Document:

Exhibit 10.1.1

 

NEPHROGENEX, INC. 
 RESTRICTED STOCK UNIT GRANT NOTICE

 

Nephrogenex, Inc. (“Company”) hereby awards to Participant a Restricted Stock Unit Award covering the number of restricted stock units (“RSUs”) set forth below (“Award”).  This Award shall be evidenced by a Restricted Stock Unit Award Agreement (“Agreement”).  This Award is subject to all of the terms and conditions as set forth in this Grant Notice and in the Agreement, which is attached hereto and incorporated in its entirety.  Capitalized terms not explicitly defined in this Grant Notice but defined in the Agreement will have the same definitions as in the Agreement.

 

	
Participant:
    	
Pierre   Legault
    
	
 
    	
 
    
	
Date of Grant:
    	
November 7,   2013
    
	
 
    	
 
    
	
Number of RSUs:
    	
156,000
    
	
 
    	
 
    
	
Vesting Commencement Date:
    	
October 21,   2013
    
	
 
    	
 
    
	
Expiration Date of the RSUs:
    	
November 6,   2023
    

 

Time-Based Vesting Schedule:  Subject to acceleration in certain cases described in the Agreement, the time-based vesting schedule for the RSUs is as follows: 25% of the RSUs will vest on the one-year anniversary of the Vesting Commencement Date, and the remaining 75% of the RSUs will vest in equal monthly installments, on the 1st day of each calendar month, beginning with November 1, 2014 and continuing for 36 months thereafter, provided however, that to be credited with time-based vesting, Participant must remain in Service on each applicable vesting date.

 

Additional Terms/Acknowledgements:  By signing below, Participant acknowledges receipt of, and understands and agrees to, this Grant Notice and the Agreement.  Participant acknowledges his obligation to satisfy any tax withholding obligations imposed on the Company with respect to the grant or vesting of the RSUs, or the delivery of the underlying Common Stock, as a condition to the receipt of any stock hereunder, including by requiring a cash payment to the Company by Participant.

 

 

	
NEPHROGENEX, INC.:
    	
PARTICIPANT:
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Richard J. Markham
    	
 
    	
/s/   Pierre Legault
    
	
Signature
    	
 
    	
Signature
    
	
 
    	
 
    	
 
    
	
Title:
    	
11/7/13
    	
 
    	
Date:
    	
November   7, 2013
    

 

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RSU Award No.:                               

Participant:                                        

 

NEPHROGENEX, INC.

RESTRICTED STOCK UNIT AGREEMENT

 

Pursuant to the Restricted Stock Unit Grant Notice (“Grant Notice”) and this Restricted Stock Unit Agreement (“Agreement”), Nephrogenex, Inc. (“Company”) has awarded Participant the number of restricted stock units (“RSUs”) indicated in the Grant Notice (collectively, the “Award”).  Subject to adjustment and the terms and conditions as provided in this Agreement, each RSU shall represent the right to receive one (1) share of Common Stock as set forth in Section 3 below.  Capitalized terms not otherwise defined in this Agreement shall have the meaning set forth in the Company’s 2005 Stock Option Plan, as amended and restated on August 13, 2007 (the “2005 Stock Option Plan”).  This Agreement shall be deemed to be signed by the Company and Participant upon the signing by Participant of the Restricted Stock Unit Grant Notice to which it is attached.

 

The details of this Award, in addition to those set forth in the Grant Notice, are as follows.

 

1.                                      NUMBER OF RSUS AND SHARES OF COMMON STOCK.

 

(a)                                 The number of RSUs subject to Participant’s Award, and the number of shares of Common Stock deliverable with respect to such RSUs, will be equitably adjusted to reflect Capitalization Adjustments.  Participant shall receive no benefit or adjustment to the Award with respect to any cash dividend or other distribution that does not result from any such Capitalization Adjustment; provided, however, that this sentence shall not apply with respect to any shares of Common Stock, if any, that are delivered to Participant in connection with this Award after such shares have been delivered.

 

(b)                                 Any additional RSUs or shares of Common Stock that become subject to the Award pursuant to this Section 1 shall be subject, in a manner determined by the Board, to the same forfeiture restrictions, restrictions on transferability, and time and manner of delivery as applicable to the other RSUs and Common Stock covered by the Award.

 

(c)                                  Notwithstanding the provisions of this Section 1, no fractional RSUs or rights for fractional shares of Common Stock shall be created pursuant to this Section 1.  The Board shall, in its discretion, determine an equivalent benefit for any fractional RSUs or fractional shares that might be created by the adjustments referred to in this Section 1.

 

2.                                      VESTING REQUIREMENTS AND EXPIRATION OF RSUS.  The RSUs shall vest, if at all, as set forth below.  There are two separate vesting requirements applicable to the RSUs (a time-based requirement and a liquidity-based requirement).  Unless otherwise provided in this Agreement, both of these vesting requirements must be satisfied before the Expiration Date as a condition to any payment or delivery of shares of Common Stock to Participant under this Award.

 

(a)                                 Time-Based Vesting Requirement.  The time-based vesting requirement with respect to the RSUs or any installment of the RSUs is satisfied if Participant has remained in Service from the Date of Grant of the RSUs through the applicable vesting dates set forth in

 

 

Participant’s Grant Notice.  Time-based vesting shall cease as of the date that Participant’s Service ceases, and any RSUs that have not vested under the time-based vesting requirement shall terminate and be forfeited back to the Company on the date Participant’s Service terminates.  Notwithstanding any contrary provisions of this Agreement or the Grant Notice, the time-based vesting requirement will be deemed to be satisfied in full (i) on the effective date of a Change in Control, or (ii) on the date Participant experiences a Qualifying Termination.

 

(b)                                 Liquidity-Based Vesting Requirement.  The liquidity-based vesting requirement with respect to an RSU is satisfied upon the first to occur of (i) the effective date of a Change in Control, or (ii) the occurrence of the Capital Increase (as defined in the Employment Agreement).

 

3.                                      DATE OF ISSUANCE.

 

(a)                                 Regular Delivery Dates.  Unless Section 3(b) of this Agreement applies, the Company shall deliver to Participant in respect of RSUs that have not been previously terminated or forfeited, one (1) share of Common Stock for each RSU that has satisfied both the time-based and liquidity-based vesting requirements in accordance with Section 2 herein, on: (i) the effective date of a Change in Control, (ii) the occurrence of the Capital Increase, in the case of RSUs that have satisfied the time-based vesting requirement on or prior to that date, or (iii) in the case of RSUs that satisfy the time-based vesting requirement after the occurrence of the Capital Increase, the date such RSUs satisfy the time-based vesting requirement (each such delivery date is a “Regular Delivery Date”).  As an additional condition to Participant’s receipt of shares of Common Stock on a Regular Delivery Date, Participant must have remained in continuous Service from the Date of Grant through such Regular Delivery Date.  Accordingly, if Participant’s Service terminates before a Regular Delivery Date for any installment of the RSU (and unless Section 3(b) of this Agreement applies), then the RSU will terminate and will be forfeited and cancelled with respect to the shares that have not yet vested as of the date Participant’s Service terminates and those shares will not be issued to Participant.

 

(b)                                 Notwithstanding Sections 2(b) and 3(a) of this Agreement, the Company shall deliver to Participant on the date of Participant’s Qualifying Termination (the “Accelerated Delivery Date”) one (1) share of Common Stock for each RSU that has not been previously settled under Section 3(a) above, terminated, or otherwise forfeited as of the Accelerated Delivery Date.

