EXHIBIT 10.1
TDN, INC.
STOCKHOLDERS AGREEMENT
By and Among
TDN, Inc.,
a Delaware corporation,
Gemstar Marketing, Inc.,
a California corporation,
and
Thomson Consumer Electronics, Inc.,
a Delaware corporation
October 31, 1997
TABLE OF CONTENTS
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Page
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SECTION 1. CERTAIN DEFINITIONS........................................... 1
1.1 "Additional Securities"....................................... 2
1.2 "Affiliate"................................................... 2
1.3 "AMPL/S"...................................................... 2
1.4 "Board"....................................................... 2
1.5 "Business".................................................... 3
1.6 "Cash Available for Distribution"............................. 3
1.7 "Company Common Stock"........................................ 3
1.8 "Confidential Information".................................... 3
1.9 "Data Delivery System"........................................ 4
1.10 "Effective Date".............................................. 4
1.11 "EPG"......................................................... 4
1.12 "Exchange Act"................................................ 4
1.13 "Fiscal Year"................................................. 4
1.14 "Foreign Corporation"......................................... 4
1.15 "GAAP"........................................................ 4
1.16 "Gemstar Offered Asset"....................................... 4
1.17 "Initial Shares".............................................. 4
1.18 "Intellectual Property Rights"................................ 4
1.19 "Internet Access Device"...................................... 5
1.20 "Latin America"............................................... 5
1.21 "Moral Rights"................................................ 5
1.22 "North America"............................................... 5
1.23 "OpenTV Products"............................................. 5
1.24 "Operating Expenses".......................................... 5
1.25 "Operational Expenses"........................................ 6
1.26 "Permitted Sale Date"......................................... 6
1.27 "Person"...................................................... 6
1.28 "Public Market Sale".......................................... 6
1.29 "Public Offering"............................................. 6
1.30 "SEC"......................................................... 6
1.31 "Securities".................................................. 6
1.32 "Securities Act".............................................. 6
1.33 "Services".................................................... 6
1.34 "Stockholders"................................................ 6
1.35 "Subsidiary".................................................. 6
1.36 "TCE Offered Asset"........................................... 7
1.37 "VBI"......................................................... 7
1.38 "Voting Securities"........................................... 7
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SECTION 2. FIRST REFUSAL RIGHTS TO PURCHASE ADDITIONAL SECURITIES........ 7
2.1 First Refusal Rights.......................................... 7
2.2 Pro Rata Share................................................ 7
2.3 Company Notice................................................ 7
2.4 Response Notice............................................... 7
2.5 Consummation.................................................. 7
2.6 Termination................................................... 8
SECTION 3. TCE RIGHTS OF FIRST OFFER..................................... 8
3.1 Gemstar Offer................................................. 8
3.2 Acceptance.................................................... 8
3.3 Rejection..................................................... 8
3.4 Below Gemstar Target Price Offer.............................. 9
3.5 Termination................................................... 9
SECTION 4. GEMSTAR RIGHTS OF FIRST OFFER................................. 9
4.1 TCE Offer..................................................... 9
4.2 Acceptance.................................................... 10
4.3 Rejection..................................................... 10
4.4 Below TCE Target Price Offer.................................. 10
4.5 Termination................................................... 11
SECTION 5. COMPANY BOARD OF DIRECTORS.................................... 11
5.1 The Board..................................................... 11
5.2 Termination................................................... 12
5.3 Initial Public Offering....................................... 12
5.4 Assignability................................................. 12
5.5 Transactions with Stockholders................................ 13
5.6 Declaration of Dividends...................................... 13
5.7 Annual Budget................................................. 13
SECTION 6. APPROVAL RIGHTS............................................... 14
6.1 Approval...................................................... 14
6.2 Termination................................................... 15
6.3 Non-Assignability............................................. 15
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SECTION 7. AUTHORITY OF THE STOCKHOLDERS TO ENGAGE IN OTHER BUSINESSES... 15
7.1 Permissible Activities........................................ 15
7.2 Promotion of Other's Services and Technology.................. 16
7.3 Corporate Opportunity......................................... 16
7.4 No Interference with Licensing and Related Activities......... 16
SECTION 8. CONFIDENTIAL INFORMATION...................................... 17
8.1 Treatment of Confidential Information......................... 17
8.2 Release from Restrictions..................................... 17
SECTION 9. RESTRICTIONS ON SALE OF SECURITIES; REGISTRATION IN INITIAL
PUBLIC OFFERING............................................... 18
9.1 Restrictions on Transfer Generally............................ 18
9.2 Restrictions on Sale of Initial Shares........................ 18
SECTION 10. CONFLICT RESOLUTION........................................... 18
10.1 Negotiation Between Executives................................ 18
10.2 Mediation..................................................... 19
10.3 Irreparable Harm.............................................. 19
SECTION 11. REMEDIES...................................................... 19
11.1 Limitation on Damages......................................... 19
11.2 Contractual Limitation Period................................. 20
11.3 Remedies Upon Default Under this Agreement and Other
Agreements.................................................... 20
SECTION 12. MISCELLANEOUS................................................. 21
12.1 Stockholders' Commitment...................................... 21
12.2 Acknowledgment................................................ 21
12.3 Injunctive Relief............................................. 21
12.4 Severability.................................................. 21
12.5 Governing Law................................................. 21
12.6 Entire Agreement.............................................. 21
12.7 Amendments and Waivers........................................ 22
12.8 Successors and Assigns........................................ 22
12.9 Third Party Beneficiary....................................... 22
12.10 Further Assurances............................................ 22
12.11 Copy of Agreement............................................. 22
12.12 Headings...................................................... 22
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12.13 Counterparts.................................................. 22
12.14 Assignment.................................................... 22
12.15 Notices....................................................... 22
12.16 Legends on Certificates....................................... 23
12.17 Disputes; Resolution.......................................... 24
12.18 WAIVER OF CONFLICT OF INTEREST................................ 24
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STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement") is made and entered into as
of October 31, 1997 by and among TDN, Inc., a Delaware corporation (the
"Company"), Gemstar Marketing, Inc., a California corporation ("Gemstar"), and
Thomson Consumer Electronics, Inc., a Delaware corporation ("TCE").
B A C K G R O U N D
- - - - - - - - - -
A. The Company is being organized for the purpose of engaging in the
Business (as defined in Section 1.4 hereof).
B. Concurrently with the execution of this Agreement, each of Gemstar and
TCE are entering into Common Stock Subscription Agreements with the Company
pursuant to which the Company will be capitalized (the "Subscription
Agreements").
C. In connection with the execution of this Agreement, the Company is also
entering into (i) an intellectual property agreement with an affiliate (as
defined in Section 1.2 hereof) and (ii) a cost reimbursement and support
agreement with [*] (the "Cost Reimbursement and Support Agreement").
D. Also in connection with this Agreement, Affiliates of Gemstar and TCE
are amending the terms of certain license agreements between them effective on
[*] and [*] (the "License Agreements").
E. The parties hereto believe that it is desirable to enter into this
Agreement in order to set forth their understanding and agreement with respect
to certain of the rights and obligations of the Stockholders as stockholders of
the Company.
A G R E E M E N T
- - - - - - - - -
In consideration of the foregoing and the mutual covenants and conditions
contained herein, the parties agree as follows:
SECTION 1. CERTAIN DEFINITIONS
For purposes of this Agreement, securities of an issuer that are held by
such issuer (i.e., treasury shares) or a Subsidiary (as defined below) of such
issuer shall not be deemed to be "outstanding." As used in this Agreement, the
following capitalized terms shall have the meanings indicated:
__________
[*] Confidential Treatment Requested.
