Joint Development and License Agreement

Exhibit 99(c)(7)


EXECUTION COPY


JOINT DEVELOPMENT AND LICENSE AGREEMENT


This LICENSE AGREEMENT is made and effective as of March 18, 1998 ("Effective Date") by and between MOTOROLA, INC., a Delaware corporation ("Motorola"), having a principal place of business at 1303 E. Algonquin Schaumburg, IL 60614, and NETSPEAK CORPORATION, a Florida corporation ("NetSpeak"), having a principal place of business at 902 Clint Moore Road, Suite 104, Boca Raton, Florida 33407.


WHEREAS, MOTOROLA seeks to accelerate its efforts in developing products for communications (including voice, fax, video, audio, and data) over Internet Protocol (IP) networks, particularly RF communications networks.


WHEREAS, NetSpeak seeks to work with Motorola to manufacture and distribute NetSpeak's IP communications software and hardware products.


NOW THEREFORE, in consideration of the mutual covenants, representations and warranties, and subject to the terms and conditions contained herein, the parties agree as follows:


This Agreement consists of the attached Basic Terms and Conditions, including the Exhibits attached thereto (collectively, the "AGREEMENT").


All capitalized terms contained herein shall have the meaning set forth in Exhibit A, attached hereto, unless otherwise defined in the main text of this Agreement.


1. GRANT OF RIGHTS.


1.1 EXCLUSIVE LICENSE GRANT TO CREATE AND REPRODUCE RF PRODUCTS. Subject to the terms and conditions of this Agreement, NetSpeak hereby grants to Motorola a non-transferable, perpetual, Exclusive, royalty-bearing (as described in Section 7 hereto) world-wide right and license under NetSpeak's Intellectual Property to:


(a) modify or have modified, or have made, the NetSpeak Products to create RF Products;


(b) use, reproduce, have reproduced, market, have marketed, perform, display, import, have imported, export, have exported, distribute and have distributed (bundled or unbundled), license and sublicense through multiple tiers of distribution, the RF Products; provided, however that to the extent such RF Products constitute software, such RF Products shall be licensed or distributed in Object Code form only.


1.2 EXCLUSIVE LICENSE GRANT TO MANUFACTURE AND SELL RF PRODUCTS. Subject to the terms and conditions of this Agreement, NetSpeak hereby grants to Motorola a non-transferable, perpetual, Exclusive, royalty-bearing (as described in Section 7 hereto) world-wide


right and license under NetSpeak's Intellectual Property to:


(a) manufacture or have manufactured the RF Products;


(b) use, sell, offer for sale, have sold or otherwise distribute, through multiple tiers of distribution, license or sublicense the RF Products; provided, however that to the extent such RF Products constitute software, the software components of such RF Products shall be licensed or distributed in Object Code form only.


1.3 EXCLUSIVE LICENSE GRANT FOR NETSPEAK COMMUNICATION PROTOCOL MODULE IN RF FIELDS. Subject to the terms and conditions of this Agreement, NetSpeak hereby grants to Motorola a non-transferable, perpetual, Exclusive, royalty free, world-wide right and license under NetSpeak's Intellectual Property to use, reproduce, have reproduced, and modify or have modified, the Source Code of the NetSpeak Communication Protocol Module, including all future Updates and Upgrades, to create RF Products and to distribute such RF Products and to copy, have copied, perform, use, display, license, sublicense and distribute, through multiple tiers of distribution, in Object Code form, the RF Products.


1.4 NON-EXCLUSIVE LICENSE GRANT. Subject to the terms and conditions of this Agreement, NetSpeak hereby grants to Motorola a non-exclusive, royalty-bearing (as described in Section 7 hereto), worldwide right and license under NetSpeak's Intellectual Property to:


(a) make, have made, use, reproduce, have reproduced, market, have marketed, perform, display, sell, have sold, import, have imported, export, have exported, distribute and have distributed (bundled or unbundled), license and sublicense, or otherwise transfer, through multiple tiers of distribution, the NetSpeak Products; provided, however that to the extent such NetSpeak Products constitute software, such NetSpeak Products shall be sold or distributed in Object Code form only;


(b) modify or have modified the NetSpeak Products to create Derivative Works (other than as set forth in Section 1.1(a));


(c) use the Source Code of the NetSpeak Software to make or have made Derivative Works, alterations or modifications thereof;


(d) to copy, have copied, perform, use, display, license, sublicense and distribute, through multiple tiers of distribution, in Object Code form, the NetSpeak Software and Derivative Works of the NetSpeak Software.


