<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1 TO FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1999
Commission File No. 000-25447
PCORDER.COM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 74-2720849
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5001 Plaza on the Lake
Austin, Texas 78746
(512) 684-1100
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, par value $.01 per share
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 [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[X]
Aggregate market value of voting stock held by non-affiliates
of the registrant as of March 27, 2000........................ $167,027,183
------------
Number of shares of Class A common stock outstanding as of
March 27, 2000................................................ 6,393,385
------------
Number of shares of Class B common stock outstanding as of
March 27, 2000................................................ 10,317,650
------------
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PART III
The Registrant hereby amends Items 10, 11, 12 and 13 of Part III of its Annual
Report on Form 10-K for the year ended December 31, 1999 filed on March 30, 2000
as follows:
ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS
Information regarding the Company's executive officers required by Item
10, is set forth in Item 1 of Part I of the Company's Annual Report on Form 10-K
filed on March 30, 2000. The following table sets forth some information
concerning our directors as of April 15, 2000.
Name Age Position
- ---- --- --------
Ross A. Cooley 59 Chairman and Chief Executive Officer
Joseph A. Liemandt 31 Director
Peter J. Barris 48 Director
Linwood A. Lacy 54 Director
Robert W. Stearns 50 Director
There are no family relationships among any of the directors or executive
officers of the Company.
Ross A. Cooley has been Chairman and Chief Executive Officer since November
1996. From 1984 to 1996, Mr. Cooley was employed by Compaq, most recently as
Senior Vice President and General Manager responsible for all North American
business and operations. Mr. Cooley is a member of the RosettaNet board of
directors, the computer industry's e-commerce standards effort, and a member of
its executive committee. During his 18-year career at IBM, Mr. Cooley completed
the Harvard Business School Senior Executive Program. Mr. Cooley holds an A.A.S.
from Broome Community College.
Joseph A. Liemandt has been a director since our inception. From July 1994 to
June 1996, Mr. Liemandt was President of pcOrder. Mr. Liemandt co-founded
Trilogy in 1989. Since that time, Mr. Liemandt has served as the President,
Chief Executive Officer and Chairman of Trilogy.
Peter J. Barris has been a director since June 1998. Since 1992, Mr. Barris has
been a partner and, in 1994, was appointed a General Partner, of New Enterprise
Associates, a firm that manages venture capital investments. In 1999, Mr. Barris
was appointed Managing General Partner. Mr. Barris is also a member of the board
of directors of Mobius Management Systems, Inc., CareerBuilder, Inc. and
Pathnet, Inc. Mr. Barris holds a B.S.E.E. from Northwestern University and an
M.B.A. from the Amos Tuck School at Dartmouth College.
Linwood A. Lacy, Jr. has been a director since August 1998. In November 1997,
Mr. Lacy retired from Micro Warehouse Incorporated where he had served as
President and Chief Executive Officer since October 1996. From 1985 to May 1996,
Mr. Lacy served as the Co-Chairman and Chief Executive Officer of Ingram Micro,
Inc., a microcomputer products distributor and a then wholly-owned subsidiary of
Ingram Industries, Inc. From December 1993 to June 1995, Mr. Lacy was also
President of Ingram Industries Inc. From June 1995 until April 1996, he was
President and Chief Executive Officer of Ingram Industries Inc., and from April
1996 to May 1996 served as its Vice Chairman. Mr. Lacy is Chairman of the Board
and a Director of Shopping4Sure.com. Mr. Lacy also serves as a director of
Ingram Industries Inc., Modus Media, Inc. and Earthlink Network, Inc. Mr. Lacy
holds a B.S.ChE from the University of Virginia and an M.B.A. in Business from
the Darden Graduate School of Business Administration at the University of
Virginia.
Robert W. Stearns has been a director since September 1998. Mr. Stearns is
currently a managing director of Sternhill Partners, a venture capital firm.
