EXHIBIT 99.1
TRANSITION AGREEMENT
This Transition Agreement (this "AGREEMENT") is entered into as of May 24,
1996 by and among DiviCom Inc., a Delaware corporation ("DIVICOM"), SAGEM S.A.,
a corporation organized and existing under the laws of France acting on behalf
of itself as well as on behalf of SAGEM International S.A., a corporation
organized and existing under the laws of France, and Tregor Electronique S.A., a
corporation organized and existing under the laws of France, and as
successor-in-interest by reason of merger to Eurodec, a societe en nom collectif
organized and existing under the laws of France (hereinafter the foregoing
companies are collectively referred to as "SAGEM"), C-Cube Microsystems Inc., a
Delaware corporation ("C-CUBE"), and, for purposes of Section 2 (Status of Prior
Agreements) only, Nolan Daines, an individual who is a resident of California
("DAINES"). DiviCom, SAGEM, C-Cube, and Daines collectively are hereinafter
referred to as the "PARTIES."
RECITALS
A. The Parties (or some of them) have entered into certain agreements
regarding the development, manufacture, sale, and distribution of certain
products and the ownership and licensing of intellectual property rights therein
and thereto, namely: (i) Joint Venture and Shareholders Agreement, dated April
20, 1993 (the "JOINT VENTURE AGREEMENT"); (ii) Business Agreement, dated as of
April 20, 1993 (the "BUSINESS AGREEMENT"); (iii) Registration Rights and Buy-Out
Agreement, dated as of April 20, 1993 (the "REGISTRATION RIGHTS AND BUY-OUT
AGREEMENT"); (iv) 1995 Rap-Up Agreement, dated January 23, 1996 (the "RAP-UP
AGREEMENT"); and (v) ASIC Purchasing Agreement, dated January 23, 1996 (the
"ASIC AGREEMENT").
B. The Parties comprise the founders of DiviCom. In light of the
evolution of DiviCom and the execution of the Merger Agreement (defined below),
the Parties have determined that it is in their respective best interests to
ensure that as between the Parties, DiviCom will own and independently develop
the technology it has developed, subject to the licenses and covenants set forth
herein.
C. The Parties desire in this Agreement to supersede the Prior Agreements
(as defined below) provided that certain matters shall occur or shall have
effect only on the Effective Date (as defined below).
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants set forth below,
the parties to this Agreement agree as follows:
1. DEFINITIONS
As used herein, the following capitalized terms have the meanings set forth
below:
"AFFILIATE(S)" of a corporation or other entity means a person or entity
that, directly or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, such corporation or other entity.
For purposes of this Agreement, "control" shall be defined as owning more than
50% of the outstanding voting equity of an entity.
"DIVICOM PRODUCTS" means any and all products and components developed,
under development as of the Effective Date, designed, manufactured, sold, or
distributed by or for DiviCom pursuant to the Prior Agreements or otherwise,
whether owned by or licensed to DiviCom.
"DIVICOM SYSTEMS" means any encoder product based on technology described
in Paragraph 4(a) of EXHIBIT A hereto.
"DIVICOM TECHNOLOGY" means any and all software, source code and object
code, hardware, technology, designs, know-how, algorithms, net lists,
procedures, techniques, solutions, and work-arounds associated with the use,
design, development, testing, manufacture and distribution of the DiviCom
Products, whether owned by or licensed to DiviCom.
"EFFECTIVE DATE" means the earliest of (i) the Effective Date under the
Merger Agreement, (ii) the effective date of the registration statement of
DiviCom in a firmly underwritten initial public offering or (iii) the closing
date of a sale or disposition of 100% of the shares or substantially all of the
assets of DiviCom.
"END USER DECODER PRODUCT" means any product containing MPEG-2 decoder
DiviCom Technology available for sale in an unaltered form to end users
including retail consumers.
"INTELLECTUAL PROPERTY RIGHTS" means patent rights (including patent
applications and disclosures), rights of priority, copyrights, mask work rights,
Moral Rights, trade secrets, know-how, and any other intellectual property
rights recognized in any country or jurisdiction in the world.
"LICENSED ASICS" is defined in EXHIBIT A hereto.
"LICENSED CONSUMER DECODERS" is defined in EXHIBIT A hereto.
"LICENSED MPEG SOFTWARE TOOLS" is defined in EXHIBIT A hereto.
"LICENSED SYSTEM PRODUCT TECHNOLOGY" is defined in EXHIBIT A hereto.
"LICENSED DIVICOM PRODUCT DOCUMENTATION" is defined in Section 4.1(d),
below.
"MERGER AGREEMENT" means the Plan and Agreement of Reorganization among
SAGEM, C-Cube, a wholly-owned subsidiary of C-Cube and DiviCom dated as of the
date hereof.
-2-
"MORAL RIGHTS" means any right to claim authorship to or to object to any
distortion, mutilation or other modification or other derogatory action in
relation to a work, whether or not such would be prejudicial to the author's
reputation, and any similar right, existing under common or statutory law of any
country in the world or under any treaty, regardless of whether or not such
right is denominated or generally referred to as a "moral right."
