1
EXHIBIT 10.16
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SOFTWARE DISTRIBUTION AGREEMENT
BETWEEN
TECH DATA PRODUCT MANAGEMENT, INC.
AND
DRAGON SYSTEMS, INC.
2
SOFTWARE DISTRIBUTION AGREEMENT
THIS AGREEMENT, DATED AS OF THIS 16TH DAY OF JUNE, 1997, IS BETWEEN
TECH DATA PRODUCT MANAGEMENT, INC., A FLORIDA CORPORATION ("'TECH DATA"), WITH
ITS PRINCIPAL CORPORATE ADDRESS AT ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇ AND DRAGON SYSTEMS, INC., A DELAWARE CORPORATION ("DRAGON SYSTEMS" OR
"VENDOR"), WITH ITS PRINCIPAL CORPORATE ADDRESS AT: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇ ▇▇▇.
RECITALS
A. Tech Data desires to purchase certain Products from Dragon Systems
from time to time and Dragon Systems desires to sell certain Products to Tech
Data in accordance with the terms and conditions set forth in this Agreement.
B. Dragon Systems desires to appoint Tech Data as its non-exclusive
distributor to market Products within the Territory (as hereinafter defined) and
Tech Data accepts such appointment on the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the Recitals, the mutual covenants contained
in this Agreement and other good and valuable consideration, Tech Data and
Dragon Systems hereby agree as follows:
ARTICLE I.
DEFINITIONS, APPOINTMENT AND TERM OF AGREEMENT
1.1 Definitions. The following definitions shall apply to this Agreement.
(a) "Customers" of Tech Data shall include dealers, resellers,
value added resellers, direct resellers and other entities
that acquire the Products from Tech Data.
(b) "DOA" shall mean Product, or any portion thereof, which fails
to operate properly on initial installation, boot, or use, as
applicable.
(c) "Documentation" shall mean user manuals, training materials,
Product descriptions and specifications, brochures, technical
manuals, license agreements, supporting materials and other
printed information relating to the Products, whether
distributed in print, electronic, or video format.
(d) "Effective Date" shall mean the date on which this Agreement
is signed and dated by a duly authorized representative of
Tech Data.
-2-
3
(e) "End Users" shall mean the final purchasers or licensees who
have acquired Products for their own use and not for resale,
remarketing or redistribution.
(f) "Non-Saleable Products" shall mean any Product that has been
returned to Tech Data by its Customers that has had the
outside shrink wrapping or other packaging seal broken; any
components of the original package are missing, damaged or
modified; or is otherwise not fit for resale.
(g) "Products" shall mean, individually or collectively, the
software licenses, electronic products, the sealed software
packages comprised of the computer programs encoded on media
together with manuals, materials and other contents of the
packages associated therewith, if any, as more fully described
in Schedule 1.1g attached hereto.
(h) "Return Credit" shall mean a credit to Tech Data in an amount
equal to the price paid by Tech Data for Products less any
price protection credits but not including any early payment,
prepayment or other discounts.
(i) "Services" means any warranty, maintenance, advertising,
marketing or technical support and any other services
performed or to be performed by Dragon Systems.
(j) "Territory" shall mean the United States of America.
1.2 Term of Agreement. The term of this Agreement shall commence on the
Effective Date and, unless terminated by either party as set forth in
this Agreement, shall remain in full force and effect for a term of one
(1) year, and will be automatically renewed for successive one (1) year
terms unless prior written notification of termination or non-renewal
is delivered by one of the parties in accordance with the notice
provision of this Agreement.
1.3 Appointment as Distributor. Dragon Systems hereby grants to Tech Data
the non-exclusive right and license to distribute Products during the
term of this Agreement within the Territory, together with any updates
or enhancements to the Products and any new releases related to the
Products. This license includes the right to order, possess and
distribute the Products to Customers and to provide the Products to
Customers for use on demonstration units. Dragon Systems and Tech Data
acknowledge and agree that the license to use the Product is solely
between Dragon Systems and the End Territory User and is governed by
the terms of the Vendor's standard use license enclosed with the
Product, and Tech Data shall have no right hereunder to use, copy,
modify, reverse engineer, reverse compile or reverse assemble any
Product except as expressly permitted by applicable law or this
Agreement. This Agreement does not grant Dragon
-3-
4
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Systems or Tech Data an exclusive right to purchase or sell Products
and shall not prevent either party from developing or acquiring other
vendors or customers or competing Products. Tech Data will use
commercially reasonable efforts to promote distribution of the
Products. Dragon Systems agrees that Tech Data may obtain Products in
accordance with this Agreement for the benefit of its parent,
affiliates and subsidiaries of Tech Data, provided that Tech Data
remains responsible for all actions and liabilities of such entities.
ARTICLE II. PURCHASE ORDERS
2.1 Issuance and Acceptance of Purchase Order.
(a) This Agreement shall not obligate Tech Data to purchase any
Products or Services except as specifically set forth in a written
purchase order.
(b) Tech Data may issue to Dragon Systems one or more purchase orders
identifying the Products Tech Data desires to purchase from Dragon
Systems. The terms and conditions of this Agreement shall govern all
purchase orders, except that purchase orders may include other terms
and conditions which are consistent with the terms and conditions of
this Agreement, or which are mutually agreed to in writing by Tech Data
and Dragon Systems. Purchase orders will be placed by Tech Data by fax
or electronically transferred in a manner acceptable to Dragon Systems.
