CONFIDENTIAL TREATMENT HAS BEEN GRANTED FOR PORTIONS OF THE
FOLLOWING EXHIBIT MARKED WITH AN *
EXHIBIT 10.14
AGREEMENT
BETWEEN
AMERICA'S HEALTH NETWORK, INC.
AND
IVI PUBLISHING, INC.
THIS AGREEMENT is made as of May 25, 1995 by and between AMERICA' S
HEALTH NETWORK, INC., a Delaware corporation with its principal office at ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ("AHN") and IVI
PUBLISHING, INC., a Minnesota corporation with its principal place of business
at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("IVI").
WHEREAS, AHN is in the process of creating and producing a cable
television consumer health programming service/network;
WHEREAS, as part of programming for the service/network, AHN intends to
offer a series of programs referred to as "Ask the Doctor" offering
medical/health information and answering viewers questions;
WHEREAS, IVI is a publisher of medical/health information in digital
interactive formats;
WHEREAS, AHN would like IVI to provide medical/health information
content for AHN's network, including the so-called "Ask the Doctor" programs.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
NOW, THEREFORE, the parties do agree as follows:
ARTICLE 1.0
As used in this Agreement, the following terms shall have the meanings
set forth in this Article 1.0. Additional terms may be defined elsewhere in this
Agreement.
1.1 "Adverse Event" shall mean the good faith determination that any of
the Materials contains any outdated, misleading, erroneous or incomplete medical
information, regardless of its source or cause, that would, in the sole
discretion of the IVI Licensor providing the source material for such Material,
or in the opinion of any governmental regulatory agency, materially jeopardizing
the health or safety of any person or persons using or relying on such
Materials.
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1.2 "Affiliate" shall mean any person controlled by or under the common
control of a party to this Agreement.
1.3 "AHN Competitor" shall mean a television programming service whose
primary service is to provide consumer health information to the general public
and who competes directly with AHN within the Territory; provided, however, that
AHN Competitor shall not include (i) any medical/health television programming
service that is not generally available to the general public (such as a
programming service serving schools, businesses [either for customers or for
employees], medical institutions and the like); nor, (ii) Interactive Digital
Television programming of any sort, nor, (iii) programming on networks or
stations that are not primarily dedicated to medical/health programming (such as
health programming for CBS, CNN, ABC, ESPN or the like).
1.4 "Audio Messages" shall mean that portion of the other Materials
created for use on the Telephone System.
1.5 "Computer System" shall mean the multimedia computer hardware and
operating software required to retrieve and use the Materials.
1.6 "Copyrights" shall mean the respective statutory and common law
rights under the copyright laws of any country in the world owned and held by a
party hereto.
1.7 "Effective Date" shall mean the date on page 1 of this Agreement.
1.8 "Home Shopping Network" shall mean an analog cable or broadcast
television shopping network such as Home Shopping Network or QVC.
1.9 "Interactive Digital Television" shall mean the broadcast of
medical/health content controlled by viewers who access the content through
digital delivery devices in their homes, thereby accessing a central storage or
broadcast facility available without programming content added by the
broadcaster or producer. For example, a database or videotext of medical/health
information accessible on demand of the viewer would be Interactive Digital
Television; non-interactive linear programming of medical/health information at
times selected by the broadcaster or producer would not be Interactive Digital
Television.
1.10 "IVI or IVI's Licensor(s)" shall mean Mayo and those other
entities approved by AHN, which approval shall not be unreasonably withheld, who
have licensed or hereafter license their source material to IVI for the creation
of the Materials.
1.11 "Materials" shall mean the video and audio support, including
illustrations, graphics, animations, B-roll and the Second Opinions comprising
the medical/health information content created and to be created by Mayo and
other IVI Licensors and provided to AHN by IVI in the formats compatible with
the Computer System and the Telephone System. "Materials" shall have two
components: the "Second Opinions" which shall mean the digital videotape
presentations by Mayo physicians (or, if approved by AHN, by physicians provided
by other of IVI's Licensors) describing medical/health conditions and
treatments, and the "Other Materials" which shall mean the content other than
the Second Opinions provided by IVI to AHN hereunder.
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1.12 "Mayo" shall mean the Mayo Foundation for Medical Education and
Research.
1.13 "Telephone System" shall mean the telephone information retrieval
hardware and machinery necessary to allow viewers and others to access the Audio
Messages.
1.14 "Term" shall mean time period defined in Article 7 hereof.
1.15 "Territory" shall mean the world.
1.16 "Trademarks" shall mean the respective statutory and common law
rights under the trademark laws of any country in the world owned or held by IVI
or any of the IVI Licensors.
ARTICLE 2.0 DEVELOPMENT OF MULTIMEDIA SERVER.
In connection with AHN's so-called "Ask the Doctor" programs or other
medical/health information segments, AHN intends to provide inter alia
medical/health information which can be retrieved from the Computer System and
from the Telephone System. AHN will provide all of the hardware and operating
systems and desires that IVI provide the medical/health content for the Computer
System and the Telephone System.
2.1 License of Content. Subject to the terms of this Agreement, IVI
hereby grants to AHN the right within the Territory to exhibit, record,
reproduce in the ordinary course of business, broadcast, rebroadcast, display,
transmit, and publicly perform the Materials as part of the "Ask the Doctor"
programs in English and any other language. The rights granted hereunder allow
AHN to utilize the digitized Materials provided to the Computer System during
the on-air portions of the "Ask the Doctor" programs and to utilize the Audio
Messages for persons who call AHN to have their questions answered. Further,
subject to the approval rights set forth in this Agreement, the rights granted
hereunder allow AHN to use the Materials to advertise, promote and publicize
itself and the "Ask the Doctor" programs. The rights granted hereunder do not
allow AHN (i) to alter the Materials in any way; (ii) to display or publicly
perform the Materials in connection with the sale or promotion of any product;
nor (iii) to use the Materials in any other manner except as specifically set
forth herein. Notwithstanding the foregoing, IVI acknowledges that AHN intends
to offer products during discrete home shopping segments which may precede,
follow or be contained within the "Ask the Doctor" programs using the Materials,
and that such segments shall not of themselves violate clause (ii) above;
provided that they are conspicuously identified and identifiable as separate and
distinct from the "Ask the Doctor" programs and that no endorsement of any
product offered in such segments by IVI or IVI's Licensors is expressed or
implied (unless such product has, in fact, been expressly endorsed by IVI and/or
an IVI Licensor). In recognition that the IVI Licensors may require that the
content contained in the Materials be deleted in its entirety so accurate
medical/health information is being given to the public, AHN agrees that upon
notice from IVI of an Adverse Event, AHN will cease performing or displaying the
Materials in question and that IVI shall have the right to delete the Materials
in question from the Computer System or the Telephone System; provided, whenever
possible, IVI shall first give AHN prior notice of the Adverse Event. The
Materials at all times shall remain the property of IVI or IVI's Licensors, as
the case may be.
