Investment Term Sheet - SeaChange International Inc. and Microsoft Corp.
INVESTMENT TERM SHEET
HIGHLY CONFIDENTIAL
Issuer: SeaChange International Inc. (the "Company")
Investor: Microsoft Corporation ("Investor")
Initial Investment: Microsoft will purchase 277,162 shares of the Company's
common stock, par value $0.01 per share (the "Common
Stock") for a purchase price of $10,000,000.
Subsequent Investments: Upon the achievement of each of the First and Second
Commercial Milestones (as defined below), Investor
shall purchase additional shares of the Company's
Common Stock equal in value to $5,000,000. The per
share price to be paid by Investor in such subsequent
closing shall be 8% below the average closing price
of the Company's Common Stock as publicly reported by
the Nasdaq Stock Market as of 4:00 p.m. Eastern Time
over the ten trading days ending one trading day prior
to the date the relevant Commercial Milestone is met.
Commercial Milestones: (a) First Commercial Milestone
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The "SeaChange System Software" (as defined in
that certain License and Development Agreement between
the parties dated as of May 8, 2000) will demonstrate a
high level of system stability and will meet the
following performance criteria:
(i) A single and multiple node system will
stream *** Windows Media Format streams at
*** of total system capacity for a period
of ***.
(ii) A single and multiple node system will
stream *** MPEG 2
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
streams at *** of total system capacity for
a period of ***.
(b) Second Commercial Milestone
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Shipment of the commercial release of the
"Enhanced Version" (as defined in that certain License
and Development Agreement between the parties dated as
of May 8, 2000) no more than 18 months after the
commercial availability of the Next Generation Windows
Media Server.
Registration Rights: Demand right for immediate registration of shares.
Strategic Relationship: Both parties will identify a contact within the
respective companies for ongoing consultation between
the parties. In addition, upon the reasonable request
of Microsoft, the Company will make available members
of Company management to meet with representatives of
Microsoft on a quarterly basis to discuss issues
relating to the Microsoft-SeaChange relationship.
Financial Information: For so long as Investor holds at least 50% of the
Common Stock acquired under the transactions
contemplated herein, the Company will deliver to the
Investor copies of the Company's 10-K's, 10-Q's, 8-K's
and Annual Reports to Shareholders promptly after such
documents are filed with the Securities and Exchange
Commission.
Conditions to Closing: The obligation of the Investor to purchase the Common
Stock will be subject to customary closing conditions
including, without limitation:
. Execution of mutually satisfactory definitive
documentation in forms substantially similar to
those attached hereto as Exhibit A (Stock Purchase
Agreement) and Exhibit B (Registration Rights
Agreement);
. Any applicable governmental and regulatory
approvals;
. Closing certificates; and
. Legal opinions.
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Both parties will use commercially reasonable
efforts to cause the foregoing closing conditions to
be satisfied.
Confidentiality: The existence and terms of this proposal will not be
disclosed to any third party (other than each party's
professional advisors and such third parties as may be
required to consent to the transaction) without the
prior written consent of the other party. Upon the
signing of this Term Sheet, the parties intend to make
a mutually-acceptable public statement regarding the
transactions contemplated herein.
Effect: The parties agree that this Term Sheet is binding upon
both parties and neither party may unilaterally
terminate the contemplated transactions described
herein except based upon the other party's failure to
satisfy a closing condition listed above.
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Dated: May 8, 2000
SeaChange International Inc. ("Company") Microsoft Corporation ("Investor")
By: /s/ William L. Fiedler By: /s/ Amar Nehru
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Its: Vice President Its: Corporate Development, VP
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Exhibit A
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Form of Stock Purchase Agreement by and between the Registrant and Microsoft
Corporation incorporated by reference to Exhibit 10.3 hereto.
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Exhibit B
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Form of Registration Rights Agreement by and between the Registrant and
Microsoft Corporation incorporated by reference to Exhibit 10.4 hereto.
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