International Software Distribution Agreement - Japan

INTERNATIONAL SOFTWARE DISTRIBUTION AGREEMENT
SYNCHRONICITY, INC.
201 FOREST STREET
MARLBORO, MA 01752
USA


Telephone: +1- 508-485-4122
Fax: +1- 508-485-7514


This International Software Distribution Agreement (the "Agreement") is made and entered into effective as of the 28th day of December, 1999 (the "Effective Date"), by and between Synchronicity, Inc., a Massachusetts corporation having its principal place of business as shown above ("Synchronicity"), on the one part, and Itochu Corporation, a Japanese corporation with its Tokyo office at 5-1 Kita-Aoyama 2-chome, Minato-ku, Tokyo, Japan ("ITC"), and Itochu Techno Science Corporation, a Japanese corporation with its principal place of business at 11-5 Fujimi 1-chome, Chiyoda-ku, Tokyo 102, Japan ("Distributor"; together with ITC collectively, "Distributor"), on the other part.


SECTION 1: DEFINITIONS


1.1. "Authorized Hardware/Software Configurations" are set forth
in Exhibit B.


1.2. "Authorized Reseller" is a subdistributor of Distributor's
right to market and distribute Products in the Territory who
has signed an agreement with Distributor sufficient to fulfill
Distributor's obligations to Synchronicity hereunder (except
any payment obligations of Distributor to Synchronicity which
shall be always honored and discharged by Distributor).


1.3. "End User" is any customer acquiring one or more copies of a
Product for the customer's own internal use.


1.4. "Evaluation Copies" are copies of the Products which will
automatically cease to function upon the expiration of a
stated period, i.e. which include a "Time Bomb," and which are
subject to the license granted in Section 3.1 of this
Agreement.


1.5. "First Line Support" is the activity of communicating with End
Users by telephone on the use, operation, installation,
configuration and implementation of the Products, assisting
End Users in the use and interpretation of Product
documentation, and passing on reports of errors and suspected
errors in the Products for Second Line Support.


1.6. "License Agreement" is an End User license agreement written
by Distributor in Japanese language with terms at least as
protective of Synchronicity's interests as the terms in
Synchronicity's end user license agreement as shown in Exhibit
A.


1.7. "Products" are those software products shown in Exhibit C, in
their most current versions, and the Japanese localized
version of the Products as developed by the parties in
accordance with Section 2 of this Agreement, including (i) its
modifications, enhancements, corrections or upgrades to the
Products to be furnished by Synchronicity to Distributor
hereunder; and (ii) documentation and any other related
materials described in Exhibit C attached hereto.
Synchronicity may amend Exhibit C of this Agreement from


Page 1 2
time to time upon ninety (90) days' prior written notice to
Distributor as updates or new releases of the Products are
provided.


1.8. "Second Line Support" is the maintenance activity to be
provided by Synchronicity to Distributors in connection with
the Products (i) bug fixing, modifying and correcting errors
in the Products and (ii) hot line support that will include,
without limitation in support of Distributor efforts to
support their End Users and, (iii) the release of updates and
upgrades of the Products for Distributor's provision of the
First Line Support to the End User.


1.9. "Support Agreement" is an annual support agreement to be
entered into by and between Distributor and the End User
written by Distributor in Japanese language with terms at
least as protective of Synchronicity's interest as
Synchronicity's Domestic support agreement shown in Exhibit I.
It also provides Product support of the Products through First
Line Support by Distributor.


1.10. "U.S. Version" is any Product based on English Language and
intended for distribution by Synchronicity in the United
States.


1.11 "Territory" is the country of Japan.


SECTION 2: DEVELOPMENT OF JAPANESE VERSION


2.1. When and if so agreed upon in writing by the parties to this
Agreement, Distributor, with the cooperation of Synchronicity,
will undertake efforts to localize the Products for the
Japanese market, in accordance with a separate Localization
Development, Marketing and Distribution Agreement.


SECTION 3: GRANT OF RIGHT TO MARKET


3.1. Synchronicity hereby grants, and Distributor hereby accepts,
an exclusive, non-transferable right and license to use for
the purposes specified hereunder, sublicense, market,
distribute and support the Products to Authorized Resellers
and End Users located in the Territory for the End User's
internal use only and only pursuant to an effective written
License Agreement, that is signed or otherwise accepted by End
User in a manner chosen by Distributor. Synchronicity also
grants to Distributor an exclusive, non-transferable license
to use (and to sublicense its Authorized Resellers to use) of
up to ten (10) copies of the Products necessary for
evaluation, demonstration and training purposes in accordance
with the License Agreement (the "Not-for-Resale Copies"). The
Not-for-Resale Copies shall not count towards any sales
benchmarks or royalty payments due Synchronicity.
Synchronicity shall not appoint any other entity as a
distributor in Japan and shall not distribute the products in
Japan directly or indirectly during the term of this
agreement.


