EXHIBIT 2.22
ROYALTY AGREEMENT
This Royalty Agreement (hereinafter "Agreement") is made as of the 13th day of
August 1999 (hereinafter the "Effective Date") by and between Xxxxxx
Corporation, a corporation duly organized under the laws of the State of
Delaware and having its principal place of business at 0000 Xxxx Xxxx Xxxxxxxxx;
Xxxxxxxxx, Xxxxxxx (hereinafter "Xxxxxx"), and Intersil Corporation, a
corporation duly organized under the laws of the State of Delaware and having
its principal place of business at 0000 Xxxx Xxx Xxxx XX.; Palm Bay, Florida
(hereinafter "Intersil").
RECITALS
WHEREAS, Xxxxxx, Intersil Corporation and Intersil Holding Corporation (Intersil
Corporation and Intersil Holding Corporation, collectively hereinafter "Buyer")
have entered into that certain Amended and Restated Master Transaction Agreement
dated as of June 2, 1999 (hereinafter "Master Agreement") that provides for the
sale by Sellers (as defined in Exhibit A to the Master Agreement) and the
purchase by Buyer of certain of the assets used in the operation of the Business
(as defined in Exhibit A to the Master Agreement);
WHEREAS, pursuant to Section 11.13 of the Master Agreement, Xxxxxx is to receive
a royalty based on the sale of certain products by Intersil;
NOW THEREFORE, in consideration of the mutual promises and covenants set forth
herein and in the Master Agreement, the parties agree as follows:
ARTICLE 1 REFERENCE TO THE MASTER AGREEMENT
The Definitions and Rules of Construction as set forth in Exhibit A to the
Master Agreement and the Agreement Conventions as set forth in Exhibit B to the
Master Agreement are incorporated herein by reference.
ARTICLE 2 DEFINITIONS
2.1 "International Territory" shall mean all countries and territories of the
world other than the United States of America, its possessions and territories.
2.2 "Prism(R) Product" means those integrated circuits, which in combination
with other integrated circuits comprise a wireless local area network chip set
compliant with the IEEE Standard 802.11-1997 (approved June 26, 1997) and
802.11b high rate standard (commonly referred to as the Prism(R) I or Prism(R)
II chip set) sold, leased, bartered, or exchanged by Intersil as of the
Effective Date including all non-substantial improvements and derivatives
thereof. The specific integrated circuits that comprise the Prism(R) I and
Prism(R) II chip sets are set forth in Exhibit A.
Any wireless local area network product designed or developed after the
Effective Date will not be considered an improvement to the Prism(R) Product and
will not be covered by this Agreement
if; (a) it involves a substantial redesign of the Prism(R) Product thereby
providing substantial new functions or performing applications not contemplated
in the original design of the Prism(R) Product; or (b) it operates in a
substantially different manner or for a substantially different purpose than the
original Prism(R) Product.
No royalty payments will be due on: (a) product samples, (b) evaluation boards,
(c) products designed by and purchased from a third party and subsequently
resold by Intersil as a component of a chip set, (d) non-recurring engineering
funds received from a third party in return for the design, development or
modification of a product, and (e) the licensing of technology or software
related to the Prism(R) Products.
2.3 "Territory" shall mean all the countries and territories of the world.
2.4 "Total Sales Price" means Intersil's gross invoice price for the Prism(R)
Product packed for shipment without any deductions, except for the following
items, to the extent they are paid or allowed by Intersil:
(a) sales or turnover taxes on sales invoices;
(b) transportation charges and insurance on shipments to customers;
(c) trade or quantity discounts (but not cash discounts allowed to
customers and not agents' commissions); and
(d) credits allowed for Prism(R) Products returned or not accepted by
customers.
(i) If a Prism(R) Product is included as a component of another product
sold by Intersil, then Total Sales Price means the Total Sales Price of
such Prism(R) Product, as if separately sold in an arm's length transaction
or the most nearly comparable Prism(R) Product that has been or would be
sold in the ordinary course of business.