 

(c)                                  The Company may settle an RSU upon a Change in Control by delivering other consideration to Participant with a fair market value equal in the aggregate to the value of the shares of Common Stock for which the RSU is being settled, including but not limited shares of the capital stock of the acquirer or surviving entity of such Change in Control or its affiliates.  If a scheduled Delivery Date falls on a date that is not a business day, such delivery date shall instead fall on the next following business day.  The form of such delivery (e.g., a stock certificate or electronic entry evidencing such shares) shall be determined by the Company.

 

(d)                                 Any RSU that has not vested by the Expiration Date will then expire.

 

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4.                                      CONSIDERATION FOR AWARD.  This Award has been granted in consideration of Participant’s past or future expected services to the Company.  Subject to Section 10 below, except as otherwise provided in the Grant Notice, Participant will not be required to make any payment to the Company (other than the provision of past and future services for the Company) with respect to Participant’s receipt of the Award, vesting of the RSUs, or the delivery of the shares of Common Stock or the Cash Payment.

 

5.                                      SECURITIES LAW COMPLIANCE.  Participant may not be issued any Common Stock under the Award unless either (i) the shares of Common Stock are then registered under the Securities Act, or (ii) the Company has determined that such issuance would be exempt from the registration requirements of the Securities Act.  The Award must also comply with other applicable laws and regulations governing the Award, and Participant shall not receive such Common Stock if the Company determines that such receipt would not be in compliance with such laws and regulations.

 

6.                                      RESTRICTIVE LEGENDS.  The Common Stock issued under the Award, if any, shall be endorsed with appropriate legends, if any, determined by the Company.

 

7.                                      TRANSFER RESTRICTIONS.  Prior to the time that shares of Common Stock have been delivered to Participant, Participant may not transfer, pledge, sell or otherwise dispose of all or any portion of the RSUs or the shares of Common Stock issuable in respect of the RSUs, except as expressly provided in this Section 7.  For example, Participant may not use shares that may be issued in respect of the RSUs as security for a loan, nor may Participant transfer, pledge, sell or otherwise dispose of such shares.  Any shares of Common Stock issued to Participant under this Agreement will be subject to the same transfer restrictions and other limitations on sale, disposition or transfer as described in Sections 7 through 10 of the Stock Option Agreement between Participant and the Company dated January 23, 2013, as amended.

 

(a)                                 Lock-Up Period.  Participant agrees that upon receipt of the Common Stock underlying the RSUs, Participant shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any shares of Common Stock or other securities of the Company held by Participant, for a period of one hundred eighty (180) days following the IPO Date or such longer period as necessary to permit compliance with FINRA Rule 2711 or NYSE Member Rule 472 and similar rules and regulations (the “Lock-Up Period”); provided, however, that nothing contained in this Section shall prevent the exercise of a repurchase option, if any, in favor of the Company during the Lock-Up Period.  Participant further agrees to execute and deliver such other agreements as may be reasonably requested by the Company and/or the underwriter(s) that are consistent with the foregoing or that are necessary to give further effect thereto.  In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to Participant’s shares of Common Stock until the end of such period.  The underwriters of the Company’s stock are intended third party beneficiaries of this Section 7(a) and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.

 

(b)                                 Death.  Upon receiving written permission from the Board or its duly authorized designee, Participant may, by delivering written notice to the Company, in a form

 

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provided by or otherwise satisfactory to the Company, designate a third party who, in the event of Participant’s death, shall thereafter be entitled to receive any distribution of Common Stock or other consideration to which Participant was entitled at the time of Participant’s death pursuant to this Agreement.  In the absence of such a designation, Participant’s executor or administrator of Participant’s estate shall be entitled to receive, on behalf of Participant’s estate, such Common Stock or other consideration.

 

(c)                                  Certain Trusts.  Upon receiving written permission from the Board or its duly authorized designee, Participant may transfer the RSUs to a trust if Participant is considered to be the sole beneficial owner (determined under Section 671 of the Code and applicable state law) while the RSUs are held in the trust, provided that Participant and the trustee enter into transfer and other agreements required by the Company.

 

(d)                                 Domestic Relations Orders.  Upon receiving written permission from the Board or its duly authorized designee, and provided that Participant and the designated transferee enter into transfer and other agreements required by the Company, Participant may transfer the RSUs or other consideration hereunder, pursuant to a domestic relations order that contains the information required by the Company to effectuate the transfer.  Participant is encouraged to discuss the proposed terms of any division of the RSUs with the Company prior to finalizing the domestic relations order to help ensure the required information is contained within the domestic relations order.

 

8.                                      AWARD NOT A SERVICE CONTRACT.  This Award is not an employment or service contract, and nothing in the Award shall be deemed to create in any way whatsoever any obligation on the part of Participant to continue in the service of the Company or any Affiliate, or on the part of the Company or any Affiliate to continue such service.  In addition, nothing in this Award shall obligate the Company or any Affiliate, their respective stockholders, boards of directors or employees to continue any relationship that Participant might have as an Employee, Consultant or Director of the Company or any Affiliate.

 

9.                                      UNSECURED OBLIGATION.  This Award is unfunded, and even as to any RSUs that vest, Participant shall be considered an unsecured creditor of the Company with respect to the Company’s obligation, if any, to issue Common Stock or make the Cash Payment pursuant to this Agreement.  Participant shall not have voting or any other rights as a stockholder of the Company with respect to any Common Stock acquired pursuant to this Agreement until such Common Stock is issued pursuant to Section 3 of this Agreement.  Upon such issuance, Participant will obtain full voting and other rights as a stockholder of the Company with respect to the Common Stock so issued.  Nothing contained in this Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship between Participant and the Company or any other person.

 

10.                               WITHHOLDING OBLIGATIONS.

 

(a)                                 At such time as Participant receives a distribution of Common Stock pursuant to the Award, or at any time thereafter as requested by the Company, Participant agrees to provide the Company an amount in cash that is sufficient to satisfy the federal, state, local and foreign tax withholding obligations of the Company or any Affiliate which arise in connection

 

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with the Award (“Withholding Taxes”).  Notwithstanding the above, the Company, in its sole discretion, may permit a Participant to satisfy any required withholding from the Common Stock issuable to such Participant.  If the tax withholding obligations are satisfied through the use of shares subject to the Award, the Company will withhold shares of Common Stock with a Fair Market Value (measured as of the date shares of Common Stock are delivered pursuant to Section 3) equal to the amount of such Withholding Taxes; provided, however, that the number of such shares of Common Stock so withheld shall not exceed the amount necessary to satisfy the Company’s required tax withholding obligations using the minimum statutory withholding rates for federal, state, local and foreign tax purposes, including payroll taxes, that are applicable to supplemental taxable income.

 

(b)                                 Unless the tax withholding obligations of the Company and/or any Affiliate are satisfied, the Company shall have no obligation to deliver to Participant any Common Stock.

 

11.                               NOTICES.  Any notices required to be given or delivered to the Company under the terms of this Award shall be in writing and addressed to the Company at its principal corporate offices.  Any notice required to be given or delivered to Participant shall be in writing and addressed to their address as on file with the Company at the time notice is given.  All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.

 

12.                               HEADINGS.  The headings of the Sections in this Agreement are inserted for convenience only and shall not be deemed to constitute a part of this Agreement or to affect the meaning of this Agreement.

