Software Development And OEM Agreement

EXHIBIT 10-21
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SOFTWARE DEVELOPMENT AND OEM AGREEMENT


THIS SOFTWARE DEVELOPMENT AND OEM AGREEMENT (this "AGREEMENT") is entered into as of December 28, 1999 (the "EFFECTIVE DATE"), by and between MICROSTRATEGY INCORPORATED, a Delaware corporation ("MICROSTRATEGY") and EXCHANGE APPLICATIONS, INC., a Delaware corporation ("EA").


RECITALS


1. EA has developed certain proprietary customer relations management ("CRM") software, including, without limitation, VALEX(TM) and eXstatic(TM), all as described in greater detail hereiN.


2. MicroStrategy desires to develop certain industry-specific data models for a set of vertical industries, as described in greater detail herein, and certain CRM applications which will function in connection with such data models and with the EA Products (as defined below).


3. EA desires to integrate the MicroStrategy Software (as defined herein) with the data models and CRM applications and/or with the EA Products (as defined herein) and to sublicense such Exchange Applications Solutions directly to end users.


4. EA and MicroStrategy believe that it is in their respective best interests that the foregoing data models, CRM applications, development environments and certain other developed software (collectively, the "DEVELOPED PRODUCTS", as defined and described in greater detail in Section 1), be developed.


5. To achieve the development of the Developed Products, EA and MicroStrategy have agreed to engage in certain joint development work and to grant certain technology licenses as set forth in this Agreement.


6. To facilitate the development of the Developed Products and integration of the Developed Products with the EA Products and the MicroStrategy Software, MicroStrategy has agreed to create a business unit dedicated to the development and maintenance of the foregoing.


7. EA and MicroStrategy have also agreed on the basis on which they will engage in certain joint marketing efforts to achieve commercial success for the Developed Products.


ACCORDINGLY, EA and MicroStrategy agree as follows:


AGREEMENT


1. DEFINITIONS. In addition to those terms that are defined where first used, the following definitions shall apply:


"APPLICATIONS" means the CRM applications developed by MicroStrategy pursuant to this Agreement, which will consist of a set of analytic CRM functionalities for certain horizontal and/or vertical industries as applied to the Data Models. The Applications may include, without


limitation, customer and segment analysis, sales and channel analysis, campaign and offer analysis and market basket analysis.


"CONFIDENTIAL INFORMATION" means any confidential or proprietary information, including without limitation any source code, software tools, designs, schematics, plans or any other information relating to any research project, work in process, future development, scientific, engineering, manufacturing, marketing or business plan, or financial or personnel matter relating to either party, its present or future products, sales, suppliers, customers, employees, investors or business, identified by the disclosing party as Confidential Information, whether in oral form, or in written, graphic or electronic form and marked as confidential or disclosed under circumstances that would lead a reasonable person to conclude that the information was confidential, including without limitation, the source code related to the EA Products, the MicroStrategy Software and the Developed Products.


"DATA MODELS" means the industry-specific models for the storage of information developed by MicroStrategy pursuant to this Agreement, which may include, without limitation, the following vertical industries: banking, mutual fund and brokerage, telecommunications, transportation, automotive, retail catalogue, business-to-business high technology and business-to-consumer Internet.


"DERIVATIVE WORK" means a work which is based on the Developed Products, such as a revision, enhancement, modification, translation, abridgement, condensation, expansion, or any other form in which the Developed Products may be recast, transformed, or adapted, and which, if prepared without authorization of the owner of the copyright in such product, would constitute a copyright infringement. For purposes hereof, Derivative Work shall also include any compilation that incorporates a Developed Product.


"DEVELOPED PRODUCTS" means, collectively, the Data Models, Applications and certain other developed software developed pursuant to the Work Plan (as defined in Section 2.1(a)) as such Work Plan may be amended and/or modified from time to time pursuant to the terms of the Work Plan.


