Sample Contracts - Master Alliance Agreement - Audible Inc., France Loisirs SAS and Audio Direct SAS

This Master Alliance Agreement (“Agreement”) is entered into as of September 15, 2004 (“Effective Date”), by and between Audible, Inc., a Delaware corporation having offices at 65 Willowbrook Boulevard, Wayne, New Jersey 07470 (“Audible”) and France Loisirs S.A.S., a French stock corporation having offices at 123 Boulevard de Grenelle, 75015, Paris, France (“France Loisirs”), and Audio Direct S.A.S., a French stock corporation having offices at 123 Boulevard de Grenelle, 75015 Paris, France (“Audio Direct”).

WHEREAS, Audible has developed and operates a service that allows end user licensees to access digital audio spoken word programming content (“Content”) for immediate play and streaming, and/or for storage and time-shifted playback to an end user’s computer, server or other device or media capable of accessing such Content (collectively with any changed, expanded or updated versions of such service offerings implemented by Audible and made available to France Loisirs from time to time, the “Audible Service”), with such end user licensees acquiring Content for their own use and not for redistribution (“End Users”);

WHEREAS, France Loisirs, desires to create, develop and expand its business in various French-speaking countries through the creation, development, promotion and operation of a French version of the Audible Service aimed at the French-speaking market, and Audible desires to provide certain technology, know-how and services to support France Loisirs and Audio Direct in these efforts consistent with the terms and conditions of this Agreement. France Loisirs has established a wholly owned subsidiary, Audio Direct, through which it intends to operate the Business (as the term is defined below) under and according to the terms and conditions of this Agreement, and Audio Direct shall be a direct beneficiary of all rights granted by Audible under this Agreement, and shall be a direct obligor of all obligations arising out of this Agreement towards Audible. Therefore, references to “France Loisirs” in this Agreement shall mean France Loisirs and Audio Direct, collectively, except where it is expressly indicated that a reference in this Agreement is only to France Loisirs or Audio Direct, individually.

1.2 Exclusive Appointment to Operate the Business and Limitations. Subject to the terms and conditions of this Agreement and as more fully detailed and set forth hereinafter, Audible hereby grants to France Loisirs the exclusive right and license during the Term (as defined in ARTICLE 7) to conduct and operate the Business, and France Loisirs accepts such grant. Both parties shall use their commercially reasonable efforts to conduct the Business at all times and faithfully, honestly and diligently perform their obligations under and in accordance with this Agreement (the “Appointment”). The terms “Business” and the “Exclusive Field” each means establishing, providing, operating and promoting a French language web site that is a French language version of the Audible Service (both as the Audible Service is currently being provided and will be provided by Audible in the future and using all technical means and methods of distribution that the Audible Service is currently using or will be using in the future, as more fully described out in the immediately following subparagraph), to offer and sell licenses to End Users to download digital audio books and audio spoken word content primarily in French. The term “Audible Content” means English-language Content that is sourced from or by Audible. The parties understand that while the editorial of such web site shall be in the French language, it may include some English language elements that are incidental to the Business and editorially appropriate, including by way of illustration, English-language titles, reviews, customer feedback, and similar materials. Accordingly, there is no requirement that all elements of the Business be in French but that it be predominantly in French, and provided that France Loisirs complies with the terms and conditions of this Agreement. Notwithstanding anything to the contrary in this Agreement, France Loisirs agrees that its marketing activities related to the Business shall be focused on and limited to the following geographic regions, unless otherwise mutually agreed: France, French speaking areas of Belgium, French Canada, and French Africa, and the French-speaking parts of Switzerland, Luxembourg and other French-speaking countries.

The means by which the Content may be distributed to End Users may include, without limitation: (i) distributing via various methods, regardless if such methods are currently developed and known already or will evolve in the future, such as (but not limited to) downloads streaming, push- and pull services; (ii) distributing over various networks such as but not limited to Internet cable networks, satellite networks, cellular networks, radio networks; (iii) distributing in the context of various services such as but not limited to www, e-mail, FTP, P to P Applications; (iv) distributing in various formats such as but not limited to MP3, MP4, AA, wma; realaudio, egg vorbis, etc.; or (v) distributing on various devices such as but not limited to PC, Mobile Phones, PDA, Smartphones; Audio Players and portable Audio Devices, in each case as authorized by this Agreement. France Loisirs agrees that all Audible Content shall be stored, served and provided only from systems owned or controlled by Audible. All End User sales (and any other sales that may be authorized by Audible) of licenses to Audible Content shall be on terms acceptable to Audible.

1.2.1 Establishment of the Business. In furtherance of the Appointment and subject to the terms and conditions of this Agreement, the parties shall jointly create and establish the web site or web sites through which the Business will be conducted. France Loisirs shall have primary responsibility for operating and controlling the operation of the Business, with Audible providing supporting Services (as the term is defined in Section 2.2) and certain rights and Audible Content as further described in this Agreement. The Business will be operated in accordance with this Agreement, solely in the Exclusive Field (subject to Section 1.3 below), and will allow End Users (“France Loisirs End Users”) to download digital spoken word audio content primarily in French (collectively, “France Loisirs Content”). Audible agrees to use its reasonable efforts to provide France Loisirs with Audible’s existing documentation (as such documentation will be developed, amended and updated from time to time) describing Audible’s procedures for managing day-to-day interactions with customers and will provide France Loisirs with updates of such documentation, if any, without undue delay, solely for use in managing the day-to-day operations of the Business consistent with Audible’s reasonable practices.

