Strategic Alliance & Software License Agreement

CONFIDENTIAL TREATMENT REQUESTED





SIEBEL SYSTEMS, INC.



STRATEGIC ALLIANCE AND SOFTWARE LICENSE AGREEMENT



THIS STRATEGIC ALLIANCE AND SOFTWARE LICENSE AGREEMENT (the "Agreement") is made and entered into effective as of this _____ day of __________, 1995 (the "Effective Date"), by and between SIEBEL SYSTEMS, INC. ("Siebel"), a California corporation, on the one hand, and ITOCHU TECHNO-SCIENCE CO R PORAT ION, a corporation organized and existing under the laws of Japan, and ITOCHU CORPORATION, a corporation organized and existing under the laws of Japan, (Itochu Techno-Science Corporation and Itochu Corporation are hereafter referred to collectively as "Itochu"), on the other hand.





A.Siebel owns and/or has rights to certain computer software programs, known collectively as the Siebel Sales Enterprise system, that are useful in managing, coordinating and improving product marketing and sales efforts.



B.Siebel and Itochu wish to enter into a strategic alliance under which the parties will cooperate to promote the marketing of the Siebel Sales Enterprise software products in Japan, Siebel will grant Itochu the right and license to rep roduce and distribute the object code of the Siebel Sales Ent erprise software product in Japan, and Itochu will agree to make an equity investment in Siebel.



NOW, THEREFORE, in consideration of the promises and covenants set forth herein, the parties hereto agree as follows:



1. DEFINITIONS.



1.1 "ANCILLARY PROGRAMS" means those software programs listed as "Ancillary Programs" on EXHIBIT A (Licensed Software) attached hereto, which programs are licensed to Siebel by third parties.



1.2 " AUTHORIZED USER" means an individual authorized by the End User to use the Licensed Software, regardless of whether such individual is using any of the programs in the Licensed Software at any given time. The maximum number of Authorized Users of a partic ular End User that may use the User P rograms sublicensed by Itochu shall be as specified in the sublicense agreements between Itochu and that End User.



1.3 "CO-EXCLUSIVE" means that, [ *** ]



1.4 "DOCUMENTATION" means user manuals written in English relating to the Licensed Software.



1.5 "DESIGNATED SYSTEM" or "DESIGNATED SYSTEMS" means the computer hardware and operating system(s) of an End User, which act as the computer servers for Authorized Users of the End User. Each End User shall specify the Designated System(s) on wh ich the Server Programs shall operate under license .



1.6 "END USER" means a third party entity that does not commercially distribute or otherwise offer a product that is competitive with the Licensed Software as listed in Exhibit B (Siebel Compet itors) and that licenses the Licensed Software for its ordinary and customary business purposes, and not for redistribution or resale.



1.7 "ERROR" means a material defect or error in the Licensed Software (other than the Ancillary Software) that causes such Licensed Software not to operate substantially in accordance with the performance and functional description of the Licensed Software contained in the Documentation.



1.8 "FIRST-LINE SUPPORT" means direct customer support of Licensed S oftware, which includes but is not limited to installation, training, technical assistance, and identifying and correcting or resolving as much as possible the software errors and problems encountered by an End User in using Licen sed Software.



1.9 "LICENSE TERM" means the period commencing on the Effective Date and continuing until the termination or expiration of the Agreement pursuant to Section 13 ("Term and Termination").



1.10 "LICENSED SOFTWARE" means the object code format of the Siebel Sales Enterprise system, comprising of the software programs listed on EXHIBIT A (Licensed Software) attached hereto (including Ancillary Programs), or any of such software programs in object code individually or in combination. "Licensed Software" shall include (i) both the English version of the Siebel Sales Enterprise software products and all Japanese Localized Versions (as defined in Section 1.11) of such products prepared by Itochu and accepted by Siebel pursuant to Section 3.3 ("Preparation o f Localized Versions") a nd (ii) Updates (as defined in Section 1.17).