1.5 NON-EXCLUSIVE LICENSE GRANT. Subject to the terms and conditions of this Agreement, NetSpeak hereby grants to Motorola a non-transferable, perpetual, non-exclusive, royalty-bearing (as described in Section 7 hereto), world-wide right and license under NetSpeak's Intellectual Property to use, reproduce, have reproduced, and modify or have modified, the Source Code of the NetSpeak Communication Protocol Module, including all future Updates and Upgrades,


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to create Derivative Works, and to distribute such Derivative Works and to copy, have copied, perform, use, display, license, sublicense and distribute, through multiple tiers of distribution, in Object Code form, the Derivative Works; provided, however, the foregoing license shall not be royalty-bearing to the extent any such Derivative Work is incorporated into any other product as to which Motorola pays NetSpeak a royalty in connection with the license grants set forth in Sections 1.1, 1.2 or 1.4.


1.6 NON-EXCLUSIVE DOCUMENTATION LICENSE GRANT. Subject to the terms and conditions of this Agreement, NetSpeak hereby grants to Motorola a royalty-free, nontransferable, non-exclusive, sub-licensable, world-wide right and license under NetSpeak's Intellectual Property to the Documentation; to use, reproduce, have reproduced, perform, display, modify, have modified, market, have marketed, translate, have translated or otherwise localize, sell, have sold, import, export, distribute and/or have distributed the Documentation, including the right to include any Documentation on any CD-ROM or diskette, in electronic form, in place of hard copy of the same.


1.7 EXCLUSIVITY COVENANT. For purposes of clarifying the Exclusive grants to Motorola under Sections 1.1, 1.2 and 1.3, NetSpeak has no rights to directly or indirectly license, sublicense (or otherwise deal with) any third party (including, but not limited to, through joint development, development of Derivative Works or the integration of generally available products) in the Exclusive Field; provided that the foregoing shall not limit the right of NetSpeak to distribute generally available NetSpeak Products through current or future indirect channels of distribution and provide customary end-user licenses in connection therewith; provided, further that NetSpeak shall not be in violation of the foregoing to the extent it directly licenses, or otherwise directly deals with a third party for joint development, development of Derivative Works, or the integration of generally available products so long as the actual or intended use of the results of such joint development, development of Derivative Works or integration of generally available products does not include RF wireless links to end-users (including, without limitation, wireless local loop, LMDS/MMDS, and all networks that use RF Wireless Products) or coax links to end-users. NetSpeak will provide Motorola with reasonably requested assurances of its compliance with the foregoing.


1.8 EXPLOITATION OF NETSPEAK PRODUCTS. While Motorola intends in good faith to perform all obligations under this Agreement, NetSpeak acknowledges that any duty to exploit the exclusive grants of the Sections 1.1, 1.2 and 1.3 for the NetSpeak Products is subsumed and satisfied:


1.8.1 During the first three (3) years of the Agreement, by the Minimum Commitments of Section 7.3, or until such Minimum Commitments are terminated; and


1.8.2 Thereafter, by the exercise of commercially reasonable efforts on the part of Motorola.


2. TRADEMARK LICENSE. Subject to the terms and conditions of this Agreement, NetSpeak hereby grants to Motorola a personal, nontransferable, royalty-free, non-exclusive, worldwide right and license, with a right to sublicense parties who agree to adhere to this Section 2 and Exhibit D, to:


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(a) use and reproduce the NetSpeak Marks, either alone or co-branded with any trademark or trade name owned by Motorola or to which Motorola has a license to use, solely in connection with the NetSpeak Products and RF Products and other Derivative Works, and which is used on any labeling, packaging, demonstrations, promotions and advertising relating thereto; PROVIDED HOWEVER, that in the case of use in connection with RF Products and Derivative Works, Motorola will notify NetSpeak in writing to obtain prior approval, which approval will not be unreasonably withheld. If NetSpeak does not respond within 30 days following notification, approval shall be deemed to have been granted; and


