, would
constitute a default under any such agreement or contract; and (viii) neither
the Products, nor any of the deliverables, nor the use of the Products or such
deliverables by Distributor in the manner specifically authorized hereunder, nor
the grant of the rights under this Agreement, is or will be an infringement of
or otherwise in violation of the rights of any third party in the Territory,
including, without limitation, the Intellectual Property Rights, or will violate
any applicable laws, rules, or regulations.
7.1.1 In this regard, Riverdeep hereby acknowledges and
agrees that Distributor shall be entitled to use and exploit in connection with
its rights under this Agreement all artwork and features and elements thereof
and all other materials provided by Riverdeep to Distributor under this
Agreement without being obligated to independently verify that, to the extent
the same has or may have been provided to Riverdeep by a third party, Riverdeep
has cleared all rights to Distributor's use and exploitation of such materials.
Without limiting the generality of the preceding sentence, Distributor at any
time shall have the right in its sole discretion to require that Riverdeep
provide to it evidence satisfactory to Distributor that all such rights to any
such materials have been cleared with all third parties, and upon receipt of
such request, Riverdeep shall promptly do so. In no event shall any such request
for verification by Distributor or disclosure by Riverdeep concerning the
impairment of such rights be deemed to abrogate or otherwise limit or affect the
protections afforded to Distributor under this Agreement in respect of
Distributor's use or exploitation of such materials.
7.2 Riverdeep further represents and warrants the
goldmaster candidate for each Product shall (i) correspond to, and perform in
all material respects in accordance with, any relevant specifications,
functional or other descriptions contained in the written materials accompanying
the Products and in all of Riverdeep's advertising and promotional materials
(including, any final demonstration versions of the Products, produced, released
or approved by Riverdeep), without interruption or error, (ii) function in all
respects on the hardware and software specified, (iii) be free
10
from viruses, bugs, and operational limiting routines, the effect of which would
materially impair the ability of the end-user to use and enjoy the Product as so
intended, (iv) not contain any viruses, worms, date bombs, time bombs, or other
code designed to cause the Products to cease operating or to damage, interrupt,
or interfere with any end-user's hardware, software or data, and (v) be free of
other material defects. If any goldmaster candidate fails to comply with
Riverdeep's representation and warranty under this Section, without limiting any
right or remedy in this Agreement, Riverdeep shall provide patches or fixes to
such Product that prevents it from functioning as represented to Distributor or
otherwise keeps it from satisfying the requirements of this Section, any such
patches or fixes to be provided as soon as commercially reasonable following
Distributor's request therefor, but in no event later than 15 days thereafter
for any material bug attributable to Riverdeep's product coding and 30 days for
all other Products, it being understood that any such patch or fix so provided
shall be deemed to cure Riverdeep's breach of the foregoing representation so
long as such patch or fix, taken together with the Product itself, would not
have resulted in a breach of such representation, and other than for any
out-of-pocket losses, costs, or expenses incurred or owed by Distributor as a
result of such breach. Distributor shall notify Riverdeep of crash bugs promptly
after becoming aware of the existence thereof and of any other impairment event
in a commercially reasonable period of time thereafter.
7.3 Riverdeep shall pay all amounts due under each of its licenses
for the Products and shall otherwise maintain the same in effect through the
term thereof. Riverdeep shall not grant any waiver or forebearance with respect
thereto if the effect of such waiver or forebearance would be to accelerate the
date of the expiration or termination thereof from the original term.
EXCEPT AS SET FORTH IN THIS SECTION, RIVERDEEP MAKES NO REPRESENTATION
OR WARRANTY WITH RESPECT TO ANY PRODUCT OR THE RELATED DOCUMENTATION AND TO THE
EXTENT PERMITTED UNDER APPLICABLE LAW THE PRODUCTS ARE DELIVERED "AS IS." THE
WARRANTY STATED HEREIN IS EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NON-INFRINGEMENT, AND
SUCH WARRANTY CONSTITUTES THE ONLY WARRANTY MADE BY Riverdeep WITH RESPECT TO
THIS AGREEMENT OR THE PRODUCTS, ARTICLES, MATERIALS, REPLACEMENT PARTS OR
SERVICES TO BE SUPPLIED HEREBY.
