<PAGE>
As filed with the Securities and Exchange Commission on November 19, 1999
Registration No. 333-89609
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT No. 3
TO
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
OPENTV CORP.
(Exact name of Registrant as specified in its charter)
---------------
<TABLE>
<S> <C> <C>
British Virgin Islands 7372 Inapplicable
(State or other
jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or
organization) Classification Code Number) Identification Number)
</TABLE>
Abbot Building
Mount Street
Tortola
Road Town
British Virgin Islands
(284) 494-5491
(Address, including zip code, and telephone number, including
area code, of registrant's registered offices)
---------------
James F. Brown, Esq.
General Counsel
OpenTV, Inc.
401 East Middlefield Road
Mountain View, CA 94043
(650) 429-5500
(Name, address, including zip code, and telephone number, including
area code, of agent for service of process)
Copies to:
<TABLE>
<S> <C>
Kris F. Heinzelman, Esq. Gary L. Sellers, Esq.
Cravath, Swaine & Moore Simpson Thacher & Bartlett
Worldwide Plaza 425 Lexington Ave.
825 Eighth Avenue New York, NY 10017
New York, NY 10019 (212) 455-2000
(212) 474-1000
</TABLE>
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are being offered in
connection on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed
Proposed Maximum
Amount Maximum Aggregate Amount of
Title of Each Class of to be Offering Price Offering Registration
Securities to be Registered Registered(/1/) Per Share(/2/) Price(/1/) Fee(/3/)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Ordinary Shares, no par value.. 8,625,000 $20.00 $172,500,000 $47,955
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Includes 1,125,000 Class A Ordinary Shares that may be purchased by the
Underwriters to cover over-allotments.
(2) Estimated solely for the purposes of calculating the amount of the
registration fee pursuant to Rule 457(a) promulgated under the Securities
Act of 1933.
(3) $47,955 of which has been previously paid.
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, or until the Registration
Statement shall become effective on such date as the United States Securities
and Exchange Commission, acting pursuant to said Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus to be used
in concurrent underwritten public offerings of Class A Ordinary Shares: a U.S.
prospectus to be used in the United States and Canada and an international
prospectus to be used outside the United States and Canada. The two
prospectuses are identical except for the front and back cover pages, the
sections entitled "Underwriting" and "Legal Matters" and certain supplemental
disclosure in the international prospectus. Those sections or pages that will
appear only in the U.S. prospectus are labeled "[U.S.]", and those that will
appear only in the international prospectus are labeled "[I]". Final forms of
each prospectus will be filed with the Securities and Exchange Commission under
Rule 424(b) under the Securities Act of 1933.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion
Preliminary Prospectus dated November 19, 1999
PROSPECTUS
7,500,000 Shares
[LOGO OF OPENTV](R)
Class A Ordinary Shares
-----------
This is OpenTV's initial public offering. The U.S. underwriters will offer
3,750,000 shares in the United States and Canada and the international managers
will offer 3,750,000 shares outside the United States and Canada.
We expect that the public offering price will be between $18.00 and $20.00
per share. Currently, no public market exists for the shares. After pricing of
the offering, we expect that the shares will trade on the Nasdaq National
Market and the Official Segment of Amsterdam Exchanges N.V.'s stock
market under the symbol "OPTV".
Investing in the shares involves risks that are described in the "Risk
Factors" section beginning on page 8 of this prospectus.
-----------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public offering price........................... $ $
Underwriting discount........................... $ $
Proceeds, before expenses, to OpenTV............ $ $
</TABLE>
The U.S. underwriters may also purchase up to an additional 562,500 shares
at the public offering price, less the underwriting discount, within 30 days
from the date of this prospectus to cover over-allotments. The international
managers may similarly purchase up to an aggregate of an additional 562,500
shares.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The shares will be ready for delivery on or about , 1999.
-----------
Merrill Lynch & Co. Thomas Weisel Partners LLC
-----------
The date of this prospectus is , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 1
Risk Factors............................................................. 8
Cautionary Notice Regarding Forward-Looking Statements................... 17
Use of Proceeds.......................................................... 18
Dividend Policy.......................................................... 18
Capitalization........................................................... 19
Dilution................................................................. 20
Unaudited Pro Forma Combined Financial Information....................... 21
Historical Predecessor Selected Consolidated Financial Data.............. 25
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 26
Business................................................................. 36
Management............................................................... 49
Transactions with Related Parties........................................ 61
Principal Shareholders................................................... 66
Description of Capital Stock............................................. 67
Shares Eligible for Future Sale.......................................... 72
United States Federal Income Tax Consequences............................ 74
British Virgin Islands Taxation.......................................... 77
Underwriting............................................................. 78
Legal Matters............................................................ 82
Experts.................................................................. 82
Available Information.................................................... 82
Index to Consolidated Financial Statements............................... F-1
</TABLE>
----------------
<TABLE>
<S> <C>
</TABLE>
You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.
"OpenTV", "OpenAuthor", "OpenTV Runtime", "OpenStreamer" and the OpenTV
logo are trademarks of OpenTV, Inc. All other trademarks or service marks
appearing in this prospectus are trademarks or service marks of the respective
companies that use them.
<PAGE>
SUMMARY
This summary may not contain all the information that may be important to
you. You should read the entire prospectus, including the financial data and
related notes, before making an investment decision. OpenTV Corp. is a holding
company whose only asset is its 78.5% ownership interest in OpenTV, Inc. as of
October 21, 1999 (82.7% after giving effect to the exercise of outstanding
employee stock options to purchase shares of common stock of OpenTV, Inc. and
the issuance of additional shares of common stock of OpenTV, Inc. to OpenTV
Corp. at the closing of these offerings). The information in this prospectus
has been adjusted to give effect to a one-for-five reverse stock split of our
ordinary shares that will be completed prior to consummation of these
offerings. The terms "OpenTV", "our company", "we", "us" and "our" as used in
this prospectus refer to OpenTV Corp. and its subsidiaries and predecessors as
a combined entity, except where the context requires otherwise.
OpenTV
We are the leading worldwide provider of software that enables digital
interactive television. Our software is running on over 4.5 million set-top
boxes worldwide, with 22 network operators in 17 countries having selected our
OpenTV Runtime software as their interactive platform. Our digital interactive
solution enhances a television viewer's experience without changing viewing
habits and provides a rich audio and video television environment for enhanced
applications such as e-commerce. Using a standard remote control, viewers can:
. access real-time statistics, buy team merchandise and purchase
tickets while watching a sporting event
. purchase compact discs and learn more about recording artists while
watching music videos
. purchase vacations, clothing, groceries and other merchandise
through dedicated interactive channels
. transfer funds, view account balances, borrow money and engage in
other banking transactions
Our patented software platform provides a comprehensive solution for the
development and delivery of digital interactive services by network operators
to television viewers. Network operators, which include cable, satellite and
terrestrial broadcasters of television content, use our software platform to
transmit a continual stream of interactive programming to viewers.
Specifically, our software platform includes software that resides both at the
network operator's central broadcasting facility and within the viewer's set-
top box. Our central broadcasting facility software enables the streaming of
data from such facility to subscribers' set-top boxes where our operating
system enables digital reception and manages the interactive television
environment.
The OpenTV system has been designed to enable network operators to
deliver interactive content through a low-cost, digital set-top box for viewing
on existing analog televisions. Our software platform, therefore, operates
within today's infrastructure, allowing network operators to rapidly deploy
digital interactive television to a large number of subscribers without
incurring prohibitively expensive hardware or infrastructure upgrade costs. In
addition, our software is designed to exploit the capabilities of emerging
infrastructure developments such as broadband transmission networks and digital
television sets. Digital television set manufacturers can incorporate our
software, which is platform-neutral, at the time of production, or our software
can be subsequently downloaded via broadcast from a network operator (a "flash
download") into digital television sets for the reception of digital
interactive television without a set-top box.
The majority of our revenues today are generated from royalties and fees
related to our core software platform. In addition, we are developing
interactive applications that we intend to license to network operators in
exchange for a share of advertising and e-commerce revenues.
1
<PAGE>
Market Opportunity
Found in nearly one billion households worldwide, television is the most
widely adopted form of home entertainment. According to Nielsen Media Research,
the average U.S. household has a television turned on for over seven hours a
day. As a result, advertisers use television as a cost-effective medium for
reaching a large number of consumers. Zenithmedia estimates that $117 billion
was spent on television advertising worldwide in 1998, representing 28% of
total advertising expenditures. Increasing competition to acquire and retain
subscribers is driving network operators to differentiate themselves by
providing enhanced television viewing and other interactive services. These
network operators are rapidly shifting to digital technology, which allows them
to cost-effectively deliver interactive services and more channels than with
traditional analog technology. The digital set-top box, which enables reception
of digital interactive television, will provide the bridge to mass adoption of
digital technology prior to the eventual proliferation of more costly digital
television sets. We believe that digital set-top boxes will become one of the
world's fastest growing consumer electronic appliances. According to estimates
by Intex Management Services, total worldwide annual shipments of digital set-
top boxes will increase from 16 million in 1998 to over 34 million at the end
of 2001. We expect that the rapid migration of television households to digital
technology will create a vast market for our products and services.
With the success of home shopping channels on television and e-commerce
over the Internet, consumers have shown a desire to purchase goods and services
through an electronic medium. Two dedicated shopping channels, Home Shopping
Network and QVC, have used the emotion of television to generate approximately
$3.5 billion of revenue selling goods and services in 1998. In addition,
International Data Corporation estimates that consumers purchased approximately
$15 billion of goods and services over the Internet in 1998, with a projected
increase to approximately $114 billion by 2002. Digital interactive television
allows advertisers and retailers to create an interactive shopping experience
with the emotion that only television-quality audio and video can deliver,
combined with the immediate gratification of electronic purchasing. As
advertisers recognize the power of interactive television, we believe a
substantial amount of television advertising expenditures will migrate to
digital interactive advertising providing significant revenue streams for
network operators, content providers and application developers through revenue
sharing agreements. Forrester estimates that the interactive television
industry will generate $11 billion annually in advertising revenue in the
United States alone by 2004.
The OpenTV Solution
We believe our software products are accelerating the acceptance and use
of digital interactive television worldwide. Our solution facilitates the
widespread adoption of digital interactive television without significant
investment in hardware or digital infrastructure by network operators. We offer
a comprehensive and highly portable solution that makes interactive television
viable today for network operators, television programming companies,
advertisers, e-commerce merchants and viewers, providing them with the
following benefits:
. cable, satellite and terrestrial broadcast network operators are
able to attract subscribers and create additional sources of
revenue from e-commerce and advertising by providing compelling
interactive services
. television programming companies and advertisers are able to
attract additional viewers and generate more revenue by creating
interesting and compelling television content
. e-commerce merchants, including banks, retailers and travel and
event ticket brokers, can access a direct, mass market avenue into
consumers' homes
. viewers are able to enjoy interactive programming and convenient e-
commerce opportunities in a relaxed and entertaining manner
2
<PAGE>
As the availability of bandwidth increases, our software will enable even
more robust services, including video-on-demand, and will serve as a bridge to
the future by providing digital interactive television over both existing and
broadband networks.
Strategy
The following are principal components of our business and growth
strategy:
. Expand our global presence. Our OpenTV system is the first digital
interactive television software being deployed worldwide by
multiple network operators and set-top box manufacturers on a
significant scale.
. Capitalize on worldwide transition to digital television. We
believe the existing installed base of one billion television
households worldwide will rapidly migrate to digital technology,
thereby creating a vast market for our products and services.
. Enhance and extend our technology. We are continually enhancing and
upgrading our software to anticipate and exploit new technology.
. Encourage independent application development. As the volume and
quality of interactive content and services provided using the
OpenTV system expands, we expect that more viewers and customers
will be attracted to our solution.
. Develop our applications business and share revenues from
advertising and e-commerce. We are creating, with our content and
e-commerce partners, a core set of turn-key applications, and we
expect to participate in the recurring advertising and transaction-
based revenue generated by these applications through revenue
sharing agreements.
Recent Developments
In October 1999, we completed a private placement of our Series C-1
Convertible Preference Shares and Series C-2 Convertible Preference Shares and
warrants to purchase our Class A Ordinary Shares to America Online, Inc.,
General Instrument Corp., Liberty Digital, Inc., News Corporation, Time Warner,
Inc. and Sun Microsystems, Inc. for net proceeds of $31.0 million. Upon
consummation of these offerings, our convertible preference shares will convert
into our ordinary shares. The convertible preference shares have an embedded
beneficial conversion feature which under EITF 98-5 will result in a preferred
stock dividend of $31.2 million in the quarter ending December 31, 1999. The
fair value attributable to the warrants to purchase our Class A Ordinary Shares
of $63.9 million (based on the mid-point of the estimated price range on the
cover of this prospectus) will be recorded in operating results as a non-cash
warrant expense in the quarter ending December 31, 1999. In connection with the
investments, we entered into strategic agreements with America Online, Inc.,
News Corporation and Time Warner, Inc. We believe these investments and
strategic agreements will allow us to increase our market penetration in the
United States and expand the range of interactive applications available to our
global client base.
These investments and the strategic agreements between us and the new
investors are described under the "Business--Strategic Partners" section of
this prospectus.
Company History
Our operating subsidiary, OpenTV, Inc., was formed in July 1996 as
THOMSON SUN Interactive, LLC by subsidiaries of THOMSON multimedia S.A. and Sun
Microsystems. OpenTV, Inc. was incorporated in 1998. MIH Limited (through its
wholly-owned subsidiary, Myriad International Holdings BV) became a shareholder
of OpenTV, Inc. in July 1997 and purchased Thomson's ownership interest in
March 1999.
OpenTV Corp., a British Virgin Islands international business company,
was formed on September 30, 1999 as a holding company to own shares of OpenTV,
Inc. Pursuant to a reorganization that occurred in October 1999, MIH Limited
exchanged its shares of common stock in OpenTV, Inc. for ordinary shares in
3
<PAGE>
OpenTV Corp. As a result, and after giving effect to transactions subsequent to
the reorganization, as of October 21, 1999 we own 78.5% of the common stock of
OpenTV, Inc., while Sun Microsystems owns 19.5% and various individuals own a
total of 2.0% after having exercised options obtained through our employee
stock option plan. After giving effect to the exercise of outstanding employee
stock options to purchase shares of common stock of OpenTV, Inc. and the
issuance of additional shares of common stock of OpenTV, Inc. to OpenTV Corp.
at the closing of these offerings, we, Sun Microsystems and various individuals
will own 82.7%, 14.3% and 3.0%, respectively, of the common stock of OpenTV,
Inc. After giving effect to these offerings and the conversion of all of our
Series C-1 Convertible Preference Shares and Series C-2 Convertible Preference
Shares into our Class A Ordinary Shares at a rate of one Class A Ordinary Share
for five convertible preference shares, MIH Limited will own 70.0% of our
ordinary shares. MIH Limited is listed on the Nasdaq National Market and is a
subsidiary of MIH Holdings Limited, which is publicly listed on the
Johannesburg Stock Exchange. For a discussion of our agreements with Sun
Microsystems regarding governance of OpenTV, Inc., see "Transactions with
Related Parties".
Our corporate headquarters are located at 401 East Middlefield Road,
Mountain View, California 94043, and our telephone number is (650) 429-5500.
The address of our web site is www.opentv.com. Information contained on our web
site is not a part of this prospectus.
4
<PAGE>
The Offerings
<TABLE>
<C> <C> <S>
Class A Ordinary Shares offered:
U.S. Offering................................ 3,750,000 shares
International Offering....................... 3,750,000 shares
----------------------
Total.................................... 7,500,000 shares
Ordinary Shares outstanding after the offerings:
Class A Ordinary Shares...................... 13,130,628 shares(/1/)
Class B Ordinary Shares...................... 30,631,746 shares(/2/)
----------------------
Total.................................... 43,762,374 shares
Use of Proceeds................................. We estimate that the net
proceeds from these
offerings (without
exercise of the over-
allotment options) will be
approximately $130.5
million. We will lend or
contribute the net
proceeds from these
offerings to OpenTV, Inc.,
which intends to use these
net proceeds to fund the
following:
. the development of our
applications business
. our working capital
needs
. possible strategic
acquisitions or
investments
Risk Factors.................................... See "Risk Factors" and the
other information included
in this prospectus for a
discussion of factors you
should carefully consider
before deciding to invest
in our Class A Ordinary
Shares.
Trading......................................... Application has been made
to list our Class A
Ordinary Shares on the
Nasdaq National Market and
on the Amsterdam Stock
Exchange under the symbol
"OPTV".
Voting and Certain Other Rights................. The rights of holders of
Class A Ordinary Shares
and holders of Class B
Ordinary Shares are
identical in most
respects, including as to
dividends. However,
holders of Class B
Ordinary Shares are
entitled to ten votes per
share while holders of
Class A Ordinary Shares
are entitled to one vote
per share. Holders of
Class A Ordinary Shares
and Class B Ordinary
Shares vote together as a
single class, except as
otherwise required by BVI
law or our Memorandum and
Articles. A purchaser of
Class A Ordinary Shares in
these offerings will be
able to exercise rights
attaching to those shares
on the date such
purchaser's name is
entered as owner of record
for such shares on the
books of the transfer
agent. A more complete
description of these
rights can be found under
the heading "Description
of Capital Stock--Class A
Ordinary Shares and Class
B Ordinary Shares".
</TABLE>
- --------
(1) The number of Class A Ordinary Shares to be outstanding after these
offerings is based upon the number of shares outstanding on October 21,
1999. This number gives effect to the conversion of all of our
5
<PAGE>
Series C-1 Convertible Preference Shares and Series C-2 Convertible
Preference Shares into 5,630,628 Class A Ordinary Shares and assumes that
the over-allotment options are not exercised. If the over-allotment options
are exercised in full, we will issue and sell 1,125,000 additional Class A
Ordinary Shares. This number also excludes: (1) 5,141,104 Class A Ordinary
Shares with an average exercise price of $2.25 per share issuable upon
exercise of employee options to purchase shares outstanding as of October
21, 1999 (of which 1,417,828 shares are vested and exercisable or will vest
and become exercisable within 60 days and 1,994,065 shares that are
exercisable but not vested) and 38,471 shares issuable upon exercise of
options available for future grant under our employee share option plan, (2)
4,729,728 Class A Ordinary Shares with an exercise price of $5.55 per share
issuable upon exercise of warrants, (3) up to 669,623 Class A Ordinary
Shares that may be issued in exchange for shares of Class A Common Stock of
OpenTV, Inc. and (4) up to 783,500 Class A Ordinary Shares that may be
issued in exchange for shares of Class A Common Stock issued pursuant to the
exercise of employee stock options under the OpenTV, Inc. Amended and
Restated 1998 Stock Option/Stock Issuance Plan. See "Management--OpenTV,
Inc. 1998 Stock Option/Stock Issuance Plan--Shares Reserved/Termination",
"Description of Capital Stock" and "Transactions with Related Parties".
(2) The number of Class B Ordinary Shares to be outstanding after these
offerings is based upon the number of shares outstanding as of October 21,
1999 and excludes 7,729,370 Class B Ordinary Shares that may be issued in
exchange for shares of Class B Common Stock of OpenTV, Inc.
6
<PAGE>
Summary Historical and Pro Forma Financial Information
The following is the summary historical financial information of OpenTV,
Inc. (the predecessor to OpenTV Corp.) and certain pro forma financial
information of OpenTV Corp. OpenTV Corp. holds 78.5% of the common stock of
OpenTV, Inc. as of October 21, 1999 (82.7% after giving effect to the exercise
of outstanding employee stock options to purchase shares of common stock of
OpenTV, Inc. and the issuance of additional shares of common stock of OpenTV,
Inc. to OpenTV Corp. at the closing of these offerings) and will consolidate
OpenTV, Inc.'s results and record a minority interest for the portion not
owned.
<TABLE>
<CAPTION>
July 1, 1996 Year Ended Nine Months Ended
(Date of Inception) December 31, September 30,
to December 31, ---------------------- ----------------------
1996 1997 1998 1998 1999
------------------- ---------- ---------- ---------- ----------
(unaudited)
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of Operations Data:
Revenues:
Royalties............................... $ -- $ 2,382 $ 2,788 $ 1,890 $ 10,061
License fees............................ 287 1,255 1,578 1,043 1,904
Services and other...................... 731 3,322 5,102 3,183 5,592
--------- ---------- ---------- ---------- ----------
Total revenues......................... 1,018 6,959 9,468 6,116 17,557
Total operating expenses.................. 5,148 17,761 23,663 16,737 26,081
--------- ---------- ---------- ---------- ----------
Loss from operations...................... (4,130) (10,802) (14,195) (10,621) (8,524)
Other income (expense), net............... 172 113 (7) 1 40
--------- ---------- ---------- ---------- ----------
Net loss.................................. $ (3,958) $ (10,689) $ (14,202) $ (10,620) $ (8,484)
========= ========== ========== ========== ==========
Net loss per share, basic and diluted..... $ (0.43) $ (0.43) $ (0.43) $ (0.32) $ (0.23)
========= ========== ========== ========== ==========
Shares used in computing net loss per
share, basic and diluted................. 9,210,877 24,973,614 33,212,803 33,197,261 36,184,858
</TABLE>
<TABLE>
<CAPTION>
As of September 30, 1999
------------------------------
OpenTV, OpenTV
Inc. Corp. Pro Forma
Actual Pro Forma As Adjusted
------- --------- -----------
(unaudited)
(in thousands)
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents........................ $ 2,580 $33,580 $164,105
Working capital (deficit)........................ (1,325) 29,675 160,200
Total assets..................................... 18,312 49,312 179,837
Minority interest................................ -- 2,153 2,153
Redeemable common stock.......................... 10,200 -- --
Total stockholders' equity (deficit)............. (140) 38,907 169,432
</TABLE>
The OpenTV Corp. Pro Forma column above gives effect to the following
transactions that occurred subsequent to September 30, 1999:
. the exchange of MIH Limited's OpenTV, Inc. Class B Common Stock for
Class B Ordinary Shares of OpenTV Corp., which results in the
recognition of a minority interest
. the sale of 23,648,646 Series C-1 Convertible Preference Shares
(convertible into 4,729,728 Class A Ordinary Shares) and warrants
to purchase 4,729,728 Class A Ordinary Shares to a new investor
group and 4,504,504 Series C-2 Convertible Preference Shares
(convertible into 900,900 Class A Ordinary Shares) to Sun
Microsystems for net proceeds of $31.0 million
The Pro Forma As Adjusted column above gives effect to (1) the conversion
of all of our Series C-1 Convertible Preference Shares and Series C-2
Convertible Preference Shares into 5,630,628 Class A Ordinary Shares and (2)
the sale of 7,500,000 Class A Ordinary Shares in these offerings at an assumed
initial public offering price of $19.00 per share (which is the mid-point of
the estimated price range on the cover of this prospectus) after deducting
underwriting discounts and commissions and estimated offering expenses.
7
<PAGE>
RISK FACTORS
Investing in our Class A Ordinary Shares will provide you with an equity
ownership interest in OpenTV. As an OpenTV shareholder, you will be subject to
all the risks inherent in our business. The market value of your shares will
reflect the performance of our business relative to, among other things, that
of our competitors and general economic, market and industry conditions. The
value of your investment may increase or may decline and could result in a
loss. You should carefully consider the following factors as well as the other
information contained in this prospectus before deciding to invest in our Class
A Ordinary Shares.
We have a history of losses that will continue for the foreseeable future and
we may not ever be profitable
We have incurred significant net losses since inception and, at September
30, 1999, had an accumulated deficit of $37.3 million. In addition, we
currently intend to incur substantial operating expenses over the next several
years to fund additional software development, marketing and general working
capital activities. As a result, we expect to incur substantial operating and
net losses for the foreseeable future. We cannot assure you that we will ever
be profitable.
Our limited operating history and the risks we encounter as a new company make
the prediction of our future results difficult
We began operations as an independent company in July 1996, and the
OpenTV system was first deployed in mid-1997. Accordingly, we have a limited
operating history, which makes the prediction of future results difficult. Our
prospects must be considered in light of the risks frequently encountered by
companies in an early stage of development, particularly companies in new
markets such as interactive television. Our ability to achieve and sustain
profitability will require, among other things:
. widespread adoption of the OpenTV system by multiple industry
participants and the television viewing public
. continued improvements to our technology and operations
. timely and successful responses to competitive developments
. the attraction, retention and motivation of qualified employees
. the firm establishment of the OpenTV brand
If we fail to successfully meet any of these challenges, our financial
performance may be materially adversely affected.
Our failure to gain broad market acceptance would result in our being unable to
successfully market and sell our products
Interactive television is a new and emerging business, and we cannot
guarantee that it will attract widespread demand or market acceptance. Our
success in this area depends upon, among other things, broad acceptance of the
concept of interactive television by industry participants, including broadcast
and pay-television networks and system operators and manufacturers of
televisions and set-top boxes, including their ability to successfully market
interactive television to television viewers and advertisers. There have been
several well-financed, high-profile attempts in the U.S. to develop and deploy
systems in the broad category of interactive television. None of these attempts
has resulted in large scale deployment, and many key industry participants have
avoided participating in interactive television for a variety of reasons,
including:
. inconsistent quality of service
. need for new and expensive hardware in homes
. inadequate transmission facilities and broadcast centers
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. complicated and expensive processes for creating interactive
content
. inability to align the conflicting interests of various
participants
Accordingly, such participants may perceive interactive television negatively
and be reluctant to participate.
In addition, other participants in the television industry must accept
and support interactive television for it to be successful. For instance,
broadcasters will need to add interactive features to their programming and
commercial vendors will need to embrace e-commerce over interactive television.
We cannot assure you that these parties will provide such support.
The failure by network operators to select OpenTV as their interactive software
platform will result in our being unable to penetrate new markets
Our growth and future success depends substantially upon our ability to
penetrate new markets and convince network operators to adopt and maintain
their use of the OpenTV system. We have entered into a limited number of non-
exclusive agreements with network operators providing for the launch of OpenTV-
based interactive services. If network operators determine that our service is
not viable as a business proposition or if they determine that the service does
not meet their business or operational strategies, they will not choose, or may
stop using, the OpenTV system as their interactive software platform.
Furthermore, EchoStar is currently the only network operator in the United
States with which we have an agreement to deploy OpenTV Runtime. If the launch
of our system on EchoStar is not successful, we may have a difficult time
penetrating the U.S. market.
An increase in the costs of set-top box components could adversely affect our
licensing revenues
Random access memory is a principal component of our set-top boxes. The
random access memory market is subject to price fluctuation and market demand
may exceed availability. Any shortage in the supply or increase in the price of
random access memory or any other components of our set-top boxes could result
in an increase in the price of set-top boxes. Any increase in the costs of set-
top boxes could adversely affect the roll-out of set-top boxes enabled with
OpenTV software and, in turn, result in a decline of our licensing revenues.
The interactive television business is a highly competitive industry and
increased competition could reduce the value of an investment in our company
We face competition from a number of companies, including many that have
significantly greater financial, technical and marketing resources and a better
recognized brand name than we do. Current and potential competitors in one or
more aspects of our business include interactive television technology
companies, Internet-related companies and broadband interactive service
providers. Among these companies, our major competitors are Wink Communications
Inc., Liberate Technologies and Microsoft Corporation.
Interactive television technology companies. Several companies have
developed technologies relevant to interactive television. Wink and Liberate
are software developers that are working to create interactive television
solutions and have established significant industry relationships that could
hinder the adoption of the OpenTV system. In addition, Microsoft Corporation
has been active in many areas of interactive television. Microsoft's wholly-
owned subsidiary, WebTV, offers set-top boxes with Internet access, interactive
program listings and simultaneous television and Internet usage. EchoStar
offers WebTV to its subscribers as an alternative to OpenTV-driven set-top
boxes. Microsoft has also acquired equity interests in several network
operators. These investments give Microsoft influence in the network operator's
choice of interactive software. Microsoft has also begun offering TVPak, its
interactive television software solution. With its vastly greater financial,
technical and marketing resources, Microsoft will be a strong competitor in the
market for interactive television operating systems.
Canal+ and Scientific-Atlanta are companies that have vertically
integrated into software for interactive television. Canal+ is one of the
largest network operators in Europe. It developed its Mediahighway
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interactive system for distribution on its pay-television platforms and has now
begun to market Mediahighway to third parties. Scientific-Atlanta is one of the
largest set-top box manufacturers in the world. It is developing interactive
software to distribute with its set-top boxes and has begun to distribute this
software to third parties.
Internet-related companies. We face competition from other Internet
companies such as America Online, Yahoo! and Real Networks. These competitors
are seeking to meld Internet browsing and traditional broadcast, cable or
satellite television programming into a single medium, and to offer many
services over the Internet which are similar to those enabled by us. For
example, Real Networks offers technology enabling streaming video over the
Internet. Additionally, interactive programming guides are available over the
Internet from several sources. Although none of these companies provides the
full range of products and features that we do, we believe that the Internet
will continue to offer functionality that competes with our products.
Broadband interactive service providers. In the future, we may encounter
competition from broadband interactive service providers such as Excite@Home,
AOL/DirecTV, RoadRunner and others. Consumer electronics companies may, in the
future, decide to compete with us by, for example, bundling their own software
with their hardware products. There are also numerous companies that operate in
fields related to interactive television that could begin to compete with us.
This rapidly evolving competitive landscape places significant pressure
on us to properly direct the evolution of our products, our industry
relationships and our business plan in order to compete effectively. If we fail
to compete effectively, our business will suffer.
Rapid technological advances or the adoption of incompatible standards could
render our products obsolete or non-competitive
The rate of technological change currently affecting the television
industry is particularly rapid compared to other industries. The migration of
television from analog to digital transmission, the convergence of television,
the Internet, communications and other media and other emerging trends are
creating a dynamic and unpredictable environment in which to operate. Our
ability to anticipate these trends and adapt to new technologies is critical to
our success.
Recent attempts to establish industry-wide standards for interactive
television software include an initiative by cable network operators in the
United States to create a uniform platform for interactive television called
OpenCable. The OpenCable standard is not yet defined, and we do not know
whether our product will be compatible with OpenCable. The establishment of
this standard or other similar standards could hurt our business, particularly
if our products require significant redevelopment in order to conform to the
newly established standards.
Any delay or failure on our part to respond quickly, cost-effectively and
sufficiently to these developments could render our existing products and
services obsolete and have a material adverse effect on our business, financial
condition and results of operations. We may have to incur substantial
expenditures to modify or adapt our products or services to respond to these
developments. We must stay abreast of cutting-edge technological developments
and evolving service offerings to remain competitive, increase the utility of
our services and attract and retain qualified employees. We must be able to
incorporate new technologies into the products we design and develop in order
to address the increasingly complex and varied needs of our customer base.
Restrictions on the ability of our operating subsidiary to make distributions
to us could render us unable to meet our cash requirements
We are a holding company whose only asset as of October 21, 1999 is our
ownership of 78.5% of the common stock of OpenTV, Inc. (82.7% after giving
effect to the exercise of outstanding employee stock options to purchase shares
of common stock of OpenTV, Inc. and the issuance of additional shares of common
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stock of OpenTV, Inc. to OpenTV Corp. at the closing of these offerings), from
which we derive substantially all of our cash flow. We will lend or contribute
all of the net proceeds of these offerings to OpenTV, Inc. We will not be able
to pay out dividends on our ordinary shares without receiving distributions
from OpenTV, Inc. The ability of OpenTV, Inc. to make such distributions could,
in the future, be subject to restrictions, such as covenants in loan agreements
or other debt instruments.
Our inability to properly manage our growth could adversely affect us
Our development activities and operations have expanded rapidly since
1996, and significant further expansion will be necessary to meet our growth
objectives and to take advantage of market opportunities. Our expansion to date
has placed substantial strain on our managerial, operational and financial
resources and systems. To manage our growth, we must successfully implement,
constantly improve and effectively utilize our operational and financial
systems while aggressively expanding our workforce. We must also maintain and
strengthen the breadth and depth of our current strategic relationships while
rapidly developing new relationships. Our existing or planned operational and
financial systems may not be sufficient to support our growth, and our
management may not be able to effectively identify, manage and exploit existing
and emerging market opportunities. If our potential growth is not adequately
managed, our business will suffer.
We depend upon key personnel to manage and grow our business
Our future success and performance is dependent on the continued services
and performance of our senior management and other key personnel. There is a
shortage of qualified marketing, technical and financial personnel in our
industry, and the competition for such personnel is intense. Accordingly, the
loss of the services of any of our executive officers or other key employees
could materially adversely affect our business.
We may have difficulty retaining or recruiting professionals for our business
Our business requires experienced software programmers, creative
designers, and application developers, and our success depends on identifying,
hiring, training and retaining such experienced, knowledgeable professionals.
If a significant number of our current employees or any of our senior technical
personnel resign, or for other reasons are no longer employed by us, we may be
unable to complete or retain existing projects or bid for new projects of
similar scope and revenues. In addition, former employees may compete with us
in the future.
Even if we retain our current employees, our management must continually
recruit talented professionals in order for our business to grow. There is
currently a shortage of qualified senior technical personnel in the software
development field, and this shortage is likely to continue. Furthermore, there
is significant competition for employees with the skills required to perform
the services we offer. We cannot assure you that we will be able to attract a
sufficient number of qualified employees in the future to sustain and grow our
business, or that we will be successful in motivating and retaining the
employees we are able to attract. If we cannot attract, motivate and retain
qualified professionals, our business, financial condition and results of
operations will suffer.
We may have difficulty consummating or integrating acquisitions, and certain
consequences of those acquisitions that we do complete could adversely affect
our operating results
Although we have not recently announced any acquisitions, in the future
we may acquire other businesses or new technologies. As a result of these
acquisitions, we may need to integrate product lines, technologies, widely
dispersed operations and distinct corporate cultures. The product lines or
technologies of the acquired companies may need to be altered or redesigned in
order to be made compatible with our software products or the software
architecture of our customers. These integration efforts may not succeed or may
distract our management from operating our existing business. Our failure to
successfully manage future acquisitions could seriously harm our operating
results.
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We may incur quarterly fluctuations in our revenues that could affect the
market price of our ordinary shares
Our revenues may vary from quarter to quarter as a result of a number of
factors, including:
. the number, size and scope of network operators deploying OpenTV-
enabled interactive services and the associated rollout to
subscribers
. the timing of upgrades by existing network operators
. the rate of subscriber growth of network operators offering
OpenTV-enabled interactive services
. the timing of revenue recognition associated with major
development contracts
A high percentage of our expenses, particularly compensation, is fixed in
advance of any particular quarter. This means that any of the factors listed
above could cause significant variations in our revenues and earnings in a
particular given quarter. Any decline in revenues or a greater than expected
loss for any quarter could cause the market price of our Class A Ordinary
Shares to decline.
Our multinational operations expose us to certain financial and operational
risks
Our revenues are dependent upon our marketing efforts in a number of
countries throughout the world, particularly the United Kingdom, France, Spain,
South Africa and Italy. In addition, we receive a material amount of revenue
denominated in euro and incur expenses in euro, Korean won, and Chinese
renminbi. Operations in several different countries exposes us to a number of
risks, such as:
. changes in legal and regulatory requirements
. export and import restrictions, tariffs and other trade barriers
. currency fluctuations and the conversion to the euro in most
member states of the European Union
. difficulties in staffing and managing offices as a result of,
among other things, distance, language and cultural differences
. longer payment cycles and problems in collecting accounts
receivable
. political and economic instability
. potentially adverse tax consequences
Any of these factors could have a material adverse effect on our business,
financial condition and results of operations.
Because much of our success and value lies in our ownership and use of
intellectual property, our failure to protect our property and develop new
proprietary technology may negatively affect us
Our ability to effectively compete is dependent in part upon the
maintenance and protection of our proprietary intellectual property. We rely on
patent, trademark, trade secret and copyright law, as well as confidentiality
procedures and licensing arrangements, to establish and protect our rights in
our technology. We typically enter into confidentiality or license agreements
with our employees, consultants, customers, strategic partners and vendors, in
an effort to control access to and distribution of our software, documentation
and other proprietary information. Despite these precautions, it may be
possible for a third party to copy or otherwise obtain and use our proprietary
technology without authorization. Policing unauthorized use of our software and
products is difficult. The steps we take may not prevent misappropriation of
our intellectual property and the agreements we enter into may not be
enforceable. In addition, effective patent, copyright and trade secret
protection may be unavailable or limited in certain foreign countries.
Litigation may be necessary in the future to enforce or protect our
intellectual property rights or to determine the validity and scope of the
proprietary rights of others. Such litigation could cause us to incur
substantial costs and diversion of resources, which in turn could materially
adversely affect our business.
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In the future, we may receive notices of claims of infringement of other
parties' proprietary rights or claims for indemnification resulting from
infringement claims. The emerging enhanced-television industry is highly
litigious, particularly in the area of on-screen program guides. The defense of
any such claims could cause us to incur significant costs and could result in
the diversion of resources with respect to the defense of any claims brought,
which could materially adversely affect our operating results and financial
condition. As a result of such infringement claims, a court could issue an
injunction preventing us from distributing certain products, which could
materially adversely affect our business. If any claims or actions are asserted
against us, we may seek to obtain a license under a third party's intellectual
property rights in order to avoid any litigation. However, a license under such
circumstances may not be available on commercially reasonable terms, if at all.
The interests of our majority owner may differ from yours and may result in our
acting in a manner inconsistent with your general interests
Immediately following the offerings and after giving effect to the
conversion of all of our Series C-1 Convertible Preference Shares and Series C-
2 Convertible Preference Shares into our Class A Ordinary Shares at a rate of
one Class A Ordinary Share for five convertible preference shares, MIH Limited
will indirectly own all of our outstanding Class B Ordinary Shares,
representing 95.9% of the voting rights with respect to our ordinary shares.
MIH Limited, which is publicly traded on the Nasdaq National Market and the
Amsterdam Stock Exchange, is controlled by MIH Holdings Limited, which is in
turn controlled by Naspers Limited. Both MIH Holdings and Naspers are publicly
traded on the Johannesburg Stock Exchange. As a result of its ownership of our
Class B Ordinary Shares, MIH Limited and its parent companies effectively
control us and have sufficient voting power, without the vote of any other
shareholders, to determine the outcome of any action requiring shareholder
approval, including amendments of our Memorandum and Articles for any purpose
(which could include increasing or reducing our authorized capital or
authorizing the issuance of additional shares). MIH Limited has agreed not to
cause us to take specified actions without the consent of certain of our
shareholders. Subject to those limitations, MIH Limited controls how we vote
our shares of OpenTV, Inc. We engage in transactions with subsidiaries of MIH
Limited and its parent companies in the ordinary course of business. The
interests of MIH Limited and its parent companies may diverge from your
interests, and they may be in a position to require us to act in a way that is
inconsistent with the general interests of the holders of our Class A Ordinary
Shares. See "Management", "Transactions with Related Parties" and "Principal
Shareholders".
Our strategic investors may acquire voting control of our company and, as a
result, certain decisions may be made by them that may be detrimental to your
interests
If MIH Limited, Sun Microsystems or a strategic investor that
subsequently acquires Class B Ordinary Shares elects to exchange its Class B
Ordinary Shares for Class A Ordinary Shares, certain of our strategic
investors, including America Online, Inc., General Instrument Corp., Liberty
Digital, Inc., News Corporation and Time Warner, Inc., have the right to
exchange their Class A Ordinary Shares for such Class B Ordinary Shares. The
Class B Ordinary Shares entitle holders to ten votes per share while Class A
Ordinary Shares entitle holders to one vote per share. As a result, these new
investors could acquire the power to determine the outcome of any action
requiring shareholder approval.
The net proceeds from these offerings may be allocated in ways with which you
may not agree
Our management has significant flexibility in applying the net proceeds
we receive in these offerings. Because the net proceeds are not required to be
allocated to any specific investment or transaction, you cannot determine at
this time the value or propriety of our management's application of the
proceeds and you and other shareholders may not agree with our decisions. See
"Use of Proceeds" for a more detailed description of how management intends to
apply the proceeds of these offerings.
Government regulations may adversely affect our business
The telecommunications, media, broadcast and cable television industries
are subject to extensive regulation by governmental agencies. These
governmental agencies continue to oversee and adopt legislation and regulation
over these industries, which may affect our business, market participants with
which we have
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relationships or the acceptance of interactive television in general. In
addition, future legislation or regulatory requirements regarding privacy
issues could be enacted to require notification to users that captured data may
be used by marketing entities to target product promotion and advertising to
that user. Any of these developments may materially adversely affect our
business.
The Year 2000 problem may adversely affect our business
The risks posed by the Year 2000 problem could adversely affect our
business in a number of significant ways. Many of our customers and potential
customers maintain their operations on systems that could be impacted by Year
2000 problems. If these entities fail to ensure that their systems are Year
2000 compliant and Year 2000 problems materially adversely affect them, our
business could be materially adversely affected, particularly if demand for our
products and services declines while customers redirect their resources to
upgrade their computer systems. Disruptions in the Internet infrastructure
arising from Year 2000 problems could also adversely affect our business,
financial condition and results of operations.
In addition, our business could be materially adversely affected if we
cannot obtain from our hardware and software suppliers products, services or
systems that are Year 2000 compliant when we need them. Our internal
information systems may experience operations difficulties because of
undetected errors or defects in the products, services or systems provided to
us by our suppliers. We are in the process of obtaining assurances from our
suppliers that they are Year 2000 compliant. The expense to correct such
defects could have a material adverse effect on our business, results of
operations and financial condition.
Because the products and services we deliver are sometimes dependent upon
third-party products and components, it may be difficult to determine which
component of our products and services may cause a Year 2000 problem. As a
result, we may become involved in litigation concerning our services or
products and components supplied by a third party. The risk that we will be
involved in a lawsuit relating to Year 2000 issues is likely to be greater than
that of companies in other industries. We sometimes provide an express warranty
to our customers that our work is Year 2000 compliant. However, even absent an
express Year 2000 warranty, there is a risk that our customers will try to hold
us liable for damages caused by the Year 2000 problem.
We cannot guarantee that we will be Year 2000 compliant in a timely
manner. Moreover, the costs related to Year 2000 compliance could be
significant. See "Managements Discussion and Analysis of Financial Condition
and Results of Operations--Year 2000 Compliance" for a further discussion of
the potential effects of the Year 2000 problem on our business.
Because we are a British Virgin Islands company, you may not be able to enforce
judgments against us that are obtained in U.S. courts
We are incorporated in the British Virgin Islands. Several of our
directors and executive officers reside outside the U.S., and a portion of our
assets are located outside the United States. As a result, it may be difficult
or impossible for investors to effect service of process upon such persons
within the United States or to enforce against such persons judgments obtained
in the U.S. courts, including judgments predicated upon the civil liability
provisions of the federal securities laws of the United States.
We have been advised by our counsel, Harney, Westwood & Riegels, that
judgments of U.S. courts predicated upon the civil liability provisions of the
federal securities laws of the United States, may be difficult to enforce in
BVI courts and that there is doubt as to whether BVI courts will enter
judgments in original actions brought in BVI courts predicated solely upon the
civil liability provisions of the federal securities laws of the United States.
Because we are a British Virgin Islands company, you may have difficulty
protecting your interests in respect of decisions made by our board of
directors
Our corporate affairs are governed by our Memorandum and Articles and by
the International Business Companies Act of the British Virgin Islands.
Principles of law relating to such matters as the validity of
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corporate procedures, the fiduciary duties of management and the rights of our
shareholders may differ from those that would apply if we were incorporated in
the United States or another jurisdiction. The rights of shareholders under BVI
law are not as clearly established as are the rights of shareholders in many
other jurisdictions. Thus, you may have more difficulty protecting your
interests in the face of actions by our board of directors or our principal
shareholders than you would have as shareholders of a corporation incorporated
in another jurisdiction.
We may be unable to raise additional capital in the future to support our
growth
We expect that our existing capital resources, combined with the net
proceeds of these offerings, will be sufficient to meet our cash requirements
through at least the next 12 months. However, as we continue to grow our
business, we may need to raise additional capital, which may not be available
on acceptable terms, if at all. If we cannot raise necessary additional capital
on acceptable terms, we may not be able to develop or enhance our products and
services, take advantage of future opportunities or respond to competitive
pressures or unanticipated requirements, any of which could have a material
adverse effect on our business.
If additional capital is raised through the issuance of equity securities
or by incurring convertible debt, the percentage ownership of our existing
shareholders will be reduced and shareholders may experience dilution in net
book value per share. Any debt financing, if available, may involve covenants
limiting or restricting our operations or future opportunities.
You will pay a price for our Class A Ordinary Shares that was not established
in a competitive market, and the price that prevails in the market may
therefore be lower than the price paid by you
There is currently no public market for our Class A Ordinary Shares, and
we cannot assure you that an active trading market will develop or be sustained
after these offerings. The initial public offering price will be determined
through negotiation between us and representatives of the underwriters and may
not be indicative of the market price for our Class A Ordinary Shares after
these offerings.
The market price of our Class A Ordinary Shares could fluctuate
significantly as a result of:
. variations in our operating results which may cause us to fail to
meet analysts' or investors' expectations
. general economic and stock market conditions
. changes in financial estimates by securities analysts
. earnings and other announcements by, and changes in market
evaluations of, companies in the interactive television industry
. changes in business or regulatory conditions affecting us
. announcements by us or our competitors of technological
innovations or new products or services
. the trading activity of our Class A Ordinary Shares
The securities of many companies have experienced extreme price and
volume fluctuations in recent years, often unrelated to the operating
performance of these companies. For example, market prices for securities of
Internet-related and technology companies have reached elevated levels, often
following initial public offerings, that may not be sustainable. If the market
price of our Class A Ordinary Shares reaches an elevated level following these
offerings, it may materially decline. In the past, following periods of
volatility in the market price of a company's securities, that company's
shareholders have often instituted securities class action litigation against
the company. If we were involved in such a class action suit, it could have a
material adverse effect on our business, financial condition and results of
operations.
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Investors in these offerings will experience immediate and substantial dilution
If you purchase Class A Ordinary Shares in these offerings, you will pay
more for your shares than the amounts existing shareholders paid for their
shares. In addition, you will experience immediate and substantial dilution of
approximately $15.84 per share, representing the difference between our pro
forma net tangible book value per share as of September 30, 1999, after giving
effect to these offerings and the assumed public offering price of $19.00 per
share. In addition, you may experience further dilution to the extent that our
ordinary shares are issued upon the exercise of options or warrants to purchase
shares. These shares will be issued at a purchase price that is less than the
public offering price per share in these offerings. See "Dilution" for a more
complete description of how the value of your investment in our Class A
Ordinary Shares will be diluted upon the completion of these offerings.
The sale of substantial amounts of our Class A Ordinary Shares could adversely
affect its market price
Sales of substantial amounts of our Class A Ordinary Shares in the public
market after the completion of these offerings, or the perception that such
sales could occur, could adversely affect the market price of our Class A
Ordinary Shares and could materially impair our future ability to raise capital
through offerings of our Class A Ordinary Shares.
In connection with these offerings, we, our executive officers, our
directors and our shareholders, including MIH Limited, have agreed not to offer
or transfer any of our ordinary shares for 180 days after completion of these
offerings without the underwriters' consent; however, the underwriters may
release these shares from these restrictions at any time. In addition, our
parent company, MIH Limited, has agreed to certain restrictions on its ability
to sell our ordinary shares for three years after these offerings pursuant to
requirements for listing on the Amsterdam Stock Exchange. We cannot predict
what effect, if any, market sales of shares held by MIH Limited or any of our
other shareholders or the availability of these shares for future sale will
have on the market price of our Class A Ordinary Shares. For a more detailed
description of the restrictions on selling ordinary shares after these
offerings, see "Shares Eligible for Future Sale".
The anti-takeover provisions contained in our charter could deter a change in
control
Certain provisions of our Memorandum and Articles may discourage attempts
by other companies to acquire or merge with us, which could reduce the market
value of our Class A Ordinary Shares. The low voting rights of our Class A
Ordinary Shares, as well as other provisions of our Memorandum and Articles,
may delay, deter or prevent other persons from attempting to acquire control of
us. These provisions include:
. the authorization of our board of directors to issue shares of
undesignated preference shares in one or more series without the
specific approval of the holders of ordinary shares
. the establishment of advance notice requirements for director
nominations and actions to be taken at shareholder meetings
. the requirement that either the holders of two-thirds of the
combined votes of all of our ordinary shares entitled to vote at a
meeting or two-thirds of our board of directors are required to
approve any change to certain provisions of our Memorandum and
Articles
In addition, our Memorandum and Articles permit special meetings of the
shareholders to be called only by the chief executive officer or upon request
by a majority of our board of directors and may deny shareholders the ability
to call such meetings or to act by shareholder consent. The low voting rights
of the Class A Ordinary Shares and such provisions, as well as provisions of
BVI law to which we are subject, could impede a merger, takeover or other
business combination involving us or discourage a potential acquiror from
making a tender offer or otherwise attempting to obtain control of us. Our
anti-takeover provisions are more fully described under the heading
"Description of Capital Stock--Certain Anti-Takeover Matters".
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CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes "forward-looking statements" for purposes of the
Securities Act of 1933 and the Securities Exchange Act of 1934. All statements
other than statements of historical fact in this prospectus, including
statements regarding our competitive strengths, business strategy, future
financial position, projected costs and plans and objectives of management are
forward-looking statements. Forward-looking statements generally can be
identified by the use of forward-looking terminology such as "may", "will",
"expect", "should", "intend", "estimate", "anticipate", "believe", "continue"
or similar terminology. Although we believe that the expectations reflected in
any such forward-looking statements are reasonable, we can give no assurance
that these expectations will prove to be correct. Important factors that could
cause actual results to differ materially from our expectations are disclosed
under "Risk Factors" and elsewhere in this prospectus and expressly qualify all
written and oral forward-looking statements attributable to us.
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USE OF PROCEEDS
We expect to receive net proceeds of approximately $130.5 million from
these offerings ($150.4 million if the over-allotment options granted to the
underwriters and international managers are fully exercised). This estimate is
based upon an initial public offering price of $19.00 per share (which is the
mid-point of the estimated price range on the cover of this prospectus) and is
computed after deducting underwriting discounts and offering expenses. We will
lend or contribute the net proceeds from these offerings to OpenTV, Inc., which
intends to use these net proceeds to fund the following:
. the development of our applications business
. our working capital needs
. possible strategic acquisitions and investments
It should be noted that with regard to the acquisitions and investments
described above, we have not entered into definitive agreements with regard to
any acquisition or investment.
Pending the use of the net proceeds as described above, we or OpenTV,
Inc., as applicable, intend to invest the net proceeds from these offerings in
short-term, interest-bearing, investment-grade securities. See "Risk Factors--
The net proceeds from these offerings may be allocated in ways with which you
may not agree".
DIVIDEND POLICY
We anticipate that any earnings in the foreseeable future will be
retained to finance our continued growth and expansion, and we have no current
intention to pay cash dividends on our ordinary shares. The payment of
dividends is within the discretion of our board of directors and will be
dependent upon, among other factors, our results of operations, financial
condition, capital requirements, restrictions imposed by our financing
arrangements and legal requirements.
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CAPITALIZATION
The OpenTV, Inc. Actual column in the following table sets forth OpenTV,
Inc.'s capitalization as of September 30, 1999. The OpenTV Corp. Pro Forma
column gives effect to the following transactions which occurred subsequent to
September 30, 1999: (1) the exchange of MIH Limited's OpenTV, Inc. Class B
Common Stock for Class B Ordinary Shares of OpenTV Corp., which results in the
recognition of a minority interest, and (2) the issuance of 23,648,646 Series
C-1 Convertible Preference Shares (convertible into 4,729,728 Class A Ordinary
Shares), 4,504,504 Series C-2 Convertible Preference Shares (convertible into
900,900 Class A Ordinary Shares) and warrants to purchase 4,729,728 Class A
Ordinary Shares for aggregate net proceeds of $31.0 million. The Pro Forma As
Adjusted column gives effect to: (1) the conversion of all of our Series C-1
Convertible Preference Shares and Series C-2 Convertible Preference Shares into
5,630,628 Class A Ordinary Shares and (2) the sale of 7,500,000 Class A
Ordinary Shares in these offerings at an assumed initial public offering price
of $19.00 per share (which is the mid-point of the estimated price range on the
cover of this prospectus) after deducting underwriting discounts and
commissions and estimated offering expenses. See "Use of Proceeds" and the
notes to our financial statements. The Open TV Corp. Pro Forma and Pro Forma As
Adjusted information set forth below is unaudited and should be read in
conjunction with our unaudited pro forma combined financial information and
consolidated financial statements and notes.
<TABLE>
<CAPTION>
September 30, 1999
--------------------------------
OpenTV, OpenTV
Inc. Corp. Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Minority interest............................. $ -- $ 2,153 $ 2,153
======== ========= =========
Long-term debt................................ $ -- $ -- $
Redeemable common stock, par value $0.001;
717,520 issued and outstanding, actual; no
shares issued and outstanding, pro forma and
as adjusted ................................. 10,200 -- --
-------- --------- ---------
Shareholders' equity:
Preference shares, no par value; 500,000,000
shares authorized; none issued and
outstanding, actual........................ -- -- --
Series C-1 Convertible Preference Shares, no
par value; 23,648,646 shares authorized, no
shares issued and outstanding actual;
23,648,646 shares issued and outstanding
pro forma; no shares issued and outstanding
pro forma as adjusted...................... -- 26,000 --
Series C-2 Convertible Preference Shares, no
par value; 4,504,504 shares authorized, no
shares issued and outstanding actual;
4,504,504 shares issued and outstanding pro
forma; no shares issued and outstanding pro
forma as adjusted.......................... -- 5,000 --
Class A Ordinary Shares, no par value;
500,000,000 shares authorized; no shares
issued and outstanding, actual; no shares
issued and outstanding, pro forma;
13,130,628 shares issued and outstanding,
pro forma as adjusted...................... -- -- 161,525
Class B Ordinary Shares, no par value;
200,000,000 shares authorized; no shares
issued and outstanding, actual; 30,631,746
shares issued and outstanding, pro forma
and pro forma as adjusted.................. -- 59,855 59,855
Warrants.................................... -- 63,851 63,851
Class A Common Stock, par value $0.001;
275,000,000 shares authorized; no shares
issued and outstanding, actual; no shares
issued and outstanding, pro forma and pro
forma as adjusted ......................... -- -- --
Class B Common Stock, par value $0.001;
225,000,000 shares authorized; 38,233,825
shares issued and outstanding, actual; no
shares issued and outstanding, pro forma
and pro forma as adjusted.................. 38 -- --
Additional paid-in capital.................. 51,770 31,250 31,250
Receivable from stockholders................ (11) (11) (11)
Deferred compensation....................... (14,575) (14,575) (14,575)
Accumulated other comprehensive income...... (29) (29) (29)
Accumulated deficit......................... (37,333) (132,434) (132,434)
-------- --------- ---------
Total shareholders' equity.................. (140) 38,907 169,432
-------- --------- ---------
Total capitalization........................ $ 10,060 $ 38,907 $ 169,432
======== ========= =========
</TABLE>
19
<PAGE>
DILUTION
At September 30, 1999 and after giving effect to the following
transactions which occurred subsequent to September 30, 1999: (1) the exchange
of MIH Limited's OpenTV, Inc. Class B Common Stock for Class B Ordinary Shares
of OpenTV Corp., which results in the recognition of a minority interest,
(2) the issuance of 23,648,646 Series C-1 Convertible Preference Shares
(convertible into 4,729,728 Class A Ordinary Shares), 4,504,504 Series C-2
Convertible Preference Shares (convertible into 900,900 Class A Ordinary
Shares) and warrants to purchase 4,729,728 Class A Ordinary Shares for
aggregate net proceeds of $31.0 million and the conversion of all our Series C-
1 Convertible Preference Shares and Series C-2 Convertible Preference Shares
into 5,630,628 Class A Ordinary Shares and (3) the assumed exchange of all
other shares of common stock of OpenTV, Inc. for ordinary shares of OpenTV
Corp. at an exchange rate of one for one, we had a net tangible book value of
approximately $34.2 million, or $0.77 per ordinary share. Net tangible book
value per share represents the amount of total tangible assets less total
liabilities divided by the number of ordinary shares outstanding. After giving
effect to the sale of Class A Ordinary Shares in these offerings at an assumed
initial public offering price of $19.00 per share (which is the mid-point of
the estimated price range on the cover of this prospectus) and after deducting
the estimated underwriting discount and offering expenses payable by us, our
pro forma net tangible book value as of September 30, 1999 would have been
approximately $164.7 million, or $3.16 per share. This represents an immediate
increase in net tangible book value of $2.39 per share to the existing
shareholders and an immediate dilution of $15.84 per share to new investors.
The following table illustrates this per share dilution.
<TABLE>
<S> <C> <C>
Assumed initial public offering price............................. $19.00
Net tangible book value as of September 30, 1999................ $0.77
Increase attributable to net proceeds of these offerings to
OpenTV......................................................... 2.39
-----
Pro forma net tangible book value after these offerings........... 3.16
------
Dilution to new investors......................................... $15.84
======
</TABLE>
The following table summarizes on a pro forma basis, at September 30,
1999 after giving effect to the following transactions which occurred
subsequent to September 30, 1999: (1) the exchange of MIH Limited's OpenTV,
Inc. Class B Common Stock for Class B Ordinary Shares of OpenTV Corp., which
results in the recognition of a minority interest, (2) the issuance of
23,648,646 Series C-1 Convertible Preference Shares (convertible into 4,729,728
Class A Ordinary Shares), 4,504,504 Series C-2 Convertible Preference Shares
(convertible into 900,900 Class A Ordinary Shares) and warrants to purchase
4,729,728 Class A Ordinary Shares for aggregate net proceeds of $31.0 million
and the conversion of all of our Series C-1 Convertible Preference Shares and
Series C-2 Convertible Preference Shares into 5,630,628 Class A Ordinary Shares
and (3) the assumed exchange of all other shares of common stock of OpenTV,
Inc. for ordinary shares of OpenTV Corp. at an exchange rate of one for one,
the difference between existing shareholders and new investors in these
offerings (at an assumed initial public offering price of $19.00 per share)
with respect to the number of ordinary shares purchased from OpenTV, the total
consideration paid and the average price paid per share:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ ------------------- Average Price
Number Percent Amount Percent per Share
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders... 44,581,971 86% $ 76,911,000 35% $ 1.73
New investors........... 7,500,000 14 142,500,000 65 19.00
---------- --- ------------ ---
Total ................ 52,081,971 100% $219,411,000 100%
========== === ============ ===
</TABLE>
The foregoing tables assume:
. no exercise of the underwriters' over-allotment options
. no exercise of the 5,141,104 outstanding options to purchase our
ordinary shares as of October 21, 1999
. no exercise of the outstanding warrants to purchase 4,729,728
Class A Ordinary Shares
20
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited pro forma combined financial information for OpenTV Corp.
gives effect to: (1) the exchange of MIH Limited's OpenTV, Inc. Class B Common
Stock for Class B Ordinary Shares of OpenTV Corp., a newly formed holding
company, in October 1999 (the "Transaction"), which results in the recognition
of a minority interest, and (2) the issuance of 23,648,646 Series C-1
Convertible Preference Shares (convertible into 4,729,728 Class A Ordinary
Shares), 4,504,504 Series C-2 Convertible Preference Shares (convertible into
900,900 Class A Ordinary Shares) and warrants to purchase 4,729,728 Class A
Ordinary Shares for net proceeds of $31.0 million. The historical information
set forth below has been derived from, and is qualified by reference to, the
consolidated financial statements of OpenTV, Inc. (the predecessor to OpenTV
Corp.) and should be read in conjunction with those financial statements, the
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this prospectus.
The unaudited pro forma combined balance sheet data as of September 30,
1999 give effect to items (1) and (2) above as if they had occurred on
September 30, 1999. The unaudited pro forma combined statement of operations
data for the nine months ended September 30, 1999 give effect to the
Transaction as if it occurred on January 1, 1998.
21
<PAGE>
OPENTV CORP.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
As of September 30, 1999
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Pro Forma
Historical Combined
OpenTV, Pro Forma OpenTV
Inc. Adjustments Corp.
---------- ----------- ---------
Assets
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents................. $ 2,580 $ 31,000 (b) $ 33,580
Accounts receivable, net.................. 3,345 -- 3,345
Prepaid expenses and other current
assets................................... 1,002 -- 1,002
-------- -------- ---------
Total current assets...................... 6,927 31,000 37,927
Property and equipment, net................ 4,146 -- 4,146
Intangible assets, net..................... 6,813 -- 6,813
Other assets............................... 426 -- 426
-------- -------- ---------
Total assets.............................. $ 18,312 $ 31,000 $ 49,312
======== ======== =========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable.......................... $ 1,387 $ -- $ 1,387
Accrued liabilities....................... 3,399 -- 3,399
Related parties payable................... 532 -- 532
Deferred revenue.......................... 2,934 -- 2,934
-------- -------- ---------
Total liabilities......................... 8,252 -- 8,252
-------- -------- ---------
Minority interest.......................... -- 2,153 (a) 2,153
Redeemable common stock, par value $0.001;
717,520 issued and outstanding,
historical; no shares issued and
outstanding, pro forma.................... 10,200 (10,200)(a) --
-------- -------- ---------
10,200 (8,047) 2,153
-------- -------- ---------
Shareholders' equity:
Preference shares, no par value;
500,000,000 shares authorized; no shares
issued and outstanding, historical and
pro forma................................ -- -- --
Series C-1 Convertible Preference Shares,
no par value; 23,648,646 shares
authorized, no shares issued and
outstanding actual; 23,648,646 shares
issued and outstanding pro forma ........ -- 26,000 (b) 26,000
Series C-2 Convertible Preference Shares,
no par value; 4,504,504 shares
authorized, no shares issued and
outstanding actual; 4,504,504 shares
issued and outstanding pro forma ........ -- 5,000 (b) 5,000
Class A Ordinary Shares, no par value:
500,000,000 shares authorized; no shares
issued and outstanding, historical and
pro forma................................ -- -- --
Class B Ordinary Shares, no par value:
200,000,000 shares authorized; no shares
issued and outstanding, historical;
30,631,746 shares issued and outstanding,
pro forma................................ -- 59,855 (a) 59,855
Warrants.................................. -- 63,851 (b) 63,851
Class A Common Stock, par value $0.001;
275,000,000 shares authorized; no shares
issued and outstanding, historical; no
shares issued and outstanding pro forma.. -- -- --
Class B Common Stock, par value $0.001;
225,000,000 shares authorized; 38,233,825
shares issued and outstanding, actual; no
shares issued and outstanding, pro
forma.................................... 38 (38)(a) --
Additional paid-in capital................ 51,770 (51,770)(a) 31,250
31,250(b)
Receivable from stockholders.............. (11) -- (11)
Deferred compensation..................... (14,575) -- (14,575)
Accumulated other comprehensive income.... (29) -- (29)
Accumulated deficit....................... (37,333) (95,101)(b) (132,434)
-------- -------- ---------
Total shareholders' equity................ (140) 39,047 38,907
-------- -------- ---------
Total liabilities and shareholders'
equity................................... $ 18,312 $ 31,000 $ 49,312
======== ======== =========
</TABLE>
22
<PAGE>
OPENTV CORP.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1999
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Pro Forma
Historical Combined
OpenTV, Pro Forma OpenTV
Inc. Adjustments Corp.
---------- ----------- ---------- --- ---
<S> <C> <C> <C> <C> <C>
Revenues:
Royalties.................... $ 10,061 $ -- $ 10,061
License fees................. 1,904 -- 1,904
Services and other........... 5,592 -- 5,592
---------- ----------- ----------
Total revenues............. 17,557 -- 17,557
---------- ----------- ----------
Operating expenses: --
Cost of services and other
revenues.................... 3,472 -- 3,472
Research and development..... 8,227 -- 8,227
Sales and marketing.......... 7,834 -- 7,834
General and administrative... 5,721 -- 5,721
Amortization of intangibles.. 827 -- 827
---------- ----------- ----------
Total operating expenses... 26,081 -- 26,081
---------- ----------- ----------
Loss from operations........ (8,524) -- (8,524)
Other income (expense), net.... 40 -- 40
Minority interest.............. -- 1,816 (c) 1,816
---------- ----------- ----------
Net loss................... $ (8,484) $ 1,816 $ (6,668)
========== =========== ==========
Net loss per share, basic and
diluted....................... $ (0.23) $ (0.26)
========== ==========
Shares used in computing net
loss per share, basic
and diluted................... 36,184,858 (10,343,137)(d) 25,841,721
</TABLE>
23
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Pro forma adjustments for the unaudited pro forma combined statement of
operations for the nine months ended September 30, 1999 and the unaudited pro
forma combined balance sheet as of September 30, 1999 are as follows:
(a) To reflect the incorporation of OpenTV Corp. and the subsequent
exchange of MIH Limited's OpenTV, Inc. Class B Common Stock for Class B
Ordinary Shares of OpenTV Corp. and record the minority stockholder's 21.4%
interest in OpenTV, Inc. as of September 30, 1999.
(b) To reflect the sale of 23,648,646 Series C-1 Convertible Preference
Shares at $5.55 per share and warrants to purchase 4,729,728 Class A Ordinary
Shares to a new investor group and 4,504,504 Series C-2 Convertible Preference
Shares at $5.55 per share to Sun Microsystems for net proceeds of $31.0
million. At the closing of these offerings, all of the Series C-1 Convertible
Preference Shares and Series C-2 Convertible Preference Shares will convert
into 5,630,628 Class A Ordinary Shares. The difference between the mid-point of
the estimated price range for shares in OpenTV Corp.'s initial public offering
("IPO") and the deemed fair value of the common stock on the date of the
transaction resulted in a beneficial conversion feature equal to the gross
proceeds of $31.2 million. Under EITF 98-5, the beneficial conversion feature
will result in a preferred stock dividend of $31.2 million in the quarter
ending December 31, 1999. The beneficial conversion feature is a one time
preferred stock dividend recorded on the sale of the convertible preference
shares and is reflected in the unaudited pro forma combined balance sheet as an
increase in additional paid-in capital and accumulated deficit.
The warrants issued to the new investors are exercisable for two years at
an exercise price of $5.55 per ordinary share. OpenTV Corp. valued the warrants
using the Black-Scholes option pricing model applying an expected life of two
years, a weighted average risk free rate of 6%, a dividend yield of zero
percent, volatility of 60% and a deemed fair value of ordinary shares equal to
the mid-point of the estimated price range for shares in OpenTV Corp.'s IPO.
The fair value of $63.9 million represents a non-cash warrant operating expense
given as an inducement to the investors to enter into current or future
strategic agreements that will be recognized in the quarter ending December 31,
1999. This is a one time charge and, accordingly, was not reflected in the pro
forma combined statement of operations. However, it is reflected in the
unaudited combined balance sheet as an increase in warrants and accumulated
deficit.
Concurrent with the financing, OpenTV Corp. entered into strategic
agreements with three of the six investors: American Online, Inc., News
Corporation and Time Warner, Inc. Under these strategic agreements, services
are being exchanged which represent non-monetary transactions between the
parties. There is no objective basis for assigning fair value to the services
being exchanged and, in accordance with APB 29, no value has been assigned.
(c) To record the minority stockholder's 21.4% interest in the results of
operation for the nine months ended September 30, 1999.
(d) Basic and diluted net loss per share (pro forma) is computed using
the weighted-average number of ordinary shares outstanding giving effect to the
Transaction as if it occurred on January 1, 1998.
Due to OpenTV, Inc.'s accumulated deficit and net loss for the year ended
December 31, 1998, no pro forma adjustment for minority interest is required.
Therefore, the unaudited pro forma combined statement of operations data for
the year ended December 31, 1998 was not presented.
24
<PAGE>
HISTORICAL PREDECESSOR SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data of OpenTV, Inc. (the
predecessor to OpenTV Corp.) should be read in conjunction with, and are
qualified by reference to, our consolidated financial statements, including the
notes thereto, and the section entitled "Management's Discussion and Analysis
of Financial Condition and Results of Operations", which are included elsewhere
in this prospectus. The consolidated statement of operations data for the
period from July 1, 1996 (date of inception) to December 31, 1996 and the years
ended December 31, 1997 and 1998, and the consolidated balance sheet data as of
December 31, 1996, 1997 and 1998, are derived from, and qualified by reference
to, our audited financial statements, which are included elsewhere in this
prospectus. The consolidated balance sheet data as of September 30, 1999 and
the consolidated statement of operations data for the nine months ended
September 30, 1998 and 1999 are derived from, and are qualified by reference
to, our unaudited consolidated financial statements, which are included
elsewhere in this prospectus. OpenTV Corp. holds 78.5% of the common stock of
OpenTV, Inc. as of October 21, 1999 (82.7 % after giving effect to the exercise
of outstanding employee stock options to purchase shares of common stock of
OpenTV, Inc. and the issuance of additional shares of common stock of OpenTV,
Inc. to OpenTV Corp. at the closing of these offerings) and will consolidate
OpenTV, Inc.'s results and record a minority interest for the portion not
owned.
<TABLE>
<CAPTION>
July 1, 1996 Year Ended Nine Months Ended
(Date of Inception) December 31, September 30,
to December 31, ---------------------- ----------------------
1996 1997 1998 1998 1999
------------------- ---------- ---------- ---------- ----------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Revenues:
Royalties............. $ -- $ 2,382 $ 2,788 $ 1,890 $ 10,061
License fees.......... 287 1,255 1,578 1,043 1,904
Services and other.... 731 3,322 5,102 3,183 5,592
--------- ---------- ---------- ---------- ----------
Total revenues....... 1,018 6,959 9,468 6,116 17,557
--------- ---------- ---------- ---------- ----------
Operating expenses:
Cost of services and
other revenues....... 587 3,290 4,736 3,131 3,472
Research and
development.......... 2,590 6,219 7,514 5,328 8,227
Sales and marketing... 845 4,323 7,418 5,433 7,834
General and
administrative....... 1,126 3,929 3,995 2,845 5,721
Amortization of
intangibles.......... -- -- -- -- 827
--------- ---------- ---------- ---------- ----------
Total operating
expenses............ 5,148 17,761 23,663 16,737 26,081
--------- ---------- ---------- ---------- ----------
Loss from operations.... (4,130) (10,802) (14,195) (10,621) (8,524)
Other income (expense),
net.................... 172 113 (7) 1 (40)
--------- ---------- ---------- ---------- ----------
Net loss................ $ (3,958) $ (10,689) $ (14,202) $ (10,620) $ (8,484)
========= ========== ========== ========== ==========
Net loss per share,
basic and diluted...... $ (0.43) $ (0.43) $ (0.43) $ (0.32) $ (0.23)
========= ========== ========== ========== ==========
Shares used in computing
net loss per share,
basic and diluted...... 9,210,877 24,973,614 33,212,803 33,197,261 36,184,858
</TABLE>
<TABLE>
<CAPTION>
As of December 31, As of
----------------------- September 30,
1996 1997 1998 1999
------ ------- ------- -------------
(in thousands)
<S> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents.............. $5,357 $ 293 $ 3,324 $ 2,580
Working capital (deficit).............. 3,627 (2,272) (1,459) (1,325)
Total assets........................... 7,482 4,878 10,038 18,312
Convertible notes payable to
stockholders.......................... -- -- 7,000 --
Redeemable common stock................ -- -- 117 10,200
Total stockholders' equity (deficit)... 4,677 (158) (4,783) (140)
</TABLE>
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Financial Statements of OpenTV, Inc. (the predecessor to OpenTV Corp.)
included elsewhere in this prospectus. OpenTV Corp. holds 78.5% of the common
stock of OpenTV, Inc. as of October 21, 1999 (82.7% after giving effect to the
exercise of outstanding employee stock options to purchase shares of common
stock of OpenTV, Inc. and the issuance of additional shares of common stock of
OpenTV, Inc. to OpenTV Corp. at the closing of these offerings) and will
consolidate OpenTV, Inc.'s results and record a minority interest for the
portion not owned.
Background
We are the leading worldwide provider of software that enables digital
interactive television. Our software is running on over 4.5 million set-top
boxes worldwide, with 22 network operators in 17 countries having selected our
OpenTV Runtime software as their interactive platform. Our digital interactive
solution enhances a television viewer's experience without changing viewing
habits and provides a rich audio and video television environment for enhanced
applications such as e-commerce.
Revenues
We currently generate revenues from the following sources:
. royalties associated with our OpenTV Runtime software
. fees from licenses of our software products
. fees for training, maintenance and software development services
Royalty revenue is generated as manufacturers and network operators
deploy digital set-top boxes enabled with OpenTV Runtime. Royalties associated
with OpenTV Runtime become due from set-top box manufacturers upon the
manufacturers' shipment of new set-top boxes enabled with OpenTV Runtime. We
also receive royalties from network operators when they install or upgrade
OpenTV Runtime to set-top boxes that have already been deployed. We recognize
royalties from licensees when notified of revenues earned. Notifications are
generally received 30 to 45 days following the quarter or month during which
the royalty obligation is incurred.
We license our application development tools and our head-end software to
customers for an initial license fee. Our customers generally include network
operators, set-top box manufacturers and independent application and content
developers. We recognize software license fees upon shipment if each of the
following are true:
. a signed contract exists
. the fee is fixed and determinable
. the collection of the resulting receivable is probable
. product returns are reasonably estimable
We license our OpenTV Hardware Porting Kit ("HPK") to set-top box
manufacturers, chip set manufacturers and conditional access vendors. The
license fee is recognized upon completion of integration of OpenTV Runtime with
the licensee's hardware or software.
For contracts with multiple obligations (e.g., maintenance and other
services), revenues from product licenses are recognized when delivery has
occurred, collection of the receivable is probable, the fee is fixed or
determinable and vendor-specific objective evidence exists to allocate the
total fee to all delivered and undelivered elements of the arrangement.
26
<PAGE>
We receive services and other revenues from the following sources:
. annual maintenance and support fees
. training
. fees for integration and program management services
. long-term software development contracts
We recognize revenue from maintenance and support fees for ongoing
customer support and product updates ratably over the period of the relevant
contract. Payments for maintenance and support fees are generally made in
advance and are non-refundable. For revenue allocated to consulting services
and for consulting services sold separately, we recognize revenue as the
related services are performed. For product licenses sold with integration
services we recognize revenue based on the completed contract method. We
recognize revenue from software development contracts of less than six months
in duration based on the completed contract method. For longer-term contracts,
we generally recognize revenue on the percentage of completion method. Under
the percentage of completion method the extent of progress towards completion
is measured based on actual costs incurred to total estimated costs. Provisions
for estimated losses on uncompleted contracts are made in the period in which
estimated losses are determined. Revenue from the sale of hardware components
and manuals are recognized upon shipment.
In future periods, we expect to generate significant revenues from our
applications business, including fees for custom developed applications and
revenue sharing arrangements related to advertising and e-commerce
applications.
Operating Expenses
Cost of revenues for royalties and license fees have not been material to
date. Cost of revenues for services consists primarily of personnel expenses,
costs related to outside consultants, travel and overhead associated with
software development, program management, customer and technical support and
training. Future versions of our products may require third-party royalties
that, if they became material, we would record as a cost of revenues.
Research and development expenses consist primarily of salary and other
related costs for personnel and independent consultants for our development
efforts. We believe that continued investment in research and development is
critical to attaining our strategic objectives. We plan to increase the level
of research and development expenses, both to develop new versions of OpenTV
Runtime and to create interactive applications and services.
Sales and marketing expenses consist primarily of personnel and related
costs for our direct sales force and marketing staff and costs associated with
marketing programs, including tradeshows, public relations and marketing
materials. We plan to increase the level of our sales and marketing expenses
substantially over the next year, as we increase spending on advertising and
marketing programs to build the OpenTV brand and establish additional
international sales and support offices to expand our presence in new
geographic markets.
General and administrative expenses consist primarily of personnel and
related costs for general corporate functions, including finance, accounting
and human resources. We expect these expenses to increase as we hire additional
general and administrative employees worldwide.
Losses
From inception through September 30, 1999, we have an accumulated deficit
of $37.3 million and have not achieved profitability on a quarterly or annual
basis. We expect to continue to incur losses for the foreseeable future.
27
<PAGE>
Nine months ended September 30, 1998 and 1999
The following table sets forth the results of our operations. These
historical results are not necessarily indicative of results to be expected for
any future period.
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended Nine Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
1998 1999 1998 1999
----------------- ----------------- ----------------- -----------------
(in thousands) (percentage of total revenues)
<S> <C> <C> <C> <C>
Revenues:
Royalties............. $ 1,890 $10,061 31 % 57 %
License fees.......... 1,043 1,904 17 11
Services and other.... 3,183 5,592 52 32
-------- ------- ---- ---
Total revenues...... 6,116 17,557 100 100
-------- ------- ---- ---
Operating expenses:
Cost of services and
other revenues....... 3,131 3,472 51 20
Research and
development.......... 5,328 8,227 87 47
Sales and marketing... 5,433 7,834 89 44
General and
administrative....... 2,845 5,721 47 32
Amortization of
intangibles.......... -- 827 0 5
-------- ------- ---- ---
Total operating
expenses........... 16,737 26,081 274 148
-------- ------- ---- ---
Loss from operations.... (10,621) (8,524) (174) (48)
Other income (expense),
net.................... 1 40 -- 0
-------- ------- ---- ---
Net loss................ $(10,620) $(8,484) (174)% (48)%
======== ======= ==== ===
</TABLE>
Revenues
Our total revenues increased 187% from $6.1 million for the nine month
period ended September 30, 1998 to $17.6 million for the nine month period
ended September 30, 1999. For the nine month period ended September 30, 1998,
our largest customer accounted for 19% of our total revenues. For the nine
month period ended September 30, 1999, our two largest customers accounted for
13% and 10%, respectively, of our total revenues.
Royalties. Royalties increased 432% from $1.9 million for the nine months
ended September 30, 1998 to $10.1 million for the nine month period ended
September 30, 1999. The increase was largely attributable to the launches of
OpenTV enabled interactive services by two network operators, BSkyB and Via
Digital.
License fees. License fees increased 83% from $1.0 million for the nine
month period ended September 30, 1998 to $1.9 million for the nine month period
ended September 30, 1999. This increase was primarily attributable to an
increase in the number of our customers, which translated into greater product
demand. In addition, the launches of OpenAuthor and OpenStreamer during first
quarter 1999 generated revenue of $380,000 and $406,000, respectively during
the nine month period ended September 30, 1999.
Services and other. Services and other revenues increased 76% from $3.2
million for the nine month period ended September 30, 1998 to $5.6 million for
the nine month period ended September 30, 1999. The increase was primarily
attributable to an increase in demand for services due to a larger customer
base and to increased Hardware Porting Kit integration and amortization of
related deferred maintenance revenues of $1.5 million.
28
<PAGE>
Operating Expenses
Our total operating expenses increased 56% from $16.7 million for the
nine month period ended September 30, 1998 to $26.1 million for the nine month
period ended September 30, 1999.
Cost of services and other revenues. Our total cost of services and other
revenues increased 11% from $3.1 million for the nine month period ended
September 30, 1998 to $3.5 million for the nine month period ended
September 30, 1999.
Research and development. Research and development expenses increased 54%
from $5.3 million for the nine month period ended September 30, 1998 to $8.2
million for the nine month period ended September 30, 1999. This increase was
primarily due to an increase in the number of personnel developing enhanced
functionality for OpenTV Runtime and related software applications.
Sales and marketing. Sales and marketing expenses increased 44% from $5.4
million for the nine month period ended September 30, 1998 to $7.8 million for
the nine month period ended September 30, 1999. This increase was primarily
attributable to the initiation of new marketing programs and higher trade show
expenses.
General and administrative. General and administrative expenses increased
101% from $2.8 million for the nine month period ended September 30, 1998 to
$5.7 million for the nine month period ended September 30, 1999. The increase
was primarily attributable to an increase in the number of personnel and
related stock-based compensation.
Amortization of intangibles. In March 1999, we acquired the intellectual
property from Thomson Consumer Electronics for $7.6 million. We are amortizing
this asset over a five year estimated life and recorded $827,000 in
amortization expense for the nine month period ended September 30, 1999.
Stock-based compensation. We recorded non-cash deferred stock
compensation of $16.9 million for the nine month period ended September 30,
1999, representing the difference between the exercise price and deemed fair
market value for options to purchase shares granted to our employees and the
fair value attributable to options granted to non-employees, of which $22,000,
$278,000, $233,000 and $1.8 million was allocated to cost of services and other
revenues, research and development, sales and marketing and general and
administrative expenses, respectively. Accordingly, we amortized $2.3 million
of deferred compensation during the nine month period ended September 30, 1999.
Accretion of $10.0 million was recorded on the redeemable Class A Common Stock
during the nine month period ended September 30, 1999. We recorded no deferred
compensation expense during the nine month period ended September 30, 1998.
Other income (expense), net. Interest expense increased from $15,000 for
the nine month period ended September 30, 1998 to $73,000 for the nine month
period ended September 30, 1999. The increase was primarily due to interest
expense on convertible notes payable to stockholders. Interest income was
$16,000 for the nine month period ended September 30, 1998 and $15,000 for the
nine month period ended September 30, 1999. Other income increased from zero
for the nine month period ended September 30, 1998 to $98,000 for the nine
month period ended September 30, 1999. This increase was primarily due to
foreign exchange transaction gains recorded in the nine month period ended
September 30, 1999.
29
<PAGE>
Years Ended December 31, 1997 and 1998
The following table sets forth the results of our operations. These
historical results are not necessarily indicative of results we expect for any
future period.
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended
December 31, 1997 December 31, 1998 December 31, 1997 December 31, 1998
----------------- ----------------- ----------------- -----------------
(in thousands) (percentage of total revenues)
<S> <C> <C> <C> <C>
Revenues:
Royalties............. $ 2,382 $ 2,788 34 % 29 %
License fees.......... 1,255 1,578 18 17
Services and other.... 3,322 5,102 48 54
-------- -------- ---- ----
Total revenues...... 6,959 9,468 100 100
-------- -------- ---- ----
Operating expenses:
Cost of services and
other revenues....... 3,290 4,736 48 51
Research and
development.......... 6,219 7,514 89 79
Sales and marketing... 4,323 7,418 62 78
General and
administrative....... 3,929 3,995 56 42
-------- -------- ---- ----
Total operating
expenses........... 17,761 23,663 255 250
-------- -------- ---- ----
Loss from operations.... (10,802) (14,195) (155) (150)
Other income (expense),
net.................... 113 (7) 1 0
-------- -------- ---- ----
Net loss................ $(10,689) $(14,202) (154)% (150)%
======== ======== ==== ====
</TABLE>
Revenues
Total revenues increased 36% from $7.0 million for fiscal 1997 to $9.5
million for fiscal 1998. For fiscal 1997, our largest customer accounted for
35% of our total revenues, while for fiscal 1998, our two largest customers
accounted for 16% and 14%, respectively, of our total revenues.
Royalties. Royalties increased 17% from $2.4 million in fiscal 1997 to
$2.8 million in fiscal 1998. The increase was largely attributable to the
addition of new network operators and an increase in the number of subscribers
for our existing network operators.
License fees. License fees increased 26% from $1.3 million in fiscal 1997
to $1.6 million in fiscal 1998. This increase was primarily attributable to
higher numbers of network operators and set-top box manufacturers licensing our
software products.
Services and other. Services and other revenues increased 54% from $3.3
million for fiscal 1997 to $5.1 million for fiscal 1998. The increase was
primarily attributable to $1.3 million of revenues recognized in 1998 under a
new long-term software development contract accounted for on the percentage of
completion method. Backlog from software development contracts accounted for on
the completed contract method was $800,000 and $700,000 at December 31, 1998
and 1997, respectively.
Operating Expenses
Total operating expenses increased 33% from $17.8 million for fiscal 1997
to $23.7 million for fiscal 1998.
Cost of services and other revenues. Cost of services and other revenues
increased 44% from $3.3 million for fiscal 1997 to $4.7 million for fiscal
1998. The increase was primarily attributable to approximately $2.6 million in
costs recognized under a long-term software development contract during fiscal
1998 versus $982,000 during fiscal 1997.
30
<PAGE>
Research and development. Research and development expenses increased 21%
from $6.2 million for fiscal 1997 to $7.5 million for fiscal 1998. This
increase was primarily attributable to an increase in the number of personnel
developing enhanced functionality for OpenTV Runtime and related software
applications.
Sales and marketing. Our sales and marketing expenses increased 72% from
$4.3 million for fiscal 1997 to $7.4 million for fiscal 1998. The increase was
primarily attributable to increased expenses incurred in connection with trade
shows and additional marketing programs.
General and administrative. Our general and administrative expenses
increased 2% from $3.9 million for fiscal 1997 to $4.0 million for fiscal 1998.
Stock-based compensation. We recorded deferred stock compensation expense
of $49,000 in 1998, representing the difference between the exercise price and
deemed fair market value for options to purchase shares granted to our
employees. Accordingly, we amortized deferred compensation expense of
approximately $13,000 during fiscal 1998, which was allocated to general and
administrative expenses. We recorded no deferred compensation expense during
fiscal 1997.
Other income (expense), net. We recognized other income of $113,000 for
fiscal 1997 and other expense of $7,000 for fiscal 1998. The change was
primarily attributable to a lower average cash balance during fiscal 1998 and
interest expense incurred on $7.0 million of convertible promissory notes
during 1998. These notes were converted to our ordinary shares in March 1999.
Income taxes. As of December 31, 1998, we had federal, state and foreign
net operating loss carryforwards of $10.6 million, $4.7 million and $0.5
million, respectively, which will expire at various dates, through 2003 for
state and foreign, and 2018 for federal income tax purposes, if not utilized.
