EXHIBIT 10.9
DIVA SYSTEMS CORPORATION
STOCKHOLDER RIGHTS AGREEMENT
AMENDED AND RESTATED AS OF
MARCH 26, 1998
TABLE OF CONTENTS
PAGE
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1. RIGHTS OF STOCKHOLDERS AND SUBORDINATED WARRANT HOLDERS.................
2. INFORMATION RIGHTS...................................................... 2
2.1 Financial Information.............................................. 2
2.2 Inspection......................................................... 2
2.3 Termination of Certain Rights...................................... 2
3. REGISTRATION RIGHTS..................................................... 3
3.1 Definitions........................................................ 3
3.2 Requested Registration............................................. 5
3.3 Piggyback Registrations............................................ 7
3.4 Expenses of Registration........................................... 9
3.5 Form S-3 Registration.............................................. 9
3.6 Obligations of the Company......................................... 10
3.7 Furnish Information................................................ 11
3.8 Delay of Registration.............................................. 11
3.9 Indemnification.................................................... 11
3.10 "Market Stand-Off" Agreement....................................... 14
3.11 Rule 144 Reporting................................................. 14
3.12 Limitations on Subsequent Registration Rights...................... 15
3.13 Assignment of Registration Rights.................................. 15
3.14 Termination of Registration Rights................................. 15
4. RIGHT OF PARTICIPATION TO SUBSCRIBE TO NEW ISSUANCES.................... 15
4.1 General............................................................ 15
4.2 Certain Definitions................................................ 16
4.3 Mechanics of Right................................................. 17
4.4 Termination........................................................ 18
4.5 Assignment......................................................... 18
5. RIGHTS OF FIRST REFUSAL AMONG COMPANY AND STOCKHOLDERS.................. 18
5.1 General............................................................ 18
5.2 Notice of Proposed Transfer........................................ 18
5.3 Exercise of Right of First Refusal................................. 18
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5.4 Purchase Price..................................................... 19
5.5 Payment............................................................ 19
5.6 Selling Stockholder's Right to Transfer............................ 19
5.7 Exception for Certain Transfers.................................... 20
5.8 Termination of Rights of First Refusal............................. 20
6. CO-SALE RIGHT AMONG STOCKHOLDERS AND SUBORDINATED WARRANT HOLDERS....... 20
6.1 General............................................................ 20
6.2 Closing............................................................ 21
6.3 Transfers.......................................................... 21
6.4 Termination........................................................ 21
7. CONFIDENTIALITY......................................................... 22
8. CERTAIN RIGHTS OF SUBORDINATED WARRANT HOLDERS.......................... 22
8.1 Right to Approve Certain Transactions.............................. 22
8.2 General............................................................ 23
8.3 Certain Definitions................................................ 23
8.4 Mechanics of Right................................................. 24
8.5 Termination........................................................ 25
8.6 Assignment......................................................... 25
9. MISCELLANEOUS........................................................... 25
9.1 All Shares Held by Stockholders or Subordinated Warrant Holders.... 25
9.2 Additional Parties................................................. 25
9.3 Successors and Assigns............................................. 25
9.4 Governing Law...................................................... 25
9.5 Counterparts....................................................... 26
9.6 Headings........................................................... 26
9.7 Notices............................................................ 26
9.8 Attorneys' Fees.................................................... 26
9.9 Amendments and Waivers............................................. 26
9.10 Severability....................................................... 26
9.11 Entire Agreement................................................... 27
9.12 Further Assurances................................................. 27
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AMENDED AND RESTATED STOCKHOLDER RIGHTS AGREEMENT
This Amended and Restated Stockholder Rights Agreement (this "AGREEMENT")
is amended and restated as of March 26, 1998 by and among DIVA Systems
Corporation, a Delaware corporation (the "COMPANY"), certain stockholders of the
Company listed on EXHIBIT A hereto (each individually a "STOCKHOLDER" and
collectively the "STOCKHOLDERS"), certain warrant holders of the Company listed
on EXHIBIT B hereto (the "SUBORDINATED WARRANT HOLDERS"), and certain holders of
Class C Common Stock listed on EXHIBIT C hereto (the "CLASS C COMMON HOLDERS").
RECITALS
WHEREAS, certain Stockholders, Subordinated Warrant Holders and Class C
Common Holders possess information rights, registration rights, rights of first
refusal and co-sale rights granted under that certain Stockholder Rights
Agreement dated August 29, 1995, as amended and restated as of October 23, 1995,
December 26, 1995, May 15, 1996, July 10, 1996, July 17, 1996, August 22, 1996,
August 7, 1997, February 11, 1998 and February 19, 1998 (the "PRIOR AGREEMENT")
between the Company and those persons (the "PRIOR HOLDERS") listed on Exhibits
A, B and C attached thereto; and
WHEREAS, the Prior Holders desire to amend and restate the Prior Agreement
and to accept the rights created herein in lieu of rights provided by the Prior
Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the Company and the Prior Holders agree that the Prior
Agreement is terminated and superseded in its entirety by this Agreement, and
all parties agree as follows:
1. RIGHTS OF STOCKHOLDERS AND SUBORDINATED WARRANT HOLDERS.
The Company hereby grants to the Stockholders the information rights,
registration rights, rights of first offer, and co-sale rights (collectively the
"RIGHTS") contained herein. The Stockholders accept the Rights and agree to be
bound by the obligations contained herein. The Company hereby grants to the
Subordinated Warrant Holders the co-sale rights contained in Section 6 herein
(the "CO-SALE RIGHTS"). The Subordinated Warrant Holders accept the Co-Sale
Rights and agree to be bound by the obligations contained herein. The Company
and the Stockholders agree that the Rights provided herein set forth the sole
and entire agreement with respect to, and supersede any and all rights granted
under, the Prior Agreement and further agree that the Prior Agreement shall
hereafter be of no further force and effect. Upon execution of this Agreement
by Prior Holders holding more than 50% of the outstanding Registerable
Securities (as defined in the Prior Agreement), the Stockholders and the
Company, this Agreement shall be binding upon all Stockholders who heretofore
had rights under the Prior Agreement and each such Stockholder shall have the
Rights and be subject to the duties hereunder as if it were a signatory hereof.
The Class C Common Holders agree to be bound by the obligations contained herein
in consideration of the shares of Class C Common Stock received pursuant to the
Purchase Agreement.
2. INFORMATION RIGHTS.
2.1 FINANCIAL INFORMATION. The Company will furnish each Stockholder
holding more than (i) 17,000 shares (as adjusted for any stock splits, reverse
splits, combinations, reclassifications, stock dividends or similar events) of
Preferred Stock (as defined herein) or (ii) 0.25% of the outstanding shares of
Common Stock of the Company (assuming conversion into Common Stock of all
outstanding shares of Class C Common Stock and Preferred Stock) (a "MAJOR
STOCKHOLDER"):
(a) Annual Reports. As soon as practicable and in any event
within ninety (90) days after the end of each fiscal year, a consolidated
Balance Sheet as of the end of such fiscal year and a consolidated Statement of
Income and a consolidated Statement of Cash Flows of the Company and its
subsidiaries for such year, setting forth in each case in comparative form the
figures from the Company's previous fiscal year (if any), all prepared in
accordance with generally accepted accounting principles and practices and
audited and certified by nationally recognized independent certified public
accountants.
(b) Quarterly Reports. As soon as practicable and in any event
within forty-five (45) days after the end of each fiscal quarter of the Company
(except the last quarter of the Company's fiscal year), quarterly unaudited
consolidated financial statements, including an unaudited consolidated Balance
Sheet, an unaudited consolidated Statement of Income and an unaudited Statement
of Cash Flows.
(c) Narrative Report. With such annual and quarterly reports a
brief report from the Chief Financial Officer of the Company describing
significant recent developments since the date of the preceding report and
certifying that such reports have been prepared in conformity with generally
accepted accounting principles consistently applied throughout the periods
indicated, subject in the case of the Quarterly Reports to normal year end
adjustments and the absence of footnotes.
2.2 INSPECTION. The Company shall permit each Major Stockholder at
such Major Stockholder's expense to visit and inspect the Company's properties,
to examine its books of account and records and to discuss the Company's
affairs, finances and accounts with its officers, all at such reasonable times
as may be requested by the Major Stockholder; provided, however, that the
Company shall not be obligated pursuant to this Section 2.2 to provide access to
any information which it reasonably considers to be a trade secret or similar
confidential information. Any Major Stockholder that is a corporation or
partnership may act through one or more designated representatives.
2.3 TERMINATION OF CERTAIN RIGHTS. The Company's obligations under
Section 2.1 and 2.2 herein will terminate upon the earliest of (i) the closing
of the Company's initial public offering of Common Stock pursuant to a
registration statement filed with and declared effective by the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "SECURITIES ACT") (the "COMPANY'S INITIAL PUBLIC REGISTRATION"), or (ii)
acquisition (by merger, consolidation or otherwise) of the Company where the
surviving entity is subject to the reporting requirement of the Securities
Exchange Act of 1934, as amended.
3. REGISTRATION RIGHTS.
3.1 DEFINITIONS.
(a) Registration. The terms "REGISTER," "REGISTERED," and
"REGISTRATION" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement.