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2.2 Exclusivity.
2.2.1 So long as AHN is not in default under this Agreement, IVI will
not license the Materials (i) for use on a network/programming service
within the Territory to an AHN Competitor or to any person who to the
knowledge of IVI intends to become an AHN Competitor nor (ii) to any
other entity for use in a televised program with a format comparable to
"Ask the Doctor". IVI will not provide medical/health information of
any kind to an AHN Competitor or to any person who to the knowledge of
IVI intends to become an AHN Competitor for use within the Territory.
Further, IVI will ensure that the Materials contain no proprietary
content which, notwithstanding the requirements of this Agreement,
could be licensed by IVI's Licensor to an AHN Competitor for use within
the Territory during the Term hereof.
2.2.2 So long as AHN is not in default under this Agreement, IVI shall
not provide medical content support of any kind to any AHN Competitor
during the Term; provided, however, that at any time during the
Exclusivity Termination Period (as hereinafter defined), IVI may elect
to terminate the provisions of this Section 2.2. IVI shall have
obtained from Mayo an agreement providing that so long as AHN is not in
default under this Agreement, Mayo shall not provide medical content
support of any kind to any AHN Competitor during the Term, and that at
any time during the Exclusivity Termination Period, Mayo may elect to
terminate its agreement to provide medical content support exclusively
to AHN. Such election to terminate exclusivity duly made by IVI or Mayo
shall have the result referred to in Section 5.2.1 and 5.2.2.
2.2.3 "Exclusivity Termination Period" as used herein shall mean the
thirty (30) day period commencing on the date that is six (6) months
after the first broadcast of "Ask the Doctor" by AHN and terminating
thirty (30) days thereafter. At any time during the Exclusivity
Termination Period IVI may on its behalf and Mayo's behalf terminate
the exclusivity provisions of this Section 2.2 by written notice to
AHN. The exclusivity provisions of this Section 2.2 may be referred to
herein as "Corporate Exclusivity."
2.3 Computer and Telephone System. AHN shall be responsible for the
purchase and installation of the Computer System and the Telephone System
including, without limitation, the cost of the operating software therefor. IVI
will consult with AHN to ensure that AHN's choices are compatible with the
format of the Materials. Upon completion of the installation and throughout the
Term, AHN will provide IVI with all information about and access to the Computer
System and the Telephone System to allow IVI to format and load the Materials
onto those systems.
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2.4 Development and Delivery of Content.
2.4.1 IVI and AHN desire that IVI have the first right to provide all
medical/health content being loaded on the Computer System and
Telephone System including, without limitation, the illustrations,
graphics, animations, B-roll and the Second Opinions. To that end, AHN
shall periodically provide IVI with specifications for the type of
content AHN wishes to have available on the Computer System and the
Telephone System, and whether AHN desires the content to be developed
by or in conjunction with Mayo. IVI will have thirty (30) days after
receipt of the specifications to provide AHN with a notice (the
"Production Notice") stating that IVI will deliver the requested
content and setting forth, among other things, the time schedule for
delivery and the fee payable by AHN therefor which fee shall be IVI's
cost of producing or obtaining the requested content plus fifteen
percent (15%); provided that IVI's cost shall be: (i) IVI's actual cost
to produce, duplicate and secure Mayo's approval of the content (if
requested by AHN), which shall be within reasonable industry standards
for comparable work, provided that IVI's cost to produce Second
Opinions and to secure Mayo's approval will be as set forth in Exhibit
A hereof; (ii) IVI's actual cost to sublicense content in its library
to AHN, to modify and duplicate library content and to secure Mayo's
approval of the library content (if requested by AHN); and (iii) IVI's
actual cost to obtain the content from third-party sources, to modify
and duplicate the third-party content and to secure Mayo's approval of
the third-party content (if requested by AHN). Any requested content
provided by IVI to AHN in accordance with the foregoing provisions
shall be considered "Materials" hereunder. IVI shall utilize all
reasonable methods to minimize its cost of delivering Materials to AHN,
including without limitation, the use of third-party sources for
Materials that are not contained in IVI's library. If (i) IVI fails to
produce or obtain the requested content within the time period
specified in the Production Notice or (ii) does not provide the
Production Notice within the 30-day period referred to above, then AHN
will be free to produce the requested content itself or to obtain them
from any other source; provided, however, that any future requested
content shall first be offered to IVI in accordance with this Section.
2.4.2 Except as set forth below, if during any Royalty Year during the
Term hereof IVI does not elect to produce and does not actually deliver
to AHN after agreeing to do so either (a) 80% of the Second Opinions
requested or (b) 80% of the "Value of the Other Materials", then the
Royalty payments otherwise due pursuant to Section 5.2.1 during said
Royalty Year shall be reduced by a factor equal to (A) 100% minus the
percentage of Second Opinions actually produced by IVI or (B) 100%
minus the percentage of Value of Other Materials actually produced by
IVI (computed as set forth below), whichever is less. The percentage of
Second Opinions actually produced shall be the number of Second
Opinions actually produced by IVI during the Royalty Year in question,
divided by the number of Second Opinions that AHN has requested IVI to
produce during the same year. The percentage of Other Materials
actually produced by IVI shall be the Value of the Other Materials
(computed as set forth below) actually produced by IVI during the
Royalty Year in question, divided by the value of the Other Materials
that AHN has requested IVI to produce during the same year. "Value of
the Other Materials" shall be computed by adding (i) the cost which IVI
did charge for production of Other Materials; and (ii) the cost
actually paid by AHN for production of the Other Materials which IVI
elected not to produce.
