Distribution Agreement - Avanticorp Hong Kong

EX-10.19 7 f76852ex10-19.txt DISTRIBUTION AGREEMENT - AVANTICORP HONG KONG DISTRIBUTION AGREEMENT Exhibit 10.19 This Distribution Agreement (the "Agreement") is entered as of October 1, 2000 and made between AVANTICORP. HONG KONG LIMITED (the "Company"), with its principal place of business at Room 1006, Bank of American Tower, 12 Harcourt Road, Hong Kong, and DAVANTECH CO. (the "Distributor"), with its principal place of business at 7th, Duam, #174-6, Seokchon-Dong, Songpa-ku, Korea, 138-190: RECITALS: A. The Company has obtained an exclusive license in the distribution (via sub-licensing) of certain Avant! software-based electronic design automation products, including documentation and manuals therefor. B. The Company wishes to appoint the Distributor as an exclusive distributor and Distributor wishes to acquire from the Company the right to distribute, market and support such products in the Territory (as defined below). NOW IT IS HEREBY AGREED AS FOLLOWS: 1. DEFINITIONS In this Agreement, the following terms shall have the following meanings: "CONFIDENTIAL INFORMATION" includes information which the Company has maintained as confidential and revealed to the Distributor and which may or may not be related to the Products including but not limited to: technical information such as computer programs, characterization, formulae, algorithms, process, performance, interface information, proprietary command architecture, proprietary scheme constructs, including commands, format, syntax and semantics, defects, bugs, proprietary circuit behavior information, the Company supplied data, circuit and logic elements and business information, including confidential future product information, confidential basic concepts, marketing and sales information, sales volume, pricing and accounting information. Confidential Information shall also include oral information disclosed by the Company to the Distributor pursuant to this Agreement, provided such information is summarized in writing and is clearly marked with the Company's name and "Confidential" or similar proprietary marking and delivered to the Distributor within thirty (30) days of disclosure. Confidential Information does not include information which: (i) has come into the public domain without breach of the confidence by the Distributor or any other person, firm or entity; (ii) is or becomes publicly known through no wrongful act of the party to whom such information was disclosed; (iii) is received by the Distributor from a third party without restrictions on its use in favor of the Company or a licensor of the Company; 1 (iv) is independently developed by the Distributor's employee, agent or contractor without use of Confidential Information; (v) is acknowledged in writing by the Company to be non-confidential; or (vi) is required to be disclosed pursuant to any statutory requirement or court order (except that the Distributor shall give the Company prompt notice of such statutory requirement or court order such that the Company may request protection therefrom). "DOCUMENTATION" means the user guides, instruction manuals, tutorials, on-screen user assistance available in the operation of the Software and other documents whether in written or machine-readable form issued by the Company from time to time for the Use of the Software; "END USER" means a customer who has signed an End User License Agreement; "END USER LICENSE AGREEMENT" means the End User Software and Service License Agreement provided by the Company from time to time; "INTELLECTUAL PROPERTY RIGHTS" means all designs patents, copyrights, inventions, enhancements, revisions, updates, adaptations, secret and confidential information, know-how, technical data, trade secrets, specifications, designs, whether or not in documentary form, functional and detailed design specifications and all other intangible property (whether or not in documentary form and whether or not registrable, patentable, copyrightable for otherwise protectable under applicable laws) relating to the Products; "M&S SERVICES" means the maintenance and support services to be provided by the Distributor pursuant to Clause 7 herein; "MINIMUM PURCHASE COMMITMENT" means the value of minimum [quarterly/annual] licensing commitment of Products and M&S Services as set out in Attachment A; "MULTINATIONAL CUSTOMERS" shall mean customers who use the Products concurrently both within and outside the Territory, including use of the Products on a wide area network; "NET LICENSING REVENUE" means the gross fee for any Product and fees for any purchased M&S Services recognised by the Distributor under US GAAP, less any direct costs (including but not limited to discounts to Distributors as set out in Exhibit B, warehousing allowances, insurance and transportation charges, taxes, rebates, cancellations and returns). The Net Licensing Revenue shall not include any interest or finance charges; "PRODUCTS" means the Software together with the corresponding Documentation; 2 "RECOMMENDED PRICE LIST" means the list setting out the Recommended Price for the Products and M&S Services to be charged by the Distributor to the End Users; "REVISIONS" means upgrades, error corrections and updates of the Software in object code form made generally available to End Users of the Software. "SOFTWARE" means the computer software programs in object code form only as set out in Attachment C; "TERM" means the term as set out in clause 18; "TERRITORY" means the territory as set out in Attachment D; "TRADE MARK" means any trade mark, service mark, trade name, symbols and logos owned or authorized to be used by the Company; "USE" means in relation to the Software, its loading, displaying, running, transmission or storage for the purpose of processing the instructions contained in the Software. 