1.1 "Additional Securities" shall mean all Securities; provided, however,
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that the term "Additional Securities" shall not include the following:
(a) The Initial Shares;
(b) Any Securities that are issued on a proportional basis to all of
the holders of Company Common Stock;
(c) Any Securities that are issued or issuable or reissued or
reissuable to any employee, consultant or independent member of the Board of the
Company or any Subsidiary of the Company pursuant to any employee benefit plan,
arrangement or agreement approved by the Board;
(d) Any Securities that are issued or issuable in connection with any
Public Offering undertaken by the Company;
(e) Any Securities that are issued or issuable in connection with the
acquisition by the Company of any business, business assets or securities from
any Person;
(f) Any Securities issued to any financing source for the Company or
any Subsidiary of the Company (or any assignee of the rights to acquire such
Securities held by any such financing source) other than TCE, Gemstar or any of
their respective Affiliates;
(g) Any Securities that are issued to [*] in connection with such
party's agreement to become a party to this Agreement and to incorporate
proprietary technology of Gemstar or its Affiliates into [*]; or
(h) Any Securities that are issued or issuable upon the exercise of
rights, options or warrants to purchase Securities or upon the conversion or
exchange of Securities convertible into or exchangeable for Securities where a
Stockholder received (or was not required to receive) a Company Notice pursuant
to Section 2.3 of this Agreement.
1.2 "Affiliate" shall mean an affiliate as such term is defined in Rule
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12b-2 of the General Rules and Regulations promulgated by the SEC under the
Exchange Act.
1.3 "AMPL/S" shall mean advertising, merchandising, promotions, linking
and services data; provided, however, AMPL/S shall not be deemed to include any
such data provided by [*] as part of [*].
1.4 "Board" shall mean the Board of Directors of the Company.
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__________
[*] Confidential Treatment Requested.
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1.5 "Business" shall mean the business of marketing and selling space on
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the Data Delivery System to Gemstar or Affiliate of Gemstar licensed EPG for
carrying third party AMPL/S originated or procured through by the Company
through various hardware implementations and broadcast networks in North America
[*] as well as developing and acquiring Intellectual Property Rights for such
purpose.
1.6 "Cash Available for Distribution" shall mean, with respect to any
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Fiscal Year, the excess of
(a) all cash receipts of the Company from Business operations,
including, without limitation, revenue from (i) marketing and selling space
on the Data Delivery System for insertion of [*] by [*] to consumers in
North America and Latin America through various broadcast networks, (ii)
subscriptions and (iii) licenses, over
(b) the sum of the following amounts (to the extent the following
amounts are expected to be paid before other cash receipts sufficient to
cover them are anticipated to be received):
(i) cash disbursements for Operating Expenses or capital
expenditures;
(ii) payments of interest and principal under any indebtedness
of the Company; and
(iii) amounts set aside as reserves by the Board for working
capital, contingent liabilities, capital replacements or for any of
the expenditures described in clauses (i) and (ii) above, or as
otherwise deemed reasonable by the Board to meet the current or
anticipated needs of the Company, including, without limitation, for
acquisitions by the Company or other corporate transactions.
In determining Cash Available for Distribution, the Board shall give due
consideration to the existing financial position of the Company and the
reasonably anticipated financial needs of the Company.
1.7 "Company Common Stock" shall mean the Company's common stock, $.01 par
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value per share.
1.8 "Confidential Information" shall mean all information and materials of
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a Person, patentable or otherwise, including, without limitation, computer
programs, code, technical information, data, reports, know-how, patent
positioning, financial information and business plans, including any negative
developments, whether disclosed on, before or after the Effective Date.
__________
[*] Confidential Treatment Requested.
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1.9 "Data Delivery System" shall mean an electronic system for the
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insertion, broadcast and delivery of data to [*].
1.10 "Effective Date" shall mean the date of this Agreement, or such other
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date as the Stockholders may mutually agree.
1.11 "EPG" shall mean a [*] electronic program guide used to obtain program
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listing and channel lineup information.
1.12 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
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amended, together with the rules and regulations promulgated thereunder.
1.13 "Fiscal Year" shall mean the fiscal year of the Company, which shall
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be the 12-month period ended March 31 of each year, until changed by the Board.
1.14 "Foreign Corporation" shall mean a non-U.S. corporation to be formed
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and in which Affiliates of Gemstar and TCE will be shareholders, which
corporation will be formed to conduct the Business (as defined in Section 1.5 of
the Agreement except that, for purposes of the definition of "Foreign
Corporation," North America in Section 1.5 shall be read as Latin America) in
Latin America.
1.15 "GAAP" shall mean United States of America generally accepted
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accounting principles.
1.16 "Gemstar Offered Asset" shall mean any Securities owned by Gemstar.
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Any other debt or equity security of the Company owned by Gemstar may be
designated as part of a Gemstar Offered Asset in a Gemstar Notice (as defined in
Section 3.1 below).
1.17 "Initial Shares" shall mean the [*] shares of Company Common Stock
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issued and outstanding on the date hereof and held of record by the Stockholders
as follows (appropriately adjusted in the future to reflect any subsequent stock
dividends, stock splits, reverse stock splits or any similar transactions),
representing the following ownership percentages as of the date hereof:
Number of Percentage of
Stockholder Initial Shares Initial Shares
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Gemstar Marketing, Inc. [*] [*]
Thomson Consumer Electronics, Inc. [*] [*]
1.18 "Intellectual Property Rights" shall mean all of the following legal
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rights in North America and Latin America: (i) patents, patent applications, and
patent rights; (ii) rights associated with works of authorship (including
audio/visual works), including copyrights, copyright applications, and copyright
registrations; (iii) rights relating to the
__________
[*] Confidential Treatment Requested.
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protection of trade secrets and confidential information; (iv) Moral Rights; (v)
design rights; (vi) any rights analogous to those set forth in the preceding
clauses and any other proprietary rights relating to intangible property other
than trademarks, trademark registrations and applications therefor, trade names,
rights in trade dress and packaging; and (vii) divisions, continuations,
renewals, reissues, and extensions of the foregoing (as applicable) now existing
or hereafter filed, issued, or acquired.
1.19 "Internet Access Device" shall mean set-top boxes and devices
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incorporated within television sets through which a consumer may access
information, content, text, images, graphics and artistic renderings,
characterizations, photography, audio, video, animations, databases, HTML files,
VRML files, and other material available from the Internet World Wide Web. This
definition may be updated upon consent of both parties to this Agreement.
1.20 "Latin America" shall mean the countries of the Western Hemisphere,
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south of the United States of America.
1.21 "Moral Rights" shall mean any right of paternity or integrity, any
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right to claim authorship, to object to or prevent any distortion, mutilation or
modification of, or other derogatory action in relation to the subject work
whether or not such would be prejudicial to the author's honor or reputation, to
withdraw from circulation or control the publication or distribution of the
subject work, and any similar right, existing under judicial or statutory law of
any country in North America or Latin America, or under any related treaty,
regardless of whether or not such right is denominated or generally referred to
as a "moral" right.
1.22 "North America" shall mean the United States of America and Canada.
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1.23 "OpenTV Products" shall mean products designed and developed to
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commercialize and promote OpenTV interactive systems and services including
libraries and methods of accessing and downloading distributed code and data
modules as well as data interpreters.
1.24 "Operating Expenses" shall mean all operating expenses of the Company,
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including, but not limited to, those incurred in connection with the following,
without duplication: (i) guide content (including TV program listing and channel
lineup information), (ii) data network operations, (iii) billing and customer
service, (iv) research and development, (v) sales and marketing, (vi) use of
third party Intellectual Property Rights, (vii) charges pertaining to data
[*], (viii) general and administrative expenses, including salaries, wages and
other compensation, (ix) Operational Expenses, (x) cost of sales including
payments made to third parties pursuant to revenue or profit sharing
arrangements, (xi) payments made to TCE in accordance with the terms of the [*],
(xii) capital expenditures and (xiii) all payments made to any party pursuant to
agreements with the Company, Gemstar, TCE or their respective Affiliates.
