EXHIBIT 10.18
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PEOPLEPC BV
SHAREHOLDERS' AGREEMENT
June 30, 2000
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TABLE OF CONTENTS
Page
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1. Certain Definitions...................................................................................... 1
2. Organization and Operation of Company.................................................................... 2
2.1 Organization.................................................................................... 2
2.2 Scope of Operations and Responsibilities........................................................ 3
3. Representations and Warranties of the Parties............................................................ 3
3.1 Investment...................................................................................... 3
3.2 Organization.................................................................................... 3
3.3 Authority....................................................................................... 4
3.4 Government Consents, etc........................................................................ 4
3.5 Investigation................................................................................... 4
3.6 Compliance with 1995 Act on the Supervision of the Securities Trade............................. 4
4. Restrictions on Transferability.......................................................................... 4
5. Restrictive Legends...................................................................................... 4
6. Offering Rights.......................................................................................... 5
7. Financial Information.................................................................................... 6
8. Lockup Agreement......................................................................................... 6
9. Right to Maintain........................................................................................ 7
10. Limitation on Ownership of Company Securities............................................................ 8
11. Right of First Refusal................................................................................... 9
11.1 Grant of Right; Exercise or Right............................................................... 9
11.2 Assignment of Right............................................................................. 10
12. Conversion............................................................................................... 10
12.1 Optional Conversion of Preferred Stock or Class B Common Shares................................. 10
12.2 Automatic Conversion of Preferred Stock......................................................... 10
12.3 Original Issue Price and Conversion Price....................................................... 10
12.4 Adjustment of Conversion Prices................................................................. 11
12.5 Mechanics of Optional and Automatic Conversions................................................. 12
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TABLE OF CONTENT
(continued)
Page
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13. Purchase Rights......................................................................................... 13
14. Voting Agreement with Respect to the Board of Directors................................................. 13
14.1 Election of Directors.......................................................................... 13
14.2 Removal........................................................................................ 13
14.3 Super-majority Vote............................................................................ 13
14.4 Quorum......................................................................................... 14
15. Shareholder Voting...................................................................................... 14
15.1 Approval of Certain Shareholders............................................................... 14
15.2 Class B Common Shares.......................................................................... 15
15.3 Form of Dividend Consideration................................................................. 15
16. Amendment............................................................................................... 15
17. Start-up Expenses....................................................................................... 15
18. Closing Conditions...................................................................................... 15
18.1 Conditions to Obligations of the Parties....................................................... 15
18.2 Conditions to Obligations of the Company....................................................... 16
19. Governing Law........................................................................................... 16
20. Entire Agreement; Conflict.............................................................................. 17
21. Notices, etc............................................................................................ 17
22. Counterparts............................................................................................ 18
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EXHIBITS
A. License Agreement
B. Master Services Agreement
C. Articles of Association
D. Form of Warrant
PEOPLEPC BV
SHAREHOLDERS' AGREEMENT
This Shareholders' Agreement (this "Agreement") is made effective as of
June 30, 2000, by and among (i) PeoplePC BV, a Dutch company (the "Company"),
(ii) PeoplePC, Inc., a Delaware corporation ("PPC U.S."), (iii) Olive Hill
Investments N.V., a company organized under the laws of the Netherlands Antilles
("PPC N.A.") and an indirect wholly owned subsidiary of PPC U.S., (iv) @viso
Limited, a company organized under the laws of the United Kingdom ("@viso") and
an affiliate of both Softbank Corp., a company organized under the laws of Japan
("Softbank") and Vivendi S.A., a company organized under the laws of France
("Vivendi") and (v) Softbank Capital Partners LP, a Delaware limited partnership
("SBCP") and an affiliate of Softbank (PPC U.S., PPC N.A., @viso and SBCP,
together, the "Parties" and each individually, a "Party").
RECITALS
WHEREAS, PeoplePC Intl., Ltd., a company organized under the laws of the British
Virgin Islands ("PPC B.V.I."), the parent company of PPC N.A. and a wholly owned
subsidiary of PPC U.S., desires to license certain technology to PeoplePC U.K.,
Ltd., a company organized under the laws of the United Kingdom ("PPC U.K.") and
currently a wholly owned subsidiary of PPC B.V.I., pursuant to the License
Agreement by and between PPC B.V.I. and PPC U.K. having substantially the form
attached hereto as Exhibit A (the "License Agreement");
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WHEREAS, Vivendi and Softbank desire to associate themselves through their
affiliates, @viso and SBCP, as shareholders of the Company, and to enter into
that certain Master Services Agreement with the Company, PPC U.S., PPC N.A.,
@viso and PPC U.K. having substantially the form attached hereto as Exhibit B
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(the "Services Agreement") for the purpose of protecting and maintaining their
investment in the Company through such affiliates;
WHEREAS, PPC U.S. desires to associate itself through its affiliate, PPC N.A.,
as a shareholder of the Company, and to enter into the Services Agreement with
the Company, PPC U.S., PPC N.A., Softbank, Vivendi, @viso and PPC U.K. for the
purpose of protecting and maintaining its investment in the Company through its
affiliate;
WHEREAS, it is deemed in the best interest of the Company, PPC U.S., PPC N.A.,
@viso and SBCP that all such parties execute this Agreement for the purpose of
continuity and stability of ownership of the Company, to the extent and upon the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of these premises and the mutual covenants
herein set forth, the parties hereby agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
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shall have the following respective meanings:
"affiliate" means any person who controls, or is controlled by or
under common control with, the affiliated party.
"Company Securities" means any of the Company's capital stock, any
securities convertible into or exchangeable for such capital stock, or any other
right to acquire such capital stock (except, in any case, by way of stock
dividends or other distributions or offerings made available to holders of any
such capital stock generally).
