1
EXHIBIT 10.7
LICENSE AGREEMENT AMENDMENT
This Amendment to License Agreement is effective as of the 28th day of
June, 1996, between Motorola, Inc., a corporation of the State of Delaware
("Motorola"), by and through its Land Mobile Products Sector, having a
principal place of business at 0000 Xxxx Xxxxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx
00000; and Transcrypt International a corporation having a principal place of
business at 0000 XX Xxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 ("Licensee").
RECITALS
The parties to this Amendment have earlier entered into an OEM
Agreement dated August 2, 1994 and a License Agreement dated August 2, 1994.
The parties do also concurrently herewith enter into an Amendment to the
foregoing OEM Agreement.
Pursuant to these agreements, the parties have agreed that the
Licensee has the right to purchase certain APCO 25 compliant subscriber
products from Motorola and to resell these products to Licensee's customers.
The Licensee further received the right to sell such product and also include
Motorola's DES-XL encryption and analog trunking capabilities to customers who
were purchasing Astro(R) or APCO 25 infrastructure, where the customer required
such DES-XL and/or analog trunking capability to facilitate backwards
compatibility with other customer operated equipment.
In addition to the above rights to purchase and resell products from
Motorola, the Licensee also received a license under patent rights that
Motorola owns with respect to modulation and frame technologies that are
essential to APCO 25 to make APCO 25 compliant products and to sell APCO 25
compliant systems.
The Licensee would now like to receive specific implementation
information regarding Motorola's analog trunking and DES and DES-XL encryption
technologies, and to be provided a license to use such information to allow
manufacture of products that include such information.
Motorola is willing to provide the Licensee with such a license, and
is further willing to provide the Licensee with a limited amount of
implementation information,
- 1 -
2
provided the Licensee is willing to strictly observe certain precautions with
respect to the handling and use of such information and the practice of such a
license. The Licensee is willing to respect these conditions.
NOW, THEREFORE, in consideration of these premises and the following
terms and conditions, the parties hereby agree as follows:
This agreement shall be an Amendment to the License Agreement of
August 2, 1994 as previously entered into between the parties. In the event of
conflict in language as between this Amendment and the previous License
Agreement, this Amendment shall prevail. In all other instances, the terms and
conditions of the August 2, 1994 License Agreement shall continue in full force
and effect.
ARTICLE I - DEFINITIONS is hereby amended to include the following revised, and
new, definitions:
C. "Licensed Products" are defined as two-way radio
communications products, including both infrastructure components and
subscriber units, that are compliant with the APCO Project 25 Standard.
"Licensed Products" further includes products that are also compatible with
DES, DES-XL (including Proper Code Detection), and/or Motorola analog trunking,
but are limited to implementation in an APCO 25 compliant digital subscriber
radio, or a subscriber unit that has the capability to be APCO 25 compliant
within 12 months of the date this Amendment is signed or within 12 months of
the first shipment of a subscriber unit hereunder, whichever is later.
D. "Delivered Technology" shall mean the enabling information,
including confidential information and trade secret information, and in
whatever form such enabling information may exist including, wherever
applicable, source code, documentation, protocol, timing, and interface
specifications, assembler code, and software tools, and the like, as provided
by Motorola to the Licensee regarding the following technologies:
--Motorola's Smartnet, Smartnet II, SmartZone, Astro(R) and Digital
Astro(R) private systems trunking;
--the MTS 2000 Series portable radio side connector.
- 2 -
3
With respect to DES and DES-XL encryption (including Proper Code
Detection technology), "Delivered Technology" shall be limited to only that
information that is technically necessary to interface the DES and DES-XL
modules and integrated circuits as provided by Motorola.
Such information may include executable object code and source code.
Some information regarding IMBE vocoding may not be available to provide as
Delivered Technology due to contractual limitations imposed on Motorola by
Digital Voice Systems, Inc., the latter being the source for the IMBE vocoding
information.
E. "Additional Motorola Patents" shall mean all present and
future issued patents (wherever and whenever issued), which patents are owned
and controlled by Motorola, and which patents cover the Delivered Technology,
such that the Delivered Technology could not be practiced by the Licensee
without infringing the patents; provided, however, that "Motorola Patents"
shall not include any patents that claim innovations related to materials used
in semiconductor manufacturing, semiconductor structures, and semiconductor
manufacturing processes.