1.3 Incidental Spillover. The preceding notwithstanding, the parties acknowledge and agree that, due to the nature of the Internet, it may be possible that, despite France Loisirs’s operation of the Business in accordance with this Agreement, some customers outside of the Exclusive Field may access and place orders with the Business, and that such incidental “spillover” shall not be deemed to be a violation of the Appointment or of France Loisirs’s obligations under this Agreement. Likewise, the parties further acknowledge and agree that, due to the nature of the Internet, it may be possible that customers within the Exclusive Field may access the web sites of Audible or its partners or licensees and place orders with such parties, and that such incidental “spillover” shall not be deemed a violation of Audible’s obligations under this Agreement or otherwise. It is expressly agreed that no party will solicit or otherwise actively encourage such “spillovers” provided that this shall not preclude Audible or its licensees from promoting the Audible Service through websites in languages other than French.

1.4 Management of the France Loisirs-Audible Relationship. To initiate and foster an effective, collaborative, working relationship between Audible and France Loisirs, the parties will agree upon appropriate procedures and processes to manage their relationship with respect to the Business, and to administer this Agreement and the activities undertaken pursuant to this Agreement. To that end, each party shall designate one qualified person to act as its primary point of contact to administer this Agreement (the “Relationship Managers”). The specific scope of authority of the Relationship Managers shall be as mutually agreed by the parties; however, the parties intend that the Relationship Managers will be the primary interfaces for managing and coordinating the parties’ day-to-day interactions. The Relationship Managers will communicate regularly and will meet regularly (whether in person, by teleconference, or as otherwise agreed) pursuant to an agreed upon schedule and as circumstances warrant, so that Audible and France Loisirs may be kept fully apprised of matters related to their relationship (e.g., progress of undertakings, new opportunities, delays, etc.), and so that the parties may resolve (and if appropriate, escalate to more senior executives) and mitigate the effect of any problems.

1.5 Compliance With Laws And Good Business Practices. France Loisirs shall secure and maintain in force in its name all required regulatory licenses, permits and certificates relating to the operation of the Business. France Loisirs shall operate the Business in compliance with all applicable laws, ordinances and regulations, including, without limitation, all applicable United States (for those aspects of the business hosted or otherwise conducted in the United States), French, European Union, and other laws and regulations relating to privacy, the use or transfer or disclosure of personal or technical data and information, workers’ compensation insurance, unemployment insurance and taxes. Audible shall support France Loisirs with its obligations under the preceding sentences by making available to it its know-how acquired through its existing activities and based upon its experience in developing businesses similar to the Business in other jurisdictions. All advertising and promotional materials France Loisirs uses to promote the Business must conform to high standards of ethical advertising but taking into account possible cultural differences applicable to individual countries or communities. The parties shall meet their obligations under this Agreement adhering to the highest standards of honesty, integrity, fair dealing and ethical conduct and shall refrain from any business or advertising practice that might harm the other party or the goodwill associated with the Business or the Audible Service (in the case of France Loisirs). Each party shall notify the other party in writing within five (5) days after the commencement of any action, suit or proceeding, or the issuance of any order, writ, injunction, award or decree of any court, agency or other governmental unit, which might adversely affect the other party or its agents or affiliates, the Business or the reputation and goodwill of the Business.

(a) Audible’s prior written consent shall be required for any sale or distribution of any Content that is not solely through a “mirror” site where Audible, on behalf of the Business, processes the transactions and provides fulfillment of Content-related orders; Audible’s prior written consent also shall be required with respect to any implementation or technology issues related to establishment or operation of any “mirror” site. Mirror sites may include “white label” or “private label” versions of the web site of the Business. Audible’s prior written consent shall not be unreasonably withheld or delayed.

(b) Audible’s prior written consent shall be required for any Channel Partners that are multi-national entities or whose products or services are offered on a multi-national basis. Notwithstanding the preceding, Audible’s prior written consent shall not be required to approach such Channel Partners if the relationship is limited to French language activities within the Exclusive Field, provided that France Loisirs obtains Audible’s prior written consent for entering into any contracts with such Channel Partners. Where Audible’s consent is required under this paragraph, such consent shall not be unreasonably withheld or delayed.

France Loisirs shall be responsible for assuring each Channel Partner’s compliance with this Agreement and each agreement with France Loisirs, and France Loisirs shall enforce such agreements; any breach of any term or requirement of this Agreement by any such party shall be deemed to be France Loisirs’s breach for purposes of this Agreement. France Loisirs shall qualify all people or organizations seeking to become Channel Partners and shall train any such accept-able Channel Partners as reasonably necessary to assure an acceptable level of quality and performance. France Loisirs shall regularly evaluate the performance of each Channel Partner for purposes of determining the level of skill of each such parties’ relationship with End Users, and the general representation of the Business and the Content afforded by each Channel Partner. Audible shall have access, upon reasonable prior notice, to all written contracts of France Loisirs pertaining to any activities related to the marketing, sale or distribution of Content by the Channel Partners.

1.9 Device Deals and Similar Relationships. France Loisirs shall not enter into any contracts or relationships for the manufacture, marketing or distribution of devices enabled to access, read, store, or play Content, except with the prior written approval of Audible, which shall not be unreasonably withheld or delayed, and subject to any terms and restrictions arising out of Audible’s relationships with device manufacturers and providers (collectively, “Device Manufacturers”), unless France Loisirs, or a company affiliated with France Loisirs, with the prior written approval of Audible (which shall not be unreasonably withheld or delayed), enters into a contract or relationship with a Device Manufacturer on terms and conditions more preferential than the ones that Audible enjoys under its agreement/relationship. Prior to France Loisirs’ approaching any Device Manufacturers, the parties shall mutually agree upon a strategy and procedure for approaching, negotiating and establishing relationships with prospective Device Manufacturers, and on the roles that Audible and France Loisirs will have in any negotiations with such parties. Audible agrees that it shall seek input from France Loisirs prior to entering into a contract with a Device Manufacturer for the marketing or distribution of such devices in the Exclusive Field.