"MOST FAVORED CUSTOMER BASIS" means as to a buyer, licensee or user, any
group of terms and conditions at least as favorable as any group of terms and
conditions provided to any other purchaser, licensee or user in transactions
involving equal or lesser quantities.
"PRIOR AGREEMENTS" means the agreements listed in Recital A hereto.
"SAGEM DECODERS" has the meaning set forth in Section 4.1.
"SAGEM DEVELOPMENTS" has the meaning set forth in Section 3.2(b).
"TRIX TECHNOLOGY" has the meaning set forth in EXHIBIT A hereto.
2. STATUS OF PRIOR AGREEMENTS
The Parties agree that as of the Effective Date, the Prior Agreements will
be entirely superseded by this Agreement and will be of no further force and
effect except for outstanding royalty payment obligations which remain due under
the Rap-Up Agreement, the ASIC Agreement and that certain oral agreement
relating to sales to Echostar at the royalty rates set forth in EXHIBIT C
hereto. As of the date hereof, the Parties agree that for purposes of
determining whether Daines (or his successors-in-interest) has fully vested
rights in the shares of DiviCom stock heretofore issued to Daines, all
milestones ("Milestones") in the Joint Venture Agreement have been met.
Additionally, the Parties agree that all Milestones have been met for all other
DiviCom stockholders and optionholders. The Parties further agree that any
repurchase rights any Party may have or control with respect to Daines'
stockholdings in DiviCom contained in Section 12 of that certain Executive
Employment Agreement, dated April 20, 1993, between Daines and DiviCom, are
terminated as of the date of this Agreement and, as of such time, there shall be
no repurchase rights with respect to Daines' stockholdings in DiviCom. The
Parties agree that subject to the conditions to the effectiveness of this
Section, the effect of this Section 2 is to terminate, as of the Effective Date,
all licenses, development obligations, territorial non-competition provisions
and other rights and duties among the Parties as of such date, and that on and
after such date the only subsisting rights and obligations as to the subject
matter of the Prior Agreements will be those set forth herein.
3. OWNERSHIP OF DIVICOM PRODUCTS AND TECHNOLOGY
3.1 DIVICOM PRODUCTS AND TECHNOLOGY. On the Effective Date, subject to
the rights granted herein, each of the Parties other than DiviCom hereby
(i) transfers and assigns to DiviCom all right, title, and interest that such
Party may have, including, without limitation, all Intellectual Property Rights,
in and to the DiviCom Products and DiviCom Technology and (ii) acknowledges
-3-
that as among the Parties, DiviCom is and shall be the exclusive owner of all
right, title and interest in and to the DiviCom Products and DiviCom Technology.
On the Effective Date, each Party other than DiviCom hereby irrevocably
transfers and assigns to DiviCom, and waives and agrees never to assert against
DiviCom or any successor-in-interest to DiviCom, any and all Intellectual
Property Rights (other than those granted herein or acquired in accordance
herewith) that it may have in or with respect to the DiviCom Products and
DiviCom Technology. Each Party other than DiviCom agrees and acknowledges that
it will not receive additional compensation for performing its obligations under
this Section, and that this Section will survive any termination or expiration
of this Agreement.
3.2 MODIFICATIONS AND IMPROVEMENTS.
(a) On and after the Effective Date, as among the Parties, DiviCom
shall be the exclusive owner of all right, title, and interest, including
without limitation all Intellectual Property Rights, in and to any
modifications, improvements, derivative works and enhancements which DiviCom
makes to the DiviCom Products and DiviCom Technology. This Section will survive
any termination or expiration of this Agreement.
(b) On and after the Effective Date, subject to Section 4.4 and
DiviCom's rights in any DiviCom Technology, SAGEM shall be the exclusive owner
of all right, title and interest, including without limitation all Intellectual
Property Rights, in and to any modifications, improvements, enhancements or
derivative works it may develop ("SAGEM Developments") in and to the technology
licensed hereunder. This Section will survive any termination or expiration of
this Agreement.
4. GRANT OF LICENSES
4.1 DECODER LICENSES. As of the Effective Date, DiviCom hereby grants to
SAGEM the following licenses:
(a) a non-exclusive, irrevocable, perpetual, worldwide license, to
use, copy, modify, enhance, improve or otherwise create derivative works of the
Licensed ASICs solely for the purposes of manufacturing, having manufactured,
marketing, distributing, and selling Licensed Consumer Decoders and any other
End User Decoder Product;
(b) a non-exclusive, irrevocable, perpetual, worldwide license to
use, copy, modify, enhance, improve or otherwise create derivative works of the
Licensed Consumer Decoders solely for the purposes of manufacturing, having
manufactured, marketing, distributing and selling Licensed Consumer Decoders and
any SAGEM Developments in the field of use of consumer decoders ("SAGEM
DECODERS");
(c) a non-exclusive, irrevocable, perpetual, royalty-free, worldwide
license to use the Licensed MPEG Software Tools, solely for the purposes of
developing products for SAGEM including, without limitation, SAGEM Decoders and
End User Decoder Products; and
-4-
(d) a non-exclusive, royalty-free, perpetual, worldwide license to
use all documentation relating to the Licensed ASICs, Licensed Consumer
Decoders, Licensed MPEG Software Tools, and Licensed System Product Documents,
as described in EXHIBIT A (collectively, the "LICENSED DIVICOM PRODUCT
DOCUMENTATION") solely for the purposes of exercising the licenses granted above
and in Section 4.2(a) below.