1.11 "LOCALIZATION SOURCE CODE" means such portions of the human readable source code version of the Licensed Software (excluding the Ancillary Programs) as are necessary for I tochu to prepare the Japanese localized version of any program included within the Licensed Software (a "Japanese Localize d Version"), and all associated technical documentation necessary for preparing such Japanese Localized Version.



1.12 "LIST PRICE" means the then current list price for licenses of the Licensed Software in Japan as published by Siebel from time to time during the term of the Agreement and attached hereto as EXHIBIT C (Current Software List Price). The List Price for a particu lar program in the Licensed Soft ware varies according to the number of Authorized Users permitted under the applicable End User license to use such program.



1.13 "NET END USER PRICE" means the gross income received by Siebel for the license or di stribution of Licensed Software to any End User for use in Japan, less distributor discounts, stock balancing, sales and consumption taxes, customs duties and other government charges, returns and license fee s paid by Siebel for the Ancillary Programs in c luded in such Licensed Software. "Net End User Price" shall also means the gross income received by Siebel for the provision by Siebel (or any third party appointed by Siebel) of First-Line or Second-Line Support related to the Licensed Software licen sed to any End User for use in Japan, less any applicable discounts, sales and consumption taxes, customs duties and other government charges, and charges paid by Siebel to third parties for the provision of services in connection with such First-Line or Seco nd-Line Support.



1.14 "SERVER PROGRAMS" shall mean those portions of the Licensed Software that reside and operate on Designated Systems.



1.15 "SOFTWARE MAINTENANCE AND SUPPORT SERVICES" shall mean support provided under Siebel's policie s in effect on the date Software Maintenance and Support Services is ordered, subject to payment by Itochu of the applicable fees for such support as set forth in Section 6.9 ("Software Maintenance a nd Support Services") of this Agreement.



1.16 "TRAINING MATERIALS" has the meaning described in Section 3.4 ("Installation and Training").



1.17 "UPDATE" means an updated or enhanced version of any of the software programs listed on EXHIBIT A (Licensed Software), in object code format, that i s generally released by Siebel to its distributors and End Users, which corrects Errors and/or adds such minor additional features or functions a s Siebel, in its discretion, may choose to include in the release. Updates typically will be designated by a c hange in the version number to the right of the first decimal point. Updates shall also include new version releases that are typically designated by a change in the version number to the left of the first decimal point. Updates shall not include any rele ase, option, upgrade or future product that Siebel licenses separately or only offers for an additional fee (above and beyond any annual maintenance or support fee).



1.18 "USER PROGRAMS" means those software programs within the Licensed Software that reside and operate on the individual computer hardware systems operated by the employees of a particular End User.



CONFIDENTIAL TREATMENT REQUESTED



2. APPOINTMENT AS CO-EXCLUSIVE DISTRIBUTOR IN JAPAN.



2.1 APPOINTMENT. Siebel hereby appoints Itochu, effective during the License Term, as Siebel's distributor of the Licensed Software for use in Japan. The appointment shall be Co-Exclusive during the Co-Exclusive Period as defined in Section 6.2 ( "Minimum Payment Obligations During Co-Exclusive P eriod") and shall otherwise be non-exclusive.



2.2 LICENSE GRANT. Subject to the terms and conditions of this Agreement, Siebel hereby grants to Itochu the following non-transferable, limited license rights exercisable solely during the License Term:



(a) [ *** ]



(b) [ *** ]



(c) [ *** ]



(d) [ *** ]



(e) [ *** ]; and



(f) [ *** ]



The foregoing rights may not be sublicensed except as permitted in Section 2.3 ("Right to Grant End User Sublicenses").