 

13.                               AMENDMENT.  This Agreement may be amended only by a writing executed by the Company and Participant which specifically states that it is amending this Agreement.

 

14.                               MISCELLANEOUS.

 

(a)                                 All covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company’s successors and assigns.

 

(b)                                 Participant agrees upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of this Award.

 

(c)                                  Participant acknowledges and agrees that Participant has reviewed the Award in its entirety, has had an opportunity to obtain the advice of counsel prior to executing and accepting the Award and fully understand all of its provisions.

 

(d)                                 This Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

 

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(e)                                  All obligations of the Company under this Agreement shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

 

15.                               EFFECT ON OTHER EMPLOYEE BENEFIT PLANS.  The value of the Award subject to this Agreement shall not be included as compensation, earnings, salaries, or other similar terms used when calculating benefits under any employee benefit plan sponsored by the Company or any Affiliate except as such plan otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any or all of the employee benefit plans of the Company or any Affiliate.

 

16.                               CHOICE OF LAW.  The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the state of New York without regard to such state’s conflicts of laws rules.  Participant hereby submits to the jurisdiction of the state and federal courts encompassing the location of the Company’s principal headquarters for the resolution of any disputes or claims regarding this Agreement.

 

17.                               SEVERABILITY.  If all or any part of this Agreement is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Agreement not declared to be unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.

 

18.                               SECTION 409A OF THE INTERNAL REVENUE CODE.  It is intended that the delivery of shares in respect of the RSUs provided under this Agreement satisfies, to the greatest extent possible, the exemption from the application of Section 409A of the Code and the regulations and other guidance thereunder and any state law of similar effect (collectively, “Section 409A”) provided under Treasury Regulations Section 1.409A-1(b)(4) and 1.409A-1(b)(9), and this Agreement will be construed to the greatest extent possible as consistent with those provisions.  To the extent not so exempt, the delivery of shares in respect of the RSUs provided under this Agreement (and any definitions in this Agreement and in the Grant Notice governing the Award) will be construed in a manner that complies with Section 409A and incorporates by reference all required definitions and payment terms.  If this Award is not exempt from, and is therefore deemed to be deferred compensation subject to, Section 409A, and if Participant is a “specified employee” (within the meaning of Section 409A(a)(2)(B)(i) of the Code) as of the date of Participant’s separation from service (within the meaning of Treasury Regulations Section 1.409A-1(h)), than the issuance of any shares that would otherwise be made upon the date of Participant’s separation from service or within the first six months thereafter will not be made on the originally scheduled date(s) and will instead be issued in a lump sum on the date that is six months and one day after the date of Participant’s separation from service, with the balance of the shares issued thereafter in accordance with the original issuance schedule, but if and only to the extent that the delay in issuance of the shares is necessary to avoid the imposition of taxation on Participant in respect of the shares under Section 409A.  Each installment of RSUs that vests is a “separate payment” for purposes of Treasury Regulations Section 1.409A-2(b)(2).  Notwithstanding the above, the Company makes no representations to

 

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Participant regarding the compliance of this Agreement or the RSUs with Section 409A, and Participant is solely responsible for the payment of any taxes or penalties arising under Section 409A(a)(1) of the Internal Revenue Code, or any state law of similar effect, with respect to the grant or vesting of the RSUs or the delivery of the shares subject to this Award.

 

19.                               SURVIVAL.  Provisions of this Agreement which by their terms must survive the termination of this Agreement in order to effectuate the intent of the parties will survive any such termination for such period as may be appropriate under the circumstances.

 

20.                               DEFINITIONS.  For purposes of this Agreement, capitalized terms that are not otherwise defined shall have the following definitions:

 

(a)                                 “Affiliate” means, at the time of determination, any “parent” or “majority-owned subsidiary” of the Company, as such terms are defined in Rule 405 of the Securities Act.  The Board shall have the authority to determine the time or times at which “parent” or “majority-owned subsidiary” status is determined within the foregoing definition.

 

(b)                                 “Board” means the Board of Directors of the Company.

 

(c)                                  “Capitalization Adjustment” means any change that is made in, or other events that occur with respect to, the Common Stock subject to this Award after the Date of Grant of the RSUs (specified in the Grant Notice) without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company).  Notwithstanding the foregoing, the conversion of any convertible securities of the Company shall not be treated as a transaction “without the receipt of consideration” by the Company.

 

(d)                                 “Change in Control” means the occurrence, in a single transaction or in a series of related transactions occurring after the date of grant of this Award, of any one or more of the following events:

 

(i)                                    any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction.  Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (A) because of a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company, or (B) because of an IPO.

 

(ii)                                there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving Entity in such merger,

 

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consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction; or

 

(iii)                            there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries during any twelve month period, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition.

 

Notwithstanding the above, to the extent any payment hereunder upon such Change in Control is deferred compensation that is subject to Section 409A of the Code, and not otherwise exempt from complying with the provisions of the statute, then a Change in Control shall only be deemed to occur if the Change in Control also qualifies as a change in the ownership or effective control of a corporation, or a change in the ownership of a substantial portion of a corporation’s assets as defined in Treasury Regulation Section 1.409A-3(i)(5).

 

(e)                                  “Common Stock” means the common stock of the Company.

 

(f)                                   “Consultant” refers to Participant’s status if he/she is rendering consulting or advisory services to the Company or an Affiliate.

 

(g)                                 “Director” means Participant is rendering services as a member of the Board.

 

(h)                                 “Disability” means a condition entitling Participant to long-term disability benefits under any policy, plan or program sponsored by the Company.  In the absence of any such policy, plan or program, the term “Disability” has the meaning set forth in Section 22(e)(3) of the Internal Revenue Code.  Notwithstanding the above, if necessary to comply with Section 409A of the Code, a “Disability” shall have the meaning set forth in Treasury Regulation Section 1.409A-3(i)(4).

 

(i)                                    “Employee” refers to Participant’s status during such times as he/she is employed by the Company or an Affiliate.

 

(j)                                    “Employment Agreement” means that certain Executive Employment Agreement between Participant and the Company dated November 7, 2013.

 

(k)                                 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(l)                                    “Exchange Act Person” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company,

 

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(iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company; or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the effective date of the Agreement, is the Owner, directly or indirectly, of the Company’s then outstanding securities.

 

(m)                             “Fair Market Value” means, as of any date, the value of the Common Stock determined in good faith by the Board in its discretion.

 

(n)                                 “IPO” means the initial public offering of the Company’s Common Stock pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act.

 

(o)                                 “IPO Date” means the date upon which the registration statement (referenced in the definition of “IPO”) is declared effective.

 

(p)                                 “Officer” means any person designated by the Company as an officer.

 

(q)                                 “Own,” “Owned,” “Owner,” “Ownership” means a person or entity shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.

 

(r)                                  “Qualifying Termination” means a termination from Service initiated by the Company without Cause (as defined in the Employment Agreement), initiated by Participant with Good Reason (as defined in the Employment Agreement), or a termination from Service because of Participant’s death or Disability.  Participant’s voluntary resignation from Service without Good Reason or the termination of Participant’s Service for Cause will not constitute a Qualifying Termination.

 

(s)                                   “Securities Act” means the Securities Act of 1933, as amended.