3.1.1 Synchronicity and Distributor have established target
revenue plan for the Products during the period
commencing from the Effective Date and ending on
December 31, 2001 as set forth in Exhibit E attached
hereto and incorporated herein by reference (the
"Revenue Plan"), and Distributor shall use
commercially reasonable efforts to meet the Revenue
Plan. Notwithstanding anything contained herein to
the contrary and for avoidance of doubts,
Synchronicity and Distributor acknowledge and agree
that the Revenue Plan shall not be construed


Page 2 3
as creating any legally binding obligation of
Distributor to purchase those amount of the Products.


3.2. In order to be eligible for the Product Support set forth in
Section 4 or the Product warranty set forth in Section 8, the
Products must be run on Authorized Hardware/Software
Configurations.


3.3. The Products are supplied to Distributor solely for the
purposes set forth in this Agreement. Distributor is
authorized to use and distribute the Products to Authorized
Resellers and End Users solely for such purposes, and may not
reproduce or modify the Products except as otherwise
specifically provided herein. Distributor shall have no right
to market or service products developed by Synchronicity other
than the Products in Exhibit C.


3.3.1. During the term of this agreement Synchronicity shall
notify Distributor of the release of any new
Synchronicity product. Distributor shall have thirty
(30) days from the date of such notice to enter into
an amendment to this Agreement which adds the new
product to Exhibit C.


3.3.2. If the parties do not enter into a mutually agreed
upon amendment to this Agreement, as provided in
Section 3.3.1 above, within the thirty (30) day
period, Synchronicity shall have no further
obligation to Distributor with respect to such
product and shall have no restriction on its
development or distribution for or within Japan or
otherwise.


3.4. Distributor acknowledges that its rights under this Agreement
are exclusive only within the geographic borders of Japan.
Synchronicity reserves the right to license Products to other
agents, distributors, value added resellers, original
equipment manufacturers, end users and other parties, located
outside Japan, provided, however, that Synchronicity shall not
appoint any other distributors, value added resellers, system
integrators or original equipment manufactures for
distribution of the Products in the Territory and shall not
distribute, market or license the Products to the End User,
directly or indirectly, in the Territory during the term of
this Agreement.


3.5 Distributor may engage any Authorized Reseller in the
Territory to market and resell the Products to the End User
located within the Territory; provided, however, that
Distributor shall (i) cause Authorized Reseller to abide by
all the terms, conditions and provisions of this Agreement to
be performed on the part of Distributor (except any payment
obligations of Distributor to Synchronicity which shall be
always honored and discharged by Distributor) and (ii) be
responsible to Synchronicity for any act or omission of its
Authorized Reseller in violation of any such terms,
conditions, or provisions of this Agreement.


SECTION 4: PRODUCT SUPPORT AND TECHNICAL TRAINING


4.1. Distributor agrees to provide First Line Support to End-Users
of the Products. The Support Agreement must, among other
things, clearly state that the agreement is assignable to
Synchronicity (or Synchronicity's designee) upon termination
of Distributor's right to provide First Line Support to End
User.


4.2. Distributor agrees to provide the marketing, sales, technical
support and staffing for the Products as set forth on Exhibit
D


Page 3 4
* Confidential Information has been omitted pursuant to Rule
406 under the Securities Act of 1933 and has been filed
separately with the Securities and Exchange Commission. The
locations of the omitted materials have been indicated with
asterisks.


4.3. Synchronicity will provide support to Distributor by
telephone, fax, the Internet or electronic mail during
Synchronicity's normal business hours for the purposes of
supporting End Users and Authorized Resellers. Distributor
will designate two (2) primary contacts to handle all contact
with Synchronicity.


4.4. Synchronicity shall make available all upgrades, updates and
enhancements specified in the end user licensing agreement for
US version Products.


4.5. Synchronicity shall provide Second Line Support to
Distributor.


SECTION 5: PRICE, PAYMENT TERMS, AND RECORDS


5.1. In consideration of the exclusive license granted to
Distributor described in Section 3 above, Distributor shall
pay to Synchronicity a pre-payment license fee (the
"Pre-Payment License Fee") for the Products in the amount of *
Dollars (USD *) with a payment structure as follows:


(i) *Dollars (USD *) payable within 45 days of completion
of this agreement, receipt of which is hereby
acknowledged by Synchronicity.