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2.4.3 Notwithstanding the foregoing, if during any Royalty Year IVI has
produced at least 150 Second Opinions (and has also met the 80% test
for Other Materials), no reduction in Royalties shall occur even if IVI
does not meet the 80% test for Second Opinions for such year. Further,
the determination of the 80% test shall be based only on those requests
made by AHN which are submitted in writing to IVI no later than 150
days after the beginning of each Royalty Year.
2.5 Copyrights. AHN hereby acknowledges that IVI or IVI's Licensors own
or control all right, title and interest to the Materials, including without
limitation, the copyrights therefor, and AHN will not challenge such rights.
2.6 IVI Approval. IVI, and as required, IVI's Licensors, shall have the
following rights of approval: (i) the right to approve the final version of the
Materials, whereby AHN shall provide all necessary information to IVI in order
to obtain the requisite approval and shall not, prior to obtaining such
approval, use, promote or perform the Materials, and after such approval is
obtained, shall make no changes to the approved versions of the Materials
thereafter without resubmitting the Materials to IVI for approval (ii) the right
to approve the manner of presentation of the Materials, provided that the
display of the Materials from time to time during AHN's "Ask the Doctor" series
of television programs (and during AHN's "Health IQ" bumpers), and the use of
the Audio Messages on AHN's Telephone System shall be approved manners of
presentation; (iii) the right to approve the use of IVI or IVI's Licensors'
names, trademarks or the like, provided, that AHN's right to use Mayo's name and
trademarks is hereby approved as specified in Section 3.4; (iv) the right to
approve all non-English language uses of the Materials; provided that any
approval by an IVI Licensor of a non-English language use will constitute the
approval by IVI of such use; and (v) the right to approve the form and format of
all promotions and publicity utilizing the Materials. Without limiting the
foregoing approval rights, Mayo's approval shall be conditioned on it being
clear, in Mayo's sole discretion, that any Materials that have not been provided
by Mayo are not, by inference or otherwise, attributable to or identified with
Mayo.
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2.7 Development of Derivative Products. The "Ask the Doctor" programs
will involve a doctor/commentator responding to questions which answers may, at
least in part, utilize the Materials provided by IVI. As a result, a data bank
of questions and answers will be compiled over time which are hereafter referred
to as the "Joint Assets". It is the intention of the parties to create
derivative products using the Joint Assets such as video cassettes, CD-ROM discs
or digital interactive two-way programming. Because the Joint Assets combine
elements which are owned by AHN and elements which are owned by IVI or IVI's
Licensors, IVI and AHN agree that all derivative products created from or
utilizing those Joint Assets shall be developed and owned jointly by IVI and/or
IVI Licensor(s), as the case may be, and AHN and the parties will negotiate in
good faith as to the royalties or profit sharing arrangement therefor. Each
party acknowledges that it cannot alone use or exploit the Joint Assets but the
parties further acknowledge that neither one is prohibited from using or
exploiting alone the elements provided by said party to the Joint Assets. By way
of example, AHN cannot develop a video cassette of the "Ask the Doctor" segments
(or portions thereof) which utilizes the Materials without IVI's participation
as set forth above. However, if AHN deletes all Materials from an "Ask the
Doctor" segment so that the resulting product contains only elements provided
and owned by AHN, then AHN may exploit the resulting product without IVI's
participation. As a further example, IVI may use the Materials (subject to the
rights of IVI Licensors), without any elements provided by AHN, in CD-ROM discs
or on Interactive Digital Television, all without any participation by AHN.
Notwithstanding IVI's rights to use the Materials for derivative products
without AHN's participation, such right shall not allow IVI to violate the
exclusivity provisions set forth in Section 2.2. Except as expressly set forth
in this Section 2.7, all assets, properties and materials developed, produced or
acquired by AHN (other than the Materials) shall remain the sole and exclusive
property of AHN and there shall be no license, express or implied, of such
assets, properties or materials to IVI or any IVI Licensor pursuant to this
Agreement.
2.8 Sale of IVI Products. AHN intends to offer home shopping segments
on its health network which will market medical/health related products. Except
as set forth below, AHN shall sell IVI products, selected by AHN, on at least
* of its daily live home shopping segments in every * period. In the
event IVI's products produce gross revenues (excluding taxes, shipping and
handling) in a * period which are less than the average per minute gross
revenues (excluding taxes, shipping and handling) received by AHN from other
products (the "Average Revenues"), then AHN may decrease the * air time by
the same proportion that IVI products' gross revenues are less than the Average
Revenues. Further, if IVI products' gross revenues during a * period are
less than * of the Average Revenues, then AHN shall have the right not to sell
or market any IVI products for a period of 90 days and thereafter, AHN will
begin to market the products again for at least a * period. Until such time
as AHN reduces IVI products' air time below * in any 24-hour
period, IVI will not contract with any other Home-Shopping Network for the sale
and distribution of the IVI products being marketed by AHN; provided, however,
that to the extent that any of IVI's Licensors has the right to market IVI
products through Home-Shopping Networks, such marketing will not be considered a
breach by IVI hereunder. AHN shall purchase the IVI products from IVI at a price
and on terms equal to the lowest price and the most favorable terms which IVI
offers said product to any retailer (other than IVI Licensors). AHN shall have
the right to sell IVI products at any price it chooses.
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ARTICLE 3.O TRADEMARKS
3.1 Trademarks. The use of IVI's Trademark or the Trademark of any of
IVI's Licensors shall be subject to the approval of IVI and IVI's Licensors. AHN
shall use such Trademarks strictly in accordance with the provisions specified
by IVI and IVI's Licensor.