"Conversion Stock" means the Company's Class A Common Stock issued or
issuable pursuant to conversion of the Company's Class B Common Stock, Series A
Preferred Shares, Series B Preferred Shares and Warrant Shares issued hereunder,
including any Class A Common Shares issued or issuable in respect of the
foregoing shares upon any stock split, stock dividend, recapitalization or
similar event.
"Holder" means (i) any Party holding Conversion Stock and (ii) any
person holding Conversion Stock to whom the rights under this Agreement have
been transferred or assigned in accordance with the terms hereof.
"IPO" shall mean the Company's initial public offering of Class A
Common Shares.
"PeoplePC" means PPC U.S. and/or its affiliates (except the Company
and PPC U.K.).
"person" shall mean any person, individual, corporation, partnership,
trust or other nongovernmental entity or any governmental agency, court,
authority or other body (whether foreign, federal, state, local or otherwise).
2. Organization and Operation of Company.
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2.1 Organization.
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(a) On or before the date on which the closing conditions in
Section 18 are either accomplished or waived (the "Closing Date") (i) the
Company will amend its deed of incorporation containing the Articles of
Association of the Company such that the Amended Articles of Association shall
be substantially in the form of Exhibit C hereto, (ii) @viso, or an affiliate of
@viso that also agrees to be bound by the terms of this Agreement, will
subscribe to 11,666,667 shares of Series A Preferred Stock, par value EUR.01
("Series A Preferred Shares") for a cash contribution of $35,000,000 and
5,000,000 shares of Series B Preferred Stock, par value EUR.01 ("Series B
Preferred Shares," together with Series A Preferred Shares, "Preferred Shares"
or "Preferred Stock") for a cash contribution of $15,000,000 (iii) SBCP will
receive a warrant to acquire up to 2,380,952 shares of Series A Preferred Stock
(the "Warrant Shares"), which warrant shall have an aggregate exercise price of
$7,142,857 and such other terms as are specified in the warrant attached as
Exhibit D hereto (the "Warrant"), (iv) PPC B.V.I. shall have assigned to PPC
N.A. all of the outstanding shares of PPC U.K., (v) PPC N.A. shall have assigned
to the Company all
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of the outstanding shares of PPC U.K. it received from PPC B.V.I., and (vi)
2,000 shares of the Company, par value EUR10.00, owned by PPC N.A., which
represent all of the outstanding capital stock of the Company prior to the
Closing Date, shall be converted automatically to 30,952,381 Class B Common
Shares, par value EUR.03 (the "Class B Common Shares," together with the Class A
Common Shares (defined below), the "Common Shares" or "Common Stock"). The
Warrant shall become exercisable, and must be exercised (i) at the request of
the Company, but no sooner than six months after the Closing Date or (ii)
immediately prior to (A) an acquisition, sale or merger of or by the Company
resulting in a change in control of the Company, (B) a merger of the Company
with and into PeoplePC, or acquisition of all of the Company's assets or shares
by PeoplePC or (C) the Company's IPO, on terms and conditions more fully set
forth therein.
(b) Initially, up to 7,142,857 Class A Common Shares, par value
EUR.01 (the "Class A Common Shares") (subject to adjustment for stock splits,
combinations and other changes in capitalization) may be issued to a foundation,
which will issue depository receipts therefor to employees, directors and
consultants of the Company pursuant to stock option or award plans adopted by
the Board of Directors of the Company and applicable laws.
2.2 Scope of Operations and Responsibilities.
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(a) Notwithstanding the extent of the objects set forth in its
Articles of Association, the Company will have the right to conduct the Local
Business in the Territory (as such terms are defined in the License Agreement)
and such other activities as may be approved by the Board of Directors in
accordance with the terms of the License Agreement and Section 13.3 hereof.
(b) PeoplePC will provide, pursuant to the License Agreement:
(i) all PeoplePC Technology and PeoplePC Brand (as such terms defined in the
License Agreement) that PeoplePC has a right to license and (ii) certain
technology, maintenance, and technical support in either case which are
necessary and appropriate for the Company to launch and operate its business in
the Territory in the manner presently contemplated.
3. Representations and Warranties of the Parties. Each Party hereby
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represents and warrants to the Company and the other Parties as follows:
3.1 Investment. It will acquire the Company Securities acquired
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pursuant to this Agreement for investment for its own account, not as a nominee
or agent, and not with a view to, or for resale in connection with, any
distribution thereof. It understands that the Company Securities acquired by it
pursuant to this Agreement have not been, and will not be, registered or
qualified for sale to the public (unless sold in connection with a public
offering by the Company) under the Securities Act of 1933, as amended, or
otherwise.
3.2 Organization. It is an entity duly organized and validly existing
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and in good standing under the laws of the jurisdiction of its organization,
with all requisite corporate power and
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authority to own, lease and operate its properties and assets and to carry on
its business as presently conducted and as proposed to be conducted.
3.3 Authority. It has all corporate right, power and authority to
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enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by it and the consummation
by it of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on its behalf. This Agreement has been duly executed
and delivered by it and constitutes a legal, valid and binding obligation,
enforceable in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated hereby
will not, conflict with or result in any violation of any obligation under any
provision of its charter documents or any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to it.
3.4 Government Consents, etc. No consent, approval or authorization
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of or designation, declaration or filing with any governmental authority on its
part is required in connection with the valid execution and delivery of this
Agreement, or the subscription for the offer or issuance of the Company
Securities hereunder or upon exercise of the Warrant or the consummation of any
other transaction contemplated hereby.
3.5 Investigation. It has had a reasonable opportunity to discuss the
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Company's business, management and financial affairs with the Company's
management and it has received satisfactory responses from management of the
Company to its inquiries.
