<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____.
Commission File Number: 0-25447
-------
PCORDER.COM, INC.
(Exact name of registrant as specified in its charter)
Delaware 74-2720849
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5001 Plaza on the Lake
Austin, Texas
(512) 684-1100 78746
------------------ -----
(Address of principal executive offices (Zip Code)
and telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
As of August 9, 1999, there were 2,788,063 shares of the Registrant's Class A
Common Stock outstanding and 12,757,000 shares of the Registrant's Class B
Common Stock outstanding.
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INDEX
PCORDER.COM, INC.
Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets as of June 30, 1999 (unaudited) and 3
December 31, 1998
Condensed Statements of Operations for the Three Months Ended 4
June 30, 1999 and 1998 (unaudited) and for the Six Months
Ended June 30, 1999 and 1998 (unaudited)
Condensed Statements of Cash Flows for the Six Months Ended 5
June 30, 1999 and 1998 (unaudited)
Notes to Condensed Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition 10
and Results of Operations
PART II OTHER INFORMATION
Item 1. Legal Proceedings 30
Item 2. Changes in Securities 30
Item 3. Defaults Upon Senior Securities 30
Item 4. Submission of Matters to a Vote of Securities Holders 30
Item 5. Other Information 30
Item 6. Exhibits and Reports on Form 8-K 30
SIGNATURES 31
EXHIBIT INDEX 32
2
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
pcOrder.com, Inc.
Condensed Balance Sheets
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------------------- -------------------------
ASSETS (Unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 47,928 $ 4,726
Short-term investments 696 -
Accounts receivable, net 21,010 4,775
Prepaid expenses and other assets 422 150
------------------------- -------------------------
Total current assets 70,056 9,651
Property and equipment, net 2,154 1,938
Long-term investments 2,774 -
Other assets - 665
------------------------- -------------------------
Total assets $ 74,984 $ 12,254
========================= =========================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 1,130 $ 612
Accrued liabilities 9,573 3,150
Payable to Trilogy, net 539 4,506
Deferred revenue 25,867 10,428
------------------------- -------------------------
Total current liabilities 37,109 18,696
Deferred revenue 3,988 2,103
Commitments and contingencies (Note 9)
Stockholders' equity (deficit)
Common stock, par value $.01 per share - 50,000,000 shares
authorized; 15,533,242 and 12,948,602 issued and outstanding in
1999 and 1998, respectively 155 129
Additional paid-in capital 51,855 4,024
Deferred stock compensation (1,403) (1,726)
Unrealized gain/(loss) on investments (14) -
Accumulated deficit (16,706) (10,972)
------------------------- -------------------------
Total stockholders' equity (deficit) 33,887 (8,545)
------------------------- -------------------------
Total liabilities and stockholders' equity (deficit) $ 74,984 $ 12,254
========================= =========================
</TABLE>
See notes to condensed financial statements
3
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pcOrder.com, Inc.
Condensed Statements of Operations
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------------------ ------------------------------------------
1999 1998 1999 1998
------------------- ------------------- ------------------- -------------------
Revenues:
<S> <C> <C> <C> <C>
Software and subscriptions $ 4,288 $ 3,075 $ 8,232 $ 5,472
Content and services 4,620 2,003 8,336 4,111
------------------- ------------------- ------------------- -----------------
Total revenues 8,908 5,078 16,568 9,583
Cost of revenues:
Software and subscriptions 821 418 1,696 784
Software and subscriptions - affiliated 301 216 627 430
royalty fee
------------------- ------------------- ------------------- -----------------
Total software and subscriptions 1,122 634 2,323 1,214
Content and services 3,357 1,417 6,100 2,363
------------------- ------------------- ------------------- -----------------
Total cost of revenues 4,479 2,051 8,423 3,577
------------------- ------------------- ------------------- -----------------
Gross profit 4,429 3,027 8,145 6,006
Operating expenses:
Research and development 1,537 975 2,768 1,785
Selling and marketing 4,723 2,170 8,698 3,723
General and administrative 1,386 660 2,803 1,296
Amortization of deferred stock
compensation 321 227 694 227
------------------- ------------------- ------------------- -----------------
Total operating expenses 7,967 4,032 14,963 7,031
Operating loss (3,538) (1,005) (6,818) (1,025)
Interest income 604 38 841 45
------------------- ------------------- ------------------- -----------------
Loss before income taxes (2,934) (967) (5,977) (980)
Income tax benefit - - (243) -
------------------- ------------------- ------------------- -----------------
Net loss $ (2,934) $ (967) $(5,734) $ (980)
=================== =================== =================== =================
Basic and diluted net loss per share $ (0.19) $ (0.08) $ (0.39) $ (0.08)
=================== =================== =================== =================
Weighted average shares outstanding 15,530 12,811 14,723 12,803
=================== =================== =================== =================
</TABLE>
See notes to condensed financial statements
4
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pcOrder.com, Inc.
Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------------------------------
1999 1998
------------------------ ------------------------
Operating activities
<S> <C> <C>
Net loss $ (5,734) $ (980)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation 1,069 385
Amortization of deferred stock compensation 694 227
Changes in operating assets and liabilities:
Accounts receivable, net (16,235) (4,851)
Prepaid expenses and other assets 305 -
Accounts payable 518 85
Accrued liabilities 6,423 226
Payable to Trilogy, net (3,802) 2,184
Deferred revenue 17,324 8,587
------------------------ ------------------------
Net cash provided by operating activities 562 5,863
Investing activities
Purchase of short-term and long-term investments (3,484) -
Purchase of property and equipment (1,285) (1,687)
------------------------ ------------------------
Net cash used in investing activities (4,769) (1,687)
Financing activities
Proceeds from the issuance of common stock, net 47,239 -
Proceeds from the exercise of stock options 170 200
------------------------ ------------------------
Net cash provided by financing activities 47,409 200
------------------------ ------------------------
Increase in cash and cash equivalents 43,202 4,376
Cash and cash equivalents at beginning of period 4,726 2,207
------------------------ ------------------------
Cash and cash equivalents at end of period $ 47,928 $ 6,583
======================== ========================
</TABLE>
See notes to condensed financial statements
5
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pcOrder, Inc.
Notes to Condensed Financial Statements
(Unaudited)
1. Business
pcOrder.com, Inc., (the "Company") is a majority owned subsidiary of Trilogy
Software, Inc. and its predecessor entities including Trilogy Development Group,
Inc. ("parent" or "Trilogy"). The Company commenced operations as a separate
business unit within Trilogy on July 1, 1993 and was incorporated as a separate
entity on July 18, 1994. The Company provides electronic commerce technology
and tailored solutions to the manufacturers, distributors and resellers of
computer products primarily in the U.S. The Company's products include software
applications and support for those applications. The software applications
consist of an integrated application suite that includes cataloging, quoting,
pricing, availability, and product configuration. Content for these
applications in the form of detailed product databases containing configuration,
pricing, availability and specifications are also provided and updated by the
Company. Customers can choose to have the Company host the software
applications or install them at their site. In addition, the Company provides
consulting services to help customers build and integrate electronic commerce
capabilities to meet their specified needs.
Effective February 26, 1999, the Company completed its initial public offering
of 2,530,000 shares at $21 per share. Offering proceeds, net of aggregate
expenses to the Company (including underwriters' discount), totaled
approximately $47.2 million.
2. Basis of Presentation
The quarterly financial information presented herein should be read in
conjunction with the Company's annual financial statements for the year ended
December 31, 1998, which can be found in the Company's registration statement
filed on Form S-1, as amended (Registration No. 333-62985). The accompanying
unaudited interim financial statements reflect all adjustments (which include
only normal, recurring adjustments) that are, in the opinion of management,
necessary to state fairly the results for the periods presented. The results
for such periods are not necessarily indicative of the results to be expected
for the full fiscal year.
3. Investments
The Company's investments consist primarily of high-quality short to long term
commercial paper, corporate notes, and money market mutual funds. The
investments are classified as available-for-sale and are reported at fair value
in the accompanying condensed balance sheets. As of June 30, 1999, unrealized
losses were approximately $14,000 and are reported as a component of
stockholders' equity within comprehensive income. Unrealized losses are charged
against income when a decline in fair value is determined to be other than
temporary.
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4. Related Party Transactions
The Company and Trilogy have entered into a number of agreements that govern the
business activities between the two companies. Pursuant to such agreements, the
Company is required to pay Trilogy royalties for the use of Trilogy's technology
and management fees for services performed by Trilogy on behalf of the Company.
For the three months ended June 30, 1999 and 1998, the Company incurred royalty
fees due to Trilogy in the amounts of $301,000 and $216,000, respectively. For
the six months ended June 30, 1999 and 1998, the Company incurred royalty fees
due to Trilogy in the amounts of $627,000, and $430,000, respectively.
Additionally, the Company is required to pay for certain management services
performed by Trilogy on behalf of the Company. For the three months ended June
30, 1999 and 1998, the Company was charged approximately $65,000 and $64,000,
respectively, for such services. For the six months ended June 30, 1999 and
1998, the Company was charged approximately $130,000 and $168,000, respectively.
The Company periodically makes payments to satisfy the amounts due to Trilogy
pursuant to the intercompany agreements discussed above. No such payment was
made during the three months ended June 30,1999. However, during the six months
ended June 30, 1999, the Company paid Trilogy approximately $5.4 million. Such
amount had accumulated over several quarters and was paid in part with proceeds
generated by the Company's initial public offering. As of June 30, 1999, the
Company owed Trilogy approximately $539,000 which was comprised primarily of the
royalty and management fees, as discussed above.
5. Net Loss per Share
For the three months ended June 30, 1999 approximately 1,949,000 in common stock
equivalents were excluded from the diluted earnings per share calculation. For
the six months ended June 30, 1999, such amount totaled approximately 1,879,000
shares. There were no common stock equivalents for the three months and six
months ended June 30, 1998. The aforementioned shares were excluded from the
diluted earnings per share calculations for the three months and six months
ended June 30, 1999, as they were anti-dilutive due to the Company's net loss.
Accordingly, the diluted net loss per share amounts were the same as the basic
net loss per share amounts for all periods presented.
7
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6. Comprehensive Income
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130
established new rules for the reporting and display of comprehensive income and
its components. The adoption of SFAS 130 had no impact on the Company's net
income (loss) or stockholders' equity. The components of comprehensive loss for
the periods presented in the accompanying statements of operations are as
follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------------------ ------------------------------------------
1999 1998 1999 1998
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Net Loss $ (2,934) $ (967) $ (5,734) $ (980)
Unrealized gain/(loss) on investments (14) - (14) -
------------------- ------------------- ------------------- -------------------
Comprehensive loss $ (2,948) $ (967) $ (5,748) $ (980)
=================== =================== =================== ===================
</TABLE>
7. Stockholders' Equity
The Company's authorized capital stock consists of 37,243,000 shares of Class A
common stock, par value of $.01 per share, 12,757,000 shares of Class B common
stock, par value of $.01 per share, and 10,000,000 shares of preferred stock,
par value $.01 per share. On February 2, 1999, each share of common stock of
the Company not owned by Trilogy was reclassified into one share of Class A
common stock and each share of common stock owned by Trilogy was reclassified
into one share of Class B common stock. The Class A common stock and Class B
common stock have substantially identical rights other than as described below.
The Class B common stock entitles its holders to eight votes per share while the
Class A common stock entitles its holders to one vote per share on all matters
submitted to a vote or for the consent of stockholders. The shares of Class B
common stock are convertible at any time prior to a tax free spin-off at the
option of the holder into shares of Class A common stock on a share-for-share
basis. Each outstanding share of Class B common stock will automatically be
converted into a share of Class A common stock upon any transfer of such share,
if after the transfer, such share is not owned by Trilogy, an affiliate of
Trilogy, or a non-affiliate of Trilogy which acquires more than 50% of the then
outstanding Class B common stock in a single transaction. In addition, subject
to certain conditions, then outstanding shares of Class B common stock will
automatically convert, after the fifth anniversary of the first transfer of
Class B common stock in a tax-free spin-off. The effect of this
reclassification has been reflected for all periods presented in the
accompanying financial statements.
8. Income Taxes
The Company's operations are included in the consolidated income tax returns
filed by Trilogy. Furthermore, the Company and Trilogy have entered into an
intercompany tax allocation agreement. Accordingly, the current income tax
benefit included in the accompanying condensed statements of operations for the
six months ended June 30, 1999, has been computed based on the amount of the
benefit to the consolidated group expected to be obtained through utilization of
the Company's net
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operating losses and other tax attributes. Deferred taxes are computed as if the
Company had not been included in the consolidated tax group of Trilogy.
9. Commitments and Contingencies
The Company has filed a lawsuit against a former employee, and the former
employee has filed a separate lawsuit against the Company regarding commissions
owed to the former employee by the Company. While the ultimate result of this
matter cannot be currently predicted, management does not expect it to have a
material adverse effect on the Company's financial condition or results of
operations. However, litigation is subject to inherent uncertainties and,
therefore, there can be no assurance that this action will not have a material
adverse effect on the Company's financial condition or results of operations.
10. Recent Accounting Pronouncements
In March 1998, the American Institute of Certified Public Accountants ("AICPA")
issued Statement of Position ("SOP 98-1"), Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. SOP 98-1 requires that
entities capitalize certain costs related to internal-use software once certain
criteria are met. The Company adopted SOP 98-1 effective January 1, 1999. Such
adoption did not have a material impact on the Company's financial condition or
results of operations.
Effective December 15, 1998, the AICPA issued SOP 98-9, Modification of SOP 97-
2, "Software Revenue Recognition", With Respect to Certain Transactions. SOP
98-9 amends SOP 97-2 and 98-4 extending the deferral of the application of
certain passages of SOP 97-2 provided by SOP 98-4 through fiscal years beginning
on or before March 15, 1999. All other provisions of SOP 98-9 are effective for
transactions entered into in fiscal years beginning after March 15, 1999. The
Company does not believe that the adoption of SOP 98-9 will have a material
effect on the Company's financial condition or results of operations.
9
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This Report on Form 10-Q includes forward-looking statements, including the
statements relating to the amount of deferred revenue estimated to be recognized
as revenue within the next 12 months, recognition of revenues from our
subscription-based services and the Compaq agreement, our belief that existing
cash and cash equivalents and related investments will be sufficient to fund our
anticipated cash needs for working capital and capital expenditures for the next
12 months, and our expectations regarding future expense levels. Any forward-
looking statements we make involve risks and uncertainties, including those
described under "Risk Factors That May Affect Results of Operations and
Financial Condition" below. Actual results may differ materially. All forward-
looking statements included in this report are made as of the date of this
report, and we assume no obligation to update these statements.
Overview
pcOrder is a leading provider of software applications and content and computer
product information and related services, all of which are designed to enable
the computer industry's suppliers, resellers and end users to buy and sell
products on-line. Increasingly, more business is being conducted over the
Internet. This type of business is commonly known as e-commerce. Our tailored
solutions, which include software applications and content, are designed to
enable computer industry participants to take advantage of the increasing
adoption of e-commerce to automate sales and distribution functions such as
product search, comparison, configuration, pricing, financing, ordering and
reseller selection. Our solutions are designed to enable our customers to lower
their cost of sales, reduce inventory levels, and more efficiently interact with
their business partners and customers.
We derive our revenues from software and subscription fees and related content
and service fees. Software and subscription fees consist of subscription-based
and perpetual license software arrangements. Currently, we derive the majority
of our software and subscription fees from subscription-based arrangements, but
may from time to time grant perpetual licenses to accommodate individual
customer needs. Content fees are charged on a subscription basis for access to
and maintenance of information stored in our database. Our service fees consist
of providing integration, customization and training services to our customers.
These fees are generally charged on a time and materials basis. However, we have
in the past and may from time to time in the future provide these services on a
fixed price basis. Additionally, we often provide hosting services to our
software customers for a monthly fee.
Historically, our content and related services have been sold in conjunction
with our software applications. However, during the quarter ended March 31,
1999, we launched ContentSourceTM, a subscription-based service that allows
customers to subscribe solely to our content without purchasing our software.
This service is primarily targeted towards Internet retailers, corporate
resellers, distributors, and third parties that provide shopping services to
Internet portals. Although no revenues from this subscription-based service
were recognized during the six months ended June 30, 1999, revenues from this
service are expected to start being recognized during the remainder of 1999.
In June 1999, the Company expanded its customer relationship with Compaq
Computer Corporation. Under the new agreement, the Company will provide a
broader range of software applications and
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services across more of Compaq's electronic commerce initiatives and include
international as well as domestic deployments. The agreement is a multi-year
subscription-based agreement, but can be terminated earlier by either party upon
prior notice in the event of a payment default, material breach, failure of the
Company to provide certain deliverables, and termination of business. It is
expected that revenues from this agreement will begin to be recognized during
the remainder of 1999.
Revenue from perpetual licenses and software subscriptions is recognized when
persuasive evidence of an arrangement exists, delivery of the product has
occurred, the fee is fixed or determinable and collectibility is probable. In
the case of perpetual licenses, revenue is recognized immediately upon
achievement of the above criteria. In the case of subscriptions, revenue
recognition commences upon achievement of the above criteria, but is generally
recognized over the life of the arrangement. Software maintenance fees relating
to perpetual licenses are recognized over the term of the applicable maintenance
agreement. Content fees, including fees from ContentSourceTM, are generally
recognized over the applicable service period, which generally commences upon
initial content entry or delivery.
Time and materials service fees are recognized as the services are performed. We
recognize revenue on fixed price service arrangements (1) upon the completion of
specific contractual events, or (2) based on an estimated percentage of
completion as work progresses.
We record cash advances and amounts billed in excess of revenue recognized as
deferred revenue. Our deferred revenue balance on June 30, 1999 was $29.9
million. Approximately $25.9 million of this deferred revenue is expected to be
recognized as revenue within the following 12 months, with the remaining amount
estimated to be recognized in later periods. The deferred revenue balance
generally results from billings to and collections from customers in advance of
receipt of products or performance of services. The timing and amount of cash
advances from customers can vary significantly depending on specific contract
terms and can therefore have a significant impact on the amount of deferred
revenue in any given period. Deferred revenue is not indicative of our contract
backlog or future revenues. We derive the majority of our revenues from
subscription based arrangements which may have pre-payment terms resulting in
deferred revenue and which require renewal for license access and service beyond
the contract period. Fluctuations in deferred revenue result in similar
fluctuations in our cash flow from operations.
In connection with an intercompany license agreement with Trilogy, we are
obligated to pay Trilogy royalties based on fees generated from perpetual
license agreements, software maintenance and subscription-based licenses. Also,
we have entered into some agreements with Trilogy under the terms of which
Trilogy provides some administrative and corporate support services to us,
including some tax administration, payroll, payroll accounting, banking,
corporate finance, recruiting and employee training services. In addition, we
have entered into a tax allocation agreement with Trilogy. See Notes 4 and 8 of
the Notes to Condensed Financial Statements.
11
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Results of Operations
The following table sets forth our results of operations expressed as a
percentage of total revenues. Our historical operating results are not
necessarily indicative of the results for any future period.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------------
1999 1998 1999 1998
---------- ---------- --------- --------
<S> <C> <C> <C> <C>
Revenues:
Software and subscriptions 48% 61% 50% 57%
Content and services 52 39 50 43
---------- ---------- --------- --------
Total revenues 100 100 100 100
Cost of revenues:
Software and subscriptions 13 12 14 13
Content and services 37 28 37 24
---------- ---------- --------- --------
Total cost of revenues 50 40 51 37
---------- ---------- --------- --------
Gross profit 50 60 49 63
Operating expenses:
Research and development 17 19 17 19
Selling and marketing 53 43 52 39
General and administrative 15 13 17 13
Amortization of deferred stock compensation 4 5 4 2
---------- ---------- --------- --------
Total operating expenses 89 80 90 73
Operating loss (39) (20) (41) (10)
Interest income 6 1 5 -
---------- ---------- --------- --------
Loss before income taxes (33) (19) (36) (10)
Income tax benefit - - 1 -
---------- ---------- --------- --------
Net loss (33)% (19)% (35)% (10)%
========== ========== ========= ========
</TABLE>
Revenues
Total revenues increased 75% to $8.9 million for the three months ended June 30,
1999 from $5.1 million for the three months ended June 30, 1998. Total revenues
increased by 73% to $16.6 million for the six months ended June 30, 1999 from
$9.6 million for the six months ended June 30, 1998. The overall increase in
revenues for both periods is primarily attributable to an increase in our
customer base for our software applications, content services and related
software integration, customization, training and hosting services.
Software and Subscriptions. Software and subscription revenues increased 39% to
$4.3 million for the three months ended June 30, 1999 from $3.1 million for the
three months ended June 30, 1998. Such amounts represented approximately 48% of
total revenues for the three months ended June 30, 1999 and approximately 61% of
total revenues for the three months ended June 30, 1998. Software and
subscription revenues increased 50% to $8.2 million for the six months ended
June 30, 1999 from $5.5 million for the six months ended June 30, 1998. Such
amounts represented approximately 50% of total revenues for the six months ended
June 30, 1999 and approximately 57% of total revenues for the six months ended
June 30, 1998. The increase in both periods in absolute dollars was due
primarily to higher subscription revenues related to our expanded customer base
and, to a lesser extent, higher software maintenance revenues period to period.
Furthermore, revenues from
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perpetual licenses increased during the six months ended June 30, 1999 when
compared to the same period in 1998. Software and subscription revenues
decreased as a percentage of total revenues for both periods primarily due to a
higher relative increase in content and service revenues related to additional
software integration, customization and training fees and, to a lesser extent,
higher content and hosting fees. Such increases are attributable to an increase
in new customers period to period as well as an increase in the level of
services provided to our existing customer base.
Content and Services. Content and service revenues increased 131% to $4.6
million for the three months ended June 30, 1999 from $2.0 million for the
three months ended June 30, 1998. Such amounts represented approximately 52% of
total revenues for the three months ended June 30, 1999 and approximately 39% of
total revenues for the three months ended June 30, 1998. Content and service
revenues increased 103% to $8.3 million for the six months ended June 30, 1999
from $4.1 million for the six months ended June 30, 1998. Such amounts
represented approximately 50% of total revenues for the six months ended June
30, 1999 and approximately 43% of total revenues for the six months ended June
30, 1998. The increase in absolute dollars and as a percentage of total
revenues for both periods was due primarily to additional software integration,
customization and training fees, and to a lesser extent, higher content and
hosting fees. Such increases are attributable to an increase in new customers
period to period as well as an increase in the level of services provided to our
existing customer base.
Cost of Revenues
Software and Subscriptions. Cost of software and subscription revenues consists
primarily of royalties paid to Trilogy and the cost of providing software
maintenance. Cost of software and subscription revenues increased 77% to $1.1
million for the three months ended June 30, 1999 from $0.6 million for the three
months ended June 30, 1998. Such amounts represented approximately 13% of
software and subscription revenues for the three months ended June 30, 1999 and
approximately 12% of software and subscription revenues for the three months
ended June 30, 1998. Cost of software and subscription revenues increased 91%
to $2.3 million for the six months ended June 30, 1999 from $1.2 million for the
six months ended June 30, 1998. Such amounts represented approximately 14% of
software and subscription revenues for the six months ended June 30, 1999 and
approximately 13% of software and subscription revenues for the six months ended
June 30, 1998. The increase in cost of software and subscription revenues in
absolute dollars for both periods was due primarily to (i) an increase in
customer support headcount and the related operating expenses and, to a lesser
extent, (ii) an increase in royalties paid to Trilogy on software applications
as a result of increased total revenues.
Content and Services. Cost of content and service revenues consists primarily
of the cost of providing access, entry, update and maintenance services for
computer product information services and the cost of in-house and contract
personnel providing software integration, customization and training services.
Cost of content and service revenues increased 137% to $3.4 million for the
three months ended June 30, 1999 from $1.4 million for the three months ended
June 30, 1998. Such amounts represented approximately 73% of content and service
revenues for the three months ended June 30, 1999 and approximately 71% of
content and service revenues for the three months ended June 30, 1998. Cost of
content and service revenues increased 158% to $6.1 million for the six months
ended June 30, 1999 from $2.4 million for the six months ended June 30, 1998.
Such amounts represented approximately 73% of content and service revenues for
the six months ended June 30, 1999 and approximately 57% of content and service
revenues for the six months ended June
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30, 1998. The increase in cost of content and service revenues in absolute
dollars and as a percentage of content and service revenues for both periods was
due primarily to (i) an increase in headcount and related costs within our
content management group and (ii) increased personnel and other costs associated
with providing increased software integration, customization, training and
hosting services to our software customers. Additionally, revenue under a fixed
fee arrangement was recognized during the first quarter of 1998 for which the
majority of the associated costs were expensed in the fourth quarter of 1997,
thus further impacting the percentage changes for the three and six months ended
June 30, 1998.
Operating Expenses
Research and Development. Research and development expenses consist primarily
of personnel costs to support our product development efforts. Research and
development expenses increased 58% to $1.5 million for the three months ended
June 30, 1999 from approximately $1.0 million for the three months ended June
30, 1998. Such amounts represented approximately 17% of total revenues for the
three months ended June 30, 1999 and approximately 19% of total revenues for the
three months ended June 30, 1998. Research and development expenses increased
55% to $2.8 million for the six months ended June 30, 1999 from $1.8 million for
the six months ended June 30, 1998. Such amounts represented approximately 17%
of total revenues for the six months ended June 30, 1999 and approximately 19%
of total revenues for the six months ended June 30, 1998. The increase for both
periods was primarily due to an increase in internal development personnel and
outsourced personnel costs. Although quarterly results may fluctuate, we
believe that continued investment in research and development is critical to
attaining our strategic objectives and, as a result, expect research and
development costs in absolute dollars to increase in future periods.
Selling and Marketing. Selling and marketing expenses consist primarily of
salaries and outsourced personnel costs, advertising, travel, tradeshows and
public relations expenses. Selling and marketing expenses increased 118% to
$4.7 million for the three months ended June 30, 1999 from approximately $2.2
million for the three months ended June 30, 1998. Such amounts represented
approximately 53% of total revenues for the three months ended June 30, 1999 and
approximately 43% of total revenues for the three months ended June 30, 1998.
Selling and marketing expenses increased 134% to $8.7 million for the six months
ended June 30, 1999 from $3.7 million for the six months ended June 30, 1998.
Such amounts represented approximately 52% of total revenues for the six months
ended June 30, 1999 and approximately 39% of total revenues for the six months
ended June 30, 1998. The increase in absolute dollars and as a percentage of
revenues for both periods was due primarily to an increase in selling and
marketing personnel, higher overall sales costs related to higher orders and
increased marketing campaign expenditures. Although quarterly results may
fluctuate, we believe that such expenses will increase in absolute dollars in
future periods as we continue to expand our sales and marketing organization and
activities.
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General and Administrative. General and administrative expenses consist
primarily of personnel costs, recruiting and professional legal and accounting
services, as well as management fees paid to Trilogy. General and
administrative expenses increased 110% to $1.4 million for the three months
ended June 30, 1999 from $660,000 for the three months ended June 30, 1998. Such
amounts represented approximately 15% of total revenues for the three months
ended June 30, 1999 and approximately 13% of total revenues for the three months
ended June 30, 1998. General and administrative expenses increased 116% to $2.8
million for the six months ending June 30, 1999 from $1.3 million for the six
months ended June 30, 1998. Such amounts represented approximately 17% of total
revenues for the six months ended June 30, 1999 and approximately 13% of total
revenues for the six months ended June 30, 1998. The increase in absolute
dollars and as a percentage of revenues for both periods was primarily due to
increased personnel and related costs necessary to support our growth and
facilities, as well as the additional expenses related to being a public
company. Although quarterly results may fluctuate, we believe that general and
administrative expenses will increase in absolute dollars in future periods as
we expand our personnel and infrastructure to support our growth.
Amortization of Deferred Stock Compensation. We record deferred stock
compensation expense for the difference between the exercise price of certain
stock option grants and the deemed fair value of the Company's common stock at
the time of such grants. Such amount is amortized over the vesting periods of
the underlying options. For the three months ended June 30, 1999 and 1998, such
amortization was approximately $321,000 and $227,000, respectively. For the six
months ended June 30, 1999 and 1998, the amortization of deferred stock
compensation was $694,000 and $227,000, respectively.
Interest Income. Interest income represents income earned on cash and cash
equivalents and our short and long-term investments. Interest income increased
to approximately $604,000 for the three months ended June 30, 1999 from
approximately $38,000 for the three months ended June 30, 1998. Interest income
increased to approximately $841,000 for the six months ended June 30, 1999 from
approximately $45,000 for the six months ended June 30, 1998. The increase in
interest income for both periods is due to the increase in our cash and cash
equivalents and short-term and long-term investments as a result of our recently
completed initial public offering.
Income Taxes. We are included in the consolidated income tax return of, and
have entered into a tax sharing agreement with, Trilogy. Should Trilogy's
ownership interest fall below 80% of the outstanding shares, we will no longer
be included in the consolidated group or be subject to the tax sharing
agreement. See Note 8 of the Notes to Condensed Financial Statements.
