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CyberMedia / Phoenix - OEM Distribution Agreement
DISTRIBUTION AGREEMENT
This Agreement is made as of this 8th day of September, 1996 by and between CyberMedia, Inc., a Delaware corporation with its principal offices at 3000 Ocean Park Boulevard, Suite 2001, Santa M
onica, California 90405 ("CyberMedia"), and Phoenix Technologies Ltd., a Delaware corporation with its principal offices at 2770 De La Cruz Boulevard, Santa Clara, California 95050 ("Phoenix"). CyberMedia and Phoenix may be referred to herein individually
as a "Party" and collectively as the "Parties."
A. CyberMedia designs, develops and markets a group of software products under the primary trademarks "First Aid" and "Oil Change". Such software products are designed for the purpose of permitting
the end user to correct problems with the PC device without having to seek support from the manufacturer or others. CyberMedia markets its products primarily to end-users.
B. Phoenix designs, develops and markets standards-based system-level soft
ware products, including basic input/output system (BIOS) software. Phoenix markets its products primarily to manufacturers of personal computing devices, including PC desktop and server systems, laptop devices, special purpose PC-based systems or devices
, motherboards and PC-related peripheral devices.
C. CyberMedia wants to expand the penetration of its products into the OEM market and believes Phoenix has the expertise to do so and Phoenix wants to utilize CyberMedia's expertise and the compleme
ntary nature of CyberMedia's software products to be able to provide OEM customers with additional products.
D. CyberMedia and Phoenix desire to expand the capability and reach of CyberMedia's products by combining certain of Phoenix's current sys
tem-level software and software to be developed with CyberMedia products. This product, preliminarily referred to as "First Aid Plus Pack" will be developed pursuant to a development and license agreement to be negotiated and executed by the parties withi
n 30 days after the Effective Date of this Agreement or as soon thereafter as possible.
NOW, THEREFORE, in consideration of the premises and the promises made herein, the parties hereto agree as follows:
1. DEFINITIONS
"Coordinator"
means the CyberMedia employee or the Phoenix employee assigned from time to time by his or her respective employer, to coordinate meetings, facilitate communication and serve as the focal point for the resolution of issues in connection with or which may
arise under this Agreement.
"Customization Tools" means those software programs developed or licensed by CyberMedia as of the Effective Date or during the Term for the purpose of customizing CyberMedia's Products which
are licensed hereunder. The Customization Tools available as of the Effective Date are described in Exhibit A attached hereto.
"CyberMedia Customer" means any OEM which has signed an agreement with CyberMedia as of the Effective Date pursuant to which such entity is license
d to copy, distribute or sublicense any of the CyberMedia Products. CyberMedia Customers are named in Exhibit E attached hereto under the heading "CyberMedia Customers."
"CyberMedia Products" means the CyberMedia products presently marketed under
the primary Mark "First Aid 95 Deluxe" and the OEM Version of Oil Change (all as are described in Exhibit A attached hereto), together with all upgrades, updates, enhancements, fixes, and future releases and versions thereof, and all current and future do
cumentation relating thereto commercially released by CyberMedia or otherwise delivered by CyberMedia to Phoenix during the Term.
"Effective Date" means the date on which this Agreement has been executed by both parties.
"Intellectual Prop
erty Rights" means patent rights, copyright rights (including, but not limited to, rights in audiovisual works and moral rights), trade secret rights, and any other intellectual property rights recognized by the law of any applicable jurisdiction.
"Knowledge Base" means a collection of product and vendor-specific technical support information, including without limitation detailed configuration information regarding specific hardware and software products and the Windows operating system.
"Marks" means the trademarks, trade names, service marks, and/or service names of a party as specified from time to time.
"Object Code" means with respect to any particular product software in machine-readable and executable form.
"OEM" means any entity, including its subsidiaries, parents, and divisions, which manufactures a PC Computer.
"OEM Version of Oil Change" means those portions of the CyberMedia products presently marketed under the primary Mark "Oil Change" which contain
the technology or functionality designed primarily to fix a hardware or software problem in a PC Computer as described under Oil Change OEM Version in Exhibit A.
"Other Manufacturer" means any entity, including its subsidiaries, parents and divisions, which manufactures a PC Peripheral.
"PC Computer" means any personal computing device capable of running general purpose PC operating system software, including without limitation, personal computers (PCs) (such as hand held, laptop or noteb
ook computers, desktop systems, and servers) and motherboards for PCs.