F. "Additional Licensed Products" shall mean:
(i) subscriber radio products that are based on and compatible
with Motorola's Astro(R), Smartnet, Smartnet II and SmartZone subscriber radio
products, regardless of whether such products are compatible with the APCO
Project 25 Standard (hereinafter referred to as "Type I" subscriber radio
products);
(ii) Transcrypt-designed subscriber radio products that include the
side connector offered by Motorola on its MTS 2000 subscriber radio products;
and
(iii) subscriber radio products that are based on DES, DES-XL
(including Proper Code Detection) encryption technology.
ARTICLE II - GRANT OF LICENSE is hereby amended to include the following
paragraph:
Motorola further hereby grants to Licensee a personal,
nontransferable, nonassignable, non-sublicenseable, non-exclusive license under
Motorola's confidential
-3-
4
information rights in the Delivered Technology and under Motorola's pertinent
intellectual property rights including the Additional Motorola Patents to: (1)
manufacture, anywhere in the world, Licensed Products; and (2) to sell APCO
Project 25 Standard compliant systems in any country provided that this license
or exercise of this license in such country is not contrary to any United
States law, regulation, or policy. Under this license grant, the Licensee has
the right to manufacture and offer for sale under the Licensee's own trade name
or trademark products that are compatibly interoperable with Motorola's analog
Smartnet family of trunked radio systems or Motorola's DES or DES-XL systems
that include Motorola proprietary encryption capability.
At such time as the Licensee shall be recognized in the industry as a
supplier of APCO Project 25 Standard compliant products, as evidenced by a
continuing shipping level, then the Licensee shall also have a personal,
nontransferable, non-assignable, non-sublicenseable, non-exclusive license
under Motorola's confidential information rights in the Delivered Technology
and under Motorola's pertinent intellectual property rights including the
Additional Motorola Patents to: (1) manufacture, anywhere in the world,
Additional Licensed Products; and (2) to sell such Additional Licensed Products
in any country provided that this license or exercise of this license in such
country is not contrary to any United States law, regulation, or policy. Under
this license grant, the Licensee has the right to manufacture and offer for
sale under the Licensee's own tradename or trademark products that are
compatibly interoperable with Motorola's analog Smartnet family of trunked
radio systems or Motorola's DES or DES-XL systems that include Motorola
proprietary encryption capability.
ARTICLE III - ROYALTY is hereby amended to include the following paragraphs:
With respect to Licensee's radio products that are based, in whole or
in part, on Motorola's trunking, including Smartnet, Smartnet II, and Astro(R)
Delivered Technology, Licensee agrees to pay Motorola a three per-cent (3%)
royalty on Net Sales After Discount on such products.
In addition to the above, with respect to Licensee's radio products
that are based, in whole or in part, on Motorola's MTS 2000 Series portable
radio side connector Delivered Technology, Licensee agrees to pay Motorola a
royalty of $3.50 per unit on such products when these side connectors are not
purchased from Motorola.
-4-
5
Payment of royalties will be for a period of 10 years. Royalty will
be paid quarterly based on actual Net selling price of radio products sold.
Payment will be made within 30 days following each quarter.
Royalties shall not apply to parts, components, kits, and the like,
that Licensee shall purchase from Motorola for use in Licensee's products, for
resale to others, or both. No royalty payments will be due on finished goods,
components and kits purchased from Motorola for use in Licensee's products. In
the case where Licensee's products contain both purchased kits and components
and also the above Delivered Technologies, then royalties will be paid on the
Net User Price of the radio product sold less the cost of the Motorola kits or
parts provided outlined in the appendix.
In the event that marketable value items are embedded in sold kits and
parts but are not part of the licensed technology, a royalty will be paid based
on an Appendix amended to this contract and negotiated annually based on
marketing value.
Licensee acknowledges that there may be some proprietary technology,
that has not been described herein, embedded in the DES, DES-XL, ASTRO(R),
SMARTNET or SMARTNET II chip sets. Should Licensee decide to implement these
additional technologies at a later date, then additional royalties may apply,
and the parties will negotiate in good faith at that time. It is agreed that
capabilities embedded in Motorola kits and integrated circuits and not marketed
by Licensee will not be subject to royalty payments. For example, if a
particular capability or function of additional market value is designed into a
particular purchased kit or part, but is not enabled, an additional license is
required to enable this capability and negotiated royalties will be paid by
Licensee based on the sale of this capability.
A new ARTICLE XIV is added as follows:
ARTICLE XIV - DELIVERED TECHNOLOGY
Upon the signing of this Amendment by both parties, Motorola shall
commence transferring Delivered Technology to the Licensee. Motorola shall use
reasonable efforts to complete such transfer in an expeditious manner.
