Exhibit 10.3
REDACTED VERSION
Execution Copy
PATENT RIGHTS AGREEMENT
*** Confidential treatment has been requested as to certain
portions of this agreement. Such omitted confidential
information has been designated by an asterisk and has been
filed separately in accordance with the Securities and
Exchange Act of 1934, as amended, and the Commission's rules
and regulations promulgated under the Freedom of Information
Act, pursuant to a request for confidential treatment. ***
This Patent Rights Agreement (this "Agreement"), is entered into on
November 7, 2002 (the "Effective Date"), by and between Gemstar-TV Guide
International, Inc., a Delaware corporation (the "Company") and Xxxxx X. Xxxx,
an individual ("Xxxx"). The Company and Xxxx may at times be referred to
individually as a "Party" or collectively as the "Parties."
WITNESSETH:
WHEREAS, Xxxx and the Company are, concurrently herewith, entering into
certain agreements, including without limitation (i) that certain Termination
Agreement of even date herewith relating to the termination of Xxxx'x employment
with Company under his current employment agreement (the "Termination
Agreement") and (ii) that certain Employment Agreement of even date herewith
(the "Employment Agreement"), pursuant to which Xxxx, among other things, is
agreeing to assign to the Company all right, title and interest in certain
inventions as more fully described therein;
WHEREAS, Xxxx may from time to time after the expiration of the term of
the Employment Agreement develop certain Inventions relating to the fields of
Interactive Program Guides or Interactive Television (as such terms are defined
below);
WHEREAS, Xxxx recognizes that such Inventions are likely to arise from
or relate to confidential information of the Company, developed or learned by
Xxxx in the course of his prior employment by the Company, and that the nature
of such Inventions are global in application;
WHEREAS, the Company desires to acquire from Xxxx, and Xxxx desires to
grant to the Company, an option to acquire all right, title and interest in and
to such Inventions conceived or made by Xxxx, whether individually or jointly,
after the Commencement Date and prior to the end of the Term (as such terms are
defined below) that relate in whole or in part to the fields of Interactive
Program Guides or Interactive Television, in accordance with the terms and
conditions set forth herein; and
WHEREAS, the Company desires to have Xxxx consult with the Company with
respect to such Inventions made during the Term of this Agreement, and Xxxx is
willing to consult with the Company on the terms set forth herein;
WHEREAS, Xxxx desires to acquire from the Company, and the Company
desires to grant to Xxxx, a license-back of certain exclusive rights in certain
Acquired Inventions (as defined below) in accordance with the terms and
conditions set forth herein.
WHEREAS, by virtue of Xxxx'x background and experience, the personal
services called for hereunder are special, unique, unusual, extraordinary and
intellectual;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, agree as follows:
1. Definitions.
(a) "Disclosure" shall mean a disclosure made pursuant to the
provisions of Section 2(a) or 2(f).
(b) "Commencement Date" shall mean the earlier of the fifth
anniversary of the Effective Date or the day of expiration or earlier
termination of the Employment Agreement.
(c) "Fee-Bearing Products" shall mean products, services, means,
processes or functions within the fields of Interactive Program Guides and
Interactive Television.
(d) "Interactive Television" shall mean any means, product, system,
or process: ***
(e) "Interactive Program Guide" shall mean any means, product,
system or process ***
(f) "Viewer means one who receives, whether at the time of
transmission or at a later time, Television Content or Digital Radio Content; an
"iTV Viewer" means one who receives, whether at the time of transmission or at a
later time, Television Content.
(g) "Television Content" means information transmitted in an analog
or digital television signal or information transmitted in substantially the
same form from a single source to many recipients, irrespective of the means of
transmission or the apparatus used to reproduce such content; and "Digital Radio
Content" means information concurrently transmitted in substantially the same
form from a single source to many recipients as Digital Radio; provided,
however, that "transmission" for purposes of these definitions shall not include
(x) the distribution of physical media (e.g., CD's, DVD's, video cassettes and
other physical media of any type) having copies of audio or video content stored
on the physical media; or (y) transmission of information using systems such as
telephone-based conferencing systems. For illustrative purposes only, Television
Content or Digital Radio Content transmitted via over-the-air broadcast, cable,
telephone lines or satellite, or downloaded directly to a recipient for storage
on a personal video recorder or recordable CD or DVD, would be included within
the scope of these definitions of "Television Content" and "Digital Radio
Content," respectively.
(h) "Digital Radio" shall mean the communication of an audio signal
in digital format by transmission of the signal from a transmitter to a
receiver, where the receiver processes the received signal using digital signal
processing techniques.
*** Confidential treatment has been requested pursuant to Section IV.4 of the
request for confidential treatment dated November 12, 2002.
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(i) "Inventions" shall mean inventions (whether or not patentable)
including all embodiments of such inventions, developments, concepts, know-how,
technology, ideas, methods, techniques, products or processes.
(j) The following principles shall be used to apply the definitions
of "Interactive Television" and "Interactive Program Guide":
(i) Living Definitions. For the purpose of determining whether
an Invention is within or outside of the fields of Interactive Television and
Interactive Program Guide, the above definitions are intended to be "living
definitions" in that, as used in these definitions, while the term "television"
shall mean television in all forms generally known as of the Effective Date, it
is intended to include the future evolution of television, taking into account
improvements, enhancements and developments therein, and the convergence of
television with personal computers and the Internet.
(ii) Inventions Intended to Improve, Evolve or Further Develop
Interactive Television and/or Interactive Program Guide. An Invention intended
to improve, evolve or further develop any means, product, system or process
within the definitions of Interactive Television and/or Interactive Program
Guide shall be deemed to be included within the fields of Interactive Television
and Interactive Program Guide for the purpose of Section 2 of this Agreement,
even though at the time of conception of the Invention, the Invention may not
fall within the then applicable definitions of Interactive Television and
Interactive Program Guide.
(iii) Inventions Not Intended to Improve, Evolve or Further
Develop Interactive Television and Interactive Program Guide. If an Invention
which is not intended to improve, evolve or further develop any means, product,
system or process within the definitions of Interactive Television and/or
Interactive Program Guide, and which is outside of the fields of Interactive
Television and Interactive Program Guide at the time Xxxx'x obligation to
disclose under Section 2 arises, but which later becomes applicable to the
fields of Interactive Television and/or Interactive Program Guide after the
Commencement Date and during the Term of this Agreement due to the effect of the
"Living Definitions" of these terms, then Xxxx shall be obligated to disclose
and grant to the Company an option to acquire such Invention pursuant to Section
2 hereof.
(iv) Definition Conferral Process. On the second anniversary of
the Effective Date, and every two (2) years thereafter during the Term, the
Parties shall meet and confer in good faith regarding the applicability of the
definitions of Interactive Television and Interactive Program Guide to the
business of the Company and the evolution of television, and modify such
definitions as appropriate in accordance with the intentions of the Parties
under the Living Definitions. Any disagreements between the Parties regarding
the modifications of such definitions shall be resolved by the arbitration
process set forth below.
(j) "Inventions" shall mean inventions (whether or not patentable)
and all embodiments of such inventions, developments, concepts, know-how,
technology, ideas, methods, techniques, products or processes.
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2. Disclosure and Option.
(a) Obligation to Disclose.
Xxxx shall promptly provide a written disclosure to the Company of
any Inventions related in whole or part to the fields of Interactive Program
Guides or Interactive Television (as such terms are defined at the time of
Xxxx'x disclosure) that he solely or jointly conceives, makes, or reduces to
practice, or with respect to which he acquires ownership or control directly or
indirectly through an entity owned or controlled by him ("Disclosure") during
the period beginning on the Commencement Date and ending upon expiration of the
Term. The disclosure required hereunder shall contain a reasonably detailed and
complete written description of all Inventions then known to Xxxx relating to
the subject matter of the Disclosure, in as much detail as Xxxx can reasonably
provide. The provision to the Company of Disclosures as required herein shall be
for the sole purpose of determining the Company's rights hereunder as set forth
in this Section 2.
Xxxx'x disclosure obligations pursuant to this Section 2(a) shall
continue during the Term (and potentially beyond the Term as provided herein),
and in the event that an Invention solely or jointly conceived, made or
developed by Xxxx during the Term does not at the time it is conceived, made or
developed relate in whole or in part to the fields of Interactive Program Guides
or Interactive Television, but due to the evolution of such fields relates in
whole or in part to such fields at a later date, such Invention shall be subject
to a disclosure (a "Subsequent Disclosure"), subject to all rights and
obligations of the Parties' hereunder at the date of such Subsequent Disclosure,
including without limitation the provisions of this Section 2, except as
provided herein.