3.2 Purpose of License. Any Trademarks which AHN may be authorized to
use in connection with the Materials shall be used solely in connection with the
display of the Materials and not for any other purpose or product and does not
give to AHN any ownership of such Trademark or any right to use such Trademark
except as expressly authorized.
3.3 No Confusion. AHN shall not register, or attempt to register, or
use, or attempt to use, any ▇▇▇▇ anywhere in the world that is confusingly
similar to the Trademarks of the other party. AHN hereby disclaims any intention
or right to contest the ownership of the Trademarks of IVI or any of IVI's
Licensors.
3.4 Use of "Mayo" Name. Solely in connection with its grant of rights
to use the Materials, IVI hereby grants to AHN a nonexclusive, paid-up,
worldwide license to use, copy and reproduce the trademarks owned by the IVI
Licensors. IVI further grants to AHN the right to identify Mayo as the source of
those Materials developed by or in conjunction with Mayo and to identify
physicians and other health care professionals presenting Second Opinions as
being affiliated with Mayo Clinic or its affiliates. In furtherance thereof, AHN
will be bound fully by the obligations of IVI contained in Section 4.5 of the
Electronic Publishing License, Development and Marketing Agreement, dated as of
April 28, 1993, and Section 4.5 of the 1994 License, Development and Marketing
Agreement dated as of September 27, 1994 both between IVI and Mayo, in the use
of any Mayo Trademarks (as defined therein).
ARTICLE 4.0 REPRESENTATIONS AND WARRANTIES
4.1 IVI Representations and Warranties. IVI hereby represents and
warrants to AHN that:
4.1.1 The IVI Licenses are valid and that there are no actual or
claimed defaults existing as of this date;
4.1.2 IVI has the full power, authority and legal right to enter into
this Agreement; this Agreement has been duly authorized, executed and
delivered by IVI; and this Agreement constitutes legal, valid and
binding obligations of IVI, each enforceable in accordance with its
respective terms;
4.1.3 To IVI's knowledge, there are no claims as of the date hereof
that any of IVI's License Rights violate or infringe upon any rights of
any third parties;
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4.1.4 IVI has the right to grant to AHN the rights granted hereunder.
4.2 AHN Representations and Warranties. AHN hereby represents and
warrants to IVI that:
4.2.1 AHN has the full power, authority and legal right to enter into
this Agreement; this Agreement has been duly authorized, executed and
delivered by AHN; and this Agreement constitutes legal, valid and
binding obligations of AHN, each enforceable in accordance with its
respective terms;
4.2.2 AHN has not granted to any other person or entity any right or
privilege granted to IVI hereunder nor entered into any agreement in
conflict herewith;
4.2.3 AHN has, or will prior to utilization have, the right to use all
information, data, content and data which it intends to use in
connection with the Materials (other than the Materials themselves).
ARTICLE 5.0 CONSIDERATION
5.1 Production Fee. AHN shall pay IVI the nonrefundable fees set forth
in each of the Production Notices referred to in Section 2.4 hereto.
5.2 Royalty Payments to IVI. In addition to the aforementioned
nonrefundable license fees, AHN shall pay to IVI royalty payments ("Royalty") in
the amounts and at the times set forth below.
5.2.1 Current Royalty Payments. AHN shall pay the following current
Royalty payments:
Royalty Year Annual Royalty Amount
------------ ---------------------
1 $1,000,000.00
* *
* *
* *
* *
In the event IVI or Mayo elects to terminate their Corporate
Exclusivity, then the amounts due for each Royalty Year thereafter
shall be twenty-five percent (25%) of the amounts set forth above, and
any excess Royalty paid for the first Royalty Year arising from such
reduction shall be applied to current Royalty payments due for
subsequent years. The annual Royalty payment due in Royalty Year 1
shall be due on the earlier to occur of (a) ten (10) days after AHN
receives a minimum of $20,000,000.00 in financing or (b) December 31,
1995. The Royalty payments due in each subsequent Royalty Year shall be
payable on a quarterly basis in advance with the first quarterly
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payment for Royalty Year 2 being due on the earlier to occur of the (i)
first day of the first quarter of Royalty Year 2 or (ii) June 30, 1997.
"Royalty Year" as used below shall mean each successive 12 month period
the first of which begins on the date AHN begins broadcasting. If
during any Royalty Year IVI does not elect to produce or does not
deliver after agreeing to do so either (a) 80% of the Second Opinions
requested or (b) 80% of the Value of the Other Materials requested, and
the amount of current Royalty paid in advance for such Royalty Year
exceeds the current Royalty due for such Royalty Year after giving the
effect to the reduction in Royalty provided for in Section 2.4.2
("Excess Amount"), then the Excess Amount shall be applied to reduce
any Royalty thereafter coming due by AHN to IVI under this Agreement.
If no further amount is to become due because of the expiration of the
Term or because subsequent Excess Amounts will become due, IVI will
repay the unapplied Excess Amounts to AHN promptly upon demand
therefor.
5.2.2 Deferred Royalty Payments. In addition to the current Royalty
payments set forth in Section 5.2.1 above, AHN shall pay to IVI
deferred Royalty payments in the amount of *
of AHN's gross revenues per year during each Royalty
Year that AHN achieves at least * of its gross
revenue goal. The foregoing obligation to pay deferred Royalty payments
shall cease in the event IVI and Mayo terminate their Corporate
Exclusivity. The deferred Royalty payments due to IVI pursuant to this
Section 5.2.2 shall be payable in full (together with interest thereon
in the amount equal to the prime reference rate of First Bank
Minneapolis, N.A. accrued from the last day of the Royalty Year to the
date of payment) no later than forty-five (45) days after the end of
the fifth Royalty Year; provided, however, that in the event of
termination of this Agreement by IVI pursuant to any of Sections 7.2.1,
7.2.2, 7.2.3, 7.2.5 or 7.2.6 or by AHN pursuant to Section 7.2.7, all
deferred Royalty payments shall be immediately due in full to the
extent accrued to the date of termination. As used herein, the gross
revenue goal shall be the gross revenue target set forth by AHN in its
final business plan for such twelve-month period as approved by its
board of directors; and "gross revenues" shall have the meaning
accorded it by generally accepted accounting principles.