(b) Registerable Securities. The term "REGISTERABLE SECURITIES"
means: (1) all shares of Common Stock issued or issuable pursuant to the
conversion of Series AA Preferred Stock, Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock and any
shares of the Common Stock of the Company or other securities issued in
connection with any stock split, stock dividend, recapitalization or similar
event relating to the foregoing; (2) all shares of Common Stock held by any
Stockholder and (3) any shares of Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, all such shares of Common Stock described in
clauses (1) and (2) of this subsection 3.1(b); excluding in all cases, however,
any Registerable Securities sold by a person in a transaction in which rights
under this Section 3 are not assigned in accordance with this Agreement or any
Registerable Securities sold to the public or sold pursuant to Rule 144
promulgated under the Securities Act.
(c) Holder. For purposes of this Section 3, the term "HOLDER"
means any person owning of record or holding an option for Registerable
Securities that have not been sold to the public or pursuant to Rule 144
promulgated under the Securities Act or any assignee of record of such
Registerable Securities to whom rights under this Section 3 have been duly
assigned in accordance with this Agreement.
(d) Initiating Holder. The term "INITIATING HOLDER" shall mean
any Holder or Holders who in the aggregate are Holders of more than 40% of the
then outstanding Registerable Securities which have not been sold to the public.
(e) Preferred Stock. The term "PREFERRED STOCK" shall mean the
Series AA Preferred Stock, Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock of the Company.
(f) Form S-3. The term "FORM S-3" means such form under the
Securities Act as is in effect on the date hereof or any successor registration
form under the Securities Act subsequently adopted by the SEC which permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
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(g) SEC. The term "SEC" or "COMMISSION" means the U.S.
Securities and Exchange Commission.
(h) Exchange Act. The term "EXCHANGE ACT" means the Securities
Exchange Act of 1934, as amended.
(i) Registration Expenses. "REGISTRATION EXPENSES" shall mean all
expenses incurred by the Company in complying with Sections 3.2 and 3.3 hereof,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel and accountants for the Company,
fees and expenses of one counsel for all the Holders in an amount not to exceed
$25,000, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company, which shall be paid in any event by the
Company).
(j) Selling Expenses. "SELLING EXPENSES" shall mean all
underwriting discounts and selling commissions applicable to the sale of
Registerable Securities and all fees and disbursements of counsel for each of
the Holders other than fees and expenses of one counsel for all the Holders in
an amount not to exceed $25,000.
(k) Senior Warrant Agreement. "SENIOR WARRANT AGREEMENT" shall
mean the Warrant Agreement dated as of February 19, 1998 between the Company and
The Bank of New York, a New York banking corporation, as warrant agent.
(l) Senior Warrant Holders. "SENIOR WARRANT HOLDERS" shall mean
the holders of Senior Warrants.
(m) Senior Warrant Registration Rights Agreement. "SENIOR WARRANT
REGISTRATION RIGHTS AGREEMENT" shall mean the Warrant Registration Rights
Agreement dated as of February 19, 1998 entered into among the Company, ▇▇▇▇▇▇▇
▇▇▇▇▇ & Co., ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated, Chase
Securities Inc. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated.
(n) Senior Warrant Shares. "SENIOR WARRANT SHARES" shall mean the
shares of Common Stock issued or issuable upon exercise of the Senior Warrants.
(o) Senior Warrants. "SENIOR WARRANTS" shall mean the warrants of
the Company issued pursuant to the Senior Warrant Agreement.
(p) Subordinated Notes. "SUBORDINATED NOTES" shall mean the 13%
Subordinated Discount Notes due May 15, 2006 issued on May 29, 1996 as governed
by the Indenture dated as of May 15, 1996 between the Company and The Bank of
New York as Trustee.
(q) Subordinated Warrants. "SUBORDINATED WARRANTS" shall mean the
warrants issued in connection with the issuance of the Subordinated Notes on May
29, 1996 pursuant
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to the Subordinated Warrant Agreement and any additional warrants issued
pursuant to the terms of the Subordinated Warrant Agreement.
(r) Subordinated Warrant Agreement. "SUBORDINATED WARRANT
AGREEMENT" shall mean the Warrant Agreement dated as of May 15, 1996 by and
between the Company and The Bank of New York as the Warrant Agent.
(s) Subordinated Warrant Registration Rights Agreement.
"SUBORDINATED WARRANT REGISTRATION RIGHTS AGREEMENT" shall mean the Warrant
Registration Rights Agreement dated as of May 15, 1996 entered into between the
Company, ▇▇▇▇▇ ▇▇▇▇▇▇ Inc. and Toronto Dominion Securities (USA) Inc.
(t) Subordinated Warrant Shares. "SUBORDINATED WARRANT SHARES"
shall mean the shares of Common Stock issued or issuable upon exercise of the
Subordinated Warrants.
3.2 REQUESTED REGISTRATION.
(a) Request for Registration by Initiating Holders. If the
Company shall receive from an Initiating Holder, at any time, a written request
that the Company effect any registration with respect to all or a part of the
Registerable Securities, the Company will:
(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders of Registerable
Securities; and
(ii) as soon as practicable, use its diligent best efforts
to effect such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registerable Securities as are specified in such request,
together with all or such portion of the Registerable Securities of any Holder
or Holders joining in such request as are specified in a written request
received by the Company within fifteen (15) days after written notice from the
Company is given under subsection 3.2(a)(i) above; provided, however, that the
Company shall not be obligated to effect, or take any action to effect, any such
registration pursuant to this subsection 3.2(a):
(A) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act or applicable rules or regulations thereunder;
(B) After the Company has effected two (2) such
registrations pursuant to Section 3.2 and such registrations have been declared
or ordered effective and the sales of such Registerable Securities shall have
closed;
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(C) If the Registerable Securities requested by all
Holders to be registered pursuant to such request have an anticipated net
aggregate public offering price (after any underwriting discounts and
commissions) of less than $5,000,000; or
(D) Prior to six (6) months after the date the
Company's Initial Public Registration has been completed or after the date the
Company has otherwise become subject to the reporting requirements of the
Exchange Act.
The registration statement filed pursuant to the request of the Initiating
Holders may, subject to the provisions of subsection 3.2(b)(i) below, include
other securities of the Company which are held by officers or directors of the
Company, or which are held by persons who, by virtue of agreements with the
Company, are entitled to include their securities in any such registration, but
the Company shall have no absolute right to include any of its securities in any
such registration.
(b) Underwriting.
(i) Request by Initiating Holders. If the Initiating Holders
intend to distribute the Registerable Securities covered by their request by
means of an underwriting, they shall so advise the Company as a part of their
request made pursuant to subsection 3.2(a) and the Company shall include such
information in the written notice referred to in subsection 3.2(a). In such
event, the right of any Holder to include such Holder's Registerable Securities
in such registration shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registerable Securities in
the underwriting (unless otherwise mutually agreed by a majority in interest of
the Initiating Holders and such Holder) to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 3.6(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders and reasonably acceptable to the Company. Notwithstanding any other
provision of Section 3.2, if the underwriter advises the Company and the
Initiating Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Company shall so advise all
Holders of Registerable Securities whose shares would otherwise be underwritten
pursuant hereto, Subordinated Warrant Holders whose Subordinated Warrant Shares
are otherwise entitled to be registered pursuant to the Subordinated Warrant
Registration Rights Agreement and Senior Warrant Holders whose Senior Warrant
Shares are otherwise entitled to be registered pursuant to the Senior Warrant
Registration Rights Agreement and the number of shares of Registerable
Securities that may be included in the underwriting shall be allocated among all
Holders, including the Initiating Holders, Subordinated Warrant Holders and
Senior Warrant Holders thereof, in proportion, as nearly as practicable, to the
respective amounts of securities sought to be registered (on an as-converted
basis) by such Holders, Subordinated Warrant Holders or Senior Warrant Holders,
as the case may be, participating in such registration at the time of filing of
the registration statement.
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(c) Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting the filing of a registration statement pursuant to
subsection 3.2(a), a certificate signed by the President or Chief Executive
Officer of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its stockholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, then the Company
shall have the right to defer such filing for a period of not more than ninety
(90) days after receipt of the request of the Initiating Holders; provided,
however, that the Company may not utilize this right more than once in any
twelve (12) month period.
3.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registerable Securities in writing at least fifteen (15) days prior to filing
any registration statement under the Securities Act for purposes of effecting a
public offering of securities of the Company for the account of the Company or
for the account of any other security holder (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding any registration statement relating to any employee
benefit plan or a corporate reorganization or a registration of securities
convertible into Common Stock) and will afford each such Holder an opportunity
to include in such registration statement all or any part of the Registerable
Securities then held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registerable Securities held by
such Holder shall, within fifteen (15) days after receipt of the above-described
notice from the Company, so notify the Company in writing, and in such notice
shall inform the Company of the number of Registerable Securities such Holder
wishes to include in such registration statement. If a Holder decides not to
include all of its Registerable Securities in any registration statement
thereafter filed by the Company, such Holder shall nevertheless continue to have
the right to include any Registerable Securities in any subsequent registration
statement or registration statements as may be filed by the Company with respect
to offerings of its securities, all upon the terms and conditions set forth
herein.