(ii) When Products are sold by Intersil to any Affiliate (as that term is
defined by the Securities Act of 1933, as amended), or when Prism(R)
Products are bartered or exchanged for goods or services, then Total Sales
Price shall be the Total Sales Price at which comparable Prism(R) Products
have been or would be sold in the ordinary course of business.
(iii) In the event that two or more integrated circuits are combined into a
single integrated circuit package ("Combined Product"), and sold (or
leased, bartered, or exchanged) as a component of a Prism(R) Product, then
the amount of royalty payable on the combined product will be
proportionally reduced in five (5%) percent increments to correspond to the
die area of the royalty-bearing integrated circuit die as a percentage of
the total combined die area.
2.5 "United States Territory" shall mean the United States of America, its
possessions and territories.
ARTICLE 3 ROYALTIES
Intersil shall pay to Xxxxxx a royalty of 2% of the Total Sales Price for each
Prism(R) Product sold, leased, bartered, or exchanged by Intersil from the
Closing Date (as defined in the Master Agreement) until the fifth (5th)
anniversary of the Closing Date. No royalty shall be due Xxxxxx for any Prism(R)
Product sold, leased, bartered, or exchanged prior to or following this period.
A Prism(R) Product shall be considered sold on the date of shipment or the date
of an invoice, whichever is earlier. A Prism Product shall be considered
bartered or exchanged on the date of shipment. Only one royalty shall be due for
each Prism(R) Product. This royalty obligation shall continue upon sale of
substantially all of the Prism(R) Product business to a third party or upon an
Initial Public Offering of Intersil.
ARTICLE 4 LIMITATION OF DAMAGES
4.1 Limitation of Liability
XXXXXX SHALL NOT BE LIABLE TO INTERSIL OR ANY THIRD PARTY, WHETHER IN CONTRACT,
TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY) OR OTHERWISE, FOR ANY INDIRECT,
SPECIAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING, BUT NOT LIMITED TO,
LOSS OF ANTICIPATED PROFITS, EVEN IF XXXXXX HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH POTENTIAL LOSS OR DAMAGE.
4.2 Maximum Liability
Xxxxxx' maximum liability for damages rising out of this Agreement shall be
limited to the payments made by Intersil hereunder. In the event of conflict
between this Paragraph 4.2 and any other provisions of this Agreement, than this
Paragraph 4.2 shall govern. This Article 4 and all other paragraphs hereunder
providing Xxxxxx with protection against liability shall survive the expiration,
termination, or cancellation of this Agreement.
ARTICLE 5 TERM
This Agreement shall take effect as of the Effective Date and shall continue
until all royalties have been paid in accord with Article 3.
ARTICLE 6 SALES RECORDS
6.1 Records
Intersil shall keep, and shall cause Intersil Affiliates to keep, full, clear
and accurate records with respect to Prism(R) Product sales sufficient to permit
determination of the royalties due hereunder.
6.2 Quarterly Reports
Within forty-five (45) days after the end of each calendar quarter ending on
March 31st, June 30th, September 30th and December 31st, commencing with the
quarter in which the Effective Date occurs and continuing thereafter until all
royalties payable hereunder shall have been reported and paid, Intersil shall
furnish to Xxxxxx a statement, in a form similar to that of Exhibit B, showing
all said Prism(R) Product that was sold, leased, bartered, or exchanged during
such quarter, and the amount of royalties payable thereon. If no Prism(R)
Product has been sold, leased, bartered, or exchanged that shall be shown on
such statement. If royalties are due as a result of calculations under Paragraph
2.4 (i)-(iii), then Intersil shall provide the method of calculation, along with
reasonable supporting documentation, for the royalty due on the Combined
Product.
