STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT
by and between
TIVO INC.
and
AMERICA ONLINE, INC.
dated as of June 9, 2000
TABLE OF CONTENTS
Page
RECITALS.....................................................................1
ARTICLE I DEFINITIONS........................................................1
SECTION 1.1 Certain Defined Terms..................................1
SECTION 1.2 Other Definitional Provisions........................ .9
ARTICLE II CORPORATE GOVERNANCE OF THE COMPANY...............................9
SECTION 2.1 Board Representation/Observation.......................9
SECTION 2.2 Available Information.................................11
SECTION 2.3 Access................................................12
SECTION 2.4 Voting of Shares......................................12
SECTION 2.5 Termination of Rights and Obligations.................13
SECTION 2.6 Other Approval Rights.................................13
SECTION 2.7 Ownership Restrictions................................13
ARTICLE III TRANSFERS.......................................................13
SECTION 3.1 Transfer Restrictions.................................13
SECTION 3.2 Transferees...........................................14
SECTION 3.3 Right of First Offer..................................14
SECTION 3.4 Termination of Rights and Obligations.................15
ARTICLE IV EQUITY PURCHASE RIGHTS...........................................16
SECTION 4.1 Unregistered Securities Offerings.....................16
SECTION 4.2 Other Issuances of Common Stock.......................17
SECTION 4.3 Issuances of Convertible Securities...................18
SECTION 4.4 No Restrictions.......................................19
SECTION 4.5 Termination of Equity Purchase Rights.................20
ARTICLE V REGISTRATION RIGHTS...............................................20
SECTION 5.1 Registration on Request...............................20
SECTION 5.2 Incidental Registrations..............................24
SECTION 5.3 Additional Registration Rights........................25
ARTICLE VI REGISTRATION PROCEDURES..........................................25
SECTION 6.1 Registration Procedures...............................25
SECTION 6.2 Information Supplied..................................29
SECTION 6.3 Restrictions on Disposition...........................29
SECTION 6.4 Indemnification.......................................29
SECTION 6.5 Required Reports......................................33
SECTION 6.6 Holdback Agreement....................................33
SECTION 6.7 No Inconsistent Agreement.............................33
ARTICLE VII STANDSTILL......................................................34
SECTION 7.1 Acquisition of Additional Voting Securities...........34
ARTICLE VIII RIGHT OF NOTIFICATION AND FORBEARANCE..........................35
SECTION 8.1 Right of Notification.................................35
SECTION 8.2 Forbearance...........................................36
SECTION 8.3 Other Rights..........................................36
ARTICLE IX MISCELLANEOUS....................................................36
SECTION 9.1 Termination...........................................36
SECTION 9.2 Amendments and Waivers................................37
SECTION 9.3 Successors, Assigns and Transferees...................37
SECTION 9.4 Notices...............................................37
SECTION 9.5 Further Assurances....................................37
SECTION 9.6 Entire Agreement......................................37
SECTION 9.7 Delays or Omissions...................................38
SECTION 9.8 Governing Law; Jurisdiction; Waiver of Jury Trial.....38
SECTION 9.9 Severability..........................................38
SECTION 9.10 Enforcement..........................................38
SECTION 9.11 Titles and Subtitles.................................38
SECTION 9.12 Counterparts; Facsimile Signatures...................38
STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT
THIS STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT (this
"Agreement") is entered into as of June 9, 2000, among TiVo Inc., a Delaware
corporation (the "Company"), and America Online, Inc., a Delaware corporation (
"AOL").
RECITALS
WHEREAS, the Company and AOL have entered into a Definitive
Product Integration and Marketing Relationship Agreement, dated as of the date
hereof (the "Commercial Agreement") pursuant to which the Company and AOL will
work together to jointly develop a branded interactive television service;
WHEREAS, the Company and AOL have entered into a Investment
Agreement, dated as of the date hereof (the "Investment Agreement"), pursuant to
which the Company has agreed to sell to AOL and AOL has agreed to purchase from
the Company shares of its Common Stock (the "Shares") and, in certain
circumstances, its Series A Convertible Preferred Stock, par value $0.001 per
share (the "Preferred Shares"), upon the terms provided in the Investment
Agreement and in the amended and restated certificate of incorporation of the
Company in the form attached to the Investment Agreement as Exhibit A, and (ii)
warrants to purchase shares of Common Stock, upon the terms provided in the
Investment Agreement and in the forms of warrants attached as Exhibits B, C, D
and E to the Investment Agreement (the "Warrants").
WHEREAS, the parties hereto desire to enter into certain
arrangements relating to the Company and AOL's interest in the Company.
NOW, THEREFORE, in consideration of the foregoing recitals and
of the mutual promises hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION1.1 Certain Defined Terms. As used herein, the
following terms shall have the following meanings:
"Acquisition Proposal" means any offer or proposal for any
merger, consolidation, purchase of substantial assets of the Company (including
securities), tender, exchange or other offer for any Equity Securities or other
business combination involving the Company or any of its Subsidiaries.
"Acquisition Proposal Notice" has the meaning assigned to such
term in Section 8.1(a). "Acquisition Restrictions" has the meaning assigned to
such term in Section 7.1(a).
"Adverse Effect" has the meaning ascribed to such term in
Section 5.1(g).
"Adverse Market Effect" has the meaning ascribed to such term
in Section 5.1(h).
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly through one or more intermediaries, controls,
is controlled by or is under common control with, such specified Person.
"AOL Offer Notice" has the meaning assigned to such term in
Section 3.3(a).
"AOL Offered Securities" has the meaning assigned to such term
in Section 3.3(a).
"AOL Observer" has the meaning ascribed to such term in
Section 2.1.
"AOL Participation Securities" has the meaning assigned to
such term in Section 4.3(a).
"AOL Representative" has the meaning ascribed to such term in
Section 2.1.
"AOL Unregistered Shares" has the meaning assigned to such
term in Section 4.1(a).
"Arbitrating Investment Banker" has the meaning assigned to
such term in the definition of Fair Market Value contained in this Section 1.1.
"beneficial owner" or "beneficially own" has the meaning given
such term in Rule 13d-3 under the Exchange Act and a Person's beneficial
ownership of either Common Stock or Preferred Shares or other Voting Securities
of the Company shall be calculated in accordance with the provisions of such
Rule; provided that, for purposes of determining beneficial ownership, a Person
shall be deemed to be the beneficial owner of any security which may be acquired
by such Person whether within sixty (60) days or thereafter, upon the
conversion, exchange or exercise of any warrants, options, rights or other
securities.
"Business Day" means any day that is not a Saturday, a Sunday
or other day on which banks are required or authorized by law to be closed in
The City of New York.
"Bylaws" means the Amended and Restated Bylaws of the Company,
as in effect on the date hereof and as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof, the
terms of the Certificate and the terms of this Agreement.
"Capital Stock" means, with respect to any Person at any time,
any and all shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) of capital stock, partnership
interests (whether general or limited) or equivalent ownership interests in or
issued by such Person and, with respect to the Company, includes any and all
shares of Common Stock, the Preferred Shares and any other shares of preferred
stock of the Company.
"Certificate" means the Amended and Restated Certificate of
Incorporation of the Company as in effect on the date hereof and as the same may
be amended, supplemented or otherwise modified from time to time in accordance
with the terms thereof and the terms of this Agreement.
"Change of Control" means:
(a) any Person is or becomes the beneficial owner, directly or
indirectly (whether by merger, consolidation, purchase of securities or
otherwise), of more than 50% of the total voting power of all the outstanding
Voting Securities of the Company (or its successor by merger, consolidation or
purchase of all or substantially all of its assets) (for the purposes of this
clause, such person shall be deemed to beneficially own any Voting Securities of
the Company held by an entity, if such Person beneficially owns, directly or
indirectly, more than 50% of the total voting power of the Voting Securities of
such entity).
(b) during any period of two (2) consecutive years,
individuals who at the beginning of such period constituted the Company Board
(together with any new Directors whose election by such Company Board or whose
nomination for election by the stockholders of the Company, as the case may be,
was approved by a vote of at least a majority of the Directors then still in
office who were either Directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Company Board then in office;
(c) the Transfer, lease or other disposition, in one or a
series of related transactions, of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole to any Third Party; or
(d) the adoption by the stockholders of the Company of a plan
or proposal for the liquidation or dissolution of the Company.
"Claims" has the meaning assigned to such term in Section
6.4(a).
"Closing" has the meaning assigned to such term in the
Investment Agreement.
"Commercial Agreement" has the meaning assigned to such term
in the Recitals.
"Common Stock" means the common shares, par value $0.001 per
share, of the Company and any securities issued in respect thereof, or in
substitution therefor, in connection with any stock split, dividend, spin-off or
combination, or any reclassification, recapitalization, merger, consolidation,
exchange or other similar reorganization or business combination.
"Company Board" means the Board of Directors of the Company.
"Company Offering" has the meaning assigned to such term in
Section 5.1(h).
"control" (including the terms "controlled by" and "under
common control with"), with respect to the relationship between or among two or
more Persons, means the possession, directly or indirectly, of the power to
direct or cause the direction of the affairs or management of a Person, whether
through the ownership of voting securities, as trustee or executor, by contract
or otherwise.
"Delay Notice" has the meaning assigned to such term in
Section 5.1(h).
"Demand Party" has the meaning assigned to such term in
Section 5.1(a).
"Director" means a member of the Company Board.
"Equity Securities" means any and all shares of Capital Stock
of the Company, securities of the Company convertible into, or exchangeable or
exercisable for, such shares, and options, warrants or other rights to acquire
such shares (including the Warrants).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Fair Market Value" means, as of any date, (A) with respect to
the securities of any Person, either (x) the average of the closing reported
sale prices of such securities on the principal national securities exchange or
automated quotation service on which such security is then listed or quoted for
the ten consecutive trading days immediately prior to the date as of which
Market Value is being determined, or (y) if such securities are not publicly
traded, then the fair market value of such securities as mutually agreed in good
faith between the Company and AOL or, failing such agreement, as determined by a
nationally recognized investment banking firm selected by mutual agreement of an
investment banking firm selected by AOL and an investment banking firm selected
by the Company (the "Arbitrating Investment Banker"), and (B) with respect to
any other assets, the fair market value of such assets as determined by the
Arbitrating Investment Banker in accordance with the procedures set forth in
clause (y) above.
"GAAP" means generally accepted accounting principles, as in
effect in the United States of America from time to time.
"Group" has the meaning assigned to such term in Section
13(d)(3) of the Exchange Act.
"Holder" means AOL and any Affiliates of AOL as well as any
Transferee of AOL or any of its Affiliates entitled to the rights under Articles
V and VI of this Agreement.
"Incentive Issuances" means the issuance or grant of any
option to purchase Common Stock or shares of Common Stock (including upon the
exercise of options) in the ordinary course of business under any employee stock
option, employee stock purchase or other equity-based employee incentive plan,
which plan was approved by the Company Board prior to such grant or issuance.