7.4 Distributor. Distributor covenants, represents and warrants
that (i) it is duly incorporated, validly existing and in good standing under
the laws of the jurisdiction in which it is incorporated, and that it has the
full rights, power, legal capacity and authority to enter into this Agreement,
and to carry out the terms hereof; (ii) this Agreement has been executed by its
duly authorized representative and is a valid, legally binding and enforceable
obligation of Riverdeep; (iii) Distributor's exercise of its rights and
performance of its obligations hereunder will not violate any laws or other
legal requirements; (iv) Distributor will not create, incur or permit any
encumbrance, lien, security interest, mortgage, pledge, assignment or other
hypothecation upon the License or Products or permit the commencement of any
proceeding or foreclosure action on a lien created by Distributor or any of its
agents or contractors on the License or Products, or to obtain any assignment
thereof, whether or not involving any judicial or nonjudicial foreclosure sales.
11
8. INDEMNIFICATION AND INSURANCE
8.1 Riverdeep Indemnity. Riverdeep shall indemnify, defend, and
hold Distributor harmless from and against all claims, suits, demands, actions
and proceedings, judgments, penalties, damages, costs and expenses (including
reasonable legal fees and costs), losses or liabilities ("DAMAGES") arising out
of (i) any trademark, trade dress, copyright, or patent infringement claim,
claim involving appropriation of trade secrets, claim arising out of the use and
exploitation of a person's appearance, performance, voice, or likeness in a
Product or Previously-Released Property, or claim arising out of anyone's right
to publicity or invasion of privacy contained in a Product or
Previously-Released Property; (ii) any amounts due to third parties for license
fees, royalties, dues, fees, or other amounts arising out of the content of or
included in any Product (including without limitation, public performance fees,
music sync license fees, and amounts due to any guilds, unions or collective
societies in connection with such content and the use and exploitation thereof);
(iii) any product liability claim or other claim for injury or damage done to
any person arising out of the use or operation of software in the Product; (iv)
any claim arising out of or relating to the manufacturing, marketing, sale,
distribution, or other exploitation of Previously-Released Properties or
Products existing in the Channel prior the Commencement Date excluding amounts
for which Distributor is responsible under Section 5 and 6 of Exhibit B; (v) any
Damages incurred by Distributor resulting from a breach by Riverdeep of any
provision of this Agreement; (vi) Distributor's costs of goods and out-of-pocket
losses arising out of a Loss Event in respect of any Product, without regard to
whether such Product is replaced pursuant to Section 2.6 or any reduction to the
Guaranteed Royalty; or, (vii) any liabilities associated with inventory in the
Channel from and after the expiration or sooner termination of the Term except
to the extent (A) of such liabilities for which Distributor is expressly liable
therefor under Section 10.2 of the Prior Agreement, or (B) of such liabilities
other than for returns, Sales Discounts, MDF for such inventory for which
Distributor would otherwise be responsible under this Agreement which arise out
of an event or condition occurring during the Term.
8.1.2 Riverdeep shall not be obligated to defend or be
liable for costs and/or damages under this Section 8 to the extent that the
alleged infringement arises out of or is in any manner attributable to any
modification of any Product by Distributor (or any of Distributor's resellers),
including packaging and marketing collateral.
8.1.3 If any intellectual property claim which Riverdeep is
obligated to defend has occurred, or in Riverdeep's opinion is likely to occur,
Distributor agrees to permit Riverdeep, at Riverdeep's option and expense,
either to procure for Distributor (or its customers) the right to continue using
the subject Product or to replace or modify such Product so that it becomes
non-infringing; provided that any such action is at no cost or expense to
Distributor and any replacement is in accordance with Section 2.6 hereof.
8.2 Distributor Indemnity. Distributor shall indemnify and hold
Riverdeep harmless from and against all Damages which may arise or result from
or relate to (i) contract claims between Distributor and any of its
distributors, resellers, replicators, or retailers relating to any of the
Products; (ii) any Damages incurred by Riverdeep as a result of any sale by
Distributor of any Product outside of the Territory; (iii) any Damages incurred
by Riverdeep resulting from a breach by Distributor of any provision of this
Agreement; (iv) any third party claims of misleading advertising by Distributor;
or (v) any trademark, trade dress, copyright, or patent infringement claim,
claim involving appropriation of trade secrets, claim arising out of the use and
exploitation of a person's appearance or likeness, in each case solely arising
out of any Product packaging created by or on
12
behalf of Distributor, or claim arising out of anyone's right to publicity or
invasion of privacy contained in any such Product packaging other than any claim
relating to underlying art assets or other materials provided by or on behalf of
Riverdeep to Distributor; (vi) any unfair trade practice, antitrust, or consumer
protection claims relating to the manufacture, marketing, sale or distribution
of the Products by Distributor; (vii) any personal injury claims relating to
Distributor's manufacture, sale, marketing or distribution of the Products,
except to the extent arising from the software in the Products; and (viii) any
claims by Riverdeep's licensors arising from or related to Distributor's
incomplete or inaccurate reporting relating to the sale of the Products (it
being understood that Distributor shall not be liable under this clause (viii)
for incomplete or inaccurate information provided to it by a third party).
