<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 13, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
QUANTUM DIRECT CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 5961 41-1899503
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
6740 SHADY OAK ROAD
EDEN PRAIRIE, MINNESOTA 55344-3433
(612) 947-5207
(Address, including zip code, telephone number, including area code, of
registrant's principal executive offices)
------------------------
DAVID T. QUINBY
VICE PRESIDENT AND SECRETARY
QUANTUM DIRECT CORPORATION
6740 SHADY OAK ROAD
EDEN PRAIRIE, MINNESOTA 55344-3433
(612) 947-5207
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
MICHAEL W. STURROCK, ESQ. STEPHEN T. BURDUMY, ESQ.
LATHAM & WATKINS KLEHR, HARRISON, HARVEY, BRANZBURG & ELLERS LLP
633 WEST FIFTH STREET, SUITE 4000 1401 WALNUT STREET
LOS ANGELES, CALIFORNIA 90071 PHILADELPHIA, PENNSYLVANIA 19102
(213) 485-1234 (215) 568-6060
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions under the Merger Agreement (described in the Joint Proxy
Statement/Prospectus herein) are satisfied or waived.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE(3)
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value..................... 59,619,612 $2.57 $153,318,492 $45,229
- ---------------------------------------------------------------------------------------------------------------------------------
Series B Convertible Preferred Stock, $.01 par
value.......................................... 81,250 $45.00 $3,656,250 $1,079
=================================================================================================================================
</TABLE>
(1) Represents (i) a maximum number of 57,994,612 shares of Common Stock, $.01
par value per share ("Parent Common Stock") and 81,250 shares of Series B
Convertible Preferred Stock, $.01 par value per share ("Parent Preferred
Stock") of Quantum Direct Corporation (the "Registrant") issuable in
connection with the mergers (together, the "Merger") contemplated by the
Agreement and Plan of Reorganization and Merger by and among ValueVision
International, Inc., National Media Corporation and V-L Holdings Corp. and
(ii) 1,625,000 shares of Parent Common Stock issuable upon conversion of the
Parent Preferred Stock, which includes the Registrant's good faith estimate
of the additional number of shares that may be issued upon conversion of the
Parent Preferred Stock as a result of antidilution adjustments with respect
to the Parent Preferred Stock.
(2) Estimated solely for the purpose of determining the registration fee in
accordance with Rule 457(f)(1). The proposed maximum aggregate offering
price with respect to Parent Common Stock is based upon the sum of (a) the
product of (i) $3.53 (the average of the high and low prices of ValueVision
Common Stock on March 11, 1998) times (ii) 26,780,778 (the sum of the number
of shares of ValueVision Common Stock outstanding) plus (b) the product of
(i) $2.25 (the average of the high and low prices of National Media Common
Stock on March 11, 1998) times (ii) 26,125,487 (the sum of the number of
shares of National Media Common Stock outstanding plus 750,000 shares of
National Media Common Stock issuable prior to the Effective Time upon the
exercise of certain options). The proposed maximum offering price with
respect to Parent Preferred Stock is based upon the sum of the product of
(i) $2.25 (the average of the high and low prices of National Media Common
Stock on March 11, 1998) times (ii) 1,625,000 (the estimated number of
shares of Parent Common Stock issuable upon exercise of Parent Preferred
Stock). The proposed maximum offering price per share is based upon the
proposed maximum aggregate offering price divided by the amount to be
registered.
(3) The registration fee for the securities registered hereby has been
calculated pursuant to Section 6(b) of the Securities Act of 1933, as
amended (the "Securities Act"). A fee of $30,303 was paid on January 23,
1998 pursuant to Rules 14a-6 and 0-11 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), in respect of the
Merger upon filing by ValueVision and National Media of a preliminary joint
proxy statement relating thereto. Pursuant to Rule 457(b) promulgated under
the Securities Act and Section 14(g)(2) of the Exchange Act and Rule 0-11
promulgated thereunder, the amount of such previously paid fee has been
credited against the registration fee payable in connection with this
filing. Pursuant to Rule 457(i), no registration fee for the 1,625,000
shares of Common Stock registered hereby for issuance upon conversion of the
Parent Preferred Stock is required.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"),
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
NMC LOGO
VALUE(R)
----------------------------------
VISION
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of National Media Corporation and ValueVision
International, Inc. have agreed on a merger designed to create one of the
premier worldwide marketers of retail merchandise through infomercials,
television home shopping, mail order, Internet and retail channels. The combined
company, Quantum Direct Corporation (formerly known as V-L Holdings Corp.) is
referred to throughout this document as Quantum Direct.
If the merger is completed, National Media stockholders will receive one
share of Quantum Direct common stock in exchange for each share of National
Media common stock that they own. ValueVision shareholders will receive 1.19
shares of Quantum Direct common stock in exchange for each share of ValueVision
common stock that they own. Based on closing prices on March 12, 1998, the
market value of one share of ValueVision common stock was $3.56 and one share of
National Media common stock was $2.19. We estimate that, following the merger,
National Media stockholders will own approximately 45% of the stock of Quantum
Direct and ValueVision shareholders will own approximately 55%.
The merger cannot be completed unless it is approved by (1) a majority of
the holders of National Media common stock and series B preferred stock, voting
together as a class, with the holders of the series B stock having 10 votes per
share held; and (2) a majority of the holders of ValueVision common stock. We
have scheduled special meetings for National Media stockholders and ValueVision
shareholders to vote on the merger. YOUR VOTE IS VERY IMPORTANT. At the special
meetings, you also will vote on Quantum Direct's 1998 Equity Participation Plan.
Whether or not you plan to attend a meeting, please take the time to vote
by completing and mailing the enclosed proxy card to us. If you sign, date and
mail your proxy card without indicating how you want to vote, your proxy will be
counted as a vote in favor of the merger and the 1998 Equity Participation Plan.
If you fail to return your card, the effect in most cases will be a vote against
the merger and the 1998 Equity Participation Plan.
The dates, times and places of the meetings are as follows:
For National Media Stockholders:
April 14, 1998
10:00 a.m. local time
The Union League
140 South Broad Street
Philadelphia, Pennsylvania 19102
For ValueVision Shareholders:
April 14, 1998
9:00 a.m. local time
Minneapolis Marriott Southwest
5801 Opus Parkway
Minnetonka, Minnesota 55343
This Joint Proxy Statement/Prospectus provides you with detailed
information about the proposed merger. In addition, you may obtain information
about our companies from documents that we have filed with the Securities and
Exchange Commission. We encourage you to read this entire document carefully.
We are mailing this Joint Proxy Statement/Prospectus and accompanying form
of proxy to the stockholders of National Media and the shareholders of
ValueVision on or about March 16, 1998.
FREDERICK S. HAMMER
Frederick S. Hammer
Chairman of the Board
National Media Corporation
ROBERT L. JOHANDER
Robert L. Johander
Chairman of the Board
ValueVision International, Inc.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORS HAVE APPROVED THE QUANTUM DIRECT COMMON STOCK TO BE ISSUED UNDER THIS
JOINT PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS JOINT PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Joint Proxy Statement/Prospectus dated March 13, 1998.
<PAGE> 3
NATIONAL MEDIA CORPORATION
ELEVEN PENN CENTER
SUITE 1100
1835 MARKET STREET
PHILADELPHIA, PENNSYLVANIA 19103
------------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 14, 1998
------------------------------
To the Stockholders of National Media Corporation ("National Media"):
A special meeting of stockholders of National Media will be held on April
14, 1998, at 10:00 a.m., at The Union League, 140 South Broad Street,
Philadelphia, Pennsylvania 19102, for the following purposes:
(a) To consider and vote upon a proposal to approve and adopt a merger
agreement dated as of January 5, 1998 by and among National Media,
ValueVision International, Inc. ("ValueVision") and Quantum Direct
Corporation (formerly known as V-L Holdings Corp.), a newly formed
corporation jointly owned by National Media and ValueVision ("Quantum
Direct"), pursuant to which, among other things, (i) National Media and
ValueVision will become wholly-owned subsidiaries of Quantum Direct;
(ii) each outstanding share of common stock of National Media will be
converted into the right to receive one share of common stock of
Quantum Direct; (iii) each outstanding share of series B preferred
stock of National Media will be converted into the right to receive one
share of series B preferred stock of Quantum Direct; and (iv) each
outstanding share of common stock of ValueVision will be converted into
the right to receive 1.19 shares of common stock of Quantum Direct;
(b) To consider and vote on a proposal to approve and adopt the 1998 Equity
Participation Plan of Quantum Direct; and
(c) To transact such other business as may properly come before the
National Media special meeting and any or all adjournments thereof.
THE NATIONAL MEDIA BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND
THE TRANSACTIONS THAT IT CONCERNS AND RECOMMENDS THAT STOCKHOLDERS VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. THE NATIONAL MEDIA BOARD OF
DIRECTORS ALSO RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF
THE 1998 EQUITY PARTICIPATION PLAN.
The merger agreement and other important matters are explained in the
accompanying Joint Proxy Statement/Prospectus, which you are urged to read
carefully. A copy of the merger agreement is attached as Annex A to the Joint
Proxy Statement/Prospectus. In addition, a copy of the 1998 Equity Participation
Plan is attached as Annex G to the Joint Proxy Statement/Prospectus.
The National Media Board of Directors has fixed the close of business on
February 26, 1998 as the record date for determining the stockholders entitled
to receive notice of and to vote at the National Media special meeting and at
any and all adjournments or postponements thereof.
Management welcomes your attendance at the National Media special meeting.
Whether or not you expect to attend the National Media special meeting in
person, however, you are requested to complete, sign, date and promptly return
the enclosed proxy in the accompanying postage-paid envelope. The prompt return
of your proxy will save expenses involved in further communication. Your proxy
will not affect your right to vote in person if you attend the National Media
special meeting. FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR FAILURE TO
VOTE IN PERSON AT THE NATIONAL MEDIA SPECIAL MEETING WILL HAVE THE SAME EFFECT
AS A VOTE AGAINST THE MERGER AGREEMENT AND THE 1998 EQUITY PARTICIPATION PLAN.
By:
BRIAN J. SISKO
Brian J. Sisko
Senior Vice President,
General Counsel and Secretary
Philadelphia, Pennsylvania
March 13, 1998
YOUR VOTE IS IMPORTANT.
TO VOTE YOUR SHARES, PLEASE SIGN, DATE AND COMPLETE THE ENCLOSED PROXY
AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
STOCKHOLDERS SHOULD NOT SEND STOCK
CERTIFICATES WITH THEIR PROXIES.
<PAGE> 4
VALUEVISION INTERNATIONAL, INC.
6740 SHADY OAK ROAD
EDEN PRAIRIE, MINNESOTA 55344-3433
------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 14, 1998
------------------------------
To the Shareholders of ValueVision International, Inc. ("ValueVision"):
A special meeting of shareholders of ValueVision will be held on April 14,
1998, at 9:00 a.m., at Minneapolis Marriott Southwest, 5801 Opus Parkway,
Minnetonka, Minnesota 55343, for the following purposes:
(a) To consider and vote upon a proposal to approve and adopt a merger
agreement dated as of January 5, 1998 by and among ValueVision,
National Media Corporation ("National Media") and Quantum Direct
Corporation (formerly known as V-L Holdings Corp.), a newly-formed
corporation jointly owned by ValueVision and National Media ("Quantum
Direct"), pursuant to which, among other things, (i) ValueVision and
National Media will become wholly-owned subsidiaries of Quantum Direct;
(ii) each outstanding share of common stock of ValueVision will be
converted into the right to receive 1.19 shares of common stock of
Quantum Direct; (iii) each outstanding share of common stock of
National Media will be converted into the right to receive one share of
common stock of Quantum Direct; and (iv) each outstanding share of
series B preferred stock of National Media will be converted into the
right to receive one share of series B preferred stock of Quantum
Direct;
(b) To consider and vote on a proposal to approve and adopt the 1998 Equity
Participation Plan of Quantum Direct; and
(c) To transact such other business as may properly come before the
ValueVision special meeting and any or all adjournments thereof.
THE VALUEVISION BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND
THE TRANSACTIONS THAT IT CONCERNS AND RECOMMENDS THAT SHAREHOLDERS VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. THE VALUEVISION BOARD OF
DIRECTORS ALSO RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL AND ADOPTION OF
THE 1998 EQUITY PARTICIPATION PLAN.
The merger agreement and other important matters are explained in the
accompanying Joint Proxy Statement/Prospectus, which you are urged to read
carefully. A copy of the merger agreement is attached as Annex A to the Joint
Proxy Statement/Prospectus. In addition, a copy of the 1998 Equity Participation
Plan is attached as Annex G to the Joint Proxy Statement/Prospectus.
The ValueVision Board of Directors has fixed the close of business on
February 26, 1998 as the record date for determining the shareholders entitled
to receive notice of and to vote at the ValueVision special meeting and at any
and all adjournments or postponements thereof.
Management welcomes your attendance at the ValueVision special meeting.
Whether or not you expect to attend the ValueVision special meeting in person,
however, you are requested to complete, sign, date and promptly return the
enclosed proxy in the accompanying postage-paid envelope. The prompt return of
your proxy will save expenses involved in further communication. Your proxy will
not affect your right to vote in person if you attend the ValueVision special
meeting. FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR FAILURE TO VOTE IN
PERSON AT THE VALUEVISION SPECIAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE
AGAINST THE MERGER AGREEMENT AND THE 1998 EQUITY PARTICIPATION PLAN.
By:
David T. Quinby
Vice President,
DAVID T. QUINBY
General Counsel and Secretary
Eden Prairie, Minnesota
March 13, 1998
YOUR VOTE IS IMPORTANT.
TO VOTE YOUR SHARES, PLEASE SIGN, DATE AND COMPLETE THE ENCLOSED PROXY
AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
SHAREHOLDERS SHOULD NOT SEND STOCK
CERTIFICATES WITH THEIR PROXIES.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY......................................... 4
RISK FACTORS.................................... 15
THE NATIONAL MEDIA SPECIAL MEETING.............. 25
General....................................... 25
Record Date and Voting........................ 25
Voting and Revocation of Proxies.............. 26
THE VALUEVISION SPECIAL MEETING................. 27
General....................................... 27
Record Date and Voting........................ 28
Voting and Revocation of Proxies.............. 28
THE MERGER...................................... 30
Background of the Merger...................... 30
Recommendations of the Boards of Directors of
National Media and ValueVision; Reasons for
the Merger.................................. 34
Opinion of Financial Advisor to National
Media....................................... 39
Opinion of Financial Advisor to ValueVision... 45
Interests Of Certain Persons In The Merger.... 49
Employment Agreements......................... 51
Accounting Treatment of the Merger............ 55
Certain Federal Regulatory Matters............ 56
Certain Federal Income Tax Consequences....... 56
Delisting and Deregistration of National Media
Common Stock and ValueVision Common Stock;
Listing of Quantum Direct Common Stock...... 58
Resales of Quantum Direct Common Stock Issued
in Connection with the Merger; Affiliate
Agreements.................................. 59
Appraisal Rights.............................. 59
Cautionary Statement Concerning
Forward-Looking Statements.................. 64
THE COMBINED COMPANY............................ 65
Business and Strategy......................... 65
Directors and Executive Officers.............. 66
Estimated Cost Savings and Synergies.......... 67
THE MERGER AGREEMENT............................ 68
The Merger.................................... 68
Conversion of Shares.......................... 68
Exchange Of Stock Certificates................ 69
Representations and Warranties................ 71
Certain Covenants............................. 72
Conditions to Obligations to Effect the
Merger...................................... 76
Termination; Termination Fees and Expenses.... 78
Amendment and Waiver.......................... 80
OTHER AGREEMENTS................................ 81
National Media Stock Option Agreement......... 81
ValueVision Stock Option Agreement............ 82
CERTAIN FINANCING ARRANGEMENTS.................. 84
COMPARATIVE MARKET PRICES AND DIVIDENDS......... 85
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
DATA.......................................... 87
ValueVision International, Inc. and National
Media Corporation Pro Forma Condensed
Consolidated Balance Sheet.................. 88
ValueVision International, Inc. and National
Media Corporation Pro Forma Condensed
Consolidated Statements of Operations....... 89
Notes to Pro Forma Condensed Consolidated
Financial Data.............................. 90
PRO FORMA SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT OF QUANTUM
DIRECT........................................ 93
DESCRIPTION OF QUANTUM DIRECT CAPITAL STOCK..... 94
General....................................... 94
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Quantum Direct Common Stock................... 94
Preferred Stock............................... 94
Preferred Share Purchase Rights............... 95
Certain Effects of Preferred Share Purchase
Rights...................................... 96
Prohibited Business Transactions.............. 96
Registrar and Transfer Agent.................. 96
COMPARISON OF RIGHTS OF HOLDERS OF NATIONAL
MEDIA COMMON STOCK AND VALUEVISION COMMON
STOCK AND QUANTUM DIRECT COMMON STOCK......... 97
Authorized Capital............................ 97
Number of Directors........................... 98
Committees of the Board....................... 98
Removal of Directors.......................... 99
Amendment to Bylaws........................... 99
Amendments to Certificate or Articles......... 100
Action by Written Consent of Shareholders..... 100
Indemnification............................... 100
Liability of Directors........................ 101
Shareholder Meetings.......................... 102
Mergers and Consolidations.................... 102
Business Combinations......................... 102
Other Anti-Takeover Provisions................ 103
Dissenters' Rights............................ 103
Foreign Ownership Limitations................. 104
PROPOSAL TO APPROVE QUANTUM DIRECT EQUITY
PARTICIPATION PLAN............................ 105
Quantum Direct Equity Participation Plan...... 105
Administration................................ 105
Eligibility................................... 105
Awards Under the Quantum Direct Equity
Participation Plan.......................... 106
Securities Laws and Federal Income Taxes...... 107
Recommendation of the Boards of Directors..... 108
STOCKHOLDER PROPOSALS........................... 108
LEGAL MATTERS................................... 109
EXPERTS......................................... 109
OTHER MATTERS................................... 109
WHERE YOU CAN FIND MORE INFORMATION............. 110
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE..................................... 110
ANNEX A -- AGREEMENT AND PLAN OF REORGANIZATION
AND MERGER.................................... A-1
ANNEX B -- LEHMAN BROTHERS, INC. FAIRNESS
OPINION....................................... B-1
ANNEX C -- BEAR, STEARNS & CO. INC. FAIRNESS
OPINION....................................... C-1
ANNEX D -- QUANTUM DIRECT RESTATED CERTIFICATE
OF INCORPORATION.............................. D-1
ANNEX E -- QUANTUM DIRECT AMENDED AND RESTATED
BYLAWS........................................ E-1
ANNEX F -- QUANTUM DIRECT SERIES B CONVERTIBLE
PREFERRED STOCK CERTIFICATE OF DESIGNATION.... F-1
ANNEX G -- 1998 EQUITY PARTICIPATION PLAN OF
QUANTUM DIRECT................................ G-1
ANNEX H -- SECTION 262 OF THE DELAWARE GENERAL
CORPORATION LAW............................... H-1
ANNEX I -- SECTIONS 302A.471 AND 302A.473 OF THE
MINNESOTA BUSINESS CORPORATION ACT............ I-1
ANNEX J -- STOCK OPTION AGREEMENT (NATIONAL
MEDIA)........................................ J-1
ANNEX K -- STOCK OPTION AGREEMENT
(VALUEVISION)................................. K-1
</TABLE>
i
<PAGE> 6
QUESTIONS AND ANSWERS
ABOUT THE NATIONAL MEDIA/VALUEVISION MERGER
Q: WHO ARE NATIONAL MEDIA AND VALUEVISION?
A: National Media is a publicly-held infomercial company which broadcasts more
than 3,000 half-hours of television programming each week, reaches 90% of
television homes in the United States, and brings its programming to more
than 370 million television households in more than 70 countries worldwide.
ValueVision is an electronic and print media direct marketing company and
the third-largest television home shopping network in the United States.
Q: WHY ARE NATIONAL MEDIA AND VALUEVISION PROPOSING TO MERGE?
A: Because we believe the combined companies will provide you, our
shareholders, with substantial benefits and enable us to better serve our
customers. The merger will create one of the largest worldwide marketers of
retail merchandise through infomercials, television home shopping, mail
order, Internet and retail channels. The merger is expected to provide
National Media with the necessary financial resources to market retail
merchandise throughout the world. National Media also plans to use
ValueVision's excess telemarketing, customer service and order fulfillment
capacity to improve National Media's U.S. operations and to make use of
ValueVision's 24-hour-per-day television home shopping channel and access to
television programming time as an outlet for some of its products. For
ValueVision, the merger matches its operational and financial resources with
significant new growth opportunities through international expansion, cost
efficiencies relating to advertising and the ability to purchase products in
greater volume at reduced costs.
Q: WHAT DO I NEED TO DO NOW?
A: Just mail your signed proxy card in the enclosed return envelope as soon as
possible, so that your shares may be represented at the special meetings.
The National Media and ValueVision special meetings will both take place on
April 14, 1998. The Boards of Directors of both National Media and
ValueVision recommend voting in favor of the proposed merger.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should follow the directions provided by your broker regarding how
to instruct your broker to vote your shares.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of three ways:
(1) First, you can send a written notice stating that you would like to
revoke your proxy.
(2) Second, you can complete and submit a new proxy card. If you choose
either of these two methods, you must submit your notice of revocation or
your new proxy card to National Media or ValueVision. If you are a National
Media stockholder, your submissions must be mailed to National Media at the
address on page 3. If you are a ValueVision shareholder, your submissions
must be mailed to ValueVision at the address on page 3.
(3) Third, you can attend the special meeting and vote in person. Simply
attending the meeting, however, will not revoke your proxy.
If you have instructed a broker to vote your shares, you must follow
directions received from your broker to change your vote.
1
<PAGE> 7
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, we will send you written instructions for
exchanging your stock certificates.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: National Media stockholders will receive one share of Quantum Direct common
stock in exchange for each share of National Media common stock held and one
share of Quantum Direct series B preferred stock in exchange for each share
of National Media series B preferred stock held.
ValueVision shareholders will receive 1.19 shares of Quantum Direct common
stock in exchange for each share of ValueVision common stock. We will not
issue fractional shares. ValueVision shareholders who would otherwise be
entitled to receive a fractional share instead will receive cash based on
the market value of the fractional share of Quantum Direct common stock at
the time of the merger.
Example:
- If you currently own 100 shares of National Media common stock or
series B preferred stock, then after the merger you will be entitled
to receive 100 shares of Quantum Direct common stock or series B
preferred stock, as the case may be.
- If you currently own 110 shares of ValueVision common stock, then
after the merger you will be entitled to receive 130 shares of Quantum
Direct common stock and a check for the market value of the 0.9
fractional share at the time of the merger.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working towards completing the merger as quickly as possible. We
expect to complete the merger within three business days following receipt
of all shareholder approvals which we expect to receive during the second
calendar quarter of 1998. In addition to the approval of (1) the holders of
a majority of National Media common stock and series B preferred stock,
voting together as a class, with the holders of the series B stock having 10
votes for each share held and (2) the holders of a majority of ValueVision
common stock, we must also obtain certain regulatory approvals.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER?
A: The opinion of Drinker Biddle & Reath LLP, tax counsel to National Media, is
that the merger will be tax-free to the holders of National Media common
stock and series B preferred stock for federal income tax purposes. The
opinion of Latham & Watkins, tax counsel to ValueVision, is that the merger
will be tax-free to the holders of ValueVision common stock for federal
income tax purposes, except to the extent those holders receive cash instead
of fractional shares. To review the tax consequences to the holders of
National Media common stock and series B preferred stock and ValueVision
common stock in greater detail, see page 56.
Q: WHAT OTHER MATTERS WILL BE VOTED ON AT THE SPECIAL MEETINGS?
A: In addition to the merger, holders of National Media common stock and series
B preferred stock and ValueVision common stock will be asked at their
special meetings to approve Quantum Direct's 1998 Equity Participation Plan,
which will be used following the merger to grant stock options, restricted
stock and other benefits to officers and employees of Quantum Direct and to
grant stock options to non-employee directors of Quantum Direct. We do not
expect to ask you to vote on any other matters at the special meetings.
2
<PAGE> 8
WHO CAN HELP ANSWER YOUR QUESTIONS
If you have more questions about the merger you should contact:
National Media Stockholders:
National Media Corporation
Eleven Penn Center, Suite 1100
1835 Market Street
Philadelphia, Pennsylvania 19103
Attention: John J. Sullivan
Telephone: (215) 988-4600
Telecopy: (215) 988-4900
ValueVision Shareholders:
ValueVision International, Inc.
6740 Shady Oak Road
Eden Prairie, Minnesota 55344-3433
Attention: Stuart R. Romenesko
Telephone: (612) 947-5207
Telecopy: (612) 947-0188
If you would like additional copies of the Joint Proxy Statement/Prospectus
or if you have questions about the merger, you can also contact:
Beacon Hill Partners, Inc.
90 Broad Street
20th Floor
New York, New York 10004
Telephone: (800) 755-5001
Telecopy: (212) 843-4384
3
<PAGE> 9
SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
merger fully and for a more complete description of the legal terms of the
merger, you should read this entire document carefully and the documents we have
referred you to. See "Where You Can Find More Information" on page 110.
THE COMPANIES
NATIONAL MEDIA CORPORATION
Eleven Penn Center
Suite 1100
1835 Market Street
Philadelphia, Pennsylvania 19103
Telephone: (215) 988-4600
Telecopy: (215) 988-4900
VALUEVISION INTERNATIONAL, INC.
6740 Shady Oak Road
Eden Prairie, Minnesota 55344-3433
Telephone: (612) 947-5207
Telecopy: (612) 947-0188
THE SPECIAL MEETINGS (PAGES 25 AND 27)
The National Media special meeting will be held at The Union League, 140
South Broad Street, Philadelphia, Pennsylvania 19102.
The ValueVision special meeting will be held at the Minneapolis Marriott
Southwest, 5801 Opus Parkway, Minnetonka, Minnesota 55343.
OUR RECOMMENDATIONS TO NATIONAL MEDIA STOCKHOLDERS:
The National Media board of directors believes that the merger is in its
stockholders' best interest and recommends that you vote FOR the proposals to:
(a) approve and adopt the merger agreement and the merger; and
(b) approve the 1998 Equity Participation Plan of Quantum Direct.
To review the reasons for the merger in greater detail, see pages 34
through 37.
OUR RECOMMENDATIONS TO VALUEVISION
SHAREHOLDERS:
The ValueVision board of directors believes that the merger is in its
shareholders' best interest and recommends that you vote FOR the proposals to:
(a) approve and adopt the merger agreement and the merger; and
(b) approve the 1998 Equity Participation Plan.
To review the reasons for the merger in greater detail, see pages 37
through 39.
VOTES REQUIRED
In order to approve the merger, (1) the holders of a majority of National
Media common stock and series B preferred stock, voting together as a class,
with the holders of the series B preferred stock having 10 votes per share held;
and (2) the holders of a majority of ValueVision common stock must vote in favor
of approving and adopting the merger agreement and the merger.
Directors and officers of National Media who collectively own, as of March
12, 1998, approximately 3% of the outstanding shares of National Media common
stock, and directors and officers of ValueVision who collectively own, as of
March 12, 1998, approximately 9% of the outstanding shares of ValueVision common
stock, have expressed their intent to vote for the merger.
Approval of the 1998 Equity Participation Plan will require the affirmative
vote of a majority of the shares voted on the matter at each of the special
meetings.
THE MERGER
THE MERGER AGREEMENT IS ATTACHED AS ANNEX A TO THIS JOINT PROXY STATEMENT/
PROSPECTUS. WE ENCOURAGE YOU TO READ THE MERGER AGREEMENT AS IT IS THE LEGAL
DOCUMENT THAT GOVERNS THE MERGER.
4
<PAGE> 10
OWNERSHIP OF QUANTUM DIRECT FOLLOWING THE MERGER
National Media stockholders will own approximately 45% of the stock of
Quantum Direct after the merger and ValueVision shareholders will own
approximately 55%.
BOARD OF DIRECTORS AND MANAGEMENT OF QUANTUM DIRECT FOLLOWING THE MERGER (SEE
PAGE 66)
If the merger is completed, the Quantum Direct Board of Directors will
initially consist of 10 members, half chosen by National Media and half chosen
by ValueVision.
- - Robert L. Johander, the current Chairman and Chief Executive Officer of
ValueVision, will become interim Chief Executive Officer and Co-Chairman of
the Board of Directors of Quantum Direct. Quantum Direct has initiated a
search to find a successor Chief Executive Officer to Mr. Johander.
- - Nicholas M. Jaksich, the current President and Chief Operating Officer of
ValueVision, will become the President and Chief Operating Officer of Quantum
Direct.
- - Frederick S. Hammer, the current Chairman of National Media, will become
Co-Chairman of the Board of Directors of Quantum Direct.
- - Stuart R. Romenesko, the current Chief Financial Officer of ValueVision, will
become the Chief Financial Officer of Quantum Direct.
Quantum Direct's Board of Directors will have a five member executive
committee which will initially be comprised of two National Media directors and
three ValueVision directors. Quantum Direct's executive committee will have all
the powers, duties and responsibilities of Quantum Direct's Board of Directors,
other than those actions that require a supermajority vote.
Under Quantum Direct's by-laws, a supermajority vote is generally required
in the case of:
- - mergers and other extraordinary transactions;
- - acquisitions or dispositions in excess of $15 million;
- - stock issuances or repurchases in excess of 5% of Quantum Direct's outstanding
capital stock;
- - removal or appointment of the Chief Executive Officer of Quantum Direct;
- - dissolutions or liquidations of Quantum Direct;
- - amendments to Quantum Direct's charter documents;
- - establishment of a new security; and
- - declaration of dividends.
OTHER INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER (SEE PAGE 49)
A number of officers and directors of National Media and ValueVision have
interests in the merger that are different from or in addition to your
interests. For example, three of National Media's officers, each of whom are
also directors, have employment agreements that entitle them to additional
compensation if their employment terminates after the merger. The aggregate
additional payments required to be paid by National Media under these employment
agreements is approximately $1.8 million. ValueVision will not be required to
make similar payments to its executive officers.
However, several ValueVision officers have employment agreements that
entitle them to increased compensation if the merger is completed.
A number of National Media and ValueVision officers and directors also have
stock options which will vest as a result of the merger. However, based upon the
prices of National Media and ValueVision common stock on December 31, 1997,
these options currently do not have any value. In addition, Robert N. Verratti,
the current President and Chief Executive Officer of National Media, and two
other senior officers of National Media, hold stock options which will be
repriced as a result of the merger. If the merger had been completed as of
December 31, 1997, the total equity value of such stock options would have been
approximately $2.3 million.
For the total value of benefits of each named executive officer and
director of National Media and ValueVision, see the table on page 54.
Please refer to pages 51 through 55 generally for more information
concerning employment arrangements, acceleration of stock options
5
<PAGE> 11
and restricted stock and other arrangements benefiting each company's officers
and directors.
CONDITIONS TO THE MERGER (SEE PAGE 76)
Before we can complete the merger, a number of conditions must be met,
including the following:
(a) the holders of (1) a majority of National Media common stock and
series B preferred stock, voting together as a class, with the holders
of series B stock having 10 votes per share and (2) a majority of
ValueVision common stock must approve the merger;
(b) the holders of no more than 5% of ValueVision's issued and outstanding
shares of common stock can have asserted the dissenter's appraisal
rights available under Minnesota law;
(c) the Federal Communications Commission must approve the merger;
(d) no governmental entity can have passed a law that prohibits the
merger;
(e) no court or other governmental entity can have entered an injunction
that prohibits the merger; and
(f) we must receive legal opinions regarding the tax consequences of the
merger.
Some of the conditions to the merger may be waived by the company entitled
to assert the condition. In the event either company waives any condition and
the waiver would have a material adverse effect on Quantum Direct or the holders
of Quantum Direct, National Media or ValueVision voting stock, then the consent
of the subject holders to the merger will be resolicited. See "The Merger
Agreement -- Conditions to Obligations to Effect the Merger."
REGULATORY APPROVALS (SEE PAGE 56)
Before we can complete the merger, we must receive certain regulatory
approvals, including approval from the Federal Communications Commission and the
Federal Trade Commission. On February 2, 1998, we received the requisite
approval of the Federal Trade Commission. Effective February 25, 1998, the
Federal Communications Commission granted approval for the transfer of control
of the FCC licenses to Quantum Direct. Absent timely challenges to such
approvals, these approvals shall become final orders on April 6, 1998.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 78)
National Media and ValueVision can agree to terminate the merger agreement
before the merger is completed, and either National Media or ValueVision can
terminate the merger agreement if any of the following occurs:
(a) the merger is not completed by June 1, 1998, but this deadline may be
extended to August 31, 1998 in certain limited circumstances relating
to obtaining Federal Communications Commission approval;
(b) a court or other governmental authority permanently prohibits the
merger;
(c) holders of a majority of the other party's voting securities do not
approve of the merger;
(d) a material adverse change occurs in the financial condition, results
of operations, business or properties of the other party;
(e) the other party fails to comply with any of its obligations under the
merger agreement or any of the other party's material representations
or warranties is inaccurate; or
(f) the board of directors of the other party:
(1) withdraws or modifies its approval or recommendation in favor of
the merger, or
(2) approves or recommends a significant transaction with a third
party.
TERMINATION FEES (SEE PAGE 78)
The merger agreement generally requires National Media or ValueVision to
pay to the other a termination fee of $5 million if the
merger agreement terminates under certain circumstances. See "The Merger
Agreement -- Termination; Termination Fees and Expenses."
RECIPROCAL STOCK OPTION AGREEMENTS (SEE PAGES 81 AND 82)
We have both signed stock option agreements under which we each
granted an option to
6
<PAGE> 12
the other party to purchase approximately 19.9% of its outstanding common stock.
The options may be exercised by National Media or ValueVision, as the case may
be, if:
- - certain events occur that entitle the party exercising the option to receive a
termination fee under the merger agreement; or
- - the merger agreement is terminated by National Media or ValueVision as a
result of the other party's breach of a material representation, warranty,
covenant or agreement contained in the merger agreement. Neither company may
exercise its option if it is in material breach of any of its material
representations, warranties, covenants or agreements contained in the stock
option agreements or the merger agreement.
The combined value of the termination fee and the stock option is
limited to $7.5 million. These stock option agreements may make it more
difficult and expensive for National Media or ValueVision to complete an
alternative transaction.
OPINIONS OF FINANCIAL ADVISORS (SEE PAGES 39 AND 45)
In deciding to approve the merger, each of our boards of directors
considered opinions from each of our financial advisors as to the fairness of
the exchange ratios from a financial point of view. National Media received an
opinion from its financial advisor, Lehman Brothers, Inc., and ValueVision
received an opinion from its financial advisor, Bear, Stearns & Co. Inc. These
opinions are attached as Annexes B and C to this Joint Proxy
Statement/Prospectus and we encourage you to read them.
The financial advisors performed several analyses in connection with
delivering their opinions. These analyses included reviewing National Media and
ValueVision historical stock prices, comparing National Media and ValueVision to
other selected publicly traded companies, and comparing the net asset values of
National Media, ValueVision and Quantum Direct. Each of the opinions make
assumptions regarding outstanding litigation of National Media and ValueVision.
See "The Merger -- Opinion of Financial Advisor to National Media" and
"-- Opinion of Financial Advisor to ValueVision." See also "Risk Factors
- -- Risks Relating to Business of Quantum Direct -- Litigation Involving
ValueVision" and "-- Litigation Involving National Media."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 56)
We have structured the merger so that no gain or loss will be recognized
for federal income tax purposes on the exchange of shares of National Media
common stock and series B preferred stock and ValueVision common stock for
shares of Quantum Direct common stock and series B preferred stock, as the case
may be, except to the extent holders of ValueVision common stock receive cash
instead of fractional shares. We will not complete the merger unless we receive
legal opinions regarding the tax consequences of the merger.
Tax matters are very complicated, and the tax consequences of the merger to
you will depend on the facts of your own situation. You should consult your tax
advisor for a full understanding of the tax consequences of the merger to you.
APPRAISAL RIGHTS (SEE PAGE 59)
Under Delaware law, National Media common stockholders have no right to an
appraisal of the value of their shares in connection with the merger.
However, under Delaware law, National Media series B preferred stockholders
have the right to an appraisal of the value of their shares of series B
preferred stock in connection with the merger. A discussion of these rights is
included on pages 59 through 62. We encourage National Media series B preferred
stockholders to read it.
Under Minnesota law, ValueVision shareholders have the right to an
appraisal of the value of their shares in connection with the merger. A
discussion of these rights is included on pages 62 through 64. We encourage
ValueVision shareholders to read it.
COMPARISON OF SHAREHOLDER RIGHTS (SEE PAGE 97)
Upon completion of the merger, National Media stockholders and
ValueVision shareholders will become Quantum Direct stockholders. As a result,
the rights of the holders of Quantum Direct capital stock will be governed by
the
7
<PAGE> 13
Restated Certificate of Incorporation, Series B Convertible Preferred Stock
Certificate of Designation and Amended and Restated Bylaws of Quantum Direct and
by Delaware law. See "Comparison of Rights of Holders of National Media Capital
Stock and ValueVision Common Stock and Quantum Direct Capital Stock" for a
summary of the material differences between the rights of holders of National
Media capital stock, ValueVision common stock and Quantum Direct capital stock.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE (SEE PAGE 64)
We have each made forward-looking statements in this document and in
documents that are incorporated by reference to this Joint Proxy
Statement/Prospectus that are subject to risks and uncertainties.
Forward-looking statements include the information concerning possible or
assumed future results of operations of National Media, ValueVision or Quantum
Direct, including the anticipated synergies from the merger. Also, when we use
words such as "believes," "expects," "anticipates" or similar expressions, we
are making forward-looking statements. National Media stockholders and
ValueVision shareholders should note that many factors could affect the future
financial results of Quantum Direct, National Media and ValueVision, and could
cause these results to differ materially from those expressed in our
forward-looking statements. These factors include the following:
- - operating, legal and regulatory risks;
- - economic, political and competitive forces affecting our businesses;
- - the risk that we are unable to achieve the revenue growth, cost savings and
synergies in the amounts and in the time frames contemplated; and
- - the risk that our analyses of these risks and forces could be incorrect
and/or that the strategies developed to address them could be unsuccessful.
COMPARATIVE MARKET PRICE INFORMATION (SEE PAGE 85)
Shares of National Media common stock are listed on the New York Stock
Exchange. Shares of ValueVision common stock are quoted on the Nasdaq National
Market. On January 2, 1998, the last full trading day prior to the public
announcement of the proposed merger, National Media common stock closed at $3.44
per share and ValueVision common stock closed at $3.88 per share. In the 30
trading days ended January 2, 1998, the average closing price of National Media
common stock was $3.52 and the average closing price of ValueVision common stock
was $3.77. On March 5, 1998, National Media common stock closed at $2.63 per
share and ValueVision common stock closed at $3.44 per share. We urge you to
obtain current market quotations.
LISTING OF QUANTUM DIRECT COMMON STOCK (SEE PAGE 58)
Quantum Direct intends to file an application to list the shares of Quantum
Direct common stock to be issued in the merger on a national exchange or market.
THE QUANTUM DIRECT EQUITY PARTICIPATION PLAN (SEE PAGE 105)
National Media stockholders and ValueVision shareholders also will vote on
the 1998 Equity Participation Plan, which will be used following the merger to
grant stock options, restricted stock and other benefits to officers and
employees and to grant stock options to non-employee directors of Quantum
Direct. The 1998 Equity Participation Plan is attached as Annex G to this Joint
Proxy Statement/Prospectus and we encourage you to read the plan in its
entirety.
8
<PAGE> 14
NATIONAL MEDIA SUMMARY HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND STATISTICAL DATA)
The financial data for the five years ended March 31, 1997 have been
derived from the audited consolidated financial statements of National Media and
the notes thereto which have been audited by Ernst & Young LLP, independent
auditors. Ernst & Young LLP's report on the consolidated financial statements
for the year ended March 31, 1997, which is incorporated by reference elsewhere
herein, includes an explanatory paragraph which describes an uncertainty about
National Media's ability to continue as a going concern.
The financial data as of and for the nine months ended December 31, 1996
and 1997 are derived from unaudited condensed consolidated financial statements
of National Media. The unaudited financial statements include all adjustments
consisting of normal recurring accruals, which National Media considers
necessary for a fair presentation of the financial position and the results of
operations for these periods. Operating results for the nine months ended
December 31, 1996 and 1997 are not necessarily indicative of the results that
may be expected for an entire year.
The summarized historical financial data should be read in conjunction with
the consolidated financial statements of National Media, the notes thereto, and
other financial information incorporated by reference into this Joint Proxy
Statement/Prospectus. See "Where You Can Find More Information," "Incorporation
Of Certain Documents By Reference," and "Pro Forma Condensed Consolidated
Financial Data" included in this Joint Proxy Statement/Prospectus. References
herein to a particular fiscal year of National Media shall mean the year ended
March 31 of the stated year (i.e. National Media's fiscal year ended March 31,
1997 shall be referred to herein as "fiscal 1997.")
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED MARCH 31, DECEMBER 31,
-------------------------------------------------------- --------------------
1993 1994(1) 1995 1996 1997(1) 1996(1) 1997(1)
---- ------- ---- ---- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues............ $141,997 $172,602 $176,167 $292,607 $358,179 $279,798 $186,635
Gross profit............ 28,762 21,317 26,601 54,891 30,071 42,318 9,031
Operating income
(loss)................ 6,706 (8,399) 317 21,119 (42,252) 6,607 (32,894)
Income (loss) before
income taxes.......... 6,335 (8,699) (372) 20,104 (43,794) 5,480 (35,193)
Net income (loss)....... 6,259 (8,699) (672) 16,579 (45,691) 3,560 (35,493)
Net income (loss) per
common share(2)....... $ 0.56 $ (0.72) $ (0.05) $ 1.08 $ (2.09) $ 0.17 $ (1.45)
Net income (loss) per
common share --
assuming
dilution(2)........... $ 0.48 $ (0.72) $ (0.05) $ 0.73 $ (2.09) $ 0.13 $ (1.45)
Weighted average number
of common shares
outstanding:(2)
Basic................. 11,237 12,078 14,024 15,411 21,905 21,415 24,736
Diluted............... 13,046 12,078 14,024 22,674 21,905 27,043 24,736
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF DECEMBER 31,
-------------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1996 1997
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $ 7,995 $ 1,377 $ 22,081 $ 38,722 $ 19,768 $ 67,829 $ 15,009
Total assets............ 46,771 47,475 64,143 116,548 165,632 192,829 150,990
Short-term debt......... 2,917 4,770 184 876 17,901 1,193 23,433
Long-term debt.......... 1,090 448 3,613 4,054 959 3,357 2,529
Shareholders' equity.... 17,630 10,571 26,625 56,462 88,560 137,950 74,805
</TABLE>
9
<PAGE> 15
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED MARCH 31, DECEMBER 31,
-------------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1996 1997
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Gross profit margin..... 20.3% 12.4% 15.1% 18.8% 8.4% 15.1% 4.8%
Operating margin(3)..... 5.2% 0.4% 3.3% 7.2% (11.1)% 2.8% (17.6)%
Current ratio(4)........ 1.29 1.04 1.69 1.72 1.27 2.38 1.22
EBITDA (as
defined)(5)........... $ 8,728 $ (6,771) $ 1,967 $ 23,218 $(32,286) $ 9,925 $(27,539)
Cash flows:
Operating............. $ (346) $ (2,220) $ 1,901 $ 5,530 $(45,567) $(28,129) $(19,500)
Investing............. $ 301 $ (1,815) $ (832) $ (4,820) $(10,925) $ (7,208) $ (780)
Financing............. $ (513) $ 2,816 $ 10,378 $ 7,402 $ 43,954 $ 29,002 $ 28,212
Country coverage(6)..... 19 32 42 60 70 65 70
</TABLE>
- -------------------------
(1) Fiscal 1994 included $5.3 million in expenses related to certain legal
settlements and associated fees, $1.0 million in relocation costs, and $1.8
million in anti-takeover and aborted stock offering costs. Fiscal 1997 and
the nine months ended December 31, 1996 and 1997 include the operating
results of certain of National Media's operating subsidiaries, namely
Positive Response Television, Inc. ("Positive Response") from May 17, 1996
forward and Prestige Marketing Limited and Suzanne Paul Holdings Pty Limited
from July 1, 1996 forward. In addition, the fiscal 1997 loss included
severance expense of $2.5 million, $8.7 million in provisions for inventory
obsolescence, $5.7 million in bad debt expense, $13.3 million in legal fees
and settlements, $6.9 million of amortization primarily related to the new
acquisitions, especially Positive Response, and Positive Response's
significant operating losses.
(2) In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share. Statement No.
128 replaces the previously reported primary and fully diluted earnings per
share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share is very
similar to the previously reported fully diluted earnings per share. All
earnings per share amounts for all periods have been presented, and where
necessary, restated to conform to the Statement No. 128 requirements.
Earnings per share is computed on the basis of the weighted average number
of shares outstanding during the periods presented. Earnings per
share-assuming dilution is computed on the basis of the weighted average
number of shares outstanding during the period plus the dilutive effect of
stock options, warrants and preferred stock.
(3) Operating margin represents operating income (loss) plus severance expense
of approximately $1.1 million for the nine months ended December 31, 1996
and $2.7 and $2.5 million for fiscal 1995 and 1997 and unusual charges of
approximately $725,000, $9.0 million and $2.9 million for fiscal 1993, 1994,
and 1995, respectively, divided by net revenues.
(4) Current ratio represents the ratio of total current assets to total current
liabilities.
(5) EBITDA (as defined) represents net income (loss) before interest income
(expense), income taxes and depreciation and amortization. EBITDA (as
defined) is viewed by management as an important alternative measure of cash
flows because it is commonly used by analysts and institutional investors in
analyzing the financial performance of companies in the broadcast and
television home shopping sectors. However, EBITDA (as defined) should not be
construed as an alternative to operating income or to cash flows from
operating activities (as determined in accordance with generally accepted
accounting principles) and should not be construed as an indication of
operating performance or as a measure of liquidity. EBITDA (as defined), as
presented, may not be comparable to similarly entitled measures reported by
other companies. EBITDA (as defined) includes severance expense of $2.5
million, legal settlements and fees of $13.3 million, provisions for bad
debts of $5.7 million and inventory obsolescence expense of $8.7 million for
fiscal 1997 and unusual charges of approximately $725,000, $9.0 million and
$2.9 million for fiscal 1993, 1994 and 1995, respectively. In addition, the
nine months ended December 31, 1996 included severance expense of $1.1
million and fiscal 1995 included severance expense of $2.7 million.
(6) Country coverage represents countries where National Media's infomercials
could be viewed by consumers as of the indicated periods.
10
<PAGE> 16
VALUEVISION SUMMARY HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND STATISTICAL DATA)
The financial data for the five years ended January 31, 1997 have been
derived from the audited consolidated financial statements of ValueVision. The
financial data as of and for the nine months ended October 31, 1996 and 1997
have been derived from the unaudited condensed consolidated financial statements
of ValueVision. In the opinion of ValueVision's management, all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial data for the nine months ended October 31, 1996
and 1997 have been reflected therein. Operating results for the nine months
ended October 31, 1996 and 1997 are not necessarily indicative of the results
that may be expected for a full year.
The summarized historical financial data should be read in conjunction with
the consolidated financial statements of ValueVision, and the notes thereto,
incorporated by reference into this Joint Proxy Statement/Prospectus. See "Where
You Can Find More Information," "Incorporation Of Certain Documents By
Reference," and "Pro Forma Condensed Consolidated Financial Data" included in
this Joint Proxy Statement/Prospectus. References herein to a particular fiscal
year of ValueVision shall mean the year ended January 31 of the stated year
(i.e. ValueVision's fiscal year ended January 31, 1997 shall be referred to as
"fiscal 1997.")
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED JANUARY 31, OCTOBER 31,
------------------------------------------------------ --------------------
1993 1994 1995 1996 1997(1) 1996(1) 1997(1)
---- ---- ---- ---- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales................. $14,545 $ 37,614 $53,931 $ 88,910 $159,478 $ 94,246 $157,887
Gross profit.............. 5,772 14,583 22,454 36,641 67,363 37,777 68,345
Operating loss............ (1,633) (1,745) (3,712) (766) (2,640) (2,238) (9,517)
Income (loss) before
income taxes and
extraordinary item...... (1,671) (1,414) (6,104) 11,120 29,690 28,658 30,462
Net income (loss)(2)...... (1,671) (1,925) (6,104) 11,020 18,090 17,208 18,632
Net income (loss) per
share................... $ (0.23) $ (0.12) $ (0.22) $ 0.38 $ 0.57 $ 0.55 $ 0.58
Weighted average number of
common and common
equivalent shares
outstanding............. 7,159 15,400 27,265 28,627 31,984 31,207 32,375
</TABLE>
<TABLE>
<CAPTION>
AS OF JANUARY 31, AS OF OCTOBER 31,
------------------------------------------------------ --------------------
1993 1994 1995 1996 1997 1996 1997
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and short-term
investments............. $ 852 $ 48,382 $26,659 $ 46,451 $ 52,859 $ 66,018 $ 45,719
Inventories, net.......... 1,943 7,226 7,833 8,889 28,109 24,586 27,286
Current assets............ 3,364 57,684 39,246 65,604 99,355 109,074 101,011
Property, equipment and
other assets............ 1,413 20,014 38,258 51,665 67,058 59,427 72,316
Total assets.............. 4,777 77,698 77,504 117,269 166,413 168,501 173,327
Current liabilities....... 3,277 7,533 10,124 13,519 37,724 38,211 39,556
Long-term obligations..... 322 147 578 447 1,443 306 1,086
Shareholders' equity...... 1,178 70,018 66,802 103,303 127,246 129,984 132,685
</TABLE>
11
<PAGE> 17
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED JANUARY 31, OCTOBER 31,
-------------------------------------------------- -------------------
1993 1994 1995 1996 1997(1) 1996(1) 1997(1)
---- ---- ---- ---- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Gross margin percentage..... 39.7% 38.8% 41.6% 41.2% 42.2% 40.1% 43.3%
Working capital............. $ 87 $ 50,151 $29,122 $ 52,085 $ 61,631 $ 70,864 $ 61,455
Current ratio............... 1.0 7.7 3.9 4.9 2.6 2.9 2.6
EBITDA (as defined)(2)(3)... $(1,425) $ (1,144) $(5,553) $ 13,790 $ 31,774 $ 29,788 $ 34,529
Cash flows:
Operating................. $(1,053) $ (3,345) $ (463) $ 2,304 $ (5,779) $ (7,799) $(22,278)
Investing................. $ (247) $(39,257) $(5,902) $(11,443) $ 19,222 $ 7,404 $ 22,370
Financing................. $ 1,645 $ 70,007 $ (235) $ 7,547 $ (4,888) $ (568) $(10,521)
</TABLE>
- -------------------------
(1) Results of operations for the year ended January 31, 1997 and nine months
ended October 31, 1996, included the operations of Montgomery Ward Direct,
Beautiful Images, Inc. and Catalog Ventures, Inc. which were acquired by
ValueVision in the second half of fiscal 1997.
(2) Net income (loss) and EBITDA (as defined) include pre-tax gains derived from
the sale of broadcast properties and other investments of $10.5 million and
$28.2 million in fiscal 1996 and 1997, respectively and $27.7 million and
$38.5 million for the nine months ended October 31, 1996 and 1997,
respectively.
(3) EBITDA (as defined) represents net income (loss) before interest income
(expense), income taxes and depreciation and amortization expense. EBITDA
(as defined) is viewed by management as an important alternative measure of
cash flows because it is commonly used by analysts and institutional
investors in analyzing the financial performance of companies in the
broadcast and television home shopping sectors. However, EBITDA (as defined)
should not be construed as an alternative to operating income or to cash
flows from operating activities (as determined in accordance with generally
accepted accounting principles) and should not be construed as an indication
of operating performance or as a measure of liquidity. EBITDA (as defined),
as presented, may not be comparable to similarly entitled measures reported
by other companies.
12
<PAGE> 18
VALUEVISION INTERNATIONAL, INC.
AND NATIONAL MEDIA CORPORATION
SELECTED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table summarizes certain unaudited selected pro forma
condensed consolidated financial data for Quantum Direct, giving effect to the
Merger as a purchase with ValueVision deemed the acquiror for accounting and
financial reporting purposes. The unaudited selected pro forma balance sheet
data as of October 31, 1997 assumes that the Merger had occurred on that date
and was prepared utilizing the unaudited balance sheets of ValueVision and
National Media as of October 31, 1997 and December 31, 1997, respectively. The
unaudited selected pro forma operating data for the year ended January 31, 1997
gives effect to the Merger as if it had occurred on February 1, 1996 and has
been prepared on the basis of the results of operations for the year ended
January 31, 1997 for ValueVision and for the year ended March 31, 1997 for
National Media. The unaudited selected pro forma operating data for the nine
months ended October 31, 1997 gives effect to the Merger as if it had occurred
on February 1, 1996 and has been prepared on the basis of the results of
operations for the nine months ended October 31, 1997 for ValueVision and for
the nine months ended December 31, 1997 for National Media.
The unaudited selected pro forma condensed consolidated financial data set
forth in the following table is derived from, and should be read in conjunction
with, the historical consolidated financial statements of ValueVision and
National Media, including the respective notes thereto, and the unaudited pro
forma condensed consolidated financial data, including the respective notes
thereto, incorporated by reference into or included in this Joint Proxy
Statement/Prospectus. See "Where You Can Find More Information," "Incorporation
Of Certain Documents By Reference," and "Pro Forma Condensed Consolidated
Financial Data." The following unaudited selected pro forma condensed
consolidated financial data is presented for informational purposes only and is
not necessarily indicative of the results that would have been achieved had the
Merger been consummated on the dates or prior to the periods presented.
<TABLE>
<CAPTION>
PRO FORMA
-------------------------------
YEAR ENDED NINE MONTHS ENDED
JANUARY 31, OCTOBER 31,
1997 1997
----------- -----------------
<S> <C> <C>
OPERATING DATA:
Net revenues.............................................. $517,657 $344,522
Direct and other operating costs.......................... 546,587 376,036
Depreciation and amortization expense..................... 16,200 11,228
Operating loss(1)(2)...................................... (45,130) (42,742)
Interest income (expense)................................. 2,370 (824)
Loss before provision (benefit) for income taxes.......... (14,342) (5,062)
Net loss(1)(2)............................................ (18,109) (7,162)
EBITDA (as defined)(1)(2)(3).............................. (512) 6,990
PER SHARE DATA:
VALUEVISION COMMON STOCK:
Net income (loss):
Historical.............................................. $ 0.57 $ 0.58
Pro forma consolidated(4)............................... (0.30) (0.11)
Book value:
Historical(5)........................................... 4.41 4.73
Pro forma consolidated(6)............................... 3.62
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
MARCH 31, DECEMBER 31,
1997 1997
---------- -----------------
<S> <C> <C>
NATIONAL MEDIA COMMON STOCK:
Net loss:
Historical.............................................. $ (2.09) $ (1.45)
Pro forma equivalent(4)................................. (0.30) (0.11)
Book value:
Historical(5)........................................... 3.68 2.95
Pro forma equivalent(6)................................. 3.62
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA AS OF
OCTOBER 31,
1997
-----------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and short-term investments........................................ $ 29,653
Working capital........................................................ 45,564
Total assets........................................................... 332,248
Total long-term debt................................................... 3,615
Shareholders' equity................................................... 212,421
</TABLE>
13
<PAGE> 19
NOTES TO SELECTED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL DATA (UNAUDITED)
(1) The unaudited pro forma operating loss, net loss and EBITDA (as defined)
does not reflect net annual estimated cost savings which management believes
are achievable within a year of consummation of the Merger. The sum of the
components of the estimated annualized cost savings exceed $12.0 million.
See "Pro Forma Condensed Consolidated Financial Data." The estimates of
potential cost savings resulting from the Merger contained in this Joint
Proxy Statement/Prospectus are forward-looking statements that involve risks
and uncertainties that could cause actual net annual cost savings to differ
materially from those projected. See "Cautionary Statement Concerning
Forward-Looking Statements."
(2) Pro forma operating loss, net loss and EBITDA (as defined) for National
Media for the year ended March 31, 1997 includes severance expense of $2.5
million, legal settlements and fees of $13.3 million, provision for bad
debts of $5.7 million and inventory obsolescence reserves of $8.7 million.
In addition, pro forma net loss and EBITDA (as defined) for ValueVision
includes pre-tax gains derived from the sale of broadcast properties and
other investments of $28.2 million and $38.5 million for the year ended
January 31, 1997 and nine months ended October 31, 1997, respectively.
(3) EBITDA (as defined) represents net income (loss) before interest income
(expense), income taxes and depreciation and amortization expense. EBITDA is
viewed by management as an important alternative measure of cash flows
because it is commonly used by analysts and institutional investors in
analyzing the financial performance of companies in the broadcast and
television home shopping sectors. However, EBITDA (as defined) should not be
construed as an alternative to operating income (loss) or to cash flows from
operating activities (as determined in accordance with generally accepted
accounting principles) and should not be construed as an indication of
Quantum Direct's future operating performance or as a measure of liquidity.
EBITDA (as defined), as presented, may not be comparable to similarly
entitled measures reported by other companies.
(4) The pro forma consolidated net loss per share consolidates the financial
information of ValueVision for the year ended January 31, 1997 and the nine
months ended October 31, 1997 with the financial information of National
Media for the year ended March 31, 1997 and for the nine months ended
December 31, 1997, respectively. The pro forma equivalent net loss per share
represents the pro forma consolidated net loss per share multiplied by the
1.0 to 1.0 National Media exchange ratio. See "Pro Forma Condensed
Consolidated Financial Data."
(5) Historical book value per share is calculated by dividing total common
shareholders' equity by total common shares outstanding.
(6) Pro forma consolidated book value per share is calculated by dividing total
pro forma common shareholders' equity by the sum of total outstanding shares
of National Media Common Stock (assuming the conversion of 5.0 shares of
National Media Series B Stock) adjusted for the 1.0 to 1.0 exchange ratio
plus the total outstanding shares of ValueVision Common Stock adjusted for
the 1.19 to 1.0 exchange ratio. Pro forma equivalent book value per share
represents the pro forma consolidated book value per share multiplied by the
1.0 to 1.0 National Media exchange ratio.
14
<PAGE> 20
RISK FACTORS
In addition to general investment risks and those factors set forth
throughout this document (including those set forth under the caption "The
Merger -- Cautionary Statement Concerning Forward-Looking Statements"), the
following risks should be considered by stockholders of National Media
Corporation ("National Media") and shareholders of ValueVision International,
Inc. ("ValueVision") in deciding whether to approve and adopt the Agreement and
Plan of Reorganization and Merger dated as of January 5, 1998 (the "Merger
Agreement"), pursuant to which National Media and ValueVision will become
subsidiaries of Quantum Direct Corporation, formerly known as V-L Holdings Corp.
("Quantum Direct"), a newly-formed corporation (the "Merger").
RISKS RELATING TO THE MERGER
Risks Associated With the Integration of the Two Companies. The Merger
involves the integration of two companies that have previously operated
independently. We cannot assure that the respective operations of National Media
and ValueVision will be integrated without encountering difficulties. Such
difficulties could arise from integrating different business strategies and
integrating personnel with disparate business backgrounds and corporate
cultures. Quantum Direct may also lose key National Media or ValueVision
personnel due to the Merger. The companies anticipate that net cost savings
within a year of consummation of the Merger will exceed $12.0 million annually.
One-time costs related to the Merger (consisting primarily of financial
advisors' fees and expenses, legal and accounting fees and expenses and
severance and other exit costs) and integration of operations are anticipated to
be approximately $9.5 million. We cannot assure whether and to what extent the
integration and consolidation will achieve increased revenues, cost savings
and/or operating synergies or that the costs of the Merger and integration of
operations will not be greater than anticipated.
Risks Associated With Fixed Exchange Ratios. Upon completion of the Merger,
each share of National Media common stock, par value $.01 per share ("National
Media Common Stock") will be converted into the right to receive one share (the
"National Media Exchange Ratio") of common stock, par value $.01 per share of
Quantum Direct ("Quantum Direct Common Stock"), each share of National Media
series B convertible preferred stock, par value $.01 per share, ("National Media
Series B Stock") will be converted into the right to receive one share of series
B convertible preferred stock, par value $.01 per share, of Quantum Direct
("Quantum Direct Series B Stock") and each share of ValueVision common stock,
par value $.01 per share ("ValueVision Common Stock"), will be converted into
the right to receive 1.19 shares (the "ValueVision Exchange Ratio" and together
with the National Media Exchange Ratio, the "Exchange Ratios") of Quantum Direct
Common Stock. The Exchange Ratios are fixed numbers and will not be adjusted,
even in the event of any increase or decrease in the market price of either
National Media Common Stock or ValueVision Common Stock. As a result, the
perceived and/or actual value of the shares of Quantum Direct Common Stock
received by holders of National Media Common Stock and ValueVision Common Stock
in the Merger could vary depending on fluctuations in the market prices of
National Media Common Stock or ValueVision Common Stock. Such fluctuations may
be the result of changes in the business, operations or prospects of National
Media, ValueVision or Quantum Direct, market assessments of the likelihood that
the Merger will be consummated, the timing thereof, and the prospects of
National Media, ValueVision or Quantum Direct, regulatory considerations,
general market and economic conditions and other factors. Accordingly, there can
be no assurance that the perceived and/or actual value of the Merger
consideration on the date of this Joint Proxy Statement/Prospectus will be the
same as on the date of the special meetings of the holders of the National Media
Common Stock and National Media Series B Stock and the holders of ValueVision
Common Stock or the effective time of the Merger.
Dependence On Key Personnel. National Media's and ValueVision's senior
executive officers have substantial experience and expertise and make
significant contributions to National Media's and ValueVision's growth and
success. In particular, National Media is highly dependent on certain of its
employees responsible for product development and production of its
infomercials. Further, the ultimate successful combination of National Media and
ValueVision after the Merger will be largely dependent on the leadership of the
new Chief Executive Officer of Quantum Direct who will succeed Mr. Johander.
Although a search has
15
<PAGE> 21
commenced to find a new Chief Executive Officer for Quantum Direct, no assurance
can be given if or when such replacement will be identified and hired. The
unexpected loss of the services of one or more of National Media's or
ValueVision's senior executive officers, or employees responsible for product
development and production of infomercials, as well as the inability to hire a
successor Chief Executive Officer, could have a material adverse effect on
Quantum Direct.
Repayment by National Media of Demand Note. Concurrently with the execution
of the Merger Agreement, ValueVision agreed to loan (the "Loan") to National
Media, pursuant to a Demand Promissory Note, up to an aggregate of $10.0 million
(the "Demand Note"), $7.0 million of which was advanced upon signing of the
Demand Note on January 5, 1998. The Demand Note is payable on the earlier of
January 1, 1999 and the happening of certain events. In the event the Merger is
consummated, the Loan will become an intercompany payable between ValueVision
and National Media. However, in the event the Merger is not consummated, there
can be no assurance that National Media will be able to repay the Loan when due.
Although ValueVision would then have the ability to convert the Loan into shares
of National Media, no assurance can be given that ValueVision will be able to
recover any portion of the Loan.
RISKS RELATING TO THE BUSINESS OF QUANTUM DIRECT
Recent Losses; Cash Flow. National Media has suffered net losses in three
of its last four fiscal years, including net losses of approximately $8.7
million in fiscal 1994, approximately $670,000 in fiscal 1995 and approximately
$45.7 million in fiscal 1997. National Media also reported a net loss of
approximately $35.5 million for the first nine months of fiscal 1998. Based upon
the deterioration which occurred in National Media's financial condition during
fiscal 1997 and the presence of certain other conditions, as of July 14, 1997 in
connection with their audit of National Media's financial statements, National
Media's independent auditors opined that substantial doubt existed as to
National Media's ability to continue as a going concern. During calendar year
1997, National Media also experienced, as a result of such losses and other
circumstances, significant cash flow difficulties. While National Media has
developed a business plan and implemented a number of programs designed to
reduce costs and return National Media to profitability, there can be no
assurance that such business plan adequately addresses the circumstances and
situations which resulted in National Media's performance in the periods
referred to above. Unless Quantum Direct adequately addresses the reasons for
National Media's recent results of operations, there can be no assurance as to
Quantum Direct's future results of operations.
ValueVision experienced operating losses of approximately $1.6 million,
$1.7 million, $3.7 million, $.8 million and $2.6 million in fiscal 1993, 1994,
1995, 1996 and 1997, respectively, and expects to report an operating loss for
fiscal 1998, and a net loss per share of $.23, $.12 and $.22, in fiscal 1993,
1994 and 1995, respectively, and net income per share of $.38 and $.57 in fiscal
1996 and 1997, respectively. Net profits of approximately $10.5 million and
$17.2 million and net profits per share of $.37 and $.54 in fiscal 1996 and
1997, respectively, were derived from gains on sale of broadcast stations and
other investments, which are not generally expected to occur in the future. In
addition, ValueVision recently restructured its relationship with Montgomery
Ward & Co., Incorporated ("Montgomery Ward") regarding ValueVision's catalog
operations. Although ValueVision's management anticipates that such
restructuring may result in a reduction of ValueVision's revenues, it has not
yet determined if such restructuring will have a material adverse impact on
ValueVision's results of operations or its financial position. There can be no
assurance that Quantum Direct will be able to achieve or maintain profitable
operations in this sector of Quantum Direct's business.
Leveraged Financial Position. Following consummation of the Merger,
National Media will have approximately $25.0 million of total indebtedness,
which will be collateralized by substantially all of the assets of National
Media and guaranteed by Quantum Direct and ValueVision. At various times during
the previous twelve months, National Media has been in technical default under
its loan agreements for such indebtedness. Following consummation of the Merger,
it is possible that National Media could once again become in default under such
loan agreements and that the lenders of such indebtedness will require payment
prior to their respective due dates.
16
<PAGE> 22
Sale of Television Stations to Paxson Communications Corporation. On
February 27, 1998, ValueVision sold to Paxson Communications Corporation ("PCC")
Television Station KBGE-TV, Channel 33, Bellevue, Washington along with two of
ValueVision's non-cable, low power television stations in Portland, Oregon and
Indianapolis, Indiana, and a minority interest (and option to acquire the
remaining interest) in an entity which has applied for a new station for
aggregate proceeds of approximately $24.5 million. An additional $10.0 million
(the "Additional Proceeds") will be payable by PCC to ValueVision if and when
Television Station KBGE-TV, currently operating at reduced power from downtown
Seattle, Washington, is able to relocate and increase its transmitter/antenna
power to a level at or near its licensed full power. There can be no assurance
that PCC will ever relocate the station and increase its transmitter/antenna
power to at or near its licensed full power so that PCC will be required to pay
the Additional Proceeds.
Nature Of The Infomercial Industry. The worldwide infomercial industry is
characterized by extreme competition for products, customers and media access.
Quantum Direct's future in this industry will depend in part on its access to,
and efficient management of, media time; the introduction of successful products
and the full exploitation of such products through not only direct marketing but
also traditional retail marketing and other channels of distribution; its
ability to enhance its product lines and support product marketing and sales
with efficient order fulfillment and customer services; and its ability to
successfully integrate the infomercial entities or businesses National Media has
or Quantum Direct may acquire into an efficient global company. The future
revenues of the infomercial business will depend substantially on Quantum
Direct's ability to create and maintain an effective, integrated organization to
develop, introduce and market products that (i) address changing consumer needs
on a timely basis; (ii) establish and maintain effective distribution channels
(infomercial and non-infomercial) for its products; and (iii) develop new
geographic markets while expanding established geographic markets. There can be
no assurance that Quantum Direct will be able to achieve these goals. While
National Media maintains an internal product development group responsible for
seeking out new products from third parties, there can be no assurance that
present and potential third party product providers will choose to market
products through Quantum Direct in the future. Delays in product introductions
and shortfalls in successful product introductions played a significant part in
National Media's fiscal 1997 and subsequent results of operations. Any
significant delays or reductions in product introductions in future periods
could have a material adverse effect on Quantum Direct's future results of
operations.
Competition. National Media competes directly with many companies which
generate sales from infomercials. National Media also competes with a large
number of consumer product companies and retailers which have substantially
greater financial, marketing and other resources than National Media, some of
which have recently commenced, or indicated their intent to conduct, direct
response marketing. National Media also competes with companies that market
imitations of National Media's products at substantially lower prices. Products
similar to National Media's products may be sold in department stores,
pharmacies, general merchandise stores and through magazines, newspapers, direct
mail advertising and catalogs.
As a general merchandise retailer, ValueVision competes for consumer
expenditures with other forms of retail businesses, including department,
discount, warehouse and specialty stores, mail order and catalog companies and
other direct sellers. The catalog and direct mail industry includes a wide
variety of specialty and general merchandise retailers and is both highly
fragmented and highly competitive. In addition, ValueVision competes with a wide
variety of department, discount and specialty stores which have greater
financial, distribution and marketing resources than ValueVision. The home
shopping industry is also highly competitive and is dominated by two companies,
Home Shopping Network, Inc. ("HSN") and QVC Network, Inc. ("QVC"). ValueVision's
television home shopping programming competes directly with HSN and QVC in
virtually all of ValueVision's markets. ValueVision is at a competitive
disadvantage in attracting viewers due to the fact that ValueVision's
programming is not carried full time in many of its markets, and that
ValueVision may have less desirable cable channels in many markets. QVC and HSN
are well-established and, similar to ValueVision, offer home shopping
programming through cable systems, owned or affiliated full and low power
television stations and directly to satellite dish owners and, accordingly,
reach a large percentage of United States television households. The television
home shopping industry is also experiencing vertical integration. QVC and HSN
are both affiliated with cable operators serving significant numbers of
subscribers nationwide. While the Cable Television Consumer Protection and
Competition Act of
17
<PAGE> 23
1992 includes provisions designed to prohibit coercion and discrimination in
favor of such affiliated programmers, the Federal Communications Commission
("FCC") has decided that it will rule on the scope and effect of these
provisions on a case-by-case basis.
Dependence On Foreign Sales. National Media had no sales outside the United
States and Canada prior to June 1991. National Media now markets products to
consumers in over 70 countries. In fiscal 1995, 1996 and 1997, approximately
45.7%, 51.6% and 47.4%, respectively, of National Media's net revenues were
derived from sales to customers outside the United States and Canada. Such sales
represented a 74.8% increase in fiscal 1995 from fiscal 1994, a 87.6% increase
in fiscal 1996 from fiscal 1995 and a 12.4% increase in fiscal 1997 from fiscal
1996. In fiscal 1995, 1996 and 1997, sales in Germany accounted for
approximately 13.0%, 7.0% and 5.7%, respectively, of National Media's net
revenues. In early 1994, National Media began airing its infomercials in Asia.
Sales of National Media's products in Asia accounted for approximately 19.8% of
National Media's net revenues for fiscal 1997. Sales of National Media's
products in Japan, which represented a significant portion of Asian revenues,
accounted for approximately 17.7% of National Media's net revenues for fiscal
1997. National Media experienced a decline of approximately 30.3% in its
Japanese net revenues in fiscal 1997 compared to fiscal 1996. During fiscal 1998
this trend has continued. In the first nine months of fiscal 1998, as compared
to the first nine months of fiscal 1997, National Media's revenues in its Asian
marketplace had declined by 49.4%, approximately 10.0% of which was attributable
to currency devaluation. National Media believes that the decline was also a
result of increased competition from traditional programming and other
infomercial competitors. National Media expects such revenues to continue to
decline in light of the economic downturn, including a significant devaluation
in currencies, and increased competition experienced in certain Asian countries
in the fourth calendar quarter of 1997 and in the first calendar quarter of
1998. Geographical expansion of sales activity results in increased working
capital requirements as a result of additional lead time for delivery of and
payment for product prior to receipt of sale proceeds. While National Media's
foreign operations have the advantage of airing infomercials that have already
proven successful in the United States market, as well as successful
infomercials produced by other international companies with limited media access
and distribution capabilities, there can be no assurance that Quantum Direct's
foreign infomercial operations will generate increases in net revenues.
Competition in National Media's international marketplace is increasing rapidly.
In addition, National Media is subject to many risks associated with doing
business abroad, including: adverse fluctuations in currency exchange rates;
transportation delays and interruptions; political and economic disruptions; the
imposition of tariffs and import and export controls; and increased customs or
local regulations. The occurrence of any one or more of the foregoing could have
a material adverse effect on Quantum Direct's results of operations.
Entering Into New Markets. As National Media enters into new markets,
including countries in Asia, Eastern Europe and South America, it is faced with
the uncertainty of never having done business in those commercial, political and
social settings. Accordingly, despite National Media's best efforts, its
likelihood of success in each new market which it enters is unpredictable for
reasons particular to each such market. It is also possible that, despite
National Media's apparently successful entrance into a new market, some
unforeseen circumstance could arise which would limit Quantum Direct's ability
to continue to do business or to expand in that new market.
Dependence On New Products; Unpredictable Market Life; Inventory Management
And Product Returns. National Media is dependent on its continuing ability to
develop or obtain rights to new products to supplement or replace existing
products as they mature through their product life cycles. Quantum Direct's
future results of operations will also be dependent upon its ability to
proactively manage its products through their life cycles. National Media's five
most successful products in each of fiscal 1995, 1996 and 1997 accounted for
approximately 54.0%, 46.0% and 41.2%, respectively, of National Media's net
revenues for such periods. For the most part, National Media's five most
successful products change from year to year. Revenues are dependent from year
to year on the introduction of new products. Even if Quantum Direct is able to
introduce new products, there can be no assurance that such new products will be
successful. Quantum Direct's future results of infomercial operations will
depend on its ability to spread its revenue (sales) stream over a larger number
of products in a given period and to more effectively exploit the full revenue
potential of each product it introduces through all levels of consumer
marketing, whether directly or through third parties.
18
<PAGE> 24
Product sales and results of infomercial operations for a given period will
depend upon, among other things, a positive customer response to Quantum
Direct's infomercials, its effective management of product inventory and the
stage in their life cycles of products sold during such period. Customer
response to infomercials depends on many variables, including, the appeal of the
products being marketed, the effectiveness of the infomercials, the availability
of competing products and the timing and frequency of air-time. There can be no
assurance that Quantum Direct's new products will receive market acceptance.
In the event Quantum Direct does not have an adequate supply of inventory,
as a result of production delays or shortages or inadequate inventory management
or cash flow difficulties, it may lose potential product sales. The ability of
Quantum Direct to maintain systems and procedures to more effectively manage its
inventory (and its infomercial airings), in the domestic as well as
international markets, is of critical importance to Quantum Direct's continuing
cash flow and results of operations. It is possible that, during a product's
life, unanticipated obsolescence of such product may occur or problems may arise
regarding regulatory, intellectual property, product liability or other issues
which may affect the continued viability of the product for sale despite the
fact that Quantum Direct may still hold a sizable inventory position in such
product. Most of Quantum Direct's products will have a limited market life. It
is therefore, extremely important that Quantum Direct fully realize the
potential of each successful product.
Historically, the majority of infomercial products generate their most
significant domestic revenue in their introductory year. Foreign revenues have
tended to have been generated more evenly over a somewhat longer period. In the
event the number of times an infomercial is broadcast within a market is
increased, the market life of such product in such market may decrease. There
can be no assurance that a product which has produced significant sales will
continue to produce significant, or any, sales in the future. As a result,
Quantum Direct will be dependent on its ability to adapt to market conditions
and competition as well as other factors which affect the life cycles of its
infomercial products and its ability to continue to identify and successfully
market new products. The failure of newly introduced products or significant
delays in the introduction of, or failure to introduce, new products would
adversely impact Quantum Direct's results of operations in terms of both lost
opportunity cost and actual loss of dollars invested.
Even when market acceptance for Quantum Direct's new products occurs,
Quantum Direct's results of operations may be adversely impacted by returns of
such products, either pursuant to Quantum Direct's warranties or otherwise.
While Quantum Direct will establish reserves against such returns which it
believes are adequate based upon historic levels and product mix, there can be
no assurance that Quantum Direct will not experience unexpectedly high levels of
returns (in excess of its reserves) for certain products. In the event that
returns exceed reserves, Quantum Direct's results of operations may be adversely
affected.
Dependence On Third Party Manufacturers And Service Providers. National
Media has historically been dependent on third party sources, both foreign and
domestic, to manufacture all of its products. National Media has also been
dependent to an extent upon a number of companies, in connection with National
Media's international operations, which serve to fulfill orders placed for
National Media's products and/or provide telemarketing services. The inability
of Quantum Direct, either temporarily or permanently, to obtain a timely supply
of product to fulfill sales orders for a specific product or to satisfy orders
for such product could have a material adverse effect on Quantum Direct's
results of operations. Moreover, because the time from this initial approval of
an infomercial product by Quantum Direct's product development personnel to the
first sale of such product is relatively short, Quantum Direct's ability to
cause its manufacturing sources to meet its production and order fulfillment
deadlines at reasonable costs and produce a high-quality product or render
quality service will be important to its business. There can be no assurance
that Quantum Direct will successfully manage this process in such a way to
maximize its sales of its products. Since Quantum Direct will often rely on
foreign manufacturers, it will have to allow longer lead times for products to
fulfill customer orders. Utilizing such foreign manufacturers will expose
Quantum Direct to the general risks of doing business abroad.
Dependence On Media Access; Effective Management Of Media Time. National
Media has historically been dependent on having access to media time to televise
its infomercials on cable networks, network affiliates and local broadcast
television stations. Quantum Direct's future results of infomercial operations
will
19
<PAGE> 25
also depend upon its ability to manage its media time, taking advantage of
long-term purchases where prudent and spot purchases where necessary. This media
management function must also include a meaningful coordination between
available infomercials and available media time. In the normal course of
business, National Media's media contracts will expire pursuant to their terms
from time to time. There can be no assurance that, as existing contracts expire,
Quantum Direct will be able to purchase or renew media time on a long-term basis
or at favorable price levels. National Media has historically purchased a
significant amount of its media time from cable television and satellite
networks. These cable television and satellite networks assemble programming for
transmission to multiple and local cable system operators. These cable system
operators may not be required to carry all of the network's programming.
National Media currently does not pay and is not paid for the "privilege" of
being broadcast by these operators. It is possible that, if demand for air time
grows, these operators will begin to charge Quantum Direct to continue
broadcasting National Media's infomercials or limit the amount of time available
for broadcast. Recently, larger multiple system operators have elected to change
their operations by selling "dark" time (i.e., the hours during which a system
does not broadcast its own programming). Significant increases in the cost of
media time or significant decreases in Quantum Direct's access to media time,
domestically or internationally, including, but not limited to, any failure to
renew or extend existing agreements, could have a material adverse effect on its
results of operations. There can also be no assurances that, even if Quantum
Direct secures media access, its programming will attract viewers or that its
products will enjoy consumer acceptance. In addition, periodically, due to world
events, media access and the number of persons viewing Quantum Direct's
infomercials in one or more markets may be substantially diminished. In such
circumstances, Quantum Direct's results of operations for such periods may be
adversely affected. In recent periods National Media has experienced an increase
in the demand by international media suppliers for fixed rates and/or for
minimum revenue guarantees, both of which will increase Quantum Direct's risk.
A significant portion of National Media's media time has historically been
purchased under contracts which are one year or greater in length. Whenever
Quantum Direct makes advance purchases and commitments to purchase media time,
if it does not manage such media time effectively, such failure could have a
material adverse effect on Quantum Direct's results of operations. In the event
Quantum Direct is unable to utilize all of the media time National Media has
acquired or Quantum Direct will in the future acquire, Quantum Direct will
attempt to arrange to sell a portion of its media time to others. There can be
no assurance, however, that Quantum Direct will be able to use all of its media
time or sell it to others or that, upon expiration of such long-term contracts,
Quantum Direct will be able to successfully negotiate extensions of such
contracts on terms favorable to Quantum Direct. The inability of Quantum Direct
to extend one or more of such contracts on reasonable terms as they expire could
have a material adverse effect on Quantum Direct's results of operations.
Potential Termination of Cable Time Purchase Agreements; Media Access;
Related Matters. ValueVision's television home shopping programming is
distributed primarily through purchased blocks of cable television time. Much of
ValueVision's cable television affiliation agreements are terminable by either
party upon 30 days, or less notice. Quantum Direct's television home shopping
business could be materially adversely affected in the event that a significant
number of ValueVision's cable television affiliation agreements are terminated
or not renewed on terms acceptable to Quantum Direct.
Potential Loss of Satellite Service. ValueVision's programming is presently
distributed, in the first instance, to cable systems, full and low power
television stations and satellite dish owners via a leased communications
satellite transponder. In the future, satellite service may be interrupted due
to a variety of circumstances beyond Quantum Direct's control, such as satellite
transponder failure, satellite fuel depletion, governmental action, preemption
by the satellite lessor and service failure. ValueVision does not have any
agreements for immediate backup satellite services, although it believes it
could arrange for such services from others. However, there can be no assurance
that Quantum Direct will be able to make any such arrangements and Quantum
Direct may incur substantial additional costs in entering into new arrangements.
Year 2000 Issues. The efficient operation of Quantum Direct's business will
be dependent in part on its computer hardware, software programs and operating
systems (collectively, "Programs and Systems"). These Programs and Systems will
be used in several key areas of Quantum Direct's business, including merchandise
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purchasing, inventory management, pricing, sales, shipping and financial
reporting, as well as in various administrative functions. National Media and
ValueVision have each been evaluating their respective Programs and Systems to
identify potential Year 2000 compliance issues. These actions are necessary to
ensure that the Programs and Systems will recognize and process the Year 2000
and beyond. It is anticipated that modification or replacement of some of
National Media's and ValueVision's Programs and Systems will be necessary to
make such Programs and Systems Year 2000 compliant. National Media and
ValueVision are each also communicating with suppliers, financial institutions
and others to coordinate Year 2000 conversion.
Based on present information, National Media and ValueVision each believes
that it will be able to achieve such Year 2000 compliance through a combination
of modification of some existing Programs and Systems, and the replacement of
other Programs and Systems with new Programs and Systems that are already Year
2000 compliant. However, no assurance can be given that these efforts will be
successful. Neither National Media nor ValueVision expects that the expenses and
capital expenditures associated with achieving Year 2000 compliance will have a
material effect on its financial condition or results of operations.
Litigation Involving ValueVision. On December 17, 1997, Time Warner
Entertainment Company, L.P., d/b/a Time Warner Cable ("Time Warner Cable"),
filed a complaint (the "Complaint") in the Connecticut Superior Court, Judicial
District of Ansonia/Milford at Milford (the "Court"), against Bridgeways
Communications Corporation ("Bridgeways"), and ValueVision, alleging, among
other things, tortious interference with contractual and business relations and
breach of contract. According to the Complaint, Bridgeways and Time Warner Cable
have been in dispute since 1993 regarding Bridgeways' attempt to assert
"must-carry" rights with respect to television station WHAI-TV in the New York
City Area of Dominant Influence. ValueVision purchased television station
WHAI-TV from Bridgeways in 1994 and subsequently sold it in 1996. ValueVision
and Time Warner Cable entered into a cable affiliation agreement in 1995 (the
"Time Warner Cable Agreement"), pursuant to which Value Vision agreed not to
assert "must-carry" rights with respect to television station WHAI-TV and
pursuant to which ValueVision's programming is currently carried by Time Warner
Cable in approximately 4.4 million full time equivalent cable households out of
ValueVision's total distribution of approximately 11.7 million full time
equivalent cable households. Time Warner Cable seeks in the Complaint to receive
unspecified damages from ValueVision and to have the Court declare the Time
Warner Cable Agreement null and void. Responsive pleadings have not yet been
filed in this matter. ValueVision believes the Complaint is totally without
merit and it intends to vigorously defend itself. However, if Time Warner Cable
were to prevail under the Complaint, such an outcome could have a material
adverse effect on Quantum Direct's financial position and/or costs of operations
to the extent it jeopardized access to, or increased the cost of access to,
these 4.4 million full-time equivalent households, which represent approximately
39% of the full-time equivalent households to which ValueVision currently has
access.
Litigation Involving National Media. The infomercial industry has
historically been very litigious and National Media in recent years has been
involved in significant legal proceedings and has incurred significant charges
in prior periods related to such litigation. Abbreviated information regarding
the status of current material pending litigation involving National Media is
set forth below. However, as it pertains to previously reported matters, such
information does not purport to be complete and is qualified in its entirety by
the detailed description of the legal and regulatory proceedings set forth in
the reports filed by National Media pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act") and incorporated by reference herein. Such
descriptions variously include information relating to the status of the
proceedings and National Media's evaluation of the claims made against it.
Certain of such previously reported matters have been resolved substantially in
accordance with the terms set forth in such prior disclosure. In addition,
National Media consummated the acquisition of DirectAmerica Corporation
("DirectAmerica") in October 1995 and the acquisition of Positive Response
Television, Inc. ("Positive Response") in May 1996. As a result of these
acquisitions, all liabilities of DirectAmerica and Positive Response became
liabilities of the respective wholly-owned subsidiary of National Media into
which each of DirectAmerica and Positive Response was merged. National Media
also acquired Prestige Marketing Limited ("Prestige") and Suzanne Paul Holdings
Pty Limited ("Suzanne Paul") in July 1996, including all of their respective
liabilities.
WWOR Litigation. In March 1997, WWOR-TV filed a breach of contract action
in the United States District Court for New Jersey against one of National
Media's operating subsidiaries alleging that the
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subsidiary wrongfully terminated a contract for the purchase of media time,
seeking in excess of $1 million in compensatory damages. National Media is
contesting the action. At this stage, National Media cannot predict the outcome
of this matter; however, even if plaintiffs were to succeed on all of their
claims, National Media does not believe that such result would have a material
adverse impact on Quantum Direct's financial condition or results of operations.
Parkin. In early October 1997, John Parkin, an on air personality appearing
in certain of National Media's infomercials, brought an action for injunctive
relief and unspecified damages in the United States District Court for the
Eastern District of Pennsylvania, alleging principally breach of contract and
intellectual property based claims. Following court hearings, Mr. Parkin's
claims for injunctive relief were dismissed. While at this stage it is not
possible to predict the outcome of this matter, National Media believes that any
resolution of this matter will not have a material adverse effect on Quantum
Direct's results of operations or financial condition.
Positive Response Shareholders' California Class Action. On May 1, 1995,
prior to the acquisition of Positive Response by National Media, a purported
class action suit was filed in the United States District Court for the Central
District of California against Positive Response and its principal executive
officers alleging that Positive Response made false and misleading statements in
its public filings, press releases and other public statements with respect to
its business and financial prospects. The suit was filed on behalf of all
persons who purchased Positive Response common stock during the period from
January 4, 1995 to April 28, 1995. The suit sought unspecified compensatory
damages and other equitable relief. On or about September 25, 1995, the
plaintiffs filed a second amended complaint which added additional officers as
defendants and attempted to set forth new facts to support plaintiff's
entitlement to legal relief. National Media reached an agreement in principle to
settle this action in fiscal year 1997 which provides for the payment of
$550,000 to the class, 66% of which is to be paid by Positive Response's
insurance carrier. National Media recorded a charge of $187,000 during fiscal
1997 in connection with this matter, reflecting its portion of such settlement.
Such settlement is contingent upon final court approval.
Suntiger. In late March 1997, Suntiger, Inc., a distributor of sunglasses,
filed suit against Positive Response and certain other parties alleging patent
infringement. National Media has reached a settlement with the plaintiffs
involving a going forward business relationship which will not have a material
adverse effect on Quantum Direct's financial condition or results of operations.
Regulatory Matters. The acquisition, ownership and operation of television
stations are subject to extensive FCC regulation under the Communications Act of
1934, as amended (the "Communications Act"). FCC approval of the Merger is
required and is a condition to the closing. No assurance can be given that such
approval will be granted. In addition, FCC approval is required before
ValueVision can acquire or sell any full or low power television station. There
can be no assurance of FCC approval of ValueVision's acquisition or disposition
of any full or low power television stations.
The maximum rates that may be charged under the FCC's "leased access" rules
as currently implemented result in prohibitively high leased access rates.
ValueVision has filed an appeal regarding the FCC's implementation of the leased
access rules and is scheduled to present its oral argument in March 1998. No
assurance can be given regarding the outcome or timing of the decision on such
appeal. Further, in the event ValueVision is successful with its appeal, no
assurance can be given that new rates will be implemented by the FCC or that
such new rates would be favorable enough to have a significant favorable impact
on Quantum Direct, or that such new rates will be implemented in the near term.
Without a significant reduction in the maximum rates chargeable under leased
access, Quantum Direct's ability to secure additional cable distribution is
likely to be limited.
The direct marketing industry is regulated by the Federal Trade Commission
(the "FTC"), the United States Post Office, the Consumer Product Safety
Commission (the "CPSC"), the FCC, the Food and Drug Administration, various
States' Attorneys General and other state and local consumer protection and
health agencies. The FTC directly regulates marketers of products, such as
National Media and ValueVision, credit card companies which process customer
orders and others involved in the infomercial, home shopping catalog and direct
marketing industries.
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Quantum Direct's marketing activities and/or products have been and will
continue to be subject to the scrutiny of each of the aforementioned regulatory
agencies. An adverse determination or extended investigation by any of these
agencies could have a material adverse effect on Quantum Direct. Moreover, the
domestic and international regulatory environments in which Quantum Direct will
operate are subject to change from time to time. It is possible that changes in
the regulations to which Quantum Direct will be subject might have a material
adverse effect on Quantum Direct's business or results of operations. As a
result of prior settlements with the FTC, National Media has agreed to two
consent orders. Prior to National Media's acquisition of Positive Response,
Positive Response and its Chief Executive Officer, Michael S. Levey, also agreed
to a consent order with the FTC. Among other things, such consent orders require
National Media, Positive Response and Mr. Levey to submit compliance reports to
the FTC staff. National Media, Positive Response and Mr. Levey submitted
compliance reports as well as additional information requested by the FTC staff.
In June 1996, National Media received a request from the FTC for additional
information regarding certain of National Media's infomercials in order to
determine whether National Media was operating in compliance with the consent
orders referred to above. National Media responded to such request. The FTC
later advised National Media that it believed National Media had violated one of
the consent orders by allegedly failing to substantiate certain claims made in
one of its infomercials which it no longer airs in the United States. National
Media, which is now indemnified against damages sustained as a result of any
action taken by the FTC in connection with such infomercials, has provided
information to the FTC to demonstrate substantiation. If National Media's
substantiation is deemed to be insufficient by the FTC, the FTC has a variety of
enforcement mechanisms available to it, including, but not limited to, monetary
penalties. While no assurances can be given, especially given the applicable
indemnification, National Media does not believe that any remedies to which it
may become subject will have a material adverse effect on Quantum Direct's
results of operations or financial condition. National Media and Positive
Response have, pursuant to the terms of the above-referenced consent orders,
notified the FTC of the Merger. The FTC may request additional information about
the Merger.
In addition, in Spring 1997, in accordance with applicable regulations,
National Media notified the CPSC of breakages which were occurring in its
Fitness Strider product. National Media also notified the CPSC of its
replacement of certain parts of the product with upgraded components. The CPSC
reviewed National Media's testing results in order to assess the adequacy of
National Media's upgraded components. The CPSC also undertook its own testing of
the product and, in November 1997, informed National Media that the CPSC
compliance staff had made a preliminary determination that the Fitness Strider
product and the upgraded component present a substantial product hazard, as
defined under applicable law. National Media and the CPSC staff are discussing
voluntary action to address the CPSC's concerns, including replacement of the
affected components. At present, management of National Media does not
anticipate that any action agreed upon, or action required by the CPSC, will
have any material adverse impact on Quantum Direct's financial condition or
results of operations. National Media has also been contacted by Australian
consumer protection regulatory authorities regarding the safety and fitness of
the Fitness Strider product and an exercise rider product marketed only in
Australia and New Zealand. At this point, National Media cannot predict whether
the outcome of these matters regarding the Fitness Strider will have a material
adverse impact upon National Media's financial condition or results of
operations.
Quantum Direct's international business will be subject to the laws and
regulations of England, the European Union, Japan and other countries in which
Quantum Direct will sell its products, including, but not limited to, the
various consumer and health protection laws and regulations in the territories
in which its programming is broadcast, where applicable. If any significant
actions were brought against Quantum Direct or any of its subsidiaries in
connection with a breach of such laws or regulations, including the imposition
of fines or other penalties, or against one of the entities through which
Quantum Direct will obtain a significant portion of its media access, Quantum
Direct could be materially adversely affected. There can be no assurance that
changes in the laws and regulations of any territory which forms a significant
portion of Quantum Direct's market will not adversely affect Quantum Direct's
financial condition or results of operations.
Product Liability Claims. Products sold by Quantum Direct may expose it to
potential liability from claims by users of such products, subject to Quantum
Direct's rights, in certain instances, to indemnification
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against such liability from the manufacturers of such products. National Media
and ValueVision have instead generally required the manufacturers of these
products to carry product liability insurance, although in certain instances
where a limited quantity of products are purchased from non-U.S. vendors, the
vendor may not be formally required to carry product liability insurance.
Certain of such vendors, however, may in fact maintain such insurance. There can
be no assurance that such parties will maintain this insurance or that this
coverage will be adequate to cover all potential claims, including coverage in
amounts which it believes to be adequate. There can be no assurance that Quantum
Direct will be able to maintain such coverage or obtain additional coverage on
acceptable terms, or that such insurance will provide adequate coverage against
all potential claims.
Seasonality. The television home shopping, mail order and infomercial
businesses in general are somewhat seasonal, with the primary selling season
occurring during the first and last quarters of the calendar year. These
businesses are also sensitive to general economic conditions and business
conditions affecting consumer spending.
Limitation on Utilization of NOLs. At December 31, 1997, National Media had
net operating loss carryovers ("NOLs") in excess of $60.0 million, which NOLs
are due to expire in the years 2009 through 2012. These NOLs may be used to
offset future taxable income through 2012 and thereby reduce or eliminate
federal income taxes otherwise payable. The Internal Revenue Code of 1986, as
amended (the "Code"), imposes significant limitations on the utilization of NOLs
in the event of an "ownership change" as defined in section 382 of the Code (the
"Section 382 Limitation"). The Section 382 Limitation is an annual limitation on
the amount of pre-ownership change NOLs that a corporation generally may use to
offset its post-ownership change income. Any portion of the Section 382
Limitation that is not used in one year will increase the Section 382 Limitation
for the following year. The Section 382 Limitation is calculated by multiplying
the value of a corporation's stock immediately before an ownership change by the
Federal long-term tax exempt rate (which rate is currently 5.10%). The Merger
will cause an "ownership change" of National Media and will, as a result, limit
the amount of NOLs that National Media may use to offset its separately
generated future taxable income following the Merger. National Media estimates
that the annual Section 382 Limitation would be approximately $4.0 million as a
result of the Merger. Consequently, there can be no assurance that Quantum
Direct will fully utilize the tax benefits associated with National Media's NOLs
before their expiration. See "Notes to Pro Forma Condensed Consolidated
Financial Data."
Estimates of Cost Savings and Synergies. The estimates of cost savings and
synergies included elsewhere in this Joint Proxy Statement/Prospectus are
inherently subject to significant uncertainties and contingencies, many of which
are beyond the control of ValueVision, National Media and Quantum Direct. There
is no assurance that they will be achieved within a specific time frame and
actual savings and synergies may vary materially from those estimated. The
inclusion of such estimates herein should not be regarded as an indication that
ValueVision, National Media, Quantum Direct or any other person considers such
estimates an accurate prediction of future events. See "Cautionary Statement
Concerning Forward-Looking Statements."
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THE NATIONAL MEDIA SPECIAL MEETING
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to stockholders of
National Media as part of the solicitation of proxies by the National Media
Board of Directors for use at a Special Meeting of Stockholders of National
Media (the "National Media Special Meeting") to be held on April 14, 1998 at
10:00 a.m. local time, at The Union League, 140 South Broad Street,
Philadelphia, Pennsylvania 19102. This Joint Proxy Statement/Prospectus and the
enclosed form of proxy are first being mailed to stockholders of National Media
on or about March 16, 1998.
The purpose of the National Media Special Meeting is:
(a) to consider and vote on a proposal to approve and adopt the Merger
Agreement pursuant to which, among other things, (i) a newly-formed
wholly-owned subsidiary of Quantum Direct ("National Media Sub") will merge
with and into National Media (the "National Media Merger"), with National
Media surviving and becoming a wholly-owned subsidiary of Quantum Direct,
(ii) each issued and outstanding share of National Media Common Stock, will
be converted into the right to receive one fully paid and nonassessable
share of Quantum Direct Common Stock, (iii) each issued and outstanding
share of National Media Series B Stock will be converted into the right to
receive one share of Quantum Direct Series B Stock, (iv) a second
newly-formed wholly-owned subsidiary of Quantum Direct ("ValueVision Sub")
will merge with and into ValueVision (the "ValueVision Merger," and
together with the National Media Merger, the "Merger") with ValueVision
surviving and becoming a wholly-owned subsidiary of Quantum Direct and (v)
each issued and outstanding share of ValueVision Common Stock, will be
converted into the right to receive 1.19 fully paid and nonassessable
shares of Quantum Direct Common Stock;
(b) to consider and vote on a proposal to approve and adopt a plan to
permit the grant of stock options to non-employee directors of Quantum
Direct and stock options and other stock awards to employees and
consultants of Quantum Direct and its subsidiaries under the 1998 Equity
Participation Plan of Quantum Direct (the "Quantum Direct Equity
Participation Plan"); and
(c) to transact such other business that may properly come before the
National Media Special Meeting.
Each copy of this Joint Proxy Statement/Prospectus mailed to holders of
National Media Common Stock and National Media Series B Stock is accompanied by
a form of proxy for use at the National Media Special Meeting.
The National Media Board of Directors recommends that stockholders vote FOR
the approval and adoption of the Merger Agreement and the Quantum Direct Equity
Participation Plan.
RECORD DATE AND VOTING
National Media has fixed the close of business on February 26, 1998 as the
record date for the determination of the National Media stockholders entitled to
notice of and to vote at the National Media Special Meeting. Accordingly, only
holders of record of National Media Common Stock and holders of National Media
Series B Stock on the record date will be entitled to notice of and to vote at
the National Media Special Meeting. As of February 26, 1998, there were
outstanding and entitled to vote 25,375,487 shares of National Media Common
Stock and 81,250 shares of National Media Series B Stock (constituting all of
the voting stock of National Media), which shares were held by approximately 824
holders of record. Each holder of record of shares of National Media Common
Stock on the record date is entitled to one vote per share and each holder of
record of shares of National Media Series B Stock on the record date is entitled
to 10 votes per share, which, in either case, may be cast either in person or by
properly executed proxy, at the National Media Special Meeting. The presence, in
person or by properly executed proxy, of the holders of a majority of the
outstanding shares of National Media Common Stock and National Media Series B
Stock
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entitled to vote at the National Media Special Meeting is necessary to
constitute a quorum at the National Media Special Meeting.
The approval of the Merger Agreement and the transactions contemplated
thereby will require the affirmative vote of the holders of a majority of the
shares of National Media Common Stock and National Media Series B Stock, voting
together as a class with the holders of National Media Series B Stock being
entitled to 10 votes per share held, outstanding on the record date. The
approval of the Quantum Direct Equity Participation Plan will require the
affirmative vote of the holders of shares of National Media Common Stock and
National Media Series B Stock, voting together as a class, with the holders of
National Media Series B Stock being entitled to 10 votes per share held,
representing a majority of the votes cast on the matter, provided that the total
votes cast on the matter represent over 50% in interest of all shares entitled
to vote on the matter.
Shares of National Media Common Stock and Series B Stock represented in
person or by proxy will be counted for the purposes of determining whether a
quorum is present at the National Media Special Meeting. Shares which abstain
from voting as to a particular matter will be treated as shares that are present
and entitled to vote at the National Media Special Meeting for purposes of
determining whether a quorum exists, but will not be counted as votes cast on
such matter. If a broker or nominee holding stock in "street name" indicates on
a proxy that it does not have discretionary authority to vote as to a particular
matter ("broker non-votes"), those shares will be treated as present and
entitled to vote at the National Media Special Meeting for purposes of
determining whether a quorum exists, but will not be counted as votes cast on
such matter. Accordingly, abstentions and broker non-votes will have the same
effect as votes against approval of the Merger Agreement, and may have the same
effect as votes against approval of the Quantum Direct Equity Participation Plan
if they result in a failure of the total votes cast on the matter to represent
over 50% in interest of all shares of National Media capital stock entitled to
vote on the matter.
As of March 12, 1998, directors and executive officers of National Media
and their affiliates may be deemed to be beneficial owners of approximately 3.0%
of the outstanding shares of National Media Common Stock and National Media
Series B Stock and have expressed their intent to vote their shares in favor of
the Merger Agreement.
VOTING AND REVOCATION OF PROXIES
All shares of National Media Common Stock and National Media Series B Stock
which are entitled to vote and are represented at the National Media Special
Meeting by properly executed proxies received prior to or at such meeting, and
not revoked, will be voted at such Meeting in accordance with the instructions
indicated on such proxies. If no instructions are indicated (other than in the
case of broker non-votes), such proxies will be voted for approval and adoption
of the Merger Agreement and the Quantum Direct Equity Participation Plan.
The National Media Board of Directors does not know of any matters other
than those described in the notice of the National Media Special Meeting that
are to come before such meeting. If any other matters are properly presented at
the National Media Special Meeting for consideration, including, among other
things, consideration of a motion to adjourn such meeting to another time and/or
place (including, without limitation, for the purposes of soliciting additional
proxies or allowing additional time for the satisfaction of conditions to the
Merger), the persons named in the enclosed forms of proxy and acting thereunder
generally will have discretion to vote on such matters in accordance with their
best judgment. Notwithstanding the foregoing, proxies voting against a specific
proposal may not be used by the persons named in the proxies to vote for
adjournment of the meeting for the purpose of giving management additional time
to solicit votes to approve such proposal.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of National Media, at or before the taking of the vote at the
National Media Special Meeting, a written notice of revocation bearing a later
date than the proxy, (ii) duly executing a later dated proxy relating to the
same shares and delivering it to the Secretary of National Media before the
taking of the vote at the National Media Special Meeting or (iii) attending the
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National Media Special Meeting and voting in person (although attendance at the
National Media Special Meeting will not in and of itself constitute a revocation
of a proxy). Any written notice of revocation or subsequent proxy should be sent
to National Media Corporation, Eleven Penn Center, Suite 1100, 1835 Market
Street, Philadelphia, Pennsylvania 19103, Attention: Secretary, or hand
delivered to the Secretary of National Media at or before the taking of the vote
at the National Media Special Meeting.
All expenses of National Media's solicitation of proxies for the National
Media Special Meeting will be borne by National Media, except that the cost of
preparing and mailing this Joint Proxy Statement/ Prospectus will be borne
equally by National Media and ValueVision. In addition to solicitation by use of
the mails, proxies may be solicited from National Media stockholders by
directors, officers and employees of National Media in person or by telephone,
telegram or other means of communication. Such directors, officers and employees
will not be additionally compensated, but may be reimbursed for reasonable
out-of-pocket expenses in connection with such solicitation. National Media has
retained Beacon Hill Partners, Inc., a proxy solicitation firm, for assistance
in connection with the solicitation of proxies for the National Media Special
Meeting at a cost of approximately $5,000 plus reimbursement of reasonable
out-of-pocket expenses. Arrangements will also be made with brokerage houses,
custodians, nominees and fiduciaries for forwarding of proxy solicitation
materials to beneficial owners of shares held of record by such brokerage
houses, custodians, nominees and fiduciaries, and National Media will reimburse
such brokerage houses, custodians, nominees and fiduciaries for their reasonable
expenses incurred in connection therewith.
STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXIES.
NATIONAL MEDIA COMMON STOCK CERTIFICATES WILL BE EXCHANGED FOR SHARES OF QUANTUM
DIRECT COMMON STOCK AND NATIONAL MEDIA SERIES B STOCK CERTIFICATES WILL BE
EXCHANGED FOR SHARES OF QUANTUM DIRECT SERIES B STOCK FOLLOWING CONSUMMATION OF
THE MERGER IN ACCORDANCE WITH INSTRUCTIONS TO BE SENT TO HOLDERS OF NATIONAL
MEDIA COMMON STOCK AND SERIES B STOCK AFTER THE MERGER.
THE VALUEVISION SPECIAL MEETING
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to shareholders of
ValueVision as part of the solicitation of proxies by the ValueVision Board of
Directors for use at the Special Meeting of Shareholders of ValueVision (the
"ValueVision Special Meeting") to be held on April 14, 1998 at 9:00 a.m. local
time, at Minneapolis Marriott Southwest, 5801 Opus Parkway, Minnetonka,
Minnesota 55343. This Joint Proxy Statement/Prospectus and the enclosed form of
proxy are first being mailed to shareholders of ValueVision on or about March
16, 1998.
The purpose of the ValueVision Special Meeting is:
(a) to consider and vote on a proposal to approve and adopt the Merger
Agreement, pursuant to which, among other things, (i) ValueVision Sub will
merge with and into ValueVision with ValueVision surviving the ValueVision
Merger and becoming a wholly-owned subsidiary of Quantum Direct, (ii) each
issued and outstanding share of ValueVision Common Stock will be converted
into the right to receive 1.19 fully paid and nonassessable shares of
Quantum Direct Common Stock, (iii) National Media Sub will merge with and
into National Media with National Media surviving the National Media Merger
and becoming a wholly-owned subsidiary of Quantum Direct, (iv) each issued
and outstanding share of National Media Common Stock will be converted into
the right to receive one fully paid and nonassessable share of Quantum
Direct Common Stock and (v) each issued and outstanding share of National
Media Series B Stock will be converted into the right to receive one share
of Quantum Direct Series B Stock;
(b) to consider and vote on a proposal to approve and adopt the
Quantum Direct Equity Participation Plan; and
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(c) to transact such other business that may properly come before the
ValueVision Special Meeting.
Each copy of this Joint Proxy Statement/Prospectus mailed to holders of
ValueVision Common Stock is accompanied by a form of proxy for use at the
ValueVision Special Meeting.
The ValueVision Board of Directors recommends that shareholders vote FOR
the approval and adoption of the Merger Agreement and the Quantum Direct Equity
Participation Plan.
RECORD DATE AND VOTING
ValueVision has fixed the close of business on February 26, 1998 as the
record date for the determination of the ValueVision shareholders entitled to
notice of and to vote at the ValueVision Special Meeting. Accordingly, only
holders of record of ValueVision Common Stock on the record date will be
entitled to notice of and to vote at the ValueVision Special Meeting. As of
February 26, 1998, there were outstanding and entitled to vote 26,780,778 shares
of ValueVision Common Stock (constituting all of the voting stock of
ValueVision), which shares were held by approximately 490 holders of record.
Each holder of record of shares of ValueVision Common Stock on the record date
is entitled to one vote per share, which may be cast either in person or by
properly executed proxy, at the ValueVision Special Meeting. The presence, in
person or by properly executed proxy, of the holders of a majority of the
outstanding shares of ValueVision Common Stock entitled to vote at the
ValueVision Special Meeting is necessary to constitute a quorum at the
ValueVision Special Meeting.
The approval of the Merger Agreement will require the affirmative vote of
the holders of a majority of the shares of ValueVision Common Stock outstanding
on the record date. The approval of the Quantum Direct Equity Participation Plan
will require the affirmative vote of the holders of shares of ValueVision Common
Stock representing a majority of the votes cast on the matter, provided that the
total votes cast on the matter represent over 50% in interest of all shares
entitled to vote on the matter.
Shares of ValueVision Common Stock represented in person or by proxy will
be counted for the purposes of determining whether a quorum is present at the
ValueVision Special Meeting. Shares which abstain from voting as to a particular
matter will be treated as shares that are present and entitled to vote at the
ValueVision Special Meeting for purposes of determining whether a quorum exists,
but will not be counted as votes cast on such matter. If a broker or nominee
holding stock in "street name" indicates on a proxy that it does not have
discretionary authority to vote as to a particular matter ("broker non-votes"),
those shares will not be treated as present and entitled to vote at the
ValueVision Special Meeting for purposes of determining whether a quorum exists,
nor will they be counted as votes cast on such matter. Accordingly, abstentions
and broker non-votes will have the same effect as votes against approval of the
Merger Agreement, and may have the same effect as votes against approval of the
Quantum Direct Equity Participation Plan if they result in a failure of the
total votes cast on the matter to represent over 50% in interest of all shares
of ValueVision Common Stock entitled to vote on the matter.
As of March 12, 1998, directors and executive officers of ValueVision and
their affiliates may be deemed to be beneficial owners of approximately 9% of
the outstanding shares of ValueVision Common Stock and have expressed their
intent to vote their shares in favor of the Merger Agreement.
VOTING AND REVOCATION OF PROXIES
All shares of ValueVision Common Stock which are entitled to vote and are
represented at the ValueVision Special Meeting by properly executed proxies
received prior to or at such Meeting, and not revoked, will be voted at such
Meeting in accordance with the instructions indicated on such proxies. If no
instructions are indicated (other than in the case of broker non-votes), such
proxies will be voted for approval of the Merger Agreement and the Quantum
Direct Equity Participation Plan.
The ValueVision Board of Directors does not know of any matters other than
those described in the notice of the ValueVision Special Meeting that are to
come before such meeting. If any other matters are properly presented at the
ValueVision Special Meeting for consideration, including, among other things,
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consideration of a motion to adjourn such meeting to another time and/or place
(including, without limitation, for the purposes of soliciting additional
proxies or allowing additional time for the satisfaction of conditions to the
Merger), the persons named in the enclosed forms of proxy and acting thereunder
generally will have discretion to vote on such matters in accordance with their
best judgment. Notwithstanding the foregoing, proxies voting against a specific
proposal may not be used by the persons named in the proxies to vote for
adjournment of the meeting for the purpose of giving management additional time
to solicit votes to approve such proposal.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Corporate Secretary of ValueVision, at or before the taking of the vote
at the ValueVision Special Meeting, a written notice of revocation bearing a
later date than the proxy, (ii) duly executing a later dated proxy relating to
the same shares and delivering it to the Corporate Secretary of ValueVision
before the taking of the vote at the ValueVision Special Meeting or (iii)
attending the ValueVision Special Meeting and voting in person (although
attendance at the ValueVision Special Meeting will not in and of itself
constitute a revocation of a proxy). Any written notice of revocation or
subsequent proxy should be sent to ValueVision International, Inc., 6740 Shady
Oak Road, Eden Prairie, Minnesota 55344-3433, Attention: Corporate Secretary; or
hand delivered to the Corporate Secretary of ValueVision at or before the taking
of the vote at the ValueVision Special Meeting.
All expenses of ValueVision's solicitation of proxies for the ValueVision
Special Meeting will be borne by ValueVision, except that the cost of preparing
and mailing this Joint Proxy Statement/Prospectus will be borne equally by
National Media and ValueVision. In addition to solicitation by use of the mails,
proxies may be solicited from ValueVision shareholders by directors, officers
and employees of ValueVision in person or by telephone, telegram or other means
of communication. Such directors, officers and employees will not be
additionally compensated, but may be reimbursed for reasonable out-of-pocket
expenses in connection with such solicitation. ValueVision has retained Beacon
Hill Partners, Inc., a proxy solicitation firm, for assistance in connection
with the solicitation of proxies for the ValueVision Special Meeting at a cost
of approximately $5,000 plus reimbursement of reasonable out-of-pocket expenses.
Arrangements will also be made with brokerage houses, custodians, nominees and
fiduciaries for forwarding of proxy solicitation materials to beneficial owners
of shares held of record by such brokerage houses, custodians, nominees and
fiduciaries, and ValueVision will reimburse such brokerage houses, custodians,
nominees and fiduciaries for their reasonable expenses incurred in connection
therewith.
SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXIES.
VALUEVISION COMMON STOCK CERTIFICATES WILL BE EXCHANGED FOR SHARES OF QUANTUM
DIRECT COMMON STOCK AND CASH IN LIEU OF FRACTIONAL SHARES FOLLOWING CONSUMMATION
OF THE MERGER IN ACCORDANCE WITH INSTRUCTIONS TO BE SENT TO HOLDERS OF
VALUEVISION COMMON STOCK AFTER THE MERGER.
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THE MERGER
BACKGROUND OF THE MERGER
ValueVision and National Media's relationship dates back to January 1994,
at which time ValueVision made an unsolicited tender offer to acquire National
Media. Although initially rejected by National Media, the companies eventually
entered into a merger agreement in March 1994 (the "1994 Merger Agreement"),
pursuant to which ValueVision amended its tender offer for National Media. In
April 1994, ValueVision terminated the 1994 Merger Agreement, asserting
inaccurate representations and breach of warranties by National Media and based
upon adverse regulatory developments concerning National Media, primarily
involving issues with the CPSC and the FTC, which have subsequently been
resolved by National Media. Termination of the 1994 Merger Agreement resulted in
a year long litigation between the companies. Pursuant to a settlement of the
litigation, ValueVision and National Media entered into a Telemarketing,
Production and Post-Production Agreement in April 1995 (the "Telemarketing
Agreement") and National Media issued to ValueVision a ten-year warrant to
purchase up to 500,000 shares of National Media Common Stock at a price of
$8.865 per share (the "Warrant"). Since entering into the Telemarketing
Agreement, ValueVision and National Media have had an ongoing business
relationship. The Telemarketing Agreement and the Warrant, which has never been
exercised, will be terminated as part of the Merger.
During the past fiscal year, both National Media and ValueVision have
independently engaged in discussions with a number of third parties regarding
the possibility of entering into strategic transactions. ValueVision has sought
primarily to find a strategic transaction whereby it could grow and more
effectively utilize its significant balance sheet. In addition, in September
1997, ValueVision announced that Robert L. Johander, its Chairman of the Board
and Chief Executive Officer, and Nicholas M. Jaksich, its President and Chief
Operating Officer, would lead a management restructuring in which successors
would be identified to assume the roles of both the chief executive officer and
chief operating officer. National Media, on the other hand, having experienced
severe cash flow and liquidity problems, has sought primarily to find a
strategic partner with the financial strength to support the cyclical nature of
National Media's business and which could provide National Media with more cost
effective operational and fulfillment support. In Spring 1997, National Media
underwent a management restructuring. Frederick S. Hammer was named Chairman of
National Media's Board of Directors, and Robert N. Verratti was hired as Chief
Executive Officer and President of National Media following Mark Hershhorn's
resignation in April 1997. In April 1997, National Media also announced it had
retained Lehman Brothers, Inc. ("Lehman Brothers") to assist it in analyzing
strategic alternatives. However, prior to the announcement of the Merger,
neither company was able to reach an agreement with any third parties on terms
that either company's Board of Directors thought were fair and provided adequate
value to its shareholders.
At the end of June 1997, National Media announced an anticipated pre-tax
loss for the fiscal year ended March 31, 1997 of approximately $45 million, that
it was in technical default of its bank loan and that its auditors were expected
to issue a "going concern" opinion concerning National Media in connection with
the audit of National Media's fiscal 1997 annual financial statements. In July
1997, National Media announced that it expected to incur losses in the first six
months of fiscal 1998. Also in July 1997, National Media obtained an additional
approximate $3.5 million in short-term debt financing through Prestige. In
August 1997, National Media announced that it had lost an additional $13.0
million in the quarter ended June 30, 1997. In late August 1997, National Media
announced the execution of an agreement pursuant to which it would receive $20
million in equity financing from unrelated third parties. Such transaction was
consummated in September 1997 along with an extension of National Media's bank
facility through December 31, 1998.
Throughout the Summer of 1997, National Media made and received inquiries
regarding potential strategic transactions, including business combinations and
asset-based financing transactions with third parties. Similarly, ValueVision
also made and received inquiries regarding strategic transactions. Discussions
were held with a number of third parties. None of such discussions resulted in
any strategic or, other than as discussed elsewhere herein, financing
transactions being agreed upon.
In August 1997, Constantinos I. Costalas, Vice Chairman of the Board and
Chief Operating Officer of National Media, contacted Robert L. Johander,
Chairman of the Board and Chief Executive Officer of
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ValueVision, to suggest the possibility of combining the two companies. On
August 18, 1997, National Media and ValueVision entered into a confidentiality
agreement in order to exchange due diligence information. On September 13, 1997,
Mr. Johander, Nicholas M. Jaksich, President and Chief Operating Officer of
ValueVision, Stuart R. Romenesko, Senior Vice President -- Finance, Chief
Financial Officer and Treasurer of ValueVision, and Marshall S. Geller and Paul
D. Tosetti, two of ValueVision's outside directors, met in New York with Messrs.
Costalas, Verratti, Hammer and John J. Sullivan, a Senior Vice President of
National Media, to discuss a possible transaction. On September 28, 1997, a
second meeting was held in New York at which the above named and certain other
ValueVision and National Media officers and directors attended, together with
representatives of ValueVision's legal advisors from Latham & Watkins and
financial advisors from Bear, Stearns & Co. Inc. ("Bear Stearns") and National
Media's legal advisors from Klehr, Harrison, Harvey, Branzburg & Ellers LLP, and
financial advisors from Lehman Brothers. At these meetings and at subsequent
meetings held in September and early October 1997, various representatives of
the two companies discussed the strategic merits of a business combination of
the companies, as well as the financial and organizational aspects of such a
transaction. In addition, the companies exchanged certain financial, operational
and legal information and representatives of ValueVision and National Media
senior management continued their internal consideration of a possible
transaction.
During this same period, ValueVision's management discussed the proposed
transaction with Bear Stearns, which ValueVision's management had previously
retained as financial advisor in connection with ValueVision's efforts to
enhance shareholder value. ValueVision's management consulted with Bear Stearns
on various financial matters concerning the transaction. Each of the companies'
financial advisors prepared and discussed with their respective clients various
financial analyses and models based on the operations and financial positions of
ValueVision and National Media. Following further discussions between
representatives and advisors of each company, the companies initially discussed
a transaction pursuant to which National Media stockholders would receive one
share of Quantum Direct Common Stock for each share of National Media Common
Stock held, and for ValueVision shareholders to receive 1.05 shares of Quantum
Direct Common Stock for each share of ValueVision Common Stock held.
On October 9, 1997, the ValueVision Board of Directors held a special
telephonic meeting, at which ValueVision's legal and financial advisors
participated, to discuss a number of corporate issues, including the proposed
transaction with National Media, The ValueVision Board of Directors, pursuant to
requirements of the Minnesota Business Corporation Act ("MBCA"), established a
committee of all of its disinterested directors, Marshall S. Geller, Robert J.
Korkowski and Paul D. Tosetti (the "Committee"), to consider a business
combination with an interested shareholder (which National Media would become
under the proposed terms of the Merger Agreement based on issuance of a stock
option to acquire 19.9% of ValueVision's Common Stock). Bear Stearns discussed
separately with the Committee and the full Board of Directors those factors
relevant to fairness of the Merger as then being proposed, including factors
relative to the 1.05 to 1 exchange ratio. The ValueVision Board of Directors and
the Committee each separately considered the proposed combination as a strategic
alternative to ValueVision's then existing growth plans and objectives. As a
result of such discussions, ValueVision management was directed to continue
negotiations with National Media.
On October 17, 1997, the ValueVision Board of Directors and the Committee
held a joint special telephonic meeting with ValueVision's legal and financial
advisors to discuss the terms of the proposed Merger. At the meeting, the basic
terms of the transaction were reviewed, discussed and considered and
ValueVision's management reviewed with its Board of Directors certain due
diligence matters. Bear Stearns reviewed its financial analysis of the terms of
the proposed transaction and presented its views on the strategic merits and
risks of the transaction. At the conclusion of the meeting, the ValueVision
Board of Directors and the Committee each separately authorized management of
ValueVision to continue the negotiations with National Media.
National Media's Board of Directors formally met, along with members of
senior management of National Media and its legal and financial advisors, on
each of October 1, October 9 and October 17, 1997 to review the preliminary
discussions with ValueVision, the progress of negotiations, the principal terms
of the proposed transaction, Lehman Brothers' valuation advice, legal issues
raised by the proposed transaction,
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issues relating specifically to National Media's Series C Convertible Preferred
Stock (the "Series C Stock") in the context of the transaction, and the status
of ValueVision's discussions with Montgomery Ward regarding its ownership
interests and contractual relationships with ValueVision. At the conclusion of
each of such meetings, the National Media Board of Directors authorized
management of National Media to continue negotiations and discussions with
ValueVision.
