EXHIBIT 10.7
STRATEGIC INVESTMENT AGREEMENT
BETWEEN
DIGIMARC CORPORATION
AND
KONINKLIJKE PHILIPS ELECTRONICS N.V.
DATED AS OF SEPTEMBER 17, 2000
TABLE OF CONTENTS
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PAGE
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ARTICLE I.
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Purchase and Sale of Shares
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2
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1.1
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Purchase and Sale of the Shares
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2
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1.2
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The Closing
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2
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1.3
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Newco Collaboration
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2
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1.4
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Consulting Agreement
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3
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ARTICLE II.
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Representations and Warranties
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3
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2.1
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Representations and Warranties of the
Company
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3
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2.2
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Representations and Warranties of the
Investor
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10
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ARTICLE III.
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Covenants
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3.1
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Galaxy Group; Watermarking Technology
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13
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3.2
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Investor’s Standstill Agreement
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13
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3.3
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Transfer
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14
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3.4
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Compliance with Section 13
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14
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ARTICLE IV.
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Registration Rights
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15
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4.1
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Legend
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15
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4.2
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Registration on Form S-3
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16
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4.3
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Piggyback Registration
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17
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4.4
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Registration Procedures
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18
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4.5
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Delay of Registration; Furnishing
Information
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20
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4.6
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Termination of Registration Rights
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21
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4.7
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Indemnification
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21
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4.8
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Assignment of Registration Rights
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23
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4.9
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Limitation on Subsequent Registration
Rights
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24
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4.10
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Market Stand-Off Agreement
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24
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4.11
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Rule 144 Reporting
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24
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ARTICLE V.
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Additional Agreements
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25
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5.1
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Consents; Approvals
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25
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5.2
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Firewall Procedures
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25
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ARTICLE VI.
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Conditions Precedent
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26
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6.1
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Investor Conditions to Closing
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26
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6.2
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Company Conditions to Closing
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28
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ARTICLE VII.
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Miscellaneous
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7.1
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Fees and Expenses
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30
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7.2
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Severability
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30
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7.3
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Consent to Jurisdiction
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30
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7.4
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Dispute Resolution Procedures
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31
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7.5
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Brokers
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33
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7.6
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Entire Agreement; Amendments
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34
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i
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7.7
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Notices
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34
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7.8
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No Waiver
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35
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7.9
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Heading
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36
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7.10
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Successors and Assigns
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36
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7.11
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No Third Party Beneficiaries
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36
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7.12
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Governing Law
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36
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7.13
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Further Assurances
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36
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7.14
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English Language Controls
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36
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7.15
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Relationship of the Parties
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36
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7.16
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Publicity
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37
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7.17
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Number and Gender of Words
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37
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7.18
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Interpretation
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37
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7.19
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Counterparts
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38
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ii
TABLE OF EXHIBITS
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Exhibit A
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-
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Definitions
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Exhibit B
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Consulting Agreement
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Exhibit C
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Schedule of Exceptions
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EXHIBIT 10.13
DIGIMARC CORPORATION
STRATEGIC INVESTMENT AGREEMENT
THIS STRATEGIC INVESTMENT AGREEMENT
(this “AGREEMENT”) is made as of September 17,
2000 by and between KONINKLIJKE PHILIPS ELECTRONICS N.V., a
Netherlands corporation (the “INVESTOR”), and DIGIMARC
CORPORATION, a Delaware corporation (the “COMPANY”),
(each a “PARTY”, collectively, the
“PARTIES”). Capitalized terms used in this Agreement
and not otherwise defined are defined in EXHIBIT A, attached
hereto and incorporated by reference herein.
A. The Investor and the Company believe that a more
extensive business relationship between them would be mutually
advantageous.
B.
As part of such current and
potential business relationship, the Parties desire that the
Investor become an equity investor in the Company by purchasing
shares of the Company’s Common Stock (the “COMMON
STOCK”, and such shares, the “SHARES”) in a
number equal to the Philips Percentage (defined below), at a
purchase price of $20.00 per share. The “PHILIPS
PERCENTAGE” of the Common Stock shall be an amount equal to
twelve percent (12%) of the issued and outstanding Common Stock at
the Closing, including the shares issued to the Investor hereunder
and the shares issued or to be issued pursuant to the proposed
Strategic Investment Agreement between the Company and Macrovision
Corporation (the “MACROVISION INVESTMENT AGREEMENT”),
but excluding shares subject to warrants, options or other
contracts for the sale of the Common Stock existing on the date of
this Agreement. If the Company issues any warrants, options or
other contracts for the purchase of Common Stock after the date of
this Agreement but prior to the Closing (other than pursuant to the
Company’s existing employee stock purchase plans), then the
Investor may purchase (at its option) a number of shares of
Common Stock such that the Philips Percentage may be
calculated including the Common Stock available for issuance under
such warrants, options and other contracts.
