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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 19, 1998
GEMSTAR INTERNATIONAL GROUP LIMITED
(Exact Name of Registrant as Specified in Charter)
British Virgin Islands 0-26878 N/A
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
135 North Los Robles Avenue, Suite 800
Pasadena, California 91101
(Address of Principal Executive Offices and Zip Code)
(Registrant's telephone number, including area code: (626) 792-5700
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Item 5. Other Events
Gemstar International Group Limited, a British Virgin Islands corporation
("Gemstar"), entered into that certain Joint Venture Formation and Stockholders
Agreement, dated as of January 19, 1998, with United Video Satellite Group,
Inc., a Delaware corporation ("United Video"), Prevue Ventures, Inc., a Delaware
corporation, G-Sub Corporation, a Delaware corporation, and effective as of the
closing, Interactive Prevue Guide, Inc., a Delaware corporation. This agreement
is filed as Exhibit 10.1 and is incorporated herein by reference.
Gemstar entered into that certain Warrant Agreement, dated January 19,
1998, with United Video and TCI Ventures Group, LLC, a Delaware limited
liability company. This agreement is filed as Exhibit 10.2 and is incorporated
herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits.
Exhibit
Number Description
- ------ -----------
*10.1 Joint Venture Formation and Stockholders Agreement, dated as of
January 19, 1998, by and among United Video Satellite Group, Inc., a
Delaware corporation, Prevue Ventures, Inc., a Delaware corporation,
Gemstar International Group Limited, a British Virgin Islands
corporation, G-Sub Corporation, a Delaware corporation and effective
as of the closing, Interactive Prevue Guide, Inc., a Delaware
corporation.
*10.2 Warrant Agreement, dated as of January 19, 1998, by and among Gemstar
International Group Limited, a British Virgin Islands corporation,
United Video Satellite Group, Inc., a Delaware corporation, and TCI
Ventures Group, LLC, a Delaware limited liability company.
* Certain information in this exhibit has been omitted and filed separately
with the Commission. Redacted portions of the exhibit are indicated by an
asterisk within brackets ([*]), and a legend appears on the appropriate
pages. Confidential Treatment has been requested with respect to the
omitted portions.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GEMSTAR INTERNATIONAL GROUP LIMITED
Date: February 6, 1998 By: /S/ LARRY GOLDBERG
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Larry Goldberg
Secretary and Corporate Counsel
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EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
*10.1 Joint Venture Formation and Stockholders Agreement, dated as of
January 19, 1998, by and among United Video Satellite Group, Inc., a
Delaware corporation, Prevue Ventures, Inc., a Delaware corporation,
Gemstar International Group Limited, a British Virgin Islands
corporation, G-Sub Corporation, a Delaware corporation and effective
as of the closing, Interactive Prevue Guide, Inc., a Delaware
corporation.
*10.2 Warrant Agreement, dated as of January 19, 1998, by and among Gemstar
International Group Limited, a British Virgin Islands corporation,
United Video Satellite Group, Inc., a Delaware corporation, and TCI
Ventures Group, LLC, a Delaware limited liability company.
* Certain information in this exhibit has been omitted and filed separately
with the Commission. Redacted portions of the exhibit are indicated by an
asterisk within brackets ([*]), and a legend appears on the appropriate
pages. Confidential Treatment has been requested with respect to the
omitted portions.
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EXHIBIT 10.1
JOINT VENTURE FORMATION AND STOCKHOLDERS AGREEMENT dated as of January 19,
1998, among UNITED VIDEO SATELLITE GROUP, INC., a Delaware corporation ("UVSG");
PREVUE VENTURES, INC., a Delaware corporation and an indirect wholly owned
subsidiary of UVSG ("UVSG-Sub"); GEMSTAR INTERNATIONAL GROUP LIMITED, a British
Virgin Islands corporation ("Gemstar"); and G-SUB CORPORATION, a Delaware
corporation and a wholly owned subsidiary of Gemstar ("G-Sub"), and, effective
as of the Closing, Interactive Prevue Guide, Inc., a Delaware corporation (the
"Company").
PRELIMINARY STATEMENT
The parties desire to participate in a joint venture to engage in (i) the
business of developing, [*] for, producing, marketing, distributing, selling,
offering to sell and supplying [*] and [*] for and [*] to [*] in the Territory
(the "Business"), and (ii) all related businesses as they may evolve over time.
Capitalized terms used herein have the meaning ascribed thereto in Article I of
this Agreement.
The joint venture will be conducted through the Company. The parties wish
to form the Company, provide for the purchase and sale of shares of common stock
of the Company, and set forth in this Agreement the manner in which the affairs
of the Company will be conducted and their undertakings with respect to the
Company.
Accordingly, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
Definitions and Construction
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SECTION 1.01. Certain Definitions. As used in this Agreement, the
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following terms shall have the meanings specified below:
"Accountants" means KPMG Peat Marwick or such other firm of nationally
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recognized independent certified public accountants for the Company appointed by
the Company Board.
"Actual Voting Power" with respect to an entity means (x) if such
-------------------
entity is a corporation, the total number of votes that may be cast in the
election of directors of such corporation at any meeting of stockholders of such
corporation, assuming all shares of common stock and other securities of such
corporation entitled to vote generally in the election of directors for such
corporation were present and voted at such meeting, other than votes that may be
cast only by one class or series of stock (other than common stock) or upon the
happening of a contingency and (y) if such entity does not have any outstanding
shares or securities, as may be
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[*] Confidential Treatment Requested.
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the case in a partnership, joint venture or unincorporated association, the
total amount of ownership interests representing the right to make decisions for
such entity. In determining the percentage of Actual Voting Power of an entity
beneficially owned by any Person, shares of common stock and other securities or
ownership interests issuable upon conversion or exercise of any securities or
rights owned by such Person shall be deemed to be outstanding, but shall not be
deemed to be outstanding for the purpose of computing the percentage of Actual
Voting Power of such entity owned by any other Person.
"Affiliate" means, when used with respect to a specified Person,
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another Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the Person
specified. For purposes of the foregoing, the term "controls" (including its
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correlative meanings "controlled by" or under "common control with") means the
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possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise. Without limiting the generality of the
foregoing, a Person shall be deemed to "control" another Person if it, directly
or indirectly, (i) beneficially owns voting securities of such other Person
representing a twenty percent or greater equity interest in such other Person or
twenty percent or more of the Actual Voting Power of such other Person or (ii)
can unilaterally cause such other Person to take or refrain from taking certain
material actions (such as any action of the nature specified herein as being a
Significant Stockholder Transaction). Notwithstanding the foregoing, the
Company shall not be deemed to be an Affiliate of any Consenting Stockholder or
Participant.
"[*]" means [*] with respect to the [*], [*] with respect to the [*],
and [*] with respect to the [*].
"Approval" means any consent, approval, license, franchise, permit or
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authorization expressed in the form specified by the applicable Contract, Law or
other document, if any.
The "Bankruptcy" of any Person shall be deemed to have occurred upon
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the happening of any of the following: (i) the filing of an application by such
Person for, or a consent to, the appointment of a trustee of its assets; (ii)
the filing by such Person of a voluntary petition in bankruptcy or the seeking
of relief under Title 11 of the United States Code, or the filing of a pleading
in any court of record admitting in writing its inability to pay its debts as
they come due; (iii) the making by such Person of a general assignment for the
benefit of creditors; (iv) the filing by such Person of an answer admitting the
material allegations of, or consenting to, or defaulting in answering, a
bankruptcy petition filed against it in, any bankruptcy proceeding or petition
seeking relief under Title 11 of the United States Code; or (v) the entry of an
order, judgment or decree by any court of competent jurisdiction adjudicating
such Person a bankrupt or for relief in respect of such Person or appointing a
trustee of its assets, and such order, judgment or decree continues unstayed and
in effect for any period of 60 consecutive days.
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[*] Confidential Treatment Requested.
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A Person shall be deemed the "beneficial owner" of, and shall be
----------------
deemed to "beneficially own", any securities which such Person or any of its
----------------
Affiliates would be deemed to "beneficially own" within the meaning of Rule 13d-
3 under the Exchange Act if the references to "within 60 days" in Rule 13d-
3(d)(1)(i) were omitted.
"Budget" means, collectively, the total budget (including research and
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development, capital expenditure and operating budgets) approved by the Company
Board for the Company for any fiscal year of the Company.
"Burdensome Condition" means any action taken, or threatened, by any
--------------------
Governmental Authority or other Person to investigate or challenge the legality
of the Transactions under any Federal or state Law or that would otherwise
deprive any party of any material benefit of any [*], which action may include
(i) the pendency of a governmental investigation (formal or informal), (ii) the
institution of Litigation or the threat thereof, (iii) an order by a
Governmental Authority of competent jurisdiction preventing consummation of the
Transactions or placing any material conditions or limitations upon consummation
or (iv) the issuance of any subpoena, civil investigative demand or other
request for documents or information that is unreasonably burdensome in the
reasonable judgment of the applicable Person.
"Business Day" means any day (other than a day which is a Saturday,
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Sunday or legal holiday in the State of New York) on which banks are open for
business in The City of New York, New York.
"CEO" means the officer identified by the Company Board as the chief
---
executive officer of the Company.
A "Change of Control" shall be deemed to have occurred with respect to
-----------------
the [*] if:
(a) any of the following transactions shall be consummated following
submission of such transaction to and approval of such transaction (x) if
such [*] is a corporation, by the stockholders of such corporation (or,
if such transaction were not submitted to the stockholders of the
corporation, it would have been required to be submitted for approval of
the stockholders if such corporation were subject to the rules of the New
York Stock Exchange) or (y) if such [*] is not a corporation, by the
governing authority for such [*]:
(i) a merger or consolidation of such [*] with any other
Person in which all Voting Securities of such [*] outstanding
immediately prior thereto represent (either by remaining outstanding
or being converted into Voting Securities of the surviving entity)
less than [*] of the Actual Voting Power of such [*] or the surviving
entity outstanding immediately after such merger or consolidation; or
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[*] Confidential Treatment Requested.
3
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(ii) the sale of disposition by such [*] (in one transaction or
a series of related transactions) of assets the fair market value of
which represents, in the aggregate, [*] or more of the fair market
value of all of such [*] assets (other than the Company Common Stock
beneficially owned by it), other than a sale or disposition by such
[*] to one or more of its Subsidiaries that continues to be a
Subsidiary of such [*];
(b) a plan of liquidation or dissolution of such [*] is submitted to
and approved (x) if such [*] is a corporation, by the stockholders of such
corporation or (y) if such [*] is not a corporation, by the governing
authority for such entity;
(c) any Person (other than (i) a trustee or other fiduciary holding
securities under an employee benefit plan of such [*], (ii) a Person owned
directly or indirectly by the stockholders (or other beneficial owners) of
such [*] in substantially the same proportions as their ownership of Voting
Securities of such [*], (iii) in the case of [*], [*] or any of its
Controlled Affiliates, or (iv) in the case of [*], any of [*], [*] and [*]
or any wholly-owned Subsidiary of one or more of these [*] or any trust of
which one or more of these [*] or any of their [*] are the trustee or
primary beneficiaries) is or becomes the beneficial owner, directly or
indirectly, of Voting Securities of such [*] representing [*] percent or
more of the Actual Voting Power of such [*], as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases or
otherwise;
(d) in any [*]-year period, a majority of the members of the Board of
Directors or other governing authority of such [*] elected during such [*]-
year period shall have been so elected against the recommendation of the
Board of Directors or other governing authority of such [*] in office
immediately prior to such election; or
(e) in any share exchange, extraordinary dividend, acquisition,
disposition or recapitalization (or series of related transactions of such
nature) (other than a merger or consolidation) the holders of Voting
Securities of such [*] immediately prior thereto continue to own
beneficially Voting Securities representing less than [*] percent of the
Actual Voting Power of such [*] (or any successor entity) immediately
thereafter.
"Closing" means the closing at which each of the events specified in
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Section 2.01 shall occur.
"Closing Date" means the date on which the Closing shall occur.
------------
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time (or any successor statute).
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[*] Confidential Treatment Requested.
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"Company Board" means the Board of Directors of the Company.
-------------
"Company Bylaws" means the Bylaws of the Company substantially in the
--------------
form of Exhibit B.
"Company Charter" means the Certificate of Incorporation of the
---------------
Company substantially in the form of Exhibit A.
"Company Common Stock" means the common stock, $0.01 par value per
--------------------
share, of the Company as set forth in the Company Charter.
"[*]" means any and all of the [*] owned or [*] by the [*] as of the
Closing Date or in the future (but prior to (i) with respect to the [*] License
to [*], the termination of [*] direct and indirect equity interest in the [*]
or, [*] the termination of the [*], (ii) with respect to the [*] License to [*],
the termination of the [*] direct and indirect equity interest in the [*] or,
[*], [*] the termination of the [*], and (iii) with respect to the [*] License
to [*] the termination of [*] direct and indirect equity interest in the [*] or,
[*] the termination of the [*] License), subject to payment or reimbursement by
the [*] of the Company's actual payment obligations to Persons that are not
Affiliates of the Company for the [*] to and use by the Applicable Licensor of
such [*].
"[*] License" means those agreements providing a license from the [*]
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to [*], to [*], and to [*], attached hereto as Exhibits C, D and E.
"Consenting Stockholder" means the Initial Stockholders and any holder
----------------------
of shares of Series B Stock that hereafter become a party to this Agreement.
"Consenting Stockholder Group" means each Consenting Stockholder none
----------------------------
of the Controlled Affiliates of which is a Consenting Stockholder and each group
of two or more Consenting Stockholders that are Controlled Affiliates of each
other.
"Contract" means any oral or written contract, indenture, mortgage,
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lease, deed, commitment, agreement, arrangement or legally binding
understanding.
"Controlled Affiliate" means, with respect to any Person, the Parent
--------------------
of such Person and the Subsidiaries of such Parent.
The term "Dispose" (including its correlative meanings "Disposed of",
------- -----------
"Disposition" and "Disposal"), with respect to any shares of the Company Common
----------- --------
Stock, means to Transfer, pledge, hypothecate or otherwise dispose of any such
shares, except by operation of law in connection with a merger or consolidation
of the Company.
__________
[*] Confidential Treatment Requested.
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"ERISA" means the Employee Retirement Security Act of 1974, as amended
-----
from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
from time to time.
[*] means the production, marketing, distribution, sale and supply of
[*] and [*] for and [*] to [*], and by [*], in the Territory.
"GAAP" means United States generally accepted accounting principles.
----
[*] means any and all of the [*] owned or [*] by [*] or any of its
Subsidiaries, now or in the future (but prior to the termination of [*] direct
and indirect equity interest in the [*]), to [*], or [*] an [*], and any
subsystems, components, parts or portions of an [*] (whether hardware, firmware,
software or otherwise), subject, in the case of [*] the license to which is
first obtained by [*] or the applicable Subsidiary after the Closing Date, to
[*] by the Company of [*] or its Subsidiaries' actual [*] to Persons that are
not their Affiliates for the [*] by the Company of such [*], if and to the
extent that the Company Board determines that the Company should obtain [*] to
any of the [*] set forth in this definition.
"[*] Agency, Marketing Representation and Services Agreement" means an
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agency and service agreement between [*] and the Company, substantially in the
form of Exhibit R.
"Gemstar" means Gemstar International Group Limited, a British Virgin
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Islands company, and any successor (by merger, consolidation, Transfer or
otherwise) to all, or substantially all, of its business and assets.
[*] means a [*] which may be granted to the [*] in the future based
upon [*].
"Governmental Approval" means any Approval of, notice to, declaration
---------------------
of, or filing with, any Governmental Authority.
"Governmental Authority" means any court, administrative agency or
----------------------
commission or other governmental agency or instrumentality, domestic or foreign,
or any arbitrator, of competent jurisdiction.
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[*] Confidential Treatment Requested.
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"Group" means a "Group" within the meaning of Section 13(d)(3) of the
-----
Exchange Act.
"Indirect Transfer" means a Transfer of common stock or other security
-----------------
interests of a Consenting Stockholder or of a Person of which such Consenting
Stockholder is a direct or indirect Subsidiary to any Person after giving effect
to which such Consenting Stockholder is no longer a Subsidiary of the Person
that was its Parent prior to such Transfer, unless the holders of Voting
Securities of the Person that was such Consenting Stockholder's Parent prior to
such Transfer beneficially own Voting Securities representing fifty percent or
more of the Actual Voting Power of the Person that is such Consenting
Stockholder's Parent immediately after such Transfer.
"Initial Participants" means [*] and [*].
--------------------
"Initial Stockholders" means [*] and [*].
--------------------
"Initial Shares" means the shares of Series B Stock to be issued, sold
--------------
and purchased at the Closing, as provided in Section 2.01.
"Injunction" means any preliminary, temporary, interim or final
----------
injunction, temporary restraining order or other legal prohibition.
[*] means an [*] or [*] (including [*], but excluding [*]).
[*] of a Person shall mean any [*], [*] property rights of such Person
that serve to limit or restrict the ability of any Person other than the owner
of such right or such owner's licensees, from [*] or otherwise commercially
exploiting the subject matter thereof. References herein to the [*] of a Person
that is a [*] as contemplated by this Agreement shall be deemed to refer to all
[*] that are owned by such Person are that are licensed to such Person with the
right to [*] of a scope that includes the [*] to be granted as contemplated
herein. [*] shall not include [*] and [*].
"Judgment" means any judgment, order, decree or arbitral award.
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"Law" means any applicable statute, law, ordinance, rule or
---
regulation.
"Lien" means, with respect to any asset, (i) any mortgage, deed of
----
trust, lien, pledge, charge, security interest, easement, covenant, right-of-
way, restriction, equity or encumbrance of any nature whatsoever in or on such
asset, (ii) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such asset
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[*] Confidential Treatment Requested.
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and (iii) in the case of securities, any purchase option, call or similar right
of a third party with respect to such securities or any limitation on the voting
rights of such securities.
"Litigation" means any written claim, action, lawsuit, arbitration or
----------
proceeding.
"Market Price" means, with respect to any share of Series B Stock as
------------
of any date, the average for the twenty full Trading Days preceding such date of
(i) the last reported sales prices, regular way, as reported on the principal
national securities exchange on which the Series A Stock is listed or admitted
for trading or (ii) if the Series A Stock is not listed or admitted for trading
on any national securities exchange, the last reported sales prices, regular
way, as reported on the National Market tier of The Nasdaq Stock Market or, if
the Series A Stock is not quoted on such National Market tier, the average of
the highest bid and lowest asked prices on each such Trading Day as reported on
The Nasdaq Stock Market, or (iii) if the Series A Stock is not listed or
admitted to trading on any national securities exchange or The Nasdaq Stock
Market, the average of the highest bid and lowest asked prices on each such
Trading Day in the domestic over-the-counter market as reported by the National
Quotation Bureau Incorporated, or any similar successor organization. For
purposes of this definition, a "Trading Day" means a day on which the principal
-----------
national securities exchange on which the Series A Stock is listed or admitted
to trading, or The Nasdaq Stock Market, as applicable, if the Series A Stock is
not listed or admitted to trading on any national securities exchange, is open
for the transaction of business (unless such trading shall have been suspended
for the entire day) or, if the Series A Stock is not listed or admitted to
trading on any national securities exchange or The Nasdaq Stock Market, any
Business Day.
Any reference to any fact, event, change or effect being "material"
--------
with respect to any party means an event, change or effect that is or, insofar
as can reasonably be foreseen, will be material to the business, properties,
prospects, assets, liabilities, financial condition or results of operations of
such party and its Subsidiaries, taken as a whole, or on the ability of such
party and its Subsidiaries to perform their respective obligations under this
Agreement and the other Operative Documents in accordance with their respective
terms.
[*] means this Agreement, the Company Charter and the Company Bylaws,
the [*] Agency, Marketing Representation and Services Agreement, the [*] Agency,
Marketing Representation and Services Agreement, the [*] Agency, Marketing
Representation and Services Agreement, the Escrow Agreement, the [*], the [*],
the [*], the [*], the [*], the [*], the [*], the Warrants and the Voting
Agreements.
"Parent" with respect to any Person as of any relevant date, means
------
such Person if it is its own ultimate parent entity (within the meaning of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder, as in effect on the date hereof) or if
it has no ultimate parent entity that is a corporation, limited
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[*] Confidential Treatment Requested.
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liability company or partnership; otherwise, "Parent" means such ultimate
corporate, limited liability company or partnership parent entity of such
Person; provided, however, that, with respect to [*] and any other Subsidiary of
-------- -------
[*] that may hereafter become a Consenting Stockholder, so long as such
Consenting Stockholder is a Subsidiary of [*], "Parent" means [*].
"Participants" means the Initial Participants, the Parent of any
------------
Person that hereafter becomes a Consenting Stockholder or such Consenting
Stockholder if it is its own Parent. A Participant shall be deemed to be
"related" or "relating" to a Consenting Stockholder if it is a Parent of such
- -------- --------
Consenting Stockholder.
"Party" means any party hereto.
-----
"Patent Rights" of a Person means any and all patents, utility models
-------------
and other patent rights of such Person under the laws of all countries,
including reissues and re-examinations thereof, and applications and provisional
applications for any of the foregoing, including any continuations,
continuations in part, patents of addition and divisions thereof, relating to
inventions or discoveries [*].
"Permitted Liens" means:
---------------
(a) mechanics', carriers', workers', repairers' or other like Liens
arising from or incurred in the ordinary course of business and securing
obligations which are not due or which are being contested in good faith by the
relevant party, Liens for taxes which are not due and payable or which may
thereafter be paid without penalty or which are being contested in good faith by
the relevant party (provided that the relevant party has set up adequate
reserves for the payment of such taxes) and other imperfections of title or
encumbrances, if any, which imperfections of title or other encumbrances do not
materially impair the use of the assets to which they relate;
(b) easements, covenants, rights-of-way and other encumbrances or
restrictions of record;
(c) zoning, building and other similar restrictions if the same are
not violated in any material respect by any improvements of the relevant party
or by the use thereof for the conduct of the relevant party's business;
(d) unrecorded easements, covenants, rights-of-way or other
encumbrances or restrictions, none of which unrecorded items materially impairs
the use of the property to which it relates in the business of the relevant
party as presently conducted or as proposed to be conducted; and
(e) Liens arising by virtue of any [*].
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[*] Confidential Treatment Requested.
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"Person" means any individual, firm, corporation, partnership, limited
------
liability company, Group, trust, joint venture, Governmental Authority or other
entity and shall include any successor (by merger or otherwise) of such entity.
"Private Approval" means any approval of, notice to, declaration of or
----------------
filing with, any Person other than a Governmental Authority.
"Public Offering" means the offering of shares of Series A Stock
---------------
pursuant to a registration statement on a form applicable to the sale of
securities to the general public.
"SEC" means the Securities and Exchange Commission or any other
---
Federal agency at the time administering the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended from
--------------
time to time.
"Senior Officer" means any one of the following officers of a Person:
--------------
the chairman of the board, any vice chairman, the chief executive officer, the
president, any executive vice president, any senior vice president, the chief
legal officer and the chief financial officer.
"Series A Stock" means shares of the series of the Company Common
--------------
Stock designated as Series A Common Stock, as set forth in the Company Charter.
"Series B Stock" means shares of the series of the Company Common
--------------
Stock designated as Series B Common Stock, as set forth in the Company Charter.
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"[*]" means the [*] of a [*] or [*] and [*] system, (including [*]
---
and [*] systems) who or that provides, over or through such [*] or [*] (alone or
together with other services) to [*] (such as [*] and [*]) for a [*], [*] of
the [*] and [*] delivered in [*] form, but excluding the [*], [*] and their [*],
[*], [*] and [*] (i.e., [*] refers to systems where [*] such as a company or
government agency; [*] refers to an secure [*] [*] between, for example,
suppliers and customers). For the purpose of defining the scope of the business
in which the Company may engage, but for no other purpose, including without
limitation, [*], the term [*] shall also include any Person who or that provides
a [*], of which [*] is the [*] and which includes an [*] (whether [*]), to [*]
for [*], if such Person has a [*], [*] or other [*] with an owner or operator of
a [*] or [*] (as described above) with regard to the [*] charged to [*] or such
Person's [*].
"Significant Board Transaction" means any of the following actions:
-----------------------------
(a) any Significant Stockholder Transaction;
(b) any change in the Accountants for the Company;
(c) the appointment or change in appointment of legal counsel for the
Company or the institution, settlement or abandonment of any legal action or
arbitration in the name of the Company or any Person controlled by the Company
involving a claim or claims for equitable relief or monetary damages aggregating
in excess of $[*] or involving a claim or claims by any Governmental Authority;
(d) all matters relating to (i) the appointment, employment,
compensation (including stock option grants), termination or removal of any
Senior Officer of the Company or (ii) the payment or agreement by the Company to
pay cash compensation to any other officer or employee of the Company whose
aggregate annual cash compensation exceeds, or would exceed by reason of a
contemplated increase, $[*];
(e) all decisions relating to the [*] and [*] (including changes to
the [*]), including [*] and [*], all material decisions relating to the [*] of
the Company's [*], all material decisions related to the [*] of the Company's
[*] and the [*], including the [*] and the Company related [*];
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[*] Confidential Treatment Requested.
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(f) the approval and adoption of annual Budgets and the adoption of a
business plan for the Company and the approval of any material deviation
therefrom;
(g) any expenditures (i) not provided for in the then Budget which,
for any one item or in the aggregate, are [*] or more of the amount allocated
for expenditures of such type in the then Budget or (ii) that exceed the amount
provided therefor in the then Budget by [*] or more for any one item or in the
aggregate, and any other material deviation from the then Budget;
(h) the making of any loan or other advance of money to any Person or
the guaranteeing of the obligations of any Person, other than in the ordinary
course of business of the Company so long as such Person is not a Consenting
Stockholder or Affiliate thereof;
(i) the adoption or change of a significant tax or accounting practice
or principle of the Company or the making of any significant tax or accounting
election by the Company or the adoption of any position for purposes of any tax
return that will have a material adverse effect on any Consenting Stockholder or
its Affiliates;
(j) the sale, transfer, disposition, pledge or encumbrance of any
assets of the Company or any Person controlled by the Company having a fair
market value in excess of [*] in any single transaction or series of related
transactions or [*] in the aggregate in any twelve-month period;
(k) the acquisition, directly or indirectly, of any substantial
interest or participation in any Person;
(l) any decision to change the location of the Company's principal
place of business from [*], except for a relocation that is made for both [*]
and [*];
(m) any transaction with a Consenting Stockholder or Affiliate
thereof;
(n) producing, marketing, distributing, selling, offering to sell or
supplying [*] and [*] for and [*] related services to [*], [*] pursuant to the
terms of the [*], the approval of any material changes in the [*] to be entered
into by the Company with [*] [*] or any changes therein that would result in
terms less favorable to [*] or the adoption of any new [*]; and
(o) any material press releases, including all announcements of
product introductions or of agreements with [*].