During the period from late October through early December, representatives
of National Media, ValueVision, Lehman Brothers and Bear Stearns met to discuss,
among other things, concerns involving the potentially significant dilutive
effect of the conversion feature of the Series C Stock. On November 3, 1997,
Messrs. Hammer and Costalas met with Messrs. Johander and Jaksich in
ValueVision's offices to continue to discuss issues regarding the Series C Stock
as well as other transaction issues. During this time, representatives of Bear
Stearns and Lehman Brothers met with representatives of holders of the Series C
Stock to discuss a possible restructuring of the Series C Stock. Since no
agreement on the proposed restructure was reached, it was proposed that National
Media redeem the Series C Stock immediately preceding the closing of the Merger,
which redemption would be funded by ValueVision. Following further negotiations
between the parties, general terms were reached pursuant to which National Media
could redeem the Series C Stock immediately preceding the Merger.
On November 6, 1997, National Media made an announcement concerning its
operating results for its second quarter ended September 30, 1997, which
indicated that its operating results were continuing to show losses. In
addition, National Media noted the continued decline in its Asian markets'
revenues and operating results. In light of ValueVision's agreement to fund the
Series C Stock redemption, National Media's results of operations for its second
quarter and the willingness of ValueVision to advance funding to National Media
upon execution of the Merger Agreement, the companies, with the advice of Bear
Stearns and Lehman Brothers, reevaluated the Exchange Ratios to be used in the
proposed transaction.
On December 8, 1997, the ValueVision Board of Directors and the Committee,
together with ValueVision's legal and financial advisors, held a joint special
telephonic meeting to discuss the status of the proposed Merger and issues
relating to the redemption of the Series C Stock. Members of ValueVision's
management discussed the status of negotiations and the Exchange Ratios.
Representatives of Bear Stearns discussed issues of fairness related to the
Merger and issues involving the holders of the Series C Stock. Thereafter,
ValueVision's Board of Directors and the Committee each authorized management of
ValueVision to continue the negotiations with National Media.
On December 9, 10 and 11, 1997, representatives of National Media and
ValueVision met in New York for further negotiations. On December 12, 1997,
representatives of National Media and ValueVision met with National Media's
primary lender regarding the proposed transaction and the need to obtain such
lender's consent to the transaction. National Media's Board of Directors
convened meetings on December 8, December 10 and December 12, 1997 to discuss
with its legal and financial advisors various issues in the negotiations and
changes in proposed terms which had taken place since its October 17 meeting,
including, but not limited to, the proposed redemption of the Series C Stock,
the proposed increase in the ValueVision Exchange Ratio from 1.05 to 1 to 1.19
to 1, and the treatment of ValueVision's relationship with Montgomery Ward. At
the conclusion of each meeting, National Media's Board of Directors authorized
and instructed management to continue negotiations with ValueVision. At the
December 12, 1997 meeting, Lehman Brothers delivered to National Media's Board
of Directors its oral opinion regarding the fairness of the National Media
Exchange Ratio to the holders of National Media Common Stock.
On December 22, 1997, National Media's Board of Directors met again with
management and its legal and financial advisors to discuss, principally, the
potential impact of the Time Warner Cable lawsuit, which was filed on December
17, 1997, on ValueVision and the Merger. See "Risk Factors -- Litigation
Involving ValueVision." At that meeting, Lehman Brothers reaffirmed orally its
oral opinion of December 12, 1997, that the National Media Exchange Ratio
remained "fair" to the holders of National Media Common Stock, from a financial
point of view; provided, however, that Lehman Brothers advised the National
Media Board of Directors that they would have to assume, in the context of such
opinion, that the subject litigation would not have any material adverse effect
on ValueVision or Quantum Direct. Based on the totality of the
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circumstances surrounding National Media, the information provided to National
Media by ValueVision regarding the lawsuit and Lehman Brothers' reaffirmation of
their oral opinion regarding the fairness of the National Media Exchange Ratio,
National Media's Board of Directors authorized management to proceed with its
negotiations regarding the Merger. During the ensuing week, discussions were
held between Lehman Brothers and Bear Stearns and between management of
ValueVision and National Media to discuss certain issues which related to the
Time Warner Cable litigation. ValueVision was unwilling to allow the subject
litigation in any way to affect the terms of the Merger.
On December 29, 1997, National Media's Board of Directors reconvened with
management and their advisors. At that meeting, ValueVision's position regarding
the litigation was disclosed to National Media's Board of Directors. In order to
provide National Media's Board of Directors with all the information necessary
for it to assess any other strategic alternative that National Media might have
available to it, management presented to the Board of Directors information
relating to National Media's liquidity and cash flow, its cash needs in light of
the infomercials presently airing, new infomercials expected to be aired in the
fourth fiscal quarter, installment principal and interest payments due on
National Media's debt during the fourth fiscal quarter, alternative
"non-traditional" financing mechanisms which management had continued to explore
during the pendency of discussions with ValueVision, and, finally, any other
potentially available extraordinary transactions. At the conclusion of this
meeting, based upon the oral opinion of Lehman Brothers delivered at the
December 12, 1997 meeting and reaffirmed as of December 29, 1997, and the other
information presented by management and National Media's legal and financial
advisors, the National Media Board of Directors granted its approval of the
Merger and the transactions contemplated thereby, subject to finalization of
definitive documents. Following such meetings, representatives of each of the
companies, National Media's lender and holders of the Series C Stock
substantially completed final negotiations related to the Merger transaction.
On January 4, 1998, ValueVision's Board of Directors and the Committee held
a special telephonic meeting at which all members of the Board of Directors and
ValueVision's legal and financial advisors participated. ValueVision's
management, together with its legal advisors, discussed significant terms of the
Merger Agreement and various aspects of the transaction. Bear Stearns made a
presentation about the fairness of the ValueVision Exchange Ratio to the holders
of ValueVision Common Stock from a financial point of view. See "The Merger --
Opinion of Financial Advisor to ValueVision." Following such presentations and
further discussions among ValueVision's Board of Directors, the Committee met
separately and discussed the terms of the transaction with ValueVision's legal
and financial advisors. The Committee then approved issuance of the stock option
to National Media, the Merger and business combination with National Media as an
interested shareholder, based on an exchange ratio of 1.19 shares of Quantum
Direct Common Stock for each share of ValueVision Common Stock. The full
ValueVision Board of Directors then reconvened and all members of the
ValueVision Board of Directors voted unanimously to approve the Merger and the
business combination with National Media based on the ValueVision Exchange Ratio
of 1.19 shares of Quantum Direct Common Stock for each share of ValueVision
Common Stock, and authorized the execution of the Merger Agreement and other
related agreements and authorized ValueVision's management to take all such
actions necessary to consummate the transactions contemplated thereby.
Effective January 5, 1998, the Merger Agreement and certain related
documents were executed and delivered by representatives of National Media and
ValueVision.
By letter dated February 6, 1998 to Bear Stearns, Michael Blake, through a
corporate entity, stated that the corporate entity was prepared to make an offer
to merge with ValueVision based upon a proposed exchange ratio of $3.50 cash
plus $2.00 in face value of 8% debentures for each share of ValueVision common
stock. The letter indicated the offer was conditioned upon, among other things,
completion of satisfactory due diligence, including evaluation of the Time
Warner Cable litigation, and obtaining satisfactory acquisition financing. Mr.
Blake's entity did not have committed financing for the cash portion of its
offer, and appeared to have no retention arrangement with any financial advisor
or other financing source. The Merger Agreement restricts both National Media's
and ValueVision's ability to consider alternative acquisition proposals, subject
to certain limited exceptions. See "The Merger Agreement -- Certain Covenants --
No Solicitation." After considering the terms of the proposed offer and
ValueVision's obligations under the Merger Agreement, ValueVision's Board of
Directors unanimously determined to reject the offer.
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In determining to reject the offer, ValueVision's Board of Directors
considered, among other factors, (i) the structure of the offer, noting that it
resulted in a sale of ValueVision as opposed to a strategic business
combination, which the Board has concluded is in the best interests of
ValueVision and its shareholders, and that it deprived ValueVision's
shareholders of the ability to participate in any future earnings and growth in
ValueVision's business, unlike the combination with National Media, (ii) the
highly conditional nature of the offer, citing the diligence and financing
conditions in particular, (iii) the uncertainty that the offer would be
consummated in an efficient and timely manner, (iv) the low price of the offer,
noting in particular the uncertainty of the value of the 8% debentures and (v)
the provision in the Merger Agreement restricting ValueVision's Board of
Directors from agreeing to another acquisition proposal, unless such other
acquisition proposal is reasonably capable of being completed on the terms
proposed and, after taking into account the strategic benefits anticipated to be
derived from the Merger and the long-term prospects of ValueVision and National
Media as a combined company, would, if consummated, result in a transaction more
favorable to its shareholders over the long term than the transactions
contemplated by the Merger Agreement.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS OF NATIONAL MEDIA AND VALUEVISION;
REASONS FOR THE MERGER
National Media. The National Media Board of Directors believes that the
terms of the Merger are fair to, and in the best interests of, National Media
and its stockholders. Accordingly, the National Media Board of Directors has
approved and adopted the Merger Agreement and the transactions contemplated
thereby and recommends its approval and adoption by the stockholders of National
Media.
The National Media Board of Directors believes that the Merger represents
the best available strategic alternative for National Media. It believes that by
combining National Media's strengths as a leading domestic and international
television infomercial direct marketer with ValueVision's strengths as a leading
domestic television home shopping network and its strong financial position, a
strong new company will be created. See "The Combined Company." The National
Media Board of Directors also believes that the Merger will provide important
critical mass and economies of scale that will allow Quantum Direct to operate
more efficiently than either National Media or ValueVision can as stand-alone
companies. In addition, the National Media Board of Directors believes that
Quantum Direct will also benefit from its ability to direct products through
virtually all stages of their respective selling life cycles.
In reaching its determination to approve the Merger Agreement and recommend
approval of the Merger to the National Media stockholders, the National Media
Board of Directors considered the information presented to it by National
Media's management, as well as National Media's professional advisors, and
weighed the positive and countervailing factors associated with the Merger. The
factors considered by the National Media Board of Directors included, without
limitation:
(i) National Media's Business. The National Media Board of Directors
considered historical and prospective information concerning the financial
condition, results of operations and business of National Media, including
in particular, the cash flow needs of the business and its current cash
position. The National Media Board of Directors also considered the current
state (and its perception of the future state) of the domestic and
international infomercial industry and the economic and market conditions
relating to the production of infomercials, the acquisition of airtime, the
financing of inventory needs, the trend towards installment payments by
consumers for their infomercial purchases, and the increasing level of
international competition, among other factors. The National Media Board of
Directors also considered the cyclical nature of National Media's past
results of operations and the need to adapt National Media's cost structure
to address this inherent characteristic of National Media's domestic
business. National Media's management and professional advisors made
numerous presentations to the National Media Board of Directors providing
it with operational, financial and legal information concerning National
Media and its future prospects. The National Media Board of Directors
considered the strategic theoretical alternatives available to National
Media in lieu of the Merger, including maintaining the status quo, seeking
to remain independent through alternative financing or partnership
transactions and seeking to sell National Media for cash, or to another
third party for stock, as well as the likelihood of being able to pursue
any such alternatives to a successful conclusion. National Media's
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operating cash flow needs were of particular import in National Media's
Board of Directors' decision to approve the Merger.
(ii) ValueVision Business. The National Media Board of Directors
considered the operational, financial and legal due diligence provided to
it by National Media's management and professional advisors concerning
ValueVision. Such due diligence included historical and prospective
information regarding the results of operations (including operating
losses), financial condition and business of ValueVision and the current
state (and its perception of the future state) of the domestic television
home shopping industry. Factors included in evaluating ValueVision
included, among other things: its strong balance sheet position; its
ownership of telemarketing, customer service, fulfillment and show
production capabilities; merchandising and marketing skills; and catalog
operations.
(iii) Opinion of Lehman Brothers. The National Media Board of
Directors considered the various presentations of Lehman Brothers, and
Lehman Brothers' oral opinion, delivered on December 12, 1997 and
reaffirmed as of December 22, 1997, that as of such dates, the National
Media Exchange Ratio was fair, from a financial point of view, to the
holders of National Media Common Stock. Lehman Brothers' oral opinion was
subsequently confirmed in writing on January 5, 1998. See "Opinion of
Financial Advisor to National Media." A copy of such written opinion, which
sets forth the assumptions made, matters considered and limitations on the
review undertaken is attached as Annex B to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference.
(iv) Strategic Merits of the Merger. The National Media Board of
Directors approved the Merger based upon its assessment of the strategic
merits of the Merger as well as its assessment of the likelihood of other
strategic and financing alternatives, which had been pursued by National
Media over the course of the 1997 calendar year, coming to fruition. The
strategic merits of the Merger, as assessed by the National Media Board of
Directors, include, but are not limited to, the following:
(a) The ability of Quantum Direct to finance its operations,
including those of National Media, through its cash flow, the use of its
available cash and cash equivalents as well as the leveraging of its
existing assets. The commitment of ValueVision to advance to National
Media up to $10 million for working capital purposes pending
consummation of the Merger was also considered.
(b) The operational fixed and variable cost savings realizable upon
combination of the respective telemarketing, customer service and
fulfillment segments of National Media's and ValueVision's businesses
which will positively impact on National Media's efforts to adapt its
business to the cyclical nature of the domestic infomercial industry.
(c) The enhancement of National Media's efforts to more fully
exploit for its own benefit the sales of its products through channels
of distribution other than infomercials, such as television home
shopping and mail order catalog.
(d) The utilization by National Media of airtime controlled by
ValueVision for testing of new product infomercials, for short program
adaptations of National Media's long form infomercials, and for National
Media's infomercials.
(e) The use of ValueVision production facilities by National Media
in certain instances in lieu of utilizing third party rental facilities.
(f) The expansion of National Media's international presence
through the introduction of ValueVision's television home shopping
business into the international markets where National Media presently
does business in the infomercial and short spot markets, resulting in
the overall increase in international revenues and, hopefully, in
greater profits.
(v) Structure of Merger; Terms of Merger Agreement. The National Media
Board of Directors considered the terms of the Merger Agreement and its
legal and tax implications. The National Media Board of Directors
considered the size of the termination fee payable, in certain
circumstances, by either party under the Merger Agreement and also
considered the reciprocal stock option agreements and the Exchange Ratios
of Quantum Direct Common Stock for National Media Common Stock and
ValueVision
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Common Stock. The National Media Board of Directors considered that the
Merger is expected to be accounted for as an acquisition of National Media
by ValueVision and is expected to be a tax free exchange by National
Media's stockholders for federal income tax purposes. The National Media
Board of Directors considered a proposed transaction structure in which
each of National Media and ValueVision will be equally represented on
Quantum Direct's Board of Directors, and the fact that the ValueVision
Exchange Ratio and the National Media Exchange Ratio are fixed and will not
be adjusted in the event that there are any increases or decreases in the
price of either the National Media Common Stock or the ValueVision Common
Stock during the period prior to consummation of the Merger.
(vi) Countervailing Considerations. The National Media Board of
Directors also seriously considered certain factors which may be
characterized as countervailing considerations, including, but not limited
to:
(a) The fact that, based upon the Exchange Ratios, ValueVision's
shareholders would receive in exchange for each share of ValueVision
Common Stock owned greater consideration than the consideration to be
received by National Media stockholders for each share of National Media
Common Stock owned. While the National Media Board of Directors would
have preferred that the Merger not involve different exchange ratios,
ValueVision would not agree to the transaction without such a
differential, nor would they agree to any adjustment to the Exchange
Ratios upon the occurrence of specified events. The amount of the
differential, when viewed in the context of recent histories for the two
stocks and the two companies, was not viewed as inappropriate.
(b) The continuing operating losses incurred by ValueVision since
its inception.
(c) The risks inherent in attempting to successfully integrate the
management of National Media and ValueVision into an effective
organization and the difficulties that may be encountered in achieving
the anticipated synergies from the Merger.
(d) The possibility that key employees and members of the
management of National Media or ValueVision may not be willing to stay
on pending the consummation of the Merger and, therefore, may leave
National Media or ValueVision, as the case may be, as well as the risks
inherent in seeking a new Chief Executive Officer for Quantum Direct.
(e) The potential adverse impact of the Time Warner Cable
litigation on ValueVision and Quantum Direct.
(f) The voting power dilution of the Merger to the National Media
stockholders, resulting in National Media's stockholders' ownership of
approximately 45% of the shares of Quantum Direct after the consummation
of the Merger. This factor was not viewed as being as significant as
those referred to above.
In addition, the National Media Board of Directors took into account the
severance arrangements of the top three executive officers of National Media, as
set forth in their respective employment agreements, and other employee benefit
provisions of the Merger Agreement described below under "Interests of Certain
Persons in the Merger." The National Media Board of Directors was aware that
such arrangements gave certain individuals interests in the Merger that were in
addition to their interests as stockholders of National Media generally.
The foregoing discussion of the information and factors considered and
given weight by the National Media Board of Directors is not intended to be
exhaustive but is believed to include the material factors considered by the
National Media Board of Directors. In addition, in reaching the determination to
approve and recommend approval and adoption of the Merger Agreement, in view of
the wide variety of factors considered in connection with its evaluation
thereof, the National Media Board of Directors did not assign any relative or
specific weights to the foregoing factors. The National Media Board of Directors
did not attempt to analyze the fairness of the National Media Exchange Ratio in
isolation from the considerations as to the businesses of National Media and
ValueVision, the strategic merits of the Merger or the other considerations
referred to above. The National Media Board of Directors did, however, take into
account, and placed reliance
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upon, the analyses performed by, and the opinion rendered by, Lehman Brothers as
to the fairness, from a financial point of view, of the National Media Exchange
Ratio. The National Media Board of Directors also did not distinguish between
factors that support a determination that the Merger is "fair" and factors that
support a determination that the Merger is in the "best interests" of National
Media's stockholders.
THE NATIONAL MEDIA BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND BELIEVES THAT THE TERMS
OF THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, NATIONAL MEDIA AND ITS
STOCKHOLDERS. THE NATIONAL MEDIA BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
ValueVision. The ValueVision Board of Directors has determined and believes
that the terms of the Merger are fair to, and in the best interests of,
ValueVision and its shareholders. Accordingly, the ValueVision Board of
Directors has approved and adopted the Merger Agreement and the transactions
contemplated thereby and recommends its approval and adoption by the
shareholders of ValueVision.
In reaching its determination, the ValueVision Board of Directors consulted
with ValueVision management, as well as its legal counsel and financial advisor,
and considered a number of positive and negative factors, including:
(i) ValueVision's Business, Condition and Prospects. The ValueVision
Board of Directors considered information with respect to the financial
condition, results of operations and business of ValueVision, on both a
historical and prospective basis, and current industry, economic and
financial market conditions. The ValueVision Board of Directors considered
ValueVision's historical growth strategies, including attempts to increase
cable distribution in the United States, expansion into international
markets and maximizing use of ValueVision's telemarketing and fulfillment
facilities through acquisition of catalog businesses. Management and
ValueVision's legal and financial representatives made presentations to and
provided the ValueVision Board of Directors with information regarding
ValueVision's financial condition and prospects. In addition, the
ValueVision Board of Directors concluded that the Merger should result in
an increase in net asset value to ValueVision's shareholders. In making
such determination, the ValueVision Board of Directors relied primarily on
projections of future per share earnings and not on historical earnings per
share data.
(ii) National Media's Business, Condition and Prospects. The
ValueVision Board of Directors considered information with respect to the
financial condition, results of operations and business of National Media,
on both a historical and prospective basis, and current industry, economic
and financial market conditions. Management and ValueVision's legal and
financial representatives made presentations to and provided the
ValueVision Board of Directors with information regarding National Media's
financial condition and prospects after conducting business, legal and
financial due diligence. In evaluating National Media's prospects, the
ValueVision Board of Directors considered, among other things, National
Media's global presence, recent changes in senior management at National
Media and the measures it was taking to correct problems which have led to
unpredictable financial results, and current product offerings which have
potential to produce sustained revenues.
(iii) Opinion of Bear Stearns. The ValueVision Board of Directors
considered the oral opinion delivered on January 4, 1998 by Bear Stearns
(which was subsequently confirmed in writing as of January 5, 1998) that as
of such date the ValueVision Exchange Ratio, is fair to the holders of
ValueVision Common Stock from a financial point of view. The ValueVision
Board of Directors also considered the oral and written presentations made
to it by Bear Stearns. See "The Merger -- Opinion of Financial Advisor to
ValueVision." A copy of Bear Stearns' written opinion, which sets forth the
assumptions made, matters considered and limitations on the review
undertaken, is attached as Annex C to this Joint Proxy Statement/Prospectus
and is incorporated herein by reference.
(iv) Fixed Exchange Ratio. The ValueVision Board of Directors
considered that the ValueVision Exchange Ratio is a fixed number and will
not be adjusted in the event of any increases or decreases in
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the price of either the ValueVision Common Stock or National Media Common
Stock. The ValueVision Board of Directors considered that the prices of
ValueVision Common Stock and National Media Common Stock at the closing of
the Merger may vary from their respective prices at the date of this Joint
Proxy Statement/Prospectus and at the date of the ValueVision Special
Meeting and the National Media Special Meeting. Such variations may be the
result of changes in the business, operations or prospects of ValueVision
or National Media, market assessments of the likelihood that the Merger
will be consummated, the timing thereof and the prospects of the Merger and
post-Merger operations, regulatory considerations, general market and
economic conditions and other factors.
(v) Strategic Combination. The ValueVision Board of Directors
considered that the Merger would combine the financial strength of
ValueVision's balance sheet with National Media's product development and
distribution capabilities, particularly in international markets, together
with National Media's strong brand name, Quantum Television. In considering
the Merger, the ValueVision Board of Directors took into account that
Quantum Direct will have enhanced market presence, particularly when buying
media time. The ValueVision Board of Directors considered the likelihood
that the combination of ValueVision and National Media would create
significant opportunities for the development and growth of the companies
on a combined basis, including development of international television home
shopping programming and catalog operations.
(vi) Financial Condition. The ValueVision Board of Directors
considered the likelihood that the Merger would enable ValueVision and
National Media to realize higher total revenues and positive cash flows
through a number of means, including decreases in show production costs and
cross-marketing and test marketing opportunities. The ValueVision Board of
Directors also considered the likelihood that a combination with National
Media would allow Quantum Direct to enjoy opportunities for operating
efficiencies, cost reductions and synergies as a result of the Merger,
particularly through the integration of information systems and support
functions such as telemarketing, customer service and fulfillment
operations, and the combined media purchasing power of the two companies.
The ValueVision Board of Directors also considered as a negative factor the
fact that National Media is more financially leveraged than ValueVision.
(vii) Terms of the Merger. The ValueVision Board of Directors
considered the terms and conditions of the Merger Agreement, the reciprocal
stock option agreements and the Demand Note, including the terms of the
Merger Agreement that allow National Media or ValueVision to terminate the
Merger Agreement under certain circumstances upon payment to the other
party of a $5 million termination fee. The ValueVision Board of Directors
considered such a termination fee in light of the range of fees payable in
comparable transactions. The ValueVision Board of Directors also considered
the fact that the Merger is expected to be accounted for as a purchase
transaction for accounting and financial reporting purposes and is
generally not expected to result in the recognition of gain or loss for
federal income tax purposes.
(viii) Management and Ownership of Quantum Direct. The ValueVision
Board of Directors considered that Quantum Direct will initially have a
Board of Directors consisting of 10 members, with five members selected by
each of ValueVision and National Media and an Executive Committee, which
will initially be comprised of Marshall S. Geller, Nicholas M. Jaksich,
Robert L. Johander, Frederick S. Hammer and Robert N. Verratti. The
ValueVision Board of Directors considered the likelihood that the
management teams of ValueVision and National Media will complement each
other and work well together in Quantum Direct (as well as the
corresponding risk that the companies might not succeed in integrating
management teams). The ValueVision Board of Directors also discussed and
took into consideration the employment, severance and other arrangements
benefiting officers and directors of National Media and ValueVision,
provided for in the Merger Agreement and described below under the caption
"-- Interests of Certain Persons in the Merger." The ValueVision Board of
Directors also considered the pro forma ownership of Quantum Direct, noting
that ValueVision shareholders would own approximately 55% of Quantum Direct
and National Media stockholders would own approximately 45%. As a company
with no concentrated voting control, however, the ValueVision Board of
Directors did not
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assign any significance to the fact that the Merger would dilute the voting
control of ValueVision shareholders.
(ix) Integration of Operations; Nonrealization of Synergies. As
described above, the ValueVision Board of Directors considered the extent
to which the Merger would provide opportunities for revenue growth and
operating cost savings that might not otherwise be available. However, the
ValueVision Board of Directors also took into account that the Merger
involves the integration of two companies that have previously operated
independently. The ValueVision Board of Directors considered as a negative
factor the possibility that Quantum Direct will not be able to integrate
the respective operations of ValueVision and National Media without
encountering difficulties or experiencing the loss of key ValueVision or
National Media personnel due to relocation or other reasons and the
possibility that the benefits expected from such integration will not be
realized. In addition, the ValueVision Board of Directors considered the
possibility that Quantum Direct will not be able to realize anticipated
operating synergies and cost reductions from the Merger.
(x) Countervailing Considerations. The ValueVision Board of Directors
also seriously considered certain factors which could negatively impact
National Media and Quantum Direct in the future. These factors include (i)
the "hit" nature of National Media's business and the need to maintain a
steady flow of successful product offerings, (ii) National Media's
historical and continuing high level of litigation costs, (iii) recent
significant liquidity problems at National Media, (iv) recent economic
developments in National Media's Asian markets and (v) the need to redeem
the Series C Stock as part of the Merger. These factors were considered in
the context of the overall transaction and the ValueVision Board of
Directors, while acknowledging the risks, still believed that the overall
transaction is fair to ValueVision shareholders and provides ValueVision
shareholders with the greatest opportunity for increasing value.
The foregoing discussion of the information and factors considered and
given weight by the ValueVision Board of Directors is not intended to be
exhaustive but is believed to include all material factors considered by the
ValueVision Board of Directors. In addition, in reaching the determination to
approve and recommend approval and adoption of the Merger Agreement, in view of
the wide variety of factors considered in connection with its evaluation
thereof, the ValueVision Board of Directors did not assign any relative or
specific weights to the foregoing factors, and individual directors may have
given differing weights to the different factors. In determining that the terms
of the Merger are fair to, and in the best interests of, ValueVision and its
shareholders, the ValueVision Board of Directors considered all of the foregoing
factors, including, with respect to its analysis of the fairness of the
ValueVision Exchange Ratio from a financial point of view, the opinion of Bear
Stearns and the oral presentations by ValueVision's executive management
regarding its independent financial analysis of ValueVision, National Media and
Quantum Direct. However, the ValueVision Board of Directors did not distinguish
between factors that support a determination that the Merger is "fair" and
factors that support a determination that the Merger is in the "best interests"
of ValueVision's shareholders.
THE VALUEVISION BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND BELIEVES THAT THE TERMS
OF THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, VALUEVISION AND ITS
SHAREHOLDERS. THE VALUEVISION BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT.
OPINION OF FINANCIAL ADVISOR TO NATIONAL MEDIA
Lehman Brothers has served as financial advisor to National Media in
connection with the Merger and delivered to the National Media Board of
Directors a written opinion on January 5, 1998, to the effect that, as of such
date and based on and subject to certain considerations and assumptions stated
therein, the National Media Exchange Ratio was fair to the holders of National
Media Common Stock from a financial point of view. Lehman Brothers has consented
to the use of its name and the summary of the Lehman Brothers opinion in this
Joint Proxy Statement/Prospectus.
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The full text of the Lehman Brothers opinion dated January 5, 1998, which
sets forth the assumptions made, matters considered and limits on the review
undertaken, is attached as Annex B to this Joint Proxy Statement/Prospectus and
is incorporated herein by reference. The summary of the Lehman Brothers opinion
set forth in this Joint Proxy Statement/Prospectus describes the material
aspects of such opinion and is qualified in its entirety by reference to the
full text of such opinion.
Other than assuming that the outcome of the Time Warner Cable litigation
would not have a material adverse effect on ValueVision, which assumption was
made with the consent of National Media, and making certain other assumptions as
set forth under "Pro Forma Merger Analysis," no limitations were imposed by
National Media on the scope of Lehman Brothers' investigation or the procedures
to be followed by Lehman Brothers in rendering its opinion except that Lehman
Brothers was not authorized to and did not solicit any indications of interest
with respect to a purchase of all or a part of National Media's business. Lehman
Brothers was not requested to and did not make any recommendation to the
National Media Board of Directors as to the form or amount of consideration to
be offered to National Media's stockholders in the Merger, which was determined
through arm's length negotiations between National Media and its financial and
legal advisors on the one hand, and ValueVision and its financial and legal
advisors on the other hand. In arriving at its opinion, Lehman Brothers did not
ascribe a specific range of values to National Media, but made its determination
as to the fairness, from a financial point of view, of the consideration to be
offered in the Merger on the basis of the financial and comparative analyses
described below. The opinion is for the use and benefit of the National Media
Board of Directors and was rendered to the National Media Board of Directors in
connection with its consideration of the Merger. The opinion does not constitute
a recommendation to any stockholder as to how such stockholder should vote with
respect to the Merger. Lehman Brothers was not requested to opine as to, and the
opinion does not in any manner address, National Media's underlying business
decision to proceed with or effect the Merger. In addition, based upon
information and analyses provided to National Media by ValueVision, National
Media authorized Lehman Brothers to assume that the resolution of the Time
Warner Cable litigation would not have a material adverse impact on the
business, operations, financial conditions or prospects of ValueVision or the
combined company following consummation of the Merger. In authorizing Lehman
Brothers to make the assumption regarding the Time Warner Cable litigation,
National Media reviewed the Complaint and the Time Warner Cable Agreement and
discussed the merits of the litigation with members of senior management of
ValueVision familiar with the facts leading up to such litigation. National
Media believes its reliance on such review and discussion with ValueVision's
management was reasonable given the proximity of the filing of such suit with
the execution of the Merger Agreement and the early stage of such litigation.
See "Risk Factors -- Risks Relating to the Business of Quantum
Direct -- Litigation Involving ValueVision."
In arriving at its opinion, Lehman Brothers reviewed and analyzed: (1) the
Merger Agreement and the specific terms of the Merger, including provisions
therein relating to corporate governance and management of the combined company
following the Merger; (2) publicly available information concerning National
Media and ValueVision that Lehman Brothers believed to be relevant to its
analysis; (3) financial and operating information with respect to the business,
operations and prospects of National Media, ValueVision and the combined company
following consummation of the Merger furnished to Lehman Brothers by National
Media and ValueVision; (4) trading histories of National Media Common Stock and
ValueVision Common Stock from December 10, 1996 to December 31, 1997 and a
comparison of those trading histories with those of other companies that Lehman
Brothers deemed relevant; (5) a comparison of the historical financial results
and present financial conditions of National Media and ValueVision with those of
other companies that Lehman Brothers deemed relevant; (6) National Media's
current cash flow forecast and limited cash position, its ability to meet
short-term liquidity requirements and the potential alternatives available to
National Media to fund such requirements, including the likelihood of being
required to issue equity securities to any potential source of financing or the
sale of all or a portion of National Media's businesses; (7) a comparison of the
financial terms of the Merger with the financial terms of certain other
transactions that Lehman Brothers deemed relevant; and (8) the potential pro
forma effects of the Merger, including the cost savings, operating synergies and
other strategic benefits expected by the management of National Media to result
from a combination of the businesses of National Media and ValueVision. In
addition, Lehman Brothers had discussions with the management of National Media
and ValueVision concerning their respective businesses,
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operations, assets, financial conditions and prospects (including, without
limitation, the cost savings, operating synergies and other strategic benefits
expected by management of National Media to result from a combination of the
businesses of National Media and ValueVision) and have undertook such other
studies, analyses and investigations as Lehman Brothers deemed appropriate.
In arriving at its opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by it
without assuming any responsibility for independent verification of such
information and further relied upon the assurances of management of each of
National Media and of ValueVision that they were not aware of any facts or
circumstances that would make such information inaccurate or misleading. With
respect to the financial projections of National Media, ValueVision and the
combined company following consummation of the Merger, upon advice of National
Media, Lehman Brothers assumed that such projections had been reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the management of each of National Media and of ValueVision as to
the future financial performance of National Media, ValueVision and the combined
company following consummation of the Merger (including, without limitation, the
cost savings, operating synergies and other strategic benefits expected by the
management of National Media and to result from a combination of the businesses
of National Media and ValueVision) and Lehman Brothers relied upon such
projections in arriving at its opinion. In addition, based upon information and
analyses provided to National Media by ValueVision, National Media requested
that Lehman Brothers also assume that the resolution of the Time Warner Cable
litigation will not have a material adverse impact on the business, operations,
financial condition or prospects of ValueVision or the combined company
following consummation of the Merger. In arriving at its opinion, Lehman
Brothers has not conducted a physical inspection of the properties and
facilities of National Media or ValueVision and has not made or obtained any
evaluations or appraisals of the assets or liabilities of National Media or
ValueVision. In arriving at its opinion, Lehman Brothers also assumed that the
transactions contemplated by the stipulation between ValueVision and Montgomery
Ward would be approved by the United States Bankruptcy Court for the District of
Delaware (which subsequently has been so approved) and that the redemption of
the Series C Stock would be satisfied prior to the consummation of the Merger
without any waivers or modifications of any material terms thereof and that the
Loan would be provided to National Media by ValueVision in accordance with its
proposed terms. Upon advice of National Media and its legal and accounting
advisors, Lehman Brothers further assumed that the Merger will qualify as a
transfer of property to Quantum Direct as described in Section 351 of the Code
and will be treated as an acquisition of National Media by ValueVision for
accounting and financial reporting purposes. In addition, although Lehman
Brothers fielded inquiries on National Media's behalf, Lehman Brothers did not
formally solicit any indications of interest from any third party with respect
to the purchase of all or a part of National Media's business. Lehman Brothers'
opinion necessarily is based upon market, economic and other conditions as they
existed on, and could be evaluated as of, the date of the opinion.
The following is a brief summary of the financial and comparative analyses
performed and factors considered by Lehman Brothers and reviewed with the
National Media Board of Directors in connection with the preparation by Lehman
Brothers of its oral presentation to the National Media Board of Directors on
December 12, 1997 and reaffirmed as of December 22, 1997, and in its January 5,
1998 written opinion.
The presentation of a fairness opinion involves various determinations as
to the most appropriate and relevant methods of financial and comparative
analysis and the application of those methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to summary
description. Furthermore, in arriving at its opinion, Lehman Brothers did not
attribute any particular weight to any analysis or factor considered by it, but
rather made qualitative judgments as to the significance and relevance of each
analysis or factor. Accordingly, Lehman Brothers believes that its analyses must
be considered as a whole and that considering any portion of such analyses and
the factors, without considering all analyses and factors, could create a
misleading or incomplete view of the process underlying the opinion. In
performing its analyses, Lehman Brothers made numerous assumptions with respect
to industry performance, general business and economic conditions and other
matters, many of which are beyond the control of National Media or ValueVision.
Any estimates contained in the analyses are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than as set forth
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therein. In addition, analyses relating to the value of businesses do not
purport to be appraisals or to reflect the prices at which businesses actually
may be sold.
Projections. As discussed above, Lehman Brothers analyzed one set of
Quantum Direct projections in support of its fairness opinion. These projections
are summarized below. The projections were not reviewed by independent auditors
and were not prepared in accordance with generally accepted accounting
principles or with Regulation S-X of the Securities Act of 1933, as amended.
Such projections were based on numerous estimates and other assumptions and are
inherently subject to significant uncertainties and contingencies. There is no
assurance that the projections will be achieved and the inclusion of such
estimates herein should not be regarded as an indication that ValueVision,
National Media, Quantum Direct or any other person considers such estimates an
accurate prediction of future events. See "The Merger -- Cautionary Statement
Concerning Forward-Looking Statements."
The Quantum Direct projections analyzed by Lehman Brothers included
revenues of $515.3 million, $582.5 million and $652.1 million in the fiscal
years ending January 31, 1999, 2000 and 2001, respectively. Such projections
also included operating income (i.e., earnings before interest and taxes, after
giving effect to certain merger synergies) of $32.5 million, $39.6 million and
$45.7 million in the fiscal years ending January 31, 1999, 2000 and 2001,
respectively. Such projections also included earnings before interest, taxes,
depreciation and amortization, after giving effect to certain merger synergies,
of $44.3 million, $51.5 million and $58.0 million in the fiscal years ending
January 31, 1999, 2000 and 2001, respectively.
Historical Stock Performance. Lehman Brothers reviewed the trading price of
the shares of National Media Common Stock and ValueVision Common Stock,
specifically, with respect to the most recent closing, fifty-two week high,
fifty-two week low and 60 day average prices. The historical stock performance
review was performed to provide background information and to add context to the
other analyses performed by Lehman Brothers, as described below.
Comparable Company Analysis. Using publicly available information, Lehman
Brothers compared the financial performance and stock market valuation of
National Media and of ValueVision with those of the following companies, which
were selected based on general business, operating and financial characteristics
comparable to National Media and ValueVision: CUC International Inc.; Fingerhut
Companies, Inc.; Harte-Hanks Communications, Inc.; HSN; The Reader's Digest
Association, Inc.; Shop at Home, Inc. and Sport Supply Group, Inc. (the
"Comparable Public Companies"). In addition, National Media was included as a
comparable company when evaluating ValueVision and ValueVision was included as a
comparable company when evaluating National Media . Among other multiples,
Lehman Brothers calculated the median multiples for the Comparable Public
Companies for the equity market value plus net indebtedness, preferred stock and
minority interests ("Firm Value") to latest twelve months ("LTM") revenues, EBIT
and EBITDA. The median multiples for the Comparable Public Companies comparable
to ValueVision for the Firm Value to revenues, EBIT and EBITDA were 0.92x, 20.4x
and 14.2x, respectively. Based on the above multiple range, the range of implied
value was $2.25 to $6.56 per share of ValueVision and $2.00 to $10.68 per share
of National Media. The range of multiples was from 0.45x to 5.93x, 9.0x to 30.0x
and 6.4x to 19.2x, respectively. The median multiples for the Comparable Public
Companies comparable to National Media for the Firm Value to revenues, EBIT and
EBITDA were 0.92x, 20.4x and 14.2x, respectively. The range of multiples was
from 0.23x to 5.93x, 9.0x to 30.0x and 6.4x to 19.2x, respectively. The
calculation of such medians and ranges excluded certain exceptionally high
and/or low (or negative) multiples. The ratios for the Comparable Public
Companies were based on publicly available financial statements dated July 31,
1997, September 30, 1997 and/or October 31, 1997 and closing stock market prices
on December 10, 1997.
However, because of the inherent differences between the businesses,
operations and prospects of ValueVision and National Media and the businesses,
operations and prospects of the Comparable Public Companies, Lehman Brothers
believed that it was inappropriate to, and therefore did not, rely solely on the
quantitative results of this analysis and accordingly made qualitative judgments
concerning differences between the financial and operating characteristics of
ValueVision, National Media and the Comparable Public Companies, that would, in
the view of Lehman Brothers, affect the public trading values of ValueVision and
of National Media and such comparable companies.
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Comparable Transaction Analysis. Using publicly available information,
Lehman Brothers reviewed certain terms and financial characteristics of merger
or acquisition transactions which Lehman Brothers deemed to be comparable (based
on the business of the acquired company, the size of the transaction and the
form of the consideration, among other factors) to the Merger. The transactions
considered by Lehman Brothers in its analysis consisted of (identified by
acquiror/acquiree): The News Corporation Limited/ Heritage Media Corp.; The Home
Depot, Inc./Maintenance Warehouse -- America Corp.; Silver King Communications,
Inc./HSN; Harte-Hanks Communications, Inc./DiMark, Inc.; Micro Warehouse, Inc./
Inmac Corp.; Heritage Media Corp./Dimac Corp.; Value Health, Inc./Diagnostics,
Inc.; Comcast Corporation/Tele-Communications, Inc.; Montgomery Ward Holding
Corp./ValueVision (for National Media only); National Media/Prestige, Prestige
Marketing International Limited and Suzanne Paul (for ValueVision only); and
National Media/Positive Response (for ValueVision only) (the "National Media
Comparable Transactions"). Lehman Brothers calculated the median multiples for
the National Media Comparable Transactions for the Firm Value (using the
transaction price for equity market value) to LTM revenues, EBIT and EBITDA. The
median multiples for transactions reviewed in analyzing the Merger from National
Media's perspective were 1.27x, 11.3x and 8.6x, respectively. The median
multiples for transactions reviewed in analyzing the Merger from ValueVision's
perspective were 1.19x, 11.2x and 8.5x, respectively. Based on the above
multiple range, the range of implied value was $1.96 to $8.04 per share of
ValueVision and $1.05 to $14.90 per share of National Media.
However, because the market conditions, rationale and circumstances
surrounding each of the transactions were specific to each transaction and
because of the inherent differences between the businesses, operations and
prospects of the Quantum Direct from ValueVision's perspective and the Quantum
Direct from National Media's perspective, and the acquired businesses analyzed,
Lehman Brothers believed that it was inappropriate to, and therefore did not
rely solely on the quantitative results of this analysis, and accordingly, also
made qualitative judgments concerning differences between the characteristics of
these transactions and the Merger that would affect the acquisition values of
ValueVision, National Media and such acquired companies.
Discounted Cash Flow Analysis of ValueVision. Lehman Brothers calculated
the present value of the future streams of after-tax cash flows that ValueVision
could be expected to produce over a ten-year period. The analysis utilized
projections relating to the business, operations and prospects of ValueVision.
ValueVision's management provided such projected information for the period
February 1, 1998 through January 31, 2001. The projected information for the
period February 1, 2001 through January 31, 2008 was extrapolated by National
Media and Lehman Brothers from the projections provided by ValueVision's
management. In calculating the projected after-tax cash flows of ValueVision,
Lehman Brothers did not include the results of Montgomery Ward Direct. The
projected after-tax cash flows for ValueVision (excluding the results of
Montgomery Ward Direct) for each of the fiscal years ending January 31, 1999,
January 31, 2000 and January 31, 2001 were approximately $1.8 million, $3.0
million and $4.4 million, respectively. The preceding projections were not
reviewed by independent auditors and were not prepared in accordance with
generally accepted accounting principles or with Regulation S-X of the
Securities Act of 1933, as amended. Such projections were based on numerous
estimates and other assumptions and are inherently subject to significant
uncertainties and contingencies. There is no assurance that the projections will
be achieved and the inclusion of such estimates herein should not be regarded as
an indication that ValueVision, National Media, Quantum Direct or any other
person considers such estimates an accurate prediction of future events. See
"The Merger -- Cautionary Statement Concerning Forward-Looking Statements."
The only material assumption made with respect to the projected after-tax
cash flows of ValueVision was that the results of Montgomery Ward Direct were
not included. After-tax cash flows for the ten year period beginning on February
1, 1998 and ending on January 31, 2008 were calculated as unlevered after-tax
earnings plus amortization and depreciation less net changes in non-cash,
non-debt working capital and capital expenditures ("Unlevered After-Tax Cash
Flow"). Lehman Brothers calculated terminal values for ValueVision in 2008 by
applying a range of perpetual growth rates to Unlevered After-Tax Cash Flow for
the year ended January 31, 2008. Lehman Brothers' determination of the
appropriate range of perpetual growth rates used was based on an assessment of
the business characteristics, operations and outlook for ValueVision, and on
Lehman Brothers' general experience in valuations of companies. The cash flow
streams and terminal
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values were then discounted to present values using a range of discount rates,
which were chosen based on several assumptions regarding factors such as
inflation rates, interest rates, the inherent business risk in ValueVision's
business and the cost of capital to ValueVision. Perpetual growth rates in
after-tax cash flows for ValueVision were projected by National Media to be 3.0%
to 5.0%. Discount rates ranged between 13.0% and 15.0%. Range of values for
ValueVision's theoretical intrinsic value per share resulting from this analysis
was $3.09 to $3.77 per share assuming no value for ValueVision's other
non-operating assets, and $5.38 to $6.05 assuming full value of ValueVision's
other non-operating assets, as estimated by management of ValueVision. This
assumes that the shares of ValueVision Common Stock and ValueVision warrants
held by Montgomery Ward would be retired/repurchased.
Analysis of Non-Operating Assets of ValueVision. In addition to reviewing
and analyzing the operations of ValueVision, Lehman Brothers also reviewed and
analyzed the non-operating assets of ValueVision, including investments in
public and private assets such as, public and private companies, partnerships,
investment funds, land and television stations "Non-Operating Assets."
Management of ValueVision provided Lehman Brothers with a schedule of such
investments, including their then-current value (as determined by ValueVision
management) and tax basis.
Discounted Cash Flow Analysis of National Media. Lehman Brothers calculated
the present value of the future streams of after-tax cash flows that National
Media could be expected to produce over a ten year period. The analysis utilized
projections covering the period January 1, 1998 through December 31, 2007 and
relating to the business, operations and prospects of National Media provided by
National Media's management and relied on certain assumptions with respect to
National Media's future business and operations. No assumptions were made with
respect to such after-tax cash flows. Lehman Brothers calculated terminal values
for National Media in 2007 by applying a range of perpetual growth rates to
Unlevered After-Tax Cash Flow for the year ended December 31, 2007. Lehman
Brothers' determination of the appropriate range of perpetual growth rates was
based on an assessment of the business characteristics, operations and outlook
for National Media, and on Lehman Brothers' general experience in valuations of
companies. The cash flow streams and terminal values were then discounted to
present values using a range of discount rates which were chosen based on
several assumptions regarding factors such as inflation rates, interest rates,
the inherent business risk in National Media's business, and the cost of capital
to National Media. Perpetual growth rates in after-tax cash flows for National
Media were projected by National Media to be 3.0% to 5.0%. Discount rates ranged
between 17.0% and 19.0%. Range of theoretical intrinsic per share values for
National Media Common Stock resulting from this analysis was $3.85 to $5.10 per
share.
Pro Forma Merger Analysis. Based on the projections for National Media for
the period January 1, 1998 through December 31, 2007 provided by management of
National Media, the projections for ValueVision provided by management of
ValueVision for the period February 1, 1998 through January 31, 2001, and the
projections for ValueVision provided by management of National Media for the
period February 1, 2001 through January 31, 2008; the value of ValueVision's
Non-Operating Assets; and employing the estimates by the management of each of
National Media and ValueVision as to potential cost savings anticipated to
result from the Merger, Lehman Brothers compared the estimated theoretical
intrinsic value of a share of National Media Common Stock (as computed in the
Discounted Cash Flow Analysis of National Media) with the estimated theoretical
intrinsic value of a common share in the combined company. In its pro forma
merger analysis, Lehman Brothers made the following assumptions: (i) operating
results of ValueVision's Montgomery Ward Direct catalog operations were
excluded; (ii) ValueVision's shares and warrants held by Montgomery Ward would
be retired/repurchased; (iii) certain ValueVision officers would receive
additional options with exercise prices "at the money" in connection with the
Merger; (iv) Robert N. Verratti's options would be priced according to the terms
of his employment agreement; (v) the Series C Stock would be repurchased; and
(vi) that transaction fees of approximately $5 million would be incurred in
connection with the Merger. Based upon such assumptions and estimates, including
the potential cost savings, operating synergies and other strategic benefits
expected by the management of each of National Media and ValueVision to result
from a combination of the businesses of National Media and ValueVision, Lehman
Brothers noted that the Merger would result in a theoretical intrinsic value per
share of National Media Common Stock of $4.21 to $5.22 excluding synergies and
$5.01 to $6.23 including synergies. Therefore, as compared with the theoretical
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intrinsic value of a share of National Media Common Stock prior to the Merger of
$3.85 to $5.10 (as described above), the Merger should result in per share value
accretion for current holders of National Media Common Stock of between 9.4% to
22.2%. Lehman Brothers also performed pro forma merger analyses using various
other assumptions with respect to the value of ValueVision's Non-Operating
Assets.
Lehman Brothers is an internationally recognized investment banking firm
and, as part of its investment banking activities, is regularly engaged in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. The National Media Board of
Directors selected Lehman Brothers because of its expertise, reputation and
familiarity with the media industry in general and because its investment
banking professionals have substantial experience in transactions similar to the
Merger.
As compensation for its services in connection with the Merger, National
Media has agreed to pay Lehman Brothers a fee for acting as financial advisor in
connection with the Merger, including rendering its opinion. This fee includes
(i) a $200,000 retainer and (ii) a fee based on the aggregate value of the total
consideration paid to National Media, and payable upon the closing of the
Merger, equal to 1.0% of the first $200 million of such consideration, plus
0.80% of any amount over $200 million, but in no event less than $2 million,
against which the retainer fees paid to Lehman Brothers will be credited. It is
presently expected that the total fees payable to Lehman Brothers will be $2
million. In addition, National Media has agreed to reimburse Lehman Brothers for
reasonable out-of-pocket expenses incurred in connection with the Merger and to
indemnify Lehman Brothers and certain related persons for certain liabilities
that may arise out of its engagement by National Media and the rendering of its
opinion.
In the ordinary course of its business, Lehman Brothers may actively trade
in National Media Common Stock and ValueVision Common Stock for its own account
and for the accounts of its customers and, accordingly, may at any time hold a
long or short position in such securities.
OPINION OF FINANCIAL ADVISOR TO VALUEVISION
At the January 4, 1998 telephonic meeting of the ValueVision Board of
Directors, Bear Stearns delivered its oral opinion (which was subsequently
confirmed in writing as of January 5, 1998) to the effect that, as of the date
thereof and subject to the assumptions and qualifications set forth therein, the
ValueVision Exchange Ratio was fair to the holders of ValueVision Common Stock
from a financial point of view (the "Bear Stearns Opinion"). Bear Stearns has
consented to the use of its name and the summary of its opinion in this Joint
Proxy Statement/Prospectus.
The full text of the Bear Stearns' Opinion, which sets forth the
assumptions made, matters considered and limits on the review undertaken, is
attached hereto as Annex C and is incorporated herein by reference. Bear Stearns
has consented to the inclusion of its opinion letter in this Joint Proxy
Statement/Prospectus and references thereto under this section. In giving such
consent, Bear Stearns does not admit that it comes within the category of
persons whose consent is required under, and Bear Stearns does not admit that it
is an "expert" with respect to any part of this Joint Proxy Statement/Prospectus
for purposes of the Securities Act and the rules and regulations thereunder.
ValueVision shareholders are urged to, and should, read the Bear Stearns Opinion
carefully in its entirety. The Bear Stearns Opinion is intended for the benefit
and use of the ValueVision Board of Directors and does not constitute a
recommendation to the ValueVision Board of Directors to approve the transaction
or to any holder of ValueVision Common Stock as to how to vote shares in
connection with the Merger. The Bear Stearns Opinion does not address
ValueVision's underlying business decision to pursue or consummate the Merger.
In addition, Bear Stearns does not express any opinion as to the price or range
of prices at which the shares of Quantum Direct may trade subsequent to the
consummation of the Merger. The summary of the Bear Stearns Opinion set forth in
this Joint Proxy Statement/Prospectus describes the material aspects of such
opinion and is qualified in its entirety by reference to the full text of such
opinion.
The financial terms of the Merger, including but not limited to the
ValueVision Exchange Ratio, were determined by arm's length negotiations between
ValueVision and National Media and were not based on any
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recommendation by Bear Stearns, although Bear Stearns provided advice to
ValueVision from time to time with respect to such terms. No limitations were
imposed by ValueVision with respect to the investigations made or the procedures
followed by Bear Stearns in rendering its opinion, but Bear Stearns did not
perform an independent assessment of the risks presented by currently
outstanding litigation involving National Media. For a discussion of these
risks, see "Risk Factors -- Risks Related to the Business of Quantum Direct --
Litigation Involving National Media.".
In the course of performing its review and analysis for rendering its
opinion, Bear Stearns, among other things: (i) reviewed the Merger Agreement
(including the exhibits attached thereto); (ii) reviewed each of ValueVision's
and National Media's Annual Reports to Shareholders and Annual Reports on Form
10-K, as amended for the years ended January 31, 1997 and March 31, 1997,
respectively, and Quarterly Reports on Form 10-Q for the periods ended April 30,
July 31 and October 31, 1997 for ValueVision and June 30 and September 30, 1997
for National Media; (iii) reviewed certain operating and financial information,
including internal projections of future financial results, provided to and
reviewed for Bear Stearns by the senior management of each of ValueVision and
National Media relating to their respective businesses and future prospects;
(iv) met with certain members of the senior managements of ValueVision and
National Media to discuss their respective operations, historical financial
statements and future prospects, as well as their views of the business,
operational and strategic benefits, potential synergies and other effects and
implications of the Merger; (v) reviewed the historical stock prices, trading
volumes and valuation parameters of ValueVision and National Media Common Stock;
(vi) reviewed certain publicly available financial data, stock market
performance data and valuation parameters of companies which Bear Stearns deemed
generally comparable to ValueVision and National Media; (vii) reviewed the
financial terms of selected recent transactions which Bear Stearns deemed
generally comparable to the Merger; and (viii) conducted such other studies,
analyses, inquiries and investigations as Bear Stearns deemed appropriate.
In the course of its review, Bear Stearns relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information, including projections, provided to Bear Stearns by
ValueVision and National Media or otherwise publicly available. With respect to
projected financial results and the potential synergies that could be achieved
upon consummation of the Merger, Bear Stearns assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the senior management of each of ValueVision and National Media
as to the expected future financial performance of their respective companies,
the combined company and as to the expected synergies achievable within the
forecasted time frames. Bear Stearns expressed no view with respect to the
obtainability of such projections and the potential synergies or the assumptions
on which they are based. Bear Stearns has not assumed any responsibility for the
independent verification of any such information or projections provided to Bear
Stearns and has relied further upon the assurances of the senior managements of
ValueVision and National Media that they are unaware of any facts that would
make the information or projections provided to Bear Stearns incomplete or
misleading. National Media provided ValueVision with various documents regarding
its pending and threatened litigation and claims. Based upon their review of
these documents and discussions with National Media's management and legal
advisors, ValueVision's management and legal advisors estimated what they
believed to be a "high end" potential range of legal exposure for such matters
of approximately $2.0 million to $3.5 million. Bear Stearns relied upon
ValueVision's estimate and expresses no opinion on such litigation and no view
as to the estimate of such liability. In arriving at its opinion, Bear Stearns
did not perform or obtain any independent appraisal of the assets or liabilities
of ValueVision and National Media, nor was Bear Stearns furnished with any such
appraisals. The Bear Stearns Opinion is necessarily based on the economic,
market and other conditions and the information made available to it as of the
date of such opinion. The opinion does not address ValueVision's underlying
decision to effect the Merger. Bear Stearns assumed that the Merger will be
accounted for under purchase accounting and Sections 351 and 368(a) (solely with
respect to ValueVision) of the Internal Revenue Code of 1986 as contemplated by
the Merger Agreement.
For purposes of rendering the Bear Stearns Opinion, Bear Stearns assumed,
with the consent of ValueVision's management, that the projections provided by
ValueVision are reasonably obtainable, and that the synergies described as being
reasonably obtainable will be obtained. Bear Stearns has also assumed, with
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the consent of ValueVision's management, that the representations and warranties
of each party contained in the Merger Agreement are true and correct in all
material respects, that each party will perform, in all material respects, all
of the material covenants and agreements required to be performed by it under
the Merger Agreement and that all conditions to the consummation of the Merger
will be satisfied or waived, unless the waiver of such condition would
materially impact ValueVision.
In connection with preparing and rendering the Bear Stearns Opinion, Bear
Stearns performed a variety of financial analyses. The summary of such analyses,
as set forth below, does not purport to be a complete description of the
analyses underlying the Bear Stearns Opinion. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to summary
description. Bear Stearns believes that its analyses must be considered as a
whole, and that selecting portions of its analyses and the factors considered by
it without considering all such factors and analyses, could create an incomplete
view of the process underlying the Bear Stearns Opinion. In arriving at its
opinion, Bear Stearns considered the results of all the analyses it performed.
Such analyses were prepared solely for purposes of providing its opinion as to
the fairness of the ValueVision Exchange Ratio, from a financial point of view,
to the shareholders of ValueVision and do not purport to be appraisals or
necessarily indicate the prices at which businesses or securities actually may
be sold. Analyses based upon forecasts of future results are not necessarily
indicative of actual future results, which may be significantly more or less
favorable than those results suggested by such analyses. As described above, the
Bear Stearns Opinion and Bear Stearns' presentation to the ValueVision Board of
Directors was one of many factors taken into consideration by the ValueVision
Board of Directors in making its determination to approve the Merger.
Bear Stearns reviewed various financial projections provided to it by
management of ValueVision and National Media. With respect to the financial
projections for ValueVision, Bear Stearns based its analyses on projections
provided by the management of ValueVision. With respect to the financial
projections for National Media, Bear Stearns based its analyses on two
alternative sets of financial projections. The first was based on projections
provided to Bear Stearns by the management of National Media. The second, based
on more conservative assumptions regarding National Media's projected
operations, including increases in the advertising-to-sales ratio, cost of goods
sold and distribution and selling expenses, with general and administrative
expenses varied to result in an approximately 4% EBITDA margin, all consistent
with average comparable historical ratios, was jointly developed by Bear Stearns
and ValueVision. The resulting two sets of projections for Quantum Direct
include certain synergies identified by ValueVision, including, but not limited
to, the estimated savings from the consolidation of certain distribution
facilities of the companies and other general and administrative functions.
Projections. As discussed above, Bear Stearns analyzed two sets of Quantum
Direct projections in support of its fairness opinion. These projections are
summarized below. The projections were not reviewed by independent auditors and
were not prepared in accordance with generally accepted accounting principles or
with Regulation S-X of the Securities Act of 1933, as amended. Such projections
were based on numerous estimates and other assumptions and are inherently
subject to significant uncertainties and contingencies. There is no assurance
that the projections will be achieved and the inclusion of such estimates herein
should not be regarded as an indication that ValueVision, National Media,
Quantum Direct or any other person considers such estimates an accurate
prediction of future events. See "The Merger -- Cautionary Statement Concerning
Forward-Looking Statements."
The first set of Quantum Direct projections analyzed by Bear Stearns
included revenues of $532.8 million, $581.4 million and $650.1 million in the
fiscal years ending January 31, 1999, 2000 and 2001, respectively. Such
projections included operating income (i.e. earnings before interest and taxes,
after giving effect to certain merger synergies) of $22.0 million, $31.7
million, and $38.7 million in the fiscal years ending January 31, 1999, 2000 and
2001, respectively. Such projections also included earnings before interest,
taxes, depreciation and amortization, after giving effect to certain merger
synergies, of $37.2 million, $46.7 million and $53.7 million in the fiscal years
ending January 31, 1999, 2000 and 2001, respectively.
The second set of Quantum Direct projections analyzed by Bear Stearns
included revenues of $511.9 million, $555.1 million and $615.6 million in the
fiscal years ending January 31, 1999, 2000 and 2001,
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respectively. Such projections included operating income (i.e. earnings before
interest and taxes, after giving effect to certain merger synergies) of $13.7
million, $20.9 million, and $25.7 million in the fiscal years ending January 31,
1999, 2000 and 2001, respectively. Such projections also included earnings
before interest, taxes, depreciation and amortization, after giving effect to
certain merger synergies, of $28.9 million, $35.9 million and $40.8 million in
the fiscal years ending January 31, 1999, 2000 and 2001, respectively.
The following is a summary of the material analyses presented by Bear
Stearns to the ValueVision Board in connection with the rendering of the Bear
Stearns Opinion.
Analysis of Market Equity Ratios. Bear Stearns reviewed and analyzed
certain actual market equity values for ValueVision and National Media (the
"Market Equity Values") based on the respective prices per share as of December
30, 1997 and based on the average price per share over the previous 30 trading
days. In this analysis, Bear Stearns compared the ratio of the Market Equity
Value of ValueVision to the sum of the Market Equity Values of ValueVision and
National Media after giving effect to the ValueVision Exchange Ratio.
ValueVision shareholders will receive approximately 55% of Quantum Direct's
Common Stock, which is higher than the ratio of the Market Equity Value of
ValueVision to the aggregate Market Equity Value of ValueVision and National
Media of approximately 54% and 51%, based on the stock price as of December 30,
1997 and the average price over the previous 30 trading days, respectively.
Pro Forma Merger Analysis. Bear Stearns analyzed certain pro forma
financial effects of the Merger based upon the estimated 1999 revenue and EBITDA
of Quantum Direct on a per share basis. Such pro forma analysis did not consider
one-time costs which may be incurred in connection with the Merger. The pro
forma analysis reflected certain assumptions regarding potential cost savings
anticipated to result from the Merger (See Footnote 1 to Selected Pro Forma
Condensed Consolidated Financial Data) provided by management of each of
ValueVision and National Media. The analysis calculated the revenue and EBITDA
on a per-share basis which each ValueVision shareholder had in ValueVision
stand-alone and then compared this to the revenue and EBITDA per share of
ValueVision shareholders in Quantum Direct, taking into account the ValueVision
Exchange Ratio. This analysis was performed on the two alternative sets of
projections of Quantum Direct described earlier, and the results of revenue and
EBITDA per share were as follows: for ValueVision stand-alone, $8.10 and $0.12,
respectively, and for each of the two sets of projections of Quantum Direct,
$11.29 and $0.59, and $11.76 and $0.76, respectively.
Net Asset Valuation. Bear Stearns analyzed the net assets of ValueVision
and Quantum Direct. The "Net Asset Value" equals the sum of: (i) the estimated
value of operating assets of ValueVision on a stand-alone basis and of Quantum
Direct and (ii) the Net After-Tax Cash Equivalent Value (as defined below) of
certain assets, less debt.
The Net After-Tax Cash Equivalent Value projected by ValueVision management
equals the projected after-tax value of certain non-operating assets of
ValueVision and Quantum Direct, as the case may be, as projected by ValueVision
management as of October 31, 1997, less the estimated cash cost of redeeming the
preferred equity interests of the holders of the Series C Stock (approximately
$22.5 million given the $20 million investment plus prepayment fees assuming the
shares are redeemed six months after their September 18, 1997 issue date) and
repurchasing the ValueVision Common Stock held by Montgomery Ward (approximately
$4.9 million), as applicable. ValueVision's and Quantum Direct's Net After-Tax
Cash Equivalent Values were projected by ValueVision senior management at
approximately $105.8 million and $101.3 million, respectively, as of October 31,
1997. The debt of ValueVision and Quantum Direct was approximately $1.5 million
and $28.9 million, respectively, as of October 31, 1997, as estimated by
ValueVision management.
In arriving at the Net Asset Values, Bear Stearns used discounted cash flow
analyses to estimate the value of various operating assets. This consisted of
(i) calculating a range of net present values for the unlevered free cash flows
(based on the financial projections for ValueVision stand-alone and the two sets
of financial projections for Quantum Direct) using discount rates in the range
of 12% to 16% reflecting the weighted average costs of capital and (ii)
combining such values with estimated terminal values by multiplying projected
EBITDA in fiscal year 2003 by terminal EBITDA multiples in the range of 5x to 9x
for ValueVision stand-alone and 6x to 10x for Quantum Direct, and discounting
such terminal values using the same discount rates utilized for the unlevered
free cash flows. The discounted cash flow analysis for
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ValueVision stand-alone and the two sets of alternative financial projections
for Quantum Direct resulted in an estimate of the after-tax value of the
operating assets of approximately $62 million, $252 million and $358 million,
respectively, which was then used in the Net Asset Value calculation as
discussed in the preceding paragraph. These analyses resulted in a Net Asset
Value of ValueVision stand-alone of approximately $166.2 million, or $6.20 per
share. Under each set of projections for Quantum Direct, the analyses resulted
in a Net Asset Value of approximately $324.6 million based upon the more
conservative projections and $430.3 million based upon the projections provided
by National Media, or approximately $6.64 and $8.80 per share, respectively,
after giving effect to the ValueVision Exchange Ratio. The analyses implied an
increase in Net Asset Value per share for ValueVision shareholders of
approximately 6.8% based upon the more conservative projections, and 41.7% based
upon the projections supplied by National Media.
Historical Stock Price Performance and Implied Market Ratios. Bear Stearns
reviewed the historical stock prices of ValueVision Common Stock and National
Media Common Stock and the implied market ratios, which it determined by
dividing the price per share of ValueVision Common Stock by the price per share
of National Media Common Stock (the "Market Ratio"), over various periods of
time including, among other periods, the twelve months ended December 30, 1997.
According to Bear Stearns' calculations, the Market Ratio ranged from a low of
0.40 to a high of 1.29, with an average of 0.72 during the twelve months ended
December 30, 1997. Bear Stearns noted that during this period, the ValueVision
Exchange Ratio was within the range of the high and low Market Ratios and above
the average Market Ratio. Accordingly, from ValueVision's financial perspective,
the ValueVision Exchange Ratio provided a premium of approximately 65.3% to the
average implied Market Ratio for the period.
Bear Stearns is an internationally recognized investment banking firm and,
as part of its investment banking activities, is regularly engaged in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. The ValueVision Board of Directors
selected Bear Sterns because of its expertise, reputation and familiarity with
the media industry in general and because its investment banking professionals
have substantial experience in transactions similar to the Merger.
Pursuant to an engagement letter between ValueVision and Bear Stearns and
as amended November 6, 1997, ValueVision agreed to pay Bear Stearns a fee of
$275,000 for rendering its opinion relating to the Merger (the "Fairness Opinion
Fee"). ValueVision also agreed to pay Bear Stearns a fee equal to 1.25% of the
aggregate value of any consideration received by the shareholders of ValueVision
in connection with the Merger, payable upon consummation of the Merger, net of
the Fairness Opinion Fee. Based on the recent closing prices of ValueVision
Common Stock, it is presently expected that the total fees payable to Bear
Stearns will be approximately $1.5 to $2 million. ValueVision also agreed to
reimburse Bear Stearns for its out-of-pocket expenses, including the reasonable
fees and disbursements of counsel, and to indemnify Bear Stearns and certain
related persons against certain liabilities in connection with the engagement of
Bear Stearns, including certain liabilities under the federal and state
securities laws.
In the ordinary course of its business, Bear Stearns may actively trade the
equity securities of ValueVision, National Media or Quantum Direct for its own
accounts and for the accounts of customers and, accordingly, may, at any time,
hold a long or short position in such securities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of the Boards of Directors of National
Media and ValueVision with respect to the Merger, the holders of National Media
Common Stock and National Media Series B Stock and the holders of ValueVision
Common Stock should be aware that certain members of management of each of
National Media and ValueVision and of the National Media Board of Directors and
the ValueVision Board of Directors have interests in the Merger that are
different from, or in addition to, the interests of the holders of National
Media Common Stock, National Media Series B Stock and ValueVision Common Stock
generally. The Boards of Directors of each of National Media and ValueVision
were aware of such interests and considered them, among other matters, in
approving the Merger Agreement and the transactions contemplated thereby.
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Board Of Directors, Committees and Management of Quantum Direct. As
provided in the Merger Agreement, upon the filing of the National Media
certificate of merger with the Secretary of State of the State of Delaware and
the ValueVision articles of merger with the Secretary of State of the State of
Minnesota, or at such later time as specified therein (the "Effective Time"),
the Quantum Direct Board of Directors will initially consist of 10 directors,
five of which will be designated by National Media and five of which will be
designated by ValueVision, all of which will be spread as evenly as possible
among Quantum Direct's three classes of Directors. Upon the appointment of a
successor Chief Executive Officer by the Quantum Direct Board of Directors, the
Quantum Direct Board of Directors will be expanded to 11 directors, with the
successor Chief Executive Officer filling the vacancy created by such expansion.
The Merger Agreement also provides that until three years after the Effective
Time, the Quantum Direct Board of Directors as constituted following each
election of directors shall consist of equal numbers of National Media Directors
(as defined below) and ValueVision Directors (as defined below). If at any time
prior to three years after the Effective Time, the number of National Media
Directors and ValueVision Directors serving, or that would be serving following
the next stockholders' meeting at which directors of Quantum Direct are to be
elected, would not be equal, then, subject to their fiduciary duties, the
Quantum Direct Board of Directors shall immediately appoint to the Quantum
Direct Board of Directors, and nominate for election at the next stockholders'
meeting at which directors are to be elected, such person or persons as may be
requested by the remaining National Media Directors (if the number of National
Media Directors is, or would otherwise become, less than the number of
ValueVision Directors) or by the remaining ValueVision Directors (if the number
of ValueVision Directors is, or would otherwise become, less than the number of
National Media Directors) to ensure that there shall be an equal number of
National Media Directors and ValueVision Directors. The term "National Media
Director" means (i) any person serving as a director of National Media who was
selected by the National Media Board of Directors on or prior to the Effective
Time to serve as a director of Quantum Direct, (ii) any person who becomes a
director of Quantum Direct pursuant to the second preceding sentence and who is
designated by the National Media Directors and (iii) any person designated by
any holder of National Media's or Quantum Direct's Series B Stock outstanding
prior to or as of the Effective Time. The term "ValueVision Director" means (i)
any person serving as a director of ValueVision who was selected by the
ValueVision Board of Directors on or prior to the Effective Time to serve as a
director of Quantum Direct and (ii) any person who becomes a Director of Quantum
Direct pursuant to the second preceding sentence and who is designated by the
ValueVision Directors.
The Quantum Direct Board of Directors will have an Executive Committee.
Until three years after the Effective Time, the Executive Committee will have
responsibility for (i) recommending to the full Quantum Direct Board of
Directors a successor Chief Executive Officer (and any successor thereto) to
Quantum Direct's interim Chief Executive Officer, Robert L. Johander and (ii)
shall have, to the fullest extent permitted by Delaware law, all of the powers,
duties and responsibilities (including, without limitation, those relating to
any and all issues relating to the FCC and any assets subject to its regulation)
of the entire Quantum Direct Board of Directors (except with respect to those
actions that require a supermajority vote as set forth in the Bylaws of Quantum
Direct). Until three years after the Effective Time, the Executive Committee
will be comprised of three ValueVision Directors (who initially shall be
Marshall S. Geller, Nicholas M. Jaksich and Robert L. Johander) and two National
Media Directors (who initially shall be Frederick S. Hammer and Robert N.
Verratti).
The Quantum Direct Board of Directors will have a Compensation Committee.
Until three years after the Effective Time, the Compensation Committee will have
responsibility for (i) reviewing the compensation and employee benefit policies
of Quantum Direct, (ii) recommending to the Executive Committee base salary
amounts and incentive awards for all elected officers of Quantum Direct and
setting guidelines for the administration of all salaries, (iii) administering
incentive compensation and awarding stock options to employees under any stock
option or compensation plan of Quantum Direct and amending or modifying any
provisions of such stock option or compensation plan that may be amended or
modified without stockholder approval and (iv) supervising all administrative
matters with respect to the foregoing. Until three years after the Effective
Time, the Compensation Committee will be comprised of two ValueVision Directors
and one National Media Director, each of whom shall meet the requirements of
independence as established by the exchange or market on which Quantum Direct's
stock is then traded or quoted.
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At the Effective Time, pursuant to the terms of the employment agreements
described below under "-- Interests of Certain Persons in the Merger --
Employment Agreements," (i) Robert L. Johander, the current Chairman and Chief
Executive Officer of ValueVision, and Frederick S. Hammer, the current President
and Chief Executive Officer of National Media, will serve as Co-Chairmen of the
Board of Quantum Direct, (ii) Robert L. Johander will serve as interim Chief
Executive Officer of Quantum Direct (Quantum Direct has engaged an executive
search firm to find a successor Chief Executive Officer to Mr. Johander), (iii)
Nicholas M. Jaksich, the current President and Chief Operating Officer of
ValueVision, will serve as President and Chief Operating Officer of Quantum
Direct; and (iv) Stuart R. Romenesko, the current Chief Financial Officer of
ValueVision, will serve as the Chief Financial Officer of Quantum Direct.
Indemnification of Directors and Officers of National Media and
ValueVision. The Merger Agreement provides that (a) from and after the Effective
Time, Quantum Direct will, and will cause the surviving corporations in the
National Media Merger and ValueVision Merger to, indemnify and hold harmless
each present and former director and officer of National Media and ValueVision
(the "Indemnified Parties"), against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities or amounts paid in
settlement incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent that National Media or ValueVision, as the case may
be, would have been permitted under Delaware law or Minnesota law and its
certificate of incorporation or articles of incorporation, as the case may be,
or bylaws in effect on the date of the Merger Agreement to indemnify such person
(and Quantum Direct, National Media and ValueVision shall also advance expenses
as incurred to the fullest extent permitted under applicable law, provided the
Indemnified Party to whom expenses are advanced provides an undertaking to repay
such advances if it is ultimately determined that such Indemnified Party is not
entitled to indemnification), and (b) for a period of six years after the
Effective Time, Quantum Direct will maintain or cause National Media and
ValueVision to maintain in effect policies of directors' and officers' liability
insurance covering those persons who are currently covered by ValueVision's or
National Media's directors' and officers' liability insurance policy with
coverage in amount and scope at least as favorable as National Media's and
ValueVision's existing coverage (provided the annual aggregate premium does not
exceed 200% of the annual premium currently paid by National Media and
ValueVision for such coverage (in either case, a "Current Premium")) with
respect to claims arising from facts or events which occurred on or before the
Effective Time. If such premium would at any time exceed 200% of the Current
Premium, then National Media and ValueVision shall maintain insurance policies
which provide the maximum and best coverage available at an annual premium equal
to 200% of the Current Premium.
Employment Agreements.
Constantinos I. Costalas. Pursuant to the terms of the Merger Agreement,
Mr. Costalas, National Media and Quantum Direct executed an amendment to Mr.
Costalas' employment agreement to become effective upon consummation of the
transactions contemplated by the Merger Agreement. Pursuant to the amended
employment agreement, Mr. Costalas will serve as Vice Chairman and Chief
Operating Officer of National Media for a period of 18 months following the
Effective Time at an annual minimum salary of $325,000. Under his existing
agreement, Mr. Costalas would have been entitled to resign following the
consummation of the Merger and to receive a lump sum payment equal to three
years base salary ($975,000). At the request of ValueVision, Mr. Costalas agreed
to defer such payment. Mr. Costalas will be entitled to a retention payment
equal to $975,000 at the end of the 18 month term of the amended agreement. The
retention payment will also be payable in the event the agreement is terminated
during the 18 month term by reason of Mr. Costalas' death or total disability,
by National Media without "Cause" or by Mr. Costalas' resignation for "Good
Reason." During the 18 month period, Mr. Costalas shall be entitled to certain
health benefits, bonus plans, an automobile allowance and life insurance as
generally made available to National Media's executive officers. National
Media's obligations under Mr. Costalas' agreement will be guaranteed by Quantum
Direct.
Frederick S. Hammer. Pursuant to the terms of the Merger Agreement, Mr.
Hammer, National Media and Quantum Direct executed an amendment to Mr. Hammer's
employment agreement to become effective
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<PAGE> 57
upon consummation of the transactions contemplated by the Merger Agreement.
Pursuant to the amended employment agreement, Mr. Hammer will serve as Chairman
of the Board of National Media for a period of six months following the
Effective Time at an annual minimum salary of $200,000. Under his existing
agreement, Mr. Hammer would have been entitled to resign following the
consummation of the Merger and to receive a lump sum payment equal to one year
base salary ($200,000). At the request of ValueVision, Mr. Hammer agreed to
defer such payment. Mr. Hammer will be entitled to a retention payment equal to
$200,000 at the end of the six month term of the amended agreement. The
retention payment will also be payable in the event the agreement is terminated
during the six month term by reason of Mr. Hammer's death or total disability,
by National Media without "Cause" or by Mr. Hammer's resignation for "Good
Reason." During the six month period, Mr. Hammer shall be entitled to certain
health benefits, bonus plans, an automobile allowance and life insurance as
generally made available to National Media's executive officers. National
Media's obligations under Mr. Hammer's agreement will be guaranteed by Quantum
Direct.
Robert N. Verratti. National Media and Mr. Verratti have amended and
restated Mr. Verratti's employment agreement pursuant to which Mr. Verratti is
employed as President and Chief Executive Officer of National Media for an
initial term expiring December 31, 1998, at an annual minimum salary of
$200,000. In connection with such agreement, Mr. Verratti holds options to
purchase up to 700,000 shares of National Media Common Stock. The options are
for a ten year term and are exercisable at a price per share equal to the lower
of $4.75 or, if a "triggering event" occurs prior to June 30, 1998, the closing
price of National Media Common Stock at the time of such triggering event, less
$4.00 per share, but in no event less than $.01 per share. The Merger will
constitute a "triggering event."
The agreement provides that either party may terminate the agreement upon
60 days' prior written notice. If National Media terminates the amended
agreement without Cause (as defined in the agreement) or if Mr. Verratti
terminates the agreement for Good Reason (as defined in the agreement), National
Media will be required to (i) pay Mr. Verratti, in installments, $300,000, and
(ii) maintain his employee benefits for one year after termination or for the
balance of the term of the amended agreement, whichever is longer. Upon a
"change in control" of National Media, Mr. Verratti may elect to resign and
receive a lump sum payment equal to $600,000. The Merger will constitute a
"change in control." Mr. Verratti has indicated his intention to exercise this
right upon consummation of the Merger.
Robert L. Johander. In connection with the negotiation of the Merger
Agreement, ValueVision executed an amendment to the employment agreement of
Rober L. Johander. Pursuant to Mr. Johander's amended employment agreement,
following the Effective Time of the Merger, Mr. Johander will serve as Chairman
of the Board of Directors and Chief Executive Officer of ValueVision and
Co-Chairman of the Board of Directors of Quantum Direct, and, until such time a
new Chief Executive Officer of Quantum Direct is hired, as interim Chief
Executive Officer of Quantum Direct. Mr. Johander's employment agreement expires
on January 31, 1999.
Nicholas M. Jaksich. In connection with the negotiation of the Merger
Agreement, ValueVision executed an amendment to the employment agreement of
Nicholas M. Jaksich. Pursuant to Mr. Jaksich's amended employment agreement, Mr.
Jaksich will serve as President and Chief Operating Officer of ValueVision and
Quantum Direct. In addition, pursuant to his amendment, Mr. Jaksich will receive
stock options to purchase 250,000 shares of ValueVision's common stock,
effective immediately prior to the Effective Time of the Merger and subject to
any applicable adjustments under the Merger Agreement. The exercise price of
each share subject to such stock options will be equal to the fair market value
of such share as of the date the stock option was granted, subject to any
applicable adjustments under the Merger Agreement, and will become exercisable
in accumulative installments of one-third of such stock options, commencing on
January 31, 1999 and on each subsequent anniversary of such date, provided that
if prior to January 31, 1999, the average trading price of the Quantum Direct
Common Stock for any 10 consecutive day period exceeds $8.00 per share, all of
such stock options will accelerate and become immediately exercisable on the
tenth day of such period. Such installments will be cumulative and will continue
to vest so long as Mr. Jaksich is an employee of ValueVision. Mr. Jaksich's
employment agreement expires on January 31, 1999.
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Messrs. Romenesko, Quinby and Lindquist. In connection with the negotiation
and execution of the Merger Agreement, and in order to provide compensation
comparable to the compensation provided to similar National Media executives,
ValueVision executed employment agreements (the "Employment Agreements") with
three of its executive officers: Stuart R. Romenesko, David T. Quinby and Scott
A. Lindquist. The Employment Agreements will only become effective upon
consummation of the Merger and will be assumed by Quantum Direct at such time.
Each Employment Agreement provides for a two year term commencing upon
consummation of the Merger. Pursuant to such Employment Agreement, the base
salaries of Messrs. Romenesko, Quinby and Lindquist will be increased from
$175,000, $140,000, and $125,000 to $210,000, $175,000 and $170,000,
respectively. In addition, Messrs. Romenesko, Quinby and Lindquist will each
receive stock options to purchase 50,000, 25,000 and 20,000 shares,
respectively, of ValueVision's Common Stock, effective immediately prior to the
Effective Time of the Merger and subject to any applicable adjustments under the
Merger Agreement. The exercise price of each share subject to such stock options
will be equal to the fair market value of such shares effective immediately
prior to the Effective Time of the Merger and subject to any applicable
adjustments under the Merger Agreement. The stock options will become
exercisable in three equal installments on each anniversary date of the Merger.
Messrs. Sisko and Sullivan. In connection with the amendment and
restatement of Mr. Verratti's employment agreement, Mr. Verratti relinquished
50,000 options previously issued to him. National Media concurrently issued
25,000 options each to Brian J. Sisko, General Counsel, Senior Vice President
and Secretary, and John J. Sullivan, Senior Vice President and Chief Financial
Officer, of National Media with the same pricing terms as Mr. Verratti's
options, as described above.
For a summary of the estimated maximum value of the contingent severance
benefits that may be provided to the executive officers of National Media and
ValueVision following consummation of the Merger, see the table below under
"-- Estimated Maximum Value of Potential Benefits to National Media and
ValueVision Executive Officers and Directors."
Stock Options. Each of the plans and agreements pursuant to which each
outstanding option to purchase shares of National Media Common Stock (a
"National Media Stock Option") and each outstanding option to purchase shares of
ValueVision Common Stock (a "ValueVision Stock Option") provides for vesting of
such options stock upon a "change in control." The Merger will constitute a
change in control under each such plan and agreement. As a result, all of the
currently unvested options outstanding under each such plan and agreement will
become fully vested and immediately exercisable upon consummation of the Merger.
The treatment in the Merger of outstanding options under each such plan and
agreement is described under "The Merger Agreement -- Certain Covenants -- Stock
Plans."
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The following table sets forth the estimated maximum value of certain
benefits afforded to the named executive officers, all executive officers as a
group, non-employee directors and all non-employee directors as a group of
National Media and Value Vision in connection with the Merger, including the
amount of severance payments that would be made to the such executive officers
(assuming for purposes of presentation that such executive officers are
terminated within the first year following the Merger) and the value of
outstanding stock options held by such executive officers and directors of
National Media and Value Vision which will be accelerated as a result of the
Merger.
ESTIMATED MAXIMUM VALUE OF POTENTIAL BENEFITS TO NATIONAL MEDIA
AND VALUEVISION EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED ESTIMATED ESTIMATED
ESTIMATED VALUE OF VALUE OF VALUE OF VALUE OF
VALUE OF STOCK OPTIONS UNVESTED RESTRICTED TOTAL
CONTINGENT REPRICED AS STOCK OPTIONS STOCK POTENTIAL
SEVERANCE A RESULT OF ACCELERATED BY ACCELERATED BY BENEFITS FROM
EXECUTIVE OFFICERS AND DIRECTORS PAYMENT(1) THE MERGER MERGER(2) MERGER(3) MERGER(4)
- -------------------------------- ---------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
NATIONAL MEDIA
Named Executive Officers:
Constantinos I. Costalas...... $ 975,000(5) -- -- -- $ 975,000
Frederick S. Hammer........... $ 200,000(6) -- -- -- $ 200,000
John W. Kirby................. -- -- -- -- --
John J. Sullivan.............. -- $ 78,125(7) -- -- $ 78,125
Robert N. Verratti............ $ 600,000 $2,187,500(8) -- -- $2,787,500
All Executive Officers as a
Group
(6 individuals)............. $1,775,000 $2,343,750 -- -- $4,118,750
Non-Employee Directors:
Albert R. Dowden.............. -- -- -- -- --
Michael J. Emmi............... -- -- -- -- --
William M. Goldstein, Esq. ... -- -- -- -- --
Robert E. Keith, Jr. ......... -- -- -- -- --
Ira M. Lubert................. -- -- -- -- --
Brian McAdams................. -- -- -- -- --
Warren V. Musser.............. -- -- -- -- --
Jon W. Yoskin II.............. -- -- -- -- --
All Non-employee Directors as
a Group (8 individuals)..... -- -- -- -- --
VALUEVISION
Named Executive Officers:
Nicholas M. Jaksich........... -- -- -- -- --
Robert L. Johander............ -- -- -- -- --
Edward A. Karr................ -- -- -- -- --
David T. Quinby............... -- -- -- -- --
Stuart R. Romenesko........... -- -- -- -- --
All Executive Officers as a
Group
(8 individuals)............. -- -- -- -- --
Non-Employee Directors:
Marshall S. Geller............ -- -- -- -- --
Robert J. Korkowski........... -- -- -- -- --
Paul D. Tosetti............... -- -- -- -- --
All Non-employee Directors as
a Group (3 individuals)..... -- -- -- -- --
</TABLE>
- -------------------------
(1) Payment of the indicated amounts is subject to termination of employment
under certain circumstances described above under "-- Employment
Agreements," and it cannot be estimated what amounts, if any, will actually
be paid to executive officers.
(2) The estimated value represents the number of shares of ValueVision Common
Stock or National Media Common Stock, as the case may be, subject to
currently unvested stock options that become vested and exercisable as a
result of consummating the Merger, multiplied by the "Option Spread." For
purposes of
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this table, the "Option Spread" is the difference between the exercise price
per share of each such option and the per share trading price of National
Media Common Stock or ValueVision Common Stock, as the case may be, on March
5, 1998 (ValueVision: $3.44 per share; National Media: $2.63 per share) (the
"Base Price").
(3) The estimated value represents the number of shares of restricted National
Media Common Stock or restricted ValueVision Common Stock, as the case may
be, with respect to which the restrictions will lapse as a result of
consummating the Merger, multiplied by the Base Price (defined above).
(4) The estimated value of the total potential benefits represents the aggregate
of the value of contingent severance payments, the value of unvested stock
options accelerated by the Merger, the value of restricted stock accelerated
by the Merger and the discounted option exercise price. The estimated value
of the total potential benefits does not include the value of stock options
that are fully vested prior to (and thus unaffected by) the Merger.
(5) Mr. Costalas is to be employed for 18 months following the Merger. Upon the
expiration of such period, he is entitled to a lump sum payment of $975,000.
If during the 18 month period Mr. Costalas' employment is terminated by
reason of his death or total disability, by National Media without "Cause"
or by Mr. Costalas' resignation for "Good Reason," Mr. Costalas or his
estate shall be entitled to the lump sum payment within 30 days of such
termination of employment.
(6) Mr. Hammer is to be employed for six months following the Merger. Upon the
expiration of such period, he is entitled to a lump sum payment of $200,000.
If during the six month period Mr. Hammer's employment is terminated by
reason of his death or total disability, by National Media without "Cause"
or by Mr. Hammer's resignation for "Good Reason," Mr. Hammer or his estate
shall be entitled to the lump sum payment within 30 days of such termination
of employment.
(7) Mr. Sullivan presently holds 25,000 options which, following consummation of
the Merger, will be exercisable at the lower of (a) $4.75 per share or (b)
the closing price of National Media Common Stock upon consummation of the
Merger, less $4.00 per share, but in no event less than $.01 per share. The
estimated value of Mr. Sullivan's stock options is based on the difference
between $3.125 (the closing price of National Media Common Stock on December
31, 1997) and $.01.
(8) Mr. Verratti presently holds 700,000 options which, following consummation
of the Merger, will be exercisable at the lower of (a) $4.75 per share or
(b) the closing price of National Media Common Stock upon consummation of
the Merger, less $4.00 per share, but in no event less than $.01 per share.
The estimated value of Mr. Verratti's stock options is based on the
difference between $3.125 (the closing price of National Media Common Stock
on December 31, 1997) and $.01.
Warrants. In connection with the Merger, Quantum Direct will assume all
obligations under warrants to purchase 1,750,000 shares of National Media Common
Stock issued to Safeguard Scientifics (Delaware), Inc. ("Safeguard") (the
"Affiliate Warrants"). Robert Keith, Ira Lubert and Warren Musser are directors
of National Media and affiliates of Safeguard. Messrs. Keith, Lubert and Musser
own 30,000, 15,000 and 60,000 Affiliate Warrants, respectively. The Affiliate
Warrants, which have a ten year term and an exercise price of $4.80 per share,
were issued to Safeguard and Messrs. Keith, Lubert and Musser in connection with
a capital raising transaction completed by National Media in December 1994.
After the Merger, the holders of the Affiliate Warrants shall have the
right to acquire the same number of shares of Quantum Direct Common Stock as
such holders would have been entitled to receive pursuant to the Merger had such
holders exercised the Affiliate Warrants in full immediately prior to the Merger
at an aggregate purchase price equal to the aggregate exercise price for the
shares of National Media Common Stock purchasable pursuant to the Affiliate
Warrants immediately prior to the Merger.
ACCOUNTING TREATMENT OF THE MERGER
Quantum Direct intends to account for the Merger by the purchase method of
accounting in accordance with generally accepted accounting principles ("GAAP").
ValueVision will be deemed the acquiror for accounting and financial reporting
purposes. Accordingly, National Media's results of operations will be included
in ValueVision's consolidated results of operations from and after the Effective
Time of the Merger. For purposes of preparing ValueVision's consolidated
financial statements, ValueVision will establish a new
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accounting basis for National Media's respective tangible and intangible assets
and liabilities based upon their respective estimated fair values thereof and
ValueVision's aggregate purchase price, including the costs of acquisition. It
is anticipated that ValueVision will have a purchase price in excess of tangible
net assets of National Media of approximately $80.1 million to be amortized over
25 years. A final determination of required purchase accounting adjustments and
the fair value of National Media's assets and liabilities has not yet been made.
Accordingly, the purchase accounting adjustments made in connection with the
development of the unaudited pro forma condensed consolidated financial data
appearing elsewhere in this Joint Proxy Statement/Prospectus are preliminary and
have been made solely for purposes of developing such pro forma financial
information to comply with disclosure requirements of the Securities and
Exchange Commission (the "SEC"). See "Pro Forma Condensed Consolidated Financial
Data."
CERTAIN FEDERAL REGULATORY MATTERS
FTC Approval Process. The Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "HSR Act") and the rules and regulations thereunder require that
parties of a certain size to a proposed merger or business combination exceeding
a certain size file with the Antitrust Division of the Department of Justice
(the "Antitrust Division") and the FTC, Notification and Report Forms ("Forms")
with respect to such merger or business combination. The parties thereafter are
required to observe a waiting period before consummating the reported
transaction. In compliance with the HSR Act, National Media and ValueVision
filed Forms on January 15, 1998 with the Antitrust Division and the FTC with
respect to the Merger. On February 2, 1998, the FTC granted early termination of
the applicable waiting period under the HSR Act. At any time before or after the
Effective Time, the Antitrust Division, the FTC, state antitrust authorities or
a private person or entity could seek to enjoin the Merger under the antitrust
laws.
FCC Approval Process. Consummation of the Merger is subject to the prior
approval of the FCC by final order. On January 20, 1998, the parties filed
applications with the FCC (the "FCC Consent Application") requesting consent to
the transfer of control of the FCC licenses currently held by subsidiaries of
ValueVision. Effective February 25, 1998, the FCC granted approval for the
transfer of control of the FCC licenses to Quantum Direct. Absent timely
challenges to such approvals, these approvals will become Final Orders on April
6, 1998.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The opinion of Drinker Biddle & Reath LLP, tax counsel to National Media,
as to the material federal income tax considerations generally applicable to
holders of National Media Common Stock who, pursuant to the National Media
Merger, exchange their National Media Common Stock solely for Quantum Direct
Common Stock, and to holders of National Media Series B Stock who exchange their
National Media Series B Stock solely for Quantum Direct Series B Stock, and the
opinion of Latham & Watkins, counsel to ValueVision, as to the material federal
income tax considerations generally applicable to holders of ValueVision Common
Stock who, pursuant to the ValueVision Merger, exchange their ValueVision Common
Stock solely for Quantum Direct Common Stock, are set forth below. Consummation
of the National Media Merger is conditioned upon the receipt by National Media
of an opinion of Drinker Biddle & Reath LLP, to the effect that, based upon
customary assumptions and representations principally relating to the stock
ownership and assets of Quantum Direct, National Media and ValueVision and the
continuation of the business of National Media and ValueVision, which
representations will be made by Quantum Direct, National Media, ValueVision and
their affiliates (the "Tax Representations"), for federal income tax purposes,
the National Media Merger, in conjunction with the ValueVision Merger, will be
treated as a nontaxable transfer of property to Quantum Direct by holders of
National Media Common Stock described in Section 351 of the Code. The portion of
the discussion below under "Treatment of Holders of National Media Common Stock
and National Media Series B Stock" assumes that the National Media Merger will
be treated in accordance with the opinion of Drinker Biddle & Reath LLP
described in the preceding sentence. Consummation of the ValueVision Merger is
conditioned upon the receipt by ValueVision of an opinion of Latham & Watkins,
to the effect that, based upon the Tax Representations, for federal income tax
purposes, the ValueVision Merger will be treated as a tax-free reorganization
within the meaning of Section 368 of the Code and the ValueVision Merger, in
conjunction with the National Media Merger, will be treated as a
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nontaxable transfer of property to Quantum Direct by holders of ValueVision
Common Stock described in Section 351 of the Code. The portions of the
discussion below under "-- Treatment of Holders of ValueVision Common Stock" and
"-- Cash in Lieu of Fractional Shares" assume that the ValueVision Merger will
be treated in accordance with the opinion of Latham & Watkins described in the
preceding sentence.
The following discussion and opinions of Drinker Biddle & Reath LLP and
Latham & Watkins are based upon the Tax Representations, current provisions of
the Code, currently applicable Treasury regulations, and judicial and
administrative decisions and rulings. There can be no assurance that the
Internal Revenue Service (the "IRS") will not take a contrary view, and no
ruling from the IRS has been or will be sought. Future legislative, judicial or
administrative changes or interpretations could alter or modify the statements
and conclusions set forth herein, and any such changes or interpretations could
be retroactive and could affect the tax consequences to the stockholders of
National Media and ValueVision.
The following discussion and opinions of Drinker Biddle & Reath LLP and
Latham & Watkins do not purport to deal with all aspects of federal income
taxation that may affect particular stockholders in light of their individual
circumstances, and is not intended for stockholders subject to special treatment
under the federal income tax law (including insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, foreign persons,
stockholders who hold their stock as part of a hedge, appreciated financial
position, straddle or conversion transaction, stockholders who do not hold their
stock as capital assets and stockholders who have acquired their stock upon the
exercise of employee options or otherwise as compensation). In addition, the
discussion below and the opinions do not consider the effect of any applicable
state, local or foreign tax laws.
Treatment Of Holders Of National Media Common Stock and National Media
Series B Stock. The opinion of Drinker Biddle & Reath LLP is that a holder of
National Media Common Stock who, pursuant to the National Media Merger,
exchanges National Media Common Stock for Quantum Direct Common Stock and to
holders of National Media Series B Stock who exchange their National Media
Series B Stock solely for Quantum Direct Series B Stock, will not recognize gain
or loss upon such exchange. Such holder's tax basis in the Quantum Direct Common
Stock and Quantum Direct Series B Stock, as the case may be, received pursuant
to the National Media Merger will be equal to its tax basis in the National
Media Common Stock and National Media Series B Stock surrendered, and its
holding period for the Quantum Direct Common Stock and Quantum Direct Series B
Stock will include its holding period for the National Media Common Stock and
National Media Series B Stock surrendered.
Exercise of National Media Dissenters' Rights. The opinion of Drinker
Biddle & Reath LLP is that holders of National Media Series B Stock who exercise
their statutory dissenters' rights will recognize gain or loss equal to the
difference between their tax basis in their National Media Series B Stock and
the amount of cash they receive in exchange therefor. See "The Merger --
Appraisal Rights."
Treatment Of Holders Of ValueVision Common Stock. The opinion of Latham &
Watkins is that, except as discussed below under "-- Cash in Lieu of Fractional
Shares," a holder of ValueVision Common Stock who, pursuant to the ValueVision
Merger, exchanges ValueVision Common Stock for Quantum Direct Common Stock will
not recognize gain or loss upon such exchange. Such holder's tax basis in the
Quantum Direct Common Stock received pursuant to the ValueVision Merger will be
equal to its tax basis in the ValueVision Common Stock surrendered (excluding
any portion of its tax basis allocated to fractional shares), and its holding
period for the Quantum Direct Common Stock will include its holding period for
the ValueVision Common Stock surrendered.
Cash In Lieu Of Fractional Shares. The opinion of Latham & Watkins is that
a holder of ValueVision Common Stock who receives cash in lieu of a fractional
share of Quantum Direct Common Stock will be treated as having received such
fractional share pursuant to the ValueVision Merger and then as having exchanged
such fractional share for cash in a redemption by Quantum Direct. Any gain or
loss attributable to fractional shares generally will be capital gain or loss.
The amount of such gain or loss will be equal to the difference between the
portion of the holder's tax basis in the ValueVision Common Stock surrendered in
the ValueVision Merger that is allocated to the fractional share and the cash
received in lieu thereof. Any such capital gain or loss will constitute
long-term capital gain or loss if the ValueVision Common Stock has been
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held by the holder for more than one year at the Effective Time. Long-term
capital gain recognized by certain non-corporate stockholders is subject to
federal income tax at preferential capital gains rates, and such gain recognized
with respect to an asset with a holding period of more than 18 months is subject
to federal income tax at further reduced capital gains rates.
Exercise of ValueVision Dissenters' Rights. The opinion of Latham & Watkins
is that ValueVision shareholders who exercise their statutory dissenters' rights
will recognize gain or loss equal to the difference between their tax basis in
their ValueVision Common Stock and the amount of cash they receive in exchange
therefor. See "The Merger -- Appraisal Rights."
Net Operating Loss Limitations. For a discussion of limitations on the use
of National Media's net operating losses, see "Risk Factors -- Risks Relating to
the Business of Quantum Direct."
Reporting Requirements and Backup Withholding. Each holder of National
Media Common Stock, National Media Series B Stock and ValueVision Common Stock
receiving Quantum Direct Common Stock or Quantum Direct Series B Stock, as the
case may be, as a result of the Merger will be required to retain certain
records and file with its federal income tax return a statement setting forth
certain facts relating to the Merger.
Backup withholding at the rate of 31% may apply with respect to certain
payments unless the recipient (i) is a corporation or comes within certain other
exempt categories and, when required, demonstrates this fact or (ii) provides a
correct taxpayer identification number, certifies as to no loss of exemption
from backup withholding and otherwise complies with applicable requirements of
the backup withholding rules. A stockholder who does not provide Quantum Direct
with its correct taxpayer identification number may be subject to penalties
imposed by the IRS. Any amounts withheld under the backup withholding rules may
be allowed as a refund or a credit against the stockholder's federal income tax
liability provided that certain required information is furnished to the IRS.
Quantum Direct will report to stockholders of Quantum Direct and to the IRS
the amount of "reportable payments" and any amount withheld with respect to
Quantum Direct Common Stock and Quantum Direct Series B Stock during each
calendar year.
EACH HOLDER OF NATIONAL MEDIA COMMON STOCK, NATIONAL MEDIA SERIES B STOCK
AND VALUEVISION COMMON STOCK IS URGED TO CONSULT ITS OWN TAX ADVISOR WITH
RESPECT TO THE TAX CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICABILITY AND
EFFECT OF STATE, LOCAL OR FOREIGN TAX LAWS.
DELISTING AND DEREGISTRATION OF NATIONAL MEDIA COMMON STOCK AND VALUEVISION
COMMON STOCK; LISTING OF QUANTUM DIRECT COMMON STOCK
ValueVision Common Stock currently is listed for quotation on the Nasdaq
National Market ("Nasdaq") under the symbol "VVTV." Upon consummation of the
Merger, ValueVision Common Stock will be delisted from Nasdaq and deregistered
under the Exchange Act. National Media Common Stock currently is listed on the
New York Stock Exchange (the "NYSE") under the symbol "NM." Upon consummation of
the Merger, National Media Common Stock will be delisted from NYSE and
deregistered under the Exchange Act. Application is being made to list the
shares of Quantum Direct Common Stock to be issued in the Merger on the NYSE.
The listing on the NYSE or a national exchange or market is a condition to the
consummation of the Merger. See "The Merger Agreement -- Conditions to
Obligations to Effect the Merger." Following the Merger, holders of National
Media Common Stock, ValueVision Common Stock and National Media Series B Stock
will need to exchange their outstanding stock certificates for shares of Quantum
Direct Common Stock and Quantum Direct Series B Stock. See "The Merger Agreement
- -- Exchange of Stock Certificates."
HOLDERS OF NATIONAL MEDIA COMMON STOCK, NATIONAL MEDIA SERIES B STOCK AND
VALUEVISION COMMON STOCK SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE A TRANSMITTAL FORM FROM NORWEST BANK MINNESOTA, N.A., THE EXCHANGE AGENT
THEREFOR.
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RESALES OF QUANTUM DIRECT COMMON STOCK ISSUED IN CONNECTION WITH THE MERGER;
AFFILIATE AGREEMENTS
Quantum Direct Common Stock issued in connection with the Merger will be
freely transferable, except that shares of Quantum Direct Common Stock received
by persons who are deemed to be "affiliates" (as such term is defined by Rule
144 under the Securities Act of 1933, as amended (the "Securities Act")), of
National Media or ValueVision at the Effective Time may be resold by them only
in transactions permitted by the resale provisions of Rule 145 under the
Securities Act or as otherwise permitted under the Securities Act. National
Media and ValueVision have agreed that they will use all reasonable efforts to
cause each of their executive officers and directors and persons who may be
deemed to be "affiliates" to execute a written agreement (an "Affiliate
Agreement") providing, among other things, that such person will not offer,
sell, transfer or otherwise dispose of any of the shares of Quantum Direct
Common Stock obtained as a result of the Merger except in compliance with the
Securities Act and the rules and regulations of the SEC thereunder. Each
Affiliate Agreement also requires such affiliate to make certain representations
with respect to certain tax matters.
APPRAISAL RIGHTS
National Media Common Stock. Holders of National Media Common Stock are not
entitled to dissenters' or appraisal rights in connection with the Merger
because (i) the National Media Common Stock was listed on the NYSE on the record
date for the National Media Special Meeting and (ii) the shares of Quantum
Direct Common Stock that such holders will be entitled to receive in the Merger
will be listed on the NYSE as of the Effective Time.
National Media Series B Stock. The holders of the National Media Series B
Stock (the "Class B Holders") who do not vote for the approval and adoption of
the Merger Agreement at the National Media Special Meeting and who otherwise
comply with the applicable statutory procedures of Section 262 of the DGCL
summarized herein may be entitled to appraisal rights under Section 262. In
order to exercise and perfect appraisal rights, the record holder of National
Media Series B Stock must follow the steps summarized below properly and in a
timely manner. A person having a beneficial interest in shares of National Media
Series B Stock held of record in the name of another person, such as a broker or
nominee, must act promptly to cause the record holder to follow the steps
summarized below properly and in a timely manner to perfect appraisal rights.
SECTION 262 OF THE DGCL IS REPRINTED IN ITS ENTIRETY AS ANNEX H TO THIS
JOINT PROXY STATEMENT/ PROSPECTUS. SET FORTH BELOW IS A SUMMARY DESCRIPTION OF
SECTION 262. THE FOLLOWING SUMMARY IS NOT A COMPLETE STATEMENT OF THE LAW
RELATING TO APPRAISAL RIGHTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
ANNEX H. ALL REFERENCES IN SECTION 262 AND THIS SUMMARY TO "CLASS B HOLDER" ARE
TO THE RECORD HOLDER OF THE SHARES OF NATIONAL MEDIA SERIES B STOCK IMMEDIATELY
PRIOR TO THE EFFECTIVE TIME AS TO WHICH APPRAISAL RIGHTS ARE ASSERTED. FAILURE
TO COMPLY STRICTLY WITH THE PROCEDURES SET FORTH IN SECTION 262 OF THE DGCL WILL
RESULT IN THE LOSS OF APPRAISAL RIGHTS.
Under the DGCL, holders of National Media Series B Stock who follow the
procedures set forth in Section 262 will be entitled to have their shares
appraised by the Delaware Court of Chancery (the "Delaware Court") and to
receive payment in cash of the "fair value" of such shares, exclusive of any
element of value arising from the accomplishment or expectation of the Merger,
together with a fair rate of interest, if any, as determined by such court.
Under Section 262, where a proposed merger is to be submitted for approval
at a meeting of stockholders, as in the case of the National Media Special
Meeting, the corporation, not less than 20 days prior to such meeting, must
notify each of its stockholders who was a stockholder on the record date with
respect to such shares for which appraisal rights are available, that appraisal
rights are so available, and must include in each such notice a copy of Section
262. This Joint Proxy Statement/Prospectus constitutes such notice to the
holders of National Media Series B Stock and Section 262 of the DGCL is attached
to this Joint Proxy Statement/Prospectus as Annex H. Any Class B Holder who
wishes to exercise such appraisal rights or who wishes to preserve his right to
do so should review the following discussion and Annex H carefully, because
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failure to timely and properly comply with the procedures specified will result
in the loss of appraisal rights under the DGCL.
A Class B Holder wishing to exercise appraisal rights (a) must not vote for
the approval and adoption of the Merger Agreement and (b) must deliver to
National Media, before the vote or the proposal to approve and adopt the Merger
Agreement, a written demand for appraisal of such holder's shares of National
Media Series B Stock. A Class B Holder who signs and returns a proxy card
without expressly directing that his or her shares of National Media Series B
Stock be voted against the Merger Agreement will effectively waive his, her or
its appraisal rights because such shares represented by the proxy card will be
voted for the approval and adoption of the Merger Agreement. Accordingly, a
Class B Holder who desires to exercise and perfect appraisal rights with respect
to any of his or her shares of National Media Series B Stock must either (i)
refrain from executing and returning the enclosed proxy card and from voting in
person in favor of the proposal to approve the Merger Agreement, or (ii) check
either the "Against" or the "Abstain" box next to the proposal on such card or
affirmatively vote in person against the proposal or register in person an
abstention with respect thereto. A vote or proxy against the Merger Agreement
shall not, in and of itself, constitute a demand for appraisal.
A demand for appraisal will be sufficient if it reasonably informs National
Media of the identity of the Class B Holder and that such Class B Holder intends
thereby to demand appraisal of such Class B Holder's shares of National Media
Series B Stock. This written demand for appraisal must be separate from any
proxy or vote abstaining from or voting against the approval and adoption of the
Merger Agreement. A Class B Holder wishing to exercise appraisal rights must be
the record holder of such shares of National Media Series B Stock on the date
the written demand for appraisal is made and must continue to hold such shares
through the Effective Time. Accordingly, a Class B Holder who is the record
holder of shares of National Media Series B Stock on the date the written demand
for appraisal is made, but who thereafter transfers such shares prior to the
Effective Time, will lose any right to appraisal in respect of such shares.
Only a holder of record of shares of National Media Series B Stock is
entitled to assert appraisal rights for the shares of National Media Series B
Stock registered in that holder's name. A demand for appraisal should be
executed by or on behalf of the holder of record, fully and correctly, as the
holder's name appears on the stock certificates and must state that such person
intends thereby to demand appraisal of his, her or its shares of National Media
Series B Stock. If the shares are owned of record in a fiduciary capacity, such
as by a trustee, guardian or custodian, execution of the demand for appraisal
should be made in that capacity, and if the shares are owned of record by more
than one person, as in a joint tenancy or tenancy in common, the demand should
be executed by or on behalf of all joint owners. An authorized agent, including
one for two or more joint owners, may execute the demand for appraisal on behalf
of a holder of record; however, the agent must identify the record owner or
owners and expressly disclose the fact that, in executing the demand, he or she
is acting as agent for such owner or owners.
A record holder such as a broker who holds shares as nominee for several
beneficial owners may exercise appraisal rights with respect to the shares of
National Media Series B Stock held for one or more beneficial owners while not
exercising such rights with respect to the shares held for other beneficial
owners; in such case, the written demand should set forth the number of shares
as to which appraisal is sought. Where the number of shares of National Media
Series B Stock is not expressly stated, the demand will be presumed to cover all
shares held in the name of the record owner. Class B Holders who hold their
shares in brokerage accounts or other nominee form and who wish to exercise
appraisal rights are urged to consult with their brokers to determine the
appropriate procedures for the making of a demand for appraisal by such nominee.
ALL WRITTEN DEMANDS FOR APPRAISAL OF SHARES MUST BE MAILED OR DELIVERED TO:
NATIONAL MEDIA CORPORATION, ELEVEN PENN CENTER, SUITE 1100, 1835 MARKET STREET,
PHILADELPHIA, PENNSYLVANIA 19103, OR SHOULD BE DELIVERED TO THE SECRETARY AT THE
NATIONAL MEDIA SPECIAL MEETING, PRIOR TO THE VOTE ON THE MERGER AGREEMENT.
Within ten days after the Effective Time, National Media will notify each
Class B Holder who properly asserted appraisal rights under Section 262 and has
not voted for the approval and adoption of the Merger Agreement as of the
Effective Time.
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Within 120 days after the Effective Time, but not thereafter, National
Media or any Class B Holder who has complied with the statutory requirements
summarized above may file a petition in the Delaware Court demanding a
determination of the fair value of the shares held by such Class B Holder. If no
such petition is filed, appraisal rights will be lost for all Class B Holders
who had previously demanded appraisal of their shares. National Media is not
under any obligation, and has no present intention, to file a petition with
respect to appraisal of the value of the shares. Accordingly, Class B Holders
who wish to exercise their appraisal rights should regard it as their obligation
to take all steps necessary to perfect their appraisal rights in the manner
prescribed in Section 262.
Within 120 days after the Effective Time, any Class B Holder who has
complied with the provisions of Section 262 will be entitled, upon written
request, to receive from National Media a statement setting forth the aggregate
number of shares of National Media Series B Stock not voted in favor of the
approval and adoption of the Merger Agreement and with respect to which demands
for appraisal were received by National Media, and the number of holders of such
shares. Such statement must be mailed within ten days after the written request
therefore has been received by National Media.
If a petition for an appraisal is timely filed and a copy thereof served
upon National Media, National Media will then be obligated within 20 days to
file with the Delaware Register in Chancery a duly verified list containing the
names and addresses of the Class B Holders who have demanded appraisal of their
shares and with whom agreements as to the value of their shares have not been
reached. After notice to the Class B Holders as required by the Delaware Court,
the Delaware Court is empowered to conduct a hearing on such petition to
determine those Class B Holders who have complied with Section 262 and who have
become entitled to appraisal rights thereunder. The Delaware Court may require
the Class B Holders who demanded appraisal rights of their shares of National
Media Series B Stock to submit their stock certificates to the Register in
Chancery for notation thereon of the pendency of the appraisal proceeding; and
if any Class B Holder fails to comply with such direction, the Delaware Court
may dismiss the proceedings as to such Class B Holder.
After determining which Class B Holders are entitled to appraisal, the
Delaware Court will appraise the "fair value" of their shares of National Media
Series B Stock, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
Holders considering seeking appraisal should be aware that the fair value of
their shares as determined under Section 262 could be more than, the same as or
less than the consideration they are entitled to receive pursuant to the Merger
Agreement if they did not seek appraisal of their shares and that investment
banking opinions as to fairness from a financial point of view are not
necessarily opinions as to fair value under Section 262. In determining "fair
value" of shares, the Delaware Court shall take into account all relevant
factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court has stated that
such factors include "market value, asset value, dividends, earnings prospects,
the nature of the enterprise and any other facts which were known or which could
be ascertained as of the date of the merger which throw any light on future
prospects of the merged corporation." In Weinberger, the Delaware Supreme Court
stated, among other things, that "proof of value by any techniques or methods
generally considered acceptable in the financial community and otherwise
admissible in court" should be considered in an appraisal proceeding. In
addition, the Delaware Court has decided that the statutory appraisal remedy,
depending on factual circumstances, may or may not be a dissenter's exclusive
remedy.
The Delaware Court will also determine the amount of interest, if any, to
be paid on the amounts to be received by persons whose shares of National Media
Series B Stock have been appraised. The costs of the action may be determined by
the Delaware Court and taxed upon the parties as the Delaware Court deems
equitable. The Delaware Court may also order that all or a portion of the
expenses incurred by any Class B Holder in connection with an appraisal,
including without limitation, reasonable attorneys' fees and the fees and
expenses of experts utilized in the appraisal proceeding, be charged pro rata
against the value of all of the shares entitled to appraisal. In the absence of
such determination or assessment, each party bears its own expenses.
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Any Class B Holder who has duly demanded and perfected an appraisal in
compliance with Section 262 will not, after the Effective Time, be entitled to
vote his or her shares for any purpose or be entitled to the payment of
dividends or other distributions thereon, except dividends or other
distributions payable to holders of record of shares of National Media Series B
Stock as of a date prior to the Effective Time.
At any time within 60 days after the Effective Time, any Class B Holder
will have the right to withdraw his or her demand for appraisal and to accept
the merger consideration. After this period, a Class B Holder may withdraw his
or her demand for appraisal only with the written consent of National Media. If
no petition for appraisal is filed with the Delaware Court within 120 days after
the Effective Time, a Class B Holder's right to appraisal will cease and he or
she will be entitled to receive the merger consideration, without interest, as
if he or she had not demanded appraisal of his or her shares. No petition timely
filed in the Delaware Court demanding appraisal will be dismissed as to any
Class B Holder without the approval of the Delaware Court, and such approval may
be conditioned on such terms as the Delaware Court deems just.
If any Class B Holder who properly demands appraisal of his or her shares
of National Media Series B Stock under Section 262 fails to perfect, or
effectively withdraws or loses, his right to appraisal, as provided in the DGCL,
the shares of such Class B Holder will be converted into the right to receive
the consideration receivable with respect to such shares in accordance with the
Merger Agreement. A Class B Holder will fail to perfect, or effectively lose or
withdraw, his right to appraisal if, among other things, no petition for
appraisal is filed within 120 days after the Effective Time, or if the Class B
Holder delivers to National Media a written withdrawal of his demand for
appraisal. Any such attempt to withdraw an appraisal demand more than 60 days
after the Effective Time will require the written approval of National Media.
CLASS B HOLDERS DESIRING TO EXERCISE THEIR APPRAISAL RIGHTS MUST NOT VOTE
FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND MUST STRICTLY COMPLY
WITH THE PROCEDURES SET FORTH IN SECTION 262 OF THE DGCL.
FAILURE TO TAKE ANY REQUIRED STEP IN CONNECTION WITH THE EXERCISE OF
APPRAISAL RIGHTS WILL RESULT IN THE TERMINATION OR WAIVER OF SUCH RIGHTS.
ValueVision Common Stock. Under Minnesota law, ValueVision shareholders
have the right to an appraisal of the value of their shares in connection with
the Merger. Sections 302A.471 and 302A.473 of the MBCA entitle any ValueVision
shareholder who objects to the Merger who follows the procedures prescribed by
Section 302A.473, in lieu of receiving the consideration proposed under the
ValueVision Merger, to receive cash equal to the "fair value" of such
shareholder's shares of ValueVision Common Stock. Set forth below is a summary
of the material procedures relating to the exercise of such dissenters' rights.
This summary does not purport to be a complete statement of dissenters' rights
and is qualified in its entirety by reference to Sections 302A.471 and 302A.473
of the MBCA, which are reproduced in full as Annex I attached to this Joint
Proxy Statement/Prospectus.
ANY VALUEVISION SHAREHOLDER CONTEMPLATING THE POSSIBILITY OF DISSENTING
FROM THE MERGER SHOULD CAREFULLY REVIEW THE TEXT OF ANNEX I (PARTICULARLY THE
SPECIFIED PROCEDURAL STEPS REQUIRED TO PERFECT THE DISSENTERS' RIGHTS, WHICH ARE
COMPLEX) AND SHOULD ALSO CONSULT SUCH SHAREHOLDER'S LEGAL COUNSEL. SUCH RIGHTS
WILL BE LOST IF THE PROCEDURAL REQUIREMENTS OF SECTION 302A.473 OF THE MBCA ARE
NOT FULLY AND PRECISELY SATISFIED.
The MBCA provides dissenters' rights for any shareholder of ValueVision who
objects to the Merger who meets the requisite statutory requirements contained
in the MBCA. Under the MBCA, any ValueVision shareholder who (i) files with
ValueVision written notice of his or her intent to demand the fair value of his
or her shares of ValueVision Common Stock if the ValueVision Merger is
consummated and becomes effective, which notice is filed with ValueVision before
the vote is taken at the ValueVision Special Meeting and (ii) does not vote his
or her shares of ValueVision Common Stock at the ValueVision Special Meeting in
favor of the proposal to approve the Merger, shall be entitled, if the Merger is
approved and effected, to receive a cash payment of the fair value of such
shareholder's shares of ValueVision Common Stock upon compliance with the
applicable statutory procedural requirements. A failure by any ValueVision
shareholder
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to vote against the proposal to approve the Merger will not in and of itself
constitute a waiver of the dissenters' rights of such shareholder under the
MBCA. In addition, a ValueVision shareholder's vote against the proposal to
approve the Merger will not satisfy the notice requirement referred to in clause
(i) above.
After the proposed ValueVision Merger has been approved, ValueVision must
send written notice to all shareholders who have given written notice of their
intent to demand the fair value of their shares of ValueVision Common Stock and
not voted in favor of the ValueVision Merger as described above.
The notice will contain: (i) the address where the demand for payment and
certificates representing the shares of ValueVision Common Stock (the
"Certificates") must be sent and the date by which they must be received, (ii)
any restrictions on transfer of uncertificated shares that will apply after the
demand for payment is received, (iii) a form to be used to certify the date on
which the shareholder, or the beneficial owner on whose behalf the shareholder
dissents, acquired the shares (or an interest in them) and to demand payment,
and (iv) a copy of the provisions of the MBCA set forth in Annex I with a brief
description of the procedures to be followed under those provisions. A
ValueVision shareholder who is sent a notice and who wishes to assert
dissenters' rights must demand payment and deposit his or her Certificate within
30 days after such notice is given by ValueVision. Prior to the Effective Time,
a ValueVision shareholder exercising dissenters' rights retains all other rights
of a ValueVision shareholder. From and after the Effective Time of the Merger,
dissenting shareholders will no longer be entitled to any rights of a
ValueVision shareholder, including, but not limited to, the right to receive
notice of meetings, to vote at any meetings or to receive dividends, and will
only be entitled to any rights to appraisal as provided by the MBCA. If any such
holder of ValueVision Common Stock shall have failed to perfect or shall have
effectively withdrawn or lost such right, his or her shares of ValueVision
Common Stock shall thereupon be deemed to have been converted into the right to
receive Quantum Direct Common Stock and cash for any fractional shares pursuant
to the Merger Agreement.
After the Effective Time or upon receipt of a valid demand for payment,
whichever is later, ValueVision must remit to each dissenting shareholder who
complied with the requirements of the MBCA the amount ValueVision estimates to
be the fair value of such shareholder's shares of ValueVision Common Stock, plus
interest accrued from the Effective Time of the Merger to the date of payment.
The payment also must be accompanied by certain financial data relating to
ValueVision, ValueVision's estimate of the fair value of the shares and a
description of the method used to reach such estimate, and a copy of the
applicable provisions of the MBCA with a brief description of the procedures to
be followed in demanding supplemental payment. The dissenting shareholder may
decline the offer and demand payment for the fair value of the ValueVision
Common Stock. Failure to make such demand on a timely basis entitles the
dissenting shareholder only to the amount offered. If ValueVision fails to remit
payment within 60 days of the deposit of the Certificates or the imposition to
transfer restrictions on uncertificated shares, it shall return all deposited
Certificates and cancel all transfer restrictions; however ValueVision may again
give notice regarding the procedure to exercise dissenters' rights and require
deposit or restrict transfer at a later time. If a dissenting shareholder
believes that the amount remitted is less than the fair value of the ValueVision
Common Stock plus interest, such dissenting shareholder may give written notice
to ValueVision of his or her own estimate of the fair value of the shares, plus
interest, within 30 days after ValueVision mails its remittance, and demand
payment of the difference.
If ValueVision receives a demand from a dissenting shareholder to pay such
difference, it shall, within 60 days after receiving the demand, either pay to
the dissenting shareholder the amount demanded or agreed to by the dissenting
shareholder after discussion with ValueVision or file in court a petition
requesting that the court determine the fair value of the ValueVision Common
Stock.
The court may appoint one or more appraisers to receive evidence and make
recommendations to the court on the amount of the fair value of the shares. The
court shall determine whether the dissenting shareholder has complied with the
requirements of Section 302A.473 of the MBCA and shall determine the fair value
of the shares, taking into account any and all factors the court finds relevant,
computed by any method or combination of methods that the court, in its
discretion, sees fit to use. The fair value to the shares as determined by the
court is binding on all dissenting shareholders and may be less than, equal to
or greater than the market price of the Quantum Direct Common Stock to be issued
to non-dissenting shareholders for
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their shares of ValueVision Common Stock if the Merger is completed. If the
court determines that the fair value of the shares is in excess of the amount if
any, remitted by ValueVision, then the court will enter a judgment for cash in
favor of the dissenting shareholders in an amount by which the value determined
by the court, plus interest, exceeds such amount previously remitted. A
dissenting shareholder will not be liable to ValueVision if the amount, if any,
remitted to such shareholder exceeds the fair value of the shares, as determined
by the court, plus interest.