2. APPOINTMENT 2.1 Subject to the terms of this Agreement, the Company hereby grants to the Distributor and the Distributor hereby accepts an exclusive right to: (i) market and distribute the Products to End Users (by way of sub-license) solely for use in the Territory; (ii) install the Products for End Users; and (iii) provide M&S Services to End Users. No source code for the software will be deemed as included, by inference or otherwise, in the License granted by this Agreement. The Company shall not appoint any person or entity other than the Distributor as its distributor, representative or agent, excluding OEM's or VAR's for the distribution of Products in the Territory. 2.2 (i) Subject to applicable terms and conditions, including fees, to be agreed on a case by case basis, the Distributor hereby grants the Company (or its other distributors as the case may be) a non-exclusive right within the Territory for the Term of this Agreement to: (a) distribute the Products directly to End Users; and (b) grant such End Users the right to use the Products. For purpose of this Clause, End Users shall be Multinational Customers of the Company or its other distributors (as the case may be). 3 (ii) Where the Multinational Customer is an End User of the Distributor subject to applicable terms and conditions, including fees, to be agreed on a case by case basis, the Company hereby grants, and/or shall use reasonable commercial effort to procure any relevant third party to grant, the Distributor a non-exclusive right outside the Territory for the Term of this Agreement to (a) distribute the Products directly to such Multinational Customers; and (b) grant such Multinational Customer the right to use the Products. 2.3 An End User within the Territory, who desires to have the right to use the input/output, ("I/O") format files of the Products in order to develop and distribute an interfacing product between the Product(s) and third parties' software programs solely for use within End User's internal design flow, may submit a request to the Distributor. The Distributor will forward such request to the Company. The Company has the sole discretion in deciding whether or not to grant such right and terms and conditions attached to such right if granted. 2.4 The Company reserves the right to change, modify or discontinue any of the Products at any time provided that the Distributor is given ninety (90) days prior written notice. Any Revision, enhancement or improvement of a Product that is generally made available by the Company, that is substantially similar to such Products and that is marketed under the same product number and nomenclature as such Product shall be added to Attachment C as a new Product. In addition to the foregoing, any products developed by the Company other than the substantially similar products referenced above, shall be considered as a new product and the Company shall decide whether the Distributor is authorized to distribute this new product; provided, however, that if any such new product is competitive with any non-Company products that Distributor is distributing, Distributor shall have thirty (30) days to decide whether to distribute Company's new product, or the non-Company product Distributor is then currently distributing. If Distributor decides to distribute the non-Company product, then Distributor, for the remainder of the term of this Agreement, will be a non-exclusive Distributor of the Products and Company shall, at its discretion, appoint other distributors, representatives or agents for the distribution of Products in the Territory. The Distributor shall have the right and freedom to distribute any non-competitive software products or services. 2.5 All rights not expressly granted are hereby reserved by the Company. 3. RESTRICTIONS ON THE APPOINTMENT 3.1 The Distributor may only distribute the Products to persons and entities located and taking delivery within the Territory (except for Multinational Customers pursuant to Clause 2.2 above). 4 3.2 The Distributor shall not tamper with the packaging of the Products and shall only sub-license the Products as packaged by the Company. 4. LICENSE TO DISTRIBUTOR 4.1 This Agreement shall operate as a limited and non-transferable License for the Distributor to Use [ten (10)] copies of the Products for demonstration, internal training, testing, providing M&S Services. The Distributor may make a single copy of each Product for archival purposes. 4.2 Except as provided in Clause 4.1, Distributor may not use the Products for its own internal use without prior written permission of the Company. 5. LICENSE TO END USER 5.1 The Distributor shall ensure that each customer has executed an appropriate End User License Agreement for the Products as provided by the Company. Any changes to the End User License shall require prior written consent from the Company. 5.2 The Distributor shall obligate each End User, by execution of the End User License Agreement, not to: (i) create or attempt to create by reverse engineering or otherwise, the source code or internal structure of the Products or any part thereof from the object code or from the information available to it; (ii) modify, amend, add to or in any way alter any Product supplied to it under the End User License Agreement; and (iii) make any copy of the Products without the prior consent of the Distributor (except one copy thereof for archival purpose). 6. RESPONSIBILITIES OF DISTRIBUTOR 6.1 The Distributor shall meet its Minimum Purchase Commitment to the Company during the Term of this Agreement. 6.2 The Distributor shall continuously maintain adequate resources and equipment and a fully dedicated team of experienced and competent sales, marketing and technical employees to fulfill the obligations of the Distributor hereunder. The Distributor shall comply with all certification requirements of its technical staff as requested by the Company. 6.3 The Distributor shall provide M&S Services to End Users pursuant to Clause 7 below. 6.4 The Distributor shall conduct business at all times in an honest and straightforward manner and make its best effort to achieve high customer satisfaction. 5 6.5 The Distributor may not appoint any sub-distributor or sub-contract any third party to perform its obligations under this Agreement without the prior written approval of the Company. 