We have taken a full valuation allowance against the deferred tax asset because
of the uncertainty regarding its realization. We recognized no income tax
expense in 1997 and 1998.
The Period From July 1, 1996 (Date of Inception) to December 31, 1996 and Year
Ended December 31, 1997
The following table sets forth the results of our operations. These
historical results are not necessarily indicative of results we expect for any
future period.
<TABLE>
<CAPTION>
Period from Period from
July 1, 1996 to Year Ended July 1, 1996 to Year Ended
December 31, 1996 December 31, 1997 December 31, 1996 December 31, 1997
----------------- ----------------- ----------------- -----------------
(in thousands) (percentage of total revenues)
<S> <C> <C> <C> <C>
Revenues:
Royalties............. $ -- $ 2,382 -- % 34 %
License fees.......... 287 1,255 28 18
Services and other.... 731 3,322 72 48
------- -------- ---- ----
Total revenues...... 1,018 6,959 100 100
------- -------- ---- ----
Operating expenses:
Cost of services and
other revenues....... 587 3,290 58 47
Research and
development.......... 2,590 6,219 254 89
Sales and marketing... 845 4,323 83 62
General and
administrative....... 1,126 3,929 111 57
------- -------- ---- ----
Total operating
expenses........... 5,148 17,761 506 255
------- -------- ---- ----
Loss from operations.... (4,130) (10,802) (406) (155)
Other income ........... 172 113 17 1
------- -------- ---- ----
Net loss................ $(3,958) $(10,689) (389)% (154)%
======= ======== ==== ====
</TABLE>
31
<PAGE>
Revenues
Total revenues increased 584% from $1.0 million for the period from July
1, 1996 to December 31, 1996 to $7.0 million in the full year ended December
31, 1997. For the period from July 1, 1996 to December 31, 1996, our top four
customers accounted for 30%, 20%, 15% and 10%, respectively, of our total
revenues, while for fiscal 1997, our top customer accounted for 35% of our
total revenues.
Royalties. We did not recognize royalty revenues for the period from July
1, 1996 to December 31, 1996. We recognized $2.4 million in 1997 as our
customers initiated shipments of OpenTV Runtime in the first quarter of 1997.
License fees. License fees increased 337% from $287,000 for the period
from July 1, 1996 to December 31, 1996 to $1.3 million for fiscal 1997. The
increase in license revenues was primarily attributable to higher numbers of
network operators and set-top box manufacturers using OpenTV software.
Services and other. Services and other revenues increased 354% from
$731,000 for the period from July 1, 1996 to December 31, 1996 to $3.3 million
for fiscal 1997. The increase was primarily attributable to a full year of
amortization of maintenance fees on licensed products and Hardware Porting Kit
integration services for fiscal 1997.
Operating Expenses
Total operating expenses increased 245% from $5.1 million for the period
from July 1, 1996 to December 31, 1996 to $17.8 million for fiscal 1997.
Cost of services and other revenues. Cost of services and other revenues
increased 460% from $587,000 for the period from July 1, 1996 to December 31,
1996 to $3.3 million for fiscal 1997. The increase was primarily attributable
to a full year of sales and related expenses and $982,000 of costs associated
with a long-term software development contract recorded during fiscal 1997.
Research and development. Research and development expenses increased
140% from $2.6 million for the period from July 1, 1996 to December 31, 1996 to
$6.2 million for fiscal 1997. The increase was primarily attributable to an
increase in the number of research and development personnel and a full year of
expense during fiscal 1997.
Sales and marketing. Sales and marketing expenses increased 412% from
$845,000 for the period from July 1, 1996 to December 31, 1996 to $4.3 million
for fiscal 1997. The increase was primarily attributable to an increase in the
number of sales and marketing personnel, and expenses incurred from trade shows
and new marketing programs, and a full year of expense during fiscal 1997.
General and administrative. General and administrative expenses increased
249% from $1.1 million for the period from July 1, 1996 to December 31, 1996 to
$3.9 million for fiscal 1997. The increase was primarily attributable to an
increase in the number of general and administrative personnel and a full year
of expense during fiscal 1997.
Other income. Other income (expense), net decreased 34% from $172,000 for
the period from July 1, 1996 to December 31, 1996 to $113,000 for fiscal 1997.
The decrease was primarily attributable to a lower average cash balance during
fiscal 1997.
Liquidity and Capital Resources
Since inception, we have financed our operations primarily through sales
of equity capital and short-term loans from our shareholders. At September 30,
1999, we had an accumulated deficit of $37.3 million, and we had cash and cash
equivalents of $2.6 million. At December 31, 1998 and 1997, we had an
accumulated deficit of $28.8 million and $14.6 million, respectively, and cash
and cash equivalents of $3.3 million and $293,000, respectively.
32
<PAGE>
Our operating activities utilized cash in the amount of $5.4 million for
the nine months ended September 30, 1999, $11.0 million for fiscal 1998 and
$9.4 million for fiscal 1997. The net cash utilized during these periods was
used primarily to fund our research and development and marketing efforts.
Net cash utilized for investing activities was $1.4 million for the nine
month period ended September 30, 1999, $2.6 million for fiscal 1998 and $1.5
million for fiscal 1997. The net cash utilized was primarily for the purchase
of computer systems and equipment.
Net cash provided by financing activities was $6.1 million for the nine
month period ended September 30, 1999, $16.8 million for fiscal 1998 and $5.8
million for fiscal 1997. The net cash provided in 1997 was from the sale of
common stock. Net cash provided in 1998 was from the proceeds from the notes
payable to shareholders of $7.0 million and payment on a receivable from a
shareholder of $9.7 million. The net cash provided for the nine months ended
September 30, 1999 was from the proceeds from notes payable to a shareholder of
$2.5 million and the sale of common stock of $3.5 million.
Our October 23, 1999 sale of Series C-1 Convertible Preference Shares,
Series C-2 Convertible Preference Shares and warrants to purchase Class A
Ordinary Shares resulted in net proceeds of $31.0 million. The convertible
preference shares have an embedded beneficial conversion feature which under
EITF 98-5 will result in a preferred stock dividend of $31.2 million in the
quarter ending December 31, 1999. The fair value attributable to the warrants
to purchase our Class A Ordinary Shares of $63.9 million (based on the mid-
point of the estimated price range on the cover of this prospectus) will be
recorded in operating results as a non-cash warrant expense in the quarter
ending December 31, 1999.
We plan to increase our investment in research and development to further
enhance OpenTV Runtime and to develop new software applications, and in sales
and marketing to further brand the OpenTV name. We believe the net proceeds
from our recent securities issuances and these offerings, along with the
anticipated funds from operations, will satisfy our working capital, projected
product development, marketing and capital expenditure requirements for at
least the next 12 months. In the long-term, we may require additional equity
investment or borrowings to fund our business plan.
Recent Accounting Pronouncements
In March 1998, the Accounting Standards Executive Committee ("AcSEC")
issued Statement of Position ("SOP") 98-1, "Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 is
effective for financial statements for years beginning after December 15, 1998.
SOP 98-1 provides guidance over accounting for computer software developed or
obtained for internal use, including the requirement to capitalize specified
costs and amortization of such costs. We adopted this standard on January 1,
1999 and do not expect it to have a material impact on our results of
operations, financial position or cash flows.
In April 1998, the AcSEC issued SOP 98-5, "Reporting on the Costs of
Start-up Activities" ("SOP 98-5"). SOP 98-5, which is effective for fiscal
years beginning after December 15, 1998. It requires costs of start-up
activities and organization costs to be expensed as incurred. As we have
historically expensed these costs, the adoption of SOP 98-5 on January 1, 1999
did not have any impact on our results of operations, financial position or
cash flows.
In December 1998, AcSEC released SOP 98-9, "Modification of SOP 97-2,
"Software Revenue Recognition,' with Respect to Certain Transactions" ("SOP 98-
9"). SOP 98-9 amends SOP 97-2 to define how an entity recognizes revenue for
multiple element arrangements for each element delivered. The provisions of SOP
98-9 became effective December 15, 1998. These paragraphs of SOP 97-2 and SOP
98-9 will be effective for transactions that are entered into in fiscal years
beginning after March 15, 1999. Retroactive application is prohibited. We do
not expect the adoption of SOP 98-9 to have a material effect on our current
revenue recognition policies.
33
<PAGE>
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"), which establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts (collectively
referred to as derivatives), and for hedging activities. SFAS No. 133 is
effective for fiscal quarters beginning after June 15, 2000. We do not expect
the adoption of SFAS No. 133 to have a material effect on our financial
results.
Year 2000 Compliance
Many currently installed computer systems and software products are coded
to accept only two-digit year entries in the date code field. Consequently, on
or before January 1, 2000, many of these systems could fail or malfunction
because they may not be able to properly distinguish dates. As a result,
computer systems and software used by many companies, including us, our
customers and our potential customers, may need to be upgraded to comply with
such "Year 2000" requirements.
Risks. Our products operate in complex network environments and directly
and indirectly interact with a number of our customers' hardware systems and
software applications. These third party hardware systems and software
applications may contain errors or defects associated with Year 2000 date
functions. We do not currently have any information concerning the Year 2000
compliance status of our customers. We are presently unable to predict to what
extent our business may be affected if hardware systems or software
applications that operate in conjunction with our products contain errors or
defects associated with Year 2000 date functions. Known or unknown Year 2000-
related errors or defects that affect the operation of our products, when used
in conjunction with other hardware systems or software applications could
result in service interruptions of network operators using our products, damage
to our reputation and possible litigation, any of which could materially
adversely affect our business and results of operations.
We incorporate hardware and software obtained from third parties into our
products. We are seeking assurances from our vendors that such hardware and
software comply with Year 2000 date functions. Despite testing by us and our
current and potential customers, and assurances from developers of hardware and
software incorporated into our products, our products may contain undetected
errors or defects associated with Year 2000 date functions. Known or unknown
Year 2000-related errors or defects in hardware and software we obtain from
third parties could result in service interruptions of network operators using
our products, damage to our reputations and possible litigation, any of which
could materially adversely affect our business and results of operations.
Finally, we are also subject to external forces that might generally
affect industry and commerce, such as utility or transportation company Year
2000 compliance failure interruptions. Year 2000 issues affecting our business,
if not adequately addressed by us, our third party vendors or suppliers or our
customers, could have a number of "worst case" consequences, including:
. the inability of our customers to use our products and services to
procure and manage their operating resources
. claims from our customers asserting liability, including liability
for breach of warranties related to the failure of our products
and services to function properly, and any resulting settlements
or judgments
. our inability to manage our own business
. damage to our reputation
State of Readiness. We have developed and implemented a company-wide
program to identify and remedy Year 2000 problems that may be present in our
products as a result of incorporating into them the Year 2000 defective
hardware and software obtained from third parties. Our program also covers
searching for Year 2000 problems that may have been overlooked in the design of
our products. We expect to complete testing our products in the fourth quarter
of 1999. We are not currently aware of any material operational issues
34
<PAGE>
or costs associated with testing our products for Year 2000 compliance as such
testing is a normal part of our quality assurance process. We have not tested
and do not intend to test any non-current versions of our products. However, we
may experience material unanticipated problems and costs caused by undetected
Year 2000-related errors or defects in the technology used in our products.
Costs. We have funded our company-wide Year 2000 program from operating
cash flows and have not separately accounted for these costs in the past. To
date, these costs have not been material. We will incur additional costs
related to the company-wide Year 2000 program for administrative personnel to
manage the program, outside contractor assistance, technical support for our
products, product engineering and customer satisfaction. In addition, we may
experience presently unanticipated material costs with our company-wide Year
2000 program that could seriously harm our business.
Contingency Plan
We have developed a contingency plan to address situations that may
result if we are unable to achieve Year 2000 readiness of our critical
operations. This plan is designed to mitigate the impact on our business and
our customers' business in the event a Year 2000 problem occurs. The plan calls
for the preparation and readiness of certain technical personnel on critical
dates and provides for the ability of those personnel to access critical data
at such times. Although we do not expect significant customer Year 2000
problems, the plan also contains a customer response component pursuant to
which certain technical teams are prepared to deal with potential customer Year
2000 problems, including on an onsite basis if necessary, at relatively short
notice. This plan may result in additional expense for us and may require the
allocation of engineering resources to solve any such Year 2000 problems. The
extent of any expense that may be incurred is unknown at this time, but we
believe that the financial and operational impact on us will not be material.
35
<PAGE>
BUSINESS
Our Business
We are the leading worldwide provider of software that enables digital
interactive television. Our software is running on over 4.5 million set-top
boxes worldwide, with 22 network operators in 17 countries having selected our
OpenTV Runtime software as their interactive platform. Our digital interactive
solution enhances a television viewer's experience without changing viewing
habits and provides a rich audio and video television environment for enhanced
applications, such as e-commerce. The majority of our revenues today are
generated from royalties and fees related to our core software platform. In
addition, we are developing interactive applications that we intend to license
to network operators in exchange for a share of advertising and e-commerce
revenues.
Increasing competition to acquire and retain subscribers is driving
network operators to differentiate themselves by providing enhanced television
viewing and other interactive services. Our patented software platform provides
a comprehensive and highly portable solution for the development and delivery
of digital interactive services to television viewers, without significant
investment in hardware or digital infrastructure by network operators. We
believe our software products are accelerating the acceptance and use of
digital interactive television worldwide and will serve as a bridge to the
future by providing digital interactive television over both existing and
broadband networks.
Strategy
The following are principal components of our business and growth
strategy.
. Continue to expand our global presence. Our OpenTV system is the
first digital interactive television software being deployed by
multiple network operators and set-top box manufacturers on a
significant scale. Our software platform has been adopted by 22
network operators in 17 countries, including France, Italy, Spain
and the United Kingdom. We plan to leverage this first mover
advantage by expanding within our current markets and entering new
markets in Europe, Asia, Latin America and the United States. For
example, as a result of our focus on Asia, which has nearly one-
half of all worldwide television households, we recently signed an
agreement with CBSat, a network operator in China.
. Capitalize on worldwide transition to digital television. We
believe the vast installed base of one billion television
households worldwide will rapidly migrate to digital technology.
We believe that digital set-top boxes will provide the bridge to
mass adoption of digital technology prior to the eventual
proliferation of more costly digital television sets. Our proven
platform enables the reception of digital signals and provides a
fully-functional interactive television experience that can be
delivered through a low-cost set-top box and within today's
digital network infrastructure. Because network operators
frequently pay for much of the expense of deploying set-top boxes
and installing digital network infrastructure, our low-cost
solution is attractive to network operators planning to deploy
interactive television services on a large scale. In contrast,
many competing products require a retooling of broadcast
facilities with more expensive hardware and additional network
infrastructure.
. Enhance and extend our technology. We are continually enhancing
and upgrading our software. For example, we are currently shipping
the third generation of our OpenTV Runtime software. We are
developing additional software features in anticipation of the
eventual proliferation of two-way broadband communication and
increased set-top box memory and performance. Through our close
partnership with Sun Microsystems, Inc. we are developing future
versions of OpenTV Runtime based on Java technology. As we update
our technology, we intend to make future versions of OpenTV
Runtime backward compatible, which allows existing applications to
run on future versions of our software without
36
<PAGE>
modification. Our software can be upgraded by network operators
via "flash downloads" that are transmitted directly to set-top
boxes without viewer involvement, and we anticipate that software
upgrades will become a significant source of future revenues.
Furthermore, we maintain our technology leadership through
participation in standards-setting bodies, including Digital Video
Broadcasting, Advanced Television Systems Committee and Open
Cable.
. Encourage independent application development. We encourage
television program developers and independent parties to design
and create additional applications with the help of our training
and support services and user-friendly authoring tools. A
substantial and growing number of independent programmers are
designing interactive television applications to run on our open
software platform. We have created an in-house team with training
in traditional television production that assists third-parties
with their projects and helps us with our own application
development. As the volume and quality of interactive content and
services provided using the OpenTV system expands, we expect that
more viewers and customers will be attracted to our solution.
. Develop our applications business and share revenues from
advertising and e-commerce. We are creating, with our content and
e-commerce partners, a core set of turn-key applications to run on
the OpenTV system. These include applications for an interactive
weather service, e-commerce, home banking and e-mail. We expect to
participate in the recurring advertising and transaction-based
revenue generated by these applications through revenue sharing
agreements with our content partners and network operators. For
example, we have recently signed a revenue-sharing agreement with
EchoStar Satellite Corporation in which we will provide certain
applications in exchange for a percentage of the revenues
generated by these applications.
Customers and Industry Relationships
We have established significant relationships with network operators,
set-top box manufacturers, chip set manufacturers, conditional access vendors
and independent application developers around the world. Our customer and
industry relationships include the following:
. 22 network operators that use our OpenTV Runtime software,
generally along with our head-end software for broadcasting
interactive content, our application development tools and other
specially developed applications
. 21 set-top box manufacturers that license OpenTV Runtime for
distribution in their set-top boxes, generally including the use
of our Hardware Porting Kit
. 7 chip set manufacturers that use our Hardware Porting Kit to
assure the compatibility of their products with OpenTV Runtime
. 5 conditional access vendors with which we have worked to ensure
the compatibility of our system
. numerous independent application developers that use our
application development tools to author programs for use with the
OpenTV system
. digital television set manufacturers can incorporate our software,
which is platform-neutral, at the time of production, or our
software can be subsequently downloaded into digital television
sets via broadcast from a network operator (a "flash download")
for the reception of digital interactive television without a set-
top box
37
<PAGE>
Since our introduction of the OpenTV system in late 1996, the number of
our customers and the number of set-top boxes deployed with our software have
both grown rapidly. The following table demonstrates our recent growth.
<TABLE>
<CAPTION>
June 30, Dec. 31, June 30, Dec. 31, June 30, Sept. 30,
1997 1997 1998 1998 1999 1999
-------- -------- -------- -------- -------- ---------
(all figures cumulative)
<S> <C> <C> <C> <C> <C> <C>
Network operators
launched............... 1 3 7 9 12 13
Set-top box
manufacturers
shipping............... 3 4 4 9 13 13
Set-top boxes deployed
(000's)................ 252 687 1,121 1,925 3,501 4,523
</TABLE>
Network Operators
OpenTV based interactive services have been launched by 13 network
operators around the world. Another nine network operators are planning to
launch digital interactive services on the OpenTV platform within the next
year. The following chart provides information about network operators that are
currently using the OpenTV system:
<TABLE>
<CAPTION>
Network Operator Country Launch Type
---------------- ------------ ------ ---------------
<S> <C> <C> <C>
Television par Satellite (TPS)......... France Q4:96 Satellite
MultiChoice Africa..................... South Africa Q4:97 Satellite
Telia Infomedia TV..................... Sweden Q4:97 Cable/Satellite
France Telecom......................... France Q1:98 Cable
Lyonnaise Cable........................ France Q1:98 Cable
Tele Danmark Kabel TV.................. Denmark Q1:98 Cable
MultiChoice Middle East................ Middle East Q2:98 Satellite
BSkyB.................................. UK Q4:98 Satellite
FUN (FreeTV)........................... Germany Q4:98 Satellite
Stream................................. Italy Q1:99 Cable/Satellite
Senda.................................. Sweden Q2:99 Terrestrial
Via Digital............................ Spain Q2:99 Satellite
Teleon................................. Turkey Q3:99 Satellite/MMDS
</TABLE>
The following network operators are planning to launch digital
interactive services on the OpenTV platform within the next year:
<TABLE>
<CAPTION>
Network Operator Country Type
---------------- ----------- ---------
<S> <C> <C>
Austar............................................... Australia Satellite
Casema............................................... Netherlands Cable
CBSat................................................ China Satellite
EchoStar............................................. USA Satellite
FOXTEL............................................... Australia Satellite
Image Wireless....................................... Canada MMDS
MediaKabel........................................... Netherlands Cable
MultiChoice Hellas................................... Greece Satellite
Sky New Zealand...................................... New Zealand Satellite
</TABLE>
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Set-Top Box Manufacturers
We market and license our OpenTV Runtime software and our Hardware
Porting Kit to digital set-top box manufacturers. Because our software is
platform neutral and flexible, we have been able to establish relationships
with a number of set-top box manufacturers. To date, 13 manufacturers have
shipped set-top boxes enabled with OpenTV Runtime and we have signed license
agreements with another eight manufacturers. We believe that our extensive base
of relationships with set-top box manufacturers is an important advantage of
the OpenTV system as it provides network operators with a broad choice of
compatible, competitively priced hardware alternatives. The following table
lists the set-top box manufacturers with which we have established
relationships.
<TABLE>
<CAPTION>
Shipping
Manufacturer Began
------------ --------
<S> <C>
Sagem............................................................. Q4:96
UEC Technologies (Pty) Limited.................................... Q1:97
Pace Micro Technology plc......................................... Q2:97
Asia Digital Broadcast Ltd........................................ Q3:97
Amstrad (Manufactured by Samsung)................................. Q4:98
Grundig........................................................... Q4:98
Humax Electronics Co Ltd.......................................... Q4:98
Matsushita/Panasonic.............................................. Q4:98
Samsung Electro-Mechanics Company, Ltd............................ Q4:98
Thomson Multimedia................................................ Q4:98
Italtel s.p.a..................................................... Q1:99
EchoStar Technologies Corp........................................ Q2:99
Nokia Satellite Systems........................................... Q2:99
</TABLE>
We are continuing to build relationships with additional set-top box
manufacturers by targeting certain strategic vendors. The following
manufacturers have signed licensing agreements with us and will begin producing
set-top boxes containing our operating system in the near future.
Avias Technology Philips
International Sony Corporation
CPS Europe Visionetics
Galaxis Zinwell Corporation
Kiryung Electronics
Chip Set Manufacturers
We also license our Hardware Porting Kit to chip set manufacturers that
use it to ensure the compatibility of their products with the OpenTV system. By
doing so, we are able to maximize the portability and compatibility of our
system. Our relationship with chip set vendors helps us anticipate the
evolution of their products 12 to 24 months in advance, giving us time to plan
enhancements to OpenTV that will take advantage of the new product features.
Furthermore, some of these vendors have developed software that is embedded
into their chip sets that is designed to work with the OpenTV platform as a
means to minimize time to market and technical risk for hardware manufacturers.
To date, the following chip set manufacturers have licensed our Hardware
Porting Kit.
Conexant ST Microelectronics
IBM Corporation Toshiba Corporation
LSI Logic Corporation VLSI Technology
NEC Electronics (UK) Limited
Conditional Access Vendors
We have developed relationships with five conditional access vendors that
have licensed our Hardware Porting Kit or with which we have consulted to
ensure the compatibility of their products with the OpenTV
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system. Conditional access vendors produce systems that scramble and decode
information streams to prevent access by unauthorized parties. Because the
ability to integrate with multiple conditional access systems is difficult to
achieve, we believe our relationships with these vendors are an important
advantage. The following conditional access vendors have ensured the
compatibility of their systems with OpenTV.
Mindport France Telecom S.A.
Nagra USA, Inc. NDS Limited
Telenor A.S.
Independent Application Developers
Numerous independent application developers have begun authoring programs
for use with OpenTV, including many using our application development tools. We
believe the proliferation of independent developers will facilitate the
acceptance of the OpenTV system to the extent that it results in the
availability of a rich and diverse set of applications.
Digital Television Set Manufacturers
Digital television set manufacturers can incorporate chip sets that are
compatible with our operating system or directly incorporate our operating
system into digital television sets to enable the reception of digital
interactive television without a set-top box. Digital television set
manufacturers can incorporate chip sets designed to work with the OpenTV
platform so that their television sets are compatible with our operating
system. Our OpenTV Runtime software would be downloaded to these televisions by
network operators without viewer involvement. Alternatively, if demand exists,
digital television set manufacturers can incorporate our OpenTV Runtime
software during the manufacturing process.
Network Operator Case Studies
BSkyB
BSkyB launched OpenTV-enabled interactive services in October 1998 and
now offers them to over 1.8 million of its subscribers. Because the majority of
BSkyB's more than seven million subscribers are equipped with an analog set-top
box, the rate of the rollout is dependent upon how quickly subscribers switch
their existing analog set-top boxes for digital set-top boxes, which BSkyB is
providing free of charge. Through the first six months of 1999, BSkyB added an
average of approximately 100,000 digital interactive subscribers per month, 43%
of whom were new BSkyB subscribers. BSkyB uses OpenTV software to offer its
viewers an interactive soccer service that allows fans to choose camera angles,
view replays and access statistics, among others.
In October 1999, BSkyB launched an interactive shopping service through a
joint venture between BSkyB, Panasonic, HSBC and British Telecom. The service
provides viewers with a shopping environment that combines video and audio with
rapid and easy site navigation using a standard remote control. BSkyB viewers
are using the service to access the following interactive features.
. On-line shopping. Viewers are browsing and purchasing a variety of
products, including clothing, groceries, travel and automobiles
from major British merchants, along with pizzas from Dominos.
. Home banking. Viewers are accessing their bank statements, paying
bills and buying products, such as mortgages.
. Entertainment. Viewers are reviewing a wealth of information on
films, music and weather and are booking tickets for concerts,
sporting events, films and theater.
. E-mail. Viewers can send and receive e-mail using either a remote
control or an optional keyboard.
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EchoStar
We have signed a contract with EchoStar Satellite Corporation for the
installation of OpenTV Runtime over its DISH Network satellite platform in the
United States. EchoStar currently has over 2.7 million total subscribers and
has been increasing its subscriber base by over 100,000 subscribers per month.
EchoStar has announced that it will launch OpenTV-enabled interactive services
and download them to a subset of customers using digital set-top boxes in early
2000.
We are working with EchoStar to create and launch a compelling set of
interactive services that will establish the DISH Network as the leader in the
provision of interactive television in the United States. Services that are
expected to be available upon launch will include e-mail, Internet access, an
interactive weather forecast service, customer care and e-commerce applications
with more enhanced services being introduced over time. In the event that we
and EchoStar are unable to agree upon certain matters related to the
development of these applications, EchoStar has the right to terminate our
agreement. In exchange for our participation in developing and launching these
applications, we will receive a fixed percentage of the net revenues these
applications generate from advertising, commercial transactions and license
fees. We intend to enter into similar arrangements with other network
operators.
TPS (Television par Satellite)
TPS launched digital interactive television on OpenTV-enabled set-top
boxes in December 1996 and currently has nearly 750,000 subscribers on its pay
television platform. TPS uses the OpenTV system to provide over 40 separate
interactive services, including the following:
. Interactive banking. Within two months of its introduction, nearly
one-third of the TPS subscribers who were also customers of the
partner bank had used the service and one-half of those had
executed transactions.
. Interactive weather service. TPS reports that this service is used
by over 50% of its viewers on a typical day and averages over 70
million hits per month.
. Interactive advertisements. TPS, in concert with its advertising
partners, is creating interactive advertisements. For example,
Renault aired an interactive television advertisement. Of TPS's
200,000 subscribers at the time, 76,000 used the interactive
feature to access additional data. Of those customers, 5.4% used
the service to order an information package to be delivered to
their homes. In addition, 80% of users are demanding more
interactive advertising.
. Electronic program guide. We developed this application for TPS,
which reports that 52% of its viewers use this service and that
the EPG receives approximately 70 million hits per month.
Strategic Partners
In October 1999, we completed a private placement of 23,648,646 Series C-
1 Convertible Preference Shares and warrants to purchase 4,729,728 Class A
Ordinary Shares to America Online, Inc., General Instrument Corp., Liberty
Digital, Inc., News Corporation and Time Warner, Inc. We also sold 4,504,504
Series C-2 Convertible Preference Shares to Sun Microsystems, Inc. Upon
consummation of our initial public offering, all of our Series C-1 Convertible
Preference Shares and Series C-2 Convertible Preference Shares will convert
into 5,630,628 Class A Ordinary Shares. The private placement resulted in net
proceeds of $31.0 million. The convertible preference shares have an embedded
beneficial conversion feature which under EITF 98-5 will result in a preferred
stock dividend of $31.2 million in the quarter ending December 31, 1999. The
fair value attributable to the warrants to purchase our Class A Ordinary Shares
of $63.9 million (based on the mid-point of the estimated price range on the
cover of this prospectus) will be recorded in operating results as a non-cash
warrant expense in the quarter ending December 31, 1999.
In connection with the investments, we entered into strategic agreements
with three of our new investors. These agreements, which are described below,
require us to undertake specific development work to
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produce software that can be used by the other party or marketed to our
respective customers. These agreements are expected to create new business
opportunities for us as applications are developed by us and deployed by the
other parties or our customers. We believe these strategic agreements will
increase our U.S. market penetration and allow us to expand the range of
interactive applications available to our global client base.
America Online
Our agreement with America Online, or AOL, provides for us to collaborate
on the development and marketing of AOL applications to be delivered to
television sets over our OpenTV Runtime software. Under the terms of the
agreement, we will develop a suite of applications to deliver AOL's most
popular online services to the television, including e-mail, instant messaging
and information services such as news, financial information and weather. In
addition, AOL and OpenTV will jointly market AOL services to cable, satellite
and terrestrial broadcast network operators.
News Corporation
We entered into a worldwide agreement with News Corporation to develop,
license and market OpenTV set-top box software to News Corporation's
participating affiliated satellite television platforms around the world. News
Corporation's affiliated satellite television platforms include BSkyB in the
United Kingdom, Stream in Italy, Sky New Zealand, FOXTEL in Australia, Sky
Brazil, Sky Mexico, Sky Columbia, Sky Chile and Star TV in Asia. BSkyB, FOXTEL
and Stream are already deploying OpenTV set-top box software to their
subscribers, and Sky New Zealand has announced its intent to deploy OpenTV
enabled programs and services. This agreement will provide us with access to
News Corporation's extensive global satellite and cable platforms and will help
us grow in markets where News Corporation is expanding and deploying its
digital interactive services.
Time Warner
We entered into an agreement with Warner Brothers and Turner Broadcasting
Systems (Time Warner Inc. subsidiaries) to develop and market enhanced
interactive television applications. Through this relationship, conventional
television programs and television advertising will be enhanced with
interactive information and e-commerce services. Initially, OpenTV and Time
Warner will focus on enabling Warner and Turner programs with interactive
features, but will later also market the interactive applications to other
programming companies. OpenTV and Time Warner plan to address a wide range of
programming genres and develop at least three interactive applications per
year.
The OpenTV System
The OpenTV system consists of the following comprehensive set of software
products that enables the development and delivery of interactive television
services in a digital environment:
. OpenTV Runtime. The core software platform or operating system
that manages the interactive television environment and enables
digital reception on a viewer's set-top box.
. Hardware Porting Kit. Documentation and tools that enable set-top
box manufacturers, chip set manufacturers, conditional access
vendors and others to extend and integrate OpenTV Runtime into,
and make it compatible with, their products and devices.
. OpenStreamer. Server software that resides at a network operator
or e-commerce provider's central broadcasting facility or head-end
and enables real-time interactive services by mixing data with
audio and video streams into subscriber homes.
. Application Development Tools. Our Software Development Kit and
OpenAuthor products enable network operators and third-party
developers to author interactive television applications and
services.
. Applications for Interactive Television. Our in-house application
development group creates and authors, often in collaboration with
content and e-commerce partners, interactive television
applications and services.
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OpenTV Runtime
Our core product is our OpenTV Runtime software, an open, highly
portable, modular and easy-to-install operating system for interactive
television. OpenTV Runtime resides in each subscriber's set-top box where it
provides a platform for and coordinates the digital broadcast and interactive
services offered to that subscriber. OpenTV Runtime is composed of a
comprehensive set of software components that serves as an operating system and
supports very specialized digital interactive television features. It also
includes an interpreter that translates between application software and the
specific instruction set of the set-top box's processor on a real time basis.
OpenTV Runtime offers the following significant advantages for network
operators:
. Ease of Installation. OpenTV Runtime can either be loaded on a
set-top box by its manufacturer and shipped to a network operator,
or it can be downloaded by a network operator directly into
digital set-top boxes in subscribers' homes. These "flash
downloads" typically occur in early morning hours and are
completed within ten minutes. They have already been successfully
performed for initial installation and upgrades of OpenTV Runtime
without any subscriber intervention. Via Digital executed a flash
download through which over 260,000 subscribers received OpenTV
Runtime in May 1999 and TPS sent an overnight upgrade to over
500,000 subscribers in February 1999.
. Maximum Flexibility and Compatibility. OpenTV Runtime is designed
so that network operators can employ a wide variety of set-top box
and head-end equipment brands, chip set vendors and conditional
access systems. Accordingly, applications written for OpenTV
Runtime can run on varying combinations of equipment on the same
or different platforms. For example, BSkyB is running common
applications across its system, even though its set-top boxes are
being provided by four separate manufacturers.
. Small Footprint. OpenTV Runtime is currently sized around the
market need for digital interactive services to run on a low-cost
set-top box having low processing and hardware memory
requirements. OpenTV Runtime also allows a network operator to
rapidly deploy interactive television services to a large number
of subscribers without incurring prohibitive costs in the purchase
of set-top boxes. OpenTV Runtime uses the experience of digital
streaming to effect this advantage by enabling the set-top box to
acquire only the applications it needs at the time the subscriber
desires them.
. Broadcast Technology. Our broadcast technology is designed to
limit bandwidth consumption and server usage. We achieve these
goals through broadcasting a continual stream of interactive
programming that viewers can select and access without delay.
. Modular Architecture. OpenTV Runtime is based on modular
architecture making it easy to upgrade and extend to cover new
hardware and software features. New versions of OpenTV Runtime
will be backward compatible with earlier versions, allowing
existing applications to operate on new versions without
modification.
. Television Protocol Compatibility. OpenTV Runtime interfaces with
established television protocols, including MPEG.
. Internet Protocol Compatibility. In addition to interactive
television services, OpenTV Runtime is capable of providing key
Internet applications, such as e-mail and chat. OpenTV Runtime
also supports standard protocols such as TCP/IP and HTTP, in order
to permit programming that leverages Internet technologies and e-
commerce infrastructure.
. Comprehensive Applications Programming Interfaces ("API"). Since
our initial deployment of OpenTV Runtime, we have extended our
APIs so that the system today can run a wide array of services.
For instance, TPS is currently running over 40 different
interactive applications.
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Future Development. We are currently shipping the third version of OpenTV
Runtime. The first, OpenTV 1.0, was released in the second quarter of 1996 and
was replaced by OpenTV EN1 in the second quarter 1998. OpenTV EN1 features more
advanced graphics, modem services, video synchronization and greater
reliability. The newest generation, OpenTV EN2, was released in the second
quarter of 1999. OpenTV EN2 features upgraded modularity, new Internet protocol
extensions, video scaling and graphic improvements.
In the future, we expect to migrate toward two different versions of
OpenTV Runtime. The first will retain the small footprint that embodies our
existing versions. It will be able to operate on platforms featuring affordable
infrastructure and hardware. We will also develop a version that exploits the
richer functionality of broadband networks and more sophisticated hardware,
including set-top boxes with higher memory, mass storage devices and DVDs.
As part of our partnership with Sun Microsystems, we have agreed to
develop future versions of our OpenTV Runtime software that incorporate Sun's
Java technology and are compatible with the appropriate JavaTV application
programming interfaces. Software developers will be able to write applications
that will run on OpenTV Runtime as well as platforms from other vendors that
are Java compatible. We believe this functionality will expand the number of
third party developers creating applications for the OpenTV system.
Extensions. OpenTV Runtime's modular architecture supports extensions
that can be chosen to achieve the exact product specification appropriate to a
given network. Using this approach, our customers have the ability to tailor
their solutions to particular cost, market and technical requirements while
retaining the option to add features later when and if those parameters change.
Using the flash download mechanism, field-deployed set-top boxes with
appropriate hardware can be upgraded to support these extensions as the
subscriber base becomes ready for new services.
Hardware Porting Kit
Our Hardware Porting Kit enables manufacturers to integrate OpenTV
Runtime into and make it compatible with their products. With its rich feature
set and proven architecture, the Hardware Porting Kit gives manufacturers
complete freedom in the design of the hardware, which empowers them to develop
the most cost-effective products.
Our Hardware Porting Kit is flexible. We are able to deliver a specific
Hardware Porting Kit (including a complete interactive television library) for
any central processing unit and digital video architecture without requiring
any modification to our source code. This flexibility has allowed some of the
largest manufacturers of digital set-boxes and leading chip set vendors to
integrate with OpenTV Runtime. In addition, the Hardware Porting Kit provides
integration with several conditional access providers and supports multiple-
standard, real-time operating systems, including industry leaders Integrated
Systems, Greenhills, Microware, Nucleus, and WindRiver.
Because of the simplicity of its interfaces, the Hardware Porting Kit,
combined with the consulting support of our Integration Services Group,
significantly reduces the time required by manufacturers to bring a product to
the market.
OpenStreamer
OpenStreamer is a system that resides at a network operator or e-commerce
provider's head-end and is used to broadcast interactive content via standard
digital broadcast facilities. As our second generation broadcasting product,
OpenStreamer is a high-level software product that allows broadcasters to
multiplex data with audio and video signals for reception by OpenTV Runtime
enabled digital receivers. It is capable of updating a data stream in real-
time, allowing up-to-the-second transmission of sports scores, stock quotes or
other time-sensitive data. For example, viewers watching a sporting event will
be able to get updated selected statistics and scores from other games on
demand rather than having to wait for the broadcaster to provide these updates.
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In addition to real-time data updates, OpenStreamer allows network
operators to broadcast multiple streams of data reliably and efficiently. It
reduces deployment and maintenance costs by relying on a single, OpenTV-
supplied hardware architecture capable of interfacing with any standard
multiplexer broadcast system.
OpenStreamer consists of the following components:
. Application Streamer software that runs the head-end portion of
the OpenTV interactive application, responds to external data
sources and updates data in real-time, and then plays out the
stream to the broadcast streamer. We enable third parties to
develop their own application streamers to help facilitate the
proliferation of third party applications.
. Broadcast Streamer software that prepares the data from the
application streamers for broadcast and outputs the streams to the
broadcaster's hardware multiplexer.
Application Development Tools
We provide two different application development tools for authoring
interactive television applications and content for use on the OpenTV system.
The tools are used by network operators, independent application developers,
and our own application developers. The OpenTV Software Developers Kit is
targeted at sophisticated programmers, while OpenAuthor is designed for content
developers with little or no programming experience.
Software Developers Kit. Our Software Developers Kit, or SDK, is a
complete content development environment for programmers who want to create
interactive television services that are high in graphic content and have the
look and feel of television. SDK allows for numerous applications to be built
directly using OpenTV's applications programming interfaces. Applications
developed with SDK make the most efficient use of a set-top box's limited
memory and processing power, yet produce broadcast-quality television images.
Software programmers can use the C programming language (the most
commonly used language in the software industry) to develop OpenTV
applications. These programmers benefit from SDK because it provides them with
full and direct access to all the features of the OpenTV architecture. SDK
provides graphical and command-line tools along with applications programming
interfaces. These application program interfaces can be used to create
compelling new interactive applications, including interactive advertising,
gaming, shopping and information services.
OpenAuthor. OpenAuthor allows users to create an OpenTV application,
without writing a single line of code, by assembling and customizing pre-built
software components using a familiar point-and-click graphical interface. This
type of design allows operators to focus on content rather than software
programming. The complete authoring process can take place on a single personal
computer. Users can create their own content, import it into OpenAuthor and
design an application. Since the authoring station is connected to an actual
digital receiver, a user can fully simulate the real television broadcast
environment, thereby saving time and money.
OpenAuthor has many competitive advantages, including giving users the
ability to create media-rich, dynamic content without requiring knowledge of
the specific capabilities of audio, video and graphic hardware within
interactive digital receivers. Applications are created using a page-based
paradigm that is already familiar to most users. Through its "plug-in" design,
OpenAuthor can be extended by developers to create new features by developing
and adding new pre-built components to OpenAuthor as application requirements
grow. For example, all of BSkyB's interactive shopping services were built from
new pre-built components added to OpenAuthor and developed by Oracle to satisfy
requirements of the operator.
OpenTV Studio. OpenTV Studio bundles the SDK together with OpenAuthor.
Using both tools, a customer can extend the functionality of OpenAuthor by
creating their own plug-in components. The plug-in design allows third parties
to approach the performance of SDK-authored applications while maintaining the
ease of use afforded by OpenAuthor.
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Applications
We develop and market interactive applications for use by our customers.
These include both applications that we market to all OpenTV-enabled platforms
and applications that we develop for a specific customer on a fee for service
basis. Our commitment to develop the "supertext" information service for BSkyB
is an example of the type of customer-specific application development we plan
to pursue.
Our principal goal is to continue to develop a set of core applications
that we believe will be applicable across numerous platforms. Core applications
are those that will have consistent appeal in multiple interactive television
markets or that require a high degree of engineering ability to develop. Core
applications that we are currently offering to network operators include the
following:
. Interactive Advertising. Allows viewers to access television-
quality interactive advertisements and, with the touch of a remote
control, obtain additional product information, find the location
and contact number of a local vendor or request a call from a
sales representative.
. Home Banking. Allows viewers to access account information and
engage in banking transactions, including transferring funds,
writing checks and applying for loans, all using a standard remote
control.
. E-commerce. Allows viewers to instantaneously purchase goods and
services, while accessing relevant and entertaining information
about the items.
. Information Services. Supports the provision of information such
as weather, sports scores, news and stock quotes and allows the
viewer to selectively retrieve such information.
. E-mail. Allows viewers to retrieve and review e-mail messages with
a remote control and, using an infrared keyboard device, send
messages over the Internet.
. Enhanced Television. Allows viewers to control the information on
their television by creating graphical overlays that provide
information without interrupting programming.
. Web Viewing. Repackages HTML-based data for broadcasting to
viewers who can access the information using a standard remote
control and enables viewing of pre-selected web sites.
As we continue to roll out the OpenTV system to more network operators,
we expect to generate an increasing portion of our revenue from sharing in
advertising and transaction fees associated with our applications business. We
intend to continue developing our strategic relationships with content
providers in order to maximize the value of the OpenTV system for network
operators. Our agreement with Time Warner to develop at least three interactive
applications per year for the next three years is an example of the strategic
relationships we are seeking to procure with content providers.
Customer Service and Support
We offer the following technical support programs to our customers:
. Program Management. Assists network operators in their upgrade and
launch of interactive services and interactive applications.
. Integration Services. Provides support to set-top box
manufacturers, chip set manufacturers and conditional access
vendors as they port and integrate OpenTV Runtime into their
programs.
. Tools Technical Support. Provides user training seminars and
coordinates bug-fixes and other support for our application
development products.
We believe that technical support is an important part of our
relationship with customers. Our technical support services are available
during normal business hours or, for an additional fee, available on a 24-hour
a day, 7-day a week basis. Customers electing to enter into support agreements
with us receive free product updates and a reduced price on full upgrades.
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Sales and Marketing
We sell our software products through our direct sales organization,
which consisted of 22 people on September 30, 1999. Our sales force is
organized geographically with offices in Mountain View, California; London,
England; Paris, France; Seoul, South Korea; and Beijing, China. We expect to
open additional U.S. and international offices in the near future. Our sales
efforts are primarily focused on network operators, because we believe they
heavily influence the adoption of the OpenTV system. Secondarily, we are
focusing our sales efforts on system integrators and set-top box manufacturers.
We focus our marketing efforts on the following activities:
. promoting the OpenTV brand with network operators, advertisers and
the creative and financial communities
. using targeted media to educate key communities on our products
and services
. providing our developers with marketing information for the
development of compelling products and services, including
upgrades and updates
In addition, we are establishing our Affiliate Services Group that will
coordinate our activities with our customers after an initial sale has been
made. This group will focus on establishing revenue sharing arrangements. They
will also coordinate joint marketing campaigns with customers, assist in
campaigns to educate subscribers on the use of OpenTV products and focus on
establishment of the OpenTV brand.
Principal Investors
MIH Limited. After giving effect to these offerings and the conversion of
all of our Series C-1 Convertible Preference Shares and Series C-2 Convertible
Preference Shares into 5,630,628 Class A Ordinary Shares, MIH Limited will
indirectly own all of our Class B Ordinary Shares (representing 95.9% of the
voting rights). MIH Limited is a multinational provider of pay-television
services and pay-television technology that is publicly listed on the Nasdaq
National Market and the Amsterdam Stock Exchange. MIH Limited's affiliates,
MultiChoice Africa and MultiChoice Middle East, license OpenTV software to
offer interactive services on their platforms. Another MIH Limited affiliate,
MultiChoice Hellas, will offer OpenTV in Greece upon the launch of its digital
system there. MIH Limited (through its wholly-owned subsidiary, Myriad
International Holdings BV) first became our shareholder in July 1997.
Sun Microsystems. After giving effect to transactions subsequent to the
reorganization, as of October 21, 1999, Sun Microsystems will indirectly own
19.5% of the common stock of our operating subsidiary, OpenTV, Inc. (14.3%
after giving effect to the exercise of outstanding employee stock options to
purchase shares of common stock of OpenTV, Inc. and the issuance of additional
shares of common stock of OpenTV, Inc. to OpenTV Corp. at the closing of these
offerings). After giving effect to these offerings and the conversion of all of
our Series C-1 Convertible Preference Shares and Series C-2 Convertible
Preference Shares into 5,630,628 Class A Ordinary Shares, Sun Microsystems will
own 6.9% of our Class A Ordinary Shares. Sun has the right to exchange its
shares of Class B Common Stock of OpenTV, Inc. into our Class B Ordinary
Shares. Sun, a global provider of enterprise network computing products, has
been a shareholder of OpenTV, Inc. since its inception. We are currently
working with Sun to develop future versions of OpenTV Runtime based on Java
technology.
Certain agreements that we have entered into with MIH Limited and Sun are
more fully described under "Transactions with Related Parties".
Competition
We face competition from a number of companies in the new and rapidly
evolving digital interactive television market. We expect to face significant
barriers in our efforts to secure broad market acceptance of our products,
including intense competition at several different levels. Current and
potential competitors in one or
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more aspects of our business include dedicated Internet set-top box companies,
interactive television technology companies, Internet-related companies and
consumer electronics companies. These competitors are more fully described in
the section entitled "Risk Factors--The interactive television business is a
highly competitive industry and increased competition could reduce the value of
an investment in our company".
Intellectual Property
As a result of our sustained research and development efforts over the
past several years, we have built a substantial intellectual property
portfolio. We currently have 27 patents issued in the United States, with
another 27 pending. We are also filing and have been granted patents
internationally in all the major markets where we intend to be active. We
believe that our patent portfolio protects many of the key elements necessary
to support digital interactive television.
Our ability to compete is dependent in part upon our ability to protect
and further mature our internally developed, proprietary intellectual property.
We rely on patent, trademark, trade secret and copyright law, as well as
confidentiality procedures and licensing arrangements to establish and protect
our rights in our technology. We believe that our current portfolio of patents
is strong. It contains many early patents in the digital interactive television
field. Nevertheless, other companies may develop technologies that are similar
or superior to our own. These factors are discussed in "Risk Factors--Because
much of our success and value lies in our ownership and use of intellectual
property, our failure to protect our property and develop new proprietary
technology may negatively affect us".
Employees
As of September 30, 1999, we employed approximately 187 full-time
equivalents, excluding temporary personnel and consultants. We are not subject
to any collective bargaining agreements and believe our relationship with our
employees is satisfactory.
Facilities
Our corporate headquarters and executive officers are in Mountain View,
California, where we occupy approximately 36,257 square feet of space. The
lease on this facility expires on February 27, 2001. We believe that we will be
able to renew this lease or secure sufficient space on reasonable terms upon
expiration of this lease. We also maintain sales and marketing offices in
London, England, Paris, France, Seoul, South Korea and Beijing, China.
Legal Proceedings
On October 12, 1999, one of our former employees brought suit against us
in California state court alleging wrongful termination and other related
claims. We believe that the suit is without merit and we intend to defend
ourselves vigorously, and we do not believe that an adverse outcome in this
suit would have a material adverse effect on our business or financial results.
48
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information as of November 1, 1999
with respect to our executive officers and directors. Except for Jan Steenkamp,
Randall S. Livingston, Mark Meagher and James F. Brown, who hold their
positions in both OpenTV, Inc. and OpenTV Corp., the officers listed below hold
their positions only with OpenTV, Inc.
<TABLE>
<CAPTION>
Name Age Positions
---- --- ---------
<S> <C> <C>
Jacobus D. T. Stofberg..... 47 Chairman of the Board of Directors
Jan Steenkamp.............. 36 President, Chief Executive Officer and Director
Vincent Dureau............. 39 Chief Technology Officer
Randall S. Livingston...... 46 Executive Vice President, Office of the CEO,
Chief Financial Officer and Director
Regis Saint Girons......... 43 Executive Vice President and General Manager,
Applications Business
Mitch Berman............... 45 Senior Vice President, Worldwide Marketing
James F. Brown............. 35 Senior Vice President, Strategic Development,
General Counsel and Secretary
Thomas Jackson............. 40 Senior Vice President, Worldwide Sales
Michael Catalano........... 48 Vice President, Technology Partners
Clay Conrad................ 48 Vice President, Affiliate Services
Debbie Coutant............. 43 Vice President, Products Group
Marilyn Hommes............. 45 Vice President, Human Resources
Mark Meagher............... 35 Vice President, Finance and Administration,
Treasurer and Assistant Secretary
Stephen Salvatore.......... 44 Vice President, Creative
Joel Zdepski............... 40 Vice President, Application Engineering
Jacobus P. Bekker.......... 46 Director
Craig L. Enenstein......... 31 Director(/2/)
Michael E. Lehman.......... 49 Director
Stephen G. Oldfield........ 44 Director(/1/)
William Raduchel........... 53 Director(/2/)
Allan M. Rosenzweig........ 43 Director(/1/)(/2/)
Peter W. Smith............. 66 Director
</TABLE>
- ----------------
(1) Member of compensation committee.
(2) Member of audit committee.
Set forth below is information regarding the relevant business experience
for each of our executive officers and directors.
Jacobus D. T. Stofberg has served as Chairman of the Board of Directors
of OpenTV, Inc. since May 1999 and as a Director of OpenTV, Inc. since January
1999. Mr. Stofberg has served as Chairman of the Board of Directors of OpenTV
Corp. since October 1999. Mr. Stofberg is Chief Executive Officer and a
Director of MIH Limited, and serves as Managing Director of MIH Holdings. Mr.
Stofberg was one of the original members of the MIH Holdings management team
and has held a variety of positions within the MIH Holdings group of companies
since 1985.
Jan Steenkamp has served as President and Chief Executive Officer of
OpenTV, Inc. since August 1997 and as a Director of OpenTV, Inc. since May
1999. Mr. Steenkamp has served as a Director of OpenTV Corp. since October 1999
and as President and Chief Executive Officer of OpenTV Corp. since November
49
<PAGE>
1999. From 1985 until he joined us in 1997, Mr. Steenkamp held a variety of
management positions within the MIH Holdings group of companies. He was the
Commercial Director of Irdeto Consultants, a Netherlands-based subsidiary of
MIH Limited that develops digital conditional access and subscriber management
systems. During his time at Irdeto, Mr. Steenkamp managed business and product
development as it grew from 50 to 250 employees. While working at MIH Holdings,
Mr. Steenkamp initiated the introduction of pay television in Greece, managed a
project team to establish pay television in Italy and was active in the
acquisition and development of the European Nethold operations in The
Netherlands, Belgium, Finland, Sweden, Denmark and Norway. Mr. Steenkamp
studied Electrical Engineering at Witwatersrand Technicon.
Vincent Dureau has worked for us since our inception and has served as
our Chief Technology Officer since May 1998. He is responsible for developing
technologies and business relationships that will bring integrated, cost-
effective solutions to our customers and partners. Prior to becoming our CTO,
Mr. Dureau served as our Senior Vice President of Engineering. From 1984 to the
time he helped start our company, Mr. Dureau held a variety of positions in
Thomson's research department in Paris and Los Angeles, where he helped develop
technology in the fields of multimedia, consumer user interfaces, video
compression and interactive television. Mr. Dureau holds a degree in Agronomy
from the Institute National Agronomique and M.S. degrees from Universite Paris
VII in Applied Mathematics and Ecole Nationale Superieure des
Telecommunications in Computer Science.
Randall S. Livingston has served as Executive Vice President, Office of
the CEO, and a Director of OpenTV, Inc. since September 1999 and as Chief
Financial Officer of OpenTV, Inc. since May 1999. Mr. Livingston has served as
a Director of OpenTV Corp. since October 1999 and as Executive Vice President,
Office of the CEO, and Chief Financial Officer of OpenTV Corp. since November
1999. From November 1998 to September 1999, he worked with us under the terms
of a consulting agreement. From 1996 until joining us full-time in September
1999, Mr. Livingston served as a consultant and part-time executive for several
Silicon Valley technology companies. From 1995 to 1996, he was Chief Financial
Officer of Heartport, Inc., where he managed that company's initial public
offering. Previously, Mr. Livingston spent seven years as Director of Corporate
Development at Apple Computer and as Chief Financial Officer for Taligent, a
400 employee Apple-IBM-HP joint venture system software company. Prior to
working at Apple, Mr. Livingston worked as Director of Corporate Sales and
Marketing for Ingres Corporation, a database software company, and as a
consultant with McKinsey and Company. Mr. Livingston holds a B.S. in Mechanical
Engineering and an M.B.A. from Stanford University.
Regis Saint Girons has worked for us since our inception and has served
as our Executive Vice President and General Manager of our Applications
Business since August 1999. Mr. Saint Girons joined us as Vice President of
Sales, Europe in July 1996 and was promoted to Managing Director, Europe in
August 1997. Prior to joining us, Mr. Saint Girons worked at Thomson. He joined
the engineering group there in 1982 and led the hardware development team of
its Home Computer Division in 1984 and later headed its research lab in Los
Angeles. Mr. Saint Girons holds a patent on MPEG compression and led the
development of MPEG at Thomson. He earned his engineering degree from Ecole
Polytechnique Federale de Lausanne, Switzerland.
Mitch Berman joined us in March 1997 as Vice President of Worldwide
Marketing. He was promoted to Senior Vice President of Sales and Operations in
June 1998, and to his current position as Senior Vice President of Worldwide
Marketing in June 1999. Prior to joining us, Mr. Berman served as General
Manager of Strategic Business Development at East Coast Pay Television, Ltd.,
where he was involved in the launch of Australia's first digital direct
broadcast satellite subscription television service. He was also President of
Strategic Marketing and Research Team, Inc., a Los Angeles-based company that
provided desktop software and strategic marketing services to entertainment,
consumer retail, cable, satellite, broadcast TV and telephone companies.
Previously, Mr. Berman was Director of Marketing at Sky Television in New
Zealand, Vice President at E! Entertainment Television in Los Angeles and
Regional Manager at Home Box Office, Inc. in Los Angeles. Mr. Berman has a
Master's degree in Public Administration/Government Management from the
University of Southern California and a B.A. in Sociology from the University
of California at Los Angeles.
50
<PAGE>
James F. Brown has served as Senior Vice President, Strategic Development
and General Counsel of OpenTV, Inc. since June 1999 and as Secretary of OpenTV,
Inc. since August 1999. Mr. Brown has served as Senior Vice President,
Strategic Development, General Counsel and Secretary of OpenTV Corp. since
November 1999. From June 1998 until he joined our company, Mr. Brown was a
partner in the law firm of McDermott Will & Emery. From June 1989 to June 1998,
he had been associated with the law firm of Pillsbury Madison & Sutro, where he
was a partner from January 1996 to June 1998. In his previous law practice, Mr.
Brown focused on transactions involving emerging growth companies, primarily in
the cable television, telecommunications, software and digital technology
areas. Such transactions involved corporate finance, mergers and acquisitions,
strategic investments, joint ventures and software licensing matters. Mr. Brown
is also a Certified Public Accountant.
Thomas Jackson has served as our Senior Vice President of Worldwide Sales
since June 1999. Prior to joining us, he was Vice President and Managing
Director for General Instrument Corporation, where he was responsible for all
sales, support, delivery, service, and business development for the
Asia/Pacific region. Prior to his Asian assignment, he was Vice President for
Sales and Business Development for General Instrument's European operation.
Before joining General Instrument, Mr. Jackson spent 15 years at Honeywell in a
variety of positions, including Director of USA Vertical Market Sales. He also
started a Strategic Business Unit for Honeywell in Europe. Mr. Jackson earned a
Bachelor's degree in Business Marketing/Management from Eastern Illinois
University. During the past six years, he has attended and graduated from two
executive global management programs, the first offered by Harvard University
and the second by Stanford University.
Michael Catalano has served as Vice President, Technology Partners since
November 1999. He joined us as Vice President of Product Development in
December 1997. Prior to joining us, Mr. Catalano held engineering management
positions at FRAX Inc. (interactive multimedia for manufacturing), Radius
(digital video, graphics and monitors), Ariel Electronics, Megatest (product
marketing, engineering management and strategic marketing in ATE) and Hewlett
Packard (integrated circuit design). He interspersed these positions with the
successful management of his own consulting businesses, as well. Mr. Catalano
holds a B.S.E.E. from Carnegie Mellon University.
Clay Conrad joined us in May 1997 as Director of Business Development. He
was promoted to Vice President of Sales in September 1997 and was subsequently
appointed to his current position as Vice President, Affiliate Services in June
1999. Prior to joining us, Mr. Conrad served as Chief Operating Officer of
Prevue International, the TV Guide company providing electronic program guides
for television. Prior to his work at Prevue, Mr. Conrad was the Managing
Director for Millicom Satellite Television in Hong Kong, where he was
responsible for cable system operations in Asia. In addition, he has served in
an executive capacity with Showtime Networks in Denver, Colorado and
Continental Cablevision in Chicago. Mr. Conrad was the founder and first
President of the Cable and Satellite Broadcasting Association of Asia,
(CASBAA). Mr. Conrad holds a B.A. in Art from William Jewell College in Liberty
Missouri, an M.A. in Fine Arts from Arizona State University and a Master's
Degree in International Management from the American Graduate School of
International Management.
Debbie Coutant has served as Vice President, Products Group since
November 1999. Prior to joining us, Ms. Coutant acted as a consultant to a
number of Internet companies, including E*Trade Group and enCommerce Inc. She
also served as General Manager and Chief Executive Officer of Taligent, Inc., a
subsidiary of IBM Corp. and a leader in object oriented design, delivering
frameworks and tools in both C++ and Java. Prior to joining Taligent, Ms.
Coutant managed development teams at Apple Computer and Hewlett Packard. She
holds a U.S. patent in the area of compiler technology and optimization, and
graduated from the University of Arizona with a Masters in Computer Science.
Marilyn Hommes joined us in August 1998 as Director, Human Resources and
was promoted to Vice President, Human Resources in August 1999. Prior to
joining us, she was Vice President, Human Resources at Wired Ventures,
publishers and producers of Wired Magazine, Hardwired, Wired TV, and Wired
Digital.
51
<PAGE>
Previously, she worked as a human resources consultant to venture capital-
backed software, biotech, video game and Internet start-ups. Ms. Hommes began
her career as a Compensation Consultant for Radford Associates, a human
resources consulting firm. She has an M.B.A. with an emphasis in Industrial
Relations from the University of Oregon.
Mark Meagher has served as Vice President, Finance and Administration of
OpenTV, Inc. since August 1999 and as Vice President, Finance and
Administration of OpenTV Corp. since November 1999. He is also the Treasurer
and Assistant Secretary of OpenTV, Inc. and OpenTV Corp. He joined us in
January 1999 as Senior Controller. Prior to joining us, Mr. Meagher was
Director of Finance for Worldwide Sales and Marketing at LSI Logic Corporation.
In addition, Mr. Meagher previously was Vice President of Finance and
Administration at PlayNet Technologies, Inc., a Internet-enabled software
entertainment company, and Executive Director and Corporate Controller at Sony
Interactive Entertainment, Inc., which was the division responsible for the
Sony PlayStation launch in North America and Europe. Prior to his experience at
Sony Interactive Entertainment, Inc., Mr. Meagher spent seven years at Price
Waterhouse as an audit manager, leaving in 1993. He holds a B.S. in Business
and Economics from Lehigh University, and he is a Certified Public Accountant.
Stephen Salvatore has served as our Vice President, Creative since July
1998. He joined us in June 1997 as our Director, Interactive Programming. Prior
to joining us, Mr. Salvatore spent 17 years managing domestic and international
television production. His efforts as director, producer and associate producer
have garnered multiple Emmy and Ace awards in sports, documentary films,
series, magazine and television programming. He has produced and directed
television for such diverse companies as HBO, NBC, CBS, ABC, Discovery Channel
Inc., Warner Brothers International, NFL Films, Universal Studios Television
and E! Entertainment Television International. Mr. Salvatore is currently
leading our development of original interactive shows and services to be
deployed worldwide later this year.
Joel Zdepski has served as our Vice President, Application Engineering
since July 1996. Prior to joining us, Dr. Zdepski held a number of positions at
RCA and Thomson. In 1986, he joined the Communications Laboratory at the David
Sarnoff Research Center, where he concentrated on video communications, and he
later ultimately became Group Head of the Digital Video Communications Group,
where his particular emphasis was on video compression for teleconferencing,
digital television and HDTV. His projects included development of the Digital
Satellite System (DSS) used for DBS service in the United States and the Grand
Alliance HDTV system before the FCC for standardization as the terrestrial
broadcast standard. He is a member of the MPEG-2 video and systems subgroups
and was a member of Grand Alliance Compression Specialist Group and Transport
Specialist Group. His research interests include combined source/channel
coding, compression algorithms, error concealment, and packet video
applications. He has authored or co-authored over 20 conference and journal
papers and holds more than 21 patents, with several pending. Dr. Zdepski
received his B.S.E.E., M.S.E.E. and Ph.D. degrees from Rutgers University in
1981, 1986 and 1994, respectively.
Jacobus P. Bekker has served as a Director of OpenTV Corp. since October
1999. Mr. Bekker founded MIH Holdings in 1985 with Mr. Stofberg and has held a
variety of positions within the MIH Holdings group of companies since that
time. Mr. Bekker was Chief Executive Officer of MIH Holdings until 1997, when
he became the Managing Director of Naspers Limited. He is also currently the
Chairman of the Board of Directors of M-Web and a Director of MIH Holdings,
SSIH, M-Net Ltd. and M-Cell. Mr. Bekker is also a Director of a number of South
African print media companies and served as a Director of NetHold from
September 1995 to April 1997.
Craig L. Enenstein has served as a Director of OpenTV Corp. since
November 1999. Mr. Enenstein is also Vice President of Business Development and
Strategy for Liberty Digital, Inc., and is responsible for leading Liberty
Digital's interactive infrastructure and Internet investment activities as well
as developing its business strategy. Prior to joining Liberty Digital, Mr.
Enenstein was employed by Knowledge Universe, LLC, an education corporation led
by Michael Milken, Lowell Milken and Larry Ellison, which invests in companies
52
<PAGE>
focused on education products and services and education Internet companies.
Prior to joining Knowledge Universe, Mr. Enenstein served as a strategy
consultant for Bain & Co. and LEK Consulting. Mr. Enenstein holds an M.B.A. in
finance from the Wharton School of Business, an M.A. in international studies
from the Lauder Institute at the University of Pennsylvania and a B.A. from the
University of California at Berkeley.
Michael E. Lehman has served as a Director since November 1999. Since
joining Sun Microsystems in 1987, Mr. Lehman has served as Director of Finance
and Administration of Sun Microsystem's Hong Kong subsidiaries, Corporate
Controller, Chief Financial Officer and, since 1998, Vice President of
Corporate Resources and Chief Financial Officer. Prior to joining Sun
Microsystems, Mr. Lehman was a senior manager for Price Waterhouse. Mr. Lehman
received his Bachelor's degree in Business from the University of Wisconsin,
and serves on the Dean's Advisory Board of the Graduate School of Business at
the University of Wisconsin, Madison.
Stephen G. Oldfield has served as a Director of OpenTV, Inc. since
January 1998, and has served as a Director of OpenTV Corp. since October 1999.
Mr. Oldfield is also Chief Executive Officer of Mindport, a subsidiary of MIH
Limited and is also a Director of MIH Limited. Mr. Oldfield has held a variety
of positions within the MIH Holdings group of companies since 1986.
William J. Raduchel has served as a Director of OpenTV, Inc. since May
1999, and has served as a Director of OpenTV Corp. since October 1999. Mr.
Raduchel has been the Chief Technology Officer of America Online Incorporated
since September 1999. Prior to that, he was the Chief Strategy Officer of Sun
Microsystems, Inc., where he also had been Chief Information Officer, acting
Vice President of Human Resources, Chief Financial Officer and Vice President
of Corporate Planning and Development. Mr. Raduchel joined Sun in 1988 after
executive positions at Xerox Corporation and McGraw-Hill, Inc. He holds A.M.
and Ph.D. degrees in economics from Harvard University and a B.A. from Michigan
State University. Mr. Raduchel is also a Director of MIH Limited as well as
several startup companies.
Allan M. Rosenzweig has served as a Director of OpenTV, Inc. since June
1997, and has served as a Director of OpenTV Corp. since October 1999.
Mr. Rosenzweig is also Group Director, Corporate Finance and a Director of MIH
Limited. Prior to joining MIH Limited in 1996, Mr. Rosenzweig was the Director
of Corporate Finance of NetHold. In addition, he was previously the Managing
Director of Intertax (Pty) Ltd., an international tax consultancy firm. He also
serves on the boards of United Services Technologies Limited and Brait S.A.
Peter W. Smith has served as a Director since November 1999. Mr. Smith is
President of News Technology, an affiliate of News Corporation, which he joined
in 1994 after a ten year association with other News Corporation affiliates as
a consultant and an employee. Mr. Smith directed the construction of one of the
world's first automated television stations in Australia and the original BSkyB
technical facilities in London and more recently headed the establishment of
the broadcast facilities for News Corporation's digital broadcasting service to
Latin America. Mr. Smith has also played an active role in the development of
the DVB digital television standard and in other broadcasting-related matters
with the European Union. His present responsibilities include granting
technology advice to assist News Corporation's strategic planning and
developing new products and initiatives for its digital satellite broadcasting
ventures. Mr. Smith holds a Bachelor of Science degree and a Bachelor of
Engineering degree with first class honors from the University of Sydney.
The business address of our Directors and executive officers is our
registered office: Abbot Building, Mount Street, Tortola, Road Town, British
Virgin Islands.
Board Committees
Our board of directors has a compensation committee and an audit
committee. The compensation committee consists of Messrs. Rosenzweig and
Oldfield. It establishes salaries, incentives and other forms of Compensation
for our directors, executive officers, employees and consultants and
administers our stock option
53
<PAGE>
incentive and other benefit plans. Compensation for our CEO and those employees
who report directly to him is reviewed and approved by the full board of
directors. None of the members of our compensation committee is currently or
has been at any time since our formation an officer or employee. Prior to the
formation of the compensation committee, all decisions regarding compensation
for directors, officers, employees and consultants and administration of stock
incentive and other benefit plans were made solely by the board of directors.
The audit committee consists of Messrs. Enenstein, Raduchel and
Rosenzweig. The audit committee reviews our audit policies and internal
accounting controls and oversees the engagement of our independent auditors.
Compensation of Directors and Officers
The aggregate salary, bonus and other compensation paid by us and our
subsidiaries to our executive officers and directors as a group during the
fiscal year ended December 31, 1998 was approximately $1.5 million. Our
directors do not currently receive cash compensation for serving as directors
other than the reimbursement of out-of-pocket expenses incurred in attending
the meetings.
The following table sets forth information for the year ended December
31, 1998, regarding the compensation of our current chief executive officer and
each of our four other most highly compensated executive officers. We refer to
these individuals as our named executive officers.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
-------------------------------------- ------------
Securities
Name and Principal Other Annual Underlying All Other
Position Salary($) Bonus($) Compensation($) Options Compensation($)
------------------ --------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Jan Steenkamp........... 97,500(/1/) -- 12,898(/2/) 570,000 --
President and Chief
Executive Officer
Vincent Dureau.......... 164,283 25,500 -- 260,000 3,000(/3/)
Chief Technology
Officer
Mitchell Berman......... 182,914 12,500 -- 200,000 3,000(/3/)
Senior Vice President,
Worldwide Marketing
Michael Catalano........ 172,470 17,169 -- 180,000 --
Vice President,
Technology Partners
Deborah Kanarek(/4/).... 156,121 29,240 -- 130,000 3,000(/3/)
Vice President, Legal
and General Counsel
</TABLE>
- --------
(1) Reflects compensation from July 6, 1998, which is the date of Mr.
Steenkamp's employment agreement. Prior to July 6, 1998, Mr. Steenkamp's
salary was paid by our parent company, MIH Limited.
(2) In 1998, Mr. Steenkamp was reimbursed for part of his housing expenses and
was provided a leased automobile by us.
(3) Represents matching contributions made by us to the named executive
officers' 401(k) plan accounts in the fiscal year ending December 31, 1998.
(4) Ms. Kanarek was our Vice President, Legal and General Counsel from
September 1998 through January 15, 1999. Ms. Kanarek served as our Director
of Legal Services and General Counsel from September 1997 through August
1998.
54
<PAGE>
Aggregate Options to Purchase Securities
At October 15, 1999, our executive officers and directors as a group held
the following options to purchase our Class A Ordinary Shares.
<TABLE>
<CAPTION>
Option Shares Purchase Price Expiration Date
------------- -------------- ---------------
<S> <C> <C>
1,140,000 $1.05 January 2008
595,000 1.05 July 2008
750,000 1.05 February 2009
170,000 2.10 May 2009
80,000 2.90 July 2009
270,000 6.00 August 2009
400,000 6.00 September 2009
</TABLE>
Option Grants in Last Fiscal Year
The following table sets forth information concerning options to purchase
shares granted to our named executive officers during the year ended December
31, 1998. No stock appreciation rights were granted during this period.
<TABLE>
<CAPTION>
Potential Realizable Value
% of Total at Assumed Annual
Number of Options Rates of Stock Price
Shares Granted to Appreciation for
Underlying Directors and Exercise Option Term(2)
Options Employees in Last Price Expiration ---------------------------
Name Granted Fiscal Year(1) ($ per share) Date 5%($) 10%($)
---- ---------- ----------------- ------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jan Steenkamp........... 570,000 12.71% $1.05 7/27/2008 $ 376,393 $ 953,855
Vincent Dureau.......... 260,000 5.8 1.05 1/27/2008 171,688 435,092
Mitchell Berman......... 200,000 4.46 1.05 1/27/2008 132,068 334,685
Michael Catalano........ 180,000 4.01 1.05 1/27/2008 118,861 301,217
Deborah Kanarek......... 50,000 1.12 1.05 1/27/2008 33,017 83,671
50,000 1.12 1.05 3/3/2008 33,017 83,671
30,000 0.67 1.05 9/23/2008 19,810 50,203
</TABLE>
- --------
(1) Percentages shown under "Percent of Total Options Granted to Employees in
the Last Fiscal Year" are based on options granted to employees, directors
and consultants of OpenTV under its 1998 Stock Option/Stock Issuance Plan
to purchase an aggregate of 4,483,348 shares during the fiscal year ended
December 31, 1998.
(2) The potential realizable value is calculated based on the ten-year term of
the option at the time of grant. Share price appreciation of 5% and 10%
(compounded annually) is assumed in accordance with rules promulgated by
the SEC and does not represent our prediction of our share price
performance. The potential realizable values at 5% and 10% appreciation are
calculated by assuming that the estimated fair market value on the date of
grant appreciates at the indicated rate for the entire term of the option
and that the option is exercised at the exercise price and sold on the last
day of its term at the appreciated price. We do not necessarily agree that
this method can properly determine the value of an option. Actual gains, if
any, on share option exercises depend on numerous factors, including our
future performance, overall market conditions and the option holder's
continued employment with us throughout the entire vesting period and
option term, which factors are not reflected in this table.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year Option Values
There were no option exercises by our named executive officers during the
fiscal year ended December 31, 1998.
55
<PAGE>
Employment Agreements
Employment Agreement with Jan Steenkamp. On July 6, 1999, we entered into
an Employment Agreement with Jan Steenkamp, our President and Chief Executive
Officer. The Employment Agreement is for a three year term and may be
terminated by us or by Mr. Steenkamp at any time and for any reason.
Mr. Steenkamp's annual salary is $205,000 and he is eligible for an annual
bonus. We are required to make payments to Mr. Steenkamp if (a) his employment
is involuntarily terminated for any reason other than those set forth in the
Employment Agreement, or (b) he resigns. Mr. Steenkamp also receives a
reimbursement of certain housing expenses and the use of a car leased by us. If
we experience a change in control, any unvested option shares held by Mr.
Steenkamp will become vested if he is involuntarily dismissed for a reason
other than cause or voluntarily resigns due to certain changes in his duties,
compensation or place of employment.
Employment Agreement with Randall S. Livingston. On September 1, 1999, we
entered into an Employment Agreement with Randall S. Livingston, our Executive
Vice President, Office of the CEO, and Chief Financial Officer. The Employment
Agreement is for a two year term and may be terminated by us or by Mr.
Livingston at any time and for any reason. We are required to make payments to
Mr. Livingston if (a) his employment is involuntarily terminated for any reason
other than those set forth in the Employment Agreement, or (b) he resigns. If
we experience a change in control, any unvested option shares held by Mr.
Livingston will become vested if he is involuntarily dismissed for a reason
other than cause or voluntarily resigns due to certain changes in his duties,
compensation or place of employment.
1999 Share Option/Share Issuance Plan
Adoption. Our board of directors adopted our 1999 Share Option/Share
Issuance Plan (the "1999 Plan") in October 1999 and amended the 1999 Plan in
November 1999. Our shareholder approved the amended plan in November 1999.
Share Reserve. We have reserved 7,200,000 Class A Ordinary Shares for
issuance under the 1999 Plan. If options or shares awarded under the 1999 Plan
are forfeited or cancelled, expire or otherwise terminate without being
exercised, then those options or shares will again become available for
issuance under the 1999 Plan.
Administration. The compensation committee of our board of directors
administers the 1999 Plan. The committee has complete discretion to make all
decisions relating to the interpretation, operation and amendment of the 1999
Plan. The committee has discretion to determine the following:
. grant recipients
. grant dates
. number of shares
. type of award
. exercisability of the award
. vesting requirements
. exercise price
. type of consideration
. any other terms and conditions of award eligibility
Eligibility. The following groups of individuals are eligible to
participate in the 1999 Plan:
. employees
. members of our board of directors who are not employees
. consultants
Structure of Plan. The plan is divided into the following two programs:
. the Option Grant Program under which eligible individuals may be
granted options to purchase Class A Ordinary Shares (the "Option
Grant Program")
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<PAGE>
. the Share Issuance Program under which eligible persons may be
issued ordinary shares directly, either through the immediate
purchase of such shares or as a bonus for services rendered to us
(the "Share Issuance Program").
Option Grant Program. Options to purchase our Class A Ordinary Shares may
be either incentive stock options ("incentive options") qualifying for
favorable tax treatment under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code") or options which do not so qualify ("non-statutory
options") as designated by the committee, in its sole discretion. The exercise
price of incentive options granted under the plan will be no less than the fair
market value of our Class A Ordinary Shares at the time the option is granted.
The exercise price may be paid in cash, in previously owned ordinary shares
valued at fair market value on the exercise date or through a cashless exercise
procedure involving a same-day sale of the purchased shares. The other terms of
the incentive options will be determined by the committee. Any options intended
to qualify as incentive options will be designed to meet all the requirements
of Code Section 422. Incentive options are not transferable, except by will or
the laws of descent and distribution. The exercise price and other terms of
non-statutory options granted under the 1999 Plan will be determined by the
committee. The committee may provide that non-statutory options will be
transferable.
Share Issuance Program. Under the Share Issuance Program, we may issue
our Class A Ordinary Shares directly, either through immediate purchase of such
shares or as a bonus for services rendered to us. The purchase price and other
terms of shares issued under the Share Issuance Program will be determined by
the committee. The committee may, in its discretion, subject any shares issued
under the Share Issuance Program to vesting and a right of repurchase by us.
Repurchase Rights. The committee has the discretion to authorize the
issuance of unvested ordinary shares upon the exercise of options granted or as
shares otherwise issued under the 1999 Plan. If the purchaser or optionee
ceases to be employed by or provide services to us, any or all of the ordinary
shares issued to the purchaser or optionee which are unvested at the time of
cessation shall be subject to repurchase by us at the purchase or exercise
price paid for such shares. The terms and conditions upon which the repurchase
rights are exercisable by us are determined by the committee and set forth in
the Repurchase Rights Agreements evidencing such rights.
Awards Granted/Assumed. Effective as of October 23, 1999, options (the
"Assumed Options") to purchase 5,141,104 shares of Class A Common Stock of
OpenTV, Inc. under its 1998 Plan (see "OpenTV, Inc. 1998 Stock Option/Stock
Issuance Plan" below) were assigned to and assumed by OpenTV Corp. and the
Assumed Options now represent the right to purchase an identical number of
Class A Ordinary Shares of OpenTV Corp. Class A Ordinary Shares purchased
pursuant to the exercise of Assumed Options will reduce and will not be in
addition to the total number of shares (7,200,000) available for issuance under
the 1999 Plan. No other options have been issued under the 1999 Plan. See
"OpenTV, Inc. 1998 Stock Option/Stock Issuance Plan--Shares
Reserved/Termination" for a description of the impact of the assignment and
assumption on the 1998 Plan. Certain options issued under the 1998 Plan will
not be assigned to or assumed by OpenTV Corp. At such time as the shares of
Class A Common Stock of OpenTV, Inc. are issued upon exercise of such options,
we will facilitate the disposition of such shares either by purchasing such
shares directly or by providing such holders with the ability to exchange their
shares in OpenTV, Inc. for shares in OpenTV Corp. The Class A Ordinary Shares
issued pursuant to such exchange will not be issued under the 1999 Plan and
will not count against the total number of shares available for issuance
thereunder.
First Refusal Right. We have a right of first refusal in the event of any
proposed disposition of our Class A Ordinary Shares issued under the 1999 Plan.
The right of first refusal is exercisable in accordance with terms and
conditions established by the board. Our right of first refusal will terminate
upon completion of these offerings.
Put Option. Participants who purchase shares under the plan and hold such
shares for at least six months have the right to require us to repurchase the
shares at the fair market value of the shares. This put option will terminate
upon completion of these offerings.
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Corporate Transaction. Options will automatically vest upon the
occurrence of certain change of control events, if such options are not assumed
or exchanged for equivalent rights by the successor entity in accordance with
the terms of the plan. In the event of a corporate transaction that does not
result in the automatic vesting of options and other awards, the board of
directors or the compensation committee has discretion to accelerate vesting of
such options and other awards.
Amendments and Termination. The board of directors may amend the plan at
any time. If the board of directors amends the 1999 plan, shareholder approval
will only be sought if required by applicable law. The 1999 plan will terminate
upon the earliest of (i) October 21, 2009, (ii) the date on which all shares
available for issuance under the 1999 plan have been issued as vested shares,
or (iii) the termination of all outstanding options in connection with certain
corporate transactions.
OpenTV, Inc. 1998 Stock Option/Stock Issuance Plan
In General. The OpenTV, Inc. board of directors adopted, and its
stockholders approved, the OpenTV, Inc. 1998 Stock Option/Stock Issuance Plan
(the "1998 Plan") on January 26, 1998. The OpenTV, Inc. board of directors
amended and restated the 1998 Plan on February 11, 1999 and August 13, 1999.
The terms of the 1998 Plan are generally identical to those of the 1999 Plan,
except that the 1998 Plan is administered by the compensation committee of the
OpenTV, Inc. board of directors and options and awards issued under the 1998
Plan entitle the holders to acquire shares of Class A Common Stock of OpenTV,
Inc. Most of the options issued under the 1998 Plan have been assigned to and
assumed by OpenTV Corp. The Assumed Options no longer represent rights to
purchase stock of OpenTV, Inc. and the shares subject thereto are no longer
available for issuance under the 1998 Plan. See "--Awards Granted/Assumed"
above.
Shares Reserved/Termination. After the assignment and assumption, options
to purchase 783,500 shares of Class A Common Stock of OpenTV, Inc. remain
outstanding and an identical number of shares are reserved for issuance under
the 1998 Plan. These options are held by certain foreign employees of OpenTV,
Inc. and cannot be assigned or assumed without adverse tax consequences to the
holders and OpenTV, Inc. The 1998 Plan will remain in existence for the sole
purpose of governing these remaining options, until such time as such options
have been exercised and the shares thereunder become transferable by the
holders. Options or shares awarded under the 1998 Plan that are forfeited or
cancelled will no longer be available for issuance under the 1998 Plan. All new
options granted to employees of OpenTV, Inc. and OpenTV Corp. will be granted
under the 1999 Plan.
1999 Employee Stock Purchase Plan
Our board adopted the 1999 Employee Stock Purchase Plan in October 1999
and our shareholder approved the plan in November 1999.
Share Reserve. We have reserved 120,000 shares of our Class A Ordinary
Shares for issuance pursuant to purchase rights granted under the purchase
plan. The first offering under the purchase plan will begin on the effective
date of these offerings. For the first offering, the board has granted purchase
rights to the full-time employees of OpenTV, Inc.
On December 31 of each year for the next ten years, beginning in 1999,
the number of shares in the reserve automatically will be increased by the
lower of:
. 5% of our outstanding shares on a fully-diluted basis;
. 500,000 shares; or
. a smaller number of shares as determined by the board.
Eligibility. The purchase plan is intended to qualify as an employee
stock purchase plan within the meaning of Section 423 of the Code. The purchase
plan provides a means by which employees may purchase our shares through
payroll deductions. The purchase plan is implemented by offerings of purchase
rights to
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eligible employees. Generally, all full-time employees who have been employed
for at least ten days may participate in the purchase plan. However, no
employee may participate in the purchase plan if immediately after we grant the
employee a purchase right, the employee has voting power over, or the value of,
5% or more of the outstanding capital stock of OpenTV Corp. or an affiliate of
OpenTV Corp.
Administration. The board is responsible for administering the purchase
plan, unless such responsibilities are delegated to a committee of the board.
The board has the authority to construe, interpret and amend the purchase plan.
Under the purchase plan, the board may specify offerings of up to 27 months in
length. The first offering will begin on the effective date of these offerings.
Unless the board otherwise determines, ordinary shares are purchased for
accounts of participating employees at a price per share equal to the lower of:
. 85% of the fair market value of a share on the first day of the
offering; or
. 85% of the fair market value of a share on the purchase date.
For the first offering, which will begin on the effective date of these
offerings, we will offer shares registered on a Form S-8 registration
statement. The fair market value of the shares on the first date of this
offering will be the price per share at which our shares are first sold to the
public as specified in the final prospectus with respect to these offerings.
Otherwise, fair market value generally means the closing sales price (rounded
up where necessary to the nearest whole cent) for such shares (or closing bid,
if no sales were reported) as quoted on the Nasdaq National Market on the
trading day prior to the relevant determination date, as reported in The Wall
Street Journal.
The board may provide that employees who become eligible to participate
after the offering period begins nevertheless may enroll in the offering. These
employees will purchase our stock at the lower of;
. 85% of the fair market value of a share on the day they began
participating in the purchase plan; or
. 85% of the fair market value of a share on the purchase date.
Participating employees may authorize payroll deductions of up to 15% of
their base compensation for the purchase of shares under the purchase plan.
Employees may end their participation in the offering at any time up to ten
days before a purchase date. Participation ends automatically on termination of
employment with us and our affiliates.
Other Provisions. Our board may grant eligible employees purchase rights
under this plan only if the purchase rights together with any other purchase
rights granted under other employee stock purchase plans established by us or
our affiliates do not permit the employee's rights to purchase our shares to
accrue at a rate which exceeds $25,000 of the fair market value of our shares
for each calendar year in which the purchase rights are outstanding.
Transactions not involving our receipt of consideration, such as a merger,
consolidation, reorganization, stock dividend or stock split, may change the
class and number of shares subject to the purchase plan and to outstanding
options. In that event, our board will appropriately adjust the purchase plan
as to the class and the maximum number of shares subject to the purchase plan.
It will also adjust outstanding rights as to class, number of shares and
purchase limits of such outstanding rights.
Upon a change in control of OpenTV, our board may provide that the
successor corporation will assume or substitute for outstanding purchase
rights. Alternatively, our board may shorten the offering period and provide
that our shares will be purchased for the participants immediately before the
change in control.
Shares Issued. We have not issued any shares under the purchase plan.
Termination. The purchase plan will terminate when the share reserve is
exhausted unless the board terminates it sooner.
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401(k) Plan
We maintain the OpenTV, Inc. 401(k) Plan for eligible U.S. employees. In
order to be a participant in the 401(k) plan, an employee must have attained
age 21. A participant may contribute up to the lesser of 25%, of his/her total
annual compensation or the statutorily prescribed annual limit. The annual
limit for both 1998 and 1999 was $10,000. We may make discretionary
contributions as a percentage of participants' contributions, subject to
established conditions and limits. The 401(k) plan is intended to qualify under
Section 401of the Internal Revenue Code, so that contributions by us or our
employees to the 401(k) plan, and income earned on the 401(k) plan
contributions, are not taxable to employees until withdrawn, and so that our
contributions, if any, will be deductible by us when made.
Bonus Plan
Certain of our executive officers are eligible for our Executive Bonus
Plan. The Executive Bonus Plan is an annual incentive award plan that provides
for a target bonus equal to a specified percentage of base salary for each
participant. The actual bonus earned may be higher or lower depending on the
extent to which company and individual performance objectives are achieved.
