Software Distribution Agreement

Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.





DISTRIBUTOR AGREEMENT



This Distributor Agreement (the "Agreement") is made by and between Dragon Systems, Inc., a ___________ corporation ("Supplier") and Merisel Americas, Inc., a Delaware corporation ("Distributor"). Supplier and Distributor hereby agree as follows:



1. Distribution Rights. Supplier grants to Distributor the non-exclusive right and license to distribute Supplier's Products to Distributor's customers in the U.S. and Canada; provided, that Distributor may at any time duri ng the term of this Agreement assign its rights and obligations under this Agreement to one or more of Merisel, Inc., or any of Merisel, Inc.'s majority owned direct or indirect subsidiaries or affiliates (individually, a "Subsidiary") with respect to the U.S. and Canada, and each Subsidiary shall thereafter have the rights and obligations of Distributor hereunder with respect to the territory assigned to it as if such Subsidiary had entered into this Agreement directly with Supplier. "Products" shall incl u de all of Supplier's products set forth on Exhibit A hereto and any other products manufactured or marketed by Supplier for distribution, during the term of this Agreement and intended for sale by resellers. Supplier has provided Distributor a list of all other distributors purchasing Products from Supplier as of the date hereof, and Supplier shall give Distributor reasonable prior written notice of the appointment of any other distributor of any of its Products during the term of this Agreement.



2. Price and Payment Terms.



2.1 Retail Price and Discount. The purchase price payable for any Product ordered by Distributor shall be equal to Supplier's published suggested retail price for the Product less a discount of _________ %. Suggeste d retail prices, Distributor and Reseller discount amounts and purchase prices for the Products are set forth on Exhibit A. In the event Supplier wishes to change the suggested retail price of any Product, Supplier shall give Distributor at least thirty ( 3 0) days' prior written notice of the change, specifying the new suggested retail price, discount amount (determined using the above discount percentage) and purchase price payable by Distributor. In the event any new Product is manufactured or marketed by Supplier for distribution during the term of the Agreement, Supplier shall notify Distributor in writing of the suggested retail price, discount amount (determined using the above discount percentage) and purchase price payable by Distributor. C onfidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.





2.2 Price Protection.



(a) If the purchase price of any Product is increased, Supplier shall honor any Distributor purchase orders placed prior to the effective date of the increase at the price in effect immediately prior to the time the increase is announced.



(b) If the purchase price of any Product is decreased, Supplier shall grant Dis tributor a credit in the amount of the price decrease for each unit of the Product that is or has been (i) on order or in transit to Distributor on the effective date of the price decrease, (ii) in Distributor's inventory on the effective date of the decr e ase, and (iii) in Distributor's customers inventory on the effective date of the decrease. In order to receive any credits hereunder, Distributor shall provide Supplier with a report or reports specifying the number of units for which credits are requeste d , and Supplier shall grant such credits within thirty (30) days after receipt of any such report. In the event no amounts are due to Supplier at such time, Distributor shall mutually agree upon a method of payment for such credit amount, which may include but shall not be limited to cash payment, in accordance with Section 2.7 of this Agreement. Should Supplier have reasonable, valid cause to question or contest any credit requested under this Section 2.2, Supplier shall contest such amount or pose such qu e stion within thirty (30) days following Supplier's receipt of Distributor's report(s) as described hereinabove or Supplier shall waive its rights to contest or question such credits and shall remit such credit amounts to Distributor as described in this S ection 2.2.



(c) Section 2.2(b) shall apply to all Subsidiaries that have the rights of Distributor hereunder, provided that for such Subsidiaries (and also for Merisel Americas, Inc. to the extent Product is held in inventory in North America o utside of the United States or ordered from a location in North America outside of the United States) the applicable credit shall be indexed to the local currency rate in effect on the date of the price decrease, for the territory or country in which such inventory of affected Product(s) is located. In no event shall the credit granted for such price decrease under this section exceed the aggregate purchase price paid in U.S. dollars for the products which are subject to the price decrease.



2.3 Payment Terms. Payments to Supplier with respect to all Products received by Distributor shall be due and payable within sixty (60) days after Distributor's receipt of the Products set forth on Exhibit A hereto; except for Distributor's In i tial Stocking Order ("ISO"), which shall be due and payable within ninety (90) days after Distributor's receipt of the Products set forth on the ISO. All payments shall be subject to (i) [**] of the date of receipt of Products and (ii) a [**] if payment i s made prior to the receipt of the order.