7. M&S SERVICES 7.1 During the Term of the Agreement, the Distributor shall: (i) provide End Users with upgrades, error corrections and Revisions of the Products as and when they become available from the Company; (ii) provide training for any End Users regarding the installation and Use of the Products; and (iii) promptly replace any corrupted or damaged Product. 7.2 The Distributor shall charge the End User a fee for the performance of the M&S Services according to the Recommended Price List. The Distributor shall pay to the Company for the M&S Services pursuant to Clause 9. 7.3 The Distributor shall only provide M&S Services and training to End Users by qualified or certified staff as required by the Company. 7.4 The Company shall provide reasonable assistance to the Distributor in its provision of M&S Services on an "AS AVAILABLE" basis. The Company reserves the right to charge for the support it agrees to provide to the Distributor and the Distributor may reject such offer. It is expected that the Distributors shall use its best efforts to familiarize itself with the Products and such that the assistance to be provided by the Company will be minimal. 7.5 The Company shall provide the Distributor with Revisions, and reserves the right to charge for the Revisions. The Distributor shall be responsible to distribute the Revisions to End Users that are receiving M&S Services. 8. ORDERING AND DELIVERY OF THE PRODUCTS 8.1 Distributor shall furnish its order sheet for the purchase of the Products to Company. Such order shall be binding upon the parties hereto unless Company otherwise notifies Distributor in writing within seven (7) days after the Company's receipt of such order. In the event of any discrepancy between the provisions of this Agreement and any order, unless expressly approved in writing signed by both parties, the provisions of this Agreement shall prevail. 8.2 Products are delivered F.O.B. Korea from the Company's applicable warehouse or place of production to Distributor. During the term of this Agreement, subject to the other terms and conditions of this Agreement, Company will use its reasonable efforts to deliver (by full or partial shipment) the Products within three (3) days from receipt of written orders, which are accepted by Company at its main office, or at Distributor specified shipment dates insofar as practical 6 and consistent with Company's then current lead-time schedule, shipping schedule, access to supplies on acceptable terms and allocation of available products and capacity among Company customers. 8.3 The Company shall be entitled to select the carrier and the method of shipment of all Products hereunder and the Distributor shall be responsible for all shipping costs and insurance premiums. Risk of loss shall pass to the Distributor upon delivery of the Products to the carrier. 8.4 The Company shall accept unlimited returns of defective media of Products. 9. BILLING AND SETTLEMENT PROCEDURES 9.1 (a) For each unit of Products or M&S Services distributed in the Territory, the Distributor shall pay to the Company the Net Licensing Revenue. The Company shall issue invoice(s) to the Distributor for the total Net Licensing Revenue payable. Payment shall be made by the Distributor in US dollars within ninety (90) days after the Net Licensing Revenue has become "recognized revenue" to the Distributor in accordance with United States generally accepted accounting principles. For special cases and upon mutual agreement, the parties may extend the credit period from the said ninety (90) days to one hundred and eighty (180) days. The payment amount and the discount are based on a fixed exchange rate that is specified in Attachment B. (b) In the event that the exchange rate exceeds +/- five percent (5%) the effect of such excess shall be borne equally by Company and Distributor. By way of example, if the fixed exchange rate is 105 won to 1 dollar the Distributor shall make payment based on an exchange rate of 110 won to one (1) dollar, (10/2 = 5; 5 + 105 = 110). By way of further example, of the fixed exchange rate is 105 won to one (1) dollar and the exchange rate on the date the customer pays the Distributor is between 99 to 111 won to one (1) dollar the Distributor will make payment based on an exchange rate of 105 won to one (1) dollar. Company and Distributor shall review the fixed exchange rate annually and mutually agree on a fixed exchange rate for the following year. If the parties do not review the fixed exchange rate or do not agree on a new fixed exchange rate, then the fixed exchange rate for the prior year will remain in effect. 9.2 If the Distributor exceeds its Minimum Purchase Commitment to the Company by at least 50% via large volume purchase or Corporate Partnership (i.e. minimum US$1M per order), the Company shall consider to grant additional discount amount for Products to Distributor, if the Distributor exceeds its Minimum Purchase Commitment by at least 50% via aggregate of small volume purchases, no additional discount for Products will be considered. 9.3 The discounts set forth in Attachment B shall be reviewed every year by the parties hereto. Notwithstanding the above, the Company reserves the right to revise the said discounts, the Net Licensing Revenue and the Recommended 7 Price List at any time upon giving the Distributor thirty (30) days advance notice in writing; provided that in no event should the discounts be less than 20% off the Recommended Price in the Recommended Price List; Provided further that for M&S Services, the parties shall negotiate in good faith an appropriate increase or decrease in price. New Price changes will apply to all orders made after such notice period. 9.4 The Distributor shall be responsible for paying all charges, including without limitation transportation charges and insurance premiums, and all local import duties, value added taxes, service taxes and all other taxes, duties and government assessments relating to the distribution of Products and the supply of M&S Services in the Territory. 