Software License & Distribution Agreement

Confidential Material has been

omitted from this document and

filed separately with the

Securities and Exchange

Commission pursuant to Rule 406

under the Securities Act of

1933, as amended. Asterisks

denote such omissions.



EXHIBIT 10.2



SAP DEVELOPMENT PARTNER

SOFTWARE LICENSE DISTRIBUTION AGREEMENT

FOR EMBEDDED PRODUCTS





This Software License and Distribution Agreement for Embedded Products ("Agreement" entered into as of March 31, 1999 by and between webMethods, Inc. ("Licensor"), corporation having principal offices at 3975 University Drive, Suite 390, Fairfax, Virgin SAP AG ("SAP"), a German company having principal offices at Neurottstrabe 16, 69 Germany.





WHEREAS, SAP designs, develops, markets and sells worldwide certain

business software based on client-server architecture;



WHEREAS, Licensor designs, develops, markets and sells certain

software business to business electronic commerce application

integration; and



WHEREAS, SAP wishes to obtain a license to integrate and embed

certain software products into SAP's software.



NOW THEREFORE, the parties agree as follows:





1. DEFINITIONS



1.1. "Applicable Entity/Entities" shall mean SAP's subsidiaries and! or

distributors partners or training partners authorized by SAP.



1.2. "Attachments" shall mean all attachments to this Agreement.



1.3. "Effective Date" shall mean the date of execution of this Agreement.



1.4. "Embedded Licensed Software" shall mean the version(s) of the

Licensed Software into and embedded into SAP Software, as defined in

Section 3.2 hereof.



1.5. "End-User" shall mean a third party end-user who licenses proprietary

software documentation for internal use.



1.6. "Essential Third Party Software" shall mean the Third Party Software

included in Software as described in Attachments A and E hereto,

along with any Third Party added to the Licensed Software by Licensor

during the term hereof which either any meaningful portion of the

functionality provided by the Licensed Software as of the date of

this Agreement or (ii) is otherwise essential to the continued

installation, use and maintenance of the Licensed Software (with

respect to the functions generally provided by the Licensed Software

as of the date of this Agreement). 1.7. "Internal Use" shall mean use of the Licensed Software by SAP and its

employees solely for internal use in SAP's operations.



1.8. "Licensed Software" shall mean all of Licensor's software products to

be embedded in SAP Software, and/or any combinations of Licensor's

software products to be embedded in SAP Software, as listed in

Attachment A hereto, together with such updates, upgrades and new

versions as Licensor shall provide to SAP hereunder during the term

hereof, and applicable End-User documentation. For purposes of this

Agreement, "Licensed Software" shall include any Essential Third

Party Software and shall not include any Non-Essential Third Party



1.9. "License Fee" shall mean the license fee payable by SAP to Licensor

for the Licensed Software licensed by SAP hereunder as stipulated in

Article 8 hereof.



1.10. "Non-Essential Third Party Software" shall mean any Third Party

Software which is not Essential Third Party Software.



1.11. "Not For Distribution Use" or "NDR" shall mean use of the Licensed

Software only for Internal Use, for internal training, for testing,

for provision of implementation consulting services with respect to

SAP Software and for demonstrations to prospects and their personnel.



1.12. "Object Code" shall mean the executable, machine-readable form of

Licensed Software.



1.13. "SAP Software" shall mean all SAP software products, including all

updates, upgrades, new versions and applicable End-User

documentation, as well as third party products other than Licensed

Software, marketed and licensed to End-Users by SAP or Applicable

Entity/Entities.



1.14. "Source Code" shall mean the form of the Licensed Software that is

intelligible to trained programmers and is capable of being

translated into Object Code form by means of a compiler or



1.15. "Steering Committee" shall mean a committee to be made up of one

development manager of Licensor and one development manager of SAP to

supervise the Development Services (as defined in Article 7).



1.16. "Territory" shall mean all countries of the world.



1.17. "Third Party Software" shall mean all third-party-owned software

products, components and data which are incorporated into or provided

with the Licensed Software as of the Effective Date (a description of

which, through Version 3.0 of the Licensed Software, is set forth in

Attachment E hereto) or which is incorporated into or provided with

the Licensed Software after the Effective Date but during the term of

this Agreement. For the purposes hereof, "third-party-owned" shall

mean owned by a person or entity which is unaffiliated with

webMethods, its executive officers and holders of 20% or more of its

outstanding equity.











