Cnn Newsource, Inc. License Agreement

CNN NEWSOURCE SALES. INC. LICENSE AGREEMENT


THIS AGREEMENT (the "Agreement") is made as of the 15th day of January, 1998, by and between CNN Newsource Sales, Inc. ("CNN-NS"), having a principal place of business at One CNN Center, Box 105366, Atlanta, Georgia 30348-5366, a Georgia corporation, and ADAM Software, Inc. ("ADAM"), a Georgia corporation, with a principal place of business at 1600 River Edge Parkway, Suite 800, Atlanta, Georgia 30328.


WITNSSETH:


WHEREAS, CNN-NS is licensor throughout the United States and Canada in all forms of media of the news services produced and/or procured by Cable News Network, Inc. ("CNN"); and


WHEREAS, ADAM is a creator of various anatomical and medical/health related images which can be used by television programmers to enhance their medical related programming and has an anatomical and medical/health related image library of over 20,000 images; and


WHEREAS, ADAM wishes to enter into this Agreement whereby it grants CNN-NS the exclusive license to distribute a set of anatomical and medical/health related graphic images developed and produced by ADAM to potential licensees for use in television programming for exhibition throughout the United States of America and Canada, and in certain limited cases as specified below, worldwide;


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NOW, THEREFORE, for and in consideration of the foregoing premises, the mutual covenants, conditions, representations and warranties contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:


1. Licensing of Adam Products.


(a) Image.


1. Right to License: Subject to the terms and conditions of this Agreement, including all exhibits and schedules attached hereto, ADAM hereby grants to CNN-NS a qualified and limited right to license the ADAM Images (which shall be defined as collectively, the Image Package, the Breaking News Images and the Custom Images, as defined herein), without any modifications or alterations thereto to: (i) CNN Networks (except CNN Interactive) and Affiliates solely for incorporation into news and information programming exhibited via Television; (ii) to Affiliates solely for incorporation in entertainment programming which is exhibited via Television only in a local market; and (iii) CNN Interactive as specified in Paragraph l(b) below. "Image Package" means the image databases (in visual form) contained on the compact discs listed on Schedule I. "Breaking News Image" means a custom created anatomical and medical/health related image by ADAM for CNN-NS that is associated with a major national or international breaking news story. "Custom Image" means any images that CNN-NS requests ADAM to produce that is not contained in the Image Package and is not a Breaking News Image. "CNN Networks" shall mean: (A) the following seven networks: (i) CNN; (ii) CNNI; (iii) CNNfn; (iv) CNN en Espanol; (v) CNN Interactive; (vi) CNN Headline News; and (vii) CNN Airport; and (B) any future network controlled by CNN. "Affiliate" means


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an entity who from time to time licenses certain news and information programming from CNN-NS for exhibition via Television. "Territory" with respect to Affiliates the United States of America and Canada and with respect to the CNN Networks means worldwide. "Television" means exhibition via broadcast, direct to home, cable, MMDS and SMATV as well as any other non-interactive television medium either now in existence or created in the future during the Term hereof. Any licenses granted by CNN-NS to an Affiliate shall only allow such Affiliate the right to exhibit the ADAM Images via Television in the Territory during the Term hereof. Any license granted by CNN-NS to a CNN Network may allow only that particular CNN Network to exhibit the ADAM Images via Television worldwide during the Term hereof. All rights not specifically and expressly granted to CNN-NS herein are expressly reserved to and by ADAM.


2. Exclusivity: Subject to the provisions of Section 3 below, CNN-NS's right to license the ADAM Images for use in Television news and information programming within the Territory shall be exclusive. During the Term of this Agreement, ADAM shall not grant any rights to any third party to use and/or distribute the ADAM Images, or any other images that ADAM currently owns or develops during the Term, for exhibition in news and information programming via Television in the Territory. Notwithstanding anything to the contrary contained herein, CNN-NS acknowledges that it is aware of the ADAM license deal with CBS Network News (the "CBS Network News License Agreement") which expires as of June 30, 1998 whereby ADAM has licensed CBS Network News the right to use certain ADAM images in its national newscasts as exhibited via broadcast television, as such terms are commonly understood and used in the television industry, and that such deal, as limited to broadcast television distribution and expiring on June 30, 1998, shall not be deemed a breach of this