2.1 Implementation of the Business. The parties will, subject to the terms and conditions of this Agreement, implement the Business in accordance with the agreed-upon project plan attached to this Agreement as Schedule 2.1 (the “Project Plan”). Each party agrees to undertake and perform its respective responsibilities and tasks assigned to it in accordance with the Project Plan. As further described in the Project Plan, the parties intend and agree that Audible shall have overall responsibility for managing the technology/infrastructure issues related to establishing, implementing and Launching the Business, subject to France Loisirs providing its full support, input and cooperation at all times as reasonably requested by Audible and as otherwise required in accordance with this Agreement and the Project Plan. The parties intend that the Project Plan be a “living document” and as such, will be updated (while remaining consistent with the responsibilities and roles set forth in it except with the parties’ express mutual agreement in writing) by the parties throughout the course of implementing the Business, so that it remains current and responsive to the evolving business considerations related to the successful Launch and operation of the Business. The parties, through their Relationship Managers, will agree upon any necessary operational procedures for updating the Project Plan.

2.2 Business Services. Subject to the terms and conditions of this Agreement, Audible agrees to provide the following services and such other services in support of the Business as are allocated to Audible under this Agreement or agreed upon by the parties (collectively, the “Services”). A description of the Services to be provided by Audible initially is set forth in Schedule 2.2. The parties understand and acknowledge that the tasks undertaken by Audible depend, in part, upon the timely and complete performance of France Loisirs of its respective obligations, and agree that Audible shall not incur liability to the extent that its failure to perform under this Agreement is caused by France Loisirs’s failure to meet its obligations.

While Audible is providing Services prior to a Transition (as defined in Section 2.5), Audible only will be responsible for correcting problems in the Audible IP and systems used to run the Business which relate to the Audible Service (which, for purposes of this clause, expressly includes Audible’s hardware and software/IT suppliers, vendors, consultants and employees of Audible or third parties providing services or delivering goods to Audible for its operation of the Audible Service), when and to the same extent that Audible makes such corrections in the Audible Service (i.e., Audible will, as part of the Services, implement for the Business such updates, bug fixes, patches or other updates to the Software licensed by Audible to the Business as Audible implements for the Audible Service). Specific post-Transition activities to be undertaken by Audible shall be as mutually agreed upon as part of the Transition Plan.

2.3 Compensation for Services. Compensation to Audible for Services shall include the amounts set forth in this Section 2.3, and any other Services-related compensation expressly agreed upon by the parties (collectively, the “Services Compensation”). The payments to Audible under this ARTICLE 2 will be made by Audio Direct, although France Loisirs shall remain jointly and severally liable with Audio Direct for payment of such amounts as are due to Audible. France Loisirs will secure that Audio Direct receives the financial resources necessary to fulfill its payment obligations under this Agreement. For that purpose, France Loisirs will provide such financial resources by infusing cash into Audio Direct's capital reserve account readily in advance of the due date of any payment obligations of Audio Direct under this Agreement.

2.3.1 Upfront Services Fees. France Loisirs shall pay Audible a non-recoupable and non-refundable payment of US $1 million which shall be a fee covering Audible’s services during the Initial Term. These services include services provided before Launch and after Launch in accordance with Schedule 2.1 and 2.2. The US $1 million will be comprised of $750,000 as upfront services fees (the “Upfront Services Fees”) and $250,000 as Upfront Royalty Payment (as defined below). France Loisirs agrees that the Upfront Services Fees shall be paid pursuant to the following schedule:

2.3.2 Payment of Incremental Expenses. Subject to the terms of this Section 2.3 France Loisirs also agrees to pay Audible any Incremental Expenses, which shall be chargeable pursuant to the terms of this Section 2.3. The term “Incremental Expenses” means expenses and costs (including fees, costs and expenses arising out of or related to the Services) that Audible incurs specifically for the Business to help launch or serve the Business, including Transition (as described in Section 2.5, below) provided that such costs are specifically incurred by Audible for, and are clearly allocable to, the Business and are beyond or in addition to Audible’s normal business expenses. By way of illustration and not limitation, Incremental Expenses include: (i) additional license fees Audible incurs to any licensor specifically in performance of the Services or the Business, (ii) additional costs Audible incurs for Content, translation of Content,, or processing of Content, (iii) additional costs Audible incurs related to customer service systems or server hosting or bandwidth costs specifically related to the Business, with such costs calculated in accordance with Schedule 2.3.2, (iv) all or an appropriate proportion of the cost of any licenses or hardware that Audible acquires for use by France Loisirs (except for certain licenses or hardware covering Audible’s capacities existing as of the Effective Date, with such costs calculated in accordance with Schedule 2.3.2). The parties agree that France Loisirs will not be charged for time spent by Audible’s management in connection with the Business; however, if Audible incurs other Incremental Expenses for its personnel supporting the Business (e.g., if France Loisirs’s needs for the Business are such that Audible is not reasonably able to use existing personnel and, as a result, hires additional employees), all or the appropriate proportion of such costs of additional, non-management personnel shall be Incremental Expenses. In general, costs and expenses incurred by Audible that are allocable both to the Business and to Audible’s own or third parties’ business (including costs and expenses in excess of the thresholds set forth in the preceding sentences) shall be reimbursed on a pro rata basis. In cases where a clear allocation is not possible, the parties shall in good faith agree on a mechanism for a fair and appropriate sharing of such costs and expenses.

