EXHIBIT 7(e)
LIBERTY DIGITAL, INC.
00000 X. XXXXXXX XXXX.
XXX XXXXXXX, XXXXXXXXXX 00000
October 23, 1999
America Online, Inc.
News America Incorporated
Time Warner Inc.
General Instrument Corporation
Dear Sir:
Each of America Online, Inc. ("AOL"), News America Incorporated ("News"),
Time Warner Inc. ("TWI"), Liberty Digital, Inc. ("LDI") and General Instrument
Corporation ("GI") (each, a "PARENT") has agreed to purchase (either
individually or through a wholly owned subsidiary) shares of C-1 Convertible
Preference Shares and Warrants to purchase A Ordinary Shares of OpenTV Corp., a
British Virgin Islands company (the "COMPANY"), pursuant to that certain C-1
Convertible Preference Shares and Warrant Purchase Agreement (the "PURCHASE
AGREEMENT") among the Investors, affiliates of MIH (BVI) Limited and Sun
Microsystems, Inc., and the Company. The agreements contained in this letter and
in the attached term sheet (collectively, this "LETTER AGREEMENT") shall become
effective upon the purchase and sale to all of the Investors of the Convertible
Preference Shares and Warrants to be acquired by the Investors pursuant to the
Purchase Agreement, and shall apply to each Parent for so long as such Parent or
a Subsidiary of such Parent owns any Investor Securities (as defined below).
Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to them in the Investors Rights Agreement (as defined in the
Purchase Agreement).
The parties intend that the covenants and agreements set forth in this
Letter Agreement will be superseded by a definitive stockholders' agreement (the
"DEFINITIVE AGREEMENT") that will contain provisions incorporating and expanding
upon the terms, conditions and agreements set forth in this Letter Agreement,
together with other provisions which may be customary in the case of
transactions of the type described in this Letter Agreement, and such other
provisions as are reasonable or appropriate in the context of the transactions
contemplated by this Letter Agreement. Notwithstanding the foregoing, the
parties expressly acknowledge and agree that this Letter Agreement constitutes a
binding agreement among them until the Definitive Agreement is executed and
delivered and, if the Definitive Agreement is not executed and delivered on or
before the 60th day following the Closing under the Purchase Agreement, then
this Letter Agreement shall be deemed to constitute the Definitive Agreement.
Each Parent agrees to negotiate in good faith and use its commercially
reasonable efforts to enter into the Definitive Agreement.
Each party represents to each other party that this Letter Agreement has
been duly authorized, executed and delivered by such party and constitutes the
legal, valid and binding obligation of such party, and is enforceable against
such party in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the rights of creditors generally and by general principles of equity.
This Letter Agreement may be executed in counterparts, each of which shall
be deemed an original and all of which shall constitute one and the same
instrument. This Letter Agreement will be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to its
conflicts of law rules. The parties agree that irreparable damage will occur
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if any provision of this Letter Agreement is not performed in accordance with
its terms, and that the parties shall be entitled to specific performance of the
terms of this Letter Agreement in addition to any other remedy at law or in
equity.
Each Parent agrees that it shall cause its Investor to require any
Permitted Transferee to which such Investor Transfers Equity Securities to
execute and deliver an instrument reasonably acceptable to the other parties
pursuant to which such Permitted Transferee agrees to perform the Investor's
obligations hereunder (but such Permitted Transferee shall not become entitled
to exercise any of the transferor Investor's rights hereunder unless such
Investor ceases to beneficially own any Investor Securities); PROVIDED, HOWEVER,
that (i) if its rights hereunder are so assigned by an Investor to a Permitted
Transferee, such assignment shall be effective only for so long as such
Permitted Transferee remains a Subsidiary of a Parent and (ii) no such
assignment shall release an Investor from its obligations hereunder until, and
such Investor shall continue to be the "Investor" hereunder so long as, it
beneficially owns any Investor Securities. Notwithstanding the foregoing, no
transferee of an Investor, other than a Permitted Transferee, shall be required
to become a party to or bound by this Letter Agreement.
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If this Letter Agreement is in accordance with your understanding please
indicate your agreement by signing below. When signed by all of the Parents,
this Letter Agreement will constitute a binding agreement among us.
Sincerely,
LIBERTY DIGITAL, INC.
By:_________________________________
Name:
Title:
Accepted and Agreed:
AMERICA ONLINE, INC.
By:___________________________________
Name:
Title:
TIME WARNER INC.
