STOCKHOLDER AGREEMENT
BY AND BETWEEN
SOFTNET SYSTEMS, INC.,
AND
MEDIACOM LLC
dated
November 4, 1999
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT is made as of November 4, 1999, by
and between SOFTNET SYSTEMS, INC., a Delaware corporation (the "Company"), and
MEDIACOM LLC, a New York limited liability company ("Mediacom").
W I T N E S S E T H:
WHEREAS, the parties desire to set forth certain rights and
restrictions related to the ownership and disposition of certain shares of
Common Stock owned by Mediacom;
WHEREAS, the Company and Mediacom, are parties to that certain
Stock Purchase Agreement of even date herewith (the "Stock Purchase Agreement")
and have agreed, pursuant to the Stock Purchase Agreement, to enter into this
Agreement; and
WHEREAS, in order to induce the parties to enter into the
Stock Purchase Agreement, that certain ISP Channel Affiliate Agreement by and
between the Company's wholly-owned subsidiary, ISP Channel, Inc., and Mediacom,
of even date herewith (the "Affiliate Agreement") and that certain Registration
Rights Agreement by and between the Company and Mediacom of even date herewith
(the "Registration Rights Agreement"), the parties hereby agree that this
Agreement shall govern certain rights and restrictions related to the ownership
and disposition of such shares of Common Stock and certain other matters as set
forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions.
1.1 "Alternate Cash Consideration" has the same meaning as set forth in the
Stock Purchase Agreement.
1.2 "Cause" means, with respect to termination of the Affiliate Agreement,
termination pursuant to Section 8.2 of the Affiliate Agreement.
1.3 "Change of Control" means any of the following:
(a) the acquisition, directly or indirectly by any person or related group of
persons (other than the Company or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Company), of
beneficial ownership of securities possessing more than fifty percent (50%) of
the total combined voting power of the Company's outstanding securities, or
(b) a change in the composition of the Board of the Company over a period of
twelve (12) consecutive months or less such that a majority of the Board members
ceases to be comprised of individuals who either (A) have been Board members
continuously since the beginning of such period or (B) have been elected or
nominated for election as Board members during such period by at least a
majority of the Board members described in clause (A) who were still in office
at the time the Board approved such election or nomination, or
(c) a merger or consolidation in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Company's outstanding
securities are transferred to a person or persons different from the persons
holding those securities immediately prior to such transaction, or
(d) the sale, transfer or other disposition, in one transaction or a series of
related transactions, of all or substantially all of the Company's assets
determined on a consolidated basis.
1.4 "Committed Home Passed" has the same meaning as set forth in the Affiliate
Agreement.
1.5 "Common Stock" means the common stock, par value $0.01, of the Company.
1.6 "Common Shares" has the same meaning as set forth in the Stock Purchase
Agreement.
1.7 "Default Amount" means an amount equal the product of (a) "*Filed separately
with the Commission*" and (b) the difference between "*Filed separately with the
Commission*" and that number of shares available for payment as Default Shares.
1.8 "Default Shares" means "*Filed separately with the Commission*" shares of
Common Stock.
1.9 "Default Notice" means written notice of default under Section 2 delivered
by the Company to Mediacom.
1.10 "Delivery Dates" mean the six dates that an installment of Committed Homes
Passed are due to be delivered for ISP Channel services, with the first such
Delivery Date occurring on the sixth month anniversary of the Effective Date and
then occurring on each of the five consecutive six-month anniversary dates
thereafter.
1.11 "Effective Date" has the same meaning as set forth in the Affiliate
Agreement.
1.12 "Fully Diluted Common Stock" has the same meaning as set forth in the Stock
Purchase Agreement.
1.13 "Initial Shares" has the same meaning as set forth in the Stock Purchase
Agreement.
1.14 "Mediacom Designee" means the person or persons designated by Mediacom for
nomination to the Company's Board of Directors.
1.15 "Preferred Share" means the share of Preferred Stock issued pursuant to
Section 5.4.
1.16 "Preferred Stock" means the preferred stock, par value $0.10 per share, of
the Company.
1.17 "Restricted Shares" means the Initial Shares that are subject to payment to
the Company as liquidated damages under Section 2.
1.18 "Second Shares" has the same meaning as set forth in the Stock Purchase
Agreement.
1.19 "Stockholder Approval" has the same meaning as set forth in the Stock
Purchase Agreement.
1.20 "Third Shares" has the same meaning as set forth in the Stock Purchase
Agreement.