2.3.3 Reimbursement. If and to the extent that Audible incurs such Incremental Expenses in compliance with this Section 2.3, France Loisirs shall reimburse all such amounts within thirty (30) days following submission of an appropriate invoice, provided that any individual Incremental Expenses above US$1000 on a per-item-basis will require prior express approval of France Loisirs to be reimbursable to Audible (which approval shall not be withheld unreasonably); Audible shall not be obligated to incur any expenses or costs that are denied by France Loisirs and France Loisirs understands that its delay or rejection or failure to reimburse any Incremental Expense for which Audible has sought France Loisirs’ prior approval may have an adverse impact on the Business and/or the Launch, for which Audible shall not be liable. Evidence reasonably documenting Incremental Expenses incurred will be furnished to France Loisirs upon request, and France Loisirs will have the right to audit and verify any Incremental Expenses that Audible charges France Loisirs.

2.4 Cooperative Marketing Efforts. France Loisirs shall develop a plan to market and promote the Business and the Content to prospective and potential France Loisirs End Users in the Exclusive Field, and shall be responsible for the marketing of the Business (“Marketing”). France Loisirs will not engage during the Term in Marketing any services or products competitive with the Business or that include digital spoken word audio distributed online, over the airwaves, or in any manner of distribution described in Section 1.2.

2.5 Transition. Upon France Loisirs request, the parties will work cooperatively and in good faith to mutually agree in writing (including, if applicable, by means of a separately signed amendment to this Agreement or separately signed agreement) upon a process and plan for transitioning the post-Launch Business from an Audible Services-environment to a “standalone” environment should the parties agree in good faith that it is in the best interest of the Business to do so, so that France Loisirs may operate the Business and its underlying systems without Audible’s providing any or all of the Services (“Transition” and the “Transition Plan”). This process and plan may include, by way of example, establishing and maintaining a remote “hot” backup site for the Business so that the Business may be transferred from Audible-controlled servers to France Loisirs-controlled servers rapidly if there is a problem with Audible’s systems or if France Loisirs elects to Transition the Services away from Audible. Notwithstanding anything to the contrary in this Agreement, no Transition may occur until after the first anniversary of the date on which Launch occurred has passed.

The parties also will mutually agree in writing upon: (i) the conditions that may give rise to a Transition and the terms and limitations pursuant to which a Transition would occur, including ongoing obligations and undertakings of the parties post-Transition, and (ii) on appropriate limitations, reasonably acceptable to Audible, on successor service providers for the Business, so that Audible’s rights in and to Audible’s intellectual property (including Audible Know-How, as defined in Section 3.3, below) are protected against use by or disclosure to competitors of Audible. The occurrence of any Transition shall not affect any payment obligations of France Loisirs with respect to the Royalty or any other amounts that may be chargeable for use of the intellectual property or assets of Audible or its licensors. Any Incremental Expenses incurred in connection with a Transition shall be borne by France Loisirs in accordance with Sections 2.3.2 and 2.3.3, above. As shall be further addressed in the Transition Plan, Audible will work with France Loisirs to provide France Loisirs with such existing Audible documentation and manuals that are reasonably necessary for France Loisirs to operate the Business post-Transition in substantially the same manner as it operated the Business prior to Transition. Notwithstanding the foregoing, Audible agrees that in the event Audible (or its successor in interest) should decide not to continue the provision of the services as rendered towards France Loisirs under this Agreement in accordance with this Agreement, at that point in time Audible will, upon France Loisirs’ request, perform a Transition in accordance with the applicable Transition Plan.

Notwithstanding anything to the contrary in this Agreement or in any Transition Plan, Audible shall have no obligation or liability following Transition for any problems or matters that arise out of or result from: (i) any breach of this Agreement by France Loisirs or anyone acting on its behalf, (ii) the modification or commingling of any Audible IP (as defined in Section 3.3) or any other materials, information, technology or systems provided by Audible (or that Audible supported) with any products or other materials not supplied or authorized by Audible, (iii) the abuse or misuse of any Audible IP (as defined in Section 3.3) or any other materials, information, technology or systems provided (or supported) by Audible, or their use in an otherwise unauthorized, unlawful or inappropriate manner. Audible’s post-Transition obligations shall not extend beyond providing such continuing support and updates, if any, as are agreed upon in the Transition Plan regarding the unmodified materials, information, technology and systems provided by Audible.

2.6 Independent Operation. Audible has provided in Schedules 2.1 and 2.2 a description of the material systems, software, infrastructure and other technology components (based on the initial design for the Business as of the Effective Date), that are necessary for France Loisirs to have in place if the Business is Transitioned from an Audible Services environment, so that France Loisirs may operate the Business in substantially the same manner as was designed to be operated while Audible was providing the Services (the “Necessary Technologies”). The parties will mutually agree upon a process for updating Schedules 2.1 and 2.2 so that the description of Necessary Technologies remains reasonably current as the design and functionality of Business evolves until and after Launch. Schedules 2.1 and 2.2 also shall identify which elements of Necessary Technologies Audible will license to France Loisirs at no additional cost (with the exception of Incremental Expenses) for use in the Business following a Transition (subject to Audible’s rights to do so and subject to payment of any Incremental Expenses incurred) and which elements France Loisirs must acquire independently. The use and licensing of such elements shall be addressed as part of the Transition process, including the specific terms governing use of such elements that are owned or provided by Audible. Audible will work with France Loisirs as part of any Transition to make available Audible’s existing standard documentation that is necessary for France Loisirs to operate the software and systems being transitioned to France Loisirs for operation independent of Audible.

