Exhibit 10.6
EDUCATION MARKET LICENSE
THIS EDUCATION MARKET LICENSE (the "License") is entered into by and
between WASATCH EDUCATION SYSTEMS CORPORATION, a Utah corporation (the
"Licensor"), and WASATCH INTERACTIVE LEARNING CORPORATION, a Utah corporation
(the "Licensee") effective as of February 7, 1997, pursuant to that certain
Asset Purchase and Software License Agreement, dated as of February 7, 1997 (the
"Asset Purchase Agreement"), by and between the Licensor and the Licensee.
RECITALS:
A. Licensor has previously developed or acquired rights in certain Licensed
Programs (defined below).
B. Pursuant to the Asset Purchase Agreement, Licensor has agreed to sell to
Licensee certain assets relating to its business in the Education Market
(defined below) and to license to Licensee the Licensed Programs for Licensee's
own internal use and development, together with the right to market, sell,
distribute and sublicense the Licensed Programs in various markets.
AGREEMENT:
NOW, THEREFORE, for TEN DOLLARS ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Definitions. As used in this License the following terms shall have the
meanings indicated:
Education Market shall mean the following markets for standalone products
(program resides and runs on one workstation only), networked products (program
runs on more than one workstation concurrently, with multiple workstations
connected to a common server), and products delivered via the Internet: (i)
preschool education institutions, facilities, and programs, both public and
private; (ii) K-12 education institutions, facilities, and programs, both public
and private; (iii) juvenile and adult basic education institutions, facilities,
and programs, both public and private; (iv) correctional facilities and
corporate sites; (v) post-secondary educational institutions, facilities, and
programs, including vocational schools and community colleges; (vi) individuals
or parents of minor students, provided the sales are made through educational
institutions, facilities, or programs (as opposed to retail sales); and (vii)
organizations directly affiliated with the above education institutions, such as
PTAs.
Education Market License
Exhibit D to Asset Purchase Agreement
Page 1 of 10
Home Market shall mean end users who are not in the Education Market and
who purchase products through channels other than the Education Market. Such
other channels shall include direct Internet channels, retail or off-the-shelf
channels, and direct sales channels, including, without limitation, mail order.
Internet shall mean distribution or delivery over a wide area network using
electronic data communications technology as presently implemented in the
Internet or as hereafter designed for use in conjunction with telephone, cable,
wireless, or other types of data transmission systems.
Licensed Programs shall mean the computer programs, multimedia materials,
and print materials for all products and services heretofore sold and provided
by Licensor to the Education Market, including but not limited to the software
and courseware titles listed or described as Licensed Programs on Schedule 1.0
attached hereto, together with all lesson content, graphics and sound files,
management systems, interfaces, authoring tools, templates, development engines,
utilities, development and resting tools, and related technologies, trade
secrets, know-how, inventions, copyrights, and intellectual properties. For
purposes of this License, Licensed Programs shall not include the Third Party
Courseware.
Net Revenues shall mean gross monies actually received by Licensee from the
distribution or sublicensing of the Licensed Programs or Licensee Derivative
Works, less the following: sales, use, and excise taxes, tariff duties, packing,
insurance, shipping, and similar charges separately invoiced and reimbursed by
customers, reasonable amounts of credits or refunds for returns, and credits,
discounts, rebates, and promotional allowances. "Net Revenues" shall not include
monies received by Licensee for installation services, consulting or training
services, maintenance and upgrade services and support purchased separately from
the initial sublicense, sales or leases of hardware or peripheral devices, sales
or licenses of Third Party Courseware (as to which Licensee makes payment
directly to the original licensor thereof), sales of print materials other than
Licensed Programs, or sales, licenses, or sublicenses of software products or
works other than the Licensed Programs or Licensee Derivative Works of the
Licensed Programs.
Licensee Derivative Works shall mean any software programs offered by
Licensee an integral part of which includes substantial code or instructional
content of the Licensed Programs or Third Party Courseware, as the case may be.
Licensor Derivative Works shall mew any software programs offered by
Licensor an integral part of which includes substantial code or instructional
content of the Licensed Programs or Third Party Courseware, as the case may be.
Third Party Courseware shall mean the proprietary computer programs,
utilities, and tools, and related documentation, owned by third parties and
licensed to Licensor for
Education Market License
Exhibit D to Asset Purchase Agreement
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commercial distribution into the Education Market as part of Licensor's product
offering, subject to royalty payments to the third parties, including those
programs identified as Third Party Courseware on Schedule 1.0.