(a) Underwriting. If a registration statement under which the
Company gives notice under Section 3.3 is for an underwritten offering, and if
the managing underwriter or underwriters of such underwritten offering have
informed the Company and the Holders of Registerable Securities requesting
inclusion in such offering, in writing, that in such underwriter's or
underwriters' opinion the total number of securities which the Company, such
Holders and any other persons desiring to participate in such registration
intend to include in such offering is such as to adversely affect the success of
such offering, including the price at which such securities can be sold, then
the Company will be required to include in such registration only the number of
securities which it is so advised should be included in such registration. In
such event: (x) in cases only involving the registration for sale of securities
for the Company's own account (other than pursuant to the exercise of "piggy-
back" rights herein and in other contractual commitments of the Company),
securities shall be registered in such offering in the following order of
priority: (i) first, the securities which the Company proposes to register, (ii)
second, provided that no securities sought to be included by the Company have
been excluded from such registration, the securities which have been requested
to be included in such registration by the Subordinated Warrant Holders, by the
Senior Warrant Holders and by the Stockholders to be allocated among these
persons on a pro rata basis based on the amount of securities
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sought to be registered by such persons and (iii) third, provided that no
securities sought to be included by the Company or the Subordinated Warrant
Holders or the Senior Warrant Holders or the Stockholders have been excluded
from such registration, the securities of other persons entitled to exercise
"piggy-back" registration rights pursuant to contractual commitments of the
Company (pro rata based on the amount of securities sought to be registered by
such persons); (y) in cases not involving the registration for sale of
securities for the Company's own account only or not pursuant to the exercise of
demand registration rights by any Holder of Registerable Securities, securities
shall be registered in such offering in the following order of priority: (i)
first, the securities of any person whose exercise of a "demand" registration
right pursuant to a contractual commitment of the Company is the basis for the
registration (provided that if such person is a Holder of Registerable
Securities, as among Holders of Registerable Securities there shall be no
priority and Registerable Securities sought to be included by Holders of
Registerable Securities shall be included pro rata based on the respective
numbers of securities sought to be registered by such persons), (ii) second,
provided that no securities sought to be included by any person referred to in
the immediately preceding clause (i) have been excluded from such registration,
the securities which have been requested to be included in such registration by
the Subordinated Warrant Holders, by the Senior Warrant Holders and by the
Stockholders to be allocated among these persons on a pro rata basis based on
the amount of securities sought to be registered by such persons; (iii) third,
provided that no securities sought to be included by such person referred to in
the immediately preceding clause (i) or of the Subordinated Warrant Holders or
of the Senior Warrant Holders or of the Stockholders have been excluded from
such registration, securities of any other persons entitled to exercise "piggy-
back" registration rights pursuant to contractual commitments (pro rata based on
the amount of securities sought to be registered by such persons) and (iv)
fourth, provided that no securities sought to be included by any person
described in the immediately preceding clauses (i) through (iii) have been
excluded from such registration, the securities which the Company proposes to
register; and; and (z) in cases involving the registration for sale of
securities pursuant to the exercise of demand registration rights by any Holder
of Registerable Securities, securities shall be registered in such offering in
the following order of priority: (i) first, the securities which have been
requested to be included in such registration by the Subordinated Warrant
Holders pursuant to this Agreement or otherwise, by the Senior Warrant Holders
and by the Stockholders to be allocated among these persons on a pro rata basis
based on the amount of securities sought to be registered by such persons; (ii)
second, provided that no securities sought to be included by the Subordinated
Warrant Holders or the Senior Warrant Holders or the Stockholders have been
excluded from such registration, securities of other persons entitled to
exercise "piggy-back" registration rights pursuant to contractual commitments
(pro rata based on the amount of securities sought to be registered by such
persons) and (iii) third, provided that no securities of any other person has
been excluded from such registration, the securities which the Company proposes
to register.
If, as a result of the provisions of this Section 3.3(a), any Holder
of Registerable Securities shall not be entitled to include all Registerable
Securities in a "piggy-back" registration that such Holder of Registerable
Securities has requested to be included, such Holder of Registerable Securities
may elect to withdraw his request to include Registerable Securities in such
registration.
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(b) Persons Deemed Holders. For any Holder of Registerable
Securities which is a partnership or corporation, the partners, retired partners
and stockholders of such Holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefit of any of the
foregoing persons shall be deemed to be a single "HOLDER," and any pro rata
reduction with respect to such "HOLDER" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "HOLDER," as defined in this sentence.
3.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 3.2, 3.3 or 3.5 shall be borne by the Company, and all Selling Expenses
shall be borne by the Holders of the securities so registered pro rata on the
basis of the number of their shares so registered; provided, however, that the
Company shall not be required to pay any Registration Expenses if, as a result
of the withdrawal of a request for registration by any of the Holders, as
applicable, the registration statement does not become effective, in which case
each of the Holders withdrawing from the requested registration shall bear such
Registration Expenses pro rata, and provided, further, that such registration
(if requested pursuant to subsection 3.2(a)) shall not be counted as a
registration pursuant to subsection 3.2(a)(ii)(B). Notwithstanding the
foregoing, if at the time of such withdrawal, the Holders have learned of a
material adverse change in the condition, business, or prospects of the Company
from that known to the Holders at the time of their request (if requested
pursuant to subsection 3.2(a)), then the Holders shall not be required to pay
any of such expenses and such registration shall not be counted as a
registration pursuant to subsection 3.2(a)(ii)(B).
3.5 FORM S-3 REGISTRATION. In case the Company shall receive from
one or more Holders a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registerable Securities owned by such Holders,
provided the number of shares requested to be sold would have an aggregate price
to the public of at least $1,000,000, then the Company will:
(a) Notice. Promptly give written notice of the proposed
registration and the Holder's request therefor, and any related qualification or
compliance, to all other Holders of Registerable Securities; and
(b) Registration. As soon as practicable, effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of the Holder's Registerable Securities as are specified in such request
together with all or such portion of the Registerable Securities of any Holder
or Holders joining in such request as are specified in a written request
received by the Company within fifteen (15) days after written notice from the
Company is given under subsection 3.5(a) above; provided, however, that the
Company shall not be obligated to effect any such registration, qualification or
compliance pursuant to this Section 3.5:
(i) if Form S-3 is not available for such offering by the
Holders;
(ii) if the Holders propose to sell Registerable Securities
at an aggregate price to the public of less than $1,000,000;
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(iii) if the Company shall furnish to the Holders a
certificate signed by the President or Chief Executive Officer of the
Company stating that in the good faith judgment of the Board of Directors
of the Company, it would be seriously detrimental to the Company and its
Stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the
Form S-3 registration statement no more than once during any twelve (12)
month period for a period of not more than ninety (90) days after receipt
of the request of the Holders under this Section 3.5;
(iv) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent
to service of process in effecting such registration, qualification or
compliance; or
(v) if the Company has filed a registration statement on
Form S-3 relating to Registerable Securities in the six (6) months
preceding the request of the Holders.
Subject to the foregoing, the Company shall file a Form S-3 registration
statement covering the Registerable Securities and other securities so requested
to be registered pursuant to this Section 3.5 as soon as practicable after
receipt of the request from the Holders for such registration.
(c) The Holders' right to register shares under this Section 3.5
shall be shared pro rata with the Subordinated Warrant Holders and all other
security holders who have a right to request inclusion therein based on the
number of shares (on an as-converted basis) held by such holders requesting
inclusion in such registration.
3.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registerable Securities under this Agreement, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registerable Securities and use its best efforts to cause such
registration statement to become effective, and keep such registration statement
effective until the distribution is completed, but not more than one hundred and
eighty (180) days for a Form S-1 or Form SB-2 Registration Statement or more
than one hundred and twenty (120) days for a Form S-3 Registration Statement.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
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(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of the Registerable Securities owned by them that
are included in such registration.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registerable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of any Holder registering
Registerable Securities, on the date that such Registerable Securities are
delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering addressed to the underwriters, if any, and if there are no
underwriters, to the Holders requesting registration of Registerable Securities
and (ii) a "comfort" letter dated as of such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering addressed to the underwriters, if any, and if
there are no underwriters, to the Holders registering Registerable Securities.
3.7 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 3.2, 3.3 or
3.5 that the selling Holders shall furnish to the Company such information
regarding themselves, the Registerable Securities held by them, and the intended
method of disposition of such securities as shall be required to timely effect
the registration of Registerable Securities.
3.8 DELAY OF REGISTRATION. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 3.
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3.9 INDEMNIFICATION. In the event any Registerable Securities are
included in a registration statement under Sections 3.2, 3.3 or 3.5:
(a) By the Company. To the extent permitted by law, the Company
will indemnify and hold harmless each Holder, the partners, officers and
directors of each Holder, any underwriter (as defined in the Securities Act) for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Exchange Act against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "VIOLATION"):
(i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto;
(ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the
statements therein not misleading, or
(iii) any violation or alleged violation by the Company of
the Securities Act, the Exchange Act, any federal or state securities law
or any rule or regulation promulgated under the Securities Act, the
Exchange Act or any federal or state securities law in connection with the
offering covered by such registration statement;
and the Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 3.9(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.
(b) By Selling Holders. To the extent permitted by law, each
selling Holder will indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the registration statement, each
person, if any, who controls the Company within the meaning of the Securities
Act, any underwriter (as defined in the Securities Act) and any other Holder
selling securities under such registration statement or any of such other
Holder's partners, directors or officers or any person who controls such
underwriter or other Holder within the meaning of the Securities Act or the
Exchange Act, against any losses, claims, damages or liabilities (joint or
several) to which the
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Company or any such director, officer, controlling person, underwriter or other
such Holder, partner or director, officer or controlling person of such
underwriter or other Holder may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are based
upon any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such
registration; and each such Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, controlling
person, underwriter or other Holder, partner, officer, director or controlling
person of such other Holder or underwriter in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection 3.9(b) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the written consent of the Holder,
which consent shall not be unreasonably withheld; and provided further, that the
total amounts payable in indemnity by a Holder under this subsection 3.9(b) in
respect of any Violation shall not exceed the net proceeds received by such
Holder in the registered offering out of which such Violation arises.
