FORM OF STOCKHOLDER
AGREEMENT
TRIDENT MICROSYSTEMS,
INC.
THIS STOCKHOLDER
AGREEMENT (this “ Agreement ”) is entered into
as of [___], 2010, 1 (the “ Agreement Date ”) by
and between Trident Microsystems, Inc., a Delaware corporation (the
" Company ”) and NXP B.V., a Dutch besloten
venootshap (the “ Investor ”). Capitalized
terms used but not defined herein shall have the meanings ascribed
to them in Exhibit A .
WHEREAS, the
Company, Trident Microsystems (Far East) Ltd. and the Investor
entered into a Share Exchange Agreement, dated as of October [___],
2009 (the “ Share Exchange Agreement ”),
pursuant to which (1) Trident Microsystems (Far East) Ltd. has
agreed to acquire (directly or through one (1) or more of its
Subsidiaries) the outstanding equity securities of the Companies
and the Transferred Newcos (as defined in the Share Exchange
Agreement) and certain assets from the Investor, (2) the
Company has agreed to issue and Trident Microsystems (Far East)
Ltd. has agreed to transfer and sell in consideration therefor, and
the Investor has agreed to acquire, shares of the Company’s
common stock, $0.001 par value per share, (3) the Company has
agreed to issue and sell, and the Investor has agreed to purchase
for cash, additional shares of such Common Stock, and
(4) pursuant to the transactions contemplated by clauses
(2) and (3), the Company will issue an aggregate of [
] (___) shares of such Common Stock (the “ Common
Shares ”) and four (4) shares of the Company’s
Series B Preferred Stock, par value $0.001 per share (the
“ Series B Shares ”);
WHEREAS, the
parties desire to enter into this Agreement to provide for certain
arrangements relating to the Company, the Common Shares and the
Series B Shares; and
WHEREAS, it is a
condition to the Closing (as defined in the Share Exchange
Agreement) that, among other things, this Agreement has been
executed and delivered and that the parties have complied with
their obligations hereunder.
NOW, THEREFORE, in
consideration of the foregoing recitals and of the mutual promises
hereinafter set forth, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE 1
CORPORATE GOVERNANCE AND INFORMATION RIGHTS
Section 1.1 Board and Committee Representation
.
(i) Immediately
following the Closing, the Board shall consist of nine
(9) Directors, and, for so long as the Persons who Own the
Series B Shares (the “Series B
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To be dated as
of Closing.
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Holders”) shall be entitled to nominate and elect at least
one (1) Director pursuant to the Certificate of Designation,
the Board shall consist of nine (9) Directors. The Board shall
at all times consist of at least a majority of Directors who are
Independent Directors.
(ii) Pursuant
to and on the terms and conditions set forth in the Certificate of
Designation, the Series B Holders (by majority vote of the
Series B Shares) shall initially be entitled to nominate and
elect up to four (4) Directors (each, a “
Series B Director ”). The number of Series B
Directors shall be reduced from time to time as provided in the
Certificate of Designations. One (1) Director (the “
Ninth Director ”) shall be mutually agreed to between
the Company Nominated Directors (as defined below) and the
Series B Directors, recommended by the Nominating and
Corporate Governance Committee, nominated by the Board and
submitted to the Company’s stockholders for election in
accordance with the Company’s Certificate of Incorporation
and Bylaws. The Ninth Director shall be the Company’s Chief
Executive Officer unless all other Directors otherwise agree, in
which case the Ninth Director shall be a Person independent of each
of the Company, the Investor, each Series B Holder, each other
stockholder of the Company owning five percent (5%) or more of the
outstanding Voting Stock of the Company and each Affiliate of any
of the foregoing. The remaining Directors (the “ Company
Nominated Directors ” and together with the Ninth
Director, the “ At-Large Directors ”) shall be
recommended by the Nominating and Corporate Governance Committee,
nominated by the Board and from time to time shall be submitted to
the Company’s stockholders for election in accordance with
the Company’s Certificate of Incorporation and
Bylaws.
(iii) Immediately
following the Closing, the Series B Holders (by majority vote
of the Series B Shares) shall be entitled to designate a total of
four (4) Series B Directors, one (1) of whom shall
be a member of the class of Directors whose term expires at the
first annual meeting of the Company’s stockholders following
the Closing, one (1) of whom shall be a member of the class of
Directors whose term expires at the second annual meeting of the
Company’s stockholders following the Closing, and two
(2) of whom shall be members of the class of Directors whose
term expires at the third annual meeting of the Company’s
stockholders following the Closing. Immediately following the
Closing, the Board shall have four (4) Company Nominated
Directors, one (1) of whom shall be a member of the class of
Directors whose term expires at the first annual meeting of the
Company’s stockholders following the Closing, two (2) of
whom shall be members of the class of Directors whose term expires
at the second annual meeting of the Company’s stockholders
following the Closing, and one (1) of whom shall be a member
of the class of Directors whose term expires at the third annual
meeting of the Company’s stockholders following the Closing.
Immediately following the Closing, the Ninth Director shall be the
Company’s CEO, and shall be elected to the class of Directors
whose term expires at the first annual meeting of the
Company’s stockholders following the Closing.
(b)
Notifications Regarding Directors .