(b) Grant of Option. Xxxx hereby grants to the Company an exclusive
option, exercisable as provided below, to acquire all right, title and interest
in and to i) any Disclosure related in whole or in part to the fields of
Interactive Program Guides or Interactive Television, and all intellectual
property and proprietary rights arising from any Invention disclosed in any such
Disclosure; and ii) any improvement to such an Invention disclosed in any
Disclosure, to the extent that he solely or jointly conceives, makes, or reduces
to practice such improvement during the Term; and iii) any Subsequent Disclosure
related in whole or in part to the fields of Interactive Program Guides or
Interactive Television (as such definitions exist at such time), and all
intellectual property and proprietary rights arising from any Invention
disclosed in any such Subsequent Disclosure.
(c) Exercise of Option.
The Company shall, as promptly as practicable and in no event
later than ninety (90) days after receipt of any Disclosure or Subsequent
Disclosure, deliver written notice to Xxxx of the Company's election to
exercise, or its election not to exercise, its option in connection with such
Disclosure or Subsequent Disclosure (an "Election Notice"). Any such Inventions
acquired by the Company hereunder may be referred to herein from time to time as
the "Acquired Inventions." Upon receipt by Xxxx of an Election Notice containing
an election by the Company not to exercise its option in any Disclosure or any
Subsequent Disclosure which is the subject of such Election Notice, or if Xxxx
does not receive such an Election Notice within
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the ninety (90) day period described above (in which case the Company shall be
deemed to have elected not to exercise its option in connection with such
Disclosure or such Subsequent Disclosure), Xxxx shall be free to use, exploit
and license any and all such Inventions, subject to the provisions of Article 10
hereof.
Xxxx hereby covenants not to assert any patent rights or other
intellectual property rights which arise from any Inventions retained by Xxxx by
reason of the Company's failure to exercise its option with respect to any such
Disclosure or any such Subsequent Disclosure against the Company or its
customers or licensees (in their capacities as such), mediate or immediate, for
activities within the fields of Interactive Program Guides or Interactive
Television. Such covenant shall be permanent, irrevocable, binding on Xxxx'x
successors and assigns, and shall run with the patents, including any extensions
thereof, and any other intellectual property rights arising from any such
Disclosure or any such Subsequent Disclosure.
In the event that the Company, after the provision to Xxxx of
an Election Notice containing an election by the Company not to exercise its
option in the Disclosure which is the subject of such Election Notice, or Xxxx'x
failure to receive an Election Notice for such Disclosure within the ninety (90)
day period, later determines that it desires to acquire such rights as may be
available in such Disclosure due to the evolution of the fields of Interactive
Television and Interactive Program Guides (a "Reclaimed Disclosure"), Company
shall provide written notice to Xxxx of such desire, and the Parties' rights and
obligations set forth herein shall apply with respect to such Disclosure;
provided, however, that the assignment by Xxxx as set forth in Section 2(d)
below shall be subject to any rights conveyed by Xxxx in any Inventions
described in the Reclaimed Disclosure prior to receipt of the notice, and such
Reclaimed Disclosure shall be added to Schedule A hereto.
(d) Assignment. Upon Xxxx'x receipt of the Company's notice that it
wishes to exercise its option in a Disclosure, a Subsequent Disclosure or a
Reclaimed Disclosure pursuant to Section 2(c), Xxxx shall promptly execute an
assignment in a form reasonably acceptable to the Company assigning to the
Company all right, title and interest in such Disclosure and any Inventions
disclosed therein. Xxxx shall at all times thereafter (i) take all actions
reasonably requested by the Company and make all further assurances reasonably
warranted to confirm that the Company is the exclusive owner of all Acquired
Inventions, subject to the limitations provided above as to any Reclaimed
Disclosures, in each of the foregoing cases all at the Company's sole cost and
expense; and, (ii) shall provide all reasonable assistance in obtaining,
perfecting and enforcing the Acquired Inventions or any legal rights in and to
the same in any administrative agency or court, domestic or foreign including,
but not limited to, reviewing and signing all lawful declarations, oaths,
affidavits and other documents in connection with any of the foregoing, in each
of the foregoing cases all at the Company's sole cost and expense including,
without limitation, reasonable compensation for Xxxx'x time expended in
connection with such assistance.
(e) Patent Prosecution and Cooperation. The Company shall have the
right to file for patent protection in its own name, to the extent allowable by
applicable law, for any Inventions acquired by the Company hereunder. The
decision to seek patent protection, and prosecution of any patent applications,
shall be at the Company's sole expense and control. Xxxx shall cooperate at the
Company's reasonable request and at the Company's sole cost and
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expense, in the prosecution of all patent applications, reissues,
reexaminations, divisionals, continuations and continuations-in-part relating to
such Inventions, including but not limited to reviewing and signing all lawful
declarations, oaths, affidavits and other documents in connection with any of
the foregoing. The Company shall reimburse Xxxx for any reasonable out-of-pocket
costs he incurs in providing such cooperation and shall reasonably compensate
Xxxx for his time expended in connection with such cooperation.
(f) Failure to Disclose. If Xxxx fails to disclose any Invention
related to the fields of Interactive Program Guides or Interactive Television
that he solely or jointly conceives or makes during the Term, such failure shall
not affect the Company's option to acquire such Invention. Upon discovery that
such Invention has not been disclosed to the Company, Xxxx shall promptly make a
Disclosure as set out in Section 2(a) (a "Late Disclosure") and shall use his
reasonable best efforts to avoid prejudice to the Company's rights under the
remainder of this Article 2.
(g) Third Party Material. If disclosure of any Invention required
under this Article 2 would require disclosure of third-party trade secrets or
other confidential information that Xxxx is legally or contractually prohibited
from disclosing to the Company, the parties will negotiate in good faith with
each other and, if necessary, with any such third party, an approach that will
allow the Company to determine whether it wishes to acquire such Invention
hereunder and to allow the Company to acquire such Invention if it wishes to do
so. Xxxx shall not knowingly include any third party trade secrets, proprietary
material or other confidential information in a Disclosure or Subsequent
Disclosure without identifying same to the Company therein. Each Disclosure and
each Subsequent Disclosure shall further identify i) any third-party patent
rights that Xxxx knows relate to one or more Inventions described therein ; and
ii) any third parties who are joint inventors, authors or creators of the
material contained therein or any portion thereof, including a description of
the contribution of each such third party thereto.
(h) No Retained Rights. Xxxx shall have no retained rights in any
Acquired Inventions other than as provided in Section 2(k), and the Company
shall be the sole and exclusive owner of the Acquired Inventions and any patents
or other intellectual property rights arising therefrom with the right to grant
licenses, xxx for infringement and recover damages without accounting to Xxxx
therefor, except as expressly provided herein.
(i) Protection Prior to Disclosure. Xxxx shall protect as
Confidential Information, pursuant to the provisions of Article 13, any
Inventions that he would be obligated to disclose under Section 2(a) until the
termination of any option the Company may have to acquire such Inventions.
(j) No License to Company Intellectual Property. Except as set forth
in Section 2(k), no license, express or implied, is being granted to Xxxx
hereunder, and Xxxx shall have no rights whatsoever under any patent or other
intellectual property rights of the Company.
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(k) Grant Back of License Rights in Other Fields of Use.
(i) The Company agrees to grant, and the Company hereby
conveys and grants as of the Commencement Date, to Xxxx an exclusive,
royalty-free, non-transferable (except as provided in Section 7) worldwide right
and license, with the full and complete right to sub-license, in and to all
Acquired Inventions and all intellectual property rights arising therefrom that
are later identified on Schedule A as set forth below, in all fields of use
other than for use in connection with Interactive Television or Interactive
Program Guides ("Licensed Inventions"); provided, however, that such license
shall be taken subject to any grant of rights or other encumbrances to third
parties under such Acquired Inventions existing prior to the time such Licensed
Invention is added to Schedule A. Such license shall be permanent, irrevocable,
binding on the Company's successors and assigns. Licensed Inventions shall be
added to Schedule A during the Term and after the Commencement Date at Xxxx'x
request, and in response to Xxxx'x demonstration during the Term that an
Acquired Invention has a not immaterial application outside the fields of
Interactive Television and Interactive Program Guides, as evolved at the time of
such demonstration (a "Mixed Use Invention").