From January 1996 to August 1998, Mr. Stearns served as the Senior Vice
President of Technology and Corporate Development of Compaq. He joined Compaq as
Vice President of Corporate Development in July 1993. Before his arrival at
Compaq, he was employed as a management consultant with McKinsey & Co., focusing
on high technology clients. Mr. Stearns serves as a director of various
private companies and the Cynthia Woods Mitchell Pavilion. In November
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1996, Mr. Stearns was appointed to the Texas Science and Technology Council and
in March 1998 he became a fellow of the Aspen Institute and a member of the
Brookings Council of the Brookings Institute. Mr. Stearns holds a B.S. in
Chemistry from Brown University and a Master of Science from the Massachusetts
Institute of Technology.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission ("SEC"). Officers, directors and greater
than ten percent shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such Section 16(a) forms filed on
Forms 3, 4 and 5, and amendments thereto furnished to the Company with respect
to its most recent fiscal year, the Company believes that, during the year ended
December 31, 1999, its executive officers, directors and greater-than-ten
percent beneficial owners complied on a timely basis with all Section 16(a)
filing requirements.
ITEM 11. EXECUTIVE COMPENSATION
The following table provides information concerning the compensation earned by
our Chief Executive Officer and our other executive officers whose salary and
bonus exceeded $100,000 for services rendered in all capacities to us during the
fiscal year ended December 31, 1999. All of these individuals are called the
"Named Executive Officers". The amounts in the Bonus column reflect the bonus
amount earned and accrued during the fiscal year ended December 31, 1999. The
amounts in the Securities Underlying Options column represent shares of our
Class A Common Stock. Ms. Jones's salary for fiscal year 1997, 1998 and 1999
includes $900 of reimbursement for excess amounts paid toward our standard
employee medical benefit plan. Mr. Luttenbacher joined us in March, 1998 and
resigned effective March 31, 2000. The $59,571 paid to Mr. Luttenbacher during
fiscal year 1998 as other compensation represents relocation expenses reimbursed
by us. The $23,916 paid to Mr. Luttenbacher during fiscal 1999 as other
compensation includes $19,647 for relocation expenses and $4,269 for travel
expenses reimbursed by us. The $103,650 paid to Mr. Friedman during fiscal year
1999 as other compensation includes $98,762 for relocation expenses and $4,888
for travel expenses reimbursed by us.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
-------------------------------------------- ----------------
Number of
Securities
Underlying All Other
Name and Principal Position Year Salary Bonus Options Compensation
------------- ---------------- ------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Ross A. Cooley .................................... 1999 $ 1 -- -- --
Chairman and Chief Executive Officer 1998 $ 1 -- --
1997 $ 1 -- -- --
Christina C. Jones ................................ 1999 $146,734 $150,000 50,000 --
President and Chief Operating Officer 1998 $100,908 $ 500 125,000 --
1997 $100,908 -- -- --
James J. Luttenbacher ............................. 1999 $175,000 $140,000 -- $ 23,916
Vice President and Chief Financial Officer 1998 $145,362 $ 5,000 150,000 $ 59,571
1997 -- -- -- --
Richard Friedman .................................. 1999 $ 79,032 $ 50,000 75,000 $103,650
Vice President, General Counsel and Secretary 1998 -- -- -- --
1997 -- -- -- --
</TABLE>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding stock option grants made
to each of the Named Executive Officers in fiscal year 1999. We did not grant
any stock appreciation rights to the Named Executive Officers during this fiscal
year. In the following table, potential realizable value is based on an
assumption that the price per share of Class A Common Stock appreciates annually
at the rate shown below (compounded annually) from the date of grant until the
end of the option term. Potential realizable value is shown net of exercise
price. These rates of appreciation are derived from the regulations promulgated
by the SEC and do not represent our estimate or projection of future stock price
growth. The options in the following table have exercise prices equal to the
fair market value of our Class A Common Stock on the date of grant. All of these
options have 10-year terms and vest over four years.
<TABLE>
<CAPTION>
Potential realizable value at
assumed
Individual Grants annual rates of stock price
------------------------------------------------------------------ ---------------------------------
Percent of
total
Number of options
securities granted to
underlying employees Per share
options in fiscal Exercise Expiration
Name granted year price date 5% 10&
- ---- ----------- ----------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ross A. Cooley.......... 0 --- --- --- --- ---
Christina C. Jones...... 50,000 2.30% $12.00 2/15/09 $ 377,337 $ 956,245
James J. Luttenbacher... 0 --- --- --- --- ---
Richard Friedman........ 75,000 3.45% $35.00 7/23/09 $1,650,848 $4,183,574
</TABLE>
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The percentages in the Percent of Total Granted to Employees in Fiscal Year
column are based on options to purchase an aggregate of 2,171,474 shares of
Class A Common Stock granted during fiscal 1999.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR END VALUES
The following table sets forth the options exercised by each of the Named
Executive Officers during fiscal year 1999 and the number and value of the
securities underlying unexercised options held by each Named Executive Officer
as of December 31, 1999. The value of the unexercised in-the-money options at
December 31, 1999 is based on the closing sales price per share of $51.00 of the
Company's Class A Common Stock on the Nasdaq National Market on December 31,
1999, less the option exercise price payable per share.