For the three months ended June 30, 1999 and 1998 our effective tax rate was 0%.
For the six months ended June 30, 1999 and 1998, our effective tax rate was 4%
and 0%, respectively. The effective tax rate for each period is based on the
amount of benefit that the consolidated group expects to obtain through
utilization of our net operating losses and other tax attributes. Had we filed
separate income tax returns, our effective tax rate would have been 0% for all
periods presented reflecting the uncertain future utilization of our deferred
tax assets.
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Liquidity and Capital Resources
From inception through 1996, we financed our operations primarily through
advances from our parent, Trilogy. Since 1997, we have primarily financed our
operations from cash provided by operations. As of June 30, 1999, we had
approximately $47.9 million in cash and cash equivalents and approximately $3.5
million in short and long-term investments reflecting the proceeds received in
our recent initial public offering. As of June 30, 1999, our principal
commitments consisted of obligations outstanding under operating leases.
Although we have no material commitments for capital expenditures, we anticipate
an increase in our capital expenditures and lease commitments consistent with
the aforementioned anticipated growth in operations, infrastructure and
personnel.
Cash provided by operations was $562,000 and $5.9 million for the six months
ended June 30, 1999 and 1998, respectively. Cash provided by operations for the
six months ended June 30, 1999 resulted primarily from an increase in deferred
revenue, accrued liabilities, and to a lesser extent, non-cash expenses,
partially offset by an increase in accounts receivable and a reduction in the
payable to Trilogy. Cash provided by operations for the six months ended June
30, 1998 resulted primarily from favorable changes in the Company's operating
assets and liabilities, primarily increases in deferred revenue and the payable
to Trilogy.
Net cash used in investing activities was $4.8 million and $1.7 million for the
six months ended June 30, 1999 and 1998, respectively. Cash used in investing
activities for the six months ended June 30, 1999 was due to the purchase of
short-term and long-term available for sale investments and the purchase of
property and equipment. For the six months ended June 30, 1998, cash used in
investing activities was related to the purchase of property and equipment. In
1998, we also had expenditures for leasehold improvements related to the move
into our then current facility.
For the six months ended June 30, 1999, cash provided by financing activities
totaled $47.4 million and was almost entirely attributable to our initial public
offering. For the six months ended June 30, 1998, cash from financing
activities was $200,000 and resulted from the exercise of stock options. In
February 1999, we completed our initial public offering of 2,530,000 shares of
Class A common stock with net proceeds totaling approximately $47.2 million. We
believe that our existing cash and cash equivalents and related investments will
be sufficient to fund our anticipated cash needs for working capital and capital
expenditures for at least the next 12 months. However, there can be no
assurances that we will not be required to raise additional financing prior to
such time, that additional financing will be available when needed or that, if
available, such financing will be available on terms favorable to us and our
stockholders.
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Year 2000 Compliance
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. This could result in system failures or miscalculations,
causing disruptions of operations including, a temporary inability to process
transactions, send invoices or engage in other normal business activities. As a
result, many companies' software and computer systems may need to be upgraded or
replaced to comply with the "Year 2000" requirements. We use a number of
computer software programs and operating systems and our proprietary solutions
include source code which must address the Year 2000 issue. However, we believe
that our Year 2000 issues are limited to information technology systems, such as
software programs and computer operating systems, and that because our business
is not solely dependent on the use of non-information technology systems, such
as embedded systems which can be devices used to control, monitor or assist the
operation of equipment and machinery, the failure of any of these non-
information technology systems as a result of Year 2000 issues would not have a
material adverse effect on our operations.
We rely, in part, on Trilogy's internal computer systems. We have been informed
by Trilogy that Trilogy's internal computer systems are Year 2000 compliant. We
have completed a review of our information technology systems and the products
for which we currently provide maintenance and support, which involved testing
and verification as described below. Based on this review, we believe our own
information technology systems and the products for which we currently provide
maintenance and support are Year 2000 compliant. Our Year 2000 compliance effort
consisted of verifying and testing the ability of the products for which we
currently provide maintenance and support to successfully handle the date change
from December 31, 1999 to January 1, 2000, date changes from February 28 to
February 29 and arbitrary dates ranging from 2000 to 2037. We have not
historically made any material expenditures in readying our information
technology systems or currently supported products for the Year 2000 and have no
current plans to expend any material amounts in connection with Year 2000
compliance.
Notwithstanding the foregoing, Year 2000 errors or defects may be discovered in
our current or future products. Any failure by us to make our products Year 2000
compliant, or if our products are not Year 2000 compliant as a result of a
failure of Trilogy's products to be Year 2000 compliant, could result in a
decrease in sales of our products, unanticipated expenses to address Year 2000
problems or significant liabilities resulting from losses suffered by our
customers due to these Year 2000 problems, any of which could have an adverse
effect on us. We do not have a contingency plan for the remediation of Year 2000
problems that may effect our information technology systems and products, or the
third-party equipment and software utilized by us, and it will be necessary for
us to make the necessary expenditures to assess and remedy these problems in the
event they arise in the future, which expenditures, if any, we cannot estimate.
These expenditures, if required, could have an adverse effect on us.
Our solutions also utilize and depend on third-party equipment and software that
may not be Year 2000 compliant. We contacted the vendors of most of these
products to ascertain their Year 2000 compliance. Based on information supplied
by these third-party vendors, our officially supported products developed using
Visual Basic 5, Visual C++ or Java can be certified Year 2000 compliant only
through December 31, 2036, the last date which we tested and verified. We
estimate that this certification applies to 90% to 95% of our total products.
Many of our products also use or rely on Microsoft's SQL Server product, which
has been certified Year 2000 compliant through December 31, 9999. We believe
that approximately 1.0% of our products use or rely on third-party vendor
software which may be subject to Year 2000 issues and for which we have received
no assurance of Year 2000 compliance. To the extent any of our products are
customized, whether by us or a third
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party, there can be no assurance that any customized product will continue to be
Year 2000 compliant. Failure of third-party equipment or software, or of systems
maintained by our suppliers, to operate properly with regard to the Year 2000
and thereafter could require us to incur unanticipated expenses to remedy any
problems, which could have an adverse effect on us. In addition, to the extent
our products are installed on customers' systems which rely on other software,
firmware or hardware which may not be Year 2000 compliant, problems in
communications among industry participants could result in a delay in our
products achieving market acceptance. Further, the purchasing patterns of
customers or potential customers may be affected by Year 2000 issues as
companies expend significant resources to correct their current systems for Year
2000 compliance. These expenditures may result in reduced funds available to
purchase products from us of computer products manufacturers, which could have
an adverse effect on us.
The information contained in this Report on Form 10-Q related to the Year 2000
constitutes Year 2000 Readiness Disclosure for purposes of the Year 2000
Information and Readiness Disclosure Act. That act does not limit liability
under the securities laws.
Risk Factors That May Affect Results of Operations and Financial Condition
Our future operations, financial performance, business and share price may be
affected by a number of factors, including the following, any of which could
cause actual results to vary materially from any forward-looking statements we
make in this Report on Form 10-Q or in other reports, press releases or other
statements issued from time to time.
A MAJORITY OF OUR REVENUES COME FROM A FEW CUSTOMERS.
Greater than 60% of our revenues came from our five largest customers in each of
the last three fiscal years and in the first six months of this fiscal year. If
we lose or fail to replace any of our large customers, our financial results and
stock price may be adversely affected. We plan to expand and diversify our
customer base. However, as a result of our limited operating history, we have
derived, and over the near term we expect to continue to derive, a significant
portion of our revenues from a limited number of large customers.
The volume of work performed for specific customers is likely to vary from year
to year, and a major customer in one year may not procure software, content or
services from us in a subsequent year. Our future growth is dependent in part on
our ability to renew existing contracts on terms favorable to us, as well as our
ability to penetrate further our existing customer accounts with additional
products and services. A decrease in business from one or more of our major
customers could have a material adverse effect on our financial results and
stock price.
THE SALES AND IMPLEMENTATION CYCLES FOR OUR PRODUCTS AND SERVICES ARE LONG,
WHICH CAN DELAY THE ACQUISITION OF NEW BUSINESS AND THE RECEIPT OF REVENUES.
Potential customers tend to engage in extensive internal reviews before making
purchase decisions. We spend a lot of time educating and providing information
to our prospective customers regarding the use and benefits of our products and
services. The purchase of our products and services for deployment within a
customer's organization often involves a significant commitment of capital and
other resources. The purchase of our products and services is therefore subject
to delays that are
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beyond our control, such as the customer's internal procedures to approve large
capital expenditures, budgetary constraints and the testing and acceptance of
new technologies that affect key operations.
We have historically experienced a lengthy cycle for sales to resellers, and
longer sales cycles for sales to manufacturers and distributors. We most likely
will continue to experience lengthy sales cycles in the future. The deployment
of our products and services within a customer's organization often takes an
extended period of time and requires us to work closely with the customer during
the process. Some of our customers have experienced difficulties or delays in
completing implementations of our products and services. Similar difficulties or
delays could occur in the future. Any of these difficulties or delays could
cause delays or non-receipt of related revenues, cause customers to reject our
solutions or lead to the delay or non-receipt of future orders for our products
and services.
WE FACE SIGNIFICANT COMPETITION AND EXPECT THE COMPETITION TO INCREASE.
The market for software products that enable e-commerce is intensely
competitive, and we expect competition in our market segment to increase
substantially. Numerous companies provide e-commerce solutions, and several
competitors target the specific computer and computer related products industry
in which we compete. We believe that our principal sources of competition
currently are systems integrators and the internal information technology
departments of our customers and potential customers. These organizations may
seek to develop e-commerce solutions through the use of tools offered by our
competitors primarily focused on providing e-commerce enabling solutions to the
computer industry. Our primary competitors include, but are not limited to,
Calico Software, Selectica, Inc., i2 Technologies, Inc., TechnologyNet, Inc.,
Open Market, Inc. and BroadVision, Inc. In addition, there are a number of
significantly larger companies with which we do not currently compete that do
not presently offer the same or similar e-commerce solutions offered by pcOrder
but that could, with limited barriers to entry, compete directly with us. Also,
Trilogy is not prohibited from competing directly or indirectly with pcOrder.
Increased competition could result in price reductions, reduced margins and loss
of market share, any of which would adversely affect our business. Many of our
current and potential competitors have significantly longer operating histories
and significantly greater financial, technical, marketing and other resources
than pcOrder. We may be unable to compete successfully with our existing
competitors or with new competitors, and failure to do so may adversely affect
our financial results and stock price.
WE MUST DEVELOP NEW PRODUCTS, SERVICES AND FEATURES THAT INCORPORATE
TECHNOLOGICAL ADVANCES AND ARE RESPONSIVE TO MARKET REQUIREMENTS OR RISK
OBSOLESENCE.
The market for our e-commerce solutions is characterized by rapidly changing
technology, evolving industry standards and frequent new product introductions.
The introduction of products embodying new technologies or the emergence of new
industry standards can render existing products obsolete and unmarketable. Our
success will depend on our ability to enhance our existing products. Our success
will also depend on our ability to develop and introduce, on a timely and cost-
effective basis, new products that keep pace with technological developments and
emerging industry standards and address increasingly sophisticated customer
requirements. Our business would be adversely affected if we were to incur
difficulties or delays in developing new products or enhancements or if those
products or enhancements did not gain market acceptance. Specifically:
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. we may not be successful in identifying, developing and marketing product
enhancements or new products that respond to technological change or evolving
industry standards;
. we may experience difficulties that could delay or prevent the successful
development, introduction and marketing of these products; and
. our new products and enhanced products may not adequately meet the
requirements of the marketplace and achieve market acceptance or may not keep
pace with advances made by our competitors.
OUR BUSINESS MODEL IS EVOLVING AND UNPROVEN AND WE MAY FAIL TO ACHIEVE BROAD
MARKET ACCEPTANCE.
If a significant number of computer industry participants do not adopt our
solutions, or if we fail to retain or fail to further penetrate our existing
customer accounts, we may not achieve the critical mass of users necessary to
enable the success of our solutions and services. We must attract a significant
number of manufacturers and channel partners from the computer industry and
expand our existing relationships. In particular, a fundamental element of our
business strategy is to enter into contractual relationships with manufacturers
and distributors that enable us to derive increasing revenues from those
customers to the extent that our e-commerce solutions are more broadly adopted
by market participants. In the past, these entities have purchased computer
products and accessories and exchanged information regarding these products
primarily through traditional means of commerce and communications. The market
for the types of products and services that we offer is still emerging and may
not continue to grow. Even if the market does continue to grow, our products
might not achieve market acceptance among computer product manufacturers,
distributors, resellers, retailers, other industry participants and end users,
including corporate buyers and consumers. If we are not successful in achieving
broad market acceptance of our third-party e-commerce solutions and services or
in achieving significant market share, our financial results and stock price may
be adversely affected.
WE HAVE HAD A HISTORY OF LOSSES THAT WE EXPECT TO CONTINUE IN THE FUTURE
During the first sixth months of this fiscal year and in each fiscal year since
inception, we have incurred losses from operations, except for a small operating
profit in 1995. At June 30, 1999, we had an accumulated deficit of $16.7
million. We expect operating losses to continue for the foreseeable future. Our
ability to become profitable depends on our ability to generate and sustain
substantially higher net revenues while maintaining reasonable expense levels.
Our future profitability and success, if any, will depend, among other factors,
on our ability to maintain and expand relationships with computer industry
participants and end users. Although our revenues have increased in recent
periods, there can be no assurance that our revenues will grow in future periods
or that we will achieve profitability on a quarterly or annual basis in the
future. Even if we do achieve profitability in future fiscal periods, we cannot
be certain that we would be able to sustain or increase profitability because of
the dynamic nature of our business and the industry in which we compete.
OUR OPERATING RESULTS ARE VOLATILE AND MAY FLUCTUATE SIGNIFICANTLY IN FUTURE
FISCAL PERIODS.
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Historically, our revenues and operating results have fluctuated significantly.
We expect that they will continue to fluctuate significantly on a quarterly and
annual basis due to a combination of factors. We have in the past recognized,
and may in the future be required to recognize, a significant portion of revenue
derived from perpetual license agreements with our customers in a single fiscal
quarter, which can cause significant variations in quarterly revenues. Since a
majority of our revenues come from a limited number of large customers, the
timing of significant orders and the recognition of revenue from these orders
are unpredictable and can cause large fluctuations in quarterly operating
results. Other factors that may cause our future revenues and operating results
to fluctuate include:
. our ability to expand significantly our sales and marketing organization;
. our ability to develop successfully new and enhanced products;
. the level of demand for our products;
. the timing and amount of license payments from our customers;
. the diversion of our potential customers' resources to address internal Year
2000 issues;
. our ability to retain existing customers and increase sales to those
customers;
. the timing and volume of new orders and our capacity to fulfill those orders;
. the level of product and price competition;
. the announcement or introduction of new or enhanced products and services by
us or our competitors;
. the amount and timing of operating costs and capital expenditures relating to
expansion of our business and sales and marketing infrastructure;
. downtime of our systems or Internet capacity or reliability problems;
. the growth in the use and acceptance of, and activity on, the Internet, Web
and Internet-related technologies, particularly by corporate, institutional
and government users for the purchase of computer products;
. the extent to which unauthorized access and use of on-line information is
perceived as a threat to network security;
. seasonal trends in customer purchasing; and
. general economic conditions.
It is likely that in some future quarter our revenues and operating results may
fall below the expectations of securities analysts and investors. In that
event, the trading price of our common stock may decline significantly.
WE HAVE A LIMITED OPERATING HISTORY, WHICH MAKES OUR FUTURE PROSPECTS DIFFICULT
TO EVALUATE.
We were established as a separate business unit within Trilogy in 1993. We were
incorporated and began to recognize revenue in 1994. We entered into agreements
with a majority of our significant customers only since the third quarter of
1997. Our limited operating history makes an evaluation of our future prospects
very difficult. In particular, our prospects should be compared to the prospects
of companies in new and rapidly evolving markets and must be considered in light
of the risks,
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expenses and difficulties frequently encountered by companies in their early
stage of development. These risks include our ability to:
. expand our sales and marketing team;
. expand our customer base and retain key customers;
. successfully deploy our products and services;
. develop and introduce new products and services;
. manage growing operations; and
. respond to a rapidly changing competitive environment.
OUR BUSINESS IS DEPENDENT ON OUR ABILITY TO MANAGE OUR CONTENT DATABASE AND
ENSURE THE ACCURACY OF THAT DATA.
Our business depends on our ability to update and maintain an extensive database
of technical and descriptive information on computer products, including over
600,000 SKUs from over 1,000 manufacturers. In addition, some of our customer
contracts require us to maintain specified data accuracy levels. To the extent
that we are unable to maintain data accuracy at required levels, we could incur
significant liabilities and the applicable contracts could be terminated, which
could adversely affect our financial results and stock price.
Maintaining our databases is a highly manual process and we utilize a
combination of highly trained internal personnel and contract personnel provided
by third parties. In addition, our computer systems and databases must be
sufficiently scalable to process large amounts of complex product specification
and configuration data without significant degradation in performance. In the
past we have experienced periodic difficulties with data accuracy. For example,
in the second quarter of 1998, database capacity constraints limited our ability
to accept daily pricing and availability updates from distributors, and
temporarily disrupted our ability to provide this data to some reseller
customers. These problems caused some of those customers to decline to renew or
delay contract renewals.
TRILOGY HAS VOTING CONTROL OVER PCORDER AND MAY EXERCISE THAT CONTROL IN A
MANNER THAT ADVERSELY AFFECTS THE COMPANY OR OTHER STOCKHOLDERS.
Trilogy owns approximately 82% of our outstanding common stock and has the
voting power to determine the outcome of almost any matter submitted for the
vote or consent of our stockholders. For example, Trilogy can elect all of our
directors, cause an amendment of our Certificate of Incorporation, Bylaws and
other documents, and generally control the management of our business and
affairs. In addition, the shares of Class B common stock held by Trilogy
entitle Trilogy to eight votes while each share of Class A common stock held by
the other stockholders of pcOrder entitle the holders to only one vote per
share. Accordingly, Trilogy may retain the ability to determine the outcome of
matters submitted to a vote of our stockholders even if it holds less than a
majority of our outstanding common stock. If Trilogy sells some or all of its
pcOrder common stock to a third party, the third party may be able to control
pcOrder in the manner that Trilogy is currently able to control us, including
the election of all of the members of our board of directors. A sale by Trilogy
to a third party may adversely affect our other stockholders, the trading price
of our Class A common stock and our business.
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Similarly, Trilogy can prevent, delay or cause a change in control of pcOrder.
If Trilogy transfers a controlling interest in pcOrder, our other stockholders
may not be able to participate in the transaction or realize any premium or
other amounts for their shares of common stock. Trilogy can also take other
actions that might be favorable to Trilogy but not necessarily favorable to our
other stockholders.
WE RELY ON TRILOGY FOR THE LICENSE OF CORE TECHNOLOGY AND THE PROVISION OF KEY
TECHNICAL AND MANAGEMENT SUPPORT; ANY CONFLICTS THAT MAY ARISE BETWEEN US AND
TRILOGY COULD HARM OUR BUSINESS.
We license core technology from Trilogy on a non-exclusive basis and with some
limitations. Our business would be disrupted by any termination of the license,
or reduction in the performance of the licensed technology, that requires
pcOrder to internally develop or license similar technology from a third party.
We believe that similar technology is not currently available from any third
party. If the license from Trilogy were terminated, we might not be able to
develop successfully similar technology on our own.
We have historically relied on Trilogy to provide significant human resource,
finance, recruiting, legal and other services. Since our initial public
offering in February 1999, we have attempted to develop and implement the
operational, administrative and other systems and infrastructure necessary to
support our current and future business. To date, we have not completed this
process. The costs of the development and implementation will be significant.
Any failure to develop successfully and implement the systems and infrastructure
may have an adverse effect on our business.
Ownership interests of our directors or officers in Trilogy's common stock, or
service as both a director or officer of pcOrder and an officer or employee of
Trilogy could create or appear to create potential conflicts of interest when
directors and officers are faced with decisions that could have different
implications for pcOrder and Trilogy. Joseph A. Liemandt, one of our directors,
is the Chairman and Chief Executive Officer and a substantial stockholder of
Trilogy.
An agreement between us and Trilogy that prohibited Trilogy from competing with
us expired June 1, 1999. While Trilogy does not currently compete directly with
us, Trilogy is free to do so. Direct competition with Trilogy could have an
adverse effect on our business. Further, Trilogy has joint ownership rights in
technology jointly developed by pcOrder and Trilogy during the term of our
license arrangement with Trilogy. Trilogy can utilize the technology in
competition with us or license the technology to our competitors, which could
have an adverse effect on our business.
SYSTEM FAILURES COULD HARM OUR BUSINESS.
Our success depends largely upon the efficient and uninterrupted operation of
our computer and communication systems. The occurrence of any system failure or
similar event could have an adverse effect on our business. We have contracted
with some of our customers to provide server hosting and to maintain redundant
leased lines to ensure system availability. Our development and management
systems are located at a facility that we lease in Austin, Texas. In addition
to that facility, we outsource the hosting of some of our servers to third
parties. Our systems and operations, whether at our site or through our third-
party outsourcing, are vulnerable to damage or
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interruption from fire, flood, power loss, telecommunications failure, break-ins
and similar events. The measures we have taken to prevent a system failure may
not be successful in the future. In addition, we do not have a formal disaster
recovery plan and do not carry sufficient business interruption insurance to
compensate us for losses that may occur as a result of any system failure.
OUR BUSINESS IS DEPENDENT ON THE FURTHER DEVELOPMENT AND MAINTENANCE OF THE WEB
INFRASTRUCTURE
The emergence and growth of the market for our products is dependent on
improvements being made to the entire Internet infrastructure to alleviate
overloading and congestion. These improvements might not be made or, if made,
they might not be made in a sufficiently timely and cost-effective manner to
facilitate market acceptance of our products. The recent growth in the use of
the Internet has caused frequent periods of performance degradation. Any
perceived degradation in the performance of the Internet as a whole could
undermine the benefits of our products. Our ability to increase the speed with
which we provide services to customers and to increase the scope of these
services ultimately is limited by, and reliant upon, the speed and reliability
of the networks operated by third parties.
WE MAY BE UNABLE TO ADEQUATELY PROTECT OR ENFORCE OUR INTELLECTUAL PROPERTY
RIGHTS; WE MAY INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
Our efforts to protect our intellectual property rights through copyright,
trademark, patent and trade secret laws may not be effective to prevent
misappropriation or infringement of our rights or create barriers to the
development of competitive products or services. Our success depends in part on
our ability to protect our proprietary software and other intellectual property.
To protect our proprietary rights, we rely generally on copyright, trademark,
patent and trade secret laws, confidentiality agreements with employees and
third parties and license agreements with consultants, vendors and customers.
However, we have not signed those agreements in every case. Despite those
protections, a third party could, without authorization, copy or otherwise
obtain and use our products or technology, or develop similar technology. Our
agreements with employees, consultants and others who participate in product
development activities may be breached, we may not have adequate remedies for
any breach, and our software or trade secrets may otherwise become known or
independently developed by competitors.
Many of our current and potential competitors dedicate substantially greater
resources to protection and enforcement of intellectual property rights,
especially patents. If a blocking patent has been issued or is issued in the
future, we would need to either obtain a license or design around the patent.
There can be no assurance that we would be able to obtain a license on
acceptable terms, if at all, or to design around the patent. We pursue the
registration of some of our trademarks and service marks in the United States
and in some other countries, although we have not secured registration of all of
our marks. In addition, the laws of some foreign countries do not protect our
proprietary rights to the same extent as do the laws of the United States.
Effective copyright, trademark and trade secret protection may not be available
in those jurisdictions. We license some of our proprietary rights to third
parties. Those licensees may not abide by compliance and quality control
guidelines regarding proprietary rights and the licensees may take actions that
would adversely affect our business.
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The computer software industry is characterized by frequent and substantial
intellectual property litigation that often is complex and expensive and
involves a significant diversion of resources and uncertainty of outcome. In the
future, we may need to pursue litigation to enforce and protect our intellectual
property rights or to defend against a claim of infringement or
misappropriation. We attempt to avoid infringing known proprietary rights of
third parties in our product development efforts. However, we have not conducted
and do not intend to conduct comprehensive patent searches to determine whether
the technology used in our products infringes patents held by third parties. In
addition, it is difficult to proceed with certainty in a rapidly evolving
technological environment in which there may be numerous patent applications
pending, which generally are confidential when filed. Any claims against pcOrder
relating to the infringement or misappropriation of third-party proprietary
rights, even if not meritorious, could result in the expenditure of significant
financial and managerial resources and in injunctions preventing pcOrder from
distributing some products.
OUR BUSINESS SUBSTANTIALLY DEPENDS ON THE CONTINUED GROWTH OF E-COMMERCE.
If the Internet as a commercial or business medium fails to develop or develops
more slowly than expected, our business would be adversely affected. The
increased use of the Internet for retrieving, sharing and transferring
information among computer industry participants has only recently developed.
Our success will depend in large part on continued growth in, and the use of,
the Internet for commerce, which depends on:
. growth in commercial access to, and acceptance of, new interactive
technologies;
. development of technologies that facilitate interactive communication between
organizations and targeted audiences; and
. increases in user bandwidth.
Critical issues about commercial use of the Internet are unresolved, including
security, reliability, cost, ease of access, quality of service and necessary
increases in bandwidth availability. These issues are likely to affect the
development of the market for our products and services. The adoption of the
Internet for information retrieval and exchange, commerce and communications
generally will require the acceptance of a new and evolving medium of conducting
business and exchanging information. That acceptance is likely only if the
Internet provides greater efficiency and an improved arena of commerce and
communication.
WE ARE DEPENDENT ON THE COMPUTER INDUSTRY, AND WE MAY BE NEGATIVELY AFFECTED BY
CONSOLIDATION IN THE INDUSTRY AND FINANCIAL DIFFICULTIES OF INDUSTRY
PARTICIPANTS.
The recent trend of the decrease in the number of participants in the channel of
distribution in the computer industry and the financial difficulties facing many
of the participants could result in the loss of material customers for our
solutions and products or render us unable to increase the number of customers
for our solutions and products. We derive substantially all of our revenues
either directly or indirectly from the computer industry, and our future growth
is dependent on the computer industry. The computer industry is sensitive to
general economic, business and industry conditions that can cause buyers of
computers and computer products to reduce or delay their
25
<PAGE>
investments in computer systems. Any event or condition that results in
decreased spending on computers or computer products, or consolidation within
the computer industry, could have a negative effect on our customers and
negatively impact our business. The number of participants in the channel of
distribution of computer products has decreased significantly over the last few
months. We believe this is the result of consolidations among participants
through mergers, acquisitions and other business combinations, business
failures, manufacturers aligning with fewer distributors and retailers and other
factors. Many of the current participants face serious financial difficulties
which can cause them to reduce, delay or suspend investments in the type of
products and services that we offer.
WE ARE DEPENDENT ON RETAINING AND ATTRACTING KEY PERSONNEL; WE MUST EXPAND OUR
SALES AND MARKETING ORGANIZATION.
The loss of the services of one or more of our key personnel could seriously
interrupt our business. We particularly depend on the continued services and
performance of Ross A. Cooley, our Chairman of the board and Chief Executive
Officer, and Christina C. Jones, our President, Chief Operating Officer and
founder. Both Mr. Cooley and Ms. Jones are parties to employment agreements with
pcOrder. Mr. Cooley can terminate his agreement at any time, and Ms. Jones can
terminate her agreement for "good reason". Mr. Cooley, in his capacity as our
Chairman of the board and Chief Executive Officer, currently performs various
executive and leadership functions, including development of our strategic and
operational plans, executive management of new customer and new account
relationship activities and recruitment of senior management personnel. Ms.
Jones, in her capacity as our President and Chief Operating Officer, is
principally responsible for managing our daily operations. We currently do not
carry key person life insurance for either Mr. Cooley or Ms. Jones.
A key element of our strategy is to maintain and expand our relationships with
computer product manufacturers, distributors, resellers, retailers and other
industry participants, and enter into new relationships with those participants.
To implement this strategy, we believe that it is necessary to expand
significantly our sales and marketing organization. Our future success also
depends in significant part upon our ability to retain and attract other key
management and technical personnel. Competition for qualified personnel is
intense, and we have in the past experienced difficulty in recruiting qualified
personnel. The loss of key personnel or the inability to attract and retain
additional qualified personnel, may have an adverse effect on our business and
stock price.
OUR FAILURE TO MANAGE GROWTH AND ENHANCE OUR ORGANIZATIONAL STRUCTURE COULD
IMPAIR OUR BUSINESS.
Our growth and new projects have placed significant demands on our management
and other resources. Our revenues increased from $5.9 million in 1996 to $21.7
million in 1998. Our staff increased from one employee in June 1994 to 194
employees at December 31, 1998. This growth has resulted in, and can be expected
to continue to require, substantial expansion of our infrastructure, including
operating and financial systems and controls and the geographic scope of our
operations and customers. Recent rapid growth has also resulted in new and
increased responsibilities for management personnel. The growth has placed and,
if it continues, is expected to continue to place, a significant strain on our
management and operations. In addition, we have historically relied on Trilogy
to provide some human resource, finance, recruiting, legal and other services.