"Significant Stockholder Transaction" means any of the following
-----------------------------------
actions:
__________
[*] Confidential Treatment Requested.
12
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(a) conducting any business other than the Business;
(b) (i) any creation of (x) any additional class of capital stock of
the Company or any Person controlled by the Company or (y) any security having a
direct or indirect equity participation in the Company or any Person controlled
by the Company, or (ii) the sale or issuance (whether by stock dividend, stock
split, reclassification, to a Person who would become a party to this Agreement,
in a Public Offering or otherwise) by the Company or any Person controlled by
the Company of shares of capital stock or warrants, options or rights to acquire
shares of capital stock or securities convertible into or exchangeable for
capital stock or any security having a direct or indirect equity participation
in the Company or any Person controlled by the Company (other than (x) shares
of Series A Stock or options to acquire shares of Series A Stock issued to
employees, officers, directors and consultants of the Company, but in no event
in an amount greater than [*] shares in the aggregate; provided, however, that
the foregoing number shall be increased by the number of shares of Series A
Stock subject to an option that expires unexercised if such shares were counted
against the [*] shares when the option was granted and (y) shares of Series A
Stock and warrants to purchase shares of Series A Stock issued to [*] or a
Subsidiary thereof as contemplated by Schedule 2.01 (c);
(c) any acquisition by the Company or any Person controlled by the
Company of a business or assets outside of the ordinary course of business,
except for any acquisition within the scope of the Business if the amount
involved in such acquisition (and any related transactions) is [*] or less;
(d) any disposition of assets or of all or a part of a business in a
transaction or series of transactions exceeding [*] in any single transaction or
series of related transactions or [*] in the aggregate for any [*] period;
(e) any amendment to or modification of any provision of the
certificate of incorporation or bylaws of the Company as in effect from time to
time;
(f) any merger, consolidation or binding share exchange to which the
Company or any Person controlled by the Company is a party;
(g) the declaration or payment of any dividend or distribution by the
Company or any Person controlled by the Company (other than the payment of a
dividend or making of a distribution to the Company by a wholly owned subsidiary
of the Company);
(h) the dissolution, liquidation or winding up of the Company;
(i) the entering into by the Company of any agreement (other than an
amendment to this Agreement) or the obtaining by the Company of any license or
franchise
___________
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13
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which restricts the transfer of shares of the Company Common Stock or
subjects the shares of the Company Common Stock to any Liens of any nature
whatsoever; and
(j) the incurrence of indebtedness for borrowed money.
After consummation of the Company's initial Public Offering,
"Significant Stockholder Transaction" shall mean (i) any amendment to or
modification of any provision of the certificate of incorporation of the Company
as in effect from time to time; (ii) any merger, consolidation or binding share
exchange to which the Company is a party or that requires the issuance of any
capital stock of the Company; (iii) the disposition in one transaction or a
series of related transactions of all or substantially all of the assets of the
Company; (iv) a dissolution, liquidation or winding up of the Company; and (v)
any other matter (other than the election of directors) required by the laws of
the jurisdiction of organization of the Company to be submitted to stockholders
for approval.
[*] means the business of providing [*] to [*] in the Territory.
[*] means the written agreement [*], and as it may from time to time
be amended in accordance with this Agreement, providing for a [*] of [*].
"Subsidiary" of any Person (the "first Person") means any other Person
----------
(the "second Person") more than [*] percent of the Actual Voting Power of the
outstanding Voting Securities of which are owned or controlled, directly or
indirectly through one or more Subsidiaries, by the first Person; provided,
--------
however, that in each case, the second Person shall be deemed to be a Subsidiary
- -------
of the first Person only for so long as such ownership or control exists.
[*] means [*], and any successor (by merger, consolidation, Transfer
or otherwise), to all, or substantially all, of its business and assets.
"[*] Agency, Marketing Representation and Services Agreement" means an
-------------------------------------------------------
agency and services agreement between TCC and the Company, substantially in the
form of Exhibit S."
[*] means [*], and any successor (by merger, consolidation, Transfer
or otherwise) to all, or substantially all, of its business and assets.
[*] means [*], and any successor (by merger, consolidation, Transfer
or otherwise) to all, or substantially all, of its business and assets.
__________
[*] Confidential Treatment Requested.
14
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"Territory" means the [*] (including [*] and [*]), the [*]
---------
territories and [*].
"Transactions" means the transactions contemplated by the [*].
------------
"Transfer" means to sell, exchange, assign or transfer.
--------
[*] means any and all of the [*] owned or [*] by [*] as of the Closing
Date to [*] or [*] an [*], and any subsystems, components, parts or portions of
an [*] (whether hardware, firmware, software or otherwise), which [*] arose out
of the [*] of which [*].
[*] means a [*] which may be granted to the [*] in the future based
upon the [*].
[*] means [*], and any successor (by merger, consolidation, Transfer
or otherwise) to all, or substantially all, of its business and assets.
"[*] Agency, Marketing Representation and Services Agreement" means
-------------------------------------------------------
an agency and services agreement between [*] and the Company, substantially in
the form of Exhibit T."
[*] means any and all of the [*] owned or [*] by [*] or any of its
Subsidiaries now or in the future (but prior to the termination of [*] direct
and indirect equity interest in the Company), to [*] or [*] an [*], and any
subsystems, components, parts or portions of an [*] (whether hardware, firmware,
software or otherwise), subject, in the case of [*] the [*] to which is first
obtained by [*] or the applicable Subsidiary after the Closing Date, to [*] by
the Company of [*] or its Subsidiaries' [*] to Persons that are not their
Affiliates for the [*] to and [*] the Company of such [*], if and to the extent
that the Company Board determines that the Company should obtain a [*] to any of
the [*] set forth in this definition.
[*] means a [*] which may be granted to the [*] in the future based
upon [*].
"Voting Securities" of any Person shall mean (x) if such Person is a
-----------------
corporation, any securities of such corporation entitled to vote generally in
the election of directors of such corporation and any other securities
(including rights, warrants and options) convertible into, exchangeable for or
exercisable for any such securities, whether or not presently convertible,
__________
[*] Confidential Treatment Requested.
15
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exchangeable or exercisable, and (y) if such Person does not have any
outstanding shares or securities, as may be the case in a partnership, joint
venture, or incorporated association, any ownership interests in such entity
representing the right to make decisions for such entity and any security,
right, warrant or options convertible into, exchangeable for or exercisable for
any such ownership interest, whether or not presently convertible, exchangeable
or exercisable.
SECTION 1.02 Additional Definitions
----------------------
<TABLE>
<CAPTION>
Defined Term Section Defined In
- ------------ ------------------
<S> <C>
Additional Capital 11.01
Allocable First Offer Shares 7.03(a)
Applicable Term 10.07(b)
Arbiter 7.09
Business Preliminary Statement
Buyer 7.09
Buy-Out Notice 7.09
Buy-Out Price 7.09
Buy-Sell Procedure 7.08
Changed Stockholder 6.02(b)
Change Notice 7.10(a)
Company Indemnified Parties 8.06
Company Notice 8.01(a)
Converting Stockholder 7.03(a)
DGCL 6.01(b)
Defaulting Holder 7.09
Demand Notice 8.01(a)
Demand Registration 8.01(a)
Eligible Holder 8.01
Escrow Agreement 10.07(a)
Event of Default 7.09
Excess Shares 7.10(a)
First Appraiser 7.02(c)
First Offer Electing Stockholder 7.03(a)
First Offer Notice of Sale 7.03(a)
First Offer Shares 7.03(a)
First Refusal Electing Stockholder 7.02(a)
First Refusal Notice of Sale 7.02(a)
First Refusal Shares 7.02(a)
First Refusal Stockholders 7.02(a)
Free-to-Convert Date 7.03(b)
Free-to-Convert Shares 7.03(b)
Funding Stockholders 11.02
[*] 10.08(b)
</TABLE>
___________
[*] Confidential Treatment Requested.
16
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<TABLE>
<S> <C>
[*] 2.01(k)
Independent Directors 6.02(a)
Initiating Holder 7.08(a)
Investment Banking Firm 7.09
Maximum Amount 8.01(f)
[*] 10.07(d)
Nondefaulting Holders 7.09
Notice of Sale 7.04(a)
Offeror IP 7.02(b)
Post-IPO Electing Stockholder 7.04(a)
Post-IPO First Refusal Shares 7.04(a)
Post-IPO First Refusal Stockholders 7.04(a)
Post-IPO Notice of Sale 7.04(a)
Post-IPO Third Party Offer 7.04(a)
Post-IPO Third Party Offeror 7.04(a)
Post-IPO Selling Stockholder 7.04(a)
Purchased Interest 7.09
Purchase Notice 7.10(a)
Purchaser 7.08(b)
Qualifying First Offer Amount 7.03(a)
Responding Holder 7.08
Second Appraiser 7.02(c)
Seller 7.08
Selling Stockholder 7.02(a)
[*] 10.07(a)
Stockholder Indemnified Partner 8.06
Subscription Notice 11.01
Supermajority Board Vote 6.06(b)
Supermajority Stockholder Vote 6.08(b)
[*] 2.01(f)
[*] 2.01(e)
[*] 2.01(c)
Third Appraiser 7.02(c)
Third Party Offer 7.02(a)
Third Party Offeror 7.02(a)
Unchanged Stockholder 6.02(b)
Unfunded Amount 11.02
[*] 2.01(d)
[*] 2.01(f)
Voting Agreements 2.01(h)
Warrants 2.01(h)
</TABLE>
__________
[*] Confidential Treatment Requested.
17
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SECTION 1.03 Terms Generally. The definitions in Sections 1.01 and 1.02
---------------
shall apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. Unless the context
shall otherwise require, any references to any agreement or other instrument or
statute or regulation are to it as amended and supplemented from time to time
(and, in the case of a statute or regulation, to any successor provisions). Any
reference in this Agreement to a "day" or number of "days" (without the explicit
qualification of "Business") shall be interpreted as a reference to a calendar
day or number of calendar days. If any action or notice is to be taken or given
on or by a particular calendar day, and such calendar day is not a Business Day,
then such action or notice shall be deferred until, or may be taken or given on,
the next Business Day.
ARTICLE II
Closing
-------
SECTION 2.01. Closing. At the Closing, subject to the satisfaction (or
-------
waiver by the applicable party) of the conditions set forth in this Agreement,
the following events shall occur:
(a) The Company shall issue and sell to [*], and [*] shall
purchase, 11,730,000 shares of the Series B Stock, for total consideration
consisting of [*] in [*] (payable by wire transfer of immediately
available funds to the Company on the Closing Date).
(b) The Company shall issue and sell to [*] and [*] shall
purchase 11,270,000 shares of Series B Stock, for total consideration
consisting of [*] in [*] (payable by wire transfer of immediately
available funds to the Company on the Closing Date).
(c) [*] will enter into a [*] with the [*] and [*] in the form of
[*] providing for the distribution of a [*] on certain of the [*] owned by
[*] and its Affiliates (the [*]). The Company, [*] and [*] shall execute
and deliver the [*] The Company agrees that [*] shall be entitled to [*] to
purchase shares of Series A Common Stock and [*] shall be accorded [*]
subject to and in accordance with [*].
___________
[*] Confidential Treatment Requested.
18
<PAGE>
(d) [*] will, and will cause its Subsidiaries to, enter into a
[*] agreement with [*], substantially in the form of Exhibit Ghereto (the
"[*] Agreement").
(e) [*] will cause [*] to enter into a [*] agreement with [*],
substantially in the form of Exhibit Hhereto (the "[*] Agreement").
(f) [*] will, and will cause its Subsidiaries to, enter into a
[*] agreement with the Company substantially in the form of Exhibit I
hereto (the "[*] Agreement").
(g) [*] will, and will cause its Subsidiaries to, enter into
a [*] agreement with the Company substantially in the form of Exhibit J
hereto (the "[*] [*]).
(h) [*] will execute and deliver to [*], and [*] will execute and
deliver to [*] and [*], the [*] substantially in the form of Exhibits K and
L, respectively (collectively, the "Warrants"), and shall cause the related
voting agreements substantially in the form of Exhibits M and N,
respectively (collectively, the "Voting Agreements"), to be executed and
delivered by each Person contemplated to be a party thereto.
(i) [*] and [*] will, and will cause their respective
Subsidiaries to, execute and deliver documents substantially in the form
annexed as Exhibits O and P, resolving the existing disputes between them
in the action pending in the U.S. District Court in Tulsa, Oklahoma, and
shall cause to be filed with the proper authorities such documents as may
be required for the dismissal of such action. Further, [*] and [*] will,
and will cause their respective Subsidiaries to, execute and deliver a
release substantially in the form of Exhibit P, releasing each other party
to such release from all claims of patent infringement for acts occurring
prior to the date of this Agreement.
SECTION 2.02. Time and Place of Closing. The Closing will take place at
-------------------------
10:00 a.m. local time on [*], at the offices of [*] at [*], or at such other
place or time as may be agreed upon by the parties.
SECTION 2.03 Stock Legends. Each certificate evidencing the Initial
-------------
Shares and any shares of the Company Common Stock hereafter issued shall bear
the following legends at the time of issuance:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
___________
[*] Confidential Treatment Requested.
19
<PAGE>
STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OFFERED FOR SALE EXCEPT
IN COMPLIANCE WITH SUCH ACT AND LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE DISPOSED OF,
EXCEPT IN ACCORDANCE WITH THE PROCEDURES AND RESTRICTIONS SET FORTH IN
THE JOINT VENTURE FORMATION AND STOCKHOLDERS AGREEMENT DATED AS OF
JANUARY 19, 1998 (THE "STOCKHOLDERS AGREEMENT"), AMONG INTERACTIVE
PREVUE GUIDE, INC. ("THE CORPORATION"), [*] GEMSTAR INTERNATIONAL
GROUP LIMITED AND [*], COPIES OF WHICH ARE FILED AT THE PRINCIPAL
OFFICE OF THE CORPORATION AND ARE AVAILABLE TO ANY HOLDER WITHOUT
CHARGE UPON WRITTEN REQUEST THEREFOR. ANY PURPORTED DISPOSITION IN
VIOLATION OF SUCH RESTRICTIONS SHALL BE VOID AND OF NO EFFECT. AS USED
HEREIN, THE TERM "DISPOSE" (INCLUDING ITS CORRELATIVE MEANINGS
"DISPOSED OF" AND "DISPOSITION"), WITH RESPECT TO ANY INTEREST IN THE
SECURITIES REPRESENTED BY THIS CERTIFICATE, MEANS TO SELL, EXCHANGE,
ASSIGN, TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF ANY SUCH
INTEREST, EXCEPT BY OPERATION OF LAW IN CONNECTION WITH A MERGER OR
CONSOLIDATION OF THE CORPORATION.
ARTICLE III
Conditions to Closing
---------------------
SECTION 3.01. Conditions to Closing. The obligations of each Initial
---------------------
Stockholder (and its related Initial Participant) to consummate the transactions
contemplated hereby at the Closing, and to enter into the other [*] to which it
is contemplated to be a party, are subject to the satisfaction or waiver, as of
the Closing Date, of the following conditions:
(a) Formation of the Company. The Company shall have been duly
------------------------
organized and be validly existing and in good standing as a corporation under
the laws of the State of Delaware and shall have become a party to this
Agreement and have executed and delivered to each of the other parties hereto a
copy hereof.
(b) Governmental Approvals. All Governmental Approvals necessary for
----------------------
the consummation of the Transactions shall have been obtained or made, and all
waiting periods imposed by any Governmental Authority or Law shall have expired
or terminated.
___________
[*] Confidential Treatment Requested.
20
<PAGE>
(c) No Injunction or Litigation. No Injunction restraining or
---------------------------
preventing the consummation of the Transactions shall be in effect, and no
Litigation shall be pending before any Governmental Authority with jurisdiction
in the matter that would restrain or prevent the consummation of the
Transactions or impose on such Stockholder, its Affiliates or the Company any
Burdensome Condition.
(d) Other [*]. The parties to each other [*] shall have entered
-----
into all such other [*], each of which shall be in full force and effect.
(e) Private Approvals. All Private Approvals necessary for the
-----------------
consummation of the Transactions shall have been obtained or made.
(f) Burdensome Condition. No Burdensome Condition shall exist in
--------------------
connection with the consummation of any of the Transactions.
(g) Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of the other Initial Stockholder (and its related Initial
Participant) made in each [*] shall be true and correct in all material respects
as of the Closing Date, as if made on and as of the Closing Date.
(h) Performance of Obligations. The other Initial Stockholder (and
--------------------------
its related Initial Participant) shall each have performed or complied in all
material respects with its respective covenants and agreements contained in the
[*] required to be performed or complied with by it on or prior to the Closing
Date.
(i) Closing Certificates. Such Initial Stockholder and its related
--------------------
Initial Participant shall have received such other certificates or documents as
they or their counsel may reasonably request relating to the satisfaction of the
conditions to the Closing, and all other corporate and legal proceedings
relating to the Closing shall be reasonably satisfactory to them and their
counsel.
(j) Operating Matters. The Initial Stockholders shall have agreed
-----------------
upon the Budget for fiscal year 1998, subject to such variations as may be
approved by the Board of Directors from time to time and the [*] contemplated
under [*].
ARTICLE IV
Representations and Warranties
------------------------------
SECTION 4.01. Representations and Warranties of the Company. The Company
---------------------------------------------
by its execution hereof represents and warrants to each Consenting Stockholder
(and its related Participant) on and as of the Closing Date, as follows:
___________
[*] Confidential Treatment Requested.
21
<PAGE>
(a) Organization and Standing. The Company:
-------------------------
(i) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware; and
(ii) has all requisite corporate power and authority and
possesses all Approvals necessary to enable it to use its corporate
name and to own, lease or otherwise hold its properties and assets.
(b) Authority. The Company has all requisite corporate power and
---------
authority to enter into this Agreement and the other [*] to which it is a party
and to consummate the Transactions. The execution and delivery by the Company of
this Agreement and the other [*] and the consummation by the Company of the
Transactions have been duly authorized by all necessary corporate action on the
part of the Company. This Agreement and the other [*] have been, or will at the
Closing have been, duly executed and delivered by the Company and constitute, or
will at the Closing constitute, legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms. The execution and delivery by the Company of this Agreement and the other
[*] do not and did not, and the consummation of the Transactions and compliance
with the terms of the [*] will not, conflict with, result in any violation of or
default (with or without notice or lapse of time or both) under, give rise to a
right of termination, cancellation or acceleration or any material obligation or
to the loss of any material benefit under or result in or require the creation,
imposition or extension of any Lien (other than a Permitted Lien) upon any of
the properties or assets of the Company under (i) any Contract, (ii) any
provision of the Company Charter or the Company Bylaws or (iii) any Judgment or
Law. No Governmental Approval or Private Approval is required to be obtained or
made by the Company in connection with the execution and delivery of this
Agreement or the other [*] or the consummation of the Transactions.
(c) Constitutive Documents. The certificate of incorporation and
----------------------
bylaws of the Company are in substantially the form annexed hereto as Exhibits A
and B, respectively.
(d) Capitalization of the Company. No shares of the Company Common
-----------------------------
Stock or other capital stock of the Company are issued or outstanding. Except
for this Agreement, there are no outstanding Contracts pursuant to which the
Company is or may become obligated to issue, deliver or sell any shares of the
Company Common Stock or other capital stock. There are no outstanding Contracts
pursuant to which the Company is or may become obligated to redeem, repurchase
or otherwise acquire or retire any shares of the Company Common Stock or other
capital stock. The issuance of the Initial Shares has been duly authorized, and
the Initial Shares, when issued and delivered pursuant to this Agreement, will
be validly issued, fully paid and non assessable and will not have been issued
in violation of, and will not be subject to, any preemptive or subscription
rights.
___________
[*] Confidential Treatment Requested.
22
<PAGE>
(e) Prior Business. Except for the execution of this Agreement
--------------
and the other [*], the consummation of the Transactions and other transactions
related thereto and matters preparatory thereto, the Company has not since its
date of incorporation carried on any business or other activities of any kind
whatsoever. Except for its rights and obligations under the [*] or as
contemplated thereby, the Company has no material assets or liabilities and is
not a party to any Contract. The Company does not have any Subsidiaries or,
directly or indirectly, own any capital stock or other equity interests in any
corporation, partnership or other entity, and the Company is not a member of or
participant in any partnership, joint venture or similar entity.
(f) Brokers or Finders. No Person is or will be entitled to any
------------------
broker's or finder's fee or any other commission or similar fee from the Company
in connection with any of the Transactions.
SECTION 4.02. Representations and Warranties of Initial Stockholders and
----------------------------------------------------------
Their Related Initial Participants. Each Initial Stockholder and its related
- ----------------------------------
Initial Participant represents and warrants to each other party that, as of the
date of this Agreement and as of the Closing Date, with respect to itself:
(a) Organization and Standing. Such party:
-------------------------
(i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization and is
duly qualified or licensed to do business and in good standing in each
jurisdiction in which the failure to be so qualified or licensed and
in good standing (individually or in the aggregate) would have a
material adverse effect on such party; and
(ii) has all requisite corporate power and authority necessary to
enable it to use its corporate name and to own, lease or otherwise
hold its properties and assets and to carry on its business as
presently conducted.
(b) Authority. Such party has all requisite corporate power and
---------
authority to enter into this Agreement and the other [*] to which it is a party
and to consummate the Transactions. The execution and delivery by such party of
this Agreement and the other [*] to which it is a party and the consummation by
such party of the Transactions have been duly authorized by all necessary
corporate action on the part of such party. This Agreement and the other [*] to
which it is a party have been, or will at the Closing have been, duly executed
and delivered by such party and constitute, or will at the Closing constitute,
its legal, valid and binding obligations, enforceable against such party in
accordance with their respective terms. The execution and delivery by such party
of this Agreement and the other [*] to which it is a party do not, and the
consummation of the Transactions and compliance with the terms of the [*]
Documents to which it is a party will not, conflict with, result in any
violation of or default (with or without notice or lapse of time or both) under,
give rise to a right of termination, cancellation or
___________
[*] Confidential Treatment Requested.
23
<PAGE>
acceleration or any material obligation or to the loss of any material benefit
under or result in or require the creation, imposition or extension of any Lien
(other than a Permitted Lien) upon any of its properties or assets under (i) any
Contract, (ii) any provision of its constitutive documents or (iii) any Judgment
or Law, except, with respect to clause (i) or (iii), for such conflicts,
violations, defaults, rights, obligations or losses that, individually or in the
aggregate, would not have a material adverse effect on such party. No
Governmental Approval or Private Approval is required to be obtained or made by
such party or any of its Affiliates in connection with the execution and
delivery of this Agreement or the other [*] to which it is a party or the
consummation of the Transactions (other than Governmental Approvals (x) relating
to the Transactions that must be obtained by such party by reason of facts
peculiar to another party which such other party has not disclosed or (y) the
absence of which would not have a material adverse effect on any party).
(c) Wholly Owned Subsidiary. Such Initial Stockholder is a direct or
-----------------------
indirect wholly owned Subsidiary of such Initial Participant.
(d) Brokers or Finders. No Person is or will be entitled to any
------------------
broker's or finder's fee or any other commission or similar fee from such party
in connection with any of the Transactions.
(e) Securities Act. The Initial Shares to be purchased by such
--------------
Initial Stockholder pursuant to this Agreement are being acquired for its own
account for the purpose of investment only and not with a view to any public
distribution thereof.
(f) Source of Funds. Such Initial Stockholder will not acquire all
---------------
or any part of the Initial Shares to be purchased by it on behalf of, or with
the assets of, any "employee benefit plan" as defined in ERISA.
(g) Labor Relations. With respect to any employees of such party
---------------
who have agreed to accept employment with the Company in accordance with Section
10.04 or who will be offered employment by the Company pursuant to Section
10.04, there is no existing collective bargaining agreement or other Contract
with a labor union.
ARTICLE V
Covenants Pending the Closing
-----------------------------
SECTION 5.01. Covenants Pending the Closing. Each party shall take all
-----------------------------
actions reasonably necessary or appropriate to ensure that the conditions to
Closing set forth herein to be satisfied by such party or its Affiliates are
satisfied on or prior to the Closing Date and to obtain (and cooperate with the
other parties in obtaining) any Approvals required to be obtained or made by it
in connection with any of the Transactions, except that such party shall not be
required to accept any condition or take any action it in good faith believes to
be commercially unreasonable under the circumstances.
___________
[*] Confidential Treatment Requested.
24
<PAGE>
SECTION 5.02. Constitutive Documents. The Company Charter shall be filed
----------------------
with the Secretary of State of Delaware and the Company Bylaws shall be duly
adopted.
ARTICLE VI
Board of Directors and Stockholders
-----------------------------------
SECTION 6.01. Voting; Written Consent
-----------------------
(a) Any agreement by the Consenting Stockholders herein to vote their
shares of the Company Common Stock in a certain manner shall be deemed, in each
instance, to include an agreement by each Consenting Stockholder to use such
Consenting Stockholder's best efforts and to take all actions necessary to call,
or cause the Company and the appropriate officers and directors of the Company
to call, as promptly as practicable, a special or annual meeting of stockholders
or to act by written consent.
(b) When any action is required to be taken by a Consenting
Stockholder pursuant to this Agreement, such Consenting Stockholder shall take
all steps necessary to implement such action, including without limitation,
executing or causing to be executed, as promptly as practicable, a consent in
writing in lieu of an annual or special meeting of stockholders pursuant to
Section 228 of the Delaware General Corporation Law or any successor statute
thereto ("DGCL") to effect such stockholder action.
(c) Unless expressly stated to the contrary herein, any action
requiring the vote of the directors (or any committee thereof) may be effected
by consent in lieu of a meeting of the directors or committee members, as the
case may be, pursuant to Section 141(f) of the DGCL.
SECTION 6.02. Composition of the Company Board.
--------------------------------
(a) Prior to consummation of the Company's initial Public Offering,
the Company Board shall consist of [*] directors, of which, subject to Section
6.02(b), each Consenting Stockholder Group shall have the right to designate [*]
individuals to serve as directors and [*] will serve as the [*] director.
Following consummation of the Company's initial Public Offering, each Consenting
Stockholder Group shall have the right to designate one individual to serve as a
director for each [*] of the outstanding shares of Series B Stock owned in the
aggregate by the members of such Consenting Stockholder Group.
