Exhibit 10.1
 
LOGO [g57909g04z38.jpg]
 
July 10, 2002
 
Primus Knowledge Solutions, KK
Ebisu Prime Sq. Tower
1-1-39 Hiroo, Shibuya-ku
Tokyo, Japan 150
 
Re:
 
Addendum Two to Amended and Restated Distribution Agreement (“Distribution
Agreement”), effective March 31, 2000, as amended, between Primus Knowledge
Solutions, Inc. (“Primus”) and Primus Knowledge Solutions, KK. (“Distributor”)

 
Dear Sasaki-san:
 
We have recently discussed a number of issues with respect to our Agreement.
This Addendum Two will clarify and memorialize our agreement on these points.
Except as otherwise expressly defined in this Amendment, capitalized terms shall
have the meanings ascribed to them in the Distribution Agreement.
 
Therefore, we hereby agree to amend our Distribution Agreement as follows:
 
1.
 
Table B “Software Distribution Fees and Support and Maintenance Fees” is hereby
deleted and replaced with Table B attached to this Addendum, effective as of
April 1, 2002 for Software Distribution Fees accrued after that date and, with
respect to Support and Maintenance Fees accruing after that date, all renewals
accruing before December 31, 2002, the payment amount shall remain at 53% of the
amount Distributor bills on those renewals and for all new customer Support and
Maintenance Fees accruing after that date and all renewals accruing after
December 31, 2002, the new rate in Table B shall apply.

 
2.
 
A new Section 7.10 is added to the Distribution Agreement as follows:

 

 
7.10
 
Guaranteed Minimum Software Distribution Fees.    Each year, Distributor shall
pay Primus at least $1,000,0000 in non-refundable, guaranteed minimum Software
Distribution Fees subject to the schedule and structure outlined in the table
below (the “Guaranteed Annual Minimum”) For purposes of determining the
Guaranteed Annual Minimum or any payment adjustments made in relation thereto,
all amounts listed in this section are based on the share of Software
Distribution Fees due Primus, net of (or post deduction) of the applicable
withholding tax deductions.

 
(1)  The Initial Period—Amendment Date to March 31, 2004.    From April 1, 2002
until March 31, 2004 (the “Initial Period”), the Guaranteed Annual Minimum is
measured by two semi-annual periods, each applied over a six-month period,
(“Bi-Annual Baseline(s)”) and, within each Bi-Annual Baseline, two fixed
quarterly
 

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www.primus.com

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minimums (“Quarterly Benchmark(s)”). Each six-month Bi-Annual Baseline period is
a “Bi-Annual Baseline Period.” Distributor will pay Primus the difference
between the Software Distribution Fees actually accrued during any respective
period and the applicable minimums of the Bi-Annual Baseline or Quarterly
Benchmark. During the Initial Period, each Quarterly Benchmark is $100,000, and
the Bi-Annual Baselines are $400,000 in the first bi-annual period covering
April 1st through September 30 (the “First Bi-Annual Baseline”) and $600,000 in
the second bi-annual period covering October 1 through March 30 (the “Second
Bi-Annual Baseline”).
 
(2)  Adjustments Against Quarterly Benchmarks.    For purposes of calculating
amounts owed, if any, after any given quarter, the first quarter of each
Bi-Annual Baseline Period is referred to as a “Q-A Period” and the second
quarter of each Bi-Annual Baseline Period is a “Q-B Period.”
 
(2)(1)  Shortfalls and Excess Amounts in a Q-A or Q-B Period.    Distributor
will pay Primus the shortfall between the Software Distribution Fees accrued in
any given Q-A or Q-B Period and the applicable Quarterly Benchmark (a “Quarterly
Adjustment”). Any Software Distribution Fees accrued in a Q-A Period in excess
of the Quarterly Benchmark may not be carried over to the Q-B Period for
purposes of measuring against the Quarterly Benchmark in the Q-B Period.
Shortfalls in a Q-B Period will require a Quarterly Adjustment. However,
Software Distribution Fees accrued in a Q-A Period that exceed the Q-A Period’s
Quarterly Benchmark will apply for purposes of measuring against the Bi-Annual
Baseline at the end of the Q-B Period. Thus shortfalls in a Q-B Period will
result in a Quarterly Adjustment for the Q-B Period, but for purposes of
measuring against the Bi-Annual Baseline, the excess amount of accrued Software
Distribution Fees in the Q-A Period will be added to the Quarterly Adjustment
paid for Q-B Period to determine whether Distributor has met the Bi-Annual
Baseline. In such cases, the total cumulative payments made by Distributor to
Primus may exceed the amount of the Bi-Annual Baseline. Quarterly Adjustments
are due within 75 days of the end of the applicable quarter and shall not be
considered purchases of additional Software or any other form of credit.
 