Sell or sale, when used in the context of Licensed Programs, Third Party
Courseware, Licensor Derivative Works, and Licensee Derivative Works, means sale
of a non-exclusive sublicense to an end user to use the same in object code.
2. Grant of Licenses. Licensor hereby grants to Licensee, subject to the
royalty obligations set forth in Section 3 below, the following licenses and
distribution rights with respect to the Licensed Programs and Third Party
Courseware:
(a) A non-exclusive, perpetual, fully paid-up, worldwide right and license
to use, copy or otherwise reproduce, display, modify, correct defects or
deficiencies in, and to prepare Licensee Derivative Works based on, all or any
portion of the Licensed Programs (specifically including any and all lesson
content).
(b) A perpetual, worldwide right and license to market, distribute, sell
and sublicense the Licensed Programs and Licensee Derivative Works of the
Licensed Programs in the Education Market, directly or through sub-distributors,
dealers, Independent Marketing Representatives ("IMRs"), or other third parties.
The foregoing license shall be exclusive during the Exclusivity Period as
defined in Section 4 below.
(c) Commencing upon expiration of the Exclusivity Period, a non-exclusive,
perpetual, worldwide right and license to market, distribute, sell and
sublicense the Licensed Programs and Licensee Derivative Works of the Licensed
Programs in the Home Market.
(d) A non-exclusive perpetual, worldwide right and sublicense to use, copy
or otherwise reproduce, display, modify, correct defects or deficiencies in, and
to prepare Licensee Derivative Works based on, all or any portion of the Third
Party Courseware, subject to the provisions and royalties, if any, due to the
original licensors of the Third Party Courseware.
(e) A perpetual, worldwide right and sublicense to market, distribute, sell
and sublicense the Third Party Courseware and Licensee Derivative Works of the
Third Party Courseware in the Education Market, directly or through
sub-distributors, dealers, IMRs, or other third parties, subject to the
provisions and royalties, if any, due to the original licensors of the Third
Party Courseware. The foregoing license shall be exclusive during the
Exclusivity Period.
(f) Commencing upon expiration of the Exclusivity Period, a non-exclusive,
perpetual, worldwide right and sublicense to market, distribute, sell and
sublicense the Third
Education Market License
Exhibit D to Asset Purchase Agreement
Page 3 of 10
Party Courseware and Licensee Derivative Works of the Third Party Courseware in
the Home Market, directly or through sub-distributors, dealers, IMRs, or other
third parties, subject to the provisions and royalties, if any, due to the
original licensors of the Third Party Courseware.
(g) A non-exclusive, perpetual, worldwide right and sublicense to market,
distribute, sell and sublicense the Licensed Programs, the Third Parry
Courseware, and Licensee Derivative Works of the Licensed Programs or Third
Party Courseware, in the Internet Market, directly or through sub-distributors,
dealers, IMRs, or other third parties, subject to the provisions and royalties,
if any, due to the original licensors of the Third Party Courseware and the
royalty provisions of Section 3 below.
All licenses of Licensed Programs and Third Party Courseware from Licensor to
Licensee shall include source code and object code, but all sublicenses from
Licensee shall be object code only.
3. Royalty Payments to Licensor. Licensee shall pay to Licensor royalties
based upon Net Revenues collected by Licensee from the distribution and
licensing of the Licensed Programs and Licensee Derivative Works of Licensed
Programs during the five (5) year period (the "Royalty Period") commencing on
the Closing Date (each of the five (5) years during this Royalty Period is
sometimes referred to as a "License Year.") The royalties shall be calculated as
follows:
(a) On Net Revenues derived from licenses of the Licensed Programs
(existing code and educational content), the royalty shall be ten percent (10%)
of said Net Revenues.
(b) On Net Revenues from Licensee Derivative Works which are modifications
or enhancements of the Licensed Programs (code and content), the royalty shall
be five percent (5%) of said Net Revenues until aggregate royalties paid to
Licensor on said Net Revenues are equal to the fully burdened cost of developing
such Licensee Derivative Works; thereafter the royalty shall be ten percent
(10%) of said Net Revenues.