3.1 License to Audible Trademarks. Subject to the terms and conditions of this Agreement, and in consideration for the fees paid by France Loisirs to Audible hereunder: (i) Audible grants to France Loisirs a license to use the Audible brand, trademarks, logos, trade dress, and domain names identified in Schedule 3.1 (as Schedule 3.1 may be modified and/or augmented by Audible in writing from time to time) and goodwill connected therewith (collectively, the “Marks”), during the Term, solely for the operation of the Business consistent with this Agreement; and (ii) Audible agrees that France Loisirs’s rights to use the Marks shall be exclusive within the Exclusive Field (except for any rights Audible must retain to exercise its rights, or to perform its obligations under this Agreement), and to avoid doubt, the parties expressly agree that France Loisirs’ exclusive rights shall be limited to the Exclusive Field. No other use of the Marks shall be permitted without Audible’s prior written approval in each case. Subject to the terms and conditions of this ARTICLE 3, the license granted hereunder shall specifically include the right to use the Marks in combination with France Loisirs’s own trademarks, service marks, trade names and trade dress in connection with the operation of the Business consistent with this Agreement. Notwithstanding the foregoing, France Loisirs understands that Audible will not delete from Schedule 3.1 any of the “Core Marks” identified in Schedule 3.1 and will keep, at its sole cost and expense, all registrations of the Core Marks current and active and will readily pay all due registration and other administrative fees so as not to endanger their continued registration, unless Audible does so due to: (1) a requirement of law or governmental authority, (2) to avoid liability to a third party, (3) because of France Loisirs’ failure to cure a breach of this ARTICLE 3, or (4) because Audible has elected to generally restrict or cease use of the Mark in connection with the Audible Service (although, in the case of (4), Audible will work with France Loisirs to give France Loisirs a reasonable period of time to transition away from using the applicable Core Marks). If Audible elects to allow a registration for a Mark to lapse, other than for one of the reasons stated in (1) - (3) of the previous sentence, Audible agrees to notify France Loisirs reasonably in advance of the lapse date and to provide France Loisirs with the opportunity to continue using the Mark during the Term, provided France Loisirs continues to comply with this Agreement and pays any amounts required to continue Audible’s registration of the Mark in the applicable jurisdiction.

3.2.1 General. France Loisirs acknowledges and agrees that: (i) Audible is the sole and exclusive owner of all right, title and interest in and to the Marks, including without limitation for use in connection with the Audible Service; and (ii) France Loisirs recognizes the value of the goodwill associated with the Marks in connection with such products and acknowledges that the Marks and all rights therein, the goodwill pertaining thereto and any registrations therefor worldwide belong exclusively to Audible, and all use of the Marks under this Agreement shall inure to the benefit of Audible. Subject to the foregoing, Audible acknowledges and agrees that France Loisirs is and shall be deemed the sole and exclusive owner of all right, title and interest in and to the trademarks owned by France Loisirs that do not incorporate the Marks or any other branding or trademarks of Audible (the “France Loisirs Marks”). Use of the France Loisirs Marks shall inure to the benefit of France Loisirs. Notwithstanding the foregoing, all trademarks and brands owned by third parties shall remain the sole and exclusive property of such parties.

3.2.2 Non-Contravention. France Loisirs agrees that during the Term, and at all times thereafter, it will not, directly or indirectly, challenge or attack the title or any rights of Audible in and to the Marks or any applications for registration or registrations of such Marks or assist others in doing so in any way. Further, France Loisirs agrees and acknowledges that it shall use the Marks in accordance with the terms set forth in this Agreement and shall not take any action to diminish, dilute or tarnish the value and/or quality of the Marks including, without limitation, any act that may infringe and/or lead to the infringement of the Marks and/or any intellectual property rights affiliated with the Marks.

3.2.3 Transfer of Domain Names. France Loisirs, subject to the full reimbursement of all out-of-pocket-expenses that France Loisirs (or companies affiliated with France Loisirs - "verbundene Unternehmen", as such term is used in ¤¤ 15 ff. of the German Stock Corporation Law - AktG) has incurred in the registration of such URLs / domain names) irrevocably assigns and agrees to assign, and will make its affiliated companies assign, to Audible all right, title and interest in and to all those domain names that have been registered by France Loisirs or companies affiliated with France Loisirs (all of which France Loisirs has identified in Schedule 3.2.3), effective upon the Effective Date, including all copyrights and other intellectual property rights inherent therein or appurtenant thereto (the "Domains"). Promptly following the Effective Date France Loisirs shall take or cause to be taken any acts (e.g., filings with domain name registrars, etc.) required to give effect to this assignment. To protect the value and goodwill associated with Audible's name, brand and trademarks worldwide, France Loisirs warrants that, after giving effect to the transfer of Domains to Audible as set forth in the first sentence of this sub-section* * *.