C.
As another part of such future
business relationship, the Parties contemplate negotiating
arrangements for jointly creating a third corporation
(“NEWCO”) as a vehicle for developing and marketing the
Company’s watermarking technology for the audio-video market,
as enhanced by audio-video technology licensed from the
Investor.
NOW, THEREFORE, in consideration of
the mutual promises contained herein and made pursuant hereto, and
good and valuable consideration, receipt of which is hereby
acknowledged, the Parties hereto do hereby agree as
follows:
1
ARTICLE I.
Purchase and Sale of
Shares
1.1
PURCHASE AND SALE OF THE
SHARES.
Subject to the terms and conditions
hereof, the Company will issue and sell to the Investor, and the
Investor will purchase from the Company, at the Closing (defined in
Section 1.2), a number of shares of Common Stock equal to the
Philips Percentage, at a purchase price per share (the “SHARE
PRICE”) equal to $20.00 per share. The “TOTAL PURCHASE
PRICE” shall be the Share Price multiplied by the number of
shares of Common Stock purchased by the Investor, such number of
shares not to exceed the Philips Percentage.
1.2
THE CLOSING.
The purchase and sale of the Shares
shall take place at the offices of Morrison & Foerster
LLP, 425 Market Street, San Francisco, California, on
October 19, 2000, or at such other time and place as the
Company and the Investor mutually agree upon orally or in writing
(the “CLOSING”). At the Closing, the Company shall
deliver to the Investor a stock certificate representing the Shares
purchased by the Investor, and the Investor shall pay the Total
Purchase Price by wire transfer of immediately available funds in
the manner requested by the Company, all in accordance with
Section 1.1.
1.3
NEWCO COLLABORATION.
The Investor and the Company each
agree to negotiate in good faith toward the accomplishment of the
following described collaboration through Newco which, although
initially contemplated to be jointly owned by the Parties, is
contemplated to evolve into a separate, publicly owned corporation.
Such good faith negotiation shall be consistent with the customs
and practices of sophisticated technology companies when they each
have an expertise in a particular technology that can be combined
synergistically in a collaboration to create a multidisciplinary
product based upon applications of both technologies. The
collaboration herein contemplated is for the creation and marketing
of an audio/video product based upon the Company’s watermark
technology and relevant Investor audio/video technology. Nothing
herein shall be deemed to contemplate any particular transfers of
intellectual property rights by either Party; provided that the
Parties contemplate that Newco itself will develop its own
intellectual property, including by creating derivative works and
copyrights for watermarking software for this audio/video market.
Nothing herein contemplates any particular level of financial
support for Newco by the Parties, which is a function of complex
economic analyses that will be done by each Party as it hereafter
evaluates the technology, the market potential, potential
competition and other matters. [***] the Company’s
obligations under the preceding proviso shall earlier terminate
upon the occurrence of any of the following: (i) the Parties
shall have failed to use reasonable Best Efforts to file their
joint application pursuant to the Hart-Scott Rodino Antitrust
Improvements Act of 1976, as amended (the “HSR
ACT”)
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within five (5) business days after the
date hereof, (ii) the Closing shall have failed to occur on
the earlier of (A) five (5) business days after the
expiration of the waiting period under the HSR Act (which date
under this subclause (ii)(A) shall not be deemed to have
occurred until at least 30 days from the date hereof) and
(B) 90 days from the date hereof, or (iii) either Party
receives notification from the Federal Trade Commission
(“FTC”) that the Parties’ HSR Act application
will not be approved. [***]
1.4
CONSULTING AGREEMENT.
The Parties shall execute a
Consulting Agreement, in substantially the form of
EXHIBIT B hereto (the “CONSULTING AGREEMENT”),
contemporaneously with the execution of this Agreement, pursuant to
which the Company shall provide consulting services to the Investor
and the Investor shall pay consulting fees to the Company, all as
set forth more specifically therein.
ARTICLE II.
Representations and
Warranties
2.1
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY.
Except as set forth on the
Schedule of Exceptions, attached hereto as EXHIBIT C
(“SCHEDULE OF EXCEPTIONS”), or as disclosed in the
SEC Documents (as defined in Section 2.1(f)), the Company
represents and warrants to the Investor as follows:
(a) ORGANIZATION AND QUALIFICATION.
The Company is a corporation duly
organized and existing in good standing under the laws of the
jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business
as now being conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary and where
the failure to qualify would have a Material Adverse Effect with
respect to the Company.
