EXHIBIT 10.4.14
March 25, 1999
Xx. Xxxxxx Xxxxxx
Senior Vice President
Communications Products Division
Lotus Development Corporation
One Xxxxxxx Park
Cambridge, MA 02142-1245
Re: Royalty Rate for Promotional Bundles in accordance with Section 5.4 of the
NetObjects License Agreement, dated March 18, 1997, as amended, between
NetObjects and IBM.
Dear Xxxxxx:
Reference is made to the NetObjects License Agreement, dated March 18, 1997, as
amended, between NetObjects, Inc. ("NetObjects") and International Business
Machines Corporation ("IBM"), (the "Agreement"). Capitalized terms used in this
letter ("Letter"), and not otherwise defined, shall have the meaning given to
them in the Agreement. The effective date of this Letter is January 1, 1999.
Pursuant to Section 5.4 of the Agreement, IBM may request a lower royalty for
the Licensed Work when a licensing transaction requires a substantial discount.
IBM and NetObjects agree that during the time period between January 1, 1999 and
December 31, 1999, ("Promotion Period"), a lower royalty described in Section 4
below will apply instead of the per copy Royalty Rate listed in Section 5 of
Exhibit B of the Agreement for any distribution of the Promotional Bundles
(defined in Section 2 below) by IBM and its Subsidiaries.
1. Licensed Works:
NetObjects Fusion (any version shipping during Promotion Period); and
NetObjects ScriptBuilder (any version shipping during Promotion Period).
2. Promotional Bundles: Studio Bundles and Server Bundles and Upgrade Bundles
are, collectively, Promotional Bundles.
a. Studio Bundle means the product tentatively titled "Lotus Domino
Application Studio" consisting of Licensed Works listed in Section 1 above
Bundled with other software, including NetObjects BeanBuilder and Lotus Domino
Designer or any future update, version, successor product or derivative work of
Lotus Domino Designer or NetObjects BeanBuilder.
b. Server Bundle means the Licensed Works listed in Section 1 above
Bundled with NetObjects BeanBuilder and Lotus Domino Server, or any future
update, version, successor product or derivative work of Lotus Domino Server or
NetObjects BeanBuilder.
c. Upgrade Bundle means the Bundle consisting of the software contained
in the Studio Bundle, except Lotus Domino Designer, and that is sold to
customers that had previously
purchased Lotus Domino Designer or Lotus Domino Server or some other
predecessor products, usually with subscription maintenance.
3. Promotion Period: January 1, 1999 - December 31, 1999
4. Royalty:
a. Studio Bundle
The royalty payment for the Studio Bundle shall be paid against revenue recorded
by IBM in a royalty payment quarter in accordance with Section 5.6 of the
Agreement, as follows:
CHART 1: Cumulative Royalties paid by IBM for Promotional Bundles And
Corresponding Royalty Rate for the Studio Bundle
BAND CUMULATIVE ROYALTY ACCRUED FOR ROYALTY (% OF BUNDLE ASP) FOR
PROMOTIONAL BUNDLES DURING STUDIO BUNDLE
PROMOTION PERIOD
Band 1. $1 - $1,125,000 9.7%
Band 2. $1,125,000 - $2,000,000 7.56%
Band 3. over $2,000,000 4.05%
The royalty payment for the Studio Bundle shall be 9.7% of the revenue
received by IBM and its Subsidiaries for the Studio Bundles in a given
calendar quarter, less any returns and promotional discounts ("Bundle ASP")
until $1,125,000 in cumulative royalty payments for Promotional Bundles has
accrued during the Promotion Period ("Band 1"). Thereafter, until an
additional $875,000 in cumulative royalty payments for Promotional Bundles
has accrued (for a total cumulative royalties of $2,000,000) during the
Promotion Period ("Band 2"), the royalty payment for the Studio Bundle shall
be 7.56% of Bundle ASP. For all Studio Bundles sold thereafter, until the
end of the Promotion Period ("Band 3"), the royalty payment for Studio
Bundles will be 4.05% of Bundle ASP. Although royalties are to be paid to
NetObjects on a quarterly basis, the cumulative royalty payments (Band 1,
Band 2 and Band 3) are aggregated across the Promotion Period.
Following each calendar quarter during the Promotion Period, the per unit
royalty accrued for the Studio Bundles distributed during that quarter will
be calculated in accordance with the Per Unit Formula set forth below ("Per
Unit Royalty"). If the Per Unit Royalty accrued for the Studio Bundles
distributed during that quarter is found to vary by more than $7 per unit
from the Comparison Royalty per unit listed in Chart 2 below (for example, in
a given calendar quarter, for Band 1, the Per Unit Royalty is either higher
than $52 or lower than $38), a new mutually-agreed upon royalty rate for the
Studio Bundles will be expressed as a percentage of Bundle ASP and set forth
in a separate letter signed by IBM and NetObjects within two months after the
end of the quarter ("New Royalty"), and the New Royalty will apply for the
Studio Bundles sold during that quarter instead of the royalty listed in
Chart 1
above. The New Royalty will apply for future quarters during the Promotion
Period, unless otherwise stated in the letter signed by IBM and NetObjects.
If a New Royalty is not set forth in a letter signed by NetObjects and IBM
within the aforementioned two-month period, the New Royalty will be equal to
the Comparison Royalty listed in Chart 2 below. The "Per Unit Formula"
derives the per unit royalty for Studio Bundles by dividing the sum of the
royalties earned by NetObjects for Studio Bundles during the calendar quarter
by the number of units of Studio Bundles distributed by IBM and its
Subsidiaries in that calendar quarter. i.e., Per Unit Royalty for a Studio
Bundle = (Bundle ASP * Royalty listed in Chart 1)/number of units of Studio
Bundles.
