EXHIBIT 99.13
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is entered
into as of March 31, 1998, by and among Gemstar International Group Limited, a
British Virgin Islands corporation ("XXXX"), Gemstar Development Corporation, a
California corporation ("Company"), and Xxxxx Xxxxx ("Employee").
WITNESSETH:
WHEREAS, Company and Employee are parties to an Employment Agreement,
entered into as of April 1, 1994, as amended August 16, 1995 and September 1,
1996 (collectively, the "Predecessor Agreement"), pursuant to which Employee has
served Company as Chief Financial Officer; and
WHEREAS, XXXX and Company desire to obtain the benefit of continued service
by Employee to Company and XXXX, and Employee desires to render services to
Company and XXXX; and
WHEREAS, Employee possesses expertise in the financial and operational
areas of Company, which expertise has been and is expected to continue to be
critical to public offerings of stock of XXXX, acquisitions by Company and the
integration of acquired products and workforces into Company, the continued
maintenance of the public company status by XXXX and the future operations of
Company; and
WHEREAS, the Board of Directors of Company (the "Company Board") and the
Board of Directors of XXXX (the "XXXX Board") have determined that because of
Employee's substantial experience and expertise in connection with the financial
and operational matters of Company, it is in the best interest of Company and
XXXX, Company's sole shareholder, to retain the services of Employee and to
provide Employee certain additional benefits; and
WHEREAS, XXXX, Company and Employee desire to set forth in this Agreement
the terms and conditions of Employee's future employment with Company.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties agree to terminate in its entirety the Predecessor
Agreement, and the parties further agree as follows:
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1. Term and Renewals; Shareholder Approval.
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(a) Initial Term.
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Company agrees to employ Employee and Employee agrees to serve
Company, in accordance with the terms of this Agreement, for an initial term
commencing with an effective date of April 1, 1998 and ending December 31, 2003
(the "Initial Term"), unless this Agreement is earlier terminated in accordance
with the provisions which follow.
(b) Renewal.
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Upon expiration of the Initial Term, this Agreement shall be
automatically renewed for a term of three additional years (the "Renewal Term"),
unless either party gives notice, in writing, at least twelve (12) months prior
to the expiration of the Initial Term of its desire to terminate this Agreement.
If Company delivers to Employee the written termination notice
contemplated by this Section 1(b), or if the Renewal Term expires without XXXX,
Company and Employee having reached an agreement for the continued employment of
Employee by XXXX and Company that is satisfactory to XXXX, Company and Employee
(in their sole and absolute discretion), such termination or expiration shall be
treated as a termination Without Cause pursuant to Section 4(d) of this
Agreement, and the date of such termination or expiration shall be deemed the
date of notice of termination for purposes of Section 4(d).
(c) Compensation Period; Current Term.
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Each June 1- May 31 annual period (or portion thereof) during the term
of this Agreement and during any period following termination of Employee's
employment hereunder during which Company has ongoing obligations hereunder
shall be a distinct and separate compensation period ("Compensation Period").
The then-current term of this Agreement, whether it is the Initial Term
(together with the Renewal Term if the termination deadline under Section 1(b)
has passed without delivery of the termination notice contemplated thereunder)
or the Renewal Term, shall be known as the "Current Term."
2. Specific Position; Duties and Responsibilities.
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Company and Employee agree that, subject to the provisions of this
Agreement, Company will employ Employee and Employee will serve Company as Chief
Operating Officer and Chief Financial Officer of Company, and Employee shall
have such other additional duties and responsibilities befitting the foregoing
positions as Company Board shall determine from time to time. XXXX and Employee
agree that, subject to the provisions of this Agreement, XXXX will employ
Employee as Chief Financial Officer of XXXX, and Employee shall have such other
additional duties and responsibilities befitting the foregoing positions as the
XXXX Board shall determine from time to time. XXXX and Company also agree that
Employee shall serve as a
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director of XXXX, Company and StarSight Telecast, Inc. ("StarSight") during the
entire term of this Agreement.
Employee agrees to devote substantially all of her time, energy and
ability to the business of Company and XXXX. Nothing herein shall prevent
Employee, upon approval of the XXXX Board, from serving as a director,
consultant or trustee of other corporations or businesses that are not in
competition with the business of XXXX or in competition with any affiliate of
XXXX. Such approval of the XXXX Board shall not be unreasonably withheld.
Nothing herein shall prevent Employee from (i) investing in real estate for her
own account, (ii) becoming a partner or a shareholder in any privately-held
corporation, partnership or other venture not in competition with the business
of XXXX or any affiliate of XXXX or (iii) becoming a partner or a shareholder
with an equity interest of not more than ten percent (10%) in any corporation,
partnership or other venture whose equity securities are publicly traded,
whether or not such corporation, partnership or other venture is in competition
with the business of XXXX or any affiliate of XXXX. Nothing in this Agreement
shall restrict the XXXX Board from paying and granting to Employee additional
cash compensation and/or grants of stock or stock options from entities created
as joint ventures between XXXX (or any of its affiliates) and third parties as a
means of providing further incentives for Employee.
For the term of this Agreement, Employee shall report to the Chief
Executive Officer of Company and the Chief Executive Officer of XXXX. For
purposes of this Agreement, the termination of Employee's employment by Company
shall also constitute termination of Employee's employment by XXXX.
3. Compensation.
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(a) Base Compensation and Adjustments.
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(i) Until March 31, 1997, Company agrees to pay Employee her current
base salary of Five Hundred Seventy Thousand Dollars (US$570,000.00) per year.
Beginning April 1,1998 and during the remaining term of this Agreement, Company
agrees to pay Employee a base salary at the rate of Seven Hundred Thousand
Dollars (US$700,000.00) per year, as adjusted as hereinafter provided (as in
effect from time to time, the "Base Salary"). Such salary shall be earned
monthly and shall be payable in periodic installments no less frequently than
monthly in accordance with Company's customary practices. Amounts payable shall
be reduced by standard withholding and other authorized deductions.