Typically, at the start of each year, the compensation committee or the board
of directors reviews and approves the performance objectives for the company
and individual officers. Our objectives consist of operating, strategic and
financial goals that are considered critical to our fundamental long-term goal
of building shareholder value. Our current bonus is based on performance from
July 1, 1998 through December 31, 1999.
At the end of the year, the compensation committee or board of directors
determines actual bonus awards based on the degree to which we have met
corporate goals and participants have met their individual goals. Awards are
paid in cash in January or February following the performance year.
Loans/Guarantees
We have made loans to certain of our employees to fund their exercise of
the Reserved Shares. These loans are secured by the stock of OpenTV, Inc. that
is purchased by these employees upon their exercise of such options.
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TRANSACTIONS WITH RELATED PARTIES
The following describes the significant transactions entered into between
us and our directors, executive officers, shareholders and affiliates of the
shareholders. All future transactions between us and any such party will be
subject to approval by a majority of the disinterested members of the board.
Shareholders who previously owned or currently own 5% or more of our
ordinary shares or the common stock of OpenTV, Inc. include the following:
. THOMSON multimedia S.A. ("Thomson"), which was a holder of more
than 5% of the common stock of OpenTV, Inc. from its inception
until March 18, 1999
. Sun Microsystems, Inc. ("Sun"), which has been a holder of more
than 5% of the common stock of OpenTV, Inc. since its inception
. MIH Limited, which in turn is controlled by MIH Holdings Limited;
MIH Limited has indirectly owned 5% or more of our ordinary shares
or the common stock of OpenTV, Inc. since July 1997
Agreements with Sun and Sun Affiliates
Software License. Under a Source Code License and Binary Distribution
Agreement, effective as of July 1, 1996, Sun agreed to grant us a license to
certain media stream manager software. OpenTV retains ownership of all
derivatives of the software created by OpenTV and all related intellectual
property rights (subject to Sun's underlying rights) but OpenTV must promptly
grant back licenses to such derivatives and intellectual property rights and
deliver copies of the same to Sun.
Java License. In March 1998, we entered into a licensing and distribution
agreement with Sun under which Sun granted us a non-exclusive, non-transferable
license to develop and distribute products based upon Sun's Java technology. In
June 1999 we amended the agreement and committed to develop future versions of
our OpenTV Runtime software incorporating Sun's Java technology and compatible
with the appropriate JavaTV application programming interfaces. We are
obligated to pay Sun license, support and royalty fees through December 31,
2004.
March 1999 Agreements with Thomson and MIH Limited
In March 1999, a series of agreements were entered into by Thomson, MIH
Limited, Sun and us pursuant to which:
. Thomson sold all of our ordinary shares held by it to MIH Limited
and MIH Limited resold a portion of those shares to Sun
. Thomson assigned and licensed specific intellectual property
valued at $7.6 million to us
. we cross-licensed specific intellectual property rights to Thomson
. Thomson, MIH Limited and OpenTV, Inc. entered into mutual releases
all as described more fully below
Pursuant to an assignment agreement between Thomson and us, Thomson
assigned to us specific intellectual property relating to our business. In a
license agreement between Thomson and us, Thomson granted to us a non-exclusive
license to make, have made, use, sell, improve, lease, or otherwise transfer,
import or export our products and services (including a limited right to
sublicense), specific Thomson intellectual property relating to our business.
Under a still picture encoder license agreement, Thomson agreed to grant
to us a non-exclusive license to copy, display, modify, distribute and use the
software known as MPEG Encoder 3.0.2 developed by
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Thomson for our own internal use, to develop derivative works, and to
sublicense the software solely in connection with the marketing and
distribution of OpenTV Runtime and the development of interactive television
applications.
Pursuant to the OpenTV License Agreement, we agreed to grant back a
license to Thomson and Thomson Broadcast Systems, S.A. under the technology
assigned to us by Thomson and its affiliates under the assignment agreement.
Pursuant to the Release Agreement, each of Thomson, MIH Limited, and the
Company released any and all claims, subject to certain exceptions, that each
could have asserted against the others or any of their affiliates, agents,
representatives, officers, directors, and employees as of March 18, 1999.
Amended and Restated Stockholders' Agreement
On October 23, 1999, OpenTV Corp. entered into the Amended and Restated
Stockholders' Agreement with OpenTV, Inc., Sun, a Sun subsidiary and a
subsidiary of MIH Limited. It contains the following provisions:
Fundamental Business Decisions
. If the board of directors of OpenTV Corp. approves any of the
following fundamental business decisions, it must submit the
matter to Sun (treating Sun as though it had exchanged its common
stock of OpenTV, Inc. for ordinary shares of OpenTV Corp.) and MIH
Limited for their approval:
(1) any business combination involving a change of control of
OpenTV Corp. (unless approved by a Sun designee to the OpenTV
Corp. board of directors),
(2) any change to the Memorandum or Articles of OpenTV Corp.
that
(a) adversely affects Sun's rights under the Exchange
Agreement described herein,
(b) affects Sun more adversely than MIH Limited or
(c) would impact the intellectual property rights licensed
by Sun to OpenTV, Inc. or
(3) any assignment or sublicensing of licensed Sun intellectual
property made outside of the ordinary course of business.
. If the board of directors of OpenTV, Inc. approves any of the
following fundamental business decisions, it must submit the
matter to Sun and OpenTV Corp. for their approval:
(1) any business combination involving a change of control of
OpenTV, Inc. (unless approved by a Sun designee to the OpenTV,
Inc. board of directors),
(2) any change to the charter of OpenTV, Inc. that
(a) adversely affects Sun's rights under the Exchange
Agreement described herein,
(b) affects Sun more adversely than OpenTV Corp. or
(c) would impact the intellectual property rights licensed
by Sun to OpenTV, Inc. or
(3) any assignment or sublicensing of licensed Sun intellectual
property made outside of the ordinary course of business.
. OpenTV Corp. fundamental business decisions require the
affirmative vote of at least 95% of all votes in respect of OpenTV
Corp. ordinary shares exercisable by MIH Limited and Sun (treating
Sun as though it had exchanged all its common stock of OpenTV,
Inc. for ordinary shares of OpenTV Corp.). OpenTV, Inc.
fundamental business decisions require the affirmative vote of at
least 95% of all votes in respect of OpenTV, Inc. common stock
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exercisable by OpenTV Corp. and Sun. If the 95% test is not
satisfied, a representative of Sun's subsidiary and OpenTV Corp.
must attempt to resolve the deadlock and, if they are
unsuccessful, a representative of Sun and MIH Limited must attempt
to resolve the deadlock. If the deadlock is not resolved within
31 days, then OpenTV Corp. shall purchase, and if OpenTV Corp.
cannot purchase, then MIH Limited may purchase, all of the shares
of OpenTV, Inc. and OpenTV Corp. held by Sun at their fair market
value.
Restrictions on Transfer of Shares by Sun
. Sun may not transfer any shares of OpenTV, Inc. other than: (1) in
exchange for shares of OpenTV Corp. pursuant to the terms of the
Exchange Agreement described herein, or (2) to an affiliate of Sun
so long as Sun remains bound and the transferee agrees to be bound
by the terms of the Amended and Restated Stockholders' Agreement.
Term
. The Amended and Restated Stockholders' Agreement terminates when
Sun exchanges all its shares of common stock of OpenTV, Inc. for
ordinary shares of OpenTV Corp.
Shareholders' Agreement
On October 23, 1999, OpenTV Corp. entered into a Shareholders' Agreement
with a subsidiary of Sun and a subsidiary of MIH Limited. Through these
subsidiaries, Sun and MIH Limited have agreed that, prior to transferring
equity securities of OpenTV Corp., they will offer such securities to each
other.
Stock Option Grant to MIH Limited Affiliate
In May 1999, we granted a non-statutory stock option to purchase 330,000
ordinary shares to a consulting firm subsidiary of MIH Limited. The subsidiary
expects that it will make available the economic benefit of these options to
its employees, including Allan Rosenzweig and Stephen Oldfield, who are
directors of OpenTV Corp., and employees of MIH Limited, our parent company.
The options were granted pursuant to the Amended and Restated 1998 Stock
Option/Stock Issuance Plan and have exercise prices equal to the fair market
value of our ordinary shares on the date of grant.
Purchase and Exchange Agreement with MIH Limited and Sun
On July 16, 1999, OpenTV, Inc. filed an Amended and Restated Certificate
of Incorporation pursuant to which, among other things, it:
. created two classes of common stock designated, respectively,
Class A and Class B Common Stock and
. reclassified each share of its common stock outstanding at the
close of business on July 12, 1999, as one share of Class A Common
Stock
In connection with the reclassification, OpenTV, Inc. offered to sell up
to 2,086,700 shares of Class B Common Stock at a purchase price of $2.90 per
share to existing stockholders of OpenTV, Inc. who qualified as "accredited
investors" (as defined in Regulation D promulgated under the Securities Act of
1933, as amended) in accordance with the terms and conditions of the Purchase
and Exchange Agreement. The number of shares offered to each qualified existing
stockholder corresponded to the stockholder's ownership percentage of OpenTV,
Inc.'s then outstanding common stock. Qualified stockholders who participated
in the financing received, on a one-for-one basis and in accordance with the
terms and conditions of a purchase and exchange agreement, Class B Common Stock
in exchange for all of the Class A Common Stock held by such stockholder.
Qualified stockholders who elected to participate in the financing include,
among others, MIH Limited and Sun.
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Investors' Rights Agreement
On October 23, 1999, OpenTV Corp., MIH Limited, Sun, America Online,
General Instrument, Liberty Digital, News Corporation and Time Warner, Inc.
entered into an Investors' Rights Agreement. We refer to MIH Limited and Sun as
the existing investors and America Online, General Instrument, Liberty Digital,
News Corporation and Time Warner as the new investors. The Investors' Rights
Agreement contains the following provisions:
Board of Directors
The existing investors and the new investors have agreed to vote their
shares so that our board of directors has the following composition:
. so long as the new investors own ordinary shares equal to at least
60% of the issued amount, two directors designated by the new
investors
. so long as the new investors own ordinary shares equal to at least
30% of the issued amount, one director designated by the new
investors
. so long as Sun owns shares equal to at least 30% of the aggregate
amount of Class B Ordinary Shares issuable in respect of their
shares of Class B Common Stock of OpenTV, Inc., one director
designated by Sun
. a majority of the directors designated by MIH Limited
Such agreement shall terminate no later than October 1, 2009.
Veto Rights
For a period not to exceed two years (other than with respect to the
required consent for affiliate transactions, which survives until the earlier
of a change of control and the new investors ceasing to own 50% of the issued
number) following these offerings, without the consent of the new investors, we
may not:
. enter into a merger, reorganization, sale of all or substantially
all our assets or liquidation
. enter into affiliate transactions that are not on arms' length
terms and that provides for aggregate compensation or
consideration of more than $500,000 in any fiscal year
. other than issuances of Class B Ordinary Shares to Sun pursuant to
the Exchange Agreement and to other existing holders of Class B
Common Stock of OpenTV, Inc., issue any equity securities having
voting rights superior to our Class A Ordinary Shares
. increase the number of Class A Ordinary Shares eligible for the
employee stock option plan and employee stock purchase plan in
excess of 4.4 million
. issue equity securities at a per share price that is less than
$5.55 per share
. devote substantial resources to any line of business outside our
existing business
So long as the new investors have the right to designate two directors
and at least one of their directors is on our board, we may not adopt new or
make material modifications to existing stock option and other equity
compensation plans without the approval of our board of directors, including
the approval of a director designated by the new investors.
Transfers and Exchanges of Shares
Prior to transferring any equity securities of OpenTV Corp. to a non-
affiliate, MIH Limited must first offer such shares to the new investors. The
new investors' right of first refusal is subject to Sun's right of first
refusal in respect of such equity securities pursuant to the Shareholders'
Agreement.
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Prior to transferring any Class B Ordinary Shares to a non-affiliate or
converting any Class B Ordinary Shares into Class A Ordinary Shares, the
existing investors and any new investor that acquires Class B Ordinary Shares
must first offer to exchange such shares for Class A Ordinary Shares held by
the new investors.
MIH Limited must make provision for the new investors to participate in
any transfer of shares by it that will result in a change of control of OpenTV
Corp.
Prior to transferring any shares to a non-affiliate, the new investors
must offer such shares first, to the other new investors and, second, to MIH
Limited.
Each of these restrictions is subject to specified exceptions.
Transfers of Warrants
Subject to an exception in the event a new investor is unable to obtain
government approval to exercise its warrants, the warrants held by the new
investors can only be transferred to other new investors.
Registration Rights
Each of the existing investors and the new investors has certain rights
to require us to register its shares on demand and in the event of specified
registered offerings of securities by us.
Exchange Agreement
Right to Exchange
In connection with the creation of OpenTV Corp., on October 23, 1999, we
entered into an Exchange Agreement with Sun that permits Sun to exchange all or
a portion of its shares of Class B Common Stock of OpenTV, Inc. for our Class B
Ordinary Shares. The rate of exchange, which is subject to customary
antidilution adjustments, is one Class B Ordinary Share for one share of Class
B Common Stock of OpenTV, Inc.
OpenTV Corp. has agreed to reserve the number of its authorized but
unissued Class B Ordinary Shares as will be sufficient to permit the exchange
in full of Sun's OpenTV, Inc. Class B Common Stock for OpenTV Corp.'s Class B
Ordinary Shares.
Preservation of OpenTV Corp.'s Interest in OpenTV, Inc.
OpenTV, Inc., OpenTV Corp. and Sun have agreed that each time OpenTV
Corp. issues additional Class A Ordinary Shares or Class B Ordinary Shares
(other than on conversion of Class B Ordinary Shares), OpenTV, Inc. will sell
and OpenTV Corp. will purchase, at a purchase price of $0.001 per share, an
equal number of shares of Class A Common Stock or Class B Common Stock of
OpenTV, Inc., respectively.
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PRINCIPAL SHAREHOLDERS
The table below sets forth, after giving effect to (1) the conversion of
all of our Series C-1 Convertible Preference Shares and Series C-2 Convertible
Preference Shares into 5,630,628 Class A Ordinary Shares and (2) the sale of
7,500,000 Class A Ordinary Shares in these offerings, certain information with
respect to the beneficial ownership of each class of our voting securities by
(1) each person who is known by us to be the beneficial owner of more than 5%
of any class or series of our voting securities and (2) all directors and
executive officers as a group. The share data for directors and officers do not
take into account any of their holdings in our parent company, MIH Limited, or
any beneficial interest deriving therefrom.
<TABLE>
<CAPTION>
Class A Class B
Ordinary Shares Ordinary Shares
--------------------- ------------------------
Identity of Person or Percent Percent Total
Group Number of Class Number of Class Voting Rights
- --------------------- ------ -------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
MIH Limited(/1/)........ -- --% 30,631,746 100.0% 95.9%
Sun Microsystems,
Inc.(/2/)............... 900,900 6.9 7,594,796(/3/) 19.9 19.4
Directors and officers
as a group (17
persons)(/4/)........... 697,833(/5/) 5.0 -- -- *
</TABLE>
- --------
* Less than 1%.
(1) MIH Limited holds its shares through its wholly-owned subsidiary, OTV
Holdings Limited.
(2) Sun Microsystems, Inc. holds its shares through its wholly-owned
subsidiary, Sun TSI Subsidiary, Inc.
(3) Represents 7,594,596 shares of Class B Common Stock of OpenTV, Inc. that
may be exchanged into Class B Ordinary Shares of OpenTV Corp. on a one-
for-one basis.
(4) Directors and officers also hold 137,142 shares of Class A Common Stock
and 21,144 shares of Class B Common Stock of OpenTV, Inc. We intend to
facilitate the disposition of these shares either by purchasing such
shares directly or by providing such holders the ability to exchange their
shares in OpenTV, Inc. for OpenTV Corp. Class A Ordinary Shares. This
amount excludes 1,126,126, 1,126,126, 8,495,696 and 30,631,746 ordinary
shares owned by News Corporation, Liberty Digital, Sun Microsystems and
MIH Limited, respectively.
(5) Represents options to purchase 697,833 Class A Ordinary Shares that are
currently vested and exercisable (or will become vested and exercisable
within 60 days of October 21, 1999). These shares are shown as being held
by the directors and officers for the purposes of this table only.
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DESCRIPTION OF CAPITAL STOCK
General
Set forth below is a description of the material terms of our capital
stock. This summary is subject to the provisions of our Memorandum and Articles
of Association which are included as exhibits to the Registration Statement of
which this prospectus is a part, and by the provisions of applicable BVI law.
Our Memorandum and Articles authorize the issuance of up to: (1)
500,000,000 Class A Ordinary Shares, (2) 200,000,000 Class B Ordinary Shares
and (3) 500,000,000 preference shares.
We have applied to list our Class A Ordinary Shares on the Nasdaq
National Market and on the Official Segment of Amsterdam Exchanges N.V.'s stock
market ("Amsterdam Stock Exchange") under the symbol "OPTV". The transfer agent
and registrar for our Class A Ordinary Shares is ChaseMellon Shareholder
Services LLC, and the paying agent in the Netherlands is MeesPierson N.V.
We intend to apply to The Depository Trust Company ("DTC"), Euroclear and
Cedel Bank S.A. ("Cedel") for acceptance of our Class A Ordinary Shares in
their respective book-entry settlement systems. Initial settlement of our Class
A Ordinary Shares will take place on the closing date through DTC, Euroclear
and Cedel in accordance with their respective customary settlement procedures
for equity securities. Each person owning a beneficial interest in our Class A
Ordinary Shares held through DTC, Euroclear or Cedel, as the case may be, must
rely on the procedures thereof and on institutions that have accounts therewith
to exercise any rights of a holder of our Class A Ordinary Shares. Persons
wishing to obtain certificates for their Class A Ordinary Shares must make
arrangements with DTC, Euroclear or Cedel, respectively.
We were incorporated on September 30, 1999 in the British Virgin Islands.
Our founding statutes do not prescribe any time period for existence.
Trading Through New ASAS
Trading of our Class A Ordinary Shares on the Amsterdam Stock Exchange
will take place through the improved Amsterdam Security Account System ("New
ASAS") in ASAS rights OpenTV ("ASAS Rights OpenTV").
Under New ASAS, the legal owner of Class A Ordinary Shares is Nominee
Amsterdam Stock Exchange N.V. ("ASAS Nominee"), a wholly-owned subsidiary of
the Amsterdam Stock Exchange. The Class A Ordinary Shares owned by ASAS Nominee
are deposited in its account with the Bank of New York. For each Class A
Ordinary Share so deposited, ASAS Nominee creates an ASAS Right OpenTV which is
deposited with the Netherlands securities settlement system, Nederlands
Centraal Instituut voor Giraal Effectenverkeer B.V. ("NECIGEF"). The ASAS
Rights OpenTV traded on the Amsterdam Stock Exchange are cleared by its
securities clearing division, AEX-Effectenclearing, and settled through
NECIGEF.
Prices of the ASAS Rights OpenTV on the Amsterdam Stock Exchange will be
quoted in U.S. dollars, in order to allow the prices thereof to be as closely
aligned as possible with those of our Class A Ordinary Shares quoted on the
Nasdaq National Market.
Payments by us in respect of our Class A Ordinary Shares in New ASAS are
made through that system. Shareholder notices are not sent directly to
investors holding ASAS Rights OpenTV, but will instead be published in the
Daily Official List (Officiele Prijscourant) of the Amsterdam Stock Exchange
and in at least one Netherlands newspaper, indicating, when applicable, where
shareholders can obtain copies of any documents referred to in the notice.
The above is only a summary of New ASAS. Investors should consult with
their professional advisors if they require more information or if they have
any questions about New ASAS.
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Class A Ordinary Shares and Class B Ordinary Shares
Voting. The holders of our Class A Ordinary Shares and our Class B
Ordinary Shares will generally be entitled to vote as a single class on all
matters upon which holders of our ordinary shares have a right to vote, subject
to the requirements of any applicable laws. Each of our Class A Ordinary Shares
entitles its holder to one vote, and each of our Class B Ordinary Shares
entitles its holder to ten votes. Unless otherwise required by law, and so long
as their rights would not be adversely affected, the holders of our Class A
Ordinary Shares and our Class B Ordinary Shares will not be entitled to vote on
any amendment to our Memorandum and Articles that relates solely to the terms
of one or more outstanding series of preference shares.
Dividends and Other Distributions. Subject to the preferential and other
dividend rights of any outstanding series of preference shares, the holders of
our Class A Ordinary Shares and our Class B Ordinary Shares will be entitled to
equal dividends per share when, as and if declared by our board of directors,
except that all dividends payable in ordinary shares will be paid in the form
of our Class A Ordinary Shares to holders of our Class A Ordinary Shares and in
the form of our Class B Ordinary Shares to holders of our Class B Ordinary
Shares. Neither our Class A nor our Class B Ordinary Shares may be split,
divided or combined unless the other class is proportionally split, divided or
combined.
According to our Memorandum and Articles, all dividends that remain
unclaimed for a period of three years after their declaration may be forfeited
by our board of directors for our benefit.
In the event we are liquidated or wound up, the holders of our Class A
Ordinary Shares and Class B Ordinary Shares will be treated equally on a per
share basis and will be entitled to receive all of our remaining assets
following distribution of the preferential and/or other amounts to be
distributed to the holders of our preference shares.
Issuance of Class B Ordinary Shares, Options, Rights or Warrants. Subject
to certain provisions regarding dividends and other distributions described
above, we will not be entitled to issue additional Class B Ordinary Shares or
issue options, rights or warrants to subscribe for additional Class B Ordinary
Shares, except that we may issue Class B Ordinary Shares in exchange for shares
of Class B Common Stock of OpenTV, Inc. and may make a pro rata offer to all
holders of ordinary shares of rights to purchase additional shares of the class
of ordinary shares held by them. Our Class A and our Class B Ordinary Shares
will be treated equally with respect to any offer by us to holders of ordinary
shares or options, rights or warrants to subscribe for any of our other capital
stock.
Merger. In the event of a merger, the holders of our Class A Ordinary
Shares and our Class B Ordinary Shares will be entitled to receive the same per
share consideration, if any, except that if such consideration includes voting
securities (or the right to acquire voting securities or securities
exchangeable for or convertible into voting securities), we may (but are not
required to) provide for the holders of our Class B Ordinary Shares to receive
voting securities (or rights to acquire voting securities) entitling them to
ten times the number of votes per share as the voting securities (or rights to
acquire voting securities) being received by holders of our Class A Ordinary
Shares.
Conversion of Class B Ordinary Shares. Each of our Class B Ordinary
Shares will be convertible, at the option of the holder thereof, into our Class
A Ordinary Shares on a share-for-share basis and will automatically convert on
a share-for-share basis upon the occurrence of any of the following:
. upon transfer of our Class B Ordinary Shares to a person or entity
which is not one of the original beneficial owners of our Class B
Ordinary Shares, our Series C-1 Convertible Preference Shares or
Series C-2 Convertible Preference Shares or an affiliate
. on the date on which the number of our Class B Ordinary Shares
then outstanding is less than 10% of our then outstanding ordinary
shares (without regard to voting rights)
. at any time when the board of directors and the holders of a
majority of our outstanding Class B Ordinary Shares approve the
conversion of all of the Class B Ordinary Shares into Class A
Ordinary Shares
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. if the board of directors, in its sole discretion, elects to
effect a conversion after a determination that there has been a
material adverse change in the liquidity, marketability or market
value of our Class A Ordinary Shares, considered in the aggregate,
due to (x) the exclusion of our Class A Ordinary Shares from
trading on a national securities exchange or the exclusion of our
Class A Ordinary Shares from quotation on the Nasdaq or any other
similar market quotation system then in use; or (y) requirements
under any applicable law, in each of cases (x) and (y), as a
result of the existence of our Class B Ordinary Shares
In the event of a transaction where our Class A Ordinary Shares are
converted into or exchanged for one or more other securities, cash or other
property (a "Class A Conversion Event"), a holder of our Class B Ordinary
Shares thereafter will be entitled to receive, upon the conversion of such
Class B Ordinary Shares, the amount of such securities, cash and other property
that such holder would have received if the conversion of such Class B Ordinary
Shares had occurred immediately prior to the record date or effective date, as
the case may be, of the Class A Conversion Event.
Preemptive Rights. The holders of our ordinary shares will not have any
preemptive rights with respect to any of our outstanding or newly issued
capital stock.
Preference Shares
Pursuant to our Memorandum and Articles, we may issue preference shares
in one or more series.
The board of directors has the authority, without any vote or action by
the shareholders, to create one or more series of preference shares up to the
limit of our authorized but unissued preference shares and to fix any of the
following:
. the number of shares constituting such series and the designation
of such series
. the voting powers (if any) of the shares of such series
. the relative, participating, optional or other rights (if any)
. any qualifications, preferences, limitations or restrictions
thereof, including, without limitation, the dividend rate (and
whether dividends are cumulative), conversion rights, rights and
terms of the redemption (including sinking fund provisions)
. the redemption price and liquidation preferences
. to increase or decrease the number of shares of any series
subsequent to the issue of shares of that series, but not below
the number of shares of such series then outstanding
Series C-1 Convertible Preference Shares
Until these offerings are completed, we will have 23,648,646 Series C-1
Convertible Preference Shares authorized, issued and outstanding. These shares
are convertible into Class A Ordinary Shares at a rate of one Class A Ordinary
Share for every five Series C-1 Convertible Preference Shares. Upon
consummation of these offerings, all of our outstanding Series C-1 Convertible
Preference Shares will be converted into our Class A Ordinary Shares.
Series C-2 Convertible Preference Shares
Until these offerings are completed, we will have 4,504,504 Series C-2
Convertible Preference Shares authorized, issued and outstanding. These shares
are convertible into Class A Ordinary Shares at a rate of one Class A Ordinary
Share for every five Series C-2 Convertible Preference Shares. Upon
consummation of these offerings, all of our outstanding Series C-2 Convertible
Preference Shares will be converted into our Class A Ordinary Shares.
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Upon the completion of these offerings, there will be no preference
shares outstanding. See "--Certain Anti-Takeover Matters--Blank Check
Preference Shares".
Warrants to Purchase Class A Ordinary Shares
As of October 23, 1999, we had outstanding warrants to purchase 4,729,728
of our Class A Ordinary Shares at an exercise price of $5.55 per share. These
warrants currently are exercisable in full and will expire in October 2001.
Limitation of Liability
Our Memorandum and Articles provide that, to the fullest extent permitted
by British Virgin Islands law or any other applicable laws, our directors will
not be personally liable to us or our shareholders for any acts or omissions in
the performance of their duties. Such limitation of liability does not affect
the availability of equitable remedies such as injunctive relief or rescission.
These provisions will not limit the liability of our directors under United
States federal securities laws.
Certain Anti-Takeover Matters
Our Memorandum and Articles include a number of provisions that may have
the effect of encouraging persons considering unsolicited tender offers or
other unilateral takeover proposals to negotiate with our board of directors
rather than pursue non-negotiated takeover attempts. These provisions include a
dual class voting stock, the inability of shareholders to act by written
consent or call a special meeting of the shareholders, an advance notice
requirement for director nominations and other actions to be taken at annual
meetings of shareholders, the requirements for approval by 66 2/3% of the
shareholder votes to amend certain provisions of our Memorandum and Articles,
removal of a director only for cause and the availability of authorized but
unissued blank check preference shares.
Dual Class Voting Stock. Our Class B Ordinary Shares are entitled to ten
votes per share and our Class A Ordinary Shares are entitled to one vote per
share. Therefore, after giving effect to these offerings and the conversion of
all of our Series C-1 Convertible Preference Shares and Series C-2 Convertible
Preference Shares into 5,630,628 Class A Ordinary Shares, our Class B Ordinary
Shares will represent 95.9% of the voting power of all our ordinary shares even
though they represent 70.0% of our economic interests. Since MIH Limited will
indirectly own all of our outstanding Class B Ordinary Shares after these
offerings, it will have effective control over any proposals to acquire us,
rendering futile any attempts to pursue unsolicited tender offers or takeover
attempts without negotiation with MIH Limited.
No Shareholder Action by Written Consent; Special Meetings Callable Only
by Board. Our Memorandum and Articles prohibit shareholders from taking action
by written consent in lieu of an annual or special meeting, and, thus,
shareholders may take action only at an annual or special meeting called in
accordance with our Memorandum and Articles. Our Memorandum and Articles
provide that special meetings of shareholders may only be called by the
direction of our board of directors pursuant to a resolution adopted by our
board of directors or by our chief executive officer. These provisions could
have the effect of delaying consideration of a shareholder proposal until the
next annual meeting. The provisions would also prevent the holders of a
majority of the voting power of our ordinary shares entitled to vote from
unilaterally using the written consent procedure to take shareholder action.
Advance Notice Requirement. Our Memorandum and Articles set forth advance
notice procedures with regard to shareholder proposals relating to the
nomination of candidates for election as directors or new business to be
presented at meetings of shareholders. These procedures provide that notice of
such shareholder proposals must be timely given in writing to our secretary
prior to the meeting at which the action is to be taken. Generally, to be
timely, notice must be received at our principal executive offices not less
than 30 days nor more than 60 days prior to the meeting. The advance notice
requirement does not give our board of directors any power to approve or
disapprove shareholder director nominations or proposals but may have the
effect of precluding the consideration of certain business at a meeting if the
proper notice procedures are not followed.
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Amendment of Memorandum and Articles. Our Memorandum and Articles require
the affirmative vote of at least 66 2/3% of the voting power of all outstanding
shares of capital stock or 66 2/3% of the members of our board of directors
entitled to vote to amend or repeal certain provisions of our Memorandum and
Articles, including those described in this section under "Certain Anti-
Takeover Matters", or to approve any merger by us that would have the effect of
making changes in our Memorandum and Articles which would have required such
affirmative vote if effected directly as an amendment. This requirement will
render more difficult the dilution of the anti-takeover provisions of our
Memorandum and Articles.
Removal of Directors Only for Cause. Our Memorandum and Articles permit
shareholders to remove directors only for cause and only by the affirmative
vote of the holders of a majority of the voting power of the ordinary shares.
This provision may restrict the ability of a third party to remove incumbent
directors and simultaneously gain control of our board of directors by filling
the vacancies created by removal with its own nominees.
Blank Check Preference Shares. Our Memorandum and Articles provide for
authorized preference shares, none of which are outstanding. The existence of
authorized but unissued preference shares may enable our board of directors to
render more difficult or discourage an attempt to obtain control of us by means
of a merger, tender offer, proxy contest or otherwise. For example, if in the
due exercise of its fiduciary obligations, our board of directors were to
determine that a takeover proposal is not in our best interests, our board of
directors could cause preference shares to be issued without shareholder
approval in one or more private offerings or other transactions that might
dilute the voting or other rights of the proposed acquirer or insurgent
shareholder or shareholder group. In this regard, our Memorandum and Articles
grant our board of directors broad power to establish the rights and
preferences of authorized and unissued preference shares. The issuance of
preference shares pursuant to our board of directors' authority described above
could decrease the amount of earnings and assets available for distribution to
you and adversely affect the enjoyment of rights of such holders, including
voting rights in the event a particular series of preference shares is given a
disproportionately large number of votes per share, and may have the effect of
delaying, deferring or preventing a change in control that may be favored by
certain shareholders.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of these offerings and after giving effect to the
conversion of all of our Series C-1 Convertible Preference Shares and Series C-
2 Convertible Preference Shares into 5,630,628 Class A Ordinary Shares, we will
have 13,130,628 Class A Ordinary Shares outstanding (14,255,628 Class A
Ordinary Shares if the underwriters' over-allotment options are exercised in
full) and 30,631,746 Class B Ordinary Shares outstanding. Of these, the
7,500,000 Class A Ordinary Shares sold by us in these offerings
(8,625,000 Class A Ordinary Shares if the underwriters' over-allotment options
are exercised in full) will be freely tradable without restriction or further
registration under the Securities Act, unless held by one of our "affiliates"
(as that term is defined under the Securities Act and the regulations
promulgated thereunder). The remaining 5,630,628 Class A Ordinary Shares
outstanding (the "Unregistered Shares"), were issued or sold without
registration under the Securities Act and may not be resold except in
compliance with the registration requirements of the Securities Act or pursuant
to an exemption therefrom, including the exemptions provided by Rule 144.
There are 4,639,638 Unregistered Shares held by our non-affiliates. These
shares will be available for resale subject to the volume and manner of sale
requirements of Rule 144 on various dates up to one year after the date of this
prospectus and will become available for unrestricted resale one year
thereafter.
There are 900,900 Unregistered Shares held by Sun, one of our affiliates.
Sun also holds 7,594,790 shares of the Class B Common Stock of OpenTV, Inc.,
which may be exchanged into a total of 7,594,790 of our Class B Ordinary
Shares. These shares will be available for resale subject to the volume and
manner of sale requirements of Rule 144 on varying dates up to one year after
the date of this prospectus.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) is entitled to sell within any three-month period
a number of shares that does not exceed the greater of (i) 1% of the number of
then outstanding Class A Ordinary Shares or (ii) the average weekly trading
volume of the outstanding Class A Ordinary Shares during the four calendar
weeks preceding such sale.
Lock-Up Agreements. Except for the issuance by us of options under our
Stock Option/Issuance Plan, we and our directors, executive officers and
existing shareholders have agreed not to, directly or indirectly, (i) sell,
grant any option to purchase or otherwise transfer or dispose of any ordinary
shares or securities convertible into or exchangeable or exercisable for
ordinary shares or file a registration statement under the Securities Act with
respect to the same or (ii) enter into any swap or other agreement or
transaction that transfers, in whole or in part, the economic consequence of
ownership of the ordinary shares (each a "disposal"), without the prior written
consent of Merrill Lynch for a period of 180 days after the date of this
prospectus.
In addition, MIH Limited (through its wholly-owned subsidiary OTV
Holdings Limited), in its capacity as a shareholder that individually holds
more than 5% of our ordinary shares outstanding, has agreed (in accordance with
the rules for admission to listing on the Amsterdam Stock Exchange of issuers
with less than three financial years' net profit) that it will not, for a
maximum period of three years after the date of such admission, dispose of
common stock that totals, in the aggregate:
. more than 25% (as long as none of our fiscal years have closed
with a net profit)
. more than 50% (for so long as not more than one of our fiscal
years has closed with a net profit) or
. more than 75% (until two of our fiscal years have closed with a
net profit)
of the number of ordinary shares currently outstanding for a maximum period of
three years after the date of admission of the Class A Ordinary Shares to
listing on the Amsterdam Stock Exchange. This prohibition is subject to the
following exceptions:
. MIH Limited (through its wholly-owned subsidiary OTV Holdings
Limited) may sell to professional investors, provided the
purchaser agrees to be bound by the same restrictions on the
disposal of the common stock being transferred as the transferor
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. under certain conditions, MIH Limited may sell by a registered
public offering occurring at least one year after the date of
admission of the Class A Ordinary Shares to listing on the
Amsterdam Stock Exchange
Our directors (to whom the above rules would apply if they held shares of
our common stock as of the date of this prospectus) have not entered into
similar undertakings as described above, since none of them, directly or
indirectly, holds or has any ownership interest in or control over the disposal
of ordinary shares currently outstanding.
Shares of OpenTV, Inc. Not Held by Sun Microsystems. We intend to
facilitate the disposition of the 804,197 shares of common stock of OpenTV,
Inc. and 783,500 shares of common stock of OpenTV, Inc. issuable on exercise of
employee stock options held by holders other than Sun Microsystems and OpenTV
Corp. either by purchasing such shares directly or by providing such holders
with the ability to exchange their shares in OpenTV, Inc. for shares in OpenTV
Corp. If all those shareholders, other than OpenTV Corp. and Sun Microsystems,
effect such an exchange, then we will issue an additional 1,453,123 Class A
Ordinary Shares and 134,574 Class B Ordinary Shares, many of which would be
freely tradeable without restriction. These shareholders in OpenTV, Inc. will
not be able to effect any such exchange until at least 180 days after these
offerings.
Registration Rights. We are a party to an Investors' Rights Agreement
that provides MIH Limited, Sun Microsystems, America Online, General
Instrument, Liberty Digital, News Corporation and Time Warner with the ability
to demand registration of all or a portion of the Class A Ordinary Shares they
own or have the right to purchase and certain shares they subsequently acquire.
These shareholders also have the right to include all or any portion of the
Class A Ordinary Shares they own on registration statements we file, other than
registration statements relating to acquisition transactions and stock-based
compensation.
Effect of Resales. Prior to these offerings, there has been no public
market for our Class A Ordinary Shares. No predictions can be made of the
effect, if any, that future sales of ordinary shares, options to acquire
ordinary shares or the availability of shares for future sale will have on the
market price prevailing from time to time. Sales of substantial amounts of
ordinary shares in the public market, or the perception that such sales may
occur, could have a material adverse effect on the market price of our Class A
Ordinary Shares.
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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
General
This section summarizes the material U.S. Federal income tax consequences
to holders of our Class A Ordinary Shares as of the date of this prospectus.
The summary applies to you only if you hold our ordinary shares as a capital
asset for tax purposes (that is, for investment purposes). The summary does not
cover state, local or foreign law. In addition, this summary does not apply to
you if you are a member of a class of holders subject to special rules, such
as:
. a dealer in securities or currencies;
. a trader in securities that elects to use a mark-to-market method
of accounting for your securities holdings;
. a bank;
. a life insurance company;
. a tax-exempt organization;
. a person that holds our ordinary shares as part of a straddle or a
hedging, integrated, constructive sale or conversion transaction
for tax purposes;
. a person whose functional currency for tax purposes is not the
U.S. dollar;
. a person liable for alternative minimum tax; or
. a person that owns, or is treated as owning, 10% or more of any
class of our shares.
The discussion is based on current law. Changes in the law may alter the
tax treatment of our ordinary shares, possibly on a retroactive basis.
The discussion does not cover tax consequences that depend upon your
particular tax circumstances. We recommend that you consult your tax advisor
about the consequences of holding our ordinary shares in your particular
situation.
For purposes of the discussion below, you are a "U.S. holder" if you are
a beneficial owner of our ordinary shares who or which is:
. an individual U.S. citizen or resident alien;
. a corporation, or entity taxable as a corporation, that was
created under U.S. law (federal or state); or
. an estate or trust as defined in Section 7701(a)(30) of the
Internal Revenue Code.
If you are not a U.S. holder, you are a "Non-U.S. holder" and the
discussion below titled "Tax Consequences to Non-U.S. Holders" will apply to
you.
If a partnership holds our ordinary shares, the tax treatment of a
partner will generally depend upon the status of the partner and upon the
activities of the partnership. If you are a partner of a partnership holding
ordinary shares, you should consult your tax advisor.
Tax Consequences to U.S. Holders
Distributions
We do not anticipate making distributions on our ordinary shares in the
foreseeable future. See "Dividend Policy". If distributions are made, however,
the gross amount of any such distribution (other than
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in liquidation) that you receive with respect to our ordinary shares generally
will be taxed to you as a dividend (i.e., ordinary income) to the extent such
distribution does not exceed our current or accumulated earnings and profits,
as calculated for U.S. Federal income tax purposes ("E&P"). To the extent any
distribution exceeds our E&P, the distribution will first be treated as a tax-
free return of capital to the extent of your adjusted tax basis in our
ordinary shares and will be applied against and reduce such basis on a dollar-
for-dollar basis (thereby increasing the amount of gain and decreasing the
amount of loss recognized on a subsequent disposition of such common stock).
To the extent that such distribution exceeds your adjusted tax basis, the
distribution will be taxed as gain recognized on a sale or exchange of our
ordinary shares. See "Sale or Other Disposition of Our Ordinary Shares",
below. Because we are not a U.S. corporation, no dividends-received deduction
will be allowed to corporations with respect to dividends paid by us.
Dividends paid with respect to our ordinary shares will generally be treated
as foreign source "passive income" or, in the case of certain types of U.S.
holders, "financial services income", for purposes of computing allowable
foreign tax credits for U.S. foreign tax credit purposes.
Sale or Other Disposition of Our Ordinary Shares
Generally speaking, in connection with the sale or other taxable
disposition of our ordinary shares:
. you will recognize gain or loss equal to the difference (if any)
between:
. the U.S. dollar value of the amount realized on such sale or
other taxable disposition, and
. your adjusted tax basis in such ordinary shares.
. any gain or loss will be capital gain or loss and will be long-
term capital gain or loss if your holding period for our ordinary
shares is more than one year at the time of such sale or other
disposition.
. any gain or loss will be treated as having a United States source
for United States foreign tax credit purposes.
. your ability to deduct capital losses is subject to limitations.
Passive Foreign Investment Company
U.S. holders generally would be subject to a special, adverse tax regime
(that would differ in certain respects from that described above) if we are or
were to become a passive foreign investment company for U.S. Federal income
tax purposes. Although the determination of whether a corporation is a passive
foreign investment company is made annually, and thus may be subject to
change, we do not believe that we are, nor do we expect to become, a passive
foreign investment company. Notwithstanding the foregoing, we urge you to
consult your own U.S. tax advisor regarding the adverse U.S. Federal income
tax consequences of owning the shares of a passive foreign investment company
and of making certain elections designed to lessen those adverse consequences.
Information Return
If you, either individually or in connection with a person related to
you within the meaning of the applicable Treasury Regulations, purchase more
than $100,000 of our ordinary shares within the 12-month period ending at the
time of the offering, you may be required to furnish information pertaining to
such purchase to the Internal Revenue Service. If you fail to furnish any such
necessary information, you could be subject to penalties. Accordingly, we urge
you to contact your own tax advisor to ascertain whether it is necessary for
you to furnish any such information to the Internal Revenue Service.
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Tax Consequences to Non-U.S. Holders
Distributions
If you are a Non-U.S. holder, you generally will not be subject to U.S.
Federal income tax on distributions made on our ordinary shares unless:
. you conduct a trade or business in the United States and,
. the dividends are effectively connected with the conduct of that
trade or business (and, if an applicable income tax treaty so
requires as a condition for you to be subject to U.S. Federal
income tax on a net income basis in respect of income from our
ordinary shares, such dividends are attributable to a permanent
establishment that you maintain in the United States).
If you fail the above test, you generally will be subject to tax in
respect of such dividends in the same manner as a U.S. holder, as described
above. In addition, any effectively connected dividends received by a non-U.S.
corporation may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty.
Sale or Other Disposition of Our Ordinary Shares
If you are a Non-U.S. holder, you will not be subject to U.S. Federal
income tax, including withholding tax, in respect of gain recognized on a sale
or other taxable disposition of our ordinary shares unless:
. your gain is effectively connected with a trade or business that
you conduct in the United States (and, if an applicable income tax
treaty so requires as a condition for you to be subject to U.S.
Federal income tax on a net income basis in respect of gain from
the sale or other disposition of our ordinary shares, such gain is
attributable to a permanent establishment maintained by you in the
United States), or
. you are an individual and are present in the United States for at
least 183 days in the taxable year of the sale or other
disposition, and either:
. your gain is attributable to an office or other fixed place of
business that you maintain in the United States, or
. you have a tax home in the United States.
Effectively connected gains realized by a non-U.S. corporation may also,
under certain circumstances, be subject to an additional "branch profits tax"
at a rate of 30% or such lower rate as may be specified by an applicable income
tax treaty.
Backup Withholding and Information Reporting
Payments (or other taxable distributions) in respect of our ordinary
shares that are made in the United States or by a U.S. related financial
intermediary will be subject to U.S. information reporting rules. You will not
be subject to "backup" withholding of U.S. Federal income tax provided that:
. you are a corporation or other exempt recipient, or
. you provide a taxpayer identification number (which, in the case
of an individual, that is his or her taxpayer identification
number) and certify that no loss of exemption from backup
withholding has occurred.
If you are not a United States person, you generally are not subject to
information reporting and backup withholding, but you may be required to
provide a certification of your non-U.S. status in order to establish that you
are exempt.
Amounts withheld under the backup withholding rules may be credited
against your U.S. Federal income tax liability, and you may obtain a refund of
any excess amounts withheld under the backup withholding rules by filing the
appropriate claim for refund with the Internal Revenue Service.
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BRITISH VIRGIN ISLANDS TAXATION
Under the International Business Companies Act of the British Virgin
Islands as currently in effect, a holder of common stock who is not a resident
of the British Virgin Islands is exempt from British Virgin Islands income tax
on dividends paid with respect to the common stock and all holders of common
stock are not liable to the British Virgin Islands for income tax on gains
realized during that year on sale or disposal of such shares; the British
Virgin Islands does not impose a withholding tax on dividends paid by a company
incorporated under the International Business Companies Act.
There are no capital gains, gift or inheritance taxes levied by the
British Virgin Islands on companies incorporated under the International
Business Companies Act. In addition, the common stock is not subject to
transfer taxes, stamp duties or similar charges.
There is no income tax treaty or convention currently in effect between
the United States and the British Virgin Islands.
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UNDERWRITING
General
We intend to offer our Class A Ordinary Shares in the United States and
Canada through a number of U.S. underwriters as well as elsewhere through
international managers. Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Thomas Weisel Partners LLC are acting as U.S. representatives of each of the
U.S. underwriters named below. Subject to the terms and conditions set forth in
a U.S. purchase agreement among our company and the U.S. underwriters, and
concurrently with the sale of 3,750,000 shares of Class A Ordinary Shares to
the international managers, we have agreed to sell to the U.S. underwriters,
and each of the U.S. underwriters severally and not jointly has agreed to
purchase from our company, the number of Class A Ordinary Shares set forth
opposite its name below.
<TABLE>
<CAPTION>
Number of
U.S. Underwriters Shares
----------------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................
Thomas Weisel Partners LLC.......................................
---------
Total ...................................................... 3,750,000
=========
</TABLE>
We have also entered into an international purchase agreement with
certain international managers outside the United States and Canada for whom
Merrill Lynch International, MeesPierson N.V. and Thomas Weisel Partners LLC
are acting as lead managers. Subject to the terms and conditions set forth in
the international purchase agreement, and concurrently with the sale of
3,750,000 Class A Ordinary Shares to the U.S. underwriters pursuant to the U.S.
purchase agreement, we have agreed to sell to the international managers, and
the international managers severally have agreed to purchase from us, an
aggregate of 3,750,000 Class A Ordinary Shares. The initial public offering
price and the total underwriting discount per Class A Ordinary Share will be
identical under the U.S. purchase agreement and the international purchase
agreement.
In the U.S. purchase agreement and the international purchase agreement,
the several U.S. underwriters and the several international managers,
respectively, have agreed, subject to the terms and conditions set forth in
those agreements, to purchase all the Class A Ordinary Shares being sold under
the terms of each such agreement if any of the Class A Ordinary Shares being
sold under the terms of that agreement are purchased. In the event of a default
by an underwriter, the U.S. purchase agreement and the international purchase
agreement provide that, in certain circumstances, the purchase commitments of
the non- defaulting underwriters may be increased or the purchase agreements
may be terminated. The closings with respect to the sale of Class A Ordinary
Shares to be purchased by the U.S. underwriters and the international managers
are conditioned upon one another.
We have agreed to indemnify the U.S. underwriters and the international
managers against some liabilities, including some liabilities under the
Securities Act, or to contribute to payments the U.S. underwriters and
international managers may be required to make in respect of those liabilities.
The Class A Ordinary Shares are being offered by the several
underwriters, subject to prior sale, when, as and if issued to and accepted by
them, subject to approval of certain legal matters by counsel for the
underwriters and certain other conditions. The underwriters reserve the right
to withdraw, cancel or modify such offer and to reject orders in whole or in
part.
78
<PAGE>
Commitments and Discounts
The U.S. representatives have advised us that the U.S. underwriters
propose initially to offer the Class A Ordinary Shares to the public at the
initial public offering price set forth on the cover page of this prospectus,
and to certain dealers at such price less a concession not in excess of $
per Class A Ordinary Share. The U.S. underwriters may allow, and such dealers
may reallow, a discount not in excess of $ per Class A Ordinary Share to
certain other dealers. After the initial public offering, the public offering
price, concession and discount may change.
The following table shows the per share and total public offering price,
underwriting discount to be paid by us to the U.S. underwriters and the
international managers and the proceeds before expenses to us. This information
is presented assuming either no exercise or full exercise by the U.S.
underwriters and the international managers of their over-allotment options.
<TABLE>
<CAPTION>
Without With
Per Share Option Option
--------- ------- ------
<S> <C> <C> <C>
Public offering price............................. $ $ $
Underwriting discount............................. $ $ $
Proceeds, before expenses, to OpenTV.............. $ $ $
</TABLE>
The expenses of the offering, exclusive of the underwriting discount, are
estimated at $ and are payable by us.
Intersyndicate Agreement
The U.S. underwriters and the international managers have entered into an
intersyndicate agreement that provides for the coordination of their
activities. Under the terms of the intersyndicate agreement, the U.S.
underwriters and the international managers are permitted to sell our Class A
Ordinary Shares to each other for purposes of resale at the initial public
offering price, less an amount not greater than the selling concession. Under
the terms of the intersyndicate agreement, the U.S. underwriters and any dealer
to whom they sell our Class A Ordinary Shares will not offer to sell or sell
our Class A Ordinary Shares to persons who are non-U.S. or non-Canadian persons
or to persons they believe intend to resell to persons who are non-U.S. or non-
Canadian persons, and the international managers and any dealer to whom they
sell Class A Ordinary Shares will not offer to sell or sell Class A Ordinary
Shares to U.S. persons or to Canadian persons or to persons they believe intend
to resell to U.S. or Canadian persons, except in the case of transactions under
the terms of the intersyndicate agreement.
Over-allotment Option
We have granted an option to the U.S. underwriters, exercisable for 30
days after the date of this prospectus, to purchase up to an aggregate of
562,500 additional Class A Ordinary Shares at the public offering price set
forth on the cover page of this prospectus, less the underwriting discount. The
U.S. underwriters may exercise this option solely to cover over-allotments, if
any, made on the sale of our Class A Ordinary Shares offered hereby. To the
extent that the U.S. underwriters exercise this option, each U.S. underwriter
will be obligated, subject to certain conditions, to purchase a number of
additional Class A Ordinary Shares proportionate to such U.S. underwriter's
initial amount reflected in the foregoing table.
We also have granted an option to the international managers, exercisable
for 30 days after the date of this prospectus, to purchase up to an aggregate
of 562,500 additional Class A Ordinary Shares to cover over-allotments, if any,
on terms similar to those granted to the U.S. underwriters.
Reserved Shares
At our request, the U.S. underwriters have reserved for sale, at the
initial public offering price, up to ( %) of the Class A Ordinary Shares
offered hereby to be sold to some of our directors, officers,
79
<PAGE>
employees, business associates and related persons. The number of our Class A
Ordinary Shares available for sale to the general public will be reduced to the
extent that those persons purchase the reserved shares. Any reserved shares
which are not orally confirmed for purchase within one day of the pricing of
the offering will be offered by the U.S. underwriters to the general public on
the same terms as the other Class A Ordinary Shares offered by this prospectus.
No Sales of Similar Securities
We and our executive officers and directors and all existing shareholders
have agreed, with certain exceptions, without the prior written consent of
Merrill Lynch on behalf of the underwriters for a period of 180 days after the
date of this prospectus, not to directly or indirectly
. offer, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any
option, right or warrant for the sale of, lend or otherwise
dispose of or transfer any of our Class A Ordinary Shares or
securities convertible into or exchangeable or exercisable for or
repayable with our Class A Ordinary Shares, whether now owned or
later acquired by the person executing the agreement or with
respect to which the person executing the agreement later acquires
the power of disposition, or file a registration statement under
the Securities Act relating to any shares of our Class A Ordinary
Shares or
. enter into any swap or other agreement that transfers, in whole or
in part, the economic consequence of ownership of our Class A
Ordinary Shares whether any such swap or transaction is to be
settled by delivery of our Class A Ordinary Shares or other
securities, in cash or otherwise.
Quotation on the Nasdaq National Market
We expect our Class A Ordinary Shares to be approved for quotation on the
Nasdaq National Market and the Amsterdam Stock Exchange, subject to official
notice of issuance, under the symbol "OPTV".
Before this offering, there has been no public market for our Class A
Ordinary Shares. The initial public offering price will be determined through
negotiations between us and the U.S. representatives and the lead managers. The
factors to be considered in determining the initial public offering price, in
addition to prevailing market conditions, are the valuation multiples of
publicly traded companies that the U.S. representatives and the lead managers
believe to be comparable to us, certain of our financial information, the
history of, and the prospects for, our company and the industry in which we
compete, and an assessment of our management, its past and present operations,
the prospects for, and timing of, future revenues of our company, the present
state of our development, and the above factors in relation to market values
and various valuation measures of other companies engaged in activities similar
to ours. There can be no assurance that an active trading market will develop
for our Class A Ordinary Shares or that our Class A Ordinary Shares will trade
in the public market subsequent to the offering at or above the initial public
offering price.
The underwriters do not expect sales of the Class A Ordinary Shares to
any accounts over which they exercise discretionary authority to exceed 5% of
the number of ordinary shares being offered in this offering.
Price Stabilization, Short Positions and Penalty Bids
Until the distribution of our Class A Ordinary Shares is completed, rules
of the Securities and Exchange Commission may limit the ability of the
underwriters and certain selling group members to bid for and purchase our
Class A Ordinary Shares. As an exception to these rules, the U.S.
representatives are permitted to engage in transactions that stabilize the
price of our Class A Ordinary Shares. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of our
Class A Ordinary Shares.
80
<PAGE>
If the underwriters create a short position in our Class A Ordinary
Shares in connection with the offering, ie., if they sell more Class A Ordinary
Shares than are set forth on the cover page of this prospectus, the U.S.
representatives may also elect to reduce any short position by purchasing our
Class A Ordinary Shares in the open market. The U.S. representatives may also
elect to reduce any short position by exercising all or part of the over-
allotment option described above.
The U.S. representatives may also impose a penalty bid on underwriters
and selling group members. This means that if the U.S. representatives purchase
Class A Ordinary Shares in the open market to reduce the underwriters' short
position or to stabilize the price of our Class A Ordinary Shares, they may
reclaim the amount of the selling concession from the underwriters and selling
group members who sold those shares.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of our Class A Ordinary Shares to
the extent that it discourages resales of our Class A Ordinary Shares.
Neither our company nor any of the underwriters makes any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of our Class A Ordinary
Shares. In addition, neither our company nor any of the underwriters makes any
representation that the U.S. representatives or the lead managers will engage
in such transactions or that such transactions, once commenced, will not be
discontinued without notice.
Other Relationships
Certain of the underwriters and their affiliates engage in transactions
with, and perform services for, our company in the ordinary course of business
and have engaged, and may in the future engage, in commercial banking and
investment banking transactions with our company, for which they have received
customary compensation.
Thomas Weisel Partners LLC, one of the representatives of the
underwriters, was organized and registered as a broker-dealer in December 1998.
Since December 1998, Thomas Weisel Partners has been named as a lead or co-
manager on 60 filed public offerings of equity securities, of which 33 have
been completed, and has acted as a syndicate member in an additional 27 public
offerings of equity securities. Thomas Weisel Partners does not have any
material relationship with us or any of our officers, directors or other
controlling persons, except with respect to its contractual relationship with
us pursuant to the underwriting agreement entered into in connection with these
offerings.
81
<PAGE>
LEGAL MATTERS
The validity of Class A Ordinary Shares offered hereby will be passed
upon for us by Harney, Westwood & Riegels, the British Virgin Islands. Certain
United States legal matters will be passed upon for us by Cravath, Swaine &
Moore, New York, New York. Certain United States legal matters will be passed
upon for the underwriters by Simpson Thacher & Bartlett, New York, New York.
EXPERTS
The consolidated financial statements of OpenTV, Inc. (the predecessor to
OpenTV Corp.) as of December 31, 1998 and 1997 and for the period July 1, 1996
(date of inception) to December 31, 1996 and for each of the two years in the
period ended December 31, 1998 included in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in accounting and
auditing.
The balance sheet of OpenTV Corp. as of September 30, 1999 included in
this prospectus has been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing.
AVAILABLE INFORMATION
Upon completion of the offering, we will be subject to the informational
requirements of the Securities Exchange Act of 1934, as amended, and will file
reports and other information with the Commission. These will include annual
reports on Form 20-F and periodic reports on Form 6-K. We expect our
information furnished on Form 6-K to include quarterly financial information.
Such reports and other information, as well as the registration statement,
exhibits and schedules, may be inspected, without charge, or copied, at
prescribed rates, at the public reference facility maintained by the Commission
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
The public may obtain information on the operation of the Public Reference Room
by calling the Commission at 1-800-SEC-0330. In addition, the Commission
maintains an Internet site that contains reports, proxy and information
statements, and other information, regarding issuers that file electronically
with the Commission. The address of the Commission's web site is
http://www.sec.gov.
82
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
OpenTV Corp.
Report of Independent Accountants.......................................... F-2
Balance Sheet.............................................................. F-3
Notes to Balance Sheet..................................................... F-4
OpenTV, Inc. and Subsidiary (Predecessor to OpenTV Corp.)
Report of Independent Accountants.......................................... F-6
Consolidated Balance Sheets................................................ F-7
Consolidated Statements of Operations and Comprehensive Loss............... F-8
Consolidated Statements of Stockholders' Equity (Deficit).................. F-9
Consolidated Statements of Cash Flows...................................... F-10
Notes to Consolidated Financial Statements................................. F-11
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
OpenTV Corp.:
In our opinion, the accompanying balance sheet presents fairly, in all
material respects, the financial position of OpenTV Corp. as of September 30,
1999, in conformity with generally accepted accounting principles in the United
States of America. The balance sheet is the responsibility of OpenTV Corp.'s
management; our responsibility is to express an opinion on the balance sheet
based on our audit. We conducted our audit of the balance sheet in accordance
with generally accepted auditing standards in the United States of America
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
San Jose, California
October 29, 1999,
except as to the
stock split
described in Note 2
which is as of
November 15, 1999
- --------------------------------------------------------------------------------
F-2
<PAGE>
OPENTV CORP.
BALANCE SHEET
September 30, 1999
(Amounts in U.S. dollars)
<TABLE>
<S> <C>
ASSETS
------
Total assets......................................................... $ --
=======
SHAREHOLDER'S EQUITY
--------------------
Class A ordinary shares, no par value: 500,000,000 shares authorized,
none issued and outstanding......................................... $ --
Class B ordinary shares, no par value: 200,000,000 shares authorized,
30,631,746 issued and outstanding................................... 1,000
Class C preference shares, no par value: 500,000,000 shares
authorized, none issued and outstanding.............................
Receivable from shareholder.......................................... (1,000)
-------
Total shareholder's equity......................................... $ --
=======
</TABLE>
See Notes to balance sheet.
F-3
<PAGE>
OPENTV CORP.
NOTES TO BALANCE SHEET
Note 1. Formation and Business of OpenTV Corp.:
OpenTV Corp. was formed as an international business company under the
laws of the British Virgin Islands on September 30, 1999, through the issuance
of 30,631,746 Class B Ordinary Shares to OTV Holdings Limited, an indirect
subsidiary of MIH Limited, in exchange for a note receivable of $1,000. The
purpose of OpenTV Corp. is to act as a holding company for MIH Limited's
ownership interest in OpenTV, Inc., a Delaware corporation engaged in
designing, developing, marketing and supporting software and related components
to enable digital interactive television worldwide. OpenTV Corp. is a majority
owned subsidiary of MIH Limited.
Note 2. Subsequent Events (unaudited):
Acquisition of OpenTV, Inc. Shares
On October 18, 1999, a subsidiary of MIH Limited transferred 30,631,746
shares of Class B Common Stock, representing 78.5% of the common stock and
79.6% of the voting power of OpenTV, Inc., to OpenTV Corp. OpenTV Corp. will
consolidate OpenTV, Inc.'s results and record a minority interest for the
portion not owned.
Employee Incentive Plans
In November 1999, the Board of Directors and shareholder of OpenTV Corp.,
adopted the 1999 Share Option/Share Issuance Plan (the "Plan") and reserved
7,200,000 Class A Ordinary Shares for issuance under the 1999 Plan. Options can
be granted at not less than 100% of the fair value of a share as determined by
the Board of Directors on the date of grant. Options granted to employees
generally vest 25% after 12 months of continuous service and 1/48 over the next
36 months. The terms of the options is 10 years from the date of grant.
Unexercised options generally expire three months after termination of
employment. Options issued under the OpenTV, Inc. 1998 Plan covering 5,141,104
shares of Class A Common Stock of OpenTV, Inc. were assigned to and assumed by
OpenTV Corp. to purchase Class A Ordinary Shares under the 1999 Plan in
November 1999.
The Board of Directors and shareholder of OpenTV Corp. also adopted the
1999 Employee Stock Purchase Plan (the "Purchase Plan"). A total of 120,000
Class A Ordinary Shares have been reserved for issuance under the Purchase
Plan, subject to annual increases. The Purchase Plan allows for eligible
employees to purchase a limited number of OpenTV Corp.'s Class A Ordinary
Shares at 85% of the fair market value during certain plan-defined periods.
Stock Split
OpenTV Corp. completed a one-for-five reverse stock split of its ordinary
shares on November 15, 1999. All share information has been adjusted to reflect
this stock split.
Strategic Financing
On October 23, 1999, OpenTV Corp. sold 23,648,646 Series C-1 Convertible
Preference Shares for $5.55 per share and warrants to purchase 4,729,728 Class
A Ordinary Shares to five new investors and 4,504,504 Series C-2 Convertible
Preference Shares for $5.55 per share to an existing investor for aggregate net
proceeds of $31.0 million. These convertible preference shares will
automatically convert into 5,630,628 Class A Ordinary Shares upon consummation
of these offerings. The difference between the mid-point of the estimated price
range for shares in OpenTV Corp.'s initial public offering ("IPO") and the
deemed fair value
F-4
<PAGE>
OPENTV CORP.
NOTES TO BALANCE SHEET (continued)
of the common stock on the date of the transaction resulted in a beneficial
conversion feature equal to the gross proceeds of $31,249,996. Under EITF 98-5,
the beneficial conversion feature will result in a preferred stock dividend of
$31,249,996 in the quarter ending December 31, 1999.
The warrants issued to the new investors are exercisable for two years at
an exercise price of $5.55 per ordinary share. OpenTV Corp. valued the warrants
using the Black-Scholes option pricing model applying an expected life of two
years, a weighted average risk-free rate of 6%, a dividend yield of zero
percent, volatility of 60% and a deemed fair value of ordinary shares equal to
the mid-point of the estimated price range for shares in OpenTV Corp.'s IPO.
The fair value of $63,851,344 represents a non-cash warrant operating expense
given as an inducement to the investors to enter into current or future
strategic agreements which will be recognized in the quarter ending December
31, 1999.
Concurrent with the financing, OpenTV Corp. entered into strategic
agreements with three of the six investors: America Online, Inc. ("AOL"), News
Corporation and Time Warner, Inc. Under these strategic agreements services are
being exchanged, which represent non-monetary transactions between the parties.
There is no objective basis for assigning fair value to the services being
exchanged and, in accordance with APB 29, no value has been assigned.
Exchange Agreement
On October 23, 1999, OpenTV Corp. entered into an Exchange Agreement with
Sun Microsystems, Inc. ("Sun") that permits Sun to exchange all or a portion of
its shares of Class B Common Stock of OpenTV, Inc. for OpenTV Corp. Class B
Ordinary Shares. The rate of exchange, which is subject to customary
antidilution adjustments, is one-for-one.
F-5
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
OpenTV, Inc. and Subsidiary (Predecessor to OpenTV Corp.):
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations and comprehensive loss, of
stockholders' equity (deficit), and of cash flows present fairly, in all
material respects, the financial position of OpenTV, Inc. and its subsidiary as
of December 31, 1997 and 1998, and the results of their operations and their
cash flows for the period from July 1, 1996 (date of inception) to December 31,
1996 and for the years ended December 31, 1997 and 1998, in conformity with
generally accepted accounting principles in the United States of America. These
financial statements are the responsibility of OpenTV, Inc.'s management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards in the United States of America which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
San Jose, California
August 9, 1999,
except as to the
stock split
described in Note 10
which is as of
November 15, 1999
- --------------------------------------------------------------------------------
F-6
<PAGE>
OPENTV, INC. AND SUBSIDIARY
(Predecessor to OpenTV Corp.)
CONSOLIDATED BALANCE SHEETS
(amounts in thousands of US dollars, except share and per share amounts)
<TABLE>
<CAPTION>
December 31,
------------------ September 30,
1997 1998 1999
-------- -------- -------------
Assets (Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.................. $ 293 $ 3,324 $ 2,580
Accounts receivable, net................... 2,262 2,218 3,345
Prepaid expenses and other current assets.. 209 703 1,002
-------- -------- --------
Total current assets..................... 2,764 6,245 6,927
Property and equipment, net.................. 2,080 3,381 4,146
Intangible assets, net....................... -- -- 6,813
Other assets................................. 34 412 426
-------- -------- --------
Total assets............................. $ 4,878 $ 10,038 $ 18,312
======== ======== ========
Liabilities and stockholders' equity
(deficit)
Current liabilities:
Accounts payable........................... $ 943 $ 1,978 $ 1,387
Accrued liabilities........................ 1,831 2,171 3,399
Related parties payable.................... 1,036 337 532
Deferred revenue........................... 1,226 3,218 2,934
-------- -------- --------
Total current liabilities................ 5,036 7,704 8,252
Convertible notes payable to stockholders.... -- 7,000 --
-------- -------- --------
Total liabilities........................ 5,036 14,704 8,252
-------- -------- --------
Commitments (Notes 4 and 8)
Redeemable common stock, par value $0.001;
none, 111,581 and 717,520 shares issued and
outstanding in 1997, 1998 and 1999,
respectively................................ -- 117 10,200
-------- -------- --------
Stockholders' equity (deficit):
Preferred stock par value $0.001;
25,000,000 shares authorized; none issued
and outstanding........................... -- -- --
Class A Common Stock, par value $0.001:
275,000,000 shares authorized; 33,183,659,
33,183,659 and no shares issued and
outstanding in 1997, 1998 and 1999,
respectively.............................. 33 33 --
Class B Common Stock, par value $0.001;
225,000,000 shares authorized; no shares
issued and outstanding in 1997 and 1998
and 38,233,823 shares issued and
outstanding in 1999....................... -- -- 38
Additional paid-in capital................. 24,082 24,131 51,770
Receivable from stockholders............... (9,700) -- (11)
Deferred compensation...................... -- (36) (14,575)
Accumulated other comprehensive income
(loss).................................... 74 (62) (29)
Accumulated deficit........................ (14,647) (28,849) (37,333)
-------- -------- --------
Total stockholders' equity (deficit)..... (158) (4,783) (140)
-------- -------- --------
Total liabilities and stockholders'
equity (deficit)........................ $ 4,878 $ 10,038 $ 18,312
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-7
<PAGE>
OPENTV, INC. AND SUBSIDIARY
(Predecessor to OpenTV Corp.)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(amounts in thousands of US dollars, except share and per share amounts)
<TABLE>
<CAPTION>
For the
Period from
July 1, 1996
(date of
inception) Year Ended December For the Nine Months
to 31, Ended September 30,
December 31, ---------------------- ----------------------
1996 1997 1998 1998 1999
------------ ---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Royalties............. $ -- $ 2,382 $ 2,788 $ 1,890 $10,061
License fees.......... 287 1,255 1,578 1,043 1,904
Services and other.... 731 3,322 5,102 3,183 5,592
--------- ---------- ---------- ---------- ----------
Total revenues...... 1,018 6,959 9,468 6,116 17,557
--------- ---------- ---------- ---------- ----------
Operating expenses:
Cost of services and
other revenues....... 587 3,290 4,736 3,131 3,472
Research and
development.......... 2,590 6,219 7,514 5,328 8,227
Sales and marketing... 845 4,323 7,418 5,433 7,834
General and
administrative....... 1,126 3,929 3,995 2,845 5,721
Amortization of
intangibles.......... -- -- -- -- 827
--------- ---------- ---------- ---------- ----------
Total operating
expenses........... 5,148 17,761 23,663 16,737 26,081
--------- ---------- ---------- ---------- ----------
Loss from
operations.......... (4,130) (10,802) (14,195) (10,621) (8,524)
Interest expense........ (1) (26) (75) (15) (73)
Other income (expense),
net.................... 173 139 68 16 113
--------- ---------- ---------- ---------- ----------
Net loss............. $(3,958) $(10,689) $(14,202) $(10,620) $(8,484)
Other comprehensive
income (loss):
Foreign currency
translation.......... 20 54 (136) (129) 33
--------- ---------- ---------- ---------- ----------
Comprehensive loss... $(3,938) $(10,635) $(14,338) $(10,749) $(8,451)
========= ========== ========== ========== ==========
Net loss per share,
basic and diluted...... $ (0.43) $ (0.43) $ (0.43) $ (0.32) $ (0.23)
========= ========== ========== ========== ==========
Shares used in computing
net loss per share,
basic and diluted...... 9,210,877 24,973,614 33,212,803 33,197,261 36,184,858
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
OPENTV, INC. AND SUBSIDIARY
(Predecessor to OpenTV Corp.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(amounts in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Receivable Accumulated
Class A Class B Additional from Deferred Other Accumu-
Common Stock Common Stock Paid-In Stock- Compen- Comprehensive lated
Shares Amount Shares Amount Capital holders sation Income (Loss) Deficit Total
------------ ------ ---------- ------ ---------- ---------- -------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of
common stock... 18,421,754 $ 18 -- $-- $ 8,597 $ -- $ -- $ -- $ -- $ 8,615
Foreign currency
translation
adjustment..... -- -- -- -- -- -- -- 20 -- 20
Net loss........ -- -- -- -- -- -- -- -- (3,958) (3,958)
------------ ----- ---------- --- ------- ------- -------- ----- -------- --------
Balances,
December 31,
1996........... 18,421,754 18 -- -- 8,597 -- -- 20 (3,958) 4,677
Issuance of
common stock... 14,761,924 15 -- -- 15,485 (9,700) -- -- -- 5,800
Foreign currency
translation
adjustment..... -- -- -- -- -- -- -- 54 -- 54
Net loss........ -- -- -- -- -- -- -- -- (10,689) (10,689)
------------ ----- ---------- --- ------- ------- -------- ----- -------- --------
Balances,
December 31,
1997........... 33,183,658 33 -- -- 24,082 (9,700) -- 74 (14,647) (158)
Cash receipt
from
stockholder.... -- -- -- -- -- 9,700 -- -- -- 9,700
Deferred
compensation
arising from
options
issued......... -- -- -- -- 49 -- (49) -- -- --
Amortization of
deferred
compensation... -- -- -- -- -- -- 13 -- -- 13
Foreign currency
translation
adjustment..... -- -- -- -- -- -- -- (136) -- (136)
Net loss........ -- -- -- -- -- -- -- -- (14,202) (14,202)
------------ ----- ---------- --- ------- ------- -------- ----- -------- --------
Balances,
December 31,
1998........... 33,183,658 33 -- -- 24,131 -- (36) (62) (28,849) (4,783)
Conversion of
notes payable
to Class A
Common Stock 2,973,917 3 -- -- 7,130 -- -- -- -- 7,133
Conversion of
Class A Common
Stock to
Class B Common
Stock.......... (36,157,575) (36) 36,157,575 36 -- -- -- -- -- --
Conversion of
related party
payable to
Class B Common
Stock.......... -- -- 862,069 1 2,499 -- -- -- -- 2,500
Issuance of
Class B Common
Stock.......... -- -- 1,214,179 1 3,520 (11) 3,510
Deferred
compensation
arising from
options
issued......... -- -- -- -- 16,859 -- (16,859) -- -- --
Capital
contribution
from
stockholder
(Note 8)....... -- -- -- -- 7,640 -- -- -- -- 7,640
Accretion on
redeemable
common stock .. -- -- -- -- (10,009) -- -- -- -- (10,009)
Amortization of
deferred
compensation... -- -- -- -- -- -- 2,320 -- -- 2,320
Foreign currency
translation
adjustment..... -- -- -- -- -- -- -- 33 -- 33
Net loss........ -- -- -- -- -- -- -- -- (8,484) (8,484)
------------ ----- ---------- --- ------- ------- -------- ----- -------- --------
Balances,
September 30,
1999
(unaudited).... -- $ -- 38,233,823 $38 $51,770 $ (11) $(14,575) $ (29) $(37,333) $ (140)
============ ===== ========== === ======= ======= ======== ===== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE>
OPENTV, INC. AND SUBSIDIARY
(Predecessor to OpenTV Corp.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands of US dollars, except share and per share amounts)
<TABLE>
<CAPTION>
For the
Period from For the Nine
July 1, 1996 Months
(date of Year Ended Ended
inception) to December 31, September 30,
December 31, ------------------ -----------------
1996 1997 1998 1998 1999
------------- -------- -------- -------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss.................. $(3,958) $(10,689) $(14,202) $(10,620) $(8,484)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and
amortization........... 106 415 830 586 645
Amortization of
intangible assets...... -- -- -- -- 827
Amortization of deferred
compensation........... -- -- 13 -- 2,320
Provision for doubtful
accounts............... 31 330 85 -- 126
Loss on write-off of
equipment.............. -- -- 96 -- --
Interest on note payable
converted to common
stock -- -- -- -- 133
Changes in operating
assets and liabilities:
Accounts receivable... (1,011) (1,812) (41) (683) (1,254)
Prepaid expenses and
other current
assets............... (95) (114) (494) (316) (299)
Accounts payable...... 336 607 1,035 604 (591)
Accrued liabilities... 747 1,084 373 (800) 1,229
Related parties
payable.............. 903 133 (732) 545 195
Deferred revenue...... 819 607 1,992 3,141 (283)
------- -------- -------- -------- -------
Net cash used in operating
activities............... (2,122) (9,439) (11,045) (7,543) (5,436)
------- -------- -------- -------- -------
Cash flows used in
investing activities:
Purchases of property and
equipment................ (258) (1,445) (2,227) (1,406) (1,410)
Increase in other assets.. -- (34) (378) (378) (15)
------- -------- -------- -------- -------
Net cash used in investing
activities............... (258) (1,479) (2,605) (1,784) (1,425)
------- -------- -------- -------- -------
Cash flows from financing
activities:
Proceeds from issuance of
common stock............. 7,717 5,800 -- -- 3,510
Proceeds from issuance of
redeemable common stock.. -- -- 117 36 74
Proceeds from notes
payable.................. -- -- 7,000 -- 2,500
Payment on receivable from
stockholder.............. -- -- 9,700 9,700 --
------- -------- -------- -------- -------
Net cash provided by
financing activities..... 7,717 5,800 16,817 9,736 6,084
------- -------- -------- -------- -------
Effect of exchange rate
changes on cash.......... 20 54 (136) (129) 33
------- -------- -------- -------- -------
Net increase (decrease) in
cash and cash
equivalents.............. 5,357 (5,064) 3,031 280 (744)
Cash and cash equivalents,
beginning of period...... -- 5,357 293 293 3,324
------- -------- -------- -------- -------
Cash and cash equivalents,
end of period............ $ 5,357 $ 293 $ 3,324 $ 573 $ 2,580
======= ======== ======== ======== =======
Supplemental disclosure of
cash flow information:
Cash paid for interest.... $ 1 $ 26 $ 60 $ 15 $ --
======= ======== ======== ======== =======
Noncash investing and
financing activities:
Equipment contributed by
founder in exchange for
common stock............. $ 269
=======
Equipment acquired in
exchange for common
stock.................... $ 629
=======
Deferred compensation
arising from issuance of
options.................. $ 49 $17,305
======== =======
Conversion of notes
payable and accrued
interest to common stock
......................... $ 7,133
=======
Intangible assets
contributed by
stockholder.............. $ 7,640
=======
Accretion on redeemable
common stock............. $10,009
=======
Conversion of related
party payable to common
stock.................... $ 2,500
=======
Notes receivable issued on
exercise of options for
redeemable common stock.. $ 563
=======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
<PAGE>
OPENTV, INC. AND SUBSIDIARY
(Predecessor to OpenTV Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands of US dollars, except share and per share amounts)
(Information relating to the nine months ended September 30, 1998 and 1999 is
unaudited)
Note 1. Formation and Business of OpenTV:
OpenTV (formerly Thomson Sun Interactive, LLC) was formed July 1, 1996 as
a limited liability company (LLC). Upon formation of the LLC, Thomson Consumer
Electronics (TCE) contributed $7,053 of cash, equipment and licenses to certain
technology in exchange for an 80.133% interest and Sun TSI Subsidiary (SSI)
contributed cash of $664, equipment and licenses to certain technology in
exchange for a 19.867% interest. TCE's contribution was recorded at historical
cost since there was no change in control. The contribution by SSI was recorded
as a purchase by the LLC. The fair value of $1,293 was allocated $664 to cash
and $629 to equipment and software. In March 1998, the LLC was converted into a
C Corporation. All share and per share data have been retroactively adjusted to
reflect the conversion.
OpenTV, a majority owned subsidiary of MIH Limited, designs, develops,
markets and supports software and related components to enable digital
interactive television worldwide.
Note 2. Summary of Significant Accounting Policies:
Principles of consolidation and basis of presentation
The financial statements include the accounts of OpenTV and its wholly
owned foreign subsidiary. All significant intercompany balances and
transactions have been eliminated.
OpenTV has incurred losses from operations since inception and has an
accumulated deficit at September 30, 1999, and will require additional funding
for operations. OpenTV has obtained a commitment from its majority shareholder
to provide additional debt or equity financings to fund operations for at least
through January 2001.
Interim financial statements (unaudited)
The financial statements as of September 30, 1999 and for the nine months
ended September 30, 1998 and 1999 are unaudited but have been prepared in
accordance with generally accepted accounting principles for interim financial
statements and the rules of the Securities and Exchange Commission and do not
include all disclosures required by generally accepted accounting principles
for annual financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
have been included. The results of operations of any interim period are not
necessarily indicative of the results of operations for the full year.
Management estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and cash equivalents
OpenTV considers all highly liquid investments with original or remaining
maturities of three months or less at the date of purchase to be cash
equivalents.
F-11
<PAGE>
OPENTV, INC. AND SUBSIDIARY
(Predecessor to OpenTV Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands of US dollars, except share and per share amounts)
(Information relating to the nine months ended September 30, 1998 and 1999 is
unaudited)
Fair value of financial instruments
The reported amounts of certain of OpenTV's financial instruments,
including cash and cash equivalents, receivables, accounts payable, accrued
liabilities and notes payable, approximate fair value due to their short
maturities.
Concentration of credit risk
Cash and cash equivalents are deposited in a domestic bank and a bank
domiciled in France. With respect to accounts receivable, OpenTV's customer
base is dispersed across many geographic areas and OpenTV generally does note
require collateral. OpenTV monitors customers' payment history and establishes
allowances for bad debt as warranted.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of three to seven years. Leasehold improvements are amortized on a
straight line basis over the estimated life of the lease, or the useful life of
the asset, whichever is shorter.
Major additions and improvements are capitalized, while replacements,
maintenance, and repairs that do not improve or extend the life of the assets
are charged to expense. In the period assets are retired or otherwise disposed
of, the costs and related accumulated depreciation and amortization are removed
from the accounts, and any gain or loss on disposal is included in results of
operations.
Intangible assets
Intangible assets are stated at cost less accumulated amortization.
Amortization is computed on a straight-line basis over the estimated benefit
period of five years.
Long-lived assets
OpenTV accounts for long-lived assets under Statement of Financial
Accounting Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which requires
OpenTV to review for impairment of long-lived assets, whenever events or
changes in circumstances indicate that the carrying amount of an asset might
not be recoverable. When such an event occurs, OpenTV estimates the future cash
flows expected to result from the use of the asset and its eventual
disposition. If the undiscounted expected future cash flows is less than the
carrying amount of the asset, an impairment loss is recognized. To date, no
impairment loss has been recognized.
Revenue recognition
OpenTV adopted the provisions of Statement of Position 97-2 ("SOP 97-2"),
Software Revenue Recognition, as amended by Statement of Position 98-4,
Deferral of the Effective Date of Certain Provisions of SOP 97-2, effective
January 1, 1998. SOP 97-2 delineates the accounting for software products,
products including software that is not incidental to the product, and
maintenance revenues. Under SOP 97-2, OpenTV recognizes product license revenue
upon shipment if a signed contract exists, the fee is fixed and determinable,
collection of the resulting receivables is probable and product returns are
reasonably estimable. OpenTV recognizes royalties upon notification from
licensees of revenues earned.
F-12
<PAGE>
OPENTV, INC. AND SUBSIDIARY
(Predecessor to OpenTV Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands of US dollars, except share and per share amounts)
(Information relating to the nine months ended September 30, 1998 and 1999 is
unaudited)
For contracts with multiple obligations (e.g., maintenance and other
services), revenue from product licenses are recognized when delivery has
occurred, collection of the receivable is probable, the fee is fixed or
determinable and vendor-specific objective evidence exists to allocate the
total fee to all delivered and undelivered elements of the arrangement. OpenTV
recognizes revenue allocated to maintenance and support fees, for ongoing
customer support and product updates ratably over the period of the relevant
contract. Payments for maintenance and support fees are generally made in
advance and are non-refundable. For revenue allocated to consulting services
and for consulting services sold separately, OpenTV recognizes revenue as the
related services are performed. Maintenance and consulting services revenues
are included in services and other revenue.
For product licenses sold with integration services, OpenTV recognizes
revenue based on the completed contract method. Revenue from software
development contracts of less than six months duration is recognized based on
the completed contract method and for longer term contracts generally on the
percentage of completion method. Under the percentage of completion method the
extent of progress towards completion is measured based on actual costs
incurred to total estimated costs. Provisions for estimated losses on
uncompleted contracts are made in the period in which estimated losses are
determined. Revenue from integration services and software development
contracts are included in services and other revenue.
Revenue from sale of hardware components and manuals are recognized upon
shipment and included in services and other revenue.
Prior to the adoption of SOP 97-2, effective January 1, 1998, OpenTV
recognized revenue from the sale of product licenses upon shipment if remaining
obligations were insignificant and collection of the resulting receivables was
probable. Revenue from software maintenance contracts, including amounts
unbundled from product sales, were deferred and recognized ratably over the
period of the contract. Consulting services revenue was recognized as the
related services were performed.
Research and development
Research and development costs are charged to operations as incurred.
Software development costs are capitalized beginning when a product's
technological feasibility has been established and ending when a product is
available for general release to customers. Amounts that could have been
capitalized under Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed," have been insignificant and therefore no costs have been capitalized
to date.
Advertising
Cost related to advertising and promotion of products is charged to sales
and marketing expense as incurred. Advertising expense for the period from July
1, 1996 (date of inception) to December 31, 1996 was $23 and for the years
ended December 31, 1997 and 1998 was $172 and $757, respectively.
Income taxes
OpenTV was not subject to income taxes during 1996, 1997 and for the
period from January 1, 1998 to March 3, 1998, since it operated as a limited
liability company and any taxes due were payable by its members.
F-13
<PAGE>
OPENTV, INC. AND SUBSIDIARY
(Predecessor to OpenTV Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands of US dollars, except share and per share amounts)
(Information relating to the nine months ended September 30, 1998 and 1999 is
unaudited)
OpenTV has accounted for income taxes using an asset and liability
approach which requires the recognition of taxes payable or refundable for the
current year and deferred tax liabilities and assets for the future tax
consequences of events that have been recognized in OpenTV's financial
statements or tax returns. The measurement of current and deferred tax
liabilities and assets are based on provisions of the enacted tax law. The
measurement of deferred tax assets is reduced, if necessary, by the amount of
any tax benefits that, based on available evidence, are not expected to be
realized.
Stock-based compensation
OpenTV accounts for stock-based employee compensation arrangements in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees," and complies with the
disclosure provisions of Statement of Financial Accounting Standards ("SFAS")
No. 123, "Accounting for Stock-Based Compensation". Under APB No. 25,
compensation expense is based on the difference, if any, on the date of the
grant, between the fair value of OpenTV's shares and the exercise price of the
option. OpenTV accounts for equity instruments issued to nonemployees in
accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force
("EITF") 96-18.
Comprehensive income
OpenTV adopted the provisions of SFAS No. 130, "Reporting Comprehensive
Income," ("SFAS No. 130"). This statement requires companies to classify items
of comprehensive income by their nature in the financial statements and display
the accumulated balance of comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of the balance
sheet. Accordingly, OpenTV has reported foreign currency translation
adjustments in comprehensive income.
Foreign currency translation
The functional currency of the foreign subsidiary is the local currency.
Assets and liabilities are translated into U.S. dollars at the balance sheet
date exchange rate. Revenues and expenses are translated at the average
exchange rate prevailing during the period. The related gains and losses from
translation are recorded as a translation adjustment in a separate component of
stockholders' equity. Foreign currency transaction gains and losses are
included in results of operations.
Net loss per share
Basic and diluted net loss per share are computed using the weighted
average number of shares of common stock outstanding net of common stock
subject to repurchase. Options totaling 1,153,800, 3,012,700, 3,507,495,
3,637,666 and 6,013,993 were not included in the computation of diluted net
loss per share for 1996, 1997, 1998 and the nine months ended September 30,
1998 and 1999, respectively, because the effect would be antidilutive.