1.21 "Unrestricted Shares" means any and all shares of Common Stock now held or
hereafter held by Mediacom that are not subject to payment to the Company as
liquidated damages under Section 2, it being understood that 10% of the Initial
Shares (350,000 shares of Common Stock) shall be Unrestricted Shares immediately
upon the execution of this Agreement.
2. Delivery of Committed Homes Passed. Pursuant to the Affiliate Agreement,
Mediacom is obligated to make available for ISP Channel services 150,000
Committed Homes Passed on or before each Delivery Date. In the event Mediacom
fails to make available for ISP Channel services the required number of
Committed Homes Passed by the one year anniversary of any applicable Delivery
Date, then Mediacom shall pay to the Company Default Shares as liquidated
damages for each such failure, and such payment shall be the Company's sole
remedy for such failure. Mediacom shall make such payment by delivering to the
Company one or more certificates representing such Default Shares no later than
five business days after the date the Company gives Mediacom a Default Notice.
In the event the Second Shares have not been delivered to Mediacom at the time
of the Default Notice, then the Company shall deduct the Default Shares from the
Second Shares to be delivered to Mediacom. In the event the Third Shares have
not been delivered to Mediacom at the time of the Default Notice, then the
Company shall deduct the Default Shares from the Third Shares to be delivered to
Mediacom; provided, that in the event the Company does not obtain Stockholder
Approval and there are not "*Filed separately with the Commission*" shares of
Common Stock available for payment of the Default Shares, then the Company shall
deduct (a) the number of shares of Common Stock available for payment of the
Default Shares from the Third Shares, and (b) the Default Amount from the
Alternate Cash Consideration, to be delivered to Mediacom.
2.1 Early Delivery. If Mediacom makes available for ISP Channel services the
required number of Committed Homes Passed prior to an applicable Delivery Date,
then the related number of Default Shares shall then immediately become
Unrestricted Shares.
2.2 Restrictions on Transfer. Mediacom will not sell, assign, transfer, pledge
hypothecate, or otherwise encumber or dispose of in any way, all or any part of
any interest in the Initial Shares; provided that, this provision shall not
apply to (i) 10% of the Initial Shares (350,000 shares of Common Stock) and (ii)
all Unrestricted Shares. Any sale, assignment, transfer, pledge, hypothecation
or other encumbrance or disposition of Shares not made in conformance with this
Agreement shall be null and void, shall not be recorded on the books of the
Company and shall not be recognized by the Company.
2.3 Federal and State Securities Laws. Notwithstanding anything to the contrary
in this Section 2, Mediacom shall transfer the Initial Shares only in conformity
with applicable federal and state laws.
2.4 Legends. Mediacom acknowledges that the Common Shares may bear one or more
of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) "THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFER, REPURCHASE RIGHTS
AND OTHER CONDITIONS CONTAINED IN THAT CERTAIN STOCKHOLDER AGREEMENT BETWEEN
MEDIACOM LLC AND SOFTNET SYSTEMS, INC., DATED NOVEMBER 4, 1999."
(c) Any legend required by the laws of the jurisdiction where Mediacom is
domiciled or organized.
(d) Any legend required by the Blue Sky laws of any other state to the extent
such laws are applicable to the shares represented by the certificate so
legended.
(e) Whenever, in the opinion of counsel to Mediacom (which opinion shall be in
writing and shall be in form and substance reasonably satisfactory to the
Company) the restrictions described in any legend set forth above cease to be
applicable to any Common Shares, the holder thereof shall be entitled to receive
from the Company, without expense to such holder, a new certificate not bearing
a legend stating such restriction.
2.5 Acceleration of Demand Registration Rights. In the event of the occurrence
of (i) a Change of Control that is not approved by the Mediacom Designee, or
(ii) Mediacom terminates the Affiliate Agreement for Cause, then all
Unrestricted Shares shall have immediate demand registration rights as set forth
in the Registration Rights Agreement, without regard to the 500,000 share
threshold therein.
3. Other Liquidated Damages. In the event Mediacom (i) terminates the Affiliate
Agreement without Cause or (ii) sells all or substantially all of its cable
systems, without providing for assignment of the Affiliate Agreement to the
purchaser of such systems or making available for ISP Channel services at least
900,000 Committed Homes Passed on the same terms as the Affiliate Agreement,
then Mediacom shall pay to the Company liquidated damages equal to (x) if such
event occurs prior to the third anniversary of the Effective Date, (A) 90% of
the Initial Shares if a Change of Control under Section 2.5(i) shall not have
previously occurred or (B) all Restricted Shares if such Change of Control shall
have occurred, or (y) if such event occurs on or after the third anniversary of
the Effective Date, all Restricted Shares.