9.5 All payments required to be made to the Company hereunder shall be made without any withholding tax unless such withholding is required by any applicable law. If the Distributor is required by law to make such withholding from any such payment, the relevant sum payable by the Distributor shall be increased to the extent necessary to ensure that, after the making of such withholding, the Company receives and retains (free from any liability in respect of any such deduction or withholding) a net sum equal to the sum which it would have received and so retained had no such withholding been made or required to be made. 10. CONFIDENTIAL INFORMATION 10.1 Upon execution of this Agreement, the Company may disclose to the Distributor Confidential Information for which the Distributor has a need to know under this Agreement. Without obtaining the Company's prior written consent, the Distributor shall not copy or duplicate any Confidential Information by any means or technique. Except as specifically provided in this Agreement, the Distributor shall not acquire any right, title or interest in or to any Confidential Information or any files, lists, records, documents, drawings, specifications, equipment, or other tangible things that incorporate or refer to all or a portion of the Confidential Information. 10.2 Unless with the prior written consent of the Company the Distributor shall not disclose or facilitate disclosure of such Confidential Information to any person, firm or entity except its employees, agents or consultants who have a need-to-know. The Distributor shall take all steps necessary or appropriate to protect the Confidential Information against unauthorized disclosure and misappropriation, including, without limitation, causing all persons, firms and entities with access to any Confidential Information to enter into a confidentiality agreement in a form acceptable to the Company. The Distributor shall use the standard of care generally appropriate for the industry (but no less than reasonable care) in order to avoid unauthorized disclosure or misappropriation of such Confidential Information. 10.3 The Distributor shall refrain from using or exploiting any and all Confidential Information for any purposes or activities other than those expressly provided 8 in this Agreement or any other written agreement entered into by and between the parties 10.4 The Distributor understands and agrees that the Confidential Information constitutes valuable business assets of the Company and/or its licensor, the unauthorized use or disclosure of which may irreparably damage the Company and/or its licensor. In the event of breach of confidence or threatened violation of its obligations under this Clause 10 by the Distributor, the Company shall be entitled to an injunction restraining the Distributor from breaching this Agreement. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened violation, including recovery of direct and consequential damages from the Distributor. 11. INTELLECTUAL PROPERTY RIGHTS 11.1 The Distributor acknowledges that the Company is the exclusive owner or authorized licensee of the Intellectual Property Rights. The Distributor shall not at any time do or cause to be done, and shall exercise its best efforts to ensure that none of its representatives does or causes to be done, any act impairing or tending to impair any part of any right, title or interest of the Company or its licensor in or to any Intellectual Property Rights provided, however, that any challenge of the validity of any item or part of the Intellectual Property Rights in a legal proceeding shall not be considered to be an act tending to impair said right, title or interest. With the exception of the rights expressly licensed under this Agreement, the Distributor shall not acquire any right, title or interest to or in the Intellectual Property Rights, or any invention, improvement or development based thereon. The Distributor further agrees that the Company shall have any and all right title and interest in and to any suggested modifications, design changes or improvements of the Products, without payment of any additional consideration therefore either to the Distributor, or its employees, agents or customers. 11.2 The Distributor shall at all times conduct business only in its own name and shall not use any Intellectual Property Rights as part of its business name. 11.3 The Distributor agrees that, as a condition of the rights granted under this Agreement and except as otherwise expressly and unambiguously authorized hereunder, it shall not: (i) create or attempt to create, by reverse engineering or otherwise, the source code or internal structure of the Products or any part thereof from the object code or from the information made available to it; (ii) modify, amend, add to or in any way alter any Product supplied to it under this Agreement; (iii) remove any product identification or notices of any confidential or copyright restrictions from the Products or any Documentation; 9 (iv) list or otherwise display or copy the object code of any Product; or (v) copy the Products, develop any derivative works thereof or include any portion thereof in any other software program; (vi) prior to disposing of any media or apparatus, to destroy completely any proprietary information or Confidential Information contained therein. 11.4 The Distributor agrees that it shall not use the Intellectual Property Rights except in conjunction with the marketing and distribution of the Products and the supply of the M&S Services, and in accordance with any guidelines as may be issued by the Company from time to time and the terms of this Agreement. The Company reserves the right to require the Distributor to submit to the Company for prior approval any and all advertising and sales literature of the Distributor that refers to the Products, or otherwise includes any Intellectual Property Rights. The Distributor shall make all modifications to the advertising and sales literature deemed necessary by the Company. 11.5 The Distributor's right to use the Intellectual Property Rights pursuant to Clause 11.4 shall cease upon termination of this Agreement. 