Certain risks and uncertainties
OpenTV's products and services are concentrated in the digital
interactive television software industry which is characterized by rapid
technological advances, changes in customer requirements and evolving
regulatory requirements and industry standards. Any failure by OpenTV to
anticipate or to respond adequately to technological developments in its
industry, changes in customer requirements or changes in regulatory
F-14
<PAGE>
OPENTV, INC. AND SUBSIDIARY
(Predecessor to OpenTV Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands of US dollars, except share and per share amounts)
(Information relating to the nine months ended September 30, 1998 and 1999 is
unaudited)
requirements or industry standards, or any significant delays in the
development or introduction of products or services, could have a material
adverse effect on OpenTV's business and operating results. Achieving and
sustaining profitability will require widespread adoption of the OpenTV system
by multiple industry participants and the television viewing public.
Recent accounting pronouncements
In March 1998, the Accounting Standards Executive Committee ("AcSEC")
issued Statement of Position ("SOP") 98-1, "Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use ("SOP 98-1"). SOP 98-1 is
effective for financial statements for years beginning after December 15, 1998.
SOP 98-1 provides guidance over accounting for computer software developed or
obtained for internal use including the requirement to capitalize specified
costs and amortization of such costs. OpenTV adopted this standard on January
1, 1999 and its adoption did not have a material impact on its results of
operations, financial position or cash flows.
In April 1998, AcSEC issued SOP 98-5, "Reporting on the Costs of Start-up
Activities." SOP 98-5, which is effective for fiscal years beginning after
December 15, 1998, provides guidance on the financial reporting of start-up
costs and organization costs. It requires costs of start-up activities and
organization costs to be expensed as incurred. As OpenTV has historically
expensed these costs, the adoption of SOP 98-5 on January 1, 1999 did not have
any impact on its results of operations, financial position or cash flows.
In December 1998, AcSEC released SOP 98-9, "Modification of SOP 97-2,
Software Revenue Recognition,' with Respect to Certain Transactions." SOP 98-9
amends SOP 97-2 to require that an entity recognize revenue for multiple
element arrangements by means of the "residual method" when (1) there is
vendor-specific objective evidence ("VSOE") of the fair values of all the
undelivered elements that are not accounted for by means of long-term contract
accounting, (2) VSOE of fair value does not exist for one or more of the
delivered elements, and (3) all revenue recognition criteria of SOP 97-2 (other
than the requirement for VSOE of the fair value of each delivered element) are
satisfied. The provisions of SOP 98-9 that extend the deferral of certain
paragraphs of SOP 97-2 became effective December 15, 1998. These paragraphs of
SOP 97-2 and SOP 98-9 will be effective for transactions that are entered into
in fiscal years beginning after March 15, 1999. Retroactive application is
prohibited. OpenTV does not expect the adoption of SOP 98-9 to have a material
effect on current revenue recognition policies.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"), which establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts (collectively
referred to as derivatives), and for hedging activities. SFAS No. 133 is
effective for fiscal quarters beginning after June 15, 2000. OpenTV does not
expect the adoption of SFAS No. 133 to have a material effect on its financial
results.
F-15
<PAGE>
OPENTV, INC. AND SUBSIDIARY
(Predecessor to OpenTV Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands of US dollars, except share and per share amounts)
(Information relating to the nine months ended September 30, 1998 and 1999 is
unaudited)
Note 3. Balance Sheet Components:
<TABLE>
<CAPTION>
December 31,
--------------- September 30,
1997 1998 1999
------ ------- -------------
<S> <C> <C> <C>
Accounts receivable
Trade accounts receivable .................... $2,323 $ 2,044 $ 3,539
Amounts billed under long term contracts...... 300 474 100
------ ------- -------
2,623 2,518 3,639
Less allowance for doubtful accounts.......... (361) (300) (294)
------ ------- -------
$2,262 $ 2,218 $ 3,345
====== ======= =======
Prepaid expenses and other current assets
Prepaid expenses and other current assets..... $ 209 $ 657 $ 733
Withholding tax receivable.................... -- 46 269
------ ------- -------
$ 209 $ 703 $ 1,002
====== ======= =======
Property and equipment
Computer equipment and software............... $2,179 $ 3,610 $ 4,827
Furniture and fixtures........................ 130 198 375
Leasehold improvements........................ 292 631 647
------ ------- -------
2,601 4,439 5,849
Less accumulated depreciation and
amortization................................. (521) (1,058) (1,703)
------ ------- -------
$2,080 $ 3,381 $ 4,146
====== ======= =======
Intangible assets
Patents and copyrights........................ $ -- $ -- $ 7,640
Less accumulated amortization................. -- -- (827)
------ ------- -------
$ -- $ -- $ 6,813
====== ======= =======
Accrued liabilities
Accrued payroll and related liabilities....... $1,203 $ 1,107 $ 2,359
Other accrued liabilities..................... 628 1,064 1,040
------ ------- -------
$1,831 $ 2,171 $ 3,399
====== ======= =======
</TABLE>
Note 4. Commitments:
OpenTV subleases its facilities from a third party under operating lease
agreements which expire in February 2001. Total rent expense for the period
July 1, 1996 (date of inception) to December 31, 1996 was $314 and for the
years ended December 31, 1997 and 1998 was $687 and $1,819, respectively.
Future minimum payments under noncancelable operating leases as of
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
1999.................................. $1,755
<S> <C>
2000.................................. 1,755
2001.................................. 300
------
$3,810
======
</TABLE>
F-16
<PAGE>
OPENTV, INC. AND SUBSIDIARY
(Predecessor to OpenTV Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands US dollars, except share and per share amounts)
(Information relating to the nine months ended September 30, 1998 and 1999 is
unaudited)
In May 1998, OpenTV subleased part of its facilities to a third party
under an operating lease agreement which expires in November 1999. In March
1999, OpenTV extended the sublease to May 31, 2000. Future sublease income
under this agreement amounts to $675 in 1999 and $281 in 2000.
OpenTV is subject to legal proceedings, claims, and litigation arising in
the ordinary course of business. OpenTV's management does not expect that the
ultimate costs to resolve these matters will have a material adverse effect on
OpenTV's consolidated financial position, results of operations, or cash flows.
Note 5. Employee Incentive Plan:
In July 1996, OpenTV adopted the Employee Incentive Plan (the "1996
Plan") under which 3,600,000 shares were reserved for issuance.
In January 1998, OpenTV adopted the 1998 Stock Option/Stock Issuance Plan
(the "1998 Plan"). All options outstanding from the 1996 Plan were cancelled
and regranted under the 1998 Plan. Under the 1998 Plan, 5,800,000 shares of
Class A Common Stock were reserved for issuance to directors, officers,
employees and consultants of OpenTV. Options can be granted at a price not less
than 85% of the fair value of a share as determined by OpenTV's Board of
Directors on the date of grant. If the optionee is a 10% stockholder, then the
exercise price shall not be less than 110% of the fair market value of common
stock on the date of grant. Options granted to employees generally vest 25%
after 12 months of continuous service with OpenTV and 1/48 over the next 36
months. The term of the options is 10 years from the date of grant. Unexercised
options generally expire three months after termination of employment with
OpenTV. The optionee has the right to exercise the option immediately, however,
the shares are subject to repurchase by OpenTV at the exercise price. The
repurchase right generally lapses 25% after 12 months of continuous service
with OpenTV and 1/48th over the next 36 months. A total of 22,187 shares of
Class A Common Stock were subject to repurchase at September 30, 1999. There
were no shares of common stock subject to repurchase at September 30, 1998 and
December 31, 1998.
Optionees who purchase shares under the 1998 Plan and hold such shares
for at least six months have the right to require OpenTV to repurchase the
shares at fair market value. This right terminates on the earliest of (1) the
date when shares outstanding are held by more than 500 persons, (2) the Board
of Directors determines that a public market exists for the common stock, or
(3) a firmly underwritten public offering in which gross proceeds are at least
$10,000. OpenTV's cumulative repurchase obligation related to options exercised
under the 1998 Plan is included as redeemable common stock in the consolidated
balance sheet.
In February 1999, OpenTV adopted the Amended and Restated 1998
Option/Stock Issuance Plan (the "Amended 1998 Plan"). Under the Amended 1998
Plan, options can be granted at not less than 100% of the fair value of a share
as determined by OpenTV's Board of Directors on the date of grant and the
optionee's right to exercise the option immediately was deleted. All other
terms and conditions under the Amended Plan are the same as for the 1998 Plan.
F-17
<PAGE>
OPENTV, INC. AND SUBSIDIARY
(Predecessor to OpenTV Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except share and per share amounts)
(Information relating to the nine months ended September 30, 1998 and 1999 is
unaudited)
Activity under the Plans is as follows:
<TABLE>
<CAPTION>
Outstanding Options
--------------------------------------------------------
Class A
Common Weighted Weighted
Stock Average Average
Available Number of Exercise Aggregate Exercise Deemed
for Grant Shares Price Price Price Fair Value
---------- ---------- -------------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Options reserved at
inception of 1996
Plan................... 3,600,000
Options granted......... (1,153,800) 1,153,800 $3.58 $ 4,125 $3.58
---------- ---------- -------
Balances, December 31,
1996................... 2,446,200 1,153,800 4,125 $3.58
Options granted......... (1,858,900) 1,858,900 $3.58 6,645 $3.58 $3.58
---------- ---------- -------
Balances, December 31,
1997................... 587,300 3,012,700 10,770 $3.58
Options cancelled under
1996 Plan.............. (587,300) (3,012,700) $3.58 (10,770) $3.58
Options reserved at
inception of 1998
Plan................... 5,800,000 -- --
Options granted......... (4,483,348) 4,483,348 $ 1.05 4,708 $1.05 $1.05
Options exercised....... -- (111,580) $ 1.05 (117) $1.05
Options cancelled....... 864,273 (864,273) $ 1.05 (908) $1.05
---------- ---------- -------
Balances, December 31,
1998................... 2,180,925 3,507,495 3,683 $1.05
Additional options
reserved............... 960,000 -- --
Options granted......... (3,443,200) 3,443,200 $ 1.05--$ 6.00 10,168 $2.95 $3.75
Options exercised....... -- (605,940) $ 1.05 (636) $1.05
Options cancelled....... 330,754 (330,754) $ 1.05--$ 6.00 (352) $1.06
---------- ---------- -------
Balances, September 30,
1999 (unaudited)....... 28,479 6,014,001 $12,863 $2.14
========== ========== =======
</TABLE>
The following table summarizes information with respect to options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
Options Currently
Options Outstanding Exercisable
------------------------------------- -----------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Price Outstanding Life Price Exercisable Price
-------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 1.05 3,507,495 9.20 $1.05 3,507,495 $1.05
</TABLE>
There were no options exercisable at December 31, 1996 and there were
427,133 options exercisable at a weighted average exercise price of $3.58 at
December 31, 1997.
F-18
<PAGE>
OPENTV, INC. AND SUBSIDIARY
(Predecessor to OpenTV Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands of US dollars, except share and per share amounts)
(Information relating to the nine months ended September 30, 1998 and 1999 is
unaudited)
Fair value disclosures
Had compensation cost for OpenTV's stock-based compensation plan been
determined based on the fair value at the grant dates for the awards under a
method prescribed by SFAS No. 123, OpenTV's net loss would have been increased
to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
For the
Period from
July 1, 1996
(date of Year Ended
inception) to December 31,
December 31, ------------------
1996 1997 1998
------------- -------- --------
<S> <C> <C> <C>
Net loss:
As reported............................... $(3,958) $(10,689) $(14,202)
Pro forma................................. $(4,062) $(11,386) $(14,474)
Net loss per share,
basic and diluted:
As reported............................... $ (0.09) $ (0.09) $ (0.09)
Pro forma................................. $ (0.09) $ (0.09) $ (0.09)
</TABLE>
OpenTV calculated the fair value of each option grant on the date of
grant using the Black-Scholes pricing method with the following assumptions for
1996, 1997 and 1998: dividend yield at 0% for all periods; weighted average
expected option term of six years for all periods; risk free interest rate of
5.97% to 6.64%, 5.77% to 6.76%, and 4.95% to 5.70%, respectively. The weighted
average fair value of options granted during 1996, 1997 and 1998 was $0.49,
$0.50 and $0.15, respectively.
These pro forma amounts may not be representative of the effects on
reported net loss for future years as options vest over several years and
additional awards are generally made each year.
Stock-based compensation
In connection with certain option grants to employees during the year
ended December 31, 1998 and the nine months ended September 30, 1999, OpenTV
recorded stock-based compensation totaling $49 and $12,058, respectively, which
is being amortized in accordance with FASB Interpretation No. 28 over the
vesting periods of the related options, which is generally four years. Stock-
based compensation amortization recognized during the year ended December 31,
1998 and the nine months ended September 30, 1999 totaled $13 and $1,111,
respectively. In addition, OpenTV recorded accretion of $10,009 for the nine
months ended September 30, 1999 for the increase in fair value on outstanding
redeemable common stock.
In connection with the grant of options to purchase common stock to non-
employees during the period from February 1, 1999 through September 30, 1999,
OpenTV recorded compensation in accordance with Emerging Issues Task Force 96-
18 and SFAS No. 123. As of September 30, 1999, OpenTV has recorded aggregate
deferred compensation of $4,801 related to these options. Such deferred
compensation will be amortized over the vesting period relating to these
options. OpenTV recorded amortization of $1,209 for the nine months ended
September 30, 1999.
F-19
<PAGE>
OPENTV, INC. AND SUBSIDIARY
(Predecessor to OpenTV Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands of US dollars, except share and per share amounts)
(Information relating to the nine months ended September 30, 1998 and 1999 is
unaudited)
Note 6. Employee Benefit Plan:
OpenTV's employees participate in the OpenTV 401(k) Plan (the "Plan"),
which was adopted on March 3, 1998. Prior to March 1998, employees participated
in the Thomson Consumer Electronics 401(k) Plan ("Thomson Plan"). In connection
with the establishment of the Plan, OpenTV and Thomson agreed to directly
transfer all of the assets and liabilities under the previous Thomson Plan to
the Plan. The Plan qualifies under Section 401(k) of the Internal Revenue Code
of 1986 and provides retirement benefits through tax deferred salary deductions
for all eligible employees meeting certain age and service requirements. OpenTV
may make discretionary matching contributions on behalf of employees. All
employee contributions are 100% vested. OpenTV made contributions to the Plans
in the amounts of $56 for the period from July 1, 1996 (date of inception) to
December 31, 1996 and $70 and $259 during the years ended December 31, 1997 and
1998, respectively.
Note 7. Income Taxes:
Effective March 3, 1998, OpenTV changed its status from a limited
liability company to a C corporation.
OpenTV's deferred tax assets as of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Net operating loss carryforwards................. $4,053
Accrued liabilities and allowances............... 787
Other............................................ 135
------
4,975
Less valuation allowance......................... (4,975)
------
Net deferred tax asset.......................... $ --
======
</TABLE>
Management believes that, based on the losses incurred to date, it is
more likely than not that the deferred tax assets will not be utilized and a
full valuation allowance has been recorded.
At December 31, 1998, OpenTV had approximately $10,567, $4,670 and $469,
respectively, in federal, state and foreign net operating loss carryforwards to
reduce future taxable income. These carryforwards expire in the year 2018 for
federal, and 2003 for state and foreign income tax purposes, if not utilized.
For federal and state income tax purposes, a portion of OpenTV's net
operating loss carryforwards may be subject to certain limitations on
utilization in the case of a change in ownership, as defined by federal and
state tax law.
F-20
<PAGE>
OPENTV, INC. AND SUBSIDIARY
(Predecessor to OpenTV Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands of US dollars, except share and per share amounts)
(Information relating to the nine months ended September 30, 1998 and 1999 is
unaudited)
Note 8. Related Party Transactions:
Related party transactions are as follows:
<TABLE>
<CAPTION>
For the
Period from For the
July 1, 1996 Nine Months
(date of Year Ended Ended
inception) to December 31, September 30,
Nature of December 31, ------------- ---------------
Related Party Transaction 1996 1997 1998 1998 1999
- ------------- ---------------------------------- ------------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Sun Microsystems........ . Consulting expense $241 $ 398 $ 15 $ -- $ --
. Facilities rent expense 314 123 -- -- --
. Software technology license and
equipment purchases -- -- 477 353 572
. Interest expense on notes
payable -- -- 7 -- 8
Thomson Consumer
Electronics, Inc. ..... . General and administrative
expense reimbursement 270 398 -- -- --
. Royalties, license fees and
service revenue 99 334 205 205 376
. Interest expense on notes
payable -- -- 26 -- 33
MIH Limited............. . Consulting expense -- -- 278 -- --
. Interest expense on notes
payable -- -- 26 -- 33
</TABLE>
Related parties balances are as follows:
<TABLE>
<CAPTION>
December 31,
------------- September 30,
1997 1998 1999
------ ------ -------------
<S> <C> <C> <C>
Related parties payable
Thomson Consumer Electronics, Inc................... $ 852 $ 26 $ --
Sun Microsystems.................................... 184 7 --
MIH Limited......................................... -- 304 532
------ ------ -----
$1,036 $ 337 $ 532
====== ====== =====
Convertible notes payable to shareholders
MIH Limited......................................... $ -- $3,114 $ --
Thompson Consumer Electronics, Inc.................. -- 3,114 --
Sun Microsystems.................................... -- 772 --
------ ------ -----
$ -- $7,000 $ --
====== ====== =====
</TABLE>
The convertible notes bear interest at 5% per annum. In March 1999, the
notes and accrued interest were converted into 2,973,917 shares of common stock
at $2.40 per share.
F-21
<PAGE>
OPENTV, INC. AND SUBSIDIARY
(Predecessor to OpenTV Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands of US dollars, except share and per share amounts)
(Information relating to the nine months ended September 30, 1998 and 1999 is
unaudited)
In March 1998, OpenTV entered into a technology license and distribution
agreement with a related party. Under the agreement OpenTV is committed to pay
fees of at least $4,000 through December 31, 2004.
On March 18, 1999, MIH Limited ("MIH") agreed to pay Thomson Consumer
Electronics, Inc. ("Thomson") $7,640 for certain intellectual property which
Thomson contributed to OpenTV and $38,566 for Thomson's 16,084,852 shares of
OpenTV's common stock. MIH issued a promissory note to Thomson for the total
amount. Thomson exchanged the promissory note for shares in MIH, a publicly
traded company, in April 1999. Sun exercised its right to acquire from MIH its
pro rata share of common stock of OpenTV which was acquired by MIH from
Thomson. As a result of these transactions, a new Stockholders' Agreement was
adopted on March 18, 1999 among OpenTV, MIH and Sun.
Note 9. Segment Information:
OpenTV currently has only one segment because there is only one
measurement of profitability for its operations.
<TABLE>
<CAPTION>
For the
Period from
July 1, 1996
(date of Year Ended For the Nine Months
inception) to December 31, ended September 30,
December 31, ------------- -------------------- ---
1996 1997 1998 1998 1999
------------- ------ ------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenue by country:
Denmark $ 13 $ 383 $ 300 $ 300 $ --
France 337 2,907 2,915 2,303 1,974
Italy 35 213 483 470 792
South Africa 156 188 660 206 1,049
Spain 8 43 66 80 1,684
Taiwan -- 221 606 307 1,463
United Kingdom 4 1,361 2,333 1,240 6,686
United States 258 246 1,039 391 914
Other foreign countries 207 1,397 1,066 819 2,995
------ ------ ------ --------- ----------
$1,018 $6,959 $9,468 $ 6,116 $ 17,557
====== ====== ====== ========= ==========
</TABLE>
Revenues are attributed to countries based on the location of customers.
<TABLE>
<CAPTION>
December 31,
------------- September 30,
1997 1998 1999
------ ------ -------------
<S> <C> <C> <C>
Property and equipment, net:
United States................................... $2,030 $3,131 $3,839
France.......................................... 50 250 307
------ ------ ------
$2,080 $3,381 $4,146
====== ====== ======
</TABLE>
F-22
<PAGE>
OPENTV, INC. AND SUBSIDIARY
(Predecessor to OpenTV Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands of US dollars, except share and per share amounts)
(Information relating to the nine months ended September 30, 1998 and 1999 is
unaudited)
Major customers by period are as follows:
<TABLE>
<CAPTION>
For the
Period from
1-Jul-96
(date of Year Ended For the nine months
inception) to December 31, ended September 30,
December 31, -------------- --------------------
1996 1997 1998 1998 1999
------------- ------ ------ --------- ---------
<S> <C> <C> <C> <C> <C>
A 30% 35% 16% 19% --
B 20% -- -- -- --
C 15% -- -- -- --
D 10% -- -- -- --
E -- -- 14% -- --
F -- -- -- -- 13%
G -- -- -- -- 10%
</TABLE>
As of December 31, 1997 and 1998, three customers accounted for 63% of
accounts receivable and one customer accounted for 16% of accounts receivable,
respectively.
Note 10. Subsequent Events (unaudited):
On July 16, 1999, OpenTV filed an Amended and Restated Certificate of
Incorporation which created two classes of common stock designated,
respectively, Class A Common Stock and Class B Common Stock, and one class of
preferred stock. OpenTV is authorized to issue 525,000,000 shares with a par
value of $0.001 per share, allocated 275,000,000 shares to Class A Common
Stock, 225,000,000 shares to Class B Common Stock, and 25,000,000 shares to
preferred stock. Each share of its Common Stock outstanding at the close of
business on July 12, 1999 was reclassified as one share of Class A Common
Stock. The primary difference between Class B and Class A Common Stock is that
holders of Class B Common Stock are entitled to five votes for each share held,
while holders of Class A Common Stock are entitled to one vote for each share
held. All share data have been retroactively adjusted to reflect the three
classes.
In connection with the reclassification, OpenTV offered to sell up to
2,086,700 shares of Class B Common Stock at a purchase price of $2.90 per share
to existing stockholders based on their pro rata ownership prior to the
offering. Stockholders who elected to participate in the offering were also
entitled to receive, on a one-for-one basis, Class B Common Stock in exchange
for all of the Class A Common Stock held by such stockholder.
Qualified stockholders who elected to participate in the offering
included, among others, MIH and Sun, with gross proceeds of $6,021 for
2,076,248 shares of Class B Common Stock. A total of 36,284,868 shares of Class
A Common Stock were reclassed to Class B Common Stock.
OpenTV completed a one-for-five reverse stock split on November 15, 1999.
All share information has been adjusted to reflect this stock split.
F-23
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Through and including , 1999 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether
or not participating in these offerings, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
7,500,000 Shares
[LOGO OF OPENTV](R)
Class A Ordinary Shares
-----------------
P R O S P E C T U S
-----------------
Merrill Lynch & Co.
Thomas Weisel Partners LLC
, 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion
Preliminary Prospectus dated November 19, 1999
PROSPECTUS
7,500,000 Shares
[LOGO OF OPENTV](R)
Class A Ordinary Shares
-----------
This is OpenTV's initial public offering. The international managers will
offer 3,750,000 shares outside the United States and Canada and the U.S.
underwriters will offer 3,750,000 shares in the United States and Canada.
We expect that the public offering price will be between $18.00 and $20.00
per share. Currently, no public market exists for the shares. After pricing of
the offering, we expect that the shares will trade on the Nasdaq National
Market and the Official Segment of Amsterdam Exchanges N.V.'s stock market
under the symbol "OPTV".
Investing in the shares involves risks which are described in the "Risk
Factors" section beginning on page 8 of this prospectus.
-----------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public offering price................................... $ $
Underwriting discount................................... $ $
Proceeds, before expenses, to OpenTV.................... $ $
</TABLE>
The international managers may also purchase up to an additional 562,500
shares at the public offering price, less the underwriting discount, within 30
days from the date of this prospectus to cover over-allotments. The U.S.
underwriters may similarly purchase up to an aggregate of an additional
562,500 shares.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The shares will be ready for delivery on or about , 1999.
-----------
Global Coordinator and Book Runner
Merrill Lynch International
MeesPierson N.V.
Thomas Weisel Partners LLC
Listing Agent
-----------
The date of this prospectus is , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 1
Risk Factors............................................................. 8
Cautionary Notice Regarding Forward-Looking Statements................... 17
Use of Proceeds.......................................................... 18
Dividend Policy.......................................................... 18
Capitalization........................................................... 19
Dilution................................................................. 20
Unaudited Pro Forma Combined Financial Information....................... 21
Historical Predecessor Selected Consolidated Financial Data.............. 25
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 26
Business................................................................. 36
Management............................................................... 49
Transactions with Related Parties........................................ 61
Principal Shareholders................................................... 66
Description of Capital Stock............................................. 67
Shares Eligible for Future Sale.......................................... 72
United States Federal Income Tax Consequences............................ 74
British Virgin Islands Taxation.......................................... 77
Certain Netherlands Tax Consequences..................................... 78
Underwriting............................................................. 80
Legal Matters............................................................ 85
Experts.................................................................. 85
Available Information.................................................... 85
Additional Information................................................... 86
Index to Consolidated Financial Statements............................... F-1
</TABLE>
----------------
<TABLE>
<S> <C>
</TABLE>
You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.
"OpenTV", "OpenAuthor", "OpenTV Runtime", "OpenStreamer" and the OpenTV
logo are trademarks of OpenTV, Inc. All other trademarks or service marks
appearing in this prospectus are trademarks or service marks of the respective
companies that use them.
<PAGE>
ADDITIONAL INFORMATION
The following table sets forth the costs and expenses, other than the
underwriting discount, payable by us in connection with the sale of our Class A
Ordinary Shares being registered. All amounts are estimates except the SEC
registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
Amounts to
be Paid
----------
<S> <C>
SEC registration fee.......................................... $ 47,955*
NASD filing fee............................................... $ 12,000*
Nasdaq National Market listing fee............................ $ 75,625*
Amsterdam Stock Exchange listing fee.......................... $ 5,000*
Printing, mailing and engraving expenses...................... $ 300,000*
Legal fees and expenses....................................... $1,000,000*
Accounting fees and expenses.................................. $ 375,000*
Transfer agent and registrar fees............................. $ 7,000*
Miscellaneous expenses........................................ $ 177,420*
----------
Total....................................................... $2,000,000*
==========
</TABLE>
--------
* Estimated for purposes of determining the net proceeds of these
offerings.
A copy of this Prospectus, including the Financial Statements, and the
Memorandum and Articles are available for inspection at the offices of
MeesPierson N.V., Rokin 55, 1012 KK, Amsterdam, The Netherlands, tel: +31(0) 20
527 2467, fax: +31 (0)20 527 1928.
The issuance of Class A Ordinary Shares being offered by us in these
offerings was authorized by resolution of our Board of Directors on October 24,
1999.
Other than as disclosed herein, there has been no material adverse change
in our financial condition or results of operations since September 30, 1999.
We, having made all reasonable enquiries, confirm that, to the best of
our knowledge and belief as of the date hereof, the information contained in
this prospectus relating to us, is accurate and this prospectus does not omit
to state any material fact the omission of which would make any such
information misleading. We are responsible for the accuracy and the
completeness of the information contained in this prospectus.
86
<PAGE>
CERTAIN NETHERLANDS TAX CONSEQUENCES
The overview of certain Netherlands taxes set forth below is only
intended for individuals and corporate entities resident in the Netherlands who
invest in our ordinary shares. This overview describes the tax consequences
that will generally apply to such investors under the Netherlands tax laws in
force and in effect as of the date hereof, and is subject to changes in
Netherlands law, including changes that could have retroactive effect. Not
every potential tax consequence of such investment under the laws of the
Netherlands will be addressed. It is therefore recommended that each investor
consults his own tax adviser with respect to the tax consequences of an
investment in our ordinary shares.
Individual and Corporate Income Tax
Individuals Not Engaged in an Enterprise
As a general rule, an individual who is resident or deemed to be resident
in the Netherlands ("Netherlands resident individual") and who holds our
ordinary shares ("Netherlands Shareholder") that are not attributable to an
enterprise carried on by or on behalf of such resident, is subject to income
tax at progressive rates or, under certain circumstances, at a flat rate of
45%, on distributions made by us as well as on certain distributions deemed
made by us as described below, unless such Netherlands Shareholder has a
substantial interest in us (see "Substantial Interest").
Distributions to Netherlands Shareholders. Distributions by us made to
Netherlands Shareholders who are subject to Netherlands income tax include, but
are not limited to:
. distributions in cash or in kind, deemed and constructive distribution
and repayments of paid-in capital not recognized for Netherlands
income tax purposes; and
. liquidation proceeds, proceeds of redemption of our common stock or,
as a rule, consideration for the repurchase (buy-back) of our ordinary
shares by us in excess of the average paid-in capital recognized for
Netherlands income tax purposes.
Capital Gains. Capital gains realized on the disposition of our common
stock by a Netherlands resident individual are generally exempt from
Netherlands income tax if
. the individual does not have a substantial interest as defined below
and
. the common stock is not attributable to an enterprise carried on by or
on behalf of such individual. See "Individuals Engaged in an
Enterprise, Companies and Other Entities" below.
Substantial Interest. A Netherlands resident individual will be subject
to tax (generally at a rate of 25%) with respect to any dividend (deemed or
actual) derived from, and any gain (deemed or actual) realized on the disposal
(deemed or actual) of, our ordinary shares if such holder has a substantial
interest (deemed or actual) in us. Generally, a holder of our ordinary shares
will not have a substantial interest in us if he, his spouse, certain other
relatives (including foster children) or certain persons sharing his household,
do not hold, alone or together, whether directly or indirectly, the ownership
of, or certain other rights over, our ordinary shares representing five percent
or more of our total issued and outstanding capital (or the issued and
outstanding capital of any class of our ordinary shares), or rights to acquire
our ordinary shares, whether or not already issued, that represent at any time
(and from time to time) five percent or more of our total issued and
outstanding capital (or the issued and outstanding capital of any class of our
ordinary shares) or the ownership of certain profit participating certificates
that relate to five percent or more of our annual profit of and/or to five
percent or more of our liquidation proceeds. A deemed substantial interest is
present if (part of) a substantial interest has been disposed of, or is deemed
to have been disposed of, on a non-recognition basis.
78
<PAGE>
Individuals Engaged in an Enterprise, Companies and Other Entities
Netherlands resident individuals who own our ordinary shares that are
attributable to an enterprise carried on by or on behalf of such individuals,
and companies or other entities, subject to Netherlands corporate income tax,
that are resident in the Netherlands for Netherlands tax purposes and that own
our ordinary shares, are generally subject to income tax or corporate income
tax with respect to distributions made by us as well as with respect to certain
distributions deemed made by us and with respect to any gain realized on the
disposal of our common stock.
Netherlands Qualifying Pension Funds and Investment Institutions
("Beleggingsinstellingen")
A Netherlands qualifying pension fund is not subject to corporate income
tax. Furthermore, qualifying Netherlands resident investment institutions are
subject to corporate income tax at a special rate of 0 percent.
Net Wealth Tax
Netherlands resident individuals are subject to Netherlands net wealth
tax on the basis of their world-wide net wealth, which includes the fair market
value of our ordinary shares.
Gift, Estate and Inheritance Taxes
Gift, estate and inheritance taxes will rise in the Netherlands with
respect to an acquisition of our ordinary shares by way of a gift by, or on the
death of, a holder of our ordinary shares who is resident or deemed to be
resident of the Netherlands.
For purposes of Netherlands gift, estate and inheritance taxes, an
individual who holds the Netherlands nationality will be deemed to be resident
in the Netherlands if he has been resident in the Netherlands at any time
during the ten years preceding the date of the gift or his death. Furthermore,
for purposes of Netherlands gift tax, an individual not holding the Netherlands
nationality will be deemed to be resident in the Netherlands if he has been
resident in the Netherlands at any time during the twelve months preceding the
date of the gift.
Other Taxes and Duties
No Netherlands capital tax, registration tax, transfer tax, stamp duty or
any other similar documentary tax or duty will be payable in the Netherlands in
respect of or in connection with the subscription, issue, placement, allotment
or delivery of our ordinary shares.
YOU SHOULD CONSULT LEGAL AND TAX ADVISORS IN THE COUNTRIES OF YOUR
CITIZENSHIP, RESIDENCE AND DOMICILE TO DETERMINE THE POSSIBLE TAX CONSEQUENCES
OF PURCHASING, HOLDING AND REDEEMING OUR ORDINARY SHARES UNDER THE LAWS OF YOUR
RESPECTIVE JURISDICTION.
79
<PAGE>
UNDERWRITING
General
We intend to offer our Class A Ordinary Shares outside the United States
and Canada through a number of international managers and in the United States
through a number of U.S. underwriters. Merrill Lynch International, MeesPierson
N.V. and Thomas Weisel Partners LLC are acting as lead managers for each of the
international managers named below. Subject to the terms and conditions set
forth in an international purchase agreement among our company and the
international managers, and concurrently with the sale of 3,750,000 Class A
Ordinary Shares to the U.S. underwriters, we have agreed to sell to the
international managers, and each of the international managers severally and
not jointly has agreed to purchase from our company the number of Class A
Ordinary Shares set forth opposite its name below.
<TABLE>
<CAPTION>
Number of
International Managers Shares
---------------------- ---------
<S> <C>
Merrill Lynch International....................................
MeesPierson N.V................................................
Thomas Weisel Partners LLC.....................................
---------
Total..................................................... 3,750,000
=========
</TABLE>
We have also entered into a U.S. purchase agreement with certain
underwriters in the United States and Canada for whom Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Thomas Weisel Partners LLC are acting as U.S.
representatives. Subject to the terms and conditions set forth in the U.S.
purchase agreement, and concurrently with the sale of 3,750,000 Class A
Ordinary Shares to the international managers pursuant to the international
purchase agreement, we have agreed to sell to the U.S. underwriters, and the
U.S. underwriters severally have agreed to purchase from us, an aggregate of
3,750,000 Class A Ordinary Shares. The initial public offering price per share
and the total underwriting discount per Class A Ordinary Share are identical
under the international purchase agreement and the U.S. purchase agreement. All
of the shares in these offerings are being sold under either the U.S. purchase
agreement or the international purchase agreement.
In the international purchase agreement and the U.S. purchase agreement,
the several international managers and the several U.S. underwriters,
respectively, have agreed, subject to the terms and conditions set forth in
those agreements, to purchase all the Class A Ordinary Shares being sold under
the terms of each such agreement if any of the Class A Ordinary Shares being
sold under the terms of that agreement are purchased. In the event of a default
by an underwriter, the U.S. purchase agreement and the international purchase
agreement provide that, in certain circumstances, the purchase commitments of
the nondefaulting underwriters may be increased or the purchase agreements may
be terminated. The closings with respect to the sale of Class A Ordinary Shares
to be purchased by the international managers and the U.S. underwriters are
conditioned upon one another.
We have agreed to indemnify the international managers and the U.S.
underwriters against certain liabilities, including certain liabilities under
the Securities Act, or to contribute to payments the U.S. underwriters and the
international managers may be required to make in respect of those liabilities.
The Class A Ordinary Shares are being offered by the several
underwriters, subject to prior sale, when, as and if issued to and accepted by
them, subject to approval of certain legal matters by counsel for the
underwriters and certain other conditions. The underwriters reserve the right
to withdraw, cancel or modify such offer and to reject orders in whole or in
part.
80
<PAGE>
Commitments and Discounts
The lead managers have advised us that the international managers propose
initially to offer the Class A Ordinary Shares to the public at the initial
public offering price set forth on the cover page of this prospectus, and to
certain dealers at such price less a concession not in excess of $ per
Class A Ordinary Share. The international managers may allow, and such dealers
may reallow, a discount not in excess of $ per Class A Ordinary Share to
certain other dealers. After the initial public offering, the public offering
price, concession and discount may change.
The following table shows the per share and total public offering price,
underwriting discount to be paid by us to the international managers and the
U.S. underwriters and the proceeds before expenses to us. This information is
presented assuming either no exercise or full exercise by the international
managers and the U.S. underwriters of their over-allotment options.
<TABLE>
<CAPTION>
Without With
Per Share Option Option
--------- ------- ------
<S> <C> <C> <C>
Public offering price............................... $ $ $
Underwriting discount............................... $ $ $
Proceeds, before expenses, to OpenTV................ $ $ $
</TABLE>
The expenses of the offering (exclusive of the underwriting discount) are
estimated at $ and are payable by us.
Intersyndicate Agreement
The international managers and the U.S. underwriters have entered into an
intersyndicate agreement that provides for the coordination of their
activities. Under the terms of the intersyndicate agreement, the international
managers and the U.S. underwriters are permitted to sell our Class A Ordinary
Shares to each other for purposes of resale at the initial public offering
price, less an amount not greater than the selling concession. Under the terms
of the intersyndicate agreement, the U.S. underwriters and any dealer to whom
they sell our Class A Ordinary Shares will not offer to sell or sell our Class
A Ordinary Shares to persons who are non-U.S. or non-Canadian persons or to
persons they believe intend to resell to persons who are non-U.S. or non-
Canadian persons, and the international managers and any dealer to whom they
sell Class A Ordinary Shares will not offer to sell or sell Class A Ordinary
Shares to U.S. persons or to Canadian persons or to persons they believe intend
to resell to U.S. persons or Canadian persons, except in the case of
transactions under the terms of the intersyndicate agreement.
Over-allotment Option
We have granted an option to the international managers, exercisable for
30 days after the date of this prospectus, to purchase up to an aggregate of
562,500 additional Class A Ordinary Shares at the public offering price set
forth on the cover page of this prospectus, less the underwriting discount. The
international managers may exercise this option solely to cover over-
allotments, if any, made on the sale of the Class A Ordinary Shares offered
hereby. To the extent that the international managers exercise this option,
each international manager will be obligated, subject to certain conditions, to
purchase a number of additional Class A Ordinary Shares proportionate to such
international manager's initial amount reflected in the foregoing table.
We also have granted an option to the U.S. underwriters, exercisable for
30 days after the date of this prospectus, to purchase up to an aggregate of
562,500 additional Class A Ordinary Shares to cover over-allotments, if any, on
terms similar to those granted to international managers.
Reserved Shares
At our request, the international managers have reserved for sale, at the
initial public offering price, up to ( %) of the Class A Ordinary Shares
offered hereby to be sold to some of our directors,
81
<PAGE>
officers, employees, business associates and related persons. The number of our
Class A Ordinary Shares available for sale to the general public will be
reduced to the extent that those persons purchase the reserved shares. Any
reserved shares which are not orally confirmed for purchase within one day of
the pricing of the offering will be offered by the international managers to
the general public on the same terms as the other Class A Ordinary Shares
offered by this prospectus.
No Sales of Similar Securities
We and our executive officers and directors and all existing shareholders
have agreed, with certain exceptions, without the prior written consent of
Merrill Lynch on behalf of the underwriters for a period of 180 days after the
date of this prospectus, not to directly or indirectly
. offer, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any
option, right or warrant for the sale of, lend or otherwise dispose
of or transfer any of our Class A Ordinary Shares or securities
convertible into, exchangeable or exercisable for or repayable with
our Class A Ordinary Shares, whether now owned or later acquired by
the person executing the agreement or with respect to which the
person executing the agreement later acquires the power of
disposition, or file a registration statement under the Securities
Act relating to any of our Class A Ordinary Shares or
. enter into any swap or other agreement that transfers, in whole or
in part, the economic consequences of ownership of our Class A
Ordinary Shares whether any such swap or transaction is to be
settled by delivery of our Class A Ordinary Shares or other
securities, in cash or otherwise.
Quotation on the Nasdaq National Market
We expect our Class A Ordinary Shares to be approved for quotation on the
Nasdaq National Market and the Amsterdam Stock Exchange, subject to official
notice of issuance under the symbol "OPTV".
Before this offering, there has been no public market for our Class A
Ordinary Shares. The initial public offering price will be determined through
negotiations between us and the U.S. representatives and the lead managers. The
factors to be considered in determining the initial public offering price, in
addition to prevailing market conditions, are the valuation multiples of
publicly traded companies that the U.S. representatives and the lead managers
believe to be comparable to us, certain of our financial information, the
history of, and the prospects for, our company and the industry in which we
compete, and an assessment of our management, its past and present operations,
the prospects for, and timing of, future revenues of our company, the present
state of our development, and the above factors in relation to market values
and various valuation measures of other companies engaged in activities similar
to ours. There can be no assurance that an active trading market will develop
for our Class A Ordinary Shares or that our Class A Ordinary Shares will trade
in the public market subsequent to the offering at or above the initial public
offering price.
The underwriters do not expect sales of the Class A Ordinary Shares to
any accounts over which they exercise discretionary authority to exceed 5% of
the number of shares being offered in this offering.
Price Stabilization, Short Positions and Penalty Bids
Until the distribution of our Class A Ordinary Shares is completed, rules
of the Securities and Exchange Commission may limit the ability of the
underwriters and certain selling group members to bid for and purchase our
Class A Ordinary Shares. As an exception to these rules, the U.S.
representatives are permitted to engage in transactions that stabilize the
price of our Class A Ordinary Shares. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of our
Class A Ordinary Shares.
If the underwriters create a short position in our Class A Ordinary
Shares in connection with the offering, i.e., if they sell more shares of our
Class A Ordinary Shares than are set forth on the cover page of this
prospectus,
82
<PAGE>
the U.S. representatives may reduce that short position by purchasing our Class
A Ordinary Shares in the open market. The U.S. representatives may also elect
to reduce any short position by exercising all or part of the over-allotment
options described above.\
The U.S. representatives may also impose a penalty bid on underwriters
and selling group members. This means that if the U.S. representatives purchase
our Class A Ordinary Shares in the open market to reduce the underwriters'
short position or to stabilize the price of our Class A Ordinary Shares, they
may reclaim the amount of the selling concession from the underwriters and
selling group members who sold those shares.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of our Class A Ordinary Shares to
the extent that it discourages resales of our Class A Ordinary Shares.
Neither our company nor any of the underwriters makes any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of our Class A Ordinary
Shares. In addition, neither our company nor any of the underwriters makes any
representation that the U.S. representatives or lead managers will engage in
such transactions or that such transactions, once commenced, will not be
discontinued without notice.
UK Selling Restrictions
Each international manager has agreed that (i) it has not offered or sold
and, prior to the expiration of the period of six months from the closing date,
will not offer or sell any Class A Ordinary Shares to persons in the United
Kingdom, except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which do not
constitute an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations 1995; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Class A Ordinary Shares in,
from or otherwise involving the United Kingdom; and (iii) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issuance of Class A Ordinary Shares to a
person who is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1996 as amended by the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1997
or is a person to whom such document may otherwise lawfully be issued or passed
on.
No Public Offering Outside the United States
No action has been or will be taken in any jurisdiction (except in the
United States) that would permit a public offering of the Class A Ordinary
Shares, or the possession, circulation or distribution of this prospectus or
any other material relating to our company or shares of our Class A Ordinary
Shares in any jurisdiction where action for that purpose is required.
Accordingly, our Class A Ordinary Shares may not be offered or sold, directly
or indirectly, and neither this prospectus nor any other offering material or
advertisements in connection with the Class A Ordinary Shares may be
distributed or published, in or from any country or jurisdiction except in
compliance with any applicable rules and regulations of any such country or
jurisdiction.
Purchasers of the ordinary shares offered by this prospectus may be
required to pay stamp taxes and other charges in accordance with the laws and
practices of the country of purchase in addition to the offering price set
forth on the cover page hereof.
Other Relationships
Certain of the underwriters and their affiliates engage in transactions
with, and perform services for, our company in the ordinary course of business
and have engaged, and may in the future engage, in
83
<PAGE>
commercial banking and investment banking with our company, for which they have
received customary compensation.
Thomas Weisel Partners LLC, one of the representatives of the
underwriters, was organized and registered as a broker-dealer in December 1998.
Since December 1998, Thomas Weisel Partners has been named as a lead or co-
manager on 60 filed public offerings of equity securities, of which 33 have
been completed, and has acted as a syndicate member in an additional 27 public
offerings of equity securities. Thomas Weisel Partners does not have any
material relationship with us or any of our officers, directors or other
controlling persons, except with respect to its contractual relationship with
us pursuant to the underwriting agreement entered into in connection with these
offerings.
84
<PAGE>
LEGAL MATTERS
The validity of Class A Ordinary Shares offered hereby will be passed
upon for us by Harney, Westwood & Riegels, the British Virgin Islands. Certain
United States legal matters will be passed upon for us by Cravath, Swaine &
Moore, New York, New York. Matters relating to Dutch tax law have been passed
upon for our company by PricewaterhouseCoopers N.V., Amsterdam, the
Netherlands. Certain United States legal matters will be passed upon for the
underwriters by Simpson Thacher & Bartlett, New York, New York.
EXPERTS
The consolidated financial statements of OpenTV as of December 31, 1998
and 1997 and for the period July 1, 1996 (date of inception) to December 31,
1996 and for each of the two years in the period ended December 31, 1998,
included in this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing.
The balance sheet of OpenTV Corp. as of September 30, 1999 included in
this prospectus has been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing.
AVAILABLE INFORMATION
Upon completion of the offering, we will be subject to the informational
requirements of the Securities Exchange Act of 1934, as amended, and will file
reports and other information with the Commission. These will include annual
reports on Form 20-F and periodic reports on Form 6-K. We expect our
information furnished on Form 6-K to include quarterly financial information.
Such reports and other information, as well as the registration statement,
exhibits and schedules, may be inspected, without charge, or copied, as
prescribed rates, at the public reference facility maintained by the Commission
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
The public may obtain information on the operation of the Public Reference Room
by calling the Commission at 1-800-SEC-0330. In addition, the Commission
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the Commission. The address of the Commission's web site is
http://www.sec.gov.
85
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Through and including , 1999 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether
or not participating in these offerings, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
7,500,000 Shares
[LOGO OF OPENTV](R)
Class A Ordinary Shares
-----------------
P R O S P E C T U S
-----------------
Merrill Lynch International
MeesPierson N.V.
Thomas Weisel Partners LLC
, 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the Registrant in connection with the sale of
common stock being registered. All amounts are estimates except the SEC
registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
Amount
to be Paid
----------
<S> <C>
SEC registration fee............................................ $ 47,955*
NASD filing fee................................................. $ 12,000*
Nasdaq National Market listing fee.............................. $ 75,625*
Amsterdam Stock Exchange listing fee............................ $ 5,000*
Printing, mailing and engraving expenses........................ $ 300,000*
Legal fees and expenses......................................... $1,000,000*
Accounting fees and expenses.................................... $ 375,000*
Transfer agent and registrar fees............................... $ 7,000*
Miscellaneous expenses.......................................... $ 177,420*
----------
Total......................................................... $2,000,000*
==========
</TABLE>
--------
* Estimated for purposes of determining the net proceeds of these
offerings.
Item 14. Indemnification of Directors and Officers
Our Articles of Association provide that, to the fullest extent permitted
by the laws of the British Virgin Islands or any other applicable laws, our
directors will not be personally liable to us or our shareholders for any acts
or omissions in the performance of their duties. Such limitation of liability
does not affect the availability of equitable remedies such as injunctive
relief or rescission. These provisions will not limit the liability of
directors under United States federal securities laws.
Item 15. Recent Sales of Unregistered Securities.
Since the Registrant's inception on September 30, 1999, the Registrant
has sold and issued the following unregistered securities:
a. On September 30, 1999, the Registrant issued 30,631,746 Class B
Ordinary Shares to a subsidiary of MIH Limited as part of its initial
capitalization.
b. On October 23, 1999, the Registrant sold Convertible Preference
Shares and warrants to purchase Class A Ordinary Shares to the following
parties in the following amounts:
<TABLE>
<CAPTION>
Warrants
to
Series C-1 Series C-2 Purchase
Convertible Convertible Class A
Preference Preference Ordinary
Investor Shares Shares Shares
-------- ----------- ----------- ---------
<S> <C> <C> <C>
Sun Microsystems, Inc...................... -- 4,504,504 --
America Online Inc......................... 4,504,504 -- 900,900
General Instrument Corp. .................. 2,252,252 -- 450,450
Liberty Digital, Inc. ..................... 5,630,630 -- 1,126,126
News Corporation........................... 5,630,630 -- 1,126,126
Time Warner, Inc. ......................... 5,630,630 -- 1,126,126
</TABLE>
II-1
<PAGE>
Each Series C-1 Preference Share and each Series C-2 Preference Share
will automatically convert into one Class A Ordinary Share upon the completion
of these offerings.
The issuance of securities described in Items 15(a) and (b) were made in
reliance upon an exemption from registration provided by Section 4(2) of the
Securities Act as transactions by an issuer not involving any public offering.
The recipients in all such transactions represented their intentions to acquire
the securities for investment only and not with a view to, or for sale in
connection with, any distribution thereof and appropriate legends were affixed
to the share certificates issued in all such transactions. All recipients
either received adequate information about the registrant or had access,
through employment or other relationships, to such information.
Item 16. Exhibits and Financial Statement Schedules
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1 U.S. Purchase Agreement.
1.2 International Purchase Agreement.
3.1+ Memorandum of Association of the Registrant.
3.2+ Articles of Association of the Registrant.
4.1+ Specimen Certificate for Class A Ordinary Share of the Registrant.
5.1+ Opinion of Harney, Westwood & Riegels with respect to the validity of
the securities being offered.
10.1+ Form of Indemnification Agreement between the Registrant and its
officers and directors.
10.2+ Registrant's 1999 Employee Stock Purchase Plan and Related Documents.
10.3 Registrant's Amended and Restated 1999 Share Option/Share Issuance
Plan and Related Documents.
10.4 Shareholder's Agreement among OTV Holdings Limited, OpenTV Corp. and
Sun TSI Subsidiary, Inc., dated October 23, 1999.
10.5 Trademark License Agreement between Sun Microsystems, Inc. and OpenTV,
Inc., dated March 20, 1998.
10.6* Technology License and Distribution Agreement between Sun
Microsystems, Inc. and OpenTV, Inc., dated March 20, 1998.
10.7* First Amendment to Technology License and Distribution Agreement,
dated June 30, 1999.
10.8+ Sublease between Netscape Communications, Inc. and OpenTV, Inc., dated
March 19, 1998.
10.9* Source Code License and Binary Distribution Agreement between Sun
Microsystems, Inc. and OpenTV, Inc., effective April 1, 1998.
10.10* Source Code License and Binary Distribution Agreement between Sun
Microsystems, Inc. and OpenTV, Inc., effective July 1, 1996.
10.11+ Convertible Preferred Stock Purchase Agreement between OpenTV Corp.
and Sun TSI Subsidiary, Inc., dated October 23, 1999.
10.12+ Convertible Preferred Stock and Warrant Purchase Agreement among
OpenTV Corp., America Online, Inc., General Instrument Corporation,
LDIG OTV, Inc., News America Incorporated and TWI-OTV Holdings Inc.,
dated October 23, 1999.
10.13+ Exchange Agreement between OpenTV Corp. and Sun TSI Subsidiary, Inc.,
dated October 23, 1999.
10.14+ Investors' Rights Agreement among OpenTV Corp., America Online, Inc.,
General Instrument Corporation, LDIG OTV, Inc., News America
Incorporated, TWI-OTV Holdings Inc., OTV Holdings Limited, Sun TSI
Subsidiary, Inc. and MIH (BVI) LTD., dated October 23, 1999.
10.15+ Amended and Restated Stockholders' Agreement among OpenTV Corp.,
OpenTV, Inc., Sun Microsystems, Inc. and Sun TSI Subsidiary, Inc.,
dated October 23, 1999.
21.1+ Subsidiaries of the Registrant.
23.1+ Consent of Harney, Westwood & Riegels (included in Exhibit 5.1).
23.2+ Consent of PricewaterhouseCoopers LLP.
</TABLE>
- --------
* Confidential treatment has been requested with respect to certain portions
of this exhibit. Omitted portions are included in the confidential treatment
request filed separately with the Commission.
+ Previously filed.
II-2
<PAGE>
(b) Financial Statement Schedules
All financial schedules, other than that listed above, have been omitted
because the information required to be set forth therein is not applicable or
is shown in the Financial Statements or Notes thereto.
Item 17. Undertakings.
The Registrant will provide to the Underwriters at the closing specified
in the Purchase Agreements certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to each
purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant, OpenTV Corp., a corporation organized and existing under the
laws of the British Virgin Islands, certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form F-1 and that
it has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Palo Alto,
California, on this nineteenth day of November, 1999.
OPENTV CORP.
/s/ Jan Steenkamp
By _________________________________
Jan Steenkamp
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on this nineteenth day of November, 1999:
Signature Title Date
- --------- ----- ----
Chairman of the
* Board November 19,
- ------------------------------------- 1999
Jacobus D.T Stofberg
Chief Executive
/s/ Jan Steenkamp Officer and November 19,
- ------------------------------------- Director (principal 1999
Jan Steenkamp executive officer)
Chief Financial
* Officer and November 19,
- ------------------------------------- Director (principal 1999
Randall S. Livingston financial and
accounting officer)
U.S. Authorized
* Representative November 19,
- ------------------------------------- 1999
James F. Brown
Director
* November 19,
- ------------------------------------- 1999
Jacobus P. Bekker
Director
* November 19,
- ------------------------------------- 1999
Stephen G. Oldfield
Director
* November 19,
- ------------------------------------- 1999
William Raduchel
Director
* November 19,
- ------------------------------------- 1999
Allan M. Rosenzweig
Director
* November 19,
- ------------------------------------- 1999
Craig L. Enenstein
Director
* November 19,
- ------------------------------------- 1999
Michael E. Lehman
Director
* November 19,
- ------------------------------------- 1999
Peter W. Smith
/s/ Jan Steenkamp
*By__________________________________
Jan Steenkamp
Attorney-in-Fact
II-4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of
OpenTV, Inc. and Subsidiary (Predecessor to OpenTV Corp.):
The one-for-five reverse stock split described in Note 10 to the
consolidated financial statements of OpenTV, Inc. has not been completed as of
November 2, 1999. When the one-for-five reverse stock split has been completed,
we will be in a position to furnish the following report:
In connection with our audits of the consolidated financial statements of
OpenTV, Inc. as of December 31, 1997 and 1998, and for the period from July 1,
1996 (date of inception) to December 31, 1996 and for years ended December 31,
1997 and 1998, which financial statements are included in the Prospectus, we
have also audited the financial statement schedule listed in Item 16(b) herein.
In our opinion, this financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
/s/ PricewaterhouseCoopers LLP
San Jose, California
August 9, 1999
S-1
<PAGE>
SCHEDULE II
OPENTV, INC. AND SUBSIDIARY
(Predecessor to OpenTV Corp.)
VALUATION AND QUALIFYING ACCOUNTS
(in thousands of US dollars)
<TABLE>
<CAPTION>
Balance at Amounts
Beginning Charged to Balance at
Description of Period Profit and Loss Deductions End of Period
- ----------- ---------- --------------- ---------- -------------
<S> <C> <C> <C> <C>
Allowance for Doubtful
Accounts:
For the period July 1,
1996 (date of inception)
to December 31, 1996
Allowance for doubtful
accounts................ $ -- $ 31 $ -- $ 31
Year ended December 31,
1997
Allowance for doubtful
accounts................ $ 31 $ 330 $ -- $ 361
Year ended December 31,
1998
Allowance for doubtful
accounts................ $361 $ 85 $(146) $ 300
Allowance for Deferred Tax
Assets:
For the period July 1,
1996 (date of inception)
to December 31, 1996
Valuation Allowance...... $ -- $ -- $ -- $ --
Year ended December 31,
1997
Valuation Allowance...... $ -- $ -- $ -- $ --
Year ended December 31,
1998
Valuation Allowance...... $ -- $4,975 $ -- $4,975
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1 U.S. Purchase Agreement.
1.2 International Purchase Agreement.
3.1+ Memorandum of Association of the Registrant.
3.2+ Articles of Association of the Registrant.
4.1+ Specimen Certificate for Class A Ordinary Share of the Registrant.
5.1+ Opinion of Harney, Westwood & Riegels with respect to the validity of
the securities being offered.
10.1+ Form of Indemnification Agreement between the Registrant and its
officers and directors.
10.2+ Registrant's 1999 Employee Stock Purchase Plan and Related Documents.
10.3 Registrant's Amended and Restated 1999 Share Option/Share Issuance
Plan and Related Documents.
10.4 Shareholder's Agreement among OTV Holdings Limited, OpenTV Corp., and
Sun TSI Subsidiary, Inc., dated October 23, 1999.
10.5 Trademark License Agreement between Sun Microsystems, Inc. and OpenTV,
Inc. dated March 20, 1998.
10.6* Technology License and Distribution Agreement between Sun
Microsystems, Inc. and OpenTV, Inc., dated March 20, 1998.
10.7* First Amendment to Technology License and Distribution Agreement,
dated June 30, 1999.
10.8+ Sublease between Netscape Communications, Inc. and OpenTV, Inc., dated
March 19, 1998.
10.9* Source Code License and Binary Distribution Agreement between Sun
Microsystems, Inc. and OpenTV, Inc., effective April 1, 1998.
10.10* Source Code License and Binary Distribution Agreement between Sun
Microsystems, Inc. and OpenTV, Inc., effective July 1, 1996.
10.11+ Convertible Preferred Stock Purchase Agreement between OpenTV Corp.
and Sun TSI Subsidiary, Inc., dated October 23, 1999.
10.12+ Convertible Preferred Stock and Warrant Purchase Agreement among
OpenTV Corp., America Online, Inc., General Instrument Corporation,
LDIG OTV, Inc., News America Incorporated and TWI-OTV Holdings Inc.,
dated October 23, 1999.
10.13+ Exchange Agreement between OpenTV Corp. and Sun TSI Subsidiary, Inc.,
dated October 23, 1999.
10.14+ Investors' Rights Agreement among OpenTV Corp., America Online, Inc.,
General Instrument Corporation, LDIG OTV, Inc., News America
Incorporated, OTV Holdings Limited, Sun TSI Subsidiary, Inc. and MIH
(BVI) Ltd., dated October 23, 1999.
10.15+ Amended and Restated Stockholders' Agreement among OpenTV Corp.,
OpenTV, Inc., Sun Microsystems, Inc. and Sun TSI Subsidiary, Inc.,
dated October 23, 1999.
21.1+ Subsidiaries of the Registrant.
23.1+ Consent of Harney, Westwood & Riegels (included in Exhibit 5.1).
23.2+ Consent of PricewaterhouseCoopers LLP.
</TABLE>
- --------
* Confidential treatment has been requested with respect to certain portions
of this exhibit. Omitted portions are included in the confidential treatment
request filed separately with the Commission.
+ Previously filed.
<PAGE>
EXHIBIT 1.1
- -------------------------------------------------------------------------------
OPENTV CORP.
(a British Virgin Islands international business company)
__________
7,500,000 Class A Ordinary Shares
U.S. PURCHASE AGREEMENT
-----------------------
- -------------------------------------------------------------------------------
Dated: November , 1999
<PAGE>
TABLE OF CONTENTS
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Page
<S> <C> <C>
SECTION 1. Representations and Warranties............................................4
(a) Representations and Warranties by the Company........................4
(b) Officers' Certificates..............................................11
(c) Representations and Warranties of OpenTV, Inc.......................11
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing..........................12
(a) Initial Securities..................................................12
(b) Option Securities...................................................12
(c) Payment.............................................................12
(d) Denominations: Registration.........................................13
SECTION 3. Covenants of the Company.................................................13
(a) Compliance with Securities Regulations and Commission Requests......13
(b) Filing of Amendments................................................14
(c) Delivery of Registration Statements.................................14
(d) Delivery of Prospectuses............................................14
(e) Continued Compliance with Securities Laws...........................14
(f) Blue Sky Qualifications.............................................15
(g) Rule 158............................................................15
(h) Use of Proceeds.....................................................15
(i) Listing.............................................................15
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(j) Restriction on Sale of Securities...................................15
(k) Reporting Requirements..............................................16
(l) Compliance with NASD Rules..........................................16
(m) Compliance with Rule 463............................................16
SECTION 4. Payment of Expenses......................................................16
(a) Expenses............................................................16
(b) Termination of Agreement............................................17
SECTION 5. Conditions of U.S. Underwriters' Obligations.............................17
(a) Effectiveness of Registration Statement.............................17
(b) Opinion of Counsel for Company......................................18
(c) Opinion of Counsel for U.S. Underwriters............................18
(d) Officers' Certificate...............................................18
(e) Accountant's Comfort Letter.........................................18
(f) Bring-down Comfort Letter...........................................19
(g) Approval of Listing.................................................19
(h) No Objection........................................................19
(i) Lock-up Agreements..................................................19
(j) Purchase of Initial International Securities........................19
(k) Conditions to Purchase of U.S. Option Securities....................19
(l) Additional Documents................................................20
(m) Termination of Agreement............................................20
SECTION 6. Indemnification..........................................................20
(a) Indemnification of U.S. Underwriters................................20
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(b) Indemnification of Company, Directors and Officers..................21
(c) Actions Against Parties: Notification...............................22
(d) Settlement Without Consent if Failure To Reimburse..................22
SECTION 7. Contribution.............................................................23
SECTION 8. Representations Warranties and Agreements To Survive Delivery............24
SECTION 9. Termination of Agreement.................................................24
(a) Termination: General................................................24
(b) Liabilities.........................................................25
SECTION 10. Default by One or More of the U.S. Underwriters.........................25
SECTION 11. Notices.................................................................26
SECTION 12. Parties.................................................................26
SECTION 13. GOVERNING LAW AND TIME..................................................26
SECTION 14. Agent for Service Submission to Jurisdiction: Waiver of Immunities......26
SECTION 15. Judgment Currency.......................................................27
SECTION 16. Effect of Headings......................................................27
SECTION 17. Counterparts............................................................27
</TABLE>
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<PAGE>
OpenTV Corp.
(a British Virgin Islands international business company)
7,500,000 Class A Ordinary Shares
(No Par Value)
U.S. PURCHASE AGREEMENT
-----------------------
November , 1999
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Thomas Weisel Partners LLC
as U.S. Representatives of the several U.S. Underwriters
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Each of OpenTV Corp., an international business company organized
under the laws of the British Virgin Islands (the "Company") and Open TV, Inc.,
-------
a corporation organized under the laws of Delaware ("OpenTV, Inc."), confirms
its agreement with Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
-------
Lynch") and each of the other U.S. Underwriters named in Schedule A hereto
- ----- ----------
(collectively, the "U.S. Underwriters," which term shall also include any
-----------------
underwriter substituted as hereinafter provided in Section 10 hereof), for whom
Merrill Lynch and Thomas Weisel Partners LLC are acting as representatives (in
such capacity, the "U.S. Representatives"), with respect to the issue and sale
--------------------
by the Company and the purchase by the U.S. Underwriters, acting severally and
not jointly, of the respective numbers of Class A Ordinary Shares, no par value,
of the Company ("Class A Ordinary Shares") set forth in said Schedule A, and
----------------------- ----------
with respect to the grant by the Company to the U.S. Underwriters, acting
severally and not jointly, of the option described in Section 2(b) hereof to
purchase all or any part of 562,500 additional Class A Ordinary Shares to cover
over-allotments, if any. The 3,750,000 Class A Ordinary Shares referred to in
Schedule A (the "Initial U.S. Securities") to be purchased by the U.S.
- ---------- -----------------------
Underwriters and all or any part of the 562,500 Class A Ordinary Shares subject
to the option described in Section 2(b) hereof (the "U.S. Option Securities")
----------------------
are hereinafter called, collectively, the "U.S. Securities."
---------------
<PAGE>
2
It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "International Purchase Agreement")
--------------------------------
providing for the offering by the Company of an aggregate of 3,750,000 Class A
Ordinary Shares (the "Initial International Securities") through arrangements
--------------------------------
with certain underwriters outside the United States and Canada (the
"International Managers") for which Merrill Lynch International, Thomas Weisel
- -----------------------
Partners LLC and MeesPierson N.V. are acting as the international
representatives (the "International Representatives") and the grant by the
-----------------------------
Company to the International Managers, acting severally and not jointly, of an
option to purchase all or any part of the International Managers' pro rata
portion of up to 562,500 additional Class A Ordinary Shares solely to cover
over-allotments, if any (the "International Option Securities" and, together
-------------------------------
with the U.S. Option Securities, the "Option Securities"). The Initial
-----------------
International Securities and the International Option Securities are hereinafter
called the "International Securities." It is understood that the Company is not
------------------------
obligated to sell, and the U.S. Underwriters are not obligated to purchase, any
Initial U.S. Securities unless all of the Initial International Securities are
contemporaneously purchased by the International Managers.
The U.S. Underwriters and the International Managers are hereinafter
collectively called the "Underwriters," the Initial U.S. Securities and the
------------
Initial International Securities are hereinafter collectively called the
"Initial Securities," and the U.S. Securities and the International Securities
- -------------------
are hereinafter collectively called the "Securities."
----------
The Underwriters will concurrently enter into an Intersyndicate
Agreement of even date herewith (the "Intersyndicate Agreement") providing for
------------------------
the coordination of certain transactions among the Underwriters under the
direction of Merrill Lynch International (in such capacity, the "Global
------
Coordinator").
- -----------
The Company understands that the U.S. Underwriters propose to make a
public offering of the U.S. Securities as soon as the U.S. Representatives deem
advisable after this Agreement has been executed and delivered.
The Company and the U.S. Underwriters agree that up to ______ shares
of the Initial U.S. Securities to be purchased by the U.S. Underwriters and up
to ______ shares of the Initial International Securities to be purchased by the
International Managers (collectively, the "Reserved Securities") shall be
reserved for sale by the Underwriters to certain eligible employees and persons
having business relationships with the Company, as part of the distribution of
the Initial Securities by the Underwriters, subject to the terms of this
Agreement and the International Purchase Agreement, the applicable U.S. and
foreign rules, regulations and interpretations of the National Association of
Securities Dealers, Inc. and all other applicable laws, rules and regulations.
To the extent that such Reserved Securities are not orally confirmed for
purchase by such eligible employees and persons having relationships with the
Company by the end of the first business day after the date of this Agreement,
such Reserved Securities may be offered to the public as part of the public
offering contemplated hereby.
<PAGE>
3
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form F-1 (No. 333-89609) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
--------
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
---------
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
-------------------- -----------
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
--------
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b).
- -----------
Two forms of prospectus are to be used in connection with the offering and sale
of the Securities: one relating to the U.S. Securities (the "Form of U.S.
------------
Prospectus") and one relating to the International Securities (the "Form of
- ---------- -------
International Prospectus"). The Form of International Prospectus is identical
- ------------------------
to the Form of U.S. Prospectus, except for the front cover and back cover pages
and the information under the caption "Underwriting" and the inclusion in the
------------
Form of International Prospectus of sections under the captions "Additional
----------
Information" and "Certain Netherlands Tax Consequences." The information
- ----------- ------------------------------------
included in any such prospectus or in any such Term Sheet, as the case may be,
that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred
to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is
---------------------
referred to as "Rule 434 Information." Each Form of U.S. Prospectus and Form of
--------------------
International Prospectus used before such registration statement became
effective, and any prospectus that omitted, as applicable, the Rule 430A
Information or the Rule 434 Information, that was used after such effectiveness
and prior to the execution and delivery of this Agreement, is herein called a
"preliminary prospectus." Such registration statement, including the exhibits
- -----------------------
thereto and schedules thereto, at the time it became effective and including the
Rule 430A Information and the Rule 434 Information, as applicable, is herein
called the "Registration Statement." Any registration statement filed pursuant
----------------------
to Rule 462(b) of the 1933 Act Regulations is herein referred to as the "Rule
----
462(b) Registration Statement," and after such filing the term "Registration
- -----------------------------
Statement" shall include the Rule 462(b) Registration Statement. The final Form
of U.S. Prospectus and the final Form of International Prospectus in the forms
first furnished to the Underwriters for use in connection with the offering of
the Securities are herein called the "U.S. Prospectus" and the "International
--------------- -------------
Prospectus," respectively, and collectively, the "Prospectuses." If Rule 434 is
- ---------- ------------
relied on, the terms "U.S. Prospectus" and "International Prospectus" shall
--------------- ------------------------
refer to the preliminary U.S. Prospectus dated November 10, 1999 and the
preliminary International Prospectus dated November 10, 1999, respectively, each
together with the applicable Term Sheet, and all references in this Agreement to
the date of such Prospectuses shall mean the date of the applicable Term Sheet.
For purposes of this Agreement, all references to the Registration Statement,
any preliminary prospectus, the U.S. Prospectus, the International Prospectus or
any Term Sheet or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR").
-----
SECTION 1. Representations and Warranties.
------------------------------
<PAGE>
4
(a) Representations and Warranties by the Company. The Company
---------------------------------------------
represents and warrants to and agrees with each U.S. Underwriter as of the date
hereof, as of the Closing Time referred to in Section 2(c) hereof, and as of
each Date of Delivery (if any) referred to in Section 2(b) hereof, and agrees
with each U.S. Underwriter, as follows:
(i) Compliance with Registration Requirements. Each of the
-----------------------------------------
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time (and, if any U.S. Option Securities are
purchased, at the Date of Delivery), the Registration Statement, the Rule
462(b) Registration Statement and any amendments and supplements thereto
complied and will comply in all material respects with the requirements of
the 1933 Act and the 1933 Act Regulations and did not and will not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and the Prospectuses, any preliminary prospectuses and any
supplements thereto or prospectus wrappers prepared in connection
therewith, at their respective times of issuance and at the Closing Time,
complied and will comply in all material respects with any applicable laws
or regulations of foreign jurisdictions in which the Prospectuses and such
preliminary prospectuses, as amended or supplemented, if applicable, are
distributed in connection with the offer and sale of Reserved Securities.
Neither of the Prospectuses nor any amendments or supplements thereto
(including any prospectus wrapper), at the time the Prospectuses or any
amendments or supplements thereto were issued and at the Closing Time (and,
if any U.S. Option Securities are purchased, at the Date of Delivery),
included or will include an untrue statement of a material fact or omitted
or will omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. If Rule 434 is used, the Company will comply with
the requirements of Rule 434 and the Prospectuses shall not be "materially
different," as such term is used in Rule 434, from the prospectuses
included in the Registration Statement at the time it became effective.
The representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or the U.S.
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by or on behalf of any U.S. Underwriter
through the U.S. Representatives expressly for use in the Registration
Statement or the U.S. Prospectus.
Each preliminary prospectus and the prospectuses filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so
filed in all material respects with the
<PAGE>
5
requirements of the 1933 Act and the 1933 Act Regulations and each
preliminary prospectus and each Prospectus delivered to the Underwriters
for use in connection with this offering was identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(ii) Independent Accountants. The accountants who certified the
-----------------------
financial statements and supporting schedules included in the Registration
Statement are independent public accountants as required by the 1933 Act
and the 1933 Act Regulations.
(iii) Financial Statements. The financial statements included in the
--------------------
Registration Statement and the Prospectuses, together with the related
schedules and notes, present fairly the financial position of the entities
to which they relate as of the dates indicated and their respective results
of operations, shareholders' equity and cash flows for the periods
specified; said financial statements have been prepared in conformity with
generally accepted accounting principles under United States Accounting
Standards ("U.S. GAAP") applied on a consistent basis throughout the
---------
periods involved. The supporting schedules included in the Registration
Statement present fairly in accordance with U.S. GAAP the information
required to be stated therein. The selected and summary financial data
included in the Prospectuses present fairly the information shown therein
and have been compiled on a basis consistent with that of the audited
financial statements included in the Registration Statement.
(iv) No Material Adverse Change in Business. Since the respective
--------------------------------------
dates as of which information is given in the Registration Statement and
the Prospectuses, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business (a "Material Adverse Effect"), (B) there have
-----------------------
been no transactions entered into by the Company or any of its
subsidiaries, other than those in the ordinary course of business, which
are material with respect to the Company and its subsidiaries considered as
one enterprise, and (C) there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital
stock.
(v) Good Standing of the Company. The Company has been duly
----------------------------
organized and is validly existing as an international business company in
good standing under the laws of the British Virgin Islands and has
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Prospectuses and to enter into
and perform its obligations under this Agreement. The Company is duly
qualified as a foreign corporation to transact business and is in good
standing in each other jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in
good standing would not, singly or in the aggregate, result in a Material
Adverse Effect.
<PAGE>
6
(vi) Good Standing of Subsidiaries. Each "significant subsidiary" of
-----------------------------
the Company (as such term is defined in Rule 1-02 of Regulation S-X) and
OpenTV, Inc. (each a "Subsidiary" and, collectively, the "Subsidiaries")
---------- ------------
has been duly organized and is validly existing as a corporation, general
partnership, limited partnership, limited liability company or similar
entity in good standing under the laws of the jurisdiction of its
organization, has organizational power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectuses and is duly qualified as a foreign corporation (or other such
entity) to transact business and is in good standing in each jurisdiction
in which such qualification is required, whether by reason of the ownership
or leasing of property or the conduct of business, except where the failure
so to qualify or to be in good standing would not, singly or in the
aggregate, result in a Material Adverse Effect. Except as otherwise
disclosed in the Registration Statement, all of the issued and outstanding
capital stock or other ownership interests of each Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and is
owned by the Company free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity. None of the outstanding shares
of capital stock or other ownership interests of any Subsidiary was issued
in violation of the preemptive or similar rights of any securityholder of
such Subsidiary. The only subsidiaries of the Company are (a) the
subsidiaries listed on Exhibit 21 to the Registration Statement and (b)
certain other subsidiaries which, considered in the aggregate as a single
subsidiary, do not constitute a "significant subsidiary" as defined in Rule
1-02 of Regulation S-X.
(vii) Capitalization. The authorized, issued and outstanding capital
--------------
stock of the Company is as set forth in the Prospectuses in the column
entitled "Actual" under the caption "Capitalization" (except for subsequent
issuances, if any, pursuant to this Agreement, pursuant to agreements or
employee benefit plans referred to in the Prospectuses or pursuant to the
exercise of options referred to in the Prospectuses). The shares of issued
and outstanding capital stock of the Company have been duly authorized and
validly issued and are fully paid and non-assessable. None of the
outstanding shares of capital stock of the Company was issued in violation
of the preemptive or other similar rights of any direct or indirect
securityholder of the Company.
(viii) Authorization of Agreement. The execution, delivery and
--------------------------
performance of this Agreement and the International Purchase Agreement have
been duly authorized by all requisite corporate action on the part of the
Company. This Agreement and the International Purchase Agreement have been
duly executed and delivered by the Company.
(ix) Authorization and Description of Securities. The Securities to
-------------------------------------------
be purchased by the U.S. Underwriters and the International Managers from
the Company have been duly authorized for issuance and sale to the U.S.
Underwriters pursuant to this Agreement and the International Managers
pursuant to the International Purchase Agreement, respectively, and, when
issued and delivered by the Company pursuant to this Agreement and the
International Purchase Agreement, respectively, against payment of the
consideration set forth herein and in the International Purchase Agreement,
respectively, will
<PAGE>
7
be validly issued, fully paid and non-assessable. The Class A Ordinary
Shares conform in all material respects to all statements relating thereto
contained in the Prospectuses and such description conforms to the rights
set forth in the instruments defining the same. No holder of the Securities
will be subject to personal liability by reason of being such a holder and
the issuance of the Securities is not subject to the preemptive or other
similar rights of any securityholder of the Company.
(x) Absence of Defaults and Conflicts. Neither the Company nor any
---------------------------------
of its subsidiaries is in violation of its charter or by-laws (or
equivalent constitutive documents) or in default in the performance or
observance of any obligation, agreement, covenant or condition contained in
any contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which it or any of them may be bound, or
to which any of the property or assets of the Company or any of its
subsidiaries is subject (collectively, "Agreements and Instruments") except
--------------------------
for such defaults that would not, singly or in the aggregate, result in a
Material Adverse Effect. The execution, delivery and performance of this
Agreement and the International Purchase Agreement and the consummation of
the transactions contemplated in this Agreement, the International Purchase
Agreement and in the Registration Statement (including the issuance and
sale of the Securities and the use of the proceeds from the sale of the
Securities as described in the Prospectuses under the caption "Use of
------
Proceeds") and compliance by the Company with its obligations under this
--------
Agreement and the International Purchase Agreement have been duly
authorized by all necessary corporate action and do not and will not,
whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as
defined below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any of
its subsidiaries pursuant to, the Agreements and Instruments (except for
such conflicts, breaches or defaults or liens, charges or encumbrances that
would not, singly or in the aggregate, result in a Material Adverse
Effect), nor will such action result in any violation of the provisions of
the charter or by-laws (or equivalent constitutive documents) of the
Company or any of its subsidiaries or any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or any of their assets, properties or
operations. As used herein, a "Repayment Event" means any event or
---------------
condition which gives the holder of any note, debenture or other evidence
of indebtedness (or any person acting on such holder's behalf) the right to
require the repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or any of its subsidiaries.
(xi) Absence of Labor Dispute. No labor dispute with the employees
------------------------
of the Company or any of its subsidiaries exists or, to the knowledge of
the Company, is threatened, and the Company is not aware of any existing or
threatened labor disturbance by the employees of any of its or any of its
subsidiaries' principal suppliers, manufacturers, customers or contractors,
which, in either case, may reasonably be expected to, singly or in the
aggregate, result in a Material Adverse Effect.
<PAGE>
8
(xii) Absence of Proceedings. There is no action, suit, proceeding,
----------------------
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Company, threatened, against or affecting the Company or any of its
subsidiaries, which is required to be disclosed in the Registration
Statement (other than as disclosed therein), or which, singly or in the
aggregate, may reasonably be expected to result in a Material Adverse
Effect, or which, singly or in the aggregate, may reasonably be expected to
materially and adversely affect the properties or assets of the Company or
any of its subsidiaries or the consummation of the transactions
contemplated in this Agreement and the International Purchase Agreement or
the performance by the Company of its obligations hereunder or thereunder.
The aggregate of all pending legal or governmental proceedings to which the
Company or any of its subsidiaries is a party or of which any of their
respective property or assets is the subject which are not described in the
Registration Statement, including ordinary routine litigation incidental to
the business, singly or in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or documents
--------------------
which are required to be described in the Registration Statement or the
Prospectuses or to be filed as exhibits thereto which have not been so
described and filed as required.
(xiv) Possession of Intellectual Property. The Company and its
-----------------------------------
subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
---------------------
now operated by them, and neither the Company nor any of its subsidiaries
has received any notice or is otherwise aware of any infringement of or
conflict with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any
Intellectual Property invalid or inadequate to protect the interest of the
Company or any of its subsidiaries therein, and which infringement or
conflict (if the subject of any unfavorable decision, ruling or finding) or
invalidity or inadequacy, singly or in the aggregate, may reasonably be
expected to result in a Material Adverse Effect.
(xv) Absence of Further Requirements. No filing with, or
-------------------------------
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale of
the Securities under this Agreement and the International Purchase
Agreement or the consummation of the transactions contemplated by this
Agreement and the International Purchase Agreement, except such as have
been already obtained and are in full force and effect or as may be
required (i) under the 1933 Act or the 1933 Act Regulations or state
securities laws, (ii) under the laws and regulations of jurisdictions
outside of the United States and Canada where the International Managers
may offer and sell the International Securities
<PAGE>
9
and (iii) under the laws and regulations in jurisdictions outside the
United States in which the Reserved Shares are offered.
(xvi) Possession of Licenses and Permits. Except as otherwise
----------------------------------
disclosed in the Registration Statement, the Company and its subsidiaries
possess such permits, licenses (including, without limitation, television
broadcast frequency allocations and licenses), approvals, consents and
other authorizations (collectively, "Governmental Licenses") issued by the
---------------------
appropriate national, provincial, state or local regulatory agencies or
bodies necessary to conduct the business now operated by them. The Company
and its subsidiaries are in compliance with the terms and conditions of all
such Governmental Licenses, except where the failure so to comply would
not, singly or in the aggregate, result in a Material Adverse Effect. All
of the Governmental Licenses are valid and in full force and effect, except
when the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not, singly or
in the aggregate, result in a Material Adverse Effect. Neither the Company
nor any of its subsidiaries has received any notice of proceedings relating
to the revocation or modification of any such Governmental Licenses which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a Material Adverse Effect.
(xvii) Title to Property. The Company and its subsidiaries have good
-----------------
and marketable title to all real property owned by the Company and its
subsidiaries and good title to all other properties owned by them, in each
case, free and clear of all mortgages, pledges, liens, security interests,
claims, restrictions or encumbrances of any kind except such as (a) are
described in the Prospectuses or (b) do not, singly or in the aggregate,
materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Company or any of
its subsidiaries. All of the leases and subleases material to the business
of the Company and its subsidiaries, considered as one enterprise, and
under which the Company or any of its subsidiaries holds properties
described in the Prospectuses, are in full force and effect, and neither
the Company nor any of its subsidiaries has any notice of any material
claim of any sort that has been asserted by anyone adverse to the rights of
the Company or any of its subsidiaries under any of the leases or subleases
mentioned above, or affecting or questioning the rights of the Company or
any of its subsidiaries to the continued possession of the leased or
subleased premises under any such lease or sublease.
(xviii) Compliance with Research Guidelines. The Company, directly
-----------------------------------
or indirectly, has not taken and will not take any action that is
inconsistent with the guidelines set forth in the memorandum dated
September 2, 1999 of Simpson Thacher & Bartlett relating to research
reports, and, without limiting the foregoing, has not distributed and will
not distribute, in any manner, any research report contemplated by such
research guidelines or any portion thereof.
(xix) Compliance with Cuba Act. The Company has complied with, and is
------------------------
and will be in compliance with, the provisions of that certain Florida act
relating to disclosure of doing business with Cuba, codified as Section
517.075 of the Florida statutes, and the
<PAGE>
10
rules and regulations thereunder (collectively, the "Cuba Act") or is
--------
exempt therefrom.
(xx) Investment Company Act. The Company is not, and upon the
----------------------
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectuses
will not be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company
Act of 1940, as amended (the "1940 Act").
--------
(xxi) Environmental Laws. Except as described in the Registration
------------------
Statement and except as would not, singly or in the aggregate, result in a
Material Adverse Effect, (A) neither the Company nor any of its
subsidiaries is in violation of any applicable national, provincial, state
or local statute, law, rule, regulation, ordinance, code, policy or rule of
common law or any judicial or a administrative interpretation thereof,
including any judicial or administrative order, consent, decree or
judgment, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including,
without limitation, laws and regulations relating to the release or
threatened release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture, processing,
-------------------
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, "Environmental Laws"), (B) the Company
------------------
and its subsidiaries have all permits, authorizations and approvals
required under any applicable Environmental Laws and are each in compliance
with their requirements, (C) there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against the
Company or any of its subsidiaries and (D) there are no events or
circumstances that might reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting the
Company or any of its subsidiaries relating to Hazardous Materials or any
Environmental Laws.
(xxii) Registration Rights. Except as disclosed in the Prospectuses,
-------------------
there are no persons with registration rights or other similar rights to
have any securities registered pursuant to the Registration Statement or
otherwise registered by the Company under the 1933 Act.
(xxiii) Year 2000. Any reprogramming required to permit the proper
---------
functioning, in and following the year 2000, of (i) the Company's and the
Subsidiaries' computer systems and (ii) equipment containing embedded
microchips (including systems and equipment supplied by others or with
which the Company's and the Subsidiaries' systems interface) and the
testing of all such systems and equipment, as so reprogrammed, has been
completed. The cost to the Company and its Subsidiaries of such
reprogramming and testing and of the reasonably foreseeable consequences of
year 2000 to the Company and its Subsidiaries (including, without
limitation, reprogramming errors and the failure of
<PAGE>
11
others' systems or equipment) will not result in a Material Adverse Effect.
Except for such of the reprogramming referred to in the preceding sentence
as may be necessary, the computer and management information systems of the
Company and its Subsidiaries are and, with ordinary course upgrading and
maintenance, will continue to be, sufficient to permit the Company and its
Subsidiaries to conduct its business without a Material Adverse Effect.
(xxiv) Passive Foreign Investment Company. The Company, based on its
----------------------------------
current operations and assets and taking into consideration the proceeds of
the offering, believes that it is not a passive foreign investment company
(a "PFIC") within the meaning of Section 1291 et seq. of the United States
Internal Revenue Code of 1986, as amended (the "Code"), and is not likely
to become a PFIC.
(xxv) Foreign Personal Holding Company. The Company, to the best of
--------------------------------
its knowledge, believes that it is not a foreign personal holding company
(a "FPHC") within the meaning of Section 551 et seq. of the Code.
(xxvi) Statistical and Market-Related Data. The statistical and
-----------------------------------
market-related data included in the Prospectuses are based on or derived
from sources which the Company believes to be reliable and accurate in all
material respects or represent the Company's good faith estimates that are
made on the basis of data derived from such sources.
(b) Officers' Certificates. Any certificate signed by any officer of
----------------------
the Company or any of its subsidiaries delivered to the Global Coordinator, the
U.S. Representatives or to counsel for the U.S. Underwriters shall be deemed a
representation and warranty by the Company to each U.S. Underwriter as to the
matters covered thereby.
<PAGE>
12
(c) Representations and Warranties of OpenTV, Inc. OpenTV, Inc.
---------------------------------------------
represents and warrants to and agrees with each U.S. Underwriter as of the date
hereof, as of the Closing Time referred to in Section 2(c) hereof, and as of
each Date of Delivery (if any) referred to in Section 2(b) hereof, and agrees
with each U.S. Underwriter, as follows:
(i) Good Standing of OpenTV, Inc. OpenTV, Inc. has been duly
----------------------------
organized and is validly existing as a corporation in good standing under
the laws of Delaware and has corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Prospectuses and to enter into and perform its obligations under this
Agreement. OpenTV, Inc. is duly qualified as a foreign corporation to
transact business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure so
to qualify or to be in good standing would not, singly or in the aggregate,
result in a Material Adverse Effect.