"PC Peripheral" means any PC-compatible hardware device which is not a PC Computer.
"Phoenix Customer" means any entity, including its subsidiaries, parents, and divi
sions, which has a license agreement with Phoenix in effect on the Effective Date and under which such entity licenses Phoenix products for use on products manufactured by such entity which are PC Computers or PC Peripherals.
"Prospect" means any
OEM with whom CyberMedia has commenced negotiations for agreements with CyberMedia pursuant to which such entity would be licensed to copy, distribute or sublicense any of the CyberMedia Products on a PC Computer to be sold to end users. Prospects are nam
ed in Exhibit E attached hereto under the heading "Prospects."
"Source Code" means, with respect to any particular product, software in human readable form and related design documentation, including all comments and any procedural code.
"
Specifications" means as to any particular product, the written description of the product, which description shall include the product's functionality and interfaces. The Specifications for the CyberMedia Products are attached hereto as Exhibit A.
"Subdistributor" means any person, other than an OEM or Other Manufacturer, authorized by or through Phoenix to sublicense CyberMedia Products to OEMs or Other Manufacturers.
"Term" means the period from and including the Effective Date through the date on which this Agreement is terminated in accordance with Section 13 hereof.
"Transition Period" means the thirty day period commencing with the Effective Date.
"Year" means each calendar year during the term of this Agreement.
2. LICENSES
2.1 Grants by CyberMedia.
(a) Subject to the terms of this Agreement, CyberMedia grants Phoenix a non-transferable, worldwide, royalty-bearing license for the Term and any period after the Term during which Phoen
ix has rights to continue to distribute CyberMedia Products (with right to sublicense as described below) to use, perform and display the CyberMedia Products internally and externally, in Object Code only, for purposes of demonstration, marketing and cust
o
mization for customers, and to copy such products and have the same copied as necessary for such use and for sublicensing as provided below, and to market, sublicense and distribute such products solely through OEMs and Other Manufacturers as follows: Pho
e
nix may grant sublicenses to such OEMs and Other Manufacturers to copy, have copied and use the CyberMedia Products, in Object Code format only, for demonstration and marketing purposes, to incorporate or bundle such products with PC Computers or PC Perip
herals, and to distribute and sublicense such incorporated or bundled products to end users and to other OEMs. Phoenix may
exercise its distribution rights through the use of Subdistributors, provided that such Subdistributors distribute CyberMedia Produc
ts only to OEMs and Other Manufacturers in the manner required of Phoenix hereunder, and agree in writing with Phoenix to be bound by licensing and confidentiality conditions at least as restrictive as those in this Agreement that are applicable to Phoeni
x
hereunder. The licenses granted Phoenix and its Subdistributors hereunder expressly exclude any right to distribute the CyberMedia Products on a standalone basis to any end user. Any sublicense rights granted by Phoenix to an OEM or Other Manufacturer wi
ll not restrict the OEM's or Other Manufacturer's ability to sublicense the CyberMedia Products in the manner described above to its end users or OEM customers anywhere in the world, except as required by law.
(b) Subject the terns of this A
greement, CyberMedia grants Phoenix a non-transferable, worldwide, royalty-bearing license for the Term and any period after the Term during which Phoenix has rights to continue to distribute CyberMedia Products (with right to sublicense as described belo
w
) to use, perform and display the Customization Tools, in Object Code only, for internal business purposes only, to customize the CyberMedia Products for an OEM or manufacturer of PC-based devices other than PC Computers. Phoenix may sublicense such right
s
to an OEM or any such manufacturer pursuant to a written agreement with such third party that it will be bound by licensing and confidentiality conditions at least as restrictive as those in this Agreement that are applicable to Phoenix hereunder. Phoeni
x
and such third party sublicensees may make a reasonable number of copies of such software as is required for back-up purposes and to carry out the customization work permitted hereunder. Phoenix may distribute such Customization Tools only to such third
p
arty licensees, and such licensees may not further distribute the Customization Tools. The Customization Tools are licensed to Phoenix pursuant to CyberMedia's standard limited warranty in effect for such tools from time to time, a copy of which may be ob
tained from CyberMedia upon request.