11.6 (i) The Distributor agrees that it shall immediately notify the Company of any claims or objections, or indications of claims or objections, that use of the Intellectual Property Rights by the Distributor may or will infringe the proprietary rights of a third party. (ii) The Distributor agrees that it shall immediately notify the Company of any infringement, illegal use or misuse by third parties of the Intellectual Property Rights. Upon notification by the Distributor of any infringement, illegal use or misuse by third parties of the Intellectual Property Rights or upon the Company otherwise learning of such infringement, illegal use or misuse by third parties, the Company has the right and sole discretion, but not the duty, to initiate any proceeding relating to the protection of the Intellectual Property Rights. Should the Company make such an election to initiate proceedings, the Company shall bear the full burden of expenses for such proceedings and shall also take the full benefit, if any, of such proceedings. Furthermore, in the event the Company should make such an election, the Distributor shall provide all necessary assistance required by the Company. The Distributor shall be kept fully informed of the proceedings but the Company shall retain full control of the proceedings. 12. USE OF TRADE MARKS 12.1 The Distributor shall not acquire any right to or interest in any Trade Marks. The Distributor may only use the Trade Marks in carrying out its licensed activities under this Agreement, and then only provided that ownership of such Trade Marks is clearly attributed to the Company or its licensor(s). 10 12.2 The Distributor acknowledges and agrees that the Company is the owner and/or licensee of the Trade Marks and that all goodwill arising out of use of the Trade Marks by the Distributor pursuant to this Agreement shall inure to the Company. The Distributor shall not at any time or in any way indicate ownership of or any right in the Trade Marks and shall not contest the right of the Company and/or its affiliates to the use of any of the Trade Marks. The Distributor shall not, and shall not have the right to, register, or apply for registration, anywhere in the world, directly or indirectly, any trade mark, service mark, trade name, copyright, company name or other proprietary or commercial right which is confusingly similar to the Trade Marks or take any other action that jeopardizes the Company's proprietary rights in the Trade Marks. 12.3 The Distributor shall at all times conduct business only under its own name and may not use any of the Trade Marks as part of its business name. 12.4 The Distributor shall not attach, remove or disfigure any Trade Marks on the media containing the Product (or that appear as the result of executing the Product) nor attach any additional marks to the media containing the Product except as otherwise agreed by the Company in writing. 12.5 The Distributor agrees not to alter, remove or obscure any copyright or other proprietary notices on or in the media containing the Product (or that appear as the result of executing the Product) or related documentation or materials. 12.6 The Company reserves the right to require the Distributor to submit to the Company for prior approval any and all advertising and sales literature of the Distributor that refers to the Company, to the Products, or otherwise includes any of the Trade Marks. The Distributor shall make all modifications to the materials deemed necessary by the Company to protect the goodwill associated with the Trade Marks. The Distributor shall also comply with any guidelines relating to use of the Trade marks as may be furnished to the Distributor and revised by the Company from time to time. 12.7 The Distributor's right to use the Trade Marks shall immediately cease upon termination or expiration of this Agreement. 13. COMPANY COVENANTS AND REPRESENTATIONS The Company represents and agrees to: 13.1 provide such assistance the Distributor in its marketing programs as the Company thinks fit; 13.2 fulfill orders accepted by the Company for the Products in accordance with this Agreement; 13.3 notify the Distributor as soon as practicable regarding the release of new or revised Products; 11 13.4 furnish the Distributor with forty (40) sets of marketing materials at no charge, and to provide additional copies at cost; 13.5 provide Distributor with timely responses regarding plans to correct bugs and enhance the products; 13.6 send one Company application engineer to Distributor during the earlier stages of the Product release for at least one week to provide Distributor with additional support; the terms and timing of this support will be mutually agreed upon; 13.7 provide a mutually agreed upon Field Application Engineer's Qualification Program including training, performance evaluation, and correction actions; 13.8 visit Korea at least once each quarter and conduct face to face meetings with both the Distributor and customer to understand, evaluate and advise the Distributor; and 13.9 provide the Distributor with a reasonable number of demonstration or customer evaluation copies of the Product for customer purchase evaluations at no charge to the Distributor. 14. DISTRIBUTOR COVENANTS AND REPRESENTATIONS The Distributor represents and agrees: 14.1 to provide the Company with (a) two-quarter rolling forecast by the end of each calendar quarter, (b) monthly sales forecast update by the end of each month and (c) weekly sales prospects when possible; 14.2 to use its best efforts to market and distribute the Products (including without limitation, inclusion of the Products in the Distributor's catalogs and other promotional materials) and provide M&S Services (including installation, training and other customer support) on a continuing basis and to comply with good business practices and all laws and regulations relevant to this Agreement or the subject matter hereof; 14.3 to keep the Company informed as to any problems encountered with the Products and any resolutions arrived at for those problems, to participate in management reviews, and to communicate promptly to the Company any and all modifications, design changes or improvements of the Products suggested by any End User, employee or agent; 14.4 not to incur any liability on behalf of the Company or in any way pledge or purport to pledge the