(b) AUTHORIZATION; ENFORCEMENT.
The Company has the requisite
corporate power and authority to enter into and perform this
Agreement and to issue the Shares in accordance with the terms
hereof. The execution and delivery by the Company of this Agreement
and the consummation of the transactions contemplated hereby have
been duly authorized by the Company’s Board of Directors, and
no further consent or authorization of the Company or its Board of
Directors or stockholders is required. This Agreement has been duly
executed and delivered by the Company. Subject to the
Company’s receipt of the Total Purchase Price, this Agreement
constitutes the valid and binding obligation of the Company
enforceable
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against the Company in accordance with its
respective terms, except as such enforceability may be limited
by applicable insolvency, reorganization, moratorium, liquidation
or similar laws relating to, or affecting generally the enforcement
of, creditors’ rights and remedies or by equitable principles
of general application.
(c) CAPITALIZATION.
The authorized capital stock of the
Company consists of 100,000,000 shares of Common Stock, of which as
of September 13, 2000, 13,085,930 shares were issued and
outstanding and 5,000,000 shares of Preferred Stock, none of which
is outstanding. All of such outstanding shares have been validly
issued and are fully paid and nonassessable. The Company has
furnished to the Investor true and correct copies of the
Company’s Certificate of Incorporation as in effect on the
date hereof (the “CERTIFICATE OF INCORPORATION”) and
the Company’s By-laws, as in effect on the date hereof (the
“BY-LAWS”).
(d) VALIDITY OF SHARES.
The Shares, when issued in
accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable.
(e) NO CONFLICTS.
The execution, delivery and
performance by the Company of this Agreement and the consummation
by the Company of the transactions contemplated hereby do not
(i) result in a violation of the Company’s Certificate
of Incorporation or By-laws, or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company is a
party, or result in a violation of any law, rule, regulation,
order, judgment or decree applicable to the Company or by which any
property or asset of the Company is bound or affected (except, in
the case of subclause (ii) above, for such conflicts,
defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have
a Material Adverse Effect on the Company). No action, suit, dispute
or proceeding is pending or, to the best knowledge of the Company,
threatened against the Company which, if adversely determined,
would prevent the Company from carrying out its obligations under
this Agreement or which would have a material adverse effect on any
of the Company’s Intellectual Property (as defined in
Section 2(m)(i) hereof). The business of the Company is
not being conducted in violation of any law, ordinance or
regulation of any Governmental Authority, except for possible
violations which either singly or in the aggregate do not and will
not have a Material Adverse Effect with respect to the Company.
Except as contemplated by this Agreement, the Company is not
required to obtain any consent, authorization or order of, or make
any filing or registration with, any court or Governmental
Authority in order for it to execute, deliver or perform any
of its obligations under this Agreement.
4
(f)
SEC DOCUMENTS, FINANCIAL
STATEMENTS.
Since December 7, 1999, the
Company has filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to
the reporting requirements of the Exchange Act (all filings with
the SEC since such date through the date of this Agreement are
hereinafter the “SEC DOCUMENTS”). As of their
respective dates, the SEC Documents complied in all material
respects with the requirements of the Exchange Act and the
rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents
(when read together with all exhibits included therein and
financial statement schedules thereto and documents (other than
exhibits) incorporated by reference) contained any untrue statement
of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in
the SEC Documents comply as to form in all material respects
with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such
financial statements have been prepared in accordance with U.S.
generally accepted accounting principles (“GAAP”)
applied on a consistent basis during the periods involved (except
(i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may not
include footnotes or year-end adjustments or may be condensed
or summary statements) and fairly present in all material respects
the consolidated financial position of the Company as of the dates
thereof and the consolidated results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
(g) LIABILITIES.
The Company has no debt, obligation,
duty or liability of any nature including any unknown, undisclosed,
unmatured, unaccrued, unasserted, contingent, indirect,
conditional, implied, vicarious, derivative, joint, several or
secondary liability, regardless of whether such debt, obligation,
duty or liability would be required to be disclosed on a balance
sheet prepared in accordance with GAAP, consistently applied, and
regardless of whether such debts, obligations, duties or
liabilities are immediately due and payable (hereinafter,
“LIABILITIES”), and the executive officers of the
Company have no knowledge of any such debts, obligations, duties or
liabilities of the Company except:
(i) Those Liabilities disclosed in the SEC
Documents; or
(ii) Those Liabilities reflected or reserved against
on the Company’s June 30, 2000 balance sheet (the
“INTERIM BALANCE SHEET”) or incurred by the Company in
the ordinary course of business since June 30, 2000, none of
which individually or in the aggregate had or will have a Material
Adverse Effect on the business of the Company or its property,
assets, financial condition, earnings, profits or prospects or
which would
5
have a material adverse effect on any of the
Intellectual Property or on the creation of an audio/video product
based on the Company’s watermarking technologies.