We are in the process of assuming responsibility for many of those services. If
we are unable to develop the
26
<PAGE>
personnel and infrastructure necessary to manage an increased level of business
and operations, our financial performance and stock price may be adversely
affected.
WE MAY EXPERIENCE UNANTICIPATED EXPENSES AND OTHER PROBLEMS RELATED TO YEAR 2000
ISSUES.
Year 2000 problems are caused by computer systems that only use a two-digit year
value and, accordingly, will be subject to error or failure when the Year 2000
arrives. We have conducted some evaluations to assess whether our business and
our products present Year 2000 risks as described under "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Year 2000
Compliance." However, the Year 2000 problem is pervasive and complex and there
is a risk that we have not identified all of the Year 2000 issues that may
affect us or that any remedial efforts we undertake will not adequately address
identified Year 2000 problems. We do not have, and currently have no plans to
make, a contingency plan for the remediation of Year 2000 problems that may
affect our information technology systems and products, or the third-party
equipment and software utilized by pcOrder. Any significant Year 2000 problem
that may arise in our business or in our products, including products we license
from Trilogy, may result in a disruption in our business, require us to make
large, unplanned expenditures or cause us to lose customers.
OUR BUSINESS WILL SUFFER IF OUR PRODUCTS CONTAIN ERRORS OR DEFECTS.
Our products may contain undetected errors or defects when first introduced or
as new versions are released. Our introduction of new products or product
enhancements with reliability, quality or compatibility problems could also
result in reduced bookings, delays in collecting accounts receivable and in
additional service and warranty costs. We have in the past experienced
difficulties and delays in successfully installing our products at some customer
sites. Similar problems may occur in the future. We have recently transitioned
our product architecture to a more modular and flexible design. New customers
may experience performance problems with this new technology platform, whether
in the form of bugs, compatibility difficulties or otherwise. In addition, our
existing customers could experience problems in transitioning to our new
technology platform. If we fail to properly manage the transition by our
existing customers to our new technology platform, we could see cancellation of
customer contracts, a decline in our competitive position or reduced or delayed
sales of our products. In addition, defects or errors in our products may result
in product liability claims being brought against us. We currently have only
limited insurance coverage against product liability claims. We may be unable to
renew our insurance in the future and any insurance we have may be inadequate to
cover any claims brought against us.
WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS.
We need substantial working capital to fund our business. Although we currently
believe that our existing capital resources will be sufficient to meet our
presently anticipated cash requirements for at least the next 12 months, we may
need to raise additional financing before that time. We cannot be certain that
additional financing will be available to us on favorable terms when required,
or at all. If additional funds are raised through the issuance of equity
securities, our stockholders may experience significant dilution. In addition,
financing may not be available when needed or may not be available on acceptable
terms. If financing is not available when required or is not available on
acceptable terms, we may be unable to expand our sales and marketing
organization, develop new
27
<PAGE>
products and product enhancements, or take advantage of business opportunities
or respond to competitive pressures.
THERE ARE MANY RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS.
Although we have had limited sales outside of the U.S. and Canada, we expect to
increase our sales in international markets. To expand international sales, we
must establish additional foreign operations, hire additional personnel and
establish relationships with additional channel partners. This expansion will
require significant management attention and financial resources and could have
an adverse effect on our business. In addition, we may be unable to maintain or
increase international market demand for our products and services. Although our
international sales are primarily denominated in U.S. dollars, we may incur an
increasing percentage of obligations denominated in foreign currencies in the
future. A change in the value of the U.S. dollar relative to foreign currencies
could make our products more expensive and, therefore, potentially less
competitive in those markets and could otherwise adversely affect our ability to
meet our foreign-currency-denominated obligations. Currently, we do not employ
currency hedging strategies to reduce this risk. In addition, our international
business may be subject to additional risks, including the following:
. difficulties in collecting international accounts receivable;
. difficulties in obtaining export licenses;
. potentially longer payment cycles;
. increased costs associated with maintaining international marketing efforts;
. the introduction of non-tariff barriers and higher duty rates; and
. difficulties in enforcement of contractual obligations and intellectual
property rights.
A CHANGE IN ACCOUNTING STANDARDS COULD ADVERSELY AFFECT OUR BUSINESS.
Effective December 15, 1998, the American Institute of Certified Public
Accountants issued Statement of Position 98-9, entitled, "Modification of SOP
97-2, 'Software Revenue Recognition', With Respect to Certain Transactions". SOP
98-9 amends SOP 97-2 and 98-4, which is entitled, "Deferral of the Effective
Date of a Provision of SOP 97-2". The deferral of the application of some
passages of SOP 97-2 provided by SOP 98-4 is extended through fiscal years
beginning on or before March 15, 1999. All other provisions of SOP 98-9 are
effective for transactions entered into in fiscal years beginning after March
15, 1999. Full implementation guidelines for this standard have not yet been
issued. Once available, our revenue accounting practices may need to change,
which may adversely affect our business.
OUR STOCK PRICE HAS BEEN, AND MAY CONTINUE TO BE, EXTREMELY VOLATILE.
The trading price of Internet stocks in general, and ours in particular, have
experienced extreme price fluctuations in recent months. These fluctuations
often have been unrelated or disproportionate to the operating performance of
these companies. The valuations of many Internet stocks, including ours, are
extraordinarily high based on conventional valuation standards such as price to
earnings and price to sales ratios. These trading prices and valuations may not
be sustained. Any negative change in the public's perception of the prospects of
Internet or e-commerce companies could
28
<PAGE>
depress our stock price regardless of our results of operations. Other broad
market and industry factors may decrease the trading price of our common stock,
regardless of our operating performance. Market fluctuations, as well as general
political and economic conditions such as recession or interest rate or currency
rate fluctuations, also may decrease the trading price of our common stock. In
addition, our stock price could be subject to wide fluctuations in response to
the following factors:
. actual or anticipated variations in our quarterly operating results;
. announcements of new products, product enhancements, technological
innovations or new services by us or our competitors;
. changes in financial estimates by securities analysts;
. conditions or trends in the Internet and on-line commerce industries;
. changes in the market valuations of other Internet or on-line service
companies;
. developments in Internet regulations;
. announcements by us or our competitors of significant acquisitions, strategic
partnerships, joint ventures or capital commitments;
. unscheduled system downtime;
. additions or departures of key personnel; and
. sales of our common stock or other securities in the open market.
In the past, securities class-action law suits have often been instituted
against companies following stock price declines. Litigation of this type, if
instituted, could result in substantial costs and a diversion of our
management's attention and resources.
FUTURE SALES OF COMMON STOCK BY TRILOGY OR INSIDERS COULD ADVERSELY AFFECT OUR
STOCK PRICE.
In connection with our initial public offering, Trilogy and our officers and
directors agreed not sell or otherwise dispose of any shares of common stock
before August 25, 1999, subject to limited exceptions. Sales by Trilogy or our
officers and directors of significant amounts of common stock in the public
market following the expiration of the lockup, or the perception that these
sales could occur, could adversely affect our stock price. Trilogy has
registration rights for its shares of common stock, which rights could
facilitate any future disposition.
INVESTORS' ABILITY TO TRADE OUR COMMON STOCK MAY BE LIMITED BY TRADING VOLUME.
The trading volume in our common stock has been limited, which may inhibit the
ability of stockholders to sell shares in pcOrder and of potential investors to
buy a stake in pcOrder.
29
<PAGE>
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings
In January 1999, the Company filed an action for declaratory judgement in the
345th Judicial District Court of Travis County, Texas, Case No. 99-00787 against
its former Vice President, Sales from July 1998 to December 1998, seeking to
have certain claims for sales commissions and stock grants determined to be
invalid. In April 1999, the defendant in the Company's action filed a
counterclaim against the Company and Christina Jones, the Company's President
and Chief Operating Officer, requesting actual and punitive damages of not less
than $3.0 million as a result of alleged failure of the Company to pay certain
commissions and stock grants, among other matters. The Company intends to
contest the action vigorously and does not believe that the resolution will have
a material adverse effect on the Company's financial condition or results of
operations. However, litigation is subject to inherent uncertainties and,
therefore, there can be no assurance that this action will not have a material
adverse effect on the Company's financial condition or results of operations.
Item 2. Changes in Securities
The Company's registration statement (Registration No. 333-62985) under the
Securities Act of 1933, as amended, for its initial public offering became
effective on February 26, 1999. Offering proceeds, net of aggregate expenses to
the Company of approximately $2.2 million, were approximately $47.2 million.
The Company has used a portion of the proceeds to in the repayment of $5.4
million in indebtedness to its parent company. The remainder of the net
proceeds has been used to purchase temporary investments primarily consisting of
cash and cash equivalents and short-term investments, and to a lesser degree,
long-term investments.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
---------
The Exhibit Index attached hereto is hereby incorporated by
reference to this Item.
(b) Reports on Form 8-K:
--------------------
On June 29, 1999, the Company filed a Form 8-K under Item 5
announcing that the Company entered into a joint alliance
agreement with Compaq Computer Corporation.
30
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
PCORDER.COM, INC.
Date: August 13, 1999 /s/ JAMES J. LUTTENBACHER
--------------------------------------
Name: James J. Luttenbacher
Title: Vice President, Chief Financial
Officer and Secretary
31
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit Title
- -------------- ----------------------------------------------------------
10.12+ Subscription Services Agreement, effective June 16,
1999, between pcOrder.com, Inc. and Compaq Computer
Corporation
27 Financial Data Schedule
+ Confidential treatment has been requested with respect to portions of the
agreement indicated with an asterisk [*]. A complete copy of this agreement,
including the redacted items, has been separately filed with the Securities and
Exchange Commission.
32
<PAGE>
Exhibit 10.12
-------------
Confidential treatment has been requested with respect to the portions of this
agreement indicated with an asterisk [*]. A complete copy of this agreement,
including the redacted terms, has been separately filed with the Securities and
Exchange Commission.
Agreement between
pcOrder.com, Inc.
and
Compaq Computer Corporation
Table of Contents
Subscription Services Agreement
Attachment A - Digitized Sublicense Agreement
Attachment B - Digitized Access Agreement
Attachment C - Authorized User Identity and Contact Information
Attachment D - Functional and Deployment Descriptions
Attachment E -- Additional Server Software
Attachment F -- New Version Acceptance Criteria
Attachment G -- Response Times and Concurrent Usage Levels
Attachment H -- Response and Correction Times
Attachment I -- Competitors
Attachment J -- Source Code Escrow Agreement
Attachment K - Performance Test
Schedule 1 - Professional Consulting Services Schedule
Schedule 2 - Data Maintenance Services Schedule
Schedule 3 - Application Hosting Services Schedule
<PAGE>
CONFIDENTIAL
------------
SUBSCRIPTION SERVICES AGREEMENT
between
pcOrder.com, Inc.
5001 Plaza on the Lake
Austin, TX 78746
"pcOrder"
and
Compaq Computer Corporation
20555 S.H. 249
Houston, TX 77070
("Client")
-----------------
1. GENERAL
1.1. This Subscription Services Agreement and any mutually negotiated,
incorporated, and separately executed schedules (the "Schedules") and
Attachments (collectively, the "Agreement") establish the terms and
conditions under which the parties agree that pcOrder shall license
certain Software and provide certain Services to Client for the benefit
of Client and its Affiliates. This Agreement supersedes all of the
rights and obligations defined in the Subscription Services Agreement
executed by the parties in June, 1998. This Agreement is effective as of
June 16, 1999.
1.2. The following are definitions for certain terms that may be used in the
Agreement.
1.2.1. "Affiliates" means all legal entities worldwide controlled by
or in common control with Client, but only for so long as
such control continues to exist. "Control" means owning 50%
or more of the ownership interest entitled to vote for
directors or managers of such entity.
1.2.2. "Authorized Use" means to receive Server Software generated
information for each Authorized User's own respective
internal business use in support of its sales and order
applications and business processes. Such use is subject to
any User Documentation and to the terms and conditions of
this Agreement and any applicable Sublicense Agreement and
Digitized Access Agreement.
1.2.3. "Authorized Users" means Groups I, II, III and IV Authorized
Users as set forth in Section 3.2.
1.2.4. "BTO" means build to order.
1.2.5. "Client" shall mean Compaq Computer Corporation.
1.2.6. "Client Products" means all services and products
manufactured, marketed, and distributed by Client under its
own brands.
1.2.7. "Competitor" means any entity described in Attachment I.
1.2.8. "CTO" means configured to order.
1.2.9. "Effective Date" means June 16, 1999.
1.2.10. "Hosting Site" means the installation location of the Server
Software.
1.2.11. "pcOrder System" means pcOrder's collection of compiled data
and software which contains information and data used to
configure, quote and order Client Products, and determine
price and availability of Client Products.
1.2.12. "Software" means the object code version of certain licensed
pcOrder Server Software, Connection Software and Utility
Software products specified in Section 3.1, any related User
Documentation that pcOrder makes generally available to
licensees, and any updates and enhancements of the Software
which fix bugs in the Software and all new releases of the
Software licensed hereunder which are made available to
pcOrder's general client base.
1.2.13. "User Documenation" means the user documentation for the
Software that pcOrder makes generally available to licensees.
2. LICENSE
2.1. Subject to the terms and conditions of this Agreement, pcOrder hereby
grants to Client a nonexclusive, nontransferable, non-assignable (except
as set forth in Section 18.2 herein), nonsublicensable (except as set
forth in subsection 2.1.3), worldwide right and object code license to:
<PAGE>
CONFIDENTIAL
------------
2.1.1. use the Server Software at the Hosting Site for the
Authorized Use. The Server Software may only be used by
Client's and the Affiliates' contractors, employees and
agents. Except for the fees set forth in this Agreement,
pcOrder shall not charge any other fees to any person to use
the Compaq CTO Module Server Software;
2.1.2. use the Connection Software for the Authorized Use. The
Connection Software may only be used by Authorized Users and
Client's and Affiliates' contractors and employees. Except
for the fees set forth in this Agreement, pcOrder shall not
charge any other fees to any person to use the Connection
Software with the Compaq CTO Module;
2.1.3. _0sublicense the Connection Software to Group I and Group II Authorized
Users solely for the Authorized Use as specified in Schedule 2. Any such
sublicense shall be pursuant to the terms and conditions of the
"Digitized Sublicense Agreement" attached hereto as Attachment A.
Notwithstanding the foregoing, pcOrder reserves the right to modify such
Digitized Sublicense Agreement from time to time. Client agrees that
prior to each such use of the Connection Software such Group I and Group
II Authorized Users must indicate their agreement to the terms and
conditions in the "Digitized Sublicense Agreement" by prominently
displaying: "NOTICE: By installing and/or using this the host system and
this software you must consent to the TERMS AND CONDITIONS of the
displayed license agreement which governs your use of the host system
and software";
2.1.4. reproduce and copy the Connection Software for distribution
to sublicensees pursuant to Section 2.1.3;
2.1.5. allow Client's and Affliates' employees, contractors, and
agents and the Authorized Users to access the Server Software
at the Hosting Site via the World Wide Web for the Authorized
Use. Client agrees that prior to each such use of the Server
Software such employees, contractors, agents, and Authorized
Users must indicate their agreement to the terms and
conditions in the "Digitized Access Agreement" attached
hereto as Attachment B by placing on each Web page of the
Hosting site that provides access to the Server Software the
following link in a type face not smaller than the smallest
type face used elsewhere on that page of the Client Web Site:
"NOTICE: By accessing the system and software contained in
this Web Site, you must consent to the TERMS AND CONDITIONS
which govern your use of the system and software" with "TERMS
AND CONDITIONS" being displayed as a link to the Digitized
Access Agreement. Notwithstanding the foregoing, pcOrder
reserves the right to modify such Digitized Sublicense
Agreement from time to time;
2.1.6. make a reasonable number of copies of the Software for
archival and backup purposes consistent with Compaq standard
procedures with respect to archival and backup copies,
provided, however, that this right to make copies of a
particular portion of the Software shall survive termination
of this Agreement for only so long as an independent license
to use such portion of the Software arising under another
subsection of this Agreement survives;
2.1.7. to use the VIPER Software solely to enter new information and
extract existing information about Client Products (expressly
excluding third party product data provided to Client by
pcOrder) into and from the pcOrder System for Authorized Use,
and in no case to correct existing information entered into
the pcOrder System by pcOrder. This use license includes the
right to reproduce the VIPER Software only as necessary for
the use permitted hereunder;
2.1.8. to use the [*] solely in support of Client's internal
business operations. This use license is expressly limited to
use of the [*] by Client employees, contractors or agents and
includes the right to reproduce the [*] only as necessary for
the use permitted hereunder; and
2.1.9. to use the third party product data provided to Client by
pcOrder hereunder solely in conjunction with Authorized Use
of the Server Software pursuant to Sections 2.1.1 and 2.1.5.
2.1.10. Notwithstanding anything in this Section 2.1 to the contrary,
Client may use the Server Software (provided however, the
Compaq CTO Module is not subject to the restriction cited
herein) solely to host (or to have hosted by pcOrder or an
outsourcing firm consistent with Section 2.3) e-commerce
websites, extranet sites, and intranet sites that meet the
following criteria: (a) such sites are identified with,
hosted by, and controlled by Client and/or its Affiliates;
(b) such sites are not identified with or controlled by any
other entity, and (c) at least [*] of the revenue generated
by product sales through such sites, if any, is recognized by
Client or one of its Affiliates. "Control," as used in this
subsection, refers to an entity's control over, for example,
which products are made available on the site, the design of
the site's user interface, and other similar indicia of
authority over what content is provided on the site. The
following are express exceptions to the restrictions
contained in this subsection 2.1.10:
2.1.10.1. Client may use the Server Software for Authorized
Use to host (or have hosted by pcOrder or an
outsourcing firm consistent with Section 2.3) e-
commerce websites sites for [*]. In addition,
Client will request that such [*] also include a
"pcOrder" trademark on the relevant site, but a
[*] refusal to do so will not restrict these
activities;
2.1.10.2. Client may use the Server Software for Authorized
use to host (or have hosted by pcOrder or an
outsourcing firm consistent with Section 2.3) [*];
and
2.1.10.3. Client may use the Server Software to provide [*].
2.2. All use of the Server Software and the Utility Software as provided
herein shall be pursuant to transferable or nontransferable user IDs and
passwords issued by Client or pcOrder.
2.3. Notwithstanding any provision herein to the contrary, no entity who is a
Competitor of pcOrder may use the Software for any purpose without
having first executed a nondisclosure agreement with pcOrder that is
mutually agreeable to the parties and that contains terms restricting
the use and disclosure of pcOrder's Confidential Information appropriate
given the nature of the Confidential Information to be disclosed to such
entity.
2
<PAGE>
CONFIDENTIAL
------------
2.4. Client shall be obligated to ensure that all authorized usage of the
Software by the Affliates and Client's and Affliates' contractors,
agents, and outsourcing firms shall be in accordance with the terms and
conditions herein, and Client shall indemnify pcOrder for all damages
and costs associated with any breach thereof.
2.5. Unless otherwise expressly permitted in this Agreement, Client shall
not: (i) use the Software to process or permit to be processed the data
for any third party; (ii) use the Software in operation of a service
bureau; (iii) disassemble, decompile, or reverse engineer the Software;
(iv) permit any subsidiaries, affiliated entities, or third parties to
use the Software; or (v) sublicense the Software to any third parties.
2.6. Client shall include pcOrder's copyright notice, proprietary legend, any
trademark and service mark attributions, patent marking, and other
indicia of pcOrder's ownership on all authorized copies of the Software,
in the content and format as those which were contained on the copy
originally distributed to Client. Client shall assume all responsibility
for the quality of the copies made hereunder.
2.7. In the event Client acquires actual knowledge of copyright infringement,
trademark infringement, patent infringement, software piracy, or breach
by any Authorized User of any sublicense granted hereunder or under
Attachments A and B hereto, Client will promptly notify pcOrder, and/or
if notified by pcOrder, will make commercially reasonable efforts to
cooperate with pcOrder to determine the existence and extent of any such
infringement, piracy, or breach and to remedy same.
2.8. Client agrees that pcOrder may, upon thirty (30) days prior written
notice and at its sole expense, enter Client's and its outsourcing
firm's respective premises to verify Client's compliance with the
license provisions of this Agreement. pcOrder's inspections shall be
limited to (i) one (1) annual inspection (unless pcOrder in its
reasonable judgment determines that it has just cause for multiple
inspections); (ii) hours that are reasonable and create minimal
interference with Client's business with its Customers; and (iii) those
records pertaining to the Software licensed hereunder. pcOrder's rights
of inspection shall remain in effect through the period ending six (6)
months from the termination or expiration of this Agreement and any
applicable Schedule hereunde r.
2.9. Client shall keep and maintain complete and accurate records in the
format set forth in Attachment C hereto of each sublicensed Channel
Partner and Independent Reseller. In the event that the Hosting Site is
relocated in accordance with Schedule 3, Client shall also keep and
maintain complete and accurate records of the physical location of any
copies of the Server Software licensed hereunder.
2.10. Subject to the terms and conditions of this Agreement, pcOrder hereby
grants to Client a nonexclusive, nontransferable, non-assignable (except
as set forth in Section 18.2 herein), nonsublicensable, perpetual,
worldwide right and source code license to use, modify, display, perform,
and copy the following software for the following purposes:
2.10.1. All software developed for Client pursuant to the Consulting
Services provided to Client by pcOrder for any purpose
whatsoever;
2.10.2. All Software that is now licensed to Client in object-code
form, solely for the purpose of diagnosing and correcting
errors in the Software upon release of the Software to Client
pursuant to the terms of the Master Preferred Escrow Agreement
between pcOrder and Data Securities International, Inc.; and
2.10.3. Any portions of the Software necessary to implement the New
Functionality pursuant to Alternative Development Plans
provided pcOrder is in material breach of sections 10.4, 10.5
or 10.6 of this Agreement, solely for purposes of developing
and implementing the New Functionality and diagnosing and
correcting errors in the New Functionality.
3. LICENSED SOFTWARE, AUTHORIZED USERS, AND GENERAL
3.1. The Software as licensed under this Agreement is set forth below and
described in Attachment D to this Subscription License Agreement:
3.1.1.Server Software:
3.1.1.1. Compaq CTO Module. Only the following modules are
provided and only with the functionality defined
in Attachment D which is required to support the
Compaq CTO Module: (i) Catalog; (ii)
Configuration; (iii) Pricing; (iv) Availability;
(v) Quote; and (vi) Order; and
3.1.1.2. pcOrder Web Storefront software; and
3.1.1.3. the additional Server Software listed on
Attachment E; and all future versions of the
Server Software made generally available by
pcOrder to its licensees.
3.1.2.Connection Software.
3.1.2.1. pcOrder Windows 32 VB client software; and
3.1.2.2. all future versions of the Connection Software
made generally available by pcOrder to its
licensees.
3.1.3.Utility Software.
3.1.3.1. PcOrder VIPER 3.0; and
3.1.3.2. [*] ; and
3.1.3.3. all future versions of the Utility Software made
generally available by pcOrder to its licensees.
3.2. The types of Authorized Users under this Agreement are as set forth
below:
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3.2.1.Group I: Channel Partners who are mutual clients of Client and
pcOrder and currently using a pcOrder Solution and other
Channel Partners of Client and the Affliates and customers of
the Channel Partners who purchase Client Products from such
Channel Partners.
3.2.2.Group II: Independent Resellers and customers of the
Independent Resellers which include corporate accounts who
purchase Client Products from such Independent Resellers.
3.2.3.Group III: Client's Corporate Accounts which consist of Fortune
1000 and small-medium businesses who purchase Client Products
from Client or from one of Client's Channel Partners.
3.2.4.Group IV: Client's customers and potential customers.
4. SUBSCRIPTION LICENSE FEES
4.1. Client shall pay to pcOrder within forty five (45) days of each of the
Effective Date and [*] thereof [*] as the Annual Subscription License
Fee for the Software.
4.2. If this Agreement is extended for a first Renewal Term pursuant to
Section 14.1, Client shall pay to pcOrder within forty five (45) days
of[*] of the Effective Date [*] as the Annual Subscription License Fee
for the Software. If this Agreement is extended for a second Renewal
Term pursuant to Section 14.1, Client shall pay to pcOrder within forty
five (45) days of [*] of the Effective Date [*] as the Annual
Subscription License Fee for the Software. Thereafter, Client may extend
this Agreement by paying to pcOrder within forty five (45) days of each
subsequent anniversary of the Effective Date an amount that is equal to
100.0 % plus or minus the U.S. Consumer Price Index percentage for the
previous calendar year times the prior year's Annual Subscription
License Fee for the Software, but in any event the amount paid to
pcOrder for such Renewal Term shall not be more than 110.0% of the prior
year's Annual Subscription License Fee for the Software.
4.3. In addition to the Annual Subscription License Fees payable hereunder,
Client shall pay to pcOrder, as an incentive to accelerate the
development of certain new versions of the Software (the "New
Versions"), the additional fees specified in this section if pcOrder
meets the delivery deadlines specified in this section.
4.3.1.If pcOrder delivers [*] to Client by [*] and it is accepted by
Client pursuant to Section 4.3.6, Client shall pay to
pcOrder[*].
4.3.2.If pcOrder delivers [*] to Client by [*] and it is thereafter
accepted by Client pursuant to Section 4.3.6, Client shall pay
to pcOrder[*].
4.3.3.If pcOrder delivers [*] to Client by [*] and it is thereafter
accepted by Client pursuant to Section 4.3.6, Client shall pay
to pcOrder[*].
4.3.4.If pcOrder delivers [*] to Client by [*] and it is thereafter
accepted by Client pursuant to Section 4.3.6, Client shall pay
to pcOrder[*].
4.3.5._All payments due under this Section 4.3 shall be due and
payable on acceptance of the applicable New Version, but as a
courtesy to Client, pcOrder agrees not to invoice Client for
the sums payable under this Section 4.3 before [*] or, in the
case of [*], before [*] and any such invoices shall be
paid by Client within forty-five (45) days after their
respective invoice date(s).
4.3.6.The parties shall follow the following procedure with respect
to acceptance of each New Version delivered to Client pursuant
to this Section 4.3.
(a) Upon delivery, pcOrder shall notify Client's Project
Manager [*] that the New Version materially meets each
of the applicable acceptance criteria set forth in
Attachment F (the "Acceptance Criteria");
(b) Client's Project Manager shall have fifteen (15) days
from such notification ("Acceptance Period") to evaluate
the New Version in accordance with the applicable
Acceptance Criteria. Such evaluation shall use mutually
acceptable test data ("Test Data");
(c) If the New Version fails to materially meet each of the
applicable Acceptance Criteria, Client's Project Manager
shall notify pcOrder's Acceptance Contact in writing of
such failure within the Acceptance Period. Any such
failure notification shall identify with specificity the
portion(s) of the Acceptance Criteria which the New
Version failed to materially meet. Otherwise, the
software shall be deemed to have been accepted as of the
day following the Acceptance Period.
(d) In the event Client's Project Manager provides pcOrder's
Acceptance Contact [*] with such New Version failure
notification, pcOrder shall have fifteen (15) days to
cure ("Cure Period") such failure. pcOrder shall be
entitled to the bonus for a particular New Version
specified in this Section 4.3 only if Client accepts a
version of such New Version that is delivered to Client
on or before the final day of such first Cure Period.
After such first Cure Period, however, acceptance steps
(a) through (c) shall be repeated until acceptance
occurs, but in no case more than twice. The parties
agree that with respect to the acceptance process for
OrderServer 2.1, the fifteen-day time periods for
evaluation and cure established by subsections (a)
through (d) shall not apply and that the parties will
work cooperatively to evaluate OrderServer 2.1 and cure
any identified failures to materially meet each of the
applicable Acceptance Criteria.
(e) Notwithstanding any contrary provision of this
Agreement, the New Version shall be deemed accepted if
(1) pcOrder can adequately demonstrate to Client that
failure to materially meet each of the applicable
Acceptance
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Criteria was a result of failure of Client to follow all
operational instructions supplied by pcOrder or
modifications to the software without the express
authorization of pcOrder, (2) if Client uses the New
Version to support a "live" e-commerce website (e.g., a
site which is made available to users other than for the
limited purposes of development or beta testing of the
site),, or (3) Client has not terminated this Agreement
pursuant to Section 14.2.4 or Section 14.2.5 by[*].
(f) Client may change its Project Manager and pcOrder may
change its Acceptance Contact upon five days prior
written notice to the other party.
4.4 The parties shall jointly perform a stress test of CommerceStation 2.0 and
OrderServer 2.0, when the software is delivered to Client. The purpose of
this stress test will be to analyze application performance and scalability
under anticipated user loads.
5. PAYMENT
5.1. The fees and other amounts required to be paid hereunder do not include
any amount for taxes, duties, or levies (including interest and
penalties). Client shall reimburse pcOrder for all sales, use, excise,
property, or other taxes, levies, or duties pcOrder is required to
collect or remit to applicable tax authorities. Client is not
responsible for pcOrder's income or franchise taxes.
