Software License Agreement

EXHIBIT 10.7


SOFTWARE LICENSE AGREEMENT


This Software License Agreement is entered into by and between Palm Computing, Inc., a subsidiary of 3Com Corporation (collectively, "3Com"), a California corporation with a place of business at 1565 Charleston Road, Mountain View, California 94043, and JD Technology, Inc. ("JD"), a California corporation with a place of business at P.O. Box 7066, Menlo Park, California. The effective date of this Agreement shall be the date last executed below ("Effective Date").


RECITALS


A. 3Com or its suppliers are the owners of software and other technology related to the 3Com Palm Computing platform.


B. JD is a developer, manufacturer and marketer of handheld computing products.


C. JD desires to obtain a license to certain 3Com software and technology, as more particularly described in Exhibit A (Palm Software), in order to develop, manufacture and market handheld computing products incorporating such 3Com software and technology. 3Com is willing to grant JD such a license upon the terms and conditions set forth below.


AGREEMENT


NOW, THEREFORE, the parties agree as follows:


1. DEFINITIONS


1.1 "Confidential Information" means that information of either party ("Disclosing Party") which is disclosed to the other party ("Receiving Party") pursuant to this Agreement, in written form and marked "Confidential," "Proprietary" or similar designation, or if disclosed orally, the Disclosing Party shall indicate that such information is confidential at the time of disclosure and send a written summary of such information to the Receiving Party within thirty (30) days of disclosure and mark such summary "Confidential," "Proprietary" or similar designation. Confidential Information shall include, but not be limited to, trade secrets, know-how, inventions, techniques, processes, algorithms, software programs, schematics, designs, contracts, customer lists, financial information, product plans, sales and marketing plans and business information. References to a Receiving Party or a Disclosing Party shall also include all present and future subsidiary and parent companies of such party, subject to the restrictions contained in this Agreement.


1.2 "JD Products" means any handheld computing products developed by JD, or for JD by a third party, which contain Palm Software, in whole or part, combined with JD's added value.


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1.3 "JD Software" means any software developed or acquired by JD, or for JD by a third party, for the JD Products.


1.4 "Net Revenue" means monies received or receivable by JD in connection with the sale, permitted licensing, distribution or other exploitation of the JD Products, but shall exclude taxes, returns, rebates, and separately stated shipping and handling costs or maintenance, support, and engineering fees.


1.5 [*]


1.6 "Palm Device Applications" means the applications files described in Exhibit A (Palm Software).


1.7 "Palm Device Applications SDK" means 3Com's commercially available software development kit for applications for the Palm Computing platform as described in Exhibit A (Palm Software).


1.8 "Palm Desktop Software" means the 3Com desktop software related to the 3Com Product described in Exhibit A (Palm Software).


1.9 "Palm Development Environment" means the development and debugging tools relating to the Palm OS described in Exhibit A (Palm Software), including a list of certain third-party development tools that are commercially available relating to the Palm OS, provided that JD shall be responsible for obtaining any necessary rights for such third-party development tools.


1.10 "Palm End-User Documentation" means the end-user documentation related to the Palm Software as described in Exhibit A (Palm Software).


1.11 "Palm GUI" means the graphical user interface files for the Palm Computing platform as described in Exhibit A (Palm Software).


1.12 "Palm Installation CD Files" means the artwork, guided tour files, and other files and related elements of the Palm installation CD as described in Exhibit A (Palm Software).


1.13 "Palm Materials" shall mean: (a) the Palm End-User Documentation, Palm Technical Documentation, and any 3Com end user materials provided under Section 7.3 below; and (b) all current and future foreign language versions thereof, to the extent that 3Com has the right to grant JD rights to such versions.


1.14 "Palm OS" means the Palm operating system software files and build tools described in Exhibit A (Palm Software), including: (a) software and documentation provided by 3Com to JD pursuant to Section 6.1; and (b) the Palm OS Drivers. All Palm OS software shall be provided in object code form only, except as may be agreed by the parties pursuant to Section 6.2(b).


* Confidential treatment has been requested for certain portions of this document pursuant to an application for confidential treatment sent to the Securities and Exchange Commission. Such portions are omitted from this filing and filed separately with the Securities and Exchange Commission.


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1.15 "Palm OS Drivers" means the software drivers and sample extensions for the Palm OS as described in Exhibit A (Palm Software).


1.16 "Palm Software" shall mean: (a) the Palm Device Applications, Palm Device Applications SDK, Palm Desktop Software, Palm GUI, Palm Installation CD Files, Palm OS, Palm OS Drivers, and Palm Test Code; and (b) all current and future foreign language versions thereof, to the extent that 3Com has the right to grant JD rights to such versions.