Company's credit or purport to make any contract binding upon the Company; 14.5 immediately bring to the attention of the Company any information received by the Distributor which is likely to be of interest, use or benefit to the Company in relation to the marketing and/or support of the Products; 12 14.6 to keep full, proper and up to date books of accounts and records showing clearly all inquiries, transactions, proceedings and End User calls relating to the Products and will allow a duly authorised representative of the Company to have access to the said books and records and take such copies thereof as such representatives may require; 14.7 that neither this Agreement (or any term hereof) nor the performance of or exercise of rights under this Agreement is restricted by, or contrary to, in conflict with any prior obligations of the Distributor to any third parties; 14.8 to provide Company Operations VP with written account activity report (including account situation, activity planning and change, technical support, customer requests, travel plans etc.) at the end of each month; 14.9 to arrange face-to-face meeting between major account executives (Division General Manager level or above, i.e., above Director level) with Company President and CEO minimum once each quarter; 14.10 to qualify all Distributor Application Engineers through Field Application Engineers Qualification Program developed by Company; 14.11 to communicate with the Company through the defined official communication channels to Company Operations VP when necessary; 14.12 to attend Company's annual Sale Meeting at the Company's designated location at the Distributor's expense. The Distributor shall make strong efforts to visit the Company in US on a regular basis to maintain good communication; and 14.13 that neither this Agreement (or any term hereof) nor the performance of or exercise of the rights under this Agreement, is restricted by, contrary to, in conflict with, ineffective under, or affects the Company's proprietary rights (or the duration thereof) under, or will required any termination payment or compulsory licensing under, any law or regulation of Korea. The Distributor shall making any filings required under Korean laws and regulations. 15. WARRANTY 15.1 The Company warrants that the program media of each Product will materially conform to the then current Documentation for three (3) months after it is delivered to an End User, provided the Products are maintained to the Company's maintenance recommendation and in a manner specified by the Company. The Company shall replace any defective media within such period, provided the Distributor bears the cost of freight and insurance to the point of repair. The company will bear the cost of freight and insurance for the return of the Products to the Distributor. 13 15.2 The Distributor will handle and be responsible for all warranty returns from its End Users. The Company will bear the costs of freight and insurance for the return of goods to Distributor. 15.3 The Company does not warrant that it will be able to correct all programming errors or other problems encountered by the Distributor and the End Users. If Company cannot, or determines that it is not practical to repair or replace the returned Product, the price therefor paid by Distributor shall be refunded. 15.3 THE COMPANY AND ITS SUPPLIERS MAKE NO OTHER WARRANTIES WITH RESPECT TO THE PRODUCTS OR ANY SERVICES AND HEREBY DISCLAIM ALL OTHER WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, TITLE, COURSE OF DEALING, USAGE OR ERROR FREE OPERATION. 15.4 The above warranty does not extend to any Product that is modified, or altered, is not maintained to the Company's maintenance recommendations, is operated in a manner other than that specified by the Company, has its serial number removed or altered or is treated with abuse, negligence or other improper treatment (including, without limitation, use outside the recommended environment). The Distributor's sole remedy with respect to any warranty or defect is as stated above. The Distributor is fully responsible for satisfaction of its customers and will be responsible for all claims, damages, settlements, expenses and attorney's fees incurred by the Company with respect to the Distributor's claims or representations regarding the Products beyond Company's above warranty obligations to the Distributor. 16. INDEMNIFICATION 16.1 The Company shall hold the Distributor harmless from any third party claims for damages and settlements, including reasonable attorneys' fees and expenses related thereto, resulting from infringement by the Products of any United States or Korea patent or any United States or Korea copyrights, provided the Company is promptly notified of any and all threats, claims and proceedings related thereto and given reasonable assistance by the Distributor and the opportunity to assume sole control over the defense and all negotiations for a settlement or compromise; the Company will not be responsible for any settlement it does not approve in writing. Notwithstanding the foregoing, the Company is not liable to any claims of infringement of a patent or copyright in which Distributor or any affiliate of Distributor has an interest or license. 16.2 If all or any part of the Products is, or in the opinion of the Company, may become, the subject of a claim or suit of infringement, the Company may: (i) secure the right of the Distributor, or End Users to continue Using the Products; (ii) modify the Products to render them non-infringing; or 14 (iii) reimburse the Distributor the Net Licensing Revenue paid to the Company for such infringing Products. THE FOREGOING IS THE EXCLUSIVE REMEDY FOR DISTRIBUTOR AND IS IN LIEU OF ANY WARRANTIES OF NON-INFRINGEMENT, WHICH ARE HEREBY DISCLAIMED. 