REA Telecommunications Software License Agreement

SUMMARY: The Rural Electrification Administration (REA) hereby amends

its regulations on telecommunications to add a uniform

Telecommunications Software License Agreement that will be an Addendum

to any REA financed central office equipment contract where the

Borrower is required to execute a Software License Agreement. This

action provides a single Telecommunications Software License Agreement

instead of the present situation where each supplier uses its own form.

This action reduces the review and approval time of equipment contracts

and provides fair and equal treatment for all providers of central

office equipment.

EFFECTIVE DATE: May 16, 1994.

FOR FURTHER INFORMATION CONTACT: John J. Schell, Chief, Central Office

Equipment Branch, Telecommunications Standards Division, Rural

Electrification Administration, room 2836, South Building, USDA,

Washington, DC 20250-1500, telephone number (202) 720-0671.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This final rule has been determined to be not-significant for

purposes of Executive Order 12866 and therefore has not been reviewed

by OMB.

Executive Order 12372

This final rule is excluded from the scope of Executive Order

12372, Intergovernmental Consultation. A notice of final rule entitled

Department Programs and Activities Excluded from Executive Order 12372

(50 FR 47034) exempts REA and RTB loans and loan guarantees, and RTB

bank loans, to governmental and nongovernmental entities from coverage

under this Order.

Executive Order 12778

This final rule has been reviewed under Executive Order 12778,

Civil Justice Reform. This final rule:

(1) Will not preempt any state or local laws, regulations, or

policies;

(2) Will not have any retroactive effect; or

(3) Will not require administrative proceedings before parties may

file suit challenging the provisions of this rule.

Regulatory Flexibility Act Certification

The Administrator of REA has determined that this final rule will

not have a significant impact on a substantial number of small entities

as defined by the Regulatory Flexibility Act (5 U.S.C. 601 et seq.).

This final rule provides for a uniform software license agreement which

will reduce review and approval time and ensure fair and equal

treatment for all providers of central office equipment.

Information Collection and Recordkeeping Requirements

The reporting and recordkeeping requirements contained in this

final rule have been submitted to OMB for approval. Comments concerning

these requirements should be directed to the Department of Agriculture,

Clearance Office, Officer of Information Resources Management, room

404-W, Washington, DC 20250, and to the Office of Information and

Regulatory Affairs of OMB, Attention: Desk Officer for USDA, room 3201,

NEOB, Washington, DC 20503.

National Environmental Policy Act Certification

The Administrator of REA has determined that this final rule will

not significantly affect the quality of the human environment as

defined by the National Environmental Policy Act of 1969 (42 U.S.C.

4321 et seq.). Therefore, this action does not require an environmental

impact statement or assessment.

Catalog of Federal Domestic Assistance

The program described by this final rule is listed in the Catalog

of Federal Domestic Assistance Programs under No. 10.851, Rural

Telephone Loans and Loan Guarantees, and 10.852, Rural Telephone Bank

Loans. This catalog is available on a subscription basis from the

Superintendent of Documents, the United States Government Printing

Office, Washington, DC 20402.

Background

7 CFR part 1753, Telecommunications System Construction Policies

and Procedures, contains guidelines for the preparation of Software

License Agreements subject to approval by REA. Efforts to conclude

satisfactory license agreements with individual equipment suppliers

have been time consuming and in certain cases REA has been unable to

reach an agreement that is acceptable to REA and the equipment

suppliers. This agreement will permit all REA financed purchases of

central office equipment and the suppliers to utilize a common uniform

Software License Agreement. The agreement will be an Addendum to all

REA financed central office equipment contracts and eliminates the

present practice of using individual license agreements negotiated with

separate equipment suppliers.

REA amends 7 CFR part 1753, by revising subpart A, Sec. 1753.7,

paragraph (f)(4), and subpart E, Sec. 1753.38, paragraph (a)(2)(i)(J),

to indicate that the software license agreement prepared by REA will be

an addendum to the central office equipment contract, and to amend

Sec. 1753.38, paragraph (c), by revising the software license

agreement. Additionally, it removes Sec. 1753.38, paragraph

(a)(2)(iii), which instructs the borrower to review the proposed

software licensing agreement and obtain REA approval, if required. This

final rule eliminates the need for instructions since the software

agreement has been prepared by REA and approved by the Administrator

prior to presentation to suppliers. It is also amended by adding a form

to Sec. 1755.93.

Comments

Public comments were received from Alcatel Network Systems, Inc.,

AT&T Network Systems, Commonwealth Telephone Company, Hastad

Engineering Co., Mitel Public Switching, Northern Telecom Inc., Redcom

Laboratories, Inc., and Seimens Stromberg-Carlson. The comments,

recommendations and responses are summarized as follows:

General Comments

One commenter felt REA should have one universal software license

for all software controlled devices.

Response: The use of a universal software license has been

considered by REA but is not viable at this time because of the large

difference in types of equipment and the requirements of various REA

contracts.

