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AGREEMENT FOR WEB SITE DESIGN AND DEVELOPMENT SERVICES









Selectica, Inc. 2890 Zanker Road, Suite 101 San Jose, CA 95134 Telephone: 408.570.9700 Fax: 408.570.9705



ATTN: Vas Bhandarkar



Effective Date: 7/15/98



This Agreement for Web Site Design and Development Services ("Agreement") is made and entered into as of the Effective Date above, between BMW of North America, Inc. ("BMW") a New Jersey corporation, ha ving offices at 300 Chestnut Ridge Road, Woodcliff Lake, NJ 07675, and Selectica, Inc. ("Selectica"), a California corporation, having offices at 2890 Zanker Road, Suite 101, San Jose, CA 95134.



1. DEFINITIONS.



a. "BMW Virtual Center Application" or "the Application" shall mean an

Internet application created for BMW in accordance with the

Specifications that provides a virtual buying experience on the

Internet for customers.



b. "BMW Materials" shall mean items set forth in Exhibit 5 as used in BMW

Virtual Center Application.



c. "Selectica Materials" shall mean the items set forth in Exhibit 6.



d. "Specifications" shall mean the specifications for the BMW Virtual

Center Application as set forth in Exhibit 9.



e. "Affiliate" of a party shall mean an entity directly or indirectly

controlling, controlled by or under common control with that party

where control means the ownership or control, directly or indirectly,

of more than fifty percent (50%) of all of the voting power of the

shares (or other securities or rights) entitled to vote for the

election of directors or other governing authority, as of the date of

this Agreement or hereafter during the term of this Agreement;

provided that such entity shall be considered an Affiliate only for

the time during which such control exists, or a BMW dealer ("Center"),

or a dealer of an Affiliate ("Affiliate Dealer"). BMW may extend the

benefits granted in this Agreement to its Affiliates (for so long as

they remain Affiliates), provided that all such Affiliates become

bound in writing (for Selectica's benefit) to BMW's obligations under

this Agreement and that BMW assumes full responsibility for compliance

by such Affiliates with such obligations.





[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY

WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH

RESPECT TO THE OMITTED PORTIONS.







2. SCOPE OF SERVICES.



Selectica shall use reasonable efforts to provide, under the provisions of

this Agreement, the services that are mutually agreed upon and described on

Exhibit 1 (Project Description/Scope of Work). BMW understands that the

Application is intended to work with certain BMW Materials and that

Selectica's performance is dependent on BMW's delivery of such BMW

Materials. Accordingly, BMW will provide Selectica with such BMW Materials

and other requested assistance in accordance with the timetable set forth

in the Exhibit 5 and any dates or time periods relevant to performance by

Selectica hereunder shall be appropriately and equitably extended to

account for any delays due to BMW. Subject to the above, Selectica shall

use commercially reasonable efforts to adhere to the deadlines, benchmarks

and milestones set forth in Exhibit 1.



3. EXHIBITS.



Exhibits are numbered for identification and include a complete description

of services to be performed, deliverables or other materials to be

produced, the schedule for completion of each of the foregoing, the

applicable fixed charges, and any additional terms the parties mutually

agree to include. BMW may extend the benefits granted in this Agreement to

its Affiliates (for so long as they remain Affiliates), provided that all

such Affiliates become bound in writing (for Selectica's benefit) to BMW's

obligations under this Agreement and that BMW assumes full responsibility

for compliance by such Affiliates with such obligations.



4. WORK POLICY/PERSONNEL.



a. Each party will designate a Project Manager to serve as the main

contact between them. The scope and specific conduct of Selectica's

services, not outlined in an Exhibit, must be coordinated with BMW's

Project Manager at all times. Selectica shall also use commercially

reasonable efforts to coordinate such efforts with Fallon McElligott's

designated Project Manager. Selectica will use its reasonable efforts

to ensure the continuity of Selectica's employees assigned to perform

services hereunder.



b. On a periodic basis, Selectica will submit written status reports

describing its activities during the preceding period, including: the

current status of activities (with an explanatory narrative when

appropriate). The precise content and format of the status report

shall be determined by the parties subsequent to the execution of this

Agreement. Upon reasonable request and at BMW's expense, Selectica

will meet with BMW management to review the status of Selectica's



c. Selectica personnel will use reasonable efforts to observe and comply

with BMW's reasonable and standard security procedures, rules,

regulations and policies, when working at BMW's site. Selectica will

use its reasonable efforts to minimize any disruption to BMW's normal

business operations at all times. If necessary, BMW will only provide

working space, resources and materials to Selectica. If any Selectica

employee performing services on the BMW site is found to be reasonably

unacceptable to BMW for any reason, BMW shall be the sole judge as to

acceptability of behavior on its site. Unless otherwise agreed to in

writing, neither party will solicit the employment of the other

party's personnel during the term of this Agreement and for a period

of six (6) months thereafter.