(c) All purchase orders are subject to acceptance by Dragon Systems. A
purchase order shall be deemed accepted by Dragon Systems unless Dragon
Systems notifies Tech Data in writing within [**] days of the date of
the purchase order that Dragon Systems does not accept the purchase
order.
2.2 Purchase Order Alterations or Cancellations. Up to [**] days prior to
the shipment date of the Products, Dragon Systems shall accept
alterations or cancellation to a purchase order in order to: (i) change
a location for delivery, (ii) modify the quantity or type of Products
to be delivered or (iii) correct typographical or clerical errors.
2.3 Evaluation or Demonstration Purchase Orders. Dragon Systems shall
provide to Tech Data a reasonable number of demonstration or evaluation
Products at no charge.
2.4 Product Shortages. If for any reason Dragon Systems's production is not
on schedule, Dragon Systems may allocate available inventory to Tech
Data and
-4-
5
make shipments based upon a fair and reasonable percentage allocation
among Dragon Systems's customers. Such allocations shall not impact the
calculation of performance rebates.
ARTICLE III. DELIVERY AND
ACCEPTANCE OF PRODUCTS
3.1 Acceptance of Products. Tech Data shall, after a reasonable time to
inspect each shipment, accept Product (the "Acceptance Date") if the
Products and all necessary documentation delivered to Tech Data are in
accordance with the purchase order. Any Products not ordered or not
otherwise in accordance with the purchase order (e.g. misshipments,
overshipments) may be returned to Dragon Systems at Dragon Systems's
expense (including without limitation reasonable costs of shipment or
storage). Dragon Systems shall refund to Tech Data within ten (10)
business days following notice thereof, all monies paid in respect to
such rejected Products. Tech Data shall not be required to accept
partial shipment unless Tech Data agrees prior to shipment.
3.2 Title and Risk of Loss. FOB Dragon Systems warehouse. Title and risk of
loss or damage to Products shall pass to Tech Data at the time the
Products are delivered to Tech Data's warehouse. Dragon Systems and
Tech Data warehouse agree that no title or ownership of the proprietary
rights to any software code is transferred by virtue of this Agreement
notwithstanding the use of terms such as "purchase", "sale" or the like
within this Agreement. Dragon Systems retains all ownership rights and
title to any software code within the Products.
3.3 Transportation of Products. Dragon Systems shall deliver the Products
clearly marked on the Product package with serial number, product
description and machine readable bar code (employing UPC or other
industry standard bar code) to Tech Data at the location shown. Dragon
Systems shall use reasonable efforts to deliver Products by the
delivery date set forth in the applicable purchase order or as
otherwise agreed upon by the parties. Charges for transportation of the
Products shall be paid by Dragon Systems. Dragon Systems shall use
reputable common carriers to ship Products. If Tech Data has reasonable
objections to the carrier used by Dragon Systems, Dragon Systems shall
consider in good faith an alternate carrier.
ARTICLE IV. RETURNS
4.1 Inventory Adjustment. Dragon Systems agrees to accept return of
overstocked Products as determined by Tech Data, in Tech Data s
reasonable discretion. Shipments of Product being returned shall be
new, unused and in sealed cartons. Vendor shall credit Tech Data's
account in the amount of the Return Credit. Tech Data shall pay for
freight charges under this section.
-5-
6
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
4.2 Defective Products/Dead on Arrival (DOA) . Tech Data shall have the
right to return to Dragon Systems for Return Credit any DOA Product
that is returned to Tech Data within ninety (90) days after the initial
delivery date to the End User and any Product that fails to perform in
accordance with Dragon Systems's Product warranty. Dragon Systems shall
bear all costs of shipping and risk of loss of DOA and in-warranty
Products to Dragon Systems's location and back to Tech Data or Tech
Data's Customer.
4.3 Obsolete or Outdated Product. Tech Data shall have the right to return
for Return Credit, [**], all Products that become obsolete or Dragon
Systems discontinues, updates, revises or are removed from Dragon
Systems's current price list; provided Tech Data returns such Products
within [**] after Tech Data receives written notice from Dragon Systems
that such Products are obsolete, superseded by a newer version,
discontinued or are removed from Dragon Systems's price list. Dragon
Systems shall bear all costs of shipping and risk of loss of Obsolete
or Outdated Products to Dragon Systems's location.
4.4 Non-Saleable. Tech Data shall have the right to return to Dragon
Systems for Return Credit Non-Saleable Products. Tech Data shall bear
all costs of shipping and risk of loss of Non-Saleable Product to
Dragon System's location.
4.5 Condition Precedent to Returns. As a condition precedent to returning
Products, Tech Data shall request and Dragon Systems shall issue a
Return Material Authorization Number (RMA) in accordance with and
subject to Section 8.9 of this Agreement.
ARTICLE V. PAYMENT TO VENDOR
5.1 Charges, Prices and Fees for Products. Charges, prices, quantities and
discounts, if any, for Products shall be determined as set forth in
Schedule 1.1.g, or as otherwise mutually agreed upon by the parties in
writing, and may be confirmed at the time of order. In no event shall
charges exceed Dragon Systems's then current list prices. Tech Data
shall not be bound by any of Dragon Systems's suggested prices.
