Territorial Software Distribution Agreement

Exhibit 10.14


*** CERTAIN CONFIDENTIAL INFORMATION
CONTAINED IN THIS DOCUMENT
(INDICATED BY ASTERISKS) HAS BEEN
OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT UNDER 17
C.F.R. SECTIONS 200.80(B)(4), 200.803
AND 230.406


TERRITORIAL SOFTWARE DISTRIBUTION AGREEMENT


This Territorial Software Distribution Agreement ("Agreement") is entered into this 14th day of April, 2004 (the "Effective Date"), by and between Lindows, Inc., a Delaware corporation ("Supplier") and livedoor Co., Ltd., a Japanese corporation ("Distributor").


WHEREAS, Supplier and Distributor previously entered into a Software Distribution Agreement dated March 17, 2003 (the "Previous Agreement"); and


WHEREAS, the Previous Agreement shall expire on August 29, 2004, and Supplier and Distributor desire to enter into this Agreement to continue the relationship of the parties, whereby Distributor shall remain Supplier's exclusive distributor of the Product in the Territory during the Licensed Term; and


WHEREAS, Supplier and Distributor understand and agree that this Agreement shall replace and supersede the Previous Agreement and all provisions thereof, and all other agreements between the parties, written or oral.


NOW, THEREFORE, the parties hereby agree as follows:


1. DEFINITIONS:


(a) "Branding Guidelines" means Lindows' proprietary trade names, trade dress, service marks, trademarks, logos, and indicia of origin and other distinctive branding features as specified in the Lindows Branding Guidelines attached hereto as Exhibit "C."


(b) "Customer" shall mean retail and end user purchasers of the Product within the Territory.


(c) "Documentation" shall mean the end user manuals relating to the Software and services and related materials provided by Supplier to Distributor hereunder.


1


(d) "Gold Master" shall mean a master disk image of the Software as made available for delivery to Licensee via electronic download at the Builder website http://www.lindows.com/builder or any successor website thereto or on CD-ROM or other media.


(e) "OEM Customer" shall mean computer builders, system integrators of computers, and value-added resellers of computers pre-installing LindowsOS on complete computer systems actually within the Territory and who execute a valid Builder Agreement located at http://www.lindows.com/licenses with Supplier.


(f) "Product" shall mean the Software and Documentation listed on Exhibit "A" attached hereto, including any modification, improvements, alterations, translations, localizations, innovations, or changes of any kind performed on the Software or Documentation by Distributor.


(g) "Services" shall mean the services set forth in Exhibit "A" attached hereto.


(h) "Software" shall mean the computer program(s) listed in Exhibit "A" in machine executable object code format only.


(i) "Territory" shall mean the Nation of Japan.


(j) "Update" shall mean versions of the Product, including version patches, subsequently released to the public for the purpose of correcting errors and fixing software bugs, which shall be given by Supplier to Distributor, pursuant to the terms set forth in Section 6(c). "Updates" does not include subsequent versions of the Product that contain new features or functionality, or which are considered a new software product.


2. APPOINTMENT: In consideration of the ***, Supplier hereby appoints Distributor, and Distributor hereby accepts the appointment, as Supplier's *** distributor in the Territory for the Licensed Term (as defined in Section 9 below) to distribute Localized Product (as defined in Section 2(d) below) on CD-ROM disks and repackaged as set forth in Section 2(a) below directly to Customers in the Territory. Subject to Section 2(j) below, the restrictions set forth in Section (i) below, and the other terms and conditions of this Agreement, Supplier hereby grants to Distributor a non-transferable, personal, non-sublicensable, except as expressly set forth in this Section below, without the right to have Distributor's rights exercised on behalf of Distributor by a third party, limited right and license in the Territory during the Licensed Term of this Agreement to:


(a) Copy and install the Software portion of the Localized Product (as defined in Section 2(d) below) in object code format only onto copies of CD-ROM disks and repackage such CD-ROM disks and the Documentation portion of the Localized Product and with an end user license agreement (the "End User License Agreement") with terms substantially the same as those set forth in Exhibit "B," both for distribution to Customers for retail sale within the Territory;


2


(b) Distribute the Localized Product to Customers with and pursuant to the End User License Agreement directly through Distributor's retail locations within the Territory and Distributor's online retail site within the Territory.