__________
[*] Confidential Treatment Requested.
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1.25 "Operational Expenses" shall mean all operating expenses associated
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with or related to the operation of the Data Delivery System, [*] and
all payments made to any third party with respect to such third party's
intellectual property that is associated with or related to the Business,
whether such payments are made by Gemstar or any of its Affiliates, which
payments shall be reimbursed by the Company to Gemstar or such Affiliate, as the
case may be.
1.26 "Permitted Sale Date" shall mean October 31, 1999.
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1.27 "Person" shall mean any individual, corporation, partnership, joint
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venture, association, joint-stock company, trust, unincorporated organization or
other entity.
1.28 "Public Market Sale" shall mean any sale of Securities into the public
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market after the Initial Public Offering which is made pursuant to Rule 144
(including Rule 144(k)) promulgated under the Securities Act or pursuant to a
registration statement filed with and declared effective by the SEC.
1.29 "Public Offering" shall mean a public offering of Securities of the
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Company registered under the Securities Act. The term "Initial Public Offering"
shall mean an underwritten Public Offering of Voting Securities which results in
gross proceeds to the Company in excess of $10 million from the sale of Voting
Securities.
1.30 "SEC" shall mean the Securities and Exchange Commission.
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1.31 "Securities" shall mean all (i) Voting Securities, (ii) all rights,
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options, warrants to purchase such Voting Securities or the securities described
in the following clause and (iii) all other securities of any type whatsoever
that are, or may become, convertible into or exchangeable for, or that entitle
the holder thereof to purchase, Voting Securities.
1.32 "Securities Act" shall mean the Securities Act of 1933, as amended,
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together with the rules and regulations promulgated thereunder.
1.33 "Services" shall mean a data delivery service to consumers in North
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America and Latin America through various broadcast networks.
1.34 "Stockholders" shall mean TCE and Gemstar.
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1.35 "Subsidiary" shall mean with respect to any Person, a corporation or
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other entity of which shares of stock or other ownership interests having
ordinary voting power to elect a majority of the directors of such corporation,
or other Persons performing similar functions for such entity, are owned,
directly or indirectly, by such Person.
__________
[*] Confidential Treatment Requested.
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1.36 "TCE Offered Asset" shall mean any Securities of the Company
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owned by TCE. Any other debt or equity security of the Company owned by TCE may
be designated as part of a TCE Offered Asset in a TCE Notice (as defined in
Section 4.1 below).
1.37 "VBI" shall mean the vertical blanking interval, which is the
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unused air time between television picture frames.
1.38 "Voting Securities" shall mean all Securities of the Company
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which possess general voting power to elect members of the Board.
SECTION 2. FIRST REFUSAL RIGHTS TO PURCHASE ADDITIONAL SECURITIES.
2.1 First Refusal Rights. If the Company proposes to issue
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Additional Securities (a "Proposed Issuance"), the Company shall offer such
Additional Securities to the Stockholders (the "PR Holders") and the PR Holders
shall have the right ("First Refusal Right") to purchase all or any portion of
their Pro Rata Share (as defined below) of such Additional Securities upon the
terms of the Proposed Issuance.
2.2 Pro Rata Share. For purposes of such First Refusal Rights, the
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"Pro Rata Share" of a PR Holder shall mean a fraction (i) the numerator of which
shall be the total number of shares of Voting Securities then held by the PR
Holder and (ii) the denominator of which shall be the total number of shares of
Voting Securities then outstanding.
2.3 Company Notice. The Company shall give each of the PR Holders
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written notice of the Proposed Issuance stating the material terms thereof,
including the type of Additional Securities involved, the proposed purchase
price therefor and the anticipated closing date of such issuance (the "Company
Notice").
2.4 Response Notice. If a PR Holder desires to exercise its First
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Refusal Rights, such PR Holder shall, within 20 days of receipt of the Company
Notice, deliver to the Company written notice stating the portion of such PR
Holder's Pro Rata Share of such Additional Securities that it is willing to
purchase (a "Response Notice"). The PR Holders' Response Notices shall be
deemed to constitute their respective irrevocable agreements to purchase the
specified portions of their Pro Rata Share of the Additional Securities upon the
terms of the Proposed Issuance described in the Company Notice, on the later of
(i) the closing date specified in the Company Notice or (ii) the closing date of
the Proposed Issuance if Persons who are not PR Holders are purchasing
Additional Securities.
2.5 Consummation. The Company shall have 90 days from the date of
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the Company Notice to consummate such Proposed Issuance with respect to the
Additional Securities which are not being purchased by the PR Holders at a price
and upon terms that are not materially less favorable to the Company than the
price and terms specified in the Company Notice, and such price and terms shall
be made available to the PR Holders who
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have elected to purchase Additional Securities. If the Company proposes to
issue Additional Securities after such 90 day period, or at a price or upon
terms which are materially less favorable to the Company than those specified in
the Company Notice, it must again comply with the procedures set forth in this
Section 2.
2.6 Termination. The rights provided to a PR Holder under this
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Section 2 shall not be assignable by a PR Holder. The rights provided to a PR
Holder under this Section 2 shall terminate (i) as to a PR Holder, at such time
as such PR Holder shall have sold a number of Voting Securities which represents
at least [*]% of such PR Holder's Initial Shares or (ii) upon the consummation
of an Initial Public Offering.
SECTION 3. TCE RIGHTS OF FIRST OFFER.
3.1 Gemstar Offer. If, from and after the Permitted Sale Date,
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Gemstar determines to solicit, or causes to be solicited, proposals for the
acquisition (whether by means of a sale of stock, exchange, consolidation, sale
of assets or merger) of any Gemstar Offered Asset, or receives an unsolicited
offer to so acquire any Gemstar Offered Asset and Gemstar determines to pursue
such an offer for the acquisition of a Gemstar Offered Asset, Gemstar shall
first give TCE written notice (the "Gemstar Notice") of such intention, which
notice shall include a term sheet stating, among other material terms, the
minimum sales price that Gemstar would entertain for such Gemstar Offered Asset
(the "Gemstar Target Price"). TCE shall have the right for a period of 30 days
following the delivery of the Gemstar Notice (the "TCE Acceptance Period") to
accept the offer to purchase all, but not less than all, of such Gemstar Offered
Asset at the Gemstar Target Price and upon the other terms provided with the
Gemstar Notice. Section 3.1 shall not apply to a Public Market Sale or to a
transfer to an Affiliate without consideration therefor; provided, however, that
such Affiliate executes a written undertaking to be and becomes bound by this
Agreement in the same manner and to the same extent as the transferring
Stockholder.
3.2 Acceptance. TCE shall, if it so desires, exercise such right by
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delivering to Gemstar written notice of its election prior to 5:00 p.m. Los
Angeles time on or before the last day of the TCE Acceptance Period. The
acceptance of the offer to purchase all of the Gemstar Offered Asset shall
identify the committed source of financing for such purchase or provide evidence
that TCE is able to effect the purchase. Gemstar and TCE shall, as soon as
reasonably possible, negotiate in good faith a definitive acquisition agreement
containing appropriate provisions customary for a transaction of the
contemplated type; provided, however, that if TCE and Gemstar are unable to
conclude the negotiation of such definitive agreement within 20 days of delivery
by TCE of its Acceptance Notice (the "Gemstar Negotiation Period"), Gemstar
shall be free to resume its efforts to sell the relevant Gemstar Offered Asset
to other prospective buyers in accordance with Section 3.3 below.
3.3 Rejection. If TCE does not elect to accept the offer to purchase
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such Gemstar Offered Asset during the TCE Acceptance Period or TCE and Gemstar
are unable to conclude negotiations of a definitive agreement during the Gemstar
Negotiation Period,
__________
[*] Confidential Treatment Requested.