(b) use, reproduce, and display the NetSpeak Marks (publicly or otherwise) in connection with demonstrations, promotions and advertising related to the NetSpeak Products and RF Products for which Motorola obtains NetSpeak's prior written approval. Motorola shall not file any applications to register the NetSpeak Marks, or any mark which are likely to cause confusion with the NetSpeak Marks, in any country. Motorola acknowledges that its use of the NetSpeak Marks is limited to the use as licensed in this Agreement. Motorola has not acquired, and will not acquire, any ownership rights in the NetSpeak Marks. All use of the NetSpeak Marks by Motorola shall inure to the benefit of NetSpeak, and the use of the marks by Motorola shall not confer any rights to the NetSpeak Marks to Motorola. Except as otherwise provided in this Section 2.0, Motorola further agrees that it has no power or right and shall not, if the Agreement is terminated pursuant to Section 10.2, until the expiration of the Term as though the Agreement were still in effect: (i) attack the title or any rights of NetSpeak in NetSpeak Marks; (ii) claim any rights, title or interest in or to the NetSpeak Marks adverse to NetSpeak, without NetSpeak's express written permission; (iii) register or apply for registration of the NetSpeak Marks or any name or mark that incorporates the NetSpeak Marks anywhere in the world, in the name of Motorola, without NetSpeak's express written consent; (iv) designate any name or mark that incorporates NetSpeak Marks as a common law trademark of Motorola anywhere in the world without NetSpeak's express written consent. Furthermore, Motorola agrees to use NetSpeak Marks only in accordance with the guidelines for using NetSpeak Marks set forth on Exhibit D.


(c) In the extent that Motorola sublicenses a third party under their rights in Sections 2(a) or (b), the sublicense agreement between Motorola and such third party shall include provisions substantially equivalent to those of Section 2.


(d) Within thirty (30) days after the date of execution of this Agreement, NetSpeak will provide Motorola with a list of countries in which they have applied or obtained registration for the NetSpeak Marks. It is acknowledged by Motorola that NetSpeak has not perfected its trademark rights in the NetSpeak Marks in all countries in which Motorola currently distributes, sells or offers products or services.


3. OWNERSHIP AND INTELLECTUAL PROPERTY.


3.1 OWNERSHIP BY NETSPEAK. All rights, title and interest in Intellectual Property embodied in the NetSpeak Products (including all copies thereof and all rights therein) shall remain


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vested in NetSpeak.


3.2 OWNERSHIP BY MOTOROLA. All rights, title and interest in Intellectual Property authored, conceived, developed or reduced to practice by Motorola (including, but not limited to, Intellectual Property embodied in the RF Products), in accordance with the licenses granted herein, shall be owned solely by Motorola, subject to any NetSpeak Intellectual Property in the NetSpeak Products.


3.3 OWNERSHIP IN DERIVATIVE WORKS; PRESERVATION OF API/NCPM.


3.3.1 The parties acknowledge that Motorola will make or have made for Motorola Derivative Works to the NetSpeak Software to supply Motorola required features and functionality to the overall NetSpeak Products and to modify the NetSpeak Products. NetSpeak shall supply the Source Code of the NetSpeak Software to Motorola to allow Motorola to make or have made such Derivative Works. Motorola in turn shall preserve the integrity of the API of the NetSpeak Software integrated into any RF Product or Derivative Work of the NetSpeak Software made by or for Motorola.


3.3.2 All Derivative Works to the NetSpeak Software made by or for Motorola shall be owned exclusively by Motorola, subject to any NetSpeak Intellectual Property in such Derivative Works; provided that in the case of Derivative Works which do not constitute RF Products, Motorola and NetSpeak may otherwise agree in a separate written instrument as to the ownership of specific Derivative Works made by NetSpeak for Motorola.