Costs of the court proceeding shall be determined by the court and assessed
against ValueVision, except that part or all of the costs may be assessed
against any dissenting shareholders whose actions in demanding supplemental
payments are found by the court to be arbitrary, vexatious or not in good faith.
If the court finds that ValueVision did not substantially comply with the
relevant provisions of the MBCA, the court may assess the fees and expenses, if
any, of attorneys or experts as the court deems equitable against ValueVision.
Such fees and expenses may also be assessed against any party in bringing the
proceedings if the court finds that such party has acted arbitrarily,
vexatiously or not in good faith, and may be awarded to a party injured by those
actions. The court may award, in its discretion, fees and expenses of an
attorney for the dissenting shareholders out of the amount awarded to such
shareholders, if any.
A shareholder of record may assert dissenters' rights as to fewer than all
of the shares registered in such shareholder's name only if he or she dissents
with respect to all shares beneficially owned by any one beneficial shareholder
and notifies ValueVision in writing of the name and address of each person on
whose behalf he or she asserts dissenters' rights. The rights of such a partial
dissenting shareholder are determined as if the shares as to which he or she
dissents and his or her other shares were registered in the names of different
shareholders.
Under Subdivision 4 of Section 302A.471 of the MBCA, a ValueVision
shareholder has no right, at law or in equity, to set aside the approval of the
Merger Agreement or the consummation of the Merger except if such adoption or
consummation was fraudulent with respect to such shareholder or ValueVision.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
National Media, ValueVision and Quantum Direct have made forward-looking
statements in this document and the documents incorporated by reference herein
that are subject to risks and uncertainties. These statements are based on
management's beliefs and assumptions, based on information currently available
to management. Forward-looking statements include the information concerning
possible or assumed future results of operations of National Media, ValueVision
and Quantum Direct set forth (i) under "Summary," "Risk Factors," "The Merger --
Background of the Merger," "-- Recommendations of the Boards of Directors of
National Media and ValueVision; Reasons for the Merger," "-- Opinion of
Financial Advisor to National Media (including without limitation the
projections of ValueVision and Quantum Direct included therein)" and "-- Opinion
of Financial Advisor to ValueVision (including without limitation the
projections of Quantum Direct included therein)," and "Unaudited Pro Forma
Financial Information," (ii) under "Business" and "Management's Discussion and
Analysis" in each company's Annual Report on Form 10-K and Quarterly Reports on
Form 10-Q incorporated by reference into this document, (iii) under "Quantum
Direct -- Business and Strategy" and (iv) in this document and the documents
incorporated herein by reference preceded by, followed by or that include the
words "believes," "expects," "anticipates," "intends," "plans," "estimates" or
similar expressions.
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. The future results and stockholder values
of National Media, ValueVision and Quantum Direct may differ materially from
those expressed in these forward-looking statements. Many of the factors that
will determine these results and values are beyond National Media's,
ValueVision's and Quantum Direct's ability to control or predict. Holders of
National Media Common Stock, National Media Series B Stock and ValueVision
Common Stock are cautioned not to put undue reliance on any forward-looking
statements. In addition, National Media, ValueVision and Quantum Direct do not
have any intention or obligation to update forward-looking statements after they
distribute this Joint Proxy Statement/Prospectus, even if new information,
future events or other circumstances have made them incorrect or misleading. For
those statements,
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National Media and ValueVision (but not Quantum Direct) claim the protection of
the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
Holders of National Media Common Stock, National Media Series B Stock and
ValueVision Common Stock should understand that the following important factors,
in addition to those discussed elsewhere in the documents which are incorporated
by reference into this Joint Proxy Statement/Prospectus, could affect the future
results of Quantum Direct and could cause results to differ materially from
those expressed in such forward-looking statements: (i) the effect of economic
conditions; (ii) the ability of National Media and ValueVision to successfully
integrate their operations; (iii) the impact of competition; and (iv) customer
demand.
THE COMBINED COMPANY
As a result of the Merger, National Media and ValueVision will become
wholly-owned subsidiaries of Quantum Direct, which will succeed to the
businesses currently conducted by National Media and ValueVision. National Media
intends to maintain its principal office in Philadelphia, Pennsylvania.
ValueVision intends to maintain its principal office in Eden Prairie, Minnesota.
The executive management of Quantum Direct will be comprised of members of the
existing executive management of National Media and ValueVision, with Robert L.
Johander serving as interim Chief Executive Officer and Co-Chairman of the Board
of Quantum Direct, Nicholas M. Jaksich serving as the President and Chief
Operating Officer of Quantum Direct, Frederick S. Hammer serving as Co-Chairman
of the Board of Quantum Direct and Stuart R. Romenesko serving as Chief
Financial Officer of Quantum Direct. The Quantum Direct Board of Directors will
initially consist of 10 persons (with National Media and ValueVision each
selecting five members) and will have a five member Executive Committee (with
National Media selecting two members and ValueVision selecting three members).
See "-- Directors and Executive Officers."
Management of National Media and ValueVision are jointly reviewing the two
companies' operations in order to develop plans and proposals regarding the
integration and combination of all functional areas of the combined business.
The goal of management of National Media and ValueVision is to complete its
transition plan prior to the consummation of the Merger, so that the plan may be
implemented as soon thereafter as possible.
BUSINESS AND STRATEGY
As set forth with more particularity elsewhere herein, each of ValueVision
and National Media have experienced frequent operating losses. Management of
Quantum Direct believes that the Merger will provide National Media and
ValueVision with the synergies and critical mass that will allow Quantum Direct
to perform more efficiently, productively and profitably than either National
Media or ValueVision has on a stand-alone basis. Management believes that the
Merger will allow: ValueVision's strong balance sheet to be put to better use;
National Media to be supported by more efficient customer servicing and
fulfillment; the combined companies' corporate and administrative cost structure
to be reduced; and National Media's cash flow needs to be satisfied internally.
Management believes that the Merger will provide the basis for creating and
refining a more efficient, profitable marketer of consumer goods on an
international basis.
The Merger will create one of the largest worldwide marketers of retail
merchandise through infomercials, television home shopping, mail order, Internet
and retail channels. The Merger is expected to provide National Media with the
necessary financial resources to market retail merchandise throughout the world.
National Media also plans to use ValueVision's excess telemarketing, customer
service and order fulfillment capacity to improve National Media's U.S.
operations and to make use of ValueVision's 24-hour-per-day home shopping
channel and access to television programming time as an outlet for certain
products. For ValueVision, the Merger matches its operational and financial
resources with significant new growth opportunities through international
expansion, cost efficiencies relating to advertising and the ability to purchase
products in greater volume at reduced costs. ValueVision and National Media
believe that the combination will create a leader in the interactive home
shopping marketplace.
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Pre-testing Infomercial Products. Prior to the distribution of infomercial
programming, significant capital outlays are required for production. National
Media believes that ValueVision's 24-hour television home shopping network can
be utilized for product testing to effectively screen products for qualities
such as consumer suitability, product benefit positioning and pricing
sensitivity. Moreover, management of the Quantum Direct believes that its
capacity to instantaneously gather marketing response data through its
customized computer processing system prior to infomercial production will
enhance its ability to target products to particular audiences.
Secondary Distribution Medium. Management of Quantum Direct believes that,
as infomercial products migrate to retail-oriented distribution during their
product cycle, utilization of ValueVision's television home shopping network as
a secondary distribution medium will enhance Quantum Direct's ability to retain
a larger portion of the post-infomercial profits from each product.
In-House Studio Production Capability. Quantum Direct believes that it will
create further cost savings through utilization of ValueVision's in-house post
production capabilities. Currently, a major cost component of National Media's
infomercial productions is the renting of studio post-production facilities and
services.
Reduction of National Media's Incremental Media Costs. ValueVision believes
utilization of its growing "inventory" of television air time resulting from its
existing relationships with cable television operators and full power television
stations will allow ValueVision to provide National Media with additional media
time at incrementally lower costs.
Elimination or Reduction of Duplicative Selling, General and Administrative
and Other Direct Expenses. Management of Quantum Direct believes the combination
will create cost savings through the elimination of duplicative selling, general
and administrative expenses and reduction of other direct costs. Quantum Direct
intends to utilize certain of ValueVision's existing telemarketing and customer
service infrastructures to replace or reduce reliance on such outside
telemarketing services and to support National Media's sales efforts, reduce
costs associated with duplicative senior management, and reduce costs associated
with other back-office operations through the integration of each company's
fulfillment facilities.
International Expansion of ValueVision's Business. Quantum Direct believes
that it can utilize Quantum International Limited's ("Quantum") existing
relationships with international distribution channels as a platform from which
to expand ValueVision's existing television home shopping business into the
international market. Quantum's programming can be seen in virtually every
country in Europe. In addition, its programs can be seen in the Middle East,
South America and the Pacific Rim.
DIRECTORS AND EXECUTIVE OFFICERS
Following the Merger, the Quantum Direct Board of Directors is expected to
initially consist of the following 10 persons: (a) Constantinos I. Costalas,
Albert R. Dowden, Frederick S. Hammer (who will serve as Co-Chairman of the
Board of Quantum Direct), Robert N. Verratti and Jon W. Yoskin II, (all of whom
were designated by National Media), and (b) Robert L. Johander (who will serve
as Co-Chairman of the Board of Quantum Direct) Marshall S. Geller, Nicholas M.
Jaksich, Robert J. Korkowski and Paul D. Tosetti (all of whom were designated by
ValueVision). Quantum Direct will also have an Executive Committee, which will
initially be comprised of Messrs. Geller, Jaksich, Johander, Hammer and Verratti
and a Compensation Committee which will initially be comprised of Messrs.
Dowden, Geller and Tosetti.
For information regarding the business experience of the foregoing
individuals, see "Where You Can Find More Information."
The Quantum Direct Board of Directors will be divided into three classes.
Class I shall initially consist of four directors, and each of Class II and
Class III will initially consist of three directors. Class I directors will be
initially elected for a term expiring at the first annual meeting of Quantum
Direct stockholders. Class II directors will be initially elected for a term
expiring at the second annual meeting of Quantum Direct stockholders. Class III
directors will be initially elected for a term expiring at the third annual
meeting of Quantum Direct stockholders. Successors to the class of directors
whose term expires at the annual meeting
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will be elected for a three-year term. In no case will a decrease in the number
of directors shorten the term of any incumbent director.
The ValueVision Directors and the National Media Directors will be spread
as evenly as possible among Class I, II and III of Quantum Direct's Board of
Directors. The Quantum Direct Bylaws provide that until three years after the
Effective Time, the Quantum Direct Board of Directors shall consist of an equal
number of National Media Directors and ValueVision Directors.
At the Effective Time, pursuant to the terms of the employment agreements
described above under "-- Interests of Certain Persons in the Merger --
Employment Agreements," (i) Robert L. Johander, the current Chairman and Chief
Executive Officer of ValueVision, and Frederick S. Hammer, the current President
and Chief Executive Officer of National Media, will serve as Co-Chairmen of the
Board, (ii) Robert L. Johander, will serve as interim Chief Executive Officer of
Quantum Direct (Quantum Direct has engaged an executive search firm to find a
successor Chief Executive Officer to Mr. Johander), (iii) Nicholas M. Jaksich,
the current Chief Operating Officer of ValueVision, will serve as President and
Chief Operating Officer of Quantum Direct and (iv) Stuart R. Romenesko, the
current Chief Financial Officer of ValueVision, will serve as the Chief
Financial Officer of Quantum Direct.
For information regarding the business experience of the foregoing
individuals, see "Where You Can Find More Information."
ESTIMATED COST SAVINGS AND SYNERGIES
National Media and ValueVision believe that the Merger will result in
approximately $12.0 million in annualized cost savings and improvements
attributable to operating synergies. These savings are expected to be derived
from the following: the consolidation of telemarketing, customer service and
order fulfillment facilities located in the United States; the utilization of
ValueVision's television home shopping programming for product testing;
utilization of excess capacity of ValueVision's in-house production
capabilities; the integration of management information systems; and the
elimination of duplicative overhead and administrative expenses. Upon
consummation of the Merger, Quantum Direct intends to review National Media's
and ValueVision's respective assets, businesses, operations, properties,
policies, corporate structures, capitalization and management in order to
identify any additional synergies, operating efficiencies and cost savings.
The estimates of cost savings and synergies included elsewhere in this
Joint Proxy Statement/Prospectus are inherently subject to significant
uncertainties and contingencies, many of which are beyond the control of
ValueVision, National Media and Quantum Direct. There is no assurance that they
will be achieved and actual savings and synergies may vary materially from those
estimated. The inclusion of such estimates herein should not be regarded as an
indication that ValueVision, National Media, Quantum Direct or any other person
considers such estimates an accurate prediction of future events. See
"Cautionary Statement Concerning Forward-Looking Statements."
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THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement, a
copy of which is attached as Annex A to this Joint Proxy Statement/Prospectus
and is incorporated herein by reference. Such summary is qualified in its
entirety by reference to the Merger Agreement. Holders of National Media Common
Stock National Media Series B Stock and ValueVision Common Stock are urged to
read the Merger Agreement in its entirety for a more complete description of the
terms and conditions of the Merger.
THE MERGER
The Merger Agreement provides that, following the approval of the Merger by
the holders of National Media Common Stock and National Media Series B Stock,
voting together as a class, and the holders of ValueVision Common Stock and the
satisfaction or waiver of the other conditions to the Merger, National Media and
ValueVision will become wholly-owned subsidiaries of Quantum Direct, the holders
of National Media Common Stock and ValueVision Common Stock will become holders
of Quantum Direct Common Stock and the holders of National Media Series B Stock
will become holders of Quantum Direct Series B Stock.
If the Merger Agreement is approved by a majority of the holders of
National Media Common Stock and National Media Series B Stock, voting together
as a class, with the holders of National Media Series B Stock being entitled to
10 votes per share held, and ValueVision Common Stock, and the other conditions
to the Merger are satisfied or waived, the Closing will take place no later than
the third business day (the "Closing Date") following the date on which the last
of the conditions is satisfied or waived, or at such other time and date to
which National Media and ValueVision mutually agree. On the Closing Date,
National Media will cause a certificate of merger to be filed with the Secretary
of State of the State of Delaware as provided in Section 251 of the DGCL and
ValueVision will cause articles of merger to be filed with the Secretary of
State of Minnesota as provided in Section 302A.615, of the MBCA. The Merger will
become effective upon the filing of such certificate of merger and articles of
merger or at such later time as is specified therein. Subject to the
satisfaction (or waiver) of the other conditions to the obligations of National
Media and ValueVision to consummate the Merger, it is presently expected that
the Merger will be consummated during the second calendar quarter of 1998. See
"The Merger Agreement -- Conditions to Obligations to Effect the Merger."
CONVERSION OF SHARES
The Merger Agreement provides that the Merger will be effected by merger of
two newly-formed wholly-owned subsidiaries of Quantum Direct, National Media Sub
and ValueVision Sub, with and into National Media and ValueVision, respectively,
in which National Media and ValueVision will be the surviving corporations.
At the Effective Time, in the National Media Merger: (i) each issued and
outstanding share of National Media Common Stock (including the rights
associated with the Series A Junior Participating Preferred Stock issued
pursuant to the National Media Rights Plan (as defined below) (other than shares
that are canceled as described below)) will be converted into one share of fully
paid and nonassessable share of Quantum Direct Common Stock; (ii) each issued
and outstanding share of National Media Series B Stock will be converted into
one share of Quantum Direct Series B Stock; (iii) each issued and outstanding
share of common stock of National Media Sub will be converted into one share of
National Media Common Stock, the surviving corporation in the National Media
Merger; and (iv) each share of National Media Common Stock that is owned by
National Media as treasury stock or is owned by ValueVision or any of its
wholly-owned subsidiaries (including any options, warrants or other securities
convertible into or exchangeable for such shares) will be canceled and will
cease to exist and no stock of Quantum Direct or other consideration shall be
delivered in exchange therefor.
At the Effective Time, in the ValueVision Merger: (i) each issued and
outstanding share of ValueVision Common Stock (other than shares that are
canceled as described below) will be converted into 1.19 shares of fully paid
and nonassessable shares of Quantum Direct Common Stock; (ii) each issued and
outstanding share of common stock of ValueVision Sub will be converted into one
share of ValueVision Common Stock, the surviving corporation in the ValueVision
Merger; and (iii) each share of ValueVision Common Stock that
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is owned by ValueVision as treasury stock or is owned by National Media or any
of its wholly-owned subsidiaries (including any options, warrants or other
securities convertible into or exchangeable for such shares) will be canceled
and will cease to exist and no stock of Quantum Direct or other consideration
shall be delivered in exchange therefor.
Consequently, as a result of the National Media Merger and the ValueVision
Merger, National Media and ValueVision will become wholly-owned subsidiaries of
Quantum Direct and holders of National Media Common Stock and ValueVision Common
Stock will become holders of Quantum Direct Common Stock. At the Effective Time,
each share of Quantum Direct Common Stock issued and outstanding immediately
prior to the Effective Time will be surrendered and canceled, and the amount
paid by National Media and ValueVision for their shares of Quantum Direct Common
Stock will be returned to them by Quantum Direct.
Based upon the number of shares of National Media Common Stock, National
Media Series B Stock and ValueVision Common Stock outstanding on the record date
for the National Media Special Meeting and the record date for the ValueVision
Special Meeting, respectively, and the Exchange Ratios described above, National
Media's current stockholders will own approximately 45% and ValueVision's
current shareholders will own approximately 55% of Quantum Direct Common Stock
that will be outstanding upon completion of the Merger.
EXCHANGE OF STOCK CERTIFICATES
As soon as reasonably practicable after the Effective Time, an exchange
agent will mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
National Media Common Stock (including the Series A Junior Participating
Preferred Stock associated therewith), National Media Series B Stock or
ValueVision Common Stock, a letter of transmittal and instructions for use in
effecting the surrender of such certificates in exchange for certificates
representing shares of Quantum Direct Common Stock or Quantum Direct Series B
Stock, as the case may be. Upon surrender of a certificate for cancellation to
the exchange agent, together with such letter of transmittal, duly executed, the
holder of such certificate will be entitled to receive in exchange therefor that
number of whole shares of Quantum Direct Common Stock or Quantum Direct Series B
Stock, as the case may be, and the amount of any cash payable in lieu of
fractional shares of Quantum Direct Common Stock and other dividends or
distributions which such holder is entitled to receive as provided in the next
three paragraphs, and the certificates so surrendered will promptly be canceled.
The shares of Quantum Direct Common Stock to be issued in exchange for
certificates which immediately prior to the Effective Time represented shares of
National Media Common Stock or ValueVision Common Stock will be held in
book-entry form on the records of Quantum Direct's Registrar and Transfer Agent,
Norwest Bank Minnesota, N.A. The shares of Quantum Direct Series B Stock which
immediately prior to the Effective Time represented shares of National Media
Series B Stock will be held on the records of Quantum Direct, who will act as
transfer agent for the Quantum Direct Series B Stock. Holders of Quantum Direct
Common Stock and Quantum Direct Series B Stock may receive a certificate
representing their shares of Quantum Direct Common Stock and Quantum Direct
Series B Stock by following the instructions in the letter of transmittal or by
requesting a certificate from Quantum Direct's Registrar and Transfer Agent.
No Further Ownership Rights In National Media Common Stock, National Media
Series B Stock Or ValueVision Common Stock. All shares of Quantum Direct Common
Stock (and cash in lieu of fractional shares in the case of ValueVision Common
Stock) and Quantum Direct Series B Stock issued upon the surrender for exchange
of certificates which immediately prior to the Effective Time represented shares
of National Media Common Stock, ValueVision Common Stock or National Media
Series B Stock will be deemed to have been issued (and paid) in full
satisfaction of all rights pertaining to the shares of National Media Common
Stock, ValueVision Common Stock or National Media Series B Stock theretofore
represented by such certificates, subject, however, to the obligations of the
surviving corporations in the National Media Merger and the ValueVision Merger
to pay any dividends or make any other distributions with a record date prior to
the Effective Time which may have been declared or made by National Media on
such shares of National Media Common Stock or National Media Series B Stock or
by ValueVision on such shares of ValueVision Common Stock prior to the date of
the Merger Agreement and which remain unpaid at the Effective Time, and from and
after the Effective Time there shall be no further registration of transfers on
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the stock transfer books of the surviving corporations in the National Media
Merger and the ValueVision Merger, as the case may be, of the shares of National
Media Common Stock or ValueVision Common Stock, respectively, which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, certificates which immediately prior to the Effective Time represented
shares of National Media Common Stock, National Media Series B Stock or
ValueVision Common Stock are presented to one of such surviving corporations or
Quantum Direct for any reason, such certificates will be canceled and exchanged
in the manner described above.
Fractional Shares. No fractional shares of Quantum Direct Common Stock will
be issued in the Merger. In lieu of any such fractional shares, each holder of
shares of ValueVision Common Stock outstanding immediately prior to the
Effective Time exchanged pursuant to the ValueVision Merger who would otherwise
have been entitled to receive a fraction of a share of Quantum Direct Common
Stock (after taking into account all certificates representing shares of
ValueVision Common Stock delivered by such holder) will receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of a
share of Quantum Direct Common Stock multiplied by the per share sales price of
Quantum Direct Common Stock (as reported on the national market or exchange upon
which the Quantum Direct Common Stock is traded or quoted) on the closing of the
first day of trading of Quantum Direct Common Stock on such national market or
exchange after the Effective Time.
Dividends and Distributions. No dividends or other distributions declared
or made after the Effective Time with respect to Quantum Direct Common Stock or
Quantum Direct Series B Stock, with a record date after the Effective Time will
be paid to the holder of any unsurrendered certificate representing shares of
National Media Common Stock, ValueVision Common Stock or National Media Series B
Stock with respect to the shares of Quantum Direct Common Stock or Quantum
Direct Series B Stock the holder thereof is entitled to receive in respect
thereof and no cash payment in lieu of fractional shares will be paid to any
such holder until the holder of record of such certificate shall surrender such
certificate to Quantum Direct as described above. Subject to the effect of
applicable laws, following surrender of any such certificate, there will be paid
to the record holder of the certificates representing whole shares of Quantum
Direct Common Stock and shares of Quantum Direct Series B Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of any cash payable in lieu of a fractional share of Quantum Direct
Common Stock to which such holder is entitled under "-- Fractional Shares" above
and an amount equal to the amount of dividends or other distributions with a
record date after the Effective Time previously paid with respect to whole
shares of Quantum Direct Common Stock and shares of Quantum Direct Series B
Stock, and (ii) at the appropriate payment date, an amount equal to the amount
of dividends or other distributions with a record date after the Effective Time
but prior to surrender and a payment date subsequent to surrender payable with
respect to whole shares of Quantum Direct Common Stock and shares of Quantum
Direct Series B Stock, in each case without interest.
Termination of Exchange Fund. Any shares of Quantum Direct Common Stock and
Quantum Direct Series B Stock and any portion of monies from which cash payments
in lieu of fractional shares of ValueVision Common Stock and any dividends or
distributions on shares of Quantum Direct Common Stock and Quantum Direct Series
B Stock will be made, which remain undistributed to the former stockholders of
National Media or shareholders of ValueVision for 180 days after the Effective
Time will be delivered to Quantum Direct upon demand, and any former stockholder
of National Media or former shareholder of ValueVision who has not previously
exchanged certificates which immediately prior to the Effective Time represented
shares of National Media Common Stock, National Media Series B Stock or
ValueVision Common Stock will thereafter look only to Quantum Direct for payment
of such former stockholder's claim for Quantum Direct Common Stock or Quantum
Direct Series B Stock, any cash in lieu of fractional shares of Quantum Direct
Common Stock and any dividends or distributions with respect to Quantum Direct
Common Stock and Quantum Direct Series B Stock.
No Liability. None of National Media, ValueVision or Quantum Direct will be
liable to any holder of shares of National Media Common Stock, National Media
Series B Stock or ValueVision Common Stock, as the case may be, for any shares
of Quantum Direct Common Stock (or cash in lieu of fractional shares of Quantum
Direct Common Stock or any dividends or distributions with respect thereto) or
Quantum Direct
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Series B Stock delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
Withholding Rights. Quantum Direct and each of the surviving corporations
in the National Media Merger and the ValueVision Merger will be entitled to
deduct and withhold from the consideration otherwise payable to any holder of
shares of National Media Common Stock or National Media Series B Stock or
ValueVision Common Stock such amounts as it is required to deduct and withhold
with respect to the making of such payment under the Code, or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld,
such withheld amounts shall be treated as having been paid to the holder of the
shares of National Media Common Stock, National Media Series B Stock or
ValueVision Common Stock, as the case may be, in respect of which such deduction
and withholding was made.
Lost Certificates. If any certificate which prior to the Effective Time
represented shares of National Media Common Stock, National Media Series B Stock
or ValueVision Common Stock shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such certificate to
be lost, stolen or destroyed and, if required by Quantum Direct or one of the
surviving corporations in the National Media Merger and the ValueVision Merger,
the posting by such person of a bond in such reasonable amount as Quantum Direct
or such surviving corporation may direct as indemnity against any claim that may
be made against it with respect to such certificate, the exchange agent will
issue in exchange for such lost, stolen or destroyed certificate the shares of
Quantum Direct Common Stock or Quantum Direct Series B Stock and any cash in
lieu of fractional shares and unpaid dividends and distributions on shares of
Quantum Direct Common Stock or Quantum Direct Series B Stock otherwise
deliverable in respect thereof.
Affiliates. Certificates surrendered for exchange by any affiliate of
ValueVision or National Media shall not be exchanged until Quantum Direct has
received an Affiliate Agreement. See "The Merger -- Resales of Quantum Direct
Common Stock Issued in Connection with the Merger; Affiliate Agreements."
HOLDERS OF NATIONAL MEDIA COMMON STOCK, NATIONAL MEDIA SERIES B STOCK OR
VALUEVISION COMMON STOCK SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE A TRANSMITTAL FORM FROM NORWEST BANK MINNESOTA, N.A., THE EXCHANGE AGENT
THEREFOR.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various customary representations and
warranties, subject to identified exceptions, relating to, among other things,
(a) due organization, valid existence and good standing of each of National
Media, ValueVision and their respective material subsidiaries and certain
similar corporate matters; (b) the capital structure of each of National Media
and ValueVision; (c) the authorization, execution, delivery and enforceability
of the Merger Agreement and the Transaction Documents (as defined in the Merger
Agreement), the consummation of the transactions contemplated by the Merger
Agreement and the Transaction Documents and related matters; (d) conflicts under
charters or by-laws, required consents or approvals and violations of any
instruments or law; (e) documents and financial statements filed by each of
National Media and ValueVision with the SEC and the accuracy of information
contained therein; (f) the absence of undisclosed liabilities; (g) the absence
of certain material adverse events, changes or events; (h) taxes and tax
returns; (i) properties; (j) intellectual property; (k) agreements, contracts
and commitments; (l) litigation; (m) environmental matters and hazardous
materials; (n) employee benefit plans; (o) compliance with laws; (p) accounting
and tax matters relating to the Merger; (q) the accuracy of information supplied
by each of National Media and ValueVision in connection with the registration
statement to be filed by Quantum Direct in connection with the issuance of the
Quantum Direct Common Stock (the "Registration Statement") and this Joint Proxy
Statement/Prospectus; (r) labor matters; (s) insurance; (t) opinions of National
Media's and ValueVision's financial advisors; (u) the absence of existing
discussions with other parties; (v) the inapplicability to the Merger of certain
provisions of the DGCL and MBCA; and (w) the National Media Rights Plan.
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CERTAIN COVENANTS
Conduct of Business. Pursuant to the Merger Agreement, each of National
Media and ValueVision has agreed that, during the period from the date of the
Merger Agreement until the Effective Time, except as included on the disclosure
schedules delivered in connection with the Merger Agreement or as contemplated
by the Merger Agreement, it and each of its respective subsidiaries will: (a)
carry on its business in the usual, regular and ordinary course in substantially
the same manner as previously conducted; (b) pay its debts and taxes when due
subject to good faith disputes over such debts or taxes, and pay or perform
other obligations when due; (c) use reasonable efforts consistent with past
practices to preserve intact its present business organization, management team
and business relationships; (d) not accelerate, amend or change the period of
exercisability of options or restricted stock granted under any employee stock
plan or authorize cash payments in exchange for any options granted under any
employee stock plan, except as required pursuant to the plan or any related
agreement; (e) not declare or pay any dividends on or make other distributions
in respect of any of its capital stock, not effect certain other changes in its
capitalization, and not purchase or otherwise acquire, directly or indirectly,
any shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of shares
in connection with the termination of service; (f) not issue or sell, or
authorize or propose the issuance or sale of, any shares of its capital stock or
securities convertible into or exchangeable for shares of its capital stock, or
any subscriptions, rights, warrants or options to acquire or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities, other than the grant of options consistent with past
practices to employees, officers, directors or consultants (but in no event
grant more than the total number of authorized shares available under its stock
option plans) and the issuance of shares upon the exercise of outstanding stock
options, warrants or National Media convertible preferred stock; (g) not make
any material acquisitions; (h) not sell, lease, license or otherwise dispose of
material properties or assets outside the ordinary course of business; (i) not
increase the compensation payable to its directors, officers or employees
(except for increases to non-officer employees consistent with past practices),
grant additional severance or termination pay or enter into employment or
severance agreements with any consultants, employees, officers or directors,
enter into any collective bargaining agreement (other than as required by law)
or establish, adopt, enter into or amend any plan for the benefit of its
directors, officers, employees or consultants; (j) not amend its certificate of
incorporation or articles of incorporation, as the case may be, or bylaws,
except as contemplated by the Merger Agreement; (k) not incur indebtedness for
money borrowed other than in the ordinary course of business; (l) not take any
action that would or is reasonably likely to result in a material breach of any
provision of the Merger Agreement or any of the Transaction Documents to which
it is a party or in any of its representations or warranties set forth in the
Merger Agreement or any of the Transaction Documents to which it is a party
being untrue as of and on the Closing Date; (m) not make or rescind any material
tax elections, settle any tax claims or make any material change in its
accounting methods; (n) not settle any material litigation relating to the
transactions contemplated by the Merger Agreement; and (o) not take, or agree in
writing to take, any of the actions described in (d) through (n) above.
No Solicitation. The Merger Agreement provides that National Media and
ValueVision will not, directly or indirectly, through any officer, director,
employee, financial advisor, representative or agent, (i) solicit, initiate or
encourage any inquiries or proposals that constitute, or could reasonably be
expected to lead to, a proposal or offer for a merger, consolidation, business
combination, sale of substantial assets, sale of shares of capital stock
(including without limitation by way of a tender offer) or similar transaction
involving such party or any of its subsidiaries, other than the transactions
contemplated by the Merger Agreement (any of the foregoing inquiries or
proposals being referred to as an "Acquisition Proposal"), (ii) engage in
negotiations or discussions concerning, or provide any non-public information to
any person or entity relating to, any Acquisition Proposal, or (iii) agree to or
recommend any Acquisition Proposal; provided, however, that nothing contained in
the Merger Agreement will prevent National Media or ValueVision or their
respective Boards of Directors from (a) furnishing non-public information to, or
entering into discussions or negotiations with, any person or entity in
connection with an unsolicited bona fide written Acquisition Proposal by such
person or entity or recommending an unsolicited bona fide written Acquisition
Proposal to the stockholders or shareholders, as the case may be, of such party,
if and only to the extent that (1) the Board of Directors of such party believes
in good faith (after consultation with its financial advisor) that such
Acquisition Proposal
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is reasonably capable of being completed on the terms proposed and, after taking
into account the strategic benefits anticipated to be derived from the Merger
and the prospects of ValueVision and National Media as a combined company,
would, if consummated, result in a transaction more favorable to the
stockholders or shareholders, as the case may be, of such party over the long
term than the transaction contemplated by the Merger Agreement (any such more
favorable Acquisition Proposal being referred to as a "Superior Proposal") and
the Board of Directors of such party determines in good faith after consultation
with outside legal counsel that such action is required for such Board of
Directors to comply with its fiduciary duties to stockholders or shareholders,
as the case may be, under applicable law and (2) prior to furnishing such non-
public information to, or entering into discussions or negotiations with, such
person or entity, such Board of Directors receives from such person or entity an
executed confidentiality agreement with terms no less favorable to such party
than those contained in the Confidentiality Agreement dated August 19, 1997
between National Media and ValueVision; or (b) complying with Rule 14e-2
promulgated under the Exchange Act with regard to an Acquisition Proposal. Each
of National Media and ValueVision also agrees not to release any third party
from, or waive any provision of, any standstill agreement to which it is a party
or any confidentiality agreement between it and another person who has made, or
who may reasonably be considered likely to make, an Acquisition Proposal, unless
its Board of Directors determines in good faith after consultation with outside
legal counsel that such action is required for such Board of Directors to comply
with its fiduciary duties to stockholders under applicable law.
The Merger Agreement requires each of National Media and ValueVision to
promptly notify the other party (orally and in writing) upon receipt of any
Acquisition Proposal or request for non-public information or access to its
properties, books or records in connection with an Acquisition Proposal. The
party providing such notice also is required to indicate in reasonable detail
the identity of the offeror and the terms and conditions of such proposal,
inquiry or contact, and continue thereafter to keep the other party informed, on
a current basis, of the status of any such discussions or negotiations and the
terms being discussed or negotiated.
Special Meetings. The Merger Agreement provides that each of National Media
and ValueVision will call a meeting of its respective stockholders and
shareholders to be held as promptly as practicable for the purpose of voting
upon the Merger Agreement and the Merger. Subject to the discussion above under
"-- No Solicitation," each of National Media and ValueVision agreed to recommend
to its respective stockholders and shareholders adoption of the Merger Agreement
and approval of such matters, to coordinate and cooperate with respect to the
timing of its special meeting and to use its best efforts to hold such meeting
on the same day as the other party's special meeting and as soon as practicable
after the date of the Merger Agreement. Unless otherwise required to comply with
the applicable fiduciary duties of the respective directors of National Media
and ValueVision, as determined by such directors in good faith after
consultation with outside legal counsel, each party agreed to use all reasonable
efforts to solicit from stockholders of such party proxies in favor of such
matters.
Post-Merger Corporate Governance; Employment Arrangements. The Merger
Agreement provides that certain corporate governance matters relating to Quantum
Direct will be as described above under "The Merger -- Interests of Certain
Persons in the Merger -- Board of Directors and Committees of Quantum Direct"
and "The Combined Company -- Directors and Executive Officers." The Merger
Agreement also provides that Quantum Direct will enter into certain executive
employment agreements and have certain executive officers as described under
"The Merger -- Interests of Certain Person in the Merger -- Employment
Agreements" and "The Combined Company -- Directors and Executive Officers."
The Merger Agreement provides that Quantum Direct will have an Executive
Committee which initially will be comprised of the following five members of the
Quantum Direct Board of Directors: Marshall S. Geller, Frederick S. Hammer,
Nicholas M. Jaksich, Robert L. Johander and Robert N. Verratti. The Executive
Committee will have responsibility for (i) recommending to the full Quantum
Direct Board of Directors a successor Chief Executive Officer (and any successor
thereto) to Robert L. Johander, the interim Chief Executive Officer of Quantum
Direct and (ii) shall have, to the fullest extent permitted by Delaware law, all
of the powers, duties and responsibilities (including, without limitation, those
relating to any and all issues relating to the FCC and any assets subject to its
regulation) of the entire Quantum Direct Board of Directors (except with respect
to those actions that require a supermajority vote as set forth in the Bylaws of
Quantum Direct). See "The Combined Company -- Directors and Executive Officers."
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The Merger Agreement provides that Quantum Direct will have a Compensation
Committee which initially will be comprised of the following: Albert R. Dowden,
Marshall S. Geller and Paul D. Tosetti. The Compensation Committee will have
responsibility for (i) reviewing the compensation and employee benefit policies
of Quantum Direct, (ii) recommending to the Executive Committee base salary
amounts and incentive awards for all elected officers of Quantum Direct and
setting guidelines for the administration of all salaries, (iii) administering
incentive compensation and awarding stock options to employees under any stock
option or compensation plan of Quantum Direct and amending or modifying any
provisions of such stock option or compensation plan that may be amended or
modified without stockholder approval and (iv) supervising all administrative
matters with respect to the foregoing.
The Merger Agreement provides that each of National Media and ValueVision
will take such action as shall reasonably be deemed by either thereof to be
advisable to give effect to the provisions described in the three preceding
paragraphs including without limitation incorporating such provisions into the
Quantum Direct Bylaws in effect at the Effective Time.
Stock Plans. At the Effective Time, each National Media Stock Option and
each ValueVision Stock Option, in each case whether vested or unvested, will be
deemed to constitute an option to acquire, on the same terms and conditions as
were applicable under such National Media Stock Option or ValueVision Stock
Option, as the case may be, the same number of shares of Quantum Direct Common
Stock as the holder of such National Media Stock Option or ValueVision Stock
Option, as the case may be, would have been entitled to receive pursuant to the
Merger had such holder exercised such option in full immediately prior to the
Effective Time. The exercise price per share of each such option, as so
converted, will be equal to (x) the aggregate exercise price for the shares of
National Media Common Stock or ValueVision Stock Option, as the case may be,
purchasable pursuant to such National Media Stock Option or ValueVision Stock
Option, as the case may be, immediately prior to the Effective Time divided by
(y) the number of whole shares of Quantum Direct Common Stock deemed purchasable
pursuant to such National Media Stock Option or ValueVision Stock Option, as the
case may be, as determined above (rounded up to the nearest whole cent). As of
March 12, 1998 options to acquire 4,194,862 million and 4,009,836 million shares
of National Media Common Stock and ValueVision Common Stock, respectively, were
outstanding. All outstanding National Media Stock Options and ValueVision Stock
Options will become exercisable in full upon the Closing, pursuant to the terms
of such stock options. In the event all such stock options were exercised,
Quantum Direct would receive aggregate proceeds of approximately $58,254,763
million.
Pursuant to the Merger Agreement, Quantum Direct has agreed to reserve for
issuance a sufficient number of shares of Quantum Direct Common Stock for
delivery upon exercise of the National Media Stock Options or the ValueVision
Stock Options, as the case may be, assumed as described above. As soon as
practicable after the Effective Time, Quantum Direct will file a registration
statement on Form S-8 with respect to the shares of Quantum Direct Common Stock
subject to such options and will use its best efforts to maintain the
effectiveness of such registration statement for so long as such options remain
outstanding.
Director and Officer Indemnification. The Merger Agreement provides that,
from and after the Effective Time, Quantum Direct will cause the surviving
corporations in the National Media Merger and the ValueVision Merger to
indemnify and hold harmless each present and former director and officer of
National Media and ValueVision against any costs or expenses (including
attorneys' fees), judgments, fines, losses, claims, damages, liabilities or
amounts paid in settlement incurred in connection with any claim, action, suit,
proceeding or investigation arising out of or pertaining to any matter existing
or occurring at or prior to the Effective Time, whether asserted or claimed
prior to, or at or after the Effective Time, to the fullest extent that National
Media or ValueVision, as the case may be, would have been permitted under
Delaware law or Minnesota law and its certificate of incorporation or articles
of incorporation, as the case may be, or bylaws in effect on the date of the
Merger Agreement to indemnify such person. Quantum Direct and/or such surviving
corporations will also be obligated to advance expenses as incurred to the
fullest extent permitted under applicable law, provided the person to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such person is not entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling Quantum Direct
pursuant to the foregoing provisions, Quantum Direct has been informed that in
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the opinion of the SEC, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
For a period of six years after the Effective Time, Quantum Direct will
maintain or cause the surviving corporations in the National Media Merger and
the ValueVision Merger to maintain (to the extent available in the market) in
effect a directors' and officers' liability insurance policy covering those
persons who are covered as of the date of the Merger Agreement by National
Media's or ValueVision's directors' and officers' liability insurance policy,
with coverage in an amount and scope at least as favorable as National Media's
or ValueVision's existing coverage; provided that in no event will Quantum
Direct or the surviving corporations in the National Media Merger and the
ValueVision Merger be required to expend in excess of 200% of the annual premium
paid by National Media or ValueVision for such coverage, and if the premium
would at any time exceed 200% of such amount, then Quantum Direct or surviving
corporations in the National Media Merger and the ValueVision Merger will
maintain insurance policies which provide the maximum coverage available at an
annual premium equal to 200% of such amount.
Stockholder Rights Plans. National Media is a party to a Rights Agreement
dated January 3, 1994 with Mellon Securities Trust Company, as amended (the
"National Media Rights Plan"). The National Media Rights Plan, as amended,
provides that transactions contemplated by the Merger Agreement, the execution
or consummation of the transactions contemplated by the Redemption and Consent
Agreement by and between National Media and the holders of the Series C Stock
dated as of January 5, 1998 (the "Redemption Agreement"), and the execution or
consummation of the transactions contemplated by the ValueVision Stock Option
Agreement (as defined below) are exempt from the provisions of the National
Media Rights Plan, and all rights issued pursuant to the National Media Rights
Plan will become non-exercisable at the Effective Time. ValueVision is not a
party to a Rights Agreement.
The Merger Agreement also provides that National Media and ValueVision will
cause Quantum Direct, prior to the Closing Date, to adopt a stockholder rights
agreement. See "Description of Quantum Direct Capital Stock -- Preferred Share
Purchase Rights."
The Warrants. The Merger Agreement provides that, at the Effective Time,
each outstanding warrant to purchase National Media Common Stock or ValueVision
Common Stock, as the case may be, will thereafter solely represent the right to
acquire, on the same terms and conditions as are currently applicable under such
warrants, the same number of shares of Quantum Direct Common Stock as a holder
of the warrants would have been entitled to receive pursuant to the ValueVision
Merger or the National Media Merger, as the case may be, had such holder
exercised the warrants in full immediately prior to the Effective Time, at the
price per share (rounded downward to the nearest whole cent) equal to (x) the
aggregate exercise price for the shares of ValueVision Common Stock or the
National Media Common Stock, as the case may be, purchasable pursuant to the
warrants immediately prior to the Effective Time divided by (y) the number of
full shares of Quantum Direct Common Stock deemed purchasable pursuant to the
warrants in accordance with the foregoing. At the Effective Time, Quantum Direct
will agree to issue any required shares of Quantum Direct Common Stock upon
exercise of the warrants in accordance with the foregoing.
Employment Agreements. The Merger Agreement provides that, except as set
forth on the National Media disclosure schedule delivered in connection with the
Merger Agreement, National Media will, and will cause each of its relevant
subsidiaries to, take any and all necessary action to prevent the execution and
delivery of the Merger Agreement and the consummation of the transactions
contemplated thereunder from triggering any "change of control" or similar
provisions resulting in an acceleration of benefits or compensation thereunder
with respect to any agreements with any officer or other key employee of
National Media or any of its subsidiaries.
Funding Advance for Redemption Agreement. The Merger Agreement provides
that, if all of the conditions to ValueVision's obligations to effect the Merger
have been satisfied (except the redemption of all of the outstanding shares of
Series C Stock as contemplated by the Redemption Agreement), ValueVision will,
concurrently with the Closing, advance to National Media, in immediately
available funds, approximately $23.5 million to consummate the transactions
contemplated by the Redemption Agreement.
Other Covenants. Pursuant to the Merger Agreement, each of National Media
and ValueVision has also agreed: (a) to confer with the other party on a regular
basis regarding ongoing operations and to give prompt
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notice to the other of, and use all commercially reasonable efforts to cure
before the Closing Date, any event, transaction or circumstance which causes or
will cause any breach, of any representation, warranty covenant or agreement;
provided, however, that neither National Media, ValueVision nor any of their
respective subsidiaries will be obligated to sell or otherwise transfer any of
its broadcast assets to obtain the FCC Consent Application and if any of
National Media's Directors are not approved of by the FCC, then National Media
shall as expeditiously as possible upon notice of such nonapproval, replace any
such director with another National Media Director until all of National Media's
Directors have been approved by the FCC; (b) to file this Joint Proxy
Statement/Prospectus and the Registration Statement, and obtain all necessary
state securities laws permits or approvals; (c) to give (and to cause their
respective subsidiaries to give) the other such party and its representatives
access to all its personnel, properties, books, contracts, commitments and
records, and to furnish related information reasonably requested by the other;
(d) to use its best efforts to take all appropriate action to consummate the
transactions contemplated by the Merger Agreement as promptly as practical,
obtain any consents, licenses, permits, waivers, approvals, authorizations or
orders from governmental entities or other third parties required in connection
with the transactions contemplated by the Merger Agreement, and make all
necessary filings and submissions with respect to the transactions contemplated
by the Merger Agreement under federal, state and foreign securities laws,
antitrust laws and the Communications Act, and other applicable laws; (e) to
consult with the other party before issuing, and use all reasonable efforts to
agree upon, any press release or other public statement concerning the
transactions contemplated by the Merger Agreement; (f) to not take any action,
or knowingly fail to take any action, that is reasonably likely to jeopardize
the tax or accounting treatment of the Merger; (g) to use all reasonable efforts
to obtain and deliver to the other party the Affiliate Agreements; (h) to use
all reasonable efforts to cause the Quantum Direct Common Stock to be issued in
the Merger to be approved for listing on the NYSE (or, if such approval cannot
be obtained, another national exchange or market), prior to the Effective Time;
(i) to use all reasonable efforts to obtain customary "comfort" letters of such
party's independent public accountants with respect to the Registration
Statement; and (j) that National Media and ValueVision will cooperate in the
preparations and filing of all returns and other documents regarding the Merger
Agreement and will pay any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees or any similar taxes which become payable in
connection with the transactions contemplated by the Merger Agreement, and that
National Media will pay, and ValueVision will pay, without deduction or
withholding from any amount payable to the holders of National Media Common
Stock or ValueVision Common Stock, as the case may be, any such taxes or fees
imposed by any Governmental Entity (as defined in the Merger Agreement) which
become payable in connection with the transactions contemplated by the Merger
Agreement on behalf of their respective stockholders.
CONDITIONS TO OBLIGATIONS TO EFFECT THE MERGER
The respective obligations of National Media and ValueVision to effect the
Merger are subject to the satisfaction (or waiver) of the following conditions:
(a) the Merger Agreement, the National Media Merger and the ValueVision Merger
shall have been approved in the manner required under the DGCL and the MBCA, as
the case may be, by the respective holders of the issued and outstanding shares
of capital stock of National Media and ValueVision; (b) the waiting period
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated; (c) the FCC shall have granted by final order the
FCC Consent Application, without conditions, qualifications or other
restrictions that are likely to have a material adverse effect immediately after
the Closing Date on Quantum Direct or any of its subsidiaries, whether imposed
by the FCC or any other Governmental Entity; (d) all authorizations, consents,
orders or approvals of, or declarations or filings with, or expirations of
waiting periods imposed by, any Governmental Entity the failure of which to
file, obtain or occur is reasonably likely to have a Material Adverse Effect (as
defined below) on National Media or a Material Adverse Effect on ValueVision
shall have been filed, been obtained or occurred; (e) the Registration Statement
shall have become effective under the Securities Act and shall not be the
subject of any stop order or proceedings seeking a stop order; (f) no
Governmental Entity shall have enacted, issued, promulgated, enforced or entered
any order, executive order, stay, decree, judgment or injunction or statute,
rule, regulation which is in effect and which has the effect of making the
Merger illegal or otherwise prohibiting consummation of the Merger; (g) the
shares of Quantum Direct Common Stock to
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be issued in the Merger and upon exercise of National Media Stock Options,
warrants to purchase National Media Common Stock, ValueVision Stock Options and
warrants to purchase ValueVision Common Stock shall have been approved for
listing on a national securities exchange or for quotation on the Nasdaq stock
market, subject to official notice of issuance; (h) ValueVision shall have
obtained the consent or approval of any person whose consent or approval shall
be required under any agreement or instrument in order to permit the
consummation of the transactions contemplated by the Merger Agreement, except
those of which, if not obtained, would not, individually or in the aggregate,
have a Material Adverse Effect on ValueVision or a material adverse effect on
the business, properties, financial condition or results of operations of
Quantum Direct after the Merger (a "Quantum Direct Material Adverse Effect");
(i) National Media shall have obtained the consent or approval of any person
whose consent or approval shall be required under any agreement or instrument in
order to permit the consummation of the transactions contemplated by the Merger
Agreement, except those which, if not obtained, would not, individually or in
the aggregate, have a Material Adverse Effect on National Media or a Quantum
Direct Material Adverse Effect; and (j) National Media and ValueVision shall
have taken all actions necessary so that (1) not later than the Effective Time,
the Restated Certificate of Incorporation and Quantum Direct Bylaws shall have
been amended as contemplated by the Merger Agreement, (2) at the Effective Time,
the composition of the Quantum Direct Board of Directors and of each committee
of the Quantum Direct Board of Directors shall be as described above under
"Interests of Certain Persons in the Merger -- Board of Directors and Committees
of Quantum Direct," and (3) not later than the Effective Time, Quantum Direct
shall have adopted the Quantum Direct Rights Agreement (as defined below); (k)
no event shall have occurred that has or would result in the triggering of any
right or entitlement of the stockholders of the National Media under the
National Media Rights Plan, or will occur as a result of the consummation of the
Merger; (l) holders of no more than 5% of the issued and outstanding shares of
ValueVision Common Stock shall have made the demands and given the notices
required under Minnesota law to assert dissenters' appraisal rights; (m) the
transactions contemplated by the stipulation between Montgomery Ward and
ValueVision regarding the Assumption and Modification of Executory Contracts and
Related Agreements (the "Settlement Agreement") shall have been approved by the
United States Bankruptcy Court for the District of Delaware (the "Court") on
terms substantially similar to those set forth in the Settlement Agreement
(which condition has been satisfied as of the date of this Joint Proxy
Statement/Prospectus). In the event National Media or ValueVision waives any of
the aforementioned conditions and such waiver would have a material adverse
effect on Quantum Direct or the holders of Quantum Direct, National Media or
ValueVision voting stock, then the consent of the subject holders to the Merger
will be resolicited.
The obligation of National Media to effect the Merger are subject to the
satisfaction (or waiver) of the following conditions: (a) the representations
and warranties of ValueVision set forth in the Merger Agreement shall be true
and correct as of the date of the Merger Agreement and (except to the extent
such representations speak as of an earlier date) as of the Closing Date as
though made on and as of the Closing Date, except for, (i) changes contemplated
by the Merger Agreement, (ii) inaccuracies which relate to the Settlement
Agreement or the failure to consummate the transactions contemplated thereby
(which condition has been satisfied as of the date hereof) and (iii)
inaccuracies which, individually or in the aggregate, have not had and are not
reasonably likely to have a Material Adverse Effect on ValueVision or a material
adverse effect upon the consummation of the transactions contemplated hereby;
and National Media shall have received a certificate signed on behalf of
ValueVision by the chief executive officer and the chief financial officer of
ValueVision to such effect; (b) ValueVision shall have performed in all material
respects all material obligations required to be performed by it under the
Merger Agreement at or prior to the Closing Date, and National Media shall have
received a certificate signed on behalf of ValueVision by the chief executive
officer and the chief financial officer of ValueVision to such effect; (c)
National Media shall have received the opinion of Drinker Biddle & Reath LLP to
the effect that for federal income tax purposes, each of the National Media
Merger and the ValueVision Merger will be treated as a transfer of property to
Quantum Direct by holders of National Media Common Stock described in Section
351 of the Code; and (d) ValueVision shall have duly executed each of the
Transaction Documents to which it is a party, and the ValueVision Guaranty (as
defined in the Merger Agreement), and such Transaction Documents and ValueVision
Guaranty shall be in full force and effect and legally binding against
ValueVision and no material
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breach by ValueVision shall have occurred thereunder as of the Closing Date. In
the event National Media waives any of the aforementioned conditions and such
waiver would have a material adverse effect on Quantum Direct or the holders of
Quantum Direct, National Media or ValueVision voting stock, then the consent of
the subject holders to the Merger will be resolicited.
The obligation of ValueVision to effect the Merger are subject to the
satisfaction (or waiver) of the following conditions: (a) the representations
and warranties of National Media set forth in the Merger Agreement shall be true
and correct as of the date of the Merger Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, except for (i)
changes contemplated by the Merger Agreement and (ii) inaccuracies which,
individually or in the aggregate, have not had and are not reasonably likely to
have a Material Adverse Effect on National Media, or a Material Adverse Effect
upon the consummation of the transactions contemplated thereby; and ValueVision
shall have received a certificate signed on behalf of National Media by the
chief executive officer and the chief financial officer of National Media to
such effect; (b) National Media shall have performed in all material respects
all material obligations required to be performed by it under the Merger
Agreement at or prior to the Closing Date; and ValueVision shall have received a
certificate signed on behalf of National Media by the chief executive officer
and the chief financial officer of National Media to such effect; (c)
ValueVision shall have received the opinion of Latham & Watkins to the effect
that for federal income tax purposes the ValueVision Merger will be treated as a
tax-free reorganization within the meaning of Section 368 of the Code and each
of the National Media Merger and the ValueVision Merger will be treated as
transfers of property to Quantum Direct by holders of ValueVision Common Stock
described in Section 351 of the Code; (d) the Telemarketing Agreement shall have
been terminated and all liabilities, obligations and amounts owed or incurred by
ValueVision to National Media thereunder shall have been released and forever
discharged; (e) each of the holders of the Series C Stock shall have duly
executed the Redemption Agreement, which shall be in full force and effect and
no material breach shall have occurred thereunder as of the Closing Date; and
National Media shall have, as of the Effective Time, redeemed all of the
outstanding shares of the Series C Stock (and the Series D Convertible Preferred
Stock issued in exchange therefore) pursuant to such Redemption Agreement and
none of such shares shall remain outstanding as of the Effective Time; and (f)
National Media shall have executed each of the Transaction Documents to which it
is a party, each of which shall be in full force and effect and legally binding
against National Media and no material breach by National Media shall have
occurred thereunder as of the Closing Date; and each of National Media's
subsidiaries shall have executed the Subsidiary Guarantee (as defined in the
Merger Agreement) which shall be in full force and effect and legally binding
against such subsidiaries. In the event ValueVision waives any of the
aforementioned conditions and such waiver would have a material adverse effect
on Quantum Direct or the holders of Quantum Direct, National Media or
ValueVision voting stock, then the consent of the subject holders to the Merger
will be resolicited.
A "Material Adverse Effect" means on the business, properties, financial
condition or results of operations of the referenced corporation and its
subsidiaries, taken as a whole.
TERMINATION; TERMINATION FEES AND EXPENSES
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the matters presented in connection
with the Merger by the holders of National Media Common Stock and ValueVision
Common Stock:
(a) by mutual written consent of National Media and ValueVision; or
(b) by either National Media or ValueVision if the Merger has not been
consummated by June 1, 1998 (the "Outside Date"); provided, however, that
if the Merger shall have not been consummated by the Outside Date due to
the failure of the FCC to grant by final order the FCC Consent Application
Agreement, the Outside Date shall be extended to August 31, 1998; and
provided, further, however, that the right to terminate the Merger
Agreement under this clause (b) will not be available to any party whose
failure to fulfill any obligations under the Merger Agreement has been the
cause or resulted in the failure of the Merger to occur on or before such
date; or
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(c) by either National Media or ValueVision if a court of competent
jurisdiction or other Governmental Entity has issued a nonappealable final
order, decree or ruling or taken any other nonappealable final action, in
each case having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger; or
(d) (i) by National Media, if, at the ValueVision Shareholders'
Meeting (including any adjournment or postponement), the requisite vote of
the shareholders of ValueVision in favor of the approval and adoption of
the Merger Agreement and the ValueVision Merger has not been obtained; or
(ii) by ValueVision if, at the National Media Stockholders' Meeting
(including any adjournment or postponement), the requisite vote of the
stockholders of National Media in favor of the approval and adoption of the
Merger Agreement and the National Media Merger has not been obtained; or
(e) by National Media, if (i) the ValueVision Board of Directors has
withdrawn or modified its recommendation of the Merger Agreement or the
ValueVision Merger; (ii) after the receipt by ValueVision of an Acquisition
Proposal, National Media requests in writing that the ValueVision Board of
Directors reconfirm its recommendation of the Merger Agreement and the
ValueVision Merger to the shareholders of ValueVision and the ValueVision
Board of Directors fails to do so within 10 business days after its receipt
of National Media's request; (iii) the ValueVision Board of Directors has
recommended to the shareholders of ValueVision an Alternative Transaction
(as defined in the Merger Agreement); (iv) a tender offer or exchange offer
for 20% or more of the outstanding shares of ValueVision Common Stock is
commenced (other than by National Media or an Affiliate of National Media)
and the ValueVision Board of Directors recommends that the shareholders of
ValueVision tender their shares in such tender or exchange offer; or (v)
for any reason ValueVision fails to call and hold the ValueVision Special
Meeting by the Outside Date (provided that National Media's right to
terminate the Merger Agreement under such clause (v) will not be available
if at such time ValueVision would be entitled to terminate the Merger
Agreement by reason of a breach by National Media of a material
representation, warranty, covenant or agreement contained in the Merger
Agreement); or
(f) by ValueVision, if (i) the National Media Board of Directors has
withdrawn or modified its recommendation of the Merger Agreement or the
National Media Merger; (ii) after the receipt by National Media of an
Acquisition Proposal, ValueVision requests in writing that the National
Media Board of Directors reconfirm its recommendation of the Merger
Agreement and the National Media Merger to the stockholders of National
Media and the National Media Board of Directors fails to do so within 10
business days after its receipt of ValueVision's request; (iii) the
National Media Board of Directors has recommended to the stockholders of
National Media an Alternative Transaction; (iv) a tender offer or exchange
offer for 20% or more of the outstanding shares of National Media Common
Stock is commenced (other than by ValueVision or an Affiliate of
ValueVision) and the National Media Board of Directors recommends that the
stockholders of National Media tender their shares in such tender or
exchange offer; or (v) for any reason National Media fails to call and hold
the National Media Special Meeting by the Outside Date (provided that
ValueVision's right to terminate the Merger Agreement under such clause (v)
will not be available if at such time National Media would be entitled to
terminate the Merger Agreement by reason of a breach of ValueVision of a
material representation, warranty, covenant or agreement contained in the
Merger Agreement); or
(g) by National Media or ValueVision, if there has been a breach of
any representation, warranty, covenant or agreement on the part of the
other party set forth in the Merger Agreement, which breach will cause the
conditions described above under "-- Conditions to Obligations to Effect
the Merger" not to be satisfied and such breach has not been cured within
20 business days following receipt by the breaching party of written notice
of such breach from the other party.
In the event of any termination of the Merger Agreement by either National
Media or ValueVision as provided above, the Merger Agreement will become void
and there will be no liability or obligation (with limited exceptions) on the
part of National Media, ValueVision, Quantum Direct or their respective
officers, directors, stockholders or affiliates, except as provided below with
respect to termination fees and except that such termination will not limit
liability for a willful breach of the Merger Agreement; provided that, the
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<PAGE> 85
indemnification provisions described above under "--Indemnification of National
Media and ValueVision Directors and Officers" and the termination fee provisions
described below will remain in full force and effect and survive any termination
of the Merger Agreement.
Except as set forth below, if the Merger is not consummated, all fees,
costs and expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby will be paid by the party incurring such
expenses. If the Merger is consummated ValueVision will pay for all fees and
expenses incurred by National Media in connection with the Merger and the
transactions contemplated by the Merger Agreement.
National Media will pay ValueVision a termination fee of $5.0 million (the
"ValueVision Termination Fee") upon the earliest to occur of the following
events: (i) the termination of the Merger Agreement by ValueVision under the
circumstances described in paragraph (d)(ii) above, but only if a proposal for
an Alternative Transaction involving National Media has been publicly announced
prior to the National Media Special Meeting and either a definitive agreement
for an Alternative Transaction is entered into, or an Alternative Transaction is
consummated, within eighteen months of such termination; or (ii) the termination
of the Merger Agreement by ValueVision under the circumstances described in
paragraph (f) above, National Media's payment of such termination fee will be
the sole and exclusive remedy of ValueVision against National Media and any of
its subsidiaries and their respective directors, officers, employees, agents,
advisors or other representatives with respect to the occurrences giving rise to
such payment; provided that this limitation will not apply in the event of a
willful breach of the Merger Agreement by National Media. Notwithstanding the
foregoing, if and to the extent ValueVision has purchased shares of National
Media Common Stock pursuant to the ValueVision Option (as defined below under
"Other Agreements -- ValueVision Stock Option Agreement") the amount of the
ValueVision Termination Fee will be reduced to the extent that the ValueVision
Total Profit (as defined below under "Other Agreements -- ValueVision Stock
Option Agreement") exceeds $7.5 million.
ValueVision will pay National Media a termination fee of $5.0 million (the
"National Media Termination Fee") upon the earliest to occur of the following
events: (i) the termination of the Merger Agreement by National Media under the
circumstances described in paragraph (d)(i) above, but only if a proposal for an
Alternative Transaction involving ValueVision has been publicly announced prior
to the ValueVision Special Meeting and either a definitive agreement for an
Alternative Transaction is entered into, or an Alternative Transaction is
consummated, within eighteen months of such termination; or (ii) the termination
of the Merger Agreement by National Media under the circumstances described in
paragraph (e) above. ValueVision's payment of such termination fee will be the
sole and exclusive remedy of National Media against ValueVision and any of its
subsidiaries and their respective directors, officers, employees, agents,
advisors or other representatives with respect to the occurrences giving rise to
such payment; provided that this limitation will not apply in the event of a
willful breach of the Merger Agreement by ValueVision. Notwithstanding the
foregoing, if and to the extent National Media has purchased shares of
ValueVision Common Stock pursuant to the National Media Option (as defined below
under "Other Agreements -- National Media Stock Option Agreement") the amount of
the National Media Termination Fee will be reduced to the extent that the
National Media Total Profit (as defined below under "Other Agreements --
National Media Stock Option Agreement") exceeds $7.5 million.
If applicable, the fees payable as described above will be paid
concurrently with the first to occur of the relevant termination events.
AMENDMENT AND WAIVER
The Merger Agreement provides that it may be amended by the parties
thereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the holders of a majority of National Media Common Stock and
National Media Series B Stock, voting together as a class, with the holders of
National Media Series B Stock entitled to 10 votes for each share held or the
holders of a majority of ValueVision Common Stock, but, after any such approval,
no amendment shall be made which by law requires further approval by such
holders
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<PAGE> 86
without such further approval. The Merger Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties hereto;
provided, however, that the Merger Agreement may be amended in writing without
obtaining the signatures of National Media, ValueVision or Quantum Direct solely
for the purpose of adding National Media Sub and ValueVision Sub as parties to
the Merger Agreement. At any time prior to the Effective Time, the parties to
the Merger Agreement, by action taken or authorized by their respective Boards
of Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
thereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant thereto and (iii) waive
compliance with any of the agreements or conditions contained therein. Any
agreement on the part of a party to the Merger Agreement to any such extension
or waiver shall be valid only if set forth in a written instrument signed on
behalf of such party.
OTHER AGREEMENTS
The following is a summary of the material terms of the National Media
Stock Option Agreement and, the ValueVision Stock Option Agreement, copies of
which agreements are attached hereto as Annexes J and K, respectively. Such
summaries are qualified in their entirety by reference to the stock option
agreements.
NATIONAL MEDIA STOCK OPTION AGREEMENT
Pursuant to the National Media Stock Option Agreement, National Media has
the right (the "National Media Option"), under the circumstances described
below, to acquire up to 5,579,119 shares of authorized but unissued ValueVision
Common Stock (the "National Media Option Shares") (or approximately 19.9% of the
outstanding shares of ValueVision Common Stock as of January 5, 1998 prior to
giving effect to the exercise of such option), at a per share cash purchase
price of $3.875 (the "National Media Option Price"). The National Media Stock
Option Agreement could have the effect of making an acquisition of ValueVision
by a third party more costly because of the need to acquire in any such
transaction the National Media Option Shares issued under the National Media
Stock Option Agreement, and could also jeopardize the ability of a third party
to acquire ValueVision in a transaction accounted for as a pooling of interests.
The National Media Option may be exercised by National Media, in whole or
in part, at any time or from time to time after the occurrence of an event which
would entitle National Media, upon termination of the Merger Agreement, to
payment of the National Media Termination Fee (as described above in "The Merger
Agreement -- Termination; Termination Fees and Expenses"); or upon termination
of the Merger Agreement by National Media as a result of ValueVision's breach of
a material representation, warranty, covenant or agreement contained in the
Merger Agreement; provided that the National Media Option may not be exercised
if National Media is in material breach of any of its material representations,
warranties, covenants or agreements contained in the National Media Stock Option
Agreement or in the Merger Agreement. National Media may exercise the National
Media Option by either (a) paying the National Media Option Price in cash and
receiving the National Media Option Shares or (b) electing, in lieu of the
payment of the National Media Option Price and the receipt of the National Media
Option Shares, to receive a cash payment (the "Cash Exercise Payment") from
ValueVision in the amount of the excess of (i) the higher of the price paid for
the ValueVision Common Stock in an Alternative Transaction or the then current
market price of the ValueVision Common Stock over (ii) the National Media Option
Price.
The National Media Stock Option Agreement further provides that if National
Media desires to sell any of the National Media Option Shares within two years
after the purchase of such shares and such sale requires the registration of
such shares under the Securities Act, ValueVision will be required to prepare
and file (subject to certain limitations) a registration statement under the
Securities Act for the purpose of permitting such sale of shares by National
Media. ValueVision will not be required to have declared effective more than two
such registration statements.
Notwithstanding any other provisions of the National Media Stock Option
Agreement, in no event will the National Media Total Profit (as defined below)
exceed $7.5 million. "National Media Total Profit" means the aggregate amount
(before taxes) of (i) the National Media Termination Fee received by National
Media,
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<PAGE> 87
(ii) the amount received by National Media for the repurchase of the National
Media Option Shares by ValueVision pursuant to the second preceding paragraph,
less the purchase price paid by National Media for such shares, and (iii) the
amount received by National Media in the sale of National Media Option Shares,
less the purchase price paid by National Media for such shares.
The National Media Option will terminate upon the earlier of (i) the
Effective Time, (ii) the date on which National Media realizes a National Media
Total Profit of $7.5 million, (iii) the date on which the Merger Agreement is
terminated, provided that the National Media Option is not exercisable at such
time and does not become exercisable simultaneous with such termination, and
(iv) 90 days after the date the National Media Option becomes exercisable,
provided that if the National Media Option cannot be exercised, or the National
Media Option Shares cannot be delivered to ValueVision upon such exercise,
because of a preliminary or permanent injunction or other court order, because
the applicable waiting period under the HSR Act has not expired or been
terminated or because the applicable approvals of the FCC have not been
obtained, the date referred to in clause (iv) above will be extended until 30
days after such impediment to exercise has been removed.
VALUEVISION STOCK OPTION AGREEMENT
Pursuant to the ValueVision Stock Option Agreement, ValueVision has the
right (the "ValueVision Option"), under the circumstances described below, to
acquire up to 5,075,979 shares of authorized but unissued National Media Common
Stock (the "ValueVision Option Shares") (or approximately 19.9% of the
outstanding National Media Common Stock as of January 5, 1998 prior to giving
effect to the exercise of such option), including the associated rights under
the National Media Rights Plan, at a per share cash purchase price of $3.4375
(the "ValueVision Option Price"). The ValueVision Stock Option Agreement could
have the effect of making an acquisition of National Media by a third party more
costly because of the need to acquire in any such transaction the ValueVision
Option Shares issued under the ValueVision Stock Option Agreement, and could
also jeopardize the ability of a third party to acquire National Media in a
transaction accounted for as a pooling of interests.
The ValueVision Option may be exercised by ValueVision, in whole or in
part, at any time or from time to time after the occurrence of an event which
would entitle ValueVision, upon termination of the Merger Agreement, to payment
of the ValueVision Termination Fee (as described above in "The Merger Agreement
- -- Termination; Termination Fees and Expenses"); or upon termination of the
Merger Agreement by ValueVision as a result of National Media's breach of a
material representation, warranty, covenant or agreement contained in the Merger
Agreement; provided that the ValueVision Option may not be exercised if
ValueVision is in material breach of any of its material representations,
warranties, covenants or agreements contained in the ValueVision Stock Option
Agreement or the Merger Agreement. ValueVision may exercise the ValueVision
Option by either (a) paying the ValueVision Option Price in cash and receiving
the ValueVision Option Shares or (b) electing, in lieu of the payment of the
ValueVision Option Price and the receipt of the ValueVision Option Shares, to
receive a Cash Exercise Payment from National Media in the amount of the excess
of (i) the higher of the price paid for the National Media Common Stock in an
Alternative Transaction or the then current market price of the National Media
Common Stock over (ii) the ValueVision Option Price.
The ValueVision Stock Option Agreement further provides that if ValueVision
desires to sell any of the ValueVision Option Shares within two years after the
purchase of such shares and such sale requires the registration of such shares
under the Securities Act, National Media will be required to prepare and file
(subject to certain limitations) a registration statement under the Securities
Act for the purpose of permitting such sale of shares by ValueVision. National
Media will not be required to have declared effective more than two such
registration statements.
Notwithstanding any other provisions of the ValueVision Stock Option
Agreement, in no event will the ValueVision Total Profit (as defined below)
exceed $7.5 million. "ValueVision Total Profit" means the aggregate amount
(before taxes) of (i) the ValueVision Termination Fee received by ValueVision,
(ii) the amount received by ValueVision for the repurchase of the ValueVision
Option Shares by National Media pursuant to the second preceding paragraph, less
the purchase price paid by ValueVision for such shares, and
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<PAGE> 88
(iii) the amount received by ValueVision in the sale of ValueVision Option
Shares, less the purchase price paid by ValueVision for such shares.
The ValueVision Option will terminate upon the earlier of (i) the Effective
Time, (ii) the date on which ValueVision realizes a ValueVision Total Profit of
$7.5 million, (iii) the date on which the Merger Agreement is terminated,
provided that the ValueVision Option is not exercisable at such time and does
not become exercisable simultaneous with such termination, and (iv) 90 days
after the date the ValueVision Option becomes exercisable, provided that if the
ValueVision Option cannot be exercised, or the National Media Option Shares
cannot be delivered to National Media upon such exercise, because of a
preliminary or permanent injunction or other court order, because the applicable
waiting period under the HSR Act has not expired or been terminated or because
the applicable approvals of the FCC have not been obtained, the date referred to
in clause (iv) above will be extended until 30 days after such impediment to
exercise has been removed.
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<PAGE> 89
CERTAIN FINANCING ARRANGEMENTS
The following is a summary of the material terms of the Redemption
Agreement, the Demand Note, ValueVision Warrant, Registration Rights Agreement
and the Consent (each as defined below), the copies of which agreements are
filed as exhibits to National Media's Current Report on Form 8-K/A, dated
January 16, 1998 and ValueVision's Current Report on Form 8-K, dated January 8,
1998, and are hereby incorporated herein by reference to such agreement.
Concurrently with the execution of the Merger Agreement, National Media
entered into certain related financing transactions, including the execution of
the Redemption Agreement and related agreements with holders of Series C Stock,
a Demand Promissory Note to borrow up to an aggregate principal amount of $10
million from ValueVision (the "Demand Note"), the issuance of a five-year
warrant to ValueVision representing the right to purchase 250,000 shares of
National Media Common Stock (the "ValueVision Warrant"), and the execution of
the Consent, Waiver and Amendment (the "Consent") with its principal lender to
obtain consent to the Merger and related transactions and to amend National
Media's existing loan documents with such lender.
Pursuant to the Redemption Agreement, National Media will redeem all of the
outstanding shares of the Series C Stock for approximately $23.5 million on the
Closing Date, including any outstanding shares of substantially identical
preferred stock that are exchanged for the Series C Stock under the Redemption
Agreement. ValueVision will provide National Media with the funds to effect such
redemption. In addition, in order to obtain the consent of the holders of the
Series C Stock to the Merger, National Media issued to such holders a five-year
warrant, representing the right to purchase an aggregate of 500,000 shares of
National Media Common Stock at an exercise price of $6.82 per share, subject to
customary anti-dilution adjustments.
Pursuant to the Demand Note, National Media received an initial loan of $7
million from ValueVision on January 5, 1998, and may borrow up to an additional
$3 million, subject to the terms and conditions therein. The Demand Note bears
interest at prime rate plus 1.5% per annum. The obligations under the Demand
Note become due and payable on written demand by ValueVision, which demand may
be made at any time after the earliest to occur of: (i) January 1, 1999, (ii)
the termination of the Merger Agreement if such termination results from a
breach of any covenant by National Media or the inaccuracy of an representation
or warranty of National Media or if the stockholders of National Media do not
approve the Merger, (iii) the announcement of a material transaction involving
National Media (such as a merger, share exchange, sale of all or substantially
all of the assets of National Media or another similar event), (iv) a change in
control of National Media (other than the Merger) or (v) the acceleration of the
obligations under the Demand Note. The obligations under the Demand Note are
unconditionally guaranteed by certain of National Media's subsidiaries.
As part of the financing transactions, National Media issued to ValueVision
the ValueVision Warrant, which represents the right to purchase 250,000 shares
of National Media Common Stock. The ValueVision Warrant is exercisable
commencing on the earlier to occur of (a) the 75th day after termination of the
Merger Agreement and (b) a default under the Demand Note and continuing until
the earlier to occur of (x) January 5, 2003 and (y) a "Termination Event," which
is defined in the warrant certificate as (i) the consummation of the Merger or
(ii) the termination of the Merger Agreement if such termination results from a
breach of any covenant by ValueVision or in the event the shareholders of
ValueVision do not approve the Merger; provided, however, that no Termination
Event will be deemed to have occurred if, within 75 days after the occurrence
thereof, National Media has not paid in full in cash all of its obligations
under the Demand Note or a default by National Media under the Demand Note
occurs during such 75-day period. The shares of National Media Common Stock
issuable under the ValueVision Warrant are, together with certain other shares
of National Media Common Stock, subject to certain registration rights provided
under a Registration Rights Agreement between National Media and ValueVision
(the "Registration Rights Agreement"). Under the Registration Rights Agreement,
National Media must, among other things, use its best efforts to register all
such shares upon written demand by a majority of the holders of such shares and
cause such registration to remain effective until the earlier of the date on
which all of such shares have been sold and
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the date on which all of such shares may be immediately sold to the public
without registration under the Securities Act.
With respect to National Media's existing loan documents with its principal
lender, including a $20 million revolving line of credit (the "Loan Documents"),
National Media and such lender entered into the Consent pursuant to which the
lender consented to and approved the Merger and related transactions and waived
any defaults that may occur as a result thereof, subject to certain specified
conditions. The lender's consent and waiver is conditioned upon, among other
things, (i) National Media not making any voluntary prepayments of any principal
amounts outstanding under the Demand Note without the prior consent of the
lender (which consent will not be unreasonably withheld), (ii) the execution of
a guaranty of the obligations under the Loan Documents by Prestige, upon the
termination of its existing facility with ASB Bank Limited and the satisfaction
of Prestige's obligations thereunder, and the granting of a security interest in
the collateral that secured such facility to the lender at such time, (iii) the
execution of a guaranty by Quantum Direct, ValueVision, and ValueVision's
operating subsidiaries of the obligations under the Loan Documents upon the
consummation of the Merger; and (iv) during the period between the execution of
the Merger Agreement and the consummation of the Merger, restrictions on
ValueVision's ability to incur liens on its property or assets, enter into a
merger or consolidation with a person, sell or otherwise dispose of more than
85% of ValueVision's total assets (based on the aggregate book value of the
assets sold as a percentage of the aggregate book value of the total assets at
such time) or pay dividends or make other distributions on account of its
capital stock. In addition, the lender and National Media amended the Loan
Documents to provide that certain accrued interest on outstanding indebtedness
become payable immediately and to make future interest payable on a monthly
basis.
COMPARATIVE MARKET PRICES AND DIVIDENDS
National Media Common Stock is listed on the New York Stock Exchange
("NYSE") and ValueVision Common Stock is traded on the Nasdaq National Market
tier of the Nasdaq Stock Market ("Nasdaq"). The table below sets forth, for the
fiscal quarters indicated, the reported high and low sales prices of National
Media Common Stock and ValueVision Common Stock as reported by the NYSE or
Nasdaq, in each case based on published financial sources. National Media's
fiscal year ends on March 31 of each year and ValueVision's fiscal year ends on
January 31 of each year.
<TABLE>
<CAPTION>
NATIONAL MEDIA VALUEVISION
COMMON STOCK COMMON STOCK
------------------------ ------------------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED 1998
4th Quarter (only through March 12, 1998 for National
Media)............................................... $ 3 7/16 $ 2 1/8 $ 4 7/8 $ 3 1/8
3rd Quarter............................................. 7 3/16 2 1/2 5 3/8 3 13/16
2nd Quarter............................................. 7 9/16 4 7/16 5 7/16 3 7/16
1st Quarter............................................. 9 3/8 5 15/16 4 3/4 3 7/16
FISCAL YEAR ENDED 1997
4th Quarter............................................. 10 1/8 6 1/2 5 7/8 4 5/8
3rd Quarter............................................. 15 3/8 5 3/4 6 7/16 5 3/8
2nd Quarter............................................. 18 14 5/8 8 1/2 5 3/8
1st Quarter............................................. 20 5/8 16 8 9/16 5 5/8
FISCAL YEAR ENDED 1996
4th Quarter............................................. 21 1/2 15 6 3/8 4 3/4
3rd Quarter............................................. 21 13 3/4 7 5/16 4 3/4
2nd Quarter............................................. 14 1/2 9 3/8 6 1/16 3 7/8
1st Quarter............................................. 9 7/8 7 1/8 6 3/8 4 7/16
</TABLE>
On January 2, 1998, the last trading date prior to the date on which
National Media and ValueVision publicly announced the signing of the Merger
Agreement, the high and low sales prices on the NYSE were
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$3 1/2 and $3 1/4 per share, respectively, for National Media Common Stock and
on Nasdaq were $3 7/8 and $3 11/16 per share, respectively, for ValueVision
Common Stock. The average closing price of National Media Common Stock and
ValueVision Common Stock for the 30 consecutive trading days ending January 2,
1998 were $3.52 and $3.77 per share, respectively. On March 12, 1998, the high
and low sales prices and last reported sales price on NYSE were $2 5/16, $2 3/16
and $2 3/16 per share for National Media Common Stock, and on Nasdaq were $3 5/8
$3 1/2 and $3 9/16 per share, respectively, for ValueVision Common Stock.
HOLDERS OF BOTH NATIONAL MEDIA AND VALUEVISION COMMON STOCK ARE URGED TO OBTAIN
CURRENT MARKET QUOTATIONS.
ValueVision and National Media have not declared or paid any dividends with
respect to ValueVision Common Stock or National Media Common Stock or National
Media Series B Stock, respectively. Quantum Direct does not currently intend to
declare or pay any cash dividends on its Common Stock or Series B Stock. Any
determination to pay dividends in the future will be at the discretion of
Quantum Direct's Board of Directors and will be dependent upon Quantum Direct's
results of operations, financial conditions, capital expenditures, working
capital requirements, any contractual restrictions and other factors deemed
relevant by the Quantum Direct's Board of Directors.
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PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following unaudited pro forma condensed consolidated financial data for
Quantum Direct is based on the historical consolidated financial statements of
ValueVision and National Media which are incorporated by reference into this
Joint Proxy Statement/Prospectus and have been prepared on a pro forma basis to
give effect to the Merger under the purchase method of accounting, as if the
transaction had occurred at February 1, 1996 for each operating period
presented. The pro forma information was prepared based upon certain assumptions
described below and may not be indicative of results that actually would have
occurred had the Merger occurred at the beginning of the last full fiscal year
presented or of results which may occur in the future. The unaudited pro forma
condensed consolidated financial data and accompanying notes should be read in
conjunction with the annual and interim consolidated financial statements and
notes thereto of ValueVision and National Media appearing elsewhere herein and
incorporated by reference into this Joint Proxy Statement/Prospectus.
The unaudited pro forma condensed consolidated balance sheet as of October
31, 1997 presents the financial position of Quantum Direct as if the Merger had
occurred on that date and was prepared utilizing the unaudited ValueVision
balance sheet as of October 31, 1997 and the unaudited National Media balance
sheet as of December 31, 1997. The unaudited pro forma condensed consolidated
statement of operations for the year ended January 31, 1997 gives effect to the
Merger as if it had occurred on February 1, 1996 and has been prepared on the
basis of the results of operations for the year ended January 31, 1997 for
ValueVision and for the year ended March 31, 1997 for National Media. The
unaudited pro forma condensed consolidated statement of operations for the nine
months ended October 31, 1997 gives effect to the Merger as if it had occurred
on February 1, 1996 and has been prepared on the basis of the results of
operations for the nine months ended October 31, 1997 for ValueVision and for
the nine months ended December 31, 1997 for National Media. The unaudited pro
forma condensed consolidated financial data is not necessarily indicative of
either future results of operations or the results that might have occurred if
the foregoing transactions had been consummated on the indicated dates.
The Merger will be accounted for using the purchase method of accounting.
The terms of the Merger Agreement provide that National Media stockholders will
receive one share of Quantum Direct Common Stock for each share of National
Media Common Stock held and one share of Quantum Direct Series B Stock for each
share of National Media Series B Stock held and ValueVision shareholders will
receive 1.19 shares of Quantum Direct Common Stock for each share of ValueVision
Common Stock held. For purposes of the unaudited pro forma condensed
consolidated financial data which follows, the Quantum Direct Common Stock to be
issued as consideration in the Merger has been valued at $2.96 per share, the
average five-day pre-announcement (January 5, 1998) last price of ValueVision's
Common Stock on the Nasdaq National Market, as adjusted to reflect the
ValueVision Exchange Ratio. Management of the companies believes that the
average five-day pre-announcement last price of ValueVision's Common Stock is
indicative of the fair value of the purchase price of National Media. The total
purchase price of the Merger will be allocated to the tangible and intangible
assets and liabilities of National Media based upon their respective estimated
fair values. The allocation of the aggregate purchase price included in the
unaudited pro forma condensed consolidated balance sheet is preliminary and is
based on the tangible net assets as reported by National Media as of December
31, 1997. The amount of the purchase price in excess of the estimated fair
values of the net tangible assets of National Media has been reflected as
goodwill and other intangible assets in the accompanying unaudited pro forma
condensed consolidated balance sheet.
The unaudited pro forma condensed consolidated statements of operations
included herein do not reflect net annual estimated operating savings which
management believes are achievable. The sum of the components of the estimated
annualized operating savings exceed $12.0 million. The significant annual cost
savings and operating synergies include the following: consolidation of certain
telemarketing, customer service and order fulfillment facilities; utilization of
ValueVision's television home shopping programming for product testing;
utilization of excess capacity of ValueVision's in-house production
capabilities; the integration of management information systems; and the
elimination of duplicative overhead and administrative expenses. Upon
consummation of the Merger, Quantum Direct intends to review ValueVision's and
National Media's respective assets, businesses, operations, properties,
policies, corporate structures, capitalization and management in order to
identify any additional synergies, operating efficiencies and cost savings. The
estimates of potential cost savings resulting from the Merger contained in this
Joint Proxy Statement/Prospectus are forward-looking statements that involve
risks and inherent uncertainties that could cause actual net annual cost savings
to differ materially from those projected.
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VALUEVISION INTERNATIONAL, INC.
AND NATIONAL MEDIA CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------ PRO FORMA
VALUEVISION NATIONAL MEDIA MERGER PRO FORMA AS
---------------- ----------------- ADJUSTMENTS ADJUSTED
AS OF AS OF AS OF AS OF
OCTOBER 31, 1997 DECEMBER 31, 1997 OCTOBER 31, 1997 OCTOBER 31, 1997
---------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............ $ 18,189 $ 11,834 $ (6,500)(1) $ 2,123
(21,400)(2)
Short-term investments............... 27,530 -- -- 27,530
Accounts receivable, net............. 11,714 28,412 -- 40,126
Inventories, net..................... 27,286 24,836 -- 52,122
Prepaid expenses and other........... 15,900 17,008 -- 32,908
Deferred taxes....................... 392 2,571 (2,571)(3) 2,963
2,571(3)
-------- -------- --------- --------
Total current assets................. 101,011 84,661 (27,900) 157,772
Property and equipment, net............ 21,851 12,925 -- 34,776
Federal Communications Commission
licenses, net........................ 5,706 -- -- 5,706
Montgomery Ward operating agreement and
licenses, net........................ 14,085 -- -- 14,085
Investment in Paxson Communications
Corporation.......................... 9,448 -- -- 9,448
Goodwill and other intangible assets,
net.................................. 12,298 50,874 (50,874)(3) 99,003
86,705(1)
Investments and other assets, net...... 8,928 2,530 -- 11,458
-------- -------- --------- --------
$173,327 $150,990 $ 7,931 $332,248
======== ======== ========= ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term
obligations........................ $ 416 $ 23,433 $ -- $ 23,849
Accounts payable..................... 22,337 17,657 -- 39,994
Accrued liabilities.................. 13,928 24,650 3,000(1) 41,578
Income taxes payable................. 2,875 -- -- 2,875
Deferred income taxes................ -- 2,351 (2,351)(3) 2,351
2,351(3)
Deferred revenue..................... -- 1,561 -- 1,561
-------- -------- --------- --------
Total current liabilities............ 39,556 69,652 3,000 112,208
Long-term debt and capital lease
obligations.......................... 1,086 2,529 -- 3,615
Other noncurrent obligations........... -- 4,004 -- 4,004
-------- -------- --------- --------
Total liabilities.................... 40,642 76,185 3,000 119,827
-------- -------- --------- --------
Shareholders' equity:
Preferred stock...................... -- 1 -- 1
Common stock......................... 280 262 (262)(4) 280
Additional paid-in capital........... 100,101 155,643 (134,105)(4) 179,975
79,736(1)
(21,400)(2)
Net unrealized holding losses on
investments........................ (2,922) -- -- (2,922)
Retained earnings (deficit).......... 35,226 (64,615) 64,615(4) 35,226
-------- -------- --------- --------
132,685 91,291 (11,416) 212,560
Treasury stock....................... -- (6,802) 6,802(4) --
Note receivable officer.............. -- (139) -- (139)
Foreign currency translation
adjustment......................... -- (9,545) 9,545(4) --
-------- -------- --------- --------
Total shareholders' equity........... 132,685 74,805 4,931 212,421
-------- -------- --------- --------
$173,327 $150,990 $ 7,931 $332,248
======== ======== ========= ========
</TABLE>
See accompanying notes to pro forma condensed consolidated financial data.
88
<PAGE> 94
VALUEVISION INTERNATIONAL, INC.
AND NATIONAL MEDIA CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
----------------------------- -----------------------------
VALUEVISION NATIONAL MEDIA PRO FORMA VALUEVISION NATIONAL MEDIA
------------ -------------- ----------------------------- ------------ --------------
ADJUSTMENTS CONSOLIDATED
YEAR ENDED YEAR ENDED
JANUARY 31, MARCH 31, JANUARY 31, JANUARY 31, OCTOBER 31, DECEMBER 31,
1997 1997 1997 1997 1997 1997
----------- --------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues......... $159,478 $358,179 $ -- $517,657 $157,887 $186,635
Direct and other
operating costs.... 156,122 390,465 -- 546,587 161,862 214,174
Depreciation and
amortization
expense............ 5,996 9,966 (3,230)(5) 16,200 5,542 5,355
3,468(5)
-------- -------- ------- -------- -------- --------
Operating
loss(6)(7)(8).... (2,640) (42,252) (238) (45,130) (9,517) (32,894)
Gain on sale of
broadcast
stations........... 27,050 -- -- 27,050 38,850 --
Interest income
(expense).......... 3,912 (1,542) -- 2,370 1,475 (2,299)
Other income
(expense), net..... 1,368 -- -- 1,368 (346) --
-------- -------- ------- -------- -------- --------
Income (loss) before
provision (benefit)
for income taxes... 29,690 (43,794) (238) (14,342) 30,462 (35,193)
Provision (benefit)
for income taxes... 11,600 1,897 (9,730)(9) 3,767 11,830 300
-------- -------- ------- -------- -------- --------
Net income
(loss)(6)(7)(8).... $ 18,090 $(45,691) $ 9,492 $(18,109) $ 18,632 $(35,493)
======== ======== ======= ======== ======== ========
Net income (loss) per
common share(10)... $ 0.57 $ (2.09) $ (0.30) $ 0.58 $ (1.45)
======== ======== ======== ======== ========
Net income (loss) per
common share --
assuming
dilution(10)....... $ 0.56 $ (2.09) $ (0.30) $ 0.58 $ (1.45)
======== ======== ======== ======== ========
Weighted average
number of common
shares
outstanding:(10)
Basic............ 31,718 21,905 59,649 32,217 24,736
======== ======== ======== ======== ========
Diluted.......... 32,342 21,905 59,649 32,375 24,736
======== ======== ======== ======== ========
<CAPTION>
PRO FORMA
-------------------------------------
ADJUSTMENTS CONSOLIDATED
NINE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
1997 1997
----------------- -----------------
<S> <C> <C>
Net revenues......... $ -- $344,522
Direct and other
operating costs.... -- 376,036
Depreciation and
amortization
expense............ (2,270)(5) 11,228
2,601(5)
-------- --------
Operating
loss(6)(7)(8).... (331) (42,742)
Gain on sale of
broadcast
stations........... -- 38,850
Interest income
(expense).......... -- (824)
Other income
(expense), net..... -- (346)
-------- --------
Income (loss) before
provision (benefit)
for income taxes... (331) (5,062)
Provision (benefit)
for income taxes... (10,030)(9) 2,100
-------- --------
Net income
(loss)(6)(7)(8).... $ 9,699 $ (7,162)
======== ========
Net income (loss) per
common share(10)... $ (0.11)
========
Net income (loss) per
common share --
assuming
dilution(10)....... $ (0.11)
========
Weighted average
number of common
shares
outstanding:(10)
Basic............ 63,074
========
Diluted.......... 63,074
========
</TABLE>
See accompanying notes to pro forma condensed consolidated financial data.
89
<PAGE> 95
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AND STATISTICAL DATA)
(1) This adjustment reflects $86.7 million of excess cost over net tangible
assets acquired (i.e., goodwill) arising from the Merger in accordance with
the purchase method of accounting. For accounting and financial reporting
purposes, ValueVision will be deemed the acquiror. Included in the purchase
price of the Merger transaction are estimated financial advisors' fees and
expenses, professional fees and transaction and exit costs of approximately
$9.5 million, of which approximately $6.5 million are assumed to be paid
out as of the pro forma balance sheet date. Also included in the purchase
price is the estimated fair value of stock options "in-the-money" as of the
Effective Time. The final allocation of the purchase price will be
determined upon the consummation of the Merger or shortly thereafter. The
following summarizes the aggregate Merger consideration and computation of
incremental excess cost over the estimated fair value of net tangible
assets acquired:
<TABLE>
<S> <C>
National Media assumed shares acquired*.................... 26,938
ValueVision stock price per share**........................ $ 2.96
-------
Initial Merger consideration............................. $79,736
Plus estimated transaction costs for financial advisors'
fees and expenses, legal and accounting fees and expenses
and severance and other exit costs....................... 9,500
-------
Aggregate Merger consideration............................. 89,236
Fair value of net tangible assets of National Media at
December 31, 1997 after adjusting for the redemption of
the Series C Stock....................................... 2,531
-------
Excess cost over the fair value of National Media net
tangible assets acquired.............................. $86,705
=======
</TABLE>
- -------------------------
* Shares assumed acquired are based upon shares outstanding as of December 31,
1997, including the Series B Stock assumed as if converted, plus the
dilutive effect of stock options and warrants "in-the-money".
** Stock price per share used to arrive at initial Merger consideration was
based on the average five-day pre-announcement (January 5, 1998) last price
of ValueVision's Common Stock as traded on the Nasdaq National Market, as
adjusted to reflect the 1.19 to 1.0 exchange ratio.
(2) This adjustment reflects the effect of the redemption of the Series C Stock
for approximately $21.4 million. The redemption price is equal to the sum
of (i) the original $20.0 million contribution, plus (ii) a 6% accrued
premium from September 18, 1997 through December 31, 1997, plus (iii) an
amount equal to 18% per annum on the sum of (i) and (ii) from September 18,
1997 to December 31, 1997.
(3) This adjustment reflects the elimination of National Media's goodwill and
deferred income taxes and the reestablishment of deferred taxes as a result
of purchase accounting.
(4) These adjustments reflect the elimination of National Media's shareholders'
equity accounts as of December 31, 1997 after the adjustment to reflect the
effect of the redemption of the Series C Stock.
(5) This adjustment reflects the replacement of National Media's historical
recurring amortization of goodwill with the amortization of Quantum Direct
goodwill recorded through purchase accounting. This adjustment excludes
$3,694 nonrecurring amortization recorded by National Media for the year
ended March 31, 1997 to reduce Positive Response's goodwill due to
significant operating losses and was based upon an independent appraisal.
Goodwill is assumed to be amortized on a straight-line basis over a period
of 25 years. The final allocation of the purchase price will be determined
upon the consummation of the Merger or shortly thereafter.
(6) The unaudited pro forma condensed consolidated statements of operations do
not reflect net annual estimated cost savings which management believes are
achievable. The sum of the components of the estimated annualized operating
savings exceed $12.0 million. The significant annual cost savings and
operating synergies include the following: consolidation of certain
telemarketing, customer service and
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<PAGE> 96
order fulfillment facilities; utilization of ValueVision's television home
shopping programming for product testing; utilization of excess capacity of
ValueVision's in-house production capabilities; the integration of
management information systems; and the elimination of duplicative overhead
and administrative expenses. The estimates of potential cost savings
resulting from the Merger contained in this Joint Proxy
Statement/Prospectus are forward looking statements that involve risks and
inherent uncertainties that could cause actual net annual cost savings to
differ materially from those projected. See "Cautionary Statement
Concerning Forward-Looking Statements."
(7) Pro forma operating loss and net loss for National Media for the year ended
March 31, 1997 includes severance expense of $2.5 million, legal
settlements and fees of $13.3 million, provision for bad debts of $5.7
million and inventory obsolescence expense of $8.7 million. In addition,
pro forma net loss for ValueVision includes pre-tax gains derived from the
sale of broadcast properties and other investments of $28.2 million and
$38.5 million for the year ended January 31, 1997 and nine months ended
October 31, 1997.
(8) National Media has 750,000 options outstanding, including 700,000 and
25,000 held by Mr. Verratti and Mr. Sullivan, respectively, which could
result in a maximum charge of $3.0 million (750,000 options multiplied by
$4.00 per share (maximum reduction of option exercise price from the
closing price of National Media common stock on the NYSE at the date of a
triggering event)) on National Media's results of operations upon
consummation of the Merger. The pro forma consolidated statement of
operations for the nine-months ended October 31, 1997 includes $750,000 of
the $3.0 million. This represents compensation expense for variable plan
options recorded in accordance with APB Opinion No. 25.
(9) These adjustments reflect the utilization of net operating losses (NOLs) of
National Media by Quantum Direct in the consolidated pro forma statement of
operations for income tax reporting purposes. It has been assumed that all
ValueVision federal tax obligations have been offset with current period
National Media operating losses and the remaining pro forma tax provisions
relate only to certain state and foreign taxes. The pro forma statement of
operations for the year ended January 31, 1997 reflects the utilization of
$9,730 of National Media's operating losses by Quantum Direct at an
effective federal tax rate of 35%. The pro forma statement of operations
for the nine months ended October 31, 1997 reflects the utilization of
$10,030 of National Media's operating losses by Quantum Direct at an
effective federal tax rate of 35%. The pro forma statement of operations do
not reflect the utilization of any National Media net operating loss
carryforwards. Subsequent to the merger, National Media's net operating
loss carryforwards will be subject to certain limitations set forth in
Section 382 of the Internal Revenue Code, as well as SRLY (separate return
limitation years) limitations. Future use of these net operating loss
carryforwards will be dependent on taxable income generated by National
Media, as well as considerations of the annual Section 382 limitations.
(10) Shares used in computing the pro forma net loss per share have been derived
from each company's historical weighted average shares outstanding adjusted
for the Exchange Ratios for each period presented and include additional
shares issuable by Quantum Direct to convert ValueVision's outstanding
91
<PAGE> 97
weighted shares at the 1.19 to 1.0 ValueVision Exchange Ratio. Computation
of pro forma weighted average shares outstanding is as follows:
<TABLE>
<CAPTION>
PRO FORMA SHARES OF QUANTUM DIRECT PRO FORMA SHARES OF QUANTUM DIRECT
YEAR ENDED NINE MONTHS ENDED
JANUARY 31, 1997 OCTOBER 31, 1997
-------------------------------------- -------------------------------------
VALUEVISION NATIONAL MEDIA TOTAL VALUEVISION NATIONAL MEDIA TOTAL
----------- -------------- ----- ----------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
Weighted average shares
outstanding.............. 31,718 21,905 32,217 24,736
Dilutive effect of stock
options and warrants in
the money................ -- -- -- --
Exchange Ratios............ 1.19 1.00 1.19 1.00
------ ------ ------ ------
Pro forma Quantum Direct
dilutive shares.......... 37,744 21,905 59,649 38,338 24,736 63,074
====== ====== ====== ====== ====== ======
</TABLE>
Weighted average shares outstanding for National Media reflects 21,905 and
24,736 weighted average shares of National Media Common Stock outstanding as
of March 31 and December 31, 1997, respectively. Weighted average shares
outstanding for ValueVision includes 2,302 and 3,951 weighted average shares
of vested common stock purchase warrants exercisable at $0.01 per share as
of January 31, and October 31, 1997 as they are considered essentially the
same as common stock outstanding for the periods presented. Shares related
to National Media Series B Stock, stock options and warrants in the money
are not included in the pro forma calculation of weighted shares outstanding
because their effect on pro forma net loss per common share would be
anti-dilutive. In computing historical net income (loss) per share,
historical weighted average common shares outstanding have been computed
under SFAS No. 128 ValueVision and for National Media.
- ---------------------------
The following table presents a reconciliation of pro forma EBITDA (as
defined) (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
JANUARY 31, 1997 OCTOBER 31, 1997
---------------- -----------------
<S> <C> <C>
EBITDA (as defined):
ValueVision EBITDA (as defined)...................... $ 31,774 $ 34,529
National Media EBITDA (as defined)................... (32,286) (27,539)
-------- --------
Pro Forma EBITDA (as defined)................... $ (512) $ 6,990
======== ========
</TABLE>
Pro Forma EBITDA (as defined) does not give effect to net annual cost
savings which management believes are achievable. See Notes to Pro Forma
Condensed Consolidated Financial Data. EBITDA (as defined) represents net
income (loss) before interest income (expense), income taxes and
depreciation and amortization expense. National Media's EBITDA (as defined)
includes severance expense of $2.5 million, legal settlements and fees of
$13.3 million, provisions for bad debts of $5.7 million and inventory
obsolescence expense of $8.7 million for fiscal 1997. EBITDA (as defined)
is viewed by management as an important alternative measure of cash flows
because it is commonly used by analysts and institutional investors in
analyzing the financial performance of companies in the broadcast and
television home shopping sectors. However, EBITDA (as defined) should not
be construed as an alternative to operating income or to cash flows from
operating activities (as determined in accordance with generally accepted
accounting principles) and should not be construed as an indication of
operating performance or as a measure of liquidity. EBITDA (as defined), as
presented, may not be comparable to similarly entitled measures reported by
other companies.
92
<PAGE> 98
PRO FORMA SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT OF QUANTUM DIRECT
The following table sets forth certain pro forma information as to the
number of shares of Quantum Direct Common Stock that will be beneficially owned
by (i) each person known by Quantum Direct expected to be the beneficial owner
of more than 5% of any of Quantum Direct's voting securities, (ii) each director
of Quantum Direct, (iii) the interim Chief Executive Officer and the other
highly compensated executive officers of Quantum Direct and (iv) Quantum
Direct's executive officers and directors as a group assuming the Merger had
been consummated on December 31, 1997. Except as indicated by the notes to the
following table (a) the holders listed below will have sole voting power and
investment power over the shares beneficially held by them and (b) the
beneficial ownership is direct.
<TABLE>
<CAPTION>
PRO FORMA
BENEFICIAL OWNERSHIP
AS OF
DECEMBER 31, 1997
--------------------
NAME OF BENEFICIAL OWNER SHARES PERCENT
------------------------ ------ -------
<S> <C> <C>
Snyder Capital Management, Inc.(1).......................... 4,578,049 8.0
350 California Street
San Francisco, CA 94104
DIRECTORS AND NAMED EXECUTIVE OFFICERS:
Constantinos I. Costalas(2)................................. 222,049 *
Albert R. Dowden............................................ 14,000 *
Marshall S. Geller(3)....................................... 246,449 *
Frederick S. Hammer(4)...................................... 335,000 *
Nicholas M. Jaksich(5)...................................... 2,270,308 3.9
Robert L. Johander(6)....................................... 2,328,724 4.0
Robert J. Korkowski(7)...................................... 308,884 *
Stuart R. Romenesko(8)...................................... 154,700 *
Paul D. Tosetti(9).......................................... 119,000 *
Robert N. Verratti(10)...................................... 700,000 1.2
Jon W. Yoskin, II(11)....................................... 120,952 *
All Directors and Executive Officers as a group (11
individuals)(12).......................................... 6,820,066 11.2
</TABLE>
- -------------------------
* Less than 1%
(1) Based on information contained in the Schedule 13G of Snyder Capital
Management Inc. dated February 19, 1998, adjusted for the ValueVision
Exchange Ratio.
(2) Includes 220,000 shares that are exercisable or will become exercisable
within 60 days of March 12, 1998.
(3) Includes 235,025 shares that are exercisable or will become exercisable
within 60 days of March 12, 1998.
(4) Includes 325,000 shares that are exercisable or will become exercisable
within 60 days of March 12, 1998.
(5) Such shares include 504,122 shares beneficially owned by Mr. Jaksich in his
capacity as General Partner to the Nicholas M. Jaksich Limited Partnership.
Includes 13,161 shares owned by Mr. Jaksich's child, as to which shares Mr.
Jaksich disclaims beneficial ownership. Includes 892,500 shares that are
exercisable or will become exercisable within 60 days of March 12, 1998.
(6) Such shares include 520,782 shares beneficially owned by Mr. Johander in
his capacity as General Partner to the Robert L. Johander Limited
Partnership. Includes 8,568 shares owned by Mr. Johander's children, as to
which shares Mr. Johander disclaims beneficial ownership. Includes 892,500
shares that are exercisable or will become exercisable within 60 days of
March 12, 1998.
(7) Includes 163,625 shares that are exercisable or will become exercisable
within 60 days of March 12, 1998. Includes 2,677 shares owned by Mr.
Korkowski's child, as to which shares Mr. Korkowski disclaims beneficial
ownership.
(8) Represents 154,700 shares that are exercisable or will become exercisable
within 60 days of March 12, 1998.
(9) Represents 119,000 shares that are exercisable or will become exercisable
within 60 days of March 12, 1998.
(10) Represents 700,000 shares that are exercisable or will become exercisable
within 60 days of March 12, 1998.
(11) Includes 25,000 shares that are exercisable or will become exercisable
within 60 days of March 12, 1998.
(12) Includes 3,727,350 shares that are issuable upon exercise of stock options
exercisable or will become exercisable within 60 days of March 12, 1998 and
24,406 shares as to which the reporting persons disclaim beneficial
ownership.
93
<PAGE> 99
DESCRIPTION OF QUANTUM DIRECT CAPITAL STOCK
THE FOLLOWING IS A SUMMARY DESCRIPTION OF THE MATERIAL ASPECTS OF THE
CAPITAL STOCK OF QUANTUM DIRECT AND IS QUALIFIED IN ITS ENTIRETY BY THE COMPLETE
TEXT OF QUANTUM DIRECT'S RESTATED CERTIFICATE OF INCORPORATION, AMENDED AND
RESTATED BYLAWS AND CERTIFICATE OF DESIGNATION OF SERIES B CONVERTIBLE PREFERRED
STOCK (THE "QUANTUM DIRECT SERIES B CERTIFICATE") WHICH ARE INCORPORATED HEREIN
BY REFERENCE AND ARE ATTACHED TO THIS JOINT PROXY STATEMENT/PROSPECTUS AS
ANNEXES D, E AND F, RESPECTIVELY.
GENERAL
The authorized capital stock of Quantum Direct upon completion of the
Merger will consist of 200,000,000 shares of Quantum Direct Common Stock and
10,000,000 shares of preferred stock, par value $.01 per share of Quantum Direct
("Quantum Direct Preferred Stock"). Based upon the number of shares of National
Media Common Stock and ValueVision Common Stock outstanding as of December 31,
1997, it is anticipated that approximately 57,244,613 shares of Quantum Direct
Common Stock and 81,250 shares of Quantum Direct Series B Stock will be issued
and outstanding immediately after the completion of the Merger.
QUANTUM DIRECT COMMON STOCK
Each share of Quantum Direct Common Stock entitles the holder to one vote
on matters submitted to a vote of the stockholders. Under Quantum Direct's
Restated Certificate of Incorporation, the Quantum Direct Board of Directors
will be classified into three classes consisting of four, three and three
directors, respectively. The holders of Quantum Direct Common Stock will not be
entitled to cumulate votes for the election of directors.
The holders of Quantum Direct Common Stock are entitled to receive ratably
a share of dividends declared by the Quantum Direct Board of Directors. In the
event of liquidation, dissolution or winding up of Quantum Direct, holders of
Quantum Direct Common Stock have the right to a ratable portion of the assets
remaining after the payment of liabilities and liquidation preferences of any
outstanding shares of Quantum Direct Preferred Stock. The holders of Quantum
Direct Common Stock have no preemptive rights or rights to convert their Quantum
Direct Common Stock into other securities. All outstanding shares of Quantum
Direct Common Stock immediately following completion of the Merger will be fully
paid and nonassessable. The rights of the holders of Quantum Direct Common Stock
will be subject to, and may be adversely affected by, the rights of the holders
of Quantum Direct Preferred Stock, if any.
It is a condition to the completion of the Merger that Quantum Direct
Common Stock be approved for listing on the NYSE (or another national exchange
or market), subject to official notification of issuance.
PREFERRED STOCK
Quantum Direct's Restated Certificate of Incorporation provides that
Quantum Direct Preferred Stock may be issued from time to time in one or more
series. Quantum Direct's Board of Directors has the authority to fix and
determine the number of shares constituting each such series and the relative
rights, preferences, privileges and immunities, if any, and any qualifications,
limitations or restrictions thereof, of the shares thereof, including the
authority to fix and determine the dividend rights, dividend rates, conversion
rights, voting rights and terms of redemption (including sinking fund
provisions), redemption prices and liquidation preferences of any wholly
unissued series of Quantum Direct Preferred Stock and to increase or decrease
the number of shares of any outstanding series, without further vote or action
by Quantum Direct's stockholders. No Quantum Direct Preferred Stock is currently
outstanding, 81,250 shares of Quantum Direct Series B Stock will be issued in
connection with the Merger, and Quantum Direct has no present plans to issue any
additional shares of Quantum Direct Preferred Stock.
94
<PAGE> 100
QUANTUM DIRECT SERIES B STOCK
Pursuant to the terms of the Merger Agreement, the holders of National
Media Series B Stock will receive one share of Quantum Direct Series B Stock for
each share of National Media Series B Stock held at the time of the Merger. As a
result, it is expected that 81,250 shares of Quantum Direct Series B Stock will
be issued and outstanding following consummation of the Merger.
Each share of Quantum Direct Series B Stock will be valued at $40.00 per
share for conversion purposes and will be convertible at the option of the
holder into shares of Quantum Direct Common Stock at a price of $4.00 per share
of Quantum Direct Common Stock (subject to certain adjustments). As a result,
each share of Quantum Direct Series B Stock is convertible into ten shares of
Quantum Direct Common Stock. In the event the Quantum Direct Board of Directors
declares a dividend on the Quantum Direct Common Stock, the holders of Quantum
Direct Series B Stock shall be entitled to receive dividends declared on the
Quantum Direct Common Stock as if the shares of Quantum Direct Series B Stock
had been converted into shares of Quantum Direct Common Stock as of the record
date for such dividend. Each share of the Quantum Direct Series B Stock has
voting rights which are equivalent to the total number of shares of Quantum
Direct Common Stock into which the shares of the Quantum Direct Series B Stock
are convertible. Following consummation of the Merger, the holders of Quantum
Direct Series B Stock will not have a right to representation on Quantum
Direct's Board of Directors.
In the event of any liquidation, dissolution or winding up of Quantum
Direct, holders of Quantum Direct Series B Stock are entitled to receive an
amount equal to $40.00 for each share of Quantum Direct Series B Stock held by
such holder. In the event that there are insufficient funds to pay $40.00 for
each share of Quantum Direct Series B Stock held, Quantum Direct's assets will
be distributed on a pro-rata basis to such holders. In addition, Quantum Direct
will be required to obtain the consent of at least 60% of the outstanding shares
of Quantum Direct Series B Stock prior to (i) altering or changing the rights,
preferences or privileges of the Quantum Direct Series B Stock in a manner which
would adversely affect the holders thereof; (ii) creating any class of
securities prior to or in parity with the Quantum Direct Series B Stock with
respect to voting, dividends, liquidation rights of otherwise; (iii) doing any
act which would result in the taxation of the holders of the Quantum Direct
Series B Stock under Section 305 of the Code; or (iv) repurchasing shares of any
class or series of capital stock of Quantum Direct.
PREFERRED SHARE PURCHASE RIGHTS
Prior to the Effective Time, the Quantum Direct Board of Directors will
authorize Quantum Direct's entry into a Stockholder Rights Agreement (the
"Quantum Direct Rights Agreement") pursuant to which one preferred stock
purchase right (the "Rights") will be attached to each share of Quantum Direct
Common Stock. The Rights will be transferable only with Quantum Direct Common
Stock, until they become exercisable at an exercise price to be determined by
the Quantum Direct Board of Directors prior to the time Quantum Direct enters
into the Quantum Direct Rights Agreement.
Generally, the Rights will become exercisable only if a person or group
(other than certain affiliates of Quantum Direct) acquires 15% or more of the
issued and outstanding shares of Quantum Direct Common Stock or announces a
tender offer, the consummation of which would result in ownership by a person or
group of 15% or more of the issued and outstanding shares of Quantum Direct
Common Stock. Each Right will entitle the holder, until the tenth anniversary of
the Rights Agreement, to buy one one-hundredth of a share of Quantum Direct
Preferred Stock, at an exercise price to be determined by the Quantum Direct
Board of Directors prior to the time Quantum Direct enters the Rights Agreement.
If a person or group (other than certain affiliates of Quantum Direct)
acquires 15% or more of the issued and outstanding shares of Quantum Direct
Common Stock or if Quantum Direct is the surviving corporation in a merger, each
Right will entitle its holder (other than such person or members of such group)
to purchase, at the Right's then current exercise price, shares of Quantum
Direct Common Stock having a market value of twice the Right's exercise price.
If Quantum Direct is acquired in a merger or other business combination
transaction, other than a merger which follows an offer which the continuing
directors determines to be fair and in the best interests of the stockholders,
each Right will entitle its holder to purchase, at the Right's then
95
<PAGE> 101
current exercise price, a number of the acquiring company's common shares having
a then current market value of twice the Rights' exercise price.
Following the acquisition by a person or group of beneficial ownership of
15% or more of the Quantum Direct Common Stock, the Quantum Direct Board of
Directors may exchange the Rights (other than Rights owned by such person or
group), in whole or in part, at an exchange ratio of one share of Quantum Direct
Common Stock per Right.
Prior to the acquisition by a person or group of beneficial ownership of
15% or more of the Quantum Direct Common Stock, the Rights will be redeemable in
whole, not in part, for one cent per Right. Quantum Direct's Transfer Agent,
Norwest Bank Minnesota, N.A., is expected to be the Rights Agent under the
Quantum Direct Rights Agreement.
CERTAIN EFFECTS OF PREFERRED SHARE PURCHASE RIGHTS
The issuance of the Rights to purchase shares of Quantum Direct Preferred
Stock will have certain anti-takeover effects.The Rights will cause substantial
dilution to a person or group that attempts to acquire Quantum Direct on terms
not approved by the Quantum Direct Board of Directors.The Rights should not
interfere with any merger or other business combination approved by the Quantum
Direct Board of Directors prior to ten days after the time that a person or
group has acquired beneficial ownership of 15% or more of the Quantum Direct
Common Stock, as the Rights will be redeemable by Quantum Direct at $0.01 per
Right prior to such time.
PROHIBITED BUSINESS TRANSACTIONS
As a corporation organized under the laws of the State of Delaware, Quantum
Direct is subject to Section 203 of the DGCL, which restricts certain business
combinations between Quantum Direct and an "interested stockholder" (in general,
a stockholder owning 15% or more of the outstanding voting stock of Quantum
Direct) or such stockholder's affiliates or associates for a period of three
years following the date on which the stockholder becomes an "interested
stockholder." The restrictions do not apply if: (i) prior to an interested
stockholder becoming such, the Quantum Direct Board approves either the business
combination or the transaction by which such person became an interested
stockholder; (ii) upon consummation of the transaction, the interested
stockholder owns at least 85% of the voting stock of Quantum Direct outstanding
at the time the transaction commenced (excluding shares owned by certain
employee stock plans and persons who are both directors and officers of Quantum
Direct); or (iii) at or subsequent to the time an interested stockholder becomes
such, the business combination is both approved by the Quantum Direct Board of
Directors and authorized at an annual or special meeting of Quantum Direct's
stockholder by the affirmative vote of at least two-thirds of the outstanding
voting stock of Quantum Direct not owned by the interested stockholder. Quantum
Direct's Restated Certificate of Incorporation also prohibits business
combinations with "Interested Stockholders" and defines them to be anyone who is
or intends to become the beneficial owner of 10% or more of the voting stock of
Quantum Direct. Unless approved by a majority of Continuing Directors (as
defined in the Quantum Direct Restated Certificate of Incorporation) or the
Interested Stockholder satisfies a number of criteria relating to, among other
things, the consideration to be received by Quantum Direct stockholders and the
public disclosure of the business combination, a proposed business combination
with an Interested Stockholder requires the affirmative vote of 75% of all the
votes entitled to be cast by holders of Quantum Direct voting stock and not less
than a majority of votes entitled to be cast by holders of Quantum Direct voting
stock, excluding the votes of the Interested Stockholder.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent of Quantum Direct will be Norwest Bank
Minnesota, N.A.
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COMPARISON OF RIGHTS OF HOLDERS OF NATIONAL MEDIA CAPITAL
STOCK AND VALUEVISION COMMON STOCK AND QUANTUM DIRECT CAPITAL STOCK
The following is a summary of the material differences between the rights
of holders of ValueVision Common Stock and National Media capital stock before
the Merger and the rights of holders of Quantum Direct capital stock after the
Merger. Because National Media and Quantum Direct are both organized under the
laws of the State of Delaware, the differences arise solely from differences
between various provisions of their respective Certificates of Incorporation,
Series B Certificates and Bylaws. However, because ValueVision is organized
under the laws of the State of Minnesota and Quantum Direct is organized under
the laws of the State of Delaware, the differences arise both from differences
between various provisions of their respective Articles and Certificate of
Incorporation and Bylaws and Minnesota and Delaware law.
The discussion of the comparative rights of the stockholders of National
Media and Quantum Direct and shareholders of ValueVision set forth below does
not purport to be complete and is subject to and qualified in its entirety by
reference to the Certificates of Incorporation, Series B Certificates and Bylaws
of National Media and Quantum Direct and Articles of Incorporation and Bylaws of
ValueVision.
AUTHORIZED CAPITAL
The total number of shares Quantum Direct will have the authority to issue
will be 210,000,000, consisting of 200,000,000 shares of common stock, par value
$.01 per share, and 10,000,000 shares of Quantum Direct Preferred Stock. The
total number of shares of capital stock which National Media has authority to
issue is 85,000,000, consisting of 75,000,000 shares of common stock, par value
$0.01 per share and 10,000,000 shares of preferred stock, par value $0.01 per
share, 500,000 of which are designated as Series A Junior Participating
Preferred Stock, $.01 par value per share, none of which are issued and
outstanding as of the date hereof, and 400,000 of which are designated as Series
B Convertible Preferred Stock, $.01 par value share, 81,250 of which are issued
and outstanding as of the date hereof. The total number of undesignated shares
of capital stock which ValueVision has the authority to issue is 100,000,000.
The Rights to be issued under the Quantum Direct Rights Agreement are similar in
all material respects to the rights issued under the National Media Rights Plan.
ValueVision is not a party to a rights agreement.
Pursuant to the terms of Quantum Direct's Series B Certificate, the Quantum
Direct Series B Stock will be valued at $40.00 per share for conversion and will
be convertible at the option of the holder into shares of Quantum Direct Common
Stock at a price of $4.00 per share of Quantum Direct Common Stock (subject to
certain adjustments) (the "Conversion Rights"). In the event the Quantum Direct
Board of Directors declares a dividend on the Quantum Direct Common Stock, the
holders of Quantum Direct Series B Stock shall be entitled to receive dividends
declared on the Quantum Direct Common Stock as if the shares of Quantum Direct
Series B Stock had been converted into shares of Quantum Direct Common Stock as
of the record date for such dividend (the "Dividend Participation Rights"). Each
share of Quantum Direct Series B Stock has voting rights which are equivalent to
the total number of shares of Quantum Direct Common Stock into which the shares
of Quantum Direct Series B Stock are convertible (the "Voting Rights"). In the
event of the liquidation, dissolution or winding up of Quantum Direct, holders
of Quantum Direct Series B Stock are entitled to receive an amount equal to
$40.00 for each share of Quantum Direct Series B Stock (the "Liquidation
Rights"). The Quantum Direct Series B Stock requires the consent of at least 60%
for certain fundamental changes to the terms of the Quantum Direct Series B
Stock.
The certificate of designation governing the National Media Series B Stock
(the "National Media Series B Certificate"), provides for Conversion Rights,
Dividend Participation Rights and Liquidation Rights identical to the Quantum
Direct Series B Certificate. In addition, the National Media Series B
Certificate provides for Voting Rights identical to the Quantum Direct Series B
Certificate; provided, however, that holders of National Media Series B Stock do
not have the right to vote on the election of National Media's Board of
Directors. Additionally, the National Media Series B Certificate prohibits the
declaration of any dividend on any class or series of stock other than the
National Media Series B Certificate without the consent of at least 60% of the
holders of National Media Series B Certificate. The Quantum Direct Series B
Certificate contains no such prohibition.
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NUMBER OF DIRECTORS
The DGCL provides that the board of directors of a Delaware corporation
will consist of one or more directors as fixed by the certificate of
incorporation or bylaws. Quantum Direct's Bylaws provide for a Board of
Directors of 10 directors, five of which will be designated by National Media
(the "National Media Directors"), five of which will be designated by
ValueVision (the "ValueVision Directors"); provided, however, that if the Board
of Directors shall have elected a successor Chief Executive Officer to succeed
the interim Chief Executive Officer pursuant to Article III, Section 8 of
Quantum Direct's Bylaws, prior to the Effective Time and such officer takes
office prior to such date, then the Quantum Direct Board of Directors shall be
expanded to 11 members and such officer shall be appointed to the Quantum Direct
Board of Directors to fill the vacancy created by such expansion of the Board.
The National Media Directors and the ValueVision Directors will be allocated as
evenly as possible among Quantum Direct's three classes of directors. Until
three years after the Effective Time, Quantum Direct's Board of Directors, as
constituted after each election of directors, will have an equal number of
National Media Directors and ValueVision Directors. If at any time during such
three-year period, the number of National Media Directors and ValueVision
Directors serving, or that would be serving following the next stockholders'
meeting at which directors are to be elected, is not equal, then, subject to its
fiduciary duties, Quantum Direct's Board of Directors will immediately appoint
to the Quantum Direct Board of Directors and nominate for election at the next
stockholders' meeting at which directors are to be elected, such person or
persons as may be requested by the remaining National Media Directors (if the
number of National Media Directors is, or would otherwise become, less than the
number of ValueVision Directors) or by the remaining ValueVision Directors (if
the number of ValueVision Directors is, or would otherwise become, less than the
number of National Media Directors) to ensure that there will be an equal number
of National Media Directors and ValueVision Directors. Quantum Direct's Restated
Certificate of Incorporation provides for a Board of Directors of not less than
three nor more than 20 directors, as fixed by Quantum Direct's Bylaws. National
Media's Bylaws provide for a Board of Directors consisting of not less than
three or more than eleven directors, as fixed by the National Media Board of
Directors. National Media's Bylaws do not provide for a classified Board of
Directors.