"EA KNOW-HOW" means the techniques, inventions, practices, methods, knowledge, designs, skill and experience relating to the EA Products that are to be disclosed by EA to MicroStrategy pursuant to this Agreement and that are proprietary to EA.


"EA PATENTS" means patents related to the EA Products, including without limitation, all foreign counterparts, all substitutions, extensions, reissues, renewals, divisions, continuations and continuations in part relating to such patents and their foreign counterparts, and which are owned or controlled by EA (where "CONTROLLED" means licensed by EA with a royalty-free right to grant sublicenses).


"EA PRODUCTS" means EA's proprietary CRM and email software products and other CRM products and CRM applications, currently existing or which may be later developed by EA, including, without limitation, VALEX(TM) and eXstatic(TM) and which may include third party licensed software products as an integrated component thereof.


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"EA TECHNOLOGY" means (i) the inventions, designs, discoveries and processes claimed in the EA Patents and (ii) the EA Know-How.


"EVALUATION" means an installation of an Exchange Applications Solution (as defined herein) for a period of sixty (60) days or less under the terms and conditions specified herein during which an end user may evaluate the Exchange Applications Solution for its internal use.


"IMPROVEMENTS" means any improvements, discoveries, developments, modifications or derivative works, whether or not patentable.


"INTELLECTUAL PROPERTY RIGHTS" means all current and future trade secrets, copyrights, patents and other patent rights, trademark rights, service mark rights, mask work rights and any and all other intellectual property or proprietary rights now known or hereafter recognized in any jurisdiction.


"MICROSTRATEGY KNOW-HOW" means the techniques, inventions, practices, methods, knowledge, designs, skill and experience that are proprietary to MicroStrategy and that were employed by MicroStrategy in the development of the MicroStrategy Software or will be employed by MicroStrategy in the development of the Developed Products, pursuant to this Agreement.


"MICROSTRATEGY PATENTS" means patents related to the MicroStrategy Software, including without limitation, all foreign counterparts, all substitutions, extensions, reissues, renewals, divisions, continuations and continuations in part relating to such patents and their foreign counterparts, and which are owned or controlled by MicroStrategy (where "CONTROLLED" means licensed by MicroStrategy with a royalty-free right to grant sublicenses).


"MICROSTRATEGY SOFTWARE" means the entire MicroStrategy product suite which is made generally available to end users during the term of this Agreement and which is set forth in Exhibit A in the form in which such product suite exists as of the Effective Date and as such may be amended by MicroStrategy from time to time during the term hereof, subject to the requirements set forth in Section 4.9(g)(ii).


"MICROSTRATEGY TECHNOLOGY" means (i) the inventions, designs, discoveries and processes claimed in the MicroStrategy Patents and (ii) the MicroStrategy Know-how.


"OPERATIVE AGREEMENTS" means, collectively, this Agreement, the Payment and Registration Rights Agreement, the Joint Marketing Agreement, the License Agreement and the Strategy.com Master Affiliation Agreement.


"QUALIFIED EVENT" means the sale of all or a substantial part of a party's assets or a stock sale where pre-event shareholders hold less than a majority of the capital stock of the party after such event, whether by acquisition, merger or otherwise.


"TERRITORY" means the World.


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"TESTING" means the testing of the G. A. version of the Developed Products contemplated by Section 2.4 to ensure compatibility, in all material respects, with the Specifications to be developed by the Steering Committee (as defined in Section 2.1).


"USER DOCUMENTATION" means all instructional and technical materials and related literature provided by MicroStrategy which is to be distributed to end users in connection with the Developed Products and/or the MicroStrategy Software.


"VAR AGREEMENT" means the value-added reseller agreement between the parties that will exist upon conversion of this Agreement in accordance with the provisions herein which shall be substantially in the form set forth in Exhibit B hereto.