8.3 The indemnifications provided for herein are conditioned upon
the indemnified party's furnishing the indemnifying party with prompt written
notice of any such claim or suit and upon reasonable cooperation in defense of
such claim or suit. In such event, the indemnifying party shall have the option
to undertake and conduct the defense of any such claim or suit. The indemnifying
party shall not settle any claim or suit without the prior written consent of
the indemnified party, which shall not be unreasonably withheld or delayed. The
indemnifications hereunder shall survive the termination of this Agreement.
8.4 NEITHER PARTY SHALL UNDER ANY CIRCUMSTANCES BE LIABLE FOR ANY
CONSEQUENTIAL, INDIRECT, SPECIAL, INCIDENTAL OR EXEMPLARY DAMAGES, INCLUDING
WITHOUT LIMITATION, ANY LOSS OF REVENUES, PROFITS, OR BUSINESS OR OTHER ECONOMIC
LOSS ARISING OUT OF OR IN CONNECTION WITH THE SERVICES PROVIDED HEREUNDER,
ARISING UNDER CONTRACT, TORT OR OTHERWISE, AND EVEN IF ADVISED OF THE
POSSIBILITY OF SUCH LOSS, EXCEPT AS SPECIFICALLY PROVIDED FOR ELSEWHERE IN THIS
AGREEMENT. THE FOREGOING SHALL NOT LIMIT EITHER PARTY'S INDEMNIFICATION
OBLIGATIONS HEREUNDER TO THE EXTENT THAT A THIRD PARTY CLAIMS ANY SUCH DAMAGES
AGAINST A PARTY HEREUNDER.
8.5 Insurance. Distributor shall obtain, at its own expense,
general liability, including product liability, insurance providing adequate
protection for Riverdeep in amounts no less than One Million Dollars
($1,000,000.00) for bodily injury to any person per any one occurrence and One
Hundred Thousand Dollars ($100,000.00) for property damage per any one
occurrence. Simultaneously with the execution of this Agreement, Distributor
shall submit to Riverdeep fully paid policies or certificates of insurance
naming Riverdeep as an additional insured party and, providing that coverage
shall extend to all claims or suits arising out of the use of the Products
manufactured or sold under this Agreement, and further requiring that the
insurer shall not terminate or materially modify such without written notice to
Riverdeep at least twenty (20) days in advance thereof.
9. TERM OF AGREEMENT.
9.1 This Agreement shall commence on the Commencement Date and
shall continue in effect for a period of two (2) years from the Commencement
Date (as the same may be extended hereunder, the "TERM"). The Term shall be
extended for any extended recoupment periods under Section 4 hereof. Each year
is conditioned on the payment of the applicable Guaranteed Royalty for the
preceding Sales Year.
13
9.2 The Term may be renewed for successive one (1) year terms upon
the mutual written agreement of the parties.
10. TERMINATION.
10.1 Termination For Cause. Either party may terminate this
Agreement, without further notice, for cause as follows:
10.1.1 Either party may immediately terminate this Agreement
upon written notice to the other party in the event that proceedings in
bankruptcy or insolvency are instituted by or against the other party, or a
receiver is appointed, or if any substantial part of the assets of the other
party is the object of attachment, sequestration or other type of comparable
proceeding, and such proceeding is not vacated or terminated within sixty (60)
days after its commencement or institution.
10.1.2 Either party may terminate this Agreement if the
other party commits a material breach of any of the terms or provisions of this
Agreement and does not cure such breach within thirty (30) days (or such shorter
period as may be expressly provided for in such applicable term or provision)
after receipt of written notice given. Distributor shall hold its affiliates,
third party manufacturers and authorized sublicensees to the same standards that
Distributor is held. If any of Distributor's affiliates, third party
manufacturers or authorized sublicensees commits any activity which would be a
breach of the Agreement by Distributor if Distributor had committed such
activity, Distributor shall within three business days following notice thereof
take commercially reasonable efforts to terminate such activity. Thereafter, if
the activity is not terminated within the earlier of thirty (30) days or the
period allowed for cure, pursuant to the applicable agreement with such third
party manufacturer or sublicensee, Distributor shall terminate the contractual
relationship with such third party.
10.1.3 [Intentionally Omitted.]