(c) On Net Revenues from Licensee Derivative Works which are all new code,
but which are based substantially upon the educational content of the Licensed
Programs, the royalty shall be two and one-half percent (2.5%) of said Net
Revenues until aggregate royalties paid to Licensor on said Net Revenues are
equal to the fully burdened costs of developing such Licensee Derivative Works;
thereafter the royalty shall be five percent (5%) of said Net Revenues.
Royalties owed under this Section 3 for each License Year shall be due and
payable within forty five (45) days after each of the 0xx, 0xx, 0xx, 0xx, and
5th anniversaries of the Closing Date (the "Payment Dates"). From and after the
5th anniversary of the Closing Date, the above
Education Market License
Exhibit D to Asset Purchase Agreement
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licenses with respect to Licensed Programs and Licensee Derivative works shall
be royalty-free. The above licenses with respect to Third Party Courseware shall
continue in accordance with the respective terms of the third party license.
4. Exclusivity Period and Minimum Royalties. The "Exclusivity Period" shall
be a period of one (1) year from the Closing Date; provided, however, that the
Exclusivity Period may be extended upon payment of certain minimum royalties
("Minimum Royalties") by Licensee to Licensor on or before the applicable
Payment Date (as defined in Section 3 above) as follows:
Minimum Royalty Payment Dates New Exclusivity Period
------------------------------------------------------------------------------
$ 500,000 1st License Year Two (2) License Years
$ 500,000 2nd License Year Three (3) License Years
$ 500,000 3rd License Year Four (4) License Years
$ 500,000 4th License Year Five (5) License Years
Minimum Royalties paid under this Section 4 shall be credited against royalties
due under Section 3 above for Net Revenues, and royalties paid under Section 3
above for Net Revenues shall be applied to satisfy the Minimum Royalty
obligations. In the event the royalties due under Section 3 above for any
License Year are less than the Minimum Royalty paid for that License Year, an
amount equal to the Minimum Royalty paid for that License Year, minus the actual
royalties payable for that License Year under Section 3 above, shall be credited
against royalties due under Section 3 above for Net Revenues in subsequent
License Years. In the event royalties paid under Section 3 above for Net
Revenues in any License Year exceed the Minimum Royalty due for that License
Year, an amount equal to the Section 3 royalties actually paid minus the Minimum
Royalty shall be credited against Minimum Royalties next falling due under this
Section 4 for subsequent License Years.
5. Education Market Exclusivity. During the Exclusivity Period, Licensee
shall have exclusive rights to exploit the Licensed Programs, Third Party
Courseware (as to which exclusivity will apply as between Licensor and
Licensee--or parties acting on behalf of Licensor--and not with respect to any
other third parties), and Licensee Derivative Works, directly or through third
parties, in the Education Market, including the exclusive right to market,
distribute, sell, and sublicense the Licensed Programs, Third Party Courseware
and Licensee Derivative Works to individual end-users through the institutional
channels defined in the Education Market. During the Exclusivity Period,
Licensor covenants that it shall not market, distribute, sell, or sublicense
Licensed Programs, Third Party Courseware, or Licensor Derivative Works,
directly or through third parties, to the Education Market (nor will
Education Marker License
Exhibit D to Asset Purchase Agreement
Page 5 of 10
Licensor license development engines or tools to third parties to use in
developing products for the Education market). The foregoing covenants and
restrictions do not apply to new products or new services (i.e, which are not
Licensed Programs, Third Party Courseware or Licensor Derivative Works) offered
by Licensor. The foregoing covenants and restrictions will apply to all
successors and assigns of Licensor, and to all third parties claiming by,
through or under Licensor. Inadvertent or incidental sales of the Licensed
Programs, Third Party Courseware or Licensor Derivative Works to end users of
the Education Market will not be considered a material breach of the foregoing
covenant and agreement so long as the sales occur through an Internet or retail
distribution channel and result from general marketing activities or catalogs
that are not substantially directed or targeted at educators or educational
institutions in the Education Market.
