Strategic Alliance Agreement Between Fev And Dsp

EXHIBIT 10.9


STRATEGIC ALLIANCE AGREEMENT


BY AND BETWEEN


FEV MOTORENTECHNIK GMBH & CO. KG


AND


DSP TECHNOLOGY INC.


[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.


STRATEGIC ALLIANCE AGREEMENT


This Agreement is entered into by and between FEV Motorentechnik GmbH & Co. KG ("FEV") with a place of business at Neuenhofstrasse 181, D-52078 Aachen and DSP Technology Inc. ("DSPT") with a place of business at 48500 Kato Road, Fremont, California 94538. The effective date of this Agreement shall be February 26, 1995 ("Effective Date").


WHEREAS, FEV and DSPT, providing complementary products, desire to combine resources to survive the strong competition in the field of test and instrumentation products for the Transportation Industry.


NOW THEREFORE, the Parties agree to enter into a strategic alliance to achieve the aforementioned goals and hereby agree as follows:


1. Definitions. This Agreement and the definitions herein are limited to Test
----------- and Instrumentation Products, unless otherwise explicitly stated.


1.1 Continuous Product Improvement shall mean minor changes to software or
------------------------------ hardware such as bug fixes, hardware ECOs (internal engineering change orders) without adding new functionality (features and/or functions) to a Product or PreExisting Product. These do not require a Product Appendix.


1.2 Competitor shall mean any person or legal entity and its subsidiaries
---------- which develops and/or markets one or more products or services for the Transportation Industry which are the same or substantially similar to those of DSPT or FEV, respectively. Competitors of each Party shall be set forth under the other Party's name (as Target) on the Competitor List, which shall be initially delivered and executed by both Parties upon execution of this Agreement and which may be modified from time to time by mutual agreement of the Management Team, as evidenced by each Party executing such revised Competitor List. Neither Party shall unreasonably withhold approval of modifications to the other Party's Competitor List to add an entity as a Competitor of a Party in cases of evident and substantial competition by an entity with such Party.


1.3 Developers shall mean employees, agents or contractors of either Party.
----------


1.4 Documentation shall mean any and all of the documents and other
------------- materials, prepared in accordance with industry standards and practices, relating to the Independent Technology or Joint Technology necessary to manufacture the Products, PreExisting Products or Enhanced Products.


1.5 Enhancements shall mean any additions to functionality (new features
------------ and/or functions), specifically designed for use in and primarily sold to the Transportation Industry, to any Product, PreExisting Product or Enhanced Product hardware and/or software, which is successfully developed pursuant to a Product Appendix.


1.5.1 Customer Proprietary Enhancement shall mean a customer
-------------------------------- requested addition or change in functionality (features or functions) in Products, PreExisting Products or Enhanced Products, in either hardware or software, that is proprietary to that customer, and such customer has requested in writing not to share such proprietary information with the other Party. While these do not require a Product Appendix, to the extent permissible, the developing Party must inform the other Party in writing that such Customer Proprietary Enhancements have been requested.


1.5.2 Localized Enhancement shall mean an Enhancement with
--------------------- specialized functions for a particular market or customer where such Enhancement is not proprietary to such customer. This requires a Product Appendix.


1.6 Enhanced Product shall mean a PreExisting Product or New Product
---------------- with one or more Enhancements.


1.7 Free Products shall mean [*]. All Free Products in existence as
------------- of the Effective Date shall be set forth on the "Free Products List," which shall be initially delivered and executed by the Management Team upon execution of this Agreement. The Free Products List may be modified from time to time by mutual agreement of both Parties, as evidenced by the Management Team executing such revised Free Products List.


1.8 GPM (Guidelines for Product Management) shall mean guidelines
-------------------------------------- which [*].


1.9 Group Managers shall mean the highest ranking manager of each
-------------- Party who is directly responsible for that Party's integrated Test and Instrumentation Products for the Transportation Industry.


1.10 Independent Technology shall mean Technology solely owned by
---------------------- either Party which is not publicly available and which is in existence and has been incorporated into a PreExisting Product or a Free Product or any other product solely owned by either Party as of the date it is contributed to a Product Appendix pursuant to Paragraph 12.2 ("Technology Exchange").


1.11 Intellectual Property Rights shall mean all patents and other
---------------------------- patent rights (such as continuations, continuations in part, and reissues), utility models, copyrights and mask work rights, including without limitation, all applications and registrations with respect thereto, rights in trade secrets, know-how, trademarks and trade names and all other intellectual property rights which are held by one or both Parties in any jurisdiction.


