EXHIBIT 2.1
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STOCKHOLDERS AGREEMENT
by and among
HALLMARK ENTERTAINMENT, INC.,
LIBERTY MEDIA CORPORATION,
VISN MANAGEMENT CORP.,
CHASE EQUITY ASSOCIATES, L.P.
and
CROWN MEDIA HOLDINGS, INC.
dated as of
May 9, 2000
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
Section 1.1 Definitions.....................................................1
ARTICLE II
CORPORATE GOVERNANCE
Section 2.1 Composition of the Board of Directors of the Company............6
Section 2.2 Removal.........................................................6
Section 2.3 Vacancies.......................................................7
Section 2.4 Board Committees................................................7
Section 2.5 Termination of Rights and Obligations...........................7
Section 2.6 Limitation on Transactions with Affiliates......................7
Section 2.7 Directors' Indemnification......................................8
Section 2.8 Corporate Opportunities Policy..................................8
ARTICLE III
TRANSFERABILITY AND PURCHASE RIGHTS
Section 3.1 Restrictions on Transferability.................................9
Section 3.2 Restrictive Legend..............................................9
Section 3.3 Notice of Proposed Transfers; Securities Law Compliance........10
Section 3.4 Permitted Transfers............................................10
Section 3.5 Tag-Along Rights...............................................10
Section 3.6 Purchase Rights................................................12
ARTICLE IV
REGISTRATION RIGHTS
Section 4.1 Demand Registration............................................13
Section 4.2 Piggy-back Registration........................................15
Section 4.3 Registration Procedures........................................16
Section 4.4 Registration Expenses..........................................19
Section 4.5 Indemnification and Contribution...............................19
Section 4.6 Other Provisions...............................................23
ARTICLE V
RIGHTS RELATING TO INVESTMENT IN ODYSSEY
Section 5.1 Actions of Odyssey Governance Committee........................23
Section 5.2 Restriction on Transfer of the Company's Interests
in Odyssey.................................................26
Section 5.3 Termination of Rights and Obligations..........................26
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Section 5.4 Covenant to make Capital Contribution..........................26
ARTICLE VI
MISCELLANEOUS
Section 6.1 Entire Agreement...............................................26
Section 6.2 Amendment and Waiver...........................................26
Section 6.3 Notices........................................................26
Section 6.4 Assignment; Benefit............................................28
Section 6.5 Absence of Presumption.........................................29
Section 6.6 Counterparts...................................................29
Section 6.7 Headings.......................................................29
Section 6.8 Governing Law; Jurisdiction and Forum..........................29
Section 6.9 Specific Enforcement...........................................30
Section 6.10 Severability...................................................30
Section 6.11 After-Acquired Shares..........................................30
Exhibit A...Notice of Registration Statement and Selling Securityholder
Questionnaire
Exhibit B...Corporate Opportunities Policy
Exhibit C...Designated Representative of NICC
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STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of May 9, 2000 by
and among Hallmark Entertainment, Inc., a Delaware corporation ("HEI"), Liberty
Media Corporation, a Delaware corporation ("Liberty"), VISN Management Corp., a
Delaware corporation ("VISN"), Chase Equity Associates, L.P., a Delaware limited
liability partnership ("CEA" and together with Liberty and VISN, the "Minority
Stockholders" and the Minority Stockholders together with HEI, the "Initial
Stockholders") and Crown Media Holdings, Inc., a Delaware corporation (the
"Company").
W I T N E S S E T H :
WHEREAS, the Initial Stockholders are parties to a Contribution Agreement,
dated as of January 27, 2000 (the "Contribution Agreement") pursuant to which
they are acquiring shares of Class A common stock, par value $.01 per share
("Class A Stock") or of Class B common stock, par value $.01 per share ("Class B
Stock") in return for, among other things, the contribution of certain assets to
the Company; and
WHEREAS, the Initial Stockholders named in Appendix I attached hereto and
hereby made a part hereof, after giving effect to the transactions contemplated
by the Contribution Agreement, own the number of shares of Class A Stock and
Class B Stock set forth opposite their respective names on Appendix I; and
WHEREAS, the parties hereto desire to enter into this Agreement to govern
certain of their rights, duties and obligations after the consummation of the
transactions contemplated by the Contribution Agreement.
NOW THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. (a) As used in this Agreement the following
defined terms shall have the following meanings:
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
(a) the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise or (b) beneficial
ownership of 10% or more of the voting securities of such Person.
"Affiliate Transaction" has the meaning set forth in Section 2.6.
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"Agreement" has the meaning set forth in the Preamble.
"Applicable Securities" means in relation to a Registration Statement the
Registrable Securities identified in the related Demand Notice or Piggy-back
Notice.
"Average Price" means a price equal to the average of the closing prices
of the shares of Class A Stock on the exchange or national market on which the
Class A Stock is traded or listed for the five trading days immediately
preceding the date of the closing of a specified transaction.
"Board" has the meaning set forth in Section 2.1.
"CEA" has the meaning set forth in the Preamble.
"Class A Stock" has the meaning set forth in the Recitals.
"Class B Stock" has the meaning set forth in the Recitals.
"Commission" means the United States Securities and Exchange Commission.
"Company" has the meaning set forth in the Preamble.
"Company Common Stock" means Class A Stock and Class B Stock.
"Company Voting Stock" means Class A Stock and Class B Stock and all other
securities of the Company entitling the holder thereof to vote for the election
of directors to the Board.
"Contribution Agreement" has the meaning set forth in the Recitals.
"Demand" has the meaning set forth in Section 4.1(a).
"Demand Notice" has the meaning set forth in Section 4.1(a).
"Demanding Stockholder" has the meaning set forth in Section 4.1(a).
"DLJ" means Xxxxxxxxx, Xxxxxx and Xxxxxxxx Securities Corporation.
"Effective Time" means the date on which the Commission declares a
Registration Statement effective or on which a Registration Statement otherwise
becomes effective.
"Effectiveness Period" means as to a Registration Statement the period
during which such Registration Statement is effective.
"Election" means, with respect to a Registration, that a Shareholder has
delivered a completed and signed Notice and Questionnaire to the Company in
accordance with the provisions hereof and provided such other information with
respect to such Shareholder and its Applicable Securities as may be required by
the Company to enable such Shareholder to use the related Prospectus in
connection with sales of such Applicable Securities.
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended.
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"Exercise Notice" has the meaning set forth in Section 3.6(c).
"HEI" has the meaning set forth in the Preamble.
"Indemnified Person" has the meaning set forth in Section 4.5(a).
"Indemnitee" has the meaning set forth in Section 4.5(c).
"Indemnitor" has the meaning set forth in Section 4.5(c).
"Independent Directors" means members of the Company's Board who are not
officers, partners, employees or directors of the Stockholders, the Company or
their respective Affiliates, who have been selected in accordance with Section
2.1(c) and who comply with the applicable definition of independent director for
purposes of the exchange or national market on which the Class A Stock is traded
or listed.
"Initial Stockholders" has the meaning set forth in the Preamble.
"Intended Offering Notice" has the meaning set forth in Section 4.2(a).
"IPO" means an initial public offering of shares of the Company's Class A
Stock.
"IPO Lock-up Period" has the meaning set forth in Section 3.1.
"Liberty" has the meaning set forth in the Preamble.
"Minority Stockholders" has the meaning set forth in the Preamble.
"NASD Rules" means the Rules of the National Association of Securities
Dealers, Inc., as amended.
"NICC" means the National Interfaith Cable Coalition, Inc., a Maryland
not-for-profit corporation.
"Notice and Questionnaire" means a Notice of Registration Statement and
Selling Securityholder Questionnaire substantially in the form of Exhibit A
hereto.
"Odyssey" means Odyssey Holdings, L.L.C., a Delaware limited liability
company.
"Odyssey Agreement" has the meaning set forth in Section 5.1.
"Parent" of a Person means any other Person which is the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act) of a majority of the
securities ordinarily entitled to vote for the election of directors (or persons
performing similar functions) or the specified Person or directly, or
indirectly, through one or more intermediaries, controls the Person specified.
For purposes of this definition, control of a Person means the power, direct or
indirect, to direct or cause the direction of the management or policies of such
Person whether by contract or otherwise.
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"Participating Stockholder" has the meaning set forth in Section 4.2(a).
"Person" means an individual, partnership, corporation, trust, limited
liability company or unincorporated organization, or other entity or
organization, including a government or agency or political subdivision thereof.
"Piggy-back Notice" has the meaning set forth in Section 4.2(a).
"Prospectus" means the prospectus (including, without limitation, any
preliminary prospectus, any final prospectus and any prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
Registration Statement in reliance upon Rule 430A under the Securities Act or
any successor rule thereto) included in a Registration Statement, as amended or
supplemented by any prospectus supplement with respect to the terms of the
offering of any portion of the Applicable Securities covered by a Registration
Statement and by all other amendments and supplements to such prospectus,
including all material incorporated by reference in such prospectus and all
documents filed after the date of such prospectus by the Company under the
Exchange Act and incorporated by reference therein.
"Purchase Right Notice" has the meaning set forth in Section 3.6(c).
"Registrable Securities" means (a) the shares of the applicable class of
Company Common Stock acquired by any Stockholder pursuant to the Contribution
Agreement, (b) the shares of the applicable class of Company Common Stock
acquired by any Stockholder pursuant to Section 3.4(i), (c) the shares of the
applicable class of Company Common Stock otherwise acquired by any Stockholder
up to a maximum of 5% of the outstanding shares of Company Common Stock
(calculated on a fully diluted basis) as of the date of a Demand Notice or an
Intended Offering Notice, as the case may be, and (d) any securities of the
Company issued or issuable with respect to any shares of Company Common Stock
referred to in subdivision (a), (b) or (c) upon conversion of such shares or by
way of stock dividend or stock split or in connection with a combination or
conversion of shares, recapitalization, merger, consolidation or other
reorganization or otherwise, other than in each case Unrestricted Securities.
"Registration" means a registration under the Securities Act effected
pursuant to Section 4.1 or Section 4.2.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with any Registration of Registrable Securities
pursuant to this Agreement, including, without limitation, National Association
of Securities Dealers, Inc. fees, all fees and expenses of complying with
securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and disbursements of counsel
for the Company and of its independent public accountants, including the
expenses of any special audits or "comfort" letters required by or incident to
such performance and compliance, premiums and other costs of policies of
insurance obtained by the Company against liabilities arising out of the public
offering of Registrable Securities being registered, but excluding fees and
disbursements of counsel retained by any Stockholder, premiums and other costs
of policies of insurance obtained by any Stockholder or its agents or
underwriter against liabilities arising out of the public offering of the
Registrable Securities being registered, any fees and
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disbursements of underwriters customarily paid by sellers of securities who are
not the issuers of such securities, all underwriting discounts and commissions
and transfer taxes, if any, and registration and filing fees relating to
Registrable Securities.