(ii) On June 1 of each Compensation Period, commencing June 1, 1999,
if "R" or "P" (as defined below) for the fiscal year ending on the immediately
preceding March 31 is positive, the Base Salary for such Compensation Period and
each Compensation Period thereafter shall be adjusted by adding to the Base
Salary for the previous Compensation Period the amount obtained by multiplying
the Base Salary for the previous Compensation Period by the positive percentage,
if any, equal to the Adjusted Percentage (as defined below); provided, however,
that
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in no event should the Adjusted Percentage applicable to any one Compensation
Period exceed thirty percent (30%).
For purposes of this Section 3(a)(ii), the "Adjusted Percentage" means
the percentage equal to the product of (1) the sum of "R" plus "P," multiplied
by (2) twenty-five hundredths (0.25), where "R" is the percentage increase, if
any, from the previous fiscal year in XXXX'x consolidated revenues, as shown on
the consolidated financial statements of XXXX (the "Financial Statements"); and
"P" is the percentage increase, if any, from the previous fiscal year in XXXX'x
consolidated positive net earnings, if any, as shown on the Financial
Statements.
(b) Annual Incentive Bonus.
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Company shall pay to Employee in respect of each fiscal year of
Company ("Fiscal Year") (or portion thereof) during the term of this Agreement,
the incentive bonus compensation benefits described in, and in accordance with
the terms of, Schedule I to this Agreement (the "Annual Incentive Bonus"), which
is incorporated herein by reference as though set forth in full;
(c) Stock Options.
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(i) Concurrently with the execution of this Agreement, XXXX shall
xxxxx to Employee, subject to the vesting provisions described in this
Agreement, options to acquire one million two hundred thousand (1,200,000)
Ordinary Shares (the "Option Grant"). Options to acquire two hundred thousand
(200,000) Ordinary Shares shall vest and become exercisable immediately upon
execution of this Agreement; and subject to other accelerated vesting provisions
of this Agreement, options to acquire two hundred thousand (200,000) Ordinary
Shares shall vest and become immediately exercisable on each March 31, beginning
March 31, 1999, that follows the date of this Agreement. The exercise price per
Ordinary Share under the Option Grant shall equal the Market Price per Ordinary
Share as of the date of this Agreement. As used herein, the "Market Price" per
Ordinary Share as of any date shall equal the most recent closing price per
Ordinary Share on the principal securities exchange or market on which Ordinary
Shares are traded. Each of the options issued under the Option Grant shall be
exercisable through the tenth (10th) anniversary of the date of its grant. Such
options shall be granted under XXXX'x employee stock option plan previously
approved by XXXX'x shareholders. XXXX represents that sufficient shares are
available under such plan for issuance of the Option Grant and that the Option
Grant is permissible under such plan. On before May 31, 2001 Employee, Company
and XXXX shall attempt to agree on an additional number of options that would
vest during the Renewal Term.
(d) Additional Benefits.
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Employee shall also be entitled to all rights and benefits for which
Employee is otherwise eligible under any bonus, incentive, participation, stock
option or extra compensation plan, pension plan, profit-sharing plan, life,
medical, dental, disability, or insurance plan or
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policy or other plan or benefit that Company its subsidiaries or affiliates may
provide for Employee or (provided Employee is eligible to participate therein)
for employees of Company generally, as from time to time in effect, during the
term of this Agreement. In order to maximize Employee's time availability to
Company, Company shall also promptly reimburse Employee for the Grossed-Up Value
(as defined below) of all professional fees and expenses incurred by Employee in
connection with (A) the negotiation and documentation of this Agreement and any
amendment thereto, (B) income tax planning and preparation, and (C) income tax
audits and the defense of income tax claims. All of the benefits described in
this Section 3(d) are collectively referred to herein as the "Additional
Benefits." The Additional Benefits shall be provided at the level commensurate
with the office held at the time and shall recognize for vesting and eligibility
purposes (but not for purposes of calculating Employee's age or for benefit
accrual purposes) Employee's prior service with Company to the extent (if any)
that such prior service is recognized under any such plans.
As used in this Agreement, the "Grossed-Up Value" of an amount shall
equal the result obtained by dividing (A) such amount by (B) the difference of
one (1) minus the sum of the highest marginal federal and state personal income
tax rates, the highest Medicare tax rate (expressed as a decimal), the
additional effective income tax rate (expressed as a decimal) resulting from the
receipt of such amount reducing available deductions of Employee, and any other
income, payroll or similar rate of tax (expressed as a decimal) imposed on the
receipt by Employee of such amount.
(e) Vacation.
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In each Compensation Period, Employee shall be entitled to an amount
of paid vacation equal to the sum of four (4) weeks plus an additional three (3)
days for each Compensation Period (or portion thereof) previously completed
during the term of this Agreement. Up to sixty (60) unused vacation days may be
carried over from any Compensation Period to the ensuing Compensation Period,
and Employee shall be paid in cash, on the last day of each Compensation Period,
for any unused vacation days that cannot be carried over to the ensuing
Compensation Period at a rate per day equal to the quotient of Employee's Base
Salary for the just-completed Compensation Period divided by two hundred twenty
(220) (the number of working days in the year).
(f) Professional Organizations and Education.
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Company shall promptly reimburse Employee for the Grossed-Up Value of
(A) the professional and membership fees and dues incurred by Employee to
maintain a membership in, or to belong to, such professional organizations and
societies as may be designated by Employee from time to time and one (1) social
or country club; and (B) the fees and costs incurred by Employee in attending
professional education courses selected by Employee.
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(g) Automobile Allowance.
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Company shall provide Employee with a car allowance of seven hundred
and fifty dollars (US$750.00) per month to be used for the purchase, lease and
maintenance of an appropriate automobile for her use during the term of
Employee's employment hereunder. If Company leases or purchases an automobile
for Employee's use, Employee shall have the ability to assume the lease at the
end of the term thereof or purchase the automobile at its residual or
depreciated value upon termination of her employment.