1.12 Invention shall mean any Invention or discovery which is or may
--------- be patentable or otherwise protectable under Title 35 of the United States Code or Section 1 et seq. of the German Patentgesetz and Gebrauchsmustergesetz (the "Patent Laws") as applicable. For the purposes of this Agreement, an invention or discovery shall be deemed to be an Invention when a Party determines that it is patentable under the Patent Laws of that Party's nationality, or the Parties mutually determine that it is patentable under either of the Patent Laws.


1.13 Joint Inventions shall mean those Inventions that [*].
----------------


[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.


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1.14 Joint Technology shall mean [*].
----------------


1.15 Management Team shall mean Geschftsfuhrender Gesellschafter of
--------------- FEV and CEO of DSPT.


1.16 Manufacturing Cost shall mean [*].
------------------


1.17 New Product shall mean [*]. The New Products include but are not
----------- limited to those Products listed on the New Products List initially delivered and executed by both Parties upon execution of this Agreement.


1.18 Net Realized Revenue shall mean the price paid by the customer
-------------------- for Products, PreExisting Products and Enhanced Products, and documented in the invoice, [*].


1.19 Parallel Product shall mean a product, [*].
----------------


1.20 Party shall mean either FEV or DSPT, and Parties shall mean FEV
----- and DSPT.


1.21 PreExisting Product shall mean [*].
-------------------


1.22 Patents shall mean all patents owned solely by a Party, or
------- jointly by the Parties.


1.23 Product(s) shall mean:
----------
(i) Enhancements
(ii) Localized Enhancements
(iii) New Products


[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.


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1.24 Product Appendix shall mean [*]. The Product Appendix Form shall
---------------- be developed by the Parties and delivered upon execution of this Agreement, and may be modified from time to time by mutual agreement of both Parties. Each Product Appendix shall incorporate by reference the terms and conditions of this Agreement. Draft Product Appendices for those products on the New Product List and for certain Enhancements and PreExisting Products shall be initially delivered and executed by the Parties upon execution of this Agreement and shall be modified and completed after the Effective Date, as evidenced by the mutual execution of such Product Appendices by the Parties.


1.25 Product Development shall mean the development of Enhancements
------------------- and New Products, in addition to the Continuous Product Improvement of PreExisting Products, Enhancements, and New Products.


1.26 Product Leader shall mean the Party who is responsible for
-------------- complete product management consistent with the terms of the Product Appendix. The initial Product Leaders are set forth on the Product Leader List initially delivered and executed by both Parties upon execution of this Agreement.


1.27 Product Managers shall mean those managers within FEV and DSPT
---------------- that are responsible for the product management of Products, PreExisting Products and Enhanced Products and for resolving in good faith by unanimous agreement any issues relating to their responsibilities. One Product Manager shall be appointed by the Group Manager for each Party for each Product Appendix in accordance with Paragraph 4.7 ("Management").


1.28 Product Share Tables shall mean tables included in each Product
-------------------- Appendix defining for each Product, PreExisting Product and Enhanced Product [*].


1.29 Proprietary Information shall mean, except as otherwise
----------------------- provided in this Agreement, all information marked or designated by a Party as "Proprietary" or "Confidential;" and all information, whether or not in written form, which the receiving Party knows or has reason to know is confidential information of the other Party. As used herein, Proprietary Information includes, but is not limited to, discoveries, ideas, designs, drawings, specifications, techniques, models, data, documentation, customer lists, marketing plans, and financial and technical information.


1.30 Rest of World ("ROW") shall mean [*].
---------------------


1.31 Technology shall mean proprietary expertise, algorithms,
---------- Inventions, trade secrets, ideas, know-how, Patents, copyrightable works, data, designs, processes, specifications, fabrication techniques or parameters or procedures, packaging techniques, recipes, device structures, chemical constituents and formulations, patent applications, and other information owned solely or jointly by the Parties relating to products for the Transportation Industry, including their design, development, manufacture, fabrication, testing or servicing. Technology shall not include Third Party Technology.


[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.


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1.32 Territory shall mean such countries [*] as set forth on the
--------- Territory List to be initially delivered and executed by the Parties upon execution of this Agreement. The Territory List may be modified from time to time by mutual agreement of the Management Team, as evidenced by each Party executing such revised Territory List.


1.33 Test and Instrumentation Product shall mean any tool or piece
-------------------------------- of equipment for measurement and control in the field of research, development and testing for the Transportation Industry.


1.34 Third Party Technology shall mean any technology jointly owned
---------------------- by any Party with any third party or licensed by any Party from any third party.


1.35 Transportation Industry shall mean the automotive industry,
----------------------- off-road equipment manufacturers, marine engine industry, supplier industry, fuels and lubricant industry, automotive engineering development companies, companies developing, manufacturing or selling combustion engines for power generation, and other combustion engine-related companies not specified.


1.36 Transfer of Control shall mean:
-------------------


1.36.1 in the case of DSPT:


(a) [*].


(b) [*].


