EXHIBIT 10.3
ADDENDUM #1 TO
LICENSING AND DISTRIBUTION AGREEMENTS
(2004-2005 AND 2005-2007)
THIS ADDENDUM #1 TO LICENSING AND DISTRIBUTION AGREEMENTS (this
"Addendum") is dated as of April 13, 2004 ("Effective Date"), by and between
Encore Software, Inc., a Minnesota corporation ("Distributor"), and RIVERDEEP
INC., A LIMITED LIABILITY COMPANY, a Delaware limited liability company
("Riverdeep"), with respect to the following Recitals.
A. Distributor and Riverdeep have entered into (i) that certain
Licensing and Development Agreement (Manufacturing Rights)(2004-2005), dated as
of March 29, 2004 ("Agreement One"), and (ii) that certain Licensing and
Development Agreement (Manufacturing Rights)(2005-2007), dated as of March 29,
2004 ("Agreement Two", and together with Agreement One, the "Agreements"; each
initially-capitalized term used herein and not otherwise defined shall have the
meaning ascribed to such term in the Agreements), pursuant to which, among other
things, Riverdeep has granted Distributor exclusive rights to replicate, sell,
and distribute the Products into the Channel and the Territory, as more
particularly described in each of the Agreements.
B. Riverdeep currently distributes some or all of the Products
into the Channel through certain agreements with COKeM and has requested
Distributor's consent to maintain such agreements in effect through the
expiration of their terms, or earlier termination. Distributor is willing to
agree to such arrangements upon the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. CERTAIN DEFINITIONS. As used herein, the following
initially-capitalized terms shall the meaning ascribed to them below.
1.1 "COKeM" means COKeM International, Ltd., and any of its
permitted successors or assigns under the COKeM Agreements.
1.2 "COKeM Agreements" has the meaning ascribed to such term in
Section 2.1 below.
1.3 "COKeM Inventory" means COKeM's on-hand inventory of finished
units of the Products (as defined in either of the Agreements) in COKeM's
possession or control as of December 31, 2004, but only if and to the extent
that any such inventory is repurchased by Riverdeep as of such date.
1.4 "COKeM Products" means any and all products to which COKeM has
been granted rights under the COKeM Agreements.
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2. COKeM AGREEMENTS; SELL-OFF AND INVENTORY PURCHASE.
2.1 Riverdeep hereby represents and warrants to Distributor that
(i) attached hereto as Exhibit A is a true and correct schedule of all of the
agreements between Riverdeep and COKeM in effect as of the date hereof other
than the agreement with COKeM set forth on Exhibit C of Agreement One (such
agreements being collectively referred to as the "COKeM Agreements), true,
correct, and complete copies of which have heretofore been provided to
Distributor; (ii) there are no extensions, supplements, amendments or other
modifications ("Modifications") to any of the COKeM Agreements; and, (iii)
notwithstanding the provisions of each of the COKeM Agreements, COKeM currently
has no ability to manufacture any of the COKeM Products.
2.2 From and after the date hereof until the expiration or sooner
termination of all of the COKeM Agreements, Riverdeep shall (i) perform all of
Riverdeep's obligations under the COKeM Agreements (except to the extent
Distributor is responsible therefor hereunder) and shall not enter into or
otherwise agree to any Modifications thereto without Distributor's prior written
consent, to be granted or denied in Distributor's sole discretion; (ii) not
waive any of COKeM's obligations, grant any additional rights, or give any
consents or approvals to COKeM, under any of the COKeM Agreements without
Distributor's prior written consent, to be granted or denied in Distributor's
sole discretion; and, (iii) provide, supply, and fulfill all COKeM Products to
COKeM solely in accordance with the terms of this Addendum.