 

(t)                                    “Service” means that Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated.  A change in the capacity in which Participant renders service to the Company or an Affiliate as an Employee, Director, or Consultant or a change in the entity for which Participant renders such service, provided that there is no interruption or termination of their service with the Company or an Affiliate, shall not terminate Participant’s Service; provided, however, if the entity for which he is rendering service ceases to qualify as an Affiliate, as determined by the Board in its sole discretion, such Service shall be considered to have terminated on the date such entity ceases to qualify as an Affiliate.  Participant’s Service shall be deemed to continue for purposes of this Agreement while Participant is on a bona fide leave of absence, if (i) such leave was approved by the Company in writing, or (ii) continued crediting of Service is required by applicable law.

 

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(u)                                 “Subsidiary” means, with respect to the Company, (i) any corporation of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%).

 

* * * * *

 

10Exhibit 10.33

 

SOFTWARE LICENSE AND SERVICES AGREEMENT

 

This Software License and Services Agreement (the “Agreement”) is entered into as of March 10, 2014 (the “Effective Date”) by and between Viggle Inc. (F/K/A Function(x) Inc.), with its principal place of business at 902 Broadway, 11th Floor, New York, NY 10010 (“Viggle”), and SFX Entertainment, Inc., with its principal place of business at 430 Park Avenue, 6th Floor, New York, NY 10022 (“SFX”).

 

In consideration of the mutual covenants and Agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

 

1.                                      DEFINITIONS. Capitalized terms shall have the meanings ascribed to them in this Section 1.  All other capitalized terms used in this Agreement not otherwise defined in Section 1 shall have the meanings assigned in the part of this Agreement in which they are defined.

 

1.1                               “Affiliate” means any entity which Controls, is Controlled by, or is under common Control with a party, at any time during the term of this Agreement, or which is a wholly owned subsidiary of a party.

 

1.2                               “Blended Hourly Rate” shall mean an hourly rate that, as of the Effective Date, shall be One Hundred Fifty Dollars ($150) per hour and may be increased following the one (1) year anniversary of the Agreement to Viggle’s average hourly rate for the applicable services (subject to Section 3.3 if applicable).

 

1.3                               “Blue Spike Litigation” means the patent infringement litigation filed by Blue Spike, LLC (Blue Spike v. Viggle Inc. (E.D. Tx., Civ. Action No. 6:12-CV-00526)).

 

1.4                               “Confidential Information” means, but shall not be limited to, all information relating to a party’s, its Affiliate(s), or its supplier(s) business, products, or services, which is furnished or disclosed to Receiving Party by Disclosing Party or its Affiliate(s), or is acquired by Receiving Party directly or indirectly from the Disclosing Party, either orally or in writing, and which a reasonable person would assume to be of a confidential or proprietary nature. Such term shall also include all memoranda, notes, reports, documents and other media containing Confidential Information, as well as any copies and extracts of Confidential Information and any computer-generated studies and data containing Confidential Information prepared by or for the benefit of Receiving Party in connection with carrying out the relationship contemplated by this Agreement.  Viggle Confidential Information shall include, without limitation, the Software and all Documentation and Enhancements thereof and any associated know-how relating to search technology.

 

1.5                               Contractor” means a third party that performs technical or development services on behalf of SFX or its Affiliates in accordance with the terms of this Agreement, provided that a “Contractor” may not include an entity that, directly or indirectly, competes with Viggle in the Viggle Field of Use.

 

 

1.6                               “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity through record or beneficial ownership of voting securities, by contract or otherwise.

 

1.7                               “Disclosing Party” means any party that provides or otherwise discloses its or any third party Confidential Information to the other party.

 

1.8                               “Documentation” means the standard user and technical manuals that describe the functionality of the Software and are distributed with the Software.

 

1.9                               “Enhancement” means a customization or enhancement of the Software, whether created solely by or on behalf of either of the parties or jointly by the parties.

 

1.10                        “Executable Code” means a form of computer program or portion thereof which can be executed by a computer without further translation or modification.  Examples include binary code and code which can be directly executed by an interpreter.

 

1.11                        “Net Third Party Revenue” means licensee fees actually received by Viggle from the licensing of any Software to third parties, less sales, export and/or use taxes, commissions, marketing and sales expenses, overhead, shipping, and amounts allowed or credited due to returns or refunds.

 

1.12                        “Initial Term” shall have the meaning set forth in Section 6.1.

 

1.13                        “Patents” means any patents and applications (including provisional applications and utility models), patents issuing from such applications, certificates of invention or any other grants by any governmental entity for the protection of inventions, and all reissues, renewals, continuations, continuations-in-part, re-examinations and extensions of any of the foregoing, in the United States and all jurisdictions of the world, including all foreign and international patents and applications.

 

1.14                        “Professional Services” mean any development, consulting, training, technical or other services provided by Viggle pursuant to a Statement of Work.

 

1.15                        “Receiving Party” means any party receiving any Confidential Information.

 

1.16                        “Renewal Term” shall have the meaning set forth in Section 6.1.

 

1.17                        “Services” means Support Services and Professional Services that are provided by Viggle pursuant to this Agreement or any SOW entered by the parties.

 

1.18                        “SFX Enhancement” means an Enhancement that is developed by Viggle at SFX’s request pursuant to an SOW.

 

1.19                        “SFX Field of Use” means the field of promotion of dance music, including, for the avoidance of doubt, dance music promotions by LiveNation.

 

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1.20                        “Software” means the Viggle software programs described on Schedule 1 and which shall be in Executable Code and Source Code formats, including Updates or Enhancements created by either of the parties, except as otherwise expressly provided hereunder.  The Software shall include all modules and functionality that exist as of the Effective Date or are created by either party for audio recognition or loyalty programs.

 

1.21                        “Source Code” means a form of computer program or portion thereof written in a programming language employed by computer programmers that must be translated into Executable Code before it can be executed.

 

1.22                        “Source Code Handling Requirements” shall mean procedures mutually agreed to by the parties to ensure that all access to Source Code follows reasonable security protocols designed to ensure secure access and accountability for use of the Source Code.  The Source Code Handling Requirements may include, for example, the use of source code repository that may only be accessed by named individuals that must use unique identifiers and access credentials.

 

1.23                        “Statement of Work” or “SOW” means a document which incorporates the terms of this Agreement by reference, and pursuant to which SFX orders certain Services from Viggle.

 

1.24                        “Support Services” means technical support and maintenance services further described in Schedule 2 to this Agreement.

 

1.25                        “Technical Requirements” mean the minimum technical requirements for the Software as provided in the Documentation.

 

1.26                        “Term” shall have the meaning set forth in Section 6.1.

 

1.27                        “Third Party Software” means software owned or licensed by a third party and which may be incorporated within or necessary for the use of the Software.

 

1.28                        “Updates” means any subsequent releases of the Software that Viggle makes generally available to its customers that receive Support Services at no additional license fee from time to time and that is intended to replace a prior Software release.  Updates shall not include any future products which Viggle licenses separately.

 

1.29                        “Viggle Field of Use” means the field of entertainment rewards.

 

1.30                        “Viggle Materials” means any materials provided to SFX by Viggle in the course of performing Services.

 

2.                                      LICENSE.

 

2.1                               License Grant.  Subject to the terms and conditions of this Agreement, Viggle grants to SFX a non-exclusive, non-transferable (except as provided herein), paid-up, world-wide, right during the Term to install, use, modify, reproduce, and create derivative works of the Software for SFX’s and its Affiliates’ internal business purposes. For the avoidance of doubt, the

 

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foregoing license shall permit SFX to create versions of the Software that enable usage in different languages.