2. SCOPE OF AGREEMENT



2.1. Scope. This Agreement, including any Attachments hereto, sets forth

the terms and conditions pursuant to which SAP will license Licensed

Software from Licensor and will be permitted to modify, market and

sublicense the Licensed Software (and any derivative works thereof)

embedded in SAP Software.



2.2. Inconsistent Terms. Deviating terms and conditions, including,

without limitation, those contained in either party's standard terms

and/or standard contracts, purchase orders, invoices and

acknowledgments, shall not apply even if referred to by one party and

not expressly objected to by the other party. Silence by one party

amounts to rejection of the other party's terms and conditions.





3. RIGHTS OF SAP



3.1. NDR Object Code License. Licensor hereby grants to SAP and the

Applicable Entities a non-exclusive, non-transferable, limited

license to use the current commercial release of the Licensed

Software and any releases or updates thereto made during the term

hereof, in each case in Object Code form only, for NDR Use basis and

an Internal Use basis. Licensor shall provide SAP one (1) copy of the

Licensed Software for such purpose, and SAP shall have the right to

distribute the necessary number of copies of the Licensed Software to

the Applicable Entities for such purpose. SAP and the Applicable

Entities shall not use such software for any purpose other than NDR

Use and Internal Use, and shall not use the Licensed Software to

provide external connectivity or service bureau services to any third

party (but SAP and the Applicable Entities may use SAP Software which

embeds Embedded Licensed Software to provide such services to third

parties).



3.2. Licensed Software Source Code License. Licensor hereby grants to SAP

(and, as necessary for the development of SAP Software, SAP Labs,

Inc. and other SAP subsidiaries identified to Licensor in writing by

SAP from time to time) a non-exclusive, non-transferable, limited

license to use the Licensed Software in Source Code form solely for

the purpose of integrating and embedding the Licensed Software into

the SAP Software. Licensor understands that it may be necessary to

create derivative works of the Licensed Software in the process of

implementing such integration and embedding and hereby grants SAP

(and, as necessary for the development of SAP Software, SAP Labs,

Inc. and any other SAP subsidiaries identified to Licensor in writing

by SAP from time to time) the right to create derivative works of the

Licensed Software for such purpose. Any portion of such a derivative

work that is created solely or jointly by either party, shall be

owned by SAP, and, except as may otherwise be specifically provided

in this Agreement or agreed upon in writing by the parties, SAP and

the Applicable Entities shall not be restricted with respect to

usage, modification, marketing or licensing such portions. For the

purpose of ensuring interoperability and supportability of the

Licensed Software, within a reasonable period, SAP shall deliver to

Licensor one copy of the Source Code representing the portion of each

such derivative work that performs the function or functions

generally performed by the Licensed Software. Subject to the

restrictions set forth in Article 4.4, SAP grants (or shall cause SAP

Labs, Inc. or such other SAP











subsidiary to grant) to Licensor a fully paid up, perpetual,

worldwide license to use, modify, distribute or otherwise make use of

such derivative works delivered to Licensor pursuant to the prior

sentence. Any patches, work arounds or bug fixes to the Licensed

Software, created solely or jointly by either party, shall remain the

sole property of Licensor. SAP shall deliver or cause to be delivered

to Licensor any fixes to the Licensed Software as soon as reasonably

practicable but in no event later than once each quarter. The version

of the Licensed Software or its derivative that is incorporated into

the SAP Software shall be referred to herein as the "Embedded

Licensed Software". Except as provided herein solely with respect to

certain application programming interfaces delivered with the

Embedded Licensed Software, in no event shall SAP or the Applicable

Entities have the right to market, distribute, sell, disclose or

sublicense the Source Code form of the Licensed Software.



Licensor shall provide SAP with one (1) copy of the Source Code, and

one (1) backup copy of such Source Code. SAP shall maintain the

primary backup copies of the Source Code in locked safes in secure

facilities, and shall install the Source Code on not more than two

networked computer systems in secure facilities and accessible by

only those employees of SAP (and, as necessary for the development of

SAP Software, SAP Labs, Inc. and any other identified SAP

subsidiaries) with a need to have access to it for the purpose of

integrating or embedding Licensed Software into SAP Software or

providing customer support of the Embedded Licensed Software, which

the parties recognize will only include software developers, second

and third level support personnel and systems administrators (with

respect to standard back-up and administrative procedures). SAP

agrees to use (and to cause its subsidiaries to use) the same degree

of care in protecting the Source Code form of the Licensed Software

as it generally uses to protect its own or its other development

partners' Source Code, but in no event less than reasonable care to

prevent access to source code by any other employees of SAP, SAP's

subsidiaries or any other third party. SAP shall provide Licensor

upon reasonable request with a written report indicating the

locations of the Source Code and listing all employees, consultants

or agents of SAP, SAP Labs, Inc. and any other identified SAP

subsidiaries that have access to the Source Code.