d. Selectica agrees and represents that it is an independent contractor

and its personnel are not BMW's agents or employees for federal tax

purposes or any other purposes whatsoever, and are not entitled to any

BMW employee benefits. Selectica assumes sole and full responsibility

for their acts and Selectica and its personnel have no authority to

make commitments or enter into contracts on behalf of, bind or

otherwise obligate BMW in any manner whatsoever. Selectica, and not

BMW, is solely responsible for the compensation of personnel assigned

to perform services hereunder, and payment of worker's compensation,

disability and other income and other similar benefits, unemployment

and other similar insurance and for withholding income and other taxes

and social security.



5. ACCEPTANCE.



The BMW Virtual Center Application shall be subject to a verification of

acceptability by BMW to ensure that it substantially conforms to the

Specifications. If the Application fails to substantially conform to the

applicable Specifications, BMW shall notify Selectica, within ten (10)

business days after receiving the Application, specifying such failures in

sufficient detail to allow Selectica to reproduce them, and Selectica will,

at no additional cost, use commercially reasonable efforts to conform the

Application to the Specifications and the acceptance/rejection/correction

provisions above shall be reapplied; provided that upon the fifth or any

subsequent rejection, either party may at any time thereafter, at its

option and without obligation or liability of any kind, terminate this

Agreement. In addition, Selectica warrants and represents that it will use

commercially reasonable efforts to replace or repair any defect,

malfunction or problem caused by a failure to conform to the Specifications

for a period of one (1) year from the date of delivery of the Application

(i.e. completion of Phase 2B).



6. OWNERSHIP.



a. As between the parties, Selectica exclusively shall have all right,

title and interest (including all patent rights, copyrights, trade

secret rights, mask work rights and other rights throughout the world

(collectively "Intellectual Property Rights")) in the Selectica

Materials and the portions of the Application not owned by BMW as

provided below ("Selectica Inventions"). Except as expressly provided

in this Agreement, BMW will have no right or license in the foregoing.



b. As between the parties, BMW exclusively shall have all right, title

and interest (including all patent rights, copyrights, trade secret

rights, mask work rights and other rights throughout the world

(collectively "Intellectual Property Rights")) in the BMW Materials

and the portion of the Application specifically and exclusively

relevant to BMW products ("BMW Inventions"). Except as necessary to

perform its obligations under this Agreement, Selectica will have no

right or license in the foregoing.



c. The parties hereby make any assignments necessary to accomplish the

foregoing ownership provisions. Each party has and will have

appropriate agreements with all such employees and contractors

necessary to fully effect the provisions of this Section 6.









i. A party being assigned any proprietary right under this Agreement

will have the exclusive right to, and, at such party's expense,

the assigning party agrees to assist such party in every proper

way (including, without limitation, becoming a nominal party) to,

evidence, record and perfect the assignment and to apply for and

obtain recordation of and from time to time enforce, maintain and

defend such proprietary right.



d. BMW shall be granted a license to Selectica intellectual property

rights incorporated into the Application to the extent necessary to

use the Application as contemplated by this Agreement.



e. BMW further acknowledges that nothing herein shall be construed to

restrict, impair or deprive Selectica of any of its rights or

proprietary interest in technology or products that existed prior to

and independent of the performance of services or provision of

materials under this Agreement. In addition, nothing in this Agreement

or otherwise shall be construed to prevent Selectica from using

general know-how, expertise, skill and understanding possessed prior

to or gained during the course of performing services hereunder.



f. Furthermore, in the event that the Selectica Materials developed or

created hereunder is software, Selectica will use all commercially

reasonable efforts with the intent that (i) any new agreements with

third party software developers shall contain provisions which provide

that said software shall function in a manner consistent with said

software's specifications for a period of time at least one (1) year

from the date of acceptance, and that in the event said software does

not function in a manner consistent with said specifications, the

developer shall use all commercially reasonable efforts to make any

and all necessary corrections and modifications during said one year

period without cost or charge to BMW, (ii) said agreements shall also

contain a representation that any such software shall not have a self

help code designed to disable a computer program or an unauthorized

code designed to permit access by an unauthorized person to the

software to harm the software and (iii) said agreements shall also

have a provision that indemnifies both BMW and Selectica for damages

in the event that contractor, person or entity developing or creating

the software hereunder is in breach of any warranty.