8
Gemstar shall have the right for a period of 120 days thereafter to sell the
Gemstar Offered Asset or, within such 120-day period, to enter into a definitive
agreement to sell such Gemstar Offered Asset within 30 days of the date of such
agreement for a sales price equal to or greater than the Gemstar Target Price
and upon terms that are not materially less favorable to Gemstar than the terms
provided to TCE in the Gemstar Notice. TCE shall have the right to approve the
purchaser of any Gemstar Offered Asset if such asset constitutes more than [*]%
of Gemstar's Initial Shares (such approval shall not be unreasonably withheld by
TCE).
3.4 Below Gemstar Target Price Offer. If Gemstar receives a written
--------------------------------
offer for such Gemstar Offered Asset at any time during such 120-day period
which is acceptable to Gemstar but is less than the Gemstar Target Price or upon
terms materially less favorable to Gemstar than the terms provided to TCE in the
Gemstar Notice (the "Below Gemstar Target Price Offer"), Gemstar shall promptly
deliver a copy of such written offer to TCE. During the 15-day period following
delivery of such written offer, TCE shall have the right to accept the offer to
purchase all, but not less than all, of the Gemstar Offered Asset on the terms
reflected in such written offer. TCE shall, if it so desires, exercise such
right by delivering to Gemstar written notice of its election prior to 5:00 p.m.
Los Angeles time on or before the final day of such additional 15-day period
(and shall identify the committed source of financing or evidence that TCE is
able to effect the purchase) and TCE and Gemstar shall then negotiate a
definitive acquisition agreement, in each case in the manner contemplated by
Section 3.2 above. If TCE does not elect to accept the offer to purchase the
Gemstar Offered Asset on such terms within such 15-day period or negotiations of
a definitive agreement within 15 days of the date of TCE's acceptance of the
Below Gemstar Target Price Offer are unable to be concluded, Gemstar shall have
90 days (or such longer period as the parties hereto may mutually agree) to
consummate the sale of the Gemstar Offered Asset at a price and upon terms that
are not materially less favorable to Gemstar than the price and terms specified
in the written offer delivered to TCE.
3.5 Termination. The rights granted to TCE under this Section 3
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shall terminate upon the consummation of an Initial Public Offering. In
addition, the rights granted to TCE under this Section 3 shall terminate with
respect to a Gemstar Offered Asset upon the sale or other disposition thereof by
Gemstar to a third party and such third party shall not be bound by the
provisions of this Section 3. The rights granted to TCE under this Section 3
shall not be assignable by TCE to any Person unless TCE shall have transferred
all of its Securities to such Person, but such rights shall not be assignable
after consummation of an Initial Public Offering.
SECTION 4. GEMSTAR RIGHTS OF FIRST OFFER
4.1 TCE Offer. If, from and after the Permitted Sale Date, TCE
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determines to solicit, or causes to be solicited, proposals for the acquisition
(whether by means of a sale of stock, exchange, consolidation, sale of assets or
merger) of any TCE Offered Asset, or receives an unsolicited offer to so acquire
any TCE Offered Asset and
__________
[*] Confidential Treatment Requested.
9
TCE decides to pursue such an offer for the acquisition of an TCE Offered Asset,
TCE shall first give Gemstar written notice (the "TCE Notice") of such
intention, which notice shall include a term sheet stating, among other material
terms, the minimum sales price that TCE would entertain for such TCE Offered
Asset (the "TCE Target Price"). Gemstar shall have the right for a period of 30
days following the delivery of the TCE Notice (the "Gemstar Acceptance Period")
to accept the offer to purchase all, but not less than all, of such TCE Offered
Asset at the TCE Target Price and upon the other terms provided with the TCE
Notice. Section 4.1 shall not apply to a Public Market Sale or to a transfer to
an Affiliate without consideration therefor; provided, however, that such
Affiliate executes a written undertaking to be and becomes bound by this
Agreement in the same manner and to the same extent as the transferring
Stockholder.
4.2 Acceptance. Gemstar shall, if it so desires, exercise such right
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by delivering to TCE written notice of its election prior to 5:00 p.m. Los
Angeles time on or before the last day of the Gemstar Acceptance Period. The
acceptance of the offer to purchase all of the TCE Offered Asset shall identify
the committed source of financing for such purchase or provide evidence that
Gemstar is able to effect the purchase. TCE and Gemstar shall, as soon as
reasonably possible, negotiate in good faith a definitive acquisition agreement
containing appropriate provisions customary for a transaction of the
contemplated type; provided, however, that if TCE and Gemstar are unable to
conclude the negotiation of such definitive agreement within 20 days of delivery
by Gemstar of its acceptance notice (the "TCE Negotiation Period"), TCE shall be
free to resume its efforts to sell the relevant TCE Offered Asset to other
prospective buyers in accordance with Section 4.3 below.
4.3 Rejection. If Gemstar does not elect to accept the offer to
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purchase such TCE Offered Asset during the Gemstar Acceptance Period, or TCE and
Gemstar are unable to conclude negotiations of a definitive agreement during the
TCE Negotiation Period, TCE shall have the right for a period of 120 days
thereafter to sell such TCE Offered Asset or, within such 120-day period, to
enter into a definitive agreement to sell such TCE Offered Asset within 30 days
of the date of such agreement for a sales price equal to or greater than the TCE
Target Price and upon terms that are not materially less favorable to TCE than
the terms provided to Gemstar in the TCE Notice. Gemstar shall have the right
to approve the purchaser of any TCE Offered Asset if such asset constitutes more
than [*]% of TCE's Initial Shares (such approval shall not be unreasonably
withheld by Gemstar).
4.4 Below TCE Target Price Offer. If TCE receives a written offer
----------------------------
for such TCE Offered Asset at any time during such 120-day period which is
acceptable to TCE but is less than the TCE Target Price or upon terms materially
less favorable to TCE than the terms provided to Gemstar in the TCE Notice (the
"Below TCE Target Price Offer"), TCE shall promptly deliver a copy of such
written offer to Gemstar. During the 15-day period following delivery of such
written offer, Gemstar shall have the right to accept the offer to purchase all,
but not less than all, of the TCE Offered Asset on the terms reflected in such
written offer. Gemstar shall, if it so desires, exercise such right by
delivering to
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[*] Confidential Treatment Requested.
10
TCE written notice of its election prior to 5:00 p.m. Los Angeles time on or
before the final day of such additional 15-day period (and shall identify the
committed source of financing or evidence that Gemstar is able to effect the
purchase), and TCE and Gemstar shall then negotiate a definitive acquisition
agreement, in each case in the manner contemplated by Section 4.2 above. If
Gemstar does not elect to accept the offer to purchase the TCE Offered Asset on
such terms within such 15-day period or TCE and Gemstar are unable to conclude
negotiations of a definitive agreement within 15 days of the date of the
acceptance of the Below TCE Target Price Offer, TCE shall have 90 days (or such
longer period as the parties hereto may mutually agree) to consummate the sale
of the TCE Offered Asset at a price and upon terms that are not materially less
favorable to TCE than the price and terms specified in the written offer
delivered to Gemstar.
4.5 Termination. The rights granted to Gemstar under this Section 4
-----------
shall terminate upon the consummation of an Initial Public Offering. In
addition, the rights granted to Gemstar under this Section 4 shall terminate
with respect to a TCE Offered Asset upon the sale or other disposition thereof
by TCE to a third party and such third party shall not be bound by the
provisions of this Section 4. The rights granted to Gemstar under this Section
4 shall not be assignable to any Person, unless Gemstar shall have transferred
all of its Securities to such Person, but such rights shall not be assignable
after consummation of an Initial Public Offering.
SECTION 5. COMPANY BOARD OF DIRECTORS.