(c) The above license rights shall be non-exclusive, except that Phoenix shall have the exclusive right to distribute through, and to sublicense to, OEMs the CyberMedia Products so long as the number of c
opies of CyberMedia Products reported as shipped in royalty reports issued by Phoenix pursuant to Section 4.1 is equal to or greater than the minimum number of copies for the applicable Year stated in Section 2.3(a) below. If such number falls below such
m
inimum, then CyberMedia may elect to convert the exclusive rights described in this paragraph into non-exclusive rights, on the terms and conditions stated in Section 2.3(a), and if converted, such rights shall continue as non-exclusive so long as this Ag
reement is in effect and as to any distribution permitted thereafter pursuant to Section 13.
(d) So long as the right to distribute CyberMedia Products to or through OEMs granted Phoenix pursuant to Section 2.1(c) above remains exclusive and
for the Year during the Term in which CyberMedia properly elects to make such right nonexclusive (the "Election Year"): (i) CyberMedia agrees that it will not grant to any entity which develops or supplies BIOS software products on a commercial basis to
O
EMs, which entities presently are comprised of Award Software, American Megatrends Inc., SystemSoft Corporation, the SurePath BIOS group of IBM Corporation, and Microid Research, any license to distribute any CyberMedia Products; and (ii) Phoenix agrees t
h
at it will not develop or market (including any distribution) any product which directly competes with CyberMedia Products; provided, however, that during the Election Year, Phoenix shall not be prohibited from developing any product which may directly co
mpete with any CyberMedia Product. If a prospective
OEM for CyberMedia Products has stated to Phoenix and CyberMedia that it will not sublicense CyberMedia Products from Phoenix, the Parties will promptly meet to discuss how to resolve the matter. If Phoe
nix agrees with an OEM that Phoenix will not grant any other named OEM with a sublicense for CyberMedia Products, then CyberMedia may enter into negotiations with such other named OEM for a license of the CyberMedia Products.
(e) Commencing
with the Effective Date, Phoenix will use all commercially reasonable efforts to promote CyberMedia Products and the Parties will use all commercially reasonable efforts to promote the relationship established between the Parties hereunder, including the
fact that Phoenix is the exclusive distributor of CyberMedia Products to OEMs. For CyberMedia, such efforts will include, without limitation, making joint sales calls with Phoenix at Phoenix's request and advising Prospects regularly that it has appointed
Phoenix as its authorized exclusive distributor of CyberMedia Products to OEMs. CyberMedia will use commercially reasonable efforts to convince Prospects to sign license agreements for CyberMedia Products directly with Phoenix and to convince each CyberMe
d
ia Customer either (i) to cancel its existing license agreement for CyberMedia Products and to enter into a new agreement whereby the CyberMedia Customer becomes an sublicensee of Phoenix for the CyberMedia Products or (ii) if acceptable to Phoenix, to co
n
sent to the assignment of such existing license agreement from CyberMedia to Phoenix. If during the Transition Period and after the expenditure of all such efforts, a Prospect has stated that it is unwilling to enter into an agreement with Phoenix for the
CyberMedia Products, but is willing to enter into an agreement with CyberMedia, CyberMedia may do so provided such contract is signed by both parties on or before the end of the Transition Period. After the end of Transition Period and so long as the righ
t
s granted Phoenix remain exclusive in accordance with Section 2.1(c), CyberMedia will have no right to sign any license agreement with OEMs for CyberMedia Products, whether or not they were Prospects, except, if after the Transition Period and after the e
x
penditure of all such efforts, an OEM has stated in writing to Phoenix or CyberMedia that it is unwilling to enter into an agreement with Phoenix for the CyberMedia Products, but is willing to enter into an agreement with CyberMedia, the Parties agree to
discuss strategies for resolving the situation.
(f) Any end user sublicense to use the CyberMedia Products and the Customization Tools will be pursuant to a license agreement (including a shrink wrap license agreement) containing terms no le
ss restrictive than the Minimum License Terms set forth in Exhibit B.
(g) CyberMedia does not grant to Phoenix any rights with respect to the Source Code to the CyberMedia Products or the Customization Tools hereunder and Phoenix agrees not
to reverse engineer, decompile or disassemble the Object Code to any of the CyberMedia Products or the Customization Tools.
(h) CyberMedia may place legitimate copyright notices in and on the CyberMedia Products and the Customization Tools
and on any documentation (or such other place as CyberMedia and Phoenix may agree in writing) delivered to Phoenix hereunder. Phoenix agrees that it will not remove any such copyright notice from within the Object Code of any CyberMedia Product and the C
ustomization Tools.