(a) Mediacom shall make such payment by delivering to the Company one or more
certificates representing such liquidated damages under this Section 3 within
three business days of such event.
(b) Such liquidated damages shall be in addition to the liquidated damages, if
any, that ISP Channel, Inc. may have under Section 8 of the Affiliate Agreement.
4. Covenants of the Company Regarding the Common Shares. The Company shall
comply with the following covenants as long as Mediacom owns any Common Shares:
4.1 Reporting Status. The Company shall timely file all reports required to be
filed with the SEC pursuant to the Exchange Act, and the Company shall not
terminate its status as an issuer required to file reports under the Exchange
Act even if the Exchange Act or the rules and regulations thereunder would
permit such termination.
4.2 Listing. The Company shall use its best efforts to continue the listing and
trading of its Common Stock on the Nasdaq National Market or the New York Stock
Exchange.
4.3 Corporate Existence. The Company shall maintain its corporate existence, and
in the event of a merger, consolidation or sale of all or substantially all of
the Company's assets, the Company shall ensure that the surviving or successor
entity in such transaction assumes (a) the Company's obligations hereunder and
in the agreements and instruments entered into in connection herewith, and (b)
is a publicly traded corporation whose common stock is listed for trading on the
Nasdaq National Market or the New York Stock Exchange.
4.4 Legal Compliance. The Company shall conduct its business and the business of
its subsidiaries in compliance with all laws, ordinances or regulations of
governmental entities applicable to such businesses.
4.5 Other Affiliations. The Company represents, covenants and agrees that the
set of terms, rates and conditions set forth in this Agreement and the Ancillary
Agreements are no less favorable than those extended to any third party cable
operator in connection with the provision of ISP Channel services. If the
Company or any of its affiliates offer ISP Channel services to any third party
cable operator on a set of terms, rates and conditions more favorable than those
specified in this Agreement and the Ancillary Agreements, taken as a whole, then
the Company shall offer to Mediacom such set of terms, rates and conditions.
5. Board of Directors. Subject to Sections 5.1 and 5.2, the Company shall use
its best efforts to elect or cause to be elected to its Board of Directors such
number of Mediacom Designees in the same proportion to the total number of
directors that the number of shares of Common Stock owned by Mediacom bears to
the total number of outstanding shares of Common Stock on the last day of the
Company's fiscal year.
5.1 Five Percent Ownership. So long as the Common Shares held by Mediacom
represent more than 5% but less than 10% of the outstanding shares of Common
Stock, or the Affiliate Agreement covers at least 500,000 Committed Homes
Passed, then the Company shall use its best efforts to (a) elect or cause to be
elected at least one Mediacom Designee to the Board of Directors, and (b) cause
its Bylaws to provide that 75% of the Board of Directors must approve the
election of the President, Chief Executive Officer, Chief Operating Officer and
Chief Financial Officer of the Company, which election shall be held at least
annually
5.2 Ten Percent Ownership. So long as the Common Shares held by Mediacom
represent 10% or more of the outstanding shares of Common Stock, then (i) the
Company shall use its best efforts to appoint one Mediacom Designee who is
serving as a director to the Executive Committee of the Board of Directors; and
(ii) the Company shall use its best efforts to cause its Bylaws to provide that
the Company shall have no more than ten directors and the Executive Committee of
the Board of Directors shall have no more than five members.
5.3 Amendment of Bylaws. The Company shall use its best efforts promptly after
the Effective Date to cause an amendment to its Bylaws to provide that members
constituting no less than 75% of the Board of Directors must approve the
election of the President, Chief Executive Officer, Chief Operating Officer and
Chief Financial Officer of the Company, which election shall be held at least
annually.
5.4 Preferred Share. In the event the stockholders of the Company do not elect
the Mediacom Designees as provided for in Section 5.1 or 5.2, as applicable,
then the Company shall duly authorize, designate and issue to Mediacom the
Preferred Share having the voting rights set forth in the Certificate of
Designation attached hereto as Exhibit A.
5.5 Termination of Rights. In the event Mediacom is required to pay liquidated
damages under Section 3, then Mediacom's rights under this Section 5 shall
terminate, Mediacom shall cause all Mediacom Designees to resign immediately
from the Board of Directors, the Preferred Stock referenced in Section 5.4, if
issued, shall be canceled by the Company, and Mediacom shall return all shares
representing such Preferred Stock to the Company.