3.6 Compliance with 1995 Act on the Supervision of the Securities
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Trade. It is a person who trades or invests in securities in the conduct of its
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profession or trade (which persons include banks, securities intermediaries
(including dealers and brokers), insurance companies, pension funds, other
institutional investors and commercial enterprises which as an ancillary
activity regularly invest in securities).
4. Restrictions on Transferability. No Party shall assign, sell, pledge
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or otherwise transfer its Company Securities except (i) to an affiliate of such
Party which agrees to be bound by the terms of this Agreement as though named as
a party hereto, (ii) with the prior written consent of each other Party, or
(iii) to the Company (to the extent permitted under Dutch law) or any person or
group approved by the Company in accordance with Section 11 below; provided,
however, that any such transfer permitted by the foregoing provisions of this
paragraph shall be made in compliance with applicable securities laws and
Section 8 hereof, and no such transfer otherwise permitted by the foregoing
provisions of this paragraph shall be made to a competitor of the Company, as
determined by the Company's Board of Directors.
5. Restrictive Legends. Each certificate representing Conversion Stock
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shall (unless otherwise permitted by the provisions of Section 4 above) be
stamped or otherwise imprinted with a
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legend in substantially the following form (in addition to any other legends
required by agreement or by applicable securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER, A LOCKUP OF 180 DAYS AND RIGHTS OF FIRST
REFUSAL SET FORTH IN A CERTAIN SHAREHOLDERS' AGREEMENT DATED AS OF
JUNE 30, 2000, A COPY OF WHICH MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE COMPANY AT THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES.
Each Holder consents to the Company making a notation on its records
and giving stop transfer instructions to any transfer agent of its Company
Securities in order to implement the restrictions on transfer established in
this Agreement.
6. Offering Rights.
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(a) If, following the earlier of (i) four years from the date
hereof and (ii) six months after the IPO, the Company shall receive a written
request from a Holder or Holders of a majority of the Conversion Stock (subject
to adjustment for stock splits, combinations and other changes in
capitalization) to effect a public offering of at least $20,000,000 in proposed
aggregate offering price, the Company shall, as soon as practicable, file or
take other action to allow such an offering of the Conversion Stock which the
Holders request to be offered; provided, however, that the Company shall only be
obligated to effect two such offerings under this Section 6(a). The Company
shall not be obligated to effect any offering within 180 days after the
effective date of a previous offering. In addition, if the equity securities of
the Company are eligible for public sale by a short-form or abbreviated offering
prospectus, each Holder will be entitled to require the Company to effect an
offering of its Conversion Stock in such a manner, provided the proposed
offering price, net of discounts and commissions, is more than $10,000,000. The
Company may postpone for up to 180 days action to effect an offering pursuant to
this Section 6(a) if the Board of Directors determines that such offering could
reasonably be expected to have a material adverse effect on any proposal or plan
by the Company to engage in any acquisition of assets (other than in the
ordinary course of business) or any merger, consolidation, tender offer,
reorganization or similar transaction, or on the Company as a whole.
(b) If the Company prepares documentation in connection with the
public offering of the Company's Class A Common Shares or Conversion Stock
(including any offering for other Holders) other than the IPO or an offering
relating solely to securities in an employee stock option, bonus or other
compensation plan or in connection with an acquisition, merger or other business
combination, the Company shall so notify the Holders and each Holder may have
any portion of its Conversion Stock included in such offering. Notwithstanding
any other provision of
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this Section 6(b), if the underwriters managing such offering advise the Company
in writing that the number of Class A Common Shares or Conversion Stock proposed
to be sold in any such offering is greater than the number which they believe
feasible to sell at that time upon the terms approved by the Company, there
shall be included in such offering and underwriting (i) first, the number of
Class A Common Shares proposed to be sold by the Company and (ii) second, the
number Conversion Stock to be sold by selling Holders on a pro-rata basis based
upon the number of Conversion Stock that each such Holder desires to offer.
(c) In connection with any offering of Conversion Stock effected
pursuant to this Section 6, the selling Holder(s) shall be responsible for any
underwriting discounts and commissions applicable to their Conversion Stock and
the Company shall, to the extent legally permitted, be responsible for all other
expenses, including, without limitation, all filing, printers and accounting
expenses, and fees and disbursements of counsel for the Company and one counsel
for the selling Holder(s).
(d) With respect to any offering effected pursuant to this
Section 6, the Company will, to the extent legally permitted, provide customary
indemnification for the selling Holder(s) and any underwriter of Conversion
Stock sold by them (and any of their directors, officers and controlling
persons) and the selling Holders will, to the extent legally permitted, provide
customary indemnification for the Company (and any of its directors, officers
and controlling persons) and any underwriters.
(e) The rights pursuant to this Section 6 may be assigned by a
Party together with any transfer or assignment of the Conversion Stock, provided
the transfer or assignment complies with the applicable securities laws and the
terms of this Agreement.
(f) The rights granted pursuant to this Section 6 shall
terminate upon the earlier of (i) three years after the IPO and (ii) the date
such Holder is eligible to sell all of its Conversion Stock under a relevant
securities law registration exemption within any three-month period.
7. Financial Information. The Company shall make the following documents
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available to any shareholder upon request: (a) within 90 days after the end of
each fiscal year of the Company, year-end financial reports; (b) within 45 days
after the end of the first three quarters of each fiscal year, quarter-end
financial reports; and (c) within 30 days prior to the end of each fiscal year,
a budget and business plan for the next fiscal year. In addition, the Company
shall, upon reasonable notice, give each such shareholder, during regular
business hours, reasonable access to the properties, documents and records,
financial and otherwise, of the Company, and provide copies or extracts of the
Company's documents and records as such shareholder may reasonably request. The
obligations hereunder shall terminate upon consummation of the IPO.