(i) As between CyberMedia and Phoenix, CyberMedia will own the CyberMedia Products, the Customization Tools, any other software CyberMedia provides Phoenix hereunder and the customized versions of CyberMedia Products cre
ated by Phoenix with the Customization Tools. CyberMedia may sell, license or otherwise distribute any customized version of CyberMedia Products unless explicitly prohibited by the OEM for whom the customized version was created. CyberMedia may not sell,
license or otherwise distribute any translations created by Phoenix except as provided herein.
2.2 Delivery of CyberMedia Products and Customization Tools. CyberMedia will deliver to Phoenix one copy of the Object Code for the CyberMedia Products a
nd of upgrades, updates, enhancements, fixes and future releases and versions as quickly as possible but within ten (10) working days (a) when shipped as a production release to a customer and (b) when released internally for pre- release use in beta rele
a
se form. All such items will be delivered in electronic form and, if requested by the receiving party, in hard copy form. CyberMedia will deliver to Phoenix one copy of the Object Code for the Customization Tools promptly after they are first available to
CyberMedia engineers.
2.3 Obligations to Retain Exclusivity. In order to retain the exclusive rights granted it pursuant to Section 2.1(a) above:
(a) Phoenix must have reported shipments by Phoenix or Subdistributors to OEMs or by
OEMs of a minimum number of copies of CyberMedia Products each Year. For purposes of the foregoing, a copy of a CyberMedia Product may be counted as shipped only once. The minimum number of copies will be six million for the period commencing with the Eff
e
ctive Date and ending December 31, 1997, it being understood that Phoenix's ability to reach such number may be adversely affected if CyberMedia enters into license agreements with Prospects during the Transition Period which are not subsequently and quic
k
ly assigned to Phoenix. The Parties will negotiate in good faith the minimum number of copies for each Year after 1997 no later than September 30 immediately preceding such Year. The determination of whether or not such minimum number of copies has been a
c
hieved will be based on the shipments reported in the royalty reports issued by Phoenix to CyberMedia pursuant to Article 4 hereof. CyberMedia acknowledges that the relevant royalty reports shall be those which are required to be made in the second, third
and fourth quarters of the Year being measured and in the first quarter of the following Year. Such reports are subject to verification by CyberMedia pursuant to the exercise of its audit rights granted in Article 5 hereof
If such minimum copies h
ave not been shipped during the Year being reviewed (or, with respect to the Year 1997, if Phoenix has failed to make payment of all of the amounts set forth in Section 2.3(b) below), then CyberMedia may elect to convert the exclusive rights granted Phoen
ix under Section 2.1(a) hereof into non-exclusive rights. Such election must be made in writing delivered to Phoenix within 30 days after Phoenix gives the final royalty report for the Year being measured.
(b) In addition, Phoenix will have paid CyberMedia the following amounts on or before the dates indicated:
PAYMENT DUE DATE AMOUNT DUE
- ---------------- ----------
Effective Date
January 15, 1997
April 15, 1997 [ * ]
July 15, 1997
October 15, 1997
Payments of these amounts are not refundable. Phoenix may not credit the [ * ] payment due on the Effective Date against any payment obligation
it may have to CyberMedia under Section 4.1 hereof. Phoenix may credit all other amounts set forth in this Section 2.3(b) against any payment obligation it may have to CyberMedia under Section 4.1 hereof.
(c) The failure of Phoenix to meet
the applicable minimum shipments shall not be deemed a breach by Phoenix of any material obligation hereunder and shall not give CyberMedia the right to terminate this Agreement or any other right of Phoenix, except as otherwise set forth herein.
3. DISTRIBUTION OBLIGATIONS OF PHOENIX
3.1 Phoenix will use all reasonable diligent, good faith commercial efforts to market and sublicense, directly or through Subdistributors, the CyberMedia Products to OEMs.
3.2 (a) Phoenix will have the
right to determine in its sole discretion, the pricing it offers Subdistributors, OEMs and Other Manufacturers for CyberMedia Products; provided, however, that from the Effective Date through December 31, 1997, the minimum license fee Phoenix will pay Cyb
e
rMedia for each copy of a CyberMedia Product shipped by the OEMs, Other Manufacturers or Subdistributors will be [ * ], unless otherwise agreed by the parties; and provided, further, that Phoenix and CyberMedia will negotiate in good faith any suggested c
hange to such minimum price with respect to any subsequent Year during the same period during which they are negotiating the minimum shipment targets pursuant to Section 2.3(a) above.
