Opinion ID: 4511116
Heading Depth: 3
Heading Rank: 1

Heading: The Master and PS Agreements

Text: In 2011, ITyX began business discussions with Eastman Kodak Company (EKC) and, on January 18, 2012, entered into a - 4 - contract called the Master Agreement. Just a day later, EKC filed for bankruptcy. In September 2013, Kodak assumed all of EKC's rights and obligations under the Master Agreement. The Master Agreement defines the parties' contractual relationship. Its Preamble states that the parties decided to enter into a strategic partnership where ITyX [would] license [the IDR software] to Kodak and Kodak [would] rebrand and market [such software]. The Agreement defines the Kodak-branded, IDR product (the Kodak Product) as the product, product family, and components of products, . . . that Kodak intends to distribute to End Users and will include or incorporate the Licensed Software . . . supplied by ITyX and as developed pursuant to this Agreement. The Master Agreement had an initial term of five years, and the parties believed that it would take about three years to bring the software to market. Unless terminated, the Master Agreement automatically renewed in two-year increments. The Master Agreement provides that either Kodak or ITyX could terminate the Master Agreement after a material breach by the other Party upon written notice to the defaulting party (Default Notice) specifying the default in reasonable detail, unless the defaulting party cures the default within 30 days after receipt of the Default Notice or, if such default cannot be cured within such time, the defaulting Party does not promptly start diligently and continuously in good faith to cure the default. - 5 - ITyX warranted that it either owned the copyright of the IDR software or ha[d] and [would] retain the authority to enter into . . . this Agreement and to grant licenses . . . to Kodak. The Agreement also created various exclusivity obligations, including that Kodak would be the sole distributor of the Kodak Product and would not develop a product functionally equivalent to the Kodak Product, i.e., an IDR product that would compete with ITyX's software. Although the Master Agreement authorized Kodak to exit in its sole good faith business judgment the IDR business (and so discontinue the marketing and sale of the Kodak Product), Kodak could not sell an IDR product not supplied by ITyX within two years of the exit date. In the event of a breach, the Master Agreement allows, but does not require, the non-breaching party to seek specific performance from the breaching party. The Master Agreement provided that ITyX would act as an independent contractor of Kodak. The Master Agreement also incorporates any Statement[s] of Work creating additional specifications and conditions into which Kodak and ITyX would enter subsequently. New York substantive law governs the Agreement. On June 25, 2015, Kodak and ITyX entered into another contract, the Professional Services Transfer Pricing Agreement (PS Agreement). The parties then amended the PS Agreement on - 6 - August 20, 2015 (the PS Amendment). Together, these PS Agreements specified that Kodak would be solely responsible for sales and marketing, and ITyX would provide the technology necessary to deliver and support the software. 2. The Investment Framework Agreement Among Related Entities More than two years after Kodak and ITyX entered into the Master Agreement, a group of related entities, KAH, ITyX OHG, ITyX Technology, and Arayan entered into a June 2014 Investment Framework Agreement (IFA). Under the IFA, KAH would acquire 25.1% of ITyX Technology. ITyX Technology, in turn, was to acquire ITyX and another company and KAH would invest €12.6 million into ITyX Technology via a series of payments over a sixteen-month period. The IFA also authorized ITyX Technology, once per quarter, to request up to two million euros in additional investment funds from KAH to support . . . acquisitions or similar strategic investments. The IFA provides that if KAH failed to make a required payment for more than thirty days, then ITyX OHG or ITyX Technology could exercise a call option. The call option, if exercised, would allow ITyX OHG or ITyX Technology to purchase all ITyX - 7 - Technology shares held by KAH in return for a payment of one euro and a waiver of KAH's outstanding IFA obligations. 3. KAH Purports to Terminate the IFA and Kodak Purports to Terminate the Master Agreement In June 2015, KAH did not make one of its required payments at the required time. In response, on November 23 or 24, 2015, ITyX OHG gave notice to KAH that it was exercising the call option. The notice stated that this decision was based on both the missed payment and on an earlier refusal by KAH to invest another two million euros into ITyX Technology pursuant the IFA.1 On December 18, 2015, KAH sent to ITyX OHG and ITyX Technology a letter stating that it would not comply with the call option, and that it was terminating the IFA for cause and was withdrawing as a shareholder of ITyX Technology. Also on December 18, 2015, Kodak sent a letter to ITyX asserting that the exercise of the call option effected a material breach of the Master Agreement, and announced Kodak was terminating the Agreement. The letter also stated that, if the termination was ineffective, Kodak was abandoning the IDR business for a two-year period following the exit date. A jury would later find that, by selling its Actionable Intelligence Management (AIM) platform, an IDR 1 Kodak contends that it missed the payment inadvertently and, immediately upon learning of this oversight, paid the required amount. The parties also dispute whether any such strategic investment[] existed. These issues do not affect the resolution of this appeal. - 8 - software, Kodak reentered the IDR business in violation of that two-year period.