(ii) Authorization of Agreement. The execution, delivery and
--------------------------
performance of this Agreement and the International Purchase Agreement have
been duly authorized by all requisite corporate action on the part of
OpenTV, Inc. This Agreement and the International Purchase Agreement have
been duly executed and delivered by OpenTV, Inc.
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing.
-----------------------------------------------
(a) Initial Securities. The Company agrees to sell to each U.S.
------------------
Underwriter, severally and not jointly, and on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, each U.S. Underwriter, severally and not jointly, agrees to purchase
from the Company, at the price per share set forth in Schedule B, the number of
----------
Initial U.S. Securities set forth in Schedule A opposite the name of such U.S.
----------
Underwriter, plus any additional number of Initial U.S. Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof.
(b) Option Securities. In addition, the Company hereby grants an
-----------------
option to the U.S. Underwriters, severally and not jointly, to purchase up to an
additional 562,500 Class A Ordinary Shares at the price per share set forth in
Schedule B, less an amount per share equal to any dividends or distributions
- ----------
declared by the Company and payable on the Initial U.S. Securities but not
payable on the U.S. Option Securities. The option hereby granted will expire 30
days after the date hereof and may be exercised in whole or in part from time to
time only for the purpose of covering over-allotments which may be made in
connection with the offering and distribution of the Initial U.S. Securities
upon notice by the Global Coordinator to the Company setting forth the number of
U.S. Option Securities as to which the several U.S. Underwriters are then
exercising the option and the time and date of payment and delivery for such
U.S. Option Securities. Any such time and date of delivery for the U.S. Option
Securities (a "Date of
-------
<PAGE>
13
Delivery") shall be determined by the Global Coordinator, but shall not be later
- --------
than seven full business days after the exercise of said option, nor in any
event prior to the Closing Time, as hereinafter defined. If the option is
exercised as to all or any portion of the U.S. Option Securities, each of the
U.S. Underwriters, acting severally and not jointly, on the basis of the
representations and warranties of the Company contained herein and subject to
the terms and conditions herein set forth, will purchase that proportion of the
total number of U.S. Option Securities then being purchased which the number of
Initial U.S. Securities set forth in Schedule A opposite the name of such
----------
U.S. Underwriter bears to the total number of Initial U.S. Securities, subject
in each case to such adjustments as the Global Coordinator in its discretion
shall make to eliminate any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
-------
certificates for, the Initial Securities shall be made at the offices of Simpson
Thacher & Bartlett, 425 Lexington Avenue, New York, New York 10017 or at such
other place as shall be agreed upon by the Global Coordinator and the Company,
at 9:00 A.M. (Eastern time) on November 29, 1999 (unless postponed in accordance
with the provisions of Section 10), or such other time not later than ten
business days after such date as shall be agreed upon by the Global Coordinator
and the Company (such time and date of payment and delivery being herein called
"Closing Time").
------------
In addition, in the event that any or all of the U.S. Option
Securities are purchased by the U.S. Underwriters, payment of the purchase price
for, and delivery of certificates for, such U.S. Option Securities shall be made
at the abovementioned offices, or at such other place as shall be agreed upon by
the Global Coordinator and the Company, on each Date of Delivery as specified in
the notice from the Global Coordinator to the Company.
Payment shall be made to the Company by wire transfer of U.S. dollars
of immediately available funds to a bank account designated by the Company,
against delivery to the U.S. Representatives for the respective accounts of the
U.S. Underwriters of certificates for the U.S. Securities to be purchased by
them. It is understood that each U.S. Underwriter has authorized the U.S.
Representatives, for its account, to accept delivery of, receipt for, and make
payment of the purchase price for, the Initial U.S. Securities and the U.S.
Option Securities, if any, which it has agreed to purchase. Merrill Lynch,
individually and not as representative of the U.S. Underwriters, may (but shall
not be obligated to) make payment of the purchase price for the Initial U.S.
Securities or the U.S. Option Securities, if any, to be purchased by any U.S.
Underwriter whose funds have not been received by the Closing Time or the
relevant Date of Delivery, as the case may be, but such payment shall not
relieve such U.S. Underwriter from its obligations hereunder.
(d) Denominations: Registration. Certificates for the Initial U.S.
---------------------------
Securities and the U.S. Option Securities, if any, shall be in such
denominations and registered in such names as the U.S. Representatives may
request in writing at least one full business day before the Closing Time or the
relevant Date of Delivery, as the case may be. The certificates for the Initial
U.S. Securities and the U.S. Option Securities, if any, will be made available
for examination and packaging by the U.S. Representatives in The City of New
York not later than 10:00 A.M.
<PAGE>
14
(Eastern time) on the business day prior to the Closing Time or the relevant
Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
------------------------
U.S. Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests.
--------------------------------------------------------------
The Company, subject to Section 3(b), will comply with the requirements of Rule
430A or Rule 434, as applicable, and will notify the Global Coordinator
immediately, and confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement shall become effective, or any
supplement to the Prospectuses or any amended Prospectuses shall have been
filed, (ii) of the receipt of any comments from the Commission, (iii) of any
request by the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectuses or for additional information, and
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, or of
the initiation or threatening of any proceedings for any of such purposes. The
Company will promptly effect the filings necessary pursuant to Rule 424(b) and
will take such steps as it deems necessary to ascertain promptly whether the
form of prospectus transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will promptly
file such prospectus. The Company will make every reasonable effort to prevent
the issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Global
--------------------
Coordinator notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)), any Term Sheet
or any amendment, supplement or revision to either the prospectus included in
the Registration Statement at the time it became effective or to the
Prospectuses, will furnish the Global Coordinator with copies of any such
documents a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file or use any such document to which the Global
Coordinator or counsel for the U.S. Underwriters shall object.
(c) Delivery of Registration Statements. The Company has furnished
-----------------------------------
or will deliver to the U.S. Representatives and counsel for the U.S.
Underwriters, without charge, signed copies of the Registration Statement as
originally filed and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein) and signed copies of all
consents and certificates of experts, and will also deliver to the U.S.
Representatives, without charge, a conformed copy of the Registration Statement
as originally filed and of each amendment thereto (without exhibits) for each of
the U.S. Underwriters. The copies of the Registration Statement and each
amendment thereto furnished to the U.S. Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
EDGAR, except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each U.S.
------------------------
Underwriter, without charge, as many copies of each preliminary prospectus as
such U.S. Under-
<PAGE>
15
writer reasonably requested, and the Company hereby consents to the use of such
copies for purposes permitted by the 1933 Act. The Company will furnish to each
U.S. Underwriter, without charge, during the period when the U.S. Prospectus is
required to be delivered under the 1933 Act or the Securities Exchange of 1934
(the "1934 Act"), such number of copies of the U.S. Prospectus (as amended or
--------
supplemented) as such U.S. Underwriter may reasonably request. The U.S.
Prospectus and any amendments or supplements thereto furnished to the U.S.
Underwriters will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will
-----------------------------------------
comply with the 1933 Act and the 1933 Act Regulations so as to permit the
completion of the distribution of the Securities as contemplated in this
Agreement, the International Purchase Agreement and the Prospectuses. If at any
time when a prospectus is required by the 1933 Act to be delivered in connection
with sales of the Securities, any event shall occur or condition shall exist as
a result of which it is necessary, in the opinion of counsel for the U.S.
Underwriters or for the Company, to amend the Registration Statement or amend or
supplement any Prospectus in order that the Prospectuses will not include any
untrue statements of a material fact or omit to state a material fact necessary
in order to make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of such counsel, at any such time to amend
the Registration Statement or amend or supplement any Prospectus in order to
comply with the requirements of the 1933 Act or the 1933 Act Regulations, the
Company will promptly prepare and file with the Commission, subject to Section
3(b), such amendment or supplement as may be necessary to correct such statement
or omission or to make the Registration Statement or the Prospectuses comply
with such requirements, and the Company will furnish to the U.S. Underwriters
such number of copies of such amendment or supplement as the U.S. Underwriters
may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts,
-----------------------
in cooperation with the U.S. Underwriters, to qualify the Securities for
offering and sale under the applicable securities laws of such states and other
jurisdictions (domestic or foreign) as the Global Coordinator may designate and
to maintain such qualifications in effect for a period of not less than one year
from the later of the effective date of the Registration Statement and of any
Rule 462(b) Registration Statement; provided, however, that the Company shall
-------- -------
not be obligated to file any general consent to service of process or to qualify
as a foreign corporation or as a dealer in securities in any jurisdiction in
which it is not so qualified or to subject itself to taxation in respect of
doing business in any jurisdiction in which it is not otherwise so subject. In
each jurisdiction in which the Securities have been so qualified, the Company
will file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not less
than one year from the effective date of the Registration Statement and of any
Rule 462(b) Registration Statement.
(g) Rule 158. The Company will timely file such reports pursuant to
--------
the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.
<PAGE>
16
(h) Use of Proceeds. The Company will use the net proceeds received
---------------
by it from the sale of the Securities in the manner specified in the
Prospectuses under "Use of Proceeds."
---------------
(i) Listing. The Company will use its best efforts to effect the
-------
listing of the Class A Ordinary Shares (including the Securities) on the
Amsterdam Stock Exchange and comply with the requirements of such exchange to
maintain such listing. In addition, the Company will use its best efforts to
effect and maintain the quotation of the Class A Ordinary Shares (including the
Securities) on the Nasdaq National Market and will file with the Nasdaq National
Market all documents and notices required by the Nasdaq National Market of
companies that have securities that are traded in the over-the-counter market
and quotations for which are reported by the Nasdaq National Market.
(j) Restriction on Sale of Securities. During a period of 180 days
---------------------------------
from the date of the Prospectuses, the Company will not, without the prior
written consent of the Global Coordinator (i) directly or indirectly, offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise dispose of or transfer any Class A Ordinary Shares or any
securities convertible into or exercisable or exchangeable for Class A Ordinary
Shares (including, without limitation, the Class B Ordinary Shares, no par
value, of the Company) or file any registration statement under the 1933 Act
with respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Class A Ordinary
Shares, whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of Class A Ordinary Shares or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (A) the sale of
the Securities hereunder or under the International Purchase Agreement, (B) the
issuance of any Class A Ordinary Shares by the Company upon the exercise of
options or warrants or the conversion of securities outstanding on the date
hereof and referred to in the Prospectuses or (C) the issuance of any Class A
Ordinary Shares or options to purchase Class A Ordinary Shares granted pursuant
to existing employee benefit plans of the Company referred to in the
Prospectuses. In addition, during a period of one year from the date of the
Prospectuses, the Company will not, without the prior written consent of the
Global Coordinator, file any registration statement under the 1933 Act for the
benefit of any person (or any of their transferees) listed on #1 through #__ of
Schedule C hereto.
- ----------
(k) Reporting Requirements. The Company, during the period when the
----------------------
Prospectuses are required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant to the
1934 Act and rules and regulations of the Commission thereunder within the time
periods referred to therein.
(l) Compliance with NASD Rules. The Company hereby agrees that it
--------------------------
will ensure that the Reserved Securities will be restricted as required by the
National Association of Securities Dealers, Inc. (the "NASD") or the NASD rules
----
from sale, transfer, assignment, pledge or hypothecation for a period of three
months following the date of this Agreement. The U.S. Underwriters will notify
the Company as to which persons will need to be so restricted. At the
<PAGE>
17
request of the U.S. Underwriters, the Company will direct the transfer agent to
place a stop transfer restriction upon such securities for such period of time.
Should the Company release, or seek to release, from such restrictions any of
the Reserved Securities, the Company agrees to reimburse the Underwriters for
any reasonable expenses (including, without limitation, legal expenses) they
incur in connection with such release.
(m) Compliance with Rule 463. The Company will file with the
------------------------
Commission such reports as may be required pursuant to Rule 463 of the 1933 Act
Regulations.
SECTION 4. Payment of Expenses.
-------------------
(a) Expenses. The Company will pay all expenses incident to the
--------
performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the U.S. Underwriters of
this Agreement, any Agreement among U.S. Underwriters and such other documents
as may be required in connection with the offering, purchase, sale, issuance or
delivery of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities to the Underwriters, including any stock or
other transfer taxes and any stamp or other duties payable upon the sale,
issuance or delivery of the Securities to the Underwriters and the transfer of
the Securities between the U.S. Underwriters and the International Managers,
(iv) the fees and disbursements of the Company's counsel, accountants and other
advisors, (v) the qualification of the Securities under securities laws in
accordance with the provisions of Section 3(f) hereof, including filing fees and
the reasonable fees and disbursements of counsel for the Underwriters in
connection therewith and in connection with the preparation of the Blue Sky
Survey and any supplement thereto, (vi) one-half of all "roadshow" expenses of
the Company and the Underwriters, (vii) the printing and delivery to the
Underwriters of copies of each preliminary prospectus, any Term Sheets and of
the Prospectuses and any amendments or supplements thereto, (viii) the
preparation, printing and delivery to the Underwriters of copies of any Blue Sky
Survey and any supplement thereto, (ix) the fees and expenses of any transfer
agent or registrar for the Securities, (x) the filing fees incident to, and the
reasonable fees and disbursements of counsel to the Underwriters in connection
with, the review by the NASD of the terms of the sale of the Securities, (xi)
the fees and expenses incurred in connection with the inclusion of the
Securities in the Nasdaq National Market and the Amsterdam Stock Exchange and
(xii) all costs and expenses of the Underwriters, including the fees and
disbursements of counsel for the Underwriters, in connection with matters
related to the Reserved Securities which are designated by the Company for sale
to employees and others having a business relationship with the Company.
(b) Termination of Agreement. If this Agreement is terminated by the
------------------------
U.S. Representatives in accordance with the provisions of Section 5 hereof
(other than in accordance with paragraph (j) as a result of the failure of the
International Managers to comply with their obligations under the International
Purchase Agreement) or Section 9(a)(i) hereof, the Company shall reimburse the
U.S. Underwriters for all of their out-of-pocket expenses incurred by the U.S.
Underwriters in connection with this Agreement or the offering of the Securities
contemplated
<PAGE>
18
hereunder, including the reasonable fees and disbursements of counsel and
special counsel for the U.S. Underwriters.
SECTION 5. Conditions of U.S. Underwriters' Obligations. The
--------------------------------------------
obligations of the several U.S. Underwriters hereunder are subject to the
accuracy of the representations and warranties of the Company contained in
Section 1 hereof or in certificates of any officer of the Company or any
subsidiary of the Company delivered pursuant to the provisions hereof, to the
performance by the Company of its covenants and other obligations hereunder, and
to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration
---------------------------------------
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission, and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to the U.S. Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A) or, if the Company has elected to rely upon Rule 434,
a Term Sheet shall have been filed with the Commission in accordance with Rule
424(b).
(b) Opinion of Counsel for Company. At Closing Time, the U.S.
------------------------------
Representatives shall have received the favorable opinion, dated as of Closing
Time, of each of (i) Cravath, Swaine & Moore, counsel for the Company and
OpenTV, Inc., (ii) Harney Westwood & Riegels, special British Virgin Islands
counsel for the Company, (iii) Nauta Dutilh, special Dutch regulatory counsel
for the Company, and (iv) PricewaterhouseCoopers LLP, special Dutch tax counsel
for the Company, each in form and substance satisfactory to counsel for the U.S.
Underwriters, together with signed or reproduced copies of such letters for each
of the other U.S. Underwriters to the effect set forth in Exhibits A-1 through
A-5 hereto, respectively.
(c) Opinion of Counsel for U.S. Underwriters. At Closing Time, the
----------------------------------------
U.S. Representatives shall have received the favorable opinion, dated as of
Closing Time, of each of Simpson Thacher & Bartlett, counsel for the U.S.
Underwriters, and O'Neal Webster O'Neal Myers Fletcher & Gordon, special British
Virgin Islands counsel to the U.S. Underwriters, together with signed or
reproduced copies of such letter for each of the other U.S. Underwriters as to
such matters as are reasonably requested by the Representatives.
(d) Officers' Certificate. At Closing Time, there shall not have
---------------------
been, since the date hereof or since the respective dates as of which
information is given in the Prospectuses, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
U.S. Representatives shall have received a certificate of the President or a
Vice President of the Company and of the chief financial or chief
<PAGE>
19
accounting officer of the Company, dated as of Closing Time, to the effect that
(i) there has been no such material adverse change, (ii) the representations and
warranties in Section 1(a) hereof are true and correct with the same force and
effect as though expressly made at and as of Closing Time, (iii) the Company has
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to Closing Time, and (iv) no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted, are pending or are
contemplated by the Commission.
(e) Accountant's Comfort Letter. At the time of the execution of
---------------------------
this Agreement, the U.S. Representatives shall have received from
PricewaterhouseCoopers Inc. a letter dated such date, in form and substance
satisfactory to the U.S. Representatives, together with signed or reproduced
copies of such letter for each of the other U.S. Underwriters containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement and the
Prospectuses.
(f) Bring-down Comfort Letter. At Closing Time, the Representatives
-------------------------
shall have received from PricewaterhouseCoopers Inc. a letter, dated as of
Closing Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (e) of this Section, except that the specified
date referred to shall be a date not more than three business days prior to
Closing Time.
(g) Approval of Listing. At Closing Time, the Securities shall have
-------------------
been approved for listing on the Amsterdam Stock Exchange and shall have been
approved for inclusion in the Nasdaq National Market, in each case, subject only
to official notice of issuance.
(h) No Objection. The NASD has confirmed that it has not raised any
------------
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
(i) Lock-up Agreements. At the date of this Agreement, the U.S.
------------------
Representatives shall have received an agreement substantially in the form of
Exhibit B hereto signed by the persons listed on Schedule C hereto.
(j) Purchase of Initial International Securities. Contemporaneously
--------------------------------------------
with the purchase by the U.S. Underwriters of the Initial U.S. Securities under
this Agreement, the International Managers shall have purchased the Initial
International Securities under the International Purchase Agreement.
(k) Conditions to Purchase of U.S. Option Securities. In the event
------------------------------------------------
that the U.S. Underwriters exercise their option provided in Section 2(b) hereof
to purchase all or any portion of the U.S. Option Securities, the
representations and warranties of the Company contained herein and the
statements in any certificates furnished by the Company or any subsidiary of the
Company hereunder shall be true and correct as of each Date of Delivery and, at
the relevant Date of Delivery, the U.S. Representatives shall have received:
<PAGE>
20
(i) Officers' Certificate. A certificate, dated such Date of Delivery,
---------------------
of the President or a Vice President of the Company and of the chief
financial or chief accounting officer of the Company confirming that the
certificate delivered at the Closing Time pursuant to Section 5(d) hereof
remains true and correct as of such Date of Delivery.
(ii) Opinion of Counsel for Company. The favorable opinion, dated as of
------------------------------
such Date of Delivery, of each of counsels listed in Section 5(b), each in
form and substance satisfactory to counsel for the U.S. Underwriters,
relating to the U.S. Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the opinion required by
Section 5(b) hereof.
(iii) Opinion of Counsel for U.S. Underwriters. The favorable opinion
----------------------------------------
of Simpson Thacher & Bartlett, counsel for the U.S. Underwriters, and of
O'Neal Webster O'Neal Myers Fletcher & Gordon, special British Virgin
Islands counsel to the U.S. Underwriters, each dated such Date of
Delivery, relating to the U.S. Option Securities to be purchased on such
Date of Delivery and otherwise to the same effect as the opinion required
by Section 5(c) hereof.
(iv) Bring-down Comfort Letter. A letter from PricewaterhouseCoopers
-------------------------
Inc., in form and substance satisfactory to the U.S. Representatives and
dated such Date of Delivery, substantially in the same form and substance
as the letter furnished to the U.S. Representatives pursuant to Section
5(f) hereof, except that the "specified date" in the letter furnished
pursuant to this paragraph shall be a date not more than five days prior
to such Date of Delivery.
(l) Additional Documents. At Closing Time and at each Date of
--------------------
Delivery, counsel for the U.S. Underwriters shall have been furnished with such
documents and opinions as they may reasonably require for the purpose of
enabling them to pass upon the issuance and sale of the Securities as herein
contemplated, or in order to evidence the accuracy of any of the representations
or warranties, or the fulfillment of any of the conditions, herein contained;
and all proceedings taken by the Company in connection with the issuance and
sale of the Securities as herein contemplated shall be satisfactory in form and
substance to the U.S. Representatives and counsel for the U.S. Underwriters.
(m) Termination of Agreement. If any condition specified in this
------------------------
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of U.S. Option
Securities on a Date of Delivery which is after the Closing Time, the
obligations of the several U.S. Underwriters to purchase the relevant Option
Securities, may be terminated by the U.S. Representatives by notice to the
Company at any time at or prior to Closing Time or such Date of Delivery, as the
case may be, and such termination shall be without liability of any party to any
other party except as provided in Section 4 and except that Sections 1, 6, 7 and
8 shall survive any such termination and remain in full force and effect.
<PAGE>
21
SECTION 6. Indemnification.
---------------
(a) Indemnification of U.S. Underwriters. Each of the Company and
------------------------------------
OpenTV, Inc. agree jointly and severally to indemnify and hold harmless each
U.S. Underwriter and each person, if any, who controls any U.S. Underwriter
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the
Rule 434 Information, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact included in any
preliminary prospectus or the Prospectuses (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of (A) the violation of any applicable
laws or regulations of foreign jurisdictions where Reserved Securities have
been offered and (B) any untrue statement or alleged untrue statement of a
material fact included in the supplement or prospectus wrapper material
distributed in foreign jurisdictions in connection with the reservation and
sale of the Reserved Securities to eligible employees and persons having
relationships with the Company or the omission or alleged omission
therefrom of a material fact necessary to make the statements therein, when
considered in conjunction with the Prospectus or preliminary prospectus,
not misleading;
(iii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission or in connection with any violation of
the nature referred to in Section 6(a)(ii)(A) hereof; provided that
(subject to Section 6(d) below) any such settlement is effected with the
written consent of the Company; and
(iv) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Merrill Lynch), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission or
in connection with any violation of the nature referred to in Section
6(a)(ii)(A) hereof, to the extent that any such expense is not paid under
(i), (ii) or (iii) above; provided, however, that this indemnity agreement
-------- -------
shall not apply to any loss, liability, claim, damage or expense to the
extent arising out of any untrue statement or omission or
<PAGE>
22
alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by any U.S.
Underwriter through the U.S. Representatives expressly for use in the
Registration Statement (or any amendment or supplement thereto), including
the Rule 430A Information and the Rule 434 Information, if applicable, or
any preliminary prospectus or the U.S. Prospectus (or any amendment or
supplement thereto).
(b) Indemnification of Company, Directors and Officers. Each U.S.
--------------------------------------------------
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment or supplement thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary U.S.
prospectus or the U.S. Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such U.S. Underwriter through the U.S. Representatives expressly for
use in the Registration Statement (or any amendment or supplement thereto) or
such preliminary prospectus or the U.S. Prospectus (or any amendment or
supplement thereto).
(c) Actions Against Parties: Notification. Each indemnified party
-------------------------------------
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it is
not materially prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Section
6(a) above, counsel to the indemnified parties shall be selected by Merrill
Lynch, and, in the case of parties indemnified pursuant to Section 6(b) above,
counsel to the indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel to the indemnifying party shall not
-------- -------
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
<PAGE>
23
(d) Settlement Without Consent if Failure To Reimburse. If at any
--------------------------------------------------
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(iii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
(e) Indemnification for Reserved Securities. In connection with the
---------------------------------------
offer and sale of the Reserved Securities, the Company agrees, promptly upon a
request in writing, to indemnify and hold harmless the Underwriters from and
against any and all losses, liabilities, claims, damages and expenses incurred
by them as a result of the failure of eligible employees and persons having
relationships with the Company to pay for and accept delivery of Reserved
Securities which, by the end of the first business day following the date of
this Agreement, were subject to a properly confirmed agreement to purchase.
SECTION 7. Contribution. If the indemnification provided for in
------------
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the U.S. Underwriters on the other hand from the
offering of the Securities pursuant to this Agreement or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and of the
U.S. Underwriters on the other hand in connection with the statements or
omissions, or in connection with any violation of the nature referred to in
Section 6(a)(ii)(A) hereof, which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
U.S. Underwriters on the other hand in connection with the offering of the U.S.
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the U.S.
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the U.S.
Underwriters, in each case as set forth on the cover of the U.S. Prospectus, or,
if Rule 434 is used, the corresponding location on the Term Sheet, bear to the
aggregate initial public offering price of the U.S. Securities as set forth on
such cover.
The relative fault of the Company on the one hand and the U.S.
Underwriters on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material
<PAGE>
24
fact relates to information supplied by the Company or by the U.S. Underwriters
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission or any violation of
the nature referred to in Section 6(a)(ii)(A) hereof.
Each of the Company, OpenTV, Inc. and the U.S. Underwriters agrees
that it would not be just and equitable if contribution pursuant to this Section
7 were determined by pro rata allocation (even if the U.S. Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 7. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
7 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no U.S. Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the U.S. Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such U.S. Underwriter has otherwise been required to pay by reason of any such
untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section ll(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls a
U.S. Underwriter within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such U.S.
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company. The U.S.
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial U.S. Securities set forth
opposite their respective names in Schedule A hereto and not joint.
----------
SECTION 8. Representations Warranties and Agreements To Survive
----------------------------------------------------
Delivery. All representations, warranties and agreements contained in this
- --------
Agreement or in certificates of officers of the Company or any of its
subsidiaries submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any U.S.
Underwriter or controlling person, or by or on behalf of the Company, and shall
survive delivery of the Securities to the U.S. Underwriters.
SECTION 9. Termination of Agreement.
------------------------
<PAGE>
25
(a) Termination: General. The U.S. Representatives may terminate
--------------------
this Agreement, by notice to the Company, at any time at or prior to Closing
Time (i) if there has been, since the time of execution of this Agreement or
since the respective dates as of which information is given in the U.S.
Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the U.S. Representatives, impracticable to market the Securities or
to enforce contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended or materially limited by the
Commission, the Amsterdam Stock Exchange or the Nasdaq National Market, or if
trading generally on the American Stock Exchange or the New York Stock Exchange
or in the Nasdaq National Market has been suspended or materially limited, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the NASD or any other governmental authority, or (iv)
if a banking moratorium has been declared by British Virgin Island, Dutch,
United States Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
-----------
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
SECTION 10. Default by One or More of the U.S. Underwriters. If one
-----------------------------------------------
or more of the U.S. Underwriters shall fail at Closing Time or a Date of
Delivery to purchase the Securities which it or they are obligated to purchase
under this Agreement (the "Defaulted Securities"), the U.S. Representatives
--------------------
shall have the right, within 24 hours thereafter, to make arrangements for one
or more of the non-defaulting U.S. Underwriters, or any other underwriters, to
purchase all, but not less than all, of the Defaulted Securities in such amounts
as may be agreed upon and upon the terms herein set forth; if, however, the U.S.
Representatives shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of U.S. Securities to be purchased on such date, each of the non-
defaulting U.S. Underwriters shall be obligated, severally and not jointly, to
purchase the full amount thereof in the proportions that their respective
underwriting obligations hereunder bear to the underwriting obligations of all
non-defaulting U.S. Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number
of U.S. Securities to be purchased on such date, this Agreement or, with respect
to any Date of Delivery which occurs after the Closing Time, the obligation of
the U.S. Underwriters to purchase and of
<PAGE>
26
the Company to sell the Option Securities to be purchased and sold on such Date
of Delivery shall terminate without liability on the part of any non-defaulting
U.S. Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
U.S. Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement or, in the case of a Date of Delivery which is
after the Closing Time, which does not result in a termination of the obligation
of the U.S. Underwriters to purchase and the Company to sell the relevant U.S.
Option Securities, as the case may be, either the U.S. Representatives or the
Company shall have the right to postpone Closing Time or the relevant Date of
Delivery, as the case may be, for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements. As used herein, the term "U.S. Underwriter"
includes any person substituted for a U.S. Underwriter under this Section 10.
SECTION 11. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the U.S.
Underwriters shall be directed to the U.S. Representatives c/o Merrill Lynch &
Co., Merrill Lynch Pierce, Fenner & Smith Incorporated at North Tower, World
Financial Center, New York, New York 1028-1201, attention of Investment Banking;
and notices to the Company shall be directed to it at OpenTV Corp., Abbot
Building, Mount Street, Tortola, Road Town, British Virgin Islands, attention of
- -----------.
SECTION 12. Parties. This Agreement shall each inure to the benefit
-------
of and be binding upon the U.S. Underwriters and the Company and their
respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the U.S. Underwriters and the Company and their respective successors and
the controlling persons and officers and directors referred to in Sections 6 and
7, and their heirs and legal representatives, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the U.S. Underwriters and the
Company and their respective successors, and said controlling persons and
officers and directors, and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities
from any U.S. Underwriter shall be deemed to be a successor by reason merely of
such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED
----------------------
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICT OF LAWS. SPECIFIED TIMES OF
DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Agent for Service Submission to Jurisdiction: Waiver of
-------------------------------------------------------
Immunities. By the execution and delivery of this Agreement, the Company (i)
- ----------
acknowledges that
<PAGE>
27
it has, by separate written instrument, designated and appointed CT Corporation
System, 1633 Broadway, New York, New York 10019 (and any successor entity), as
its authorized agent upon which process may be served in any suit or proceeding
arising out of or relating to this Agreement that may be instituted in any
Federal or state court in the Borough of Manhattan, City of New York, State of
New York, or brought under the United States Federal or state securities laws,
and acknowledges that CT Corporation System has accepted such designation, (ii)
submits to the non-exclusive jurisdiction of any such court in any such suit or
proceeding and (iii) agrees that service of process upon CT Corporation System
and written notice of said service to the Company in accordance with Section 11
shall be deemed in every respect effective service of process upon the Company
in any such suit or proceeding. The Company further agrees to take any and all
action, including the execution and filing of any and all such documents and
instruments, as may be necessary to continue such designation and appointment of
CT Corporation System in full force and effect so long as any of the Class A
Ordinary Shares shall be outstanding; provided, however, that the Company may,
-------- -------
by written notice to the U.S. Representatives, designate such additional or
alternative agent for service of process under this Section 14 that (i)
maintains an office located in the Borough of Manhattan, City of New York, in
the State of New York and (ii) is either (x) counsel for the Company or (y) a
corporate service company which acts as agent for service of process for other
persons in the ordinary course of its business. Such written notice shall
identify the name of such agent for process and the address of the office of
such agent for service of process in the Borough of Manhattan, City of New York,
State of New York.
To the extent that the Company or any of its properties, assets or
revenues may or may hereafter become entitled to, or have attributed to the
Company, any right of immunity, on the grounds of sovereignty or otherwise, from
any legal action, suit or proceeding, from the giving of any relief in any such
legal action, suit or proceeding, from setoff or counterclaim, from the
jurisdiction of any New York or U.S. federal court, from service of process,
from attachment upon or prior to judgment, from attachment in aid of execution
of judgment, or from execution of judgment, or other legal process or proceeding
for the giving of any relief or for the enforcement of any judgment, in any such
court in which proceedings may at any time be commenced, with respect to the
obligations and liabilities of the Company, or any other matter under or arising
out of or in connection with this Agreement or the International Purchase
Agreement, the Company hereby irrevocably and unconditionally waives such right,
and agrees not to plead or claim any such immunity, and consents to such relief
or enforcement.
SECTION 15. Judgment Currency. The Company agrees to indemnify each
-----------------
U.S. Underwriter and each person, if any, who controls any U.S. Underwriter
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act,
against any loss incurred by such party as a result of any judgment or order
being given or made against the Company for any U.S. dollar amount due under
this Agreement and such judgment or order being expressed and paid in a currency
(the "Judgment Currency") other than United States dollars and as a result of
-----------------
any variation as between (i) the rate of exchange at which the United States
dollar amount is converted into the Judgment Currency for the purpose of such
judgment or order and (ii) the spot rate of exchange in The City of New York at
which such party on the date of payment of such judgment or order is able to
purchase United States dollars with the amount of the Judgment Currency actually
received by such party if such party had utilized such amount of Judgment
Currency to
<PAGE>
28
purchase United States dollars as promptly as practicable upon such party's
receipt thereof. The foregoing indemnity shall continue in full force and effect
notwithstanding any such judgment or order as aforesaid. The term "spot rate of
exchange" shall include any premiums and costs of exchange payable in connection
with the purchase of, or conversion into, United States dollars.
SECTION 16. Effect of Headings. The Section headings herein and the
------------------
Table of Contents are for convenience only and shall not affect the construction
hereof.
SECTION 17. Counterparts. This Agreement may be executed in one or
------------
more counterparts and, when a counterpart has been executed by each party, all
such counterparts taken together shall constitute one and the same agreement.
<PAGE>
29
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the U.S. Underwriters and the Company in accordance with its terms.
Very truly yours,
OPENTV CORP.
By: ________________________________
Name:
Title:
OPENTV, INC.
By: ________________________________
Name
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
THOMAS WEISEL PARTNERS LLC
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: ____________________________________
Authorized Signatory
For themselves and as U.S. Representatives of the other U.S. Underwriters named
in Schedule A hereto.
<PAGE>
SCHEDULE A
Number of Initial
Name of U.S. Underwriter U.S. Securities
- ------------------------ -----------------
Merrill Lynch, Pierce, Fenner & Smith Incorporated...
Thomas Weisel Partners LLC........................... ---------
Total................................................ 3,750,000
=========
<PAGE>
SCHEDULE B
OPEN TV CORP.
___________
Class A Ordinary Shares
(No Par Value)
1. The initial public offering price per share for the Securities,
determined as provided in Section 2, shall be $_____.
2. The purchase price per share for the U.S. Securities to be paid by
the several U.S. Underwriters shall be $_____, being an amount equal to the
initial public offering price set forth above less $_____ per share; provided
that the purchase price per share for any U.S. Option Securities purchased upon
the exercise of the over-allotment option described in Section 2(b) shall be
reduced by an amount per share equal to any dividends or distributions declared
by the Company and payable on the Initial U.S. Securities but not payable on the
U.S. Option Securities.
<PAGE>
SCHEDULE C
List of Persons and Entities Subject
to Lock-Up
1. Myriad International Holdings BV (MIH Limited)
2. Sun TSI Subsidiary, Inc (Sun Microsystems, Inc.)
3. America Online, Inc.
4. General Instrument Corp.
5. Liberty Digital, Inc.
6. News America Incorporated
7. Warner Bros., a division of Time Warner Entertainment Company, L.P. and
Turner Broadcasting System, Inc.
8. Jan Steenkamp
9. Vincent Dureau
10. Randall Livingston
11. Mitchell Berman
12. Joel Zdepski
13. Regis Saint Girons
14. James Brown
15. Thomas Jackson
16. Michael Catalano
17. Clay Conrad
18. Marilyn Hommes
19. Mark Meagher
<PAGE>
20. Gilles Boccon Gibod
21. Jon Haass
22. Igor Pavlin
23. Yeong-Su Sheu
24. Deborah Kanarek
25. Ravindranath Rishy-Maharaj
26. Jean-Rene Menand
27. Vera Lazarevic
<PAGE>
Exhibit A-1
-----------
FORM OF OPINION OF CRAVATH, SWAINE & MOORE
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) OpenTV, Inc. has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(ii) OpenTV, Inc. has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Purchase
Agreement.
(iii) OpenTV, Inc. is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
(v) The Purchase Agreement has been duly authorized, executed and delivered
by OpenTV, Inc.
(vi) The Purchase Agreement has been duly authorized, executed and
delivered by MIH Limited.
(vii) The Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the 1933 Act; any required filing
of the Prospectus pursuant to Rule 424(b) has been made in the manner and within
the time period required by Rule 424(b); and, to the best of our knowledge, no
stop order suspending the effectiveness of the Registration Statement or any
Rule 462(b) Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or threatened
by the Commission.
(viii) The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 430A Information and the Rule 434 Information, as
applicable, the Prospectus and each amendment or supplement to the Registration
Statement and Prospectus as of their respective effective or issue dates (other
than the financial statements and supporting schedules included therein or
omitted therefrom, as to which we need express no opinion) complied as to form
in all material respects with the requirements of the 1933 Act and the 1933 Act
Regulations.
<PAGE>
(ix) If Rule 434 has been relied upon, the Prospectus was not "materially
different," as such term is used in Rule 434, from the prospectus included in
the Registration Statement at the time it became effective.
(x) The form of certificate used to evidence the Class A Ordinary Shares
complies in all material respects with all applicable requirements of the Nasdaq
National Market.
(xi) To the best of our knowledge, there is not pending or threatened any
action, suit, proceeding, inquiry or investigation, to which the Company or any
subsidiary is a party, or to which the property of the Company or any subsidiary
is subject, before or brought by any court or governmental agency or body,
domestic or foreign, which might reasonably be expected to result in a Material
Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation of the
transactions contemplated in the Purchase Agreement or the performance by the
Company of its obligations thereunder.
(xii) The information in the Prospectus under "Description of Capital
Stock", "Business--Intellectual Property", "Business--Legal Proceedings",
"United States Federal Income Tax Consequences" and in the Registration
Statement under Item 14, to the extent that it constitutes matters of law,
summaries of legal matters, OpenTV, Inc.'s charter and bylaws or legal
proceedings, or legal conclusions, has been reviewed by us and is correct in all
material respects; and the opinion of such firm set forth under "United States
Federal Income Tax Consequences" is confirmed.
(xiii) To the best of our knowledge, there are no Federal or New York
State statutes or regulations that are required to be described in the
Prospectus that are not described as required.
(xiv) All descriptions in the Registration Statement of contracts and
other documents to which the Company or its subsidiaries are a party are
accurate in all material respects; to the best of our knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed or incorporated by reference as exhibits thereto,
and the descriptions thereof or references thereto are correct in all material
respects.
(xv) To the best of our knowledge, neither the Company nor any subsidiary
is in violation of its charter or by-laws and no default by the Company or any
subsidiary exists in the due performance or observance of any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument that is described or referred to in the Registration Statement or the
Prospectus or filed or incorporated by reference as an exhibit to the
Registration Statement.
(xvi) The execution, delivery and performance of the Purchase Agreement
and the consummation of the transactions contemplated in the Purchase Agreement
and in the Registration Statement (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities as
described in the Prospectus under the caption "Use Of
<PAGE>
Proceeds") and compliance by the Company with its obligations under the Purchase
Agreement do not and will not, whether with or without the giving of notice or
lapse of time or both, conflict with or constitute a breach of, or default or
Repayment Event (as defined in Section 1(a)(x) of the Purchase Agreement) under
or result in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any subsidiary pursuant to any
contract, indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or any other agreement or instrument, known to us, to which the Company or
any subsidiary is a party or by which it or any of them may be bound, or to
which any of the property or assets of the Company or any subsidiary is subject
(except for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not have a Material Adverse Effect), nor will such
action result in any violation of any applicable law, statute, rule, regulation,
judgment, order, writ or decree, known to us, of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any subsidiary or any of their respective properties, assets or
operations.
(xvii) The execution, delivery and performance of the Purchase Agreement
and the consummation of the transactions contemplated in the Purchase Agreement
and in the Registration Statement (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities as
described in the Prospectus under the caption "Use Of Proceeds") and compliance
by OpenTV, Inc. with its obligations under the Purchase Agreement do not and
will not, whether with or without the giving of notice or lapse of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as
defined in Section 1(a)(x) of the Purchase Agreement) under or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of OpenTV, Inc. or any subsidiary pursuant to any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or any other
agreement or instrument, known to us, to which OpenTV, Inc. or any subsidiary is
a party or by which it or any of them may be bound, or to which any of the
property or assets of OpenTV, Inc. or any subsidiary is subject (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that would not
have a Material Adverse Effect), nor will such action result in any violation of
the provisions of the charter or by-laws of OpenTV, Inc. or any subsidiary, or
any applicable law, statute, rule, regulation, judgment, order, writ or decree,
known to us, of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over OpenTV, Inc. or any subsidiary or any of their
respective properties, assets or operations.
(xviii) To the best of our knowledge, there are no persons with
registration rights or other similar rights to have any securities registered
pursuant to the Registration Statement or otherwise registered by the Company
under the 1933 Act.
(xix) The Company is not an "investment company" or an entity "controlled"
by an "investment company," as such terms are defined in the 1940 Act.
Nothing has come to our attention that would lead us to believe that the
Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable), (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need make no statement), at the time such
<PAGE>
Registration Statement or any such amendment became effective, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
or that the Prospectus or any amendment or supplement thereto (except for
financial statements and schedules and other financial data included therein or
omitted therefrom, as to which we need make no statement), at the time the
Prospectus was issued, at the time any such amended or supplemented prospectus
was issued or at the Closing Time, included or includes an untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of the laws of the British Virgin Islands, upon the
opinion of Harney Westwood & Riegels, special counsel to the Company (which
opinion shall be dated and furnished to the Representatives at the Closing Time,
shall be satisfactory in form and substance to counsel for the Underwriters and
shall expressly state that the Underwriters may rely on such opinion as if it
were addressed to them), provided that Cravath, Swaine & Moore shall state in
their opinion that they believe that they and the Underwriters are justified in
relying upon such opinion, and (B) as to matters of fact (but not as to legal
conclusions), to the extent they deem proper, on certificates of responsible
officers of the Company and public officials. Such opinion shall not state that
it is to be governed or qualified by, or that it is otherwise subject to, any
treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA Section of
Business Law (1991).
<PAGE>
Exhibit A-2
-----------
FORM OF OPINION OF HARNEY WESTWOOD & RIEGELS
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company has been duly organized and is validly existing as an
international business company in good standing under the laws of the British
Virgin Islands.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Purchase
Agreement.
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectus in the column entitled "Actual" under the
caption "Capitalization" (except for subsequent issuances, if any, pursuant to
the Purchase Agreement or pursuant to reservations, agreements or employee
benefit plans referred to in the Prospectus or pursuant to the exercise of
convertible securities or options referred to in the Prospectus); the shares of
issued and outstanding capital stock of the Company have been duly authorized
and validly issued and are fully paid and non-assessable; and none of the
outstanding shares of capital stock of the Company was issued in violation of
the preemptive or other similar rights of any securityholder of the Company.
(v) The Securities have been duly authorized for issuance and sale to the
Underwriters pursuant to the Purchase Agreement and, when issued and delivered
by the Company pursuant to the Purchase Agreement against payment of the
consideration set forth in the Purchase Agreement, will be validly issued and
fully paid and non-assessable and no holder of the Securities is or will be
subject to personal liability by reason of being such a holder.
(vi) The issuance of the Securities is not subject to preemptive or other
similar rights of any securityholder of the Company.
(vii) Each Subsidiary has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus and is
duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required, whether
by reason of the
<PAGE>
ownership or leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a Material
Adverse Effect; except as otherwise disclosed in the Registration Statement, all
of the issued and outstanding capital stock of each Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and, to the best
of our knowledge, is owned by the Company, directly or through subsidiaries,
free and clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity; none of the outstanding shares of capital stock of any
Subsidiary was issued in violation of the preemptive or similar rights of any
securityholder of such Subsidiary.
(viii) The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
(ix) The form of certificate used to evidence the Class A Ordinary Shares
complies in all material respects with all applicable statutory requirements,
with any applicable requirements of the charter and by-laws of the Company.
(x) To the best of our knowledge, there are no British Virgin Islands
statutes or regulations that are required to be described in the Prospectus that
are not described as required.
(xi) To the best of our knowledge, neither the Company nor any subsidiary
is in violation of its charter or by-laws and no default by the Company or any
subsidiary exists in the due performance or observance of any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument that is described or referred to in the Registration Statement or the
Prospectus or filed or incorporated by reference as an exhibit to the
Registration Statement.
(xii) No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental authority or
agency, domestic or foreign (other than under the 1933 Act and the 1933 Act
Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which we need express
no opinion) is necessary or required in connection with the due authorization,
execution and delivery of the Purchase Agreement or for the offering, issuance
or sale of the Securities.
(xiii) The execution, delivery and performance of the Purchase Agreement
and the consummation of the transactions contemplated in the Purchase Agreement
and in the Registration Statement (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities as
described in the Prospectus under the caption "Use Of Proceeds") and compliance
by the Company with its obligations under the Purchase Agreement do not and will
not, whether with or without the giving of notice or lapse of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as
defined in Section 1(a)(x) of the Purchase Agreement) under or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any subsidiary pursuant to any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or any other
agreement or instrument, known to us, to which the Company or any subsidiary is
a party or by which it or any of them may be bound, or to which any of the
property or assets of the Company
<PAGE>
or any subsidiary is subject (except for such conflicts, breaches or defaults or
liens, charges or encumbrances that would not have a Material Adverse Effect),
nor will such action result in any violation of the provisions of the charter or
by-laws of the Company or any subsidiary, or any applicable law, statute, rule,
regulation, judgment, order, writ or decree, known to us, of any government,
government instrumentality or court, domestic or foreign, having jurisdiction
over the Company or any subsidiary or any of their respective properties, assets
or operation.
(xiv) The choice of New York law to govern the Purchase Agreement
constitutes a valid choice of law insofar as the law of the British Virgin
Islands is concerned. The submission by the Company to the non-exclusive
jurisdiction of any federal or state court sitting in New York County, New York
is a valid submission insofar as the law of the British Virgin Islands is
concerned.
(xv) Any final and conclusive monetary judgment for a definite sum which
is not subject to a stay of execution obtained against the Company in the courts
of the State of New York in respect of the Purchase Agreement would be treated
by the courts of the British Virgin Islands as a cause of action in itself so
that no retrial of the issues would be necessary.
(xvi) The Company has the corporate power and authority to conduct its
business as described in the Registration Statement, and the conduct of such
business does not violate the provisions of its Memorandum of Association or
Articles of Association or any applicable law, regulation, order or decree in
the British Virgin Islands.
(xvii) Neither the Memorandum of Association nor the Articles of
Association of the Company nor any applicable British Virgin Islands law,
regulation or decree imposes any pre-emptive or similar rights on the issuance
and sale of the Shares by the Company.
(xviii) The certificates evidencing the Shares are in due and proper form
and comply with all applicable statutory requirements of the British Virgin
Islands and with the Memorandum and Articles of Association of the Company.
(xix) The statements set forth in the Prospectuses under the headings
"Description of Capital Stock", "Risk Factors -- Because we British Virgin
Island company, you may have difficulty protecting your interests in respect of
decisions made by our board of directors" and " -- Because we are a British
Virgin Island company, you may not be able to enforce judgments against us that
are obtained in U.S. courts" and in the Registration Statement under Item 14 to
the extent that they constitute a description of the laws and regulations of the
British Virgin Islands, or its respective agencies, authorities or other
governmental bodies, or documents, or proceedings or conclusions of British
Virgin Islands law, are correct in all material respects.
(xx) To the best of our knowledge, there are no proceedings pending before
any court, tribunal, arbitrator, government agency or administrative body within
the British Virgin Islands against or threatened against the Company of any of
its assets which if adversely determined could or might result in any material
adverse change in the business, assets or condition (financial or otherwise) of
the Company or the ability of the Company to perform any obligations required by
the terms and conditions of the Purchase Agreement.
<PAGE>
(xxi) MIH Limited has been duly organized and is validly existing as an
international business company in good standing under the laws of the British
Virgin Islands.
(xxii) MIH Limited has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Purchase
Agreement.
(xxiii) MIH Limited is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(xxiv) The Purchase Agreement has been duly authorized, executed and
delivered by MIH Limited.
(xxv) The execution, delivery and performance of the Purchase Agreement
and the consummation of the transactions contemplated in the Purchase Agreement
and in the Registration Statement (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities as
described in the Prospectus under the caption "Use Of Proceeds") and compliance
by MIH Limited with its obligations under the Purchase Agreement do not and will
not, whether with or without the giving of notice or lapse of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as
defined in Section 1(a)(x) of the Purchase Agreement) under or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of MIH Limited or any subsidiary pursuant to any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or any other
agreement or instrument, known to us, to which MIH Limited or any subsidiary is
a party or by which it or any of them may be bound, or to which any of the
property or assets of MIH Limited or any subsidiary is subject (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that would not
have a Material Adverse Effect), nor will such action result in any violation of
the provisions of the charter or by-laws of MIH Limited or any subsidiary, or
any applicable law, statute, rule, regulation, judgment, order, writ or decree,
known to us, of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over MIH Limited or any subsidiary or any of their
respective properties, assets or operation.
<PAGE>
Exhibit A-3
-----------
FORM OF OPINION OF NAUTA DUTILH
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
1. The signing by the Parties of the Purchase Agreements and the performance by
them of their respective obligations thereunder, and the issuance and sale
of the Shares and the use of proceeds for such sale indirectly by any of the
Dutch subsidiaries as described in the Prospectuses under the caption "Use
of Proceeds", do not in themselves, on the face of the Transaction
Documents, violate Netherlands Law.
2. There are no statues or regulations of Netherlands Law or the Official
Segment of Amsterdam Exchanges N.V. ("AEX") rules which are required by
Netherlands Law or the AEX Rules to be described in the Prospectuses that
are not described therein to the extent so required.
3. No consents or approvals and no licenses, authorizations or orders from or
notices to or filings with any regulatory authority or governmental body of
The Netherlands are required for the execution and delivery of the Purchase
Agreements or the offering, issuance, sale or delivery of the Shares in The
Netherlands, except (i) filing, notice and approval requirements under the
AEX Rules including, without limitation, approval by the AEX of the
prospectuses and the application for admission of the Shares to listing on
the ASE, and (ii) notice requirements to The Netherlands Central Bank ("De
Nederlandsche Bank N.V.") pursuant to the Act on Foreign Financial Relations
("Wet Financiele Betrekkingen Buitenland") and regulations promulgated
thereunder, provided, however, that the failure to observe the latter notice
requirements would not adversely affect the validity of the Purchase
Agreements.
<PAGE>
Exhibit A-4
-----------
FORM OF OPINION OF PRICEWATERHOUSECOOPERS LLP
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
The information in the prospectus under the caption "Certain Netherlands Tax
Consequences" has been reviewed by us and is correct in all material respects.
<PAGE>
Exhibit B
---------
, 1999
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
THOMAS WEISEL PARTNERS LLC
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
United States of America
MERRILL LYNCH INTERNATIONAL
MEESPIERSON N.V.
THOMAS WEISEL PARTNERS LLC
c/o Merrill Lynch International
25 Ropemaker Place
London EC2Y 9LY
United Kingdom
Re: Agreement not to sell or otherwise dispose of securities of
-----------------------------------------------------------
OpenTV Corp.
------------
Ladies and Gentlemen:
The undersigned understands that OpenTV Corp. (the "Company") proposes
to file a registration statement on Form F-1 (the "Registration Statement") with
the United States Securities and Exchange Commission in connection with the
initial public offering (the "Offering") of ordinary shares ("Shares") of the
Company. The undersigned further understands that the Company proposes to enter
into one or more purchase agreements (collectively, the "Purchase Agreement")
with you as representative of the underwriters of the Offering (the
"Underwriters").
In recognition of the benefit that the Offering will confer upon the
undersigned as a securityholder of the Company, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
in order to induce the Company and the Underwriters to enter into the Purchase
Agreement and to proceed with the Offering, the undersigned hereby agrees, that
from the date hereof until [the first anniversary of]/1/ [the date which is 180
days after]/2/ the date of the Purchase Agreement, the undersigned will not,
without
- --------------------------
/1/ For persons 1-__ on Schedule C.
/2/ For persons __-15 on Schedule C.
<PAGE>
2
the prior written consent of Merrill Lynch International, directly or
indirectly, (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant for the sale of, or otherwise dispose of or transfer
(collectively, a "Covered Sale") any Shares (other than any Shares registered in
------------
the Offering) or any securities convertible into or exchangeable or exercisable
for any Shares, whether now owned or hereafter acquired by the undersigned or
with respect to which the undersigned has or hereafter acquires the power of
disposition (collectively, the "Locked Shares") or request the filing of any
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to any of the foregoing (it being understood
- ---------------
that such a request shall not be deemed to have been made pursuant to any
registration rights agreement until a request is made thereunder and the mere
entering into of any registration rights agreement shall not be deemed such a
request) or (ii) enter into any swap or any other agreement or any transaction
that transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of Shares, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of the Shares or other
securities, in cash or otherwise.
<PAGE>
3
[Notwithstanding the foregoing, on or after the date which is 181 days after the
date of the Purchase Agreement, the undersigned may make a Covered Sale of any
Locked Shares, pursuant to a private sale exempt from registration under the
Securities Act and without engaging in any marketing activities, other than to
any broker dealer, bank, investment fund, investment company, insurance company,
trust fund, employee benefit plan or similar financial institution; provided,
--------
however, that (x) the aggregate number of transferees (including subsequent
- -------
transferees) who hold Locked Shares prior to the first anniversary of the date
of the Purchase Agreement shall not exceed five and (y) each such transferee
(including any subsequent transferee) must agree in writing to be bound by the
terms of this agreement as if a party hereto.]/3/
- --------------------------
/3/ For persons 1-__ on Schedule C.
Sincerely,
Name of Securityholder:
_________________________________
(Print)
Signature:
_________________________________
Name:
Title:
(If not a natural person)
<PAGE>
EXHIBIT 1.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OPENTV CORP.
(a British Virgin Islands
international business company)
---------------------------------
7,500,000 Class A Ordinary Shares
INTERNATIONAL PURCHASE AGREEMENT
--------------------------------
Dated: November , 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
INTERNATIONAL PURCHASE AGREEMENT
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Representations and Warranties............................................. 4
(a) Representations and Warranties by the Company..................................... 4
(i) Compliance with Registration Requirements......................................... 4
(ii) Independent Accountants.......................................................... 5
(iii) Financial Statements............................................................ 5
(iv) No Material Adverse Change in Business........................................... 5
(v) Good Standing of the Company...................................................... 6
(vi) Good Standing of Subsidiaries.................................................... 6
(vii) Capitalization.................................................................. 7
(viii) Authorization of Agreement..................................................... 7
(ix) Authorization and Description of Securities...................................... 7
(x) Absence of Defaults and Conflicts................................................. 7
(xi) Absence of Labor Dispute......................................................... 8
(xii) Absence of Proceeding........................................................... 8
(xiii) Accuracy of Exhibits........................................................... 9
(xiv) Possession of Intellectual Property............................................. 9
(xv) Absence of Further Requirements.................................................. 9
(xvi) Possession of Licenses and Permits.............................................. 9
(xvii) Title to Property.............................................................. 10
(xviii) Compliance with Research Guidelines........................................... 10
(xix) Compliance with Cuba Act........................................................ 10
(xx) Investment Company Act........................................................... 11
(xxi) Environmental Laws.............................................................. 11
(xxii) Registration Rights............................................................ 11
(xxiii) Year 2000..................................................................... 11
(xxiv) Passive Foreign Investment Company............................................. 12
(xxv) Foreign Personal Holding Company................................................ 12
(xxvi) Statistical and Market-Related Data............................................ 12
(b) Officers' Certificates............................................................ 12
(c) Representations and Warranties of OpenTV, Inc..................................... 13
(i) Good Standing of OpenTV, Inc...................................................... 13
(ii) Authorization of Agreement....................................................... 13
SECTION 2. Sale and Delivery to the International Managers: Closing................... 14
(a) Initial Securities................................................................ 14
(b) Option Securities................................................................. 14
(c) Payment........................................................................... 14
(d) Denominations; Registration....................................................... 15
SECTION 3. Covenants of the Company................................................... 15
(a) Compliance with Securities Regulations and Commission Requests.................... 15
(b) Filing of Amendments.............................................................. 16
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(c) Delivery of Registration Statements.............................................. 16
(d) Delivery of Prospectuses......................................................... 16
(e) Continued Compliance with Securities Laws........................................ 17
(f) Blue Sky Qualifications.......................................................... 17
(g) Rule 158......................................................................... 17
(h) Use of Proceeds.................................................................. 18
(i) Listing.......................................................................... 18
(j) Restriction on Sale of Securities................................................ 18
(k) Reporting Requirements........................................................... 18
(l) Compliance with NASD Rules....................................................... 19
(m) Compliance with Rule 463......................................................... 19
SECTION 4. Payment of Expenses....................................................... 19
(a) Expenses......................................................................... 19
(b) Termination of Agreement......................................................... 20
SECTION 5. Conditions of International Managers' Obligations......................... 20
(a) Effectiveness of Registration Statement.......................................... 20
(b) Opinion of Counsel for Company................................................... 20
(c) Opinion of Counsel for the International Managers................................ 21
(d) Officers' Certificate............................................................ 21
(e) Accountant's Comfort Letter...................................................... 21
(f) Bring-down Comfort Letter........................................................ 21
(g) Approval of Listing.............................................................. 22
(h) No Objection..................................................................... 22
(i) Lock-up Agreements............................................................... 22
(j) Purchase of Initial U.S. Securities.............................................. 22
(k) Conditions to Purchase of International Securities............................... 22
(i) Officers' Certificate............................................... 22
(ii) Opinion of Counsel for Company...................................... 22
(iii) Opinion of Counsel for International Managers....................... 22
(iv) Bring-down Comfort Letter........................................... 23
(l) Additional Documents............................................................. 23
(m) Termination of Agreement......................................................... 23
SECTION 6. Indemnification........................................................... 23
(a) Indemnification of the International Managers.................................... 23
(b) Indemnification of Company, Directors and Officers............................... 25
(c) Actions Against Parties; Notification............................................ 25
(d) Settlement Without Consent if Failure To Reimburse............................... 26
SECTION 7. Contribution.............................................................. 26
SECTION 8. Representations, Warranties and Agreements To Survive Delivery............ 28
SECTION 9. Termination of Agreement.................................................. 28
(a) Termination; General............................................................. 28
(b) Liabilities...................................................................... 28
SECTION 10. Default by One or More of the International Managers..................... 29
SECTION 11. Notices.................................................................. 29
SECTION 12. Parties.................................................................. 30
SECTION 13. GOVERNING LAW AND TIME................................................... 30
SECTION 14. Agent for Service; Submission to Jurisdiction;
Waiver of Immunities................................................................. 30
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 15. Judgment Currency........................................................ 31
SECTION 16. Effect of Headings....................................................... 31
SECTION 17. Counterparts............................................................. 32
</TABLE>
<PAGE>
OpenTV Corp.
(a British Virgin Islands
international business company)
7,500,000 Class A Ordinary Shares
(No Par Value)
INTERNATIONAL PURCHASE AGREEMENT
--------------------------------
November , 1999
MERRILL LYNCH INTERNATIONAL
MeesPierson N.V.
Thomas Weisel Partners LLC
as Lead Managers of the several International Managers
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England
Ladies and Gentlemen:
Each of OpenTV Corp., an international business company organized
under the laws of the British Virgin Islands (the "Company") and OpenTV, Inc., a
-------
corporation organized under the laws of Delaware ("OpenTV, Inc."), confirms its
agreement with Merrill Lynch International, ("Merrill Lynch") and each of the
-------------
other international managers named in Schedule A hereto (collectively, the
----------
"International Managers," which term shall also include any underwriter
----------------------
substituted as hereinafter provided in Section 10 hereof), for whom Merrill
Lynch, MeesPierson N.V. and Thomas Weisel Partners LLC are acting as
representatives (in such capacity, the "Lead Managers"), with respect to the
issue and sale by the Company and the purchase by the International Managers,
acting severally and not jointly, of the respective numbers of Class A Ordinary
Shares, no par value, of the Company ("Class A Ordinary Shares") set forth in
-----------------------
said Schedule A, and with respect to the grant by the Company to the
----------
International Managers, acting severally and not jointly, of the option
described in Section 2(b) hereof to purchase all or any part of 562,500
additional Class A Ordinary Shares to cover over-allotments, if any. The
3,750,000 Class A Ordinary Shares referred to in Schedule A (the "Initial
---------- -------
International Securities") to be purchased by the International Managers and all
- ------------------------
or any part of the 562,500 Class A Ordinary Shares subject to the option
described in Section 2(b) hereof (the "International Option Securities") are
-------------------------------
hereinafter called, collectively, the "International Securities."
------------------------
<PAGE>
2
It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "U.S. Purchase Agreement") providing for
-----------------------
the offering by the Company of an aggregate of 3,750,000 Class A Ordinary Shares
(the "Initial U.S. Securities") through arrangements with certain underwriters
-----------------------
inside the United States and Canada (the "U.S. Underwriters") for which Merrill
-----------------
Lynch, Pierce, Fenner & Smith Incorporated and Thomas Weisel Partners LLC are
acting as the representatives (the "U.S. Representatives") and the grant by the
--------------------
Company to the U.S. Underwriters, acting severally and not jointly, of an option
to purchase all or any part of the U.S. Underwriters' pro rata portion of up to
562,500 additional Class A Ordinary Shares solely to cover over-allotments, if
any (the "U.S. Option Securities" and, together with the International Option
----------------------
Securities, the "Option Securities"). The Initial U.S. Securities and the U.S.
-----------------
Option Securities are hereinafter called the "U.S. Securities." It is understood
---------------
that the Company is not obligated to sell, and the International Managers are
not obligated to purchase, any Initial International Securities unless all of
the Initial U.S. Securities are contemporaneously purchased by the U.S.
Underwriters.
The International Managers and the U.S. Underwriters are hereinafter
collectively called the "Underwriters," the Initial International Securities and
------------
the Initial U.S. Securities are hereinafter collectively called the "Initial
-------
Securities," and the International Securities and the U.S. Securities are
- ----------
hereinafter collectively called the "Securities."
----------
The Underwriters will concurrently enter into an Intersyndicate
Agreement of even date herewith (the "Intersyndicate Agreement") providing for
-------------- ---------
the coordination of certain transactions among the Underwriters under the
direction of Merrill Lynch International (in such capacity, the "Global
------
Coordinator").
- -----------
The Company understands that the International Managers propose to
make a public offering of the International Securities as soon as the Lead
Managers deem advisable after this Agreement has been executed and delivered.
The Company and the International Managers agree that up to ______
shares of the Initial International Securities to be purchased by the
International Managers and up to __________ shares of the Initial U.S.
Securities to be purchased by the U.S. Underwriters (collectively, the "Reserved
Securities") shall be reserved for sale by the Underwriters to certain eligible
employees and persons having business relationships with the Company, as part of
the distribution of the Initial Securities by the Underwriters, subject to the
terms of this Agreement and the U.S. Purchase Agreement, the applicable U.S. and
foreign rules, regulations and interpretations of the National Association of
Securities Dealers, Inc. and all other applicable laws, rules and regulations.
To the extent that such Reserved Securities are not orally confirmed for
purchase by such eligible employees and persons having business relationships
with the
<PAGE>
3
Company by the end of the first business day after the date of this Agreement,
such Reserved Securities may be offered to the public as part of the public
offering contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form F-1 (No. 333-89609) covering the
----------
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
--------
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
---------
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
-------------------- -----------
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b).
- -----------
Two forms of prospectus are to be used in connection with the offering and sale
of the Securities: one relating to the International Securities (the "Form of
-------
International Prospectus") and one relating to the U.S. Securities (the "Form
- ------------------------ ----
of U.S. Prospectus"). The Form of International Prospectus is identical to the
- ------------------
Form of U.S. Prospectus, except for the front cover and back cover pages and the
information under the caption "Underwriting" and the inclusion in the Form of
------------
International Prospectus of sections under the captions "Additional Information"
----------------------
and "Certain Netherlands Tax Consequences." The information included in any
------------------------------------
such prospectus or in any such Term Sheet, as the case may be, that was omitted
from such registration statement at the time it became effective but that is
deemed to be part of such registration statement at the time it became effective
(a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A
---------
Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as
- -----------
"Rule 434 Information." Each Form of International Prospectus and Form of U.S.
- ---------------------
Prospectus used before such registration statement became effective, and any
prospectus that omitted, as applicable, the Rule 430A Information or the Rule
434 Information, that was used after such effectiveness and prior to the
execution and delivery of this Agreement, is herein called a "preliminary
-----------
prospectus." Such registration statement, including the exhibits thereto and
- ----------
schedules thereto, at the time it became effective and including the Rule 430A
Information and the Rule 434 Information, as applicable, is herein called the
"Registration Statement." Any registration statement filed pursuant to Rule
- -----------------------
462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b)
-----------
Registration Statement," and after such filing the term "Registration Statement"
- ---------------------- ----------------------
shall include the Rule 462(b) Registration Statement. The final Form of
International Prospectus and the final Form of U.S. Prospectus in the forms
first furnished to the Underwriters for use in connection with the offering of
the Securities are herein called the "International Prospectus" and the "U.S.
------------------------ ----
Prospectus," respectively, and collectively, the "Prospectuses." If Rule 434 is
- ---------- ------------
relied on, the terms "International Prospectus" and "U.S. Prospectus" shall
------------------------ ---------------
refer to the preliminary International Prospectus dated November 10, 1999 and
the preliminary U.S. Prospectus dated November 10, 1999, respectively, each
together with the applicable Term Sheet, and all references in this Agreement to
the date of such Prospectuses shall mean the date of the
<PAGE>
4
applicable Term Sheet. For purposes of this Agreement, all references to the
Registration Statement, any preliminary prospectus, the International
Prospectus, the U.S. Prospectus or any Term Sheet or any amendment or supplement
to any of the foregoing shall be deemed to include the copy filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
system ("EDGAR").
-----
SECTION 1. Representations and Warranties.
------------------------------
(a) Representations and Warranties by the Company. The Company
---------------------------------------------
represents and warrants to and agrees with each International Manager as of
the date hereof, as of the Closing Time referred to in Section 2(c) hereof,
and as of each Date of Delivery (if any) referred to in Section 2(b)
hereof, and agrees with each International Manager, as follows:
(i) Compliance with Registration Requirements. Each of the
-----------------------------------------
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto, became
effective and at the Closing Time (and, if any International Option
Securities are purchased, at the Date of Delivery), the Registration
Statement, the Rule 462(b) Registration Statement and any amendments and
supplements thereto complied and will comply in all material respects with
the requirements of the 1933 Act and the 1933 Act Regulations and did not
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Prospectuses, any
preliminary prospectuses and any supplements thereto or prospectus wrappers
prepared in connection therewith, at their respective times of issuance and
at the Closing Time, complied and will comply in all material respects with
any applicable laws or regulations of foreign jurisdictions in which the
Prospectuses and such preliminary prospectuses, as amended or supplemented,
if applicable, are distributed in connection with the offer and sale of
Reserved Securities. Neither of the Prospectuses nor any amendments or
supplements thereto (including any prospectus wrapper), at the time the
Prospectuses or any amendments or supplements thereto were issued and at
the Closing Time (and, if any International Option Securities are
purchased, at the Date of Delivery), included or will include an untrue
statement of a material fact or omitted or will omit to state a material
fact necessary in order to make the statements therein, in the light of the
<PAGE>
5
circumstances under which they were made, not misleading. If Rule 434 is
used, the Company will comply with the requirements of Rule 434 and the
Prospectuses shall not be "materially different," as such term is used in
Rule 434, from the prospectuses included in the Registration Statement at
the time it became effective. The representations and warranties in this
subsection shall not apply to statements in or omissions from the
Registration Statement or the International Prospectus made in reliance
upon and in conformity with information furnished to the Company in writing
by or on behalf of any International Manager through the Lead Managers
expressly for use in the Registration Statement or the International
Prospectus.
Each preliminary prospectus and the prospectuses filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so
filed in all material respects with the requirements of the 1933 Act and
the 1933 Act Regulations and each preliminary prospectus and each
Prospectus delivered to the Underwriters for use in connection with this
offering was identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted
by Regulation S-T.
(ii) Independent Accountants. The accountants who certified
-----------------------
the financial statements and supporting schedules included in the
Registration Statement are independent public accountants as required
by the 1933 Act and the 1933 Act Regulations.
(iii) Financial Statements. The financial statements included
--------------------
in the Registration Statement and the Prospectuses, together with the
related schedules and notes, present fairly the financial position of
the entities to which they relate as of the dates indicated and their
respective results of operations, shareholders' equity and cash flows
for the periods specified; said financial statements have been prepared
in conformity with generally accepted accounting principles under
United States Accounting Standards ("U.S. GAAP") applied on a
---------
consistent basis throughout the periods involved. The supporting
schedules included in the Registration Statement present fairly in
accordance with U.S. GAAP the information required to be stated
therein. The selected and summary financial data included in the
Prospectuses present fairly the information shown therein and have been
compiled on a basis consistent with that of the audited financial
statements included in the Registration Statement.
(iv) No Material Adverse Change in Business. Since the
--------------------------------------
respective dates as of which information is given in the Registration
Statement and the Prospectuses, except as otherwise stated therein, (A)
there has been no material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business
prospects of the
<PAGE>
6
Company and its subsidiaries considered as one enterprise, whether or
not arising in the ordinary course of business (a "Material Adverse
----------------
Effect"), (B) there have been no transactions entered into by the
------
Company or any of its subsidiaries, other than those in the ordinary
course of business, which are material with respect to the Company and
its subsidiaries considered as one enterprise, and (C) there has been
no dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock.
(v) Good Standing of the Company. The Company has been duly
----------------------------
organized and is validly existing as an international business company
in good standing under the laws of the British Virgin Islands and has
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectuses and to
enter into and perform its obligations under this Agreement. The
Company is duly qualified as a foreign corporation to transact business
and is in good standing in each other jurisdiction in which such
qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not, singly or in
the aggregate, result in a Material Adverse Effect.
(vi) Good Standing of Subsidiaries. Each "significant
----------------------------- -----------
subsidiary" of the Company (as such term is defined in Rule 1-02 of
----------
Regulation S-X) and OpenTV, Inc. (each a "Subsidiary" and,
----------
collectively, the "Subsidiaries") has been duly organized and is
------------
validly existing as a corporation, general partnership, limited
partnership, limited liability company or similar entity in good
standing under the laws of the jurisdiction of its organization, has
organizational power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectuses
and is duly qualified as a foreign corporation (or other such entity)
to transact business and is in good standing in each jurisdiction in
which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not,
singly or in the aggregate, result in a Material Adverse Effect. Except
as otherwise disclosed in the Registration Statement, all of the issued
and outstanding capital stock or other ownership interests of each
Subsidiary has been duly authorized and validly issued, is fully paid
and non-assessable and is owned by the Company free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or
equity. None of the outstanding shares of capital stock or other
ownership interests of any Subsidiary was issued in violation of the
preemptive or similar rights of any securityholder of such Subsidiary.
The only subsidiaries of the Company are (a) the subsidiaries listed on
Exhibit 21 to the Registration Statement and (b) certain other
subsidiaries which, considered in the aggregate as a single subsidiary,
do not constitute a "significant subsidiary" as defined in Rule 1-02 of
Regulation S-X.
<PAGE>
7
(vii) Capitalization. The authorized, issued and outstanding
--------------
capital stock of the Company is as set forth in the Prospectuses in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement, pursuant to
agreements or employee benefit plans referred to in the Prospectuses or
pursuant to the exercise of options referred to in the Prospectuses).
The shares of issued and outstanding capital stock of the Company have
been duly authorized and validly issued and are fully paid and
non-assessable. None of the outstanding shares of capital stock of the
Company was issued in violation of the preemptive or other similar
rights of any direct or indirect securityholder of the Company.
(viii) Authorization of Agreement. The execution, delivery and
--------------------------
performance of this Agreement and the U.S. Purchase Agreement have been
duly authorized by all requisite corporate action on the part of the
Company. This Agreement and the U.S. Purchase Agreement have been duly
executed and delivered by the Company.
(ix) Authorization and Description of Securities. The
-------------------------------------------
Securities to be purchased by the International Managers and the U.S.
Underwriters from the Company have been duly authorized for issuance
and sale to the International Managers pursuant to this Agreement and
the U.S. Underwriters pursuant to the U.S. Purchase Agreement,
respectively, and, when issued and delivered by the Company pursuant to
this Agreement and the U.S. Purchase Agreement, respectively, against
payment of the consideration set forth herein and in the U.S. Purchase
Agreement, respectively, will be validly issued, fully paid and
non-assessable. The Class A Ordinary Shares conform in all material
respects to all statements relating thereto contained in the
Prospectuses and such description conforms to the rights set forth in
the instruments defining the same. No holder of the Securities will be
subject to personal liability by reason of being such a holder and the
issuance of the Securities is not subject to the preemptive or other
similar rights of any securityholder of the Company.
(x) Absence of Defaults and Conflicts. Neither the Company nor
---------------------------------
any of its subsidiaries is in violation of its charter or by-laws (or
equivalent constitutive documents) or in default in the performance or
observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or other agreement or instrument to which
the Company or any of its subsidiaries is a party or by which it or any
of them may be bound, or to which any of the property or assets of the
Company or any of its subsidiaries is subject (collectively,
"Agreements and Instruments") except for such defaults that would not,
--------------------------
singly or in the aggregate, result in a Material Adverse Effect. The
execution, delivery and performance of this Agreement and the U.S.
Purchase Agreement and the consummation of the transactions
contemplated in this Agreement, the U.S. Purchase Agreement and in the
<PAGE>
8
Registration Statement (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities
as described in the Prospectuses under the caption "Use of Proceeds")
---------------
and compliance by the Company with its obligations under this Agreement
and the U.S. Purchase Agreement have been duly authorized by all
necessary corporate action and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with
or constitute a breach of, or default or Repayment Event (as defined
below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
of its subsidiaries pursuant to, the Agreements and Instruments (except
for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not, singly or in the aggregate, result in a
Material Adverse Effect), nor will such action result in any violation
of the provisions of the charter or by-laws (or equivalent constitutive
documents) of the Company or any of its subsidiaries or any applicable
law, statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any of its subsidiaries or any
of their assets, properties or operations. As used herein, a "Repayment
---------
Event" means any event or condition which gives the holder of any note,
-----
debenture or other evidence of indebtedness (or any person acting on
such holder's behalf) the right to require the repurchase, redemption
or repayment of all or a portion of such indebtedness by the Company or
any of its subsidiaries.
(xi) Absence of Labor Dispute. No labor dispute with the
------------------------
employees of the Company or any of its subsidiaries exists or, to the
knowledge of the Company, is threatened, and the Company is not aware
of any existing or threatened labor disturbance by the employees of any
of its or any of its subsidiaries' principal suppliers, manufacturers,
customers or contractors, which, in either case, may reasonably be
expected to, singly or in the aggregate, result in a Material Adverse
Effect.
(xii) Absence of Proceeding. There is no action, suit,
---------------------
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the
Company or any of its subsidiaries, which is required to be disclosed
in the Registration Statement (other than as disclosed therein), or
which, singly or in the aggregate, may reasonably be expected to result
in a Material Adverse Effect, or which, singly or in the aggregate, may
reasonably be expected to materially and adversely affect the
properties or assets of the Company or any of its subsidiaries or the
consummation of the transactions contemplated in this Agreement and the
U.S. Purchase Agreement or the performance by the Company of its
obligations hereunder or thereunder. The aggregate of all pending legal
or governmental proceedings to which the Company or any of its
subsidiaries is a party or of which any of their respective property or
assets is the subject
<PAGE>
9
which are not described in the Registration Statement, including
ordinary routine litigation incidental to the business, singly or in
the aggregate, could not reasonably be expected to result in a Material
Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or
--------------------
documents which are required to be described in the Registration
Statement or the Prospectuses or to be filed as exhibits thereto which
have not been so described and filed as required.
(xiv) Possession of Intellectual Property. The Company and its
-----------------------------------
subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures),trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") necessary
---------------------
to carry on the business now operated by them, and neither the Company
nor any of its subsidiaries has received any notice or is otherwise
aware of any infringement of or conflict with asserted rights of others
with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of its
subsidiaries therein, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity
or inadequacy, singly or in the aggregate, may reasonably be expected
to result in a Material Adverse Effect.
(xv) Absence of Further Requirements. No filing with, or
-------------------------------
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance or
sale of the Securities under this Agreement and the U.S. Purchase
Agreement or the consummation of the transactions contemplated by this
Agreement and the U.S. Purchase Agreement, except such as have been
already obtained and are in full force and effect or as may be required
(i) under the 1933 Act or the 1933 Act Regulations or state securities
laws, (ii) under the laws and regulations of jurisdictions outside of
the United States and Canada where the International Managers may offer
and sell the International Securities and (iii) under the laws and
regulations outside the United States in which the Reserved Securities
are offered..
(xvi) Possession of Licenses and Permits. Except as otherwise
----------------------------------
disclosed in the Registration Statement, the Company and its
subsidiaries possess such permits, licenses (including, without
limitation, television broadcast frequency allocations and licenses),
approvals, consents and other authorizations (collectively,
"Governmental Licenses") issued by the appropriate national,
---------------------
provincial, state or local regulatory agencies or bodies
<PAGE>
10
necessary to conduct the business now operated by them. The Company and
its subsidiaries are in compliance with the terms and conditions of all
such Governmental Licenses, except where the failure so to comply would
not, singly or in the aggregate, result in a Material Adverse Effect.
All of the Governmental Licenses are valid and in full force and
effect, except when the invalidity of such Governmental Licenses or the
failure of such Governmental Licenses to be in full force and effect
would not, singly or in the aggregate, result in a Material Adverse
Effect. Neither the Company nor any of its subsidiaries has received
any notice of proceedings relating to the revocation or modification of
any such Governmental Licenses which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would result
in a Material Adverse Effect.
(xvii) Title to Property. The Company and its subsidiaries
-----------------
have good and marketable title to all real property owned by the
Company and its subsidiaries and good title to all other properties
owned by them, in each case, free and clear of all mortgages, pledges,
liens, security interests, claims, restrictions or encumbrances of any
kind except such as (a) are described in the Prospectuses or (b) do
not, singly or in the aggregate, materially affect the value of such
property and do not interfere with the use made and proposed to be made
of such property by the Company or any of its subsidiaries. All of the
leases and subleases material to the business of the Company and its
subsidiaries, considered as one enterprise, and under which the Company
or any of its subsidiaries holds properties described in the
Prospectuses, are in full force and effect, and neither the Company nor
any of its subsidiaries has any notice of any material claim of any
sort that has been asserted by anyone adverse to the rights of the
Company or any of its subsidiaries under any of the leases or subleases
mentioned above, or affecting or questioning the rights of the Company
or such subsidiaries to the continued possession of the leased or
subleased premises under any such lease or sublease.
(xviii) Compliance with Research Guidelines. The Company,
-----------------------------------
directly or indirectly, has not taken and will not take any action that
is inconsistent with the guidelines set forth in the memorandum dated
September 2, 1999 of Simpson Thacher & Bartlett relating to research
reports, and, without limiting the foregoing, has not distributed and
will not distribute, in any manner, any research report contemplated by
such research guidelines or any portion thereof.
(xix) Compliance with Cuba Act. The Company has complied
------------------------
with, and is and will be in compliance with, the provisions of that
certain Florida act relating to disclosure of doing business with Cuba,
codified as Section 517.075 of the Florida statutes, and the rules and
regulations thereunder (collectively, the "Cuba Act") or is exempt
therefrom.
<PAGE>
11
(xx) Investment Company Act. The Company is not, and upon the
----------------------
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the
Prospectuses will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").
--------
(xxi) Environmental Laws. Except as described in the
------------------
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company
nor any of its subsidiaries is in violation of any applicable national,
provincial, state or local statute, law, rule, regulation, ordinance,
code, policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent, decree or judgment, relating to pollution or protection of
human health, the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum
or petroleum products (collectively, "Hazardous Materials") or to the
-------------------
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Law"), (B) the Company and its subsidiaries have all
-----------------
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements,
(C) there are no pending or threatened administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigation or proceedings
relating to any Environmental Law against the Company or any of its
subsidiaries and (D) there are no events or circumstances that might
reasonably be expected to form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party or
governmental body or agency, against or affecting the Company or any of
its subsidiaries relating to Hazardous Materials or any Environmental
Laws.
(xxii) Registration Rights. Except as disclosed in the
-------------------
Prospectuses, there are no persons with registration rights or other
similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Company under the
1933 Act.
(xxiii) Year 2000. Any reprogramming required to permit the
---------
proper functioning, in and following the year 2000, of (i) the
Company's and the Subsidiaries' computer systems and (ii) equipment
containing embedded microchips (including systems and equipment
supplied by others or with which the Company's and the Subsidiaries'
systems interface) and the testing of all such systems and equipment,
as so reprogrammed,
<PAGE>
12
has been completed. The cost to the Company and its Subsidiaries of
such reprogramming and testing and of the reasonably foreseeable
consequences of year 2000 to the Company and its Subsidiaries
(including, without limitation, reprogramming errors and the failure of
others' systems or equipment) will not result in a Material Adverse
Effect. Except for such of the reprogramming referred to in the
preceding sentence as may be necessary, the computer and management
information systems of the Company and its Subsidiaries are and, with
ordinary course upgrading and maintenance, will continue to be,
sufficient to permit the Company and its Subsidiaries to conduct its
business without a Material Adverse Effect.
(xxiv) Passive Foreign Investment Company. The Company, based
----------------------------------
on its current operations and assets and taking into consideration the
proceeds of the offering, believes that it is not a passive foreign
investment company (a "PFIC") within the meaning of Section 1291 et
seq. of the United States Internal Revenue Code of 1986, as amended
(the "Code"), and is not likely to become a PFIC.
(xxv) Foreign Personal Holding Company. The Company, to the
--------------------------------
best of its knowledge, believes that it is not a foreign personal
holding company (a "FPHC") within the meaning of Section 551 et seq. of
the Code.
(xxvi) Statistical and Market-Related Data. The statistical
-----------------------------------
and market-related data included in the Prospectuses are based on or
derived from sources which the Company believes to be reliable and
accurate in all material respects or represent the Company's good faith
estimates that are made on the basis of data derived from such sources.
(b) Officers' Certificates. Any certificate signed by any
----------------------
officer of the Company or any of its subsidiaries delivered to the Global
Coordinator, the Lead Managers or to counsel for the International Managers
shall be deemed a representation and warranty by the Company to each
International Manager as to the matters covered thereby.
<PAGE>
13
(c) Representations and Warranties of OpenTV, Inc. OpenTV,
---------------------------------------------
Inc. represents and warrants to and agrees with each U.S. Underwriter as of the
date hereof, as of the Closing Time referred to in Section 2(c) hereof, and as
of each Date of Delivery (if any) referred to in Section 2(b) hereof, and agrees
with each U.S. Underwriter, as follows:
(i) Good Standing of OpenTV, Inc. OpenTV, Inc. has been duly
-----------------------------------------
organized and is validly existing as a corporation in good standing
under the laws of Delaware and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectuses and to enter into and perform its
obligations under this Agreement. OpenTV, Inc. is duly qualified as a
foreign corporation to transact business and is in good standing in
each other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in
good standing would not, singly or in the aggregate, result in a
Material Adverse Effect.
(ii) Authorization of Agreement. The execution, delivery and
--------------------------
performance of this Agreement and the International Purchase Agreement
have been duly authorized by all requisite corporate action on the part
of OpenTV, Inc. This Agreement and the International Purchase Agreement
have been duly executed and delivered by OpenTV, Inc.
<PAGE>
14
SECTION 2. Sale and Delivery to the International
--------------------------------------
Managers: Closing
- -----------------
(a) Initial Securities. The Company agrees to sell to each
------------------
International Managers, severally and not jointly, and on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, each International Manager, severally and not
jointly, agrees to purchase from the Company, at the price per share set forth
in Schedule B, the number of Initial International Securities set forth in
----------
Schedule A opposite the name of such International Manager, plus any additional
- ----------
number of Initial International Securities which such International Manager may
become obligated to purchase pursuant to the provisions of Section 10 hereof.
(b) Option Securities. In addition, the Company hereby grants
-----------------
an option to the International Managers, severally and not jointly, to purchase
up to an additional 562,500 Class A Ordinary Shares at the price per share set
forth in Schedule B, less an amount per share equal to any dividends or
----------
distributions declared by the Company and payable on the Initial International
Securities but not payable on the International Option Securities. The option
hereby granted will expire 30 days after the date hereof and may be exercised in
whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Initial International Securities upon notice by the Global
Coordinator to the Company setting forth the number of International Option
Securities as to which the several International Managers are then exercising
the option and the time and date of payment and delivery for such International
Option Securities. Any such time and date of delivery for the International
Option Securities (a "Date of Delivery") shall be determined by the Global
----------------
Coordinator, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Time, as
hereinafter defined. If the option is exercised as to all or any portion of the
International Option Securities, each of the International Managers, acting
severally and not jointly, on the basis of the representations and warranties of
the Company contained herein and subject to the terms and conditions herein set
forth, will purchase that proportion of the total number of International Option
Securities then being purchased which the number of Initial International
Securities set forth in Schedule A opposite the name of such International
----------
Manager bears to the total number of Initial International Securities, subject
in each case to such adjustments as the Global Coordinator in its discretion
shall make to eliminate any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery
-------
of certificates for, the Initial Securities shall be made at the offices of
Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York 10017 or at
such other place as shall be agreed upon by the Global Coordinator and the
Company, at 9:00 A.M. (Eastern time) November 29, 1999 (unless postponed in
accordance with the provisions of Section 10), or such other time not later
<PAGE>
15
than ten business days after such date as shall be agreed upon by the Global
Coordinator and the Company (such time and date of payment and delivery being
herein called "Closing Time").
------------
In addition, in the event that any or all of the International
Option Securities are purchased by the International Managers, payment of the
purchase price for, and delivery of certificates for, such International Option
Securities shall be made at the above-mentioned offices, or at such other place
as shall be agreed upon by the Global Coordinator and the Company, on each Date
of Delivery as specified in the notice from the Global Coordinator to the
Company.
Payment shall be made to the Company by wire transfer of U.S.