(h) Disability Insurance. During the Initial Term and any Renewal Term,
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Company agrees to purchase and keep in effect, or reimburse Employee for the
cost of, one or more policies of disability insurance reasonably satisfactory to
Employee and Company, with maximum annual premiums not to exceed Twenty-Two
Thousand Dollars (US$22,000.00). Such purchase or reimbursement shall include
payment to Employee of such amount as is necessary to ensure that Employee
receives the Grossed-Up Value of the premiums on such disability policy (less
any amounts paid directly by Company to the carrier). Such policy will contain
a feature permitting Employee to continue the policy at her cost (subject to
other provisions in this Agreement requiring Company to fund such amounts
following termination of employment) following any termination of Employee's
employment.
(i) Life Insurance. During the Initial Term and any Renewal Term, Company
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agrees to purchase and keep in effect, or reimburse Employee for the cost of, a
policy of life insurance reasonably satisfactory to Employee and Company, with
maximum annual premiums not to exceed Ten Thousand Dollars (US$10,000.00). Such
purchase or reimbursement shall include payment to Employee of such amount as is
necessary to ensure that Employee receives the Grossed-Up Value of the premiums
on such life insurance policy (less any amounts paid directly by Company to the
carrier). Such policy will contain a feature permitting Employee to continue
the policy at her cost (subject to other provisions in this Agreement requiring
Company to fund such amounts following termination of employment) following any
termination of Employee's employment.
(j) Other Benefits.
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Employee will, from time to time, receive such other benefits as she
may reasonably request that are commensurate with Employee's position and
facilitate performance of her duties under this Agreement.
4. Termination. The compensation and other benefits provided to Employee
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pursuant to this Agreement, and the employment of Employee by Company, shall be
terminated prior to expiration of the term of this Agreement only as provided in
this Section 4:
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(a) Disability.
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In the event that Employee shall fail, because of illness, incapacity
or injury which is determined to be total and permanent by a physician selected
by Company or its insurers and acceptable to Employee or Employee's legal
representative (such agreement as to acceptability not to be withheld
unreasonably) to render for three consecutive months or for shorter periods
aggregating seventy five (75) or more business days in any twelve (12) month
period, the services contemplated by this Agreement, Employee's employment
hereunder may be terminated by written notice of termination from Company to
Employee. Thereafter, Company shall pay Employee all of her previously earned
Base Salary and Additional Benefits and shall continue for twenty four (24)
months after the date of such notice or until expiration of the Current Term,
whichever period is longer, to pay Base Salary to Employee at a rate and time
and in an amount and manner equal to one hundred percent (100%) of the Base
Salary payable immediately prior to the termination. Thereafter, no further
salary shall be paid except to the extent otherwise expressly provided in
Section 4(b). Upon any such employment termination pursuant to this Section
4(a), all previously vested options to acquire Ordinary Shares shall remain
fully exercisable for their full term, all options to acquire Ordinary Shares
granted to Employee which would become vested and exercisable for the then
current Compensation Period and the next Compensation Period (and which would
not otherwise become vested and exercisable) shall immediately vest in full and
shall become fully exercisable for their full term, and any remaining options
that have not otherwise become vested or exercisable shall be forfeited.
(b) Death.
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In the event of Employee's death during the term or during the
extended benefit period contemplated by Section 4(a), Company shall pay to such
person or persons as Employee shall have directed in writing or, in the absence
of a designation, the estate of Employee (the "Beneficiary") all of Employee's
previously earned Base Salary and Additional Benefits and shall continue for
twenty four (24) months after the date of Employees death or until expiration of
the Current Term, whichever period is longer, to pay Employee's Base Salary to
the Beneficiary at a rate and time and in an amount and manner equal to one
hundred percent (100%) of the Base Salary payable immediately prior to death.
If Employee's death occurs while receiving payments under Section 4(a) above,
such payments shall cease and the Beneficiary shall be entitled only to payments
and benefits under this Section 4(b) at one hundred percent (100%) of the rate
of Base Salary in effect immediately prior to the disability. Upon Employee's
death, all previously vested options to acquire Ordinary Shares shall remain
fully exercisable for their full term, any options that would have vested on a
date within one year following Employees death (assuming Employee had satisfied
the other vesting conditions of such options) shall vest as to that percentage
equal to the percentage of the one-year period ending on such date prior to
Employee's death, and any remaining options that did not otherwise become vested
or exercisable shall be forfeited. This Agreement in all other respects will
terminate upon the death of Employee except as otherwise expressly provided.
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(c) For Cause, Right to Appeal.
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Employee's employment hereunder shall be terminated, and all of her
unearned rights to receive Base Salary and (subject to the terms of any plans
relating thereto) Additional Benefits hereunder in respect of any period after
such termination shall immediately terminate upon a reasonable determination by
the XXXX Board, acting in good faith based upon actual knowledge at such time
and following the meeting described in the immediately succeeding paragraph,
that Employee (i) is engaging or has engaged in acts of fraud, material
dishonesty or other acts of willful misconduct that have had a material adverse
effect on the business of Company, (ii) has repeatedly and willfully refused to
perform her significant duties hereunder after notice, (iii) has habitually
abused any substance (such as narcotics or alcohol) and such abuse has had a
material adverse effect on the business of Company or (iv) has been convicted
of, or plead guilty to, an act constituting a felony that has a material adverse
effect on the business of Company (any of the conduct described in the foregoing
clauses being referred to in this Agreement as "Cause").
Notwithstanding the foregoing, Employee's employment hereunder shall
not be terminated for Cause pursuant to this Section 4(c) unless and until
Employee has received notice of a proposed termination for Cause and Employee
has had an opportunity to be heard before at least a majority of the members of
the XXXX Board. Employee shall be deemed to have had such opportunity if given
written notice by any director acting on behalf of the XXXX Board at least
seventy two (72) hours in advance of a meeting if scheduled in California or
ninety six (96) hours in advance if such meeting is scheduled outside
California. Any actions or proceedings by Company pursuant to this subparagraph
4(c) shall be conducted in a confidential manner and all steps shall be taken to
prevent any harm to Employee's reputation.
Upon any such employment termination pursuant to this Section 4(c),
all options to acquire Ordinary Shares previously granted to Employee and then
remaining unvested shall be forfeited, and all previously vested options to
acquire Ordinary Shares shall remain fully exercisable for their full term.
(d) Without Cause.