(3)  Adjustments Against Baseline.    Bi-Annual Baselines represent the total
amount of Software Distribution Fees accrued during any six-month Bi-Annual
Baseline Period. Distributor will pay to Primus the shortfall between the
Software Distribution Fees actually accrued during any Bi-Annual Baseline Period
and the applicable Bi-Annual Baseline (each of such payments called a “Baseline
Adjustment”). During the Bi-Annual Baseline Period, accrued Software
Distribution Fees that exceed an applicable Bi-Annual Baseline cannot be carried
forward and applied to the next Bi-Annual Baseline Period, nor can such excess
be retroactively applied to reduce a previous Baseline Adjustment. Baseline
Adjustments are due within seventy-five (75) days of the applicable Bi-Annual
Period and shall not be considered purchases of additional Software or any other
form of credit.

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Example.    By way of example only, if the Software Distribution Fees accrued
during the Q-A Period of the First Bi-Annual Baseline Period is $380,000 (thus
meeting the applicable Quarterly Benchmark for that period) and $80,000 in the
Q-B Period, Distributor will pay a Q-B Quarterly Adjustment of $20,000. The
cumulative total payments made by Distributor for the First Bi-Annual Baseline
Period will equal $480,000 and the excess of $80,000 paid for the First
Bi-Annual Baseline Period will not be carried over into the Q-A Period of the
Second Bi-Annual Period.
 
(4)  Post-Initial Period.    After the Initial Period and continuing
indefinitely during the term of the Distribution Agreement, the Guaranteed
Annual Minimum will be measured and paid solely on a quarterly basis. For each
of the first, second and third quarters, the minimum quarterly Software
Distribution Fees accruable to Primus will be $200,000, and in the fourth
quarter, $400,000 (each a “Fixed Quarterly Minimum”). Payment of Software
Distribution Fees during a quarterly period that exceed an applicable Fixed
Quarterly Minimum cannot be carried forward and applied to the next Fixed
Quarterly Minimum, nor can such excess be retroactively applied to reduce a
previous Fixed Quarterly Adjustment: in any quarter, if the Software
Distribution Fees actually accrued to Primus are less than a Fixed Quarterly
Minimum, Distributor will pay the difference as a quarterly license fee
adjustment (“Fixed Quarterly Adjustment”). Fixed Quarterly Adjustments are
payable within seventy-five (75) days of the end of the applicable quarter and
shall not be considered purchases of additional Software or any other form of
credit.

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The following table depicts the schedule and structure of the Guaranteed Annual
Minimum Payment:
 

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Guaranteed Annual Minimum Payment Schedule and Structure

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Initial Period
April 1, 2002 ~ March 30, 2004
  
Post-Initial
April 1, 2004 ~

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Q-A Periods ending June 30
 
Quarterly Benchmark: $100,000
 
April 1
 
First Bi-Annual
Baseline:
  
Fixed Quarterly Minimum:
 
$200,000

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Shortfalls paid as Quarterly Adjustment within 75 days of end of Q-A Period;
excess carried over for determining Bi-Annual Baseline
 
 
$400,000
       
Shortfalls paid as Fixed Quarterly Adjustment within 75 days of last quarter

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Q-B Periods ending Sept. 30
 
Quarterly Benchmark: $100,000
 
Sept. 30

  
Fixed Quarterly Minimum:
 
$200,000

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Shortfalls paid as Quarterly Adjustment within 75 days of end of Q-B Period; no
excess carried back for Q-A Period Adjustment
 
Shortfalls paid as Baseline Adjustment within 75 days of end of Q-B Period; no
excess carried forward into Second Bi-Annual Baseline Period
       
Shortfalls paid as Fixed Quarterly Adjustment within 75 days of last quarter

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Q-A Periods Ending Dec. 30
    
Quarterly Benchmark: $100,000
 
Oct. 1
 
Second Bi-Annual
Baseline:
  
Fixed Quarterly Minimum:
 
$200,000

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Shortfalls paid as Quarterly Adjustment within 75 days of end of Q-A Period;
excess carried over for determining Bi-Annual Baseline
 
 
$600,000
       
Shortfalls paid as Fixed Quarterly Adjustment within 75 days of last quarter

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Q-B Periods Ending March 30
    
Quarterly Benchmark:
$100,000
 
March 30

  
Fixed Quarterly Minimum:
 
$400,000

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Shortfalls paid as Baseline Adjustment within 75 days of end of Q-B Period; no
excess carried forward into next, First Bi-Annual Baseline Period
       
Shortfalls paid as Fixed Quarterly Adjustment within 75 days of last quarter

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3.
 
The parties understand and agree that Distributor will be taking on additional
product development responsibilities in accordance with product plans that may
be determined from time to time. The parties will meet periodically to discuss
in good faith future development plans and allocation of resources. All such
work performed by Distributor shall be owned by Primus under Section 2.3.2 of
the Distribution Agreement and Distributor will make periodic deliveries of new
versions of Software and derivatives source code and programmer’s notes to
Primus upon Primus’ request.