"Registration Statement" means a registration statement filed under the
Securities Act by the Company pursuant to the provisions of Section 4.1 or
Section 4.2, including the Prospectus contained therein, any amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits and all material incorporated by reference in such registration
statement.
"Related Documents" has the meaning set forth in the Contribution
Agreement.
"Rules and Regulations" means the published rules and regulations of the
Commission promulgated under the Securities Act or the Exchange Act, as in
effect at any relevant time.
"Sale Notice" has the meaning set forth in Section 3.5(c).
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Stockholder Allotment" has the meaning set forth in Section 3.5(a).
"Stockholders" means each Person, other than the Company, who has
executed this Agreement and each Person who is required to become a party to
this Agreement in the future in accordance with the terms hereof.
"Stockholders' Shares" has the meaning set forth in Section 3.5(a).
"Tag-Along Notice" has the meaning set forth in Section 3.5(c).
"Tag-Along Sale" has the meaning set forth in Section 3.5(a).
"Tag-Along Sale Date" has the meaning set forth in Section 3.5(c).
"Transfer" means a sale, assignment, encumbrance, gift, pledge,
hypothecation or other disposition of Company Common Stock or any interest
therein; PROVIDED that a pledge of Company Common Stock to a financial
institution in a bona fide transaction shall not be deemed to be a Transfer for
the purposes of this Agreement, so long as the Stockholder retains full voting
power in such shares prior to any event of default, it being understood that in
the event of such default such transferee shall have no rights or obligations
under this Agreement.
"Transferor Stockholder" has the meaning set forth in Section 3.3.
"Underwriter" means any underwriter of Applicable Securities designated by
a Demanding Stockholder pursuant to Section 4.1(f) hereof.
"Unrestricted Securities" means any shares of Company Common Stock that
(i) have been registered under an effective registration statement under the
Securities Act and have been disposed of pursuant to such effective registration
statement, (ii) have been transferred in
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compliance with Rule 144 or Rule 145 under the Securities Act (or in each case
any successor provision thereto) under circumstances in which any legend
relating to restrictions on transfer under the Securities Act is removed, (iii)
are transferable pursuant to paragraph (k) of Rule 144 or paragraph (d) of Rule
145 under the Securities Act (or in each case any successor provision thereto),
(iv) have otherwise been transferred and a new security not subject to transfer
restrictions under the Securities Act has been delivered upon such transfer by
or on behalf of the Company or (v) cease to be outstanding.
"VISN" has the meaning set forth in the Preamble.
"VISN Director" has the meaning set forth in Section 5.1.
(b) For the purposes hereof, (i) words in the singular shall be held to
include the plural and VICE VERSA and words of one gender shall be held to
include the other gender as the context requires, (ii) the terms "hereof,"
"herein," and "herewith" and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Article, Section and paragraph
references are to the Articles, Sections and paragraphs to this Agreement unless
otherwise specified, (iii) the word "including" and words of similar import when
used in this Agreement shall mean "including, without limitation," unless the
context otherwise requires or unless otherwise specified, (iv) the word "or"
shall not be exclusive, and (v) provisions shall apply, when appropriate, to
successive events and transactions.
ARTICLE II
CORPORATE GOVERNANCE
Section 2.1. Composition of the Board of Directors of the Company. Subject
to Section 2.5, each of the Stockholders hereby agrees to take, at any time and
from time to time, all action necessary such that the Board of Directors of the
Company (the "Board") shall consist of not less than 11 directors, who shall be
nominated as follows: (a) HEI shall have the right to nominate six members of
the Board; PROVIDED that one such nominee shall be the Chief Executive Officer
of the Company, (b) each Minority Stockholder shall have the right to nominate
one member of the Board and (c) at least two members of the Board shall be
Independent Directors nominated by the Board. Each Stockholder entitled to vote
for the election of directors to the Board shall vote its shares of Company
Voting Stock or execute written consents, as the case may be, and shall take all
other action necessary in order to ensure compliance with this Section 2.1. The
Company shall take such action as may be required under applicable law to and
shall otherwise use reasonable efforts to cause the composition of the Board to
be as set forth in this Section 2.1.
Section 2.2. Removal. Each Stockholder agrees that at any time that it is
then entitled to vote or execute a written consent for the removal and/or
replacement of any director of the Company, (a) it shall not vote or execute a
written consent for any of its shares of Company Voting Stock in favor of the
removal and/or replacement of any individual who shall have been nominated
pursuant to Section 2.1, unless the Stockholder entitled to nominate such
director shall have requested such removal and/or replacement in writing and (b)
it shall vote or execute a written consent for all of its shares of Company
Voting Stock in favor of and shall take all other action necessary to cause the
removal and/or replacement of an individual nominated pursuant to
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Section 2.1 if so requested in writing by the Stockholder entitled to nominate
such individual. Subject to Section 2.5, nothing contained in this Section 2.2
shall affect the right of any Stockholder to nominate a member of the Board
pursuant to Section 2.1.
Section 2.3. Vacancies. If, as a result of the death, disability,
retirement, resignation, removal or otherwise there shall exist or occur any
vacancy on the Board, then the Stockholder entitled under Section 2.1 to
nominate such director whose death, disability, retirement, resignation or
removal resulted in such vacancy, may, subject to the provisions of Section 2.5,
designate another individual to fill such capacity and serve as a director of
the Company. Each Stockholder shall, if such Stockholder is then entitled to
vote for the election of such designee as a director of the Company, vote or
execute a written consent for its shares of Company Voting Stock in order to
ensure that such designee be elected to the Board and the Company shall use
reasonable efforts to cause such vacancy to be filled by such designee.
Section 2.4. Board Committees. The Board shall establish an Audit
Committee which shall consist of the Independent Directors.
Section 2.5. Termination of Rights and Obligations. The right of each
Stockholder to nominate or designate a member or members of the Board pursuant
to this Article II, and all related obligations of the Company and each other
Stockholder with respect thereto contained in this Article II, shall terminate
on the later of such date as such Stockholder (i) ceases to beneficially own in
the aggregate at least 5% of the shares of Company Common Stock then issued and
outstanding and (ii) ceases to beneficially own at least 75% of the Company
Common Stock set forth opposite such Stockholder's name on Appendix I
(appropriately adjusted for stock splits, dividends or combinations of shares of
Company Common Stock after the IPO); PROVIDED that the provisions of Section 4.5
shall survive the termination of this Agreement.
Section 2.6. Limitation on Transactions with Affiliates. The Company shall
not, and shall not permit any of its Subsidiaries to, directly or indirectly,
sell any of its material properties or assets to, or purchase any material
property or assets from, or enter into any material contract, transaction,
agreement, understanding, loan, advance or guaranty with, or for the benefit of,
any Affiliate of the Initial Stockholders (each of the foregoing, an "Affiliate
Transaction"), unless such Affiliate Transactions are entered into in good faith
and on commercially reasonable terms and (i) with respect to any Affiliate
Transactions that, together with all related Affiliate Transactions, have an
aggregate value of not more than $35,000,000, such Affiliate Transactions are
approved by a majority of the Independent Directors and (ii) with respect to any
Affiliate Transactions that, together with all related Affiliate Transactions,
have an aggregate value of more than $35,000,000, such Affiliate Transactions
are approved by a majority of the members of the Board not nominated by such
Initial Stockholder.
Notwithstanding the foregoing, the following shall be deemed not to be
Affiliate Transactions: (i) transactions pursuant to the Trademark License
Agreement dated as of August 1, 1999, by and between Hallmark Cards,
Incorporated and Hallmark Entertainment Networks, Inc., the Trademark License
Agreement dated as of August 23, 1999, by and between Hallmark Cards,
Incorporated and Hallmark Entertainment Networks (UK) Limited, the Security
Agreement dated as of August 1, 1999 by and between Hallmark Entertainment
Networks, Inc. and Hallmark Cards, Incorporated, the Promissory Note dated as of
November 19, 1999, by and
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between HC Crown Corporation and Crown Media, Inc., any of the Related Documents
or any contract, agreement, understanding, loan or guaranty described in, or
filed as an exhibit to, the registration statement under which shares are sold
in the IPO as the same may be amended, modified or replaced from time to time,
so long as any such amendment, modification or replacement is not material and
no less favorable to the Company and its Subsidiaries than such contract,
agreement, understanding or loan each as in effect on the date of this
Agreement; (ii) transactions pursuant to the Contribution Agreement; (iii)
transactions in connection with the non-exclusive licensing of any service xxxx
or trademark of an Affiliate or Affiliates of any Initial Stockholder to the
Company that do not require payment (other than in connection with names of
movies, miniseries or series); and (iv) transactions between or among the
Company and any wholly owned Subsidiary of the Company, PROVIDED that such
Subsidiary remains a wholly owned Subsidiary of the Company.
Section 2.7. Directors' Indemnification. During the term of this
Agreement, the Company will use its reasonable best efforts to obtain directors'
and officers' liability insurance covering the full Board in a form and amount
consistent with industry practice to the extent such insurance is available on
reasonable terms.
Section 2.8. Corporate Opportunities Policy. The Board of Directors of HEI
has adopted and approved a corporate opportunities policy substantially in the
form of Exhibit B. HEI shall act in accordance with the provisions of its
corporate opportunities policy during the term of such policy unless otherwise
agreed by a majority of the members of the Board not nominated by HEI.
ARTICLE III
TRANSFERABILITY AND PURCHASE RIGHTS
Section 3.1. Restrictions on Transferability. (a) No Company Common Stock
may be Transferred except upon compliance with the provisions of the Securities
Act and this Agreement, and any attempted Transfer other than in accordance with
the terms hereof is void AB INITIO and transfers no right, title or interest in
or to such Company Common Stock to the purported transferee, buyer, donee,
assignee or encumbrance holder.
(b) Except as permitted by Section 3.4, the Stockholders agree that they
will not Transfer (i) any shares of Company Common Stock (except for Transfers
by HEI upon exercise of the over-allotment option by the underwriters in the
IPO) for a period of 180 days from the date of the IPO (the "IPO Lock-up
Period"), without the consent of DLJ and (ii) more than 25% of the shares of
Company Common Stock set forth opposite such Stockholder's name on Appendix I
(appropriately adjusted for stock splits, stock dividends or combinations of
shares of Company Common Stock after the IPO) prior to the second anniversary of
this Agreement, without the written consent of each other Stockholder.