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Notwithstanding any other provision of this Section 4, the XXXX Board
shall have the right to terminate Employee's employment with Company at any
time, but in the event of any such termination, other than as expressly provided
in Section 4(a), (b) or (c) herein, or in the event Company elects not to renew
the term of this Agreement by giving notice of termination under Section 1(b)
hereof, (any such termination of Employee's employment under this Section 4(d)
being referred to in this Agreement as a termination "Without Cause"), Company
shall thereafter pay and grant to Employee, in addition to any other amounts due
under this Agreement, on the last day of Employee's employment, an amount equal
to the greater of (a) the product of Employee's then-current Base Salary
multiplied by a factor of three (3), and (b) the product of Employee's then-
current Base Salary multiplied by the number of years, rounded up, remaining in
the Current Term, and Company shall thereafter continue to provide to Employee
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the Additional Benefits for sixty (60) months from such last day of employment.
Upon any such employment termination pursuant to this Section 4(d), all options
to acquire Ordinary Shares previously granted to Employee shall immediately vest
in full and shall become fully exercisable for their full term, and all
previously vested options to acquire Ordinary Shares shall remain fully
exercisable for their full term.
(e) Limited Succession of Additional Benefits Upon Termination.
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If Employee's services are terminated hereunder pursuant to Sections
4(a) or 4(b) and Employee is no longer eligible for Additional Benefits (under
the terms of any plans relating thereto) because of such termination Employee
(or in event of death, the Beneficiary) shall be entitled to and Company shall
provide the Grossed-Up Value of benefits substantially equivalent to those
benefits in the nature of health and welfare type benefits to which Employee was
entitled immediately prior to such termination for the period (if any) during
which Employee (or Beneficiary, as the case may be) remains entitled to receive
the Base Salary under such sections. During such period, however, Employee
shall not be entitled to option, equity, appreciation, profit sharing, deferred
compensation, savings, bonus, participation, pension, extra compensation and
other incentive plan benefits (except to the extent otherwise expressly provided
in any then outstanding awards to such Employee).
(f) Constructive Termination.
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A Constructive Termination (defined below) shall be treated as a
termination Without Cause pursuant to Section 4(d) of this Agreement.
For purposes of this Agreement, "Constructive Termination" means the
change of Employee's position, without Employee's written consent, so that
Employee is neither the Chief Operating Officer nor the Chief Financial Officer
of Company and XXXX, or the removal from her position as a director of XXXX or
Company, assignment to Employee of duties or responsibilities inconsistent with
the positions of Chief Operating Officer or Chief Financial Officer of Company
and XXXX, relocation of Employee's principal office to another geographic
location without Employee's written consent, in any case other than as a result
of grounds for termination of employment for Cause under Section 4(c), for
disability under Section 4(a) or because of death or retirement, or the
requirement that Employee to report to any person or entity other than the
current (as of the date of this Agreement) Chief Executive Officer of XXXX or
the current (as of the date of this Agreement) Chief Executive Officer of
Company, or the removal, termination (including constructive termination) or
resignation, reduction in duties or responsibilities of such current Chief
Executive Officer of XXXX or the Company.
(g) Termination by Employee.
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Subject to Section 4(h), Employee shall have the right, in her sole
discretion, to terminate her employment under this Agreement at any time after
expiration of the period ending eighteen (18) months after the date of this
Agreement, by providing notice, in writing, at least six
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(6) months prior to Employee's termination of employment, but in the event of
any such termination Company shall thereafter pay and grant to Employee, in
addition to any other amounts due under this Agreement, on the last day of
Employee's employment, an amount equal to the Employee's then-current Base
Salary. Upon termination by Employee, all options to acquire Ordinary Shares
previously granted to Employee and then remaining unvested shall be forfeited,
and all previously vested options to acquire Ordinary Shares shall remain fully
exercisable for their full term.
(h) Change of Control.
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(i) As used in this Agreement, "CHANGE OF CONTROL" is defined as any
of the following acts:
(A) The acquisition (other than from XXXX directly or from any
stockholder of XXXX who on the date hereof owns twenty five percent (25%)
or more of XXXX'x outstanding Ordinary Shares) after the date hereof by any
person, entity, or group, within the meaning of (S)13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), of
beneficial ownership of twenty-five percent (25%) or more of XXXX'x
outstanding Ordinary Shares; or
(B) The acquisition by any person, entity, or group, within the
meaning of (S)13(d) or 14(d) of the Exchange Act, of beneficial ownership
of twenty-five percent (25%) or more of Company's outstanding shares of its
common stock, par value $.01 per share (the "COMMON STOCK") (excluding any
such acquisition by XXXX or any of its subsidiaries); or
(C) During any period of two (2) consecutive years, individuals who,
at the beginning of such period, constituted the board of directors of
Company or XXXX (together with any new directors whose election or
appointment to such board of directors or whose nomination for election by
the stockholders of Company or XXXX was approved by Employee or by a vote
of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election, appointment or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the board of directors of Company or XXXX then in
office; or
(D) Approval by the board of directors or a majority of the
stockholders of either Company or XXXX of a merger, reorganization,
combination or consolidation whereby the stockholders of either Company or
XXXX immediately prior to such approval will not, immediately after
consummation of such reorganization, merger, combination or consolidation
own more than fifty percent (50%) of the voting stock of the surviving
entity; or
(E) A liquidation or dissolution of either Company or XXXX or the sale
of all or substantially all of the assets of either Company or XXXX, unless
the successor to the assets in any such liquidation, dissolution or sale is
XXXX or any of its subsidiaries.
(ii) Employee's Base Salary and other compensation shall be reviewed
promptly following any Change of Control and increased (but not decreased) to
reflect any expansion of Employee's duties or areas of responsibility, as
determined in good faith by the XXXX Board.
(iii) Employee shall have the right, in her sole discretion, to
terminate her employment under this Agreement at any time during the ninety (90)
days following notice of a Change of Control, and in the event of any such
termination Company shall thereafter pay and grant to Employee, in addition to
any other amounts due under this Agreement, on the last day of Employee's
employment, an amount equal to the product of Employee's Base Salary multiplied
by five (5), and Company shall thereafter continue to provide to Employee all
other elements of compensation under Section 3 for sixty (60) months from such
last day of employment, except that upon such termination, all unvested options
to acquire Ordinary Shares previously granted to Employee shall immediately vest
in full and shall become fully exercisable for their full term, and all
previously vested options to acquire Ordinary Shares shall remain fully
exercisable for their full term.