Notwithstanding any other provision of this Agreement, if IVI or Mayo
elects to terminate its Corporate Exclusivity, no deferred Royalty
payments shall be or become due or payable.
5.2.3 Upon any termination of this Agreement by either party, AHN shall
have no further obligation to pay IVI any Royalties except as provided
in Section 5.2.2. Current Royalty payments that have been prepaid shall
be apportioned over the year or quarter for which such current Royalty
payment has been made in advance, and IVI shall pay AHN, within 90 days
after the date of such termination, the amount, if any, relating to the
portion of the period after the date of termination, after deducting
therefrom any amounts due IVI by AHN under the terms of this Agreement.
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AHN's obligations to pay the Royalty payments pursuant to this Section 5.2 shall
be a secured obligation of AHN collateralized by AHN's rights in the Materials
and all proceeds thereof. Upon request of IVI, AHN shall immediately execute
such documents as IVI may request to evidence IVI's security interest.
5.3 Payment Procedures. All payments of Royalties to IVI shall be
accompanied by a written statement for the relevant accounting period in such
form and detail as will enable IVI to understand the basis for the calculation
of the Royalties. AHN shall maintain true and accurate books and records for at
least three (3) years after the end of each year. All such books and records may
be inspected and copied by IVI or its representative upon reasonable prior
notice and during normal business hours. Such inspections shall not be made more
than twice per year. Such inspections shall be limited to the verification of
the amount of the Royalty payments due IVI or the accuracy or completeness of
the written statements rendered to IVI. All such books and records shall be
deemed Confidential Information, provided, however, copies of such books and
records and/or testimony concerning any analysis of the foregoing may be
introduced as evidence in any legal proceeding related to any dispute about such
royalty payments. Such inspections shall be at IVI's own expense, except if such
inspection indicates that the royalty payments have been underpaid to IVI in any
Royalty Year by five percent (5%), AHN shall promptly reimburse all the
reasonable expenses of IVI incurred in such inspection.
5.4 Taxes. AHN shall be responsible for paying all taxes, duties,
assessments or other governmental charges, however designated, arising from or
resulting from this Agreement, other than income taxes, if any, payable by IVI.
5.5 Late Payments. If and for so long as any payment from AHN to IVI is
overdue, such payment shall bear interest at the rate of one and one-half
percent per month or such lower amount as may be required by any applicable
usury law.
ARTICLE 6.0 PROTECTION OF INTELLECTUAL PROPERTY RIGHTS
6.1 Cooperation. The parties acknowledge that there are important and
valuable intellectual property rights embodied in the Materials. Each party
shall use its best efforts to cooperate with the other in the vigilant and
diligent protection and enforcement of such rights including, without
limitation, any rights under the patent, copyright, trademark or trade secret
laws of any country in the world. AHN shall cooperate with IVI and IVI's
Licensors in any registrations procedure that IVI or IVI's Licensors may deem
appropriate to protect the intellectual property rights.
6.2 Enforcement Procedures.
6.2.1 AHN shall promptly inform IVI in writing of any reasonably
suspected or known infringement of any intellectual property rights
embodied in the Materials or of any claim, lawsuit or legal proceeding
by a third party pertaining to the aforementioned intellectual property
rights. IVI shall take such action as is required or allowed by IVI's
Licensors to protect the intellectual property rights. If IVI elects
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not to take any action to ▇▇▇ infringers, AHN may at its sole cost and
expense pursue the infringers. If IVI and any IVI Licensor decline to
pursue such legal action on any basis provided above, IVI or such IVI
Licensor shall be hereby deemed to have granted, released, assigned,
and transferred its right to take such legal action to AHN, and AHN may
then, at its option, pursue legal action in its own name and in
whatever manner it deems appropriate in that country, including use of
its power of attorney under Section 6.2.2 below. AHN shall bear the
entire cost of such action and shall be entitled to retain the entire
amount of any recovery by way of judgment or settlement. IVI shall
render and shall use its best efforts to cause any IVI Licensor
affected by the alleged infringement to render such corporation as may
be reasonably requested by the prosecuting party and at the prosecuting
party's expense and shall permit its joinder as a party to any such
legal action if such joinder is reasonably necessary for effective
prosecution of such action.
6.2.2 If AHN pursues legal action under Section 6.2.1 and is required
to join the other party for the effective prosecution of same and if
IVI has declined to participate in such legal action, IVI shall be
hereby deemed to have authorized AHN to do so as its attorney-in-fact,
to execute, acknowledge, verify, serve or file all pleadings or
instruments pertaining thereto in the name of and on behalf of IVI,
save and except any commitments creating or purporting to create a
financial obligation of IVI. AHN shall deliver to IVI and to its legal
counsel a copy of each such document, pleading or instrument at least
twenty (20) days prior to any service or filing thereof to permit IVI a
reasonable opportunity to review and object to any matters or
statements made therein. IVI shall provide promptly copies of all such
documentation to the affected IVI Licensor.
6.3 Covenants of IVI.
(a) IVI will make all payments required by the IVI Licenses.
(b) To the extent not prohibited by any of the IVI Licenses, IVI will
defend itself and AHN from any claims of third parties that AHN is not
authorized to use any of the Materials or that any of the Materials infringe
upon the rights of third parties.