<TABLE>
<CAPTION>
Number of
Shares Securities Underlying Value of Unexercised
Acquired Value Unexercised Options In-the-Money Options
Name on Exercise Realized at December 31, 1999 at December 31, 1999
---- ----------- -------- ---------------------- ----------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ross A. Cooley .............. 200,000 $5,650,000 525,000 150,000 $25,200,000 $ 7,200,000
Christina C. Jones .......... 85,000 $4,070,000 474,450 265,650 $22,773,600 $12,301,200
James J. Luttenbacher ....... 36,500 $ 532,875 19,750 93,750 $ 948,000 $ 4,500,000
Richard Friedman............. -- -- -- 75,000 -- $ 1,200,000
</TABLE>
DIRECTOR COMPENSATION
We do not currently compensate outside directors for attending Board or
committee meetings, but we reimburse directors for their reasonable travel
expenses incurred in connection with attending the meetings. On November 1,
1996, we granted to Mr. Liemandt an option to purchase 100 shares of our Class A
Common Stock at an exercise price of $3.00 per share. Upon joining the board,
Mr. Barris received options to acquire 10,000 shares of Class A Common Stock at
$6.40 per share, Mr. Lacy received options to acquire 30,000 shares of Class A
Common Stock at $8.00 per share, and Mr. Stearns received options to acquire
15,000 shares of Class A Common Stock at $9.00 per share. In 1999, Mr. Lacy
received options to acquire 10,000 shares of Class A Common Stock at $39.875 per
share and Mr. Stearns received options to acquire 20,000 shares of Class A
Common Stock at $39.875 per share.
EMPLOYMENT CONTRACTS
We have entered into employment agreements with Ross A. Cooley, our Chairman
and Chief Executive Officer, Christina C. Jones, our President and Chief
Operating Officer, and Richard Friedman, our Vice President, Secretary and
General Counsel. The Cooley and Jones employment agreements are each for a
period of four years. Each of the three executives is eligible to participate in
any management incentive compensation plan which we may have from time to time.
We also had an employment agreement with our former Chief Financial Officer
James J. Luttenbacher.
The Cooley and Friedman agreements may each be terminated by us or the
executive at any time. The Jones agreement may be terminated by us at any time
and by Ms. Jones for "good reason." The definition of good reason includes any
"change of control" of pcOrder. If we terminate any of the three employment
agreements for "cause" or if Messrs. Cooley or Friedman terminate for reasons
other than as a result of a "change in control," no further rights to
compensation or benefits will accrue to that executive. During employment and
for two years following our termination of the employment, each of the three
executives is not permitted to solicit any of our customers, induce or attempt
to induce any customer to withdraw, curtail or cancel its business with us or in
any manner modify or fail to enter into any actual or potential business
relationship with us, recruit or solicit any employee or vendor of ours, or of
Trilogy in
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the case of Ms. Jones, to cease his, her or its relationship with us, or with
Trilogy in the case of Ms. Jones, or permit his or her name to be used by or
engage in any business competing with our business.
Cooley Employment Agreement. Mr. Cooley's employment agreement, dated
November 1, 1996 and amended effective November 1, 1997, provides for an annual
salary of not less than $1.00. Mr. Cooley currently performs various executive
and leadership functions, including development of our strategic and operational
plans, strategic planning, executive management of new customer and new account
relationship activities and recruitment of senior management personnel. In
connection with the Cooley agreement, Mr. Cooley was granted a stock option of
875,000 shares of our Class A Common Stock at an exercise price of $3.00 per
share, of which 425,000 shares became exercisable at the time the Cooley
agreement was entered into, 100,000 of those shares became exercisable on
November 1, 1998, 100,000 shares became exercisable on November 1, 1999, and
100,000 shares will become exercisable on November 1, 2000. The remaining
150,000 shares under the stock option grant were to become exercisable on
November 1, 2003, provided that the Cooley agreement is in effect on that date.