(ii) In the event that, during the Term, the Company
knowingly conveys rights to a third party under any Acquired Invention that is
not included on Schedule A (but subject to Xxxx'x rights hereunder) for the
purpose of exploiting such Acquired Invention in a field that the Company knows
is outside the fields of Interactive Television and Interactive Program Guides
under any reasonable interpretation at the time of the conveyance, the Company
hereby covenants not to assert any patent rights or other intellectual property
rights which arise from such Acquired Invention against Xxxx, or any of his
customers or licensees, mediate or immediate, based on activities of any of the
foregoing in fields other than Interactive Television and Interactive Program
Guides, provided, that Xxxx has requested that such Acquired Invention be added
to Schedule A during the Term and establishes during the Term that such Acquired
Invention is a Mixed Use Invention. Any such third party conveyance shall be
subject to such covenant, which shall be permanent, irrevocable, binding on the
Company's successors and assigns, and shall run with the patents, including any
extensions thereof, and any other intellectual property rights arising from such
Acquired Invention.
(iii) In the event the Company elects to pursue patent
protection for a Licensed Invention, the Company and Xxxx shall share equally in
the costs of preparation, filing, and maintenance of all patents, renewals, and
extensions arising from such Licensed Invention (other than a Reclaimed
Disclosure) after the date on which such Licensed Invention is added to Schedule
A, and the Company shall make commercially reasonable efforts to procure patent
claims relating to applications outside the fields of Interactive Television and
Interactive Program Guides at Xxxx'x reasonable direction. Xxxx shall have the
right to license and enforce the Licensed Inventions in fields outside the
fields of Interactive Television and Interactive Program Guides and at his sole
cost and expense. Xxxx may not institute any action to enforce a patent for a
Licensed Invention without the Company's consent, which consent shall not be
unreasonably withheld or delayed. The Company shall reasonably cooperate in any
enforcement action to which it consents, including joining as a party as
required by law subject to (i) reimbursement by Xxxx of Company's expenses
incurred in connection with such action and (ii) payment by Xxxx of Company's
reasonable compensation for its employees' time expended in connection with such
matter. Xxxx shall fully and vigorously defend any challenges raised with
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respect to the validity and/or enforceability of any patents so enforced. Xxxx
may not settle or compromise any such action without the Company's express
written consent, which consent shall not be unreasonably withheld; provided,
however, that Xxxx may settle or compromise an action for which consent is not
received from Company within a reasonable amount of time (given the
circumstances then applicable to such proposed compromise or settlement)
following notice by Xxxx of the terms of such proposed compromise or settlement.
Any license fees, damages recovery, settlement amounts, or other compensation
received for infringement or authorized use of such patent shall be belong
solely to Xxxx.
(l) Failure to Maintain or Prosecute by Xxxx. Should Xxxx at any
time elect not to, or otherwise fail to, share the costs to maintain or
prosecute any particular patent or patent application in accordance with the
terms of this provision, Company shall provide Xxxx with a written notice
thereof. Xxxx shall have thirty (30) days after receipt of such written notice
of any such alleged failure to remedy the alleged failure set forth in such
notice. If Xxxx fails to remedy such alleged failure within such period of time,
the Company shall have a claim for damages and/or a right of set-off for such
amounts which are then actually due and owing (plus interest as provided for
herein) against monies which are then or thereafter otherwise owing to Xxxx
hereunder, and Company shall have no further obligations to pursue patent claims
relating to applications outside the fields of Interactive Television and
Interactive Program Guides unless Xxxx has paid all amounts then due and owing,
and provided further assurances of his obligation to pay future expenses, by the
time the Company is required to incur additional expense to maintain such patent
claims. Nothing in this paragraph shall be deemed to abrogate any of the
Company's rights under this Agreement.
(m) Patent Identification. Xxxx shall have a duty to xxxx, and shall
use commercially reasonable efforts to cause his licensees to xxxx, including
without limitation including a provision in all licenses obligating such
licensees to xxxx, all products and literature concerning any Licensed Invention
in a form which complies with the law of the jurisdiction in which the products
are manufactured, used, sold and distributed, and shall also comply with the
provisions of 35 U.S.C. Section 287.
(n) Consultation. During the Term hereof, Xxxx shall consult with
the Company and provide assistance as reasonably requested in connection with
the Company's use and exploitation of Acquired Inventions, all at the Company's
sole cost and expense including, without limitation, reasonable compensation for
Xxxx'x time expended in connection with such assistance. Such consultation shall
be in addition to the cooperation and assistance provided by Xxxx pursuant to
Section 2(d).
(o) Covenant Not to Xxx on Acquired Inventions. Xxxx hereby
covenants not to assert any patents or other intellectual property rights
relating in whole or in part to the fields of Interactive Program Guides or
Interactive Television, for which Xxxx acquires ownership or control during the
Term, whether directly or indirectly through an entity owned or controlled by
him, against the Company or the Company's customers and licensees (in their
capacities as such), mediate and immediate, for activities within the fields of
Interactive Program Guides or Interactive Television.
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3. Term.
This term of this Agreement (the "Term") shall commence upon the
Commencement Date, and shall remain in force until the date which is seven (7)
years from the Effective Date unless otherwise terminated as provided herein
(the "Initial Term"). At the end of the Initial Term, the Agreement shall
terminate unless the Company and Xxxx mutually agree in writing to extend the
Agreement, in which case the Agreement shall continue in effect for an
additional seven (7) year period. Thereafter, the Agreement shall continue in
effect for additional seven (7) year periods (each seven (7) year period that
the Agreement is in effect following the Initial Term, a "Subsequent Term") upon
the Company's and Xxxx'x mutual written agreement to effect such extensions upon
the expiration of a Subsequent Term. (The Initial Term, and any and all
Subsequent Terms, are collectively referred to herein as the "Term.")
Notwithstanding the foregoing, (i) the Term shall terminate upon the death of
Xxxx, and (ii) the Company may, in its sole discretion, (1) terminate the
Initial Term as of the third anniversary of the Commencement Date and (2)
terminate any Subsequent Term as of the third anniversary of the first day of
such Subsequent Term, in each case by written notice from the Company to Xxxx
delivered at least sixty (60) days in advance of the applicable anniversary date
on which such termination would be effective.
4. Representations and Warranties.
(a) The Company's Representations and Warranties. The Company hereby
represents and warrants to Xxxx as of the Effective Date that: (i) the
execution, delivery and performance of this Agreement by the Company: (1) are
within the corporate power and authority of the Company; (2) have been duly
authorized by all necessary or proper corporate action; (3) are not in
contravention of any provision of the certificate of incorporation or bylaws of
the Company; and (4) will not violate the terms of any agreement, or other
instrument to which the Company is a party or by which the Company or any of its
property is bound; (ii) this Agreement has been duly executed and delivered by
the Company and constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable insolvency and other laws
affecting creditors' rights generally or by the availability of equitable
remedies; and (iii) except as otherwise specifically set forth in this
Agreement, the license granted to Xxxx in the Licensed Inventions is free and
clear of any encumbrances and liens except those arising from (A) acts,
omissions or legal obligations of Xxxx and (B) any pre-existing grants of rights
under such Licensed Inventions.
(b) Xxxx'x Representations and Warranties. Xxxx hereby represents
and warrants to the Company as of the Effective Date that: (i) the execution,
delivery and performance of this Agreement by Xxxx and the granting of options
and assignments made herein will not violate the terms of any agreement or other
instrument to which Xxxx is a party or by which Xxxx or any of his property is
bound; and (ii) this Agreement constitutes a legal, valid and binding obligation
of Xxxx, enforceable against Xxxx in accordance with its terms, except as such
enforceability may be limited by applicable insolvency and other laws affecting
creditors' rights generally or by the availability of equitable remedies; and
(iii) except as otherwise specifically set forth in this Agreement, the rights
assignable to Company at its option pursuant to this Agreement are free and
clear of any encumbrances and liens.
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(c) Representations and Warranties with Respect to Disclosures. Xxxx
represents and warrants as of the date of each Disclosure that, except to the
extent explicitly set forth in a Disclosure, such Disclosure does not, to the
best of his knowledge, include any material which was made by any third party or
covered by any third party patent or other intellectual property rights.
(d) No Inconsistent Agreements. Each of Xxxx and the Company
covenants to the other that it will not enter into any agreement, make any
commitment, or otherwise take any action that is inconsistent with the
provisions of this Agreement or the rights granted and promised to be granted
hereunder.
(e) No Other Representations or Warranties. There are no
representations, promises, warranties, covenants or undertakings with respect to
the subject matter hereof other than those contained in this Agreement.
