Distribution Terms - ADAM Software Inc. and Mindscape Inc.
A.D.A.M./MINDSCAPE
DISTRIBUTION TERMS
LICENSE: Mindscape will have the right to manufacture, sell and
distribute all English language version titles listed
on Schedule A, and their subsequent upgrades, if any,
during the term of the agreement. Mindscape shall have
exclusive rights to retail distribution, OEM licensing,
and retail direct marketing, except in the health care
market. For this purpose, the "health care market"
means individuals, companies and institutions that
provide health care services. Notwithstanding anything
herein to the contrary, in the health care market,
Mindscape shall only have the limited, nonexclusive
right to retail direct marketing solely with respect to
individuals that provide health care services.
Mindscape shall not have the right to retail direct
marketing, in the health care market, with respect to
companies and institutions that provide health care
services. Mindscape shall have non-exclusive rights
for on-line distribution and to sell all education SKU's
related to the products listed on Schedule A at
standard reseller prices determined by A.D.A.M.
Mindscape shall distribute such educational SKU's in
accordance with A.D.A.M.'s standard educational
reseller agreement. The rights granted to Mindscape
are subject to A.D.A.M.'s right to maintain its
existing contractual relationships with the third
parties listed on Schedule B. All rights not granted
to Mindscape are retained by A.D.A.M. Without limiting
the generality of the foregoing, A.D.A.M. expressly
retains the right to retail direct marketing in the
health care market and to sell directly to an
end-user.
PACKAGING: Mindscape will display the A.D.A.M. logo (or such other
logos as are on the master materials for the product or
which are specified by A.D.A.M.) on all packaging and
sales material and will represent product with a label
which has been approved in advance by A.D.A.M., that
says "distributed by Mindscape." A.D.A.M. will provide
Mindscape the package design for all products listed on
Schedule A. Mindscape will develop all new packaging
going forward, which must be approved by A.D.A.M.
TERM: The term of this Agreement shall commence on the later
of March 1, 1997 or execution of this agreement and
expire December 31, 1998 unless earlier terminated. In
the event Mindscape meets a minimum of $750,000 in total
royalties during the term of the agreement, the
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agreement shall be renewed for an additional 2 years
subject to the royalty structure as required during the
initial term. In regard to the Medical Housecall and
Pediatric Housecall product line, even if these
products are approved by the developer to be included
on Schedule A for the initial term of the agreement,
these products may not be available for the additional
two-year period because of contract limitations.
TERRITORY: Worldwide, except with respect to the prior contractual
relationships set forth in Schedule B. A.D.A.M. will
not extend or renew any contractual relationships with
any third party listed on Schedule B during the term of
the agreement, except possibly Matsushita.
TITLES: Titles indicated on Schedule A and other mutually agreed
upon titles.
DUTIES: Mindscape will provide end-user support. Mindscape
agrees to reasonably promote and market A.D.A.M.
products on the same basis as similar Mindscape product.
Mindscape will submit to A.D.A.M. an initial marketing
plan to be submitted to A.D.A.M. no later than April 15,
1997 and provide updated information upon request.
Mindscape agrees to submit 2 sales plans in 1997, the
first by April 15, 1997, and three plan in 1998 to
A.D.A.M. Mindscape will bear the cost of all marketing
and advertising expenses. All A.D.A.M. titles published
by Mindscape must be approved by the Mindscape quality
assurance department, whose approval will not be
unreasonably withheld, prior to publication.
ADVANCES: Mindscape agrees to pay $275,000 in non-refundable
advances for the titles listed on Schedule A, payable as
detailed under "Schedule of Payments". The sale of all
titles shall be credited against the advances.
ROYALTIES: Mindscape shall pay royalties to A.D.A.M. based upon net
cash receipts by titles listed on Schedule A. "Net cash
receipts" means gross receipts actually received by
Mindscape from the sale, license, or sublicense of
titles listed on Schedule A less cost of goods,
royalties, duties, credits for discounts, refunds
(including price protection), replacements, and returns
(including returns for stock balancing purposes). All
royalties due shall be applied against advances. The
royalty rate by title is listed on Schedule A. All
royalty payments shall be paid to A.D.A.M. no later than
45 days
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after the end of each calendar quarter. Mindscape
agrees to send unaudited gross sales reports on a
monthly basis to A.D.A.M. A.D.A.M. shall have the
right, upon reasonable notice, to conduct an audit of
Mindscape's books and records relating to royalty
payments.