The foregoing licenses and rights may not be sublicensed or otherwise
transferred, in whole or in part, by SAGEM to any third party other than a SAGEM
Affiliate provided that such Affiliate agrees to be bound by the terms hereof
and provided further that such sublicense or other transfer shall terminate if
and at such time that such Affiliate ceases to be an Affiliate. Notwithstanding
the foregoing, SAGEM shall be permitted to subcontract development and
manufacturing services and in connection therewith, SAGEM shall be permitted to
provide its subcontractors with all licensed DiviCom Technology including,
without limitation, Licensed MPEG Software Tools (in object code only) and
Licensed DiviCom Product Documentation in accordance with the confidentiality
and use restrictions described herein. Except as otherwise specifically
provided for in this Agreement, DiviCom will be under no obligation to provide
any modifications, improvements, derivative works or enhancements of DiviCom
Products or DiviCom Technology to SAGEM or any other Party. Further, to the
extent that any license herein granted to SAGEM is a license of software, said
software shall be provided in source code (to the extent such exists) with the
exception of TRIX Technology which shall be provided as detailed in Section 2(c)
of EXHIBIT A hereto.
4.2 SYSTEMS LICENSES AND DISTRIBUTORSHIP RIGHTS. As of the Effective
Date, DiviCom hereby grants to SAGEM the following licenses and rights:
(a) a royalty-free license to sell, lease, provide customer support
services and distribute in Europe and sublicense object code versions of any
software contained therein solely to end users (without any right by such
sublicensee to copy or further sublicense) DiviCom Systems purchased directly
from DiviCom until the second anniversary of the Effective Date. The foregoing
license shall be non-exclusive; provided, however, that during the two-year term
of such license, DiviCom will, to the extent permitted by law, not license any
third party to sell or lease or otherwise distribute DiviCom Systems in France;
and
(b) DiviCom agrees to furnish SAGEM, on a Most Favored Customer Basis
with respect to price terms, such quantities of DiviCom Systems as are
commercially practicable for DiviCom to furnish and as SAGEM may reasonably
request from time to time.
Except as otherwise provided above, the foregoing licenses and rights
may not be sublicensed or otherwise transferred, in whole or in part, by SAGEM
to any third party other than a SAGEM Affiliate provided that such Affiliate
agrees to be bound by the terms hereof and provided further that such sublicense
or other transfer shall terminate if and at such time that such Affiliate ceases
to be an Affiliate.
4.3 PROCUREMENT OF ASIC CHIPS. DiviCom and SAGEM acknowledge that DiviCom
and SAGEM currently procure the ASIC Chips from certain foundries (the "CURRENT
ASIC
-5-
PROVIDERS"). DiviCom agrees that it will continue to authorize the Current ASIC
Providers to furnish ASIC Chips to SAGEM for so long as the Current ASIC
Providers continue to furnish such products to DiviCom. In the event that,
after the Effective Date, DiviCom ceases to obtain ASIC Chips from the Current
ASIC Providers because C-Cube has commenced manufacture of ASIC Chips
internally, C-Cube agrees to furnish ASIC Chips to SAGEM on a Most Favored
Customer Basis with respect to price, warranty and current release terms, or, if
C-Cube is not furnishing ASIC Chips to any third party, C-Cube and SAGEM agree
to negotiate in good faith to determine a reasonable basis by which C-Cube will
furnish such ASIC Chips to SAGEM. The Parties acknowledge that none of the
Current ASIC Providers nor C-Cube is obligated to ensure any particular
quantities to SAGEM nor to continue to manufacture the ASIC Chips, it being
further acknowledged that Section 4.1(a) gives SAGEM rights to manufacture or
have manufactured the same. The Parties further agree that it is in their
mutual best interests to cooperate with each other so that each Party may obtain
the full benefit of the bargain of this Agreement. In furtherance thereof, but
without creating or imposing any obligation whatsoever, SAGEM intends to
purchase ASIC's from C-Cube to the extent C-Cube is able to satisfy and fulfill
SAGEM's requirements including, without limitation, those pertaining to quantity
and price.
4.4 THIRD-PARTY RIGHTS. The Parties acknowledge that certain DiviCom
Products and DiviCom Technologies contain certain Intellectual Property Rights
of third parties that have been licensed to DiviCom as have been or will be
provided in writing prior to the Effective Date ("THIRD PARTY INTELLECTUAL
PROPERTY RIGHTS"). DiviCom hereby grants to SAGEM only those rights, if any, as
sublicensee, to the Third Party Intellectual Property Rights as (i) it is
currently permitted (and without any representation as to the scope of such
rights or the Third-Party Intellectual Property Rights to which they relate) to
convey to SAGEM and (ii) which shall not require any additional payment by
DiviCom to such third parties, which rights shall, as limited by the foregoing,
be considered to be incorporated in the licenses granted herein. SAGEM
acknowledges and agrees that subject to the foregoing, it must obtain licenses
directly from such third parties before it may exercise any Third-Party
Intellectual Property Rights with respect to such licenses and that it may be
required to pay royalties to third parties to obtain such licenses. DiviCom
makes no representation that such licenses may be available to SAGEM on terms
acceptable to SAGEM, if at all.