5.2 Payment. Except as otherwise set forth in this Agreement, any
undisputed sum due to Dragon Systems pursuant to this Agreement shall
be payable as follows:[**], net sixty (60) days after the invoice
receipt. Dragon Systems shall invoice Tech Data no earlier than the
applicable shipping date for the Products covered by such invoice.
Products which are shipped from outside the United
-6-
7
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
States, shall not be invoiced to Tech Data prior to the Products being
placed on a common carrier within the United States for final delivery
to Tech Data. The due date for payment shall be extended during any
time the parties have a bona fide dispute concerning such payment.
Notwithstanding anything herein to the contrary, for the initial order
only, payment shall be made by Tech Data upon resale of the Products
and expiration of the Customer return period and Tech Data may return
any of the Products delivered under the initial order for Return
Credit.
Notwithstanding anything contained in the Agreement or in any other
agreements between Tech Data and Dragon Systems, including Dragon
Systems's invoices, Tech Data has the right to delay payment for any
Products ordered or received by Tech Data until Tech Data's sale of the
Products.
5.3 Invoices. A "correct" invoice shall contain (i) Dragon Systems's name
and invoice date, (ii) a reference to the purchase order or other
authorizing document, (iii) separate descriptions, unit prices and
quantities of the Products actually delivered, (iv) credits (if
applicable), (v) shipping charges (if applicable) (vi) name (where
applicable), title, phone number and complete mailing address as to
where payment is to be sent, and (vii) other substantiating
documentation or information as may reasonably be required by Tech Data
from time to time. Notwithstanding any pre-printed terms or conditions
on Dragon Systems's invoices, the terms and conditions of this
Agreement shall apply to and govern all invoices issued by Dragon
Systems hereunder, except that invoices may include other terms and
conditions which are consistent with the terms and conditions of this
Agreement, or which are mutually agreed to in writing by Tech Data and
Dragon Systems.
5.4 Taxes. Tech Data shall be responsible for franchise taxes, sales or use
taxes or shall provide Dragon Systems with an appropriate exemption
certificate. Dragon Systems shall be responsible for all other taxes,
assessments, permits and fees, however designated which are levied upon
this Agreement or the Products, except for taxes based upon Tech Data's
income. No taxes of any type shall be added to invoices without the
prior written approval of Tech Data.
5.5 [**] Pricing and Terms. Dragon Systems represents that the prices
charged and the terms offered to Tech Data are and will be [**]. If
Dragon Systems [**], Tech Data shall also be entitled to participate
and receive notice of the same no later than other like distributors,
aggregators, or resellers.
-7-
8
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
5.6 Price Adjustments.
(a) Price Increases. Dragon Systems shall have the right to increase
prices from time to time, upon written notice to Tech Data [**]. All
orders placed prior to the effective date of the increase, for shipment
[**] after the effective date, shall be invoiced by Dragon Systems
[**].
(b) Price Decreases. Dragon Systems shall have the right to decrease
prices from time to time, upon written notice to Tech Data . Dragon
Systems shall grant to Tech Data, its parent, affiliates and
subsidiaries and Tech Data's Customers a price credit for the full
amount of any Dragon Systems price decrease on all Products on order,
in transit and in their inventory on the effective date of such price
decrease. Tech Data and its Customers shall, after receiving written
notice of the effective date of the price decrease, provide a list of
all Products for which they claim a credit. Dragon Systems shall have
the right to a reasonable audit at Dragon Systems's expense unless the
credits claimed by Tech Data are more than [**] percent [**] higher
than disclosed by the audit in which case Tech Data will bear the cost
of the audit.
5.7 Advertising.
(a) Cooperative Advertising. Dragon Systems offers a [**] co-op program
and may offer at its sole option additional advertising credits, or
other promotional programs or incentives to Tech Data as it offers to
its other distributors or customers. Tech Data shall have the right, at
Tech Data's option, to participate in such programs. Attached as
Schedule 5.7 is a copy of Dragon Systems's co-op policy. All monies
spent require Dragon Systems prior approval.
(b) Advertising Support. Dragon Systems shall provide [**] to Tech Data
and the Customers of Tech Data, marketing support, and advertising
materials in connection with the resale of Products as are currently
offered or that may be offered by Dragon Systems. Tech Data reserves
the right to charge Dragon Systems for advertising, marketing and
training services which are preapproved by the vendor.
(c) Launch Funds. Prior to receipt of the initial purchase order,
Dragon Systems shall pay Tech Data for all launch funds expenditures to
which Dragon Systems and Tech Data have agreed.