3.3.3 Motorola and NetSpeak agree to maintain common core compatibility as defined by a mutually agreed upon test suite of the NetSpeak Communications Protocol Module. Netspeak shall not create any modifications, enhancements or extensions of the Netspeak Communications Protocol Module which would render inoperable or would otherwise not be "backwardly compatible" with the Derivative Works which incorporate: (i) the then existing version of the NetSpeak Communications Protocol Module, or (ii) the immediate prior two Upgrades of the Netspeak Communications Protocol; provided, however that for purposes of this Section 3.3.3 NetSpeak agrees not to release more than two Upgrades in any two year period.


4. DELIVERY AND ACCEPTANCE.


4.1 NETSPEAK PRODUCTS. NetSpeak shall deliver the NetSpeak Products to Motorola as available, with Motorola receiving most-favored customer delivery on current and future NetSpeak Products.


4.2 FUTURE PRODUCTS. NetSpeak shall deliver to Motorola, promptly upon the availability thereof, Masters for any Future Products.


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*Confidential treatment requested for omitted portions. Omitted material is on file with the Commission.


5. ENFORCEMENT. When requested by Motorola, NetSpeak shall take any and all commercially reasonable measures to enforce its Intellectual Property rights.


6. QUALITY OF PRODUCTS. NetSpeak shall take commercially reasonable efforts to manufacture, or have manufactured, the NetSpeak Products delivered to Motorola to standards that are at least as high as those for similar products of Motorola.


7. ROYALTY, PRODUCT, TERMS AND MINIMUM PAYMENTS.


7.1 ROYALTY. Subject to the terms and conditions of this Agreement, Motorola agrees to pay royalties (according to a royalty schedule to be set forth in Exhibit G) to NetSpeak on fair, reasonable, most-favored customer and competitive rates and terms for similar quantities and under similar conditions.


7.1.1 With respect to Subscriber Devices, Motorola shall pay NetSpeak the following royalty amounts (not to exceed * in the aggregate) which will result in a fully-paid up license with respect to Subscriber Devices for unlimited use of any license granted hereunder: * for each of the first * million Subscriber Devices shipped which incorporate a NetSpeak Product, an RF Product or a Derivative Work pursuant to the license grants of Sections 1.1, 1.2, 1.4 or 1.5; * for each of the next * million Subscriber Devices shipped which incorporate a NetSpeak Product, an RF Product or a Derivative Work pursuant to the license grants of Sections 1.1, 1.2, 1.4 or 1.5.


7.1.2 With respect to New NetSpeak Products incorporated into a Subscriber Device after the fifth anniversary of the execution of this Agreement, Motorola shall agree to pay an additional reasonable royalty rate for each Subscriber Device incorporating such New NetSpeak Products on a most-favored customer basis; provided, however in no event shall Motorola be obligated to pay in excess of * million (excluding any amount paid under Section 7.1.1) for such Subscriber Devices incorporating the New NetSpeak Products and once Motorola pays * million in the aggregate (excluding any amount paid under Section 7.1.1) for such Subscriber Devices incorporating the New NetSpeak Products, Motorola shall have an unlimited right to further incorporate such New NetSpeak Products in all Subscriber Devices without any further royalty payment obligation or accounting to NetSpeak.


7.1.3 With respect to NetSpeak Products, RF Products and Derivative Products which are not incorporated into Subscriber Devices, Motorola and NetSpeak will meet within thirty (30) days of the date of execution of this Agreement to develop a business model for defining the Motorola royalty base for each NetSpeak Product. The defined royalty base shall quantify the boundary of the Motorola RF Products, Derivative Works and NetSpeak Products upon which a royalty calculation will be made. The business model shall take into consideration the existing royalty base for each NetSpeak Product outside of the Exclusive Field to comparably define a royalty base for the Motorola RF Products and Derivative Works. It is acknowledged and agreed by NetSpeak that the Motorola royalty schedule shall be such that Motorola achieves a most favored customer royalty rate applied to the defined royalty base. The parties will negotiate declining


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royalty rates based on average selling prices and volume levels, which take into consideration Motorola's and NetSpeak's current business models.


7.2 PRODUCT. Subject to the terms and conditions of this Agreement, NetSpeak will offer, and Motorola agrees to pay, pricing to NetSpeak for NetSpeak Products not paid for under Section 7.1, on fair, reasonable, most-favored customer and competitive terms and subject to Motorola's standard product purchase terms set forth on Exhibit H, but in all cases no more than at most favored pricing for similar quantities and under similar conditions.


