1
EXHIBIT 10.23
SETTLEMENT AND LICENSE AGREEMENT
Settlement and License Agreement entered into by and between Lockheed
Missiles & Space Company, a California corporation, having its principal place
of business at 0000 Xxxxxxxx Xxx, Xxxxxxxxx, Xxxxxxxxxx ("LMSC"), and Talarian
Corporation, a Maryland corporation, having its principal place of business at
000 Xxxxx Xxxxx, Xxxxxxxx Xxxx, Xxxxxxxxxx 00000 ("Talarian"), as of the 1st day
of February, 1989.
RECITALS
A. LMSC has developed a real-time artificial intelligence system,
including hardware, computer software and copyrightable and potentially
patentable features, trade secrets and know-how.
B. Talarian is qualified and otherwise particularly suited to enhance
the LMSC real-time artificial intelligence system and desires to obtain
licenses, and other rights from LMSC.
C. LMSC and Talarian wish to settle their differences and to clarify
their mutual rights and obligations with respect to the LMSC real-time
artificial intelligence system.
AGREEMENT
I. DEFINITIONS
A. Designated Government Contracts. Any grant, agreement, contract or
modification thereof awarded by the Department of Defense or National
Aeronautics & Space Agency, and any classified grant, agreement, contract or
modification thereof awarded by any agency or department of the Federal
Government; provided, however, that Designated
1
2
Government Contracts do not include small business set asides, grants or awards
(such as the Small Business Innovation Research ("SBIR") Program) for which LMSC
is not eligible.
B. Lockheed. The Lockheed Corporation, of which LMSC is a wholly owned
subsidiary.
C. L*STAR Milestones (or Milestones). The milestones identified in the
specification and schedule attached as Exhibit A. D. L*STAR Product. The L*STAR
Technology enhanced by Talarian as it exists six months after the date of
completion of the L*STAR Milestones.
E. L*STAR Technology. The LMSC-developed real-time artificial
intelligence system, including hardware, computer software, copyrightable and
potentially patentable features, trade secrets and know-how, as it exists on the
date of this Agreement.
F. Net Receipts. The gross revenues of Talarian, less only returns and
allowances which are actually given and taxes directly imposed upon particular
sales.
G. Phase 1. The period from execution of the Agreement until the later
of July 1, 1989 or the date upon which all of the Milestones have been met.
H. Phase 2. A six-month period starting at the end Phase 1.
I. Start Date. The start date for purposes of measuring any of the
L*STAR Milestones will be the earlier of April 1, 1989 or the date by which
Talarian receives a total of $250,000 in equity or debt financing.
J. Technology Transfer Period. The period from the date of execution of
this Agreement until the later of February 1, 1990 or the date of delivery of
the L*STAR Product by Talarian to LMSC (comprising both Phase 1 and Phase 2).
2
3
K. Technology Package. The set of technology information listed in
Exhibit B to be provided by LMSC to Talarian.
II. LICENSE GRANTS
A. LMSC License of L*STAR Technology to Talarian. LMSC hereby grants
Talarian a royalty-bearing worldwide license to use, reproduce, make derivatives
of and distribute by sublicense the L*STAR Technology as enhanced in the L*STAR
Product, subject to the following limitations:
1. Phase 1 Limitation. Until the end of Phase 1, Talarian shall not,
except in conjunction with Lockheed and pursuant to the limitations in Section V
D, (1) market the L*STAR Technology or the L*STAR Product to the Department of
Defense or the National Aeronautics & Space Agency or in connection with any
classified grant, agreement, contract or modification to be awarded by any
agency or department of the Federal Government (excluding small business set
asides, grants or awards (such as the SBIR program) for which LMSC is not
eligible), or (2) make any proposal with respect to their use in Designated
Government Contracts.
2. Phase 2 Limitation. Until the end of Phase 2, Talarian shall not,
except in conjunction with Lockheed and pursuant to the limitations in Section V
D, enter into a contract for delivery of the L*STAR Technology or any product
developed by use of the L*STAR Technology or derived therefrom (i) as a
subcontractor at any tier under any Designated Government Contract or (ii) as a
prime contractor in any Designated Government Contract.