1.17 "Palm Technical Documentation" means the technical documentation, repair manuals, service manual, engineering schematics, and other materials relating to the Palm OS as described in Exhibit A (Palm Software).


1.18 "Palm Test Code" means the software quality assurance and hardware and production test code described in Exhibit A (Palm Software).


2. LICENSES


2.1 Development and Documentation License.


(a) 3Com Deliverables. Subject to the terms and conditions of this Agreement, 3Com hereby grants to JD a limited, non-exclusive, non-transferable (except as provided in Section 17.9), fully-paid license to use and reproduce the Palm Development Environment, the Palm Software in object code form, and the Palm Materials solely to develop, manufacture, test and support the JD Products. Such license shall include the right to use any 3Com intellectual property rights associated with or related to use of the Palm Development Environment, Palm Software and/or Palm Materials, in connection with the development, manufacturing, testing or support of such items solely within JD Products.


(b) Derivative Works. Subject to the terms and conditions of this Agreement, 3Com hereby grants to JD a limited, non-exclusive, non-transferable (except as provided in Section 17.9), fully-paid license to create derivative works based upon the Palm Materials and, to the extent permitted under Section 6.2 (OS Enhancements), the Palm OS (collectively, "Derivative Works") solely for use within JD Products.


2.2 Distribution License. Subject to the terms and conditions of this Agreement, 3Com hereby grants to JD a limited, non-exclusive, non-transferable (except as provided in Section 17.9), worldwide, royalty-bearing license to use, reproduce, and distribute (directly and through third parties) solely for use within JD Products: (i) the Palm Software in object code form only; (ii) the Palm Materials (subject to Section 13); and (iii) Derivative Works. Such license shall include the right to use any 3Com intellectual property rights associated with or related to use of the Palm Development Environment, Palm Software and/or Palm Materials, in connection with the distribution of such items within JD Products. Such license shall also include the right to grant end user sublicenses subject to the provisions of Section 10.4 below.


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2.3 Compatibility and Trademark License.


(a) Compatibility Testing. 3Com will finalize and provide to JD compatibility test criteria for ensuring interoperability of third party add-on software for the Palm OS and the JD Products ("Test Criteria") within ninety (90) days of the Effective Date. JD and 3Com will agree on a reasonable time period for compatibility testing of the JD Products by any of 3Com's independent testing labs ("Test Period") which shall be incorporated into the Test Criteria. When finalized, such Test Criteria shall be attached as Exhibit B (Test Criteria) to this Agreement. 3Com shall use its reasonable discretion in determining the contents of the Test Criteria; provided that, in the event JD does not approve of the Test Criteria, as its sole and exclusive remedy JD may terminate this Agreement immediately without liability within thirty (30) days of its first receipt of the Test Criteria from 3Com. Prior to the release of any and all JD Products, or any upgrade or new version thereof, JD shall submit the JD Products at its expense to any of 3Com's approved independent compatibility testing labs ("Approved Testing Lab") for compatibility testing in accordance with the Test Criteria. If the Approved Testing Lab rejects the JD Products because of a nonconformance with the Test Criteria, then such testing lab will provide JD and 3Com a detailed written statement of the reasons for such rejection. ("Statement of Errors"). Upon receipt of the Statement of Errors, JD shall use reasonable efforts to modify the JD Products to conform to the Test Criteria. The parties acknowledge that the contents of the Test Criteria may need to be changed from time to time if major new functionality is added to the Palm Software. 3Com shall use its reasonable discretion in determining new Test Criteria for such Palm Software with such new functionality and will apply such new Test Criteria to its internal customers and to JD and its other licensees.


(b) Compatibility Certification Requirement. JD agrees that it shall not release or distribute any JD Products which have not received compatibility certification from an Approved Testing Lab in accordance with the Test Criteria. Each version of a JD Product shall be required to pass the Test Criteria only once, regardless of 3Com's subsequent modifications to the Palm Software. However, in order to obtain compatibility certification for Palm Software with new functionality and new Test Criteria as described in the last paragraph of Section 2.3(a), JD may submit JD Products for compatibility testing against such new Test Criteria in accordance with Section 2.3(a). JD may indicate compatibility certification for JD Products only with respect to the version(s) of the Test Criteria which the JD Products have passed.