In connection with the Company's initial Public Offering, the size of the
Company Board shall be increased to [*] directors effective as of the
consummation of such Public Offering. The [*] additional directors shall each be
a Person who is unaffiliated with the Company or either Consenting Stockholder
(the "Independent Directors"). Each Consenting Stockholder
___________
[*] Confidential Treatment Requested.
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shall be entitled to designate one of the Independent Directors, which designee
shall be reasonably satisfactory to the other Consenting Stockholder, for so
long as such Consenting Stockholder is entitled to designate at least [*]
pursuant to Section 6.02(a); provided, however, that under the circumstances
-------- -------
described in Section 6.02(b), the [*] Independent Directors shall be selected by
a majority vote of the Company Board.
The directors will be divided into three classes as nearly equal in size as
practicable, with the term of the Class I Directors expiring at the 1999 annual
meeting of stockholders, of the Class II Directors expiring at the 2000 annual
meeting and of the Class III Directors expiring at the 2001 annual meeting of
stockholders. The designees of each Consenting Stockholder Group will be
allocated evenly among the classes so that each such Consenting Stockholder
Group has appointed one member of each class. The [*] will be a Class I
Director.
(b) Notwithstanding Section 6.02(a), in the event of a [*] of the [*]
of a [*] prior to consummation of the Company's initial Public Offering, the
number of individuals that such Consenting Stockholder (the "Changed
Stockholder") (and its Consenting Stockholder Group, if applicable) shall be
entitled to designate to the Company Board shall be [*] and the number of
individuals that the other Consenting Stockholder (the "Unchanged Stockholder")
(and its Consenting Stockholder Group, if applicable) shall be entitled to
designate to the Company Board shall be [*]. Promptly following the occurrence
of the [*], the Changed Stockholder shall request the removal of one of its
directors in accordance with Section 6.03 and the Unchanged Stockholder shall be
entitled to designate an individual to fill the resulting vacancy in accordance
with Section 6.04.
(c) Each Consenting Stockholder hereby agrees to vote all shares of
the Company Common Stock owned by such Consenting Stockholder to cause the
election to the Company Board of the individuals designated by the Consenting
Stockholders in accordance with this Section 6.02.
SECTION 6.03. Removal of Directors. Each Consenting Stockholder shall
--------------------
vote all shares of the Company Common Stock owned by such Consenting Stockholder
for the removal (with or without cause) of any director designated and elected
pursuant to Section 6.02 hereof if the Consenting Stockholder entitled to
designate such director pursuant to Section 6.02 requests such removal by
written notice to the other Consenting Stockholder.
SECTION 6.04. Vacancies. If, as a result of death, disability,
---------
retirement, resignation, removal (with or without cause) or otherwise there
shall exist or occur any vacancy on the Company Board:
(i) the Consenting Stockholder Group entitled to designate (pursuant
to Section 6.02) the director whose death, disability, retirement,
resignation or removal resulted in such vacancy or that is otherwise
entitled to fill such vacancy (pursuant to
___________
[*] Confidential Treatment Requested.
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Section 6.02(b)) may designate another individual to fill such capacity and
to serve as a director of the Company and
(ii) each Consenting Stockholder shall vote its respective shares in
favor of the individual designated in accordance with clause (i) above to
fill such vacancy.
SECTION 6.05. Conflicting Charter or Bylaw Provisions. Each Consenting
---------------------------------------
Stockholder shall vote its shares of the Company Common Stock, and shall take
all other actions necessary, to ensure that the Company Charter and the Company
Bylaws, as each may be amended from time to time, facilitate and do not at any
time conflict with the provisions of this Agreement.
SECTION 6.06. Action by the Board of Directors.
--------------------------------
(a) Except as otherwise provided in Sections 6.06(b) and (c), all
actions of the Company Board and committees thereof shall require the
[*] of the [*] of directors present at a duly convened meeting of the Company
Board or committee thereof at which a quorum is present or, in lieu of a
meeting, by the unanimous written consent of the members of the Company Board or
committee thereof.
(b) Prior to consummation of the Company's initial Public Offering,
neither the Company nor any entity controlled by the Company shall take, and no
party to this Agreement shall cause the Company or any entity controlled by the
Company to take, any action with respect to any Significant Board Transaction
without
(i) (unless waived by both Initial Participants) providing to the
directors at least ten Business Days' notice of any meeting of the
Company Board at which a Significant Board Transaction is proposed to
be approved, which notice shall describe such proposed Significant
Board Transaction, and
(ii) the prior approval of [*] directors (a "Supermajority Board
Vote").
(c) Notwithstanding the provisions of Sections 6.06(a) and (b), in
addition to any other approval provided in such Sections, the approval of a
majority of disinterested members of the Board of Directors shall be required to
approve any transaction (other than a transaction expressly contemplated in this
Agreement) between the Company and a Consenting Stockholder or an Affiliate of a
Consenting Stockholder.
(d) In the event that a [*] of the members of the Company Board
vote to approve a Significant Board Transaction but a [*] is not obtained, then
the Consenting Stockholders shall first use their good faith efforts to resolve
the matter in a mutually satisfactory manner. If no mutually satisfactory
resolution of the matter has been reached within five days of the initial vote
of the Company Board thereon, then the Consenting
___________
[*] Confidential Treatment Requested.
27
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Stockholders shall (at the insistence of any Consenting Stockholder) refer the
matter to the [*] of [*] for resolution. If the chief executive officers so
agree the proposed Significant Board Transaction will be resubmitted for a vote
of the Company Board within ten days (or such shorter or longer period as they
may agree) after referral to the chief executive officers. Unless and until the
proposed Significant Board Transaction is so resubmitted, the initial vote of
the Company Board will continue to govern with respect to such matter.
SECTION 6.07. Budget Process.
--------------
(a) The CEO shall submit annually to the Company Board at least ninety
(90) days prior to the start of each fiscal year of the Company after the fiscal
year ending December 31, 1998, a proposed research and development, capital
expenditure and operating budget (the "Proposed Budget") for the forthcoming
fiscal year including an income statement prepared on an accrual basis which
shall show in reasonable detail the revenues and expenses projected for the
business of the Company for the forthcoming fiscal year and a cash flow
statement which shall show in reasonable detail the receipts and disbursements
projected for the business of the Company for the forthcoming fiscal year and
the amount of any corresponding cash surplus or deficiency and any contemplated
borrowings of the Company. If such Proposed Budget is approved by the Company
Board by Supermajority Board Vote, then such Proposed Budget shall be considered
approved and shall constitute the "Budget" for all purposes of this Agreement
and shall supersede any previously approved Budget. If a Proposed Budget is not
approved by the requisite vote of the Company Board, then the directors of the
Company shall (and the Consenting Stockholders shall cause their designees on
the Company Board to) cooperate in good faith and confer with the CEO and other
senior officers of the Company for the purpose of attempting to arrive at a
Proposed Budget that can secure the approval of the Company Board.
(b) If, notwithstanding the foregoing procedures, on January 1 of any
fiscal year of the Company no Proposed Budget has been approved by the Company
Board for such fiscal year, then the Budget for the prior fiscal year, adjusted
(without duplication) to reflect increases or decreases resulting from the
following events, shall govern until such time as the Company Board approves a
new Proposed Budget:
(i) the operation of escalation or de-escalation provisions
in contracts in effect at the time of approval of the prior fiscal
year's Budget solely as a result of the passage of time or the
occurrence of events beyond the control of the Company to the extent
such contracts are still in effect;
(ii) elections made in any prior fiscal year under contracts
contemplated by the Budget for the prior fiscal year regardless of
which party to such contracts made such elections;
___________
[*] Confidential Treatment Requested.
28
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(iii) increases or decreases in expenses attributable to
the annualized effect of employee additions or reductions during the
prior fiscal year contemplated by the Budget for the prior fiscal
year;
(iv) changes in interest expense attributable to any loans
made to or retired by the Company;
(v) increases in overhead expenses in an amount equal to the
total of overhead expenses reflected in the Budget for the prior
fiscal year multiplied by the increase in the Consumer Price Index for
the prior year, but in no event more than five percent (5%);
(vi) the anticipated incurrence of costs during such fiscal
year for any legal, accounting and other professional fees or
disbursements in connection with events or changes not contemplated at
the time the Budget for the fiscal year was adopted;
(vii) the continuation of the effects of a decision made by
the Company Board or the Consenting Stockholders in the prior fiscal
year with respect to any Significant Board Transaction or Significant
Stockholder Transaction that are not reflected in the Budget; and
(viii) decreases in expense attributable to non-recurring
items reflected in the prior fiscal year's Budget.
Any budget established pursuant to this Section 6.07(b) is herein referred
to as a "Default Budget." If on January 1 of any fiscal year the Company no
Proposed Budget has been approved by the Company Board for such fiscal year and
a Default Budget was in effect for the prior fiscal year, then such Default
Budget, adjusted (without duplication) to reflect increases or decreases
resulting from the events listed above (as if the references in the first
sentence of this Section 6.07(b) to "Budget" referred to such "Default Budget")
shall govern until the Company Board approves a new Proposed Budget.
SECTION 6.08. Action by Stockholders.
----------------------
(a) [*], all actions required to be approved by the stockholders of
the Company shall require the affirmative vote in person or by proxy at a duly
convened annual or special meeting of stockholders at which a quorum is present
of shares that are entitled to vote and represent a majority of the combined
voting power of the outstanding shares of the Company Common Stock entitled to
vote on the particular action, voting together as a single class, or in lieu of
a meeting, by unanimous written consent of the holders of the Company Common
Stock entitled to vote.
___________
[*] Confidential Treatment Requested.
29
<PAGE>
(b) [*], neither the Company nor any entity controlled by the Company
shall take, and no party to this Agreement shall cause the Company or any entity
controlled by the Company to take, any action with respect to any [*] without
the prior approval of shares of the Company Common Stock entitled to vote and
representing [*] of the combined voting power of the outstanding shares entitled
to vote on the particular action, voting together as a single class, at such a
duly convened meeting or, in lieu of a meeting, by unanimous written consent of
the holders of the Company Common Stock entitled to vote (a [*]); provided,
however, that if prior to consummation of the Company's initial Public Offering,
a [*] occurs with respect to the [*] then, except as otherwise provided in
Section 7.11, the [*] thereafter required to approve a [*] at a duly convened
stockholders' meeting shall be [*] (rather than [*]) of the combined voting
power of the outstanding shares of Company Common Stock entitled to vote on the
particular matter, voting together as a single class.
SECTION 6.09 [*] [*] Committee. The Company shall have an [*]
---------
Committee made up of two Company employees to be designated by the Company Board
and one representative of each [*]. The [*] Committee shall hold regular
meetings at least quarterly. The purposes of the [*] Committee shall be
to:
(a) review and prescribe the Company's practices and procedures for
identifying and protecting [*] developed by the Company;
(b) review technical developments by the Company and recommend and
direct appropriate steps to protect [*] in those developments;
(c) review the status and progress of patent applications, copyright
registrations, trademark applications, mask work registrations and other steps
taken to protect [*] developed by [*] and make recommendations and
directions in that regard;
(d) review [*] of the Company's [*] to others and make recommendations
in that regard; and
(e) review [*] of the [*] of others to the Company and make
recommendations and directions in that regard.
The [*] Committee may undertake such other duties relating to the identification
and protection of [*] developed by the Company as its members may decide upon.
___________
[*] Confidential Treatment Requested.
30
<PAGE>
ARTICLE VII
Transfers
---------
SECTION 7.01. Restrictions on Transfers and Conversion.
----------------------------------------
(a) Prior to consummation of the Company's initial Public Offering, a
Consenting Stockholder shall not Dispose of any of its shares of Company Common
Stock, or convert any of its shares of Series B Stock into Series A Stock,
except for (i) a Transfer of all and not less than all of its shares of Company
Common Stock (x) to any of such Consenting Stockholder's Controlled Affiliates,
provided that the transferee assumes the obligations of the transferor under
this Agreement with respect to such shares and agrees to become a party to this
Agreement, (y) in compliance with Section 7.02, or (z) to another Consenting
Stockholder or its designee pursuant to Section 7.08 or 7.09; or (ii) a Transfer
of a portion of its shares of Company Common Stock to the extent required by
Section 7.10.
(b) After consummation of the Company's initial Public Offering, a
Consenting Stockholder shall not Dispose of any of its shares of Series B Stock,
including by conversion into Series A Stock, except (i) for a Transfer of shares
of Series B Stock to any of such Consenting Stockholder's Controlled Affiliates,
provided that, in each case, the transferee assumes, jointly and severally with
the transferor if less than all of such shares of the transferor are
transferred, the obligations of the transferor under this Agreement with respect
to such shares and agrees to become a party to this Agreement; or (ii) in
compliance with Section 7.03 or 7.04.
(c) Any attempt to Dispose of any shares of the Company Common Stock
or convert any shares of Series B Stock into Series A Stock, in a manner that
does not comply with this Agreement shall be ineffective.
(d) Except as expressly permitted by this Agreement, each Consenting
Stockholder shall, from and after the Closing Date, (i) be the record and
beneficial owner of such shares of the Company Common Stock and other securities
of the Company indicated in the Company's records as being owned by such
Consenting Stockholder, in each case free and clear of any Lien (other than a
Permitted Lien) of any kind, and (ii) have sole voting power with respect to
such Consenting Stockholder's shares of the Company Common Stock and will not
grant any proxy with respect to such shares, enter into any voting trust or
other voting agreement or arrangement with respect to such shares or grant any
other rights to vote such shares; provided, however, that the foregoing shall
-------- -------
not be construed to limit the ability of a Consenting Stockholder to enter into
agreements with respect to the voting of its shares of the Company Common Stock
pending a sale of such stock permitted by Section 7.02 or 7.04 or to enter into
agreements not inconsistent with this Agreement that restrict such Consenting
Stockholder's ability to transfer shares of the Company Common Stock.
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(e) The Company agrees not to record any transfer or conversion of the
Company Common Stock by any Consenting Stockholder in the stock transfer books
of the Company unless the transfer or conversion complies with all provisions of
this Agreement.
SECTION 7.02. Pre-IPO Rights of First Refusal.
-------------------------------
(a) After the third anniversary of the date of this Agreement and
prior to the consummation of the Company's initial Public Offering, if a
Consenting Stockholder ("Selling Stockholder") or its Parent shall receive at
any time a bona fide offer in writing, which the Selling Stockholder or its
Parent proposes to accept (a "Third Party Offer"), from a third party (the
"Third Party Offeror") to acquire all and not less than all of its shares of the
Company Common Stock (the "First Refusal Shares") or to effect an Indirect
Transfer (in which case the "First Refusal Shares" shall be all the shares of
the Company Common Stock owned by the Selling Stockholder), the Selling
Stockholder shall deliver to each other Consenting Stockholder (the "First
Refusal Stockholders") a notice (a "First Refusal Notice of Sale") containing a
copy of the Third Party Offer and setting forth the identity of the Third Party
Offeror and its Parent and an offer to sell the First Refusal Shares to the
First Refusal Stockholders on the following terms: (i) if the Third Party Offer
contemplates a purchase of the First Refusal Shares by the Third Party Offeror
for consideration consisting solely of cash, then the Selling Stockholder's
offer shall be to sell the First Refusal Shares for cash in an amount equal to
the purchase price specified in, and otherwise on the terms and conditions
contained in, the Third Party Offer, and (ii) if the Third Party Offer
contemplates an acquisition of the First Refusal Shares by the Third Party
Offeror for consideration any portion of which is not cash or if the Third Party
Offer contemplates an Indirect Transfer, then the Selling Stockholder's offer
shall be to sell the First Refusal Shares for cash in an amount equal to the
fair market value of the noncash consideration or of the First Refusal Shares,
as applicable (as determined pursuant to Section 7.02(c), and otherwise on the
terms and conditions contained in the Third Party Offer. The First Refusal
Notice of Sale shall specify the price at which the First Refusal Shares are
offered, as provided in the preceding sentence. The First Refusal Stockholders
shall enter into an appropriate confidentiality agreement reasonably requested
by the Selling Stockholder with respect to the Third Party Offer.
(i) If a First Refusal Stockholder desires to accept all or any
portion of the offer set forth in a First Refusal Notice of Sale as to
any part of the First Refusal Shares, such First Refusal Stockholder
(a "First Refusal Electing Stockholder") shall, within ten Business
Days of receipt of such First Refusal Notice of Sale, notify the
Selling Stockholder of its intention to acquire First Refusal Shares
and the number of such shares it desires to acquire, and deliver a
copy of such notice to each other First Refusal Stockholder.
(ii) If the First Refusal Electing Stockholders desire to
acquire, in the aggregate, all of the First Refusal Shares, then the
First Refusal Electing Stockholders shall have the right to acquire
all the First Refusal Shares, allocated
32
<PAGE>
among them as follows (or in such other manner as the First Refusal
Electing Stockholders may agree):
(A) the First Refusal Shares shall be allocated among the
First Refusal Electing Stockholders pro rata (based on the number
of shares of Series B Stock owned by each of them) until all of
the First Refusal Shares have been allocated or any First Refusal
Electing Stockholder has been allocated the number of First
Refusal Shares that it desires to acquire, as specified in its
notice to the Selling Stockholder, as it may have been amended
pursuant to clause (iii);
(B) if all First Refusal Shares are not allocated pursuant
to paragraph (A) or any prior application of this paragraph (B),
any First Refusal Shares that were not allocated pursuant to
paragraph (A) or any prior application of this paragraph (B)
shall be allocated among the First Refusal Electing Stockholders
(other than any First Refusal Electing Stockholder that has been
allocated the number of First Refusal Shares that it desires to
acquire, as specified in its notice to the Selling Stockholder,
as it may have been amended pursuant to clause (iii)) pro rata
(based on the number of shares of Series B Stock owned by each of
them); and
(C) if all First Refusal Shares are not allocated pursuant
to paragraph (A) and any prior application of paragraph (B), any
First Refusal Shares that were not allocated pursuant to
paragraph (A) and any prior application of paragraph (B) shall be
allocated by continuing to apply paragraph (B) as required.
(iii) If the First Refusal Electing Stockholders desire to
acquire, in the aggregate, less than all of the First Refusal Shares,
then the Selling Stockholder shall so notify the First Refusal
Electing Stockholders and:
(A) each First Refusal Electing Stockholder shall have the
right, by written notice sent to the Selling Stockholder (with a
copy of such notice to each other Consenting Stockholder) within
five Business Days after its receipt of the notice from the
Selling Stockholder pursuant to this clause (iii) to amend its
notice to increase the number of First Refusal Shares that it
desires to purchase;
(B) if, after giving effect to any amendment to any First
Refusal Electing Stockholder's notice pursuant to this clause
(iii), the First Refusal Electing Stockholders desire to acquire,
in the aggregate, all of the First Refusal Shares, then the First
Refusal Electing Stockholders shall have the
33
<PAGE>
right to acquire all the First Refusal Shares, allocated among
them in accordance with clause (ii); and
(C) if, after giving effect to any amendment to any First
Refusal Electing Stockholder's notice pursuant to this clause
(iii), the First Refusal Electing Stockholders desire to acquire,
in the aggregate, less than all of the First Refusal Shares, then
the Selling Stockholder's offer of the First Refusal Shares shall
be deemed rejected as of the last day for a First Refusal
Electing Stockholder to amend its notice pursuant to this clause
(iii).
(b) If (i) the Selling Stockholder's offer of the First Refusal Shares
is rejected as provided in Section 7.02(a), or (ii) the purchase of the First
Refusal Shares is not consummated within the period set forth in Section
7.05(a)(iii) for any reason other than a breach by the Selling Stockholder of
any of its covenants, representations or warranties that are a condition to
consummation of such purchase, then the Selling Stockholder shall have the
right, at any time during the sixty-day period beginning on the date that the
Seller Stockholder's offer of the First Refusal Shares is deemed rejected or the
day following the last day of the period set forth in Section 7.05(a)(iii), as
applicable, to enter into a binding agreement to sell all of the First Refusal
Shares to the Third Party Offeror, or to effect the Indirect Transfer
contemplated by the Third Party Offer, as applicable, in either case on terms
and conditions no less favorable in the aggregate to the Selling Stockholder
(and, in the case of an Indirect Transfer, its Parent) than those set forth in
the Third Party Offer, and thereafter (within the period specified below in this
Section 7.02(b)) to sell all of the First Refusal Shares to the Third Party
Offeror or effect the Indirect Transfer, as applicable, pursuant to such
agreement; provided that (i) in the case of a sale of First Refusal Shares, the
Third Party Offeror assumes the obligations of the Selling Stockholder under
this Agreement with respect to such shares and becomes a party to this
Agreement, and (ii) in the case of an Indirect Transfer, the Third Party
Offeror, upon taking control of the Selling Stockholder causes the Selling
Stockholder to confirm in writing the continuing validity and effectiveness of
its obligations under this Agreement, and in such case, its [*] to the [*] to
its [*] [*] equivalent to the [*] pursuant to the [*] Agreement if the [*] set
forth in Section [*] hereof has been [*]. The Selling Stockholder shall, as
promptly as practicable and prior to the closing of such sale or Indirect
Transfer, provide to the First Refusal Stockholders a copy of the agreement for
the sale of the First Refusal Shares so as to permit the First Refusal
Stockholders to confirm for themselves that the terms and conditions of such
sale are not less favorable in the aggregate to the Selling Stockholder (and, in
the case of an Indirect Transfer, its [*]) than those set forth in the Third
Party Offer. If the Selling Stockholder does not enter into such an agreement
during such sixty-day period, or does not close the sale thereunder within sixty
days after the execution of such an agreement (subject to extension for a
maximum of one hundred eighty additional days to the extent required to obtain
all required Governmental and Private Approvals), the procedure set forth above
with respect to the First Refusal Notice of Sale shall be repeated with respect
to
__________
[*] Confidential Treatment Requested.
34
<PAGE>
any subsequent proposed sale, assignment or other disposition of shares of the
Company Common Stock by the Selling Stockholder.
(c) Before submitting a First Refusal Notice of Sale pursuant to
Section 7.02(a) in response to a Third Party Offer that contemplates (i) a sale
of the First Refusal Shares in conjunction with other assets, (ii) an
acquisition of the First Refusal Shares by the Third Party Offeror for
consideration any portion of which is not cash or (iii) an Indirect Transfer,
the Selling Stockholder and the other Consenting Stockholders shall cause (A) if
the Third Party Offer contemplates a sale of the First Refusal Shares in
conjunction with other assets, the total consideration specified in the Third
Party Offer to be allocated between the First Refusal Shares and such other
assets, (B) if the Third Party Offer contemplates an acquisition of the First
Refusal Shares by the Third Party Offeror for consideration any portion of which
is not cash or if the Third Party Offer contemplates an Indirect Transfer, the
fair market value of the noncash consideration or of the First Refusal Shares,
as applicable, to be determined, in each case pursuant to this Section 7.02(c):
(i) The Selling Stockholder shall deliver to each other
Consenting Stockholder a notice stating that the Selling Stockholder
intends to deliver a First Refusal Notice of Sale to which this
Section 7.02(c) applies and identifying an appraiser (the "First
Appraiser") who has been retained by the Selling Stockholder to
allocate the total consideration specified in the Third Party Offer or
to conduct an appraisal of the noncash consideration or of the First
Refusal Shares, as applicable, pursuant to this Section 7.02(c).
Within ten Business Days after its receipt of the Selling
Stockholder's notice pursuant to the preceding sentence, the
Consenting Stockholder (other than the Selling Stockholder) that,
together with its Controlled Affiliates, owns the greatest number of
shares of Series B Stock, shall send a notice to the Selling
Stockholder and the other Consenting Stockholders identifying a second
appraiser (the "Second Appraiser") who shall be retained by the
Selling Stockholder to make such allocation or conduct such appraisal,
as applicable, pursuant to this Section 7.02(c).
(ii) The First Appraiser and the Second Appraiser shall submit
their independent determinations of the amount of consideration
allocable to the First Refusal Shares or the fair market value of the
noncash consideration or of the First Refusal Shares, as applicable,
within thirty days after the date on which the Second Appraiser is
retained. If the respective determinations of the First Appraiser and
the Second Appraiser vary by less than ten percent of the higher
determination, the amount of consideration allocable to the First
Refusal Shares or the fair market value of the noncash consideration
or of the First Refusal Shares, as applicable, for purposes of Section
7.02(a), shall be the average of the two determinations.
(iii) If the respective determinations of the First Appraiser
and the Second Appraiser vary by ten percent or more of the higher
determination, the
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<PAGE>
two Appraisers shall promptly designate a third appraiser (the "Third
Appraiser"), who shall be retained by the Selling Stockholder to make
an allocation or conduct an appraisal pursuant to this Section
7.02(c). The First Appraiser and the Second Appraiser shall be
instructed not to, and no party to this Agreement or any Controlled
Affiliate of any party to this Agreement shall, provide any
information to the Third Appraiser as to the determinations of the
First Appraiser and the Second Appraiser or otherwise influence the
Third Appraiser's determination in any way. The Third Appraiser shall
submit its determination of the amount of consideration allocable to
the First Refusal Shares or the fair market value of the noncash
consideration or of the First Refusal Shares, as applicable, within
thirty days after the date on which the Third Appraiser is retained.
If a Third Appraiser is retained, the amount of consideration
allocable to the First Refusal Shares or the fair market value of the
noncash consideration or of the First Refusal Shares, as applicable,
for purposes of Section 7.02(a), shall equal the average of the two
closest of the three determinations, except that, if the difference
between the highest and middle determinations is no more than [*] and
no less than [*] of the difference between the middle and lowest
determinations, then the amount of consideration allocable to the
First Refusal Shares or the fair market value of the noncash
consideration or of the First Refusal Shares, as applicable, for
purposes of Section 7.02(a), shall equal the middle determination.
(iv) Any appraiser retained pursuant to this Section 7.02(c)
shall be nationally recognized as being qualified and experienced in
the appraisal of assets comparable to the First Refusal Shares and, if
applicable, any other assets proposed to be sold pursuant to the Third
Party Offer and shall not be an Affiliate of any party to this
Agreement. All fees and expenses of any appraiser retained pursuant
to this Section 7.02(c) shall be paid by the Selling Stockholder.
(v) In determining the fair market value of the noncash
consideration or of the First Refusal Shares, if applicable, each
appraiser retained pursuant to this Section 7.02(c) shall: (A) assume
that the fair market value of the applicable asset is the price at
which the asset would change hands between a willing buyer and a
willing seller, neither being under any compulsion to buy or sell and
each having reasonable knowledge of all relevant facts; (B) assume
that the applicable asset would be sold for cash; and (C) use
valuation techniques then prevailing in the relevant industry.
SECTION 7.03. Conversion of Series B Stock to Series A Stock; Right of
--------------------------------------------------------
First Offer.