4.5 LICENSED DIVICOM PRODUCT DOCUMENTATION. Within thirty (30) days after
the date of this Agreement, DiviCom will have delivered to SAGEM the Licensed
DiviCom Product Documentation (including both decoder and system documentation
as well as documentation in DiviCom's possession in existence as of the date of
this Agreement pertaining to Third Party Intellectual Property Rights to the
extent such documentation exists and may be provided without consent of or
payment by DiviCom to any party, and without any loss of any rights DiviCom may
be entitled to pursuant to such documentation) described in EXHIBIT A hereto.
DiviCom hereby represents and warrants that the documentation DiviCom will
provide to SAGEM pursuant to the foregoing sentence will constitute the latest
full versions of all written materials prepared by DiviCom employees and
consultants and made available for internal use by DiviCom (and shall constitute
the latest revisions and versions of such documentation as it pertains to the
licensed DiviCom Products or DiviCom Technology as identified in EXHIBIT A but
excluding personal notes, log books, crib notes and the like) as of the date of
this Agreement (or such earlier date(s) as indicated in EXHIBIT A) in
-6-
connection with the technology described in EXHIBIT A. During the thirty (30)
days following delivery of the last document to be delivered pursuant to the
foregoing sentence, SAGEM will review the materials delivered and at the end of
such time will provide DiviCom with a list of any issues regarding the
documentation itself, including any questions as to whether it includes all
documentation required to be delivered. The Licensed DiviCom Product
Documentation may only be used by SAGEM in accordance with this Agreement,
including with the terms of Section 9 hereof (Confidential Information).
5. MAINTENANCE AND SUPPORT
5.1 SUPPORT SERVICES. Subject to DiviCom entering into an arrangement
with another distributor with respect to DiviCom Products that are licensed to
SAGEM hereunder in which case DiviCom will provide support services to SAGEM
customers on a Most Favored Customer Basis, DiviCom will provide the standard
support services described in EXHIBIT B hereto for all DiviCom Products sold or
committed to be sold by SAGEM. The Parties acknowledge that DiviCom may from
time to time modify and change the standard terms and conditions in EXHIBIT B,
and the Parties agree that upon any such change, DiviCom shall be bound to
provide support services only with respect to the then current terms and
conditions. The Parties further agree that in the event of any conflict between
the terms and conditions in EXHIBIT B and the other provisions of this
Agreement, including all other exhibits hereto, the other provisions of this
Agreement, including all other exhibits hereto, shall control. Upon terms and
conditions to be mutually agreed upon between DiviCom and SAGEM, such support
services may be extended.
5.2 DIVICOM SYSTEMS SOFTWARE. DiviCom agrees to furnish to SAGEM, in the
form of a master disc (in object code only), the next version of DiviCom Systems
software to be released by DiviCom after the date of this Agreement (the
Springdale software), as soon as such software is available, at no additional
cost to SAGEM, and for use by SAGEM solely for purposes of licensing such
software to SAGEM's customers who have been shipped DiviCom Systems by SAGEM.
DiviCom further agrees that the standard terms and conditions in EXHIBIT B for
DiviCom Systems that are provided by DiviCom to such SAGEM customers will
extend, with respect to each such SAGEM customer, to the later of (i) the date
that is ninety (90) days after DiviCom furnishes to SAGEM the DiviCom System
software described in the foregoing sentence or (ii) the first anniversary of
the date such SAGEM customer was shipped a DiviCom System by SAGEM.
5.3 SALES SUPPORT ENGINEERING. While DiviCom will have no obligation to
train SAGEM personnel to utilize the Licensed DiviCom Product Documentation or
the DiviCom Technology, DiviCom will provide, solely with regard to the Licensed
DiviCom Product Documentation, for a period ending on the first anniversary of
the Effective Date, up to two man days per month of sales support engineering.
6. ROYALTIES, PRICES AND SUPPLIES
6.1 ROYALTY OBLIGATIONS. On and after the Effective Date, the following
royalties shall be payable on each of the following:
-7-
6.1.1 LICENSED ASICS. SAGEM shall pay a license fee equal to the
applicable Per Unit Fee set forth in EXHIBIT C for each Licensed ASIC (including
derivative products) manufactured by or for SAGEM (the Per Unit Fees
collectively are hereinafter referred to as the "LICENSE FEES"). The Per Unit
Fee for each Licensed ASIC (and derivative product) shall accrue upon completion
of manufacture by SAGEM, or if manufactured for SAGEM, upon delivery to or on
behalf of SAGEM, of each such Licensed ASIC (or derivative product) and shall be
payable in accordance with Section 6.2. All payments hereunder shall be
computed and paid in United States dollars. The obligation of SAGEM to accrue
royalties to DiviCom hereunder shall cease on the third anniversary of the
Effective Date at which time, provided all royalties accrued prior to such date
are paid, the foregoing license will be fully paid up.