REGISTRATION: A.D.A.M. agrees to incur the operating and expenses for
the electronic registration services utilized in ATIS
"97. Mindscape, at its own cost, may put electronic
registration services on the other products listed on
Schedule A. A.D.A.M. will own the registration records
generated from all registration methods and will grant
Mindscape use of such records. A.D.A.M. and Mindscape
agree to share this information in an electronic form
on a monthly basis.
CHANNEL INVENTORY: Mindscape will assume all A.D.A.M. channel inventory.
OTHER: By signing below, the parties agree that these terms
will be binding upon each of them and that they will
negotiate in good faith and execute in due course a
more comprehensive mutually acceptable formal written
agreement containing these and other customary and
appropriate terms which formal agreement, when
executed, shall supersede this agreement. This
agreement may not be amended except in writing signed
by both parties. Either party may terminate this
agreement upon material breach by the other party and
failure to cure within thirty (30) days following
notice of such breach.
Mindscape, Inc. A.D.A.M. Software, Inc.
/s/ Gordon Landes /s/ Robert S. Cramer, Jr.
------------------ -------------------------
By By
Gordon Landes Robert S. Cramer, Jr.
------------------ -------------------------
Print Name Print Name
Exec. V.P. Chairman and CEO
------------------ -------------------------
Title Title
2-26-97 Feb. 26, 1997
------------------ -------------------------
Date Date
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Schedule "A"
Schedule of Advances and Royalty Rates
OEM SALE
TITLE ADVANCE ROYALTY ROYALTY
----- ------- ------- --------
A.D.A.M. The Inside Story 1997 Edition* $180,000 23% 25%
Nine Month Miracle* $ 70,000 23% 25%
Life's Greatest Mysteries*** $ 15,000 20% 25%
Medical Housecall 2.0** $ -- 23% 25%
Pediatric Housecall 1.0** $ -- 23% 25%
Medical Housecall 1.0**** $ -- 23% 25%
ATIS 1.0*** $ 10,000 20% 25%
$275,000
--------
-------------------------------
* Minimum royalty per unit shall be $2.00. Royalty increases to 25% after
Mindscape achieves $1,000,000 in gross sales for these two products combined.
** Contingent on A.D.A.M.'s receipt of approval from the developer. Such
titles are subject to removal. Minimum royalty per unit shall by $1.40.
Royalty increase to 25% after Mindscape achieves $1,000,000 in gross sales for
these two products combined.
*** Minimum royalty per unit shall be $0.25. OEM sales royalty shall be the
greater of $0.25 or 25%.
**** Minimum royalty per unit shall be $0.50. OEM sales royalty shall be the
greater of $0.50 or 25%.
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SCHEDULE OF PAYMENTS
UPON EXEC. 90 DAYS
OF DIST. AFTER JAN. 31,
TITLE TERMS EXECUTION 1998
----- ----- --------- --------
A.D.A.M. The Inside Story $ 60,000 $ 70,000 $ 50,000
1997 Edition
Nine Month Miracle $ 30,000 $ 20,000 $ 20,000
Life's Greatest Mysteries $ 10,000 $ - $ 5,000
Medical Housecall 2.0 $ - $ - $ -
Pediatric Housecall 2.0 $ - $ - $ -
Medical Housecall 1.0 $ - $ - $ -
ATIS 1.0 $ - $ 10,000 $ -
--------- --------- --------
$ 100,000 $ 100,000 $ 75,000
--------- --------- --------
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SCHEDULE "B"
Third Parties Having Existing Consumer Contractual
Relationships with A.D.A.M.
BOMICO: Non-exclusive for English language products in Europe. Expires July 12,
1997.
RANDOM HOUSE U.K.: expires April 15, 1997. Requires 30-day written notice.
The current deal only covers ATIS 1.0 and NMM.
BRADERBUND: A non-exclusive bundle deal with ATIS 1.0
POINT GROUP: A non-exclusive bundle/OEM deal for LGM with Compaq.
DATAFLOW: Expires July 24, 1997 with 30-days written notice. Territory is
Australia and New Zealand.
MATSUSHITA: part of a large, long-term exclusive distribution relationship. Have
a Japanese language version of ATIS, '97 in development. Must discuss making
change in distribution as it relates to English versions. No guarantees.