(h) OFFERING.
Assuming (i) the accuracy of
the representations and warranties of the Investor contained in
Section 2.2 hereof and (ii) that the principal office of
the Investor is at Amstelplein 1, Amsterdam, The Netherlands, the
offer, issuance, and sale of the Shares are and will be exempt from
the registration and prospectus delivery requirements of the
Securities Act and are exempt from the registration, permit, or
qualification requirements of all applicable state securities
laws.
(i)
SUBSIDIARIES.
The Company does not presently own
or control, directly, or indirectly, any interest in any other
corporation, association, partnership, or other business
entity.
(j)
LITIGATION.
There are no civil, criminal or
administrative actions, suits, claims, hearings or proceedings
pending, initiated or, to the best knowledge of the executive
officers of the Company, threatened, against the Company which, if
decided adversely, are reasonably expected to have a Material
Adverse Effect with respect to the Company. There are no actions,
suits, claims, hearings or proceedings pending, initiated or, to
the best knowledge of the Company, threatened, by the Company
against any other Person for claims in excess of
$500,000.
(k) GALAXY GROUP; WATERMARKING
TECHNOLOGY.
(i)
The Company is in compliance with
Section 1.3.
(ii) There is no present intention by the Company to
depart from its business plan of aggressively developing and
marketing its watermarking technology.
(l)
ABSENCE OF CERTAIN
CHANGES.
Since the date of the
Company’s most recent quarterly report filed with the SEC
(the “AUDIT DATE”), the Company has conducted its
businesses only in, and has not engaged in any material transaction
other than according to, the ordinary and usual course of its
business. Without limiting the generality of the foregoing, since
the Audit Date there has not been (i) any Material Adverse
Effect or any development or combination of developments that,
individually or in the aggregate, has had or is reasonably likely
to have a Material Adverse Effect; or (ii) any damage,
destruction or other casualty or loss with respect to any asset or
property owned, leased or otherwise used by the Company, whether or
not covered by insurance, which has had or will have a Material
Adverse Effect on the Company.
6
(m) INTELLECTUAL PROPERTY.
(i)
The Company is the sole legal and
beneficial owner of all intellectual property, proprietary
technology and proprietary information held or used in the business
of the Company (the “INTELLECTUAL PROPERTY”), except
for Intellectual Property that is the subject of any license for
Third Party Intellectual Property Rights (a “THIRD PARTY
INTELLECTUAL PROPERTY LICENSE”) or commercially available or
user licenses. Notwithstanding the foregoing, the Company makes no
warranty about third party patents that have not, to the knowledge
of the Company’s executive officers, been asserted in writing
against the Company as of the date hereof, other than:
(A) third party patents that the Company has asked outside
legal counsel to analyze to determine whether such patents apply to
the Company’s products; (B) any third-party patent for
which the Company’s in-house attorneys have prepared a
written analysis relating to the relevance of such patent to the
Company’s products; (C) third-party patents that have
been identified by or brought to the attention to any of the
executive officers of the Company (which includes its Chief
Technology Officer and the general managers of each of its three
lines of business) or the Vice President of Engineering or the Vice
President of Corporate Development of the Company as being
potentially infringed by the Company’s products or methods,
or (D) third party patents that the Company is willfully
infringing.
(ii) With the exception of immaterial licenses and
agreements entered into in the normal course of business and except
for as set forth in the Schedule of Exceptions,
[***].
(iii) The Company is in compliance in all material
respects with all Third Party Intellectual Property
Licenses.
(iv) The Company is not, nor will it be as a result
of the execution and delivery of this Agreement or the performance
of obligations hereunder in violation or breach of any contracts as
to which the Company licenses or sublicenses the Intellectual
Property or any Third Party Intellectual Property
Licenses.
(v) The Company has the right to license to third
parties the use of the Intellectual Property other than
commercially available and user software licenses and other than
the Intellectual Property that, in the aggregate, would be
immaterial to the Company’s business.
(vi) All registrations and filings relating to the
Company’s Intellectual Property are in good standing. All
maintenance and renewal fees necessary to preserve the rights of
the Company in respect of its Intellectual Property have been made.
The registrations and filings relating to the Company’s
Intellectual Property are proceeding, and there are no facts of
which the executive officers of the Company have knowledge which
could significantly undermine those registrations or filings or
reduce to a significant extent the scope of protection of any
patents arising from such applications beyond that which ordinarily
might occur in a patent prosecution proceeding.
