LICENSE AND DISTRIBUTION AGREEMENT

 

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                                                                    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 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.

 

         1.3       "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 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 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 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 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.

 

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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

n