Dollars of immediately available funds to a bank account designated by the
Company, against delivery to the Lead Managers for the respective accounts of
the International Managers of certificates for the International Securities to
be purchased by them. It is understood that each International Manager has
authorized the International Managers, for its account, to accept delivery of,
receipt for, and make payment of the purchase price for, the Initial
International Securities and the International Option Securities, if any, which
it has agreed to purchase. Merrill Lynch, individually and not as representative
of the International Managers, may (but shall not be obligated to) make payment
of the purchase price for the Initial International Securities or the
International Option Securities, if any, to be purchased by any International
Manager whose funds have not been received by the Closing Time or the relevant
Date of Delivery, as the case may be, but such payment shall not relieve such
International Manager from its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial
---------------------------
International Securities and the International Option Securities, if any, shall
be in such denominations and registered in such names as the Lead Managers may
request in writing at least one full business day before the Closing Time or the
relevant Date of Delivery, as the case may be. The certificates for the Initial
International Securities and the International Option Securities, if any, will
be made available for examination and packaging by the Lead Managers in The City
of New York not later than 10:00 A.M. (Eastern time) on the business day prior
to the Closing Time or the relevant Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company covenants
------------------------
with each International Manager as follows:
(a) Compliance with Securities Regulations and Commission
-----------------------------------------------------
Requests. The Company, subject to Section 3(b), will comply with the
- --------
requirements of Rule 430A or Rule 434, as applicable, and will notify the Global
Coordinator immediately, and confirm the notice in writing, (i) when any
post-effective amendment to the Registration Statement shall become effective,
or any supplement to the Prospectuses or any amended Prospectuses shall have
been filed, (ii) of the receipt of any comments from the Commission, (iii) of
any request by the
<PAGE>
16
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectuses or for additional information, and (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of any
preliminary prospectus, or of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, or of the initiation or
threatening of any proceedings for any of such purposes. The Company will
promptly effect the filings necessary pursuant to Rule 424(b) and will take such
steps as it deems necessary to ascertain promptly whether the form of prospectus
transmitted for filing under Rule 424(b) was received for filing by the
Commission and, in the event that it was not, it will promptly file such
prospectus. The Company will make every reasonable effort to prevent the
issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Global
--------------------
Coordinator notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)), any Term Sheet
or any amendment, supplement or revision to either the prospectus included in
the Registration Statement at the time it became effective or to the
Prospectuses, will furnish the Global Coordinator with copies of any such
documents a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file or use any such document to which the Global
Coordinator or counsel for the International Managers shall object.
(c) Delivery of Registration Statements. The Company has
-----------------------------------
furnished or will deliver to the Lead Managers and counsel for the International
Managers, without charge, signed copies of the Registration Statement as
originally filed and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein) and signed copies of all
consents and certificates of experts, and will also deliver to the Lead
Managers, without charge, a conformed copy of the Registration Statement as
originally filed and of each amendment thereto (without exhibits) for each of
the International Managers. The copies of the Registration Statement and each
amendment thereto furnished to the International Managers will be identical to
the electronically transmitted copies thereof filed with the Commission pursuant
to EDGAR, except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to
------------------------
each International Manager, without charge, as many copies of each preliminary
prospectus as such International Manager Underwriter reasonably requested, and
the Company hereby consents to the use of such copies for purposes permitted by
the 1933 Act. The Company will furnish to each International Manager, without
charge, during the period when the International Prospectus is required to be
delivered under the 1933 Act or the Securities Exchange Act of 1934 (the "1934
----
Act"), such number of copies of the International Prospectus (as amended or
- ---
supplemented) as such International Manager may reasonably request. The
International Prospectus and any
<PAGE>
17
amendments or supplements thereto furnished to the International Managers will
be identical to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company
-----------------------------------------
will comply with the 1933 Act and the 1933 Act Regulations so as to permit the
completion of the distribution of the Securities as contemplated in this
Agreement, the U.S. Purchase Agreement and the Prospectuses. If at any time when
a prospectus is required by the 1933 Act to be delivered in connection with
sales of the Securities, any event shall occur or condition shall exist as a
result of which it is necessary, in the opinion of counsel for the International
Managers or for the Company, to amend the Registration Statement or amend or
supplement any Prospectus in order that the Prospectuses will not include any
untrue statements of a material fact or omit to state a material fact necessary
in order to make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of such counsel, at any such time to amend
the Registration Statement or amend or supplement any Prospectus in order to
comply with the requirements of the 1933 Act or the 1933 Act Regulations, the
Company will promptly prepare and file with the Commission, subject to Section
3(b), such amendment or supplement as may be necessary to correct such statement
or omission or to make the Registration Statement or the Prospectuses comply
with such requirements, and the Company will furnish to the International
Managers such number of copies of such amendment or supplement as the
International Managers may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best
-----------------------
efforts, in cooperation with the International Managers, to qualify the
Securities for offering and sale under the applicable securities laws of such
states and other jurisdictions (domestic or foreign) as the Global Coordinator
may designate and to maintain such qualifications in effect for a period of not
less than one year from the later of the effective date of the Registration
Statement and of any Rule 462(b) Registration Statement; provided, however, that
the Company shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in securities in
any jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is not
otherwise so subject. In each jurisdiction in which the Securities have been so
qualified, the Company will file such statements and reports as may be required
by the laws of such jurisdiction to continue such qualification in effect for a
period of not less than one year from the effective date of the Registration
Statement and of any Rule 462(b) Registration Statement.
(g) Rule 158. The Company will timely file such reports
--------
pursuant to the 1934 Act as are necessary in order to make generally available
to its securityholders as soon as practicable an earnings statement for the
purposes of, and to provide the benefits contemplated by, the last paragraph of
Section 11(a) of the 1933 Act.
<PAGE>
18
(h) Use of Proceeds. The Company will use the net proceeds
---------------
received by it from the sale of the Securities in the manner specified in the
Prospectuses under "Use of Proceeds."
---------------
(i) Listing. The Company will use its best efforts to effect
-------
the listing of the Class A Ordinary Shares (including the Securities) on the
Amsterdam Stock Exchange and comply with the requirements of such exchange to
maintain such listing. In addition, the Company will use its best efforts to
effect and maintain the quotation of the Class A Ordinary Shares (including the
Securities) on the Nasdaq National Market and will file with the Nasdaq National
Market all documents and notices required by the Nasdaq National Market of
companies that have securities that are traded in the over-the-counter market
and quotations for which are reported by the Nasdaq National Market.
(j) Restriction on Sale of Securities. During a period of 180
---------------------------------
days from the date of the Prospectuses, the Company will not, without the prior
written consent of the Global Coordinator (i) directly or indirectly, offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise dispose of or transfer any Class A Ordinary Shares or any
securities convertible into or exercisable or exchangeable for Class A Ordinary
Shares (including, without limitation, the Class B Ordinary Shares, no par
value, of the Company) or file any registration statement under the 1933 Act
with respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Class A Ordinary
Shares, whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of Class A Ordinary Shares or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (A) the sale of the
Securities hereunder or under the U.S. Purchase Agreement, (B) the issuance of
any Class A Ordinary Shares by the Company upon the exercise of options or
warrants or the conversion of securities outstanding on the date hereof and
referred to in the Prospectuses or (C) the issuance of any Class A Ordinary
Shares or options to purchase Class A Ordinary Shares granted pursuant to
existing employee benefit plans of the Company referred to in the Prospectuses.
In addition, during a period of one year from the date of the Prospectuses, the
Company will not, without the prior written consent of the Global Coordinator,
file any registration statement under the 1933 Act for the benefit of any person
(or any of their transferees) listed on #1 through #__ of Schedule C hereto.
(k) Reporting Requirements. The Company, during the period
----------------------
when the Prospectuses are required to be delivered under the 1933 Act or the
1934 Act, will file all documents required to be filed with the Commission
pursuant to the 1934 Act and rules and regulations of the Commission thereunder
within the time periods referred to therein.
<PAGE>
19
(l) Compliance with NASD Rules. The Company hereby agrees that
--------------------------
it will ensure that the Reserved Securities will be restricted as required by
the National Association of Securities Dealers, Inc. (the "NASD") or the NASD
rules from sale, transfer, assignment, pledge or hypothecation for a period of
three months following the date of this Agreement. The U.S. Underwriters will
notify the Company as to which persons will need to be so restricted. At the
request of the U.S. Underwriters, the Company will direct the transfer agent to
place a stop transfer restriction upon such securities for such period of time.
Should the Company release, or seek to release, from such restrictions any of
the Reserved Securities, the Company agrees to reimburse the Underwriters for
any reasonable expenses (including, without limitation, legal expenses) they
incur in connection with such release.
(m) Compliance with Rule 463. The Company will file with the
------------------------
Commission such reports as may be required pursuant to Rule 463 of the 1933 Act
Regulations.
SECTION 4. Payment of Expenses.
-------------------
(a) Expenses. The Company will pay all expenses incident to
--------
the performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the U.S. Underwriters of
this Agreement, any Agreement among U.S. Underwriters and such other documents
as may be required in connection with the offering, purchase, sale, issuance or
delivery of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities to the Underwriters, including any stock or
other transfer taxes and any stamp or other duties payable upon the sale,
issuance or delivery of the Securities to the Underwriters and the transfer of
the Securities between the U.S. Underwriters and the International Managers,
(iv) the fees and disbursements of the Company's counsel, accountants and other
advisors, (v) the qualification of the Securities under securities laws in
accordance with the provisions of Section 3(f) hereof, including filing fees and
the reasonable fees and disbursements of counsel with the preparation of the
Blue Sky Survey and any supplement thereto, (vi) one-half of all "roadshow"
expenses of the Company and the Underwriters, (vii) the printing and delivery to
the Underwriters of copies of each preliminary prospectus, any Term Sheets and
of the Prospectuses and any amendments or supplements thereto, (viii) the
preparation, printing and delivery to the Underwriters of copies of any Blue Sky
Survey and any supplement thereto, (ix) the fees and expenses of any transfer
agent or registrar for the Securities, (x) the filing fees incident to, and the
reasonable fees and disbursements of counsel to the Underwriters in connection
with, the review by the NASD of the terms of the sale of the Securities, (xi)
the fees and expenses incurred in connection with the inclusion of the
Securities in the Nasdaq National Market and (xii) all costs and expenses of the
Underwriters, including the fees and disbursements of counsel for the
Underwriters, in connection with matters
<PAGE>
20
related to the Reserved Securities which are designated by the Company for sale
to employees and others having a business relationship with the Company.
(b) Termination of Agreement. If this Agreement is terminated
------------------------
by the Lead Managers in accordance with the provisions of Section 5 hereof
(other than in accordance with paragraph (j) as a result of the failure of the
U.S. Underwriters to comply with their obligations under the U.S. Purchase
Agreement) or Section 9(a)(i) hereof, the Company shall reimburse the
International Managers for all of their out-of-pocket expenses incurred by the
International Managers in connection with this Agreement or the offering of the
Securities contemplated hereunder, including the reasonable fees and
disbursements of counsel and special counsel for the International Managers.
SECTION 5. Conditions of International Managers' Obligations.
-------------------------------------------------
The obligations of the several International Managers hereunder are subject to
the accuracy of the representations and warranties of the Company contained in
Section 1 hereof or in certificates of any officer of the Company or any
subsidiary of the Company delivered pursuant to the provisions hereof, to the
performance by the Company of its covenants and other obligations hereunder, and
to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration
---------------------------------------
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission, and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to the International Managers. A
prospectus containing the Rule 430A Information shall have been filed with the
Commission in accordance with Rule 424(b) (or a post-effective amendment
providing such information shall have been filed and declared effective in
accordance with the requirements of Rule 430A) or, if the Company has elected to
rely upon Rule 434, a Term Sheet shall have been filed with the Commission in
accordance with Rule 424(b).
(b) Opinion of Counsel for Company. At Closing Time, the Lead
------------------------------
Managers shall have received the favorable opinion, dated as of Closing Time, of
each of (i) Cravath Swaine & Moore, counsel for the Company and OpenTV, Inc.,
(ii) Harney Westwood & Riegels, special British Virgin Islands counsel for the
Company, (iii) Nauta Dutilh, special Dutch regulatory counsel for the Company
and (iv) PricewaterhouseCoopers LLP, special Dutch tax counsel for the Company,
each in form and substance satisfactory to counsel for the International
Managers, together with signed or reproduced copies of such letters for each of
the other International Managers to the effect set forth in Exhibits A-1 through
A-5 thereto, respectively.
<PAGE>
21
(c) Opinion of Counsel for the International Managers. At
-------------------------------------------------
Closing Time, the Lead Managers shall have received the favorable opinion, dated
as of Closing Time, of each of Simpson Thacher & Bartlett, counsel for the
International Managers, and O'Neal Webster O'Neal Myers Fletcher & Gordon,
special British Virgin Islands counsel to the International Managers, together
with signed or reproduced copies of such letter for each of the other
International Managers as to such matters as are reasonably requested by the
Lead Managers.
(d) Officers' Certificate. At Closing Time, there shall not
---------------------
have been, since the date hereof or since the respective dates as of which
information is given in the Prospectuses, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
Lead Managers shall have received a certificate of the President or a Vice
President of the Company and of the chief financial or chief accounting officer
of the Company, dated as of Closing Time, to the effect that (i) there has been
no such material adverse change, (ii) the representations and warranties in
Section l(a) hereof are true and correct with the same force and effect as
though expressly made at and as of Closing Time, (iii) the Company has complied
with all agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to Closing Time, and (iv) no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted, are pending or are contemplated by the
Commission.
(e) Accountant's Comfort Letter. At the time of the execution
---------------------------
of this Agreement, the Lead Managers shall have received from
PricewaterhouseCoopers Inc. a letter dated such date, in form and substance
satisfactory to the Lead Managers, together with signed or reproduced copies of
such letter for each of the other International Managers containing statements
and information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and certain
financial information contained in the Registration Statement and the
Prospectuses.
(f) Bring-down Comfort Letter. At Closing Time, the Lead
-------------------------
Managers shall have received from PricewaterhouseCoopers Inc. a letter, dated as
of Closing Time, to the effect that they reaffirm the statements made in the
letter furnished pursuant to subsection (e) of this Section, except that the
specified date referred to shall be a date not more than three business days
prior to Closing Time.
(g) Approval of Listing. At Closing Time, the Securities shall
-------------------
have been approved for listing on the Amsterdam Stock Exchange and shall have
been approved for inclusion in the Nasdaq National Market, in each case, subject
only to official notice of issuance.
<PAGE>
22
(h) No Objection. The NASD has confirmed that it has not
------------
raised any objection with respect to the fairness and reasonableness of the
underwriting terms and arrangements.
(i) Lock-up Agreements. At the date of this Agreement, the
------------------
Lead Managers shall have received an agreement substantially in the form of
Exhibit B hereto signed by the persons listed on Schedule C hereto.
- --------- ----------
(j) Purchase of Initial U.S. Securities. Contemporaneously
-----------------------------------
with the purchase by the International Managers of the Initial International
Securities under this Agreement, the U.S. Underwriters shall have purchased the
Initial U.S. Securities under the U.S. Purchase Agreement.
(k) Conditions to Purchase of International Securities. In the
--------------------------------------------------
event that the International Managers exercise their option provided in Section
2(b) hereof to purchase all or any portion of the International Option
Securities, the representations and warranties of the Company contained herein
and the statements in any certificates furnished by the Company or any
subsidiary of the Company hereunder shall be true and correct as of each Date of
Delivery and, at the relevant Date of Delivery, the Lead Managers shall have
received:
(i) Officers' Certificate. A certificate, dated such Date of
---------------------
Delivery, of the President or a Vice President of the Company and of
the chief financial or chief accounting officer of the Company
confirming that the certificate delivered at the Closing Time pursuant
to Section 5(d) hereof remains true and correct as of such Date of
Delivery.
(ii) Opinion of Counsel for Company. The favorable opinion,
------------------------------
dated as of such Date of Delivery, of each of counsels listed in
Section 5(b), each in form and substance satisfactory to counsel for
the International Managers, relating to the International Option
Securities to be purchased on such Date of Delivery and otherwise to
the same effect as the opinion required by Section 5(b) hereof.
(iii) Opinion of Counsel for International Managers. The
---------------------------------------------
favorable opinion of Simpson Thacher & Bartlett, counsel for the
International Managers, and of O'Neal Webster O'Neal Myers Fletcher &
Gordon, special British Virgin Islands counsel to the International
Managers, each dated such Date of Delivery, relating to the
International Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the opinion required by
Section 5(c) hereof.
(iv) Bring-down Comfort Letter. A letter from
-------------------------
PricewaterhouseCoopers Inc., in form and substance satisfactory to the
Lead Managers and dated such Date of Delivery,
<PAGE>
23
substantially in the same form and substance as the letter furnished to
the Lead Managers pursuant to Section 5(f) hereof, except that the
"specified date" in the letter furnished pursuant to this paragraph
shall be a date not more than five days prior to such Date of Delivery.
(l) Additional Documents. At Closing Time and at each Date of
--------------------
Delivery, counsel for the International Managers shall have been furnished with
such documents and opinions as they may reasonably require for the purpose of
enabling them to pass upon the issuance and sale of the Securities as herein
contemplated, or in order to evidence the accuracy of any of the representations
or warranties, or the fulfillment of any of the conditions, herein contained;
and all proceedings taken by the Company in connection with the issuance and
sale of the Securities as herein contemplated shall be satisfactory in form and
substance to the Lead Managers and counsel for the Internal Managers.
(m) Termination of Agreement. If any condition specified in
------------------------
this Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement, or, in the case of any condition to the purchase of
International Option Securities on a Date of Delivery which is after the Closing
Time, the obligations of the several International Managers to purchase the
relevant Option Securities, may be terminated by the Lead Managers by notice to
the Company at any time at or prior to Closing Time or such Date of Delivery, as
the case may be, and such termination shall be without liability of any party to
any other party except as provided in Section 4 and except that Sections 1, 6, 7
and 8 shall survive any such termination and remain in full force and effect.
SECTION 6. Indemnification.
---------------
(a) Indemnification of the International Managers. Each of the
---------------------------------------------
Company and OpenTV, Inc. agree jointly and severally to indemnify and hold
harmless each International Manager and each person, if any, who controls any
International Manager within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
the Prospectuses (or any amendment or supplement thereto), or the
omission or alleged
<PAGE>
24
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of (A) the violation of
any applicable laws or regulations of foreign jurisdictions where
Reserved Securities have been offered and (B) any untrue statement or
alleged untrue statement of a material fact included in the supplement
or prospectus wrapper material distributed in foreign jurisdictions in
connection with the reservation and sale of the Reserved Securities to
eligible employees and persons having relationships with the Company or
the omission or alleged omission therefrom of a material fact necessary
to make the statements therein, when considered in conjunction with the
Prospectus or preliminary prospectus, not misleading;
(iii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission or in connection with any violation of the nature referred to
in Section 6(a)(ii)(A) hereof, or any such alleged untrue statement or
omission; provided that (subject to Section 6(d) below) any such
settlement is effected with the written consent of the Company; and
(iv) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission or in connection with any
violation of the nature referred to in Section 6(a)(ii)(A) hereof, to
the extent that any such expense is not paid under (i), (ii) or (iii)
above; provided, however, that this indemnity agreement shall not apply
to any loss, liability, claim, damage or expense to the extent arising
out of any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with written
information furnished to the Company by any International Manager
through the Lead Managers expressly for use in the Registration
Statement (or any amendment or supplement thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or any
preliminary prospectus or the International Prospectus (or any
amendment or supplement thereto).
(b) Indemnification of Company, Directors and Officers. Each
--------------------------------------------------
International Manager severally agrees to indemnify and hold harmless the
Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act against
<PAGE>
25
any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment or supplement
thereto), including the Rule 430A Information and the Rule 434 Information, if
applicable, or any preliminary international prospectus or the International
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such
International Manager through the Lead Managers expressly for use in the
Registration Statement (or any amendment or supplement thereto) or such
preliminary prospectus or the International Prospectus (or any amendment or
supplement thereto).
(c) Actions Against Parties; Notification. Each indemnified
-------------------------------------
party shall give notice as promptly as reasonably practicable to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability hereunder to
the extent it is not materially prejudiced as a result thereof and in any event
shall not relieve it from any liability which it may have otherwise than on
account of this indemnity agreement. In the case of parties indemnified pursuant
to Section 6(a) above, counsel to the indemnified parties shall be selected by
Merrill Lynch, and, in the case of parties indemnified pursuant to Section 6(b)
above, counsel to the indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel to the indemnifying party shall not
-------- -------
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for fees
and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) Settlement Without Consent if Failure To Reimburse. If at
--------------------------------------------------
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(iii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the
<PAGE>
26
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
(e) Indemnification for Reserved Securities. In connection
---------------------------------------
with the offer and sale of the Reserved Securities, the Company agrees, promptly
upon a request in writing, to indemnify and hold harmless the Underwriters from
and against any and all losses, liabilities, claims, damages and expenses
incurred by them as a result of the failure of eligible employees and persons
having relationships with the Company to pay for and accept delivery of Reserved
Securities which, by the end of the first business day following the date of
this Agreement, were subject to a properly confirmed agreement to purchase.
SECTION 7. Contribution. If the indemnification provided for
------------
in Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the International Managers on the other hand from
the offering of the Securities pursuant to this Agreement or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and of the International Managers on the other hand in connection with the
statements or omissions, or in connection with any violation of the nature
referred to in Section 6(a)(ii)(A) hereof, which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Company on the one hand
and the International Managers on the other hand in connection with the offering
of the International Securities pursuant to this Agreement shall be deemed to be
in the same respective proportions as the total net proceeds from the offering
of the International Securities pursuant to this Agreement (before deducting
expenses) received by the Company and the total underwriting discount received
by the International Managers, in each case as set forth on the cover of the
International Prospectus, or, if Rule 434 is used, the corresponding location on
the Term Sheet, bear to the aggregate initial public offering price of the
International Securities as set forth on such cover.
The relative fault of the Company on the one hand and the
International Managers on the other hand shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or by the International Managers and
<PAGE>
27
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission or any violation of the nature
referred to in Section 6(a)(ii)(A) hereof.
Each of the Company, OpenTV, Inc. and the International
Managers agrees that it would not be just and equitable if contribution pursuant
to this Section 7 were determined by pro rata allocation (even if the
International Managers were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this Section 7. The aggregate amount of
losses, liabilities, claims, damages and expenses incurred by an indemnified
party and referred to above in this Section 7 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no
International Manager shall be required to contribute any amount in excess of
the amount by which the total price at which the International Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such International Manager has otherwise
been required to pay by reason of any such untrue or alleged untrue statement or
omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who
controls an International Manager within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act shall have the same rights to contribution as
such International Manager, and each director of the Company, each officer of
the Company who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as the Company.
The International Managers' respective obligations to contribute pursuant to
this Section 7 are several in proportion to the number of Initial International
Securities set forth opposite their respective names in Schedule A hereto and
not joint.
SECTION 8. Representations, Warranties and Agreements To
---------------------------------------------
Survive Delivery. All representations, warranties and agreements contained in
- ----------------
this Agreement or in certificates of officers of the Company or any of its
subsidiaries submitted pursuant hereto, shall remain
<PAGE>
28
operative and in full force and effect, regardless of any investigation made by
or on behalf of any International Manager or controlling person, or by or on
behalf of the Company, and shall survive delivery of the Securities to the
International Managers.
SECTION 9. Termination of Agreement.
------------------------
(a) Termination; General. The Lead Managers may terminate this
--------------------
Agreement, by notice to the Company, at any time at or prior to Closing Time (i)
if there has been, since the time of execution of this Agreement or since the
respective dates as of which information is given in the International
Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the Lead Managers, impracticable to market the Securities or to
enforce contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended or materially limited by the
Commission, the Amsterdam Stock Exchange or the Nasdaq National Market, or if
trading generally on the American Stock Exchange or the New York Stock Exchange
or in the Nasdaq National Market has been suspended or materially limited, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the NASD or any other governmental authority, or (iv)
if a banking moratorium has been declared by British Virgin Islands, Dutch,
United States Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to
-----------
this Section, such termination shall be without liability of any party to any
other party except as provided in Section 4 hereof, and provided further that
Sections 1, 6, 7 and 8 shall survive such termination and remain in full force
and effect.
SECTION 10. Default by One or More of the International
-------------------------------------------
Managers. If one or more of the International Managers shall fail at Closing
- --------
Time or a Date of Delivery to purchase the Securities which it or they are
obligated to purchase under this Agreement (the "Defaulted Securities"), the
--------------------
Lead Managers shall have the right, within 24 hours thereafter, to make
arrangements for one or more of the non-defaulting International Managers, or
any other underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Lead Managers shall not have completed such arrangements
within such 24-hour period, then:
<PAGE>
29
(a) if the number of Defaulted Securities does not exceed 10%
of the number of International Securities to be purchased on such date,
each of the non-defaulting International Managers shall be obligated,
severally and not jointly, to purchase the full amount thereof in the
proportions that their respective underwriting obligations hereunder
bear to the underwriting obligations of all non-defaulting
International Managers, or
(b) if the number of Defaulted Securities exceeds 10% of the
number of International Securities to be purchased on such date, this
Agreement or, with respect to any Date of Delivery which occurs after
the Closing Time, the obligation of the International Managers to
purchase and of the Company to sell the Option Securities to be
purchased and sold on such Date of Delivery shall terminate without
liability on the part of any non-defaulting International Manager.
No action taken pursuant to this Section shall relieve any
defaulting International Manager from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement or, in the case of a Date of Delivery which is
after the Closing Time, which does not result in a termination of the obligation
of the International Managers to purchase and the Company to sell the relevant
International Option Securities, as the case may be, either the Lead Managers or
the Company shall have the right to postpone Closing Time or the relevant Date
of Delivery, as the case may be, for a period not exceeding seven days in order
to effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements. As used herein, the term "International
Manager" includes any person substituted for an International Manager under this
Section 10.
SECTION 11. Notices. All notices and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to the
International Managers shall be directed to the Lead Managers c/o Merrill Lynch
& Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated at North Tower, World
Financial Center, New York, New York 10281-1201, attention of Investment
Banking; and notices to the Company shall be directed to it at OpenTV Corp.,
Abbot Building, Mount Street, Tortola, Road Town, British Virgin Islands,
attention of ____________.
SECTION 12. Parties. This Agreement shall each inure to the
-------
benefit of and be binding upon the International Managers and the Company and
their respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the International Managers and the Company and their respective successors
and the controlling persons and officers and directors referred to in Sections
<PAGE>
30
6 and 7, and their heirs and legal representatives, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
herein contained. This Agreement and all conditions and provisions hereof are
intended to be for the sole and exclusive benefit of the International Managers
and the Company and their respective successors, and said controlling persons
and officers and directors, and their heirs and legal representatives, and for
the benefit of no other person, firm or corporation. No purchaser of Securities
from any International Manager shall be deemed to be a successor by reason
merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE
----------------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICT OF LAWS. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Agent for Service; Submission to Jurisdiction;
----------------------------------------------
Waiver of Immunities. By the execution and delivery of this Agreement, the
- --------------------
Company (i) acknowledges that it has, by separate written instrument, designated
and appointed CT Corporation System, 1633 Broadway, New York, New York 10019
(and any successor entity), as its authorized agent upon which process may be
served in any suit or proceeding arising out of or relating to this Agreement
that may be instituted in any Federal or state court in the Borough of
Manhattan, City of New York, State of New York, or brought under the United
States Federal or state securities laws, and acknowledges that CT Corporation
System has accepted such designation, (ii) submits to the non-exclusive
jurisdiction of any such court in any such suit or proceeding and (iii) agrees
that service of process upon CT Corporation System and written notice of said
service to the Company in accordance with Section 11 shall be deemed in every
respect effective service of process upon the Company in any such suit or
proceeding. The Company further agrees to take any and all action, including the
execution and filing of any and all such documents and instruments, as may be
necessary to continue such designation and appointment of CT Corporation System
in full force and effect so long as any of the Class A Ordinary Shares shall be
outstanding; provided, however, that the Company may, by written notice to the
-------- -------
Lead Managers, designate such additional or alternative agent for service of
process under this Section 14 that (i) maintains an office located in the
Borough of Manhattan, City of New York, in the State of New York and (ii) is
either (x) counsel for the Company or (y) a corporate service company which acts
as agent for service of process for other persons in the ordinary course of its
business. Such written notice shall identify the name of such agent for process
and the address of the office of such agent for service of process in the
Borough of Manhattan, City of New York, State of New York.
To the extent that the Company or any of its properties,
assets or revenues may or may hereafter become entitled to, or have attributed
to the Company, any right of immunity, on the grounds of sovereignty or
otherwise, from any legal action, suit or proceeding, from the
<PAGE>
31
giving of any relief in any such legal action, suit or proceeding, from setoff
or counterclaim, from the jurisdiction of any New York or U.S. federal court,
from service of process, from attachment upon or prior to judgment, from
attachment in aid of execution of judgment, or from execution of judgment, or
other legal process or proceeding for the giving of any relief or for the
enforcement of any judgment, in any such court in which proceedings may at any
time be commenced, with respect to the obligations and liabilities of the
Company, or any other matter under or arising out of or in connection with this
Agreement or the International Purchase Agreement, the Company hereby
irrevocably and unconditionally waives such right, and agrees not to plead or
claim any such immunity, and consents to such relief or enforcement.
SECTION 15. Judgment Currency. The Company agrees to indemnify
-----------------
each International Manager and each person, if any, who controls any
International Manager within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, against any loss incurred by such party as a result
of any judgment or order being given or made against the Company for any U.S.
dollar amount due under this Agreement and such judgment or order being
expressed and paid in a currency (the "Judgment Currency") other than United
-----------------
States dollars and as a result of any variation as between (i) the rate of
exchange at which the United States dollar amount is converted into the Judgment
Currency for the purpose of such judgment or order and (ii) the spot rate of
exchange in The City of New York at which such party on the date of payment of
such judgment or order is able to purchase United States dollars with the amount
of the Judgment Currency actually received by such party if such party had
utilized such amount of Judgment Currency to purchase United States dollars as
promptly as practicable upon such party's receipt thereof. The foregoing
indemnity shall continue in full force and effect notwithstanding any such
judgment or order as aforesaid. The term "spot rate of exchange" shall include
any premiums and costs of exchange payable in connection with the purchase of,
or conversion into, United States dollars.
SECTION 16. Effect of Headings. The Section headings
------------------
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.
SECTION 17. Counterparts. This Agreement may be executed in
------------
one or more counterparts and, when a counterpart has been executed by each
party, all such counterparts taken together shall constitute one and the same
agreement.
<PAGE>
32
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the International Managers and the Company in accordance with
its terms.
Very truly yours,
OPENTV CORP.
By: __________________________
Name:
Title:
OPENTV, INC.
By: __________________________
Name:
Title:
<PAGE>
33
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH INTERNATIONAL
MEESPIERSON N.V.
THOMAS WEISEL PARTNERS LLC
By: MERRILL LYNCH INTERNATIONAL
By: ______________________________
Authorized Signatory
For themselves and as Lead Managers of the other International Managers named in
Schedule A hereto.
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Name of International Manager Initial
- ----------------------------- International Securities
------------------------
<S> <C>
Merrill Lynch International...............................
Thomas Weisel Partners LLC................................
MeesPierson N.V...........................................
---------
Total..................................................... 3,750,000
=========
</TABLE>
<PAGE>
SCHEDULE B
OPENTV CORP.
------------
Class A Ordinary Shares
(No Par Value)
1. The initial public offering price per share for the Securities,
determined as provided in Section 2, shall be $______________.
2. The purchase price per share for the International Securities to
be paid by the several International Managers shall be $_________________, being
an amount equal to the initial public offering price set forth above less
$_________________ per share; provided that the purchase price per share for any
International Option Securities purchased upon the exercise of the over-
allotment option described in Section 2(b) shall be reduced by an amount per
share equal to any dividends or distributions declared by the Company and
payable on the Initial International Securities but not payable on the
International Option Securities.
<PAGE>
SCHEDULE C
List of Persons and Entities Subject
to Lock-Up
1. Myriad International Holdings BV (MIH Limited)
2. Sun TSI Subsidiary, Inc (Sun Microsystems, Inc.)
3. America Online, Inc.
4. General Instrument Corp.
5. Liberty Digital, Inc.
6. News America Incorporated
7. Warner Bros., a division of Time Warner Entertainment Company, L.P. and
Turner Broadcasting System, Inc.
8. Jan Steenkamp
9. Vincent Dureau
10. Randall Livingston
11. Mitchell Berman
12. Joel Zdepski
13. Regis Saint Girons
14. James Brown
15. Thomas Jackson
16. Michael Catalano
17. Clay Conrad
18. Marilyn Hommes
19. Mark Meagher
20. Gilles Boccon Gibod
21. Jon Haass
<PAGE>
2
22. Igor Pavlin
23. Yeong-Su Sheu
24. Deborah Kanarek
25. Ravindranath Rishy-Maharaj
26. Jean-Rene Menand
27. Vera Lazarevic
<PAGE>
Exhibit A-1
-----------
FORM OF OPINION OF CRAVATH, SWAINE & MOORE TO
BE DELIVERED PURSUANT TO SECTION 5(b)
(i) OpenTV, Inc. has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(ii) OpenTV, Inc. has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the International
Purchase Agreement.
(iii) OpenTV, Inc.is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) The International Purchase Agreement has been duly authorized,
executed and delivered by the Company.
(v) The International Purchase Agreement has been duly authorized,
executed and delivered by OpenTV, Inc.
(vi) The International Purchase Agreement has been duly authorized,
executed and delivered by MIH Limited.
(vii) The Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the 1933 Act; any required filing
of the Prospectus pursuant to Rule 424(b) has been made in the manner and within
the time period required by Rule 424(b); and, to the best of our knowledge, no
stop order suspending the effectiveness of the Registration Statement or any
Rule 462(b) Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or threatened
by the Commission.
(viii) The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 430A Information and the Rule 434 Information, as
applicable, the Prospectus and each amendment or supplement to the Registration
Statement and Prospectus as of their respective effective or issue dates (other
than the financial statements and supporting schedules included
<PAGE>
therein or omitted therefrom, as to which we need express no opinion) complied
as to form in all material respects with the requirements of the 1933 Act and
the 1933 Act Regulations.
(ix) If Rule 434 has been relied upon, the Prospectus was not "materially
different," as such term is used in Rule 434, from the prospectus included in
the Registration Statement at the time it became effective.
(x) The form of certificate used to evidence the Class A Ordinary Shares
complies in all material respects with all applicable requirements of the Nasdaq
National Market.
(xi) To the best of our knowledge, there is not pending or threatened any
action, suit, proceeding, inquiry or investigation, to which the Company or any
subsidiary is a party, or to which the property of the Company or any subsidiary
is subject, before or brought by any court or governmental agency or body,
domestic or foreign, which might reasonably be expected to result in a Material
Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation of the
transactions contemplated in the Purchase Agreement or the performance by the
Company of its obligations thereunder.
(xii) The information in the Prospectus under "Description of Capital
Stock-Class A Ordinary Shares and Class B Ordinary Shares", "Business--
Intellectual Property", "Business--Legal Proceedings" and "Description of
Capital Stock--Preferred Shares", "United States Federal Income Tax
Consequences" and in the Registration Statement under Item 14, to the extent
that it constitutes matters of law, summaries of legal matters, OpenTV, Inc.'s
charter and bylaws or legal proceedings, or legal conclusions, has been reviewed
by us and is correct in all material respects; and the opinion of such firm set
forth under "United States Federal Income Tax Consequences" is confirmed.
(xiii) To the best of our knowledge, there are no Federal or New York
State statutes or regulations that are required to be described in the
Prospectus that are not described as required.
(xiv) All descriptions in the Registration Statement of contracts and
other documents to which the Company or its subsidiaries are a party are
accurate in all material respects; to the best of our knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed or incorporated by reference as exhibits thereto,
and the
<PAGE>
3
descriptions thereof or references thereto are correct in all material respects.
(xv) To the best of our knowledge, neither the Company nor any subsidiary
is in violation of its charter or by-laws and no default by the Company or any
subsidiary exists in the due performance or observance of any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument that is described or referred to in the Registration Statement or the
Prospectus or filed or incorporated by reference as an exhibit to the
Registration Statement.
(xvi) The execution, delivery and performance of the International
Purchase Agreement and the consummation of the transactions contemplated in the
International Purchase Agreement and in the Registration Statement (including
the issuance and sale of the Securities and the use of the proceeds from the
sale of the Securities as described in the Prospectus under the caption "Use Of
Proceeds") and compliance by the Company with its obligations under the
International Purchase Agreement do not and will not, whether with or without
the giving of notice or lapse of time or both, conflict with or constitute a
breach of, or default or Repayment Event (as defined in Section 1(a)(x) of the
International Purchase Agreement) under or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the Company or
any subsidiary pursuant to any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or any other agreement or instrument,
known to us, to which the Company or any subsidiary is a party or by which it or
any of them may be bound, or to which any of the property or assets of the
Company or any subsidiary is subject (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not have a Material
Adverse Effect), nor will such action result in any violation of any applicable
Federal or New York State law, statute, rule, regulation, judgment, order, writ
or decree, known to us, of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over the Company or any subsidiary or
any of their respective properties, assets or operations.
(xvii) The execution, delivery and performance of the International
Purchase Agreement and the consummation of the transactions contemplated in the
International Purchase Agreement and in the Registration Statement (including
the issuance and sale of the Securities and the use of the proceeds from the
sale
<PAGE>
4
of the Securities as described in the Prospectus under the caption "Use Of
Proceeds") and compliance by OpenTV, Inc. with its obligations under the
International Purchase Agreement do not and will not, whether with or without
the giving of notice or lapse of time or both, conflict with or constitute a
breach of, or default or Repayment Event (as defined in Section 1(a)(x) of the
International Purchase Agreement) under or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of OpenTV, Inc.
or any subsidiary pursuant to any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or any other agreement or instrument,
known to us, to which OpenTV, Inc. or any subsidiary is a party or by which it
or any of them may be bound, or to which any of the property or assets of
OpenTV, Inc. or any subsidiary is subject (except for such conflicts, breaches
or defaults or liens, charges or encumbrances that would not have a Material
Adverse Effect), nor will such action result in any violation of the provisions
of the charter or by-laws of OpenTV, Inc. or any subsidiary, or any applicable
Federal or New York State law, statute, rule, regulation, judgment, order, writ
or decree, known to us, of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over OpenTV, Inc. or any subsidiary or
any of their respective properties, assets or operations.
(xviii) To the best of our knowledge, there are no persons with
registration rights or other similar rights to have any securities registered
pursuant to the Registration Statement or otherwise registered by the Company
under the 1933 Act.
(xix) The Company is not an "investment company" or an entity "controlled"
by an "investment company," as such terms are defined in the 1940 Act.
Nothing has come to our attention that would lead us to believe that the
Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable), (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need make no statement), at the time such Registration
Statement or any such amendment became effective, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus or any amendment or supplement thereto (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need make no
<PAGE>
5
statement), at the time the Prospectus was issued, at the time any such amended
or supplemented prospectus was issued or at the Closing Time, included or
includes an untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of the laws of the British Virgin Islands, upon the
opinion of Harney Westwood & Riegels, special counsel to the Company (which
opinion shall be dated and furnished to the Representatives at the Closing Time,
shall be satisfactory in form and substance to counsel for the Underwriters and
shall expressly state that the Underwriters may rely on such opinion as if it
were addressed to them), provided that Cravath, Swaine & Moore shall state in
their opinion that they believe that they and the Underwriters are justified in
relying upon such opinion, and (B) as to matters of fact (but not as to legal
conclusions), to the extent they deem proper, on certificates of responsible
officers of the Company and public officials. Such opinion shall not state that
it is to be governed or qualified by, or that it is otherwise subject to, any
treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA Section of
Business Law (1991).
<PAGE>
Exhibit A-2
-----------
FORM OF OPINION OF HARNEY WESTWOOD & RIEGELS
TO BE DELIVERED PURSUANT TO SECTION 5(b)
(i) The Company has been duly organized and is validly existing as an
international business company in good standing under the laws of the British
Virgin Islands.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the International
Purchase Agreement.
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectus in the column entitled "Actual" under the
caption "Capitalization" (except for subsequent issuances, if any, pursuant to
the International Purchase Agreement or pursuant to reservations, agreements or
employee benefit plans referred to in the Prospectus or pursuant to the exercise
of convertible securities or options referred to in the Prospectus); the shares
of issued and outstanding capital stock of the Company have been duly authorized
and validly issued and are fully paid and non-assessable; and none of the
outstanding shares of capital stock of the Company was issued in violation of
the preemptive or other similar rights of any securityholder of the Company.
(v) The Securities have been duly authorized for issuance and sale to the
Underwriters pursuant to the International Purchase Agreement and, when issued
and delivered by the Company pursuant to the International Purchase Agreement
against payment of the consideration set forth in the International Purchase
Agreement, will be validly issued and fully paid and non-assessable and no
holder of the Securities is or will be subject to personal liability by reason
of being such a holder.
(vi) The issuance of the Securities is not subject to preemptive or other
similar rights of any securityholder of the Company.
<PAGE>
2
(vii) Each Subsidiary has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, has corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Prospectus and is
duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding capital stock of each
Subsidiary has been duly authorized and validly issued, is fully paid and non-
assessable and, to the best of our knowledge, is owned by the Company, directly
or through subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity; none of the outstanding shares of
capital stock of any Subsidiary was issued in violation of the preemptive or
similar rights of any securityholder of such Subsidiary.
(viii) The International Purchase Agreement has been duly authorized,
executed and delivered by the Company.
(ix) The form of certificate used to evidence the Class A Ordinary Shares
complies in all material respects with all applicable statutory requirements,
with any applicable requirements of the charter and by-laws of the Company.
(x) To the best of our knowledge, there are no British Virgin Islands
statutes or regulations that are required to be described in the Prospectus that
are not described as required.
(xi) To the best of our knowledge, neither the Company nor any
subsidiary is in violation of its charter or by-laws and no default by the
Company or any subsidiary exists in the due performance or observance of any
material obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument that is described or referred to in the Registration Statement or the
Prospectus or filed or incorporated by reference as an exhibit to the
Registration Statement.
(xii) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign (other than under the 1933 Act and the
1933 Act
<PAGE>
3
Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which we need express
no opinion) is necessary or required in connection with the due authorization,
execution and delivery of the International Purchase Agreement or for the
offering, issuance or sale of the Securities.
(xiii) The execution, delivery and performance of the International
Purchase Agreement and the consummation of the transactions contemplated in the
International Purchase Agreement and in the Registration Statement (including
the issuance and sale of the Securities and the use of the proceeds from the
sale of the Securities as described in the Prospectus under the caption "Use Of
Proceeds") and compliance by the Company with its obligations under the
International Purchase Agreement do not and will not, whether with or without
the giving of notice or lapse of time or both, conflict with or constitute a
breach of, or default or Repayment Event (as defined in Section 1(a)(x) of the
International Purchase Agreement) under or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the Company or
any subsidiary pursuant to any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or any other agreement or instrument,
known to us, to which the Company or any subsidiary is a party or by which it or
any of them may be bound, or to which any of the property or assets of the
Company or any subsidiary is subject (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not have a Material
Adverse Effect), nor will such action result in any violation of the provisions
of the charter or by-laws of the Company or any subsidiary, or any applicable
law, statute, rule, regulation, judgment, order, writ or decree, known to us, of
any government, government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any subsidiary or any of their respective
properties, assets or operation.
(xiv) The choice of New York law to govern the International Purchase
Agreement constitutes a valid choice of law insofar as the law of the British
Virgin Islands is concerned. The submission by the Company to the non-exclusive
jurisdiction of any federal or state court sitting in New York County, New York
is a valid submission insofar as the law of the British Virgin Islands is
concerned.
(xv) Any final and conclusive monetary judgment for a definite sum
which is not subject to a stay of execution obtained against the Company in the
courts of the State of New York in
<PAGE>
4
respect of the International Purchase Agreement would be treated by the courts
of the British Virgin Islands as a cause of action in itself so that no retrial
of the issues would be necessary.
(xvi) The Company has the corporate power and authority to conduct
its business as described in the Registration Statement, and the conduct of such
business does not violate the provisions of its Memorandum of Association or
Articles of Association or any applicable law, regulation, order or decree in
the British Virgin Islands.
(xvii) Neither the Memorandum of Association nor the Articles of
Association of the Company nor any applicable British Virgin Islands law,
regulation or decree imposes any pre-emptive or similar rights on the issuance
and sale of the Shares by the Company.
(xviii) The certificates evidencing the Shares are in due and proper
form and comply with all applicable statutory requirements of the British Virgin
Islands and with the Memorandum and Articles of Association of the Company.
(xix) The statements set forth in the Prospectuses under the headings
"Description of Capital Stock", "Risk Factors --Because we British Virgin
Island company, you may have difficulty protecting your interests in respect of
decisions made by our board of directors" and "--Because we are a British Virgin
Island company, you may not be able to enforce judgements against us that are
obtained in U.S. courts" and in the Registration Statement under Item 14 to the
extent that they constitute a description of the laws and regulations of the
British Virgin Islands, or its respective agencies, authorities or other
governmental bodies, or documents, or proceedings or conclusions of British
Virgin Islands law, are correct in all material respects.
(xx) To the best of our knowledge, there are no proceedings pending
before any court, tribunal, arbitrator, government agency or administrative body
within the British Virgin Islands against or threatened against the Company of
any of its assets which if adversely determined could or might result in any
material adverse change in the business, assets or condition (financial or
otherwise) of the Company or the ability of the Company to perform any
obligations required by the terms and conditions of the International Purchase
Agreement.
<PAGE>
5
(xxi) MIH Limited has been duly organized and is validly existing as
an international business company in good standing under the laws of the British
Virgin Islands.
(xxii) MIH Limited has corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Purchase
Agreement.
(xxiii) MIH Limited is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(xxiv) The International Purchase Agreement has been duly authorized,
executed and delivered by MIH Limited.
(xxv) The execution, delivery and performance of the International
Purchase Agreement and the consummation of the transactions contemplated in the
International Purchase Agreement and in the Registration Statement (including
the issuance and sale of the Securities and the use of the proceeds from the
sale of the Securities as described in the Prospectus under the caption "Use Of
Proceeds") and compliance by MIH Limited with its obligations under the
International Purchase Agreement do not and will not, whether with or without
the giving of notice or lapse of time or both, conflict with or constitute a
breach of, or default or Repayment Event (as defined in Section 1(a)(x) of the
International Purchase Agreement) under or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of MIH Limited or
any subsidiary pursuant to any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or any other agreement or instrument,
known to us, to which MIH Limited or any subsidiary is a party or by which it or
any of them may be bound, or to which any of the property or assets of MIH
Limited or any subsidiary is subject (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not have a Material
Adverse Effect), nor will such action result in any violation of the provisions
of the charter or by-laws of MIH Limited or any subsidiary, or any applicable
law, statute, rule, regulation, judgment, order, writ or decree, known to us, of
any government, government instrumentality or court, domestic or foreign, having
jurisdiction over MIH Limited or any subsidiary or any of their respective
properties, assets or operation.
<PAGE>
6
Exhibit A-3
-----------
FORM OF OPINION OF NAUTA DUTILH
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
1. The signing by the Parties of the International Purchase Agreement and the
performance by them of their respective obligations thereunder, and the
issuance and sale of the Shares and the use of proceeds for such sale
indirectly by any of the Dutch subsidiaries as described in the
Prospectuses under the caption "Use of Proceeds", do not in themselves, on
the face of the Transaction Documents, violate Netherlands Law.
<PAGE>
2. There are no statues or regulations of Netherlands Law or the Official
Segment of Amsterdam Exchanges N.V. ("AEX") rules which are required by
Netherlands Law or the AEX Rules to be described in the Prospectuses that
are not described therein to the extent so required.
3. No consents or approvals and no licenses, authorizations or orders from or
notices to or filings with any regulatory authority or governmental body of
The Netherlands are required for the execution and delivery of the
International Purchase Agreement or the offering, issuance, sale or
delivery of the Shares in The Netherlands, except (i) filing, notice and
approval requirements under the AEX Rules including, without limitation,
approval by the AEX of the prospectuses and the application for admission
of the Shares to listing on the ASE, and (ii) notice requirements to The
Netherlands Central Bank ("De Nederlandsche Bank N.V.") pursuant to the Act
on Foreign Financial Relations ("Wet Financiele Betrekkingen Buitenland")
and regulations promulgated thereunder, provided, however, that the failure
to observe the latter notice requirements would not adversely affect the
validity of the International Purchase Agreement.
<PAGE>
Exhibit A-4
-----------
FORM OF OPINION OF PRICEWATERHOUSECOOPERS LLP
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
The information in the prospectus under the caption "Certain Netherlands Tax
Consequences" has been reviewed by us and is correct in all material respects.
<PAGE>
Exhibit B
---------
, 1999
MERRILL LYNCH & CO
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
THOMAS WEISEL PARTNERS LLC
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
United States of America
MERRILL LYNCH INTERNATIONAL
MEESPIERSON N.V.
THOMAS WEISEL PARTNERS LLC
c/o Merrill Lynch International
25 Ropemaker Place
London EC2Y 9LY
United Kingdom
Re: Agreement not to sell or otherwise dispose of securities of OpenTV
------------------------------------------------------------------
Corp.
- -----
Ladies and Gentlemen:
The undersigned understands that OpenTV Corp. (the "Company") proposes
to file a registration statement on Form F-1 (the "Registration Statement") with
the United States Securities and Exchange Commission in connection with the
initial public offering (the "Offering") of ordinary shares ("Shares") of the
Company. The undersigned further understands that the Company proposes to enter
into one or more purchase agreements (collectively, the "Purchase Agreement")
with you as representative of the underwriters of the Offering (the
Underwriters").
In recognition of the benefit that the Offering will confer upon the
undersigned as a securityholder of the Company, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
in order to induce the Company and the Underwriters to enter into the Purchase
Agreement and to proceed with the offering, the undersigned hereby agrees, that
from the date hereof until [the first anniversary of]/1/ [the date which is 180
days after]/2/ the date of
- --------------------
/1/ For persons 1-__ on Schedule C.
<PAGE>
2
the Purchase Agreement, the undersigned will not, without the prior written
consent of Merrill Lynch International, directly or indirectly, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of, or otherwise dispose of or transfer (collectively, a "Covered
-------
Sale") any Shares (other than any Shares registered in the offering) or any
- ----
securities convertible into or exchangeable or exercisable for any Shares,
whether now owned or hereafter acquired by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition
(collectively, the "Locked Shares") or request the filing of any registration
-------------
statement under the Securities Act of 1933, as amended (the "Securities Act"),
--------------
with respect to any of the foregoing (it being understood that such a request
shall not be deemed to have been made pursuant to any registration rights
agreement until a request is made thereunder and the mere entering into of any
registration rights agreement shall not be deemed such a request) or (ii) enter
into any swap or any other agreement or any transaction that transfers, in whole
or in part, directly or indirectly, the economic consequence of ownership of
Shares, whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of the Shares or other securities, in cash or otherwise.
- --------------------------------------------------------------------------------
/2/ For persons __-15 on Schedule C.
<PAGE>
3
[Notwithstanding the foregoing, on or after the date which is 181 days after the
date of the Purchase Agreement, the undersigned may make a Covered Sale of any
Locked Shares, pursuant to a private sale exempt from registration under the
Securities Act and without engaging in any marketing activities, other than to
any broker dealer, bank, investment fund, investment company, insurance company,
trust fund, employee benefit plan or similar financial institution; provided,
--------
however, that (x) the aggregate number of transferees (including subsequent
- -------
transferees) who hold Locked Shares prior to the first anniversary of the date
of the Purchase Agreement shall not exceed five and (y) each such transferee
(including any subsequent transferee) must agree in writing to be bound by the
terms of this agreement as if a party hereto.]/3/
Sincerely,
Name of Securityholder:
________________________________
(Print)
Signature:
________________________________
Name:
Title:
(If not a natural person)
- --------------------
/3/ For entities 1-__ on Schedule C.
<PAGE>
Exhibit 10.3
OPENTV CORP.
AMENDED AND RESTATED
1999 SHARE OPTION/SHARE ISSUANCE PLAN
Adopted by the Board of Directors of OpenTV Corp. on October 22, 1999
ARTICLE ONE
GENERAL PROVISIONS
1. PURPOSE.
This AMENDED AND RESTATED 1999 SHARE OPTION/SHARE ISSUANCE PLAN is
intended to promote the interests Of OPENTV CORP., a British Virgin Island
corporation, by providing eligible persons with the opportunity to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation as an incentive for them to remain in the service of the
Corporation.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
2. STRUCTURE OF PLAN.
a. The Plan shall be divided into two (2) separate equity programs:
(i) the OPTION GRANT PROGRAM under which eligible persons
may, at the discretion of the Board, be granted Options (an "Option")
to purchase shares of Class A Ordinary Shares, and
(ii) the SHARE ISSUANCE PROGRAM under which eligible
persons may, at the discretion of the Board, be issued shares of
Class A Ordinary Shares directly (a "Share Issuance"), either
through the immediate purchase of such shares or as a bonus for
services rendered the Corporation (or any Parent or Subsidiary).
b. Any right granted under the Plan, including Options and Share
Issuances, shall be referred to herein as a Share Award. The provisions of
Articles One and Four shall apply to all Share Awards under the Plan and shall
accordingly govern the interests of all Participants under the Plan.
3. ADMINISTRATION OF THE PLAN.
a. The Plan shall be administered by the Board. However, any or
all administrative functions otherwise exercisable by the Board may be
delegated to a committee
<PAGE>
composed of not fewer than two (2) Directors (the "Committee"), and may also
be, in the discretion of the Board, Outside Directors. If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board (and
references in this Plan to the Board shall thereafter be to the Committee),
subject, however, to such resolutions, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the administration
of the Plan. Additionally, prior to the date of the first registration of any
equity security of the Corporation under Section 12 of the Exchange Act, and
notwithstanding anything to the contrary contained herein, the Board may
delegate administration of the Plan to any person or persons or to a committee
of one or more members of the Board and the term "Committee" shall apply to
any person or persons to whom such authority has been delegated.
Notwithstanding anything in this Section 3 to the contrary, at any time the
Board or the Committee may delegate to a committee of one or more members of
the Board the authority to grant Share Awards to eligible persons who are
either (i) not then Covered Employees and are not expected to be Covered
Employees at the time of recognition of income resulting from such Share Award,
or (ii) not persons with respect to whom the Corporation wishes to avoid the
application of Section 162(m) of the Code.
b. The Board shall have full power and authority (subject to the
provisions of the Plan) to establish such rules and regulations as it may deem
appropriate for proper administration of the Plan and to make such
determinations under, and issue such interpretations of, the Plan and any
outstanding Share Awards thereunder as it may deem necessary or advisable.
Decisions of the Board shall be final and binding on all parties who have an
interest in the Plan or any Share Award thereunder.
4. ELIGIBILITY.
a. The persons eligible to participate in the Plan are as follows:
(i) Employees,
(ii) Outside Directors, non-employee Directors or the
non-employee members of the board of directors of any Parent or
Subsidiary, and
(iii) Consultants and other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).
b. The Board shall have full authority to determine, (i) with respect
to Options, which eligible persons are to receive the Options, the time or times
when the grants covering the Options are to be made, the number of shares to be
covered by each Option, the status of each Option as either an Incentive Option
or a Non-Statutory Option, the time or times when each Option is to become
exercisable, the vesting schedule (if any) applicable to each Option, the
exercise price of each Option and the maximum term for which each Option is to
remain outstanding, and (ii) with respect to Share Issuances, which eligible
persons are to receive Share Issuances, the time or times when such share
issuances are to be made, the number of shares covered by the Share Issuance,
the vesting schedule (if any) applicable to the Share Issuance and
<PAGE>
the consideration to be paid by the Participant for the shares covered by each
Share Issuance.
c. Incentive Options may only be granted to Employees. In addition, no
person shall be eligible for the grant of an Incentive Option if, at the time of
grant, such person owns (or is deemed to own pursuant to Section 424(d) of the
Code) shares possessing more than ten percent (10%) of the total combined voting
power of all classes of shares of the company or of any of its affiliates unless
the exercise price of such Option is at least one hundred ten percent (110%) of
the Fair Market Value of such shares at the date of grant and the Incentive
Option is not exercisable after the expiration of five (5) years from the date
of grant.
d. The Board shall have the absolute discretion to grant either
Options or Share Issuances.
5. SHARES SUBJECT TO THE PLAN
a. The shares issuable under the Plan shall be shares of authorized
but unissued or reacquired Class A Ordinary Shares. Subject to the provisions of
subsection 1.c. of this Section 5 relating to adjustments upon changes in
shares, the maximum number of shares of Class A Ordinary Shares which may be
issued over the term of the Plan shall not exceed 36,000,000 shares.
b. Shares of Class A Ordinary Shares subject to outstanding Options
shall be available for subsequent issuance under the Plan to the extent (i) the
Options expire or terminate for any reason prior to exercise in full or (ii) the
Options are cancelled in accordance with the cancellation-regrant provisions of
Article Two. Unvested shares issued under the Plan and subsequently repurchased
by the Corporation, at the Option exercise price or direct issue price paid per
share, pursuant to the Corporation's repurchase rights under the Plan shall be
added back to the number of shares of Class A Ordinary Shares reserved for
issuance under the Plan and shall accordingly be available for reissuance
through one or more subsequent Options or Share Issuances under the Plan.
c. If any change is made in the shares subject to the Plan, or subject
to any Share Award, without the receipt of consideration by the Corporation
(through merger, consolidation, reorganization, recapitalization,
reincorporation, share dividend, dividend in property other than cash, share
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Corporation), the Plan will be appropriately adjusted in
the class(es) and number of shares and price per share of shares subject to such
outstanding Share Awards. Such adjustments shall be made by the Board or the
Committee, the determination of which shall be final, binding and conclusive.
The conversion of any convertible securities of the Corporation shall not be
treated as a "transaction not involving the receipt of consideration by the
Corporation."
<PAGE>
ARTICLE TWO
OPTION GRANT PROGRAM
1. OPTION TERMS
Each Option shall be evidenced by one or more documents in the form
approved by the Board; provided, however, that each such document shall comply
with the terms specified below. Each document evidencing an Incentive Option
shall, in addition, be subject to the provisions of the Plan applicable to such
Options.
a. Exercise Price.
1. The exercise price of each Incentive Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the shares
subject to the Option on the date the Option is granted and the exercise price
of each Nonstatutory Option shall be at the price determined by the Board of
Directors. Notwithstanding the foregoing, an Incentive Option may be granted
with an exercise price lower than that set forth in the preceding sentence if
such Option is granted pursuant to an assumption or substitution for another
Option in a manner satisfying the provisions of Section 424(a) of the Code.
2. The exercise price shall become immediately due upon
exercise of the Option and shall, subject to the provisions of Section 1 of
Article Four and the documents evidencing the Option, be payable in cash or
check made payable to the Corporation. Should the Class A Ordinary Shares be
registered under Section 12(g) of the 1934 Act at the time the Option is
exercised, then the exercise price may also be paid as follows:
(i) in shares of Class A Ordinary Shares held for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date, or
(ii) to the extent the Option is exercised for vested
shares, through a special sale and remittance procedure pursuant to
which the Participant shall concurrently provide irrevocable
instructions (A) to a Corporation-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate exercise price payable
for the purchased shares plus all applicable Federal, state and local
income and employment taxes required to be withheld by the Corporation
by reason of such exercise and (B) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm
in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
<PAGE>
b. Exercise and Term of Options. Each Option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Board and set forth in the documents evidencing the Option
grant. However, no Option shall have a term in excess of ten (10) years measured
from the Option grant date.
c. The aggregate Fair Market Value of the shares of Class A Ordinary
Shares (determined as of the respective date or dates of grant) for which one or
more Options granted to any Employee under the Plan (or any other Option plan of
the Corporation or any Parent or Subsidiary) may for the first time become
exercisable as Incentive Options during any one (1) calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such Options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such Options as Incentive Options shall be applied on the
basis of the order in which such Options are granted. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of shares with
respect to which Incentive Options are exercisable for the first time by any
Participant during any calendar year under all plans of the Company and its
Affiliates exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Options.
d. Effect of Termination of Service.
1. The following provisions shall govern the exercise of
any Options held by the Participant at the time of cessation of Service or
death:
(i) Should the Participant cease to remain in Service
for any reason other than Disability, then the Participant shall have
a period of three (3) months following the date of such cessation of
Service during which to exercise each outstanding Option held by such
Participant.
(ii) Should the Participant's Service terminate by
reason of Disability, then the Participant shall have a period of
twelve (12) months following the date of such cessation of Service
during which to exercise each outstanding Option held by such
Participant.
(iii) If the Participant dies while holding an
outstanding Option, then the personal representative of his or her
estate or the person or persons to whom the Option is transferred
pursuant to the Participant's will or the laws of inheritance shall
have a twelve (12)-month period following the date of the
Participant's death to exercise such Option.
(iv) Under no circumstances, however, shall any such
Option be exercisable after the specified expiration of the Option
term.
(v) During the applicable post-Service exercise period,
the Option may not be exercised in the aggregate for more than the
number of vested shares for which the Option is exercisable on the
date of the Participant's
<PAGE>
cessation of Service. Upon the expiration of the applicable exercise
period or (if earlier) upon the expiration of the Option term, the
Option shall terminate and cease to be outstanding for any vested
shares for which the Option has not been exercised. However, the
Option shall, immediately upon the Participant's cessation of
Service, terminate and cease to be outstanding with respect to any
and all Option shares for which the Option is not otherwise at the
time exercisable or in which the Participant is not otherwise at that
time vested.
2. The Board shall have the discretion, exercisable either at the time
an Option is granted or at any time while the Option remains outstanding, to:
(i) extend the period of time for which the Option is to
remain exercisable following Participant's cessation of Service or
death from the limited period otherwise in effect for that Option to
such greater period of time as the Board shall deem appropriate, but
in no event beyond the expiration of the Option term, and/or
(ii) permit the Option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested shares of Class A Ordinary Shares for which such
Option is exercisable at the time of the Participant's cessation of
Service but also with respect to one or more additional installments
in which the Participant would have vested under the Option had the
Participant continued in Service.
e. Shareholder Rights. The holder of an Option shall have no shareholder
rights with respect to the shares subject to the Option until such person shall
have exercised the Option, paid the exercise price and become a holder of record
of the purchased shares.
f. Unvested Shares. The Board shall have the discretion to grant Options
which are exercisable for unvested shares of Class A Ordinary Shares. Should the
Participant cease Service while holding such unvested shares, the Corporation
shall have the right to repurchase, at the exercise price paid per share, any or
all of those unvested shares. The terms upon which such repurchase right shall
be exercisable (including the period and procedure for exercise and the
appropriate vesting schedule for the purchased shares) shall be established by
the Board and set forth in the document evidencing such repurchase right. The
Board may not impose a vesting schedule upon any Option grant or the shares of
Class A Ordinary Shares subject to that Option which is more restrictive than
twenty percent (20%) per year vesting, with the initial vesting to occur not
later than one (1) year after the Option grant date. However, such limitation
shall not be applicable to any Option grants made to individuals who are
officers of The Corporation, non employee Board members or independent
consultants.
g. First Refusal Rights. Until such time as the Class A Ordinary Shares
are first registered under Section 12(g) of the 1934 Act, the Corporation shall
have the right of first refusal with respect to any proposed disposition by the
Participant (or any successor in interest) of any shares of Class A Ordinary
Shares issued under the Plan. Such right of first refusal shall be exercisable
in accordance with the terms established by the Board and set forth in the
document
<PAGE>
evidencing such right.
h. Limited Transferability of Options. During the lifetime of the
Participant, the Option shall be exercisable only by the Participant and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Participant's death.
i. Withholding. The Corporation's obligation to deliver shares of Class A
Ordinary Shares upon the exercise of any Options granted under the Plan shall be
subject to the satisfaction of all applicable federal, state and local income
and employment tax withholding requirements.
2. CORPORATE TRANSACTION
a. The shares subject to each Option outstanding under the Plan at the
time of a Corporate Transaction shall automatically vest in full so that each
such Option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for all of the shares of Class A Ordinary
Shares at the time subject to that Option and may be exercised for any or all of
those shares as fully-vested shares of Class A Ordinary Shares. However, the
shares subject to an outstanding Option shall not vest on such an accelerated
basis if and to the extent: (i) such Option is assumed by the successor
corporation (or parent thereof) in the Corporate Transaction and the
Corporation's repurchase rights with respect to the unvested Option shares are
concurrently assigned to such successor corporation (or parent thereof) or (ii)
such Option is to be replaced with a cash incentive program of the successor
corporation which preserves the spread existing on the unvested Option shares at
the time of the Corporate Transaction and provides for subsequent payout in
accordance with the same vesting schedule applicable to those unvested Option
shares or (iii) the acceleration of such Option is subject to other limitations
imposed by the Board at the time of the Option grant.
b. All outstanding repurchase rights shall also terminate automatically,
and the shares of Class A Ordinary Shares subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Board at the time the repurchase right is issued.
c. Immediately following the consummation of the Corporate Transaction,
all outstanding Options shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof).
d. Each Option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Participant in consummation of such Corporate Transaction,
had the Option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction and (ii) the exercise price payable per share under
each outstanding Option, provided the aggregate
<PAGE>
exercise price payable for such securities shall remain the same.
e. The Board shall have the discretion, exercisable either at the time
the Option is granted or at any time while the Option remains outstanding, to
provide for the automatic acceleration (in whole or in part) of one or more
outstanding Options (and the immediate termination of the Corporation's
repurchase rights with respect to the shares subject to those Options) upon the
occurrence of a Corporate Transaction, whether or not those Options are to be
assumed in the Corporate Transaction.
f. The Board shall also have full power and authority, exercisable either
at the time the Option is granted or at any time while the Option remains
outstanding, to structure such Option so that the shares subject to that Option
will automatically vest on an accelerated basis should the Participant's Service
terminate by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which the Option is assumed and the repurchase rights
applicable to those shares do not otherwise terminate. Any Option so accelerated
shall remain exercisable for the fully-vested Option shares until the earlier of
(i) the expiration of the Option term or (ii) the expiration of the one (1)-year
period measured from the effective date of the Involuntary Termination. In
addition, the Board may provide that one or more of the outstanding repurchase
rights with respect to shares held by the Participant at the time of such
Involuntary Termination shall immediately terminate on an accelerated basis, and
the shares subject to those terminated rights shall accordingly vest at that
time.
g. The portion of any Incentive Option accelerated in connection with a
Corporate Transaction shall remain exercisable as an Incentive Option only to
the extent the applicable One Hundred Thousand Dollar limitation is not
exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of such Option shall be exercisable as a Non-Statutory Option under the
federal tax laws.
h. The grant of Options under the Plan shall in no way affect the right
of the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
3. CANCELLATION AND REGRANT OF OPTIONS
The Board shall have the authority to effect, at any time and from
time to time, with the consent of the affected Option holders, the cancellation
of any or all outstanding Options under the Plan and to grant in substitution
therefor new Options covering the same or different number of shares of Class A
Ordinary Shares but with an exercise price per share based on the Fair Market
Value per share of Class A Ordinary Shares on the new Option grant date.
<PAGE>
ARTICLE THREE
SHARE ISSUANCE PROGRAM
1. SHARE ISSUANCE TERMS
Shares of Class A Ordinary Shares may be issued under the Share
Issuance Program through direct and immediate issuances. Each such Share
Issuance shall be evidenced by a Share Issuance Agreement which complies with
the terms specified below.
a. Purchase Price
1. The purchase price per share shall be fixed by the
Board.
2. Subject to the provisions of Section 1. of Article Four,
shares of Class A Ordinary Shares may be issued under the Share Issuance Program
for any of the following items of consideration which the Board may deem
appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
b. Vesting Provisions
1. Shares of Class A Ordinary Shares issued under the Share
Issuance Program may, in the discretion of the Board, be fully and immediately
vested upon issuance or may vest in one or more installments over the
Participant's period of Service or upon attainment of specified performance
objectives. However, the Board may not impose a vesting schedule upon any share
issuance effected under the Share Issuance Program which is more restrictive
than twenty percent (20%) per year vesting, with initial vesting to occur not
later than one (1) year after the issuance date. Such limitation shall not apply
to any Class A Ordinary Shares issuances made to the officers of the
Corporation, non-employee Board members or independent consultants.
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Class A Ordinary Shares by reason of any share dividend,
share split, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Class A Ordinary Shares as a class
without the Corporation's receipt of consideration shall be issued subject to
(i) the same vesting requirements applicable to the Participant's unvested
shares of Class A Ordinary Shares and (ii) such escrow arrangements as the Board
shall deem appropriate.
3. The Participant shall have full shareholder rights with
respect to any shares of Class A Ordinary Shares issued to the Participant under
the Share Issuance Program, whether or not the Participant's interest in those
shares is vested. Accordingly, the Participant shall
<PAGE>
have the right to vote such shares and to receive any regular cash dividends
paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Class A Ordinary Shares issued under the
Share Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Class A Ordinary Shares, then
those shares shall be immediately surrendered to the Corporation for
cancellation, and the Participant shall have no further shareholder rights with
respect to those shares. To the extent the surrendered shares were previously
issued to the Participant for consideration paid in cash or cash equivalent
(including the Participant's purchase-money indebtedness), the Corporation shall
repay to the Participant the cash consideration paid for the surrendered shares
and shall cancel the unpaid principal balance of any outstanding purchase-money
note of the Participant attributable to such surrendered shares.
5. The Board may in its discretion waive the surrender and
cancellation of one or more unvested shares of Class A Ordinary Shares (or other
assets attributable thereto) which would otherwise occur upon the non-completion
of the vesting schedule applicable to such shares. Such waiver shall result in
the immediate vesting of the Participant's interest in the shares of Class A
Ordinary Shares as to which the waiver applies. Such waiver may be effected at
any time, whether before or after the Participant's cessation of Service or the
attainment or non-attainment of the applicable performance objectives.
c. First Refusal Rights. Until such time as the Class A Ordinary
Shares are first registered under Section 12(g) of the 1934 Act, the Corporation
shall have the right of first refusal with respect to any proposed disposition
by the Participant (or any successor in interest) of any shares of Class A
Ordinary Shares issued under the Share Issuance Program. Such right of first
refusal shall be exercisable in accordance with the terms established by the
Board and set forth in the document evidencing such right.
2. CORPORATE TRANSACTION
a. Upon the occurrence of a Corporate Transaction, all outstanding
repurchase rights under the Share Issuance Program shall terminate
automatically, and the shares of Class A Ordinary Shares subject to those
terminated rights shall immediately vest in full, except to the extent: (i)
those repurchase rights are assigned to the successor corporation (or parent
thereof) in connection with such Corporate Transaction or (ii) such accelerated
vesting is precluded by other limitations imposed by the Board at the time the
repurchase right is issued.
b. The Board shall have the discretionary authority, exercisable
either at the time the unvested shares are issued or any time while the
Corporation's repurchase rights with respect to those shares remain outstanding,
to provide that those rights shall automatically terminate on an accelerated
basis, and the shares of Class A Ordinary Shares subject to those terminated
rights shall immediately vest, in the event the Participant's Service should
subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which those repurchase rights are assigned
to the successor corporation (or parent thereof).
<PAGE>
3. SHARE ESCROW/LEGENDS
Unvested shares may, in the Board's discretion, be held in escrow by
the Corporation until the Participant's interest in such shares vests or may be
issued directly to the Participant with restrictive legends on the certificates
evidencing those unvested shares.
ARTICLE FOUR
MISCELLANEOUS
1. FINANCING
The Board may permit any Participant or Participant to pay the Option
exercise price under the Option Grant Program or the purchase price of shares
issued under the Share Issuance Program by delivering a full-recourse, interest
bearing promissory note payable in one or more installments. The terms of any
such promissory note (including the interest rate and the terms of repayment)
shall be established by the Board in its sole discretion. In no event may the
maximum credit available to the Participant or Participant exceed the sum of (i)
the aggregate Option exercise price or purchase price payable for the purchased
shares (less the par value of those shares) plus (ii) any Federal, state and
local income and employment tax liability incurred by the Participant in
connection with the Option exercise or share purchase.
2. EFFECTIVE DATE AND TERM OF PLAN
a. The Plan shall become effective when adopted by the Board, but no
Option granted under the Plan may be exercised, and no Share Issuance shall be
issued under the Plan, until the Plan is approved by the Corporation's
shareholders. If such shareholder approval is not obtained within twelve (12)
months after the date of the Board's adoption of the Plan, then all Options
previously granted under the Plan shall terminate and cease to be outstanding,
and no further Options shall be granted and no shares shall be issued under the
Plan. Subject to such limitation, the Board may grant Options and issue shares
under the Plan at any time after the effective date of the Plan and before the
date fixed herein for termination of the Plan.
b. The Plan shall terminate upon the earliest of (i) January 25, 2008,
(ii) the date on which all shares available for issuance under the Plan shall
have been issued as vested shares or (iii) the termination of all outstanding
Options in connection with a Corporate Transaction. All Options and unvested
share issuances outstanding at that time under the Plan shall continue to have
full force and effect in accordance with the provisions of the documents
evidencing such Options or issuances.
<PAGE>
3. AMENDMENT OF THE PLAN
The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
Options or unvested share issuances at the time outstanding under the Plan
unless the Participant consents to such amendment or modification. In addition,
certain amendments may require shareholder approval pursuant to applicable laws
and regulations.
4. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Class A Ordinary Shares under the Plan shall be used for general corporate
purposes.
5. WITHHOLDING
The Corporation's obligation to deliver shares of Class A Ordinary
Shares upon the exercise of any Options or upon the vesting of any shares issued
under the Plan shall be subject to the satisfaction of all applicable federal,
state and local income and employment tax withholding requirements.
6. REGULATORY APPROVALS
The implementation of the Plan, the granting of any Options under the
Plan and the issuance of any shares of Class A Ordinary Shares (i) upon the
exercise of any Option or (ii) under the Share Issuance Program shall be subject
to the Corporation's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the Options granted
under it and the shares of Class A Ordinary Shares issued pursuant to it.
7. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon the Participant any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Participant, which
rights are hereby expressly reserved by each, to terminate such person's Service
at any time for any reason, with or without cause.
8. FINANCIAL REPORTS
The Corporation shall deliver a balance sheet and an income statement
at least annually to each individual holding an outstanding Share Award under
the Plan, unless such individual is a key Employee whose duties in connection
with the Corporation (or any Parent or Subsidiary) assure such individual access
to equivalent information.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
Affiliate shall mean any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
Board shall mean the Corporation's Board of Directors.
Code shall mean the Internal Revenue Code of 1986, as amended.
Committee shall have the meaning as set forth in Section 3 of Article One.
Class A Ordinary Shares shall mean the Corporation's Class A ordinary
shares.
Continuous Status as an Employee, Director or Consultant shall mean that
the service of an individual to the Company, whether as an Employee, Director or
Consultant, is not interrupted or terminated. The Board or the chief executive
officer of the Company may determine, in that party's sole discretion, whether
Continuous Status as an Employee, Director or Consultant shall be considered
interrupted in the case of: (i) any leave of absence approved by the Board or
the chief executive officer of the Company, including sick leave, military
leave, or any other personal leave; or (ii) transfer between the Company,
Affiliates or their successors.
Covered Employee shall mean the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to shareholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
Corporate Transaction shall mean either of the following shareholder-
approved transactions to which the Corporation is a party:
(a) a merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different
from the persons holding those securities immediately prior to such
transaction, or
(b) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.
Corporation shall mean OpenTV Corp., a British Virgin Island corporation.
Director means a member of the Board.
Disability shall mean the inability of the Participant to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be
<PAGE>
determined by the Board on the basis of such medical evidence as the Board deems
warranted under the circumstances.
Employee shall mean an individual who is in the employ of the Corporation
(or any Parent or Subsidiary), subject to the control and direction of the
employer entity as to both the work to be performed and the manner and method of
performance.
Exercise Date shall mean the date on which the Corporation shall have
received written notice of the Option exercise.
Fair Market Value per share of Class A Ordinary Shares on any relevant date
shall be determined in accordance with the following provisions:
(a) If the Class A Ordinary Shares are at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the closing
selling price per share of Class A Ordinary Shares on the date in question,
as such price is reported by the National Association of Securities Dealers
on the Nasdaq National Market. If there is no closing selling price for the
Class A Ordinary Shares on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for which
such quotation exists.
(b) If the Class A Ordinary Shares are at the time listed on any Share
Exchange, then the Fair Market Value shall be the closing selling price per
share of Class A Ordinary Shares on the date in question on the Share
Exchange determined by the Board to be the primary market for the Class A
Ordinary Shares, as such price is officially quoted in the composite tape
of transactions on such exchange. If there is no closing selling price for
the Class A Ordinary Shares on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
(c) If the Class A Ordinary Shares are at the time neither listed on
any Share Exchange nor traded on the Nasdaq National Market, then the Fair
Market Value shall be determined by the Board after taking into account
such factors as the Board shall deem appropriate.
Incentive Option shall mean an Option which satisfies the requirements of
Code Section 422.
Involuntary Termination shall mean the termination of the Service of any
individual which occurs by reason of:
(a) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(b) such individual's voluntary resignation following (i) a change in
his or her position with the Corporation which materially reduces his or
her level of
<PAGE>
responsibility, (ii) a reduction in his or her level of compensation (including
base salary, fringe benefits and target bonuses under any corporate-performance
based bonus or incentive programs) by more than fifteen percent (15%) or (iii) a
relocation of such individual's place of employment by more than fifty (50)
miles, provided and only if such change, reduction or relocation is effected
without the individual's consent.
1934 Act shall mean the Securities Exchange Act of 1934, as amended.
Non-Statutory Option shall mean an Option not intended to satisfy the
requirements of Code Section 422.
Option Grant Program shall mean the Option grant program in effect under
the Plan.
Outside Director shall mean a Director who either (i) is not a current
employee of the Corporation or an "affiliated corporation" (within the meaning
of Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Corporation or a "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Corporation or an "affiliated corporation" for services in any capacity
other than as a Director, or (ii) is otherwise considered an "outside director"
for purposes of Section 162(m) of the Code.
Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, share possessing fifty percent (50%) or more of the total
combined voting power of all classes of share in one of the other corporations
in such chain.
Participant shall mean any person to whom a Share Award is granted under
the Plan.
Plan shall mean the Corporation's 1998 Share Option/Share Issuance Plan, as
set forth in this document.
Service shall mean the provision of services to the Corporation (or any
Parent or Subsidiary) by a person in the capacity of an Employee, a non-employee
member of the board of directors or a consultant or independent advisor, except
to the extent otherwise specifically provided in the documents evidencing the
Option grant.
Share Exchange shall mean either the American Stock Exchange or the New
York Stock Exchange.
<PAGE>
Share Issuance Agreement shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of Class A
Ordinary Shares under the Share Issuance Program.
Share Issuance Program shall mean the share issuance program in effect
under the Plan.
Subsidiary shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, shares possessing fifty percent (50%) or more of the
total combined voting power of all classes of shares in one of the other
corporations in such chain.
10% Shareholder shall mean the owner of shares (as determined under Code
Section 424(d)) possessing more than ten percent (10%) of the total combined
voting power of all classes of shares of the Corporation (or any Parent or
Subsidiary).
<PAGE>
EXHIBIT 10.4
SHAREHOLDERS' AGREEMENT
dated October 23, 1999
among
OTV HOLDINGS LIMITED
and
SUN TSI SUBSIDIARY, INC.
and
OPENTV CORP.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. RECITALS ................................................................ 1
2. DEFINITIONS AND INTERPRETATION .......................................... 1
3. TRANSFER OF SHARES ...................................................... 3
4. GOVERNING LAW, ARBITRATION AND LIMITATION
ON DAMAGES .............................................................. 6
5. DURATION AND TERMINATION ................................................ 8
6. WAIVERS ................................................................. 9
7. ASSIGNMENT .............................................................. 9
8. ENTIRE AGREEMENT ........................................................ 9
9. NOTICES ................................................................. 10
10.CONFLICT WITH OTHER DOCUMENTS ........................................... 12
11.COUNTERPARTS ............................................................ 12
12.PARENT UNDERTAKING ...................................................... 12
-2-
<PAGE>
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT is entered into as of this 23rd day of
October 1999, by and among OTV Holdings Limited, a company incorporated in the
British Virgin Islands ("OTVH"), Sun TSI Subsidiary, Inc., a Delaware
corporation ("SSI"), and OpenTV Corp., a company incorporated in the British
Virgin Islands (the "Company").
1. RECITALS
1.1. The Company and SSI have entered into --
1.1.1. an Exchange Agreement, dated of even date herewith (the
"Exchange Agreement"), pursuant to which SSI has the right to
exchange all of its existing shares of Class B Common Stock in
OpenTV, Inc., a Delaware corporation, for B Shares of the
Company.
1.1.2. a C-2 Convertible Preference Shares Purchase Agreement, dated
of even date herewith, pursuant to which SSI has agreed to
subscribe for C-2 Convertible Preference Shares of the Company,
which shares are convertible into A Shares of the Company under
certain circumstances.
1.2. SSI and OTVH wish to enter into this Agreement in order to
regulate some aspects of their relationship as holders of shares
of the Company.
2. DEFINITIONS AND INTERPRETATION
2.1. The section headings used herein are inserted for reference
purposes only and not in any way affect the meaning or
interpretation of this Agreement.
2.2. As used in this Agreement, the masculine, feminine or neuter
gender, and the singular or plural, shall be deemed to include
the others whenever and wherever the context so requires.
2.3. Unless the context otherwise requires, the terms defined in this
Section 2.3 shall have the meanings herein specified for all
purposes of this Agreement:
-3-
<PAGE>
"Affiliate" mean any Person which directly or indirectly Controls, is
---------
Controlled by, or is under common Control with, the indicated Person;
"Agreement" means this Shareholders' Agreement and the schedules
---------
hereto;
"A Shares" means A Ordinary Shares in the capital of the Company;
--------
"B Shares" means B Ordinary Shares in the capital of the Company;
--------
"Control" means having a direct or indirect ownership interest in
-------
capital or profits exceeding fifty percent (50%) in a Person or the right to
exercise over fifty percent (50%) of the voting rights with respect to the
selection of the board of directors or other governing body of such Person;
"Encumbrance" means any interest or equity of any person (including
-----------
any right to acquire, option or right of pre-emption) or any mortgage, charge,
pledge, lien, assignment, hypothecation, security interest, title retention or
any other security agreement or arrangement;
"Investors' Rights Agreement" means the agreement of that title
---------------------------
between the Company, OTVH, SSI and the Investors dated of even date herewith;
"Investors" means the Persons defined as such in the Investors' Rights
---------
Agreement;
"Permitted Transferee" means a Person to whom SSI and/or OTVH has
--------------------
transferred Shares in accordance with Section 2(b) of the Investors' Rights
Agreement;
"Person" means any natural person, corporation, limited liability
------
company, trust, association, company, partnership, joint venture or other entity
and any governmental agency, instrumentality or political subdivision;
"Shares" means shares in the capital of the Company of whatever class,
------
including B Shares currently issued or hereafter acquired, including without
limitation upon the exchange of securities pursuant to the Exchange Agreement;
"Shareholders" means SSI, OTVH and their respective Permitted
------------
Transferees from time to time in accordance herewith;
"Transfer" means in relation to any Share or any legal or beneficial
--------
interest in a Share, includes, whether voluntarily or involuntarily, (i) the
sale, transfer, lease, assignment, grant, renunciation, alienation, or disposal
of such Share or of any right or
-4-
<PAGE>
interest which a Person may have in the Company as a result of such right or
interest in that Share; (ii) entering into any agreement in respect of the votes
attached to such Share; (iii) creating or granting any Encumbrance over or in
respect of such Share except if the Person in whose favor the Encumbrance has
been given or created will have agreed in writing to be bound by the provisions
of this Agreement; and (iv) any agreement (whether or not subject to conditions)
to do or create or grant any of the foregoing.
3. TRANSFER OF SHARES
3.1. Each Shareholder undertakes that it will not Transfer any of its
Shares during the term of this Agreement otherwise than in accordance
with the provisions of this Agreement or the provisions of the
Investors' Rights Agreement, except as provided in that certain letter
between OTVH and News America Incorporated, dated as of the date of
this Agreement, regarding the voting of shares in favor of the
election to the Board of Directors of the Company a nominee of News
under certain circumstances.
Permitted Transfers
3.2 A Shareholder may, at any time and on any terms (including as to
price), Transfer all (but not part only) of its Shares to any of
its Affiliates, provided that -
3.2.1. the transferor shall remain a party to this Agreement and
hereby agrees to guarantee the performance by the transferee of
its obligations pursuant to the provisions of this Agreement and
to indemnify the other Shareholder from and against a breach by
such transferee of any of its obligations under this Agreement;
3.2.1. it shall be a condition precedent to any such Transfer (and any
registration thereof) that the transferee agrees in writing with
the other Shareholder to observe, perform and be bound by the
terms and conditions of this Agreement as if references herein to
the transferor were references to the transferee;
3.2.2. if the transferee ceases to be an Affiliate of OTVH or SSI, as
the case may be, then the transferor shall cause the transferee
to Transfer to the transferor or another Affiliate of OTVH or
SSI, as
-5-
<PAGE>
the case may be, all its Shares prior to the date of such
cessation in accordance with this Section 3.2.