Section 3.2. Restrictive Legend. (a) Each certificate representing any
portion of Company Common Stock that is held by a Stockholder shall be stamped
or otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
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"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR
SALE OR OTHERWISE DISTRIBUTED EXCEPT IN CONJUNCTION WITH AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT, OR IN COMPLIANCE WITH RULE 144 OR PURSUANT TO
ANOTHER EXEMPTION. THE SECURITIES ARE ALSO SUBJECT TO PROVISIONS OF
A STOCKHOLDERS' AGREEMENT DATED May 9, 2000, AS IT MAY BE AMENDED
FROM TIME TO TIME IN ACCORDANCE WITH THE PROVISIONS THEREOF (THE
"AGREEMENT"), WHICH CONTAINS RESTRICTIONS ON TRANSFER AND TAG-ALONG
PROVISIONS. COPIES OF THE AGREEMENT MAY BE OBTAINED FROM THE
SECRETARY OF THE COMPANY."
(b) If any shares of Company Common Stock shall cease to be Registrable
Securities, the Company shall, upon the written request of the holder thereof
and such other documentation as may be reasonably requested, issue to such
holder a new certificate evidencing such shares without the legend required by
Section 3.1(a) endorsed thereon.
Section 3.3. Notice of Proposed Transfers; Securities Law Compliance.
Prior to any proposed Transfer of any Company Common Stock, unless there is in
effect a Registration Statement covering the proposed Transfer, the Stockholder
intending to Transfer such Company Common Stock (the "Transferor Stockholder")
shall give written notice to the Company of such Transferor Stockholder's
intention to effect such Transfer. Each such notice shall set forth the name of
the proposed transferee, the number of shares proposed to be transferred and the
proposed amount and form of consideration to be paid for such Company Common
Stock (other than Transfers by a Stockholder to one or more Affiliates of such
Stockholder); PROVIDED that in the event of a Transfer pursuant to Rule 144
under the Securities Act, the Transferor may satisfy the requirements of this
Section 3.3 by filing Form 144 with the Company at the time such form is filed
with the Securities and Exchange Commission.
Section 3.4. Permitted Transfers. Notwithstanding Section 3.1, but subject
to compliance with the applicable provisions of the Securities Act and Section
3.3, the following Transfers may be made and HEI shall have no obligation under
Section 3.5 with respect thereto: (i) Transfers by a Stockholder to one or more
Affiliates of such Stockholder, or to one or more executives of such Stockholder
pursuant to a stock-based compensation plan, or to one or more Affiliates of any
other Stockholder, subject to the transferee executing a signature page hereof
and thereby becoming a party hereto (as a Stockholder) and agreeing that it
shall receive the same rights hereunder and be bound by the same obligations
hereunder, except as provided in this Section 3.4 and Section 3.5, as the
Transferor Stockholder; or (ii) Transfers pursuant to a merger, consolidation or
other business combination involving all of the outstanding Company Common Stock
and a third party which, prior to entering into an agreement with the Company
with respect to such business combination, was not an Affiliate of the Company
or tender or
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exchange offer for all of the outstanding Company Common Stock by a third party
which, prior to the commencement of such offer, was not an Affiliate of the
Company.
Section 3.5. Tag-Along Rights. (a) Except as permitted by Section 3.4 or
in the case of sales pursuant to Article IV, if HEI, at any time or from time to
time, in a single transaction or series of related transactions occurring within
a six-month period, or within a longer period if pursuant to a single agreement,
proposes to Transfer 20% or more of the outstanding shares of Company Common
Stock (a "Tag-Along Sale"), then each Minority Stockholder shall have the right,
but not the obligation, to participate in such Tag-Along Sale by selling the
number of shares of Company Common Stock respectively owned by it as calculated
in the following manner. Such shares of Company Common Stock which were acquired
by the Minority Stockholders pursuant to the Contribution Agreement and which
are owned by the Minority Stockholders or their Affiliates which are Parties to
this Agreement are hereinafter referred to as the "Stockholders' Shares;"
PROVIDED, HOWEVER that shares of Company Common Stock transferred from another
Stockholder to a Minority Stockholder or its Affiliates (other than an Affiliate
of such transferring Stockholder) shall not be deemed to be Stockholders'
Shares. The number of shares of Company Common Stock that each Minority
Stockholder shall be entitled to include in such Tag-Along Sale (the
"Stockholder Allotment") shall equal the product of (i) the total number of
shares of Company Common Stock proposed to be Transferred pursuant to the
Tag-Along Sale or such greater number of shares that the proposed purchaser in
the Tag-Along Sale shall agree to purchase or otherwise acquire, times (ii) a
fraction, the numerator of which shall equal the number of Stockholders' Shares
owned by such Minority Stockholder and its Affiliates which are parties to this
Agreement on the date of the Sale Notice, and the denominator of which shall
equal the sum of (A) the number of shares of Company Common Stock owned by HEI
and its Affiliates on the date of the Sale Notice plus (B) the total number of
Stockholders' Shares owned by all Minority Stockholders and their Affiliates
which are parties to this Agreement on the date of the Sale Notice.
(b) Any such sales by the Minority Stockholders shall be on the same terms
and conditions as the proposed Tag-Along Sale by HEI; PROVIDED, HOWEVER that no
participating Minority Stockholder shall be required to make any representation
or warranty in connection with the Tag-Along Sale, other than as to the
enforceability of each agreement entered into in connection with such Tag-Along
Sale with respect to the Minority Stockholder and its ownership and authority to
sell, free of consent and approval requirements, liens, claims and encumbrances,
the shares of Company Common Stock proposed to be sold by it. Each participating
Minority Stockholder shall (and hereby agrees to), without limitation as to
time, indemnify and hold harmless, to the full extent permitted by law, each of
the other Stockholders against all losses, claims, damages, liabilities, costs
(including costs of preparation) and expenses (including attorneys' fees and
disbursements) arising out of or relating to any representation or warranty made
by, or covenant of, such participating Minority Stockholder or any agent,
employee, officer, or director of such participating Minority Stockholder in
connection with or relating to or under the terms of each agreement entered into
in connection with such Tag-Along Sale, except insofar as the same are based
solely upon written information furnished in writing to such participating
Minority Stockholder by such other Minority Stockholder expressly for use
therein.
(c) HEI shall promptly provide each of the Minority Stockholders with
written notice (the "Sale Notice") not less than 15 days prior to the proposed
date of the Tag-Along Sale (the
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Page 28 of 58 Pages
"Tag-Along Sale Date"). In order to facilitate the prompt delivery of the Sale
Notice, the Company hereby covenants to provide HEI and the Minority
Stockholders participating in a Tag-Along Sale access to the stock record books
of the Company. Each Sale Notice shall set forth:
(i) the name of each proposed transferee or purchaser of Company
Common Stock in the Tag-Along Sale;
(ii) the number of shares of Company Common Stock proposed to be
Transferred by HEI and, if applicable, such greater number of shares that
the proposed purchaser is willing to purchase in connection with the
Tag-Along Sale;
(iii) the proposed amount and form of consideration to be paid for
such shares of Company Common Stock and the material terms and conditions
of payment offered by each proposed transferee or purchaser;
(iv) confirmation that the proposed purchaser or transferee has been
informed of the "Tag-Along Rights" provided for herein and has agreed to
purchase shares of Company Common Stock in accordance with the terms
hereof;
(v) such Minority Stockholder's Stockholder Allotment; and
(vi) the Tag-Along Sale Date.
Each Minority Stockholder who wishes to participate in the Tag-Along Sale
shall provide written notice (or oral notice confirmed immediately in writing)
(the "Tag-Along Notice") to HEI not less than seven days prior to the Tag-Along
Sale Date. The Tag-Along Notice shall set forth the number of shares of Company
Common Stock that such Minority Stockholder elects to include in the Tag-Along
Sale, which shall not exceed such Minority Stockholder's Stockholder Allotment.
HEI shall determine the aggregate number of shares of Company Common Stock
to be sold by each participating Minority Stockholder in any given Tag-Along
Sale in accordance with the terms hereof, and the Tag-Along Notices given by the
Minority Stockholders shall constitute their binding agreements to sell such
shares at the price and on the terms and conditions applicable to such sale.
If a Tag-Along Notice is not received by HEI participating in the
Tag-Along Sale from a Minority Stockholder prior to the seven-day period
specified above, HEI shall have the right to Transfer the number of shares of
Company Common Stock specified in the Sale Notice to the proposed purchaser or
transferee without any participation by such Minority Stockholder, but only at a
price and upon terms and conditions no more favorable to HEI than stated in such
Sale Notice and only if such sale occurs on a date within 60 days of the
Tag-Along Sale Date.
Section 3.6. Purchase Rights. (a) In the event that the Company proposes
to issue Company Common Stock in a public offering in exchange for cash, and as
a result thereof Liberty and its Affiliates which are Parties to this Agreement
would cease to own in the aggregate at least 10% of the outstanding Company
Common Stock, then Liberty shall have the right to purchase from the Company for
cash, at a price per share equal to the public offering
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price, that number of shares of Class A Stock such that it and its Affiliates
which are Parties to this Agreement own in the aggregate 10% of the outstanding
Company Common Stock immediately following such public offering.
(b) In the event that the Company proposes to issue Company Common Stock
in a private transaction in exchange for cash, and as a result thereof Liberty
and its Affiliates which are Parties to this Agreement would cease to own in the
aggregate at least 10% of the outstanding Company Common Stock, then Liberty
shall have the right to purchase from the Company for cash, at a price per share
equal to the Average Price on the closing date of such transaction, that number
of shares of Class A Stock such that it and its Affiliates which are Parties to
this Agreement own in the aggregate 10% of the outstanding Company Common Stock
immediately following such private transaction.
(c) The Company shall promptly provide Liberty with written notice (the
"Purchase Right Notice") not less than 15 days prior to the proposed date of the
issuance of Company Common Stock that is subject to Section 3.6(a) or (b). Each
Purchase Right Notice shall set forth the number of shares of Company Common
Stock proposed to be issued, the proposed date of the issuance and the number of
shares of Class A Stock which Liberty is entitled to purchase pursuant to
Section 3.6(a) and (b).
If Liberty wishes to purchase shares pursuant to Section 3.6(a) or (b),
Liberty shall provide written notice (or oral notice confirmed immediately in
writing) (the "Exercise Notice") to the Company not less than seven days prior
to the proposed issuance date. The delivery of the Exercise Notice shall
constitute Liberty's binding agreement to purchase the number of shares of Class
A Stock set forth in the Purchase Right Notice at the price and on the terms set
forth in this Section 3.6. The closing of such purchase shall be on the closing
date for the public offering under Section 3.6(a) or the private transaction
under Section 3.6(b), as the case may be.