(iv) In the event a transaction described in Section 280G(b)(2)(A)(i)
of the Internal Revenue Code of 1986, as amended, occurs with respect to
Company, XXXX, any predecessor, successor, direct or indirect subsidiary or
affiliate of Company or XXXX, the provisions of Schedule II shall apply.
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5. Business Expenses.
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During the term of this Agreement, Company shall reimburse Employee
promptly for reasonable business expenditures, whether or not Company can fully
deduct such expenses according to federal income tax laws.
6. Inventions and Patents.
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Subject to exceptions under Section 2870 of the California Labor Code, all
inventions, designs, improvements, patents, copyrights, and discoveries
conceived by Employee during the term of this Agreement which are competitive
with or related to existing products or services of Company or its affiliates or
products or services under active development by Company or its affiliates,
shall be assigned to Company. Exhibits A and B attached hereto contain a
description of Company's business and the products and services currently under
active development by Company and its affiliates. Employee will promptly and
fully disclose to Company all such inventions, designs, improvements, and
discoveries (whether developed individually or with other persons) and shall
take all reasonable steps necessary and required to assure Company's
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ownership thereof and to assist Company in protecting or defending Company's
proprietary rights therein.
Employee acknowledges hereby receipt of written notice from Company
pursuant to California Labor Code Section 2872 that this Agreement (to the
extent it requires an assignment or offer to assign rights to any invention of
Employee) does not apply to an invention that qualifies fully under California
Labor Code Section 2870.
7. Indemnity.
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To the maximum extent permitted by applicable law, Company shall
indemnify Employee and hold Employee harmless from and against any and all
claims, liabilities, judgments, fines, penalties, costs and expenses (including,
without limitation, reasonable attorneys' fees, costs of investigation and
experts, settlements and other amounts actually incurred by Employee in
connection with the defense of any action, suit or proceeding, and in connection
with any appeal thereon) incurred by Employee in any and all threatened, pending
or completed actions, suits or proceedings, whether civil, criminal,
administrative or investigative (including, without limitation, actions, suits
or proceedings brought by or in the name of Company), arising, directly or
indirectly, by reason of Employee's status, actions or inaction as a director,
officer, employee or agent of Company or of an affiliate of Company so long as
Employee's conduct was in good faith. Company shall promptly advance to
Employee upon request any and all expenses incurred by Employee in defending any
and all such actions, suits or proceedings to the maximum extent permitted by
applicable law.
8. XXXX Agreement.
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XXXX agrees to perform, and to cause Company to perform, their
respective obligations under this Agreement so as to give full force and effect
to the provisions hereof.
9. Miscellaneous.
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(a) Succession; Survival.
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This Agreement shall inure to the benefit of and shall be binding upon
Company and XXXX and their respective successors and assigns, but without the
prior written consent of Employee this Agreement may not be assigned other than
in connection with a merger or sale of substantially all the assets of Company
or XXXX or a similar transaction in which the successor or assignee assumes
(whether by operation of law or express assumption) all obligations of Company
or XXXX hereunder. The obligations and duties of Employee hereunder are
personal and otherwise not assignable.
(b) Notices.
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Any notice or other communication provided for in this Agreement shall
be in writing and sent, if to XXXX or Company, to its office at:
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Gemstar Development Corp.
Suite 800
000 Xxxxx Xxx Xxxxxx Xxx.
Xxxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: General Counsel
or at such other address as XXXX or Company may from time to time in writing
designate, and, if to Employee, at such address as Employee may from time to
time in writing designate (or Employee's business address of record in the
absence of such designation). 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 Section 9(b) and an appropriate
answerback is received, (ii) if given by mail, three 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.
(c) Entire Agreement; Amendments.
----------------------------
This Agreement contains the entire agreement of the parties relating
to the subject matter hereof and it supersedes any prior agreements,
undertakings, commitments and practices relating to Employee's employment by
Company or its affiliates except for any and all other agreements necessary to
give effect to the provisions of this Agreement or the Predecessor Agreement (to
the extent not modified by this Agreement), including, without limitation, stock
option agreements, and agreements relating to Additional Benefits. No amendment
or modification of the terms of this Agreement shall be valid unless made in
writing and signed by Employee and, on behalf of Company and XXXX, by the Chief
Executive Officer or authorized representatives of the respective boards of
directors.
(d) Waiver.
------
No failure on the part of any party to exercise or delay in exercising
any right hereunder shall be deemed a waiver thereof or of any other right, nor
shall any single or partial exercise preclude any further or other exercise of
such right or any other right.
(e) Choice of 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 California applicable to contracts made and performed in such State and
without regard to conflicts of law doctrines.
13
(f) Arbitration.
-----------
Any controversy or claim arising out of or relating to this Agreement,
its enforcement or interpretation, or because of an alleged breach, default, or
misrepresentation in connection with any of its provisions, shall be submitted
to arbitration, to be held in Los Angeles County, California in accordance with
California Code of Civil Procedure Sections 1282-1284.2. In the event either
party institutes arbitration under this Agreement, the party prevailing in any
such arbitration shall be entitled, in addition to all other relief, to
reasonable attorneys' fees relating to such arbitration. The nonprevailing
party shall be responsible for all costs of the arbitration, including but not
limited to, the arbitration fees, court reporter fees, etc.
(g) Confidentiality, Proprietary Information.
----------------------------------------
Employee agrees to not make use of, divulge or otherwise disclose,
directly or indirectly, any trade secret or other confidential or proprietary
information concerning the business (including, but not limited to its products,
employees, services, practices or policies) of Company or any of its affiliates
of which Employee may learn or be aware as a result of Employee's employment
during the term of this Agreement or prior thereto as shareholder, employee,
officer or director of or consultant to Company and its predecessors, except to
the extent such use or disclosure is (i) necessary to the performance of this
Agreement and in furtherance of Company's best interests, (ii) required by
applicable law, (iii) lawfully obtainable from other sources, or (iv) authorized
in writing by Company. The provisions of this Section 9(g) shall survive the
expiration, suspension or termination, for any reason, of this Agreement.