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Agreement provided that such deal is not renewed and that the right to license the certain ADAM images specified above is granted to CNN-NS as of June 30, 1998. CNN-NS expressly agrees that upon the expiration of the ADAM/CBS Network News License Agreement specified above, CNN-NS shall negotiate with CBS Network News in good faith for a license to the ADAM Image Products; provided, however, that so long as CNN-NS has complied with the above and negotiated with CBS Network News in good faith, CNN-NS's failure to reach a definitive agreement with the CBS Network News for such images shall not be considered a breach hereof CNN-NS further agrees that it will consult with ADAM about any network exclusive deal that it is contemplating; provided, however, that the ultimate decision to do such deal shall belong to CNN-NS.


3. Basset Images: CNN-NS is aware that the retail versions of the CD-ROM's that make up the Image Package contain cadaver images that are commonly known as the Basset Images. ADAM agrees to remove the Basset Images from the Image Package that is being delivered to CNN-NS. Both CNN-NS and ADAM agree to treat any and all external costs actually incurred by ADAM that are associated with the removal of the Basset Images from the Image Package as a Sales and Marketing Expense (as defined herein) and ADAM shall be reimbursed for such expenses from the first year's Annual Gross Revenues in accordance with the applicable line item set forth on Schedule I attached hereto and by this reference expressly incorporated herein.


4. Additional License Rights: During the Term of this Agreement, ADAM agrees to make a good faith effort to review any CNN-NS proposal for the right to relicense the ADAM Images via Television outside of the Territory; provided, however, that ADAM shall


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retain the right to negotiate such rights with any other party, and ADAM shall be under no obligation to enter into any agreement with CNN-NS, accept any CNN-NS offer or allow CNN-NS to match any other offer or to otherwise grant CNN-NS the right to license the ADAM Images for exhibition via Television outside of the Territory.


(b) Breaking News Images and Library Images. ADAM further agrees that throughout the Term hereof CNN-NS shall have the right to license the Breaking News Images at a rate of $50.00 per Image, the Custom Images at a rate of $250.00 per hour spent to create such Image and the Image Package pursuant to a standard rate card as determined by mutual agreement between CNN-NS and ADAM, to the Affiliates and the CNN Networks throughout the Territory. CNN-NS understands and agrees that CNN Interactive's use of such images is limited to (i) CNN Interactive's video-streaming of any programming which aired on the CNN Networks and included one of the ADAM Images and/or (ii) CNN Interactive's insertion of a still frame of one of the ADAM Images image(s) in a web version of a story which was already aired on any one of the CNN Networks (with such still frame used to be a "Raster Image" in .JPG and/or .GIF graphic format or other "Raster Formats" that may be used in the future, as such terms are commonly understood in the interactive world wide web industry.) ADAM agrees that it will provide CNN-NS with the name and contact numbers, facsimile number and address for the person(s) responsible for taking the orders from CNN-NS for the Breaking News Images and the Custom Images. ADAM agrees that it will use its commercially reasonable efforts to create the Breaking News Images and the Custom Images promptly from the time of CNN-NS's initial request, but in no case more than forty-five (45) days of CNN-NS's initial request. Notwithstanding any provision of this Agreement, during any twelve (12) month


