EXHIBIT 10.4
ADDENDUM #2 TO
LICENSING AND DISTRIBUTION AGREEMENTS
(2004-2005 AND 2005-2007)
THIS ADDENDUM #2 TO LICENSING AND DISTRIBUTION AGREEMENTS (this
"Addendum") is dated as of October ___, 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"), as amended pursuant to that certain Addendum #1 to
Licensing and Distribution Agreements (2004-2005 and 2005-2007) ("Addendum #1",
and together with Agreement One and Agreement Two, the "Agreements"; each
initially-capitalized term used herein and not otherwise defined shall have the
meaning ascribed to such term in the Agreements).
B. Since entering into the Agreements, Distributor has identified
certain provisions of the Agreements which it believes should be amended in
order to provide additional clarity with respect to the rights and obligations
of the parties.
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. MODIFICATIONS TO THE AGREEMENTS.
1.1 Section 1 of Agreement One is hereby amended by deleting the
existing language of Section 1.15 and inserting the following therefor:
"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.
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."
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1.2 The second sentence of Section 4.2.1 of Agreement One is hereby
amended by deleting the existing language in its entirety and inserting the
following therefor:
"If and to the extent that Riverdeep receives third party consents
from its licensors sufficient to enable it to license the
Consent-Required Products to Distributor in accordance with the
terms of this Agreement (each, a "Third Party Consent"), then,
Riverdeep shall promptly notify Distributor as to each Third Party
Consent that is received and Distributor shall increase the
Guaranteed Royalty by an amount equal to the product of (i)
$2,000,000, and (ii) the sum of the allocable percentages
corresponding to those Consent-Required Products as to which
Riverdeep has received such Third Party Consent."
1.3 The first paragraph of Section 6 of Exhibit B to Agreement One
entitled "Channel Inventory" is hereby amended in its entirety to read as
follows:
"6. Channel Inventory. From and after the Commencement Date, all
amounts received by Riverdeep on account of Product distributed into
the Channel shall be payable to Distributor, and to the extent any
such funds are received by Riverdeep, the same shall be reported and
paid thereto within fifteen (15) days of receipt thereof. During the
Term, Distributor shall: (a) accept returns of Channel Inventory;
and (b) provide Distributor's retail accounts with the Channel
Inventory Credits. Distributor shall be entitled to credit against
amounts otherwise payable to Riverdeep in the amount of
Distributor's cost (1) for Channel Inventory Credits provided by
Distributor to its Retailers during the Term and (2) for credits
issued for the return of Channel Inventory to Distributor not to
exceed 16%, except in instances of credits issued prior to the
Effective Date of the Agreement."
1.4 Section 1 of Addendum #1 is hereby amended by inserting the
following as Section 1.5:
"1.5 "Excess COKeM Inventory" means all COKeM Inventory purchased by
Distributor pursuant this Addendum which exceeds ten weeks of
inventory, except where such COKeM Inventory is saleable and active
as mutually determined by the parties and as further defined as set
forth in the product list to be attached as Schedule A hereto."
1.5 Section 2.7.3 of Addendum #1 is hereby amended by deleting the
current section and replacing it with the following:
"2.7.3 In addition, Distributor shall be entitled to a credit on a
monthly basis against amounts otherwise payable to Riverdeep in an
amount equal to (i) the amount by which the purchase price paid by
Distributor for the Excess COKeM Inventory exceeds the (ii) the
wholesale price for which Distributor is able to sell the Excess
COKeM Inventory. Distributor shall use good faith efforts to sell
such Excess COKeM Inventory. In the event that any Excess COKeM
Inventory remains in the possession of Distributor on the first
anniversary of the
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Commencement Date, Distributor shall be entitled to destroy such
Excess COKeM Inventory without further obligation to Riverdeep."
2. EXCESS COKeM INVENTORY. Riverdeep and Distributor hereby acknowledge and
agree that those Products identified on Schedule A, which shall be mutually
determined using the commercially reasonable judgment of each of the parties
hereto, and later attached hereto and incorporated herein, represent the Excess
COKeM Inventory.
3. THIRD PARTY CONSENTS; ADDITIONAL PAYMENTS.
(i) The parties hereby acknowledge and agree that the indemnification
obligations of each of the parties as is set forth in the Agreements shall
extend to the Consent-Required Products as is defined therein.
(ii) If upon the receipt of a Third Party Consent and application of the
applicable increase to the Guaranteed Royalty (each, a "Third Party Consent
Increase") payments by Distributor to Riverdeep prior to the application of the
Third Party Consent Increase were insufficient to cover the Guaranteed Royalty
(including the retroactive application of the Third Party Consent Increase),
Distributor shall make a "catch up" payment in an amount equal to the difference
between the amount actually paid by Distributor to Riverdeep prior to the
application of the Third Party Consent Increase and the amount of the Guaranteed
Royalty following the application of the Third Party Consent Increase. This
catch-up payment, if any, shall be payable by Distributor to Riverdeep not later
than 30 days following the application of a Third Party Consent Increase.
Thereafter, subject to adjustment pursuant to the terms and conditions set forth
in the Agreements, the Guaranteed Royalty shall be increased by the amount of
the Third Party Consent Increase.
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. The Agreement, as otherwise amended and as modified by
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 the Agreement and this Addendum. This Addendum may be
executed in any number of counterparts.
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IN WITNESS WHEREOF, the parties have caused their authorized signatories to
execute this Addendum as of the date set forth above.
ENCORE SOFTWARE, INC., a Minnesota RIVERDEEP, INC., A LIMITED LIABILITY
corporation COMPANY, a Delaware limited liability
company
By:________________________________ By: ____________________________________
Stephen P. Miller Name:
CFO Title:
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