1.36.2 in the case of FEV:


(a) [*].


(b) [*].


(c) [*].


(i) [*].


[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.


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[*].


(ii) [*].


(iii) [*].


1.36.3 [*].


2. Overview of the Strategic Alliance.
----------------------------------


2.1 Goals. The Parties intend to [*], which can effectively compete in
----- the Transportation Industry. Consistent with the mission, goals and business plan of the strategic alliance as approved and revised by the Management Team from time to time, the Parties will:


2.1.1 [*].


2.1.2 [*].


2.2 Proposal of New Product and Enhancements. The Parties agree that in
---------------------------------------- order to strengthen the strategic nature of this alliance, neither Party will develop or market [*].


2.3 Parallel Products. [*].
-----------------


2.4 [*] Distributorship.
--------------------


2.4.1 DSPT hereby appoints FEV [*] distributor within FEV's Territory of DSPT's PreExisting Products. FEV shall not promote or distribute any products which are directly competitive to such PreExisting Products without the prior written approval of DSPT.


FEV hereby appoints DSPT [*] distributor within DSPT's Territory of FEV's PreExisting Products. DSPT shall not promote or distribute any products which are directly competitive to such PreExisting Products without the prior written approval of FEV.


Nothing in this Agreement, however, shall prevent either Party from accepting unsolicited orders for its PreExisting Products from outside of its respective Territory.


[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.


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2.4.2 Effective upon the distribution by DSPT of more than [*], DSPT hereby appoints FEV as the [*] of DSPT. DSPT shall provide FEV with notice immediately upon the distribution of the [*]. FEV may decline such appointment [*] by notifying DSPT in writing, and DSPT shall then be [*]. FEV shall not promote or distribute any products which are directly competitive to the Free [*] without the prior written approval of DSPT.


Effective upon the distribution by FEV of more than three [*], FEV hereby appoints DSPT as the [*] of FEV. FEV shall provide DSPT with notice immediately upon the distribution of the [*]. DSPT may decline such appointment [*] by notifying FEV in writing, and FEV shall then be free to [*]. FEV shall not promote or distribute any products which are directly competitive to the [*] without the prior written approval of FEV.


Nothing in this Agreement, however, shall prevent either Party from accepting unsolicited orders for its [*] from outside of its respective Territory.


2.4.3 The Parties shall mutually agree as necessary to the further terms and conditions of the [*] distributorship arrangements set forth in Paragraphs 2.4.1 and 2.4.2.


3. Product Appendix Procedure.
--------------------------


3.1 Either Party may [*] and submitting [*] it to the [*] for written approval prior to completion of [*].


3.2 The Parties agree that the development of a [*] and that the [*] of the [*] by both Parties will be a [*]. However, major changes in the [*] and manufacturing site have to be [*]. Other changes may be [*]. [*] will be [*] by the Management Team, so that the Product Share Tables are consistent with the work performed.


3.3 For the Product Appendix procedure the following general rules will apply:


3.3.1 A Product Appendix is not required for Continuous Product Improvements. However, the other Party needs to be kept completely informed of such improvements, as set forth in the GPM and in Paragraph 12.1 ("Technology Exchange").


3.3.2 One Product Appendix is required for each (i) PreExisting Product to be distributed pursuant to Paragraph 2.4 ("[*] Distributorship"), (ii) Product, and (iii) Enhanced Product.


[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.


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3.4 If a Party proposes that the Parties develop a New Product by means of a draft Product Appendix and the other Party declines (in writing or by failing to take action for [*] to participate in the development, the proposing Party is thereafter entitled to [*], subject to the provisions of Paragraphs 3.4.1, 3.4.2 and 3.4.3. If a Party proposes that the Parties develop Enhancements by means of a draft Product Appendix and the other Party declines, (in writing, or by failing to take action for [*], to participate in the development, the other Party is thereafter entitled to [*]. However, the declining Party reserves the right to [*]. The proposing Party shall notify the declining Party, immediately and in writing, of the [*].


3.4.1 GPM P-1 Phase. If a Party initially elects not to
------------- participate in a Product Appendix and the other Party proceeds with such Product Development, the declining Party may [*].


3.4.2 GPM P-1 Phase Completion. If a Party initially elects
------------------------ not to participate in a Product Appendix, the declining Party may [*].


3.4.3 Post GPM P-1 Phase. If a Party initially elects not to
------------------ participate in a Product Appendix and the other Party proceeds with such Product Development and distribution, the declining Party may [*].