(b) Phoenix may from time to time wish to bundle CyberMedia
Products with other Phoenix products in order to effect a sublicense of CyberMedia Products to an OEM or Other Manufacturer. Phoenix will propose to CyberMedia an allocation of the sublicense fees among the components of the bundled product (including the
rationale therefor) and CyberMedia will advise Phoenix as promptly as practicable (but in no event in more than three working days) as to whether or not it agrees with such allocation, which agreement will not be unreasonably withheld. If CyberMedia doesn
't agree with the allocation, the parties will meet within one day thereafter to negotiate in good faith a mutually acceptable allocation.
(c) Unless otherwise agreed, Phoenix will not significantly increase the pricing of Phoenix products over that previously offered by it to an OEM or Other Manufacturer while at or about
- -------- *Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
the same time offering the CyberMedia Products at a significant discount nor will it maintain the pricing of such Phoenix products while significantly decreasing the pricing of CyberMedia Products. Unless otherwise agreed, Phoenix will not of
fer to license CyberMedia Products to a prospective customer at a discount rate greater than that which is applicable to the Phoenix products being concurrently offered to the prospective customer.
3.3 Phoenix and CyberMedia will jointly complete a market rollout campaign to coordinate announcement and marketing of CyberMedia Products to both the retail and OEM channels.
3.4 Phoenix will establish a direct technical support service with respect to CyberMedia Products to Phoenix's sublicens
ees of CyberMedia Products (i.e., its OEMs, Other Manufacturers and Subdistributors), which support will be comparable to that provided by Phoenix for Phoenix software products.
3.5 Phoenix will attend such of CyberMedia' s technical training cour
ses as it determines and will send technically qualified personnel to such courses. Phoenix will use all diligent commercial efforts to ensure that it has at least two technical employees who have received technical training from CyberMedia with respect t
o the CyberMedia Products.
3.6 Phoenix agrees (and agrees to include in its agreements with Subdistributors the obligation of a Subdistributor): (a) to conduct its efforts hereunder in a manner that reflects favorably on the CyberMedia Products and
the good name, goodwill and reputation of CyberMedia; (b) to avoid deceptive or unethical practices, including but not limited to disparagement of the CyberMedia Products; (c) to make no representations, warranties or guarantees to OEMs or Subdistributor
s
with respect to the specifications, features or capabilities of the CyberMedia Products that are inconsistent with the literature and other documentation provided by CyberMedia, or developed jointly by the Parties, including all warranties and disclaimer
s.
3.7 The Parties acknowledge that they have a goal of achieving a public image of joint cooperation and support of CyberMedia Products that will consistently position the Parties' respective roles and contributions under this Agreement. Toward th
at end, the parties will develop joint marketing and promotional programs hereunder, which would include joint customer presentations where appropriate, joint attendance at appropriate industry events, the preparation of consistent marketing collateral an
d
the issuance of appropriate joint press releases. With respect to press releases, the Parties agree that each will include a mutually agreeable reference to the other in press releases and promotions relating to CyberMedia Products and, to the extent any
such press release relates to or involves a third party CyberMedia and Phoenix will use all reasonable efforts to obtain such third party's consent to the issuance of such press release. The parties will mutually agree on all sales and marketing materials
, press releases and other promotional materials relating to CyberMedia Products.
3.8 Phoenix will use commercially diligent efforts to require its OEM and Other Manufacturer sublicensees of CyberMedia Products to provide their Knowledge Base, cust
omizations and relevant end user information to Phoenix and to CyberMedia. Phoenix will provide CyberMedia with copies of any such information which the OEM agrees may be provided to CyberMedia.
4. PAYMENTS.
4.1 Phoenix will pay CyberMedia
the following percentages of the license fees, net of any amounts Phoenix is required to pay others as defined in this Agreement, actually received by Phoenix from OEMs, Other Manufacturers and Subdistributors for Object Code licenses of any CyberMedia Pr
o
duct: with respect to the first [ * ] of such license fees, the percentage will be [ * ] [ * ] and with respect to license fees after the first $ 1,000,000, the percentage will be [ * ]. Payment shall be made within 30 days after the end of the quarter in
which such license fees were received and will be accompanied by a report showing the number of units shipped for which payment was received.