7
Notwithstanding the foregoing, the Company only
makes the foregoing warranties under this
subsection (vi) to the knowledge of the Company’s
executive officers as of the Closing as applied to the Third Party
Intellectual Property Rights.
(vii) The manufacturing, marketing, distribution or
sale of any product currently manufactured, marketed, distributed
or sold by, or identified for development by, the Company, any of
its subsidiaries, licensees or sublicensees in the countries where
the Company has conducted or proposes to conduct such activities
does not and would not infringe, induce infringement or
contributorily infringe the intellectual property rights throughout
the world of any third party (collectively, “THIRD PARTY
INTELLECTUAL PROPERTY RIGHTS”), except the Company makes no
warranty about third party patents that have not, to the knowledge
of the Company’s executive officers, been asserted in writing
against the Company as of the date hereof, other than:
(A) third party patents that the Company has asked outside
legal counsel to analyze to determine whether such patents apply to
the Company’s products; (B) any third-party patent for
which the Company’s in-house attorneys have prepared a
written analysis relating to the relevance of such patent to the
Company’s products; (C) third-party patents that have
been identified by or brought to the attention to any of the
executive officers of the Company (which includes its Chief
Technology Officer and the general managers of each of its three
lines of business) or the Vice President of Engineering or the Vice
President of Corporate Development of the Company as being
potentially infringed by the Company’s products or methods,
or (D) third party patents that the Company is willfully
infringing.
(viii) Except as set forth in the Schedule of
Exceptions, there are no allegations, claims or proceedings
instituted or pending which challenge the rights possessed by the
Company to use the Intellectual Property or the validity or
effectiveness of the Intellectual Property, including without
limitation any interferences, oppositions, cancellations or other
contested proceedings.
(ix) There are no outstanding claims or proceedings
instituted or pending by any third party challenging the ownership,
priority, scope or validity or effectiveness of any Intellectual
Property.
(x)
There are no Third Party
Intellectual Property Rights that would be infringed by the
continued practice of any technologies previously used or presently
used by the Company, except the Company makes no warranty about
third party patents that have not, to the knowledge of the
Company’s executive officers, been asserted in writing
against the Company as of the date hereof, other than:
(A) third party patents that the Company has asked outside
legal counsel to analyze to determine whether such patents apply to
the Company’s products; (B) any third-party patent for
which the Company’s in-house attorneys have prepared a
written analysis relating to the relevance of such patent to the
Company’s products; (C) third-party patents that have
been identified by or brought to the attention to any of the
executive officers of the Company (which includes its Chief
Technology Officer and the general managers of each of its three
lines of business) or the Vice President of Engineering or the Vice
President of Corporate
8
Development of the Company as being potentially
infringed by the Company’s products or methods, or
(D) third party patents that the Company is willfully
infringing.
(xi) Except as set forth in the Schedule of
Exceptions, to the knowledge of the executive officers of the
Company, there is no unauthorized use, infringement or
misappropriation of the Intellectual Property by any third party,
including any employee or former employee of the Company or any of
its subsidiaries, except for use, infringement or misappropriation
that would not have a Material Adverse Effect.
(xii) The Company has taken commercially reasonable
measures to maintain the confidentiality of the inventions, trade
secrets, formulae, know-how, technical information, research data,
research raw data, laboratory notebooks, procedures, designs,
proprietary technology and information of the Company, and all
other information the value of which to the Company is contingent
upon maintenance of the confidentiality thereof.
(n) ACCOUNTS RECEIVABLE.
The accounts receivable of the
Company as shown in the Interim Balance Sheet (i) have arisen
in the ordinary course of business, and (ii) represent valid
and, with the exception of the established reserves reflected on
the Interim Balance Sheet, collectible obligations owed to the
Company.
(o) BOOKS AND RECORDS.
The books, records and accounts of
the Company (i) are, in all material respects, true, complete
and correct, (ii) have been maintained in accordance with
ordinary business practices of the Company and (iii) fairly
reflect the Company’s financial statements.
(p) PAYMENTS.
To the knowledge of the executive
officers of the Company, none of the current stockholders,
directors, officers, representatives, agents or employees of the
Company (i) has used or is using any corporate funds for any
illegal or improper contributions, gifts, entertainment or other
unlawful expenses, (ii) has used or is using any corporate
funds for any direct or indirect unlawful or improper payments to
any domestic government officials or employees, (iii) has
established or maintained, or is maintaining, any unlawful,
improper or unrecorded fund of corporate monies or other
properties, (iv) has made any false or fictitious entries on
the books and records of the Company, (v) has made any bribe,
rebate, payoff, influence payment, kickback or other unlawful or
improper payment of any nature using corporate funds or otherwise
on behalf of the Company, or (vi) has made any material favor
or gift that is not deductible for federal income tax purposes
using corporate funds or otherwise on behalf of the
Company.