- -----------
(a) No Consenting Stockholder shall convert any shares of Series B
Stock to Series A Stock prior to the consummation of the Company's initial
Public Offering. After the consummation of the Company's initial Public
Offering, if a Consenting Stockholder (a "Converting Stockholder") desires to
convert all or any portion of its shares of Series B Stock to
__________
[*] Confidential Treatment Requested.
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Series A Stock, it shall first deliver to each other Consenting Stockholder a
written notice (a "First Offer Notice of Sale") of its intention to so convert
such shares of Series B Stock (the "First Offer Shares"). The First Offer Notice
of Sale shall contain the Converting Stockholder's offer to sell the First Offer
Shares to such other Consenting Stockholders at a price per share equal to the
Market Price as of the date of the First Offer Notice of Sale (which price
shall, unless otherwise agreed by the Converting Stockholder and the Consenting
Stockholders accepting such offer, be payable in cash). As used in this Section
7.03, the "Qualifying First Offer Amount" means, with respect to any First Offer
Notice of Sale, the amount, if any, by which the number of First Offer Shares
specified in such First Offer Notice of Sale exceeds [*] percent of the number
of shares of the Company Common Stock outstanding at the time such First Offer
Notice of Sale is delivered (or such lesser amount as may be specified in the
First Offer Notice of Sale or as may otherwise be agreed to by the Converting
Stockholder).
(i) If a Consenting Stockholder desires to accept all or any
portion of the offer set forth in a First Offer Notice of Sale, such
Consenting Stockholder (a "First Offer Electing Stockholder") shall,
within ten Business Days of receipt of such First Offer Notice of
Sale, notify the Converting Stockholder of its intention to acquire
First Offer Shares and the number of such shares it desires to
acquire, and deliver a copy of such notice to each other Consenting
Stockholder.
(ii) If, after giving effect to any amendment to any First Offer
Electing Stockholder's notice pursuant to Section 7.03(a)(iii), the
First Offer Electing Stockholders desire to acquire, in the aggregate,
either (x) all the First Offer Shares, or (y) a number of First Offer
Shares that is not more than the Qualifying First Offer Amount, then
the First Offer Electing Stockholders shall have the right to acquire,
in the case of clause (x), all the First Offer Shares or, in the case
of clause (y), the number of shares that the First Offer Electing
Stockholders desire to acquire (such shares that the First Offer
Electing Stockholders have the right to acquire, the "Allocable First
Offer Shares"), allocated among them as follows (or in such other
manner as the First Offer Electing Stockholders may agree):
(A) the Allocable First Offer Shares shall be allocated
among the First Offer Electing Stockholders pro rata (based on
the number of shares of Series B Stock owned by each of them)
until all of the Allocable First Offer Shares have been allocated
or any First Offer Electing Stockholder has been allocated the
number of First Offer Shares that it desires to acquire, as
specified in its notice to the Converting Stockholder, as it may
have been amended pursuant to Section 7.03(a)(iii);
(B) if all Allocable First Offer Shares are not allocated
pursuant to paragraph (A) or any prior application of this
paragraph (B), any Allocable First Offer Shares that were not
allocated pursuant to paragraph (A) or any prior application of
this paragraph (B) shall be allocated among the First Offer
Electing Stockholders (other than any First Offer Electing
________________
[*] Confidential Treatment Requested
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Stockholder that has been allocated the number of First Offer
Shares that it desires to acquire, as specified in its notice to
the Converting Stockholder, as it may have been amended pursuant
to Section 7.03(a)(iii)) pro rata (based on the number of shares
of Series B Stock owned by each of them); and
(C) if all Allocable First Offer Shares are not allocated
pursuant to paragraph (A) and any prior application of paragraph
(B), any Allocable First Offer Shares that were not allocated
pursuant to paragraph (A) and any prior application of paragraph
(B) shall be allocated by continuing to apply paragraph (B) as
required.
(iii) If the First Offer Electing Stockholders desire to
acquire, in the aggregate, less than all of the First Offer Shares,
then the Converting Stockholder shall so notify the First Offer
Electing Stockholders and:
(A) subject to Section 6.03(a)(iii)(B), each First Offer
Electing Stockholder shall have the right, by written notice sent
to the Converting Stockholder (with a copy of such notice to each
other Consenting Stockholder) within five days after its receipt
of the notice from the Converting Stockholder pursuant to this
Section 7.03(a)(iii) to amend the notice it delivered pursuant to
7.03(a)(i) to increase or decrease the number of First Offer
Shares that it desires to purchase;
(B) notwithstanding Section 7.03(a)(iii)(A), no notice by
any First Offer Electing Stockholder pursuant to this Section
7.03(a)(iii) shall constitute an amendment of the notice it
delivered pursuant to Section 7.03(a)(i) if the number of shares
that the First Offer Electing Stockholders originally desired to
acquire, in the aggregate, as specified in their notices pursuant
to Section 7.03(a)(i) was less than or equal to the Qualifying
First Offer Amount and the number of shares that the First Offer
Electing Stockholders subsequently desired to acquire, in the
aggregate, as specified in their notices as proposed to be
amended pursuant to this Section 7.03(a)(iii), was greater than
the Qualifying First Offer Amount but less than all the First
Offer Shares; if this Section 7.03(a)(iii)(B) applies, the First
Offer Electing Stockholders shall have the right to acquire the
number of shares that the First Offer Electing Stockholders
originally desired to acquire, allocated among them in accordance
with Section 7.03(a)(ii);
(C) if, after giving effect to any amendment to any First
Offer Electing Stockholder's notice pursuant to this Section
7.03(a)(iii), the First Offer Electing Stockholders desire to
acquire, in the aggregate, either (x) all the First Offer Shares,
or (y) a number of First Offer Shares that is not
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more than the Qualifying First Offer Amount, then the First Offer
Electing Stockholders shall have the right to acquire, in the
case of clause (x), all the First Offer Shares or, in the case of
clause (y), the number of shares that the First Offer Electing
Stockholders desire to acquire, allocated among them in
accordance with Section 7.03(a)(ii);
(D) if, after giving effect to any amendment to any First
Offer Electing Stockholder's notice pursuant to this Section
7.03(a)(iii) (but subject to Section 7.03(a)(iii)(B)), the First
Offer Electing Stockholders desire to acquire, in the aggregate,
a number of First Offer Shares that is greater than the
Qualifying First Offer Amount but less than all the First Offer
Shares, then the Converting Stockholder's offer of the First
Offer Shares shall be deemed rejected in full as of the last day
for a First Offer Electing Stockholder to amend its notice
pursuant to this Section 7.03(a)(iii); and
(E) if, after giving effect to any amendment to any First
Offer Electing Stockholder's notice pursuant to this Section
7.03(a)(iii), the First Offer Electing Stockholders desire to
acquire, in the aggregate, a number of First Offer Shares that is
less than or equal to the Qualifying First Offer Amount, then the
Converting Stockholder's offer of the First Offer Shares shall be
deemed accepted as to the number of First Offer Shares that the
First Offer Electing Stockholders desire to acquire (and the
First Offer Electing Stockholders shall have the right to acquire
such shares as provided in Section 7.03(a)(iii)(C)) and shall be
deemed rejected with respect to that portion of the First Offer
Shares that exceeds the number of First Offer Shares that the
First Offer Electing Stockholders desire to acquire as of the
last day for a First Offer Electing Stockholder to amend its
notice pursuant to this Section 7.03(a)(iii).
(b) If (i) the Converting Stockholder's offer of the First Offer
Shares is rejected (in whole or in part) as provided in Section 7.03(a), or (ii)
the purchase of the First Offer Shares is not consummated within the period set
forth in Section 7.05(a)(iii) for any reason other than a breach by the
Converting Stockholder of any of its covenants, representations or warranties
that are a condition to consummation of such purchase, then, beginning on the
date that the Converting Stockholder's offer of the First Offer Shares is deemed
rejected or the day following the last day of the period set forth in Section
7.05(a)(iii), as applicable (such applicable date, the "Free-to-Convert Date"),
the Converting Stockholder shall have the right to convert the First Offer
Shares with respect to which the Converting Stockholder's offer was rejected or
the First Offer Shares that were not purchased within the period set forth in
Section 7.05(a)(iii), as applicable (such First Offer Shares, the "Free-to-
Convert Shares"), to shares of Series A Stock at any time prior to the later of
(i) the ninetieth day after the Free-to-Convert Date, or (ii) if prior to or
within ten Business Days after the Free-to-Convert Date the Converting
Stockholder either delivers a Demand Notice pursuant to Section 8.01 or submits
a written request in response to a
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Company Notice pursuant to Section 8.01 with respect to the registration of the
shares of Series A Stock into which the Free-to-Convert Shares may be converted,
either (A) the date on which the registration statement filed by the Company
with respect to such shares of Series A Stock becomes effective or (B) the date
on which such registration statement is withdrawn, as applicable. If the
Converting Stockholder does not convert the Free-to-Convert Shares into shares
of Series A Stock during the applicable period, the procedure set forth above
with respect to the First Offer Notice of Sale shall be repeated with respect to
any subsequent proposed conversion of shares of Series B Stock to shares of
Series A Stock by the Converting Stockholder.
SECTION 7.04. Post-IPO Right of First Refusal.
-------------------------------
(a) Following consummation of the Company's initial Public Offering,
if a Consenting Stockholder (a "Post-IPO Selling Stockholder") or its Parent
shall receive at any time a bona fide offer in writing, which the Post-IPO
Selling Stockholder or its Parent proposes to accept (a "Post-IPO Third Party
Offer"), from a third party (the "Post-IPO Third Party Offeror") to acquire all
or part of its shares of Series B Stock (the "Post-IPO First Refusal Shares") or
to effect an Indirect Transfer (in which case the "Post-IPO First Refusal
Shares" shall be all the shares of Series B Stock owned by the Post-IPO Selling
Stockholder), the Post-IPO Selling Stockholder shall deliver to each other
Consenting Stockholder (the "Post-IPO First Refusal Stockholders") a notice (a
"Post-IPO Notice of Sale" and, together with the First Refusal Notice of Sale
and the First Offer Notice of Sale, the "Notices of Sale") containing a copy of
the Post-IPO Third Party Offer, the identity of the Post-IPO Third Party Offeror
and its Parent and an offer to sell the Post-IPO First Refusal Shares to the
Post-IPO First Refusal Stockholders on the following terms: (i) if the Post-IPO
Third Party Offer contemplates a purchase of the Post-IPO First Refusal Shares
by the Post-IPO Third Party Offeror for consideration consisting solely of cash,
then the Post-IPO Selling Stockholder's offer shall be to sell the Post-IPO
First Refusal Shares for cash in an amount equal to the purchase price specified
in, and otherwise on the terms and conditions contained in, the Post-IPO Third
Party Offer, and (ii) if the Post-IPO Third Party Offer contemplates an
acquisition of the Post-IPO First Refusal Shares by the Post-IPO Third Party
Offeror for consideration any portion of which is not cash or if the Post-IPO
Third Party Offer contemplates an Indirect Transfer, then the Post-IPO Selling
Stockholder's offer shall be to sell the Post-IPO First Refusal Shares for cash
in an amount equal to the fair market value of the noncash consideration or of
the Post-IPO First Refusal Shares, as applicable (as determined pursuant to
Section 7.02(c) as if the references therein to Selling Stockholder, First
Refusal Shares and First Refusal Notice of Sale referred to the Post-IPO Selling
Stockholder, Post-IPO First Refusal Shares and Post-IPO Notice of Sale,
respectively) and otherwise on the terms and conditions contained in the Post-
IPO Third Party Offer. The Post-IPO Notice of Sale shall specify the price at
which the Post-IPO First Refusal Shares are offered, as provided in the
preceding sentence. The Post-IPO First Refusal Stockholders shall enter into an
appropriate confidentiality agreement reasonably requested by the Post-IPO
Selling Stockholder with respect to the Post-IPO Third Party Offer.
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(i) If a Post-IPO First Refusal Stockholder desires to accept
all or any portion of the offer set forth in a Post-IPO Notice of Sale
as to any part of the Post-IPO First Refusal Shares, such Post-IPO
First Refusal Stockholder (a "Post-IPO Electing Stockholder") shall,
within ten Business Days of receipt of such Post-IPO Notice of Sale,
notify the Post-IPO Selling Stockholder of its intention to acquire
Post-IPO First Refusal Shares and the number of such shares it desires
to acquire, and deliver a copy of such notice to each other Post-IPO
First Refusal Stockholder.
(ii) If the Post-IPO Electing Stockholders desire to acquire, in
the aggregate, all of the Post-IPO First Refusal Shares, then the
Post-IPO Electing Stockholders shall have the right to acquire all the
Post-IPO First Refusal Shares, allocated among them in the same manner
as First Refusal Shares are allocated among First Refusal Electing
Stockholders pursuant to Section 7.02(a)(ii).
(iii) If the Post-IPO Electing Stockholders desire to acquire,
in the aggregate, less than all of the Post-IPO First Refusal Shares,
then the Post-IPO Selling Stockholder shall so notify the Post-IPO
Electing Stockholders and the procedures set forth in Section
7.02(a)(iii) shall be followed as if the references therein to the
First Refusal Electing Stockholders, the Selling Stockholder and First
Refusal Shares referred to the Post-IPO Electing Stockholders, the
Post-IPO Selling Stockholder and the Post-IPO First Refusal Shares.
If after giving effect to any amendment to any Post-IPO Electing
Stockholder's notice pursuant to said procedures, the Post-IPO
Electing Stockholders desire to acquire, in the aggregate, less than
all of the Post-IPO First Refusal Shares, then the Post-IPO Selling
Stockholder's offer shall be deemed rejected as of the last day for a
Post-IPO Electing Stockholder to amend its notice pursuant to said
procedures.
(b) If (i) the Post-IPO Selling Stockholder's offer of the Post-IPO
First Refusal Shares is rejected as provided in Section 7.04(a), or (ii) the
purchase of the Post-IPO First Refusal Shares is not consummated within the
period set forth in Section 7.05(a)(iii) for any reason other than a breach by
the Post-IPO Selling Stockholder of any of its covenants, representations or
warranties that are a condition to consummation of such purchase, then the Post-
IPO Selling Stockholder shall have the right, at any time during the sixty-day
period beginning on the date that the Post-IPO Seller Stockholder's offer of the
Post-IPO First Refusal Shares is deemed rejected or the day following the last
day of the period set forth in Section 7.05(a)(iii), as applicable, to enter
into a binding agreement to sell all of the Post-IPO First Refusal Shares to the
Post-IPO Third Party Offeror, or to effect the Indirect Transfer contemplated by
the Post-IPO Third Party Offer, as applicable, in either case on terms and
conditions no less favorable in the aggregate to the Post-IPO Selling
Stockholder (and, in the case of an Indirect Transfer, its Parent) than those
set forth in the Post-IPO Third Party Offer, and thereafter (within the period
specified below in this Section 7.04(b)) to sell all of the Post-IPO First
Refusal Shares to the Post-IPO Third Party Offeror or effect the Indirect
Transfer, as applicable, pursuant to such agreement. The Post-IPO Selling
Stockholder shall, as promptly as
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practicable and prior to the closing of such sale or Indirect Transfer, provide
to the Post-IPO First Refusal Stockholders a copy of the agreement for the sale
of the Post-IPO First Refusal Shares so as to permit the Post-IPO First Refusal
Stockholders to confirm for themselves that the terms and conditions of such
sale are not less favorable in the aggregate to the Post-IPO Selling Stockholder
(and, in the case of an Indirect Transfer, its Parent) than those set forth in
the Post-IPO Third Party Offer. If the Post-IPO Selling Stockholder does not
enter into such an agreement during such sixty-day period, or does not close the
sale thereunder within sixty days after execution of such an agreement (subject
to extension for a maximum of one hundred eighty additional days to the extent
required to obtain all required Governmental and Private Approvals), the
procedure set forth above with respect to the Post-IPO First Refusal Notice of
Sale shall be repeated with respect to any subsequent proposed sale, assignment
or other disposition of shares of Series B Stock by the Post-IPO Selling
Stockholder.
(c) If the Post-IPO First Refusal Shares include a sufficient number
of shares of Series B Stock so that the holder thereof after giving effect to
the acquisition of such shares would beneficially own at least 16% of the shares
of Series B Stock then outstanding (or such other percentage of Series B Stock
that would, in accordance with this Agreement as in effect at such time, entitle
the holder to elect at least one director of the Company), then the Post-IPO
Selling Stockholder shall have the right to sell to the Post-IPO Third Party
Offeror such shares of Series B Stock or permit the Indirect Transfer, as
applicable, without converting such shares to Series A Stock so long as (i) in
the case of a sale of the Post-IPO First Refusal Shares, the Post-IPO Third
Party Offeror assumes the obligations of the Post-IPO Selling Stockholder under
this Agreement with respect to such shares and becomes a party to this
Agreement, and (ii) in the case of an Indirect Transfer, the Post-IPO Third
Party Offeror, upon taking control of the Post-IPO Selling Stockholder, causes
the Post-IPO Selling Stockholder to confirm in writing the continuing validity
and effectiveness of its obligations under this Agreement. If the Post-IPO
First Refusal Shares do not include such sufficient number of shares of Series B
Stock, or if the Post-IPO Third Party Offeror refuses to become a party to this
Agreement, then the Post-IPO Selling Stockholder shall, prior to transferring
the Post-IPO First Refusal Shares to the Post-IPO Third Party Offeror or
effecting the Indirect Transfer, as applicable, convert all shares of Series B
Stock included in the Post-IPO First Refusal Shares to Series A Stock and shall
not have the right to sell Series B Stock to the Post-IPO Third Party Offeror or
to permit the Indirect Transfer while the Post-IPO Selling Stockholder holds
shares of Series B Stock. The conversion of shares of Series B Stock to Series
A Stock pursuant to the foregoing sentence shall not be subject to the
provisions of Section 7.03. If the Post-IPO Third Party Offeror receives only
shares of Series A Stock, then it shall not be required to become a party to
this Agreement.
(d) Before submitting a Post-IPO Notice of Sale pursuant to Section
7.04(a) in response to a Post-IPO Third Party Offer that contemplates (i) a sale
of the Post-IPO First Refusal Shares in conjunction with other assets, (ii) an
acquisition of the Post-IPO First Refusal Shares by the Post-IPO Third Party
Offeror for consideration any portion of which is not cash or (iii) an Indirect
Transfer, the Post-IPO Selling Stockholder and the other Consenting
Stockholders shall cause (A) if the Post-IPO Third Party Offer contemplates a
sale of the Post-IPO First Refusal Shares in conjunction with other assets, the
total consideration specified in the
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Post-IPO Third Party Offer to be allocated between the Post-IPO First Refusal
Shares and such other assets, (B) if the Post-IPO Third Party Offer contemplates
an acquisition of the Post-IPO First Refusal Shares by the Post-IPO Third Party
Offeror for consideration any portion of which is not cash or if the Post-IPO
Third Party Offer contemplates an Indirect Transfer, the fair market value of
the noncash consideration or of the Post-IPO First Refusal Shares, as
applicable, to be determined, in each case pursuant to Section 7.02(c), as if
the references therein to the Selling Stockholder, the First Refusal Notice of
Sale, the Third Party Offer and the First Refusal Shares referred to the Post-
IPO Selling Stockholder, the Post-IPO Notice of Sale, the Post-IPO Third Party
Offer and the Post-IPO First Refusal Shares, respectively.
SECTION 7.05. Terms and Conditions of Sales Pursuant to Sections 7.02,
--------------------------------------------------------
7.03 and 7.04.
- -------------
(a) Any purchase and sale of the Company Common Stock pursuant to
Section 7.02, 7.03 or 7.04 shall be subject to the following terms and
conditions:
(i) The selling Consenting Stockholder shall represent and
warrant that the buying Consenting Stockholders will receive good and
valid title to the First Refusal Shares, Post-IPO First Refusal Shares
or First Offer Shares, as applicable (the "Offered Shares"), free and
clear of all Liens, of any nature whatsoever except for Permitted
Liens and except for Governmental and Private Approvals required for
transfers of shares of the Company Common Stock generally.
(ii) The closing of the purchase and sale shall be subject to the
satisfaction of the following conditions:
(A) all applicable waiting periods under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations promulgated thereunder, shall have expired
or been terminated;
(B) all Governmental and Private Approvals expressly
required with respect to the transactions to be consummated at
such closing shall have been obtained, to the extent the failure
to obtain such Approvals would prevent the Converting
Stockholder, the Selling Stockholder or the Post-IPO Selling
Stockholder, as the case may be, from performing any of its
material obligations under the transaction documents or would
result in any material adverse change in, or material adverse
effect on, the Company;
(C) there shall be no preliminary or permanent injunction or
other order by any court of competent jurisdiction restricting,
preventing
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or prohibiting the consummation of the transactions to be
consummated at such closing; and
(D) the representation and warranty of the Converting
Stockholder, the Selling Stockholder or the Post-IPO Selling
Stockholder, as the case may be, contemplated by clause (i) of
this sentence shall be true and correct at the closing of such
sale with the same force and effect as if then made.
(iii) Unless otherwise agreed by the applicable parties, the
closing of any purchase and sale of Company Common Stock pursuant to
Section 7.02, 7.03 or 7.04 shall take place at the principal executive
offices of the Company at 10:00 a.m. local time on a Business Day
selected by the Consenting Stockholders that will be purchasers at
such closing, provided that such closing shall occur as promptly as
practicable, and in any event within sixty days after the acceptance
of the applicable offer, subject to extension for a maximum of one
hundred eighty additional days to the extent required to obtain all
required Governmental and Private Approvals.
(iv) Unless otherwise agreed by the applicable parties, the
purchase price shall be payable by wire transfer of same day funds or
by certified or cashier's check drawn to the order of the selling
Consenting Stockholder, as specified by the selling Consenting
Stockholder.
(b) In furtherance of the rights set forth in Sections 7.02, 7.03 and
7.04, the Company agrees that, on reasonable notice following the delivery of a
Notice of Sale, at reasonable times and without interfering with the business or
operations of the Company, it will assist the Converting Stockholder, the
Selling Stockholder or the Post-IPO Selling Stockholder, as the case may be, in
obtaining all necessary consents to any disposition of the Offered Shares.
SECTION 7.06. Transferee Consenting Stockholders. A Consenting Stockholder
----------------------------------
shall remain a Consenting Stockholder for so long as it owns any Series B Stock
regardless of the percentage of Series B Stock it may own from time to time. Any
transferee of a Consenting Stockholder required to become a party to this
Agreement pursuant to Section 7.01(a), 7.01(b), 7.02(b) or 7.04(c) shall become
a Consenting Stockholder by delivering to the Company (which shall promptly send
notice thereof to the Consenting Stockholders) a counterpart signature page to
this Agreement. No further action by the Company or the Consenting Stockholders
shall be required for such person to become a party to this Agreement. Following
any Indirect Transfer permitted by this Agreement, the Consenting Stockholder
with respect to which such Indirect Transfer has occurred shall confirm to the
other Consenting Stockholders in writing the continuing validity and
effectiveness of its obligations under this Agreement.
SECTION 7.07. Cooperation. Each Consenting Stockholder shall use
-----------
commercially reasonable efforts to cooperate with any transferring Consenting
Stockholder in
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connection with its efforts to transfer any interest in the Company Common Stock
in accordance with the provisions of this Article VII, including making
qualified personnel available for attending hearings and meetings respecting any
consents, approvals and authorizations required for such transfer and, at the
request of the transferring Consenting Stockholder, making all filings with, and
giving all notices to, third parties and Governmental Authorities that may be
necessary or reasonably required to be made or given by such of the Consenting
Stockholders in order to effect the contemplated transfers. Subject to the other
provisions of this Article, no Consenting Stockholder shall take any action to
delay, impair or impede the receipt of any required consents, approvals or
authorizations. "Commercially reasonable efforts" as used in this Article shall
not require any party to undertake extraordinary or unreasonable measures to
obtain any consents, approvals or other authorizations, including requiring such
party to make any material expenditures (other than normal filing fees or the
like) or to accept any material changes in the terms of the contract, license or
other instrument for which a consent, approval or authorization is sought.
SECTION 7.08. Buy-Sell Procedure.
------------------
(a) After the [*] of the date of this Agreement and prior to
consummation of the Company's initial Public Offering, the procedure set forth
in this Section 7.08 (the "Buy-Sell Procedure") may be initiated by a Consenting
Stockholder Group (the "Initiating Holder"), at its option, by giving notice to
the other Consenting Stockholder Group (the "Responding Holder") of its election
to initiate the Buy-Sell Procedure. Such notice shall include a statement of the
Initiating Holder's estimate of the value per share of the Company Common Stock
for the purposes of the Buy-Sell Procedures (the "Stated Value").
(b) Within sixty days after receipt of the notice from the Initiating
Holder, the Responding Holder shall give written notice of its election either
to (i) purchase (or designate another Person to purchase) the Initiating
Holder's ownership interest in the Company, or (ii) sell the Responding Holder's
ownership interest in the Company. If the Responding Holder elects to purchase
(or cause a designee to purchase) the Initiating Holder's ownership interest,
the Initiating Holder shall be obligated to sell the same and, if the Responding
Holder elects to sell its ownership interest, the Initiating Holder (or its
designee) shall be obligated to buy the same. The purchase price for the
ownership interest to be sold shall be the amount determined by multiplying the
Stated Value by the number of shares of the Company Common Stock being sold. In
addition, the applicable Consenting Stockholder (or its designee) that the
foregoing procedure establishes will be the purchaser (the "Purchaser") of the
ownership interest of the other Consenting Stockholder (the "Seller"), shall
also purchase any preferred stock of the Company held by the Seller for the
issue price thereof plus any accreted or accrued and unpaid dividends thereon,
and any debt of the Company held by the Seller for the issue price thereof plus
any accreted or accrued but unpaid interest thereon.
(c) The closing of the purchase and sale of the Seller's ownership
interest shall be held at the principal executive offices of the Company at
10:00 a.m. local time on a Business Day selected by the Purchaser, which closing
date shall be as promptly as practicable,
__________
[*] Confidential Treatment Requested.
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and in any event within sixty days after the Responding Holder's notice of
election is given, subject to extension for a maximum of one hundred eighty
additional days to the extent required to obtain all required Governmental and
Private Approvals. The closing shall be subject to the conditions applicable to
the transfer of Offered Shares as contemplated by Section 7.05(a). At such
closing, the Seller shall transfer to the Purchaser the Seller's ownership
interest in the Company free and clear of all Liens (other than Permitted Liens)
and shall execute such documents as may be necessary to effectuate the sale.