2. DEVELOPMENT OF DEVELOPED PRODUCTS; LICENSE FEE; VAR AGREEMENT SUPERSEDED.


2.1 DEVELOPMENT PROGRAM; CREATION OF BUSINESS UNIT AND STEERING COMMITTEE; ONGOING OBLIGATIONS.


(a) Promptly following the execution of this Agreement, MicroStrategy will create a business unit (the "BUSINESS UNIT"), which will include an engineering team, dedicated to the development and maintenance, support, integration and testing of the Developed Products pursuant to the terms of this Agreement. The composition of the Business Unit, development overview and the development objectives are set forth in Exhibit C, which shall be subject to modification as set forth in the Work Plan. The parties will establish a steering committee (the "STEERING COMMITTEE") promptly following the Effective Date, which committee will be dedicated to setting the direction for development of the Developed Products and the other development obligations of the Business Unit as set forth in the Work Plan, including, without limitation, the establishment of quarterly milestones ("Milestones"). The composition, process-related responsibilities and operations of the Steering Committee are set forth in Exhibit D (collectively, with Exhibit C, the "WORK PLAN"). MicroStrategy will allow EA complete access to the Business Unit at all times during normal business hours, and all reasonable efforts shall be made by EA so that such access does not interfere with the development responsibilities of the Business Unit and/or the achievement of Milestones. EA will have the option, at its discretion, to locate up to ten (10) members of its own engineering and development team at the site established by MicroStrategy for the location of the Business Unit, and MicroStrategy will provide EA with adequate space to accommodate the foregoing. The Steering Committee shall develop the specifications for the Developed Products (the "SPECIFICATIONS"). Upon termination of the Business Unit duties by EA as provided in this Agreement or upon termination of this Agreement for any reason, excluding material breach by EA, MicroStrategy shall promptly deliver to EA the source code to all Developed Products which have been completed and/or are in process as of the termination date, product and design specifications, User Documentation, test data, and other related information reasonably requested by EA (collectively, the "DELIVERIES"). From time-to-time as the Developed Products are completed and tested pursuant to Work Plan and/or upon the request of EA, MicroStrategy shall make the Deliveries (or that portion thereof requested by EA) to EA.


(b) MicroStrategy shall maintain and support (by providing research and development support and bug fixes to EA) the Developed Products and all software licensed by


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MicroStategy hereunder during the term of this Agreement and any renewal periods thereof as such software is actually used by the end user. The foregoing support shall be provided in accordance, in all material respects, with MicroStrategy's standard technical support procedures. In addition, MicroStrategy will provide testing and quality engineering support for the Developed Products utilizing its Quality Engineering and Beta Programs groups, which group will provide the results of their tests to EA. MicroStrategy will designate a dedicated product manager for the Developed Products, create demonstrations of the Applications and develop pre-sales consulting materials for the Applications.


(c) Subject to the right of either party under Section 10 to terminate this Agreement, the Business Unit will develop the Developed Products in accordance with the Specifications in all material respects, and will perform the tasks and furnish the deliverables described in the Work Plan, as such may be modified pursuant to the procedures set forth therein. The parties shall meet on a periodic basis in connection with the establishment of deliverables pursuant to the Work Plan to identify with specificity and in writing the Developed Products.


(d) The parties shall work in good faith to finalize the form of VAR Agreement within thirty (30) days after the Effective Date.


2.2 LICENSE FEE.


(a) EA will pay MicroStrategy a license fee (the "LICENSE FEE") of sixty five million dollars ($65,000,000) in cash and EA common stock in the respective amounts and in accordance with the payment schedule set forth in the Payment and Registration Rights Agreement by and between the parties dated as of the Effective Date and attached hereto as Exhibit E (the "PAYMENT AND REGISTRATION RIGHTS AGREEMENT"), in consideration of the rights, licenses and obligations of the parties under this Agreement and the Exhibits hereto.


(b) Except as set forth in the foregoing paragraphs of this subsection 2.2 or as otherwise expressly provided in this Agreement, each party will bear its own costs incurred by it to accomplish its responsibilities in the development effort.