10.1.4 *
10.2 Rights Upon Termination. Upon termination of this Agreement,
by expiration of the Term or otherwise, all further rights and obligations of
the parties shall cease, except that the parties shall not be relieved of (i)
their respective obligations to pay any monies due or which become due as of or
subsequent to the date of termination, and (ii) any other respective obligations
under this Agreement which specifically survive or are to be performed after the
date of termination. Riverdeep shall provide written notice to the Channel that
Riverdeep or its new distributor will take responsibility for all returns, Sales
Discounts, and MDF from and after such expiration or sooner termination; [*]
Such Mediator shall be advised at the time of engagement to invoice each party
for 50% of fees and costs. In the event of termination for Distributor's breach,
Distributor shall, at Riverdeep's direction, destroy Products in Distributor's
possession, or transfer Products in its possession to Riverdeep, provided that
Riverdeep shall reimburse Distributor the actual cost of goods plus shipping and
handling fees for all units transferred to Riverdeep. Upon termination or
expiration of the Agreement for Distributor's breach, Distributor's payment
obligation for earned and guaranteed royalties shall survive and shall be due
and payable upon the same terms and conditions as provided for herein subject to
any obligation under applicable law to mitigate damages suffered by virtue of
Distributor's breach.
* The material has been omitted pursuant to a request for confidential
treatment and the material has been filed separately with the Office of the
Secretary of the Securities and Exchange Commission.
14
10.3 Unforeseen Circumstances. No delay or failure by the parties
hereto in the performance of any obligation of this Agreement shall be deemed a
breach of this Agreement nor shall it create any liability, if the same shall
arise by reason of any cause beyond the reasonable control of the affected
party, including, but not limited to, labor disputes, strikes, wars, terrorism,
riots, insurrection, civil commotion, accident, shortage of materials or
equipment, government regulations, fire, flood, storm, or any other acts of God,
including defects and/or breakdowns of equipment and programming errors not
within the reasonable control of the affected party, provided that the party so
affected shall use commercially reasonable efforts to avoid or remove such cause
of nonperformance and shall continue performance hereunder as soon as
practicable. The foregoing shall not excuse the performance of any financial
obligations hereunder under any circumstance. In the event such cause occurs and
exceeds sixty (60) calendar days, the party not so affected may cancel this
Agreement upon written notice.
10.4 Bankruptcy. The parties hereby agree and intend that this
Agreement is an executory contract governed by Section 365 of the Bankruptcy
Code.
(a) In the event of Distributor's bankruptcy, the parties intend that
any royalties earned under this Agreement during the bankruptcy period be deemed
administrative claims under the Bankruptcy Code because the parties recognize
and agree that the bankruptcy estate's enjoyment of this Agreement will (i)
provide a material benefit to the bankruptcy estate during its reorganization
and (ii) deny Riverdeep the benefit of the exploitation of the rights through
alternate means during the bankruptcy reorganization.
(b) The parties acknowledge and agree that any delay in the decision of
trustee of the bankruptcy estate to assume or reject the Agreement (the
"Decision Period") materially xxxxx Riverdeep by interfering with Riverdeep's
ability to alternatively exploit the rights granted under this Agreement during
a Decision Period of uncertain duration. The parties recognize that arranging
appropriate alternative exploitation would be a time consuming and expensive
process and that it is unreasonable for Riverdeep to endure a Decision Period of
extended uncertainty. Therefore, the parties agree that the Decision Period
shall not exceed sixty (60) days.
(c) Riverdeep, in its interest to safeguard its valuable interests
(including, without limitation, its intellectual property rights in the
Products), has relied on the particular skill and knowledge base of Distributor.
Therefore, the parties acknowledge and agree that in a bankruptcy context this
Agreement is a license of the type described by Section 365(c)(1) of the
Bankruptcy Code and may not be assigned without the prior written consent of
Riverdeep.
10.5 Cross-Default. An uncured material default under the Prior
Agreement by either party shall be deemed to constitute a an uncured material
default under this Agreement, the occurrence of which will entitle the party not
so in default to pursue all rights and remedies hereunder, including termination
and such other rights and remedies as such party may have at law or in equity.
10.6 Survival of Terms. Sections 3, 4, 6, 7, 8, 10.2, 10.5, 11 and
12 of this Agreement shall survive any termination of this Agreement.