"Indemnified Parties" has the meaning assigned to such term in
Section 6.4(a).
"Information Delay Notice" has the meaning assigned to such
term in Section 5.1(h).
"Investment Agreement" has the meaning assigned to such term
in the Recitals.
"Law" has the meaning assigned to such term in the Investment
Agreement.
"Managing Underwriters" has the meaning assigned to such term
in Section 5.1(f).
"Material Breach of the Commercial Agreement" means a
"Material Breach" as defined in the Commercial Agreement.
"NASD" means the National Association of Securities Dealers,
Inc.
"Nasdaq" means the Nasdaq National Market tier of The Nasdaq
Stock Market.
"NYSE" means The New York Stock Exchange, Inc.
"Other Issuance Shares" has the meaning assigned to such term
in Section 4.2(a).
"Other Share Issuance" has the meaning assigned to such term
in Section 4.2(a).
"Ownership Percentage" means, at any time, the ratio,
expressed as a percentage, (i) of the total shares of Common Stock beneficially
owned by AOL and its Affiliates to (ii) the total number of outstanding shares
of Common Stock, in each case (x) including (A) all shares issuable upon
conversion of the Preferred Shares, if any, and (B) all shares issuable upon
exercise of all the Warrants (regardless of whether they are exercisable at such
time), but (y) excluding all shares issuable upon the conversion or exercise of
Participation Securities or any other convertible or exercisable securities of
the Company.
"Participation Offering" has the meaning assigned to such term
in Section 4.3(a).
"Participation Offering Notice" has the meaning assigned to
such term in Section 4.3(b).
"Participation Securities" has the meaning assigned to such
term in Section 4.3(a).
"Person" means any individual, corporation, limited liability
company, limited or general partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, government or any agency or
political subdivisions thereof or any Group comprised of two or more of the
foregoing.
"Preferred Shares" has the meaning assigned to such term in
the Recitals.
"Pro Rata Portion" means:
(a) for purposes of Section 4.1, on any issuance date for
Unregistered Shares, the number or amount of Unregistered Shares equal to the
product of (i) the total number or amount of Unregistered Shares to be issued by
the Company on the applicable date multiplied by (ii) the fraction determined by
dividing (A) the number of shares of Common Stock beneficially owned by AOL and
its Affiliates (including the shares of Common Stock issuable upon conversion of
the Preferred Shares, but excluding any shares of Common Stock issuable pursuant
to the Warrants or Participation Securities held by AOL on such date) by (B) the
total number of shares of Common Stock outstanding on such date;
(b) for purposes of Section 4.2, on any issuance date for an
Other Share Issuance, the number or amount of Other Issuance Shares included in
such Other Share Issuance equal to the product of (i) the total number or amount
of Other Issuance Shares issued by the Company on the applicable date multiplied
by (ii) the fraction determined by dividing (A) the number of shares of Common
Stock beneficially owned by AOL and its Affiliates (including the shares of
Common Stock issuable upon conversion of the Preferred Shares, but excluding any
shares of Common Stock issuable pursuant to the Warrants or Participation
Securities held by AOL on such date) by (B) the total number of shares of Common
Stock outstanding on such date; or
(c) for purposes of Section 4.3, on any issuance date for
Participation Securities, the number or amount of Participation Securities equal
to the product of (i) the total number or amount of Participation Convertible
Securities to be issued by the Company multiplied by (ii) the fraction
determined by dividing (A) the number of shares of Common Stock beneficially
owned by AOL and its Affiliates on such date (including the shares of Common
Stock issuable upon conversion of the Preferred Shares, exercise of the
Warrants, and exercise or conversion of Participation Securities previously
issued and outstanding) by (B) the total number of shares of Common Stock
outstanding on such date (including the shares of Common Stock issuable upon
conversion of the Preferred Shares, exercise of the Warrants, and exercise or
conversion of Participation Securities previously issued and outstanding).
"Registrable Securities" means any Preferred Shares and any
Common Stock (including the Warrant Shares) held by any Holder. For purposes of
this Agreement, any required calculation of the amount of, or percentage of,
Registrable Securities shall be based on the number of shares of Common Stock
which are Registrable Securities, including shares issuable upon the conversion,
exchange or exercise of any security convertible, exchangeable or exercisable
into Common Stock (including the Warrants and the Preferred Shares). As to any
particular Registrable Securities, once issued, such Registrable Securities
shall cease to be Registrable Securities when:
(i) a registration statement with respect to the sale by the
Holder of such securities shall have become effective under
the Securities Act and such securities shall have been
disposed of in accordance with such registration statement;
(ii) such securities shall have been distributed to the public
pursuant to Rule 144; or
(iii) such securities shall have ceased to be outstanding.
"Registration Expenses" means any and all expenses incident to
performance of or compliance with Articles V and VI of this Agreement,
including:
(i) all SEC and NYSE or other securities exchange, Nasdaq or NASD
registration and filing fees;
(ii) all fees and expenses of complying with securities or blue sky
laws (including the reasonable fees and disbursements of
counsel for the underwriters in connection with blue sky
qualifications of the Registrable Securities);
(iii) all printing, messenger and delivery expenses;
(iv) all fees and expenses incurred in connection with the listing
of the Registrable Securities on Nasdaq or any other
securities exchange pursuant to this Agreement and all rating
agency fees;
(v) the fees and disbursements of counsel for the Company and of
its independent public accountants, including the expenses of
any special audits and/or "cold comfort" letters required by
or incident to such performance and compliance;
(vi) any reasonable fees and disbursements of underwriters and
their counsel customarily paid by the issuers or sellers of
securities, and the reasonable fees and expenses of special
experts retained in connection with the requested
registration, but excluding underwriting discounts and
commissions; and
(vii) all expenses incurred in connection with any road shows.
"Rule 144" means Rule 144 (or any successor provision)
promulgated under the Securities Act.
"Schedule 13D" means the Statement on Schedule 13D filed by
AOL pursuant to Rule 13d-1 under the Exchange Act relating to AOL's interest in
the Company's Capital Stock, and any amendments thereto.
"SEC" means the U.S. Securities and Exchange Commission or any
other federal agency then administering the Securities Act or the Exchange Act
and other federal securities laws.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Set Top Box Launch" has the meaning assigned to such term in
the Investment Agreement.
"Shares" has the meaning assigned to such term in the
Recitals.
"Standstill Period" means the period commencing on the date
hereof and continuing until the earlier of:
(i) the eighth anniversary of the date hereof; or
(ii) the first date on which AOL does not own in excess of 10% of
the outstanding shares of Common Stock.
"Subsidiary" means (i) any corporation of which a majority of
the securities entitled to vote generally in the election of directors thereof,
at the time as of which any determination is being made, are owned by another
entity, either directly or indirectly, and (ii) any joint venture, general or
limited partnership, limited liability company or other legal entity in which an
entity is the record or beneficial owner, directly or indirectly, of a majority
of the voting interests or the general partner.
"Third Party" means any Person who is not an Affiliate of AOL,
including any Group, other than a Group which includes AOL or any of its
Affiliates as members.
"Transaction Agreements" means the, collectively, this
Agreement, the Investment Agreement, the Warrants, the Voting Agreement (as
defined in the Investment Agreement), the Escrow Agreement (as defined in the
Investment Agreement), the Restated Certificate (as defined in the Investment
Agreement) and the Commercial Agreement.
"Transaction Delay Notice" has the meaning assigned to such
term in Section 5.1(h).
"Transfer" means, directly or indirectly, to sell, transfer,
assign, pledge, encumber, hypothecate or similarly dispose of, either
voluntarily or involuntarily, or to enter into any contract with respect to the
sale, transfer, assignment, pledge, encumbrance, hypothecation or similar
disposition of, any Equity Securities beneficially owned by a Person.
"Transferee" means any Person to whom AOL or any Transferee
thereof Transfers Equity Securities of the Company.
"Unregistered Offering" has the meaning assigned to such term
in Section 4.1(a).
"Unregistered Offering Notice" has the meaning assigned to
such term in Section 4.1(b).
"Unregistered Shares" has the meaning assigned to such term in
Section 4.1(a).
"Voting Securities" means, at any time, shares of any class of
Equity Securities which are then entitled to vote generally in the election of
Directors.
"Warrants" has the meaning assigned to such term in the
Recitals.
"Warrant Shares" means the shares of Common Stock or other
Equity Securities purchasable pursuant to the Warrants, as adjusted from time to
time in accordance with the terms of such Warrants and this Agreement, whether
such Warrant is exercisable or not.
SECTION 1.2 Other Definitional Provisions. (a) The words
"hereof," "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Article and Section references are to this
Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
ARTICLE II
CORPORATE GOVERNANCE OF THE COMPANY
SECTION 2.1 Board Representation/Observation. (a) Subject to
Sections 2.5 and 2.1(c), AOL will be entitled to designate one person for
election to the Company Board (the "AOL Representative"). The Company agrees to
take all such action as may be required under applicable Law:
(i) so that, effective as of the Closing, the Company Board will
include the AOL Representative, and the AOL Representative
shall be a member of the class of Directors having a term
extending until the 2003 annual meeting of shareholders of the
Company;
(ii) to include the AOL Representative in the slate of nominees for
the class of Directors in which the AOL Representative is
designated recommended by the Company Board for election by
the stockholders of the Company; and
(iii) to use its best efforts to cause the election of the AOL
Representative to the Company Board, including nominating such
individual to be elected as a Director of the Company Board.
(b) In the event that a vacancy is created on the Company
Board at any time by the death, disability, retirement, resignation or removal
(with or without cause) of any AOL Representative, the Company and the remaining
Directors will cause the vacancy created thereby to be filled by a new designee
of AOL as soon as possible, who is designated in the manner specified in this
Section 2.1, and the Company hereby agrees to take, or cause to be taken, at any
time and from time to time, all actions necessary to accomplish the same. Unless
requested by AOL, the Company agrees not to take any action to cause the removal
of any AOL Representative without cause.
(c) AOL shall have the right, exercisable at any time by
written notice to the Company, to appoint one observer (the "AOL Observer") to
attend all regular and special meetings of the Board of Directors. Upon delivery
to the Company of the notice designating an AOL Observer, AOL shall cause the
AOL Representative, if any, to resign as a member of the Company Board; provided
that the person serving as the AOL Representative shall be permitted to serve as
the AOL Observer. Upon the removal of any AOL Observer, AOL shall have the
right, at its sole discretion, subject to Section 2.6, to appoint an AOL
Representative in accordance with Section 2.1(a) or a replacement AOL Observer
in accordance with this Section 2.1(c); provided that (i) after replacing an AOL
Representative with an AOL Observer, AOL shall be permitted to freely replace
such AOL Observer with an AOL Representative on one occasion, and (ii)
thereafter, if AOL desires to replace such AOL Representative with an AOL
Observer, AOL and the Company shall consult in good faith regarding AOL's desire
to designate an AOL Representative and such AOL Representative shall be subject
to the reasonable discretion of the Company. The AOL Observer shall be entitled
to receive the same notice of any such meeting and all other information and
materials (financial and otherwise) as and at the same time received by the
Directors, and shall have the right to participate therein, but shall not have
the right to vote on any matter or to be counted for purposes of determining
whether a quorum is present thereat. In addition, the AOL Observer shall have
the right to receive copies of any action proposed to be taken by written
consent of the Board of Director without a meeting.