3.3. Embedded Licensed Software Object Code License. Licensor hereby

grants to SAP and the Applicable Entities a non-exclusive, non

transferable, limited right and license to make copies of the master

media copies of the Embedded Licensed Software, and to use, modify,

sublicense and distribute the Embedded Licensed Software, in Object

Code form only to End-Users and SAP partners only (except as

otherwise permitted herein), within the Territory. SAP and the

Applicable Entities shall not have the right to copy, distribute or

sublicense the Embedded Licensed Software except as a component of

SAP Software containing meaningful functionality in addition to the

functionality provided by the Licensed Software; provided, that the

parties acknowledge that the offering by SAP and the Applicable

Entities of the Licensed Software as a component of a bundled package

which includes other SAP Basis software development and integration

tools shall be permissible hereunder. The Embedded Licensed Software

(including any Derivative Products) will be distributed by SAP and

the Applicable Entities pursuant to terms no less restrictive than

those contained in the license agreements used by SAP and the

Applicable Entities for the licensing of SAP Software to End Users.

SAP and the











Applicable Entities shall be entitled to determine the license fees

that SAP or such entities charge End-Users for the SAP Software

independently of Licensor. However, if at any time during the term of

this Agreement SAP begins to charge End-Users separately to obtain

the functionality of the Embedded Licensed Software, Licensor and SAP

agree to attempt in good faith to negotiate a payment arrangement

that will fairly compensate Licensor under such circumstances to

replace the License Fee provided for in this Agreement.



3.4. Scope Limitation. Notwithstanding any other provision of this

Agreement to the contrary, the rights granted to SAP and the

Applicable Entities hereunder shall be limited solely to use of the

Embedded Licensed Software for connection over the internet, over a

distributed network or otherwise of (a) SAP Software with SAP

Software or (b) SAP Software with browsers and other human interface

software using HTML and XML.



3.5. Publication and Ownership of Interface Data Structures. Licensor

agrees that SAP shall own and shall have the right to publish the

interface data structures and protocols which permit the SAP Software

to pass data to and from the Embedded Licensed Software (the "R/3-B2B

Protocols"). SAP agrees that Licensor shall own the interface data

structures and protocols developed by Licensor which permit the

Embedded Licensed Software to pass data over the internet, over a

distributed network or otherwise to and from other SAP Software,

browsers or other human interface software using HTML or XML (whether

in XML or a proprietary format) or Licensor Software (including,

without limitation, the Licensed Software) (collectively, the "WM-XML

Protocols"). Licensor agrees that SAP shall own any interface data

structures and protocols developed by SAP which permit the Embedded

Licensed Software to pass data over the internet, over a distributed

network or otherwise to and from other SAP Software, browsers or

other human interface software using HTML or XML (collectively, the

"SAP-XML Protocols"). Licensor agrees that SAP is hereby provided a

worldwide, fully-paid, nonexclusive license for the use, distribution

and modification of the WM-XML Protocols. SAP agrees that Licensor is

hereby provided a worldwide, fully-paid, nonexclusive license for the

use, distribution and modification of the R/3-B2B Protocols and the

SAP-XML Protocols. SAP and Licensor hereby agree to publish the

WM-XML. Protocols to a standards body competent in establishing

industry interface specification as promptly as practicable (or, if

the parties cannot mutually agree upon such standards body, the

parties will jointly submit the specification to the World Wide Web

consortium). Following such joint publication, SAP shall have the

right to publish the WM-XML Protocols from time to time. Each party

hereby agrees that the other party and any third parties shall be

permitted to create products using the WM-XML Protocols and the

SAP-XML Protocols without any obligation to account to such party.

Accordingly, Licensor acknowledges that, following the publication of

the WM-XML Protocols, third parties will be permitted to use the

WM-XML Protocols to develop products which may be competitive with

the Licensed Software. Prior to the joint publication of the WM-XML

Protocols, SAP may distribute API sample code for the WM-XML



3.6. SAP has the right to develop software competitive to the Licensed

Software and to embed competitors' software in SAP Software,

provided, however, that at no time during or after the term hereof

shall SAP (a) use any confidential or proprietary information of











to develop such software, or (b) employ or retain any person having

exposure to the Source Code form of the Licensed Software for or in

connection with any such development effort (except in connection

with Microsoft's BizTalk software products).