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Securities and Exchange Commission. Asterisks denote omissions.





2.4 Rebates. Set forth on Exhibit A are Quarterly Sales Goals agreed upon by Distributor and Supplier for the first four fiscal quarters of Distributor during the term of this Agreement (with a prorated goal being included in the event this Agreement commences on a date other than the start of a fiscal quarte r of Distributor). In the event Distributor achieves the Quarterly Sales Goal in any quarter (as they may be adjusted from time to time pursuant to Exhibit A), Supplier shall pay Distributor a rebate in the amount determined pursuant to Exhibit A within th irty (30) days after receipt of a sales report from Distributor setting forth its sales results. For quarters after the first four quarters, Supplier and Distributor shall agree on mutually acceptable Quarterly Sales Goals as provided in Exhibit A.



2.5 [**]. Supplier agrees that [**] shall not at any time [**] and other terms and conditions of sale for the Products [**].



2.6 Recoupment.



(a) Distributor shall have the right of recoupment with respect to all amounts owed to it by Supplier under this Agreement. Any amounts payable to Distributor under this Agreement for any reason (including, without limitation, for price protection, product returns, or marketing funds) shall first be applied as a credit by Distributor and shall reduce any uncontested amounts owed by Distributor to Supplier. In the event that Distributor maintains a credit balance with Supplier after application of credits, Supplier shall, upon Distributor's request, promptly pay Distributor the amount of t he remaining credit balance via an instrument acceptable to Distributor (which may include, but shall not be limited to, in Distributor's sole option, by cash, company check, cashier's check, or wire transfer).



(b) Distributor shall have the ri ght of recoupment with respect to any amounts owed by it to Supplier. Any amounts owed to Supplier by Distributor under this Agreement for any reason (including, without limitation, for the purchase of products) shall first be reduced by any amounts owed t o Distributor by Supplier. In the event that Distributor maintains a debit balance with Supplier after such reduction (including the application of credits), Distributor shall have the right, in its sole option, to either: (i) return Products in Distribut o r's inventory to Supplier for credit in the amount of the purchase price paid for such Products, less any credits previously issued to Distributor under Section 2.2 hereof, which credit shall be applied to the amounts owed by Distributor to Supplier; or ( ii) pay Supplier the amount owed by Distributor to Supplier. Irrespective of which option Distributor selects, Distributor shall retain all future rights to return Product as set forth in this Agreement.





3. Orders and Shipping.



3.1 O rder Placement. Distributor shall place orders for Products with Supplier in writing. Supplier shall use reasonable efforts to deliver Products to Distributor within five (5) days of the delivery date set forth in Distributor's order, or, if no delivery d ate is specified on Distributor's order, within ten (10) days of Supplier's receipt of Distributor's order. Distributor shall have no obligation to order any minimum quantity of Products.



3.2 Allocation. In the event of any shortage of Products , upon order by Distributor Supplier shall ship to Distributor at least as many units of Product as Supplier ships to any other similar customer. In the event any Product is subject to limited availability at any time and Distributor has placed orders for such Product, either prior to the date such Product becomes subject to limited availability, or during such time as such Product is subject to limited availability, Supplier agrees to contact Distributor prior to shipping any order for such Product, and D istributor shall have the right, in its sole option and without liability, to cancel any existing order for such Product(s).



3.3 Title and Risk of Loss. Products shall be shipped F.O.B. to the Distributor warehouse specified in the order. Any freight costs for Products shipped to Distributor shall be paid by Supplier.



3.4 Incorrect or Erroneous Shipment. In the event the Product(s) shipped to Distributor does not conform to the Product description for such Product set forth on the a pplicable purchase order for such Product(s), Distributor shall contact Supplier, and Supplier shall ship the correct Product(s) to Distributor within two (2) business days of Distributor's notification of such misshipment to Supplier at no additional cos t to Distributor. Distributor shall obtain a Return Material Authorization number, as is set forth in Section 5.4 of this Agreement, for any such Product and shall return any misshipped Product to Supplier, via freight collect, for credit in the amount pai d by Distributor for such Product.