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(c) Restrictions. CNN-NS acknowledges that with respect to the ADAM Images, this license only grants CNN-NS the rights to relicense the visual images to Affiliates and CNN Networks for exhibition via Television throughout the Territory and excludes any and all other rights, including the rights to the source code. CNN-NS covenants that it shall license the ADAM Images Products to the Affiliates and the CNN Networks pursuant to a standard CNN-NS license agreement which will contain all of the terms, restrictions and covenants set forth herein (a copy of which shall be provided to ADAM within thirty (30) days hereof as of courtesy). Except as expressly required or authorized herein, CNN-NS will not, nor authorize any entity to, transmit, modify, alter, distribute, exhibit, copy, duplicate, sublicense or otherwise use the ADAM Images or any portion thereof by any means whatsoever outside the Territory or to any entity not authorized herein. CNN-NS agrees that nothing in this Agreement shall provide CNN-NS with any other rights whatsoever to the ADAM Images, nor convey, confer, grant, assign or otherwise provide CNN-NS with copyright, title or any other proprietary or ownership interest in or to the ADAM Images or any elements thereof. CNN-NS further agrees that IT will not use nor authorize any of its Affiliates to use any part of the ADAM Images or the Logos, as defined in Paragraph 10 herein, as part of any kind of promotional material without the prior written consent of ADAM. Notwithstanding anything contained in this Agreement, CNN-NS does not have the right to license the ADAM Images for use in: (A) health related programming which is produced by companies primarily for internal distribution; or (B) in nationally distributed entertainment programming.


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2. Term. This Agreement shall remain in full force and effect from the date hereof through January 5, 2002 (the "Term"); provided, however, that should CNN-NS fail to collect Two Hundred Thousand U.S. Dollars (US$200,000.00) in Net Revenues, as such term is defined in Paragraph 5 below, per each year of the Term hereof, calculated within forty-five (45) days after the termination of each year during the Term, then both parties shall have the option to terminate this Agreement anytime within the first four (4) months of the commencement of each year of the Term starting in year 2 of the Term, upon either party's delivery of fifteen (15) days prior written notice delivered to the other party. Both parties agree that should either party terminate the Agreement after the first year of the Term, as specified herein, each will honor any existing agreements with the Affiliates for the distribution of the ADAM Images which shall not extend beyond six (6) months after the applicable effective termination date.


3. Limited Exclusivity. Except for the rights expressly granted to CNN-NS pursuant to Paragraph I hereof, ADAM retains all rights with respect to the ADAM Images. Subject to the terms of Paragraph 1, CNN-NS acknowledges and agrees that ADAM reserves the right to use, license, distribute or license others to do so (i) the ADAM Images to other television networks, solely outside of the Territory (the United States of America) and (ii) the ADAM Images for exhibition via any other medium other than Television, as defined above, within or outside the Territory. ADAM further agrees that it is the intent of both parties in this Agreement that CNN-NS be the sole licensee and distributor of the ADAM Images throughout the Territory for exhibition via Television, and ADAM will not license the ADAM Images during the Term hereof in any way that breaches the intent of this Agreement.


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4. Delivery.


(a) ADAM Images. ADAM shall deliver the Image Package on four (4) CDROM's to CNN-NS at its principal office in Atlanta within thirty (30) days of CNN-NS's written request. CNN-NS shall be responsible for the repackaging and distribution of the Image Package to the Affiliates and the CNN Networks in a form mutually agreed upon by the parties hereto. ADAM shall also be responsible for delivery of the Breaking News Images and the Custom Images to CNN-NS via the World Wide Web or, per CNN-NS's instructions, directly to the Affiliates and the CNN Networks directly via the World Wide Web, unless otherwise mutually agreed upon by the parties hereto within thirty (30) days of CNN-NS's written request or a reasonable time thereafter should such Breaking News Image or Custom Image involved require additional preparation time.


(b) Equipment Responsibility. As between the parties hereto, CNN-NS, the CNN Networks and/or its Affiliates shall be solely responsible for all construction, equipment, telecommunications service, decoding (if the signal carrying the Custom Images is encrypted) and any other charges necessary for the reception, distribution and exhibition of ADAM Images by CNN-NS and/or its Affiliates and/or the CNN Networks in the Territory. CNN-NS and/or its Affiliates and/or the CNN Networks shall be responsible for obtaining and complying with such necessary and appropriate authorizations, licenses and other permissions, if any, that may be required of CNN-NS by appropriate authority for the reception, transmission and exhibition of ADAM Images in the Territory. ADAM shall be responsible for obtaining and complying with such necessary and appropriate authorizations, licenses and other permissions, if any, that may be required of ADAM by the appropriate authority for the delivery of the ADAM Images, including,


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but not limited to, insurance for the shipment of the CD-ROM's containing the Image Package to CNN-NS.