One commenter states that their switch uses firmware, which is

hardware based and sold with the product, rather than software,

therefore, they are not required to have a software agreement.

Response: REA does not require an executed software license

agreement. If the vendor requires an executed software/firmware license

agreement, then the only one acceptable to REA is the REA prepared

Software License Agreement (Addendum 2).

One commenter feels that it is in the best interest of the Licensor

and the REA Borrowers to use its existing standard form Software

License, or failing that, to use the currently approved REA Negotiated

License instead of the REA prepared Software License Agreement.

Response: REA believes one form of Software License to be used in

all Software leasing situations involving the Forms 525 and 545

Contracts is in the best interests of the suppliers, the borrowers, and

REA because a single uniform Software License presents a fair and

equitable distribution of risk to all parties involved and assures

borrowers that all manufacturers must meet the same requirements.

Two commenters felt that the term ``Licensed Software'' be used

consistently throughout the Agreement.

Response: The Agreement has been revised to reflect the above

comment.

Section (1)

One commenter suggested that the definition of Licensed Software

and the associated documentation be more specific.

Response: The definition of Licensed Software and associated

documentation has been revised to resolve this problem.

One commenter suggested that the definition of Licensee and

Licensor be expanded to include sublicensors of the Licensor so that

resellers or distributors could sign the Agreement.

Response: REA believes that there should be one party responsible

for meeting the Licensee's obligations and one party responsible for

meeting the Licensor's obligations so that the ultimately responsible

entities can be easily ascertained. The language in this definition has

not been changed.

Section (2)

Two commenters suggested that the last sentence of Section (2) be

changed to more clearly define the use of the Licensed Software.

Response: REA has revised this sentence to clarify the intention

that the Licensed Software can only be used with the System provided

under the Contract.

One commenter suggested that section (2)(i) be changed to require

the Licensee to notify the Licensor of any change in location of the

equipment and Licensed Software so that the Licensor could track its

software and assist in providing software support (e.g., change

notices, etc).

Response: REA agrees. Section (2)(i) has been revised to

incorporate the suggested change.

One commenter wanted additional language added to section (2)(ii)

emphasizing territorial limits and the comparable technical application

by transferee of the original License.

Response: REA has added language to sections (2)(ii) and (2)(iii)

to further define the responsibilities of the transferee and the

original License holder.

One commenter wanted language added to section (2)(ii) to restrict

the transfer of the Licensed Software unless the transfer was

authorized in writing by the Licensor.

It was also requested that the Licensor be allowed a 60 day period

to raise any objections to the transfer.

In addition, it was suggested that if a Company's relationship to

the Licensee changes such that it is no longer a subsidiary of the

Licensee then a transfer of the License Agreement is required or the

Licensor has the right to terminate the Agreement and revoke the right

to use the Licensed Software.

Response: REA feels that the Licensee should have the right to

transfer the Licensed Software to any party who acquires legal title to

the System.

REA has added language to section (2)(ii) to specify that the

Licensor should receive 30 days notice of any transfer.

The obligations of the Licensee and of the transferee who acquires

legal title to the System are covered under section (2)(ii). In

addition, REA has added language to section (2)(iii) to emphasize the

responsibilities of the Licensee, therefore, REA does not feel that

additional changes are advisable.

Two commenters felt that the word ``reasonable'' should be changed

to ``necessary'' in the first sentence of section (2)(iii).

One commenter felt that the word ``rightful'' should be added to

the last sentence before the word ``acts''.

One commenter requested that the following sentence be added to

section (2)(iii): ``The Licensee shall not make the Licensed Software

available to any person except its employees on a need to know basis''.

Response: REA feels the word ``necessary'' places too great a

burden on the Licensee and that ``reasonable'' provides Licensor with

adequate protection. This requested change has not been implemented.

The Licensee would not know if information or data that is

available to the general public was rightfully released or not. This

requested change has not been implemented.

REA has added language to restrict Software availability to a need

to know basis, however, the words ``its employees'' have not been

added. This would restrict the Licensee from obtaining assistance from

other sources in the event section (2)(xi) required enforcement.

(i) In section (2)(iv), one commenter wanted additional language

added to require the Licensee to follow the commenter's printed

procedures for copying the Licensed Software. It was suggested that the

phrase ``pursuant to the Licensor's then current procedures and

practices'' be added to section (2)(iv).

(ii) One commenter wanted the words ``In such reproduction,'' to

begin the second sentence and the word ``such'' inserted between the

words ``all'' and ``copies'' in the second sentence to further define

the limitation of reproduction of the Licensed Software.

(iii) One commenter remarked that there was no need to copy the

code since it was contained on non-volatile ROM on the switch.

Response: (i) REA feels the suggested language regarding current

procedures and practices is too vague and could impose unknown

restrictions on the Licensee. This language has not been added to the

Software License.