(c) Trademark License. Subject to subsections (a) and (b) above and the other terms and conditions of this Agreement, 3Com hereby grants to JD a limited, non-exclusive, nontransferable (except as provided in Section 17.9), fully-paid license to use, subject to the guidelines set forth in 3Com's Trademark Policy Guidelines attached hereto as Exhibit C, the "Palm Computing Platform Compatible" trademark and such other 3Com trademarks and the respective stylistic marks as may be mutually agreeable and the artwork for which has been provided by 3Com to JD (collectively, the "3Com Trademarks") in connection with the marketing and sale of JD Products that have received compatibility certification in accordance with subsection (a) above. JD shall use such trademarks in conjunction with the distribution, promotion, and marketing of any JD Products that have received compatibility certification, consistent with the guidelines set forth in Exhibit C. 3Com shall have the right to receive free


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samples of all advertising and promotional materials and reasonable numbers of sample production units of the JD Products and related JD documentation on which such trademarks are used to ensure that 3Com's quality standards are maintained. The foregoing license shall be limited to use of the 3Com Trademarks for the purposes of Section 8.3. JD shall have the right to permit its [*] for the JD Products to use the 3Com Trademarks as set forth herein, provided that JD contractually obligates such [*] to comply with the terms of Section 7.3 and this Section 2.3, and provided further that 3Com reserves the right to enforce and protect its trademark rights directly in the event of any failure to comply with such terms.


2.4 Right to Sublicense.


(a) [*] Within thirty (30) days of the execution of each [*], JD shall notify 3Com in writing of such execution and the identity of the [*]. Each such [*] will contain provisions that protect 3Com's proprietary rights to no less of an extent than such rights are protected by Sections 2.3 (Compatibility and Trademark License), 2.5 (No Reverse Engineering), 2.6 (Inspection Rights), 8.3 (Branding), 10 (Proprietary Rights), 13 (Confidentiality), and 15 (Export Regulations) of this Agreement. In the event of any failure by any [*] to comply with the foregoing terms of their [*], JD shall use its reasonable efforts to enforce and protect 3Com's intellectual property rights against such [*], provided that 3Com reserves the right to enforce and protect its intellectual property rights directly against such [*] with the cooperation of JD.


(b) Subject to the requirements of Sections 2.5 and 13, JD shall have the right to sublicense its rights under Section 2.1 to consultants and contractors solely for the purpose of developing, manufacturing, testing, and supporting JD Products for JD.


(c) Except as specified in this Section 2.4, JD shall not have the right to sublicense any of its rights under this Agreement.


2.5 No Reverse Engineering. JD shall not reverse engineer, reverse compile or disassemble any Palm Software, or otherwise attempt to derive the source code to any Palm Software. The foregoing shall not apply to such activities conducted in the ordinary course of technical support of JD Products such as may occur through the use of debugging tools.


2.6 Inspection Rights. 3Com shall have the right, upon reasonable advance notice, to inspect JD's records and facilities, and its [*], with respect to the manufacture of the JD Products hereunder and to receive sample units thereof in order to verify that such manufacturing is within the scope of this Agreement, and that there are appropriate security procedures to protect 3Com's Confidential Information. JD shall have similar rights with respect to its contract manufacturers sublicensed under Section 2.4(b).


2.7 No Other Licenses. The licenses granted under this Agreement are specifically set forth herein, and no licenses are granted by 3Com to JD by implication or estoppel.


* Confidential treatment has been requested for certain portions of this document pursuant to an application for confidential treatment sent to the Securities and Exchange Commission. Such portions are omitted from this filing and filed separately with the Securities and Exchange Commission.


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2.8 Limitations on Scope of Agreement. Notwithstanding the other terms and conditions of this Agreement, the rights granted to JD under this Agreement do not, and will not, include:


(a) [*]


(b) [*]


(c) any right or license to sublicense any of the foregoing rights to any OEMs, consultants, contractors, or other third parties.


3. DELIVERY AND SOURCING


3.1 Delivery of Licensed Materials. Within forty-five (45) days following the Effective Date, 3Com will deliver to JD a complete and current set of the Palm Software, Palm Development Environment and Palm Materials.


3.2 Third Party Sourcing. Exhibit D contains a list of custom components ("Components") that JD may wish to purchase from 3Com's third party component suppliers and/or manufacturers ("Sources") for incorporation in JD Products. 3Com hereby grants JD the right to use such suppliers and procure such Components during the term of this Agreement, and will notify such Sources of the same. In the event that such Sources are unable to promptly fill all Component orders from 3Com due to market demand, manufacturing delays, or other factors, JD acknowledges and agrees that such Sources shall fulfill all orders from 3Com before fulfilling orders from JD or JD's [*].