ARTICLE 7.0 TERM AND TERMINATION
7.1 Term. The Term of the Agreement, and the Term of AHN's obligation
to pay any Royalty, shall commence on the Effective Date and terminate five (5)
years after the date on which AHN begins broadcasting in the United States
(which date will be confirmed by IVI and AHN in a subsequent letter between
them); provided, however, that the period during which AHN has the right to use
one or more of the Materials will begin on the first day such Materials are
loaded onto the Computer System or the Telephone System in a particular language
and terminate on the earlier to occur of (i) the termination of IVI's license
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from the IVI Licensor supplying said Materials or (ii) five (5) years after the
Material is so loaded. The extension of the term beyond the Term in this
Agreement for AHN's use of any of the Materials as set forth in the preceding
clause shall also be subject to AHN agreeing that the terms of this Agreement,
notwithstanding its expiration, shall survive such expiration and shall apply to
AHN's use of the Materials, its obligations pertaining to such use and IVI's
rights to terminate the use. Further, if the Agreement is terminated for any
reason prior to the expiration of the Term, then AHN shall not have the right to
extend the use of any Materials beyond the termination date.
7.2 Early Termination. Notwithstanding the stated Term, the Term, this
Agreement and the rights granted hereunder may be terminated earlier under any
of the following circumstances.
7.2.1 By either party, effective immediately upon delivery of written
notice of such termination, if, for any reason, the other party ceases
conducting its business in the normal course, becomes insolvent or
bankrupt, or makes a general assignment for the benefit of creditors,
admits in writing its inability to pay its debts as they mature,
suffers or permits the appointment of a receiver for its business or
assets, or avails itself of or becomes subject to any proceeding under
any statute of any governing authority relating to insolvency or the
protection of rights of creditors and such proceeding is not dismissed
within thirty (30) days of its filing;
7.2.2 By IVI, effective thirty (30) days after delivery of written
notice of such termination, if any of the rights licensed by IVI to AHN
hereunder, is attached or levied upon by a creditor or claimant of AHN
or of any Affiliate of AHN, and such attachment or levy is not released
or bonded within thirty (30) days after IVI receives written notice
thereof.
7.2.3 By either party if the other party (i) defaults in the
performance of its obligations and such default is not cured within
twenty (20) days after written notice of such default or (ii)
materially breaches any representation or warranty hereunder
7.2.4 By IVI immediately upon written notice to AHN as to the rights to
any Material if IVI's rights to such Material are terminated by the IVI
Licensor thereof specifying the basis for such termination and the
Material affected; and by AHN immediately upon written notice to IVI at
any time after IVI has exercised its right under this Section 7.2.4
(for any reason other than an Adverse Event) with respect to either (i)
10% in number of the Second Opinions delivered to date or (ii) Other
Materials having an original cost to AHN of at lease 10% of the
aggregate original cost to AHN of the Other Materials delivered to
date.
7.2.5 By IVI if AHN is in default in the performance of its obligations
under any other agreement or document between AHN and IVI; provided,
that if the terms of the agreement under which the claimed default has
occurred do not require that AHN receive prior written notice and have
the right to cure such default, then IVI shall give AHN prior written
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notice of the claimed default and AHN shall have the right to cure such
default within 10 days thereafter (or, if the claimed default is not
such that can be fully cured within such 10 days, then within such 10
days AHN shall take steps reasonably calculated to effect the cure of
such default) and shall diligently pursue and cure said default within
30 days; provided, further however, that the foregoing cure shall not
apply to any payment or monetary default.
7.2.6 By IVI immediately upon notice to AHN if: (i) AHN has not begun
broadcasting on its network by June 30, 1996; or (ii) if AHN has not
received at least $20,000,000.00 in financing/investment by March 31,
1996; or (iii) AHN substantially changes its programming so that it is
no longer primarily a consumer health network; or (iv) AHN fails to
make its Royalty payments as required hereunder within ten (10) days of
the due date therefor.
7.2.7 By AHN upon written notice to IVI at any time after the third
Royalty Year if less than fifty percent (50%) of the non-shopping
programming broadcast by AHN in the United States during such Royalty
Year was "Ask the Doctor" programming; whereupon, notwithstanding
anything to the contrary contained herein, AHN shall have no further
rights to any of the Materials including no rights to request any
extensions of the term for such Materials.
7.3 Effects of Termination or Expiration of this Agreement. Upon
expiration or earlier termination of this Agreement, all of AHN rights hereunder
shall immediately terminate and AHN shall return to IVI all Materials. In the
event the termination is pursuant to subsection 7.2.4 above, then only the
rights granted to AHN hereunder for the specific Materials shall terminate and
AHN shall return only those Materials. Termination shall not affect, preclude,
reduce or limit any other remedy at law or in equity that may be available to
either party except as otherwise provided herein.
ARTICLE 8.0 CONFIDENTIAL INFORMATION
8.1 Nonuse and Nondisclosure. In the course of a party's performance of
this Agreement, it may disclose to the other party sensitive proprietary
information or trade secrets, including, without limitation, software programs,
designs, specifications, protocols, schedules, competition analyses, price or
cost data, supplier information, customer information, and the like
(collectively, "Confidential Information"). To facilitate the cooperation of the
parties hereto and to protect the legitimate interests of each party in its own
Confidential Information, neither party may use or disclose to any other person
the Confidential Information of the other party except for the purposes of this
Agreement. "Confidential Information" shall also include the terms of this
Agreement.
8.2 Duration of Duty. The foregoing duty of nonuse and nondisclosure of
any Confidential Information shall be binding upon the receiving party during
the Term and for three (3) years thereafter; provided, however, that nothing
herein shall imply that at the end of such 3-year period that the receiving
party shall have the right to use Confidential Information.
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8.3 Exclusions. The foregoing duty of nonuse and nondisclosure of
Confidential Information shall not apply to any information which (a) is or
becomes in the public domain through no fault or act of the receiving party; (b)
is obtained by the receiving party from a third party under no duty of nonuse
and nondisclosure to the disclosing party; (c) is independently developed or
derived by receiving party prior to its disclosure to the receiving party, as
shown by the receiving party's books and records; (d) is required to be revealed
to an IVI Licensor pursuant to the license agreement between IVI and the IVI
Licensor; or (e) is required to be revealed pursuant to law or regulation. In
the latter event, the party required by law or regulation to make such
revelation shall use its best efforts to afford the other party a reasonable
opportunity to challenge such requirement and/or to obtain any protective order
as may be available to limit or control the revelation.