5. Indemnification; Limitation of Liability.
(a) The Company shall indemnify and hold Xxxx harmless from and
against all losses, claims, damages, liabilities, demands, proceedings and costs
(including actual legal costs incident thereto) (collectively, "Claims") of any
type whatsoever relating to or arising out of Company's use of, and/or Company's
exercise of dominion over, the Inventions acquired by the Company from Xxxx
pursuant to this Agreement except to the extent the Claims relate to (1)
third-party rights of which Xxxx was aware and failed to disclose to the Company
in a Disclosure containing the relevant Inventions; or (2) Xxxx'x knowing and
undisclosed failure to convey sole and exclusive title in such Inventions to the
Company. Xxxx shall notify the Company of any Claims for which he believes he is
entitled to seek indemnification promptly after first receiving notice of the
Claim, providing all information in his possession relating to the Claim, and
any other cooperation and assistance as may be necessary for Company to evaluate
the Claim. The Company shall have the right to assume and control the defense of
any such Claims. Xxxx shall not settle or compromise any Claims for which he
believes he is entitled to seek indemnification without first (i) providing
notice, cooperation and assistance as described above; (ii) allowing Company a
reasonable amount of time to evaluate the Claim and assume the defense; and
(iii) disclosing the proposed settlement terms to Company and allowing Company a
reasonable amount of time (given the circumstances then applicable to such
proposed compromise or settlement) following notice by Xxxx of the terms of such
proposed compromise or settlement to consent to settlement on such terms.
(b) XXXX'X LIABILITY TO THE COMPANY FOR ALL DAMAGES, INCLUDING
ACTUAL, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES, OR LOST OR
IMPUTED PROFITS AND/OR ROYALTIES ARISING OUT OF THIS AGREEMENT OR ITS
TERMINATION OR EXPIRATION, WHETHER FOR BREACH (OR ALLEGED BREACH) OF A
REPRESENTATION OR WARRANTY OR ANY OBLIGATION UNDER THIS AGREEMENT AND WHETHER
LIABILITY IS ASSERTED IN CONTRACT OR TORT AND IRRESPECTIVE OF WHETHER XXXX HAS
BEEN ADVISED OF THE POSSIBILITY OF ANY SUCH LOSS OR DAMAGE, SHALL BE LIMITED TO
THE GREATER OF (i) THE COMPENSATION RECEIVED BY XXXX UNDER THIS AGREEMENT DURING
THE TWELVE MONTH PERIOD PRIOR TO THE
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DATE ON WHICH SUCH LIABILITY AROSE OR (ii) THE ACTUAL BENEFIT RECEIVED BY XXXX
AS A RESULT OF THE BREACH; PROVIDED, HOWEVER, THAT IF SUCH DAMAGES AROSE OUT OF
ANY KNOWING BREACH OF THIS AGREEMENT, XXXX'X LIABILITY TO THE COMPANY FOR ALL
SUCH DAMAGES SHALL BE LIMITED TO THE GREATER OF (i) THE ACTUAL BENEFIT RECEIVED
BY XXXX AS A RESULT OF THE BREACH, OR (ii) TWENTY-TWO MILLION ONE HUNDRED
SEVENTY-FIVE THOUSAND FIVE HUNDRED DOLLARS ($22,175,500). THE COMPANY HEREBY
WAIVES ANY CLAIM THAT THESE EXCLUSIONS DEPRIVE IT OF ANY ADEQUATE REMEDY.
6. Protection of Licensed Patent Rights; Infringements.
Xxxx shall promptly notify Company of any apparently unauthorized
use or infringement of any Acquired Inventions by a third party as promptly as
is reasonably practicable after such unauthorized use or infringement comes to
the Xxxx'x attention. Neither Party will license or enforce any patents arising
from the Acquired Inventions in violation of any laws.
7. Assignability/Binding Effect.
No rights or obligation of the Company under this Agreement
may be assigned or transferred by the Company without Xxxx'x prior written
consent, except that such rights or obligations may be assigned or transferred
pursuant to a merger or consolidation in which the Company is not the continuing
entity, or a sale, liquidation or other disposition of all or substantially all
of the business and assets of the Company, provided that the assignee or
transferee is the successor to all or substantially all of the business and
assets of the Company and assumes the liabilities, obligations and duties of the
Company under this Agreement, either contractually or as a matter of law. In the
event of any disposition of its business and assets described in the preceding
sentence, the Company shall take whatever action it can in order to cause such
assignee or transferee expressly to assume the liabilities, obligations and
duties of the Company hereunder. Xxxx acknowledges that this Agreement is
personal and may not be assigned by him; provided, however, that he shall have
the right to (i) assign any right or rights to receive payments hereunder,
during his lifetime, by sending written notice to the Company or, upon his
death, by will or the laws of descent and distribution, (ii) assign any of his
rights under the license granted to him pursuant to Section 2(k)(i) and all
rights under the covenant not to xxx granted to him pursuant to Section 2(k)(ii)
(the "Permanent Irrevocable Rights") to one or more legal entities and/or trusts
owned or controlled by him (each, a "Transferee") for the purpose of exploiting
the Permanent Irrevocable Rights, provided, that (A) he promptly notifies the
Company of any such assignment and provides the Company with a copy of the
documentation effecting such assignment and evidence reasonably satisfactory to
the Company that he owns or controls such Transferee, (B) such Transferee is
prohibited from any further transfers except to a Transferee to whom (or to
which) Xxxx would have been permitted to transfer such Permanent Irrevocable
Rights directly pursuant to this Section 7, (C) each such assignment is
expressly made permanently and irrevocably subject to all of the terms,
conditions, and limitations attaching to the Permanent Irrevocable Rights set
forth herein, (D) such assignment is subject to the condition that such
Transferee continues to be owned or controlled by Xxxx or by persons or trusts
acquiring such ownership or control upon his death, and (E) any such legal
entity or trust executes and delivers to the Company a written undertaking for
the
11
benefit of the Company (1) acknowledging and accepting all of Xxxx'x obligations
and covenants to the Company with respect to such Permanent Irrevocable Rights,
(2) providing that such rights may not be further transferred or assigned
without the Company's prior written consent and will terminate upon any other
transfer or assignment or in the event that Xxxx (or persons or trusts acquiring
such ownership or control of such entity or trust upon his death) no longer owns
or controls such entity or trust and (3) indicating that such assignment or
transfer complies with the requirements of this Section 7; and (iii) transfer
any Permanent Irrevocable Rights and/or his ownership interests in any
Transferee that is a legal entity to his beneficiaries by will or by the laws of
descent and distribution, provided, that any further transfers by any such
beneficiary shall be subject to the limitations of this Section 7 to the same
extent as if such beneficiary were Xxxx; provided, that any such beneficiaries
enter into a written agreement with the Company acknowledging and accepting all
of Xxxx'x obligations and covenants to the Company with respect to such
Permanent Irrevocable Rights and providing that such rights may not be
transferred or assigned and will terminate upon transfer or assignment. Any
other purported assignment by Xxxx of any rights under this Agreement without
the Company's written consent shall be void and of no effect. To the extent
applicable, this Agreement shall be binding upon, and inure to the benefit of,
the successors and assigns, beneficiaries, devisees, heirs, next of kin,
executors and administrators of Xxxx. In the event of Xxxx'x death or a judicial
determination of his incompetence, references in this Agreement to Xxxx shall be
deemed to refer, where appropriate, to his legal representative, or, where
appropriate, to his beneficiary or beneficiaries.
Breach.
(a) If either Party materially defaults under this Agreement, the
non-defaulting Party may send notice of default and, if the defaulting Party has
not substantially cured the default within sixty (60) days, the non-defaulting
Party shall have the right to terminate this Agreement by sending written notice
to the defaulting Party in addition to any other remedies that may be available.
(b) Notwithstanding any expiration or termination of this Agreement,
the provisions of Sections 2 (except 2(n)) 4(c), 4(d), 5, 6 (the last sentence
only), 8(b), 8(c), 8(d), 9 (to the extent earned thereunder at the time of
termination or expiration under any of subsections (a), (b), (d) and (f)) and
12-21 shall remain in full force and effect.
(c) Termination of this Agreement in whole or in part pursuant to
any of the provisions hereof shall be without prejudice to any rights which
either Party may have against the other Party hereto.
(d) In the event that, at the end of the Initial Term or any
Subsequent Term, Xxxx does not agree with the Company to extend the Agreement
for a new Subsequent Term, then, notwithstanding the provisions of any other
agreement between Xxxx and the Company that provide for a longer exercise
period, Xxxx'x right to exercise any then outstanding options granted to him
pursuant to Section 9(c) of this Agreement shall continue for a period of one
hundred and eighty (180) days following the termination of this Agreement (or
such shorter period as the terms of the applicable option agreement or any other
applicable agreement
12
between Xxxx and the Company otherwise provide), after which such options shall
be terminated and forfeited.
8. Payment Terms; Additional Consideration; Audit.
(a) During the Term, Xxxx shall be paid annual compensation of
$250,000 per year, payable in monthly installments, and shall be entitled to
receive health benefits to the same extent as provided pursuant to the
Employment Agreement as of the date of its termination.