5.2. All dollar amounts listed in this Agreement are in US Dollars, and all
payments by Client to pcOrder shall be made in US Dollars.
5.3. Additional Services, Data Maintenance Services, and Application Hosting
Services (collectively "Services") provided by pcOrder shall be at the
pricing set forth in this Agreement or as mutually agreed to by the
parties.
5.4. Client shall reimburse pcOrder, in accordance with Client's standard
expense policies, for reasonable expenses incurred in the performance of
Services which are related to travel, lodging, and meals. Such expenses,
when incurred by pcOrder nonbillable employees, shall be preapproved by
Client. Such expenses are not included in the fees specified in this
Agreement.
6. DEPLOYMENT
6.1 pcOrder will during the Term of this Agreement assign a dedicated
deployment engineer to Client's account for technical support.
6.2 Channel Partner/Reseller Integrations: Unless otherwise agreed in
writing by the parties, whenever Client hires and pays pcOrder to create
a custom program (pursuant to sections 7.0 and 12.0) to integrate
pcOrder Software into the back-office systems of a Channel Partner based
outside of the United States and the ownership of such custom program is
assigned to pcOrder, pcOrder shall not make such custom program
available to any other computer product manfacturer or computer product
reseller until [*] following the date that the integration has been
successfully implemented on Client's behalf.
7. PROFESSIONAL CONSULTING SERVICES
7.1. pcOrder agrees to provide mutually agreed upon professional consulting
services (the "Consulting Services"), which may include software
development, integration, implementation, customization, data
integration, training, and modeling of Client Products to the extent such
Client Products are supported by pcOrder pursuant to Schedule 2 (Data
Maintenance Services). These Consulting Services shall be provided in
accordance with the terms and conditions applicable in this Agreement,
including Section 18.12, and are more specifically described in
Schedule 1.
7.2. pcOrder will provide resources and use qualified employees and/or
consultants as it deems necessary to perform the Consulting Services.
7.3. pcOrder shall provide Train the Trainer training and the on-site training
at the rates specified in Schedule 1.
8. DATA MAINTENANCE SERVICES
8.1. In consideration of Client's payment to pcOrder of the applicable fees
specified in Schedule 2, pcOrder shall provide the Data Maintenance
Services specified in Schedule 2 in accordance with the terms and
conditions applicable in this Agreement including Section 18.12.
8.2. The fees applicable to such Data Maintenance Services shall be specified
in Schedule 2.
9. APPLICATION HOSTING SERVICES
9.1. In consideration of Client's payment to pcOrder of the fees specified in
Schedule 3, pcOrder shall provide Client the Application Hosting Services
specified in Schedule 3 under the terms applicable in this Agreement
including Section 18.12.
9.2. Hosting Site.
9.2.1. The initial Hosting Site shall be on servers located at
pcOrder's location.
9.2.2. Client may change the Hosting Site in accordance with the terms
and conditions of Schedule 3.
9.3. Client shall provide the Required Hardware systems set forth in
Attachment A to Schedule 3 in quantities deemed necessary by pcOrder to
support the licensed use of the Server Software. Client shall provide the
Required Hardware for as long as the Hosting Site is at pcOrder's
location and at no cost to pcOrder. The applicable Client limited
warranty statement is included with each piece of Required Hardware
shipped to pcOrder. EXCEPT FOR THE WARRANTY SET FORTH IN THE COMPAQ
LIMITED WARRANTY STATEMENT, Client MAKES NO WARRANTIES OR REPRESENTATIONS
WITH RESPECT TO THE PERFORMANCE OF required hardware. ALL IMPLIED
WARRANTIES, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE HEREBY
DISCLAIMED. THE LIABILITY OF Client FOR DAMAGES CAUSED BY DEFECTIVE
required hardware IS LIMITED TO THE TERMS OF THE LIMITED WARRANTY
STATEMENT.
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9.4. At no cost to pcOrder, Client shall upgrade and/or increase the Required
Hardware as deemed necessary from time to time by pcOrder in accordance
with reasonable analysis of the Required Hardware's ability to support
then current and reasonably expected near term usage of the Server
Software.
9.5. In the event Client elects to transfer the Hosting Site pursuant to
Schedule 3, Client shall provide the software requirements set forth in
Attachment A to Schedule 3 prior to transferring the Hosting Site.
10. MAINTENANCE AND SUPPORT
10.1. In consideration of Client's payment to pcOrder of the applicable
Subscription License Fees, pcOrder shall provide the maintenance and
support services listed in this Section 10 (the "Maintenance and Support
Services") for the period commencing on the Effective Date and
terminating upon termination of the Agreement.
10.2. pcOrder shall provide Client with the following Maintenance and Support
Services for the Software:
10.2.1. Use all commercially reasonable efforts to provide Client
with available solutions and corrections for reported
problems, which are replicated and diagnosed by pcOrder as
substantial defects in the Software, so that the Software
materially conforms with any applicable User Documentation
and the performance metrics set forth in Attachment G.
Support is limited to telephone and e-mail support to ten
(10) Client contacts whom Client has designated in writing
(or via e-mail) as Client's support representatives (the
"Support Representatives) and does not include onsite support
at Customer's or Client's location;
10.2.2. Provide reasonable telephone support twenty four (24) hours
per day, seven (7) days per week inclusive of holidays
observed by pcOrder, in response to calls and e-mail from the
Support Representatives; and
10.2.3. Provide, at no additional charge, any updates and
enhancements of the Software which fix bugs in the Software
and all new releases of the Software as licensed hereunder
which are made available to pcOrder's general client base.
10.2.4. pcOrder shall respond to calls and e-mails from the Support
Representatives within the response times as set forth in
Attachment H and shall use commercially reasonable efforts to
provide corrections to errors to the Support Representatives
within the correction times as set forth in Attachment H. All
such time periods shall be calculated from pcOrder's receipt,
during the hours during which Support is provided pursuant to
Section 10.2.2, of a call or e-mail from a Support
Representative.
10.2.5. pcOrder will place no limit on the number of incidents that
Client may report, pcOrder will grant Client unlimited access
to on-line issue tracking and call status reports, pcOrder
will assign a dedicated deployment engineer to Client's
account pursuant to Section 6.1, and pcOrder will provide
Client with toll-free access for support telephone calls.
10.3. To assist pcOrder in performance of its maintenance and support
obligations, Client shall provide pcOrder with the following:
10.3.1. The names of its designated Support Representatives within
twenty (20) business days from the Effective Date;
10.3.2. All information and materials reasonably requested by pcOrder
for use in replicating, diagnosing, and correcting a
particular problem reported by Client; and
10.3.3. pcOrder shall not be obligated to provide Maintenance and
Support Services for any software other than pcOrder's
standard Software which is released for the use of pcOrder's
general client base or has been modified for Client's use
pursuant to its Consulting Services provided that pcOrder has
indicated in writing its intention to include such
modification in a general release of Software to its
licensees. Unless expressly and mutually agreed, pcOrder will
not maintain and support any other software which has been
developed, customized or modified for Client by pcOrder or
any third party.
10.4. pcOrder is responsible for scheduling quarterly meetings with Client in
order to review and discuss [*]. Client will provide input on technology
direction and prioritized product enhancement requests for software
licensed under this Agreement. Client and pcOrder will jointly agree to
a [*] and timeframes.
10.5. If pcOrder agrees in [*] to deliver new functionality within a specified
timeframe (the "New Functionality"), the parties will follow the
acceptance procedure set forth in Section 4.3.6, unless an alternative
acceptance procedure is agreed to by the parties in [*]. If, after the
completion of the acceptance procedure, the New Functionality has not
been accepted, Client may, in its reasonable discretion, specify and
require the establishment a revised plan for the further development of
the New Functionality ( an "Alternative Development Plan"). An
Alternative Development Plan may include development efforts by pcOrder,
development efforts by Client, or joint development efforts as
appropriate. Client may, in its reasonable discretion, require under any
Alternative Development Plan substantial Client participation in such
further development efforts regarding the New Functionality. Client,
may, in its reasonable discretion, involve a third party that is not a
Competitor of pcOrder and that is mutually agreeable to the parties in
such further development efforts (each, a "Third Party Developer"),
provided that such Third Party Developer executes a nondisclosure
agreement with pcOrder that is mutually agreeable to the parties and
that contains terms restricting the use and disclosure of pcOrder's
Confidential Information appropriate given the nature of the
Confidential Information to be disclosed to such Third Party Developer.
10.6. Each Alternative Development Plan involving Client or Third Party
Developer participation shall contain a section describing the technical
information regarding the Software to which pcOrder shall provide Client
or the Third Party Developer with access in association with such
further development efforts. Such technical information shall consist of
the technical information reasonably necessary for a software developer
of reasonable skill to complete and deliver the New Functionality. Such
technical information shall include, where appropriate, documentation,
specifications for applications programming interfaces, and, if
necessary, source code for relevant portions of the Software. All such
technical information shall be deemed to be pcOrder Confidential
Information and access to such technical information shall be restricted
to pcOrder's facility in Austin, Texas. All such technical information
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shall be used by Client or the Third Party Developer for the sole
purpose of developing and testing the New Functionality. Should Client
determine during the course of such further development efforts that
access to additional pcOrder technical information is reasonably
necessary to complete development of the New Functionality, Client shall
so notify pcOrder and the parties shall meet to determine appropriate
modifications to the Alternative Development Plan.
10.7. Client shall own all rights, title, and interest in any modifications to
the existing source code for the Software that are necessary in order to
implement the New Functionality and that are developed by Client (or any
Third Party Developer), pursuant to Sections 10.5 and 10.6. Upon
completion of the development process, Client and pcOrder shall meet to
determine jointly what materials, including portions of source code, are
reasonably necessary for a software developer of reasonable skill to
install and diagnose and correct errors in the modified source code, and
pcOrder hereby grants Client permission to remove such materials from
pcOrder's facility and hereby grants to Client a nonexclusive,
nontransferable, nonassignable (except as set forth in Section 18.2
herein), nonsublicensable, worldwide license to use such materials to
install and diagnose and correct errors in the modified source code and
Software. Neither party shall be precluded from or liable for using
information to which such party was given access by the other party
during the implementation of any Alternative Development Plan that
remains in the unaided memories of its employees and contractors for
purposes of enhancing or correcting errors in the Software.
10.8. Within thirty (30) days of the Effective Date, pcOrder shall designate
Client as a "Preferred Beneficiary" of the Master Preferred Escrow
Agreement between pcOrder and Data Securities International, Inc.
pcOrder will deposit into escrow the source code of any new release of
the Software within thirty (30) days of pcOrder's general commercial
release of such new release. For the parties reference, a copy of this
Master Preferred Escrow Agreement is appended hereto as Attachment J. In
addition, the parties agree that the Master Escrow Agreement is hereby
amended as follows:
. Section 7.3 of the Escrow Agreement regarding arbitration shall not
apply.
. The parties consent to the state and federal courts of Travis
County, Texas as the exclusive jurisdiction and venue for
resolution of disputes arising under and relating to the Master
Preferred Escrow Agreement.
. Section 4.2 is modified to state that Preferred Beneficiary shall
provide written notice to pcOrder at the same time it provides
written notice to DSI.
. Section 4.3 is modified to state that Contrary Instructions must be
supported by a court order to prevent a release of the Deposited
Materials within the required ten (10) business day period. The
parties agree that a release of source code that was not called for
by the Master Preferred Escrow Agreement would result in imminent
irreparable injury to pcOrder and therefore the entry of temporary
injunctive relief to prevent such a release will be appropriate if
pcOrder demonstrates a likelihood of success on the merits in
showing that a "Release Condition" (as defined therein) had not
occurred in applying for a court order pursuant to this Section.
. DSI will be also be made a party to and be bound by the terms of
this amendment to the Master Escrow Agreement.
11. CLIENT'S RESPONSIBILITIES
11.1. Client agrees:
11.1.1. Client is responsible for securing formal, written
commitment of prospective Authorized Users to participate in
any deployment of the Software and to accept and permit any
necessary modifications to their pcOrder-powered solution
applications or other electronic commerce applications and
data before pcOrder contacts such Authorized Users and
begins deployment of the Software capability via such
applications. Client shall promptly notify pcOrder upon
securing such commitment in the format set forth in
Attachment C hereto.
11.1.2. To pursue mutually acceptable joint marketing including
issuance of a joint press release within fifteen (15) days
of the Effective Date which is mutually acceptable to
pcOrder and Client and announces the strategic relationship
between pcOrder and Client in the context of Client's
overall corporate and worldwide objectives. Client agrees to
use reasonable commercial efforts to obtain approval from
its subsidiary, the AltaVista Company, and any other
approvals that may be necessasry to include in such press
release a specific reference to the AltaVista Company and
its shopping.com division. Client agrees to issue a joint
press release that is mutually acceptable to pcOrder and
Client that announces the deployment of the Software, in
part or in whole, for the benefit of the AltaVista Company
prior to actually deploying the Software, in part or in
whole, for the benefit of the AltaVista Company.
11.1.3. To endorse a written testimonial, acceptable to Client,
promptly after the successful deployment of the Software
which outlines the benefits of pcOrder's services received
by Client with regard to Client's overall corporate and
worldwide objectives and detailing the relationship between
the parties.
11.1.4. To have joint meetings with the press promptly after the
successful deployment of the Software to promote the
benefits of the pcOrder/Client partnership with regard to
Client's overall corporate and worldwide objectives.
11.1.5. To provide references/recommendations to other pcOrder
prospective customers who are not direct competitors of
Client.
11.1.6. Client shall retain records of all input, configurations,
quotations, and orders pertaining to Client's and Authorized
User's access to and use of the pcOrder System. Client shall
provide pcOrder access to such records in aggregated form
pursuant to a process that is mutually agreeable to the
parties. pcOrder may not publish or otherwise disclose
aggregate data pertaining to such access and use if the
proportion of Client's data represents more than Client's
approximate market share (as determined by reference to
standard industry sources) of the aggregate data approved by
pcOrder's other clients for publication.
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11.1.7. Client shall use `reasonable efforts' to assist pcOrder in
establishing direct formal relationships with its major
partners (suppliers and Customers) to provide information
into the pcOrder system.
11.1.8. To provide Client Product data and to support real-time
pricing, availability, and ordering integration (including
order status integration when available) for the pcOrder
system to ensure that the highest possible quality of Client
Product data is provided to users of pcOrder systems.
11.2. Client shall receive membership in pcOrder's ChannelTrack Program in
accordance with pcOrder's standard terms and conditions and receive the
full benefits thereof including receipt of ChannelTrack Program analysis
tools.
11.3. Client acknowledges that pcOrder's ability to provide the Services under
this Agreement is dependent on Client's timely supplying a leased line
between Client's facilities and pcOrder's facility in Austin, Texas, and
other lines as are mutually deemed necessary for performance of the
Services herein. The preferred line is a T1 type, but at a minimum, 56K,
set up, paid for, and maintained by Client.
11.4. Client shall place a "Powered by pcOrder" logo ("Logo"), to be provided
by pcOrder, in the bottom portion of the appropriate Client World Wide
Web pages, such determination as to which webpages are appropriate to be
made in Client's reasonable discretion, and Windows Client Application
that contains access to the Software provided that such logo placement
does not violate Client's channel partner/customer's standard electronic
commerce/web-page guidelines. The Logo, when so placed by Client, shall
occupy an area approximately 88x31 pixels.
11.5. To the extent required by pcOrder, Client will make available to pcOrder
certain of its facilities, computer resources, software programs,
personnel, and business information as are reasonably required to
perform any Services hereunder. While on Client's premises, pcOrder and
its third party contractor(s) agree to comply at all times with Client's
rules and regulations regarding safety, security, conduct, and
operational procedures and practices that are communicated to pcOrder.
12. OWNERSHIP
Unless expressly agreed otherwise in this Agreement, pcOrder and its licensors
retain all rights, title, and interest in and to the Software, Documentation,
and training materials for the Software, and Client acknowledges that it does
not acquire any rights, express or implied, therein. If Client suggests,
without commissioning pcOrder to develop through Consulting Services, any new
features, functionality, or performance improvements for the Software that
pcOrder subsequently incorporates into the Software, such new features,
functionality, or performance improvements shall be the sole and exclusive
property of pcOrder and shall be free from any confidentiality restrictions that
might otherwise be imposed on pcOrder pursuant to Section 13.
Unless expressly agreed with regards to any custom programs developed for Client
by pcOrder, Client shall be vested with all rights, title, and interest in and
to the customer programs, all copies thereof, source code and other materials
provided to Client by pcOrder, including, without limitation, any custom program
enhancements or modifications, and all copyright, trade secret, patent, and
other rights relating thereto, expressly excluding any rights, title, or
interest to any applications programming interface to any component of the
Software ("API"), as implemented in any such custom program, in source code or
object code form, or as described in documentation. Unless expressly agreed
otherwise, all such APIs shall be treated as pcOrder Confidential Information.
pcOrder hereby grants and agrees to grant to Client a nonexclusive,
nontransferable, non-assignable (except as set forth in Section 18.2),
nonsublicensable, worldwide license to use any such API solely as such API is
implemented in any such custom program for the internal business purpose of
Client and its Affiliates. Notwithstanding the foregoing, pcOrder shall be
vested with, and Client hereby assigns and agrees to assign to pcOrder, all
rights, title, and interest in and to any such custom programs that (a) the
parties agree are appropriate for pcOrder to include in a general release of the
Software to its licensees, (b) are integrations to Channel Partner back-office
systems, or (c) are integrations between any component of the Software and any
product of the following entities or their affiliates: SAP AG, Siebel Systems,
Inc., i2, and Vignette. The parties may mutually agree on a per Assignment
Order basis and under mutually acceptable terms and conditions to grant
ownership of modifications to the Software developed for Client under such
Assignment Order to pcOrder.
13. CONFIDENTIALITY
13.1. "Confidential Information" includes all information disclosed by the
parties, before or after the Effective Date, and generally not publicly
known, whether tangible or intangible and in whatever form or medium
provided, as well as any information generated by the parties to the
extent that it contains, reflects, or is derived from Confidential
Information, provided that tangible Confidential Information shall
include only the Software, User Documentation, training materials and
security procedure information delivered to Client by pcOrder and marked
as "confidential" or the like, and any other information or materials
that are marked as "confidential" or the like at the time of their
disclosure. The terms and conditions of this Agreement are Confidential
Information; however, the existence of this Agreement is not
Confidential Information. All Confidential Information of pcOrder and
Client is proprietary to pcOrder (or its third party licensors) and
Client, respectively, and includes trade secrets and the unpublished
copyrighted material of pcOrder and its third party licensors and
Client. Except as expressly permitted in this Agreement, neither party
may copy, reproduce, or distribute the Confidential Information of the
other party, and neither party shall sell, lease, license, assign,
transfer, or disclose the other party's Confidential Information to any
third party. Each party shall protect the other party's Confidential
Information by using the same degree of care but no less than a
reasonable degree of care as it uses to safeguard its own confidential
or proprietary information of a like nature from unauthorized use,
disclosure, or dissemination. Client shall not reverse engineer the
Software, or disassemble, decompile, or apply any procedure or process
to the Software in order to ascertain, derive, and/or appropriate for
any reason or purpose, the source code or source listings for the
Software, any trade secret information, process, or other Confidential
Information contained in the Software.
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13.2. The Software and pcOrder's method of representation of modeled data and
"constraint based" configuration approach and concept, as well as that
of any third party licensor are also Confidential Information, including
information relating thereto as given in oral form in pcOrder's training
classes.
13.3. Each party agrees to restrict access to the other party's Confidential
Information to only the Affiliates, and the parties' and Affliates'
employees and contractors who require such access in the course of their
assigned duties and responsibilities and who have been informed of the
obligations of Section 13. The parties agree that their and the
Affiliates' employees and contractors (including the third parties
referenced in Section 18.12) who may have access to any Confidential
Information of the other party will be legally obligated, by a written
agreement, to preserve the confidentiality of such information under
terms and conditions no less restrictive than those set forth herein.
For purposes of this Agreement, the term "access" shall exclusively mean
access for Authorized Use only and shall not include the ability to copy
or possess the Software or otherwise control its operation. The parties
shall make all reasonable efforts to enforce such obligations.
13.4. Notwithstanding Section 13.3, no contractor who is a competitor of
pcOrder may have access to pcOrder's Confidential Information.
13.5. Nothing in this Agreement shall be construed to convey any title or
ownership rights to the Software or Confidential Information to Client
or to any patent, copyright, trademark, or trade secret or grant any
other right, title, or ownership interest to the Confidential
Information except as may be provided by this Agreement.
13.6. Without granting any right or license, the foregoing obligations shall
not apply with respect to a party's Confidential Information which the
other party can document and that: (i) was in the possession of or known
by the other party without an obligation of confidentiality prior to
receipt from the disclosing party, (ii) is or becomes general public
knowledge through no fault or acts of the other party; (iii) is or
becomes lawfully available to the other party from a third party without
an obligation of confidentiality; (iv) is independently developed by the
other party without use of any Confidential Information; or (v) is
required to be disclosed pursuant to any law, code or regulation,
provided the disclosing party is given ten (10) days written notice
prior to such requirement in order that it may seek a protective order.
14. TERM AND TERMINATION
14.1. The Agreement shall remain in effect for [*] from the Effective Date
unless terminated earlier as described below ("Initial Term"). The
Agreement shall renew for additional twelve (12) month periods (each, a
"Renewal Term") at the rates specified herein for such Renewal Terms, or
if not specified herein, at pcOrder's then-current standard fees for the
Software and Services, until such time as Client gives pcOrder thirty
(30) days written notice prior to the end of the Initial Term or the
then-current Renewal Term of its election not to renew the Subscription
Licenses.
14.2. This Agreement and any license issued hereunder and any respective
Schedule may be respectively terminated earlier in accordance with the
following:
14.2.1. By pcOrder if Client fails to make any payments due hereunder
within thirty (30) days after pcOrder delivers written notice
of such default to Client.
14.2.2. By either party on thirty (30) days written notice to the
other party if the other party fails to perform any material
obligation required of it under this Agreement and such
failure is not cured within such thirty (30) day period.
14.2.3. By either party if the other files a petition for bankruptcy
or insolvency, has an involuntary petition filed against it,
commences an action providing for relief under bankruptcy
laws, files for the appointment of a receiver, or is
adjudicated a bankrupt concern.
14.2.4. If [*], [*], and [*] have not been accepted pursuant to
Section 4.3.6 by [*] (provided, however, that acceptance
pursuant to Section 4.3.6(e)(2) shall not be considered
acceptance for purposes of this Section 14.2.4), Client may
terminate this Agreement, together with all licenses granted
hereunder, by providing written notice of termination to
pcOrder on[*] . Termination pursuant to this Section 14.2.4
shall be effective as of the first anniversary of the
Effective Date. Upon termination pursuant to this Section
14.2.4, Client shall be relieved of the obligation to make
those payments set forth in Section 4.1 that are due within
forty-five (45) days of the first and second anniversaries of
the Effective Date, but shall not be relieved of the
obligation to make and shall not be entitled to any refund of
the payment set forth in Section 4.1 that is due within
forty-five (45) days of the Effective Date or any payments
paid or payable pursuant to Section 4.3. If this Agreement is
not terminated by Client pursuant to this Section 14.2.4
on[*] , [*], [*], and [*] shall be deemed accepted on that
date if such New Versions have not already been accepted
pursuant to Section 4.3.6.
14.2.5. At any time on or before[*], Client may conduct the
performance test set forth in Attachment K on the most recent
version of the Software delivered to Client by pcOrder,
provided, however, that before such performance test is
conducted pcOrder shall be allowed to verify the environment
of the test and all other test parameters. If the Software
fails to pass such performance test, Client shall provide
pcOrder written notice of such failure identifying with
specificity the nature of such failure. After receipt of such
notice, pcOrder shall have twenty-five (25) days in which to
provide Client with a fix remedying the problem. If pcOrder
fails to provide such a fix within such twenty-five-day
period, Client may terminate this Agreement, together with
all licenses granted hereunder, by providing written notice
of termination to pcOrder, provided, however, such right to
terminate pursuant to this Section 14.2.5 may be exercised
only on or before [*] . Termination pursuant to this Section
14.2.5 shall be effective as of the first anniversary of the
Effective Date. Upon termination pursuant to this Section
14.2.5, Client shall be relieved of the obligation to make
those payments set forth in Section 4.1 that are due within
forty-five (45) days of the first and second anniversaries of
the Effective Date, but shall not
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be relieved of the obligation to make and shall not be
entitled to any refund of the payment set forth in Section
4.1 that is due within forty-five (45) days of the Effective
Date or any payments paid or payable pursuant to Section 4.3.
14.3. The terms and conditions of this Subscription Services Agreement shall
remain in effect and applicable to any Schedule that remains in effect
after expiration or termination of this Agreement for the term of any
such Schedule.
14.4. With respect to each Software license hereunder, pcOrder may terminate
Client's license to the particular Software if Client has failed to pay
any fee due as required under this Agreement. pcOrder may immediately
terminate any or all licenses hereunder if Client has breached its
confidentiality obligations as set forth in Section 13 of this
Agreement.
14.5. Upon the termination of Client's licenses to any and all Software by
pcOrder due to material breach of this Agreement by Client or by
expiration of such licenses by the terms of this Agreement, Client shall
within five (5) business days stop using the Software and shall return
to pcOrder, or destroy, all copies thereof, as well as return or destroy
all copies of pcOrder System User Documentation and related materials
provided to Client under this Agreement for the Software. Within thirty
(30) days from the termination of Client's license to such Software in
accordance with this Section 14.5, Client shall provide pcOrder with a
written certification signed by an officer of Client that all copies
thereof have been returned or destroyed and no copies of the Software
have been retained by Client except for archival and backup copies
pursuant to Section 2.1.6 of this Agreement. All archival and backup
copies of the Software shall be destroyed consistent with Client's
standard procedures with respect to archival and backup copies.
14.6. Notwithstanding anything to the contrary in Section 14.5, upon
termination of this Agreement by Client pursuant to Section 14.2.2,
Client may opt to continue to license the object code version of the
Software pursuant to the terms of Sections 2, 3, and 4 of this Agreement
without Maintenance and Support Services and, notwithstanding anything
herein to the contrary, without any entitlement to future versions of
the Software not yet delivered to Client, by so specifying in the
written notice provided to pcOrder pursuant to Section 14.2.2. After
such termination and notice, pcOrder shall discount all Annual
Subscription License Fees to be paid thereafter pursuant to the terms of
Section 4.2 by[*].
15. WARRANTY AND REMEDIES
15.1. Each party represents and warrants to the other that it has the right to
enter into this Agreement and to perform its obligations under this
Agreement. Without limitation, pcOrder represents and warrants that it
has the right to grant to Client licenses as provided herein. Each party
represents and warrants that it has the right to disclose to the other
and grant the other party access to the information disclosed under the
terms of this Agreement. pcOrder represents, to the best of its
knowledge, that the Software does not infringe any patent or copyright
or violate any other proprietary rights of a third party.
15.2. Information and data provided by pcOrder to Client through the Data
Maintenance Services is provided "AS IS" and is not verified or
expressly or implicitly warranted by pcOrder. pcOrder does not represent
that the information obtained is error free and shall not be liable or
responsible for any pricing, configuration, availability, or other
errors contained in any information provided to Client or Authorized
Users.
15.3. Except as otherwise provided on a Schedule, pcOrder warrants that the
Software will materially conform with the specifications set forth in
the User Documentation and Attachment D for a period of ninety (90) days
from the date that the Software Acceptance Crteria specified in
Attachment D hereto establishes that the Software is performing
satisfactorily. Should the Software fail to materially conform to the
specifications during the Warranty Period, Client shall promptly notify
pcOrder in writing of such nonconformance. To the extent that the
nonconformance exists in a current, unaltered release of the Software,
pcOrder shall, at its own cost and expense, make every commercially
reasonable effort to correct the nonconformance or, if necessary, to
replace the nonconforming Software.
15.3.B pcOrder warrants that the Software, when used in accordance
with the applicable Documentation, will perform the functions
specified in such Documentation when processing calendar dates
falling before, on, or after January 1, 2000, including February
29, 2000 and dates thereafter, and will not produce a material
Severity Level 1 or 2 failure (as defined in Attachment H) and
will not produce invalid or incorrect results relative to
calendar year and leap year calculations.
15.4. pcOrder warrants that all services performed under the Agreement shall
be performed in a workmanlike and professional manner by its employees
or by third party contractors.
15.5. EXCEPT AS OTHERWISE STATED IN THIS AGREEMENT, PCORDER MAKES NO OTHER
WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, INCLUDING ANY IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND
NONINFRINGEMENT.
15.6. Notwithstanding Sections 15.1, 15.2, and 15.4, any express, implied, or
statutory warranties arising under this Agreement are VOID if Client has
made changes to the Software or permitted any changes to be made other
than by or with the express, written approval of pcOrder.