8. Lockup Agreement. In connection with an underwritten offering by the
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Company, if so requested by the Company or any of the underwriters, the Holders
shall not, directly or indirectly,
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sell, offer or contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of (other than to
an affiliate or pursuant to gifts to donees who agree to be similarly bound) any
Conversion Stock at any time during the period specified by the Company's Board
of Directors at the request of the underwriters, with such period not to exceed
180 days following the effective date of offering (the "Lockup Period").
9. Right to Maintain.
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(a) The Parties shall cause the Company to grant to PeoplePC,
@viso and, following the exercise of the Warrant, SBCP, the right of first
refusal to acquire its Pro Rata Share of New Securities (as defined in this
Section 9) which the Company may, from time to time, propose to sell and issue.
A "Pro Rata Share," for purposes of this right of first refusal, is the ratio
that (i) the sum of the number of Class A Common Shares and shares of Conversion
Stock then held by PeoplePC, @viso or SBCP, as the case may be, bears to (ii)
the sum of the total number of Class A Common Shares outstanding and shares of
Conversion Stock then held by all Holders.
(b) Except as set forth below, "New Securities" shall mean any
shares of Company Securities, including any class of Common Shares and any
series of Preferred Shares, whether now authorized or not, and rights, options
or warrants to acquire said shares of Common Shares or Preferred Shares, and
securities of any type whatsoever that are, or may become, convertible into or
exchangeable for said shares of Common Shares or Preferred Shares.
Notwithstanding the foregoing, "New Securities" does not include:
(i) Class A Common Shares issued with respect to the
Conversion Stock;
(ii) shares issued or issuable to employees, directors,
consultants and vendors pursuant to an employee stock option plan, stock
purchase plan or similar benefit program or agreement approved by the Board of
Directors, where the primary purpose is not to raise additional equity capital
for the Company;
(iii) as direct consideration for the acquisition by the
Company of another business entity or the merger of any business entity with or
into the Company;
(iv) in connection with a stock split or dividend, or a
recapitalization or reorganization of the Company;
(v) upon the exercise of warrants or options, or upon the
conversion of convertible securities, outstanding on the date hereof or as to
which PeoplePC, @viso or SBCP have been previously offered the right to
participate as contemplated by this Section 9;
(vi) securities issued in the IPO;
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(vii) securities issued pursuant to a strategic
partnership or customer transaction of the Company; or
(viii) securities issued pursuant to this Section 9;
provided, however, that the foregoing exceptions (i)-(viii) shall not apply to
PeoplePC to the extent necessary for PeoplePC to maintain its ownership interest
of the Company's outstanding capital stock at 51% at all times; provided,
further, that where securities are issued as contemplated by this Section 9 as a
result of the issuance of New Securities that are Class A Common Shares, the
right to maintain shall be exercised by acquiring a newly authorized series of
preferred stock having rights, preferences and privileges similar to the Class B
Common Shares, the fair market value of which shall be determined by an
investment bank acceptable to the Holders of three-quarters of the Conversion
Stock.
(c) In the event the Parties cause the Company to undertake an
issuance of New Securities, it shall give written notice of its intention to
each of PeoplePC, @viso and SBCP describing the amount and type of New
Securities, and the price and terms upon which the Company proposes to issue the
same. Each such party shall have 14 days from the date of receipt of any such
notice to agree to acquire up to its respective Pro Rata Share of such New
Securities for the price and upon the terms specified in the notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be acquired. An indication to exercise its right to maintain shall not be
binding upon such party unless and until the Company obtains binding commitments
to acquire all or a part of the securities specified in the notice of the
offering on the terms stated in such notice.
(d) Beginning 14 days after the notice given pursuant to Section
9(c) above, the Company shall have 180 days to issue the New Securities not
elected or eligible to be acquired by PeoplePC, @viso or SBCP at the price and
upon the terms no more favorable to the purchasers of such securities than
specified in the Company's notice. In the event the Company has not issued all
of the New Securities within said 180 day period, the Company shall not
thereafter issue any New Securities without first offering such securities in
the manner provided above.
(e) @viso and SBCP's rights under this Section 9 may be assigned
to any of their affiliates with the Company's consent and will terminate and be
of no further force or effect upon the closing of the Company's IPO. PeoplePC's
rights under this Section 9 shall survive the closing of the IPO.
10. Limitation on Ownership of Company Securities. For a period of ten
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years from the Closing Date, except for shares acquired by SBCP on exercise of
the Warrant, each Party other than PeoplePC shall not (and each such Party shall
not permit any of its affiliates to) acquire, directly or indirectly, beneficial
ownership of any Company Securities or authorize or make a tender, exchange or
other offer, without the written consent of the Company, if the effect of such
acquisition or offer would be to increase the quotient determined by dividing
(a) the number of Company
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Securities beneficially owned by such Party, including without limitation the
Warrant Shares, by (b) the number of shares of Company Securities outstanding,
to more than the value of such quotient as calculated on the Closing Date.
(a) Subject to the limitation set forth in this Section 10,
Company Securities may be acquired by any such Party in the open market or from
third parties; provided, however, that (i) such Party advises management of the
Company as to such Party's plans to acquire additional Company Securities
reasonably in advance of any such acquisition, and (ii) all open market
purchases of Company Securities by such Party shall be made in compliance with
applicable laws and regulations and the provisions of this Agreement.
(b) Such Party will not be obligated to dispose of any Company
Securities if the aggregate percentage ownership of that Party in the Company
Securities is increased as a result of a recapitalization of the Company or a
repurchase of securities by the Company or any other action taken by the Company
or its affiliates, but that Party shall not acquire any additional Company
Securities unless such acquisition would otherwise be permitted under this
Agreement. No such Party shall join a partnership, limited partnership,
syndicate or other group, or otherwise act in concert with any third person, for
the purpose of acquiring, holding, or disposing of Company Securities.