7. TRADEMARKS.



Except for the approved creation, production and publication of the subject

matter of the Agreement, Selectica shall not use the trade names,

trademarks, service marks, logos, or any other proprietary designations of

BMW without BMW's prior written consent.



8. INTELLECTUAL PROPERTY LICENSE.



a. Subject to all the terms of this Agreement and payment of all fees,

Selectica grants BMW a worldwide, perpetual, nonsublicensable,

nontransferable right to use the BMW Virtual Center Application in the

nonsource code form provided by Selectica only on the number of

servers specified in Exhibit 7. Notwithstanding the foregoing, BMW may

request any number of additional servers provided it pays the amounts

set forth in Exhibit 7 as "Additional per Server Charge". BMW will

maintain the copyright notice and any other notices that appear on the

Application on any copies and any media. BMW may allow its

distributors access to the Application. BMW will not (and will not

allow any third party to) (i) reverse engineer or attempt to discover







any source code or underlying ideas or algorithms of the Application

(except to the extent that applicable law prohibits reverse

engineering restrictions), (ii) provide, lease, lend, use for

timesharing or service bureau purposes or otherwise use or allow

others to use a Application for the benefit of any third party, or

(iii) use any Application, or allow the transfer, transmission,

export, or re-export of any Application or portion thereof in

violation of any export control laws or regulations administered by

the U.S. Commerce Department, OFAC, or any other government agency.



b. BMW hereby grants Selectica a worldwide, nonsublicensable,

nontransferable license to modify, adapt, and prepare derivative works

of the BMW Materials, or have its contractors do so on its behalf, as

necessary to develop the Application or any additional work requested

by BMW as provided herein and for no other purpose.



9. REPRESENTATIONS AND COVENANTS.



a. Selectica warrants that the Services provided by it as described in

this Agreement will be of professional quality conforming to generally

accepted practices governing the development and design of web sites.



b. In addition to any other express or implied warranty made in this

Agreement, Selectica hereby represents and warrants that as it relates

to the BMW Virtual Center Application provided by Selectica pursuant

to the Services designated in this Agreement:



i. Selectica warrants to BMW that the occurrence of the date January

1, 2000 will not, by itself cause the BMW Virtual Center

Application to materially fail to perform century date change

2000 date conversion and capability (including, but not limited

to date, data century recognition, calculations which accommodate

same century and multi-century formulas and date-values, correct

sorting, ordering and date data interface values that reflect the

century), failure to automatically compensate for and manage and

manipulate data involving dates (including single century

formulas and multi-century formulas) or to otherwise operate in

accordance with the published specifications for such BMW Virtual

Center Application; provided that all other software, hardware

and products used in combination with the BMW Virtual Center

Application properly exchange date data with the BMW Virtual

Center Application.



ii. Notwithstanding anything else contained in this Agreement, this

warranty shall be deemed to be a warranty for current and future

performance and shall apply for as long as maintenance fees are

being paid by BMW. For the purpose of any applicable Statute of

Limitation or Statute of Repose, discovery of any breach of this

warranty shall be deemed to have been made when Selectica has

actually experienced each such breach of this warranty; and



iii. A disclaimer of any other express or implied warranties contained

in this Agreement will not be deemed to be a disclaimer of this







c. Selectica further warrants, covenants and represents that, in its

performance hereunder, that it shall not knowingly introduce, through

data transmission via modem or any other medium, any virus, worm,

trap, trap door, back door, any contaminant, or disabling devices,

including, but not limited to, timer, clock, counter, or other

limiting routings, codes, commands, or instructions intended to damage

or disable the software used by BMW, or other BMW information, or

other BMW property other than in accordance with the specifications

("Harmful Code"). In the event that Selectica introduces Harmful Code,

then, as BMW's sole and exclusive remedy, Selectica shall at no cost

to BMW use reasonable efforts to provide and install a new copy of

software without Harmful Code.



d. Notwithstanding anything else contained in this Agreement, this

warranty shall be deemed to be a warranty for current and future

performance and shall apply until for so long as maintenance fees are

being paid by BMW. For the purpose of any applicable Statute of

Limitation or Statute of Repose, discovery of any breach of this

warranty shall be deemed to have been made when the BMW has actually

experienced each such breach of this warranty.