However, in February 1999, the compensation committee accelerated the exercise
date for these 150,000 shares so that 50,000 shares became exercisable in
February 1999, 50,000 shares became exercisable on November 1, 1999, and 50,000
shares will become exercisable on November 1, 2000.
If the Cooley agreement is terminated by us without cause or by Mr. Cooley
as a result of a change of control of pcOrder, Mr. Cooley will not be entitled
to any additional compensation under the terms of the Cooley agreement, but will
have these rights relating to the exercise of then unexercised stock options as
are provided in his stock option agreement.
Jones Employment Agreement. Ms. Jones' employment agreement, dated November
1, 1996, provides for an annual salary of not less than $100,000. Under the
Jones agreement, Ms. Jones has been granted a stock option to purchase up to
650,000 shares of our Class A Common Stock at an exercise price of $3.00 per
share. As a condition to the grant of this option, Ms. Jones entered into an
option cancellation agreement with Trilogy which terminated a stock option
agreement dated February 10, 1994 between Trilogy and Ms. Jones in connection
with which Ms. Jones had been granted a stock option to purchase shares of
Trilogy Class B Common Stock at an exercise price of $1.50 per share.
If we terminate the Jones agreement without cause or if Ms. Jones
terminates the Jones agreement for good reason, including upon a change of
control, Ms. Jones will continue to receive employee benefits and monthly
payments equal to one-twelfth of her then-current annual salary for 12 months
following the effective date of the termination.
Luttenbacher Employment Agreement. Mr. Luttenbacher's employment agreement,
dated February 12, 1998, provided for an annual salary of not less than
$175,000. Mr. Luttenbacher received a bonus of $5,000 upon commencement of his
employment with us. Mr. Luttenbacher voluntarily resigned from the Company
effective March 31, 2000. Under this agreement, Mr. Luttenbacher has been
granted a stock option to purchase up to 150,000 shares of our Class A Common
Stock at an exercise price of $3.00 per share. Mr. Luttenbacher voluntarily
terminated his employment with us effective March 31, 2000.
Friedman Employment Agreement. Mr. Friedman's employment agreement, dated
July 9, 1999, provides for an annual salary of not less than $175,000. Under
this agreement, Mr. Friedman has been granted a stock option to purchase up to
75,000 shares of our Class A Common Stock at an exercise price of $35.00 per
share. If we terminate the Friedman agreement without cause, Mr. Friedman will
continue to receive employee benefits and monthly payments equal to one-twelfth
of his then-current annual salary for six months following the effective date of
the termination.
The exercisability of the options held by the executives are subject to
acceleration in whole or in part in connection with certain changes in control
of pcOrder. The accelerated vesting in certain cases is conditioned on
termination of employment following the change in control event.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the compensation committee of the board serves or
has served as one of our officers or employees. None of our executive officers
serve as a member of the board or compensation committee of any entity which has
one or more executive officers serving as a member of our board or compensation
committee. The current members of the Compensation Committee are Messrs. Barris
and Liemandt. Mr. Liemandt, a member of our compensation committee, is the
Chairman, Chief Executive Officer and a substantial stockholder of Trilogy.
Through his relationship with Trilogy, Mr. Liemandt beneficially owns more than
5% of the Class B Common Stock.
ITEM 12. OWNERSHIP OF SECURITIES
The following table sets forth information known to us with respect to the
beneficial ownership of our Class A Common Stock as of March 31, 2000 by (i)
each of our Named Executive Officers and directors; (ii) all of our current
executive officers and directors as a group; and (iii) each person we know to
own beneficially more than 5% of our Class A Common Stock. We have determined
beneficial ownership in accordance with the rules of the Securities and Exchange
Commission. The number of shares beneficially owned by a person includes shares
of Class A Common Stock that are issuable within 60 days of March 31, 2000 upon
exercise of outstanding options or conversion of outstanding shares of Class B
Common Stock. The shares issuable pursuant to these options or Class B Common
Stock are deemed outstanding for purposes of computing the percentage ownership
of the person holding the options or Class B Common Stock but are not deemed
outstanding for purposes of computing the percentage ownership of any other
person. Except pursuant to applicable community property laws or as otherwise
indicated in the paragraphs following this table, to our knowledge, the
stockholders identified in the table have sole voting and investment power with
respect to all shares beneficially owned by that stockholder. Percent of Class A
Common Stock ownership is based on 6,452,237 shares of Class A Common Stock
outstanding on March 31, 2000. As of March 31, 2000, 10,317,620 shares of Class
B Common Stock were outstanding, 100% of which were beneficially owned by
Trilogy, Inc. Percent of Total Common Stock ownership is based on a total of
16,769,857 shares of Class A Common Stock and Class B Common Stock outstanding
on March 31, 2000.