2.3 RIGHT TO GRANT END USER SUBLICENSES. Subject to the terms and conditions of this Agreement, Siebel hereby grants to Itoc hu the non-transferable right, exercisable solely during the License Term, to grant to each End User the following limited, non-transferable sublicense rights:



(a) to use the Server Programs solely for the End User's own internal data pr ocessing and business operations on the Designated Systems specified by such End User (or on a backup system if such Designated Systems are inoperative); to use the User Programs solely for the End User's own internal dat a processing and business operati o ns for and by up to that number of Authorized Users as provided in the license with Itochu; provided, however, that the End User may not relicense the Licensed Software or use the Licensed Software for third-party training, commercial time-sharing, rental or servic e bureau use;



(b) the right to reproduce the User Programs, up to the maximum number of Authorized Users permitted under the sublicense agreement with such End User; provided, however, that in no event shall Itochu grant such r ight to an End User if Itochu has reproduced and distributed to such End User a numbe r of copies of the User Programs equal to such number of Authorized Users;



(c) the right to use the Documentation provided by Itochu in support of the authorized use of the Licensed Software; and



(d) the right to copy the Licensed Software solely for archival or backup purposes; provided, however, that User Programs may be copied to up to one additional computer system for each Authorized User; all titles, trademarks, and copyright and restricted rights notices shall be reproduced in such copies; and all archival and backup copies of the Programs shall be subject to the te rms of this Agreement.



For purposes of this Agreement, an "End User" may include Itochu if Itochu agrees to be bound by the terms and conditions of EXHIBIT E (Terms for End User Agreement) to this Agreement and pays the amounts set forth in Section 6.2 ("I tochu End User Payment").



2.4 END USER SUBLICENSE AGREEMENT. Itochu shall enter into an End User sublicense agreement in Japanese language with each End User to whom Itochu grants sublicense rights to use Licensed Software, which sublice nse agreement shall contain, and be at least as protective of Siebel's rights and inte rests as, the terms and conditions for such agreement as attached hereto as Exhibit E (Terms for End User Agreement). Such sublicense agreement shall specify the Design ated Systems on which the Server Programs may be used and the maximum number of Authorized Users permitted to use the User Program s.



2.5 CO-EXCLUSIVE SIEBEL DISTRIBUTION IN JAPAN. Notwithstanding the above, Itochu understands and agrees that duri ng the Co-Exclusive Period (as set forth in Section 6.4 ("Minimum Payment Obligations During Co-Exclusive Period")) Siebel may distribute and license, and may appoint third parties to distribute and license, the Licensed Software to End Users for use in J apan, and such licensing shall not constitute a breach of any terms of the Agreement, provided that Siebel pays Itochu with the amounts set forth in Section 6.5 ("Siebel Payments") with respect to any such licenses granted.



3. MARKETING AND SUPPORT OBLIGATIONS.



3.1 MARKETING AND SALES EFFORTS. Itochu shall use best efforts to promote and market the Licensed Software to End Users and potential End Users in order to maximize the licensing and distribution of the Licensed Software to End Users in Jap an. Such marketing efforts shall include, without limita tion: establishment of a marketing and sales team (the "Marketing Team") dedicated exclusively to promoting and distributing the Licensed Software in Japan, as provided in Section 3.2 ("Marketing Te a m"); advertising the Licensed Software in Japan in a commercially appropriate and reasonable manner ; and promoting the Licensed Software at seminars, trade shows and conferences. Itochu agrees further that its marketing and advertising efforts with respe c t to the Licensed Software will be of the highest quality and in good taste, and shall preserve the professional image and reputation of Siebe l and the Licensed Software. Itochu agrees that if Itochu Techno-Science Corporation or any of its subsidiaries, divisions, joint ventures or "Affiliates" (as defined below") promote, market, license or distribute any products which are competitive ("Competitive Products") with the Licensed Softwa re (collectively referred to as "Itochu Competitive Activity"), the C o -Exclusive Period (and Itochu's Co-Exclusive distribution rights) shall immediately end and the following shall immediately occur: (i) the payments which Itochu would otherwise be entitled to under Section 6.5 ("Siebel Payments" ) shall be of no force or e ffect commencing on the date when such Itochu Competitive Activity first occurred, (ii) Itochu's rights hereunder shall convert to a non-exclusive basis and Itochu shall retain such rights for the rest of the License Term on such basis. For purposes of th e foregoing, the term "Affiliates" shall mean any company in which Itochu Techno-Science Corporation or any of its subsidiaries, divisions, or joint ventures hold an equity or other capital investment in excess of $1,000,000. The parties agree that the pro ducts which shall be considered to be "Competitive Product s" as of the Effective Date are listed in EXHIBIT F (Competitive Products).