3.5 Notwithstanding the foregoing, neither Party shall be permitted to submit a draft Product Appendix for any Enhancement or New Product, or develop a product without such Product Appendix, which the Proposing Party has reason to know (a) [*], and (b) [*]. Such consent is not to be unreasonably withheld or delayed. Moreover, neither Party shall submit a draft Product Appendix for any Enhancement or series of Enhancements or for Localized Enhancements, or develop such enhancements without such Product Appendix, which enhancements the Proposing Party knows are unnecessary, or impractical, or unmarketable, or not cost-effective. Submission of Product Appendices for Enhancements or development of enhancements [*].


[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.


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[*].


4. Management.
----------


4.1 The management structure will consist of the Management Team, Group Managers and Product Managers.


4.2 The Management Team will meet a minimum of four times per year at [*] times and locations (or telephonically) to:


4.2.1 exchange information as defined in a Sample Agenda which shall be initially delivered and executed by both Parties upon execution of this Agreement and which may be modified from time to time [*] of the Management Team of both Parties.


4.2.2 FEV, its Geschaftsfuhrer and its Group Manager and other FEV affiliates and any other persons with access to this information will each be governed by DSPT's insider trading compliance policy as set forth in DSPT's insider trading policy, which shall be delivered upon execution of this Agreement, while this Agreement remains in effect. Each Party shall restrict access to the information provided under Paragraph 4.2.1 to the Parties listed or to others in the respective organizations with a "need to know."


4.3 The Management Team will approve the distribution and marketing approach for the Products. The Management Team will also approve the designation of any joint ventures or distributors as necessary for distribution and marketing of the Products.


4.4 Either FEV or DSPT will be designated in the Product Appendix as being the Product Leader, as approved by the Management Team.


4.5 [*].


4.6 DSPT [*] FEV Test Technology Group [*]. Also, FEV [*] DSPT Transportation Group [*]. [*].


4.7 The Product Managers will have primary responsibility for the working level day-to-day product management of Products developed under the terms of a Product Appendix and for resolving in good faith by unanimous agreement any issues relating to their responsibilities. Each Group Manager shall appoint a Product Manager for each New Product or Enhancement to be developed. The two Product Managers designated for each Product Appendix may vary from appendix to appendix. If the Group Manager fails to appoint such Party's Product Manager for any project, the Group Manager shall serve in such role. Such Product Managers shall initially be described in the applicable Product Appendix. Either Party


[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.


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may change the identity of such Party's Product Manager at any time upon prior written notice to the other Party, but the Parties agree to exercise reasonable restraint in exercising this right so that there is a reasonable continuity of supervision for each development project.


4.8 Each Product Manager shall be responsible for keeping the other Party's Product Manager informed of the progress of the project and any problems encountered with respect to the research and development work being performed in accordance with the applicable Product Appendix and for responding to any reasonable inquiry made by the other Product Manager regarding any such development work. Each Party has to submit all of the required information as defined in the GPM and Paragraph 12.1 ("Technology Exchange"), and handle the disclosure and receipt of information in accordance with Paragraph 19.7 ("Proprietary Information; Nondisclosure") of this Agreement.


5. Resolution of Technical and Business Issues.
-------------------------------------------


5.1 [*].


5.2 [*].


5.3 [*].


6. Contributions of the Parties.
----------------------------


6.1 DSPT and FEV will (i) share in contributing engineering personnel and equipment necessary to carry out each Party's respective portion of the proposed research and development, (ii) share in contributing the use of facilities, and (iii) share in providing other resources to the development effort. Where practicable, the Parties will bear expenses in proportion to their respective portions of the proposed research and development, with final decisions on sharing of expenses and resources to be made by the Group Managers by mutual agreement.


6.2 Both Parties will [*].


6.3 Both Parties will [*].


[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.


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6.4 Both Parties will, as practicable, in a reasonably timely manner, [*], including, but not limited to [*].


6.5 Both Parties will be [*].


6.6 Both Parties will, in general, [*]. [*] will be monitored and compared to the development plan in the Product Appendix and the GPM during the development of the Product or Enhanced Product. [*].


6.7 The Party who manufactures the Products, Enhanced Products and PreExisting Products will be [*]. The purpose of [*] is to [*] on the [*] so that over time [*]. The Parties agree to use reasonable efforts to use information from [*] where commercially reasonable.


6.8 Each Party will [*].


7. Product Revenue Shares.
----------------------


7.1 The Product Share Table for Products, PreExisting Products and Enhanced Products shall [*].


7.2 Payment. The Parties shall be paid monthly in U.S. Dollars
------- within thirty (30) days of the end of the month in which the customer invoice is partially or fully paid. Payment to the Parties will reflect any reversals due to Product, PreExisting Product or Enhanced Product returns occurring in that month.


8. Costs. Each Party [*]. During the performance of this Agreement, each
----- Party shall provide the other Party with reasonable office space, equipment and secretarial help without charge for use by such Party when visiting the facility of the other Party.


9. Loaned Equipment, Capital Equipment and Supplies.
-------------------------------- ...