(ii) The suggested language on limitation of reproduction has been

added.

(iii) REA feels that it is appropriate to be able to copy any

Licensed Software/Firmware that is furnished with the System covered

under the Contract for the reasons described in section (2)(iv) of the

Software License Agreement.

One commenter remarked that in section (2)(v), activation of

nonactivated program instruction steps is a process by which a non-

enabled software feature may be enabled and that, in such cases,

additional Right-To-Use fees may apply.

Response: REA agrees and has added language to that effect.

One commenter suggested that a new section (2)(vi) be added

restricting decompiling or reverse assembly.

Response: Although REA has not added a new section, the suggested

language has been added to section (2)(iii).

Four commenters replied on section (2)(vii)(A). Their comments are

summarized below:

(i) Three would void the warranty if the Licensee made any changes.

(ii) Three wanted section (2)(vii)(A) removed.

(iii) One suggested extensively revising the language.

(iv) One suggested refusing to allow Licensee to make any changes

to the Licensed Software to restore service.

Response: (i) REA feels the Borrower must be able to attempt to

preserve or restore service to their subscribers without incurring a

penalty if the Licensor is unable to preserve or restore service in a

timely manner.

(ii), (iii) Section (2)(vii)(A) has not been removed but the

language has been extensively revised to clarify REA's intention and

protect the Licensor.

(iv) As stated previously, REA feels the Borrower must be able to

attempt to preserve or restore service to their subscribers. However,

this section has been revised to indicate that any changes made by

Licensee can only be made if the Licensor is unable to preserve or

restore service in a timely manner.

One commenter wanted to know who determines that the Licensor is

unwilling or unable to furnish support for the Licensed Software under

section (2)(vii)(C).

Response: The exception set forth in section (2)(vii)(c) applies

only if section (2)(xi) is enforced. Section (2)(vii)(c) has been

revised to indicate the above.

One commenter feels that all rights to any changes made under

section (2)(vii) should remain the property of the Licensor.

Response: As indicated previously, section (2)(vii)(A) has been

revised for clarification and any changes made under section

(2)(vii)(C) are only allowed if section (2)(xi) is enforced. REA

believes any changes should become the property of the Licensee because

the changes are made only in the instance where the Licensor is

unwilling or unable to support the Licensed Software.

Comments were received on section (2)(ix) as follows:

(i) Five commenters stated that some software problems cannot be

corrected in thirty days and suggested that additional time be allowed

in these cases.

(ii) Two commenters suggested a one (1) year warranty period.

(iii) One commenter felt that the Software warranty should begin at

the Completion of Installation.

(iv) It was also felt that the Software should function according

to the Specification and not to the technical material provided to

explain the System and that the Licensor's sole obligation should be to

repair the Software and correct any physical damage caused by the

Software failure.

(v) One commenter wanted the phrase ``free from errors and

incompleteness'' added to the first sentence of section (2)(ix) to

reflect the requirement in 7 CFR 1753.38(c)(1)(v) and a definition of

those terms added to the Agreement.

(vi) It was also suggested that a one (1) year warranty period be

added for special equipment.

Response: (i) Section (2)(ix) already allows for an extension of

time if the software problem cannot be corrected in thirty (30) days.

This language has been further clarified.

(ii) REA requires a five (5) year warranty period because software

is information based and defects in seldom used programs would not be

detected until the program is used. REA believes that over a 5 year

period even seldom used programs would be used and any defects

corrected.

(iii) In order for the Licensee to realize a full five (5) year

warranty the warranty period must start with the delivery of possession

and control from the Licensor. If it began at the Completion of

Installation, the warranty period would be diminishing while the

equipment was still under control of the Licensor.

(iv) Performance of the software must be in accordance with both

the Specification and Licensor documentation. The documentation is

furnished to assist the Licensee in the operation, administration, and

maintenance of the System. REA has made no change in the obligations of

the Licensor as stated in the Contract.

(v) REA does not feel the term ``free from errors and

incompleteness'' fully describes the intent of this section (2)(ix).

This language has not been added to section (2)(ix).

(vi) This License was specifically designed for use with REA Forms

525 Central Office Equipment Contract (Including Installation) and 545

Central Office Equipment Contract (Not Including Installation) and does

not apply to special equipment contracts, therefore, there is no need

for a one (1) year warranty clause for special equipment.

Comments were received on section (2)(x) as follows:

(i) Two commenters wanted the ability to modify the Licensed

Software or replace it with equivalent software at Licensor's option.

(ii) One commenter suggested that section (2)(x) disclaim any

special, indirect or consequential damages in connection with the use

or performance of the Licensed Software.

(iii) One commenter wanted the infringement clause to apply only to

United States patents, copyrights and trademarks and the right to

remove the enjoined Licensed Software and refund some of the Right-to-

Use Fee if modification or replacement is not feasible.