5. Payment of Expenses and Revenue Sharing.


(a) Expenses. CNN-NS and ADAM agree that throughout the Term, ADAM shall be solely responsible for payment of all expenses directly and exclusively associated with the creation and delivery of the ADAM Images as specified above, including, but not limited to, the shipment of the CD-ROMs containing the Image Package and the delivery of the Breaking News Images and the Custom Images via the World Wide Web and all taxes associated therewith. The parties further agree that CNN-NS shall be responsible for all delivery costs as specified in Paragraph 4 as well as all sales and marketing expenses (the "Sales and Marketing Expenses") actually incurred by CNN-NS associated with the marketing and sale of the ADAM Images to the Affiliates and CNN Networks, including, but not limited to, the repackaging of the four (4) CD-ROMs containing the Image Package, production of the marketing material deemed necessary by CNN-NS in order to sell the ADAM Images, and any taxes related thereto, along with any other expenses the parties agree to in writing. If the parties mutually agree that ADAM shall handle the repackaging of the four (4) CD-ROMs which contain the Image Package instead of CNN-NS, ADAM shall be paid for any and all expenses associated with such repackaging with such amount not to exceed the line item set forth on the SM Expense Budget for the initial year of the Term, defined below and attached hereto as Schedule II. Both parties agree that Schedule I, attached hereto and by this reference expressly incorporated herein, sets forth a budget of the Sales and Marketing Expenses (the "SM Expense Budget") anticipated to be spent in year 1 of the Term of this Agreement as well as the actual manufacturing costs of each Image Package. Both parties agree that CNN-NS shall be responsible for submitting an updated SM


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Expense Budget to ADAM within forty-five (45) days of the expiration of the then current year of the Term. Both parties agree that they will make a good faith effort to agree on the terms of the most recently submitted SM Expense Budget within thirty (30) days of CNN-NS's submission of the Budget; provided, however, that should the parties fail to reach such agreement will use the SM Expense Budget agreed to for year 1 of this Agreement for such applicable year of the Term set forth as Schedule I and by this referenced incorporated herein.


(b) During each year of the Term, all revenues collected from the license of the ADAM Images throughout the Territory as specified in Paragraph 1 (the "Annual Gross Revenues") shall be paid to CNN-NS. CNN-NS agrees that it will use commercially reasonable efforts to maximize the Annual Gross Revenues hereunder and to collect all such license fees charged for the ADAM Images. From Annual Gross Revenues, CNN-NS shall be entitled each year to deduct and pay the Sales and Marketing Expenses actually incurred by CNN-NS (with such amounts not to exceed the SM Expenses Budget as submitted by CNN-NS quarterly to ADAM pursuant to Paragraph 5(a) above, as well as the actual manufacturing costs of the ADAM Images which amount per Image Package is set forth as a line Item on Schedule I and shall remain the same each year of the Term hereof unless otherwise agreed upon by the parties in writing. Sixty-five percent (65%) of any remaining revenues actually collected after all deductions set forth in this Subparagraph (the "Net Revenues") shall be paid to ADAM within forty-five (45) days after the end of each quarter of each year of the Term hereof along with a definitive report detailing the Sales and Marketing Expenses paid as well as the revenues collected from the Affiliates and CNN Networks for the quarter just ended (with the first such quarter terminating on April 14, 1998). Past due payments on all amounts due and payable as


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provided for in this Agreement shall bear interest, which shall accrue fifteen (15) days after the date such payment was due, at a rate of one and one-half percent (1 1/2%) per month, or, in the event the parties are precluded by law from establishing such rate, the maximum legal interest rate permitted by law. CNN-NS agrees that it shall supply ADAM with estimate reports (the "Estimate Reports") on a quarterly basis throughout the Term detailing estimates of the Marketing and Sales Expenses paid as well as the revenues collected from the Affiliates and the CNN Networks (with such Estimate Reports to be delivered no later than thirty (30) days after the termination of each quarter of each year throughout the Term hereof with the first such quarter terminating on April, 1998 and with ADAM understanding and agreeing that the amounts set forth in such Reports are strictly estimates and not final numbers to be relied upon as such).


(c) Right to Audit. S ...