(i) The
Series B Holders will notify the Company in writing promptly,
and in any event within five (5) Business Days, of any action
by the Series B Holders or any of their Affiliates (other than
the Company) that results in a reduction in the number of shares of
Common Stock that are Beneficially Owned by the Series B
Holders representing, individually
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or together
with all such reductions since the date of the filing of the
Certificate of Designation with the Secretary of State of the State
of Delaware or the date of any previous such notice, as applicable,
one percent (1%) or more of the outstanding Common Stock as of the
date of such filing or such previous notice, which notice will set
forth the number of shares of Common Stock Beneficially Owned by
the Series B Holders immediately following the occurrence of
such reduction; provided, that for purposes of this provision, in
determining the shares of Common Stock outstanding the
Series B Holders may rely upon the Company’s most recent
periodic report filed with the SEC, or any update thereof, or any
notice provided by the Company pursuant to Section 1.1(b)(iii)
below. In the event that the number of Directors that the
Series B Holders are entitled to nominate and elect to the
Board is reduced pursuant to Section 4(a) of the Certificate of
Designation, the Series B Holders shall promptly cause one
(1) or more of the Series B Directors to immediately
resign, such that the number of remaining Series B Directors
serving on the Board shall equal the number of Directors that the
Series B Holders are then entitled to elect to the Board
pursuant to such Section 4(a) of the Certificate of Designation. In
the event that any such Series B Director is unwilling to
resign, the Series B Holders will take all such actions as are
necessary to cause the removal of such Series B Director. If
any such Series B Director shall not have resigned or been
removed within thirty (30) days after the date on which such
resignation was required, the At-Large Directors, by majority vote,
may remove the Series B Director selected by the Series B
Holders for removal, or if no such Series B Director has been
so selected by the Series B Holders within ten
(10) Business Days of a request from the Company, the At-Large
Directors, by majority vote, may remove one (1) Series B
Director selected by them. Any vacancies created as a result of a
reduction in the number of Series B Directors that the
Series B Holders are entitled to elect pursuant to Section
4(a) of the Certificate of Designation shall be filled by nominees
(A) who satisfy the requirements of Section 1.1(c), and
(B) are recommended by the Nominating and Corporate Governance
Committee and approved by the Board. The Director appointed to fill
such vacancy shall stand for re-election at the next annual meeting
of the Company’s stockholders and shall, if elected, serve
for the remaining term of the Series B Director that such
Director replaced.
(ii) The
Series B Holders shall notify the Company in writing at least
ten (10) days in advance of the anticipated date of the
mailing of the Company’s proxy statement in connection with
its annual meeting of stockholders (as advised by the Company in
writing to the Series B Holders not less than twenty
(20) nor more than sixty (60) days prior to such
anticipated mailing date) of the nominees to be elected as
Series B Directors in the class of Directors to be elected at
such annual meeting. The Series B Holders shall, to the extent
practicable, notify the Company in writing a reasonable time in
advance of any other nomination of any person to serve as
Series B Director, including for the purpose of electing or
appointing a Series B Director to fill a vacancy that the
Series B Holders are entitled to fill, together, in each case,
with all information concerning such nominee that may be reasonably
requested by the Company, or that may be required for the Company
to comply with its reporting obligations under the Exchange Act or
Exchange listing requirements; provided that in the absence of such
notice, the Series B Holders shall be deemed to have nominated
and elected the person(s) then serving as Series B
Director(s).
(iii) The
Company shall notify the Series B Holders promptly, and in any
event within five (5) Business Days, of any issuance of Common
Stock representing, individually or together with all issuances of
Common Stock since the date of the filing of the
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Certificate of
Designation with the Secretary of State of the State of Delaware or
the date of any previous such notice, as applicable, one percent
(1%) or more of the outstanding Common Stock as of the date of such
filing or such previous notice together with the aggregate number
of shares of Common Stock outstanding following such
issuance.
(c)
Limitations on Directors . Each Director shall, at all times
during which such Person serves as a Director, not have been during
the last five (5) years convicted in a criminal proceeding
(excluding traffic violations or other misdemeanors not involving
moral turpitude or deliberate dishonesty) or a party to a civil
proceeding brought by a Governmental Authority in which such
Director has been finally determined to have committed a violation
of federal, state or foreign law (excluding traffic violations or
similar misdemeanors not involving moral turpitude or deliberate
dishonesty). The Series B Holders shall not nominate or elect
any such Series B Director who does not meet the requirements
set forth in this Section 1.1(c) and shall cause any such
Series B Director who fails to meet the requirements set forth
above to resign promptly. If any such Series B Director is
unwilling to resign, the Series B Holders will take such
actions as are necessary to cause the removal of the Series B
Director as promptly as reasonably practicable.
(d)
Limitations on Series B Directors . At least two
(2) of the Series B Directors shall have substantial
operating or industry experience, and no more than two
(2) Series B Directors may be Persons who are not
Independent Directors. The Series B Holders shall consult with
the Nominating and Corporate Governance Committee (which may
delegate such consultation to the Committee Chairperson and/or the
Chief Executive Officer of the Company) regarding the names,
backgrounds and qualifications of the persons to be nominated as
Series B Directors after considering the Company’s
Corporate Governance Guidelines (as made publicly available from
time to time). However, the Nominating and Corporate Governance
Committee shall not have any right nor shall it have any duty to
approve or disapprove any person meeting the requirements of
Section 1.1(c) selected as a Series B Director by the
Series B Holders.
(e)
Limitations on Company Nominated Directors . No more than
one (1) Company Nominated Director may be a Person who is not
an Independent Director. At least two (2) of the Company
Nominated Directors shall have substantial operating or industry
experience.
Section 1.2 Board Committees .
(a) Subject
to the requirements of applicable law and Committee Qualification
Requirements applicable to all Directors, for as long as there is
at least one (1) Series B Director on the Board, the
Company shall maintain an Audit Committee, a Compensation
Committee, a Nominating and Corporate Governance Committee and a
Strategy Committee. Subject to the terms set forth in this
Section 1.2, the power and authority of each such committee
shall be as set forth in the charter of such committee, and (except
as otherwise provided in the charter of such committee or as
required by applicable law or any applicable Exchange rules) the
exercise of such power and authority will be at all times subject
to the power and authority of the entire Board.
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(i)
Audit Committee . The Audit Committee shall be comprised of
three (3) Directors, each of whom shall be an Independent
Director and satisfy the requirements of applicable law and any
applicable Exchange rules. One (1) member of the Audit
Committee shall be a Series B Director who is not an employee
of the Investor or any of its Subsidiaries and two (2) members
of the Audit Committee shall be At-Large Directors.
(ii)
Compensation Committee . The Compensation Committee shall be
comprised of three (3) Directors, each of whom shall be an
Independent Director and satisfy the requirements of applicable law
and any applicable Exchange rules. One (1) member of the
Compensation Committee shall be a Series B Director who is not
an employee of the Investor or any of its Subsidiaries and two
(2) members of the Compensation Committee shall be At-Large
Directors.