By:___________________________________
Name:
Title:
NEWS AMERICA INCORPORATED
By:___________________________________
Name:
Title:
GENERAL INSTRUMENT CORPORATION
By:___________________________________
Name:
Title:
TERM SHEET
1. VOTING GENERALLY. Except as otherwise expressly provided herein or
in the Investors Rights Agreement, each Investor shall be entitled to vote all
voting securities of the Company beneficially owned by it as such Investor shall
determine in its sole discretion. Each Investor Designee (as defined below)
representing the Investors shall, to the extent practicable, respond to requests
from Investors concerning matters to be presented to the Board (of which he or
she has knowledge); PROVIDED, that such Investor Designee shall act and vote
upon matters presented to the Board as such Investor Designee shall determine,
consistent with such person's fiduciary duties to stockholders of the Company.
2. DIRECTOR DESIGNEES.
(a) Pursuant to the Investor Agreement, the Investors hereby
designate Xxxxx Xxxxxxxxx of LDI and Xxxxx Xxxxx of News as their initial
representatives (each, an "INVESTOR DESIGNEE") on the Company's Board of
Directors (the "BOARD"). All Investor Designees shall be directors or senior
executives of the Parent of an Eligible Investor or a subsidiary or division of
the Parent of an Eligible Investor.
(b) Each Investor Designee shall serve as a member of the Board for
the term specified in the Company's Bylaws and until his or her successor is
selected and qualified. Upon the occurrence of any vacancy on the Board which
the Investors are entitled to fill (in accordance with the Investors Rights
Agreement), the Investors, acting by a Majority Vote (as defined below), shall
select a successor to fill such vacancy; PROVIDED, that (x) no Parent which
beneficially owns less than 66-2/3% of the outstanding Investor Securities will
be entitled to designate (or cause to be designated) more than one Investor
Designee and (y) no Parent who is, or whose Investor is, in breach of this
Letter Agreement shall be entitled to designate an Investor Designee. Such
successor Investor Designee shall be nominated for election to the Board by the
Investors in accordance with the Investors Rights Agreement. As used herein, (i)
"ELIGIBLE INVESTOR" shall mean an Investor which, together with its Permitted
Transferees, beneficially owns at least 50% of the Investor Securities held by
it immediately following the Closing, (ii) "MAJORITY VOTE" means the approval of
Investors (or Permitted Transferees) holding a majority of the outstanding
Investor Securities (without regard to the voting power attributable to such
shares) and (iii) "INVESTOR SECURITIES" means, without duplication, (x) the
Convertible Preference Shares issued to the Investors at the Closing and any
Shares issued upon conversion thereof and (y) the Warrants sold to the Investors
at the Closing (excluding the warrants proposed to be issued to GI other than
pursuant to the Purchase Agreement) and the Class A Shares issued upon the
exercise of such Warrants. The Investor Securities owned by a particular
Investor and its Permitted Transferees shall include only those Equity
Securities of the Company acquired by such Investor at the Closing or those
Equity Securities which such Investor (or its Permitted Transferees or its
Parent) acquires from another Investor (or such Investor's Permitted Transferee)
(provided that the Equity Securities so acquired were Investor Securities when
owned by such transferor) or from OTVH or SSI pursuant to the exchange right
provided in Section 21 of the Investors Rights Agreement. By way of example and
not in limitation of the foregoing, Equity Securities acquired by an Investor
from OTVH pursuant to Section 19, or from the Company pursuant to Section 18, of
the Investor Rights Agreement, or in a market transaction following the initial
Public Offering, shall not be Investor Securities. To the extent
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any Equity Securities are Transferred to a Person which is not a Permitted
Transferee of an Investor, such Investor Securities shall be deemed not to be
outstanding for purposes of this Letter Agreement. The term "outstanding
Investor Securities" shall include Shares which are outstanding as well as
Shares issuable upon exercise of the Warrant.
(c) The Investors agree that, (i) so long as (x) News beneficially
owns all of its Originally Issued Amount and (y) neither News nor its Investor
is in material breach of this Agreement and (ii) so long as the Investors are
entitled to appoint one or more Investor Designees, News shall be entitled to
specify one of the Investor Designees. The parties agree that unless News is the
only remaining Eligible Investor or News has acquired beneficial ownership of 66
2/3% or more of the outstanding Investor Securities, News shall not be entitled
to designate more than one Investor Designee.