(ii) * Dollars (USD *) payable by March 31, 2000.


(iii) * Dollars (USD *) payable by June 30, 2000.


(iv) * Dollars (USD *) payable by September 29, 2000.


(v) * Dollars (USD *) payable by December 29, 2000.


(vi) * Dollars (USD *) payable by March 30, 2001.


(vii) * Dollars (USD *) payable by June 29, 2001.


(viii) * Dollars (USD *) payable by September 28, 2001.


(ix) * Dollars (USD *) payable by December 29, 2001


The Pre-Payment License Fee shall be applied as a credit
against all future license fees for the Products payable by Distributor
to Synchronicity pursuant to Section 5.2 of this Agreement.


Page 4 5
* Confidential Information has been omitted pursuant to Rule
406 under the Securities Act of 1933 and has been filed
separately with the Securities and Exchange Commission. The
locations of the omitted materials have been indicated with
asterisks.


5.2. The license fees to be paid by Distributor for Products shall
be determined by reference to Synchronicity's US Domestic
Pricing and Configuration Schedule, set forth in Exhibit B
hereto, less a * discount. The prices set forth in Exhibit B
may be amended from time to time by Synchronicity upon ninety
(90) days' prior written notice. All Not-for-Resale Copies of
Products used by Distributor or its Authorized Resellers for
evaluation, demonstration, support and training shall not be
subject to a fee. The license fee for other internal use of
the Products (other than evaluation, demonstration, support
and training) shall be in accordance with Exhibit B. In
addition, distributor will be granted the right to convert
remaining inventory of DesignSync and ProjectSync licenses
held on December 31, 1999 to other product license types of
equal cost as specified in Exhibit C.


5.3. If there is an increase in prices set forth in Exhibit B
attached hereto, then all End User orders for Products
received by Distributor and not yet shipped prior to the
effective date of the price increase are not subject to such
price increase. And, if Distributor shall deliver to
Synchronicity a copy of the quotation furnished to its
potential End Users no later than five (5) business days after
the receipt of notice for the price increase and Distributor
has received firm order from such End Users within ninety (90)
days after the effective date of such price increase, ex-price
shall apply to such orders. If there is a price decrease then
all End User orders for a Products received by Distributor and
not yet shipped prior to the effective date of the price
decrease will be subject to such price decrease.


5.4. All payments to Synchronicity shall be in U. S. dollars, and
are due within thirty (30) days after receipt of an invoice
issued by Synchronicity for the full amount owed for the
delivered Products. Except for the withholding income tax
assessed by the Japanese tax officer on the payments by
Distributor to Synchronicity hereunder, payments will be
conducted via cable transfer of funds to the bank account
specified by Synchronicity. Prices listed are exclusive of any
shipping costs, import duties, sales, use, value-added,
privilege, excise, or similar taxes or duties levied upon
Synchronicity, or any other charges or assessments established
by any government agency in Japan, that are based upon
licensing of the Products pursuant to this Agreement, all of
which shall be paid by Distributor. Synchronicity acknowledges
and agrees that the payment pursuant to this Agreement shall
be subject to the withholding income tax based on (i) Sections
161-7-2, 178, 179-1, and 212 of the Income Tax Laws of Japan,
and (ii) Article 14 of the Tax Convention between U.S.A. and
Japan (the "USA/Japan Tax Convention"). Distributor shall (i)
withhold such tax from the payment to Synchronicity, (ii) pay
such tax to the Japanese tax authority on behalf of
Synchronicity, and (iii) transmit to Synchronicity an official
tax receipt issued by the Japanese tax authority after such
tax payment. Synchronicity shall execute and deliver to
Distributor an appropriate application form and Distributor
shall execute such application form and file it with a
competent tax office in Japan in order to reduce an applicable
tax rate of withholding income tax in accordance with the
USA/Japan Tax Convention.


5.5. Distributor shall prepare and maintain complete and accurate
books and records documenting the licensing and servicing of
Products and any compensation received therefrom.


5.6. During the term of this Agreement and for a period of one year
thereafter, Synchronicity shall have the right, at its expense
and upon reasonable notice, to examine or have examined by an
accountant Distributor's books and records in connection with
the distribution of the Products under this Agreement during
the Distributor's normal business hours and without
interrupting Distributor's business no more than once
annually, in order to determine and verify performance under
this Agreement.


Page 5 6
5.7. In the event that Distributor at any time during the term of
this Agreement has outstanding payables to Synchronicity more
than one hundred twenty (120) days past due aggregating to 10%
of the total account balance, Synchronicity may elect, at its
discretion, to send notice of default of this contract to
Distributor and it ...