5.1 The Board. Subject to the terms and conditions of this Section
---------
5, at each annual or special meeting of stockholders of the Company, or in any
written consent executed in lieu of a stockholder meeting, at or pursuant to
which persons are being elected to fill positions on the Board, TCE and Gemstar
agree to exercise, or cause to be exercised, voting rights with respect to the
Voting Securities then owned or held of record or beneficially by each of them
or any Affiliates of each of them in such a manner that two candidates nominated
by TCE and four candidates nominated by Gemstar shall be entitled to fill and
continue to hold positions on the Board which TCE and Gemstar agree shall
consist of six authorized directors.
If at any time from and after the date hereof, either TCE or Gemstar
shall notify the other of its desire to remove any director previously nominated
by that party or parties to serve on the Board, each of TCE and Gemstar agree to
exercise or cause to be exercised voting rights with respect to all Voting
Securities owned or held of record or beneficially by each of them or any
Affiliates of each of them so as to remove such director of the Company. If at
any time from and after the date hereof, any director previously nominated by
either TCE or Gemstar to serve on the Board ceases to be a director (whether by
reason of death, resignation, removal or otherwise), whichever party nominated
such director shall be entitled to nominate a successor director to fill the
vacancy created thereby, and each of TCE and Gemstar agree to exercise its
voting rights with respect to the Voting Securities owned or held of record or
beneficially by each of them or any Affiliates of each of them so as to elect
such nominee as a director of the Company.
11
5.2 Termination. The rights granted to [*] under this Section 5
-----------
shall terminate on the earlier of (i) ten years from the date hereof, (ii) the
consummation of an Initial Public Offering, (iii) the date [*] shall have
transferred that number of shares of Voting Securities held by [*] as is equal
to [*]% of the Initial Shares held by [*] or (iv) the date the number of shares
of Voting Securities held by [*] constitutes less than [*] of the total number
of outstanding shares of Voting Securities. The rights granted to [*] under this
Section 5 shall terminate on the earlier of (i) ten years from the date hereof,
(ii) the consummation of an Initial Public Offering, (iii) the date [*] shall
have transferred that number of shares of Voting Securities held by [*] as is
equal to [*] of the Initial Shares held by [*] or (iv) the date the number of
shares of Voting Securities held by [*] constitutes less than 10% of the total
number of outstanding shares of Voting Securities.
5.3 Initial Public Offering. The members of the Board immediately
-----------------------
prior to an Initial Public Offering shall amend the Company's Bylaws to increase
the size of the Board by two members and two independent members shall be
appointed to the Board as necessary to comply with applicable stock exchange or
stock market regulations. The members of the Board immediately prior to an
Initial Public Offering shall also amend the Company's Certificate of
Incorporation to increase the Company's authorized capital as necessary and
advisable prior to the Initial Public Offering and TCE and Gemstar shall vote
their Voting Securities in favor of such amendment. If the managing underwriter
for the Initial Public Offering (the "Managing Underwriter") advises that
amendment of this Agreement is advisable in connection with the Initial Public
Offering, or if an amendment is necessary to comply with law or the rules or
regulations of a stock exchange or stock market, TCE and Gemstar agree to
cooperate in good faith to so amend this Agreement (and the Company's
Certificate of Incorporation (including voting their Voting Securities in favor
of such amendment) and Bylaws, if necessary). If the Managing Underwriter
advises that the Foreign Corporation needs to be combined with the Company in
connection with the Initial Public Offering, then each Stockholder hereby agrees
to exchange its shares of the Company for shares of the Foreign Corporation or
cause its Affiliates to exchange its shares of the Foreign Corporation for
shares of the Company, as the case may be, depending upon the Managing
Underwriter's advice as to whether the Foreign Corporation or the Company,
respectively, is the better entity in which to sell shares to the public in
connection with the Initial Public Offering. For purposes of this Agreement,
the terms "Public Offering" and "Initial Public Offering" shall be construed to
include a post-combination offering of either the Company's voting securities or
those of the Foreign Corporation. The parties hereby agree that the foregoing
exchange of securities shall be made based upon a valuation of the Company and
the Foreign Corporation performed by the Selected Investment Banking Firm (as
defined below). The "Selected Investment Banking Firm" shall mean the
investment banking firm selected by TCE within five days after TCE's receipt
from Gemstar of a list of five nationally recognized investment banking firms
selected by Gemstar.
5.4 Assignability. The right to designate members of the Board of
-------------
Directors pursuant to Section 5.1 shall not be assigned or otherwise transferred
to a
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12
transferee unless TCE or Gemstar, as the case may be, shall have transferred all
of its Securities to the transferee.
5.5 Transactions with Stockholders.
------------------------------
(a) The Board may cause the Company to transact business with any
Stockholder or any Affiliate of any Stockholder for the performance of
services or purchase of goods or other property that may at any time be
reasonably required in carrying on the Business of the Company; provided,
however, that the Company will perform services for TCE and Gemstar on a
priority basis at such prices and on terms and conditions no less favorable
than the most favorable terms, conditions and prices the Company offers to
third parties.
(b) The Company shall incur and pay for all Operational Expenses.
If the program listing and channel lineup information necessary for the
Company to [*] is available to Gemstar or its Affiliates through third
party sources or from internal sources, then Gemstar shall, and shall cause
its Affiliates to, make such information available to the Company (if
permitted by applicable law and any applicable contractual provisions), and
the Company shall reimburse Gemstar or its Affiliates, as the case may be,
for the costs incurred by Gemstar or its Affiliates, as applicable, in
obtaining or generating such information. Nothing in this Agreement shall
be construed to require Gemstar and/or its Affiliates to obtain or provide
program listings or channel lineup information or any other information to
the Company unless such information is then available to Gemstar or its
Affiliates as contemplated above on terms and conditions acceptable to
Gemstar or its Affiliates. The Company agrees to provide (at no expense to
Gemstar, its Affiliates and/or their licensees) program listing and channel
lineup information and the delivery thereof, and the use of the Data
Delivery System on behalf of Gemstar, its Affiliates and their licensees in
order to permit Gemstar and/or its Affiliates to satisfy their respective
obligations to licensees of Gemstar and/or its Affiliates in the electronic
program guide field.
5.6 Declaration of Dividends. The Board of Directors of the Company
------------------------
shall declare dividends on the Common Stock within 90 days of the end of each
Fiscal Year in an amount, in the aggregate, which is equal to the Cash Available
for Distribution; provided, however, in no event shall the dividends declared
exceed the maximum amount of dividends or other distributions permitted by
applicable law. The payment date for any dividends declared pursuant to this
Section 5.6 shall be no later than 60 days after the declaration date.
5.7 Annual Budget. The Board of Directors shall cause to be prepared
-------------
by the officers of the Company an annual budget. The annual budget shall be
prepared and distributed to the Board no later than 30 days prior to the
commencement of each Fiscal Year and shall be in such detail and address such
matters as the Board may reasonably request. The annual budget shall not be
effective until approved by the Board.
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[*] Confidential Treatment Requested.
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SECTION 6. APPROVAL RIGHTS.
6.1 Approval. The Company shall not take any of the following
--------
actions without the affirmative vote or written consent of at least [*] of the
nominees to the Company's Board of Directors designated by [*] pursuant to the
terms of Section 5 hereof:
(a) sell or dispose of all or substantially all of the Company's
assets;
(b) effect any merger, dissolution or voluntary bankruptcy of the
Company;
(c) effect any material change in the Business of the Company;
(d) effect any material change in any agreement between the
Company and Gemstar;
(e) declare any dividend other than as contemplated by Section
5.6 of this Agreement;
(f) effect any change of the Company's name or any material
change in the Company's certificate of incorporation or bylaws;
(g) enter into any contract or transaction with any Stockholder
or any Affiliate of any Stockholder that involves expenditures by the
Company in excess of $[*] in any calendar year;
(h) lend or advance any funds, other than in the ordinary course
of business, to any officer, director or employee of the Company;
(i) other than in connection with the Business, guaranty any
third party obligation or become a surety for any third party obligation,
in either case in an amount in excess of $[*];
(j) other than in the ordinary course of business, enter into a
transaction in which the Company would incur indebtedness in excess of
$[*]; or
(k) purchase, acquire, sale, dispose of or create any other
company or business involving a value or cost in excess of $[*].