16.3 The foregoing obligation of the Company does not apply with respect to Products or portions or components thereof: (i) not supplied by the Company; (ii) made in whole or in part in accordance to the specifications of the Distributor or End User if the alleged infringement is caused by such specifications; (iii) which are modified (other than by the Company) after shipment by the Company, if the alleged infringement relates to such modification; (iv) combined with other products, processes or materials where the alleged infringement relates to such combination; (v) where the Distributor and/or End Users continue allegedly infringing activity after being notified thereof or after being informed of modifications that would have avoided the alleged infringement; (vi) where the use of the Product is incident to an infringement not resulting primarily from the Product; or (vii) where the Product is used in an application or environment for which such Product was not designed, or where the use is not strictly in accordance with the pertinent directions. 16.4 The Distributor shall hold the Company harmless from and shall indemnify the Company and its officers, directors, agents and employees from all damages, settlements, attorney's Fees and expenses related to a claim caused by the Distributor's act, omission, misconduct, negligence or breach of any term of this Agreement. 17. LIMITED LIABILITY EXCEPT AS PROVIDED IN CLAUSE 16 ABOVE, NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, THE COMPANY AND ITS SUPPLIER WILL NOT BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR (I) ANY AMOUNTS IN EXCESS IN THE AGGREGATE OF THE AMOUNTS PAID TO THE COMPANY HEREUNDER DURING THE EIGHTEEN 15 MONTH PERIOD PRIOR TO THE DATE THE CAUSE OF ACTION AROSE; OR (II) ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOST PROFITS OR LOST OR INACCURATE DATA, EVEN IF THE COMPANY OR ITS SUPPLIERS HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; OR (III) COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES. THE COMPANY SHALL HAVE NO LIABILITY FOR ANY FAILURE OR DELAY DUE TO MATTERS BEYOND ITS REASONABLE CONTROL. THE DISTRIBUTOR HEREBY ACKNOWLEDGES THAT THE MUTUAL COVENANTS AND AGREEMENTS SET FORTH IN THIS AGREEMENT REFLECT THIS ALLOCATION OF RISK. 18. TERM AND TERMINATION 18.1 Subject to Clause 18.2 below, this Agreement shall be for a non-cancelable term up to 31 December, 2007. Thereafter, this Agreement shall be renewed automatically for successive periods of five (5) years unless either Party notifies the other Party of its intention not to renew at least six (6) months prior to the expiration of the then current term of this Agreement. 18.2 This Agreement may be terminated by a party for cause immediately by written notice upon the occurrence of any of the following events: (i) if the other ceases to do business, or otherwise terminates its business operations or if there is a material change in control of the other; or (ii) if the other breaches any material provision of this Agreement and fails to cure such breach within 30 days of written notice describing the breach; or (iii) if the other shall fail to promptly secure or renew any license, registration, permit, authorization or approval for the conduct of its business in the manner contemplated by this Agreement of any such license, registration, permit, authorization or approval is revoked or suspended and not reinstated within thirty (30) days; or (iv) if the other becomes insolvent or seeks protection under any bankruptcy, receivership, trust deed, creditors arrangement, composition or comparable proceeding, or if any such proceeding is instituted against that party. 18.3 Clauses 10, 11, 12, 15, 16, 17, 18, 19 and 20 shall survive termination of this Agreement. 19. CONSEQUENCE OF TERMINATION 16 19.1 Upon termination or expiration of this Agreement for any reason whatsoever, the Distributor shall immediately: (i) discontinue any use of any Intellectual Property Rights of the Company; (ii) discontinue all representations or statements from which it might be inferred that the Distributor is a distributor of the Products in the Territory or is in any way related to the Company; (iii) cease to promote, solicit orders for or procure orders for Products (but will not act in any way to damage the reputation of the Company or any Product) or M&S Services; (iv) provide the Company with details of all End Users so that the Company may enter into direct contractual relationship with them regarding the distribution and support of Products in the Territory with the intent that the Company shall assume all maintenance and support obligations for the Products to customers in the Territory; (v) return to the Company at the Distributor's expense, all catalogues and literature of the Company then in possession of the Distributor; and (vi) return to the Company at the Distributor's expense, all copies in whatever media of Confidential Information in the Distributor's possession, power, custody or control or at the Company's election, certify the destruction of the same by an officer of the Distributor. 19.2 Unless expressly provided otherwise herein, each party understands that the rights of termination hereunder are absolute. Neither party shall incur any liability whatsoever for any damage, loss or expenses of any kind suffered or incurred by the other (or for any compensation to the other) arising from or incident to any termination of this Agreement by such party which complies with the terms of the Agreement whether or not such party is aware of such damage, loss or expenses. 19.3 Upon termination, Distributor shall be entitled to compensation to be calculated by the following formula: total amount of Income from the previous twelve (12) months immediately prior to the date of termination multiplied by the number of months remaining under the Agreement divided by twelve (12). "Income" shall mean total product revenue earned by the Distributor from distributing products covered by the Agreement minus total cost of such Product paid to the Company. 20. MISCELLANEOUS 20.1 Amendment and Waiver: Except as otherwise expressly provided herein, any provision of this Agreement may be amended and the observance of any provision of this Agreement may be waived (either generally or any particular 17 instance and either retroactively or prospectively) only with the written consent of the parties. 