11. Right of First Refusal.
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11.1 Grant of Right; Exercise or Right. Prior to making any sale or
---------------------------------
transfer of Company Securities, other than to an affiliate in accordance with
Section 4, each Party other than PeoplePC shall give the Company the opportunity
to purchase such Company Securities in the following manner:
(a) Such Party shall give notice (the "Transfer Notice") to the
Company in writing of such intention specifying the names of the proposed
purchasers or transferees, the amount of Company Securities proposed to be sold
or transferred, the proposed price per share therefor (the "Transfer Price") and
the other material terms upon which such disposition is proposed to be made.
(b) The Company shall have the right, exercisable by written
notice given by the Company to such Party within five (5) business days after
receipt of such Transfer Notice, to purchase all of the Company Securities
specified in such Transfer Notice for cash per share equal to the Transfer
Price.
(c) If the Company exercises its right of first refusal
hereunder, the closing of the purchase of the Company Securities with respect to
which such right has been exercised shall take place within fifteen (15)
business days after the Company gives notice of such exercise, which period of
time shall be extended if necessary to comply with applicable securities laws
and regulations. Upon exercise of the Company's right of first refusal, the
Company and the Party shall
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be legally obligated to consummate the purchase contemplated thereby and shall
use their best efforts to secure any approvals required in connection therewith.
(d) If the Company does not exercise its right of first refusal
hereunder within the time specified for such exercise, the Party shall be free,
during the period of thirty (30) days following the expiration of such time for
exercise, to sell the Company Securities specified in such Transfer Notice on
terms no less favorable to such Party than the terms specified in such Transfer
Notice; provided, however, such transfer shall be subject to any restrictions
imposed under applicable securities laws and regulations. The transferee who
acquires such Company Securities shall be bound by the provisions of this
Agreement as though named as a party hereto.
11.2 Assignment of Right. In the event that the Company elects to
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exercise a right of first refusal to purchase all of the Company Securities
specified in the Transfer Notice under this Section 11, the Company may specify
prior to the closing of such purchase that PeoplePC is its designee to purchase
all or part (if the balance is purchased by the Company) of the Company
Securities to which such notice relates. If the Company shall designate PeoplePC
as the purchaser pursuant to this Section 11, the giving of notice of acceptance
of the right of first refusal by the Company shall constitute a legally binding
obligation of the Company to complete such purchase if PeoplePC shall fail to do
so.
12. Conversion.
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12.1 Optional Conversion of Preferred Stock or Class B Common Shares.
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As set forth in the Articles of Association, each share of Preferred Stock and
each share of Class B Common Shares shall be convertible, at the option of the
holder thereof, at any time after the date of issuance of such share, into such
number of fully paid and nonassessable Class A Common Shares as is determined by
dividing the Original Issue Price per share of such share of Preferred Stock or
Class B Common Shares, as the case may be, by the Conversion Price per share at
the time in effect for such series or class.
12.2 Automatic Conversion of Preferred Stock. As set forth in the
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Articles of Association, each share of Series A Preferred Stock shall
automatically be converted into Class A Common Shares at the then effective
Conversion Price upon (i) the IPO or (ii) a merger of the Company with and into
PeoplePC, or acquisition of all of the Company's assets or shares by PeoplePC.
The Class B Common Shares shall not automatically convert into Class A Common
Shares at any time.
12.3 Original Issue Price and Conversion Price. The Original Issue
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Price per share of Series A Preferred Shares is $3.00. The Conversion Price per
share of Series A Preferred Shares initially shall be $3.00. The Original Issue
Price per share of Series B Preferred Shares is $3.00. The Conversion Price per
share of Series B Preferred Shares initially shall be $3.00. The Original Issue
Price per share of Class B Common Shares is $3.00. The Conversion Price per
share of Class B Common Shares initially shall be $1.00.
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12.4 Adjustment of Conversion Prices. The Conversion Prices shall be
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subject to adjustment, as applicable, from time to time as follows:
(a) Adjustments for Subdivisions or Combinations of Class A
-------------------------------------------------------
Common Shares. In the event the outstanding Class A Common Shares shall be
-------------
subdivided into a greater number of Class A Common Shares, the Conversion Price
of the Class B Common Shares and each series of Preferred Stock then in effect
shall, concurrently with the effectiveness of such subdivision, be
proportionately decreased. In the event the outstanding Class A Common Shares
shall be combined or consolidated into a lesser number of Class A Common Shares,
the Conversion Price of the Class B Common Shares and each series of Preferred
Stock then in effect shall, concurrently with the effectiveness of such
combination or consolidation, be proportionately increased.
(b) Adjustments for Stock Dividends and Other Distributions. In
-------------------------------------------------------
the event the Company makes, or fixes a record date for the determination of
holders of Class A Common Shares entitled to receive, any distribution
(excluding repurchases of securities by the Company not made on a pro rata
basis) payable in property or in securities of the Company other than Class A
Common Shares, then and in each such event the holders of the Class B Common
Shares and Preferred Stock shall receive, at the time of such distribution, the
amount of property or the number of securities of the Company that they would
have received had their Class B Common Shares and Preferred Stock been converted
into Class A Common Shares on the date of such event.
(c) Adjustments for Reclassifications or Similar Events. If the
---------------------------------------------------
Class A Common Shares shall be changed into the same or a different number of
shares of any other class or classes of stock or other securities or property,
whether by capital reorganization, reclassification or otherwise, then each
share of Class B Common Shares and Preferred Stock shall thereafter be
convertible into the number of shares of stock or other securities or property
to which a holder of the number of shares of Class A Common Shares of the
Company deliverable upon conversion of such Class B Common Shares or shares of
Preferred Stock shall have been entitled upon such capital reorganization,
reclassification or other event.