 

2.2                               License Restrictions. SFX’s use of the Software (or any Viggle Materials licensed pursuant to Section 5.2) is subject to the following:

 

2.2.1                     SFX may not, nor allow any third party to (a) decompile, disassemble, or reverse engineer the Software except to the extent expressly permitted by applicable law without Viggle’s prior written consent; (b) remove any product identification or proprietary rights notices; (c) lease, lend, sublicense (except as expressly permitted) or use the Software for timesharing or service bureau purposes; or (d) otherwise use or copy the Software or Viggle Materials except as expressly provided herein;

 

2.2.2                     SFX may sublicense the use of the Software or Viggle Materials licensed hereunder in accordance with the terms of this Agreement to (a) an Affiliate (only for so long as such person or entity remains an Affiliate of SFX) and (b) co-promoters, joint venture partners or non-wholly owned subsidiaries of SFX and its Affiliates, provided that any such joint venture partners shall be subject to Viggle’s approval, not to be unreasonably withheld (collectively, “Partners”), and (c) Contractor that is performing development services on behalf of SFX or its Affiliates, provided that (i) SFX and each Affiliate, Partner or Contractor that has access to or uses the Software or Viggle Materials shall be jointly and severally liable for such parties’ compliance with the terms of this Agreement, (ii) SFX shall cause each such party to agree in writing that Viggle is a third party beneficiary of the license agreement between SFX and such party, (iii) only Affiliates and Contractors may have access to Source Code and, as a pre-requisite for such access, must agree in writing to adhere and shall adhere to the Source Code Handling Requirements.  For the avoidance of doubt, any Contractors, Affiliates, or Partners may only use the Software for Viggle’s or its Affiliates’ internal business purposes (which, with respect to co-promoters, shall include co-promotion of events that are co-promoted by SFX or an SFX Affiliate and the co-promoter but shall not include an event promoted solely by such co-promoter).

 

2.3                               Retention of Rights.  Viggle reserves all rights not expressly granted to SFX in this Agreement.  Except as specified in Section 5.3 (Restrictions on Competitive Use), nothing in this Agreement shall limit in any way Viggle’s right to develop, use, license, create derivative works of, or otherwise exploit the Software, or to permit third parties to do so.

 

3.                                      SERVICES.

 

3.1                               Support Services.  Viggle shall provide SFX and its Affiliates with Support Services as described more fully in Schedule 2.

 

3.2                               Professional Services.  Subject to SFX providing Viggle with a written request for Professional Services specifying the scope of work, schedule for performance and technical requirements to enable Viggle to secure necessary resources and provided that the parties execute a Statement of Work, Viggle will provide Professional Services to SFX.  Professional Services may include development services (e.g., creation of SFX Enhancements), technical,

 

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design, consulting, or other similar services, and shall be subject to the following additional terms:

 

3.2.1                     For on-site work, SFX will be billed for a minimum duration of one (1) workday, which may include travel time to/from the SFX’s site if it is necessary to travel during typical workday hours (Monday-Friday, 8:30am-6pm).

 

3.2.2                     SFX shall reimburse Viggle for all reasonable travel and lodging expenses incurred while performing Professional Services.  Hotel accommodations are business class and airline tickets are refundable coach class.

 

3.2.3                     Professional Services performed (a) in excess of eight (8) hours on a business day are billed at one-and-a-half times standard rates, and (b) on weekends and Viggle holidays are billed at twice standard rates. Travel on weekends and Viggle holidays and international travel are billed at standard rates using the official airline guide for travel time.

 

3.2.4                     Should SFX cancel a Professional Services engagement less than two (2) business days prior to the date that such engagement was scheduled to commence, SFX shall pay Viggle fifty percent (50%) of the estimated Professional Service fees for up to two (2) cancelled days plus non-recoverable expenses. Such fees shall be waived if Viggle is able to reassign resources to another Professional Services engagement prior to the scheduled commencement date.

 

3.3                               Most Favored Terms. During the Term, to the extent that terms and conditions are offered by Viggle to a third-party licensing the Software that are, when taken as a whole, more favorable than the terms and conditions provided in Section 3.2 and Section 4.1.2, Viggle shall provide SFX with the same terms and conditions on a prospective basis.

 

4.                                      FEES.

 

4.1                               One Time Fees For Initial Term and Any Renewal Terms. SFX shall pay to Viggle the following fees:

 

4.1.1                     License Fees.

 

4.1.1.1           Initial Term.  For the Initial Term, SFX shall pay Five Million Dollars ($5,000,000) on the Effective Date, which shall constitute an upfront royalty for the license to use the Software hereunder.

 

4.1.1.2           Renewal Term(s).  For each Renewal Term, if any, SFX shall pay Five Million Dollars ($5,000,000) on or prior to the commencement of the applicable Renewal Terms, which payment shall constitute an upfront royalty for the license to use the Software hereunder.

 

4.1.2                     Services Fees. Unless otherwise agreed to by the parties, all Professional Services or Support Services (other than the provision of Updates that are made available to other Viggle customers) shall be chargeable at the Blended Hourly Rate, provided that Viggle has personnel with the requisite skills and experience to perform the requested Professional

 

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Services.  In the event that Viggle does not have personnel with the skills required for the requested Professional Services, Viggle reserves the right to charge SFX for Professional Services at Viggle’s current applicable professional services rates.

 

4.2                               Royalties.  During the Term, Viggle shall calculate its Net Third Party License Revenue arising from its third party licensing of the Software and shall, within forty five (45) days following each calendar quarter, remit to SFX 50% of such Net Third Party License Revenue.  Viggle will provide with such payments a written report to SFX a report summarizing in reasonable detail the calculation of its Net Third Party License Revenue. Viggle will keep accurate, full, and complete records that support such reports and related calculation of the payments due under the Agreement. SFX shall have the right to nominate an independent certified public accountant satisfactory to it who shall have access during reasonable business hours to such of Viggle’s records as are necessary to verify the accuracy of the royalty reports and the royalty payments made under this Agreement. The parties shall split the costs of any such accountant review.

 

4.3                               Payment Terms.  Unless otherwise provided herein, all fees are due and payable within thirty (30) days of the date of invoice. Late payments will bear interest at the rate of 1.5% per month, or, if lower, the maximum rate allowed by law.

 

4.4                               Taxes.  SFX is responsible for payment of all applicable sales, use, consumption, VAT, GST and other taxes and all applicable export and import fees, customs duties and similar charges (other than taxes based on Viggle’s net income) arising from the payment of license or maintenance fees or the delivery or license of the Software or maintenance services. SFX will make all payments without reduction for any withholding taxes, which taxes shall be SFX’s sole responsibility, and SFX will provide Viggle with such evidence as Viggle may reasonably request to establish that such taxes have been paid.

 

5.                                      INTELLECTUAL PROPERTY RIGHTS; RESTRICTIONS ON COMPETIVE USE OF SOFTWARE OR VIGGLE MATERIALS

 

5.1                               Ownership of Software and Viggle Materials.  Except for the licenses granted herein and subject to the restrictions specified in Section 5.3, Viggle and its suppliers shall own all right, title and interest (including any copyrights, patents, trade secrets or other intellectual property rights) in and to the Software (including, for the avoidance of doubt, Enhancements) or any Viggle Materials delivered to SFX pursuant to this Agreement.