6.1.2 LICENSED CONSUMER DECODERS OTHER THAN TRIX-BASED DECODERS.
a. For each Licensed Consumer Decoder or SAGEM Decoder
(other than decoders based on TRIX Technology) sold by SAGEM, directly or
through a distributor, to a customer based in Canada, the United States of
America or Mexico, SAGEM shall pay a license fee equal to the applicable Per
Unit Fee set forth in EXHIBIT C.
b. For each Licensed Consumer Decoder (including derivative
products) or SAGEM Decoder (other than decoders based on TRIX Technology) sold
by SAGEM, directly or through a distributor, to a customer introduced to SAGEM,
with SAGEM's consent, by DiviCom, C-Cube or any of their Affiliates, SAGEM shall
pay a license fee equal to the applicable Per Unit Fee set forth in EXHIBIT C.
The Per Unit Fees provided for in this Section 6.1.2 for each Licensed
Consumer Decoder (including derivative products) or SAGEM Decoder shall accrue
thirty (30) days after SAGEM issues an invoice for the aforesaid product and
shall be payable in accordance with Section 6.2. All payments hereunder shall
be computed and paid in United States dollars. The obligation of SAGEM to pay
royalties to DiviCom under this Section 6.1.2 shall cease on the third
anniversary of the Effective Date at which time, provided all royalties accrued
prior to such date are paid, the related licenses will be fully paid up.
6.1.3 TRIX-BASED LICENSED CONSUMER DECODERS.
a. For each Licensed Consumer Decoder (including derivative
products) or SAGEM Decoder based on TRIX Technology sold by SAGEM, SAGEM shall
pay a license fee equal to the applicable Per Unit Fee set forth in EXHIBIT C.
b. For each Licensed Consumer Decoder (including derivative
products) or SAGEM Decoder based on TRIX Technology sold by SAGEM, directly or
through a distributor, to a customer introduced to SAGEM, with SAGEM's consent,
by DiviCom, C-Cube or any of their Affiliates, SAGEM shall pay a license fee
equal to the applicable Per Unit Fee set forth in EXHIBIT C.
-8-
The Per Unit Fees provided for in this Section 6.1.3 for each Licensed Consumer
Decoder (including derivative products) or SAGEM Decoder shall accrue thirty
(30) days after SAGEM issues an invoice for the aforesaid product and shall be
payable in accordance with Section 6.2. All payments hereunder shall be
computed and paid in United States dollars. The obligation of SAGEM to accrue
royalties to DiviCom under this Section 6.1.3 shall cease on the third
anniversary of the Effective Date at which time, provided all royalties accrued
prior to such date are paid, the related license will be fully paid up.
6.2 REPORTS AND PAYMENTS. SAGEM shall provide by the forty-fifth (45th)
calendar day following the end of each calendar quarter a report reflecting a
calculation of all License Fees due, and the breakdown of such fees among the
products on which such fees have accrued hereunder. By the same date, and
included with the quarterly Report that SAGEM is to provide to DiviCom, SAGEM
will include any License Fees accrued or owed for that quarter. To the extent
that any License Fees have not been paid in full when due, DiviCom shall be
entitled to receive, and SAGEM agrees to pay, interest on any and all overdue
License Fees at a rate equal to the then-current prime rate of Citibank N.A.,
based on a 360 day year. All such interest payments and delinquent License Fees
shall be due immediately.
6.3 INSPECTIONS AND AUDITS. SAGEM shall make and maintain until the
expiration of eighteen (18) months after the last payment under this Agreement
is due books, records and accounts regarding exclusively: (i) the distribution
or other disposition of the Licensed Consumer Decoders; (ii) the manufacture of
Licensed ASICs by or for SAGEM; and (iii) the License Fees due DiviCom
hereunder. DiviCom shall have the right, not more than once each and for a
maximum of five (5) working days each year, to have a third party, reasonably
acceptable to SAGEM, examine such books, records and accounts during SAGEM's
normal business hours to verify SAGEM's reports on the amount of payments made
to DiviCom under this Agreement. Any proprietary information of SAGEM,
including customer identity or requirements, communicated as a result of said
examination shall be deemed "Confidential Information" for purposes of Section 9
hereof. If any such examination discloses a shortfall in payment to DiviCom of
more than five percent (5%) for any year, SAGEM agrees to immediately pay or
reimburse DiviCom for the reasonable expenses of the examination and immediately
remit payment to DiviCom of the full amount of any disclosed and undisputed
shortfalls plus interest.
6.4 CERTAIN SUPPLY AGREEMENT. SAGEM and DiviCom are currently negotiating
a significant supply agreement (the "Supply Agreement") with a communications
company for DiviCom Systems and decoders in which SAGEM will serve as a
manufacturer and supplier of DiviCom Products. A Memorandum of Understanding
(the "MOU") currently exists between the Parties with respect thereto. To the
extent the Supply Agreement is reached, and to the extent that DiviCom licenses
a third party to manufacture and supply such communications company with the
DiviCom Products to be supplied by SAGEM, SAGEM will be entitled to terms on a
Most Favored Customer Basis, provided that in no event shall the royalty payable
to DiviCom with respect to decoder product sales exceed Fourteen Dollars ($14)
per unit, subject to DiviCom's obligation to reimburse SAGEM for certain
development costs and the other terms and conditions of the MOU.