(d) The Company shall reimburse each AOL Representative or AOL
Observer, as the case may be, for his or her reasonable out-of-pocket expenses
incurred by him or her for the purpose of attending meetings of the Company
Board or committees thereof. The AOL Representative or AOL Observer shall also
be entitled to the same benefits (including coverage under insurance policies)
as other non-employee Directors.
(e) Notwithstanding that any AOL Representative may be a
member of the Company Board or an AOL Observer may be entitled to observe
Company Board meetings, AOL and its Affiliates may, and, to the greatest extent
permitted by the General Corporation Law of the State of Delaware, any
individual serving as an AOL Representative or an AOL Observer may in his own
right or as a director, officer, employee or shareholder of any other Person,
carry on any activity, pursue any business opportunity or enter into any
agreement, arrangement or understanding whatsoever.
SECTION 2.2 Available Information. (a) So long as AOL and its
Affiliates collectively own Common Stock and Preferred Shares representing 85%
of the shares of Common Stock issued to it at the Closing or receivable upon
conversion of the Preferred Shares as of the Closing, the Company will deliver,
or will cause to be delivered, the following to AOL:
(i) to the extent prepared by the Company, as soon as practical
after the preparation thereof, a consolidated balance sheet of
the Company and its Subsidiaries as of the end of each month,
consolidated statements of income and cash flows of the
Company and its Subsidiaries, for each month and for the
current fiscal year of the Company to date, a comparison of
such statements to the corresponding periods of the prior
fiscal year and to the Company's business plan then in effect;
and
(ii) an annual budget, a business plan and financial forecasts for
the Company for the next fiscal year of the Company, no later
than thirty (30) days before the beginning of the Company's
next fiscal year, in such manner and form as approved by the
Company Board, which shall include at least a projection of
income and a projected cash flow statement for each fiscal
quarter in such fiscal year and a projected balance sheet as
of the end of each fiscal quarter in such fiscal year. Any
material changes in such business plan shall be delivered to
the AOL Representative, the AOL Observer or AOL, as the case
may be, as promptly as practicable after such changes have
been approved by the Company Board.
(b) The Company will promptly deliver to AOL when available
such number of copies of each annual report on Form 10-K and quarterly report on
Form 10-Q of the Company, as filed with the SEC, as AOL shall reasonably
request. In the event an annual report on Form 10-K or quarterly report on Form
10-Q is unavailable, the Company may, in lieu of the requirements of the
preceding sentence, deliver, or cause to be delivered, the following to the AOL
Representative, the AOL Observer or AOL, as the case may be:
(i) as soon as practicable after the end of each fiscal year of
the Company, and in any event within ninety (90) days
thereafter, a consolidated balance sheet of the Company and
its Subsidiaries as of the end of such fiscal year, and
consolidated statements of income and cash flows of the
Company and its Subsidiaries for such year, prepared in
accordance with GAAP and setting forth in each case in
comparative form the figures for the previous fiscal year, all
in reasonable detail and followed promptly thereafter (to the
extent not available) such financial statements accompanied by
the opinion of independent public accountants of recognized
national standing selected by the Company, and a
Company-prepared comparison to the Company's business plan for
such year as approved by the Company Board; and
(ii) as soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the
Company, and in any event within forty-five (45) days
thereafter, a consolidated balance sheet of the Company and
its Subsidiaries as of the end of each such quarterly period,
and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such period and for the
current fiscal year to date, prepared in accordance with GAAP
and setting forth in comparative form the figures for the
corresponding periods of the previous fiscal year and to the
Company's business plan then in effect and approved by the
Company Board, subject to changes resulting from normal
year-end audit adjustments, all in reasonable detail and
certified by the principal financial or accounting officer of
the Company, except that such financial statements need not
contain the notes required by GAAP.
SECTION 2.3 Access. So long as AOL and its Affiliates
collectively own Common Stock and Preferred Shares representing 85% of the
shares of Common Stock issued to it at the Closing or receivable upon conversion
of the Preferred Shares as of the Closing, the company will afford AOL the
opportunity to discuss the Company's business, affairs, finances, prospects and
accounts with the Company's Chief Executive Officer on a quarterly basis and the
Company's Chief Financial Officer on a monthly basis, and at such other times
and with such other officers, attorneys and accountants of the Company as the
Company shall approve (such approval not to be unreasonably withheld).
SECTION 2.4 Voting of Shares. (a) Voting of Shares by AOL.
Subject to the final sentence of this Section 2.4 and to Section 2.5, AOL shall
be entitled to vote, or cause to be voted, that number of Voting Securities it
owns representing up to 19.9% of the voting power of all the outstanding Voting
Securities of the Company on any matter submitted to a vote of stockholders (or
for which action in lieu of a vote is solicited by the Company) in AOL's sole
discretion. Subject to the final sentence of this Section 2.4 and to Section
2.5, AOL agrees to vote or cause to be voted all of the Voting Securities that
it at any time owns representing in excess of 19.9% of the total voting power of
all the outstanding Voting Securities on any matter submitted to a vote of
stockholders (or for which action in lieu of a vote is solicited by the Company)
in accordance with the recommendation of the Company Board. Notwithstanding the
foregoing, AOL shall not be limited or restricted in any manner in voting any
number of Voting Securities and shall not be subject to any voting obligation
with respect to any Voting Securities in respect of any of the following:
(i) any amendment to the Company's Certificate that is adverse in
a discriminatory manner to AOL; or
(ii) any Acquisition Proposal if the Company has materially
breached any of its obligations under Section 6.2 or Section
6.3 of the Investment Agreement or Section 7.1(e), Section
7.1(f) or Article VIII of this Agreement.
(b) Voting of Shares by New Investors. In the event that prior
to the Closing (as defined in the Investment Agreement), the Company issues any
voting securities in a transaction that is not an underwritten offering, then
the Company shall require as a condition of such issuance that the purchasers of
such securities enter into a voting agreement similar to the Voting Agreement to
vote in favor of the transactions contemplated by the Investment Agreement.
SECTION 2.5 Termination of Rights and Obligations.. The
provisions of Section 2.1 and Section 2.4 shall terminate upon expiration of the
Standstill Period.
SECTION 2.6 Other Approval Rights.. If the Company at any time
after the date hereof grants to any other holders of Equity Securities any
rights to consent to or approve any corporate action, transaction, or other
event or development concerning the Company or its business, this Agreement
shall be deemed amended to provide to AOL substantially equivalent rights of
consent or approval.
SECTION 2.7 Ownership Restrictions.. The Company shall not
adopt, enter into or enforce any restriction on AOL's ability to acquire
ownership (beneficial or otherwise) of any securities of the Company, pursuant
to a shareholder rights plan or otherwise, except (i) as expressly provided
herein and in the other Transaction Agreements or (ii) pursuant to a customary
shareholder rights plan that expressly provides that no adverse effect on AOL
will occur (including, without limitation, the separation or exercisability of
the rights issued pursuant to such plan or the designation of AOL or its
affiliates as an "acquiring person" or the like) under such plan by reason of or
due to (x) AOL acquiring beneficial ownership of up to 30% of all the
outstanding shares of Common Stock, (y) any acquisition of beneficial or record
ownership by AOL or its Affiliates of securities of the Company pursuant to the
terms of any of the Transaction Agreements (including, without limitation,
Article I of the Investment Agreement, Articles IV or VII hereof, the
conversion, antidilution, adjustment, dividend or redemption provisions of the
Preferred Shares, the exercise, adjustment or antidilution provisions of the
Warrants or otherwise) or (z) any action taken by the Company (including,
without limitation, repurchases of securities or dividends on equity
securities).
ARTICLE III
TRANSFERS
SECTION 3.1 Transfer Restrictions. (a) Subject to Sections
3.1(b) and 3.4, neither AOL nor any of its Affiliates will transfer any of their
Equity Securities to any Person without the Company's prior consent.
(b) Notwithstanding the foregoing, and subject to Sections 3.3
(including Sections 3.3(d)) and 3.4, AOL and its Affiliates may Transfer all or,
from time to time, any portion of their Equity Securities:
(i) if, after giving effect to the Transfer, the Transferee will
not, to AOL's knowledge, beneficially own or have the right to
acquire in excess of 5% of the outstanding Capital Stock of
the Company;
(ii) in response to a Third Party Acquisition Proposal that has
been recommended or approved by the Company Board;
(iii) to Persons who are eligible to report their ownership of
Equity Securities on Schedule 13G under Section 13(g) of the
Exchange Act or any successor provision;
(iv) pursuant to a bona fide underwritten public offering or Rule
144; provided that, (A) in the case of an underwritten
offering, the underwriters have been requested to inquire, and
(B) in the case of a sale pursuant to Rule 144 that is not
executed on any securities exchange or in the over-the-counter
market, AOL or its representatives have inquired, whether any
purchaser in such transaction will beneficially own, after
giving effect to such transaction, in excess of 5% of the
outstanding Capital Stock of the Company;
(v) upon or following a Change of Control of the Company; or
(vi) to any Affiliate of AOL; provided that such Affiliate shall
agree in writing to be bound by the terms of this Agreement in
accordance with Section 9.4; provided further that in the
event such Transferee ceases to be an Affiliate of AOL, such
Transferee shall Transfer any Equity Securities then held by
it to AOL or another Affiliate of AOL.
SECTION 3.2 Transferees. Except as set forth in Section
3.1(vi), no Transferee of AOL or its Affiliates will be obligated, or entitled
to rights, under this Agreement.
SECTION 3.3 Right of First Offer. Subject to Sections 3.3(d)
and 3.4, AOL agrees not to Transfer any of its Equity Securities except as set
forth below:
(a) Notice. Prior to any Transfer of Equity Securities by AOL,
AOL shall deliver to the Company written notice (the "AOL Offer Notice"), which
notice shall state the number of Equity Securities proposed to be Transferred
(the "AOL Offered Securities") and the proposed purchase price therefor.