3. Material Breach. Failure of Talarian to observe the limitations
set forth in Sections II A 1 and II A 2 shall be considered a material breach of
this Agreement.
3
4
4. Perpetual License on Completion of Milestones. Upon completion of
the L*STAR Milestones, the license granted by LMSC to Talarian for the L*STAR
Technology shall become perpetual and irrevocable. Talarian shall own the L*STAR
Product subject to LMSC's ownership of the underlying L*STAR Technology and the
licenses granted to LMSC by Talarian in Section H hereunder.
5. Damages and Termination of the LMSC License to Talarian. If
Talarian is more than 30 days late in meeting in any L*STAR Milestone, the total
royalties of $700,000 set forth in Section III A shall be increased by $500 per
day for each day beyond 30 days that the Milestone is not met, providing,
however, that the total royalties shall not exceed $1,000,000. If Talarian does
not complete any L*STAR Milestone within 120 days of the specified date for the
Milestone as set forth in Exhibit A, or within 15 months after the Start Date,
the license granted by LMSC to Talarian for the L*STAR Technology will, at
LMSC's option, terminate immediately, provided that LMSC has given Talarian at
least 30 days prior written notice of its intention to terminate if such
Milestone is not completed by such date.
6. Failure to Agree on Milestones. If Talarian and LMSC disagree
whether a Milestone has been met, the parties will jointly approach a referee
selected by LMSC from the list below to determine whether the Milestone has or
has not been met. The referee will make a decision within 5 working days. The
expenses of the referee will be shared equally by LMSC and Talarian. Referees
acceptable to both parties are Xxxx X. Xxxxxxxxx, Xxxxxxx Xxxxx and Xxxxxxx
Xxxxx. The decision of the referee will be final. If the referee determines that
the Milestone has been met, there shall be no increase in the royalty cap
accrued with respect to that Milestone from the date the Milestone technology,
in the same form as submitted to the referee, was submitted to LMSC.
4
5
B. Talarian's License of the L*STAR Product to LMSC. Talarian hereby
grants to LMSC a perpetual, irrevocable royalty-free, worldwide license to use,
reproduce, make derivatives of and distribute by sublicense the L*STAR Product,
subject to the following limitations:
1. Use Restriction. During the Technology Transfer Period, LMSC shall
not market or use the L*STAR Technology or the L*STAR Product in non-government
applications except as provided in Section V C.
2. Product Protection. LMSC will use substantially the same measures
to protect the L*STAR Product and its source code from unauthorized use,
reproduction, derivation, distribution or disclosure as LMSC uses to protect its
own proprietary software and will, if required by law, apply an appropriate
copyright and "restricted rights" notice to all copies of the L*STAR Product and
derivatives thereof in order to protect Talarian's interests therein.
III. ROYALTIES
A. Royalties Paid by Talarian to LMSC. Talarian shall pay LMSC a royalty
equal to five percent (5%) of Talarian's Net Receipts from licenses and
sublicenses of the L*STAR Technology, the L*STAR Product or any other product
developed or derived therefrom, until a total of $700,000 (plus any addition
thereto pursuant to Section II A 4) has been paid. Royalties will be paid
quarterly within 45 days after the end of the quarter in which Talarian receives
payment. Late royalty payments shall bear interest at the rate of 2% over the
prime rate then quoted by the Bank of America NT&SA.
B. Records. With respect to the royalties set forth in this section,
Talarian shall keep full, clear and accurate records with respect to any
products subject to a royalty. These records shall be retained for a period of
three (3) years from the date of payment. LMSC shall have the
5
6
right, through a mutually agreed upon independent Certified Public Accountant
and at LMSC's expense, to examine and audit, not more than once a year during
normal business hours, all records and accounts as may under recognized
accounting practice contain information bearing upon the amount of royalty paid
to LMSC under this Agreement. Prompt adjustments shall be made by Talarian to
compensate for any errors and/or omissions disclosed by such examination or
audit. In the event that the amount of such error and/or omission exceeds
$10,000, Talarian shall pay LMSC an additional fee equal to the cost of the
audit.
IV. DELIVERABLES
A. Technology Package. LMSC shall deliver the Technology Package to
Talarian within 20 days of execution of this Agreement.