(c) Set up OEM Customers for the distribution of Software, Documentation and Localized Product pre-installed on the respective OEM Customer's computer system products. Specifically this appointment shall be non-exclusive, Supplier's OEM Customers shall be entitled to sell computer systems with the Software and/or Documentation installed within the Territory, but Supplier will not engage in securing OEM Agreements within the Territory, unless in coordination with, and with compensation to Distributor as provided herein. Distributor shall distribute the Software, Documentation and Localized Product only to OEM Customers who have executed a valid Builder Agreement with Supplier, only for installation in the Territory by such OEM Customer on such OEM Customer's computer systems, only for distribution pre-installed on such OEM Customer's computer systems within the Territory, and only for distribution to Customers with and pursuant to the End User License Agreement.


(d) Translate and localize the English version of the Product into appropriate Japanese language using the pre-existing translation applications available to create a localized Product (the "Localized Product"). Supplier reserves the right to terminate this Agreement in its sole and complete discretion in the event that the Localized Product, does not operate effectively or provide all defined functions, or is not accurate. Any translation and localization problems or defects which do not entail Software malfunctioning, operating defects, or inaccuracies shall not be deemed as a failure of Supplier's reasonable requirements and shall not justify the termination of this Agreement. Distributor shall have forty-five (45) days to cure to Supplier's satisfaction after receiving written notification by registered letter of Supplier's intention to terminate this Agreement, which notification shall contain a detailed description of the grounds and requirements which are deemed not to be satisfied. Absent the above-mentioned notice and cure period, any termination shall be void and to not effect.


(e) Sublicense to third party distributors in the Territory Distributor's rights under Sections 2(b) and 2(e) only, and to third party retailers in the Territory Distributor's rights under Section 2(b) only, both pursuant to an agreement consistent with and substantially the same as this Agreement (except such agreement shall not include the rights set forth in Sections 2(c), 2(d) and 2(f)).


(f) Sublicense the Localized Product to Customers pursuant to the End User License Agreement.


(g) Use the Product internally solely for the purpose of providing customer support services, demonstrations and marketing purposes.


(h) For clarity, Distributor's rights under Section 2(b) shall include the right for Distributor to distribute downloadable versions of the Localized Product on-line and via the Internet, using both Distributor's facilities and hardware resources for e-


3


commerce, and any services, facilities and hardware resources supplied by third party retailers who are validly sublicensed pursuant to Section 2(e). If deemed necessary by any of the parties, further terms and conditions or the material sale implementation procedures shall be settled with a further agreement between the same parties, which shall be executed within a reasonable amount of time after request in writing from either party.


(i) Subject to Section 2(j) below, Distributor shall not, and shall ensure that any OEM Customer, distributor, retailer, Customer, or other third party does not: (a) copy, reproduce, distribute or otherwise make available the Software, Documentation, Product or Localized Product or any portion or element of any of the foregoing except as and to the extent expressly authorized herein and by Supplier; (b) translate, adapt, enhance, create derivative works of or otherwise modify the Software, Documentation, Product or Localized Product or any portion or element of any of the foregoing, except as expressly set forth in Section 2(d) above, (c) decompile, disassemble or reverse engineer (except as and to the extent permitted by applicable local law), or extract ideas, algorithms, procedures, workflows or hierarchies from, the Software, Documentation, Product or Localized Product or any portion or element of any of the foregoing, (d) use the Software, Documentation, Product or Localized Product or any portion or element of any of the foregoing to provide facility management, service bureau or similar services to third parties; or (e) reproduce or use in any manner (except solely as and to the extent expressly authorized under Section 2 above), or remove, destroy, obscure or alter any Lindows.com Branding Features or any related materials placed on or contained within the Software, Documentation, or Product or any portion or element of any of the foregoing. Distributor shall not, and shall not allow any other OEM Customer, distributor, or retailer to, make any representation or warranty binding on or purporting to bind Supplier, including but not limited to in connection with the performance, condition, title, non-infringement, merchantability, fitness for a particular purpose, system integration or data accuracy of the Software, Documentation, Product or Localized Product or any portion or element of any of the foregoing, and Distributor shall disclaim all warranties implied by law and other warranties to the maximum extent permitted by applicable law. Distributor shall comply strictly with all United States import and export regulations (and any similar regulations in foreign countries) and shall obtain all required licenses, approvals and/or other clearances to export, re-export or import, as applicable, the Software, Documentation, Product or Localized Product or any portion or element of any of the foregoing, and any associated technical data, including, but not limited to, where a Software, Documentation, Product or Localized Product or any portion or element of any of the foregoing is installed on computer system.


