Common use of License Fees and Royalties Clause in Contracts

License Fees and Royalties. 7.1. For the license to the Synapse 3220 class of Products, TI shall pay a non-refundable license fee and prepaid royalty fee (“Initial Fees”) of [***] upon the terms and milestones set forth in Exhibit A. Further, TI shall pay to Sonics the License Fees and applicable Running Royalty for License Products utilizing future Licensed Technology for which TI may exercise its option in accordance with the terms of the applicable Exhibit A addendum established pursuant to Section 8 herein. 7.2. The Running Royalty for each class of Licensed Product that is subject to Running Royalty shall be a sum equal to the aggregate number of units of Licensed Products sold by TI during the reporting period that are embedded with a Smart Core, which are in a common class of Sonics Products, less returns and amounts actually repaid or credited with respect to any Licensed Products within the same class that are returned and that are subject to Running Royalty Fees, multiplied by the ASP therefore, multiplied by the applicable Running Royalty rate, all as set forth in Exhibit A and/or its addenda, save that the aggregate Running Royalty for any Licensed Product (incorporating a Smart Core from any single class of Sonics Products) shall not exceed, the following per unit limit: In the event that any Licensed Product incorporates Smart Cores from more than one class of Sonics Products, the running royalty payable for such Licensed Product shall be calculated as follows. The two highest running royalty rates then applicable shall be aggregated and the resulting running royalty rate shall be applied to such Licensed Product in accordance with this Section 7.2, provided, however, that in no event shall the running royalty applicable for any such Licensed Product exceed [***]. 7.3. With respect to each Licensed Product for which a Running Royalty shall apply, TI shall pay the Running Royalty for a period of not less than ten (10) years from the date of first sale, supply or distribution of that Licensed Product. Thereafter, TI shall pay Sonics a Running Royalty only on the sale of such Licensed Products if the manufacture or sale would infringe upon unexpired Sonics patents. 7.4. TI undertakes not to employ its modification rights to re-design Smart Cores to avoid Sonics patents where there is no substantial engineering purpose to be served by the change. 7.5. Running Royalties due to Sonics under this Agreement shall be paid in accordance with the terms set forth in Exhibit D and shall be accompanied by a report listing all Licensed Products which are subject to Running Royalty payments and which are being sold during the applicable royalty period; the report shall not break down the sales by individual Licensed Product. 7.6. TI shall keep all records of account for three (3) years from the date of such report as are necessary to demonstrate compliance with its obligations under this Section 7. 7.7. Sonics shall have the right for representatives of a firm of independent Chartered Accountants, to which TI shall not unreasonably object, (“Auditors”) to make an examination and audit, by prior appointment during normal business hours, not more frequently than once annually, of all records and accounts as may under recognized accounting practices contain information reasonably necessary to establish the number of Licensed Products and the ASP by Sonics Product class for all Licensed Products sold or distributed by TI under this Agreement and the amounts of Running Royalties payable to Sonics under this Section 7. The Auditors will only report to Sonics whether the Running Royalties paid to Sonics by TI were or were not correct, and if incorrect, the correct amounts for Running Royalties. In the event that the Auditors determine that the Running Royalties paid to Sonics by TI were incorrect, the Auditors will deliver to TI a detailed report (“Report”) supporting such conclusion. If TI and the Auditors are unable to agree on the contents of the Report then TI will (i) disclose to Sonics that part of the Report with which TI disagrees and (ii) produce evidence supporting TI’s contention that such part of the Report is incorrect. Thereafter TI and Sonics shall enter into good faith negotiations to promptly resolve the issue. 7.8. Such audit shall be at Sonics’ expense unless it reveals an underpayment or overpayment of Running Royalties of [***] or more, in which case TI shall reimburse Sonics for the costs of such audit. TI shall make good any underpayment of royalties forthwith. If the audit identifies that TI has made an overpayment, the amount overpaid will be, at TI’s option, returned forthwith or credited to the next such payment or payments to be made by TI. 7.9. TI shall have the right upon thirty (30) days prior notice to Sonics to conduct an audit, through an independent third party auditor that is mutually acceptable to TI and Sonics, relevant records and agreements of Sonics necessary to ensure that the obligation with respect to Section 8.4 (“MFN”) are being fully met. Sonics shall not unreasonably withhold its approval of TI’s independent auditor. The audit may be conducted not more often than once annually and must be carried out during normal business hours of Sonics in such a way as not to unreasonably interfere with Sonics business operations. The independent auditor shall only report to TI whether Sonics has or has not complied with the obligation with respect to Section 8.4, and if not, the amount of any overpayment. Sonics shall reimburse to TI any overpayment that is disclosed by the audit together with TI’s reasonable cost to perform the audit if the audit discloses that Sonics is not in compliance with the MFN. 7.10. In consideration of the maintenance and support services provided by Sonics to TI under Section 6 hereof, Sonics will invoice TI and TI shall pay to Sonics, in advance, an annual support fee as provided in Exhibit A and/or its addenda detailing the Licensed Technology; such fee (“Maintenance Fees”) to be payable within thirty (30) days of the TI acceptance of the Transfer Materials and any required support anniversary thereafter. Thereafter support will be optional to TI; the rate is subject to renegotiation based on “support” experience of the previous two (2) years. 7.11. If any sum under this Agreement is not paid within thirty (30) days of the due date, then (without prejudice to Sonics’ other rights and remedies) Sonics reserves the right to charge simple interest on such sum (as well after as before any judgment) from the due date to the date of payment at the average of the prime interest rate as quoted by the head office of Citibank N.A., New York in force during the period of default. 7.12. Save for the first payment of the Initial Fee and the Running Royalties, TI will pay any fee due to Sonics under the terms of this Agreement thirty (30) days from the date of Sonics’ invoice therefore provide such invoice is properly issued in accordance with the terms of this Agreement.