 

5.2                               License to Viggle Materials.  Subject to full payment to Viggle of all sums due for any Professional Services provided hereunder and the terms and conditions of this Agreement (including the restrictions specified in Section 2.2 above), Viggle hereby grants to SFX a non-exclusive, non-transferable (except as provided herein) license during the Term to use, modify, reproduce, and create derivative works of the Viggle Materials for SFX’s and its Affiliates’ internal business purposes.

 

5.3                               Restrictions on Competitive Use.

 

5.3.1                     Restrictions on Viggle Use of Software.  Notwithstanding anything to the contrary in this Agreement, Viggle agrees that during the term of this Agreement it may not

 

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license the Software (or any Viggle Materials) to any third party that directly competes with SFX within the SFX Field of Use.

 

5.3.2                     Restriction on SFX Use of Software. Notwithstanding anything to the contrary in this Agreement, SFX agrees that during the term of this Agreement it may not use the Software (or any Viggle Materials) for any business that directly competes with Viggle within the Viggle Field of Use. Viggle acknowledges that the business of SFX does not currently compete with the business of Viggle.

 

5.4                               Prosecution of Viggle Patents.  Viggle agrees to shall have the exclusive right to conduct prosecution and maintenance of Patents relating to the Software and/or any Enhancements (collectively, the “Viggle Patents”), at Viggle’s discretion and by internal or external counsel of Viggle’s choosing. The phrase “prosecution and maintenance” of Patents shall be deemed to include, without limitation, the conduct of interferences or oppositions, and/or requests for re-examinations, reissues or extensions of patent terms.  Viggle shall use commercially reasonable efforts to obtain broad patent coverage with respect to the Viggle Patents.  The Viggle Patents are specified on Schedule 3.

 

6.                                      TERM AND TERMINATION

 

6.1                               Term.  The term of this Agreement shall commence on the effective date and continue for a period of ten (10) years (the “Initial Term”), unless terminated in accordance with its term.  Following the Initial Term, SFX may renew this Agreement by providing at least ninety (90) days notice prior to the expiration of the then current term, whereupon the term shall be extended for am additional ten (10) year period (each, a “Renewal Term”).  The “Term” shall mean, collectively, the Initial Term and any Renewal Term(s).

 

6.2                               Termination.  Either party may terminate this Agreement if the breaching party fails to cure any material breach of this Agreement within thirty (30) days of receiving notice of such breach from the non-breaching party.  Upon such termination, all of SFX’s right to use the Software shall immediately cease and SFX shall promptly return to Viggle or destroy all copies of the Software and Documentation.

 

6.3                               Suspension.  Notwithstanding anything to the contrary contained in the Agreement, Viggle may temporarily suspend any Services immediately, without notice, if (a) interruption of service is necessary to prevent or protect against fraud or otherwise protect Viggle’s or its subcontractors or Affiliates’ personnel, facilities or services, (b) SFX breaches or otherwise fails to comply in any material respect with the license restrictions; or (c) the suspension is in accordance with an order, instruction or request of a government, an emergency service organization or other administrative agency having appropriate jurisdiction.  The suspension shall be without prejudice to any other right or remedy Viggle may have arising out of SFX’s breach or non-compliance.

 

6.4                               Effect of Termination.  Any obligations to pay fees incurred under Section 4 prior to termination and the provisions of Sections 5, and 7-11 shall survive termination of the Agreement for any reason. Termination is not an exclusive remedy.

 

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7.                                      LIMITED WARRANTY AND DISCLAIMER

 

7.1                               Software Warranty.  Viggle warrants that, when delivered, and for a period of ninety (90) days thereafter (the “Warranty Period”), the Software licensed hereunder (excluding Updates, Enhancements for purposes of this Section 7.1) will conform in all material respects to Viggle’s current Documentation for such Software.  The preceding warranty will not apply if:  (a) any Software is modified without Viggle’s written consent, (b) Software is used other than in accordance with the Agreement or the Documentation, or (c) Software is installed on any computer hardware or used with any software not specified in the Documentation or in accordance with the Technical Requirements.

 

7.2                               Services Warranty.  Viggle warrants for a period of ninety (90) days from the performance of any Services provided by Viggle pursuant to this Agreement, including Support Services, that such Services shall be performed in a professional and workmanlike manner consistent with generally accepted industry standards.

 

7.3                               Additional Warranties.  Viggle further warrants that (a) has all requisite corporate authority to enter into this Agreement and its performance hereunder does not and shall not conflict with any third party contracts or agreements to which it is a party; (b) it has taken all necessary actions to authorize the execution and performance of this Agreement; (c) to its knowledge, there are no intellectual property rights owned by a third party that will be infringed or misused by the exercise or exploitation of the Software as set forth herein in a manner that will have a material adverse impact on the business of Viggle, provided that the parties each acknowledge that Viggle has disclosed to SFX the Blue Spike Litigation, which Viggle does not believe will have a material impact on either Viggle’s or SFX’s business.

 

7.4                               Warranty Limitations.  SFX must report in writing any breach of the warranties contained in this Section 7.1 and 7.2 to Viggle during the applicable warranty periods, and SFX’s exclusive remedy and Viggle’s entire liability for any breach of such warranties shall be as follows:

 

7.4.1                     Software Warranty Remedy.  In the event of a breach of Section 7.1, Viggle shall use its commercially reasonable efforts to correct or provide a workaround for reproducible Software errors that cause a breach of such warranty, or if Viggle is unable to make the Software operate as warranted within a reasonable time considering the severity of the error, SFX shall be entitled to return the Software to Viggle and recover the fees paid for the Software.

 

7.4.2                     Services Warranty Remedy.  In the event of a breach of Section 7.2, Viggle shall reperform the Services, or if Viggle is unable to perform the Services as warranted, SFX shall be entitled to a services credit equal to the fees paid to Viggle for the nonconforming Services.

 

7.5                               Warranty Disclaimers.  Viggle does not warrant that (a) the Software will meet SFX’s requirements, (b) the Software will operate in combination with other hardware, software, systems or data not provided by which SFX may select for use, (c) the operation of the Software will be uninterrupted or error-free, or (d) all Software errors will be corrected.  THE SOFTWARE IS PROVIDED “AS IS.”  THE WARRANTIES ABOVE ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, AND VIGGLE AND ITS LICENSORS HEREBY DISCLAIM ALL IMPLIED

 

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WARRANTIES, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, NONINFRINGEMENT, AND QUALITY OF SERVICE.

 

8.                                      LIMITATION OF REMEDIES AND DAMAGES

 

8.1                               EXCEPT FOR BREACHES OF SECTION 2 (LICENSE) OR SECTION 10 (CONFIDENTIALITY), IN NO EVENT SHALL VIGGLE, VIGGLE’S SUPPLIERS OR SFX BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION DAMAGES FOR LOSS OF PROFITS, DATA OR USE, INCURRED BY EITHER PARTY OR ANY THIRD PARTY, WHETHER IN AN ACTION IN CONTRACT OR TORT, EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

 

8.2                               Except for Viggle’s liability for IP Claims pursuant to Section 9.1, any breach of Section 2 (License), Section 10 (Confidentiality), or any amounts to be paid hereunder, the aggregate and cumulative liability of each party and its suppliers for damages hereunder shall in no event exceed the amount of fees paid or owed by SFX under this Agreement, and if such damages relate to particular Software or Services, such liability shall be limited to fees paid for the Software or Services giving rise to the liability.