 
4.
 
The parties agree that the eServer Email Assist program is a module to eServer
and is included in the list of Products under the Distribution Agreement.

 
5.
 
In consideration of the Distributor retaining a greater portion of = support and
maintenance fees from its customers and given that Distributor will be taking a
more active role in product development, Distributor will develop a program for
training, developing and maintaining a support organization at a level so
Distributor can provide at least tier one support with personnel knowledgeable
in the use and implementation of Primus products by December 31, 2002. During
the transition period from the date hereof to December 31, 2002, Primus and
Distributor will implement a mutually agreed transition plan. Distributor
further agrees that as its business grows, it will build and maintain sufficient
additional internal support infrastructure to provide sufficient first tier
support to its growing customer base in accordance with industry practices.

 
Except as expressly stated above, this letter Addendum provides no other
consent, express or implied, to materially modify the Distribution Agreement.
 
Please indicate your agreement to this letter by executing the enclosed
duplicate in the space provided below. This Addendum Two shall be effective as
of April 1, 2002 on the terms set forth above (the “Effective Date”).
 
Sincerely,
     
Agreed and Accepted:
Primus Knowledge Solutions, Inc.
     
Primus Knowledge Solutions, KK
/S/    RON STEVENS

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By:
 
/S/    MASAHIRO SASAKI

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Ronald M. Stevens
Chief Financial Officer
     
Name:
 
Masahiro Sasaki

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Its:
 
President & CEO

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Date:
 
July 15, 2002

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5

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Schedule 1
 
New Table B
 
Table B – Software Distribution Fees and Support and Maintenance Fees
 
Primus Products

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Language

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Share of Distributor’s Net Fees (%)

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Primus eServer and eSupport
    
Japanese and English
    
30%*

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*
 
For calendar year 2002, all maintenance renewals shall be paid to Primus at 53%
of support and maintenance fee renewals and not 30%.

 
Upstream Supplier Products

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Language

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Price per Unit

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Support and Maintenance Fees

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Seagate Crystal Info Set
    
Japanese
    
$1,500 per Crystal Info Set
    
See Note 4

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Note 1:
 
Primus eServer is formerly known as SolutionSeries Server, Solution Builder and
Solution Explorer.

 
Note 2:
 
Primus eSupport is formerly known as Solution Publisher.

 
Note 3:
 
Seagate Crystal Info Set refers to a set of five (5) licenses of Seagate Crystal
Info. v.7.0 or v.7.5 software. Table B notwithstanding, in the event that
Distributor enters into a License Agreement with an End User for a total initial
acquisition of twenty-five (25) seats (license type regardless) or more of
Primus eServer and/or Primus eSupport, Primus will waive the US$1,500 licensee
fee with respect to the one (1) Seagate Crystal Info Set provided by Distributor
to such End User, providing the End User is not charged a distribution fee,
license fee or the like for the free single Seagate Crystal Info Set. The
foregoing provision of a free Seagate Crystal Info Set shall not apply to any
current End Users or any End Users who initially acquire less than 25 seats of
Primus eServer and/or Primus eSupport. Primus will notify Distributor of any
change in the pricing of Seagate Crystal software and such price changes will be
effective when the same are effective for Primus with respect to its use of
Seagate Crystal software.

 
Note 4:
 
Primus’ support obligations relating to the Seagate Crystal Info v.7.0 and v.7.5
shall be limited only to Secondline Support for the standard reports that are
provided by Primus as a part of such software and for only as long as Primus is
generally making support available for such Seagate version in connection with
the English language version of the applicable Primus Product. No upgrades or
updates are provided to Seagate Crystal products.

 
Note 5:
 
As used above, “Distributor’s Net Fees” shall mean the gross list price fees for
Software licensed from Primus by Distributor to its customer/sub-distributor,
less Distributor’s customary trade and quantity discounts. In no event, however,
will the share of Distributor’s Net Fees owing to Primus on a transaction by
transaction basis be less than fifteen percent (15%) of the applicable Primus
list price for the same product/service (using a then current currency
conversion rate) without the prior written approval of a Primus Vice President
in each instance. For example, if in a combined single transaction license of
eServer and eSupport, Distributor’s Net Fees are $20,000 and 15% of the Primus
list price for the same software is $8,000, then Distributor shall pay Primus
$8,000 concerning that transaction, and not $6,000 (or 30% of Distributor’s Net
Fees). Distributor shall not use the Primus products as a “loss leader”, shall
not provide them to any third party at a nominal or no charge (other than in
connection with a short-term non-production evaluation), and shall not bundle
the Primus products with any other non-Primus product or service (including a
Distributor service engagement) in the same or any related transaction without
Primus’ prior written consent in each instance.

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