-5-
6
Both parties recognize that source code is a particularly sensitive
and valuable form of information. When source code is provided as an item of
Delivered Technology to the Licensee, the Licensee acknowledges that
appropriate safeguards are necessary in order to ensure that Motorola's source
code is properly used and cared for. Within ninety (90) days of receiving
source code, the Licensee shall either: (a) return the source; or (b) provide
Motorola with a written statement indicating that the Licensee will make
near-term actual use of the source code when exercising its rights under this
Amendment. When holding Motorola source code, in addition to observing all
other requirements set forth in this Amendment regarding confidential
information, the Licensee shall additionally number all copies of the source
code, and shall maintain a written record of the location of the original and
all copies at all times. When returning source code to Motorola, the Licensee
shall indicate in writing that the original and all copies have either been
returned or destroyed.
A new ARTICLE XV is added as follows:
ARTICLE XV - CHANGES IN PARTY
This Amendment is personal to each of the parties hereto, and either
party shall have the right to cancel this Amendment by giving written notice of
cancellation to the other party at any time upon or after: 1) the filing by the
other party of a petition commencing a proceeding with respect to itself in
bankruptcy or insolvency; 2) any adjudication by a court of competent
jurisdiction that the other party is bankrupt or insolvent; 3) the appointment
of a receiver for all or substantially all of the property of the other party
which appointment shall remain in effect for 180 days; or 4) the making by the
other party of any assignment or attempted assignment of this Amendment for the
benefit of creditors. Upon the giving of such notice of cancellation this
Amendment shall be terminated forthwith.
In the event a change of control of the Licensee occurs and control is
held, directly or indirectly by any of the following companies, or combination
thereof:
Telefonaktiebolaget LM Ericsson,
Alcatel Alsthom Compagnie Generale D'Electricite,
Alcatel Cit S.A.,
Hitachi, Ltd.,
Philips electronics N.V.,
- 6 -
7
Toshiba Corporation,
Matsushita Electric Industrial Co., Ltd.,
Matsushita Electric Works, Ltd.,
NEC Corporation,
Matra, S.A.,
AT&T,
Lucent Technologies,
Sprint,
MCI,
or any RBOC, including
Nynex,
Xxxx Atlantic,
Southern Xxxx,
Southwestern Xxxx,
US West,
Pacific Telesis, or
Ameritech,
then Motorola shall have the right to immediately terminate this Amendment.
In the event a change of control over the Licensee occurs and control
is held, directly or indirectly by any third party manufacturer in the
telecommunications industry, other than those listed above, Motorola shall have
the right to cancel this Amendment at any time thereafter upon giving twelve
(12) months written notice thereof to the Licensee and/or the third party and,
upon the giving of such notice of cancellation, this Amendment shall terminate
in accordance therewith.
For purposes of this Amendment, "control" shall mean:
-- that the controlling entity owns, directly or indirectly, stock or other
interest in the Licensee representing more than fifty (50) percent of the
aggregate stock or other interest entitled to vote for the election of
directors or other decisions reserved to a vote by owners of such stock or
other interests; or
- 7 -
8
--that the controlling entity has the power to direct the management or
policies of the Licensee, directly or indirectly, whether through the ownership
of voting securities, by contract, merger, or acquisition of assets of the
Licensee, or otherwise.
Notwithstanding the above, nothing contained herein shall prevent
Licensee from assigning this Agreement and any and all amendments hereto to the
successor in interest corporation or limited liability company which is
established to facilitate the public offering of equity interests in Licensee.
A new ARTICLE XVI is added as follows:
ARTICLE XVI - REPRESENTATIONS AND DISCLAIMERS
Nothing contained in this Amendment shall be construed as:
(a) a warranty or representation that the manufacture, sale,
lease, use, or other disposition of any product that is manufactured by other
than Motorola using Delivered Technology will be free from infringement of
third party patents, provided, however, that if promptly notified in writing,
Motorola will defend any claim against the Licensee that alleges that U.S.