-8-
9
ARTICLE VI. WARRANTIES,
INDEMNITIES AND OTHER OBLIGATIONS OF VENDOR
6.1 Warranty. Dragon Systems hereby represents and warrants that Dragon
Systems has all right, title, ownership interest and marketing rights
necessary to provide the Products to Tech Data. Dragon Systems further
represents and warrants that it has not entered into any agreements or
commitments which are inconsistent with or in conflict with the rights
granted to Tech Data in this Agreement; the Products are new and when
provided to Tech Data shall be free and clear of all liens and
encumbrances; Tech Data and its Customers and End Users shall be
entitled to use the Products without disturbance; the Products have
been listed with Underwriters' Laboratories or other nationally
recognized testing laboratory whenever such listing is required; if
applicable, the Products meet all FCC requirements; the Products do and
will conform to all codes, laws or regulations; and the Products
conform in all respects to the Product warranties. Dragon Systems
agrees that Tech Data shall be entitled to pass through to Customers of
Tech Data and End Users of the Products all Product warranties granted
by Dragon Systems. Tech Data shall have no authority to alter or extend
any of the warranties of Dragon Systems expressly contained or referred
to in this Agreement without prior approval of Dragon Systems. Dragon
Systems has made express warranties in this Agreement and in
Documentation, promotional and advertising materials. EXCEPT AS SET
FORTH HEREIN OR IN THE END USER WARRANTIES ENCLOSED IN THE PRODUCT
PACKAGING, DRAGON SYSTEMS DISCLAIMS ALL WARRANTIES WITH REGARD TO THE
PRODUCTS, INCLUDING WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THIS SECTION
SHALL SURVIVE TERMINATION OR EXPIRATION OF THIS AGREEMENT.
6.2 Proprietary Rights Indemnification. Dragon Systems hereby represents
and warrants that the Products and the sale and use of the Products do
not infringe upon any copyright, patent, trademark, trade secret or
other proprietary or intellectual property right of any third party in
the Territory, and that there are no suits or proceedings, pending or
threatened alleging any such infringement, except as specified in
Schedule 6.2. Dragon Systems shall indemnify and hold Tech Data, Tech
Data's parent, affiliates and subsidiaries and their respective,
officers, directors, employees and agents harmless from and against any
and all actions, claims, losses, damages, liabilities, awards, costs
and expenses, which they or any of them incur or become obligated to
pay resulting from or arising out of any breach or claimed breach of
the foregoing warranty. Tech Data shall inform Dragon Systems of any
such suit or proceeding filed against Tech Data and shall have the
right, but not the obligation, to participate in the defense of any
such suit or proceeding at Tech Data's expense. Dragon Systems shall,
at its option and expense, either (i) procure for Tech Data, its
Customers and End Users the
-9-
10
right to continue to use the Product as set forth in this Agreement, or
(ii) replace, to the extent Products are available, or modify the
Product to make its use non-infringing while being capable of
performing the same function without degradation of performance. If
neither of the foregoing alternatives (i) or (ii) is reasonably
available, Dragon Systems shall accept a return of the Products from
Tech Data, at Dragon Systems's sole cost and expense, and shall refund
to Tech Data the full amount of the price paid by Tech Data for said
returned Products, less any price protection credits, but not including
any early payment or prepayment discounts. Dragon Systems shall have no
liability under this Section 6.2 for any infringement based on the use
of any Product, if the Product is used in a manner or with equipment
for which it was not reasonably intended. Dragon Systems's obligations
under this Section 6.2 shall survive termination or expiration of this
Agreement.
6.3 Indemnification.
(a) Vendor. Dragon Systems shall be solely responsible for the design,
development, supply, production and performance of the Products. Dragon
Systems agrees to indemnify and hold Tech Data, its parent, affiliates
and subsidiaries and their officers, directors and employees harmless
from and against any and all claims, damages, costs, expenses
(including, but not limited to, reasonable attorney s fees and costs)
or liabilities that may result, in whole or in part, from any warranty
or Product liability claim, or any claim for infringement, or for
claims for violation of any of the warranties contained in this
Agreement.
(b) Tech Data. Tech Data agrees to indemnify and hold Dragon Systems,
its officers, directors and employees harmless from and against any and
all claims, damages, costs, expenses (including, but not limited to,
reasonable attorneys' fees and costs) or liabilities that may result,
in whole or in part, from Tech Data's negligence or misconduct in the
distribution of the Products pursuant to this Agreement, or for
representations or warranties made by Tech Data related to the Products
in excess of the warranties of Dragon Systems.
6.4 Insurance.
(a) The parties shall be responsible for providing Worker's
Compensation insurance in the statutory amounts required by the
applicable state laws.
(b) Without in any way limiting Dragon Systems's indemnification
obligation as set forth in this Agreement, Dragon Systems shall
maintain Commercial General Liability or Comprehensive General
Liability Insurance in such amounts as is reasonable and standard for
the industry. Either policy form should contain the following
coverages: Personal and Advertising Injury, Broad Form Property
-10-
11
Damage, Products and Completed Operations, Contractual Liability,
employees as Insured and Fire Legal Liability.
(c) Dragon Systems will provide evidence of the existence of insurance
coverages referred to in this Section 6.4 by certificates of insurance
which should also provide for at least thirty (30) days notice of
cancellation, non-renewal or material change of coverage to Tech Data.
The certificates of insurance shall name Tech Data Product Management,
Inc., its parent, affiliates and subsidiaries as an additional insured
for the limited purpose of claims arising pursuant to this Agreement.
6.5 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
PURSUANT TO THIS AGREEMENT FOR AMOUNTS REPRESENTING INDIRECT, SPECIAL,
INCIDENTAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES OF THE OTHER PARTY
ARISING FROM THE PERFORMANCE OR BREACH OF ANY TERMS OF THIS AGREEMENT
EVEN IF SUCH PARTY HAS BEEN MADE AWARE OF THE POSSIBILITIES OF SUCH
DAMAGES.