(iii)
Nominating and Corporate Governance Committee . The
Nominating and Corporate Governance Committee shall be comprised of
three (3) Directors, each of whom shall be an Independent
Director and satisfy the requirements of applicable law and any
applicable Exchange rules. One (1) member of the Nominating
and Corporate Governance Committee shall be a Series B
Director and two (2) members of the Nominating and Corporate
Governance Committee shall be At-Large Directors.
(iv)
Other Committees . With respect to each other committee or
subcommittee of the Board, the Board shall appoint to each such
committee or subcommittee a number of Series B Directors as is
proportional to the representation of the Series B Directors
on the Board as a whole, rounded to the nearest whole
number.
(b) Any
Directors appointed to a committee or subcommittee of the Board who
are not Series B Directors shall be recommended by the
Nominating and Corporate Governance Committee and appointed by the
Board. If the members of the Nominating and Corporate Governance
Committee are unable to agree on any committee or subcommittee
assignment, the Chairman of the Board shall act as a temporary
member of the Nominating and Corporate Governance Committee for
purposes of casting the deciding vote on such matter. The
Series B Directors shall be entitled to designate the
Series B Director(s) to serve on each committee or
subcommittee of the Board, provided that such Series B
Directors meet the applicable requirements set forth in
Section 1.2(a), and the Board shall take all actions necessary
to appoint such Series B Directors to such committees or
subcommittees.
(c) Except
for (i) routine commercial transactions entered into on an
arms’ length basis in the ordinary course of business,
(ii) contracts or arrangement involving expenditures, revenues
or the incurrence of liabilities not in excess of $[ ], and
(iii) the transactions contemplated by the Share Exchange
Agreement, the entry into, termination or variation of any contract
or arrangement between the Company and any Related Party shall be
approved by the affirmative vote of a majority of the disinterested
Directors. For purpose of this Section 1.2(c), a “
Related Party ” includes the Directors and officers of
the Company, the spouses or children of such Directors and
officers, the Investor, any of the Series B Holders, any other
stockholder that (together with its Affiliates) Beneficially Owns
more than ten percent (10%) of the outstanding Voting Stock of the
Company, or any Affiliate of any of the foregoing.
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(d) Notwithstanding
the foregoing, any Board committee may hold executive sessions at
which one (1) or more Directors is not permitted to be present
to the extent the committee determines in good faith that such
exclusion is appropriate.
(a)
Change of Control Transactions . Subject to compliance with
Section 1.3(c), Section 1.3(d) and Section 3.2, the
Investor and its Affiliates may vote any Voting Stock Beneficially
Owned by any of them in their sole discretion on any Change of
Control transaction submitted to the stockholders of the Company
for approval, provided that on and after the fourth anniversary of
the date of this Agreement, the Investor may, notwithstanding
Section 1.3(c) or Section 1.3(d) hereof, but subject to
compliance with Section 3.2 hereof, vote in its discretion on
any proposal to replace Directors that is made by an unaffiliated
third party in connection with a Change of Control transaction
proposed by such unaffiliated third party.
(b)
Amendments to Certificate of Incorporation or Bylaws . The
Investor and its Affiliates may vote the Voting Stock Beneficially
Owned by any of them on any proposal related to any amendment or
restatement of the Certificate of Incorporation or Bylaws of the
Company which is in any way adverse to the Investor in their sole
discretion.
(c)
Stockholders Agreement . The Investor shall, and shall cause
its Permitted Transferees to and shall use commercially reasonable
efforts to cause its Affiliates to, vote the Voting Stock
Beneficially Owned by any them in favor of each matter required to
effectuate any provision of this Agreement and against any matter
the approval of which would be inconsistent with any provision of
this Agreement.
(d)
Directors . With respect to the election, removal,
replacement and classification of Directors (other than
Series B Directors) the Investor and its Affiliates shall
either (i) vote all of the Voting Stock Beneficially Owned by
any of them in accordance with the recommendation of the Board
approved by a majority of the At-Large Directors or (ii) vote
all of the Voting Stock Beneficially Owned by any of them in the
same proportion (for, against, abstain or withheld, or as otherwise
indicated) as the votes cast by all other holders of Voting Stock
on all matters to be voted on by holders of Voting Stock
(e)
Other Matters . Except as provided in Sections 1.3(a),
1.3(b), 1.3(c) and 1.3(d), for so long as the Investor and its
Affiliates in the aggregate Beneficially Own in excess of thirty
percent (30%) of the outstanding Voting Stock of the Company (the
“ Voting Limit ”), the Investor shall, and shall
cause its Affiliates to, either (i) vote all of the Voting
Stock Beneficially Owned by any of them in excess of the Voting
Limit in accordance with the recommendation of the Board approved
by a majority of the At-Large Directors or (ii) vote all of
the Voting Stock Beneficially Owned by any of them in excess of the
Voting Limit in the same proportion (for, against, abstain or
withheld, or as otherwise indicated) as the votes cast by all other
holders of Voting Stock on all matters to be voted on by holders of
Voting Stock. Subject to the other provisions of this Agreement,
the Investor and its Affiliates may vote the Voting Stock
Beneficially Owned up to and including (but not in excess of) the
Voting Limit on any proposal in its sole discretion.
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(f)
Quorum . At every meeting (or action by written consent, if
applicable) of the stockholders of the Company called, and at every
postponement or adjournment thereof, the Investor shall, and shall
cause its Affiliates to, cause any and all shares of Common Stock
Beneficially Owned by it or them and entitled to be voted thereat
to be present in person or represented by proxy at the meeting so
that all such shares shall be counted as present for purposes of
determining the presence of a quorum at such meeting.
Section 1.4 Information Rights .