CHART 2: Cumulative Royalties paid by IBM for Promotional Bundles And
Comparison Royalty per unit
BAND CUMULATIVE ROYALTY ACCRUED FOR COMPARISON ROYALTY PER UNIT
PROMOTIONAL BUNDLES DURING PROMOTION
PERIOD
Band 1. $1 - $1,125,000 $45.00
Band 2. $1,125,000 - $2,000,000 $35.00
Band 3. over $2,000,000 $18.75
b. Server Bundle. The royalty payment for the Server Bundle shall be set forth
in a separate written document signed by IBM and NetObjects, and, like the
Studio Bundle pricing in Section 4a, shall be based upon a percentage of the
revenue received by IBM and its Subsidiaries for the Server Bundle.
c. Upgrade Bundle Royalties: For purposes of this section 5, "Upgrade ASP"
shall be defined as the revenues received by IBM and its Subsidiaries for the
Upgrade Bundles during a calendar quarter, less any returns or discounts. The
"Per Unit Upgrade ASP" shall mean Upgrade ASP for a given calendar quarter
divided by the number of Upgrade Bundles distributed by IBM or its Subsidiaries
during that quarter. The "Per Unit Bundle ASP" shall mean Bundle ASP for a
given calendar quarter divided by the number of Studio Bundles distributed by
IBM or its Subsidiaries during the quarter. The "Upgrade Rate" shall be derived
by multiplying the royalty percentage for Studio Bundles in Chart 1 for the
applicable Band by the quotient of the Per Unit Upgrade ASP divided by the Per
Unit Bundle ASP. The royalties to be paid by IBM to NetObjects for Upgrade
Bundles will be equal to the Upgrade Rate multiplied by Upgrade ASP. An
example of the calculation of the royalty payment for an Upgrade Bundle is
provided below:
Example:
Upgrade Rate = Per Unit Bundle ASP / Per Unit Upgrade ASP * applicable royalty
for Studio Bundles in Chart 1
Royalty Rate for Upgrade Bundles = Upgrade Rate * Upgrade ASP
Upgrade ASP = $400
Bundle ASP = $550
applicable royalty rate = 7.56%
Upgrade ASP = $200,000.00
Upgrade Rate = $550 / $400 * 7.56 = 10.40%
Royalty for Upgrade Bundles = $200,000.00 * 10.40% = $20,800.00
The royalties paid by IBM or its Subsidiaries to NetObjects for units sold as
part of the "Upgrade Bundle" shall apply towards the aggregate royalties paid by
IBM to NetObjects for the purposes of calculating royalties due as set forth
above in Section 4 or under this section.
5. Marketing: The parties shall develop a joint marketing plan due on the
first customer ship of the Studio Bundle. The Lotus marketing contact is Xxxx
Xxxxxxxxxx and the NetObjects marketing contact is Xxxxxxx Xxxxxxxxxx. On or
before July 1, 1999, the parties shall review the sales of the Studio Bundle and
plan additional marketing efforts, if necessary.
6. Software: Lotus will be responsible for producing the first "Gold" CD for
the Studio Bundle containing NetObjects Fusion 4.1 and 3.01, NetObjects
ScriptBuilder 3.01 and NetObjects BeanBuilder 1.0 and CD artwork ("Gold CD").
Subsequently thereafter, whenever updated versions or releases of the
Licensed Works or updated versions or releases of NetObjects BeanBuilder
become generally available to the public ("Public Availability Date"),
NetObjects shall provide to Lotus a single Gold CD containing the most recent
versions and releases of the Licensed Works listed in Section 1 above along
with the most recent version and release of NetObjects BeanBuilder within
fifteen (15) days of the Public Availability Date. The Gold CDs provided by
NetObjects will contain artwork for each of the Licensed Works and NetObjects
BeanBuilder and will have a unified install experience for the end user which
guides them through installation of the Licensed Works, NetObjects
BeanBuilder and documentation without requiring the user to browse
directories on the Gold CD directly. The Licensed Works and NetObjects
BeanBuilder on the Gold CD will be delivered by NetObjects in such a way that
Lotus will not be required to deliver individual product serial numbers for
the Licensed Works to end users. Lotus will be responsible for duplication
of the Gold CD.
7. Distribution of NetObjects BeanBuilder: Any distribution of NetObjects
BeanBuilder by NetObjects to IBM or by IBM to a third party in conjunction with
Licensed Works as part of Studio Bundle or Server Bundle under this Letter
("BeanBuilder Distribution") shall constitute a distribution of NetObjects
BeanBuilder by IBM (and not a distribution of NetObjects BeanBuilder by
NetObjects) and thus this Letter shall not obligate NetObjects to pay royalties
to IBM for a BeanBuilder Distribution under the agreement number 4998S20724
entered into between IBM and NetObjects, Inc. on September 14, 1998.
8. Agreement: The terms of the Agreement remain in full force and effect and
shall apply to the Promotional Bundles, except as expressly provided above. In
the event of any conflict between the terms of this letter and the terms of the
Agreement, the terms of this letter shall control with respect to the
Promotional Bundles set forth above.
Please sign below to indicate that the terms of this letter accurately reflect
our agreement for these Promotional Bundles.
Sincerely,
Xxxxx Xxxxx
CEO, NetObjects, Inc.
ACCEPTED AND ACKNOWLEDGED
/s/ Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
Senior Vice-President
Lotus Development Corporation
Date: 3/25/99