Notwithstanding the foregoing, the parties hereto understand and agree
that no Board action will be required to approve a transaction pursuant to which
Gemstar or any of its Affiliates (the "Acquiring Entity") acquires [*]
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[*] Confidential Treatment Requested.
14
[*]. The parties further understand and agree that, in the event of any such
acquisition, the Company shall make such payments to [*] under the terms of [*]
as if [*] continued [*].
6.2 Termination. The approval rights provided for in Section 6.1
-----------
above shall terminate upon the earlier of (i) [*] years from the date hereof,
(ii) the consummation of an Initial Public Offering, (iii) the date [*] shall
have transferred that number of shares of Voting Securities held by [*] as is
equal to [*]% of the Initial Shares held by [*] or (iv) the date the number of
shares of Voting Securities held by [*] constitutes less than [*]% of the total
number of outstanding shares of Voting Securities.
6.3 Non-Assignability. The rights granted under Section 6.1 shall
-----------------
not be assigned or otherwise transferred to any transferee.
SECTION 7. AUTHORITY OF THE STOCKHOLDERS TO ENGAGE IN OTHER BUSINESSES
7.1 Permissible Activities. Nothing in this Agreement or under
----------------------
applicable law shall prevent any Stockholder, its Affiliates and/or their
licensees from providing TV program listings, channel lineup or other
information which may be offered by such Stockholder, its Affiliates and/or
their licensees as part of or in connection with the licensing policies or
arrangements of such Stockholder and/or its Affiliates and/or from collecting
any royalties, licensing fees or other compensation in connection with such
activities without any obligation to the Company, any other Stockholder or any
of their Affiliates. In addition, [*] shall have the right to enter into an
arrangement with a third party relating to Internet Access Devices so long as
[*] Internet Access Device products are designed and manufactured to use the
EPG. [*] Notwithstanding the above, no license or rights, express or implied,
shall be deemed granted to [*] by operation of this Agreement or otherwise.
Subject to the foregoing and Sections 7.3 and 7.4, each Stockholder
(including its wholly-owned and controlled affiliates) agrees not to enter into
any arrangements with a third party, and to itself refrain from engaging in any
business activity, for the purpose of developing, selling or distributing
Services in North America and Latin America that would compete with Services.
This restriction shall not apply to Services which are not compatible with
products designed to receive the Company provided Services. Except as set forth
above, each Stockholder and its Affiliates may engage in the same or different
activities or lines of business as the Company. Each Stockholder acknowledges
that the other is engaged in the business of developing, licensing,
manufacturing or otherwise
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[*] Confidential Treatment Requested.
15
exploiting electronic program guide devices, and that neither this Section, nor
this Agreement, shall restrict either Shareholder or its Affiliates in their
respective businesses. By way of example, and not in limitation, [*] shall not
be restricted from developing or licensing electronic program guide devices,
other than [*], for a third party entity which may compete directly with the
Company, and [*] shall not be restricted from developing or licensing electronic
guide technologies to a third party which may compete directly with the Company,
provided that in each of these situations, the Stockholder or Affiliate, as the
case may be, does not exercise over and owns less than 50% of such third party
entity. Each Stockholder further acknowledges that the other is currently
engaged in certain litigation or legal disputes with third parties, and that
nothing in this Section or this Agreement shall restrict the parties to, or the
terms of any settlement of such litigation or dispute. The Stockholders further
acknowledge that each Stockholder or its Affiliates may have various business
arrangements or negotiations with certain entities, including [*] such as [*],
[*] such as [*] and [*], [*] such as [*] and [*], and [*] such as [*] and [*],
which entities may decide to compete directly with the Company despite any
effort by either Stockholder to convince them otherwise, and that neither this
Section, nor this Agreement shall restrict such business arrangements or
negotiations.
7.2 Promotion of Other's Services and Technology. Each Stockholder
--------------------------------------------
shall use commercially reasonable efforts to promote, market and otherwise
encourage its customers and licensees to use the services offered by the Company
and the other Stockholders. TCE shall, and shall cause its Affiliates to,
encourage their customers to incorporate the Company's and Gemstar's and its
Affiliates' technology, features and services into such customers' products and
services.
7.3 Corporate Opportunity. No Stockholder or any Affiliate of any
---------------------
Stockholder shall be obligated to present any particular business opportunity to
the Company or to any other Stockholder or Affiliate of any other Stockholder or
have any right to participate in any particular business opportunity even if
such opportunity is of a character that, if presented to the Company,
Stockholder or Affiliate, such opportunity could be taken by the Company,
Stockholder or Affiliate, and, subject to this Section 7, each of them shall
have the right to take or participate in such business opportunity for its own
use or to recommend to others any such business opportunity without any
obligation to the Company, any Stockholder or any of their Affiliates.
7.4 No Interference with Licensing and Related Activities.
-----------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary, the
parties acknowledge and agree that (i) each party's obligation to, and
participation in, the Company shall not preclude TCE or its Affiliates or
Gemstar or its Affiliates from licensing third parties to incorporate TCE's or
its Affiliate's or Gemstar's or its Affiliate's technology, respectively, into
the products of such third parties, (ii) each party and its Affiliates shall be
entitled to collect and keep for itself any and all royalties, licensing fees or
other compensation earned in connection with the activities contemplated by the
immediately preceding clause (i), and (iii) the activities
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[*] Confidential Treatment Requested.
16
contemplated by the immediately preceding clauses (i) and (ii) are not meant to
be restricted by any agreements with the Company or the other Stockholders.
SECTION 8. CONFIDENTIAL INFORMATION
8.1 Treatment of Confidential Information. The Company and each
-------------------------------------
Stockholder (and any Affiliate thereof) will maintain in confidence the others'
Confidential Information and will not, without the prior written permission of
the Company or Stockholder to which the Confidential Information relates,
disclose, divulge or otherwise communicate such Confidential Information to
others, or use it for any purpose, except as otherwise provided or permitted
hereunder or under the terms of any other agreements to which the Company and
the Stockholders are parties, and hereby agrees to exercise reasonable
precautions, including, without limitation, use of written agreements to prevent
and restrain the unauthorized disclosure of such Confidential Information by any
director, officer, employee, consultant, subcontractor, sublicensee or agent.
The provisions of this Section 8 will survive termination of this Agreement.
Notwithstanding the foregoing, nothing in this Section 8.1 is intended to, or
shall be deemed to, in any way alter, enlarge or diminish the rights granted to
the Company in any of the other agreements to which the Company and the
Stockholders are parties. Any press release or other public announcement
related to this Agreement shall be unanimously approved by the Stockholders,
which approval will not be unreasonably withheld.
8.2 Release from Restrictions. The provisions of Section 8.1 will
-------------------------
not apply to any Confidential Information disclosed pursuant to any of the other
agreements to which the Company and the Stockholders are parties or otherwise
which:
(a) was known or used by the receiving entity or its Affiliates
(unless known on account of research or development done by or on behalf of
the disclosing entity and/or distributed to the receiving entity or its
Affiliates pursuant to confidentiality restrictions) prior to its date of
disclosure to the receiving entity, as evidenced by the written records of
the receiving entity or its Affiliates;
(b) either before or after the date of the disclosure to the
receiving entity is lawfully disclosed without restriction to the receiving
entity or its Affiliates by an independent, unaffiliated third party
rightfully in possession of the Confidential Information with the right to
disclose such Confidential Information (but only to the extent of the
rights received from and limitations imposed by such third party);
(c) either before or after the date of the disclosure to the
receiving entity becomes published or available to the public through no
fault or omission on the part of the receiving entity or its Affiliates or
other third parties; or
(d) is required to be disclosed by the receiving entity or its
Affiliates to comply with applicable laws or to comply with governmental
regulations, provided that the receiving entity provides at least ten days
prior written notice of such
17
proposed disclosure to the other entity and takes reasonable and lawful
actions to minimize the degree of such disclosure.