(b) Exercise. For a period of ten (10) days following receipt
of the AOL Offer Notice, the Company shall have the option, but not the
obligation, to purchase all, but not less than all, of the AOL Offered
Securities for a purchase price per share in cash equal to the purchase price
per share set forth in the AOL Offer Notice and on the same terms and conditions
as applicable to the proposed Transfer. In the event the Company elects to
purchase all of the AOL Offered Securities, the Company shall provide written
notice to AOL no later than ten (10) days following receipt by the Company of
the AOL Offer Notice. Any purchase by the Company of AOL Offered Securities
under this Section 3.3 shall occur as soon as practicable following the
Company's election to exercise its rights under this Section 3.3, but in any
event within twenty (20) days following such election. At the closing of such
purchase, AOL shall deliver a certificate or certificates to the Company, duly
endorsed for transfer or accompanied by stock powers duly executed, in either
case executed in blank or in favor of the Company against payment of the
aggregate purchase price therefor by wire transfer of immediately available
funds. In the event the Company fails to elect to purchase all the AOL Offered
Securities by delivery of a notice to such effect pursuant to Section 3.3(a),
then the Company shall be deemed to have elected not to purchase the AOL Offered
Securities pursuant to this Section 3.3.
(c) Completion of Transfer. In the event the Company elects
not to purchase the AOL Offered Securities pursuant to this Section 3.3, AOL
may, within one hundred twenty (120) days following the expiration of the 10-day
period set forth in Section 3.3(b), Transfer the AOL Offered Securities at a
price not lower, and on other terms no less favorable to AOL, than those set
forth in the AOL Offer Notice; provided that, if the consideration to be
received by AOL consists in whole or in part of consideration other than cash,
the portion of the price received by AOL for the Transfer of the Offered
Securities consisting of such non-cash consideration shall deemed to be the Fair
Market Value of such non-cash consideration as of the date AOL enters into a
binding agreement with respect to the Transfer of the Offered Securities or, if
no such agreement is entered into, the date of the consummation of the Transfer
of the Offered Securities (it being understood that in connection with any
determination of Fair Market Value which involves an Arbitrating Investment
Banker, the fees and expenses of such Arbitrating Investment Banker shall be
paid by AOL if it is determined that the total price to be paid to AOL for the
Offered Securities is less than that set forth in the AOL Offer Notice and
otherwise shall be paid by the Company). If the AOL Offered Securities are not
so Transferred within such 120-day period, such securities shall again become
subject to all of the terms and conditions of the Agreement and may not
thereafter be Transferred except in the manner and on the terms herein provided.
(d) Exceptions to the Right of First Offer. This Section 3.3
shall not apply to Transfers of Equity Securities by AOL made in accordance with
paragraphs (ii), (iv), (v) or (vi) of Section 3.1(b).
SECTION 3.4 Termination of Rights and Obligations. The
provisions of this Article III shall terminate upon expiration of the Standstill
Period.
ARTICLE IV
EQUITY PURCHASE RIGHTS
SECTION 4.1 Unregistered Securities Offerings. (a) Grant of
Right. Subject to Section 4.5 and the other terms and conditions of this Section
4.1, the Company hereby grants to AOL the right to subscribe for and purchase
its Pro Rata Portion (or any lesser amount as AOL may elect) of any shares of
Common Stock (the "Unregistered Shares") that the Company may, from time to
time, propose to issue (excluding Incentive Issuances) pursuant to an offering
of Common Stock for cash consideration that is not registered with the SEC (each
an "Unregistered Offering"). The number or amount of Unregistered Shares which
AOL may subscribe for or purchase pursuant to this Section 4.1 shall be referred
to as the "AOL Unregistered Shares."
(b) Notice. The Company shall deliver to AOL written notice
(an "Unregistered Offering Notice") of each proposed Unregistered Offering,
which shall set forth the material terms and conditions of the proposed
Unregistered Offering that are known to the Company at the time such notice is
given, including, to the extent available, the name of any proposed
purchaser(s), the names of any underwriters, placement agents, initial
purchasers or similar participants in such offering, the proposed manner of
disposition, the number and amount of Unregistered Shares proposed to be issued
and the proposed purchase price per share (or range of purchase prices). In
addition, the Company shall have the continuing obligation to (i) promptly
provide (and, if available to the Company prior to the time AOL must notify the
Company whether it desires to participate in such Unregistered Offering pursuant
to Section 4.1(c), prior to such time) to AOL any additional material
information regarding the terms of such Unregistered Offering (including changes
in such terms) that becomes available to the Company, including as a result of
discussions with underwriters, private placement agents, initial purchasers or
similar participants in such offering and (ii) promptly provide to AOL any other
information available to the Company concerning such Unregistered Offering that
AOL shall reasonably request. Each Unregistered Offering Notice must be received
by AOL at least fifteen (15) days prior to the proposed Unregistered Offering.
(c) Exercise. At any time during the 10-day period following
receipt of an Unregistered Offering Notice, AOL may elect to purchase any or all
of the AOL Unregistered Shares at the purchase price and upon the other terms
and conditions upon which shares of Common Stock are actually issued in the
Unregistered Offering by delivering a written notice to such effect to the
Company. If (i) AOL elects to purchase AOL Unregistered Shares and after such
election the price at which Unregistered Shares are issued is greater than 133%
of the price specified in the Unregistered Offering Notice (or the last written
notice delivered to AOL regarding such issuance of Unregistered Shares), then
AOL shall be entitled to withdraw its election to purchase AOL Unregistered
Shares or (ii) if AOL fails to elect to purchase AOL Unregistered Shares during
such 10-day period and after such 10-day period the price at which Unregistered
Shares are issued is less than 67% of the price specified in the Unregistered
Offering Notice (or the last written notice delivered to AOL regarding such
issuance of Unregistered Shares), then AOL shall be released from its
obligations under Article VII of this Agreement for a period of sixty (60) days
following the consummation of such Unregistered Offering (or, if later, the
cessation of any restrictions under applicable Law or the rules of Nasdaq or any
stock exchange on AOL's ability to purchase Common Stock) in order to allow AOL
to purchase the number of shares of Common Stock that it could have purchased in
such Unregistered Offering. Except as provided in the following sentence, such
purchase shall be consummated concurrently with the consummation of the
Unregistered Offering. The closing of any purchase of AOL Unregistered Shares by
AOL may be extended beyond the closing of the transaction described in the
Unregistered Offering Notice to the extent necessary to obtain required
governmental approvals and other necessary approvals and the Company and AOL
shall use their respective reasonable best efforts to obtain such approvals.
(d) Completion of the Unregistered Offering. The Company shall
not complete any Unregistered Offering unless it has complied with the
provisions of this Section 4.1. If the Company fails to complete any
Unregistered Offering within thirty (30) days following the exercise by AOL of
its rights to participate in such Unregistered Offering pursuant to this Section
4.1, AOL shall thereafter be entitled to withdraw or change its election to
purchase AOL Unregistered Shares and the Company shall continue to comply with
this Section 4.1 until such time as the Company shall deliver to AOL a written
notice that the Company is terminating such Unregistered Offering. Upon any
termination of an Unregistered Offering without any shares of Common Stock
having been issued, the Company shall have no obligation to issue or sell shares
of Common Stock to AOL, but shall be obligated to comply with this Section 4.1
for any subsequent Unregistered Offering.
(e) Warrants. Immediately following each Unregistered Offering
(or the sixty-day period specified in clause (ii) of the second sentence of
Section 4.1(c), if applicable), the number of Warrant Shares shall be increased,
to the extent AOL actually purchases AOL Unregistered Shares, in the aggregate
by a number of shares of Common Stock equal to (x) a fraction, the numerator of
which is the number of AOL Unregistered Shares which AOL actually purchased in
connection with such Unregistered Offering and the denominator of which is the
number of AOL Unregistered Shares which AOL was entitled to purchase in
connection with such Unregistered Offering, multiplied by (y) that number of
shares of Common Stock necessary to restore AOL's Ownership Percentage to the
Ownership Percentage in effect immediately prior to such Unregistered Offering.
Any such increase in the number of Warrant Shares shall be allocated
proportionally among all Warrants unexercised at such time. Upon presentation of
the Warrants to the Company by AOL, the Company shall issue to AOL new Warrants
reflecting the increased number of shares of Common Stock subject thereto. The
Company shall at all time cause to be reserved for issuance the aggregate number
of Warrant Shares issuable pursuant to the Warrants.
SECTION 4.2 Other Issuances of Common Stock. (a) Release from
Standstill. Subject to Section 4.5, in the event the Company issues shares of
Common Stock other than pursuant to an Unregistered Offering or an Incentive
Issuance (an "Other Share Issuance"), AOL will be released from its obligations
under Article VII of this Agreement for a period of sixty (60) days following
its receipt of the notice described in the next sentence (or, if later, the
cessation of any restrictions under applicable Law or the rules of Nasdaq or any
stock exchange on AOL's ability to purchase Common Stock) in order to allow AOL
to purchase a number of shares of Common Stock equal to its Pro Rata Portion of
the total number of shares of Common Stock (the "Other Issuance Shares") issued
in such Other Share Issuance. Upon the closing of any Other Share Issuance, the
Company shall notify AOL in writing of such fact and shall specify the number of
shares of Common Stock issued in such Other Share Issuance.
(b) Warrants. Immediately following the expiration of the
60-day period referred to in Section 4.2(a), the number of Warrant Shares shall
be increased, to the extent AOL actually purchases Other Issuance Shares, in the
aggregate by a number of shares of Common Stock equal to (x) a fraction, the
numerator of which is the number of Other Issuance Shares which AOL actually
purchased in connection with such Other Share Issuance and the denominator of
which is the number of Other Issuance Shares which AOL was entitled to purchase
in connection with such Other Share Issuance multiplied by (y) that number of
shares of Common Stock necessary to restore AOL's Ownership Percentage to the
Ownership Percentage in effect immediately prior to such Other Share Issuance.
Any such increase in the number of Warrant Shares shall be allocated
proportionally among all Warrants unexercised at such time. Upon presentation of
the Warrants to the Company by AOL, the Company shall issue to AOL new Warrants
reflecting the increased number of shares of Common Stock subject thereto. The
Company shall at all time cause to be reserved for issuance the aggregate number
of Warrant Shares issuable pursuant to the Warrants.
SECTION 4.3 Issuances of Convertible Securities. (a) Grant of
Right. Subject to Section 4.5 and the other terms of this Section 4.3, the
Company hereby grants to AOL the right to subscribe for and purchase its Pro
Rata Portion (or any lesser amount as AOL may elect) of any securities
exercisable for or convertible into Common Stock (the "Participation
Securities") that the Company may, from time to time, propose to issue
(excluding Incentive Issuances) (each a "Participation Offering"). The number or
amount of Participation Convertible Securities which AOL may subscribe for and
purchase pursuant to this Section 4.3 shall be referred to as the "AOL
Participation Securities."