(c) Notice. Promptly after receipt by an indemnified party under
Section 3.9 of notice of the commencement of any action (including, without
limitation, any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under Section 3.9,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding, and provided further, that
the indemnifying party shall not be required to pay for more than one separate
counsel for all indemnified parties. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under Section 3.9,
but the omission so to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise
than under Section 3.9.
(d) Contribution. In order to provide for just and equitable
contribution to joint liability under the Securities Act in any case in which
either (i) any Holder exercising rights under this Agreement, or any controlling
person of any such Holder, makes a claim for indemnification pursuant to Section
3.9 but it is judicially determined (by the entry of a final judgment or decree
by a court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that Section 3.9 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling Holder or any such controlling
person in circumstances for which indemnification is provided under Section 3.9;
then, and in each such case, the Company and such
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Holder will contribute to the aggregate losses, claims, damages or liabilities
to which they may be subject (after contribution from others) in such proportion
so that such Holder is responsible for the portion represented by the percentage
that the public offering price of its Registerable Securities offered by and
sold under the registration statement bears to the public offering price of all
securities offered by and sold under such registration statement, and the
Company and other selling Holders are responsible for the remaining portion;
provided, however, that, in any such case, (A) no such Holder will be required
to contribute any amount in excess of the net proceeds received by such holder
from all such Registerable Securities offered and sold by such Holder pursuant
to such registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
(e) Survival. The obligations of the Company and Holders under
Section 3.9 shall survive the completion of any offering of Registerable
Securities in a registration statement, and otherwise.
3.10 "MARKET STAND-OFF" AGREEMENT. Each Holder and each Class C
Common Holder hereby agrees that it shall not, to the extent requested by the
Company or an underwriter of securities of the Company, sell or otherwise
transfer or dispose of any Registerable Securities, Class C Common Stock or
other shares of stock of the Company then owned by such Holder (other than to
donees, affiliates or partners of the Holder who agree to be similarly bound) or
Class C Common Holder for up to one hundred and eighty (180) days following the
date of the final prospectus in connection with the registration statement of
the Company filed under the Securities Act; provided, however, that such
agreement shall be applicable only to the first such registration statement of
the Company that covers securities to be sold on its behalf to the public in an
underwritten offering but not to Registerable Securities sold pursuant to such
registration statement and that such agreement shall only be applicable if the
underwriters request such agreement from each Holder or Class C Common Holder,
as the case may be.
In order to enforce the foregoing covenant, the Company shall have the right to
place restrictive legends on the certificates representing the shares subject to
this Section 3.10 and to impose stop transfer instructions with respect to the
Registerable Securities and such other shares of stock of each Holder and Class
C Common Holder (and the shares or securities of every other person subject to
the foregoing restriction) until the end of such period. The provisions of this
Section 3.10 shall be binding upon any transferee of any Registerable Securities
or Class C Common Stock.
3.11 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any time permit
the sale of the Registerable Securities to the public without registration,
after such time as a public market exists for the Common Stock of the Company,
the Company agrees to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date of the
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first registration under the Securities Act filed by the Company for an offering
of its securities to the general public;
(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements); and
(c) So long as a Holder owns any Registerable Securities, to
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it
has become subject to the reporting requirements of the Exchange Act), a copy of
the most recent annual or quarterly report of the Company, and such other
reports and documents of the Company as a Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing a Holder to
sell any such securities without registration (at any time after the Company has
become subject to the reporting requirements of the Exchange Act).
3.12 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of at least 33% of the Registerable Securities, enter
into any agreement with any holder or prospective holder of any securities of
the Company which would allow such holder or prospective holder (a) to include
such securities in any registration filed under this Section 3 hereof, unless
under the terms of such agreement, such holder or prospective holder may include
such securities in any such registration only to the extent that the inclusion
of his securities will not reduce the amount of the Registerable Securities of
the Holders which is included, or (b) to make a demand registration to the
Company.
3.13 ASSIGNMENT OF REGISTRATION RIGHTS. The rights of a Holder under
this Section 3 may be assigned (i) by any Holder that is a partnership to any of
its partners, (ii) by any Holder that is a corporation to any of its
stockholders or any such corporation's subsidiaries, affiliates, officers,
directors, employees or consultants who acquire Registerable Securities from
such corporation and (iii) by any Holder to any party that acquires a minimum of
20,000 shares of Registerable Securities or shares of Preferred Stock
convertible into a minimum of 20,000 shares of Registerable Securities (as
adjusted for any stock splits, reverse stock splits, combinations,
reclassifications, stock dividends or similar events) in a transfer not
involving a distribution or offering of such shares to the public and not made
pursuant to Rule 144 promulgated under the Securities Act; provided, however, in
each case that such partner, stockholder or other party agrees in writing with
the Company to be bound by all of the provisions of this Section 3.
3.14 TERMINATION OF REGISTRATION RIGHTS. The registration rights
granted pursuant to Section 3 will terminate as to any Holder upon the later to
occur of (a) such time as the Company and the Holder are satisfied that Rule
144(k) is available for the resale by the then-current Holder of the Common
Stock underlying all of the Preferred Stock, (b) the one-year anniversary
following the
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effective date of the Company's Initial Public Registration or (c) such time as
a Holder has less than 300,000 shares of the outstanding Common Stock of the
Company (assuming conversion of all Preferred Stock and any other securities
convertible into Common Stock, but not including options or warrants to acquire
Common Stock, and as adjusted for any stock splits, reverse stock splits,
combinations, reclassifications, stock dividends or similar events), but in no
event later than five years after the Company's Initial Public Registration.
4. RIGHT OF PARTICIPATION TO SUBSCRIBE TO NEW ISSUANCES.
4.1 GENERAL. The Company hereby grants to each Major Stockholder who
is an "accredited investor" within the meaning of Rule 501(a) of the Securities
Act, and who can otherwise satisfy the necessary securities law requirements for
an exemption for a particular transaction, the right of participation to
purchase such Major Stockholder's pro rata share ("PRO RATA SHARE") of New
Securities (as defined in subsection 4.2(a)) that the Company may, from time to
time, propose to sell and issue. Such Major Stockholder's Pro Rata Share, for
purposes of this right of participation, is the ratio that the number of shares
of Common Stock (assuming conversion of all Preferred Stock and any other
securities convertible into Common Stock but not including options or warrants
to acquire Common Stock) held by such Major Stockholder bears to the total
number of shares of Common Stock outstanding immediately prior to the time of
issuance of such New Securities (assuming conversion into Common Stock of all
outstanding Preferred Stock and any other securities convertible into Common
Stock but not including options or warrants to acquire Common Stock). This
right of participation shall be subject to the following provisions:
4.2 CERTAIN DEFINITIONS. For the purposes of Section 4:
(a) "NEW SECURITIES" shall mean any Common Stock or any Preferred
Stock of the Company, whether or not now authorized, and any rights, options, or
warrants to purchase said Common Stock or Preferred Stock, and securities of any
type whatsoever that are, or may become, convertible into or exchangeable for
Common Stock or Preferred Stock; provided, however, that "NEW SECURITIES" does
not include (i) securities issuable upon conversion of or with respect to the
Series AA Preferred Stock, Series A Preferred Stock, Series B Preferred Stock,
Series C or Series D Preferred Stock or upon conversion of or with respect to
any other Preferred Stock subsequently issued; (ii) securities offered to the
public pursuant to a registration statement filed under the Securities Act;
(iii) securities issued pursuant to the acquisition of another unaffiliated
corporation by the Company by merger, purchase of substantially all of the
assets, or other reorganization whereby the Company or its Stockholders own not
less than 50% of the voting power of the surviving corporation; (iv) shares of
the Company's Common Stock (or related options or warrants) issued to employees,
officers, directors, consultants, or other persons performing services for the
Company (including, but not by way of limitation, distributors and sales
representatives) pursuant to any stock offering, plan, or arrangement approved
by a majority of the non-employee members of the Board of Directors of the
Company; (v) securities issued pursuant to or in connection with any corporate
partnership, joint venture or licensing arrangement with a non-affiliate or in
connection with an unaffiliated equipment lease financing or bank debt into
which the Company may enter; (vi) the Subordinated Warrants issued in
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connection with the issuance of the Subordinated Notes; (vii) shares of the
Company's Common Stock or Preferred Stock issued in connection with any stock
split, stock dividend, or recapitalization by the Company; (viii) securities
issued upon the exercise of outstanding warrants of the Company as of the date
of the initial issuance of the Subordinated Warrants after giving effect to the
issuance of the Subordinated Warrants; (ix) securities issuable upon conversion
of or with respect to the Class C Common Stock; (x) securities issued upon the
exercise of a Subordinated Warrant Holder's right of participation pursuant to
Section 8, (xi) securities issued pursuant to the acquisition of ▇▇▇▇▇▇▇ Real
Time Corporation by the Company or (xii) warrants to purchase Common Stock, and
the securities issuable upon the exercise thereof, issued in connection with the
offering of 12.625% Senior Discount Notes due March 1, 2008 issued on February
19, 1998, as governed by the Indenture between the Corporation and the Bank of
New York as Trustee dated as February 19, 1998.
4.3 MECHANICS OF RIGHT.
(a) Notices; Pro Rata Rights. In the event that the Company
proposes to issue New Securities, it shall give each such Major Stockholder
holding the number of shares set forth in Section 4.1, written notice (the
"FIRST NOTICE") of its intention, describing the type of New Securities, the
price, and the general terms upon which the Company proposes to issue the same.