The MBCA provides that the Board of Directors of a Minnesota corporation
will consist of one or more directors as fixed by the articles of incorporation
or bylaws. ValueVision's Bylaws provide that the board will initially consist of
five directors, which number may be increased or decreased from time to time by
resolution of a majority of the ValueVision Board of Directors (determined as if
all vacancies are filled) or by resolution of the shareholders at their regular
meetings or at a special meeting called for such purpose. ValueVision's Bylaws
do not provide for a classified Board of Directors.
COMMITTEES OF THE BOARD
Quantum Direct's Bylaws provide for an Executive Committee and a
Compensation Committee. Until three years after the Effective Time, the
Executive Committee will be comprised of three ValueVision Directors and two
National Media Directors and will have responsibility for (i) recommending to
Quantum Direct's Board of Directors a successor Chief Executive Officer (and any
successor thereto) to Quantum Direct's interim Chief Executive Officer, Robert
L. Johander and (ii) will have, to the fullest extent permitted by Delaware law,
all of the powers, duties and responsibilities (including, without limitation,
those relating to any and all issues relating to the FCC and any assets subject
to its regulation) of the entire Quantum Direct Board of Directors (except with
respect to those actions that require a supermajority vote as set forth in
Quantum Direct's Bylaws). Until three years after the Effective Time, Quantum
Direct's Compensation Committee will have responsibility for (i) reviewing the
compensation and employee benefit policies of Quantum Direct, (ii) recommending
to the Executive Committee base salary amounts and incentive awards for all
elected officers of Quantum Direct and setting guidelines for the administration
of all salaries, (iii) administering incentive compensation and awarding stock
options to employees under any stock option or compensation plan of Quantum
Direct and amending or modifying any provisions of such stock option or
compensation plan that may be amended or modified without stockholder approval
and (iv) supervising all administrative matters with respect to the foregoing.
Until three years after the Effective Time, the Compensation Committee will be
comprised of two ValueVision Directors and one National Media Director,
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each of whom will meet the requirements of independence as established by the
exchange or market on which Quantum Direct's stock is then traded or quoted.
ValueVision's Bylaws provide that its Board of Directors may establish a
committee or committees having the authority of the Board of Directors in the
management of the business of ValueVision to the extent provided in the
resolution adopted by its Board of Directors. Currently, ValueVision's Board of
Directors has established a Compensation Committee and an Audit Committee, but
not an Executive Committee.
National Media's Bylaws provide that its Board of Directors may establish a
committee having the authority of the Board of Directors in the management of
the business of National Media to the extent provided in a resolution adopted by
a majority of the Board of Directors. Currently, National Media has established
an Audit Committee, a Compensation Committee and a Board Affairs Committee,
which oversees the structure, composition and committees of the Board of
Directors.
REMOVAL OF DIRECTORS
The DGCL provides that a director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors, except (i) in the case of a
corporation whose board is classified, that directors may be removed only for
cause unless the certificate of incorporation provides otherwise, or (ii) if the
corporation has cumulative voting, in which event if less than the entire board
is to be removed, no director may be removed without cause if the votes cast
against the director's removal would be sufficient to elect that director if
voted cumulatively either at an election of the entire board of directors or for
classes of the board. Quantum Direct's Restated Certificate of Incorporation
does not provide for directors to be removed without cause or provide for
cumulative voting. National Media's Certificate of Incorporation does not
classify its board of directors and does not provide for cumulative voting.
National Media's Bylaws require the affirmative vote of the holders of a
majority of the shares entitled to vote to remove a director without cause.
The MBCA provides that, unless modified by the articles or bylaws of the
corporation or by shareholder agreement, the directors may be removed with or
without cause by the affirmative vote of that proportion or number of the voting
power of the shares of the classes or series the director represents which would
be sufficient to elect such director. If a corporation has cumulative voting,
the MBCA provides that, unless the entire board is removed simultaneously, a
director is not removed from the board if there are cast against removal of the
director the votes of a proportion of the voting power sufficient to elect the
director at an election of the entire board under cumulative voting.
ValueVision's Articles of Incorporation and Bylaws do not modify the MBCA with
respect to the removal of directors or provide for cumulative voting.
AMENDMENT TO BYLAWS
Under the DGCL, bylaws may be altered, amended, supplemented or repealed,
or new bylaws adopted, by the stockholders entitled to vote, by the board of
directors, or by any other manner as may be authorized by the certificate of
incorporation. Quantum Direct's Restated Certificate of Incorporation provides
that stockholders can amend Quantum Direct's Bylaws with an affirmative vote of
70% of the votes entitled to be cast. Quantum Direct's Bylaws provide that the
Board of Directors may amend Quantum Direct's Bylaws with an affirmative vote of
a majority, plus one, of the then authorized number of Quantum Direct's Board of
Directors (a "Supermajority Vote"). National Media's Bylaws may be altered,
amended or repealed, or new bylaws may be adopted by a majority of the Board of
Directors, but any bylaws adopted by the Board of Directors may be amended or
repealed by National Media's stockholders.
The MBCA and ValueVision's Bylaws provide that the power to adopt, amend or
repeal the bylaws will be vested in the board of directors (subject to certain
notice requirements set forth in ValueVision's Bylaws), except that the board
will not adopt, amend or repeal a bylaw fixing a quorum for a meeting of
shareholders, prescribing procedures for removing directors or filling vacancies
in the board, or fixing the number of directors or their classifications,
qualifications, or terms of office, but may adopt or amend a bylaw to increase
the number of directors. Notwithstanding the above, under the MBCA, a
shareholder or shareholders holding 3% or more of the voting shares entitled to
vote may propose a resolution to amend or repeal bylaws adopted,
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amended or repealed by the board, in which event such resolution must be
approved pursuant to the procedures for amending the articles of incorporation.
AMENDMENTS TO CERTIFICATE OR ARTICLES
Under the DGCL, amendment of the certificate of incorporation will be made
by a resolution of the board of directors setting forth the amendment, declaring
its advisability, and either calling a special meeting of the stockholders
entitled to vote or directing that the amendment proposed be considered at the
next annual meeting of the stockholders. At such stockholder's meeting, a
majority of the outstanding shares entitled to vote is required to approve the
amendment. If an amendment would increase or decrease the number of authorized
shares of such class, increase or decrease the par value of the shares of such
class or alter or change the powers, preferences or other special rights of a
class of outstanding shares so as to affect the class adversely, then a majority
of shares of that class must approve the amendment as well. The DGCL also
permits a corporation to make provision in its certificate requiring a greater
proportion of voting power to approve a specified amendment. Quantum Direct's
Bylaws provide that the Quantum Direct Board of Directors may amend its Restated
Certificate of Incorporation with a Supermajority Vote. National Media's Bylaws
do not provide any special provisions regarding amendments to its Certificate of
Incorporation.
The MBCA provides that an amendment to a corporation's articles must be by
resolution approved by the affirmative vote of a majority of the directors
present or proposed by a shareholder or shareholders holding 3% or more of the
voting shares entitled to vote thereon. Under the MBCA and ValueVision's Bylaws,
any such amendment must be approved by the affirmative vote of a majority of the
shareholders entitled to vote thereon, except that the articles may provide for
a specified proportion or number larger than a majority.
ACTION BY WRITTEN CONSENT OF HOLDERS OF COMMON STOCK
The DGCL and MBCA both contain provisions permitting actions by holders of
common stock without providing notice and convening a meeting of such holders.
National Media's Bylaws permit any actions to be taken by stockholders without a
meeting, by written consent, provided such written consent sets forth the
actions taken and is signed by the holders of the minimum number of shares
required to take such actions at a meeting at which all shares entitled to vote
are present and voted. ValueVision's Bylaws permit shareholders to take actions
without a meeting and notice if a consent in writing, setting forth the actions
so taken, is signed by all of the shareholders entitled to notice of such
meeting. Quantum Direct's Bylaws do not permit stockholders to take action
without a meeting.
INDEMNIFICATION
The DGCL and MBCA both contain provisions setting forth conditions under
which a corporation may indemnify its directors, officers and employees. While
indemnification is permitted only if certain statutory standards of conduct are
met, the DGCL and the MBCA are substantially similar in providing for
indemnification if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the conduct was unlawful. The statutes differ,
however, with respect to whether indemnification is permissive or mandatory,
whether there is a distinction between third-party actions and actions by or in
the right of the corporation, and whether, and to what extent, reimbursement of
judgments, fines, settlements and expenses is allowed.
The major difference between the MBCA and the DGCL is that while
indemnification of officers, directors and employees is mandatory under the
MBCA, indemnification is merely permissive under the DGCL. The one exception to
the DGCL's permissive indemnification rule is that a corporation must indemnify
a person who is successful on the merits or otherwise in the defense of certain
specified actions, suits or proceedings for expenses and attorneys' fees
actually and reasonably incurred in connection therewith. Although
indemnification is permissive in Delaware, the DGCL allows a corporation,
through its certificate of incorporation, bylaws, or other intracorporate
agreements, to make indemnification mandatory. Pursuant to this authority,
Quantum Direct's Restated Certificates of Incorporation and Amended and Restated
Bylaws provide that Quantum Direct will indemnify its directors and officers to
the fullest extent permitted by law.
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Quantum Direct's Restated Certificates of Incorporation specifically requires
indemnification of judgments, fines, settlements and expenses of third-party
actions for any person who was or is a party, or is threatened to be a party, by
reason of the fact that such person was or is a director or officer of Quantum
Direct or because such person was serving Quantum Direct or any other legal
entity at as a director or officer at the request of Quantum Direct while a
director or officer of Quantum Direct. Quantum Direct's Restated Certificate of
Incorporation, however, does not extend this mandatory indemnification for
third-party actions to employees or agents. National Media's Certificate of
Incorporation provides that National Media shall indemnify to the fullest extent
of the DGCL all persons whom it may indemnify pursuant thereto and National
Media's Bylaws incorporate Section 145 of the DGCL (Indemnification of Officers,
Directors, Employees and Agents; Insurance.) by reference.
The DGCL, unlike the MBCA, also differentiates between third-party actions
and claims by or in the right of the corporation (i.e., stockholder derivative
suits). While the MBCA makes no distinction between third-party actions and
shareholder derivative suits and requires indemnification in either case if the
relevant statutory standard of conduct is met, indemnification under the DGCL
varies depending on whether the action is brought by a third party or by
stockholders in a derivative suit. Unlike a third-party action, in which
indemnification is permissive under the statute and mandatory under National
Media's Certificate of Incorporation and mandatory for officers and directors
under Quantum Direct's Restated Certificate of Incorporation, the DGCL does not
permit indemnification in a stockholder derivative suit if the person is found
liable to the corporation unless and only to the extent that the Delaware Court
of Chancery or the court in which such action or suit was brought determines
that the person is fairly and reasonably entitled to indemnification. Further,
the corporation may indemnify such persons only for attorneys' fees and other
expenses.
The advancement of expenses is permissive under the DGCL but mandatory
under the MBCA. Quantum Direct's Restated Certificate of Incorporation provides
for the advancement of expenses incurred by a director or officer, subject to an
undertaking that the director or officer will repay such amount if it is
ultimately determined that such director or officer is not entitled to
indemnification. National Media's Certificate of Incorporation is silent with
respect to such advancement of expenses other than to provide that National
Media shall indemnify to the fullest extent of the DGCL all persons whom it may
indemnify pursuant thereto. National Media's Bylaws, by incorporating Section
145 of the DGCL by reference, permit National Media to advance such expenses
upon receipt of an undertaking by or on behalf of such director or officer to
repay such amount if it shall ultimately be determined that such person is not
entitled to be indemnified.
Although the MBCA allows broader indemnification than under the DGCL, the
MBCA requires that a corporation report any indemnification payments to its
shareholders no later than the next meeting of stockholders. The DGCL, National
Media's Amended and Restated Certificate of Incorporation and Quantum Direct's
Restated Certificate of Incorporation contain no such similar provision.
LIABILITY OF DIRECTORS
Under the DGCL, a corporation's certificate of incorporation may contain a
provision limiting or eliminating a director's personal liability to the
corporation or its stockholders for monetary damages for a director's breach of
fiduciary duty subject to certain limitations. Quantum Direct's Restated
Certificate of Incorporation and National Media's Certificate of Incorporation
and Bylaws each include such a provision. Accordingly, under the DGCL, National
Media's Certificate of Incorporation and Bylaws and Quantum Direct's Restated
Certificate of Incorporation, indemnification is provided if the person seeking
indemnification acted in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of the corporation (and, in cases
of liability involving criminal violations, only if the person had no reasonable
cause to believe that his conduct was unlawful), provided, however, that if the
person seeking indemnification is adjudged liable to the corporation by a court,
indemnification is provided only if the court, upon application, determines that
such indemnification is fair and reasonable in view of all the circumstances of
the case.
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ValueVision's Articles of Incorporation provide that a director will not be
personally liable to ValueVision or its shareholders for monetary liability
relating to breach of fiduciary duty, unless the liability relates to a breach
of the duty of loyalty, acts or omissions involving a lack of good faith or an
intentional or knowing violation of law, liability for illegal distributions and
unlawful sales of ValueVision's securities, transactions where the director
gained an improper personal benefit, or acts or omissions occurring prior to the
date on which the liability limitation provision was added to ValueVision's
Articles of Incorporation.
SHAREHOLDER MEETINGS
In accordance with Quantum Direct's Bylaws, annual meetings of stockholders
will be held on such date as may be fixed by Quantum Direct's Board of
Directors, and special meetings of stockholders may be called only by a majority
of Quantum Direct's Board of Directors, by the Chairman of the Board and Chief
Executive Officer or by the President and Chief Operating Officer. Pursuant to
National Media's Bylaws, annual meetings of stockholders will be held on such
date as may be fixed by National Media's Board of Directors, and special
meetings of stockholders may be called by the Board of Directors, the Chairman
of the Board or the President. The DGCL, National Media's Bylaws and Quantum
Direct's Bylaws require that whenever stockholders are required or permitted to
take action at a meeting, a written notice stating the place, time and date of
the meeting and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, must be sent to all stockholders of record entitled
to vote thereon not less than 10 nor more than 60 days before the meeting. Under
the DGCL, notice of a meeting to consider an agreement of merger must be sent at
least 20 days prior to the date of the meeting.
The MBCA and ValueVision's Bylaws provide that regular meetings of its
shareholders may be held annually or on a less frequent periodic basis, as may
be established by a resolution of the Board of Directors, or may be held on call
by the Board of Directors from time to time as and when the Board determines.
The MBCA and ValueVision's Bylaws further provide that if a regular meeting of
the shareholders has not been held for a period of 15 months, a shareholder or
group of shareholders holding 3% or more of the issued and outstanding voting
shares of ValueVision may demand that a regular meeting of the shareholders be
held. The MBCA and ValueVision's Bylaws provide that the Chief Executive
Officer, a Vice President in the absence of the Chief Executive Officer, the
Treasurer, any two directors, or a shareholder or shareholders holding 10% or
more of shares entitled to vote at such meeting may call a special meeting.
However, if the meeting involves a business combination, including an action to
affect the composition of the Board of Directors, then at least 25% of the
shares entitled to vote at such meeting are required to call the meeting. If the
meeting is demanded by shareholders, the meeting, on notice, must occur between
30 and 90 days after receipt of the demand.
MERGERS AND CONSOLIDATIONS
In order to effect a merger under the DGCL, a corporation's board of
directors must adopt an agreement of merger and recommend it to the
stockholders. The agreement must be adopted by holders of a majority of the
outstanding shares of the corporation entitled to vote thereon. The MBCA
provides that a resolution containing a plan of merger or exchange must be
approved by the affirmative vote of a majority of the directors present at a
meeting and submitted to the shareholders and approved by the affirmative vote
of the holders of a majority of the voting power of all shares entitled to vote.
Unlike the DGCL, the MBCA requires that any class of shares of a Minnesota
corporation must approve the plan if it contains a provision which, if contained
in a proposed amendment to the corporation's articles of incorporation, would
entitle such class to vote as a class.
BUSINESS COMBINATIONS
The DGCL bars a corporation which has securities traded on an exchange,
designated on the Nasdaq National Market or held of record by more than 2,000
stockholders from engaging in certain business combinations, including a merger,
sale of substantial assets, loan or substantial issuance of stock, with an
interested stockholder, or an interest stockholder's affiliates and associates,
for a three-year period beginning on the date the interested stockholder
acquires 15% or more of the outstanding voting stock of the corporation. The
restrictions on business combinations do not apply if (a) the board of directors
gives prior approval to the
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transaction in which the 15% ownership level is exceeded, (b) the interested
stockholder acquires at one time at least 85% of the corporation's stock
(excluding those shares owned by persons who are directors and also officers as
well as employee stock plans in which employees do not have a confidential right
to vote), or (c) the business combination is approved by the board of directors
and authorized at a meeting of stockholders by the holders of at least
two-thirds of the outstanding voting stock, excluding shares owned by the
interested stockholder. Although a Delaware corporation may elect, pursuant to
its certificate or bylaws, not to be governed by this provision, Quantum
Direct's Restated Certificate of Incorporation and Amended and Restated Bylaws
and National Media's Certificate of Incorporation and Bylaws do not contain such
an election or other limitation on the applicability of this provision.
The MBCA contains a provision which restricts certain business combination
transactions with an interested stockholder for four years after such
shareholder has acquired 10% of the voting power of a publicly traded
corporation having 50 or more stockholders, unless such business combination or
the acquisition of shares by the interested shareholder is approved prior to
such share acquisition by a committee of all of the corporation's disinterested
directors.
OTHER ANTI-TAKEOVER PROVISIONS
The DGCL does not contain a control share acquisition statute which
restricts the voting rights of a person who acquires a controlling interest in
the corporation to those voting rights which are conferred by the stockholders
at a meeting. ValueVision, however, is subject to the control share acquisition
provisions of the MBCA, which subject to certain exceptions, requires the
approval of the holders of a majority of the corporation's voting shares and a
majority of the corporation's voting shares held by disinterested shareholders
before a person purchasing 20% or more of the corporation's voting shares can
vote the shares in excess of 20%. Similar shareholder approvals are required at
the 33 1/3% and majority thresholds. The MBCA also provides that during any
tender offer, a publicly held corporation may not enter into or amend an
agreement (whether or not subject to contingencies) that increases the current
or future compensation of any officer or director. Delaware law has no
equivalent provision. In addition, under the MBCA, a publicly held corporation
is prohibited from purchasing any voting shares owned for less than two years
from a 5% shareholder for more than the market value unless the transaction has
been approved by the affirmative vote of the holders of a majority of the voting
power of all shares entitled to vote or unless the corporation makes a
comparable offer to all holders of shares of the class or series of stock held
by the 5% shareholder and to all holders of any class or series into which such
securities may be converted. Delaware law has no equivalent provision.
In addition to the anti-takeover measures discussed above, the provisions
in ValueVision's Bylaws limiting the right of shareholders to call a special
meeting of shareholders to consider a business combination or any action to
change or otherwise affect the composition of the Board of Directors by
requiring the request of holders of at least 25% of the outstanding shares
(discussed above under "Stockholder Meetings"), and the authority of the Board
of Directors to issue, without shareholder approval, shares of preferred stock
with voting and conversion rights that could adversely affect the voting power
of the holders of ValueVision's Common Stock may make it more difficult to
effect a change in control in ValueVision and may discourage or deter a third
party from attempting a takeover. See "Description of ValueVision Stock --
Special Voting Provisions."
DISSENTERS' RIGHTS
Under both the DGCL and the MBCA, stockholders may exercise a right of
dissent from certain corporate actions and obtain payment of the fair value of
their shares. This remedy is an exclusive remedy, except where the corporate
action involves fraud or illegality. Under the DGCL, dissenters' rights are
limited. Appraisal rights are available only in connection with certain
statutory mergers or consolidations, amendments to the certificate of
incorporation (if so provided in the certificate of incorporation), any merger
or consolidation in which the corporation is a constituent corporation, or sales
of all or substantially all of the assets of a corporation. Under the MBCA, the
categories of transactions subject to dissenters' rights are broader than those
in the DGCL. A shareholder of a Minnesota corporation may exercise dissenters'
rights in connection with an amendment to the articles of incorporation which
materially and adversely affects the rights or preferences of shares held by the
dissenting shareholder, a disposition of all or substantially all of the
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corporation's property and assets not in the usual course of business, a plan of
merger in which the shareholder may vote, and a plan of exchange involving the
acquisition of the corporation's shares if the shareholder is entitled to vote
on the plan.
FOREIGN OWNERSHIP LIMITATIONS
Quantum Direct's Restated Certificate of Incorporation, like ValueVision's
Articles of Incorporation, provides that not more than 20% of the aggregate
number of shares of capital stock or aggregate voting power of all outstanding
shares of Quantum Direct shall be owned by or for the account of non-U.S.
citizens or their representatives, or by or for the account of a foreign
government or representative thereof, or by or for the account of any
corporation organized under the laws of a foreign country. No transfer of shares
of the capital stock of Quantum Direct which would cause ownership of such
capital stock of the Quantum Direct by non-U.S. citizens to exceed the 20% limit
will be permitted. Quantum Direct's Restated Certificate of Incorporation also
permits Quantum Direct to redeem shares held by non-U.S. citizens at their then
fair market value if such limits are exceeded. Certificates representing shares
of the Quantum Direct's capital stock will contain a legend restricting the
transfer of such shares to non-U.S citizens if such transfer would result in
Quantum Direct's failure to comply with the limitations on foreign ownership and
describing Quantum Direct's right of redemption if such limitations are
exceeded. Quantum Direct's Board of Directors is authorized to make such rules
and regulations as it deems necessary or appropriate to enforce these voting and
stock ownership provisions, although no such rules and regulations have yet been
adopted and there can be no assurance that Quantum Direct will be able to
monitor compliance with this restriction.
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PROPOSAL TO APPROVE QUANTUM DIRECT EQUITY PARTICIPATION PLAN
QUANTUM DIRECT EQUITY PARTICIPATION PLAN
Prior to the Special Meetings, the Quantum Direct Board of Directors will
adopt and approve the 1998 Equity Participation Plan of Quantum Direct (the
"Quantum Direct Equity Participation Plan") and reserve 1,750,000 shares of
Quantum Direct Common Stock for stock options and other stock awards to
employees of Quantum Direct and its subsidiaries and other eligible participants
after the Merger. The principal purposes of the Quantum Direct Equity
Participation Plan will be to provide incentives for officers, employees and
consultants of Quantum Direct and its subsidiaries through granting of options,
restricted stock and other awards ("Awards"), thereby stimulating their personal
and active interest in Quantum Direct's development and financial success, and
inducing them to remain in Quantum Direct's employ. In addition to Awards made
to officers, employees or consultants, the Quantum Direct Equity Participation
Plan will permit the granting of stock options ("Director Options") to Quantum
Direct's non-employee directors ("Independent Directors").
Under the Quantum Direct Equity Participation Plan, not more than 1,750,000
shares of Quantum Direct Common Stock (or the equivalent in other equity
securities) will be authorized for issuance upon exercise of options, stock
appreciation rights ("SARs"), and other Awards, or upon vesting of restricted or
deferred stock awards. Furthermore, the maximum number of shares which may be
subject to Awards granted under the Quantum Direct Equity Participation Plan to
any individual in any calendar year will not exceed 100,000 shares or up to
1,000,000 shares with respect to any Chief Executive Officer of Quantum Direct.
These Awards will be in addition to outstanding options to purchase National
Media Common Stock and ValueVision Common Stock, which will be deemed to
constitute options to purchase Quantum Direct Common Stock at the Effective
Time. See "The Merger Agreement -- Certain Covenants -- Stock Plans." No stock
options or other equity awards will be granted under the National Media
Incentive Plan or the ValueVision Incentive Plans after the Effective Time.
The material features of the Quantum Direct Equity Participation Plan are
summarized below, but the summary is qualified in its entirety by reference to
the Quantum Direct Equity Participation Plan which is attached as Annex G to
this Joint Proxy Statement/Prospectus.
ADMINISTRATION
The Compensation Committee of the Quantum Direct Board of Directors (the
"Compensation Committee") will administer the Quantum Direct Equity
Participation Plan with respect to grants of Awards to officers, employees or
consultants of Quantum Direct and the full Board of Directors will administer
the Quantum Direct Equity Participation Plan with respect to grants of Director
Options to Independent Directors. The Compensation Committee will consist of at
least two members of the Board, each of whom is a "non-employee director" for
purposes of Rule 16b-3 under the Exchange Act ("Rule 16b-3") and an "outside
director" for the purposes of Section 162(m) of the Code ("Section 162(m)").
Subject to the terms and conditions of the Quantum Direct Equity Participation
Plan, the Quantum Direct Board or the Compensation Committee has the authority
to select the persons to whom Awards are to be made, to determine the number of
shares to be subject thereto and the terms and conditions thereof, and to make
all other determinations and to take all other actions necessary or advisable
for the administration of the Quantum Direct Equity Participation Plan.
Similarly, the Quantum Direct Board has discretion to determine the terms and
conditions of grants of Director Options to Independent Directors and to
interpret and administer the Quantum Direct Equity Participation Plan with
respect to grants to Independent Directors.
ELIGIBILITY
Options, SARs, restricted stock and other Awards under the Quantum Direct
Equity Participation Plan may be granted to individuals who are then officers or
other employees of Quantum Direct or any of its present or future subsidiaries.
Such Awards also may be granted to consultants of Quantum Direct selected by the
Compensation Committee for participation in the Quantum Direct Equity
Participation Plan. Independent Directors of Quantum Direct, may be granted
NQSOs (as defined herein) by the Quantum Direct Board of Directors.
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AWARDS UNDER THE QUANTUM DIRECT EQUITY PARTICIPATION PLAN
The Quantum Direct Equity Participation Plan provides that the Compensation
Committee may grant or issue stock options, SARs, restricted stock, deferred
stock, dividend equivalents, performance awards, stock payments and other stock
related benefits, or any combination thereof. Each Award will be set forth in a
separate agreement or certificate and will indicate the type, terms and
conditions of the Award.
Nonqualified Stock Options ("NQSOs"), other than Director Options, will
provide for the right to purchase Quantum Direct Common Stock at a specified
price which, except with respect to NQSOs intended to qualify as
performance-based compensation under Section 162(m), may be less than fair
market value on the date of grant (but not less than par value) and usually will
become exercisable, in the discretion of the Compensation Committee in one or
more installments after the grant date, subject to the participant's continued
provision of services to Quantum Direct and/or subject to the satisfaction of
individual or Quantum Direct performance targets established by the Compensation
Committee. NQSOs may be granted for any term specified by the Compensation
Committee, not to exceed ten years from the date of grant. Director Options will
provide for the right to purchase Quantum Direct Common Stock at a price equal
to the fair market value of a share of Quantum Direct Common Stock as of the
date of grant and will become exercisable in cumulative annual installments of
25% on each of the first, second, third and fourth anniversary of the date of
grant of the option and will have a term of ten years.
Under the Quantum Direct Equity Participation Plan, each person who is an
Independent Director as of the Effective Time may be granted an NQSO to purchase
shares of Quantum Direct Common Stock as of the Effective Time and each
Independent Director who is initially elected to the Board after the Effective
Time may be granted an NQSO to purchase shares of Quantum Direct Common Stock as
of the date of such initial election. Thereafter, each Independent Director may
be granted an NQSO to purchase shares of Quantum Direct Common Stock on the date
of each annual meeting of stockholders at which the Independent Director is
reelected to the Quantum Direct Board of Directors. If granted, such NQSOs will
(i) have a per share exercise price equal to the fair market value of a share of
Quantum Direct Common Stock as of the date of grant, (ii) have a term of ten
years and (iii) become exercisable in four equal annual installments, beginning
on the first anniversary of the date of grant.
Incentive Stock Options ("ISOs"), will be designed to comply with the
provisions of the Code and will be subject to certain restrictions contained in
the Code. Among such restrictions, ISOs must have an exercise price not less
than the fair market value of a share of Quantum Direct Common Stock on the date
of grant, may only be granted to employees, must expire within a specified
period of time following the optionee's termination of employment, and must be
exercised within the ten years after the date of grant; but, may be subsequently
modified to disqualify them from treatment as ISOs. In the case of an ISO
granted to an individual who owns (or is deemed to own) at least 10% of the
total combined voting power of all classes of stock of Quantum Direct, the
Quantum Direct Equity Participation Plan provides that the exercise price must
be at least 110% of the fair market value of a share of Quantum Direct Common
Stock on the date of grant and the ISO must expire upon the fifth anniversary of
the date of its grant.
Restricted Stock may be sold to participants at various prices (but not
below par value) and made subject to such restrictions as may be determined by
the Compensation Committee. Restricted stock, typically, may be repurchased by
Quantum Direct at the original purchase price if the conditions or restrictions
are not met. In general, restricted stock may not be sold, or otherwise
transferred or hypothecated, until restrictions are removed or expire.
Purchasers of restricted stock, unlike recipients of options, will have voting
rights and will receive dividends prior to the time when the restrictions lapse.
Deferred Stock may be awarded to participants, typically without payment of
consideration, but subject to vesting conditions based on continued employment
or on performance criteria established by the Compensation Committee. Like
restricted stock, deferred stock may not be sold, or otherwise transferred or
hypothecated, until vesting conditions are removed or expire. Unlike restricted
stock, deferred stock will not be issued until the deferred stock award has
vested, and recipients of deferred stock generally will have no voting or
dividend rights prior to the time when vesting conditions are satisfied.
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Stock Appreciation Rights may be granted in connection with stock options
or other Awards, or separately. SARs granted by the Compensation Committee in
connection with stock options or other awards typically will provide for
payments to the holder based upon increases in the price of Quantum Direct's
Common Stock over the exercise price of the related option or other Awards, but
alternatively may be based upon criteria such as book value. Except as required
by Section 162(m) with respect to an SAR which is intended to qualify as
performance-based compensation as described in Section 162(m), there are no
restrictions specified in the Quantum Direct Equity Participation Plan on the
exercise of SARs or the amount of gain realizable therefrom, although
restrictions may be imposed by the Compensation Committee in the SAR agreements.
The Compensation Committee may elect to pay SARs in cash or in Quantum Direct
Common Stock or in a combination of both. The holder does not pay any
consideration to Quantum Direct upon the grant or exercise of a SAR.
Dividend Equivalents represent the value of the dividends per share paid by
Quantum Direct, calculated with reference to the number of shares covered by the
stock options, SARs or other Awards held by the participant.
Performance-Based Awards may be granted by the Compensation Committee on an
individual or group basis. Generally, these Awards will be based upon specific
performance targets and may be paid in cash or in Quantum Direct Common Stock or
in a combination of both. Performance Awards may include "phantom" stock Awards
that provide for payments based upon increases in the price of Quantum Direct
Common Stock over a predetermined period. Performance-Based Awards may also
include bonuses which may be granted by the Compensation Committee on an
individual or group basis and which may be payable in cash or in Quantum Direct
Common Stock or in a combination of both. The payment of a Performance-Based
Award in cash will not reduce the number of shares reserved under the Quantum
Direct Equity Participation Plan.
Stock Payments may be authorized by the Compensation Committee in the form
of shares of Quantum Direct Common Stock or an option or other right to purchase
Quantum Direct Common Stock as part of a deferred compensation arrangement in
lieu of all or any part of compensation, including bonuses, that would otherwise
be payable in cash to the key employee or consultant.
SECURITIES LAWS AND FEDERAL INCOME TAXES
Securities Laws. The Quantum Direct Equity Participation Plan is intended
to conform to the extent necessary with all provisions of the Securities Act and
the Exchange Act and any and all regulations and rules promulgated by the SEC
thereunder, including without limitation Rule 16b-3. The Quantum Direct Equity
Participation Plan will be administered, and Awards will be granted and may be
exercised, only in such a manner as to conform to such laws, rules and
regulations. To the extent permitted by applicable law, the Quantum Direct
Equity Participation Plan and Awards granted thereunder shall be deemed amended
to the extent necessary to conform to such laws, rules and regulations.
General Federal Tax Consequences. Under current federal laws, in general,
recipients of awards and grants of nonqualified stock options, stock
appreciation rights, restricted stock, deferred stock, dividend equivalents,
performance awards, and stock payments under the Quantum Direct Equity
Participation Plan are taxable under Section 61 or 83 of the Code upon their
receipt of Quantum Direct Common Stock or cash with respect to such awards or
grants and, subject to Section 162(m) of the Code, Quantum Direct will be
entitled to a corresponding income tax deduction with respect to the amounts
taxable to such recipients. Under Sections 421 and 422 of the Code, recipients
of ISOs are generally not taxable on their receipt of Quantum Direct Common
Stock upon their exercises of ISOs if the ISOs and option stock are held for
certain minimum holding periods and, in such event, Quantum Direct is not
entitled to income tax deductions with respect to such exercises. Participants
in the Quantum Direct Equity Participation Plan will be provided with detailed
information regarding the tax consequences relating to the various types of
awards and grants under the plan.
Section 162(m) Limitation. In general, under Section 162(m), income tax
deductions of publicly-held corporations may be limited to the extent total
compensation (including base salary, annual bonus, stock option exercises,
transfers of property and benefits paid under non-qualified plans) for certain
executive
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officers exceeds $1 million (less the amount of any "excess parachute payments"
as defined in Section 280G of the Code) per officer in any one year. However,
under Section 162(m), the deduction limit does not apply to certain
"performance-based compensation."
Under Section 162(m), stock options and SARs will satisfy the
"performance-based compensation" exception if the award of the options or SARs
are made by a Board of Directors committee consisting solely of 2 or more
"outside directors," the plan is approved by the corporation's stockholders and
sets the maximum number of shares that can be granted to any person within a
specified period and the compensation is based solely on an increase in the
stock price after the grant date (i.e. the option exercise price or SAR base
price is equal to or greater than the fair market value of the stock subject to
the award on the grant date). Other types of awards may only qualify as
"performance-based compensation" if such awards are only granted or payable to
the recipients based upon the attainment of objectively determinable and
pre-established performance goals which are established by a qualifying
committee and which relate to performance criteria which are approved by the
corporation's shareholders.
The Quantum Direct Equity Participation Plan has been designed in order to
permit the Compensation Committee to grant stock options and SARs which will
qualify as "performance-based compensation." In addition, in order to permit
Awards other than stock options and SARS to qualify as "performance-based
compensation," the Quantum Direct Equity Participation Plan provides that the
Compensation Committee may designate as "Section 162(m) Participants" certain
employees whose compensation for a given fiscal year may be subject to the limit
on deductible compensation imposed by Section 162(m). The Compensation Committee
may grant Awards to Section 162(m) Participants that vest or become exercisable
upon the attainment of performance criteria which are related to one or more of
the following performance goals: (i) net-income; (ii) pre-tax income; (iii)
operating income; (iv) cash flow; (v) earnings per share; (vi) return on equity;
(vii) return on invested capital or assets; (viii) cost reductions or savings;
(ix) funds from operations, (x) appreciation in the fair market value of Quantum
Direct Common Stock and (xi) earnings before any one or more of the following
items: interest, taxes, depreciation or amortization.
RECOMMENDATION OF THE BOARDS OF DIRECTORS
The National Media Board of Directors, ValueVision Board of Directors and
Quantum Direct recommend approval of the Quantum Direct Equity Participation
Plan. The proposal must be approved by the holders of at least at majority of
the shares present and entitled to vote on the matter at the National Media
Special Meeting, provided that the total votes cast on the matter represent over
50% of the Common Stock entitled to vote on the matter. The proposal must also
be approved by the holders of at least a majority of the total votes of the
shares present and entitled to vote on the matter at the ValueVision Special
Meeting, provided that the total votes cast on the matter represent over 50% in
interest of all securities entitled to vote on the matter. Neither abstentions
nor broker non-votes will be counted as votes cast for purposes of determining
whether the votes cast represent over 50% in interest of the securities entitled
to vote, and because an affirmative vote of a majority of the total votes of the
shares present and entitled to vote is required, abstentions and broker
non-votes may have the same effect as votes against approval of the Quantum
Direct Equity Participation Plan if they result in a failure of the total votes
cast to represent over 50% in interest of the securities entitled to vote. The
enclosed proxy will be voted in accordance with the instructions specified in
the space provided on the form of proxy. If no instructions are given, proxies
will be voted for approval of the Quantum Direct Equity Participation Plan.
Approval of the Merger is not conditioned upon approval of the Quantum Direct
Equity Participation Plan.
STOCKHOLDER PROPOSALS
If the Merger is consummated, the first annual meeting of the stockholders
of Quantum Direct after such consummation is expected to be held on or about
January 29, 1999. If the Merger is not consummated, the next annual meeting of
stockholders of National Media is expected to be held on or about June 14, 1998
and the next annual meeting of the shareholders of ValueVision is expected to be
held on or about May 15, 1998.
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Subject to the foregoing, if any Quantum Direct stockholder intends to
present a proposal at Quantum Direct's first annual meeting and wishes to have
such proposal considered for inclusion in the proxy materials for such meeting,
such holder must submit the proposal to the Secretary of Quantum Direct in
writing so as to be received at the executive offices of Quantum Direct no
sooner than October 30, 1998 and no later than November 30, 1998. Such proposals
must also meet the other requirements of the rules of the SEC relating to
stockholders' proposals.
In addition to any other applicable requirements, the Bylaws of Quantum
Direct require that for business to be properly brought before an annual meeting
by a stockholder, the stockholder must have given timely notice thereof,
containing the information required by the Quantum Direct Bylaws and in writing,
to the Corporate Secretary of Quantum Direct. To be timely, a stockholder's
notice containing the information required by the Quantum Direct Bylaws must be
delivered to or mailed and received at the principal executive offices of
Quantum Direct not less than sixty days nor more than ninety days prior to the
meeting; provided, however, that in the event that less than seventy days notice
or prior public disclosure of the date of the annual meeting is given or made to
stockholders, notice by a stockholder, to be timely, must be received no later
than the close of business on the tenth day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made, whichever first occurs.
In the event the Merger is not consummated, the only stockholder proposals
eligible to be considered for inclusion in the proxy materials for the next
annual meetings of ValueVision and National Media, respectively, will be those
which were duly submitted to the Secretary of ValueVision or National Media, as
the case may be, by April 1, 1998, and May 1, 1998, as provided in the next
respective annual meeting proxy statements of ValueVision and National Media.
LEGAL MATTERS
The validity of the shares of Quantum Direct Common Stock to be issued in
connection with the Merger will be passed upon by Latham & Watkins, Los Angeles,
California. Paul D. Tosetti, a director of ValueVision and a director-nominee of
Quantum Direct, is also a partner of Latham & Watkins.
EXPERTS
The consolidated financial statements and schedule of National Media at
March 31, 1997 and 1996, and for each of the three years in the period ended
March 31, 1997, incorporated by reference in this Joint Proxy
Statement/Prospectus, which is referred to and made a part of this Joint Proxy
Statement/Prospectus, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon (which contains an explanatory
paragraph describing conditions that raise substantial doubt about National
Media's ability to continue as a going concern as described in Note 1 to the
consolidated financial statements), and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of ValueVision and subsidiaries as of
January 31, 1996 and 1997, and for each of the years in the three year-period
ended January 31, 1997 have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said reports.
Representatives of Arthur Andersen LLP are expected to be present at the
ValueVision Special Meeting with an opportunity to make a statement if they
desire to do so, and such representatives are expected to be available to
respond to appropriate questions.
OTHER MATTERS
As of the date of this Joint Proxy Statement/Prospectus, the National Media
Board of Directors and the ValueVision Board of Directors know of no matters
that will be presented for consideration at the National Media Special Meeting
or the ValueVision Special Meeting other than as described in this Joint Proxy
Statement/Prospectus. If any other matters shall properly come before either
stockholder meeting or any
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adjournments or postponements thereof and be voted upon, the enclosed proxies
will be deemed to confer discretionary authority on the individuals named as
proxies therein to vote the shares represented by such proxies as to any such
matters. The persons named as proxies intend to vote or not to vote in
accordance with the recommendation of the respective managements of National
Media and ValueVision.
WHERE YOU CAN FIND MORE INFORMATION
National Media and ValueVision are subject to the Exchange Act and file
annual, quarterly and special reports, proxy statements and other information
with the SEC. You may read and copy any reports, statements or other information
we file at the SEC's public reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available to
the public from commercial document retrieval services and at the web site
maintained by the SEC at "http://www.sec.gov."
Quantum Direct filed a Registration Statement on Form S-4 to register with
the SEC the Quantum Direct Common Stock to be issued to holders of National
Media and ValueVision Common Stock in the Merger. This Joint Proxy
Statement/Prospectus is a part of that Registration Statement and constitutes a
prospectus of Quantum Direct in addition to being a proxy statement of National
Media and ValueVision for the Special Meetings. As allowed by SEC rules, this
Joint Proxy Statement/Prospectus does not contain all the information you can
find in the Registration Statement or the exhibits to the Registration
Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information into this Joint
Proxy Statement/ Prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be part of this
Joint Proxy Statement/Prospectus, except for any information superseded by
information in this Joint Proxy Statement/Prospectus. This Joint Proxy
Statement/Prospectus incorporates by reference the documents set forth below
that we have previously filed with the SEC. These documents contain important
information about our companies and their finances.
<TABLE>
<S> <C>
NATIONAL MEDIA SEC FILINGS (FILE NO. 1-6715) PERIOD
Annual Report on Form 10-K, as amended Year ended March 31, 1997
Quarterly Reports on Form 10-Q Quarters ended June 30, September 30 and
December 31, 1997
Quarterly Reports on Form 10-Q/A Quarter ended September 30, 1997
Current Reports on Form 8-K Filed on September 24, 1997 and January 5, 1998
Current Report on Form 8-K/A Filed on January 16, 1998
VALUEVISION SEC FILINGS (FILE NO. 0-20243) PERIOD
Annual Report on Form 10-K, as amended Year ended January 31, 1997
Quarterly Reports on Form 10-Q Quarters ended April 30, July 31 and October 31,
1997
Quarterly Reports on Form 10-Q/A Quarters ended July 31 and October 31, 1997
Current Reports on Form 8-K Filed on October 24, November 17 and December
22, 1997 and January 8, 1998
</TABLE>
We are also incorporating by reference additional documents that we may
file with the SEC between the date of this Joint Proxy Statement/Prospectus and
the dates of the Special Meetings.
National Media has supplied all information contained or incorporated by
reference in this Joint Proxy Statement/Prospectus relating to National Media
and ValueVision has supplied all such information relating to ValueVision. If
you are a holder of National Media or ValueVision Common Stock or National Media
Series B Stock, we may have sent you some of the documents incorporated by
reference, but you can obtain any of them through us or the SEC. Documents
incorporated by reference are available from us without charge, excluding all
exhibits unless we have specifically incorporated by reference an exhibit in
this Joint Proxy Statement/Prospectus. Holders of National Media and ValueVision
Common Stock and National
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Media Series B Stock may obtain documents incorporated by reference in this
Joint Proxy Statement/ Prospectus by requesting them in writing or by telephone
from the appropriate party at the following addresses:
<TABLE>
<S> <C>
National Media Corporation ValueVision International, Inc.
Attention: Director of Investor Attention: Secretary
Relations 6740 Shady Oak Road
Eleven Penn Center Eden Prairie, Minnesota 55344-3433
Suite 1100 Telephone: (612) 947-5207
1835 Market Street Telecopy: (612) 947-0188
Philadelphia, Pennsylvania 19103
Telephone: (215) 988-4600
Telecopy: (215) 988-4900
</TABLE>
If you would like to request documents from us, please do so by April 1,
1998 to receive them before the Special Meetings.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS TO VOTE ON THE MERGER. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT
FROM WHAT IS CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS. THIS JOINT
PROXY STATEMENT/PROSPECTUS IS DATED MARCH 13, 1998. YOU SHOULD NOT ASSUME THAT
THE INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS ACCURATE
AS OF ANY DATE OTHER THAN MARCH 13, 1998, AND NEITHER THE MAILING OF THE JOINT
PROXY STATEMENT/PROSPECTUS TO HOLDERS OF NATIONAL MEDIA COMMON STOCK, NATIONAL
MEDIA SERIES B STOCK AND VALUEVISION COMMON STOCK NOR THE ISSUANCE OF QUANTUM
DIRECT COMMON STOCK AND QUANTUM DIRECT SERIES B STOCK IN THE MERGER SHALL CREATE
ANY IMPLICATION TO THE CONTRARY.
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ANNEX A
================================================================================
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
BY AND AMONG
VALUEVISION INTERNATIONAL, INC.,
NATIONAL MEDIA CORPORATION,
AND
V-L HOLDINGS CORP.
------------------------
DATED AS OF JANUARY 5, 1998
------------------------
================================================================================
<PAGE> 118
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE I. THE MERGERS...................................... A-1
SECTION 1.1. Certificate of Incorporation and Bylaws of
Parent....................................... A-1
SECTION 1.2. The ValueVision Merger....................... A-1
SECTION 1.3. The National Media Merger.................... A-2
SECTION 1.4. Effective Time of the Mergers................ A-2
SECTION 1.5. Closing...................................... A-2
SECTION 1.6. Effect of the Mergers........................ A-2
SECTION 1.7. Articles or Certificate of Incorporation and
Bylaws of the Surviving Corporations......... A-3
SECTION 1.8. Directors and Officers of the Surviving
Corporations................................. A-3
ARTICLE II. CONVERSION OF SECURITIES........................ A-3
SECTION 2.1. Conversion of ValueVision Capital Stock...... A-3
SECTION 2.2. Conversion of National Media Capital Stock... A-4
SECTION 2.3. Cancellation of Parent Common Stock.......... A-5
SECTION 2.4. Exchange of Certificates..................... A-5
SECTION 2.5. Dissenting Shares............................ A-7
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF
VALUEVISION.................................... A-8
SECTION 3.1. Organization of ValueVision.................. A-8
SECTION 3.2. ValueVision Capital Structure................ A-8
SECTION 3.3. Authority; No Conflict; Required Filings and
Consents..................................... A-9
SECTION 3.4. SEC Filings; Financial Statements............ A-10
SECTION 3.5. No Undisclosed Liabilities................... A-11
SECTION 3.6. Absence of Certain Changes or Events......... A-11
SECTION 3.7. Taxes........................................ A-11
SECTION 3.8. Properties................................... A-12
SECTION 3.9. Intellectual Property........................ A-12
SECTION 3.10. Agreements, Contracts and Commitments....... A-13
SECTION 3.11. Litigation.................................. A-13
SECTION 3.12. Environmental Matters....................... A-13
SECTION 3.13. Employee Benefit Plans...................... A-13
SECTION 3.14. Compliance With Laws........................ A-15
SECTION 3.15. Accounting and Tax Matters.................. A-15
SECTION 3.16. Registration Statement; Joint Proxy
Statement/Prospectus........................ A-15
SECTION 3.17. Labor Matters............................... A-16
SECTION 3.18. Insurance................................... A-16
SECTION 3.19. Opinion of Financial Advisor................ A-16
SECTION 3.20. No Existing Discussions..................... A-16
SECTION 3.21. Sections 302A.671 and 302A.673 of the MBCA
Not Applicable.............................. A-16
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF NATIONAL
MEDIA........................................... A-17
SECTION 4.1. Organization of National Media............... A-17
SECTION 4.2. National Media Capital Structure............. A-17
SECTION 4.3. Authority; No Conflict; Required Filings and
Consents..................................... A-18
SECTION 4.4. SEC Filings; Financial Statements............ A-19
SECTION 4.5. No Undisclosed Liabilities................... A-20
SECTION 4.6. Absence of Certain Changes or Events......... A-20
SECTION 4.7. Taxes........................................ A-20
SECTION 4.8. Properties................................... A-21
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C>
SECTION 4.9. Intellectual Property........................ A-21
SECTION 4.10. Agreements, Contracts and Commitments....... A-21
SECTION 4.11. Litigation.................................. A-21
SECTION 4.12. Environmental Matters....................... A-21
SECTION 4.13. Employee Benefit Plans...................... A-22
SECTION 4.14. Compliance With Laws........................ A-24
SECTION 4.15. Accounting and Tax Matters.................. A-24
SECTION 4.16. Registration Statement; Joint Proxy
Statement/Prospectus........................ A-24
SECTION 4.17. Labor Matters............................... A-25
SECTION 4.18. Insurance................................... A-25
SECTION 4.19. Opinion of Financial Advisor................ A-25
SECTION 4.20. No Existing Discussions..................... A-25
SECTION 4.21. Section 203 of the DGCL and Sections 2538,
2555, and 2564 of the Pennsylvania Business
Corporation Law Not Applicable.............. A-25
SECTION 4.22. National Media Rights Plan.................. A-25
ARTICLE V. COVENANTS........................................ A-26
SECTION 5.1. Conduct of Business.......................... A-26
SECTION 5.2. Cooperation; Notice; Cure.................... A-27
SECTION 5.3. No Solicitation.............................. A-27
SECTION 5.4. Joint Proxy Statement/Prospectus;
Registration Statement....................... A-28
SECTION 5.5. Nasdaq Quotation and NYSE Listing............ A-29
SECTION 5.6. Access to Information........................ A-29
SECTION 5.7. Stockholders Meetings........................ A-29
SECTION 5.8. Legal Conditions to Merger................... A-29
SECTION 5.9. Public Disclosure............................ A-30
SECTION 5.10. Tax-Free Reorganization and Transfer........ A-30
SECTION 5.11. Affiliate Agreements........................ A-30
SECTION 5.12. National Listing or Nasdaq Quotation........ A-31
SECTION 5.13. Stock Plans................................. A-31
SECTION 5.14. Brokers or Finders.......................... A-32
SECTION 5.15. Indemnification............................. A-32
SECTION 5.16. Letter of National Media's Accountants...... A-32
SECTION 5.17. Letter of ValueVision's Accountants......... A-33
SECTION 5.18. Stock Option Agreements..................... A-33
SECTION 5.19. Post-Merger Parent Corporate Governance..... A-33
SECTION 5.20. Name of Parent.............................. A-34
SECTION 5.21. Parent Stockholder Rights Plan.............. A-34
SECTION 5.22. The Warrants................................ A-34
SECTION 5.23. Conveyance Taxes............................ A-34
SECTION 5.24. Stockholder Litigation...................... A-34
SECTION 5.25. Annual Reports for Welfare Benefit Plans.... A-35
SECTION 5.26. Employment Agreements....................... A-35
SECTION 5.27. Funding Advance for Redemption Agreement.... A-35
ARTICLE VI. CONDITIONS TO MERGER............................ A-35
SECTION 6.1. Conditions to Each Party's Obligation to
Effect the Mergers........................... A-35
SECTION 6.2. Additional Conditions to Obligations of
ValueVision.................................. A-37
SECTION 6.3. Additional Conditions to Obligations of
National Media............................... A-37
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C>
ARTICLE VII. TERMINATION AND AMENDMENT...................... A-38
SECTION 7.1. Termination.................................. A-38
SECTION 7.2. Effect of Termination........................ A-39
SECTION 7.3. Fees and Expenses............................ A-39
SECTION 7.4. Amendment.................................... A-41
SECTION 7.5. Extension; Waiver............................ A-41
ARTICLE VIII. MISCELLANEOUS................................. A-41
SECTION 8.1. Nonsurvival of Representations, Warranties
and Agreements............................... A-41
SECTION 8.2. Notices...................................... A-41
SECTION 8.3. Interpretation............................... A-42
SECTION 8.4. Counterparts................................. A-42
SECTION 8.5. Entire Agreement; No Third Party
Beneficiaries................................ A-42
SECTION 8.6. Governing Law................................ A-42
SECTION 8.7. Assignment................................... A-43
SECTION 8.8. References to "Stockholders"................. A-43
</TABLE>
EXHIBITS
<TABLE>
<S> <C> <C>
Exhibit A -- ValueVision Stock Option Agreement
Exhibit B -- National Media Stock Option Agreement
Exhibit C -- Restated Certificate of Incorporation of Parent
Exhibit D -- Amended and Restated Bylaws of Parent
Exhibit E -- Certificate of Designations of Parent Series B Convertible
Preferred Stock
Exhibit F -- Form of Affiliate Agreement
Exhibit G -- Form of Demand Note
Exhibit H -- Form of Warrant Agreement
Exhibit I -- Form of Registration Rights Agreement
Exhibit J -- Form of Amendment to National Media Rights Plan
Exhibit K -- Form of Redemption Agreement
Exhibit L -- Form of Series B Consent Agreement
Exhibit M -- Form of CoreStates Consent Agreement
Exhibit N -- Form of Amendments to Hammer and Costalas Employment
Agreements
Exhibit O -- Form of Parent Stock Plan
Exhibit P -- Form of Parent Rights Plan
Exhibit Q -- Form of Subsidiary Guaranty
Exhibit R -- Form of ValueVision Guaranty
</TABLE>
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
CROSS REFERENCE
TERMS IN AGREEMENT
- ----- ---------------
<S> <C>
Acquisition Proposal........................................ Section 5.3.(a)
Affiliate................................................... Section 5.11.
Affiliate Agreement......................................... Section 5.11.
Agreement................................................... Preamble
Alternative Transaction..................................... Section 7.3.(e)
Annual Report............................................... Section 5.25
Bankruptcy and Equity Exception............................. Section 3.3.(a)
</TABLE>
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<TABLE>
<CAPTION>
CROSS REFERENCE
TERMS IN AGREEMENT
- ----- ---------------
<S> <C>
Benefit Arrangement......................................... Section 3.13.(a)
Certificate of Designations................................. Section 4.2(b)
Certificates................................................ Section 2.4.(b)
Closing..................................................... Section 1.5.
Closing Date................................................ Section 1.5.
Code........................................................ Preamble
Communications Act.......................................... Section 3.3.(c)
Confidentiality Agreement................................... Section 5.3.(a)
CoreStates Consent Agreement................................ Section 3.3(a)
Costs....................................................... Section 5.15.(a)
Court....................................................... Section 6.1(m)
Current Premium............................................. Section 5.15.(b)
DGCL........................................................ Section 1.3.
Demand Note................................................. Section 3.3(a)
Dissenting Shares........................................... Section 2.5.
Effective Time.............................................. Section 1.4.(c)
Employee Benefit Plan....................................... Section 3.13.(a)
Environmental Law........................................... Section 3.12.(b)
ERISA....................................................... Section 3.13.(a)
ERISA Affiliate............................................. Section 3.13.(a)
Exchange Act................................................ Section 3.3.(c)
Exchange Agent.............................................. Section 2.4.(a)
Exchange Fund............................................... Section 2.4.(a)
FCC......................................................... Section 3.3.(c)
FCC Consent Application..................................... Section 5.8.(a)
Final Order................................................. Section 6.1.(c)
Governmental Entity......................................... Section 3.3.(c)
Hazardous Substance......................................... Section 3.12.(c)
HSR Act..................................................... Section 3.3.(c)
Indemnified Parties......................................... Section 5.15.(a)
IRS......................................................... Section 3.7.(b)
Joint Proxy Statement/Prospectus............................ Section 3.16.
Material Adverse Change..................................... Section 3.6.
MBCA........................................................ Section 1.2.
Mergers..................................................... Section 1.3.
Merger Sub 1................................................ Section 1.2.
Merger Sub 2................................................ Section 1.3.
National Media 10-K......................................... Section 4.6
National Media Balance Sheet................................ Section 4.4.(b)
National Media Certificate of Merger........................ Section 1.4.(b)
National Media Common Stock................................. Section 1.3.
National Media Convertible Preferred Stock.................. Section 4.2.(a)
National Media Director..................................... Section 5.19.(a)
National Media Disclosure Schedule.......................... ARTICLE IV.
National Media Employee Plans............................... Section 4.13.(a)
National Media ERISA Affiliate.............................. Section 4.13.(a)
National Media Exchange Ratio............................... Section 2.2.(c)
</TABLE>
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<TABLE>
<CAPTION>
CROSS REFERENCE
TERMS IN AGREEMENT
- ----- ---------------
<S> <C>
National Media Material Adverse Effect...................... Section 4.1.
National Media Material Contracts........................... Section 4.10.
National Media Merger....................................... Section 1.3.
National Media Parachute Agreements......................... Section 4.13(e)
National Media Rights Plan.................................. Section 4.2.(b)
National Media SEC Reports.................................. Section 4.4.(a)
National Media Stock Option................................. Section 2.2(e)
National Media Stock Option Agreement....................... Preamble
National Media Stock Plans.................................. Section 4.2.(a)
National Media Stockholders' Meeting........................ Section 3.16.
National Media Surviving Corporation........................ Section 1.6.
National Media Warrants..................................... Section 4.2.(a)
NYSE........................................................ Section 5.5.
Order....................................................... Section 5.8.(b)
Outside Date................................................ Section 7.1.(b)
Parent...................................................... Preamble
Parent Common Stock......................................... Section 1.2.
Parent Material Adverse Effect.............................. Section 6.1.(h)
Parent Series B Convertible Preferred Stock................. Section 2.2 (d)
Parent Stock Plan........................................... 5.13(f)
PBCL........................................................ Section 4.21
PBGC........................................................ Section 4.13.(c)
Pension Plan................................................ Section 4.13.(c)
Redemption Agreement........................................ Section 3.3(a)
Registration Rights Agreement............................... Section 3.3(a)
Registration Statement...................................... Section 3.16.
Rule 145.................................................... Section 5.11.
SEC......................................................... Section 3.3.(c)
Securities Act.............................................. Section 3.1(a)
Series B Convertible Preferred Stock........................ Section 4.2(a)
Series B Consent Agreement.................................. Section 3.3(a)
Series C Convertible Preferred Stock........................ Section 4.2(a)
Series C Note............................................... Section 3.3(a)
Settlement Agreement........................................ Section 6.1(m)
Stock Option Agreements..................................... Preamble
Subsidiary.................................................. Section 3.1.
Surviving Corporations...................................... Section 1.6.
Tax......................................................... Section 3.7.(a)
Taxes....................................................... Section 3.7.(a)
Third Party................................................. Section 7.3.(e)
Transaction Documents....................................... Section 3.3(a)
ValueVision 10-K............................................ Section 3.6
ValueVision Articles of Merger.............................. Section 1.4.(a)
ValueVision Balance Sheet................................... Section 3.4.(b)
ValueVision Common Stock.................................... Section 1.2.
ValueVision Director........................................ Section 5.19.(a)
ValueVision Disclosure Schedule............................. ARTICLE III.
</TABLE>
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<TABLE>
<CAPTION>
CROSS REFERENCE
TERMS IN AGREEMENT
- ----- ---------------
<S> <C>
ValueVision Employee Plans.................................. Section 3.13.(a)
ValueVision ERISA Affiliate................................. Section 3.13.(a)
ValueVision Exchange Ratio.................................. Section 2.1.(c)
ValueVision Guaranty........................................ Section 6.3(d)
ValueVision Material Adverse Effect......................... Section 3.1.
ValueVision Material Contracts.............................. Section 3.10.
ValueVision Merger.......................................... Section 1.2.
ValueVision Parachute Agreements............................ Section 3.13(e)
ValueVision SEC Reports..................................... Section 3.4.(a)
ValueVision Stock Option.................................... Section 2.1(d)
ValueVision Stock Option Agreement.......................... Preamble
ValueVision Stock Plans..................................... Section 3.2.(a)
ValueVision Stockholders' Meeting........................... Section 3.16.
ValueVision Surviving Corporation........................... Section 1.6.
ValueVision Warrants........................................ Section 3.2.(a)
Warrants.................................................... Section 4.2.(a)
Warrant Agreement........................................... Section 3.3(a)
</TABLE>
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AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER (the "Agreement"), dated as
of January 5, 1998, by and among VALUEVISION INTERNATIONAL, INC. a Minnesota
corporation ("ValueVision"), NATIONAL MEDIA CORPORATION, a Delaware corporation
("National Media"), and V-L HOLDINGS CORP., a newly-formed Delaware corporation,
one-half of the issued and outstanding capital stock of which is owned by each
of ValueVision and National Media ("Parent").
WHEREAS, the Boards of Directors of ValueVision and National Media deem it
advisable and in the best interests of each corporation and its respective
stockholders that ValueVision and National Media combine in a "merger of equals"
in order to advance the long-term business interests of ValueVision and National
Media;
WHEREAS, the combination of ValueVision and National Media shall be
effected by the terms of this Agreement through (i) a merger of a wholly-owned
subsidiary of Parent with and into ValueVision and (ii) a merger of another
wholly-owned subsidiary of Parent with and into National Media such that
ValueVision and National Media become wholly-owned subsidiaries of Parent and
the stockholders of ValueVision and National Media become stockholders of
Parent;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to each of ValueVision's and National Media's
willingness to enter into this Agreement, ValueVision and National Media have
entered into (i) a Stock Option Agreement dated as of the date of this Agreement
and attached hereto as Exhibit A (the "ValueVision Stock Option Agreement"),
pursuant to which National Media granted ValueVision an option to purchase
shares of common stock of National Media under certain circumstances, and (ii) a
Stock Option Agreement dated as of the date of this Agreement and attached
hereto as Exhibit B (the "National Media Stock Option Agreement" and, together
with the ValueVision Stock Option Agreement, the "Stock Option Agreements"),
pursuant to which ValueVision granted National Media an option to purchase
shares of common stock of ValueVision under certain circumstances;
WHEREAS, for Federal income tax purposes, it is intended that (i) the
ValueVision Merger (as defined in Section 1.2) shall qualify as a reorganization
described in Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code") and, taken together with the National Media Merger (as defined in
Section 1.3), as a transfer of property to Parent by holders of ValueVision
Common Stock (as defined in Section 1.2) described in Section 351 of the Code,
and (ii) the National Media Merger shall, taken together with the ValueVision
Merger, qualify as a transfer of property to Parent by holders of National Media
Common Stock (as defined in Section 1.3) described in Section 351 of the Code;
and
WHEREAS, the Boards of Directors of ValueVision and National Media have
approved this Agreement and each of the Transaction Documents to which its
company is a party (as defined in Section 3.3).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I.
THE MERGERS
SECTION 1.1. Certificate of Incorporation and Bylaws of Parent. The
Certificate of Incorporation and Bylaws of Parent shall be amended prior to the
Effective Time (as defined in Section 1.4) to be substantially in the form of
Exhibit C and Exhibit D attached hereto, respectively. From the date hereof
until the Effective Time, ValueVision and National Media shall consult with each
other prior to causing or permitting Parent to take any action and neither shall
cause or permit Parent to take any action inconsistent with the provisions of
this Agreement without the written consent of the other.
SECTION 1.2. The ValueVision Merger. ValueVision and National Media shall
cause Parent to form a wholly-owned subsidiary named ValueVision Acquisition
Corp. ("Merger Sub 1") under the laws of the State
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of Minnesota. ValueVision and National Media shall cause Parent to cause Merger
Sub 1 to execute and deliver this Agreement. Upon the terms and subject to the
provisions of this Agreement, and in accordance with the Minnesota Business
Corporation Act (the "MBCA"), Merger Sub 1 will merge with and into ValueVision
(the "ValueVision Merger") at the Effective Time, and each outstanding share of
Common Stock, par value $.01 per share, of ValueVision ("ValueVision Common
Stock") shall be converted into 1.19 shares of common stock, par value $.01 per
share, of Parent (the "Parent Common Stock") (as described in Section 2.1(c)).
Merger Sub 1 will be formed solely to facilitate the ValueVision Merger and will
conduct no business or activity other than in connection with the ValueVision
Merger.
SECTION 1.3. The National Media Merger. ValueVision and National Media
shall cause Parent to form a wholly-owned subsidiary named National Media
Acquisition Corp. ("Merger Sub 2") under the laws of the State of Delaware.
ValueVision and National Media shall cause Parent to cause Merger Sub 2 to
execute and deliver this Agreement. Upon the terms and subject to the provisions
of this Agreement, and in accordance with the Delaware General Corporation Code
(the "DGCL"), Merger Sub 2 shall merge with and into National Media (the
"National Media Merger" and together with the ValueVision Merger, the "Mergers")
at the Effective Time, and each outstanding share of Common Stock, par value
$.01 per share, of National Media ("National Media Common Stock") shall be
converted into 1.00 share of Parent Common Stock (as described in Section
2.2(c)). Merger Sub 2 will be formed solely to facilitate the National Media
Merger and will conduct no business or activity other than in connection with
the National Media Merger.
SECTION 1.4. Effective Time of the Mergers.
(a) The ValueVision Merger. Subject to, and consistent with, the provisions
of this Agreement, articles of merger with respect to the ValueVision Merger in
such form as is required by the relevant provisions of the MBCA (the
"ValueVision Articles of Merger") shall be duly prepared, executed and
acknowledged and thereafter delivered to the Secretary of State of the State of
Minnesota for filing, as provided in the MBCA as early as practicable on the
Closing Date (as defined in Section 1.5). The ValueVision Merger shall become
effective upon the filing of the ValueVision Articles of Merger with the
Secretary of State of the State of Minnesota
(b) The National Media Merger. Subject to, and consistent with, the
provisions of this Agreement, a certificate of merger (the "National Media
Certificate of Merger") with respect to the National Media Merger in such form
as is required by the relevant provisions of the DGCL shall be duly prepared,
executed and acknowledged and thereafter delivered to the Secretary of State of
the State of Delaware for filing, as provided in the DGCL as early as
practicable on the Closing Date. The National Media Merger shall become
effective upon the filing of the National Media Certificate of Merger with the
Secretary of State of the State of Delaware.
(c) The Effective Time. The time at which both Mergers have become fully
effective is hereinafter referred to as the "Effective Time."
SECTION 1.5. Closing. The closing of the Mergers (the "Closing") will take
place at 11:00 a.m., Eastern Standard Time, on a date to be specified by
National Media and ValueVision, which shall be no later than the third business
day after satisfaction or, if permissible, waiver of the conditions set forth in
Article VI (the "Closing Date"), at the offices of Latham & Watkins, 885 Third
Avenue, Suite 1000, New York, New York 10022-4802, unless another date, place or
time is agreed to in writing by National Media and ValueVision.
SECTION 1.6. Effect of the Mergers. As a result of the ValueVision Merger,
the separate corporate existence of Merger Sub 1 shall cease and ValueVision
shall continue as the surviving corporation (the "ValueVision Surviving
Corporation"). As a result of the National Media Merger, the separate corporate
existence of Merger Sub 2 shall cease and National Media shall continue as the
surviving corporation (the "National Media Surviving Corporation" and together
with ValueVision Surviving Corporation, the "Surviving Corporations"). Upon
becoming effective, the Mergers shall have the effects set forth in the MBCA and
the DGCL, as the case may be. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, (i) all properties, rights,
privileges, powers and franchises of ValueVision and Merger Sub 1
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shall vest in ValueVision Surviving Corporation, and all debts, liabilities and
duties of ValueVision and Merger Sub 1 shall become the debts, liabilities and
duties of the ValueVision Surviving Corporation and (ii) all properties, rights,
privileges, powers and franchises of National Media and Merger Sub 2 shall vest
in National Media Surviving Corporation, and all debts, liabilities and duties
of National Media and Merger Sub 2 shall become the debts, liabilities and
duties of National Media Surviving Corporation.
SECTION 1.7. Articles or Certificate of Incorporation and Bylaws of the
Surviving Corporations. At the Effective Time, (i) the Articles of Incorporation
and Bylaws of ValueVision Surviving Corporation shall be the Articles of
Incorporation and Bylaws, respectively, of ValueVision, as in effect immediately
prior to the Effective Time, in each case until duly amended in accordance with
applicable law, and (ii) the Certificate of Incorporation and Bylaws of National
Media Surviving Corporation shall be the Certificate of Incorporation and
Bylaws, respectively, of National Media, as in effect immediately prior to the
Effective Time, in each case until duly amended in accordance with applicable
law.
SECTION 1.8. Directors and Officers of the Surviving Corporations.
(a) ValueVision Surviving Corporation. The officers and directors of
ValueVision immediately prior to the Effective Time shall be the initial
officers and directors of ValueVision Surviving Corporation, each to hold office
in accordance with the Articles of Incorporation and Bylaws of ValueVision
Surviving Corporation.
(b) National Media Surviving Corporation. The officers and directors of
National Media immediately prior to the Effective Time shall be the initial
officers and directors of National Media Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and Bylaws of
National Media Surviving Corporation.
ARTICLE II.
CONVERSION OF SECURITIES
SECTION 2.1. Conversion of ValueVision Capital Stock. At the Effective
Time, by virtue of the ValueVision Merger and without any action on the part of
any of the parties hereto or the holders of any shares of ValueVision Common
Stock or capital stock of Merger Sub 1:
(a) Capital Stock of Merger Sub 1. Each issued and outstanding share
of the capital stock of Merger Sub 1 shall be converted into and become one
fully paid and nonassessable share of Common Stock, par value $.01 per
share, of ValueVision Surviving Corporation.
(b) Cancellation of Treasury Stock and National Media-Owned Stock. All
shares of ValueVision Common Stock that are owned by ValueVision or any
Subsidiary (as defined in Section 3.1) of ValueVision and any shares of
ValueVision Common Stock (including any options, warrants or other
securities convertible into or exchangeable for such shares) owned by
National Media, Merger Sub 2 or any other Subsidiary of National Media
shall be canceled and retired and shall cease to exist and no stock of
Parent or other consideration shall be delivered in exchange therefor.
(c) Exchange Ratio for ValueVision Common Stock. Subject to Section
2.4(e), each issued and outstanding share of ValueVision Common Stock
(other than shares to be canceled in accordance with Section 2.1(b) and
Dissenting Shares (as defined in Section 2.5)) shall be converted into the
right to receive 1.19 shares (the "ValueVision Exchange Ratio") of Parent
Common Stock. All such shares of ValueVision Common Stock, when so
converted, shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any rights
with respect thereto, except the right to receive the shares of Parent
Common Stock, any cash in lieu of fractional shares of Parent Common Stock
to be issued or paid in consideration therefor and an amount equal to
certain dividends and distributions described in Section 2.4(c), in each
case, upon the surrender of such certificate in accordance with Section 2.4
and without interest.
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(d) ValueVision Stock Options. At the Effective Time, each outstanding
option to purchase shares of ValueVision Common Stock (a "ValueVision Stock
Option") under the ValueVision Stock Plans (as defined in Section 3.2(a)),
whether vested or unvested, shall be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable under such
ValueVision Stock Option the same number of shares of Parent Common Stock
as the holder of such ValueVision Stock Option would have been entitled to
receive pursuant to the ValueVision Merger had such holder exercised such
option in full immediately prior to the Effective Time (rounded downward to
the nearest whole number), at a price per share (rounded downward to the
nearest whole cent) equal to (y) the aggregate exercise price for the
shares of ValueVision Common Stock purchasable pursuant to such ValueVision
Stock Option immediately prior to the Effective Time divided by (z) the
number of full shares of Parent Common Stock deemed purchasable pursuant to
such ValueVision Stock Option in accordance with the foregoing.
(e) ValueVision Warrants. At the Effective Time, each ValueVision
Warrant (as defined in Section 3.2(a)) shall thereafter solely represent
the right to acquire, on the terms and conditions as are currently
applicable under the ValueVision Warrants, the same number of shares of
Parent Common Stock as a holder of the ValueVision Warrants would have been
entitled to receive pursuant to the ValueVision Merger had such holder
exercised such ValueVision Warrants in full immediately prior to the
Effective Time (rounded downward to the nearest whole number), at the price
per share (rounded downward to the nearest whole cent) equal to (y) the
aggregate exercise price for the shares of ValueVision Common Stock
purchasable pursuant to the ValueVision Warrants immediately prior to the
Effective Time divided by (z) the number of full shares of Parent Common
Stock deemed purchasable pursuant to the ValueVision Warrants in accordance
with the foregoing.
SECTION 2.2. Conversion of National Media Capital Stock. At the Effective
Time, by virtue of the National Media Merger and without any action on the part
of any of the parties hereto or the holders of any shares of National Media
Common Stock or capital stock of Merger Sub 2:
(a) Capital Stock of Merger Sub 2. Each issued and outstanding share
of the capital stock of Merger Sub 2 shall be converted into and become one
fully paid and nonassessable share of Common Stock, par value $.01 per
share, of National Media Surviving Corporation.
(b) Cancellation of Treasury Stock and ValueVision-Owned Stock. All
shares of National Media Common Stock that are owned by National Media or
any Subsidiary of National Media (including treasury stock) and any shares
of National Media Common Stock (including any options, warrants or other
securities convertible into or exchangeable for such shares) owned by
ValueVision, Merger Sub 1 or any other Subsidiary of ValueVision shall be
canceled and retired and shall cease to exist and no stock of Parent or
other consideration shall be delivered in exchange therefor.
(c) Exchange Ratio for National Media Common Stock. Subject to Section
2.4(e), each issued and outstanding share of National Media Common Stock
(including the rights associated with the Series A Junior Participating
Preferred Stock issued pursuant to the National Media Rights Plan (as
defined in Section 4.2(b)) (other than shares to be canceled in accordance
with Section 2.2(b)) shall be converted into the right to receive 1.00
share (the "National Media Exchange Ratio") of Parent Common Stock. All
such shares of National Media Common Stock, when so converted, shall no
longer be outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a certificate representing any
such shares shall cease to have any rights with respect thereto, except the
right to receive the shares of Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock to be issued or paid in
consideration therefor and an amount equal to certain dividends and
distributions described in Section 2.4(c), in each case, upon the surrender
of such certificate in accordance with Section 2.4 and without interest.
(d) Exchange Ratio for Series B Convertible Stock. Each issued and
outstanding share of Series B Convertible Preferred Stock (as defined in
Section 4.2(a)) shall be converted into the right to receive 1.00 share of
Parent Series B Convertible Preferred Stock, par value $.01 per share (the
"Parent Series B Convertible Preferred Stock"), with the designations,
preferences and rights set forth in the Certificate of Designations of the
Parent Series B Convertible Preferred Stock in the form attached hereto as
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Exhibit E. All such shares of Series B Convertible Preferred Stock, when so
converted, shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any rights
with respect thereto, except the right to receive the shares of Parent
Series B Convertible Preferred Stock upon the surrender of such certificate
in accordance with procedures to be established by Parent and without
interest.
(e) National Media Stock Options. At the Effective Time, each
outstanding option to purchase shares of National Media Common Stock (a
"National Media Stock Option") under the National Media Stock Plans (as
defined in Section 4.2(a)), whether vested or unvested, shall be deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under such National Media Stock Option the same number of shares
of Parent Common Stock as the holder of such National Media Stock Option
would have been entitled to receive pursuant to the National Media Merger
had such holder exercised such option in full immediately prior to the
Effective Time (rounded downward to the nearest whole number), at a price
per share (rounded downward to the nearest whole cent) equal to (y) the
aggregate exercise price for the shares of National Media Common Stock
purchasable pursuant to such National Media Stock Option immediately prior
to the Effective Time divided by (z) the number of full shares of Parent
Common Stock deemed purchasable pursuant to such National Media Stock
Option in accordance with the foregoing.
(f) National Media Warrants. At the Effective Time, each National
Media Warrant (as defined in Section 4.2(a)) shall thereafter solely
represent the right to acquire, on the terms and conditions as are
currently applicable under the National Media Warrants, the same number of
shares of Parent Common Stock as a holder of the National Media Warrants
would have been entitled to receive pursuant to the National Media Merger
had such holder exercised such National Media Warrants in full immediately
prior to the Effective Time (rounded downward to the nearest whole number),
at the price per share (rounded downward to the nearest whole cent) equal
to (y) the aggregate exercise price for the shares of National Media Common
Stock purchasable pursuant to the National Media Warrants immediately prior
to the Effective Time divided by (z) the number of full shares of Parent
Common Stock deemed purchasable pursuant to the National Media Warrants in
accordance with the foregoing.
SECTION 2.3. Cancellation of Parent Common Stock. At the Effective Time, by
virtue of the Mergers and without any action on the part of any holder of any
capital stock of ValueVision, National Media or Parent, each share of Parent
Common Stock issued and outstanding immediately prior to the Effective Time
shall be canceled, and no consideration shall be delivered in exchange therefor.
SECTION 2.4. Exchange of Certificates. The procedures for exchanging shares
of ValueVision Common Stock and National Media Common Stock for Parent Common
Stock outstanding immediately prior to the Effective Time pursuant to the
Mergers are as follows:
(a) Exchange Agent. As of the Effective Time, Parent shall deposit
with a bank or trust company designated by National Media and ValueVision
(the "Exchange Agent"), for the benefit of the holders of shares of
ValueVision Common Stock outstanding immediately prior to the effective
time and the holders of shares of National Media Common Stock outstanding
immediately prior to the Effective Time, for exchange in accordance with
this Section 2.4, through the Exchange Agent, certificates representing the
shares of Parent Common Stock issuable pursuant to Sections 2.1 and 2.2 in
exchange for outstanding shares of ValueVision Common Stock and National
Media Common Stock, respectively (such shares of Parent Common Stock,
together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of ValueVision Common Stock or National
Media Common Stock (including the Series A Junior Participating Preferred
Stock associated with the National Media Common Stock and issued pursuant
to the National Media Rights Plan) (the "Certificates") whose shares were
converted pursuant to Section 2.1 or Section 2.2 into the right to receive
shares of Parent Common Stock (i) a letter of transmittal (which shall
specify that delivery shall
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be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as ValueVision and National
Media may reasonably specify), and (ii) instructions for effecting the
surrender of the Certificates in exchange for certificates representing
shares of Parent Common Stock (plus cash in lieu of fractional shares, if
any, of Parent Common Stock as provided below). Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent
or agents as may be appointed by Parent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing that
number of whole shares of Parent Common Stock which such holder has the
right to receive pursuant to the provisions of this Article II, and the
Certificate so surrendered shall immediately be canceled. In the event of a
transfer of ownership of ValueVision Common Stock or National Media Common
Stock prior to the Effective Time which is not registered in the transfer
records of ValueVision or National Media, respectively, a certificate
representing the proper number of shares of Parent Common Stock may be
issued to a transferee if the Certificate representing such ValueVision
Common Stock or National Media Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Immediately after the Effective Time, each outstanding Certificate
which theretofore represented shares of ValueVision Common Stock or
National Media Common Stock shall represent only the right to receive the
shares of Parent Common Stock pursuant to the terms hereof and shall not be
deemed to evidence ownership of the number of shares of Parent Common Stock
into which such shares of ValueVision Common Stock or National Media Common
Stock would be or were, as the case may be, converted into the right to
receive until the Certificate therefor shall have been surrendered in
accordance with this Section 2.4.
(c) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect
to Parent Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock the holder thereof is entitled to receive in
respect thereof and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to subsection (e) below until the holder
of record of such Certificate shall surrender such Certificate. Subject to
the effect of applicable laws, following surrender of any such Certificate,
there shall be paid to the record holder of the certificates representing
whole shares of Parent Common Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of any cash payable
in lieu of a fractional share of Parent Common Stock to which such holder
is entitled pursuant to subsection (e) below and the amount of dividends or
other distributions with a record date after the Effective Time previously
paid with respect to such whole shares of Parent Common Stock, and (ii) at
the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect
to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in ValueVision Common Stock and
National Media Common Stock. All shares of Parent Common Stock issued upon
the surrender for exchange of Certificates in accordance with the terms
hereof (including any cash paid pursuant to subsection (c) or (e) of this
Section 2.4) shall be deemed to have been issued in full satisfaction of
all rights pertaining to the shares of ValueVision Common Stock or National
Media Common Stock theretofore represented by such Certificates, subject,
however, to the applicable Surviving Corporation's obligation to pay any
dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared or made by ValueVision on such
shares of ValueVision Common Stock or by National Media on such shares of
National Media Common Stock, as the case may be, in accordance with the
terms of this Agreement (to the extent permitted under Section 5.1) prior
to the date hereof and which remain unpaid at the Effective Time, and from
and after the Effective Time there shall be no further registration of
transfers on the stock transfer books of the ValueVision Surviving
Corporation or the National Media Surviving Corporation, as the case may
be, of the shares of ValueVision Common Stock or National Media Common
Stock, respectively, which were outstanding immediately prior to the
Effective Time. If,
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after the Effective Time, Certificates are presented to one of the
Surviving Corporations or Parent for any reason, such Certificates shall be
canceled and exchanged as provided in this Section 2.4.
(e) No Fractional Shares. No certificate or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender
for exchange of Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any other rights of a stockholder
of Parent. Notwithstanding any other provision of this Agreement, each
holder of shares of ValueVision Common Stock or shares of National Media
Common Stock outstanding immediately prior to the Effective Time exchanged
pursuant to the Mergers who would otherwise have been entitled to receive a
fraction of a share of Parent Common Stock (after taking into account all
Certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of
Parent Common Stock multiplied by the per share sales price of Parent
Common Stock (as reported by the national securities exchange or market on
which such Parent Common Stock is traded or quoted) on the first day of
trading of Parent Common Stock on such exchange or market after the
Effective Time.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the former stockholders of ValueVision or
National Media on the 180th day after the Effective Time shall be delivered
to Parent upon demand, and any former stockholder of ValueVision or
National Media who has not previously complied with this Section 2.4 shall
thereafter look only to Parent for payment of such stockholder's claim for
Parent Common Stock, any cash in lieu of fractional shares of Parent Common
Stock and any dividends or distributions with respect to Parent Common
Stock.
(g) No Liability. None of ValueVision, National Media or Parent shall
be liable to any holder of shares of ValueVision Common Stock or National
Media Common Stock, as the case may be, for any shares of Parent Common
Stock (or cash in lieu of fractional shares of Parent Common Stock or any
dividends or distributions with respect thereto) delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
(h) Withholding Rights. Parent and each of the Surviving Corporations
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of ValueVision
Common Stock or National Media Common Stock such amounts as it is required
to deduct and withhold with respect to the making of such payment under the
Code, or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by Parent or one of the Surviving
Corporations, as the case may be, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of ValueVision Common Stock or National Media Common Stock, as the
case may be, in respect of which such deduction and withholding was made.
(i) Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required
by Parent or one of the Surviving Corporations, the posting by such person
of a bond in such reasonable amount as Parent or such Surviving Corporation
may direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate, the shares of Parent Common
Stock, any cash in lieu of fractional shares, and any unpaid dividends and
distributions on shares of Parent Common Stock deliverable in respect
thereof pursuant to this Agreement.
(j) Affiliates. Notwithstanding anything herein to the contrary,
Certificates surrendered for exchange by any Affiliate (as defined in
Section 5.11) of ValueVision or National Media shall not be exchanged until
Parent has received an Affiliate Agreement (as defined in Section 5.11)
substantially in the form of Exhibit F attached hereto from such Affiliate.
SECTION 2.5. Dissenting Shares. Any ValueVision Common Stock held by a
holder who dissents from the ValueVision Merger and becomes entitled to obtain
payment for the value of such ValueVision Common Stock pursuant to the
applicable provisions of Minnesota law shall be herein called "Dissenting
Shares." Any Dissenting Share shall not, after the Effective Time, be entitled
to vote for any purpose or receive any
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dividends or other distributions and shall not be converted into Parent Common
Stock; provided, however, that ValueVision Common Stock held by a dissenting
shareholder who subsequently withdraws a demand for payment, fails to comply
fully with the requirements of Minnesota law, or otherwise fails to establish
the right of such shareholder to be paid the value of such shareholder's shares
under Minnesota law shall be deemed to be have been converted into Parent Common
Stock pursuant to the terms and conditions referred to above.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF VALUEVISION
ValueVision represents and warrants to National Media that the statements
contained in this Article III are true and correct except as set forth herein
and in the disclosure schedules delivered by ValueVision to National Media on or
before the date of this Agreement (the "ValueVision Disclosure Schedule"). The
ValueVision Disclosure Schedule shall be arranged in paragraphs corresponding to
the numbered and lettered paragraphs contained in this Article III and the
disclosure in any paragraph shall qualify other paragraphs in this Article III
only to the extent that it is reasonably apparent from a reading of such
disclosure that it also qualifies or applies to such other paragraphs.
SECTION 3.1. Organization of ValueVision. Each of ValueVision and
ValueVision's Material Subsidiaries (as defined below) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power to own,
lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the failure to be so qualified would have a material adverse effect on the
business, properties, financial condition or results of operations of
ValueVision and its Subsidiaries, taken as a whole (a "ValueVision Material
Adverse Effect"). Except as set forth in the ValueVision SEC Reports (as defined
in Section 3.4) filed prior to the date hereof or on the ValueVision Disclosure
Schedule, neither ValueVision nor any of its Subsidiaries directly or indirectly
owns (other than ownership interests in ValueVision or in one or more of its
Subsidiaries) any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, any corporation, partnership, joint
venture or other business association or entity, excluding securities in any
publicly traded company held for investment by ValueVision and comprising less
than five percent (5%) of the outstanding stock of such company. A true, correct
and complete copy of the Articles of Incorporation and Bylaws of ValueVision and
each of ValueVision's Material Subsidiaries (as defined below) has been
delivered to National Media. As used in this Agreement, the word "Subsidiary"
means, with respect to any party, any corporation or other organization, whether
incorporated or unincorporated, of which (i) such party or any other Subsidiary
of such party is a general partner (excluding partnerships the general
partnership interests of which held by such party or any Subsidiary of such
party do not have a majority of the voting interest in such partnership) or (ii)
at least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries. "ValueVision's Material Subsidiaries" shall mean those
Subsidiaries of ValueVision set forth on the ValueVision Disclosure Schedule,
which Subsidiaries constitute all of ValueVision's "significant subsidiaries" as
defined in Rule 1-02 of Regulation S-X under the Securities Act of 1933, as
amended (the "Securities Act").
SECTION 3.2. ValueVision Capital Structure.
(a) The authorized capital stock of ValueVision consists of 100,000,000
shares of undesignated capital stock. As of the date hereof, (i) 28,035,778
shares of ValueVision Common Stock were issued and outstanding, all of which are
validly issued, fully paid and nonassessable and (ii) no shares of ValueVision
Common Stock were held in the treasury of ValueVision or by Subsidiaries of
ValueVision. The ValueVision Disclosure Schedule shows the number of shares of
ValueVision Common Stock reserved for future issuance pursuant to stock options
granted and outstanding as of the date hereof, the plans under which such
options were granted and award agreements pursuant to which "non-plan" options
were granted (collectively, the "ValueVision Stock Plans"), and the entities or
persons to whom such options were granted. The ValueVision
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Disclosure Schedule also shows the agreements under which the warrants to
purchase an aggregate of 4,242,143 shares of ValueVision Common Stock granted
and outstanding as of the date hereof (collectively, the "ValueVision Warrants")
were issued and to whom such warrants were issued. As of the date hereof, no
other shares of capital stock are issued and outstanding. All shares of
ValueVision Common Stock subject to issuance as specified above are duly
authorized and, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be validly issued, fully
paid and nonassessable. Except as set forth on the ValueVision Disclosure
Schedule, there are no obligations, contingent or otherwise, of ValueVision or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
ValueVision Common Stock or the capital stock of any Subsidiary or to provide
funds to or make any material investment (in the form of a loan, capital
contribution or otherwise) in any such Subsidiary or any other entity other than
guarantees of bank obligations of Subsidiaries entered into in the ordinary
course of business. All of the outstanding shares of capital stock of each of
ValueVision's Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable and all such shares (other than directors' qualifying shares in
the case of foreign Subsidiaries) are owned by ValueVision or another Subsidiary
free and clear of all security interests, liens, claims, pledges, agreements,
limitations in ValueVision's voting rights, charges or other encumbrances of any
nature.
(b) Except as set forth in this Section 3.2 or as reserved for future
grants of options under the ValueVision Stock Plans or the National Media Stock
Option Agreement, (i) there are no equity securities of any class of ValueVision
or any of its Subsidiaries, or any security exchangeable into or exercisable for
such equity securities, issued, reserved for issuance or outstanding; (ii) there
are no options, warrants, equity securities, calls, rights, commitments or
agreements of any character to which ValueVision or any of its Subsidiaries is a
party or by which it is bound obligating ValueVision or any of its Subsidiaries
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of ValueVision or any of its Subsidiaries or obligating
ValueVision or any of its Subsidiaries to grant, extend, accelerate the vesting
of or enter into any such option, warrant, equity security, call, right,
commitment or agreement; and (iii) to the best knowledge of ValueVision, there
are no voting trusts, proxies or other voting agreements or understandings with
respect to the shares of capital stock of ValueVision.
SECTION 3.3. Authority; No Conflict; Required Filings and Consents.
(a) ValueVision has all requisite corporate power and authority to enter
into this Agreement and each of the Transaction Documents (as defined below) to
which it is a party and to consummate the transactions contemplated by this
Agreement and each of the Transaction Documents to which it is a party. The
execution and delivery of this Agreement and each of the Transaction Documents
to which it is a party and the consummation of the transactions contemplated by
this Agreement and each of the Transaction Documents to which it is a party by
ValueVision have been duly authorized by all necessary corporate action on the
part of ValueVision, subject only to the approval and adoption of this Agreement
by ValueVision's stockholders under the MBCA. This Agreement and each of the
Transaction Documents to which it is a party have been duly executed and
delivered by ValueVision and constitute the valid and binding obligations of
ValueVision, enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equitable principles (the "Bankruptcy and Equity Exception"). "Transaction
Documents" means the Stock Option Agreements, the $10 million Promissory Demand
Note by National Media for the benefit of ValueVision in the form of Exhibit G
attached hereto (the "Demand Note"), the promissory demand note by National
Media for the benefit of ValueVision which will be substantially in the form of
the Demand Note and which will evidence the loan from ValueVision to National
Media to fund the redemption under the Redemption Agreement (as defined below)
(the "Series C Note"), the Warrant Agreement between National Media and
ValueVision in the form of Exhibit H attached hereto (the "Warrant Agreement"),
the Registration Rights Agreement between National Media and ValueVision in the
form of Exhibit I attached hereto (the "Registration Rights Agreement"), the
Amendment to the National Media Rights Plan (as defined in Section 4.2(b)) in
the form of Exhibit J attached hereto, the Redemption and Consent Agreement
between National Media and the holders of the Series C Convertible Preferred
Stock in the form of Exhibit K attached hereto (the "Redemption Agreement"), the
Series B Consent Agreement between National Media
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and holders of at least 60% of the outstanding shares of the Series B
Convertible Preferred Stock in the form of Exhibit L attached hereto (the
"Series B Consent Agreement"), the Consent, Waiver and Amendment between
CoreStates Bank, N.A. ("CoreStates") and National Media and certain of its
Subsidiaries in the form of Exhibit M attached hereto (the "Corestates Consent
Agreement") and the Amendments to the Hammer and Costalas Employment Agreements
in the forms of Exhibit N attached hereto, each dated as of the date hereof.
(b) Except as set forth on the ValueVision Disclosure Schedule, the
execution and delivery of this Agreement and each of the Transaction Documents
to which it is a party by ValueVision does not, and the consummation of the
transactions contemplated by this Agreement and each of the Transaction
Documents to which it is a party will not, (i) conflict with, or result in any
violation or breach of, any provision of the Articles of Incorporation or Bylaws
of ValueVision or any of its Subsidiaries, (ii) result in any violation or
breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any material benefit) under, or require a consent or
waiver under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, contract or other agreement, instrument or
obligation to which ValueVision or any of its Subsidiaries is a party or by
which any of them or any of their properties or assets may be bound, or (iii)
conflict with or violate any permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
ValueVision or any of its Subsidiaries or any of its or their properties or
assets, except in the case of (ii) and (iii) for any such conflicts, violations,
defaults, terminations, cancellations or accelerations which are not,
individually or in the aggregate, reasonably likely to have a ValueVision
Material Adverse Effect.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity") is
required by or with respect to ValueVision or any of its Subsidiaries in
connection with the execution and delivery of this Agreement and each of the
Transaction Documents to which it is a party or the consummation of the
transactions contemplated hereby or thereby, except for (i) the filing of the
pre-merger notification report under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("HSR Act"), (ii) the filing of an Articles
of Merger with respect to the ValueVision Merger with the Minnesota Secretary of
State, (iii) the filing of the Joint Proxy Statement/Prospectus (as defined in
Section 3.16 below) with the Securities and Exchange Commission (the "SEC") in
accordance with the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (iv) applicable approvals of the Federal Communications Commission (the
"FCC") pursuant to the Communications Act of 1934, as amended, and any
regulations promulgated thereunder (the "Communications Act"), (v) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state or foreign securities laws,
and (vi) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not be reasonably likely to
have a ValueVision Material Adverse Effect.
SECTION 3.4. SEC Filings; Financial Statements.
(a) ValueVision has filed and made available to National Media all forms,
reports and documents filed or required to be filed by ValueVision with the SEC
since January 1, 1995 (collectively, the "ValueVision SEC Reports"). Except as
set forth on the ValueVision Disclosure Schedule, the ValueVision SEC Reports
(i) at the time filed, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated in such ValueVision SEC Reports or necessary in order to
make the statements in such ValueVision SEC Reports, in the light of the
circumstances under which they were made, not misleading. None of ValueVision's
Subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes) contained in the ValueVision SEC Reports complied as to form
in all material respects with the applicable published rules and regulations of
the SEC with respect thereto, was prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be
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indicated in the notes to such financial statements or, in the case of unaudited
statements, in conformity with the requirements of Form 10-Q under the Exchange
Act) and fairly presented in all material respects the consolidated financial
position of ValueVision and its Subsidiaries as of the dates and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not expected to
be material in amount. The audited balance sheet of ValueVision as of January
31, 1997 is referred to herein as the "ValueVision Balance Sheet."
SECTION 3.5. No Undisclosed Liabilities. Except as set forth on the
ValueVision Disclosure Schedule, and except as disclosed in the ValueVision SEC
Reports filed prior to the date hereof, and except for normal or recurring
liabilities incurred since January 31, 1997 in the ordinary course of business
consistent with past practices, ValueVision and its Subsidiaries do not have any
liabilities, either accrued, contingent or otherwise (whether or not required to
be reflected in financial statements in accordance with generally accepted
accounting principles), and whether due or to become due, which individually or
in the aggregate are reasonably likely to have a ValueVision Material Adverse
Effect.
SECTION 3.6. Absence of Certain Changes or Events. Except as disclosed in
the ValueVision SEC Reports filed prior to the date hereof or on the ValueVision
Disclosure Schedule, since the date of the ValueVision Balance Sheet,
ValueVision and its Subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past practice and, since such
date, there has not been (i) any material adverse change in the financial
condition, results of operations, business or properties (a "Material Adverse
Change") of ValueVision and its Subsidiaries, taken as a whole (other than
changes that are the effect or result of economic factors affecting the economy
as a whole or the industry (as described in the ValueVision 10-K for the fiscal
year ended January 31, 1997 (the "ValueVision 10-K") in which ValueVision
competes), or any development or combination of developments of which the
management of ValueVision is aware that, individually or in the aggregate, has
had, or is reasonably likely to have, a ValueVision Material Adverse Effect
(other than changes that are the effect or result of economic factors affecting
the economy as a whole or the industry (as described in the ValueVision 10-K) in
which ValueVision competes); (ii) any damage, destruction or loss (whether or
not covered by insurance) with respect to ValueVision or any of its Subsidiaries
having a ValueVision Material Adverse Effect; (iii) any material change by
ValueVision or its Subsidiaries in their respective accounting methods,
principles or practices to which National Media has not previously consented in
writing; (iv) any revaluation by ValueVision or its Subsidiaries of any of their
respective assets having a ValueVision Material Adverse Effect; or (v) any other
action or event that would have required the consent of National Media pursuant
to Section 5.1 of this Agreement had such action or event occurred after the
date of this Agreement and that, individually or in the aggregate, has had or is
reasonably likely to have a ValueVision Material Adverse Effect.
SECTION 3.7. Taxes.
(a) For the purposes of this Agreement, a "Tax" or, collectively, "Taxes,"
means any and all federal, state, local and foreign taxes, assessments and other
governmental charges, duties, impositions and liabilities, including taxes based
upon or measured by gross receipts, income, profits, sales, use and occupation,
and value added, ad valorem, transfer, gains, franchise, withholding, payroll,
recapture, employment, excise, unemployment insurance, social security, business
license, occupation, business organization, stamp, environmental and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts. For purposes of this Agreement, "Taxes" also includes any
obligations under any agreements or arrangements with any other person with
respect to Taxes of such other person (including pursuant to Treas. Reg.
sec. 1.1502-6 or comparable provisions of state, local or foreign tax law) and
including any liability for Taxes of any predecessor entity.
(b) ValueVision and each of its Subsidiaries have (i) filed all federal,
state, local and foreign Tax returns and reports required to be filed by them
prior to the date of this Agreement (taking into account all applicable
extensions), (ii) paid or accrued all Taxes due and payable, and (iii) paid or
accrued all Taxes for which a notice of assessment or collection has been
received (other than amounts being contested in good faith by appropriate
proceedings), except in the case of clauses (i), (ii) or (iii) for any such
filings, payments or
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accruals that are not reasonably likely, individually or in the aggregate, to
have a ValueVision Material Adverse Effect. There are no audits known by
ValueVision to be pending or contemplated with respect to ValueVision's tax
returns. Neither the Internal Revenue Service (the "IRS") nor any other taxing
authority has asserted any claim for Taxes, or to the actual knowledge of the
executive officers of ValueVision, is threatening to assert any claims for
Taxes, which claims, individually or in the aggregate, are reasonably likely to
have a ValueVision Material Adverse Effect. ValueVision and each of its
Subsidiaries have withheld or collected and paid over to the appropriate
governmental authorities (or are properly holding for such payment) all Taxes
required by law to be withheld or collected, except for amounts that are not
reasonably likely, individually or in the aggregate, to have a ValueVision
Material Adverse Effect. Neither ValueVision nor any of its Subsidiaries has
made an election under Section 341(f) of the Code, except for any such elections
that are not reasonably likely, individually or in the aggregate, to have a
ValueVision Material Adverse Effect. There are no liens for Taxes upon the
assets of ValueVision or any of its Subsidiaries (other than liens for Taxes
that are not yet due or that are being contested in good faith by appropriate
proceedings), except for liens that are not reasonably likely, individually or
in the aggregate, to have a ValueVision Material Adverse Effect. No extension of
a statute of limitations relating to any Taxes is in effect with respect to
ValueVision and its Subsidiaries.
(c) Neither ValueVision nor any of its Subsidiaries has been a member of an
affiliated group of corporations filing a consolidated federal income tax return
(or a group of corporations filing a consolidated, combined or unitary income
tax return under comparable provisions of state, local or foreign tax law) for
any taxable period beginning on or after February 1, 1991, other than a group
the common parent of which was ValueVision or any Subsidiary of ValueVision.
(d) Neither ValueVision nor any of its Subsidiaries has any obligation
under any agreement or arrangement with any other person with respect to Taxes
of such other person (including pursuant to Treas. Reg. sec. 1.1502-6 or
comparable provisions of state, local or foreign tax law) and including any
liability for Taxes of any predecessor entity, except for obligations that are
not reasonably likely, individually or in the aggregate, to have a ValueVision
Material Adverse Effect.
(e) Neither ValueVision nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
SECTION 3.8. Properties.
(a) Neither ValueVision nor any of its Subsidiaries is in default under any
of their respective leases for real property, except where the existence of such
defaults, individually or in the aggregate, is not reasonably likely to have a
ValueVision Material Adverse Effect.
(b) Except as set forth on the ValueVision Disclosure Schedule, with
respect to each item of real property that ValueVision or any of its
Subsidiaries owns, except for such matters that, individually or in the
aggregate, are not reasonably likely to have a ValueVision Material Adverse
Effect: (i) ValueVision or the identified Subsidiary has good and clear record
and marketable title to such property, insurable by a recognized national title
insurance company at standard rates, free and clear of any lien, encumbrance,
security interest, easement, covenant or other restriction, except for recorded
easements, covenants and other restrictions which do not materially impair the
current uses or occupancy of such property; and (ii) the improvements
constructed on such property are in good condition, and all mechanical and
utility systems servicing such improvements are in good condition, free in each
case of material defects.
SECTION 3.9. Intellectual Property. Each of ValueVision and its
Subsidiaries owns, or is licensed or otherwise possesses legally enforceable
rights to use, all trademarks, trade names, service marks, copyrights, and any
applications for such trademarks, trade names, service marks and copyrights,
know-how, computer software programs or applications and tangible or intangible
proprietary information or material that are necessary to conduct the business
of each of ValueVision and its Subsidiaries as currently conducted, subject to
such exceptions that would not be reasonably likely to have a ValueVision
Material Adverse Effect. Neither ValueVision nor any of its Subsidiaries has any
knowledge of any assertion or claim challenging the validity of
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any of such intellectual property, except such assertions or claims that,
individually or in the aggregate, are not reasonably likely to have a
ValueVision Material Adverse Effect.
SECTION 3.10. Agreements, Contracts and Commitments. Neither ValueVision
nor any of its Subsidiaries has breached, or received in writing any claim or
notice that it has breached, any of the terms or conditions of any material
agreement, contract or commitment filed or required to be filed as an exhibit to
the ValueVision SEC Reports ("ValueVision Material Contracts") in such a manner
as, individually or in the aggregate, is reasonably likely to have a ValueVision
Material Adverse Effect. Each ValueVision Material Contract that has not expired
by its terms is in full force and effect.
SECTION 3.11. Litigation. Except as described in the ValueVision SEC
Reports filed prior to the date hereof or except as set forth on the ValueVision
Disclosure Schedule, there is no action, suit or proceeding, claim, arbitration
or investigation against ValueVision or any of its Subsidiaries pending or as to
which ValueVision or any of its Subsidiaries has received any written notice of
assertion, which, individually or in the aggregate, is reasonably likely to have
a ValueVision Material Adverse Effect or a material adverse effect on the
ability of ValueVision to consummate the transactions contemplated by this
Agreement.
SECTION 3.12. Environmental Matters.
(a) To the knowledge of ValueVision and its Subsidiaries, except as
disclosed in the ValueVision SEC Reports filed prior to the date hereof or on
the ValueVision Disclosure Schedule and except for such matters that,
individually or in the aggregate, are not reasonably likely to have a
ValueVision Material Adverse Effect: (i) ValueVision and its Subsidiaries are in
material compliance with all applicable Environmental Laws (as defined in
Section 3.12(b)); (ii) the properties currently owned or operated by ValueVision
and its Subsidiaries (including soils, groundwater, surface water, buildings or
other structures) are not contaminated with any Hazardous Substances (as defined
in Section 3.12(c)); (iii) the properties formerly owned or operated by
ValueVision or any of its Subsidiaries were not contaminated with Hazardous
Substances during the period of ownership or operation by ValueVision or any of
its Subsidiaries; (iv) neither ValueVision nor its Subsidiaries are subject to
liability for any Hazardous Substance disposal or contamination on any third
party property; (v) neither ValueVision nor any of its Subsidiaries has been
associated with any release or threat of release of any Hazardous Substance;
(vi) neither ValueVision nor any of its Subsidiaries has received any written
notice, demand, letter, claim or request for information alleging that
ValueVision or any of its Subsidiaries may be in violation of or liable under
any Environmental Law; (vii) neither ValueVision nor any of its Subsidiaries is
subject to any orders, decrees, injunctions or other arrangements with any
Governmental Entity or is subject to any indemnity or other agreement with any
third party relating to liability under any Environmental Law or relating to
Hazardous Substances; and (viii) there are no circumstances or conditions
involving ValueVision or any of its Subsidiaries that could reasonably be
expected to result in any claims, liability, investigations, costs or
restrictions on the ownership, use or transfer of any property of ValueVision
pursuant to any Environmental Law.
(b) As used in this Agreement, the term "Environmental Law" means any
federal, state, local or foreign law, regulation, order, decree, permit,
authorization, common law or agency requirement relating to: (A) the protection,
investigation or restoration of the environment, health and safety, or natural
resources, (B) the handling, use, presence, disposal, release or threatened
release of any Hazardous Substance or (C) noise, odor, wetlands, pollution,
contamination or any injury or threat of injury to persons or property.
(c) As used in this Agreement, the term "Hazardous Substance" means any
substance that is: (A) listed, classified or regulated pursuant to any
Environmental Law; (B) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (C) any other substance which is the subject
of regulatory action by any Governmental Entity pursuant to any Environmental
Law.
SECTION 3.13. Employee Benefit Plans.
(a) ValueVision has listed on the ValueVision Disclosure Schedule all
employee benefit plans ("Employee Benefit Plans"), as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
all other material benefit arrangements that are not Employee Benefit Plans,
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including, but not limited to any employment or consulting agreement, any
arrangement providing insurance benefits, any incentive bonus or deferred bonus
arrangement, any arrangement providing termination allowance, severance or
similar benefits, any equity compensation plan, any deferred compensation plan,
and any compensation policy or practice ("Benefit Arrangements"), (i) which are
maintained, contributed to or required to be contributed to by ValueVision or
any entity that, together with ValueVision as of the relevant measuring date
under ERISA, is or was required to be treated as a single employer under Section
414 of the Code ("ValueVision ERISA Affiliate") or under which ValueVision or
any ValueVision ERISA Affiliate may incur any liability, and (ii) which cover
the employees, former employees, directors or former directors of ValueVision or
any ValueVision ERISA Affiliate ("ValueVision Employee Plans").
(b) A true and complete copy of each written ValueVision Employee Plan that
covers employees or former employees of ValueVision or any Subsidiary of
ValueVision, including, if applicable, each amendment thereto and any trust
agreement, insurance contract, collective bargaining agreement, or other funding
or investment arrangements for the benefits under such ValueVision Employee
Plan, has been delivered to National Media. In addition, with respect to each
such ValueVision Employee Plan to the extent applicable, ValueVision has
delivered to National Media the most recently filed Federal Forms 5500, the most
recent summary plan description (including any summaries of material
modifications), the most recent IRS determination letter, if applicable, the
most recent actuarial report or valuation, if applicable, and all material
employee communications with respect to each such ValueVision Employee Plan.
(c) Except as set forth on the ValueVision Disclosure Schedule:
(i) neither ValueVision nor any ValueVision ERISA Affiliate sponsors
or has previously sponsored, maintained, contributed to or incurred an
obligation to contribute to any Employee Benefit Plan regulated under Title
IV of ERISA, including any "multiemployer plan," as defined in Sections
3(37) and 4001(a)(3) of ERISA;
(ii) neither ValueVision nor any ValueVision ERISA Affiliate sponsors
or has previously sponsored, maintained, contributed to or incurred an
obligation to contribute to any Employee Benefit Plan that provides or will
provide benefits described in Section 3(1) of ERISA to any former employee
or retiree of ValueVision or any ValueVision ERISA Affiliate, except as
required under Part 6 of Title I of ERISA and Section 4980B of the Code;
(iii) all ValueVision Employee Plans that cover or have covered
employees or former employees of ValueVision have been maintained and
operated, and currently are, in compliance in all material respects with
their terms, the requirements prescribed by any and all applicable laws
(including ERISA and the Code), orders, or governmental rules and
regulations in effect with respect thereto, and ValueVision and the
ValueVision ERISA Affiliates have performed all material obligations
required to be performed by them under, are not in any material respect in
default under or in violation of, and have no knowledge of any default or
violation by any other party to, any of the ValueVision Employee Plans;
(iv) each ValueVision Employee Plan that covers or has covered
employees or former employees of ValueVision and is intended to qualify
under Section 401(a) of the Code and each trust established pursuant to
each such ValueVision Employee Plan that is intended to qualify under
Section 501(a) of the Code is the subject of a favorable determination
letter from the IRS, a copy of which has been delivered to National Media,
and, to ValueVision's knowledge, nothing has occurred which may reasonably
be expected to impair such determination or otherwise adversely affect the
tax-qualified status of such ValueVision Employee Plan;
(v) ValueVision and the ValueVision ERISA Affiliates have made full
and timely payment of all amounts required to be contributed under the
terms of each ValueVision Employee Plan and applicable law or required to
be paid as expenses under such ValueVision Employee Plan; and
(vi) other than claims for benefits in the ordinary course, there is
no claim, suit, action, dispute, arbitration or legal, administrative or
other proceeding or governmental investigation or audit pending, or, to the
knowledge of ValueVision, threatened, alleging any breach of the terms of
any ValueVision
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Employee Plan or of any fiduciary duty thereunder or violation of any
applicable law with respect to any such ValueVision Employee Plan.
(d) With respect to the ValueVision Employee Plans, individually and in the
aggregate, no event has occurred, and to the knowledge of ValueVision, there
exists no condition or set of circumstances in connection with which ValueVision
could be subject to any liability that is reasonably likely to have a
ValueVision Material Adverse Effect under ERISA, the Code or any other
applicable law.
(e) Except as set forth on the ValueVision Disclosure Schedule and except
as disclosed in the ValueVision SEC Reports filed prior to the date of this
Agreement, and except as provided for in this Agreement, neither ValueVision nor
any of its Subsidiaries is a party to any oral or written (i) agreement with any
officer or other key employee of ValueVision or any of its Subsidiaries, the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving ValueVision of the nature
contemplated by this Agreement, (ii) agreement with any officer of ValueVision
providing any term of employment or compensation guarantee extending for a
period longer than one year from the date hereof and for the payment of
compensation in excess of $100,000 per annum, or (iii) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. None of the execution and delivery of this
Agreement or any of the Transaction Documents or the consummation of the
transactions contemplated hereunder or thereunder will trigger any "change of
control" or similar provisions resulting in the acceleration of benefits or
compensation with respect to any agreements with any officer or other key
employee of ValueVision or any of its Subsidiaries except for such applicable
agreements as set forth on the ValueVision Disclosure Schedule (the "ValueVision
Parachute Agreements"). The aggregate amounts payable under the ValueVision
Parachute Agreements as a result of the transactions contemplated by this
Agreement and each of the Transaction Documents will not exceed $0.
SECTION 3.14. Compliance With Laws. Each of ValueVision and its
Subsidiaries has complied with, is not in violation of, and has not received any
notices of violation with respect to, any federal, state or local statute, law
or regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for failures to comply or violations which,
individually or in the aggregate, have not had and are not reasonably likely to
have a ValueVision Material Adverse Effect.
SECTION 3.15. Accounting and Tax Matters.
(a) To the knowledge of ValueVision and its Subsidiaries, after consulting
with its independent auditors, neither ValueVision nor any of its Affiliates (as
defined in Section 5.12) has taken or agreed to take any action which would
prevent the ValueVision Merger from constituting a transaction qualifying as a
reorganization under Section 368 of the Code or the Mergers from constituting
transactions qualifying as transfers under Section 351 of the Code.
(b) To the knowledge of ValueVision and its Subsidiaries, the stockholders
of ValueVision have no present plan, intention or arrangement to sell or
otherwise dispose of any of the Parent Common Stock received in the ValueVision
Merger that would cause the ValueVision Merger to fail to qualify as a
reorganization under Section 368 of the Code or the Mergers to fail to qualify
as transfers under Section 351 of the Code.
SECTION 3.16. Registration Statement; Joint Proxy Statement/Prospectus. The
information to be supplied by ValueVision or its Subsidiaries or about
ValueVision or its Subsidiaries by ValueVision's agents for inclusion in the
registration statement on Form S-4 pursuant to which shares of Parent Common
Stock issued in the Mergers will be registered under the Securities Act (the
"Registration Statement"), shall not at the time the Registration Statement is
declared effective by the SEC contain any untrue statement of a material fact or
omit to state any material fact required to be stated in the Registration
Statement or necessary in order to make the statements in the Registration
Statement, in light of the circumstances under which they were made, not
misleading. The information supplied by ValueVision or its Subsidiaries for
inclusion in the
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joint proxy statement/prospectus to be sent to the stockholders of National
Media and ValueVision in connection with the meeting of ValueVision'
stockholders (the "ValueVision Stockholders' Meeting") and the meeting of
National Media's stockholders (the "National Media Stockholders' Meeting") to
consider this Agreement and the Mergers (the "Joint Proxy Statement/Prospectus")
shall not, on the date the Joint Proxy Statement/Prospectus is first mailed to
stockholders of ValueVision or National Media, at the time of the ValueVision
Stockholders' Meeting and the National Media Stockholders' Meeting and at the
Effective Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, omit to state any material fact necessary in order to make
the statements made in the Joint Proxy Statement/Prospectus not false or
misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the ValueVision Stockholders' Meeting or the National Media
Stockholders' Meeting which has become false or misleading. If at any time prior
to the Effective Time any event relating to ValueVision or any of its
Affiliates, officers or directors should be discovered by ValueVision which
should be set forth in an amendment to the Registration Statement or a
supplement to the Joint Proxy Statement/Prospectus, ValueVision shall promptly
inform National Media.
SECTION 3.17. Labor Matters. Except as disclosed in the ValueVision SEC
Reports filed prior to the date hereof, neither ValueVision nor any of its
Subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor, as of the date hereof, is ValueVision or any of its
Subsidiaries the subject of any material proceeding asserting that ValueVision
or any of its Subsidiaries has committed an unfair labor practice or is seeking
to compel it to bargain with any labor union or labor organization nor, as of
the date of this Agreement, is there pending or, to the knowledge of the
executive officers of ValueVision, threatened, any material labor strike,
dispute, walkout, work stoppage, slow-down or lockout involving ValueVision or
any of its Subsidiaries.
SECTION 3.18. Insurance. All material fire and casualty, general liability,
business interruption, product liability, and sprinkler and water damage
insurance policies maintained by ValueVision or any of its Subsidiaries are with
reputable insurance carriers, provide full and adequate coverage for all normal
risks incident to the business of ValueVision and its Subsidiaries and their
respective properties and assets, and are in character and amount at least
equivalent to that carried by persons engaged in similar businesses and subject
to the same or similar perils or hazards, except for any such failures to
maintain insurance policies that, individually or in the aggregate, are not
reasonably likely to have a ValueVision Material Adverse Effect.
SECTION 3.19. Opinion of Financial Advisor. The financial advisor of
ValueVision, Bear Stearns & Co., has delivered to ValueVision an opinion dated
the date of this Agreement to the effect that the ValueVision Exchange Ratio is
fair to the holders of ValueVision Common Stock from a financial point of view.
SECTION 3.20. No Existing Discussions. As of the date hereof, neither
ValueVision nor any of its Affiliates is engaged, directly or indirectly, in any
discussions or negotiations with any other party with respect to an Acquisition
Proposal (as defined in Section 5.3).
SECTION 3.21. Sections 302A.671 and 302A.673 of the MBCA Not
Applicable. The Board of Directors of ValueVision has taken all actions
necessary under the MBCA, including approving the transactions contemplated by
the Agreement and each of the Transaction Documents to which it is a party, to
ensure that Section 302A.673 of the MBCA applicable to a "business combination"
does not, and will not, apply to the transactions contemplated hereunder and
thereunder. The restrictions contained in Section 302A.671 of the MBCA
applicable to "control share acquisitions" will not apply to the authorization,
execution, delivery and performance of this Agreement or each of the Transaction
Documents by ValueVision to which it is a party or the consummation of the
ValueVision Merger by ValueVision. No other "fair price," "moratorium," or other
similar anti-takeover statute or regulation is applicable to ValueVision or (by
reason of ValueVision's participation therein) the ValueVision Merger or the
other transactions contemplated by this Agreement or the other Transaction
Documents to which it is a party.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF NATIONAL MEDIA
National Media represents and warrants to ValueVision that the statements
contained in this Article IV are true and correct, except as set forth on the
disclosure schedules delivered by National Media to ValueVision on or before the
date of this Agreement (the "National Media Disclosure Schedule"). The National
Media Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article IV and the disclosure
in any paragraph shall qualify other paragraphs in this Article IV only to the
extent that it is reasonably apparent from a reading of such document that it
also qualifies or applies to such other paragraphs.
SECTION 4.1. Organization of National Media. Each of National Media and
National Media's Material Subsidiaries (as defined below) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power to own,
lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the failure to be so qualified would have a material adverse effect on the
business, properties, financial condition or results of operations of National
Media and its Subsidiaries, taken as a whole (a "National Media Material Adverse
Effect"). Except as set forth on the National Media Disclosure Schedule or in
the National Media SEC Reports (as defined in Section 4.4) filed prior to the
date hereof, neither National Media nor any of its Subsidiaries directly or
indirectly owns (other than ownership interests in National Media or in one or
more of its Subsidiaries) any equity or similar interest in, or any interest
that is mandatorily convertible into or exchangeable or exercisable for, any
corporation, partnership, joint venture or other business association or entity,
excluding securities in any publicly traded company held for investment by
National Media and comprising less than five percent (5%) of the outstanding
stock of such company. A true, correct and complete copy of the Certificate of
Incorporation and other similar organizational documents of National Media and
each of National Media's Material Subsidiaries (as defined below) has been
delivered to ValueVision. "National Media's Material Subsidiaries" shall mean
those subsidiaries of National Media set forth on the National Media Disclosure
Schedule, which Subsidiaries constitute all of National Media's "significant
subsidiaries" as defined in Rule 1-02 of Regulation S-X under the Securities
Act.
SECTION 4.2. National Media Capital Structure.
(a) The authorized capital stock of National Media consists of 75,000,000
shares of Common Stock, $.01 par value, and 10,000,000 shares of Preferred
Stock, $.01 par value. As of the date hereof, (i) 25,507,436 shares of National
Media Common Stock were issued and outstanding, all of which are validly issued,
fully paid and nonassessable, and (ii) 705,280 shares of National Media Common
Stock were held in the treasury of National Media or by Subsidiaries of National
Media. The National Media Disclosure Schedule shows the number of shares of
National Media Common Stock reserved for future issuance pursuant to stock
options granted and outstanding as of the date hereof, the plans under which
such options were granted and award agreements pursuant to which "non-plan"
options were granted (collectively, the "National Media Stock Plans"), and the
entities or persons to whom such options were granted. The National Media
Disclosure Schedule also shows the agreements under which the warrants to
purchase an aggregate of 7,093,413 shares of National Media Common Stock granted
and outstanding as of the date hereof (the "National Media Warrants," and
together with the ValueVision Warrants, the "Warrants") were issued and to whom
such warrants were granted. As of the date hereof, an aggregate number of 86,250
shares of Series B Convertible Preferred Stock, par value $.01 per share, of
National Media, which are currently convertible into 862,500 shares of National
Media Common Stock and which are currently entitled to vote on all matters
submitted to the stockholders of National Media (with the exception of the
election of directors) on an "as converted" basis (the "Series B Convertible
Preferred Stock") and 20,000 shares of Series C Convertible Preferred Stock, par
value $.01 per share, of National Media which are currently convertible into
3,300,330 (the quotient of $20 million divided by $6.06) shares of National
Media Common Stock, plus the number of shares of National Media Common Stock
equal to the quotient of the Accrued Premium (as defined in the Certificate of
Designations (as defined below)) divided by $6.06 (the "Series C Convertible
Preferred Stock" and,
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together with the Series B Convertible Preferred Stock the "National Media
Convertible Preferred Stock") are issued and outstanding. All shares of National
Media Common Stock subject to issuance as specified above are duly authorized
and, upon issuance on the terms and conditions specified in the instruments
pursuant to which they are issuable, shall be validly issued, fully paid and
nonassessable. Except as set forth on the National Media Disclosure Schedule,
there are no obligations, contingent or otherwise, of National Media or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
National Media Common Stock or the capital stock of any Subsidiary or to provide
funds to or make any material investment (in the form of a loan, capital
contribution or otherwise) in any such Subsidiary or any other entity other than
guarantees of bank obligations of Subsidiaries entered into in the ordinary
course of business. Except as set forth on the National Media Disclosure
Schedule, all of the outstanding shares of capital stock of each of National
Media's Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable and all such shares (other than directors' qualifying shares in
the case of foreign Subsidiaries) are beneficially owned by National Media or
another Subsidiary free and clear of all security interests, liens, claims,
pledges, agreements, limitations in National Media's voting rights, charges or
other encumbrances of any nature.
(b) Except as set forth in this Section 4.2 or as reserved for future
grants of options under the National Media Stock Plans or the ValueVision Stock
Option Agreement, and except for the Series A Junior Participating Preferred
Stock issued and issuable under the Rights Agreement dated as of January 3, 1994
between National Media and Mellon Securities Trust Company, as amended (the
"National Media Rights Plan") or as disclosed on the National Media Disclosure
Schedule, (i) there are no equity securities of any class of National Media or
any of its Subsidiaries, or any security exchangeable into or exercisable for
such equity securities, issued, reserved for issuance or outstanding; (ii)
except as set forth in the Certificate of Designations, Preferences and Rights
of the Series C Convertible Preferred Stock (the "Certificate of Designations")
and the Registration Rights Agreement dated as of September 4, 1997 among
National Media and the holders of the Series C Convertible Preferred Stock,
there are no options, warrants, equity securities, calls, rights, commitments or
agreements of any character to which National Media or any of its Subsidiaries
is a party or by which it is bound obligating National Media or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of National Media or any of its
Subsidiaries or obligating National Media or any of its Subsidiaries to grant,
extend, accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement; and (iii) to the best knowledge
of National Media, there are no voting trusts, proxies or other voting
agreements or understandings with respect to the shares of capital stock of
National Media.