3.5 Disclaimer of Standard Terms. All terms, conditions, or provisions which may appear as pre-printed language or otherwise be inserted within any order, order confirmation or invoice for any Products shall be of no force and effect notwithst anding the execution or delivery of such other document subsequent to the date of this Agreement.



3.6 Bar Coding. Supplier shall mark each Product sold to Distributor with the appropriate UPC bar code: The preferred bar codes are Version A barc ode, or Code 39 with FACT Data Identifiers barcode. In the event Supplier utilizes any other UPC standard bar code, Supplier shall submit a sample of such bar code to Distributor, prior to the execution of this Agreement, to verify compatibility with Dist ributor's bar





Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.





code recognition systems. Distributor reserves the right, in its sole discretion and without pe nalty or liability to Distributor, to (i) refuse any shipment of Product(s) which are not so marked; and (ii) elect not to set up any Product in its systems which is not marked with a UPC standard bar code compatible with Distributor's bar code recognitio n systems.



4. Defective Products. Supplier shall accept the return of any Product alleged by Distributor or its customers to be defective and shall grant to Distributor a credit for any Products to be returned in the amount of the purchase price c harged to Distributor therefor, less any applicable credits pursuant to Section 2.2 hereof which have been previously paid to Distributor. Supplier agrees to issue Distributor a blanket Return Authorization for all Products which are returned to Distribut or, by its customers, as defective. Supplier also shall pay all freight charges for shipments of such Products to Supplier by Distributor.



5. Inventory Maintenance.



5.1 Stock Balancing Rights. At any time or from time to time after the date of execution of this Agreement, Distributor may stock balance Products which are in their original packaging to Supplier [**].



5.2 Acceptable Level Return Rights. In addition to the Stock Balancing Rights set forth hereinabove, in the event [**] at any time during the term of this Agreement, Distributor may [**].



5.3 Discontinued Products.



(a) In the event Supplier shall discontinue any Product or declare any Product to be obsolete, Supplier shall notify Distrib utor thirty (30) days in advance of such discontinuation or declaration of obsolescence. Distributor shall have the right to return all units of such Product then in Distributor's Inventory to Supplier, for credit for a period of [**] days following the e ffective date of discontinuation.



(b) In the event Supplier offers to Distributor, or any other similar purchaser, new Products which are of equivalent and/or superior fit, form and function to a similar Product, and such new Product negatively affects Distributor's ability to sell such similar Product(s) then in Distributor's inventory, Distributor shall have the right to declare its inventory of such similar Product(s) functionally discontinued, shall so



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notify Supplier, and shall return the affected inventory of such functionally discontinued Product(s) for credit for a period of [**] days following the date of functional discontinuation.



(c) The return rights set forth in this Section 5.3 are in addition to any return rights described under Sections 5.1 and 5.2 of this Agreement.



5.4 Return Procedures. Supplier agrees to issue Distributor a blanket Return Authorization for all Products which are returned to Supplier by Distributo r; or, at Distributor's sole option, Supplier shall issue a Return Material Authorization ("RMA") number for any Products Distributor requests to return within [**] business days following the date Distributor requests such RMA; (provided, however, that i n the event such RMA is not issued within such [**] day period, Distributor shall have the right to return any units of the Product(s) to Supplier without an RMA, and Supplier shall be obligated to accept such return). All Products returned pursuant to thi s Section 5 shall be unopened and in their original packaging. The amount of the credit for any returned Products shall be equal to the original purchase price charged to Distributor less any credits pursuant to Section 2.2 hereof which have been previousl y paid to Distributor. Distributor shall bear all freight costs associated with returns of Product to Supplier by Distributor under Section 5.1 and 5.2. Supplier shall bear all freight costs associated with returns of Product to Supplier by Distributor und er Section 5.3.



6. Product Information Obligations and D.A.T.A. Bank Program.



6.1 Product Set Up, Descriptions and Technical Support Requirements. Supplier shall provide Distributor's Product Information Center with the materials set forth on Exhibit B hereto. Distributor may, from time to time, change the requirements set forth in Exhibit B, and Supplier in its discretion may continue to provide such new materials. Supplier shall be solely responsible for the factual accuracy and com pleteness of any information or materials provided to Distributor. Distributor reserves the right to delay set up in Distributor's systems of any Product for which this information is not provided.