(d) Adjustments for Diluting Issues. Adjustment to the
-------------------------------
Conversion Prices, if any, as the Company's Board of Directors deems to be
equitable and subject to the last sentence of this Section 12.4(d), shall be
made in the event of any change in the outstanding shares of Company Securities
by reason of any new issuance with an issue price per share less than or equal
to the Conversion Price per share of the Preferred Shares then in effect (a
"Dilutive Issuance"), it being understood that Dilutive Issuances shall not
include issuances (i) upon conversion of shares of Preferred Stock or Class B
Common Stock; (ii) to employees, consultants, officers or directors of the
Company pursuant to a stock grant, stock option plan or stock purchase plan or
similar benefit including without limitation upon the exercise of outstanding
options; (iii) to any party in connection with a transaction or arrangement
which has business purposes and benefits to the Company in the good faith
judgement of the Board of Directors, including, but not limited to, an
acquisition or merger, a strategic alliance or corporate partnering transaction,
a vendor or customer agreement or an asset acquisition or disposition agreement.
Any adjustment of the Conversion Prices shall be made
-11-
by the Company's Board of Directors in the event of a Dilutive Issuance using a
broad-based, weighted average, price-based antidilution formula which adjusts
the Conversion Prices based upon a weighted average of the purchase prices of
outstanding Company Securities and the newly issued Company Securities that
result from a Dilutive Issuance. The determination of the Company's Board of
Directors as to the amount (if any) of adjustment to the Conversion Prices in
response to any Dilutive Issuance shall be final, binding and conclusive as to
all Parties. Notwithstanding the foregoing, no adjustment to the Conversion
Price of the Class B Common Shares under this Section 12.4(d) shall be made
unless it is necessary and only to the extent necessary to maintain PeoplePC's
ownership of Company Securities at 51% at any time.
(e) Payment of Excess Par Value. If an adjustment of the
---------------------------
Conversion Price pursuant to this Section 12.4 implies that the shares to be
converted shall be converted into shares with in the aggregate a larger amount
in par value, the excess in par value shall be issued to the respective
shareholder against the free distributable reserves of the Company. Whereby
fractions of 0.5 or more shall be rounded up and fractions less than 0.5 shall
be rounded down to the next round figure.
(f) Retirement of Shares on Certain Conversion Events. If an
-------------------------------------------------
adjustment of the Conversion Price pursuant to this Section 12.4 implies that
the shares to be converted shall be converted into shares with in the aggregate
a lower amount in par value, the shares which comprise the deficit shall be
transferred by the respective shareholder for no consideration to the Company.
Whereby fractions of 0.5 or more shall be rounded up and fractions less than 0.5
shall be rounded down to the next round figure.
12.5 Mechanics of Optional and Automatic Conversions. Before any
-----------------------------------------------
holder shall be entitled to convert the same into Class A Common Shares pursuant
to Section 12.1, such holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Company or of any transfer agent,
and shall give written notice by mail, postage prepaid, to the Company at its
principal corporate office, of the election to convert the same, and such
conversion shall be deemed to have been made immediately prior to the close
business on the date of such surrender of the shares to be converted. In the
event of an automatic conversion pursuant to Section 12.2, the outstanding
shares of Preferred Stock shall be converted automatically without any further
action by the holder of such shares and whether or not the certificates
representing such shares are surrendered to the Company or the transfer agent
for such Preferred Stock; and the Company shall not be obligated to issue
certificates evidencing the Class A Common Shares issuable upon such automatic
conversion unless the certificates evidencing such shares of Preferred Stock are
either delivered to the Company or the transfer agent for such Preferred Stock
as provided above, or the holder notifies the Company or the transfer agent for
such Preferred Stock that such certificates have been lost, stolen or destroyed
and executes an agreement satisfactory to the Company to indemnify the Company
from any loss incurred by it in connection with such certificates. The Company
shall, as soon as practicable thereafter, issue and deliver to such address as
the holder may direct, a certificate or certificates for the number of Class A
Common Shares to which such holder shall be entitled.
-12-
13. Purchase Rights. If the IPO does not occur within four years of the
---------------
date hereof, @viso and SBCP shall be entitled to purchase all of PeoplePC's
Company Securities, subject to PeoplePC's superseding right to purchase all of
their Company Securities, at a price equal to the then fair market value as
determined (without regard to any control premium) by a process agreed to by
@viso and PeoplePC. PeoplePC shall be entitled to use as consideration, at its
sole election, cash or registered PeoplePC stock.
14. Voting Agreement with Respect to the Board of Directors
-------------------------------------------------------
14.1 Election of Directors. At each annual meeting of the
---------------------
shareholders of the Company, or at any meeting of the shareholders of the
Company at which members of the Board of Directors of the Company are to be
elected, or whenever members of the Board of Directors are to be elected by
written consent, each Party, Holder or transferee that is entitled to vote
agrees to vote or act with respect to their shares:
(a) So as to elect four members of the Company's Board of
Directors designated by PeoplePC; provided that PeoplePC continues to hold at
least 25% of the outstanding capital stock of the Company;
(b) So as to elect two members of the Company's Board of
Directors designated by @viso; provided that after the Company's IPO, @viso
shall be entitled to elect only one director, and only if @viso, SBCP and their
affiliates hold at least 75% of the Company Securities issued to them hereunder
(as adjusted for any recapitalizations, stock combinations, stock dividends,
stock splits and the like); and
(c) So as to elect the President and Chief Executive Officer of
the Company who shall be designated by PeoplePC;
it being understood that for so long as PeoplePC is entitled to designate four
directors hereunder, PeoplePC shall continue to control the daily operating
decisions of the Company (including issues relating to brand management).