7.3 MINIMUM PAYMENTS. Subject to the terms and conditions of this Agreement, including without limitation Section 10, Motorola agrees to pay NetSpeak the following minimum commitments (each, a "Minimum Commitment"): $2.5M for NetSpeak Products sold between the date of execution hereof and Product Acceptance; $2.5M for NetSpeak Products during the first year following Product Acceptance; $10M for NetSpeak Products during the second year following Product Acceptance; and $15M for NetSpeak Products during the third year following Product Acceptance; provided that to the extent Motorola's Minimum Commitment for any given year exceeds the NetSpeak Revenue Minimum, such Minimum Commitment shall be reduced to the amount of such NetSpeak Revenue Minimum.


The "NetSpeak Revenue Minimum" means an amount equal to 50% of NetSpeak's revenues for any given year (as reported in a manner consistent with NetSpeak's reported financial statements). The NetSpeak Revenue Minimum will be determined as follows: NetSpeak shall provide to Motorola revenue results for the period of 11 months from Product Acceptance or a Product Acceptance anniversary, as the case may be, and an amount representing revenues for the 12 month period of such year projected on an annualized basis (the "Annualized Amount"). The Annualized Amount shall be used for purposes of determining the NetSpeak Revenue Minimum and Motorola shall pay either the Minimum Commitment amount set forth above or, if less, the NetSpeak Revenue Minimum within 30 days of the date NetSpeak provides the foregoing information to Motorola. If, after payment of such amount, it is determined that actual revenues for a given year varied from the Annualized Amount, an appropriate adjustment will be made to future payments hereunder (including any Minimum Commitment).


For purposes of illustration only, assume Product Acceptance occurred on January 1, 1999 and on December 1, 2000 NetSpeak provides Motorola with its revenue results for the first 11 months of the year (being the second year following Product Acceptance) showing annualized revenues of $18M. Since 50% of $18M is $9M, Motorola's minimum obligation for 2000 will be reduced from $10M to $9M. Such $9M will be payable by December 31, 2000. If the annualized results (based on 11 months) were not in fact the actual results (because of a variation in expected revenues for December, 2000), there would be an adjustment in 2001 through a credit toward such year's royalty payments (including any minimum).


7.4 INTERNAL USE. Notwithstanding anything to the contrary set forth herein, no royalties shall be due and payable to NetSpeak by Motorola for any NetSpeak Software, RF Products, Netspeak Communication Protocol Modules or Derivative Works used internally within Motorola.


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solely for development, testing and marketing of such products, but specifically excluding deployment into Motorola networks.


7.5 ROYALTY PAYMENT TERMS. Motorola shall pay royalties on NetSpeak Products, RF Products and any Derivative Works thereof, 45 days following the end of the calendar quarter in which Motorola distributes the same. Motorola shall keep records relating to such royalties in accordance with generally accepted accounting principles. Once per year, NetSpeak shall have the right, at its expense, to have its independent public accountants audit such records upon reasonable notice to Motorola in accordance with Section 7.7.


7.6 STATEMENT OF ROYALTIES. Beginning with the first calendar quarter in which the NetSpeak Software is distributed, and in conjunction with the payment of the royalties following the end of each calendar quarter, Motorola agrees to provide to NetSpeak a statement of royalties due to NetSpeak under this Agreement for the prior quarter in a timely fashion, but in no event later than such time that Motorola provides such reports to its other licensors for which royalty reports are required.


7.7 RECORDS/AUDITS. Each party agrees to keep and preserve for at least two (2) years after any transactions relating to this Agreement, accurate records of all such transactions relating to this Agreement. In particular, each party shall ensure that its records adequately identify the product so that they can be distinguished from other goods not licensed hereunder. NetSpeak's independent public accountants shall have the right, at NetSpeak's expense, at any time during the other party's normal business hours and upon fifteen (15) business days prior to written notice to that party, to examine all such records, including all ship records, invoices and other records that relate to the shipment and sale of product. If such an audit detects a shortfall in royalties paid, Motorola shall pay the unpaid royalties together with interest at a rate equal to the rate announced by Chase Manhattan Bank as its "prime rate" or "corporate base rate" per annum from the date due on any unpaid amount.