(iv) One commenter wanted the Licensee to indemnify the Licensor in

like manner for any claim, suit or proceeding brought against the

Licensor for infringement caused by the Licensee. The commenter also

wanted to remove the phrase ``This shall be in addition to any other

rights or claims which the Licensee may have'' and suggested that

section (2)(x) disclaim any liability for any settlement made without

Licensee's consent.

Response: (i) The option of modifying or replacing the Licensed

Software is in the current language.

(ii) REA's intent is to limit liability for special, indirect and

consequential damages to provide the Licensor with reasonable

protection against losses related to product failure; protect the

government's loan security; and serve as a standard that bidders and

owners alike can expect to see on all central office equipment

contracts so competitive bidding can be facilitated. This language has

not been changed.

(iii) REA feels that the Licensor should know what software can be

legally licensed by the Licensor, and the Licensee should expect that

the Licensed Software furnished with the System is not going to be

subject to infringement challenges. Simply allowing the Licensor to

refund some of the Right-to-Use Fee and remove the enjoined Licensed

Software gives the Licensor the right to ``buy back'' equipment or

software when a copyright problem is encountered. To the Licensee, this

means that essential features or capability could be lost and would

remain unavailable for the entire useful life of the new switching

equipment. The resulting reduction in value of the contract to the

Licensee cannot be predicted, and certainly cannot be limited to the

price of the infringing equipment or software less depreciation. These

requirements have not been changed.

(iv) Section (2)(x) specifically exempts the Licensor from

liability if the infringing software is of the Licensee's design or

selection. REA feels that the existing language sufficiently protects

the Licensor from unwarranted claims caused by the Licensee. REA also

feels the Licensee should not have to relinquish its rights as covered

in the Contract because the Licensor is involved in an infringement

dispute. This language has not been changed. Also, the Licensee cannot

commit the Licensor to any settlement, therefore, the suggested

additional language is not required.

Comments were received on section (2)(xi) as follows:

(i) Two commenters suggested that software support after the

warranty period should have a specific time period.

(ii) Two commenters suggested that they should not be required to

support retired software when there is active equivalent or upgraded

software available from the Licensor which it will support.

(iii) One commenter suggested that the language should be amended

to exclude information that the Licensor does not have the legal right

to turn over; e.g., third party Software.

(iv) One commenter suggested that the only support covered under

this section (2)(xi) should be the support required by the Contract.

The commenter also felt that the Licensee should be allowed to modify

the Licensed Software for proper equipment operation but not for

feature enhancements, and the Licensor should receive royalty-free

rights to make, use and sell any modifications made by the Licensee

under this section.

(v) One commenter remarked that the only time the Licensee should

be able to modify the Licensed Software is in the event that the

Licensor withdraws from the business of selling and supporting the

Licensed Software.

Response: (i) REA agrees that support after the warranty period

should have a specified time limit. This was addressed when REA

published the Proposed Rule Form 525 Central Office Equipment Contract

(Including Installation) in the Federal Register.

(ii) REA feels that the Licensee should reasonably expect to

receive support for the Licensed Software without having to upgrade the

System.

(iii) REA agrees in principle, however, this exclusion does not

extend to any information or Software not specifically identified as

``agreed excluded documentation'' in an attachment to the Contract, and

under no circumstance can it include the overall operating Software of

the System. Section (2)(xi) has been revised to reflect the above.

(iv) REA agrees that the support referred to in section (2)(xi) is

the support required by the Contract. The language has been changed to

reflect this. However, REA does not agree that the Licensee should be

restricted from making feature enhancements. The Licensee must be able

to add enhancements to the System in order to offer current and future

services to their subscribers. Due to the circumstances that would

require enforcement of this section (2)(xi) any changes made under this

section become the exclusive property of the Licensee.

(v) REA feels the Licensee should have the right to modify the

Licensed Software in the event that the Licensor refuses to furnish

support as required by the Contract.

One commenter felt that in section (2)(xii), the word Licensor

should be Licensee. One commenter felt that this section should apply

to both the Licensor and the Licensee.

Response: Section (2)(xii) refers specifically to the Licensor.

Section (2)(xiii) refers to the Licensee and details the remedies

available to the Licensor.

Five commenters remarked on section (2)(xiii). Their comments are

summarized below:

(i) One commenter felt that damages of ten times the Contract price

for a breach of the Software License was excessive and should be

changed to the initial cost of the Software.

(ii) One commenter felt that damages of ten times the Contract

price for a breach of the Software License was not a sufficient

deterrent and sixty (60) days notice before termination may cause

irreparable harm to the Licensor. It was suggested that section

(2)(xiii) be eliminated in its entirety.

(iii) One commenter suggested that the sixty (60) day notice period

for REA should be changed to thirty (30) days.

(iv) One commenter wanted section (2)(xiii) to apply to the

Licensee and the Licensor and exclude from damages lost revenue or

profits.