4 ROYALTIES, FEES, AND REPORTS


4.1 Royalties. JD shall pay to 3Com royalties on its Net Revenues ("Royalties") as specified in Exhibit E (Royalties and Fees). Such royalties shall be due and payable to 3Com regardless of whether JD collects payments for the JD Products from JD's customers.


4.2 Maintenance and Support Fees. JD shall pay to 3Com fees as specified in Exhibit E (Royalties and Fees) for maintenance, support, updates, and upgrades provided by 3Com to JD pursuant to Sections 6.1 and 7. Such fees shall be due and payable to 3Com in advance beginning one year after the Effective Date, regardless of whether JD collects payments for the JD Products or their maintenance and support from JD's customers.


4.3 Reports. JD shall keep adequate records to verify all reports and payments to be made to 3Com pursuant to this Agreement for a period of two (2) years following the date of


* Confidential treatment has been requested for certain portions of this document pursuant to an application for confidential treatment sent to the Securities and Exchange Commission. Such portions are omitted from this filing and filed separately with the Securities and Exchange Commission.


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such reports and payments. 3Com shall have the right to select an independent certified public accountant mutually agreeable to the parties to inspect no more frequently than annually the records of JD on reasonable notice and during regular business hours to verify the reports and payments required hereunder. If such inspection should disclose any underreporting, JD shall pay 3Com such amount within thirty (30) days of the conclusion of such inspection. The entire cost of such inspection shall be borne by 3Com; provided, however, that if JD is determined by such inspection to have underpaid royalties by five percent (5%) or more, then the cost of such audit shall be borne by JD.


5. PAYMENT TERMS


5.1 Payment. Royalties shall accrue upon shipment to a customer of JD Products by JD and shall be payable within [*] after the end of each calendar [*]. Each Royalty payment shall be accompanied by a statement setting forth in sufficient detail the basis upon which royalties were calculated. Payments and statements shall be sent to 3Com at the address set forth at the beginning of this Agreement or such other address as 3Com may designate in writing.


5.2 Royalty-Free Units of JD Products. JD shall have the right to manufacture and distribute a commercially reasonable number of JD Products, provided that it does not receive any revenue therefrom, for the following purposes without incurring a Royalty obligation to 3Com: units for testing, units with limited functionality for reseller point of purchase and demonstration, units provided to 3Com, Palm, or other Palm licensees, units used internally by employees or contractors of JD, and units given to press and analysts.


5.3 [*]. [*] Such option will be JD's sole and exclusive remedy for 3Com's breach of this Section 5.3. The parties acknowledge that 3Com's current license agreements with [*] and [*] are exempt from the requirements of this provision.


5.4 Taxes. In addition to any other payments due under this Agreement, JD agrees to reimburse and hold 3Com harmless from any sales, use, excise, import or export, value added or similar tax or duty, any other tax not based on 3Com's net income, and any governmental permit and license fees, customs fees and similar fees levied upon delivery of the deliverables and/or services hereunder which 3Com may incur in respect of this Agreement.


6. UPDATE RESPONSIBILITIES AND OS ENHANCEMENTS


6.1 Updates and Additions to Palm Software and Palm Materials. During the term of this Agreement and subject to Section 9.4 (3Com Update and Support Obligations), 3Com shall


* Confidential treatment has been requested for certain portions of this document pursuant to an application for confidential treatment sent to the Securities and Exchange Commission. Such portions are omitted from this filing and filed separately with the Securities and Exchange Commission.


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deliver to JD all upgrades, bug fixes, modifications, enhancements and new versions of the Palm Software and Palm Materials within ten (10) business days after 3Com's internal beta releases or production releases. Upon such delivery, the licenses granted to JD pursuant to Section 2 above shall be deemed to include the items delivered pursuant to this Section 6.1. JD acknowledges that during the term of this Agreement, in addition to delivering to JD the upgrades, bug fixes, modifications, enhancements and new versions referred to above, 3Com. expects to release separate modules and components for the Palm Computing platform for which 3Com may elect to require that licensees pay separate consideration and enter into separate agreements or amendments in order to have any rights to such modules or components.


6.2 OS Enhancements.


(a) Approved OS Enhancements. In the event that JD requests in writing that 3Com add new functionality to the Palm OS requiring enhancements to the Palm OS source code, 3Com will consider such request in good faith and will respond to JD in writing within thirty (30) days of its receipt of such request (or within such longer time period as may be reasonably agreed by the parties) with whether 3Com intends to implement such request and, if so, with a proposed schedule for implementation. In the event 3Com approves such request under a proposed schedule reasonably acceptable to JD ("Approved OS Enhancements"), 3Com will use its reasonable commercial efforts to implement such enhancements within the proposed schedule, whereupon such Approved OS Enhancements will be deemed additional Palm OS software for all purposes of this Agreement. Upon delivery to JD, the licenses granted to JD pursuant to Section 2 above shall be deemed to include such Approved OS Enhancements. JD shall execute all assignments and other documents as may be requested by 3Com to evidence and perfect 3Com's ownership of the Approved OS Enhancements and the intellectual property rights therein.