ARTICLE 9.0 INDEMNIFICATION
9.1 IVI Indemnification of AHN. IVI hereby agrees to defend and hereby
indemnifies and holds AHN, its officers, directors, employees and agents and
AHN's Affiliates and the officers, directors, employees and agents of such
Affiliates harmless from all liability, demands, damages, expenses, losses, fees
(including reasonable attorney's fees) arising out of or resulting from (a) any
breach of the covenants, representations or warranties given by IVI elsewhere in
this Agreement, (b) any death, personal injury, or illness arising out of or
resulting from IVI's negligent or reckless preparation of the Materials and (c)
any claims for property damage, defamation or invasion of privacy made against
AHN that arise out of or result from IVI's negligent or reckless preparation of
the Materials.
9.2 AHN Indemnification of IVI. AHN hereby agrees to defend and hereby
indemnifies and holds IVI, its officers, directors, employees and agents and
IVI's Affiliates and IVI's Licensors and the officers, directors, employees and
agents of such Affiliates and Licensors harmless from all liability, demands,
damages expenses, losses, fees (including reasonable attorney's fees) arising
out of or resulting from (a) any breach of the covenants, representations or
warranties given by AHN elsewhere in this Agreement, (b) any death, personal
injury, or illness arising out of or resulting from AHN's negligent use of the
Materials and (c) property damage, defamation and invasion of privacy made
against IVI or IVI's licensors that arise out of or result from AHN's negligent
or improper use of the Materials.
9.3 Procedure for Indemnification Claim. An indemnified party shall
give prompt written notice to the indemnifying party for any request for
indemnification under this Article 9, setting forth in reasonable detail the
nature and extent of the liability, demand, damage, expense, loss, fee or
settlement ("Liability Claim"). An indemnifying party shall have no duty of
indemnification under this Article 9 if the indemnified party fails to give such
notice in a timely manner and such failure is materially prejudicial to the
ability of the indemnifying party to defend against such Liability Claim. The
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indemnified party shall render such cooperation in the defense of any Liability
Claim as the indemnifying party may reasonably request but at the indemnifying
party's expense, and the indemnifying party shall have sole and exclusive
control of the litigation, defense or settlement of any Liability Claim;
provided,however, if there is or reasonably appears to be a conflict of interest
in a single legal counsel representing both the indemnifying party and the
indemnified party, the indemnified party shall have the right to separate
representation by legal counsel of its own choice, at the expense of and subject
to the approval of the indemnifying party, which approval shall not be
unreasonably withheld.
ARTICLE 10.0 DISPUTE RESOLUTION
10.1 Dispute Resolution. Except as provided in Section 10.2 below, AHN
and IVI shall each use its best efforts to resolve any dispute between them
promptly and amicably and without resort to any legal process if feasible within
thirty (30) days of receipt of a written notice by one party to the other party
of the existence of such dispute. Except as provided in Section 10.2 below, no
further action may be taken under this Article 10.0 unless and until an officer
of AHN and an officer of IVI have met in good faith to discuss and settle such
dispute. The foregoing requirement in this Section 10.1 shall be without
prejudice to either party's rights, if applicable, to terminate this Agreement
under Article 7.0 above.
10.2 Litigation Rights Reserved. If any dispute arises with regard to
the infringement of a party's intellectual property rights or with regard to any
violation of any confidentiality provisions or with regard to the use of the
Materials by AHN in violation of the terms of this Agreement, the adversely
affected party may seek any available remedy at law or in equity from a court of
competent jurisdiction.
10.3 Procedure for Arbitration. Except as provided in section 10.2
above, any dispute between AHN and IVI arising out of or resulting from this
Agreement, its performance or its termination shall be resolved by final and
binding arbitration according to the then-current Commercial Arbitration Rules
of the American Arbitration Association ("AAA Rules"). Such arbitration shall be
performed by three (3) neutral arbitrators selected by the mutual agreement of
the parties or, failing such agreement, in accordance with the AAA Rules. At
least one (1) of the arbitrators shall be an attorney reasonably experienced in
business law matters, and at least one (1) of the arbitrators shall be a person
with reasonable experience and/or expertise in the field of electronic
publishing. Such arbitration shall take place in Minneapolis, Minnesota, and
each party hereby consents to the personal jurisdiction of the Minnesota State
District Court in and for Hennepin County for the purpose of entry or
enforcement of any arbitral award or judgment. Notwithstanding any contrary
provision in the AAA Rules, the following procedures and rules shall apply to
any such arbitration:
10.3.1 Each party shall have the right to request from the arbitrators,
and the arbitrators shall order upon good cause shown, reasonable and
limited prehearing discovery, including (a) exchange of witness lists,
(b) depositions under oath of named witnesses, (c) written
interrogatories, and (d) document requests.
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10.3.2 Upon conclusion of the pre-hearing discovery, the arbitrators
shall promptly hold a hearing upon the evidence to be adduced by the
parties and shall promptly render a written opinion and award.
10.3.3 The arbitrators may not award or assess punitive damages against
either party.
10.3.4 Each party shall bear its own costs and expenses of the
arbitration and one-half (1/2) of the fees and costs of the
arbitrators, subject to the power of the arbitrators, in their sole
discretion, to award all such reasonable costs, expenses and fees to
the prevailing party.
10.4 Survival. The duty of the parties to arbitrate any dispute
pursuant to Section 10.3 shall survive the termination of this Agreement.
ARTICLE 11.0 MISCELLANEOUS PROVISIONS
11.1 Notices. All notices, invoices or accounting statements required
or permitted under this Agreement shall be given in writing and sent to the
other party at the addresses set forth in the preamble to this Agreement. Any
notice so given shall be deemed to have been served in the case of personal
delivery, on the day of delivery; in the case of service by certified U.S. mail,
in four (4) working days from the day it was posted with sufficient postage
attached and with the proper address (or on the date of actual receipt, if a
return receipt shows actual receipt earlier); and in the case of a telex or
facsimile transmission, on the date of transmission of the notice (if proof of
successful transmission is retained by the transmitting party). Any notice given
in any other manner shall be effective only when actually received. Either party
may change the above address by written not ice to the other party in accordance
with this Section 10.1.