SECTION 9. RESTRICTIONS ON SALE OF SECURITIES; REGISTRATION IN INITIAL PUBLIC
OFFERING
9.1 Restrictions on Transfer Generally. Subject to Section 9.2, no
----------------------------------
Stockholder shall sell, assign, transfer, hypothecate, encumber or otherwise
dispose of any Securities, or any right, title or interest therein, except (i)
in compliance with the Securities Act and all applicable state securities laws
and (ii) for sales of Securities expressly permitted by and in compliance with
this Agreement. Any attempt to sell, assign, transfer, hypothecate, encumber or
otherwise dispose of any Securities not in compliance with this Agreement shall
be null and void, and the Company shall not give effect to any such attempted
transaction or transfer. Any Securities transferred pursuant to the terms and
requirements of this Agreement shall be transferred free and clear of all
mortgages, liens, pledges, charges and security interests or encumbrances, or
any obligations or liabilities in connection therewith. Except as otherwise
provided herein, all transferees (other than a transferee in a Public Market
Sale) will be bound by this Agreement in the same manner and to the same extent
as the transferor.
9.2 Restrictions on Sale of Initial Shares. Prior to the Permitted
--------------------------------------
Sale Date, neither TCE nor Gemstar shall sell any of their respective Initial
Shares without the prior written consent of Gemstar or TCE, as the case may be,
which consent may be withheld in such party's sole discretion. After the
Permitted Sale Date, TCE and Gemstar may transfer their respective Initial
Shares after complying with the other provisions of this Agreement, but only
with the prior written consent of the other party, which consent shall not be
unreasonably withheld. The foregoing provisions of this Section 9.2 shall not
be applicable to any transfer of Securities which are transferred to an
Affiliate without consideration therefor; provided, however, that such Affiliate
executes a written undertaking to be and becomes bound by this Agreement in the
same manner and to the same extent as the transferring Stockholder.
SECTION 10. CONFLICT RESOLUTION
10.1 Negotiation Between Executives. Each of the Stockholders and the
------------------------------
Company shall attempt in good faith to resolve any dispute arising out of or
relating to the interpretation, breach or termination of this Agreement (a
"Dispute") promptly by negotiations between executives of the Company and the
disputing Stockholders who have authority to settle the Dispute. For the
purposes of this Agreement, the term "Dispute" does not include any disputes or
controversies resulting from, arising out of or with respect to any of the other
agreements to which the Company and the Stockholders are parties, unless
otherwise provided in any of the other agreements to which the Company and the
Stockholders are parties. Any Stockholder or the Company who is a party to a
Dispute may give the other Stockholders and the Company written notice of any
Dispute not resolved in the normal course of business. Within 20 days after
delivery of such a notice, executives of
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all Stockholders involved in the Dispute, and the Company, who have authority to
settle the Dispute shall meet at a mutually acceptable time and place, and
thereafter as often as they reasonably deem necessary, to attempt to resolve the
Dispute. Subject to Section 10.2, if the matter has not been resolved within 30
days after such notice, unless extended by the agreement in writing of the
parties involved in the controversy (the "Negotiation Period"), the Dispute
shall be subject to litigation. If a Stockholder or the Company intends to be
accompanied at a meeting by an attorney, the other involved parties shall be
given at least three working days' notice of such intention and may also be
accompanied by an attorney. All negotiation pursuant to this Section 10.1 is
considered Confidential Information and shall be treated as compromise and
settlement negotiations for purposes of the United States Federal Rules of
Evidence and state rules of evidence.
10.2 Mediation. Notwithstanding Section 10.1, at any time during the
---------
Negotiation Period any party to a Dispute may elect to resolve the Dispute by
mediation administered by the American Arbitration Association under its
Commercial Mediation Rules, before resorting to litigation. The Mediation shall
be completed within 45 days of its initiation pursuant to the Commercial
Mediation Rules, unless all the Stockholders involved in such Dispute otherwise
agree. Executives of all parties involved in the controversy with authority to
resolve the controversy shall participate in the mediation. The mediation shall
take place in any location agreed to by the parties to such Dispute. The
Stockholders shall attempt in good faith to reach agreement on the appointment
of a mediator. If they cannot so agree, the mediator shall be appointed
pursuant to the Commercial Mediation Rules; provided, however, that the mediator
appointed shall have a background in the industry of EPGs. The parties involved
in such Dispute shall each pay their own expenses of mediation, including
attorneys' fees, and shall share equally the mediator's fees and expenses.
10.3 Irreparable Harm. The parties acknowledge that breach of any
----------------
part of Section 8 hereof may cause irreparable harm, the extent of which would
be difficult to ascertain. Accordingly, they agree that, in addition to any
other legal remedies to which a non-breaching party might be entitled, such
party may seek immediate injunctive relief in the event of any breach of any of
the provisions of Section 8.
SECTION 11. REMEDIES
11.1 Limitation on Damages.
---------------------
(A) NO STOCKHOLDER SHALL BE LIABLE FOR ANY INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL LOSSES OR DAMAGES (INCLUDING, WITHOUT LIMITATION,
LOSS OF PROFITS OR LOSS OF USE) SUFFERED BY ANY OTHER STOCKHOLDER ARISING FROM
OR RELATING TO A STOCKHOLDER'S PERFORMANCE, NON-PERFORMANCE, BREACH OF OR
DEFAULT UNDER A COVENANT, WARRANTY, REPRESENTATION, TERM OR CONDITION HEREOF.
EACH STOCKHOLDER WAIVES AND RELINQUISHES
19
CLAIMS FOR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
(B) NO STOCKHOLDER SHALL HAVE THE RIGHT TO RECOVER PUNITIVE DAMAGES
FROM ANY OTHER STOCKHOLDER, AND EACH STOCKHOLDER HEREBY WAIVES AND RELINQUISHES
ANY AND ALL PUNITIVE DAMAGE CLAIMS.
(C) THE LIMITATIONS ON LIABILITY AND DAMAGES SET FORTH IN SECTIONS
11.1(A) AND 11.1(B) APPLY TO ALL CAUSES OF ACTION THAT MAY BE ASSERTED
HEREUNDER, WHETHER SOUNDING IN BREACH OF CONTRACT, BREACH OF WARRANTY, TORT,
PRODUCT LIABILITY, NEGLIGENCE OR OTHERWISE.
11.2 Contractual Limitation Period. Any arbitration, litigation,
-----------------------------
judicial reference or other legal proceeding involving the parties shall be
commenced within two years after the accrual of the cause of action, except for
arbitration, litigation, judicial reference or other legal proceedings with
respect to claims for indemnification under the provisions of this Agreement,
which indemnification claims shall be commenced within the statutory limitations
period provided by applicable law.
11.3 Remedies Upon Default Under this Agreement and [*].
---------------------------------------------------
(a) Upon any material breach of [*], including, without limitation,
the obligations of [*] to [*] in accordance with the [*], the Company shall
have a right to terminate the [*] and to repurchase [*] Shares at the price
paid by [*] therefor under the terms of [*] Subscription Agreement with the
Company. For the purposes of this Agreement, a material breach of [*]
shall mean [*] failure to achieve at least [*]% of the quantities specified
in the applicable [*] for years [*] within the specified calendar year and
any specified cure period. With respect to any material breach other than
relating to [*], the Company shall provide [*] with written notice of such
breach and [*] shall have thirty business days to cure such breach or any
longer period to cure as the Company may agree to in writing.