(a) Subject
to Section 1.5, the Company will deliver to the Investor the
following information:
(i) with
respect to each fiscal year: (A) promptly after it has been
made available (but in no event later than fifteen
(15) Business Days of the end of each fiscal year) the
unaudited consolidated financial statements of the Company and its
Subsidiaries, (B) promptly after it has been made available
(but in no event later than twenty-five (25) Business Days of
the end of each fiscal year) the audited consolidated financial
statements of the Company and its Subsidiaries, audited in
accordance with U.S. GAAS, and (C) promptly after it has been
made available (but in no event later than seventy
(70) Business Days of the end of each fiscal year) the
international financial reporting standards (“ IFRS
”) consolidated financial statements of the Company and its
Subsidiaries; provided, that if the Company properly extends the
date for filing of any such statements specified in subparagraph
(B) or (C) above with the SEC (i.e., by means of a filing
on Form 12b-25), then the date set forth above for delivery to the
Investor shall be extended for a corresponding period;
(ii) with
respect to each quarterly period, promptly after it has been made
available, quarterly unaudited U.S. GAAP consolidated financial
statements of the Company and its Subsidiaries, including
(i) a detailed profit and loss statement, balance sheet and
cash flow statement (which may be unreviewed and subject to further
adjustment) to be provided within ten (10) Business Days of
the end of each quarter, (ii) such information as may
reasonably be required for the Investor to prepare an update of the
IFRS reconciliation for net income and shareholders equity,
(iii) a management discussion & analysis, including an
analysis of revenue, (iv) a rolling forecast in relation to
the current quarter as presented to the Board of Directors and (vi)
financial information on related party matters, which information
shall, to the extent possible, be directly extracted from the
Company ‘s information technology systems;
(iii) with
respect to each monthly period, promptly after it has been made
available (but in no event later than ten (10) Business Days
of the end of each month) information including net income and net
assets and equity (which may be unreviewed and subject to
adjustment) (provided, that if such information is not delivered
earlier, estimates of such information shall be made available
within seven (7) Business Days of the end of each
month);
(iv) draft
business plans for the Company and its Subsidiaries for the
subsequent three (3) year period no later than two
(2) Business Days after approval thereof by the Board, in the
form presented to the Board (but subject to
Section 1.4(b));
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(v) copies
of all reports, certificates, and other information delivered to
the Company’s lenders or creditors in respect of any material
indebtedness of the Company; and
(vi) any
other financial information, reports and workpapers in the
possession or under the control of the Company or any of its
Subsidiaries that the Investor reasonably requires to comply with
reporting, disclosure, filing or other requirements imposed on the
Investor or any of its Subsidiaries (A) by a Governmental
Authority having jurisdiction over the Investor or any of its
Subsidiaries, including under applicable securities or tax laws,
including the Sarbanes-Oxley Act of 2002, as amended, (B) by
IFRS adopted by the International Accounting Standards Board or any
successor entity, (C) by the covenants in financing
arrangements to which the Investor is a party, and (D) the
rules and regulations thereunder, or applicable rules of any
self-regulatory organization.
(b) The
Investor shall be entitled to confer with each Series B
Director regarding the business, affairs, financial condition,
results of operations and prospects of the Company and may discuss
any and all information (other than confidential compensation
information) provided to the Investor or any such Series B
Director, subject to Section 1.5 below; provided , that
if the Board determines in good faith that any Company information
must be held in confidence in order to (i) preserve attorney-client
privilege, (ii) comply with any applicable confidentiality or
non-disclosure agreement, or (iii) prevent a dissemination of
competitively sensitive information regarding (A) products,
services or other activities of the Company with respect to which
the Investor or its Subsidiaries competes with the Company or
(B) proposed products, services or other activities of the
Company that the Board reasonably determines that the Company may
develop, acquire or pursue that would be competitive with the
current products, services or other activities of the Investor or
any of its Subsidiaries or (C) any other matter as to which
the Board has determined in good faith that the Company and the
Investor have a material conflict of interest based on a reasonable
expectation that disclosure of such information may be harmful to
the Company, then the Series B Directors shall hold such
information in confidence and not discuss such information with the
Investor except to the degree, if any, approved by the
Board.
Section 1.5 Confidentiality . (a) The Investor
shall keep confidential (x) all proprietary and non-public
information regarding the Company and its Subsidiaries received
pursuant to Sections 1.3 or 1.4 or otherwise, (y) all
“Information” (as defined in the Confidentiality
Agreement) provided to the Investor or its representatives under
the Confidentiality Agreement prior to the date hereof
(notwithstanding the termination of the Confidentiality Agreement),
and (z) all non-public information furnished or disclosed to
or otherwise acquired by any Series B Director in such
Person’s capacity as a Director (clauses (x), (y) and
(z) collectively, “ Confidential Information
”), and in each case shall not disclose or reveal any such
information to any Person without the prior written consent of the
Company, other than those of its employees, officers, directors,
First Tier Affiliates, attorneys, accountants and financial
advisors (“ Permitted Representatives ”) who
need to know such information for the purpose of evaluating,
monitoring or taking any other action with respect to the
investment by the Investor in the Common Shares or the
Series B Share and shall cause those Permitted Representatives
to observe the terms of this Section 1.5 and agree for the benefit
of the Company to do so (and any violation or breach of the terms
of this Section 1.5 by any Permitted
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Representative
shall be deemed a breach hereof by the Investor). Notwithstanding
the foregoing, no officer, employee or director of any Entity that
is a Company Competitor shall be a Permitted Representative, and no
Confidential Information shall be furnished or disclosed to any
such Company Competitor.
