1
EXHIBIT 10.1
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
FOURTH AMENDMENT TO PROGRESS
SOFTWARE APPLICATION PARTNER AGREEMENT
FOURTH AMENDMENT to the Progress Software Corporation Application
Partner Agreement is effective as of April 1, 1998 ("Effective Date"), by and
between Progress Software Corporation, a Massachusetts corporation with its
principal place of business at 14 Oak Park, Bedford, Massachusetts 01730 ("PSC")
and Security Dynamics Inc., a Massachusetts corporation with its principal place
of business at 20 Crosby Drive, Bedford, Massachusetts 01730 ("AP").
WHEREAS, PSC and AP entered into a Progress Software Application
Partner Agreement effective as of December 5, 1994 (the "Agreement"); and
WHEREAS, PSC and AP previously amended the Agreement by entering into
the Progress Software Application Partner Agreement Addendum effective as of
December 5, 1994 (the "Addendum") and a subsequent amendment to the Agreement
dated as of October 19, 1995 (the "Amendment");
WHEREAS, PSC and AP entered into a Second Amendment to the Agreement
dated as of November 29, 1995 (the "Second Amendment") which completely
superseded the terms and conditions of the earlier Addendum and Amendment and
specified new special pricing and distribution terms and conditions in an
Attachment A relating to certain PSC products distributed by AP or AP's
distributors in conjunction with AP's PROGRESS(R)-based applications; and
WHEREAS, PSC and AP entered into a Third Amendment to the Agreement
dated as of November 15, 1996 (the "Third Amendment") specifying certain
additional modifications to the terms and conditions of the Agreement and
replacing the Attachment A incorporated by reference into the Second Amendment
with a new Attachment A including modified special pricing and distribution
terms and conditions relating to certain PSC products distributed by AP or AP's
distributors in conjunction with AP's PROGRESS(R)-based applications;
WHEREAS, PSC and AP desire to make additional modifications to the
terms and conditions of the Agreement and to the special pricing and
distribution terms and conditions set forth in Attachment A to the Third
Amendment;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
1. The terms and conditions of Attachment A to the Third Amendment
(hereinafter referred to as "Attachment A") shall continue in force
during the term of this Fourth Amendment subject to the following:
A. The purpose of Section 1 of Attachment A is to specify the PSC
products which AP has the right to distribute to accomplish
the AP customer configuration for AP's PROGRESS-based
application. The
2
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
identification of the PSC products included in the AP customer
configuration was omitted from Section 1 of Attachment A.
AP represents that the PSC products AP has been deploying as
part of the AP customer configuration for AP's PROGRESS-based
application during the term of the Third Amendment consists of
the following PSC products: ProVISION, E/SQL, Enterprise
Database Server, Server Networking, Client Networking, or
subset thereof. During the term of this Fourth Amendment, the
PSC products which AP may deploy as part of the AP customer
configuration will continue to be limited to the PSC products
referenced above.
As part of PSC's development project code named "Sky Walker,"
PSC is developing a new version of the Enterprise Database
Server product. Section 1 of Attachment A specifies that AP
will be entitled to receive updates of the PSC products
included in the AP customer configuration as they become
available. The new version of the Enterprise Database Server,
once generally available, will be considered an "update" for
the purposes of Section 1 of Attachment A. If AP offers to
upgrade existing ACE Server application licenses by offering
to replace the Enterprise Database Server product with the new
version (once generally available), or otherwise offers to
upgrade the ACE Server application, and charges its AP
customers an upgrade fee for such upgrades, the upgrade fees
will be subject to the percentage royalty provisions set forth
in Sections 3 and 4 of Attachment A, as modified by paragraphs
(F) and (G) below, respectively.
B. During the term of this Fourth Amendment, the special pricing,
production, and distribution terms and conditions set forth in
Attachment A shall apply solely with respect to the PSC
products listed in paragraph (A) above distributed only in
conjunction with AP's ACE Server application or any future
releases of the ACE Server application known by any other name
which contain substantially the same functionality as the ACE
Server application.