3.3. Any attempted Transfer other than in accordance with this Agreement or
the Investors' Rights Agreement shall be void ab initio, and the
Company shall not give effect to any Transfer made in contravention of
the provisions of this Section 3 or any other express provision of
this Agreement or of the Investors' Rights Agreement and shall not
reflect on its records any changes in record ownership of the Shares
pursuant to any such attempted Transfer.
Right of First Refusal
3.4. Subject to the provisions of Section 3.8, if a Shareholder (the
"Offeror") wishes to Transfer any or all of its Shares, it shall, by
notice in writing (the "Offer") to the Company and to the other
Shareholder (the "Offeree"), offer to sell to the Offeree such Shares
("Sale Shares") at the price and on the terms specified in the Offer.
The Offer shall specify the material terms and conditions including,
without limitation, the price at which the Offeror is prepared to sell
the Sale Shares and shall remain open for acceptance by the Offeree
for 15 days from the date of the Offer (the "Offer Period"). No
Shareholder may offer to sell its Shares except on an "all cash"
basis, provided that a Shareholder may offer to sell its Shares in
exchange for immediately liquid, freely tradeable marketable
securities which are listed on a national securities exchange.
3.5. If the Offeree shall not have accepted an Offer in respect of all (but
not less than all) of the Sale Shares during the Offer Period, the
Offeror (a) if OTVH, shall be entitled to sell the Sale Shares to the
Investors or others in accordance with the Investors' Rights
Agreement, but at a price which shall not be less than that, and on
terms and conditions which are not, taken as a whole, more favorable
than those at which the Offeree was entitled to purchase the Sale
Shares in terms of Section 3.4. If no such sale shall have been
effected during the periods stipulated in the Investors' Rights
Agreement, then the Offeror shall not be entitled to effect any
Transfer of any or all of its Sale Shares thereafter unless the
provisions of Section 3.4 shall again have been complied with in
respect of such Shares (b) if SSI, shall be entitled, within 30 days
after such non-acceptance, to sell the Sale Shares, but at a price
which shall not be less than that, and on terms and conditions which
are not, taken as a whole, more favorable than those at which the
Offeree was entitled to purchase the Sale Shares in
-6-
<PAGE>
terms of Section 3.4. If SSI shall not have effected such sale during
such 30-day period, then the Offeror shall not be entitled to effect
any Transfer of any or all of its Shares thereafter unless the
provisions of Section 3.4 shall again have been complied with in
respect of such Shares.
3.6. If the Offeree elects to purchase all of the Sale Shares as provided
in Section 3.4, the Offeror shall be obliged to sell, and the Offeree
shall be obliged to purchase, the Sale Shares on the terms set out in
the Offer by the close of business on the twentieth day following the
expiration of the fifteen (15) day period referred to in Section 3.4,
at the registered office of the Company (or such other time, date and
place as may be agreed by the Offeror and the Offeree).
3.7. At the completion of the sale and purchase of the Sale Shares to the
Offeree -
3.7.1. the Offeree shall use its best efforts to ensure the immediate
release of all guarantees, indemnities and similar covenants, if
any, given by the Offeror in favor or for the benefit of the
Company and specified in the Offer (and pending such release
shall keep the Offeror fully and effectively indemnified from and
against all claims arising under such guarantees, indemnities and
similar covenants);
3.7.2. against delivery in accordance with Section 3.7.3, the Offeree
shall pay the purchase price to the Offeror by way of a wire
transfer of immediately available funds;
3.7.3. concurrent with payment of the purchase price in accordance
with Section 3.7.2, the Offeror shall deliver to the Offeree
share certificates (including executed share powers with respect
thereto) and such other documents of title as the Offeree may
reasonably require to show good title to the Sale Shares and to
enable the Offeree to be registered as holder of the Sale Shares.
Transfers
3.8. Each Shareholder undertakes to exercise all voting rights to ensure
that any Transfer of Shares made in accordance with this Agreement can
be effected in accordance herewith and that in such an event the
Shareholders shall adopt a resolution to enable such a Transfer to
take effect and in such
-7-
<PAGE>
resolution the Shareholders shall waive any inconsistent or
conflicting rights which they may have under the Company's Memorandum
of Association or Articles of Association in relation to such
Transfer.
4. GOVERNING LAW, ARBITRATION AND LIMITATION ON DAMAGES
4.1. This Agreement shall be governed by and construed in all respects in
accordance with the laws (without regard to the laws of conflicts of
law) of the State of California, except to the extent relating to
matters of corporate governance, which shall be governed by and
construed in all respects in accordance with the laws (without regard
to the laws of conflicts of law) of the British Virgin Islands.
4.2. If any dispute arises between the parties in connection with -
4.2.1. the formation or existence of, the implementation of or the
interpretation or application of, the provisions of the parties'
respective rights and obligations in terms of or arising out of
this Agreement or its breach or termination; or
4.2.2. the validity, enforceability, rectification, termination or
cancellation, whether in whole or in part, of this Agreement, or
4.2.3. which relates in any way to any matter affecting the interests
of the parties in terms of this Agreement, and the parties are
unable to resolve their dispute, then any party shall be entitled
to refer the dispute in the first instance, to the respective
nominated senior officers of the Shareholders for resolution.
4.3. If the matter in dispute shall not have been resolved within thirty
(30) days of it having been so referred under Section 4.2, any
Shareholder may refer the matter in dispute for determination by final
arbitration in Los Angeles, California in accordance with the Rules of
the London Court of International Arbitration ("LCIA") (which Rules
are deemed to be incorporated by reference into this Section) by a
neutral arbitrator which shall be selected by the Shareholders. If the
Shareholders are unable to agree on a neutral arbitrator within
fifteen (15) days after the expiration of the thirty day period
referred to in the preceding sentence, then each Shareholder shall
select an arbitrator (a "Party Arbitrator") within five (5) days after
expiration of such fifteen (15) day period. An additional
-8-
<PAGE>
arbitrator, who shall be the chairman of the tribunal, shall be
appointed by agreement between the Party Arbitrators within thirty
(30) days after the date on which the Party Arbitrators were selected,
failing which, such arbitrator shall be appointed by the relevant
appointing authority under the Rules of the LCIA. The arbitrators
shall establish the procedural rules applicable to the proceedings.
Any arbitral award shall be final and binding upon the parties and
this Agreement places no restriction on the jurisdiction in which such
award shall be enforced.
4.4. Section 4.3 shall not preclude any party from obtaining interim
injunctive relief on an urgent basis from a court of competent
jurisdiction, pending any decision of the arbitrators under Section
4.3. In addition, the parties hereto acknowledge and agree that they
have no adequate remedy at law for any breach or threatened breach of
any covenant or agreement contained in this Agreement and that any
party may, in addition to the other remedies that may be available to
it, commence proceedings in equity for an injunction preliminarily or
permanently enjoining any other party from breaching or threatening
any such breach of any such covenant or agreement. With respect of any
such proceeding in equity, it shall be presumed that the remedies at
law or otherwise available to any party would be inadequate and that
it would suffer irreparable harm as a result of the violation of any
provision hereof by any other party.
4.5. The provision of this Section -
4.5.1. constitute an irrevocable consent by the parties to any
proceedings in terms hereof and no party shall be entitled to
withdraw therefrom or claim at any such proceedings that it is
not bound by such provisions;
4.5.2. are severable from the rest of this Agreement and shall remain
in effect despite the termination of or invalidity for any reason
of this Agreement.
4.6. In connection with any injunctive relief sought under Section 4.4,
each party to this Agreement, by its execution hereof, (i) hereby
irrevocably submits to the exclusive jurisdiction of the state courts
of the State of California or the United States District Court located
in the State of California, and (ii) hereby waives, to the extent not
prohibited by applicable law, and agrees not to assert, by way of
motion, as a defense or otherwise, in any such action, any claim that
it is not subject personally to
-9-
<PAGE>
the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution, that any such
proceeding brought in one of the above-named courts is improper, or
that this Agreement or the subject matter hereof may not be enforced
in or by such court. Each party hereto hereby consents to service of
process in any such proceeding in any manner permitted by Californian
law, and agrees that service of process by registered or certified
mail, return receipt requested, at its address specified pursuant to
Section 9.2 hereof is reasonably calculated to give actual notice.
4.7. No party shall be liable for any indirect, special, incidental or
consequential loss or damage (including, without limitation, loss of
profits or loss of use) suffered by any other party arising from or
relating to a party's performance, non-performance, breach of or
default under a covenant, warranty, representation, term or condition
hereof. Each party waives and relinquishes claims for indirect,
special, incidental or consequential damages.
4.8. No party shall have the right to recover punitive damages from the
other party, and each party hereby waives and relinquishes any and all
punitive damage claims.
4.9. The limitations on liability and damages referred to in Sections 4.7
and 4.8 apply to all causes of action that may be asserted under this
Agreement, whether in respect of breach of contract, breach of
warranty, tort, product liability, negligence or otherwise.
5. DURATION AND TERMINATION
Except as otherwise provided herein, this Agreement shall continue in full
force and effect without time limit until both Shareholders agree in
writing to terminate this Agreement. Notwithstanding the foregoing, upon a
Transfer of all of the Shares then held by a Shareholder (and its
Affiliates) and the termination or expiration of all rights to acquire
shares of capital stock of the Company then held by a Shareholder (and its
Affiliates), such Shareholder shall cease to be subject to the terms and
conditions of this Agreement except for those provisions which expressly
provide they shall apply to any party hereto regardless of the ownership or
holding of any Shares by any party hereto or which expressly provide that
they shall survive any Transfer in accordance herewith.
-10-
<PAGE>
6. WAIVERS
6.1. No delay in exercising or failure to exercise any right or remedy
under this Agreement shall operate as a waiver thereof nor shall any
single or partial exercise of any right or remedy preclude either the
further exercise thereof or the exercise of any other right or remedy
provided in this Agreement.
6.2. In the event that any party shall expressly waive any breach, default
or omission hereunder, without the prior written consent of the other
parties hereto, no such waiver shall apply to, or operate as, a waiver
of similar breaches, defaults or omissions or be deemed to be a waiver
of any other breach, default or omission hereunder.
7. ASSIGNMENT
No party hereto shall be entitled to transfer this Agreement or any of its
rights and obligations hereunder without the prior written consent of the
other parties, except to a transferee of Shares in accordance with this
Agreement.
8. ENTIRE AGREEMENT
8.1. This Agreement constitutes the entire agreement between the parties
hereto concerning the subject matter hereof and supersedes all prior
agreements between the parties concerning the subject matter hereof.
Except as provided herein, no amendment, change or additions hereto
shall be effective or binding on any party unless reduced to writing
and executed by all of the parties hereto.
8.2. Each of the parties acknowledges that in entering into this Agreement
it is not relying on any representation or other statement which is
not set out in this Agreement.
8.3. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
Subject to the immediately preceding sentence, this Agreement shall
not run to the benefit of or be enforceable by any Person other than a
party to this Agreement and its successors and permitted assigns.
-11-
<PAGE>
9. NOTICES
9.1. All notices and communications under this Agreement shall be given in
writing and shall be delivered to the relevant party or sent by
registered airmail or facsimile to the address of that party or that
party's facsimile number specified in Section 9.2. Unless otherwise
specified herein, each notice or other communication shall be deemed
effective or having been given (i) on the date received, if personally
delivered, (ii) eight (8) business days after being sent, if sent by
registered airmail, or (iii) one (1) business day after being sent, if
sent by telecopier with confirmation of transmission.
9.2. Notices and communications shall be addressed as follows:
if to OTVH: OTV Holdings Limited
c/o Myriad International Holdings BV
Jupiterstraat 13-15
2132 HC Hoofddorp
The Netherlands
Attention: Mr. Allan Rosenzweig
Facsimile No.: +31 2355 62880
with a copy to: Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street, 23rd Floor
Los Angeles, California 90071
Attention: Siobhan McBreen Burke, Esq.
Facsimile No.: (213) 627-0705
if to SSI: Sun TSI Subsidiary, Inc.
c/o Sun Microsystems, Inc.
901 San Antonio Road
Mail Stop PAL1-521
Palo Alto, California 94303
Attention: Laura Fennell, Esq.
Facsimile No: (650) 336-0359
with a copy to: Fenwick & West LLP
Two Palo Alto Square, Suite 700
Palo Alto, California 94306
-12-
<PAGE>
Attention: David W Healy, Esq.
Facsimile No: (650) 494-1417
if to the Company: OpenTV Corp.
c/o Havelet Trust Company (BVI) Limited
Abbott Building
Post Office Box 3186
Road Town
Tortola, British Virgin Islands
with a copy to: Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street, 23rd Floor
Los Angeles, California 90071
Attention: Siobhan McBreen Burke, Esq.
or such other address of a party, Person and/or fax number as that
party shall have notified in writing to all other parties in
accordance with Section 9.1.
9.3. All notices and communications shall be given and made in the English
language.
10. CONFLICT WITH OTHER DOCUMENTS
In the event of any conflict between the provisions of this Agreement and
the provisions of the Company's Memorandum of Association or Articles of
Association then, subject to the provisions of British Virgin Islands law,
the provisions of this Agreement shall prevail as between the Shareholders
and the Shareholders shall exercise all voting and other rights and powers
legally available to them (whether as Shareholders or otherwise) to give
effect to the provisions of this Agreement. If there is an irreconcilable
conflict between a provisions of this Agreement and a mandatory provisions
of British Virgin Islands law, the parties shall use their respective best
efforts to agree on an alternative mechanism or provision which is as close
as reasonably possible to the provisions of this Agreement and the
conflicting provisions contained in this Agreement shall be invalid (but
only to the extent necessary), provided that such invalidity shall not
affect the other provisions of this Agreement.
-13-
<PAGE>
11. COUNTERPARTS
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, with the same effect as
if all parties had signed the same document. All such counterparts shall be
deemed an original, shall be construed together and shall constitute one
and the same instrument.
12. PARENT UNDERTAKING
As inducement to the execution of this Agreement by the parties hereto,
each of Sun Microsystems, Inc. and MIH Limited have executed an
unconditional and irrevocable guaranty in substantially the forms as
attached hereto as Schedule 1 and Schedule 2, respectively.
-14-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorised representative as of the date
first set forth above.
OTV HOLDINGS LIMITED
By: _____________________
Title: ____________________
SUN TSI SUBSIDIARY, INC
By: _____________________
Title: ____________________
OPENTV CORP.
By: _____________________
Title: ____________________
-15-
<PAGE>
SCHEDULE 1
FORM OF GUARANTY
For good and valuable consideration, the sufficiency and receipt of which are
hereby acknowledged, Sun Microsystems, Inc., a Delaware corporation hereby
unconditionally and irrevocably guarantees the full, complete and timely
performance of all obligations, covenants and agreements of Sun TSI Subsidiary,
Inc., a Delaware corporation, contained in or made pursuant to that certain
Shareholders Agreement (the "Shareholders Agreement") among OTV Holdings
Limited, a company incorporated in the British Virgin Islands ("OTVH"), Sun TSI
Subsidiary Inc., a Delaware corporation ("SSI"), and OpenTV Corp., a company
incorporated in the British Virgin Islands (the "Company").
This Guaranty shall be construed in accordance with and governed by the laws of
the State of California. Guarantor (i) hereby irrevocably submits to the
exclusive jurisdiction of the state courts of the State of California or the
United States District Court located in the State of California for the purpose
of any action, claim, cause of action or suit (in contract, tort or otherwise),
inquiry, proceeding or investigation arising out of or based upon this Guaranty
or relating to the subject matter hereof, (ii) hereby waives, to the extent not
prohibited by applicable law, and agrees not to assert, by way of motion, as a
defence or otherwise, in any such action, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution, that any such proceeding brought
in one of the above-named courts is improper, or that this Guaranty or the
subject matter hereof may not be enforced in or by such court and (iii) hereby
agrees not to commence or maintain any action, claim, cause of action or suit
(in contract, tort or otherwise), inquiry, proceeding or investigation arising
out of or based upon this Guaranty or relating to the subject matter hereof
other than before one of the above-named courts nor to make any motion or take
any other action seeking or intending to cause the transfer or removal of any
such action, claim, cause of action or suit (in contract, tort or otherwise),
inquiry, proceeding or investigation to any court other than one of the
above-named courts whether on the grounds of inconvenient forum or otherwise.
Guarantor hereby consents to service of process in any such proceeding in any
manner permitted by Californian law, and agrees that service of process by
registered or certified mail, return receipt requested, at its address specified
below is reasonably calculated to give actual notice.
<PAGE>
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed by its
duly authorized officer as of this 23rd day of October 1999.
SUN MICROSYSTEMS, INC.
By: ______________________
Title: _____________________
-2-
<PAGE>
SCHEDULE 2
FORM OF GUARANTY
For good and valuable consideration, the sufficiency and receipt of which are
hereby acknowledged, MIH Limited, a British Virgin Islands corporation hereby
unconditionally and irrevocably guarantees the full, complete and timely
performance of all obligations, covenants and agreements of OpenTV Corp., a
British Virgin Islands corporation, contained in or made pursuant to that
certain Shareholders Agreement (the "Shareholders Agreement") among OTV Holdings
Limited, a company incorporated in the British Virgin Islands ("OTVH"), Sun TSI
Subsidiary Inc., a Delaware corporation ("SSI"), and OpenTV Corp., a company
incorporated in the British Virgin Islands (the "Company").
This Guaranty shall be construed in accordance with and governed by the laws of
the State of California. Guarantor (i) hereby irrevocably submits to the
exclusive jurisdiction of the courts of England for the purpose of any action,
claim, cause of action or suit (in contract, tort or otherwise), inquiry,
proceeding or investigation arising out of or based upon this Guaranty or
relating to the subject matter hereof, (ii) hereby waives, to the extent not
prohibited by applicable law, and agrees not to assert, by way of motion, as a
defence or otherwise, in any such action, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution, that any such proceeding brought
in one of the above-named courts is improper, or that this Guaranty or the
subject matter hereof may not be enforced in or by such court and (iii) hereby
agrees not to commence or maintain any action, claim, cause of action or suit
(in contract, tort or otherwise), inquiry, proceeding or investigation arising
out of or based upon this Guaranty or relating to the subject matter hereof
other than before one of the above-named courts nor to make any motion or take
any other action seeking or intending to cause the transfer or removal of any
such action, claim, cause of action or suit (in contract, tort or otherwise),
inquiry, proceeding or investigation to any court other than one of the
above-named courts whether on the grounds of inconvenient forum or otherwise.
Guarantor hereby consents to service of process in any such proceeding in any
manner permitted by British law, and agrees that service of process by
registered or certified mail, return receipt requested, at its address specified
below is reasonably calculated to give actual notice.
<PAGE>
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed by its
duly authorised officer as of this 23rd day of October 1999.
MIH LIMITED
By: ______________________
Title: _____________________
-3-
<PAGE>
Exhibit 10.5
TRADEMARK LICENSE
This Trademark License (the "License") is entered into this 20th day of
March, 1998 (the "Effective Date") between Sun Microsystems, Inc., acting by
and through its JavaSoft business unit ("Sun") with its principal place of
business at 901 San Antonio Road, Palo Alto, California 94303 and OpenTV, Inc.,
a Delaware corporation with a principal place of business at 3401-A Hillview
Avenue, Palo Alto, CA 94304-1320 ("Licensee").
This License is executed concurrently with, or subsequent to, the execution
of a Technology License and Distribution Agreement ("TLDA") between Sun and
Licensee, attached hereto. The terms and conditions of this License shall
supersede any inconsistent or conflicting terms and conditions in the TLDA.
Capitalized terms not defined herein shall have the meaning specified in the
TLDA.
NOW THEREFORE, Sun and Licensee enter into this License on the following terms.
1.0 DEFINITIONS.
1.1 "Java Trademarks" means the Sun trademarks: Java, Java Compatible, the
Java Compatible logo, the Java Authorized Licensee logo, Java Powered, the Java
Powered logo, the Coffee Cup logo, Sun and the Sun logo(s), and all of Sun's
other Java-based trademarks, whether now in use or adopted in the future.
1.2 "Java Trademark Guidelines" means the usage guidelines provided by Sun,
the trademark guidelines located at http://java.sun.com/trademarks.html and the
Sun Trademark and Logo Policies, as may be revised by Sun during the Term, and
which are incorporated by reference into this License.
1.3 "Compatibility Logo(s)" means the particular Java Trademark(s) specified
in Exhibit C of the TLDA to be used by Licensee to indicate that Products
implementing a Technology meet the applicable compatibility requirements
specified in the TLDA. Sun shall provide Licensee access to the Compatibility
Logo(s) and instructions for use via Sun's designated web site upon execution of
this License. Sun may revise the compatibility Logo(s) from time to time during
the Term.
1.4 "Java Authorized Licensee logo or (JLL)" means the Coffee Cup logo with
the words "Java Authorized Licensee" which Sun makes makes available for
non-Product use pursuant to the terms of this License.
1.5 "Java Logo(s)" means collectively the Compatibility Logo(s) and Java
Authorized Licensee logo.
1.6 "OEM Products(s)" means value added products(s) of an OEM customer of
Licensee which integrate a Product while maintaining compatibility as required
in this License.
1.7 "Term" means the term of this License as specified in Section 6.1.
2.0 TRADEMARKS.
2.1 Trademark License. Subject to the terms and conditions of this License, Sun
-----------------
grants to Licensee a worldwide, non-exclusive, non-transferable, personal,
royalty-free license to:
a: Compatibility Logo(s): use the Compatibility Logo(s) only in connection
---------------------
with each Product that fully meets the requirements of Section 2.6 below;
b: Java Authorized Licensee logo: use the Java Authorized Licensee logo on
-----------------------------
marketing material, tradeshows and collateral, whether or not in connection with
a specific Licensee Product, to advertise that Licensee is a current TLDA
licensee provided that the Java Authorized Licensee logo may not be used on any
Product (including media or electronic versions), Product packaging or Product
documentation; and
1
<PAGE>
c. Licensee is granted no other right, title, interest or license to the
Java Logo(s), any other Java Trademarks or any other Sun trademark for any
purpose, and is specifically granted no right to sublicense the Java Logo(s), or
any other Sun trademarks, except as provided in Section 2.8.
2.2 Territory Reduction. Sun may notify the license grant specified in
-------------------
Section 2.1 above to eliminate any country or jurisdiction from this License if
Sun determines, in its sole judgment, that use or continued use of the Java
Logo(s) in such country or jurisdiction may subject Sun or any third party to
legal liability, or may jeopardize Sun's rights in the Java Logo(s), any other
Java Trademarks or any other Sun trademark in that or any other country or
jurisdiction. In such event, and upon written notice from Sun, Licensee shall
promptly cease all use of the Java Logo(s) in such country or jurisdiction.
2.3 Recordal Notice. Licensee shall use commercially reasonable efforts to
---------------
provide Sun with written notice prior to shipping any Product into or using a
Java logo in one of the following countries: Israel, South Korea, Liberia, the
People's Republic of China and the Republic of China (Taiwan); but in no event
later than twenty days after actual shipment of the Product into such countries.
Sun may amend this list of countries at any time by written notice to
Licensee.
2.4 Ownership of Java Trademarks. Licensee acknowledges and agrees that Sun is
----------------------------
the sole owner worldwide of the Java trademarks and all associated goodwill.
Licensee shall not (i) do anything that might harm the reputation or goodwill of
the Java Logo(s) or the other Java Trademarks; (ii) take any action inconsistent
with Sun's ownership of the Java Logo(s) or the other Java Trademarks; or (iii)
challenge Sun's rights in or attempt to register the Java Logo(s) or the other
Java Trademarks or any mark or logo substantially similar thereto. Licensee's
use of the Java Logo(s) inures solely to Sun's benefit. If at any time,
Licensee acquires any rights in, or trademark registrations or applications for,
the Java Logo(s) or any other Java Trademarks by operation of law or otherwise
in any country or jurisdiction, Licensee will immediately upon request by Sun
and at no expense to Sun, assign such rights, registrations, or applications to
Sun, along with any and all associated goodwill.
2.5 Further Assurances. Licensee shall assist Sun to the extent reasonably
------------------
necessary to protect and maintain the Java Logo(s) worldwide, including, but not
limited to, giving prompt notice to Sun of any known or potential infringement
of the Java Logo(s), and cooperating with Sun in preparing and executing any
documents necessary to register the Java Logo(s) or to record this trademark
license, or any other document concerning the license grant, as may be required
by the laws or rules of any country or jurisdiction. In its sole discretion,
Sun may commence, prosecute or defend any action or claim concerning the Java
Logo(s). Sun shall have the right to control any such litigation, and Licensee
shall fully cooperate with Sun in any such litigation, including the
satisfaction of procedural requirements necessary to bring such litigation in a
particular country or jurisdiction. Sun shall reimburse Licensee for the
reasonable costs associated with providing such assistance, except to the extent
that any such costs result from Licensee's breach of this License. Licensee
shall not commence any action regarding the Java Logo(s), without Sun's prior
written consent which Sun may withhold in its sole discretion.
2.6 Quality Standards.
-----------------
a. Certification and Audit. This License applies only to versions of
-----------------------
Products that have successfully passed the applicable Java Test Suites, and
which otherwise fully comply with all other compatibility requirements of the
TLDA for a particular Technology. Upon thirty (30) days written notice by Sun
no more than two (2) times per calendar year, Licensee shall permit Sun or its
authorized representative to inspect and test any Product with which the
Compatibility Logo is used to ensure that such Product meets the compatibility
requirements of the TLDA.
b. Reputation and Industry Standards. Licensee shall maintain the quality
---------------------------------
of the Product or service on or in connection with which it uses the Java
Logo(s) in a manner consistent with all terms,
<PAGE>
conditions and requirements set forth in this License and at a level that meets
or exceeds Licensee's overall reputation for quality and that is at least
commensurate with industry standards.
2.7 Java Logo Usage, Location and Attribution.
-----------------------------------------
a. Usage. Licensee shall use the Java Logo(s) in the exact form provided by
-----
Sun, and only in accordance with the Java Trademark Guidelines. Whenever
Licensee displays a Java Logo, Licensee shall display it in a size and style
less prominent than, and separate from, Licensee's own name, marks or logos;
accompanied by a "TM" symbol; and not in combination with any other name, mark
or logo.
b. Location. Licensee shall display the Compatibility Logo(s): (i) for
--------
tangible Product media: on external Product packaging, on the accompanying
documentation and the media containing the Product (disk, CD-ROM, tape etc.);
(ii) for on-line versions of the Product: on web pages featuring information
about the Product in GIF images that point to the current Sun Java Page (http://
java.sun.com) via hypertext link; (iii) for both tangible media and on-line
versions of the Product, on splash screens appearing upon launch of the Product
and in general Product information screens (e.g., "About", "Help", "Info"); and
(iv) on tangible marketing collateral featuring the Product, including
advertisements and datasheets.
c. Evidence of Use. Licensee shall use reasonable efforts within thirty (30)
---------------
days following the FCS of each Product, or in any event upon written request by
Sun, to provide Sun, at no charge to Sun with one copy of such Product's
packaging and the date with accompanying evidence of the Product's FCS release.
d. Product Preparation. Licensee may begin use of the Compatibility Logo(s)
in advance of FCS of a Licensee Product to begin production packaging and
preparation, however Licensee may not distribute Product with the Compatibility
Logo(s) without otherwise complying with the terms of this License, including
but not limited to, the compatibility requirements set forth in Section 2.6
above.
e. Attribution. Licensee shall legibly display the following trademark legend
-----------
on all materials in or on which Licensee displays the Java Logo(s):
"Java, and all Java-based trademarks and logos are trademarks or registered
trademarks of Sun Microsystems, Inc. in the U.S. and other countries."
2.8 OEM Product Branding. To the extent that customers of Licensee who
--------------------
distribute OEM Products desire to utilize the Compatibility Logo(s), Sun will
enter into a separate trademark license agreement with such customers of
Licensee provided that:
a. Licensee provides direct support to its sublicensees to facilite
compatibility testing of the OEM Products;
b. such OEM Products pass the applicable Java Test Suites prior to
distribution; and
c. Sun may require that OEM Products be tested for compatibility by a third
party test facility designated by Sun at the sublicensee's expense.
3.0 DISCLAIMER OF WARRANTY. Sun licenses the Java Logo(s) to Licensee on an "AS
IS" basis. SUN MAKE NO WARRANTIES OF ANY KIND RESPECTING THE JAVA LOGO(S),
INCLUDING THE VALIDITY OF SUN'S RIGHTS IN THE JAVA LOGO(S) IN any COUNTRY OR
JURISDICTION, AND ALL REPRESENTATIONS AND WARRANTIES, INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
NON-INFRINGEMENT OF THE JAVA LOGO(S) ARE HEREBY DISCLAIMED.
4.0 LIMITED INDEMNITY.
<PAGE>
4.1 In the event Licensee receives a claim of infringement with respect to
the Java Logo(s) in any country or jurisdiction, Sun shall at its election, and
as Licensee's sole and exclusive remedy, either: (i) release Licensee from
further obligation to include the Compatibility Logo on Products distributed in
such country or jurisdiction until such claim is satisfactorily resolved, or
(ii) defend and indemnify Licensee with respect to such claim and pay all
damages awarded by a court of competent jurisdiction, or such settlement amount
negotiated by Sun, attributable to such claim, provided that Licensee: (a)
provides notice of the claim promptly to Sun; (b) gives Sun sole control of the
defense and settlement of the claim; (c) provides to Sun, at Sun's expense, all
available information, assistance and authority to defend; and (d) has not
compromised or settled such proceeding without Sun's prior written consent.
4.2 THIS SECTION 4 STATES THE ENTIRE LIABILITY OF SUN WITH RESPECT TO
INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS RELATED TO THE JAVA LOGO(S).
SUN SHALL HAVE NO OTHER LIABILITY WITH RESPECT TO INFRINGEMENT OF INTELLECTUAL
PROPERTY RIGHTS OF ANY THIRD PARTY AS A RESULT OF USE, LICENSE, OR DISTRIBUTION
OF PRODUCTS OR JAVA LOGO(S).
5.0 LIMITATION OF LIABILITY. Except for the express undertaking to indemnify
provided in Section 4 and/or breach of Sections 2.6 2.7 or 2.8:
a. Each party's liability to the other for claims relating to this License,
whether for breach or in tort, shall be limited to the license fees paid by
Licensee under the TLDA.
b. IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY INDIRECT, INCIDENTAL,
SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH OR ARISING OUT OF
THIS LICENSE (INCLUDING LOSS OF PROFITS, USE, DATA, OR OTHER ECONOMIC
ADVANTAGE), NO MATTER WHAT THEORY OF LIABILTIY, EVEN IF EITHER PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OR PROBABILITY OF SUCH DAMAGES. FURTHER, LIABILITY
FOR SUCH DAMAGE SHALL BE EXCLUDED, EVEN IF THE EXCLUSIVE REMEDIES PROVIDED FOR
IN THIS LICENSE FAIL OF THEIR ESSENTIAL PURPOSE. The provisions of this Section
5.0 allocate the risks under this License between Sun and Licensee and the
parties have relied upon the limitations set forth herein in determining whether
to enter ito this License.
6.0 TERM AND TERMINATION.
6.1 Term. This License shall begin on the Effective Date and continue until
----
Licensee is no longer authorized to distribute Products pursuant to the TLDA,
unless earlier terminated. Termination is permitted either for breach of this
License or the TLDA (a) upon thirty (30) days written notice to the other party
and an opportunity to cure within such thirty (30) day period, or (b)
immediatelY upon notice if such breach, by its nature, cannot be remedied.
6.2 Effect of Termination. Upon termination of this License, Licensee shall
---------------------
promptly cease use, display and distribution of all Products and materials
containing the Java Logo(s). All rights and licenses granted to Licensee shall
terminate upon such termination.
6.3 No Liability for Expiration or Lawful Termination. Neither party shall
-------------------------------------------------
have the right to recover damages or to indemnification of any nature, whether
by way of lost profits, expenditures for promotion, payment for goodwill or
otherwise made in connection with the business contemplated by this License, due
to the expiration or permitted or lawful termination of this License. EACH
PARTY WAIVES AND RELEASES THE OTHER FROM ANY CLAIM TO COMPENSATION OR INDEMNITY
FOR TERMINATION OF THE BUSINESS RELATIONSHIP UNLESS TERMINATION IS IN MATERIAL
BREACH OF THIS LICENSE.
6.4 No Waiver. The failure of either party to enforce any provision of this
---------
License shall not be deemed a waiver of that provision. The rights of Sun under
this Section 6.0 are in addition to any other rights and remedies permitted by
law or under this License.
6.5 Survival. The parties' rights and obligations under Sections
--------
2.5,4.0,5.0,6.3,6.4,6.5,6.6,7.0 shall survive termination of this License.
4
<PAGE>
6.6 Irreparable Harm. Notwithstanding the limitation of liability set forth
----------------
in Section 5.0 above, the parties acknowledge that a breach of Section 2.0 would
cause irreparable harm, the extent of which would be difficult to ascertain.
Accordingly, they agree that, in addition to any other legal remedies to which a
non-breaching party might be entitled, such party may obtain immediate
injunctive relief in the event of a breach of the provisions of such Sections.
7.0 MISCELLANEOUS.
7.1 Notices. All written notices required by this License must ve delivered
-------
in person or by means evidenced by a delivery receipt and will be effective upon
receipt by the persons at the addresses specified below.
<TABLE>
<CAPTION>
<S> <C>
Sun Licensee
Sun Microsystems, Inc. OpenTV, Inc.,
901 San Antonio Road 3401-A-Hillview Avenue,
Palo Alto, California 94303 Palo Alto, CA 94304-1320
Attn.: JavaSoft Vice President, Sales Attn.: Vice President Business Development
cc: JavaSoft Legal Department cc: Legal Department
</TABLE>
7.2 Partial Invalidity. If any of the above provisions are held to be in
------------------
violation of applicable law, void, or unenforceable in any jurisdiction, then
such provisions are herewith waived or amended to the extent necessary for the
License to be otherwise enforceable in such jurisdiction. However, if in Sun's
opinion deletion or amendment of any provisions of the License by operation of
this paragraph unreasonably compromises the rights or increase the liailities of
Sun or its licensors, Sun reserves the right to terminate the License.
7.3 Language. This License is the English language only, which language
--------
shall be controlling in all respects, and all versions of this License in any
other language shall be for accommodation only and shall not be binding on the
parties to this License. All communications and notices made or given pursuant
to this License, and all documentation and support to be provided, unless
otherwise noted, shall be in the English language.
7.4 Governing Law. This License is made under and shall be governed by and
-------------
construed under the laws of the State of California, regardless of its choice of
laws provisions.
7.5 Disclaimer of Agency. The relationship created hereby is that of
--------------------
licensor and licensee and the parities hereby acknowledge and agree that nothing
herein shall be deemed to constitute Licensee as a franchisee of Sun. Licensee
hereby waives the benefit of any state or federal statutes dealing with the
establishment and regulation of franchises.
7.6 Assignment and Change in Control. This License may not be assigned or
--------------------------------
transferred by either party without the prior written consent of the other
party, which consent shall not be unreasonably withheld or delayed, except that
Sun may assign or transfer this License to a majority-owned subsidiary.
7.7 Construction. This License has been negotiated by Sun and Licensee and
------------
by their respective counsel. This License will be fairly interpreted in
accordance with its terms and without any strict construction in favor of or
against either party.
7.8 Force Majeure. Neither party shall be liable to the other party for non-
-------------
performance of this License, if the non-performance is caused by events or
conditions beyond that party's control and the party gives prompt notice under
Section 7.1 and makes all reasonable efforts to perform.
7.9 Section References. Any reference contained herein to a section of this
------------------
License shall be meant to refer to all subsections of the section.
7.10 Complete Understanding. This License constitutes and express the final,
----------------------
complete and exclusive agreement and understanding between the parties with
respect to the Java Logo(s) and supersede all previous communications,
representations or agreements, whether written or oral,
5
<PAGE>
with respect thereto. This License may not be modified, amended, rescinded,
canceled or waived, in whole or part, except by a written instrument signed by
the parties.
IN WITNESS WHEREOF, the parties have caused this License to be executed by
their duly authorized representatives.
Sun: Licensee:
By: /s/ By: /s/
Name: Lee Patch Name: J.W. SceenKamp
---------------------- -----------------------
(Print or Type) (Print or Type)
Title: Vice President Title: CEO
Date: 3/25/98 Date: 4-15-98
----------------------- -----------------------
6
<PAGE>
EXHIBIT 10.6
TECHNOLOGY LICENSE
AND
DISTRIBUTION AGREEMENT
This Technology License and Distribution Agreement (the "Agreement") is
entered into this 20th day of March, 1998 (the "Effective Date") between Sun
Microsystems, Inc., acting by and through its JavaSoft business unit ("Sun")
with its principal place of business at 901 San Antonio Road, Palo Alto,
California 94303 and OpenTV Inc., a Delaware corporation with a principal place
of business at 3401-A Hillview Avenue, Palo Alto, CA 94304-1320 ("Licensee").
RECITALS
WHEREAS Sun wishes to license its Java(TM) technology, while maintaining
compatibility among Java language based products; and
WHEREAS Sun wishes to protect and promote certain trademarks used in connection
with Java technology; and
WHEREAS Licensee wishes to develop and distribute products based upon Sun's Java
technology;
NOW THEREFORE, Sun and Licensee enter into this Agreement on the following
terms.
1.0 DEFINITIONS
1.1 "Application Programming Interfaces" or "APIs" means the names of
class library calls and the number and types of arguments they take in invoking
the functionality of such class libraries.
1.2 "Applet" means a Java application which (i) runs on the Java
Environments and (ii) consists of Java byte codes executable by the Java Runtime
Interpreter (but does not include or incorporate the Java Runtime Interpreter or
the Java class libraries).
1.3 "Bug Fixes" means correction of errors in either the Shared Part or
Platform Dependent Part of the Technology.
1.4 "Documentation" means the materials which Sun provides for use with
the Technology, as more particularly identified in Exhibit C, as may be revised
by Sun during the Term.
1.5 "Derivative Work(s)" means any work which is based upon the
Technology, such as a revision, modification, translation, abridgement,
condensation, expansion, collection, compilation or any other form in which the
Technology may be recast, transformed or adapted, any new material, information
or data relating to and derived from the Technology, the preparation, use
and/or distribution of which, in the absence of this Agreement or other
authorization from the owner, would constitute infringement under applicable
law.
1.6 "Distributors" means distribution channels designated by Licensee for
distribution of Products, including OEMs, distributors, resellers, dealers and
sales representatives.
1.7 "Exhibit C" means collectively Exhibits C-1 through C-n which
incorporate into the Agreement the specific terms and conditions for each
Technology licensed hereunder.
1.8 "FCS" means first commercial shipment of a production version of a
software or hardware product or technology.
1.9 "Field of Use" means the relevant market segments and/or product areas
for each Technology specified in Exhibit C.
1.10 "Java Classes" means the specific class libraries associated with
each Technology defined in Exhibit C, as may be revised by Sun during the Term.
1.11 "Java Environment(s)" means each or all the Java Application
Environment ("JAE"), Personal Java Environment ("pJava"), Embedded Java
Environment ("eJava"), JavaCard
- --------------
* = Indicates that confidential treatment has been granted for that portion of
the text as marked and that the confidential portion has been filed
separately with the U.S. Securities and Exchange Commission.
1
<PAGE>
Environment ("JCE"), JavaOS Environment and Embedded JavaOS Environment, or any
other Java Environment released by Sun during the Term, described in
specifications from Sun, as may be revised by Sun during the Term.
1.12 "Java Runtime Interpreter" means the program(s) which implement the
Java virtual machine for a particular Java Environment as specified in the Java
Virtual Machine Specification from Sun, as may be revised by Sun during the
Term.
1.13 "Java Test Suites" means the applicable test suites associated with
each Technology, as may be revised by Sun during the Term.
1.14 "Licensee Open Class(es)" means an additional Java class and
associated API(s) developed by or for Licensee which: (i) extends the
functionality of a Java Environment; and (ii) is exposed to third party software
developers for the purpose of developing additional software which invokes such
additional Java class.
1.15 "OEM" means an original equipment manufacturer of hardware and/or
software, who integrates Products into its own valued added products or
technologies which represent a significant functional and value enhancement to
the Products, and which are distributed through its established distribution
channels.
1.16 "Platform Dependent Part" means those Source Code files (and
corresponding binary code) of the Technology which are not in a "share"
directory or subdirectory thereof.
1.17 "Product(s)" means a Licensee product into which the Technology is
implemented or integrated. A Product must: (i) have a principal purpose which is
substantially different from that of the stand-alone Technology; (ii) represent
a significant functional and value enhancement to the Technology; (iii) operate
in conjunction with the Technology; and (iv) not be marketed as a technology
which replaces or substitutes for the Technology. A list of Products current as
of the Effective Date is included in Exhibit C for each Technology. Licensee may
add Products within the designated Field of Use for such Products by written
notification to Sun.
1.18 "Shared Part" means those Source Code files (and corresponding binary
code) of the Technology which are in any "share" directory or subdirectory
thereof.
1.19 "Source Code" means the human readable version, in whole or in part,
of the Technology supplied to Licensee and any corresponding comments and
annotations.
1.20 "Standard Extensions" means the additional classes and associated
APIs specified in Exhibit C.
1.21 "Technology" means each specific Java technology (excluding Tools)
licensed by Sun hereunder as more fully described in Exhibit C, as may be
revised by Sun during the Term, and Upgrades thereto to the extent Licensee is
authorized to receive them.
1.22 "Term" means the term of the Agreement as specified in Section 9.1.
1.23 "Tools" means any Java Test Suites, and other development tools, in
source or binary code form specified in Exhibit C, as may be revised by Sun
during the Term.
1.24 "Trademark License" means the separate agreement entered into by the
parties that specifies the terms and conditions related to the use of
trademarks, logos and branding in connection with Products, and when executed
will be attached hereto for reference as Exhibit D.
1.25 "Upgrades" means bug fixes, modifications, variations, and
enhancements, to the extent included in a patch or release of the Technology
unless otherwise specified in Exhibit C, which Sun generally licenses as part of
the Technology.
1.26 "Trade-In Softwares" means Sun's particular Java Environment (other
than pJava) which may be required for the use of any set-top box-related Java
APIs as specified in Exhibit C-2.
1.27 "Additional Environment" means any additional Java Environment (other
than pJava) which may be made generally available by Sun which includes a
set-top box-related Java API to provide a television set-top box solution, as
specified in Exhibit C-2.
2.0 LICENSE GRANTS
2
<PAGE>
2.1 Source Code Product Development License.
a. Product Development. Subject to the terms and conditions contained in
this Agreement, Sun hereby grants to Licensee, solely for the Field(s) of
Use, a worldwide, non-exclusive, non-transferable license to use and
modify the Source Code to create Derivative Works including:
(i) porting of the Platform Dependent Part to platforms other than
those offered by Sun and specified in Exhibit C;
(ii) development of Bug Fixes;
(iii) integration of the Source Code, Bug fixes and Derivative Works
with other source code of Licensee; and
(iv) compiling all of the foregoing to create Products.
b. Product Development Restrictions. In the exercise of the rights granted
in Section 2.1a. above, Licensee:
(i) must include the Shared Part complete and unmodified in the
Product;
(ii) may not modify the functional behavior of the Java Runtime
Interpreter or the Java Classes;
(iii) may not modify or subset the interfaces of the Java Runtime
Interpreter or the Java Classes;
(iv) may not subset the Java Classes;
(v) may not modify or extend the public class or interface
declarations whose names begin with "java", "sun.hotjava", "COM.sun" or
their equivalents in any subsequent naming convention; and
(vi) may not sublicense or distribute the Source Code or Derivative
Works thereof, to third parties, except as provided in Section 2.4.
c. Bug Fixes. Licensee will inform Sun promptly, and no later than it
informs any third party, of any bugs identified in the Technology, and to
the extent that Licensee elects to correct such bugs, Licensee will make
such Bug Fixes promptly available to Sun free of all restrictions as they
are implemented.
d. Applet Tags. Any Product that reads or writes hypertext markup language
(HTML) or standard generalized markup language (SGML) shall use the
Document Type Definition ("DTD") as specified in Exhibit A when
referencing the Applet tag, unless another DTD is defined for the Applet
tag by an industry standard.
22. Source Code Research License.
a. Subject to the terms and conditions contained in this Agreement, Sun
hereby grants to Licensee, without the right to sublicense, a worldwide,
non-exclusive, non-transferable license to use and modify the Source Code
for internal research and development, to facilitate the development of
Products. This research license is not subject to the restrictions set
forth in Section 2.1b above, provided that Licensee may not incorporate
any of the Source Code or Derivative Works created pursuant to this
research license into Products or any other products.
b. If Licensee identifies any changes which are necessary to the Shared
Part to enable porting to other platforms, Sun will make reasonable
efforts to evaluate the feasibility of implementing such changes or
reclassifying the necessary code as Platform Dependent.
3
<PAGE>
2.3. Documentation License. Subject to the terms and conditions contained
in this Agreement, Sun hereby grants to Licensee, solely for the Field(s) of
Use, a worldwide, non-exclusive, non-transferable license to use, modify,
translate and subset the Documentation to create technically accurate Licensee
documentation associated with the Products.
2.4 Sublicensing of Source Code. Licensee may deliver and sublicense the
Source Code to third parties (excluding customers of Licensee) located in the
United States, the European Union (as constituted as of the Effective Date),
Finland, Sweden, Norway, Israel, Canada and Japan for the sole purpose of
furnishing services to Licensee in connection with the rights granted in Section
2.1 above; provided that all such third parties shall execute appropriate
documents acknowledging their work-made-for-hire status and/or effecting
assignments of all intellectual property rights with respect to such work to
Licensee or Sun, as appropriate, and undertaking obligations of confidentiality
and non-use with respect to such work. Licensee may deliver and sublicense the
Source Code to third parties in countries other than those set out above,
subject to prior approval of Sun. Sun may, upon its request, review and approve
or reject any documents proposed for use by Licensee prior to any use of such
contractors.
2.5 Licensee Open Classes. Subject to the terms and conditions contained
in this Agreement, Sun hereby grants to Licensee, solely for use with Products,
a worldwide, non-exclusive, non-transferable license to use information gained
from access to the Technology to develop Licensee Open Classes, provided that:
a. Licensee may not include any of the Technology in such Licensee Open
Class;
b. Licensee uses only names for Licensee Open Classes that begin with
"COM.Licensee" or such other convention as Sun may reasonably require,
and shall make commercially reasonable efforts to ensure that other
software which Licensee develops relating to the Technology conforms to
this convention;
c. Licensee publishes to the industry, on a non-confidential basis and
free of all restrictions, the specification for any Licensee Open Class as
early as is reasonably possible but in no event later than the date on
which it first provides such specification or an implementation thereof to
any third party. Included with such specification shall be an appropriate
test suite sufficiently detailed to allow any third party reasonably
skilled in the technology to produce implementations compatible with the
specification. Licensee shall use its reasonable commercial efforts to
clarify and correct the specification or the test suite upon written
request by Sun;
d. Licensee agrees to refrain from enforcing any copyrights or patent
rights that it might have relating to compatibility or interface, which
would be infringed by Sun or any third party implementinq the
specifications for a Licensee Open Class;
e. Licensee hereby grants to Sun a non-exclusive, worldwide, fully-paid-up
license to use an unlimited number of copies of the Licensee Open Class,
in binary form, for Sun's internal use for evaluation and demonstration;
and
f. Licensee agrees to negotiate in good faith with Sun the terms of a
commercial license for the source code of the Licensee Open Class.
2.6 Tools License Grant. Subject to the terms and conditions contained in
this Agreement, Sun hereby grants to Licensee, a worldwide, non-exclusive,
non-transferable license to use the Tools solely for the purpose of developing
and testing Products. Licensee may not sublicense the Tools unless specifically
provided in Exhibit C.
2.7 Binary Code Distribution License. Subject to the terms and conditions
contained in this Agreement, Sun hereby grants to Licensee, solely for the
Field(s) of Use, a non-exclusive, worldwide, right and license to distribute the
Product(s) in binary form only, both directly and through Distributors, subject
to the following:
4
<PAGE>
a. Distributors shall not be authorized to modify any portion of the
Technology or Derivative Works thereof created by Licensee, and shall be
obligated to abide by the relevant terms in this Agreement governing use,
distribution, compatibility, and confidentiality
b. Licensee or its Distributors shall require an end user license
agreement for all Product(s) distributed, which includes the minimum terms
specified in Exhibit C for each Technology, unless it is not customary in
the industry to include an end user license with such Products;
c. Licensee shall include Sun's compatibility logo trademark(s) specified
in Exhibit C on FCS versions of Products distributed hereunder, subject to
the Trademark License, to indicate that such Products meet the applicable
compatibility requirements specified in Section 2.8 below.
d. Licensee may release Product(s) based on pre-FCS versions of the
Technology, if clearly labeled as a pre-release version and only for beta
testing purposes.
2.8 Compatibility Requirements.
a. Unless otherwise specified in Exhibit C, from time to time during the
term of the Agreement, Sun will make available to Licensee at no cost,
Java Test Suites for validating that the portion of Licensee's Product
which interprets Java bytecodes is compatible with the then-current
version of the applicable Technology and Standard Extensions.
b. Each new generation of Licensee's reference design for a Product by
Licensee must pass the most current applicable Java Test Suite that was
available from Sun one hundred twenty (120) days before FCS of such
version of the Product. In the event that Licensee elects to use a version
of the Technology and/or Standard Extension(s) that is newer than that
which is required under this Section 2.8, then Licensee agrees to pass the
Java Test Suite that corresponds to such newer version. Once a new
generation of a Product has satisfied the compatibility requirement set
forth above, Licensee may continue to ship such new generation after
delivery by Sun of later versions of the Technology, provided however,
that later new generations of such Product developed by Licensee must
satisfy the compatibility requirement set out above.
c. If Licensee provides Sun with written notice of the existence of a bug
in a current Java Test Suite, then Licensee shall be released from
compatibility with the minimum portion of such Java Test Suite necessary
to avoid the impact of such bug, until such time as Sun provides to
Licensee a corrected or new Java Test Suite.
d. Upon request by Sun, Licensee shall promptly make any modifications to
any Product necessary for it to meet the compatibility requirements set
out in this Section 2.8.
2.9 Ownership
a. Ownership by Sun. Sun retains all right, title and interest in the
Technology, Documentation, Tools, Bug Fixes, and modifications to the
Shared Pan. Licensee agrees to execute (in recordable form where
appropriate) any instruments and/or documents as Sun may reasonably
request to verify and maintain Sun's ownership rights in the foregoing, or
to transfer any part of the same which may vest in Licensee for any
reason.
b. Ownership by Licensee. Licensee retains all right, title and interest
in the Products, any License Open Classes, and any Derivative Works
(excluding Bug Fixes and modifications to the Shared Part), created by or
for Licensee as authorized under the terms of this Agreement, subject to
Sun's underlying ownership rights identified in Section 2.9.a.
2.10 No Other Grant. Each party agrees that this Agreement does not grant
any right or license, under any intellectual property rights of the other party,
or otherwise, except as expressly
5
<PAGE>
provided in this Agreement, and no other right or license is to be implied by or
inferred from any provision of this Agreement or by the conduct of the parties.
2.11 Trade-In Option. Licensee may at any time within six (6) months of
FCS of the Additional Environment, trade-in the pJava Environment software, on a
one for one basis, for the Trade-in Software, and shall pay the Trade-In Fee(s)
and any applicable Royalties as specified in Exhibit C-2. All other terms and
conditions of the Agreement, except as amended for specific Trade-In Software
concerns, would then transfer and apply to the Trade-in Software and all rights
granted to the pJava Environment would cease. The provisions of Section 10.3
would then apply with respect to the pJava Environment.
2.12 Additional Software. Licensee may if and when available during the
Term, at any time within six (6) months of FCS of such Additional Environment,
elect to license the Additional Environment subject to any additional terms
generally applicable to licensees of such Additional Environment, and shall pay
the Fee(s) and any applicable Royalties as specified in Exhibit C-2.
3.0 SUPPORT AND UPGRADES
3.1 Licensee Support and Upgrades. Sun shall provide support and Upgrades
to Licensee under the terms and conditions specified in Exhibit C, and payment
terms specified in Section 4.1. The frequency of Upgrades shall be at Sun's sole
discretion provided that any Upgrades will be made available to Licensee at the
same time as Sun makes such Upgrades generally available to commercial licensees
of the applicable Technology.
3.2 End User Support. Licensee is not authorized to make any
representation or warranty on behalf of Sun to Licensee's end users or third
parties. Licensee shall provide technical and maintenance support service for
its Distributors and end user customers in accordance with Licensee's standard
support practices. Sun shall not be responsible for providing any support to
Licensee's Distributors or customers for the Technology or the Product(s).
4.0 PAYMENT
4.1 License and Support Fees. Licensee shall pay to Sun the fees set forth
in Exhibit C within thirty (30) days from the Effective Date of this Agreement.
Thereafter, and for the term of the Agreement, Licensee shall pay the annual
support and Upgrade Fees on or before the anniversary of the Effective Date.
4.2 Royalty Payments. Payment of royalties shall be made quarterly, shall
be due thirty (30) days following the end of the calendar quarter to which they
relate and shall be submitted with a written statement documenting the basis for
the royalty calculation.
4.3 Taxes. All payments required by this Agreement shall be made in United
States dollars, are exclusive of taxes, and Licensee agrees to bear and be
responsible for the payment of all such taxes, including, but not limited to,
all sales, use, rental receipt, personal property or other taxes and their
equivalents which may be levied or assessed in connection with this Agreement
(excluding only taxes based on Sun's net income). To the extent Licensee is
required to withhold taxes based upon Sun's income in any country, Licensee
shall provide Sun with written evidence of such withholding, suitable for Sun to
obtain a tax credit in the United States.
4.4 Records. Licensee shall maintain account books and records consistent
with Generally Accepted Accounting Principles appropriate to Licensee's
domicile, as may be in effect from time to time, sufficient to allow the
correctness of the royalties required to be paid pursuant to this Agreement to
be determined.
4.5 Audit Rights. Sun shall have the right to audit such accounts upon
reasonable prior notice using an independent auditor of Sun's choice (the
"Auditor"). The Auditor shall be bound to keep confidential the details of the
business affairs of Licensee and to limit disclosure of the results of any audit
to the sufficiency of the accounts and the amount, if any, of a payment
adjustment that should be made. Such audits shall not occur more than once each
year (unless discrepancies are discovered in excess of the five percent (5%)
threshold set forth in Section 4.6, in which case two consecutive
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<PAGE>
quarters per year may be audited). Except as set forth in Section 4.6 below, Sun
shall bear all costs and expenses associated with the exercise of its rights to
audit.
4.6 Payment Errors. In the event that any errors in payments shall be
--------------
determined, such errors shall be corrected by appropriate adjustment in payment
for the quarterly period during which the error is discovered. In the event of
an underpayment of more than five percent (5%) of the proper amount owed, upon
such underpayment being properly determined by the Auditor, Licensee shall
reimburse Sun the amount of said underpayment and all reasonable costs and
expenses associated with the exercise of its rights to audit, and interest on
the overdue amount at the maximum allowable interest rate from the date of
accrual of such obligation.
5.0 ADDITIONAL AGREEMENT OF PARTIES
5.1 Notice of Breach or Infringement. Each party shall notify the other
--------------------------------
immediately in writing when it becomes aware of any breach or violation of the
terms of this Agreement, or when Licensee becomes aware of any potential or
actual infringement by a third party of the Technology or Sun's intellectual
property rights therein.
5.2 Proprietary Rights Notices. Licensee shall not remove any copyright
--------------------------
notices, trademark notices or other proprietary legends of Sun or its suppliers
contained on or in the Technology and Documentation and shall incorporate such
notices in all Products, related documentation, as applicable. Licensee shall
comply with all reasonable requests by Sun to include additional copyright or
other proprietary rights notices of Sun or third parties from time to time.
6.0 LIMITED WARRANTY AND DISCLAIMER
6.1 Limited Warranty. Sun represents and warrants that the media, if
----------------
any, on which the Technology is recorded will be free from defects in materials
and workmanship for a period of ninety (90) days after delivery. Sun's sole
liability with respect to breach of this warranty is to replace the defective
media. Except as expressly provided in this Section 6.1, Sun licenses the
Technology Documentation and Tools to Licensee on an "AS IS" basis.
6.2 General Disclaimer. EXCEPT AS SPECIFIED IN THIS AGREEMENT, ALL OTHER
------------------
REPRESENTATIONS AND WARRANTIES, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT OF THE
TECHNOLOGY, TOOLS, AND DOCUMENTATION ARE HEREBY DISCLAIMED.
6.4 Limitation. The limited warranty set forth in this Section 6.0 are
----------
expressly subject to Section 9.0 (Limitation of Liability).
7.0 CONFIDENTIAL INFORMATION
7.1 Confidential Information. For the purposes of this Agreement,
------------------------
"Confidential Information" means the Technology, Tools, Documentation and that
information which relates to (i) either party's hardware or software, (ii) the
customer lists, business plans and related information of either party, and
(iii) any other technical or business information of the parties, including the
terms and conditions of this Agreement and the Trademark License. In all cases,
information which a party wishes to be treated as "Confidential Information"
shall be marked as "confidential" or "proprietary" (or with words of similar
import) in writing by the disclosing party on any tangible manifestation of the
information transmitted in connection with the disclosure, or, if disclosed
orally, designated as "confidential" or "proprietary" (or with words of similar
import) at the time of disclosure. Sun has no obligation of confidentiality to
Licensee with respect to Bug Fixes, modifications to the Shared part, or the
specifications for any Licensee Open Class.
7.2 Preservation of Confidentiality. The parties agree that all
-------------------------------
disclosures of Confidential Information (as defined under Section 7.1 above)
shall be governed by and treated in accordance with the terms of the
Confidential Disclosure Agreement (the "CDA") attached hereto as Exhibit B and
incorporated herein by reference, modified as follows:
(a) the definition of "Confidential Information" shall be as set
forth in Section 7.1 above notwithstanding any definition provided in the CDA;
7
<PAGE>
(b) the use of Confidential Information shall be limited to the scope of
this Agreement;
(c) the obligations of confidentiality expressed in the CDA shall extend
three (3) years from the date of disclosure, except with respect to
Sun Source Code which shall be held confidential in perpetuity; and
(d) the CDA shall remain in effect for the term of this Agreement.
8.0 LIMITED INDEMNITY
8.1 The parties acknowledge that the Technology may be in pre-release form
*** **** *** ***** *** ** ****** *** *** ******* ** ************ ** ***
*********** ************** ***** ** ** *** ******** ********** ****** *******
*** **** ** ** ********** **** *** ********** ******* ** *** **** ******* ******
************ *** ******* ** ***** ** ** ***** ** ******* ** ************ ** ***
****** ** ************** ** *** ********** ** *************. Upon FCS of the
Technology by Sun, Sun will provide to Licensee a limited indemnity as described
in Sections 8.2-8.3 below.
8.2 Sun will defend, at its expense, any legal proceeding brought against
Licensee, to the extent it is based on a claim that use of the FCS or subsequent
production version(s) of the Technology, Documentation or Tools is an
infringement of a third party trade secret or a copyright in a country that is a
signatory to the Berne Convention, and will pay all damages awarded by a court
of competent jurisdiction, or such settlement amount negotiated by Sun,
attributable to such claim, provided that Licensee: (i) provides notice of the
claim promptly to Sun; (ii) gives Sun sole control of the defense and settlement
of the claim; (iii) provides to Sun, at Sun's expense, all available
information, assistance and authority to defend; and (iv) has not compromised or
settled such proceeding without Sun's prior written consent. *** ****** *** ****
** **** ********** **** ** * ******* ****** ******* ****** ** ******* * ******
********* ** **** ** *** ******** **** ********** ******* *** ************
********* *** *** ******* ** *** ********** ******** ** ******** ********** ***
***** ***** ** ******* **** ****** ********* ** ********* *** ***** ***
********** ********* ****** *** ************* *** **** ** ***** ******* ** *****
********* ******** ********* *** *** ********** ***** ******* ******** ***** **
*** ********* *****
8.3 Should any FCS Technology, Documentation or Tools or any portion
thereof become, or in Sun's opinion be likely to become, the subject of a claim
of infringement for which indemnity is provided under Section 8.2, Sun shall, in
addition to the obligations specified in Section 8.2, as Licensee's sole and
exclusive remedy, elect to: (i) obtain for Licensee the right to use such FCS
Technology; (ii) replace or modify the FCS Technology, Documentation or Tools so
that it becomes non-infringing; or if alternatives (i) or (ii) are not
commercially practicable; (iii) accept the return of the Technology,
Documentation or Tools and grant Licensee a refund of the License Fee, as
depreciated on a five year straight-line basis.
8.5 THIS SECT1ON 8 STATES THE ENTIRE LIABILITY OF SUN WITH RESPECT TO
INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS BY THE TECHNOLOGY AND TOOLS.
SUN SHALL HAVE NO OTHER LIABILITY WITH RESPECT TO INFRINGEMENT OF INTELLECTUAL
PROPERTY RIGHTS OF ANY THIRD PARTY AS A RESULT OF USE, LICENSE, OR SALE OF
TECHNOLOGY OR TOOLS.
8.6 Indemnity by Licensee. Except for claims for which Sun is obligated to
indemnify Licensee under Section 8.2 or elects to indemnify under the Trademark
License, Licensee shall defend, at Licensee's expense, any and all claims
brought against Sun by third parties, and shall pay all damages awarded by a
court of competent jurisdiction, or such settlement amount negotiated by
Licensee, arising out of or in connection with Licensee's use, reproduction or
distribution of the ************************** Product(s), or Licensee Open
Classes. Licensee's obligation to provide indemnification under this Section 8.6
shall arise provided that Sun: (i) provides notice of the claim promptly to
Licensee; (ii) gives Licensee sole control of the defense and settlement of the
claim; (iii) provides to Licensee, at Licensee's expense, all available
information, assistance and authority to defend and (iv) has not compromised or
settled such proceeding without Licensee's prior written consent.
9.0 LIMITATION OF LIABILITY
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<PAGE>
9.1 Limitation of Liability. Except *** ******* ************ ** *********
***** **** ********* ****** ****** ** ******** ***** ******** *** ** ****
** **** ******* ********* ** *** ***** *** ****** ******** ** **** **********
******* *** ****** ** ** ***** ***** ** ******* ** *** ******* **** **** **
******** *** *** ********** ******* ** *** *******
b. IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY INDIRECT, INCIDENTAL,
SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT (INCLUDING LOSS OF PROFITS, USE, DATA, OR OTHER ECONOMIC
ADVANTAGE), NO MATTER WHAT THEORY OF LIABILITY, EVEN IF EITHER PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OR PROBABILITY OF SUCH DAMAGES. FURTHER, LIABILITY
FOR SUCH DAMAGE SHALL BE EXCLUDED, EVEN IF THE EXCLUSIVE REMEDIES PROVIDED FOR
IN THIS AGREEMENT FAIL OF THEIR ESSENTIAL PURPOSE. The provisions of this
Section 9.0 allocate the risks under this Agreement between Sun and Licensee and
the parties have relied upon the limitations set forth herein in determining
whether to enter into this Agreement.
9.2 High Risk Activities. The Technology is not designed or intended for
use in on-line control of aircraft, air traffic, aircraft navigation or aircraft
communications; or in the design, construction, operation or maintenance of any
nuclear facility. Sun disclaims any express or implied warranty of fitness for
such uses. Licensee agrees that it will not use or license the Technology for
such purposes, and that it will ensure that its licensees and end users of the
Technology are provided a copy of the foregoing notice.
10.0 TERM AND TERMINATION
10.1 Term. The Term of this Agreement shall begin on the Effective Date
and shall continue for a period of five (5) years, or until terminated as
provided below. Each year for five (5) consecutive years following expiration of
the initial five (5) year term, at Licensee's sole option, Licensee may extend
the Term of this Agreement for one (1) additional year. Licensee shall indicate
its intent to extend the Agreement by written notice to Sun at least thirty (30)
days prior to the expiration of the preceding Term. Termination is permitted
either for breach of this Agreement, upon thirty (30) days written notice to the
other party and an opportunity to cure within such thirty (30) day period, **
**** *** ****** ** ******** ******** **** *** ** ************ ** *** **********
** *** ** *** ** ***** ********* ** *** *********** ********* * ****** **
********* ** *** ****** **** ******** ******** * ***** **** *** ** *** *** **
********** ********** ********** ** *** *********** ************* ** ***** ** **
************ ** * ***** ***** ******* ******** *** ****** *** ** ******* ** ***
**** ***** *** ***** **** **** ** **** ********* ** *** ****** ** ********* ****
********** **** *********** ***** ** ********* ** *** **** *********** **** **
*** ********* **** ****** **** **** ****** **** **** ***** ***** ******* ** ****
*******
10.2 Effect of Expiration. Upon expiration of this Agreement, Sun shall
retain use, under the terms of this Agreement, of the rights received hereunder,
and Licensee shall be authorized to: (i) distribute Product(s) containing the
version of the Technology incorporated therein at the time of expiration,
subject to Licensee's continued compliance with this Agreement including the
Java Test Suites current at the time of expiration, and payment of royalties,
and (ii) retain one (1) copy of the Source Code to support customers having
copies of Product(s) distributed by Licensee prior to the expiration hereof. All
other rights of Licensee shall terminate upon such expiration.
10.3 Effect of Termination. In the event of termination of this Agreement
by Sun in accordance with Section 10.1 above, Licensee shall promptly: (i)
return to Sun all copies of the Technology, Documentation, and other
Confidential Information of Sun (collectively "Sun Property") in Licensee's
possession or control; or (ii) permanently destroy or disable all copies of the
Sun Property in Licensee's possession or control, except as specifically
permitted in writing by Sun; and (iii) provide Sun with a written statement
certifying that Licensee has complied with the foregoing obligations except that
Licensee may retain one (1) copy of the Technology in Source Code form to
support customers having copies of Product(s) distributed by Licensee prior to
the termination hereof. All rights and licenses granted to Licensee shall
terminate upon such termination. Notwithstanding the foregoing, Licensee
end-users would be permitted continued use of any products purchased prior
9
<PAGE>
to the termination under the terms of their agreement with Licensee provided
they are not otherwise in breach of the terms of this Agreement or their
agreement with Licensee.
10.4 No Liability for Expiration or Lawful Termination. Neither party
shall have the right to recover damages or to indemnification of any nature,
whether by way of lost profits, expenditures for promotion, payment for goodwill
or otherwise made in connection with the business contemplated by this
Agreement, due to the expiration or permitted or lawful termination of this
Agreement. EACH PARTY WAIVES AND RELEASES THE OTHER FROM ANY CLAIM TO
COMPENSATION OR INDEMNITY FOR TERMINATION OF THE BUSINESS RELATIONSHIP UNLESS
TERMINATION IS IN MATERIAL BREACH OF THIS AGREEMENT.
10.5 No Waiver. The failure of either party to enforce any provision of
this Agreement shall not be deemed a waiver of that provision. The rights of Sun
under this Section 10.0 are in addition to any other rights and remedies
permitted by law or under this Agreement.
10.6 Survival. The parties' rights and obligations under Sections 2.0,
4.0, 5.2, 7.0, 8.0, 9.0, 10.0, and 11.0 shall survive expiration or termination
of this Agreement, except in the event of termination by Sun under Section 10.1,
in which case Licensee's rights under Section 2.0 shall not survive.
10.7 Irreparable Harm. The parties acknowledge that breach of Sections
2.0, 5.2, 7.0, 9.2, 11.4 and 11.7 would cause irreparable harm, the extent of
which would be difficult to ascertain. Accordingly, they agree that, in addition
to any other legal remedies to which a non-breaching party might be entitled,
such party shall be entitled to obtain immediate injunctive relief in the event
of a breach of the provisions of such Sections.
11.0 MISCELLANEOUS
11.1 Notices. All written notices required by this Agreement must be
delivered in person or by means evidenced by a delivery receipt and will be
effective upon receipt by the persons at the addresses specified below.
Sun Licensee
Sun Microsystems, Inc. OpenTV, Inc.
901 San Antonio Road 3401-A Hillview Avenue,
Palo Alto, California 94303 Palo Alto, CA 94304-1320
Attn.: JavaSoft Vice President, Sales Attn.: Vice President Business
cc: JavaSoft Legal Department Development
cc: Legal Department
11.2 Marketing and Press Announcements. Licensee's initial press
announcement concerning execution of this Agreement must be reviewed by Sun
prior to its release. Licensee hereby authorizes Sun to include Licensee in a
published list of licensees of the Technology.
Each party shall also be authorized to use the other party's name in
advertising, marketing collateral, and customer success stories, prepared by or
on behalf of such party, for the Technology. The foregoing authorization is
subject to prior written approval of the other named party, such approval not to
be unreasonably withheld or delayed.
11.3 Partial Invalidity. If any of the above provisions are held to be in
violation of applicable law, void, or unenforceable in any jurisdiction, then
such provisions are herewith waived or amended to the extent necessary for the
License to be otherwise enforceable in such jurisdiction. However, if in Sun's
opinion deletion or amendment of any provisions of the License by operation of
this paragraph unreasonably compromises the rights or increase the liabilities
of Sun or its licensors, Sun reserves the right to terminate the License.
11.4 U.S. Government Restricted Rights. If Licensee is licensing Product
or accompanying documentation to or on behalf of the U.S. Government, it shall
be made subject to "Restricted Rights", as that term is defined in the Federal
Acquisition Regulations ("FARs") in paragraph 52.227-19(c)(2),
10
<PAGE>
or its equivalent paragraph in the DOD Supplement to the FARs.
Contractor/Manufacturer is: Sun Microsystems Inc., 901 San Antonio Road, Palo
Alto, California 94303.
11.5 Language. This Agreement is in the English language only, which
language shall be controlling in all respects, and all versions of this
Agreement in any other language shall be for accommodation only and shall not be
binding on the parties to this Agreement. All communications and notices made or
given pursuant to this Agreement, and all documentation and support to be
provided, unless otherwise noted, shall be in the English language.
11.6 Governing Law. This Agreement is made under and shall be governed by
and construed under the laws of the State of California, regardless of its
choice of laws provisions.
11.7 Compliance with Laws. The Technology and Documentation, including
technical data, is subject to U.S. export control laws, including the U.S.
Export Administration Act and its associated regulations, and may be subject to
export or import regulations in other countries. Licensee agrees to comply
strictly with all such regulations and acknowledges that it has the
responsibility to obtain such licenses to export, re-export or import the
Technology, Documentation or Product(s) as may be required after delivery to
Licensee.
Licensee shall make reasonable efforts to notify and inform its employees
having access to the Technology of Licensee's obligation to comply with the
requirements stated in this Section.
11.8 Disclaimer of Agency. The relationship created hereby is that of
licensor and licensee and the parties hereby acknowledge and agree that nothing
herein shall be deemed to constitute Licensee as a franchisee of Sun. Licensee
hereby waives the benefit of any state or federal statutes dealing with the
establishment and regulation of franchises.
1.9 Delivery. As soon as practicable after the Effective Date, Sun shall
deliver to Licensee one (1) copy of each of the deliverables set forth in
Exhibit C. Licensee acknowledges that certain of the deliverables are in various
stages of completion and agrees to accept the deliverables as and to the extent
completed as of the date of delivery and "AS IS." In the event any deliverable
is already in the possession or custody of Licensee, such item(s) shall, to the
extent used in connection with the rights granted in Section 2.0 above, be
subject to the terms of this Agreement, notwithstanding any pre-existing
agreement or understanding between Licensee and Sun with respect to such items.
11.10 Assignment and Change in Control. This Agreement may not be assigned
or transferred by either party without the prior written consent of the other
party, which consent shall not be unreasonably withheld or delayed, except that
Sun may assign or transfer this Agreement to a majority-owned subsidiary.
11.11 Construction. This Agreement has been negotiated by Sun and Licensee
and by their respective counsel. This Agreement will be fairly interpreted in
accordance with its terms and without any strict construction in factor of or
against either party.
11.12 Force Majeure. Except for the obligation to pay money, neither party
shall be liable to the other party for non-performance of this Agreement, if the
non-performance is caused by events or conditions beyond that party's control
and the party gives prompt notice under Section 11.1 and makes all reasonable
efforts to perform.
11.13 Exhibits
The following are included herein by reference as integral parts of this
Agreement:
o Exhibit A - Document Type Definition
o Exhibit B - Confidential Disclosure Agreement
o Exhibit C - Technology Specific Terms and Conditions
o Exhibit D - Trademark License
To the extent the terms and conditions of Exhibit C are contrary to the
terms and conditions of this Agreement, the terms and conditions of the Exhibit
C shall govern.
11.14 Section References. Any reference contained herein to a section of
this Agreement shall be meant to refer to all subsections of the section.
11.15 No Competitive Restrictions. The Parties agree that nothing in this
Agreement is intended to prohibit Licensee from independently developing or
acquiring technology that is the same as or
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similar to the Technology, provided that Licensee does not do so in breach of
Exhibit B to this Agreement.
11.16 Complete Understanding. This Agreement and the Exhibits hereto
constitute and express the final, complete and exclusive agreement and
understanding between the parties with respect to its subject matter and
supersede all previous communications, representations or agreements, whether
written or oral, with respect to the subject matter hereof. No terms of any
purchase order or similar document issued by Licensee shall be deemed to add to,
delete or modify the terms and conditions of this Agreement. This Agreement may
not be modified, amended, rescinded, canceled or waived, in whole or part,
except by a written instrument signed by the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
authorized representatives.
Sun: Licensee:
By: /s/ Lee Patch By: /s/ J. W. Steenkamp
-------------------------------- -------------------------------------
Name: Lee Patch Name: J. W. Steenkamp
------------------------------ -----------------------------------
(Print or Type) (Print or Type)
Title: Vice President Title: CEO
----------------------------- ----------------------------------
Date: 3/25/98 Date: 4-15-98
------------------------------ -----------------------------------
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EXHIBIT A
DOCUMENT TYPE DEFINITION
In order to ensure interoperability between all Java compliant browsers, Sun
needs to define the exact notation of applets in HTML documents. The format of
the APPLET tag shall be implementation language independent and SGML compliant.
SGML compliance is important if the APPLET tag is to be accepted as part of the
HTML standard in the future.
Example:
(applet codebase="http:///java.sun.com/people/avh/classes"
code="BounceItem.java" width=400 height=300) (/applet)
The applet tag has the following attributes:
CODEBASE The base url of the applet. The applet's code is located relative to
this URL. If this attribute is not specified, it defaults to the
document's URL.
CODE The file in which the applet is located. This file is relative to
base url of the applet, It cannot be absolute.
ALT Alternate text which can be displayed by text only browsers.
NAME The symbolic name of the applet. This name can be used by applets in
the same page to locate each other.
WIDTH Required attribute which specifies the initial width of the applet
in pixels.
HEIGHT Required attribute which specifies the initial height of the applet
in pixels.
ALIGN The alignment of the applet, similar to the img tag.
VSPACE The vertical space around the applet, similar to the img tag.
HSPACE The horizontal space around the applet, similar to the img tag.
Note that the position of the applet in the page is determined by the width,
height, align, vspace and hspace attributes just like the img tag.
Applets can access the above attributes using the getParameter() method call
defined in the Applet class. All attribute/parameter names are automatically
folded to lower case. Applets that require parameters in addition to the
predefined ones need to use the param tag. It is unfortunately not legal in SGML
for a tag to have an arbitrary list of attributes. That is why additional applet
parameters explicitly using the PARAM tag have to be named. For example:
(applet codes="DateItem.class" alt="The Date" width="200 height=40)
(param name="speaker" value="avh")
(param name="translator" value="DutchTime")
(/applet)
In addition to the ALT tag, Licensee can include additional text and markup
before the applet end tag. Java compliant browsers will ignore this text, but
browsers that do not understand the applet tag will display it instead of the
applet. For example:
(applet codebase=classes code=ImageLoop.class width=100 height=100)
(param name=imgs value="images/duke")
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If Licensee were using a Java enabled browser, Licensee would see an animation
instead of this static image. (p)
(img src=images/duke/T1.gif")
(/applet)
Below is the formal SGML DTD for the APPLET and PARAM tags.
(!ELEMENT APPLET -- (PARAM*, (%text;)*))
(!ATTLIST APPLET
CODEBASE CDATA #IMPLIED -- code base --
CODE CDATA #REQUIRED -- code file --
ALT CDATA #IMPLIED -- alternative string --
NAME CDATA #IMPLIED -- the applet name --
HEIGHT NUMBER #REQUIRED
ALIGN (left|right|top|texttop|middle|
absmiddle|baseline|bottom|absbottom) baseline
VSPACE NUMBER #IMPLIED
HSPACE NUMBER #IMPLIED
)
(!ELEMENT PARAM -0 EMPTY)
(!ATTLIST PARAM
NAME NAME #REQUIRED -- The name of the parameter --
VALUE CDATA #IMPLIED -- The value of the parameter --
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EXHIBIT B
CONFIDENTIAL DISCLOSURE AGREEMENT
DISCLOSURES BY SUN
Effective Date: December 15, 1997
Sun Microsystems, Inc., by and through its JavaSoft business unit ("Sun") and
Open TV, a corporation having a place of business at 3401A Hillview Ave, PALO
ALTO, CA ("Recipient"), agree that:
1) The Sun information disclosed under this Agreement ("Information") includes
business technical and pricing information relating to Java Technology.
2) The permitted use of information is for the purpose of evaluating the Java
Technology for potential licensing by Recipient.
3. Recipients obligations regarding information expire three (3) years after the
date of disclosure (except for source code, which shall be protected in
perpetuity). Information shall be used solely as permitted above and shall not
be disclosed to a third party. Recipient shall hold information in strict
confidence and shall provide information to its employees only on a need-to-know
basis. Upon termination of this Agreement or Sun's written request, Recipient
shall cease use of information and return or destroy all information.
4. Recipient shall be obligated to protect information which is disclosed orally
or in written form and identified as confidential or proprietary.
5. This Agreement imposes no obligation upon Recipient with respect to
information which Recipient can establish by legally sufficient evidence: (a)
was in the possession of, or was known by, Recipient prior to its receipt from
Sun, without an obligation to maintain its confidentiality; (b) is or becomes
generally known to the public without violation of this Agreement; (c) is
obtained by Recipient from a third party having the right to disclose it,
without an obligation to keep such information confidential; or (d) is
independently developed by Recipient without the use of information and without
the participation of individuals who have had access to information.
6. Disclosure of information is not prohibited if prior notice is given to Sun
and such disclosure is: (a) compelled pursuant to a legal proceeding or (b)
otherwise required by law, information is delivered "AS IS", and all
representations and warranties, express or implied, including fitness for a
particular purpose, merchantability and non-infringement, are hereby disclaimed.
Neither party has an obligation under this Agreement to sell or purchase any
item from the other party. Recipient agrees that any breach of this Agreement
will result in irreparable harm to Sun for which damages would be an inadequate
remedy and, therefore, in addition to its rights and remedies otherwise
available at law, Sun shall be entitled to equitable relief, including
injunction, in the event of such breach. Recipient waives any requirement for
the posting of a bond or other security in the event that Sun seeks such an
injunction. Sun retains ownership of information. Recipient does not acquire any
rights in information, except the limited right to use information as described
above.
7. If Recipient takes or does not take any action (including product
development) relying, in whole or in part, on the information or future
availability of a Sun product described by or based upon the information,
Recipient does so at its own risk and expense. Sun has no obligation under this
Agreement to develop, make available or sell any information, product or
technology. Sun is not liable for any defects or deficiencies in any product,
process or design created by or for Recipient using or relying on the
Information, whether or not caused by defects or deficiencies in the
Information.
8. This Agreement constitutes the entire agreement between the parties
concerning its subject matter. Execution of this Agreement in the space provided
below constitutes acceptance by Recipient of the terms and conditions herein.
Delivery of Information to Recipient by Sun's acceptance of the terms and
conditions herein. All additions or modifications to this Agreement must be made
in writing and must be signed by an authorized representative of each party. The
parties agree to comply strictly with all applicable export control laws and
regulations. Any action related to this Agreement will be governed by California
law, excluding choice of law rules.
RECIPIENT:
BY: /s/ J. Steenkamp
--------------------------------
NAME: J. Steenkamp
------------------------------
TITLE: CEO.
-----------------------------
15
<PAGE>
EXHIBIT C
TECHNOLOGY SPECIFIC TERMS AND CONDITIONS
The technologies licensed hereunder are those initialled by both parties below:
Exhibit Technology Licensee Sun
C-1: Java Application Environment ________ ____
C-2: Personal Java Environment [ILLEGIBLE] [ILLEGIBLE]
----------- -----------
C-3: Embedded Java Environment ________ ____
C-4: Java Card Environment ________ ____
C-5: HotJava Browser ________ ____
C-6: HotJava Views ________ ____
C-7: JavaServer Toolkit ________ ____
C-8: Java Development Tools ________ ____
C-9: HotJava HTML Component ________ ____
C-10: Personal Web Access ________ ____
16
<PAGE>
EXHIBIT C-2
PERSONAL JAVA ENVIRONMENT
(pJava)
I. Description of Technology and Documentation
a. Required components
The Personal Java Environment consists of the following source code:
i) All the .java files from the following Java packages:
java.lang Language Classes
java.lang.reflect
java.io Stream I/O
java.net Networking Classes
java.util General utilities
java.applet Applet Classes
java.awt Abstract Window Toolkit
java.awt.image Image Handling Classes
java.awt.event delegation event model
java.awt.peer Implementation Classes for awt
java.awt.datatransfer data transfer
java.util.zip java archive file format java
java.beans native component model
ii) Associate sun.*files.
iii) The Source Code for the Java Runtime Interpreter.
b. Tools Suite: a) JavaCheck and b) JavaCode Compact.
C. Documentation.
Java OEM Language Specification
Personal Java OEM API Specification
Java OEM Virtual Machine Specification
*** ******** ** **** *********** ******* ********** ******** *** *** ** *******
***** **** ******* ** ******* ** ********** *****
III. Product List:
IV. Schedule of Fees and Royalties
** ******* ****** ******* ****
*** *** ***** ********* ************** *********** ******* ** ********
** *********** *** ** **** **** ********* *****
*** ********** *** ** **** **** ********* ***** ***
**** ********** *** *** **** **** ********* ****
********** ********* *************** *** ** **** ********* **** *** *** **
********** ****
17
<PAGE>
b. Upfront per Seat Fee for Distribution of Binary Tools Suite:
Number of Seats Price/Seat
* *********
* ** * *********
* ** * *********
* ** ** *********
** *** ** *********
Licensee may use the Tools Suite for internal development **** ** ******* The
above fees are payable by Licensee upon distribution of the Binary Tools Suite
to Licensee's customer. Mandatory one seat minimum for Tools Suite for each
design win. Excluding JavaCheck, the first seat must be node locked, and shall
be limited to use on one workstation and is for use by one developer only. Each
subsequent seat is floating and may be used consecutively by alternate
developers, but only one developer at a time.
c. Per Unit or Concurrent User Royalty:*
*Licensee agrees to pay Sun a minimum amount of ********** in royalties within
the first 5 years of the initial Term based on a royalty rate of ***** *** *****
e. Annual Support and Upgrade Fees: **************** payable in quarterly
installments, the first of such quarterly payments will be on the Effective
Date.
f. Trade-in Fee for the first Reference Implementation: **********
Licensee may Trade-in the pJava Environment for the Trade-In Software as set out
in Section 2.11.
g. Additional Technology: *
* Licensee may elect to add the Additional Environment, if and when available,
to the Agreement as set out in Section 2.12 for an Upfront fee ** * **********
**** ********* ******** ************ ** ***** **** ******* *** *** ***********
** *** ******* *********** **** ***** ** ***** *** *** **** ******* **** ******
*** ******* **** ** ***** *** *** **** ***** **** ** ** *** ********** ** * ***
**** **********
V. Compatibility Requirements
Products must fully comply with the Documentation specified in Section I.c
above, and pass the Java Test Suites for the Personal Java Environment and any
included Standard Extensions, pursuant to the requirements of Section 2.8 of the
Agreement. Licensee may self-certify such compatibility unless Sun policy
requires verification of compatibility by an independent test facility
designated by Sun, at Licensee's expense. Licensee may not incorporate or
otherwise distribute a Licensee Open Class which implements functionality
substantially similar to any Java Classes required in another Java Environment.
VI. Compatibility Logo: Java Powered
VII. Description of Support and Upgrades
a. Updates and Bug Tracking. Subject to payment of the fees specified above,
Licensee shall have access to the Technology, Updates and the JavaSoft bug
tracking database via Sun's commercial licensee web site, and shall be included
on Sun's commercial licensee general support alias. Licensee shall have access
to the JavaSoft commercial licensee FTP site for the purpose of down loading FCS
releases of Updates, as well as early access versions of the Technology as Sun
makes such versions available.
b. Technical Support. In addition to the Updates and bug reporting specified
above, Sun shall provide up to the equivalent of *** ******* ***** **** engineer
to provide technical support to Licensee including email, facsimile and
telephone support (during regular business hours Pacific Standard Time). The
selection of the support engineer shall be at Sun's discretion, subject to
Licensee's reasonable approval. Licensee may designate a maximum of three (3)
contacts within Licensee's organization to interface with the Sun support
organization. The support engineer will provide the following services:
i) arrange meetings or discussions with Sun technical and management
personnel;
18
<PAGE>
ii) provide technical assistance in development of Permitted Derivative
Works;
iii) respond to bug reports from Licensee;
iv) develop bug fixes;
v) bug tracking for releases;
vi) provide interim releases if the need arises; and
vii) provide existing and future Documentation as available.