(b) Implementation by JD. To the extent that 3Com rejects JD's request for Palm OS enhancements, or if 3Com's proposed schedule is not reasonably acceptable to JD, then JD may notify 3Com in writing that JD wishes to implement such enhancements itself, whereupon the parties will negotiate in good faith the terms under which JD will develop the enhancements, including: (i) which Palm OS source code and tools JD will require; (ii) the limitations that will be placed on JD's (and any contractors') use of such source code and tools; (iii) the parties respective intellectual property rights in such enhancements; (iv) 3Com's responsibility, if any, for support and maintenance of such enhancement; and (v) JD's responsibility for any costs and expenses that 3Com may incur in connection with such implementation, support, and maintenance.


7. SUPPORT


Subject to Section 9.4 (3Com Update and Support Obligation), 3Com shall provide JD with the following support during the term of this Agreement in accordance with the 3Com Support terms set forth in Exhibit F (3Com Support Services).


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7.1 Development Support. 3Com will provide JD with a reasonable level of support by telephone, e-mail, fax or, if requested by JD, in person at 3Com's Mountain View and/or Santa Clara, California site, during 3Com's normal business hours (8:00 am - 5:00 pm California time, excluding holidays) in connection with JD's use of the Palm Software to develop and support the JD Products, including the use of reasonable commercial efforts: (i) to answer JD's questions regarding the proper utilization and optimization of the Palm Software; and (ii) to provide solutions, workarounds and/or patches to correct any reproducible error in the Palm Software. JD shall designate up to two qualified individuals per Designated Site to act as primary technical liaisons for communications with 3Com's technical support staff. 3Com shall designate two qualified individuals to act as primary and secondary technical liaisons for communications with JD's technical support staff.


7.2 Customer Support Training. During the term of this Agreement, 3Com shall, at its expense, provide JD with one (1) course per version of the Palm Software of basic and advanced training as it relates to customer support for up to six (6) JD employees engaged in the technical support of the JD Product. 3Com shall further provide to JD, at 3Com's expense, similar training for modifications or other revisions to the Palm Software, as it relates to customer support. Training will be conducted at 3Com's facilities in Mountain View and/or Santa Clara, California or such other mutually agreeable facility. Each training course shall commence on a mutually agreed upon date. Such training shall cover in detail, the installation, configuration, operation, trouble-shooting, adjustment, test and maintenance of the Palm Software, as it relates to customer support. JD shall provide a reasonable quantity of appropriate JD Product units as training aids. 3Com shall provide copies of the student training guides, and all other necessary materials to each trainee and to JD. All other training requested by JD and provided by 3Com shall be billed at 3Com's standard rates.


7.3 Customer Support. JD shall be solely responsible for First Level Support and Second Level Support of the JD Products. The parties agree to work together to develop and facilitate the call handling processes to provide seamless customer support and technical service to resellers and end users of the JD Product. In addition, 3Com will provide JD with Third Level Support during the term of this Agreement. The definitions of First, Second And Third Level Support shall be as set forth in Section 7.4 below. During the term of this Agreement, 3Com shall permit JD to create hyperlinks to the 3Com Web site and to display certain 3Com end user materials on JD's Web site for customer support purposes, subject to 3Com's prior approval of each proposed use. During the term of this Agreement, JD shall permit 3Com to create hyperlinks to the JD Web site and to display certain JD end-user materials on 3Com's Web site for customer support purposes, subject to JD's prior approval of each proposed use.


7.4 Technical Support.


(a) Technical Support Levels. For the purposes of Section 7.3 above, "Level" means a certain class of service provided for the JD Products. Definitions are as follows:


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(i) "First Level Support" means first call support on all customer calls; technical support staff answers technical inquiries regarding JD Products, performs JD Product configuration support, if applicable, and provides broad troubleshooting expertise.


(ii) "Second Level Support" means specialist level technical support; technical support/escalation staff performs problem isolation and replication, and implements a solution for a problem that is not the result of a Palm Software program error. In the case of a Palm Software program error, the technical staff is able to identify the source of the error, create a reproducible test case, and document the details of the error for escalation to 3Com. ...