(a) France Loisirs may incorporate the “look and feel” of the Audible Service (e.g., coloring, placement of branding and navigation elements, links, etc.) into the Business, and France Loisirs shall have the overall responsibility and right to control its own local advertising strategy related to promotion of the Business, subject to the terms of ARTICLE 3 with respect to the use of the Audible Marks. (For purposes of this Section 3.2.3, the term “Marks” shall be deemed to include the “look and feel” of the Audible Service.) France Loisirs agrees that it shall not advertise the Business in any manner that would reasonably be expected to cause confusion between the Business and the Audible Service or which would dilute or diminish the value of the Marks. By way of illustration and not limitation, unless otherwise agreed in writing by Audible France Loisirs shall limit all of its advertising and marketing copy to the French language (which shall not prevent France Loisirs from using isolated English language idioms, words or expressions in its advertising), and shall clearly distinguish France Loisirs and the Business (as the provider of French-language digital audio books and spoken word audio content) from the Audible Service (as the provider of English and all other language digital audio books and spoken word audio content).

(b) France Loisirs acknowledges the importance to Audible of its goodwill and reputation with consumers of maintaining high, uniform standards of quality in the products sold and services provided under the Marks. France Loisirs agrees to use the Marks only in the form, fonts and styles and with such appropriate proprietary notices and legends as reasonably prescribed from time to time by Audible. France Loisirs’s use of the Marks will meet or exceed Audible’s quality standards and use guidelines as expressed by Audible to France Loisirs from time to time and be consistent with (and be subject any restrictions on use necessary to comply with) applicable law. Audible shall have the right to exercise quality control over the use of its Marks to the degree that Audible reasonably deems necessary to maintain the validity and enforceability of such Marks (and the Audible brand generally) and to protect the goodwill associated therewith. If Audible, in its reasonable opinion, finds that France Loisirs’s use of the Marks materially threatens the goodwill, value or validity of the Marks and/or that France Loisirs is not complying with its obligations under this Section, Audible may require that France Loisirs take immediate steps to rectify the problem. At Audible’s discretion, Audible also may escalate the problem through the parties’ respective senior managers and/or require that France Loisirs immediately stop using such Mark(s) pending resolution of the problem (e.g., if necessary to protect Audible’s rights or to avoid liability). France Loisirs agrees to work with Audible reasonably and in good faith to respond to Audible’s concerns under this Section in a timely and expeditious manner.

3.3 Ownership of Intellectual Property Generally. Except as expressly agreed in writing otherwise, Audible and France Loisirs (or their respective licensors and suppliers, as applicable) each shall be deemed to be the sole and exclusive owner of any pre-existing or independently created proprietary technologies, tools, content and other intellectual property that they each may provide or use, or license to each other, in the course of this Agreement or in connection with the Business, and all derivatives, enhancements and improvements thereto, including all copyrights and other intellectual property rights inherent therein or appurtenant thereto and also including, as far as Audible is concerned, the Marks and the Audible Know-How (as defined below) (the “Audible IP” and the “France Loisirs IP”, respectively). By way of example and not limitation, each party’s respective intellectual property includes its pre-existing or independently developed content, software, systems, products, tools, utilities, processes, technologies, methods of doing business, and Confidential Information (as the term is defined in Section 9.2). For purposes of clarity, the Audible IP also includes any Audible Know-How that may be provided, disclosed or used by Audible in the course of this Agreement or in connection with the Business. The term "Audible Know-How" means the trade secrets, Confidential Information, methods, unpatented inventions, technical data, formulations, proprietary production process know-how and show-how, technology and technical information which are owned and/or developed, in whole or in part, by Audible as of the Effective Date, and any derivatives thereof.

3.3.1 Audible Know-How License. To the extent that Audible provides or discloses any Audible Know-How under this Agreement to France Loisirs, and to the extent necessary for France Loisirs to develop and operate the Business and for such purpose, Audible grants to France Loisirs, subject to the terms and conditions of this Agreement, a non-transferable license during the Term to use such Audible Know-How solely to conduct the Business. Subject to the terms and conditions of this Agreement, Audible agrees that France Loisirs’s rights to use the Audible Know-How under this Section shall be exclusive as to the market defined by the Exclusive Field (except for any rights Audible must retain to exercise its rights, or to perform its obligations under this Agreement).

3.3.2 License to Other Audible Materials. Subject to the terms and conditions of this Agreement, Audible grants to France Loisirs, under Audible’s applicable intellectual property rights, a non-transferable license during the Term to use the Other Audible Material solely to conduct the Business. Unless otherwise agreed by Audible, the Other Audible Materials may only be used by France Loisirs in their intended manner and for the purpose for which they are provided. France Loisirs understands that its rights to use the Other Audible Materials and the manner in which the Other Audible Materials may be used shall be subject to any limitations on Audible’s rights and any other limitations to which Audible is subject. The term “Other Audible Materials” means intellectual property and proprietary materials of Audible that Audible provides to France Loisirs for use in the Business, that are not the subject of another license granted to France Loisirs pursuant to this Agreement or of another agreement between Audible and France Loisirs.

3.3.3 Additional Updated Technologies. Audible agrees during the Term to provide or make available to the Business, to the extent that Audible has the rights to do so, the future developed and implemented technologies and intellectual property that are used to operate the Audible Service, for use by the Business in substantially the same manner as such materials are used in the Audible Service. The parties shall mutually agree upon a process for including in the Business new technologies that are implemented for the Audible Service without additional costs other than those related to or arising out of the Business.