(b) The
Investor shall not, and shall cause its First Tier Affiliates and
Permitted Representatives not to, use such proprietary and
non-public information for any purpose other than in connection
with evaluating, monitoring or taking any other action with respect
to the investment by the Investor in the Common Shares or the
Series B Share; provided , that nothing herein shall
prevent the Investor or any of its Permitted Representatives from
disclosing any such information that (1) is or becomes
generally available to the public other than as a result of a
disclosure by the Investor or its Permitted Representatives in
violation of this Section 1.5 or any other confidentiality
agreement between the Company and the Investor or any of its
Permitted Representatives or any other legal duty, fiduciary duty,
or other duty of trust and confidence of the Investor, any of its
Permitted Representatives, or any Series B Director,
(2) was within the Investor’s or its Permitted
Representative’s possession on a non-confidential basis prior
to being furnished with such information (provided that the source
of such information was not known by the Investor at the time of
such disclosure by the Investor or any of its Permitted
Representatives to be bound by a confidentiality agreement with, or
other contractual, legal or fiduciary obligation of confidentiality
to or other duty of trust and confidence to, the Company with
respect to such information), (3) was independently developed
by Investor without use of any information furnished to Investor,
any of its Permitted Representatives or any Series B Director,
or (4) becomes available to the Investor or its Permitted
Representative on a non-confidential basis from a source other than
the Company (provided that such source is not known by the Investor
at the time of such disclosure by the Investor or any of its
Permitted Representatives to be bound by a confidentiality
agreement with, or other contractual, legal or fiduciary obligation
of confidentiality to or other duty of trust and confidence to, the
Company with respect to such information).
(c) If
any Confidential Information is required to be disclosed by
applicable law or judicial order, then the Investor will notify the
Company in writing and will cooperate with the Company if the
Company elects to seek a protective order or other appropriate
remedy with respect to such required disclosure. If no such
protective order is obtained, and if Investor or any of its
Permitted Representatives has been advised by legal counsel in
writing that it is legally compelled to disclose any Confidential
Information, then the Investor or such Permitted Representative may
disclose such Confidential Information, but will furnish only that
portion of the Confidential Information which Investor or is
Permitted Representatives is advised by counsel is legally required
and will exercise its reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded such
Confidential Information.
(d) Upon
the redemption of all of the Series B Shares and the
termination of the Investor’s right to information under
Section 1.4, the Investor shall return to the Company all
written Confidential Information that has been provided to the
Investor by the Company; provided, that in lieu of being returned
to the Company such Confidential Information may be destroyed by
Investor, in which case Investor shall provide the Company with a
written certification that such written Confidential Information
has been destroyed.
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Section 1.6 Major Decisions . The approval of any of
the following matters shall require an affirmative vote of at least
two-thirds (2/3) of the Directors present (in person or by
telephone or video conference) and voting for or against approval
of any such matter at any meeting at of which proper notice is
provided to the Board in accordance with the Company’s Bylaws
(or is waived by all Directors) and such matter is
considered:
(i) any
amendment to the Company’s Certificate of Incorporation,
Bylaws or any other organizational documents of the
Company;
(ii) the
consummation of any merger, business combination, consolidation,
corporate reorganization or any transaction constituting a Change
of Control, by the Company with or into any Entity;
(iii) any
sale, transfer or other disposition (including by way of issuance
of Equity Securities of a Subsidiary) of assets of the Company and
its Subsidiaries in an amount in excess of $50,000,000;
(iv) any
acquisition, capital expenditure, investment (or any commitment in
respect thereof) by the Company or any of its Subsidiaries (or
series of related acquisitions, expenditures, investments or
commitments) of the assets or securities of any other Entity in an
amount in excess of $50,000,000;
(v) any
Liquidation Proceeding;
(vi) the
removal or termination of employment of the Company’s Chief
Executive Officer or the selection of a replacement of the Chief
Executive Officer;
(vii) any
transactions with the Investor or any of its Affiliates that
involve more than $1,000,000 or that are otherwise material to the
Company;
(viii) any
authorization or approval of any amendment to or waiver under this
Agreement;
(ix) any
payment or declaration of dividends on the Company’s capital
stock, special or otherwise;
(x) any
repurchase by the Company of any of its Equity Securities in an
amount exceeding $5,000,000 in any 12-month period;
(xi) any
equity or debt financing in an amount in excess of $50,000,000;
and
(xii) any
other matters requiring stockholder approval under the listing
rules of the NASDAQ Stock Market or any other Exchange on which the
Common Stock is listed.
10
Section 2.1 Transfer Restrictions .
(a)
General Restriction . The Investor shall not Transfer any of
the Series B Shares or any Common Shares or other Equity
Securities acquired pursuant to Section 3.1 hereof other than
as expressly permitted by, and in compliance with, the other
provisions of this Section 2.1, and any attempted Transfer in
violation of this Agreement shall be of no effect and null and
void, and shall not be recorded on the stock transfer books of the
Company, regardless of whether the purported Transferee has any
actual or constructive knowledge of the Transfer restrictions set
forth in this Agreement.
(b)
Two Year Lock-up Restriction .
(i) Prior
to the second anniversary of the Closing (the “ Lock-up
Period ”), the Investor shall not Transfer any Common
Shares or other Equity Securities acquired pursuant to
Section 3.1 hereof, except that the Investor may
Transfer any or all of its Common Shares or Equity Securities
acquired pursuant to Section 3.1 hereof (1) pursuant to
any Approved Transaction in which stockholders of the Company are
offered, permitted or required to participate as holders of any of
the Company’s Equity Securities; (2) as a pledge of its
assets pursuant to a bona fide financing transaction; or
(3) to one (1) or more First Tier Affiliates of the
Investor; provided that in the case of clause (3), any Transferee
of Common Shares or other Equity Securities acquired pursuant to
Section 3.1 hereof (x) agrees to be bound hereunder as an
Investor, and (y) executes a counterpart to this Agreement
agreeing to the terms of this Agreement (including, without
limitation, this Section 2.1 and Section 3.2) (the
Transfers referred to in clauses (1) through
(3) collectively referred to as the “ Exempt
Transfers ”). Upon a Transfer contemplated by clause
(3) above, any Transferee of Common Stock shall be deemed an
Investor hereunder and shall be entitled to the rights (including,
but not limited to the registration rights pursuant to
Article 4), and subject to the obligations and restrictions
(including, without limitation, the provisions of this
Section 2.1 and Section 3.2), contained herein. As used
herein, “ Approved Transaction ” means any
tender offer, exchange offer, merger, sale of the Company,
reclassification, reorganization, recapitalization or other
transaction that has been approved or recommended by a majority of
the At-Large Directors who are Independent Directors (and which at
the time of Transfer continues to be approved or recommended by a
majority of the At-Large Directors who are Independent
Directors).