(b) As soon as practicable but no later than forty-five (45) days
after the end of each full or partial fiscal quarter during the Term (each such
fiscal quarter period, a "Fee Period"), Company shall (i) deliver to Xxxx a
statement (the "Quarterly Fee Statement") signed by its Chief Executive Officer
or Chief Financial Officer setting forth: (x) Company's calculation of the total
dollar amount of Company's net revenues from the Company's use, sale,
distribution or licensing of Fee-Bearing Products (including without limitation
any such amounts for licensing, advertising, t-commerce and transaction and
other recurring revenue) during the preceding Fee Period (in each of the
foregoing cases less deductions for or on account of any present or future sales
taxes, duties, levies or freight charges; any uncollectable invoices ; or any
similar reductions) (the results of such calculation, the "Quarterly Revenue");
and, (y) Company's calculation of the amount equal to two percent (2%) of the
Quarterly Revenue for such Fee Period (such amount for each such Fee Period, a
"Fee Payment") and (ii) make payment to Xxxx of the applicable Fee Payment for
the most recent Fee Period by means of a wire transfer to the bank account
designated by Xxxx. In no event shall the cumulative Fee Payment paid over the
course of any fiscal year (or partial fiscal year) of the Company during the
Term (each, a "Fee Year") be less than one million, two hundred fifty thousand
dollars ($1,250,000) (the "Floor") nor more than two million seven hundred fifty
thousand dollars ($2,750,000) (the "Ceiling"), as such amounts are adjusted from
time to time pursuant hereto for each full fiscal year during the Term or an
appropriately reduced (on a prorated basis) Floor and Ceiling for each partial
fiscal year during the Term. All dollar amounts to be determined herein shall be
calculated in accordance with United States generally accepted accounting
principles consistently applied. If two percent (2%) of the aggregate Quarterly
Revenue for any given Fee Year is less than the Floor, Company shall pay the
difference between the cumulative Fee Payment attributable to such Fee Year (or
portion thereof, if this Agreement should expire or terminate prior to the end
of any Fee Year) and the Floor (or pro-rated portion thereof, if this Agreement
should expire or terminate prior to the end of any Fee Year) within forty-five
(45) days of the end of the applicable Fee Year. The Floor and Ceiling shall be
adjusted on each anniversary of the Commencement Date in accordance with any
increase in the Consumer Price Index for the Los Angeles area for such prior
period. If this Agreement expires or is terminated in accordance herewith on a
date other than the last day of a fiscal quarter, the Fee Payment for the
partial fiscal quarter period from the end of the full fiscal quarter
immediately preceding such expiration or termination through the date of such
expiration or termination shall be paid no later than forty-five (45) days from
the date of such expiration or termination. If the Company so elects prior to
the beginning of any Fee Year, it may make a payment of the Ceiling (as
adjusted) for the Fee Year in quarterly installments within forty-five (45) days
after the end of each fiscal quarter, in which case it shall not be required to
submit any Quarterly Fee Statements for such Fee Year. The Company may offset
against all payments described in this Section 9(b) any damages suffered by the
Company due to a breach by Xxxx of any provision of Sections 6, 8,
13
10(h) or 10(i) of the Employment Agreement; any representation or warranty
contained in Section 15 of the Termination Agreement; and/or any provision of
Section 12 of the Termination Agreement or Sections 2 or 10 of this Agreement;
provided, however, that the Company, prior to offsetting any such payments, has
invoked the provisions of Section 10(f) of the Employment Agreement, Section 13
of the Termination Agreement or Section 20 of this Agreement, as applicable,
with respect to any claim for damages suffered by the Company due to a breach by
Xxxx of the above referenced provisions; provided further, that in the event
that it is determined pursuant to such proceedings that the Company is not
entitled to all or any portion of such offset payments, the Company shall
immediately pay over to Xxxx all amounts that had been offset to which the
Company was not entitled.
(c) In addition to the compensation, benefits and Fee Payment
described above and as additional consideration for entering into this Agreement
and for the benefits to the Company hereunder, the Company shall grant and issue
to Xxxx on each anniversary date of the Effective Date during the Term, unless
this Agreement is terminated as of such anniversary date pursuant to Section 3,
options to acquire two hundred thousand (200,000) shares of the common stock of
the Company (such number of shares to be adjusted proportionately by the Company
to the extent, if any, necessary to account for, and preserve the intended level
of benefits following, any extraordinary dividend or other extraordinary
distribution in respect of the outstanding common stock to the extent paid in
the form of common stock or other equity securities, or any recapitalization,
stock split, including a stock split in the form of a stock dividend, reverse
stock split, reorganization, merger, combination, consolidation, split-up,
spin-off, exchange of common stock or similar extraordinary event , in each case
to the extent such event affects the outstanding common stock); provided,
however, that, (i) if the Term begins after the fourth anniversary of the
Effective Date, then such grants shall be made only on the sixth and seventh
anniversaries of the Effective Date, (ii) the foregoing notwithstanding, if this
Agreement is terminated as of the seventh anniversary of the Effective Date
pursuant to Section 3, no grant shall be made as of the seventh anniversary of
the Effective Date and (iii) subject to the foregoing provisos, if any such
grant date is not a business day, such grant shall be made on the first business
day after such grant date. Notwithstanding anything herein to the contrary, no
stock options shall be granted and any right to receive such stock options shall
be forfeited in the event of any (i) Breach Event (as such term is defined and
determined under the Employment Agreement) which (if capable of cure) has not
(together with all effects thereof) been fully cured by Employee within the
Breach Cure Period (as such term is defined under the Employment Agreement) or
(ii) material breach by Xxxx of Sections 2 or 10 of this Agreement. Such options
shall (i) be fully vested and immediately exercisable in full as of the date of
such grant, (ii) shall be in the form attached hereto as Exhibit 1, with such
changes to such form as may be necessary to comply with changes in law or
changes in the Company's stock option plans; provided, however, that no change
shall be required pursuant to any change in the Company's stock option plans
that is economically and materially adverse to Xxxx without Xxxx'x prior written
consent except to the extent that such change in the plans is required by law,
regulations, listing standards or changes necessary to preserve the accounting
treatment, (iii) have an exercise price equal to the Fair Market Value (as such
term is defined in the Company's 1994 Stock Incentive Plan as in effect on the
Effective Date (the "SIP")) of one share of the Company's common stock on the
date of the grant, and (iv) be granted under the SIP (or any other a stock
option plan) of the Company pursuant to which such grants may be made. If the
Company at any time prior to the date of a required option grant does not have
an effective stock option plan with adequate
14
available options necessary to grant and issue to Xxxx the number of options
contemplated hereby, then the Parties shall work together in good faith to
determine an alternative method of compensation of appropriate value and
liquidity such that Xxxx is compensated under this paragraph in a manner
substantially consistent with the intent hereof. If the Company at any time
prior to the date of a required option grant under this paragraph merges,
consolidates, reorganizes or exchanges its shares of common stock with any other
person such that Company is not the surviving entity following such transaction
(or ceases to be a public company but becomes a subsidiary of a public company),
then the surviving entity (or the parent public company, as the case may be)
shall be required to grant the options provided for herein and references to
options to purchase shares of Company's common stock hereunder shall be deemed
to refer to options to purchase an equivalent number of shares of such surviving
entity's (or public parent's) equivalent class of capital stock. In the event of
a Change in Control Event (as defined in the Stock Option Agreements attached to
the Employment Agreement as Exhibits A and B), the Company shall grant any award
of stock options required under this Agreement (and not already granted) on the
later of (i) the date that is six months and one day after the Effective Date,
or if such day is not a business day, on the next succeeding business day, (ii)
the date of the Change in Control Event, or (iii) the Commencement Date, but
only if the Company (or a successor thereto) has failed to provide for the
cash-out of such grants, or the continuation of such grants in an economically
equivalent amount (as provided in Section 7 of the Stock Option Agreements
attached to the Employment Agreement as Exhibits A and B).
(d) The Company, as additional consideration for entering into this
Agreement and for the benefits to Company hereunder, shall pay to Xxxx a
one-time acquisition fee for each Disclosure whose Inventions are acquired by
the Company hereunder. Such fee will be in addition to the other payment
obligations of the Company hereunder, shall be due and payable within forty-five
(45) days of the Company's acquisition of the Inventions disclosed in such
Disclosure under Section 2, and shall be in an amount equal to two hundred fifty
thousand dollars ($250,000) per Disclosure, payable via wire transfer to such
account as Xxxx may designate. Each Disclosure shall contain a complete
description of all Inventions then known to Xxxx relating to the subject matter
of the Disclosure and otherwise comply with the requirements of Section 2(a)(i)
of this Agreement, and Xxxx shall not submit multiple, fractional disclosures
relating to the same subject matter.