16. INFRINGEMENT
16.1. pcOrder agrees to indemnify, defend, and hold Client harmless from any
and all claims, damages, costs, expenses (including, but not limited to,
reasonable attorney's fees and costs) or liabilities that may result, in
whole or in part, or arise out of any legal action based on any claim
that any Software or custom program delivered by pcOrder to Client
("Delivered Program") infringes a copyright, patent, trade secret, or
other proprietary right of a third party. Such obligation is subject to
the following conditions:
16.1.1. Client must notify pcOrder in writing promptly after Client
becomes aware of a claim.
16.1.2. The parties agree to cooperate in good faith in the defense
of any legal action or suit brought by third parties based on
any claim that the Delivered Program violates or infringes
upon the existing rights of any third party.
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16.1.3. pcOrder has sole control of the settlement, compromise,
negotiation, and defense of any such action. Client may elect
to participate in any such action with an attorney of its own
choice and at its own expense; however, with regard to the
infringement claim and the defense and/or litigation thereof,
pcOrder shall remain in sole control.
16.1.4. pcOrder may, at its sole option, obtain the right for Client
to continue using the Delivered Program for the remaining
portion of the term, or replace or modify the Delivered
Program so it is no longer infringing and is functionally
equivalent to the infringing Delivered Program. If pcOrder is
unable to, or if it is commercially unreasonable for pcOrder
to provide Client with a non-infringing Delivered Program,
pcOrder will provide Client, a refund of the most recent
Annual Subscription License Fee actually paid to pcOrder, and
Client may terminate this Agreement.
16.1.5. The foregoing indemnity shall not apply to any infringement
claim to the extent that the claim arises from (i) a
Delivered Program which has been modified by Client or any
third party without pcOrder's express written consent where
such modification gave rise to the infringement claim; (ii)
Client's use of the Delivered Program in conjunction with
Client's data where use with such data gave rise to the
infringement claim, provided that the Delivered Program could
be used for its intended purpose with a non-infringing form
of the data; (iii) Client's use of the Delivered Program with
other software or hardware (but expressly excluding from such
other software and hardware Microsoft's Windows NT operating
system and SQL Server database management program), where use
with such other software or hardware gave rise to the
infringement claim; (iv) a custom program delivered by
pcOrder to Client to the extent that the infringement claim
arises from any information or materials incorporated into
the custom program that was specified, prepared, or
contributed by any entity other than pcOrder or a contractor
of pcOrder, including but not limited to specifications,
documentation, and source or object code; or (v) Client's
unauthorized use of the Delivered Program.
16.2. SECTION 16 STATES THE ENTIRE LIABILITY OF PCORDER WITH RESPECT TO ANY
CLAIM OF ANY TYPE INFRINGEMENT.
17. LIMITATION OF LIABILITY
17.1. EXCEPT FOR CLIENT'S OBLIGATIONS UNDER SECTION 2, THE INFRINGEMENT
INDEMNIFICATION SET FORTH IN SECTION 16 HEREIN, AND THE PARTIES'
OBLIGATIONS UNDER SECTION 13, THE LIABILITY OF EITHER PARTY TO THE
OTHER, IN THE AGGREGATE, FOR ANY REASON AND UPON ANY AND ALL CLAIMS AND
CAUSES OF ACTION INCLUDING CONTRACT, TORT, NEGLIGENCE, OR OTHER CAUSES
OF ACTION, SHALL BE LIMITED TO [*] . PCORDER'S LIABILITY TO CLIENT WITH
RESPECT TO ANY PARTICULAR PRODUCT OR DEVELOPMENT PROJECT PURSUANT TO
SCHEDULE 1, SUCH AS A PROJECT TO DEVELOP A PARTICULAR USER INTERFACE OR
THIRD PARTY INTEGRATION (WHICH PROJECT MAY INCLUDE ONE OR MORE
ASSIGNMENT ORDERS), SHALL BE LIMITED TO[*] . NOTWITHSTANDING ANYTHING
CONTAINED HEREIN TO THE CONTRARY, NEITHER PARTY SHALL BE LIABLE FOR LOST
PROFITS OR FOR SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES,
EVEN IF IT IS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND
NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE. PCORDER FURTHER
DISCLAIMS ANY LIABILITY FOR ANY PRICING, CONFIGURATION, AVAILABILITY, OR
OTHER ERROR CONTAINED IN ANY DATA INCLUDING CLIENT DATA OR DATA PROVIDED
TO AUTHORIZED USERS.
17.2. Neither party shall be liable for any delay or failure to perform its
obligations and Services hereunder for causes that are beyond its
reasonable control. For illustration purposes, and without limiting the
generality thereof, such causes shall include, but are not limited to,
acts of nature, floods, fires, loss of electricity or other utilities,
lack of Client support necessary for the timely provision of Services,
or delays by Client in providing required software, hardware,
information, personnel, or performing any other obligation hereunder.
Additionally, and notwithstanding any provisions or any hardware
warranty or other agreement provisions to the contrary, pcOrder shall
not be liable for any delay or failure to perform any of its obligations
and Services hereunder due to any breach of the applicable Client
standard, limited warranty statement provided in accordance with Section
9.3.
18. MISCELLANEOUS
18.1. This Agreement shall not be amended unless in writing signed by each
party. All changes to this Agreement shall be made by written amendment
and any alterations made on the Agreement document itself shall be of no
force or effect.
18.2. Neither party may assign this Agreement or any license created hereunder
by operation of law, change of control, or in any other manner without
the prior written consent of the other, and such consent shall not be
unreasonably withheld; provided, however, that such consent shall not be
required if either party assigns this Agreement in connection with a
merger, acquisition, or sale of all or substantially all of its assets.
All other assignments are void. This Agreement shall be binding upon all
successors and assigns.
18.3. In the event an action, including arbitration, is brought to enforce any
provision or declare a breach of this Agreement, the prevailing party
shall be entitled to recover, in addition to any other amounts awarded,
reasonable legal and other related costs and expenses, including
reasonable attorneys' fees, incurred thereby.
18.4. Each party acknowledges that the other party shall have the right to
take all reasonable steps to protect its Software, Confidential
Information, and Client Confidential Information, including, but not
limited to, injunctive relief and any other remedies as may be available
at law or in equity in the event the other party does not fulfill its
obligations under this Agreement.
18.5. Any notice required under the Agreement shall be given in writing and
shall be deemed effective upon delivery to the party to whom addressed.
All notices shall be sent to the applicable address specified on the
face page hereof or to such other address as the parties may designate
in writing.
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18.6. If any term or provision of this Agreement is determined to be invalid
or unenforceable for any reason, it shall be reformed rather than
voided, if possible, to achieve the intent of the parties to the fullest
extent possible. In any event, all other terms and provisions shall be
deemed valid and enforceable to the maximum extent possible.
18.7. The Agreement and any related action shall be governed and interpreted
by the laws of the State of Texas except for the conflict of laws
provisions thereof.
18.8. The failure of a party to enforce any provision of this Agreement or any
Schedule or Exhibit hereto shall not constitute a waiver of such
provision, remedy, or the right of such party to enforce such provision
or any other provision.
18.9. The provisions set forth in Sections 2.1.6, 2.3, 2.4, 2.8, 2.9, 5, 12,
13, 15, 16, 17, 18.2 through 18.21 of this Subscription Services
Agreement shall survive termination or expiration of this Agreement and
any applicable license hereunder.
18.10.The parties are independent contractors and nothing in the Agreement
shall be deemed to make a party an agent, employee, partner or joint
venturer of the other. Neither party shall have authority to bind,
commit, or otherwise obligate the other party in any manner whatsoever.
18.11.This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all proposals and
prior discussions and writings between the parties with respect thereto.
18.12.pcOrder shall have the right to use third parties in performance of its
obligations and Services hereunder and, for purposes of the Agreement,
all references to pcOrder or its employees shall be deemed to include
such third parties.
18.13.This Agreement may be signed in one or more counterparts, each of which
is an original for all purposes but all of which taken together
constitute only a single instrument.
18.14.Both parties shall comply with all then-current export and import laws
and regulations of the United States and such other governments as are
applicable when using the Software. Both parties hereby certify that
they will not directly or indirectly export, re-export, transship, or
transmit the Software, or any portion thereof, or related information,
media, or products in violation of United States laws and regulations.
18.15.Both parties agree to comply with all applicable laws, regulations, and
ordinances relating to its performance under this Agreement.
18.16.The terms and conditions of any purchase order or other instrument
issued by Client or pcOrder in connection with this Agreement which are
in addition to or inconsistent with the terms and conditions of this
Agreement shall not be binding on either party.
18.17.pcOrder reserves all rights not specifically granted herein.
18.18.During the term of this Agreement and for a period of one (1) year
thereafter, Client and pcOrder agree not to solicit, nor attempt to
solicit, the services of any employee or contractor of the other party
without the prior written consent of the other party. Violation of this
provision shall entitle the adversely affected party to assert
liquidated damages against the other party equal to one hundred (100)
percent of the solicited person's new gross annual compensation.
18.19.Headings are for reference purposes only, have no substantive effect,
and shall not enter into the interpretation hereof.
18.20.This Agreement incorporates this Subscription Services Agreement and
Assignment Orders, Exhibits, Schedules, and Attachments which reference
this Subscription Services Agreement and are mutually agreed upon in
writing by authorized representatives of the parties.
18.21.In the event of a conflict between the terms and conditions of the
Subscription Services Agreement and any Schedules and Attachments
thereto, the terms and conditions of the Schedules and Attachments shall
prevail in that order.
By signing below, each party acknowledges that it has read,
understands, and agrees to the terms of this Agreement:
pcOrder.com, Inc.: Compaq Computer Corporation:
/s/ Christina Jones 6/21/99 /s/ Ben K. Wells
--------------------------------- ---------------------------
By: Signature Date By: Signature Date
Christina C. Jones Ben K. Wells
------------------------------- ------------------------
Name Name
President & COO Chief Financial Officer (Acting)
-------------------------- --------------------------------
Title Title VP, Corporate Treasurer
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ATTACHMENT A
TO THE SUBSCRIPTION SERVICES AGREEMENT
SUBLICENSE AGREEMENT
between
pcOrder.com, Inc.
5001 Plaza on the Lake
Austin, TX 78746
"pcOrder"
and
[Group I or Group II Authorized User]
[address of same]
("Licensee")
PLEASE CAREFULLY READ THE TERMS AND CONDITIONS OF THIS AGREEMENT BEFORE USING
- -----------------------------------------------------------------------------
THE PCORDER SOFTWARE. BY USING THE PCORDER SOFTWARE, YOU AGREE TO BE BOUND BY
- ------------------------------------------------------------------------------
THE TERMS OF THIS AGREEMENT. IF THIS AGREEMENT IS NOT ACCEPTABLE TO YOU, DO
- -----------------------------------------------------------------------------
NOT INSTALL THE PCORDER SOFTWARE OR ACCESS THE PCORDER SYSTEM AND PROMPTLY
- --------------------------------------------------------------------------
RETURN THE PCORDER SOFTWARE TO THE PARTY BY WHOM IT WAS DISTRIBUTED. YOUR USE OF
- --------------------------------------------------------------------------------
THE PCORDER SYSTEM IS SUBJECT TO AND CONTINGENT ON YOUR ACCEPTANCE OF THE TERMS
- -------------------------------------------------------------------------------
AND CONDITIONS OF THIS AGREEMENT.
- ---------------------------------
This Digitized License Agreement (this "Agreement') is entered into between you
(either as an individual or an entity) and pcOrder.com, Inc. ("pcOrder"). This
Agreement governs your: (i) use of the pcOrder software program, related user
documentation, and any fixes, releases, upgrades and new versions or
enhancements which pcOrder may subsequently issue to you (collectively, the
"Software") and (ii) access to pcOrder's configuration, quotation, and lease
financing services system (the "pcOrder system").
1. LICENSE GRANT AND RIGHT OF USE
1.1. Each license granted hereunder shall be a nonexclusive,
nontransferable, and nonassignable license to use the object code
version of this Software.
1.2. Licensee may use the Software to access the Compaq CTO module for
purposes of enabling Licensee and its customers to electronically
configure, obtain prices and quotes for, determine the availability
of, and electronically order for use, distribution, or reselling
manufactured, marketed, and distributed products of pcOrder (the
foregoing activities being hereafter defined as "Electronic
Commerce").
1.3. Licensee may use the Software to perform the configuration-related
functions described in any applicable documentation, which
documentation will be provided to Licensee in either hard copy format
or via an online help format.
1.4. The license for the Software granted herein shall be a single user
license. Only one (1) individual user may access each copy of the
Software. User IDs and passwords shall be provided by pcOrder or
pcOrder's third party licensor.
1.5. Licensee shall have no right to distribute, sublicense, transfer, or
assign the Software. If Licensee ceases to require use of the
Software, Licensee shall destroy or return all copies of the Software
to pcOrder. Licensee agrees to promptly notify pcOrder if it becomes
aware of any use of the Software in an unauthorized manner and shall
cooperate with pcOrder by providing additional information and
assistance in effecting a resolution of such misuse.
1.6. Unless otherwise expressly permitted in this Agreement, Licensee shall
not: (i) use the Software to process or permit to be processed the
data for any third party; (ii) use the Software in operation of a
service bureau; (iii) disassemble, decompile, or reverse engineer the
Software; (iv) permit any subsidiaries, affiliated entities, or third
parties to use the Software; (v) sublicense the Software to any third
parties; or (iv) use this Software for the benefit of any third party.
1.7. The term of this Agreement and rights and licenses granted herein
shall begin upon the date of execution of this Agreement and pcOrder
may earlier terminate this Agreement upon the termination of pcOrder's
license agreement with any third-party licensor which owns any
intellectual property contained in the Software and may terminate
access and use of the Compaq CTO module upon termination of any
applicable agreement between pcOrder and Compaq Computer Corporation.
2. REPRODUCTION and DISTRIBUTION
2.1. Subject to the restrictions set forth herein, Licensee may make one
(1) copy of the Software for archive purposes and backup use in
emergency situations .
2.2. Licensee shall include any copyright notice, proprietary legend, and
other indicia of ownership on all copies, in the content and format as
those which were contained on the copy originally distributed to
Licensee. Licensee shall pay all duplication costs incurred by
Licensee in making the copy of the Software.
2.3. Licensee shall keep and maintain complete and accurate records of each
copy of the Software. All such copies shall be owned by pcOrder.
2.4. Licensee agrees that pcOrder may, upon thirty (30) days prior written
notice, enter Licensee's premises to verify Licensee's compliance with
the provisions of this Agreement. Such inspections shall be limited to
(i) one annual inspection (unless pcOrder believes that it has just
cause for multiple inspections); (ii) occurring during Licensee's
normal business hours; and (iii) strictly limited to those records
pertaining to the Software licensed hereunder. These rights of
inspection shall remain in effect through the period ending six (6)
months from the termination or expiration of this Agreement and any
applicable license hereunder.
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3. CONFIDENTIALITY
3.1. "Proprietary Information" provided to Licensee includes valuable
confidential information and trade secrets which are proprietary to
pcOrder or its third party licensor. Proprietary Information includes
the Software and other related materials furnished by pcOrder and the
oral and visual information relating thereto. pcOrder's third party
licensor's method of representation of modeled data and their approach
to configuration, including the "constraint-based" approach and
concept are Proprietary confidential information. Nothing in this
Agreement shall be construed to convey any title or ownership rights
to the Proprietary Information to Licensee. Licensee shall not sell,
lease, license, assign, transfer, or disclose the Confidential
Information to any third party and shall not copy, reproduce or
distribute the Confidential Information except as expressly permitted
in this Agreement. Client shall protect the Proprietary Information by
using the same degree of care but no less than a reasonable degree of
care as it uses to safeguard its own confidential or proprietary
information of a like nature from unauthorized use, disclosure, or
dissemination.
3.2. Licensee shall not reverse engineer the Software, or disassemble,
decompile, or otherwise apply any procedure or process to the Software
in order to ascertain, derive, and/or appropriate for any reason or
purpose, the source code or source listings for the Software or any
algorithm process or procedure or trade secret information contained
in the Software.
3.3. Licensee agrees to restrict access to the Proprietary Information only
to employees who require access in the course of their assigned duties
and responsibilities and have agreed in writing to be bound by
provisions no less restrictive than those set forth in this Section 3.
3.4. Nothing in this Agreement shall be construed to convey any title or
ownership rights to the Proprietary Information to Licensee or to any
patent, copyright, trademark, or trade secret or grant any other
right, title, or ownership interest to the Confidential Information
except as may be provided by this Agreement.
3.5. Without granting any right or license, Confidential information shall
not include any information which the receiving party can document
and: (i) was in the possession of or known by the other party without
an obligation of confidentiality prior to receipt from the disclosing
party, or (ii) is or becomes general public knowledge through no fault
or acts of the other party; (iii) is or becomes lawfully available to
the other party from a third party without an obligation of
confidentiality; or (iv) is independently developed by the other party
without use of any such Confidential Information.
4. TERM AND TERMINATION
4.1. This Agreement and any license created hereunder may be terminated in
accordance with the following:
4.1.1. By pcOrder, in accordance with Section 1.7.
4.1.2. By pcOrder or Licensee, without cause, upon fifteen (15) days
prior written notice.
4.1.3. By pcOrder if Licensee files a petition for bankruptcy or
insolvency, has an involuntary petition filed against it,
commences an action providing for relief under bankruptcy laws,
files for the appointment of a receiver, or is adjudicated a
bankrupt concern.
4.2. Upon termination of this Agreement and any license hereunder,
Licensee's rights to the affected Software shall cease. Licensee shall
immediately stop using such Software and shall, at pcOrder's sole
option, either:
4.2.1. return such Software to pcOrder; or
4.2.2. destroy all copies thereof at pcOrder's direction.
4.3. In addition, Licensee shall provide pcOrder with written certification
signed by an officer of Licensee, that all copies of the Software have
been returned or destroyed and that no copies have been retained by
Licensee for any purpose whatsoever.
5. WARRANTY
5.1. Each party represents and warrants to the other that it has all rights
necessary to enter into this Agreement and to perform its obligations
under this Agreement.
5.2. THE SOFTWARE IS LICENSED ON AN "AS IS" BASIS. IN ADDITION. INFORMATION
OBTAINED VIA THE COMPAQ CTO MODULE OR OTHER USE OF THE SOFTWARE SUCH
AS ANY PRICING, CONFIGURATION, AVAILABILITY, OR OTHER DATA IS MADE
AVAILABLE ON AN "AS IS" BASIS. NEITHER COMPAQ NOR ITS THIRD PARTY
LICENSORS MAKE ANY WARRANTIES OR REPRESENTATIONS, EXPRESS, IMPLIED, OR
STATUTORY AS TO THE SOFTWARE OR THE INFORMATION, INCLUDING WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, AND NONINFRINGEMENT.
6. LIMITATION OF LIABILITY
NEITHER PCORDER NOR COMPAQ WILL BE LIABLE TO LICENSEE OR ANY OTHER PARTY FOR ANY
LOSS OR DAMAGE, INCLUDING ANY GENERAL, INCIDENTAL, INDIRECT, SPECIAL, OR
CONSEQUENTIAL DAMAGES, ARISING UNDER THIS AGREEMENT UNDER ANY THEORY OF
LIABILITY INCLUDING CONTRACT, TORT, NEGLIGENCE, OR OTHER CAUSES OF ACTION OR
LICENSEE'S OR ITS SUBLICENSEE'S USE OR POSSESSION OF THE SOFTWARE OR USE OF THE
CTO MODULE EVEN IF IT IS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND
NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE. SOME STATES DO NOT ALLOW THE
EXCLUSION OR LIMITATION OF LIABILITY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO
THE FOREGOING LIMITATIONS MAY NOT APPLY TO YOU.
7. MISCELLANEOUS
7.1. This Agreement shall not be amended unless in writing signed by each
party. All changes to this Agreement shall be made by written
amendment and any alterations made on the Agreement document itself
shall be of no force or effect.
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7.2. Licensee acknowledges that pcOrder shall have the right to take all
reasonable steps to protect its Software and other Proprietary
Information, including, but not limited to, injunctive relief and any
other remedies as may be available at law or in equity in the event
the Licensee does not fulfill its obligations under this Agreement.
7.3. This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all proposals
and prior discussions and writings between the parties with respect
thereto.
7.4. The failure of a party to enforce any provision of this Agreement
hereto shall not constitute a waiver of such provision, remedy, or the
right of such party to enforce such provision or any other provision.
7.5. If any term or provision of this Agreement is determined to be invalid
or unenforceable for any reason, it shall be reformed rather than
voided, if possible, to achieve the intent of the parties to the
fullest extent possible. In any event, all other terms and provisions
shall be deemed valid and enforceable to the maximum extent possible.
7.6. The provisions set forth in Sections 3, 4.2, 4.3, and 6 of this
Agreement shall survive termination or expiration of this Agreement
and any applicable license hereunder.
7.7. pcOrder reserves all rights not specifically granted herein.
7.8. Headings are for reference purposes only, have no substantive effect,
and shall not enter into the interpretation hereof.
7.9. The terms and conditions of any purchase order or other instrument
issued by Licensee in connection with this Agreement which are in
addition to or inconsistent with the terms and conditions of this
Agreement shall not be binding on pcOrder.
7.10. ln the event any action, including arbitration, is brought to enforce
any provision of this Agreement or to declare a breach of this
Agreement, the prevailing party shall be entitled to recover, in
addition to any other amounts awarded, reasonable legal and other
related costs and expenses, including attorney's fees, incurred
thereby.
7.11. Licensee shall not directly or indirectly export the Software without
the prior written permission of pcOrder. Should pcOrder grant Licensee
the right to export the Software, Licensee shall comply with all then
current export and import laws and regulations of the United States
and such other governments as are applicable when distributing the
Software.
7.12. If You have any questions concerning the Agreement, please write to
pcOrder at 5001 Plaza on the Lake, Austin, TX 78746.
This document and Your signature in electronic form, or a hard copy duplicate in
good form, shall be considered an original document with authenticated signature
admissible into evidence unless the document's authenticity is genuinely placed
in question. By indicating agreement below, You acknowledge that you have read,
understand, and agree to the terms of this Agreement.
YES, I AGREE TO THESE TERMS: (Type complete Name )
-----------------------------------
NO, I DO NOT AGREE TO THESE TERMS
3
<PAGE>
ATTACHMENT B
TO THE SUBSCRIPTION SERVICES AGREEMENT
DIGITIZED ACCESS AGREEMENT
PLEASE CAREFULLY READ THE TERMS AND CONDITIONS OF THIS AGREEMENT BEFORE USING
- -----------------------------------------------------------------------------
THE PCORDER SOFTWARE. BY USING THE PCORDER SOFTWARE, YOU AGREE TO BE BOUND BY
- ------------------------------------------------------------------------------
THE TERMS OF THIS AGREEMENT. IF THIS AGREEMENT IS NOT ACCEPTABLE TO YOU, DO
- -----------------------------------------------------------------------------
NOT INSTALL THE PCORDER SOFTWARE OR ACCESS THE PCORDER SYSTEM AND PROMPTLY
- --------------------------------------------------------------------------
RETURN THE PCORDER SOFTWARE TO THE PARTY BY WHOM IT WAS DISTRIBUTED. YOUR USE OF
- --------------------------------------------------------------------------------
THE PCORDER SYSTEM IS SUBJECT TO AND CONTINGENT ON YOUR ACCEPTANCE OF THE TERMS
- -------------------------------------------------------------------------------
AND CONDITIONS OF THIS AGREEMENT.
- ---------------------------------
This Digitized Access Agreement (this "Agreement") is entered into between you
(either an individual or an entity) and pcOrder.com, Inc. ("pcOrder"). This
Agreement governs your: (iii) use of the pcOrder software program, related user
documentation, and any fixes, releases, upgrades and new versions or
enhancements which pcOrder may subsequently issue to you (collectively, the
"pcOrder Software") and (iv) access to pcOrder's configuration, quotation, and
lease financing services system (the "pcOrder system").
1. LICENSE GRANT AND ONLINE SERVICES.
Subject to the terms and conditions of this Agreement, pcOrder hereby grants
You: (i) a non-exclusive, nontransferable, limited use license (the "License")
to use the object code version of the pcOrder Software; and (ii) the right to
access the pcOrder system, as well as other generally available pcOrder files,
libraries, electronic mail and ordering, discussion forums and live chat areas
which pcOrder authorizes you to access (collectively, the "Online Services").
pcOrder may at any time revise these terms and conditions upon notice prior to
your access of the pcOrder system session in which such revised terms and
conditions are effective. Your continued use of the pcOrder system subsequent to
such notice indicates your acceptance of such revisions.
2. RIGHTS OF AND RESTRICTIONS ON USE.
You may use the pcOrder Software and pcOrder system (collectively the "System")
as follows:
2.1. pcOrder Software: You may load and use the pcOrder Software on a
single computer solely in conjunction with the pcOrder system to
configure, determine availability, price, quote, and order the
Products, to access lease financing information, transmit credit
application information, and to access lease finance documentation as
provided by Third Party Lenders.
2.2. pcOrder system: You may use the information obtained from the pcOrder
system solely in support of Your internal business or personal
activities. You may download, store, load, and execute, on your remote
access equipment, any JAVA applets or similar client-side routines
made available by pcOrder.
2.3. Use of the pcOrder system is limited to "Named Users" who have been
provided a unique User ID and secret password (the "Logon ID") from
pcOrder. Only one (1) person per Logon ID may use the pcOrder Software
and access the pcOrder system.
2.4. You are responsible for installing the pcOrder Software on properly
configured and compatible computer equipment as specified in any
applicable user documentation. You are responsible for all costs such
as long distance, modem, and other communication costs required to
access the System. You are also responsible for safeguarding and
protecting your Logon ID from disclosure or use by others. You agree
to promptly change Your password and notify pcOrder if You have reason
to believe Your account is being accessed or used by others. YOU ARE
STRICTLY LIABLE FOR ALL ACTIVITY USING YOUR LOGON ID AND ACCOUNT.
2.5. Except with the express written consent of pcOrder or as expressly
stated herein, You may not:
2.5.1. allow anyone else to use or share Your Logon ID;
2.5.2. modify, disassemble, decompile, reverse engineer, or apply any
process, technique, or procedure to the pcOrder Software in an
attempt to ascertain or derive the source code or source
listings or any trade secret or other confidential information
contained therein;
2.5.3. publicly display, copy, download, store, reproduce, transmit,
distribute, resell, use the pcOrder Software in operation of a
service bureau, or otherwise commercially exploit any part of
the pcOrder system, including any data or information derived
from the pcOrder system, in any format or through any
technology or media now existing or hereafter developed;
2.5.4. copy (except for one back-up copy), distribute, sell, resell,
sublicense, rent, assign, lease, loan, delegate, or transfer
the pcOrder Software, this License, or any of Your rights
under this Agreement to any other party; or
2.5.5. use the pcOrder Software in any country other than the country
in which the pcOrder Software was acquired from an authorized
pcOrder representative.
Restricted Rights.
The pcOrder Software is provided with Restricted Rights. Use, duplication or
disclosure by the U.S. Government is subject to the restrictions in subparagraph
(c) (1) (ii) of the Rights in Technical Data and Computer Software clause at
DFARS 252.227-7013, or subparagraphs (c) (1) and (2) of the Commercial Computer
Software - Restricted Rights at 48CFR52.227-19, as applicable. The Software
manufacturer is pcOrder or its third party licensor.
Export Regulations.
The transfer of technology across national boundaries is regulated by the U.S.
Government. You hereby certify that You will not export or re-export (including
by way of inbound or outbound electronic transmission) any data or technology
derived from the pcOrder system in violation of United States laws and
regulations.
3. TITLE, CONFIDENTIALITY.
You agree that all rights, title, and interest (including all copyrights and
other intellectual property rights) in the pcOrder system, and all trademarks,
service marks, and tradenames belong exclusively
1
<PAGE>
to pcOrder, its third party licensors, and other parties which have granted
certain rights to pcOrder. You also acknowledge that the pcOrder Software
contains trade secret and copyrighted information of pcOrder. Title to the
pcOrder Software, related materials and all copies thereof and intellectual
property rights related thereto shall remain with pcOrder and/or any of its
third party licensors. You may not disclose, give, or transfer the pcOrder
Software to any other party. You will not allow the defacement or removal of any
confidential or proprietary notice placed on the pcOrder Software.
4. ORDERING PRODUCTS.
4.1. You may have the option to purchase Products over the Online Services
using a credit card and by sending that information over the Internet
to a Third-Party Vendor ("Vendor") to whom your order is directed. The
OnLine Services use the "Secure Sockets Layer," which is intended to
encrypt your communication to protect the information from access by
unauthorized third parties. Neither pcOrder nor any Vendor, however,
can guarantee that the Secure Sockets Layer will operate as intended
or that a third party will not be able to access such information. If
you have any concerns about sending such information over the
Internet, you should use an alternative means of payment. You agree
that pcOrder shall not have any liability for any failure by the
encryption technology to protect your information.