11.2 Assignment. AHN shall not assign, delegate, sublicense or
otherwise transfer all or any of its rights or duties hereunder without the
prior written consent of IVI; provided, that without the consent of IVI, AHN
shall have the right to assign this Agreement, and all of its rights and
obligations hereunder, to any corporation, partnership, limited liability
company or other entity that succeeds to the business of AHN, so long as such
entity assumes in writing all of the obligations of AHN under this Agreement by
a written instrument reasonably satisfactory to IVI and there is no change in
the senior management of AHN. IVI shall not assign this Agreement without the
written consent of AHN; provided, however, that IVI may assign this Agreement
without consent of AHN to any party with whom IVI merges or to whom IVI sells
substantially all of its assets and further provided that the delegation or
assignment by IVI to third parties of production, creation or development duties
shall not be considered an assignment hereunder. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and to their respective legal successors and assigns.
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11.3 Independent Contractors. Nothing in this Agreement constitutes a
partnership between or joint venture by the parties hereto or constitutes either
party the agent of the other. Neither party shall hold itself out contrary to
the terms of this Section 10.3, and neither party shall become liable by any
representation, act or omission of the other party which is contrary to the
terms of this Section 11.3.
11.4 Entire Agreement; Amendment. This Agreement and the schedules,
exhibits and attachments hereto constitute the entire agreement between the
parties hereto and supersede and cancel any and all prior or contemporaneous
negotiations, undertakings, discussions, agreements and licenses, oral or
written, with respect to the subject matter hereof.
11.5 Waiver. No waiver by either party of any breach of this Agreement
shall be a waiver of any other breach of the same or any other provision hereof.
The exercise of any right granted to either party shall not be a waiver of any
other right. No remedy or election shall be exclusive but shall, wherever
possible, be cumulative with all other remedies at law or in equity to achieve
the fairest and most just outcome between the parties hereto.
11.6 Consent. Whenever this Agreement refers to the "prior written
consent" of either party, to be binding upon such party, such consent shall be
express and shall not be implied, whether by context, conduct or otherwise.
11.7 Choice of Law. This Agreement is made under and shall be performed
and interpreted in accordance with the laws of the State of Minnesota and of the
United States of America, but exclusive of its choice of laws or conflict of
laws provisions.
11.8 Savings Clause. If any provision of this Agreement shall be found
invalid or unenforceable, in whole or in part, by a court of competent
jurisdiction, then such provision shall be deemed to be modified or restricted
to the extent and in the manner necessary to render the same valid and
enforceable, or, if that is not possible, such provision shall be deemed
stricken and deleted from this Agreement, as the case may require, and this
Agreement shall then be construed and enforced to the maximum extent permitted
by law and to achieve the fundamental intent of the parties hereto.
11.9 Captions and Headings. The captions and headings used in this
Agreement are for convenience of reference only and shall not be deemed to
expand, contract, alter or restrict any term or condition herein.
11.10 Construction. IVI and AHN have each contributed to the
negotiation and drafting of this Agreement and the schedules, exhibits and
attachments hereto and have each had the right and opportunity to consult
privately with experienced and independent legal counsel prior to the execution
of this instrument. Accordingly, the fact that one party or the other may have
drafted all or a part of any term or condition of this Agreement shall not be a
basis to read or construe such provision more strictly against the drafting
party.
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11.11 Counterparts. This Agreement may be executed by the parties
hereto in counterparts, and, taken together, shall constitute the one and same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
IVI:
IVI PUBLISHING, INC.
By /s/ ▇▇▇ ▇▇▇▇▇▇▇
Its Senior Vice President
AHN:
AMERICA'S HEALTH NETWORK, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its Chairman and Chief Executive Officer
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Exhibit A
1. IVI'S fee for the production of the first forty-eight (48) Second
Opinions shall be Three Hundred Sixty Dollars ($360.00) per Second
Opinion, inclusive of the 15% fee payable to IVI under Section 2.4.1 of
the Agreement and all costs of Mayo's approval of the Second Opinion.
This amount further includes all IVI services necessary to produce and
deliver a second opinion produced to broadcast standards and approved
by Mayo (if required), except tape stock to be provided by AHN,
including, without limitation, the following services: (i)
identification and scheduling of the appropriate Mayo physician or
other health care professional and the amount required to secure the
appearance of such person, (ii) identification and scheduling of the
appropriate shoot location, (iii) selection and scheduling of an
AHN-approved video production team (such approval not to be
unreasonably withheld) to include a shooter, a shooter's assistant, a
make-up artist, and a production assistant, and (iv) post-production
services including but not limited to cleaning up the in/out cues of
each selected take, incorporation of appropriate b-roll approved by
Mayo, and delivery of the Second Opinion, with appropriate supporting
documentation, to AHN. At the completion of the first 48 Second
Opinions AHN and IVI will meet in good faith to determine the extent to
which the cost-related assumptions underlying the price of Three
Hundred Sixty Dollars ($360.00) per Second Opinion were accurate and
the extent to which any need for any upward or downward revision in
price may be indicated.
2. IVI's cost to obtain Mayo's approval of any Materials (when requested
by AHN) other than Second opinions shall be the lesser of (i) fifty
dollars ($50.00) per item of such Material and (ii) two hundred fifty
dollars ($250.00) per hour of labor devoted to the approval of such
Material. As, a prerequisite to AHN's, payment of approval services
rendered by IVI, IVI shall complete and, submit to AHN an "approval
document" (to be jointly developed by AHN and IVI) which details the
time spent gaining Mayo's approval of each item of requested Materials
and contains the signatures of Mayo representatives authorized to
approve each item of Materials.