 

9.                                      INTELLECTUAL PROPERTY INDEMNITY

 

9.1                               If a third party makes a claim against SFX that the Software infringes any U.S. patent, copyright, or trademark or misappropriates any trade secret (“IP Claim”); Viggle will (a) defend SFX against the IP Claim at Viggle’s cost and expense, and (b) indemnify and hold SFX harmless against any and all costs, damages and expenses (including reasonable legal fees) finally awarded against SFX by a court of competent jurisdiction or agreed to in a written settlement agreement signed by Viggle arising out of such IP Claim; provided that: (i) SFX promptly notifies Viggle in writing no later than ninety (90) days after SFX’s receipt of notification of a potential claim, provided that any failure to provide such notice Viggle shall limit Viggle’s foregoing obligations only to the extent that Viggle is prejudiced by such delay; (ii) Viggle may assume sole control of the defense of such claim and all related settlement negotiations, provided that SFX may in its sole discretion and cost, participate in its defense through its counsel; and (iii) SFX provides Viggle, at Viggle’s request and expense, with the assistance, information and authority necessary to perform Viggle’s obligations under this Section.  Notwithstanding the foregoing, Viggle shall have no liability for any claim of infringement based on (w) the use of a superseded or altered release of Software if the infringement would have been avoided by the use of a current unaltered release of the Software, (x) the modification of Software by anyone other than Viggle, (y) the use of the Software other than in accordance with the Documentation and this Agreement and Technical Requirements, or (z) use of the Software in combination with any other software, hardware or data where in the absence of such combination the Software would not have been infringing.

 

9.2                               If the Software is held to infringe or is believed by Viggle to infringe, Viggle shall have the option, at its expense, to (a) replace or modify the Software to be non-infringing, or (b) obtain for SFX a license to continue using the Software.  If it is not commercially reasonable to

 

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perform either of the foregoing options, then Viggle may terminate the Software license for the infringing Software and refund the license fees paid for those Software and fees for any Services that directly relate to such Software upon return of the Software by SFX.  Except in the case of Viggle’s breach of Section 7.3(b), this Section 9.2 states Viggle’s entire liability and SFX’s exclusive remedy for any claim of infringement provided that Viggle covers the out of pocket costs incurred by SFX in any such action.

 

10.                               CONFIDENTIALITY.

 

10.1                        Disclosure of Confidential Information.  The Receiving Party may not disclose the Disclosing Party’s Confidential Information to any third party except the Receiving Party’s representative and advisors, and only to the extent that such disclosure is necessary for the performance of the Receiving Party’s obligations and exercise of Receiving Party’s rights under this Agreement, provided, however, that before disclosing any Confidential Information of the Disclosing Party, the Receiving Party shall ensure that all such persons receiving Confidential Information shall (a) be subject to a written confidentiality Agreement with the Receiving Party that is at least as protective of the Disclosing Party’s Confidential Information as this Agreement, and (b) have been informed of the confidential nature of the Confidential Information. Additionally, if a Receiving Party is ordered by a court, administrative agency, regulatory agency, or other governmental body of competent jurisdiction to disclose Confidential Information, or if it is served with or otherwise becomes aware of a motion or similar request that such an order be issued, then the Receiving Party will not be liable to the Disclosing Party for disclosure of Confidential Information required by such order, provided that the Receiving party first notifies the Disclosing Party of the motion or order by the most expeditious possible means and permits the Disclosing Party an opportunity to seek a protective order or injunction prohibiting or restricting such disclosure

 

10.2                        Restrictions on Use of Confidential Information.  Receiving Party agrees to use reasonable care, but in all events at least the same degree of care that it uses to protect its own confidential and proprietary information of similar importance, to prevent the unauthorized use, disclosure, or availability of Confidential Information of the Disclosing Party. SFX acknowledges and agrees that the Source Code provided hereunder constitute valuable Viggle trade secrets.  Accordingly, SFX will and shall cause its Contractors and employees to (a) comply with the Source Code Handling Requirements and (b) monitor, maintain and implement prevailing industry standard security controls that are designed to prevent unauthorized access to the Viggle Source Code.  Except as otherwise expressly permitted by this Agreement, the Receiving Party shall not

 

10.2.1              disclose, duplicate, copy, transmit or otherwise disseminate in any manner whatsoever any Confidential Information of the Receiving Party;

 

10.2.2              use the Confidential Information of the Disclosing Party for the Receiving Party’s own benefit or that of any third party or for any purpose other than performance of this Agreement;

 

10.2.3              commercially exploit any Confidential Information of the Disclosing Party; or

 

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10.2.4              acquire any right in, or assert any lien against, the Confidential Information of the Disclosing Party.

 

10.3                        Exceptions to Confidential Treatment.  Confidential Information shall not include, and the obligations herein shall not apply to, information that

 

10.3.1              is now or subsequently becomes generally available to the public through no fault of Receiving Party;

 

10.3.2              Receiving Party can demonstrate was rightfully in its possession prior to disclosure to Receiving Party by Disclosing Party;

 

10.3.3              is independently developed by Receiving Party without the use of any Confidential Information provided by Disclosing Party; or

 

10.3.4              Receiving Party rightfully obtains from a third party (without restriction and without breach of any agreement) who has the right, without obligation to Disclosing Party, to transfer or disclose such information.

 

10.4                        Return of Confidential Information. Except as otherwise provided in this Agreement, upon termination of this Agreement, or upon the Disclosing Party’s earlier request, the Receiving Party shall promptly return to the Disclosing Party, or destroy, all of the Disclosing Party’s Confidential Information then in the Receiving Party’s possession, except for any data retained by SFX pursuant to its automatic back-up/retention policy.  The Receiving Party shall, if requested in writing, certify its respective compliance with the foregoing provision

 

10.5                        Injunctive Relief.  It is agreed that the unauthorized use or disclosure of any Confidential Information by Receiving Party in violation of this Agreement may cause severe and irreparable damage to Disclosing Party, for which monetary damages may be insufficient.  In the event of any violation of this Agreement, Receiving Party agrees that Disclosing Party may, without posting a bond, seek from any court of competent jurisdiction preliminary and/or permanent injunctive relief to prevent disclosure and/or to prohibit further disclosure.

 

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11.                               MISCELLANEOUS

 

11.1                        Assignment.  Except as otherwise provided in this Section 11.1, neither party may assign this Agreement, and SFX may not transfer Software, to another legal entity, without the other party’s written consent, such consent not to be unreasonably withheld or delayed; provided, however, that no consent shall be required if (a) either party assigns this Agreement to an Affiliate or in connection with a merger, acquisition, or sale of all or substantially all of its assets, unless the Affiliate or surviving entity is a direct competitor of the other party, and so long as: (i) such Affiliate or surviving entity agrees to be bound in writing by the terms of this Agreement, and (ii) the assigning or transferring entity provides the other party with notice of the assignment or transfer and the Affiliate or surviving entity’s written assent to the terms of this Agreement within thirty days of the assignment or transfer, or (b) Viggle assigns its right to receive and collect payments hereunder. This Agreement and all of its terms, conditions and covenants are intended to be fully effective and binding, to the extent permitted by law, on the successors and permitted assigns of the parties hereto.