(b) Notice. The Company shall deliver to AOL written notice (a
"Participation Offering Notice") of each proposed Participation Offering, which
shall set forth the material terms and conditions of the proposed Participation
Offering that are known to the Company at the time such notice is given,
including, to the extent available, the name of any proposed purchaser(s), the
names of any underwriters, placement agents, initial purchasers or similar
participants in such offering, the proposed manner of disposition, the number
and amount of Participation Securities proposed to be issued, a description of
the conversion or exchange features of the Participation Securities and the
proposed purchase price per security (or range of purchase prices) (including a
description of any non-cash consideration sufficiently detailed to permit
valuation thereof). In addition, the Company shall have the continuing
obligation to (i) promptly provide (and, if available to the Company prior to
the time AOL must notify the Company whether it desires to participate in such
Participation Offering pursuant to Section 4.3(c), prior to such time) to AOL
any additional material information regarding the terms of such Participation
Offering (including changes in such terms) that becomes available to the
Company, including as a result of discussions with underwriters, private
placement agents, initial purchasers or similar participants in such offering
and (ii) promptly provide to AOL any other information available to the Company
concerning such Participation Offering that AOL shall reasonably request. Each
Participation Offering Notice must be received by AOL at least fifteen (15) days
prior to the proposed Participation Offering.
(c) Exercise. At any time during the 10-day period following
receipt of a Participation Offering Notice, AOL may elect to purchase any or all
of the AOL Participation Securities at the purchase (or if the purchase price
includes consideration other than cash, the amount in cash equal to the fair
value of such other consideration) and upon the other terms and conditions upon
which the Participation Securities are actually issued by delivering a written
notice to such effect to the Company. If (i) AOL elects to purchase AOL
Participation Securities and after such election the price at which
Participation Securities are issued is greater than 133% of the price specified
in the Participation Offering Notice (or the last written notice delivered to
AOL regarding such issuance of Participation Securities Shares), then AOL shall
be entitled to withdraw its election to purchase AOL Participation Securities or
(ii) if AOL fails to elect to purchase AOL Participation Securities during such
10-day period and after such 10-day period the price at which Participation
Securities are issued is less than 67% of the price specified in the
Participation Offering Notice (or the last written notice delivered to AOL
regarding such issuance of Participation Securities), then AOL shall be released
from its obligations under Article VII of this Agreement for a period of sixty
(60) days in order to allow AOL to purchase the number of shares of Common Stock
that would be issuable upon conversion of the all Participation Securities it
could have purchased in such Participation Offering. Except as provided in the
following sentence, such purchase shall be consummated concurrently with the
consummation of the Participation Offering. The closing of any purchase of AOL
Participation Securities by AOL may be extended beyond the closing of the
transaction described in the Participation Notice to the extent necessary to
obtain required governmental approvals and other necessary approvals and the
Company and AOL shall use their respective reasonable best efforts to obtain
such approvals.
(d) Completion of the Participation Offering. The Company
shall not complete any Participation Offering unless it has complied with the
provisions of this Section 4.3. If the Company fails to complete any
Participation Offering within thirty (30) days following the exercise by AOL of
its rights to participate in such Participation Offering pursuant to this
Section 4.3, AOL shall thereafter be entitled to withdraw or change its election
to purchase AOL Participation Securities and the Company shall continue to
comply with this Section 4.3 until such time as the Company shall deliver to AOL
a written notice that the Company is terminating such Participation Offering.
Upon any termination of an Participation Offering without any Participation
Securities having been issued, the Company shall have no obligation to issue or
sell any AOL Participation Securities to AOL, but shall be obligated to comply
with this Section 4.3 for any subsequent Participation Offering.
SECTION 4.4 No Restrictions. The Company shall not enter into
or permit to become effective any restrictions on AOL's rights under this
Article IV, whether pursuant to a contract, provision of the Certificate or
Bylaws or otherwise. The Company represents to AOL that it has, and for each
purchase of securities pursuant to this Article IV it will, approve the
acquisition of securities by AOL for purposes of Section 203 of the General
Corporation Law of the State of Delaware.
SECTION 4.5 Termination of Equity Purchase Rights. AOL's
equity purchase rights under this Article IV will expire upon the earlier of (i)
December 31, 2001 or (ii) the Set Top Box Launch.
ARTICLE V
REGISTRATION RIGHTS
SECTION 5.1 Registration on Request.
(a) Request. Subject to Section 5.1(b), at any time after the
date hereof, AOL (or any other Holder; provided that no Transferee of AOL or any
of its Affiliates or of any Transferee may request a registration pursuant to
this Section 5.1 unless the right to make such a request was transferred to such
Transferee pursuant to Section 9.3) (individually or collectively, as the case
may be, the "Demand Party") may request in writing that the Company effect the
registration under the Securities Act of an underwritten offering of all or part
of such Demand Party's Registrable Securities, specifying the number of
Registrable Securities proposed to be sold. Subject to the other provisions of
this Section 5.1, the Company shall promptly give written notice of such
requested registration to all other Holders, and thereupon will, as
expeditiously as possible, use its efforts to best effect the registration under
the Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by the Demand Party; and
(ii) all other Registrable Securities which the Company has been
requested to register by any other Holder thereof by written
request given to the Company within thirty (30) days after the
giving of such written notice by the Company (which request
shall specify the amount of such Registrable Securities), all
to the extent necessary to permit the disposition of the
Registrable Securities so to be registered.
(b) Limits on Registration Requests. Notwithstanding Section
5.1(a):
(i) in no event will the Company be required to effect more than
four (4) registrations pursuant to this Section 5.1;
(ii) following the nine month anniversary of the Closing, upon the
request of AOL, the Company will be required to effect up to
two (2) registrations pursuant to Section 5.1(a);
(iii) except as set forth in paragraph (ii) above, the Company will
not be required to effect a registration pursuant to Section
5.1(a) until the earliest of:
(A) the second anniversary of the date hereof;
(B) the termination of the Commercial Agreement pursuant
to the mutual agreement of the Company and AOL;
(C) the occurrence of a Material Breach of the Commercial
Agreement by the Company, so long as such Material
Breach has not been cured prior to the Demand Party's
request for a registration pursuant to Section
5.1(a); or
(D) the expiration of the Commercial Agreement in
accordance with its terms; and
(iv) if AOL commits a Material Breach of the Commercial Agreement,
the Company will not be obligated to file a registration
statement relating to any request under this Section 5.1 prior
to the earlier of (x) the expiration of a period of twelve
(12) months from the date such Material Breach occurred and
(y) the date such Material Breach has been cured.
Nothing in this Section 5.1 shall operate to limit the right
of any Holder to (i) request the registration of Common Stock issuable upon the
exercise or conversion of any Warrants or Preferred Shares held by such Holder
notwithstanding the fact that at the time of request such Holder does not hold
the Common Stock underlying such Warrants or Preferred Shares or (ii) request
the registration at one time of both Preferred Shares convertible into Common
Stock and the Common Stock underlying any such Preferred Shares.
(c) Registration Statement Form. The Company shall select the
registration statement form for any registration pursuant to this Section 5.1.
(d) Expenses. In connection with registrations pursuant to
this Section 5.1:
(i) each Holder will pay its own underwriting fees and discounts,
if any, and the fees and expenses of its legal, accounting and
other advisors with respect to the sale of its Registrable
Securities; and
(ii) the Company will pay all other Registration Expenses; provided
that the Company shall not be required to pay for expenses of
any registration proceeding begun pursuant to this Section 5.1
(other than SEC registration fees which the Company is able to
apply to a subsequent registration statement), the request of
which has been subsequently withdrawn by the Demand Party,
unless (a) the withdrawal is based upon material adverse
information or developments concerning the Company of which
the Demand Party was not aware at the time of such request,
(b) the Holders of a majority of the Registrable Securities
agree to forfeit their right to one requested registration
pursuant to Section 5.1 (in which event such right shall be
forfeited by all Holders), (c) the Company has exercised its
right to postpone such registration pursuant to Section
5.1(h), (d) any event of the kinds described in Section 6.1(f)
occurs or (e) the requested registration is not timely
completed due to the Company's failure to comply with any of
its obligations hereunder or other actions or omissions of the
Company.
(e) Effective Registration Statement. A registration requested
pursuant to this Section 5.1 will not be deemed to have been effected:
(i) unless a registration statement with respect thereto has
become effective and remained effective in compliance with the
provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by such
registration statement until the earlier of (x) such time as
all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition thereof
set forth in such registration statement or (y)
one-hundred-eighty (180) days after the effective date of such
registration statement;
(ii) if after it has become effective, the registration statement
is interfered with by any stop order, injunction or other
order or requirement of the SEC or other governmental agency
or authority and does not thereafter become effective and
remain effective for the period specified in paragraph (i)
above; or
(iii) if the conditions to closing specified in the underwriting
agreement, if any, entered into in connection with such
registration are not satisfied or waived, other than by reason
of a failure on the part of the Demand Party or other Holders.
(f) Underwriters. The managing underwriters for any
registration under this Section 5.1 shall each be a nationally recognized
investment banking firm and shall be selected by the Company; provided, that
such underwriter(s) shall be reasonably satisfactory to AOL (the "Managing
Underwriters").
(g) Priority in Requested Registrations. If the Managing
Underwriter of a requested registration pursuant to this Section 5.1 advises the
Company in writing that, in its opinion, the number of securities to be included
in such registration would be likely to have a material adverse effect on the
price, timing or distribution of the securities to be offered in such offering
as contemplated by the Holders (an "Adverse Effect"), then the Company shall
include in such registration: (i) first, 100% of the Registrable Securities
requested to be included by the Demand Party and all other Holders of
Registrable Securities, if any (reduced, if necessary, pro rata in proportion to
the respective number of shares proposed to be included by each); (b) second,
after inclusion of all the Registrable Securities proposed to be included in
such registration by the Demand Party and the other Holders, to the extent of
the amount of Equity Securities requested to be included by the Company in such
registration which, in the opinion of such Managing Underwriter, can be sold
without having the material adverse effect referred to above, such Equity
Securities requested to be included by the Company; and (c) third, after
inclusion of all the Registrable Securities proposed to be included in such
registration by the Demand Party and the other Holders and all the Equity
Securities proposed to be included by the Company, to the extent of the amount
of Equity Securities requested to be included by the other stockholders of the
Company in such registration which, in the opinion of such Managing Underwriter,
can be sold without having the material adverse effect referred to above, such
Equity Securities requested to be included by other stockholders of the Company.
If the Managing Underwriter of any underwritten offering shall advise the
Holders participating in a registration pursuant to this Section 5.1 that the
Registrable Securities covered by the registration statement cannot be sold in
such offering within a price range acceptable to the Demand Party, then the
Demand Party shall have the right to notify the Company that it has determined
that the registration statement be abandoned or withdrawn, in which event the
Company shall abandon or withdraw such registration statement and such requested
and withdrawn registration shall not be deemed to have been effected pursuant to
Section 5.1(b)(i).
(h) Postponements in Requested Registrations.