2.3 BUSINESS UNIT CHANGES. The parties' respective project managers shall participate in project review meetings as mutually agreed. MicroStrategy may change or substitute members of the Business Unit at its discretion from time to time. Notwithstanding the foregoing, MicroStrategy shall adhere to the then-current requirements of the Work Plan regarding the skill levels and other qualifications of the Business Unit members.


2.4 CONFORMANCE TESTING. MicroStrategy will complete development and delivery of the deliverable items set forth in the Work Plan in accordance with the Milestones set forth therein. Upon completion of the Milestones, including, without limitation, final completion of the Developed Products and the performance of product quality and conformance testing of the G.A. version of the Developed Products by MicroStrategy based upon testing criteria and Specifications established by the Steering Committee, EA have the right to confirm the results of such product quality and performance testing.


2.5 DEMONSTRATION ENVIRONMENT. MicroStrategy agrees to allocate a portion of the Business Unit toward the development of a demonstration environment for the Exchange


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Applications Solution and the Developed Products at EA's site. In connection with the foregoing, MicroStrategy shall provide the MicroStrategy Software, the Developed products and certain Business Unit personnel as selected by MicroStrategy (collectively, the "MicroStrategy Resources"), and EA shall be responsible for all third party software, all hardware and all costs related to the demonstration environment, excluding those directly related to the MicroStrategy Resources, or as otherwise specifically provided for in the Work Plan.


2.6 TERMINATION OF VAR AGREEMENT. The parties acknowledge and agree that this Agreement supersedes and replaces that DSS Partner Value-Added Reseller Agreement between the parties dated June 1, 1999, which is hereby terminated pursuant to Section 15.9 thereof. All licenses to end users granted under the foregoing agreement will survive such termination, all obligations set forth in Section 14.6 shall survive, and MicroStrategy's obligations under Section 9.2 thereof for support shall be pursuant to this Agreement in lieu of its support obligations thereunder.


2.7 SOURCE CODE ESCROW. WITHIN TEN (10) DAYS AFTER the Effective Date, the parties shall enter into a Source Code Escrow Addendum in respect of the MicroStrategy Software in substantially the form provided to MicroStrategy's other customers (the "SOURCE CODE ESCROW ADDENDUM").


3. JOINT MARKETING AND SALES; JOINT MARKETING AGREEMENT. The parties' respective obligations regarding marketing and promotion of the Developed Products and certain mutually agreed upon details regarding their relationship as embodied in this Agreement shall be as set forth in a Joint Marketing Agreement in the form attached hereto as Exhibit F.


4. JOINT OWNERSHIP OF DEVELOPED PRODUCTS; OEM LICENSE GRANTS TO MICROSTRATEGY SOFTWARE.


4.1 JOINT OWNERSHIP; RESTRICTION ON SALE. MicroStrategy and EA shall jointly own all right, title and interest worldwide in and to the Developed Products including, without limitation, patents, copyrights, trade secrets and any other Intellectual Property Rights (including trademarks and trade names related to the Developed Products, but excluding any trademarks and trade names owned individually by either party) incorporated in the Developed Products, whether in the United States or abroad, which ownership rights shall be subject to the restrictions set forth in Sections 4.7, 4.8 and elsewhere in this Agreement. EA acknowledges that MicroStrategy has not filed any patent applications nor obtained any issued patents on the Developed Products as of the Effective Date. It is the intention of the parties that all the Intellectual Property Rights (including any related trademarks and trade names, but excluding those owned individually by either party) in the Developed Products shall be jointly owned without any duty to account (except in the event of infringement as provided in Section 4.12 or share any royalties (except as provided in Section 11.1) based on the licensing or use of the Developed Products by the other party. Notwithstanding the foregoing and except pursuant to Section 10.3, during the period of time that the Business Unit obligations are continuing hereunder and for a period of six (6) months thereafter (the "Lockup Period"), neither party may sell, assign, transfer or encumber its ownership interest in the Developed Products (a "Transfer of Ownership") without the other party's prior written consent, which may be granted or withheld in such party's sole discretion. After the Lockup Period, either party shall have the