3.4 Audible Content. Audible agrees to make available to France Loisirs for the Business all Audible Content for which Audible has the necessary worldwide rights, that are licensed or otherwise controlled by Audible and that France Loisirs may request, and France Loisirs shall pay Audible’s cost for such Content. France Loisirs agrees that it only shall license, use and distribute such Content subject to terms and procedures that are at least as protective of Audible’s (and its licensors’) rights as those that France Loisirs uses to protect its own (and its licensors’) rights in and to France Loisirs Content similarly used and distributed. France Loisirs understands that its rights to use any such Content and the manner in which such Content may be used also shall be subject to any limitations to which Audible is subject. Notwithstanding anything to the contrary in this Agreement, Audible shall have the right to withdraw and cease making available any particular Content, in Audible’s business discretion, and France Loisirs shall comply with any notice or requirement from Audible in that regard. All End User licenses to any Content of Audible shall be subject to such agreements, terms and conditions as are established or required by Audible from time to time, and in establishing such agreements, terms and conditions Audible will take into account that the laws applicable to End Users domiciled in territories in the Exclusive Field may require adjustments and adaptations.

3.8 Moral Rights and Similar Rights. With respect to any assignments of rights to Audible under this Agreement, such assignment also shall be deemed to include the following. France Loisirs either assigns to Audible, or waives and agrees never to assert against Audible or any third party, any “moral rights”, “droit moral” or similar rights that France Loisirs may have or obtain in any of the assigned materials or in any intellectual property or other property of Audible. France Loisirs agrees to obtain assignments or waivers consistent with the foregoing from any third party or affiliated entity that may have any such rights in any such materials, for purposes of confirming and securing Audible’s rights.

4.1 Initial Funding of the Business. France Loisirs will, at its own sole cost and expense, fund all Start-Up Costs of the Business until the Business first achieves Breakeven. Notwithstanding the preceding, France Loisirs shall have the right to discontinue the operation of the Business at any time if, in France Loisirs’s sole but reasonable opinion, the prospects of the Business should not justify continued operation, in which event the terms of ARTICLE 7 and ARTICLE 8 of this Agreement shall apply. These Start-Up Costs will be recoupable solely in accordance with and subject to this Agreement. As used above, “Breakeven” means the first time that the Business has achieved positive Net Income for the immediately preceding fiscal year. “Net Income” means net income of the Business as determined in accordance with IAS. “Start-Up Costs” means all costs and losses incurred (whether capitalized or expensed for accounting purposes) by France Loisirs prior to Breakeven for starting-up and initially launching the Business, after deducting therefrom (i) the Upfront Services Fees, and (ii) the Upfront Royalty Payment (as defined below).

(a) Subject to the last sentence of Section 4.5, Audio Direct agrees to pay to Audible a royalty, commencing with the Business achieving Breakeven, as follows (the “Royalty”). The Royalty will be applied retroactively to the first fiscal year for which Breakeven occurred. The Royalty shall be five percent (5%) of the Business’s Net Paid Revenues, unless in a particular fiscal year the Business has generated net paid revenues of more than EUR 20 million; in which case the Royalty applicable to that year will be a flat fee of EUR 1 million, unless the Business has generated net paid revenues in excess of EUR 33.3 million during that year; in which case the Royalty applicable to that year shall be EUR 1 million plus 3% of Net Paid Revenues in excess of EUR 33.3 million. The Royalty shall be payable annually, after deduction of any mandatory five percent (5%) (or such other amount as is required by law) French withholding tax and subject to the limitations set forth in Section 4.4. Each Royalty payment shall be accompanied by a statement documenting and verifying the calculation of the Royalty, the amount due, and such other information as the parties may agree upon. “Net Paid Revenues” means net paid revenues for digital spoken word content (i.e., its net paid revenues after the deduction of sales tax and/or respectively, VAT, net of returns, after deduction of hardware revenue separately listed in the customer invoice, but not of cost of hardware included in subscriptions and not separately listed in the customer invoice, calculated in accordance with IAS.

(b) The Royalty covers the post-Launch period licenses granted to France Loisirs, updates of the Audible software, as well as the use of third party software licenses as they exist as of the Effective Date (e.g., Broadvision) to the extent Audible has the right to grant such use rights to use third party software, and for use of hardware existing as of the Effective Date (e.g., server capacity). The Royalty does not cover Incremental Expenses. For the avoidance of doubt, if Audible does not have sufficient usage capacity under an existing software license to accommodate the Business, the cost of any Incremental Expenses incurred by Audible to expand or obtain additional licenses to cover such additional capacity will be borne by France Loisirs as described in Section 2.3.

4.2.2 Additional Royalty. Audible also shall receive an Additional Royalty as follows. Fifty percent (50%) of the annual Net Income available for distribution, as calculated in accordance with IAS after deduction of any Commission, of any Bonus and of any Royalty but before deduction of any Additional Royalty of the Business, will be paid to Audible as an Additional Royalty (the “Additional Royalty”). The payment of the Additional Royalty to Audible in accordance with this Section shall occur for the first time after the Business has achieved Breakeven. All payments of the Additional Royalty shall be made after deduction of any mandatory five percent (5%) (or such other amount as is required by law) French withholding tax.

4.3 Commissions. France Loisirs shall be entitled to receive a Commission (the “Commission”) from the Business for customers referred from France Loisirs’s customer base, as follows. The Commission shall be twelve percent (12%) of the Business’s Net Paid Revenues derived during the last fiscal year from France Loisirs End Users of the Business that were recruited from France Loisirs’s documented customer base as such customer base exists as of the Effective Date and thereafter as such customer base may change independently of the Business (the “FL Customers”). The Commission shall continue to be paid for such customers for as long as their accounts established during the Term remain active.