20.2 Governing Law and Legal Actions: This Agreement shall be governed by and construed under the laws of the State of California and the United States without regard to conflicts of laws or provisions thereof and without regard to the United Nations Convention on Contracts for the International Sale of goods. Unless waived by Company in writing for the particular instance (which Company may do at its option), the sole jurisdiction and venue for actions related to the subject matter hereof shall be the U.S. federal courts having within their jurisdiction the location of Company's principal place of business. Both parties consent to the jurisdiction of such courts and agree that process may be served in the manner provided for giving of notices or otherwise as allowed by California State or federal law. In any action or proceeding to enforce rights under this Agreement, the prevailing party shall be entitled to recover costs and attorneys' fees. 20.3 Headings: Headings and captions are for convenience only and are not to be used in the interpretation of this Agreement. 20.4 Export Laws: The Distributor agrees with all applicable international and national laws that apply to the export and import of the Products, including the Department of Commerce and the US Export Administration Regulations (or any successor supplement or regulations) as well as end-user, end-used country destination restrictions issued by the US Export Administration and other government. The Distributor shall demonstrate to the Company compliance with all applicable laws and regulations prior to delivery thereof by Company. 20.5 Notices: Notices under this Agreement shall be sufficient only if (x) personally delivered, (y) faxed to the fax number of a party as it may notify the other party in writing from time to time, with confirmed answer-back report, or (z) delivered by a major commercial rapid delivery courier or mailed by certified or registered mail, return receipt requested to a party at its addresses first set forth herein or as amended by notice pursuant to this subsection. If not received sooner, notice by fax shall be deemed received one (1) day after the date indicated in the answer-back report and notice by mail shall be deemed received fourteen (14) days after deposit in the mail. 20.6 This Agreement and the rights hereunder are not transferable or assignable without prior written consent of the parties hereto, except for rights to payment and except to a person or entity who acquires all or substantially all of the assets or business of a party, whether by sale, merger or otherwise; any such assignee shall agree to abide by the terms and conditions of this Agreement. 20.7 Confidentiality: The parties will not disclose the terms of this Agreement or any attachment hereto to any third party without the prior written consent of the other party (except that either party may disclose such terms to potential investors, their attorney's and accountants, and government officials). 18 20.8 Severability: If any provision of this Agreement is held by a court of competent jurisdiction to be illegal, invalid or unenforceable, that provision shall be limited or eliminated to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect and enforceable. 20.9 Force Majeure: Neither party hereto shall be responsible for any failure to perform its obligations under this Agreement (other than any payment obligations) if such failure is caused by acts of God, war, strikes, revolutions, lack or failure of transportation facilities, laws or governmental regulations or other causes which are beyond the reasonable control of such party. Obligations hereunder, however, shall in no event be executed but shall be suspended only until the cessation of any cause of such failure. In the event that such force majeure should obstruct performance of this Agreement for more than one (1) month, the parties hereto shall consult with each other to determine whether this Agreement should be modified or terminated. The party facing an event of force majeure shall use its best endeavors in order to remedy that sensation as well as to minimize its effects. A case of force majeure shall be notified to the other party by telex or telefax within five (5) days after its occurrence and shall be confirmed by a letter. 20.10 Relationship of Parties: The parties hereto expressly understand and agree that Distributor is an independent contractor in the performance of each and every part of this Agreement, is solely responsible for all of its employees and agents and its labor costs and expenses arising in connection therewith. 20.11 Entire Agreement: This Agreement supersedes all proposals, oral or written, all negotiations, conversations, discussions or prior agreements between or among parties relating to the subject matter of this Agreement and all past dealing or industry custom. 20.12 Counterparts: This Agreement may be executed in counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same instrument. COMPANY: DISTRIBUTOR: By: /s/ JOHN HSU By: /s/ SANCHO PARK ----------------------- ------------------------ Date: Oct. 13, 2000 Date: 10/23/2000 Name: John Hsu Name: Sancho Park Title: President Title: Executive Director 19 Attachment A MINIMUM PURCHASE COMMITMENT - -------------------------------------------------------------------------------- MINIMUM PURCHASE COMMITMENT PERIOD [Q/YR] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [PLEASE INSERT. NOT STATED IN ORIGINAL CONTRACT] 20 Attachment B DISCOUNTS AND NET LICENSING REVENUE Products The discounts for the Products shall be 45% off the Recommended Price for the relevant Product as set out in the Recommended Price List. M&S Services The discounts for the M&S Services shall be 35% off the Recommended Price for the relevant M&S Services as set out in the Recommended Price List. FIXED EXCHANGE RATE The fixed exchange rate for the purpose of Clause 9.1 of this Agreement shall be 1,050 won to 1 US dollar. 21 Attachment C PRODUCTS All Products produced or acquired by the Company as of the date of this Agreement less those products to be distributed by third parties, which are agreed upon between the Company and the Distributor. 22 Attachment D TERRITORY The Territory includes the entire Republic of Korea 23