Within fifteen (15) days after receipt of the First Notice, the Major
Stockholder shall give the Company written notice (the "STOCKHOLDER NOTICE") of
its intention to purchase or obtain, at the price and on the terms specified in
the Notice, its Pro Rata Share of the New Securities. In addition, the
Stockholder Notice shall state whether a Major Stockholder wishes to purchase
more than its Pro Rata Share of the New Securities. The Company shall promptly
give written notice to each Major Stockholder that purchases its Pro Rata Share
of the New Securities (a "FULLY-EXERCISING INVESTOR") of the amount of New
Securities, if any, that other Major Stockholders or Subordinated Warrant
Holders entitled to participate therein pursuant to Section 8 hereof do not
elect to purchase in response to the First Notice (the "SECOND NOTICE"). Each
Fully-Exercising Investor shall notify the Company within five (5) days of
receipt of the Second Notice if it would like to purchase any of the
unsubscribed shares and indicate the maximum number of unsubscribed shares it
would like to purchase. The Company shall inform the Fully-Exercising Investors
of the total number of unsubscribed shares available and provide the Fully-
Exercising Investors with an allocation of the unsubscribed shares based on the
number of shares of Common Stock (assuming conversion of all Preferred Stock
into Common Stock) held by each Fully-Exercising Investor.
(b) Company Right. To the extent that Major Stockholders fail to
exercise in full the right of first offer as provided in subsection 4.3(a)
hereof, the Company shall have ninety (90) days thereafter to sell (or enter
into an agreement pursuant to which the sale of New Securities covered thereby
shall be closed, if at all, within said ninety (90) day period) the New
Securities respecting which the Major Stockholders' rights were not exercised,
at a price and upon general terms no more favorable to the purchasers thereof
than specified in the Company's notice. In the event the Company has not sold
the New Securities within said ninety (90) day period (or sold and issued New
Securities in accordance with the foregoing within ninety (90) days from the
date of said agreement), the Company shall not thereafter issue or sell any New
Securities, without first offering such securities to the Major Stockholders in
the manner provided above.
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(c) No Impairment. A Major Stockholder's failure to exercise this
right of first refusal on any issuance of New Securities shall not adversely
affect the Major Stockholder's right of first refusal to purchase subsequent
issuances of New Securities.
(d) Closing. The participating Investors shall be included in the
same closing as the closing with other investors, provided, however, that the
participating Investors shall not be required to close sooner than thirty (30)
days after the date of the First Notice. The participating Investors shall be
parties to the same agreement as the other investors purchasing New Securities,
which shall include reasonably acceptable representations, warranties and
covenants by the Company.
4.4 TERMINATION. The rights of participation under this Section 4
shall not apply to and shall terminate immediately before the closing of the
Company's Initial Public Registration and shall be reinstated if such closing
does not occur.
4.5 ASSIGNMENT. The rights of participation granted under this
Section 4 may be assigned to any party that meets the requirements of a Major
Stockholder; provided, however, in each case that such assignee agrees in
writing with the Company to be bound by all of the provisions of this Section 4.
5. RIGHTS OF FIRST REFUSAL AMONG COMPANY AND STOCKHOLDERS.
5.1 GENERAL. Before any Common Stock or Common Stock equivalents of
the Company held by a Stockholder or Class C Common Holder or any transferee
(either being sometimes referred to herein as the "SELLING STOCKHOLDER") may be
sold or otherwise transferred (including transfer by gift or operation of law),
the Company or its assignee(s) and the other Stockholders who (i) are Major
Stockholders and (ii) are "accredited investors" within the meaning of Rule
501(a) of the Securities Act, and who can otherwise satisfy the necessary
securities law requirements for an exemption for a particular transaction (the
"REMAINING STOCKHOLDERS") shall have rights of first refusal to purchase the
shares on the terms and conditions set forth in this Section 5 (the "RIGHTS OF
FIRST REFUSAL").
5.2 NOTICE OF PROPOSED TRANSFER. The Selling Stockholder of the
shares shall deliver to the Company and the Remaining Stockholders a written
notice (the "NOTICE") stating: (i) the Selling Stockholder's bona fide intention
to sell or otherwise transfer such shares (the "OFFERED SHARES"); (ii) the name
of each proposed purchaser or other transferee ("PROPOSED TRANSFEREE"); (iii)
the number of Offered Shares to be transferred to each Proposed Transferee; and
(iv) the bona fide cash price or other consideration for which the Selling
Stockholder proposes to transfer the Offered Shares (the "OFFERED PRICE"), and
the Selling Stockholder shall offer the Offered Shares at the Offered Price to
the Company or its assignee(s) and the Remaining Stockholders.
5.3 EXERCISE OF RIGHT OF FIRST REFUSAL.
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(a) Exercise by Company. At any time within fifteen (15) days
after receipt of the Notice, the Company or its assignee(s) may, by giving
written notice to the Selling Stockholder, elect to purchase some or all of the
Offered Shares, at the purchase price determined in accordance with Section 5.4
below.
(b) Exercise by Remaining Stockholders. If the Company or its
assignee(s) does not choose to purchase all the Offered Shares within fifteen
(15) days after receipt of the Notice, the Remaining Stockholders may elect by
giving written notice to the Selling Stockholder within thirty (30) days after
receipt of the Notice to purchase up to such Stockholder's Pro Rata Share of the
Offered Shares not purchased by the Company and its assignee(s), at the purchase
price determined in accordance with Section 5.4 below. For purposes of these
Rights of First Refusal, a Remaining Stockholder's "PRO RATA SHARE" is the ratio
that the number of shares of Common Stock (assuming conversion of all Preferred
Stock and any other securities convertible into Common Stock, but not including
options or warrants to acquire Common Stock) held by such Stockholder bears to
the total number of shares of Common Stock (assuming conversion of all Preferred
Stock and any other securities convertible into Common Stock, but not including
options or warrants to acquire Common Stock) held by all Remaining Stockholders.
In addition, the notice shall state whether a Remaining Stockholder wishes to
purchase more than its Pro Rata Share of Offered Shares. The Company shall
promptly give written notice (the "SECOND NOTICE") to each Remaining Stockholder
that purchases its Pro Rata Share of Offered Shares (a "FULLY-EXERCISING
HOLDER") of the amount of Offered Shares, if any, that other Remaining
Stockholders do not elect to purchase in response to the Notice. Each Fully-
Exercising Holder shall notify the Company within five (5) days of receipt of
the Second Notice if it would like to purchase any of the unsubscribed shares
and indicate the maximum number of unsubscribed shares it would like to
purchase. The Company shall inform the Fully-Exercising Holders of the total
number of unsubscribed shares available and provide the Fully-Exercising Holders
with an allocation of the unsubscribed shares based on the number of shares of
Common Stock (assuming conversion of all Preferred Stock into Common Stock) held
by each Fully Exercising Holder.
5.4 PURCHASE PRICE. The purchase price ("PURCHASE PRICE") for the
Offered Shares purchased by the Company or its assignee(s) or the Remaining
Stockholders under this Section 5.4 shall be the Offered Price. If the Offered
Price includes consideration other than cash, the cash equivalent value of the
non-cash consideration shall be determined by the Board of Directors of the
Company in good faith.
5.5 PAYMENT. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s) or the purchasing Remaining
Stockholders, in cash (by check), by cancellation of all or a portion of any
outstanding indebtedness of the Selling Stockholder to the Company (or, in the
case of repurchase by an assignee, to the assignee), or by any combination
thereof within forty (40) days after receipt of the Notice or in the manner and
at the times set forth in the Notice. The sale shall constitute a representation
and warranty by the Selling Stockholder that the shares being sold are free and
clear of all liens, claims and encumbrances.
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5.6 SELLING STOCKHOLDER'S RIGHT TO TRANSFER. If all of the Offered
Shares proposed in the Notice to be transferred to a given Proposed Transferee
are not purchased by the Company, its assignee(s) and the Remaining Stockholders
as provided in this Section 5, then none of the Offered Shares shall be
purchased under this Section 5 and the Selling Stockholder may sell or otherwise
transfer the Offered Shares (subject to certain restrictions on transfer
governing the Class C Common Stock as provided in the Purchase Agreement) to
that Proposed Transferee at the Offered Price or at a higher price, provided
that such sale or other transfer (i) complies with the provisions of Section 6
of this Agreement with respect to Co-sale Rights, (ii) is consummated within one
hundred and eighty (180) days after the date of the Notice, (iii) is in
accordance with all the terms of this Agreement and (iv) is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Agreement shall continue to apply
to the Offered Shares in the hands of such Proposed Transferee. If the Offered
Shares described in the Notice are not transferred to the Proposed Transferee
within such period, a new Notice shall be given to the Company and the Remaining
Stockholders, and the Company or its assignees and the Remaining Stockholders
shall again be offered the Rights of First Refusal before any Offered Shares
held by the Selling Stockholder may be sold or otherwise transferred.
