EXHIBIT 10.1
ADDENDUM #6 TO
LICENSING AND DISTRIBUTION AGREEMENTS
(2004-2005 and 2005-2007)
     THIS ADDENDUM #6 TO LICENSING AND DISTRIBUTION AGREEMENTS (this “Addendum”)
is dated as of October 6, 2005 and is effective as of June 30, 2005 (“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.
RECITALS
     A. WHEREAS, Distributor and Riverdeep have entered into (i) that certain
Licensing and Development Agreement (Manufacturing Rights)(2004-2005), dated as
of March 29, 2004, as amended and in effect (collectively, “Agreement One”),
(ii) that certain Licensing and Development Agreement (Manufacturing
Rights)(2005-2007), dated as of March 29, 2004, as amended and in effect
(collectively, “Agreement Two”, and together with Agreement One, as amended, the
“Manufacturing Agreements”, and (iii) that certain Transition Services Agreement
dated April 1, 2004 (the “Transition Agreement”); each initially-capitalized
term used herein and not otherwise defined shall have the meaning ascribed to
such term in the Manufacturing Agreements or the Transition Agreement, as
applicable), 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. WHEREAS, the parties now desire to enter into this Addendum to amend
certain terms and conditions of the Manufacturing Agreements as specifically set
forth herein, and to memorialize the release of certain specific rights as
further set forth herein solely with respect to Agreement One and the Transition
Agreement; and
     C. WHEREAS, the parties agree to work in good faith to amend and restate
Agreement Two to reflect and be consistent with the terms and conditions set
forth herein, in addition to other identified amended terms included in any and
all other Addenda previously agreed in writing between 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:
AGREEMENT
1. Definitions. Capitalized terms used but not defined herein shall have the
same meaning as in the Agreements.
2. Reconciliation. The parties hereby acknowledge and agree that each has made
good faith efforts in respect of the reconciliation of accounts and records
related to Agreement One and the Transition Agreement, and have reached mutual
agreement with respect to such amounts, provided however that certain additional
adjustments to such reconciliation may be required by the mutual agreement of
the parties in the future due to the difficulties of presently ascertaining all
possible adjustments to the subject matter of the reconciliation as of the
Effective Date of this

 

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Addendum. Notwithstanding the foregoing, as of the Effective Date the parties
are not aware of any outstanding reconciliation items. The parties hereby agree,
subject to Section 4 (Offset) below:

  (i)   Payments made by Distributor to Riverdeep have equaled $12,106,360.00,
which included both cash payment and acknowledged and agreed discounts on
payment, effective as of March 31, 2005 of which $2,624,878 of such amount are
pre-paid royalties under Agreement One which Distributor has not yet recouped
(“Unearned Royalties”). Distributor shall be entitled to take as prepaid
royalties under Agreement One. Notwithstanding the foregoing, to the extent that
Distributor has not otherwise earned out any Unearned Royalties by the
expiration of the Term of Agreement Two, then the Term of Agreement Two shall be
extended until such time as any Unearned Royalties have been recouped, in
addition to such extensions as otherwise set forth in Section 4 of Agreement
Two. To the extent the Unearned Royalties are recouped by the expiration of the
Term of Agreement Two, no such extension shall be triggered.     (ii)  
Riverdeep agrees to pay (in the form of a credit against amounts owed by
Distributor to Riverdeep) Distributor $1,433,203.04, or such other amount based
upon those adjustments permissible under Section 2(iii) over twelve (12) months
beginning on April 1, 2005. Payment will be made in 12 monthly installments,
with the April monthly installment due as of May 1, 2005. All remaining payments
will be due on the first day of the subsequent month with the last payment due
on April 1, 2006. The first seven (7) of those installments shall be of
$106,146.05 and the remaining five installment payments shall be of $138,036.14.
    (iii)   The parties agree that, as of the Effective Date, certain
reconciliation items remain to be finalized and are have been expressly excluded
from the releases set forth in this Addendum in addition to items 2(iii)(A)-(D)
(the “Release Exceptions”). Notwithstanding the foregoing, each party shall
diligently work in concert to resolve all such reconciliations, chargebacks,
credits and/or payments. Each party agrees that deductions or credits pursuant
to Section 2 shall result in corresponding adjustments to the royalties paid to
Riverdeep by adjusting the Net Receipts. As of the Effective Date, the parties
are aware of the following reconciliation items:

(A) Riverdeep is entitled to payment of $114,282.81 in channel inventory
reconciliation with respect to the account of certain Products formerly
distributed by Riverdeep and now owned by MyFamily.com pursuant to an agreement
by and between Riverdeep and MyFamily.com, provided that Riverdeep represents
and warrants that as of the Effective Date, it is the owner of such channel
inventory and Riverdeep hereby agrees to indemnify and hold Distributor harmless
from any loss, cost, expense or damage (including attorney’s fees) to the extent
relating to any action, claim, demand or proceeding instituted by MyFamily.com,
Inc. due to payment of such amounts by Distributor to Riverdeep in relation to
such channel inventory.
(B) Distributor is entitled to and Riverdeep has credited an amount equivalent
to $1,071,040.96 for returns, rebates, product mark-down expenses, MDF credits,
and

 

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Sales Discounts (“Dilutions”) incurred by Encore from various retail accounts
related to activity prior to the Commencement Date of Agreement One.
(C) Riverdeep is entitled to payment in the amount of $116,471.94 due to
Wal-Mart Corporation erroneously crediting Distributor, or Distributor’s parent
company with such aforementioned amount, that was actually due to Riverdeep for
unresolved account activity in the retail channel prior to the Commencement Date
of Agreement One.
(D) Riverdeep may be entitled to credit or reconciliation of amounts up to a
maximum of $41,690.57 in relation to post-audit credits relating to sales and
distribution by Wal-Mart Corporation prior to the Commencement Date of Agreement
One, the parties shall endeavor to research and resolve such post-audit credits
within sixty (60) days from the Effective Date hereof .unless such time period
is extended by mutual agreement of the parties.
3. Modifications and Release. In consideration of the amendments made herein and
such other good and valuable consideration, the receipt and sufficiency of which
is acknowledged by each of the parties, with the exception of the Release
Exceptions , the parties intend to release any and all potential disputes,
claims or potential claims that may arise between Distributor and Riverdeep in
relation to Returns received through March 31, 2005 for sales of Channel
Inventory attributable to Riverdeep prior to the Effective Date of Agreement One
(the “Potential Claim”). In full satisfaction of such Potential Claim,
(A) Riverdeep agrees to:

  (i)   pay Distributor $507,617.75 in three (3) equal annual installments of
$169,205.92 annually beginning on March 31, 2007, separate and apart from any
obligations under the Manufacturing Agreements;     (ii)   by amendment to that
agreement, extend the Term of Agreement Two by one (1) year to March 31, 2011
provided however that, the Term shall additionally be extended for any
recoupment periods under Section 4 of Agreement Two and each of the first,
second, third, fourth and fifth and sixth Sales Years is conditioned on the
payment of the applicable Guaranteed Royalty for the preceding Sales Year; and  
  (iii)   add one (1) incremental product annually as a “Product” under
Agreement Two, by April 1, 2006 and for each year thereafter, in consideration
of which, Distributor agrees to release Riverdeep from payment of $1,955,758.80
that Distributor claims it is entitled to collect, provided however, such amount
shall be forgiven over a five (5) year period in installments of $391,151.76
beginning on April 1, 2007 and on each anniversary thereof.

 

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(B) Distributor agrees to:

  (i)   pay Riverdeep (in addition to any other amounts Distributor has agreed
to pay Riverdeep hereunder) the sum of $9,960 per month for a period of
twenty-five (25) months upon the Effective Date of this Addendum.