(h) Trade Secrets.
-------------
Employee, prior to and during the term of employment, has had and will
have access to and become acquainted with various trade secrets, consisting of
software, plans, formulas, patterns, devices, secret inventions, processes,
customer lists, contracts, and compilations of information, records and
specifications that are owned by Company or by its affiliates and regularly used
in the operation of their respective businesses and that may give Company an
opportunity to obtain an advantage over competitors who do not know or use such
trade secrets. Employee agrees and acknowledges that Employee has been granted
access to these valuable trade secrets only by virtue of the confidential
relationship created by Employee's employment and Employee's prior relationship
to, interest in and fiduciary relationships to Company and its predecessors.
Employee shall not disclose any of the aforesaid trade secrets, directly or
indirectly, or use them in any way, either during the term of this Agreement or
at any time thereafter, except as required in the course of employment by
Company and for its benefit.
All records, files, documents, drawings, specifications, software,
equipment, and similar items relating to the business of Company or its
affiliates, including without limitation all records relating to customers (the
"Documents"), whether prepared by Employee or otherwise coming into Employee's
possession, shall remain the exclusive property of Company or such
14
affiliates and shall not be removed from the premises of Company or its
affiliates under any circumstances whatsoever without the prior consent of a
senior executive officer of Company. Upon termination of employment, Employee
agrees to promptly deliver to Company all Documents in the possession or under
the control of Employee.
(i) Severability.
------------
If any provision of this Agreement is held invalid or unenforceable,
the remainder of this Agreement shall nevertheless remain in full force and
effect, and if any provision is held invalid or unenforceable with respect to
particular circumstances, it shall nevertheless remain in full force and effect
in all other circumstances, to the fullest extent permitted by law.
(j) Withholding; Deductions.
-----------------------
All compensation payable hereunder, including salary and other
benefits, shall be subject to applicable taxes, withholding and other required,
normal or elected employee deductions.
(k) Section Headings.
----------------
Section and other headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(l) 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.
(m) Representation By Counsel; Interpretation.
-----------------------------------------
Each party hereto acknowledges that it or she has been represented by
counsel in connection with this Agreement and the matters contemplated by this
Agreement. Accordingly, any rule of law, including but not limited to Section
1654 of the California Civil Code, or any legal decision that would require
interpretation of any claimed ambiguities in this Agreement against the party
that drafted it has no application and is expressly waived. The provisions of
this Agreement shall be interpreted in a reasonable manner to effect the intent
of the parties.
(n) Antidilution Adjustments.
------------------------
All amounts of shares, options and option exercise prices referred to
in this Agreement shall be subject to appropriate adjustment for stock splits,
reverse stock splits, stock dividends, restructurings and recapitalizations
occurring after the date hereof.
15
(o) No Duty to Mitigate.
-------------------
All amounts payable pursuant to this Agreement shall be paid without
regard to whether Employee has taken actions to mitigate damages.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
"XXXX"
GEMSTAR INTERNATIONAL GROUP LIMITED
By: /s/ XXXXX X. XXXX
-------------------------------------
Xxxxx X. Xxxx, President and CEO
By: /s/ XXXXX XXXXXXXX
-------------------------------------
Xxxxx Xxxxxxxx, Secretary
"Company"
GEMSTAR DEVELOPMENT CORPORATION
By: /s/ XXXXX X. XXXX
------------------------------------
Xxxxx X. Xxxx, President and CEO
By: /s/ XXXXX XXXXXXXX
------------------------------------
Xxxxx Xxxxxxxx, Assistant Secretary
"Employee"
XXXXX MA XXXXX
/s/ XXXXX MA XXXXX
----------------------------------------
16
EXHIBIT A
COMPANY'S BUSINESS
(for purposes of this exhibit Company
shall include [*])
[*]
[*]Includes the following disclosures, patent applications, patents,
continuations, continuations-in-part and foreign counterparts thereto:
[*] [*]
PATENT NO. 5,335,079 PATENT NO. 5,382,983
[*] [*]
PATENT NO. 5,307,173
[*]
___________
[*] Omitted, confidential treatment requested
1
EXHIBIT B
ACTUAL OR DEMONSTRABLY ANTICIPATED RESEARCH OR
DEVELOPMENT OF GEMSTAR
[*]
___________
[*] Omitted, confidential treatment requested
C-2
SCHEDULE I
ANNUAL INCENTIVE BONUS COMPENSATION
(a) Subject to the terms and conditions of this Agreement, and in
addition to the Base Salary and other Additional Benefits to which Employee may
otherwise be entitled from Company, at the end of each Fiscal Year (or portion
thereof) during the term of this Agreement, Employee shall be deemed to have
earned a bonus (the "Annual Incentive Bonus" or "B"), payable by Company to
Employee on the last day of the Compensation Period in which such Fiscal Year
ends (or such sooner date as of which this Agreement terminates), commencing
with the Compensation Period ending May 31, 1998, calculated according to the
following formula:
(i) if C/E is less than or equal to 1.00, then B = 0.00;
(ii) if C/E = (1.35)(to the power of n), or more, then B = 0.40 x S
(iii) if 1 is less than C/E less than (1.35)(to the power of n), then B is
calculated pro-rata using the appropriate multiple between 0.00 x S,
and 0.40 x S
Where:
C = The sum of XXXX'x consolidated earnings per share for each of the
four (4) fiscal quarters in such Fiscal Year (or, if this
Agreement terminates prior to the end of a Fiscal Year, the
portion of such Fiscal Year preceding the date of such
termination) as reflected, with respect to the first three (3) of
such quarters, in the respective quarterly reports on Form 10-Q
filed by XXXX with the SEC and, with respect to the fourth
quarter, in the annual report on Form 10-K filed by XXXX with the
SEC, in each case excluding the effect of one-time charges
("EPS");
E = EPS of XXXX for the Fiscal Year ended March 31, 1997 (or, if this
Agreement terminates prior to the end of a Fiscal Year, the
portion of the Fiscal Year ended March 31, 1997 comparable to the
portion of such Fiscal Year preceding the date of such
termination);
n = the number of the then-completed Fiscal Years, numbering them
consecutively considering the Fiscal Year ended March 31, 1997 as
n=0, determined as follows:
----------------------------------------------------------------------------
Fiscal Year Ending March 31, n
----------------------------------------------------------------------------
1998 n=1
----------------------------------------------------------------------------
1999 n=2
----------------------------------------------------------------------------
2000 n=3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2004 n=7
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2010 n=13
----------------------------------------------------------------------------
----------------------------------------------------------------------------
I-1
S = Base Salary as of the last day of such Fiscal Year.