11. BOOKKEEPING OBLIGATIONS AND INSPECTION RIGHTS.
11.1 Distributor shall maintain true and complete books of account
containing an accurate record of all data necessary for the proper computation
of payments hereunder, and Riverdeep shall have the right, by a certified public
accountant appointed by it and reasonably approved by Distributor, to examine
such books at all reasonable times (but not more than once in each calendar
15
year and not during the first fifteen days of any quarter) for the purpose of
verifying the accuracy of the reports and computation rendered by Distributor.
Upon reasonable advance written notice (but in no event less than 15 days), such
examination shall be made during normal business hours at the principal place of
business of Distributor. If such examination reveals that reports furnished by
Distributor were inaccurate by more than five percent (5%) and that amounts in
excess of those paid to Riverdeep are due, the cost of such examination shall be
borne by Distributor, and Distributor shall pay the amount of any discrepancy to
Riverdeep, plus interest at the rate of nine percent (9%) per year or part
thereof on any deficiencies.
11.2 Distributor will make commercially reasonable efforts to
facilitate Riverdeep's ability to enter and inspect all premises and facilities
(including, without limitation, storage and shipping facilities) of Distributor
and its manufacturer(s) and distributor(s), and its and their warehousers and/or
shippers, in order to ensure that the manufacture, packaging, labeling,
advertising and promotion and distribution of Products comply with Distributor's
obligations hereunder and all applicable laws. Distributor will make
commercially reasonable efforts to provide all information reasonably requested
by Riverdeep regarding the testing, manufacture, quality control, storage and
shipment of the Products.
12. MISCELLANEOUS.
12.1 Entire Agreement. This Agreement contains the entire
understanding of the parties hereto relating to the Products, supersedes any
prior written or oral agreement or understandings between the parties with
respect to the Products, and cannot be changed or terminated orally. This
Agreement may be amended only by a writing signed by the parties hereto.
12.2 Enforceability. The invalidity or unenforceability of any
provision of this Agreement will not affect the validity or enforceability of
any other provision of this Agreement.
12.3 Assignment. Neither party shall assign this Agreement without
the prior consent of the other, not to be unreasonably withheld or delayed,
except to an entity which controls, is controlled by, or under common control
with such party ("control" defined as the power to directly or indirectly direct
the management of the applicable entity or ownership of 50% or more of the
voting shares thereof) or a merger of a party into another business entity, the
sale or transfer of the ownership interest or control of a party, or the sale or
transfer of more than 50% of a party's assets
12.4 Successors. All rights and obligations arising out of this
Agreement shall inure the benefit of, and be binding on and enforceable by the
parties and their respective successors and permitted assigns.
12.5 Currency. All dollar amounts herein are expressed in United
States funds.
12.6 Governing Law. This Agreement and its validity, construction
and performance shall be governed in all respects by the laws of the State of
California.
12.7 Notices. All notices or other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be considered as properly given or made if hand delivered, mailed first class
mail, postage prepaid, sent by prepaid telegram (or telex or other facsimile
transmission) or sent by express overnight courier service:
16
If to Riverdeep, to: If to Distributor, to:
Riverdeep Inc. A Limited Liability Company Encore Software, Inc.
000 Xxxxxxx Xxxx. 00000 X. Xxxx Xxxxxx
Xxxxxx, XX 00000 Xxxxxxx, XX 00000
Attention: Chief Operating Officer Attention: Xxxxxxx X. Xxxx
Fax: (000) 000-0000 Fax: (000) 000-0000
With a copy to: With a copy to:
Riverdeep, Inc. Encore Software, Inc.
000 Xxxxxxx Xxxxxxxxx 00000 X. Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000 Xxxxxxx, XX 00000
Attention: Counsel Attn: General Counsel
Fax: (000) 000-0000
or to such other address as any such party may have designated by like notice
forwarded to the other party hereto.
12.8 Dispute Resolution; Election of Remedy. Any dispute,
controversy, or claim arising out of, in connection with, or in relation to this
Agreement or the breach thereof shall be resolved in a state or federal court
venued in Marin or San Francisco County, the jurisdiction of which is
stipulated. The parties waive any right to claim forum non conveniens, or to
otherwise object to jurisdiction or venue. Unless expressly set forth to the
contrary, either party's election of any remedies provided for in this Agreement
will not be exclusive of any other remedies available hereunder or otherwise at
law or in equity.
12.9 Injunctive Relief. Distributor understands and agrees that
Riverdeep will suffer irreparable harm in the event that Distributor fails to
comply with the any of its obligations under Section 2.1 or Section 3, above,
and that monetary damages in such event would be substantial and inadequate to
compensate Riverdeep. Consequently, in such event Riverdeep will be entitled, in
addition to such monetary relief as may be recoverable by law, to such
temporary, preliminary and/or permanent injunctive relief as may be necessary to
restrain any continuing or further breach by Distributor, without showing or
proving any actual damages sustained by Riverdeep.