14.2 Removal. PeoplePC or @viso, as the case may be, may procure
-------
removal of any or all of its designated directors (and PeoplePC may remove the
President and Chief Executive Officer) at any time and from time to time, with
or without cause (subject to any requirements of law), in their sole discretion,
and after written notice to each of the Parties hereto of the new nominee to
replace such director or officer, each Party, Holder or transferee that is
entitled to vote shall promptly vote its shares of capital stock of the Company
to elect such nominee to the Board of Directors.
14.3 Super-majority Vote. Only prior to the Company's IPO, decisions
-------------------
of the Board of Directors shall require a super-majority, defined as the vote of
five directors, one of which shall be by a director designated by @viso, with
respect to the following transactions (except where
-13-
such transactions or arrangements are contemplated by this Agreement or any
related agreements or documents):
(a) any proposal to the general meeting to distribute a dividend
or other distribution;
(b) any proposal to the general meeting to make any acquisition
in which more than 20% of the stock of the Company is issued, or any sale of
more than 20% of the Company's assets, or any capital expenditure representing
more than 20% of the Company's assets, or to the extent the board of directors
is authorized to resolve upon the issuance of shares pursuant to Article 4 of
the Articles of Association of the Company, a resolution to accomplish any such
sale of assets or capital expenditure;
(c) any material contracts or arrangements with PeoplePC, or
@viso or SBCP or their affiliates, other than contracts or arrangements (i)
contemplated by this Agreement or any related agreements or documents or (ii)
entered into in the ordinary course of business;
(d) any proposal to the general meeting to adopt compensatory
stock option or other equity incentive plans which, in the aggregate, reserve
for issuance more than 15% of the Company Securities at their date of adoption,
or to the extent the board of directors is authorized to resolve upon the
issuance of shares pursuant to Article 4 of the Articles of Association of the
Company, a resolution to accomplish any such stock option or equity incentive
plan; or
(e) a dedication of a material amount of assets to an activity
that is outside the Company's stated purpose.
14.4 Quorum. A quorum shall consist of at least a majority of the
------
directors, with decisions taken by majority vote except as otherwise provided
herein. All directors shall be provided with reasonable notice of not less than
five business days unless otherwise agreed to and the opportunity to attend
meetings of the Board of Directors; provided, however, that attendance at a
meeting shall constitute a waiver of such notice requirement.
15. Shareholder Voting.
------------------
15.1 Approval of Certain Shareholders. Only prior to the Company's
--------------------------------
IPO, the favorable vote of each of @viso and PeoplePC will be required to
approve the following (unless otherwise permitted under this Agreement):
(a) a change in number of directors of the Board of Directors;
(b) an acquisition, sale or merger of or by the Company
resulting in a change of control of the Company, or a liquidation of the
Company; or
-14-
(c) any amendment of the Articles of Association which adversely
affects either @viso or PeoplePC, it being understood that the authorization of
additional shares of capital stock with rights, preferences and privileges
substantially similar to those of the Series A Preferred Shares (other than
rights, preferences and privileges which are related to the price of a new
series of capital stock) in connection with fund raising activities shall, among
other things, not constitute an adverse effect.
In addition, the Parties shall execute and shall procure to cast their
votes in any corporate body of the Company in accordance with the terms of this
Agreement.
15.2 Class B Common Shares. Prior to the Company's IPO, each holder
---------------------
of Class B Common Shares will vote one third of the Class B Common Shares held
by it. Thereafter, the provisions of the Company's Articles of Association shall
govern.
15.3 Form of Dividend Consideration. The Parties agree that at any
------------------------------
general meeting at which the form of consideration of a dividend is to be
determined by the shareholders, the Parties will vote in favor of the form of
consideration voted for by PeoplePC, which shall be either cash or the type of
consideration received by the Company's shareholders in the event that triggers
such dividend payment.
16. Amendment. Except as otherwise provided herein, neither this Agreement
---------
nor any provisions hereof shall be amended, waived, discharged or terminated
without written consent of the Company and the Parties.
17. Start-up Expenses. Upon approval of the Board of Directors, the
-----------------
Company shall reimburse PeoplePC and @viso for reasonable start-up expenses
incurred by PeoplePC and @viso on behalf of the Company; provided, however, that
such reimbursable expenses shall include only third party expenses and not
management time.
18. Closing Conditions.
------------------
18.1 Conditions to Obligations of the Parties. The obligation of each
----------------------------------------
Party to acquire securities pursuant to Section 2.1 is subject to the
fulfillment on or prior to the Closing Date of the following conditions, any or
all of which may be waived at the option of the Party.
(a) All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the Closing Date shall
have been performed or complied with in all material respects.
(b) There shall not then be in effect any order enjoining or
restraining the transactions contemplated by this Agreement.
-15-
(c) There shall not be in effect any law, rule or regulation
prohibiting or restricting such issuance, or requiring any consent or approval
of any person which shall not have been obtained to issue the securities
hereunder, except as otherwise provided in this Agreement.
(d) The Articles of Association in the form attached hereto as
Exhibit C shall have been approved by the Dutch Ministry of Justice.
(e) The License Agreement in the form attached hereto as Exhibit
A and the License Agreement between PPC U.S. and PPC B.V.I. contemplated thereby
shall be in full force and effect and neither party shall be in breach thereof.
(f) The Services Agreement attached hereto as Exhibit B shall be
in full force and effect and the parties thereto shall not be in breach thereof.
