TECHTV INC.
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the “Agreement”) is entered into as of ______, 2001, by and among TechTV Inc., a Delaware corporation (the “Company”) and each of the investors set forth on Exhibit A hereto, as amended from time to time (the “Investors,” and each individually referred to hereinafter as the “Investor”).
RECITALS
WHEREAS, the members of TechTV, LLC, a Delaware limited liability company and the Company's predecessor (the "LLC"), entered into that certain Amended and Restated Investor Rights Agreement with the Company (the "Existing Agreement"); and
WHEREAS, the LLC converted into the Company, a Delaware corporation, effective as of ______, 2001, and in connection with such conversion, the former members of the LLC became shareholders of the Company.
NOW, THEREFORE, in consideration of the mutual promises, representations, warranties, covenants and conditions set forth in this Agreement, the parties agree to amend and restate the Existing Agreement in its entirety as follows:
SECTION 1.DEFINITIONS
1.1Definitions. As used in this Agreement the following terms shall have the following respective meanings:
“Administrator” shall have the meaning set forth in Section 8.1.
“Affiliate” of any Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person; provided, however, that notwithstanding the foregoing, the Company shall not be considered an Affiliate of Investor and Investor shall not be considered an Affiliate of the Company. For the purposes of this definition, “control,” when used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“Agreement” shall have the meaning set forth in the preamble to this Agreement.
“Appraiser” means any Person who shall be an investment banker experienced in the valuation of businesses and (a) is mutually selected by the Selling Party and the Company or (b) if the Selling Party and Company cannot agree on the selection of an appraiser, is selected as follows: Selling Party and Company shall each select a qualified appraiser and the two appraisers shall select a third appraiser who shall perform the appraisal.
“Company” shall have the meaning set forth in the preamble to this Agreement.
“Compelled Sale” shall have the meaning set forth in Section 6.1.
“Compelled Sale Notice” shall have the meaning set forth in Section 6.2.
“Compelled Securities” shall have the meaning set forth in Section 6.1.
“Control Transfer” means one or a series of related transactions as a result of which (i) any Third Party, or group of Third Parties acting in concert, owns, directly or indirectly, a majority of the Total Voting Power of Company (after giving effect to the conversion or exchange of all outstanding options, warrants, or other similar securities convertible or exchangeable into equity interests), or (ii) Company consolidates with or merges into or with, or effects any plan of share exchange with, any Person and after giving effect to such consolidation or merger or plan of share exchange any Third Party or group of Third Parties acting in concert owns, directly or indirectly, a majority of the Total Voting Power of the Person (after giving effect to the conversion or exchange of all outstanding options, warrants, or other similar securities convertible or exchangeable into equity interests) surviving such consolidation or merger.
“Convertible Securities” shall mean (i) any security convertible, with or without consideration, into any Shares (including any option to purchase such a Convertible Security) or (ii) any warrant or right to subscribe to or purchase any Shares.
“Demand for Arbitration” shall have the meaning set forth in Section 8.2(a).
“Estimated Non-Cash Value” shall have the meaning set forth in Section 6.2(a).
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.
“Excluded Security” or “Excluded Securities” shall have the meaning set forth in Section 7.6.
“Form S-3” means such form under the Securities Act as 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.
“Holder” means any Investor owning of record Registrable Securities that have not been sold to the public or any assignee of record of such Registrable Securities in accordance with Section 2 hereof.
“Initiating Holder” shall have the meaning set forth in Section 6.1.
“Initial Offering” means the Company’s first firm commitment underwritten public offering of its common stock registered under the Securities Act.
“Investor” shall have the meaning set forth in the preamble to this Agreement.
“Major Holder” means an Investor who, together with its Affiliates, owns not less than twenty percent (20%) of Registrable Securities (as adjusted for splits, equity dividends and combinations).
“New Securities” shall mean any (i) Shares or (ii) other security of the Company, excluding Convertible Securities, issued after the date hereof.
“Offered Securities” shall have the meaning set forth in Section 3.1.
“Other Securities” shall have the meaning set forth in Section 4.4.
“Parties” means the Company and the Investors and “Party” means any one of them.
“Participating Holder” means, with respect to a public offering of securities, a Holder participating in such public offering.
“Person” means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association or organization, joint venture, government or department or agency thereof, or other entity of whatever nature.
“Purchase Notice” shall have the meaning set forth in Section 3.2.
“Purchase Notice Period” shall have the meaning set forth in Section 3.2.
“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 or document.
“Registrable Securities” means (a) Shares held by an Investor on the date hereof, including any Shares issued or issuable upon conversion of any Convertible Securities held by an Investor on the date hereof; and (b) any Shares 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, such above-described securities. Notwithstanding the foregoing, Registrable Securities shall not include any securities sold by a Person to the public either pursuant to a registration statement or Rule 144 or sold in a private transaction in which the transferor’s rights under Section 2 of this Agreement are not assigned.
“Registrable Securities then outstanding” shall be the number of shares determined by calculating the total number of shares of the Company’s common stock or other Shares that are Registrable Securities and either (a) are then issued and outstanding or (b) are issuable pursuant to Convertible Securities which are then exercisable or convertible.
“Remaining Holders” shall have the meaning set forth in Section 6.1.
“Restricted Transferee” shall have the meaning set forth in Section 2.1(b).
“Sales Notice” shall have the meaning set forth in Section 3.1.
“SEC” or “Commission” means the Securities and Exchange Commission.
“Securities” mean, collectively, (i) Shares, and (ii) Convertible Securities.
“Securities Act” means the Securities Act of 1933, as amended from time to time.
“Selling Party” shall have the meaning set forth in Section 3.1.
“Shares” mean the Company's common stock and preferred stock.
“Third Party” means a purchaser or prospective purchaser of securities or rights, options, or warrants convertible into or exercisable for securities, who is not a Party or an Affiliate of a Party.
“Total Voting Power” means the aggregate of all votes of any Person then entitled to vote.
“Transfer” shall mean any direct or indirect sale, assignment, transfer, hypothecation, pledge, encumbrance, or disposal of a Party’s interest in any Security.
“Violation” shall have the meaning set forth in Section 4.6(a).
SECTION 2.RESTRICTIONS ON TRANSFER OR ISSUANCE
2.1Restrictions on Transfer. Each Investor agrees not to Transfer all or any portion of or any interest in the Securities held by such Investor unless and until:
(a)There is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement, and compliance with applicable state securities or “blue sky” laws has been effected; or
(b)(i) The transferee has agreed in writing to be bound by the terms of this Agreement as an “Investor” (including the “Market Stand-Off” Agreement set forth in Section 4.8 hereof) and such Investor has caused such transferee to execute and deliver counterparts of this Agreement to the Company and each of the Investors, (ii) such Investor shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, (iii) unless the transferor receives prior written consent from the Company, which may be withheld in the Company’s sole and absolute discretion, such transferee shall not be in the business of video distribution via cable television, broadcast, satellite or other similar technology (“Restricted Transferee”), (iv) if reasonably requested by the Company, such Investor shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such Securities under the Securities Act or registration or qualification under the securities or “blue sky” laws of any state, and (v) such Investor has complied with the terms of any other agreements providing restrictions on transfer of the Securities. It is agreed that the Company will not require opinions of counsel for transactions made pursuant to Rule 144 except in unusual circumstances.
(c)Notwithstanding the provisions of paragraphs (a) and (b) above, no such registration statement or opinion of counsel shall be necessary for a transfer by an Investor which is (i) a partnership to its partners or former partners in accordance with partnership interests, (ii) a corporation to its shareholders in accordance with their interest in the corporation, (iii) a limited liability company to its members or former members in accordance with their interest in the limited liability company, (iv) to the Investor’s family member or trust for the benefit of an individual Investor, or (v) to any entity which is an Affiliate of Investor, provided that such Affiliate shall not be a Restricted Transferee. In each case the transferee will be subject to the terms of this Agreement to the same extent as if he were an original Investor hereunder.
2.2Restrictions on Issuance. The Company agrees that prior to the issuance of any New Securities or Excluded Securities to any Person who is not a party to this Agreement, the Company will cause such Person to execute and deliver counterparts of this Agreement to the Company and each of the Investors.
2.3Legend Requirement.
(a)Each certificate representing Securities shall (unless otherwise permitted by the provisions of the Agreement) be stamped or otherwise imprinted with a legend substantially similar to the following (in addition to any legend required under applicable state securities laws or as provided elsewhere in this Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
(b)The Company shall be obligated to reissue promptly unlegended certificates at the request of any holder thereof if the holder shall have obtained an opinion of counsel (which counsel may be counsel to the Company) reasonably acceptable to the Company to the effect that the Securities proposed to be disposed of may lawfully be so disposed of without registration, qualification or legend.
(c)Any legend endorsed on an instrument pursuant to applicable state securities laws and the stop-transfer instructions with respect to such Securities shall be removed upon receipt by the Company of an order of the appropriate blue sky authority authorizing such removal.
SECTION 3.RIGHT OF FIRST REFUSAL
3.1Sales Notice. If a Holder desires to Transfer any Securities, excluding Securities Transferred pursuant to Section 2.1(c), (the “Offered Securities”), such Party (the “Selling Party”) shall deliver written notice (a “Sales Notice”) to the Company of its intent to do so. The Sales Notice must specify: (1) the name and address of the Person to whom the Selling Party intends to Transfer the Offered Securities, (2) the number of Offered Securities the Selling Party proposes to Transfer, (3) the cash or other consideration per Offered Security to be paid to the Selling Party for the proposed Transfer, and (4) all other material terms and conditions of the proposed Transfer.
3.2Election to Purchase. The Company shall have thirty (30) days (the “Purchase Notice Period”) after receipt of a Sales Notice to elect to purchase all, but not less than all, of the Offered Securities at the price and upon the terms set forth in the Sales Notice by delivery of a written notice (a “Purchase Notice”) to the Selling Party within the Purchase Notice Period.
3.3Delivery. Within ten (10) days after receipt by the Selling Party of a Purchase Notice, (i) the Selling Party shall deliver to the Company certificates representing the Offered Securities, duly endorsed for transfer to the Company or its nominees and (ii) the Company or its nominees shall deliver to the Selling Party any consideration required to consummate any such purchase of such Offered Securities by the Company or its nominees; provided, however, that if the terms of payment set forth in the Sales Notice were other than cash against delivery, the Company shall pay for the Offered Securities on the same terms and conditions set forth in the Sales Notice in a cash amount that equals the fair market value of the non-cash terms of payment set forth in the Sales Notice, as determined by an Appraiser.
3.4Failure to Purchase. If the Company fails to deliver a Purchase Notice or delivers a Purchase Notice but fails to purchase the Offered Securities within the ten (10) day period after such Purchase Notice, the Selling Party shall be under no obligation to sell any of the Offered Securities to the Company, but instead may sell them to the Person specified in the Sales Notice; provided, however, that the Selling Party may not, without delivering a new Sales Notice pursuant to Section 3 and following the procedures specified herein, Transfer any or all of the Offered Securities (i) more than thirty (30) days (or such longer period not exceeding ninety (90) days as may be necessary to comply with any applicable provisions of the HSR Act) following the expiration of the Purchase Notice Period, (ii) to any Person(s) other than those specified in the Sales Notice or (iii) at any other price or on any other terms and conditions other than those specified in the Sales Notice.
SECTION 4.REGISTRATION RIGHTS.
4.1Company Registration. If (but without any obligation to do so) at any time the Company proposes to register (including for this purpose a registration effected by the Company for holders other than the Holders) any of its stock or other securities under the Securities Act in connection with the public offering of such securities solely for cash (other than on a registration statement on Form S-8 relating solely to the sale of securities to participants in a Company stock plan), the Company shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within twenty (20) days after mailing of such notice by the Company, the Company shall, subject to the provisions of Section 4.4, cause to be registered under the Securities Act all of the Registrable Securities that each such Holder has requested to be registered.
4.2Obligations of Company. Whenever required under this Section 4 to effect the registration of any Registrable Securities, the Company shall as expeditiously as reasonably possible:
(a)Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or until the distribution contemplated in the registration statement has been completed, whichever is shorter; provided, however, that (A) such one hundred twenty (120) day period shall be extended for a period of time equal to the period the Holder refrains from selling any securities included in such registration at the request of an underwriter of common stock or other securities of the Company; and (B) in the case of any registration of Registrable Securities on Form S-3 which are intended to be offered on a continuous or delayed basis, such one hundred twenty (120) day period shall be extended, if necessary, to keep the registration statement effective until all such Registrable Securities are sold, provided that Rule 415 or any successor rule under the Securities Act permits an offering on a continuous or delayed basis and provided further that applicable rules under the Securities Act governing the obligation to file a post-effective amendment permit, in lieu of filing a post-effective amendment which (X) includes any prospectus required by Section 10(a)(3) of the Securities Act or (Y) reflects facts or events representing a material or fundamental change in the information set forth in the registration statement, the incorporation by reference of information required to be included in (X) and (Y) above to be contained in periodic reports filed pursuant to the Exchange Act in the 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.
(c)Furnish to the Holders such numbers 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 Registrable Securities owned by them.
(d)Use its best efforts to register and qualify the securities covered by such registration statement under such state and other securities laws of such jurisdictions as shall be reasonably requested by the Holders, provided 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, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act.
(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 of such offering. Each Holder participating in such underwriting shall also enter into and perform its customary obligations under such an agreement.
(f)Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the 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)Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed.
(h)Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.