(i) If, upon receipt of a registration request pursuant to Section
5.1(a), the Company is advised in writing by the Managing
Underwriter that, in such firm's opinion, a registration at
the time and on the terms requested would materially adversely
affect any public offering of Common Stock by the Company
(other than in connection with employee benefit and similar
plans) (a "Company Offering") with respect to which the
Company has commenced preparations for a registration prior to
the receipt of a registration request pursuant to Section
5.1(a) or the Company Board has concluded in good faith based
on the written advice of an investment banking firm of
national reputation that the completion of the distribution
with respect to the offering contemplated by the registration
request pursuant to Section 5.1(a) would have a long-term
material adverse effect on the trading market for the Common
Stock (an "Adverse Market Effect"), and, in either case, the
Company furnishes the Holders with a certificate signed by the
Chief Executive Officer or Chief Financial Officer of the
Company to such effect (and attaching the written advice of
such Managing Underwriter or investment banking firm) (the
"Transaction Delay Notice") promptly after such request, the
Company shall not be required to effect a registration
pursuant to Section 5.1(a) until the earliest of (A) sixty
(60) days after the completion of such Company Offering, (B)
promptly after the abandonment of such Company Offering, (C)
promptly after a determination by the Company Board that no
Adverse Market Effect would occur or (D) ninety (90) days
after the date of the Transaction Delay Notice.
(ii) If upon receipt of a registration request pursuant to Section
5.1(a) or while a registration request pursuant to Section
5.1(a) is pending, the Company Board determines in its good
faith reasonable judgment after consultation with its
principal outside securities counsel that the filing of a
registration statement would require disclosure of material
information which the Company has a bona fide business purpose
for preserving as confidential and the Company provides the
Holders written notice (the "Information Delay Notice" and,
together with the Transaction Delay Notice, the "Delay
Notice") thereof promptly after the Company makes such
determination, which shall be made promptly after the receipt
of any request, the Company shall not be required to comply
with its obligations under Section 5.1(a) until the earlier of
(A) the date upon which such material information is disclosed
to the public or ceases to be material or (B) ninety (90) days
after the Holders' receipt of such notice.
(iii) Notwithstanding the foregoing provisions of this Section
5.1(h), the Company shall be entitled to serve (x) only one
(1) Delay Notice with respect to any registration requested
pursuant to Section 5.1(a) and (y) only two (2) Delay Notices
in the aggregate.
SECTION 5.2 Incidental Registrations. (a) If the Company at
any time after the date hereof proposes to register Equity Securities under the
Securities Act (other than a registration on Form S-4 or S-8, or any successor
or other forms promulgated for similar purposes), whether or not for sale for
its own account, in a manner which would permit registration of Registrable
Securities for sale to the public under the Securities Act, it will, at each
such time, give prompt written notice to all Holders of its intention to do so
and of such Holders' rights under this Agreement. Upon the written request of
any such Holder made within thirty (30) days after the receipt of any such
notice (which request shall specify the Registrable Securities intended to be
disposed of by such Holder), the Company will use its best efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the Holders thereof; provided that:
(i) if, at any time after giving written notice of its intention
to register any securities and prior to the effective date of
the registration statement filed in connection with such
registration, the Company shall determine for any reason not
to proceed with the proposed registration of the securities to
be sold by it, the Company may, at its election, give written
notice of such determination to each Holder and, thereupon,
shall be relieved of its obligation to register any
Registrable Securities in connection with such registration
(but not from its obligation to pay the Registration Expenses
in connection therewith); and
(ii) if such registration involves an underwritten offering, all
Holders requesting to be included in the Company's
registration must sell their Registrable Securities to the
underwriters selected by the Company on the same terms and
conditions as apply to the Company, with such differences,
including any with respect to indemnification and liability
insurance, as may be customary or appropriate in combined
primary and secondary offerings.
If a registration requested pursuant to this Section 5.2
involves an underwritten public offering, any Holder requesting to be included
in such registration may elect, in writing prior to the effective date of the
registration statement filed in connection with such registration, not to
register all or any part of such securities in connection with such
registration. Nothing in this Section shall operate to limit the right of any
Holder to request the registration of Common Stock issuable upon conversion,
exchange or exercise of securities, including Warrants or Preferred Shares, held
by such Holder notwithstanding the fact that at the time of request such Holder
does not hold the Common Stock underlying such securities. The registrations
provided for in this Section 5.2 are in addition to, and not in lieu of,
registrations made upon the request of any Demand Party in accordance with
Section 5.1.
(b) Expenses. In connection with each registration of
Registrable Securities requested pursuant to this Section 5.2:
(i) each Holder will pay its own underwriting fees and discounts,
if any, and the fees and expenses of its legal, accounting and
other advisors with respect to the sale of its Registrable
Securities; and
(ii) the Company will pay all other Registration Expenses.
(c) Priority in Incidental Registrations. If a registration
pursuant to this Section 5.2 involves an underwritten offering and the managing
underwriter advises the Company in writing that, in its opinion, the number of
Registrable Securities requested to be included in such registration would be
likely to have a material adverse effect on the price, timing or distribution of
the securities to be offered in such offering as contemplated by the Company
(other than the Registrable Securities), then the Company shall include in such
registration (i) first, 100% of the securities proposed to be included by the
Company, if any, and the Holders (reduced, if necessary, pro rata in proportion
to the respective number of shares proposed to be included by each; provided
that in no event shall the securities to be issued by the Company be reduced to
less than 75% of the total number of securities to be included in the offering)
and (b) second, to the extent of the amount of Equity Securities requested to be
included by other stockholders of the Company in such registration which, in the
opinion of such managing underwriter, can be sold without having the material
adverse effect referred to above, such Equity Securities requested to be
included by other stockholders of the Company.
SECTION 5.3 Additional Registration Rights. If the Company at
any time after the date hereof grants to any other holders of Common Stock (or
securities that are convertible, exchangeable or exercisable into Common Stock)
any rights to request the Company to effect the registration under the
Securities Act of any such shares of Common Stock (or any such securities) on
terms more favorable to such holders than the terms set forth in this Article V
or Article VI, the terms of this Article V or Article VI, as the case may be,
will be deemed amended or supplemented to the extent necessary to provide the
Holders such more favorable rights and benefits.
ARTICLE VI
REGISTRATION PROCEDURES
SECTION 6.1 Registration Procedures. If and whenever the
Company is required to use its best efforts to effect or cause the registration
of any Registrable Securities under the Securities Act as provided in this
Agreement, the Company will, as expeditiously as possible:
(a) prepare and, in any event within thirty (30) days after
the receipt of a request for registration, file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective within ninety (90) days
of the initial filing;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period not in excess of one-hundred-eighty (180) days and to comply with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all securities covered by such registration statement during such
period in accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement; provided, however,
that before filing a registration statement or prospectus, or any amendments or
supplements thereto in accordance with Sections 6.1(a) or (b), the Company will
furnish to AOL copies of all documents proposed to be filed, which documents
will be subject to the prompt and reasonable review and comment by the Holders
and their counsel; provided further that, except for any section of the
prospectus, or any amendment or supplement thereto, relating to the Holders of
Registrable Securities and the plan of distribution of the Registrable
Securities, the content of such registration or any supplement or amendment
thereto shall be within the reasonable discretion of the Company;
(c) furnish to each seller of such Registrable Securities such
number of copies of such registration statement and of each amendment and
supplement thereto (in each case including all exhibits filed therewith,
including any documents incorporated by reference), such number of copies of the
prospectus included in such registration statement (including each preliminary
prospectus and summary prospectus), in conformity with the requirements of the
Securities Act, and such other documents as such seller may reasonably request
in order to facilitate the disposition of the Registrable Securities by such
seller;
(d) use its best efforts to register or qualify such
Registrable Securities covered by such registration in such jurisdictions as
each seller shall reasonably request, and do any and all other acts and things
which may be reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of the Registrable Securities
owned by such seller, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
jurisdiction where, but for the requirements of this subsection (d), it would
not be obligated to be so qualified, to subject itself to taxation in any such
jurisdiction or to consent to general service of process in any such
jurisdiction;
(e) use its commercially reasonable efforts to cause such
Registrable Securities covered by such registration statement to be registered
with or approved by such other governmental authorities as may be necessary to
enable the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(f) notify each seller of any such Registrable Securities
covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the Company's
becoming aware that the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and at the request of any such seller, prepare and furnish to such
seller a reasonable number of copies of an amended or supplemental prospectus as
may be necessary so that, as thereafter delivered to the sellers of such
Registrable Securities, such prospectus shall not include 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable (but not more than eighteen (18)
months) after the effective date of the registration statement, an earnings
statement which shall satisfy the provisions of Section 11(a) of the Securities
Act;
(h) use its best efforts to list all Registrable Securities
covered by such registration statement on Nasdaq or any other national
securities exchange on which Registrable Securities of the same class covered by
such registration statement are then listed and, if no such Registrable
Securities are so listed, on Nasdaq or any national securities exchange on which
the Common Stock is then listed;
(i) enter into such customary agreements (including an
underwriting agreement in customary form), which may include indemnification
provisions in favor of underwriters and other Persons in addition to, or in
substitution for the provisions of Section 6.4 hereof, and take such other
actions as sellers of a majority of shares of such Registrable Securities or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities;
(j) obtain a "cold comfort" letter or letters from the
Company's independent public accounts in customary form and covering matters of
the type customarily covered by "cold comfort" letters as the seller or sellers
of a majority of shares of such Registrable Securities shall reasonably request;
(k) make available for inspection by any seller of such
Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant or other agent retained
by any such seller or any such underwriter, all pertinent financial and other
records, pertinent corporate documents and properties of the Company, and cause
all of the Company's officers, directors and employees to supply all information
requested by any such seller, underwriter, attorney, accountant or agent
reasonably necessary to facilitate the disposition of such securities or to
establish by any such person that it conducted due diligence or a reasonable
investigation of the Company in connection with such registration and
disposition;
(l) notify the Holders of Registrable Securities included in
such registration statement and the managing underwriter or agent, immediately,
and confirm the notice in writing:
(i) when the registration statement, or any post-effective
amendment to the registration statement, shall have become
effective, or any supplement to the prospectus or any
amendment to the prospectus shall have been filed;
(ii) of the receipt of any comments from the SEC;
(iii) of any request of the SEC to amend the registration statement
or amend or supplement the prospectus or for additional
information; and
(iv) of the issuance by the SEC 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
registration statement for offering or sale in any
jurisdiction, or of the institution or threatening of any
proceedings for any of such purposes;
(m) use its best efforts to prevent the issuance of any stop
order suspending the effectiveness of the registration statement or of any order
preventing or suspending the use of any preliminary prospectus and, if any such
order is issued, to obtain the withdrawal of any such order at the earliest
possible moment;
(n) if requested by the managing underwriter or agent or any
Holder of Registrable Securities covered by the registration statement, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or agent or such Holder reasonably
requests to be included therein, including, with respect to the number of
Registrable Securities being sold by such Holder to such underwriter or agent,
the purchase price being paid therefor by such underwriter or agent and with
respect to any other terms of the underwritten offering of the Registrable
Securities to be sold in such offering; and make all required filings of such
prospectus supplement or post-effective amendment as soon as practicable after
being notified of the matters incorporated in such prospectus supplement or
post-effective amendment;
(o) cooperate with the Holders of Registrable Securities
covered by the registration statement and the managing underwriter or agent, if
any, to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing securities to be sold under the
registration statement, and enable such securities to be in such denominations
and registered in such names as the managing underwriter or agent, if any, or
such Holders may request;
(p) use its best efforts to obtain for delivery to the Holders
of Registrable Securities being registered and to the underwriter or agent an
opinion or opinions from counsel for the Company in customary form and in form,
substance and scope reasonably satisfactory to such Holders, underwriters or
agents and their counsel;
(q) cooperate with each seller of Registrable Securities and
each underwriter or agent participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings required
to be made with the NASD or Nasdaq or any other securities exchange or self
regulatory organization; and
(r) subject to and consistent with the best judgment of the
underwriters, use its commercially reasonable efforts (taking into account the
interests of the Company) to make available the executive officers of the
Company to participate with the Holders and any underwriters in any "road shows"
or other selling efforts that may be reasonably requested by the Holders in
connection with the methods of distribution for the Registrable Securities.