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right to engage in a Transfer of Ownership, provided that such transfer shall shall be a transfer of the transferring party's joint ownership interest in the Developed Products only (subject to the restrictions set forth in this Agreement), and shall not entail a transfer or assignment of any license or other rights granted by MicroStrategy pursuant to this Agreement or of any obligations of MicroStrategy hereunder.


4.2 ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS. Upon reasonable request, each party (the "ASSISTING Party") will assist the other party (the "REQUESTING PARTY") in every proper way to obtain and from time to time enforce, United States and foreign Intellectual Property Rights related to the Developed Products in any and all countries. To that end, the Assisting Party will execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Requesting Party may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Intellectual Property Rights and the Requesting Party's joint ownership interest therein. The Assisting Party's obligation to assist the Requesting Party with respect to such Intellectual Property Rights relating to the Developed Products in any and all countries shall continue for a period of five (5) years after expiration or termination of this Agreement, which expenses shall be shared by the parties as they may mutually agree. In addition, the Assisting Party will execute any license agreement which is consistent with the rights granted and the terms set forth in this Agreement requiring the names of both co-owners to make the license granted therein enforceable.


4.3 EXECUTION OF DOCUMENTS. In the event the Requesting Party is unable for any reason, after reasonable effort (which shall include the issuance of a final notice pursuant to the notice provisions hereof), to secure the Assisting Party's signature on any document needed in connection with the actions specified in Section 4.2 above, the Assisting Party hereby irrevocably designates and appoints the Requesting Party and its duly authorized officers and agents as its agent and attorney in fact, which appointment is coupled with an interest, to act for and in its behalf to execute, verify and file any such documents and to do all other lawfully permitted acts to further the purposes of the preceding paragraph with the same legal force and effect as if executed by the Assisting Party.


4.4 COPYRIGHT NOTICES ON DEVELOPED PRODUCTS. EA and MicroStrategy agree that all copies of the Developed Products and any Derivative Works, whether or not modified, made by EA or MicroStrategy, or their respective licensees or sublicensees, will contain applicable proprietary notices as described in greater detail in Exhibit G. In addition, EA and MicroStrategy agree to include an applicable copyright notice, as described in greater detail in Exhibit G, in or on the media of all copies of the Developed Products or any Derivative Work.


4.5 DERIVATIVE WORKS. Neither party shall have the obligation to share or disclose its own respective Derivative Works to the other party. Notwithstanding the provisions of Section 8, either party may prepare and file a patent application for its own Derivative Work in any country; provided that such party (i) notifies the other party, in writing, at least sixty (60) days prior to submitting such patent application; and (ii) describes the scope of the proposed patent application and the countries in which it desires to seek patent protection. The ownership of the patent on the Derivative Work and the application therefor, excluding any patent or other intellectual property rights related to the Developed Product underlying the Derivative Work or upon which such Derivative Work is based, shall be vested in the party which is the developer of


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such Derivative Work. Notwithstanding any of the foregoing, in no event shall either party (the "Non-Creating Party") bring an action to enforce any rights to seek remedies against the other party (the "Creating Party"), its customers or licensees based upon a claim that the Creating Party's Derivative Works infringe upon the Non-Creating Party's Intellectual Property Rights. Notwithstanding the foregoing, nothing stated herein shall allow either party to create Derivative Works in violation of its obligations with respect to Confidential Information contained in Section 8 or to create Derivative Works which infringe upon the other party's intellectual property rights related to the MicroStrategy Software or the EA Products, as applicable.


4.6 TRADEMARK LICENSE. MicroStrategy hereby grants to EA ...