LICENSE AND DISTRIBUTION AGREEMENT

 

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                                                                    EXHIBIT 10.1

 

                       LICENSE AND DISTRIBUTION AGREEMENT

                             (MANUFACTURING RIGHTS)

                                   (2004-2005)

 

          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       "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 Amazon.com); 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.

 

         1.2       "COMMENCEMENT DATE" shall mean March 31, 2004.

 

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         1.3       "CONSENT-REQUIRED CONTRACT" shall have the meaning ascribed to

such term in Section 7.1.

 

         1.4       "CONSENT-REQUIRED PRODUCTS" shall have the meaning ascribed to

such term in Section 7.1.

 

         1.5       "DELIVERABLES" shall have the meaning ascribed to such term in

Section 2.9.

 

         1.6       "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.

 

         1.7       "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.

 

         1.8       "EXCLUDED PRODUCTS" means (i) genealogy-based and

language-based software programs unless otherwise consented to by Distributor in

its sole discretion; and, (ii) 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.

 

         1.9       "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.

 

         1.10      "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.

 

         1.11      "LOSS EVENT" means, with respect to any Product, (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.

 

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         1.12      "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.

 

         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 1.1 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; provided however, 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" herein shall be deemed to include all SKU's

within such Product other than Previously-Released Properties.

 

         1.16      "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.

 

         1.17      "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.

 

         1.18      "SALES DISCOUNTS" shall mean price discounts and price

protection.

 

         1.19      "SALES YEAR" means the twelve-month period commencing on the

Commencement Date.

 

         1.20      "TERM" shall mean that period of time specified in Section 9

of the Agreement.

 

         1.21      "THIRD PARTY CONSENT" shall have the meaning ascribed to such

term in Section 4.4.2.

 

         1.22      "TERRITORY" shall mean the United States.

 

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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

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; Porting. 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.

 

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         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 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 or on behalf

of Distributor in manufacturing, promoting, marketing and distributing the

Products, including but not limited to manufacturing, shipping, handling and

warehousing costs, 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 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, 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       [Intentionally Omitted]

 

         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.

 

         2.9       Deliverables. In respect of each of the Products on Exhibit A

as of the Commencement Date, Riverdeep shall provide to Distributor the

deliverables set forth on Exhibit D attached hereto (collectively, the

"Deliverables") on the Commencement Date. If Riverdeep shall choose to add

additional Products to this Agreement in accordance with Section 2.6.2, the

parties shall mutually agree upon the ship dates therefor, and thereafter

Riverdeep shall provide the

 

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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 Riverdeep's failure to provide the

Deliverables for any Product on a timely basis, 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), 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 mark 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 any other trademarks propriety

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 mark, 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

 

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specified from time to time by Riverdeep. The Products shall feature the

Riverdeep brands. Distributor shall mark 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.

 

         4.2       Guaranteed Royalty.

 

                  4.2.1     *

 

                  4.2.2.    Distributor shall pay the Guaranteed Royalty as

follows. Distributor shall have deposited, together with this Agreement, an

initial payment in the amount of [*] (the "Initial Payment") into an escrow

arrangement that is mutually agreeable to Riverdeep and Distributor, which shall

be paid from such escrow to Riverdeep upon the Commencement Date. The remaining

balance shall be payable in twelve equal monthly installments, the first of

which shall be payable forty-five (45) days after the release of the Initial

Payment from escrow, the second of which shall be payable on that date that

falls thirty (30) days after the payment date of the first installment, and each

installment thereafter shall be payable on the day of each month thereafter on

which the second installment was paid (i.e., if the second installment was paid

on the 23rd day of the applicable month, each installment thereafter shall be

paid on the 23rd day). If on the date on which the final installment of the

Guaranteed Royalty is due the entire Guaranteed Royalty has not been paid, then

any remaining balance shall be paid on the last business day of the Sales Year.

 

                  4.2.3     The Guaranteed Royalty for the Sales Year shall be

fully recoupable by Distributor from royalties earned by Riverdeep on Products

during such year; provided however, that if at the end of the Sales Year,

Distributor has not fully recouped the Guaranteed Royalty for such Sales Year,

then Distributor shall have forty-two additional months to sell and distribute

the Products to fully recoup the Guaranteed Royalty; provided however, that if

at any time during such forty-two month period, a Loss Event shall occur, then

in addition to any other rights and remedies that Distributor shall have, such

forty-month period shall be extended for such additional time thereafter as

Distributor shall need to fully recoup the Guaranteed Royalty. Distributor shall

have the same rights and remedies for Loss Events occurring during such extended

recoupment periods as during the initial recoupment period.

 

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.

 

*     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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         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. The

parties shall mutually agree upon a written communication to the Channel

customers to be prepared promptly following the Commencement Date. 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 matter relating

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

 

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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 other than the licensors under the

license agreements (the "Consent-Required Contracts") pursuant to which

Riverdeep procures the rights to the Products listed on Exhibit F (the

"Consent-Required Products") and only then until a Third Party Consent is

received in respect of any such Consent-Required Product upon the occurrence of

which this representation shall be deemed true and correct with respect to the

third party licensors under any such Consent-Required Contracts; (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 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

 

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<PAGE>

 

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.

 

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

 

                                       10

<PAGE>

 

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 the 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

deposited into the Channel by Riverdeep or any third-party appointed or

permitted to place Product into the Channel by Riverdeep from and after the

expiration or sooner termination of the Term.

 

                  8.1.1     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.

 

                  8.1.2     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;

(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 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

 

                                        11

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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 one (1) year thereafter(the "TERM"), as

the same may be extended for any extended recoupment period under Section 4

hereof.

 

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

 

                                       12

<PAGE>

 

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.

 

         10.2      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.

Distributor and any authorized sublicensees shall immediately cease all

manufacturing, selling, marketing, distributing, advertising and/or promoting of

the Products. Distributor shall not increase sales in the Channel prior to

expiration of the Agreement in a manner inconsistent with standard industry

practices and Distributor's inventory management practices during the Term. In

the event of expiration or termination for Riverdeep's breach, Distributor

shall, at Riverdeep's direction, destroy Products in Distributor's possession,

or transfer all Products in its possession to Riverdeep, [*]. 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.

 

         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

 

*   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.

 

                                       13

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(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 harms 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      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 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

Distri