(b) If [*] fail to achieve the [*] for calendar year [*], [*] shall
pay to the Company $[*] by wire transfer no later than [*], which amount
shall be accounted for as a capital contribution for no additional shares
in the Company.
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[*] Confidential Treatment Requested.
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(c) If [*] fail to achieve the [*] for calendar year [*], [*] shall
pay to the Company $[*] by wire transfer no later than [*], which amount
shall be treated as a capital contribution for no additional shares in the
Company.
SECTION 12. MISCELLANEOUS
12.1 Stockholders' Commitment. The Stockholders shall exercise, or
------------------------
cause to be exercised, voting rights with respect to Voting Securities held or
beneficially owned by them in a manner so that, and shall otherwise take any
necessary actions in order that, the covenants and understandings of the parties
set forth in this Agreement shall be implemented.
12.2 Acknowledgment. Gemstar and TCE hereby acknowledge that the
--------------
Company was formed pursuant to a nonbinding [*], and that this Agreement, which
shall be considered the "Definitive Agreement" referred to and defined in the
[*], supersedes the [*], and to the extent that provisions of the [*] conflict
with or are inconsistent with this Agreement, the provisions of this Agreement
shall govern.
12.3 Injunctive Relief. It is acknowledged that it will be impossible
-----------------
to measure in money the damages that would be suffered if the parties hereto
fail to comply with any of the obligations imposed herein on them and that, in
the event of any such failure, an aggrieved party hereto will be irreparably
damaged and will not have an adequate remedy at law. In addition to being
entitled to exercise all rights granted by law, any such party shall, therefore,
subject to Section 10 hereof, be entitled to injunctive relief, including
specific performance, to enforce such obligations, and if any action should be
brought in equity to enforce any of the provisions of this Agreement, none of
the parties hereto shall raise the defense that there is an adequate remedy at
law.
12.4 Severability. In case any provision of this Agreement shall be
------------
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
effected or impaired thereby.
12.5 Governing Law. This Agreement shall be governed by, and
-------------
construed and enforced in accordance with, the laws of the State of Delaware,
without regard to the conflicts of laws principles thereof.
12.6 Entire Agreement. This Agreement and the other agreements
----------------
referred to in the Background section of this Agreement constitute the entire
agreement and understanding among the parties pertaining to the subject matter
hereof and supersede any and all prior agreements, whether written or oral,
relating hereto.
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[*] Confidential Treatment Requested.
21
12.7 Amendments and Waivers. Any amendment of this Agreement or
----------------------
waiver of compliance with any provisions hereof shall be in writing and shall
require the written approval of TCE and Gemstar. Any such amendment or waiver
so approved in writing shall be binding upon all of the parties hereto and their
respective successors and permitted assigns.
12.8 Successors and Assigns. This Agreement shall be binding on the
----------------------
parties hereto and their respective successors and permitted assigns.
12.9 Third Party Beneficiary. No provision of this Agreement is
-----------------------
intended to be for the benefit of or enforceable by any third party.
12.10 Further Assurances. Each party hereto agrees to perform any
------------------
further acts and execute and deliver any documents which may be reasonably
necessary to carry out the intent of this Agreement and to make appropriate
changes to the procedures set forth herein to implement such rights to the
extent necessary to conform to the General Corporation Law of the State of
Delaware or other applicable law. Each party hereto further agrees not to take
any action violating the intent and purpose of this Agreement.
12.11 Copy of Agreement. A copy of this Agreement and all permitted
-----------------
amendments hereto and waivers hereof shall be kept at the principal executive
offices of the Company.
12.12 Headings. The Table of Contents hereto and the introductory
--------
headings at the beginning of each Section and paragraph of this Agreement are
solely for the convenience of the parties and shall not be deemed to be a
limitation upon or description of the contents of this Agreement.
12.13 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument. Fax signature pages shall constitute
original signature pages for all purposes of this Agreement.
12.14 Assignment. Unless expressly permitted herein, this Agreement
----------
and the rights granted hereunder shall not be assignable.
12.15 Notices. All notices, requests and other communications
-------
hereunder shall be in writing and, if by personal delivery, shall be deemed to
have been validly served, given or delivered upon actual delivery, and, if by
facsimile transmission, shall be deemed to have been validly served, given or
delivered upon transmission and confirmation of receipt thereof, in each case
addressed to the party or parties to be notified, at the following addresses (or
such other address(es) as a party may designate for itself by like notice):
22
If to TCE:
---------
Thomson Consumer Electronics, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇, Chief
Operating Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Gemstar:
--------------
Gemstar Marketing, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company:
------------------
TDN, Inc.
c/o Gemstar Marketing, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
12.16 Legends on Certificates. Any and all certificates now or
-----------------------
hereafter issued evidencing the Securities governed by this Agreement shall have
endorsed upon them a legend substantially as follows:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS UPON TRANSFER AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT IN ACCORDANCE
WITH THE TERMS AND CONDITIONS OF THAT CERTAIN STOCKHOLDERS AGREEMENT
DATED AS OF [*], A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF TDN, INC."
Such certificates shall also bear such legends and shall be subject to such
restrictions on transfer as may be necessary to comply with all applicable
federal and state securities laws and regulations.
__________
[*] Confidential Treatment Requested.
23
12.17 Disputes; Resolution. Subject to Section 10 hereof, in the
--------------------
event of any dispute among the parties arising out of this Agreement, the
prevailing party shall be entitled to recover from the nonprevailing party the
reasonable expenses of the prevailing party, including, without limitation,
reasonable attorneys' fees. Subject to Section 10 hereof, the parties hereby
agree that all actions or proceedings arising directly or indirectly hereunder
shall be litigated or otherwise resolved in Southern California and hereby waive
trial by jury, any objection based on forum non conveniens and any objection to
venue of any action instituted hereunder.
12.18 WAIVER OF CONFLICT OF INTEREST. EACH OF THE STOCKHOLDERS HAS
------------------------------
BEEN REPRESENTED BY SEPARATE COUNSEL IN CON NECTION WITH THIS AGREEMENT AND THE
ANCILLARY AGREEMENTS. SUCH COUNSEL HAS NOT REPRESENTED THE COMPANY TO DATE.
THE ATTORNEYS, ACCOUNTANTS AND OTHER EXPERTS WHO HAVE PERFORMED SERVICES FOR THE
STOCKHOLDERS IN THE PAST MAY PERFORM SERVICES FOR THE COMPANY AND MAY CONTINUE
TO ALSO PERFORM SERVICES FOR THE SEPARATE STOCKHOLDERS IN THE FUTURE. TO THE
EXTENT THAT SUCH DUAL REPRESENTATION CONSTITUTES A CONFLICT OF INTEREST, THE
COMPANY AND EACH OF THE STOCKHOLDERS HEREBY EXPRESSLY WAIVE ANY SUCH CONFLICT OF
INTEREST WITH RESPECT TO ANY SUCH DUAL REPRESENTATION RELATIVE TO THE
NEGOTIATION, AUTHORSHIP AND EXECUTION OF THIS AGREEMENT AND THE ANCILLARY
AGREEMENTS.
24
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have duly executed this
Stockholders Agreement as of the day and year first above written.
"COMPANY"
TDN, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------
Title: Secretary
------------------------
THOMSON CONSUMER ELECTRONICS, INC.
By: /s/ ▇.▇. ▇▇▇▇▇
--------------------------------
Name: ▇.▇. ▇▇▇▇▇
------------------------
Title: Ex-VP
------------------------
GEMSTAR MARKETING, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------
Title: CEO
-------------------------
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