4.2. The prices contained on the pcOrder system have been provided to
pcOrder by third parties and, to the best of pcOrder's knowledge, the
prices are accurate. If You submit an order and it is determined that
the prices on which the order was based are in fact, inaccurate, Your
Order will be rejected and You will have the opportunity to submit a
new order at the correct pricing.
4.3. pcOrder is not a party to transactions between you and any Vendor.
PCORDER DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES WHETHER EXPLICIT,
IMPLIED, OR STATUTORY REGARDING GOODS OR SERVICES YOU OBTAIN FROM
VENDORS AND YOU AGREE TO LOOK SOLELY TO SUCH VENDORS FOR ALL CLAIMS
REGARDING THE GOODS OR SERVICES.
5. EXTERNAL SITES.
The OnLine Services may contain links to other sites on the Internet which are
owned and operated by Vendors (the "External Sites"). You acknowledge that
pcOrder is not responsible for the availability of, or the content located on or
through, any External Site. You should contact the site administrator or
Webmaster for those External Sites if you have any concerns regarding such links
or the content located on such External Sites.
6. TERM OF LICENSE.
The License granted herein and the use of the Software is contingent on the
payment of subscription fees and other obligations by the Vendors who have
executed agreement(s) to allow access to and use of the pcOrder system (the
"Subscription") for its Users. This License will terminate if (i) You fail to
comply with any of the terms or conditions of this Agreement or (ii) the
Subscription is terminated. You must discontinue use and destroy all copies of
the pcOrder Software upon termination of this Agreement.
7. WARRANTIES.
THE PCORDER SOFTWARE IS LICENSED ON AN "AS IS" BASIS. IN ADDITION, INFORMATION
CONTAINED IN THE PCORDER SYSTEM REPRESENTS DATA COMPILED BY PCORDER FROM
HARDWARE MANUFACTURERS, DISTRIBUTORS AND OTHER THIRD PARTIES AND HAS BEEN MADE
AVAILABLE ON AN "AS IS" BASIS. NEITHER PCORDER OR IT'S THIRD PARTY LICENSORS
MAKE ANY WARRANTIES OR REPRESENTATIONS, EXPRESS, IMPLIED, OR STATUTORY, AS TO
THE PCORDER SOFTWARE, THE PCORDER SYSTEM, OR THE USE THEREOF INCLUDING WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, AND NONINFRINGEMENT. NEITHER PCORDER OR IT'S THIRD PARTY LICENSORS
MAKE ANY WARRANTIES OR REPRESENTATIONS, EXPRESS, IMPLIED, OR STATUTORY, AS TO
THE ACCURACY OF THE DATA CONTAINED IN THE PCORDER SYSTEM.
8. LIMITATION OF LIABILITY.
8.1. NEITHER PCORDER OR ITS THIRD PARTY LICENSORS SHALL BE LIABLE FOR ANY
LOST PROFITS OR SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL
DAMAGES OF ANY KIND AND HOWEVER CAUSED, EVEN IF PCORDER OR ITS THIRD
PARTY LICENSORS ARE ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND
NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY REMEDY.
PCORDER FURTHER DISCLAIMS ANY LIABILITY FOR ANY PRICING,
CONFIGURATION, DELAY, AVAILABILITY, OTHER ERRORS CONTAINED IN ANY DATA
OR SOFTWARE, OR DELAY IN FURNISHING ANY PRODUCTS OR DATA. SOME STATES
DO NOT ALLOW THE EXCLUSION OR LIMITATION OF LIABILITY FOR INCIDENTAL
OR CONSEQUENTIAL DAMAGES, SO THE FOREGOING LIMITATIONS MAY NOT APPLY
TO YOU.
8.2. IN NO EVENT SHALL PCORDER'S LIABILITY ARISING OUT OF OR RELATED TO
THIS AGREEMENT EXCEED THE FEES PAID BY YOU TO PCORDER UNDER THIS
AGREEMENT.
9. MISCELLANEOUS.
9.1. This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas without regard to conflicts of law
provisions thereof.
9.2. This is the entire agreement between the parties relating to the
subject matter unless You have entered into a Subscription Services
Agreement with pcOrder. In the event the Subscription Services
Agreement contains any terms and conditions that conflict with or are
in addition to the terms and conditions of this Agreement, those terms
and conditions contained in the Subscription Services Agreement will
prevail.
9.3. No waiver of any provision of this Agreement by pcOrder will be
effective unless made in writing. Any waiver made by pcOrder of any
provisions of this Agreement will not be considered a waiver of that
provision for the future, or for any subsequent breach thereof. No
failure or delay in enforcing any right or
2
<PAGE>
exercising any remedy will be deemed a waiver of any right or remedy.
9.4. Any provision in this Agreement found by a court or other tribunal of
competent jurisdiction to be illegal, invalid, or unenforceable shall
be reformed to the minimum extent necessary in order for this
Agreement to otherwise remain in full force and effect and the other
provisions shall remain in full force and effect.
9.5. The provisions set forth in Sections 2.5.1 through 2.5.3, 0, 3, 8,
9.1, and 9.2 of the body of this Agreement shall survive termination
or expiration of this Agreement and any applicable license hereunder.
9.6. If You have any questions concerning the Agreement, please write to
pcOrder at 5001 Plaza on the Lake, Austin, TX 78746.
This document and Your signature in electronic form, or a hard copy
duplicate in good form, shall be considered an original document with
authenticated signature admissible into evidence unless the document's
authenticity is genuinely placed in question. By indicating agreement below, You
acknowledge that you have read, understand, and agree to the terms of this
Agreement.
YES, I AGREE TO THESE TERMS: (Type complete Name )
-----------------------------------
NO, I DO NOT AGREE TO THESE TERMS
3
<PAGE>
ATTACHMENT C
TO THE SUBSCRIPTION SERVICES AGREEMENT
Channel Partner, Independent Reseller, and Client Corporate Account Authorized
User Identity and Contact Information
The following are the identities and contact information for each Channel
Partner, Independent Reseller, and Client Corporate Account Authorized User.
1. CHANNEL PARTNER AUTHORIZED USERS:
1. Name:_______________________________________________
Address:____________________________________________
Telephone No.:______________________________________
Contact:____________________________________________
pcOrder Deployment Acceptance notification Date:____
Successful Deployment Date:_________________________
...
2. INDEPENDENT RESELLER AUTHORIZED USERS:
1. Name:_______________________________________________
Address:____________________________________________
Telephone No.:______________________________________
Contact:____________________________________________
pcOrder Deployment Acceptance notification Date:____
Successful Deployment Date:_________________________
...
3. CLIENT CORPORATE ACCOUNT AUTHORIZED USERS:
1. Name:_______________________________________________
Address:____________________________________________
Telephone No.:______________________________________
Contact:____________________________________________
pcOrder Deployment Acceptance notification Date:___
Successful Deployment Date:_________________________
...
1
<PAGE>
CONFIDENTIAL
------------
ATTACHMENT D
TO THE SUBSCRIPTION SERVICES AGREEMENT
CTO Module Functional and Deployment Descriptions
-------------------------------------------------
All references herein to Channel Partners, Channel Partner's customers,
VARs, Reseller, user, sales representatives, Distributors, Corporate Resellers,
Retail Partners, Independent Resellers, and all other entities, individuals, or
their representatives apply only to the same who are also Authorized Users.
Acceptance Criteria is divided into distinct Software and Deployment
Acceptance Criteria as specified below. Client shall designate a CTO Project
Manager within fifteen (15) days of the Effective Date who shall be responsible
for evaluating Software Acceptance and Deployment Acceptance on behalf of
Client.
Client's designated CTO Project Manager shall be __________________________
with a business address of c/o Compaq Computer Corporation, 20555 S.H. 249,
Houston, TX 77070, a phone number of ____________________, and an e-mail
address of ______________________. pcOrder's designated Acceptance Contact
shall be [*] with a business address of c/o pcOrder.com Inc., 5001 Plaza on the
Lake, Austin, TX 78746, (512) 684-1100, and an e-mail address of [*] The
parties agree that Client's designated CTO Project Manager and pcOrder's
Software Acceptance Contact may change from time to time upon prior notification
to the other party's counterpart.
CTO MODULE SOFTWARE ACCEPTANCE
------------------------------
1. pcOrder shall notify Client's CTO Project Manager that the Software
materially meets the Software Acceptance Criteria;
2. The CTO Project manager shall have fifteen (15) days from such notification
("Software Acceptance Period") to evaluate the Software at pcOrder's site
and in accordance with the below specified Software Acceptance Criteria.
Such evaluation shall use mutually acceptable test data ("Test Data"); and
3. If the Software fails to materially meet the Software Acceptance Criteria,
Client's CTO Project Manager shall notify pcOrder's Acceptance Contact in
writing of such failure within the Software Acceptance Period. Any such
failure notification shall identify with specificity the portion(s) of the
Software Acceptance Criteria which the Software failed to materially meet.
Otherwise, the Software shall be deemed to have been accepted as of the day
following the Software Acceptance Period.
4. In the event Client's CTO Project Manager provides pcOrder's Acceptance
Contact with such Software failure notification, pcOrder shall have thirty
(30) days to cure ("Cure Period") such failure. After such Cure Period,
Software Acceptance steps 1 through 3 shall be repeated with any
modifications to the Software.
5. Notwithstanding any contrary provision of this Agreement, the Software shall
be deemed accepted in the event that failure to materially meet the Software
Acceptance Criteria is a result of failure of Client to follow all
operational instructions supplied by pcOrder or modifications to the
Software without the express authorization of pcOrder.
Software Acceptance Criteria:
- -----------------------------
1. The Software shall be code-complete and tested;
2. pcOrder shall provide Client with technical training and documentation for
the Software;
3. Using the Test Data, the Software shall materially conform to the catalog
search, configuration, pricing, availability, order placement of CTO/BTO
Client Products, and quoting functionality ("Compaq CTO Functionality")
specified in the pcOrder Online Users Guide, Version 2.6 and the pcOrder Web
Storefront Users Guide, Version 2.0;
4. The Software shall be compatible with Internet Explorer 3.0, Netscape 3.0,
and Windows95(TM) or higher versions of same; and
5. Subject to the following definitions, the Software materially conform to the
following performance criteria:
a) The Software shall have a response time of no more than: (i) twenty
(20) seconds for a search corresponding to seven (7) SKUs or less,
and (ii) thirty (30) seconds for configuration (needs analysis &
validation) per system.
Response times are defined as the time the Software receives a request
until the Software returns a result ready for transmission to client
software and represent average times over one (1) twenty-four (24) hour
period. The performance criteria is applicable only to a pcOrder hosted
Server Farm and excludes any client software overhead, web server
software overhead, and network latency.
CTO MODULE DEPLOYMENT ACCEPTANCE
--------------------------------
For each deployment to a Channel Partner, Independent Reseller, and Corporate
Account ("Deployed User") of the capability to access the Compaq CTO
Functionality:
1. pcOrder shall notify Client's CTO Project Manager that such deployment
materially meets the Deployment Acceptance Criteria;
2. The CTO Project manager shall have fifteen (15) days from such notification
("Deployment Acceptance Period") to evaluate such deployment in accordance
with the below specified Deployment Acceptance Criteria; and
3. If such deployment fails to materially meet the Deployment Acceptance
Criteria, Client's CTO Project Manager shall notify pcOrder's Acceptance
Contact in writing of such failure within the Deployment Acceptance Period.
Any such failure notification shall identify with specificity the portion(s)
of the Deployment Acceptance Criteria that the deployment failed to
materially meet. Otherwise, the
1
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CONFIDENTIAL
------------
deployment shall be deemed to have been accepted by Client, and a "successful
deployment" of such Deployed User shall be deemed to have occurred as of the
day following the Deployment Acceptance Period.
4. In the event Client's CTO Project Manager provides pcOrder's Acceptance
Contact with such Deployment failure notification, pcOrder shall have thirty
(30) days to cure ("Cure Period") such failure. After such Cure Period,
Deployment Acceptance steps 1 through 3 shall be repeated with any
modifications to the Software.
5. Notwithstanding any contrary provision of this Agreement, the Software shall
be deemed accepted in the event that failure to materially meet the Software
Acceptance Criteria is a result of failure of Client or Authorized User to
follow all operational instructions supplied by pcOrder or is a result of the
introduction of hardware or software without the express authorization by
pcOrder.
Deployment Acceptance Criteria:
- -------------------------------
1. One or more Designated Users of the Deployed User shall gain access to the
Compaq CTO Functionality under one of the applicable Deployment Scenarios
specified below;
2. The Designated User(s) shall be trained in accordance with Section 7 of the
Subscription Services Agreement;
3. The Designated User(s) may place three (3) consecutive CTO/BTO orders to an
entity in Table 1 specified under the applicable Deployment Scenario
("Appropriate Entity");
4. The Appropriate Entity shall receive each such CTO/BTO order; and
5. Each of the three consecutive CTO/BTO orders received by the Appropriate
Entity shall materially conform to the corresponding CTO/BTO order placed.
Pilot Test: pcOrder will conduct a pilot test of Scenarios 1 and 2 with
-----------
two (2) Channel Partners (whom Client has secured the agreement in Section
11.1.1 of the Subscription Services Agreement) prior to Phase I rollout of any
additional Channel Partner Authorized Users and Client Corporate Account and
Independent Reseller Authorized Users . Such pilot tests shall meet the
Deployment Acceptance Criteria defined immediately above and shall be conducted
over a period of not less than thirty (30) days. pcOrder will make
modifications to the Software as necessary during this pilot phase to
satisfactorily meet the Deployment Acceptance Criteria.
Deployment Scenarios and Functional Descriptions
- ------------------------------------------------
Pursuant to the terms and conditions of this Agreement, p_cOrder will
create and maintain a module for Client's CTO and BTO Products ("Compaq CTO
Module"). The Compaq CTO Module will utilize a pcOrder configuration solution,
electronic commerce platform, and client-server architecture to provide Client
customers with the capability to configure, price, and order Client's CTO
products using "Buildup" rules. This means that, using their existing business
processes and toolsets and, assuming their formal commitment to participate, the
Channel Partners will use a pcOrder-powered CTO module to create bills-of-
materials for systems which will be assembled by Client and then shipped to the
Channel Partners or the Channel Partners' customer(s). pcOrder will deploy this
capability within the Win32 Client/Server and WWW-based versions of pcOrder's
electronic commerce offerings. Pricing for configured systems will be quoted
from the appropriate Channel Partner and availability will be quoted from
Client. Order information from the Channel Partners' tools will flow both to
the Channel Partners' back-end system (via their existing order management
processes, varying on a per-partner basis), and ultimately to Client's back-end
system (via EDI).
Deployment Scenario Descriptions:
- ---------------------------------
Scenario 1: Channel Partners pcOrder Windows Client. Designed for Client's
---------------------------------------------------
Channel Partners, this solution will use Win32 client applications to access the
pcOrder System via the Internet. This application will be delivered to these
users once the Channel Partners agree to participate in the program and upon
delivery of the Windows Client and CTO Module. Note that applicable Authorized
Users must have a unique SKU in their pricebook for every Compaq CTO product SKU
----
so that, for example, a component SKU used for the Compaq CTO is different than
a SKU used for a disk drive from another vendor. The user will log in to the
Windows application with a registered user ID and password in order to access
the CTO Module. From within the application, Client's products will be
presented to the user as they search the catalog and configure Client solutions.
The results will return the Client system(s) that meet their requirements. The
user can then access detailed product information on all of the components that
make up the configured system. As a registered Reseller, the user may access
customer-specific pricing from major distributor partners, and current
availability from Client. The user may then select the desired product(s) to
add it to their quote. Once in the quote screen, the user may save the quote,
apply pricing profiles, print the quote, or order the products via their
existing order management applications.
Scenario 1 will allow Client to provide catalog search, configuration,
quoting and ordering of Client's products to the sales representatives of
pcOrder and Client's mutual Channel Partners. These Channel Partners will
include Distributors, Corporate Resellers, Retail Partners and VARs who are
using pcOrder Online, or another branded version of pcOrder's Win32 Client
Application. This application will be incorporated to existing pcOrder-powered
systems, or will be provided as an independent, Client-branded solution.
Scenario 2: Channel Partners pcOrder Webstorefront. Designed for Client's
--------------------------------------------------
Channel Partner customers, this application will be accessed through Channel
Partners' web sites by Partners' Corporate Account Users. These users will log
in to the application with a registered user ID and password. The user will
then find the desired system using the catalog search or needs analysis
interface. The results will return the configured solutions that meet the user's
requirements. The user can then access more detail about the desired system, or
view product data sheets on each of the components included in the system. If
the user is classified as an end-user, a Reseller's pricing may
2
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CONFIDENTIAL
------------
be displayed. Once a system has been chosen, the user can add it to his shopping
cart/quote, print or save the shopping cart/quote, or submit an order to the
appropriate Channel Partners or Reseller.
Scenario 2 will allow Client to provide catalog search, configuration,
quoting and ordering of Client's products to the end customers of pcOrder and
Client's Channel Partners. These Channel Partners will include Distributors,
Corporate Resellers, Retail Partners and VARs who are given access to the
pcOrder Webstorefront, or another branded version of pcOrder's WWW Client
Applications. This application will be incorporated to existing pcOrder-powered
systems, or will be provided as an independent, Client-branded solution.
Scenario 3: Corporate Accounts Webstorefront. Designed for Client
--------------------------------------------
customers with Internet access, this application will be delivered via the WWW.
This solution will allow a user to log in with a registered user ID and password
that identifies him as a valid user from one of Client's Corporate Accounts.
The user will then find the desired system using the catalog search or needs
analysis interface. The results will return the Client system(s) that meet their
requirements. Once the desired system has been chosen, the user can ask to see
more detail about the system and view available product data sheets for each of
the system's components. If the user is a customer of a registered Reseller or
Channel Partners, customer-specific pricing from the appropriate
resellers/partners and Client's current availability will be displayed. User
will then be able to add the desired system(s) to their shopping cart/quote,
print or save the shopping cart/quote or place an order to the appropriate
Channel Partners or Reseller.
Scenario 3 will allow Client to provide catalog, configuration, quoting and
ordering of Client's products to Corporate Accounts, via a Client-specific, WWW-
based application.
Scenario 4: Independent Reseller CTO Solution. Designed for Client's
----------------------------------------------
Independent Resellers with Internet access, this solution will be delivered via
the Win32 client application or the WWW. This solution will allow a user to log
in with a registered user ID and password that identifies him as a valid user
from one of Client's Independent Resellers. The user will then find the desired
system using the catalog search or needs analysis interface. The results will
return the Client's system(s) that meet their requirements. Once the desired
system has been chosen, the user can ask to see more detail about the system and
view available product data sheets for each of the system's components. If the
user is a registered Reseller, customer-specific pricing from the appropriate
Channel Partners and Client's current availability will be displayed. User will
then be able to add the desired system(s) to their shopping cart/quote, print or
save the shopping cart/quote or place an order to the appropriate Channel
Partners, Reseller and/or Client.
Scenario 4 will allow Client to provide catalog, configuration, quoting and
ordering of Client's products to the Sales Representatives and Corporate Account
customers of Independent Resellers, via a Client-specific, pcOrder-powered
application. It will be provided as either a Win32 or WWW-based application.
<TABLE>
<CAPTION>
Scenario 1: Scenario 2: Scenario 3: Scenario 4:
Channel Channel Partners' Corporate Accounts Independent Reseller
Partners' Webstorefront Webstorefront CTO Solution
Windows Client ------------------ ---------------------- -----------------------
-----------------
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WWW or Win32
Interface Win32 WWW WWW WWW and Win32
- -------------------------------------------------------------------------------------------------------------
Catalog Search Y Y Y Y
- -------------------------------------------------------------------------------------------------------------
Needs Analysis
Product Configuration Y Y Y Y
- -------------------------------------------------------------------------------------------------------------
Data Sheet
Product Information Y Y Y Y
- -------------------------------------------------------------------------------------------------------------
Pricing Channel Partner Channel Partner & Channel Partner & Channel Partner,
Legacy Reseller Reseller Reseller, &/or Client
- -------------------------------------------------------------------------------------------------------------
Availability Client Client Client Client
- -------------------------------------------------------------------------------------------------------------
Quoting Y Y Y Y
- -------------------------------------------------------------------------------------------------------------
Ordering* Client, Client, Client, Reseller, & Client, Distributor,
Distributor, & Distributor, or Channel Partner Reseller, &/or Client
Legacy Reseller
- -------------------------------------------------------------------------------------------------------------
</TABLE>
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CONFIDENTIAL
------------
<TABLE>
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Audience Channel Partner Channel Partners' Client's Corporate Reseller Sales
Sales End Customers Accounts Representatives &
Representatives, (Resellers and Resellers' Corporate
& Channel Corporate Accounts
Partners' Accounts)
Reseller Sales
Representatives
- -------------------------------------------------------------------------------------------------------------
</TABLE>
* Note: In each Scenario, the order is generally sent to Client and the
additional source.
Functionality Definitions:
- -------------------------
Catalog Search: Ability to search for Client's products by class/category,
---------------
and/or distributor or manufacturer product number with the additional ability to
narrow the search by description or price. The system finds all of the parts
that meet the user's inputs, and presents the results to the user. User can
request a product data sheet on each of the results, view pricing and
availability for these results or add the desired parts to his shopping
cart/quote.
Needs Analysis Product Configuration: Allows the user to select a
-------------------------------------
collection of system requirements such as processor speed, hard drive size,
component selections, etc. The system finds all of the valid configurations that
meet the user's needs, and presents the results to the user. User can ask to see
more detail about the configured system, request a product data sheet on each of
the components in that system, view pricing and availability for these results,
or add the desired systems to his shopping cart/quote.
Data Sheets Product Information: On the user's request, the system
--------------------------------
dynamically generates Product Data Sheets that display detailed product
specifications, product images, and marketing information, as they are
maintained in the Product Data Repository.
Pricing: User-specific pricing and availability for Client solutions from
--------
Resellers, Distributors, and Legacy systems.
Availability: Current availability from Client for Client's products.
-------------
Quoting: Product selections chosen are added to a shopping cart/quote, with
--------
the ability to print or save the shopping cart/quote.
Ordering: Ability to order product from current Channel Partners through
---------
pcOrder-powered systems or through a local Reseller for end-users.
4
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------------
ATTACHMENT E
TO THE SUBSCRIPTION SERVICES AGREEMENT
Additional Server Software
--------------------------
pcOrder Application Server 6.5;
pcOrder Backbone 3.2;
pcOrder CommerceStation 1.3;
pcOrder Order Server 1.1;
CIM 1.0;
CIM 2.0;
SalesBUILDER;
pcOrder Pricer; and all future versions of the Server Software made generally
available by pcOrder to its licensees.
1
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------------
ATTACHMENT F
TO THE SUBSCRIPTION SERVICES AGREEMENT
New Version Acceptance Criteria
-------------------------------
A. CommerceStation 2.0
. Features and Functionality
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------
User Administration/ The dynamic authorization and registration system across multiple audiences to enable
Profiler: personalization by segment. Client Administrators and end user administrators can assign
users to the appropriate organization. CommerceStation is designed to enable an unlimited
number of user profiles.
- -----------------------------------------------------------------------------------------------------------------------
Catalog: All of Licensee's products accessible from catalog, generate, view and search data sheets by
product/SKU, allow for side-by-side view of selected products for feature comparison.
Catalog allows for multiple language descriptions per SKU. (This will allow each sku to
have internationalized descriptions, so that each country can select a language(s) to
display.)
- -----------------------------------------------------------------------------------------------------------------------
Standards Management: Users can create and manage custom, bundles and standard configurations. Users can be
exposed to certain bundles as authorized by login ID.
- -----------------------------------------------------------------------------------------------------------------------
Configuration Interface: CommerceStation will interface with Client's configuration solution. Users will utilize a
wizard interface to underlying configuration model(s); users will be able to validate
configuration of items added to the shopping cart.
- -----------------------------------------------------------------------------------------------------------------------
Datasheets: Users will be able to access product datasheets from the catalog, configuration wizard, and
shopping cart/quoting services.
- -----------------------------------------------------------------------------------------------------------------------
Shopping Cart/Quoter: Enable user to change quantity, delete product, save, load previously saved basket, add
relevant user data, refresh pricing, and display line items.
- -----------------------------------------------------------------------------------------------------------------------
Pricing: This is the module that holds and aggregates pricing as provided by Client, corporate
resellers, distributors in batched formats. Can support multiple currencies. Can support up
to 50 pricebooks.
- -----------------------------------------------------------------------------------------------------------------------
Availability: This is the module that holds and aggregates availability data as provided by Client,
corporate resellers, distributors in batched (hourly, daily), or real time formats.
- -----------------------------------------------------------------------------------------------------------------------
Ordering: Interaction with Client's Order Server implementation for order placement, order routing,
and order status to/from Client or Client's Channel Partners.
- -----------------------------------------------------------------------------------------------------------------------
Approval Workflow: Allows Client's corporate customers to model their internal approval workflow rules. This
allows requester/approver permissions and controls. Includes administrator, purchase
requestor and purchase approver.
- -----------------------------------------------------------------------------------------------------------------------
Usage Reporting: Customer can aggregate and report on usage data from activity on the CommerceStation
platform.
- -----------------------------------------------------------------------------------------------------------------------
Leasing: Quote financial products (fair market value, 10% fixed purchase option, dollar buyout). This
module will be available but not enabled on first release.
- -----------------------------------------------------------------------------------------------------------------------
Services Layer A programmable framework to write pcOrder Backbone services and integrations. The services
layer provides: an integration point for writing services, documentation guide on how to
write those services., provides load balancing and fault tolerance within the architecture,
and logging functionality.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
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------------
Order Server 2.0
. Features and functionality. OrderServer 2.0 will permits vendors to simplify
the complexities that arise when processing e-commerce transactions.
. Channel Integration Kit: SAP, Custom, SMTP, manual status.
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------
Order management A single order is split (by SKU, vendor, product attribute, or supplier) and routed to
multiple business partners and internal back-end systems for fulfillment. Order line items
must be divided and routed appropriately, and order confirmation will be delivered to the
purchaser via email. Order status will also be aggregated and presented to the end user.
Fulfillment partners will also have a batch interface that allows them to update order
status.
- -----------------------------------------------------------------------------------------------------------------------
Pricing and availability Pricing and inventory information may come from a vendor, a fulfillment partner, or some
combination thereof. Can support multiple currencies.
- -----------------------------------------------------------------------------------------------------------------------
Payment Payment terms may range in complexity from purchase orders to credit cards, PO, financing,
for each order. Version 2.0 will pass payment information to the appropriate fulfillment
partner.
- -----------------------------------------------------------------------------------------------------------------------
Integration Client will utilize a toolkit to write integrations into multiple ERP systems, including:
SAP, SMTP (email), and Custom APIs.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
B. Order Server 2.1
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------
Integration The Integration toolkit will be extended to include XML and EDI formats.
- -----------------------------------------------------------------------------------------------------------------------
Maintenance Client will have a simple maintenance tool that will allow an administrator to designate
order routing rules.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
C. VIPER [*]
An extensible, web-based data maintenance environment for pcOrder product data.
VIPER provides:
. [*]
. [*]
. [*]
. [*]
2
<PAGE>
CONFIDENTIAL
------------
ATTACHMENT G
TO THE SUBSCRIPTION SERVICES AGREEMENT
Response Times and Concurrent Usage Levels
------------------------------------------
These response time metrics apply to Commerce Station and Webstorefront
software, measured from inside the Compaq firewall (i.e., minus Internet Network
Latency) using a URL transactional tool such as "SiteScope".
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Type of Total Response Network Latency Transaction
transaction: Time: Time: Time:
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Catalog View (datasheet) [*] seconds [*] milliseconds [*] seconds
---------------------------------------------------------------------------------------------------
Level 1 Hierarchical Catalog [*] seconds [*] milliseconds [*] seconds
View
---------------------------------------------------------------------------------------------------
Configuration [*] seconds [*] milliseconds [*] seconds
---------------------------------------------------------------------------------------------------
Pricing [*] seconds [*] milliseconds [*] seconds
---------------------------------------------------------------------------------------------------
Catalog Search [*] seconds [*] milliseconds [*] seconds
---------------------------------------------------------------------------------------------------
</TABLE>
The usage metrics in the table above apply to the Commerce Station Software.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Type of Total Response Network Latency Transaction
transaction: Time: Time: Time:
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Catalog View (datasheet) [*] seconds [*] milliseconds [*] seconds
---------------------------------------------------------------------------------------------------
Level 1 Hierarchical Catalog [*] seconds [*] milliseconds [*] seconds
View
---------------------------------------------------------------------------------------------------
Configuration [*] seconds [*] milliseconds [*] seconds
---------------------------------------------------------------------------------------------------
Pricing [*] seconds [*] milliseconds [*] seconds
---------------------------------------------------------------------------------------------------
Catalog Search [*] seconds [*] milliseconds [*] seconds
---------------------------------------------------------------------------------------------------
</TABLE>
The usage metrics in the table above apply to the Webstorefront Software.
Total "orders per day" and total "shoppers per day" concern a defined server
farm, consisting of three (3) application serversand two (2) database servers.
Application server and database server would be defined as Proliant class NT
machines, with at minimum a 100BaseT Switched network connecting the two
servers.