-9-
6.5 TRIX TECHNOLOGY. In the event DiviCom licenses to any unrelated
person, firm or corporation the right to use any later version of the TRIX
Technology which, without limitation, updates, improves, modifies or enhances
the version licensed to SAGEM hereunder, DiviCom will offer to provide SAGEM the
right to use each such later version on a Most Favored Customer Basis.
7. REPRESENTATIONS AND WARRANTIES
7.1 MUTUAL REPRESENTATIONS AND WARRANTIES. Each Party represents and
warrants, severally and not jointly, to each of the other Parties that:
(a) such Party has full power, right and authority to enter into this
Agreement, to carry out its obligations under this Agreement, including the
superseding of the Prior Agreements, and to the extent applicable, to grant,
assign and license the rights that are granted, assigned and licensed to any
other Party under this Agreement;
(b) neither the execution and delivery of this Agreement, nor the
performance of any of such Party's obligations hereunder, will conflict with, or
result in a termination, breach, impairment or violation of any material
agreement between such Party and any third party (other than the termination of
each of the Prior Agreements);
(c) the performance of such Party's obligations hereunder will not
require the consent of any third party not a Party hereto;
(d) this Agreement, when duly executed by each Party, will constitute
a valid and binding obligation of such Party, enforceable in accordance with its
terms; and
(e) such Party has not previously granted or assigned and will not
grant or assign any Intellectual Property Rights to any third party which are
inconsistent with the rights that are granted and assigned herein.
7.2 AGREEMENT TO COOPERATE TO RESOLVE ANY INFRINGEMENT OF THIRD PARTY
INTELLECTUAL PROPERTY RIGHTS. Each of DiviCom and SAGEM agrees to promptly
notify the other of any infringement or unauthorized use or variation of the
DiviCom Technology licensed hereunder by others promptly following such Party's
becoming aware of facts relating to such event, and then of such Party's
conclusion, if any, that such infringement or use exists. DiviCom shall have
the initial right to determine whether or not to bring infringement or unfair
competition or related proceedings on account of any such infringement or
unauthorized use or variation, or any other matter involving the DiviCom
Technology generally, and may institute, defend or settle claims, actions or
proceedings at its sole cost and expense. If within thirty (30) days after
receipt of notice of such conclusion with respect to any such claim (or such
shorter period as reasonable under the circumstances), DiviCom refuses to
prosecute such action or fails to give written notice to SAGEM that it will
prosecute such action, then SAGEM shall have the right, after first giving
DiviCom written notice, to institute, defend or settle such action or claim or
proceeding at its sole cost and expense. DiviCom and SAGEM, as the case may be,
shall each cooperate fully with the other in any legal action taken by the
-10-
other against any party alleged to be infringing upon the DiviCom Technology.
If SAGEM is prosecuting or defending the action, then SAGEM shall be entitled to
name DiviCom as a party to such action if necessary in SAGEM's reasonable
judgment. Any amount awarded with respect to any legal action brought hereunder
shall first be used to reimburse all costs expended and the remainder shall be
allocated equitably between SAGEM and DiviCom unless otherwise agreed to by
SAGEM and DiviCom. Any disputes as to which Party has the right to prosecute
the action, or as to allocation of proceeds from the action, shall be settled by
arbitration as provided in Section 11.3.
7.3 NO OTHER WARRANTIES. THE WARRANTIES SET FORTH IN THIS SECTION 7 ARE
THE SOLE AND EXCLUSIVE WARRANTIES MADE BY EACH PARTY HEREUNDER AND ARE IN LIEU
OF ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED
TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, NON-INFRINGEMENT OR WARRANTY OF TITLE, ALL OF WHICH ARE HEREBY
EXPRESSLY DISCLAIMED.
8. INDEMNIFICATION
8.1 DUTY TO INDEMNIFY.
(a) SAGEM hereby indemnifies and agrees to defend and hold harmless
DiviCom and its Affiliates and their respective officers, directors and
employees from and against any Loss (as defined in the Merger Agreement)
suffered or incurred by any of them arising out of or resulting from any breach
of any representation or warranty of SAGEM in Section 7.1.
(b) DiviCom hereby indemnifies and agrees to defend and hold harmless
Licensee and its Affiliates and their respective officers, directors and
employees from and against any Loss suffered or incurred by any of them arising
out of or resulting from any breach of any representation or warranty of DiviCom
in Section 7.1.
8.2 THIRD PARTY CLAIMS. In the event of any claim by a third party
covered by Section 8.1, the Party seeking indemnification (the "INDEMNIFIED
PARTY") will: (i) promptly notify the Party from whom indemnification is sought
(the "INDEMNIFYING PARTY") of the claim; (ii) provide the Indemnifying Party
with all reasonable information and assistance; and (iii) grant the Indemnifying
Party authority and control of the defense or settlement of such claim. The
Indemnifying Party shall not settle any such claim without the Indemnified
Party's prior written consent, which consent will not be unreasonably withheld.
The Indemnified Party reserves the right to retain counsel, at its expense, to
participate in the defense and settlement of any such claim.