18.2 Conditions to Obligations of the Company. The Company's
----------------------------------------
obligation to issue the securities pursuant to Section 2.1 is subject to the
fulfillment on or prior to the Closing Date of the following conditions, any or
all of which may be waived at the option of the Company:
(a) The representations and warranties made by each Party in
Section 3 hereof shall be true and correct in all material respects when made,
and shall be true and correct in all material respects on the Closing Date with
the same force and effect as if they had been made on and as of said date.
(b) All covenants, agreements and conditions contained in this
Agreement to be performed by the Parties on or prior to the Closing Date shall
have been performed or complied with in all material respects.
(c) There shall not then be in effect any order enjoining or
restraining the transactions contemplated by this Agreement.
(d) There shall not be in effect any law, rule or regulation
prohibiting or restricting such issuance, or requiring any consent or approval
of any person which shall not have been obtained to issue the securities
hereunder, except as otherwise provided in this Agreement.
(e) The Articles of Association in the form attached hereto as
Exhibit C shall have been approved by the Dutch Ministry of Justice.
(f) The Parties or any affiliates designated as signatories to
each of the License Agreement, the Services Agreement and the Vivendi
Connectivity Agreement shall have delivered a duly executed counterpart of each
such agreement, each such agreement shall be in full force and effect and the
parties thereto shall not be in breach thereof.
19. Governing Law. This Agreement shall be governed in all respects by the
-------------
internal laws of the State of New York without regard to conflict of laws
provisions. Any claim or
-16-
disagreement arising out of or in connection with this Agreement shall be
referred to arbitration in London, England with three arbitrators under the LCIA
Rules. The arbitration award shall be final and binding upon the parties and
judgment thereon may be entered in any court having jurisdiction.
20. Entire Agreement; Conflict. This Agreement and the exhibits hereto
--------------------------
constitute the full and entire understanding and Agreement among the Parties
regarding the matters set forth herein. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding upon
the successors, assigns, heirs, executors and administrators of the Parties
hereto. In the event of a conflict, inconsistency or disagreement between this
Agreement and the Articles of Association of the Company, the provisions of this
Agreement shall prevail and the Parties shall not claim any rights under the
Articles of Association that are in violation of, or inconsistent with, this
Agreement. If the implementation or performance of this Agreement is in any way
precluded by the Articles of Association, the Parties shall promptly procure the
amendment of the Articles of Association to permit full implementation and
performance hereof.
21. Notices, etc. All notices and other communications required or
------------
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by facsimile
transmission, by hand or by messenger, addressed:
(a) if to a Party, at such Party's address as set forth on the
signature page hereto, or at such other address as such Party shall have
furnished to the Company,
(b) if to the Company, to:
PeoplePC BV
c/o PeoplePC, Inc.
βββ ββββ ββββββ, βββββ βββ
βββ βββββββββ, ββββββββββ βββββ
Attention: ββββ ββββ
Fax: (βββ) βββ-ββββ
or at such other address as the Company shall have furnished to the
Parties, with a copy to:
ββββββ βββββββ ββββββββ & ββββββ
βββ ββββ ββββ ββββ
ββββ ββββ, ββββββββββ βββββ-ββββ
Attention: ββββ β. βββββββββ, Esq.
βββ β. ββββββββ, Esq.
Fax: (βββ) βββ-ββββ
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, if sent by facsimile, the first business day after the
date of confirmation that the facsimile has been successfully transmitted
-17-
to the facsimile number for the party notified, or, if sent by mail, at the
earlier of its receipt or 14 days after the same has been deposited in a
regularly maintained receptacle for the deposit of the United States mail,
addressed and mailed as aforesaid.
22. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original and all of which together shall
constitute one instrument.
-18-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
COMPANY PARTIES
PEOPLEPC BV PEOPLEPC, INC.
By: /s/ ββββββ βββββ By: /s/ ββββ ββββ
-------------------------------- --------------------------------
Name: ββββββ βββββ Name: ββββ ββββ
------------------------------ ------------------------------
Senior Vice President,
Corporate Secretary and
Title: Managing Director Title: General Counsel
----------------------------- ------------------------------
Address: βββ ββββ ββββββ, βββββ ββββ
---------------------------
βββ βββββββββ, ββ βββββ
---------------------------
OLIVE HILL INVESTMENTS N.V.
By: /s/ β. ββββββ
--------------------------------
Name: β. ββββββ
------------------------------
Managing Director,
Title: Equity Trust (Curacao) N.V.
-----------------------------
Address:
---------------------------
---------------------------
[Signature Page to Shareholders' Agreement]
@VISO LIMITED
By: /s/ ββββββ ββββββββ
---------------------------------
Name: ββββββ ββββββββ
-------------------------------
Title: Chief Executive Officer
------------------------------
Address: c/o Macfarlanes
ββ βββββββ ββββββ
ββββββ ββββ βββ
βββββββ
Attention: βββββββ ββββββ
Telephone: ββ-βββ-βββ-ββββ
Fax: ββ-βββ-βββ-ββββ
With a copy to:
ββββββββ & ββββββββ
βββ βββββ ββββββ
βββ ββββ, ββ βββββ
βββ
Attention: βββββββ β. βββββ, Esq.
Telephone: βββ-βββ-ββββ
Fax: βββ-βββ-ββββ
SOFTBANK CAPITAL PARTNERS LP
By: SOFTBANK CAPITAL PARTNERS LLC,
General Partner
By: /s/ ββββββ β. ββββββ
-----------------------------
Name: ββββββ β. ββββββ
---------------------------
Title: Administrative Member
--------------------------
Address: ββββ ββββββ ββββββ
------------------------
ββββββ ββββββ, ββ βββββ
------------------------
[Signature Page to Shareholders' Agreement]
Exhibit A
License Agreement
Exhibit B
Master Services Agreement
Exhibit C
Articles of Association
Exhibit D
Form of Warrant