SECTION 6.2 Information Supplied. The Company may require each
seller of Registrable Securities as to which any registration is being effected
to furnish it with such information regarding such seller and pertinent to the
disclosure requirements relating to the registration and the distribution of
such securities as the Company may from time to time reasonably request in
writing.
SECTION 6.3 Restrictions on Disposition. Each Holder agrees
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 6.1(f), such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 6.1(f), and,
if so directed by the Company, such Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice. In the event the Company shall
give any such notice, the period mentioned in Section 6.1(b) shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to Section 6.1(f) and to and including the date
when each seller of Registrable Securities covered by such registration
statement shall have received the copies of the supplemented or amended
prospectus contemplated by Section 6.1(f).
SECTION 6.4 Indemnification. (a) Indemnification by the
Company. In the event of any registration of any securities of the Company under
the Securities Act pursuant to Article V, the Company shall indemnify, to the
extent permitted by law, the seller of any Registrable Securities covered by
such registration statement, each Affiliate of such seller and their respective
directors, officers, employees and stockholders or members or general and
limited partners (and any director, officer, Affiliate, employee, stockholder
and controlling Person of any of the foregoing), each Person who participates as
an underwriter in the offering or sale of such securities and each other Person,
if any, who controls such seller or any such underwriter within the meaning of
the Securities Act (collectively, the "Indemnified Parties"), against any and
all losses, claims, damages or liabilities, joint or several, actions or
proceedings (whether commenced or threatened) in respect thereof ("Claims") and
expenses (including reasonable attorney's fees and reasonable expenses of
investigation) to which such Indemnified Party may become subject under the
Securities Act, common law or otherwise, insofar as such Claims or expenses
arise out of, relate to or are based upon:
(i) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under
which such securities were registered under the Securities
Act, any preliminary, final or summary prospectus contained
therein, or any amendment or supplement thereto; or
(ii) any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein (in the case of a prospectus, in light of
the circumstances under which they were made) not misleading.
(b) Limits on Indemnification by the Company. Notwithstanding
the foregoing, the Company shall not be liable to any Indemnified Party in any
such case to the extent, but only to the extent:
(i) that any such Claim or expense arises out of, relates to or is
based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in such registration
statement or amendment or supplement thereto or in any such
preliminary, final or summary prospectus in reliance upon and
in conformity with written information regarding the seller of
Registrable Securities furnished to the Company through an
instrument duly executed by or on behalf of such seller
specifically stating that it is for use in the preparation
thereof; and
(ii) that the foregoing indemnity with respect to any untrue
statement contained in or omitted from a registration
statement or the prospectus shall not inure to the benefit of
any party (or any person controlling such party) who is
obligated to deliver a prospectus in transactions in a
security as to which a registration statement has been filed
pursuant to the Securities Act and from whom the person
asserting any such Claims purchased any of the Registrable
Securities to the extent that it is finally judicially
determined that such Claims resulted solely from the fact that
such party sold Registrable Securities to a person to whom
there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the registration
statement or the prospectus, as amended or supplemented, and
(x) the Company shall have previously and timely furnished
sufficient copies of the registration statement or prospectus,
as so amended or supplemented, to such party in accordance
with this Agreement and (y) the registration statement or
prospectus, as so amended or supplemented, would have
corrected such untrue statement or omission of a material
fact.
(c) Survival of the Company's Indemnification Obligation. The
indemnity provided by this Section 6.4 will remain in full force and effect
regardless of any investigation made by or on behalf of any Indemnified Party
and shall survive the Transfer of securities by any seller.
(d) Indemnification by the Prospective Sellers. The Company
may require, as a condition to including any Registrable Securities in any
registration statement filed in accordance with Sections 5.1 or 5.2 herein, that
it shall have received an undertaking reasonably satisfactory to it from the
prospective seller of such Registrable Securities or any underwriter to
indemnify (in the same manner and to the same extent as set forth in Section
6.4(a)) the Company and all other prospective sellers or any underwriter, as the
case may be, with respect to any untrue statement or alleged untrue statement in
or omission or alleged omission from such registration statement, any
preliminary, final or summary prospectus contained therein, or any amendment or
supplement thereto, if such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by or on behalf of such seller or underwriter specifically stating that it is
for use in the preparation of such registration statement, preliminary, final or
summary prospectus or amendment or supplement, or a document incorporated by
reference into any of the foregoing. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the Company
or any of the prospective sellers, or any of their respective Affiliates,
directors, officers or controlling Persons and shall survive the Transfer of
securities by any seller. In no event shall the liability of any seller of
Registrable Securities hereunder be greater in amount than the dollar amount of
the proceeds actually received by such seller upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(e) Notice and Defense of Action. Promptly after receipt by an
indemnified party hereunder of written notice of the commencement of any action
or proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 6.4, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action or proceeding; provided, however, that
the failure of the indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under Section 6.4, except to
the extent that the indemnifying party is materially prejudiced by such failure
to give notice. In case any such action or proceeding is brought against an
indemnified party, unless in such indemnified party's reasonable judgment (after
consultation with legal counsel) a conflict of interest between such indemnified
and indemnifying parties may exist in respect of such action or proceeding, the
indemnifying party will be entitled to participate in and to assume the defense
thereof (at its expense), jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation; provided, however,
that in the event that (i) the indemnifying party declines or fails to assume
the defense of the action or proceeding or to employ counsel reasonably
satisfactory to the indemnified party, in either case within a 30-day period,
(ii) if the indemnifying party is not vigorously defending such action or
proceeding or (iii) the named parties to any proceeding (including impleaded
parties) include both such indemnified party and the indemnifying party, and
such indemnified party shall have been advised by counsel that there may be one
or more legal defenses available to it which are different from or additional to
those available to the indemnifying party, then such indemnified party may
employ counsel to represent or defend it in any such action or proceeding and
the indemnifying party shall pay the reasonable fees and disbursements of such
counsel or other representative as incurred; provided, however, that the
indemnifying party shall not be required to pay the fees and disbursements of
more than one counsel for all indemnified parties (together with appropriate
local counsel) in any jurisdiction in any single action or proceeding.
(f) Settlement. No indemnifying party will settle any action
or proceeding or consent to the entry of any judgment without the prior written
consent of the indemnified party, unless such settlement or judgment (i)
includes as an unconditional term thereof the giving by the claimant or
plaintiff of a release to such indemnified party from all liability in respect
of such action or proceeding and (ii) does not involve the imposition of
equitable remedies or the imposition of any obligations on such indemnified
party and does not otherwise adversely affect such indemnified party, other than
as a result of the imposition of financial obligations for which such
indemnified party will be indemnified hereunder. No indemnified party will
settle any action or proceeding or consent to the entry of any judgment without
the prior written consent of the indemnifying party, unless such settlement or
judgment (i) includes as an unconditional term thereof a release of such
indemnifying party from all liability in respect of such action or proceeding or
(ii) the indemnifying party fails to assume and maintain the defense of the
applicable action or proceeding pursuant to this Section 6.4(c).
(g) Contribution.
(i) If the indemnification provided for in this Section 6.4 from
the indemnifying party is unavailable to an indemnified party
hereunder in respect of any Claim or expenses referred to
herein, then the indemnifying party, in lieu of indemnifying
such indemnified party, to the extent permitted by applicable
law, shall contribute to the amount paid or payable by such
indemnified party as a result of such Claim or expenses in
such proportion as is appropriate to reflect the relative
fault of the indemnifying party and indemnified party in
connection with the actions which resulted in such Claim or
expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party
and indemnified party shall be determined by agreement of the
indemnifying party and indemnified party or, failing that, by
a court of law, by reference to, among other things, whether
any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission
to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party
under this Section 6.4(g) as a result of the Claim and
expenses referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such
party in connection with any action or proceeding.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6.4(g) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in Section 6.4(g)(i). No Person
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(h) Other Indemnification Obligations. Indemnification similar
to that specified in this Section 6.4 (with appropriate modifications) shall be
given by the Company and each seller of Registrable Securities with respect to
any required registration or other qualification of securities under any Law or
with any governmental authority other than as required by the Securities Act.
(i) Additional Liabilities. The obligations of the parties
under this Section 6.4 shall be in addition to any liability which any party may
otherwise have to any other party.
SECTION 6.5 Required Reports. The Company covenants that it
will file the reports required to be filed by it under the Securities Act and
the Exchange Act (or, if the Company is not required to file such reports, it
will, upon the request of any Holder, make publicly available such information),
and it will take such further action as any Holder may reasonably request, all
to the extent required from time to time to enable such Holder to sell shares of
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rule 144, as such Rule may be
amended from time to time, or (ii) any similar rule or regulation hereafter
adopted by the SEC. Upon the request of any Holder, the Company will deliver to
such Holder a written statement as to whether it has complied with such
requirements.
SECTION 6.6 Holdback Agreement. If any registration under
Section 5.1 or under Section 5.2 in which a Holder participates is in connection
with an underwritten public offering, each Holder agrees not to effect any
public sale or distribution, including any sale pursuant to Rule 144 under the
Securities Act, of any Equity Securities of the Company (in each case, other
than as part of such underwritten public offering), within seven (7) days
before, or one hundred eighty (180) days (or such lesser period as the managing
underwriters may permit) after, the effective date of any such registration
pursuant to Sections 5.1 or 5.2, and the Company hereby also so agrees, and
agrees to use reasonable efforts to cause each other holder of any equity
security of the Company purchased from the Company (at any time other than in a
public offering), to agree to similar limitations of like duration.
SECTION 6.7 No Inconsistent Agreement. The Company represents
and warrants that it will not enter into, or cause or permit any of its
Subsidiaries to enter into, any agreement which conflicts with or limits or
prohibits the exercise of the rights granted to the Holders of Registrable
Securities in this Agreement.