SECTION 4.3. Authority; No Conflict; Required Filings and Consents.
(a) National Media has all requisite corporate power and authority to enter
into this Agreement and each of the Transaction Documents to which it is a party
and to consummate the transactions contemplated by this Agreement and each of
the Transaction Documents to which it is a party. The execution and delivery of
this Agreement and each of the Transactions Documents to which it is a party and
the consummation of the transactions contemplated by this Agreement and each of
the Transaction Documents to which it is a party by National Media have been
duly authorized by all necessary corporate action on the part of National Media,
subject only to the approval and adoption of this Agreement by National Media's
stockholders under the DGCL. This Agreement and each of the Transaction
Documents to which it is a party have been duly executed and delivered by
National Media and constitute the valid and binding obligations of National
Media, enforceable in accordance with their terms, subject to the Bankruptcy and
Equity Exception.
(b) Except as set forth on the National Media Disclosure Schedule, the
execution and delivery of this Agreement and each of the Transaction Documents
to which it is a party by National Media does not, and the consummation of the
transactions contemplated by this Agreement and each of the Transaction
Documents to which it is a party will not, (i) conflict with, or result in any
violation or breach of, any provision of the Certificate of Incorporation or
Bylaws of National Media or any of its Subsidiaries, (ii) result in any
violation or breach of, or constitute (with or without notice or lapse of time,
or both) a default (or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any material benefit) under, or
require a consent or waiver under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, lease, contract or other agreement,
instrument or obligation to which National Media or any of its Subsidiaries
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is a party or by which any of them or any of their properties or assets may be
bound (including the Series C Convertible Preferred Stock), or (iii) conflict
with or violate any permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to National Media
or any of its Subsidiaries or any of its or their properties or assets, except
in the case of (ii) and (iii) for any such conflicts, violations, defaults,
terminations, cancellations or accelerations which are not, individually or in
the aggregate, reasonably likely to have a National Media Material Adverse
Effect. The Redemption Agreement pursuant to which holders of the outstanding
shares of Series C Convertible Preferred Stock consent to the authorization,
execution and delivery of this Agreement and each of the Transaction Documents
and the consummation of the transactions contemplated hereunder and thereunder,
is being entered into concurrently with the execution of this Agreement and a
form is attached hereto as Exhibit K. The Series B Consent Agreement pursuant to
which holders of the outstanding shares of National Media Series B Convertible
Preferred Stock consent to the authorization, execution and delivery of this
Agreement and each of the Transaction Documents and the consummation of the
transactions contemplated hereunder and thereunder, is being entered into
concurrently with the execution of this Agreement and a form is attached hereto
as Exhibit L. The CoreStates Consent Agreement pursuant to which CoreStates
consents to the authorization, execution and delivery of this Agreement and each
of the Transaction Documents and the consummation of the transactions
contemplated hereunder and thereunder, is being entered into concurrently with
the execution of this Agreement and a form is attached hereto as Exhibit M.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to National Media or any of its Subsidiaries in connection with the
execution and delivery of this Agreement and each of the Transaction Documents
to which it is a party or the consummation of the transactions contemplated
hereby or thereby, except for (i) the filing of the pre-merger notification
report under the HSR Act, (ii) the filing of a Certificate of Merger with
respect to the National Media Merger with the Delaware Secretary of State, (iii)
the filing of the Joint Proxy Statement/Prospectus with the SEC in accordance
with the Exchange Act, (iv) applicable approvals of the FCC pursuant to the
Communications Act, (v) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state or foreign securities laws, and (vi) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made, would not
be reasonably likely to have a National Media Material Adverse Effect.
SECTION 4.4. SEC Filings; Financial Statements.
(a) National Media has filed and made available to ValueVision all forms,
reports and documents filed or required to be filed by National Media with the
SEC since January 1, 1995 (collectively, the "National Media SEC Reports"). The
National Media SEC Reports (i) except as set forth on the National Media
Disclosure Schedule, at the time filed, complied in all material respects with
the applicable requirements of the Securities Act and the Exchange Act, as the
case may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such National Media SEC Reports or
necessary in order to make the statements in such National Media SEC Reports, in
the light of the circumstances under which they were made, not misleading. None
of National Media's Subsidiaries is required to file any forms, reports or other
documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes) contained in the National Media SEC Reports complied as to
form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited statements, in conformity with
the requirements of Form 10-Q under the Exchange Act) and fairly presented in
all material respects the consolidated financial position of National Media and
its Subsidiaries as of the dates and the consolidated results of its operations
and cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount. The
audited balance sheet of National Media as of March 31, 1997 is referred to
herein as the "National Media Balance Sheet."
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SECTION 4.5. No Undisclosed Liabilities. Except as disclosed in the
National Media SEC Reports filed prior to the date hereof or on the National
Media Disclosure Schedule, and except for normal or recurring liabilities
incurred since March 31, 1997 in the ordinary course of business consistent with
past practices, National Media and its Subsidiaries do not have any liabilities,
either accrued, contingent or otherwise (whether or not required to be reflected
in financial statements in accordance with generally accepted accounting
principles), and whether due or to become due, which individually or in the
aggregate, are reasonably likely to have a National Media Material Adverse
Effect.
SECTION 4.6. Absence of Certain Changes or Events. Except as disclosed in
the National Media SEC Reports filed prior to the date hereof or on the National
Media Disclosure Schedule, since the date of the National Media Balance Sheet,
National Media and its Subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past practice and, since such
date, there has not been (i) any Material Adverse Change in National Media and
its Subsidiaries, taken as a whole (other than changes that are the effect or
result of economic factors affecting the economy as a whole or the industry (as
described in National Media's Form 10-K for the fiscal year ended March 31, 1997
(the "National Media 10-K") in which National Media competes) or any development
or combination of developments of which the management of National Media is
aware that, individually or in the aggregate, has had, or is reasonably likely
to have, a National Media Material Adverse Effect (other than changes that are
the effect or result of economic factors affecting the economy as a whole or the
industry (as described in the National Media 10-K) in which National Media
competes); (ii) any damage, destruction or loss (whether or not covered by
insurance) with respect to National Media or any of its Subsidiaries having a
National Media Material Adverse Effect; (iii) any material change by National
Media or its Subsidiaries in their respective accounting methods, principles or
practices to which ValueVision has not previously consented in writing; (iv) any
revaluation by National Media or its Subsidiaries of any of their assets having
a National Media Material Adverse Effect; or (v) any other action or event that
would have required the consent of ValueVision pursuant to Section 5.1 of this
Agreement had such action or event occurred after the date of this Agreement and
that, individually or in the aggregate, has had or is reasonably likely to have
a National Media Material Adverse Effect.
SECTION 4.7. Taxes.
(a) National Media and each of its Subsidiaries have (i) filed all federal,
state, local and foreign Tax returns and reports required to be filed by them
prior to the date of this Agreement (taking into account all applicable
extensions), (ii) paid or accrued all Taxes due and payable, and (iii) paid or
accrued all Taxes for which a notice of assessment or collection has been
received (other than amounts being contested in good faith by appropriate
proceedings), except in the case of clauses (i), (ii) or (iii) for any such
filings, payments or accruals that are not reasonably likely, individually or in
the aggregate, to have a National Media Material Adverse Effect. There are no
audits known by National Media to be pending or contemplated with respect to
National Media's tax returns. Neither the IRS nor any other taxing authority has
asserted any claim for Taxes, or to the actual knowledge of the executive
officers of National Media, is threatening to assert any claims for Taxes, which
claims, individually or in the aggregate, are reasonably likely to have a
National Media Material Adverse Effect. National Media and each of its
Subsidiaries have withheld or collected and paid over to the appropriate
governmental authorities (or are properly holding for such payment) all Taxes
required by law to be withheld or collected, except for amounts that are not
reasonably likely, individually or in the aggregate, to have a National Media
Material Adverse Effect. Neither National Media nor any of its Subsidiaries has
made an election under Section 341(f) of the Code, except for any such elections
that are not reasonably likely, individually or in the aggregate, to have a
National Media Material Adverse Effect. There are no liens for Taxes upon the
assets of National Media or any of its Subsidiaries (other than liens for Taxes
that are not yet due or that are being contested in good faith by appropriate
proceedings), except for liens that are not reasonably likely, individually or
in the aggregate, to have a National Media Material Adverse Effect. No extension
of a statute of limitations relating to any Taxes is in effect with respect to
National Media and its Subsidiaries.
(b) Neither National Media nor any of its Subsidiaries has been a member of
an affiliated group of corporations filing a consolidated federal income tax
return (or a group of corporations filing a consolidated,
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combined or unitary income tax return under comparable provisions of state,
local or foreign tax law) for any taxable period beginning on or after April 1,
1991, other than a group the common parent of which was National Media or any
Subsidiary of National Media.
(c) Neither National Media nor any of its Subsidiaries has any obligation
under any agreement or arrangement with any other person with respect to Taxes
of such other person (including pursuant to Treas. Reg. sec. 1.1502-6 or
comparable provisions of state, local or foreign tax law) and including any
liability for Taxes of any predecessor entity, except for obligations that are
not reasonably likely, individually or in the aggregate, to have an National
Media Material Adverse Effect.
(d) Neither National Media nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
SECTION 4.8. Properties.
(a) Neither National Media nor any of its Subsidiaries is in default under
any of their respective leases for real property, except where the existence of
such defaults, individually or in the aggregate, is not reasonably likely to
have a National Media Material Adverse Effect.
(b) Neither National Media nor any of its Subsidiaries owns any real
property.
SECTION 4.9. Intellectual Property. Other than as set forth on the
National Media Disclosure Schedule, each of National Media and its Subsidiaries
owns, or is licensed or otherwise possesses legally enforceable rights to use,
all trademarks, trade names, service marks, copyrights, and any applications for
such trademarks, trade names, service marks and copyrights, know-how, computer
software programs or applications, and tangible or intangible proprietary
information or material that are necessary to conduct the business of each of
National Media and its Subsidiaries as currently conducted, subject to such
exceptions that would not be reasonably likely to have a National Media Material
Adverse Effect. Other than as set forth on the National Media Disclosure
Schedule, neither National Media nor any of its Subsidiaries has any knowledge
of any assertion or claim challenging the validity of any of such intellectual
property, except such assertions or claims that, individually or in the
aggregate, are not reasonably likely to have a National Media Material Adverse
Effect.
SECTION 4.10. Agreements, Contracts and Commitments. Neither National
Media nor any of its Subsidiaries has breached, or received in writing any claim
or notice that it has breached, any of the terms or conditions of any material
agreement, contract or commitment filed or required to be filed as an exhibit to
the National Media SEC Reports ("National Media Material Contracts") in such a
manner as, individually or in the aggregate, is reasonably likely to have a
National Media Material Adverse Effect. Each National Media Material Contract
that has not expired by its terms is in full force and effect.
SECTION 4.11. Litigation. Except as described in the National Media SEC
Reports filed prior to the date hereof or as set forth on the National Media
Disclosure Schedule, there is no action, suit or proceeding, claim, arbitration
or investigation against National Media or any of its Subsidiaries pending or as
to which National Media or any of its Subsidiaries has received any written
notice of assertion, which, individually or in the aggregate, is reasonably
likely to have a National Media Material Adverse Effect or a material adverse
effect on the ability of National Media to consummate the transactions
contemplated by this Agreement.
SECTION 4.12. Environmental Matters. To the knowledge of National Media
and its Subsidiaries, except as disclosed in the National Media SEC Reports
filed prior to the date hereof and except for such matters that, individually or
in the aggregate, are not reasonably likely to have a National Media Material
Adverse Effect: (i) National Media and its Subsidiaries are in material
compliance with all applicable Environmental Laws; (ii) the properties currently
owned or operated by National Media and its Subsidiaries (including soils,
groundwater, surface water, buildings or other structures) are not contaminated
with any Hazardous Substances; (iii) the properties formerly owned or operated
by National Media or any of its Subsidiaries were not contaminated with
Hazardous Substances during the period of ownership or operation by National
Media or any of its Subsidiaries; (iv) neither National Media nor its
Subsidiaries are subject to
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liability for any Hazardous Substance disposal or contamination on any third
party property; (v) neither National Media nor any of its Subsidiaries has been
associated with any release or threat of release of any Hazardous Substance;
(vi) neither National Media nor any of its Subsidiaries has received any written
notice, demand, letter, claim or request for information alleging that National
Media or any of its Subsidiaries may be in violation of or liable under any
Environmental Law; (vii) neither National Media nor any of its Subsidiaries is
subject to any orders, decrees, injunctions or other arrangements with any
Governmental Entity or is subject to any indemnity or other agreement with any
third party relating to liability under any Environmental Law or relating to
Hazardous Substances; and (viii) there are no circumstances or conditions
involving National Media or any of its Subsidiaries that could reasonably be
expected to result in any claims, liability, investigations, costs or
restrictions on the ownership, use or transfer of any property of National Media
pursuant to any Environmental Law.
SECTION 4.13. Employee Benefit Plans.
(a) National Media has listed on the National Media Disclosure Schedule all
Employee Benefit Plans, as defined in Section 3.13(a) of this Agreement, and all
Benefit Arrangements, as defined in Section 3.13(a) of this Agreement, (i) which
are maintained, contributed to or required to be contributed to by National
Media or any entity that, together with National Media as of the relevant
measuring date under ERISA, is or was required to be treated as a single
employer under Section 414 of the Code ("National Media ERISA Affiliate") or
under which National Media or any National Media ERISA Affiliate may incur any
liability, and (ii) which cover the employees, former employees, directors or
former directors of National Media or any National Media ERISA Affiliate
("National Media Employee Plans").
(b) A true and complete copy of each written National Media Employee Plan
that covers employees or former employees of National Media or any Subsidiary of
National Media, including each amendment thereto and any trust agreement,
insurance contract, collective bargaining agreement, or other funding or
investment arrangements for the benefits under such National Media Employee
Plan, has been delivered to ValueVision. In addition, with respect to each such
National Media Employee Plan to the extent applicable, National Media has
delivered to ValueVision the most recently filed Federal Forms 5500 (solely with
respect to the National Media 401(k) Plan), the most recent summary plan
description (including any summaries of material modifications), the most recent
IRS determination letter, if applicable, the most recent actuarial report or
valuation, if applicable, and all material employee communications with respect
to each such National Media Employee Plan.
(c) Except as set forth on the National Media Disclosure Schedule:
(i) Neither National Media nor any National Media ERISA Affiliate
sponsors, maintains, contributes to, or has any obligation to contribute to
any Employee Benefit Plan regulated under Title IV of ERISA, other than a
"multiemployer plan," as defined in Sections 3(37) and 4001(a)(3) of ERISA,
("Pension Plan"); with respect to any Pension Plan previously sponsored,
maintained or contributed to by National Media or any National Media ERISA
Affiliate or with respect to which National Media or any National Media
ERISA Affiliate previously incurred an obligation to contribute:
(A) As of the last day of the last plan year of each such Pension
Plan and as of the Closing Date, the "amount of unfunded benefit
liabilities" as defined in Section 4001(a)(18) of ERISA (but excluding
from the definition of "current value" of "assets" of such Pension Plan,
accrued but unpaid contributions) did not and will not exceed zero.
(B) No such Pension Plan has been terminated so as to subject,
directly or indirectly, National Media or any National Media ERISA
Affiliate to any liability, contingent or otherwise, or the imposition
of any lien under Title IV of ERISA;
(C) No proceeding has been initiated by any person, including the
Pension Benefit Guaranty Corporation ("PBGC"), to terminate any such
Pension Plan;
(D) No liability to the PBGC exists or is reasonably expected to be
incurred with respect to any such Pension Plan that could subject,
directly or indirectly, National Media or any National
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Media ERISA Affiliate to any liability, contingent or otherwise, or the
imposition of any lien under Title IV of ERISA, whether to the PBGC or
to any other person;
(E) No "reportable event," as defined in Section 4043 of ERISA (to
the extent the reporting of such event to the PBGC has not been waived)
has occurred and is continuing with respect to any such Pension Plan;
(F) No such Pension Plan which is subject to Section 302 of ERISA
or Section 412 of the Code has incurred an "accumulated funding
deficiency," within the meaning of Section 302 of ERISA and 412 of the
Code, whether or not such deficiency has been waived;
(G) Neither National Media nor any National Media ERISA Affiliate
has, at any time, (i) ceased operations at a facility so as to become
subject to the provisions of Section 4068(e) of ERISA, (ii) withdrawn as
a substantial employer so as to become subject to the provisions of
Section 4063 of ERISA, or (iii) ceased making contributions on or before
the Closing Date to any Pension Plan subject to Section 4064(a) of ERISA
to which National Media or any National Media ERISA Affiliate made
contributions during the five years prior to the Closing Date.
(ii) neither National Media nor any National Media ERISA Affiliate
sponsors or has previously sponsored, maintained, contributed to or
incurred an obligation to contribute to any "multiemployer plan," as
defined in Sections 3(37) and 4001(a)(3) of ERISA;
(iii) neither National Media nor any National Media ERISA Affiliate
sponsors or has previously sponsored, maintained, contributed to or
incurred an obligation to contribute to any Employee Benefit Plan that
provides or will provide benefits described in Section 3(1) of ERISA to any
former employee or retiree of National Media or any National Media ERISA
Affiliate, except as required under Part 6 of Title I of ERISA and Section
4980B of the Code;
(iv) all National Media Employee Plans that cover or have covered
employees or former employees of National Media have been maintained and
operated, and currently are, in compliance in all material respects with
their terms, the requirements prescribed by any and all applicable laws
(including ERISA and the Code), orders, or governmental rules and
regulations in effect with respect thereto, and National Media and the
National Media ERISA Affiliates have performed all material obligations
required to be performed by them under, are not in any material respect in
default under or in violation of, and have no knowledge of any default or
violation by any other party to, any of the National Media Employee Plans;
(v) each National Media Employee Plan that covers or has covered
employees or former employees of National Media and is intended to qualify
under Section 401(a) of the Code and each trust established pursuant to
each such National Media Employee Plan that is intended to qualify under
Section 501(a) of the Code is the subject of a favorable determination
letter from the IRS, a copy of which has been delivered to ValueVision,
and, to National Media's knowledge, nothing has occurred which may
reasonably be expected to impair such determination or otherwise adversely
affect the tax-qualified status of such National Media Employee Plan;
(vi) National Media and the National Media ERISA Affiliates have made
full and timely payment of all amounts required to be contributed under the
terms of each National Media Employee Plan and applicable law or required
to be paid as expenses under such National Media Employee Plan; and
(vii) other than claims for benefits in the ordinary course, there is
no claim, suit, action, dispute, arbitration or legal, administrative or
other proceeding or governmental investigation or audit pending, or, to the
knowledge of National Media, threatened, alleging any breach of the terms
of any National Media Employee Plan or of any fiduciary duty thereunder or
violation of any applicable law with respect to any such National Media
Employee Plan.
(d) With respect to the National Media Employee Plans, individually and in
the aggregate, no event has occurred, and to the knowledge of National Media,
there exists no condition or set of circumstances in connection with which
National Media could be subject to any liability that is reasonably likely to
have a National Media Material Adverse Effect under ERISA, the Code or any other
applicable law.
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(e) Except as disclosed in the National Media SEC Reports filed prior to
the date of this Agreement or on the National Media Disclosure Schedule, and
except as provided for in this Agreement, neither National Media nor any of its
Subsidiaries is a party to any oral or written (i) agreement with any officer or
other key employee of National Media or any of its Subsidiaries, the benefits of
which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving National Media of the nature contemplated
by this Agreement, (ii) agreement with any officer of National Media providing
any term of employment or compensation guarantee extending for a period longer
than one year from the date hereof and for the payment of compensation in excess
of $100,000 per annum, or (iii) agreement or plan, including any stock option
plan, stock appreciation right plan, restricted stock plan or stock purchase
plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement. None of the execution or delivery of this Agreement or any of
the Transaction Documents to which it is a party or the consummation of the
transactions contemplated hereunder or thereunder will trigger any "change in
control" or similar provisions resulting in an acceleration of benefits or
compensation thereunder with respect to any agreements with any officer or other
key employee of National Media or any of its Subsidiaries except for such
applicable agreements as set forth on the National Media Disclosure Schedule
(the "National Media Parachute Agreements"). Except as set forth on the National
Media Disclosure Schedule, the aggregate amounts payable under the National
Media Parachute Agreements as a result of the transactions contemplated by this
Agreement and each of the Transaction Documents will not exceed $600,000.
SECTION 4.14. Compliance With Laws. Except as disclosed on the National
Media Disclosure Schedule, each of National Media and its Subsidiaries has
complied with, is not in violation of, and has not received any notices of
violation with respect to, any federal, state or local statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for failures to comply or violations which,
individually or in the aggregate, have not had and are not reasonably likely to
have a National Media Material Adverse Effect.
SECTION 4.15. Accounting and Tax Matters.
(a) To the knowledge of National Media and its Subsidiaries, after
consulting with its independent auditors, neither National Media nor any of its
Affiliates (as defined in Section 5.12) has taken or agreed to take any action
which would prevent the Mergers from constituting transactions qualifying as
transfers under Section 351 of the Code.
(b) To the knowledge of National Media and its Subsidiaries, the
stockholders of National Media have no present plan, intention or arrangement to
sell or otherwise dispose of any of the Parent Common Stock received in the
National Media Merger that would cause the Mergers to fail to qualify as
transfers under Section 351 of the Code.
(c) None of National Media's non-United States Subsidiaries have, excluding
the effects of any guarantees made by any such Subsidiaries with respect to the
Demand Note, any "applicable earnings" for purposes of Section 956 of the Code
as of the end of each such Subsidiary's tax year ending on or after the date
hereof.
SECTION 4.16. Registration Statement; Joint Proxy
Statement/Prospectus. The information to be supplied by National Media or its
Subsidiaries or about National Media or its Subsidiaries by National Media's
agents for inclusion in the Registration Statement shall not at the time the
Registration Statement is declared effective by the SEC contain any untrue
statement of a material fact or omit to state any material fact required to be
stated in the Registration Statement or necessary in order to make the
statements in the Registration Statement, in light of the circumstances under
which they were made, not misleading. The information to be supplied by National
Media or its Subsidiaries or about National Media or its Subsidiaries by
National Media's agents for inclusion in the Joint Proxy Statement/Prospectus
shall not, on the date the Joint Proxy Statement/Prospectus is first mailed to
stockholders of National Media or ValueVision, at the time of the National Media
Stockholders' Meeting and the ValueVision Stockholders' Meeting and at the
Effective Time, contain any statement which, at such time and in light of the
circumstances under which it
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shall be made, is false or misleading with respect to any material fact, omit to
state any material fact necessary in order to make the statements made in the
Joint Proxy Statement/Prospectus not false or misleading, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the National Media Stockholders'
Meeting or the ValueVision Stockholders' Meeting which has become false or
misleading. If at any time prior to the Effective Time any event relating to
National Media or any of its Affiliates, officers or directors should be
discovered by National Media which should be set forth in an amendment to the
Registration Statement or a supplement to the Joint Proxy Statement/Prospectus,
National Media shall promptly inform ValueVision.
SECTION 4.17. Labor Matters. Except as disclosed in the National Media
SEC Reports filed prior to the date hereof, neither National Media nor any of
its Subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor, as of the date hereof, is National Media or any of its
Subsidiaries the subject of any material proceeding asserting that National
Media or any of its Subsidiaries has committed an unfair labor practice or is
seeking to compel it to bargain with any labor union or labor organization nor,
as of the date of this Agreement, is there pending or, to the knowledge of the
executive officers of National Media, threatened, any material labor strike,
dispute, walkout, work stoppage, slow-down or lockout involving National Media
or any of its Subsidiaries.
SECTION 4.18. Insurance. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by National Media or any of its
Subsidiaries are with reputable insurance carriers, provide full and adequate
coverage for all normal risks incident to the business of National Media and its
Subsidiaries and their respective properties and assets, and are in character
and amount at least equivalent to that carried by persons engaged in similar
businesses and subject to the same or similar perils or hazards, except for any
such failures to maintain insurance policies that, individually or in the
aggregate, are not reasonably likely to have a National Media Material Adverse
Effect.
SECTION 4.19. Opinion of Financial Advisor. The financial advisor of
National Media, Lehman Brothers, Inc., has delivered to National Media an
opinion dated the date of this Agreement to the effect that the National Media
Exchange Ratio is fair to the holders of National Media Common Stock from a
financial point of view.
SECTION 4.20. No Existing Discussions. As of the date hereof, neither
National Media nor any of its Affiliates is engaged, directly or indirectly, in
any discussions or negotiations with any other party with respect to an
Acquisition Proposal.
SECTION 4.21. Section 203 of the DGCL and Sections 2538, 2555, and 2564 of
the Pennsylvania Business Corporation Law Not Applicable. The Board of Directors
of National Media has taken all actions necessary under the DGCL and the
Pennsylvania Business Corporation Law ("PBCL"), including approving the
transactions contemplated by this Agreement and each of the Transaction
Documents to which it is a party, to ensure that Section 203 of the DGCL
applicable to a "business combination" (as defined in Section 203 of the DGCL)
and Sections 2538, 2555 and 2564 of the PBCL applicable to a "business
combination," "control share acquisitions and transaction with "interested
shareholders," do not, and will not, apply to the transactions contemplated
hereunder and thereunder. No other "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation is applicable
to National Media or (by reason of National Media's participation therein) the
National Media Merger or the other transactions contemplated by this Agreement
or the other Transaction Documents to which it is a party.
SECTION 4.22. National Media Rights Plan. Under the terms of the National
Media Rights Plan, the transactions contemplated by this Agreement will not
cause a Distribution Date to occur or cause the rights issued pursuant to the
National Media Rights Plan to become exercisable and all such rights shall
become non-exercisable at the Effective Time.
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ARTICLE V.
COVENANTS
SECTION 5.1. Conduct of Business. Except as set forth on Section 5.1 of the
ValueVision Disclosure Schedule or the National Media Disclosure Schedule,
during the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, ValueVision
and National Media each agrees as to itself and its respective Subsidiaries
(except to the extent that the other party shall otherwise consent in writing)
to carry on its business in the usual, regular and ordinary course in
substantially the same manner as previously conducted, to pay its debts and
taxes when due subject to good faith disputes over such debts or taxes, to pay
or perform its other obligations when due, and, to the extent consistent with
such business, use all reasonable efforts consistent with past practices and
policies to (i) preserve intact its present business organization, (ii) keep
available the services of its present officers and key employees and (iii)
preserve its relationships with customers, suppliers, distributors, and others
having business dealings with it. Except as expressly contemplated by this
Agreement (including the Exhibits attached hereto) or as set forth on Section
5.1 of the ValueVision Disclosure Schedule or the National Media Disclosure
Schedule, during the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time,
ValueVision and National Media each shall not (and shall not permit any of its
respective Subsidiaries to), without the written consent of the other party:
(a) Accelerate, amend or change the period of exercisability of
options or restricted stock granted under any employee stock plan of such
party or authorize cash payments in exchange for any options granted under
any of such plans, except as required by the terms of such plans or any
related agreements in effect as of the date of this Agreement;
(b) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital
stock, or split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock, except
from former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service to such party;
(c) Issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or securities
convertible into or exchangeable for shares of its capital stock, or
subscriptions, rights, warrants or options to acquire, or other agreements
or commitments of any character obligating it to issue any such shares or
other convertible securities, other than (i) the grant of options
consistent with past practices to employees, officers, directors or
consultants, but in no event grant more than the total number of authorized
options available under such party's stock option plans and (ii) the
issuance of shares of ValueVision Common Stock or National Media Common
Stock, as the case may be, pursuant to the exercise of options, warrants or
the National Media Convertible Preferred Stock outstanding on the date of
this Agreement;
(d) Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership or other business organization or division, or otherwise
acquire or agree to acquire any assets (other than inventory and other
items in the ordinary course of business), except for any such acquisitions
involving aggregate consideration of not more than $1,000,000;
(e) Sell, lease, license or otherwise dispose of any of its material
properties or assets, except for transactions in the ordinary course of
business; provided, however, that in no event shall either party enter into
any agreement, option or other arrangements (including without limitation
any joint venture) involving the licensing of such party's name or system
in any foreign country, except for transactions in the ordinary course of
business;
(f) (i) Increase or agree to increase the compensation payable or to
become payable to its directors, officers, employees or consultants, except
for increases in salary or wages of employees (other than officers) in
accordance with past practices, (ii) grant any additional severance or
termination pay to, or
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enter into any employment or severance agreements with, any consultants,
employees, officers or directors (iii) enter into any collective bargaining
agreement (other than as required by law or extensions to existing
agreements in the ordinary course of business), or (iv) establish, adopt,
enter into or amend any bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, trust, fund, policy or
arrangement for the benefit of any directors, officers, employees or
consultants;
(g) Amend or propose to amend its Certificate of Incorporation or
Articles of Incorporation, as the case may be, or Bylaws;
(h) Incur any indebtedness for borrowed money other than in the
ordinary course of business;
(i) Take any action that would or is reasonably likely to result in a
material breach of any provision of this Agreement or any of the
Transaction Documents to which it is a party or in any of its
representations and warranties set forth in this Agreement or any of the
Transaction Documents to which it is a party being untrue on and as of the
Closing Date;
(j) Make or rescind any material express or deemed election relating
to Taxes, settle or compromise any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to Taxes, or change any of its methods of reporting income or
deductions for federal income Tax purposes from those employed in the
preparation of its federal income tax return for the taxable year ending
January 31, 1997 with respect to ValueVision and March 31, 1997 with
respect to National Media, except as may be required by applicable law;
(k) Settle any stockholder litigation relating to the transactions
contemplated hereby; or
(l) Take, or agree in writing or otherwise to take, any of the actions
described in Sections (a) through (k) above.
SECTION 5.2. Cooperation; Notice; Cure. Subject to compliance with
applicable law, from the date hereof until the Effective Time, each of
ValueVision and National Media shall confer on a regular and frequent basis with
one or more representatives of the other party to report on the general status
of ongoing operations and shall promptly provide the other party or its counsel
with copies of all filings made by such party with the SEC or with any
Governmental Entity in connection with this Agreement, the Mergers and the
transactions contemplated hereby and thereby. Each of ValueVision and National
Media shall notify the other of, and will use all commercially reasonable
efforts to cure before the Closing Date, any event, transaction or circumstance,
as soon as practical after it becomes known to such party, that causes or will
cause any covenant or agreement of ValueVision or National Media under this
Agreement to be breached or that renders or will render untrue any
representation or warranty of ValueVision or National Media contained in this
Agreement. Each of ValueVision and National Media also shall notify the other in
writing of, and will use all commercially reasonable efforts to cure, before the
Closing Date, any violation or breach, as soon as practical after it becomes
known to such party, of any representation, warranty, covenant or agreement made
by ValueVision or National Media. No notice given pursuant to this paragraph
shall have any effect on the representations, warranties, covenants or
agreements contained in this Agreement for purposes of determining satisfaction
of any condition contained herein. Notwithstanding anything to the contrary in
this Agreement, (i) neither ValueVision nor any of its Subsidiaries nor National
Media nor any of its Subsidiaries shall be obligated to sell or otherwise
transfer any of its broadcast assets to obtain the FCC Consent Application (as
defined in Section 5.8(a)) and (ii) if any of National Media's Directors (as
defined in Section 5.19(a)) are not approved of by the FCC, then National Media
shall as expeditiously as possible upon notice of such nonapproval replace any
such director with another National Media Director until all of National Media's
Directors have been approved of by the FCC.
SECTION 5.3. No Solicitation.
(a) ValueVision and National Media each shall not, directly or indirectly,
through any officer, director, employee, financial advisor, representative or
agent of such party (i) solicit, initiate, or encourage any inquiries or
proposals that constitute, or could reasonably be expected to lead to, a
proposal or offer for a merger,
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consolidation, business combination, sale of substantial assets, sale of shares
of capital stock (including without limitation by way of a tender offer) or
similar transaction involving such party or any of its Subsidiaries, other than
the transactions contemplated by this Agreement (any of the foregoing inquiries
or proposals being referred to in this Agreement as an "Acquisition Proposal"),
(ii) engage in negotiations or discussions with any third party concerning, or
provide any nonpublic information to any person or entity relating to, any
Acquisition Proposal, or (iii) agree to or recommend any Acquisition Proposal;
provided, however, that nothing contained in this Agreement shall prevent
ValueVision or National Media, or their respective Board of Directors, from (A)
furnishing non-public information to, or entering into discussions or
negotiations with, any person or entity in connection with an unsolicited bona
fide written Acquisition Proposal by such person or entity or modifying or
withdrawing its recommendation with respect to the transactions contemplated
hereby or recommending an unsolicited bona fide written Acquisition Proposal to
the stockholders of such party, if and only to the extent that (1) the Board of
Directors of such party believes in good faith (after consultation with its
financial advisor) that such Acquisition Proposal is reasonably capable of being
completed on the terms proposed and, after taking into account the strategic
benefits anticipated to be derived from the Mergers and the long-term prospects
of ValueVision and National Media as a combined company, would, if consummated,
result in a transaction more favorable to the stockholders of such party over
the long term than the transaction contemplated by this Agreement and the Board
of Directors of such party determines in good faith after consultation with
outside legal counsel that such action is required for such Board of Directors
to comply with its fiduciary duties to stockholders under applicable law and (2)
prior to furnishing such non-public information to, or entering into discussions
or negotiations with, such person or entity, such Board of Directors receives
from such person or entity an executed confidentiality and standstill agreement
with terms no less favorable to such party than those contained in the
Confidentiality Agreement dated August 19, 1997 between National Media and
ValueVision (the "Confidentiality Agreement"); or (B) complying with Rule 14e-2
promulgated under the Exchange Act with regard to an Acquisition Proposal. Each
of ValueVision and National Media agrees not to release any third party from, or
waive any provision of, any standstill agreement to which it is a party or any
confidentiality agreement between it and another person who has made, or who may
reasonably be considered likely to make, an Acquisition Proposal, unless its
Board of Directors determines in good faith after consultation with outside
legal counsel that such action is necessary for such Board of Directors to
comply with its fiduciary duties to stockholders under applicable law.
(b) ValueVision and National Media shall each notify the other party
immediately after receipt by ValueVision or National Media (or their advisors)
of any Acquisition Proposal or any request for nonpublic information in
connection with an Acquisition Proposal or for access to the properties, books
or records of such party by any person or entity that informs such party that it
is considering making, or has made, an Acquisition Proposal. Such notice shall
be made orally and in writing and shall indicate in reasonable detail the
identity of the offeror and the terms and conditions of such proposal, inquiry
or contact. Such party shall continue to keep the other party hereto informed,
on a current basis, of the status of any such discussions or negotiations and
the terms being discussed or negotiated.
SECTION 5.4. Joint Proxy Statement/Prospectus; Registration Statement.
(a) As promptly as practicable after the execution of this Agreement,
ValueVision and National Media shall prepare and file with the SEC the Joint
Proxy Statement/Prospectus and will cause Parent to prepare and file with the
SEC the Registration Statement in which the Joint Proxy Statement/Prospectus
will be included as a prospectus. ValueVision and National Media shall use all
reasonable efforts to cause the Registration Statement to become effective as
soon after such filing as practical. The Joint Proxy Statement/ Prospectus shall
include the recommendation of the Board of Directors of ValueVision in favor of
this Agreement and the ValueVision Merger and the recommendation of the Board of
Directors of National Media in favor of this Agreement and the National Media
Merger; provided that the Board of Directors of either party may modify or
withdraw such recommendation if such Board of Directors believes in good faith
after consultation with outside legal counsel that the modification or
withdrawal of such recommendation is necessary for such Board of Directors to
comply with its fiduciary duties under applicable law.
(b) ValueVision and National Media shall make all necessary filings with
respect to the Merger under the Securities Act, the Exchange Act, applicable
state blue sky laws and the rules and regulations thereunder.
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(c) ValueVision and National Media shall use their best efforts to furnish
to each other all information required for any application or other filing to be
made pursuant to the rules and regulations of any applicable law (including all
information required to be included in the Joint Proxy Statement/Prospectus and
the Registration Statement) in connection with the transactions contemplated by
this Agreement.
SECTION 5.5. Nasdaq Quotation and NYSE Listing. ValueVision agrees to use
its reasonable best efforts to continue the quotation of ValueVision Common
Stock on Nasdaq during the term of this Agreement and National Media agrees to
use its reasonable best efforts to continue the quotation and listing of
National Media Common Stock on the New York Stock Exchange (the "NYSE") during
the term of this Agreement.
SECTION 5.6. Access to Information. Upon reasonable notice, ValueVision and
National Media shall each (and shall cause each of their respective Subsidiaries
to) afford to the officers, employees, accountants, counsel and other
representatives of the other, access, during normal business hours during the
period prior to the Effective Time, to all its personnel, properties, books,
contracts, commitments and records and, during such period, each of ValueVision
and National Media shall, and shall cause each of their respective Subsidiaries
to, furnish promptly to the other (a) a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of federal securities laws and (b) all other
information concerning its business, properties and personnel as such other
party may reasonably request. The parties will hold any such information which
is nonpublic in confidence in accordance with the Confidentiality Agreement. No
information or knowledge obtained in any investigation pursuant to this Section
5.6 shall affect or be deemed to modify any representation or warranty contained
in this Agreement or the conditions to the obligations of the parties to
consummate the Merger.
SECTION 5.7. Stockholders Meetings. ValueVision and National Media each
shall call a meeting of its respective stockholders to be held as promptly as
practicable for the purpose of voting, in the case of ValueVision, upon this
Agreement and the ValueVision Merger and, in the case of National Media, upon
this Agreement and the National Media Merger. Subject to Sections 5.3 and 5.4,
ValueVision and National Media shall, through their respective Boards of
Directors, recommend to their respective stockholders approval of such matters
and shall coordinate and cooperate with respect to the timing of such meetings
and shall use their best efforts to hold such meetings on the same day and as
soon as practicable after the date hereof. Unless otherwise required to comply
with the applicable fiduciary duties of the respective directors of ValueVision
and National Media, as determined by such directors in good faith after
consultation with outside legal counsel, each party shall use all reasonable
efforts to solicit from stockholders of such party proxies in favor of such
matters.
SECTION 5.8. Legal Conditions to Merger.
(a) ValueVision and National Media shall each use all reasonable efforts to
(i) take, or cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary and proper under applicable law to consummate and
make effective the transactions contemplated hereby as promptly as practicable,
(ii) obtain from any Governmental Entity or any other third party any consents,
licenses, permits, waivers, approvals, authorizations, or orders required to be
obtained or made by ValueVision or National Media or any of their Subsidiaries
in connection with the authorization, execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby including, without
limitation, the Mergers, and (iii) as promptly as practicable, make all
necessary filings, and thereafter make any other required submissions, with
respect to this Agreement and the Mergers required under (A) the Securities Act
and the Exchange Act, and any other applicable federal or state securities laws,
(B) the HSR Act and any related governmental request thereunder, (C) the
Communications Act (including the filing of one or more requisite applications
with the FCC requesting its written consent to the transactions contemplated
hereby (the "FCC Consent Application"), and (D) any other applicable law.
ValueVision and National Media shall cooperate with each other in connection
with the making of all such filings, including providing copies of all such
documents to the non-filing party and its advisors prior to filing and, if
requested, to accept all reasonable additions, deletions or changes suggested in
connection therewith.
(b) ValueVision and National Media agree, and shall cause each of their
respective Subsidiaries, to cooperate and to use their respective best efforts
to obtain any government clearances required for Closing
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(including through compliance with the HSR Act and any applicable foreign
government reporting requirements), to respond to any government requests for
information, and to contest and resist any action, including any legislative,
administrative or judicial action, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) (an "Order") that restricts, prevents or prohibits the
consummation of the Mergers or any other transactions contemplated by this
Agreement. The parties hereto will consult and cooperate with one another, and
consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party hereto in connection
with proceedings under or relating to the HSR Act, the Communications Act or any
other federal, state or foreign antitrust or fair trade law. ValueVision and
National Media shall cooperate and work together in any proceedings or
negotiations with any Governmental Entity relating to any of the foregoing.
Notwithstanding anything to the contrary in this Section 5.8, neither
ValueVision nor National Media, nor any of their respective Subsidiaries, shall
be required to take any action that would reasonably be expected to
substantially impair the overall benefits expected, as of the date hereof, to be
realized from the consummation of the Mergers.
(c) Each of ValueVision and National Media shall give (or shall cause their
respective Subsidiaries to give) any notices to third parties, and use, and
cause their respective Subsidiaries to use, all reasonable efforts to obtain any
third party consents related to or required in connection with the Mergers.
(d) National Media shall duly comply with all of its obligations under, and
shall diligently prosecute all of its rights under, the Redemption Agreement.
SECTION 5.9. Public Disclosure. ValueVision and National Media shall agree
on the form and content of the initial press release regarding the transactions
contemplated hereby and thereafter shall consult with each other before issuing,
and use all reasonable efforts to agree upon, any press release or other public
statement with respect to any of the transactions contemplated hereby and shall
not issue any such press release or make any such public statement prior to such
consultation.
SECTION 5.10. Tax-Free Reorganization and Transfer. ValueVision and
National Media shall each use all reasonable efforts to cause the ValueVision
Merger to be treated as a reorganization within the meaning of Section 368 of
the Code and the Mergers to be treated as transfers within the meaning of
Section 351 of the Code.
SECTION 5.11. Affiliate Agreements. Upon the execution of this Agreement,
ValueVision and National Media will provide each other with a list of those
persons who are, in ValueVision's or National Media's respective reasonable
judgment, "affiliates" of ValueVision or National Media, as the case may be,
within the meaning of Rule 145 (each such person who is an "affiliate" of
ValueVision or National Media within the meaning of Rule 145 is referred to as
an "Affiliate") promulgated under the Securities Act ("Rule 145"). ValueVision
and National Media shall provide each other such information and documents as
the other party shall reasonably request for purposes of reviewing such list and
shall notify the other party in writing regarding any change in the identity of
its Affiliates prior to the Closing Date. ValueVision and National Media shall
each use all reasonable efforts to deliver or cause to be delivered to each
other by January 30, 1998 (and in any case prior to the Effective Time) from
each of its Affiliates, an executed Affiliate Agreement, substantially similar
to the form attached hereto as Exhibit F, by which each Affiliate of ValueVision
and each Affiliate of National Media agrees to comply with the applicable
requirements of Rule 145 and for the ValueVision Merger to qualify as a tax-free
reorganization within the meaning of Section 368 and the Mergers to qualify as
transfers within the meaning of Section 351 of the Code (an "Affiliate
Agreement"). Parent shall be entitled to place appropriate legends on the
certificates evidencing any Parent Common Stock to be received by such
Affiliates of ValueVision or National Media pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for Parent Common Stock, consistent with the terms of the Affiliate
Agreements (provided that such legends or stop transfer instructions shall be
removed, when such shares of Parent Common Stock are generally transferable
without any restrictions imposed by Rule 145, upon the request of any
stockholder that is not then an Affiliate of Parent).
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SECTION 5.12. National Listing or Nasdaq Quotation. ValueVision and
National Media shall cause Parent to promptly prepare and submit an application
to the NYSE, if Parent is eligible for such listing, or, if not so eligible, to
another national securities exchange or market to list or quote the shares of
Parent Common Stock to be issued in the Mergers and upon exercise or conversion
of ValueVision Stock Options, the ValueVision Warrants, the National Media Stock
Options and the National Media Warrants, and shall use all reasonable efforts to
cause such shares to be approved for listing or quotation on the NYSE or such
other exchange or market, as the case may be, prior to the Effective Time,
subject to official notice of issuance.
SECTION 5.13. Stock Plans.
(a) At the Effective Time, each outstanding ValueVision Stock Option under
the ValueVision Stock Plans and each outstanding National Media Stock Option
under the National Media Stock Plans, in each case whether vested or unvested,
shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such ValueVision Stock Option or National
Media Stock Option, as the case may be the same number of shares of Parent
Common Stock as the holder of such ValueVision Stock Option or National Media
Stock Option, as the case may be, would have been entitled to receive pursuant
to the ValueVision Merger or the National Media Merger, respectively, had such
holder exercised such option in full immediately prior to the Effective Time
(rounded downward to the nearest whole number), at a price per share (rounded
downward to the nearest whole cent) equal to (y) the aggregate exercise price
for the shares of ValueVision Common Stock or National Media Common Stock, as
the case may be, purchasable pursuant to such ValueVision Stock Option or such
National Media Stock Option immediately prior to the Effective Time divided by
(z) the number of full shares of Parent Common Stock deemed purchasable pursuant
to such ValueVision Stock Option or National Media Stock Option, as the case may
be, in accordance with the foregoing.
(b) As soon as practicable after the Effective Time, Parent shall deliver
to the participants in the ValueVision Stock Plans and the National Media Stock
Plans appropriate notice setting forth such participants' rights pursuant
thereto and the grants pursuant to ValueVision Stock Plans or National Media
Stock Plans, as the case may be, shall continue in effect on the same terms and
conditions (subject to the adjustments required by this Section 5.13 after
giving effect to the Mergers).
(c) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery under
ValueVision Stock Plans and National Media Stock Plans assumed in accordance
with this Section 5.13. As soon as practicable after the Effective Time, Parent
shall file a registration statement on Form S-8 (or any successor or other
appropriate forms), or another appropriate form with respect to the shares of
Parent Common Stock subject to such options and shall use its best efforts to
maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options remain outstanding.
(d) The Board of Directors of each of ValueVision and National Media shall,
prior to or as of the Effective Time, take all necessary actions, pursuant to
and in accordance with the terms of the ValueVision Stock Plans and the
instruments evidencing the ValueVision Stock Options, or the National Media
Stock Plans and the instruments evidencing the National Media Stock Options, as
the case may be, to provide for the conversion of the ValueVision Stock Options
and the National Media Stock Options into options to acquire Parent Common Stock
in accordance with this Section 5.13, and that no consent of the holders of the
ValueVision Stock Options or National Media Stock Options is required in
connection with such conversion.
(e) The Board of Directors of each of ValueVision and National Media shall,
prior to or as of the Effective Time, take appropriate action to approve the
deemed disposition of the ValueVision Stock Options or National Media Stock
Options, as the case may be, for purposes of excepting such disposition under
Rule 16b-3(e) promulgated under the Exchange Act. The Board of Directors of
Parent shall, prior to or as of the Effective Time, take appropriate action to
approve the deemed grant of options to purchase Parent Common Stock under the
ValueVision Stock Options and the National Media Stock Options (as converted
pursuant to this Section 5.13) for purposes of excepting such grant under Rule
16b-3(d) promulgated under the Exchange Act.
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(f) At the Effective Time, the Parent shall adopt the stock plan (the
"Parent Stock Plan") substantially in the form attached hereto as Exhibit O.
SECTION 5.14. Brokers or Finders. Each of National Media and ValueVision
represents, as to itself, its Subsidiaries and its Affiliates, that no agent,
broker, investment banker, financial advisor or other firm or person is or will
be entitled to any broker's or finder's fee or any other commission or similar
fee in connection with any of the transactions contemplated by this Agreement,
except Bear Stearns & Co. Incorporated, whose fees and expenses will be paid by
ValueVision in accordance with ValueVision's agreement with such firm (a copy of
which has been delivered by ValueVision to National Media prior to the date of
this Agreement), and Lehman Brothers, Inc., whose fees and expenses will be paid
by National Media in accordance with National Media's agreement with such firm
(a copy of which has been delivered by National Media prior to the date of this
Agreement); provided, however, that if the Mergers are consummated, such fees
shall be paid by ValueVision in accordance with Section 7.3 hereof. Each of
National Media and ValueVision agrees to indemnify and hold the other harmless
from and against any and all claims, liabilities or obligations with respect to
any such fees, commissions or expenses asserted by any person on the basis of
any act or statement alleged to have been made by such party or any of its
Affiliates.
SECTION 5.15. Indemnification.
(a) From and after the Effective Time, Parent agrees that it will, and will
cause the Surviving Corporations to, indemnify and hold harmless each present
and former director and officer of ValueVision and National Media (the
"Indemnified Parties"), against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities or amounts paid in
settlement (collectively, "Costs") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to matters
existing or occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent that
ValueVision or National Media, as the case may be, would have been permitted
under Minnesota law and Delaware law, as the case may be, and its articles or
certificate of incorporation, as the case may be, or bylaws in effect on the
date hereof to indemnify such Indemnified Party (and Parent and the Surviving
Corporation shall also advance expenses as incurred to the fullest extent
permitted under applicable law, provided the Indemnified Party to whom expenses
are advanced provides an undertaking to repay such advances if it is ultimately
determined that such Indemnified Party is not entitled to indemnification).
(b) For a period of six years after the Effective Time, Parent shall
maintain or shall cause the Surviving Corporations to maintain (to the extent
available in the market) in effect a directors' and officers' liability
insurance policy covering those persons who are currently covered by
ValueVision's or National Media's directors' and officers' liability insurance
policy (copies of which have been heretofore delivered by ValueVision and
National Media to each other) with coverage in amount and scope at least as
favorable as ValueVision's or National Media's existing coverage; provided that
in no event shall Parent or the Surviving Corporations be required to expend in
excess of 200% of the annual premium currently paid by ValueVision or National
Media, as the case may be, for such coverage (in either case, the "Current
Premium"); and if such premium would at any time exceed 200% of the Current
Premium, then the Surviving Corporations shall maintain insurance policies which
provide the maximum and best coverage available at an annual premium equal to
200% of the Current Premium.
(c) The provisions of this Section 5.15 are intended to be in addition to
the rights otherwise available to the current officers and directors of
ValueVision and National Media by law, charter, statute, bylaw or agreement, and
shall operate for the benefit of, and shall be enforceable by, each of the
Indemnified Parties, their heirs and their representatives.
SECTION 5.16. Letter of National Media's Accountants. National Media shall
use all reasonable efforts to cause to be delivered to ValueVision and National
Media a letter of Ernst & Young LLP, National Media's independent accountants,
dated a date within two business days before the date on which the Registration
Statement shall become effective and addressed to ValueVision, in form
reasonably satisfactory to ValueVision and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
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SECTION 5.17. Letter of ValueVision's Accountants. ValueVision shall use
all reasonable efforts to cause to be delivered to National Media and
ValueVision a letter of Arthur Andersen LLP, ValueVision's independent
accountants, dated a date within two business days before the date on which the
Registration Statement shall become effective and addressed to National Media,
in form reasonably satisfactory to National Media and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Registration Statement.
SECTION 5.18. Stock Option Agreements. National Media and ValueVision each
agree to fully perform their respective obligations under the Stock Option
Agreements.
SECTION 5.19. Post-Merger Parent Corporate Governance.
(a) At the Effective Time, the total number of persons serving on the Board
of Directors of Parent shall be ten (unless otherwise agreed in writing by
ValueVision and National Media prior to the Effective Time), five of whom shall
be ValueVision Directors, five of whom shall be National Media Directors (as
such terms are defined below), all of which ValueVision Directors and National
Media Directors shall be spread as evenly as possible among Parent's three
classes of Directors; provided, however, that if the Board of Directors shall
have elected a Chief Executive Officer to succeed the interim Chief Executive
Officer identified in Section 5.19(b)(i) below prior to the Effective Time and
such officer takes office prior to such date, then the Board of Directors of
Parent shall be expanded to 11 members and such officer shall be appointed to
the Board of Directors to fill the vacancy created by such expansion of the
Board. The persons to serve initially on the Board of Directors of Parent at the
Effective Time who are ValueVision Directors shall be selected solely by and at
the absolute discretion of the Board of Directors of ValueVision prior to the
Effective Time; and, subject to the second following sentence, the persons to
serve initially on the Board of Directors of Parent at the Effective Time who
are National Media Directors shall be selected solely by and at the absolute
discretion of the Board of Directors of National Media prior to the Effective
Time. In the event that, prior to the Effective Time, any person so selected to
serve on the Board of Directors of Parent after the Effective Time is unable or
unwilling to serve in such position, the Board of Directors which selected such
person shall designate another of its members to serve in such person's stead in
accordance with the provisions of the immediately preceding sentence. To the
extent any holder of National Media's or Parent's Series B Convertible Preferred
Stock is entitled to designate any director to the Board of Directors of Parent,
such director shall be deemed to be a National Media Director. The term
"ValueVision Director" means any person serving as a Director of ValueVision or
any of its Subsidiaries on the date hereof who becomes a Director of Parent at
the Effective Time and any successor director appointed or elected pursuant to
Article III, Section 1 of the Bylaws of Parent; and the term "National Media
Director" means any person serving as a Director of National Media or any of its
Subsidiaries on the date hereof who becomes a Director of Parent at the
Effective Time and any successor director appointed or elected pursuant to
Article III, Section 1 of the Bylaws of Parent.
(b) Subject to Section 8.5, at the Effective Time, (i) Robert L. Johander,
the current Chief Executive Officer of ValueVision, shall hold the position of
interim Chief Executive Officer and Co-Chairman of the Board of Parent, (ii)
Frederick S. Hammer, a current director of National Media, shall hold the
position of Co-Chairman of the Board of Parent, (iii) Nicholas M. Jaksich, the
current President and Chief Operating Officer of ValueVision, shall hold the
position of President and Chief Operating Officer of Parent and (iv) Stuart R.
Romenesko, the current Chief Financial Officer of ValueVision, shall hold the
position of Chief Financial Officer of Parent. If any of the persons identified
in the preceding sentence is unable or unwilling to hold such offices as set
forth above, his successor shall be selected by the Board of Directors of Parent
in accordance with the Bylaws of Parent.
(c) Subject to Section 8.5, at the Effective Time and continuing until the
third anniversary of the Effective Time, Parent shall have an Executive
Committee which shall always be comprised of three ValueVision Directors (who
initially shall be Marshall S. Geller, Nicholas M. Jaksich and Robert L.
Johander) and two National Media Directors (who initially shall be Frederick S.
Hammer and Robert N. Verratti). Until the third anniversary of the Effective
Time, the Executive Committee shall have responsibility for recommending to the
full Board of Directors a successor Chief Executive Officer (and any successor
thereto) to the interim Chief Executive Officer of the Parent, which search for
such successor Chief Executive
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Officer shall commence as promptly as reasonably practicable, and shall have, to
the fullest extent permitted by Delaware law, all of the powers, duties and
responsibilities (including, without limitation, those relating to any and all
issues relating to the FCC and any assets subject to its regulation) of the
entire Board of Directors of Parent (except with respect to those actions that
require a Supermajority Vote as set forth and defined in the Bylaws of Parent).
(d) Subject to Section 8.5, at the Effective Time and continuing until the
third anniversary of the Effective Time, Parent shall have a Compensation
Committee which shall always be comprised of two ValueVision Directors and one
National Media Director, each of whom shall meet the requirements of
independence as established by the exchange or market on which Parent's stock is
then traded or quoted. Until the third anniversary of the Effective Time, the
Compensation Committee shall have responsibility for (i) reviewing the
compensation and employee benefit policies of Parent, (ii) recommending to the
Executive Committee base salary amounts and incentive awards for all elected
officers of Parent and setting guidelines for the administration of all
salaries, (iii) administering incentive compensation and awarding stock options
to employees under any Parent stock option or compensation plan and amending or
modifying any provisions of such stock option or compensation plan that may be
amended or modified without stockholder approval and (iv) supervising all
administrative matters with respect to the foregoing.
(e) Each of ValueVision and National Media shall take such action as shall
reasonably be deemed by either thereof to be advisable to give effect to the
provisions set forth in this Section 5.19, including without limitation
incorporating such provisions in the Bylaws of Parent in effect at the Effective
Time.
SECTION 5.20. Name of Parent. Prior to the Effective Time, ValueVision and
National Media shall use reasonable efforts to decide on a new corporate name
for Parent.
SECTION 5.21. Parent Stockholder Rights Plan. Prior to the Effective Time,
ValueVision and National Media shall cause Parent to adopt a Stockholder Rights
Plan (the "Parent Rights Plan") that is substantially in the form of the
Stockholders Rights Agreement attached hereto as Exhibit P.
SECTION 5.22. The Warrants. At the Effective Time, each Warrant shall
thereafter solely represent the right to acquire, on the same terms and
conditions as are currently applicable under the Warrants, the same number of
shares of Parent Common Stock as a holder of the Warrants would have been
entitled to receive pursuant to the ValueVision Merger or the National Media
Merger, as the case may be, had such holder exercised the Warrants in full
immediately prior to the Effective Time (rounded downward to the nearest whole
number), at the price per share (rounded downward to the nearest whole cent)
equal to (y) the aggregate exercise price for the shares of ValueVision Common
Stock or the National Media Common Stock, as the case may be, purchasable
pursuant to the Warrants immediately prior to the Effective Time divided by (z)
the number of full shares of Parent Common Stock deemed purchasable pursuant to
the Warrants in accordance with the foregoing. At the Effective Time, Parent
shall agree to issue any required shares of Parent Common Stock upon exercise of
the Warrants in accordance with the foregoing.
SECTION 5.23. Conveyance Taxes. ValueVision and National Media shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees or any similar taxes
which become payable in connection with the transactions contemplated by this
Agreement that are required or permitted to be filed on or before the Effective
Time. ValueVision shall pay, and National Media shall pay, without deduction or
withholding from any amount payable to the holders of ValueVision Common Stock
or National Media Common Stock, as the case may be, any such taxes or fees
imposed by any Governmental Entity (and any penalties and interest with respect
to such taxes and fees), which become payable in connection with the
transactions contemplated by this Agreement, on behalf of their respective
stockholders.
SECTION 5.24. Stockholder Litigation. Each of ValueVision and National
Media shall give the other the reasonable opportunity to participate in the
defense of any stockholder litigation against ValueVision or National Media, as
applicable, and its directors relating to the transactions contemplated hereby.
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SECTION 5.25. Annual Reports for Welfare Benefit Plans. Prior to the
Closing Date, National Media shall cause to be filed any Annual Return/Report
Federal Form 5500 ("Annual Report") for any National Media Employee Plan that is
an "employee welfare benefit plan" within the meaning of Section 3(1) of ERISA
with respect to which: (i) a filing obligation exists under Section 101 of ERISA
or Section 6039D of the Code and (ii) no Annual Report has been timely filed.
National Media further agrees to cause any such filing to be made and civil
penalties paid in accordance with the procedures outlined by the U.S. Department
of Labor for the Delinquent Filer Voluntary Compliance Program at 60 Federal
Register 20874, dated April 27, 1995.
SECTION 5.26. Employment Agreements. Except as set forth on the National
Media Disclosure Schedule, National Media shall, and shall cause each of its
relevant Subsidiaries to, take any and all necessary action to prevent the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereunder from triggering any "change of control" or
similar provisions resulting in an acceleration of benefits or compensation
thereunder with respect to any agreements with any officer or other key employee
of National Media or any of its Subsidiaries.
SECTION 5.27. Funding Advance for Redemption Agreement. If all of the
conditions to ValueVision's obligations as set forth in Sections 6.1 and 6.2
hereof (other than the second sentence of Section 6.2(e)) have been satisfied,
then ValueVision shall concurrently with the Closing, advance to National Media,
pursuant to the Series C Note, in immediately available funds, such amounts as
are necessary to consummate the transactions contemplated by the Redemption
Agreement.
ARTICLE VI.
CONDITIONS TO MERGER
SECTION 6.1. Conditions to Each Party's Obligation to Effect the
Mergers. The respective obligations of each party to this Agreement to effect
the Mergers shall be subject to the satisfaction or waiver in writing by each of
National Media and ValueVision prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. This Agreement, the ValueVision Merger and
the National Media Merger shall have been approved in the manner required
under the MBCA and the DGCL, as the case may be, by the respective holders
of the issued and outstanding shares of capital stock of ValueVision and
National Media.
(b) HSR Act. The waiting period applicable to the consummation of the
Mergers under the HSR Act shall have expired or been terminated.
(c) FCC Consents. Subject to the last sentence of Section 5.2, the FCC
shall have granted by Final Order the FCC Consent Application, without
conditions, qualifications or other restrictions that are likely to have a
material adverse effect immediately after the Closing Date on Parent or any
of its Subsidiaries, whether imposed by the FCC or any other Governmental
Entity. "Final Order" means an order, action or decision of a Governmental
Entity that has not been reversed, stayed, or enjoined and as to which the
time to appeal, petition for certiorari or seek reargument or rehearing or
administrative reconsideration or review has expired and as to which no
appeal, reargument, petition for certiorari or rehearing or petition for
reconsideration or application for review is pending or as to which any
right to appeal, reargue, petition for certiorari or rehearing or
reconsideration or review has been waived in writing by each party having
such a right or, if any appeal, reargument, petition for certiorari or
rehearing or reconsideration or review thereof has been sought, the order
or judgment of the court or agency has been affirmed by the highest court
(or the administrative entity or body) to which the order was appealed or
from which the argument or rehearing or reconsideration or review was
sought, or certiorari has been denied, and the time to take any further
appeal or to seek certiorari or further reargument or rehearing, or
reconsideration or review, has expired.
(d) Approvals. Other than the filing provided for by Section 1.4, all
authorizations, consents, orders or approvals of, or declarations or
filings with, or expirations of waiting periods imposed by, any
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Governmental Entity the failure of which to file, obtain or occur is
reasonably likely to have a ValueVision Material Adverse Effect or a
National Media Material Adverse Effect shall have been filed, obtained or
occurred.
(e) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of
any stop order or proceedings seeking a stop order.
(f) No Injunctions. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any order, executive order, stay, decree,
judgment or injunction or statute, rule, regulation which is in effect and
which has the effect of making the Mergers illegal or otherwise prohibiting
consummation of the Mergers.
(g) National Listing or Nasdaq Quotation. The shares of Parent Common
Stock to be issued in the Merger and upon exercise or conversion of
ValueVision Options, the ValueVision Warrants, the National Media Options,
and the National Media Warrants shall have been approved for listing on a
national securities exchange or for quotation on The Nasdaq Stock Market,
subject to official notice of issuance.
(h) Consents Under ValueVision Agreements. ValueVision shall have
obtained the consent or approval of any person whose consent or approval
shall be required under any agreement or instrument in order to permit the
consummation of the transactions contemplated hereby, except those of
which, if not obtained, would not, individually or in the aggregate, have
(i) a ValueVision Material Adverse Effect or (ii) a material adverse effect
on the business, properties, financial condition or results of operations
of Parent after the Merger (a "Parent Material Adverse Effect").
(i) Consents Under National Media Agreements. National Media shall
have obtained the consent or approval of any person whose consent or
approval shall be required under any agreement or instrument in order to
permit the consummation of the transactions contemplated hereby, except
those which, if not obtained, would not, individually or in the aggregate,
have (i) a National Media Material Adverse Effect or (ii) a Parent Material
Adverse Effect.
(j) Corporate Governance. ValueVision and National Media shall have
taken all actions necessary so that (i) not later than the Effective Time,
the Certificate of Incorporation and Bylaws of Parent shall have been
amended to be substantially in the form of Exhibit C and Exhibit D attached
hereto; and (ii) at the Effective Time, the composition of the Board of
Directors of Parent and of each Committee of the Board of Directors of
Parent shall comply with Section 5.19 hereof (assuming ValueVision has
designated the ValueVision Directors and National Media has designated the
National Media Directors, in each case as contemplated by Section 5.19(a)
hereof) and (iii) not later than the Effective Time, Parent shall have
adopted the Parent Rights Plan.
(k) No Trigger of National Media Rights Plan. No event shall have
occurred that has or would result in the triggering of any right or
entitlement of stockholders of National Media under the National Media
Rights Plan, or will occur as a result of the consummation of the Mergers.
(l) Dissenters' Rights. Holders of no more than 5% of the issued and
outstanding shares of ValueVision Common Stock shall have made the demands
and given the notices required under Minnesota law to assert dissenters'
appraisal rights.
(m) Montgomery Ward. The transactions contemplated by the Stipulation
between Montgomery Ward & Co., Incorporated and ValueVision regarding the
Assumption and Modification of Executory Contracts and Related Agreements
(the "Settlement Agreement") shall have been approved by the United States
Bankruptcy Court for the District of Delaware (the "Court") on terms
substantially similar to those set forth in the Settlement Agreement;
provided, that, this condition shall be deemed to be satisfied if National
Media does not object to the terms of any approval by the Court within
three business days after any such approval becomes final and
non-appealable. ValueVision shall have consummated the repurchase of the
securities contemplated by the Settlement Agreement.
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SECTION 6.2. Additional Conditions to Obligations of ValueVision. The
obligation of ValueVision to effect the ValueVision Merger is subject to the
satisfaction of each of the following conditions prior to the Effective Time,
any of which may be waived in writing exclusively by ValueVision:
(a) Representations and Warranties. The representations and warranties
of National Media set forth in this Agreement shall be true and correct as
of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, except for, (i)
changes contemplated by this Agreement and (ii) inaccuracies which,
individually or in the aggregate, have not had and are not reasonably
likely to have a National Media Material Adverse Effect (without regard to
any materiality limitations contained in any such representation or
warranty), or a material adverse effect upon the consummation of the
transactions contemplated hereby; provided, however, that the last three
sentences in Section 4.3(b) must be true and correct in all respects; and
ValueVision shall have received a certificate signed on behalf of National
Media by the chief executive officer and the chief financial officer of
National Media to such effect.
(b) Performance of Obligations of National Media. National Media shall
have performed in all material respects all material obligations required
to be performed by it under this Agreement at or prior to the Closing Date,
and ValueVision shall have received a certificate signed on behalf of
National Media by the chief executive officer and the chief financial
officer of National Media to such effect.
(c) Tax Opinion. ValueVision shall have received the opinion of Latham
& Watkins, counsel to ValueVision, to the effect that, for Federal income
tax purposes, the ValueVision Merger will be treated as a tax-free
reorganization within the meaning of Section 368 of the Code and each of
the Mergers will be treated as transfers within the meaning of Section 351
of the Code (it being agreed that National Media shall provide reasonable
cooperation, including the delivery of such certifications as shall be
reasonably requested, to Latham & Watkins to enable it to render such
opinion).
(d) Termination of Telemarketing, Production and Post-Production
Agreement. The Telemarketing, Production and Post-Production Agreement
dated as of April 13, 1995 by and between National Media and ValueVision,
as amended, shall have been terminated and all liabilities, obligations and
amounts owed or incurred by ValueVision to National Media thereunder shall
have been released and forever discharged.
(e) Series C Convertible Preferred Stock. Each of the holders of the
Series C Convertible Preferred Stock shall have duly executed the
Redemption Agreement in the form attached hereto as Exhibit K, which
Agreement shall be in full force and effect and no material breach shall
have occurred thereunder as of the Closing Date. National Media shall have,
as of the Effective Time, redeemed all of the outstanding shares of the
Series C Convertible Preferred Stock (and the Series D Convertible
Preferred Stock issued in exchange therefore) pursuant to such Redemption
Agreement and none of such shares shall remain outstanding as of the
Effective Time.
(f) Transaction Documents. National Media shall have executed each of
the Transaction Documents to which it is a party, each of which shall be in
full force and effect and legally binding against National Media and no
material breach by National Media shall have occurred thereunder as of the
Closing Date. Each of National Media's Subsidiaries shall have executed the
Subsidiary Guarantee in the form attached hereto as Exhibit Q, which shall
be in full force and effect and legally binding against such Subsidiaries.
SECTION 6.3. Additional Conditions to Obligations of National Media. The
obligations of National Media to effect the National Media Merger are subject to
the satisfaction of each of the following conditions prior to the Effective
Time, any of which may be waived in writing exclusively by National Media:
(a) Representations and Warranties. The representations and
warranties of ValueVision set forth in this Agreement shall be true and
correct as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, except for, (i)
changes contemplated by this Agreement, (ii) inaccuracies
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which relate to the Settlement Agreement or the failure to consummate the
transactions contemplated thereby and (iii) inaccuracies which,
individually or in the aggregate, have not had and are not reasonably
likely to have a ValueVision Material Adverse Effect (without regard to any
materiality limitations contained in any such representation or warranty),
or a material adverse effect upon the consummation of the transactions
contemplated hereby; and National Media shall have received a certificate
signed on behalf of ValueVision by the chief executive officer and the
chief financial officer of ValueVision to such effect.
(b) Performance of Obligations of ValueVision. ValueVision shall have
performed in all material respects all material obligations required to be
performed by it under this Agreement at or prior to the Closing Date; and
National Media shall have received a certificate signed on behalf of
ValueVision by the chief executive officer and the chief financial officer
of ValueVision to such effect.
(c) Tax Opinion. National Media shall have received a written opinion
from Drinker, Biddle & Reath, LLP, tax counsel to National Media, to the
effect that each of the Mergers will be treated for Federal income tax
purposes as transfers within the meaning of Section 351 of the Code (it
being agreed that ValueVision shall provide reasonable cooperation,
including the delivery of such certifications as shall be reasonably
requested, to Drinker, Biddle & Reath, LLP to enable it to render such
opinion).
(d) Transaction Documents. ValueVision shall have duly executed each
of the Transaction Documents to which it is a party, and the Guaranty
attached hereto as Exhibit R (the "VVI Guaranty"), and such Transaction
Documents and VVI Guaranty shall be in full force and effect and legally
binding against ValueVision and no material breach by ValueVision shall
have occurred thereunder as of the Closing Date.
ARTICLE VII.
TERMINATION AND AMENDMENT
SECTION 7.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time (with respect to Sections 7.1(b) through 7.1(g), by
written notice by the terminating party to the other party), whether before or
after approval of the matters presented in connection with the Mergers by the
stockholders of ValueVision or National Media:
(a) by mutual written consent of ValueVision and National Media; or
(b) by either ValueVision or National Media if the Mergers shall not
have been consummated by June 1, 1998 (the "Outside Date"); provided,
however, that if the Mergers shall have not been consummated by the Outside
Date due to the failure of the condition set forth in Section 6.1(c), the
Outside Date shall be extended to August 31, 1998; and provided, further,
however, that the right to terminate this Agreement under this Section
7.1(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of or resulted in the
failure of the Mergers to occur on or before such date; or
(c) by either ValueVision or National Media if a court of competent
jurisdiction or other Governmental Entity shall have issued a nonappealable
final order, decree or ruling or taken any other nonappealable final
action, in each case having the effect of permanently restraining,
enjoining or otherwise prohibiting the Mergers; or
(d) (i) by ValueVision, if, at the National Media Stockholders'
Meeting (including any adjournment or postponement thereof), the requisite
vote of the stockholders of National Media in favor of the approval and
adoption of this Agreement and the National Media Merger shall not have
been obtained; or (ii) by National Media if, at the ValueVision
Stockholders' Meeting (including any adjournment or postponement thereof),
the requisite vote of the stockholders of ValueVision in favor of the
approval and adoption of this Agreement and the ValueVision Merger shall
not have been obtained; or
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(e) by ValueVision, if (i) the Board of Directors of National Media
shall have withdrawn or modified its recommendation of this Agreement or
the National Media Merger; (ii) after the receipt by National Media of an
Acquisition Proposal, ValueVision requests in writing that the Board of
Directors of National Media reconfirm its recommendation of this Agreement
and the National Media Merger to the stockholders of National Media and the
Board of Directors of National Media fails to do so within 10 business days
after its receipt of ValueVision's request; (iii) the Board of Directors of
National Media shall have recommended to the stockholders of National Media
an Alternative Transaction (as defined in Section 7.3(e)); (iv) a tender
offer or exchange offer for 20% or more of the outstanding shares of
National Media Common Stock is commenced (other than by ValueVision or an
Affiliate of ValueVision) and the Board of Directors of National Media
recommends that the stockholders of National Media tender their shares in
such tender or exchange offer; or (v) for any reason National Media fails
to call and hold the National Media Stockholders' Meeting by the Outside
Date (provided that ValueVision's right to terminate this Agreement under
such clause (v) shall not be available if at such time National Media would
be entitled to terminate this Agreement under Section 7.1(g)); or
(f) by National Media, if (i) the Board of Directors of ValueVision
shall have withdrawn or modified its recommendation of this Agreement or
the ValueVision Merger; (ii) after the receipt by ValueVision of an
Acquisition Proposal, National Media requests in writing that the Board of
Directors of ValueVision reconfirm its recommendation of this Agreement and
the ValueVision Merger to the stockholders of ValueVision and the Board of
Directors of ValueVision fails to do so within 10 business days after its
receipt of National Media's request; (iii) the Board of Directors of
ValueVision shall have recommended to the stockholders of ValueVision an
Alternative Transaction; (iv) a tender offer or exchange offer for 20% or
more of the outstanding shares of ValueVision Common Stock is commenced
(other than by National Media or an Affiliate of National Media) and the
Board of Directors of ValueVision recommends that the stockholders of
ValueVision tender their shares in such tender or exchange offer; or (v)
for any reason ValueVision fails to call and hold the ValueVision
Stockholders' Meeting by the Outside Date (provided that National Media's
right to terminate this Agreement under such clause (v) shall not be
available if at such time ValueVision would be entitled to terminate this
Agreement under Section 7.1(g)); or
(g) by ValueVision or National Media, if there has been a breach of
any representation, warranty, covenant or agreement on the part of the
other party set forth in this Agreement, which breach (i) will cause the
conditions set forth in Section 6.2(a) or (b) (in the case of termination
by ValueVision) or 6.3(a) or (b) (in the case of termination by National
Media) not to be satisfied, and (ii) shall not have been cured within 20
business days following receipt by the breaching party of written notice of
such breach from the other party.
SECTION 7.2. Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of ValueVision,
National Media, Parent or their respective officers, directors, stockholders or
Affiliates, except as set forth in Sections 5.15 and 7.3 and except that such
termination shall not limit liability for a willful breach of this Agreement;
provided that, the provisions of Sections 5.15 and 7.3 of this Agreement, the
Stock Option Agreements, the Demand Note, the Series C Note, the Warrant
Agreement, the Registration Rights Agreement and the Confidentiality Agreement
shall remain in full force and effect and survive any termination of this
Agreement.
SECTION 7.3. Fees and Expenses.
(a) Except as set forth in this Section 7.3, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses, if the Mergers are not
consummated; provided, however, that if the Mergers are consummated, ValueVision
shall pay for all fees and expenses incurred by National Media in connection
with the Mergers and the transactions contemplated hereunder.
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(b) ValueVision shall pay National Media a termination fee of $5.0 million
upon the earliest to occur of the following events:
(i) the termination of this Agreement by National Media pursuant to
Section 7.1(d)(ii), but only if a proposal for an Alternative Transaction
involving ValueVision shall have been publicly announced prior to the
ValueVision Stockholders' Meeting and either a definitive agreement for an
Alternative Transaction is entered into, or an Alternative Transaction is
consummated, within eighteen months of such termination; or
(ii) the termination of this Agreement by National Media pursuant to
Section 7.1(f), if a proposal for an Alternative Transaction involving
ValueVision shall have been made prior to the ValueVision Stockholders'
Meeting.
ValueVision's payment of a termination fee pursuant to this subsection
shall be the sole and exclusive remedy of National Media against ValueVision and
any of its Subsidiaries and their respective directors, officers, employees,
agents, advisors or other representatives with respect to the occurrences giving
rise to such payment; provided that this limitation shall not apply in the event
of a willful breach of this Agreement by ValueVision. Notwithstanding the
foregoing, if and to the extent that National Media has purchased shares of
ValueVision Common Stock pursuant to the National Media Stock Option Agreement,
the amount payable to National Media under this Section 7.3(b), together with
(i) (x) the amount received by National Media pursuant to ValueVision'
repurchase of Shares (as defined in the National Media Stock Option Agreement)
pursuant to Section 7 of the National Media Stock Option Agreement, less (y)
National Media's purchase price for such Shares, and (ii) (x) the net cash
amounts received by National Media pursuant to the sale of Shares (or any other
securities into which such Shares are converted or exchanged) to any
unaffiliated party, less (y) National Media's purchase price for such Shares,
shall not exceed $7.5 million.
(c) National Media shall pay ValueVision a termination fee of $5.0 million
upon the earliest to occur of the following events:
(i) the termination of this Agreement by ValueVision pursuant to
Section 7.1(d)(i), but only if a proposal for an Alternative Transaction
involving National Media shall have been publicly announced prior to the
National Media Stockholders' Meeting and either a definitive agreement for
an Alternative Transaction is entered into, or an Alternative Transaction
is consummated, within eighteen months of such termination; or
(ii) the termination of this Agreement by ValueVision pursuant to
Section 7.1(e), if a proposal for an Alternative Transaction involving
National Media shall have been made prior to the National Media
Stockholders' Meeting.
National Media's payment of a termination fee pursuant to this subsection
shall be the sole and exclusive remedy of ValueVision against National Media and
any of its Subsidiaries and their respective directors, officers, employees,
agents, advisors or other representatives with respect to the occurrences giving
rise to such payment; provided that this limitation shall not apply in the event
of a willful breach of this Agreement by National Media. Notwithstanding the
foregoing, if and to the extent that ValueVision has purchased shares of
National Media Common Stock pursuant to the ValueVision Stock Option Agreement,
the amount payable to ValueVision under this Section 7.3(c), together with (i)
(x) the amount received by ValueVision pursuant to National Media's repurchase
of Shares (as defined in the ValueVision Stock Option Agreement) pursuant to
Section 7 of the ValueVision Stock Option Agreement, less (y) ValueVision'
purchase price for such Shares, and (ii) (x) the net cash amounts received by
ValueVision pursuant to the sale of Shares (or any other securities into which
such Shares are converted or exchanged) to any unaffiliated party, less (y)
ValueVision' purchase price for such Shares, shall not exceed $7.5 million.
(d) The expenses and fees, if applicable, payable pursuant to Section
7.3(b) or 7.3(c) shall be paid concurrently with the first to occur of the
events described in Section 7.3(b)(i) or (ii) or 7.3(c)(i) or (ii).
(e) As used in this Agreement, "Alternative Transaction" means either (i) a
transaction pursuant to which any person (or group of persons) other than
ValueVision or National Media or their respective affiliates (a "Third Party"),
acquires more than 20% of the outstanding shares of ValueVision Common Stock or
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National Media Common Stock, as the case may be, pursuant to a tender offer or
exchange offer or otherwise, (ii) a merger or other business combination
involving ValueVision or National Media pursuant to which any Third Party
acquires more than 20% of the outstanding shares of ValueVision Common Stock or
National Media Common Stock, as the case may be, or the entity surviving such
merger or business combination, (iii) any other transaction pursuant to which
any Third Party acquires control of assets (including for this purpose the
outstanding equity securities of Subsidiaries of ValueVision or National Media,
and the entity surviving any merger or business combination including any of
them) of ValueVision or National Media having a fair market value (as determined
by the Board of Directors of ValueVision or National Media, as the case may be,
in good faith) equal to more than 20% of the fair market value of all the assets
of ValueVision or National Media, as the case may be, and their respective
Subsidiaries, taken as a whole, immediately prior to such transaction, or (iv)
any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
SECTION 7.4. Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Mergers by the stockholders of ValueVision or National Media, but, after any
such approval, no amendment shall be made which by law requires further approval
by such stockholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto; provided, however, that this Agreement may be amended in writing
without obtaining the signatures of ValueVision, National Media or Parent solely
for the purpose of adding Merger Sub 1 and Merger Sub 2 as parties to this
Agreement.
SECTION 7.5. Extension; Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties of the other
parties hereto contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions of the other
parties hereto contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.1. Nonsurvival of Representations, Warranties and
Agreements. None of the representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for the agreements contained in Sections 1.6,
1.7, 1.8, 2.1, 2.2, 2.3, 2.4, 2.5, 5.10, 5.13, 5.14, 5.15, 5.18, 5.19, 5.22,
5.23, 5.24, 5.25 and 5.26 and this Article VIII, and the agreements of the
Affiliates delivered pursuant to Section 5.11. The Confidentiality Agreement
shall survive the execution and delivery of this Agreement.
SECTION 8.2. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to ValueVision, to
ValueVision International, Inc.
6740 Shady Oak Road
Eden Prairie, Minnesota 55344-3433
Attention: General Counsel
Telecopy: (612) 947-0141
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with a copy to
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071-2007
Attention: Michael W. Sturrock, Esq.
Telecopy: (213) 891-8763
(b) if to National Media, to
National Media Corporation
Eleven Penn Center
Suite 1100
1835 Market Street
Philadelphia, Pennsylvania 19103
Attention: General Counsel
Telecopy: (215) 988-4900
with a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, Pennsylvania 19102-3163
Attention: Stephen T. Burdumy, Esq.
Telecopy (215) 568-6603
SECTION 8.3. Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
phrases "the date of this Agreement", "the date hereof," and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to
January 5, 1998.
SECTION 8.4. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
SECTION 8.5. Entire Agreement; No Third Party Beneficiaries. This Agreement
and all documents and instruments referred to herein (a) constitute the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and
thereof, and (b) except as provided in Section 5.15, are not intended to confer
upon any person (including, without limitation, the individuals identified in
Section 5.19) other than the parties hereto any rights or remedies hereunder;
provided that the Confidentiality Agreement shall remain in full force and
effect until the Effective Time. Each party hereto agrees that, except for the
representations and warranties contained in this Agreement, neither ValueVision
nor National Media makes any other representations or warranties, and each
hereby disclaims any other representations and warranties made by itself or any
of its officers, directors, employees, agents, financial and legal advisors or
other representatives, with respect to the execution and delivery of this
Agreement or the transactions contemplated hereby, notwithstanding the delivery
or disclosure to the other or the other's representatives of any documentation
or other information with respect to any one or more of the foregoing.
SECTION 8.6. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without regard to
any applicable conflicts of law.
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SECTION 8.7. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
SECTION 8.8 References to "Stockholders". All references to "stockholder"
or "stockholders" in this Agreement shall be deemed to refer to "shareholder" or
"shareholders," respectively, with respect to ValueVision.
IN WITNESS WHEREOF, ValueVision, National Media and Parent have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first written above.
VALUEVISION INTERNATIONAL, INC.
/s/ ROBERT L. JOHANDER
--------------------------------------
By: Robert L. Johander
Its: Chairman of the Board and
Chief Executive Officer
NATIONAL MEDIA CORPORATION
/s/ ROBERT N. VERRATTI
--------------------------------------
By: Robert N. Verratti
Its: President and Chief Executive
Officer
V-L HOLDINGS CORP.
/s/ ROBERT L. JOHANDER
--------------------------------------
By: Robert L. Johander
Its: Chief Executive Officer
A-43
<PAGE> 167
ANNEX B
January 5, 1998
Board of Directors
National Media Corporation
Eleven Penn Center, Suite 1100
1835 Market Street
Philadelphia, PA 19103
Members of the Board:
We understand that National Media Corporation (the "Company") and
ValueVision International, Inc. ("VICTORY") are proposing to enter into an
agreement whereby the Company and VICTORY will each become wholly-owned
subsidiaries of a newly formed holding company ("Parent" or "NewCo") (such
transactions being referred to herein as the "Merger"), and upon effectiveness
of the Merger, each issued and outstanding share of common stock of the Company
will be exchanged for 1.00 share of common stock of Parent (the "Exchange
Ratio") and each issued and outstanding share of common stock of VICTORY will be
exchanged for 1.19 shares of common stock of Parent (the "Proposed
Transaction"). Following the Merger, the Company and VICTORY will have equal
representation on the Board of Directors of Parent. We further understand that,
as conditions to the consummation of the Proposed Transaction, (i) VICTORY will
restructure its current relationship with Montgomery Ward ("MW"), so as to
cancel the warrants to purchase 3.8 million shares of common stock of VICTORY
held by MW and to repurchase 1.3 million shares of common stock of VICTORY held
by MW for an aggregate purchase price of $4.9 million (the "MW Restructuring"),
and (ii) the Company will repurchase all of its outstanding shares of Series C
Convertible Preferred Stock ("the Preferred C shares") for an aggregate
consideration of (A) cash in an amount equal to the accreted principal amount
plus an 18% pro rata premium applied to the accreted principal amount and (B)
warrants to purchase 500,000 shares of common stock of the Company at an
exercise price of $6.82 per share (the "Repurchase" and, together with the MW
Restructuring, the "Conditions"). The terms and conditions of the Proposed
Transaction are set forth in more detail in the definitive Merger Agreement
dated January 5, 1998 among the Company, VICTORY and Parent (the "Agreement").
We further understand that, as a condition to the Company's willingness to
proceed with the Proposed Transaction, Victory has agreed to provide up to $10
million of working capital financing to the Company prior to the closing of the
Proposed Transaction (the "Working Capital Facility"), including an initial
drawdown of $7 million.
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to the
shareholders of the Company (other than the holders of the Preferred C shares)
of the Exchange Ratio to be received by such shareholders in the Proposed
Transaction. We have not been requested to opine as to, and our opinion does not
in any manner address, the Company's underlying business decision to proceed
with or effect the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and
the specific terms of the Proposed Transaction, including provisions therein
relating to corporate governance and management of Parent following the Merger;
(2) publicly available information concerning the Company and VICTORY that we
believe to be relevant to our analysis; (3) financial and operating information
with respect to the business, operations and prospects of the Company, VICTORY
and the combined company following consummation of the Proposed Transaction
furnished to us by the Company and VICTORY; (4) trading histories of the
Company's and VICTORY's common stocks from December 10, 1996 to December 31,
1997 and a comparison of those trading histories with those of other companies
that we deemed relevant; (5) a comparison of the historical financial results
and present financial conditions of the Company and VICTORY with those of other
companies that we deemed relevant; (6) the Company's current cash flow forecast
and limited cash position, its ability to meet short-term liquidity requirements
and the potential alternatives available to the Company to fund such
requirements, including the likelihood of being required to issue equity
securities to any potential source of financing or the sale of all or a portion
of the Company's businesses; (7) a comparison of the financial terms of the
Proposed Transaction with the financial terms of certain other transactions that
we deemed relevant; and (8) the potential pro forma effects of the Proposed
Transaction,
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<PAGE> 168
including the cost savings, operating synergies and other strategic benefits
expected by the management of the Company to result from a combination of the
businesses of the Company and VICTORY. In addition, we have had discussions with
the managements of the Company and VICTORY concerning their respective
businesses, operations, assets, financial conditions and prospects (including,
without limitation, the cost savings, operating synergies and other strategic
benefits expected by management of the Company to result from a combination of
the businesses of the Company and VICTORY) and have undertaken such other
studies, analyses and investigations as we deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of managements of the Company and of
VICTORY that they are not aware of any facts or circumstances that would make
such information inaccurate or misleading. With respect to the financial
projections of the Company, VICTORY and the combined company following
consummation of the Proposed Transaction, upon advice of the Company we have
assumed that such projections have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
managements of the Company and of VICTORY as to the future financial performance
of the Company, VICTORY and the combined company following consummation of the
Proposed Transaction (including, without limitation, the cost savings, operating
synergies and other strategic benefits expected by management of the Company to
result from a combination of the businesses of the Company and VICTORY) and we
have relied upon such projections in arriving at our opinion. In addition, based
upon information and analyses provided to the Company by VICTORY, the Company
has requested that we also assume that the resolution of the action by Time
Warner Cable against Bridgeways Communications Corporation and VICTORY will not
have a material adverse impact on the business, operations, financial condition
or prospects of VICTORY or the combined company following consummation of the
Proposed Transaction. In arriving at our opinion, we have not conducted a
physical inspection of the properties and facilities of the Company or VICTORY
and have not made or obtained any evaluations or appraisals of the assets or
liabilities of the Company or VICTORY. In arriving at our opinion, we also have
assumed that both of the Conditions will be satisfied prior to the consummation
of the Proposed Transaction without any waivers or modifications of any material
terms thereof and that the Working Capital Facility will be provided to the
Company by VICTORY in accordance with its proposed terms. Upon advice of the
Company and its legal and accounting advisors, we have further assumed that the
Merger will qualify as a transfer of property to Parent as described in Section
351 of the Internal Revenue Code of 1986 and will be treated as an acquisition
of the Company by VICTORY for accounting purposes. In addition, although we have
responded to inquiries on your behalf, we have not formally solicited any
indications of interest from any third party with respect to the purchase of all
or a part of the Company's business. Our opinion necessarily is based upon
market, economic and other conditions as they exist on, and can be evaluated as
of, the date of this letter.
In addition, we express no opinion as to the prices at which shares of
common stock of the Parent actually will trade following consummation of the
Proposed Transaction and this opinion should not be viewed as providing any
assurance to the shareholders of the Company that the market value of the shares
of common stock of Parent to be received by such shareholders in the Merger will
be equal to or in excess of the market value of the shares of common stock of
the Company owned by such shareholders at any time prior to announcement or
consummation of the Proposed Transaction.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the Exchange Ratio to be
received by the Company's shareholders in the Proposed Transaction is fair to
such shareholders.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services which is contingent
upon the consummation of the Proposed Transaction. In addition, the Company has
agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. In the ordinary course of our business, we may trade
in the equity securities of the Company and VICTORY for our own account and for
the accounts of our customers and, accordingly, may at any time hold a long or
short position in such securities.
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<PAGE> 169
This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered to the Board of Directors in connection with its
consideration of the Proposed Transaction. This opinion is not intended to be
and does not constitute a recommendation to any shareholder of the Company as to
how the shareholders should vote with respect to the Proposed Transaction.
Very truly yours,
/s/ LEHMAN BROTHERS
B-3
<PAGE> 170
ANNEX C
January 5, 1998
Board of Directors
ValueVision International Inc.
6740 Shady Oak Road
Eden Prairie, MN 55344-3433
Dear Sirs:
We understand that pursuant to an Agreement and Plan of Merger dated as of
January 5, 1998 (the "Merger Agreement") among ValueVision International Inc.
("ValueVision"), National Media Corporation ("National Media") and V-L Holdings
Corp. ("Parent"), ValueVision and National Media have agreed to a merger
transaction pursuant to which (i) ValueVision Acquisition Corp. ("Merger Sub
1"), a wholly-owned subsidiary of Parent, will be merged into ValueVision and
each share of common stock of ValueVision will be converted into 1.19 shares of
common stock of Parent (the "Exchange Ratio") and, (ii) National Media
Acquisition Corp. ("Merger Sub 2"), also a wholly-owned subsidiary of Parent,
will be merged into National Media and each share of common stock of National
Media will be converted into 1.00 shares of common stock of Parent (together,
the "Merger"). We further understand that as part of the transaction,
ValueVision will (a) extend a $10 million working capital loan to National Media
prior to closing and (b) has agreed pursuant to a Redemption and Consent
Agreement dated as of January 5, 1998 to fund, subject to certain conditions,
the repurchase by National Media of its outstanding Series C Convertible
Preferred Stock (and any shares exchanged therefor). We further understand that
the Merger will be accounted for under purchase accounting and Sections 351 and
368(a) (solely with respect to ValueVision) of the Internal Revenue Code of
1986, as amended, as contemplated by the Merger Agreement.
You have asked us to render our opinion as to whether the Exchange Ratio is
fair, from a financial point of view, to the shareholders of ValueVision.
In the course of performing our reviews and analyses for rendering this
opinion, we have:
1. reviewed the Merger Agreement (including the exhibits thereto) in
substantially final form as provided by you to us and have assumed that
the final Form of such agreement will not vary in any regard that is
material to our analysis;
2. reviewed the Annual Report to Shareholders and the Annual Report on
Form 10-K for the year ended January 31, 1997, and the Quarterly
Reports on Form 10-Q for the periods ended April 30, July 31 and
October 31, 1997 for ValueVision;
3. reviewed the Annual Report to Shareholders and the Annual Report on
Form 10-K for the year ended March 31, 1997, and the Quarterly Report
on Form 10-Q for the periods ended June 30, and September 30, 1997 for
National Media;
4. reviewed certain operating and financial information, including
internal projections of future financial results, provided to us and
reviewed for us by the senior managements of ValueVision and National
Media relating to ValueVision's and National Media's businesses and
future prospects;
5. met with certain members of ValueVision's senior management to discuss
ValueVision's operations, historical financial statements and future
prospects, as well as their views of the business, operational and
strategic benefits, potential synergies and other implications of the
Merger;
6. met with certain members of National Media's senior management to
discuss National Media's operations, historical financial statements
and future prospects, and their views of the business, operational and
strategic benefits, potential synergies and other implications of the
Merger;
7. reviewed the historical stock prices, trading volumes and valuation
parameters of ValueVision and National Media common stock;
8. reviewed certain publicly available financial data, stock market
performance data and valuation parameters of companies we have deemed
generally comparable to ValueVision and National Media;
9. reviewed the financial terms of certain other recent acquisitions of
companies which we deemed generally comparable to ValueVision and to
National Media; and
10. conducted such other studies, analyses, inquiries and investigations as
we deemed appropriate.
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<PAGE> 171
In the course of our review, we have relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information, including projections, provided to us by ValueVision and
National Media or otherwise publicly available. With respect to projected
results and the potential synergies that could be achieved upon consummation of
the Merger, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the senior
managements of ValueVision and National Media as to expected future performance
of ValueVision, National Media, and Parent, including the potential synergies of
the Merger. We express no view with respect to the obtainability of such
projections and potential synergies or the assumptions on which they are based.
We have not assumed any responsibility for the independent verification of any
such information or projections provided to us and we have relied further upon
the assurances of the senior managements of ValueVision and National Media that
they are unaware of any facts that would make the information or projections
provided to us incomplete or misleading. We further have relied upon ValueVision
management's estimate of the liability associated with the currently outstanding
litigation with respect to National Media and we express no opinion on such
litigation and no view as to the estimate of such liability. In arriving at our
opinion, we have not performed or obtained any independent appraisal of the
assets or liabilities of ValueVision or National Media nor have we been
furnished with any such appraisals. Our opinion is necessarily based on the
economic, market and other conditions, and the information made available to us,
as of the date hereof. This opinion does not address ValueVision's underlying
decision to effect the Merger.
For purposes of rendering our opinion we have assumed, with your consent,
that the projections provided by ValueVision are reasonably obtainable, and that
the synergies described as being reasonably obtainable will be obtained. We have
also assumed, with your consent, that the representations and warranties of each
party contained in the Merger Agreement are true and correct in all material
respects, that each party will perform in all material respects all of the
material covenants and agreements required to be performed by it under the
Merger Agreement and that all conditions to the consummation of the Merger will
be satisfied or waived, unless the waiver of such condition would materially
impact ValueVision.
We do not express any opinion as to the price or range of prices at which
shares of common stock of Parent may trade subsequent to the consummation of a
Merger.
We have acted as financial advisor to ValueVision in connection with the
Merger and will receive a fee for such advisory services, including the
rendering of this opinion, payment of a significant portion of which is
contingent on the consummation of the Merger.
In the ordinary course of business, Bear Stearns may actively trade the
securities of ValueVision and National Media for its own account and for the
accounts of customers and accordingly, may, at any time, hold a long or short
position in such securities.
It is understood that this letter is intended for the benefit and use of
the Board of Directors of ValueVision in its evaluation of the transaction. This
letter does not constitute a recommendation to the Board of Directors of
ValueVision to approve the Merger. This letter does not constitute a
recommendation to any shareholder as to how such shareholder should vote on the
Merger. It is understood that this letter may be included in the proxy statement
to be mailed to shareholders of National Media or ValueVision, or in the
prospectus which is part of the registration statement on Form S-4 to be filed
by Parent with the Securities and Exchange Commission, provided that this letter
will be reproduced in such proxy statement or prospectus in full, and any
description of or reference to us or summary of this letter in such proxy
statement or prospectus will be in a form acceptable to us and our counsel.
Except as provided above, this letter is not to be reproduced, disseminated,
quoted from or referred to at any time, in whole or in part, without our prior
written consent.
Based on and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair to the holders of ValueVision common
stock from a financial point of view.
Very truly yours,
BEAR, STEARNS & CO. INC.
By: /s/ JAMES B. CARROLL
------------------------------------
Managing Director
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<PAGE> 172
ANNEX D
RESTATED
CERTIFICATE OF INCORPORATION
OF
V-L HOLDINGS CORP.
The present name of the Corporation is . The Corporation was
incorporated under the name "V-L Holdings Corp." by the filing of its original
Certificate of Incorporation with the Secretary of State of the State of
Delaware on , 1997 This Restated Certificate of Incorporation of the
Corporation, which both restates and further amends the provisions of the
Corporation's Certificate of Incorporation, was duly adopted in accordance with
the provisions of Sections 242 and 245 of the General Corporation Law of the
State of Delaware and by the unanimous written consent of its stockholders in
accordance with Section 228 of the General Corporation Law of the State of
Delaware. The Certificate of Incorporation of the Corporation is hereby amended
and restated to read in its entirety as follows:
FIRST: The name of the Corporation is .
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Service Company, 1013 Centre Road, in the City
of Wilmington, County of New Castle, State of Delaware. The name of its
registered agent at that address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware as set forth in Title 8 of the Delaware Code (the "GCL").
FOURTH: A. The total number of shares of stock which the Corporation shall
have authority to issue is 210,000,000 (the "Capital Stock") consisting of
200,000,000 shares of Common Stock, par value $.01 per share (the "Common
Stock"), and 10,000,000 shares of Preferred Stock, par value of $.01 per share
(the "Preferred Stock").
B. Shares of Preferred Stock may be issued from time to time in one or more
series, as provided for herein or as provided for by the Board of Directors as
permitted hereby. All shares of Preferred Stock shall be of equal rank and shall
be identical, except in respect of the terms fixed herein for the series
provided for herein or fixed by the Board of Directors for any series provided
for by the Board of Directors as permitted hereby. All shares of any one series
shall be identical in all respects with all the other shares of such series,
except the shares of any one series issued at different times may differ as to
the dates from which dividends thereon may be cumulative.
The Board of Directors is hereby authorized, by resolution or resolutions,
to establish, out of the unissued shares of Preferred Stock not then allocated
to any series of Preferred Stock, additional series of Preferred Stock. Before
any shares of any such additional series are issued, the Board of Directors
shall fix and determine, and is hereby expressly empowered to fix and determine,
by resolution or resolutions, the number of shares constituting such series and
the distinguishing characteristics and the relative rights, preferences,
privileges and immunities, if any, and any qualifications, limitations or
restrictions thereof, of the shares thereof, so far as not inconsistent with the
provisions of this Article FOURTH. Without limiting the generality of the
foregoing, the Board of Directors may fix and determine:
1. The designation of such series and the number of shares which shall
constitute such series of such shares;
2. The rate of dividend, if any, payable on shares of such series;
3. Whether the shares of such series shall be cumulative,
non-cumulative or partially cumulative as to dividends, and the dates from
which any cumulative dividends are to accumulate;
4. Whether the shares of such series may be redeemed, and, if so, the
price or prices at which and the terms and conditions on which shares of
such series may be redeemed;
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<PAGE> 173
series in the event of the voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Corporation;
6. The sinking fund provisions, if any, for the redemption of shares
of such series;
7. The voting rights, if any, of the shares of such series;
8. The terms and conditions, if any, on which shares of such series
may be converted into shares of capital stock of the Corporation of any
other class or series;
9. Whether the shares of such series are to be preferred over shares
of capital stock of the Corporation of any other class or series as to
dividends, or upon the voluntary or involuntary dissolution, liquidation,
or winding up of the affairs of the Corporation, or otherwise; and
10. Any other characteristics, preferences, limitations, rights,
privileges, immunities or terms not inconsistent with the provisions of
this Article FOURTH.
C. Except as otherwise provided in this Restated Certificate of
Incorporation, each holder of Common Stock shall be entitled to one vote for
each share of Common Stock held by him on all matters submitted to stockholders
for a vote and each holder of Preferred Stock of any series that is Voting Stock
(as hereinafter defined) shall be entitled to such number of votes for each
share held by him as may be specified herein or in the Certificate of
Designation in respect thereof.
Except as otherwise provided by law, the presence, in person or by proxy,
of the holders of record of issued and outstanding shares of Capital Stock
entitling the holders thereof to cast a majority of the votes entitled to be
cast by the holders of issued and outstanding shares of Capital Stock entitled
to vote shall constitute a quorum at all meetings of the stockholders.
FIFTH: A. The Board of Directors shall have the power to make, adopt,
alter, amend, change or repeal the Amended and Restated Bylaws of the
Corporation (the "Bylaws") by resolution adopted by the affirmative vote of a
majority of the entire Board of Directors, subject to any law or Bylaw provision
requiring the affirmative vote of a larger percentage of the members of the
Board of Directors.
B. Stockholders may not make, adopt, alter, amend, change or repeal the
Bylaws of the Corporation or any provision of this Restated Certificate of
Incorporation except upon the affirmative vote of at least 70% of the votes
entitled to be cast by the holders of all outstanding shares then entitled to
vote generally in the election of directors, voting together as a single class.
SIXTH: The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors, which shall consist of not less
than three or more than twenty directors, the exact number of directors to be
determined from time to time by the Bylaws. The Board of Directors shall be
divided into three classes, designated Class I, Class II and Class III. Class I
shall initially consist of four directors, and each of Class II and Class III
shall initially consist of three directors. Class I directors shall be initially
elected for a term expiring at the first annual meeting of stockholders of the
Corporation following the date hereof, Class II directors shall be initially
elected for a term expiring at the second annual meeting of stockholders of the
Corporation following the date hereof, and Class III directors shall be
initially elected for a term expiring at the third annual meeting of
stockholders of the Corporation following the date hereof. At each annual
meeting of stockholders, beginning in 1999, successors to the class of directors
whose term expires at that annual meeting shall be elected for a three year
term. If the number of directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of directors in each
class as nearly equal as possible, and any additional director of any class
elected to fill a vacancy resulting from an increase in such class shall hold
office for a term that shall coincide with the remaining term of that class, but
in no case will a decrease in the number of directors shorten the term of any
incumbent director. A director shall hold office until the annual meeting for
the year in which his term expires and until his successor shall be elected and
shall qualify, subject, however, to such director's prior death, resignation,
retirement, disqualification or removal from office. Subject to Article III,
Section 1 of the Bylaws, any vacancy on the Board of Directors that results from
an increase in the number of directors and any other vacancy may only be filled
by a majority of the directors then in office, even if less than a quorum, or by
a sole remaining director. Any
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director elected to fill a vacancy not resulting from an increase in the number
of directors shall have the same remaining term as that of his predecessor.
Notwithstanding the foregoing, whenever the holders of any one or more
series of Preferred Stock issued by the Corporation shall have the right, voting
separately as a class or series, to elect directors at an annual or special
meeting of stockholders, the election, term of office, removal, filling of
vacancies and other features of such directorships shall be governed by the
terms of this Restated Certificate of Incorporation applicable thereto
(including the resolutions of the Board of Directors pursuant to Article FOURTH
hereof), and such Directors so elected shall not be divided into classes
pursuant to this Article SIXTH unless expressly provided by such terms.
SEVENTH: Special meetings of the stockholders of the Corporation, for any
purpose or purposes, may only be called at any time by a majority of the entire
Board of Directors or by either the Chairman or the President of the
Corporation.
EIGHTH: No stockholder action may be taken except at an annual or special
meeting of stockholders of the Corporation and stockholders of the corporation
may not take any action by written consent in lieu of a meeting.
NINTH: Directors and officers, in exercising their respective powers with a
view to the interests of the Corporation, may consider:
(a) The interests of the Corporation's employees, suppliers, creditors
and customers;
(b) The economy of the state and nation;
(c) The interests of the community and of society; and
(d) The long-term as well as short-term interests of the Corporation
and its stockholders, including the possibility that these interests may be
best served by the continued independence of the Corporation.
This Article NINTH does not create or authorize any causes of action
against the corporation or its directors or officers.
TENTH: A. Subject to Section C of this Article TENTH, the Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that he is or was a director
or officer of the Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best interest
of the Corporation, or, with respect to any criminal action or proceeding, had
reasonable cause to believe his conduct was unlawful.
B. Subject to Section C of this Article TENTH, the Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interest of the Corporation; except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that
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the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
C. Any indemnification under this Article TENTH (unless ordered by a court)
shall be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section A or Section B of this Article TENTH, as the case may be. Such
determination shall be made (i) by a majority vote of directors who were not
parties to such action, suit or proceeding, even though less than a quorum, or
(ii) by a committee of such disinterested directors designated by a majority of
such disinterested directors, even though less than a quorum, or (iii) if there
are no such disinterested directors or if such disinterested directors so
direct, by independent legal counsel in a written opinion, or (iv) by the
stockholders. To the extent, however, that a director or officer of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding described in Section A or Section B of this Article
TENTH, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith, without the necessity of authorization
in the specific case.
D. For purposes of any determination under Section C of this Article TENTH,
a person shall be deemed to have acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
Corporation, and, with respect to any criminal action or proceeding, to have had
no reasonable cause to believe his conduct was unlawful, if his action is based
on the records or books of account of the Corporation or another enterprise, or
on information supplied to him by the officers of the Corporation or another
enterprise in the course of their duties, or on the advice of legal counsel for
the Corporation or another enterprise or on information or records given or
reports made to the Corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or another enterprise. The term "another
enterprise" as used in this Section D of Article TENTH shall mean any other
corporation or any partnership, joint venture, trust or other enterprise of
which such person is or was serving at the request of the Corporation as a
director, officer, employee or agent. The provisions of this Section D shall not
be deemed to be exclusive or to limit in any way the circumstances in which a
person may be deemed to have met the applicable standard of conduct set forth in
Sections A or B of this Article TENTH as the case may be.
E. Notwithstanding any contrary determination in the specific case under
Section C of this Article TENTH, and notwithstanding the absence of any
determination thereunder, any director or officer may apply to any court of
competent jurisdiction in the State of Delaware for indemnification to the
extent otherwise permissible under Sections A and B of this Article TENTH. The
basis of such indemnification by a court shall be a determination by such court
that indemnification of the director or officer is proper in the circumstances
because he has met the applicable standards of conduct set forth in Sections A
or B of this Article TENTH, as the case may be. Notice of any application for
indemnification pursuant to this Section E of Article TENTH shall be given to
the Corporation promptly upon the filing of such application.
F. Expenses incurred by a director or officer of the Corporation in
defending or investigating a threatened or pending action, suit or proceeding
shall be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Corporation as authorized in
this Article TENTH.
G. The indemnification and advancement of expenses provided by this Article
TENTH shall not be deemed exclusive of any other rights to which any person
seeking indemnification or advancement of expenses may be entitled under any
Bylaw, agreement, contract, vote of stockholders or disinterested directors or
pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, it being the policy of the
Corporation that indemnification of, and advancement of expenses to, the persons
specified in
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Sections A and B of this Article TENTH shall be made to the fullest extent
permitted by law. The provisions of this Article TENTH shall not be deemed to
preclude the indemnification of, and advancement of expenses to, any person who
is not specified in Sections A or B of this Article TENTH but whom the
Corporation has the power or obligation to indemnify under the provisions of the
General Corporation Law of the State of Delaware, or otherwise. The
indemnification provided by this Article TENTH shall continue as to a person who
has ceased to be a director or officer and shall inure to the benefit of the
heirs, executors and administrators of such person.
H. The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director or officer of the Corporation, or, while a
director or officer of the Corporation, is or was serving at the request of the
Corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power or the obligation to
indemnify him against such liability under the provisions of this Article TENTH.
I. For purposes of this Article TENTH, reference to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors or officers, so that any person who is or
was a director or officer of such constituent corporation, or is or was serving
at the request of such constituent corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article TENTH with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
ELEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of the GCL or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
the provisions of Section 279 of the GCL, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
TWELFTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Restated Certificate of Incorporation, in
the manner now or thereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
THIRTEENTH: No director of this Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law, (iii) under Section 174 of the GCL, or (iv) for any
transaction from which the director derived an improper personal benefit. If the
GCL is hereafter amended to authorize corporate action further limiting or
eliminating the personal liability of directors, then the liability of each
director of the Corporation shall be limited or eliminated to the fullest extent
permitted by the GCL as so amended from time to time.
FOURTEENTH: A. Any provisions herein to the contrary notwithstanding,
except as otherwise provided by law, not more than twenty percent (20%) of the
aggregate voting power of all shares outstanding entitled to vote on any matter
shall be at any time voted by or for the account of aliens or their
representatives, or by or
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for the account of a foreign government or representative thereof, or by or for
the account of any corporation organized under the laws of a foreign country.
The Board of Directors shall make such rules and regulations as it shall
deem necessary or appropriate to enforce the provisions of this paragraph A.
B. Except as otherwise provided by law, aliens, foreign governments, or
corporations organized under the laws of a foreign country, or the
representatives of such aliens, foreign governments, or corporations organized
under the laws of a foreign country shall not own, directly or through a third
party who holds the stock for the account of such alien, foreign government, or
corporation organized under the laws of a foreign country: (1) more than twenty
percent (20%) of the number of shares of outstanding stock of the Corporation,
or (2) shares representing more than twenty percent (20%) of the aggregate
voting power of all outstanding shares of voting stock of the Corporation.
Shares of stock shall not be transferable on the books of the Corporation
to aliens, foreign governments or corporations organized under the laws of
foreign countries, or to the representatives of, or persons holding for the
account of, such aliens, foreign governments or corporations organized under the
laws of foreign countries, unless, after giving effect to such transfer, the
aggregate number of shares of stock owned by or for the account of aliens,
foreign governments, and corporations organized under the laws of foreign
countries, and any representatives thereof, will not exceed twenty percent (20%)
of the number of shares of outstanding stock of the Corporation, and the
aggregate voting power of such shares will not exceed twenty percent (20%) of
the aggregate voting power of all outstanding shares of voting stock of the
Corporation.
If, notwithstanding the restriction on transfer set forth in this Article
FOURTEENTH, the aggregate number of shares of stock owned by or for the account
of aliens, foreign governments, and corporations organized under the laws of
foreign countries, exceeds twenty percent (20%) of the number of shares of
outstanding stock of the Corporation, or if the aggregate voting power of such
shares exceeds twenty percent (20%) of the aggregate voting power of all
outstanding shares of voting stock of the Corporation, the Corporation shall
have the right to redeem shares of all classes or capital stock, at their then
fair market value, on a pro rata basis, owned by or for the account of all
aliens, foreign governments, and corporations organized under the laws of
foreign countries, in order to reduce the number of shares and/or percentage of
voting power held by or for the account of aliens, foreign governments, and
corporations organized under the laws of foreign countries, and their
representatives to the maximum number or percentage allowed under this Restated
Certificate of Incorporation or as otherwise require by applicable federal law.
The Board Directors shall make such rules and regulations as it deems
necessary or appropriate to enforce the foregoing provisions of this Article
FOURTEENTH.
IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by Robert L. Johander, its Chief Executive Officer and attested by David
T. Quinby, its Secretary, this day of , 1998.
By:
--------------------------------------
Robert L. Johander
Chief Executive Officer
ATTEST:
- -----------------------------------
David T. Quinby
Secretary
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ANNEX E
AMENDED AND RESTATED
BYLAWS
OF
V-L HOLDINGS CORP.
ARTICLE I.
OFFICES
SECTION 1. Registered Office. The registered office of V-L Holdings Corp.
(the "Corporation") shall be at Corporation Service Company, 1013 Centre Road,
in the City of Wilmington, County of New Castle, State of Delaware.
SECTION 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors of the Corporation (the "Board of Directors") may from time to time
determine.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
SECTION 1. Place of Meetings. Meetings of the stockholders for the election
of directors or for any other purpose shall be held at such time and place,
either within or without the State of Delaware as shall be designated from time
to time by the Board of Directors and stated in the notice of the meeting or in
a duly executed waiver of notice thereof.
SECTION 2. Annual Meetings. The annual meeting of stockholders shall be
held on such date and at such time as may be fixed by the Board of Directors and
stated in the notice of the meeting, for the purpose of electing directors and
for the transaction of only such other business as is properly brought before
the meeting in accordance with these Amended and Restated Bylaws (these
"Bylaws").
Written notice of an annual meeting stating the place, date and hour of the
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than ten nor more than sixty days before the date of the meeting.
To be properly brought before the annual meeting, business must be either
(i) specified in the notice of annual meeting (or any supplement or amendment
thereto) given by or at the direction of the Board of Directors, (ii) otherwise
brought before the annual meeting by or at the direction of the Board of
Directors, or (iii) otherwise properly brought before the annual meeting by a
stockholder. In addition to any other applicable requirements, for business to
be properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation not less than
sixty (60) days nor more than ninety (90) days prior to the meeting; provided,
however, that in the event that less than seventy (70) days notice or prior
public disclosure of the date of the annual meeting is given or made to
stockholders, notice by a stockholder, to be timely, must be received no later
than the close of business on the tenth (10th) day following the day on which
such notice of the date of the annual meeting was mailed or such public
disclosure was made, whichever first occurs. A stockholder's notice to the
Secretary shall set forth (a) as to each matter the stockholder proposes to
bring before the annual meeting (i) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, and (ii) any material interest of the
stockholder in such business, and (b) as to the stockholder giving the notice
(i) the name and record address of the stockholder and (ii) the class, series
and number of shares of capital stock of the Corporation which are beneficially
owned by the stockholder. Notwithstanding anything in these Bylaws to the
contrary, no business shall be conducted
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at the annual meeting except in accordance with the procedures set forth in this
Article II, Section 2. The officer of the Corporation presiding at an annual
meeting shall, if the facts warrant, determine and declare to the annual meeting
that business was not properly brought before the annual meeting in accordance
with the provisions of this Article II, Section 2, and if such officer should so
determine, such officer shall so declare to the annual meeting and any such
business not properly brought before the meeting shall not be transacted.
SECTION 3. Special Meetings. Unless otherwise prescribed by law or by the
Restated Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation"), special meetings of stockholders, for any purpose or purposes,
may only be called by a majority of the entire Board of Directors or by the
Chairman of the Board and Chief Executive Officer or the President and Chief
Operating Officer.
Written notice of a special meeting stating the place, date and hour of the
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than ten nor more than sixty days before the date of the meeting.
SECTION 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the holders of a
majority of the votes entitled to be cast by the stockholders entitled to vote
thereat, present in person or represented by proxy may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented by proxy. At such adjourned meeting at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally noticed. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder entitled to vote at the meeting.
SECTION 5. Voting. Unless otherwise required by law, the Certificate of
Incorporation, the rules or regulations of any stock exchange applicable to the
Corporation or these Bylaws, any question (other than the election of directors)
brought before any meeting of stockholders shall be decided by the vote of the
holders of a majority of the stock represented and entitled to vote thereat. At
all meetings of stockholders for the election of directors, a plurality of the
votes cast shall be sufficient to elect. Each stockholder represented at a
meeting of stockholders shall be entitled to cast one vote for each share of the
capital stock entitled to vote thereat held by such stockholder, unless
otherwise provided by the Certificate of Incorporation. Such votes may be cast
in person or by proxy but no proxy shall be voted after three years from its
date, unless such proxy provides for a longer period. The Board of Directors, in
its discretion, or the officer of the Corporation presiding at a meeting of
stockholders, in his discretion, may require that any votes cast at such meeting
shall be cast by written ballot.
SECTION 6. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
SECTION 7. Stock Ledger. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 6 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
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ARTICLE III.
DIRECTORS
SECTION 1. Number of Directors; Qualifications. The total number of persons
serving on the Board of Directors of the Corporation shall be 10, five of whom
shall be ValueVision Directors and five of whom shall be National Media
Directors (as such terms are defined below), all of which ValueVision Directors
and National Media Directors shall be spread as evenly as possible among the
Corporation's three classes of Directors; provided however, that if the Board of
Directors shall have elected a successor Chief Executive Officer to succeed the
interim Chief Executive Officer pursuant to Article III, Section 8 of these
bylaws, prior to the [Effective Time] and such officer takes office prior to
such date, then the Board of Directors of Parent shall be expanded to 11 members
and such officer shall be appointed to the Board of Directors to fill the
vacancy created by such expansion of the Board. Until [three years after the
Effective Time,] the Board of Directors of the Corporation as constituted
following each election of Directors shall consist of an equal number of
ValueVision Directors and National Media Directors. If, at any time during the
period referenced in the immediately preceding sentence, the number of
ValueVision Directors and National Media Directors serving, or that would be
serving following the next stockholders' meeting at which Directors are to be
elected, as Directors of the Corporation, would not be equal, then, subject to
the fiduciary duties of the Directors of the Corporation, the Board of Directors
shall immediately appoint to the Board of Directors and nominate for election at
the next stockholders' meeting at which Directors are to be elected, such person
or persons as may be requested by the remaining ValueVision Directors (if the
number of ValueVision Directors is, or would otherwise become, less than the
number of National Media Directors) or by the remaining National Media Directors
(if the number of National Media Directors is, or would otherwise become, less
than the number of ValueVision Directors) to ensure that there shall be an equal
number of ValueVision Directors and National Media Directors. The provisions of
the preceding sentence shall not apply in respect of any vacancies or
stockholders' meeting which take place after [three years after the Effective
Time.] The term "ValueVision Director" means (i) any person serving as a
director of ValueVision who was selected by the Board of Directors of
ValueVision on or prior to the [Effective Time] to serve as a Director of the
Corporation and (ii) any person who becomes a Director of the Corporation
pursuant to the second preceding sentence and who is designated by the
ValueVision Directors; and the term "National Media Director" means (i) any
person serving as a director of National Media who was selected by the Board of
Directors of National Media on or prior to the [Effective Time] to serve as a
Director of the Corporation, (ii) any person who becomes a Director of the
Corporation pursuant to the second preceding sentence and who is designated by
the National Media Directors and (iii) any person designated by any holder of
National Media's or Parent's Series B Convertible Preferred Stock outstanding
prior to or as of the [Effective Time].
SECTION 2. Nomination of Directors. Nominations of persons for election to
the Board of Directors of the Corporation at a meeting of stockholders of the
Corporation may be made at such meeting by or at the direction of the Board of
Directors, by any committee or persons appointed by the Board of Directors or by
any stockholder of the Corporation entitled to vote for the election of
directors at the meeting who complies with the notice procedures set forth in
this Article III, Section 2. Such nominations by any stockholder shall be made
pursuant to timely notice in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice shall be delivered to or mailed and received at
the principal executive offices of the Corporation not less than sixty (60) days
nor more than ninety (90) days prior to the meeting; provided however, that in
the event that less than seventy (70) days notice or prior public disclosure of
the date of the meeting is given or made to stockholders, notice by the
stockholder, to be timely, must be received no later than that the close of
business on the tenth (10th) day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made, whichever
first occurs. Such stockholder's notice to the Secretary shall set forth (i) as
to each person whom the stockholder proposes to nominate for election or
reelection as a director, (a) the name, age, business address and residence
address of the person, (b) the principal occupation or employment of the person,
(c) the class and number of shares of capital stock of the Corporation which are
beneficially owned by the person, and (d) any other information relating to the
person that is required to be disclosed in solicitations for proxies for
election of directors pursuant to the Rules and Regulations of the Securities
and Exchange Commission under Section 14 of the Securities Exchange Act of 1934,
as amended;
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and (ii) as to the stockholder giving the notice (a) the name and record address
of the stockholder and (b) the class and number of shares of capital stock of
the Corporation which are beneficially owned by the stockholder. The Corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the Corporation to determine the eligibility of such
proposed nominee to serve as a director of the Corporation. No person shall be
eligible for election as a director of the Corporation unless nominated in
accordance with the procedures set forth herein. The officer of the Corporation
presiding at an annual meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
SECTION 3. Meetings. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the Chairman of the Board or Chief Executive Officer or the President or Chief
Operating Officer or a majority of the entire Board of Directors. Notice thereof
stating the place, date and hour of the meeting shall be given to each director
either by mail not less than forty-eight (48) hours before the date of the
meeting, by telephone or telegram on twenty-four (24) hours notice, or on such
shorter notice as the person or persons calling such meeting may deem necessary
or appropriate in the circumstances.
SECTION 4. Quorum. Except as may be otherwise specifically provided by law,
the Certificate of Incorporation or these Bylaws, at all meetings of the Board
of Directors or any committee thereof, a majority of the entire Board of
Directors or such committee, as the case may be, shall constitute a quorum for
the transaction of business and the act of a majority of the directors present
at any meeting at which there is a quorum shall be the act of the Board of
Directors or such committee, as the case may be. If a quorum shall not be
present at any meeting of the Board of Directors or of any committee thereof, a
majority of the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
SECTION 5. Actions of Board of Directors. Unless otherwise provided by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 6. Meetings by Means of Conference Telephone. Unless otherwise
provided by the Certificate of Incorporation or these Bylaws, members of the
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Article III, Section 6 shall
constitute presence in person at such meeting.
SECTION 7. Committees. The Board of Directors may designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any disqualified member at
any meeting of any such committee. In the disqualification of a member of a
committee, and in the absence of a designation by the Board of Directors of an
alternate member to replace the disqualified member, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any disqualified
member. Any committee, to the extent allowed by law and provided in the
resolution establishing such committee, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation. Each committee shall keep regular minutes and
report to the Board of Directors when required.