6. Exclusive Use of Product Names. To the fullest extent allowed by law,
Licensor hereby grants to Licensee an exclusive, perpetual, worldwide, fully
paid-up license to use all tradenames and logos embodied in or associated with
the Licensed Programs and Third Party Courseware (the "Licensed Tradenames"),
which Licensed Tradenames are listed on Schedule 7.5 attached to the Asset
Purchase Agreement. To the extent Licensor does not have the right or power to
grant an "exclusive" license for Licensed Tradenames of Third Party Courseware,
the foregoing license shall be exclusive as between Licensor and Licensee. In
any event, Licensor shall not use in any product name, or grant any licenses to
any third party to use, the Licensed Tradenames. Licensor shall develop and use
new names for Licensed Products, Third Party Courseware, and Licensor Derivative
Works distributed into the Home Market; provided, that (a) Licensor shall not
use a new product name that combines an existing product name (or one that is
confusingly similar to an existing product name) with some special designation
such as "Home Edition" or "Family Edition" or "Personal Edition" or "New and
Improved"; (b) Licensor shall not use "Wasatch" or "Wasatch Education" in its
new product name. In all events, Licensor may continue to use "Wasatch Education
Systems Corporation" as its corporate name, including the following variations
thereof: "Wasatch", "Wasatch Education", and "Wasatch Education Systems"
(collectively, the "Corporate Name"), display the Corporate Name (but not the
"Wasatch" logo) prominently, and refer to the Corporate Name as the development
origin of the products it offers in the Home Market. In the event Licensor
introduces a "networked product" for the Home Market during the Exclusivity
Period, Licensor shall (a) provide Licensee at least 3 months' prior written
notice of the anticipated release date; and (b) label the "networked product" as
follows: "Not Intended for School Use".
7. Reservation of Rights. Notwithstanding the foregoing grants of licenses
and sublicenses to Licensee, Licensor reserves all rights not explicitly granted
herein, including (a) the perpetual, worldwide right to use, copy or otherwise
reproduce, display, modify, correct defects or deficiencies in, prepare and
distribute Licensor Derivative Works based upon, and market, distribute, sell,
and sublicense the Licensed Programs, Third Party Courseware and Licensor
Derivative Works, in the Home Market, directly or through sub-distributors,
dealers,
Education Market License
Exhibit D to Asset Purchase Agreement
Page 6 of 10
IMRs, or other third parties, subject to the provisions and royalties, if any,
due to the original licensors of the Third Party Courseware, and (b) upon
expiration of the Exclusivity Period, the nonexclusive, worldwide right to
market, distribute, sell, and sublicense the Licensed Programs, Third Party
Courseware and Licensor Derivative Works, in the Education Market, directly or
through sub-distributors, dealers, IMRs, or other third parties.
8. Covenant of Home Market Exclusivity. During the Royalty Period (as
defined in Section 3 above), Licensor shall have exclusive rights to exploit the
Licensed Programs, Third Party Courseware, and Licensor Derivative Works,
directly or through third parties, in the Home Market. During the Royalty
Period, Licensee covenants that it will not market, distribute, sell, or
sublicense Licensed Programs, Third Party Courseware, or Licensee Derivative
Works, directly or through third parties, to the Home Market. The foregoing
covenants and restrictions do not apply to new products or new services (i.e,
not Licensee Derivative Works) offered by Licensee. The foregoing covenants and
restrictions will apply to all successors and assigns of Licensee, and to all
third parties claiming by, through or under Licensee. Inadvertent or incidental
sales of the Licensed Programs, Third Party Courseware or Licensee Derivative
Works to end users of the Home Market will not be considered a material breach
of the foregoing covenant and agreement so long as the sales occur through
Education Market distribution channels.
9. Ownership of Derivative Works. Except for the royalty obligations owed
by Licensee to Licensor on Licensee Derivative Works under Section 3 above,
neither Licensor nor Licensee shall acquire any intellectual property rights or
licenses in the Derivative Works of the other.
10. Limited Warranty. Licensor warrants and represents, to the best
knowledge of Licensor, that it is the sole and exclusive owner of all patent
rights, copyrights, trade secrets, and other propriety rights of any kind, in or
relating to the Licensed Programs, excepting the Third Party Courseware as to
which Licensor warrants that it has valid licenses to use, distribute, and
sublicense to Licensee hereunder, and that the Licensed Programs (excepting the
Third Party Courseware), to the best of Licensor's knowledge, do not infringe
any patent, copyright, trade secret, or other proprietary right of any third
party. Licensor further warrants and represents that it has not previously
granted any rights in the Licensed Programs which are inconsistent with the
rights granted to Licensee herein; and, to the best of Licensor's knowledge,
that Licensor has full power to enter into this License and grant the rights
herein granted to Licensee. The covenants and agreements set forth in Section
9.1 of the Asset Purchase Agreement shall apply as necessary or appropriate to
give effect to the provisions of this License. Licensor shall indemnify and hold
Licensee harmless from all damages (including costs and attorneys' fees)
resulting from any breach of the foregoing warranties. The foregoing warranties
of Licensor shall apply only to the Licensed Programs as originally delivered to
Licensee hereunder.