Unless otherwise agreed by the Purchaser and Seller, the purchase price shall be
payable by wire transfer of same day funds or by certified or cashier's check
drawn to the order of the Seller, as specified by the Seller. If the Purchaser
fails to tender payment at the closing in the manner agreed by the parties or if
the closing fails to occur within the time period specified above for any reason
other than a breach by the Seller, then such failure shall constitute an
election by the Purchaser to sell its ownership interest in the Company and the
Purchaser shall then be bound to sell if the Seller, by notice given within five
days thereafter, requires it to do so. If the Seller timely gives such notice,
then the date by which the closing of the purchase and sale of the Purchaser's
ownership interest shall occur shall be calculated, in accordance herewith, from
the date such notice is given. If the Seller does not timely give such notice or
fails to consummate the purchase as provided above, then the Buy-Sell Procedure
shall be deemed not to have been initiated.
SECTION 7.09. Default.
-------
(a) The Bankruptcy of a Consenting Stockholder or its Parent (or any
Subsidiary of such Parent through which such Parent beneficially owns its
interest in such Consenting Stockholder) prior to consummation of the Company's
initial Public Offering with respect to any Consenting Stockholder shall
constitute an "Event of Default" by such Consenting Stockholder (the "Defaulting
Holder") under this Agreement.
(b) Upon the occurrence of any Event of Default with respect to any
Defaulting Holder, the other Consenting Stockholder Group, provided it includes
no Defaulting Holders (the "Nondefaulting Holder"), shall have the right
exercisable by written notice given to the Defaulting Holder at any time after
and during the continuance of such Event of Default, to cause the purchase of
the entire ownership interest (including debt and equity) of such Defaulting
Holder in the Company. Such remedy shall, with respect to an Event of Default
referred to in Section 7.09(a), be in addition to all other rights or remedies
available to the Nondefaulting Holder, to any other party hereunder or to the
Company under this Agreement or under any other Operative Document or otherwise,
and all such remedies shall be cumulative and no such remedy shall be to the
exclusion of any other remedy.
(c) In the event written notice (a "Buy-Out Notice") of election to
cause the purchase of the ownership interest of any Defaulting Holder (the
"Purchased Interest") is given by the Nondefaulting Holder pursuant to Section
7.09(b), then the Purchased Interest will be purchased by the Nondefaulting
Holder (the "Buyer").
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(d) The price (the "Buy-Out Price") to be paid by the Buyer for the
Purchased Interest will be determined as follows: The Buyer and the Defaulting
Holder will mutually select a nationally recognized investment banking firm (an
"Investment Banking Firm") to act as the "Arbiter" under this Section 7.09(d).
If the Buyer and the Defaulting Holder have not selected an Investment Banking
Firm by 5:00 p.m. New York City time on the fifth Business Day after the date of
the Buy-Out Notice, then the Buyer and the Defaulting Holder will each select an
Investment Banking Firm at its own expense, and the two Investment Banking Firms
will mutually select a third Investment Banking Firm to act as the Arbiter;
provided, however, that, if by 5:00 p.m. New York City time on the tenth
- -------- -------
Business Day after the date of the Buy-Out Notice, either the Buyer or the
Defaulting Holder has selected such an Investment Banking Firm while the other
has not, then the Investment Banking Firm so selected will act as the Arbiter.
Once the Arbiter has been selected, the Buyer and the Defaulting Holder will
each submit to the Arbiter, within thirty days of such selection, a price for
the Purchased Interest. The Arbiter shall pick as the Buy-Out Price under this
Section 7.09(d) either the price submitted by the Buyer or the price submitted
by the Defaulting Holder, whichever price is, in the judgment of the Arbiter,
closer to the price that an unaffiliated third party willing and able to buy
would be willing to pay, and which a willing and able seller would be willing to
accept, for the Purchased Interest. Such determination of the Buy-Out Price by
the Arbiter will be final and binding on the Buyer and the Defaulting Holder.
The Buyer and the Defaulting Holder will each pay one-half of the fees and
expenses of the Arbiter. All other costs and expenses of such determination will
be borne by the party incurring such cost or expense.
(e) The closing of any purchase of a Purchased Interest shall take
place at the principal executive offices of the Company at 10:00 a.m. local time
on a Business Day selected by the Buyer, which closing date shall be as promptly
as practicable, and in any event within sixty days following the determination
of the Buy-Out Price, subject to extension for a maximum of one hundred eighty
additional days to the extent required to obtain all necessary Governmental and
Private Approvals. The closing shall be subject to the conditions applicable to
the transfer of Offered Shares as contemplated by Section 7.05(a). At such
closing, the Defaulting Holder shall Transfer to the Buyer the Purchased
Interest, free and clear of all Liens (other than Permitted Liens), and shall
execute such documents as may be necessary to effectuate the sale. Unless
otherwise agreed by the Buyer and the Defaulting Holder, the Buy-Out Price shall
be payable by wire transfer of same day funds or by certified or cashier's check
drawn to the order of the Defaulting Holder, as specified by the Defaulting
Holder.
(f) In lieu of giving a Buy-Out Notice pursuant to Section 7.09(b),
the Nondefaulting Holder may elect, by written notice given to the Defaulting
Holder at any time during the continuance of such Event of Default to cause the
Company to be dissolved and its assets liquidated. If such election is made by
the Nondefaulting Holder, the Defaulting Holder shall vote its shares of Company
Common Stock in favor of dissolution of the Company. Such remedy shall, with
respect to an Event of Default referred to in Section 7.09(a)(i), be in addition
to all other rights or remedies available to the Nondefaulting Holder, to any
other party hereunder or to the Company under this Agreement or under any other
Operative Document or otherwise,
47
<PAGE>
and all such remedies shall be cumulative and no such remedy shall be to the
exclusion of any other remedy.
SECTION 7.10. [*]
(a) If a [*] occurs with respect to the [*] prior to consummation of
the Company's initial Public Offering, the Changed Stockholder shall promptly
thereafter give written notice thereof (a "Change Notice") to the Unchanged
Stockholder. If, at the time of such [*] the Unchanged Stockholder owns less
than [*] of the outstanding shares of Series B Stock and the Changed Stockholder
owns [*] of the outstanding shares of Series B Stock, then in addition to the
consequences of such [*] set forth in Sections 6.02(b) and 6.07(b), the
Unchanged Stockholder shall have the right exercisable by written notice (a
"Purchase Notice") given to the Changed Stockholder within sixty days after
receipt of the Change Notice, to purchase that number of shares of Series B
Stock owned by the Changed Stockholder that when added to the number of shares
of Series B Stock owned by the Unchanged Stockholder will equal [*] of the
outstanding shares of Series B Stock (the "Excess Shares"). The purchase price
for the Excess Shares shall be an amount equal to the fair market value thereof.
(b) The fair market value of the Excess Shares shall be the amount of
cash, determined by appraisal as provided below, that a willing buyer would pay,
and a willing Seller would accept, for the Excess Shares, neither being under
any compulsion to buy or sell and each having reasonable knowledge of all
relevant facts. The Unchanged Stockholder shall designate one appraiser in its
Purchase Notice and the Changed Stockholder shall designate the second appraiser
by notice given to the Unchanged Stockholder within ten Business Days after its
receipt of the Purchase Notice. If either Consenting Stockholder fails to
designate its appraiser in a timely manner as provided above, then the appraisal
of the Excess Shares shall be conducted by the single appraiser that was timely
selected.
(c) Each appraiser shall submit its independent determination of the
fair market value of the Excess Shares within twenty days after the date on
which the last appraiser is retained (or would have been retained had a second
appraiser been selected). If the respective determinations of the fair market
value of the Excess Shares vary by less than [*] percent of the higher
determination, the fair market value of the Excess Shares shall be the average
of the two determinations. If the respective determinations vary by [*] percent
or more of the higher determination, the two appraisers shall promptly designate
a third appraiser to conduct such appraisal. The first two appraisers shall be
instructed not to, and no party to this Agreement or any Controlled Affiliate of
such party shall, provide any information to the third appraiser as to the
determinations of the first two appraisers or otherwise influence the third
appraiser's determination in any way. The third appraiser shall submit its
determination of the fair market value of the Excess Shares within twenty days
after the date on which the third appraiser is retained. If a third appraiser is
retained, the fair market value of the Excess Shares shall equal the average of
the two closest of the three determinations, except that if the difference
between the highest and middle determination is no more than [*] and no less
than [*] of the
__________
[*] Confidential Treatment Requested.
48
<PAGE>
difference between the middle and the lowest determinations, then the fair
market value of the Excess Shares shall equal the middle determination.
(d) Any appraiser retained pursuant to this Section 7.10 shall meet
the requirements of Section 7.02(c)(iv). The Changed Stockholder and the
Unchanged Stockholder shall bear equally the fees and expenses of the
appraisers.
(e) The purchase and sale of the Excess Shares shall take place at the
principal executive offices of the Company at 10:00 a.m. local time on a
Business Day selected by the Unchanged Stockholder, which closing date shall be
as promptly as practicable and in any event within sixty days following the
determination of the purchase price, subject to extension for a maximum of one
hundred eighty additional days to the extent required to obtain all necessary
Governmental and Private Approvals. At such closing, the Changed Stockholder
shall Transfer to the Unchanged Stockholder the Excess Shares free and clear of
all Liens (other than Permitted Liens) and shall execute such documents as may
be necessary to effectuate the sale. Unless otherwise agreed by the Unchanged
Stockholder and the Changed Stockholder, the purchase price shall be payable by
wire transfer of same day funds or by certified or cashier's check drawn to the
order of the Changed Stockholder, as specified by the Changed Stockholder.
(f) No vote or consent of the stockholders of the Company for a
Significant Stockholder Transaction shall be solicited, taken or given by the
Changed Stockholder during the period following a Change of Control that the
Unchanged Stockholder shall have the right to give a Purchase Notice or, if a
Purchase Notice is given, prior to the purchase by the Unchanged Stockholder of
the Excess Shares or the expiration of the period during which such purchase may
be consummated in accordance with this Section 7.10 provided that the period
shall be extended if failure to consummate the purchase of the Excess Shares is
a result of a breach by the Changed Stockholder.
SECTION 7.11 Dissolution.
-----------
(a) Prior to the [*] of consummation of the [*] and the [*] of the
date of this Agreement, no dissolution of the Company and liquidation of its
assets shall occur, except (i) in the sole discretion of [*] pursuant to Section
[*], (ii) with the consent of [*] in each case for so long as a Controlled
Affiliate of such Person is a Consenting Stockholder and has the right to
designate at least one director of the Company, and (iii) in the event of the
Bankruptcy of the Company. Each Consenting Stockholder hereby waives its right
to, and covenants and agrees not to, seek a judicial dissolution of the Company,
except as permitted by the preceding sentence.
(b) In the event of a dissolution of the Company under the
circumstances described in Section 7.11(a), [*] and its Affiliates shall
have no right to the [*] the [*] or the [*] and [*] and its
Affiliates shall have no right to the [*] or the [*]. The rights of [*] and its
Subsidiaries, [*] and its Subsidiaries and [*] to [*] and, in the case of
[*], a [*]
__________
[*] Confidential Treatment Requested.
49
<PAGE>
[*] shall be paid in the following order of priority (as among the [*] and
subject to any prior rights of other creditors of the Company ) from revenues
collected by the Company under its agreements with [*] in connection with the
winding up of its affairs, after payment of operating expenses: first, to [*]
for the payment of its [*], second to [*] for the payment of its [*], third to
[*] for the payment of its [*] and fourth to [*] for its [*]. The payment of the
foregoing amounts shall be made before any distribution of liquidation proceeds
is made to holders of Company Common Stock in their capacity as common
stockholders.
(c) Except as provided in Section 7.11(d), in the event of a
dissolution of the Company, [*] and [*] shall each own an undivided one-
half interest, without the obligation of accounting to the other, in the [*]
[*] or [*].
(d) In the event of a dissolution of the Company, [*] and [*] shall
form an [*] committee to supervise the procurement and maintenance of [*] and
other [*] developed, owned or otherwise controlled by the Company. The [*]
committee shall consist of four persons, two to be selected by [*] and two to be
selected by [*]. [*] and [*] agree, following the dissolution of the Company, to
equally divide the costs associated with procuring and maintaining [*] [*] and
other [*] developed, owned or otherwise controlled by the Company, and shall
each own an undivided one-half interest in such property. In the event that
either [*] or [*] elect not to pay one-half of the costs associated with
procuring or maintaining a particular [*] hereunder (for example, each [*] and
[*] [*] and [*] constituting a separate [*] for purposes of this provision),
such refusal shall act as a forfeiture by the non-paying party of any interest
it would otherwise have to the particular [*].
ARTICLE VIII
Registration Rights Registration Rights
---------------------------------------
SECTION 8.01. Demand Registrations.
--------------------
(a) Requests for Registration. At any time after the date which is
-------------------------
six months after the closing of the Company's initial Public Offering, any
stockholder of the Company which is a party to this Agreement (an "Eligible
Holder") may request that the Company effect the registration under the
Securities Act of all or part of its shares of Series A Stock (including shares
of Series A Stock issuable upon conversion of shares of Series B Stock held by
it) for sale in the manner specified in such request. A stockholder that
previously owned shares of Series B
__________
[*] Confidential Treatment Requested.
50
<PAGE>
Stock but ceased to be a Consenting Stockholder upon the conversion of its
shares of Series B Stock to shares of Series A Stock shall continue to be a
party to this Agreement so long as it owns any shares of Series A Stock and
therefore shall be an Eligible Holder. Such request shall be made by furnishing
written notice thereof (a "Demand Notice") to the Company setting forth the
number of shares of Series A Stock requested to be registered and such Eligible
Holder's preferred method of distribution. Within ten days after receipt of any
Demand Notice, the Company shall give written notice of such Demand Notice to
all other Eligible Holders. Following receipt of notice from the Company of a
Demand Notice (the "Company Notice"), each such other Eligible Holder may give
the Company a written request to register any or all of such Eligible Holder's
Series A Stock (including shares of Series A Stock issuable upon conversion of
shares of Series B Stock held by it) in the registration described in the
Company Notice, provided that such written request is given within fifteen days
after the date on which the Company Notice is given (with such request stating
(i) the number of shares of Series A Stock to be so included, (ii) such other
Eligible Holder's preferred method of distribution of such shares and (iii) any
other information that the Company Notice reasonably requests be included in
such notice from such Eligible Holder). All registrations requested pursuant to
this Section 8.01 are referred to herein as "Demand Registrations." The Company
shall not be required to effect a Demand Registration unless the aggregate
number of shares of Series A Stock demanded to be so registered is at least [*]
percent of the number of shares of Company Common Stock then outstanding (the
"Minimum Condition"). If the Minimum Condition is met, then, subject to Sections
8.01(b), 8.01(c) and 8.01(f) below, the Company shall, as soon as practicable,
file with the SEC and use all commercially reasonable efforts to cause to become
effective as promptly as practicable, a registration statement on a form
applicable to the sale of securities to the general public which shall cover the
shares of Series A Stock requested to be registered pursuant to such Demand
Notices.
(b) Number of Demand Registrations. Once a Demand Registration has
------------------------------
been effected, the Company shall not be obligated to register Series A Stock
pursuant to another Demand Registration prior to the expiration of twelve months
from the date on which the previous Demand Registration was declared effective;
provided, however, that a registration will not count as a Demand Registration
unless it has become effective, and such effectiveness has been maintained under
the Securities Act (and not subject to any stop order, injunction or other order
or requirement of the SEC or other Governmental Authority for any reason) for
the period specified in Section 8.03(a). Each Eligible Holder may, before any
registration statement becomes effective, withdraw its shares of Series A Stock
from inclusion therein if the terms of the proposed distribution are not
satisfactory to such Eligible Holder. If after giving effect to such withdrawal
or withdrawals of shares from a Demand Registration the Minimum Condition would
no longer be satisfied, then such registration statement shall be withdrawn. A
registration that is withdrawn at the request of the Eligible Holders that
demanded such Demand Registration will not count as a Demand Registration.
(c) Restrictions on Registrations. The Company may postpone for up to
-----------------------------
three months after its receipt of a Demand Notice the filing of a registration
statement for a Demand Registration if the Company reasonably believes that such
Demand Registration would have a
______________________
[*] Confidential Treatment Requested.
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<PAGE>
material adverse effect on any proposal or plan by the Company or any of its
Subsidiaries to engage in any financing, acquisition of assets (other than in
the ordinary course of business) or any merger, consolidation, tender offer or
other significant transaction and notifies the Eligible Holders in writing of
such postponement; provided that the Company shall have the right to so postpone
--------
such filing or effectiveness only one time during any period of twelve
consecutive months; and provided, further, that the three-month limitation
-------- -------
contained above in this Section 8.01(c) and the limitation contained in the
first proviso to this Section 8.01(c) shall not apply if the shares proposed to
be registered by the Eligible Holder furnishing the applicable Demand Notice
could then be sold without restrictions (including any volume limitation) under
the Securities Act.
(d) Underwriting.
------------
(i) Subject to Section 8.01(e), the distribution of the Series A
Stock covered by the Demand Registration shall be effected by means of
a firm commitment underwriting, and the right of any Eligible Holder
to registration pursuant to this Article VIII shall be conditioned
upon such Eligible Holders' participation in such underwriting and the
inclusion of such Eligible Holder's Series A Stock in the underwriting
(unless otherwise mutually agreed by a majority in interest of the
other Eligible Holders) to the extent provided herein. The Company
(together with all Eligible Holders proposing to distribute their
Series A Stock through such underwriting) shall enter into an
underwriting agreement in customary form with a managing underwriter
of nationally recognized standing selected for such underwriting by
the Company with the approval of the Eligible Holder that has included
the largest number of shares in the Demand Registration, such approval
not to be withheld unreasonably. No Eligible Holder may participate
in any Demand Registration unless such Eligible Holder (A) agrees to
sell its Series A Stock on the basis provided in such underwriting
agreement and (B) completes and executes all questionnaires, powers of
attorney, indemnities and other documents required under the terms of
such underwriting agreement.
(ii) Notwithstanding any other provision of this Article VIII, if
the managing underwriter advises the Company and the Eligible Holders
in writing that marketing factors require a limitation of the number
of shares to be underwritten, then the managing underwriter may
exclude shares requested to be included in such Demand Registration.
The number of shares of Series A Stock that may be included in the
Demand Registration and underwriting shall be allocated among the
Eligible Holders who have requested registration in accordance with
the provisions of Section 8.01(f). No Series A Stock excluded from
the underwriting by reason of the managing underwriter's marketing
limitation shall be included in such Demand Registration.
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(iii) If any Eligible Holder participating in a Demand
Registration disapproves of the terms of the underwriting, such person
may elect to withdraw therefrom by written notice to the Company, the
managing underwriter and the other Eligible Holders. If by such
withdrawal a greater number of shares of Series A Stock held by other
Eligible Holders may be included in such Demand Registration (up to
the maximum of any limitation imposed by the managing underwriter),
then the Company shall offer to all Eligible Holders participating in
the Demand Registration the right to include additional shares of
Series A Stock, which additional shares shall be allocated among the
Eligible Holders who have requested registration in accordance with
the provisions of Section 8.01(f).
(e) Shelf Registration. If at the time of a Demand Notice, the Company
------------------
is eligible to file a registration statement on Form S-3 (or any equivalent
successor form), then Eligible Holders who hold at least 51% of the shares of
Series A Stock which are to be included in a Demand Registration may request
that the Demand Registration be effected pursuant to a shelf registration under
Rule 415 of the Securities Act; provided, however, that (i) if the Company shall
-----------------
reasonably determine, after consultation with an independent investment banking
firm of nationally recognized standing, that such method of distribution would
adversely affect the public market for the Series A Stock, then the Company
shall not be obligated to effect the Demand Registration pursuant to such method
of distribution, and (ii) during the term of any such shelf registration, the
Company may require from time to time that the Eligible Holders refrain from
selling pursuant to such registration statement under the circumstances, in the
manner and for the time period described in Section 8.01(c).
(f) Allocation among Eligible Holders. If the managing underwriter
---------------------------------
imposes a limit on the number of shares of Series A Stock to be included in the
Demand Registration, then each Eligible Holder shall have the right to include
in such Demand Registration up to its pro rata share (based on the ratio that
the number of shares of Series A Stock proposed to be sold by it bears to the
total number of shares of Series A Stock proposed to be sold by all Eligible
Holders who have elected to participate in the Demand Registration) of the
maximum number of shares permitted by the managing underwriter to be included in
the Demand Registration (the "Maximum Amount").
(g) Inclusion of Shares by the Company. If the managing underwriter
----------------------------------
has not limited the number of shares of Series A Stock to be underwritten or if
the number of shares which the Eligible Holders have requested to be registered
is less than the Maximum Amount, then the Company may include securities for its
own account or for the account of others in such Demand Registration if the
managing underwriter so agrees and if the number of shares of Series A Stock
held by Eligible Holders which would otherwise have been included in such Demand
Registration and underwriting will not thereby be limited. The inclusion of such
shares shall be on the same terms as the registration of shares held by the
Eligible Holders. In the event that the managing underwriter excludes some of
the securities to be registered, the securities to be sold for the account of
the Company and any other holders shall be excluded in their entirety prior to
the exclusion of any shares of Series A Stock of the Eligible Holders.
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<PAGE>
SECTION 8.02. Lockup Agreements. Each Eligible Holder agrees not to effect
-----------------
any public sale or other distribution of Series A Stock during the seven days
prior to the effective date of any Public Offering or Demand Registration or
during the 180-day period (or such shorter period as the managing underwriter
may require) beginning on such effective date (except in either case as part of
such Demand Registration), unless the managing underwriter otherwise agrees. The
Company agrees not to effect any public sale or other distribution of Series A
Stock during the seven days prior to the effective date of any Demand
Registration or during the 180-day period (or such shorter period as the
managing underwriter may require) beginning on such effective date (except in
either case as part of such Demand Registration or pursuant to registrations on
Form S-8 or any successor form), unless the managing underwriter otherwise
agrees. Each Eligible Holder understands that stop transfer instructions may be
given to the Company's transfer agent to prevent transfers restricted by this
Section 8.02 during the applicable period of such restriction.
SECTION 8.03. Registration Procedures. Whenever the Company is obligated by
-----------------------
the provisions of this Agreement to effect a registration of any shares of
Series A Stock under the Securities Act, the Company shall use commercially
reasonable efforts to effect such registration and the sale of the shares of
Series A Stock covered thereby in accordance with the intended method of
disposition thereof, and pursuant thereto the Company will as expeditiously as
possible:
(a) prepare and file with the SEC a registration statement with
respect to such shares and use all commercially reasonable efforts to cause such
registration statement to become and remain effective for such period as may be
reasonably necessary to effect the sale of such securities, not to exceed ninety
days;
(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 until the sooner
to occur of the sale of all such shares or the ninetieth day following the
effective date of such registration statement and comply with the provisions of
the Securities 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 sellers thereof set forth in such registration
statement;
(c) furnish to each Eligible Holder participating in such Demand
Registration and the underwriters such number of copies of such registration
statement, each amendment and supplement thereto, the prospectus included in
such registration statement (including each preliminary prospectus) and such
other documents as such seller or underwriters may reasonably request in order
to facilitate the sale of the shares being sold;
(d) use all reasonable efforts to register or qualify the shares being
sold under such other securities or blue sky laws of such jurisdictions as any
seller reasonably requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable
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<PAGE>
such seller to consummate the disposition in such jurisdictions of the shares
owned by such seller; provided, however, that the Company will not be required
-------- -------
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) conform its
capitalization or the composition of its assets to the securities or blue sky
laws of such jurisdictions or (iii) consent to general service of process in any
such jurisdiction;
(e) cause all such shares to be listed or authorized for quotation on
each securities exchange or automated quotation system on which similar
securities issued by the Company are then listed or quoted;
(f) notify each seller of such shares, promptly after it shall receive
notice thereof, of the time when such registration statement has become
effective or a supplement to any prospectus forming a part of such registration
statement has been filed;
(g) notify each seller of such shares of any request by the SEC for
the amending or supplementing of such registration statement or prospectus or
for additional information;
(h) prepare and file with the SEC, promptly upon the request of any
seller of such shares, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel selected by the holders
of a majority of the shares being registered, is required under the Securities
Act in connection with the distribution of shares by such seller;
(i) prepare and promptly file with the SEC each amendment or
supplement to such registration statement or prospectus as may be necessary to
correct any statements or omissions if, at the time when a prospectus relating
to such securities is required to be delivered under the Securities Act, any
event shall have occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they were made,
not misleading; and
(j) advise each seller of such shares, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceeding for such purpose and promptly use commercially
reasonable efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued.
SECTION 8.04. Expenses. Each Eligible Holder that participates in a Demand
--------
Registration (including a Demand Registration that is withdrawn prior to
becoming effective) shall pay all underwriting discounts and commissions and any
transfer taxes attributable to the sale of such Eligible Holder's shares, the
fees and expenses of counsel for such Eligible Holder, and any other out-of-
pocket expenses of such Eligible Holder incurred in connection with its
participation in such Demand Registration. The Company shall pay all expenses
connected with
55
<PAGE>
the registration of such shares for sale, including the registration fee, the
fees of its counsel and accountants and any printing costs.
SECTION 8.05. Preparation of Registration Statement. Each Eligible Holder
-------------------------------------
agrees to furnish to the Company such written information concerning such
Eligible Holder as may reasonably be requested by the Company which is necessary
in connection with any Demand Registration.
SECTION 8.06. Indemnification.
---------------
(a) In the event that the Company effects a registration of any shares
owned by an Eligible Holder, such Eligible Holder shall indemnify and hold the
Company, and each of its directors and officers and each person, if any, who
controls the Company within the meaning of the federal securities laws (the
"Company Indemnified Parties") harmless against all losses, liabilities and
expenses of any nature whatsoever which the Company Indemnified Parties may
incur as a result of or arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement filed by the Company (including any prospectus contained in such
registration statement and any post-effective amendment or supplement thereto)
or as a result of or arising out of or based upon the omission or alleged
omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, which untrue statement or omission or alleged untrue
statement or omission was made in such registration statement (including any
prospectus contained in such registration statement and any post-effective
amendment or supplement thereto) in reliance upon and in conformity with
information furnished in writing by or behalf of such Eligible Holder for
inclusion therein; provided, however, that such Eligible Holder shall not be
-------- -------
liable to the extent that the losses, liabilities or expenses arise out of or
are based upon (i) the use by the Company or another Eligible Holder of any
prospectus after such time as the obligation of the Company to keep the same
effective and current has expired or (ii) the use by the Company or another
Eligible Holder of any prospectus after such time as such Eligible Holder has
advised the Company that the filing of a post-effective amendment or supplement
thereto is required with respect to any information contained in such prospectus
concerning such Eligible Holder, except such prospectus as so amended or
supplemented.