6.6 INTENTIONALLY DELETED.
6.7 INTENTIONALLY DELETED.
6.8 Vendor Reports. Dragon Systems shall, if requested, render monthly
reports to Tech Data setting forth the separate Products, dollars
invoiced for each Product, and total dollars invoiced to Tech Data for
the month, and such other information as Tech Data may reasonably
request.
6.9 Tech Data Reports. Tech Data shall, if requested, render monthly sales
out reports on Tech Data s BBS system. Information provided will
include: month and year sales activity occurred, internal product
number (assigned by Tech Data), written description, state and zip-code
of Customers location, unit cost (distributor's cost at quantity 1),
quantity and extended cost (cost times quantity. Dragon Systems agrees
that any such information provided by Tech Data shall be received and
held by Dragon Systems in strict confidence and shall be used solely
for sell through or compensation reporting information and shall not be
used for purposes related to Dragon Systems's sales activities.
6.10 Trademark Usage. Tech Data is hereby authorized to use the following
trademarks and trade names of Dragon Systems to be used in connection
with advertising, promoting or distributing the Products: Dragon
Systems, DragonDictate, Dragon PowerSecretary, and the Dragon logo.
Tech Data recognizes Dragon Systems or other third parties may have
rights or ownership of certain trademarks, trade names and patents
associated with the Products. Tech Data will act consistent with such
rights, and Tech Data shall comply with
-11-
12
any reasonable written guidelines when provided by Dragon Systems or
third parties licensing Dragon Systems related to such trademark or
trade name usage. Tech Data will notify Dragon Systems of any
infringement of which Tech Data has actual knowledge. Tech Data shall
discontinue use of Dragon Systems's trademarks or trade names upon
termination of this Agreement, except as may be necessary to sell or
liquidate any Product remaining in Tech Data's inventory. Tech Data
will at all times conduct its business in which it uses the trademarks
of Dragon Systems in a manner consistent with the standard of quality
established by written guidelines provided to Tech Data by Dragon
Systems for such marks. Tech Data shall at no time register any Dragon
Systems's trade names or trademarks or any ▇▇▇▇ or name confusingly
similar thereto.
ARTICLE VII. TERMINATION OR EXPIRATION
7.1 Termination.
(a) Termination With or Without Cause: Either party may terminate this
Agreement, without cause, upon giving the other party sixty (60) days
prior written notice. In the event that either party materially or
repeatedly defaults in the performance of any of its duties or
obligations set forth in this Agreement, and such default is not
substantially cured within thirty (30) days after written notice is
given to the defaulting party specifying the default, then the party
not in default may, by giving written notice thereof to the defaulting
party, terminate this Agreement or the applicable purchase order
relating to such default as of the date specified in such notice of
termination.
(b) Termination for Insolvency or Bankruptcy Either party may
immediately terminate this Agreement and any purchase orders by giving
written notice to the other party in the event of (i) the liquidation
or insolvency of the other party, (ii) the appointment of a receiver or
similar officer for the other party, (iii) an assignment by the other
party for the benefit of all or substantially all of its creditors,
(iv) entry by the other party into an agreement for the composition,
extension, or readjustment of all or substantially all of its
obligations, or (v) the filing of a petition in bankruptcy by or
against a party under any bankruptcy or debtors' law for its relief or
reorganization which is not dismissed within ninety (90) days.
7.2 Rights Upon Termination or Expiration.
(a) Termination or expiration of this Agreement shall not affect Dragon
Systems's right to be paid for undisputed invoices for Products already
shipped and accepted by Tech Data or Tech Data s rights to any credits
or payments owed or accrued to the date of termination or expiration.
Tech Data's rights to credits upon termination or expiration shall
include credits
-12-
13
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
against which Tech Data would, but for termination or expiration, be
required under this Agreement to apply to future purchases.
(b) Dragon Systems shall accept purchase orders from Tech Data for
additional Products which Tech Data is contractually obligated to
furnish to its Customers and does not have in its inventory upon the
termination or expiration of this Agreement; provided Tech Data
notifies Dragon Systems of any and all such transactions within sixty
(60) days following the termination or expiration date.
(c) Upon termination or expiration of this Agreement, Tech Data shall
discontinue holding itself out as a distributor of the Products.
7.3 [**] Products Upon Termination or Expiration. Upon the effective date
of termination or expiration of this Agreement for any reason, Dragon
Systems agrees to [**] all Products in Tech Data's inventory and
Products which are returned to Tech Data by its Customers within [**]
days following the effective date of termination or expiration. Dragon
Systems will [**]. [**] shall not be [**] any deductions or offsets for
early pay or prepay discounts. Such returns shall not [**] any co-op
payments or obligations owed to Tech Data. Within [**] days following
the effective date of termination or expiration, Tech Data shall return
to Dragon Systems [**] all Product held in Tech Data's inventory as of
the effective date of termination or expiration. Additional returns
shall be sent at reasonable intervals thereafter, provided all returns
of Product by Tech Data under this Section 7.3 shall be shipped within
[**] following the effective date of termination or expiration. Dragon
Systems will issue an RMA to Tech Data for all such Products; provided,
however, that Dragon Systems shall accept returned Products in
accordance with this Section absent an RMA if Dragon Systems [**].
Dragon Systems shall credit any outstanding balances owed to Tech Data.
If such credit exceeds amounts due from Tech Data, Dragon Systems shall
remit in the form of a check to Tech Data the excess within [**] of
receipt of the Product. Customized Products shall not be eligible for
repurchase pursuant to this Section.