If an Exercise Notice is not received by the Company prior to the
seven-day period specified above, Liberty's rights under this Section 3.6 shall
expire with respect to such issuance.
ARTICLE IV
REGISTRATION RIGHTS
Section 4.1. Demand Registration. (a) (i) HEI shall have the right, on not
more than four occasions in the aggregate, and no more frequently than once
during any six-month period, and (ii) the Minority Stockholders as a group shall
have the right (though such right need not be jointly exercised by the Minority
Stockholders), on not more than two occasions in the aggregate (it being
understood and agreed that two or more Minority Stockholders may make joint
Demands hereunder or any Minority Stockholder may join in a Demand made by any
other Minority Stockholder, and any such joint Demand or joining in of a Demand
shall be deemed to be a single Demand for all purposes hereof), and no more
frequently than once during any six-month period, to require the Company to
register for offer and sale under the Securities Act (a "Demand") all or a
portion of the Registrable Securities held by such Stockholder, subject to the
restrictions set forth herein; PROVIDED that no Stockholder shall be entitled to
make a Demand
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hereunder unless the Registrable Securities subject to such Demand represent at
least 7% of the aggregate shares of Company Common Stock then issued and
outstanding.
As promptly as practicable after the Company receives from a Stockholder
(the "Demanding Stockholder") a notice pursuant to this Section 4.1(a) (a
"Demand Notice"), a copy of which shall have also been delivered to each other
Minority Stockholder at the same time as to the Company, demanding that the
Company register for offer and sale under the Securities Act Registrable
Securities, subject to Section 4.1(b), the Company shall (i) use all reasonable
efforts to file as promptly as reasonably practicable with the Commission a
Registration Statement relating to the offer and sale of the Applicable
Securities on such form as the Company may reasonably deem appropriate (PROVIDED
that the Company shall not, unless the Company otherwise determines, be
obligated to register any securities on a "shelf" registration statement or
otherwise to register securities for offer or sale on a continuous or delayed
basis) and, thereafter, (ii) after the filing of an initial version of the
Registration Statement, use reasonable efforts to cause such Registration
Statement to be declared effective under the Securities Act as promptly as
practicable after the date of filing of such Registration Statement; PROVIDED,
HOWEVER, that no Demanding Stockholder shall be entitled to be named as a
selling securityholder in the Registration Statement or to use the Prospectus
forming a part thereof for resales of Registrable Securities unless such
Demanding Stockholder has made an Election. Subject to Section 4.1(b), the
Company shall use reasonable efforts to keep each Registration Statement
continuously effective in order to permit the Prospectus forming a part thereof
to be usable by such Demanding Stockholder for resales of Registrable Securities
for an Effectiveness Period ending on the earlier of (i) 30 days from the
Effective Time of such Registration Statement and (ii) such time as all of such
securities have been disposed of by the selling securityholders.
(b) The Company shall have the right to postpone (or, if necessary or
advisable, withdraw) the filing, or delay the effectiveness, of a Registration
Statement, or fail to keep such Registration Statement continuously effective or
not amend or supplement the Registration Statement or included Prospectus, if
the Company determines based upon the advice of counsel that it would be
advisable to not disclose in the Registration Statement a planned or proposed
financing, acquisition or other corporate transaction or other material
information, and the Company shall have determined in good faith that such
disclosure is not in the best interests of the Company and its stockholders;
PROVIDED that no one such postponement shall exceed 90 days in any six-month
period and all such postponements shall not exceed 180 days in the aggregate.
The Company shall advise the Demanding Stockholder of any such determination as
promptly as practicable after such determination.
(c) In connection with an underwritten offering, if the managing
underwriter or underwriters advise the Company that in its or their opinion the
number of Applicable Securities subject to a Demand exceeds the number which can
be sold in such offering, the Company shall include in such Registration the
number of Applicable Securities that, in the opinion of such managing
underwriter or underwriters, can be sold in such offering (PROVIDED that, in the
event of a joint Demand, the Applicable Securities included shall be allocated
pro rata among the Demanding Stockholders on the basis of the relative number of
Applicable Securities each such Demanding Stockholder has requested to be
included in such Registration).
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(d) The Company may include in any registration requested pursuant to
Section 4.1(a) hereof other securities for sale for its own account or for the
account of another Person, subject to the following sentence. In connection with
an underwritten offering, if the managing underwriter or underwriters advise the
Company that in its or their opinion the number of Applicable Securities
requested by the Demanding Stockholder, together with other securities for sale
for the account of the Company or any other Person, to be registered exceeds the
number which can be sold in such offering, the Company shall include in such
Registration the number of Applicable Securities and other securities that, in
the opinion of such managing underwriter or underwriters, can be sold in such
offering as follows: (i) first, the Applicable Securities requested to be
registered by the Demanding Stockholder and (ii) second, any other securities
requested to be included in such Registration.
(e) A Demanding Stockholder shall have the right to withdraw any Demand
(i) prior to the time the Registration Statement in respect of such Demand has
been declared effective, (ii) upon the issuance by the Commission or any other
governmental agency of a stop order, injunction or other order which interferes
with such Registration, (iii) upon the Company's availing itself of Section
4.1(b), or (iv) if such Demanding Stockholder is prevented pursuant to Section
4.1(c) or (d) from selling all of the Applicable Securities it requested to be
registered. Notwithstanding such request to withdraw the Demand, the
Registration requested by such Demanding Stockholder shall nonetheless be deemed
to have been effected (and, therefore, requested) for purposes of Section 4.1(a)
hereof if such Demanding Stockholder withdraws any Demand (A) pursuant to clause
(i) of the preceding sentence after the Commission filing fee is paid with
respect thereto or (B) pursuant to clause (iv) of the preceding sentence in
circumstances where at least 50% of the Applicable Securities requested to be
included in such Registration by such Demanding Stockholder could have been
included, and in each case, (x) the Company has not availed itself of Section
4.1(b) with respect to such Registration request or (y) the Company has availed
itself of Section 4.1(b) and the withdrawal request is not made within 10 days
after the termination of the suspension period occasioned by the Company's
exercise of its rights under Section 4.1(b). If a Demanding Stockholder
withdraws a Demand but the Company nevertheless determines to complete, within
30 days after such withdrawal, the Registration so requested as to securities
other than the Applicable Securities, such Demanding Stockholder shall be
entitled to participate in such Registration pursuant to Section 4.2, but in
such case the Intended Offering Notice shall be required to be given to such
Demanding Stockholder at least five business days prior to the anticipated
filing date of the Registration Statement, or if such Registration Statement has
already been filed, within 10 business days after receipt of the request to
withdraw Demand from such Demanding Stockholder and such Demanding Stockholder
shall be required to give the Piggy-back Notice no later than 3 business days
after the Company's delivery of such Intended Offering Notice.
(f) In the event that any Registration pursuant to this Section 4.1 shall
involve, in whole or in part, an underwritten offering, one co-lead managing
underwriter shall be selected by the Company and shall be reasonably acceptable
to the Demanding Stockholder, and the other co-lead underwriter shall be
selected by the Demanding Stockholder, PROVIDED that, in the event of a joint
Demand, the other co-lead underwriter shall be selected by a majority in
interest (by reference to the number of Applicable Securities requested to be
included in the Registration) of the Demanding Stockholders, and shall be
reasonably acceptable to the Company. Any additional co-managing underwriters
shall be selected by the Company.
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Page 32 of 58 Pages
Section 4.2. Piggy-back Registration. (a) If at any time the Company
intends to file on its behalf or on behalf of any of its securityholders a
registration statement under the Securities Act in connection with a public
offering of any securities of the Company on a form and in a manner that would
permit the registration for offer and sale under the Securities Act of
Registrable Securities, other than a registration statement on Form S-8 or Form
S-4, then the Company shall give written notice (an "Intended Offering Notice")
of such intention to each Stockholder then holding Registrable Securities at
least 20 business days prior to the anticipated filing date of such registration
statement. Such Intended Offering Notice shall offer to include in such
registration statement for offer to the public such number of Registrable
Securities as each Stockholder may request, subject to the conditions set forth
herein, and shall specify, to the extent then known, the number and class of
securities proposed to be registered, the proposed date of filing of such
registration statement, any proposed means of distribution of such securities,
any proposed managing underwriter or underwriters of such securities and a good
faith estimate by the Company of the proposed maximum offering price of such
securities, as such price is proposed to appear on the facing page of such
registration statement. Each Stockholder shall advise the Company in writing
(such written notice being a "Piggy-back Notice") not later than 10 business
days after the Company's delivery to such Stockholder of the Intended Offering
Notice, if such stockholder desires to participate in such offering. The
Piggy-back Notice shall set forth the number of Registrable Securities such
Stockholder desires to have included in the registration statement and offered
to the public. Upon the request of the Company, each Stockholder electing to
include Registrable Securities in the Registration Statement (a "Participating
Stockholder") shall enter into such underwriting, custody and other agreements
as are customary in connection with registered secondary offerings or necessary
or appropriate in connection with the offering. No Participating Stockholder
shall be entitled to be named as a selling securityholder in the Registration
Statement or to use the Prospectus forming a part thereof for sales of
Registrable Securities unless such Participating Stockholder has made an
Election.
(b) In connection with an underwritten offering, if the managing
underwriter or underwriters advise the Company in writing that in its or their
opinion the number of securities proposed to be registered exceeds the number
that can be sold in such offering, the Company shall include in such
Registration the number of securities that, in the opinion of such managing
underwriter or underwriters, can be sold as follows: (i) first, the securities
that the Company proposes to sell or, if the Registration is in response to a
Demand, the securities that the Demanding Stockholder proposes to sell (in the
event of a joint Demand, pro rata in proportion to the number of Applicable
Securities requested to be included by each Demanding Stockholder), (ii) second,
Applicable Securities requested to be included in such Registration by the
Participating Stockholders, and, if the Registration is in response to a Demand,
the securities that the Company proposes to sell (pro rata in proportion to the
number of Applicable Securities requested to be included by each Participating
Stockholder and, if applicable, the Company) and (iii) third, other securities
requested to be included in such Registration.