(v) One commenter wanted REA to agree that certain events would

cause REA to recommend termination. One commenter wanted the right to

terminate the Software License without REA approval.

(vi) One commenter suggested the word reasonable in the first

sentence of section (2)(xiii) be changed to thirty (30) days.

Response: (i) REA feels that damages limited to the initial cost of

the Software is not a sufficient deterrent to provide a reasonable

amount of security against a breach of the Software License. However,

after further evaluation, and in response to the comments, REA feels

that ten times the Contract price could financially devastate the

typical REA Borrower and consequently jeopardize REA loan security.

Damages payable by the Licensee for breach of this License have been

changed to not exceed the total Contract price

(ii) In order to protect the Borrower and REA loan security REA

feels there must be a cap on damages against the Licensee for a breach

of this License. REA also feels that there must be some restrictions on

the termination of the Software License. This section (2)(xiii)

remains.

(iii) REA feels that thirty (30) days is not sufficient time to

thoroughly evaluate and arrive at a fair and equitable decision

regarding the circumstances that might cause termination of the

Software License.

(iv) As stated previously, section (2)(xii) refers specifically to

the Licensor. Section (2)(xiii) refers to the Licensee and details the

remedies available to the Licensor.

(v) Any event that would cause the Licensor to recommend

termination of the Software License must be individually and thoroughly

evaluated by REA prior to any recommendation by REA. In order to

protect the loan security of REA and the Licensee's ability to repay

that loan, REA must be included in any decision to terminate the

Software License.

(vi) REA has evaluated the suggestion to change the word reasonable

to thirty (30) days and agree that it would make the Software License

more definitive. The language in section (2)(xiii) has been changed to

reflect this.

The remainder of section (2)(xiii) has not been changed.

One commenter felt that section (2)(xv) was unnecessary because the

Software License is an Addendum to the Contract and the Contract is

subject to REA approval.

Response: Separate provisions for REA approval of the Software

License Agreement makes the Agreement more prominent and helps ensure

that arbitrary changes are not made to the Agreement without REA's

knowledge or approval.

One commenter wanted four additional paragraphs added to section

(2) of the Software License. One commenter wanted two additional

paragraphs added to section (2) of the Software License. These six

paragraphs are summarized here.

(i) One paragraph specified that the obligations of the Licensee

under this agreement shall survive after the termination of this

Agreement.

(ii) One paragraph specified that the Licensee shall not, without

the prior written permission of the Licensor, use in advertising,

publicity, or otherwise, any trade name, trademark, or any other

identification owned by the Licensor.

(iii) One paragraph specified that the Software License Agreement

shall prevail notwithstanding any conflicting terms or legends which

may appear on or in the Licensed Software.

(iv) One paragraph specified that nothing contained herein shall be

construed as conferring by implication or otherwise (1) any license or

right to use any name, trade name, trademark or any other

identification, or simulation thereof; (2) any obligation to furnish to

any person, including Licensee, any assistance whatsoever, or any

documentation other than Licensed Software and related documentation as

specified in this Agreement; (3) a grant to sell, lease, or otherwise

transfer or dispose of Licensed Software, except as specified.

(v) One paragraph specified that the Licensee shall not decompile

or reverse assemble the Licensed Software.

(vi) One paragraph specified that the Licensee assumes sole

responsibility for ensuring that the Billing Center can correctly read

call records and risk of loss for any data, use, revenue or profit

shall be the responsibility of Licensee.

Response: (i) REA agrees and has added the suggested language to

the Software License Agreement in section (2)(xiv).

(ii) REA agrees that the Licensor and Licensee have a right to

protect their trademarks, trade names and other forms of

identification. Language has been added to the Software License to

reflect this in section (2)(xv).

(iii) REA believes that this is the intent of the Software License

Agreement and has added the suggested language to the Software License

in section (2)(xvi).

(iv) REA believes that the language added to the Software License

for paragraph (ii) covers part (1) of this paragraph. Part (2) of this

paragraph has not been added as the Licensor must provide support and

assistance as required by the Contract. REA has not added part (3) of

this paragraph because section (2)(ii) of the Software License already

states the requirements for sale of the System.

(v) Although REA has not added a new section, the suggested

language has been added to section (2)(iii).

(vi) REA believes it is the responsibility of the Licensor to

determine what format is required for the call records and react

accordingly. This paragraph has not been added to the Software License.

List of Subjects

7 CFR Part 1753

Communications equipment, Loan programs--communications, Reporting

and recordkeeping requirements, Rural areas, Telephone.

7 CFR Part 1755

Loan programs--communications, Reporting and recordkeeping

requirements, Rural areas, Telephone.

For the reasons set out in the preamble, Chapter XVII of title 7 of

the Code of Federal Regulations is amended as follows:

PART 1753--TELECOMMUNICATIONS SYSTEM CONSTRUCTION POLICIES AND

PROCEDURES

1. The authority citation for part 1753 continues to read as

follows:

Authority: 7 U.S.C. 901 et seq., 1921 et seq.