7.8 PRODUCT PRICING ON ISG-MANUFACTURED PRODUCT. Subject to the terms and conditions of this Agreement, Motorola will offer to NetSpeak and NetSpeak will pay prices on fair, reasonable, most-favored customer and competitive terms, for NetSpeak Products and/or Derivative Works (other than RF Products) manufactured by Motorola or for Motorola which are purchased by NetSpeak, but in all cases no more than most favored pricing for similar quantities under similar conditions.


8. SUPPORT.


8.1 CUSTOMER SUPPORT.


8.1.1 As further described below, Motorola or its agents shall provide customer support for NetSpeak Products sold through Motorola and RF Products distributed into, sold into or otherwise used in the Exclusive Field of the license grants of Sections 1.1 and 1.2 (the "Supported


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Products"). All Updates and support materials (including marketing materials) shall be provided to Motorola by NetSpeak and, to the extent possible, in downloadable form so that they may be distributed electronically.


8.1.2 During the term of the agreement, Motorola and its distributors or maintenance co-providers will provide Level 1 (support necessary to process initial call from the end user) and Level 2 support (support required for problem determination and solution) for the Supported Products. In addition to any other support provided by NetSpeak in connection with its provision of NetSpeak products to Motorola (such support to be at least equivalent to support provided to any other customer of NetSpeak for similar products), NetSpeak will provide Level 3 support (includes, patches, fixes and work arounds) for the Supported Products. Motorola will use all reasonable efforts to verify the following technical issues before calling NetSpeak: (i) create a test case and define the technical problem; (ii) attempt to reproduce problem; and, (iii) document and e-mail to NetSpeak hot line support.


8.1.3 Motorola may request technical assistance by calling or faxing to NetSpeak technical support at any time and Netspeak will provide support as provided in Section 8.3.


8.1.4 Normal calls will be responded to within four hours during normal business hours. Call identified as "urgent" will be responded to within one hour. If Motorola determines that such response times are not being met, NetSpeak will work in good faith with Motorola to reduce the response time. "Response" shall mean a return call by a technical support engineer whose qualifications and knowledge are commensurate with Motorola's request for support and who is designated by NetSpeak's technical support manager. NetSpeak will provide daily feedback on progress for unresolved problems lasting more than twenty four hours. In the event the problem remains unsolved for more than twenty-four hours, NetSpeak shall involve its engineering management and Motorola's designee shall be contacted and briefed on the problem by NetSpeak engineering management. In such case, NetSpeak will maintain direct contact with customers to work escalated calls and provide Motorola an update at daily/weekly intervals (as reasonably requested by Motorola) depending upon seriousness of issue. In the event that normal technical support procedures for problem resolution do not solve a customer problem, upon request by Motorola , NetSpeak shall use its best efforts to provide engineering resources at a designated site to identify and resolve problems corresponding to NetSpeak's support obligations.


8.1.5 NetSpeak's Technical Support Guidelines are as set forth on Exhibit B.


8.1.6 It is understood that any customer information provided to, or customer contact made by, NetSpeak in the process of assisting Motorola and its customers will be only used for support purposes. This information and contact will not be used to generate direct or indirect NetSpeak sales, except as approved by Motorola.


8.2 CUSTOMER WARRANTY SUPPORT. Motorola shall be responsible for all warranty obligations relating to any defects in the manufacture of the NetSpeak Hardware, provided that such defective NetSpeak Hardware were manufactured by or for Motorola. As applicable, NetSpeak shall


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provide appropriate warranties and support with respect to NetSpeak-provided products (under the most favored relationship between Motorola and NetSpeak). If NetSpeak Products qualify for warranty service under the provisions of the applicable agreement between Motorola and its customer due to a defect in Motorola's manufacture of such product, Motorola may, at its sole discretion, provide a replacement NetSpeak Product. Motorola shall not be liable for royalty payments for such replacement products.


8.3 NETSPEAK SUPPORT. NetSpeak sha ...