7.4 Survival of Terms. Termination or expiration of this Agreement for any
reason shall not release either party from any liabilities or
obligations set forth in this Agreement which (i) the parties have
expressly agreed shall survive any such termination or expiration, or
(ii) remain to be performed or by their nature would be intended to be
applicable following any such termination or expiration. The
termination or expiration of this Agreement shall not affect any of
Dragon Systems's warranties, indemnification or obligations relating to
-13-
14
returns, co-op advertising payments, credits or any other matters set
forth in this Agreement that should survive termination or expiration
in order to carry out their intended purpose, all of which shall
survive the termination or expiration of this Agreement.
ARTICLE VIII. MISCELLANEOUS
8.1 Binding Nature, Assignment, and Subcontracting. This Agreement shall be
binding on the parties and their respective successors and assigns.
Neither party shall have the power to assign this Agreement without the
prior written consent of the other party.
8.2 Counterparts, This Agreement may be executed in several counterparts,
all of which taken together shall constitute one single agreement
between the parties.
8.3 Headings. The Article and Section headings used in this Agreement are
for reference and convenience only and shall not affect the
interpretation of this Agreement.
8.4 Relationship of Parties. Tech Data is performing pursuant to this
Agreement only as an independent contractor. Nothing set forth in this
Agreement shall be construed to create the relationship of principal
and agent between Tech Data and Dragon Systems. Neither party shall act
or represent itself, directly or by implication, as an agent of the
other party.
8.5 Confidentiality. Each party acknowledges that in the course of
performance of its obligations pursuant to this Agreement, it may
obtain certain information specifically marked as confidential or
proprietary. Each party hereby agrees that all such information
communicated to it by the other party, its parent, affiliates,
subsidiaries, or Customers, whether before or after the Effective Date,
shall be and was received in strict confidence, shall be used only for
purposes of this Agreement, and shall not be disclosed without the
prior written consent of the other party, except as may be necessary by
reason of legal, accounting or regulatory requirements beyond either
party's reasonable control. The provisions of this Section shall
survive termination or expiration of this Agreement for any reason for
a period of two (2) years after said termination or expiration.
8.6 Arbitration. Any disputes arising under this Agreement shall be
submitted to arbitration in accordance with such rules as the parties
jointly agree. If the parties are unable to agree on arbitration
procedures, arbitration shall be conducted in the city and state of the
respondent party, in accordance with the
-14-
15
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Commercial Arbitration Rules of the American Arbitration Association.
Any such award shall be final and binding upon both parties.
8.7 Notices. Wherever one party is required or permitted to give notice to
the other party pursuant to this Agreement, such notice shall be deemed
given when actually delivered by hand, by telecopier (if and when
immediately confirmed in writing by any of the other means provided
herein ensuring acknowledgment of receipt thereof for purposes of
providing notice of default or termination), via overnight courier, or
when mailed by registered or certified mail, return receipt requested,
postage prepaid, and addressed as follows:
In the Case of Vendor: In the Case of Tech Data:
---------------------- -------------------------
Dragon Systems, Inc. Tech Data Product Management, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Attn: ▇▇▇▇▇ ▇▇▇▇
Vice President-Marketing Operations
Contracts Administration
Either party may from time to time change its address for notification
purposes by giving the other party written notice of the new address
and the date upon which it will become effective.
8.8 Force Majeure. The term "Force Majeure" shall be defined to include
fires or other casualties or accidents, acts of God, severe weather
conditions, strikes or labor disputes, war or other violence, or any
law, order, proclamation, regulation, ordinance, demand or requirement
of any governmental agency.
(a) A party whose performance is prevented, restricted or interfered
with by reason of a Force Majeure condition shall be excused from such
performance to the extent of such Force Majeure condition so long as
such party provides the other party with prompt written notice
describing the Force Majeure condition and immediately continues
performance until and to the extent such causes are removed.
(b) If, due to a Force Majeure condition, the scheduled time of
delivery or performance is or will be delayed for more than ninety (90)
days after the scheduled date, the party not relying upon the Force
Majeure condition may terminate, without liability to the other party,
any purchase order or portion thereof covering the delayed Products.
8.9 Return Material Authorization Numbers. Dragon Systems is required to
issue an RMA to Tech Data within [**] business days of Tech Data's
request;
-15-
16
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
however, if the RMA is not received by Tech Data within [**] business
days, Dragon Systems shall accept returned Products absent an RMA.
8.10 Credits to Tech Data. In the event any provision of this Agreement or
any other agreement between Tech Data and Dragon Systems requires that
Dragon Systems grant credits to Tech Data's account, and such credits
are not received within thirty (30) days, all such credits shall become
effective immediately upon notice to Dragon Systems. In such event,
Tech Data shall be entitled to deduct any such credits from the next
monies owed to Dragon Systems. In the event credits exceed any balances
owed by Tech Data to Dragon Systems, Dragon Systems shall, upon request
from Tech Data, issue a check payable to Tech Data within ten (10) days
of such notice. Credits owed to Tech Data shall not be reduced by early
payment or prepayment discounts. Tech Data shall have the right to set
off against any amounts due to Dragon Systems under this Agreement or
any invoices issued by Dragon Systems related to this Agreement any and
all amounts due to Tech Data from Dragon Systems, whether or not
arising under this Agreement.