(ii) Notwithstanding
clause (i) above, the Investor may Transfer Common Shares or
other Equity Securities acquired pursuant to Section 3.1
hereof to one or more Persons that are Eligible Transferees in an
aggregate amount not to exceed 15% of the outstanding Voting Stock
if and to the extent that the Investor determines (after
consultation with its independent registered public accounting
firm) that the Investor would otherwise be required to consolidate
the Company’s financial results in the Investor’s
consolidated financial statements prepared under IFRS or US
generally accepted accounting principles. In connection with any
such Transfer, (x) the Company shall not have any obligation
to register such transferred shares under the Securities Act or any
other applicable law in order to permit such Transfer, (y) any
such Transfer must comply with all of the provisions of
Section 2.1(c), and (z) as a condition to
11
any such
Transfer the Transferee must (1) agree in writing to be bound
by and comply with this Section 2.1 and (2) agree in
writing to be bound by and comply with the provisions of Section
1.3 and Section 3.2 hereof until the end of the Lock-up Period
(with the reference to “Standstill Limit” to be
replaced by a reference to the percentage of the outstanding Voting
Stock subject to such Transfer). Any Transferee under this
Section 2.1(b)(ii) shall not be considered an Investor under
this Agreement and shall have no rights under this Agreement
(including, without limitation, under Sections 1.4, 3.1 and
4.1 hereof) other than the right to participate in Piggyback
Registrations (if any) under Section 4.2. Upon any Transfer
pursuant to this Section 2.1(b)(ii), the Standstill Limit
shall immediately be permanently reduced by a number of shares of
Common Stock equal to the number of shares of Common Stock so
Transferred.
(c)
Ongoing Restrictions . After the Lock-up Period, unless
otherwise approved by a majority of the At-Large Directors (which
approval shall not be unreasonably withheld or delayed), the
Investor shall not, and shall not permit any of its Affiliates to,
Transfer any Common Stock or agree to Transfer, directly or
indirectly, any Common Stock, other than any Transfer:
(i) that
would have been an Exempt Transfer permitted during the Lock-up
Period under clauses (1), (2) or (3) of
Section 2.1(b) (which, in the case of clause (3) of
Section 2.1(b), the Transferee shall be deemed an Investor
hereunder and shall be entitled to the rights (including, but not
limited to the registration rights pursuant to Article 4), and
subject to the obligations and restrictions (including, without
limitation, any applicable provisions of this Section 2.1 and
Section 3.2), contained herein);
(ii) pursuant
to and in compliance with the restrictions of Rule 144 under
the Securities Act applicable to sales by affiliates of an
issuer;
(iii) pursuant
to a firm commitment underwritten distribution to the public,
registered under the Securities Act;
(iv) pursuant
to a distribution registered under the Securities Act (other than
as provided in clause (iii) above), in an amount not
exceeding, on any trading day, 25% of the ADTV as in effect on such
trading day; or
(v) to
any Person that after consummation of such Transfer would
Beneficially Own (A) in the case of an Eligible Transferee,
less than fifteen percent (15%), and (B) in the case of an
Ineligible Transferee, less than five percent (5%), of the
outstanding Voting Stock of the Company;
provided , that, in the case of a Transfer pursuant to
clause (ii) or clause (iv), the Investor shall not knowingly
Transfer any shares of Common Stock to any Person that, after
consummation of such Transfer, would Beneficially Own (I) in
the case of an Eligible Transferee, more than fifteen percent
(15%), and (II) in the case of an Ineligible Transferee, more
than five percent (5%), of the outstanding Voting Stock of the
Company; and provided further , that in the case of a
Transfer pursuant to clause (iii) that is effected through a
firm commitment underwriting, the Investor shall instruct the
underwriters to use their reasonable best efforts to
(A) effect as wide a distribution as practicable of the Common
Stock Transferred, consistent with best execution
12
standards and
(B) not knowingly sell Common Stock to any Person that, after
consummation of such Transfer, would Beneficially Own (I) in
the case of an Eligible Transferee, more than fifteen percent
(15%), and (II) in the case of an Ineligible Transferee, more
than five percent (5%), of the outstanding Voting Stock of the
Company.
Any Transferee
acquiring Common Stock pursuant to clauses (ii), (iii),
(iv) or (v) of this Section 2.1(c) (other than the
Investor, an Affiliate of the Investor or any member of a 13D Group
of which the Investor or any of its Affiliates are members) shall
take such Common Stock free of the obligations of the Investor
under this Agreement (including, without limitation, this Section
2.1 and Section 3.2) and shall have no rights as an Investor
or Permitted Transferee under this Agreement (including, without
limitation, any rights under Article 1, Section 3.1 or
Article 4).
(d)
Restrictions on the Series B Share . Neither the
Investor nor any other Series B Holder may Transfer any of the
Series B Shares to any other Person, except that the Investor
shall have the right to Transfer Series B Shares to any
Permitted Transferee that acquires twenty percent (20%) or more of
the Investor Registrable Securities in compliance with the
provisions of this Section 2.1 in an aggregate amount
representing. Upon such a Transfer, such Transferee shall be deemed
an Investor and a Series B Holder hereunder and shall be
entitled to the rights, and subject to the obligations and
restrictions, contained herein.
Section 2.2 Legends; Securities Act Compliance
.
(a) Each
certificate representing Common Shares, Series B Shares or
other Equity Securities acquired by the Investor or any of its
Affiliates pursuant to Section 3.1 will bear a legend
conspicuously thereon to the following effect:
“THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED UNLESS REGISTERED OR EXEMPT FROM REGISTRATION
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS. IN ADDITION,
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
OF A STOCKHOLDER AGREEMENT AND MAY NOT BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH SUCH
AGREEMENT.”
(b) In
addition to the restrictions set forth in Section 2.1, the
Investor shall not offer, sell or legally transfer any Common
Shares or Equity Securities acquired pursuant to Section 3.1
hereof except pursuant to: (i) an effective Registration
Statement under the Securities Act; (ii) an opinion of legal
counsel reasonably acceptable to the Company that such Transfer is
exempt from the registration requirements of Section 5 of the
Securities Act; (iii) pursuant to Rule 144 under the
Securities Act; or (iv) a “no action” letter from
the staff of the SEC addressed
13
to the Investor
or a Permitted Transferee to the effect that the Transfer without
registration would not result in a recommendation by the staff to
the SEC that action be taken with respect thereto.