2. Section 1753.7 is amended by revising paragraph (f)(4) to read

as follows:

Sec. 1753.7 Plans and specifications (P&S).

* * * * *

(f) * * *

(4) Telecommunications software license provision. If the borrower

is required to enter into a software license agreement in order to use

the equipment, the contract must contain the REA prepared Software

License Agreement as an Addendum.

3. Section 1753.38 is amended by revising paragraph (a)(2)(i)(J),

by removing paragraph (a)(2)(iii), by redesignating paragraphs

(a)(2)(iv) through (a)(2)(vii) as paragraphs (a)(2)(iii) through

(a)(2)(vi), respectively, and by revising newly designated paragraph

(a)(2)(v) and paragraph (c) to read as follows:

Sec. 1753.38 Procurement procedures.

(a) * * *

(2) * * *

(i) * * *

(J) A software license agreement (if required by the manufacturer)

in the form indicated in =1753.38(c).

* * * * *

(v) After evaluation of the technical proposals and REA approval of

changes to the P&S, sealed bids shall be solicited from only those

bidders whose technical proposals meet the P&S requirements. When fewer

than three bidders are qualified to bid, REA approval must be obtained

to proceed. Generally, REA will grant this approval only if all

suppliers currently listed in the ``List of Materials Acceptable for

Use on Telephone Systems of REA Borrowers'' were invited to submit

technical proposals.

* * * * *

(c) Software license agreement (Addendum 2). The Addendum in this

paragraph to REA Form 525, Central Office Equipment Contract (Including

Installation), and REA Form 545, Central Office Equipment Contract (Not

Including Installation), must be used with any central office equipment

contract that requires a software license agreement and for which REA

financial assistance is to be provided.

Addendum 2--Software License Agreement

(1) Definitions. For the purpose of this Software License

Agreement--

Contract means the REA Form 525 Central Office Equipment

Contract (Including Installation) or REA Form 545 Central Office

Equipment Contract (Not Including Installation),

dated ____________, between

----------------------------------------------------------------------

(the Licensee) and

----------------------------------------------------------------------

(the Licensor).

Days means calendar days.

Licensed Software means the computer programs, furnished for the

operation of the System(s) provided under the Contract, whether

contained on a tape, disc, semiconductor device, or other memory

device or system memory consisting of logic instructions and

instruction sequences in machine-readable object code, which

manipulate data in the central processor, control and perform input/

output operations, perform error diagnostic and recovery routines,

control call processing, and perform peripheral control,

administrative and maintenance functions; as well as Licensor's

standard customer documentation, excluding source code, used to

describe, maintain and use the programs provided under the Contract.

Licensee and Licensor, respectively, mean the parties signing

the software license agreement as the licensee and licensor.

Right-to-Use Fee is defined in section (2).

Specifications means the REA Form 522, General Specification for

Digital, Stored Program Controlled Central Office Equipment, which

is part of the Contract.

System means the stored program controlled central office and

associated remote switching terminal or terminals which use the

Licensed Software covered by this License.

(2) Software License Provisions. The Licensor may charge a fee,

herein referred to as a Right-to-Use Fee, for use of the Licensed

Software. The Right-to-Use Fee shall be included in the Total Base

Bid as defined in the Contract. In consideration of the Right-to-Use

Fee, the Licensor hereby grants the Licensee the right to use all

Licensed Software, solely in connection with the System provided

under this Contract, so that the System performs in accordance with

the Contract and the Specifications.

(i) The Licensee's right to use the Licensed Software is non-

exclusive and limited to use or operation in the United States of

America, including its Territories, the Federated States of

Micronesia, the Marshall Islands, Palau and the Commonwealth of

Puerto Rico, with the System for which the Licensed Software is

provided by the Licensor. The Licensee may reuse the equipment and

its accompanying Licensed Software at another location within the

Licensee's System without obtaining additional approvals from

Licensor, provided, however, that the Licensee notify the Licensor,

within ten (10) days, of the change in location of the equipment and

Licensed Software.

(ii) The Licensee and any successor to the Licensee's title in

the System may, without further consent of the Licensor, transfer

the Licensed Software and all of the Licensee's rights and interests

under this Software License to any transferee who acquires legal

title to the System, provided that such transferee first agrees in

writing to the Licensor to abide by all of the terms and conditions

of this License including, without limitation, the territorial

limitation stated in section (2)(i) and the restrictions on

decompiling or reverse assembly stated in section (2)(iii). Licensee

shall give Licensor written notice thirty (30) days prior to any

transfer. The Licensor shall not place any additional conditions on

the transferee's use of the System or the Licensed Software. If the

provisions of this section (2)(ii) are satisfied, thereafter the

Licensee shall bear no responsibility for transferee's failure to

abide by the terms and conditions of this License.