B. Monthly Delivery of Source Code. By the 5th day of each month during
the Technology Transfer Period, Talarian shall deliver to LMSC a source code
tape of the L*STAR Technology as enhanced by Talarian as it existed on the last
day of the previous month.
C. Final Delivery of Source Code. Within 5 days after the end of the
Technology Transfer Period, Talarian shall deliver to LMSC a source code tape of
the L*STAR Product as it existed at the end of the Technology Transfer Period.
V. COOPERATION BETWEEN LMSC AND TALARIAN
A. AI Center as L*STAR Advocate. During the Technology Transfer Period,
the Lockheed Artificial Intelligence Center ("AI Center") will be a strong
advocate for the L*STAR Technology and the L*STAR Product within Lockheed.
B. Technical Assistance. Talarian will make the L*STAR Product
operational on a DEC VAX computer operating under the current version of the
operating system in the LMSC
6
7
AI Center. "Operational" means that the L*STAR Product compiles, links, loads,
and runs Talarian's demonstration application.
C. Technology Transfer Period Commercial Activity by LMSC. During the
Technology Transfer Period, if LMSC desires to make any proposals relating to
the L*STAR Product to a non-government entity, LMSC will team with Talarian for
such proposals.
D. Coordination through AI Center. During the Technology Transfer
Period, all Talarian activities at Lockheed in connection with the L*STAR
Technology and the L*STAR Product will be coordinated through the AI Center,
unless otherwise agreed. To that end during the Technology Transfer Period
Talarian will notify (pursuant to the notice provisions set forth in Section XII
L) the AI Center of any requests received by Talarian from within Lockheed for
the L*STAR Technology, the L*STAR Product, or support therefor and will inform
anyone within Lockheed who makes such a request that the request must be
directed to and coordinated through the AI Center. All meetings during the
Technology Transfer Period between Talarian and any person or group at Lockheed
relating to the L*STAR Technology, the L*STAR Product or support therefor must
be set up by the AI Center.
E. Protection of Source Code. During. Phase 1 and Phase 2, neither party
will make the source code of the L*STAR Technology or the L*STAR Product source
code available to any third party without the other party's prior written
consent, which will not be unreasonably withheld. Either party may nonetheless
deposit the L*STAR Technology or L*STAR Product source code with a third party
escrow agent, to be released to licensed users for the limited purposes of
providing support to such users if the party making the deposit ceases to
support the L*STAR Technology or L*STAR Product.
7
8
F. Support. For a period of five years from the Start Date, Talarian
will provide support to LMSC for the L*STAR Product .and other Talarian products
derived from the L*STAR Technology, at Talarian's standard prices, terms and
conditions.
VI. FOLLOW-ON PRODUCTS
A. Talarian's L*STAR Derivative Products. Until the earlier of (i) five
years after the Start Date or (ii) payment by Talarian of the royalty cap,
Talarian will license LMSC, at Talarian's standard list prices less a discount
of 15%, to use copies, in object code, of any standard software product derived
by Talarian from the L*STAR Technology, solely for use within LMSC.
B. Access to New Technology. Until the earlier of (i) five years after
the Start Date or (ii) payment by Talarian of the royalty cap, Talarian will
notify LMSC of the availability of any new standard software products derived
from the L*STAR Technology or new releases of existing standard products at
least as early as Talarian announces such availability to any other party, and
will offer LMSC the opportunity to receive a beta test version for such products
on the same terms as are offered to any other party.
VII. EMPLOYEES
Because of the close cooperation and exchange of confidential
information required between the parties in order to achieve the benefits of the
Agreement, (1) Talarian will not, without the written consent of LMSC, at any
time prior to January 1, 1990, hire any LMSC employee who is or was an employee,
staff member or student of the AI Center, except for Xxx Xxxxxx and three other
individuals; and (2) LMSC will not, without the written consent of Talarian, at
any time prior to January 1, 1990, hire any person who is at such time, or was
within the immediately preceding three months, an employee of Talarian.
8
9
VIII. TERMINATION
A. Expiration. The term of this Agreement shall be five years from the
Start Date or until Talarian has paid the royalty cap, unless earlier terminated
in accordance with Section B below.