[*] ORDERS PER DAY for each application server and database server farm.
[*] SHOPPERS PER DAY for each application server and database server farm.
pcOrder and Client agree to review these metrics after the first anniversary of
the Effective Date to mutually determine whether adjustments are necessary to
keep Client's solutions competitive in the marketplace.
1
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------------
Performance Bug Severity Levels and Resolution
----------------------------------------------
Severity Level 25% of all transactions exceed Complete Response and
targeted Transaction Time Correction Times
- --------------------------------------------------------------------------------
1 A reproducible error that causes 4 hours for response
degradation that is over 100% Next business day for
resolution of problem or
agreed upon path to
resolve the problem
- --------------------------------------------------------------------------------
2 A reproducible error that causes 8 hours for response
degradation that is over 50% 10 days for correction
- --------------------------------------------------------------------------------
3 A reproducible error that causes Next business day for response
degradation that is over 25% 15 days for correction
- --------------------------------------------------------------------------------
4 A reproducible error that causes 3 business days for response
degradation that is in excess of Next product release for
the target response times. correction
- --------------------------------------------------------------------------------
2
<PAGE>
CONFIDENTIAL
------------
ATTACHMENT H
TO THE SUBSCRIPTION SERVICES AGREEMENT
Response and Correction Times
-----------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Severity Level Definition of Production Issue Complete Response and Correction Times
- -----------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
1 A reproducible error that causes complete 1 hour for response
unavailability of the pcOrder System 4 hours for correction
- -----------------------------------------------------------------------------------------------------------------------
2 a reproducible error that causes the unavailability 4 hours for response
of a pcOrder System function Next business day for correction
- -----------------------------------------------------------------------------------------------------------------------
3 a reproducible error that causes a reduction of the Next business day for response
average performance of the pcOrder System as 20 business days for correction
determined by pcOrder
- -----------------------------------------------------------------------------------------------------------------------
4 a question on the use or functionality of the Software 3 business days for response
Possible future release for correction
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Client will identify the severity level of every issue when it is reported to
the pcOrder help desk.
Escalation Procedures
If an error is not corrected within the applicable time frame set forth in the
chart above, Client may escalate the error to pcOrder's Support Manager (which
as of the Effective Date is [*] ). If, after escalation to pcOrder's Support
Manager, an error is not corrected within the applicable time frame set forth in
the chart above, Client may escalate the error to pcOrder's Compaq.com Business
Unit Manager (which as of the Effective Date is [*] ). If, after escalation to
pcOrder's Compaq.com Business Unit Manager, an error is not corrected within the
applicable time frames set forth in the chart above, Client may escalate the
error to pcOrder's President and Chief Operating Officer (which as of the
Effective Date is Christina Jones).
1
<PAGE>
CONFIDENTIAL
------------
ATTACHMENT I
TO THE SUBSCRIPTION SERVICES AGREEMENT
Competitors
-----------
[*]
Broadvision
[*]
Broadvision
Smart
Calico
[*]
This list shall also include the parent companies, subsidiaries, foreign
branches, and foreign offices of the entities listed above.__The parties agree
that pcOrder may, by providing written notice to Client, update this list with
the names of additional entities that develop or market software products that
pcOrder reasonably deems to be competitive with software developed or marketed
by pcOrder. The parties agree that any competitors added to this list shall be
considered "Competitors" effective only thirty (30) days following delivery to
Client of an updated list.
1
<PAGE>
CONFIDENTIAL
------------
ATTACHMENT J
TO THE SUBSCRIPTION SERVICES AGREEMENT
MASTER PREFERRED ESCROW AGREEMENT
Master Number ______________________
This Agreement is effective April 1, 1999 among DSI Technology Escrow Services,
-------------
Inc. ("DSI"), pcOrder.com, Inc. ("Depositor") and any additional party signing
the Acceptance Form attached to this Agreement ("Preferred Beneficiary"), who
collectively may be referred to in this Agreement as "the parties."
A. Depositor and Preferred Beneficiary have entered or will enter into a
license agreement, development agreement, and/or other agreement regarding
certain proprietary technology of Depositor (referred to in this Agreement as
"the License Agreement").
B. Depositor desires to avoid disclosure of its proprietary technology except
under certain limited circumstances.
C. The availability of the proprietary technology of Depositor is critical to
Preferred Beneficiary in the conduct of its business and, therefore, Preferred
Beneficiary needs access to the proprietary technology under certain limited
circumstances.
D. Depositor and Preferred Beneficiary desire to establish an escrow with DSI
to provide for the retention, administration and controlled access of certain
proprietary technology materials of Depositor.
E. The parties desire this Agreement to be supplementary to the License
Agreement pursuant to 11 United States [Bankruptcy] Code, Section 365(n).
ARTICLE 1 -- DEPOSITS
1.1 Obligation to Make Deposit. Upon the signing of this Agreement by the
--------------------------
parties, including the signing of the Acceptance Form, Depositor shall deliver
to DSI the proprietary technology and other materials ("Deposit Materials")
required to be deposited by the License Agreement or, if the License Agreement
does not identify the materials to be deposited with DSI, then such materials
will be identified on an Exhibit A. If Exhibit A is applicable, it is to be
prepared and signed by Depositor and Preferred Beneficiary. DSI shall have no
obligation with respect to the preparation, signing or delivery of Exhibit A.
1.2 Identification of Tangible Media. Prior to the delivery of the Deposit
--------------------------------
Materials to DSI, Depositor shall conspicuously label for identification each
document, magnetic tape, disk, or other tangible media upon which the Deposit
Materials are written or stored. Additionally, Depositor shall complete Exhibit
B to this Agreement by listing each such tangible media by the item label
description, the type of media and the quantity. The Exhibit B must be signed
by Depositor and delivered to DSI with the Deposit Materials. Unless and until
Depositor makes the initial deposit with DSI, DSI shall have no obligation with
respect to this Agreement, except the obligation to notify the parties regarding
the status of the deposit account as required in Section 2.2 below.
1.3 Deposit Inspection. When DSI receives the Deposit Materials and the
------------------
Exhibit B, DSI will conduct a deposit inspection by visually matching the
labeling of the tangible media containing the Deposit Materials to the item
descriptions and quantity listed on the Exhibit B. In addition to the deposit
inspection, Preferred Beneficiary may elect to cause a verification of the
Deposit Materials in accordance with Section 1.6 below.
1.4 Acceptance of Deposit. At completion of the deposit inspection, if DSI
---------------------
determines that the labeling of the tangible media matches the item descriptions
and quantity on Exhibit B, DSI will date and sign the Exhibit B and mail a copy
thereof to Depositor and Preferred Beneficiary. If DSI determines that the
labeling does not match the item descriptions or quantity on the Exhibit B, DSI
will (a) note the discrepancies in writing on the Exhibit B; (b) date and sign
the Exhibit B with the exceptions noted; and (c) mail a copy of the Exhibit B to
Depositor and Preferred Beneficiary. DSI's acceptance of the deposit occurs
upon the signing of the Exhibit B by DSI. Delivery of the signed Exhibit B to
Preferred Beneficiary is Preferred Beneficiary's notice that the Deposit
Materials have been received and accepted by DSI.
1.5 Depositor's Representations. Depositor represents as follows:
---------------------------
a. Depositor lawfully possesses all of the Deposit Materials deposited
with DSI;
b. With respect to all of the Deposit Materials, Depositor has the right
and authority to grant to DSI and Preferred Beneficiary the rights as
provided in this Agreement;
c. The Deposit Materials are not subject to any lien or other
encumbrance;
1
<PAGE>
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------------
d. The Deposit Materials consist of the proprietary technology and other
materials identified either in the License Agreement or Exhibit A, as
the case may be; and
e. The Deposit Materials are readable and useable in their current form
or, if the Deposit Materials are encrypted, the decryption tools and
decryption keys have also been deposited.
1.6 Verification. Preferred Beneficiary shall have the right, at Preferred
------------
Beneficiary's expense, to cause a verification of any Deposit Materials. A
verification determines, in different levels of detail, the accuracy,
completeness, sufficiency and quality of the Deposit Materials. If a
verification is elected after the Deposit Materials have been delivered to DSI,
then only DSI, or at DSI's election an independent person or company selected
and supervised by DSI, may perform the verification.
1.7 Deposit Updates. Unless otherwise provided by the License Agreement,
---------------
Depositor shall update the Deposit Materials within thirty (30) days of
Depositor's making of an new release or new version of the software licensed
under the License Agreement generally available to Depositor's client base.
Such updates will be added to the existing deposit. Unless otherwise expressly
agreed otherwise by Depositor and Preferred Beneficiary in writing, updates to
the Deposit Materials will not include software developed for Preferred
Beneficiary on a custom basis or any custom modifications to Depositor's
generally available software. All deposit updates shall be listed on a new
Exhibit B and the new Exhibit B shall be signed by Depositor. Each Exhibit B
will be held and maintained separately within the escrow account. An
independent record will be created which will document the activity for each
Exhibit B. The processing of all deposit updates shall be in accordance with
Sections 1.2 through 1.6 above. All references in this Agreement to the Deposit
Materials shall include the initial Deposit Materials and any updates.
1.8 Removal of Deposit Materials. The Deposit Materials may be removed and/or
----------------------------
exchanged only on written instructions signed by Depositor and Preferred
Beneficiary, or as otherwise provided in this Agreement.
ARTICLE 2 -- CONFIDENTIALITY AND RECORD KEEPING
2.1 Confidentiality. DSI shall maintain the Deposit Materials in a secure,
---------------
environmentally safe, locked facility which is accessible only to authorized
representatives of DSI. DSI shall have the obligation to reasonably protect the
confidentiality of the Deposit Materials. Except as provided in this Agreement,
DSI shall not disclose, transfer, make available, or use the Deposit Materials.
DSI shall not disclose the content of this Agreement to any third party. If DSI
receives a subpoena or other order of a court or other judicial tribunal
pertaining to the disclosure or release of the Deposit Materials, DSI will
immediately notify the parties to this Agreement. It shall be the
responsibility of Depositor and/or Preferred Beneficiary to challenge any such
order; provided, however, that DSI does not waive its rights to present its
position with respect to any such order. DSI will not be required to disobey
any court or other judicial tribunal order. (See Section 7.5 below for notices
of requested orders.)
2.2 Status Reports. DSI will issue to Depositor and Preferred Beneficiary a
--------------
report profiling the account history at least semi-annually. DSI may provide
copies of the account history pertaining to this Agreement upon the request of
any party to this Agreement.
2.3 Audit Rights. During the term of this Agreement, Depositor and Preferred
------------
Beneficiary shall each have the right to inspect the written records of DSI
pertaining to this Agreement. Any inspection shall be held during normal
business hours and following reasonable prior notice.
ARTICLE 3 -- GRANT OF RIGHTS TO DSI
3.1 Title to Media. Depositor hereby transfers to DSI the title to the media
--------------
upon which the proprietary technology and materials are written or stored.
However, this transfer does not include the ownership of the proprietary
technology and materials contained on the media such as any copyright, trade
secret, patent or other intellectual property rights.
3.2 Right to Make Copies. DSI shall have the right to make copies of the
--------------------
Deposit Materials as reasonably necessary to perform this Agreement. DSI shall
copy all copyright, nondisclosure, and other proprietary notices and titles
contained on the Deposit Materials onto any copies made by DSI. With all
Deposit Materials submitted to DSI, Depositor shall provide any and all
instructions as may be necessary to duplicate the Deposit Materials including
but not limited to the hardware and/or software needed.
3.3 Right to Transfer Upon Release. Depositor hereby grants to DSI the right to
transfer Deposit Materials to Preferred Beneficiary upon any release of the
Deposit Materials pursuant to Section 4 for use by Preferred Beneficiary in
accordance with Section 4.5. Except upon such a release or as otherwise
provided in this Agreement, DSI shall not transfer the Deposit Materials.
ARTICLE 4 -- RELEASE OF DEPOSIT
4.1 Release Conditions. As used in this Agreement, "Release Condition" shall
------------------
mean the following:
2
<PAGE>
CONFIDENTIAL
------------
a. Depositor's failure to remedy a material breach of its support and
maintenance obligations under the License Agreement within twenty (20)
days of receiving written notice of such breach from Preferred
Beneficiary, provided that (a) such breach arises from Depositor's
failure to remedy an Serious Error in the software licensed under the
License Agreement, and (b) such notice describes the error in
sufficient detail to allow Depositor to reproduce the error. For
purposes of this Section 4.1, a "Serious Error" is an error that
significantly impairs the value of the software to Preferred
Beneficiary by (i) causing the software to fail catastrophically, (ii)
causing the software to repeatedly fail materially to perform one or
more of the major functions described in the functional specifications
for the software, (iii) causing the software to repeatedly produce
materially and substantially incorrect results, or (iv) causing the
operating performance of the software to be substantially degraded; or
b. Depositor's failure to continue to do business in the ordinary course.
4.2 Filing For Release. If Preferred Beneficiary believes in good faith that a
------------------
Release Condition has occurred, Preferred Beneficiary may provide to DSI written
notice of the occurrence of the Release Condition and a request for the release
of the Deposit Materials. Upon receipt of such notice, DSI shall provide a copy
of the notice to Depositor by commercial express mail.
4.3 Contrary Instructions. From the date DSI mails the notice requesting
---------------------
release of the Deposit Materials, Depositor shall have ten business days to
deliver to DSI Contrary Instructions. "Contrary Instructions" shall mean the
written representation by Depositor that a Release Condition has not occurred or
has been cured. Upon receipt of Contrary Instructions, DSI shall send a copy to
Preferred Beneficiary by commercial express mail. Additionally, DSI shall
notify both Depositor and Preferred Beneficiary that there is a dispute to be
resolved pursuant to the Dispute Resolution section of this Agreement (Section
7.3). Subject to Section 5.2, DSI will continue to store the Deposit Materials
without release pending (a) joint instructions from Depositor and Preferred
Beneficiary; (b) resolution pursuant to the Dispute Resolution provisions; or
(c) order of a court.
4.4 Release of Deposit. If DSI does not receive Contrary Instructions from the
------------------
Depositor, DSI is authorized to release the Deposit Materials to the Preferred
Beneficiary or, if more than one beneficiary is registered to the deposit, to
release a copy of the Deposit Materials to the Preferred Beneficiary. However,
DSI is entitled to receive any fees due DSI before making the release. Any
copying expense in excess of $300 will be chargeable to Preferred Beneficiary.
Upon any such release, the escrow arrangement will terminate as it relates to
the Depositor and Preferred Beneficiary involved in the release.
4.5 Right to Use Following Release. Unless otherwise provided in the License
------------------------------
Agreement, upon release of the Deposit Materials in accordance with this Article
4, Preferred Beneficiary shall have the right to, and Depositor hereby grants
Preferred Beneficiary a license to use the Deposit Materials for the sole
purpose of diagnose and correct errors in the software licensed under the
License Agreement.
4.6 Confidential Treatment. Preferred Beneficiary agrees that the Deposit
----------------------
Materials shall be treated as confidential information of pcOrder, as such term
or any similar term is defined by the License Agreement, provided, however, that
any exception to Preferred Beneficiary's confidentiality obligations under the
License Agreement based upon the confidential information being in the Preferred
Beneficiary's or another party's prior possession or becoming lawfully available
from another source or being independently developed by the Preferred
Beneficiary shall not apply to the Deposit Materials. Without limiting the
generality of the Preferred Beneficiary's obligations with respect to
confidential information, including without limitation the Deposit Materials,
under the License Agreement, Preferred Beneficiary shall also: (a) maintain the
Deposit Materials at a facility under the Preferred Beneficiary's control; (b)
shall designate a manager who shall have responsibility for preserving the
security of the Deposit Materials at all times; (c) maintain the Deposit
Materials in a room or locker to which access may be obtained only through a key
or computerized card-access security device; (d) to the extent the Deposit
Materials are installed in machine-readable form on any computer equipment,
limit access to such Deposit Materials through a password-based computer control
facility; (e) assure that no person other than such manager and other personnel
specifically designated by such manager (solely on a "need to know" basis) may
have access to the Deposit Materials; (f) assure that no individual shall have
such access to the Deposit Materials unless he or she (i) has been made aware of
and acknowledges, in writing, the confidential and proprietary nature of Deposit
Materials; (ii) has been trained with respect to the procedures designed to
preserve the confidentiality of the Deposit Materials, and (iii) is subject to a
binding and enforceable obligation neither to use the Deposit Materials other
than for the purposes expressly permitted by this Agreement nor to disclose the
Deposit Materials to any person other than Preferred Beneficiary personnel
similarly authorized to access such Deposit Materials; (g) assure that the
manager maintains a record of all persons who have access to the Deposit
Materials and the location of all Deposit Materials, and (h) make such records
available to Depositor upon Depositor's written request).
ARTICLE 5 -- TERM AND TERMINATION
5.1 Term of Agreement. The initial term of this Agreement is for a period of
-----------------
one year. Thereafter, this Agreement shall automatically renew from year-to-
year unless (a) Depositor and Preferred Beneficiary jointly instruct DSI in
writing that the Agreement is terminated; (b) Preferred Beneficiary instructs
DSI in writing that the Agreement is terminated as it relates to Preferred
Beneficiary; or (c) the Agreement is terminated by DSI for nonpayment in
accordance with Section 5.2. If the Acceptance Form has been signed at a date
later than this Agreement, the initial term of the Acceptance Form will be for
one year with subsequent terms to be adjusted to match the anniversary date of
this Agreement. If the Deposit Materials are subject to another escrow
agreement with DSI, DSI reserves the right, after the initial one year term, to
adjust the anniversary date of this Agreement to match the then prevailing
anniversary date of such other escrow arrangements.
3
<PAGE>
CONFIDENTIAL
------------
5.2 Termination for Nonpayment. In the event of the nonpayment of fees owed to
--------------------------
DSI, DSI shall provide written notice of delinquency to the parties to this
Agreement affected by such delinquency. Any such party shall have the right to
make the payment to DSI to cure the default. If the past due payment is not
received in full by DSI within one month of the date of such notice, then at any
time thereafter DSI shall have the right to terminate this Agreement to the
extent it relates to the delinquent party by sending written notice of
termination to such affected parties. DSI shall have no obligation to take any
action under this Agreement so long as any payment due to DSI remains unpaid.
5.3 Disposition of Deposit Materials Upon Termination. Upon termination of
-------------------------------------------------
this Agreement, DSI shall destroy, return, or otherwise deliver the Deposit
Materials in accordance with Depositor's instructions. If there are no
instructions, DSI may, at its sole discretion, destroy the Deposit Materials or
return them to Depositor. DSI shall have no obligation to return or destroy the
Deposit Materials if the Deposit Materials are subject to another escrow
agreement with DSI.
5.4 Survival of Terms Following Termination. Upon termination of this
---------------------------------------
Agreement, the following provisions of this Agreement shall survive:
a. Depositor's Representations (Section 1.5);
b. The obligations of confidentiality with respect to the Deposit
Materials;
c. The rights granted in the sections entitled Right to Transfer Upon
Release (Section 3.3) and Right to Use Following Release (Section
4.5), if a release of the Deposit Materials has occurred prior to
termination;
d. The obligation to pay DSI any fees and expenses due;
e. The provisions of Article 7; and
f. Any provisions in this Agreement which specifically state they survive
the termination or expiration of this Agreement.
ARTICLE 6 -- DSI'S FEES
6.1 Fee Schedule. DSI is entitled to be paid its standard fees and expenses
------------
applicable to the services provided. DSI shall notify the party responsible
for payment of DSI's fees at least 90 days prior to any increase in fees. For
any service not listed on DSI's standard fee schedule, DSI will provide a quote
prior to rendering the service, if requested.
6.2 Payment Terms. DSI shall not be required to perform any service unless the
-------------
payment for such service and any outstanding balances owed to DSI are paid in
full. Fees are due upon receipt of a signed contract or receipt of the Deposit
Materials whichever is earliest. If invoiced fees are not paid, DSI may
terminate this Agreement in accordance with Section 5.2. Late fees on past due
amounts shall accrue interest at the rate of one and one-half percent per month
(18% per annum) from the date of the invoice.
ARTICLE 7 -- LIABILITY AND DISPUTES
7.1 Right to Rely on Instructions. DSI may act in reliance upon any
-----------------------------
instruction, instrument, or signature reasonably believed by DSI to be genuine.
DSI may assume that any employee of a party to this Agreement who gives any
written notice, request, or instruction has the authority to do so. DSI shall
not be responsible for failure to act as a result of causes beyond the
reasonable control of DSI.
7.2 Indemnification. DSI shall be responsible to perform its obligations under
---------------
this Agreement and to act in a reasonable and prudent manner with regard to this
escrow arrangement. Provided DSI has acted in the manner stated in the
preceding sentence, Depositor and Preferred Beneficiary each agree to indemnify,
defend and hold harmless DSI from any and all claims, actions, damages,
arbitration fees and expenses, costs, attorney's fees and other liabilities
incurred by DSI relating in any way to this escrow arrangement.
7.3 Dispute Resolution. Any dispute relating to or arising from this Agreement
------------------
shall be resolved by arbitration under the Commercial Rules of the American
Arbitration Association. Unless otherwise agreed by Depositor and Preferred
Beneficiary, arbitration will take place in San Diego, California, USA. Any
court having jurisdiction over the matter may enter judgment on the award of the
arbitrator(s). Service of a petition to confirm the arbitration award may be
made by First Class mail or by commercial express mail, to the attorney for the
party or, if unrepresented, to the party at the last known business address.
7.4 Controlling Law. This Agreement is to be governed and construed in
---------------
accordance with the laws of the State of California, without regard to its
conflict of law provisions.
7.5 Notice of Requested Order. If any party intends to obtain an order from
-------------------------
the arbitrator or any court of competent jurisdiction which may direct DSI to
take, or refrain from taking any action, that party shall:
4
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a. Give DSI at least two business days' prior notice of the hearing;
b. Include in any such order that, as a precondition to DSI's obligation,
DSI be paid in full for any past due fees and be paid for the
reasonable value of the services to be rendered pursuant to such
order; and
c. Ensure that DSI not be required to deliver the original (as opposed to
a copy) of the Deposit Materials if DSI may need to retain the
original in its possession to fulfill any of its other escrow duties.
ARTICLE 8 -- GENERAL PROVISIONS
8.1 Entire Agreement. This Agreement, which includes the Acceptance Form and
----------------
the Exhibits described herein, embodies the entire understanding among all of
the parties with respect to its subject matter and supersedes all previous
communications, representations or understandings, either oral or written. DSI
is not a party to the License Agreement between Depositor and Preferred
Beneficiary and has no knowledge of any of the terms or provisions of any such
License Agreement. DSI's only obligations to Depositor or Preferred Beneficiary
are as set forth in this Agreement. No amendment or modification of this
Agreement shall be valid or binding unless signed by all the parties hereto,
except that Exhibit A need not be signed by DSI, Exhibit B need not be signed by
Preferred Beneficiary and the Acceptance Form need only be signed by the parties
identified therein.
8.2 Notices. All notices, invoices, payments, deposits and other documents and
-------
communications shall be given to the parties at the addresses specified in the
attached Exhibit C and Acceptance Form. It shall be the responsibility of the
parties to notify each other as provided in this Section in the event of a
change of address. The parties shall have the right to rely on the last known
address of the other parties. Unless otherwise provided in this Agreement, all
documents and communications may be delivered by First Class mail.
8.3 Severability. In the event any provision of this Agreement is found to be
------------
invalid, voidable or unenforceable, the parties agree that unless it materially
affects the entire intent and purpose of this Agreement, such invalidity,
voidability or unenforceability shall affect neither the validity of this
Agreement nor the remaining provisions herein, and the provision in question
shall be deemed to be replaced with a valid and enforceable provision most
closely reflecting the intent and purpose of the original provision.
8.4 Successors. This Agreement shall be binding upon and shall inure to the
----------
benefit of the successors and assigns of the parties. However, DSI shall have
no obligation in performing this Agreement to recognize any successor or assign
of Depositor or Preferred Beneficiary unless DSI receives clear, authoritative
and conclusive written evidence of the change of parties.
8.5 Regulations. Depositor and Preferred Beneficiary are responsible for and
-----------
warrant compliance with all applicable laws, rules and regulations, including
but not limited to customs laws, import, export, and re-export laws and
government regulations of any country from or to which the Deposit Materials may
be delivered in accordance with the provisions of this Agreement.
pcOrder.com, Inc DSI Technology Escrow Services, Inc.
By: By:
-------------------------------- --------------------------------
Name: Name:
------------------------------ ------------------------------
Title: Title:
----------------------------- -----------------------------
Date: Date:
------------------------------ ------------------------------
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PREFERRED BENEFICIARY
ACCEPTANCE FORM
Account Number ______________________
Depositor, Preferred Beneficiary and DSI Technology Escrow Services, Inc.
("DSI"), hereby acknowledge that __________________________________ is the
Preferred Beneficiary referred to in the Master Preferred Escrow Agreement
effective April 1, 1999 with DSI as the escrow agent and pcOrder.com, Inc. as
the Depositor. Preferred Beneficiary hereby agrees to be bound by all
provisions of such Agreement.
Depositor hereby enrolls Preferred Beneficiary to the following account(s):
Account Name Account Number
- ------------ --------------
- ----------------------------------- ------------------------------------
- ----------------------------------- ------------------------------------
- ----------------------------------- ------------------------------------
Notices and communications to Preferred
Beneficiary should be addressed to: Invoices should be addressed to:
Company Name:
---------------------- ------------------------------------
Address:
--------------------------- ------------------------------------
--------------------------- ------------------------------------
--------------------------- ------------------------------------
Designated Contact: Contact:
---------------- ----------------------------
Telephone:
------------------------- ------------------------------------
Facsimile: P.O.#, if required:
------------------------- -----------------
- ----------------------------------- ------------------------------------
Preferred Beneficiary Depositor
Beneficiary
- -----------------------------------
By: By:
----------------------------------- ---------------------------------
Name: Name:
------------------------------ -------------------------------
Title: Title:
----------------------------- ------------------------------
Date: Date:
------------------------------ -------------------------------
DSI Technology Escrow Services, Inc.
- ------------------------------------
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Date:
-----------------------------------
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EXHIBIT A
MATERIALS TO BE DEPOSITED
Account Number ______________________
Depositor represents to Preferred Beneficiary that Deposit Materials delivered
to DSI shall consist of: (a) a copy of the source code for the software programs
listed below on computer-readable magnetic media, excluding any embedded third-
party software which pcOrder does not have the legal right to place into this
escrow account; (b) descriptions of any embedded third-party software not placed
into escrow by Depositor sufficient for Preferred Beneficiary to understand the
function and vendor of such third-party software; and (c) technical
documentation sufficient to enable a reasonably skilled programmer to use such
source code within the scope of the license granted in Section 4.5.
Software Programs:
- ----------------------------------- ------------------------------------
Depositor Preferred Beneficiary
By: By:
-------------------------------- ---------------------------------
Name: Name:
------------------------------ -------------------------------
Title: Title:
----------------------------- ------------------------------
Date: Date:
------------------------------ -------------------------------
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EXHIBIT B
DESCRIPTION OF DEPOSIT MATERIALS
Depositor Company Name
---------------------------------------------------------
Account Number
-----------------------------------------------------------------
Product Name Version
-------------------------------- --------------------------
(Product Name will appear on Account History report)
DEPOSIT MATERIAL DESCRIPTION:
Quantity Media Type & Size Label Description of Each Separate Item
(Please use other side if
additional space is needed)
Disk 3.5" or
- -------- ----
DAT tape mm
- -------- ----
CD-ROM
- --------
Data cartridge tape
- -------- ----
TK 70 or tape
- -------- ----
Magnetic tape
- -------- ----
Documentation
- --------
Other
- -------- -------------------
PRODUCT DESCRIPTION:
Operating System
---------------------------------------------------------------
Hardware Platform
--------------------------------------------------------------
DEPOSIT COPYING INFORMATION:
Is the media encrypted? Yes / No If yes, please include any passwords and the
decryption tools.
Encryption tool name Version
----------------------------------- --------------
Hardware required
--------------------------------------------------------------
Software required
--------------------------------------------------------------
I certify for Depositor that the DSI has inspected and accepted the
above described Deposit Materials above materials (any exceptions are
have been transmitted to DSI: noted above):
Signature Signature
-------------------------- ---------------------------
Print Name Print Name
------------------------- --------------------------
Date Date Accepted
------------------------------- -----------------------
Exhibit B#
--------------------------
Send materials to: DSI, 9555 Chesapeake Dr. #200, San Diego, CA 92123
(619) 694-1900
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EXHIBIT C
DESIGNATED CONTACT
Master Number ______________________
Notices and communications
should be addressed to: Invoices should be addressed to:
Company Name:
---------------------- -------------------------------------
Address:
--------------------------- -------------------------------------
--------------------------- -------------------------------------
--------------------------- -------------------------------------
Designated Contact: Contact:
---------------- ----------------------------
Telephone:
------------------------- -------------------------------------
Facsimile: P.O.#, if required:
------------------------- -----------------
Requests to change the designated contact should be given in writing by the
designated contact or an authorized employee.