patents, copyrights, or trade secrets of another have been infringed solely by:
-- Motorola's unaltered software as provided to the Licensee as Delivered
Technology, provided, however, that this indemnity shall not apply to the IMBE
vocoder to the extent that the vocoder technology as included with Delivered
Technology shall be based on information provided by Digital Voice Systems,
Inc.; or
-- the Licensee's software authored by the Licensee, provided such Licensee
software is substantially based upon and functionally substitutes for Motorola
software as provided in the Delivered Technology, and the claim of infringement
would exist regardless of whether the Licensee software or the corresponding
Motorola software, for which the Licensee software is a substitute, were used
by the Licensee, and the Licensee would otherwise be indemnified by Motorola
for use of such corresponding Motorola software;
and Motorola will save and hold the Licensee harmless from any judgment,
damages, or awards arising out of any such claim. Upon Motorola's request, the
Licensee agrees to reasonably assist in any defense and surrender control of
the suit to Motorola. Motorola may elect, at any time, to modify or replace
such software with
- 8 -
9
equivalent non-infringing items, obtain the right to continue using the
software, or, if these remedies are not reasonably available, to accept return
of such software from the Licensee;
(b) a warranty that the Licensee will successfully manufacture
products based upon the Delivered Technology transferred hereunder.
A new ARTICLE XVII is added as follows:
ARTICLE XVII - TERMS
In addition to royalties payable under Article III entitled "ROYALTY"
as provided hereinabove, Licensee shall pay to Motorola the sum of ** in
accordance with paragraphs A-C as follows:
A. ** due at contract signing.
B. ** due one (1) year after the signing of this contract.
C. ** due and payable as follows:
1 . ** due upon Licensee having sold 2,500 total units of
Type I subscriber radio products, as defined in Article 1, paragraph F, clause
(i) above.
2. An additional ** due upon Licensee having sold 5,000
total units of Type I subscriber radio products.
3. An additional ** due upon Licensee having sold 7,500
total units of Type I subscriber radio products.
4. An additional ** due upon Licensee having sold 10,000
total units of Type I subscriber radio products.
5. An additional ** due upon Licensee having sold 12,500
total units of Type I subscriber radio products.
All sections marked with two asterisks ("**") reflect portions which
have been redacted and filed separately with the Securities and Exchange
Commission as part of a request for confidential treatment.
- 9 -
10
6. An additional $** due upon Licensee having sold
15,000 total units of Type I subscriber radio products.
7. An additional $** due upon Licensee having sold
17,500 total units of Type I subscriber radio products.
8. An additional $** due upon Licensee having sold
20,000 total units of Type I subscriber radio products.
A new ARTICLE XVIII is added as follows:
ARTICLE XVIII - ENGINEERING SUPPORT
Motorola agrees to provide engineering support for the technologies
licensed in the LICENSE AMENDMENT in the amount of 500 staff/hours at Motorola
sites and 500 staff/hours of on-site support, with all travel and miscellaneous
expenses such as room, board, copy services and the like being paid for by
Licensee within 30 days of receipt of invoice. Additional hours beyond these
amounts will be paid by Licensee at the rate of $200 per hour, accruable in
10-minute increments.
A new ARTICLE XIX is added as follows:
ARTICLE XIX - MISCELLANEOUS
A. Motorola agrees to negotiate in good faith with respect to
licensing present and future encryption technologies.
B. Motorola having refused to license its proprietary DVP and
DVP-XL encryption technologies to Licensee, Motorola states as follows:
If, in the normal course of business, a domestic (U.S. markets only)
customer requests Licensee to provide Motorola DVP or DVP-XL encryption in one
of Licensee's subscriber products, for the purpose of in the future going to
APCO 25, Licensee may quote and deliver such a product and will be provided the
necessary
-10-
11
modules (kits) by Motorola at the same price as the DES-XL module noted in the
Amendment to the OEM Agreement.
C. Motorola having refused to include its OTAR technology for DES
and DES-XL two-way radio products in this Amendment, Motorola agrees to
negotiate in good faith at a later date the numerous issues that are included
in this technology.
D. Pricing for all accessories as described in the attachment to
this License Amendment shall be at 55% off standard list prices per current
DNUP book.
E. Nothing herein shall be construed as granting any rights, by
license or otherwise, in the trademarks or trade names of either party.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by
their duly authorized officers.
Each person who signs below personally represents that he or she is
authorized to do so.
MOTOROLA, INC. Transcrypt International
By: XXX XxXXXX By: XXXXXXX XXXXXX
--------------------------- -------------------------
Xxx XxXxxx Xxxxxxx Xxxxxx
V.P. & General Manager President
Date: 9/13/96 Date: 9/13/96
------------------------- ------------------------
By:
---------------------------
Xxxxx X. Xxxxxxx
Senior Vice President
Motorola, Inc.
Patents, Trademarks and Licensing
Date:
-------------------------
- 11 -