4.4.2 The “Bonus” shall be fifteen percent (15%) of the Business’s Net Paid Revenues from FL Customers that are commission bearing under Section 4.3 above. Until France Loisirs has recouped its start up costs it shall receive the lesser of Net Income before Royalties or the Bonus for each year (after payment of the Commission but before payment of the Bonus and the Royalty) from FL Customers during the applicable fiscal year. For the avoidance of doubt, in years for which a Bonus is payable, if and to the to the extent that payment of the Royalty and the Bonus would lead to a negative Net Income for the Business, the Bonus shall have the priority of payment until the total recoupment by France Loisirs of its Start-Up Costs. More generally, payment of Commission shall always have priority over payment of Bonus and payment of Royalty, and payment of Bonus shall always have priority over payment of Royalty. Illustrations of various Commission, Bonus, Royalty and Additional Royalty calculations and scenarios are set forth in Schedule 4.4.2.

4.5 Payment of Commission, Bonus and Royalty. The basis for the calculation of the Commission, the Bonus and the Royalty shall in each case be the immediately preceding fiscal year of the Business. The Commission shall be paid monthly and under any circumstances (even to the extent it would lead to Negative Income), the Bonus and the Royalty shall each be due once per fiscal year and shall be paid (if and to the extent the applicable conditions for their respective payment have been met for the applicable fiscal year) two (2) weeks after the financial statements for the Business for such preceding fiscal year have been audited, approved and adopted. The first fiscal year of the Business for this purpose shall be a “stub” year, starting on the date the Business commences its operations and ending on December 31, 2004. Once France Loisirs has recouped its Start-Up Costs, the Royalty will be reduced to the extent necessary to retain a Net Revenue of the Business of EUR 1 after payment of the Royalty.

4.6 Additional Contributions. If for any fiscal year, the Budget (as defined below) for the Business approved by the parties indicates a need for additional capital, or if a capital injection must be made to meet requirements of law, the parties will, to the extent possible under French corporate law, each be given the opportunity to meet 50% of such need, and then to additionally contribute any remaining funds needed by the Business that the other party has elected not to contribute (in each case “Additional Investment”). To the extent France Loisirs shall operate the Business through a subsidiary as envisaged in Section 13.12 (in particular through Audio Direct), and to the extent France Loisirs as (sole) shareholder of such subsidiary shall be obliged under French corporate law to carry out a recapitalization in the form of equity, France Loisirs shall comply with such requirement and meet 100% of such need. France Loisirs shall be entitled, but not obligated, to reinvest a sum of the profits back into the Business, and Audible shall be entitled but not obligated to invest an Additional Investment, including in the situation described in the preceding sentence by matching any mandatory equity recapitalization by France Loisirs. Unless otherwise mutually agreed and in the absence of an obligation for equity recapitalization, the Additional Investment shall be in the form of a loan at an interest rate of not less than 15% per annum (or if less, the maximum rate allowable at law), subject to terms reasonably agreeable to Audible and France Loisirs (with agreement not being withheld or conditioned unreasonably). Provided, however, in the event an Additional Investment is made, the party(ies) providing such Additional Investment(s) (in excess of the Business’s startup losses, the recoupment of which is covered separately above in Section 4.1), will receive one hundred percent (100%) of the pro-rata share of the Net Income of the Business corresponding to their Additional Investment(s), compared to all other prior and simultaneous Additional Investment(s) (in excess of the Business’s startup losses, the recoupment of which is covered separately above in Section 4.1) on a priority basis over the Additional Royalty until the parties have fully recouped their respective Additional Investment(s)

4.9 Royalty Payments to France Loisirs for France Loisirs Content. France Loisirs agrees to make available France Loisirs’s content for licensing, use and distribution by Audible in connection with the Audible Service, to the extent that France Loisirs has the right to grant such rights to the content. If and to the extent Audible elects to license any such content from France Loisirs, Audible agrees to pay France Loisirs the third party licensing fees (e.g., publishers’ royalties) incurred by France Loisirs to enable Audible’s use of the content licensed by Audible, * * * derived from Audible’s licensing and distribution of the content in connection with the Audible Service. The parties shall mutually agree upon a payment schedule for any such royalty payments, but such payments shall be made on a quarterly basis.

4.10 Payments to Audible by Audio Direct. The payments to Audible under this ARTICLE 4 will be made by Audio Direct, although France Loisirs shall remain jointly and severally liable with Audio Direct for payment of such amounts as are due to Audible. France Loisirs will secure that Audio Direct receives the financial resources necessary to fulfill its payment obligations under this Agreement. For that purpose, France Loisirs will provide such financial resources by infusing cash into Audio Direct's capital reserve account readily in advance of the due date of any payment obligations of Audio Direct under this Agreement.

(b) Authority; Enforceability. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all requisite action on the part of Audible. This Agreement constitutes the legal, valid and binding agreement of Audible, enforceable against Audible in accordance with its terms (except insofar as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally, or by principles governing the availability of equitable remedies).

(c) Noncontravention. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby shall not (i) conflict with or result in any violation of any provision of the organizational documents of Audible, as amended to date; (ii) conflict with, result in any violation or breach of, constitute a default under, give rise to any right of termination or acceleration (with or without notice or the lapse of time or both) pursuant to, or result in being declared void or voidable, any term or provision of any note, bond, mortgage, indenture, lease, license, contract or other instrument to which Audible is a party or by which any of its properties or assets are or may be bound; or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Audible.

(b) Authority; Enforceability. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all requisite action on the part of France Loisirs. This Agreement constitutes the legal, valid and binding agreement of France Loisirs, enforceable against France Loisirs in accordance with its terms (except insofar as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally, or by principles governing the availability of equitable remedies).

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