(c) In
the event that any Common Shares Beneficially Owned by the Investor
or any of its Affiliates is Transferred in a Public Offering as
provided in Section 2.1(c)(iii) or 2.1(c)(iv), the Company
shall promptly, upon request, but in any event not later than is
necessary in order to consummate the sale of such securities
pursuant to such Public Offering, remove the legend set forth above
in connection with such Transfer. In the event that any Common
Shares Beneficially Owned by the Investor or any of its Affiliates
is Transferred pursuant to Rule 144 under the Securities Act
in compliance with Section 2.1(c)(ii), the Company shall upon
request, upon receipt of documentation reasonably required by the
Company to confirm such Investor’s eligibility to sell such
Common Shares pursuant to Rule 144 under the Securities Act,
promptly but in any event not later than is necessary in order to
consummate the sale of such securities pursuant to Rule 144
under the Securities Act (subject to receipt of such documentation
a reasonable period of time prior to such sale), remove the second
sentence of the legend set forth above in connection with such
Transfer.
(d) In
the event that any Common Shares are transferable without volume or
manner of sale restrictions pursuant to Rule 144 under the
Securities Act and the terms of this Article 2 no longer
restrict the Transfer of such Common Shares by the holder thereof,
the Company shall promptly upon request remove the legends set
forth above from the certificates representing such Common
Shares.
(e) Upon
the termination of the restrictions set forth in Section 2.1,
the Company shall promptly, upon request, deliver a replacement
certificate not containing the second sentence of the legend set
forth above.
ARTICLE 3
CERTAIN COVENANTS
Section 3.1 Right to Maintain . During the Right to
Maintain Period:
(a) The
Company shall provide the Investor the opportunity to purchase in
any Offering up to its Pro Rata Share; provided, however, in no
event shall the Investor be entitled to purchase an amount of
Equity Securities in any such Offering that would cause
Section 3.2 to be violated.
(b) No
later than fifteen (15) Business Days prior to the anticipated
consummation of an Offering, the Company shall send a written
notice (the “ Offering Notice ”) to the
Investor, indicating the material terms and conditions of the
proposed Offering, including, without limitation, (i) the
number and type of Equity Securities expected to be offered or sold
and the material terms of such Equity Securities, (ii) the
expected price at which it proposes to offer or sell such Equity
Securities, or the expected formula for determining such price,
(iii) the expected timing of the Offering, and (iv) the
name, telephone and facsimile number or e-mail address of the
Person at the Company to whom the Investor should deliver a
Response Notice (as defined below). If, prior to the consummation
of the Offering, the terms and conditions of the
14
proposed
Offering change, with the result that the price will be less than
the minimum price set forth in the Offering Notice or the other
principal terms and conditions will be materially more favorable to
potential subscribers in the Offering than those set forth in the
Offering Notice, it will be necessary for a separate Offering
Notice to be furnished, and the terms and provisions of this
Section 3.1 separately complied with, in order to consummate
the Offering pursuant to this Section 3.1.
(c) The
Investor shall have the right, by providing written notice to the
Company no later than five (5) Business Days prior to the
anticipated consummation of an Offering and indicating the name,
telephone number, facsimile number or e-mail address of the Person
or Persons that the underwriter(s) of the Offering should call to
coordinate with respect to any sales to the Investor, to either
(i) purchase Equity Securities up to its Pro Rata Share in the
Offering upon the terms and conditions specified in the Offering
Notice and upon the same terms and conditions applicable to all
other participants in such proposed Offering, or (ii) waive
its right to so purchase Equity Securities up to its Pro Rata Share
in the Offering (in either case, a “ Response Notice
”). If the Investor or a Permitted Transferee shall fail to
provide the Company with a Response Notice no later than five
(5) Business Days prior to the date of the expected Offering
as set forth in the Offering Notice, then the Investor shall not be
entitled to purchase Equity Securities in the Offering. In any
event, it shall be a condition to the Investor’s or a
Permitted Transferee’s opportunity to purchase Equity
Securities in an Offering that it comply with the reasonable
requests of the underwriter(s) necessary for it to purchase shares
in the Offering (e.g., establishing an account with an underwriter
in the Offering). The election by the Investor not to exercise its
rights to purchase up to its Pro Rata Share in, or failure to
deliver a Response Notice with respect to, any Offering shall not
affect its rights as to future Offerings pursuant to this
Section 3.1. In the event that the Company has not sold the
Equity Securities within sixty (60) calendar days after the
date of the expected Offering as set forth in the Offering Notice,
then the Company shall not thereafter issue or sell the Equity
Securities without again first complying with the provisions of
this Section 3.1 and offering the Investor the right to
purchase its Pro Rata Share thereof.
(d) For
the avoidance of doubt, under no circumstances shall any pledgee of
any Common Stock or any Transferee from such pledgee be deemed an
Investor for purposes of this Section 3.1, and no such pledgee
or Transferee shall have any rights under this
Section 3.1.