(e) Xxxx shall, at Xxxx'x expense except as provided herein, have
the right, and Company shall xxxxx Xxxx and its representatives the opportunity,
to have an independent certified public accountant, on thirty (30) days advance
notice to the Company and not more than once for any Fee Year, examine and make
copies of the books and records of Company related to the preparation of the
Quarterly Fee Statement and calculation of the Quarterly Revenue and the Fee
Payment. If any such examination discloses a deficiency in any payments made by
Company to Xxxx of more than three percent (3%) of such payment, the Company
shall reimburse Xxxx for all of the reasonable expenses connected with such
examination in addition to the payment of the amount of any such deficiency.
Such independent certified public accountant will maintain as confidential all
information obtained in connection with any such examination, in accordance with
such auditor's legal and professional obligations; provided, that, such
certified public accountant may: (i) provide to Xxxx a report on amounts due to
Xxxx and the basis for determination thereof in accordance with the ordinary
professional standards applicable to such certified public accountant; and (ii)
use the results of such examination as
15
reasonably necessary to assist Xxxx in making and/or pursuing any claims
regarding such amounts or the payment thereof. This audit right shall not apply
with respect to any Fee Year in which the Company has paid the Ceiling for such
Fee Year.
(f) The Parties agree that interest will accrue at a rate equal to
the lesser of (A) the maximum rate allowable by law and (B) one and one-half
percent (1-1/2%) per month or portion thereof, in each case compounded daily,
and will be applied to any unpaid amounts from the date on which payment was due
until the date such payment is received.
Limitations on Xxxx'x Activities.
(a) As used in this Section 10, the following terms shall have the
following meanings:
(i) "associated with", when used in the context of
"associated with any Business" or "associated with any ITV / IPG Business",
shall mean being a full or part time employee of, a consultant or other advisor
to, an agent or representative of, a director or manager of, a shareholder or
other owner of, a lender to, an investor in, a partner in, a promoter of, a
licensee or licensor of, or otherwise associated with, any Business, or any ITV
/ IPG Business, respectively, but shall not include being the owner of an equity
interest of not more than five percent in any Business or any ITV / IPG Business
whose equity securities are publicly traded.
(ii) "Business" shall mean any business, whether conducted by a
corporation, partnership, limited liability company or any other legal entity or
conducted by Xxxx as a sole proprietorship other than the Company or any
subsidiary of the Company.
(iii) "ITV / IPG Business" shall mean any Business, a
principal business activity which involves the development, sale or licensing of
products, services, technology or intellectual property in the fields of
Interactive Television or Interactive Program Guides.
(iv) "Limitations Period" shall mean the period beginning on
the Commencement Date and ending on the last day of the Term.
(iv) "Personal Services in the Fields of Interactive Television
or Interactive Program Guides" shall mean providing advice to, consulting with,
or disclosing information directly or indirectly materially relevant to, the
fields of Interactive Television or Interactive Program Guides.
(b) During the Limitations Period, if the Company is engaged in the
ITV/IPG Business at such time, Xxxx shall not, without the prior written consent
of the Company, (i) be associated with any ITV / IPG Business or (ii) directly
or indirectly provide Personal Services in the Fields of Interactive Television
or Interactive Program Guides to any Business. Neither the immediately preceding
sentence nor any other provision of this Agreement shall at any time, whether
during the Limitations Periods or thereafter, prevent Xxxx from being associated
with any Business, other than an ITV / IPG Business during the Limitations
Period as provided above, so long as Xxxx does not provide any Personal Services
in the Fields of Interactive Television or Interactive Program Guides to such
Business during the Limitations Period. The parties acknowledge that it is their
intention that this Section 10 is intended only to ensure that, during
16
the Limitations Period, Xxxx does not use his substantial knowledge and
experience in the fields of Interactive Television and Interactive Program
Guides to benefit any Business, including but not limited to any ITV / IPG
Business, and is not in any way intended to limit any other business activities
of Xxxx at any time.
9. No Joint Venture.
Nothing herein contained shall be construed to place the
Parties in the relationship of partners or joint venturers, and neither Company
nor Xxxx shall become bound by any representation, act or omission of the other.
10. Waivers.
None of the terms of this Agreement can be waived or modified
except by an express agreement in writing signed by all the Parties hereto. The
failure of any Party to enforce, or the delay by any Party in enforcing, any of
its rights under this Agreement shall not be deemed a continuing waiver or a
modification thereof and any Party may, within the time provided by applicable
law, commence an appropriate proceeding to enforce any and all such rights.
11. Confidential Information.
(a) Xxxx and the Company agree to maintain in strict confidence, and
not to disclose to others or use for any purposes other than as reasonably
needed to exercise their rights under this Agreement, the terms of this
Agreement, the content of each Disclosure, and any non-public technical or
financial information they obtain from each other pursuant to this Agreement
(hereinafter "Confidential Information").
(b) Information disclosed by either Party shall not be Confidential
Information to the extent that such information (i) is available to members of
the public or becomes publicly available through no unauthorized act of the
receiving Party, (ii) is known to the receiving Party prior to the date of this
Agreement, except, with respect to Xxxx, Confidential Information of the Company
known to him; (iii) is subsequently given to the receiving Party by a third
party having a right to do so, or (iv) is independently developed by Xxxx or
employees of the Company without access to or knowledge of the other Party's
Confidential Information, as evidenced by written documents in its possession.
Each Party's obligation not to disclose Confidential Information shall continue
for so long as such information remains Confidential Information as defined
herein. Such obligation of confidentiality shall not apply to the extent that
either Party is required to disclose such Confidential Information by any
governmental authority, court or agency, domestic or foreign, or makes use of
such Confidential Information in any dispute with the other Party over the terms
or performance of this Agreement in any court of law or equity and then only
under a protective order of the court, provided, that, the Party holding the
information sought in such circumstances must provide notice to the other Party
at least ten (10) days in advance of the disclosure of such information in order
to enable the Party claiming the information is confidential to seek to
intervene to protect its confidentiality.
17
(c) Upon the Company's provision of an Election Notice, and payment
therefor is made to Xxxx under Section 9(c) for the Inventions contained in a
Disclosure, the Company's obligation of confidentiality and non-use with respect
to such Disclosure shall immediately cease, but Xxxx'x obligation of
confidentiality and non-use with respect to such Disclosure shall continue in
perpetuity, notwithstanding any termination or expiration of this Agreement.
Upon the provision to Xxxx of an Election Notice containing an election by the
Company not to exercise its option in the Disclosure which is the subject of
such Election Notice, or Xxxx'x failure to receive an Election Notice for such
Disclosure within the ninety (90) day period, Xxxx'x obligation of
confidentiality and non-use with respect to such Disclosure shall immediately
cease, but the Company's obligation of confidentiality and non-use with respect
to such Disclosure shall continue in perpetuity, notwithstanding any termination
or expiration of this Agreement. Notwithstanding the foregoing, neither Party's
confidentiality obligations hereunder shall cease with respect to any trade
secrets or other Confidential Information relating to any Licensed Inventions;
provided, however, that nothing in this Agreement shall be construed as
preventing the Company from seeking patent protection for any Licensed
Inventions at its sole discretion.
(d) Xxxx has had, prior to the Commencement Date, and will have,
during the Term, access to, and has, prior to the Commencement Date, and will
continue to, during the Term, become acquainted with various trade secrets and
other confidential information of the Company, consisting of software, plans,
formulas, patterns, devices, secret inventions, processes, business plans,
strategic plans, financial information, customer lists, contracts, and
compilations of information, records and specifications that are owned by the
Company or by its subsidiaries and regularly used in the operation of their
respective businesses and that may give the Company an opportunity to obtain an
advantage over competitors who do not know or use such trade secrets. Xxxx
agrees and acknowledges that Xxxx has been granted access to these valuable
trade secrets only by virtue of the confidential relationship created by this
Agreement and Xxxx'x prior relationship to, interest in and fiduciary
relationships to the Company and its predecessors. Xxxx further agrees and
acknowledges that Inventions conceived, made or reduced to practice during the
Term, and related in whole or in part to the fields of Interactive Program
Guides or Interactive Television, may be based in part on such trade secrets and
confidential information of the Company. Xxxx shall not disclose any of the
aforesaid trade secrets, directly or indirectly, or use them in any way, either
during the Term or at any time thereafter, except as required in the course of
performing services under this Agreement for the benefit of the Company.
12. Severability.
In the event that any term or provision of this Agreement shall
for any reason be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other term
or provision and this Agreement shall be interpreted and construed as if such
term or provision, to the extent the same shall have been held to be invalid,
illegal or unenforceable, had never been contained herein; unless the deletion
of such term or provision shall cause this Agreement to become materially
adverse to either Party, in which event the Parties shall use reasonable best
efforts to arrive at an accommodation that best preserves for the Parties the
benefits and obligations of the offending term or provision.