8.11 Severability. If, but only to the extent that, any provision of this
Agreement is declared or found to be illegal, unenforceable or void,
then both parties shall be relieved of all obligations arising under
such provision, it being the intent and agreement of the parties that
this Agreement shall be deemed amended by modifying such provision to
the extent necessary to make it legal and enforceable while preserving
its intent.
8.12 Waiver. A waiver by either of the parties of any covenants, conditions
or agreements to be performed by the other party or any breach thereof
shall not be construed to be a waiver of any succeeding breach thereof
or of any other covenant, condition or agreement herein contained.
8.13 Remedies. All remedies set forth in this Agreement shall be cumulative
and in addition to and not in lieu of any other remedies available to
either party at law, in equity or otherwise, and may be enforced
concurrently or from time to time.
8.14 Entire Agreement. This Agreement, including any Exhibits and documents
referred to in this Agreement or attached hereto, constitutes the
entire and exclusive statement of Agreement between the parties with
respect to its subject matter and there are no oral or written
representations, understandings or agreements relating to this
Agreement which are not fully expressed herein. The parties agree that
unless otherwise agreed to in writing by the party
-16-
17
intended to be bound, the terms and conditions of this Agreement shall
prevail over any contrary terms in any purchase order, sales
acknowledgment, confirmation or any other document issued by either
party affecting the purchase or sale of Products hereunder.
8.15 Governing Law. This Agreement shall have Florida as its situs and shall
be governed by and construed in accordance with the laws of the State
of Florida, without reference to choice of laws. The parties agree that
this Agreement excludes the application of the 1980 United Nations
Convention on Contracts for the International Sale of Goods, if
otherwise applicable.
8.16 INTENTIONALLY DELETED.
IN WITNESS WHEREOF, the parties have each caused this Agreement to be
signed and delivered by its duly authorized officer or representative as of the
Effective Date.
DRAGON SYSTEMS INC. TECH DATA PRODUCT
MANAGEMENT, INC.
By: \s\ ▇▇▇▇▇ ▇. ▇▇▇▇▇ By: \s\ ▇. ▇. ▇▇▇▇▇▇▇▇
------------------------- ----------------------------------
Printed Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇ Printed Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------- -------------------------
Title: President Title: Senior Vice President, Marketing
---------------------- --------------------------------
Date: 16 June 1997 Date: June 26, 1997
----------------------- ---------------------------------
-17-
18
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SCHEDULE 5.7
CO-OP GUIDELINES
To increase the effectiveness of advertising and sales promotions Tech Data has
developed the following advertising requirements:
HOW CO-OP IS EARNED:
- Co-op dollars will be at least [**]% of the purchases made by Tech Data, net
of returns.
- Co-op dollars will be accrued on a monthly basis.
HOW CO-OP IS SPENT:
- Tech Data will obtain Vendor's prior approval for all co-op expenditures.
- Tech Data will be reimbursed for [**]% of the cost for ads or promotions that
feature Vendor products.
- Co-op dollars will be used within the [**] months immediately following the
month in which they are earned.
HOW CO-OP IS CLAIMED:
- Claims for co-op will be submitted to vendor within [**] days of the event
date.
- Claims for co-op will be submitted with a copy of vendor prior approval and
proof of performance.
- Payment must be remitted within [**] days of the claim date, or Tech Data
reserves the right to deduct from the next invoice.
CO-OP REPORTING:
- Vendor will submit a monthly co-op statement outlining (i) co-op earned, (ii)
co-op used and (iii) co-op claims paid.
Accepted:
\s\ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
Date: 16 June 1997
-18-
19
SCHEDULE 6.2
PENDING LITIGATION AGAINST DRAGON SYSTEMS:
Excerpt taken from letter sent by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Manager - Business Affairs,
via fax to ▇▇▇▇ ▇. ▇▇▇▇, ▇▇. on May 21, 1997:
"We need to make you aware of a counter lawsuit the Apple has extended to
Dragon, because one of Dragon's affiliates, Articulate Systems, whose product
Dragon distributes (Power Secretary), had sued Apple. The counter suit claims a
violation in the user interface because of the use of pull-down menus, which are
of course widely used in the industry. Our lawyers assure us that we have a
strong position in this, but since it has not been resolved to-date, we are
making you aware of this."
-19-
20
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
DRAGON SYSTEMS
Discount Schedule
SRP Range in US$ Discount Rebate Prepay Discount
[**] [**] [**] [**]
Dragon Systems Confidential Do Not Distribute 06/06/97
This information is believed to be accurate as of its publication date; such
information is subject to change without notice. Dragon Systems is not
responsible for any inadvertent errors.