(b) In the event that the Company effects a registration of any shares
owned by an Eligible Holder, the Company shall indemnify and hold such Eligible
Holder, and each of its directors and officers and each person, if any, who
controls the Eligible Holder within the meaning of the federal securities laws
(the "Stockholder Indemnified Parties") harmless against all losses, liabilities
and expenses of any nature whatsoever which such Stockholder Indemnified Parties
may incur as a result of or arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement filed by the Company (including any prospectus contained in such
registration statement and any post-effective amendment or supplement thereto)
or as a result of or arising out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in
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order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, provided, however, that the Company will
-------- -------
not be liable in any such case to the extent that the losses, liabilities or
expenses arise out of or are based upon (i) any untrue statement or omission or
alleged untrue statement or omission made in such registration statement
(including any prospectus contained in such registration statement and any post-
effective amendment or supplement thereto) in reliance upon and in conformity
with information furnished in writing by or on behalf of such Eligible Holder to
the Company for inclusion therein in connection therewith, (ii) the use of any
prospectus after such time as the obligation of the Company to keep the same
effective and current has expired, or (iii) the use of any prospectus after such
time as the Company has advised the Eligible Holder that the filing of a post-
effective amendment or supplement thereto is required, except such prospectus as
so amended or supplemented.
(c) With respect to the indemnities provided above in this Section
8.06, an indemnified party shall, with respect to any claim made against such
indemnified party, notify the indemnifying party in writing of the nature of the
claim as soon as practicable but not more than ten days after the indemnified
party shall have received notice of the assertion thereof before any court or
governmental authority. The failure by an indemnified party to give notice as
provided in the foregoing sentence shall not relieve the indemnifying party of
its obligations under this section except to the extent that the failure results
in the failure of actual notice to the indemnifying party and the indemnifying
party is damaged solely as a result of the failure to give notice. Upon receipt
of notice by an indemnifying party from an indemnified party of the assertion of
any such claim, the indemnifying party shall employ counsel reasonably
acceptable to the indemnified party and shall assume the defense of such claim.
The indemnified party shall have the right to employ separate counsel and to
participate in (but not control) any such action, but the fees and expenses of
such counsel shall be the expense of such indemnified party unless (i) the
employment of counsel by such indemnified party has been authorized by the
indemnifying party, (ii) the indemnified party shall have been advised by its
counsel in writing that there is a conflict of interest between the indemnifying
party and the indemnified party in the conduct of the defense of such action (in
which case the indemnifying party shall not have the right to direct the defense
of such action on behalf of the indemnified party) or (iii) the indemnifying
party shall not in fact have employed counsel to assume the defense of such
action, in each of which cases the fees and expenses of such counsel shall be at
the expense of the indemnifying party. An indemnifying party shall not be
liable for any settlement of an action effected without its written consent
(which consent shall not be unreasonably withheld). No indemnifying party will
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect of such
action.
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ARTICLE IX
Financial Statements of the Company
-----------------------------------
SECTION 9.01. Annual Financial Statements. As soon as practicable following
---------------------------
the end of each fiscal year of the Company and in any event not later than
thirty days after the end of such fiscal year, the Company shall prepare and
deliver to each Consenting Stockholder an audited balance sheet of the Company
as of the end of such fiscal year and the related statements of operations, cash
flows and stockholders' equity for such fiscal year, together with appropriate
notes to such financial statements, all of which shall be prepared in accordance
with GAAP and certified by the Accountants, and in each case setting forth in
comparative form the corresponding figures for the preceding fiscal year. The
fiscal year of the Company shall be the same as the calendar year.
SECTION 9.02. Quarterly Financial Statements. As soon as practicable
------------------------------
following the end of each fiscal quarter of the Company (and in any event not
later than ten days after the end of such fiscal quarter), the Company shall
prepare and deliver to each Consenting Stockholder an unaudited balance sheet of
the Company as of the end of such fiscal quarter and the related statements of
operations and statements of cash flows for such fiscal quarter and for the
fiscal year to date, in each case setting forth in comparative form the
corresponding figures for the preceding fiscal quarter and for the prior year's
fiscal quarter corresponding to the fiscal quarter just completed.
SECTION 9.03. Other Financial Information. Not later than five days after
---------------------------
the end of each calendar month, the Company shall notify each Consenting
Stockholder of the Company's net income for such month. In addition, as soon as
practicable following the end of each calendar month (and in any event not later
than ten days after the end of such month), the Company shall prepare and
deliver to each Consenting Stockholder an unaudited balance sheet of the Company
as of the end of such month and the related statements of operations and cash
flows for such month and for the fiscal year to date, in each case setting forth
in comparative form the corresponding figures for the preceding fiscal year and
for the prior year's calendar month corresponding to the month just completed.
The Company will also provide to each Consenting Stockholder such other
information about the Company's financial position and affairs as such
Consenting Stockholder may request and promptly upon request by any Consenting
Stockholder, copies of all information received from or provided by [*]
including without limitation, [*], [*] and [*].
____________________
[*] Confidential Treatment Requested.
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ARTICLE X
Other Covenants of Stockholders and Participants
------------------------------------------------
SECTION 10.01. Transactions with Affiliates. The Consenting Stockholders
----------------------------
and their related Participants will not permit the Company, directly or
indirectly, to enter into any transaction or series of transactions with any
Consenting Stockholder or Participant or any of their respective Affiliates
other than on terms and conditions substantially as favorable to the Company as
would be obtainable by it at the time of such transaction in a comparable arm's-
length transaction with a Person that is not such an Affiliate; provided,
however, that this Section 10.01 shall not apply to (i) the Transactions, or
(ii) any transaction contemplated by the balance of this Article X.
SECTION 10.02. Procurement from Initial Participants.
-------------------------------------
(a) For so long as [*] or any of its Controlled Affiliates is a
Consenting Stockholder, [*] and its Subsidiaries will be the [*] to the Company
of services with respect to [*], [*] and [*]. [*] and its Subsidiaries will be
the [*] of [*] to [*], subject to and as set forth in Section 10.08(f). [*]
shall provide the [*] and [*] services to the Company, subject to the company
paying [*] for its costs in connection with the provision of such [*] and such
[*]. For so long as [*] or any of its Controlled Affiliates is a Consenting
Stockholder, [*] and its Subsidiaries will be the [*] to the Company of services
regarding the management of the Company's [*] (specifically, the [*]) and
services with respect to international sales support, when applicable, provided,
in each case, that such services are reasonably competitive with those available
from third-party providers with respect to performance, function, and
availability. In addition, if and to the extent that (i) technology research and
development services are needed by the Company for work that the Company Board
has determined that the Company will not perform itself, or (ii) the Company
Board has determined that the Company shall outsource any or all of its
requirements for [*] and/or [*], then, in any such case, [*] and its
Subsidiaries shall be the [*] for the needed services, provided, in each case,
that such services are reasonably competitive with those available from third-
party providers with respect to performance, function and availability. The
pricing with respect to services, as applicable, to be provided by [*] and their
respective Subsidiaries to the Company as contemplated by this Section 10.02
(other than for the provision of [*] to the Company, which shall be provided
[*]) shall be on [*], regardless of whether more [*] would otherwise be
available to [*], [*] the applicable Subsidiary or the Company for such [*] or
[*].
(b) [*] right to be the [*] of services with respect to [*] and [*]
and [*] to the Company will be terminable by [*]
___________
[*] Confidential Treatment Requested.
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[*] if the Company fails to achieve as of the end of any calendar year the [*]
for such calendar year [*] and, if curable, such failure is not cured within [*]
thereafter. If the [*] exercises such termination right, then [*] and its
Subsidiaries (for so long as [*] or one of its Controlled Affiliates is a
Consenting Stockholder) shall have the [*] to offer to be the [*] of such
services [*]. If, notwithstanding the change in the provider of such services,
the Company continues to fail or thereafter fails to achieve the [*] for a
calendar year set forth on [*] as of the end of such calendar year, then the
arrangements with [*] for the provision of such services will be terminable by
[*]. In the event of such termination, the Company Board shall promptly cause
the Company either to seek to procure a third-party supplier of such services
that is acceptable to [*] and [*] or to perform such services itself. The
decision by the [*] to exercise its termination rights pursuant to this Section
10.02(b) shall be made by those members of the Company Board who have not been
designated by those Consenting Stockholders that are Controlled Affiliates of
the provider of such services.
SECTION 10.03. [*]. [*] shall, on behalf of the Company, market the
Company's [*] to [*] that also [*], and in such capacity shall have the right to
offer [*] to Persons who [*], subject to compliance with the following terms and
conditions:
(i) [*] will [*] the Company for [*] of the amount of [*] at
which it [*] in accordance with this Section 10.03, such [*] to be
made, at [*] option, [*].
(ii) For so long as [*] or one of its Controlled Affiliates is a
Consenting Stockholder, [*] will also provide [*] to [*] on [*] in an
amount equal to [*] of the amount of [*] in accordance with this
Section 10.03, with the amount of such [*] to be based on the [*];
provided, however, that if the percentage of the outstanding Company
Common Stock owned by [*] and its Controlled Affiliates [*] to more
than [*] percent or [*] to less than [*] percent, then the amount of
[*] to be provided to [*] shall, in lieu of [*] percent of the
__________
[*] Confidential Treatment Requested.
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amount of the applicable [*] be such higher or lower percentage as
equals the product of [*] percent times the [*] and its Controlled
Affiliates as of the beginning of the [*] that payment to the Company
for the [*] Notwithstanding the foregoing, at [*] option, [*] may pay
[*].
(iii) The [*] to be made available [*] to the Company and [*]
hereunder may not be [*] to any Person other than a Controlled
Affiliate of the Company or [*], as applicable, and must be [*]. The
content of [*] proposed by the Company or [*] shall be reasonably
acceptable to [*] and shall not [*] or the Company's [*]; provided,
--------
however, that if [*] rejects any [*] proposed by [*] pursuant to this
-------
clause (iii), then [*] shall [*].
SECTION 10.04. Employees. It is the intention of the parties that, except
---------
as otherwise contemplated by Section 10.02, the Company shall create, as soon as
reasonably practicable after the Closing Date, a [*], including with respect to
the hiring of employees. Such employees may include [*] of [*], as well as
employees not previously employed by [*]. Each [*] agrees to encourage those of
its and its Subsidiaries' [*] that are involved with such [*] and are identified
by the Company as desirable employees to become employees of the Company. Each
employee of the Company will be hired on such terms as are mutually agreeable to
the Company Board and to such employee.
SECTION 10.05. [*]
[*].
__________
[*] Confidential Treatment Requested.
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[*].
[*].
[*].
SECTION 10.06. Certain Additional Ventures
---------------------------
(a) It is the intention of the parties that, for so long as [*] of [*]
and [*] are Consenting Stockholders, [*] would [*], and [*] and its Subsidiaries
would use [*] in [*] if and to the extent that [*] for such business, all on
mutually acceptable terms and conditions, consistent with industry custom and
__________
[*] Confidential Treatment Requested.
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standards, to be set forth in a separate agreement, including the condition
that [*].
(b) [*] and [*] desire to form another joint venture to pursue the
business of providing [*] in markets outside the Territory, subject to any
existing relationships the parties may have in any such market. To effect the
foregoing, [*] and [*] agree to use all commercially reasonable efforts to
negotiate in good faith and enter into definitive agreements for such an [*].
SECTION 10.07 [*] Certain Additional Covenants
----------------------------
(a) Each of [*], on behalf of itself and its Subsidiaries, hereby
agrees that it will (or in the case of [*], will cause one or more of its
Subsidiaries) , at the request of the Company at any time and from time to time
prior to the first to occur of (x) dissolution of the Company and (y) the
termination of the [*], or the [*], as applicable, in accordance with its terms,
execute and deliver agreements with [*], in the form of Exhibit F-1 or such
other form as may have been approved by the Company Board or by management of
the Company if approval by the Company Board is not then required by this
Agreement and [*] and [*]), with the Company pursuant to which such [*] will
grant to [*] that executes and delivers such an agreement the right and [*] to
the [*] of the [*] and the [*], solely to the extent required to make available
to such [*] the [*] and [*] and related services and equipment provided by the
Company pursuant to such [*]. Each of [*] and [*], on behalf of itself and its
Subsidiaries, shall execute and deliver the [*] with the effect set forth
therein. All payments due from [*] under any [*] that contains such a [*] or the
[*] shall be paid to an escrow account established by the Company, [*] pursuant
to an escrow agreement in substantially the form of Exhibit Q("Escrow
Agreement") with an escrow agent selected by the Company Board that satisfies
the requirements of Section 6 of the Escrow Agreement.
(b) In addition to any other amounts payable to [*] pursuant to this
Agreement or any agreement contemplated hereby, for so long as [*] beneficially
owns any [*], or so long as the [*] is in effect, the Company shall pay to [*]
within forty-five days after the end of each calendar quarter, an amount equal
to [*] of the amount of [*] earned in such calendar quarter (such amount, the
[*]). For this purpose, [*] in any quarter shall mean the aggregate amount of
[*] by the Company in such quarter from all sources, including [*] forming part
of the Company's [*], less the aggregate amount of [*]
__________
[*] Confidential Treatment Requested.
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[*] accrued with respect to such [*] and less allowances for uncollectible
amounts and bad debts. No deduction for any [*] given to [*] shall be made in
determining [*] Notwithstanding the foregoing, the Company [*] to pay the [*]
with respect to any quarter in [*] installments, together with interest on the
unpaid portion of such [*] at the rate of [*] per annum (calculated for actual
days elapsed on the basis of a 365-day or 366-day year, as applicable). The
Company may prepay amounts remaining due pursuant to the preceding sentence, in
whole or in part, at any time and from time to time without premium or penalty.
(c) [*] and its Subsidiaries shall license to the Company, pursuant to
the [*] agreement, the mark [*], subject to [*] approval on a case-by-case
basis, for use with other words as a trademark or service mark that may be used
by the Company in marketing and selling the Company's products and services. The
mark [*], when used alone, [*].
(d) [*] and its Subsidiaries shall license to the Company, pursuant to
the [*] Agreement, the marks [*] and [*] as trademarks and service marks for use
by the Company in marketing and selling the Company's products and services.
(e) In the event of a sale of [*], or [*] the acquiring Person and its
Parent [*].
[*].
SECTION 10.08. [*].
[*] hereby grants to the Company an [*] and the [*], as applicable,
exercisable by the Company on or after the [*] of the Closing Date upon the
following terms and conditions: (1) the
__________
[*] Confidential Treatment Requested.
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payment by the Company to the [*] and (2) the [*] being in form and substance
mutually agreed upon by the parties, but including at least the following terms:
[*].
[*].
In the event the [*] exercises its [*] under this Section 10.08 and
following such exercise [*]. Losses means any cost, damage (including, without
limitation, any consequential, special or punitive damages), including, but not
limited to, loss of revenue or income, or loss of business reputation,
disbursement, expense, liability, loss, deficiency, obligation, penalty, or
settlement of any kind or nature, whether forseeable or unforseeable, including,
but not limited to, out of pocket interest or other carrying cost, penalties,
legal, accounting and other professional fees and expenses incurred in the
investigation, collection, prosecution and defense of claims, and amounts paid
in settlement that may be imposed on or otherwise incurred or suffered. [*]
shall promptly remit to [*], reimbursement, or in the case of legal fees,
advances, for all losses incurred or suffered by [*]. Upon the initiation of any
such legal action, all restrictions on competition imposed by this Agreement on
[*] shall be terminated , and any agency arrangements between [*] and the
Company shall become nonexclusive. In the event a third party prevails in such
legal action, any license granted by [*] to the Company, the [*], and any right
to acquire a license from [*] shall terminate.
With respect to the indemnities provided above in this Section 10.08,
an indemnified party shall, with respect to any claim made against such
indemnified party, notify the indemnifying party in writing of the nature of the
claim as soon as practicable but not more than ten(10) days after the
indemnified party shall have received notice of the assertion thereof before any
court or governmental authority. The failure by an indemnified party to give
notice as provided in the foregoing sentence shall not relieve the indemnifying
party of its obligations under this section except to the extent that the
failure results in the failure of actual notice to the indemnifying party and
the indemnifying party is damaged solely as a result of the failure to give
notice. Upon receipt of notice by an indemnifying party from an indemnified
party of the
__________
[*] Confidential Treatment Requested.
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assertion of any such claim, the indemnifying party shall employ counsel
reasonably acceptable to the indemnified party and shall assume the defense of
such claim. The indemnified party shall have the right to employ separate
counsel and to participate in any such action, but the fees and expenses of such
counsel shall be the expense of such indemnified party unless (i) the employment
of counsel by such indemnified party has been authorized by the indemnifying
party, (ii) the indemnified party shall have been advised by its counsel in
writing that there is a conflict of interest between the indemnifying party and
the indemnified party in the conduct of the defense of such action (in which
case the indemnifying party shall not have the right to direct the defense of
such action on behalf of the indemnified party) or (iii) the indemnifying party
shall not in fact have employed counsel to assume the defense of such action, in
each of which cases the fees and expenses of such counsel shall be at the
expense of the indemnifying party. An indemnifying party shall not be liable for
any settlement of an action effected without its written consent (which consent
shall not be unreasonably withheld). No indemnifying party will consent to entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such action.
ARTICLE XI
Additional Capital
------------------
SECTION 11.01. Additional Capital. If, at any time prior to consummation
------------------
of the Company's initial Public Offering, the Company has a need for funds in
excess of the funds then available to it, then, if such action is approved by
Supermajority Board Vote and Supermajority Stockholder Vote, the Company shall
seek to obtain such additional funding (the "Additional Capital") by offering to
borrow Additional Capital from, or by offering to issue additional shares of
Series A Stock to, the Consenting Stockholders and/or other Persons, in each
case on such terms and conditions as may be approved by the Company Board by
Supermajority Board Vote and authorized by the stockholders by Supermajority
Stockholder Vote, provided that [*].
SECTION 11.02. Offering Procedure. Before any Additional Capital is
------------------
issued or sold following the approval of such issuance and sale by the Company
Board and stockholders, the Company shall give each Consenting Stockholder a
notice (the "Subscription Notice") which shall (i) state the terms of the
Additional Capital and the conditions on which it will be issued and sold and
(ii) offer each Consenting Stockholder the opportunity to subscribe for such
Additional Capital up to its Pro Rata Share during the twenty days after the
date of the
__________
[*] Confidential Treatment Requested.
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Subscription Notice. If any Consenting Stockholder does not subscribe for all of
its Pro Rata Share of such Additional Capital within the twenty-day period, then
the Company shall give notice of the aggregate amount of Additional Capital not
subscribed for (the "Unfunded Amount") to each other Consenting Stockholder that
subscribed for all and not less than all of its Pro Rata Share of such
Additional Capital (the "Funding Stockholders") and each such Funding
Stockholder shall have the right to subscribe for all or any of such Unfunded
Amount on terms no more favorable to the offeree then those set forth in the
Subscription Notice during the ten days after the date of such notice (and if
there is more than one Funding Stockholder that elects to subscribe for the
Unfunded Amount, then such amount shall be allocated among the Funding
Stockholders so subscribing in proportion to their respective Pro Rata Shares up
to in each case the maximum additional amount so subscribed for by the
applicable Funding Stockholder). None of the Consenting Stockholders,
Participants or the Company shall have any duty to limit the dilution of
economic or voting interests in the Company of Consenting Stockholders not
subscribing for their Pro Rata Share of Additional Capital. The subscription
rights of the Consenting Stockholders pursuant to this Section 11.02 shall not
apply to shares of Series A Stock or options or warrants to purchase shares of
Series A Stock issued to employees, officers, directors or consultants of the
Company or to [*] or any of its Subsidiaries, in each case as contemplated by
the exception to the requirements of clause (b)(ii) of the definition of
Significant Stockholder Transaction.
ARTICLE XII
Miscellaneous
-------------
SECTION 12.01 Freedom of Action. [*], no Consenting Stockholder or
-----------------
Affiliate thereof shall have any obligation to the Company or to the other
Consenting Stockholder or Affiliate thereof not to (i) engage in the same or
similar activities or lines of business as the Company or develop or market any
products or services that [*] with those of the Company or (ii) invest or own
any interest publicly or privately in, or develop a business relationship with,
any corporation, partnership or other entity engaged in the same or similar
activities or lines of business as, or otherwise in competition with, the
Company or (iii) do business with any client or customer of the Company or (iv)
employ or otherwise engage any current or former officer or employee of the
Company. [*], no Consenting Stockholder or Affiliate thereof nor any of their
respective stockholders, officers, directors, employees or former employees
shall have any obligation, or be liable, to the Company or the other Consenting
Stockholders or other Affiliates for or arising out of the conduct described in
[*], for exercising its rights under this Agreement or any other [*] to which it
is or will be a party, for exercising or failing to exercise its rights as a
Consenting Stockholder or for breach of any fiduciary or other duty to the
Company or the other Consenting Stockholders by reason of such conduct, such
officers', directors', employees' or former employees' participation therein or
such employees' or former employees' actions as officers or employees of the
Company. [*], in the event that a Consenting Stockholder or Affiliate thereof or
any of its officers, directors, employees or former employees acquires knowledge
of a
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[*] Confidential Treatment Requested.
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potential transaction, agreement, arrangement or other matter which may be a
business opportunity for both such Consenting Stockholder or Affiliate thereof
and the Company, neither such Consenting Stockholder or Affiliate thereof nor
its officers, directors, employees or former employees shall have any duty to
communicate or offer such business opportunity to the Company, and neither such
Consenting Stockholder or Affiliate thereof nor its officers, directors,
employees or former employees shall be liable to the Company or its other
Consenting Stockholders or their Affiliates for breach of any fiduciary or other
duty, as a Consenting Stockholder or otherwise, by reason of the fact that such
Consenting Stockholder or Affiliate thereof pursues or acquires such business
opportunity for itself, directs such business opportunity to another Person or
does not communicate such business opportunity or information regarding such
business opportunity to the Company.
SECTION 12.02 Notices. Except as expressly provided herein, notices and
-------
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed or sent by telecopier, as
follows:
(a) if to the Company,
[*]
Attention: President
with a copy to:
[*]
Attention: President
(b) if to [*],
[*]
Attention: President
__________
[*] Confidential Treatment Requested.
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with a copy to:
Baker & Botts, L.L.P.
599 Lexington Avenue
New York, New York 10022
Telephone: (212) 705-5000
Telecopier: (212) 705-5125
Attention: Elizabeth M. Markowski
(c) [*]
Attention: President
with a copy to:
O'Melveny & Myers
610 Newport Center Drive, Suite 1700
Newport Beach, California 92660
Telephone: (714) 760-9600
Telecopier: (714) 669-6994
Attention: David Krinsky
or to such other address or attention of such other Person as any party shall
advise the other parties in writing. Except as expressly provided herein, all
notices and other communications given to a party hereto in accordance with the
provisions of this Agreement shall be deemed to have been given (i) three
Business Days after the same are sent by certified or registered mail, postage
prepaid, return receipt requested, (ii) when delivered by hand or transmitted by
telecopy or (iii) two Business Days after the same are sent by a reliable
overnight courier service, with acknowledgment of receipt.
SECTION 12.03 Termination. If the Closing shall not have occurred [*],
-----------
this Agreement and all obligations of the parties hereunder, shall terminate.
SECTION 12.04 Table of Contents; Headings. The table of contents and
---------------------------
headings of the Articles, Sections and other subdivisions of this Agreement are
for convenience of reference only and shall not modify, define or limit any of
the terms or provisions of this Agreement.
SECTION 12.05 Governing Law. The validity, construction and performance
-------------
of this Agreement shall be governed by and construed in accordance with the laws
of the State of
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Delaware, applicable to contracts executed in and performed entirely within such
State, without reference to any choice of law principles of such State.
SECTION 12.06 Severability. If any provision of this Agreement shall be
------------
held to be illegal, invalid or unenforceable, that provision will be enforced to
the maximum extent permissible so as to effect the intent of the parties, and
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby. If necessary to effect the intent of
the parties, the parties will negotiate in good faith to amend this Agreement to
replace the unenforceable language with enforceable language which as closely as
possible reflects such intent.
SECTION 12.07 Amendments and Waivers. This Agreement may not be amended
----------------------
or modified in any respect except by an instrument in writing signed by all of
the parties hereto. Any failure of any party hereto to comply with any
obligation, covenant, agreement or condition contained herein may be waived by
the party or parties entitled to the benefits thereof, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
SECTION 12.08 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts shall have been signed by
each party and delivered to each other party.
SECTION 12.09 Entire Agreement. The provision of this Agreement and the
----------------
other Operative Documents set forth the entire agreement and understanding among
the parties as to the subject matter hereof and supersede all prior agreements,
oral or written, and other communications between the parties relating to the
subject matter hereof.
SECTION 12.10 Assignment. No party shall assign this Agreement or any of
----------
its rights or obligations hereunder without the prior written consent of the
other parties, except that no such consent shall be required for a transfer by
operation of law in connection with a merger or consolidation of such party
(without prejudice to any other rights the parties may have under Section 7.02,
7.04, 7.09 or 7.10 or any other [*]) or a transfer in connection with a Transfer
of all shares of the Company Common Stock then owned by such party permitted by
Article VI.
(a) Any attempted assignment of this Agreement in violation of this
Section 12.10 shall be void and of no effect.
(b) This Agreement shall be binding upon, inure to the benefit of and
be enforceable by the parties hereto and their respective successors and
permitted assigns.
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SECTION 12.11 No Third-Party Beneficiaries. This Agreement is for the sole
----------------------------
benefit of the parties and their permitted assigns and nothing herein expressed
or implied shall give or be construed to give to any Person, other than the
parties and such assigns, any legal or equitable rights hereunder.
SECTION 12.12 Expenses.
--------
(a) Whether or not any of the Transactions are consummated, all costs
and expenses incurred in connection with the [*] and the Transactions shall be
paid by the party incurring such cost or expense, except as the parties shall
otherwise agree.
(b) The provisions of this Section 12.12 shall remain operative and in
full force and effect regardless of the expiration of this Agreement or the
consummation of the Transactions.
SECTION 12.13 Remedies
--------
(a) In no event will any party be liable to another party for
incidental damages, lost profits, lost savings, or any other consequential or
punitive damages, even if such party has been advised of the possibility of such
damages, resulting from the breach of its obligations under any [*] or from the
use of any confidential or other information.
(b) Because the breach by any party of the provisions of Article VI,
Article VII and Section 10.05 would cause irreparable harm and significant
injury that would be difficult to ascertain and would not be compensable by
damages alone, the parties agree that each party will have the right to enforce
such provisions by injunction, specific performance or other equitable relief
without prejudice to any other rights and remedies the enforcing party may have.
