HTC 2012 Annual Report Download - page 120

S3 Graphics Co, Ltd. ("S3 Graphics") owns patents on key graphics technologies, which can strengthen the Company's
patent portfolio and counteract the patent rights of competitors and potential licensors around the globe. In the
meeting on July 6, 2011, the Board of Directors resolved to invest in S3 Graphics, and in November 2011, the Company
obtained all patents owned by S3 Graphics through the purchase of all the shares of S3 Graphics from VIABASE CO.,
LTD. and WTI Investment International, Ltd. by increasing the capital of HTC Investment One (BVI) Corporation by an
amount of US$300,000 thousand.
(12) Patent Litigation
Note 31 has more information.
(13) Loan
On July 19, 2012, HTC's board of directors passed a resolution to offer US$225,000 thousand short-term loan to Beats
Electronics, LLC to support the transition of Beats into a product company. This loan was secured by all the assets of Beats.
Term loan must be repaid in full no later than one year from signing date of loan agreement and the repayment can be made
in full at anytime during the term of the loan or at the repayment date. The calculation of interest is based on LIBOR plus 1.5%,
3.5%, 5.5% and 7.5% for the first quarter to the fourth quarter, respectively. The loan details were as follows:
2012
Name of Counterparty Account Maximum Balance Ending Balance Interest Rate Interest Revenue
Beats Electronics, LLC Other receivable $6,554,025
(US$225,000)
$6,554,025
(US$225,000) 1.9466%-3.8188% $82,027
(US$2,816)
(14) Compensation of Directors, Supervisors and Management Personnel
2011 2012
NT$ NT$ US$ (Note 3)
Salaries $166,422 $206,089 $7,075
Incentives (Note a) 351,024 29,575 1,015
Special compensation - - -
Bonus (Note b) 680,387 - -
$1,197,833 $235,664 $8,090
Note: a. Due to uncertainty of distribution of part of the incentives for 2012, the disclosure of incentives for 2012 was only for the amount that would
be distributed exactly.
b. The information about bonus to employees for 2012 is not available since the related proposal had not yet been made in the stockholders'
meeting. The compensation of directors, supervisors and management personnel for 2011 included bonuses appropriated from the earnings
of 2011, which were approved by the stockholders in the annual meeting in 2012.
The Company's disclosure of the compensation of directors, supervisors, president, vice president and management
personnel for 2011 and 2012 was in compliance with Order VI-0970053275 issued by the Financial Supervisory
Commission under the Executive Yuan. The disclosure of the compensation included salaries, incentives, special
compensation, business expenses and bonus.
28. PLEDGED ASSETS
To protect the rights and interests of its employees, HTC placed an accrued employee bonus of NT$3,645,820 thousand
(US$125,161 thousand) in a trust account in September 2012. The trust account, which is under restricted assets - current,
had amounted to NT$3,645,820 thousand (US$125, 161 thousand) as of December 31, 2012.
As of December 31, 2011 and 2012, the Company had provided time deposits of NT$68,700 thousand and NT$3,700
thousand (US$127 thousand), respectively, as collateral for rental deposits and as part of the requirements for HTC to get a
certificate from the National Tax Administration of the Northern Taiwan Province stating that it had no pending income tax.
29. COMMITMENTS AND CONTINGENCIES
As of December 31, 2012, unused letters of credit amounted to US$60 thousand and EUR107 thousand.
30. SIGNIFICANT CONTRACTS
Patent Agreement
The Company specializes in the research, design, manufacture and sale of smart handheld devices. To enhance the quality
of its products and manufacturing technologies, the Company has patent agreements, as follows:
Contractor Contract Term Description
Apple, Inc. November 11, 2012 - November 10, 2022 The scope of this license agreement covers
both the current and future patents held by
the parties as agreed upon and specifically set
forth in the agreement, with royalties payable
as prescribed.
Microsoft February 1, 2009 - March 31, 2015 Authorization to use an embedded operating
system; royalty payment based on agreement.
Qualcomm Incorporated December 20, 2000 to the following dates:
a. If the Company materially breaches any
agreement term and fails to take remedial action
within 30 days after Qualcomm's issuance of a
written notice, the Company will be prohibited
from using Qualcomm's property or patents.
b. Any time when the Company is not using any of
Qualcomm's intellectual property, the Company
may terminate this agreement upon 60 days'
prior written notice to Qualcomm.
Authorization to use CDMA technology to
manufacture and sell units; royalty payment
based on agreement.
Telefonaktiebolaget LM Ericsson December 15, 2008 - December 14, 2013 Authorization to use the platform patent
license; royalty payment based on agreement.
Nokia Corporation January 1, 2003 - December 31, 2016 Authorization to use wireless technology, like
GSM; royalty payment based on agreement.
InterDigital Technology Corporation December 31, 2003 to the expiry dates of these
patents stated in the agreement.
Authorization to use TDMA and CDMA
technology; royalty payment based on
agreement.
KONINKLIJKE PHILIPS
ELECTRONICS N.V.
January 5, 2004 to the expiry dates of these patents
stated in the agreement.
GSM/DCS 1800/1900 patent license; royalty
payment based on agreement.
MOTOROLA, Inc. December 23, 2003 to the latest of the following
dates:
a. Expiry dates of patents stated in the agreement.
b. Any time when the Company is not using any of
Motorola's intellectual property.
TDMA, NARROWBAND CDMA, WIDEBAND
CDMA or TD/CDMA standards patent license
or technology; royalty payment based on
agreement.
Siemens Aktiengesellschaft July 2004 to the expiry dates of these patents
stated in the agreement.
Authorization to use GSM, GPRS or EDGE
patent license or technology; royalty payment
based on agreement.
IV International Licensing
Netherlands, B.V.
November 2010 - June 2020 Authorization to use wireless technology;
royalty payment based on agreement.
2
3
6
8
FINANCIAL INFORMATION
2
3
7
8
FINANCIAL INFORMATION