C. Section 7 of Attachment A provided that PSC would grant AP a
development license, as defined therein, for the SINIX
operating system platform subject to a license fee of [**],
and a maintenance fee of [**] of such license fee. AP did not
purchase such development license for the SINIX operating
system platform during the term of the Third Amendment. PSC no
longer supports the development license on the SINIX operating
system platform, therefore, this option will no longer be
available to AP during the term of the Fourth Amendment.
-2-
3
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
D. Exhibit A to Attachment A specifies the generally available
operating system environments for the PSC products identified
in paragraph (A) above. The PSC products specified in
paragraph (A) above are no longer supported on the SINIX
operating system platform. The SINIX operating system shall be
deemed to be stricken from said Exhibit A.
E. The price list for AP's ACE Server application as set forth in
Section 2 of Attachment A has been updated by AP. A copy of
the current price list in effect as of January 1, 1998 is
attached hereto. All prices in the price list attached hereto
are in U.S. dollars. Section 2 of Attachment A also refers to
an Exhibit B containing AP's discount schedule for the ACE
Server application. AP has eliminated the discount schedule
set forth in said Exhibit B, and no longer has a standard
discount schedule for the ACE Server application. AP shall
notify PSC in writing of any changes made by AP to the ACE
Server price list and/or any new discount schedule(s)
established by AP from time to time during the term of this
Fourth Amendment.
F. Section 3 of Attachment A specifies the method for calculating
the license fee owed to PSC for each ACE Server license
deployed with certain PSC products, as described in paragraph
(A) above. The formula for calculating PSC's license fee shall
remain the same as set forth in Section 3 of Attachment A,
except that the royalty rate of [**] referenced in the first
paragraph of Section 3 of Attachment A shall be reduced to
[**]. Also, the royalty rate increase referenced at the end of
Section 3 of Attachment A as being an increase from [**] to
[**] shall be modified to reflect an increase from [**] to
[**]. The effective date of the license royalty rate reduction
described above shall be subject to the terms and conditions
set forth in paragraph (I) below.
G. Section 4 of Attachment A specifies the method for calculating
the maintenance fees due to PSC for each AP customer obtaining
a license to use PSC products in conjunction with AP's ACE
Server application, as well as certain terms and conditions
pertaining to the scope of maintenance services to be provided
by PSC in consideration of such maintenance fees. The terms
and conditions of Section 4 of Attachment A shall remain the
same except that the maintenance royalty rate of [**]
referenced in Section 4 of Attachment A shall be reduced to
[**]. The effective date of the maintenance royalty rate
reduction described above shall be subject to the terms and
conditions set forth in paragraph (I) below.
-3-
4
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
H. Section 5 of Attachment A specifies AP's reporting
requirements. The terms and conditions contained in said
Section 5 shall remain the same except that AP shall be
required to provide PSC with the required reports on a monthly
basis rather than a quarterly basis. The reports for each
month will be due by the thirtieth (30th) day of the following
month and shall cover copies of the ACE Server application
licensed, upgraded and/or maintenance collected directly by AP
or one of its authorized distributors or value-added resellers
during the month which is the subject of the report. Payment
in full for license and maintenance fees owed to PSC for the
prior month is due with these reports.
I. In accordance with Section 12 of Attachment A, AP paid to PSC
a non-refundable advance payment of $3.75 million. In exchange
for such payment, PSC provided AP with a $3.75 million
allowance to be used against license and initial maintenance
fees for deployment licenses incurred on or after the
effective date of Attachment A. Pursuant to said Section 12,
once AP completely used the $3.75 million allowance, the
royalty percentage rate used to calculate the deployment
license fees owed to PSC pursuant to Section 3 of Attachment A
was to increase from [**] to [**].
The above-mentioned royalty increase shall not occur upon
exhaustion of the $3.75 million allowance. AP shall pay to PSC
another nonrefundable advance payment in the amount of $6
million in accordance with the following payment schedule:
$1,650,000 due by May 31, 1998
$1,650,000 due by June 30, 1998
$1,700,000 due by July 31, 1998
$1,000,000 due by November 1, 1998
In exchange for such payment, PSC will provide AP with a $6
million allowance against license and maintenance fees for
deployment licenses subject to the following conditions:
(i) If AP has a remaining balance of the $3.75 million
allowance as of the Effective Date of this Fourth
Amendment, then the license royalty rate of [**] and
the maintenance royalty rate of [**] originally
referenced in Sections 3 and 4 of Attachment A
respectively shall remain in effect until the $3.75
million allowance is completely exhausted.