18
13. Integration.
This Agreement, the Employment Agreement and the Termination
Agreement represent the entire understanding between the Parties hereto with
respect to the subject matter hereof and this Agreement, the Employment
Agreement and the Termination Agreement supersede all previous representations,
understandings or agreements, oral or written, or contemporaneous oral
agreements, between the Parties with respect to the subject matter hereof and
cannot be modified except by a written instrument signed by the Parties hereto.
14. Notices.
Any notice or other communication required or permitted to be
given by the Parties hereto shall be in writing and sent, if to Xxxx, at such
address as Xxxx may designate in writing from time to time (or Xxxx'x business
address of record in the absence of such designation), and, if to Company, to
its office at:
Gemstar-TV Guide International, Inc.
Suite 800
000 Xxxxx Xxx Xxxxxx Xxx.
Xxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: General Counsel
or at such other address as Company may designate in writing from time to time.
Each such notice or other communication shall be effective (i) if given by
telecommunication, when transmitted to the applicable number so specified in (or
pursuant to) this paragraph and an appropriate confirmation-back is received,
with confirmation by a nationally-recognized overnight courier; (ii) if given by
first class mail, return receipt requested, three (3) days after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when actually
delivered at such address.
15. Captions.
The captions used in connection with the paragraphs and
subparagraphs of this Agreement are inserted only for purpose of reference. Such
captions shall not be deemed to govern, limit, modify or in any other manner
affect the scope, meaning or intent of the provisions of this Agreement or any
part thereof, nor shall such captions otherwise be given any legal effect.
16. Disclaimed Warranties.
(a) Nothing contained in this Agreement shall be construed as a
warranty or representation by any of the Parties to this Agreement as to the
validity, scope or enforceability of any of the Inventions or any patents issued
or patent applications filed with respect thereto.
(b) Subject to Section 2(g), nothing contained in this Agreement
shall be construed as a warranty or representation that any manufacture, sale,
offer for sale, lease, import, use or other disposition of any Fee-Bearing
Product hereunder will be free from infringement of
19
patents, or utility models, copyrights, mask work rights, trade secrets,
trademarks, trade names, or the like, of third parties.
(c) Company shall not be required by anything contained in this
Agreement to file in any country an application for patent on any invention, or
to secure any patent, or once having filed an application for patent or obtained
a patent, to maintain the patent application or patent in force.
17. Governing Law.
This Agreement, the legal relations between the Parties and
any action, whether contractual or non-contractual, instituted by any Party with
respect to matters arising under or growing out of or in connection with or in
respect of this Agreement, the relationship of the Parties or the subject matter
hereof shall be governed by and construed in accordance with the laws of the
State of New York applicable to contracts made and performed in such State and
without regard to conflicts of law doctrines.
18. Arbitration; Injunctive Relief.
(a) In the event of any dispute, controversy, claim or disagreement
between the Parties with respect to any alleged breach of this Agreement, the
interpretation of this Agreement, or the rights or obligations of either Party
under this Agreement, the Parties shall consult and negotiate with each other in
good faith and, recognizing their mutual interests, attempt to reach a solution
satisfactory to both Parties. If they do not resolve the dispute, controversy,
claim or disagreement within a period of 30 days, or such longer period as they
may mutually agree, then such dispute, controversy, claim or disagreement shall
be finally resolved pursuant to confidential binding arbitration in New York,
New York by a panel of three neutral arbitrators. The arbitration shall be
conducted in accordance with the Commercial Rules of the American Arbitration
Association then in effect. Within 15 days after the initiation of arbitration,
the Parties shall select three neutral arbitrators, all of whom shall be members
of a state bar actively engaged in the practice of law for at least 10 years.
Either Party may seek interim or preliminary relief from the arbitrators until
an arbitration award is rendered or the controversy is otherwise resolved.
Either Party also may, prior to the establishment of the arbitral tribunal, and
without waiving any remedy under this Agreement, seek interim or provisional
relief that is necessary to protect the rights or property of that party. The
arbitration award shall be made as promptly as practicable and in any event
within nine months of the filing of the notice of intention to arbitrate, and
the arbitrators shall agree to comply with this schedule before accepting
appointment; proved, however, that this time limit may be extended by agreement
of the Parties or by the arbitrators if necessary. The award of the arbitrators
shall be in writing, shall be signed by a majority of the arbitrators, and shall
include findings of fact and the reasons for the disposition of each claim. In
the award, the arbitrators shall allocate all costs of the arbitration,
including the fees of the arbitrators and reasonable attorneys' fees of the
prevailing Party, against the non-prevailing Party. This Section 20(a) shall not
be construed to limit either Party's right to obtain equitable relief with
respect to any dispute and, pending a final arbitration by the arbitrators with
respect to any such dispute, either Party shall be entitled to obtain any such
relief by direct application to state, federal or other applicable court,
without being first required to arbitrate such dispute. Except as may be
required by law, or by judicial or
20
administrative process or order or the rules of any securities exchange or
similar self-regulatory organization applicable to the party or arbitrator,
neither the Parties nor the arbitrators may disclose the existence, content or
results of any arbitration hereunder without the prior written consent of all
the Parties. Judgment on the award may be entered in any court having
jurisdiction thereof.
(b) In addition to the provisions of the foregoing Section 20(a), in
connection with any dispute as to Section 2 of this Agreement, discovery shall
be on an expedited basis, the decision of the arbitration panel shall be final
and there shall be no right of appeal or right to petition to vacate such award.
Each of the Parties acknowledges that the other Party would be irreparably
damaged, and there would be no adequate remedy at law, for a breach of this
Agreement, and accordingly, the terms of this Agreement may be specifically
enforced by a Party.
19. Counterparts.
This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which shall constitute one and
the same instrument.
[The remainder of this page has been intentionally left blank; the signature
page follows.]
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Execution Copy
[SIGNATURE PAGE TO PATENT RIGHTS AGREEMENT]
IN WITNESS WHEREOF, Xxxx and the Company have caused this instrument to
be duly executed as of the day and year first above written.
/s/ Xxxxx X. Xxxx
--------------------------------------
XXXXX X. XXXX
GEMSTAR-TV GUIDE INTERNATIONAL, INC.
By: /s/ Xxxx Xxxxx
----------------------------------
Xxxx Xxxxx, Co-President
Exhibit 1
GEMSTAR-TV GUIDE INTERNATIONAL, INC.
PATENT RIGHTS STOCK OPTION AGREEMENT
THIS AGREEMENT dated as of _______, ____, between Gemstar-TV Guide
International, Inc., a Delaware Corporation (the "Company"), and Xxxxx X. Xxxx
("Xxxx").
W I T N E S S E T H
WHEREAS, Xxxx is a consultant or advisor who (directly or through an entity with
which he is associated) renders or has rendered bona fide services to the
Company; and
WHEREAS, pursuant to the Gemstar-TV Guide International, Inc. 1994 Stock
Incentive Plan, as amended (the "SIP"), the Company has granted to Xxxx
effective as of ______, ____ (the "Grant Date") two hundred thousand (200,000)
nonqualified stock options to purchase authorized but unissued or treasury
shares of the Company's Common Shares, $.01 par value, upon and subject to the
terms and conditions set forth herein and in the SIP.
NOW, THEREFORE, in consideration of the mutual promises and covenants made
herein and the mutual benefits to be derived herefrom, the parties agree as
follows:
1. Defined Terms. Capitalized terms shall have the meaning assigned
to them herein. Where capitalized terms are not defined herein they shall have
the meaning assigned to them in the SIP.
For purposes of this Agreement:
"Breach Event" shall have the meaning assigned to it under the New Employment
Agreement.
"Breach Cure Period" shall have the meaning assigned to it under the New
Employment Agreement.
"Common Share" shall have the meaning assigned to it under the Termination
Agreement.
"New Employment Agreement" shall mean the employment agreement between the
Company and Xxxx dated as of _________, 2002.
"Patent Rights Agreement" shall mean the patent rights agreement between the
Company and Xxxx dated as of _________, 2002.
"Termination Agreement" shall mean the termination agreement between the
Company, Xxxx and Gemstar Development Corporation, a California corporation,
dated as of _______, 2002.
2. Grant of Option. Effective as of the Grant Date, this Agreement
evidences the Company's grant to Xxxx, subject to the restrictions set forth
below, of two hundred thousand (200,000) stock options (the "Options") under the
SIP. Each Option shall represent the right to
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acquire one (1) Common Share. The number, type and exercise price of the Options
are subject to adjustment pursuant to Section 4.2 of the SIP.