6.2 Product Physical Information. Supplier agr ees to provide Distributor with the per-unit weight of each Product (such weight to include packaging) to be distributed by Distributor, and the cube dimension of each unit of Product, each Master Carton (if any) for each Product, and each pallet. Distrib utor reserves the right to delay set up in Distributor's systems of any Product for which this information is not provided.





6.3 New Products. Supplier agrees to provide Distributor with the material described in Section 6.1 and Exhibit B hereo f for all updates and revisions of each Product and for each new Product made available for distribution by Supplier during the term of this Agreement, and shall provide Distributor with thirty (30) days prior notice or at least as much notice given to an y other similar purchaser of any such update, revision or new Product.



6.4 Product Changes. Supplier shall give Distributor thirty (30) days notice, or at least as much notice as is given to any other similar purchaser for any changes in Product packaging, documentation or major version changes.



6.5 Information, Products and Services.



(a) Distributor, from time to time, may design, develop and operate a variety of materials, product catalogues, product set up forms, sal es support and marketing services in connection with its wholesale computer products distribution business, including, without limitation, maintaining an electronic library containing computer hardware, software, peripheral and accessory product descripti o ns, creating custom product descriptions upon the request of its customers, publishing a computer reseller price book, creating and publishing advertisements for computer products; operating direct mail promotions, publishing catalogues; operating sales e v ents and promotions and training sessions; operating an on-line order entry and information service (collectively, the "Information Products"). Distributor's Information Products may also permit Supplier to communicate directly with resellers through on-l ine message boards and other technology.



(b) From time to time Supplier may provide information to Distributor for inclusion in the Information Products. Distributor may, in its sole discretion, with prior written approval from Supplier, charge a fee to the Supplier as a condition precedent for the inclusion of Supplier's information in an Information Product.



(c) Distributor, in its sole discretion, may publish the Information Products through any available medium, including, witho ut, limitation, through on-line computer networks, print media, CD ROM, diskette, facsimile, cable or satellite transmission. The type, amount and usage of the Information Products shall be as determined by Distributor from time to time, in its sole discr e tion. Distributor, in its sole discretion, may elect to charge the recipient of the Information Products (the "Customer") for receipt of the Information Products and the pricing charged by Distributor may include a profit for Distributor. Distributor rese r ves the right to modify or terminate any Information Product at any time, without notice or liability to Supplier, unless Supplier has paid for inclusion in which case Distributor will notify Supplier and provide a refund for service paid for but not prov ided.





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Securities and Exchange Commission. Asterisks denote omissions.





(d) The information that is contained in the Information Products come from the following sources:



(i) Distributor created or generated information, including materials created by Distributor, that may or may not embody product information provided by the Supplier; and



(ii) Supplier provided "Spec Sheets", photographs and Supplier trademarks, tradenames and logos (collectively, the "Supplier Information"). "Distributor Information" means all intellectual pro perty and information that is contained in the Information Products, except the Supplier Information.



(e) Distributor shall have the ownership rights for all Distributor Information. Supplier grants Distributor a nonexclusive worldwide right a nd license to republish and distribute the Supplier Information and to include the Supplier Information in any Information Product that Distributor may produce from time to time. Supplier warrants to Distributor that it has all rights to grant such a lice nse in the Supplier Information.



(f) Supplier shall be solely responsible for the factual accuracy and completeness of any information provided to Distributor for use in any Information Product.



6.6 D.A.T.A. Bank Program. At Suppli er's sole discretion, Supplier may participate in Distributor's D.A.T.A. Bank Program, in such countries where Distributor offers such a Program, a copy of which is attached to this Agreement as Exhibit C and which may subsequently be amended or discontin u ed by Distributor from time to time. Supplier's participation in the D.A.T.A. Bank Program during each subsequent year shall be automatically renewed unless Supplier gives written notice to Distributor, in accordance with the terms set forth in Exhibit C, at least thirty (30) days prior to the expiration of the first or any subsequent Program year during the term of this Agreement. Distributor shall render an invoice each calendar quarter to Supplier for the participation fees payable by Supplier in connec t ion with the D.A.T.A. Bank Program during the preceding quarter. Invoices rendered hereunder shall be paid by Supplier within thirty (30) days after receipt or, at Distributor's option, Distributor may deduct such amounts from any amounts due Supplier her eunder.