6.3 Audit of Records
Xxxxxx shall have the right to audit the Intersil books and records related to
Prism(R) Products at Xxxxxx' expense, by an independent auditor. Said audit
shall be conducted during normal business hours with 5 days written advance
notice provided by Xxxxxx. The designated auditor shall retain in confidence the
information in the books of account and shall report to Xxxxxx only the accuracy
or inaccuracy of the reports rendered to Xxxxxx. If such audit discloses that
the amounts paid to Xxxxxx were understated by more than 5% in any quarter, then
Intersil shall reimburse Xxxxxx for the cost of the audit and pay the amount of
such understated royalties.
6.4 Late Payments
For any late payment, Intersil shall pay Xxxxxx interest at the prime rate. The
prime rate will be as established by Chemical Bank, N.A. on the date the payment
was due.
ARTICLE 7 PAYMENT OF ROYALTY
7.1 Intersil shall pay all the royalty due under this Agreement for the sales,
leases, barters, or exchanges of Prism(R) Product for each calendar quarter
within forty-five (45) days after the end of such calendar quarter.
7.2 All royalty due hereunder shall be paid in United States funds. For purposes
of computing the Total Sales Price and royalty on sales in the International
Territory, the Total Sales Price of the Prism(R) Product bearing royalty
hereunder shall first be determined in the local currency of the country in
which sold and then converted into its equivalent in United States funds at the
bank buying rate for such local currency, as published by Chemical Bank, N.A.
for the last business day of each accounting period.
7.3 Any sum required under the laws of any governmental authority to be withheld
by Intersil, its Subsidiaries or Licensees from payment for the account of
Xxxxxx shall be promptly paid by Intersil for and on behalf of Xxxxxx to the
appropriate tax or other governmental authority and Intersil shall furnish
Xxxxxx with copies of official tax receipts or other appropriate evidence
issued by the appropriate tax or other governmental authorities to enable Xxxxxx
to support a claim for tax or other credit or refund in respect of any sum so
withheld.
ARTICLE 9 APPLICABLE LAW
This Agreement shall be governed by and interpreted under the laws of the
State of New York and the New York courts, without regard to choice of laws.
ARTICLE 10 ENTIRE UNDERSTANDING
This Agreement sets forth the entire understanding between Seller and
Intersil pertaining to its subject matter and supersedes and replaces all prior
oral or written agreements between Seller and Intersil pertaining to such
subject matter.
ARTICLE 11 AMENDMENT
This Agreement may not be amended, supplemented or otherwise modified
except by an instrument in writing signed by both parties.
ARTICLE 12 DISPUTE RESOLUTION AND ARBITRATION
Subject only to Section 13.7 of the Master Agreement, in the event that any
dispute arises between the parties pertaining to this subject matter of this
Agreement, and the parties, through the senior management of Xxxxxx and
Intersil, are unable to resolve such dispute within a reasonable time through
negotiations and mediation efforts by senior executives of both parties, such
dispute shall be resolved as set forth in Section 6(a-j) of Exhibit B of the
Master Agreement, which Section 6(a-j) is incorporated herein by reference.
ARTICLE 13 NOTICES
Any notice required or permitted hereunder shall be given in writing by
personal delivery or by registered or certified mail, return receipt requested,
postage prepaid, and, if sent by mail, shall be effective upon delivery to the
following addresses
Corporate Secretary
Xxxxxx Corporation
0000 Xxxx Xxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxx 00000
General Counsel
Intersil Corporation
0000 Xxxx Xxx Xxxx XX
Xxxx Xxx, Xxxxxxx 00000
Agreed to:
XXXXXX CORPORATION INTERSIL CORPORATION
Signature: /s/ Xxxxxx X. Xxxxxxx Signature: /s/ Xxxxxxx X. Xxxxxxxx
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Name: Xxxxxx X. Xxxxxxx Name: Xxxxxxx X. Xxxxxxxx
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Title: Vice President Title: CEO
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Date: 8/13/99 Date: 8/13/99
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