2.3 Riverdeep hereby appoints Distributor its exclusive inventory
manager to manage, fulfill, and process all purchase orders for COKeM Products
that Riverdeep receives from COKeM from and after April 13, 2004, until the
expiration or sooner termination of all of the COKeM Agreements. To that end, in
respect of the COKeM Agreements, Distributor shall fill purchase orders received
by Riverdeep from COKeM; assist in inventory management; subject to the
reimbursement herein, arrange for the manufacture of all finished goods of COKeM
Products so ordered; and process and ship such units to such locations directed
by Riverdeep. Unless otherwise agreed to between the parties, Riverdeep shall
remain the point of contact with COKeM. In addition, Riverdeep shall remain
directly responsible and solely liable (i) for collecting all amounts due under
the COKeM Agreements and shall remain entitled to collect all amounts in
connection therewith, and (ii) for all amounts due under, and for all
liabilities associated with, the COKeM Products or COKeM Agreements. Riverdeep
shall cooperate with Distributor in order to enable Distributor to carry out its
obligations hereunder.
2.4 No later than 30 days after each month, Riverdeep shall
reimburse Distributor, or Distributor in its sole discretion may deduct from
amounts otherwise payable by Distributor to Riverdeep, all direct costs, fees,
charges, and expenses incurred or owed by Distributor to manufacture, process,
fulfill, handle, and ship all COKeM Products during such period in accordance
with Riverdeep's obligations under the COKeM Agreements (including, without
limitation, cost of goods, shipping, handling, and insurance to the extent
applicable). In addition, Riverdeep shall pay Distributor, or Distributor in its
sole discretion may deduct from amounts otherwise payable by Distributor to
Riverdeep, each month, concurrently with the foregoing amounts, a nonrefundable,
irrevocable management fee equal to [*].
* 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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2.5 Distributor acknowledges that (i) Distributor's exclusivity
under the Agreements to the accounts serviced by COKeM under the COKeM
Agreements shall be limited to such extent; and (ii) Riverdeep shall not be
deemed to be in breach of that representation and warranty stated at 7.1(iv) of
the Agreements by reason of COKeM's rights under the COKeM Agreements so long as
Riverdeep complies with the terms of this Addendum. However, immediately upon
the expiration of the terms of the COKeM Agreements, or upon their earlier
termination for whatever reason, the exclusivity granted to Encore with respect
to those retail accounts serviced by COKeM under the COKeM Agreements shall
immediately revert back to Encore as was originally contemplated under the
Agreements, and that certain representation and warranty stated at 7.1(iv) of
the Agreements shall apply to Riverdeep without exception.
2.6 Subject to the terms and conditions of this Addendum,
Distributor hereby agrees to purchase from Riverdeep the COKeM Inventory;
provided however, [*]; and provided further, that Riverdeep shall have ceased
accepting purchase orders from COKeM as of December 31, 2004. The purchase price
for the COKeM Inventory shall be that amount that COKeM originally paid
Riverdeep for such inventory and shall be payable within 60 days after each
month in which any such inventory is sold by Distributor.
2.7 Notwithstanding anything to the contrary in the Agreements,
and without limiting any other credits, offsets, or reimbursements available to
Distributor under the Agreements:
2.7.1 Riverdeep shall not be entitled to earn Royalties under
the Agreements (i) on COKeM Products for which Distributor acts as
inventory manager pursuant to Section 2.2 above, or (ii) on the COKeM
Inventory. Distributor shall maintain and provide to Riverdeep such
sales information and other data necessary to confirm sales of the
COKeM Inventory by Distributor and the royalty treatment of such
inventory as provided herein.
2.7.2 Distributor shall be entitled to a credit on a monthly
basis against the Guaranteed Royalties under Agreement One (or, if the
entire Guaranteed Royalty under Agreement One has been paid, then the
Guaranteed Royalties under Agreement Two) in an amount equal to that
which Riverdeep would have earned in Royalties under Agreement One
(without regard to Section 2.3.1 above) if each of the following
categories of Products had been distributed by Distributor in
accordance with the terms of Agreement One: (i) those COKeM Products
sold by COKeM from and after the date upon which the COKeM Termination
Event (as defined below) occurs, and (ii) the COKeM Inventory sold by
Distributor. Riverdeep shall provide such sales data to Distributor to
enable Distributor to calculate the amount of such credit.
2.7.3 In addition, Distributor shall be entitled to a credit
on a monthly basis against the Guaranteed Royalties under Agreement One
(or, if the entire Guaranteed Royalty under Agreement One has been
paid, then the Guaranteed Royalties under Agreement Two) in an amount
equal to (i) the amount by which the purchase price paid by Distributor
for the COKeM Inventory under Section 2.2 above, exceeds (ii) the
wholesale price for which Distributor is able to sell the COKeM
Inventory.
