EXHIBIT 4.3
MAGINET CORPORATION
AMENDED AND RESTATED
SHAREHOLDERS' AGREEMENT
This Amended and Restated Shareholders' Agreement (the "Restated
Shareholders' Agreement") is made as of December 29, 1995 and amends and
restates the Shareholders' Agreement dated September 29, 1994, and First and
Second Amendments thereto, (the "Shareholders Agreement") by and among MAGINET
CORPORATION, a California corporation (the "Company") (as successor, in the
August 1995 reorganization, to the business of Pacific Pay Video Limited, a
California corporation), and the persons and entities listed on Exhibit A
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attached hereto.
Pursuant to Section 10.8 of the Shareholders' Agreement, which permits
amendment of the Shareholders' Agreement with consent of the Company and a
majority in interest of the Holders, the parties have agreed to amend and
restate in its entirety the Shareholders' Agreement, including any previous
amendments thereto, as follows:
"R E C I T A L S
A. On July 23, 1992, the Company and certain securityholders of the
Company entered into a Series A Preferred Stock Purchase Agreement (the "Series
A Agreement"), which, among other things, conferred upon certain securityholders
of the Company rights regarding the registration of shares of the Company's
Common Stock, certain covenant rights, and rights of first refusal upon the sale
of securities by any Purchasers (as those terms are defined in the Series A
Agreement).
B. On August 31, 1992, the Company and certain securityholders of the
Company entered into a Series B Preferred Stock Purchase Agreement (the "Series
B Agreement"), which, among other things, conferred upon certain securityholders
of the Company certain covenant rights and rights regarding the registration of
shares of the Company's Common Stock which superseded the registration rights
granted in the Series A Agreement.
C. On March 17, 1993, the Company and certain securityholders of the
Company entered into a Series B Preferred Stock and Warrant Purchase Agreement
(the "Second Series B Agreement"), which, among other things, conferred upon
certain securityholders of the Company certain covenant rights, rights of first
refusal, and rights regarding the registration of shares of the Company's Common
Stock which superseded the registration rights granted in the Series B
Agreement.
D. On September 29, 1993, the Company granted to COMSAT Video
Enterprises a warrant to purchase up to 1,575,000 shares of the Company's Common
Stock (the "COMSAT Warrant") and in connection therewith, the Company and
certain other parties to the Second Series B Agreement entered into an Amendment
No. 1 to the Second Series B Agreement (the "Series B Amendment"), which
provided that the shares of Common Stock issuable upon exercise of the
COSMAT Warrant would be deemed "Registrable Securities" under Section 8 of the
Series B Agreement.
E. On March 10, 1994, in connection with the Note and Warrant Purchase
Agreement, the Company issued Warrants to purchase Common Stock (the "First
Bridge Warrants"); and the Company and certain parties to the Second Series B
Agreement, as amended, entered into a new agreement (the "Registration Rights
Agreement"), which superseded Section 8 of the Second Series B Agreement, as
amended by the Series B Amendment, in its entirety, contained provisions
substantially similar to those of Section 8 of the Second Series B Agreement, as
amended by the Series B Amendment, and granted such rights to the holders of
First Bridge Warrants.
F. On June 20, 1994, the Company granted to Silicon Valley Bank ("SVB")
and Hambrecht & Quist Guaranty Finance ("H&Q") warrants to purchase Common Stock
of the Company (the "SVB/H&Q Warrants"), and in connection therewith, the
Company and certain other parties to the Registration Rights Agreement entered
into the First Amendment to Registration Rights Agreement (the "First
Amendment"), which provided that the shares of Common Stock issuable upon
exercise of the SVB/H&Q Warrants would be deemed "Registrable Securities" under
the Registration Rights Agreement.
G. On September 12, 1994, in connection with the Second Note and
Warrant Purchase Agreement, the Company agreed to issue certain warrants to
purchase Common Stock (the "Second Bridge Warrants"); and the Company and
certain parties to the Registration Rights Agreement, as amended, entered into
the Second Amendment to Registration Rights Agreement (the "Second Amendment"),
which provided that the shares of Common Stock issuable upon exercise of the
Second Bridge Warrants would be deemed "Registrable Securities" under the
Registration Rights Agreement, as amended.
H. In connection with the issuance of Series C Preferred Stock (the
"Series C Preferred") and warrants to purchase Series C Preferred Stock (the
"Series C Warrants") pursuant to the Series C Preferred Stock Purchase Agreement
dated September 29, 1994 (the "Series C Agreement"), certain shareholders
constituting the holders of a majority of the Registrable Securities (as that
term is defined in the Registration Rights Agreement, as amended) entered into
the Shareholders' Agreement which restated and superseded the Registration
Rights Agreement, in its entirety, and which granted such registration rights to
the holders of the Series C Preferred and Series C Warrants.
I. On May 16, 1995, the Company granted Silicon Valley Bank warrants to
purchase Common Stock of the Company (the "SVB Warrants"), and in connection
therewith, the Company and certain parties to the Shareholders' Agreement
entered into the First Amendment to Shareholders' Agreement (the "First
Amendment") which provided that the shares of Common Stock issuable upon
exercise of the SVB Warrants would be deemed registerable securities under the
Shareholders' Agreement.
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J. On August 15, 1995, in connection with its Senior Secured Note
financing, the Company granted to Mutual Life Insurance Company of New York,
Namtor BVC, L.P., New York Life Insurance Company, and Waslic Company II,
warrants to purchase Common Stock of the Company (the "Common Warrants"), and in
connection therewith, the Company and certain other parties to the Shareholders'
Agreement entered into the Second Amendment to Shareholders' Agreement (the
"Second Amendment") which provided that the shares of Common Stock issuable upon
exercise of the Common Warrants would be deemed registerable securities under
the Shareholders' Agreement.
K. In connection with the issuance of Series D Preferred Stock (the
"Series D Preferred Stock") pursuant to the Series D Preferred Stock Purchase
Agreement dated December ___, 1995 (the "Series D Agreement"), the purchasers of
the Series D Preferred Stock (the "Series D Holders") desire to enter into an
agreement which will restate and supersede the Shareholders' Agreement, in its
entirety, and which will grant certain rights to the Series D Holders.
SECTION 1
REGISTRATION RIGHTS
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1.1 Certain Definitions. As used in this Restated Shareholders'
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Agreement, the following definitions shall apply:
"Commission" means the Securities and Exchange Commission or any
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other federal agency at the time administering the Securities Act.
"Common Warrants" means those warrants to purchase shares of Common
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stock of the Company granted to certain investors in connection with the
purchase and sale of the Company's Senior Secured Notes due 2000 in the
aggregate principal amount of up to $30,000,000 pursuant to the Note Agreement
dated August 15, 1995.
"Holder" means any holder of outstanding Registrable Securities;
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provided, however, that for all purposes under this Section, a holder of Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, the
Series D Preferred Stock, the COMSAT Warrant, the Original Warrants (as defined
below), the First Bridge Warrants, the SVB\H&Q Warrants, the Second Bridge
Warrants, Series C Warrants, the SVB Warrants, or the Common Warrants shall be
deemed to be a Holder of the Registrable Securities into which such shares are
then convertible or for which such warrants are then exercisable.
"Initiating Holders" means Holders of not less than forty percent
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(40%) of the Registrable Securities.
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"Registrable Securities" means (i) the shares of Common Stock
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issuable upon conversion of the Company's Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock (the
"Conversion Stock"), (ii) the shares of Common Stock issuable upon exercise of
the warrants issued pursuant to the Second Series B Agreement (the "Original
Warrants"), the COMSAT Warrant, the First Bridge Warrants, the SVB\H&Q Warrants,
the Second Bridge Warrants, the SVB Warrants, the Common Warrants, or the Common
Stock issuable upon conversion of the Series C Preferred Stock issuable upon
exercise of the Series C Warrants (collectively, the "Warrant Shares"), (iii)
the shares of Common Stock currently outstanding and not issued pursuant to the
exercise of options or warrants (the "Founders' Stock"), and (iv) any shares of
Common Stock of the Company issued or issuable, directly or indirectly, in
respect of the stock described in (i), (ii) and (iii) upon any stock split,
stock dividend, recapitalization, or similar event, or any shares of Common
Stock otherwise issued or issuable with respect to such stock; provided,
however, that Registrable Securities shall not include shares of Common Stock
that have been sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, sold in a transaction exempt
from the registration and prospectus delivery requirements of the Securities Act
under Section 4(1) thereof so that all transfer restrictions, and restrictive
legends with respect thereto, if any, are removed upon the consummation of such
sale, or Registrable Securities sold by a person in a transaction in which
rights under this Section 1 are not assigned.
"Registration Expenses" means all expenses incurred by the Company
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in complying with Sections 1.2, 1.3, and 1.4, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, 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). Registration Expenses shall
not include expenses of the holders of Registrable Securities to the extent
limited or precluded in applicable blue sky laws. Registration Expenses shall
include the fees or expenses of one legal counsel to the Holders and one
separate legal counsel to the holders of the Common Warrants. Registration
Expenses shall not include selling commissions, discounts or other compensation
paid to underwriters or other agents or brokers to effect the sale, or the fees
or expenses of any additional legal counsel retained by any Holder or Holders.
"Restricted Securities" means the Company's currently outstanding
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Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock,
the Conversion Stock, the Founders' Stock, the Original Warrants, the COMSAT
Warrant, the First Bridge Warrants, the SVB\H&Q Warrants, the Second Bridge
Warrants, the Series C Warrants, the SVB Warrants, the Common Warrants and the
Warrant Shares, and any other securities issued in respect thereof upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event.
"Securities Act" means the United States Securities Act of 1933, as
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amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, as shall be in effect at the time.
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The terms "register", "registered" and "registration" refer to a
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registration effected by preparing and filing a registration statement in
compliance with the Securities Act (and any post-effective amendments filed or
required to be filed), and the declaration or ordering of the effectiveness of
such registration statement; provided, however, that the foregoing terms shall
also include a registration in a foreign jurisdiction to the extent set forth in
Section 1.18.
"Shareholder" means certain persons and entities listed as such on
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Exhibit A attached hereto, who were parties to the Shareholder's Agreement dated
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September 29, 1994 and the holders of Series D Preferred Stock.
"SVB Warrants" means those warrants to purchase shares of Common
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stock of the Company granted to Silicon Valley Bank in connection with the loan
of up to $5,000,000 by Silicon Valley Bank pursuant to the Loan and Security
Agreement dated May 16, 1995.
1.2 Requested Registration.
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(a) Request for Registration. In case the Company shall receive
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from Initiating Holders a written request six (6) months after the effective
date of the initial registration of the Company's securities, that the Company
effect any underwritten registration, qualification, or compliance with respect
to Registrable Securities held by such Initiating Holders, then the Company
shall:
(i) promptly give written notice of the proposed
registration, qualification, or compliance to all other Holders; and
(ii) as soon as practicable, use its most diligent efforts
to effect all such registration, qualification, or compliance (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 and any other governmental requirements or regulations)
as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holders joining in such request as are specified in a written
request received by the Company within twenty (20) days after the date the
Company mails such written notice;
Provided, however, that the Company shall not be obligated to
take any action to effect any such registration, qualification, or compliance
pursuant to this Section 1.2:
(A) In any jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification, or compli ance unless the Company is already
subject to service in such jurisdiction and except as may be required by the
Securities Act;
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(B) During the period starting with the date sixty
(60) days prior to the Company's estimated date of filing of, and ending on the
date six months immediately following the effective date of any registration
statement pertaining to securities of the Company (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit plan
or initiated by security holders);
(C) Unless the registration will be requested for at
least ten percent (10%) of the Registrable Securities; or
(D) At any time during which the Company is qualified
to use Form S-3 for registration of the Registrable Securities held by the
Holders.
Subject to the foregoing clauses (A) through (D), the Company
shall file a registration statement covering the Registrable Securities so
requested to be registered as soon as prac ticable, and in any event within 90
days, after receipt of the request or requests of the Initiating Holders;
provided, however, that if the Company shall furnish to Holders requesting a
registration statement under this Section 1.2, a certificate signed by the
President 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 shareholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, 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 further,
that the Company may not utilize this right more than once in any twelve- (12-)
month period.
(b) Underwriting. The right of any Holder to registration pursuant
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to this Section 1.2 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting to the extent requested (unless otherwise mutually agreed by a
majority in interest of the Initiating Holders and such Holder) and to the
extent provided herein.
The Company shall (together with all Holders and holders of
other securities proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by a majority in interest of
the Initiating Holders. Notwithstanding any other provision of this Section 1.2,
if the managing underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the securities of the Company entitled to be included in such
registration which are not Registrable Securities shall be excluded from such
registration to the extent required by such limitation. If a limitation of the
number of shares is still required, then the Company shall so advise all
Holders, and the number of shares of Registrable Securities that may be included
in the registration and underwriting shall first be allocated among Holders
thereof in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities, other than Founders Shares, entitled to inclusion
(determined without regard to any require-
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ment of a request to be included in such registration) in such registration held
by all such Holders at the time of filing the registration statement and,
second, should the underwriter's limitation permit inclusion of any additional
securities, among all Holders in proportion, as nearly as practicable, to the
respective amounts of Founders Shares entitled to inclusion (determined without
regard to any requirement of a request to be included in such registration) in
such registration held by all such Holders at the time of filing the
registration statement. No Registrable Securities or other securities excluded
from the underwriting by reason of the underwriter's marketing limitation shall
be included in such registration. To facilitate the allocation of shares in
accordance with the above provisions, the Company or the underwriters may round
the number of shares allocated to any Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the
terms of the underwriting, such person may elect to withdraw therefrom by
written notice to the Company, the managing underwriter and the Initiating
Holders. The Registrable Securities and/or other securities so withdrawn shall
also be withdrawn from registration, and such Registrable Securities shall not
be trans ferred in a public distribution prior to ninety (90) days after the
effective date of such registration, or such other shorter period of time as the
underwriters may require. If by the withdrawal of such Registrable Securities a
greater number of Registrable Securities held by other Holders may be included
in such regis tration (up to the maximum of any limitation imposed by the
underwriters), then the Company shall offer to all Holders who have included
Registrable Securities in the registration the right to include additional
Registrable Securities in the same proportion and manner used in determining the
underwriter limitation in this Section 1.2(b).
If the managing underwriter has not limited the number of
Registrable Securities to be underwritten, the Company may include securities
for its own account or for the account of others in such registration if the
underwriter so agrees and if the number of Registrable Securities which would
otherwise have been included in such registration and underwriting will not
thereby be limited.
1.3 Company Registration.
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(a) Notice of Registration. If at any time or from time to time,
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the Company shall determine to register any of its securities, either for its
own account or the account of a security holder or holders exercising their
respective demand registration rights, other than (i) a registration relating
solely to employee benefit plans, or (ii) a registration relating solely to a
Rule 145 transaction, the Company shall:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities
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specified in a written request by each Holder received by the Company within
fifteen (15) days after the Company mails such written notice, subject to the
provisions below.
(b) Underwriting. The right of any Holder to registration pursuant
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to Section 1.3 shall be conditioned upon the participation by such Holder in
such underwriting, if any, and the inclusion of the Registrable Securities of
such Holder in the underwriting to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by the
Company. Notwithstanding any other provision of this Section 1.3, if the
managing underwriter deter mines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may limit the
Registrable Securities held by Holders. If a limitation of the number of shares
to be included in such registration is required, then the Company shall so
advise all Holders, and the number of shares of Registrable Securities and other
securities that may be included in the registration and underwriting shall be
allocated among all Holders and other holders of securities thereof: first,
among all Holders of the Common Warrants in proportion as nearly as practicable,
to the respective amounts of securities entitled to inclusion (determined
without regard to any requirement of a request to be included in such
registration) in such registration held by all such Holders at the time of
filing the registration statement; second, should the underwriter's limitation
permit inclusion of any additional securities, among all remaining Holders and
other holders in proportion, as nearly as practicable, to the respective amounts
of securities, other than Founders Shares, entitled to inclusion (determined
without regard to any requirement of a request to be included in such
registration) in such registration held by all such remaining Holders and other
holders at the time of filing the registration statement; and third, should the
underwriter's limitation permit inclusion of any additional securities, among
all Holders in proportion, as nearly as practicable, to the respective amounts
of Founders Shares entitled to inclusion (determined without regard to any
requirement of a request to be included in such registration) in such
registration held by all such Holders at the time of filing the registration
statement; provided, however, that the number of Registrable Securities entitled
to inclusion in any such registration, except for the registration of the
initial public offering of the Company's securities, shall be no less than
twenty percent (20%) of the total number of shares covered by such registration.
To facilitate the allocation of shares in accor dance with the above provisions,
the Company may round the number of shares allocated to any Holder to the
nearest 100 shares. If any Holder or other holder disapproves of the terms of
any such under writing, he may elect to withdraw therefrom by written notice to
the Company and the managing underwriter. Any securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration.
(c) Right to Terminate Registration. The Company shall have the
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right to terminate or withdraw any registration initiated by it under this
Section 1.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
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1.4 Form S-3 Registration. In case the Company shall receive from a
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Holder or Holders a written request that the Company effect a registration on
Form S-3 and any related qualification or compliance with respect to an amount
of the Registrable Securities owned by such Holder or Holders for which the
anticipated aggregate offering price would be at least $500,000, the Company
shall:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance to all other Holders; and
(b) 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 such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
twenty (20) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification, or compliance pursuant to this Section 1.4: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Company
shall furnish to the Holders a certificate signed by the president 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 shareholders
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 for a period of not more than ninety (90) days after receipt of the
initiating request of the Holder or Holders under this Section 1.4; provided,
however, that the Company shall not utilize this right more than twice in any
twelve- (12-) month period; (3) if the Company has, within the twelve- (12-)
month period preceding the date of such request, already effected one (1)
registration on Form S-3 for the Holders pursuant to this Section 1.4; or (4) in
any 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.
Subject to the foregoing, the Company shall effect such
registration, qualification, or compliance (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 and any other governmental requirements or regulations) covering the
Registrable Securities and other securities so requested to be registered as
soon as practicable after receipt of the request or requests of the Holders.
Registrations effected pursuant to this Section 1.4 shall not be counted as
demands for registration or registrations effected pursuant to Sections 1.2 or
1.3.
If the registration to be effected pursuant to this Section 1.4
is to be an underwritten public offering, it shall be managed by an underwriter
or underwriters acceptable to the Company selected by a majority in interest of
the Holders requesting registration. In such event, the right of any Holder to
registration pursuant to Section 1.4 shall be conditioned upon the participation
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by such Holder in such underwriting and the inclusion of the Registrable
Securities of such Holder in the underwriting to the extent provided herein. If
the managing underwriter so selected determines that marketing factors require a
limitation of the number of shares to be underwritten, the managing underwriter
may limit the Registrable Securities held by such Holders to be included in such
registration. The Company shall so advise such Holders, and the number of shares
of Registrable Securities that may be included in the registration shall be
allocated among such Holders in proportion to the respective amounts of
Registrable Securities which would be held by each of such Holders at the time
of filing of the registration statement. Any Registrable Securities that are so
excluded from the underwriting shall be excluded from the registration. As used
throughout this Section the term "Form S-3" shall be deemed to include any
equivalent successor form for registration pursuant to the Act.
1.5 Expenses of Registration.
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All Registration Expenses incurred in connection with the
registration, qualification or compliance pursuant to Sections 1.2, 1.3, and 1.4
shall be borne by the Company; provided, however, that the Company shall not be
required to pay for expenses of (i) any registrations requested pursuant to
Section 1.2 after the Company has effected three (3) such registrations pursuant
to Section 1.2 or 1.4 and such registrations have been declared or ordered
effective, and (ii) any registration proceeding begun pursuant to Section 1.2,
the request of which has been subsequently withdrawn by the Initiating Holders,
in which case such expenses shall be borne by the Holders of securities
(including Registrable Securities) pro rata in accordance with the number of
shares initially sought to be registered requesting or causing such withdrawal,
unless the Holders shall agree that such withdrawn registration shall be counted
as a registration for purposes of Section 1.2(a)(ii)(D). Notwithstanding the
foregoing, if such withdrawal is occasioned by the disclosure to the Initiating
Holders of a material adverse fact regarding the Company not known by the
Initiating Holders at the time of their request for registration then the
Company will bear such Registration Expenses and the Holders will retain their
rights under Section 1.2 hereof.
1.6 Registration Procedures. If and whenever the Company is required by
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the provisions of this Section to use its most diligent efforts to effect
promptly the registration of Registrable Securities, the Company shall:
(a) Prepare and file with the Commission a registration statement
with respect to such Registrable Securities and use its most diligent efforts to
cause such registration statement to become and remain effective as provided
herein.
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
current and to comply with the provisions of the Securities Act with respect to
the sale or other disposition of all Registrable Securities covered by such
registration statement, including such amendments and supplements as may be
necessary to reflect the
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intended method of disposition of the prospective seller or sellers of such
Registrable Securities, but for no longer than one hundred twenty (120) days
subsequent to the effective date of such registration in the case of a
registration statement on Form S-1 (or any similar form of registration
statement required to set forth substantially identical information) and for no
longer than 90 days in the case of a registration statement on Form S-3.
(c) Furnish to each prospective seller of Registrable Securities
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 such seller may reasonably request in order to facilitate the
public sale or other disposition of the Registrable Securities of such seller.
1.7 Indemnification. In the event any of the Registrable Securities are
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included in a registration statement under this Section:
(a) The Company will indemnify each Holder, each of its officers
and directors and partners and such Holder's separate legal counsel and
independent accountants, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, and each underwriter, if any, and
each person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to the Company in
connection with any such registration, qualification or compliance, and the
Company will reimburse each such Holder, each of its officers and directors and
partners and such Holders' separate legal counsel and independent accountants
and each person controlling such Holder, each such underwriter and each person
who controls any such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating, preparing or defending any
such claim, loss, damage, liability or action, provided that the Company will
not be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder or underwriter and stated to be specifically for
use therein.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and its legal counsel and independent accountants, each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act,
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and each other such Holder, each of its officers and directors and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
(which information shall be limited to a brief description of the Holder, its
holdings of the Registrable Securities to be sold, and its plan of distribution
therefor) furnished to the Company by an instrument duly executed by such Holder
and stated to be specifically for use therein; provided, however, that the
obligations of each Holder hereunder shall be limited to an amount equal to the
net proceeds to each such Holder of Registrable Securities sold pursuant to such
registration statement.
(c) Each party entitled to indemnification under this Section (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
(d) If the indemnification provided for in this Section is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to herein,
then the Indemnifying Party, in lieu of indemnifying the Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party with
respect to such loss, liability, claim, damage or expense in the proportion that
is appropriate to reflect the relative fault of the Indemnifying Party and the
Indemnified Party in connection with the statements or omissions that resulted
in such loss, liability, claim, damage or expense, as well as any other relevant
equitable considerations. The relative fault of the Indemnifying Party and the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of material fact or the omission
to state a material fact relates to information supplied by the Indemnifying
Party or by the Indemnified Party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission; provided, however,
-12-
that the obligations of each Holder to make contributions shall be limited to an
amount equal to the net proceeds received by each such Holder of Registerable
Securities sold pursuant to such registration statement.
(e) The indemnity and contribution provided by each Holder of
Registrable Securities under this Section 1.7 shall be provided severally and
not either jointly or jointly and severally with any other Holder.
1.8 Information by Holder. The Holder or Holders of Registrable
---------------------
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Section.
1.9 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 Restricted Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company and
until five years from the date hereof, the Company shall use its best efforts
to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, beginning ninety
(90) days after (i) the effective date of the first registration statement filed
by the Company for an offering of its securities to the general public, (ii) the
Company registers a class of securities under Section 12 of the Securities
Exchange Act of 1934, as amended, or (iii) the Company issues an offering
circular meeting the requirements of Regulation A under the Securities Ac t;
(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Securities Exchange Act of 1934, as amended (at any time after it has become
subject to such reporting requirements);
(c) Furnish to any Holder promptly upon request a written statement
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 Securities Exchange Act of 1934 (at
any time after it has become subject to such reporting requirements), a copy of
the most recent annual or quarterly report of the Company, and such other
reports and documents of the Company and other information in the possession of
or reasonably obtainable by 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.
1.10 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register securities granted under this Section may be assigned to a
transferee or assignee in connection with
-13-
the transfer or assignment of Registrable Securities only if such shares
represent at least 1% of the outstanding shares of the Company's capital stock
(assuming conversion of all Preferred Stock to Common Stock, exercise of all
warrants for Common Stock and the conversion of all Series C Preferred Stock
issuable upon the exercise of the Series C Warrants) on the date of such
assignment.
1.11 Limitations on Subsequent Registration Rights. From and after
---------------------------------------------
the date of this Restated Shareholders' Agreement, the Company shall not,
without the prior written consent of the Holders of a majority of the
outstanding Registrable 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 Section 1.2 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 Registrable Securities of the Holders which is
included, or (b) to make a demand registration which could result in such
registration statement being declared effective prior to the earlier of either
of the dates set forth in subsection 1.2(a) or within one hundred twenty (120)
days of the effective date of any registration effected pursuant to Section 1.2.
1.12 Amendment of Registration Rights. The registration rights
--------------------------------
provided in this Section may be amended or waived with the written consent of
the Company and the holders of a majority of the Registrable Securities except
(i) the rights of Holders of the Registrable Securities issuable upon exercise
of the Common Warrants may only be amended or waived with the written consent of
the Company and Holders of Common Warrants exercisable into shares of common
stock which in the aggregate amount to at least seventy percent (70%) of the
aggregate number of shares of common stock into which all the Common Warrants
are exercisable, to the extent such rights are adversely affected by such
amendment or waiver in a manner different from other Holders, and (ii) the
rights provided in Section 1.3 may not be amended or waived, so as to adversely
affect the holders of Founders Shares in a manner different from other Holders,
without the written consent of the holders of a majority of the Founders Shares.
1.13 Termination of Registration Rights. No Holder shall be entitled
----------------------------------
to exercise any right provided for in this Section 1 after five years following
the consummation of the sale of securities pursuant to a registration statement
filed by the Company under the Securities Act in connection with the initial
firm commitment underwritten offering of its securities to the general public or
at such time as all Registrable Securities held by such Holder may immediately
be sold under Rule 144 during any ninety-(90-) day period.
1.14 Lock-Up Provision. If requested by the Company and an
-----------------
underwriter of securities of the Company, no Holder shall sell or otherwise
transfer or dispose of any Restricted Securities (other than those securities
included in the registration) during the up to one hundred eighty- (180-) day
period following the effective date of a registration statement filed in
connection with the public offering of the Company's securities, provided that
all officers and directors enter into similar agreements. The obligations
described in this Section 1.14 shall not apply to a registration relating
-14-
solely to employee benefit plans on Form S-1 or Form S-8 or similar form that
may be promulgated in the future. The Company may impose stop-transfer
instructions with respect to the securities subject to the foregoing restriction
until the end of the one hundred eighty (180) day period.
1.15 Option to Conduct Foreign Registration. To the extent the
--------------------------------------
Company is obligated to register securities pursuant to this Section 1, such
obligation may be satisfied, at the Company's option, by effecting a
registration in a jurisdiction other than the United States, pursuant to the
applicable securities laws of such jurisdiction. In the event the Company
effects a registration in a foreign jurisdiction, provided that in the good
faith judgment of the board of directors of the Company registration in such
jurisdiction is in the best interests of the Company and its shareholders, and
the Holders will not be materially adversely affected by such choice of
jurisdiction, (i) the rights of holders of Registrable Securities pursuant to
Section 1.3 hereof shall apply to such registration, and (ii) references in this
Section 1 to laws, rules, and customary practices applicable to a registration
under United States securities laws shall be interpreted so as to reflect as
nearly as possible the relevant laws, rules, and custo mary practices related to
a securities registration in the jurisdiction in which such registration is
made.
1.16 Coordination of Prior Rights. Certain of the Shareholders,
----------------------------
constituting a majority in interest of the Holders (as defined in the
Registration Rights Agreement, as amended) hereby agree that the execution and
delivery of this Restated Shareholders' Agreement is an amendment of the
Registration Rights Agreement, as amended, and that the registration rights
contained therein shall be null and void as of the execution hereof and shall be
superseded in their entirety by the terms of this Restated Shareholders'
Agreement.
SECTION 2
VOTING
------
2.1 Voting of Shares. The Shareholders each agree to hold all shares of
----------------
voting capital stock of the Company registered in their respective names or
beneficially owned by them or any of their respective affiliates as of the date
hereof (and any and all other securities of the Company legally or beneficially
acquired by each such Shareholder after the date hereof) (hereinafter
collectively referred to as the "Shares") subject to, and to vote the Shares in
accordance with, the provisions of this Section 2.
2.2 Election of Directors. Each time the Shareholders shall meet, or
---------------------
act by written consent in lieu of acting at a meeting, for the purpose of
electing one or more directors of the Company, each Shareholder agrees to vote
its Shares for the election of (i) three (3) representatives of Sunset Partners
(hereinafter defined as Sunset Partners, L.P., Sunset Partners II, L.P., and
Sunset Partners III, L.P. collectively), and (ii) one (1) representative of
Pomona Capital and its affiliated partnerships; provided, however, that each
Shareholder also agrees to vote its shares for the election of two (2)
-15-
representatives of the holders of Series C Preferred Stock as two additional
directors (resulting in a board of nine (9) directors) if the Company fails to
meet any one or more of the following three criteria for the period (the
"Relevant Period") commencing on the date hereof and ending December 31, 1996:
(a) average gross revenues per room of not less than $30 per month
for the Relevant Period,
(b) at least 100,000 rooms installed by the end of the Relevant
Period, and
(c) a capital cost per room (including the cost of interactive
shopping, but excluding the cost of televisions) of not more than $600 based on
rooms added during the Relevant Period.
The obligation assumed by each Shareholder hereunder to vote its Shares as set
forth above shall be deemed to be a right coupled with an interest in favor of
each other Shareholder, and each other Shareholder may, by acting through a
person designated by Shareholders holding a majority of the Shares subject to
this provision, vote such Shareholder's Shares by proxy. The parties to this
Restated Shareholders' Agreement shall vote their Shares to maintain a board of
seven (7) directors, unless one or more of the foregoing three criteria are not
met during the Relevant Period. In which case, the parties hereto shall vote
their Shares to increase the board to nine (9) directors with the additional two
(2) directors nominated and elected as set forth above.
2.3 Successors; Directors. In the event that any of the individuals or
---------------------
entities identified in Section 2.2 is unable or unwilling to serve on the Board
of Directors of the Company, his successor shall be chosen by the person or
entity (or persons or entities) whom that director is representing. With
respect to the representatives of holders of the Series C Preferred Stock, the
representatives shall be selected by a majority of the Series C Preferred Stock.
2.4 Effectiveness; Termination. This Section 2 shall become effective
--------------------------
on the date hereof. This Section 2 shall terminate upon the closing of the
Company's first offering of voting equity securities to the public pursuant to a
registration statement filed with the Securities and Exchange Commission. If
Sunset Partners holds less than fifty percent (50%) of the shares of Series C
Preferred Stock it holds on the effective date of this Restated Shareholders'
Agreement, then each Shareholder agrees to vote its shares for the election of
two (2) representatives of Sunset Partners. If Sunset Partners holds less than
twenty-five (25%) of the shares of Series C Preferred Stock it holds on the
effective date of this Restated Shareholders' Agreement, then each Shareholder
agrees to vote its shares for the election of one (1) representative of Sunset
Partners. With respect to Sunset Partners, the provisions of this Section 2
shall terminate when Sunset Partners holds less than ten percent (10%) of the
shares of Series C Preferred Stock it holds on the effective date of this
Restated Shareholders' Agreement. With respect to Pomona Capital, the provisions
of this Section 2 shall terminate when Pomona Capital and its affiliated
partnerships hold less than fifty percent (50%) of the shares of Series C
Preferred Stock such entities hold on the effective date of this Restated
Shareholders' Agreement.
-16-
2.5 Representations. Each Shareholder represents and warrants to the
---------------
other Shareholders that (a) it now owns (or, upon the distribution thereof, will
own) the Shares, free and clear of liens or encum brances, and has not, prior
to the date of this Restated Shareholders' Agreement, executed or delivered any
proxy or entered into any other voting agreement or similar arrangement with
respect to the Shares other than one which has expired or terminated prior to
the date hereof, and (b) such Shareholder has full power and capacity to
execute, deliver and perform this Restated Shareholders' Agreement, which has
been duly executed and delivered by, and evidences the valid and binding
obligation of, such Shareholder enforceable in accordance with its terms.
SECTION 3
RIGHT OF FIRST REFUSAL
----------------------
3.1 The Right. The Company hereby grants to (a) each holder of Series C
---------
Preferred Stock and each holder of Series D Preferred Stock of the Company and
(b) holders of more than five percent (5%) of the voting capital of the Company
prior to the issuance of the Series C Preferred Stock (collectively the Right
Holders and each a "Right Holder"), the right to purchase such Right Holder's
Pro Rata Share (as defined below) of any New Securities (as defined below) which
the Company may, from time to time, proposed to sell and issue, on the same
terms and conditions and for the same price as set forth in the notice described
in Subsection 3.2 hereof. Each Right Holder's "Pro Rata Share" for purposes of
this right of first refusal is the ratio of (i) the total number of shares of
Common Stock held by Shareholder as of the date of the notice, assuming the
conversion of all Preferred Stock, to (ii) the total aggregate shares of Common
Stock outstanding assuming the conversion of all Preferred Stock.
3.2 Notice. The Company shall give to such Right Holder written notice
------
of the proposed offer to sell and issue any of the new Securities, which written
notice shall contain the terms of such proposed sale in reasonable detail and
shall be delivered to such Right Holder not less than twenty (20) days prior to
the date such securities are proposed to be sold and issued. Such Right Holder
shall have the right to exercise the option granted pursuant to Subsection 3.1
above by giving written notice thereof to the Company prior to the expiration of
such twenty (20) day period, specifying the amount of securities which such
Right Holder desires to purchase. In the event such Right Holder does not give
such notice, then the Company shall be free to sell and issue such New
Securities to other parties, but only on the same terms as set forth in said
written notice. If the Company does not sell and issue such New Securities on
such terms within one hundred eighty (180) days of the expiration of the Right
Holder's right of first refusal hereunder, then such New Securities shall once
again be subject to the right of first refusal set forth in this Section 3.
3.3 New Securities. The term "New Securities" as used in this Section 3
--------------
shall mean any shares of the Company's Common Stock or Preferred Stock, rights,
options or warrants to purchase such shares of Common Stock or Preferred Stock,
Convertible Securities, and securities of any type
-17-
whatsoever that are, or may become, convertible into such shares of Common Stock
or Preferred Stock; provided that "New Securities" does not include:
(a) Common Stock issuable upon conversion of Preferred Stock or
exercise of common stock warrants (to the extent such common stock warrants are
outstanding as of the closing of the transactions contemplated by the Series D
Agreement) or upon conversion of the Series C Preferred Stock issuable upon
exercise of the Series C Warrants.
(b) securities issued in an underwritten public offering, pursuant
to an effective registration statement under the Securities Act of 1933, as
amended;
(c) securities issued pursuant to the acquisition of another
corporation by merger, purchase of all or substantially all of the assets, or
other reorganization;
(d) securities issued to employees, officers, or directors of, or
consultants to, the corporation, pursuant to stock option, purchase or bonus
plans or agreements on terms approved by the Board of Directors;
(e) securities issued to dealers, trade vendors, sales
representatives, equipment lessors, commercial lenders (or their guarantors) or
joint venturers of the Company on terms approved by the Board of Directors; and
(f) securities issued to effect any stock split or stock dividend
by the Company.
3.4 Termination. The rights granted by this Section 3 shall terminate
-----------
immediately prior to the closing of a public offering of the Company's equity
securities pursuant to registration statement filed under the Securities Act of
1933, as amended.
SECTION 4
TRANSFER RESTRICTIONS; RIGHTS OF FIRST OFFER
--------------------------------------------
4.1 Restrictions on Transfer. The Shareholders agree not to sell,
------------------------
assign, pledge, or in any other manner transfer any of the Company's securities
held by them, or any right or interest therein, whether voluntarily or by
operation of law, or otherwise, except (a) sales made in a registered public
offering or in an open market transaction, or (b) private sales for cash
consideration made subject to the rights of first offer specified in this
Section 4. The foregoing notwithstanding, no sale, assignment, pledge, or
transfer, of any of the Company's securities, or any right or interest therein,
whether voluntarily or by operation of law, or otherwise, may be made by any
Shareholder (i) to an Adverse Person, as defined below, or (ii) that would
result in such transferee holding in excess of ten
-18-
percent (10%) of voting capital stock of the Company registered in their
respective names or beneficially owned by them or any of their respective
affiliates as of the date thereof.
4.2 Adverse Person. The term "Adverse Person" as used in this Section 4
--------------
shall mean any corporation or entity which at such time is a competitor of the
Company or any affiliate of such corporation or entity.
4.3 Right of First Offer. Pursuant to the restrictions set forth in
--------------------
Section 4.1 above:
(a) Prior to any transfer of the Company's securities, the
Transferring Shareholder (the "Transferring Shareholder") shall promptly notify
the Company and all holders of Series C and Series D Preferred Stock (not
including the Transferring Shareholder) (the "Remaining Holders") of the terms
and conditions of such purchase offer (the "Purchase Offer"). Such notice shall
set forth (a) the Transferring Shareholder's bona fide intention to transfer
such securities; (b) the securities to be transferred; and (c) the cash price
or, in reasonable detail, other consideration, per share for which the
Transferring Shareholder proposes to transfer such securities.
(b) For twenty (20) days following receipt of such notice, the
Company shall have the option to purchase all or any portion of the securities
specified in the notice upon the terms specified in the Purchase Offer. If the
Company elects to purchase any of the securities specified in the notice, the
Company will deliver written notice to the Transferring Shareholder. Settlement
for the purchase of the securities shall be made as provided below.
(c) In the event the Company does not elect to acquire all of the
securities specified in the Purchase Offer, the Company shall so notify the
Remaining Holders who at such time shall have the option to purchase such
securities on a pro rata basis determined by applying (i) the ratio of the
number of shares of Common Stock held by each Remaining Holder as of the date of
the notice to the number of shares of Common Stock held by the Remaining Holders
in aggregate, assuming the conversion of all Preferred Stock in both cases, to
(ii) the number of securities available through the Purchase Offer, provided
that the securities allocated to any Remaining Holder that does not elect to
acquire the securities shall be allocated pro rata to those that do elect. If
any Remaining Holder elects to purchase any of the remaining securities
specified in the notice, such Remaining Holder shall deliver written notice to
the Transferring Shareholder and the Company. Settlement for the purchase of the
securities shall be made as provided below.
(d) In the event the Remaining Holders elect not to purchase all of
the remaining securities specified in the Transferring Shareholder's notice, the
Transferring Shareholder may sell to any transferee (subject to Sections 4.1 and
4.2 above) on the terms of the Purchase Offer the remainder of the securities
specified in the notice provided that such sale closes within sixty (60) days of
the expiration of the Remaining Holders' twenty (20) day notice period and that
the sale is on terms substantially similar to those specified in the
Transferring Shareholder's notice.
-19-
(e) Settlement for any or all of the securities elected to purchase
under this Section 4 shall be made in cash within five (5) business days after
the Transferring Shareholder receives the notice from the Company or the
Remaining Holders that it is electing to purchase some or all of the securities;
provided, however, that if the terms of the Purchase Offer called for payment
other than in cash, the Company or the Remaining Holders shall pay for such
securities on the same terms and conditions set forth in the Transferring
Shareholders' notice.
(f) Any sale or transfer, or purported sale or transfer, of the
Company's securities shall be null and void unless the terms, conditions and
provisions of this Section 4 are strictly observed and followed. The Company
will not be required (i) to transfer on its books any shares that have been
sold, gifted or otherwise transferred in violation of this Restated
Shareholders' Agreement, or (ii) to treat as owner of such shares, or to accord
the right to vote or pay dividends to any purchaser, donee or other transferee
to whom such shares may have been so transferred.
(g) Each certificate representing securities now or hereafter owned
by the Shareholders or issued to any permitted transferee shall be endorsed with
the following legend or its substantial equivalent:
"THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN RIGHT OF FIRST OFFER
COPIES OF WHICH MAY BE OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST TO THE
SECRETARY OF THE CORPORATION."
(h) The legend shall be removed and the right of first offer shall
terminate immediately prior to the closing of the sale of the Company's Common
Stock in a bonafide underwritten public offering registered under the Act.
4.4 Permitted Transfers. The transfer restrictions and rights of first
-------------------
offer of the Company and of the Series C and Series D Preferred Stock shall not
pertain or apply to (i) any transfer to the spouse or to a trust for the benefit
of the Transferring Shareholder or his or her spouse, brother(s), sister(s),
ancestors, descendants, in any combination, (ii) any sale of securities pursuant
to any exercise of regis tration rights as set forth in Section 1 of this
Restated Shareholders' Agreement, (iii) any affiliates of the Transferring
Shareholder, or (iv) any distribution to the partners of a Transferring
Shareholder which is a limited partnership, which distribution is consistent
with the terms of such limited partnership agreement; provided that (A) the
Transferring Shareholder shall inform the Company and Remaining Holders of such
transfer prior to effecting it and (B) except for Section 4.4(ii), the
transferee (the "Permitted Transferee") shall furnish the Company with a written
agreement to be bound by and comply with all provisions of this Restated
Shareholders' Agreement applicable to the shareholder.
-20-
SECTION 5
COORDINATION OF PRIOR RIGHTS OF FIRST REFUSAL
---------------------------------------------
5.1 Second Series B Agreement Rights of First Refusal. Pursuant to
-------------------------------------------------
Section 10.4 ("Entire Agreement; Amendment and Waiver") of the Second Series B
Agreement, as amended, certain of the undersigned Shareholders, constituting a
majority in interest of the persons entitled to the right of first refusal set
forth in Section 9 ("Right of First Refusal") therein, hereby agree that the
execution and delivery of this Restated Shareholders' Agreement is an amendment
of the Second Series B Agreement, as amended, and that the rights of first
refusal contained therein shall be null and void as of the execution hereof and
shall be superseded in their entirety by the terms of this Restated
Shareholders' Agreement.
5.2 Series A Agreement Rights of First Refusal. Pursuant to Section 10.4
------------------------------------------
("Entire Agreement; Amendment and Waiver") of the Series A Agreement, certain of
the undersigned Shareholders, constituting a majority in interest of the holders
of Securities (as defined therein) and the Company hereby agree that the
execution and delivery of this Restated Shareholders' Agreement is an amendment
of the Series A Agreement and that the rights of first refusal contained in
Section 9 ("Right of First Refusal of Company and Purchasers") therein shall be
null and void as of the execution hereof and shall be superseded in their
entirety by the terms of this Restated Shareholders' Agreement.
SECTION 6
COORDINATION OF PRIOR COVENANTS RIGHTS
--------------------------------------
6.1 Series B Agreement Covenants. Pursuant to Section 9.4 ("Entire
----------------------------
Agreement; Amendment and Waiver") of the Series B Agreement certain of the
undersigned Shareholders, constituting a majority in interest of the holders of
Securities (as defined therein) and the Company hereby agree that the execution
and delivery of this Restated Shareholders' Agreement is an amendment of the
Series B Agreement, and that the covenant rights set forth in Section 7
("Covenants of the Company and the Purchaser") of the Series B Agreement shall
be null and void as of the execution hereof and shall be superseded in their
entirety by the terms of this Restated Shareholders' Agreement.
6.2 Series A Agreement Covenants. Pursuant to Section 10.4 ("Entire
----------------------------
Agreement; Amendment and Waiver") of the Series A Agreement, certain of the
undersigned Shareholders, constituting a majority in interest of the holders of
Securities (as defined in the Series A Agreement) and the Company hereby agree
that the execution and delivery of this Restated Shareholders' Agreement is an
amendment of the Series A Agreement and that the covenant rights set forth in
-21-
Section 7 ("Covenants of the Company and the Purchaser") shall be null and void
as of the execution hereof and shall be superseded in their entirety by the
terms of this Restated Shareholders' Agreement.
6.3 Second Series B Agreement Covenants. Pursuant to Section 10.4
-----------------------------------
("Entire Agreement; Amendment and Waiver") of the Second Series B Agreement, as
amended, certain of the undersigned Shareholders constituting a majority in
interest of the holders of Securities (as defined therein) and the Company
hereby agree that the execution and delivery of this Restated Shareholders'
Agreement is an amendment of the Second Series B Agreement, as amended, and that
the covenant rights set forth in Section 7 ("Covenants of the Company and
Purchaser") shall be null and void as of the execution hereof and shall be
superseded in their entirety by the terms of this Restated Shareholders'
Agreement.
SECTION 7
COORDINATION OF PRIOR CO-SALE AGREEMENT
---------------------------------------
Pursuant to Section 5.5 of the Amended and Restated Co-Sale Agreement dated
March 17, 1993, by and between Robert R. Creager, the Company, and certain
Securityholders of the Company (the "Restated Co-Sale Agreement'), certain of
the undersigned Shareholders, constituting the Major Shareholder and the
Preferred Shareholders holding a majority of the Preferred Shares (as those
terms are defined therein) and the Company hereby agree that the Restated Co-
Sale Agreement is null and void as of the execution hereof and that this
Restated Shareholders' Agreement supersedes any and all rights contained
therein.
SECTION 8
COORDINATION OF PRIOR VOTING AGREEMENT
--------------------------------------
Pursuant to Section 3.3 of the Voting Agreement (the "Voting Agreement")
dated as of October 15, 1992, by and among the Company and certain
Securityholders of the Company as amended by the Amendment and Agreement to be
Bound dated March 17, 1993, the undersigned Shareholder, constituting holders of
more than fifty percent (50%) of the Shares (as defined therein) subject to the
Voting Agreement, hereby agree that the execution and delivery of this Restated
Shareholders' Agreement is an amendment of the Voting Agreement, and that the
Voting Agreement, as amended, is null and void as of the execution hereof and
that this Restated Shareholders' Agreement supersedes any and all rights
contained therein.
SECTION 9
COORDINATION OF PRIOR RIGHT OF FIRST OFFER AGREEMENT
----------------------------------------------------
-22-
The Company and COMSAT Video Enterprises, Inc. hereby agree to renegotiate
the Right of First Offer Agreement dated as of March 15, 1993 in good faith
subsequent to the execution of this Restated Shareholders' Agreement.
SECTION 10
GENERAL PROVISIONS
------------------
10.1 Necessary Actions. If and whenever the Shares are sold by a
-----------------
Shareholder or its representative, the Shareholder or its representative shall
do all things and execute and deliver all documents and make all transfers, and
cause any transferee of the Shares to do all things and execute and deliver all
documents, as may be necessary to consummate such sale consistent with this
Restated Shareholders' Agreement.
10.2 Equitable Relief. The parties hereto declare that it is impossible
----------------
to measure in money the damages which will accrue to a party hereto or to their
heirs, personal representatives, or assigns by reason of a failure to perform
any of the obligations under this Restated Shareholders' Agreement and agree
that the terms of this Restated Shareholders' Agreement shall be specifically
enforceable. If any party hereto or his heirs, personal representatives, or
assigns institutes any action or proceeding to specifi cally enforce the
provisions hereof, any person against whom such action or proceeding is brought
hereby waives the claim or defense therein that such party or such personal
representative has an adequate remedy at law, and such person shall not offer in
any such action or proceeding the claim or defense that such remedy at law
exists.
10.3 Reclassifications, etc. In the event that subsequent to the date of
----------------------
this Restated Shareholders' Agreement any shares or other securities are issued
on, or in exchange for, any of the Shares held by the Shareholders by reason of
any stock dividend, stock split, consolidation of shares, reclassification,
merger or consolidation involving the Company, such shares or securities shall
be deemed to be Shares for purposes of this Restated Shareholders' Agreement.
10.4 Further Assurances. Each Shareholder agrees to execute and deliver
------------------
such additional documents and take such additional actions as may be necessary
or reasonably desirable to carry out the intent of this Restated Shareholders'
Agreement.
10.5 Governing Law. This Restated Shareholders' Agreement shall be
-------------
governed by and construed according to the laws of the State of California.
10.6 Survival. The representations, warranties, and covenants of the
--------
parties made herein shall survive the Closing.
-23-
10.7 Successors and Assigns. Except as otherwise expressly limited
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto.
10.8 Entire Agreement; Amendment and Waiver. This Restated
--------------------------------------
Shareholders' Agreement and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subject matters hereof and thereof. Except as provided in
Section 1.12, any term of this Restated Shareholders' Agreement may be amended
and the observance of any term hereof may be waived (either prospectively or
retroactively and either generally or in a parti cular instance) only with the
written consent of more than 75% of the Holders and the written consent of the
Company. Any amendment or waiver effected in accordance with this Section 10.8
shall be binding upon each Holder and the Company. In addition, the Company may
waive performance of any obligation owing to it, as to some or all of the
Holders, or agree to accept alternatives to such performance, without obtaining
the consent of any Holder.
10.9 Rights of Holders. Each Holder shall have the absolute right to
-----------------
exercise or refrain from exercising any right or rights that such Holder may
have by reason of this Restated Shareholders' Agreement, including without
limitation the right to consent to the waiver of any obligation of the Company
under this Restated Shareholders' Agreement and to enter into an agreement with
the Company for the purpose of modifying this Restated Shareholders' Agreement
or any agreement affecting any such modification, and such Holder shall not
incur any liability to any other Holder or Holders with respect to exercising or
refraining from exercising any such right or rights.
10.10 Notices, etc. All notices and other communications required or
-------------
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (i) if to a Holder, at the address such Holder shall have furnished to
the Company in writing, or (ii) if to the Company, one copy to its principal
executive offices addressed to the attention of the Corporate Secretary, or at
such other address as the Company shall have furnished to the Holders, and
another copy to the Company's legal counsel, Wilson, Sonsini, Goodrich & Rosati,
650 Page Mill Road, Palo Alto, California 94304-1050, to the attention of Thomas
C. DeFilipps, Esq.
10.11 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power, or remedy accruing to any party upon any breach or default under this
Restated Shareholders' Agreement, shall be deemed a waiver of any other breach
or default theretofore or thereafter occurring. Any waiver, permit, consent, or
approval of any kind or character on the part of any party of any breach or
default under this Restated Shareholders' Agreement, or any waiver on the part
of any party of any provisions or conditions of this Restated Shareholders'
Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this Restated
Shareholders' Agreement or by law or otherwise afforded to any of the parties,
shall be cumulative and not alternative.
-24-
10.12 References. Unless context otherwise requires, any reference to
----------
a "Section" refers to a section of this Restated Shareholders' Agreement. Any
reference to "this Section" refers to the whole numbered section in which such
reference is contained.
10.13 Severability. If any provision of this Restated Shareholders'
------------
Agreement is held to be unenforceable under applicable law, then such provision
shall be excluded from this Restated Shareholders' Agreement and the balance of
this Restated Shareholders Agreement shall be interpreted as if such provision
were so excluded and shall be enforceable in accordance with its terms. The
court in its discretion may substitute for the excluded provision an enforceable
provision which in economic substance reasonably approximates the excluded
provision.
10.14 Counterparts. This Restated Shareholders' Agreement may be
------------
executed in any number of counterparts, each of which shall be deemed an
original and enforceable against the parties actually executing such
counterpart, and all of which together shall constitute one instrument.
-25-
[Signature Page to Amended and Restated Shareholders' Agreement]
IN WITNESS WHEREOF, the parties have caused this Restated Shareholders'
Agreement to be duly executed by their duly authorized officers, all as of the
date first above written.
COMPANY:
MAGINET CORPORATION
By:/s/ James A. Barth
--------------------------------
Name: James A. Barth
------------------------------
Title: Exec. Vice President & CFO
-----------------------------
-26-
[Signature Page to Amended and Restated Shareholders' Agreement]
EXISTING RIGHTS HOLDERS:
/s/ Robert R. Creager
-----------------------------------
ROBERT R. CREAGER
SUNSET PARTNERS, L.P.
By: /s/ Stuart J. Ellman
--------------------------------
Name: Stuart J. Ellman
------------------------------
Title: Member of GP
-----------------------------
SUNSET PARTNERS II, L.P.
By: /s/ Stuart J. Ellman
-------------------------------
Name: Stuart J. Ellman
-----------------------------
Title: Member of GP
----------------------------
SUNSET PARTNERS III, L.P.
By: /s/ Stuart J. Ellman
-------------------------------
Name: Stuart J. Ellman
-----------------------------
Title: Member of GP
----------------------------
-27-
[Signature Page to Amended and Restated Shareholders' Agreement]
SERIES D HOLDER:
FESTIVAL COMPANY, INC.
By:/s/ Jansen Wiraatmaja
--------------------------------
Name: Jansen Siraatmaja
-----------------------------
Title: Director
----------------------------
AIA CAPITAL INVESTMENT CO., LTD.
By: /s/ Jaime C. Gonzalez
--------------------------------
Name: Jaime C. Gonzalez
-----------------------------
Title: Director
--------
/s/ Koya Aoi
-----------------------------------
KOYA AOI
/s/ Peter Huang
-----------------------------------
PETER HUANG
SKANDIA ASIA LIMITED
By: /s/ Torbjorn Segerstedt
--------------------------------
Name: Torbjorn Segerstedt
-----------------------------
Title: Managing Director
----------------------------
-28-
EXHIBIT A
---------
SHAREHOLDERS
- ------------
AIA Capital Investment Co., Ltd.
Koya Aoi
Allan Ashmead
Asia Pacific Growth Fund, L.P.
Bancorp Hawaii Small Business Investment Company, Inc.
Cornelius Bond
Clarion Capital Corporation
Comsat Video Enterprises, Inc.
Robert Creager
CSK Venture Capital Co., Ltd. As Investment Manager For CSK-1(a) Investment Fund
CSK Venture Capital Co., Ltd. As Investment Manager for CSK-1(b) Investment Fund
Dunwoodie Family Trust
Revocable Trust of Jarold A. Evans U/T/D April 19, 1994
Festival Company, Inc.
Freidenrich Family Trust
Hakman Capital Corporation
Peter Huang
H & Q PPV Investors, L.P.
Eric Hass
Joseph S. Hrouda
J.F. Shea Co., Inc.
Willard L. Kauffman
The Walter Loewenstern, Jr. Separate Property Trust U/D/T dated 2/12/90
W. Patrick McDowell
Nikko Capital Co., Ltd
N.C. No. 2, Investment Partnership
O'Rourke Investment Corporation
OSCCO III, L.P.
Partech International
Pomona Capital, L.P.
Rogers Family Trust
R & W Ventures II
Skandia Asia Limited
SOF Venture Capital, L.P.
SP Venture Capital
SP Offshore Venture Capital, L.P.
Sunset Partners, L.P.
Sunset Partners II, L.P.
Sunset Partners III, L.P.
Unterberg Harris Interactive Media Limited Partnership C.V.
Gunnar Wetlesen
Michael W. Wilsey
WS Investments 94A
ADDITIONAL RIGHTS HOLDERS
- -------------------------
The Mutual Life Insurance Company of New York
Namtor BVC L.P.
New York Life Insurance Company
Silicon Valley Bank
Waslic Company II
Hambrecht & Quist Guaranty Finance, L.P.