Contracts, Deposit Materials and notices Invoice inquiries and fee remittances
DSI should be addressed to: to DSI should be addressed to:
DSI DSI
Contract Administration Accounts Receivable
Suite 200 Suite 1450
9555 Chesapeake Drive 425 California Street
San Diego, CA 92123 San Francisco, CA 94104
Telephone: (619) 694-1900 (415) 398-7900
Facsimile: (619) 694-1919 (415) 398-7914
Date:
------------------------------
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ADDITIONAL ESCROW ACCOUNT AMENDMENT
TO MASTER PREFERRED ESCROW AGREEMENT
Master Number ______________________
New Account Number ______________________
pcOrder.com, Inc. ("Depositor") has entered into a Master Preferred Escrow
Agreement with DSI Technology Escrow Services, Inc. ("DSI"). Pursuant to that
Agreement, Depositor may deposit certain Deposit Materials with DSI.
Depositor desires that new Deposit Materials be held in a separate account and
be maintained separately from the existing account. By execution of this
Amendment, DSI will establish a separate account for the new Deposit Materials.
The new account will be referenced by the following name: ____________________.
Depositor hereby agrees that all terms and conditions of the existing Master
Preferred Escrow Agreement previously entered into by Depositor and DSI will
govern this account. The termination or expiration of any other account of
Depositor will not affect this account.
DSI Technology Escrow Services, Inc.
- -----------------------------------
Depositor
By: By:
-------------------------------- ---------------------------------
Name: Name:
------------------------------ -------------------------------
Title: Title:
----------------------------- ------------------------------
Date: Date:
------------------------------ -------------------------------
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ATTACHMENT K
TO THE SUBSCRIPTION SERVICES AGREEMENT
PERFORMANCE TEST PLAN
Attachment K defines a standardized test that is designed to show that
CommerceStation 2.0, Order Server 2.0 and SystemBuilder products meet or exceed
the following performance targets.
Performance Targets
For a standard server configuration, herein referred to as a "cluster", a
cluster can support
[*] shoppers per day
[*] orders per day
while meeting the following average response time requirements.
Type of transaction Network Latency Transaction Time
Time
- --------------------------------------------------------------------------------
Catalog View (datasheet) [*] milliseconds [*] seconds
- --------------------------------------------------------------------------------
Level 1 Hierarchical Catalog [*] milliseconds [*] seconds
View
- --------------------------------------------------------------------------------
Configuration [*] milliseconds [*] seconds
- --------------------------------------------------------------------------------
Pricing [*] milliseconds [*] seconds
- --------------------------------------------------------------------------------
Catalog Search [*] milliseconds [*] seconds
- --------------------------------------------------------------------------------
Note - Network latency is directly proportional to the size of the data set
returned to the browser. It is assumed that not more than 20 parts are returned
in the catalog search results and the time required to transfer collateral (such
as images) is not included in the timings. These response time metrics apply to
Commerce Station, Order Server and System Builder software, measured from inside
the Compaq firewall (i.e., minus Internet Network Latency) using a URL
transactional tool. Webload is the preferred URL transactional tool.
Performance Testbed - Cluster Hardware/Software Assumptions
For the purposes of the standardized test, a cluster is defined by the following
hardware and software configuration. (Note: This does not necessarily represent
the recommended cluster configuration optimized for production use.)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Name Hardware description Installed software
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Web Server 1 Compaq Proliant server with at least 2 Pentium CommerceStation 2.0 running on
II 400Mhz processors, 512 MB RAM, 4GB disk Microsoft IIS 4.0, and NT 4.0
- ------------------------------------------------------------------------------------------------------------------
Web Server 2 Compaq Proliant server with at least 2 Pentium CommerceStation 2.0 running on
II 400Mhz processors, 512 MB RAM, 4GB disk Microsoft IIS 4.0, and NT 4.0
- ------------------------------------------------------------------------------------------------------------------
Web Server 3 Compaq Proliant server with at least 2 Pentium CommerceStation 2.0 running on
II 400Mhz processors, 512 MB RAM, 4GB disk Microsoft IIS 4.0, and NT 4.0
- ------------------------------------------------------------------------------------------------------------------
Configuration Server Compaq Proliant server with at least 2 Pentium SystemBuilder running on Microsoft IIS
II 400 Mhz processors, 512 MB RAM, 4GB disk 4.0, and NT 4.0
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Application Server Compaq Proliant server with at least 4 Pentium CommerceStation 2.0 running on
II 400Mhz processors, 1 GB RAM, 4GB disk Microsoft IIS 4.0, and NT 4.0
- ------------------------------------------------------------------------------------------------------------------
Database Server Compaq Proliant server with at least 4 Pentium Microsoft SQL Server 7.0
II 400Mhz processors, 1 GB RAM, RAID array
with 8 GB disk
- ------------------------------------------------------------------------------------------------------------------
Network 100 Base-T Switched Network, no firewall n/a
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Test Scenario Definition
We will use Compaq's graphical user interface, provided that the functionality
tested is restricted to the transactions described below. The test scenario is
defined as follows:
1) Hit the main page of the site
2) Login as a registered user (enter username/password)
3) First level catalog browse
4) Load the catalog search page
5) Catalog search by sku (ie, sku=CPQD-329301-B21)
6) View product datasheet
7) Config Compaq classic system
8) Change a parameter in config
9) Change a parameter in config
10) Change a parameter in config
11) Change a parameter in config
12) Change a parameter in config
13) Add item to shopping cart
14) Load the catalog search page
15) Catalog search by class (ie, class=Desktop)
16) Add item to shopping cart
17) Load the catalog search page
18) Catalog search by class/category (ie, class=Desktop, category=Pentium II
500)
19) Add item to shopping cart
20) Save shopping cart
21) Enter order information via SSL session, excluding interaction with any
external integrations.
User "think time" between cicks for configuration selections: between 5-10
seconds.
User "think time" between clicks for all other steps: between 20-30 seconds.
Test Data Assumptions
The test data consists of the following:
[] A catalog with approximately [*] Compaq parts
[] [*] pricebooks for that catalog
[] A SystemBuilder configuration model for Compaq Deskpro EN minitowers and
desktops
Other Test Assumptions
[] The latest available patches to CommerceStation, Order Server and
SystemBuilder must be applied.
[] The latest available patches to Microsoft IIS 4.0, SQL Server 7.0, and NT
4.0 must be applied.
[] A third party product, WebLoad 3.01 from RadView, is used to simulate users
to generate the test load, and record the performance results.
[] pcOrder will provide an implementation of the Webload test scripts and test
data to Compaq, if desired.
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SCHEDULE 1
PROFESSIONAL CONSULTING SERVICES SCHEDULE
TO SUBSCRIPTION SERVICES AGREEMENT
between
pcOrder.com, Inc.
5001 Plaza on the Lake
Austin, TX 78746
and
Compaq Computer Corporation
20555 S.H. 249
Houston, TX 77070
---------------
This Professional Consulting Services Schedule amends Subscription Services
Agreement between the parties, dated June 16, 1999.
1. Software CONSULTING Services:
1.1. All Consulting Services shall be outlined in a mutually agreed upon
and jointly executed Assignment Order. Assignment Orders shall
describe the project's deliverables, if any, the timeframe within
which the project is to be completed, and the respective roles and
responsibilities of the parties. Assignment Orders which specify
specific deliverables to be prepared shall describe clearly defined
projects and specify milestones for the completion of the project that
are no greater than one month apart. The first milestone for each such
Assignment Order will be for the completion of a scoping phase within
two to three weeks. Work performed during the scoping phase will be
performed on a time and materials basis. At the completion of the
scoping phase, the parties will mutually agree whether further work
will be performed for a fixed fee or on a time and materials basis.
1.2. Projects that require significant work involving integration with
third party products will be performed on a time and materials basis.
Once the scoping phase is completed for such projects, the parties
will mutually agree upon an anticipated budget for the project and an
anticipated completion date. Fees for the project will be tracked on a
monthly basis and reported to Client against anticipated budget
amounts. Before exceeding the budgeted amount for such a project,
pcOrder will obtain approval from the individual to whom Client's
project manager for the particular project reports or a Client
executive responsible for the project. Each Assignment Order will
specify an early completion date and provide that, if pcOrder
completes the project by such date, Client will pay to pcOrder a
twenty percent bonus. Possible time and materials projects include [*]
integration work,[*] integration for leasing, freight/tax integration,
[*] integration for [*] integration, and [*] integration.
1.3. Projects that will not require significant work involving integration
with third party products will be performed on a fixed fee basis once
the scoping phase has been completed. Fixed fee projects will be
quoted in mutually agreed upon dollar amounts. Twenty percent of the
fees will be due and payable on the effective date of the applicable
Assignment Order. Sixty percent of the fees will be due and payable
ratably on a monthly basis between the Effective Date and the
anticipated completion date. Twenty percent of the fees will be due
and payable upon completion of the project and delivery of the
project's fully functional deliverables, provided the project was
completed on time. Each Assignment Order will specify an early
completion date and provide that, if pcOrder completes the project by
such date, Client will pay to pcOrder a twenty percent bonus.
2. Fees:
2.1. For the scoping phase of each Assignment Order and for time and
materials Assignment Orders, Client agrees to pay the below-specified
fees for Consulting Services. In accordance with Client's standard
expense polices, Client agrees to pay all taxes, materials, and
reasonable travel, lodging, and other reasonable out-of-pocket
expenses incurred in connection with the provision of Consulting
Services by billable and nonbillable pcOrder employees under all
Assignment Orders. Expenses will be due and payable monthly.
2.2. Termination of the Subscription Services Agreement shall not, under
any circumstances, relieve Client from the obligation to pay for all
Consulting Services provided under this Schedule prior to such
termination.
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3. Pricing for additional Services:
pcOrder shall make Consulting Services available to Client, from the Effective
Date through June 30, 2000, at the following rates:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Type of service: Hourly Description of service: Estimated FTEs:
Rate: (based on a 200
hour month)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
[*] Develops user and
administration training As needed
User/Administration documentation and course
- ------------------- curriculum. Compaq has
Documentation the option to outsource
- ------------- documentation.
- -----------------------------------------------------------------------------------------
[*] Conducts developer
training courses and As needed
Trainer Train the Trainer
- ------- Sessions for Compaq
users and web site
administrators.
- -----------------------------------------------------------------------------------------
[*] Provides onsite
deployment/training 6 FTEs
Deployment Support Engineer support. Assists
- --------------------------- consulting team in data
process definition,
testing, and
implementation.
- -----------------------------------------------------------------------------------------
[*] Works under the
direction of Sr. 6 FTEs
Consultant Consultant to provide
- ---------- technical development
services. (rate
increases to Sr.
Consultant after six
months)
- -----------------------------------------------------------------------------------------
[*] Develops e-commerce
solutions based on 8 FTEs
Sr. Consultant specifications and
- -------------- architecture derived in
collaboration with
Lead/Technical Architect.
- -----------------------------------------------------------------------------------------
[*] Responsible for design
and implementation of 4 FTEs
Lead Consultant/ internal and external
- ---------------- e-commerce solutions.
Technical Architect Works closely with
- ------------------- Client to define custom
implementations.
- -----------------------------------------------------------------------------------------
[*] Primary interface with
customer to define and 4 FTEs
Sr. Project Manager lead the complete
- ------------------- implementation of
comprehensive e-commerce
solutions
- -----------------------------------------------------------------------------------------
[*] Transfers Compaq's high
end configuration and 3 FTEs
CIM 2 Platform Migration quote solution (ESP) to
- ------------------------ the CommerceStation 2.0
platform
- -----------------------------------------------------------------------------------------
[*] Builds SAP linked
SAP Integration Consultant solutions utilizing 3 FTEs
Trilogy Connector and
custom solutions.
- -----------------------------------------------------------------------------------------
[*] Designs and leads the
Sr. SAP Integration implementation of SAP 2 FTEs
Specialist linked solutions.
- -----------------------------------------------------------------------------------------
</TABLE>
3.1. After June 30, 2000, Consulting Services will be subject to an annual
increase of[*].
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4. ASSIGNMENT ORDER TERMINATION
4.1. Client may terminate any Assignment Order for convenience on fifteen
(15) days prior written notice. Such termination shall not relieve
Client of its obligation to pay all fees and costs that have accrued
as of such termination. At Client's request following such a
termination, pcOrder shall supply to Client all work-in-progress
produced under the terminated Assignment Order and any applications
programming interfaces to the Software necessary to complete the work
comtemplated by the terminated Assignment Order.
By signing below, each party acknowledges that it has read, understands,
and agrees to the terms of this Professional Consulting Services Schedule.
pcOrder.com, Inc.: Compaq Computer Corporation:
/s/ Christina Jones 6/21/99 /s/ Ben K. Wells
------------------------------ -------------------------------
By: Signature Date By: Signature Date
Christina C. Jones Ben K. Wells
------------------------------ -------------------------------
Name Name
Chief Financial Officer
President & COO (Acting)
------------------------------ -------------------------------
Title Title VP, Corporate Treasurer
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SCHEDULE 2
DATA MAINTENANCE SERVICES SCHEDULE
TO SUBSCRIPTION SERVICES AGREEMENT
between
pcOrder.com, Inc.
5001 Plaza on the Lake
Austin, TX 78746
and
Compaq Computer Corporation
20555 S.H. 249
Houston, TX 77070
---------------
This Data Maintenance Services Schedule supplementsthe Subscription Services
Agreement between the parties, dated June 16, 1999. For purposes of the
Subscription Services Agreement and this Schedule, "Data Maintenance Services"
are defined as: (i) data compilation services to provide Client with
information and data regarding Client's Products; (ii) services required to
maintain Product pricing and availability information; (iii) services required
to change attributes of the Client Products; and (iv) the activities specified
herein.
1. Definitions
1.1. "Client Products" means all computer hardware, software, services and
other items manufactured, marketed, and distributed by Client under
its own brands.
1.2. A "SKU" represents a computer component or peripheral product. For
purposes of this Agreement, "SKU" shall mean a part number
representing a Client Product.
1.3. "Catalog" is an electronic file in mutually agreeable format
consisting of Client records which contain, but are not limited to,
the following fields: a Client assigned SKU number and a description
of the Client Product.
1.4. "Class/Categorization" is the process of assigning the relevant
pcOrder Class and Category definitions to a specific SKU.
Class/Categorization precedes Population for any SKU.
1.5. "Class" is a grouping of products by type, as used by pcOrder in the
pcOrder system. Class examples are, but not limited to: desktops,
printers, scanners, and modems.
1.6. "Category" is a grouping of products within a Class, as used by
pcOrder in the pcOrder system. Category examples for the Class
"printers" are, but not limited to: B&W laser, color laser, dot
matrix, and ink jet.
1.7. A "Configurable SKU" is a computer system (laptop, desktop, server)
into which another technically-valid component SKU can be
incorporated to enhance the system's performance, or a component SKU
(memory, hard drive, modem, etc.) that can be incorporated into a
configurable computer system. Configurable SKUs and their component
SKUs will be mutually defined by the Client and pcOrder.
1.8. "Configuration Model" is the pcOrder industry standard model of
Configurable SKUs which is required by the pcOrder configuration
software in order to configure products.
1.9. .
1.10. A "3rd Party SKU" is a SKU identifying a product not branded by the
Client. 3rd party SKUs may be a Configurable SKU, or a product that
is marketed or operated independently of a configured system.
1.11. A "High End SKU" is a a Client could contain more than eight central
processing units, and other SKUs that are configurable with such a
Client Product such as storage devices, monitors, expansion cards,
modems, memory products, software, printers, and cables.
1.12. A "High Volume SKU" is a a Client Product, that is a desktop, tower,
notebook, or server system containing up to eight central processing
units. "High Volume SKUs" may contain other Client Products that are
configurable with such Client Product such as storage devices,
monitors, expansion cards, modems, memory products, software,
printers, and cables.
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1.13. "Mapping" is the process of assigning all Client and distributor
codes to a SKU, in order to enable pricing, availability, and
ordering via the pcOrder Software. Mapping of a SKU is necessarily
preceded by Class/Categorization of that SKU.
1.14. "Population" is the process of assigning all technical
specifications, marketing information, and other Product attributes
to a SKU, in order to enable the pcOrder Software. Population of a
SKU is necessarily preceded by Class/Categorization of that SKU.
2. SETUP AND Maintenance of HIGH VOLUME SKus
2.1. The following service levels apply to High Volume SKUs:
2.1.1. Setup.
pcOrder shall require initial setup periods ("Setup
Periods") in which to analyze each set of High Volume
SKU Catalog information provided by Client and to
perform initial catalog maintenance. The length of
setup periods for High Volume SKUs will be mutually
determined by the parties on a project basis. Setup
periods that require population of more than [*] High
Volume SKUs will require 30 days advance notice.
2.1.2. Maintenance.
2.1.2.1. pcOrder will Class/Categorize up to [*] High Volume
SKUs per year. pcOrder will accept up to [*] High
Volume SKUs for Class/Categorization per business
day, which pcOrder will Class/Categorize within two
business days of receipt.
2.1.2.2. pcOrder will Populate up to [*] High Volume SKUs per
year. pcOrder will accept up to [*] High Volume SKUs
per week, which pcOrder will Populate within ten
business days of receipt. This service level applies
only to preparation of English language datasheets.
pcOrder will, however, accept local language text
provided by Client in order to support international
deployments.
2.1.2.3. pcOrder will Configure up to [*] High Volume SKUs per
year. pcOrder will accept up to [*] High Volume SKUs
for every two week product release cycle.
3. SETUP AND MAINTENANCE OF HIGH END SKUS
3.1. The following service levels apply to High End SKUs:
3.1.1. Setup.
pcOrder shall not maintain information for Client
Products that fall in the Himalaya product line.[*]
pcOrder shall require initial setup periods ("Setup
Period") in which to analyze each set of High End
SKU Catalog information provided by Client and to
perform initial catalog maintenance. The length of
setup periods for High End SKUs will be mutually
determined by the parties on a project basis. Setup
periods that require population of more than [*] High
End SKUs will require 30 days advance notice.
3.1.2. Maintenance.
pcOrder will Class/Categorize up to [*] High End SKUs
per year. pcOrder will accept up to [*] High End SKUs
for Class/Categorization per business day, which
pcOrder will Class/Categorize within two business
days of receipt.
3.1.2.1. pcOrder will Populate up to [*] High End SKUs per
year. pcOrder will accept up to [*] High End SKUs per
week, which pcOrder will Populate within ten business
days of receipt.
3.1.2.2. pcOrder will Configure up to [*] High End SKUs per
year. pcOrder will accept up to [*] High End SKUs for
every two week product release cycle.
4. SETUP AND MAINTENANCE OF THIRD PARTY SKUS
4.1. The following service levels apply to Third Party SKUs:
4.1.1. Setup.
pcOrder shall require initial setup periods ("Setup
Period") in which to analyze each set of 3rd Party or
3rd party SKU Catalog information provided by Client
and to perform initial catalog maintenance. This
process will include generation by the parties of a
list of all Client manufacturer codes and their
equivalent pcOrder manufacturer codes, so as to
facilitate SKU mapping. The length of setup periods
for 3rd party SKUs will be mutually determined by the
parties on a project basis. Setup periods that
require population of more than [*] 3rd party SKUs
will require 30 days advance notice.
4.1.2. Maintenance.
4.1.2.1. pcOrder will Class/Categorize up to [*] 3rd Party
SKUs per year. pcOrder will accept up to [*] 3rd
Party SKUs for Class/Categorization per business day,
which pcOrder will Class/Categorize within two
business days of receipt.
4.1.2.2. pcOrder will Populate up to [*] 3rd Party SKUs per
year. pcOrder will accept up to [*] 3rd Party SKUs
per week, which pcOrder will Populate within ten
business days of receipt. This service level applies
only to preparation of English language datasheets.
pcOrder will, however, accept local language text
provided by Client in order to support international
deployments.
4.1.2.3. pcOrder will Configure up to [*] 3rd Party SKUs per
year. pcOrder will accept up to [*] 3rd Party SKUs
for every two week product release cycle.
2
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5. Client Obligations
5.1. Client acknowledges that pcOrder's ability to provide the Data
Maintenance Services is dependent on Client's timely providing
pcOrder with resources and test cases which include Client Product
information, pricing and availability data, and such other
information as pcOrder shall reasonably require to enable it to
perform the Data Maintenance Services. Client shall provide pcOrder
with test cases by sending a file containing such test cases via FTP,
in a format provided by pcOrder which includes a tab delimited ASCII
text file containing the following fields: a) unique test case ID; b)
part quantity; c) 3-letter vendor code; d) part number; and e)
expected result (C=configure; F=fail; A=added part).
5.2. Client shall promptly, after the Amendment Effective Date, provide
Client Product pricing, availability, and other information requested
by pcOrder. Client agrees that such provided information is complete,
accurate, and current, and pcOrder shall not be responsible for any
defects or damages which arise from a delay in obtaining such
resources and information or from the use of defective information
provided by Client.
5.3. Client shall promptly, after the Amendment Effective Date, ensure
that applicable Authorized Users provide Client Product pricing,
availability, and other information requested by pcOrder. pcOrder
shall not be responsible for any defects or damages which arise from
a delay in obtaining such resources and information or from the use
of defective information provided by the Authorized Users.
6. Fees
6.1. Client shall pay to pcOrder Annual Data Maintenance Fees according to
the following schedule: (a) [*] on the Effective Date for the first
twelve (12) months of Data Maintenance Services (which shall include
Data Maintenance Services for High Volume, High End, and 3rd Party
SKUs); (b) [*] in four quarterly installments in advance for the
second twelve (12) months of Data Maintenance Services (which shall
include Data Maintenance Services for 3rd Party SKUs), and (c) [*] in
four quarterly installments in advance for the third twelve (12)
months of Data Maintenance Services (which shall include Data
Maintenance Services for 3rd Party SKUs). Should Client terminate
this Agreement pursuant to Section 14.2.4 or 14.2.5, Client shall be
relieved from the obligation to make those payments set forth in
subsections (b) and (c) of this Section 6.1, but shall not be
relieved from the obligation to make and shall not be entitled to any
refund of the payment set forth in subsection (a) of this Section
6.1.
6.2. Client may, at its option, renewal datasheet and model maintenance
services for Client Products for the years following the first and
second anniversaries of the Amendment Effective Date by providing
pcOrder with written notice thirty (30) days prior to each such
anniversary. pcOrder will provide such services at an annual fee no
greater than [*] .
7. Other
7.1. Client data will be replicated to Client-hosted sites on a mutually
agreed upon schedule..
7.2. Client will have the option to increase its Data Maintenance Services
to include international datasheet coverage on mutually acceptable
terms.
7.3. Termination of the Subscription Services Agreement or this Schedule,
for any reason, will not relieve Client from the obligation to pay
for all Data Maintenance Services provided prior to termination of
this Schedule.
7.4. The fees specified in this Schedule are effective only if the
Schedule is executed on or before June 16, 1999.
7.5. pcOrder will to continue throughout the term of this Agreement to
conduct third-party audits of its data quality and to use
commercially reasonable efforts to maintain its present level of data
quality.
By signing below, each party acknowledges that it has read, understands,
and agrees to the terms of this Data Maintenance Services Schedule.
pcOrder.com, Inc.: Compaq Computer Corporation:
/s/ Christina Jones 6/21/99 /s/ Ben K. Wells
------------------------------ -------------------------------
By: Signature Date By: Signature Date
Christina C. Jones Ben K. Wells
------------------------------ -------------------------------
Name Name
Chief Financial Officer
President & COO (Acting)
------------------------------ -------------------------------
Title Title VP, Corporate Treasurer
3
<PAGE>
CONFIDENTIAL
------------
SCHEDULE 3
APPLICATION HOSTING SERVICES SCHEDULE
To SUBSCRIPTION SERVICES AGREEMENT
between
pcOrder.com, Inc.
5001 Plaza on the Lake
Austin, TX 78746
and
Compaq Computer Corporation
20555 S.H. 249
Houston, TX 77070
---------------
This Application Hosting Services Schedule ("Application Hosting Schedule")
amends the Subscription Services Agreement between the parties, dated June 16,
1999.
Application Hosting Services for the Server Software shall consist of the
following: (i) maintaining the hardware upon which the Server Software is
loaded; (ii) installing and maintaining the Server Software; and (iii)
administering the hardware and Server Software to facilitate reliable and
consistent access to the Server Software by Authorized Users.
1. Fees
The fee for the Application Hosting Services performed by pcOrder is [*] per
year for the first [*] servers supporting Client at the Hosting Site. An
additional fee of [*] per server per year shall be paid by Client for each
server in addition thereto. These fees shall be due and payable in quarterly
installments in advance based upon the number of servers that are in service.
Application Hosting Services will support pcOrder's Data Maintenance Service
guidelines as set forth in Schedule 2.
2. Hosting Services Levels
2.1. pcOrder shall provide hosting service levels substantially in
accordance with a mutually agreed upon Hosting Service Level
Agreement ("SLA") to be attached hereto as Attachment B. Such SLA
shall be agreed upon within thirty (30) days of the Effective Date,
and agreement shall not be unreasonably withheld.
2.2. This Schedule 3 may be amended to include mutually agreed upon
penalites for nonconformance to such SLA .
2.3. pcOrder may change the team members and contacts listed in Attachment
B from time to time.
3. Other
3.1. Termination of the Agreement or this Application Hosting Schedule,
for any reason, will not relieve Client from the obligation to pay
for all Application Hosting Services provided prior to termination of
this Application Hosting Schedule.
3.2. Client may terminate this Application Hosting Schedule within thirty
(30) days from the date of execution of this Application Hosting
Schedle.
3.3. Client shall provide pcOrder with the necessary dedicated
communications mechanism(s) for providing the pcOrder Hosting
Services in accordance with Attachment A hereto.
3.4. Both parties acknowledge that during the term of this Application
Hosting Schedule, Client may, at its sole discretion, elect to
transfer the Hosting Site from pcOrder's offices to a Client facility
provided: (i) Client gives pcOrder not less than ninety (90) days
prior written notice of its intent to transfer the Hosting Site; and
(ii) the new Hosting Site is within the United States. Subject to
fulfillment of Client's obligations for transferring the Hosting Site
and within ninety (90) days of receipt of Client's written notice,
pcOrder shall deliver one (1) copy of the Server Software to Client
to be used in accordance with the terms and conditions of the
Agreement. Client shall provide its own hardware and administration
of the system. All such administration of the Software will be
performed at Client's Authorized Location. On-site support for new
site setup, software installation, upgrades, and routine maintenance
will be provided by pcOrder on a time and materials basis, at a rate
of [*] per hour plus reasonable expenses. Data Maintenance Services
shall continue as provided in Schedule 2 and at the same fee as
described therein. pcOrder shall no longer be obligated to maintain
the data in the system; instead, pcOrder shall provide to a single
Client location daily updates of pcOrder's Catalog containing the
data to be entered and maintained by pcOrder under the terms of the
Data Maintenance provisions of the Agreement. Additional costs for
data updates to multiple Client locations are to be determined.
Client would henceforth not be responsible for future quarterly
payments.
3.5. In the event Client elects to transfer the Hosting Site pursuant to
this Schedule 3 and upon transfer of the Hosting Site, pcOrder grants
to Client a nonexclusive, nontransferable, non-assignable, worldwide
right and license to:
1
<PAGE>
CONFIDENTIAL
------------
3.5.1. reproduce and copy the delivered Server Software only as
strictly necessary to host the Server Software; and
3.5.2. to make a reasonable number of copies of the Server Software
for archival and backup purposes consistent with Compaq's
established policy with respect to archival and backup copies.
By signing below, each party acknowledges that it has read, understands,
and agrees to the terms of this Application Hosting Schedule.
pcOrder.com, Inc.: Compaq Computer Corporation:
/s/ Christina Jones 6/21/99 /s/ Ben K. Wells
------------------------------ -------------------------------
By: Signature Date By: Signature Date
Christina C. Jones Ben K. Wells
------------------------------ -------------------------------
Name Name
Chief Financial Officer
President & COO (Acting)
------------------------------ -------------------------------
Title Title VP, Corporate Treasurer
2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONDENSED BALANCE SHEET (UNAUDITED) AS OF JUNE 30, 1999 AND CONDENSED
STATEMENT OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS ENDED JUNE 30, 1999,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 47,928
<SECURITIES> 696
<RECEIVABLES> 21,010
<ALLOWANCES> 500
<INVENTORY> 0
<CURRENT-ASSETS> 70,056
<PP&E> 5,030
<DEPRECIATION> 2,876
<TOTAL-ASSETS> 74,984
<CURRENT-LIABILITIES> 37,109
<BONDS> 0
0
0
<COMMON> 155
<OTHER-SE> 33,732
<TOTAL-LIABILITY-AND-EQUITY> 74,984
<SALES> 8,908
<TOTAL-REVENUES> 8,908
<CGS> 4,479
<TOTAL-COSTS> 4,479
<OTHER-EXPENSES> 7,967
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,934)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,934)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,934)
<EPS-BASIC> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