(iii) The Licensee shall take reasonable steps to protect the

confidentiality of the Licensed Software and shall not decompile or

reverse assemble all or any part of the Licensed Software to

generate source code. The Licensee shall not make the Licensed

Software available to any person except on a need to know basis. The

obligations of the Licensee hereunder shall not extend to any

information or data relating to the Licensed Software which is now

available to the general public or becomes available by reason of

the acts of the Licensor or third parties.

(iv) The Licensee may reproduce or copy the Licensed Software

and related materials solely for the purpose of archival backup, in-

house training and operating, maintaining, and administering the

System provided under this Contract. In such reproduction, the

Licensee shall include, upon all such copies of the Licensed

Software, all proprietary notices, including the copyright notice

within the Licensed Software program and related documentation in

the form in which it is received from the Licensor.

(v) The Licensee acknowledges that the Licensed Software program

is the property of the Licensor, and shall not do, or cause to be

done, anything to activate any of the subsisting nonactivated

computer instruction steps therein unless authorized in writing by

the Licensor. The Licensor shall have the exclusive right to

activate, or authorize the activation of, the subsisting

nonactivated program instruction steps in the Licensed Software. In

this event Licensee shall pay any additional Right-To-Use Fee(s)

agreed to by Licensee and Licensor.

(vi) In the event the Licensor develops significant improvements

to the Licensed Software, the Licensor may market the improvements

as a separate offering requiring payment of an additional Right-to-

Use Fee.

(vii) The Licensee shall not modify or otherwise change the

Licensed Software other than at the direction of the Licensor. This

provision shall not apply to:

(A) Changes to the Licensed Software which are necessary to

preserve or restore service. Licensee shall use all reasonable

efforts to contact Licensor before making any such changes. If the

Licensor is unable to make the necessary changes promptly to the

Licensed Software to preserve or restore service, then the Licensee

may make only such changes to the Licensed Software as are necessary

to preserve or restore service. In such event, Licensee shall

promptly notify Licensor of the changes made by Licensee.

(B) Changes made by the Licensee to its own database; and

(C) Changes made by the Licensee in connection with the exercise

of its rights under section (2)(xi).

(viii) Within thirty (30) days after written notice that a

program or a release thereof has been discontinued and is no longer

required for the operation of the System and the Licensor has

furnished the Licensee with a new program that is fully satisfactory

to the Licensee, the Licensee agrees to return the original and all

copies of the discontinued program and specified related documents.

If such return is impossible or impractical, the Licensee shall

destroy said program and documents and provide the Licensor with a

written notice of such destruction.

(ix) The Licensor warrants to the Licensee that any Software

licensed under this Software License shall function for a period of

five (5) years from the warranty start date defined in the Contract

in accordance with the Specifications and any written or printed

technical material provided by the Licensor to explain the operation

of the Licensed Software and aid in its use. The Licensor shall

correct all deficiencies within thirty (30) days from the date of

receipt by the Licensor of written notice of such deficiencies from

the Licensee. An extension of this thirty (30) day period may be

allowed only if agreed upon by the Licensee and REA. It shall be the

Licensor's obligation to insert and thoroughly test, at no charge to

the Licensee, any software amendment or alteration provided to

satisfy the obligations of this section (2)(ix). If a deficiency is

detected or a correction made within the final ninety (90) days of

the warranty, the warranty shall be extended to a date ninety (90)

days after the deficiency has been corrected.

(x) The Licensor shall hold harmless and indemnify the Licensee

from any and all claims, suits, and proceedings for the infringement

of any patent, copyright, trademark, or violation of trade secrets

covering any Licensed Software used with the System, except for

items of the Licensee's design or selection. If the Licensee's use

of the Licensed Software is enjoined, the Licensor shall promptly,

at its own expense, place the Licensee in a position where it is

able to use the System in accordance with the Specifications,

whether by:

(A) Modifying the Licensed Software or portion thereof so that

it no longer infringes but remains functionally equivalent,

(B) Replacing the Licensed Software with noninfringing

equivalent software,

(C) Obtaining for the Licensee a license or other right to use,

or

(D) Such other actions as may be required. This shall be in

addition to any other rights or claims which the Licensee may have.

The Licensor shall, at its own expense, (and the Licensee agrees to

permit the Licensor to do so) defend any suits which may be

instituted by any party against the Licensee for alleged

infringement of patents, copyright, trademark, or violation of trade

secrets relative to the Licensor's performance hereunder. Either

party shall notify the other promptly of any such claims, and the

Licensee shall give to the Licensor full authority and opportunity

to settle such claims, and shall reasonably cooperate with the

Licensor in obtaining information relative to such claims.