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<TABLE>
<CAPTION>
Shares Beneficially
Name and Address Owned
---------------- -----------------------------------------
Percent of Class A Percent of Total
Number Common Stock Common Stock
---------- ------------------ ----------------
<S> <C> <C> <C>
Trilogy, Inc. (1)
6034 West Courtyard Drive
Austin, TX 78730.......................... 10,317,620 61.52% 61.52%
Joseph A. Liemandt (1)
6034 West Courtyard Dr.
Austin, TX 78730........................ 10,317,695 61.53% 61.53%
Peter J. Barris............................. 2,500 * *
Linwood A. Lacy, Jr......................... 2,500 * *
Robert W. Stearns........................... 3,750 * *
Ross A. Cooley
5001 Plaza on the Lake
Austin, TX 78746........................ 475,000 7.36% 2.83%
Christina C. Jones
5001 Plaza on the Lake
Austin, TX 78746........................ 518,200 8.03% 3.09%
James J. Luttenbacher....................... 26,000 * *
Richard Friedman............................ * * *
All directors and officers as a group
(8 persons)................................. 11,345,645 67.65% 67.65%
Janus Capital Corporation
100 Fillmore Street
Denver, CO 80206...................... 643,550 9.97% 3.84%
Fidelity Investments
82 Devonshire Street
Boston, MA 02109..................... 405,700 6.29% 2.42%
West Highland Capital, Inc.
300 Drake's Landing Road,
Suite 290
Greenbrae, CA 94904.................. 1,020,000 15.81% 6.08%
</TABLE>
______________
* Less than 1% of the outstanding shares of Class A Common Stock
(1) Shares beneficially owned by Trilogy, Inc. are registered in the name
of Trilogy Software, Inc., a wholly owned subsidiary of Trilogy, and
Trilogy Partnership, a Delaware general partnership of which Trilogy
Software, Inc. is the general partner and the managing partner. Of the
shares beneficially owned by Trilogy, Inc., 20,620 of these shares are
subject to options granted by Trilogy Software, Inc. to some of its
employees, entitling these employees to purchase the shares at any
time prior to August 25, 2009, at a price of $5.00 per share. Through
his ownership of securities of Trilogy, Inc., Mr. Liemandt has the
right to cause to be elected a majority of the board of directors of
Trilogy, Inc. As a result, Mr. Liemandt may, under the rules of the
Securities and Exchange Commission, be deemed to be the beneficial
owner of the shares beneficially owned by Trilogy, Inc. Mr. Liemandt
disclaims beneficial ownership of the shares beneficially owned by
Trilogy, Inc., except with respect to any proportional pecuniary
interest therein.
ITEM 13. CERTAIN RELATIONSHIPS
Since January 1, 1999 there has not been any transaction or series of
similar transactions to which the Company was or is a party in which the amount
involved exceeded or exceeds $60,000 and in which any director, executive
officer, holder of more than 5% of any class of the Company's voting securities,
or any member of the immediate family of any of the foregoing persons had or
will have a direct or indirect material interest, other than the transactions
described below.
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Relationship with Trilogy
Trilogy is our controlling stockholder. It established pcOrder as a separate
business unit within Trilogy and then incorporated pcOrder as a Delaware
corporation. Trilogy is a leading provider of sales, marketing and business-to-
business e-commerce applications. Trilogy's software solutions are designed to
integrate each function in a customer's sales and marketing operation, including
pricing management, product management, sales, commissions, promotions, contract
management and channel management. In addition, Trilogy's software solutions are
designed to enable companies to engage in e-commerce as well as improve channel
management processes.
We have a non-exclusive license from Trilogy to use Trilogy's front office
and e-commerce software applications in our business. To help industry sales
representatives and end users quickly and accurately build customer-configured
computer systems using components from multiple vendors, we have customized and
extended the software licensed from Trilogy to support the specific
configuration and pricing rules of the computer industry. Although Trilogy does
not currently compete directly with us, Trilogy has the right to compete
directly or indirectly with us.