3.2 MARKETING TEAM. Itochu shall establish a full time Marketing Team that is dedicated exclusively to marketing , promoting and selling the Licensed Software within Japan. Itochu shall ensure that the Itochu employees on such Marketing Team use best efforts to promote and market the Licensed Sof tware in Japan. The Marketing Team shall include, at a minimum, the fo llowing personnel:



(a) The "Itochu Marketing Manager," who will have overall responsibility for coordinating the marketing, promotion, and distribution efforts by Itochu for the Licensed Software and for managing the activities of the Ito chu Technical Services Manager, the Itochu Sales Director and the Itochu Market ing Programs Manager (as described below);



(b) The "Itochu Technical Services Manager," who will have primary responsibility for directing, coordinating and implementing the technical services and support activities related to installations of the Licensed Software in Japan, which activities include without limitation customer training pro grams, customer service, integration services and technical support;



(c) The "Itochu Sales Director," who will have primary responsibility for the directing, coordinating and implementing the sales and distribution of the Licensed Software by Itochu in Japan; and



(d) The "Itochu Marketing Programs Director," who will have primary responsibility for all activities in the marketing and promotion of the Licensed Software, including without limitation advertising, seminar coordination, sales communication development, brochures and other mark eting materials de velopment and trade show coordination.



Itochu shall appoint such other employees to the Marketing Team as are needed to satisfy Itochu's obligation to use best efforts to market and sell the Licensed Software in Japan.



3.3 PREP ARATION OF LOCALIZED VERSIONS. Itochu shall be responsible for utilizing the Localization Source Code to prepare the Japanese Localized Versions of the Licensed Software (excluding the Ancillary Programs) and of any new version thereof in accordance with a schedule to be agreed upon for e ach such new version. Itochu's obligation in the immediately preceding sentence shall be expressly conditioned upon Itochu's receipt from Siebel of such technical support and assistance regarding the Licensed Software as I tochu may reasonably request in connection with the preparation of Japanese Localized Versions. All such localization efforts shall take place at Siebel's California facility, at Itochu's expense. Employees and agents of Itochu will observe the working ho u rs, rules and holiday schedule of Siebel while working on Siebel's premises and shall agree to such other reasonable conditions as Siebel may require. Itochu shall also be responsible for translating the Documentation, on-line help, and the Training Mater i als into Japanese, as set forth in EXHIBIT G ("Core Documentation, Help and Training Related Materials"). Siebel will provide ten (10) copies in hard copy and one (1) copy each in electronic format of such Documentation, on-line help and Training Material s in the English language no later than ten (10) consecutive business days following the Effective Date. Itochu shall use best efforts to assure that such localized versions are of the highest quality and faithfully and accurately translate into Japanese t h e relevant information and materials in the Licensed Software, the Documentation, on-line help and the Training Materials, and Itochu will use commercially reasonable efforts to complete the localization of each Licensed Software version with in sixty (60 ) days of the release of such version to Itochu. In order to facilitate the localization process, Siebel agrees to provide Itochu with beta releases of such versions as soon as they become available in the United States. Upon completion of the development o f each Localized Version, Ito chu shall deliver a master copy of the localization to Siebel and Siebel shall have thirty (30) business days in which to accept or reject the same. Siebel shall own the entire right, title and interest in and to all such loc alized and/or translated versions of the Licensed Software, Documentation , on-line help and Training Materials.