SECTION 8. Executive Committee. Until [three years after the Effective
Time], the Executive Committee of the Corporation shall have responsibility for
(i) recommending to the full Board of Directors a
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successor Chief Executive Officer (and any successor thereto) to the Chief
Executive Officer identified in Article IV, Section 5 of these Bylaws and (ii)
shall have, to the fullest extent permitted by Delaware law, all of the powers,
duties and responsibilities (including, without limitation, those relating to
any and all issues relating to the Federal Communications Commission and any
assets subject to its regulation) of the entire Board of Directors of the
Corporation (except with respect to those actions that require a Supermajority
Vote as set forth and defined in Article VI of these Bylaws). Until [three years
after the Effective Time], the Executive Committee shall always be comprised of
three ValueVision Directors (who initially shall be Marshall S. Geller, Nicholas
M. Jaksich and Robert L. Johander) and two National Media directors (who
initially shall be Frederick S. Hammer and Robert N. Verratti).
SECTION 9. Compensation Committee. Until [three years after the Effective
Time], the Compensation Committee of the Corporation shall have responsibility
for (i) reviewing the compensation and employee benefit policies of the
Corporation, (ii) recommending to the Executive Committee base salary amounts
and incentive awards for all elected officers of the Corporation and setting
guidelines for the administration of all salaries, (iii) administering incentive
compensation and awarding stock options to employees under any stock option or
compensation plan of the Corporation and amending or modifying any provisions of
such stock option or compensation plan that may be amended or modified without
stockholder approval and (iv) supervising all administrative matters with
respect to the foregoing. Until [three years after the Effective Time], the
Compensation Committee shall always be comprised of two ValueVision Directors
and one National Media director, each of whom shall meet the requirements of
independence as established by the exchange or market on which the Corporation's
stock is then traded or quoted.
SECTION 10. Compensation. The directors may be paid their expenses, if any,
of attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated salary
as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
SECTION 11. Interested Directors. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the shareholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
shareholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof or the shareholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
ARTICLE IV.
OFFICERS
SECTION 1. General. The officers of the Corporation shall be elected by the
Board of Directors and shall consist of: a Chairman of the Board; a Chief
Executive Officer; a President; a Chief Operating Officer; a Secretary; and a
Treasurer. The Board of Directors, in its discretion, may also elect one or more
Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, Assistant
Secretaries, Assistant Treasurers, a Controller and such other officers as in
the judgment of the Board of Directors may be necessary or desirable. Any number
of offices may be held by the same person and more than one person may hold the
same office, unless otherwise prohibited by law, the Certificate of
Incorporation or these Bylaws. The officers of the
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Corporation need not be stockholders of the Corporation nor, except in the case
of the Chairman of the Board of Directors, need such officers be directors of
the Corporation.
SECTION 2. Election. The Board of Directors at its first meeting held after
each annual meeting of stockholders shall elect the officers of the Corporation
who shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board of
Directors; and all officers of the Corporation shall hold office until their
successors are chosen and qualified, or until their earlier resignation or
removal. Except as otherwise provided in this Article IV, any officer elected by
the Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors. The salaries of all
officers who are directors of the Corporation shall be fixed by the Board of
Directors.
SECTION 3. Voting Securities Owned by the Corporation. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be executed in the name of and on
behalf of the Corporation by the Chairman of the Board and Chief Executive
Officer, the President and Chief Operating Officer or any Vice President, and
any such officer may, in the name and on behalf of the Corporation, take all
such action as any such officer may deem advisable to vote in person or by proxy
at any meeting of security holders of any corporation in which the Corporation
may own securities and at any such meeting shall possess and may exercise any
and all rights and powers incident to the ownership of such securities and
which, as the owner thereof, the Corporation might have exercised and possessed
if present. The Board of Directors may, by resolution, from time to time confer
like powers upon any other person or persons.
SECTION 4. Chairman or Co-Chairmen of the Board. The Chairman or
Co-Chairmen of the Board shall be members of the Board of Directors, and shall
exercise and perform such duties and have such powers as may be prescribed by
the Board of Directors or these Bylaws, all in accordance with basic policies as
established by and subject to the oversight of the Board of Directors.
Initially, Robert L. Johander and Frederick S. Hammer shall serve as Co-Chairmen
of the Board and all references to the Chairman of the Board in these Bylaws or
the Certificate of Incorporation shall be deemed to be references to the Co-
Chairmen of the Board, each of whose consent shall be required to take or
authorize any action for which the consent of the Chairman of the Board is
required under these Bylaws or the Certificate of Incorporation.
SECTION 5. Chief Executive Officer. The Chief Executive Officer of the
Corporation shall supervise, coordinate and manage the Corporation's business
and activities and supervise, coordinate and manage its operating expenses and
capital allocation, shall have general authority to exercise all the powers
necessary for the Chief Executive Officer of the Corporation and shall perform
such other duties and have such other powers as may be prescribed by the Board
of Directors or these Bylaws, all in accordance with basic policies as
established by and subject to the oversight of the Board of Directors. In the
absence or disability of the Chairman of the Board, the duties of the Chairman
of the Board shall be performed and the Chairman of the Board's authority may be
exercised by the Chief Executive Officer and, in the event the Chief Executive
Officer is absent or disabled, such duties shall be performed and such authority
may be exercised by a director designated for such purpose by the Board of
Directors. Initially, Robert L. Johander shall serve as Chief Executive Officer
of the Corporation.
SECTION 6. President. The President shall supervise, coordinate and manage
the Corporation's business and activities and supervise, coordinate and manage
its operating expenses and capital allocation, shall have general authority to
exercise all the powers necessary for the President of the Corporation and shall
perform such other duties and have such other powers as may be prescribed by the
Board of Directors or these, all in accordance with basic policies as
established by and subject to the oversight of the Board of Directors, the
Chairman of the Board and the Chief Executive Officer. In the absence or
disability of the Chairman of the Board and Chief Executive Officer, the duties
of the Chairman of the Board shall be performed and the Chairman of the Board's
authority may be exercised by the President or Chief Operating Officer and, in
the event the President or Chief Operating Officer is absent or disabled, such
duties shall be performed and such authority may be exercised by a director
designated for such purpose by the Board of Directors. Initially, Nicholas M.
Jaksich shall serve as President of the Corporation.
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SECTION 7. Chief Operating Officer. The Chief Operating Officer shall
supervise, coordinate and manage the Corporation's business and activities and
supervise, coordinate and manage its operating expenses and capital allocation,
shall have general authority to exercise all the powers necessary for the Chief
Operating Officer of the Corporation and shall perform such other duties and
have such other powers as may be prescribed by the Board of Directors or these
Bylaws, all in accordance with basic policies as established by and subject to
the oversight of the Board of Directors and the Chairman of the Board and Chief
Executive Officer. In the absence or disability of the Chairman of the Board and
Chief Executive Officer, the duties of the Chairman of the Board shall be
performed and the Chairman of the Board's authority may be exercised by the
President or Chief Operating Officer and, in the event the President or Chief
Operating Officer is absent or disabled, such duties shall be performed and such
authority may be exercised by a director designated for such purpose by the
Board of Directors. Initially, Nicholas M. Jaksich shall serve as Chief
Operating Officer of the Corporation.
SECTION 8. Vice Presidents. At the request of the President or Chief
Operating Officer or in the absence of each of the Chairman of the Board, Chief
Executive Officer, President and Chief Operating Officer, or in the event of
their inability or refusal to act , the Vice President or the Vice Presidents if
there is more than one (in the order designated by the Board of Directors) shall
perform the duties of the Chairman of the Board, Chief Executive Officer,
President and/or Chief Operating Officer, and when so acting, shall have all the
powers of and be subject to all the restrictions upon such offices (other than
as Chairman of the Board). Each Vice President shall perform such other duties
and have such other powers as the Board of Directors from time to time may
prescribe. If there be no Vice President, the Board of Directors shall designate
the officer of the Corporation who, in the absence of each of the Chairman of
the Board, Chief Executive Officer, President and Chief Operating Officer or in
the event of the inability or refusal of such officers to act, shall perform the
duties of such offices (other than as Chairman of the Board), and when so
acting, shall have all the powers of and be subject to all the restrictions upon
such offices (other than as Chairman of the Board).
SECTION 9. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors, the
Chairman of the Board and Chief Executive Officer or the President and Chief
Operating Officer, under whose supervision the Secretary shall be. If the
Secretary shall be unable or shall refuse to cause to be given notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
if there be no Assistant Secretary, then the Board of Directors, the Chairman of
the Board and Chief Executive Officer or the President and Chief Operating
Officer may choose another officer to cause such notice to be given. The
Secretary shall have custody of the seal of the Corporation and the Secretary or
any Assistant Secretary, if there be one, shall have authority to affix the same
to any instrument requiring it and when so affixed, it may be attested by the
signature of the Secretary or by the signature of any such Assistant Secretary.
The Board of Directors may give general authority to any other officer to affix
the seal of the Corporation and to attest the affixing by his signature. The
Secretary shall see that all books, reports, statements, certificates and other
documents and records required by law to be kept or filed are properly kept or
filed, as the case may be.
SECTION 10. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death,
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resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the Corporation.
SECTION 11. Assistant Secretaries. Except as may be otherwise provided in
these Bylaws, Assistant Secretaries, if there be any, shall perform such duties
and have such powers as from time to time may be assigned to them by the Board
of Directors, the Chairman of the Board, the Chief Executive Officer, the
President or the Chief Operating Officer, any Vice President, if there be one,
or the Secretary, and in the absence of the Secretary or in the event of his
disability or refusal to act, shall perform the duties of the Secretary, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the Secretary.
SECTION 12. Assistant Treasurers. Assistant Treasurers, if there be any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the Chairman of the Board, the Chief
Executive Officer, the President, the Chief Operating Officer, any Vice
President, if there be one, or the Treasurer, and in the absence of the
Treasurer or in the event of his disability or refusal to act, shall perform the
duties of the Treasurer, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the Treasurer. If required by the Board of
Directors, an Assistant Treasurer shall give the Corporation a bond in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
SECTION 13. Controller. The Controller shall establish and maintain the
accounting records of the Corporation in accordance with generally accepted
accounting principles applied on a consistent basis, maintain proper internal
control of the assets of the Corporation and shall perform such other duties as
the Board of Directors, the Chairman of the Board, the Chief Executive Officer,
the President, the Chief Operating Officer or any Vice President of the
Corporation may prescribe.
SECTION 14. Other Officers. Such other officers as the Board of Directors
may choose shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors. The Board of Directors may
delegate to any other officer of the Corporation the power to choose such other
officers and to prescribe their respective duties and powers.
ARTICLE V.
STOCK
SECTION 1. Form of Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate signed, in the name of the Corporation
(i) by the Chairman of the Board and Chief Executive Officer, the President and
Chief Operating Officer or a Vice President and (ii) by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation, certifying the number of shares owned by him in the Corporation.
SECTION 2. Signatures. Any or all of the signatures on the certificate
may be a facsimile, including, but not limited to, signatures of officers of the
Corporation and countersignatures of a transfer agent or registrar. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue.
SECTION 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to
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give the Corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
SECTION 4. Transfers. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these Bylaws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the certificate
or by his attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be canceled before a new certificate shall be
issued.
ARTICLE VI.
SUPERMAJORITY PROVISIONS
SECTION 1. The Corporation and the Board of Directors shall not take (or
agree to take) any action regarding the following matters (except those matters
that relate to the Federal Communications Commission and any assets subject to
its regulation, any action regarding any such matters may be taken solely by the
Executive Committee as set forth in Article III, Section 8) without the
affirmative vote of a majority, plus one, of the total number of the then
authorized Board of Directors (a "Supermajority Vote"):
(a) The merger, consolidation or other business combination by the
Corporation into or with any other entity, other than any transaction
involving only the Corporation and/or one or more directly or indirectly
wholly owned subsidiaries of the Corporation; provided, however, that the
provisions of this paragraph shall not apply to transactions which have
been approved in accordance with subparagraphs (b) or (c) below, or which
would not otherwise require approval thereunder;
(b) The acquisition (other than an acquisition covered by subparagraph
(d) below) by the Corporation of any assets or properties (including stock
or other equity interests of a third party) in one transaction or a series
of related transactions, which assets or properties have an aggregate
purchase price or value in excess of $15 million;
(c) The disposition by the Corporation of any assets or properties
(including stock or other equity interests of a third party) in one
transaction or a series of related transactions having an aggregate value
in excess of $15 million;
(d) The issuance of shares of Common Stock (as defined in the
Certificate of Incorporation) or any warrants, options or other securities
convertible into or exchangeable for such shares of Common Stock (the
"Derivative Securities") for cash, assets or other property, if such
issuance would constitute in excess of 5% of the then outstanding shares of
Common Stock (calculated on a primary basis, but assuming the conversion or
exercise of any Derivative Securities so issued);
(e) The purchase, redemption or other acquisition for value of any
shares of Common Stock or any Derivative Securities, in each case, if such
purchase, redemption or other acquisition would constitute in excess of 5%
of the then outstanding shares of Common Stock (calculated on a primary
basis, but assuming the conversion or exercise of any Derivative Securities
so purchased, redeemed or acquired);
(f) The removal of any Chief Executive Officer and the appointment of
any successor thereto;
(g) Any actions resulting in the voluntary dissolution or liquidation
of the Corporation, or the initiation of any proceedings relating to the
voluntary bankruptcy of the Corporation;
(h) Any amendment, alteration or repeal of any provision of these
Bylaws or the Certificate of Incorporation, other than any amendment to or
modification of these Bylaws or the Certificate of Incorporation which is
necessary in order to implement any action which has been otherwise
approved by a Supermajority Vote;
(i) The establishment, creation or designation of any additional class
or series of capital stock or any security having a direct or indirect
equity participation in the Corporation;
(j) The declaration or payment of any dividend on, or the making of
any distribution to holders of, any equity securities of the Corporation;
and
(k) Any amendment or modification to Article III, Section 8 or Section
9.
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ANNEX F
CERTIFICATION OF DESIGNATION
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
V-L HOLDINGS CORP.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
V-L Holdings Corp., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Company"), hereby certifies that
the following resolutions were adopted by the Board of Directors of the Company
(the "Board") and by a committee of the Board pursuant to the authority of the
Board as required by Section 151 of the Delaware General Corporation Law:
RESOLVED, that there is hereby established a series of the Series Preferred
Stock designated "Series B Convertible Preferred Stock, par value $.01 per
share", (herein referred to as "Series B Preferred Stock"), consisting of
400,000 shares, having a stated value per share equal to $.01, and having the
relative rights, designations, preferences, qualifications, privileges,
limitations, restrictions, options, conversion rights and other special or
relative rights applicable thereto as follows:
1. Dividend Provisions. The holders of shares of Series B Preferred Stock
shall be entitled to receive dividends, out of any assets legally available
therefor, in an amount per share of Series B Preferred Stock which is equal to
the product of (a) the number of shares of Common Stock into which the Series B
Preferred Stock is convertible at the time of declaration of such dividend
multiplied by (b) the aggregate per share amount of all cash dividends plus the
aggregate per share amount (based upon the fair market value at the time the
non-cash dividend or other distribution is declared or paid as determined in
good faith by the board of directors) of all non-cash dividends or other
distributions on the Common Stock of the corporation other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock of
the corporation. Such dividends shall be declared and paid contemporaneously
with the declaration and payment of the related dividend on the Common Stock.
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
corporation, either voluntary or involuntary, the holders of Series B Preferred
Stock shall be entitled to receive, prior and in preference to any distribution
of any of the assets of this corporation to the holders of Common Stock by
reason of their ownership thereof, an amount per Series B Preferred Stock share
equal to $40.00 (such amount being referred to herein as the "Premium"). If upon
the occurrence of such event, the assets and funds thus distributed amount the
holders of the Series B Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amount, then the
entire assets and funds of the corporation legally available for distribution
shall be distributed ratably among the holders of the Series B Preferred Stock
in proportion to the amount of such Stock owned by each such holder.
Notwithstanding the foregoing, if upon the occurrence of any event of
liquidation, dissolution or winding up of the corporation, the holders of the
Series B Preferred Stock would receive an aggregate amount in excess of $40.00
per share of Series B Preferred Stock if they were to convert such Series B
Preferred Stock into Common Stock, then such holders, in lieu of receiving a
distribution as a holder of Series B Preferred Stock, will be treated for the
purposes of such liquidation, dissolution or winding up as if they had
theretofore converted.
(b) After the distribution described in subsection (a) has been paid, the
remaining assets of the corporation available for distribution to shareholders
shall be distributed among the holders of Common Stock pro rata based on the
number of shares of Common Stock held by each such holder.
(c) A sale, conveyance or disposition of all or substantially all of the
assets of this corporation shall be deemed to be a liquidation, dissolution or
winding up within the meaning of this Section 2, if the holders of a
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majority of the outstanding Series B Preferred Stock elect to have such
transaction treated as a liquidation, failing which election the holders of the
Series B Preferred Stock shall receive the same treatment in such sale,
conveyance or disposition as the holders of shares of Common Stock.
3. Conversion. The holders of the Series B Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Conversion Rights. Each share of Series B Preferred Stock shall be
convertible, at the option of the holder thereof, at any time from and after the
date of issuance of such share, at the office of this corporation or any
transfer agent for the Series B Preferred Stock, into such number of fully paid
and nonassessable shares of Common Stock as is determined by dividing $40.00 per
share by the Conversion Price at the time in effect for such share. The initial
Conversion Price per share for shares of Series B Preferred Stock shall be $4.00
per share of Common Stock; provided, however, that the Conversion Price for the
Series B Preferred Stock (the "Conversion Price") shall be subject to adjustment
as set forth in subsection 3(c).
(b) Mechanics of Conversion. Before any holder of Series B Preferred Stock
shall be entitled to convert the same into shares of Common Stock, he shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the corporation or of any transfer agent for the Series B Preferred Stock,
and shall give written notice by mail, postage prepaid, to the corporation at
its principal corporate office, of the election to convert the same and shall
state therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. The corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Series B Preferred Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of whole shares of Common Stock to
which such holder shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series B Preferred Stock to be converted, and
the person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date. If the conversion is in
connection with an underwritten offer of securities registered pursuant to the
Securities Act of 1933, the conversion may, at the option of any holder
tendering Series B Preferred Stock for conversion, be conditioned upon the
closing with the underwriter of the sale of securities pursuant to such
offering, in which event the person or persons entitled to receive the Common
Stock issuable upon such conversion of the Series B Preferred Stock shall not be
deemed to have converted such Series B Preferred Stock until immediately prior
to the closing of such sale of securities.
(c) Conversion Price Adjustments of Preferred Stock. The Conversion Price
shall be subject to adjustment from time to time as follows:
(i) (A) If the corporation shall issue any Additional Stock (as defined
below) without consideration or for a consideration per share less than the
Conversion Price in effect immediately prior to the issuance of such Additional
Stock, the Conversion Price in effect immediately prior to each such issuance
shall forthwith (except as otherwise provided in this clause (i)) be reduced,
concurrently with such issue, to a price (calculated to the nearest cent)
calculated on a weighted average basis based upon the issue price, the
Conversion Price then applicable, the number of shares of Common Stock issued
and outstanding before such transaction and the number of shares of Common Stock
issuable in connection with such transaction.
(B) No reduction of the Conversion Price for the Series B Preferred Stock
shall be made in an amount less than one cent per share, provided that any
adjustments which are not required to be made by reason of this sentence shall
be carried forward and shall be either taken into account in any subsequent
adjustment made prior to three years from the date of the event giving rise to
the adjustment being carried forward, or, if no such adjustment is made, shall
be made at the end of three years from the date of the event giving rise to the
adjustment being carried forward. Except to the limited extent provided for in
subsections (E)(3) and (E)(4), no adjustment of such Conversion Price pursuant
to this subsection 3(c)(i) shall have the effect of increasing the Conversion
Price above the Conversion Price in effect immediately prior to such adjustment.
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(C) In the case of the issuance of Common Stock for cash, the consideration
shall be deemed to be the amount of cash paid therefor before deducting any
discounts, commissions or other expenses allowed, paid or incurred by the
corporation for any underwriting or otherwise in connection with the issuance
and sale thereof.
(D) In the case of the issuance of the Common Stock for a consideration in
whole or in part other than cash, the consideration other than cash shall be
deemed to be the fair value thereof as reasonably determined by the Board of
Directors, irrespective of any accounting treatment.
(E) In the case of the issuance of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities (which are not excluded from the
definition of Additional Stock), the following provisions shall apply:
1. The aggregate maximum number of shares of Common Stock deliverable upon
exercise of such options to purchase or rights to subscribe for Common Stock
shall be deemed to have been issued at the time such options or rights were
issued and for a consideration equal to the consideration (determined in the
manner provided in subsections 3(c)(i)(C) and (c)(i)(D)), if any, received by
the corporation upon the issuance of such options or rights plus the minimum
purchase price provided in such options or rights for the Common Stock covered
thereby.
2. The aggregate maximum number of shares of Common Stock deliverable upon
conversion of or in exchange for any such convertible or exchangeable securities
or upon the exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration equal to
the consideration, if any, received by the corporation for any such securities
and related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the additional consideration, if any, to be
received by the corporation upon the conversion or exchange of such securities
or the exercise of any related options or rights (the consideration in each case
to be determined in the manner provided in subsections 3(c)(i)(C) and
(c)(i)(D)).
3. In the event of any change in the number of shares of Common Stock
deliverable or any increase in the consideration payable to the corporation upon
exercise of such options or rights or upon conversion of or in exchange for such
convertible or exchangeable securities, including but not limited to a change
resulting from the antidilution provisions thereof, the Conversion Price of the
Series B Preferred Stock obtained with respect to the adjustment which was made
upon the issuance of such options, rights or securities, and any subsequent
adjustments based thereon, shall be recomputed to reflect such change, but no
further adjustment shall be made for the actual issuance of Common Stock or any
payment of such consideration upon the exercise of any such options or rights or
the conversion or exchange of such securities.
4. Upon the expiration of any such options or rights, the termination of
any such rights to convert or exchange or the expiration of any options or
rights related to such convertible or exchangeable securities, the Conversion
Price of the Series B Preferred Stock obtained with respect to the adjustment
which was made upon the issuance of such options, rights or securities or
options or rights related to such securities, and any subsequent adjustments
based thereon, shall be recomputed to reflect the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities or upon the exercise
of the options or rights related to such securities.
(ii) "Additional Stock" shall mean any shares of Common Stock issued (or
deemed to have been issued pursuant to subsection 3(c)(i)(E)) by this
corporation after the date any shares of Series B Preferred Stock are first
issued (the "Purchase Date") other than:
(A) Common Stock issued pursuant to a transaction described in subsection
3(c)(iii) hereof or pursuant to any warrants issued in connection with the sale
by the Company of the Series B Preferred Stock of issuance by the Company of
debt,
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(B) shares of Common Stock issuable or issued after the Purchase Date to
employees, directors, consultants or other persons having a business
relationship with the Company for the primary purpose of soliciting or retaining
their employment or business relationship, or
(C) Common Stock issued or issuable upon conversion of the Series B
Preferred Stock.
(iii) In the event the corporation should at any time or from time to time
after the Purchase Date fix a record date for the effectuation of a split or
subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Series B Preferred Stock shall be appropriately decreased so that
the number of shares of Common Stock issuable on conversion of each share of
such series shall be increased in proportion to such increase of outstanding
shares determined in accordance with subsection 3(c)(i)(E).
(iv) If the number of shares of Common Stock outstanding at any time after
the Purchase Date is decreased by a combination of the outstanding shares of
Common Stock, then following the record date of such combination, the Conversion
Price for the Series B Preferred Stock shall be appropriately increased so that
the number of shares of Common Stock issuable on conversion of each share of
such series shall be decreased in proportion to such decrease in outstanding
shares.
(d) Other Distributions. In the event the corporation shall declare a
distribution payable in securities of other persons, evidences of indebtedness
issued by the corporation or other persons, assets (excluding cash dividends) or
options or rights not referred to in subsection 3(c)(iii), then, in each such
case for the purpose of this subsection 3(d), the holders of the Series B
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the corporation into which their shares of Series B Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the corporation entitled to receive such distribution.
(e) Recapitalizations. If at any time or from time to time there shall be a
recapitalization of the Common Stock (other than a subdivision, combination or
merger or sale of assets transaction provided for elsewhere in this Section 3),
provision shall be made so that the holders of the Series B Preferred Stock
shall thereafter be entitled to receive upon conversion of the Series B
Preferred Stock the number of shares of stock of other securities or property of
the corporation or otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 3 with respect to the rights of the holders of the Series B
Preferred Stock after the recapitalization to the end that the provisions of
this Section 3 (including adjustment of the Conversion Price then in effect and
the number of shares purchasable upon conversion of the Series B Preferred
Stock) shall be applicable after that event as nearly equivalent as may be
practicable.
(f) No Impairment. The corporation will not, by amendment of its Restated
Certificate of Incorporation (the "Certificate") or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Series B Preferred Stock against
impairment.
(g) No Fractional Shares; Certificate as to Adjustments.
(i) No fractional shares shall be issued upon conversion of the Series B
Preferred Stock, and the number of shares of Common Stock to be issued shall be
rounded to the nearest whole share. Whether or not
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fractional shares are issuable upon such conversion shall be determined on the
basis of the total number of shares of Series B Preferred Stock the holder is at
the time converting into Common Stock and the number of shares of Common Stock
issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of the
Conversion Price of Series B Preferred Stock pursuant to this Section 3, the
corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series B Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The corporation shall, upon the written request at any
time of any holder of Series B Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price at the time in effect, and (C) the number
of shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of Series B Preferred
Stock.
(h) Notices of Record Date. In the event of any taking by the corporation
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock or any class of any other
securities or property, or to receive any other right, this corporation shall
mail to each holder of Series B Preferred Stock, at least 20 days prior to the
date specified therein, a notice specifying the date on which any such record is
to be taken for the purpose of such dividend; distribution or right, and the
amount and character of such dividend, distribution or right.
(i) Reservation of Stock Issuable Upon Conversion. This corporation shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of the Series B Preferred Stock such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series B Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series B
Preferred Stock, in addition to such other remedies as shall be available to the
holder of such Series B Preferred Stock, the corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes.
(j) Notices. Any notice required by the provisions of this Section 3 to be
given to the holders of shares of Series B Preferred Stock shall be deemed given
if deposited in the United States mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of this corporation.
4. Voting Rights. The holder of each share of Series B Preferred Stock
shall have the right to one vote for each share of Common Stock into which such
Series B Preferred Stock could then be converted (with any fractional share
determined on an aggregate conversion basis being rounded to the nearest whole
share), and with respect to such vote, such holder shall have full voting rights
and powers equal to the voting rights and powers of the holders of Common Stock,
and shall be entitled, notwithstanding any provision hereof, to notice of any
shareholders' meeting in accordance with the by-laws of this corporation, and
shall be entitled to vote, together with holders of Common Stock, with respect
to any question upon which holders of Common Stock have the right to vote.
5. Protective Provisions. So long as shares of Series B Preferred Stock are
outstanding, this corporation shall not without first obtaining the approval (by
vote or written consent) of the holders of at least 60% of the then outstanding
shares of Series B Preferred Stock (voting in accordance with Section 4 above):
(a) alter or change the rights, preferences or privileges of the shares of
Series B Preferred Stock so as to affect adversely the shares;
(b) create any new series of stock or any other securities convertible into
equity securities of the corporation having a preference over, or being on a
parity with, the Series B Preferred Stock with respect to voting, dividends,
liquidation rights or otherwise; or
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(c) do any act or thing which would result in taxation of the holders of
shares of the Series B Preferred Stock under Section 305 of the Internal Revenue
Code of 1986, as amended (or any comparable provision of the Internal Revenue
Code as hereafter from time to time amended).
6. Status of Converted Stock. In the event any shares of Series B Preferred
Stock shall be converted pursuant to Section 3 hereof, the shares so converted
shall be cancelled and shall not be reissuable by the corporation, and the
Certificate of this corporation shall be appropriately amended to affect the
corresponding reduction in the corporation's authorized capital stock.
IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf
of the Corporation by its President and attested by its Secretary this day
of , 1998.
V-L HOLDINGS CORP.
By:
-----------------------------------
[SEAL]
ATTEST:
- ---------------------------------------------------------
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ANNEX G
THE 1998 EQUITY PARTICIPATION PLAN
OF
V-L HOLDINGS CORP.
V-L Holdings Corp., a Delaware corporation (the "Company"), has adopted The
1998 Equity Participation Plan of V-L Holdings Corp. (the "Plan"), effective
, 1998, for the benefit of its eligible employees,
consultants and directors.
The purposes of this Plan are as follows:
(1) To provide an additional incentive for directors, key Employees (as
such term is defined below) and consultants to further the growth, development
and financial success of the Company by personally benefiting through the
ownership of Company stock and/or rights which recognize such growth,
development and financial success.
(2) To enable the Company to obtain and retain the services of directors,
key Employees and consultants considered essential to the long range success of
the Company by offering them an opportunity to own stock in the Company and/or
rights which will reflect the growth, development and financial success of the
Company.
ARTICLE 1.
DEFINITIONS
1.1. General. Wherever the following terms are used in this Plan they shall
have the meanings specified below, unless the context clearly indicates
otherwise.
1.2. Award Limit. "Award Limit" shall mean 100,000 shares of Common Stock;
provided that with respect to any Chief Executive Officer of the Company, "Award
Limit" shall mean 1,000,000 shares of Common Stock.
1.3. Board. "Board" shall mean the Board of Directors of the Company.
1.4. Change in Control. "Change in Control" shall mean a change in
ownership or control of the Company effected through either of the following
transactions:
1.4.1. 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) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange
Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities pursuant to a
tender or exchange offer made directly to the Company's stockholders which
the Board does not recommend such stockholders to accept; or
1.4.2. there is a change in the composition of the Board over a period
of thirty-six (36) consecutive months (or less) such that a majority of the
Board members (rounded up to the nearest whole number) ceases, by reason of
one or more proxy contests for the election of Board members, to be
comprised of individuals who either (i) have been Board members
continuously since the beginning of such period or (ii) 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 (i) who were still in
office at the time such election or nomination was approved by the Board.
1.5. Code. "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.6. Committee. "Committee" shall mean the Compensation Committee of the
Board, or another committee of the Board, appointed as provided in Section 9.1.
1.7. Common Stock. "Common Stock" shall mean the common stock of the
Company, par value $.01 per share, and any equity security of the Company issued
or authorized to be issued in the future, but excluding any preferred stock and
any warrants, options or other rights to purchase Common Stock. Debt securities
of the Company convertible into Common Stock shall be deemed equity securities
of the Company.
1.8. Company. "Company" shall mean V-L Holdings, Corp., a Delaware
corporation.
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1.9. Corporate Transaction. "Corporate Transaction" shall mean any of the
following stockholder-approved transactions to which the Company is a party:
1.9.1. a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State in which the Company is incorporated, form a holding
company or effect a similar reorganization as to form whereupon this Plan
and all Options are assumed by the successor entity;
1.9.2. the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions
to Section 1.9.1, above; or
1.9.3. any reverse merger in which the Company is the surviving entity
but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities are
transferred or issued to a person or persons different from those who held
such securities immediately prior to such merger.
1.10. Deferred Stock. "Deferred Stock" shall mean Common Stock awarded
under Article 7 of this Plan.
1.11. Director. "Director" shall mean a member of the Board.
1.12. Dividend Equivalent. "Dividend Equivalent" shall mean a right to
receive the equivalent value (in cash or Common Stock) of dividends paid on
Common Stock, awarded under Article 7 of this Plan.
1.13. Employee. "Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company, or of
any corporation which is a Subsidiary.
1.14. Exchange Act. "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
1.15. Fair Market Value. "Fair Market Value" of a share of Common Stock as
of a given date shall be (i) the closing price of a share of Common Stock on the
principal exchange on which shares of Common Stock are then trading, if any (or
as reported on any composite index which includes such principal exchange), on
the trading day previous to such date, or if shares were not traded on the
trading day previous to such date, then on the next preceding date on which a
trade occurred, or (ii) if Common Stock is not traded on an exchange but is
quoted on NASDAQ or a successor quotation system, the mean between the closing
representative bid and asked prices for the Common Stock on the trading day
previous to such date as reported by NASDAQ or such successor quotation system;
or (iii) if Common Stock is not publicly traded on an exchange and not quoted on
NASDAQ or a successor quotation system, the Fair Market Value of a share of
Common Stock as established by the Committee (or the Board, in the case of
Options granted to Independent Directors) acting in good faith.
1.16. Grantee. "Grantee" shall mean an Employee or consultant granted a
Performance Award, Dividend Equivalent, Stock Payment or Stock Appreciation
Right, or an award of Deferred Stock, under this Plan.
1.17. Incentive Stock Option. "Incentive Stock Option" shall mean an option
which conforms to the applicable provisions of Section 422 of the Code and which
is designated as an Incentive Stock Option by the Committee.
1.18. Independent Director. "Independent Director" shall mean a member of
the Board who is not an Employee of the Company.
1.19. Non-Qualified Stock Option. "Non-Qualified Stock Option" shall mean
an Option which is not designated as an Incentive Stock Option by the Committee.
1.20. Option. "Option" shall mean a stock option granted under Article 3 of
this Plan. An Option granted under this Plan shall, as determined by the
Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option;
provided, however, that Options granted to Independent Directors and consultants
shall be Non-Qualified Stock Options.
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1.21. Optionee. "Optionee" shall mean an Employee, consultant or
Independent Director granted an Option under this Plan.
1.22. Performance Award. "Performance Award" shall mean a cash bonus, stock
bonus or other performance or incentive award that is paid in cash, Common Stock
or a combination of both, awarded under Article 7 of this Plan.
1.23. Plan. "Plan" shall mean The 1998 Equity Participation Plan of V-L
Holdings Corp.
1.24. QDRO. "QDRO" shall mean a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.
1.25. Restricted Stock. "Restricted Stock" shall mean Common Stock awarded
under Article 6 of this Plan.
1.26. Restricted Stockholder. "Restricted Stockholder" shall mean an
Employee or consultant granted an award of Restricted Stock under Article 6 of
this Plan.
1.27. Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under the
Exchange Act, as such Rule may be amended from time to time.
1.28. Section 162(m) Participant. "Section 162(m) Participant" shall mean
any key Employee designated by the Committee as a key Employee whose
compensation for the fiscal year in which the key Employee is so designated or a
future fiscal year may be subject to the limit on deductible compensation
imposed by Section 162(m) of the Code.
1.29. Stock Appreciation Right. "Stock Appreciation Right" shall mean a
stock appreciation right granted under Article 8 of this Plan.
1.30. Stock Payment. "Stock Payment" shall mean (i) a payment in the form
of shares of Common Stock, or (ii) an option or other right to purchase shares
of Common Stock, as part of a deferred compensation arrangement, made in lieu of
all or any portion of the compensation, including without limitation, salary,
bonuses and commissions, that would otherwise become payable to a key Employee
or consultant in cash, awarded under Article 7 of this Plan.
1.31. Subsidiary. "Subsidiary" shall mean any corporation in an unbroken
chain of corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain then owns stock possessing
50 percent or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
1.32. Termination of Consultancy. "Termination of Consultancy" shall mean
the time when the engagement of an Optionee, Grantee or Restricted Stockholder
as a consultant to the Company or a Subsidiary is terminated for any reason,
with or without cause, including, but not by way of limitation, by resignation,
discharge, death or retirement; but excluding terminations where there is a
simultaneous commencement of employment with the Company or any Subsidiary. The
Committee, in its absolute discretion, shall determine the effect of all matters
and questions relating to Termination of Consultancy, including, but not by way
of limitation, the question of whether a Termination of Consultancy resulted
from a discharge for good cause, and all questions of whether particular leaves
of absence constitute Terminations of Consultancy. Notwithstanding any other
provision of this Plan, the Company or any Subsidiary has an absolute and
unrestricted right to terminate a consultant's service at any time for any
reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in writing.
1.33. Termination of Directorship. "Termination of Directorship" shall mean
the time when an Optionee who is an Independent Director ceases to be a Director
for any reason, including, but not by way of limitation, a termination by
resignation, failure to be elected, death or retirement. The Board, in its sole
and absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Directorship with respect to Independent Directors.
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1.34. Termination of Employment. "Termination of Employment" shall mean the
time when the employee-employer relationship between an Optionee, Grantee or
Restricted Stockholder and the Company or any Subsidiary is terminated for any
reason, with or without cause, including, but not by way of limitation, a
termination by resignation, discharge, death, disability or retirement; but
excluding (i) terminations where there is a simultaneous reemployment or
continuing employment of an Optionee, Grantee or Restricted Stockholder by the
Company or any Subsidiary, (ii) at the discretion of the Committee, terminations
which result in a temporary severance of the employee-employer relationship, and
(iii) at the discretion of the Committee, terminations which are followed by the
simultaneous establishment of a consulting relationship by the Company or a
Subsidiary with the former employee. The Committee, in its absolute discretion,
shall determine the effect of all matters and questions relating to Termination
of Employment, including, but not by way of limitation, the question of whether
a Termination of Employment resulted from a discharge for good cause, and all
questions of whether particular leaves of absence constitute Terminations of
Employment; provided, however, that, unless otherwise determined by the
Committee in its discretion, a leave of absence, change in status from an
employee to an independent contractor or other change in the employee-employer
relationship shall constitute a Termination of Employment if, and to the extent
that, such leave of absence, change in status or other change interrupts
employment for the purposes of Section 422(a)(2) of the Code and the then
applicable regulations and revenue rulings under said Section. Notwithstanding
any other provision of this Plan, the Company or any Subsidiary has an absolute
and unrestricted right to terminate an Employee's employment at any time for any
reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in writing.
1.35. Transactions. "Transactions" shall mean the transactions contemplated
under the Agreement and Plan of Reorganization and Merger, dated as of January
5, 1998, by and among National Media Corporation, ValueVision International Inc.
and V-L Holdings Corp.
ARTICLE 2.
SHARES SUBJECT TO PLAN
2.1 Shares Subject to Plan.
2.1.1. The shares of stock subject to Options, awards of Restricted Stock,
Performance Awards, Dividend Equivalents, awards of Deferred Stock, Stock
Payments or Stock Appreciation Rights shall be Common Stock, initially shares of
the Company's Common Stock, par value $.01 per share. The aggregate number of
such shares which may be issued upon exercise of such options or rights or upon
any such awards under the Plan shall not exceed 1,750,000. The shares of Common
Stock issuable upon exercise of such options or rights or upon any such awards
may be either previously authorized but unissued shares or treasury shares.
2.1.2. The maximum number of shares which may be subject to Options, awards
of Restricted Stock, Performance Awards, Dividend Equivalents, awards of
Deferred Stock, Stock Payments or Stock Appreciation Rights granted under the
Plan to any individual in any fiscal year of the Company shall not exceed the
Award Limit. To the extent required by Section 162(m) of the Code, shares
subject to Options which are canceled continue to be counted against the Award
Limit and if, after grant of an Option, the price of shares subject to such
Option is reduced, the transaction is treated as a cancellation of the Option
and a grant of a new Option and both the Option deemed to be canceled and the
Option deemed to be granted are counted against the Award Limit. Furthermore, to
the extent required by Section 162(m) of the Code, if, after grant of a Stock
Appreciation Right, the base amount on which stock appreciation is calculated is
reduced to reflect a reduction in the Fair Market Value of the Company's Common
Stock, the transaction is treated as a cancellation of the Stock Appreciation
Right and a grant of a new Stock Appreciation Right and both the Stock
Appreciation Right deemed to be canceled and the Stock Appreciation Right deemed
to be granted are counted against the Award Limit.
2.2. Add-back of Options and Other Rights. If any Option, or other
right to acquire shares of Common Stock under any other award under this Plan,
expires or is canceled without having been fully exercised, or is
exercised in whole or in part for cash as permitted by this Plan, the number of
shares subject to such Option or
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other right but as to which such Option or other right was not exercised prior
to its expiration, cancellation or exercise may again be optioned, granted or
awarded hereunder, subject to the limitations of Section 2.1. Furthermore, any
shares subject to Options or other awards which are adjusted pursuant to Section
10.3 and become exercisable with respect to shares of stock of another
corporation shall be considered cancelled and may again be optioned, granted or
awarded hereunder, subject to the limitations of Section 2.1. Shares of Common
Stock which are delivered by the Optionee or Grantee or withheld by the Company
upon the exercise of any Option or other award under this Plan, in payment of
the exercise price thereof, may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1. If any share of Restricted Stock is
forfeited by the Grantee or repurchased by the Company pursuant to Section 6.6
hereof, such share may again be optioned, granted or awarded hereunder, subject
to the limitations of Section 2.1. Notwithstanding the provisions of this
Section 2.2, no shares of Common Stock may again be optioned, granted or awarded
if such action would cause an Incentive Stock Option to fail to qualify as an
incentive stock option under Section 422 of the Code.
ARTICLE 3.
GRANTING OF OPTIONS
3.1. Eligibility. Any Employee or consultant selected by the Committee
pursuant to Section 3.4.1 shall be eligible to be granted an Option. Each
Independent Director of the Company shall be eligible to be granted Options at
the times and in the manner set forth in Section 3.4.4.
3.2. Disqualification for Stock Ownership. No person may be granted an
Incentive Stock Option under this Plan if such person, at the time the Incentive
Stock Option is granted, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
then existing Subsidiary or parent corporation (within the meaning of Section
422 of the Code) unless such Incentive Stock Option conforms to the applicable
provisions of Section 422 of the Code.
3.3. Qualification of Incentive Stock Options. No Incentive Stock Option
shall be granted to any person who is not an Employee.
3.4. Granting of Options.
3.4.1. The Committee shall from time to time, in its absolute discretion,
and subject to applicable limitations of this Plan:
3.4.1.1. Determine which Employees are key Employees and select from
among the key Employees or consultants (including Employees or consultants
who have previously received Options or other awards under this Plan) such
of them as in its opinion should be granted Options;
3.4.1.2. Subject to the Award Limit, determine the number of shares to
be subject to such Options granted to the selected key Employees or
consultants;
3.4.1.3. Subject to Section 3.3, determine whether such Options are to
be Incentive Stock Options or Non-Qualified Stock Options and whether such
Options are to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code; and
3.4.1.4. Determine the terms and conditions of such Options,
consistent with this Plan; provided, however, that the terms and conditions
of Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall include, but not be
limited to, such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code.
3.4.2. Upon the selection of a key Employee or consultant to be granted an
Option, the Committee shall instruct the Secretary of the Company to issue the
Option and may impose such conditions on the grant of the Option as it deems
appropriate. Without limiting the generality of the preceding sentence, the
Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition on the grant of an Option to an Employee or consultant
that the Employee or consultant surrender for cancellation some or all of the
unexercised Options, awards of Restricted Stock or Deferred Stock, Performance
Awards, Stock
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Appreciation Rights, Dividend Equivalents or Stock Payments or other rights
which have been previously granted to him under this Plan or otherwise. An
Option, the grant of which is conditioned upon such surrender, may have an
option price lower (or higher) than the exercise price of such surrendered
Option or other award, may cover the same (or a lesser or greater) number of
shares as such surrendered Option or other award, may contain such other terms
as the Committee deems appropriate, and shall be exercisable in accordance with
its terms, without regard to the number of shares, price, exercise period or any
other term or condition of such surrendered Option or other award.
3.4.3. Any Incentive Stock Option granted under this Plan may be modified
by the Committee to disqualify such option from treatment as an "incentive stock
option" under Section 422 of the Code.
3.4.4. The Board shall from time to time, in its absolute discretion, and
subject to applicable limitations of this Plan:
3.4.4.1. Select from among the Independent Directors (including
Independent Directors who have previously received Options under this Plan)
such of them as in its opinion should be granted Options;
3.4.4.2. Subject to the Award Limit, determine the number of shares to
be subject to such Options granted to the selected Independent Directors;
3.4.4.3. Subject to the provisions of Article 4, determine the terms
and conditions of such Options, consistent with this Plan.
All the foregoing Option grants authorized by this Section 3.4.4 are
subject to stockholder approval of the Plan.
ARTICLE 4.
TERMS OF OPTIONS
4.1. Option Agreement. Each Option shall be evidenced by a written Stock
Option Agreement, which shall be executed by the Optionee and an authorized
officer of the Company and which shall contain such terms and conditions as the
Committee (or the Board, in the case of Options granted to Independent
Directors) shall determine, consistent with this Plan. Stock Option Agreements
evidencing Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall contain such terms and
conditions as may be necessary to meet the applicable provisions of Section
162(m) of the Code. Stock Option Agreements evidencing Incentive Stock Options
shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.
4.2. Option Price. The price per share of the shares subject to each Option
shall be set by the Committee; provided, however, that such price shall be no
less than the par value of a share of Common Stock, unless otherwise permitted
by applicable state law, and (i) in the case of Incentive Stock Options and
Options intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code, such price shall not be less than 100% of the
Fair Market Value of a share of Common Stock on the date the Option is granted;
(ii) in the case of Incentive Stock Options granted to an individual then owning
(within the meaning of Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company or any Subsidiary
or parent corporation thereof (within the meaning of Section 422 of the Code)
such price shall not be less than 110% of the Fair Market Value of a share of
Common Stock on the date the Option is granted; and (iii) in the case of Options
granted to Independent Directors, such price shall equal 100% of the Fair Market
Value of a share of Common Stock on the date the Option is granted.
4.3. Option Term. The term of an Option shall be set by the Committee in
its discretion; provided, however, that, (i) in the case of Options granted to
Independent Directors, the term shall be ten (10) years from the date the Option
is granted, without variation or acceleration hereunder, but subject to Section
5.6, and (ii) in the case of Incentive Stock Options, the term shall not be more
than ten (10) years from the date the Incentive Stock Option is granted, or five
(5) years from such date if the Incentive Stock Option is
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granted to an individual then owning (within the meaning of Section 424(d) of
the Code) more than 10% of the total combined voting power of all classes of
stock of the Company or any Subsidiary or parent corporation thereof (within the
meaning of Section 422 of the Code). Except as limited by requirements of
Section 422 of the Code and regulations and rulings thereunder applicable to
Incentive Stock Options, the Committee may extend the term of any outstanding
Option in connection with any Termination of Employment or Termination of
Consultancy of the Optionee, or amend any other term or condition of such Option
relating to such a termination.
4.4. Option Vesting
4.4.1. The period during which the right to exercise an Option in whole or
in part vests in the Optionee shall be set by the Committee and the Committee
may determine that an Option may not be exercised in whole or in part for a
specified period after it is granted; provided, however, that Options granted to
Independent Directors shall become exercisable in cumulative annual installments
of 25% on each of the first, second, third and fourth anniversaries of the date
of Option grant, without variation or acceleration hereunder except as provided
in Section 10.3.2. At any time after grant of an Option, the Committee may, in
its sole and absolute discretion and subject to whatever terms and conditions it
selects, accelerate the period during which an Option (except an Option granted
to an Independent Director) vests.
4.4.2. No portion of an Option which is unexercisable at Termination of
Employment, Termination of Directorship or Termination of Consultancy, as
applicable, shall thereafter become exercisable, except as may be otherwise
provided by the Committee in the case of Options granted to Employees or
consultants either in the Stock Option Agreement or by action of the Committee
following the grant of the Option.
4.4.3. To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section 422 of
the Code, but without regard to Section 422(d) of the Code) are exercisable for
the first time by an Optionee during any calendar year (under the Plan and all
other incentive stock option plans of the Company and any Subsidiary) exceeds
$100,000, such Options shall be treated as Non-Qualified Options to the extent
required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking Options into account in the order in which
they were granted. For purposes of this Section 4.4.3, the Fair Market Value of
stock shall be determined as of the time the Option with respect to such stock
is granted.
4.5. Continued Employment. Nothing in this Plan or in any Stock Option
Agreement hereunder shall confer upon any Optionee any right to continue in the
employ of, or as a consultant for, the Company or any Subsidiary, or as a
director of the Company, or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which are hereby expressly reserved,
to discharge any Optionee at any time for any reason whatsoever, with or without
good cause.
ARTICLE 5.
EXERCISE OF OPTIONS
5.1. Partial Exercise. An exercisable Option may be exercised in whole or
in part. However, an Option shall not be exercisable with respect to fractional
shares and the Committee (or the Board, in the case of Options granted to
Independent Directors) may require that, by the terms of the Option, a partial
exercise can only be effective with respect to a minimum number of shares.
5.2. Manner of Exercise. All or a portion of an exercisable Option shall be
deemed exercised upon delivery of all of the following to the Secretary of the
Company or his office:
5.2.1. A written notice complying with the applicable rules
established by the Committee (or the Board, in the case of Options granted
to Independent Directors) stating that the Option, or a portion thereof, is
exercised. The notice shall be signed by the Optionee or other person then
entitled to exercise the Option or such portion;
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5.2.2. Such representations and documents as the Committee (or the
Board, in the case of Options granted to Independent Directors), in its
absolute discretion, deems necessary or advisable to effect compliance with
all applicable provisions of the Securities Act of 1933, as amended, and
any other federal or state securities laws or regulations. The Committee or
Board may, in its absolute discretion, also take whatever additional
actions it deems appropriate to effect such compliance including, without
limitation, placing legends on share certificates and issuing stop-transfer
notices to agents and registrars;
5.2.3. In the event that the Option shall be exercised pursuant to
Section 10.1 by any person or persons other than the Optionee, appropriate
proof of the right of such person or persons to exercise the Option; and
5.2.4. Full cash payment to the Secretary of the Company for the
shares with respect to which the Option, or portion thereof, is exercised.
However, the Committee (or the Board, in the case of Options granted to
Independent Directors), may in its discretion (i) allow a delay in payment
up to thirty (30) days from the date the Option, or portion thereof, is
exercised; (ii) allow payment, in whole or in part, through the delivery of
shares of Common Stock owned by the Optionee, duly endorsed for transfer to
the Company with a Fair Market Value on the date of delivery equal to the
aggregate exercise price of the Option or exercised portion thereof; (iii)
allow payment, in whole or in part, through the surrender of shares of
Common Stock then issuable upon exercise of the Option having a Fair Market
Value on the date of Option exercise equal to the aggregate exercise price
of the Option or exercised portion thereof; (iv) allow payment, in whole or
in part, through the delivery of property of any kind which constitutes
good and valuable consideration; (v) allow payment, in whole or in part,
through the delivery of a full recourse promissory note bearing interest
(at no less than such rate as shall then preclude the imputation of
interest under the Code) and payable upon such terms as may be prescribed
by the Committee or the Board; (vi) allow payment, in whole or in part,
through the delivery of a notice that the Optionee has placed a market sell
order with a broker with respect to shares of Common Stock then issuable
upon exercise of the Option, and that the broker has been directed to pay a
sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price; or (vii) allow payment through
any combination of the consideration provided in the foregoing
subparagraphs (ii), (iii), (iv), (v) and (vi). In the case of a promissory
note, the Committee (or the Board, in the case of Options granted to
Independent Directors) may also prescribe the form of such note and the
security to be given for such note. The Option may not be exercised,
however, by delivery of a promissory note or by a loan from the Company
when or where such loan or other extension of credit is prohibited by law.
5.3. Conditions to Issuance of Stock Certificates. The Company shall not
be required to issue or deliver any certificate or certificates for shares of
stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
5.3.1. The admission of such shares to listing on all stock exchanges
on which such class of stock is then listed;
5.3.2. The completion of any registration or other qualification of
such shares under any state or federal law, or under the rulings or
regulations of the Securities and Exchange Commission or any other
governmental regulatory body which the Committee or Board shall, in its
absolute discretion, deem necessary or advisable;
5.3.3. The obtaining of any approval or other clearance from any state
or federal governmental agency which the Committee (or Board, in the case
of Options granted to Independent Directors) shall, in its absolute
discretion, determine to be necessary or advisable;
5.3.4. The lapse of such reasonable period of time following the
exercise of the Option as the Committee (or Board, in the case of Options
granted to Independent Directors) may establish from time to time for
reasons of administrative convenience; and
5.3.5. The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax, which, in the
discretion of the Committee or the Board may be in the form of
consideration used by the Optionee to pay for such shares under Section
5.2.4.
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5.4. Rights as Stockholders. The holders of Options shall not be, nor have
any of the rights or privileges of, stockholders of the Company in respect of
any shares purchasable upon the exercise of any part of an Option unless and
until certificates representing such shares have been issued by the Company to
such holders.
5.5. Ownership and Transfer Restrictions. The Committee (or Board, in the
case of Options granted to Independent Directors), in its absolute discretion,
may impose such restrictions on the ownership and transferability of the shares
purchasable upon the exercise of an Option as it deems appropriate. Any such
restriction shall be set forth in the respective Stock Option Agreement and may
be referred to on the certificates evidencing such shares. The Committee may
require the Employee to give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
(i) two years from the date of granting such Option to such Employee or (ii) one
year after the transfer of such shares to such Employee. The Committee may
direct that the certificates evidencing shares acquired by exercise of an Option
refer to such requirement to give prompt notice of disposition.
5.6. Limitations on Exercise of Options Granted to Independent
Directors. No Option granted to an Independent Director may be exercised to any
extent by anyone after the first to occur of the following events:
5.6.1. The expiration of twelve (12) months from the date of the
Optionee's death;
5.6.2. the expiration of twelve (12) months from the date of the
Optionee's Termination of Directorship by reason of his permanent and total
disability (within the meaning of Section 22(e)(3) of the Code);
5.6.3. the expiration of three (3) months from the date of the
Optionee's Termination of Directorship for any reason other than such
Optionee's death or his permanent and total disability, unless the Optionee
dies within said three-month period; or
5.6.4. The expiration of ten years from the date the Option was
granted.
ARTICLE 6.
AWARD OF RESTRICTED STOCK
6.1. Award of Restricted Stock.
6.1.1. The Committee may from time to time, in its absolute discretion:
6.1.1.1. Select from among the key Employees or consultants (including
Employees or consultants who have previously received other awards under
this Plan) such of them as in its opinion should be awarded Restricted
Stock; and
6.1.2. Determine the purchase price, if any, and other terms and conditions
applicable to such Restricted Stock, consistent with this Plan.
6.1.3. The Committee shall establish the purchase price, if any, and form
of payment for Restricted Stock; provided, however, that such purchase price
shall be no less than the par value of the Common Stock to be purchased, unless
otherwise permitted by applicable state law. In all cases, legal consideration
shall be required for each issuance of Restricted Stock.
6.1.4. Upon the selection of a key Employee or consultant to be awarded
Restricted Stock, the Committee shall instruct the Secretary of the Company to
issue such Restricted Stock and may impose such conditions on the issuance of
such Restricted Stock as it deems appropriate.
6.2. Restricted Stock Agreement. Restricted Stock shall be issued only
pursuant to a written Restricted Stock Agreement, which shall be executed by the
selected key Employee or consultant and an authorized officer of the Company and
which shall contain such terms and conditions as the Committee shall determine,
consistent with this Plan.
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6.3. Consideration. As consideration for the issuance of Restricted Stock,
in addition to payment of any purchase price, the Restricted Stockholder shall
agree, in the written Restricted Stock Agreement, to remain in the employ of, or
to consult for, the Company or any Subsidiary for a period of at least one year
after the Restricted Stock is issued (or such shorter period as may be fixed in
the Restricted Stock Agreement or by action of the Committee following grant of
the Restricted Stock). Nothing in this Plan or in any Restricted Stock Agreement
hereunder shall confer on any Restricted Stockholder any right to continue in
the employ of, or as a consultant for, the Company or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any Restricted
Stockholder at any time for any reason whatsoever, with or without good cause.
6.4. Rights as Stockholders. Upon delivery of the shares of Restricted
Stock to the escrow holder pursuant to Section 6.7, the Restricted Stockholder
shall have, unless otherwise provided by the Committee, all the rights of a
stockholder with respect to said shares, subject to the restrictions in his
Restricted Stock Agreement, including the right to receive all dividends and
other distributions paid or made with respect to the shares; provided, however,
that in the discretion of the Committee, any extraordinary distributions with
respect to the Common Stock shall be subject to the restrictions set forth in
Section 6.5.
6.5. Restriction. All shares of Restricted Stock issued under this Plan
(including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Restricted Stock
Agreement, be subject to such restrictions as the Committee shall provide, which
restrictions may include, without limitation, restrictions concerning voting
rights and transferability and restrictions based on duration of employment with
the Company, Company performance and individual performance; provided, however,
that by action taken after the Restricted Stock is issued, the Committee may, on
such terms and conditions as it may determine to be appropriate, remove any or
all of the restrictions imposed by the terms of the Restricted Stock Agreement.
Restricted Stock may not be sold or encumbered until all restrictions are
terminated or expire. Unless provided otherwise by the Committee, if no
consideration was paid by the Restricted Stockholder upon issuance, a Restricted
Stockholder's rights in unvested Restricted Stock shall lapse upon Termination
of Employment or, if applicable, upon Termination of Consultancy with the
Company.
6.6. Repurchase of Restricted Stock. The Committee shall provide in the
terms of each individual Restricted Stock Agreement that the Company shall have
the right to repurchase from the Restricted Stockholder the Restricted Stock
then subject to restrictions under the Restricted Stock Agreement immediately
upon a Termination of Employment or, if applicable, upon a Termination of
Consultancy between the Restricted Stockholder and the Company, at a cash price
per share equal to the price paid by the Restricted Stockholder for such
Restricted Stock; provided, however, that provision may be made that no such
right of repurchase shall exist in the event of a Termination of Employment or
Termination of Consultancy without cause, or following a Change in Control of
the Company or because of the Restricted Stockholder's retirement, death or
disability, or otherwise.
6.7. Escrow. The Secretary of the Company or such other escrow holder as
the Committee may appoint shall retain physical custody of each certificate
representing Restricted Stock until all of the restrictions imposed under the
Restricted Stock Agreement with respect to the shares evidenced by such
certificate expire or shall have been removed.
6.8. Legend. In order to enforce the restrictions imposed upon shares of
Restricted Stock hereunder, the Committee shall cause a legend or legends to be
placed on certificates representing all shares of Restricted Stock that are
still subject to restrictions under Restricted Stock Agreements, which legend or
legends shall make appropriate reference to the conditions imposed thereby.
6.9. Provisions Applicable to Section 162(m) Participants.
6.9.1. Notwithstanding anything in the Plan to the contrary, the Committee
may grant Restricted Stock awards to a Section 162(m) Participant that vest upon
the attainment of performance targets for the Company which are related to one
or more of the following performance goals: (i) pre-tax income,
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(ii) operating income, (iii) cash flow, (iv) earnings per share, (v) return on
equity, (vi) return on invested capital or assets and (vii) cost reductions or
savings.
6.9.2. To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with respect to
Restricted Stock which may be granted to one or more Section 162(m)
Participants, no later than ninety (90) days following the commencement of any
fiscal year in question or any other designated fiscal period (or such other
time as may be required or permitted by Section 162(m) of the Code), the
Committee shall, in writing, (i) designate one or more Section 162(m)
Participants, (ii) select the performance goal or goals applicable to the fiscal
year or other designated fiscal period, (iii) establish the various targets and
bonus amounts which may be earned for such fiscal year or other designated
fiscal period and (iv) specify the relationship between performance goals and
targets and the amounts to be earned by each Section 162(m) Participant for such
fiscal year or other designated fiscal period. Following the completion of each
fiscal year or other designated fiscal period, the Committee shall certify in
writing whether the applicable performance targets have been achieved for such
fiscal year or other designated fiscal period. In determining the amount earned
by a Section 162(m) Participant, the Committee shall have the right to reduce
(but not to increase) the amount payable at a given level of performance to take
into account additional factors that the Committee may deem relevant to the
assessment of individual or corporate performance for the fiscal year or other
designated fiscal period.
6.10. Section 83(b) Election. If a Restricted Stockholder makes an
election under Section 83(b) of the Code, or any successor section
thereto, to be taxed with respect to the Restricted Stock as of the date of
transfer of the Restricted Stock rather than as of the date or dates upon which
the Restricted Stockholder would otherwise be taxable under Section 83(b) of
the Code, the Restricted Stockholder shall deliver a copy of such election to
the Company immediately after filing such election with the Internal Revenue
Service.
ARTICLE 7.
PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
DEFERRED STOCK, STOCK PAYMENTS
7.1. Performance Awards. Any key Employee or consultant selected by the
Committee may be granted one or more Performance Awards. The value of such
Performance Awards may be linked to the market value, book value, net profits or
other measure of the value of Common Stock or other specific performance
criteria determined appropriate by the Committee, in each case on a specified
date or dates or over any period or periods determined by the Committee, or may
be based upon the appreciation in the market value, book value, net profits or
other measure of the value of a specified number of shares of Common Stock over
a fixed period or periods determined by the Committee. In making such
determinations, the Committee shall consider (among such other factors as it
deems relevant in light of the specific type of award) the contributions,
responsibilities and other compensation of the particular key Employee or
consultant.
7.2. Dividend Equivalents. Any key Employee or consultant selected by the
Committee may be granted Dividend Equivalents based on the dividends declared on
Common Stock, to be credited as of dividend payment dates, during the period
between the date an Option, Stock Appreciation Right, Deferred Stock or
Performance Award is granted, and the date such Option, Stock Appreciation
Right, Deferred Stock or Performance Award is exercised, vests or expires, as
determined by the Committee. Such Dividend Equivalents shall be converted to
cash or additional shares of Common Stock by such formula and at such time and
subject to such limitations as may be determined by the Committee. With respect
to Dividend Equivalents granted with respect to Options intended to be qualified
performance-based compensation for purposes of Section 162(m) of the Code, such
Dividend Equivalents shall be payable regardless of whether such Option is
exercised.
7.3. Stock Payments. Any key Employee or consultant selected by the
Committee may receive Stock Payments in the manner determined from time to time
by the Committee. The number of shares shall be determined by the Committee and
may be based upon the Fair Market Value, book value, net profits or other
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measure of the value of Common Stock or other specific performance criteria
determined appropriate by the Committee, determined on the date such Stock
Payment is made or on any date thereafter.
7.4. Deferred Stock. Any key Employee or consultant selected by the
Committee may be granted an award of Deferred Stock in the manner determined
from time to time by the Committee. The number of shares of Deferred Stock shall
be determined by the Committee and may be linked to the market value, book
value, net profits or other measure of the value of Common Stock or other
specific performance criteria determined to be appropriate by the Committee, in
each case on a specified date or dates or over any period or periods determined
by the Committee. Common Stock underlying a Deferred Stock award will not be
issued until the Deferred Stock award has vested, pursuant to a vesting schedule
or performance criteria set by the Committee. Unless otherwise provided by the
Committee, a Grantee of Deferred Stock shall have no rights as a Company
stockholder with respect to such Deferred Stock until such time as the award has
vested and the Common Stock underlying the award has been issued.
7.5. Performance Award Agreement, Dividend Equivalent Agreement, Deferred
Stock Agreement, Stock Payment Agreement. Each Performance Award, Dividend
Equivalent, award of Deferred Stock and/or Stock Payment shall be evidenced by a
written agreement, which shall be executed by the Grantee and an authorized
Officer of the Company and which shall contain such terms and conditions as the
Committee shall determine, consistent with this Plan.
7.6. Term. The term of a Performance Award, Dividend Equivalent, award of
Deferred Stock and/or Stock Payment shall be set by the Committee in its
discretion.
7.7. Exercise Upon Termination of Employment. A Performance Award,
Dividend Equivalent, award of Deferred Stock and/or Stock Payment is
exercisable or payable only while the Grantee is an Employee or consultant;
provided that the Committee may determine that the Performance Award, Dividend
Equivalent, award of Deferred Stock and/or Stock Payment may be exercised or
paid subsequent to Termination of Employment or Termination of Consultancy
without cause, or following a Change in Control of the Company, or because of
the Grantee's retirement, death or disability, or otherwise.
7.8. Payment on Exercise. Payment of the amount determined under Section
7.1 or 7.2 above shall be in cash, in Common Stock or a combination of both, as
determined by the Committee. To the extent any payment under this Article 7 is
effected in Common Stock, it shall be made subject to satisfaction of all
provisions of Section 5.3.
7.9. Consideration. In consideration of the granting of a Performance
Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment, the
Grantee shall agree, in a written agreement, to remain in the employ of, or to
consult for, the Company or any Subsidiary for a period of at least one year
after such Performance Award, Dividend Equivalent, award of Deferred Stock
and/or Stock Payment is granted (or such shorter period as may be fixed in such
agreement or by action of the Committee following such grant). Nothing in this
Plan or in any agreement hereunder shall confer on any Grantee any right to
continue in the employ of, or as a consultant for, the Company or any Subsidiary
or shall interfere with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any Grantee at any
time for any reason whatsoever, with or without good cause.
7.10. Provisions Applicable to Section 162(m) Participants.
7.10.1. Notwithstanding anything in the Plan to the contrary, the Committee
may grant any performance or incentive awards described in Article 7 to a
Section 162(m) Participant that vest or become exercisable upon the attainment
of performance targets for the Company which are related to one or more of the
following performance goals: (i) pre-tax income, (ii) operating income, (iii)
cash flow, (iv) earnings per share, (v) return on equity, (vi) return on
invested capital or assets and (vii)cost reductions or savings.
7.10.2. To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with respect to
performance or incentive awards described in Article 7 which may be granted to
one or more Section 162(m) Participants, no later than ninety (90) days
following the commencement of any fiscal year in question or any other
designated fiscal period (or such other time as
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may be required or permitted by Section 162(m) of the Code), the Committee
shall, in writing, (i) designate one or more Section 162(m) Participants, (ii)
select the performance goal or goals applicable to the fiscal year or other
designated fiscal period, (iii) establish the various targets and bonus amounts
which may be earned for such fiscal year or other designated fiscal period and
(iv) specify the relationship between performance goals and targets and the
amounts to be earned by each Section 162(m) Participant for such fiscal year or
other designated fiscal period. Following the completion of each fiscal year or
other designated fiscal period, the Committee shall certify in writing whether
the applicable performance targets have been achieved for such fiscal year or
other designated fiscal period. In determining the amount earned by a Section
162(m) Participant, the Committee shall have the right to reduce (but not to
increase) the amount payable at a given level of performance to take into
account additional factors that the Committee may deem relevant to the
assessment of individual or corporate performance for the fiscal year or other
designated fiscal period.
ARTICLE 8.
STOCK APPRECIATION RIGHTS
8.1. Grant of Stock Appreciation Rights. A Stock Appreciation Right may
be granted to any key Employee or consultant selected by the Committee. A Stock
Appreciation Right may be granted (i) in connection and simultaneously with the
grant of an Option, (ii) with respect to a previously granted Option, or (iii)
independent of an Option. A Stock Appreciation Right shall be subject to such
terms and conditions not inconsistent with this Plan as the Committee shall
impose and shall be evidenced by a written Stock Appreciation Right Agreement,
which shall be executed by the Grantee and an authorized officer of the
Company. The Committee, in its discretion, may determine whether a Stock
Appreciation Right is to qualify as performance-based compensation as described
in Section 162(m)(4)(C) of the Code and Stock Appreciation Right Agreements
evidencing Stock Appreciation Rights intended to so qualify shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code. Without limiting the generality of the foregoing,
the Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition of the grant of a Stock Appreciation Right to an
Employee or consultant that the Employee or consultant surrender for
cancellation some or all of the unexercised Options, awards of Restricted Stock
or Deferred Stock, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments, or other rights which have been previously
granted to him under this Plan or otherwise. A Stock Appreciation Right, the
grant of which is conditioned upon such surrender, may have an exercise price
lower (or higher) than the exercise price of the surrendered Option or other
award, may cover the same (or a lesser or greater) number of shares as such
surrendered Option or other award, may contain such other terms as the
Committee deems appropriate, and shall be exercisable in accordance with its
terms, without regard to the number of shares, price, exercise period or any
other term or condition of such surrendered Option or other award.
8.2. Coupled Stock Appreciation Rights.
8.2.1. A Coupled Stock Appreciation Right ("CSAR") shall be related to a
particular Option and shall be exercisable only when and to the extent the
related Option is exercisable.
8.2.2. A CSAR may be granted to the Grantee for no more than the number of
shares subject to the simultaneously or previously granted Option to which it is
coupled.
8.2.3. A CSAR shall entitle the Grantee (or other person entitled to
exercise the Option pursuant to this Plan) to surrender to the Company
unexercised a portion of the Option to which the CSAR relates (to the extent
then exercisable pursuant to its terms) and to receive from the Company in
exchange therefor an amount determined by multiplying the difference obtained by
subtracting the Option exercise price from the Fair Market Value of a share of
Common Stock on the date of exercise of the CSAR by the number of shares of
Common Stock with respect to which the CSAR shall have been exercised, subject
to any limitations the Committee may impose.
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8.3. Independent Stock Appreciation Rights.
8.3.1. An Independent Stock Appreciation Right ("ISAR") shall be unrelated
to any Option and shall have a term set by the Committee. An ISAR shall be
exercisable in such installments as the Committee may determine. An ISAR shall
cover such number of shares of Common Stock as the Committee may determine. The
exercise price per share of Common Stock subject to each ISAR shall be set by
the Committee. An ISAR is exercisable only while the Grantee is an Employee or
consultant; provided that the Committee may determine that the ISAR may be
exercised subsequent to Termination of Employment or Termination of Consultancy
without cause, or following a change in control of the Company, or because of
the Grantee's retirement, death or disability, or otherwise.
8.3.2. An ISAR shall entitle the Grantee (or other person entitled to
exercise the ISAR pursuant to this Plan) to exercise all or a specified portion
of the ISAR (to the extent then exercisable pursuant to its terms) and to
receive from the Company an amount determined by multiplying the difference
obtained by subtracting the exercise price per share of the ISAR from the Fair
Market Value of a share of Common Stock on the date of exercise of the ISAR by
the number of shares of Common Stock with respect to which the ISAR shall have
been exercised, subject to any limitations the Committee may impose.
8.4. Payment and Limitations on Exercise
8.4.1. Payment of the amount determined under Section 8.2.3 and 8.3.2 above
shall be in cash, in Common Stock (based on its Fair Market Value as of the date
the Stock Appreciation Right is exercised) or a combination of both, as
determined by the Committee. To the extent such payment is effected in Common
Stock it shall be made subject to satisfaction of all provisions of Section 5.3
above pertaining to Options.
8.4.2. Grantees of Stock Appreciation Rights may be required to comply with
any timing or other restrictions with respect to the settlement or exercise of a
Stock Appreciation Right, including a window-period limitation, as may be
imposed in the discretion of the Board or Committee.
8.5. Consideration. In consideration of the granting of a Stock
Appreciation Right, the Grantee shall agree, in the written Stock Appreciation
Right Agreement, to remain in the employ of, or to consult for, the Company or
any Subsidiary for a period of at least one year after the Stock Appreciation
Right is granted (or such shorter period as may be fixed in the Stock
Appreciation Right Agreement or by action of the Committee following grant of
the Restricted Stock). Nothing in this Plan or in any Stock Appreciation Right
Agreement hereunder shall confer on any Grantee any right to continue in the
employ of, or as a consultant for, the Company or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any Grantee at any
time for any reason whatsoever, with or without good cause.
ARTICLE 9.
ADMINISTRATION
9.1. Compensation Committee. The Compensation Committee (or another
committee or a subcommittee of the Board assuming the functions of the Committee
under this Plan) shall consist solely of two or more Independent Directors
appointed by and holding office at the pleasure of the Board, each of whom is
both a "non-employee director" as defined by Rule 16b-3 and an "outside
director" for purposes of Section 162(m) of the Code. Appointment of Committee
members shall be effective upon acceptance of appointment. Committee members may
resign at any time by delivering written notice to the Board. Vacancies in the
Committee may be filled by the Board.
9.2. Duties and Powers of Committee. It shall be the duty of the
Committee to conduct the general administration of this Plan in
accordance with its provisions. The Committee shall have the power to interpret
this Plan and the agreements pursuant to which Options, awards of Restricted
Stock or Deferred Stock, Performance Awards, Stock Appreciation Rights,
Dividend Equivalents or Stock Payments are granted or awarded, and to adopt
such rules for the administration, interpretation, and application of this Plan
as are consistent therewith and to interpret, amend or revoke any such rules.
Notwithstanding the foregoing, the full
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Board, acting by a majority of its members in office, shall conduct the general
administration of the Plan with respect to Options granted to Independent
Directors. Any such grant or award under this Plan need not be the same with
respect to each Optionee, Grantee or Restricted Stockholder. Any such
interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code. In its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under this Plan except with respect to
matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations
or rules issued thereunder, are required to be determined in the sole discretion
of the Committee.
9.3. Majority Rule; Unanimous Written Consent. The Committee shall act by a
majority of its members in attendance at a meeting at which a quorum is present
or by a memorandum or other written instrument signed by all members of the
Committee.
9.3. Compensation; Professional Assistance; Good Faith Actions. Members of
the Committee shall receive such compensation for their services as members as
may be determined by the Board. All expenses and liabilities which members of
the Committee incur in connection with the administration of this Plan shall be
borne by the Company. The Committee may, with the approval of the Board, employ
attorneys, consultants, accountants, appraisers, brokers, or other persons. The
Committee, the Company and the Company's officers and Directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee or the Board in good faith shall be final and binding upon all
Optionees, Grantees, Restricted Stockholders, the Company and all other
interested persons. No members of the Committee or Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to this Plan, Options, awards of Restricted Stock or Deferred Stock,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments, and all members of the Committee and the Board shall be fully
protected by the Company in respect of any such action, determination or
interpretation.
ARTICLE 10.
MISCELLANEOUS PROVISIONS
10.1. Not Transferable. Options, Restricted Stock awards, Deferred Stock
awards, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments under this Plan may not be sold, pledged, assigned, or
transferred in any manner other than by will or the laws of descent and
distribution or pursuant to a QDRO, unless and until such rights or awards have
been exercised, or the shares underlying such rights or awards have been issued,
and all restrictions applicable to such shares have lapsed. No Option,
Restricted Stock award, Deferred Stock award, Performance Award, Stock
Appreciation Right, Dividend Equivalent or Stock Payment or interest or right
therein shall be liable for the debts, contracts or engagements of the Optionee,
Grantee or Restricted Stockholder or his successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence.
During the lifetime of the Optionee or Grantee, only he may exercise an
Option or other right or award (or any portion thereof) granted to him under the
Plan, unless it has been disposed of pursuant to a QDRO. After the death of the
Optionee or Grantee, any exercisable portion of an Option or other right or
award may, prior to the time when such portion becomes unexercisable under the
Plan or the applicable Stock Option Agreement or other agreement, be exercised
by his personal representative or by any person empowered to do so under the
deceased Optionee's or Grantee's will or under the then applicable laws of
descent and distribution.
10.2. Amendment, Suspension or Termination of this Plan. Except as
otherwise provided in this Section 10.2, this Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at
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any time or from time to time by the Board or the Committee. However, without
approval of the Company's stockholders given within twelve months before or
after the action by the Board or the Committee, no action of the Board or the
Committee may, except as provided in Section 10.3, increase the limits imposed
in Section 2.1 on the maximum number of shares which may be issued under this
Plan or modify the Award Limit, and no action of the Board or the Committee may
be taken that would otherwise require stockholder approval as a matter of
applicable law, regulation or rule. No amendment, suspension or termination of
this Plan shall, without the consent of the holder of Options, Restricted Stock
awards, Deferred Stock awards, Performance Awards, Stock Appreciation Rights,
Dividend Equivalents or Stock Payments, alter or impair any rights or
obligations under any Options, Restricted Stock awards, Deferred Stock awards,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments theretofore granted or awarded, unless the award itself otherwise
expressly so provides. No Options, Restricted Stock, Deferred Stock, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments may be
granted or awarded during any period of suspension or after termination of this
Plan, and in no event may any Incentive Stock Option be granted under this Plan
after the first to occur of the following events:
10.2.1. The expiration of ten years from the date the Plan is adopted
by the Board; or
10.2.2. The expiration of ten years from the date the Plan is approved
by the Company's stockholders under Section 10.4.
10.3. Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events.
10.3.1. Subject to Section 10.3.4, in the event that the Committee (or the
Board, in the case of Options granted to Independent Directors)determines that
any dividend or other distribution (whether in the form of cash, Common Stock,
other securities, or other property), recapitalization, reclassification, stock
split, reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase, liquidation, dissolution, or sale, transfer,
exchange or other disposition of all or substantially all of the assets of the
Company (including, but not limited to, a Corporate Transaction), or exchange of
Common Stock or other securities of the Company, issuance of warrants or other
rights to purchase Common Stock or other securities of the Company, or other
similar corporate transaction or event, in the Committee's sole discretion (or
in the case of Options granted to Independent Directors, the Board's sole
discretion), affects the Common Stock such that an adjustment is determined by
the Committee to be appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan
or with respect to an Option, Restricted Stock award, Performance Award, Stock
Appreciation Right, Dividend Equivalent, Deferred Stock award or Stock Payment,
then the Committee (or the Board, in the case of Options granted to Independent
Directors) shall, in such manner as it may deem equitable, adjust any or all of
10.3.1.1. the number and kind of shares of Common Stock (or other
securities or property) with respect to which Options, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments may be
granted under the Plan, or which may be granted as Restricted Stock or
Deferred Stock (including, but not limited to, adjustments of the
limitations in Section 2.1 on the maximum number and kind of shares which
may be issued and adjustments of the Award Limit),
10.3.1.2. the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Options, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents, or Stock Payments, and in
the number and kind of shares of outstanding Restricted Stock or Deferred
Stock, and
10.3.1.3. the grant or exercise price with respect to any Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment.
10.3.2. Subject to Sections 10.3.2.7 and 10.3.4, in the event of any
Corporate Transaction or other transaction or event described in Section 10.3.1
or any unusual or nonrecurring transactions or events affecting the Company, any
affiliate of the Company, or the financial statements of the Company or any
affiliate, or of changes in applicable laws, regulations, or accounting
principles, the Committee (or the Board, in the case of Options granted to
Independent Directors) in its discretion is hereby authorized to take any one or
more of the following actions whenever the Committee (or the Board, in the case
of Options granted to Independent
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Directors) determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to any option, right or other
award under this Plan, to facilitate such transactions or events or to give
effect to such changes in laws, regulations or principles:
10.3.2.1. In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may provide, either by
the terms of the agreement or by action taken prior to the occurrence of
such transaction or event and either automatically or upon the Optionee's
request, for either the purchase of any such Option, Performance Award,
Stock Appreciation Right, Dividend Equivalent, or Stock Payment, or any
Restricted Stock or Deferred Stock for an amount of cash equal to the
amount that could have been attained upon the exercise of such option,
right or award or realization of the Optionee's rights had such option,
right or award been currently exercisable or payable or fully vested or the
replacement of such option, right or award with other rights or property
selected by the Committee (or the Board, in the case of Options granted to
Independent Directors) in its sole discretion;
10.3.2.2. In its sole and absolute discretion, the Committee (or the
Board, in the case of Options granted to Independent Directors) may
provide, either by the terms of such Option, Performance Award, Stock
Appreciation Right, Dividend Equivalent, or Stock Payment, or Restricted
Stock or Deferred Stock or by action taken prior to the occurrence of such
transaction or event that it cannot be exercised after such event;
10.3.2.3. In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may provide, either by
the terms of such Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent, or Stock Payment, or Restricted Stock or Deferred
Stock or by action taken prior to the occurrence of such transaction or
event, that for a specified period of time prior to such transaction or
event, such option, right or award shall be exercisable as to all shares
covered thereby, notwithstanding anything to the contrary in (i) Section
4.4 or (ii) the provisions of such Option, Performance Award, Stock
Appreciation Right, Dividend Equivalent, or Stock Payment, or Restricted
Stock or Deferred Stock;
10.3.2.4. In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may provide, either by
the terms of such Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent, or Stock Payment, or Restricted Stock or Deferred
Stock or by action taken prior to the occurrence of such transaction or
event, that upon such event, such option, right or award be assumed by the
successor or survivor corporation, or a parent or subsidiary thereof, or
shall be substituted for by similar options, rights or awards covering the
stock of the successor or survivor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of shares
and prices; and
10.3.2.5. In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may make adjustments in
the number and type of shares of Common Stock (or other securities or
property) subject to outstanding Options, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents, or Stock Payments, and in the
number and kind of outstanding Restricted Stock or Deferred Stock and/ or
in the terms and conditions of (including the grant or exercise price), and
the criteria included in, outstanding options, rights and awards and
options, rights and awards which may be granted in the future.
10.3.2.6. In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide either by the
terms of a Restricted Stock award or Deferred Stock award or by action
taken prior to the occurrence of such event that, for a specified period of
time prior to such event, the restrictions imposed under a Restricted Stock
Agreement or a Deferred Stock Agreement upon some or all shares of
Restricted Stock or Deferred Stock may be terminated, and, in the case of
Restricted Stock, some or all shares of such Restricted Stock may cease to
be subject to repurchase under Section 6.6 or forfeiture under Section 6.5
after such event.
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10.3.2.7. None of the foregoing discretionary actions taken under this
Section 10.3.2 shall be permitted with respect to Options granted under
Section 3.4.4 to Independent Directors to the extent that such discretion
would be inconsistent with the applicable exemptive conditions of Rule
16b-3. In the event of a Change in Control or a Corporate Transaction, to
the extent that the Board does not have the ability under Rule 16b-3 to
take or to refrain from taking the discretionary actions set forth in
Section 10.3.2.3 above, each Option granted to an Independent Director
shall be exercisable as to all shares covered thereby upon such Change in
Control or during the five days immediately preceding the consummation of
such Corporate Transaction and subject to such consummation,
notwithstanding anything to the contrary in Section 4.4 or the vesting
schedule of such Options. In the event of a Corporate Transaction, to the
extent that the Board does not have the ability under Rule 16b-3 to take or
to refrain from taking the discretionary actions set forth in Section
10.3.2.2 above, no Option granted to an Independent Director may be
exercised following such Corporate Transaction unless such Option is, in
connection with such Corporate Transaction, either assumed by the successor
or survivor corporation (or parent or subsidiary thereof) or replaced with
a comparable right with respect to shares of the capital stock of the
successor or survivor corporation (or parent or subsidiary thereof).
10.3.3. Subject to Section 10.3.4 and 10.8, the Committee (or the Board, in
the case of Options granted to Independent Directors) may, in its discretion,
include such further provisions and limitations in any Option, Performance
Award, Stock Appreciation Right, Dividend Equivalent, or Stock Payment, or
Restricted Stock or Deferred Stock agreement or certificate, as it may deem
equitable and in the best interests of the Company.
10.3.4. With respect to Options, Stock Appreciation Rights and performance
or incentive awards described in Article 7 which are granted to Section 162(m)
Participants and are intended to qualify as performance-based compensation under
Section 162(m)(4)(C), no adjustment or action described in this Section 10.3 or
in any other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause the Plan to violate Section 422(b)(1) of the
Code or would cause such option or stock appreciation right to fail to so
qualify under Section 162(m)(4)(C), as the case may be, or any successor
provisions thereto. Furthermore, no such adjustment or action shall be
authorized to the extent such adjustment or action would result in short-swing
profits liability under Section 16 or violate the exemptive conditions of Rule
16b-3 unless the Committee (or the Board, in the case of Options granted to
Independent Directors) determines that the option or other award is not to
comply with such exemptive conditions. The number of shares of Common Stock
subject to any option, right or award shall always be rounded to the next whole
number.
10.4. Approval of Plan by Stockholders. This Plan will be submitted for the
approval of the Company's stockholders within twelve months after the date of
the Board's initial adoption of this Plan. Options, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments may be granted and
Restricted Stock or Deferred Stock may be awarded prior to such stockholder
approval, provided that such Options, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments shall not be exercisable and such
Restricted Stock or Deferred Stock shall not vest prior to the time when this
Plan is approved by the stockholders, and provided further that if such approval
has not been obtained at the end of said twelve-month period, all Options,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments previously granted and all Restricted Stock or Deferred Stock
previously awarded under this Plan shall thereupon be canceled and become null
and void.
10.5. Tax Withholding. The Company shall be entitled to require payment in
cash or deduction from other compensation payable to each Optionee, Grantee or
Restricted Stockholder of any sums required by federal, state or local tax law
to be withheld with respect to the issuance, vesting or exercise of any Option,
Restricted Stock, Deferred Stock, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment. The Committee (or the Board, in the case
of Options granted to Independent Directors) may in its discretion and in
satisfaction of the foregoing requirement allow such Optionee, Grantee or
Restricted Stockholder to elect to have the Company withhold shares of Common
Stock otherwise issuable under such Option or other award (or allow the return
of shares of Common Stock) having a Fair Market Value equal to the sums required
to be withheld.
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10.6. Loans. The Committee may, in its discretion, extend one or more loans
to key Employees in connection with the exercise or receipt of an Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment granted under this Plan, or the issuance of Restricted Stock or Deferred
Stock awarded under this Plan. The terms and conditions of any such loan shall
be set by the Committee.
10.7. Forfeiture Provisions. Pursuant to its general authority to determine
the terms and conditions applicable to awards under the Plan, the Committee (or
the Board, in the case of Options granted to Independent Directors) shall have
the right (to the extent consistent with the applicable exemptive conditions of
Rule 16b-3) to provide, in the terms of Options or other awards made under the
Plan, or to require the recipient to agree by separate written instrument, that
(i) any proceeds, gains or other economic benefit actually or constructively
received by the recipient upon any receipt or exercise of the award, or upon the
receipt or resale of any Common Stock underlying such award, must be paid to the
Company, and (ii) the award shall terminate and any unexercised portion of such
award (whether or not vested) shall be forfeited, if (a) a Termination of
Employment, Termination of Consultancy or Termination of Directorship occurs
prior to a specified date, or within a specified time period following receipt
or exercise of the award, or (b) the recipient at any time, or during a
specified time period, engages in any activity in competition with the Company,
or which is inimical, contrary or harmful to the interests of the Company, as
further defined by the Committee (or the Board, as applicable).
10.8. Limitations Applicable to Section 16 Persons and Performance-Based
Compensation. Notwithstanding any other provision of this Plan, this Plan, and
any Option, Performance Award, Stock Appreciation Right, Dividend Equivalent or
Stock Payment granted, or Restricted Stock or Deferred Stock awarded, to any
individual who is then subject to Section 16 of the Exchange Act, shall be
subject to any additional limitations set forth in any applicable exemptive rule
under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of
the Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, the Plan, Options, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents, Stock Payments,
Restricted Stock and Deferred Stock granted or awarded hereunder shall be deemed
amended to the extent necessary to conform to such applicable exemptive rule.
Furthermore, notwithstanding any other provision of this Plan, any Option, Stock
Appreciation Right or performance or incentive award described in Article 7
which is granted to a Section 162(m) Participant and is intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall be subject to any additional limitations set forth in Section 162(m) of
the Code (including any amendment to Section 162(m) of the Code) or any
regulations or rulings issued thereunder that are requirements for qualification
as performance-based compensation as described in Section 162(m)(4)(C) of the
Code, and this Plan shall be deemed amended to the extent necessary to conform
to such requirements.
10.9. Effect of Plan Upon Options and Compensation Plans. The adoption of
this Plan shall not affect any other compensation or incentive plans in effect
for the Company or any Subsidiary. Nothing in this Plan shall be construed to
limit the right of the Company (i) to establish any other forms of incentives or
compensation for Employees, Directors or Consultants of the Company or any
Subsidiary or (ii) to grant or assume options or other rights otherwise than
under this Plan in connection with any proper corporate purpose including but
not by way of limitation, the grant or assumption of options in connection with
the acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, partnership, limited liability
company, firm or association.
10.10. Compliance with Laws. This Plan, the granting and vesting of
Options, Restricted Stock awards, Deferred Stock awards, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments under this
Plan and the issuance and delivery of shares of Common Stock and the payment of
money under this Plan or under Options, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments granted or Restricted Stock or
Deferred Stock awarded hereunder are subject to compliance with all applicable
federal and state laws, rules and regulations (including but not limited to
state and federal securities law and federal margin requirements) and to such
approvals by any listing, regulatory or governmental authority as may, in the
opinion of counsel for the Company, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall be subject to such
restrictions, and the person acquiring such securities shall, if requested by
the Company, provide such
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assurances and representations to the Company as the Company may deem necessary
or desirable to assure compliance with all applicable legal requirements. To the
extent permitted by applicable law, the Plan, Options, Restricted Stock awards,
Deferred Stock awards, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments granted or awarded hereunder shall be deemed
amended to the extent necessary to conform to such laws, rules and regulations.
10.11. Titles. Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of this Plan.
10.12. Governing Law. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.
* * *
I hereby certify that the foregoing Plan was duly adopted by the Board of
Directors of on , 1998.
Executed on this day of , 1998.
Secretary
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ANNEX H
DELAWARE GENERAL CORPORATION LAW
SECTION 262 APPRAISAL RIGHTS -- (a) Any stockholder of a corporation of
this State who holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to such shares, who
continuously holds such shares through the effective date of the merger or
consolidation, who has otherwise complied with subsection (d) of this section
and who has neither voted in favor of the merger or consolidation nor consented
thereto in writing pursuant to sec.228 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of the stockholder's shares
of stock under the circumstances described in subsections (b) and (c) of this
section. As used in this section, the word "stockholder" means a holder of
record of stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of a
nonstock corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec.251 (other than a merger effected pursuant to
sec.251(g) of this title), sec.252, sec.254, sec.257, sec.258, sec.263 or
sec.264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec.251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec.251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security or an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec.253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares
of any class or series of its stock as a result of an amendment to its
certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or
substantially all of the assets of the corporation. If the certificate of
incorporation contains such a provision, the procedures of this section,
including those set forth in subsections (d) and (e) of this section, shall
apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval
at a meeting of stockholders, the corporation, not less than 20 days
prior to the meeting, shall notify each of its stockholders who was such
on the record date for such meeting with respect to shares for which
appraisal rights are available pursuant to subsections (b) or (c) hereof
that appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of
this section. Each stockholder electing to demand the appraisal of his
shares shall deliver to the corporation, before the taking of the vote
on the merger or consolidation, a written demand for appraisal of his
shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of his shares. A proxy or vote
against the merger or consolidation shall not constitute such a demand.
A stockholder electing to take such action must do so by a separate
written demand as herein provided. Within 10 days after the effective
date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that
the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to sec.228
or sec.253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal
rights of the approval of the merger or consolidation and that appraisal
rights are available for any or all shares of such class or series of
stock of such constituent corporation, and shall include in such notice
a copy of this section; provided that, if the notice is given on or
after the effective date or the merger or consolidation, such notice
shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation
that are entitled to appraisal rights. Such notice may, and, if given on
or after the effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may, within
20 days after the date of mailing of such notice, demand in writing from
the surviving or resulting corporation the appraisal of such holder's
shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger
or consolidation, either (i) each such constituent corporation shall
send a second notice before the effective date of the merger or
consolidation notifying each of the holders of any class or series of
stock of such constituent corporation that are entitled to appraisal
rights of the effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second notice to
all such holders on or within 10 days after such effective date;
provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only
be sent to each stockholder who is entitled to appraisal rights and who
has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receiver either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided,
that if the notice is given on or after the
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effective date of the merger or consolidation, the record date shall be
such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of
business on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder
who has complied with subsections (a) and (d) hereof and who is otherwise
entitled to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within 60 days
after the effective date of the merger or consolidation, any stockholder
shall have the right to withdraw his demand for appraisal and to accept the
terms offered upon the merger or consolidation. Within 120 days after the
effective date of the merger or consolidation, any stockholder who has
complied with the requirements of subsections (a) and (d) hereof, upon
written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement
setting forth the aggregate number of shares not voted in favor of the
merger or consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such shares. Such
written statement shall be mailed to the stockholder within 10 days after
his written request for such statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of
a copy thereof shall be made upon the surviving or resulting corporation,
which shall within 20 days after such service file in the office of the
Register in Chancery in which the petition was filed a duly verified list
containing the names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the surviving or resulting corporation. If
the petition shall be filed by the surviving or resulting corporation, the
petition shall be accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the time and
place fixed for the hearing of such petition by registered or certified
mail to the surviving or resulting corporation and to the stockholders
shown on the list at the addresses therein stated. Such notice shall also
be given by 1 or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The
forms of the notices by mail and by publication shall be approved by the
Court, and the costs thereof shall be borne by the surviving or resulting
corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become
entitled to appraisal rights. The Court may require the stockholders who
have demanded an appraisal for their shares and who hold stock represented
by certificates to submit their certificates of stock to the Register in
Chancery for notation thereon of the pendency of the appraisal proceedings;
and if any stockholder fails to comply with such direction, the Court may
dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. In determining
such fair value, the Court shall take into account all relevant factors. In
determining the fair rate of interest, the Court may consider all relevant
factors, including the rate of interest which the surviving or resulting
corporation would have had to pay to borrow money during the pendency of
the proceeding. Upon application by the surviving or resulting corporation
or by any stockholder entitled to participate in the appraisal proceeding,
the Court may, in its discretion, permit discovery or other pretrial
proceedings and may proceed to trial upon the appraisal prior to the final
determination of the stockholder entitled to an appraisal. Any stockholder
whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has
submitted his certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that he is not entitled to appraisal rights under this section.
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(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple or
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and
the case of holders of shares represented by certificates upon the
surrender to the corporation of the certificates representing such stock.
The Court's decree may be enforced as other decrees in the Court of
Chancery may be enforced, whether such surviving or resulting corporation
be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances.
Upon application of a stockholder, the Court may order all or a portion of
the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value
of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded his appraisal rights as provided in
subsection (d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the
stock (except dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the merger or
consolidation); provided, however, that if no petition for an appraisal
shall be filed within the time provided in subsection (e) of this section,
or if such stockholder shall deliver to the surviving or resulting
corporation a written withdrawal of his demand for an appraisal and an
acceptance of the merger or consolidation, either within 60 days after the
effective date of the merger or consolidation as provided in subsection (e)
of this section or thereafter with the written approval of the corporation,
then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of
Chancery shall be dismissed as to any stockholder without the approval of
the Court, and such approval may be conditioned upon such terms as the
Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation.
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ANNEX I
MINNESOTA BUSINESS CORPORATION ACT
302A.471. RIGHTS OF DISSENTING SHAREHOLDERS
SUBDIVISION 1. ACTIONS CREATING RIGHTS. A shareholder of a corporation may
dissent from, and obtain payment for the fair value of the shareholder's shares
in the event of, any of the following corporate actions:
(a) An amendment of the articles that materially and adversely affects the
rights or preferences of the shares of the dissenting shareholder in that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the redemption of
the shares, including a provision respecting a sinking fund for the redemption
or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the shares to
acquire shares, securities other than shares, or rights to purchase shares or
securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a matter, or
to cumulate votes, except as the right may be excluded or limited through the
authorization or issuance of securities of an existing or new class or series
with similar or different voting rights; except that an amendment to the
articles of an issuing public corporation that provides that section 302A.671
does not apply to a control share acquisition does not give rise to the right to
obtain payment under this section;
(b) A sale, lease, transfer, or other disposition of all or substantially
all of the property and assets of the corporation, but not including a
transaction permitted without shareholder approval in section 302A.661,
subdivision 1, or a disposition in dissolution described in section 302A.725,
subdivision 2, or a disposition pursuant to an order of a court, or a
disposition for cash on terms requiring that all or substantially all of the net
proceeds of disposition be distributed to the shareholders in accordance with
their respective interests within one year after the date of disposition;
(c) A plan of merger, whether under this chapter or under chapter 322B, to
which the corporation is a party, except as provided in subdivision 3;
(d) A plan of exchange, whether under this chapter or under chapter 322B,
to which the corporation is a party as the corporation whose shares will be
acquired by the acquiring corporation, if the shares of the shareholder are
entitled to be voted on the plan; or
(e) Any other corporate action taken pursuant to a shareholder vote with
respect to which the articles, the bylaws, or a resolution approved by the board
directs that dissenting shareholders may obtain payment for their shares.
SUBD. 2. BENEFICIAL OWNERS. (a) A shareholder shall not assert dissenters'
rights as to less than all of the shares registered in the name of the
shareholder, unless the shareholder dissents with respect to all the shares that
are beneficially owned by another person but registered in the name of the
shareholder and discloses the name and address of each beneficial owner on whose
behalf the shareholder dissents. In that event, the rights of the dissenter
shall be determined as if the shares as to which the shareholder has dissented
and the other shares were registered in the names of different shareholders.
(b) The beneficial owner of shares who is not the shareholder may assert
dissenters' rights with respect to shares held on behalf of the beneficial
owner, and shall be treated as a dissenting shareholder under the terms of this
section and section 302A.473, if the beneficial owner submits to the corporation
at the time of or before the assertion of the rights a written consent of the
shareholder.
SUBD. 3. RIGHTS NOT TO APPLY. (a) Unless the articles, the bylaws, or a
resolution approved by the board otherwise provide, the right to obtain payment
under this section does not apply to a shareholder of the surviving corporation
in a merger, if the shares of the shareholder are not entitled to be voted on
the merger.
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(b) If a date is fixed according to section 302A.445, subdivision 1, for
the determination of shareholders entitled to receive notice of and to vote on
an action described in subdivision 1, only shareholders as of the date fixed,
and beneficial owners as of the date fixed who hold through shareholders, as
provided in subdivision 2, may exercise dissenters' rights.
SUBD. 4. OTHER RIGHTS. The shareholders of a corporation who have a right
under this section to obtain payment for their shares do not have a right at law
or in equity to have a corporate action described in subdivision 1 set aside or
rescinded, except when the corporate action is fraudulent with regard to the
complaining shareholder or the corporation.
302A.473. PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS
SUBDIVISION 1. DEFINITIONS. (a) For purposes of this section, the terms
defined in this subdivision have the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action referred to in section 302A.471, subdivision 1 or the
successor by merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of the corporate action
referred to in section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the effective date
of the corporate action referred to in section 302A.471, subdivision 1, up to
and including the date of payment, calculated at the rate provided in section
549.09 for interest on verdicts and judgments.
SUBD. 2. NOTICE OF ACTION. If a corporation calls a shareholder meeting at
which any action described in section 302A.471, subdivision 1 is to be voted
upon, the notice of the meeting shall inform each shareholder of the right to
dissent and shall include a copy of section 302A.471 and this section and a
brief description of the procedure to be followed under these sections.
SUBD. 3. NOTICE OF DISSENT. If the proposed action must be approved by the
shareholders, a shareholder who is entitled to dissent under section 302A.471
and who wishes to exercise dissenters' rights must file with the corporation
before the vote on the proposed action a written notice of intent to demand the
fair value of the shares owned by the shareholder and must not vote the shares
in favor of the proposed action.
SUBD. 4. NOTICE OF PROCEDURE; DEPOSIT OF SHARES. (a) After the proposed
action has been approved by the board and, if necessary, the shareholders, the
corporation shall send to all shareholders who have complied with subdivision 3
and to all shareholders entitled to dissent if no shareholder vote was required,
a notice that contains:
(1) The address to which a demand for payment and certificates of
certificated shares must be sent in order to obtain payment and the date by
which they must be received;
(2) Any restrictions on transfer of uncertificated shares that will apply
after the demand for payment is received;
(3) A form to be used to certify the date on which the shareholder, or the
beneficial owner on whose behalf the shareholder dissents, acquired the shares
or an interest in them and to demand payment; and
(4) A copy of section 302A.471 and this section and a brief description of
the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares or comply with
any restrictions on transfer of uncertificated shares within 30 days after the
notice required by paragraph (a) was given, but the dissenter retains all other
rights of a shareholder until the proposed action takes effect.
SUBD. 5. PAYMENT; RETURN OF SHARES. (a) After the corporate action takes
effect, or after the corporation receives a valid demand for payment, whichever
is later, the corporation shall remit to each dissenting
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shareholder who has complied with subdivisions 3 and 4 the amount the
corporation estimates to be the fair value of the shares, plus interest,
accompanied by:
(1) The corporation's closing balance sheet and statement of income for a
fiscal year ending not more than 16 months before the effective date of the
corporate action, together with the latest available interim financial
statements;
(2) An estimate by the corporation of the fair value of the shares and a
brief description of the method used to reach the estimate; and
(3) A copy of section 302A.471 and this section, and a brief description of
the procedure to be followed in demanding supplemental payment.
(b) The corporation may withhold the remittance described in paragraph (a)
from a person who was not a shareholder on the date the action dissented from
was first announced to the public or who is dissenting on behalf of a person who
was not a beneficial owner on that date. If the dissenter has complied with
subdivisions 3 and 4, the corporation shall forward to the dissenter the
materials described in paragraph (a), a statement of the reason for withholding
the remittance, and an offer to pay to the dissenter the amount listed in the
materials if the dissenter agrees to accept that amount in full satisfaction.
The dissenter may decline the offer and demand payment under subdivision 6.
Failure to do so entitles the dissenter only to the amount offered. If the
dissenter makes demand, subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of the deposit
of certificates or the imposition of transfer restrictions on uncertificated
shares, it shall return all deposited certificates and cancel all transfer
restrictions. However, the corporation may again give notice under subdivision 4
and require deposit or restrict transfer at a later time.
SUBD. 6. SUPPLEMENTAL PAYMENT; DEMAND. If a dissenter believes that the
amount remitted under subdivision 5 is less than the fair value of the shares
plus interest, the dissenter may give written notice to the corporation of the
dissenter's own estimate of the fair value of the shares, plus interest, within
30 days after the corporation mails the remittance under subdivision 5, and
demand payment of the difference. Otherwise, a dissenter is entitled only to the
amount remitted by the corporation.
SUBD. 7. PETITION; DETERMINATION. If the corporation receives a demand
under subdivision 6, it shall, within 60 days after receiving the demand, either
pay to the dissenter the amount demanded or agreed to by the dissenter after
discussion with the corporation or file in court a petition requesting that the
court determine the fair value of the shares, plus interest. The petition shall
be filed in the county in which the registered office of the corporation is
located, except that a surviving foreign corporation that receives a demand
relating to the shares of a constituent domestic corporation shall file the
petition in the county in this state in which the last registered office of the
constituent corporation was located. The petition shall name as parties all
dissenters who have demanded payment under subdivision 6 and who have not
reached agreement with the corporation. The corporation shall, after filing the
petition, serve all parties with a summons and copy of the petition under the
rules of civil procedure. Nonresidents of this state may be served by registered
or certified mail or by publication as provided by law. Except as otherwise
provided, the rules of civil procedure apply to this proceeding. The
jurisdiction of the court is plenary and exclusive. The court may appoint
appraisers, with powers and authorities the court deems proper, to receive
evidence on and recommend the amount of the fair value of the shares. The court
shall determine whether the shareholder or shareholders in question have fully
complied with the requirements of this section, and shall determine the fair
value of the shares, taking into account any and all factors the court finds
relevant, computed by any method or combination of methods that the court, in
its discretion, sees fit to use, whether or not used by the corporation or by a
dissenter. The fair value of the shares as determined by the court is binding on
all shareholders, wherever located. A dissenter is entitled to judgment in cash
for the amount by which the fair value of the shares as determined by the court,
plus interest, exceeds the amount, if any, remitted under subdivision 5, but
shall not be liable to the corporation for the amount, if any, by which the
amount, if any, remitted to the dissenter under subdivision 5 exceeds the fair
value of the shares as determined by the court, plus interest.
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SUBD. 8. COSTS; FEES; EXPENSES. (a) The court shall determine the costs and
expenses of a proceeding under subdivision 7, including the reasonable expenses
and compensation of any appraisers appointed by the court, and shall assess
those costs and expenses against the corporation, except that the court may
assess part or all of those costs and expenses against a dissenter whose action
in demanding payment under subdivision 6 is found to be arbitrary, vexatious, or
not in good faith.
(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses of
any experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily, vexatiously, or
not in good faith in bringing the proceeding, and may be awarded to a party
injured by those actions.
(c) The court may award, in its discretion, fees and expenses to an
attorney for the dissenters out of the amount awarded to the dissenters, if any.
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ANNEX J
STOCK OPTION AGREEMENT (NATIONAL MEDIA)
STOCK OPTION AGREEMENT, dated as of January 5, 1998 (the "Agreement"),
between NATIONAL MEDIA CORPORATION, a Delaware corporation (the "Grantee"), and
VALUEVISION INTERNATIONAL, INC., a Minnesota corporation (the "Grantor").
WHEREAS, the Grantee, V-L HOLDINGS CORP., a newly-formed Delaware
corporation ("Parent"), and the Grantor are entering into an Agreement and Plan
of Reorganization and Merger, dated as of the date hereof (the "Merger
Agreement"), which provides, among other things, for the merger (the "National
Media Merger") of a wholly-owned subsidiary of Parent with and into the Grantee
and the merger (the "ValueVision Merger") of another wholly-owned subsidiary of
Parent with and into the Grantor, such that the Grantee and the Grantor will
become wholly-owned subsidiaries of Parent and the stockholders of the Grantee
and the Grantor will become stockholders of Parent (the National Media Merger
and the ValueVision Merger collectively, the "Mergers");
WHEREAS, pursuant to a Stock Option Agreement dated as of the date hereof
between the Grantee and the Grantor, the Grantee has granted the Grantor an
option to acquire shares of common stock of the Grantee on terms that are
substantially similar to the terms of this Agreement (the "ValueVision Option");
WHEREAS, as a condition and inducement to their willingness to enter into
the Merger Agreement and the ValueVision Option, the Grantee and Parent have
requested that the Grantor grant to the Grantee an option to purchase 5,579,119
shares of Common Stock, par value $0.01 per share, of the Grantor (the "Common
Stock"), upon the terms and subject to the conditions hereof; and
WHEREAS, in order to induce the Grantee to enter into the Merger Agreement
and grant the ValueVision Option, the Grantor is willing to grant the Grantee
the requested option.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. The Option; Exercise; Adjustments; Payment of Spread.
(a) Contemporaneously herewith the Grantee, Parent and the Grantor are
entering into the Merger Agreement. Subject to the other terms and conditions
set forth herein, the Grantor hereby grants to the Grantee an irrevocable option
(the "Option") to purchase up to 5,579,119 as adjusted as provided herein)
shares of Common Stock (the "Shares") at a per share cash purchase price equal
to the lower of (i) $3.875 per Share or (ii) the average closing sales price of
the Common Stock on the Nasdaq National Market ("Nasdaq") for the five
consecutive trading days beginning on and including the day that the Mergers are
publicly announced (as adjusted as provided herein) (such lower price being the
"Purchase Price"). The Option may be exercised by the Grantee, in whole or in
part, at any time, or from time to time, following the occurrence of one of the
events set forth in Section 2(c) hereof and prior to the termination of the
Option in accordance with the terms of this Agreement.
(b) In the event the Grantee wishes to exercise the Option, the Grantee
shall send a written notice to the Grantor (the "Stock Exercise Notice")
specifying a date (subject to the HSR Act (as defined below)) not later than 10
business days and not earlier than the next business day following the date such
notice is given for the closing of such purchase. In the event of any change in
the number of issued and outstanding shares of Common Stock by reason of any
stock dividend, stock split, split-up, reclassification, recapitalization,
merger or other change in the corporate or capital structure of the Grantor, the
number of Shares subject to this Option and the purchase price per Share shall
be appropriately adjusted to restore the Grantee to its rights hereunder,
including its right to purchase Shares representing 19.9% of the capital stock
of the Grantor entitled to vote generally for the election of the directors of
the Grantor which is issued and outstanding immediately prior to the exercise of
the Option at an aggregate purchase price equal to the Purchase Price multiplied
by 5,579,119. In the event that any additional shares of Common Stock are issued
after the date of this Agreement (other than pursuant to an event described in
the preceding sentence), the number of Shares
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subject to this Option shall be increased by 19.9% of the number of the
additional shares of Common Stock so issued (and such additional Shares shall
have a purchase price per share equal to the Purchase Price).
(c) If at any time the Option is then exercisable pursuant to the terms of
Section 1(a) hereof, the Grantee may elect, in lieu of exercising the Option to
purchase Shares provided in Section 1(a) hereof, to send a written notice to the
Grantor (the "Cash Exercise Notice") specifying a date not later than 20
business days and not earlier than 10 business days following the date such
notice is given on which date the Grantor shall pay to the Grantee an amount in
cash equal to the Spread (as hereinafter defined) multiplied by all or such
portion of the Shares subject to the Option as Grantee shall specify. As used
herein "Spread" shall mean the excess, if any, over the Purchase Price of the
higher of (x) if applicable, the highest price per share of Common Stock
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by any person in an Alternative Transaction (as defined in clause
(i), (ii) or (iii) of Section 7.3(e) of the Merger Agreement) (the "Alternative
Purchase Price") or (y) the closing sales price of the shares of Common Stock on
the Nasdaq on the last trading day immediately prior to the date of the Cash
Exercise Notice (the "Closing Price"). If the Alternative Purchase Price
includes any property other than cash, the Alternative Purchase Price shall be
the sum of (i) the fixed cash amount, if any, included in the Alternative
Purchase Price plus (ii) the fair market value of such other property. If such
other property consists of securities with an existing public trading market,
the average of the closing sales prices (or the average of the closing bid and
asked prices if closing sales prices are unavailable) for such securities in
their principal public trading market on the five trading days ending five days
prior to the date of the Cash Exercise Notice shall be deemed to equal the fair
market value of such property. If such other property consists of something
other than cash or securities with an existing public trading market and, as of
the payment date for the Spread, agreement on the value of such other property
has not been reached, the Alternative Purchase Price shall be deemed to equal
the Closing Price. Upon exercise of the Grantee's right to receive cash pursuant
to this Section 1(c) and the payment of such cash to the Grantee, the
obligations of the Grantor to deliver Shares pursuant to Section 3 shall be
terminated with respect to such number of Shares for which the Grantee shall
have elected to be paid the Spread.
2. Conditions to Delivery of Shares. The Grantor's obligation to deliver
Shares upon exercise of the Option is subject only to the conditions that:
(a) No preliminary or permanent injunction or other order issued by
any federal or state court of competent jurisdiction in the United States
prohibiting the delivery of the Shares shall be in effect; and
(b) Any applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") shall have expired or
been terminated, applicable approvals of the Federal Communications
Commission ("FCC") pursuant to the Communications Act of 1934, as amended
(the "Communications Act") shall have been obtained, and all other
consents, approvals, orders, notifications or authorizations, the failure
of which to obtain or make would have the effect of making the issuance of
the Shares illegal (collectively, the "Regulatory Approvals") shall have
been obtained or made; and
(c) (i) a proposal for an Alternative Transaction involving the
Grantor shall have been publicly announced prior to the time the Merger
Agreement is terminated pursuant to the terms thereof (the "Merger
Termination Date") and one or more of the following events shall have
occurred on or after the time of the making of such proposal: (A) the
requisite vote of the stockholders of the Grantor in favor of adoption and
approval of the Merger Agreement shall not have been obtained at the
ValueVision Stockholders' Meeting (as defined in Section 3.16 of the Merger
Agreement) or any adjournment or postponement thereof; (B) the Board of
Directors of the Grantor shall have withdrawn or modified its
recommendation of the Merger Agreement or the ValueVision Merger or failed
to confirm its recommendation of the Merger Agreement or the ValueVision
Merger to the stockholders of the Grantor within ten business days after a
written request by the Grantee to do so; (C) the Board of Directors of the
Grantor shall have recommended to the stockholders of the Grantor an
Alternative Transaction; (D) a tender offer or exchange offer for 20% or
more of the outstanding shares of Grantor Common Stock shall have been
commenced (other than by the Grantee or an affiliate of the Grantee) and
the Board of Directors of the Grantor shall have recommended that the
stockholders of the Grantor tender their shares
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in such tender or exchange offer; or (E) for any reason Grantor shall have
failed to call and hold the ValueVision Stockholders' Meeting by the
Outside Date (as defined in Section 7.1(b) of the Merger Agreement;
provided, however, that the Option may not be exercised if the Grantee is
in material breach of any of its material representations, warranties,
covenants or agreements contained in this Agreement or in the Merger
Agreement; or (ii) the Merger Agreement shall have been terminated by the
Grantee pursuant to Section 7.1(g) of the Merger Agreement.
3. The Closing.
(a) Any closing hereunder shall take place on the date specified by the
Grantee in its Stock Exercise Notice or Cash Exercise Notice, as the case may
be, at 11:00 A.M., Eastern Standard Time, at the offices of Latham & Watkins,
885 Third Avenue, Suite 1000, New York, NY 10022-4802, or, if the conditions set
forth in Section 2(a) or 2(b) have not then been satisfied, on the second
business day following the satisfaction of such conditions, or at such other
time and place as the parties hereto may agree (the "Closing Date"). On the
Closing Date, (i) in the event of a closing pursuant to Section 1(b) hereof, the
Grantor will deliver to the Grantee a certificate or certificates, duly endorsed
(or accompanied by duly executed stock powers), representing the Shares in the
denominations designated by the Grantee in its Stock Exercise Notice and the
Grantee will purchase such Shares from the Grantor at the price per Share equal
to the Purchase Price or (ii) in the event of a closing pursuant to Section 1(c)
hereof, the Grantor will deliver to the Grantee cash in an amount determined
pursuant to Section 1(c) hereof. Any payment made by the Grantee to the Grantor,
or by the Grantor to the Grantee, pursuant to this Agreement shall be made by
certified or official bank check or by wire transfer of federal funds to a bank
designated by the party receiving such funds.
(b) The certificates representing the Shares may bear an appropriate legend
relating to the fact that such Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act").
4. Representations And Warranties of the Grantor. The Grantor represents
and warrants to the Grantee that (a) the Grantor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota and has the requisite corporate power and authority to enter into and
perform this Agreement; (b) the execution and delivery of this Agreement by the
Grantor and the consummation by it of the transactions contemplated hereby have
been duly authorized by the Board of Directors of the Grantor and this Agreement
has been duly executed and delivered by a duly authorized officer of the Grantor
and constitutes a valid and binding obligation of the Grantor, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles; (c)
the Grantor has taken all necessary corporate action to authorize and reserve
the Shares issuable upon exercise of the Option and the Shares, when issued and
delivered by the Grantor upon exercise of the Option, will be duly authorized,
validly issued, fully paid and non-assessable and free of preemptive rights; (d)
except as otherwise required by the HSR Act and other than any filings required
under the blue sky laws of any states or by the Communications Act and Nasdaq,
the execution and delivery of this Agreement by the Grantor and the issuance of
Shares upon exercise of the Option do not require the consent, waiver, approval
or authorization of or any filing with any person or public authority and will
not violate, result in a breach of or the acceleration of any obligation under,
or constitute a default under, any provision of any charter or by-law,
indenture, mortgage, lien, lease, agreement, contract, instrument, order, law,
rule, regulation, judgment, ordinance, or decree, or restriction by which the
Grantor or any of its subsidiaries or any of their respective properties or
assets is bound; and (e) no "fair price", "moratorium" or other form of
antitakeover statute or regulation (including, without limitation, the
restrictions on "business combinations" and "control share acquisitions" set
forth in Section 302A.673 and 302A.671, respectively, of the Minnesota Business
Corporation Act) is or shall be applicable to the acquisition of Shares pursuant
to this Agreement (and the Board of Directors of Grantor has taken all action to
approve the acquisition of the Shares to the extent necessary to avoid such
application).
5. Representations and Warranties of the Grantee. The Grantee represents
and warrants to the Grantor that (a) the execution and delivery of this
Agreement by the Grantee and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Grantee and this Agreement has been duly executed and
delivered by a duly authorized officer of the
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Grantee and will constitute a valid and binding obligation of Grantee; and (b)
the Grantee is acquiring the Option after the Grantee has been afforded the
opportunity to obtain, and has obtained, sufficient information regarding the
Grantor to make an informed investment decision with respect to the Grantee's
purchase of the Shares issuable upon the exercise thereof, and, if and when the
Grantee exercises the Option, it will be acquiring the Shares issuable upon the
exercise thereof for its own account and not with a view to distribution or
resale in any manner which would be in violation of the Securities Act.
6. Quotation of Shares; HSR Act Filings; Regulatory Approvals. Subject to
applicable law and the rules and regulations of the Nasdaq, the Grantor will
promptly file an application to have the Shares quoted on the Nasdaq and will
use its best efforts to obtain approval of such quotation and to file all
necessary filings by the Grantor under the HSR Act and the Communications Act;
provided, however, that if the Grantor is unable to effect such quotation on the
Nasdaq by the Closing Date, the Grantor will nevertheless be obligated to
deliver the Shares upon the Closing Date. Each of the parties hereto will use
its best efforts to obtain consents of all third parties and all Regulatory
Approvals, if any, necessary to the consummation of the transactions
contemplated.
7. Repurchase of Shares; Sale of Shares. At any time following the
Grantor's receipt of a Stock Exercise Notice, the Grantor shall have, on or
after the closing date of the purchase under the Stock Exercise Notice, the
right to purchase (the "Repurchase Right") all, but not less than all, of the
Shares then beneficially owned by the Grantee or any of its affiliates at a
price per share equal to the greater of (i) the Purchase Price, or (ii) the
average of the closing sales prices for shares of Common Stock on the twenty
trading days ending five days prior to the date the Grantor gives written notice
of its intention to exercise the Repurchase Right. If the Grantor does not
exercise the Repurchase Right within thirty days following the Grantor's receipt
of a Stock Exercise Notice, the Repurchase Right terminates. In the event the
Grantor wishes to exercise the Repurchase Right, the Grantor shall send a
written notice to the Grantee specifying a date (not later than 10 business days
and not earlier than the next business day following the date such notice is
given) for the closing of such purchase.
8. Registration Rights.
(a) In the event that the Grantee shall desire to sell any of the Shares
within two years after the purchase of such Shares pursuant hereto, and such
sale requires, in the opinion of counsel to the Grantee, which opinion shall be
reasonably satisfactory to the Grantor and its counsel, registration of such
Shares under the Securities Act, the Grantor will cooperate with the Grantee and
any underwriters in registering such Shares for resale, including, without
limitation, promptly filing a registration statement which complies with the
requirements of applicable federal and state securities laws, entering into an
underwriting agreement with such underwriters upon such terms and conditions as
are customarily contained in underwriting agreements with respect to secondary
distributions; provided that the Grantor shall not be required to have declared
effective more than two registration statements hereunder and shall be entitled
to delay the filing or effectiveness of any registration statement for up to 120
days if the offering would, in the judgment of the Board of Directors of the
Grantor, require premature disclosure of any material corporate development or
otherwise interfere with or adversely affect any pending or proposed offering of
securities of the Grantor or any other material transaction involving the
Grantor.
(b) If the Common Stock is registered pursuant to the provisions of this
Section 8, the Grantor agrees (i) to furnish copies of the registration
statement and the prospectus relating to the Shares covered thereby in such
numbers as the Grantee may from time to time reasonably request and (ii) if any
event shall occur as a result of which it becomes necessary to amend or
supplement any registration statement or prospectus, to prepare and file under
the applicable securities laws such amendments and supplements as may be
necessary to keep effective for at least 180 days a prospectus covering the
Common Stock meeting the requirements of such securities laws, and to furnish
the Grantee such numbers of copies of the registration statement and prospectus
as amended or supplemented as may reasonably be requested. The Grantor shall
bear the cost of the registration, including, but not limited to, all
registration and filing fees, printing expenses, and fees and disbursements of
counsel and accountants for the Grantor, except that the Grantee shall pay the
fees and disbursements of its counsel, the underwriting fees and selling
commissions applicable to the shares of
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Common Stock sold by the Grantee. The Grantor shall indemnify and hold harmless
Grantee, its affiliates and its officers, directors and controlling persons from
and against any and all losses, claims, damages, liabilities and expenses
arising out of or based upon any statements contained or incorporated by
reference in, and omissions or alleged omissions from, each registration
statement filed pursuant to this paragraph; provided, however, that this
provision does not apply to any loss, liability, claim, damage or expense to the
extent it arises out of any untrue statement or omission made in reliance upon
and in conformity with written information furnished to the Grantor by the
Grantee, its affiliates and its officers expressly for use in any registration
statement (or any amendment thereto) or any preliminary prospectus filed
pursuant to this paragraph. The Grantor shall also indemnify and hold harmless
each underwriter and each person who controls any underwriter within the meaning
of either the Securities Act or the Securities Exchange Act of 1934, as amended,
against any and all losses, claims, damages, liabilities and expenses arising
out of or based upon any statements contained or incorporated by reference in,
and omissions or alleged omissions from, each registration statement filed
pursuant to this paragraph; provided, however, that this provision does not
apply to any loss, liability, claim, damage or expense to the extent it arises
out of any untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Grantor by the underwriters expressly
for use in any registration statement (or any amendment thereto) or any
preliminary prospectus filed pursuant to this paragraph.
9. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement, in no event
shall the Grantee's Total Profit (as hereinafter defined) exceed $7.5 million
and, if it does exceed such amount, the Grantee, at its sole election, shall,
within five business days, either (a) deliver to the Grantor for cancellation
Shares (valued, for the purposes of this Section 9(a), at the average closing
sales price of the Common Stock on the Nasdaq for the twenty consecutive trading
days preceding the day on which the Grantee's Total Profit exceeds $7.5 million)
previously purchased by the Grantee, (b) pay cash or other consideration to the
Grantor or (c) undertake any combination thereof, so that the Grantee's Total
Profit shall not exceed $7.5 million after taking into account the foregoing
actions.
(b) As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the amount of cash received by the Grantee
pursuant to Section 7.3(c) of the Merger Agreement and Section 1(c) hereof,
(ii)(x) the net cash amount received by the Grantee pursuant to the Grantor's
repurchase of Shares pursuant to Section 7 hereof, less (y) the Grantee's
purchase price for such Shares, and (iii)(x) the amount received by the Grantee
pursuant to the sale of Shares (or any other securities into which such Shares
are converted or exchanged), less (y) the Grantee's purchase price for such
Shares.
10. Expenses. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided
herein.
11. Specific Performance. The Grantor acknowledges that if the Grantor
fails to perform any of its obligations under this Agreement immediate and
irreparable harm or injury would be caused to the Grantee for which money
damages would not be an adequate remedy. In such event, the Grantor agrees that
the Grantee shall have the right, in addition to any other rights it may have,
to specific performance of this Agreement. Accordingly, if the Grantee should
institute an action or proceeding seeking specific enforcement of the provisions
hereof, the Grantor hereby waives the claim or defense that the Grantee has an
adequate remedy at law and hereby agrees not to assert in any such action or
proceeding the claim or defense that such a remedy at law exists. The Grantor
further agrees to waive any requirements for the securing or posting of any bond
in connection with obtaining any such equitable relief.
12. Notice. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given and made if in writing and if
served by personal delivery upon the party for whom it is intended or delivered
by registered or certified mail, return receipt requested, or if sent by
facsimile transmission, upon receipt of oral confirmation that such transmission
has been received, to the person at the
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address set forth below, or such other address as may be designated in writing
hereafter, in the same manner, by such person:
If to the Grantee:
National Media Corporation
Eleven Penn Center
Suite 1100
1835 Market Street
Philadelphia, Pennsylvania 19103
Attention: General Counsel
Telecopy: (215) 988-4871
With a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, Pennsylvania 19102-3163
Attention: Stephen T. Burdumy, Esq.
Telecopy: (215) 568-6603
If to the Grantor:
ValueVision International, Inc.
6740 Shady Oak Road
Eden Prairie, Minnesota 55344-3433
Attention: General Counsel
Telecopy: (612) 947-0141
With a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071-2007
Attention: Michael W. Sturrock, Esq.
Telecopy: (213) 891-8763
13. Parties in Interest. This Agreement shall inure to the benefit of and
be binding upon the parties named herein and their respective permitted
successors and assigns; provided, however, that such successor in interest or
assigns shall agree to be bound by the provisions of this Agreement. Except as
set forth in Section 8, nothing in this Agreement, express or implied, is
intended to confer upon any person other than the Grantor or the Grantee, or
their successors or assigns, any rights or remedies under or by reason of this
Agreement.
14. Entire Agreement; Amendments. This Agreement, together with the
Merger Agreement and the other documents referred to therein, contains the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions. This
Agreement may not be changed, amended or modified orally, but may be changed
only by an agreement in writing signed by the party against whom any waiver,
change, amendment, modification or discharge may be sought.
15. Assignment. No party to this Agreement may assign any of its rights or
obligations under this Agreement without the prior written consent of the other
party hereto, except that the Grantee may assign its rights and obligations
hereunder to any of its direct or indirect wholly owned subsidiaries, but no
such transfer shall relieve the Grantee of its obligations hereunder if such
transferee does not perform such obligations. Any assignment made in violation
of this Section 15 shall be void.
16. Headings. The section headings herein are for convenience only and
shall not affect the construction of this Agreement.
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17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (regardless of the laws that
might otherwise govern under applicable Delaware principles of conflicts of
law).
19. Termination. The right to exercise the Option granted pursuant to this
Agreement shall terminate at the earlier of (i) the Effective Time (as defined
in the Merger Agreement), (ii) the date on which the Grantee realizes a Total
Profit of $7.5 million, (iii) the date on which the Merger Agreement is
terminated; provided that the Option is not exercisable at such time and does
not become exercisable simultaneous with such termination and (iv) 90 days after
the date the Option becomes exercisable (the date referred to in clause (iv)
being hereinafter referred to as the "Option Termination Date"); provided that,
if the Option cannot be exercised or the Shares cannot be delivered to the
Grantee upon such exercise because the conditions set forth in Section 2(a) or
Section 2(b) hereof have not yet been satisfied, the Option Termination Date
shall be extended until thirty days after such impediment to exercise has been
removed.
All representations and warranties contained in this Agreement shall
survive delivery of and payment for the Shares.
20. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
21. Public Announcement. The Grantee will consult with the Grantor and the
Grantor will consult with the Grantee before issuing any press release with
respect to the initial announcement of this Agreement, the Option or the
transactions contemplated hereby and neither party shall issue any such press
release prior to such consultation except as may be required by law.
IN WITNESS WHEREOF, the Grantee and the Grantor have caused this Agreement
to be signed by their respective duly authorized officers as of the date first
written above.
NATIONAL MEDIA CORPORATION
/s/ ROBERT N. VERRATTI
--------------------------------------
By: Robert N. Verratti
Its: President and Chief Executive
Officer
VALUEVISION INTERNATIONAL, INC.
/s/ ROBERT L. JOHANDER
--------------------------------------
By: Robert L. Johander
Its: Chairman of the Board and Chief
Executive Officer
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ANNEX K
STOCK OPTION AGREEMENT (VALUEVISION)
STOCK OPTION AGREEMENT, dated as of January 5, 1998 (the "Agreement"),
between VALUEVISION INTERNATIONAL, INC., a Minnesota corporation (the
"Grantee"), and NATIONAL MEDIA CORPORATION, a Delaware corporation (the
"Grantor").
WHEREAS, the Grantee, V-L HOLDINGS CORP., a newly-formed Delaware
corporation ("Parent"), and the Grantor are entering into an Agreement and Plan
of Reorganization and Merger, dated as of the date hereof (the "Merger
Agreement"), which provides, among other things, for the merger (the "National
Media Merger") of a wholly-owned subsidiary of Parent with and into the Grantor
and the merger (the "ValueVision Merger") of another wholly-owned subsidiary of
Parent with and into the Grantee, such that the Grantor and the Grantee will
become wholly-owned subsidiaries of Parent and the stockholders of the Grantor
and the Grantee will become stockholders of Parent (the National Media Merger
and the ValueVision Merger collectively, the "Mergers");
WHEREAS, pursuant to a Stock Option Agreement dated as of the date hereof
between the Grantee and the Grantor, the Grantee has granted the Grantor an
option to acquire shares of common stock of the Grantee on terms that are
substantially similar to the terms of this Agreement (the "National Media
Option");
WHEREAS, as a condition and inducement to their willingness to enter into
the Merger Agreement and the National Media Option, the Grantee and Parent have
requested that the Grantor grant to the Grantee an option to purchase 5,075,979
shares of Common Stock, par value $0.01 per share, of the Grantor (the "Common
Stock"), upon the terms and subject to the conditions hereof; and
WHEREAS, in order to induce the Grantee to enter into the Merger Agreement
and grant the National Media Option, the Grantor is willing to grant the Grantee
the requested option.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. The Option; Exercise; Adjustments; Payment of Spread.
(a) Contemporaneously herewith the Grantee, Parent and the Grantor are
entering into the Merger Agreement. Subject to the other terms and conditions
set forth herein, the Grantor hereby grants to the Grantee an irrevocable option
(the "Option") to purchase up to 5,075,979 (as adjusted as provided herein)
shares of Common Stock (together with the associated purchase rights issued with
respect thereto pursuant to the Rights Agreement dated as of January 3, 1994
between the Grantor and Mellon Securities Trust Company (the "Grantor Rights
Plan")) (the "Shares") at a per share cash purchase price equal to the lower of
(i) $3.4375 per Share or (ii) the average closing sales price of the Common
Stock on the New York Stock Exchange ("NYSE") Composite Tape for the five
consecutive trading days beginning on and including the day that the Mergers are
publicly announced (as adjusted as provided herein) (such lower price being the
"Purchase Price"). The Option may be exercised by the Grantee, in whole or in
part, at any time, or from time to time, following the occurrence of one of the
events set forth in Section 2(c) hereof and prior to the termination of the
Option in accordance with the terms of this Agreement.
(b) In the event the Grantee wishes to exercise the Option, the Grantee
shall send a written notice to the Grantor (the "Stock Exercise Notice")
specifying a date (subject to the HSR Act (as defined below)) not later than 10
business days and not earlier than the next business day following the date such
notice is given for the closing of such purchase. In the event of any change in
the number of issued and outstanding shares of Common Stock by reason of any
stock dividend, stock split, split-up, reclassification, recapitalization,
merger or other change in the corporate or capital structure of the Grantor
(including the occurrence of a Distribution Date under the Grantor Rights Plan),
the number of Shares subject to this Option and the purchase price per Share
shall be appropriately adjusted to restore the Grantee to its rights hereunder,
including its right to purchase Shares representing 19.9% of the capital stock
of the Grantor entitled to vote generally for the
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election of the directors of the Grantor which is issued and outstanding
immediately prior to the exercise of the Option at an aggregate purchase price
equal to the Purchase Price multiplied by 5,075,979. In the event that any
additional shares of Common Stock are issued after the date of this Agreement
(other than pursuant to an event described in the preceding sentence), the
number of Shares subject to this Option shall be increased by 19.9% of the
number of the additional shares of Common Stock so issued (and such additional
Shares shall have a purchase price per share equal to the Purchase Price).
(c) If at any time the Option is then exercisable pursuant to the terms of
Section 1(a) hereof, the Grantee may elect, in lieu of exercising the Option to
purchase Shares provided in Section 1(a) hereof, to send a written notice to the
Grantor (the "Cash Exercise Notice") specifying a date not later than 20
business days and not earlier than 10 business days following the date such
notice is given on which date the Grantor shall pay to the Grantee an amount in
cash equal to the Spread (as hereinafter defined) multiplied by all or such
portion of the Shares subject to the Option as Grantee shall specify. As used
herein "Spread" shall mean the excess, if any, over the Purchase Price of the
higher of (x) if applicable, the highest price per share of Common Stock
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by any person in an Alternative Transaction (as defined in clause
(i), (ii) or (iii) of Section 7.3(e) of the Merger Agreement) (the "Alternative
Purchase Price") or (y) the closing sales price of the shares of Common Stock on
the NYSE Composite Tape on the last trading day immediately prior to the date of
the Cash Exercise Notice (the "Closing Price"). If the Alternative Purchase
Price includes any property other than cash, the Alternative Purchase Price
shall be the sum of (i) the fixed cash amount, if any, included in the
Alternative Purchase Price plus (ii) the fair market value of such other
property. If such other property consists of securities with an existing public
trading market, the average of the closing sales prices (or the average of the
closing bid and asked prices if closing sales prices are unavailable) for such
securities in their principal public trading market on the five trading days
ending five days prior to the date of the Cash Exercise Notice shall be deemed
to equal the fair market value of such property. If such other property consists
of something other than cash or securities with an existing public trading
market and, as of the payment date for the Spread, agreement on the value of
such other property has not been reached, the Alternative Purchase Price shall
be deemed to equal the Closing Price. Upon exercise of the Grantee's right to
receive cash pursuant to this Section 1(c) and the payment of such cash to the
Grantee, the obligations of the Grantor to deliver Shares pursuant to Section 3
shall be terminated with respect to such number of Shares for which the Grantee
shall have elected to be paid the Spread.
2. Conditions to Delivery of Shares. The Grantor's obligation to deliver
Shares upon exercise of the Option is subject only to the conditions that:
(a) No preliminary or permanent injunction or other order issued by
any federal or state court of competent jurisdiction in the United States
prohibiting the delivery of the Shares shall be in effect; and
(b) Any applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") shall have expired or
been terminated and all other consents, approvals, orders, notifications or
authorizations, the failure of which to obtain or make would have the
effect of making the issuance of the Shares illegal (collectively, the
"Regulatory Approvals") shall have been obtained or made; and
(c) (i) a proposal for an Alternative Transaction involving the
Grantor shall have been publicly announced prior to the time the Merger
Agreement is terminated pursuant to the terms thereof (the "Merger
Termination Date") and one or more of the following events shall have
occurred on or after the time of the making of such proposal: (A) the
requisite vote of the stockholders of the Grantor in favor of adoption and
approval of the Merger Agreement shall not have been obtained at the
National Media Stockholders' Meeting (as defined in Section 3.16 of the
Merger Agreement) or any adjournment or postponement thereof; (B) the Board
of Directors of the Grantor shall have withdrawn or modified its
recommendation of the Merger Agreement or the National Media Merger or
failed to confirm its recommendation of the Merger Agreement or the
National Media Merger to the stockholders of the Grantor within ten
business days after a written request by the Grantee to do so; (C) the
Board of Directors of the Grantor shall have recommended to the
stockholders of the Grantor an Alternative
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Transaction; (D) a tender offer or exchange offer for 20% or more of the
outstanding shares of Grantor Common Stock shall have been commenced (other
than by the Grantee or an affiliate of the Grantee) and the Board of
Directors of the Grantor shall have recommended that the stockholders of
the Grantor tender their shares in such tender or exchange offer; or (E)
for any reason the Grantor shall have failed to call and hold the National
Media Stockholders' Meeting by the Outside Date (as defined in Section
7.1(b) of the Merger Agreement); provided, however, that the Option may not
be exercised if the Grantee is in material breach of any of its material
representations, warranties, covenants or agreements contained in this
Agreement or in the Merger Agreement; or (ii) the Merger Agreement shall
have been terminated by the Grantee pursuant to Section 7.1(g) of the
Merger Agreement.
3. The Closing.
(a) Any closing hereunder shall take place on the date specified by the
Grantee in its Stock Exercise Notice or Cash Exercise Notice, as the case may
be, at 11:00 A.M., Eastern Standard Time, at the offices of Latham & Watkins,
885 Third Avenue, Suite 1000, New York, NY 10022-4802, or, if the conditions set
forth in Section 2(a) or 2(b) have not then been satisfied, on the second
business day following the satisfaction of such conditions, or at such other
time and place as the parties hereto may agree (the "Closing Date"). On the
Closing Date, (i) in the event of a closing pursuant to Section 1(b) hereof, the
Grantor will deliver to the Grantee a certificate or certificates, duly endorsed
(or accompanied by duly executed stock powers), representing the Shares in the
denominations designated by the Grantee in its Stock Exercise Notice and the
Grantee will purchase such Shares from the Grantor at the price per Share equal
to the Purchase Price or (ii) in the event of a closing pursuant to Section 1(c)
hereof, the Grantor will deliver to the Grantee cash in an amount determined
pursuant to Section 1(c) hereof. Any payment made by the Grantee to the Grantor,
or by the Grantor to the Grantee, pursuant to this Agreement shall be made by
certified or official bank check or by wire transfer of federal funds to a bank
designated by the party receiving such funds.
(b) The certificates representing the Shares may bear an appropriate legend
relating to the fact that such Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act").
4. Representations And Warranties of the Grantor. The Grantor represents
and warrants to the Grantee that (a) the Grantor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to enter into and
perform this Agreement; (b) the execution and delivery of this Agreement by the
Grantor and the consummation by it of the transactions contemplated hereby have
been duly authorized by the Board of Directors of the Grantor and this Agreement
has been duly executed and delivered by a duly authorized officer of the Grantor
and constitutes a valid and binding obligation of the Grantor, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles; (c)
the Grantor has taken all necessary corporate action to authorize and reserve
the Shares issuable upon exercise of the Option and the Shares, when issued and
delivered by the Grantor upon exercise of the Option, will be duly authorized,
validly issued, fully paid and non-assessable and free of preemptive rights; (d)
except as otherwise required by the HSR Act and other than any filings required
under the blue sky laws of any states or by the NYSE, the execution and delivery
of this Agreement by the Grantor and the issuance of Shares upon exercise of the
Option do not require the consent, waiver, approval or authorization of or any
filing with any person or public authority and will not violate, result in a
breach of or the acceleration of any obligation under, or constitute a default
under, any provision of any charter or by-law, indenture, mortgage, lien, lease,
agreement, contract, instrument, order, law, rule, regulation, judgment,
ordinance, or decree, or restriction by which the Grantor or any of its
subsidiaries or any of their respective properties or assets is bound; (e) no
"fair price", "moratorium", "control share acquisition" or other form of
antitakeover statute or regulation (including, without limitation, the
restrictions on "business combinations" set forth in Section 203 of the Delaware
General Corporation Law) is or shall be applicable to the acquisition of Shares
pursuant to this Agreement (and the Board of Directors of Grantor has taken all
action to approve the acquisition of the Shares to the extent necessary to avoid
such application) and (f) the Grantor has taken all corporate action necessary
so that the grant and any subsequent exercise of the Option by the Grantee will
not result in the separation or exercisability of rights under the Grantor
Rights Plan.
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<PAGE> 231
5. Representations and Warranties of the Grantee. The Grantee represents
and warrants to the Grantor that (a) the execution and delivery of this
Agreement by the Grantee and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Grantee and this Agreement has been duly executed and
delivered by a duly authorized officer of the Grantee and will constitute a
valid and binding obligation of Grantee; and (b) the Grantee is acquiring the
Option after the Grantee has been afforded the opportunity to obtain, and has
obtained, sufficient information regarding the Grantor to make an informed
investment decision with respect to the Grantee's purchase of the Shares
issuable upon the exercise thereof, and, if and when the Grantee exercises the
Option, it will be acquiring the Shares issuable upon the exercise thereof for
its own account and not with a view to distribution or resale in any manner
which would be in violation of the Securities Act.
6. Listing of Shares; HSR Act Filings; Regulatory Approvals. Subject to
applicable law and the rules and regulations of the NYSE, the Grantor will
promptly file an application to have the Shares listed on the NYSE and will use
its best efforts to obtain approval of such quotation and to file all necessary
filings by the Grantor under the HSR Act, provided, however, that if the Grantor
is unable to effect such listing on the NYSE by the Closing Date, the Grantor
will nevertheless be obligated to deliver the Shares upon the Closing Date. Each
of the parties hereto will use its best efforts to obtain consents of all third
parties and all Regulatory Approvals, if any, necessary to the consummation of
the transactions contemplated.
7. Repurchase of Shares; Sale of Shares. At any time following the
Grantor's receipt of a Stock Exercise Notice, the Grantor shall have, on or
after the closing date of the purchase under the Stock Exercise Notice, the
right to purchase (the "Repurchase Right") all, but not less than all, of the
Shares then beneficially owned by the Grantee or any of its affiliates at a
price per share equal to the greater of (i) the Purchase Price, or (ii) the
average of the closing sales prices for shares of Common Stock on the twenty
trading days ending five days prior to the date the Grantor gives written notice
of its intention to exercise the Repurchase Right. If the Grantor does not
exercise the Repurchase Right within thirty days following the Grantor's receipt
of a Stock Exercise Notice, the Repurchase Right terminates. In the event the
Grantor wishes to exercise the Repurchase Right, the Grantor shall send a
written notice to the Grantee specifying a date (not later than 10 business days
and not earlier than the next business day following the date such notice is
given) for the closing of such purchase.
8. Registration Rights.
(a) In the event that the Grantee shall desire to sell any of the Shares
within two years after the purchase of such Shares pursuant hereto, and such
sale requires, in the opinion of counsel to the Grantee, which opinion shall be
reasonably satisfactory to the Grantor and its counsel, registration of such
Shares under the Securities Act, the Grantor will cooperate with the Grantee and
any underwriters in registering such Shares for resale, including, without
limitation, promptly filing a registration statement which complies with the
requirements of applicable federal and state securities laws and entering into
an underwriting agreement with such underwriters upon such terms and conditions
as are customarily contained in underwriting agreements with respect to
secondary distributions; provided that the Grantor shall not be required to have
declared effective more than two registration statements hereunder and shall be
entitled to delay the filing or effectiveness of any registration statement for
up to 120 days if the offering would, in the judgment of the Board of Directors
of the Grantor, require premature disclosure of any material corporate
development or otherwise interfere with or adversely affect any pending or
proposed offering of securities of the Grantor or any other material transaction
involving the Grantor.
(b) If the Common Stock is registered pursuant to the provisions of this
Section 8, the Grantor agrees (i) to furnish copies of the registration
statement and the prospectus relating to the Shares covered thereby in such
numbers as the Grantee may from time to time reasonably request and (ii) if any
event shall occur as a result of which it becomes necessary to amend or
supplement any registration statement or prospectus, to prepare and file under
the applicable securities laws such amendments and supplements as may be
necessary to keep effective for at least 180 days a prospectus covering the
Common Stock meeting the requirements of such securities laws, and to furnish
the Grantee such numbers of copies of the registration statement and prospectus
as amended or supplemented as may reasonably be requested. The Grantor shall
bear the cost of
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<PAGE> 232
the registration, including, but not limited to, all registration and filing
fees, printing expenses, and fees and disbursements of counsel and accountants
for the Grantor, except that the Grantee shall pay the fees and disbursements of
its counsel, the underwriting fees and selling commissions applicable to the
shares of Common Stock sold by the Grantee. The Grantor shall indemnify and hold
harmless Grantee, its affiliates and its officers, directors and controlling
persons from and against any and all losses, claims, damages, liabilities and
expenses arising out of or based upon any statements contained or incorporated
by reference in, and omissions or alleged omissions from, each registration
statement filed pursuant to this paragraph; provided, however, that this
provision does not apply to any loss, liability, claim, damage or expense to the
extent it arises out of any untrue statement or omission made in reliance upon
and in conformity with written information furnished to the Grantor by the
Grantee, its affiliates and its officers expressly for use in any registration
statement (or any amendment thereto) or any preliminary prospectus filed
pursuant to this paragraph. The Grantor shall also indemnify and hold harmless
each underwriter and each person who controls any underwriter within the meaning
of either the Securities Act or the Securities Exchange Act of 1934, as amended,
against any and all losses, claims, damages, liabilities and expenses arising
out of or based upon any statements contained or incorporated by reference in,
and omissions or alleged omissions from, each registration statement filed
pursuant to this paragraph; provided, however, that this provision does not
apply to any loss, liability, claim, damage or expense to the extent it arises
out of any untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Grantor by the underwriters expressly
for use in any registration statement (or any amendment thereto) or any
preliminary prospectus filed pursuant to this paragraph.
9. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement, in no event
shall the Grantee's Total Profit (as hereinafter defined) exceed $7.5 million
and, if it does exceed such amount, the Grantee, at its sole election, shall,
within five business days, either (a) deliver to the Grantor for cancellation
Shares (valued, for the purposes of this Section 9(a), at the average closing
sales price of the Common Stock on the NYSE Composite Tape for the twenty
consecutive trading days preceding the day on which the Grantee's Total Profit
exceeds $7.5 million) previously purchased by the Grantee, (b) pay cash or other
consideration to the Grantor or (c) undertake any combination thereof, so that
the Grantee's Total Profit shall not exceed $7.5 million after taking into
account the foregoing actions.
(b) As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the amount of cash received by the Grantee
pursuant to Section 7.3(c) of the Merger Agreement and Section 1(c) hereof,
(ii)(x) the net cash amount received by the Grantee pursuant to the Grantor's
repurchase of Shares pursuant to Section 7 hereof, less (y) the Grantee's
purchase price for such Shares, and (iii)(x) the amount received by the Grantee
pursuant to the sale of Shares (or any other securities into which such Shares
are converted or exchanged), less (y) the Grantee's purchase price for such
Shares.
10. Expenses. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided
herein.
11. Specific Performance. The Grantor acknowledges that if the Grantor
fails to perform any of its obligations under this Agreement immediate and
irreparable harm or injury would be caused to the Grantee for which money
damages would not be an adequate remedy. In such event, the Grantor agrees that
the Grantee shall have the right, in addition to any other rights it may have,
to specific performance of this Agreement. Accordingly, if the Grantee should
institute an action or proceeding seeking specific enforcement of the provisions
hereof, the Grantor hereby waives the claim or defense that the Grantee has an
adequate remedy at law and hereby agrees not to assert in any such action or
proceeding the claim or defense that such a remedy at law exists. The Grantor
further agrees to waive any requirements for the securing or posting of any bond
in connection with obtaining any such equitable relief.
12. Notice. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given and made if in writing and if
served by personal delivery upon the party for whom it is intended or delivered
by registered or certified mail, return receipt requested, or if sent by
facsimile
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<PAGE> 233
transmission, upon receipt of oral confirmation that such transmission has been
received, to the person at the address set forth below, or such other address as
may be designated in writing hereafter, in the same manner, by such person:
If to the Grantee:
ValueVision International, Inc.
6740 Shady Oak Road
Eden Prairie, Minnesota 55344-3433
Attention: General Counsel
Telecopy: (612) 947-0141
With a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071-2007
Attention: Michael W. Sturrock, Esq.
Telecopy: (213) 891-8763
If to the Grantor:
National Media Corporation
Eleven Penn Center
Suite 1100
1835 Market Street
Philadelphia, Pennsylvania 19103
Attention: General Counsel
Telecopy: (215) 988-4871
With a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, Pennsylvania 19102-3163
Attention: Stephen T. Burdumy, Esq.
Telecopy: (215) 568-6603
13. Parties in Interest. This Agreement shall inure to the benefit of and
be binding upon the parties named herein and their respective permitted
successors and assigns; provided, however, that such successor in interest or
assigns shall agree to be bound by the provisions of this Agreement. Except as
set forth in Section 8, nothing in this Agreement, express or implied, is
intended to confer upon any person other than the Grantor or the Grantee, or
their successors or assigns, any rights or remedies under or by reason of this
Agreement.
14. Entire Agreement; Amendments. This Agreement, together with the
Merger Agreement and the other documents referred to therein, contains the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions. This
Agreement may not be changed, amended or modified orally, but may be changed
only by an agreement in writing signed by the party against whom any waiver,
change, amendment, modification or discharge may be sought.
15. Assignment. No party to this Agreement may assign any of its rights
or obligations under this Agreement without the prior written consent of the
other party hereto, except that the Grantee may assign its rights and
obligations hereunder to any of its direct or indirect wholly owned
subsidiaries, but no such transfer shall relieve the Grantee of its obligations
hereunder if such transferee does not perform such obligations. Any assignment
made in violation of this Section 15 shall be void.
16. Headings. The section headings herein are for convenience only and
shall not affect the construction of this Agreement.
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<PAGE> 234
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (regardless of the laws that
might otherwise govern under applicable Delaware principles of conflicts of
law).
19. Termination. The right to exercise the Option granted pursuant to
this Agreement shall terminate at the earlier of (i) the Effective Time (as
defined in the Merger Agreement), (ii) the date on which the Grantee realizes a
Total Profit of $7.5 million, (iii) the date on which the Merger Agreement is
terminated; provided that the Option is not exercisable at such time and does
not become exercisable simultaneous with such termination and (iv) 90 days after
the date the Option becomes exercisable (the date referred to in clause (iv)
being hereinafter referred to as the "Option Termination Date"); provided that,
if the Option cannot be exercised or the Shares cannot be delivered to the
Grantee upon such exercise because the conditions set forth in Section 2(a) or
Section 2(b) hereof have not yet been satisfied, the Option Termination Date
shall be extended until thirty days after such impediment to exercise has been
removed.
All representations and warranties contained in this Agreement shall
survive delivery of and payment for the Shares.
20. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
21. Public Announcement. The Grantee will consult with the Grantor and the
Grantor will consult with the Grantee before issuing any press release with
respect to the initial announcement of this Agreement, the Option or the
transactions contemplated hereby and neither party shall issue any such press
release prior to such consultation except as may be required by law.
IN WITNESS WHEREOF, the Grantee and the Grantor have caused this Agreement
to be signed by their respective duly authorized officers as of the date first
written above.
NATIONAL MEDIA CORPORATION
/s/ ROBERT N. VERRATTI
--------------------------------------
By: Robert N. Verratti
Its: President and Chief Executive
Officer
VALUEVISION INTERNATIONAL, INC.
/s/ ROBERT L. JOHANDER
--------------------------------------
By: Robert L. Johander
Its: Chairman of the Board and Chief
Executive Officer
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<PAGE> 235
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection (a) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the person's conduct was
unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that the
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by the person in
connection with the defense or settlement of such action or suit if the person
acted under similar standards, except that no indemnification may be made in
respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnification for such expenses which the Court of Chancery or
such other court shall deem proper.
Section 145 of the DGCL further provides that, to the extent that a
director or officer of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in the defense of any claim, issue or
matter therein, the person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by the person in connection
therewith; and that indemnification provided by, or granted pursuant to, Section
145 shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled. Section 145 further empowers the corporation to
purchase and maintain insurance on behalf of any person who is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether or
not the corporation would have the power to indemnify such person against such
liabilities under Section 145 of the DGCL.
Article Tenth of the Registrant's Certificate of Incorporation provides, in
detail, for the indemnification of directors, officers and employees of the
Registrant to the fullest extent permitted under Section 145 of the DGCL.
Section 102(b)(7) of the DGCL enables a Delaware corporation to provide in
its certificate of incorporation for the elimination or limitation of the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director. Any such provision
cannot eliminate or limit a director's liability (1) for any breach of the
director's duty of loyalty to the corporation or its stockholders; (2) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (3) under Section 174 of the DGCL (which imposes
liability on directors for unlawful payment of dividends or unlawful stock
purchase or redemption); or (4) for any transaction from which the director
derived an improper personal benefit. Article Thirteenth of the Certificate of
Incorporation of the Registrant eliminates the liability of a director of the
Registrant to the Registrant or its stockholders for monetary damages for breach
of fiduciary duty as a director to the fullest extent permitted by the DGCL.
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<PAGE> 236
Under the Merger Agreement, for a period of six years after the Effective
Time (as defined in the Merger Agreement), the Registrant is required to
maintain or shall cause the Surviving Corporations (as defined in the Merger
Agreement) to maintain (to the extent available in the market) in effect a
directors' and officers' liability insurance policy covering those persons who
are currently covered by National Media's or ValueVision's directors' and
officers' liability insurance policy with coverage in amount at least as
favorable as National Media's or ValueVision's existing coverage; provided that
in no event is the Registrant or the Surviving Corporations required to expend
in the aggregate in excess of 200% of the annual premium currently paid by
National Media and ValueVision for such coverage. If the premium would exceed
200% of such amount, then the Registrant or the Surviving Corporations is
required to maintain insurance policies which provide the maximum and best
coverage available at an annual premium equal to 200% of such amount.
Additionally, the Merger Agreement requires that the Registrant defend and hold
harmless each person who prior to the Effective Time was or became an officer or
director of National Media or ValueVision against all liabilities (and shall
advance expenses related thereto) arising out of the fact that such person was
an officer or director of such entities to the full extent that would have been
permitted under Delaware law or Minnesota law, as the case may be, and the
certificate or articles of incorporation, as the case may be, or bylaws of such
entities. See "The Merger Agreement -- Certain Covenants -- Director and Officer
Indemnification."
The Registrant will carry policies of insurance which cover the individual
directors and officers of the Registrant for legal liability and which would pay
on behalf of the Registrant for expenses of indemnification of directors and
officers in accordance with the Certificate of Incorporation.
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<PAGE> 237
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
2 Agreement and Plan of Reorganization and Merger, dated
January 5, 1998, by and among ValueVision International,
Inc. ("ValueVision"), National Media Corporation ("National
Media") and the Registrant(1)
3.1 Form of Restated Certificate of Incorporation of the
Registrant(1)
3.2 Form of Amended and Restated Bylaws of the Registrant(1)
4.1 Form of Rights Agreement between the Registrant and the
Rights Agent(1)
4.2 Form of Certificate of Designations of Series B Convertible
Preferred Stock(1)
5 Opinion of Latham & Watkins as to the legality of the
securities being registered(1)
8.1 Opinion of Latham & Watkins regarding certain tax matters(1)
8.2 Opinion of Drinker Biddle & Reath LLP regarding certain tax
matters(1)
10.1 Amendment to Employment Agreement between Robert L. Johander
and ValueVision dated January 5, 1998(1)
10.2 Employment Agreement between Robert L. Johander and
ValueVision dated September 1, 1993(2)
10.3 Amendment to Employment Agreement between Nicholas M.
Jaksich and ValueVision dated January 5, 1998(1)
10.4 Employment Agreement between Nicholas M. Jaksich and
ValueVision dated September 1, 1993(2)
10.5 Amendment No. 2 to Employment Agreement by and among
Constantinos I. Costalas, National Media and the Registrant
dated January 5, 1998(3)
10.6 Amendment No. 1 to Employment Agreement between Constantinos
I. Costalas and National Media dated July 23, 1997(4)
10.7 Employment Agreement between Constantinos I. Costalas and
National Media dated April 28, 1997(4)
10.8 Amended and Restated Employment Agreement between National
Media and Robert N. Verratti dated January 28, 1998(3)
10.9 Amendment No. 1 to Employment Agreement between Frederick S.
Hammer and National Media dated January 5, 1998(3)
10.10 Employment Agreement between Frederick S. Hammer and
National Media dated February 27, 1997(4)
10.11 Employment Agreement dated January 5, 1998 by and between
ValueVision and Stuart R. Romenesko(1)
10.12 Consulting Agreement between Brian McAdams and National
Media dated December 19, 1996(3)
10.13 Agreement between Mark P. Hershhorn and National Media dated
April 24, 1997(1)
10.14 Employment Agreement between John W. Kirby and Direct
America Corporation dated October 24, 1995(5)
10.15 Employment Agreement between Michael Levey, Positive
Response Television, Inc. and National Media dated May 17,
1996(6)
10.16 Amended and Restated Non-Incentive Stock Option Agreement
between National Media and Robert N. Verratti dated as of
January 28, 1998(3)
10.17 Option Agreement between Robert Korkowski and ValueVision
dated June 24, 1993(2)
10.18 Option Agreement between Robert Korkowski and ValueVision
dated June 3, 1994(1)
</TABLE>
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<PAGE> 238
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.19 Option Agreement between Robert Korkowski and ValueVision
dated September 1, 1995(7)
10.20 Option Agreement between Robert Korkowski and ValueVision
dated March 3, 1997(1)
10.21 Option Agreement between Marshall Geller and ValueVision
dated June 24, 1993(2)
10.22 Option Agreement between Marshall Geller and ValueVision
dated June 3, 1994(1)
10.23 Option Agreement between Marshall Geller and ValueVision
dated August 8, 1995(7)
10.24 Option Agreement between Marshall Geller and ValueVision
dated March 3, 1997(1)
10.25 Option Agreement between Paul Tosetti and ValueVision dated
September 4, 1996(1)
10.26 Option Agreement between Paul Tosetti and ValueVision dated
March 3, 1997(1)
10.27 Non-Incentive Stock Option Agreement between National Media
and Constantinos I. Costalas dated April 28, 1997(1)
10.28 Non-Incentive Stock Option Agreement between National Media
and Frederick S. Hammer dated July 10, 1997(1)
10.29 Non-Incentive Stock Option Agreement between National Media
and Frederick S. Hammer dated June 18, 1997(1)
10.30 Non-Incentive Stock Option Agreement between National Media
and Frederick S. Hammer dated February 27, 1997(1)
10.31 Non-Incentive Stock Option Agreement between National Media
and Jon Yoskin(1)
10.32 1998 Equity Plan of Registrant(1)
10.33 Amended 1990 Stock Option Plan of ValueVision(8)
10.34 Form of Option Agreement under the Amended 1990 Stock Option
Plan of ValueVision(1)
10.35 1994 Executive Stock Option and Compensation Plan of
ValueVision(9)
10.36 Amended and Restated 1991 Stock Option Plan of National
Media(10)
10.37 1995 Management Incentive Plan of National Media(10)
10.38 DirectAmerica Corporation Employee Bonus Plan(5)
10.39 Promissory Note payable to ValueVision dated December 31,
1997 for $25,000 executed by Robert L. Johander(1)
10.40 Promissory Note payable to ValueVision dated April 24, 1997
for $140,000 executed by Robert L. Johander(1)
10.41 Promissory Note payable to ValueVision dated April 29, 1997
for $35,000 executed by Robert L. Johander(1)
10.42 Promissory Note payable to ValueVision dated May 2, 1997 for
$58,000 executed by Robert L. Johander(1)
10.43 Promissory Note payable to ValueVision dated May 13, 1997
for $15,000 executed by Robert L. Johander(1)
10.44 Promissory Note payable to ValueVision dated March 21, 1997
for $50,000 executed by Robert L. Johander(1)
10.45 Term Promissory Note payable to ValueVision dated November
20, 1995 for $500,000 executed by Nicholas M. Jaksich(1)
10.46 Mortgage dated November 20, 1995 between Nicholas M. Jaksich
and ValueVision(1)
10.47 Form of Mortgage Subordination Agreement dated as of
November , 1997 by and among Lasalle Bank F.S.B. and
ValueVision(1)
10.48 Promissory Note payable to ValueVision dated May 15, 1995
for $50,000 executed by Nicholas M. Jaksich(1)
</TABLE>
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<PAGE> 239
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.49 Transponder Lease Agreement between ValueVision and Hughes
Communications Galaxy, Inc. dated July 23, 1993, as
supplemented by letters dated July 23, 1993(2)
10.50 Transponder Service Agreement between ValueVision and Hughes
Communications Satellite Services, Inc.(2)
10.51 Industrial Space Lease Agreement between ValueVision and
Shady Oak Partners dated August 31, 1994(11)
10.52 Asset and Stock Purchase and Option Grant Agreement dated as
of November 14, 1997 by and among ValueVision, VVI Seattle,
Inc., VVILPTV, Inc., VVI Spokane, Inc., VVI Tallahassee,
Inc. and Paxson Communications Corporation(1)
10.53 Amendment to Asset and Stock Purchase Agreement dated
February 27, 1998(1)
10.54 Agreement dated July 16, 1997 by and among National Media,
Paul Meier, Suzanne Kilworth, Alan Meier and Tancot Pty
Limited(12)
10.55 Agreement dated July 16, 1997 by and among National Media,
Paul Meier, Suzanne Kilworth, Alan Meier, P&S Holdings
Limited(12)
10.56 Lease of National Media for 7822 S. 46th Street; Phoenix,
AZ(13)
10.57 Note and Warrant Purchase Agreement between National Media,
Media Arts International, Ltd., Quantum International
Limited and Safeguard Scientifics (Delaware), Inc. dated
October 19, 1994(14)
10.58 Securities Purchase Agreement between National Media and,
the persons executing, or causing to be executed, the
signature page thereof dated November 30, 1994(15)
10.59 Registration Rights Agreement dated as of December 19, 1994
by and among National Media and the persons whose signatures
appear on the signature page thereof(16)
10.60 Modification Agreement between National Media, Media Arts
International, Ltd., Quantum International Limited,
Safeguard Scientifics (Delaware), Inc. and Meridian Bank
dated as of April 20, 1995(17)
10.61 Loan and Security Agreement, dated November 28, 1995 by and
between National Media, certain of its subsidiaries and
Meridian Bank(18)
10.62 Allonge dated November 28, 1995 by National Media and
certain of its subsidiaries for the benefit of Meridian
Bank(18)
10.63 Amended and Restated Loan and Security Agreement dated June
26, 1996 between National Media, Quantum North America,
Inc., Quantum International Limited, Positive Response
Television, Inc. and DirectAmerica Corporation(12)
10.64 Loan Modification Agreement dated September 18, 1997 between
National Media, Quantum North America, Inc., Quantum
International Limited, Positive Response Television, Inc.
and DirectAmerica Corporation(12)
10.65 Facility Agreement dated July 23, 1997 between ASB Bank
Limited and Prestige Marketing Limited(12)
10.66 Short Term Facility dated May 19, 1997 between Quantum
International Limited and Barclays Bank PLC(12)
10.67 Consent, Waiver and Amendment dated January 5, 1998 by and
among CoreStates Bank, N.A., National Media, Quantum North
America, Inc., Quantum International Limited, Positive
Response Television, Inc. and DirectAmerica Corporation(19)
10.68 Series C Warrant between National Media and Capital Ventures
International and RGC International Investors, LDC(1)
10.69 Series D Warrant between National Media and Capital Ventures
International and RGC International Investors, LDC(1)
</TABLE>
II-5
<PAGE> 240
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.70 Amendment No. 1 to Registration Rights Agreement by and
among National Media, the Registrant, Capital Ventures
International and RGC International Investors, LDC dated
, 1998(1)
10.71 Registration Rights Agreement by and among National Media,
Capital Ventures International and RGC International
Investors, LDC dated September 4, 1997(20)
10.72 Form of Warrant to Purchase Common Stock of National Media
issued to CoreStates Bank, N.A.(21)
21.1 Subsidiaries of the Registrant(1)
23.1 Consent of Arthur Andersen LLP(1)
23.2 Consent of Independent Auditors(1)
23.3 Consent of Lehman Brothers, Inc.(1)
23.4 Consent of Bear, Stearns & Co. Inc.(1)
23.5 Consent of Latham & Watkins (included in the opinion filed
as Exhibit 5 and 8 (1))
23.6 Consent of Drinker Biddle & Reath LLP (included in the
opinion filed as Exhibit 8(2))
24.1 Power of Attorney (included in signature pages contained in
this Registration Statement)
99.1 Consent of Constantinos I. Costalas(1)
99.2 Consent of Albert R. Dowden(1)
99.3 Consent of Marshall S. Geller(1)
99.4 Consent of Frederick S. Hammer(1)
99.5 Consent of Nicholas M. Jaksich(1)
99.6 Consent of Robert L. Johander(1)
99.7 Consent of Robert J. Korkowski(1)
99.8 Consent of Paul D. Tosetti(1)
99.9 Consent of Robert N. Verratti(1)
99.10 Consent of Jon W. Yoskin II(1)
</TABLE>
- -------------------------
FOOTNOTES
(1) Filed herewith.
(2) Incorporated by reference to ValueVision's Registration Statement on Form
S-3, filed October 13, 1993, as amended, File No. 33-70256.
(3) Incorporated by reference to National Media's Quarterly Report on Form 10-Q
for the fiscal quarter ended December 31, 1997, filed February 13, 1998,
File No. 1-6715.
(4) Incorporated by reference to National Media's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 1997, filed August 14, 1997, File No.
1-6715.
(5) Incorporated by reference to National Media's Current Report on Form 8-K
dated October 19, 1995, filed October 31, 1995, File No. 1-6715.
(6) Incorporated by reference to National Media's Current Report on Form 8-K
dated May 17, 1996, filed May 31, 1996, File No. 1-6715.
(7) Incorporated by reference to ValueVision's Annual Report on Form 10-K for
the fiscal year ended January 31, 1996, filed April 29, 1996, as amended,
File No. 0-20243.
(8) Incorporated by reference to ValueVision's Registration Statement on Form
S-1, filed December 20, 1994, File No. 33-38374, as amended on Form SB-2.
(9) Incorporated by reference to ValueVision's Proxy Statement in connection
with annual meeting of shareholders held on August 17, 1994, filed July 19,
1994, File No. 0-20243.
II-6
<PAGE> 241
(10) Incorporated by reference to National Media's Proxy Statement in connection
with annual meeting of stockholders held on February 22, 1995, filed
January 26, 1995, File No. 1-6715.
(11) Incorporated by reference to ValueVision's Form 10-QSB for the fiscal
quarter ended August 31, 1994, filed September 13, 1994, File No. 0-20243.
(12) Incorporated by reference to National Media's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1997, filed November 14, 1997,
as amended, File No. 1-6715.
(13) Incorporated by reference to National Media's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1993, filed November 12, 1993,
File No. 1-6715.
(14) Incorporated by reference to National Media's Current Report on Form 8-K
dated October 5, 1994, filed October 27, 1994, File No. 1-6715.
(15) Incorporated by reference to National Media's Current Report on Form 8-K
dated December 8, 1994, filed December 15, 1994, File No. 1-6715.
(16) Incorporated by reference to National Media's Annual Report on Form 10-K
for fiscal year ended March 31, 1995, filed June 29, 1995, File No. 1-6715.
(17) Incorporated by reference to National Media's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 1995 filed August 14, 1995, File No.
1-6715.
(18) Incorporated by reference to National Media's Quarterly Report on Form 10-Q
for the fiscal quarter ended December 31, 1995, filed February 15, 1996,
File No. 1-6715.
(19) Incorporated by reference to ValueVision's Current Report on Form 8-K,
dated January 5, 1998, filed January 8, 1998, File No. 0-20243.
(20) Incorporated by reference to National Media's Current Report on Form 8-K
dated September 18, 1997, filed September 24, 1997, File No. 1-6715.
(21) Incorporated by reference to Amendment No. 2 of National Media's
Registration Statement on Form S-3, filed January 9, 1998, File No.
333-36637.
(b) Financial Statement Schedules
None. Schedules are omitted because of the absence of the conditions under
which they are required or because the information required by such omitted
schedules is set forth in the financial statements or the notes thereto.
(c) Report, Opinion or Appraisal
The opinion of Lehman Brothers, Inc., financial advisor to National Media,
and the opinion of Bear, Stearns & Co, Inc., financial advisor to ValueVision,
are attached as Annex B and Annex C, respectively, to the Joint Proxy
Statement/Prospectus included in this Registration Statement.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
II-7
<PAGE> 242
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
(2) That, for purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") (and, where applicable, each filing of
an employee benefit plan's annual report pursuant to section 15(d) of the
Exchange Act) that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X are not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
(d) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(e) The undersigned Registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (e) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to this Registration Statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(f) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act as is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-8
<PAGE> 243
(g) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this Registration Statement through
the date of responding to the request.
(h) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
II-9
<PAGE> 244
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Minneapolis, State of
Minnesota, on March 13, 1998.
Quantum Direct Corporation
By: /s/ ROBERT L. JOHANDER
------------------------------------
Robert L. Johander
Chief Executive Officer and
Co-Chairman of the Board
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears on
the signature page to this Registration Statement constitutes and appoints
Robert L. Johander and Stuart R. Romenesko, and each of them, his true and
lawful attorneys-in-fact and agents, and each of them, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and grants unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or each of them, or his substitute, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ROBERT L. JOHANDER Chief Executive Officer and Co- March 13, 1998
--------------------------------------------- Chairman of the Board
Robert L. Johander (Principal Executive Officer)
/s/ STUART R. ROMENESKO Chief Financial Officer March 13, 1998
--------------------------------------------- (Principal Financial and
Stuart R. Romenesko Accounting Officer)
/s/ FREDERICK S. HAMMER Co-Chairman of the Board March 13, 1998
---------------------------------------------
Frederick S. Hammer
/s/ NICHOLAS M. JAKSICH President, Chief Operating March 13, 1998
--------------------------------------------- Officer, and Director
Nicholas M. Jaksich
/s/ CONSTANTINOS I. COSTALAS Director March 13, 1998
---------------------------------------------
Constantinos I. Costalas
</TABLE>
II-10
<PAGE> 1
EXHIBIT 2
================================================================================
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
BY AND AMONG
VALUEVISION INTERNATIONAL, INC.,
NATIONAL MEDIA CORPORATION,
AND
V-L HOLDINGS CORP.
------------------------
DATED AS OF JANUARY 5, 1998
------------------------
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I. THE MERGERS...................................... A-1
SECTION 1.1. Certificate of Incorporation and Bylaws of
Parent....................................... A-1
SECTION 1.2. The ValueVision Merger....................... A-1
SECTION 1.3. The National Media Merger.................... A-2
SECTION 1.4. Effective Time of the Mergers................ A-2
SECTION 1.5. Closing...................................... A-2
SECTION 1.6. Effect of the Mergers........................ A-2
SECTION 1.7. Articles or Certificate of Incorporation and
Bylaws of the Surviving Corporations......... A-3
SECTION 1.8. Directors and Officers of the Surviving
Corporations................................. A-3
ARTICLE II. CONVERSION OF SECURITIES........................ A-3
SECTION 2.1. Conversion of ValueVision Capital Stock...... A-3
SECTION 2.2. Conversion of National Media Capital Stock... A-4
SECTION 2.3. Cancellation of Parent Common Stock.......... A-5
SECTION 2.4. Exchange of Certificates..................... A-5
SECTION 2.5. Dissenting Shares............................ A-7
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF
VALUEVISION.................................... A-8
SECTION 3.1. Organization of ValueVision.................. A-8
SECTION 3.2. ValueVision Capital Structure................ A-8
SECTION 3.3. Authority; No Conflict; Required Filings and
Consents..................................... A-9
SECTION 3.4. SEC Filings; Financial Statements............ A-10
SECTION 3.5. No Undisclosed Liabilities................... A-11
SECTION 3.6. Absence of Certain Changes or Events......... A-11
SECTION 3.7. Taxes........................................ A-11
SECTION 3.8. Properties................................... A-12
SECTION 3.9. Intellectual Property........................ A-12
SECTION 3.10. Agreements, Contracts and Commitments....... A-13
SECTION 3.11. Litigation.................................. A-13
SECTION 3.12. Environmental Matters....................... A-13
SECTION 3.13. Employee Benefit Plans...................... A-13
SECTION 3.14. Compliance With Laws........................ A-15
SECTION 3.15. Accounting and Tax Matters.................. A-15
SECTION 3.16. Registration Statement; Joint Proxy
Statement/Prospectus........................ A-15
SECTION 3.17. Labor Matters............................... A-16
SECTION 3.18. Insurance................................... A-16
SECTION 3.19. Opinion of Financial Advisor................ A-16
SECTION 3.20. No Existing Discussions..................... A-16
SECTION 3.21. Sections 302A.671 and 302A.673 of the MBCA
Not Applicable.............................. A-16
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF NATIONAL
MEDIA........................................... A-17
SECTION 4.1. Organization of National Media............... A-17
SECTION 4.2. National Media Capital Structure............. A-17
SECTION 4.3. Authority; No Conflict; Required Filings and
Consents..................................... A-18
SECTION 4.4. SEC Filings; Financial Statements............ A-19
SECTION 4.5. No Undisclosed Liabilities................... A-20
SECTION 4.6. Absence of Certain Changes or Events......... A-20
SECTION 4.7. Taxes........................................ A-20
SECTION 4.8. Properties................................... A-21
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 4.9. Intellectual Property........................ A-21
SECTION 4.10. Agreements, Contracts and Commitments....... A-21
SECTION 4.11. Litigation.................................. A-21
SECTION 4.12. Environmental Matters....................... A-21
SECTION 4.13. Employee Benefit Plans...................... A-22
SECTION 4.14. Compliance With Laws........................ A-24
SECTION 4.15. Accounting and Tax Matters.................. A-24
SECTION 4.16. Registration Statement; Joint Proxy
Statement/Prospectus................................... A-24
SECTION 4.17. Labor Matters............................... A-25
SECTION 4.18. Insurance................................... A-25
SECTION 4.19. Opinion of Financial Advisor................ A-25
SECTION 4.20. No Existing Discussions..................... A-25
SECTION 4.21. Section 203 of the DGCL and Sections 2538,
2555, and 2564 of the Pennsylvania Business
Corporation Law Not Applicable.............. A-25
SECTION 4.22. National Media Rights Plan.................. A-25
ARTICLE V. COVENANTS........................................ A-26
SECTION 5.1. Conduct of Business.......................... A-26
SECTION 5.2. Cooperation; Notice; Cure.................... A-27
SECTION 5.3. No Solicitation.............................. A-27
SECTION 5.4. Joint Proxy Statement/Prospectus;
Registration Statement................................. A-28
SECTION 5.5. Nasdaq Quotation and NYSE Listing............ A-29
SECTION 5.6. Access to Information........................ A-29
SECTION 5.7. Stockholders Meetings........................ A-29
SECTION 5.8. Legal Conditions to Merger................... A-29
SECTION 5.9. Public Disclosure............................ A-30
SECTION 5.10. Tax-Free Reorganization and Transfer........ A-30
SECTION 5.11. Affiliate Agreements........................ A-30
SECTION 5.12. National Listing or Nasdaq Quotation........ A-31
SECTION 5.13. Stock Plans................................. A-31
SECTION 5.14. Brokers or Finders.......................... A-32
SECTION 5.15. Indemnification............................. A-32
SECTION 5.16. Letter of National Media's Accountants...... A-32
SECTION 5.17. Letter of ValueVision's Accountants......... A-33
SECTION 5.18. Stock Option Agreements..................... A-33
SECTION 5.19. Post-Merger Parent Corporate Governance..... A-33
SECTION 5.20. Name of Parent.............................. A-34
SECTION 5.21. Parent Stockholder Rights Plan.............. A-34
SECTION 5.22. The Warrants................................ A-34
SECTION 5.23. Conveyance Taxes............................ A-34
SECTION 5.24. Stockholder Litigation...................... A-34
SECTION 5.25. Annual Reports for Welfare Benefit Plans.... A-35
SECTION 5.26. Employment Agreements....................... A-35
SECTION 5.27. Funding Advance for Redemption Agreement.... A-35
ARTICLE VI. CONDITIONS TO MERGER............................ A-35
SECTION 6.1. Conditions to Each Party's Obligation to
Effect the Mergers..................................... A-35
SECTION 6.2. Additional Conditions to Obligations of
ValueVision............................................ A-37
SECTION 6.3. Additional Conditions to Obligations of
National Media......................................... A-37
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE VII. TERMINATION AND AMENDMENT...................... A-38
SECTION 7.1. Termination.................................. A-38
SECTION 7.2. Effect of Termination........................ A-39
SECTION 7.3. Fees and Expenses............................ A-39
SECTION 7.4. Amendment.................................... A-41
SECTION 7.5. Extension; Waiver............................ A-41
ARTICLE VIII. MISCELLANEOUS................................. A-41
SECTION 8.1. Nonsurvival of Representations, Warranties
and Agreements......................................... A-41
SECTION 8.2. Notices...................................... A-41
SECTION 8.3. Interpretation............................... A-42
SECTION 8.4. Counterparts................................. A-42
SECTION 8.5. Entire Agreement; No Third Party
Beneficiaries.......................................... A-42
SECTION 8.6. Governing Law................................ A-42
SECTION 8.7. Assignment................................... A-43
SECTION 8.8. References to "Stockholders"................. A-43
</TABLE>
EXHIBITS
<TABLE>
<S> <C> <C>
Exhibit A -- ValueVision Stock Option Agreement
Exhibit B -- National Media Stock Option Agreement
Exhibit C -- Restated Certificate of Incorporation of Parent
Exhibit D -- Amended and Restated Bylaws of Parent
Exhibit E -- Certificate of Designations of Parent Series B Convertible
Preferred Stock
Exhibit F -- Form of Affiliate Agreement
Exhibit G -- Form of Demand Note
Exhibit H -- Form of Warrant Agreement
Exhibit I -- Form of Registration Rights Agreement
Exhibit J -- Form of Amendment to National Media Rights Plan
Exhibit K -- Form of Redemption Agreement
Exhibit L -- Form of Series B Consent Agreement
Exhibit M -- Form of CoreStates Consent Agreement
Exhibit N -- Form of Amendments to Hammer and Costalas Employment
Agreements
Exhibit O -- Form of Parent Stock Plan
Exhibit P -- Form of Parent Rights Plan
Exhibit Q -- Form of Subsidiary Guaranty
Exhibit R -- Form of ValueVision Guaranty
</TABLE>
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
CROSS REFERENCE
TERMS IN AGREEMENT
----- ---------------
<S> <C>
Acquisition Proposal........................................ Section 5.3.(a)
Affiliate................................................... Section 5.11.
Affiliate Agreement......................................... Section 5.11.
Agreement................................................... Preamble
Alternative Transaction..................................... Section 7.3.(e)
Annual Report............................................... Section 5.25
Bankruptcy and Equity Exception............................. Section 3.3.(a)
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
CROSS REFERENCE
TERMS IN AGREEMENT
----- ---------------
<S> <C>
Benefit Arrangement......................................... Section 3.13.(a)
Certificate of Designations................................. Section 4.2(b)
Certificates................................................ Section 2.4.(b)
Closing..................................................... Section 1.5.
Closing Date................................................ Section 1.5.
Code........................................................ Preamble
Communications Act.......................................... Section 3.3.(c)
Confidentiality Agreement................................... Section 5.3.(a)
CoreStates Consent Agreement................................ Section 3.3(a)
Costs....................................................... Section 5.15.(a)
Court....................................................... Section 6.1(m)
Current Premium............................................. Section 5.15.(b)
DGCL........................................................ Section 1.3.
Demand Note................................................. Section 3.3(a)
Dissenting Shares........................................... Section 2.5.
Effective Time.............................................. Section 1.4.(c)
Employee Benefit Plan....................................... Section 3.13.(a)
Environmental Law........................................... Section 3.12.(b)
ERISA....................................................... Section 3.13.(a)
ERISA Affiliate............................................. Section 3.13.(a)
Exchange Act................................................ Section 3.3.(c)
Exchange Agent.............................................. Section 2.4.(a)
Exchange Fund............................................... Section 2.4.(a)
FCC......................................................... Section 3.3.(c)
FCC Consent Application..................................... Section 5.8.(a)
Final Order................................................. Section 6.1.(c)
Governmental Entity......................................... Section 3.3.(c)
Hazardous Substance......................................... Section 3.12.(c)
HSR Act..................................................... Section 3.3.(c)
Indemnified Parties......................................... Section 5.15.(a)
IRS......................................................... Section 3.7.(b)
Joint Proxy Statement/Prospectus............................ Section 3.16.
Material Adverse Change..................................... Section 3.6.
MBCA........................................................ Section 1.2.
Mergers..................................................... Section 1.3.
Merger Sub 1................................................ Section 1.2.
Merger Sub 2................................................ Section 1.3.
National Media 10-K......................................... Section 4.6
National Media Balance Sheet................................ Section 4.4.(b)
National Media Certificate of Merger........................ Section 1.4.(b)
National Media Common Stock................................. Section 1.3.
National Media Convertible Preferred Stock.................. Section 4.2.(a)
National Media Director..................................... Section 5.19.(a)
National Media Disclosure Schedule.......................... ARTICLE IV.
National Media Employee Plans............................... Section 4.13.(a)
National Media ERISA Affiliate.............................. Section 4.13.(a)
National Media Exchange Ratio............................... Section 2.2.(c)
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
CROSS REFERENCE
TERMS IN AGREEMENT
----- ---------------
<S> <C>
National Media Material Adverse Effect...................... Section 4.1.
National Media Material Contracts........................... Section 4.10.
National Media Merger....................................... Section 1.3.
National Media Parachute Agreements......................... Section 4.13(e)
National Media Rights Plan.................................. Section 4.2.(b)
National Media SEC Reports.................................. Section 4.4.(a)
National Media Stock Option................................. Section 2.2(e)
National Media Stock Option Agreement....................... Preamble
National Media Stock Plans.................................. Section 4.2.(a)
National Media Stockholders' Meeting........................ Section 3.16.
National Media Surviving Corporation........................ Section 1.6.
National Media Warrants..................................... Section 4.2.(a)
NYSE........................................................ Section 5.5.
Order....................................................... Section 5.8.(b)
Outside Date................................................ Section 7.1.(b)
Parent...................................................... Preamble
Parent Common Stock......................................... Section 1.2.
Parent Material Adverse Effect.............................. Section 6.1.(h)
Parent Series B Convertible Preferred Stock................. Section 2.2 (d)
Parent Stock Plan........................................... 5.13(f)
PBCL........................................................ Section 4.21
PBGC........................................................ Section 4.13.(c)
Pension Plan................................................ Section 4.13.(c)
Redemption Agreement........................................ Section 3.3(a)
Registration Rights Agreement............................... Section 3.3(a)
Registration Statement...................................... Section 3.16.
Rule 145.................................................... Section 5.11.
SEC......................................................... Section 3.3.(c)
Securities Act.............................................. Section 3.1(a)
Series B Convertible Preferred Stock........................ Section 4.2(a)
Series B Consent Agreement.................................. Section 3.3(a)
Series C Convertible Preferred Stock........................ Section 4.2(a)
Series C Note............................................... Section 3.3(a)
Settlement Agreement........................................ Section 6.1(m)
Stock Option Agreements..................................... Preamble
Subsidiary.................................................. Section 3.1.
Surviving Corporations...................................... Section 1.6.
Tax......................................................... Section 3.7.(a)
Taxes....................................................... Section 3.7.(a)
Third Party................................................. Section 7.3.(e)
Transaction Documents....................................... Section 3.3(a)
ValueVision 10-K............................................ Section 3.6
ValueVision Articles of Merger.............................. Section 1.4.(a)
ValueVision Balance Sheet................................... Section 3.4.(b)
ValueVision Common Stock.................................... Section 1.2.
ValueVision Director........................................ Section 5.19.(a)
ValueVision Disclosure Schedule............................. ARTICLE III.
</TABLE>
v
<PAGE> 7
<TABLE>
<CAPTION>
CROSS REFERENCE
TERMS IN AGREEMENT
----- ---------------
<S> <C>
ValueVision Employee Plans.................................. Section 3.13.(a)
ValueVision ERISA Affiliate................................. Section 3.13.(a)
ValueVision Exchange Ratio.................................. Section 2.1.(c)
ValueVision Guaranty........................................ Section 6.3(d)
ValueVision Material Adverse Effect......................... Section 3.1.
ValueVision Material Contracts.............................. Section 3.10.
ValueVision Merger.......................................... Section 1.2.
ValueVision Parachute Agreements............................ Section 3.13(e)
ValueVision SEC Reports..................................... Section 3.4.(a)
ValueVision Stock Option.................................... Section 2.1(d)
ValueVision Stock Option Agreement.......................... Preamble
ValueVision Stock Plans..................................... Section 3.2.(a)
ValueVision Stockholders' Meeting........................... Section 3.16.
ValueVision Surviving Corporation........................... Section 1.6.
ValueVision Warrants........................................ Section 3.2.(a)
Warrants.................................................... Section 4.2.(a)
Warrant Agreement........................................... Section 3.3(a)
</TABLE>
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<PAGE> 8
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER (the "Agreement"), dated as
of January 5, 1998, by and among VALUEVISION INTERNATIONAL, INC. a Minnesota
corporation ("ValueVision"), NATIONAL MEDIA CORPORATION, a Delaware corporation
("National Media"), and V-L HOLDINGS CORP., a newly-formed Delaware corporation,
one-half of the issued and outstanding capital stock of which is owned by each
of ValueVision and National Media ("Parent").
WHEREAS, the Boards of Directors of ValueVision and National Media deem it
advisable and in the best interests of each corporation and its respective
stockholders that ValueVision and National Media combine in a "merger of equals"
in order to advance the long-term business interests of ValueVision and National
Media;
WHEREAS, the combination of ValueVision and National Media shall be
effected by the terms of this Agreement through (i) a merger of a wholly-owned
subsidiary of Parent with and into ValueVision and (ii) a merger of another
wholly-owned subsidiary of Parent with and into National Media such that
ValueVision and National Media become wholly-owned subsidiaries of Parent and
the stockholders of ValueVision and National Media become stockholders of
Parent;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to each of ValueVision's and National Media's
willingness to enter into this Agreement, ValueVision and National Media have
entered into (i) a Stock Option Agreement dated as of the date of this Agreement
and attached hereto as Exhibit A (the "ValueVision Stock Option Agreement"),
pursuant to which National Media granted ValueVision an option to purchase
shares of common stock of National Media under certain circumstances, and (ii) a
Stock Option Agreement dated as of the date of this Agreement and attached
hereto as Exhibit B (the "National Media Stock Option Agreement" and, together
with the ValueVision Stock Option Agreement, the "Stock Option Agreements"),
pursuant to which ValueVision granted National Media an option to purchase
shares of common stock of ValueVision under certain circumstances;
WHEREAS, for Federal income tax purposes, it is intended that (i) the
ValueVision Merger (as defined in Section 1.2) shall qualify as a reorganization
described in Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code") and, taken together with the National Media Merger (as defined in
Section 1.3), as a transfer of property to Parent by holders of ValueVision
Common Stock (as defined in Section 1.2) described in Section 351 of the Code,
and (ii) the National Media Merger shall, taken together with the ValueVision
Merger, qualify as a transfer of property to Parent by holders of National Media
Common Stock (as defined in Section 1.3) described in Section 351 of the Code;
and
WHEREAS, the Boards of Directors of ValueVision and National Media have
approved this Agreement and each of the Transaction Documents to which its
company is a party (as defined in Section 3.3).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I.
THE MERGERS
SECTION 1.1. Certificate of Incorporation and Bylaws of Parent. The
Certificate of Incorporation and Bylaws of Parent shall be amended prior to the
Effective Time (as defined in Section 1.4) to be substantially in the form of
Exhibit C and Exhibit D attached hereto, respectively. From the date hereof
until the Effective Time, ValueVision and National Media shall consult with each
other prior to causing or permitting Parent to take any action and neither shall
cause or permit Parent to take any action inconsistent with the provisions of
this Agreement without the written consent of the other.
SECTION 1.2. The ValueVision Merger. ValueVision and National Media shall
cause Parent to form a wholly-owned subsidiary named ValueVision Acquisition
Corp. ("Merger Sub 1") under the laws of the State
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of Minnesota. ValueVision and National Media shall cause Parent to cause Merger
Sub 1 to execute and deliver this Agreement. Upon the terms and subject to the
provisions of this Agreement, and in accordance with the Minnesota Business
Corporation Act (the "MBCA"), Merger Sub 1 will merge with and into ValueVision
(the "ValueVision Merger") at the Effective Time, and each outstanding share of
Common Stock, par value $.01 per share, of ValueVision ("ValueVision Common
Stock") shall be converted into 1.19 shares of common stock, par value $.01 per
share, of Parent (the "Parent Common Stock") (as described in Section 2.1(c)).
Merger Sub 1 will be formed solely to facilitate the ValueVision Merger and will
conduct no business or activity other than in connection with the ValueVision
Merger.
SECTION 1.3. The National Media Merger. ValueVision and National Media
shall cause Parent to form a wholly-owned subsidiary named National Media
Acquisition Corp. ("Merger Sub 2") under the laws of the State of Delaware.
ValueVision and National Media shall cause Parent to cause Merger Sub 2 to
execute and deliver this Agreement. Upon the terms and subject to the provisions
of this Agreement, and in accordance with the Delaware General Corporation Code
(the "DGCL"), Merger Sub 2 shall merge with and into National Media (the
"National Media Merger" and together with the ValueVision Merger, the "Mergers")
at the Effective Time, and each outstanding share of Common Stock, par value
$.01 per share, of National Media ("National Media Common Stock") shall be
converted into 1.00 share of Parent Common Stock (as described in Section
2.2(c)). Merger Sub 2 will be formed solely to facilitate the National Media
Merger and will conduct no business or activity other than in connection with
the National Media Merger.
SECTION 1.4. Effective Time of the Mergers.
(a) The ValueVision Merger. Subject to, and consistent with, the provisions
of this Agreement, articles of merger with respect to the ValueVision Merger in
such form as is required by the relevant provisions of the MBCA (the
"ValueVision Articles of Merger") shall be duly prepared, executed and
acknowledged and thereafter delivered to the Secretary of State of the State of
Minnesota for filing, as provided in the MBCA as early as practicable on the
Closing Date (as defined in Section 1.5). The ValueVision Merger shall become
effective upon the filing of the ValueVision Articles of Merger with the
Secretary of State of the State of Minnesota
(b) The National Media Merger. Subject to, and consistent with, the
provisions of this Agreement, a certificate of merger (the "National Media
Certificate of Merger") with respect to the National Media Merger in such form
as is required by the relevant provisions of the DGCL shall be duly prepared,
executed and acknowledged and thereafter delivered to the Secretary of State of
the State of Delaware for filing, as provided in the DGCL as early as
practicable on the Closing Date. The National Media Merger shall become
effective upon the filing of the National Media Certificate of Merger with the
Secretary of State of the State of Delaware.
(c) The Effective Time. The time at which both Mergers have become fully
effective is hereinafter referred to as the "Effective Time."
SECTION 1.5. Closing. The closing of the Mergers (the "Closing") will take
place at 11:00 a.m., Eastern Standard Time, on a date to be specified by
National Media and ValueVision, which shall be no later than the third business
day after satisfaction or, if permissible, waiver of the conditions set forth in
Article VI (the "Closing Date"), at the offices of Latham & Watkins, 885 Third
Avenue, Suite 1000, New York, New York 10022-4802, unless another date, place or
time is agreed to in writing by National Media and ValueVision.
SECTION 1.6. Effect of the Mergers. As a result of the ValueVision Merger,
the separate corporate existence of Merger Sub 1 shall cease and ValueVision
shall continue as the surviving corporation (the "ValueVision Surviving
Corporation"). As a result of the National Media Merger, the separate corporate
existence of Merger Sub 2 shall cease and National Media shall continue as the
surviving corporation (the "National Media Surviving Corporation" and together
with ValueVision Surviving Corporation, the "Surviving Corporations"). Upon
becoming effective, the Mergers shall have the effects set forth in the MBCA and
the DGCL, as the case may be. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, (i) all properties, rights,
privileges, powers and franchises of ValueVision and Merger Sub 1
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shall vest in ValueVision Surviving Corporation, and all debts, liabilities and
duties of ValueVision and Merger Sub 1 shall become the debts, liabilities and
duties of the ValueVision Surviving Corporation and (ii) all properties, rights,
privileges, powers and franchises of National Media and Merger Sub 2 shall vest
in National Media Surviving Corporation, and all debts, liabilities and duties
of National Media and Merger Sub 2 shall become the debts, liabilities and
duties of National Media Surviving Corporation.
SECTION 1.7. Articles or Certificate of Incorporation and Bylaws of the
Surviving Corporations. At the Effective Time, (i) the Articles of Incorporation
and Bylaws of ValueVision Surviving Corporation shall be the Articles of
Incorporation and Bylaws, respectively, of ValueVision, as in effect immediately
prior to the Effective Time, in each case until duly amended in accordance with
applicable law, and (ii) the Certificate of Incorporation and Bylaws of National
Media Surviving Corporation shall be the Certificate of Incorporation and
Bylaws, respectively, of National Media, as in effect immediately prior to the
Effective Time, in each case until duly amended in accordance with applicable
law.
SECTION 1.8. Directors and Officers of the Surviving Corporations.
(a) ValueVision Surviving Corporation. The officers and directors of
ValueVision immediately prior to the Effective Time shall be the initial
officers and directors of ValueVision Surviving Corporation, each to hold office
in accordance with the Articles of Incorporation and Bylaws of ValueVision
Surviving Corporation.
(b) National Media Surviving Corporation. The officers and directors of
National Media immediately prior to the Effective Time shall be the initial
officers and directors of National Media Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and Bylaws of
National Media Surviving Corporation.
ARTICLE II.
CONVERSION OF SECURITIES
SECTION 2.1. Conversion of ValueVision Capital Stock. At the Effective
Time, by virtue of the ValueVision Merger and without any action on the part of
any of the parties hereto or the holders of any shares of ValueVision Common
Stock or capital stock of Merger Sub 1:
(a) Capital Stock of Merger Sub 1. Each issued and outstanding share
of the capital stock of Merger Sub 1 shall be converted into and become one
fully paid and nonassessable share of Common Stock, par value $.01 per
share, of ValueVision Surviving Corporation.
(b) Cancellation of Treasury Stock and National Media-Owned Stock. All
shares of ValueVision Common Stock that are owned by ValueVision or any
Subsidiary (as defined in Section 3.1) of ValueVision and any shares of
ValueVision Common Stock (including any options, warrants or other
securities convertible into or exchangeable for such shares) owned by
National Media, Merger Sub 2 or any other Subsidiary of National Media
shall be canceled and retired and shall cease to exist and no stock of
Parent or other consideration shall be delivered in exchange therefor.
(c) Exchange Ratio for ValueVision Common Stock. Subject to Section
2.4(e), each issued and outstanding share of ValueVision Common Stock
(other than shares to be canceled in accordance with Section 2.1(b) and
Dissenting Shares (as defined in Section 2.5)) shall be converted into the
right to receive 1.19 shares (the "ValueVision Exchange Ratio") of Parent
Common Stock. All such shares of ValueVision Common Stock, when so
converted, shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any rights
with respect thereto, except the right to receive the shares of Parent
Common Stock, any cash in lieu of fractional shares of Parent Common Stock
to be issued or paid in consideration therefor and an amount equal to
certain dividends and distributions described in Section 2.4(c), in each
case, upon the surrender of such certificate in accordance with Section 2.4
and without interest.
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(d) ValueVision Stock Options. At the Effective Time, each outstanding
option to purchase shares of ValueVision Common Stock (a "ValueVision Stock
Option") under the ValueVision Stock Plans (as defined in Section 3.2(a)),
whether vested or unvested, shall be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable under such
ValueVision Stock Option the same number of shares of Parent Common Stock
as the holder of such ValueVision Stock Option would have been entitled to
receive pursuant to the ValueVision Merger had such holder exercised such
option in full immediately prior to the Effective Time (rounded downward to
the nearest whole number), at a price per share (rounded downward to the
nearest whole cent) equal to (y) the aggregate exercise price for the
shares of ValueVision Common Stock purchasable pursuant to such ValueVision
Stock Option immediately prior to the Effective Time divided by (z) the
number of full shares of Parent Common Stock deemed purchasable pursuant to
such ValueVision Stock Option in accordance with the foregoing.
(e) ValueVision Warrants. At the Effective Time, each ValueVision
Warrant (as defined in Section 3.2(a)) shall thereafter solely represent
the right to acquire, on the terms and conditions as are currently
applicable under the ValueVision Warrants, the same number of shares of
Parent Common Stock as a holder of the ValueVision Warrants would have been
entitled to receive pursuant to the ValueVision Merger had such holder
exercised such ValueVision Warrants in full immediately prior to the
Effective Time (rounded downward to the nearest whole number), at the price
per share (rounded downward to the nearest whole cent) equal to (y) the
aggregate exercise price for the shares of ValueVision Common Stock
purchasable pursuant to the ValueVision Warrants immediately prior to the
Effective Time divided by (z) the number of full shares of Parent Common
Stock deemed purchasable pursuant to the ValueVision Warrants in accordance
with the foregoing.
SECTION 2.2. Conversion of National Media Capital Stock. At the Effective
Time, by virtue of the National Media Merger and without any action on the part
of any of the parties hereto or the holders of any shares of National Media
Common Stock or capital stock of Merger Sub 2:
(a) Capital Stock of Merger Sub 2. Each issued and outstanding share
of the capital stock of Merger Sub 2 shall be converted into and become one
fully paid and nonassessable share of Common Stock, par value $.01 per
share, of National Media Surviving Corporation.
(b) Cancellation of Treasury Stock and ValueVision-Owned Stock. All
shares of National Media Common Stock that are owned by National Media or
any Subsidiary of National Media (including treasury stock) and any shares
of National Media Common Stock (including any options, warrants or other
securities convertible into or exchangeable for such shares) owned by
ValueVision, Merger Sub 1 or any other Subsidiary of ValueVision shall be
canceled and retired and shall cease to exist and no stock of Parent or
other consideration shall be delivered in exchange therefor.
(c) Exchange Ratio for National Media Common Stock. Subject to Section
2.4(e), each issued and outstanding share of National Media Common Stock
(including the rights associated with the Series A Junior Participating
Preferred Stock issued pursuant to the National Media Rights Plan (as
defined in Section 4.2(b)) (other than shares to be canceled in accordance
with Section 2.2(b)) shall be converted into the right to receive 1.00
share (the "National Media Exchange Ratio") of Parent Common Stock. All
such shares of National Media Common Stock, when so converted, shall no
longer be outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a certificate representing any
such shares shall cease to have any rights with respect thereto, except the
right to receive the shares of Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock to be issued or paid in
consideration therefor and an amount equal to certain dividends and
distributions described in Section 2.4(c), in each case, upon the surrender
of such certificate in accordance with Section 2.4 and without interest.
(d) Exchange Ratio for Series B Convertible Stock. Each issued and
outstanding share of Series B Convertible Preferred Stock (as defined in
Section 4.2(a)) shall be converted into the right to receive 1.00 share of
Parent Series B Convertible Preferred Stock, par value $.01 per share (the
"Parent Series B Convertible Preferred Stock"), with the designations,
preferences and rights set forth in the Certificate of Designations of the
Parent Series B Convertible Preferred Stock in the form attached hereto as
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<PAGE> 12
Exhibit E. All such shares of Series B Convertible Preferred Stock, when so
converted, shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any rights
with respect thereto, except the right to receive the shares of Parent
Series B Convertible Preferred Stock upon the surrender of such certificate
in accordance with procedures to be established by Parent and without
interest.
(e) National Media Stock Options. At the Effective Time, each
outstanding option to purchase shares of National Media Common Stock (a
"National Media Stock Option") under the National Media Stock Plans (as
defined in Section 4.2(a)), whether vested or unvested, shall be deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under such National Media Stock Option the same number of shares
of Parent Common Stock as the holder of such National Media Stock Option
would have been entitled to receive pursuant to the National Media Merger
had such holder exercised such option in full immediately prior to the
Effective Time (rounded downward to the nearest whole number), at a price
per share (rounded downward to the nearest whole cent) equal to (y) the
aggregate exercise price for the shares of National Media Common Stock
purchasable pursuant to such National Media Stock Option immediately prior
to the Effective Time divided by (z) the number of full shares of Parent
Common Stock deemed purchasable pursuant to such National Media Stock
Option in accordance with the foregoing.
(f) National Media Warrants. At the Effective Time, each National
Media Warrant (as defined in Section 4.2(a)) shall thereafter solely
represent the right to acquire, on the terms and conditions as are
currently applicable under the National Media Warrants, the same number of
shares of Parent Common Stock as a holder of the National Media Warrants
would have been entitled to receive pursuant to the National Media Merger
had such holder exercised such National Media Warrants in full immediately
prior to the Effective Time (rounded downward to the nearest whole number),
at the price per share (rounded downward to the nearest whole cent) equal
to (y) the aggregate exercise price for the shares of National Media Common
Stock purchasable pursuant to the National Media Warrants immediately prior
to the Effective Time divided by (z) the number of full shares of Parent
Common Stock deemed purchasable pursuant to the National Media Warrants in
accordance with the foregoing.
SECTION 2.3. Cancellation of Parent Common Stock. At the Effective Time, by
virtue of the Mergers and without any action on the part of any holder of any
capital stock of ValueVision, National Media or Parent, each share of Parent
Common Stock issued and outstanding immediately prior to the Effective Time
shall be canceled, and no consideration shall be delivered in exchange therefor.
SECTION 2.4. Exchange of Certificates. The procedures for exchanging shares
of ValueVision Common Stock and National Media Common Stock for Parent Common
Stock outstanding immediately prior to the Effective Time pursuant to the
Mergers are as follows:
(a) Exchange Agent. As of the Effective Time, Parent shall deposit
with a bank or trust company designated by National Media and ValueVision
(the "Exchange Agent"), for the benefit of the holders of shares of
ValueVision Common Stock outstanding immediately prior to the effective
time and the holders of shares of National Media Common Stock outstanding
immediately prior to the Effective Time, for exchange in accordance with
this Section 2.4, through the Exchange Agent, certificates representing the
shares of Parent Common Stock issuable pursuant to Sections 2.1 and 2.2 in
exchange for outstanding shares of ValueVision Common Stock and National
Media Common Stock, respectively (such shares of Parent Common Stock,
together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of ValueVision Common Stock or National
Media Common Stock (including the Series A Junior Participating Preferred
Stock associated with the National Media Common Stock and issued pursuant
to the National Media Rights Plan) (the "Certificates") whose shares were
converted pursuant to Section 2.1 or Section 2.2 into the right to receive
shares of Parent Common Stock (i) a letter of transmittal (which shall
specify that delivery shall
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be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as ValueVision and National
Media may reasonably specify), and (ii) instructions for effecting the
surrender of the Certificates in exchange for certificates representing
shares of Parent Common Stock (plus cash in lieu of fractional shares, if
any, of Parent Common Stock as provided below). Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent
or agents as may be appointed by Parent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing that
number of whole shares of Parent Common Stock which such holder has the
right to receive pursuant to the provisions of this Article II, and the
Certificate so surrendered shall immediately be canceled. In the event of a
transfer of ownership of ValueVision Common Stock or National Media Common
Stock prior to the Effective Time which is not registered in the transfer
records of ValueVision or National Media, respectively, a certificate
representing the proper number of shares of Parent Common Stock may be
issued to a transferee if the Certificate representing such ValueVision
Common Stock or National Media Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Immediately after the Effective Time, each outstanding Certificate
which theretofore represented shares of ValueVision Common Stock or
National Media Common Stock shall represent only the right to receive the
shares of Parent Common Stock pursuant to the terms hereof and shall not be
deemed to evidence ownership of the number of shares of Parent Common Stock
into which such shares of ValueVision Common Stock or National Media Common
Stock would be or were, as the case may be, converted into the right to
receive until the Certificate therefor shall have been surrendered in
accordance with this Section 2.4.
(c) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect
to Parent Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock the holder thereof is entitled to receive in
respect thereof and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to subsection (e) below until the holder
of record of such Certificate shall surrender such Certificate. Subject to
the effect of applicable laws, following surrender of any such Certificate,
there shall be paid to the record holder of the certificates representing
whole shares of Parent Common Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of any cash payable
in lieu of a fractional share of Parent Common Stock to which such holder
is entitled pursuant to subsection (e) below and the amount of dividends or
other distributions with a record date after the Effective Time previously
paid with respect to such whole shares of Parent Common Stock, and (ii) at
the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect
to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in ValueVision Common Stock and
National Media Common Stock. All shares of Parent Common Stock issued upon
the surrender for exchange of Certificates in accordance with the terms
hereof (including any cash paid pursuant to subsection (c) or (e) of this
Section 2.4) shall be deemed to have been issued in full satisfaction of
all rights pertaining to the shares of ValueVision Common Stock or National
Media Common Stock theretofore represented by such Certificates, subject,
however, to the applicable Surviving Corporation's obligation to pay any
dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared or made by ValueVision on such
shares of ValueVision Common Stock or by National Media on such shares of
National Media Common Stock, as the case may be, in accordance with the
terms of this Agreement (to the extent permitted under Section 5.1) prior
to the date hereof and which remain unpaid at the Effective Time, and from
and after the Effective Time there shall be no further registration of
transfers on the stock transfer books of the ValueVision Surviving
Corporation or the National Media Surviving Corporation, as the case may
be, of the shares of ValueVision Common Stock or National Media Common
Stock, respectively, which were outstanding immediately prior to the
Effective Time. If,
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after the Effective Time, Certificates are presented to one of the
Surviving Corporations or Parent for any reason, such Certificates shall be
canceled and exchanged as provided in this Section 2.4.
(e) No Fractional Shares. No certificate or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender
for exchange of Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any other rights of a stockholder
of Parent. Notwithstanding any other provision of this Agreement, each
holder of shares of ValueVision Common Stock or shares of National Media
Common Stock outstanding immediately prior to the Effective Time exchanged
pursuant to the Mergers who would otherwise have been entitled to receive a
fraction of a share of Parent Common Stock (after taking into account all
Certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of
Parent Common Stock multiplied by the per share sales price of Parent
Common Stock (as reported by the national securities exchange or market on
which such Parent Common Stock is traded or quoted) on the first day of
trading of Parent Common Stock on such exchange or market after the
Effective Time.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the former stockholders of ValueVision or
National Media on the 180th day after the Effective Time shall be delivered
to Parent upon demand, and any former stockholder of ValueVision or
National Media who has not previously complied with this Section 2.4 shall
thereafter look only to Parent for payment of such stockholder's claim for
Parent Common Stock, any cash in lieu of fractional shares of Parent Common
Stock and any dividends or distributions with respect to Parent Common
Stock.
(g) No Liability. None of ValueVision, National Media or Parent shall
be liable to any holder of shares of ValueVision Common Stock or National
Media Common Stock, as the case may be, for any shares of Parent Common
Stock (or cash in lieu of fractional shares of Parent Common Stock or any
dividends or distributions with respect thereto) delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
(h) Withholding Rights. Parent and each of the Surviving Corporations
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of ValueVision
Common Stock or National Media Common Stock such amounts as it is required
to deduct and withhold with respect to the making of such payment under the
Code, or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by Parent or one of the Surviving
Corporations, as the case may be, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of ValueVision Common Stock or National Media Common Stock, as the
case may be, in respect of which such deduction and withholding was made.
(i) Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required
by Parent or one of the Surviving Corporations, the posting by such person
of a bond in such reasonable amount as Parent or such Surviving Corporation
may direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate, the shares of Parent Common
Stock, any cash in lieu of fractional shares, and any unpaid dividends and
distributions on shares of Parent Common Stock deliverable in respect
thereof pursuant to this Agreement.
(j) Affiliates. Notwithstanding anything herein to the contrary,
Certificates surrendered for exchange by any Affiliate (as defined in
Section 5.11) of ValueVision or National Media shall not be exchanged until
Parent has received an Affiliate Agreement (as defined in Section 5.11)
substantially in the form of Exhibit F attached hereto from such Affiliate.
SECTION 2.5. Dissenting Shares. Any ValueVision Common Stock held by a
holder who dissents from the ValueVision Merger and becomes entitled to obtain
payment for the value of such ValueVision Common Stock pursuant to the
applicable provisions of Minnesota law shall be herein called "Dissenting
Shares." Any Dissenting Share shall not, after the Effective Time, be entitled
to vote for any purpose or receive any
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dividends or other distributions and shall not be converted into Parent Common
Stock; provided, however, that ValueVision Common Stock held by a dissenting
shareholder who subsequently withdraws a demand for payment, fails to comply
fully with the requirements of Minnesota law, or otherwise fails to establish
the right of such shareholder to be paid the value of such shareholder's shares
under Minnesota law shall be deemed to be have been converted into Parent Common
Stock pursuant to the terms and conditions referred to above.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF VALUEVISION
ValueVision represents and warrants to National Media that the statements
contained in this Article III are true and correct except as set forth herein
and in the disclosure schedules delivered by ValueVision to National Media on or
before the date of this Agreement (the "ValueVision Disclosure Schedule"). The
ValueVision Disclosure Schedule shall be arranged in paragraphs corresponding to
the numbered and lettered paragraphs contained in this Article III and the
disclosure in any paragraph shall qualify other paragraphs in this Article III
only to the extent that it is reasonably apparent from a reading of such
disclosure that it also qualifies or applies to such other paragraphs.
SECTION 3.1. Organization of ValueVision. Each of ValueVision and
ValueVision's Material Subsidiaries (as defined below) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power to own,
lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the failure to be so qualified would have a material adverse effect on the
business, properties, financial condition or results of operations of
ValueVision and its Subsidiaries, taken as a whole (a "ValueVision Material
Adverse Effect"). Except as set forth in the ValueVision SEC Reports (as defined
in Section 3.4) filed prior to the date hereof or on the ValueVision Disclosure
Schedule, neither ValueVision nor any of its Subsidiaries directly or indirectly
owns (other than ownership interests in ValueVision or in one or more of its
Subsidiaries) any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, any corporation, partnership, joint
venture or other business association or entity, excluding securities in any
publicly traded company held for investment by ValueVision and comprising less
than five percent (5%) of the outstanding stock of such company. A true, correct
and complete copy of the Articles of Incorporation and Bylaws of ValueVision and
each of ValueVision's Material Subsidiaries (as defined below) has been
delivered to National Media. As used in this Agreement, the word "Subsidiary"
means, with respect to any party, any corporation or other organization, whether
incorporated or unincorporated, of which (i) such party or any other Subsidiary
of such party is a general partner (excluding partnerships the general
partnership interests of which held by such party or any Subsidiary of such
party do not have a majority of the voting interest in such partnership) or (ii)
at least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries. "ValueVision's Material Subsidiaries" shall mean those
Subsidiaries of ValueVision set forth on the ValueVision Disclosure Schedule,
which Subsidiaries constitute all of ValueVision's "significant subsidiaries" as
defined in Rule 1-02 of Regulation S-X under the Securities Act of 1933, as
amended (the "Securities Act").
SECTION 3.2. ValueVision Capital Structure.
(a) The authorized capital stock of ValueVision consists of 100,000,000
shares of undesignated capital stock. As of the date hereof, (i) 28,035,778
shares of ValueVision Common Stock were issued and outstanding, all of which are
validly issued, fully paid and nonassessable and (ii) no shares of ValueVision
Common Stock were held in the treasury of ValueVision or by Subsidiaries of
ValueVision. The ValueVision Disclosure Schedule shows the number of shares of
ValueVision Common Stock reserved for future issuance pursuant to stock options
granted and outstanding as of the date hereof, the plans under which such
options were granted and award agreements pursuant to which "non-plan" options
were granted (collectively, the "ValueVision Stock Plans"), and the entities or
persons to whom such options were granted. The ValueVision
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Disclosure Schedule also shows the agreements under which the warrants to
purchase an aggregate of 4,242,143 shares of ValueVision Common Stock granted
and outstanding as of the date hereof (collectively, the "ValueVision Warrants")
were issued and to whom such warrants were issued. As of the date hereof, no
other shares of capital stock are issued and outstanding. All shares of
ValueVision Common Stock subject to issuance as specified above are duly
authorized and, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be validly issued, fully
paid and nonassessable. Except as set forth on the ValueVision Disclosure
Schedule, there are no obligations, contingent or otherwise, of ValueVision or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
ValueVision Common Stock or the capital stock of any Subsidiary or to provide
funds to or make any material investment (in the form of a loan, capital
contribution or otherwise) in any such Subsidiary or any other entity other than
guarantees of bank obligations of Subsidiaries entered into in the ordinary
course of business. All of the outstanding shares of capital stock of each of
ValueVision's Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable and all such shares (other than directors' qualifying shares in
the case of foreign Subsidiaries) are owned by ValueVision or another Subsidiary
free and clear of all security interests, liens, claims, pledges, agreements,
limitations in ValueVision's voting rights, charges or other encumbrances of any
nature.
(b) Except as set forth in this Section 3.2 or as reserved for future
grants of options under the ValueVision Stock Plans or the National Media Stock
Option Agreement, (i) there are no equity securities of any class of ValueVision
or any of its Subsidiaries, or any security exchangeable into or exercisable for
such equity securities, issued, reserved for issuance or outstanding; (ii) there
are no options, warrants, equity securities, calls, rights, commitments or
agreements of any character to which ValueVision or any of its Subsidiaries is a
party or by which it is bound obligating ValueVision or any of its Subsidiaries
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of ValueVision or any of its Subsidiaries or obligating
ValueVision or any of its Subsidiaries to grant, extend, accelerate the vesting
of or enter into any such option, warrant, equity security, call, right,
commitment or agreement; and (iii) to the best knowledge of ValueVision, there
are no voting trusts, proxies or other voting agreements or understandings with
respect to the shares of capital stock of ValueVision.
SECTION 3.3. Authority; No Conflict; Required Filings and Consents.
(a) ValueVision has all requisite corporate power and authority to enter
into this Agreement and each of the Transaction Documents (as defined below) to
which it is a party and to consummate the transactions contemplated by this
Agreement and each of the Transaction Documents to which it is a party. The
execution and delivery of this Agreement and each of the Transaction Documents
to which it is a party and the consummation of the transactions contemplated by
this Agreement and each of the Transaction Documents to which it is a party by
ValueVision have been duly authorized by all necessary corporate action on the
part of ValueVision, subject only to the approval and adoption of this Agreement
by ValueVision's stockholders under the MBCA. This Agreement and each of the
Transaction Documents to which it is a party have been duly executed and
delivered by ValueVision and constitute the valid and binding obligations of
ValueVision, enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equitable principles (the "Bankruptcy and Equity Exception"). "Transaction
Documents" means the Stock Option Agreements, the $10 million Promissory Demand
Note by National Media for the benefit of ValueVision in the form of Exhibit G
attached hereto (the "Demand Note"), the promissory demand note by National
Media for the benefit of ValueVision which will be substantially in the form of
the Demand Note and which will evidence the loan from ValueVision to National
Media to fund the redemption under the Redemption Agreement (as defined below)
(the "Series C Note"), the Warrant Agreement between National Media and
ValueVision in the form of Exhibit H attached hereto (the "Warrant Agreement"),
the Registration Rights Agreement between National Media and ValueVision in the
form of Exhibit I attached hereto (the "Registration Rights Agreement"), the
Amendment to the National Media Rights Plan (as defined in Section 4.2(b)) in
the form of Exhibit J attached hereto, the Redemption and Consent Agreement
between National Media and the holders of the Series C Convertible Preferred
Stock in the form of Exhibit K attached hereto (the "Redemption Agreement"), the
Series B Consent Agreement between National Media
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and holders of at least 60% of the outstanding shares of the Series B
Convertible Preferred Stock in the form of Exhibit L attached hereto (the
"Series B Consent Agreement"), the Consent, Waiver and Amendment between
CoreStates Bank, N.A. ("CoreStates") and National Media and certain of its
Subsidiaries in the form of Exhibit M attached hereto (the "Corestates Consent
Agreement") and the Amendments to the Hammer and Costalas Employment Agreements
in the forms of Exhibit N attached hereto, each dated as of the date hereof.
(b) Except as set forth on the ValueVision Disclosure Schedule, the
execution and delivery of this Agreement and each of the Transaction Documents
to which it is a party by ValueVision does not, and the consummation of the
transactions contemplated by this Agreement and each of the Transaction
Documents to which it is a party will not, (i) conflict with, or result in any
violation or breach of, any provision of the Articles of Incorporation or Bylaws
of ValueVision or any of its Subsidiaries, (ii) result in any violation or
breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any material benefit) under, or require a consent or
waiver under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, contract or other agreement, instrument or
obligation to which ValueVision or any of its Subsidiaries is a party or by
which any of them or any of their properties or assets may be bound, or (iii)
conflict with or violate any permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
ValueVision or any of its Subsidiaries or any of its or their properties or
assets, except in the case of (ii) and (iii) for any such conflicts, violations,
defaults, terminations, cancellations or accelerations which are not,
individually or in the aggregate, reasonably likely to have a ValueVision
Material Adverse Effect.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity") is
required by or with respect to ValueVision or any of its Subsidiaries in
connection with the execution and delivery of this Agreement and each of the
Transaction Documents to which it is a party or the consummation of the
transactions contemplated hereby or thereby, except for (i) the filing of the
pre-merger notification report under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("HSR Act"), (ii) the filing of an Articles
of Merger with respect to the ValueVision Merger with the Minnesota Secretary of
State, (iii) the filing of the Joint Proxy Statement/Prospectus (as defined in
Section 3.16 below) with the Securities and Exchange Commission (the "SEC") in
accordance with the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (iv) applicable approvals of the Federal Communications Commission (the
"FCC") pursuant to the Communications Act of 1934, as amended, and any
regulations promulgated thereunder (the "Communications Act"), (v) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state or foreign securities laws,
and (vi) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not be reasonably likely to
have a ValueVision Material Adverse Effect.
SECTION 3.4. SEC Filings; Financial Statements.
(a) ValueVision has filed and made available to National Media all forms,
reports and documents filed or required to be filed by ValueVision with the SEC
since January 1, 1995 (collectively, the "ValueVision SEC Reports"). Except as
set forth on the ValueVision Disclosure Schedule, the ValueVision SEC Reports
(i) at the time filed, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated in such ValueVision SEC Reports or necessary in order to
make the statements in such ValueVision SEC Reports, in the light of the
circumstances under which they were made, not misleading. None of ValueVision's
Subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes) contained in the ValueVision SEC Reports complied as to form
in all material respects with the applicable published rules and regulations of
the SEC with respect thereto, was prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be
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indicated in the notes to such financial statements or, in the case of unaudited
statements, in conformity with the requirements of Form 10-Q under the Exchange
Act) and fairly presented in all material respects the consolidated financial
position of ValueVision and its Subsidiaries as of the dates and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not expected to
be material in amount. The audited balance sheet of ValueVision as of January
31, 1997 is referred to herein as the "ValueVision Balance Sheet."
SECTION 3.5. No Undisclosed Liabilities. Except as set forth on the
ValueVision Disclosure Schedule, and except as disclosed in the ValueVision SEC
Reports filed prior to the date hereof, and except for normal or recurring
liabilities incurred since January 31, 1997 in the ordinary course of business
consistent with past practices, ValueVision and its Subsidiaries do not have any
liabilities, either accrued, contingent or otherwise (whether or not required to
be reflected in financial statements in accordance with generally accepted
accounting principles), and whether due or to become due, which individually or
in the aggregate are reasonably likely to have a ValueVision Material Adverse
Effect.
SECTION 3.6. Absence of Certain Changes or Events. Except as disclosed in
the ValueVision SEC Reports filed prior to the date hereof or on the ValueVision
Disclosure Schedule, since the date of the ValueVision Balance Sheet,
ValueVision and its Subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past practice and, since such
date, there has not been (i) any material adverse change in the financial
condition, results of operations, business or properties (a "Material Adverse
Change") of ValueVision and its Subsidiaries, taken as a whole (other than
changes that are the effect or result of economic factors affecting the economy
as a whole or the industry (as described in the ValueVision 10-K for the fiscal
year ended January 31, 1997 (the "ValueVision 10-K") in which ValueVision
competes), or any development or combination of developments of which the
management of ValueVision is aware that, individually or in the aggregate, has
had, or is reasonably likely to have, a ValueVision Material Adverse Effect
(other than changes that are the effect or result of economic factors affecting
the economy as a whole or the industry (as described in the ValueVision 10-K) in
which ValueVision competes); (ii) any damage, destruction or loss (whether or
not covered by insurance) with respect to ValueVision or any of its Subsidiaries
having a ValueVision Material Adverse Effect; (iii) any material change by
ValueVision or its Subsidiaries in their respective accounting methods,
principles or practices to which National Media has not previously consented in
writing; (iv) any revaluation by ValueVision or its Subsidiaries of any of their
respective assets having a ValueVision Material Adverse Effect; or (v) any other
action or event that would have required the consent of National Media pursuant
to Section 5.1 of this Agreement had such action or event occurred after the
date of this Agreement and that, individually or in the aggregate, has had or is
reasonably likely to have a ValueVision Material Adverse Effect.
SECTION 3.7. Taxes.
(a) For the purposes of this Agreement, a "Tax" or, collectively, "Taxes,"
means any and all federal, state, local and foreign taxes, assessments and other
governmental charges, duties, impositions and liabilities, including taxes based
upon or measured by gross receipts, income, profits, sales, use and occupation,
and value added, ad valorem, transfer, gains, franchise, withholding, payroll,
recapture, employment, excise, unemployment insurance, social security, business
license, occupation, business organization, stamp, environmental and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts. For purposes of this Agreement, "Taxes" also includes any
obligations under any agreements or arrangements with any other person with
respect to Taxes of such other person (including pursuant to Treas. Reg.
sec. 1.1502-6 or comparable provisions of state, local or foreign tax law) and
including any liability for Taxes of any predecessor entity.
(b) ValueVision and each of its Subsidiaries have (i) filed all federal,
state, local and foreign Tax returns and reports required to be filed by them
prior to the date of this Agreement (taking into account all applicable
extensions), (ii) paid or accrued all Taxes due and payable, and (iii) paid or
accrued all Taxes for which a notice of assessment or collection has been
received (other than amounts being contested in good faith by appropriate
proceedings), except in the case of clauses (i), (ii) or (iii) for any such
filings, payments or
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accruals that are not reasonably likely, individually or in the aggregate, to
have a ValueVision Material Adverse Effect. There are no audits known by
ValueVision to be pending or contemplated with respect to ValueVision's tax
returns. Neither the Internal Revenue Service (the "IRS") nor any other taxing
authority has asserted any claim for Taxes, or to the actual knowledge of the
executive officers of ValueVision, is threatening to assert any claims for
Taxes, which claims, individually or in the aggregate, are reasonably likely to
have a ValueVision Material Adverse Effect. ValueVision and each of its
Subsidiaries have withheld or collected and paid over to the appropriate
governmental authorities (or are properly holding for such payment) all Taxes
required by law to be withheld or collected, except for amounts that are not
reasonably likely, individually or in the aggregate, to have a ValueVision
Material Adverse Effect. Neither ValueVision nor any of its Subsidiaries has
made an election under Section 341(f) of the Code, except for any such elections
that are not reasonably likely, individually or in the aggregate, to have a
ValueVision Material Adverse Effect. There are no liens for Taxes upon the
assets of ValueVision or any of its Subsidiaries (other than liens for Taxes
that are not yet due or that are being contested in good faith by appropriate
proceedings), except for liens that are not reasonably likely, individually or
in the aggregate, to have a ValueVision Material Adverse Effect. No extension of
a statute of limitations relating to any Taxes is in effect with respect to
ValueVision and its Subsidiaries.
(c) Neither ValueVision nor any of its Subsidiaries has been a member of an
affiliated group of corporations filing a consolidated federal income tax return
(or a group of corporations filing a consolidated, combined or unitary income
tax return under comparable provisions of state, local or foreign tax law) for
any taxable period beginning on or after February 1, 1991, other than a group
the common parent of which was ValueVision or any Subsidiary of ValueVision.
(d) Neither ValueVision nor any of its Subsidiaries has any obligation
under any agreement or arrangement with any other person with respect to Taxes
of such other person (including pursuant to Treas. Reg. sec. 1.1502-6 or
comparable provisions of state, local or foreign tax law) and including any
liability for Taxes of any predecessor entity, except for obligations that are
not reasonably likely, individually or in the aggregate, to have a ValueVision
Material Adverse Effect.
(e) Neither ValueVision nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
SECTION 3.8. Properties.
(a) Neither ValueVision nor any of its Subsidiaries is in default under any
of their respective leases for real property, except where the existence of such
defaults, individually or in the aggregate, is not reasonably likely to have a
ValueVision Material Adverse Effect.
(b) Except as set forth on the ValueVision Disclosure Schedule, with
respect to each item of real property that ValueVision or any of its
Subsidiaries owns, except for such matters that, individually or in the
aggregate, are not reasonably likely to have a ValueVision Material Adverse
Effect: (i) ValueVision or the identified Subsidiary has good and clear record
and marketable title to such property, insurable by a recognized national title
insurance company at standard rates, free and clear of any lien, encumbrance,
security interest, easement, covenant or other restriction, except for recorded
easements, covenants and other restrictions which do not materially impair the
current uses or occupancy of such property; and (ii) the improvements
constructed on such property are in good condition, and all mechanical and
utility systems servicing such improvements are in good condition, free in each
case of material defects.
SECTION 3.9. Intellectual Property. Each of ValueVision and its
Subsidiaries owns, or is licensed or otherwise possesses legally enforceable
rights to use, all trademarks, trade names, service marks, copyrights, and any
applications for such trademarks, trade names, service marks and copyrights,
know-how, computer software programs or applications and tangible or intangible
proprietary information or material that are necessary to conduct the business
of each of ValueVision and its Subsidiaries as currently conducted, subject to
such exceptions that would not be reasonably likely to have a ValueVision
Material Adverse Effect. Neither ValueVision nor any of its Subsidiaries has any
knowledge of any assertion or claim challenging the validity of
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any of such intellectual property, except such assertions or claims that,
individually or in the aggregate, are not reasonably likely to have a
ValueVision Material Adverse Effect.
SECTION 3.10. Agreements, Contracts and Commitments. Neither ValueVision
nor any of its Subsidiaries has breached, or received in writing any claim or
notice that it has breached, any of the terms or conditions of any material
agreement, contract or commitment filed or required to be filed as an exhibit to
the ValueVision SEC Reports ("ValueVision Material Contracts") in such a manner
as, individually or in the aggregate, is reasonably likely to have a ValueVision
Material Adverse Effect. Each ValueVision Material Contract that has not expired
by its terms is in full force and effect.
SECTION 3.11. Litigation. Except as described in the ValueVision SEC
Reports filed prior to the date hereof or except as set forth on the ValueVision
Disclosure Schedule, there is no action, suit or proceeding, claim, arbitration
or investigation against ValueVision or any of its Subsidiaries pending or as to
which ValueVision or any of its Subsidiaries has received any written notice of
assertion, which, individually or in the aggregate, is reasonably likely to have
a ValueVision Material Adverse Effect or a material adverse effect on the
ability of ValueVision to consummate the transactions contemplated by this
Agreement.
SECTION 3.12. Environmental Matters.
(a) To the knowledge of ValueVision and its Subsidiaries, except as
disclosed in the ValueVision SEC Reports filed prior to the date hereof or on
the ValueVision Disclosure Schedule and except for such matters that,
individually or in the aggregate, are not reasonably likely to have a
ValueVision Material Adverse Effect: (i) ValueVision and its Subsidiaries are in
material compliance with all applicable Environmental Laws (as defined in
Section 3.12(b)); (ii) the properties currently owned or operated by ValueVision
and its Subsidiaries (including soils, groundwater, surface water, buildings or
other structures) are not contaminated with any Hazardous Substances (as defined
in Section 3.12(c)); (iii) the properties formerly owned or operated by
ValueVision or any of its Subsidiaries were not contaminated with Hazardous
Substances during the period of ownership or operation by ValueVision or any of
its Subsidiaries; (iv) neither ValueVision nor its Subsidiaries are subject to
liability for any Hazardous Substance disposal or contamination on any third
party property; (v) neither ValueVision nor any of its Subsidiaries has been
associated with any release or threat of release of any Hazardous Substance;
(vi) neither ValueVision nor any of its Subsidiaries has received any written
notice, demand, letter, claim or request for information alleging that
ValueVision or any of its Subsidiaries may be in violation of or liable under
any Environmental Law; (vii) neither ValueVision nor any of its Subsidiaries is
subject to any orders, decrees, injunctions or other arrangements with any
Governmental Entity or is subject to any indemnity or other agreement with any
third party relating to liability under any Environmental Law or relating to
Hazardous Substances; and (viii) there are no circumstances or conditions
involving ValueVision or any of its Subsidiaries that could reasonably be
expected to result in any claims, liability, investigations, costs or
restrictions on the ownership, use or transfer of any property of ValueVision
pursuant to any Environmental Law.
(b) As used in this Agreement, the term "Environmental Law" means any
federal, state, local or foreign law, regulation, order, decree, permit,
authorization, common law or agency requirement relating to: (A) the protection,
investigation or restoration of the environment, health and safety, or natural
resources, (B) the handling, use, presence, disposal, release or threatened
release of any Hazardous Substance or (C) noise, odor, wetlands, pollution,
contamination or any injury or threat of injury to persons or property.
(c) As used in this Agreement, the term "Hazardous Substance" means any
substance that is: (A) listed, classified or regulated pursuant to any
Environmental Law; (B) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (C) any other substance which is the subject
of regulatory action by any Governmental Entity pursuant to any Environmental
Law.
SECTION 3.13. Employee Benefit Plans.
(a) ValueVision has listed on the ValueVision Disclosure Schedule all
employee benefit plans ("Employee Benefit Plans"), as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
all other material benefit arrangements that are not Employee Benefit Plans,
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including, but not limited to any employment or consulting agreement, any
arrangement providing insurance benefits, any incentive bonus or deferred bonus
arrangement, any arrangement providing termination allowance, severance or
similar benefits, any equity compensation plan, any deferred compensation plan,
and any compensation policy or practice ("Benefit Arrangements"), (i) which are
maintained, contributed to or required to be contributed to by ValueVision or
any entity that, together with ValueVision as of the relevant measuring date
under ERISA, is or was required to be treated as a single employer under Section
414 of the Code ("ValueVision ERISA Affiliate") or under which ValueVision or
any ValueVision ERISA Affiliate may incur any liability, and (ii) which cover
the employees, former employees, directors or former directors of ValueVision or
any ValueVision ERISA Affiliate ("ValueVision Employee Plans").
(b) A true and complete copy of each written ValueVision Employee Plan that
covers employees or former employees of ValueVision or any Subsidiary of
ValueVision, including, if applicable, each amendment thereto and any trust
agreement, insurance contract, collective bargaining agreement, or other funding
or investment arrangements for the benefits under such ValueVision Employee
Plan, has been delivered to National Media. In addition, with respect to each
such ValueVision Employee Plan to the extent applicable, ValueVision has
delivered to National Media the most recently filed Federal Forms 5500, the most
recent summary plan description (including any summaries of material
modifications), the most recent IRS determination letter, if applicable, the
most recent actuarial report or valuation, if applicable, and all material
employee communications with respect to each such ValueVision Employee Plan.
(c) Except as set forth on the ValueVision Disclosure Schedule:
(i) neither ValueVision nor any ValueVision ERISA Affiliate sponsors
or has previously sponsored, maintained, contributed to or incurred an
obligation to contribute to any Employee Benefit Plan regulated under Title
IV of ERISA, including any "multiemployer plan," as defined in Sections
3(37) and 4001(a)(3) of ERISA;
(ii) neither ValueVision nor any ValueVision ERISA Affiliate sponsors
or has previously sponsored, maintained, contributed to or incurred an
obligation to contribute to any Employee Benefit Plan that provides or will
provide benefits described in Section 3(1) of ERISA to any former employee
or retiree of ValueVision or any ValueVision ERISA Affiliate, except as
required under Part 6 of Title I of ERISA and Section 4980B of the Code;
(iii) all ValueVision Employee Plans that cover or have covered
employees or former employees of ValueVision have been maintained and
operated, and currently are, in compliance in all material respects with
their terms, the requirements prescribed by any and all applicable laws
(including ERISA and the Code), orders, or governmental rules and
regulations in effect with respect thereto, and ValueVision and the
ValueVision ERISA Affiliates have performed all material obligations
required to be performed by them under, are not in any material respect in
default under or in violation of, and have no knowledge of any default or
violation by any other party to, any of the ValueVision Employee Plans;
(iv) each ValueVision Employee Plan that covers or has covered
employees or former employees of ValueVision and is intended to qualify
under Section 401(a) of the Code and each trust established pursuant to
each such ValueVision Employee Plan that is intended to qualify under
Section 501(a) of the Code is the subject of a favorable determination
letter from the IRS, a copy of which has been delivered to National Media,
and, to ValueVision's knowledge, nothing has occurred which may reasonably
be expected to impair such determination or otherwise adversely affect the
tax-qualified status of such ValueVision Employee Plan;
(v) ValueVision and the ValueVision ERISA Affiliates have made full
and timely payment of all amounts required to be contributed under the
terms of each ValueVision Employee Plan and applicable law or required to
be paid as expenses under such ValueVision Employee Plan; and
(vi) other than claims for benefits in the ordinary course, there is
no claim, suit, action, dispute, arbitration or legal, administrative or
other proceeding or governmental investigation or audit pending, or, to the
knowledge of ValueVision, threatened, alleging any breach of the terms of
any ValueVision
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Employee Plan or of any fiduciary duty thereunder or violation of any
applicable law with respect to any such ValueVision Employee Plan.
(d) With respect to the ValueVision Employee Plans, individually and in the
aggregate, no event has occurred, and to the knowledge of ValueVision, there
exists no condition or set of circumstances in connection with which ValueVision
could be subject to any liability that is reasonably likely to have a
ValueVision Material Adverse Effect under ERISA, the Code or any other
applicable law.
(e) Except as set forth on the ValueVision Disclosure Schedule and except
as disclosed in the ValueVision SEC Reports filed prior to the date of this
Agreement, and except as provided for in this Agreement, neither ValueVision nor
any of its Subsidiaries is a party to any oral or written (i) agreement with any
officer or other key employee of ValueVision or any of its Subsidiaries, the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving ValueVision of the nature
contemplated by this Agreement, (ii) agreement with any officer of ValueVision
providing any term of employment or compensation guarantee extending for a
period longer than one year from the date hereof and for the payment of
compensation in excess of $100,000 per annum, or (iii) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. None of the execution and delivery of this
Agreement or any of the Transaction Documents or the consummation of the
transactions contemplated hereunder or thereunder will trigger any "change of
control" or similar provisions resulting in the acceleration of benefits or
compensation with respect to any agreements with any officer or other key
employee of ValueVision or any of its Subsidiaries except for such applicable
agreements as set forth on the ValueVision Disclosure Schedule (the "ValueVision
Parachute Agreements"). The aggregate amounts payable under the ValueVision
Parachute Agreements as a result of the transactions contemplated by this
Agreement and each of the Transaction Documents will not exceed $0.
SECTION 3.14. Compliance With Laws. Each of ValueVision and its
Subsidiaries has complied with, is not in violation of, and has not received any
notices of violation with respect to, any federal, state or local statute, law
or regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for failures to comply or violations which,
individually or in the aggregate, have not had and are not reasonably likely to
have a ValueVision Material Adverse Effect.
SECTION 3.15. Accounting and Tax Matters.
(a) To the knowledge of ValueVision and its Subsidiaries, after consulting
with its independent auditors, neither ValueVision nor any of its Affiliates (as
defined in Section 5.12) has taken or agreed to take any action which would
prevent the ValueVision Merger from constituting a transaction qualifying as a
reorganization under Section 368 of the Code or the Mergers from constituting
transactions qualifying as transfers under Section 351 of the Code.
(b) To the knowledge of ValueVision and its Subsidiaries, the stockholders
of ValueVision have no present plan, intention or arrangement to sell or
otherwise dispose of any of the Parent Common Stock received in the ValueVision
Merger that would cause the ValueVision Merger to fail to qualify as a
reorganization under Section 368 of the Code or the Mergers to fail to qualify
as transfers under Section 351 of the Code.
SECTION 3.16. Registration Statement; Joint Proxy Statement/Prospectus. The
information to be supplied by ValueVision or its Subsidiaries or about
ValueVision or its Subsidiaries by ValueVision's agents for inclusion in the
registration statement on Form S-4 pursuant to which shares of Parent Common
Stock issued in the Mergers will be registered under the Securities Act (the
"Registration Statement"), shall not at the time the Registration Statement is
declared effective by the SEC contain any untrue statement of a material fact or
omit to state any material fact required to be stated in the Registration
Statement or necessary in order to make the statements in the Registration
Statement, in light of the circumstances under which they were made, not
misleading. The information supplied by ValueVision or its Subsidiaries for
inclusion in the
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joint proxy statement/prospectus to be sent to the stockholders of National
Media and ValueVision in connection with the meeting of ValueVision'
stockholders (the "ValueVision Stockholders' Meeting") and the meeting of
National Media's stockholders (the "National Media Stockholders' Meeting") to
consider this Agreement and the Mergers (the "Joint Proxy Statement/Prospectus")
shall not, on the date the Joint Proxy Statement/Prospectus is first mailed to
stockholders of ValueVision or National Media, at the time of the ValueVision
Stockholders' Meeting and the National Media Stockholders' Meeting and at the
Effective Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, omit to state any material fact necessary in order to make
the statements made in the Joint Proxy Statement/Prospectus not false or
misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the ValueVision Stockholders' Meeting or the National Media
Stockholders' Meeting which has become false or misleading. If at any time prior
to the Effective Time any event relating to ValueVision or any of its
Affiliates, officers or directors should be discovered by ValueVision which
should be set forth in an amendment to the Registration Statement or a
supplement to the Joint Proxy Statement/Prospectus, ValueVision shall promptly
inform National Media.
SECTION 3.17. Labor Matters. Except as disclosed in the ValueVision SEC
Reports filed prior to the date hereof, neither ValueVision nor any of its
Subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor, as of the date hereof, is ValueVision or any of its
Subsidiaries the subject of any material proceeding asserting that ValueVision
or any of its Subsidiaries has committed an unfair labor practice or is seeking
to compel it to bargain with any labor union or labor organization nor, as of
the date of this Agreement, is there pending or, to the knowledge of the
executive officers of ValueVision, threatened, any material labor strike,
dispute, walkout, work stoppage, slow-down or lockout involving ValueVision or
any of its Subsidiaries.
SECTION 3.18. Insurance. All material fire and casualty, general liability,
business interruption, product liability, and sprinkler and water damage
insurance policies maintained by ValueVision or any of its Subsidiaries are with
reputable insurance carriers, provide full and adequate coverage for all normal
risks incident to the business of ValueVision and its Subsidiaries and their
respective properties and assets, and are in character and amount at least
equivalent to that carried by persons engaged in similar businesses and subject
to the same or similar perils or hazards, except for any such failures to
maintain insurance policies that, individually or in the aggregate, are not
reasonably likely to have a ValueVision Material Adverse Effect.
SECTION 3.19. Opinion of Financial Advisor. The financial advisor of
ValueVision, Bear Stearns & Co., has delivered to ValueVision an opinion dated
the date of this Agreement to the effect that the ValueVision Exchange Ratio is
fair to the holders of ValueVision Common Stock from a financial point of view.
SECTION 3.20. No Existing Discussions. As of the date hereof, neither
ValueVision nor any of its Affiliates is engaged, directly or indirectly, in any
discussions or negotiations with any other party with respect to an Acquisition
Proposal (as defined in Section 5.3).
SECTION 3.21. Sections 302A.671 and 302A.673 of the MBCA Not
Applicable. The Board of Directors of ValueVision has taken all actions
necessary under the MBCA, including approving the transactions contemplated by
the Agreement and each of the Transaction Documents to which it is a party, to
ensure that Section 302A.673 of the MBCA applicable to a "business combination"
does not, and will not, apply to the transactions contemplated hereunder and
thereunder. The restrictions contained in Section 302A.671 of the MBCA
applicable to "control share acquisitions" will not apply to the authorization,
execution, delivery and performance of this Agreement or each of the Transaction
Documents by ValueVision to which it is a party or the consummation of the
ValueVision Merger by ValueVision. No other "fair price," "moratorium," or other
similar anti-takeover statute or regulation is applicable to ValueVision or (by
reason of ValueVision's participation therein) the ValueVision Merger or the
other transactions contemplated by this Agreement or the other Transaction
Documents to which it is a party.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF NATIONAL MEDIA
National Media represents and warrants to ValueVision that the statements
contained in this Article IV are true and correct, except as set forth on the
disclosure schedules delivered by National Media to ValueVision on or before the
date of this Agreement (the "National Media Disclosure Schedule"). The National
Media Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article IV and the disclosure
in any paragraph shall qualify other paragraphs in this Article IV only to the
extent that it is reasonably apparent from a reading of such document that it
also qualifies or applies to such other paragraphs.
SECTION 4.1. Organization of National Media. Each of National Media and
National Media's Material Subsidiaries (as defined below) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power to own,
lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the failure to be so qualified would have a material adverse effect on the
business, properties, financial condition or results of operations of National
Media and its Subsidiaries, taken as a whole (a "National Media Material Adverse
Effect"). Except as set forth on the National Media Disclosure Schedule or in
the National Media SEC Reports (as defined in Section 4.4) filed prior to the
date hereof, neither National Media nor any of its Subsidiaries directly or
indirectly owns (other than ownership interests in National Media or in one or
more of its Subsidiaries) any equity or similar interest in, or any interest
that is mandatorily convertible into or exchangeable or exercisable for, any
corporation, partnership, joint venture or other business association or entity,
excluding securities in any publicly traded company held for investment by
National Media and comprising less than five percent (5%) of the outstanding
stock of such company. A true, correct and complete copy of the Certificate of
Incorporation and other similar organizational documents of National Media and
each of National Media's Material Subsidiaries (as defined below) has been
delivered to ValueVision. "National Media's Material Subsidiaries" shall mean
those subsidiaries of National Media set forth on the National Media Disclosure
Schedule, which Subsidiaries constitute all of National Media's "significant
subsidiaries" as defined in Rule 1-02 of Regulation S-X under the Securities
Act.
SECTION 4.2. National Media Capital Structure.