The Options shall expire on the first to occur of (i) the close of business on
the last business day of the Company coinciding with or immediately preceding
the day before the tenth anniversary of the Grant Date or (ii) the termination
of the Options pursuant to Section 4.2 of the SIP.
The exercise price per Common Share under each Option shall equal the Fair
Market Value of a Common Share on the Grant Date (or as of the last trading day
preceding the Grant Date if the Grant Date is not a trading day).
The Options are intended to be non-qualified stock options and not incentive
stock options under Code Section 422.
3. Exercisability of Options. The Options shall vest on the Grant
Date.
To the extent Xxxx does not purchase all or any part of the Common Shares under
the Options exercisable and to which Xxxx is entitled, Xxxx has the right
cumulatively thereafter to purchase any Common Shares not so purchased and such
right shall continue until the Option terminates or expires. Fractional Common
Share interests shall be disregarded, but may be cumulated. No fewer than 50
Common Shares may be purchased at any one time, unless the number purchased is
the total number at the time available for purchase under the Option.
4. Method of Exercise of Options. The Options shall be exercisable
by the delivery to the Company of a written exercise notice in the form to be
provided by Company, which shall state the number of Common Shares to be
purchased pursuant to the Options. The purchase price of any Common Shares
purchased on exercise of an Option shall be paid by Xxxx (or Xxxx'x Personal
Representative or Beneficiary, as the case may be) in full at the time of each
purchase in one or a combination of the following methods: (i) in money,
including by electronic funds transfer; (ii) by check payable to the order of
the Company; (iii) to the extent permitted by applicable law, by a promissory
note of Xxxx consistent with the requirements of Section 1.8 of the SIP,
provided, however, that the Committee may in its absolute discretion limit
Xxxx'x ability to exercise an Option using a promissory note; or (iv) to the
extent permitted by and consistent with the Company's Certificate of
Incorporation (as amended) and applicable law, by notice and third party payment
in such manner as may be authorized by the Committee or by the delivery of
Common Shares already owned by Xxxx, provided, however, that the Committee may
in its absolute discretion limit Xxxx'x ability to exercise an Option by
delivering such Common Shares. Common Shares that are permitted to be used to
satisfy the exercise price of an Option shall be valued at their Fair Market
Value on the date of exercise and shall have been beneficially owned by Xxxx for
at least six months prior to such delivery.
In the event that the Company determines that the Company (or any affiliate or
subsidiary of Company) is required to withhold any tax as a result of the
issuance, vesting, exercise, payment or disposition of any Options, the tax
withholding obligation shall be satisfied in accordance with the provisions and
terms of Section 4.5 of the SIP.
Xxxx (or Xxxx'x Beneficiary or Personal Representative) shall furnish any
written statements required pursuant to Section 4.4 of the SIP.
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5. No Employment Commitment.
Nothing contained in this Agreement or the SIP constitutes an employment
commitment by the Company, confers upon Xxxx any right to employment by the
Company or any Subsidiary, interferes in any way with the right of the Company
or any Subsidiary at any time to terminate Xxxx'x consulting relationship with
the company, or affects the right of the Company or any Subsidiary to increase
or decrease Xxxx'x other compensation.
6. Reserved.
7. Reserved.
8. Termination of Options Under Certain Events. As contemplated by
Section 4.2 of the SIP, the Options may be terminated or rendered
non-exercisable (to the extent they were not previously exercised) in certain
circumstances, as described therein.
9. Non-Transferability of Options. The Options and any other rights
of Xxxx under this Agreement or the SIP are nontransferable and subject to
extensive restrictions under Section 1.9 of the SIP. The Common Shares issuable
on exercise of the Options are also subject to restrictions on transfer under
Section 1.10 of the SIP and to any and all repurchase or redemption rights of
the Company that may be provided under its Certificate of Incorporation and
Bylaws, as amended from time to time.
10. Notices. Any notice to be given under the terms of this Agreement
shall be in writing and addressed to the Company at its principal office and to
Xxxx at the addresses given beneath their respective signatures hereon, or at
such other address as either party may hereafter designate in writing to the
other. Any such notice shall be deemed given only when received, but if Xxxx is
no longer an Eligible Person, any notice to Xxxx shall be deemed to have been
duly given when enclosed in a properly sealed envelope addressed as aforesaid,
registered or certified, and deposited (postage and registry or certification
fee prepaid) in a post office or branch post office regularly maintained by the
United States Government.
11. Plan. The Options and all rights of Xxxx thereunder are subject
to, and Xxxx agrees to be bound by, all of the terms and conditions of the
provisions of the SIP, incorporated herein by this reference. In the event of a
conflict or inconsistency between the terms and conditions of this Agreement,
and of the terms and conditions of the SIP, the terms and conditions of the SIP
shall govern except as expressly set forth herein. In the event of conflict or
inconsistency between the terms and conditions of this Agreement, and the terms
and conditions of the Patent Rights Agreement, the terms and conditions of this
Agreement shall govern. Xxxx acknowledges receipt of a copy of the SIP, which is
made a part hereof by this reference, and agrees to be bound by the terms
thereof. Unless otherwise expressly provided in other Sections of this
Agreement, provisions of the SIP that confer discretionary authority on the
Committee do not (and shall not be deemed to) create any rights in Xxxx, unless
such rights are expressly set forth herein or are otherwise in the sole
discretion of the Committee so conferred by appropriate action of the Committee
under the SIP after the date hereof.
12. Entire Agreement. This Agreement, the Patent Rights Agreement,
the Termination Agreement, the New Employment Agreement and the SIP together
constitute the entire agreement and supersede all prior understandings and
agreements, written or oral, of the parties hereto with
3
respect to the subject matter hereof. The SIP and this Agreement may be amended
pursuant to Section 4.6 of the SIP. Such amendment must be in writing and signed
by the Company. The Company may, however, unilaterally waive any provision
hereof in writing to the extent such waiver does not adversely affect the
interests of Xxxx, but no such waiver shall operate as or be construed to be a
subsequent waiver of the same provision or a waiver of any other provision
hereof.
13. Severability. If a court of competent jurisdiction determines
that any portion of this Agreement is in violation of any statute or public
policy, then only the portions of this Agreement which violate such statute or
public policy shall be stricken, and all portions of this Agreement which do not
violate any statute or public policy shall continue in full force and effect.
Further, it is the parties' intent that any court order striking any portion of
this Agreement should modify the terms as narrowly as possible to give as much
effect as possible to the intentions of the parties under this Agreement.
14. California Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of California.
15. Privileges of Stock Ownership. Except as otherwise expressly
authorized by the Committee or the SIP, Xxxx will not be entitled to any
privilege of stock ownership as to any Common Shares not actually delivered to
and held of record by Xxxx. No adjustment will be made for dividends or other
rights as a stockholder for which a record date is prior to such date of
delivery.
16. No Restriction on Corporate Powers. The existence of the SIP
and/or the Options shall not affect or restrict in any way the right or power of
the Board or the stockholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the Company,
any issue of bonds, debentures, preferred or prior preference stocks ahead of or
affecting the Company's capital stock or the rights thereof, the dissolution or
liquidation of the Company or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding.
17. Further Assurances. Each of the parties hereto shall use its
reasonable and diligent best efforts to proceed promptly with the transactions
contemplated herein, to fulfill the conditions precedent for such party's
benefit or to cause the same to be fulfilled and to execute such further
documents and other papers and perform such further acts as may be reasonably
required or desirable to carry out the provisions hereof and the transactions
contemplated herein.
18. Execution. The grant of Options hereunder shall be rendered
ineffective if Xxxx and spouse fail to execute this Agreement (with Consent of
Spouse) and return the executed Agreement (with Consent of Spouse) to the
Company within 30 days of the Grant Date.
19. Counterparts. This Agreement and any amendment hereto may be
executed in several counterparts. All of such counterparts shall constitute one
and the same agreement and shall become effective when a copy signed by each
party has been delivered to the other party.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf by a duly authorized officer and Xxxx has hereunto set his or her
hand.
GEMSTAR-TV GUIDE INTERNATIONAL, INC.
By:
--------------------------------
Title:
------------------------------
XXXX
------------------------------------
Xxxxx X. Xxxx
------------------------------------
(Address)
------------------------------------
(City, State, Zip Code)
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CONSENT OF SPOUSE
In consideration of the execution of the foregoing Patent Rights Stock Option
Agreement by Gemstar-TV Guide International, Inc., I,
_____________________________________, the spouse of the Xxxx herein named, do
hereby join with my spouse in executing the foregoing Patent Rights Stock Option
Agreement and do hereby agree to be bound by all the terms and provisions
thereof and of the SIP.
Dated as of the ____ of ____, ____. -------------------------
Signature of Spouse
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