5.7 EXCEPTION FOR CERTAIN TRANSFERS. Anything to the contrary
contained in this Section 5 notwithstanding (provided that the exceptions
contained in this Section 5.7 shall not apply to the transfer of any or all of
the Class C Common Stock), the provisions of this Section 5 shall not apply to
the transfer of any or all of the Offered Shares (i) during the Selling
Stockholder's lifetime or on the Selling Stockholder's death by will or
intestacy to the Selling Stockholder's immediate family, a trust for the benefit
of the Selling Stockholder or the Selling Stockholder's immediate family or an
affiliate of the Selling Stockholder, (ii) by a Selling Stockholder that is a
partnership to the Selling Stockholder's partners through a distribution, (iii)
by a Selling Stockholder that is a corporation to the Selling Stockholder's
stockholders, subsidiaries or affiliates (iv) upon exercise of an option by an
optionee who is an employee, officer, director or consultant of a Selling
Stockholder that is a corporation or upon any repurchase by ▇▇▇▇▇▇▇ Real Time
Corporation pursuant to repurchase rights, (v) subject to the prior written
approval of the Company, which may be withheld in its sole discretion, by a
Selling Stockholder as a charitable contribution, (vi) to a new stockholder
based on the best interests of the Company as determined by a majority of
disinterested members of the Company's Board of Directors or (vii) by a
stockholder who holds at least 500,000 shares of the Company's Common Stock
(assuming conversion of all Preferred Stock and any other securities convertible
into Common Stock, but not including options or warrants to acquire Common
Stock, and as adjusted for any stock splits, reverse stock splits, combinations,
reclassifications, stock dividends or similar events) of up to 2% of his
holdings in any calendar year and up to 5% of his holdings overall on a
cumulative basis. "IMMEDIATE FAMILY" as used herein shall mean spouse, lineal
descendant or antecedent, father, mother, brother or sister. In such case, the
transferee or other recipient shall receive and hold the Offered Shares so
transferred subject to the provisions of this Section 5, and there shall be no
further transfer of such Offered Shares except in accordance with the terms of
this Section 5.
5.8 TERMINATION OF RIGHTS OF FIRST REFUSAL. The Rights of First
Refusal under Section 5 shall not apply to and shall terminate immediately
before the closing of the Company's Initial Public Registration and shall be
reinstated if there is no closing.
-20-
6. CO-SALE RIGHT AMONG STOCKHOLDERS AND SUBORDINATED WARRANT HOLDERS.
6.1 GENERAL. To the extent the Company or its assignee(s) and the
Remaining Stockholders fail to exercise their Rights of First Refusal under
Section 5.3, a Selling Stockholder proposing to sell at least 1% of the
Company's outstanding voting securities (assuming conversion of all Preferred
Stock and any other securities convertible into Common Stock, but not including
options or warrants to acquire Common Stock) shall send a written notice (the
"SECOND NOTICE") to all Stockholders and Subordinated Warrant Holders containing
the terms and conditions of the proposed transfer and the number of Offered
Shares, within sixty (60) days of sending the original Notice pursuant to
Section 5.2, but no later than twenty-one (21) days prior to the contemplated
closing date of such proposed sale.
(a) The mailing of the Second Notice by a Selling Stockholder
pursuant to this Section 6.1 shall trigger the right of all Subordinated Warrant
Holders to exercise their Subordinated Warrants on the seventh (7th) day prior
to the closing of such proposed sale by a Selling Stockholder as provided in the
Subordinated Warrant Agreement. If, however, the sale of at least 1% of the
Company's voting securities is not consummated by a Selling Stockholder
(together with the co-sales by other parties hereto pursuant to this Section 6),
the Subordinated Warrants shall be deemed not exercisable and any payment of the
exercise price of any Subordinated Warrant which has been exercised shall be
immediately returned to the exercising holder of such Subordinated Warrant.
After the closing of any such sale of greater than 1% of the Company's voting
securities (an "EXERCISE EVENT"), all Subordinated Warrants shall be exercisable
under the terms of the Subordinated Warrant Agreement.
(b) Within fourteen (14) days after the date of a Second Notice,
each of the Stockholders and Subordinated Warrant Holders shall notify the
Selling Stockholder, if such holder elects to participate in such transfer. Each
participating Stockholder and Subordinated Warrant Holder (upon exercise of its
Subordinated Warrant) shall then have the right to sell, at the same price and
on the same terms as the Selling Stockholder, an amount of shares equal to the
number of shares to be sold or transferred multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock (assuming
conversion of all Preferred Stock and any other securities convertible into
Common Stock, but not including options or warrants to acquire Common Stock)
held by the participating Stockholder or Subordinated Warrant Holder and the
denominator of which shall be the sum of the number of shares of Common Stock
(assuming conversion of all Preferred Stock and any other securities convertible
into Common Stock, but not including options or warrants to acquire Common
Stock) held by the Selling Stockholder and all participating Stockholders and
Subordinated Warrant Holders; provided, however, that any shares of Common Stock
acquired prior to the proposed closing date upon exercise of any options or
warrants held by a Stockholder or Subordinated Warrant Holder and Subordinated
Warrant Shares held by a Subordinated Warrant Holder will be counted for
purposes of such determinations.
-21-
(c) Any sales (except to affiliates) of voting securities of the
Company by a Stockholder in any six (6) month period shall be aggregated for
purposes of determining whether the obligations of this Section 6.1 apply. If
the number of voting securities sold by and proposed to be sold by a Stockholder
exceed 1% of the Company's voting securities (as calculated above) during any
six (6) month period, the obligations under this Section 6.1 shall apply to such
Stockholder.
6.2 CLOSING. The participating Stockholders and Subordinated Warrant
Holders agree to enter into an agreement with the purchaser on terms and
conditions identical, to the extent feasible, with the agreement entered into by
the Selling Stockholder providing representations and warranties and other terms
and conditions agreed to by the Selling Stockholder.
6.3 TRANSFERS. In the event that the Selling Stockholder sells or
transfers any shares of the Company's Common Stock or Common Stock equivalents
to any party as permitted by Section 5.7 above, any subsequent sales or
transfers by such party shall be subject to all the terms and conditions of this
Section 6.
6.4 TERMINATION. The Co-Sale Right described in this Section 6 shall
not apply to and shall terminate upon the closing of the Company's Initial
Public Registration and shall be reinstated if there is no closing.
7. CONFIDENTIALITY.
Each Stockholder, Subordinated Warrant Holder and Class C Common
Holder hereby agrees to safeguard against disclosure to third parties and not to
use except as specifically authorized herein (or by agreements executed pursuant
hereto) all confidential information concerning the business of the Company that
may be disclosed to such Stockholder or Subordinated Warrant Holder or Class C
Common Holder by reason of such Stockholder's or Subordinated Warrant Holder's
or Class C Common Holder's access to the books, records, properties or personnel
of the Company before or after the date hereof in its capacity as Stockholder or
Subordinated Warrant Holder or Class C Common Holder (collectively, "COMPANY
CONFIDENTIAL INFORMATION") by using reasonable secrecy measures and in no event
less than the same degree of care as such Stockholder or Subordinated Warrant
Holder or Class C Common Holder uses for such Stockholder's or Subordinated
Warrant Holder's or Class C Common Holder's own similar proprietary information.
However, a Stockholder or Subordinated Warrant Holder or Class C Common Holder
shall not be obligated to maintain any such Company Confidential Information in
confidence to the extent that: (i) the Company Confidential Information is or
becomes public knowledge other than through the fault of such Stockholder or
Subordinated Warrant Holder or Class C Common Holder; (ii) the Company
Confidential Information is or becomes available on an unrestricted basis to
such Stockholder or Subordinated Warrant Holder or Class C Common Holder from a
source other than the Company; or (iii) the Company Confidential Information is
required to be disclosed by such Stockholder or Subordinated Warrant Holder or
Class C Common Holder, under a court order or governmental action, provided,
however, that such Stockholder or Subordinated Warrant Holder or Class C Common
Holder provides not less than thirty (30) days' prior written notification to
the Company of such obligation and seeks, or allows the Company to seek, an
appropriate protective order, and provided further, that disclosure solely
pursuant to this clause (iii) shall not release a
-22-
Stockholder or Subordinated Warrant Holder or Class C Common Holder from such
Stockholder's or Subordinated Warrant Holder's or Class C Common Holder's
obligation to maintain confidentiality. Notwithstanding the foregoing, a
Stockholder, Subordinated Warrant Holder or Class C Common Holder that is a
registered investment company or similar entity under the Investment Company Act
of 1940, as amended, shall be permitted to disclose Company Confidential
Information (a) to such of its respective officers, directors, employees,
agents, affiliates and representatives as need to know such Company Confidential
Information (who will be informed of the confidential nature of such information
and who agrees to treat such Confidential Information in accordance with this
paragraph), and (b) to the extent otherwise required by applicable laws and
regulation or by any subpoena or similar legal process, or requested by any
regulatory authority, without prior notification to the Company. The provisions
of this Section 7 shall not restrain a Subordinated Warrant Holder from
disclosing Company Confidential Information to any potential purchaser of
Subordinated Warrants; provided that such potential purchaser agrees in writing
to be bound by provisions substantially similar to the provisions of this
Section 7.
8. CERTAIN RIGHTS OF SUBORDINATED WARRANT HOLDERS.
8.1 RIGHT TO APPROVE CERTAIN TRANSACTIONS. The Stockholders and
Class C Common Holders acknowledge that, with respect to any proposed Change of
Control (as defined in the Subordinated Warrant Agreement) the consummation of
which would be subject to approval by the Stockholders, the Company shall
consider the consents of the Subordinated Warrant Holders as though the
Subordinated Warrants had been exercised and were entitled to vote.