(j) Certain software, or portions thereof, included in the Software are distributed under the GNU General Public License ("GPL"), other similar open source license agreements and other third party agreements which contain terms that expand (or restrict) Distributor's and/or third parties' rights to certain portions of the Software. The GPL and other similar open source license agreements permit Distributor and/or third parties to copy, modify, redistribute and have access to the source code of certain portions of the Software. The GPL, other similar open source license agreements, other


4


third party agreements, on-line documentation, source code, and other information about all such software programs are available at the website http://www.lindows.com/licenses. To the extent the GPL, other similar open source license agreements or other third party agreements require Supplier to provide rights to the applicable portions of the Software that are broader than the rights granted elsewhere in this Agreement, then the GPL and/or other similar open source license agreements shall take precedence over the rights and restrictions set forth in this Agreement. Nothing in this Section 2(j) shall permit Distributor or any third party to use the Lindows.com Branding Features in connection with exercising the rights granted under the GPL, other similar open source license agreements or other third party agreements.


3. OBLIGATIONS OF DISTRIBUTOR:


(a) Diligence. Distributor shall use commercially reasonable efforts to promote the marketing and distribution of the Product to realize the maximum sales potential for the Product in the Territory. Except as expressly set forth herein, Distributor shall be solely responsible for all costs and expenses related to the advertising, marketing, promotion, and distribution of the Product and for performing its obligations hereunder.


(b) Repackaging. Any retail repackaging of the Product must be approved by Supplier before the distribution of the Product in the Territory, provided, however, that such approval shall not be unreasonably withheld.


(c) Translation; Localization. Distributor shall translate or localize the Product into the Japanese language as provided in Section 2(d), provided, however, that Supplier retain and shall have all ownership rights in and to the Software, Documentation, Product, and Localized Product. Distributor understands and agrees that Supplier shall have the right, at its sole and absolute discretion, to sell and distribute the Localized Product to end users or OEM customers outside of the Territory. Distributor shall provide a copy of any and all publicly released versions of the Localized Product ten (10) days prior to the release of the Localized Product.


(d) Product Support.


(i) Distributor shall provide reasonable technical support to Customers, including, without limitation: (a) maintaining trained and competent technical and engineering support personnel for the Localized Product who are sufficiently knowledgeable with respect to the Localized Product to answer Customer questions regarding the use and operation of the Product, (b) responding promptly to requests for technical support from Customers, and (c) providing technical support services to address and resolve Customers' support requests with respect to the Localized Product.


(ii) Distributor shall ensure that all Customer questions regarding the use or operation of the Localized Product are initially addressed to and answered by Distributor. Unless otherwise agreed in writing by Supplier, Distributor shall not


5


represent to any third party that Supplier is available to answer questions from any Customer directly.


(e) End User License. Prior to providing any Customer with any Software, Distributor shall ensure that each Customer has read and agreed to the terms and conditions of, and validly executed, the End User License Agreement, which shall be contained in each software unit. As set forth more fully in Section 2(i), Distributor shall not conduct, support, or permit, and shall not authorize any third party to conduct, support, or permit, the copying, modification, alteration, reverse engineering, disassembly or decompiling of the Product.