(c) The rights of each Stockholder pursuant to Section 4.1 hereof and this
Section 4.2 are cumulative, and the exercise of rights under one such Section
shall not exclude the subsequent exercise of rights under the other such Section
(except to the extent expressly provided otherwise herein). Notwithstanding
anything herein to the contrary, the Company may abandon and/or withdraw any
registration as to which any right under Section 4.2 may exist at
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Page 33 of 58 Pages
any time and for any reason without liability hereunder. In such event, the
Company shall notify each Stockholder to the extent that it has delivered a
Piggy-back Notice to such Stockholder to participate therein.
Section 4.3. Registration Procedures. In connection with a Registration
Statement, the following provisions shall apply:
(a) The Company shall furnish to each Demanding Stockholder or
Participating Stockholder, prior to the Effective Time, a copy of the
Registration Statement as initially filed with the Commission, and each
amendment thereto and each amendment or supplement, if any, to the Prospectus
included therein.
(b) Subject to Section 4.1(b) and in respect of a Registration Statement
under Section 4.1, the Company shall use reasonable best efforts to promptly
take such action as may be necessary so that (i) each of the Registration
Statement and any amendment thereto and the Prospectus forming part thereof and
any amendment or supplement thereto (and each report or other document
incorporated therein by reference in each case), when it becomes effective,
complies in all material respects with the Securities Act and the Exchange Act
and the Rules and Regulations, (ii) each of the Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) each of the Prospectus forming part of the Registration Statement, and any
amendment or supplement to such Prospectus, does not at any time during the
period during which the Company is required to keep a Registration Statement
effective under Section 4.1(a) include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(c) The Company shall, promptly upon learning thereof, advise each
Demanding Stockholder or Participating Stockholder, and shall confirm such
advice in writing if so requested by any Demanding Stockholder or Participating
Stockholder:
(i) when a Registration Statement and any amendment thereto has been
filed with the Commission and when the Registration Statement or any
post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements
to the Registration Statement or the Prospectus included therein or for
additional information with respect to the Registration Statement and
Prospectus;
(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for such purpose;
(iv) of the receipt by the Company of any notification with respect
to the suspension of the qualification of the securities included in the
Registration Statement for sale in any jurisdiction or the initiation of
any proceeding for such purpose; and
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(v) following the effectiveness of any Registration Statement, of
the happening of any event or the existence of any state of facts that
requires the making of any changes in the Registration Statement or the
Prospectus included therein so that, as of such date, such Registration
Statement and Prospectus do not contain an untrue statement of a
material fact and do not omit to state a material fact required to be
stated therein or necessary to make the statements therein (in the case
of the Prospectus, in light of the circumstances under which they were
made) not misleading (which advice shall be accompanied by an
instruction to each Demanding Stockholder or Participating Stockholder
to suspend the use of the Prospectus until the requisite changes have
been made, which instruction each Demanding Stockholder or
Participating Stockholder agrees to follow).
(d) In respect of a Registration Statement under Section 4.1 (and not
Section 4.2), the Company shall use all reasonable efforts to prevent the
issuance, and if issued to obtain the withdrawal, of any order suspending the
effectiveness of the Registration Statement at the earliest possible time.
(e) The Company shall furnish to each Demanding Stockholder or
Participating Stockholder, without charge, at least one copy of the Registration
Statement and all post-effective amendments thereto, including financial
statements and schedules, and, if such holder so requests in writing, all
reports, other documents and exhibits that are filed with or incorporated by
reference in the Registration Statement.
(f) The Company shall, during the period during which the Company is
required to keep a Registration Statement continuously effective under Section
4.1(a) or elects to keep such effective under Section 4.2, deliver to each
Demanding Stockholder or Participating Stockholder, without charge, as many
copies of the Prospectus (including each preliminary Prospectus) included in the
Registration Statement and any amendment or supplement thereto as each Demanding
Stockholder or Participating Stockholder may reasonably request, and the Company
consents (except during the continuance of any event described in Section 4.1(b)
or Section 4.3(c)(v) hereof) to the use of the Prospectus, with any amendment or
supplement thereto, by each Demanding Stockholder or Participating Stockholder
in connection with the offering and sale of the Applicable Securities covered by
the Prospectus and any amendment or supplement thereto during such period.
(g) Prior to any offering of Applicable Securities pursuant to the
Registration Statement, the Company shall use reasonable efforts to (i) register
or qualify or cooperate with each Demanding Stockholder or Participating
Stockholder and its respective counsel in connection with the registration or
qualification of such Applicable Securities for offer and sale under the
securities or "blue sky" laws of such jurisdictions within the United States as
each Demanding Stockholder or Participating Stockholder may reasonably request,
(ii) keep such registrations or qualifications in effect and comply with such
laws so as to permit the continuance of offers and sales in such jurisdictions
for the period during which the Company is required to keep a Registration
Statement continuously effective under Section 4.1(a) and (iii) take any and all
other reasonable actions requested by each Demanding Stockholder or
Participating Stockholder which are necessary to enable the disposition in such
jurisdictions of such Applicable Securities; PROVIDED, HOWEVER, that in no event
shall the Company be obligated
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to (1) qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to so qualify but for this
Agreement or (2) file any general consent to service of process or subject
itself to tax in any jurisdiction where it is not so subject.
(h) The Company shall cooperate with each Demanding Stockholder or
Participating Stockholder to facilitate the timely preparation and delivery of
certificates representing Applicable Securities to be sold pursuant to the
Registration Statement, which certificates shall comply with the requirements of
any United States securities exchange upon which any Applicable Securities are
listed (provided that nothing herein shall require the Company to list any
Registrable Securities on any securities exchange on which they are not
currently listed) or the NASD Rules, as applicable, and which certificates shall
be free of any restrictive legends and in such permitted denominations and
registered in such names as each Demanding Stockholder or Participating
Stockholder may request in connection with the sale of Applicable Securities
pursuant to the Registration Statement.
(i) The Company shall use reasonable efforts to:
(i) make such reasonable representations and warranties in the
applicable underwriting agreement to the Underwriters, in form, substance
and scope as are customary;
(ii) in connection with any underwritten offering, obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the Underwriters) addressed
to the Underwriters, covering such matters as are customary to the extent
reasonably required by the applicable underwriting agreement;
(iii) in connection with any underwritten offering, obtain "cold
comfort" letters and updates thereof from the independent public
accountants of the Company (and, if necessary, from the independent public
accountants of any subsidiary of the Company or of any business acquired
by the Company for which financial statements and financial data are, or
are required to be, included in the Registration Statement), addressed to
each Demanding Stockholder or Participating Stockholder (if such Demanding
Stockholder or Participating Stockholder has provided such letter,
representations or documentation, if any, required for such cold comfort
letter to be so addressed) and the Underwriters, in customary form and
covering matters of the type customarily covered in "cold comfort" letters
in connection with secondary underwritten offerings of equity securities;
and
(iv) in connection with any underwritten offering, deliver such
documents and certificates as may be reasonably requested by each
Demanding Stockholder or Participating Stockholder and the Underwriters,
if any, including, without limitation, certificates to evidence compliance
with any conditions contained in the underwriting agreement or other
agreements entered into by the Company.
(j) In respect of a Registration Statement under Section 4.1 (and not
Section 4.2), the Company shall use reasonable efforts to take all other
steps reasonably necessary to effect the
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Page 36 of 58 Pages
timely registration, offering and sale of the Applicable Securities
covered by the Registration Statements contemplated hereby.
Section 4.4. Registration Expenses. The Company shall bear the
Registration Expenses in connection with the performance of its obligations
under Sections 4.1, 4.2 and 4.3. Each Demanding Stockholder or Participating
Stockholder shall bear all other expenses relating to any Registration or sale
in which such Demanding Stockholder or Participating Stockholder participates
pro rata with the other Stockholders participating therein, including all of the
fees and expenses of counsel to such Demanding Stockholder or Participating
Stockholder, any applicable underwriting discounts or commissions and
registration or filing fees with respect to the Applicable Securities.
Section 4.5. Indemnification and Contribution. (a) Upon the effectiveness
of the Registration of Applicable Securities pursuant to Section 4.1 or 4.2, the
Company shall indemnify and hold harmless each Demanding Stockholder or
Participating Stockholder and each Underwriter or selling agent, and each of
their respective officers and directors and each Person who controls such
Demanding Stockholder or Participating Stockholder, Underwriter or selling agent
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act (each such Person being sometimes referred to as an "Indemnified
Person") from and against any losses, claims, damages or liabilities, joint or
several, (or actions in respect thereof) to which such Indemnified Person may
become subject under the Securities Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement under which such
Applicable Securities are registered under the Securities Act, or any Prospectus
contained therein or furnished by the Company to any Indemnified Person, or any
amendment or supplement thereto in each case relating to the sale of Applicable
Securities, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Company hereby agrees to
reimburse such Indemnified Person for any reasonable legal or other expenses
reasonably incurred by it in connection with investigating or defending any such
loss, claim, damage or liability (or action in respect thereof) as such expenses
are incurred; PROVIDED, HOWEVER, that (i) the Company shall not be liable to any
such Indemnified Person in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
Registration Statement or Prospectus, or amendment or supplement, in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of such Indemnified Person or by or on behalf of any Demanding
Stockholder or Participating Stockholder expressly for use therein; (ii) the
Company shall not be liable to the extent that any loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon (a) the use of any Prospectus after such time as the obligation
of the Company to keep the same effective and current has expired, or (b) the
use of any Prospectus after such time as the Company has advised each Demanding
Stockholder or Participating Stockholder in writing that a post-effective
amendment or supplement thereto is required, except such Prospectus as so
amended or supplemented; and (iii) the Company shall not be liable to any Person
who participates as an Underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls such Underwriter within the
meaning of the Securities Act, to the extent that any loss, claim, damage,
liability (or
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action or proceeding in respect thereof) or expense arises out of the matters
described in the first proviso of this sentence or in (a) or (b) above or such
Person's failure to send or give a copy of the final prospectus or supplement to
the Persons asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of Registrable Securities to such Person if such statement or omission was
timely corrected in such final prospectus or supplement.