12.10 Independent Contractors. The parties hereto are independent
contractors and neither party is an employee, agent, partner or joint venturer
of the other. Neither party shall have the right to bind the other party,
whether directly or indirectly, to any agreement with a third party or to incur
any obligation or liability on behalf of such other party, whether directly or
indirectly.
12.11 No Third Party Beneficiaries. Except for the parties hereto,
no other party shall be entitled to any rights, benefits, or privileges under
this Agreement.
12.12 Offset. Notwithstanding any provision of this Agreement, at
any time during the Term or any extension of this Agreement and after expiration
or termination of this Agreement, either party has the right to offset any and
all amounts or credits which such party owes to the other party hereunder
against any and all amounts which other party owes such party hereunder.
17
12.13 Relationship to Prior Agreement. Notwithstanding anything to
the contrary in this Agreement or in the Prior Agreement, upon the Commencement
Date hereof and any time thereafter, Distributor shall have the right, but not
the obligation, to terminate the Prior Agreement.
18
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
signed under seal as of the date first set forth above.
RIVERDEEP INC., A LIMITED LIABILITY ENCORE SOFTWARE, INC.
COMPANY
By: ________________________________ By: ____________________________
Name: Xxxx Rim Name:
Its: VP, Asst. Treasurer, Title:
Riverdeep Interactive Learning USA, Inc.,
Sole Member of
Riverdeep Inc., a Limited
Liability Company
19
INDEX OF EXHIBITS
EXHIBIT A - SCHEDULE OF PRODUCTS
EXHIBIT B - CERTAIN ADDITIONAL TERMS
EXHIBIT C - SCHEDULE OF APPROVED SUBLICENSES
EXHIBIT D - SCHEDULE OF DELIVERABLES FOR EACH PRODUCT
EXHIBIT E - SCHEDULE OF PRE-APPROVED THIRD PARTY MANUFACTURERS
EXHIBIT F - ROYALTY REPORT TEMPLATE
20
EXHIBIT A
SCHEDULE OF PRODUCTS
[*]
* The material has been omitted pursuant to a request for confidential
treatment and the material has been filed separately with the Office of the
Secretary of the Securities and Exchange Commission.
21
EXHIBIT B
SCHEDULE OF CERTAIN ADDITIONAL TERMS
1. [Intentionally Omitted.]
2. Royalties and Payment Terms:
a) [Intentionally Omitted].
b) Earned Royalty. Riverdeep shall earn royalties for sales of Products
during each Sales Year as provided below, provided that the same shall not be
payable until Distribution has recouped from such amounts the corresponding
Guaranteed Royalty for such year.
*
"NET RECEIPTS" is defined as gross sales from the sale of
Products, less actual credits granted for returns, rebates,
product xxxx-down expenses, and Sales Discounts. To the extent
gross sales or dilutions relate to Mixed Assortments or Mixed
Bundles, then Distributor may only apply such gross sales or
deduct dilutions in an amount proportional to the percentage
of Products in said Mixed Assortment or Mixed Bundle. With
each royalty statement, Distributor may take a reasonable
reserve for anticipated returns, [*]. With each monthly
statement, Distributor will liquidate each reserve held, and
pay to Riverdeep any royalties then due that are in excess of
the liquidated reserve. Distributor may not deduct: cash
discounts granted as terms of payment; promotional/new store
discounts; costs, taxes or duties incurred in manufacturing,
handling, shipping, importing, or selling. At Riverdeep's
request, Distributor shall review its customer credit status
with Riverdeep on a regular basis, but not more than once each
quarter.
Distributor, in consultation with Riverdeep, will develop and
designate wholesale pricing strategies, pricing envelopes, and
lifecycle management pricing guidelines around which
Distributor may operate on a day-to-day basis independent of
Riverdeep consultation; provided however, deviations from
current pricing models outside of these parameters will
require that Distributor consult with Riverdeep and
Distributor will develop and designate any such pricing
strategies, pricing envelopes, and lifecycle management
pricing guidelines that so deviate from the current models.
Distributor shall have full discretion with respect to the
price it charges its retail customers. At such time as a
Product reaches late-stage "closeout" status, Distributor
shall request Riverdeep's consent to closeout the Product
inventory through one or more closeout distributors. If
Riverdeep shall fail to grant such consent within fifteen (15)
days thereafter, then Riverdeep shall be required to purchase
such inventory for an amount equal to Distributor's cost of
goods therefor.
c) [Intentionally Omitted.]