(xi) In the event the Licensor becomes unwilling or unable to

furnish support required by the Contract for the Licensed Software,

the Licensor shall, upon written request of the Licensee, provide

with the greatest possible dispatch all Licensed Software back-up

documentation including proprietary information other than agreed

excluded documentation. In this event, (1) the Licensee shall be

permitted full use of all Licensed Software and documentation as

long as the System is operational and (2) the Licensee may modify,

or have modified, the Licensed Software for feature enhancement or

proper equipment operation and becomes the owner of such

modifications for all purposes, including patenting, copywriting,

sale, or license thereof. Agreed excluded documentation is Licensed

Software back-up documentation described in the first sentence of

this section (2)(xi) which (A) is proprietary information of a third

party, (B) was specifically described at the pre-bid technical

session and individually identified in an attachment to the Bid, and

(C) REA and the Licensee agree, before bids are opened, may be

excluded from the requirements of this section (2)(xi). In the event

the Licensor furnishes agreed excluded documentation and the

Licensee exercises its rights under this section (2)(xi), the

Licensor shall use its best efforts to provide such agreed excluded

information to the Licensee, or obtain continuing support agreements

from the parties retaining legal rights to the excluded

documentation. Licensor agrees that certain Licensed Software cannot

be excluded from the requirements of this section (2)(xi) including,

but not limited to, software, the absence or improper operation of

which would significantly impair the operation of the System, would

significantly impair the ability of the Licensee to generate

revenue, or would pose a risk to REA loan security.

(xii) A breach of this License by the Licensor is a breach of

the Contract. Therefore, the remedies specified in the Contract

shall apply.

(xiii) The Licensee shall have thirty (30) days after receipt of

written notice from the Licensor to correct any breach of this

License. Damages payable by the Licensee for its breach of this

License shall not exceed the total Contract price. The Licensor

shall not terminate this License unless:

(A) The Licensor has given REA sixty (60) days notice before

termination; and

(B) REA agrees with the Licensor that termination is the only

method available to prevent significant harm to the Licensor from

additional Licensee defaults.

(xiv) The obligations of Licensee and Licensor and any

successors in title under this Agreement shall survive the

termination of this Agreement and continue after any termination of

rights granted hereunder.

(xv) Licensee and Licensor agree that it will not, without the

prior written permission of the other party, use in advertising,

publicity, packaging, labeling, or otherwise, any trade name,

trademark, trade device, service mark, symbol, or any other

identification or any abbreviation, contraction, or simulation

thereof owned by the other party or any of its affiliates or used by

the other party or any of its affiliates to identify any of their

products or services, unless otherwise agreed by the parties.

(xvi) This Software License Agreement shall prevail

notwithstanding any conflicting terms or legends which may appear on

or in the Licensed Software.

(xvii) If any Section or part thereof, in this Agreement shall

be held to be invalid or unenforceable in any jurisdiction in which

this Agreement is being performed, then the meaning of such section

or part shall be construed so as to render it enforceable, to the

extent feasible; and if no feasible interpretation would save such

section or part, it shall be severed from this Agreement and the

remainder shall remain in full force and effect. However, in the

event such section or part is considered an essential element of

this Agreement, the parties shall promptly negotiate a replacement

therefor.

(xviii) This Software License and any amendments thereto, or

revisions thereof, are subject to REA approval.

Licensor

Company

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By---------------------------------------------------------------------

Title------------------------------------------------------------------

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Licensee

Company

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By---------------------------------------------------------------------

Title------------------------------------------------------------------

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[End of clause]

* * * * *

PART 1755--TELECOMMUNICATIONS STANDARDS AND SPECIFICATIONS FOR

MATERIALS, EQUIPMENT AND CONSTRUCTION

4. The authority citation for part 1755 is revised to read as

follows:

Authority: 7 U.S.C. 901 et seq., 1921 et seq.

5. Section 1755.93 is amended by adding a new entry at the end of

the table and by revising footnote 1 at the end of table to read as

follows:

1755.93 List of standard forms of telecommunications contracts.

* * * * *

----------------------------------------------------------------------------------------------------------------

Source of

REA form No. Issue date Title Purpose copies

----------------------------------------------------------------------------------------------------------------

* * * * * * *

Addendum No. 2....... May 16, 1994........ Addendum to REA Forms 525 Incorporates the Software REA.\1\

and 545 Central Office License Agreement into

Equipment Contracts. REA Forms 525 and 545.

----------------------------------------------------------------------------------------------------------------

\1\A limited number of copies of the publication will be furnished by REA upon request. As this document is

produced by the Federal Government and is, therefore, in the public domain, additional copies may be

duplicated locally by any user as desired. Requests for copies should be sent the Director, Administrative

Services Division, U.S. Department of Agriculture, Rural Electrification Administration, Washington, DC 20250.

The telephone number of the REA Publication Office is (202) 720-8674.

* * * * *

Dated: April 16, 1994.

Bob J. Nash,

Under Secretary, Small Community and Rural Development.

[FR Doc. 94-8834 Filed 4-13-94; 8:45 am]

BILLING CODE 3410-15-P