(b) In the event that Employee's employment with Company terminates during
a Fiscal Year and it is impracticable to calculate "C" or "E" for a portion of a
Fiscal Year, Employee's Annual Incentive Bonus shall be calculated based on what
would have been payable for a full Fiscal Year and prorating that amount based
upon the number of days during the Fiscal Year that Employee was employed by
Company.
(c) The Annual Incentive Bonus amount due for each Fiscal Year shall be
paid by Company to Employee at the end of each Compensation Period (or such
sooner date as of which this Agreement terminates) (the "Due Date"). Employee
may, at her own expense, audit the applicable records at the place where Company
maintains the same in order to verify the calculation of the Annual Incentive
Bonus. Any such audit shall be conducted only by a reputable public accountant
during reasonable business hours in such manner as not to interfere with
Company's normal business activities. In no event shall an audit with respect
to the calculation of the Annual Incentive Bonus commence later than twelve (12)
months after the Due Date.
If any audit of Company's records by Employee reveals that Company has
failed to properly account for and pay Employee the Annual Incentive Bonus that
should have been paid for that Fiscal Year, and the amount of any Annual
Incentive Bonus which Company has failed to properly account and pay for in
respect of any Fiscal Year exceeds by at least three percent (3%) the amount of
Annual Incentive Bonus actually accounted for and paid to Employee for such
Fiscal Year, Company shall, in addition to paying Employee such overdue amount
of Annual Incentive Bonus, reimburse Employee for her direct, reasonable out-of-
pocket expenses incurred in conducting such audit.
(d) The provisions of this Schedule I shall not be deemed to restrict in
any way any rights of XXXX or the XXXX Board, acting in good faith, during the
term of this Agreement to dissolve, reorganize or take any other action or make
any other change (fundamental or otherwise) affecting the structure, existence,
organization, operations or business of Company or any of its subsidiaries. If
at any time during any Fiscal Year Company shall be dissolved, the right to
Annual Incentive Bonus payments pursuant to this Agreement shall terminate. If
at any time during any Compensation Period, Company shall be a party to a merger
or sale of all or substantially all of its assets to another entity, Company
shall (or shall cause a successor to) provide for adjustment as nearly
equivalent as practicable to preserve to Employee the benefits of this Agreement
relating to payment of Annual Incentive Bonus amounts in respect of the business
of Company or such successor. Such adjustments by the XXXX Board made in good
faith shall be conclusive.
(e) All accounting terms or concepts used herein have the meanings
assigned or applied under generally accepted accounting principles, consistently
applied.
I-2
SCHEDULE II
Excise Tax Gross-Up
(Capitalized terms not defined herein have the meanings
ascribed thereto in the attached Amended and Restated
Employment Agreement)
(a) In the event it is determined (pursuant to (b) below) or finally
determined (as defined in (c)(iii) below) that any payment, distribution,
transfer, benefit or other event with respect to the XXXX, Company or a
predecessor, successor, direct or indirect subsidiary or affiliate of
either Company or XXXX (or any predecessor, successor of affiliate of any
of them, and including any benefit plan of any of them), to or for the
benefit of Employee or Employee's dependents, heirs or beneficiaries
(whether such payment, distribution, transfer, benefit or other event
occurs pursuant to the terms of this Agreement or otherwise, but determined
without regard to any additional payments required under this Schedule II)
(each a "Payment" and collectively the "Payments") is or was subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended, and any successor provision or any comparable provision of state
or local income tax law (collectively, "Section 4999"), or any interest,
penalty or addition to tax is or was incurred by Employee with respect to
such excise tax (such excise tax, together with any such interest, penalty,
addition to tax, and costs (including professional fees) hereinafter
collectively referred to as the "Excise Tax"), then, within 10 days after
such determination or final determination, as the case may be, Company
shall pay to Employee an additional cash payment (hereinafter referred to
as the "Gross-Up Payment") in an amount such that after payment by Employee
of all taxes, interest, penalties, additions to tax and costs imposed or
incurred with respect to the Gross-Up Payment (including, without
limitation, any income and excise taxes imposed upon the Gross-Up Payment),
Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon such Payment or Payments. This provision is intended to put
Employee in the same position as Employee would have been had no Excise Tax
been imposed upon or incurred as a result of any Payment.
(b) Except as provided in subsection (c) below, the determination that
a Payment is subject to an Excise Tax shall be made in writing by a
certified public accounting firm selected by Employee ("Employee's
Accountant"). Such determination shall include the amount of the Gross-Up
Payment and detailed computations thereof, including any assumptions used
in such computations (the written determination of the Employee's
Accountant, hereinafter, the "Employee's Determination"). The Employee's
Determination shall be reviewed on behalf of Company by a certified public
accounting firm selected by Company (the "Company's Accountant"). The
Company shall notify Employee within 10 business days after receipt of the
Employee's Determination of any disagreement or dispute therewith, and
failure to so notify within that period shall be considered an agreement by
Company with the Employee's Determination, obligating Company to make
payment as provided in subsection (a) above within 10 days from the
expiration of such 10 business-day period. In the event of an objection by
Company to the Employee's Determination, any amount not in dispute shall be
paid within 10 days following the 10 business-day period referred to
herein, and with respect to the amount in dispute the Employee's Accountant
and Company's Accountant shall jointly select a third nationally recognized
certified public accounting firm to resolve the dispute and the decision of
such third firm shall be final, binding and conclusive upon the Employee
and Company. In such a case, the third accounting firm's findings shall be
deemed the binding determination with
II-1
respect to the amount in dispute, obligating Company to make any payment as
a result thereof within 10 days following the receipt of such third
accounting firm's determination. All fees and expenses of each of the
accounting firms referred to in this Schedule II shall be borne solely by
Company.