-20-
21
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
DRAGON SYSTEMS
Price List
PRODUCT NAME DESCRIPTION PART NUMBER SRP Price Price
DragonDictate Singles -CD/VXI Dictate into Single App, Internet ▇▇-▇▇▇-▇▇-▇▇ [**] [**]
& more
DragonDictate Personal Edition -CD 10,000 active word vocabulary ▇▇-▇▇▇-▇▇-▇▇ [**] [**]
ROM/VXI Microphone Dictate into virtually any
Windows App
DragonDictate Personal Edition - 10,000 active word vocabulary ▇▇-▇▇▇-▇▇-▇▇ [**] [**]
Diskettes/VXI Microphone Dictate into virtually any
Windows App
Text to Speech Option Converts written text to Speech ▇▇-▇▇▇-▇▇-▇▇ [**] [**]
Upgrade from Dragon Singles to Upgrade allows users to dictate ▇▇-▇▇▇-▇▇-▇▇ [**] [**]
Personal Edition CD/no Microphone into any virtually app & the
ability to edit/create macros
Dragon Dictate Classic Edition - 30,000 active word vocabulary ▇▇-▇▇▇-▇▇-▇▇ [**] [**]
CD Version /VXI Microphone Dictate into virtually any
Windows App
Dragon Dictate Power Edition - 60,000 active word vocabulary ▇▇-▇▇▇-▇▇-▇▇ [**] [**]
CD Version /VXI Microphone Dictate into virtually any
Windows App
Power Secretary Personal Edition Dictate into WordPerfect only CD-04000-WP [**] [**]
for WordPerfect - CD ROM 32,000 Active Word Vocabulary
Power Secretary Personal Edition for Dictate into ClarisWorks only CD-04001-CW [**] [**]
ClarisWorks - CD ROM 32,000 Active Word Vocabulary
Power Secretary Personal Edition for Dictate into MS Word only CD-04002-MW [**] [**]
MS Word - CD ROM 32,000 Active Word Vocabulary
Power Secretary Personal Edition for Dictate FileMaker Pro into only CD-04003-FM [**] [**]
FileMaker Pro - CD ROM 32,000 Active Word Vocabulary
Power Secretary Power Edition Dictate into many Macintosh CD-05000-PS [**] [**]
CD ROM Applications 60,000 Active
Word Vocabulary
Power Secretary MED Edition Dictate into many Macintosh CD-08000-MD [**] [**]
CD ROM Applications 60,000 Active
Word Vocabulary; Medical Terms
Dragon Systems Confidential Do Not Distribute 06/06/97
This information is believed to be accurate as of its publication date; such
information is subject to change without notice. Dragon Systems is not
responsible for any inadvertent errors.
-21-
22
MODIFICATION to the
SOFTWARE DISTRIBUTION AGREEMENT
BETWEEN TECH DATA PRODUCT MANAGEMENT, INC., AND DRAGON SYSTEMS, INC.
This Modification Agreement (the "Agreement"), effective as of the 26 day of
June, 1997 (the "Effective Date"), is between Tech Data Product Management,
Inc., a Florida corporation ("Tech Data") and Dragon Systems, Inc., a Delaware
corporation ("Dragon Systems").
RECITALS
A. Tech Data and Dragon Systems entered into a Software Distribution
Agreement dated June 26, 1997, (the "Original Agreement"), pursuant to
which Tech Data acts as a distributor of Dragon Systems products.
B. Tech Data and Dragon Systems desire to modify certain terms in the
Original Agreement in accordance with this Agreement.
C. Unless otherwise defined herein, all capitalized terms shall have the
same meaning ascribed thereto in the Original Agreement.
NOW THEREFORE, in consideration of mutual promises herein contained and other
good and valuable consideration, Tech Data and Dragon Systems hereby agree as
follows:
1. Modification. The Original Agreement is hereby modified and amended as
stated in this section.
(a) Section 3.2 of the Original Agreement is hereby revised in its
entirety to read as follows:
Title and Risk of Loss. FOB Dragon Systems warehouse.
Title and risk of loss or damage to Products shall
pass to Tech Data at the time the Product are
delivered to the common carrier. Dragon Systems and
Tech Data agree that no title or ownership of the
proprietary rights to any software code is
transferred by virtue of this Agreement
notwithstanding the use of terms such as "purchase",
"sale" or the like within this Agreement. Dragon
Systems retains all ownership rights and title to any
software code within the Products.
(b) Section 5.2 of the Original Agreement is hereby revised in its
entirety to read as follows:
-22-
23
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Payment. Except as otherwise set forth in this Agreement, any
undisputed sum due to Dragon Systems pursuant to this Agreement shall
be payable as follows: [**], net sixty (60) days after the invoice
receipt. Dragon Systems shall invoice Tech Data no earlier than the
applicable shipping date for the Products covered by such invoice.
Products which are shipped from outside the United States, shall not be
invoiced to Tech Data prior to the Products being placed on a common
carrier within the United States for final delivery to Tech Data. The
due date for payment shall be extended during any time the parties have
a bona fide dispute concerning such payment.
2. Ratification. Except as expressly modified herein, the parties hereby
ratify and affirm all terms and conditions of the Original Agreement,
which terms and conditions remain in full force and effect as
originally agreed to by the parties unless otherwise modified or
amended in a signed writing.
IN WITNESS WHEREOF, each party has signed this Agreement on the day and year
written above effective as of the Effective Date.
DRAGON SYSTEMS, INC. TECH DATA PRODUCT MANAGEMENT, INC.
a Delaware corporation a Florida corporation
By: \s\ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: \s\ ▇. ▇. ▇▇▇▇▇▇▇▇
------------------------- --------------------------------
Printed Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Printed Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------- --------------------------------
Title: Vice President - Finance Title: Senior Vice President, Marketing
------------------------- --------------------------------
Date: 5/7/98 Date: 5/11/98
------------------------- --------------------------------
-23-