The reference to specific Sections or Articles in this Section 12.13(b) is not
a waiver of any party's rights to seek equitable relief for breaches of other
Sections or Articles.
(c) No failure or delay of any party in exercising any power or right
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such right or power, preclude any other or
further exercise thereof or the exercise of any other right or power.
SECTION 12.14 Publicity. No public release, announcement or other form
---------
of publicity concerning the Transactions shall be issued by any party without
the prior consent of the other parties, except as such release or announcement
may be required by Law or the rules or regulations of any securities exchange or
association, in which case the party required to make the release or
announcement shall, to the extent possible, allow the other party reasonable
time to comment on such release or announcement in advance of such issuance.
__________
[*] Confidential Treatment Requested.
71
<PAGE>
SECTION 12.15 Further Assurances. Upon reasonable request from time to
------------------
time, the parties shall execute and deliver all documents and instruments and do
all other acts that may be reasonably necessary or desirable to give effect to
the Transactions or the exercise by the other parties of their respective rights
hereunder.
SECTION 12.16 Jurisdiction; Consent to Service of Process
-------------------------------------------
(a) Each party hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any Delaware State
court sitting in the County of New Castle or any Federal court of the United
States of America sitting in the District of Delaware, and any appellate court
from any such court, in any suit, action or proceeding arising out of or
relating to this Agreement or any other Operative Document, or for recognition
or enforcement of any judgment, and each party hereby irrevocably and
unconditionally agrees that all claims in respect of any such suit, action or
proceeding may be heard and determined in such Delaware State court or, to the
extent permitted by law, in such Federal court.
(b) Each party hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or any other [*] in any Delaware
State court sitting in the County of New Castle or any Federal Court sitting in
the District of Delaware. Each party hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such suit, action or proceeding in any such court and further waives the
right to object, with respect to such suit, action or proceeding, that such
court does not have jurisdiction over such party.
(c) Each party irrevocably consents to service of process in the
manner provided for the giving of notices pursuant to this Agreement. Nothing
in this Agreement shall affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 12.17 Waiver of Jury Trial. Each party waives, to the fullest
--------------------
extent permitted by applicable law, any right it may have to a trial by jury in
respect of any action, suit or proceeding arising out of or relating to this
Agreement or any other Operative Document.
SECTION 12.18. Construction. This Agreement has been negotiated by the
------------
parties and their respective counsel and will be fairly interpreted in
accordance with its terms and without any strict construction in favor of or
against any party.
SECTION 12.19. Confidentiality. Each Participant and each Consenting
---------------
Stockholder agrees that it will not, directly or indirectly, without the prior
written consent of the Company, use or disclose to any Person any information,
trade secrets, confidential customer information, technical data or know-how
relating to the products, processes, methods, equipment or business practices of
the Company or any of its Subsidiaries or any of the other parties hereto,
___________
[*] Confidential Treatment Requested.
72
<PAGE>
except (a) to the extent any of the foregoing is or becomes available to the
public other than as a result of disclosure by such Consenting Stockholder or
any of its Affiliates or the directors, officers, employees, agents, advisors
and controlling persons of it or any of its Affiliates, (b) as necessary to
effect a transaction under and in compliance with Article VII or VIII (c) as may
be required by law and (d) as any Consenting Stockholder may disclose to its
lenders, rating agencies and business, legal and financial advisors. In the
event any Consenting Stockholder is required by applicable law or regulation or
by legal process to disclose any of the foregoing, it will provide the Company
and the other Consenting Stockholders and any other parties hereto with prompt
notice thereof to enable them to seek an appropriate protective order. The
covenants made by a Consenting Stockholder and each other party hereto in this
Section 12.19 shall continue to apply for a period of two years after such
Consenting Stockholder ceases to be a Consenting Stockholder. In the event that
any Initial Participant proposes to file this Agreement or any of the exhibits
hereto with the SEC or any other governmental agency as part of any publicly
available filing, such Initial Participant shall notify the other Initial
Participant of such proposed filing and shall seek confidential treatment for
such portions of the filed documents as the parties shall agree prior to the
Closing.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
[*]
by
___________________________________________
Name:
Title:
[*]
by
___________________________________________
Name:
Title:
[*]
by
___________________________________________
Name:
Title:
[*]
by
___________________________________________
Name:
Title:
[*]
by
___________________________________________
Name:
Title:
__________
[*] Confidential Treatment Requested.
74
<PAGE>
[*]
by
___________________________________________
Name:
Title:
[*]
by
___________________________________________
Name:
Title:
___________
[*] Confidential Treatment Requested.
75
<PAGE>
EXHIBIT 10.2
WARRANT AGREEMENT
WARRANT AGREEMENT ("Agreement"), dated as of January 19, 1998, by and
among GEMSTAR INTERNATIONAL GROUP LIMITED, a British Virgin Islands corporation
(the "Company"), [*], a Delaware corporation ([*]), and [*], a Delaware limited
liability company ([*] and together with [*], the "Initial Registered Holders,"
and, collectively, with their permitted assignees, the "Registered Holders").
WHEREAS, the Company, [*] and certain other entities are parties to
that certain Joint Venture Formation and Stockholders Agreement, dated as of
January 19, 1998, relating to the formation and operation of Interactive Prevue
Guide, Inc., a Delaware corporation (the "Joint Venture"); and
WHEREAS, in connection with the [*], the Company has agreed to grant
to each of the Registered Holders warrants (together with any replacement or
substitute warrant hereunder, each, a "Warrant" and, collectively, the
"Warrants") to purchase in the aggregate for each Registered Holder [*] shares
(as adjusted pursuant to Section 6.1) of the fully paid and nonassessable Common
Stock of the Company (each such term as defined herein) (the "Shares") at a
purchase price equal to the applicable [*] (as defined herein) and on the terms
and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
SECTION I
1.1 Certain Definitions. As used in this Agreement, the following terms
-------------------
have the meanings specified below:
"Affiliate" means, when used with respect to a specified Person,
---------
another Person that directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the Person
specified. For purposes of the foregoing, the term "controls" (including the
--------
correlative meanings "controlled by" or under "common control with") means the
------------- -------------------
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"Close of Business" means 5:00 p.m. local time in the City of New
-----------------
York, New York.
__________
[*] Confidential Treatment Requested.
<PAGE>
"Closing Price" of a share of Common Stock on any Trading Day means
-------------
(i) the last reported sales price, regular way, for such Trading Day as reported
on the principal national securities exchange on which the Common Stock is
listed or admitted for trading or (ii) if the Common Stock is not listed or
admitted for trading on any national securities exchange, the last reported
sales price, regular way, for such Trading Day as reported on the National
Market tier of The Nasdaq Stock Market or, if the Common Stock is not quoted on
such National Market tier, the average of the highest bid and lowest asked
prices on such Trading Day as reported on The Nasdaq Stock Market, or (iii) if
the Common Stock is not listed or admitted to trading on any national securities
exchange or The Nasdaq Stock Market, the average of the highest bid and lowest
asked prices on such Trading Day in the domestic over-the-counter market as
reported by the National Quotation Bureau Incorporated, or any similar successor
organization.
"Common Stock" means the Ordinary Shares of the Company as they exist
------------
on the date of this Agreement, any securities of the Company into or for which
such Common Stock may hereafter be changed, converted or exchanged, and, where
appropriate, the other securities or property (including cash) acquirable upon
exercise of a Warrant following the happening of certain events as provided
herein.
"Company" means Gemstar International Group Limited, a British Virgin
-------
Islands corporation, and any successor (by merger, consolidation, transfer or
otherwise) to all, or substantially all, of its business and assets.
"Convertible Securities" means any or all options, warrants,
----------------------
securities and rights which are convertible into or exercisable or exchangeable
for Common Stock at the option of the holder thereof, or which otherwise entitle
the holder thereof to subscribe for, purchase or otherwise acquire Common Stock.
"Current Market Price", on the Determination Date for any issuance of
--------------------
rights or warrants or any distribution in respect of which the Current Market
Price is being calculated, shall mean the average of the daily Closing Prices of
the Common Stock for the shortest of:
(i) the period of 30 consecutive Trading Days commencing 45
Trading Days before such Determination Date;
(ii) the period commencing on the date next succeeding the first
public announcement of the issuance of rights or warrants or the distribution in
respect of which the Current Market price is being calculated and ending on the
last full Trading Day before such Determination Date; and
(iii) the period, if any, commencing on the date next succeeding
the Ex-Dividend Date with respect to the next preceding issuance of rights or
warrants or distribution for which an adjustment is required by the provisions
of clause (iv) of the first sentence of Section 6.1(a), Section 6.1(b) or
Section 6.1(c), and ending on the last full Trading Day before such
Determination Date.
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<PAGE>
If the record date for an issuance of rights or warrants or a distribution
for which an adjustment is required by the provisions of clause (iv) of the
first sentence of Section 6.1(a), Section 6.1(b) or Section 6.1(c) (the
"preceding adjustment event") precedes the record date for the issuance or
distribution in respect of which the Current Market Price is being calculated
and the Ex-Dividend Date for such preceding adjustment event is on or after the
Determination Date for the issuance or distribution in respect of which the
Current Market Price is being calculated, then the Current Market Price shall be
adjusted by deducting therefrom the fair market value (on the record date for
the issuance or distribution in respect of which the Current Market Price is
being calculated), as determined in good faith by the Board of Directors, of the
capital stock, rights, warrants, assets or evidences of indebtedness issued or
distributed in respect of each share of Common Stock in such preceding
adjustment event. Further, in the event that the Ex-Dividend Date (or in the
case of a subdivision, combination or reclassification, the effective date with
respect thereto) with respect to a dividend, subdivision, combination or
reclassification to which clauses (i), (ii), (iii) or (v) of the first sentence
of Section 6.1(a) applies occurs during the period applicable for calculating
the Current Market Price, then the Current Market Price shall be calculated for
such period in a manner determined in good faith by the Board of Directors to
reflect the impact of such dividend, subdivision, combination or
reclassification on the Closing Prices of the Common Stock during such period.
"Determination Date" for any issuance of rights or warrants or any
------------------
distribution to which Section 6.1(b) or Section 6.1(c) applies shall mean the
earlier of (i) the record date for the determination of stockholders entitled to
receive the rights or warrants or the distribution to which such Section applies
and (ii) the Ex-Dividend Date for such right, warrants or distribution.
"Ex-Dividend Date" shall mean the date on which "ex-dividend" trading
----------------
commences for a dividend, an issuance of rights or warrants or a distribution to
which any of Section 6.1(a), Section 6.1(b) or Section 6.1(c) applies in the
over-the-counter market or on the principal exchange on which the Common Stock
is then quoted or listed.
"Exercise Date" means, in connection with any exercise of a Warrant,
-------------
the date as of which all of the requirements of the first sentence of Section
3.2(a) have first been satisfied with respect to such Warrant exercise.
"Fair Market Value", for purposes of Section 2.1(b), shall be
-----------------
calculated in the manner provided in 16 C.F.R. (S)801.10(a) and (S)801.10(c)(i).
"Ordinary Shares" means the Ordinary Shares, par value $.01 per share,
---------------
of the Company.
"Person" means any individual, firm, corporation, partnership, limited
------
liability company, trust, joint venture, governmental agency or authority or
other entity and shall include any successor (by merger or otherwise) of such
entity.
"SEC" means the Securities and Exchange Commission and any successor
---
to the functions of the Securities and Exchange Commission.
3
<PAGE>
[*] means [*], a Delaware corporation, and any successor (by merger,
consolidation, transfer or otherwise) to all, or substantially all, of its
business and assets.
"Trading Day" means a day on which the principal national securities
-----------
exchange on which the Common Stock is listed or admitted to trading, or The
Nasdaq Stock Market, as applicable, if the Common Stock is not listed or
admitted to trading on any national securities exchange, is open for the
transaction of business (unless such trading shall have been suspended for the
entire day) or, if the Common Stock is not listed or admitted to trading on any
national securities exchange or The Nasdaq Stock Market, any Business Day.
"[*]" means that certain [*] Agreement, dated as of January 19, 1998,
---
among the Company, [*] and certain stockholders of the Company.
1.2 Additional Definitions.
----------------------
Agreement Preamble
Company SEC Documents 4.1(a)(v)
Exchange Act 4.1(a)(i)
Exercise Period 3.1
Exercise Price 3.2(b)
Expiration Date 3.1
Extraordinary Cash Dividend 6.1(c)
HSR Act and Rules 2.1(c)
Initial Registered Holders Preamble
Initial Vesting Condition 2.1(b)
Initial Vesting Date 2.1(b)
Initial Warrants 2.1(a)
Initial Warrant Exercise Price 3.2(b)
Issue Date 7.5
Joint Venture Preamble
Outside Date 2.1(c)
Preference Shares 4.1(a)(ii)
Qualifying Shares 4.1(a)(v)
Registered Holders 4.1(a)(v)
Rights Preamble
Second Vesting Condition 2.1(c)
Second Vesting Date 2.1(c)
Second Warrant Exercise Price 3.2(c)
Second Warrants 2.1(a)
Securities Act 4.1(a)(v)
Shares 4.1(a)(v)
[*] 7.3(c)
[*] Preamble
Warrant Preamble
__________
[*] Confidential Treatment Requested.
4
<PAGE>
1.3 Terms Generally. The definitions in Sections 1.1 and 1.2 shall apply
---------------
equally to both the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation". All
references herein to Sections and Exhibits shall be deemed references to
Sections of, and Exhibits to, this Agreement unless the context shall otherwise
require. Unless the context shall otherwise require, any references to any
agreement or other instrument or statute or regulation are to it as amended and
supplemented from time to time (and, in the case of a statute or regulation, to
any successor provisions). Any reference in this Agreement to a "day" or number
of "days" (without the explicit qualification of "Business") shall be
interpreted as a reference to a calendar day or number of calendar days. If any
action or notice is to be taken or given on or by a particular calendar day, and
such calendar day is not a Business Day, then such action or notice shall be
deferred until, or may be taken or given on, the next Business Day. All
references to "dollar", "$" or any variant thereof in this Agreement means
United States dollars.
SECTION II
2.1 Issuance of Warrants; Form of Warrant.
-------------------------------------
(a) On the date hereof, the Company will issue and deliver to each
Initial Registered Holder its Warrants, which shall be in the form of Exhibit A
(the "Initial Warrant") and Exhibit B (the "Second Warrant"), respectively.
(b) The Initial Warrants of the Registered Holders will vest and first
become exercisable on such date (the "Initial Vesting Date") as of which [*] and
[*] first beneficially own in the aggregate, directly and/or indirectly through
their respective subsidiaries, shares of Common Stock with an aggregate Fair
Market Value of at least [*] but in any event [*] (the "Initial Vesting
Condition"), provided that the Initial Vesting Condition has been satisfied by
no later than the Close of Business on the [*] day following [*]. If the Initial
Vesting Condition has not been met by the Close of Business on the [*] day
following [*], then this Agreement shall terminate and have no force or effect,
and the Company shall have no further obligations, and the Registered Holders
shall possess no rights, hereunder. If the Initial Vesting Condition has been
met as of such time and date, then the shares of Common Stock beneficially owned
by [*] and [*] when the Initial Vesting Condition has been satisfied shall
constitute Qualifying Shares for purposes of Section 7.5.
(c) The Second Warrants of the Registered Holders will vest and first
become exercisable on the date (the "Second Vesting Date") as of which [*] and
[*] first beneficially own, consistent with and not in breach of their covenants
in [*], in the aggregate, directly or indirectly through their respective
subsidiaries, [*] shares of Common Stock (the "Second Vesting Condition"),
provided that the Second Vesting Condition has been satisfied by no later than
the Close of Business on the [*] day following the expiration or
termination of the [*], provided, further, however, that
-------- ------- -------
__________________
[*] Confidential Treatment Requested.
5
<PAGE>
if [*] and/or [*] as applicable has filed a Notification and Report Form with
respect to the acquisition of shares of Common Stock pursuant to the Hart-Scott-
Rodino Antitrust Improvement Act of 1976, as amended, and the rules and
regulations thereunder ("HSR Act and Rules") on or before the [*] day following
the expiration or termination of the [*], then the date by which the Second
Vesting Condition must be satisfied shall be extended to the 30th day following
the expiration or early termination of the waiting period for such acquisition
pursuant to the HSR Act and Rules (the "Outside Date"). If the Second Vesting
Condition has not been met as of the Outside Date, then this Agreement shall
terminate and have no force or effect and the Company shall have no further
obligations, and the Registered Holders shall possess no rights, hereunder. If
the Second Vesting Condition has been met as of the Close of Business on the
Outside Date, then such [*] shares of Common Stock shall be "Qualifying Shares"
for purposes of Section 7.5. The Second Vesting Condition may not be satisfied
in whole or in part with shares of Common Stock acquired upon exercise of the
Warrant.
(d) The Warrants shall be executed on behalf of the Company by the
manual or facsimile signature of the President or other authorized officer of
the Company, under its corporate seal, affixed or in facsimile, attested by the
manual or facsimile signature of the Secretary or an Assistant Secretary of the
Company.
SECTION III
3.1 Exercise Period. Each of the Warrants shall be exercisable, in whole
---------------
or in part, at any time and from time to time, during the period beginning on
(i) in the case of the Initial Warrants, the Initial Vesting Date and ending,
subject to earlier termination in accordance with Section 2, at the Close of
Business on the third anniversary of the Initial Vesting Date and (ii) in the
case of the Second Warrants, the Second Vesting Date and ending at the Close of
Business on the third anniversary of the Second Vesting Date (or, in either
case, if such day is not a Business Day, the immediately succeeding Business
Day) (each such period, an "Exercise Period" and the date on which the
applicable Exercise Period expires, the "Expiration Date").
3.2 Method of Exercise; Payment; Issuance of New Warrants.
-----------------------------------------------------
(a) Each Warrant may be exercised by the Registered Holder, in whole
or in part, by the surrender of the Warrant (with the notice of exercise in the
form of Exhibit 1 thereto duly executed) at the principal office of the Company
and by the payment to the Company of an amount, in cash or by certified or bank
cashier's check, equal to the Exercise Price multiplied by the number of Shares
then being purchased. Subject to Section 7.5, within ten (10) days after the
Exercise Date, the Company shall cause to be issued and delivered to or upon the
written order of the Registered Holder, and in such name or names as the
Registered Holder may designate, a certificate for the Shares so purchased and,
unless such Warrant has been fully exercised or has expired, a new Warrant
representing the portion of the Shares, if any, with respect to which such
Warrant shall not then have been exercised. Such certificates shall be deemed
to have been issued and any Person so designated to be named therein shall be
deemed to have become the
__________
[*] Confidential Treatment Requested.
6
<PAGE>
holder of record of such Shares, and shall possess all rights of a stockholder
with respect to such Shares, as of the Exercise Date.
(b) The initial exercise price of the Initial Warrants (as the same
may be adjusted from time to time pursuant to Section 6.1, the "Initial Warrant
Exercise Price") with respect to each share of Common Stock shall be equal to
[*].
(c) The initial exercise price of the Second Warrants (as the same may
be adjusted from time to time pursuant to Section 6.1, the "Second Warrant
Exercise Price" and, together with the Initial Warrant Exercise Price, the
"Exercise Price") with respect to each share of Common Stock shall be equal to
[*].
SECTION IV
4.1 Representations and Warranties of the Company; Certain Covenants.
----------------------------------------------------------------
(a) The Company represents and warrants to each of the Registered
Holders that as of December 31, 1997:
(i) Organization and Standing. The Company (x) is a corporation
-------------------------
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and is duly qualified or licensed to do
business and in good standing in each jurisdiction in which the failure to be so
qualified or licensed and in good standing (individually or in the aggregate)
would have a material adverse effect on the Company, and (y) has all requisite
corporate power and authority necessary to enable it to carry on its business as
now conducted, to enter into this Agreement, to issue the Warrants and to carry
out the transactions contemplated hereby and thereby. True and accurate copies
of the Company's Amended and Restated Articles of Association and Amended and
Restated Memorandum of Association, each as amended and as currently in effect,
have been made available to the Initial Registered Holders through the Company's
filings with the SEC pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act") prior to December 31, 1997, and such documents constitute
all of the constitutive or governing documents of the Company.
(ii) Capitalization. The authorized capital of the Company is,
--------------
as of the date hereof, and will be, as of the Effective Date, $5,500,000,
consisting of one class and series of Ordinary Shares divided into 500,000,000
shares of $.01 par value, and one class and series of Preference Shares divided
into 50,000,000 shares of $.01 par value ("Preference Shares"). The rights,
privileges and preferences of the Ordinary Shares and Preference Shares are as
stated in the Company's Amended and Restated Memorandum of Association. As of
December 31, 1997, there were issued and outstanding 48,228,588 Ordinary Shares,
no Preference Shares and no other shares of capital stock. All such issued and
outstanding Ordinary Shares and Preference Shares have been duly authorized and
validly issued, are fully paid and nonassessable, and were issued in compliance
with all applicable state and federal securities laws. As of December 31, 1997,
there were no outstanding options, warrants or other rights to purchase or
otherwise acquire equity securities of the Company, securities convertible into
or exchangeable for equity securities of the Company, options, warrants or other
rights to purchase
__________
[*] Confidential Treatment Requested.
7
<PAGE>
or otherwise acquire any such convertible or exchangeable securities, or
agreements to issue or grant any of the foregoing (collectively, "Rights"),
other than those set forth on Schedule 4.1. Since December 31, 1997, the Company
has not issued any additional Ordinary Shares (except upon exercise of
outstanding Rights listed on Schedule 4.1), Preference Shares or other capital
stock and the Company has not issued or granted any Rights (except as set forth
on Schedule 4.1). All Rights listed on Schedule 4.1 have been duly authorized
and validly issued, are fully paid and nonassessable (except as to the payment
of any exercise price for the underlying securities) and were issued in
compliance with all applicable state and federal securities laws. To the best
knowledge of the Company, other than the Voting Agreement, there are no voting
trusts, voting agreements, irrevocable proxies or other agreements or
understandings with respect to any voting shares of capital stock of the
Company. The Company has reserved: (i) 9.1 million Ordinary Shares for issuance
to employees, officers, directors, consultants and agents of the Company
pursuant to any employee or consultant stock offering, plan or arrangement
approved by the Board of Directors of the Company (all of which are set forth on
Schedule 4.1) and (ii) and approximately 1.2 million Ordinary Shares for
issuance upon exercise of the Warrants. Except as set forth above in this
Section 4.1(a)(ii), no shares of capital stock or other securities of the
Company were issued, reserved for issuance or outstanding as of December 31,
1997. Other than the Rights listed on Schedule 4.1, there are no preemptive
rights, rights of first refusal, participation rights or other similar rights
currently outstanding or in effect to purchase any of the authorized but
unissued capital stock or treasury stock of the Company.
(iii) Authorization. All corporate action on the part of the
-------------
Company and its officers, directors and shareholders necessary for the
authorization, execution and delivery of, and the performance of all obligations
of the Company under, this Agreement and, upon issuance in accordance with the
terms of this Agreement, the Warrants, and for the authorization, issuance and
delivery of the Warrants and of the Shares issuable upon exercise of the
Warrants has been taken. This Agreement has been duly executed and delivered by
the Company, and this Agreement constitutes, and the Warrants when issued and
delivered in accordance with the terms of this Agreement shall constitute, the
legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, subject to: (x) judicial
principles respecting election of remedies or limiting the availability of
specific performance, injunctive relief and other equitable remedies; and (y)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect generally relating to or affecting creditors' rights.
(iv) No Conflicts. The execution and delivery by the Company of
------------
this Agreement and the Warrants and the performance by the Company of its
obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby do not and will not conflict with, result in any
violation of or default (with or without notice or lapse of time or both) under,
give rise to a right of termination, cancellation or acceleration or any
material obligation or to the loss of any material benefit under or result in or
require the creation, imposition or extension of any lien, security interest,
restriction or other encumbrance upon any of the Company's properties or assets
(other than those imposed under this Agreement or the Warrants) under (i) any
oral or written contract, indenture, mortgage, lease, deed, commitment,
agreement, arrangement or legally binding understanding or instrument, (ii) any
provision of its constitutive or governing documents or (iii) any law, statute,
ordinance, rule,
8
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regulation, judgment, order, decree or arbitral award, except for any such
conflicts, violations, defaults, rights, obligations or losses that,
individually or in the aggregate, would not have a material adverse effect on
the Company or its ability to consummate the transactions contemplated under
this Agreement or the Warrants.
(v) SEC Filings. The Company has filed all required reports,
-----------
schedules, forms, statements and other documents with the SEC since December 31,
1996 (as such documents have been amended prior to the date hereof, the "Company
SEC Documents"). As of their respective dates, the Company SEC Documents
complied in all material respects with the requirements of the Securities Act of
1933, as amended (the "Securities Act") and the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such Company SEC Documents. None of the Company SEC Documents contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except to
the extent such statements have been modified or superseded by a later Company
SEC Document.
(b) Reservation of Shares; Stock Fully Paid; Validity of Stock and
--------------------------------------------------------------
Warrants. The Shares, when issued upon exercise of the Warrants, shall be duly
- --------
authorized, validly issued, fully paid, nonassessable, and free from all taxes
(other than income taxes with respect to dividends or distributions thereon and
taxes arising from the disposition thereof), liens, charges, security interests,
restrictions and other encumbrances (except restrictions set forth in this
Agreement or otherwise imposed under applicable securities laws). The Company
will at all times during each applicable Exercise Period reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued Common Stock, or its authorized and issued Common Stock held in
treasury, for the purpose of enabling it to satisfy any obligation to issue
Shares upon exercise of Warrants, the full number of Shares deliverable upon the
exercise of all outstanding Warrants. Before taking any action which would
cause an adjustment pursuant to Section 6 reducing any applicable Exercise Price
below the then par value (if any) of the Shares issuable upon exercise of the
Warrants, the Company will take any corporate action that may, in the opinion of
its counsel (which may be counsel employed by the Company), be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable Shares at the Exercise Price as so adjusted.
(c) No Impairment. The rights granted to the Registered Holders
-------------
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to a registered holder of the Company's securities under any
other agreements, except such rights that have been waived. The Company will
not, by amendment of its Articles of Association or Memorandum of Association,
or through reorganization, consolidation, merger, dissolution, issuance or sale
of securities, sale of assets or any other voluntary action, willfully avoid or
seek to avoid the observance or performance of any of the terms of this
Agreement or the Warrants, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Registered
Holders under this Agreement and the Warrants against wrongful impairment.