4.2 If CyberMedia enters into a license agreement with a Prospect during the Transition Period as contemp
lated by Section 2.1(e), CyberMedia will pay Phoenix [ * ] of any license fees, net of any amounts CyberMedia is required to pay others as defined in this Agreement, actually received by CyberMedia from such Prospect; provided such Prospect is a Phoenix C
u
stomer as of the Effective Date and provided that CyberMedia is the primary source of support to the Prospect. CyberMedia will not owe Phoenix any portion of any license fees CyberMedia collects from Prospects with whom it enters into a license agreement
f
or CyberMedia Products during the Transition Period if the Prospect is not a Phoenix Customer as of the Effective Date. CyberMedia will pay Phoenix [ * ] of license fees, net of any amounts it is required to pay others as defined in this Agreement actuall
y received by CyberMedia from any such Prospect if the Parties agree, following good faith negotiations, that Phoenix is required to provide significant support to such Prospect with respect to CyberMedia Products.
4.3 A Party will be entitled to d
educt from license fees received by it any sales, use, value-added, withholding or other tax or duty levied with respect to such license fee, except and to the extent such tax is imposed by a foreign entity and the Party is able to credit such tax in full
against its U.S. federal income taxes or commissions it may be required to pay to a third party sales agent.
4.4 As a condition to entering into a sublicense agreement with Phoenix for CyberMedia Products, an OEM or Other Manufacturer may request
a program whereby CyberMedia passes through to the OEM or Other Manufacturer and to Phoenix a portion of license fees paid by an end user for upgrading a CyberMedia Product. Provided the purchase of such upgrade will occur as a direct result of actions ta
k
en by the OEM or Other Manufacturer, CyberMedia agrees to consider in good faith any request from Phoenix for such a pass through but may withhold its consent to such pass through in CyberMedia's sole discretion. The Parties will use all commercial, effor
t
s to develop a reasonable mechanism to determine whether or not the purchase of the upgrade is the direct result of actions taken by the OEM or Other Manufacturer. Payment of any fees which may be due under this Section 4.4 from CyberMedia shall be made w
ithin 30 days after the end of the quarter in which such license fees were received.
4.5 CyberMedia will invoice Phoenix, and Phoenix will pay net 30, any invoice issued by CyberMedia for integration or customization services with respect to CM Products performed by CyberMedia pursuant to Section 11.2(d) below.
- -------- *Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
4.6 CyberMedia may choose to add third party software to CyberMedia Products after the Effective Date for the purpose of adding features or functionality and will keep Phoenix informed of any plans to so add third party software. If the third party
requires CyberMedia to pay a royalty with respect to each copy of the software shipped (the "Third Party Royalty"), CyberMedia will inform Phoenix as soon as practicable of the amount of such royalty and Phoenix will have the following options:
(a) Phoenix will pay CyberMedia the Third Party Royalty with respect to shipments of CyberMedia Products containing such third party software for which an OEM, Subdistributor, or Other Manufacturer pays Phoenix license fees. For purposes of Section 4
.1, the Third Party Royalty will be subtracted from the actual receipts before the percentage is applied;
(b) Phoenix may enter into an agreement directly with the third party with respect to the payment of the Third Party Royalty, in which
event, for purposes of Section 4.1, the Third Party Royalty will be subtracted from the actual receipts before the applicable percentage is applied; or
(c) Phoenix may elect to take the CyberMedia Products without such third party software and will have no liability to CyberMedia for any Third Party Royalty relating to such software.
For purposes of Section 4.2, if CyberMedia receives license fees from any Prospect referred to in Section 4.2 for CyberMedia Products which include third party
software for which CyberMedia owes a Third Party Royalty, such Third Party Royalty will be deducted from such fees before the percentage is applied.
5. REPORTS AND AUDITS
5.1 For at least two (2) years following payment of any amount owed t
he other party hereunder, each party will maintain any records it may have with respect to such payment, which shall include, without limitation, records showing the number of units of CyberMedia Products to which such payment relates and records received
from any OEM, Other Manufacturer or Subdistributor.