8.2 GENERAL. The Company hereby grants to each Subordinated Warrant
Holder the right of participation to purchase such Subordinated Warrant Holder's
Participating Share (as defined below) of New Securities (as defined in
subsection 8.3(b) and subject to the terms of Section 8.2(b)) that the Company
may, from time to time, propose to sell and issue. A "PARTICIPATING SHARE", for
purposes of this right of participation with respect to any Subordinated Warrant
Holder, shall be calculated as (a) with respect to any offering of New
Securities, after giving effect to which the aggregate gross proceeds yielded by
issuances of New Securities by the Company after the date of the original
issuance of the Subordinated Warrants would be less than $10,000,000, the ratio
that twice the number of shares of Common Stock (assuming conversion of all
Subordinated Warrants) held by such Subordinated Warrant Holder bears to the
total number of shares of Common Stock outstanding immediately prior to the time
of issuance of such New Securities (assuming conversion into Common Stock of all
outstanding Preferred Stock and any other securities convertible into Common
Stock and all options and warrants to acquire Common Stock), and (b) with
respect to any subsequent offering of New Securities, the ratio that the number
of shares of Common Stock (assuming conversion of all Subordinated Warrants)
held by such Subordinated Warrant Holder bears to the total number of shares of
Common Stock outstanding immediately prior to the time of issuance of such New
Securities (assuming conversion into Common Stock of all outstanding Preferred
Stock and any other securities convertible into Common Stock and all options and
warrants to acquire Common Stock); provided, however, that in such event each
Subordinated Warrant Holder shall have the right of participation to purchase
such Subordinated Warrant Holder's Participating Share of only those New
Securities to be issued to Insiders in connection with such offering. This
right of participation shall be subject to the following provisions:
-23-
8.3 CERTAIN DEFINITIONS. For the purposes of this Section 8:
(a) "INSIDERS" shall mean all Major Stockholders and all
directors and executive officers of the Company.
(b) "NEW SECURITIES" shall mean any Common Stock or Preferred
Stock of the Company, whether or not now authorized, and any rights, options, or
warrants to purchase said Common Stock or Preferred Stock, and securities of any
type whatsoever that are, or may become, convertible into or exchangeable for
Common Stock or Preferred Stock; provided, however, that "NEW SECURITIES" shall
not include (i) securities issuable upon conversion of or with respect to the
Series AA Preferred Stock, Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, or Series D Preferred Stock or upon conversion of or
with respect to any other Preferred Stock subsequently issued; (ii) securities
offered to the public pursuant to a registration statement filed under the
Securities Act; (iii) securities issued pursuant to the acquisition of another
unaffiliated corporation by the Company by merger, purchase of substantially all
of the assets, or other reorganization whereby the Company owns not less than
50% of the voting power of the surviving corporation; (iv) shares of the
Company's Common Stock (or related options or warrants) issued to employees,
officers, directors, consultants, or other persons performing services for the
Company (including, but not by way of limitation, distributors and sales
representatives) pursuant to any stock offering, plan, or arrangement approved
by a majority of the non-employee members of the Board of Directors of the
Company; (v) securities issued pursuant to or in connection with any corporate
partnership, joint venture or licensing arrangement with a non-affiliate or in
connection with an unaffiliated equipment lease financing or bank debt into
which the Company may enter; (vi) the Subordinated Warrants issued in connection
with the issuance of the Subordinated Notes; (vii) shares of the Company's
Common Stock or Preferred Stock issued in connection with any stock split, stock
dividend, or recapitalization by the Company; (viii) securities issued upon the
exercise of outstanding warrants of the Company as of the date of the initial
issuance of the Subordinated Warrants after giving effect to the issuance of the
Warrants; (ix) securities issuable upon conversion of or with respect to the
Class C Common Stock; (x) securities issued pursuant to the acquisition of
▇▇▇▇▇▇▇ Real Time Corporation by the Company or (xi) warrants to purchase Common
Stock, and the securities issuable upon the exercise thereof, issued in
connection with the offering of 12.625% Senior Discount Notes due March 1, 2008
issued on February 19, 1998, as governed by the Indenture between the
Corporation and the Bank of New York as Trustee dated as February 19, 1998.
-24-
8.4 MECHANICS OF RIGHT.
(a) Notices; Participating Rights. In the event that the Company
proposes to issue New Securities, it shall give each such Subordinated Warrant
Holder written notice (the "FIRST NOTICE") of its intention, describing the type
of New Securities, the price, and the general terms upon which the Company
proposes to issue the same. Within fifteen (15) days after receipt of the First
Notice, the Subordinated Warrant Holder shall give the Company written notice
(the "SUBORDINATED WARRANT HOLDER NOTICE") of its intention to purchase or
obtain, at the price and on the terms specified in the Notice, its Participating
Share of the New Securities. In addition, the Subordinated Warrant Holder
Notice shall state whether a Subordinated Warrant Holder wishes to purchase more
than its Participating Share of the New Securities. The Company shall promptly
give written notice to each Subordinated Warrant Holder that purchases its
Participating Share of the New Securities (a "FULLY-EXERCISING INVESTOR") of the
amount of New Securities, if any, that other Major Stockholders or Subordinated
Warrant Holders do not elect to purchase in response to the First Notice (the
"SECOND NOTICE"). Each Fully-Exercising Investor shall notify the Company
within five (5) days of receipt of the Second Notice if it would like to
purchase any of the unsubscribed shares and indicate the maximum number of
unsubscribed shares it would like to purchase. The Company shall inform the
Fully-Exercising Investors of the total number of unsubscribed shares available
and provide the Fully-Exercising Investors with an allocation of the
unsubscribed shares based on the number of shares of Common Stock (assuming
conversion of all Subordinated Warrants) held by each Fully-Exercising Investor.
(b) Company Right. To the extent that the Subordinated Warrant
Holders fail to exercise in full the right of first offer as provided in
subsection 8.4(a) hereof, the Company shall have ninety (90) days thereafter to
sell (or enter into an agreement pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within said ninety (90) day period)
the New Securities respecting which the Subordinated Warrant Holders' rights
were not exercised, at a price and upon general terms no more favorable to the
purchasers thereof than specified in the Company's notice. In the event the
Company has not sold the New Securities within said ninety (90) day period (or
sold and issued New Securities in accordance with the foregoing within ninety
(90) days from the date of said agreement), the Company shall not thereafter
issue or sell any New Securities, without first offering such securities to the
Subordinated Warrant Holders in the manner provided above.
(c) No Impairment. A Subordinated Warrant Holder's failure to
exercise this right of first refusal on any issuance of New Securities shall not
adversely affect the Subordinated Warrant Holder's right of first refusal to
purchase subsequent issuances of New Securities.
(d) Closing. The participating Investors shall be included in the
same closing as the closing with other investors, provided, however, that the
participating Investors shall not be required to close sooner than thirty (30)
days after the date of the First Notice. The participating Investors shall be
parties to the same agreement as the other investors purchasing New Securities,
which shall include reasonably acceptable representations, warranties and
covenants by the Company.
-25-
8.5 TERMINATION. The rights of participation under this Section 8
shall not apply to and shall terminate immediately before the closing of the
Company's Initial Public Registration and shall be reinstated if such closing
does not occur.
8.6 ASSIGNMENT. The rights of participation granted under this
Section 8 may be assigned to any party that meets the requirements of a
Subordinated Warrant Holder; provided, however, in each case that such assignee
agrees in writing with the Company to be bound by all of the provisions of this
Section 8.
9. MISCELLANEOUS.
9.1 ALL SHARES HELD BY STOCKHOLDERS OR SUBORDINATED WARRANT HOLDERS.
The terms and conditions of this Agreement govern all shares of Common Stock or
Preferred Stock held or acquired by any party to this Agreement subsequent to
the date of this Agreement and before the Company's Initial Public Registration.
In the event of a conflict between the terms of this Agreement and similar terms
in an option agreement or other agreement governing shares of stock held by a
Stockholder or Subordinated Warrant Holder, the terms of this Agreement shall
govern.
9.2 ADDITIONAL PARTIES. From time to time, the Company may add
Stockholders to this Agreement without the consent of the existing Stockholders
or Subordinated Warrant Holders; provided, however, that the rights of the new
Stockholders are not superior to or different from the rights of the existing
Stockholders; and provided, further, that such Stockholders (and the shares held
by such Stockholders) shall be excluded from the determination of the Holders
whose consent is required under Section 3.12, unless the addition of such
Stockholder is approved pursuant to Section 9.9.
9.3 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted transferees and permitted assigns of the parties.
9.4 GOVERNING LAW. This Agreement shall be governed by and construed
under the internal laws of the State of Delaware as applied to agreements among
Delaware residents entered into and to be performed entirely within Delaware,
without reference to principles of conflict of laws or choice of laws.
9.5 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
9.6 HEADINGS. The headings and captions used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules shall, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which are incorporated herein by this reference.
-26-
9.7 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given the earlier of (i) when received, (ii) upon personal delivery
to the party to be notified, (iii) one business day after delivery via
facsimile, (iv) one day after being deposited with an overnight courier service
or (v) three days after deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to the party to be
notified at the address set forth on the signature page of this Agreement, or at
such other address as such party may designate by ten days advance written
notice to all other parties.
9.8 ATTORNEYS' FEES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
9.9 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
more than 50% of the Registerable Securities; provided, however, that amendment
or waiver of the provisions of Section 4, 5 and 6 shall require the written
consent of the holders of at least 75% of the Registerable Securities; provided
further, the Company shall not effect any amendment to Section 6 which
eliminates or substantially impairs the Co-Sale Right of the Subordinated
Warrant Holders or the rights of the Subordinated Warrant Holders under Section
8 without the prior written consent of holders of at least a majority of the
Subordinated Warrant Shares. Any such amendments or waivers will be binding on
all parties hereto except where the amendment or waiver affects a right or
creates an obligation that is specific to a party named herein (whether an
individual, trust, partnership or corporation), in which event the amendment or
waiver of such right or creation of such obligation requires the consent of such
party.