(d) In the event (i) an Investor which has designated an Investor
Designee either (x) ceases to be an Eligible Investor or (y) is determined, or
whose Parent is determined, to be in material breach of this Letter Agreement,
or (ii) if requested by (x) the Investor which designated an Investor Designee
or (y) Investors beneficially owning at least 50% of the outstanding Investor
Securities, the Investors agree to use their reasonable best efforts to cause
the Investor Designee in question to resign from the Board or be removed as a
director. In the event News requests the removal of its Investor Designee, News
shall, so long as it is entitled to specify an Investor Designee pursuant to the
first sentence of paragraph 2(c) above, be entitled to designate such Investor
Designee's successor. So long as News is entitled to specify an Investor
Designee pursuant to the first sentence of paragraph 2(c) above, such Investor
Designee shall not be removed by the Investors unless such removal is consented
to by News (in which case News shall be entitled to select a successor to such
Investor Designee). In the event the Investor
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Designee of another Investor resigns or is to be removed, the replacement shall
be a person selected by a Majority Vote of the Investors.
3. EXERCISE OF INVESTOR RIGHTS.
(a) In connection with the exercise of their approval rights over
Specified Corporate Actions as provided in the Investors Rights Agreement (the
"INVESTOR RIGHTS"), the Investors, by action of a Majority Vote, will from time
to time appoint one Eligible Investor to act as the Representative. Such
Representative shall continue as such until it resigns or the Investors, by a
Majority Vote, determine to replace it. The parties agree that the initial
Representative will be LDIG OTV, Inc.
(b) The Representative, upon being contacted by the Company in
accordance with Section 17 of the Investors Rights Agreement concerning any
proposed Specified Corporate Action, shall in turn contact each of the other
Investors as promptly as practicable and shall describe in reasonable detail the
Specified Corporate Action proposed to be taken and the date by which notice
must be received by the Company regarding the exercise of the Investor Rights
with respect to the proposed Specified Corporate Action (the "NOTICE DATE")
(based upon information provided to it by the Company) and forward to each other
Investor any written materials delivered to it by the Company in connection with
such proposal, and shall solicit from each Investor such Investor's
determination as to whether or not to approve the proposed Specified Corporate
Action.
(c) Unless Investors beneficially owning (as of the close of
business on the second day preceding the Notice Date (such day, the "RECORD
DATE")) 60% or more of the outstanding Investor Securities as of the Record Date
duly notify the Representative on or before
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the Record Date that they approve the proposed Specified Corporate Action, the
Investors shall be deemed to have exercised the Investor Rights and objected to
(and not approved) such Specified Corporate Action, and the Representative shall
deliver promptly (but in any event prior to the Notice Date) written notice of
such objection and the exercise of the Investor Rights to the Company and each
Investor. Investors which do not notify the Representative prior to the Record
Date of their consent or approval of such proposed Specified Corporate Action
are hereinafter referred to as "DISSENTING INVESTORS".
(d) The parties hereto acknowledge and agree that:
(i) the Representative shall only have the duties and
responsibilities specified herein and no others;
(ii) the Representative shall be entitled to rely upon written
and oral communications received by it from the Company and the Investors
which it reasonably believes to be genuine and to take actions based upon
such communications; and
(iii) the Representative shall not be liable for actions taken
or omitted to be taken by it in good faith in accordance with this Letter
Agreement, unless it shall have been grossly negligent or been guilty of
intentional misconduct in connection with the performance of its duties
hereunder.
(e) In the event that the Representative, any Investor or any
officer, director, employee, affiliate or controlling person of any Investor, or
any Investor Designee (each, an "INDEMNIFIED PERSON") becomes subject to any
action, claim, damage or liability arising out of or relating to any exercise of
the Investor Rights in accordance with the provisions of this
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Paragraph 3 then, to the extent that such action, claim, damage or liability
(including any related legal or other fees and expenses incurred by or on behalf
of an Indemnified Person in connection with the investigation and defense
thereof) is or are not, in whole or in part, reimbursed or paid by the Company
or by any insurance or indemnity policy maintained by the Company for the
benefit of the Company's directors, officers or controlling persons (any such
remaining unpaid or unreimbursable amounts described by this sentence being
referred to collectively as "LOSSES"), then the Dissenting Investors shall
indemnify and hold harmless, severally and not jointly, each Indemnified Person
from and against any such Losses; PROVIDED, HOWEVER, that no Dissenting Investor
shall be required to indemnify any Indemnified Person for any settlement or
compromise relating to any Losses unless such settlement or compromise is
consented to in writing by the Dissenting Investor. The indemnification
obligation of each Dissenting Investor shall be several and not joint with other
Dissenting Investors. A Dissenting Investor's maximum indemnity obligation
hereunder shall be the product of (x) the amount of Losses and (y) a fraction,
the numerator of which is the number of Investor Securities beneficially owned
by such Dissenting Investor as of the Record Date and the denominator of which
is the number of Investor Securities beneficially owned by all Dissenting
Investors as of the Record Date.
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