(b) Each Demanding Stockholder or Participating Stockholder agrees,
severally and not jointly, as a consequence of the inclusion of Applicable
Securities in such Registration Statement, and each Underwriter or selling agent
shall agree, as a consequence of facilitating such disposition of Applicable
Securities, severally and not jointly, to (i) indemnify and hold harmless the
Company and each other Demanding Stockholder or Participating Stockholder, their
respective directors and officers and each Person, if any, who controls the
Company or each other Demanding Stockholder or Participating Stockholder, within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities (or actions in
respect thereof) to which the Company or each other Demanding Stockholder or
Participating Stockholder, or such other Persons may become subject, under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in such Registration Statement or Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, unless such untrue
statement or alleged untrue statement or omission or alleged omission was
subsequently remedied in an amendment or supplement to such Registration
Statement or Prospectus and the Company failed to comply with the delivery
requirements of the Securities Act, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such indemnifying
Demanding Stockholder or Participating Stockholder, the Underwriter or selling
agent or its agent, expressly for use therein, and (ii) subject to the
limitation set forth immediately preceding this clause (ii), reimburse the
Company and each other Demanding Stockholder or Participating Stockholder, for
any legal or other expenses reasonably incurred by it in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by any Person entitled to indemnity (an
"Indemnitee") under Section 4.5(a) or (b) hereof of notice of the commencement
of any action or claim, such Indemnitee shall, if a claim in respect thereof is
to be made against an Indemnitor (an "Indemnitor") under this Section 4.5,
notify such Indemnitor in writing of the commencement thereof, but the omission
so to notify the Indemnitor shall not relieve it from any liability which it may
have to any Indemnitee except to the extent of any actual prejudice. In case any
such action shall be brought against any Indemnitee, it shall notify an
Indemnitor of the commencement thereof, such Indemnitor shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other Indemnitor similarly notified, to assume the defense thereof, with counsel
satisfactory to such Indemnitee, and, after notice from the Indemnitor to such
Indemnitee of its election so to assume the defense thereof, such Indemnitor
shall not be liable to such Indemnitee under this Section 4.5 for any legal
expenses of other counsel or any
-20-
Page 38 of 58 Pages
other expenses, in each case subsequently incurred by such Indemnitee, in
connection with the defense thereof. No Indemnitor shall, without the prior
written consent of the Indemnitee, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or threatened
action or claim in respect of which indemnification or contribution may be
sought hereunder (whether or not the Indemnitee is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the Indemnitee from all liability arising
out of such action or claim and (ii) does not include a statement as to, or an
admission of, fault, culpability or a failure to act, by or on behalf of any
Indemnitee.
Notwithstanding the foregoing, an Indemnitee shall have the right to
employ separate counsel reasonably acceptable to the Company in any such
proceeding and to participate in (but not control, other than as provided in (3)
below) the defense thereof, but the fees and expenses of such counsel shall be
at the expense of such Indemnitee unless (1) the Indemnitor has agreed to pay
such fees and expenses; (2) the Indemnitor shall have failed after notice to
assume the defense of such proceeding; or (3) the named parties to any such
proceeding (including any impleaded parties) include both such Indemnitee and
the Indemnitor or any of its affiliates or controlling persons, and a conflict
of interest will exist if such counsel represents such Indemnitee and the
Indemnitor (or such affiliate or controlling person) and in the case of (3), the
Indemnitee shall have the right to control the Indemnitee's defense and in each
of the cases, if such Indemnitee notifies the Indemnitor in writing that it
elects to employ separate counsel, the reasonable fees and expenses of such
counsel shall be at the expense of the Indemnitor; it being understood, however,
that the Indemnitor shall not, in connection with any one such proceeding or
separate but substantially similar or related proceedings in the same
jurisdiction, arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys (together with appropriate local counsel) at any time for all such
Indemnitees, which firm shall be designated by the Indemnitee that had the
largest number of shares included in the applicable registration statement. An
Indemnitor shall not be liable for any settlement of an action effected without
its written consent.
(d) If the indemnification provided for in this Section 4.5 is unavailable
to or insufficient to hold harmless an Indemnitee under Section 4.5(a) or (b)
hereof in respect of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then each Indemnitor shall contribute to
the amount paid or payable by such Indemnitee as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the Indemnitor and
the Indemnitee in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative fault of such
Indemnitor and Indemnitee shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by such Indemnitor or by such Indemnitee, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 4.5(d) were determined
solely by pro rata allocation (even if each Demanding Stockholder or
Participating Stockholder or any Underwriters or selling agents or all of them
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations
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Page 39 of 58 Pages
referred to in this Section 4.5(d). The amount paid or payable by an Indemnitee
as a result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such Indemnitee in connection with investigating
or defending any such action or claim. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. The obligations of each Demanding Stockholder or
Participating Stockholder and any Underwriters or selling agents in this Section
4.5(d) to contribute shall be several in proportion to the number of Applicable
Securities registered or underwritten or sold, as the case may be, by them and
not joint.
Notwithstanding any other provision of this Section 4.5(d), any Demanding
Stockholder or Participating Stockholder shall not be required to contribute any
amount in excess of the amount by which the net proceeds received by such
Stockholder from the sale of Company Common Stock pursuant to a Registration
Statement exceeds the amount of damages which such Stockholder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.
(e) The obligations of the Company under this Section 4.5 shall be in
addition to any liability which the Company may otherwise have to any Indemnitee
and the obligations of any Indemnified Person under this Section 4.5 shall be in
addition to any liability which such Indemnified Person may otherwise have to
the Company. The remedies provided in this Section 4.5 are not exclusive and
shall not limit any rights or remedies that may otherwise be available to an
Indemnitee at law or in equity.
Section 4.6. Other Provisions. (a) The respective indemnities, agreements
and other provisions set forth in this Article IV or made pursuant to this
Article IV shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Stockholder, any director, officer or partner of any Stockholder, any
agent or Underwriter, any director, officer or partner of such agent or
Underwriter, or any Affiliate of any of the foregoing, and shall survive the
registration, offering and sale of the Applicable Securities of each
Stockholder.
(b) Each Stockholder shall cooperate with respect to any Registration
effected under this Agreement and shall provide such information, documents, and
instruments as may be reasonably requested in connection therewith.
(c) Each Stockholder agrees, if so requested by the managing underwriter
in any underwritten offering of the Company's securities, not to effect any
public sale or distribution of Registrable Securities (other than pursuant to
such underwritten offering) during the 30 days prior to and the 90 days after
any registration statement for any such underwritten offering of the Company's
securities (either for its own account or for the benefit of the holders of any
securities of the Company) has become effective (or such period of time shorter
than 90 days that is sufficient and appropriate, in the sole opinion of the
managing underwriter, in order to complete the sale and distribution of
securities included in such registration).
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Page 40 of 58 Pages
(d) Each Stockholder agrees to keep confidential the fact that the Company
has exercised its rights under Section 4.1(b), any advice of the Company
pursuant to Section 4.3(c) and any other confidential information provided by
the Company in connection with this Agreement.
(e) The Company shall use reasonable best efforts to file all reports
required to be filed with respect to the Company under Section 13 or Section
15(d) of the Exchange Act during such time as there are any Registrable
Securities.
ARTICLE V
RIGHTS RELATING TO INVESTMENT IN ODYSSEY
Section 5.1. Actions of Odyssey Governance Committee. For so long as (a)
the Company or any of its Affiliates shall be entitled to a representative on
the Odyssey Governance Committee (as defined in the Amended and Restated Company
Agreement of Odyssey, effective as of November 13, 1998 (the "Odyssey
Agreement")) or is otherwise entitled to consent to the taking of the actions
set forth below pursuant to the Odyssey Agreement and (b) VISN and its
Affiliates which are Parties to this Agreement either (i) are entitled to
nominate or designate a member of the Board of Directors of the Company (the
"VISN Director") or (ii) beneficially own any Odyssey Preferred Interests (as
defined in the Odyssey Agreement), neither the Company nor any of its Affiliates
shall, without the written consent of the VISN Director or the representative of
NICC designated on Exhibit C, or otherwise designated by NICC and delivered in
writing to the Company (the "NICC Representative"), vote in favor of (or
otherwise consent to), directly or through their representatives:
(i) (A) any change in the following provisions of the Odyssey
Agreement: Section 5.7 (but solely in the case of Section 5.7.2, with
respect to the creation or issuance of any interest senior to, or PARI
PASSU with, the Preferred Interest), Section 6.6, Section 6.7.2, Section
6.9, Section 8.1 (but only insofar as Section 8.1 relates to the Preferred
Interest), Section 8.3 (but only insofar as Section 8.3 relates to or
establishes the priority for the Preferred Interest), Section 10.1.1,
Section 10.3 (but only insofar as Section 10.3 relates to the Preferred
Interest) or Section 13.3 or (B) any of the actions described in the
following provisions of the Odyssey Agreement: Section 6.2.2.1, Section
6.2.2.4 (but solely with respect to the creation or issuance of any
interest senior to, or PARI PASSU with, the Preferred Interest) or clause
(b) of Section 6.2.2.5 (but solely with respect to the incurrence of debt
which restricts payments made in connection with the NICC Budget (as
defined in the Odyssey Agreement));
(ii) (A) any repayment or redemption of any Odyssey interest
outstanding as of the date of the IPO junior to the Preferred Interest or
(B) any repayment or redemption of any interest junior to, or PARI PASSU
with, the Preferred Interest created or issued after the IPO in an amount
in excess of the aggregate proceeds received from the sale or issuance of
such interests);
(iii) any sale or transfer of all or substantially all of Odyssey's
assets unless the transferee of such assets assumes all of the obligations
contained in Section 6.6, Section 6.7.2 and Section 6.9 of the Odyssey
Agreement and agrees not to take the actions
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Page 41 of 58 Pages
described in Section 6.2.2.1 or clause (b) of Section 6.2.2.5 (but solely
with respect to the incurrence of debt which restricts payments made in
connection with the NICC Budget) of the Odyssey Agreement without the
consent of the VISN Director or the NICC Representative, in each case
until the later of the fifth anniversary of the IPO or the second
anniversary of such sale or transfer;
(iv) any merger or other business combination involving Odyssey where
Odyssey is not the surviving entity unless at the time of such merger or
business combination (A) the surviving entity assumes the Preferred
Interest on terms no less favorable to VISN than those set forth in the
Odyssey Agreement including, but not limited to, Section 5.7 (but solely
in the case of Section 5.7.2, with respect to the creation or issuance of
any interest senior to, or PARI PASSU with, the Preferred Interest),
Section 8.1 (but only insofar as Section 8.1 relates to the Preferred
Interest), Section 8.3 (but only insofar as Section 8.3 relates or
establishes the priority for the Preferred Interest), Section 10.1.1,
Section 10.3 (but only insofar as Section 10.3 relates to the Preferred
Interest) and Section 13.3, (B) references to Odyssey in Sections 5.1(ii),
(iii), (iv), (v), (vi) and (viii) of this Agreement shall be deemed to
refer to such surviving entity and (C) the surviving entity assumes all of
the obligations contained in Section 6.6, Section 6.7.2 and Section 6.9 of
the Odyssey Agreement and agrees not to take the actions described in
Section 6.2.2.1, Section 6.2.2.4 (but solely with respect to the creation
or issuance of any interest senior to, or PARI PASSU with, the Preferred
Interest) and clause (b) of Section 6.2.2.5 (but solely with respect to
the incurrence of debt which restricts payments made in connection with
the NICC Budget) of the Odyssey Agreement until the later of the fifth
anniversary of the IPO or the second anniversary of such merger or
business combination, PROVIDED Section 6.2.2.4 shall only expire when the
Preferred Interest has been redeemed, and PROVIDED, FURTHER that the
obligations of the surviving entity under this clause (C) shall not so
expire in the case of a merger or other business combination in which the
holders of equity interests in Odyssey (not including the Preferred
Interests) immediately before such transaction own at least a majority of
the equity interests in such surviving entity (or its Parent) (not
including the Preferred Interests) in substantially the same proportions
as their ownership prior to such transaction.