Education Market License
Exhibit D to Asset Purchase Agreement
Page 7 of 10
11. No Support Obligation. Licensee acknowledges and agrees that the
Licensed Programs are being licensed "AS IS" with respect to their usefulness
and functionality, and that Licensor shall have no obligation to support or
maintain the Licensed Programs. IN NO EVENT SHALL LICENSOR BE LIABLE, UNDER ANY
LEGAL THEORY, FOR INDIRECT, INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES
(INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS, SAVINGS, OR DATA) RESULTING
FROM THE USE OR INABILITY TO USE THE LICENSED PROGRAMS, WHETHER OR NOT LICENSOR
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
12. Record Keeping; Payment; and Audit Rights. Licensee shall maintain
accurate accounting and licensing records in accordance with generally accepted
accounting practices. Licensor has the right to audit (at Licensor's cost and
expense) the records of Licensee not more than twice each year and for a period
of one year following termination of this License. If any discrepancy of more
than 10% is verified in any audit, Licensee shall reimburse Licensor the full
cost and expense of the audit, in addition to any amounts previously
underreported.
13. Entire License; Amendments. This License is delivered in connection
with the Asset Purchase Agreement between the parties, which supersedes and
replaces any and all prior agreements, conversations, understandings, and
writings. It is binding upon the parties and their respective successors and
assigns. This License can only be amended by specific written amendment signed
by both parties.
14. Governing Law; Notices. This License shall be governed and interpreted
in accordance with the laws of the State of Utah. Any notice or communication
required or permitted by this License shall be in writing and shall be delivered
as follows: (i) by personal delivery to the party to whom the notice is to be
given, (ii) by overnight delivery service, (iii) by prepaid registered or
certified mail, return receipt requested, or (iv) by facsimile. Except for
notice of a party's change of address, which shall be effective only upon actual
receipt, a notice or communication shall be effective (a) in the case of
personal service, upon receipt by the party, (b) by overnight delivery, one (1)
day after placing the notice of communication in the care of the delivery
service as confirmed by the receipt provided by such service, (c) by registered
or certified mail, five (5) days after mailing, as confirmed by the date on the
receipt provided by the postal service, and (d) by facsimile transmission, upon
transmission as confirmed by telephone that such notice or communication has
been received in legible form. All notices or other communications shall be sent
to the recipient at the address listed below (or such other address that the
receiving party may have provided for the purpose of receiving notices and other
communications iii accordance with this Section 14):
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Education Market License
Exhibit D to Asset Purchase Agreement
Page 8 of 10
If to Licensor:
Wasatch Education Systems Corporation
c/o Technology Funding, Inc.
0000 Xxxxxxx xx xxx Xxxxxx
Xxx Xxxxx, XX 00000
Attention: Xxxx Xxxxxx
Fax: (000) 000-0000
with copy to:
Xxxxxxx Xxx
c/o Technology Funding, Inc.
0000 Xxxxxxx xx xxx Xxxxxx
Xxx Xxxxx, XX 00000
Xxxx Xxxxxx
Unison Capital Group
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxx, XX 00000
If to Licensee:
Wasatch Interactive Learning Corporation
0000 Xxxxx 000 Xxxx, Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
Attention: Xxxxx Xxxxx
Fax: (000) 000-0000
with copy to:
Xxxx X. Xxxxxxxxxxx, P.C.
00000 X. X. 000xx Xxxxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
Education Market License
Exhibit D to Asset Purchase Agreement
Page 9 of 10
IN WITNESS WHEREOF, the parties hereto have caused this License to be
executed by their respective officers thereunto duly authorized on the date
first written above.
LICENSOR: LICENSEE:
WASATCH EDUCATION SYSTEMS WASATCH INTERACTIVE
CORPORATION, a Utah corporation LEARNING CORPORATION, a Utah
corporation
By /s/ Xxxxxxx X. Xxxxxx By /s/ Xxxxxxx Xxxxxx
--------------------------- ---------------------------
Xxxxxxx X. Xxxxxx, Director Xxxxxxx Xxxxxx, President
Date Signed: February 7, 1997 Date Signed: February 7, 1997
Education Market License
Exhibit D to Asset Purchase Agreement
Page 10 of 10