Itochu shall have exclusive res ponsibility for the development, packaging and quality assurance of the Japanese Localized Versions. Itochu shall indemnify Siebel from any liability, damages, costs and expenses caused by any errors in such localizations or translations. In the event tha t Siebel a ccepts such master copy of the Localized Version of the Licensed Software within the period described above, such Localized Version shall be included within the definition of the Licensed Software and Itochu retains such rights as set forth in S ections 2.2 ("License Grant") and 2.3 ('Right to Grant End User Sublicenses") of this Agreement for such Localized Version. In the event that Siebel rejects any master copy of a Localized Version, Itochu shall have no right to distribute such version.



3.4 INSTALLATION AND TRAINING. Itochu shall be responsible for conducting all activities required to install the Licensed Software at End User locations in Japan and for providing training to the End Users and any systems integrators involved in suc h installation. Siebel shall provide to Itochu, promptly after the Effective Date, an English copy of all Siebel training materials relating to the Licensed Software, and Itochu shall translate such materials into Japanese (the English and Japanese version s of the Siebel training materials are referred to collectively as the "Training Materials"). A complete list of training courses, as covered by the Training Materials, that Itochu shall utilize in training customers and integrators on the Licensed System i s set forth on EXHIBIT H (Training Courses) attached hereto. Itochu shall provide such installation for End User customers located in Japan and licensed by Siebel or any third parties, at Siebel's request and Itochu may charge a reasonable fee to such End Users for such installation. Itochu shall also conduct the training related activities for such End Users, at such End User's request, and charge a reasonable fee to such End Users for such training. All such installation and training shall be conducted w ith the highest level of professionalism and quality.



3.5 TECHNICAL SUPPORT AND MAINTENANCE. Itochu shall be responsible for providing First-Line Support with respect to technical questions, support problems, and Error evaluation and correction to all End Users of Licensed Software in Japan (including End Users licensed directly by Siebel or any thi rd parties) who have entered into the Software Maintenance Agreement with Itochu, as set forth in Section 6.9 ("Software Maintenance and Support Servi c es") of this Agreement, or an agreement with Siebel (or a third party appointed by Siebel) for the provision of First-Line or Second-Line Support re lated to the Licensed Software to any End User in Japan provided that Itochu shall receive appropriate pay m ent for such agreement as set forth in Section 6.5 ("Siebel Payments") or such other payment as the parties may mutually agree to in the event the Co-Exclusive Period ends; provided, however, that Siebel reserves the right to provide (or appoint others to provide) First-Line Support to End Users in the event Itochu does not have qualified technical personnel, Itochu is not adequately equipped to provide such First-Line Support or Itochu is not providing quality support to End Users. Si ebel shall be respon sible for providing to Itochu Second-Line Support with respect to any such support or Error correction issues arising from End Users located in Japan. Such technical support obligations are as follows:



(a) First-Line Support. Itochu will provide First-Line Support to all Licensed Software End Users located in Japan. Itochu shall provide telephone and other appropriate contact points so that such End Users may contact Itochu regarding technical and support questions and Errors or other pro b lem s regarding use of the Licensed Software. Itochu shall inform such End Users that End Users must contact Itochu for resolution of all support, technical questions and Error correction issues with respect to the Licensed Software. Itochu shall use best efforts to answer all such technical and supp ort questions promptly and accurately and to provide workaround or other solutions to any Errors or problems reported by such End Users. If, after using its best efforts, Itochu is not able to answer a support question or to correct a reported material Error or problem in the Licensed Software, It ochu may contact Siebel for Second-Line Support, as provided below.