8.3 LIMITATIONS OF LIABILITY. REGARDLESS OF WHETHER ANY REMEDY SET FORTH
HEREIN FAILS OF ITS ESSENTIAL PURPOSE, IN NO EVENT WILL ANY PARTY BE LIABLE TO
ANY OTHER PARTY FOR ANY FORM OF SPECIAL, INCIDENTAL, INDIRECT, CONSEQUENTIAL, OR
PUNITIVE DAMAGES, WHETHER OR NOT FORESEEABLE (INCLUDING, WITHOUT LIMITATION
DAMAGES FOR LOSS OF BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS
INFORMATION, AND THE LIKE), WHETHER BASED ON
-11-
BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), PRODUCT LIABILITY, OR
OTHERWISE, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
9. CONFIDENTIAL INFORMATION
9.1 CONFIDENTIAL INFORMATION. As used herein, "CONFIDENTIAL INFORMATION"
means any information of the other Party that might reasonably be considered
proprietary, sensitive or private, including but not limited to the following:
(i) technical information, know-how, source code, data,
techniques, discoveries, inventions, ideas, unpublished
patent applications, formulae, analyses, laboratory reports,
other reports, financial information, studies, findings or
other information relating to such Party or methods or
techniques used by such Party, whether or not contained in
samples, documents, sketches, photographs, drawings, lists
and the like;
(ii) data and other information employed in connection
with the marketing of the products or services of such Party
including cost information, business policies and
procedures, revenues and markets, distributors and customers
and similar items of information, whether or not contained
in documents or other tangible materials; and
(iii) any other information that is not generally known to,
and not readily ascertainable by proper means by, third
parties.
9.2 EXCLUSIONS. No Party will be liable for the disclosure of
Confidential Information if such information:
(i) is or becomes publicly available through no fault of
the Party receiving the Confidential Information;
(ii) is made publicly available by the originating Party;
(iii) except with respect to Confidential Information that
constitutes DiviCom Technology, is known by the receiving
Party prior to the disclosure or becomes known by the
receiving Party through lawful disclosure from a third party
that is not subject to a confidentiality agreement with the
originating Party; or
(iv) is required to be disclosed by law, provided notice
is given to the other Party of such requirement as soon as
practicable and reasonable assistance is rendered to such
Party, if requested, to prevent such disclosure.
-12-
9.3 USE AND DISCLOSURE RESTRICTIONS. Each Party acknowledges that, prior
to the date hereof and in connection with the performance of this Agreement, it
has received or will receive Confidential Information from the other Parties
hereto. Each Party agrees that, with respect to all Confidential Information
constituting DiviCom Technology, it will, in perpetuity, and for all other
Confidential Information, for a period of five years after the disclosure of
such Confidential Information, (i) use Confidential Information only as
permitted or required under the terms hereof, (ii) continue to keep confidential
all Confidential Information, (iii) not disclose Confidential Information to any
other person, firm or corporation except (A) to the extent necessary for such
Party to exercise, enforce or defend its rights or perform its obligations under
this Agreement, (B) to permitted subcontractors and sublicensees who have been
apprised of the confidential nature of the Confidential Information and (C) to
its attorneys and advisors with a "need to know;" (iv) exercise the same degree
of care to safeguard the confidentiality of such Confidential Information as it
would exercise in protecting the confidentiality of similar property of its own
but in no event less than reasonable care; and (v) use reasonable efforts to
prevent inadvertent or unauthorized disclosure or publication of any
Confidential Information. Without limitation of the foregoing, each Party
agrees not to disclose Confidential Information to any other person, firm or
corporation without a written confidentiality agreement unless a written
agreement would not be required to protect said Confidential Information under
the circumstances.
10. TERM AND TERMINATION
10.1 TERMINATION BY DIVICOM. No breach of this Agreement by SAGEM, whether
or not material, shall entitle DiviCom to terminate or rescind any license or
other rights granted to SAGEM herein and SAGEM will be entitled to continue to
use such licensed DiviCom Technology for the purposes permitted by this
Agreement and DiviCom shall not be entitled to terminate or rescind such
licenses for any reason; provided, however, that DiviCom shall nonetheless be
entitled to all other remedies available for any such breach by SAGEM including,
without limitation, all monetary damages and other equitable remedies including
specific performance of the terms hereof.
11. GENERAL PROVISIONS
11.1 GOVERNING LAW; LANGUAGE. This Agreement is written in English and
will be governed by and construed in accordance with the laws of the State of
California, without regard to conflicts of law provisions.
11.2 COMPLIANCE WITH LAWS. Each Party agrees to comply in all material
respects with all applicable laws, rules, and regulations, including but not
limited to all applicable export control laws and regulations, in connection
with its activities under this Agreement.