* 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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3. MODIFICATIONS TO THE AGREEMENTS.
3.1 The first sentence of Section 4.2.1 of Agreement One is hereby
amended in its entirety to read as follows:
"Distributor shall pay a guaranteed, irrevocable,
non-refundable payment (recouped against royalties as
hereinafter provided) for the Sales Year (as the same may be
increased in accordance with this Section 4.2.1 below, the
"Guaranteed Royalty") in the amount of [*]. In the event that
Riverdeep is able to obtain for Encore during the first Sales
Year (i) all of the rights granted to COKeM under all of the
COKeM Agreements, and (ii) a mutual termination and release,
in form and substance satisfactory to Distributor in its sole
discretion, pursuant to which COKeM shall have relinquished
all its rights under the COKeM Agreements to distribute the
Products into the Channel and shall have released all claims
related to the distribution of Products in the Channel by
Distributor or otherwise arising under the COKeM Agreements
(the satisfaction of the aforementioned conditions being
referred to herein as the "COKeM Termination Event"), the
Guaranteed Royalty shall be increased by [*], such amount to
be pro-rated based on the remaining portion of the Sales Year.
(Thus, for example, if the COKeM Termination Event occurs at
the end of 6 months after the Commencement Date, then the
Guaranteed Royalty shall be increased by [*].)"
3.2 Section 9.1 of Agreement Two is hereby amended in its entirety
to read as follows:
"This Agreement shall commence on the Commencement Date and
shall continue in effect for a period of five (5) years from
the Commencement Date (as the same may be extended hereunder,
the "Term"). The Term shall be extended for any extended
recoupment periods under Section 4 hereof. Each of the first,
second, third, fourth, and fifth Sales Year is conditioned on
the payment of the applicable Guaranteed Royalty for the
preceding Sales Year."
3.3 Section 4.2.1(ii) of Agreement Two is hereby amended in its
entirety to read as follows:
"In respect of each of the second, third, fourth, and fifth
Sales Years, the Guaranteed Royalty shall be 80% of the actual
Royalties earned by Riverdeep from sales of the Products
during the preceding Sales Year; provided however, that such
Guaranteed Royalty shall be prorated in respect of any portion
of a Sales Year hereunder; provided further, that no
Guaranteed Royalty shall be payable under any circumstances
for any period of time that the Term is extended solely in
order to accommodate any extended recoupment periods under
Section 4.2.2. For clarity, any adjustments or credits that
could accrue in any Sales Year under Agreement Two prior to
this Addendum shall accrue in the same manner and be applied
to the same extent during the third, fourth, and fifth Sales
Years created by this Addendum."
* 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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3.4 All references in each Agreement to the term "Agreement" shall
hereafter mean such Agreement as the same has been amended in accordance with
the terms hereof.
4. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES. Both parties reaffirm
the representations and warranties set forth in the Agreements, as amended by
the terms hereof.
5. CONFLICT. In the event of any conflict between the terms of the
Agreements and the terms of this Addendum, the terms of this Addendum shall
prevail. Otherwise, except as specifically set forth in this Addendum, all the
terms and conditions of the Agreements are hereby ratified and affirmed.
6 ENTIRE AGREEMENT. This Addendum is the sole agreement between the
parties to the subject matter hereof and supersedes all prior understandings,
writings, proposals, representations, or communications, oral or written, of
either party relating to the subject matter of this Addendum. This Addendum may
be executed in any number of counterparts.
7. NO THIRD PARTY BENEFICIARIES. Nothing contained herein shall be deemed
or construed as conferring any rights or benefits to or upon any party not a
party to this Agreement, including, without limitation, COKeM.
IN WITNESS WHEREOF, the parties have caused their authorized signatories to
execute this Addendum as of the date set forth above.
ENCORE SOFTWARE, INC., RIVERDEEP, INC., A LIMITED
a Minnesota corporation LIABILITY COMPANY,
a Delaware limited liability company
By: __________________________________ By: ________________________________
Xxxxxxx X. Xxxxxx Name:
CFO Title:
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EXHIBIT A
[*]
* 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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