B. Termination. Either party may terminate this Agreement if any of the
following events occur:
1. If the other party materially breaches any provision hereof.
2. If either party becomes insolvent or admits, in writing its
inability to pay its debts as they mature, or makes an assignment for the
benefit of creditors; or if a petition under any foreign state, or United States
Bankruptcy Act, receivership statute, or the like, as they now exist, or as they
may be amended, is filed by either party; or if such a petition is filed by any
third party or an application for a receiver of either party is made by anyone
and such petition or application is not resolved favorably to either party
within sixty days.
3. Termination by a party pursuant to this section shall be effective
thirty (30) days after notice of termination is given specifying the reasons
therefor, unless the other party cures the event giving rise to the termination
during the thirty day period. The rights and remedies of each party provided in
this section shall not be exclusive and are in addition to any other rights and
remedies provided by law or this Agreement.
C. Survival of Rights and Obligations. Each party's rights and
obligations under Section IX below shall survive and continue after any
expiration or termination of this Agreement. In addition, each party's rights
and obligations regarding licenses specified in Section II above shall, to the
extent such licenses have become irrevocable as of the date of termination,
survive such termination.
9
10
IX. CONFIDENTIALITY AND NON-DISCLOSURE
A. During the term of this Agreement and for five years thereafter, each
party agrees to hold confidential at a level equivalent to their protection of
their own proprietary information any proprietary information and technical
information that is furnished by the other party and is marked "PROPRIETARY" or
"CONFIDENTIAL" or is identified as such in writing within ten days of its first
disclosure. Notwithstanding any provisions contained herein concerning
nondisclosure of the proprietary information and technical information, both
parties shall have no obligations regarding disclosure of any such information
which (a) is or becomes publicly known through publication, inspection of
products or otherwise and through no wrongful act of the receiving party; (b) is
received from a third party without similar restriction and without breach of
this Agreement; (c) is shown by documentary evidence to be independently
developed by the receiving party; (d) is disclosed to a third party by or on
behalf of the disclosing party without a similar restriction on the third
party's rights; or (e) is released for use by written authorization of the
disclosing party.
X. WARRANTIES
A. Each party warrants that it shall make its best efforts (i) to insure
that the information provided during the Technology Transfer Period by it to the
other party shall be free from errors and defects and (ii) to insure that such
errors and defects found, if any, shall be promptly corrected and that such
corrections shall be promptly provided to the other party.
B. EXCEPT AS EXPRESSLY SET FORTH IN SECTION A ABOVE, NO WARRANTIES ARE
GIVEN BY EITHER PARTY, WHETHER EXPRESS, IMPLIED OR OTHERWISE, INCLUDING BUT NOT
LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT
10
11
TO INFORMATION OR PRODUCTS DEVELOPED OR DELIVERED HEREUNDER, AND BOTH PARTIES
EXPRESSLY DISCLAIM ANY AND ALL SUCH WARRANTIES. THERE IS NO WARRANTY MADE BY
EITHER PARTY WITH RESPECT TO PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT OR
RIGHTS OR TRADE SECRETS OF THIRD PARTIES.
XI. LIMITATION OF LIABILITY
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY SPECIAL, INDIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING FROM THE RIGHTS AND OBLIGATIONS
HEREUNDER, EVEN IF THE PARTY HAS BEEN ADVISED OR OTHERWISE HAS REASON TO KNOW
THE POSSIBILITIES OF SUCH DAMAGES.
XII. MISCELLANEOUS
A. Assignment. This Agreement and any rights or licenses granted herein
are personal to each party and shall be binding upon and inure to the benefit of
the parties and their respective successors-and assigns; provided, however, that
the successor shall expressly assume in writing the performance of all the terms
and conditions of this Agreement to be performed by the assigning party. During
the Technology Transfer Period, Talarian shall not have any right whatsoever to
assign any of its rights or privileges hereunder without the prior written
consent of LMSC.
B. No Waiver. No failure or delay on the part of either party exercising
its right of termination hereunder for any one or more causes shall be construed
to prejudice its right of termination for such causes or subsequent causes. Any
failure or delay on the part of either party in the exercise of any right or
privilege hereunder shall not operate as a waiver thereof, nor shall
11
12
a single or partial exercise of any such right or privilege preclude other or
further exercise thereof or of any right or privilege.