9
(q) REGISTRATION RIGHTS.
The Company has not granted
registration rights with respect to the Company’s securities,
except as set forth in the Company’s Second Amended and
Restated Investor Rights Agreement dated as of November 2,
1999.
(r)
FULL DISCLOSURE.
No representation or warranty made
by the Company or any of its subsidiaries in this Agreement nor any
of the exceptions, qualifications or other information set forth in
the Schedule of Exceptions (i) contains any statement
that is false or misleading with respect to any material fact, or
(ii) omits to state any material fact that is necessary to
make the statements made in the context in which made, not false or
misleading. Notwithstanding anything in the foregoing to the
contrary, nothing in this Agreement shall require the Company to
provide to the Investor information which (A) the Company
must, under confidentiality obligations to third parties, not
disclose to the Investor; provided that the Company shall provide
as much necessary information as is permitted under agreements with
such third parties which have such confidentiality obligations;
(B) is protected by the attorney-client privilege of the
Company; or (C) is the Company’s attorney work
product.
(s) DISCLAIMER.
The Company shall not be deemed to
have made to the Investor any representation or warranty other than
as expressly made by the Company in this Section 2.1. Without
limiting the generality of the foregoing, and without prejudice to
any express representations and warranties made by the Company in
this Section 2.1, the Company makes no representation or
warranty to the Investor with regard to any projections, estimates
or budgets or as to any matters addressed in other materials
previously delivered to or made available to the Investor with
respect to future revenues, expenses, expenditures or future
results of operations. Within the limits of the foregoing
disclaimer, nothing in this Section 2.1(s) shall limit any
remedy that may be available to the Investor pursuant to
Applicable Law.
2.2
REPRESENTATIONS AND WARRANTIES OF
THE INVESTOR.
The Investor hereby makes the
following representations and warranties to the Company:
(a) AUTHORIZATION; ENFORCEMENT.
The Investor is a corporation duly
organized and existing in good standing under the laws of the
Netherlands. The Investor has the requisite corporate power and
authority to enter into and perform this Agreement. The
execution and delivery of this Agreement by the Investor and the
consummation by the Investor of the transactions contemplated
hereby have been duly authorized by all necessary corporate action,
and no further
10
consent or authorization of the Investor or its
Board of Directors or stockholders is required. This Agreement has
been duly authorized, executed and delivered by the Investor. Upon
receipt of the Shares, this Agreement constitutes a valid and
binding obligation of the Investor enforceable against the Investor
in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting
generally the enforcement of, creditors’ rights and remedies
or by other equitable principles of general application.
(b) PRESENT OWNERSHIP.
Other than the Shares to be acquired
pursuant to this Agreement, the Investor does not Beneficially Own
any securities issued by the Company.
(c) INVESTMENT INTENT.
The Investor is acquiring the Shares
solely for the purpose of investment within the meaning of 16
C.F.R. Section 802.9 and, as a result of this investment, the
Investor, the ultimate parent entity of the Investor, and all other
entities controlled by the ultimate parent entity of the Investor,
will not own more than 12% of the outstanding voting securities of
the Company. As used in the preceding sentence the term
“controlled” shall have the meaning set forth in 16
C.F.R. Section 801.1(b), and the term “ultimate parent
entity” shall have the meaning set forth in 16 C.F.R.
Section 801.1(a)(3). This representation and warranty is made
solely for the purpose of determining the applicability to the
transactions contemplated by this Agreement of the HSR
Act.
(d) NO CONFLICTS.
The execution, delivery and
performance of this Agreement by the Investor and the consummation
by the Investor of the transactions contemplated hereby do not
(i) result in a violation of the Investor’s charter or
governing documents or (ii) conflict with, or constitute a
default (or an event which with material notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any
material agreement, material indenture or material instrument to
which the Investor or any of its subsidiaries is a party, or result
in a violation of any law, rule, regulation, order, judgment or
decree applicable to the Investor, any of its subsidiaries or by
which any property or asset of the Investor or any of its
subsidiaries is bound or affected (except in the case of subclause
(ii) for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect
with respect to the Investor or materially impair the
Investor’s ability to perform its obligations under this
Agreement). No action, suit, dispute or proceeding is pending or,
to the best knowledge of the Investor, threatened against the
Investor which, if adversely determined, would prevent the Investor
from carrying out its obligations under this Agreement. Except as
contemplated by this Agreement, the Investor is not required to
obtain any consent, authorization or order of, or make any filing
or registration with, any court or
11
governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement
or to purchase the Shares in accordance with the terms
hereof.