6. Restriction on Ownership. Mediacom shall not acquire, either pursuant to the
Stock Purchase Agreement or otherwise, more than 35% of the Fully Diluted Common
Stock without the approval of the Board of Directors.
7. Miscellaneous.
7.1 Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable overnight courier service (charges
prepaid), mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid, or transmitted by facsimile (with request
for immediate confirmation of receipt in a manner customary for communications
of such type and with physical delivery of the communication being made by one
of the other means specified in this Section as promptly as practicable
thereafter). Such notices, demands and other communications shall be addressed
as follows:
If to the Company:
SOFTNET SYSTEMS, INC.
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxx, Secretary
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to Mediacom
MEDIACOM LLC
000 Xxxxxxx Xxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
Chairman and Chief Executive Officer
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxxxx Xxxxxx Xxxxxxxx Xxxxxx & Xxxxxx, P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party
(provided that notice of a change of address shall be effective only upon
receipt thereof).
7.2 Remedies. The parties shall have all rights and remedies set forth in this
Agreement and all rights which such holders have under any law. Any person
having any rights under any provision of this agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that either party may, in its sole
discretion, apply to any court of law or equity of competent jurisdiction for
specific performance or injunctive relief (without posting a bond or other
security) in order to enforce or prevent any violation of the provisions of this
Agreement. The losing party shall pay the reasonable fees and expenses incurred
by the prevailing party for the enforcement of the rights granted under this
Agreement.
7.3 Entire Agreement; Waivers and Amendments. This Agreement (including the
exhibits and schedules hereto and the documents and instruments referred to
herein) contains the entire agreement and understanding of the parties with
respect to the subject matter hereof and supersedes all prior written or oral
agreements and understandings with respect thereto. This Agreement may only be
amended or modified, and the terms hereof may only be waived, by a writing
signed by both parties hereto or, in the case of a waiver, by the party entitled
to the benefit of the terms being waived.
7.4 Assignment; Binding Effect. This Agreement may not be assigned or delegated,
in whole or in part, by either party hereto without the prior written consent of
the other party hereto, except by operation of law in connection with a merger,
consolidation or other reorganization or sale of all or substantially all of the
assets of Mediacom; provided, that Mediacom may assign, in its sole discretion,
all of its rights, interests and obligations under this Agreement to any buyer
who assumes all of Mediacom's obligations under this Agreement and the Ancillary
Agreements; and provided further, that Mediacom may assign its rights pursuant
to Section 5 only if such assignment includes a transfer to such assignee of all
of the Common Shares then owned by Mediacom and the Preferred Share, if issued.
Mediacom may assign any or all of its rights and obligations hereunder to its
direct or indirect wholly-owned subsidiaries if such subsidiaries agree in
writing in form satisfactory to the Company to be bound by this Agreement. In
the event Mediacom assigns such rights to any such subsidiary, such subsidiary
shall be deemed to be "Mediacom" for all purposes of this Agreement. The
assignment by Mediacom of any rights, interest or obligations under the
Registration Rights Agreement to a transferee of the Unrestricted Shares
acquired hereunder shall not affect or diminish the rights or obligations of
Mediacom under this Agreement. Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
7.5 Severability. In the event that any provision of this Agreement shall be
declared invalid or unenforceable by a court of competent jurisdiction in any
jurisdiction, such provision shall, as to such jurisdiction, be ineffective to
the extent declared invalid or unenforceable without affecting the validity or
enforceability of the other provisions of this Agreement, and the remainder of
this Agreement shall remain binding on the parties hereto.
7.6 Governing Law; Jurisdiction and Venue. This Agreement shall be governed by,
construed and enforced in accordance with the internal laws of the State of
Delaware, excluding the conflict of laws provisions thereof that would otherwise
require the application of the law of any other jurisdiction. The parties hereto
acknowledge and agree that the state and federal courts sitting in the State of
Delaware shall have jurisdiction in any matter arising out of this Agreement,
and the parties hereby consent to such jurisdiction and agree that the venue of
any such matter shall also be proper in such state and federal courts sitting in
the State of Delaware.
7.7 Captions. The Section and subsection headings in this Agreement are inserted
for convenience of reference only, and shall not affect the interpretation of
this Agreement.
7.8 Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original and both of which together shall be considered one
and the same agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the date first written above.
SOFTNET SYSTEMS, INC.
--------------------------------------
By: Xxxxxxxx X. Brilliant
Its: Chief Executive Officer
MEDIACOM LLC
--------------------------------------
By: ----------------------------------
Title: -------------------------------