(b) Second-Line Support. Siebel will offer second line support to Itochu in the form of an eight (8) hours per day, five (5) days per week telephone hot line and email support which qualified Itochu support personnel can use after attempting to resolve support or Error correction problems relatin g to the Licensed Software for (i) a d iagnosis of problems or performance deficiencies of the Licensed Software, and (ii) a resolution of problems or performance deficiencies of the Licensed Software. If Itochu requests Siebel to provide applications support or Error correction at a customer site or at Itochu, Itochu agrees to pay Siebel for services in accordance with Siebel's then current List Price for such services and to reimburse Siebel all its out-of-pocket expenses, including travel and accommodations, in providing such support.



3.6 SOFTWARE MAINTENANCE AND SUPPORT SERVICES FOR PROGRAMS OTHER THAN LIMITED PRODUCTION PROGRAMS. Software Maintenance and Support Services shall be provided under Siebel's Software Maintenance and Support Services policies in effect on the date the S o ftware Maintenance and Support Services is o rdered, subject to the payment by Itochu of the applicable fees. Siebel reserves the right to alter such policies from time to time, in its reasonable discretion, on ninety (90) days' prior notice to Itochu. It o chu hereby agrees to purchase Software Maintenance and Support Services from Siebel fo r the term of this Agreement for all Licensed Software which is licensed to Itochu (for internal purposes only) pursuant to this Agreement. Itochu is hereby authorized to distribute any and all Error corrections and Updates which it receives from Siebel as a part of Software Maintenance and Suppor t Services to all of its End User customers and sublicensees.



3.7 END USER VISITS. Siebel may visit the End Users lo cated in Japan (directly licensed by Itochu) from time to time to stay abreast of customer requirements and to evaluate features for potential future products provided that Siebel notifies Itochu in writing in advance regarding such visits. I tochu agrees to provide Siebel reasonable assistance in arranging such visits with End Users.



3.8 ITOCHU WARRANTY. Itochu warrants that it maintains the facilities, resources and experienced personnel necessary to market and distribute Licensed Software and t o perform the necessary installation, training and maintenance services related to such Licensed Software and otherwise to fulfill i ts obligations under this Agreement and that it is not precluded by any existing arrangement, contractual or otherwise, fr om entering into this Agreement.



3.9 ITOCHU INDEMNITY. Itochu will indemnify Siebel for, and hold Siebel harmless from, any loss, expense, damages, claims, demands, or liability arising from any claim, suit, action or demand resulting from: (a) th e negligence, error, omission or willful misconduct of Itochu or its representati ves or sublicensees; (b) the breach of any terms of this Agreement; or (c) Itochu's non-compliance with applicable laws and regulations pursuant to Section 14 ("Compliance w ith Laws").



3.10 SIEBEL WARRANTY. Siebel warrants and covenants that it has and will during the License Term take all actions reasonably necessary and appropriate to maintain the right to grant Itochu to use, reproduce, or sublicense the Licensed Software under this Agreement.



4. DELIVERY AND ACCEPTANCE.



4.1 DELIVERY OF LICENSED SOFTWARE. Within ten (10) business days after the Effective Date of this Agreement, Siebel shall deliver to Itochu one copy, appropriate for reproduction, of the Licensed Software and of the Documentation and the Training Materials, in English. In the event that Siebel de velops any Update of the Licensed Software or creates revised or updated versions of the Documentation and/or Training Materials, Siebel shall deliver to Itochu one (1) copy of such Licensed Software, Documentation and/or Training Materials no later than ten (10) business days after the commercial release of such version to its distributors and End Users.



4.2 ACCEPTANCE. Itochu acknowled ges that it is familiar with the Licensed Software and that such Licensed Software shall therefore be deemed to have been accepted by Itochu concurrent with delivery pursuant to Section 4.1 ("Delivery of Licensed Software") above.



4.3 LOCALIZATIO N SOURCE CODE. The Localization Source Code will be made available to Itochu at Siebel's California facility for the limited purpose of preparing Japanese localizations pursuant to Section 3.3 ("Preparation of Localized Versions"), and Itochu agrees that it will not copy such Local ization Source Code or use it outside of Siebel's California facility.




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