9.10 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision(s) shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms to the maximum extent possible.
9.11 ENTIRE AGREEMENT. This Agreement, together with all exhibits and
schedules hereto, constitutes the entire understanding and agreement of the
parties with respect to the subject matter hereof and supersedes all prior
negotiations, correspondence, agreements, understandings, duties or obligations
among the parties with respect to the subject matter hereof.
9.12 FURTHER ASSURANCES. From and after the date of this Agreement,
upon the request of a party, the other parties shall execute and deliver such
instruments, documents or other writings as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement.
-27-
STOCKHOLDER RIGHTS AGREEMENT
________________________________________________________________________________
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
DIVA SYSTEMS CORPORATION
Signature of Authorized Signatory
Name of Signatory
Title of Signatory
STOCKHOLDERS
Name of Stockholder
Signature of Authorized Signatory
Name of Signatory
Title of Signatory
STOCKHOLDER RIGHTS AGREEMENT
________________________________________________________________________________
SUBORDINATED WARRANT HOLDERS
Name of Warrant Holder
Signature of Authorized Signatory
Name of Signatory
Title of Signatory
-29-
STOCKHOLDER RIGHTS AGREEMENT
________________________________________________________________________________
CLASS C COMMON STOCK HOLDERS
Name of Class C Common Stock Holder
Signature of Authorized Signatory
Name of Signatory
Title of Signatory
-30-
EXHIBIT A
STOCKHOLDERS PARTICIPATING IN
STOCKHOLDER RIGHTS AGREEMENT
STOCKHOLDER
-----------
Acorn Ventures, Inc.
▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇ & Company
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ as Trustees for the ▇▇▇▇▇▇▇▇ Trust
dated 11/23/93
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇ Income Fund, Inc.
BEA High Yield Portfolio
▇▇▇▇▇, ▇▇▇▇▇ ▇.
Blazerhold & Co., as nominee for Ameritech Corporation
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇.
▇▇▇▇▇ & co. as nominee for ▇▇▇▇▇▇ Labs
▇▇▇▇ & Co. as nominee for Agway Inc. Employee High Yield
▇▇▇▇ & Co. as nominee for Central States
▇▇▇▇ & Co. as nominee for Mobil Oil Corp.
▇▇▇▇ & Co. as nominee for ▇▇▇▇▇▇ High Yield Fixed Income DBT
▇▇▇▇ & Co. as nominee for ▇▇▇▇▇▇ High Yield Fixed Income Trust
▇▇▇▇ & Co. as nominee for ▇▇▇▇▇▇ High Yield Managed Trust
Brescia, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇ ▇., Trustee of the ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Revocable Intervivos Trust UTD
5/13/91
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇ Children's Irrevocable Trust
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇, ▇▇▇▇ ▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇ as Trustees of the ▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇ Living
Trust dated April 21, 1992
▇▇▇▇, ▇▇▇▇ ▇., Trustee of the ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Irrevocable Trust dtd 11/28/95
▇▇▇▇, ▇▇▇▇ ▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇, Trustees of the ▇▇▇▇▇ Groton 1996 Irrevocable
Trust dtd 3/18/96
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ 401k P.S.P & Trust DTD 1/1/72 FBO C. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇, ▇▇▇▇▇ ▇.
General Retirement Systems of the City of Detroit
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
Gokhale, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Investments
Groton, ▇▇▇▇▇, Trustee of the ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Groton 1994 Trust dtd
12/23/94
Groton, ▇▇▇▇▇, Trustee of the ▇▇▇▇▇▇▇ ▇▇▇▇▇ Groton 1994 Trust dtd 12/23/94
Groton, ▇▇▇▇▇, Trustee of the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 1994 Trust dtd 12/23/94
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ California
Hancs, ▇▇▇▇▇▇
▇▇▇▇ & Co. as nominee for Southern Farm Bureau
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, R. ▇▇▇▇▇▇ ▇▇.
▇▇▇▇, ▇▇▇▇▇ ▇. and ▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇.
▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇ ▇., Trustee of the ▇▇▇▇▇ ▇. ▇▇▇▇▇, D.D.S.
Kelen, ▇▇▇▇▇ ▇. Family Limited Partnership
▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. & ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, JTWROS
Korsun, ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇, ▇▇▇▇▇ and ▇▇▇▇▇▇ Community Property Trust
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. Trust
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇ ▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Joint Tenants, WROS
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇., Trustee of the ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Revocable Trust dated
2/15/90
▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ Global Allocation Fund, Inc.
▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇ ▇. and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇ & Co. as nominee for PCM Diversified Income Fund
Muico & Co. as nominee for PCM Diversified Income Trust
Muico & Co. as nominee for PCM High Yield Fund
Muico & Co. as nominee for ▇▇▇▇▇▇ Convertible Opps & Income
Muico & Co. as nominee for ▇▇▇▇▇▇ Diversified Income Fund
Muico & Co. as nominee for ▇▇▇▇▇▇ Diversified Income II
Muico & Co. as nominee for ▇▇▇▇▇▇ Diversified Income Trust II
Muico & Co. as nominee for ▇▇▇▇▇▇ High Yield
Muico & Co. as nominee for ▇▇▇▇▇▇ High Yield Advantage
Muico & Co. as nominee for ▇▇▇▇▇▇ High Yield Advantage Fund
Muico & Co. as nominee for ▇▇▇▇▇▇ High Yield Fund
Muico & Co. as nominee for ▇▇▇▇▇▇ Managed High Yield Trust
Muico & Co. as nominee for ▇▇▇▇▇▇ Master Income Trust
Muico & Co. as nominee for ▇▇▇▇▇▇ Master Intermediate Income
Muico & Co. as nominee for ▇▇▇▇▇▇ Premier Income Trust
▇▇▇▇▇▇, Tieng ▇.
▇▇▇▇, ▇▇▇▇▇▇ ▇.
Northwestern University
Norwest Bank Minnesota, N.A. Trustee of the ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Self-Directed ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇
OKGBD & Co.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
Omaha Public School Employee Retirement System
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇'▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇. III
▇▇▇▇▇▇▇▇▇ & Co FBO SEI Institutional Managed Trust
▇▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇-▇▇▇▇▇ Corp. ▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇., Trustee of the ▇▇▇▇▇ ▇. ▇▇▇▇▇ 1993 Trust U/A 04/14/93
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇.
▇▇▇▇▇, ▇▇▇▇▇, Trustee of The ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Family Trust dated 2/18/93
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. and ▇▇▇▇▇▇ ▇., JTWROS
▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
Raman, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇
RJR Nabisco Domestic High Yield
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇ Corporation
▇▇▇▇▇▇▇ Real Time Corporation
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇.
▇▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, Trustee of the ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ 1994 Trust dtd 12/23/94
▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
St. ▇▇▇▇ Venture Capital IV LLC
St. ▇▇▇▇ Venture Capital Affiliates Fund I, LLC
▇▇▇▇▇, ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, Trustees of The ▇▇▇▇▇ 1995 Revocable
Trust
▇▇▇▇▇, ▇▇▇▇
Suburban Cable
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
Texaco, Inc.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ C.
Trosby, ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇. and ▇▇▇▇▇ ▇▇▇▇▇▇ JTWROS
Trustee, WSGR Retirement Plan, FBO ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vail
Vanozzi, ▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
Western Investments Capital, LLC
Whitney, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
WS Investment Company 95B
Yeh, ▇▇▇▇ ▇.
▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇.
EXHIBIT B
SUBORDINATED WARRANT HOLDERS PARTICIPATING IN
STOCKHOLDER RIGHTS AGREEMENT
WARRANT HOLDER
--------------
.▇▇▇▇▇▇ High Yield Managed Trust
▇▇▇▇▇▇ High Yield Fixed Income Trust (DBT)
▇▇▇▇▇▇ High Yield Advantage Fund
Putnam Capital Manger Trust - High Yield Fund
▇▇▇▇▇▇ Asset Allocation Fund - Balanced Portfolio
▇▇▇▇▇▇ Asset Allocation Fund - Conservative Portfolio
▇▇▇▇▇▇ Asset Allocation Fund - Growth Portfolio
▇▇▇▇▇▇ High Income Convertible and Bond Fund
▇▇▇▇▇▇ Master Income Trust
▇▇▇▇▇▇ Premier Income Trust
▇▇▇▇▇▇ Master Intermediate Income Trust
▇▇▇▇▇▇ Diversified Income Trust
▇▇▇▇▇▇ Diversified Income Trust II
▇▇▇▇▇▇ Capital Manger Trust - Diversified Income Fund
▇▇▇▇▇▇ Convertible Opportunities & Income Trust
▇▇▇▇▇▇ High Yield Trust
Ameritech Pension Trust
Central States SE and SW Areas Pension Fund
▇▇▇▇-▇▇▇▇▇▇ Cancer Institute
.Prospect Street Investors
.BEA Associates
.▇▇▇▇▇ ▇▇▇▇▇▇ Inc. for the account of
Acorn Ventures, Inc.
▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇ as Trustees
of the ▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇
Living Trust dated April 21, 1992
EXHIBIT C
CLASS C COMMON HOLDERS
PARTICIPATING IN STOCKHOLDER
RIGHTS AGREEMENT
N.S. Telcom (Quebec) Inc.
▇▇▇▇ Van Der Star
▇▇▇ ▇▇▇▇▇▇▇▇
DLR Capital Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Max ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
F.H.M. Properties Ltd.