3.7. Reasonable Efforts to Embed. SAP will use reasonable efforts to embed

the Licensed Software (or Derivative Products thereof) in SAP's

Business-to-Business Procurement and Business Connector solutions,

but SAP shall have no obligation to do so.



3.8. No Implied License. Except for the express license granted herein, no

other licenses are granted by implication, estoppel or otherwise.





4. LICENSOR'S OBLIGATIONS



4.1. Installation. Licensor's personnel shall install, within five

business days after the Effective Date, on one (1) network file

server, the Source Code copy of the Licensed Software at the SAP

location identified in Attachment A. If necessary to conform to

applicable export restrictions with respect to the development or

distribution of Embedded Licensed Software, promptly following SAP's

request, Licensor shall install a Source Code copy of the Licensed

Software on one (1) network file server at SAP Labs, Inc.'s location

in Palo Alto, California. Licensor shall be responsible for

compliance with applicable U.S. export control laws in connection

with the initial export of the Licensed Software to SAP's site in

Walldorf, Germany, and the export of any new versions, upgrades or

updates of the Licensed Software to SAP's site in Walldorf, Germany.

Except as set forth above in this Section 4.1, SAP shall be solely

responsible for compliance with all U.S., German and other import and

export control laws applicable to the Licensed Software, including,

without limitation, the shipment, installation and use of the

Embedded Licensed Software to distributors and End Users and the

installation and use of the Licensed Software by End Users.



4.2. Updates. During the term hereof, Licensor shall provide to SAP master

media copies and NDR Use copies, including applicable user

documentation, of the Licensed Software, updates and new releases, on

a preferred basis, but in all events not later than its first

shipment to its own similarly situated customers, distributors or

development partners.



4.3. Training. Licensor shall provide initial training to SAP developers

and trainers with respect to the Licensed Software for the number of

days as mutually agreed upon by SAP and Licenser.



4.4. Licenser's Restrictions. Licensor shall refrain from, and shall use

reasonable efforts to cause its distributors to refrain from,

licensing the Licensed Software (including B2B Server and B2B

Developer) for use in connecting SAP software with SAP Software or

SAP Software with human interfaces (HTML and XML). The foregoing

restriction shall not apply to Licensor or its distributors in the

event that:



(i) SAP does not make meaningful features and functions

of the Licensed Software generally available for

shipping to SAP R/3 customers (Release













Confidential material omitted

and filed separately with the

Securities and Exchange

Commission pursuant to Rule 406

under the Securities Act of

1933, as amended Asterisks

denote such omissions





3.1 and higher) as part of the SAP Business Connector

product within ninety (90) calendar days following

the release by Licensor for general availability of

Licensor's B2B Server Version 3.0 and the delivery of

the Source Code form of such release to SAP;



(ii) SAP agrees in writing (in its sole discretion) that

Licensor may license the Licensed Software for use

with SAP R/3 Release 3.0 and prior releases for

particular SAP customers; or



(iii) SAP embeds in SAP Software, resells or otherwise

distributes to End Users software (which is not

Licensed Software or a derivative work of the

Licensed Software), whether developed internally by

SAP or licensed or otherwise acquired by SAP from a

third party, with substantially the same

functionality as the Licensed Software or which

otherwise is directly competitive with the Licensed

Software. SAP shall provide Licensor with 90 days'

prior written notice of any such event, the

restriction shall expire upon receipt of such notice

and SAP agrees that (a) it shall not announce

publicly its planned distribution of the competitive

product until the earlier to occur of (I) a public

announcement by Licensor that it will commence

distribution of the Licensed Software to End Users

for the uses set forth above in this Section 4.4 and

(II) the expiration of thirty (30) days following the

delivery of such written notice to Licensor and (b)

it shall not deliver the competitive product to

customers during such 90-day notice period.



4.5. Inter-Operability. Each party agrees to use commercially reasonable

efforts to work together to ensure that the Embedded Licensed

Software is and will continue to be during the entire term of this

Agreement compatible with SAP Software, including new versions or

releases thereof.





4.6. Essential Third Party Software. For the purposes of this Agreement,

Essential Third Party Software shall be treated by the parties in all

respects as Licensed Software for the purposes of the parties'

obligations with respect to delivery, support, services and

restrictions upon use and distribution. Without limiting the

foregoing, Licensor shall cause to be developed and incorporated into

its B2B Server Version 3.0 (for general availability) the necessary

interfaces to the * software included in the Essential Third Party

Software, which will be provided to SAP on or prior to June 30, ...