ARTICLE VII
STANDSTILL
SECTION 7.1 Acquisition of Additional Voting Securities. (a)
Subject to Section 7.1(c) and Sections 4.1, 4.2 and 4.3, during the Standstill
Period, AOL hereby agrees that it may not, and that it will not permit its
controlled Affiliates to, without the prior approval of the Company Board
(excluding, for purposes of such approval, the AOL Representative):
(i) acquire or agree to acquire the beneficial ownership of any
additional Equity Securities of the Company or any voting
rights with respect to the Capital Stock of the Company;
provided that the foregoing restrictions shall not apply to
any acquisition or proposed acquisition of beneficial
ownership of any additional Voting Securities of the Company:
(x) which is by way of stock dividends, stock
reclassifications or other distributions or offerings
made available on a pro rata basis to holders of
Equity Securities of the Company generally; or
(y) involves Equity Securities acquired from the Company
(including upon exercise of the Warrants, conversion
of Preferred Shares and Participation Securities or
pursuant to Article IV) or otherwise in accordance
with the provisions of this Agreement and the other
Transaction Agreements;
(ii) make, or in any way participate in, any "solicitation" of
"proxies" (as such terms are defined or used in Regulation 14A
under the Exchange Act) to vote any Voting Securities of the
Company or seek to influence any Person with respect to the
voting of any Voting Securities of the Company or publicly
announce its intention to do so;
(iii) make any public announcement with respect to, or submit any
offer or purchase proposal that is required under applicable
law to be made public by the Company for, any Acquisition
Proposal;
(iv) act, either independently or in concert with others, in
connection with any Acquisition Proposal, or form or join a
Group; provided that this Section 7.1(a)(iv) shall not
restrict AOL from acting independently to submit an
Acquisition Proposal that is not prohibited under paragraph
(iii) of this Section 7.1(a); or
(v) make any demand, request or proposal to amend, waive or
terminate any provision of this Section 7.1
(collectively, the "Acquisition Restrictions").
(b) Nothing contained in this Section 7.1 shall be construed
to limit or restrict any action taken in good faith by the AOL Representative or
AOL Observer in his or her capacity as a Director or observer on the Company
Board.
(c) The Acquisition Restrictions will cease to apply from and
after such time as (i) the Company materially breaches any of its obligations
under Section 7.1(e) or Article VIII of this Agreement, (ii) the Company
materially breaches its obligations under Sections 6.2 or 6.3 of the Investment
Agreement or (iii) the Company or any representative of the Company delivers
confidential information to any Third Party who has expressed an interest in
making, or has made, an Acquisition Proposal and such Third Party has not
entered into a "standstill" agreement or other agreement containing restrictions
similar to those contained in this Section 7.1 with the Company.
(d) Notwithstanding the Acquisition Restrictions, AOL shall be
permitted to file one or more amendments to its Schedule 13D and any other
similar or successor forms required to be filed with the SEC to reflect any
proposals or announcements it is not prohibited from making, or other actions it
is not prohibited from taking, pursuant to this Section 7.1.
(e) In the event (i) the Company or any representative of the
Company solicits an Acquisition Proposal or any interest in making an
Acquisition Proposal from any Third Party or (ii) the Company receives an
unsolicited Acquisition Proposal which it determines to consider, then AOL shall
be notified promptly, but in any event, within five (5) Business Days of such
event and will be released from the Acquisition Restrictions to the extent
required in order to submit an Acquisition Proposal to the Company and
participate in the process developed by the Company for consideration of
Acquisition Proposals (if any), so long as AOL agrees to be bound by the same
rules (if any) as are applicable to other Third Parties participating in such
process; provided, however, in no event will AOL be required to agree to any
rules governing the conduct of any Third Party that are in any way more
restrictive to AOL than its obligations contained in this Section 7.1.
(f) If the Company or any representative of the Company at any
time delivers confidential information to any Third Party who has expressed an
interest in making, or has made, an Acquisition Proposal and such Third Party
has entered into a "standstill" agreement with the Company which contains terms
that are more favorable to such Third Party than AOL's obligations under this
Section 7.1, then the Acquisition Restrictions and the other provisions of this
Section 7.1 shall be deemed amended or supplemented to the extent necessary to
provide AOL with the benefit of such more favorable terms.
ARTICLE VIII
RIGHT OF NOTIFICATION AND FORBEARANCE
SECTION 8.1 Right of Notification. (a) During the Standstill
Period, the Company will notify AOL in writing within five (5) Business Days of
(i) its receipt of a bona fide Acquisition Proposal from a Third Party, (ii) the
determination by the Company Board to solicit any Acquisition Proposal from a
Third Party, and (iii) the determination by the Company Board to provide
confidential information to, or enter into negotiations or discussions with, a
Third Party who has expressed an interest (which Third Party in the case of
clause (iii) has included a potential price or price range which the Company
Board has determined warrants exploration) in making, or has made, an
Acquisition Proposal (each, an "Acquisition Proposal Notice").
(b) Within two (2) Business Days of receipt of any Acquisition
Proposal Notice, AOL may provide a list of at least fifteen (15) entities, each
of which AOL in good faith deems to be (i) capable of completing an acquisition
of the Company and (ii) either (w) a television or film media company, (x) a
video service operator, (y) an Internet service provider or (z) a company
providing interactive video services or enabling platform technologies.
(c) Within one (1) Business Day of the Company's receipt of
such list, the Company will specify whether or not the Third Party making such
Acquisition Proposal or expressing interest in making an Acquisition Proposal is
or is an Affiliate of one of the entities set forth on such list.
SECTION 8.2 Forbearance. During the Standstill Period, the
Company shall not enter into any agreement, letter of intent or similar document
(whether binding or not) with respect to any Acquisition Proposal prior to the
expiration of a five (5) Business Day period following delivery of an
Acquisition Proposal Notice under paragraph (ii) or (iii) of Section 8.1(a),
relating to such Acquisition Proposal.
SECTION 8.3 Other Rights. If the Company at any time after the
date hereof grants to any Person(s) any rights of notification or forbearance
with terms that are more favorable to such Person(s) than the terms set forth in
this Article VIII, the terms of this Article VIII will be deemed amended or
supplemented to the extent necessary to provide AOL such more favorable terms.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Termination. (a) Except as specifically set forth
herein, the provisions of this Agreement shall terminate as follows:
(i) by mutual agreement of the parties;
(ii) at such time as no Holder holds any Registrable Securities; or
(iii) upon the termination of the Investment Agreement prior to the
closing of the issuance of the Shares, Preferred Shares (if
any) and Warrants thereunder.
(b) Nothing herein shall relieve any party from any liability
for the breach of any of the agreements set forth in this Agreement.
SECTION 9.2 Amendments and Waivers. Except as otherwise
provided herein, no modification, amendment or waiver of any provision of this
Agreement shall be effective against any party hereto unless such modification,
amendment or waiver is approved in writing by such party. The failure of any
party to enforce any of the provisions of this Agreement shall in no way be
construed as a waiver of such provisions and shall not affect the right of such
party thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
SECTION 9.3 Successors, Assigns and Transferees. This
Agreement shall bind and inure to the benefit of and be enforceable by the
parties hereto and their respective successors, permitted assigns and
Transferees. Except as expressly provided herein, this Agreement may not be
assigned without the prior written consent of the other party, except that (i)
AOL may assign its rights and obligations hereunder to any of its Affiliates and
(ii) AOL (or any Transferee of Equity Securities) may assign any or all of its
rights under Articles V and VI to any Transferee of Equity Securities.
SECTION 9.4 Notices. (a) All notices required or permitted
hereunder shall be in writing and shall be deemed effectively given (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient or, if not,
then on the next Business Day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid or (iv)
one (1) Business Day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of receipt.
(b) All communications shall be sent as follows:
(i) to the Company and AOL, to their respective addresses
specified in Section 7.10 of the Investment Agreement;
(ii) to any other Holder, to the address of such Holder as
shown in the stock record books of the Company; or
(iii) to such other address for any party as it may specify by
like notice.
SECTION 9.5 Further Assurances. At any time or from time to
time after the date hereof, the parties agree to cooperate with each other, and
at the request of any other party, to execute and deliver any further
instruments or documents and to take all such further action as the other party
may reasonably request in order to evidence or effectuate the consummation of
the transactions contemplated hereby and to otherwise carry out the intent of
the parties hereunder.
SECTION 9.6 Entire Agreement. Except as otherwise expressly
set forth herein, this document and the other Transaction Agreements embody the
complete agreement and understanding among the parties hereto with respect to
the subject matter hereof and supersede and preempt any prior understandings,
agreements or representations by or among the parties, written or oral, that may
have related to the subject matter hereof in any way.
SECTION 9.7 Delays or Omissions. It is agreed that no delay or
omission to exercise any right, power or remedy accruing to any party, upon any
breach, default or noncompliance by another party under this Agreement, shall
impair any such right, power or remedy, nor shall it be construed to be a waiver
of any such breach, default or noncompliance, or any acquiescence therein, or of
or in any similar breach, default or noncompliance thereafter occurring. It is
further agreed that any waiver, permit, consent or approval of any kind or
character on the part of any party hereto of any breach, default or
noncompliance under this Agreement or any waiver on such party's part of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, by law, or otherwise afforded to any
party, shall be cumulative and not alternative.
SECTION 9.8 Governing Law; Jurisdiction; Waiver of Jury Trial.
This Agreement shall be governed in all respects by the laws of the State of New
York, except, in the case of the Company and with respect to Section 2.1, to the
extent that the General Corporation Law of the State of Delaware is applicable.
Any suit, action or proceeding with respect to this Agreement may be brought in
any court or before any similar authority in a court of competent jurisdiction
in the State of New York, and the parties hereto hereby submit to the
non-exclusive jurisdiction of such courts for the purpose of such suit,
proceeding or judgment. Each of the parties hereto hereby irrevocably and
unconditionally waives trial by jury in any legal action or proceeding in
relation to this Agreement and for any counterclaim therein.
SECTION 9.9 Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 9.10 Enforcement. Each party hereto acknowledges that
money damages would not be an adequate remedy in the event that any of the
covenants or agreements in this Agreement are not performed in accordance with
its terms, and it is therefore agreed that in addition to and without limiting
any other remedy or right it may have, the non-breaching party will have the
right to an injunction, temporary restraining order or other equitable relief in
any court of competent jurisdiction enjoining any such breach and enforcing
specifically the terms and provisions hereof.
SECTION 9.11 Titles and Subtitles. The titles of the sections
and subsections of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
SECTION 9.12 Counterparts; Facsimile Signatures. This
Agreement may be executed in any number of counterparts, each of which shall be
an original, but all of which together shall constitute one instrument. This
Agreement may be executed by facsimile signature(s).
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have executed the
STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT as of the date set forth in the
first paragraph hereof.
TIVO INC.
By: /s/ Michael Ramsay
Name: Michael Ramsay
Title: President and Chief Executive Officer
AMERICA ONLINE, INC.
By: /s/ David M. Colburn
Name: David M. Colburn
Title: President, Business Affairs