5.2 A party may, at its own expense and upon at least five (5) working days' notice to the other party, cause an audit to be performed by an independent auditor (acceptable to both parties) of th
e records of the other party described in Section 6.1 above. The audit shall be for the purpose of confirming the accuracy of the payment of fees and royalties or other charges in accordance with this Agreement. The auditor will report to the party reques
t
ing the audit only such information obtained during the course of such audit as is necessary to determine whether the payments made hereunder were correct. No party may cause any audit to be conducted more frequently than once in any Year, outside normal
b
usiness hours, or at a location other than where the audited party's records being audited are maintained. If any such audit discloses an error in payment by a party of amounts owed the other party in an amount greater than five percent (5%) of the total
amounts owed for the period audited, the audited party will also reimburse the auditing party for all expenses (including the fees and expenses incurred by the independent auditor) reasonably incurred in connection with the audit.
6. WARRANTIES
6.1 Each party warrants and represents to the other that it has all authority to enter into this Agreement and to perform its obligations hereunder.
6.2 CyberMedia warrants and represents that it has all right, title, and interest and/or licen
se rights in the CyberMedia Products and the Customization Tools necessary to grant the licenses set forth herein and that it has not taken any action or suffered any action to be taken with respect to the CyberMedia Products or the Customization Tools wh
i
ch would restrict or affect the rights of Phoenix and its sublicensees hereunder. By way of example, and not by limitation, CyberMedia has not heretofore granted any person any exclusive distribution rights, whether geographically based or otherwise, whic
h will limit the license rights granted herein.
6.3 CyberMedia represents and warrants that, to the best of its knowledge, any software delivered by it to Phoenix hereunder will be free of any harmful code, defined for purposes of this Agreement as
any computer code, programming instruction, or set of instructions which have been designed with the ability to damage, interfere with, or otherwise adversely affect computer programs, data files, or hardware, without the consent or intent of the end use
r, including without limitation, self- replicating and self-propagating programming instructions commonly referred to as viruses and worms.
6.4 CyberMedia represents and warrants that each production release of the CyberMedia Products will, for a p
eriod of twelve (12) months after the date such release is first shipped by CyberMedia to Phoenix, perform substantially in accordance with its respective Specifications. CyberMedia will, at its option and its own expense, either (a) correct or provide an
acceptable workaround for any verifiable conditions reported to CyberMedia by Phoenix within the warranty period that cause such product not to perform in accordance with the above warranty or (b) replace such nonconforming product with a conforming produ
c
t; regardless of the option chosen by CyberMedia, it will perform this warranty service within the time frames set forth in Exhibit D. If CyberMedia is unable to correct or provide an acceptable workaround for any such error after reasonable efforts, Cybe
r
Media will refund to Phoenix any license fees previously paid to CyberMedia for copies of the affected product for which Phoenix certifies in a writing signed by an executive officer of Phoenix that it will be making a refund to an affected OEM or Subdist
ributor. The foregoing shall be CyberMedia's sole liability and Phoenix's sole remedy in the event of a breach of the warranty contained in this Section 6.4.
6.5 CYBERMEDIA MAKES NO WARRANTIES, EITHER EXPRESS OR IMPLIED WITH RESPECT TO THE CYBERMED
IA PRODUCTS OTHER THAN THOSE EXPRESSLY SET FORTH IN THIS SECTIONS 6.2 THROUGH 6.4, INCLUSIVE, AND CYBERMEDIA EXPRESSLY DISCLAIMS ANY SUCH WARRANTIES, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OR MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPO
SE.
6.6 Nothing herein shall diminish a party's support obligation to the other as set forth elsewhere in this Agreement.
7. INTELLECTUAL PROPERTY INDEMNITY
7.1 CyberMedia agrees to defend Phoenix, its officers, employees, agents, r
epresentatives, sublicensees, and/or customers (collectively, the "Indemnified Party"), at CyberMedia's expense, against any claim, action or proceeding brought against any Indemnified Party to the extent that it is based on a claim that the use of the Cy
b
erMedia Products and/or the Customization Tools, including software and related documentation, licensed or sublicensed to the Indemnified Party hereunder, when used in accordance with the terms and conditions of this Agreement, infringes any copyright or
U
.S. patent or misappropriates any trade secret and agrees to pay any liabilities, damages, costs and expenses (including the actual fees of attorneys and other professionals and all related costs and expenses) finally awarded in any such claim, action or
p
roceeding. CyberMedia will be relieved of its obligations under this Section 7.1 unless Phoe...
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