 

11.2                        Governing Law; Jurisdiction. The Agreement shall be governed by and construed under the laws of the State of New York without regard to the conflicts of law provisions thereof. The United Nations Convention on Contracts for the International Sale of Goods is specifically excluded from application to this Agreement.  There parties hereby consent to the exclusive jurisdiction of the federal and state courts located in New York County, New York.

 

11.3                        Notices.  All notices delivered under the Agreement shall be in writing and deemed given upon receipt when delivered personally or upon confirmation of receipt following delivery of (i) nationally recognized overnight courier service or (ii) registered or certified mail, return receipt requested, postage prepaid, in each case addressed to the Legal Department at the address indicated above, or at such other address of which one party is notified by the other in writing.

 

11.4                        Severability.  If a provision of the Agreement or portion thereof is found to be invalid or unenforceable under applicable law, it shall be omitted from the Agreement without invalidating the remainder of such provision or the remaining provisions of the Agreement. The waiver by either party of any default or breach of any provision of this Agreement shall not constitute a waiver of any other or subsequent default or breach.

 

11.5                        Force Majeure.  Each party will be excused from performance for any period during which, and to the extent that, it or its subcontractor(s) is prevented from performing any obligation or service, in whole or in part, as a result of causes beyond its reasonable control, and without its fault or negligence, including without limitation, acts of God, strikes, lockouts, riots, acts of war, epidemics, communication line failures, and power failures.

 

11.6                        Export Laws.  SFX agrees to comply fully with all relevant export laws and regulations, including but not limited to the U.S. Export Administration Regulations (collectively, “Export Controls”).  Without limiting the generality of the foregoing, SFX expressly agrees that it shall not, and shall cause its representatives to agree not to, export, directly or indirectly, re-export, divert, or transfer the Software, Documentation, Enhancements

 

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or any code or work product provided hereunder to any destination, company or person restricted or prohibited by Export Controls.

 

11.7                        Nonsolicitation.  Except if agreed to in writing by Viggle, SFX shall not contract or employ any current or former Viggle employee(s), either directly or through a third party, to work with products or services developed, provided, sold or licensed by Viggle.  Contracting or employing a current or former Viggle employee to perform any implementation, customization, configuration or support on Viggle products or services is expressly prohibited by this clause. Such prohibition shall be binding until one (1) year after the date of the applicable current or former employee’s termination of employment with Viggle.

 

11.8                        Independent Contractor.  Viggle is an independent contractor; nothing in this Agreement shall be construed to create a partnership, joint venture or agency relationship between the parties

 

11.9                        Entire Agreement.  The Agreement, including the attached Schedules and any Statement(s) of Work, represents the entire Agreement between the parties, and expressly supersedes and cancels any other agreements, whether oral or written, on the subjects herein.  Each party acknowledges that it is not entering into the Agreement on the basis of any representations not expressly contained herein.  Other than as specified herein, this Agreement may only be supplemented or modified by an amendment in a writing executed by the parties.  No additional or conflicting term in a purchase order or other document shall have any effect.

 

11.10                 Counterparts.  This Agreement may be executed simultaneously in two (2) or more counterparts, each of which will be considered an original, but all of which together will constitute one and the same instrument.  The exchange of digital copies of a fully executed Agreement (in counterparts or otherwise) shall be sufficient to bind the parties to the terms and conditions of this Agreement.

 

 

	
SFX   ENTERTAINMENT, INC.
    	
 
    	
VIGGLE   INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
By:
    	
/s/   Shelly Finkel
    	
 
    	
By:
    	
/s/   John C. Small
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    	
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13

 

SCHEDULE 1 — SOFTWARE DESCRIPTION

 

Viggle’s Audio Content Recognition (“ACR”) software, which includes functionality to convert an audio sample into a digital fingerprint and match that digital fingerprint against a database of stored digital fingerprints and any associated loyalty programs of such audio recognition platform.  For the avoidance of doubt, the license granted hereby does not include a database of audio fingerprints.

 

 

SCHEDULE 2 —SUPPORT AND MAINTENANCE SERVICES

 

1.                                      SUPPORT AND MAINTENANCE SERVICES. In consideration SFX’s payment of the applicable fees set forth in the Agreement, Viggle shall provide the support and maintenance services set forth in this Schedule 2 (collectively, “Support Services”) for a term of ten years from the original delivery date of the Software.  Support Services are renewed and invoiced on an annual basis unless terminated as provided herein.

 

1.1                               Standard Telephone Support.  During normal Viggle business hours (i.e., 9:00 a.m. to 5:00 p.m. U.S. Eastern Time, Monday through Friday, holidays excepted), Viggle shall provide SFX technical assistance by telephone with the installation and use of the Software, the identification of Software and/or Documentation problems and the reporting of Bugs (as defined below).

 

1.2                               Software Updates.  Viggle shall make available to SFX each minor and major functional release of the Software, that Viggle makes generally available without additional charge to its customers that receive support services for such Software to replace a prior Software release.  A major functional release is indicated by a change in the first digit of a version number, e.g. from 4.0.0 to 5.0.0; a minor functional release is indicated by a change in the second digit, e.g. from 4.0.0 to 4.1.0. Maintenance releases, which are indicated by a change in the third digit of a version number, e.g. from 5.0.1 to 5.0.2, are provided as needed in response to SFX inquiry.

 

1.3                               Bug Fixes.  Viggle shall exercise commercially reasonable efforts to correct any reproducible malfunction of the Software reported to Viggle by SFX that prevents the Software from performing in accordance with the operating specifications described in the then current Documentation (a “Bug”).

 

1.4                               Retirement of Releases.  Support Services are provided for a Software product version from the date the version becomes generally available until such version is retired.  Prior commercial releases of the Software are retired as follows: (a) one month after the commercial release of a subsequent maintenance release; (b) two (2) months after the commercial release of a new minor functional release; (c) six (6) months after the commercial release of a new major functional release. In all events, however, telephone support services are provided with respect to “how-to” use questions for a retired version of the Software for six (6) months following its retirement.

 

1.5                               Termination.  SFX may terminate Support Service at the end of the term by giving written notice to Viggle at least thirty (30) days prior to the end of any such term.  Viggle may suspend or cancel Maintenance Service if SFX fails to make any required payments or if SFX is in material breach of the Agreement.  The

 

1.6                               Exclusions.  Viggle shall have no obligation to support or maintain: (a) any Software modified without Viggle’s written consent, (b) use of the Software other than in accordance with the Agreement or the Documentation, (c) SFX Enhancements, (d) Software installed on any computer hardware or used with any software, not specified in the Documentation or in accordance with the Technical Requirements, or (e) Third Party Software.  In the event that SFX requests Support Services and Viggle performs services and any of the exclusions in this Section 1.6 applies, Viggle may charge SFX for such services as specified in Section 4 of the Agreement.

 

 

SCHEDULE 3 —VIGGLE PATENTS

 

	
Non-Provisional   Patent Application
   No. 13/345,942
    	
 
    	
January 9,   2012
    	
 
    	
METHOD   AND SYSTEM FOR IDENTIFYING A MEDIA PROGRAM FROM AN AUDIO SIGNAL ASSOCIATED WITH   THE MEDIA PROGRAM
    
	
Non-Provisional   Patent Application
   No. 13/405,851
    	
 
    	
February 27,   2012
    	
 
    	
SYSTEM   AND METHOD FOR PLAYING AN ADJUNCT  GAME DURING A LIVE SPORTING EVENT

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