* The material has been omitted pursuant to a request for confidential
treatment and the material has been filed separately with the Office of the
Secretary of the Securities and Exchange Commission.
22
d) Reporting and Payment. Detailed reporting and payment of earned
royalties shall be provided no later than twenty-one (21) days following the end
of each calendar month. Royalty reports shall contain such information as is
included in a template report attached hereto as Exhibit F.
e) Late Charges. Any payments which are made to Riverdeep or
Distributor hereunder more than thirty (30) days after the due date therefor,
shall bear interest at the rate of 9% per annum from the date such payments are
due to the date of payment. Each party's right hereunder to interest on late
payments shall not preclude such party from exercising any of its other rights
or remedies pursuant to this Agreement or otherwise with regard to the other
party's failure to make timely remittances.
3. Marketing Plan And Reports: Distributor shall provide Riverdeep, within 90
days of the Commencement Date, with a retail forecast for each Product licensed
hereunder. In the event that Products are added to Exhibit A, Distributor shall
provide Riverdeep with a retail forecast for each such Product no less than
within a reasonable period of time prior to Riverdeep's planned Gold Master date
for each such Product. For Riverdeep's review and consultation, Distributor will
provide Riverdeep (a) with a sales and marketing plan and forecast including
reasonably detailed information, on a quarterly basis; (b) a ninety (90) day
rolling retail forecast for each active Product provided on a monthly basis; (c)
on the first business day of each week during the Term, Distributor will provide
Riverdeep with a report detailing gross shipments by Retailer for the previous
week. Distributor will provide Riverdeep with the following reports on a monthly
basis within nine (9) business days of the end of every month: SKU by reporting
Retailer; EDI Sell-Through; Product Returns authorized; and Inventory Report.
Distributor will provide Riverdeep with the following reports within thirty (30)
business days of the end of every month (concurrent with royalty reporting): SKU
by Sublicensee (if any approved); and Product units sold and/or distributed by
Sublicensee (if any approved).
Distributor shall use commercially reasonable efforts to market and sell the
Products and to promote the Products at industry trade shows specified by
Riverdeep and agreed to by Distributor, which agreement shall not be
unreasonably withheld. Distributor shall submit all marketing campaigns to
Riverdeep for review and approval, not to be unreasonably withheld or delayed.
Distributor shall use commercially reasonable efforts to meet all product
availability commitments made by Riverdeep (prior to the Commencement Date) to
retail accounts, including meeting replenishment orders for fixed plan-o-grams,
provided that Riverdeep shall have furnished Distributor with all deliverables
and information Distributor may require to do so on a timely basis.
Distributor will not discriminate against the Products in favor of Distributor's
other similar products.
Distributor shall not liquidate or deep-discount the Products, or otherwise
distribute in a manner that may reasonably be expected to reduce the good will
associated with or otherwise tarnish the Riverdeep brands. Products will only be
sold to Retailers, or to distributors for resale, shipment and/or distribution
to Retailers, who Distributor has a good faith belief will sell such Products in
the Territory and Channel to the public in the same general manner in which
merchandise of the same general description is customarily marketed, displayed
and sold. In the event Distributor learns that any Retailer is treating the
Products in a manner less favorably than similar merchandise, Distributor will
inform Riverdeep and will make commercially reasonable efforts to have the
problem corrected to Riverdeep's satisfaction. If Riverdeep is not satisfied
within a reasonable period then, upon written request of Riverdeep, Distributor
will discontinue future shipments to such Retailer and will not provide such
Retailer with Licensed Article(s) thereafter without Approval.
23
4. Approvals. Distributor shall create and produce its own packaging, labels,
disc art, end-user documentation, marketing and promotional materials, all
subject to Riverdeep review, guidance, feedback and approval at the following
stages:
- Concept design
- Alpha package design, including copy
- Final mechanical.
A submission shall be approved or disapproved within ten (10) business days from
receipt of the materials except the final mechanical, which will be approved
within five (5) business days of receipt of materials. Approval shall not be
unreasonably withheld or delayed. A submission shall in no instance be deemed
approved. If approval is not granted, Riverdeep shall identify the reasons for
disapproval and such corrective measures which, when taken, will result in
approval upon resubmission. Among other reasons, Riverdeep may reasonably
withhold approval in relation to the maintenance of brand and trade dress
consistency between versions, product lines, and in its other channels.