10. CHARGES AND TERMS OF PAYMENT.



a. The applicable charges shall be specified in Exhibit 7. Unless

otherwise agreed upon by the parties, in no event shall any charges

exceed the charges as they are set forth in the attached Exhibit 7. In

addition, BMW shall remit to Selectica approved out-of-pocket costs

consistent with the procedures set forth in Exhibit 3 (Billing

Procedures) attached hereto. No costs for any out-of-pocket services,

(such services to include, but not necessarily be limited to, the

creation of advertising copy, photography, layout, design,

typesetting, or any other services related to, or necessary to

support, Selectica's duties and responsibilities as described

hereunder), rendered by Selectica shall be subject to any mark-up or

increase. Notwithstanding the above, if there is a conflict between

this Agreement and the BMW Billing Procedures, the terms of this

Agreement shall supersede and govern.



b. BMW will pay all taxes levied against or upon the services provided

hereunder, or arising out of this Agreement, exclusive, however, of

taxes based on Selectica's income, which shall be paid by Selectica.

BMW agrees to pay directly any tax for which it is responsible or will

reimburse Selectica upon receipt of proof of payment.



c. Selectica will use all commercially reasonable efforts to maintain

complete and accurate accounting records in connection with services

performed and materials provided hereunder, in accordance with

generally accepted accounting principles, to substantiate its charges.

BMW shall have the right to appoint an independent certified public

accountant, who is not compensated based on the results of the audit

and who is acceptable to Selectica (which acceptance shall not be

unreasonably withheld), to inspect the records of Selectica in order

to verify the charges set forth in the accounting records. Such audit

may only be performed once a year, upon reasonable prior notice and

during regular business hours and at BMW's expense. Unless necessary

to establish in a court of law BMW's right to payment of fees

hereunder, BMW's auditor shall hold all information obtained in strict

confidence, shall not disclose such information to any other person or

entity without Selectica's prior written consent and shall not

disclose to BMW any information regarding Selectica's business other

than any noncompliance by Selectica with the fee payment provisions

hereof. The terms of this provision shall survive the termination of

this Agreement for a period of five (5) years.







d. Each payment pursuant to this Agreement will be made in U.S. dollars

in and from the United States and will be made no later than thirty

(30) days from the date of invoice sent to BMW on or after the

occurrence of the event specified in Exhibit 7 for which payment is



11. WARRANTIES.



a. Selectica warrants that: (i) it has the authority and the right to

enter into this Agreement, to perform services and provide the BMW

Virtual Center Application hereunder, and that its obligations

hereunder are not in conflict with any other Selectica obligations;

(ii) all services will be performed in a competent and professional

manner, and will substantially conform, in all material respects, to

BMW's requirements expressly set forth in this Agreement; (iii) to its

knowledge, neither the BMW Virtual Center Application, nor the

performance of any services by Selectica infringe upon or violate the

rights of any third party and to its knowledge, BMW shall receive free

and clear title to all deliverables assigned to it pursuant to Section

6; and (iv) at the time of acceptance, the BMW Virtual Center

Application will substantially conform to the Specifications and as

BMW's sole and exclusive remedy for a breach of the foregoing,

Selectica shall use all commercially reasonable efforts to correct and

repair, at no cost to BMW, any defect, malfunction or non-conformity

that prevents the BMW Virtual Center Application from conforming to

the Specifications.



b. Furthermore, Selectica warrants and represents that it shall not use

the BMW Materials which it develops for BMW hereunder in the use and

development of any software and software code for any other

manufacturer or distributor of automobiles, motorcycles or

recreational vehicles.



c. Any warranty in this Agreement shall not apply to: (i) altered or

damaged or any portion of the Application incorporated with or into

other software; (ii) the Application if it was subjected to

negligence, abuse or misapplication by BMW.



d. EXCEPT AS EXPRESSLY PROVIDED HEREIN, SELECTICA MAKES NO WARRANTIES TO

ANY PERSON OR ENTITY WITH RESPECT TO THE BMW VIRTUAL CENTER

APPLICATION, SELECTICA MATERIALS OR ANY DELIVERABLE OR ANY SERVICES OR

LICENSES AND DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING WITHOUT

LIMITATION WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR

PURPOSE AND NON-INFRINGEMENT.



12. TERM AND TERMINATION.



a. This Agreement shall commence as of the Effective Date and shall

continue in full force and effect thereafter unless and until Exhibit

1 has been terminated or Milestone 5 has been completed, or as

otherwise provided hereunder.



b. In the event of any material breach of this Agreement by either party,

the other party may terminate this Agreement, by giving thirty (30)

days written notice to such other party; provided, however, that any

such termination shall not be effective if such other party has cured

the breach of which it has been notified prior to the expiration of

said thirty (30) days.



c. Subject to Section 12(d), upon a
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