11.3 ARBITRATION. Other than for purposes of obtaining injunctive relief
pursuant to the terms hereof for which the Parties agree that action may be
taken in any court of competent jurisdiction, any controversy, dispute or claim
arising out of, in connection with, or in relation to the interpretation,
performance or breach of this Agreement, including any claim based on contract,
tort or statute, shall be settled, at the request of any Party, by arbitration
conducted in Palo Alto,
-13-
California, or such other location upon which the parties may mutually agree,
before a panel of three arbitrators (the "Panel") and in accordance with the
then existing Rules of Commercial Arbitration of the American Arbitration
Association ("AAA"), and judgment upon any award rendered by the Panel may be
entered by any State or Federal court having jurisdiction thereof. A written
demand for arbitration shall be filed with each other Party to the dispute and
with the AAA to commence the arbitration, which shall be conducted on a timely,
expedited basis. Any controversy concerning whether a dispute is an arbitrable
dispute shall be determined by the Panel. The Parties intend that this
agreement to arbitrate be valid, specifically enforceable and irrevocable. The
members of the Panel shall be selected as follows: (i) if there are two Parties
to the dispute, each Party shall select a member of the Panel, and the two
members so selected shall jointly select a third member; (ii) if there are more
than two Parties to the dispute, the Parties to the dispute shall select the
members of the Panel in accordance with the then-existing Rules of Commercial
Arbitration of the AAA. The members of the Panel shall each be members of the
Large Complex Case Panel with significant intellectual property (patent and
copyright) law experience. The arbitrator may, in its discretion, award to the
prevailing Party in any arbitration proceeding commenced hereunder, and the
court shall include in its judgment for the prevailing Party in any claim
arising hereunder, the prevailing Party's costs and expenses (including expert
witness expenses and reasonable attorneys' fees) of investigating, preparing and
presenting such arbitration claim or cause of action.
11.4 ASSIGNMENT. The rights and liabilities of the Parties hereto will
bind and inure to the benefit of their successors and assigns. No Party may
assign any of its rights or obligations, in whole or in part, to any third party
without the prior written consent of each of the other Parties, except that any
Party may assign this Agreement in whole or in part to such Party's Affiliate(s)
provided that any assignment, whether in whole or in part, must include both
rights and any related obligations and provided further,. that any such
assignment shall be deemed null and void if and at such time that any such
Affiliate assignee ceases to be an Affiliate, unless otherwise consented to in
writing by all of the Parties.
11.5 WAIVER. The waiver of any breach or default will not constitute a
waiver of any other right hereunder or any subsequent breach or default.
11.6 NOTICES. All notices required or permitted under this Agreement will
be in writing, will reference this Agreement and will be deemed given: (i) when
sent by facsimile confirmed by the recipient or personally delivered or
(ii) three (3) working days after deposit with a commercial overnight carrier,
with written verification of receipt. All communications will be sent to the
addresses set forth below or to such other address as may be designated by a
Party by giving written notice to the other Party pursuant to this Section 11.6.
-14-
If to DiviCom: If to SAGEM:
------------- -----------
DiviCom Inc. SAGEM, S.A.
1708 McCarthy Blvd. 27, rue Leblanc
Milpitas, CA 95053 Paris 7501S
Attn: President Attn: Michael Toussan
Tel: 408/944-6700 Tel: 33-1-40-70-64-56
Fax: 408/944-6524 Fax: 33-1-40-70-64-38
If to C-Cube: If to Daines:
------------ ------------
C-Cube Microsystems, Inc. Nolan Daines
1778 McCarthy Blvd. 38236 Kimbro Street
Milpitas, CA 95035 Fremont, CA 94536
Attn: Rick Foreman Tel: 510/795-7608
Tel: 408/944-6406 Fax: 510/713-7651
Fax: 408/944-6402
11.7 RELATIONSHIP OF PARTIES. The Parties to this Agreement are
independent contractors and this Agreement will not establish any relationship
of partnership, joint venture, employment, franchise, or agency among the
Parties. No Party will have the power to bind the other or incur obligations on
the other's behalf without the other's prior written consent.
11.8 ENTIRE AGREEMENT. This Agreement and its exhibits are the complete
and exclusive agreement among the Parties with respect to the subject matter
hereof, superseding and replacing any and all prior agreements, communications,
and understandings (both written and oral) regarding such subject matter. This
Agreement may only be modified, or any rights under it waived, by a written
document executed by the Party or Parties to be charged with such modification.
11.9 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which will be deemed an original, but both of which together will constitute
one and the same instrument.
11.10 EXPORT CONTROLS. Each of the Parties hereto agrees that, with
respect to its performance of any terms or conditions of this Agreement, or the
exercise of any of the rights granted herein, it will not violate, and at all
times will comply with, any U.S. laws or regulations restricting or otherwise
controlling the export of any technology or products, including but not limited
to regulations of the U.S. Department of Commerce and the U.S. Department of
State.
11.11 FURTHER ASSURANCES. Each Party agrees to execute such further
documents and instruments as the other Parties may reasonably request in order
to effectuate the terms and intentions of this Agreement.
-15-
IN WITNESS WHEREOF, this Agreement is hereby executed as of the date first
above written.
DIVICOM INC. SAGEM S.A.
By: By:
----------------------- -----------------------
Name: Name:
----------------------- -----------------------
Title: Title:
----------------------- -----------------------
C-CUBE MICROSYSTEMS INC. NOLAN DAINES,
FOR PURPOSES OF SECTION 2 ONLY
By:
-----------------------
Name:
-----------------------
Title:
----------------------- ------------------------------
[SIGNATURE PAGE TO TRANSITION AGREEMENT]
-16-