4. OBLIGATIONS OF SUPPLIER:


(a) Marketing Support. Supplier shall provide Distributor with reasonable marketing support, including providing reasonable quantities of Supplier's advertising and promotional materials, pricing information and technical data related to the Product. Supplier may also from time to time provide, at Supplier's sole discretion, monetary support for certain marketing and promotional activities involving the Product, such as exhibitions, conventions, trade shows, and advertisements.


(b) Japanese Language CNR Warehouse Aisle. Supplier shall maintain an aisle within the CNR Warehouse containing references to software applications which may be of interest to Japanese-speaking end users, including, maintaining bandwidth and infrastructure necessary to support such aisle. Supplier shall exercise its sole and absolute discretion as to which software applications to place within such Japanese language aisle.


5. ***


6. PRICE/PAYMENT:


(a) Per Unit License Fee. Pursuant to Section 2(a) above, for each CD-ROM disk copied from the Gold Master, and for each Service purchased from Supplier, Distributor shall pay a per-unit licensing fee to Supplier (the "Per Unit License Fee"). During the Licensed Term (as defined in Section 9 below), Distributor shall pay Supplier the Per Unit License Fee according to the following schedule:


PRODUCT PRICE - ---------------------------- ----- LindowsOS (Retail Version) ***


LindowsOS (OEM Version) ***


LindowsOffice with StarSuite ***


LindowsLive (CD) ***


Lindows Laptop Edition ***


6


SERVICE PRICE MINIMUM UNITS PURCHASED - ---------------------- ----- ----------------------- LindowsPlus Membership *** ***


VirusSafe *** ***


Distributor shall purchase the number of minimum units of services above, and thereafter, shall be able to purchase any number of units without a minimum unit requirement. All payments by Distributor to Supplier under this Section 6(a) shall be made in U.S. Dollars via certified check or electronic wire transfer. Distributor shall provide Supplier, on a monthly basis, sales, shipment, inventory, and other written or electronic reports relating to Distributor's activities under this Agreement during the prior month. All payments made by Distributor to Supplier shall be made within thirty (30) days from the date of each monthly report.


(b) ***


(c) Updates. In the event Supplier makes available to the public, any Updates for the Products listed in Section 6(a), Supplier shall give such Updates to Distributor, free of charge, with the exception that no Updates shall be given to Distributor after the expiration of the Licensed Term. Distributor understands and agrees that Supplier shall not give any Updates for any of the Products after the expiration of the Licensed Term. Distributor shall have the right to distribute such Updates, pursuant to the license granted in Section 2 of this Agreement.


(d) Taxes. The prices set forth in Section 6(a) above do not include any Japanese taxes, including franchise, sales and use taxes, if any. Distributor shall be solely responsible for payment of any and all such taxes or obligations, including any fines, penalties, or interest relating thereto. Notwithstanding the foregoing, any sum required under applicable tax laws to be withheld by Distributor for account of Supplier from payments due to Supplier, shall be withheld and shall be promptly paid by Distributor to the appropriate tax authorities. Distributor shall furnish Supplier official tax receipts or other appropriate evidence issued by tax authorities sufficient to enable Supplier to file a claim for credit in respect of any sum so withheld against its home country's income taxes.


(e) Product Identification Numbers. For all Services that Distributor purchases during the Licensed Term pursuant to Section 6(a) above, Supplier shall provide Distributor with the product identification numbers for the corresponding Services within ten (10) days of receipt of Distributor's payment for such Services.


(f) Books and Records; Audit. Both parties shall maintain complete books, records and accounts relevant to computation and accounting for amounts payable under this Agreement. Each party agrees to allow an independent certified public accountant the right to audit and examine such books, records and accounts during normal business hours no more than once per year upon ten (10) days notice at such examining party's expense, to verify the accuracy of the reports and payments made under this Section 6. In


7


the event any such audit reveals that a party has knowingly breached a material obligation hereunder, then, in addition to such other remedies as such examining party may have, the audited party shall pay or reimburse to the examining party the cost of such audit.


7. REPLACEMENT OF THE PREVIOUS AGREEMENT:


(a) Distributor understand ...