VIII. End user License Terms
For Products distributed pursuant to a software license agreement to end users,
Licensee shall include the following terms and conditions. Licensee shall
substitute Licensee's name in place of Sun in each instance where it occurs in
the following text.
1. Restrictions. Software is confidential copyrighted information of Sun and
title to all copies is retained by Sun and/or its licensors. Customer shall not
modify, decompile, disassemble, decrypt, extract, or otherwise reverse engineer
Software. Software may not be leased, assigned, or sublicensed, in whole or in
part. Software is not designed or intended for use in on-line control of
aircraft, air traffic, aircraft navigation or aircraft communications; or in the
design, construction, operation or maintenance of any nuclear facility. Customer
warrants that it will not use or redistribute the Software for such purposes.
2. Export Regulations. Software, including technical data, is subject to U.S.
export control laws, including the U.S. Export Administration Act and its
associated regulations, and may be subject to export or import regulations in
other countries. Customer agrees to comply strictly with all such regulations
and acknowledges that it has the responsibility to obtain licenses to export,
re-export, or import Software. Software may not be downloaded, or otherwise
exported or re-exported (i) into, or to a national or resident of, Cuba, Iraq,
Iran, North Korea, Libya, Sudan, Syria or any country to which the U.S. has
embargoed goods; or (ii) to anyone on the U.S. Treasury Department's list of
Specially Designated Nations or the U.S. Commerce Departments Table of Denial
Orders.
3. Restricted Rights. Use, duplication or disclosure by the United States
government is subject to the restrictions as set forth in the Rights in
Technical Data and Computer Software Clauses in DFARS 252.227-7013(c) (1) (ii)
and FAR 52.227-19(c) (2) as applicable.
19
<PAGE>
EXHIBIT D
TRADEMARK LICENSE
(to be attached)
* Indicates that confidential treatment has been granted for that portion of the
text as marked and that the confidential portion has been filed separately with
the U.S. Securities and Exchange Commission.
June 30, 1999 Final Sun Confidential
20
<PAGE>
EXHIBIT 10.7
FIRST AMENDMENT TO
TECHNOLOGY LICENSE AND DISTRIBUTION AGREEMENT
THIS FIRST AMENDMENT ("Amendment") is made as of June 30, 1999 (the "Amendment
Date"), by and between Sun Microsystems, Inc. ("Sun") and OpenTV, Inc.
("Licensee").
RECITALS
WHEREAS, Sun and Licensee are parties to a certain Technology License and
Distribution Agreement dated March 20, 1998 which provides, among other things,
certain development, use and distribution license rights to Licensee with
respect to specified portions of Sun's Java(TM) technology (the "Agreement");
and
WHEREAS, in consideration of the respective promises contained herein, the
parties wish to amend the Agreement in the manner set forth below;
NOW THEREFORE, in consideration of the foregoing and the parties' respective
obligations under the Agreement, Sun and Licensee hereby amend the Agreement as
follows:
1. Definitions. Section 1 of the Agreement is amended to add the following
sections and renumber the remaining sections accordingly:
1.11 "Java-Enabled Television Software Stacks" means a class of
products, available from Licensee and other Sun licensees, which
includes Sun's Personal Java(TM) technology (or alternative Java
platform technology as subsequently agreed to by the parties,
hereinafter the "Appropriate Java Platform") together with
compliant implementations of the Java technology specificiation
for television devices that corresponds to the Appropriate Java
Platform ("Corresponding TV API"), an operating system, a user
interface and other technology, integrated for use in specific
Television Devices.
1.16 "Optimized-Product" means a Java-Enabled Television Software
Stack that has been developed by Licensee and optimized for a
Television Device.
1.29 "Television Devices" means set top box devices, with or without a
display, whose principal purpose is to display a broadcast
television picture (in any format, including, but not limited to,
NTSC, PAL, and HDTV formats).
2. Java Technology for TV. Section 1 of Exhibit C-2 of the Agreement is amended
to add, when and if it becomes available, Sun's reference implementation of the
Corresponding TV API. ** ********** *** *** ******* * ** ******* *** ** ***
********* ** ******** **** **** *** ** ** ******* ********** ***** **********
************* ** **** *** ********* **** **** ** **** *** ******* *** ** ******
********* *** ** *** ********** ******** ***** *** ********* ******* **********
******** ** ********** ************ ************ ************** **** ****
******* ** ** ********* ** *** *********** ********** ********* ** ******* *****
******** ************ *** ****** ***** **** ********** ************ *** ********
* Indicates that confidential treatment has been granted for that portion of
the text as marked and that the confidential portion has been filed separately
with the U.S. Securities and Exchange Commission.
June 30, 1999 Final Sun Confidential
<PAGE>
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** **** **** *** ** ** ******* ********** ***** ********* ************ ** ***
************* ** **** *** ********* **** **** ** **** *** ******* *** ** ******
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******* ** ** ********* ** *** *********** ********** ********* ** ******* *****
******** ************ *** ****** ***** **** ********** ************ *** ********
********************************************************************************
3. Additional Agreement of Parties. Section 5.0 of the Agreement is amended to
add the following sections:
3.1 Coordination.*** ******** ***** ** * ********** *************
------------
******* ********* ************ ********** ******** ****** ** *** **********
******* ******* ****** ******* ********** **** *** ********* ***** *** ****
******** **** ********** **** *** ** ******** *** **** ******* ******** ** *
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******** *** ***** *** ********* ******* ******* ******* **** **** ****** *** **
********** **** **** ******** ******** ***** *********** ********* *** *********
3.2 Personal Java Technology for TV
-------------------------------
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******** *** **** *** *** * ***** ** *** ** **** ** **** *********** **********
**** *** ** *******
* Indicates that confidential treatment has been granted for that portion of the
text as marked and that the confidential portion has been filed separately with
the U.S. Securities and Exchange Commission.
June 30, 1999 Final Sun Confidential
<PAGE>
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3.3 Jini Connection Technology, **** *** ********* ************** ** **** ** **
--------------------------
**** *** **** **** ********** ******* ** *** ******* *** ************* ****
******* *** ******* **** ************
* Indicates that confidential treatment has been granted for that portion of the
text as marked and that the confidential portion has been filed separately with
the U.S. Securities and Exchange Commission.
June 30, 1999 Final Sun Confidential
<PAGE>
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** ** ********* *** *** ** ********** ********** ******** ** ******** *** ****
3.4 Standards and Content Development ********* ********* *** *********
---------------------------------
***** *********************** ********** *** ******* *** ** ******* ** ********
*** ******** ********* ****** ** ***** *** ******** **** *** ********** ***
*********** **** ******** *** ************* ** *** ** ********** *** *** ****
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********** *** *** **** ******** ******
3.5 Marketing. Licensee will use commercially reasonable efforts to
---------
include in its appropriate press releases and marketing collateral, as well as
in oral communications with customers and the public, statements declaring
Licensee's preferential support for Appropriate Java Platform and the
Corresponding TV API, provided that the content, timing and form of such
communications shall be at Licensees discretion. Sun will use commercially
reasonable efforts to issue a press release* *** ********** ******* **
************** ***** ** ** **** ***********provided that the content, form and
timing shall be at Sun's discretion and provided further that Sun shall
consider, in good faith, suggestions regarding additions, deletions and/or
changes made by Licensee. Sun will use commercially reasonable efforts to
include in its appropriate subsequent press releases and marketing collateral,
as well as in oral communications with customers and the public, statements
declaring Sun's support for Licensee as a preferred channel partner within the
Television Devices market, provided that the content, timing and form of such
communications shall be at Sun's discretion.
4. ******* Royalty. ** *** ** ****** ****** ** ********* ************ ***
-------
***** ******* ****** ******* **** **** **** *** *** ****** ** ******* ** ***
********* ***** ** ****** ****** ** ****** *** *** ********* ** *** ************
***** ** *** ***** *** ***
* Indicates that confidential treatment has been granted for that portion of the
text as marked and that the confidential portion has been filed separately with
the U.S. Securities and Exchange Commission.
<PAGE>
******** ******** *** *** *** *** ************ ****** ******** *** ***
**** *** ********** **** ********* ****** ********* *** ********** *** *******
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5. Annual Support and Upgrade Fees **** *** ********* ************** ** **** **
-------------------------------
** **** *** **** **** ********** ******* ** *** ******* *** ************* ****
******* *** ******* **** ************
6. Effect on Agreement. Except as otherwise specifically provided in this
-------------------
Amendment, defined terms shall have the same meaning as defined in the
Agreement. Except as amended hereby, all other terms and conditions of the
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by
their duly authorized representatives.
SUN MICROSYSTEMS, INC. OPENTV, INC.
Subject to ratification by OpenTV, Inc.,
By: /s/ Jay Puri Board of Directors
---------------------
By: /s/ Randall S. Livingston
Name: Jay Puri ------------------------------
Title: VP WW Sales Name: Randall S. Livingston
6/30/99 Title: Chief Financial Officer
June 30, 1999 Final Sun Confidential
* Indicates that confidential treatment has been granted for that portion of the
text as marked and that the confidential portion has been filed separately with
the U.S. Securities and Exchange Commission.
<PAGE>
******* ** ********** *************
** *********** *** ********* **** ******** ***********
** *********** *** ********* ** ************ *** *** **************
**** ** ****** *** **** *** ************ ******* *** **** ***** ********** ****
* Indicates that confidential treatment has been granted for that portion of
the text as marked and that the confidential portion has been filed separately
with the U.S. Securities and Exchange Commission.
June 30, 1999 Final Sun Confidential
<PAGE>
EXHIBIT 10.9
[LOGO]Sun ORIGINAL Sun Confidential
microsystems ORIGINAL
SUN MICROSYSTEMS, INC.
SOURCE CODE LICENSE AND BINARY CODE DISTRIBUTION AGREEMENT
THIS SOURCE CODE LICENSE AND BINARY CODE DISTRIBUTION AGREEMENT including
Exhibits ("Agreement") is made to be effective as of 1 April 1998 (the
"Effective Date"), by and between Sun Microsystems, Inc., a Delaware corporation
having its principal place of business at 901 San Antonio Road, Palo Alto,
California 94303 ("Sun"), and Licensee as identified in Exhibit A ("Licensee").
1. DEFINITIONS
1.1 "Binary Code" means machine-readable, executable code of a computer
program.
1.2 "Confidential Information" means (a) the Licensed Software (including
its nature and existence) and Derivative Works thereof, (b) any and all other
information which is disclosed by Sun to Licensee orally, electronically,
visually, or in a document or other tangible form, which is either identified as
or should be reasonably understood to be confidential and/or proprietary, (c)
any test results, error data, or other reports made by Licensee in connection
with the license rights granted under this Agreement, (d) any notes, extracts,
analyses, or materials prepared by Licensee which are copies of or Derivative
Works of the Confidential Information or from which the substance of the
Confidential Information can be inferred or otherwise understood, and (e) the
terms, conditions, and existence of this Agreement. "Confidential Information"
does not include information received from Sun which Licensee can clearly
establish by written evidence (a) is or becomes down by Licensee without an
obligation to maintain its confidentiality; (b) is or becomes generally known to
the public through no act or omission of Licensee; or (c) is independently
developed by Licensee without use of the Confidential Information.
1.3 "Derivative Work means: (a) for copyrightable or copyrighted material
(including materials subject to mask work rights), a work which is based upon
one or more pre-existing works, such as a revision, modification, translation,
abridgement, condensation, expansion, collection, compilation, or any other form
in which such pre-existing works may be recast, transformed, or adapted; (b) for
patentable or patented materials, any adaptation. addition, improvement, or
combination; and (c) for material subject to trade secret protection, any new
material, information, or data relating to and derived from such existing trade
secret material, including new material which may be protectable by copyright.
patent, or other proprietary rights.
1.4 "Designated Equipment For Source Code" or "Designated Equipment" means
the non-networked standalone equipment on which Licensee uses Licensed Software
in Source Code form pursuant to this Agreement and which is Identified in
Exhibit A(3).
1.5 "Designated Products" means the software products sold, leased, or
otherwise distributed by or for Licensee, as mop fully set forth in Exhibit
A(7).
1.6 "Designated Site For Binary Code" means the network or location as set
forth in Exhibit A(5).
1.7 "Designated Site For Source Code" means the location of the Designated
Equipment as set forth in Exhibit A(4).
1.8 "Developed Product" means the Binary Code form of Derivative Works of
the Licensed Software developed for distribution solely bundled with Designated
Products in accordance with this Agreement, as more fully set forth in Exhibit
A(1O).
1.9 "Distributor" means any entity which is under a contractual obligation
as set forth in this Agreement with Licensee to distribute Developed Products
directly or indirectly to End Users in accordance with Section 3.4 of this
Agreement.
1.10 "Documentation" means materials related to the Licensed Software
which Sun delivers to Licensee hereunder as more particularly described in
Exhibit A, and such other materials as Sun may deliver hereunder from time to
time.
1.11 "End User" means the end users licensed to use the Developed Products
under an End User Binary Code License with Sun, Licensee, or a Distributor.
- -------------
* Indicates that confidential treatment has been granted for that portion of
the text as marked and that the confidential portion has been filed
separately with the U.S. Securities and Exchange Commission.
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1.12 "End User Binary Code License" means the license agreement used by
Sun, Licensee, or a Distributor to license the Developed Products to End Users
and which agreement must include the material terms set forth in Exhibit B.
1.13 "Error" means any reproducible failure of Licensed Software to
conform in any material respect to the functional or performance specifications
or Documentation therefor, as the same may be amended and/or supplemented from
tine to time.
1.14 "Error Correction" means an action taken which, whether in the form
of a modification, addition, procedure, or routine, when taken or observed,
establishes material conformity to the current specifications and Documentation
therefor or eliminates the practical adverse effect of an Error in the regular
operation of the software in question.
1.15 "Intellectual Property Rights" means all intellectual property rights
worldwide arising under statutory or common law or by contract and whether or
not perfected, now existing or hereafter filed, issued, or acquired, including
all (a) patent rights; (b) rights associated with works of authorship including
copyrights and mask work rights; (c) rights relating to the protection of trade
secrets and confidential information; and (d) any right analogous to those set
forth herein and any other proprietary rights relating to intangible property;
but specifically excluding trademarks, service marks, trade dress, trade names,
and design patent rights.
1.16 "Licensed Software" means the Source Code and Binary Code forms of
the software specifically identified in Exhibit A, including any Error
Corrections and any related Documentation delivered to Licensee during the term
of this Agreement. In addition, Licensed Software shall include any Updates to
the Licensed Software or additional software delivered to Licensee during the
term of this Agreement.
1.17 "License Fees" means the fees set forth in Exhibit A(8).
1.18 "Royalties" means the royalties set forth in Exhibit A(8).
1.19 "Source Code" means code of a computer program that is not executable
by a computer system directly but must be converted into machine language by
compilers, assemblers, and/or interpreters.
1.20 "Sun Technology" means (a) Licensed Software and other Confidential
Information; and (b) Derivative Works of the foregoing.
1.21 "Updates" means later releases, modifications, enhancements, or
extensions to the Licensed Software, other than Error Corrections.
2. OWNERSHIP
2.1 Ownership Of Sun Technology. Licensee acknowledges and agrees that as
between the parties, Sun is and will be the sole and exclusive owner of all
right, title, and interest in and to the Sun Technology and all associated
Intellectual Property Rights, and that Licensee acquires no interests under this
Agreement to any Sun Technology or any Intellectual Property Rights therein,
other than the limited interests specifically granted in this Agreement.
Licensee agrees to and hereby does assign to Sun without additional compensation
any and all right, title, and interest it may have or obtain in and to such Sun
Technology and associated Intellectual Property Rights.
2.2 No Limitation On Use. Nothing contained in this Agreement shall be
construed to limit or restrict, in any way or manner, any right of Sun to
encumber, transfer, license, access, reference, use, or practice the Sun
Technology in any way for any purpose or use (subject only to the rights
specifically granted Licensee hereunder), including without limitation the use,
licensing, and/or registration of the Sun Technology anywhere in the world far
any purpose or use in connection with the development, manufacture,
distribution, marketing, promotion. and sale of any products.
3. LICENSE GRANT; LIMITTATIONS AND OBLIGATIONS
3.1 Grant To Licensee. Subject to all limitations and obligations set
forth in this Agreement, including the obligation to pay the License Fees and/or
Royalties set forth in Exhibit A(8), Sun grants to
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Licensee a non-exclusive, non-transferable license to use, modify, and copy the
Licensed Software internally on or with the Designated Equipment and solely at
the Designated Site For Source Code, only for the following purposes: to (a)
create Derivative Works thereof that are Developed Products (including Error
Corrections incorporated therein); (b) support and maintain such Developed
Products; (c) copy, have copied, and distribute such Developed Products in
Binary Code form and Documentation directly or through Distributors to End
Users, solely for use on or with Designated Products, (d) grant said
Distributors the rights granted in (c) above.
3.2 Other Equipment. In the event that, and only for so long as, the
Designated Equipment is inoperable, Licensee may use the Source Code of the Sun
Technology at the Designated Site For Source Code on substitute equipment of the
same manufacturer, provided that Licensee notifies Sun in writing within ten
(10) days of such substitution and identifies the substitute equipment. Licensee
may not otherwise transfer the Source Code of the Sun Technology, or any portion
thereof, to a site other than the Designated Site For Source Code or to
substitute equipment of a different manufacturer (whether or not at the
Designated Site For Source Code) without Sun's prior written consent.
3.3 Conformance To Specifications. Derivative Works and Developed Products
shall conform to the Specifications set forth in Exhibit A(10).
3.4 End User License Terms. Prior to Licensee or any Distributor
furnishing any Developed Products to one of its Distributors or End Users,
Licensee and/or any Distributor shall obtain: (a) a signed agreement from such
Distributor, the terms and conditions of which shall be consistent with the
relevant terms and conditions of this Agreement; and (b) an agreement from each
End User incorporating the material terms and conditions of the End User Binary
Code License attached as Exhibit B.
3.5 No Other Rights. Other than the limited rights granted in this
Agreement Licensee acquires no right, title, or interest in or to the Sun
Technology.
4. DELIVERY, INSTALLATION, ACCEPTANCE, AND RISK OF LOSS
4.1 Delivery Of Licensed Software. Subject to the conditions set forth in
this Agreement, Sun shall deliver the Licensed Software to a carrier, F.O.B. Sun
facilities. Licensee assumes all risk of loss or damage upon delivery of the
Licensed Software by Sun to a carrier. Licensee agrees that acceptance occurs
upon delivery of Licensed Software by Sun to a carrier.
4.2 Installation. Licensee shall be solely responsible for installation of
the Licensed Software on the Designated Equipment.
4.3 Notice Of Errors. Licensee shall promptly inform Sun regarding any
Errors it may detect in the Licensed Software.
5. TERM AND TERMINATION
5.1 Term. This Agreement shall commence on the Effective Date, and expire
on the date set forth in Exhibit A (2).
5.2 Termination. Sun may terminate this Agreement immediately in the event
(a) Licensee materially breaches any of the provisions of this Agreement (b)
Licensee takes any action in derogation of Sun's rights to Sun's Confidential
Information, or (c) the Licensed Software, or any portion thereof, becomes, or
in Sun's opinion is likely to become, the subject of a claim of infringement of
a patent, trade secret, copyright, mask work right, or other proprietary right.
5.3 Change Of Control. In the event of the direct or indirect taking over
or assumption of control of Licensee or of substantially all of its assets by
any government, governmental agency, or other third party, or more than fifty
percent (50%) equitable ownership of Licensee is transferred to a direct
competitor of Sun, or Licensee becomes insolvent, Sun may at its sole option and
in its sole discretion terminate the license granted under Section 3.1 or
terminate this Agreement upon written notice to Licensee.
5.4 Obligations On Termination. Within one-hundred twenty (120) days of
the expiration or termination of this Agreement, Licensee shall discontinue all
use of the Sun Technology and the license and rights granted hereunder shall
terminate at that time; however, if the termination is due to Licensee's breach,
then Licensee must immediately discontinue all use of the Sun Technology, and
the license and rights
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SUN CONFIDENTIAL
granted hereunder shall immediately terminate. Within thirty (30) days after
such expiration or termination, Licensee shall deliver to Sun, F.O.B. Sun's
facilities, all Sun Technology, including any and all copies of material
containing Confidential Information. Notwithstanding the foregoing, unless Sun
has terminated this Agreement pursuant to this Article 5 for failure to comply
with any of the terms or conditions of this Agreement, Licensee may continue to
use the Licensed Software solely in connection with maintenance and support (but
not to create Updates) of the Developed Products sublicensed to existing End
Users, but only for so long as Licensee is contractually bound to provide such
support and maintenance. Licenses previously granted to End Users shall not
terminate.
5.5 Survival. The provisions set forth in Sections 2, 5.2, 5.4, 5.5, 6, 7,
8, 9, 10, 11, and 13 shall survive termination or expiration of the Agreement.
6. PAYMENTS, RECORDS, AND TAXES
6.1 License Fees. Licensee shall pay to Sun in U.S. Dollars the
non-refundable License Fees specified in Exhibit A(8) (if any), upon full
execution of this Agreement.
6.2 Royalties. Licensee shall pay to Sun in U.S. Dollars the Royalties
specified in Exhibit A(8) (if any). Royalties shall be paid quarterly within
thirty (30) days following the end of the calendar quarter in which the
Developed Products ship. Payments shall be accompanied by a certified statement
of the number of Developed Products sold in the calendar quarter and the total
cumulative volume of Developed Products sold as of the end of that quarter.
6.3 Taxes. All amounts payable by Licensee to Sun under this Agreement are
exclusive of any tax, levy, or similar governmental charge that may be assessed
by any jurisdiction, whether based on gross revenue; the delivery, possession,
or use of licensed Software; the execution or performance of this Agreement, or
otherwise. If, under the laws of the applicable jurisdictional Licensee is
required to withhold any tax on amounts payable, then the amount of the payment
will be automatically increased to offset such tax, so that the amount actually
remitted, net of all taxes, equals the amount invoiced or otherwise due.
Licensee will pay all other taxes, levies or similar governmental charges and
provide Sun with a certificate of exemption acceptable to the taxing authority.
Notwithstanding the foregoing, Licensee may deduct from payments any income tax
or tax of a similar nature (including, without limitation, taxes based on net
worth and franchise taxes) imposed by any government ("government income tax")
on such payment and actually paid by it for the account of Sun, to the extent
that such government income tax does not exceed the appropriate withholding
amount applicable under relevant tax treads and qualifies as creditable foreign
tax by the government of the United States of America, In the event that
Licensee deducts any such income or similar tax from any such payment Licensee
shall furnish Sun with an official receipt a other evidence issued by the taxing
authority.
7. SUPPORT AND UPDATES
7.1 No Updates. The License Fees and Royalties specified in Exhibit A(8)
(if any) are for the initial delivered version of the Licensed Software. Updates
are not included. Any Updates provided in Sun's discretion may require payment
of additional License Fees and/or increased Royalties.
7.2 No Support For Sun Technology. Notwithstanding any provision to the
contrary contained elsewhere in this Agreement, Sun shall have no obligation to
provide support for the Sun Technology. In addition, Sun is under no obligation
to enhance, correct deficiencies, or provide Error Corrections for the Sun
Technology Error Corrections may be supplied by Sun from time to time, in Sun's
sole discretion.
7.3 No Support For Derivative Works. Licensee acknowledges and agrees that
it shall be solely responsible for maintaining and supporting any Derivative
Works, including but not limited to Developed Products, and Licensee shall be
responsible for all engineering resources necessary for such maintenance and
support. License shall not refer its customers to Sun for support.
8. COPYRIGHT NOTICES
8.1 Included Notices. In the exercise of the rights and licenses granted
in this Agreement, Licensee shall retain, reproduce, and apply any copyright
notices and/or other proprietary rights notices included on or embedded in the
Licensed Software to all copies, in whole or in part, in any form of the
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SUN CONFIDENTIAL
Licensed Software. In addition, Licensee shall comply with all reasonable
requests by Sun to include copyright and/or other proprietary rights notices on
any part of the Sun Technology.
8.2 Trademarks, Logos, And Product Designs. "Sun Trademarks" means all
names, marks, logos, designs, trade dress, and other brand designations used by
Sun in connection with Sun products. Licensee is granted no right, title, or
license to, or interest in, any Sun Trademarks. Licensee acknowledges Sun's
rights in Sun trademarks and agrees that any use of Sun Trademarks by Licensee
shall inure to the sole benefit of Sun. Licensee agrees not to (a) challenge
Sun's ownership or use of, (b) register, or (c) infringe any Sun Trademarks, nor
shall Licensee incorporate any Sun Trademarks into Licensee's trademarks,
service marks, company names, internet addresses, domain names, or any other
similar designations. If Licensee acquires any rights in any Sun Trademarks by
operation of law or otherwise, it will immediately at no expense to Sun assign
such rights to Sun along with any associated goodwill applications, and/or
registrations.
9. CONFIDENTIAL INFORMATION
9.1 Confidential Information. Licensee shall not disclose Confidential
Information to any third party and shall protect and treat all Confidential
Information with the same degree of care as it uses to protect its own
confidential information of like importance, but in no event less than
reasonable care. Except as expressly provided in Article 3, Licensee shall not
use, make, or have made any copies of Confidential information, in whole or in
part, without the prior written authorization of Sun. Licensee shall only
disclose Confidential Information to its employees having a need to know for the
purposes of this Agreement. Licensee shall notify and inform such employees of
Licensee's limitations, duties, and obligations regarding use, access to, and
nondisclosure of Confidential Information and shall obtain or have obtained its
employees' agreements to comply with such limitations, duties, and obligations.
Licensee agrees to provide notice to Sun immediately after learning of or having
reason to suspect a breach of any of the proprietary restrictions set forth in
this Article 9. In the event that Licensee is required to disclose Confidential
Information pursuant to law, Licensee shall notify Sun of the required
disclosure with sufficient time to seek relief, cooperate with Sun in taking
appropriate protective measures, and shall make such disclosure in the fashion
which maximizes protection of the Confidential Information from further
disclosure. This Article 9 will not affect any other confidential disclosure
agreement between the parties.
9.2 Breach By Sublicensees. If any Distributor or End User fails to
fulfill one or more of its material obligations under its agreement with
Licensee or any Distributor which failure may materially jeopardize Sun's rights
and interests in and to any Sun Technology (including but not limited to
accounting for and payment of Licensee Fees and Royalties), Sun may, at its
election and in addition to any other remedies that it may have, notify Licensee
in writing of such breach and require Licensee or a Distributor to terminate all
the rights sublicensed from Sun under this Agreement on not less than sixty (60)
days' written notice to such Distributor or End User, unless within the period
of such notice all breaches specified therein shall have been remedied. Should
Licensee not take such action or be unsuccessful, Sun may undertake enforcement
directly against the breaching Distributor or End User.
10. DISCLAIMER OF WARRANTY
10.1 No Warranties. LICENSEE ACKNOWLEDGES THAT ALL INFORMATION SUPPLIED BY
SUN UNDER THIS AGREEMENT, INCLUDING WITHOUT LIMITATION THE SUN TECHNOLOGY, IS
PROVIDED BY SUN "AS IS" AND WITHOUT WARRANTY OF ANY KIND. SUN HEREBY DISCLAIMS
ALL WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE SAME, INCLUDING BUT NOT
LIMITED TO ANY WARRANTIES OF DESIGN MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, NON-INFRINGEMENT, OR WARRANTIES ARISING FROM A COURSE OF DEALING,
USAGE, OR TRADE PRACTICE. No agent of Sun is authorized to incur warranty
obligations on behalf of Sun or modify the limitations as set forth in this
Section 10.1.
11. LIMITATION OF LIABILITY
11.1 Limitation Of Liability. EXCEPT *** ****** ** ******** **** ******
******* ***** ****** ANY APPLICABLE SOFTWARE LICENSE, AND TO THE EXTENT NOT
PROHIBITED BY APPLICABLE LAW:
*** **** ******* ********* ********* ** *** ***** *** ****** *******
*** ** ** ******** ** **** ********** ******* *** ****** ** ** ****
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SUN CONFIDENTIAL
********** ************ ***** ** ******* ** *** ****** ** ******* **** ***
********* *** *** ******** ******** ***** ** *** ******* ****** ** *** *******
(b) NEITHER PARTY WILL BE LIABLE FOR ANY INDIRECT, PUNITIVE,
SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGE IN CONNECTION WITH OR ARISING OUT
OF OR RELATING TO THIS AGREEMENT (INCLUDING LOSS OF BUSINESS, REVENUE, PROFITS,
USE, DATA, OR OTHER ECONOMIC ADVANTAGE), HOWEVER IT ARISES, WHETHER FOR BREACH
OR IN TORT (INCLUDING NEGLIGENCE), EVEN IF THAT PARTY HAS BEEN PREVIOUSLY
ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.
(c) LIABILITY FOR DAMAGES SHALL BE LIMITED AND EXCLUDED, EVEN IF ANY
EXCLUSIVE REMEDY PROVIDED FOR IN THIS AGREEMENT FAILS OF ITS ESSENTIAL PURPOSE.
11.2 Infringement. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A
WARRANTY OR REPRESENTATION BY SUN THAT THE SUN TECHNOLOGY WILL BE FREE FROM
INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES. SUN HEREBY
EXPRESSLY DISCLAIMS AND SHALL NOT BE RESPONSIBLE FOR ANY LIABILITY ARISING AS A
RESULT OF OR IN CONNECTION WITH ANY CLAIM OR SUIT ALLEGING THAT THE USE OF SUN
TECHNOLOGY INFRINGES THE INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY.
11.3 Aircraft Product And Nuclear Applications. Sun Technology is not
designed or intended for use in on-line control of aircraft, air traffic,
aircraft navigation, or aircraft communications; or in the design, construction,
operation, or maintenance of any nuclear facility. Sun disclaims any express or
implied warranty of fitness for such uses. Licensee represents and warrants that
it will not use or resell Sun Technology for such purposes, and that it will use
its best efforts to ensure that its customers and end-users of Developed
Products are provided with a copy of the foregoing notice.
11.4 Responsibility For Backup. Licensee shall have the sole
responsibility for adequate protection and backup of its data and/or equipment
used with the Sun Technology and Licensee shall not make any claim against Sun
for lost data, re-run time, inaccurate output, work delays, or lost profits
resulting from the use of the Sun Technology or any portion thereof.
12. INDEMNIFICATION
12.1 Licensee will defend and indemnify Sun from any and all claims
brought against Sun, and will hold Sun harmless from all damages, liabilities,
costs and expenses (including attorneys' fees) incurred by Sun arising out of or
in connection with Licensee's use, modification, reproduction and/or
distribution of Developed Products or other exercise by Licensee of rights
granted under this Agreement; provided that Sun: (a) gives written notice of the
claim to Licensee; (b) permits Licensee to answer and defend such claim; (c)
provides Licensee with reasonable assistance, at Licensee's expense, to defend
such claim; and (d) has not compromised or settled such claim without Licensee's
permission.
13. MISCELLANEOUS
13.1 Further Assurances. Licensee agrees to cooperate with Sun and take
all reasonable actions required to vest and secure in Sun the ownership rights
and appurtenant Intellectual Property Rights as provided in this Agreement.
Should any such rights vest in Licensee by operation of law or otherwise in a
manner inconsistent with the parties' intentions as expressed in this Agreement,
then Licensee shall upon request by Sun and at Sun's expense, promptly make the
appropriate and necessary assignment of rights to Sun, and/or otherwise take all
steps reasonably requested to conform the parties' respective ownership rights
with this Agreement, including but not limited to the execution of recordable
instruments and other documents necessary to perfect such assignments.
13.2 Force Majeure. A party is not liable under this Agreement for
non-performance caused by events or conditions beyond that party's control, if
the party makes reasonable efforts to perform. This provision does not relieve
Licensee of its obligation to make payments then owing.
13.3 Import And Export Laws. Sun Technology delivered under this Agreement
is subject to U.S. export control laws and may be subject to export or import
regulations in other countries. Licensee agrees to comply strictly with all such
laws and regulations and acknowledges that it has the responsibility to obtain
such licenses to export, re-export, or import as may be required after delivery
to Licensee.
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13.4 U.S. Government Rights. Notwithstanding any preprinted license terms
contained in the packaging or otherwise provided with the Licensed Software
including any Documentation, all Licensed Software and Documentation are
provided only under the terms and conditions of this Agreement. The FAR and/or
DFAR or any other Agency provisions relating to Rights in Data, Computer
Software and/or Technical Data do not apply, even though some of the terms of
those provisions may be similar to provisions stated herein. Licensee shall not
provide Licensed Software, Developed Products nor technical data to any third
party, including the U.S. Government, unless such third party accepts the
following restrictions: All Developed Products and technical data to be provided
directly or indirectly to the U.S. Government is subject to restrictions of FAR
52.227-14(g)(2)(6/87) and FAR 52.227-19(6/87), or DFAR 252.2277-015(b)(6/95) and
DFAR 227.7202-3(a). Licensee is responsible for ensuring that proper notice is
given to all such third parties and that the Developed Products and technical
data are properly marked.
13.5 Relationship Of The Parties. This Agreement is not intended to create
a relationship such as a partnership, franchise, joint venture, agency, or
employment relationship. Neither party may act in a manner which expresses or
implies a relationship other than that of independent contractor nor bind the
other party.
13.6 Notices. All written notices required by this Agreement must be
delivered to the addresses specified in Exhibit A(12) by a means evidenced by a
delivery receipt and will be effective upon receipt.
13.7 Assignment. Neither party may assign or otherwise transfer any of its
rights or obligations under this Agreement, without the prior written consent of
the other party, except that Sun may assign its right to payment and may assign
this Agreement to an affiliated company.
13.8 Agreement For Benefit Of Parties. This Agreement is made for the
benefit of the parties hereto, and not for the benefit of any third parties.
13.9 Waiver Or Delay. Any express waiver or failure to exercise promptly
any right under this Agreement will not create a continuing waiver or any
expectation of non-enforcement.
13.10 Headings. The headings used herein are for reference only and shall
not be considered as substantive parts of this Agreement.
13.11 Construction. This Agreement has been negotiated by the parties,
each of which has been represented by counsel. This Agreement will be fairly
interpreted in accordance with its terms, without any strict construction in
favor of or against either party.
13.12 English Language. The original of this Agreement has been written in
English, and such version shall be the governing version of the Agreement. Each
party waives any right it may have, if any, under any law or regulation to have
this Agreement written in a language other than English.
13.13 Provisions Found Invalid. If any term or provision of this Agreement
is found to be invalid under any applicable statute or rule of law then, that
provision notwithstanding, this Agreement shall remain in full force and effect
and such provision shall be deemed omitted, unless such an omission would
frustrate the intent of the parties with respect to any material aspect of the
relationship established hereby, in which case this Agreement shall terminate.
13.14 Governing Law; Venue. Any action related to this Agreement will be
governed by California law and controlling U.S. federal law, and the United
Nations' Convention On Contracts For The International Sale Of Goods and the
choice of law rules of any jurisdiction shall not apply. The parties agree that
any action shall be brought and venued exclusively in the United States District
Court for the Northern District Of California or the California Superior Court
for the County of Santa Clara, as applicable.
13.15 Injunctions. Licensee agrees that any violation or threat of
violation hereof will result in irreparable harm to Sun for which damages would
not be an adequate remedy and, therefore, in addition to its rights and remedies
otherwise available at law, including without limitation the recovery of damages
for breach of this Agreement, Sun shall be entitled to immediate equitable
relief, including both interim and permanent injunctions, to prevent any
unauthorized use or disclosure, and to such other and further equitable relief
as the court may deem proper under the circumstances.
13.16 Entire Agreement. This Agreement is the parties' entire agreement
relating to its subject matter. It supersedes all prior or contemporaneous oral
or written communications, proposals, conditions, representations, and
warranties, and prevails over any conflicting or additional terms of any quote,
order,
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acknowledgement, or other communication between the parties relating to its
subject matter during the term of this Agreement. No modification to this
Agreement will be binding, unless in writing and signed by an authorized
representative of each party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives.
SUN MICROSYSTEMS, INC. LICENSEE
OPENTV, INC.
By: /s/ Ken Okin By: /s/ Jan Steenkamp
-------------------------------- -------------------------------------
Name: Ken Okin Name: Jan Steenkamp
----------------------------- -----------------------------------
Title: VP & GM Workstation Products Title: CEO
Group
----------------------------- ----------------------------------
Date: 7/24/98 Date: July 22, 1998
------------------------------ -----------------------------------
Approved
by
legal
/s/[ILLEGIBLE]
----------
7/22/98
----------
date
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EXHIBIT A
1. Licensee:
Company OpenTV, Inc.
Address: 401 E. Middlefield Road
City/State/Zip: Mountain View, CA 94043-4005
Country: USA
2. Term:
The initial term of this Agreement shall expire one (1) from the Effective
Data ("Initial Term"). After the Initial Term, the Agreement will renew
automatically for successive one-year terms upon the anniversary of the
Effective Date, unless terminated by either party by giving thirty (30) days'
prior written notice to the other party.
3. Designated Equipment For Source Code:
Model: Ultra Enterprise 4000, Service Name UGS1000-U4002X
Serial No.: 736F0259
Associated Equipment 2x RSM2000 storage array, ETL 4/1800 tape library
Host name: redwood.opentv.com
Service Contract Number: NK20003729
Host ID: 80881132
4. Designated Site For Source Code:
Address: 401 E. Middlefield Road
City/State/Zip: Mountain View, CA 94043-4005
Country: USA
5. Designated Site For Binary Code:
Local Network:
Wide Network:
Address: 401 E. Middlefield Road
City/State/Zip: Mountain View, CA 94043-4005
Country: USA
6. Licensed Software
6.1 Software: ecpp
Release No.:
List Of Files: ecppreg.h, ecppio.h, bpp_io.h, ecppvar.h,
ecpp.c, Makefile
Documentation:
6.2 Software: bpp
Release No:
List Of Files: bpp_io.h, bpp_reg.h, bpp_var.h, bpp.c,
Makefile
Documention:
7. Designated Products:
Name: FlowCaster, OpenStreamer, OpenTV SDK, xfdb, Vidserv
Platform: SPARC
Owner/licensor: Licensee
8. Fees And Royalties:
*****
9. Payment Address:
***
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10. Specifications Of Derivative Works and/or Developed Products
Developed Products shall conform to the following Specifications:
Parallel port will be used to connect television broadcast equipment for
transmission of digital video.
In addition, any Derivative Works and/or Developed Products permitted
under this Agreement shall:
(a) have an application programmer's interface and/or graphical user
interface that is the same as the Licensed Software, if applicable;
(b) be developed solely for use on the following indicated platforms and
operating systems;
|X| Sun(R) computer equipment running Sun Solaris(R) 2.x or higher
operating systems
|X| SPARC(R) -based computer systems running Sun Solaris 2.x or higher
operating systems
|X| Other (specify):Java
and (c) conform to the following standards;
|X| OpenWindows(R) GUI
|X| Motif(R) GUI
|X| IEEE standard no. 1284-1994 as proposed or such standard as may be
published based thereon
|X| Other (specify): Java
In addition, Derivative Works and/or Developed Products may be compatible
with similar non-Sun hardware and/or software at similar or lesser
functionality.
11. Support:
None.
12. Contacts:
For Licensee:
Primary: Jon Hasse
Address: 401 E. Middlefield Road
City/State/Zip: Mountain View, CA 94043--4005
Country: USA
Phone: (650) 849-5566
Fax: (650) 494-1981
E-mail: [email protected]
Secondary: Christopher Cunningham
Address: 401 E. Middlefield Road
City/State/Zip: Mountain View, CA 94043-4005
Country: USA
Phone: (650)849-5500
Fax: (650)494-1981
E-mail: [email protected]
For Sun:
Primary
Name: Barbara Yee
Address: 901 San Antonio Rd., MS MPK24-201
City/State/Zip: Palo Alto, CA 94303
Country: USA
Phones: (650)786 9073
Fax:
E-mail: [email protected]
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SUN CONFIDENTIAL
Secondary
Name: Yuanbi Su
Address: 901 San Antonio Rd., MS MPK14-302
City/State/Zip: Palo Alto, CA 94303
Country: USA
Phone: (650)786 6410
Fax:
E-maiL: [email protected]
Legal
Name: Product and Technology Legal Department
Address: 901 San Antonio Road, MS MPK12-208
City/State/Zip: Palo Alto, CA 94303
Country: USA
Phone: 650-786-7740
Notice of changes in the above addresses or contacts shall be given in
writing in accordance with Section 13.6 of the Agreement.
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EXHIBIT B
END USER BINARY CODE LICENSE
READ THE TERMS OF THIS AGREEMENT AND ANY PROVIDED SUPPLEMENTAL LICENSE TERMS
(COLLECTIVELY "AGREEMENT") CAREFULLY BEFORE OPENING THE SOFTWARE MEDIA PACKAGE.
BY OPENING THE SOFTWARE MEDIA PACKAGE, YOU AGREE TO THE TERMS OF THIS AGREEMENT.
IF YOU ARE ACCESSING THE SOFTWARE ELECTRONICALLY INDICATE YOUR ACCEPTANCE OF
THESE TERMS BY SELECTING THE "ACCEPT" BUTTON AT THE END OF THIS AGREEMENT. IF
YOU DO NOT AGREE TO ALL OF THESE TERMS, PROMPTLY RETURN THE UNUSED SOFTWARE TO
YOUR PLACE OF PURCHASE FOR A REFUND OR, IF THE SOFTWARE IS ACCESSED
ELECTRONICALLY, SELECT THE "DECLINE" BUTTON AT THE END OF THIS AGREEMENT.
1. License to Use. Sun grants to you a non-exclusive and non-transferable
license for the internal use only of the accompanying software and documentation
and any error corrections provided by Sun (collectively "Software"), by the
number of users and the class of computer hardware for which the corresponding
fee has been paid.
2. Restrictions. Software is confidential and copyrighted. Title to Software and
all associated intellectual property rights is retained by Sun and/or its
licensors. Except as specifically authorized in any Supplemental License Terms,
you may not make copies of Software, other than a single copy of Software for
archival purposes. Unless enforcement is prohibited by applicable law, you may
not modify, decompile, disassemble, or otherwise reverse engineer software.
Software is not designed or licensed for use in on-line control of aircraft, air
traffic, aircraft or navigation or aircraft communications; or in the design,
construction, operation or maintenance of any nuclear facility. You warrant that
you will not use the Software for these purposes. You may not publish or provide
the results of any benchmark or comparison tests run on Software to any third
party without the prior written consent of Sun. No right, title or interest in
or to any trademark, service mark, logo, or trade name of Sun or its licensors
is granted under this Agreement.
3. Limited Warranty. Sun warrants to you that for a period of ninety (90) days
from the date of purchase, as evidenced by a copy of the receipt, the media on
which Software is furnished (if any) will be free of defects in materials and
workmanship under normal use. Except for the foregoing, Software is provided "AS
IS". Your exclusive remedy and Sun's entire liability under this limited
warranty will be at Sun's option to replace the Software media or refund the fee
paid for the Software.
4. Disclaimer of Warranty. UNLESS SPECIFIED IN THIS AGREEMENT, ALL EXPRESS OR
IMPLIED CONDITIONS, REPRESENTATIONS AND WARRANTIES, INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR
NON-INFRINGEMENT, ARE DISCLAIMED, EXCEPT TO THE EXTENT THAT THESE DISCLAIMERS
ARE HELD TO BE LEGALLY INVALID.
5. Limitation of Liability. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW, IN
NO EVENT WILL SUN OR ITS LICENSORS BE LIABLE FOR ANY LOST REVENUE, PROFIT OR
DATA, OR FOR SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES,
HOWEVER CAUSED AND REGARDLESS OF THE THEORY OF LIABILITY, ARISING OUT OF OR
RELATED TO THE USE OF OR INABILITY TO USE SOFTWARE, EVEN IF SUN HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES. In no event will Sun's liability to you,
whether in contact, tort (including negligence), or otherwise, exceed the amount
paid by you for Software under this Agreement. The foregoing limitations will
apply even if the above stated warranty fails of its essential purpose.
6 Termination. This Agreement is effective until terminated. You may terminate
this Agreement at any time by destroying all copies of Software. This Agreement
will terminate immediately without notice from Sun if you fail to comply with
any provision of this Agreement. Upon termination, you must destroy all copies
of Software.
7. Export Regulations. All Software and technical data delivered under this
Agreement are subject to U.S. export control laws and may be subject to export
or import regulations in other countries. You agree to comply strictly with all
such laws and regulations and acknowledge that you have the responsibility to
obtain such licenses to export, re-export, or import as may be required after
delivery to you.
8. U.S. Government Restricted Rights. Use, duplication, or disclosure by the
U.S. Government is subject to restrictions set forth in this Agreement and as
provided in DFARS 227.7202-1(a) and 227.7202-3(a)(1995), DFARS 252.227-
7013(c)(1)(ii)(Oct 1988), FAR 12.212(a)(1995), FAR 52.227-19 (June 1987), or FAR
52.227.l4((ALT III) (June 1987), as applicable.
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SUN CONFIDENTIAL
9. Governing Law. Any action related to this Agreement will be governed by
California law and controlling U.S. federal law. No choice of law rules of any
jurisdiction will apply.
10. Severability. If any provision of this Agreement is held to be
unenforceable, this Agreement will remain in effect with the provision omitted,
unless omission of the provision would frustrate the intent of the parties, in
which case this Agreement will immediately terminate.
11. Integration. This Agreement is the entire agreement between you and Sun
relating to its subject matter. It supersedes all prior or contemporaneous oral
or written communications, proposals, representations and warranties and
prevails over any conflicting or additional terms of any quote, order,
acknowledgement, or other communication between the parties relating to its
subject matter during the term of this Agreement. No modification of this
Agreement will be binding, unless in writing and signed by an authorized
representative of each party.
For inquiries please contact: Sun Microsystems, Inc., 901 San Antonio Road, Palo
Alto, California 94303.
* Indicates that confidential treatment has been granted for that portion of the
text as marked and that the confidential portion has been filed separately with
the U.S. Securities and Exchange Commission.
June 30, 1999 Final Sun Confidential
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EXHIBIT 10.10
SUN MICROSYSTEMS COMPUTER COMPANY
SOURCE CODE LICENSE AND BINARY DISTRIBUTION AGREEMENT
THIS SOURCE CODE LICENSE AND BINARY DISTRIBUTION AGREEMENT including
Exhibits ("Agreement") is made to be effective as of the 1st day of July, 1996
(the "Effective Date"), by and between Sun Microsystems, Inc., a Delaware
corporation and having its principal place of business at 901 San Antonio Road,
Palo Alto, California 94303 ("Sun"), and THOMSON SUN Interactive, LLC, a
Delaware Limited Liability Company, having its principal place of business
identified in Exhibit A and its successor corporation, OpenTV, Inc., a Delaware
corporation (collectively, "TSI"), in connection with the transactions described
in the Master Agreement dated May 17, 1996 between Sun TSI Subsidiary, Inc., a
Delaware corporation and THOMSON multimedia S.A., a French corporation ("Master
Agreement"). The recitals in the Master Agreement are incorporated by reference
into this Agreement.
1. DEFINITIONS
1.1. "Affiliate" of any party means any Person controlling, under common
control with, or controlled by the referenced party hereto. A Person shall be
deemed to control another Person if such Person owns, directly or indirectly,
more than fifty percent (50%) of the voting stock of the second Person or has
the power, directly or indirectly, to elect or remove a majority of the members
of the Board of Directors, trustees or comparable governing body of such second
Person.
1.2. "API Compatibility Requirement" means that TSI and each of its
Qualified Subcontractors and Distributors maintain compatibility to Sun's
Application Programming Interface ("API") call parameters, as such API call
parameters are disclosed and documented by Sun in its product and engineering
literature as of July 1, 1996. Maintaining compatibility includes the right of
TSI, its Qualified Subcontractors or Distributors to create and utilize API's
that are a superset of the Sun API as of July 1,1996, but modifications to the
Sun API as of July 1, 1996 or creation of a subset thereof, is not permitted.
The API Compatibility Requirement applies to any disclosure or authorization to
use, by TSI or its Distributors, to its or their customers of the API of the
Licensed Software to an application.
1.3. "Benchmark Data" means results of tests or evaluations of the Sun
Technology, including but not limited to usability, functionality, performance,
performance against standard benchmarks, and/or quality information, data, or
output.
1.4. "Binary Code" means machine-readable, executable code of a computer
program.
1.5. "Confidential Information" means (a) the Licensed Software and
Derivative Works thereof in Source Code form, (b) any and all other information
relating to the Licensed Software which is disclosed by Sun to TSI orally,
electronically, visually, or in a document or other tangible form, which is
either identified as or should be reasonably understood to be confidential
and/or proprietary, (c) any test results, error data, or other reports including
Benchmark Data made by TSI in connection with the license rights granted under
this Agreement, (d) any notes, extracts, analyses, or materials prepared by TSI
which are copies of or Derivative Works of the Confidential Information or from
which the substance of the Confidential Information can be inferred or otherwise
understood, and (e) the terms and
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* Indicates that confidential treatment has been granted for that portion of
the text as marked and that the confidential portion has been filed
separately with the U.S. Securities and Exchange Commission.
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conditions of this Agreement. "Confidential Information" does not include
information received from Sun which TSI can clearly establish by written
evidence (a) is or becomes rightfully known by TSI without an obligation to
maintain its confidentiality; (b) is or becomes generally known to the public
through no act or omission of TSI; or (c) is independently developed by TSI
without use of the Confidential Information.
1.6. "Derivative Work" means: (a) for copyrightable or copyrighted
material (including materials subject to mask work rights), a work which is
based upon one or more pre-existing works, such as a revision, modification,
translation, abridgment, condensation, expansion, collection, compilation, or
any other form in which such pre-existing works may be recast, transformed, or
adapted; (b) for patentable or patented materials, any adaptation, addition,
improvement, or combination; and (c) for material subject to trade secret
protection, any new material, information, or data relating to and derived from
such existing trade secret material, including new material which may be
protectable by copyright, patent, or other proprietary rights. Notwithstanding
the foregoing, an otherwise original work shall not be deemed to be a Derivative
Work of the Licensed Software solely by virtue of the fact that it interfaces
with the Licensed Software through the API's of the Licensed Software or a
superset of the API's developed in conformance with the API Compatibility
Requirement.
1.7. "Developed Products" means the Binary Code form of products which
include the Licensed Software or Derivative Works of the Licensed Software
developed by TSI, Qualified Subcontractors and/or Distributors for distribution
in accordance with this Agreement.
1.8. "Distributor" means any entity which is under a contractual
obligation as set forth in this Agreement with TSI to distribute Developed
Products directly or indirectly to End Users in accordance with Section 3.4 of
this Agreement.
1.9. "Documentation" means materials related to the Licensed Software
which Sun delivers to TSI hereunder as more particularly described in Exhibit A,
and any other such materials as Sun may deliver hereunder from time to time.
1.10. "End User" means an end user licensed to use the Developed Products
under an End User Binary Code License with TSI or a Distributor.
1.11. "End User Binary Code License" means the license agreement used by
TSI or a Distributor to license the Developed Products to End Users and which
agreement must include the material terms set forth in Exhibit B.
1.12. "Error" means any reproducible failure of Licensed Software to
conform in any material respect to its functional or performance specifications
or Documentation therefor, as the same may be amended and/or supplemented from
time to time.
1.13. "Error Correction" means an action taken which, whether in the form
of a modification, addition, procedure, or routine, when taken or observed,
establishes material conformity to the current specifications and Documentation
therefor or eliminates the practical adverse effect of an Error in the regular
operation of the software in question.
1.14. "Intellectual Property Rights" means all intellectual property
rights worldwide arising under statutory or common law or by contract and
whether or not perfected, now existing or hereafter filed, issued, or acquired,
including all (a) patent rights; (b) rights associated with works of authorship
including copyrights and mask work rights; (c) rights relating to the protection
of trade secrets and confidential information; and (d) any right analogous to
those set
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forth herein and any other proprietary rights relating to intangible property;
but specifically excluding trademarks, service marks, trade dress, trade names,
and design patent rights.
1.15. "Licensed Software" means the Source Code and Binary Code forms of
the software specifically identified in Exhibit A, including any Error
Corrections and any related Documentation delivered to TSI during the term of
this Agreement. In addition, Licensed Software shall include any Updates to the
Licensed Software or additional software delivered to TSI during the term of
this Agreement.
1.16. "LLC Agreement" means the Limited Liability Company Agreement of
THOMSON SUN Interactive, LLC dated effective as of the Effective Date.
1.17. "Moral Rights" means any rights of paternity or integrity, any right
to claim authorship, to object to or prevent any distortion, mutilation or
modification of, or other derogatory action in relation to the subject work
whether or not such would be prejudicial to the author's honor or reputation, to
withdraw from circulation or control the publication or distribution of the
subject work, and any similar right, existing under judicial 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.
1.18. "Person" means any individual, corporation, partnership,
association, trust or other entity or organization.
1.19. "Qualified Subcontractor" means a Person (i) that is neither a
current nor announced competitor of Sun's server products; and (ii) that
provides services to TSI pursuant to a written agreement providing for TSI's
ownership of all Derivative Works based on the Licensed Software, subject to the
grant-back license to Sun described in Section 2.2 below.
1.20. "Source Code" means code of a computer program that is not
executable by a computer system directly but must be converted into machine
language by compilers, assemblers, and/or interpreters.
1.21. "Sun Technology" means Licensed Software and any information
relating to the Licensed Software which is disclosed by Sun to TSI.
1.22. "Updates" means later releases, modifications, enhancements, or
extensions to the Licensed Software, other than Error Corrections.
2. OWNERSHIP
2.1. Ownership Of Sun Technology. TSI acknowledges and agrees that, as
between the parties, Sun is and will be the sole and exclusive owner of all
right, title, and interest in and to the Sun Technology and all associated
Intellectual Property Rights, and that TSI acquires no interests under this
Agreement to any Sun Technology or any Intellectual Property Rights therein,
other than the limited interests specifically granted in this Agreement. TSI
agrees to and hereby does assign to Sun without additional compensation any and
all right, title, and interest it may have or obtain in and to such Sun
Technology and associated Intellectual Property Rights.
2.2. Ownership Of Derivative Works, Grant-Back License. As between the
parties, TSI is and will be the sole and exclusive owner of all right, title,
and interest in and to Derivative Works it creates and all associated
Intellectual Property Rights, subject to the underlying rights of Sun in the Sun
Technology upon which such Derivative Works are based. TSI hereby grants and
agrees to grant to Sun a royalty-free, worldwide, non-exclusive, perpetual
license under any
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Intellectual Property Rights now owned or hereafter owned or licensable by TSI
which cover any Derivative Works created by or on behalf of TSI to make, have
made, use, copy, display, adapt, distribute and create Derivative Works of any
and all Derivative Works created by or on behalf of TSI.
2.3. No Limitation On Use. Nothing contained in this Agreement shall be
construed to limit or restrict, in any way or manner, any right of Sun to
encumber, transfer, license, access, reference, use, or practice the Sun
Technology in any way for any purpose or use (subject only to the rights
specifically granted TSI hereunder), including without limitation the use,
licensing, and/or registration of the Sun Technology anywhere in the world for
any purpose or use in connection with the development, manufacture,
distribution, marketing, promotion, and sale of any products.
3. LICENSE GRANT; LIMITATIONS AND OBLIGATIONS
3.1. Grant To TSI. Subject to all limitations and obligations set forth in
this Agreement, Sun grants to TSI a worldwide, irrevocable (subject to Sections
5.2 and 5.3 below), **************** **************** ******* ** ********* **
******* ****** ************** license to:
(a) use, make, have made, display, adapt, modify, and copy the
Licensed Software;
(b) create Derivative Works in conformance to the API Compatibility
Requirement;
(c) port, or have ported by a Qualified Subcontractor, the Licensed
Software to other platforms;
(d) sublicense or distribute Developed Products in Binary Code form
and Documentation directly or through Distributors to End Users either (i) as a
stand-alone product; or (ii) as bundled with a product; in either case in
conformance to the API Compatibility Requirement; and
(e) sublicense only the "client stub" portion of the Licensed
Software in Source Code form to Distributors, with the right to use, modify and
copy the same solely to create Developed Products in conformance to the API
Compatibility Requirement and to further distribute Binary Code only of such
Developed Products in accordance with this Agreement; TSI may not distribute or
sublicense the "server" portion of the Source Code.
The foregoing license may also be exercised by any wholly owned
subsidiary of TSI.
3.2. No Right to Grant Sublicenses; Use of Qualified Subcontractors. TSI
has no right, and agrees not, to sublicense or transfer (other than as permitted
in Section 12.6) any of its rights under the foregoing license, provided,
however, that, subject to the terms and conditions of this Agreement, TSI may
utilize the services of Qualified Subcontractors to assist TSI in the exercise
of its rights under Sections 3.1(a) & (c) of the foregoing license and may
sublicense Distributors the rights under Section 3.1(c) of the foregoing
license, and may provide access to such Qualified Subcontractors and
Distributors to the Licensed Software as such Qualified Subcontractors or
Distributors have a need to know only pursuant to a written agreement, which
agreement will:
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(i) contain all of the same limitations and restrictions, including
but not limited to confidentiality restrictions, of this Agreement;
(ii) require that only persons who have a need to know will have
access to the Licensed Software;
(iii) require that all of the Licensed Software provided to such
Qualified Subcontractor or Distributor, as the case may be, shall be utilized by
the Qualified Subcontractor or Distributor solely for the development of the
indicated products of TSI or Distributor and will be returned to TSI upon
completion or other termination of such development;
(iv) disclaim on the part of such Qualified Subcontractor or
Distributor any and all rights in the Licensed Software or any Confidential
Information, other than the right to use the same for development of products on
behalf of TSI or Distributor;
(v) contain an assignment and an agreement to assign to TSI all
right, title and interest in and to all products and other work product created
by such Qualified Subcontractor or Distributor and all Intellectual Property
Rights therein; and
(vi) contain a provision waiving and agreeing never to claim or
assert any and all Moral Rights with respect to any such products and other work
product.
3.3. Embedded Third Party Rights. Sun represents to TSI that, to the best
of Sun's knowledge as of the Effective Date, the Licensed Software does not
infringe the copyright or trade secret rights of any third party. Sun makes no
representation or warranty, however, with respect to whether the Licensed
Software may or may not infringe the patent rights, trademark rights, or other
intellectual property rights of any third party.
3.4. End User License Terms. Prior to TSI furnishing any Developed
Products to one of its Distributors, TSI shall obtain a signed agreement from
such Distributor, the terms and conditions of which shall be consistent with the
relevant terms and conditions of this Agreement. Prior to TSI and any
Distributor furnishing any Developed Products to one of its End Users, TSI and
any Distributor shall obtain a signed agreement from or provide a "shrink-wrap"
agreement to each End User incorporating the material terms and conditions of
the End User Binary Code License attached as Exhibit B.
3.5. No Other Rights. Other than the limited rights granted in this
Agreement, TSI acquires no right, title, or interest in or to the Sun
Technology.
4. DELIVERY, INSTALLATION, ACCEPTANCE, AND RISK OF LOSS
4.1. Delivery Of Licensed Software. TSI acknowledges that Sun has
previously delivered to TSI, and TSI has received and accepted, the Licensed
Software.
4.2. Future Versions. Upon request of TSI, Sun agrees to negotiate in good
faith with TSI to license to TSI on commercially reasonable terms, in both
Binary Code and Source Code forms, future versions of the Licensed Software or
Error Corrections or Updates thereto that Sun may make commercially available
from time to time, subject to TSI's agreement to conform to the API
Compatibility Requirement as to any revised Sun API that may be utilized in
connection with such new version, Error Correction or Update.
4.3. Installation. TSI shall be solely responsible for installation of the
Licensed Software.
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4.4. Notice Of Errors. TSI shall promptly inform Sun's contact identified
in Exhibit A regarding any Errors it may detect in the Licensed Software.
4.5. License to Developed Technology. Upon request of Sun, TSI agrees to
negotiate in good faith with Sun to license to Sun on commercially reasonable
terms any Error Corrections, Derivative Works, and/or Developed Products of or
to the Licensed Software made by or for TSI or any Distributor and any
documentation therefor, in both Binary Code and Source Code forms.
4.6. Disclosure Of Benchmark Data. In the event TSI desires to disclose
Benchmark Data to any third party, TSI shall notify Sun of its desire to
disclose such Benchmark Data and shall deliver same to Sun. Upon Sun's consent,
which consent shall not be unreasonably withheld, TSI may release such Benchmark
Data to third parties.
5. TERM AND TERMINATION
5.1. Term. The term of this Agreement and the licenses granted to TSI
hereunder will be the same as the term of the LLC Agreement, subject to
extension of the term, or termination prior to expiration of the term, of the
LLC Agreement pursuant to its terms (which will thereby automatically extend the
term of, or terminate, as the case may be, this Agreement); provided, however,
that in the event of a Roll Up (as defined in the LLC Agreement), initial public
offering, or acquisition of TSI, a majority of its stock or substantially all of
its assets (an "Upside Event"), then, notwithstanding any related expiration or
termination of the LLC Agreement, this Agreement shall continue in effect for
the life of any successor or acquiring entity and may be assigned to such
successor or acquiring entity. TSI will give Sun prompt written notice of such
proposed assignment in connection with such proposed Upside Event.
5.2. Termination
(a) Sun may terminate the licenses granted in this Agreement upon
thirty (30) days advance written notice in the event that TSI exceeds the scope
of such licenses or otherwise breaches any material obligations hereunder with
respect to the Licensed Software, and such breach remains uncured at the end of
such thirty (30) day period.
(b) TSI may terminate the licenses granted in this Agreement for any
reason or for no reason upon written notice to Sun.
(c) Upon any termination by either party under this Section 5.2, TSI
will thereupon cease all use of the Sun Technology and destroy or return to Sun
any tangible embodiments of the same in TSI's possession or under its control,
but no such termination will affect the right or ability of TSI's customers to
use products of TSI previously distributed by TSI in accordance with this
Agreement. Notwithstanding the foregoing, TSI shall have the right to dispose of
all stock on hand of Developed Products which embody the Licensed Software for a
period of six months after such termination.
5.3. Effect of Expiration. TSI agrees that in case of expiration of this
Agreement, all of TSI's rights under this Agreement will automatically cease and
be deemed rescinded and terminated as of the date of such expiration and TSI
will thereupon cease all use of the Sun Technology, and all manufacture, use,
sale and distribution of products based in whole or in part thereon.
Notwithstanding the foregoing, TSI shall have the right to dispose of all stock
on hand of Developed Products which embody the Licensed Software for a period of
six months after
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such expiration. In no event, however, will expiration of this Agreement or the
licenses granted hereunder affect the right or ability of TSI's customers to use
products of TSI previously distributed by TSI in accordance with this Agreement.
5.4. No Waiver of Damages; No Damages for Termination. Termination under
this Section 5 will not be deemed a waiver or election of remedies by Sun with
respect to any breach that gave rise to such termination or existed at the time
of such termination. In addition, SUN WILL NOT BE LIABLE TO TSI FOR DAMAGES OF
ANY KIND INCLUDING INCIDENTAL OR CONSEQUENTIAL DAMAGES MERELY ON ACCOUNT OF
TERMINATION OF THIS AGREEMENT FOR ANY REASON WHATSOEVER, EVEN IF ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
5.5. Survival. The provisions set forth in Sections 2, 5.2, 5.3, 5.4, 5.5,
7, 8, 9, 10, 11, and 12 shall survive termination or expiration of the
Agreement.
6. SUPPORT AND UPDATES
6.1. No Updates. Sun shall have no obligation to provide Updates to TSI.
Any Updates provided in Sun's discretion may require payment of license fees
and/or royalties.
6.2. No Support For Sun Technology. Notwithstanding any provision to the
contrary contained elsewhere in this Agreement, Sun shall have no obligation to
provide support for the Sun Technology. ** ********* *** ** ***** ** **********
** ******** ******* ************* ** ******* ***** *********** *** *** ***
*********** Error Corrections may be supplied by Sun from time to time, in Sun's
sole discretion.
6.3. No Support For Derivative Works. TSI acknowledges and agrees that it
shall be solely responsible for maintaining and supporting any Derivative Works,
including but not limited to Developed Products, and TSI shall be responsible
for all engineering resources necessary for such maintenance and support. TSI
shall not refer its customers to Sun for support.
7. COPYRIGHT NOTICES
7.1. Included Notices. In the exercise of the rights and licenses granted
in this Agreement, TSI agrees not to alter any copyright notices and/or other
proprietary rights notices included on or embedded in the Licensed Software. In
addition, TSI agrees to label all documentation of the Developed Products with
the following label, and to embed within each copy of the Developed Products in
ASCII form the following label, or such other label as Sun may from time to time
request:
"Portions copyright symbol (C) 199__ Sun Microsystems, Inc. All rights
reserved. Use is subject to license terms. Sun, Sun Microsystems, the Sun
Logo, are trademarks or registered trademarks of Sun Microsystems, Inc. in
the U.S. and other countries. RESTRICTED RIGHTS: Use, duplication, or
disclosure by the U.S. Government is subject to restrictions as provided
in DFARS 227.7202-1(a) and 227.7202-3(a) (1995), DFARS 252.227-
7013(c)(1)(ii) (OCT 1988), FAR 12.212(a) (1995), FAR 52.227-19, or FAR
52.227-14 (ALT III), as applicable. Sun Microsystems, Inc."
In addition, TSI shall comply with all reasonable requests by Sun to
include copyright and/or other proprietary rights notices on any part of the Sun
Technology.
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8. CONFIDENTIAL INFORMATION
8.1. Confidential Information. TSI shall not disclose Confidential
Information to any third party other than Qualified Subcontractors or
Distributors as permitted hereunder, and shall protect and treat all
Confidential Information with the same degree of care as it uses to protect its
own confidential information of like importance, but in no event less than
reasonable care. Except as expressly provided in Article 3, TSI shall not use,
make, or have made any copies of Confidential Information, in whole or in part,
without the prior written authorization of Sun. TSI shall disclose Confidential
Information only to its employees and Qualified Subcontractors or Distributors
having a need to know for the purposes of this Agreement. TSI shall notify and
inform such employees and Qualified Subcontractors or Distributors of TSI's
limitations, duties, and obligations regarding use, access to, and nondisclosure
of Confidential Information. TSI agrees to notify Sun immediately after learning
of or having reason to suspect a breach of any of the proprietary restrictions
set forth in this Article 8. In the event that TSI or a Qualified Subcontractor
or Distributor is required to disclose Confidential Information pursuant to law,
TSI shall notify Sun of the required disclosure with sufficient time to seek
relief, cooperate with Sun in taking appropriate protective measures, and shall
make such disclosure in the fashion which maximizes protection of the
Confidential Information from further disclosure. This Article 8 will not affect
any other confidential disclosure agreement between the parties.
8.2. Employees And Qualified Subcontractors. TSI shall inform its
employees and/or Qualified Subcontractors and Distributors having access to
Confidential Information of the limitations, duties, and obligations regarding
non-disclosure of Confidential Information imposed by (a) this Agreement, and/or
(b) third parties who have supplied information and/or technology to Sun. TSI
shall obtain or have obtained its employees' and/or Qualified Subcontractors' or
Distributors' agreements to comply with such limitations, duties, and
obligations.
8.3. Breach By Sublicensees. If any Distributor, End User or Qualified
Subcontractor fails to fulfill one or more of its material obligations which
this Agreement requires to be incorporated into its agreement with TSI and/or
with any Distributor, which failure may materially jeopardize Sun's rights and
interests in and to any Sun Technology, Sun may, at its election and in addition
to any other remedies that it may have, notify TSI in writing of such breach and
require TSI or a Distributor to terminate all the rights sublicensed from Sun
under this Agreement on not less than sixty (60) days' written notice to such
Distributor or End User, unless within the period of such notice all breaches
specified therein shall have been remedied. Should TSI not take such action or
be unsuccessful, Sun may undertake enforcement directly against the breaching
Distributor, End User or Qualified Subcontractor.
9. DISCLAIMER OF WARRANTIES
TSI acknowledges that ALL INFORMATION SUPPLIED BY SUN UNDER THIS
AGREEMENT, INCLUDING WITHOUT LLMITATION THE SUN TECHNOLOGY, IS PROVIDED BY SUN
"AS IS" AND WITHOUT WARRANTY OF ANY KIND. SUN HEREBY DISCLAIMS ALL WARRANTIES,
EXPRESS OR IMPLIED, WITH RESPECT TO THE SAME, INCLUDING BUT NOT LIMITED TO ANY
WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NON-INFRINGEMENT, OR WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE, OR
TRADE PRACTICE. No agent of Sun is authorized to incur warranty obligations
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on behalf of Sun or modify the limitations as set forth in this Section 9. TSI
acknowledges that Sun's willingness to grant the license rights granted
hereunder to TSI is expressly conditioned on its ability to disclaim and exclude
such warranties and to limit its liabilities as set forth below.
10. LIMITATION OF LIABILITY
10.1 Limitation Of Liability. EXCEPT *** ****** ** ******** * ** * ******
******* ***** *** TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW:
A. NEITHER PARTY WILL BE LIABLE FOR ANY INDIRECT, PUNITIVE, SPECIAL,
INCIDENTAL, OR CONSEQUENTIAL DAMAGE IN CONNECTION WITH OR ARISING OUT OF OR
RELATING TO THIS AGREEMENT (INCLUDING LOSS OF BUSINESS, REVENUE, PROFITS, USE,
DATA, OR OTHER ECONOMIC ADVANTAGE), HOWEVER IT ARISES, WHETHER FOR BREACH OR IN
TORT (INCLUDING NEGLIGENCE), EVEN IF THAT PARTY HAS BEEN PREVIOUSLY ADVISED OF
THE POSSIBILITY OF SUCH DAMAGE.
B. LIABILITY FOR DAMAGES SHALL BE LIMITED AND EXCLUDED, EVEN IF ANY
EXCLUSIVE REMEDY PROVIDED FOR IN THIS AGREEMENT FAILS OF ITS ESSENTIAL PURPOSE.
10.2 Infringement. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A
WARRANTY OR REPRESENTATION BY SUN THAT THE SUN TECHNOLOGY WILL BE FREE FROM
INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES. SUN HEREBY
EXPRESSLY DISCLAIMS AND SHALL NOT BE RESPONSIBLE FOR ANY LIABILITY ARISING AS A
RESULT OF OR IN CONNECTION WITH ANY CLAIM OR SUIT ALLEGING THAT THE USE OF SUN
TECHNOLOGY INFRINGES THE INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY.
10.3. Aircraft Product And Nuclear Applications. Sun Technology is not
designed or intended for use in on-line control of aircraft, air traffic,
aircraft navigation, or aircraft communications; or in the design, construction,
operation, or maintenance of any nuclear facility. Sun disclaims any express or
implied warranty of fitness for such uses. TSI represents and warrants that it
will not use or resell Sun Technology for such purposes, and that it will use
its best efforts to ensure that its customers and end-users of Developed
Products are provided with a copy of the foregoing notice.
10.4. Responsibility For Backup. TSI shall have the sole responsibility
for adequate protection and backup of its data and/or equipment used with the
Sun Technology and TSI shall not make any claim against Sun for lost data,
re-run time, inaccurate output, work delays, or lost profits resulting from the
use of the Sun Technology, or any portion thereof.
11. INDEMNIFICATION OF SUN
TSI will hold Sun harmless and defend Sun against any claim brought
against Sun based on or arising out of (i) a claim that Developed Products
infringe the Intellectual Property Rights of third parties or (ii) TSI's or its
Qualified Subcontractors' or Distributors' use, modification, distribution,
sale, licensing or other disposition of the Sun Technology or Developed Products
based thereon, and TSI will pay all damages and costs awarded by a court of
final appeal attributable to any such claim, provided that Sun: (a) gives
written notice of the claim to TSI; (b)
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gives TSI sole control of the defense and settlement of the claim; (c)
cooperates with TSI; and (d) has not compromised or settled such claim.
12. MISCELLANEOUS
12.1. Further Assurances. TSI agrees to cooperate with Sun and take all
reasonable actions required to vest and secure in Sun the ownership rights and
appurtenant Intellectual Property Rights as provided in this Agreement. Should
any such rights vest in TSI by operation of law or otherwise in a manner
inconsistent with the parties' intentions as expressed in this Agreement, then
TSI shall upon request by Sun promptly make the appropriate and necessary
assignment of rights to Sun, and/or otherwise take all steps reasonably
requested to conform the parties' respective ownership rights with this
Agreement, including but not limited to the execution of recordable instruments
and other documents necessary to perfect such assignments.
12.2. Force Majeure. A party is not liable under this Agreement for
non-performance caused by events or conditions beyond that party's control, if
the party makes reasonable efforts to perform.
12.3. Import And Export Laws. Sun Technology delivered under this
Agreement is subject to U.S. export control laws and may be subject to export or
import regulations in other countries. TSI agrees to comply strictly with all
such laws and regulations and acknowledges that it has the responsibility to
obtain such licenses to export, re-export, or import as may be required after
delivery to TSI.
12.4. Relationship Of The Parties. This Agreement is not intended to
create a relationship such as a partnership, franchise, joint venture, agency,
or employment relationship. Neither party may act in a manner which expresses or
implies a relationship other than that of independent contractor, nor bind the
other party.
12.5. Notices. All written notices required by this Agreement must be
delivered to the addresses specified in Exhibit A by a means evidenced by a
delivery receipt and will be effective upon receipt.
12.6. Assignment Except for assignments in connection with an Upside Event
as provided in Section 5.1 hereof, this Agreement and the licenses granted
hereunder may not be assigned by TSI, in whole or in part (including by
operation of law, in a merger or otherwise), without the prior written approval
of Sun and any such purported assignment without such consent shall be void. The
provisions of this Agreement bind and benefit a party's lawful successors and
permitted assigns.
12.7. Agreement For Benefit Of Parties. This Agreement is made for the
benefit of the parties hereto, and not for the benefit of any third parties.
12.8. Waiver Or Delay. Any express waiver or failure to exercise promptly
any right under this Agreement will not create a continuing waiver or any
expectation of non-enforcement.
12.9. Headings. The headings used herein are for reference only and shall
not be considered as substantive parts of this Agreement.
12.10. Construction. This Agreement has been negotiated by the parties,
each of which has been represented by counsel. This Agreement will be fairly
interpreted in accordance with its terms, without any strict construction in
favor of or against either party.
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12.11. English Language. The original of this Agreement has been written
in English, and such version shall be the governing version of the Agreement.
Each party waives any right it may have, if any, under any law or regulation to
have this Agreement written in a language other than English.
12.12. Provisions Found Invalid. If any term or provision of this
Agreement is found to be invalid under any applicable statute or rule of law
then, that provision notwithstanding, this Agreement shall remain in full force
and effect and such provision shall be deemed omitted, unless such an omission
would frustrate the intent of the parties with respect to any material aspect of
the relationship established hereby, in which case this Agreement shall
terminate.
12.13. Governing Law. Any action related to this Agreement will be
governed by California law and controlling U.S. federal law, and the United
Nations' Convention On Contracts For The International Sale Of Goods and the
choice of law rules of any jurisdiction shall not apply.
12.14. Injunctions. TSI agrees that any violation or threat of violation
hereof will result in irreparable harm to Sun for which damages would not be an
adequate remedy and, therefore, in addition to its rights and remedies otherwise
available at law, including without limitation the recovery of damages for
breach of this Agreement, Sun shall be entitled to immediate equitable relief,
including both interim and permanent injunctions, to prevent any unauthorized
use or disclosure, and to such other and further equitable relief as the court
may deem proper under the circumstances.
12.15. U.S. Government Rights. Notwithstanding any preprinted license
terms contained in the packaging or otherwise provided with the Licensed
Software including any Documentation, all Licensed Software and Documentation
are provided only under the terms and conditions of this Agreement. The FAR
and/or DFAR or any other Agency provisions relating to Rights in Data, Computer
Software and/or Technical Data do not apply, even though some of the terms of
those provisions may be similar to provisions stated herein. Licensee shall not
provide Licensed Software, Developed Products or technical data to any third
party, including the U.S. Government, unless such third party accepts the
following restrictions: All Developed Products and technical data to be provided
directly or indirectly to the U.S. Government is subject to restrictions of FAR
52.227-14(g)(2)(6/87) and FAR 52.227-19(6/87), or DFAR 252.227-7015(b)(6/95) and
DFAR 227.7202-3(a). Licensee is responsible for ensuring that proper notice is
given for all such third parties and that the Developed Products and technical
data are properly marked.
12.16. Entire Agreement. This Agreement is the parties' entire agreement
relating to its subject matter except where the provisions of other agreements
are expressly referred to. It supersedes all prior or contemporaneous oral or
written communications, proposals, conditions, representations, and warranties
relating to its subject matter, and prevails over any conflicting or additional
terms of any quote, order, acknowledgment, or other communication between the
parties relating to its subject matter during the term of this Agreement. No
modification to this Agreement will be binding, unless in writing and signed by
an authorized representative of each party.
12.17. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, and all such counterparts together shall
constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representative.
SUN MICROSYSTEMS, INC. THOMSON SUN INTERACTIVE, LLC
By: /s/ W. J. Raduchel By: /s/ Jan Steenkamp
-------------------------------- -------------------------------------
Name: W. J. RADUCHEL Name: JAN STEENKAMP
Title: Chief Strategy Officer Title: CEO
Date: 1/24/97 Date: 1-22-98
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EXHIBIT A
1. Licensee:
Company: THOMSON SUN Interactive, LLC and its successor
corporation, OpenTV, Inc.
Address: 3401-A Hillview Ave.
City/State/Zip: Palo Alto, CA 94304
Country: U.S.A.
2. Licensed Software:
Software: Sun MediaCenter Media Stream Manager
Release No.: Version 1.3
List Of Files:
Acl.c Log.h Player.h TitleLut.h
Acl.h Macros.h Playhead.c TitleMfs.c
ArrayOf.c Makefile Playhead.h TitleMfs.h
ArrayOf.h Makefile.client Playlist.c TitleToc.c
BinarySearch.c MfsPath.c Playlist.h TitleToc.h
BinarySearch.h MfsPath.h Rpc.c Types.h
DontEditThis MfsStubs.c Rpc.h Version.c
File.c MsmClient.c Rpc1.c Version.h
File.h MsmClient.h Rpc2.c llib-lc
Forsign.h MsmMain.c SchedCall.c llib-lthread
HashTable.c MsmTime.c SchedCall.h msm.x
HashTable.h MsmTime.h SedScript sed.typedefs
List.c Persist.c Title.c vname.csh
List.h Persist.h Title.h
Log.c Player.c TitleLut.c
3. Support:
None.
4. Contacts:
For TSI:
Primary: Jon Haass
Address: 3401-A Hillview Ave.
City/State/Zip: Palo Alto, CA 94304
Country: U.S.A.
Phone: (650) 849-5500
Fax: (650) 494-3961
E-mail: [email protected]
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Secondary: Vincent Dureau
Address: 3401-A Hillview Ave.
City/State/Zip: Palo Alto, CA 94304
Country: U.S.A.
Phone: (650) 849-5500
Fax: (650) 494-3961
E-mail [email protected]
For Sun:
Name: Michael DeMoney
Address: 901 San Antonio Road, MS UMPK 15-214
City/State/Zip: Palo Alto, CA 94303
Country: U.S.A.
(FedEx address: 100 Hamilton Avenue, Suite 300
Palo Alto, CA 94301)
Phone: (415) 473-7210
Fax: (415) 473-7101
E-mail: [email protected]
Notice of changes in the above addresses or contacts shall be given in writing
in accordance with Section 12.5 of the Agreement.
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EXHIBIT B
END USER BINARY CODE LICENSE
SUN IS WILLING TO LICENSE THE ACCOMPANYING SOFTWARE TO YOU ONLY UPON THE
CONDITION THAT YOU ACCEPT ALL OF THE TERMS CONTAINED IN THIS LICENSE AGREEMENT.
READ THE TERMS AND CONDITIONS OF THIS LICENSE CAREFULLY BEFORE OPENING THE
SOFTWARE MEDIA PACKAGE. BY OPENING THE SOFTWARE MEDIA PACKAGE, YOU AGREE TO THE
TERMS AND CONDITIONS OF THIS AGREEMENT. IF YOU ARE NOT WILLING TO BE BOUND BY
THIS AGREEMENT, RETURN THE SOFTWARE UNUSED WITHIN FIFTEEN (15) DAYS OF PURCHASE
FOR A REFUND OF THE LICENSE FEE PAID.
1. License to Use. Customer is granted a non-exclusive and
non-transferable license ("License") for the use of the accompanying binary
software in machine-readable form, together with accompanying documentation
("Software"), by the number of users and the class of computer hardware for
which the corresponding fee has been paid.
2. Restrictions. Software is copyrighted and title to all copies is
retained by Sun and/or its licensors. Customer shall not make copies of
Software, other than a single copy of Software for archival purposes and, if
applicable, Customer may, for its internal use only, print the number of copies
of on-line documentation for which the applicable fee has been paid, in which
event all proprietary rights notices on Software shall be reproduced and
applied. Unless enforcement of this provision is prohibited by applicable law,
Customer shall not modify, decompile, disassemble, decrypt, extract, or
otherwise reverse engineer Software. Software is not designed or licensed for
use in on-line control equipment in hazardous environments such as operation of
nuclear facilities, aircraft navigation or control, or direct life support
machines.
3. Confidentiality. Software is confidential and proprietary information
of Sun and/or its licensors. Customer agrees to take adequate steps to protect
Software from unauthorized disclosure or use.
4. Limited Warranty. Sun warrants that for a period of ninety (90) days
from the date of purchase, as evidenced by a copy of the receipt: the media on
which Software is furnished will be free of defects in materials and workmanship
under normal use. Otherwise, the Software is provided "AS IS". This limited
warranty extends only to Customer as the original licensee. Customer's exclusive
remedy and Sun's entire liability under this limited warranty will be at Sun's
option to repair, replace, or refund the license fee paid therefor.
5. Disclaimer of Warranty. EXCEPT AS SPECIFIED IN THIS LICENSE, ALL
EXPRESS OR IMPLIED CONDITIONS, REPRESENTATIONS AND WARRANTIES, INCLUDING ANY
IMPLIED WARRANTY OR MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
NON-INFRINGEMENT, ARE HEREBY EXCLUDED TO THE EXTENT ALLOWED BY APPLICABLE LAW.
6. Limitation of Liability. IN NO EVENT WILL SUN BE LIABLE FOR ANY LOST
REVENUE, PROFIT, OR DATA, OR FOR SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL,
OR PUNITIVE DAMAGES HOWEVER CAUSED AND REGARDLESS OF THEORY OF LIABILITY ARISING
OUT OF THE USE OF OR INABILITY TO USE SOFTWARE, EVENT IF SUN HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES. In no event shall Sun's liability to Customer,
whether in contract, tort (including negligence), or otherwise, exceed the
license fee paid by Customer for Software. The foregoing limitations shall apply
even if the above stated warranty fails of its essential purpose.
<PAGE>
7. Termination. This License is effective until terminated. Customer may
terminate this License at any time by destroying all copies of Software
including any documentation. This License will terminate immediately without
notice from Sun if Customer fails to comply with any provision of this License.
Upon termination, Customer must destroy all copies of Software.
8. Export Regulations. Software, including technical data, is subject to
U.S. export control laws, including the U.S. Export Administration Act and its
associated regulations, and may be subject to export or import regulations in
other countries. Customer agrees to comply strictly with all such regulations
and acknowledges that it has the responsibility to obtain licenses to export,
re-export, or import Software.
9. U.S. Government Restricted Rights. The Software is provided only under
the terms and conditions of this Agreement. The FAR and/or DFAR or any other
Agency provisions relating to Rights in Data, Computer Software and/or Technical
Data do not apply, even though some of the terms of those provisions may be
similar to provisions stated herein. All Software and technical data to be
provided directly or indirectly to the U.S. Government is subject to
restrictions of FAR 52.227-14(g)(2)(6/87) and FAR 52.227-19(6/87), or DFAR
252.227-7015(b)(6/95) and DFAR 227.7202-3(a). Use, duplication, reproduction or
disclosure by the U.S. Government is subject to such restrictions or successor
provisions. Contractor/Manufacturer is: Sun Microsystems, Inc., 901 San Antonio
Road, Palo Alto, CA 94303.
10. Governing Law. This Agreement is made under, shall be governed by, and
construed in accordance with the laws of the State of California, U.S.A.,
excluding its choice of law provisions.
11. Severability. If any of the above provisions are held to be in
violation of applicable law, void, or unenforceable in any jurisdiction, then
such provisions are herewith waived to the extent necessary for the License to
be otherwise enforceable in such jurisdiction. However, if in Sun's opinion
deletion of any provisions of the License by operation of this paragraph
unreasonably compromises the rights or liabilities of Sun or its licensors, Sun
reserves the right to terminate the License and refund the fee paid by Customer
as Customer's sole and exclusive remedy.
12. Integration. This Agreement is the entire agreement between Customer
and Sun relating to Software and: (i) supersedes all prior or contemporaneous
oral or written communications, proposals, and representations with respect to
its subject matter; and (ii) prevails over any conflicting or additional terms
of any quote, order, acknowledgment, or similar communication between the
parties during the term of this Agreement. No modification to this Agreement
will be binding, unless in writing and signed by a duly authorized
representation of each party.
* Indicates that confidential treatment has been granted for that portion of the
text as marked and that the confidential portion has been filed separately with
the U.S. Securities and Exchange Commission.
June 30, 1999 Final Sun Confidential