(v) the dissolution of Odyssey, except in connection with a complete
liquidation of the business conducted by Odyssey because such business is
being discontinued;
(vi) (A) any sale or transfer of all or substantially all of
Odyssey's assets to, or any merger or other business combination involving
Odyssey with, the Company or any of its Affiliates or (B) any other
material transaction (with respect to Odyssey) with the Company or any of
its Affiliates that is not on an arm's length basis or on commercially
reasonable terms if such transaction results in (1) an excessive or unfair
financial benefit to the Company or any of its Affiliates and (2) an
inability of Odyssey to satisfy its obligations under Section 6.6 of the
Odyssey Agreement or with respect to the Preferred Interests. In such
event the Company agrees to apply the amount by which its excessive or
unfair financial benefit exceeds the financial benefit that the Company
would have received if the transaction had been entered into on an arm's
length basis or on commercially reasonable terms to satisfy such Odyssey
obligations;
-24-
Page 42 of 58 Pages
(vii) any sale or transfer of all or substantially all of Odyssey's
assets, or any merger or other business combination involving Odyssey
where Odyssey is not the surviving entity, in each case prior to the
second anniversary of the IPO; or
(viii) any amendment or modification to the Odyssey Agreement, the
result of which would be that (A) none of the Company or any of its
Affiliates or their respective representatives would have the right to
consent to the taking of the actions listed in subparagraphs (i) though
(vii) above, (B) VISN would have any increased liability or additional
obligations under the Odyssey Agreement, or (C) there would occur any
adverse change to VISN's Capital Account (as defined in the Odyssey
Agreement) with respect to the Preferred Interests except to reflect the
redemption thereof pursuant to Section 5.7 of the Odyssey Agreement.
Section 5.2. Restriction on Transfer of the Company's Interests in
Odyssey.
(a) The Company shall not Transfer any of its Odyssey Common Interests (as
defined in the Odyssey Agreement) prior to the second anniversary of the IPO
without the consent of the VISN Director or the NICC Representative.
(b) The Company shall not Transfer of any of its Odyssey Common Interests
after the second anniversary of the IPO unless such Transfer is subject to a
requirement that the transferee agree to assume the Company's obligations under
Section 5.1 hereof, PROVIDED that the transferee's obligations under Section 5.1
hereof shall expire on the later of (i) the fifth anniversary of the IPO, (ii)
the second anniversary of such Transfer or (iii) the repayment or redemption of
VISN's Odyssey Preferred Interest, PROVIDED that notwithstanding the foregoing,
the transferee's obligations under Section 5.1 shall expire upon the dissolution
of Odyssey.
Section 5.3. Termination of Rights and Obligations. The rights of VISN, or
NICC, as the case may be, under Section 5.1 and 5.2 shall terminate (if not
theretofore terminated) pursuant to the terms of Section 5.1 or 5.2 on the later
of such date as VISN and its Affiliates which are Parties to this Agreement
cease to (i) be entitled to nominate or designate a member of the Board of
Directors of the Company or (ii) beneficially own any Odyssey Preferred
Interests.
Section 5.4. Covenant to make Capital Contribution. The Company covenants
that it shall cause Crown to make the $10 million Mandatory Capital Contribution
(as defined in the Odyssey Agreement) required pursuant to Section 7.2 of the
Odyssey Agreement and shall not waive The Xxx Xxxxxx Company's obligation to
make its $10 million Mandatory Capital Contribution required pursuant to Section
7.2 of the Odyssey Agreement.
ARTICLE VI
MISCELLANEOUS
Section 6.1. Entire Agreement. This Agreement contains the entire
agreement between the parties hereto with respect to the subject matter hereof
and there are no agreements, understandings, representations or warranties
between the parties hereto other than those set forth or referred to herein.
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Page 43 of 58 Pages
Section 6.2. Amendment and Waiver. This Agreement, including this
Section 6.2, may be amended, and waivers or consents to departures from the
provisions hereof may be given, only by a written instrument duly executed, in
the case of an amendment, by the Company and each Stockholder, or in the case of
a waiver or consent, by the party against whom the waiver or consent, as the
case may be, is to be effective.
Section 6.3. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission)
and shall be given as follows:
(a) if to the Company or HEI to:
Hallmark Cards, Incorporated
Department 339
0000 XxXxx
Xxxxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxx, Vice President,
General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with copies to:
Hallmark Entertainment, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx von Gal
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) if to CEA, to:
Chase Equity Associates, L.L.C.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxx, Xxxxx & Xxxxx
0000 Xxxxxxxx, Xxxxx 0000
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Page 44 of 58 Pages
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(c) if to Liberty, to:
Liberty Media Corporation
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxx, Senior Vice President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Liberty Media Corporation
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxxx, Senior Vice President
and General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a further copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(d) if to VISN, to:
VISN Management Corp.
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxx Chance Xxxxxx & Xxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
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Page 45 of 58 Pages
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Section 6.4. Assignment; Benefit. The terms and provisions of this
Agreement shall not be assignable or transferable and except for Indemnitees and
as otherwise expressly provided herein there shall be no third party
beneficiaries hereto; PROVIDED, HOWEVER, that any Affiliate of a Stockholder
that beneficially owns Registrable Securities may exercise such Stockholder's
rights under Article III hereof. All the terms and provisions of this Agreement
shall be binding upon, shall inure to the benefit of and shall be enforceable by
the respective legal successors and permitted assigns of the parties hereto.
Section 6.5. Absence of Presumption. This Agreement shall be construed
without regard to any presumption or rule requiring construction or
interpretation against the party drafting or causing any instrument to be
drafted.
Section 6.6. Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
Section 6.7. Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
Section 6.8. Governing Law; Jurisdiction and Forum. THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS.
THE PARTIES HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE COURTS OF THE
STATE OF DELAWARE SOLELY IN RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE
PROVISIONS OF THIS AGREEMENT AND IN RESPECT OF THE TRANSACTIONS CONTEMPLATED
HEREBY, AND HEREBY WAIVE, AND AGREE NOT TO ASSERT, AS A DEFENSE IN ANY ACTION,
SUIT OR PROCEEDING FOR THE INTERPRETATION OR ENFORCEMENT HEREOF, THAT IT IS NOT
SUBJECT THERETO OR THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS
NOT MAINTAINABLE IN SAID COURTS OR THAT THE VENUE THEREOF MAY NOT BE APPROPRIATE
OR THAT THIS AGREEMENT MAY NOT BE ENFORCED IN OR BY SUCH COURTS, AND THE PARTIES
HERETO IRREVOCABLY AGREE THAT ALL CLAIMS WITH RESPECT TO SUCH ACTION OR
PROCEEDING SHALL BE HEARD AND DETERMINED IN SUCH A DELAWARE STATE COURT. THE
PARTIES HEREBY CONSENT TO AND GRANT ANY SUCH COURT JURISDICTION OVER SUCH
PARTIES AND OVER THE SUBJECT MATTER OF SUCH DISPUTE AND AGREE THAT MAILING OF
PROCESS OR OTHER PAPERS IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING IN THE
MANNER PROVIDED IN SECTION 6.3 OR IN SUCH OTHER MANNER AS MAY BE PERMITTED BY
LAW SHALL BE VALID AND SUFFICIENT SERVICE THEREOF.
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Page 46 of 58 Pages
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH PARTY HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 6.8.
Section 6.9. Specific Enforcement. Each party hereto acknowledges that
remedies at law may be inadequate to protect any other party against any actual
or threatened breach of this Agreement by the other parties and, without
prejudice to any other rights and remedies otherwise available to any party,
each party agrees to the granting of injunctive relief in any other party's
favor without proof of actual damages. In the event of litigation relating to
this Agreement, if a court of competent jurisdiction determines that this
Agreement has been breached by a party, then such party shall reimburse the
other party for costs and expenses (including, but not limited to, reasonable
legal fees and expenses) incurred in connection with all such litigation.
Section 6.10. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or entity
or any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such original provision and (b)
the remainder of this Agreement and the application of such provision to other
Persons, entities or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in any
other jurisdiction.
Section 6.11. After-Acquired Shares. All of the provisions of this
Agreement shall apply to and include, to the extent received in respect of
shares of Company Common Stock acquired pursuant to the Contribution Agreement,
all securities and instruments (i) received by a Stockholder as a dividend on or
other payment made to holders of Company Common Stock, or (ii) issued in
connection with a split of shares of Company Common Stock or as a result of any
exchange for or reclassification of shares of Company Common Stock or a
reorganization, recapitalization, consolidation or merger.
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Page 47 of 58 Pages
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers as of the day and year first
above written.
CROWN MEDIA HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title:
HALLMARK ENTERTAINMENT INC.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title:
LIBERTY MEDIA CORPORATION
By: /s/ Xxxxx Xxxx
-------------------------------------
Name: Xxxxx Xxxx
Title:
VISN MANAGEMENT CORP.
By: /s/ Xxxxxxx X. Xxxx, Xx.
-------------------------------------
Name: Xxxxxxx X. Xxxx, Xx.
Title: Chairman VMC
CHASE EQUITY ASSOCIATES, L.P.