(C) The parties mutually agree that:
(i) Section 1.18 of Agreement Two shall be amended by deleting the phrase
“June 30, 2005” from the definition of “Revision Event” noted therein, provided
however that Distributor shall have an additional 12 month period to recoup all
Guaranteed Royalties from the sales of all the Products for the first Sales Year
of Agreement Two.
(ii) Section 4.2.1 only of Agreement Two shall be amended by deleting such
section in its entirety and replacing it with the following:
“4.2.1 Subject to further adjustments as provided in this Section 4.2 below, for
each Sales Year during the Term of this Agreement, Distributor shall pay a
guaranteed, irrevocable, non-refundable payment (recouped against royalties as
hereinafter provided) as follows (for each Sales Year, the “Guaranteed
Royalty”).
(a) In respect of the first Sales Year, the Guaranteed Royalty shall be
$10,000,000.
(b) In respect to the second Sales Year, the Guaranteed Royalty shall be 80% of
the actual Royalties earned by Riverdeep from sales of the Product during the
first Sales Year. For purposes of clarification, the calculation of the
aforementioned Royalties actually earned shall exclude royalties actually earned
for products under the Prior Agreement until such products become Products under
this Agreement pursuant to the terms of Section 1.15 and, Unearned Royalties as
such term is defined in that certain Addendum #6 dated June 30, 2005 by and
between the parties, and
The Guaranteed Royalty for each Sales Year shall be paid in twelve equal monthly
installments on the 1st day of each month of the applicable Sales Year for the
preceding month (i.e. on July 1st payment will be made for June’s Guaranteed
Royalty payment, provided however that in respect to the first Sales Year, the
payment made on July 1st will also include the applicable payment for the month
of July and the next subsequent payment will be made on September 1st for the
month of August). Notwithstanding the foregoing, upon the occurrence of the
first applicable Revision Event, the Guaranteed Royalty for the current and, if
applicable remaining Sales Years shall be zero, and within 30 days after the
occurrence of such Revision Event, Riverdeep shall refund to Distributor the
amount by which the aggregate installments of the Guaranteed Royalty theretofore
paid by Distributor, exceed the royalties earned by Riverdeep with respect to
sales of the Products in such Sales Year.”

 

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(iii) Payment in Satisfaction. The parties acknowledge and agree that all
payments made, reconciled or acknowledged hereunder are in full satisfaction of
any payments that would be due as of the Effective Date.
(iv) Survival of Agreement One. The parties do not intend, by this Addendum to
terminate the rights and obligations of Agreement One, as amended by this
Addendum but rather to provide a limited release of the Potential Claims.
(v) Releases of Potential Claim under Agreement One and the Transition
Agreement.
     (a) Release by Distributor. For and in consideration of the mutual
promises, covenants, and releases set forth herein, Encore does hereby for
itself, and for each of its predecessors, successors, past and present assigns,
officers, directors, shareholders, employees, attorneys, agents, subsidiaries,
parent companies, affiliates, accountants, spouses, heirs and representatives,
if any, release and absolutely discharge Riverdeep and Riverdeep’s respective
past and present officers, directors, shareholders, employees, predecessors,
successors in interest, attorneys, agents, assigns, subsidiaries, parent
companies, affiliates, accountants and representatives, and each of them, (the
“Released Riverdeep Parties”) from any and all claims, debts, liabilities,
demands, obligations, promises, acts, agreements, accounts, accountings,
reckonings, costs, and expenses (including, but not limited to, attorneys’ fees
and costs), damages, liens, judgments, actions and causes of action, of every
kind and nature whatsoever, at law or in equity, known or unknown, suspected or
unsuspected, which Encore ever had, or now has against Riverdeep and/or the
Released Riverdeep Parties, solely to the extent in relation to the Potential
Claims set forth herein, expressly excluding and not releasing the parties’
rights and obligations under Agreement One, as modified by this Addendum,
including but not limited to the Release Exceptions as defined herein.
     (b) Release by Riverdeep. For and in consideration of the mutual promises,
covenants, and releases set forth herein, Riverdeep does hereby for itself, and
for its predecessors, successors, assigns, past and present assigns, officers,
directors, shareholders, employees, attorneys, agents, subsidiaries, parent
companies, affiliates, accountants and representatives, if any, release and
absolutely discharge Encore, and Encore’s respective past and present officers,
directors, shareholders, employees, predecessors, successors in interest,
attorneys, agents, assigns, subsidiaries, parent companies, affiliates,
accountants and representatives, and each of them, (the “Released Encore
Parties”) from any and all claims, debts, liabilities, demands, obligations,
promises, acts, agreements, accounts, accountings, reckonings, costs, and
expenses (including, but not limited to, attorneys’ fees and costs), damages,
liens, judgments, actions and causes of action, of every kind and nature
whatsoever, at law or in equity, known or unknown, suspected or unsuspected,
which Riverdeep ever had, or now has against Encore or the Released Encore
Parties, solely to the extent in relation to the Potential