Distributor acknowledges that some of Riverdeep's licensors may have approval
rights regarding packaging, software development and their proprietary brands
and other names. Distributor shall reasonably cooperate with Riverdeep when
third-party licensor approval is required. Distributor shall provide archived
files of all approved materials, suitable for reproduction and in a form and
format specified by Riverdeep, within 10 days of Riverdeep's approval.
Neither Distributor (any permitted sublicensees) nor third party manufacturers
shall manufacture Products without Riverdeep's prior written approval of the
materials to be reproduced unless such materials have been furnished to it by
Riverdeep. Notwithstanding such approval, Distributor (any permitted
sublicensees), and third party manufacturers shall be responsible to include on
all Products and Packaging any third-party licensor's name, trademark, and logo,
and all applicable notices. Riverdeep's approval shall not relieve Distributor
of this obligation; provided however, Riverdeep's approval of any given
packaging shall be deemed to constitute Distributor's compliance with the
packaging requirements hereof.
24
EXHIBIT C
SCHEDULE OF APPROVED SUBLICENSES
[*]
* The material has been omitted pursuant to a request for confidential
treatment and the material has been filed separately with the Office of the
Secretary of the Securities and Exchange Commission.
25
EXHIBIT D
SCHEDULE OF DELIVERABLES
--------------------------------------------------------------------------------------------------------------------
DUE DATE (Based On Number Of Days Before The
DELIVERABLES Agreed Upon Ship Date)
--------------------------------------------------------------------------------------------------------------------
Layered, high resolution files for available artwork for
Packaging as well as all but not limited to available marketing
copy, legal copy, twenty screenshots, product/corporate logos,
and key art 90
--------------------------------------------------------------------------------------------------------------------
Manual in electronic format:
Draft 45
Final Version 30
--------------------------------------------------------------------------------------------------------------------
Documentation 90
--------------------------------------------------------------------------------------------------------------------
Layered, high resolution files for available sell sheets and
other promotional materials 90
--------------------------------------------------------------------------------------------------------------------
25, 50, 100, and 200 word product descriptions, title
treatments (where available) 90
--------------------------------------------------------------------------------------------------------------------
Press accolades, awards, reviews, endorsements (where available) 90
--------------------------------------------------------------------------------------------------------------------
Product demos and .avi's (where applicable and available) 90
--------------------------------------------------------------------------------------------------------------------
Product walk-through documents (where available) 90
--------------------------------------------------------------------------------------------------------------------
Competitive analysis - development features 90
--------------------------------------------------------------------------------------------------------------------
Product design document 90
--------------------------------------------------------------------------------------------------------------------
System requirements 90
--------------------------------------------------------------------------------------------------------------------
ESRB Rating (if applicable) and certificate 45
--------------------------------------------------------------------------------------------------------------------
Age range / grade level 90
--------------------------------------------------------------------------------------------------------------------
Retailer and promotional history (where available) 90
--------------------------------------------------------------------------------------------------------------------
6 samples of existing product 90
--------------------------------------------------------------------------------------------------------------------
goldmaster candidate Submission - three copies 45
--------------------------------------------------------------------------------------------------------------------
Replicatable Goldmaster - three copies 30
--------------------------------------------------------------------------------------------------------------------
26
EXHIBIT E
SCHEDULE OF APPROVED THIRD PARTY MANUFACTURERS
ACUPRINT 0000 Xxxxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
ADVANCED COLOR GRAPHICS 000 Xxxx Xxxxx
Xxxxxxxxx, XX 00000
ADVANCE PAPER BOX 0000 X Xxxxxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
XXXX-CO GRAPHICS 0000 Xxxxx Xxxxxxx Xxxx
Xxx Xxxxxxx, XX. 00000
COLOUR CONCEPTS 0000 Xxxxx Xx - Xxxxx X
Xxxxxxxxx, XX 00000
DELTA PRINTING SOLUTIONS 00000 X Xxxxxx Xxxxxxxx
Xxxxxxxx, XX 00000
FUTURE MEDIA PRODUCTIONS 00000 Xxx Xxxxxxxxxxx
Xxxxxxxx, XX 00000
PRIMARY COLOR 0000 XxXxx Xxxxxx
Xxxxxx, XX 00000
RITEK GLOBAL MEDIA 00000 Xxx Xxxx Xxx.
Xxxx xx Xxxxxxxx, XX 00000
SONOPRESS LLC 000 Xxxxxxxxxx Xx.
Xxxxxxxxxxx, XX 00000
TECHNICOLOR 0000 X. Xxxxxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
27
EXHIBIT F
ROYALTY REPORT TEMPLATE
[see attached]
28