(e) INVESTMENT REPRESENTATION.
The Investor understands and
acknowledges that none of the Shares have been registered or
qualified under the federal or applicable state securities laws and
the Shares are being sold to and purchased by the Investor in
reliance upon applicable exemptions from such registration and
qualification requirements. The Investor is an “ACCREDITED
INVESTOR” within the meaning of the federal securities laws
and acknowledges that it has been furnished with access to, and has
been afforded access to, and afforded the opportunity to ask
questions and receive answers concerning such information
pertaining to the Shares, the Company, and its assets and
liabilities as it deemed necessary to decide whether to purchase
the Shares pursuant to the terms of this Agreement. The Shares will
be acquired by the Investor for investment only and not with a view
to any public distribution thereof. The Investor understands that
the Shares are “RESTRICTED SECURITIES” within the
meaning of the federal securities laws. The Investor agrees that it
will not offer to sell or otherwise dispose of any of the Shares in
violation of the registration and qualification requirements of the
federal and applicable state securities laws. All certificates to
be delivered at the Closing evidencing the Shares will contain
appropriate legends incorporating any applicable securities laws
restrictions.
(f)
APPOINTMENT OF AGENT FOR SERVICE OF
PROCESS.
The Investor has designated Philips
Electronics, North America Corp., 1000 West Maude Avenue,
Sunnyvale, CA 94085-2810 (Attention: Legal Department), as agent
for service of process hereunder and the above named is authorized
and directed to accept service of process on behalf of the Investor
in any suit instituted regarding the transactions contemplated by
this Agreement.
(g) DISCLAIMER.
The Investor shall not be deemed to
have made to the Company any representation or warranty other than
as expressly made by the Investor in this Section 2.2. Without
limiting the generality of the foregoing, and without prejudice to
any express representations and warranties made by the Investor in
this Section 2.2, the Investor makes no representation or
warranty to the Company with regard to any issues related to
projections, estimates or budgets or other matters previously
delivered to or made available to the Company with respect to
future revenues, expenses, expenditures or future results of
operations. Within the limits of the foregoing disclaimer, nothing
in this Section 2.2(g) shall limit any remedy that
may be available to Company pursuant to Applicable
Law.
12
ARTICLE III.
Covenants
3.1
GALAXY GROUP; WATERMARKING
TECHNOLOGY.
[***]
3.2
INVESTOR’S STANDSTILL
AGREEMENT.
(a) STANDSTILL PERIOD.
Subject to
subsection (b) below, during the period commencing on the
Closing and ending [***] (the “STANDSTILL Period”), the
Investor agrees that, except as specifically permitted by this
Agreement, the Investor and each of its Affiliates will not, in any
manner, directly or indirectly:
(i)
acquire, or offer or agree to
acquire, any Common Stock of the Company or any of its successors,
except by way of stock dividends or other distributions or
offerings made available to holders of Common Stock generally,
[***];
(ii) disclose publicly any intention, plan or
arrangement inconsistent with the foregoing; or
(iii) enter into any discussions, negotiations,
arrangements or understanding with any third party with respect to
circumventing, or aid, abet or encourage any action prohibited by,
any of the foregoing.
(b) EXCEPTIONS.
(i)
Notwithstanding any provision of
this Section 3.2 to the contrary, the provisions of
subsection (a) above shall terminate on the following
events:
(A) [***]; or
(B) [***]
(ii) Notwithstanding any provision of this
Section 3.2 to the contrary, the provisions of
subsection (a) above shall not be construed to prohibit
or otherwise restrict [***].
(c) NOTICE OF ACQUISITION; COMPLIANCE.
During the Standstill Period, the
Investor agrees that, prior to any time that the Investor wishes to
acquire Company Securities in any open market purchase or other
purchase permitted under this Agreement, it will give the Company
notice of its intention
13
to make such acquisition. All open market
purchases of shares of Company Securities by the Investor and its
Affiliates shall be made in compliance with Applicable
Laws.
3.3
TRANSFER.
(a) TRANSFER RESTRICTIONS.