Mr. Liemandt, one of our directors, is Chairman, Chief Executive Officer and
a substantial stockholder of Trilogy.
We also lease our Austin facilities from Trilogy pursuant to an arm's length
lease arrangement. See "Item 2. Properties" in our Annual Report on Form 10-K
filed on March 30, 2000.
Agreements with Trilogy
In June 1996, we entered into a series of agreements with Trilogy to clarify
our ongoing relationship with Trilogy. Because these agreements were entered
into at a time when we were a wholly owned subsidiary of Trilogy, they may not
be the result of arms' length negotiations between the parties.
Asset Purchase Agreement. In August 1996, we entered into an asset transfer
agreement with Trilogy, which was amended in August 1998 and June 1999. Under
the asset transfer agreement, Trilogy transferred the assets and liabilities of
its pcOrder.com division to us. In exchange for these transferred assets, we
issued to Trilogy 900 shares of our common stock, which established us as a
wholly owned subsidiary of Trilogy. These shares were subsequently split into
11,520,000 shares of common stock.
Trilogy has the right, on no more than four occasions after the offering, to
require us to register the shares of common stock that it holds within 180 days
of the request. Trilogy is exercising one of these rights in connection with
this registration statement. In addition, Trilogy and its transferees have the
right under some circumstances to include shares held by Trilogy and its
transferees in a registration statement registering other shares of our common
stock. These registration rights are subject to some conditions and limitations,
including our right not to effect a requested registration under some
conditions. We have agreed to indemnify Trilogy against, and provide
contribution for, some liabilities under the Securities Act in connection with
any registration. These registration rights expire eight years after the
effective date of the asset transfer agreement.
Technology, Services and License Agreement. In September 1998, we entered
into a technology, services and license agreement with Trilogy which replaced an
earlier agreement we had with Trilogy. Under this agreement we each provide the
other with access to specified intellectual property and products owned by each
party or jointly owned by the parties and existing as of September 1, 1998. The
agreement also requires each party to provide to the other any updates, changes
to, and new releases of the material until 5 years after a "trigger event" but
no sooner than September 1, 2008. However, after a trigger event Trilogy must
only provide updates, changes to, and new releases of Trilogy products that are
the same,
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similar to, replacements of or equivalent to Trilogy products provided to us
before such an event. A "trigger event" is the date there is a change in control
of Trilogy or the date Trilogy is no longer required by generally accepted
accounting principles to be consolidated with us for financial reporting
purposes.
In granting each other access to the material, each party allowed the other
party to use the other's intellectual property in creating, marketing,
distributing and licensing products to customers upon payment of royalties to
the owner of the material. Additionally, either party may sublicense their right
to conduct these activities to third parties, provided the other party's
intellectual property continues to be treated as confidential information.
Similarly, Trilogy also granted us a license to access Trilogy's network
based e-commerce products (except for market analysis data) beginning on the
date of a trigger event and extending for 5 years after this date, or at least
until September 1, 2008. During that period, we may use the material in
creating, marketing, distributing and licensing products to customers upon
payment of royalties to Trilogy.
The parties also agreed to provide to each other consulting services upon the
request of the other. Either party may make a request between September 1, 1998
and the later of the date of a trigger event or September 1, 2010. However,
neither party has any obligation to request these services.
In connection with the technology agreement, neither party is restricted from
entering into or having similar agreements with third parties or from engaging
in any activity relating to competitive products and services.
The technology agreement also provides that where at least one of our
employees or contractors and at least one Trilogy employee or contractor
cooperate toward jointly creating, inventing or discovering new material
qualifying for either patent or copyright protection, the parties will negotiate
in good faith on a project-by-project basis to determine to what extent this
newly developed material should be jointly owned. In the event of joint
ownership, the parties will have an equal, undivided interest in that patent,
copyright or other intellectual property.
Each party is obligated to pay to the other monthly royalties based on a
percentage of:
. license fees derived from sales of products that incorporate, or data
maintenance services related to, the other party's intellectual property;
. software maintenance fees other than data maintenance services in connection
with products that incorporate the other party's intellectual property; and
. online subscription service fees from products that incorporate the other
party's intellectual property.