Immediately thereafter, the $6 million allowance
shall be used to offset license and maintenance fees
for deployment licenses and the license royalty rate
referenced in Section 3 of Attachment A shall, in
accordance with paragraph (F) above, be reduced from
[**]
-4-
5
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
[**] to [**] and the maintenance royalty rate
referenced in Section 4 of Attachment A shall, in
accordance with paragraph (G) above, be reduced from
[**] to [**].
(ii) If AP exhausted the $3.75 million allowance prior to
the Effective Date of this Fourth Amendment, PSC
shall, rather than invoicing AP for any excess
license and maintenance fees, reduce AP's $6 million
allowance by the amount of such fees. Notwithstanding
the foregoing, any license and maintenance fees owed
to PSC for copies of the ACE Server application
licensed or upgraded, or for maintenance collected,
prior to the Effective Date of this Fourth Amendment
shall be calculated using the license royalty rate of
[**] and the maintenance royalty rate of [**]
originally referenced in Sections 3 and 4 of
Attachment A, respectively. If AP exhausted the $3.75
million allowance as described in this subparagraph
(ii), then, as of the Effective Date of this Fourth
Amendment, the license royalty rate referenced in
Section 3 of Attachment A shall, in accordance with
paragraph (F) above, be reduced from [**] to [**] and
the maintenance royalty rate referenced in Section 4
of Attachment A shall, in accordance with paragraph
(G) above, be reduced from [**] to [**].
Once AP has completely used all of the $6 million allowance
mentioned above, the royalty percentage rate used to calculate
the deployment license fees owed to PSC under Section 3 of
Attachment A shall be increased from [**] to [**] for the
remainder of the term of this Fourth Amendment.
J. The provision set forth in Section 14 of Attachment A allowing
AP to use up to [**] of the pre-paid product/maintenance
allowance for paying the education service fees described in
said Section 14 shall not apply with respect to the prepayment
described in paragraph (I) above.
2. The terms and conditions pertaining to the limit on PSC's liability
under the Agreement shall remain the same as specified in Section 4 of
the Third Amendment, except that the cap on PSC's aggregate liability
under the Agreement shall be increased such that the limit is the
greater of (a) [**] or (b) the total amount of royalties reported by AP
to PSC for PSC products delivered to AP customers during the ninety day
period immediately prior to the date the claim is made by AP.
-5-
6
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
3. The terms and conditions pertaining to the limit on AP's liability
under the Agreement shall remain the same as specified in the second
paragraph of Section 6 of the Second Amendment, except that the cap on
AP's aggregate liability under the Agreement shall be increased such
that the limit is the lesser of (a) the sum of the aggregate amounts
paid by AP under this Agreement and any outstanding amounts owed by AP
to PSC under this Agreement or (b) [**].
4. The term of this Fourth Amendment shall commence as of the Effective
Date defined above, and shall continue in force until the expiration
date as specified in Section 6 of the Third Amendment.
5. Except as may be modified or amended by this Fourth Amendment, the
terms and conditions of the Agreement (as previously amended by the
Third and Second Amendments thereto) shall remain in effect until the
termination of the Agreement. No other modifications or additions are
made to the Agreement. The Agreement, Second Amendment, Third Amendment
and this Fourth Amendment constitutes the entire agreement between the
parties with respect to the subject matter hereof. In the event of
conflict among the terms and conditions of the Agreement, the Second
Amendment, the Third Amendment or this Fourth Amendment, the order of
precedence shall be: first, this Fourth Amendment, second, the Third
Amendment, third, the Second Amendment (which completely superseded the
earlier Addendum and Amendment) and fourth and finally, the Agreement.
IN WITNESS WHEREOF, this Fourth Amendment has been executed under seal
for and on behalf of each of the parties hereto by their duly authorized
representative as of the date first set forth above.
PROGRESS SOFTWARE CORPORATION SECURITY DYNAMICS, INC.
By: /s/ DAVID P. VESTY By: /s/ A.W. COVIELLO JR.
----------------- ---------------------
Name: David P. Vesty Name: A.W. Coviello Jr.
Title: Vice President Title: COO
-6-