(c) (i) Employee shall notify Company in writing of any claim by the
Internal Revenue Service (or any successor thereof) or any state or local
taxing authority (individually or collectively, the "Taxing Authority")
that, if successful, would require the payment by Company of a Gross-Up
Payment. Such notification shall be given as soon as practicable but no
later than 30 days after Employee receives written notice of such claim and
shall apprise Company of the nature of such claim and the date on which
such claim is requested to be paid; provided, however, that failure by
Employee to give such notice within such 30-day period shall not result in
a waiver or forfeiture of any of Employee's rights under this Schedule II
except to the extent of actual damages suffered by Company as a result of
such failure. Employee shall not pay such claim prior to the expiration of
the 15-day period following the date on which Employee gives such notice to
Company (or such shorter period ending on the date that any payment of
taxes, interest, penalties or additions to tax with respect to such claim
is due). If Company notifies Employee in writing prior to the expiration
of such 15-day period that it desires to contest such claim (and
demonstrates to the reasonable satisfaction of Employee its ability to make
the payments to Employee which may ultimately be required under this
section before assuming responsibility for the claim), Employee shall:
(A) give Company any information reasonably requested by Company
relating to such claim;
(B) take such action in connection with contesting such claim as
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney selected by Company that is
reasonably acceptable to Employee;
(C) cooperate with Company in good faith in order effectively to
contest such claim; and
(D) permit Company to participate in any proceedings relating to
such claim; provided, however, that Company shall bear and pay
directly all attorneys fees, costs and expenses (including additional
interest, penalties and additions to tax) incurred in connection with
such contest and shall indemnify and hold Employee harmless, on an
after-tax basis, for all taxes (including, without limitation, income
and excise taxes), interest, penalties and additions to tax imposed in
relation to such claim and in relation to the payment of such costs
and expenses or indemnification. Without limitation on the foregoing
provisions of this Schedule II, and to the extent its actions do not
unreasonably interfere with or prejudice Employee's disputes with the
Taxing Authority as to other issues, Company shall control all
proceedings taken in connection with such contest and, in its
reasonable discretion, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either
direct Employee to pay the tax, interest or penalties claimed and xxx
for a refund or contest the claim in any permissible manner, and
Employee agrees to prosecute such contest to a determination before
any
II-2
administrative tribunal, in a court of initial jurisdiction and in one
or more appellate courts, as Company shall determine; provided,
however, that if Company directs Employee to pay such claim and xxx
for a refund, Company shall advance an amount equal to such payment to
Employee, on an interest-free basis, and shall indemnify and hold
Employee harmless, on an after-tax basis, from all taxes (including,
without limitation, income and excise taxes), interest, penalties and
additions to tax imposed with respect to such advance or with respect
to any imputed income with respect to such advance, as any such
amounts are incurred; and, further, provided, that any extension of
the statute of limitations relating to payment of taxes, interest,
penalties or additions to tax for the taxable year of Employee with
respect to which such contested amount is claimed to be due is limited
solely to such contested amount; and, provided, further, that any
settlement of any claim shall be reasonably acceptable to Employee and
Company's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder, and
Employee shall be entitled to settle or contest, as the case may be,
any other issue.
(ii) If, after receipt by Employee of an amount advanced by Company
pursuant to paragraph (c)(i), Employee receives any refund with respect to
such claim, Employee shall (subject to Company's complying with the
requirements of this Schedule II) promptly pay to Company an amount equal
to such refund (together with any interest paid or credited thereon after
taxes applicable thereto), net of any taxes (including without limitation
any income or excise taxes), interest, penalties or additions to tax and
any other costs incurred by Employee in connection with such advance, after
giving effect to such repayment. If, after the receipt by Employee of an
amount advanced by Company pursuant to paragraph (c)(i), it is finally
determined that Employee is not entitled to any refund with respect to such
claim, then such advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall be treated as a Gross-Up
Payment and shall offset, to the extent thereof, the amount of any Gross-Up
Payment otherwise required to be paid.
(iii) For purposes of this Schedule II, whether the Excise Tax is
applicable to a Payment shall be deemed to be "finally determined" upon the
earliest of: (A) the expiration of the 15-day period referred to in
paragraph (c)(i) above if Company has not notified Employee that it intends
to contest the underlying claim, (B) the expiration of any period following
which no right of appeal exists, (C) the date upon which a closing
agreement or similar agreement with respect to the claim is executed by
Employee and the Taxing Authority (which agreement may be executed only in
compliance with this Schedule II), (D) the receipt by Employee of notice
from Company that it no longer seeks to pursue a contest (which notice
shall be deemed received if Company does not, within 15 days following
receipt of a written inquiry from Employee, affirmatively indicate in
writing to Employee that Company intends to continue to pursue such
contest).
(d) As a result of uncertainty in the application of Section 4999
that may exist at the time of any determination that a Gross-Up Payment is
due, it may be possible that in making the calculations required to be made
hereunder, the parties or their accountants shall determine that a Gross-Up
Payment need not be made (or shall make no determination with respect to a
Gross-Up Payment) that properly should be made ("Underpayment"), or that a
Gross-Up Payment not properly needed to be made should be made
("Overpayment"). The determination of any Underpayment shall be made using
the procedures set forth in paragraph (b) above and
II-3
shall be paid to Employee as an additional Gross-Up Payment. The Company
shall be entitled to use procedures similar to those available to Employee
in paragraph (b) to determine the amount of any Overpayment (provided that
Company shall bear all costs of the accountants as provided paragraph (b)).
In the event of a determination that an Overpayment was made, any such
Overpayment shall be treated for all purposes as a loan to Employee with
interest at the applicable Federal rate provided for in Section 1274(d) of
the Code; provided, however, that the amount to be repaid by Employee to
Company shall be subject to reduction to the extent necessary to put
Employee in the same after-tax position as if such Overpayment were never
made.
II-4