The technology agreement provides that each party will defend, indemnify and
hold the other party harmless for any claim against the other party by any third
party to the extent based on specific circumstances enumerated in the agreement.
This agreement has a perpetual term, unless terminated earlier by either
party upon 31 days prior notice of an uncured breach by the other party, subject
to extension for special circumstances, or the bankruptcy of either of the
parties.
Management Services Agreement. We entered into a management services
agreement with Trilogy, effective as of July 1, 1998. Under this agreement,
Trilogy agreed to provide us with some administrative and corporate support
services. Some of these services are mandatory services, including tax
administration, payroll, payroll accounting, banking, corporate finance,
recruiting and employee training services. In addition, Trilogy has agreed to
provide some optional services to us, including hardware purchasing, shipping
and receiving, purchase order database administration, network administration,
audit services, human resources administration, legal services and customer
training. The provision of mandatory services may not be unilaterally terminated
by either party during the effectiveness of the management
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services agreement. The provision of optional services may be terminated by
either party upon 90 days notice.
The management services agreement provides that Trilogy will use the same
level of care in rendering services to us that Trilogy uses in rendering
services to itself or any of its other subsidiaries. This level of care must be
at least equal to the care that Trilogy used in rendering the services to us in
the past. However, the selection of personnel to perform the various services
will be within the sole control of Trilogy. Specifically, Trilogy may, without
our consent or approval, subcontract any service to be provided under this
agreement.
This agreement terminated on June 30, 1999. Both parties, however, agreed to
renew the agreement for a one-year term. Successive renewals can occur. This
agreement may be terminated if there is an uncured material breach by the other
party or Trilogy ceases to own a majority of our common stock.
Tax Allocation Agreement. From our incorporation until August 25, 1999, we
were a member of the Trilogy consolidated federal income tax group. As a result,
our federal taxable income (loss) was included in Trilogy's consolidated federal
income tax return. Under a tax allocation agreement between us and Trilogy, for
these tax periods payments are required to be made between us based on the
federal income taxes we would have paid if we filed separate federal, state and
local income taxes. The amount of taxes to be paid or received by us includes,
except as provided below, any amounts to be due as a result of a redetermination
of the tax liability of Trilogy arising from an audit or otherwise.
Under the terms of the tax allocation agreement, in computing our stand-alone
tax liability or tax refund, we are able to utilize some tax items, such as net
operating losses, foreign tax credits and other tax credits. In addition, for
our tax attributes that come into existence after the execution of the tax
allocation agreement, and under the terms of the tax allocation agreement,
Trilogy will be required to make any payment to us as such of our tax attributes
are utilized by the Trilogy consolidated federal income tax group. In connection
with this agreement, Trilogy's obligation to make any payment to us relating to
the our tax attributes will apply only to tax periods during which we, or our
affiliated subsidiaries, are a member of Trilogy's consolidated federal income
tax group.
Trilogy will continue to have all the rights of a parent of a consolidated
group (and similar rights provided for by applicable state and local law
regarding a parent of a combined, consolidated or unitary group) for tax periods
prior to August 25, 1999. Further, Trilogy will be the sole and exclusive agent
for us in any and all matters relating to our income, franchise and similar
liabilities, will have sole and exclusive responsibility for the preparation and
filing of consolidated federal and consolidated or combined state and local
income tax returns (or amended returns), and will have the power, in its sole
discretion, to contest or compromise any asserted tax adjustment or deficiency
and to file, litigate or compromise any claim for refund on behalf of us for any
tax periods ending prior to August 26, 1999.
The tax allocation agreement remains in effect until the expiration of any
open years for which we have filed as a member of the Trilogy consolidated
group. Each member of a consolidated group is jointly and severally liable for
the federal income tax liability of each other member of the consolidated group.
Accordingly, although this agreement allocates tax liabilities between us and
Trilogy, during the period in which we are included in Trilogy's consolidated
group, we could be liable if any federal tax liability is incurred, but not
discharged, by any other member of Trilogy's consolidated group. In connection
with this agreement, however, Trilogy is obligated to indemnify us for any tax
liabilities, provided that we have paid our allocated share of those liabilities
to Trilogy.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Form 10-K/A to be signed on its behalf by the
undersigned, thereunto duly authorized.
PCORDER.COM, INC.
By: /s/ Christina C. Jones
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Christina C. Jones
President and Chief Operating Officer
Date: April 28, 2000
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