Without limiting the generality of the foregoing, the Company: (i) will take
all such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable Shares
9
<PAGE>
upon the exercise of the Warrants; and (ii) will not on or after the date hereof
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the Registered Holders under this Agreement or which
otherwise conflicts with the provisions hereof.
(d) Taxes. The Company shall pay any and all issue, documentary
-----
stamp or other taxes (other than applicable income taxes) that may be payable in
respect of any issuance or delivery of Shares. The Company shall not, however,
be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of Shares in a name other than that of a
Registered Holder, and no such issuance or delivery shall be made unless and
until the Person to which issuance and delivery is to be made has paid to the
Company the amount of any such tax, or has established, to the satisfaction of
the Company, that such tax has been paid.
SECTION V
5.1 Representations and Warranties of the Registered Holders. Each
--------------------------------------------------------
Initial Registered Holder, as to itself only, hereby makes the following
representations and warranties for the benefit of the Company:
(a) Authorization. All corporate action on the part of such Initial
-------------
Registered Holder that is necessary for the execution, delivery and performance
by such Initial Registered Holder of its obligations under this Agreement has
been taken. This Agreement has been duly executed and delivered by such Initial
Registered Holder, and this Agreement constitutes the legal, valid and binding
obligation of such Initial Registered Holder, enforceable against it in
accordance with its terms, subject to: (i) judicial principles respecting
election of remedies or limiting the availability of specific performance,
injunctive relief and other equitable remedies; and (ii) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
generally relating to or affecting creditors' rights.
(b) Restrictions under Securities Laws. Such Initial Registered
----------------------------------
Holder is an "accredited investor" within the meaning of Regulation D
promulgated under the Securities Act. The Warrants and, if exercised, the
Shares are being acquired by such Initial Registered Holder for its own account
for investment and not with a view to the public distribution or resale thereof.
Such Initial Registered Holder understands that the Warrants and Shares have not
been registered under the Securities Act or any state securities or blue sky
laws, by reason of their issuance in a transaction exempt from the registration
requirements thereunder and may not be resold unless the subsequent disposition
thereof is registered thereunder or is exempt from registration thereunder.
SECTION VI
6.1 Adjustment of Exercise Price and Number of Shares Purchasable. The
-------------------------------------------------------------
Exercise Prices of the Initial Warrants and the Second Warrants and the number
of Shares purchasable
10
<PAGE>
upon the exercise of each Warrant are subject to adjustment from time to time as
set forth in this Section 6.1.
(a) In case the Company shall at any time after the date of this
Agreement: (i) pay a dividend on the Common Stock in shares of Common Stock,
(ii) subdivide the outstanding shares of Common Stock into a greater number of
shares, (iii) combine the outstanding shares of Common Stock into a smaller
number of shares, (iv) pay a dividend on the Common Stock in shares of its
capital stock (other than Common Stock), or (v) issue any shares of its capital
stock by reclassification of the shares of Common Stock (other than any
reclassification by way of merger or binding share exchange that is subject to
Section 6.1(h)), the Exercise Price, and the number and kind of Shares
receivable upon exercise, in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the holder of any
Warrant exercised after such time shall be entitled to receive the aggregate
number and kind of Shares which, if such Warrant had been exercised immediately
prior to such time, he would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any event
listed above shall occur. Subject to Section 6.1(f), for a dividend or
distribution, the adjustment shall become effective immediately after the record
date for the dividend or distribution, and for a subdivision, combination or
reclassification, the adjustment shall become effective immediately after the
effective date of the subdivision, combination or reclassification.
(b) In case the Company shall issue rights or warrants to all holders
of Common Stock entitling them (for a period expiring within 45 days after the
record date for the determination of stockholders entitled to receive such
rights or warrants) to subscribe for or purchase shares of Common Stock (or
Convertible Securities) at a price per share (or having a conversion price per
share, after adding thereto an allocable portion of the exercise price of the
right or warrant to purchase such Convertible Securities, computed on the basis
of the maximum number of shares of Common Stock issuable upon conversion of such
Convertible Securities) less than the Current Market Price per share on the
Determination Date, the Exercise Price shall be adjusted by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction, of
which the numerator shall be the number of shares of Common Stock outstanding on
such record date plus the number of shares which the aggregate offering price of
the total number of shares of Common Stock so offered (or the aggregate initial
conversion price of the Convertible Securities so offered, after adding thereto
the aggregate exercise price of the rights or warrants to purchase such
Convertible Securities) to holders of Common Stock (and to holders of
Convertible Securities referred to in the following paragraph if the
distribution to which this Section 6.1(b) applies is also being made to such
holders) would purchase at such Current Market Price, and of which the
denominator shall be the number of shares of Common Stock outstanding on such
record date plus the number of additional shares of Common Stock so offered for
subscription or purchase (or into which the Convertible Securities so offered
are initially convertible). The adjustment contemplated by this Section 6.1(b)
shall be made successively whenever any such rights or warrants are issued and
shall become effective immediately after the close of business on such record
date; however, to the extent that shares of Common Stock (or Convertible
Securities) have not been issued when such rights or warrants expire (or, in the
case of rights or warrants to purchase Convertible Securities which have been
11
<PAGE>
exercised, if all of the shares of Common Stock issuable upon conversion of such
Convertible Securities have not been issued prior to the expiration of the
conversion right thereof), the Exercise Price shall be readjusted (but only with
respect to Warrants exercised after such expiration) to the Exercise Price which
would then be in effect had the adjustments made upon the issuance of such
rights or warrants been made upon the basis of delivery of only the number of
shares (or Convertible Securities) actually issued upon the exercise of such
rights or warrants (or the conversion of such Convertible Securities).
For purposes of this Section 6.1(b) the number of shares of Common
Stock outstanding on any record date shall be deemed to include the maximum
number of shares of Common Stock the issuance of which would be necessary to
effect the full exercise, exchange or conversion of all Convertible Securities
outstanding on such record date which are then exercisable, exchangeable or
convertible at a price (before giving effect to any adjustment to such price for
the distribution to which this Section 6.1(b) is being applied) equal to or less
than the Current Market Price per share of Common Stock on the applicable
Determination Date, if all of such Convertible Securities were deemed to have
been exercised, exchanged or converted immediately prior to the opening of
business on such record date. In case any subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined by the Board of Directors of the
Company. Shares of Common Stock owned by or held for the account of the Company
or any majority owned subsidiary shall not be deemed outstanding for the purpose
of any computation under this Section 6.1(b).
(c) In case the Company shall distribute to all holders of Common
Stock evidences of its indebtedness or assets or subscription rights or warrants
(excluding (x) dividends or distributions referred to in Section 6.1(a) and
distributions of rights or warrants referred to in Section 6.1(b) and (y) cash
dividends or other cash distributions, unless such cash dividends or cash
distributions are Extraordinary Cash Dividends), the Exercise Price shall be
adjusted by multiplying the Exercise Price in effect immediately prior to the
record date for the determination of stockholders entitled to receive such
distribution by a fraction, of which the numerator shall be the number of shares
of Common Stock outstanding on such record date multiplied by the Current Market
Price on the Determination Date, less the fair market value (as determined by
the Board of Directors of the Company) on such record date of the evidences of
indebtedness, assets, subscription rights or warrants to be distributed to the
holders of Common Stock (and to the holders of Convertible Securities referred
to below if the distribution to which this Section 6.1(c) applies is also being
made to such holders), and of which the denominator shall be the number of
shares of Common Stock outstanding on such record date multiplied by such
Current Market Price. For purposes of this Section 6.1(c), the number of shares
of Common Stock outstanding on any record date shall be deemed to include the
maximum number of shares of Common Stock the issuance of which would be
necessary to effect the full exercise, exchange or conversion of all Convertible
Securities outstanding on such record date which are then exercisable,
exchangeable or convertible at a price (before giving effect to any adjustment
to such price for the distribution to which this Section 6.1(c) is being
applied) equal to or less than the Current Market Price per share of Common
Stock on the applicable Determination Date, if all of such Convertible
Securities were deemed to have been exercised, exchanged or converted
immediately prior to the opening of business on such record date.
12
<PAGE>
For purposes of this Section 6.1(c), the term "Extraordinary Cash
Dividend" shall mean any cash dividend with respect to the Common Stock the
amount of which, together with the aggregate amount of cash dividends on the
Common Stock to be aggregated with such cash dividend in accordance with the
following provisions of this paragraph, equals or exceeds the threshold
percentage set forth below in the following sentence. If, upon the date prior
to the Ex-Dividend Date with respect to a cash dividend on Common Stock, the
aggregate of the amount of such cash dividend together with the amounts of all
cash dividends on the Common Stock with Ex-Dividend Dates occurring in the 365
consecutive day period ending on the date prior to the Ex-Dividend Date with
respect to the cash dividend to which this provision is being applied (other
than any such other cash dividends with Ex-Dividend Dates occurring in such
period for which a prior adjustment to the Exercise Price was previously made
under this Section 6.1(c)) equals or exceeds on a per share basis [*] of the
average of the Closing Prices during the period beginning on the date after the
first such Ex-Dividend Date in such period and ending on the date prior to the
Ex-Dividend Date with respect to the cash dividend to which this provision is
being applied (except that if no other cash dividend has had an Ex-Dividend Date
occurring in such period, the period for calculating the average of the Closing
Prices shall be the period commencing 365 days prior to the date immediately
prior to the Ex-Dividend Date with respect to the cash dividend to which this
provision is being applied), such cash dividend together with each other cash
dividend with an Ex-Dividend Date occurring in such 365-day period that is
aggregated with such cash dividend in accordance with this paragraph shall be
deemed to be an Extraordinary Cash Dividend.
The adjustment pursuant to the foregoing provisions of this Section 6.1(c)
shall be made successively whenever any distribution to which this Section
6.1(c) applies is made, and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
Shares of Common Stock owned by or held for the account of the Company or any
majority owned subsidiary shall not be deemed outstanding for the purposes of
any such adjustment.
(d) In the event that this Section 6.1 requires adjustments to the
Exercise Price and number of Shares purchasable under more than one of clause
(iv) of the first sentence of Section 6.1(a), Section 6.1(b) or Section 6.1(c),
and the record dates for the distribution giving rise to such adjustments shall
occur on the same date, then such adjustments shall be made by applying, first,
the provisions of Section 6.1(a), second the provisions of Section 6.1(c) and,
third, the provisions of Section 6.1(b).
(e) No adjustment in the Exercise Price shall be required if the
amount of such adjustment shall be less than 40 cents per Share; provided,
--------
however, that any adjustments which by reason of this subsection (e) are not
- -------
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 6.1 shall be made to
the nearest cent or to the nearest one-hundredth of a Share, as the case may be.
(f) In any case in which this Section 6.1 shall require that an
adjustment in the Exercise Price be made effective as of the record date for a
specified event, the Company may elect to defer until the occurrence of such
event (x) issuing to the holder of any Warrant exercised after such record date
the Shares, if any, issuable upon such exercise over and above
___________
[*] Confidential Treatment Requested.
13
<PAGE>
the Shares, if any, issuable upon such exercise on the basis of the Exercise
Price in effect prior to such adjustment and (y) paying to such holder cash or
its check in lieu of any fractional interest to which such holder would be
entitled pursuant to Section 6.2; provided, however, that the Company shall
-------- -------
deliver to such holder a due bill or other appropriate instrument evidencing
such holder's right to receive such additional Shares and such cash upon the
occurrence of the event requiring such adjustment.
(g) Upon each adjustment of the Exercise Price as a result of the
calculations made in subsections (a), (b), (c) or (i) of this Section 6.1, each
Warrant outstanding prior to the making of the adjustment in the Exercise Price
shall thereafter evidence the right to purchase, at the adjusted Exercise Price,
that number of Shares (calculated to the nearest hundredth) obtained by (A)
multiplying the number of Shares purchasable upon exercise of a Warrant prior to
adjustment of the number of Shares by the Exercise Price in effect prior to
adjustment of the Exercise Price and (B) dividing the product so obtained by the
Exercise Price in effect after such adjustment of the Exercise Price.
(h) If the Company consolidates with or merges into, or transfers
(other than by mortgage or pledge) its properties and assets substantially as an
entirety to, another Person or the Company is a party to a merger or binding
share exchange which reclassifies or changes its outstanding Common Stock, the
Company (or its successor in such transaction) or the transferee of such
properties and assets shall make appropriate provision so that each Warrant then
outstanding shall thereafter be exercisable, upon the terms and conditions
specified in this Agreement, for the kind and amount of securities, cash or
other assets receivable upon such transaction by a holder of the number of
Shares purchasable upon exercise of such Warrant immediately before the
effective date of such transaction (assuming, to the extent applicable, that
such holder failed to exercise any rights of election with respect thereto, and
received per Share the kind and amount of securities, cash or other assets
received per share of Common Stock by a plurality of the nonelecting shares of
Common Stock); and in any such case, if necessary, the provisions set forth in
this Section 6.1 with respect to the rights and interests thereafter of the
holders of the Warrants shall be appropriately adjusted so as to be applicable,
as nearly as may reasonably be, to any such other securities or assets
thereafter deliverable on the exercise of the Warrants. The subdivision or
combination of the Common Stock at any time outstanding into a greater or lesser
number of shares of Common Stock shall not be deemed to be a reclassification of
the Common Stock for the purposes of this subsection. The Company shall not
effect any such consolidation, merger, transfer or binding share exchange unless
prior to or simultaneously with the consummation thereof the successor (if other
than the Company) resulting from such consolidation or merger or the Person
purchasing such assets or other appropriate Person shall assume, by written
instrument, the obligation to deliver to the holder of each Warrant such
securities, cash or other assets as, in accordance with the foregoing
provisions, such holders may be entitled to purchase and the other obligations
under this Agreement.
(i) The Company may make such reductions in the Exercise Price, in
addition to those required by subsections (a), (b) and (c) of this Section 6.1,
as it shall in its sole discretion determine to be advisable.
14
<PAGE>
6.3 Fractional Shares. If the number of Shares purchasable upon the
-----------------
exercise of each Warrant is adjusted pursuant to of Section 6.1(g), the Company
shall nonetheless not be required to issue fractions of Shares upon exercise of
the Warrants or to distribute share certificates which evidence fractional
Shares. In lieu of fractional Shares, there shall be paid to the Registered
Holders at the time such Warrants are exercised as herein provided an amount in
cash equal to the same fraction of the current market value of a Share. For
purposes of this Section 6.2, the current market value of a Share shall be the
Closing Price of a Share for the Trading Day immediately prior to the date of
such exercise.
6.4 Notices to Warrantholders.
-------------------------
(a) Upon any adjustment of the Exercise Price pursuant to Section
6.1, the Company within 20 days thereafter shall cause to be given to each
Registered Holder written notice of such adjustment setting forth the Exercise
Price after such adjustment and setting forth in reasonable detail the method of
calculation and the facts upon which such calculations are based and setting
forth the number of Shares (or portion thereof) purchasable upon exercise of a
Warrant after such adjustment in the Exercise Price. Where appropriate, such
notice may be given in advance and included as a part of the notice required to
be mailed under the provisions of Section 6.3(b).
(b) In case:
(i) the Company shall authorize the issuance to all holders of
Common Stock of rights or warrants to subscribe for or purchase shares of Common
Stock or of any other subscription rights or warrants; or
(ii) the Company shall authorize the distribution to all holders
of Common Stock of evidences of its indebtedness or assets (other than dividends
payable in Common Stock); or
(iii) of any consolidation, merger or binding share exchange to
which the Company is a party and for which approval of any shareholders of the
Company is required, or of the conveyance or transfer of the properties and
assets of the Company as, or substantially as, an entirety, or of any
reclassification or change of outstanding Shares issuable upon exercise of the
Warrants (other than a change in par value, or from par value to no par value,
or from no par value to par value, or as a result of a subdivision or
combination); or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(v) the Company proposes to take any action (other than actions
of the character described in Section 6.1(a), except as required under (iii)
above) which would require an adjustment of the Exercise Price pursuant to
Section 6.1;
then the Company shall cause to be given to each Registered Holder at least 20
days (or 10 days in any case specified in clauses (i) or (ii) above) prior to
the applicable record or effective date
15
<PAGE>
hereinafter specified, a written notice stating (x) the date as of which the
holders of record of Common Stock to be entitled to receive any such rights,
warrants or distribution are to be determined, or (y) the date on which any such
consolidation, merger, binding share exchange, conveyance, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of record of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property, if any, deliverable upon such reclassification, consolidation, merger,
binding share exchange, conveyance, transfer, dissolution, liquidation or
winding up. The failure to give the notice required by this Section 6.3(b) or
any defect therein shall not affect the legality or validity of any
distribution, right, warrant, consolidation, merger, binding share exchange,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any such action.
SECTION VII
7.1 Loss or Mutilation. Upon receipt by the Company of evidence reasonably
------------------
satisfactory to it of the ownership, and the loss, theft, destruction or
mutilation, of a Warrant, and of indemnity reasonably satisfactory to it, and
(in the case of mutilation) upon surrender and cancellation of such Warrant, the
Company will execute and deliver in lieu thereof a new Warrant of like tenor.
7.2 No Rights or Liabilities as Stockholder. Nothing contained in this
---------------------------------------
Agreement or in any Warrant shall be construed as conferring upon the holders
thereof the right to vote or to consent or to receive notice as shareholders in
respect of the meetings of shareholders for the election of directors of the
Company or any other matter or any rights whatsoever as shareholders of the
Company.
7.3 Governmental Approvals; Regulatory Compliance; Standstill Period.
----------------------------------------------------------------
(a) The Company shall from time to time take all action that may be
necessary to obtain and keep effective any and all permits, consents and
approvals of governmental agencies and authorities and filings under federal and
state laws or with any securities exchange or association on which the Common
Stock is listed, which may be or become requisite in connection with the
issuance, sale, transfer and delivery of the Warrants, the exercise of the
Warrants and the issuance, sale, transfer and delivery of the Shares issued upon
exercise of the Warrants; provided, however, the foregoing shall not be
-------- -------
construed to impose upon the Company any obligation to register the issuance to
or resale by the Registered Holder of the Shares under the Securities Act or any
state securities laws.
(b) Without limiting the generality of the foregoing, in the event
that the Company or any Registered Holder reasonably believes that the purchase
of shares of Common Stock to satisfy the Second Vesting Condition or the
exercise of a Warrant and issuance of Shares acquirable upon such exercise
requires prior compliance with the HSR Act and Rules, then any such purchase or
exercise shall be contingent upon such prior compliance and, in the case of the
Warrant exercise shall, subject to effecting such compliance, be effective as of
the Exercise Date. In the event that compliance with the HSR Act and Rules with
respect to a
16
<PAGE>
Warrant exercise is effected after the Expiration Date, such expiration of the
Warrant shall not affect the Registered Holder's right to exercise in accordance
with a notice of exercise delivered to the Company in compliance with Section
3.2 prior to such Expiration Date. To effect such compliance, the Company and
the applicable Registered Holder will, promptly following receipt by the Company
of such Registered Holder's notice of exercise or other written request, use
their respective commercially reasonable efforts to make all filings necessary
to cause the expiration or termination of any applicable waiting period under
the HSR Act and Rules. Each of the Company and each Registered Holder shall bear
and pay the costs or expenses that it incurs in complying with this Section 7.3,
except that each of the Company and the applicable Registered Holder shall pay
one half of any fee payable to the Federal Trade Commission or the Department of
Justice (or any other governmental body then having jurisdiction with respect to
the HSR Act and Rules) in connection with the filing of any reports under the
HSR Act and Rules.
(c) Notwithstanding the foregoing, during the period commencing on the
date hereof and expiring on the day, corresponding to the date hereof, in the
[*] following the date hereof or, if earlier, the date as of which [*] and [*]
are relieved of their obligations pursuant to this Section 7.3(c) ([*]), [*] and
[*] will not and will not permit any Person of which either of them is the
ultimate parent within the meaning of the HSR Act and Rules to purchase or
otherwise acquire any shares of Common Stock or other voting securities of the
Company the acquisition of which would result in the acquiring person (within
the meaning of the HSR Act and Rules) owning [*] of the Common Stock or other
voting securities of the Company (as determined pursuant to [*]. The [*] will
expire on such earlier date, if any, on which (i) the Company has advised [*]
and [*] that it is releasing them from their obligations hereunder, or (ii)
another Person makes an offer to the Board of Directors of the Company or to the
Company's stockholders to acquire [*] of the Common Stock of the Company
(whether by tender or exchange offer, merger, consolidation, binding share
exchange or otherwise), and the Company [*].
7.4 Mechanics and Effects of Transfer. An assignment, conveyance or other
---------------------------------
transfer of any Warrant or the rights hereunder shall be made on the books of
the Company maintained for such purpose at the principal office of the Company
upon surrender of any such Warrant together with a properly completed assignment
in the form of Exhibit 2 to the forms of Warrant attached hereto duly executed
by the Registered Holder. Upon any such registration of transfer, a new Warrant
shall be issued to the transferee and the surrendered Warrant shall be canceled.
Notwithstanding the foregoing, the Warrant and the rights under this Agreement
may not be assigned, conveyed or transferred unless (i) such assignment,
conveyance or transfer complies with all applicable securities laws and the
provisions of this Agreement, including Section 7.5, and (ii) the transferee
agrees in writing to be bound by the terms of this Agreement, including the
restrictions set forth in Section 7.5.
7.5 Lockup. If the Warrants vest, then the Warrants, the Qualifying
------
Shares and the Shares purchased upon exercise of the Warrants may not be sold,
assigned or otherwise transferred to any Person (i) in the case of the Warrants,
during the Exercise Period, (ii) as to any Qualifying Shares, during the period
commencing on (x) in the case of any such Qualifying Shares purchased prior to
the Initial Vesting Date, the Initial Vesting Date and (y) in the case of
__________
[*] Confidential Treatment Requested.
17
<PAGE>
any other Qualifying Shares, the date such Qualifying Share is purchased, and
ending on the corresponding day in the [*] following the Initial Vesting Date or
the applicable purchase date, as applicable (or, if there is no such
corresponding day in such [*], then the last day of such [*]) and (iii) as to
any Shares, during the period commencing on the date such Share is first issued
("Issue Date") and ending on the corresponding day in the [*] following the
Issue Date (or, if there is no such corresponding day in such [*], then the last
day of such [*]), except that a Registered Holder may transfer its Warrant, any
Shares purchased thereunder and any Qualifying Shares (x) to an Affiliate of
such Registered Holder that agrees in writing to be bound by the terms of this
Agreement and (y) to a Person that is not an Affiliate of such Registered Holder
pursuant to a public offer made by such Person to acquire 50% or more of the
outstanding shares of Common Stock. Further, if any designated Holder desires to
pledge any of the Warrants, any Qualifying Shares or any Shares, then it shall
be a condition to the effectiveness of any such pledge during the applicable of
the foregoing periods that the pledgee agree in writing to be bound by the
provisions of this Section 7.5 as if it were the pledgor hereunder.
7.6 Legends; Notations.
------------------
(a) The certificates evidencing the Warrants and the Shares shall be
imprinted with conspicuously noted legends substantially in the form of the
legends set forth on the form of Warrants annexed as Exhibit A and Exhibit B and
any legend required by any applicable state securities law.
(b) The Company shall make a notation on its stock books regarding
the restrictions on transfer of the Warrants and Shares required by applicable
securities and other laws and imposed pursuant to this Agreement and will
transfer securities on the books of the Company only to the extent not
inconsistent therewith. Without limiting the generality of the foregoing, the
Company shall refuse to register any transfer of the Warrants or Shares not made
in accordance with the registration requirements of the Securities Act or
pursuant to an applicable exemption from registration under the Securities Act.
SECTION VIII
8.1 Notices. Any notice required or permitted under this Agreement shall
-------
be in writing and shall be delivered by hand or overnight courier service or by
certified or registered mail, postage prepaid, return receipt requested, or by
telecopier (answer back received), to the applicable party at its address set
forth below (or to such other address or attention of such other Person as any
party shall advise the other parties in writing). Notice shall be deemed given
upon actual receipt thereof.
To the Company: Gemstar International Group Limited
135 North Los Robles Avenue, Suite 800
Pasadena, California 91101
Telecopier No.: (626) 792-4051
Attention: President
__________
[*] Confidential Treatment Requested.
18
<PAGE>
(with a copy similarly addressed to the
attention of the Legal Department)
With a copy to: O'Melveney & Myers
610 Newport Center Drive
Newport Beach, California 92660
Telecopier No.: (714) 669-6994
Attention: David Krinsky
To [*]: [*]
Attention: President
(with a copy similarly addressed to the
attention of the Legal Department)
With a copy to: Baker & Botts, L.L.P.
599 Lexington Avenue
New York, New York 10022
Telecopier No: (212) 705-5125
Attention: Elizabeth M. Markowski, Esq.
To [*]: [*]
Attention: President - [*]
(with a copy similarly addressed to the Legal
Department)
With a copy to: Baker & Botts, L.L.P.
599 Lexington Avenue
New York, New York 10022
Telecopier No: (212) 705-5125
Attention: Elizabeth M. Markowski, Esq.
8.2 Severability. If any provision of this Agreement is held by a court
------------
of competent jurisdiction to be invalid, illegal or unenforceable, that
provision will be enforced to the maximum extent permissible so as to effect the
intent of the parties, and the validity, legality and enforceability of the
remaining provisions shall in no way be affected, impaired or invalidated.
8.3 Headings. The headings set forth in this Agreement are for convenience
--------
of reference only and shall not be deemed to constitute a part hereof.
__________
[*] Confidential Treatment Requested.
19
<PAGE>
8.4 Governing Law. This Agreement and the Warrants shall be construed and
-------------
enforced in accordance with, and governed by, the internal laws of the State of
Delaware, notwithstanding any otherwise applicable conflicts of laws principles.
8.5 Successors and Assigns; No Third Party Beneficiaries. This Agreement
----------------------------------------------------
and the rights and obligations set forth herein shall inure to, and shall be
binding upon, the Company and each of the Registered Holders and each of their
respective successors and permitted assigns. Nothing in this Agreement, express
or implied, is intended to confer upon any third party any rights, remedies,
obligations or liabilities under, or by reason of, this Agreement, except as
expressly provided in this Agreement.
8.6 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be an original and all of which together shall
constitute one and the same agreement.
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<PAGE>
IN WITNESS WHEREOF, the Company and the Registered Holders have executed
this Agreement as of January 19, 1998.
[*]
By: /s/ [*]
-------------------------------
Name: [*]
Title: CEO
[*]
By: /s/ [*]
-------------------------------
Name: [*]
Title: President
[*]
By: /s/ [*]
-------------------------------
Name:
Title:
___________
[*] Confidential Treatment Requested.
21