By: Chase Capital Partners,
its general partner
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: General Partner
-30-
Page 48 of 58 Pages
APPENDIX I
Name Class A Stock Class B Stock
---- ------------- -------------
Hallmark Entertainment, Inc. -- 30,670,422
Liberty Media Corporation 9,154,930 --
VISN Management Corp. 6,338,028 --
Chase Equity Associates, L.L.C. 3,836,620 --
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Page 49 of 58 Pages
Exhibit A
---------
[NAME OF ISSUER]
Notice of Registration Statement
and
Selling Securityholder Questionnaire
------------------------------------
(Date)
Reference is hereby made to the Stockholder Agreement (the "Stockholders
Agreement") among Hallmark Entertainment, Inc., a Delaware corporation ("HEI"),
Liberty Media Corporation, a Delaware corporation ("Liberty"), VISN Management
Corp., a Delaware corporation ("VISN"), Chase Equity Associates, L.L.C., a
California limited partnership ("CEA" and together with Liberty, VISN and HEI,
the "Stockholders") and Crown Media Holdings, Inc., a Delaware corporation (the
"Company"). Pursuant to the Stockholders Agreement, the Company [has filed] with
the United States Securities and Exchange Commission (the "Commission") a
registration statement on Form ____ (the "Registration Statement") for the
registration and resale under the Securities Act of 1933, as amended (the
"Securities Act"), of shares of Company Common Stock. All capitalized terms not
otherwise defined herein shall have the meanings ascribed thereto in the
Stockholders Agreement.
The Stockholder is entitled to have the Registrable Securities owned by it
included in the Registration Statement. In order to have Registrable Securities
included in the Registration Statement, this Notice of Registration Statement
and Selling Securityholder Questionnaire ("Notice and Questionnaire") must be
completed, executed and delivered to the Company's counsel at the address set
forth herein for receipt ON OR BEFORE [DEADLINE FOR RESPONSE]. If the
Stockholder does not complete, execute and return this Notice and Questionnaire
by such date, the Stockholder (i) will not be named as a selling securityholder
in the Registration Statement and (ii) may not use the Prospectus forming a part
thereof for resales of Registrable Securities.
Certain legal consequences arise from being named as a selling
securityholder in the Registration Statement and related Prospectus.
Accordingly, the Stockholder is advised to consult its own securities law
counsel regarding the consequences of being named or not being named as a
selling securityholder in the Registration Statement and related Prospectus.
Page 50 of 58 Pages
ELECTION
The Stockholder (the "Selling Securityholder") hereby elects to include in
the Registration Statement the Registrable Securities beneficially owned by it
and listed below in Item (3). The Selling Securityholder, by signing and
returning this Notice and Questionnaire, agrees to be bound with respect to such
Registrable Securities by the terms and conditions of this Notice and
Questionnaire.
The Selling Securityholder hereby provides the following information to
the Company and represents and warrants that such information is accurate and
complete:
-2-
Page 51 of 58 Pages
QUESTIONNAIRE
(1) Full Legal Name of Selling Securityholder:
(2) Address for Notices to Selling Securityholder:
Telephone:
Fax:
Contact Person:
(3) EXCEPT AS SET FORTH BELOW IN THIS ITEM (3), THE UNDERSIGNED DOES NOT
BENEFICIALLY OWN ANY SHARES OF ANY CLASS OF COMPANY COMMON STOCK.
(a) Number of Registrable Securities and shares of each class of Company
Common Stock beneficially owned:
(b) Number of Registrable Securities which the undersigned wishes to be
included in the Registration Statement:
(4) Beneficial Ownership of Other Securities of the Company:
Except as set forth below in this Item (4), the undersigned Selling
Securityholder is not the beneficial or registered owner of any shares of any
class of Company Common Stock or any other securities of the Company, other than
the Registrable Securities and shares of Company Common Stock listed above in
Item (3).
State any exceptions here:
(5) Relationships with the Company:
Except as set forth below, neither the Selling Securityholder nor any of
its affiliates, officers, directors or principal equity holders (5% or more) has
held any position or office or has
-3-
Page 52 of 58 Pages
had any other material relationship with the Company (or its predecessors or
affiliates) during the past three years.
State any exceptions here:
(6) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder intends
to distribute the Registrable Securities listed above in Item (3) only as
follows (if at all): Such Registrable Securities may be sold from time to time
directly by the undersigned Selling Securityholder or, alternatively, through
underwriters, broker-dealers or agents. Such Registrable Securities may be sold
in one or more transactions at fixed prices, at prevailing market prices at the
time of sale, at varying prices determined at the time of sale, or at negotiated
prices. Such sales may be effected in transactions (which may involve crosses or
block transactions) (i) on any national securities exchange or quotation service
on which the Registered Securities may be listed or quoted at the time of sale,
(ii) in the over-the-counter market, (iii) in transactions otherwise than on
such exchanges or services or in the over-the-counter market, or (iv) through
the writing of options. In connection with sales of the Registrable Securities
or otherwise, the Selling Securityholder may enter into hedging transactions
with broker-dealers, which may in turn engage in short sales of the Registrable
Securities in the course of hedging the positions they assume. The Selling
Securityholder may also sell Registrable Securities short and deliver
Registrable Securities to close out such short positions, or loan or pledge
Registrable Securities to broker-dealers that in turn may sell such securities.
State any exceptions here:
By signing below, the Selling Securityholder acknowledges that it
understands its obligation to comply, and agrees that it will comply, with the
provisions of the Exchange Act and the Rules and Regulations, particularly
Regulation M.
By signing below, the Selling Securityholder consents to the disclosure of
the information contained herein in its answers to Items (1) through (6) above
and the inclusion of such information in the Registration Statement and related
Prospectus. The Selling Securityholder understands that such information will be
relied upon by the Company in connection with the preparation of the
Registration Statement and related Prospectus.
In accordance with the Selling Securityholder's obligation under the
Stockholders Agreement to provide such information as may be required by law for
inclusion in the Registration Statement, the Selling Securityholder agrees to
promptly notify the Company of any inaccuracies or changes in the information
provided herein which may occur subsequent to the date hereof at any time while
the Registration Statement remains in effect. All notices hereunder
-4-
Page 53 of 58 Pages
and pursuant to the Stockholders Agreement shall be made in writing, by
hand-delivery or air courier guaranteeing overnight delivery as follows:
(i) To the Company:
[Name of Issuer]
[Address]
(ii) With a copy to:
[Company Counsel]
[Address]
Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Company's counsel, the terms of this Notice
and Questionnaire, and the representations and warranties contained herein,
shall be binding on, shall inure to the benefit of and shall be enforceable by
the respective successors, heirs, personal representatives, and assigns of the
Company and the Selling Securityholders. This Agreement shall be governed in all
respects by the laws of the State of New York.
-5-
Page 54 of 58 Pages
IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person or
by its duly authorized agent.
Dated: ________________
Selling Securityholder
By:
Name:
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON
OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY'S COUNSEL AT:
[Company Counsel]
[Address]
-6-
Page 55 of 58 Pages
Exhibit B
---------
CORPORATE OPPORTUNITIES POLICY
Crown Media Holdings, Inc. will be the primary (but not exclusive) vehicle
for the pursuit of corporate opportunities relating to the ownership and
operation of pay television channels dedicated to family programming ("Pay
Television Opportunities") that are provided or otherwise made available to
Hallmark Entertainment, Inc. and its subsidiaries. However, the term Pay
Television Opportunities does not include opportunities (1) developed by or made
available to any public company that is a subsidiary of Hallmark Entertainment,
Inc. or any of Hallmark Entertainment, Inc.'s subsidiaries (other than Crown
Media Holdings, Inc. and its subsidiaries), (2) relating to the production or
distribution of programming that is developed by, or provided or made available
to, a subsidiary of Hallmark Entertainment, Inc. that does not own or operate
pay television channels dedicated to family programming and whose primary
business is the production or distribution of programming, (3) arising out of or
relating to Pay Television Opportunities that have been provided or made
available to Crown Media Holdings, Inc. but which Crown Media Holdings, Inc. has
determined not to pursue or has failed to pursue within the applicable time
period reasonably specified by Hallmark Entertainment, Inc., or (4) that
Hallmark Entertainment, Inc. or any of its subsidiaries is legally or
contractually obligated to provide or make available to a person other than
Crown Media Holdings, Inc.
Crown Media Holdings, Inc. is not obligated to pursue any Pay
Television Opportunity presented to it by Hallmark Entertainment, Inc. If
Crown Media Holdings, Inc. determines not to pursue or fails to pursue an
opportunity, in each case within such time as Hallmark Entertainment, Inc.
may reasonably specify (taking into account the type and nature of the Pay
Television Opportunity provided or made available) in its communication to
Crown Media Holdings, Inc. relating to such Pay Television Opportunity, then
Hallmark Entertainment, Inc. and its subsidiaries may pursue such Pay
Television Opportunity.
This policy is effective from the completion of the initial public
offering of Class A Common Stock of Crown Media Holdings, Inc. This policy
automatically terminates upon the first to occur of (1) Hallmark Entertainment,
Inc. and its subsidiaries ceasing to beneficially own, in the aggregate, at
least a majority in voting power of the outstanding voting securities of Crown
Media Holdings, Inc. entitled to vote generally upon all matters submitted to
common stockholders and (2) the third anniversary of the completion of the
initial public offering of Class A Common Stock of Crown Media Holdings, Inc.
The Hallmark Entertainment, Inc. board of directors is required to act in
accordance with its fiduciary duties owed to Hallmark Entertainment, Inc. and
Hallmark Entertainment, Inc.'s fiduciary duties, if any, to its subsidiaries in
making all determinations in connection with this policy. With respect to any
Pay Television Opportunity that may be subject to this policy and any obligation
(fiduciary or otherwise) to one or more other subsidiaries, the Hallmark
Entertainment, Inc. board of directors will have discretion to determine,
without reference to this policy, to which of Crown Media Holdings, Inc. or such
other subsidiary of Hallmark Entertainment, Inc. such Pay Television Opportunity
will be provided or made available. Notwithstanding anything set forth in this
policy, Hallmark Entertainment, Inc. will have no obligation to exercise any
rights it may have as a shareholder, partner or member of any entity that is not
a wholly owned subsidiary or to exercise any rights available to it under
agreements with other shareholders, partners or members, in order to implement
determinations under this
Page 56 of 58 Pages
policy. All determinations of the Hallmark Entertainment, Inc. board of
directors with respect to this policy and the interpretation of this policy are
conclusive and binding.
Hallmark Entertainment, Inc.'s board of directors from time to time may
amend, modify or rescind this policy or adopt additional or other policies or
make exceptions with respect to the application of this policy in connection
with particular facts and circumstances, all as the Hallmark Entertainment, Inc.
board of directors may determine, consistent with its fiduciary duties and in
accordance with Section 2.8 of the Stockholders Agreement dated as of May 9,
2000 by and among Hallmark Entertainment, Inc., Liberty Media Corporation, VISN
Management Corp., Chase Equity Associates, L.P. and Crown Media Holdings, Inc.
The transactions contemplated by the Contribution Agreement shall not
create any inference or course of dealing as to the opportunities to which this
policy applies.
-2-
Page 57 of 58 Pages
Exhibit C
---------
NICC representative: Xxxxxxx Xxxx