C. Limitation of Cooperation. Under no circumstances shall the parties
hereto exchange or discuss with one another any matter which is not relevant to
the execution of the obligations of this Agreement. For example, the parties
shall not discuss or exchange information relevant to their specific customers,
marketing policies or activities, or pricing.
D. Entire Agreement. This Agreement and the exhibits attached hereto and
made a part hereof embody the entire understanding of the parties with respect
to the subject matter contained herein and shall supercede all previous
communications, representations or understandings, either oral or written,
between the parties relating to the subject matter hereof. No amendment or
modification of this Agreement shall be valid or binding upon the parties unless
in writing signed by their respect duly authorized officers.
E. Disclaimers. Nothing contained in this Agreement shall be construed
as:
1. conferring any rights to use in advertising, publicity or
other marketing activities, any name, trademark or other designation of
either party hereto, and either party hereto agrees not to use the
existence of this Agreement in any marketing activity without the
express written approval of the other party;
2. conferring by implication, estoppel or otherwise on either
party hereunder any license or other right except the licenses and
rights expressly granted hereunder;
3. a warranty or representation that the manufacture, sale,
lease, use, or other disposition of systems and products hereunder will
be free from infringement of intellectual property rights of third
parties, including patents, utility model, design patents, copyrights
and trade secret rights;
12
13
4. a warranty that any party will successfully develop products
based upon the Technology Package transferred hereunder; or
5. an obligation to bring or prosecute action or suits against
third parties for any infringement, or to secure and/or maintain any of
its intellectual property rights.
F. Force Majeure. Anything contained in this Agreement to the contrary
notwithstanding, the performance of the obligations of the parties hereto shall
be subject to all laws, both present and future, of any government having
jurisdiction over the parties hereto or, act of public enemies, strikes, or
other labor disturbance, fires, floods, acts of God, or any causes of like or
different kind beyond the control of the parties, and the parties hereto shall
be excused from any failure to perform or any delay in the performance of any
obligation hereunder to the extent such failure or delay is caused by such law
or contingency.
G. Exportation Limitations. LMSC and Talarian both agree not to export
or re-export, or cause to be exported or re-exported, any technical data
received hereunder or the direct product of such technical data, to any country
to which, under the law of the United States, both parties are or may be
prohibited from exporting its technology or the direct product thereof.
H. Captions. The captions used in this Agreement are for convenience
only and are not to be used in interpreting the obligations of the parties. I.
Applicable Law. The applicable law governing any cause of action arising out of
this Agreement, or the performance of either party, shall be governed by the
laws of the State of California.
J. No Joint Venture. Nothing contained herein, or done in pursuance of
this Agreement, shall constitute the parties as entering upon a joint venture or
shall constitute either party hereto the agent for the other party for any
purpose or in any sense whatsoever.
13
14
K. Severability. In case any one or more of the provisions of this
Agreement shall, for any reason, be held to be invalid or unenforceable in any
respect, such invalidity or unenforceability shall not affect any other
provision of this Agreement. Such provision or provisions shall be ineffective
only to the extent of such invalidity or unenforceability without invalidating
the remainder of such provision or provisions or the remaining provisions of
this Agreement.
L. Notices. All notices, statements and reports required or permitted by
this Agreement shall be in writing and sent to the party to whom such notice,
statement and report is to be givers at its offices first above mentioned--for
LMSC to the attention of The Manager, AI Center, AIC Building, and for Talarian
to the attention of Xxxxxx Xxxxxx, provided that any party may change its
address for the purposes of notice given pursuant to this section.
LOCKHEED MISSILES & SPACE COMPANY,
By: /s/
--------------------------------------
[name]
V.P. Gen. Mgr. Research & Devlpt.
--------------------------------------
[title]
Mar. 3, 1989
--------------------------------------
[date]
TALARIAN CORPORATION,
By: /s/
--------------------------------------
[name]
Vice President
--------------------------------------
[title]
March 6, 1989
--------------------------------------
[date]
14