7. Marketing, and Shelf Space Acquisition Fee.



7.1 Programs and Development Funds. Supplier shall provide Distributor with marketing development funds equal to [**] of Distributor's gross





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Securities and Exchange Commission. Asterisks denote omissions.





purchases of Products. Such funds shall be used in connection with marketing programs to be mutually agreed upon by Supplier and Distributor. Sup plier shall also provide Distributor with Product launch funds of at least [**] to be utilized by Distributor to conduct initial marketing activities in connection with the commencement of Distributor's relationship with Supplier, such funds to be expende d in accordance with a launch plan to be mutually agreed upon by Supplier and Distributor. Distributor shall invoice Supplier for all marketing development and launch funds due Distributor hereunder, and such invoices shall be due and payable within [**] d ays after receipt or, at Distributor's option, Distributor may deduct such amounts from amounts due Supplier.



7.2 Shelf-Space Acquisition Fees. To defray the costs incurred by Distributor associated with the initial warehousing start-up expense s of the Product(s), Supplier shall provide Distributor with a nonrecurring Shelf-Space Acquisition Fee in the amount of [**]. Supplier agrees to remit, to Distributor prior to the set up of any Supplier Product in Distributor's systems, the Shelf-Space A cquisition Fee via an instrument acceptable to Distributor (which may include, but shall not be limited to, in Distributor's sole option, by cash, company check, cashier's check, or wire transfer).



7.3 News Releases. No news releases, including photographs, films or videos, public announcements, Product or company endorsements by Distributor or confirmation of all, or any part of, the subject matter of this Agreement shall be made public without the prior written consent of Distributor.



8. Product Agreements and Indemnification.



8.1 No Violations. Supplier represents and warrants that the purchase of Products by Distributor and subsequent sale to its customers, as co ntemplated by this Agreement throughout the United States, Canada and Mexico, and, to the best knowledge of Supplier, the sale of each Product in any other foreign country, violates no foreign, federal state or local law or regulation or any agreement bet ween Supplier and any other person or entity.



8.2 Title and Infringement. Supplier represents and warrants that (a) it owns all rights, title and interest in and to the Products necessary to enter into and perform its obligations to Distributor hereunder, and (b) not withstanding a current lawsuit against Supplier, to the best of Supplier's knowledge, no Product sold to Distributor during the term of this Agreement, nor the use of any such Product, nor anything in or contemplated by this Agreem ent, infringes upon the Intellectual Rights (as herein defined) of any other person or entity, and no suit or proceeding is pending or threatened alleging that any Product or the use thereof infringes upon any Intellectual





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Securities and Exchange Commission. Asterisks denote omissions.





Rights. As used herein, the term "Intellectual Right" means any rights relating to any trademark, tradename, service mark, copyright, patent, trade secret or other proprietary right.



8.3 Indemnification. Supplier agrees to hold Distributor harmless and indemnify, reimburse, and defend it upon request at its own cost from any proceedings related to any claim asserted against Distrib utor or its customers with respect to the Products, any information or materials provided by Supplier pursuant to this Agreement, or which otherwise arises out of its relationship with Distributor, (including without limitation any claim that any Product i nfringes the Intellectual Rights of another) and shall pay them for all amounts owed by them to third persons and expenses incurred by them in connection with any such claim or suit. Notwithstanding the above, Supplier shall not be responsible for indemni fying Distributor for claims resulting from (a) express warranties by Distributor in excess of those provided by Supplier; (b) gross negligence of Distributor; or (c) intentional misconduct by Distributor.



8.4 Insurance. Supplier shall maintain , at its expense, a policy or policies of product liability insurance, with a broad form Vendor's Endorsement naming Distributor as an additional insured, providing coverage of not less than [**] combined single limit, and shall provide Distributor with a Certificate of Insurance (including broad form Vendor's Endorsement) reflecting such coverage. The Certificate shall provide for at least ten (10) days prior written notice of cancellation or substantial change.



8.5 Buy American Act. In order to ascertain whether or not the Products meet the requirements of the "Buy American Act" and to ensure that the Products may be exported to Canada and Mexico in accordance with the terms of the North American Free Trade Agreement, Supplier shall set forth , on Exhibit A hereto, which Products, if any, are less than fifty-one percent (51 %) U.S. manufactured, and further sha ...