 

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Claims set forth herein, expressly excluding and not releasing the parties’
rights and obligations under Agreement One, as modified by this Addendum,
including but not limited to the Release Exceptions as defined herein.
(c) Subject to the scope of Section 3(c)(iv)(a) and 3(c)(iv)(b)above, the
parties expressly understand and agree that this Addendum fully releases and
resolves the matters released and discharged in Sections 3(c)(iv)(a) and
3(c)(iv)(b), including those which may be unknown, unanticipated and/or
unsuspected, and, upon the advice of legal Counsel, hereby expressly waive all
benefits under California Civil Code Section 1542, as well as under any other
statutes or common law principles of similar effect, to the extent that such
benefits may contravene the release set forth in this Section, except in
instances of fraud. The parties hereby acknowledge that each has read and
understood Section 1542, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN ITS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY SUCH CREDITOR MUST HAVE MATERIALLY AFFECTED ITS SETTLEMENT WITH THE
DEBTOR.
  (D) No Admission of Liability. This Addendum does not constitute an admission
by either party of liability or responsibility to the other.
(E) Representations and Warranties. The parties represent and warrant to and
agree with each other as follows:
(i) Each party has received independent legal advice from attorneys of its
choice with respect to the advisability of entering into this Addendum and of
giving any release by such Addendum.
(ii) Neither party has previously assigned or otherwise transferred any claim
being released under this Addendum.
(iii) With respect to the settlement and releases set forth herein, this
Addendum, contains the entire agreement of the parties hereto with respect to
such settlement and releases. There are no agreements or understandings between
the parties hereto relating to the subject matter herein with respect to such
settlement and releases referred to in this Agreement other than as set forth in
this Addendum. With respect to all other matters herein, there are no other
agreements, with the exception of the Transition Agreement and The Manufacturing
Agreement other than as set forth in this Addendum.
(iv) All parties hereto and their counsel have made such investigation of the
facts pertaining to the releases contained herein as they deem necessary and the
terms of this Addendum are contractual and are the result of negotiation among
the parties. Each party has cooperated in the drafting and preparation of this

 

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Addendum. In any construction to be made of this Addendum, the same shall not be
construed against any party, and the canon of contractual interpretation set
forth in California Civil Code Section 1654 shall not be applied to this
Addendum. This Addendum has been carefully read by each of the parties and the
contents thereof are known and understood by each of the parties and is signed
freely by each party, by a representative authorized to execute this Addendum on
behalf of each party.
4. Offset. All amounts due and payable hereunder by either party may be offset
against any and all amounts which the other party owes Distributor hereunder or
pursuant to the Manufacturing Agreements.
5. Modifications. This Addendum may not be amended, canceled, revoked or
otherwise modified except by written agreement subscribed by all of the parties
to be charged with such modification.
6. Severability; Binding Unamended. In the event any provision of this Addendum
shall be held to be void, voidable or unenforceable, the remaining provisions
shall remain in full force and effect. To the extent unamended by the Addendum,
all other terms and conditions of the Manufacturing Agreements and the
Transition Agreement shall remain in full force and effect.
7. Conflict. In the event of any conflict between the terms of this Addendum and
the Manufacturing Agreements or the Transition Agreement, the terms of this
Addendum shall control. The parties have acknowledged that Agreement Two shall
be amended to reflect the relevant terms and conditions of this Addendum.
8. Governing Law. This Addendum shall be construed in accordance with, and be
governed by, the laws of the State of California, without regard to choice of
law provisions thereof.
9. Counterparts. This Addendum may be executed in one or more counterparts, each
of which when executed and delivered shall be an original, and all of which when
executed shall constitute one and the same instrument. Facsimile signatures on
this Addendum, or any counterpart of this Agreement, shall have the same force
and effect as original signatures.
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IN WITNESS WHEREOF, the parties hereto have executed the agreement by their duly
authorized representatives as set forth below.

          DATED:                                                             ,
2005   RIVERDEEP INC., A Limited Liability Company
 
  By:    
 
       
 
  Its:    
 
       
 
        DATED:                                                             ,
2005   ENCORE SOFTWARE, INC.
 
  By:    
 
       
 
  Its: