Exhibit 10.12
KSO CASH RIGHT AGREEMENT
This agreement (the "AGREEMENT") is entered into by and among WiderThan
Co., Ltd. ("WT"), in its capacity as the issuer of the KSOs (as defined below),
Melody Share Corporation, a Cayman Islands company ("CAYCO") and _____________
(the "KSO HOLDER") and is effective as of August 10, 2005 (the "EFFECTIVE
DATE").
PREAMBLE
WHEREAS the records of WT indicate that the KSO Holder is the holder of
Korean Stock Options, as identified on Exhibit A attached hereto (the "KSOS");
WHEREAS, Cayco is the holder of certain shares of Series C Convertible,
Redeemable Preferred Shares of (the "SERIES C PREFERRED SHARES"), which shares
are convertible into common shares of WT ("COMMON SHARES") immediately prior to
an IPO (as defined below);
WHEREAS, the parties hereto understand that WT intends to undertake an
underwritten initial public offering of its Common Shares pursuant to the
effective registration statement filed with the U.S. Securities Exchange
Commission under the U.S. Securities Act of 1933, as amended (an "IPO");
WHEREAS, in connection with the IPO, WT and the KSO Holder desire that the
KSO Holder's outstanding KSOs listed on Exhibit A hereto be canceled in exchange
for the cash payments described below, which cash payments will, subject to the
provisions set forth below, arise from the sale of the number of American
Depository Shares that correspond with the number of Common Shares into which
the number of Series C Preferred Shares set forth on Exhibit B attached hereto
(and held by Cayco for the benefit of the KSO Holder) convert (the "ADSS").
Pursuant to this Agreement, each party hereto agrees to the following:
1. Cancellation of KSOs. Effective as of the Effective Date, all of the
KSO Holder's outstanding KSOs listed on Exhibit A hereto, whether vested or
unvested, shall automatically be canceled and any and all rights the KSO Holder
may have had thereunder shall terminate.
2. Consideration for Cancellation of KSOs.
(a) Amount of Cash Payment. In consideration for the KSO Holder's
agreement to the cancellation of the outstanding KSOs listed on Exhibit A hereto
(whether vested or unvested) held by the KSO Holder immediately prior to the
date of this Agreement, the KSO Holder will be entitled to receive from Cayco
two lump sum cash payments (the "INSTALLMENT PAYMENTS", as such term is defined
in Section 2(b) below) in the manner set forth on Exhibit C attached hereto and
payable in accordance with the provisions of Section 2(c) below, subject to the
sale by Cayco of the ADSs as described above.
(b) Interest. Within ten (10) business days following the IPO
Closing Date (as such term is defined in Section 3(a) below), Cayco shall
deposit an amount equal to the First Installment and Second Installment (as such
terms are defined in Exhibit C hereto) (each, an "INSTALLMENT PAYMENT") and the
IPO Price Protection Shares Cash Payment (as such term is defined in Exhibit C
hereto), if applicable, in a standard interest-bearing U.S. money market account
on behalf of the KSO Holder. Each Installment Payment and IPO Price Protection
Shares Cash Payment, if applicable, shall then accrue interest, at such rate and
at such time(s) as the terms of such money market account shall provide, from
the date on which the amount of the Installment Payments and IPO Price
Protection Shares Cash Payments, if applicable, was deposited in such account
through the applicable Payment Date (the total amount of all such interest
earned on each Installment Payment and IPO Price Protection Shares Cash Payment,
if applicable, through the applicable Payment Date provided in Section 2(c)
below, the "INTEREST PAYMENT").
(c) Payment and Payment Dates. Subject to Section 2(a) and Section 3
of this Agreement, Cayco shall pay the KSO Holder: (i) the sum of (x) the amount
of the First Installment, (y) one-half of the IPO Price Protection Shares Cash
Payment, and (z) the applicable Interest Payment, on December 21, 2006 or
earlier, if so instructed by both WT Investor Corp., a Delaware corporation
("WTIC") and WT (the "FIRST PAYMENT DATE"); and (ii) the sum of (x) the amount
of the Second Installment, (y) one-half of the IPO Price Protection Shares Cash
Payment, and (z) the applicable Interest Payment, on July 15, 2007 or earlier,
if so instructed by both WTIC and WT (the "SECOND PAYMENT DATE", together with
the First Payment Date, the "PAYMENT DATES").
3. Expiration of KSOs. Notwithstanding anything set forth in this
Agreement to the contrary, in the event that (i) the consummation of an IPO (the
"IPO CLOSING DATE") does not occur on or prior to December 15, 2005, (ii) the
Administrator (as such term is defined in the Administration Agreement (as
hereinafter defined)) requests that WT redeem all of the Series C Preferred
Shares held by Cayco for the benefit of all KSO Holders pursuant to the
Administration Agreement (the "Redemption"), (iii) all of the Series C Preferred
Shares are put by by Silicon Valley Bank to any of WTIC, Nokia Venture Partners
II, L.P., i-Hatch WTC Holdings, L.L.C., WTC Investment LLC and/or SAIF Capital
Limited (any of the foregoing, an "INVESTOR"), pursuant to the applicable
agreements governing such put right, or (iv) upon the passing of a special
resolution prior to an IPO by the members of Cayco for the winding up of the
Company (or the actual winding up of Cayco), then, as of the earlier of such
dates (the date of the first to occur of any of the foregoing, the "EXPIRATION
DATE"), Section 2 of this Agreement shall terminate on the Expiration Date
without, subject to Section 3(b), further obligation or liability of Cayco, WT
to the KSO Holder with respect to the matters referenced therein; provided,
however, that if the Expiration Date is expected to occur solely by reason of
clause (i) above, and Cayco is instructed under the Administration Agreement to
extend the effectiveness of this Agreement beyond December 15, 2005, then the
effectiveness of this Agreement shall be extended through the earlier to occur
of (x) the date to which Cayco is instructed under the Administration Agreement
to extend the effectiveness of this Agreement and (y) the effective date of a
Redemption, in which case all references to "Expiration Date" contained in this
Agreement shall be deemed to refer to such later date. For purposes of this
Agreement, the term "Administration Agreement" shall mean that certain
Administration Agreement between Cayco and Maples Finance Jersey Limited dated
as of the same date hereof.
4. Sale Transaction.
(a) Sale Transaction Consideration. In the event that at any time
prior to the IPO there occurs a Sale Transaction, Section 2(a) and (b) and
Section 3 of this Agreement shall terminate on such date, and instead the KSO
Holder shall become entitled to receive such consideration (in cash, in kind or
a combination thereof) in respect of the number of Series C Preferred Shares
that the KSO Holder would have been entitled to have received if the KSO Holder
were holding, immediately prior to the time of the Sale Transaction, an option
to purchase the number of "REGULAR CAYCO SHORTS" as identified on Exhibit B
(and, if applicable, the "IPO PRICE PROTECTION SERIES C PREFERRED SHARES " as
identified on Exhibit B), that had a per share exercise price equal to the US
dollar equivalent of Korean Won 9,520 on the date of the Purchase Date, which
option was exercised immediately prior to the Sale Transaction using a "cashless
exercise" or "net exercise" mechanic (the "SALE TRANSACTION CONSIDERATION"). For
purposes of this Agreement, "Sale Transaction" shall have the same meaning as
such term is set forth in
the KSO. For the avoidance of doubt, upon the occurrence of any IPO prior to the
occurrence of any Sale Transaction, this Section 4 shall cease to be of any
further force and effect.
(b) Payment of Sale Transaction Consideration. The Sale Transaction
Consideration shall accrue interest in the same manner as the Installment
Payments would have accrued interest under Section 2(b) above, and shall be paid
(with such accrued interest) in two equal installments on each of the relevant
Payment Dates, to the extent the KSO Holder remains employed with WT through the
relevant Payment Dates or, if WT terminates the KSO Holder's employment other
than for cause prior to such relevant Payment Dates, in the same manner as the
Installment Payments would have been paid in accordance with the payment
procedure set forth in Section 2(c) above.
5. No Right to Continued Employment. Neither this Agreement nor the KSO
Holder's entitlement to any Installment Payment, Interest Payment or IPO Price
Protection Shares Cash Payment, if applicable, set forth herein constitutes an
employment contract between any of, WT, any of its affiliates, Cayco and the KSO
Holder. At no time shall the KSO Holder be considered, or otherwise become, an
employee of Cayco by virtue of the execution by Cayco of this Agreement.
6. Governing Law. This Agreement shall be governed by the laws of the
State of New York (and, to the extent applicable, U.S. Federal law), without
regard to the conflict of laws provisions thereof (other than as to matters of
U.S. Federal law). In the event of any dispute involving the matters addressed
in this Agreement, each party hereto waives any right it may otherwise have to a
jury trial.
7. Other Benefits. None of the Installment Payments, Interest Payments,
IPO Price Protection Cash Payments (if applicable), nor any payments referenced
in Section 3(c) or Section 4 above, shall be taken into account in computing the
KSO Holder's salary or compensation for the purposes of determining any benefits
or compensation under (a) any pension, retirement, life insurance or other
benefit plan of WT or its affiliates or (b) any agreement between WT or its
affiliates and the KSO Holder.
8. Taxes. The KSO Holder shall make all arrangements as may be necessary
to pay to WT all amounts necessary, if any, for the purpose of satisfying any
liability for any national or local income or other taxes required by law to be
withheld with respect to any payments made to the KSO Holder hereunder.
9. Limited Recourse and Non-Petition to Cayco; Recourse to WT
(a) The obligations of Cayco to the KSO Holder shall be limited to
the lesser of (i) the nominal amount of the claim of the KSO Holder determined
in accordance with the terms of this Agreement (other than this clause) (the
"CLAIM"); and (ii) the product of (x) the Net Proceeds divided by the aggregate
gross amount of all limited recourse obligations of Cayco ranking pari passu
with and including the Claim and (y) the nominal amount of the Claim, except in
the case of fraud, willful default and/or gross negligence on the part of Cayco,
in which case the KSO Holder shall have full rights to claim for any damages
(including attorneys' fees and expenses) incurred under this Agreement. In this
clause, "NET PROCEEDS" means the net proceeds of realisation of all the assets
of Cayco other than the ordinary share capital and the transaction fee charged
by Cayco after payment of, or provision for, all debts, costs, expenses and
other obligations of Cayco as determined by the directors of Cayco in their
absolute discretion, other than any limited recourse obligations ranking below
or pari passu with and including the Claim. If there are no Net Proceeds, no
debt shall be owed to the KSO Holder by Cayco and once the amount owed by Cayco
calculated in accordance with this clause has been paid, Cayco shall have no
further obligation in respect of the Claim, except in the case of fraud, willful
default and/or gross
negligence on the part of Cayco, in which case the KSO Holder shall have full
rights to claim for any damages (including attorneys' fees and expenses)
incurred under this Agreement.
(b) Except as expressly otherwise provided for in Section 10(a)
above and 10(d) below, the KSO Holder and Cayco each hereby acknowledges and
agrees that Cayco's obligations under this Agreement are solely the corporate
obligations of Cayco, and that the KSO Holder shall not have any recourse
against any of the directors, officers or employees of Cayco for any claims,
losses, damages, liabilities, indemnities or other obligations whatsoever in
connection with any transactions contemplated by this Agreement. Cayco also
hereby acknowledges and agrees that it shall have no recourse against WT, its
affiliates, or any of their respective directors, officers or employees for any
claims, losses, damages, liabilities, indemnities or other obligations under
this Agreement for any amounts payable to the KSO Holder hereunder.
(c) The KSO Holder shall not take any action or commence any
proceedings against Cayco to recover any amounts due and payable by Cayco under
this Agreement except as expressly permitted by the provisions of this Agreement
or in the case of fraud, willful default and/or gross negligence on the part of
Cayco, in which case the KSO Holder shall have full rights to claim for any
damages (including attorneys' fees and expenses) incurred under this Agreement.
The KSO Holder shall not take any action or commence any proceedings or petition
a court for the liquidation of Cayco, nor enter into any arrangement,
reorganization or insolvency proceedings in relation to Cayco whether under the
laws of the Cayman Islands or other applicable bankruptcy laws until after the
later to occur of the payment in respect of the Claim or the extinction of
Cayco's rights in respect of the Claim, except in the case of fraud, willful
default and/or gross negligence on the part of Cayco, in which case the KSO
Holder shall have full rights to claim for any damages (including attorneys'
fees and expenses) incurred under this Agreement.
(d) The KSO Holder hereby acknowledges and agrees that it shall have
no recourse against WT, its affiliates, or any of their respective directors,
officers or employees for any claims, losses, damages, liabilities, indemnities
or other obligations whatsoever in connection with any obligations of Cayco
under this Agreement. The KSO Holder further agrees he/she shall not take any
action or commence any proceedings against WT or any of its affiliates to
recover any amounts due and payable by Cayco under this Agreement, nor take any
action or commence any proceedings against WT or any of its affiliates in
connection with any action taken, or any failure to take any action, by any of
the Investors, WT or any of its affiliates in connection with any of the subject
matter identified herein; provided, however, in all events the KSO Holder shall
be entitled to take action or commence a proceeding against: WT in respect of
any failure by WT to issue Common Shares to Cayco when obligated to do so under
the terms of the Series C Preferred if and only if, in any such case, such
obligations arise by operation of the terms of this Agreement.
(e) WTA will reimburse Cayco for any employment taxes and
withholding taxes (and any penalties, interest or other expenses with respect
thereto) that Cayco pays by reason of the payment of any Installment Payment,
Interest Payment, IPO Price Protection Shares Cash Payment, if applicable, or
Sale Transaction Consideration.
10. Notices. Any notices which may be required or may be given under this
Agreement shall be in writing and shall be sufficiently delivered if provided in
writing, delivered personally, by certified or registered mail, return receipt
requested, by a nationally recognized international courier or via facsimile
confirmed in writing to the recipient, as follows:
If to Cayco: P.O. Box 309GT, Queensgate House,
South Church Street, George Town, Grand Cayman,
Cayman Islands, Attention:
If to WT: 17F, K1 REIT Building, 463 3-ga, Chungjeong-ro,
Seodaemun-gu, Seoul 120-709, Korea,
Attention: Don Rim
If to WTA: 11 West 42nd Street, 11th Floor, New York, New York,
10036, U.S.A., Attention: Dan Nemo
If to the KSO Holder: At the address set forth on the signature page
hereto.
11. Amendment and Modification; Counterparts. This Agreement may only be
amended by the mutual written agreement of all three parties hereto. This
Agreement may be executed in counterparts, each of which shall constitute an
original, but all of which taken together shall constitute one and the same
agreement.
[Signatures on next page.]
IN WITNESS WHEREOF, this Agreement is entered into as of the date first
above written.
Melody Share Corporation
Name: ____________________
Title: ____________________
WiderThan Co., Ltd.
Name: ____________________
Title: ____________________
KSO HOLDER
___________________________
EXHIBIT A
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Date of Grant Number of KSOs Exercise Price
- ------------- -------------- --------------
EXHIBIT B
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CALCULATIONS OF SERIES C PREFERRED SHARES
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(1) The amount of Series C Preferred Shares attributable to the KSO Holder in
respect of fifty percent (50%) of such holder's KSOs to be cancelled (the
"YEAR 1 KSO SHARES") is equal to _____________.
(2) The amount of Series C Preferred Shares attributable to the KSO Holder in
respect of the remaining fifty percent (50%) of such holder's KSOs to be
cancelled (the "YEAR 2 KSO SHARES") is equal to ________________.
For purposes of this Agreement, the term "Regular Cayco Shorts" shall refer to
the sum of the number of Year 1 KSO Shares and the number of Year 2 KSO Shares.
The number of Series C Preferred Shares attributable to the IPO price protection
mechanism referred to in Exhibit C (the "IPO PRICE PROTECTION SERIES C PREFERRED
SHARES") shall be ___________.
EXHIBIT C
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CALCULATION OF CASH PAYMENTS
----------------------------
(1) The amount payable in respect of Year 1 KSO Shares to be cancelled (the
"FIRST INSTALLMENT") is equal to the result of the product of (a) and (b),
where:
(a) equals the excess of (x) the amount of proceeds per Series C Preferred
Share received by Cayco upon its sale of the Series C Preferred Shares
(less the per Series C Preferred Share allocation of underwriter fees
payable and discounts taken in respect of the Series C Preferred Shares),
over (y) the equivalent amount of US Dollars equal to Korean Won of 9,520
on the Purchase Date;
(b) equals the total number of Year 1 KSO Shares.
(2) The amount payable in respect of Year 2 KSO Shares to be cancelled (the
"SECOND INSTALLMENT") is equal to the result of the product of (a) and (b),
where:
(a) equals the excess of (x) the amount of proceeds per Series C Preferred
Share received by Cayco upon its sale of the Series C Preferred Shares
(less the per Series C Preferred Share allocation of underwriter fees
payable and discounts taken in respect of the Series C Preferred Shares),
over (y) the equivalent amount of US Dollars equal to Korean Won of 9,520
on the Purchase Date;
(b) equals the total number of Year 2 KSO Shares.
(3) In the event that the price per share in the IPO is less than US$17.00,
then an amount shall be payable in respect of the IPO Price Protection
Series C Preferred Shares (the "IPO PRICE PROTECTION SHARES CASH PAYMENT"),
which amount shall equal the product of (a) and (b), where:
(a) equals the excess of (x) the amount of proceeds per Series C Preferred
Share received by Cayco upon its sale of the Series C Preferred Shares
(less the per Series C Preferred Share allocation of underwriter fees
payable and discounts taken in respect of the Series C Preferred Shares),
over (y) the equivalent amount of US Dollars equal to Korean Won of 9,520
on the Purchase Date; and
(b) equals the total number of IPO Price Protection Series C Preferred
Shares.
For the avoidance of doubt, in the event that the price per share in the
IPO is equal to or greater than US$17.00, then no IPO Price Protection
Shares Cash Payment shall be payable.