(a) For
a period of six (6) years from the Closing (the “
Standstill Period ”), the Investor shall not, and the
Investor shall ensure that none of its Affiliates shall, nor shall
any of the foregoing Persons act in concert with any other Person
to, directly or indirectly, without the prior consent of a majority
of the At-Large Directors who are Independent Directors:
(i) acquire
or agree to acquire (whether by purchase, tender or exchange offer,
through acquisition of control of another Person, by joining a 13D
Group, through the use of a derivative instrument or voting
agreement, or otherwise), Beneficial Ownership of any Equity
Securities, or any Economic Right or Voting Right to or regarding
any Equity Securities, or authorize or make a tender offer,
exchange offer or other offer or proposal, whether oral or written,
to acquire Equity Securities, in each case, if the effect of
such
15
acquisition
would be that the Common Stock Beneficially Owned in the aggregate
by the Investor and its Affiliates (including, without limitation,
any 13D Group of which any Investor or any Affiliate thereof is a
member), or with respect to which the Investor, its Affiliates or
any such 13D Group would have Economic Rights or Voting Rights,
would exceed the Standstill Limit (it being understood that in the
event that there shall be more than one (1) Investor, all shares
Beneficially Owned and all Economic Rights and Voting Rights held
by all Investors and all other Persons that are participants in any
13D Group of which any Investor is a member shall be aggregated,
and deemed Beneficially Owned and held by each Investor, for
purposes of this Section 3.2(a)(i));
(ii) (A) make
or in any way participate in any “solicitation” of
“proxies” (as such terms are used in the rules and
regulations of the SEC) with respect to any Voting Stock, or
(B) seek to advise or influence any Person with respect to the
voting of any Voting Stock (other than (x) the Investor or any
Affiliate or (y) in accordance with and consistent with the
recommendation of the Board);
(iii) deposit
any Voting Stock or Series B Shares in a voting trust or,
except as otherwise provided or contemplated herein, subject any
Voting Stock or Series B Shares to any arrangement or
agreement with any Person (other than between the Investor and any
of its First Tier Affiliates) with respect to the voting of such
Voting Stock or Series B Shares;
(iv) join
a 13D Group (other than a group comprising solely of the Investor
and its Permitted Transferees) or other group, or otherwise act in
concert with any third Person for the purpose of acquiring,
holding, voting or disposing of Voting Stock, Series B Shares
or Convertible Securities;
(v) effect
or seek, offer or propose (whether publicly or otherwise) to effect
any Change of Control or any acquisition of Equity Securities in
excess of the Standstill Limit;
(vi) otherwise
act, alone or in concert with others, to effect or seek, offer or
propose (whether publicly or otherwise) to effect control of the
management, Board or policies of the Company; or
(vii) otherwise
take any action that would or could reasonably be expected to
compel the Company to make a public announcement (including any
disclosure required to be made in any SEC filing under the rules
and regulations of the SEC) regarding any of the matters set forth
in this Section 3.2(a).
Notwithstanding
the foregoing, the restrictions contained in this
Section 3.2(a) shall not (A) apply with respect to the
election of the Series B Directors by Investor and its
Permitted Transferees in accordance with the Certificate of
Designation, (B) prevent, restrict, encumber or in any way
limit the ability of any Series B Director to vote on matters,
make non-public statements to officers, employees, agents,
management or other Directors or to take any action or make any
statement at any meeting of the Board or any committee or
subcommittee thereof in his or her capacity as a Director,
(C) apply to or restrict any non-public discussions or
other
16
non-public
communications between or among directors, members, officers,
employees or agents of the Investor or any First Tier Affiliate of
the Investor, or (D) restrict any disclosure or statements
required to be made by any Series B Director or the Investor
under applicable law.
(b) If
during the Standstill Period the Investor is entitled (as a result
of dilution due to future share issuances by the Company) to
purchase shares of Common Stock (up to the Standstill Limit) in
compliance with this Section 3.2, then unless the Board
otherwise approves such purchases shall be made in full compliance
with all applicable securities laws, but shall not be made by means
of any tender offer.
(c) The
restrictions set forth in Section 3.2(a) shall terminate if,
at any time during the Standstill Period, (i) the Company
publicly announces its entry into a definitive agreement, the
consummation of which would result in a Change of Control, and such
agreement has not been approved by a majority of the Series B
Directors, (ii) the Company shall have waived the terms of its
Rights Agreement to permit any Person (other than the Investor or
any 13D Group of which the Investor is a member) to effect a Change
of Control or otherwise acquire more than fifteen percent (15%) of
the outstanding Common Stock, and such transaction has not been
approved by a majority of the Series B Directors, or
(iii) any Person (other than the Investor or any Affiliate of
the Investor or any 13D Group of which the Investor or any
Affiliate of the Investor is a member) shall have commenced a
bona fide public tender or exchange offer which if
consummated would result in a Change of Control, unless the Board
recommends against such tender or exchange offer within ten
(10) Business Days after the commencement (as such term is
defined in Rule 14d-2 under the Exchange Act) thereof and
thereafter continues to oppose such tender or exchange offer. If
(x) the restrictions set forth in Section 3.2(a) shall
have terminated as provided in this Section 3.2(c), and
(y) any definitive agreement described in clause
(i) above, or transaction described in clause (ii) above,
or tender or exchange offer described in clause (iii) above,
as the case may be, shall have been terminated or abandoned prior
to consummation thereof, and (z) any alternative offer or
proposal by Investor in response to any such agreement,
transaction, tender offer or exchange offer shall also have been
abandoned or withdrawn prior to consummation thereof, then the
restrictions set forth in Section 3.2(a) shall be
reinstated.
(d) If
during the Standstill Period the Board elects to commence a process
intended to lead to a proposal with respect to Change of Control of
the Company (whether in response to a proposal from a third party
or otherwise), the Company will notify the Investor of the
Board’s election and will permit the Investor to participate
in such process as a potential bidder, if the Investor so elects,
on the same terms and conditions as third party participants. As a
condition to the Investor’s participation in such process,
the Board may require that the Investor agree in writing with the
Company that if such process results in the Board’s approval
of a Change of Control transaction with a Person other than the
Investor that is a Superior Proposal as compared to any bona
fide written proposal from the Investor, then the Investor will
consent to such transaction, will raise no objection to the
consummation thereof, and will tender shares of Equity Securities
Beneficially Owned by it, as applicable, upon the consummation of
such transaction. In the event that any such transaction requires
the approval of the Company’s stockholders, the Investor
agrees, if the matter is brought to a vote at a stockholder
meeting, that the Investor will be present, in person or by proxy,
as holders of Voting Stock, at all such meetings and be counted for
determining the presence of a quorum at such meetings and
will
17
vote for the
approval of any such transaction approved and recommended by the
Board. So long as the Board continues to recommend such
transaction, the Investor agrees to vote and to use reasonable
efforts to cause its Affiliates, as the case may be, to vote all
shares o
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