The Investor shall not, at any time,
directly or indirectly, sell or transfer, or offer to sell or
transfer, all or any portion of the Holder’s Company
Securities or Registrable Securities acquired pursuant to this
Agreement or Beneficially Owned by it, except:
(i)
as provided in
Section 3.3(b);
(ii) in transactions in compliance with Rule 144
promulgated under the Securities Act, as such rule exists on
the date hereof as hereafter amended (or any successor or similar
provision governing the resale of the restricted securities);
or
(iii) in any other bona fide sales or transfers to any
Person pursuant to an exemption from the registration requirements
of the Securities Act, but only if:
(A) the Investor has previously delivered to the
Company an opinion of counsel reasonably satisfactory to the
Company to the effect that any sale or transfer pursuant to this
Section 3.3 is exempt from registration under the Securities
Act; and
(B) the Investor shall have notified the Company of
the proposed disposition and shall have furnished the Company with
a detailed statement of the circumstances surrounding the proposed
disposition.
(b) PERMITTED TRANSFERS.
The Investor shall be permitted to
sell Company Securities that are registered pursuant to an
effective registration statement under the Securities Act under
Article IV below.
3.4
COMPLIANCE WITH
SECTION 13.
The Investor shall, promptly and at
all times after the date hereof, use Best Efforts to comply with
its obligations to make any filings required by Section 13 of
the Exchange Act.
3.5
DIRECTOR APPOINTMENTS AND
ELECTION.
At the Closing, the Company shall
appoint an individual selected by the Investor and reasonably
acceptable to the Company (the “INVESTOR NOMINEE”) to a
seat on the Company’s Board of Directors with a term expiring
at the Company’s annual shareholders’ meeting in
calendar year 2003. The Investor shall have the right to
replace
14
the Investor Nominee at any time and appoint
another individual reasonably acceptable to the Company to serve
the remainder of the term expiring at the 2003 shareholders’
meeting.
ARTICLE IV.
Registration
Rights
4.1
LEGEND.
(a) LEGEND.
All certificates evidencing the
Shares shall bear the following legend, to the extent applicable,
which legend will remain on such certificates until such time as
the securities represented by such certificates are no longer
subject to the legended restrictions, and there is delivered to the
Company an opinion of counsel reasonably acceptable to the Company
to the effect that such legend is no longer required (at which time
new certificates shall be issued at the Company’s expense
without such legend):
THIS SECURITY IS SUBJECT TO THE
PROVISIONS OF THE STRATEGIC INVESTMENT AGREEMENT DATED AS OF
SEPTEMBER 17, 2000 BETWEEN THE ISSUER AND KONINKLIJKE PHILIPS
ELECTRONICS N.V. AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN
ACCORDANCE THEREWITH. A COPY OF SUCH AGREEMENT IS ON FILE AT THE
OFFICE OF THE CORPORATE SECRETARY OF THE ISSUER. THIS SECURITY WAS
SOLD IN A PRIVATE PLACEMENT, WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933 (THE “ACT”), AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF
COUNSEL OR BASED ON OTHER WRITTEN EVIDENCE IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE
THEREWITH.
(b) REMOVAL OF SECURITIES ACT LEGEND.
The Company shall be obligated to
reissue promptly unlegended certificates at the request of the
Investor, if the Investor shall have obtained an opinion of counsel
reasonably acceptable to the Company to the effect that the
securities proposed to be disposed of may lawfully be so
disposed of without registration, qualification or
legend.
15
(c) REMOVAL OF BLUE SKY LEGEND.
Any legend endorsed on an instrument
pursuant to applicable state securities laws and the stop-transfer
instructions with respect to such securities shall be removed upon
receipt by the Company of an order of the appropriate blue sky
authority authorizing such removal.
4.2
REGISTRATION ON
FORM S-3.
Not earlier than [***] after the
Closing, if the Company shall receive from the Investor a written
request or requests (such requests shall state the number of
Registrable Securities to be disposed of and the intended methods
of disposition of such shares by the Investor) that the Company
effect a registration on Form S-3 (or any successor to
Form S-3) or any similar short-form registration
statement and any related qualification or compliance with respect
to all or a part of the Registrable Securities the Company
will:
(a) as soon as practicable, effect such registration
and all such qualifications and compliances as may be so
requested and as would permit or facilitate the sale and
distribution of all or such portion of the Investor’s
Registrable Securities as are specified in such request; provided,
however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this
Section 4.2:
(i)
if the Company shall have already
effected two (2) registrations for the Investor under this
Section 4.2
(ii) if Form S-3 (or such successor or similar
form) is not available for such offering by the Investor;
or
(iii) if the Investor, together with the holders of
any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate offering price to the public of
less than $1,000,000; or
(iv) if the Company shall furnish to the Investor a
certificate signed by the President or Chief Executive Officer of
the Company stating that, in the good faith judgment of the Board
of Directors of the Company, it would be seriously detrimental to
the Company and its shareholders for such Form S-3
Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the
Form S-3 registration statement for a single period of not
more than ninety (90) days after receipt of