(a) The authorized capital stock of National Media consists of 75,000,000
shares of Common Stock, $.01 par value, and 10,000,000 shares of Preferred
Stock, $.01 par value. As of the date hereof, (i) 25,507,436 shares of National
Media Common Stock were issued and outstanding, all of which are validly issued,
fully paid and nonassessable, and (ii) 705,280 shares of National Media Common
Stock were held in the treasury of National Media or by Subsidiaries of National
Media. The National Media Disclosure Schedule shows the number of shares of
National Media Common Stock reserved for future issuance pursuant to stock
options granted and outstanding as of the date hereof, the plans under which
such options were granted and award agreements pursuant to which "non-plan"
options were granted (collectively, the "National Media Stock Plans"), and the
entities or persons to whom such options were granted. The National Media
Disclosure Schedule also shows the agreements under which the warrants to
purchase an aggregate of 7,093,413 shares of National Media Common Stock granted
and outstanding as of the date hereof (the "National Media Warrants," and
together with the ValueVision Warrants, the "Warrants") were issued and to whom
such warrants were granted. As of the date hereof, an aggregate number of 86,250
shares of Series B Convertible Preferred Stock, par value $.01 per share, of
National Media, which are currently convertible into 862,500 shares of National
Media Common Stock and which are currently entitled to vote on all matters
submitted to the stockholders of National Media (with the exception of the
election of directors) on an "as converted" basis (the "Series B Convertible
Preferred Stock") and 20,000 shares of Series C Convertible Preferred Stock, par
value $.01 per share, of National Media which are currently convertible into
3,300,330 (the quotient of $20 million divided by $6.06) shares of National
Media Common Stock, plus the number of shares of National Media Common Stock
equal to the quotient of the Accrued Premium (as defined in the Certificate of
Designations (as defined below)) divided by $6.06 (the "Series C Convertible
Preferred Stock" and,
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together with the Series B Convertible Preferred Stock the "National Media
Convertible Preferred Stock") are issued and outstanding. All shares of National
Media Common Stock subject to issuance as specified above are duly authorized
and, upon issuance on the terms and conditions specified in the instruments
pursuant to which they are issuable, shall be validly issued, fully paid and
nonassessable. Except as set forth on the National Media Disclosure Schedule,
there are no obligations, contingent or otherwise, of National Media or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
National Media Common Stock or the capital stock of any Subsidiary or to provide
funds to or make any material investment (in the form of a loan, capital
contribution or otherwise) in any such Subsidiary or any other entity other than
guarantees of bank obligations of Subsidiaries entered into in the ordinary
course of business. Except as set forth on the National Media Disclosure
Schedule, all of the outstanding shares of capital stock of each of National
Media's Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable and all such shares (other than directors' qualifying shares in
the case of foreign Subsidiaries) are beneficially owned by National Media or
another Subsidiary free and clear of all security interests, liens, claims,
pledges, agreements, limitations in National Media's voting rights, charges or
other encumbrances of any nature.
(b) Except as set forth in this Section 4.2 or as reserved for future
grants of options under the National Media Stock Plans or the ValueVision Stock
Option Agreement, and except for the Series A Junior Participating Preferred
Stock issued and issuable under the Rights Agreement dated as of January 3, 1994
between National Media and Mellon Securities Trust Company, as amended (the
"National Media Rights Plan") or as disclosed on the National Media Disclosure
Schedule, (i) there are no equity securities of any class of National Media or
any of its Subsidiaries, or any security exchangeable into or exercisable for
such equity securities, issued, reserved for issuance or outstanding; (ii)
except as set forth in the Certificate of Designations, Preferences and Rights
of the Series C Convertible Preferred Stock (the "Certificate of Designations")
and the Registration Rights Agreement dated as of September 4, 1997 among
National Media and the holders of the Series C Convertible Preferred Stock,
there are no options, warrants, equity securities, calls, rights, commitments or
agreements of any character to which National Media or any of its Subsidiaries
is a party or by which it is bound obligating National Media or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of National Media or any of its
Subsidiaries or obligating National Media or any of its Subsidiaries to grant,
extend, accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement; and (iii) to the best knowledge
of National Media, there are no voting trusts, proxies or other voting
agreements or understandings with respect to the shares of capital stock of
National Media.
SECTION 4.3. Authority; No Conflict; Required Filings and Consents.
(a) National Media has all requisite corporate power and authority to enter
into this Agreement and each of the Transaction Documents to which it is a party
and to consummate the transactions contemplated by this Agreement and each of
the Transaction Documents to which it is a party. The execution and delivery of
this Agreement and each of the Transactions Documents to which it is a party and
the consummation of the transactions contemplated by this Agreement and each of
the Transaction Documents to which it is a party by National Media have been
duly authorized by all necessary corporate action on the part of National Media,
subject only to the approval and adoption of this Agreement by National Media's
stockholders under the DGCL. This Agreement and each of the Transaction
Documents to which it is a party have been duly executed and delivered by
National Media and constitute the valid and binding obligations of National
Media, enforceable in accordance with their terms, subject to the Bankruptcy and
Equity Exception.
(b) Except as set forth on the National Media Disclosure Schedule, the
execution and delivery of this Agreement and each of the Transaction Documents
to which it is a party by National Media does not, and the consummation of the
transactions contemplated by this Agreement and each of the Transaction
Documents to which it is a party will not, (i) conflict with, or result in any
violation or breach of, any provision of the Certificate of Incorporation or
Bylaws of National Media or any of its Subsidiaries, (ii) result in any
violation or breach of, or constitute (with or without notice or lapse of time,
or both) a default (or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any material benefit) under, or
require a consent or waiver under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, lease, contract or other agreement,
instrument or obligation to which National Media or any of its Subsidiaries
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is a party or by which any of them or any of their properties or assets may be
bound (including the Series C Convertible Preferred Stock), or (iii) conflict
with or violate any permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to National Media
or any of its Subsidiaries or any of its or their properties or assets, except
in the case of (ii) and (iii) for any such conflicts, violations, defaults,
terminations, cancellations or accelerations which are not, individually or in
the aggregate, reasonably likely to have a National Media Material Adverse
Effect. The Redemption Agreement pursuant to which holders of the outstanding
shares of Series C Convertible Preferred Stock consent to the authorization,
execution and delivery of this Agreement and each of the Transaction Documents
and the consummation of the transactions contemplated hereunder and thereunder,
is being entered into concurrently with the execution of this Agreement and a
form is attached hereto as Exhibit K. The Series B Consent Agreement pursuant to
which holders of the outstanding shares of National Media Series B Convertible
Preferred Stock consent to the authorization, execution and delivery of this
Agreement and each of the Transaction Documents and the consummation of the
transactions contemplated hereunder and thereunder, is being entered into
concurrently with the execution of this Agreement and a form is attached hereto
as Exhibit L. The CoreStates Consent Agreement pursuant to which CoreStates
consents to the authorization, execution and delivery of this Agreement and each
of the Transaction Documents and the consummation of the transactions
contemplated hereunder and thereunder, is being entered into concurrently with
the execution of this Agreement and a form is attached hereto as Exhibit M.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to National Media or any of its Subsidiaries in connection with the
execution and delivery of this Agreement and each of the Transaction Documents
to which it is a party or the consummation of the transactions contemplated
hereby or thereby, except for (i) the filing of the pre-merger notification
report under the HSR Act, (ii) the filing of a Certificate of Merger with
respect to the National Media Merger with the Delaware Secretary of State, (iii)
the filing of the Joint Proxy Statement/Prospectus with the SEC in accordance
with the Exchange Act, (iv) applicable approvals of the FCC pursuant to the
Communications Act, (v) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state or foreign securities laws, and (vi) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made, would not
be reasonably likely to have a National Media Material Adverse Effect.
SECTION 4.4. SEC Filings; Financial Statements.
(a) National Media has filed and made available to ValueVision all forms,
reports and documents filed or required to be filed by National Media with the
SEC since January 1, 1995 (collectively, the "National Media SEC Reports"). The
National Media SEC Reports (i) except as set forth on the National Media
Disclosure Schedule, at the time filed, complied in all material respects with
the applicable requirements of the Securities Act and the Exchange Act, as the
case may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such National Media SEC Reports or
necessary in order to make the statements in such National Media SEC Reports, in
the light of the circumstances under which they were made, not misleading. None
of National Media's Subsidiaries is required to file any forms, reports or other
documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes) contained in the National Media SEC Reports complied as to
form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited statements, in conformity with
the requirements of Form 10-Q under the Exchange Act) and fairly presented in
all material respects the consolidated financial position of National Media and
its Subsidiaries as of the dates and the consolidated results of its operations
and cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount. The
audited balance sheet of National Media as of March 31, 1997 is referred to
herein as the "National Media Balance Sheet."
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SECTION 4.5. No Undisclosed Liabilities. Except as disclosed in the
National Media SEC Reports filed prior to the date hereof or on the National
Media Disclosure Schedule, and except for normal or recurring liabilities
incurred since March 31, 1997 in the ordinary course of business consistent with
past practices, National Media and its Subsidiaries do not have any liabilities,
either accrued, contingent or otherwise (whether or not required to be reflected
in financial statements in accordance with generally accepted accounting
principles), and whether due or to become due, which individually or in the
aggregate, are reasonably likely to have a National Media Material Adverse
Effect.
SECTION 4.6. Absence of Certain Changes or Events. Except as disclosed in
the National Media SEC Reports filed prior to the date hereof or on the National
Media Disclosure Schedule, since the date of the National Media Balance Sheet,
National Media and its Subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past practice and, since such
date, there has not been (i) any Material Adverse Change in National Media and
its Subsidiaries, taken as a whole (other than changes that are the effect or
result of economic factors affecting the economy as a whole or the industry (as
described in National Media's Form 10-K for the fiscal year ended March 31, 1997
(the "National Media 10-K") in which National Media competes) or any development
or combination of developments of which the management of National Media is
aware that, individually or in the aggregate, has had, or is reasonably likely
to have, a National Media Material Adverse Effect (other than changes that are
the effect or result of economic factors affecting the economy as a whole or the
industry (as described in the National Media 10-K) in which National Media
competes); (ii) any damage, destruction or loss (whether or not covered by
insurance) with respect to National Media or any of its Subsidiaries having a
National Media Material Adverse Effect; (iii) any material change by National
Media or its Subsidiaries in their respective accounting methods, principles or
practices to which ValueVision has not previously consented in writing; (iv) any
revaluation by National Media or its Subsidiaries of any of their assets having
a National Media Material Adverse Effect; or (v) any other action or event that
would have required the consent of ValueVision pursuant to Section 5.1 of this
Agreement had such action or event occurred after the date of this Agreement and
that, individually or in the aggregate, has had or is reasonably likely to have
a National Media Material Adverse Effect.
SECTION 4.7. Taxes.
(a) National Media and each of its Subsidiaries have (i) filed all federal,
state, local and foreign Tax returns and reports required to be filed by them
prior to the date of this Agreement (taking into account all applicable
extensions), (ii) paid or accrued all Taxes due and payable, and (iii) paid or
accrued all Taxes for which a notice of assessment or collection has been
received (other than amounts being contested in good faith by appropriate
proceedings), except in the case of clauses (i), (ii) or (iii) for any such
filings, payments or accruals that are not reasonably likely, individually or in
the aggregate, to have a National Media Material Adverse Effect. There are no
audits known by National Media to be pending or contemplated with respect to
National Media's tax returns. Neither the IRS nor any other taxing authority has
asserted any claim for Taxes, or to the actual knowledge of the executive
officers of National Media, is threatening to assert any claims for Taxes, which
claims, individually or in the aggregate, are reasonably likely to have a
National Media Material Adverse Effect. National Media and each of its
Subsidiaries have withheld or collected and paid over to the appropriate
governmental authorities (or are properly holding for such payment) all Taxes
required by law to be withheld or collected, except for amounts that are not
reasonably likely, individually or in the aggregate, to have a National Media
Material Adverse Effect. Neither National Media nor any of its Subsidiaries has
made an election under Section 341(f) of the Code, except for any such elections
that are not reasonably likely, individually or in the aggregate, to have a
National Media Material Adverse Effect. There are no liens for Taxes upon the
assets of National Media or any of its Subsidiaries (other than liens for Taxes
that are not yet due or that are being contested in good faith by appropriate
proceedings), except for liens that are not reasonably likely, individually or
in the aggregate, to have a National Media Material Adverse Effect. No extension
of a statute of limitations relating to any Taxes is in effect with respect to
National Media and its Subsidiaries.
(b) Neither National Media nor any of its Subsidiaries has been a member of
an affiliated group of corporations filing a consolidated federal income tax
return (or a group of corporations filing a consolidated,
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combined or unitary income tax return under comparable provisions of state,
local or foreign tax law) for any taxable period beginning on or after April 1,
1991, other than a group the common parent of which was National Media or any
Subsidiary of National Media.
(c) Neither National Media nor any of its Subsidiaries has any obligation
under any agreement or arrangement with any other person with respect to Taxes
of such other person (including pursuant to Treas. Reg. sec. 1.1502-6 or
comparable provisions of state, local or foreign tax law) and including any
liability for Taxes of any predecessor entity, except for obligations that are
not reasonably likely, individually or in the aggregate, to have an National
Media Material Adverse Effect.
(d) Neither National Media nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
SECTION 4.8. Properties.
(a) Neither National Media nor any of its Subsidiaries is in default under
any of their respective leases for real property, except where the existence of
such defaults, individually or in the aggregate, is not reasonably likely to
have a National Media Material Adverse Effect.
(b) Neither National Media nor any of its Subsidiaries owns any real
property.
SECTION 4.9. Intellectual Property. Other than as set forth on the
National Media Disclosure Schedule, each of National Media and its Subsidiaries
owns, or is licensed or otherwise possesses legally enforceable rights to use,
all trademarks, trade names, service marks, copyrights, and any applications for
such trademarks, trade names, service marks and copyrights, know-how, computer
software programs or applications, and tangible or intangible proprietary
information or material that are necessary to conduct the business of each of
National Media and its Subsidiaries as currently conducted, subject to such
exceptions that would not be reasonably likely to have a National Media Material
Adverse Effect. Other than as set forth on the National Media Disclosure
Schedule, neither National Media nor any of its Subsidiaries has any knowledge
of any assertion or claim challenging the validity of any of such intellectual
property, except such assertions or claims that, individually or in the
aggregate, are not reasonably likely to have a National Media Material Adverse
Effect.
SECTION 4.10. Agreements, Contracts and Commitments. Neither National
Media nor any of its Subsidiaries has breached, or received in writing any claim
or notice that it has breached, any of the terms or conditions of any material
agreement, contract or commitment filed or required to be filed as an exhibit to
the National Media SEC Reports ("National Media Material Contracts") in such a
manner as, individually or in the aggregate, is reasonably likely to have a
National Media Material Adverse Effect. Each National Media Material Contract
that has not expired by its terms is in full force and effect.
SECTION 4.11. Litigation. Except as described in the National Media SEC
Reports filed prior to the date hereof or as set forth on the National Media
Disclosure Schedule, there is no action, suit or proceeding, claim, arbitration
or investigation against National Media or any of its Subsidiaries pending or as
to which National Media or any of its Subsidiaries has received any written
notice of assertion, which, individually or in the aggregate, is reasonably
likely to have a National Media Material Adverse Effect or a material adverse
effect on the ability of National Media to consummate the transactions
contemplated by this Agreement.
SECTION 4.12. Environmental Matters. To the knowledge of National Media
and its Subsidiaries, except as disclosed in the National Media SEC Reports
filed prior to the date hereof and except for such matters that, individually or
in the aggregate, are not reasonably likely to have a National Media Material
Adverse Effect: (i) National Media and its Subsidiaries are in material
compliance with all applicable Environmental Laws; (ii) the properties currently
owned or operated by National Media and its Subsidiaries (including soils,
groundwater, surface water, buildings or other structures) are not contaminated
with any Hazardous Substances; (iii) the properties formerly owned or operated
by National Media or any of its Subsidiaries were not contaminated with
Hazardous Substances during the period of ownership or operation by National
Media or any of its Subsidiaries; (iv) neither National Media nor its
Subsidiaries are subject to
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liability for any Hazardous Substance disposal or contamination on any third
party property; (v) neither National Media nor any of its Subsidiaries has been
associated with any release or threat of release of any Hazardous Substance;
(vi) neither National Media nor any of its Subsidiaries has received any written
notice, demand, letter, claim or request for information alleging that National
Media or any of its Subsidiaries may be in violation of or liable under any
Environmental Law; (vii) neither National Media nor any of its Subsidiaries is
subject to any orders, decrees, injunctions or other arrangements with any
Governmental Entity or is subject to any indemnity or other agreement with any
third party relating to liability under any Environmental Law or relating to
Hazardous Substances; and (viii) there are no circumstances or conditions
involving National Media or any of its Subsidiaries that could reasonably be
expected to result in any claims, liability, investigations, costs or
restrictions on the ownership, use or transfer of any property of National Media
pursuant to any Environmental Law.
SECTION 4.13. Employee Benefit Plans.
(a) National Media has listed on the National Media Disclosure Schedule all
Employee Benefit Plans, as defined in Section 3.13(a) of this Agreement, and all
Benefit Arrangements, as defined in Section 3.13(a) of this Agreement, (i) which
are maintained, contributed to or required to be contributed to by National
Media or any entity that, together with National Media as of the relevant
measuring date under ERISA, is or was required to be treated as a single
employer under Section 414 of the Code ("National Media ERISA Affiliate") or
under which National Media or any National Media ERISA Affiliate may incur any
liability, and (ii) which cover the employees, former employees, directors or
former directors of National Media or any National Media ERISA Affiliate
("National Media Employee Plans").
(b) A true and complete copy of each written National Media Employee Plan
that covers employees or former employees of National Media or any Subsidiary of
National Media, including each amendment thereto and any trust agreement,
insurance contract, collective bargaining agreement, or other funding or
investment arrangements for the benefits under such National Media Employee
Plan, has been delivered to ValueVision. In addition, with respect to each such
National Media Employee Plan to the extent applicable, National Media has
delivered to ValueVision the most recently filed Federal Forms 5500 (solely with
respect to the National Media 401(k) Plan), the most recent summary plan
description (including any summaries of material modifications), the most recent
IRS determination letter, if applicable, the most recent actuarial report or
valuation, if applicable, and all material employee communications with respect
to each such National Media Employee Plan.
(c) Except as set forth on the National Media Disclosure Schedule:
(i) Neither National Media nor any National Media ERISA Affiliate
sponsors, maintains, contributes to, or has any obligation to contribute to
any Employee Benefit Plan regulated under Title IV of ERISA, other than a
"multiemployer plan," as defined in Sections 3(37) and 4001(a)(3) of ERISA,
("Pension Plan"); with respect to any Pension Plan previously sponsored,
maintained or contributed to by National Media or any National Media ERISA
Affiliate or with respect to which National Media or any National Media
ERISA Affiliate previously incurred an obligation to contribute:
(A) As of the last day of the last plan year of each such Pension
Plan and as of the Closing Date, the "amount of unfunded benefit
liabilities" as defined in Section 4001(a)(18) of ERISA (but excluding
from the definition of "current value" of "assets" of such Pension Plan,
accrued but unpaid contributions) did not and will not exceed zero.
(B) No such Pension Plan has been terminated so as to subject,
directly or indirectly, National Media or any National Media ERISA
Affiliate to any liability, contingent or otherwise, or the imposition
of any lien under Title IV of ERISA;
(C) No proceeding has been initiated by any person, including the
Pension Benefit Guaranty Corporation ("PBGC"), to terminate any such
Pension Plan;
(D) No liability to the PBGC exists or is reasonably expected to be
incurred with respect to any such Pension Plan that could subject,
directly or indirectly, National Media or any National
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Media ERISA Affiliate to any liability, contingent or otherwise, or the
imposition of any lien under Title IV of ERISA, whether to the PBGC or
to any other person;
(E) No "reportable event," as defined in Section 4043 of ERISA (to
the extent the reporting of such event to the PBGC has not been waived)
has occurred and is continuing with respect to any such Pension Plan;
(F) No such Pension Plan which is subject to Section 302 of ERISA
or Section 412 of the Code has incurred an "accumulated funding
deficiency," within the meaning of Section 302 of ERISA and 412 of the
Code, whether or not such deficiency has been waived;
(G) Neither National Media nor any National Media ERISA Affiliate
has, at any time, (i) ceased operations at a facility so as to become
subject to the provisions of Section 4068(e) of ERISA, (ii) withdrawn as
a substantial employer so as to become subject to the provisions of
Section 4063 of ERISA, or (iii) ceased making contributions on or before
the Closing Date to any Pension Plan subject to Section 4064(a) of ERISA
to which National Media or any National Media ERISA Affiliate made
contributions during the five years prior to the Closing Date.
(ii) neither National Media nor any National Media ERISA Affiliate
sponsors or has previously sponsored, maintained, contributed to or
incurred an obligation to contribute to any "multiemployer plan," as
defined in Sections 3(37) and 4001(a)(3) of ERISA;
(iii) neither National Media nor any National Media ERISA Affiliate
sponsors or has previously sponsored, maintained, contributed to or
incurred an obligation to contribute to any Employee Benefit Plan that
provides or will provide benefits described in Section 3(1) of ERISA to any
former employee or retiree of National Media or any National Media ERISA
Affiliate, except as required under Part 6 of Title I of ERISA and Section
4980B of the Code;
(iv) all National Media Employee Plans that cover or have covered
employees or former employees of National Media have been maintained and
operated, and currently are, in compliance in all material respects with
their terms, the requirements prescribed by any and all applicable laws
(including ERISA and the Code), orders, or governmental rules and
regulations in effect with respect thereto, and National Media and the
National Media ERISA Affiliates have performed all material obligations
required to be performed by them under, are not in any material respect in
default under or in violation of, and have no knowledge of any default or
violation by any other party to, any of the National Media Employee Plans;
(v) each National Media Employee Plan that covers or has covered
employees or former employees of National Media and is intended to qualify
under Section 401(a) of the Code and each trust established pursuant to
each such National Media Employee Plan that is intended to qualify under
Section 501(a) of the Code is the subject of a favorable determination
letter from the IRS, a copy of which has been delivered to ValueVision,
and, to National Media's knowledge, nothing has occurred which may
reasonably be expected to impair such determination or otherwise adversely
affect the tax-qualified status of such National Media Employee Plan;
(vi) National Media and the National Media ERISA Affiliates have made
full and timely payment of all amounts required to be contributed under the
terms of each National Media Employee Plan and applicable law or required
to be paid as expenses under such National Media Employee Plan; and
(vii) other than claims for benefits in the ordinary course, there is
no claim, suit, action, dispute, arbitration or legal, administrative or
other proceeding or governmental investigation or audit pending, or, to the
knowledge of National Media, threatened, alleging any breach of the terms
of any National Media Employee Plan or of any fiduciary duty thereunder or
violation of any applicable law with respect to any such National Media
Employee Plan.
(d) With respect to the National Media Employee Plans, individually and in
the aggregate, no event has occurred, and to the knowledge of National Media,
there exists no condition or set of circumstances in connection with which
National Media could be subject to any liability that is reasonably likely to
have a National Media Material Adverse Effect under ERISA, the Code or any other
applicable law.
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(e) Except as disclosed in the National Media SEC Reports filed prior to
the date of this Agreement or on the National Media Disclosure Schedule, and
except as provided for in this Agreement, neither National Media nor any of its
Subsidiaries is a party to any oral or written (i) agreement with any officer or
other key employee of National Media or any of its Subsidiaries, the benefits of
which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving National Media of the nature contemplated
by this Agreement, (ii) agreement with any officer of National Media providing
any term of employment or compensation guarantee extending for a period longer
than one year from the date hereof and for the payment of compensation in excess
of $100,000 per annum, or (iii) agreement or plan, including any stock option
plan, stock appreciation right plan, restricted stock plan or stock purchase
plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement. None of the execution or delivery of this Agreement or any of
the Transaction Documents to which it is a party or the consummation of the
transactions contemplated hereunder or thereunder will trigger any "change in
control" or similar provisions resulting in an acceleration of benefits or
compensation thereunder with respect to any agreements with any officer or other
key employee of National Media or any of its Subsidiaries except for such
applicable agreements as set forth on the National Media Disclosure Schedule
(the "National Media Parachute Agreements"). Except as set forth on the National
Media Disclosure Schedule, the aggregate amounts payable under the National
Media Parachute Agreements as a result of the transactions contemplated by this
Agreement and each of the Transaction Documents will not exceed $600,000.
SECTION 4.14. Compliance With Laws. Except as disclosed on the National
Media Disclosure Schedule, each of National Media and its Subsidiaries has
complied with, is not in violation of, and has not received any notices of
violation with respect to, any federal, state or local statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for failures to comply or violations which,
individually or in the aggregate, have not had and are not reasonably likely to
have a National Media Material Adverse Effect.
SECTION 4.15. Accounting and Tax Matters.
(a) To the knowledge of National Media and its Subsidiaries, after
consulting with its independent auditors, neither National Media nor any of its
Affiliates (as defined in Section 5.12) has taken or agreed to take any action
which would prevent the Mergers from constituting transactions qualifying as
transfers under Section 351 of the Code.
(b) To the knowledge of National Media and its Subsidiaries, the
stockholders of National Media have no present plan, intention or arrangement to
sell or otherwise dispose of any of the Parent Common Stock received in the
National Media Merger that would cause the Mergers to fail to qualify as
transfers under Section 351 of the Code.
(c) None of National Media's non-United States Subsidiaries have, excluding
the effects of any guarantees made by any such Subsidiaries with respect to the
Demand Note, any "applicable earnings" for purposes of Section 956 of the Code
as of the end of each such Subsidiary's tax year ending on or after the date
hereof.
SECTION 4.16. Registration Statement; Joint Proxy
Statement/Prospectus. The information to be supplied by National Media or its
Subsidiaries or about National Media or its Subsidiaries by National Media's
agents for inclusion in the Registration Statement shall not at the time the
Registration Statement is declared effective by the SEC contain any untrue
statement of a material fact or omit to state any material fact required to be
stated in the Registration Statement or necessary in order to make the
statements in the Registration Statement, in light of the circumstances under
which they were made, not misleading. The information to be supplied by National
Media or its Subsidiaries or about National Media or its Subsidiaries by
National Media's agents for inclusion in the Joint Proxy Statement/Prospectus
shall not, on the date the Joint Proxy Statement/Prospectus is first mailed to
stockholders of National Media or ValueVision, at the time of the National Media
Stockholders' Meeting and the ValueVision Stockholders' Meeting and at the
Effective Time, contain any statement which, at such time and in light of the
circumstances under which it
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shall be made, is false or misleading with respect to any material fact, omit to
state any material fact necessary in order to make the statements made in the
Joint Proxy Statement/Prospectus not false or misleading, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the National Media Stockholders'
Meeting or the ValueVision Stockholders' Meeting which has become false or
misleading. If at any time prior to the Effective Time any event relating to
National Media or any of its Affiliates, officers or directors should be
discovered by National Media which should be set forth in an amendment to the
Registration Statement or a supplement to the Joint Proxy Statement/Prospectus,
National Media shall promptly inform ValueVision.
SECTION 4.17. Labor Matters. Except as disclosed in the National Media
SEC Reports filed prior to the date hereof, neither National Media nor any of
its Subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor, as of the date hereof, is National Media or any of its
Subsidiaries the subject of any material proceeding asserting that National
Media or any of its Subsidiaries has committed an unfair labor practice or is
seeking to compel it to bargain with any labor union or labor organization nor,
as of the date of this Agreement, is there pending or, to the knowledge of the
executive officers of National Media, threatened, any material labor strike,
dispute, walkout, work stoppage, slow-down or lockout involving National Media
or any of its Subsidiaries.
SECTION 4.18. Insurance. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by National Media or any of its
Subsidiaries are with reputable insurance carriers, provide full and adequate
coverage for all normal risks incident to the business of National Media and its
Subsidiaries and their respective properties and assets, and are in character
and amount at least equivalent to that carried by persons engaged in similar
businesses and subject to the same or similar perils or hazards, except for any
such failures to maintain insurance policies that, individually or in the
aggregate, are not reasonably likely to have a National Media Material Adverse
Effect.
SECTION 4.19. Opinion of Financial Advisor. The financial advisor of
National Media, Lehman Brothers, Inc., has delivered to National Media an
opinion dated the date of this Agreement to the effect that the National Media
Exchange Ratio is fair to the holders of National Media Common Stock from a
financial point of view.
SECTION 4.20. No Existing Discussions. As of the date hereof, neither
National Media nor any of its Affiliates is engaged, directly or indirectly, in
any discussions or negotiations with any other party with respect to an
Acquisition Proposal.
SECTION 4.21. Section 203 of the DGCL and Sections 2538, 2555, and 2564 of
the Pennsylvania Business Corporation Law Not Applicable. The Board of Directors
of National Media has taken all actions necessary under the DGCL and the
Pennsylvania Business Corporation Law ("PBCL"), including approving the
transactions contemplated by this Agreement and each of the Transaction
Documents to which it is a party, to ensure that Section 203 of the DGCL
applicable to a "business combination" (as defined in Section 203 of the DGCL)
and Sections 2538, 2555 and 2564 of the PBCL applicable to a "business
combination," "control share acquisitions and transaction with "interested
shareholders," do not, and will not, apply to the transactions contemplated
hereunder and thereunder. No other "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation is applicable
to National Media or (by reason of National Media's participation therein) the
National Media Merger or the other transactions contemplated by this Agreement
or the other Transaction Documents to which it is a party.
SECTION 4.22. National Media Rights Plan. Under the terms of the National
Media Rights Plan, the transactions contemplated by this Agreement will not
cause a Distribution Date to occur or cause the rights issued pursuant to the
National Media Rights Plan to become exercisable and all such rights shall
become non-exercisable at the Effective Time.
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ARTICLE V.
COVENANTS
SECTION 5.1. Conduct of Business. Except as set forth on Section 5.1 of the
ValueVision Disclosure Schedule or the National Media Disclosure Schedule,
during the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, ValueVision
and National Media each agrees as to itself and its respective Subsidiaries
(except to the extent that the other party shall otherwise consent in writing)
to carry on its business in the usual, regular and ordinary course in
substantially the same manner as previously conducted, to pay its debts and
taxes when due subject to good faith disputes over such debts or taxes, to pay
or perform its other obligations when due, and, to the extent consistent with
such business, use all reasonable efforts consistent with past practices and
policies to (i) preserve intact its present business organization, (ii) keep
available the services of its present officers and key employees and (iii)
preserve its relationships with customers, suppliers, distributors, and others
having business dealings with it. Except as expressly contemplated by this
Agreement (including the Exhibits attached hereto) or as set forth on Section
5.1 of the ValueVision Disclosure Schedule or the National Media Disclosure
Schedule, during the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time,
ValueVision and National Media each shall not (and shall not permit any of its
respective Subsidiaries to), without the written consent of the other party:
(a) Accelerate, amend or change the period of exercisability of
options or restricted stock granted under any employee stock plan of such
party or authorize cash payments in exchange for any options granted under
any of such plans, except as required by the terms of such plans or any
related agreements in effect as of the date of this Agreement;
(b) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital
stock, or split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock, except
from former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service to such party;
(c) Issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or securities
convertible into or exchangeable for shares of its capital stock, or
subscriptions, rights, warrants or options to acquire, or other agreements
or commitments of any character obligating it to issue any such shares or
other convertible securities, other than (i) the grant of options
consistent with past practices to employees, officers, directors or
consultants, but in no event grant more than the total number of authorized
options available under such party's stock option plans and (ii) the
issuance of shares of ValueVision Common Stock or National Media Common
Stock, as the case may be, pursuant to the exercise of options, warrants or
the National Media Convertible Preferred Stock outstanding on the date of
this Agreement;
(d) Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership or other business organization or division, or otherwise
acquire or agree to acquire any assets (other than inventory and other
items in the ordinary course of business), except for any such acquisitions
involving aggregate consideration of not more than $1,000,000;
(e) Sell, lease, license or otherwise dispose of any of its material
properties or assets, except for transactions in the ordinary course of
business; provided, however, that in no event shall either party enter into
any agreement, option or other arrangements (including without limitation
any joint venture) involving the licensing of such party's name or system
in any foreign country, except for transactions in the ordinary course of
business;
(f) (i) Increase or agree to increase the compensation payable or to
become payable to its directors, officers, employees or consultants, except
for increases in salary or wages of employees (other than officers) in
accordance with past practices, (ii) grant any additional severance or
termination pay to, or
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enter into any employment or severance agreements with, any consultants,
employees, officers or directors (iii) enter into any collective bargaining
agreement (other than as required by law or extensions to existing
agreements in the ordinary course of business), or (iv) establish, adopt,
enter into or amend any bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, trust, fund, policy or
arrangement for the benefit of any directors, officers, employees or
consultants;
(g) Amend or propose to amend its Certificate of Incorporation or
Articles of Incorporation, as the case may be, or Bylaws;
(h) Incur any indebtedness for borrowed money other than in the
ordinary course of business;
(i) Take any action that would or is reasonably likely to result in a
material breach of any provision of this Agreement or any of the
Transaction Documents to which it is a party or in any of its
representations and warranties set forth in this Agreement or any of the
Transaction Documents to which it is a party being untrue on and as of the
Closing Date;
(j) Make or rescind any material express or deemed election relating
to Taxes, settle or compromise any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to Taxes, or change any of its methods of reporting income or
deductions for federal income Tax purposes from those employed in the
preparation of its federal income tax return for the taxable year ending
January 31, 1997 with respect to ValueVision and March 31, 1997 with
respect to National Media, except as may be required by applicable law;
(k) Settle any stockholder litigation relating to the transactions
contemplated hereby; or
(l) Take, or agree in writing or otherwise to take, any of the actions
described in Sections (a) through (k) above.
SECTION 5.2. Cooperation; Notice; Cure. Subject to compliance with
applicable law, from the date hereof until the Effective Time, each of
ValueVision and National Media shall confer on a regular and frequent basis with
one or more representatives of the other party to report on the general status
of ongoing operations and shall promptly provide the other party or its counsel
with copies of all filings made by such party with the SEC or with any
Governmental Entity in connection with this Agreement, the Mergers and the
transactions contemplated hereby and thereby. Each of ValueVision and National
Media shall notify the other of, and will use all commercially reasonable
efforts to cure before the Closing Date, any event, transaction or circumstance,
as soon as practical after it becomes known to such party, that causes or will
cause any covenant or agreement of ValueVision or National Media under this
Agreement to be breached or that renders or will render untrue any
representation or warranty of ValueVision or National Media contained in this
Agreement. Each of ValueVision and National Media also shall notify the other in
writing of, and will use all commercially reasonable efforts to cure, before the
Closing Date, any violation or breach, as soon as practical after it becomes
known to such party, of any representation, warranty, covenant or agreement made
by ValueVision or National Media. No notice given pursuant to this paragraph
shall have any effect on the representations, warranties, covenants or
agreements contained in this Agreement for purposes of determining satisfaction
of any condition contained herein. Notwithstanding anything to the contrary in
this Agreement, (i) neither ValueVision nor any of its Subsidiaries nor National
Media nor any of its Subsidiaries shall be obligated to sell or otherwise
transfer any of its broadcast assets to obtain the FCC Consent Application (as
defined in Section 5.8(a)) and (ii) if any of National Media's Directors (as
defined in Section 5.19(a)) are not approved of by the FCC, then National Media
shall as expeditiously as possible upon notice of such nonapproval replace any
such director with another National Media Director until all of National Media's
Directors have been approved of by the FCC.
SECTION 5.3. No Solicitation.
(a) ValueVision and National Media each shall not, directly or indirectly,
through any officer, director, employee, financial advisor, representative or
agent of such party (i) solicit, initiate, or encourage any inquiries or
proposals that constitute, or could reasonably be expected to lead to, a
proposal or offer for a merger,
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consolidation, business combination, sale of substantial assets, sale of shares
of capital stock (including without limitation by way of a tender offer) or
similar transaction involving such party or any of its Subsidiaries, other than
the transactions contemplated by this Agreement (any of the foregoing inquiries
or proposals being referred to in this Agreement as an "Acquisition Proposal"),
(ii) engage in negotiations or discussions with any third party concerning, or
provide any nonpublic information to any person or entity relating to, any
Acquisition Proposal, or (iii) agree to or recommend any Acquisition Proposal;
provided, however, that nothing contained in this Agreement shall prevent
ValueVision or National Media, or their respective Board of Directors, from (A)
furnishing non-public information to, or entering into discussions or
negotiations with, any person or entity in connection with an unsolicited bona
fide written Acquisition Proposal by such person or entity or modifying or
withdrawing its recommendation with respect to the transactions contemplated
hereby or recommending an unsolicited bona fide written Acquisition Proposal to
the stockholders of such party, if and only to the extent that (1) the Board of
Directors of such party believes in good faith (after consultation with its
financial advisor) that such Acquisition Proposal is reasonably capable of being
completed on the terms proposed and, after taking into account the strategic
benefits anticipated to be derived from the Mergers and the long-term prospects
of ValueVision and National Media as a combined company, would, if consummated,
result in a transaction more favorable to the stockholders of such party over
the long term than the transaction contemplated by this Agreement and the Board
of Directors of such party determines in good faith after consultation with
outside legal counsel that such action is required for such Board of Directors
to comply with its fiduciary duties to stockholders under applicable law and (2)
prior to furnishing such non-public information to, or entering into discussions
or negotiations with, such person or entity, such Board of Directors receives
from such person or entity an executed confidentiality and standstill agreement
with terms no less favorable to such party than those contained in the
Confidentiality Agreement dated August 19, 1997 between National Media and
ValueVision (the "Confidentiality Agreement"); or (B) complying with Rule 14e-2
promulgated under the Exchange Act with regard to an Acquisition Proposal. Each
of ValueVision and National Media agrees not to release any third party from, or
waive any provision of, any standstill agreement to which it is a party or any
confidentiality agreement between it and another person who has made, or who may
reasonably be considered likely to make, an Acquisition Proposal, unless its
Board of Directors determines in good faith after consultation with outside
legal counsel that such action is necessary for such Board of Directors to
comply with its fiduciary duties to stockholders under applicable law.
(b) ValueVision and National Media shall each notify the other party
immediately after receipt by ValueVision or National Media (or their advisors)
of any Acquisition Proposal or any request for nonpublic information in
connection with an Acquisition Proposal or for access to the properties, books
or records of such party by any person or entity that informs such party that it
is considering making, or has made, an Acquisition Proposal. Such notice shall
be made orally and in writing and shall indicate in reasonable detail the
identity of the offeror and the terms and conditions of such proposal, inquiry
or contact. Such party shall continue to keep the other party hereto informed,
on a current basis, of the status of any such discussions or negotiations and
the terms being discussed or negotiated.
SECTION 5.4. Joint Proxy Statement/Prospectus; Registration Statement.
(a) As promptly as practicable after the execution of this Agreement,
ValueVision and National Media shall prepare and file with the SEC the Joint
Proxy Statement/Prospectus and will cause Parent to prepare and file with the
SEC the Registration Statement in which the Joint Proxy Statement/Prospectus
will be included as a prospectus. ValueVision and National Media shall use all
reasonable efforts to cause the Registration Statement to become effective as
soon after such filing as practical. The Joint Proxy Statement/ Prospectus shall
include the recommendation of the Board of Directors of ValueVision in favor of
this Agreement and the ValueVision Merger and the recommendation of the Board of
Directors of National Media in favor of this Agreement and the National Media
Merger; provided that the Board of Directors of either party may modify or
withdraw such recommendation if such Board of Directors believes in good faith
after consultation with outside legal counsel that the modification or
withdrawal of such recommendation is necessary for such Board of Directors to
comply with its fiduciary duties under applicable law.
(b) ValueVision and National Media shall make all necessary filings with
respect to the Merger under the Securities Act, the Exchange Act, applicable
state blue sky laws and the rules and regulations thereunder.
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(c) ValueVision and National Media shall use their best efforts to furnish
to each other all information required for any application or other filing to be
made pursuant to the rules and regulations of any applicable law (including all
information required to be included in the Joint Proxy Statement/Prospectus and
the Registration Statement) in connection with the transactions contemplated by
this Agreement.
SECTION 5.5. Nasdaq Quotation and NYSE Listing. ValueVision agrees to use
its reasonable best efforts to continue the quotation of ValueVision Common
Stock on Nasdaq during the term of this Agreement and National Media agrees to
use its reasonable best efforts to continue the quotation and listing of
National Media Common Stock on the New York Stock Exchange (the "NYSE") during
the term of this Agreement.
SECTION 5.6. Access to Information. Upon reasonable notice, ValueVision and
National Media shall each (and shall cause each of their respective Subsidiaries
to) afford to the officers, employees, accountants, counsel and other
representatives of the other, access, during normal business hours during the
period prior to the Effective Time, to all its personnel, properties, books,
contracts, commitments and records and, during such period, each of ValueVision
and National Media shall, and shall cause each of their respective Subsidiaries
to, furnish promptly to the other (a) a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of federal securities laws and (b) all other
information concerning its business, properties and personnel as such other
party may reasonably request. The parties will hold any such information which
is nonpublic in confidence in accordance with the Confidentiality Agreement. No
information or knowledge obtained in any investigation pursuant to this Section
5.6 shall affect or be deemed to modify any representation or warranty contained
in this Agreement or the conditions to the obligations of the parties to
consummate the Merger.
SECTION 5.7. Stockholders Meetings. ValueVision and National Media each
shall call a meeting of its respective stockholders to be held as promptly as
practicable for the purpose of voting, in the case of ValueVision, upon this
Agreement and the ValueVision Merger and, in the case of National Media, upon
this Agreement and the National Media Merger. Subject to Sections 5.3 and 5.4,
ValueVision and National Media shall, through their respective Boards of
Directors, recommend to their respective stockholders approval of such matters
and shall coordinate and cooperate with respect to the timing of such meetings
and shall use their best efforts to hold such meetings on the same day and as
soon as practicable after the date hereof. Unless otherwise required to comply
with the applicable fiduciary duties of the respective directors of ValueVision
and National Media, as determined by such directors in good faith after
consultation with outside legal counsel, each party shall use all reasonable
efforts to solicit from stockholders of such party proxies in favor of such
matters.
SECTION 5.8. Legal Conditions to Merger.
(a) ValueVision and National Media shall each use all reasonable efforts to
(i) take, or cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary and proper under applicable law to consummate and
make effective the transactions contemplated hereby as promptly as practicable,
(ii) obtain from any Governmental Entity or any other third party any consents,
licenses, permits, waivers, approvals, authorizations, or orders required to be
obtained or made by ValueVision or National Media or any of their Subsidiaries
in connection with the authorization, execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby including, without
limitation, the Mergers, and (iii) as promptly as practicable, make all
necessary filings, and thereafter make any other required submissions, with
respect to this Agreement and the Mergers required under (A) the Securities Act
and the Exchange Act, and any other applicable federal or state securities laws,
(B) the HSR Act and any related governmental request thereunder, (C) the
Communications Act (including the filing of one or more requisite applications
with the FCC requesting its written consent to the transactions contemplated
hereby (the "FCC Consent Application"), and (D) any other applicable law.
ValueVision and National Media shall cooperate with each other in connection
with the making of all such filings, including providing copies of all such
documents to the non-filing party and its advisors prior to filing and, if
requested, to accept all reasonable additions, deletions or changes suggested in
connection therewith.
(b) ValueVision and National Media agree, and shall cause each of their
respective Subsidiaries, to cooperate and to use their respective best efforts
to obtain any government clearances required for Closing
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(including through compliance with the HSR Act and any applicable foreign
government reporting requirements), to respond to any government requests for
information, and to contest and resist any action, including any legislative,
administrative or judicial action, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) (an "Order") that restricts, prevents or prohibits the
consummation of the Mergers or any other transactions contemplated by this
Agreement. The parties hereto will consult and cooperate with one another, and
consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party hereto in connection
with proceedings under or relating to the HSR Act, the Communications Act or any
other federal, state or foreign antitrust or fair trade law. ValueVision and
National Media shall cooperate and work together in any proceedings or
negotiations with any Governmental Entity relating to any of the foregoing.
Notwithstanding anything to the contrary in this Section 5.8, neither
ValueVision nor National Media, nor any of their respective Subsidiaries, shall
be required to take any action that would reasonably be expected to
substantially impair the overall benefits expected, as of the date hereof, to be
realized from the consummation of the Mergers.
(c) Each of ValueVision and National Media shall give (or shall cause their
respective Subsidiaries to give) any notices to third parties, and use, and
cause their respective Subsidiaries to use, all reasonable efforts to obtain any
third party consents related to or required in connection with the Mergers.
(d) National Media shall duly comply with all of its obligations under, and
shall diligently prosecute all of its rights under, the Redemption Agreement.
SECTION 5.9. Public Disclosure. ValueVision and National Media shall agree
on the form and content of the initial press release regarding the transactions
contemplated hereby and thereafter shall consult with each other before issuing,
and use all reasonable efforts to agree upon, any press release or other public
statement with respect to any of the transactions contemplated hereby and shall
not issue any such press release or make any such public statement prior to such
consultation.
SECTION 5.10. Tax-Free Reorganization and Transfer. ValueVision and
National Media shall each use all reasonable efforts to cause the ValueVision
Merger to be treated as a reorganization within the meaning of Section 368 of
the Code and the Mergers to be treated as transfers within the meaning of
Section 351 of the Code.
SECTION 5.11. Affiliate Agreements. Upon the execution of this Agreement,
ValueVision and National Media will provide each other with a list of those
persons who are, in ValueVision's or National Media's respective reasonable
judgment, "affiliates" of ValueVision or National Media, as the case may be,
within the meaning of Rule 145 (each such person who is an "affiliate" of
ValueVision or National Media within the meaning of Rule 145 is referred to as
an "Affiliate") promulgated under the Securities Act ("Rule 145"). ValueVision
and National Media shall provide each other such information and documents as
the other party shall reasonably request for purposes of reviewing such list and
shall notify the other party in writing regarding any change in the identity of
its Affiliates prior to the Closing Date. ValueVision and National Media shall
each use all reasonable efforts to deliver or cause to be delivered to each
other by January 30, 1998 (and in any case prior to the Effective Time) from
each of its Affiliates, an executed Affiliate Agreement, substantially similar
to the form attached hereto as Exhibit F, by which each Affiliate of ValueVision
and each Affiliate of National Media agrees to comply with the applicable
requirements of Rule 145 and for the ValueVision Merger to qualify as a tax-free
reorganization within the meaning of Section 368 and the Mergers to qualify as
transfers within the meaning of Section 351 of the Code (an "Affiliate
Agreement"). Parent shall be entitled to place appropriate legends on the
certificates evidencing any Parent Common Stock to be received by such
Affiliates of ValueVision or National Media pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for Parent Common Stock, consistent with the terms of the Affiliate
Agreements (provided that such legends or stop transfer instructions shall be
removed, when such shares of Parent Common Stock are generally transferable
without any restrictions imposed by Rule 145, upon the request of any
stockholder that is not then an Affiliate of Parent).
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SECTION 5.12. National Listing or Nasdaq Quotation. ValueVision and
National Media shall cause Parent to promptly prepare and submit an application
to the NYSE, if Parent is eligible for such listing, or, if not so eligible, to
another national securities exchange or market to list or quote the shares of
Parent Common Stock to be issued in the Mergers and upon exercise or conversion
of ValueVision Stock Options, the ValueVision Warrants, the National Media Stock
Options and the National Media Warrants, and shall use all reasonable efforts to
cause such shares to be approved for listing or quotation on the NYSE or such
other exchange or market, as the case may be, prior to the Effective Time,
subject to official notice of issuance.
SECTION 5.13. Stock Plans.
(a) At the Effective Time, each outstanding ValueVision Stock Option under
the ValueVision Stock Plans and each outstanding National Media Stock Option
under the National Media Stock Plans, in each case whether vested or unvested,
shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such ValueVision Stock Option or National
Media Stock Option, as the case may be the same number of shares of Parent
Common Stock as the holder of such ValueVision Stock Option or National Media
Stock Option, as the case may be, would have been entitled to receive pursuant
to the ValueVision Merger or the National Media Merger, respectively, had such
holder exercised such option in full immediately prior to the Effective Time
(rounded downward to the nearest whole number), at a price per share (rounded
downward to the nearest whole cent) equal to (y) the aggregate exercise price
for the shares of ValueVision Common Stock or National Media Common Stock, as
the case may be, purchasable pursuant to such ValueVision Stock Option or such
National Media Stock Option immediately prior to the Effective Time divided by
(z) the number of full shares of Parent Common Stock deemed purchasable pursuant
to such ValueVision Stock Option or National Media Stock Option, as the case may
be, in accordance with the foregoing.
(b) As soon as practicable after the Effective Time, Parent shall deliver
to the participants in the ValueVision Stock Plans and the National Media Stock
Plans appropriate notice setting forth such participants' rights pursuant
thereto and the grants pursuant to ValueVision Stock Plans or National Media
Stock Plans, as the case may be, shall continue in effect on the same terms and
conditions (subject to the adjustments required by this Section 5.13 after
giving effect to the Mergers).
(c) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery under
ValueVision Stock Plans and National Media Stock Plans assumed in accordance
with this Section 5.13. As soon as practicable after the Effective Time, Parent
shall file a registration statement on Form S-8 (or any successor or other
appropriate forms), or another appropriate form with respect to the shares of
Parent Common Stock subject to such options and shall use its best efforts to
maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options remain outstanding.
(d) The Board of Directors of each of ValueVision and National Media shall,
prior to or as of the Effective Time, take all necessary actions, pursuant to
and in accordance with the terms of the ValueVision Stock Plans and the
instruments evidencing the ValueVision Stock Options, or the National Media
Stock Plans and the instruments evidencing the National Media Stock Options, as
the case may be, to provide for the conversion of the ValueVision Stock Options
and the National Media Stock Options into options to acquire Parent Common Stock
in accordance with this Section 5.13, and that no consent of the holders of the
ValueVision Stock Options or National Media Stock Options is required in
connection with such conversion.
(e) The Board of Directors of each of ValueVision and National Media shall,
prior to or as of the Effective Time, take appropriate action to approve the
deemed disposition of the ValueVision Stock Options or National Media Stock
Options, as the case may be, for purposes of excepting such disposition under
Rule 16b-3(e) promulgated under the Exchange Act. The Board of Directors of
Parent shall, prior to or as of the Effective Time, take appropriate action to
approve the deemed grant of options to purchase Parent Common Stock under the
ValueVision Stock Options and the National Media Stock Options (as converted
pursuant to this Section 5.13) for purposes of excepting such grant under Rule
16b-3(d) promulgated under the Exchange Act.
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(f) At the Effective Time, the Parent shall adopt the stock plan (the
"Parent Stock Plan") substantially in the form attached hereto as Exhibit O.
SECTION 5.14. Brokers or Finders. Each of National Media and ValueVision
represents, as to itself, its Subsidiaries and its Affiliates, that no agent,
broker, investment banker, financial advisor or other firm or person is or will
be entitled to any broker's or finder's fee or any other commission or similar
fee in connection with any of the transactions contemplated by this Agreement,
except Bear Stearns & Co. Incorporated, whose fees and expenses will be paid by
ValueVision in accordance with ValueVision's agreement with such firm (a copy of
which has been delivered by ValueVision to National Media prior to the date of
this Agreement), and Lehman Brothers, Inc., whose fees and expenses will be paid
by National Media in accordance with National Media's agreement with such firm
(a copy of which has been delivered by National Media prior to the date of this
Agreement); provided, however, that if the Mergers are consummated, such fees
shall be paid by ValueVision in accordance with Section 7.3 hereof. Each of
National Media and ValueVision agrees to indemnify and hold the other harmless
from and against any and all claims, liabilities or obligations with respect to
any such fees, commissions or expenses asserted by any person on the basis of
any act or statement alleged to have been made by such party or any of its
Affiliates.
SECTION 5.15. Indemnification.
(a) From and after the Effective Time, Parent agrees that it will, and will
cause the Surviving Corporations to, indemnify and hold harmless each present
and former director and officer of ValueVision and National Media (the
"Indemnified Parties"), against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities or amounts paid in
settlement (collectively, "Costs") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to matters
existing or occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent that
ValueVision or National Media, as the case may be, would have been permitted
under Minnesota law and Delaware law, as the case may be, and its articles or
certificate of incorporation, as the case may be, or bylaws in effect on the
date hereof to indemnify such Indemnified Party (and Parent and the Surviving
Corporation shall also advance expenses as incurred to the fullest extent
permitted under applicable law, provided the Indemnified Party to whom expenses
are advanced provides an undertaking to repay such advances if it is ultimately
determined that such Indemnified Party is not entitled to indemnification).
(b) For a period of six years after the Effective Time, Parent shall
maintain or shall cause the Surviving Corporations to maintain (to the extent
available in the market) in effect a directors' and officers' liability
insurance policy covering those persons who are currently covered by
ValueVision's or National Media's directors' and officers' liability insurance
policy (copies of which have been heretofore delivered by ValueVision and
National Media to each other) with coverage in amount and scope at least as
favorable as ValueVision's or National Media's existing coverage; provided that
in no event shall Parent or the Surviving Corporations be required to expend in
excess of 200% of the annual premium currently paid by ValueVision or National
Media, as the case may be, for such coverage (in either case, the "Current
Premium"); and if such premium would at any time exceed 200% of the Current
Premium, then the Surviving Corporations shall maintain insurance policies which
provide the maximum and best coverage available at an annual premium equal to
200% of the Current Premium.
(c) The provisions of this Section 5.15 are intended to be in addition to
the rights otherwise available to the current officers and directors of
ValueVision and National Media by law, charter, statute, bylaw or agreement, and
shall operate for the benefit of, and shall be enforceable by, each of the
Indemnified Parties, their heirs and their representatives.
SECTION 5.16. Letter of National Media's Accountants. National Media shall
use all reasonable efforts to cause to be delivered to ValueVision and National
Media a letter of Ernst & Young LLP, National Media's independent accountants,
dated a date within two business days before the date on which the Registration
Statement shall become effective and addressed to ValueVision, in form
reasonably satisfactory to ValueVision and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
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SECTION 5.17. Letter of ValueVision's Accountants. ValueVision shall use
all reasonable efforts to cause to be delivered to National Media and
ValueVision a letter of Arthur Andersen LLP, ValueVision's independent
accountants, dated a date within two business days before the date on which the
Registration Statement shall become effective and addressed to National Media,
in form reasonably satisfactory to National Media and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Registration Statement.
SECTION 5.18. Stock Option Agreements. National Media and ValueVision each
agree to fully perform their respective obligations under the Stock Option
Agreements.
SECTION 5.19. Post-Merger Parent Corporate Governance.
(a) At the Effective Time, the total number of persons serving on the Board
of Directors of Parent shall be ten (unless otherwise agreed in writing by
ValueVision and National Media prior to the Effective Time), five of whom shall
be ValueVision Directors, five of whom shall be National Media Directors (as
such terms are defined below), all of which ValueVision Directors and National
Media Directors shall be spread as evenly as possible among Parent's three
classes of Directors; provided, however, that if the Board of Directors shall
have elected a Chief Executive Officer to succeed the interim Chief Executive
Officer identified in Section 5.19(b)(i) below prior to the Effective Time and
such officer takes office prior to such date, then the Board of Directors of
Parent shall be expanded to 11 members and such officer shall be appointed to
the Board of Directors to fill the vacancy created by such expansion of the
Board. The persons to serve initially on the Board of Directors of Parent at the
Effective Time who are ValueVision Directors shall be selected solely by and at
the absolute discretion of the Board of Directors of ValueVision prior to the
Effective Time; and, subject to the second following sentence, the persons to
serve initially on the Board of Directors of Parent at the Effective Time who
are National Media Directors shall be selected solely by and at the absolute
discretion of the Board of Directors of National Media prior to the Effective
Time. In the event that, prior to the Effective Time, any person so selected to
serve on the Board of Directors of Parent after the Effective Time is unable or
unwilling to serve in such position, the Board of Directors which selected such
person shall designate another of its members to serve in such person's stead in
accordance with the provisions of the immediately preceding sentence. To the
extent any holder of National Media's or Parent's Series B Convertible Preferred
Stock is entitled to designate any director to the Board of Directors of Parent,
such director shall be deemed to be a National Media Director. The term
"ValueVision Director" means any person serving as a Director of ValueVision or
any of its Subsidiaries on the date hereof who becomes a Director of Parent at
the Effective Time and any successor director appointed or elected pursuant to
Article III, Section 1 of the Bylaws of Parent; and the term "National Media
Director" means any person serving as a Director of National Media or any of its
Subsidiaries on the date hereof who becomes a Director of Parent at the
Effective Time and any successor director appointed or elected pursuant to
Article III, Section 1 of the Bylaws of Parent.
(b) Subject to Section 8.5, at the Effective Time, (i) Robert L. Johander,
the current Chief Executive Officer of ValueVision, shall hold the position of
interim Chief Executive Officer and Co-Chairman of the Board of Parent, (ii)
Frederick S. Hammer, a current director of National Media, shall hold the
position of Co-Chairman of the Board of Parent, (iii) Nicholas M. Jaksich, the
current President and Chief Operating Officer of ValueVision, shall hold the
position of President and Chief Operating Officer of Parent and (iv) Stuart R.
Romenesko, the current Chief Financial Officer of ValueVision, shall hold the
position of Chief Financial Officer of Parent. If any of the persons identified
in the preceding sentence is unable or unwilling to hold such offices as set
forth above, his successor shall be selected by the Board of Directors of Parent
in accordance with the Bylaws of Parent.
(c) Subject to Section 8.5, at the Effective Time and continuing until the
third anniversary of the Effective Time, Parent shall have an Executive
Committee which shall always be comprised of three ValueVision Directors (who
initially shall be Marshall S. Geller, Nicholas M. Jaksich and Robert L.
Johander) and two National Media Directors (who initially shall be Frederick S.
Hammer and Robert N. Verratti). Until the third anniversary of the Effective
Time, the Executive Committee shall have responsibility for recommending to the
full Board of Directors a successor Chief Executive Officer (and any successor
thereto) to the interim Chief Executive Officer of the Parent, which search for
such successor Chief Executive
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Officer shall commence as promptly as reasonably practicable, and shall have, to
the fullest extent permitted by Delaware law, all of the powers, duties and
responsibilities (including, without limitation, those relating to any and all
issues relating to the FCC and any assets subject to its regulation) of the
entire Board of Directors of Parent (except with respect to those actions that
require a Supermajority Vote as set forth and defined in the Bylaws of Parent).
(d) Subject to Section 8.5, at the Effective Time and continuing until the
third anniversary of the Effective Time, Parent shall have a Compensation
Committee which shall always be comprised of two ValueVision Directors and one
National Media Director, each of whom shall meet the requirements of
independence as established by the exchange or market on which Parent's stock is
then traded or quoted. Until the third anniversary of the Effective Time, the
Compensation Committee shall have responsibility for (i) reviewing the
compensation and employee benefit policies of Parent, (ii) recommending to the
Executive Committee base salary amounts and incentive awards for all elected
officers of Parent and setting guidelines for the administration of all
salaries, (iii) administering incentive compensation and awarding stock options
to employees under any Parent stock option or compensation plan and amending or
modifying any provisions of such stock option or compensation plan that may be
amended or modified without stockholder approval and (iv) supervising all
administrative matters with respect to the foregoing.
(e) Each of ValueVision and National Media shall take such action as shall
reasonably be deemed by either thereof to be advisable to give effect to the
provisions set forth in this Section 5.19, including without limitation
incorporating such provisions in the Bylaws of Parent in effect at the Effective
Time.
SECTION 5.20. Name of Parent. Prior to the Effective Time, ValueVision and
National Media shall use reasonable efforts to decide on a new corporate name
for Parent.
SECTION 5.21. Parent Stockholder Rights Plan. Prior to the Effective Time,
ValueVision and National Media shall cause Parent to adopt a Stockholder Rights
Plan (the "Parent Rights Plan") that is substantially in the form of the
Stockholders Rights Agreement attached hereto as Exhibit P.
SECTION 5.22. The Warrants. At the Effective Time, each Warrant shall
thereafter solely represent the right to acquire, on the same terms and
conditions as are currently applicable under the Warrants, the same number of
shares of Parent Common Stock as a holder of the Warrants would have been
entitled to receive pursuant to the ValueVision Merger or the National Media
Merger, as the case may be, had such holder exercised the Warrants in full
immediately prior to the Effective Time (rounded downward to the nearest whole
number), at the price per share (rounded downward to the nearest whole cent)
equal to (y) the aggregate exercise price for the shares of ValueVision Common
Stock or the National Media Common Stock, as the case may be, purchasable
pursuant to the Warrants immediately prior to the Effective Time divided by (z)
the number of full shares of Parent Common Stock deemed purchasable pursuant to
the Warrants in accordance with the foregoing. At the Effective Time, Parent
shall agree to issue any required shares of Parent Common Stock upon exercise of
the Warrants in accordance with the foregoing.
SECTION 5.23. Conveyance Taxes. ValueVision and National Media shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees or any similar taxes
which become payable in connection with the transactions contemplated by this
Agreement that are required or permitted to be filed on or before the Effective
Time. ValueVision shall pay, and National Media shall pay, without deduction or
withholding from any amount payable to the holders of ValueVision Common Stock
or National Media Common Stock, as the case may be, any such taxes or fees
imposed by any Governmental Entity (and any penalties and interest with respect
to such taxes and fees), which become payable in connection with the
transactions contemplated by this Agreement, on behalf of their respective
stockholders.
SECTION 5.24. Stockholder Litigation. Each of ValueVision and National
Media shall give the other the reasonable opportunity to participate in the
defense of any stockholder litigation against ValueVision or National Media, as
applicable, and its directors relating to the transactions contemplated hereby.
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SECTION 5.25. Annual Reports for Welfare Benefit Plans. Prior to the
Closing Date, National Media shall cause to be filed any Annual Return/Report
Federal Form 5500 ("Annual Report") for any National Media Employee Plan that is
an "employee welfare benefit plan" within the meaning of Section 3(1) of ERISA
with respect to which: (i) a filing obligation exists under Section 101 of ERISA
or Section 6039D of the Code and (ii) no Annual Report has been timely filed.
National Media further agrees to cause any such filing to be made and civil
penalties paid in accordance with the procedures outlined by the U.S. Department
of Labor for the Delinquent Filer Voluntary Compliance Program at 60 Federal
Register 20874, dated April 27, 1995.
SECTION 5.26. Employment Agreements. Except as set forth on the National
Media Disclosure Schedule, National Media shall, and shall cause each of its
relevant Subsidiaries to, take any and all necessary action to prevent the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereunder from triggering any "change of control" or
similar provisions resulting in an acceleration of benefits or compensation
thereunder with respect to any agreements with any officer or other key employee
of National Media or any of its Subsidiaries.
SECTION 5.27. Funding Advance for Redemption Agreement. If all of the
conditions to ValueVision's obligations as set forth in Sections 6.1 and 6.2
hereof (other than the second sentence of Section 6.2(e)) have been satisfied,
then ValueVision shall concurrently with the Closing, advance to National Media,
pursuant to the Series C Note, in immediately available funds, such amounts as
are necessary to consummate the transactions contemplated by the Redemption
Agreement.
ARTICLE VI.
CONDITIONS TO MERGER
SECTION 6.1. Conditions to Each Party's Obligation to Effect the
Mergers. The respective obligations of each party to this Agreement to effect
the Mergers shall be subject to the satisfaction or waiver in writing by each of
National Media and ValueVision prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. This Agreement, the ValueVision Merger and
the National Media Merger shall have been approved in the manner required
under the MBCA and the DGCL, as the case may be, by the respective holders
of the issued and outstanding shares of capital stock of ValueVision and
National Media.
(b) HSR Act. The waiting period applicable to the consummation of the
Mergers under the HSR Act shall have expired or been terminated.
(c) FCC Consents. Subject to the last sentence of Section 5.2, the FCC
shall have granted by Final Order the FCC Consent Application, without
conditions, qualifications or other restrictions that are likely to have a
material adverse effect immediately after the Closing Date on Parent or any
of its Subsidiaries, whether imposed by the FCC or any other Governmental
Entity. "Final Order" means an order, action or decision of a Governmental
Entity that has not been reversed, stayed, or enjoined and as to which the
time to appeal, petition for certiorari or seek reargument or rehearing or
administrative reconsideration or review has expired and as to which no
appeal, reargument, petition for certiorari or rehearing or petition for
reconsideration or application for review is pending or as to which any
right to appeal, reargue, petition for certiorari or rehearing or
reconsideration or review has been waived in writing by each party having
such a right or, if any appeal, reargument, petition for certiorari or
rehearing or reconsideration or review thereof has been sought, the order
or judgment of the court or agency has been affirmed by the highest court
(or the administrative entity or body) to which the order was appealed or
from which the argument or rehearing or reconsideration or review was
sought, or certiorari has been denied, and the time to take any further
appeal or to seek certiorari or further reargument or rehearing, or
reconsideration or review, has expired.
(d) Approvals. Other than the filing provided for by Section 1.4, all
authorizations, consents, orders or approvals of, or declarations or
filings with, or expirations of waiting periods imposed by, any
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Governmental Entity the failure of which to file, obtain or occur is
reasonably likely to have a ValueVision Material Adverse Effect or a
National Media Material Adverse Effect shall have been filed, obtained or
occurred.
(e) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of
any stop order or proceedings seeking a stop order.
(f) No Injunctions. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any order, executive order, stay, decree,
judgment or injunction or statute, rule, regulation which is in effect and
which has the effect of making the Mergers illegal or otherwise prohibiting
consummation of the Mergers.
(g) National Listing or Nasdaq Quotation. The shares of Parent Common
Stock to be issued in the Merger and upon exercise or conversion of
ValueVision Options, the ValueVision Warrants, the National Media Options,
and the National Media Warrants shall have been approved for listing on a
national securities exchange or for quotation on The Nasdaq Stock Market,
subject to official notice of issuance.
(h) Consents Under ValueVision Agreements. ValueVision shall have
obtained the consent or approval of any person whose consent or approval
shall be required under any agreement or instrument in order to permit the
consummation of the transactions contemplated hereby, except those of
which, if not obtained, would not, individually or in the aggregate, have
(i) a ValueVision Material Adverse Effect or (ii) a material adverse effect
on the business, properties, financial condition or results of operations
of Parent after the Merger (a "Parent Material Adverse Effect").
(i) Consents Under National Media Agreements. National Media shall
have obtained the consent or approval of any person whose consent or
approval shall be required under any agreement or instrument in order to
permit the consummation of the transactions contemplated hereby, except
those which, if not obtained, would not, individually or in the aggregate,
have (i) a National Media Material Adverse Effect or (ii) a Parent Material
Adverse Effect.
(j) Corporate Governance. ValueVision and National Media shall have
taken all actions necessary so that (i) not later than the Effective Time,
the Certificate of Incorporation and Bylaws of Parent shall have been
amended to be substantially in the form of Exhibit C and Exhibit D attached
hereto; and (ii) at the Effective Time, the composition of the Board of
Directors of Parent and of each Committee of the Board of Directors of
Parent shall comply with Section 5.19 hereof (assuming ValueVision has
designated the ValueVision Directors and National Media has designated the
National Media Directors, in each case as contemplated by Section 5.19(a)
hereof) and (iii) not later than the Effective Time, Parent shall have
adopted the Parent Rights Plan.
(k) No Trigger of National Media Rights Plan. No event shall have
occurred that has or would result in the triggering of any right or
entitlement of stockholders of National Media under the National Media
Rights Plan, or will occur as a result of the consummation of the Mergers.
(l) Dissenters' Rights. Holders of no more than 5% of the issued and
outstanding shares of ValueVision Common Stock shall have made the demands
and given the notices required under Minnesota law to assert dissenters'
appraisal rights.
(m) Montgomery Ward. The transactions contemplated by the Stipulation
between Montgomery Ward & Co., Incorporated and ValueVision regarding the
Assumption and Modification of Executory Contracts and Related Agreements
(the "Settlement Agreement") shall have been approved by the United States
Bankruptcy Court for the District of Delaware (the "Court") on terms
substantially similar to those set forth in the Settlement Agreement;
provided, that, this condition shall be deemed to be satisfied if National
Media does not object to the terms of any approval by the Court within
three business days after any such approval becomes final and
non-appealable. ValueVision shall have consummated the repurchase of the
securities contemplated by the Settlement Agreement.
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SECTION 6.2. Additional Conditions to Obligations of ValueVision. The
obligation of ValueVision to effect the ValueVision Merger is subject to the
satisfaction of each of the following conditions prior to the Effective Time,
any of which may be waived in writing exclusively by ValueVision:
(a) Representations and Warranties. The representations and warranties
of National Media set forth in this Agreement shall be true and correct as
of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, except for, (i)
changes contemplated by this Agreement and (ii) inaccuracies which,
individually or in the aggregate, have not had and are not reasonably
likely to have a National Media Material Adverse Effect (without regard to
any materiality limitations contained in any such representation or
warranty), or a material adverse effect upon the consummation of the
transactions contemplated hereby; provided, however, that the last three
sentences in Section 4.3(b) must be true and correct in all respects; and
ValueVision shall have received a certificate signed on behalf of National
Media by the chief executive officer and the chief financial officer of
National Media to such effect.
(b) Performance of Obligations of National Media. National Media shall
have performed in all material respects all material obligations required
to be performed by it under this Agreement at or prior to the Closing Date,
and ValueVision shall have received a certificate signed on behalf of
National Media by the chief executive officer and the chief financial
officer of National Media to such effect.
(c) Tax Opinion. ValueVision shall have received the opinion of Latham
& Watkins, counsel to ValueVision, to the effect that, for Federal income
tax purposes, the ValueVision Merger will be treated as a tax-free
reorganization within the meaning of Section 368 of the Code and each of
the Mergers will be treated as transfers within the meaning of Section 351
of the Code (it being agreed that National Media shall provide reasonable
cooperation, including the delivery of such certifications as shall be
reasonably requested, to Latham & Watkins to enable it to render such
opinion).
(d) Termination of Telemarketing, Production and Post-Production
Agreement. The Telemarketing, Production and Post-Production Agreement
dated as of April 13, 1995 by and between National Media and ValueVision,
as amended, shall have been terminated and all liabilities, obligations and
amounts owed or incurred by ValueVision to National Media thereunder shall
have been released and forever discharged.
(e) Series C Convertible Preferred Stock. Each of the holders of the
Series C Convertible Preferred Stock shall have duly executed the
Redemption Agreement in the form attached hereto as Exhibit K, which
Agreement shall be in full force and effect and no material breach shall
have occurred thereunder as of the Closing Date. National Media shall have,
as of the Effective Time, redeemed all of the outstanding shares of the
Series C Convertible Preferred Stock (and the Series D Convertible
Preferred Stock issued in exchange therefore) pursuant to such Redemption
Agreement and none of such shares shall remain outstanding as of the
Effective Time.
(f) Transaction Documents. National Media shall have executed each of
the Transaction Documents to which it is a party, each of which shall be in
full force and effect and legally binding against National Media and no
material breach by National Media shall have occurred thereunder as of the
Closing Date. Each of National Media's Subsidiaries shall have executed the
Subsidiary Guarantee in the form attached hereto as Exhibit Q, which shall
be in full force and effect and legally binding against such Subsidiaries.
SECTION 6.3. Additional Conditions to Obligations of National Media. The
obligations of National Media to effect the National Media Merger are subject to
the satisfaction of each of the following conditions prior to the Effective
Time, any of which may be waived in writing exclusively by National Media:
(a) Representations and Warranties. The representations and
warranties of ValueVision set forth in this Agreement shall be true and
correct as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, except for, (i)
changes contemplated by this Agreement, (ii) inaccuracies
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which relate to the Settlement Agreement or the failure to consummate the
transactions contemplated thereby and (iii) inaccuracies which,
individually or in the aggregate, have not had and are not reasonably
likely to have a ValueVision Material Adverse Effect (without regard to any
materiality limitations contained in any such representation or warranty),
or a material adverse effect upon the consummation of the transactions
contemplated hereby; and National Media shall have received a certificate
signed on behalf of ValueVision by the chief executive officer and the
chief financial officer of ValueVision to such effect.
(b) Performance of Obligations of ValueVision. ValueVision shall have
performed in all material respects all material obligations required to be
performed by it under this Agreement at or prior to the Closing Date; and
National Media shall have received a certificate signed on behalf of
ValueVision by the chief executive officer and the chief financial officer
of ValueVision to such effect.
(c) Tax Opinion. National Media shall have received a written opinion
from Drinker, Biddle & Reath, LLP, tax counsel to National Media, to the
effect that each of the Mergers will be treated for Federal income tax
purposes as transfers within the meaning of Section 351 of the Code (it
being agreed that ValueVision shall provide reasonable cooperation,
including the delivery of such certifications as shall be reasonably
requested, to Drinker, Biddle & Reath, LLP to enable it to render such
opinion).
(d) Transaction Documents. ValueVision shall have duly executed each
of the Transaction Documents to which it is a party, and the Guaranty
attached hereto as Exhibit R (the "VVI Guaranty"), and such Transaction
Documents and VVI Guaranty shall be in full force and effect and legally
binding against ValueVision and no material breach by ValueVision shall
have occurred thereunder as of the Closing Date.
ARTICLE VII.
TERMINATION AND AMENDMENT
SECTION 7.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time (with respect to Sections 7.1(b) through 7.1(g), by
written notice by the terminating party to the other party), whether before or
after approval of the matters presented in connection with the Mergers by the
stockholders of ValueVision or National Media:
(a) by mutual written consent of ValueVision and National Media; or
(b) by either ValueVision or National Media if the Mergers shall not
have been consummated by June 1, 1998 (the "Outside Date"); provided,
however, that if the Mergers shall have not been consummated by the Outside
Date due to the failure of the condition set forth in Section 6.1(c), the
Outside Date shall be extended to August 31, 1998; and provided, further,
however, that the right to terminate this Agreement under this Section
7.1(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of or resulted in the
failure of the Mergers to occur on or before such date; or
(c) by either ValueVision or National Media if a court of competent
jurisdiction or other Governmental Entity shall have issued a nonappealable
final order, decree or ruling or taken any other nonappealable final
action, in each case having the effect of permanently restraining,
enjoining or otherwise prohibiting the Mergers; or
(d) (i) by ValueVision, if, at the National Media Stockholders'
Meeting (including any adjournment or postponement thereof), the requisite
vote of the stockholders of National Media in favor of the approval and
adoption of this Agreement and the National Media Merger shall not have
been obtained; or (ii) by National Media if, at the ValueVision
Stockholders' Meeting (including any adjournment or postponement thereof),
the requisite vote of the stockholders of ValueVision in favor of the
approval and adoption of this Agreement and the ValueVision Merger shall
not have been obtained; or
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(e) by ValueVision, if (i) the Board of Directors of National Media
shall have withdrawn or modified its recommendation of this Agreement or
the National Media Merger; (ii) after the receipt by National Media of an
Acquisition Proposal, ValueVision requests in writing that the Board of
Directors of National Media reconfirm its recommendation of this Agreement
and the National Media Merger to the stockholders of National Media and the
Board of Directors of National Media fails to do so within 10 business days
after its receipt of ValueVision's request; (iii) the Board of Directors of
National Media shall have recommended to the stockholders of National Media
an Alternative Transaction (as defined in Section 7.3(e)); (iv) a tender
offer or exchange offer for 20% or more of the outstanding shares of
National Media Common Stock is commenced (other than by ValueVision or an
Affiliate of ValueVision) and the Board of Directors of National Media
recommends that the stockholders of National Media tender their shares in
such tender or exchange offer; or (v) for any reason National Media fails
to call and hold the National Media Stockholders' Meeting by the Outside
Date (provided that ValueVision's right to terminate this Agreement under
such clause (v) shall not be available if at such time National Media would
be entitled to terminate this Agreement under Section 7.1(g)); or
(f) by National Media, if (i) the Board of Directors of ValueVision
shall have withdrawn or modified its recommendation of this Agreement or
the ValueVision Merger; (ii) after the receipt by ValueVision of an
Acquisition Proposal, National Media requests in writing that the Board of
Directors of ValueVision reconfirm its recommendation of this Agreement and
the ValueVision Merger to the stockholders of ValueVision and the Board of
Directors of ValueVision fails to do so within 10 business days after its
receipt of National Media's request; (iii) the Board of Directors of
ValueVision shall have recommended to the stockholders of ValueVision an
Alternative Transaction; (iv) a tender offer or exchange offer for 20% or
more of the outstanding shares of ValueVision Common Stock is commenced
(other than by National Media or an Affiliate of National Media) and the
Board of Directors of ValueVision recommends that the stockholders of
ValueVision tender their shares in such tender or exchange offer; or (v)
for any reason ValueVision fails to call and hold the ValueVision
Stockholders' Meeting by the Outside Date (provided that National Media's
right to terminate this Agreement under such clause (v) shall not be
available if at such time ValueVision would be entitled to terminate this
Agreement under Section 7.1(g)); or
(g) by ValueVision or National Media, if there has been a breach of
any representation, warranty, covenant or agreement on the part of the
other party set forth in this Agreement, which breach (i) will cause the
conditions set forth in Section 6.2(a) or (b) (in the case of termination
by ValueVision) or 6.3(a) or (b) (in the case of termination by National
Media) not to be satisfied, and (ii) shall not have been cured within 20
business days following receipt by the breaching party of written notice of
such breach from the other party.
SECTION 7.2. Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of ValueVision,
National Media, Parent or their respective officers, directors, stockholders or
Affiliates, except as set forth in Sections 5.15 and 7.3 and except that such
termination shall not limit liability for a willful breach of this Agreement;
provided that, the provisions of Sections 5.15 and 7.3 of this Agreement, the
Stock Option Agreements, the Demand Note, the Series C Note, the Warrant
Agreement, the Registration Rights Agreement and the Confidentiality Agreement
shall remain in full force and effect and survive any termination of this
Agreement.
SECTION 7.3. Fees and Expenses.
(a) Except as set forth in this Section 7.3, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses, if the Mergers are not
consummated; provided, however, that if the Mergers are consummated, ValueVision
shall pay for all fees and expenses incurred by National Media in connection
with the Mergers and the transactions contemplated hereunder.
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(b) ValueVision shall pay National Media a termination fee of $5.0 million
upon the earliest to occur of the following events:
(i) the termination of this Agreement by National Media pursuant to
Section 7.1(d)(ii), but only if a proposal for an Alternative Transaction
involving ValueVision shall have been publicly announced prior to the
ValueVision Stockholders' Meeting and either a definitive agreement for an
Alternative Transaction is entered into, or an Alternative Transaction is
consummated, within eighteen months of such termination; or
(ii) the termination of this Agreement by National Media pursuant to
Section 7.1(f), if a proposal for an Alternative Transaction involving
ValueVision shall have been made prior to the ValueVision Stockholders'
Meeting.
ValueVision's payment of a termination fee pursuant to this subsection
shall be the sole and exclusive remedy of National Media against ValueVision and
any of its Subsidiaries and their respective directors, officers, employees,
agents, advisors or other representatives with respect to the occurrences giving
rise to such payment; provided that this limitation shall not apply in the event
of a willful breach of this Agreement by ValueVision. Notwithstanding the
foregoing, if and to the extent that National Media has purchased shares of
ValueVision Common Stock pursuant to the National Media Stock Option Agreement,
the amount payable to National Media under this Section 7.3(b), together with
(i) (x) the amount received by National Media pursuant to ValueVision'
repurchase of Shares (as defined in the National Media Stock Option Agreement)
pursuant to Section 7 of the National Media Stock Option Agreement, less (y)
National Media's purchase price for such Shares, and (ii) (x) the net cash
amounts received by National Media pursuant to the sale of Shares (or any other
securities into which such Shares are converted or exchanged) to any
unaffiliated party, less (y) National Media's purchase price for such Shares,
shall not exceed $7.5 million.
(c) National Media shall pay ValueVision a termination fee of $5.0 million
upon the earliest to occur of the following events:
(i) the termination of this Agreement by ValueVision pursuant to
Section 7.1(d)(i), but only if a proposal for an Alternative Transaction
involving National Media shall have been publicly announced prior to the
National Media Stockholders' Meeting and either a definitive agreement for
an Alternative Transaction is entered into, or an Alternative Transaction
is consummated, within eighteen months of such termination; or
(ii) the termination of this Agreement by ValueVision pursuant to
Section 7.1(e), if a proposal for an Alternative Transaction involving
National Media shall have been made prior to the National Media
Stockholders' Meeting.
National Media's payment of a termination fee pursuant to this subsection
shall be the sole and exclusive remedy of ValueVision against National Media and
any of its Subsidiaries and their respective directors, officers, employees,
agents, advisors or other representatives with respect to the occurrences giving
rise to such payment; provided that this limitation shall not apply in the event
of a willful breach of this Agreement by National Media. Notwithstanding the
foregoing, if and to the extent that ValueVision has purchased shares of
National Media Common Stock pursuant to the ValueVision Stock Option Agreement,
the amount payable to ValueVision under this Section 7.3(c), together with (i)
(x) the amount received by ValueVision pursuant to National Media's repurchase
of Shares (as defined in the ValueVision Stock Option Agreement) pursuant to
Section 7 of the ValueVision Stock Option Agreement, less (y) ValueVision'
purchase price for such Shares, and (ii) (x) the net cash amounts received by
ValueVision pursuant to the sale of Shares (or any other securities into which
such Shares are converted or exchanged) to any unaffiliated party, less (y)
ValueVision' purchase price for such Shares, shall not exceed $7.5 million.
(d) The expenses and fees, if applicable, payable pursuant to Section
7.3(b) or 7.3(c) shall be paid concurrently with the first to occur of the
events described in Section 7.3(b)(i) or (ii) or 7.3(c)(i) or (ii).
(e) As used in this Agreement, "Alternative Transaction" means either (i) a
transaction pursuant to which any person (or group of persons) other than
ValueVision or National Media or their respective affiliates (a "Third Party"),
acquires more than 20% of the outstanding shares of ValueVision Common Stock or
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National Media Common Stock, as the case may be, pursuant to a tender offer or
exchange offer or otherwise, (ii) a merger or other business combination
involving ValueVision or National Media pursuant to which any Third Party
acquires more than 20% of the outstanding shares of ValueVision Common Stock or
National Media Common Stock, as the case may be, or the entity surviving such
merger or business combination, (iii) any other transaction pursuant to which
any Third Party acquires control of assets (including for this purpose the
outstanding equity securities of Subsidiaries of ValueVision or National Media,
and the entity surviving any merger or business combination including any of
them) of ValueVision or National Media having a fair market value (as determined
by the Board of Directors of ValueVision or National Media, as the case may be,
in good faith) equal to more than 20% of the fair market value of all the assets
of ValueVision or National Media, as the case may be, and their respective
Subsidiaries, taken as a whole, immediately prior to such transaction, or (iv)
any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
SECTION 7.4. Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Mergers by the stockholders of ValueVision or National Media, but, after any
such approval, no amendment shall be made which by law requires further approval
by such stockholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto; provided, however, that this Agreement may be amended in writing
without obtaining the signatures of ValueVision, National Media or Parent solely
for the purpose of adding Merger Sub 1 and Merger Sub 2 as parties to this
Agreement.
SECTION 7.5. Extension; Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties of the other
parties hereto contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions of the other
parties hereto contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.1. Nonsurvival of Representations, Warranties and
Agreements. None of the representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for the agreements contained in Sections 1.6,
1.7, 1.8, 2.1, 2.2, 2.3, 2.4, 2.5, 5.10, 5.13, 5.14, 5.15, 5.18, 5.19, 5.22,
5.23, 5.24, 5.25 and 5.26 and this Article VIII, and the agreements of the
Affiliates delivered pursuant to Section 5.11. The Confidentiality Agreement
shall survive the execution and delivery of this Agreement.
SECTION 8.2. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to ValueVision, to
ValueVision International, Inc.
6740 Shady Oak Road
Eden Prairie, Minnesota 55344-3433
Attention: General Counsel
Telecopy: (612) 947-0141
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with a copy to
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071-2007
Attention: Michael W. Sturrock, Esq.
Telecopy: (213) 891-8763
(b) if to National Media, to
National Media Corporation
Eleven Penn Center
Suite 1100
1835 Market Street
Philadelphia, Pennsylvania 19103
Attention: General Counsel
Telecopy: (215) 988-4900
with a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, Pennsylvania 19102-3163
Attention: Stephen T. Burdumy, Esq.
Telecopy (215) 568-6603
SECTION 8.3. Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
phrases "the date of this Agreement", "the date hereof," and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to
January 5, 1998.
SECTION 8.4. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
SECTION 8.5. Entire Agreement; No Third Party Beneficiaries. This Agreement
and all documents and instruments referred to herein (a) constitute the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and
thereof, and (b) except as provided in Section 5.15, are not intended to confer
upon any person (including, without limitation, the individuals identified in
Section 5.19) other than the parties hereto any rights or remedies hereunder;
provided that the Confidentiality Agreement shall remain in full force and
effect until the Effective Time. Each party hereto agrees that, except for the
representations and warranties contained in this Agreement, neither ValueVision
nor National Media makes any other representations or warranties, and each
hereby disclaims any other representations and warranties made by itself or any
of its officers, directors, employees, agents, financial and legal advisors or
other representatives, with respect to the execution and delivery of this
Agreement or the transactions contemplated hereby, notwithstanding the delivery
or disclosure to the other or the other's representatives of any documentation
or other information with respect to any one or more of the foregoing.
SECTION 8.6. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without regard to
any applicable conflicts of law.
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SECTION 8.7. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
SECTION 8.8 References to "Stockholders". All references to "stockholder"
or "stockholders" in this Agreement shall be deemed to refer to "shareholder" or
"shareholders," respectively, with respect to ValueVision.
IN WITNESS WHEREOF, ValueVision, National Media and Parent have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first written above.
VALUEVISION INTERNATIONAL, INC.
/s/ ROBERT L. JOHANDER
--------------------------------------
By: Robert L. Johander
Its: Chairman of the Board and
Chief Executive Officer
NATIONAL MEDIA CORPORATION
/s/ ROBERT N. VERRATTI
--------------------------------------
By: Robert N. Verratti
Its: President and Chief Executive
Officer
V-L HOLDINGS CORP.
/s/ ROBERT L. JOHANDER
--------------------------------------
By: Robert L. Johander
Its: Chief Executive Officer
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<PAGE> 1
EXHIBIT 3.1
RESTATED
CERTIFICATE OF INCORPORATION
OF
V-L HOLDINGS CORP.
The present name of the Corporation is . The Corporation was
incorporated under the name "V-L Holdings Corp." by the filing of its original
Certificate of Incorporation with the Secretary of State of the State of
Delaware on , 1997 This Restated Certificate of Incorporation of the
Corporation, which both restates and further amends the provisions of the
Corporation's Certificate of Incorporation, was duly adopted in accordance with
the provisions of Sections 242 and 245 of the General Corporation Law of the
State of Delaware and by the unanimous written consent of its stockholders in
accordance with Section 228 of the General Corporation Law of the State of
Delaware. The Certificate of Incorporation of the Corporation is hereby amended
and restated to read in its entirety as follows:
FIRST: The name of the Corporation is .
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Service Company, 1013 Centre Road, in the City
of Wilmington, County of New Castle, State of Delaware. The name of its
registered agent at that address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware as set forth in Title 8 of the Delaware Code (the "GCL").
FOURTH: A. The total number of shares of stock which the Corporation shall
have authority to issue is 210,000,000 (the "Capital Stock") consisting of
200,000,000 shares of Common Stock, par value $.01 per share (the "Common
Stock"), and 10,000,000 shares of Preferred Stock, par value of $.01 per share
(the "Preferred Stock").
B. Shares of Preferred Stock may be issued from time to time in one or more
series, as provided for herein or as provided for by the Board of Directors as
permitted hereby. All shares of Preferred Stock shall be of equal rank and shall
be identical, except in respect of the terms fixed herein for the series
provided for herein or fixed by the Board of Directors for any series provided
for by the Board of Directors as permitted hereby. All shares of any one series
shall be identical in all respects with all the other shares of such series,
except the shares of any one series issued at different times may differ as to
the dates from which dividends thereon may be cumulative.
The Board of Directors is hereby authorized, by resolution or resolutions,
to establish, out of the unissued shares of Preferred Stock not then allocated
to any series of Preferred Stock, additional series of Preferred Stock. Before
any shares of any such additional series are issued, the Board of Directors
shall fix and determine, and is hereby expressly empowered to fix and determine,
by resolution or resolutions, the number of shares constituting such series and
the distinguishing characteristics and the relative rights, preferences,
privileges and immunities, if any, and any qualifications, limitations or
restrictions thereof, of the shares thereof, so far as not inconsistent with the
provisions of this Article FOURTH. Without limiting the generality of the
foregoing, the Board of Directors may fix and determine:
1. The designation of such series and the number of shares which shall
constitute such series of such shares;
2. The rate of dividend, if any, payable on shares of such series;
3. Whether the shares of such series shall be cumulative,
non-cumulative or partially cumulative as to dividends, and the dates from
which any cumulative dividends are to accumulate;
4. Whether the shares of such series may be redeemed, and, if so, the
price or prices at which and the terms and conditions on which shares of
such series may be redeemed;
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5. The amount payable upon shares of such series in the event of the
voluntary or involuntary dissolution, liquidation or winding up of the
affairs of the Corporation;
6. The sinking fund provisions, if any, for the redemption of shares
of such series;
7. The voting rights, if any, of the shares of such series;
8. The terms and conditions, if any, on which shares of such series
may be converted into shares of capital stock of the Corporation of any
other class or series;
9. Whether the shares of such series are to be preferred over shares
of capital stock of the Corporation of any other class or series as to
dividends, or upon the voluntary or involuntary dissolution, liquidation,
or winding up of the affairs of the Corporation, or otherwise; and
10. Any other characteristics, preferences, limitations, rights,
privileges, immunities or terms not inconsistent with the provisions of
this Article FOURTH.
C. Except as otherwise provided in this Restated Certificate of
Incorporation, each holder of Common Stock shall be entitled to one vote for
each share of Common Stock held by him on all matters submitted to stockholders
for a vote and each holder of Preferred Stock of any series that is Voting Stock
(as hereinafter defined) shall be entitled to such number of votes for each
share held by him as may be specified herein or in the Certificate of
Designation in respect thereof.
Except as otherwise provided by law, the presence, in person or by proxy,
of the holders of record of issued and outstanding shares of Capital Stock
entitling the holders thereof to cast a majority of the votes entitled to be
cast by the holders of issued and outstanding shares of Capital Stock entitled
to vote shall constitute a quorum at all meetings of the stockholders.
FIFTH: A. The Board of Directors shall have the power to make, adopt,
alter, amend, change or repeal the Amended and Restated Bylaws of the
Corporation (the "Bylaws") by resolution adopted by the affirmative vote of a
majority of the entire Board of Directors, subject to any law or Bylaw provision
requiring the affirmative vote of a larger percentage of the members of the
Board of Directors.
B. Stockholders may not make, adopt, alter, amend, change or repeal the
Bylaws of the Corporation or any provision of this Restated Certificate of
Incorporation except upon the affirmative vote of at least 70% of the votes
entitled to be cast by the holders of all outstanding shares then entitled to
vote generally in the election of directors, voting together as a single class.
SIXTH: The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors, which shall consist of not less
than three or more than twenty directors, the exact number of directors to be
determined from time to time by the bylaws. The Board of Directors shall be
divided into three classes, designated Class I, Class II and Class III. Class I
shall initially consist of four directors, and each of Class II and Class III
shall initially consist of three directors. Class I directors shall be initially
elected for a term expiring at the first annual meeting of stockholders of the
Corporation following the date hereof, Class II directors shall be initially
elected for a term expiring at the second annual meeting of stockholders of the
Corporation following the date hereof, and Class III directors shall be
initially elected for a term expiring at the third annual meeting of
stockholders of the Corporation following the date hereof. At each annual
meeting of stockholders, beginning in 1999, successors to the class of directors
whose term expires at that annual meeting shall be elected for a three year
term. If the number of directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of directors in each
class as nearly equal as possible, and any additional director of any class
elected to fill a vacancy resulting from an increase in such class shall hold
office for a term that shall coincide with the remaining term of that class, but
in no case will a decrease in the number of directors shorten the term of any
incumbent director. A director shall hold office until the annual meeting for
the year in which his term expires and until his successor shall be elected and
shall qualify, subject, however, to such director's prior death, resignation,
retirement, disqualification or removal from office. Subject to Article III,
Section 1 of the Bylaws, any vacancy on the Board of Directors that results from
an increase in the number of directors and any other vacancy may only be filled
by a majority of the directors then in office, even if less than a quorum, or by
a sole remaining director. Any
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director elected to fill a vacancy not resulting from an increase in the number
of directors shall have the same remaining term as that of his predecessor.
Notwithstanding the foregoing, whenever the holders of any one or more
series of Preferred Stock issued by the Corporation shall have the right, voting
separately as a class or series, to elect directors at an annual or special
meeting of stockholders, the election, term of office, removal, filling of
vacancies and other features of such directorships shall be governed by the
terms of this Restated Certificate of Incorporation applicable thereto
(including the resolutions of the Board of Directors pursuant to Article FOURTH
hereof), and such Directors so elected shall not be divided into classes
pursuant to this Article SIXTH unless expressly provided by such terms.
SEVENTH: Special meetings of the stockholders of the Corporation, for any
purpose or purposes, may only be called at any time by a majority of the entire
Board of Directors or by either the Chairman or the President of the
Corporation.
EIGHTH: No stockholder action may be taken except at an annual or special
meeting of stockholders of the Corporation and stockholders of the corporation
may not take any action by written consent in lieu of a meeting.
NINTH: Directors and officers, in exercising their respective powers with a
view to the interests of the Corporation, may consider:
(a) The interests of the Corporation's employees, suppliers, creditors
and customers;
(b) The economy of the state and nation;
(c) The interests of the community and of society; and
(d) The long-term as well as short-term interests of the Corporation
and its stockholders, including the possibility that these interests may be
best served by the continued independence of the Corporation.
This Article NINTH does not create or authorize any causes of action
against the corporation or its directors or officers.
TENTH: A. Subject to Section C of this Article TENTH, the Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that he is or was a director
or officer of the Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best interest
of the Corporation, or, with respect to any criminal action or proceeding, had
reasonable cause to believe his conduct was unlawful.
B. Subject to Section C of this Article TENTH, the Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interest of the Corporation; except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that
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the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
C. Any indemnification under this Article TENTH (unless ordered by a court)
shall be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section A or Section B of this Article TENTH, as the case may be. Such
determination shall be made (i) by a majority vote of directors who were not
parties to such action, suit or proceeding, even though less than a quorum, or
(ii) by a committee of such disinterested directors designated by a majority of
such disinterested directors, even though less than a quorum, or (iii) if there
are no such disinterested directors or if such disinterested directors so
direct, by independent legal counsel in a written opinion, or (iv) by the
stockholders. To the extent, however, that a director or officer of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding described in Section A or Section B of this Article
TENTH, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith, without the necessity of authorization
in the specific case.
D. For purposes of any determination under Section C of this Article TENTH,
a person shall be deemed to have acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
Corporation, and, with respect to any criminal action or proceeding, to have had
no reasonable cause to believe his conduct was unlawful, if his action is based
on the records or books of account of the Corporation or another enterprise, or
on information supplied to him by the officers of the Corporation or another
enterprise in the course of their duties, or on the advice of legal counsel for
the Corporation or another enterprise or on information or records given or
reports made to the Corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or another enterprise. The term "another
enterprise" as used in this Section D of Article TENTH shall mean any other
corporation or any partnership, joint venture, trust or other enterprise of
which such person is or was serving at the request of the Corporation as a
director, officer, employee or agent. The provisions of this Section D shall not
be deemed to be exclusive or to limit in any way the circumstances in which a
person may be deemed to have met the applicable standard of conduct set forth in
Sections A or B of this Article TENTH as the case may be.
E. Notwithstanding any contrary determination in the specific case under
Section C of this Article TENTH, and notwithstanding the absence of any
determination thereunder, any director or officer may apply to any court of
competent jurisdiction in the State of Delaware for indemnification to the
extent otherwise permissible under Sections A and B of this Article TENTH. The
basis of such indemnification by a court shall be a determination by such court
that indemnification of the director or officer is proper in the circumstances
because he has met the applicable standards of conduct set forth in Sections A
or B of this Article TENTH, as the case may be. Notice of any application for
indemnification pursuant to this Section E of Article TENTH shall be given to
the Corporation promptly upon the filing of such application.
F. Expenses incurred by a director or officer of the Corporation in
defending or investigating a threatened or pending action, suit or proceeding
shall be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Corporation as authorized in
this Article TENTH.
G. The indemnification and advancement of expenses provided by this Article
TENTH shall not be deemed exclusive of any other rights to which any person
seeking indemnification or advancement of expenses may be entitled under any
Bylaw, agreement, contract, vote of stockholders or disinterested directors or
pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, it being the policy of the
Corporation that indemnification of, and advancement of expenses to, the persons
specified in
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Sections A and B of this Article TENTH shall be made to the fullest extent
permitted by law. The provisions of this Article TENTH shall not be deemed to
preclude the indemnification of, and advancement of expenses to, any person who
is not specified in Sections A or B of this Article TENTH but whom the
Corporation has the power or obligation to indemnify under the provisions of the
General Corporation Law of the State of Delaware, or otherwise. The
indemnification provided by this Article TENTH shall continue as to a person who
has ceased to be a director or officer and shall inure to the benefit of the
heirs, executors and administrators of such person.
H. The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director or officer of the Corporation, or, while a
director or officer of the Corporation, is or was serving at the request of the
Corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power or the obligation to
indemnify him against such liability under the provisions of this Article TENTH.
I. For purposes of this Article TENTH, reference to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors or officers, so that any person who is or
was a director or officer of such constituent corporation, or is or was serving
at the request of such constituent corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article TENTH with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
ELEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of the GCL or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
the provisions of Section 279 of the GCL, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
TWELFTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Restated Certificate of Incorporation, in
the manner now or thereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
THIRTEENTH: No director of this Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law, (iii) under Section 174 of the GCL, or (iv) for any
transaction from which the director derived an improper personal benefit. If the
GCL is hereafter amended to authorize corporate action further limiting or
eliminating the personal liability of directors, then the liability of each
director of the Corporation shall be limited or eliminated to the fullest extent
permitted by the GCL as so amended from time to time.
FOURTEENTH: A. Any provisions herein to the contrary notwithstanding,
except as otherwise provided by law, not more than twenty percent (20%) of the
aggregate voting power of all shares outstanding entitled to vote on any matter
shall be at any time voted by or for the account of aliens or their
representatives, or by or
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for the account of a foreign government or representative thereof, or by or for
the account of any corporation organized under the laws of a foreign country.
The Board of Directors shall make such rules and regulations as it shall
deem necessary or appropriate to enforce the provisions of this paragraph A.
B. Except as otherwise provided by law, aliens, foreign governments, or
corporations organized under the laws of a foreign country, or the
representatives of such aliens, foreign governments, or corporations organized
under the laws of a foreign country shall not own, directly or through a third
party who holds the stock for the account of such alien, foreign government, or
corporation organized under the laws of a foreign country: (1) more than twenty
percent (20%) of the number of shares of outstanding stock of the Corporation,
or (2) shares representing more than twenty percent (20%) of the aggregate
voting power of all outstanding shares of voting stock of the Corporation.
Shares of stock shall not be transferable on the books of the Corporation
to aliens, foreign governments or corporations organized under the laws of
foreign countries, or to the representatives of, or persons holding for the
account of, such aliens, foreign governments or corporations organized under the
laws of foreign countries, unless, after giving effect to such transfer, the
aggregate number of shares of stock owned by or for the account of aliens,
foreign governments, and corporations organized under the laws of foreign
countries, and any representatives thereof, will not exceed twenty percent (20%)
of the number of shares of outstanding stock of the Corporation, and the
aggregate voting power of such shares will not exceed twenty percent (20%) of
the aggregate voting power of all outstanding shares of voting stock of the
Corporation.
If, notwithstanding the restriction on transfer set forth in this Article
FOURTEENTH, the aggregate number of shares of stock owned by or for the account
of aliens, foreign governments, and corporations organized under the laws of
foreign countries, exceeds twenty percent (20%) of the number of shares of
outstanding stock of the Corporation, or if the aggregate voting power of such
shares exceeds twenty percent (20%) of the aggregate voting power of all
outstanding shares of voting stock of the Corporation, the Corporation shall
have the right to redeem shares of all classes or capital stock, at their then
fair market value, on a pro rata basis, owned by or for the account of all
aliens, foreign governments, and corporations organized under the laws of
foreign countries, in order to reduce the number of shares and/or percentage of
voting power held by or for the account of aliens, foreign governments, and
corporations organized under the laws of foreign countries, and their
representatives to the maximum number or percentage allowed under this Restated
Certificate of Incorporation or as otherwise require by applicable federal law.
The Board Directors shall make such rules and regulations as it deems
necessary or appropriate to enforce the foregoing provisions of this Article
FOURTEENTH.
IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by Robert L. Johander, its Chief Executive Officer and attested by David
T. Quinby, its Secretary, this day of , 1998.
By:
--------------------------------------
Robert L. Johander
Chief Executive Officer
ATTEST:
- ---------------------------------------------------------
David T. Quinby
Secretary
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EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
V-L HOLDINGS CORP.
ARTICLE I.
OFFICES
SECTION 1. Registered Office. The registered office of V-L Holdings Corp.
(the "Corporation") shall be at Corporation Service Company, 1013 Centre Road,
in the City of Wilmington, County of New Castle, State of Delaware.
SECTION 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors of the Corporation (the "Board of Directors") may from time to time
determine.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
SECTION 1. Place of Meetings. Meetings of the stockholders for the election
of directors or for any other purpose shall be held at such time and place,
either within or without the State of Delaware as shall be designated from time
to time by the Board of Directors and stated in the notice of the meeting or in
a duly executed waiver of notice thereof.
SECTION 2. Annual Meetings. The annual meeting of stockholders shall be
held on such date and at such time as may be fixed by the Board of Directors and
stated in the notice of the meeting, for the purpose of electing directors and
for the transaction of only such other business as is properly brought before
the meeting in accordance with these Amended and Restated Bylaws (these
"Bylaws").
Written notice of an annual meeting stating the place, date and hour of the
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than ten nor more than sixty days before the date of the meeting.
To be properly brought before the annual meeting, business must be either
(i) specified in the notice of annual meeting (or any supplement or amendment
thereto) given by or at the direction of the Board of Directors, (ii) otherwise
brought before the annual meeting by or at the direction of the Board of
Directors, or (iii) otherwise properly brought before the annual meeting by a
stockholder. In addition to any other applicable requirements, for business to
be properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation not less than
sixty (60) days nor more than ninety (90) days prior to the meeting; provided,
however, that in the event that less than seventy (70) days notice or prior
public disclosure of the date of the annual meeting is given or made to
stockholders, notice by a stockholder, to be timely, must be received no later
than the close of business on the tenth (10th) day following the day on which
such notice of the date of the annual meeting was mailed or such public
disclosure was made, whichever first occurs. A stockholder's notice to the
Secretary shall set forth (a) as to each matter the stockholder proposes to
bring before the annual meeting (i) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, and (ii) any material interest of the
stockholder in such business, and (b) as to the stockholder giving the notice
(i) the name and record address of the stockholder and (ii) the class, series
and number of shares of capital stock of the Corporation which are beneficially
owned by the stockholder. Notwithstanding anything in these Bylaws to the
contrary, no business shall be conducted
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at the annual meeting except in accordance with the procedures set forth in this
Article II, Section 2. The officer of the Corporation presiding at an annual
meeting shall, if the facts warrant, determine and declare to the annual meeting
that business was not properly brought before the annual meeting in accordance
with the provisions of this Article II, Section 2, and if such officer should so
determine, such officer shall so declare to the annual meeting and any such
business not properly brought before the meeting shall not be transacted.
SECTION 3. Special Meetings. Unless otherwise prescribed by law or by the
Restated Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation"), special meetings of stockholders, for any purpose or purposes,
may only be called by a majority of the entire Board of Directors or by the
Chairman of the Board and Chief Executive Officer or the President and Chief
Operating Officer.
Written notice of a special meeting stating the place, date and hour of the
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than ten nor more than sixty days before the date of the meeting.
SECTION 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the holders of a
majority of the votes entitled to be cast by the stockholders entitled to vote
thereat, present in person or represented by proxy may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented by proxy. At such adjourned meeting at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally noticed. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder entitled to vote at the meeting.
SECTION 5. Voting. Unless otherwise required by law, the Certificate of
Incorporation, the rules or regulations of any stock exchange applicable to the
Corporation or these Bylaws, any question (other than the election of directors)
brought before any meeting of stockholders shall be decided by the vote of the
holders of a majority of the stock represented and entitled to vote thereat. At
all meetings of stockholders for the election of directors, a plurality of the
votes cast shall be sufficient to elect. Each stockholder represented at a
meeting of stockholders shall be entitled to cast one vote for each share of the
capital stock entitled to vote thereat held by such stockholder, unless
otherwise provided by the Certificate of Incorporation. Such votes may be cast
in person or by proxy but no proxy shall be voted after three years from its
date, unless such proxy provides for a longer period. The Board of Directors, in
its discretion, or the officer of the Corporation presiding at a meeting of
stockholders, in his discretion, may require that any votes cast at such meeting
shall be cast by written ballot.
SECTION 6. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
SECTION 7. Stock Ledger. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 6 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
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ARTICLE III.
DIRECTORS
SECTION 1. Number of Directors; Qualifications. The total number of persons
serving on the Board of Directors of the Corporation shall be 10, five of whom
shall be ValueVision Directors and five of whom shall be National Media
Directors (as such terms are defined below), all of which ValueVision Directors
and National Media Directors shall be spread as evenly as possible among the
Corporation's three classes of Directors; provided however, that if the Board of
Directors shall have elected a successor Chief Executive Officer to succeed the
interim Chief Executive Officer pursuant to Article III, Section 8 of these
bylaws, prior to the [Effective Time] and such officer takes office prior to
such date, then the Board of Directors of Parent shall be expanded to 11 members
and such officer shall be appointed to the Board of Directors to fill the
vacancy created by such expansion of the Board. Until [three years after the
Effective Time,] the Board of Directors of the Corporation as constituted
following each election of Directors shall consist of an equal number of
ValueVision Directors and National Media Directors. If, at any time during the
period referenced in the immediately preceding sentence, the number of
ValueVision Directors and National Media Directors serving, or that would be
serving following the next stockholders' meeting at which Directors are to be
elected, as Directors of the Corporation, would not be equal, then, subject to
the fiduciary duties of the Directors of the Corporation, the Board of Directors
shall immediately appoint to the Board of Directors and nominate for election at
the next stockholders' meeting at which Directors are to be elected, such person
or persons as may be requested by the remaining ValueVision Directors (if the
number of ValueVision Directors is, or would otherwise become, less than the
number of National Media Directors) or by the remaining National Media Directors
(if the number of National Media Directors is, or would otherwise become, less
than the number of ValueVision Directors) to ensure that there shall be an equal
number of ValueVision Directors and National Media Directors. The provisions of
the preceding sentence shall not apply in respect of any vacancies or
stockholders' meeting which take place after [three years after the Effective
Time.] The term "ValueVision Director" means (i) any person serving as a
director of ValueVision who was selected by the Board of Directors of
ValueVision on or prior to the [Effective Time] to serve as a Director of the
Corporation and (ii) any person who becomes a Director of the Corporation
pursuant to the second preceding sentence and who is designated by the
ValueVision Directors; and the term "National Media Director" means (i) any
person serving as a director of National Media who was selected by the Board of
Directors of National Media on or prior to the [Effective Time] to serve as a
Director of the Corporation, (ii) any person who becomes a Director of the
Corporation pursuant to the second preceding sentence and who is designated by
the National Media Directors and (iii) any person designated by any holder of
National Media's or Parent's Series B Convertible Preferred Stock outstanding
prior to or as of the [Effective Time].
SECTION 2. Nomination of Directors. Nominations of persons for election to
the Board of Directors of the Corporation at a meeting of stockholders of the
Corporation may be made at such meeting by or at the direction of the Board of
Directors, by any committee or persons appointed by the Board of Directors or by
any stockholder of the Corporation entitled to vote for the election of
directors at the meeting who complies with the notice procedures set forth in
this Article III, Section 2. Such nominations by any stockholder shall be made
pursuant to timely notice in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice shall be delivered to or mailed and received at
the principal executive offices of the Corporation not less than sixty (60) days
nor more than ninety (90) days prior to the meeting; provided however, that in
the event that less than seventy (70) days notice or prior public disclosure of
the date of the meeting is given or made to stockholders, notice by the
stockholder, to be timely, must be received no later than that the close of
business on the tenth (10th) day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made, whichever
first occurs. Such stockholder's notice to the Secretary shall set forth (i) as
to each person whom the stockholder proposes to nominate for election or
reelection as a director, (a) the name, age, business address and residence
address of the person, (b) the principal occupation or employment of the person,
(c) the class and number of shares of capital stock of the Corporation which are
beneficially owned by the person, and (d) any other information relating to the
person that is required to be disclosed in solicitations for proxies for
election of directors pursuant to the Rules and Regulations of the Securities
and Exchange Commission under Section 14 of the Securities Exchange Act of 1934,
as amended;
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and (ii) as to the stockholder giving the notice (a) the name and record address
of the stockholder and (b) the class and number of shares of capital stock of
the Corporation which are beneficially owned by the stockholder. The Corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the Corporation to determine the eligibility of such
proposed nominee to serve as a director of the Corporation. No person shall be
eligible for election as a director of the Corporation unless nominated in
accordance with the procedures set forth herein. The officer of the Corporation
presiding at an annual meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
SECTION 3. Meetings. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the Chairman of the Board or Chief Executive Officer or the President or Chief
Operating Officer or a majority of the entire Board of Directors. Notice thereof
stating the place, date and hour of the meeting shall be given to each director
either by mail not less than forty-eight (48) hours before the date of the
meeting, by telephone or telegram on twenty-four (24) hours notice, or on such
shorter notice as the person or persons calling such meeting may deem necessary
or appropriate in the circumstances.
SECTION 4. Quorum. Except as may be otherwise specifically provided by law,
the Certificate of Incorporation or these Bylaws, at all meetings of the Board
of Directors or any committee thereof, a majority of the entire Board of
Directors or such committee, as the case may be, shall constitute a quorum for
the transaction of business and the act of a majority of the directors present
at any meeting at which there is a quorum shall be the act of the Board of
Directors or such committee, as the case may be. If a quorum shall not be
present at any meeting of the Board of Directors or of any committee thereof, a
majority of the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
SECTION 5. Actions of Board of Directors. Unless otherwise provided by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 6. Meetings by Means of Conference Telephone. Unless otherwise
provided by the Certificate of Incorporation or these Bylaws, members of the
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Article III, Section 6 shall
constitute presence in person at such meeting.
SECTION 7. Committees. The Board of Directors may designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any disqualified member at
any meeting of any such committee. In the disqualification of a member of a
committee, and in the absence of a designation by the Board of Directors of an
alternate member to replace the disqualified member, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any disqualified
member. Any committee, to the extent allowed by law and provided in the
resolution establishing such committee, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation. Each committee shall keep regular minutes and
report to the Board of Directors when required.
SECTION 8. Executive Committee. Until [three years after the Effective
Time], the Executive Committee of the Corporation shall have responsibility for
(i) recommending to the full Board of Directors a
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successor Chief Executive Officer (and any successor thereto) to the Chief
Executive Officer identified in Article IV, Section 5 of these Bylaws and (ii)
shall have, to the fullest extent permitted by Delaware law, all of the powers,
duties and responsibilities (including, without limitation, those relating to
any and all issues relating to the Federal Communications Commission and any
assets subject to its regulation) of the entire Board of Directors of the
Corporation (except with respect to those actions that require a Supermajority
Vote as set forth and defined in Article VI of these Bylaws). Until [three years
after the Effective Time], the Executive Committee shall always be comprised of
three ValueVision Directors (who initially shall be Marshall S. Geller, Nicholas
M. Jaksich and Robert L. Johander) and two National Media directors (who
initially shall be Frederick S. Hammer and Robert N. Verratti).
SECTION 9. Compensation Committee. Until [three years after the Effective
Time], the Compensation Committee of the Corporation shall have responsibility
for (i) reviewing the compensation and employee benefit policies of the
Corporation, (ii) recommending to the Executive Committee base salary amounts
and incentive awards for all elected officers of the Corporation and setting
guidelines for the administration of all salaries, (iii) administering incentive
compensation and awarding stock options to employees under any stock option or
compensation plan of the Corporation and amending or modifying any provisions of
such stock option or compensation plan that may be amended or modified without
stockholder approval and (iv) supervising all administrative matters with
respect to the foregoing. Until [three years after the Effective Time], the
Compensation Committee shall always be comprised of two ValueVision Directors
and one National Media director, each of whom shall meet the requirements of
independence as established by the exchange or market on which the Corporation's
stock is then traded or quoted.
SECTION 10. Compensation. The directors may be paid their expenses, if any,
of attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated salary
as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
SECTION 11. Interested Directors. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the shareholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
shareholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof or the shareholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
ARTICLE IV.
OFFICERS
SECTION 1. General. The officers of the Corporation shall be elected by the
Board of Directors and shall consist of: a Chairman of the Board; a Chief
Executive Officer; a President; a Chief Operating Officer; a Secretary; and a
Treasurer. The Board of Directors, in its discretion, may also elect one or more
Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, Assistant
Secretaries, Assistant Treasurers, a Controller and such other officers as in
the judgment of the Board of Directors may be necessary or desirable. Any number
of offices may be held by the same person and more than one person may hold the
same office, unless otherwise prohibited by law, the Certificate of
Incorporation or these Bylaws. The officers of the
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Corporation need not be stockholders of the Corporation nor, except in the case
of the Chairman of the Board of Directors, need such officers be directors of
the Corporation.
SECTION 2. Election. The Board of Directors at its first meeting held after
each annual meeting of stockholders shall elect the officers of the Corporation
who shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board of
Directors; and all officers of the Corporation shall hold office until their
successors are chosen and qualified, or until their earlier resignation or
removal. Except as otherwise provided in this Article IV, any officer elected by
the Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors. The salaries of all
officers who are directors of the Corporation shall be fixed by the Board of
Directors.
SECTION 3. Voting Securities Owned by the Corporation. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be executed in the name of and on
behalf of the Corporation by the Chairman of the Board and Chief Executive
Officer, the President and Chief Operating Officer or any Vice President, and
any such officer may, in the name and on behalf of the Corporation, take all
such action as any such officer may deem advisable to vote in person or by proxy
at any meeting of security holders of any corporation in which the Corporation
may own securities and at any such meeting shall possess and may exercise any
and all rights and powers incident to the ownership of such securities and
which, as the owner thereof, the Corporation might have exercised and possessed
if present. The Board of Directors may, by resolution, from time to time confer
like powers upon any other person or persons.
SECTION 4. Chairman or Co-Chairmen of the Board. The Chairman or
Co-Chairmen of the Board shall be members of the Board of Directors, and shall
exercise and perform such duties and have such powers as may be prescribed by
the Board of Directors or these Bylaws, all in accordance with basic policies as
established by and subject to the oversight of the Board of Directors.
Initially, Robert L. Johander and Frederick S. Hammer shall serve as Co-Chairmen
of the Board and all references to the Chairman of the Board in these Bylaws or
the Certificate of Incorporation shall be deemed to be references to the Co-
Chairmen of the Board, each of whose consent shall be required to take or
authorize any action for which the consent of the Chairman of the Board is
required under these Bylaws or the Certificate of Incorporation.
SECTION 5. Chief Executive Officer. The Chief Executive Officer of the
Corporation shall supervise, coordinate and manage the Corporation's business
and activities and supervise, coordinate and manage its operating expenses and
capital allocation, shall have general authority to exercise all the powers
necessary for the Chief Executive Officer of the Corporation and shall perform
such other duties and have such other powers as may be prescribed by the Board
of Directors or these Bylaws, all in accordance with basic policies as
established by and subject to the oversight of the Board of Directors. In the
absence or disability of the Chairman of the Board, the duties of the Chairman
of the Board shall be performed and the Chairman of the Board's authority may be
exercised by the Chief Executive Officer and, in the event the Chief Executive
Officer is absent or disabled, such duties shall be performed and such authority
may be exercised by a director designated for such purpose by the Board of
Directors. Initially, Robert L. Johander shall serve as Chief Executive Officer
of the Corporation.
SECTION 6. President. The President shall supervise, coordinate and manage
the Corporation's business and activities and supervise, coordinate and manage
its operating expenses and capital allocation, shall have general authority to
exercise all the powers necessary for the President of the Corporation and shall
perform such other duties and have such other powers as may be prescribed by the
Board of Directors or these, all in accordance with basic policies as
established by and subject to the oversight of the Board of Directors, the
Chairman of the Board and the Chief Executive Officer. In the absence or
disability of the Chairman of the Board and Chief Executive Officer, the duties
of the Chairman of the Board shall be performed and the Chairman of the Board's
authority may be exercised by the President or Chief Operating Officer and, in
the event the President or Chief Operating Officer is absent or disabled, such
duties shall be performed and such authority may be exercised by a director
designated for such purpose by the Board of Directors. Initially, Nicholas M.
Jaksich shall serve as President of the Corporation.
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SECTION 7. Chief Operating Officer. The Chief Operating Officer shall
supervise, coordinate and manage the Corporation's business and activities and
supervise, coordinate and manage its operating expenses and capital allocation,
shall have general authority to exercise all the powers necessary for the Chief
Operating Officer of the Corporation and shall perform such other duties and
have such other powers as may be prescribed by the Board of Directors or these
Bylaws, all in accordance with basic policies as established by and subject to
the oversight of the Board of Directors and the Chairman of the Board and Chief
Executive Officer. In the absence or disability of the Chairman of the Board and
Chief Executive Officer, the duties of the Chairman of the Board shall be
performed and the Chairman of the Board's authority may be exercised by the
President or Chief Operating Officer and, in the event the President or Chief
Operating Officer is absent or disabled, such duties shall be performed and such
authority may be exercised by a director designated for such purpose by the
Board of Directors. Initially, Nicholas M. Jaksich shall serve as Chief
Operating Officer of the Corporation.
SECTION 8. Vice Presidents. At the request of the President or Chief
Operating Officer or in the absence of each of the Chairman of the Board, Chief
Executive Officer, President and Chief Operating Officer, or in the event of
their inability or refusal to act , the Vice President or the Vice Presidents if
there is more than one (in the order designated by the Board of Directors) shall
perform the duties of the Chairman of the Board, Chief Executive Officer,
President and/or Chief Operating Officer, and when so acting, shall have all the
powers of and be subject to all the restrictions upon such offices (other than
as Chairman of the Board). Each Vice President shall perform such other duties
and have such other powers as the Board of Directors from time to time may
prescribe. If there be no Vice President, the Board of Directors shall designate
the officer of the Corporation who, in the absence of each of the Chairman of
the Board, Chief Executive Officer, President and Chief Operating Officer or in
the event of the inability or refusal of such officers to act, shall perform the
duties of such offices (other than as Chairman of the Board), and when so
acting, shall have all the powers of and be subject to all the restrictions upon
such offices (other than as Chairman of the Board).
SECTION 9. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors, the
Chairman of the Board and Chief Executive Officer or the President and Chief
Operating Officer, under whose supervision the Secretary shall be. If the
Secretary shall be unable or shall refuse to cause to be given notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
if there be no Assistant Secretary, then the Board of Directors, the Chairman of
the Board and Chief Executive Officer or the President and Chief Operating
Officer may choose another officer to cause such notice to be given. The
Secretary shall have custody of the seal of the Corporation and the Secretary or
any Assistant Secretary, if there be one, shall have authority to affix the same
to any instrument requiring it and when so affixed, it may be attested by the
signature of the Secretary or by the signature of any such Assistant Secretary.
The Board of Directors may give general authority to any other officer to affix
the seal of the Corporation and to attest the affixing by his signature. The
Secretary shall see that all books, reports, statements, certificates and other
documents and records required by law to be kept or filed are properly kept or
filed, as the case may be.
SECTION 10. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death,
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resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the Corporation.
SECTION 11. Assistant Secretaries. Except as may be otherwise provided in
these Bylaws, Assistant Secretaries, if there be any, shall perform such duties
and have such powers as from time to time may be assigned to them by the Board
of Directors, the Chairman of the Board, the Chief Executive Officer, the
President or the Chief Operating Officer, any Vice President, if there be one,
or the Secretary, and in the absence of the Secretary or in the event of his
disability or refusal to act, shall perform the duties of the Secretary, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the Secretary.
SECTION 12. Assistant Treasurers. Assistant Treasurers, if there be any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the Chairman of the Board, the Chief
Executive Officer, the President, the Chief Operating Officer, any Vice
President, if there be one, or the Treasurer, and in the absence of the
Treasurer or in the event of his disability or refusal to act, shall perform the
duties of the Treasurer, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the Treasurer. If required by the Board of
Directors, an Assistant Treasurer shall give the Corporation a bond in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
SECTION 13. Controller. The Controller shall establish and maintain the
accounting records of the Corporation in accordance with generally accepted
accounting principles applied on a consistent basis, maintain proper internal
control of the assets of the Corporation and shall perform such other duties as
the Board of Directors, the Chairman of the Board, the Chief Executive Officer,
the President, the Chief Operating Officer or any Vice President of the
Corporation may prescribe.
SECTION 14. Other Officers. Such other officers as the Board of Directors
may choose shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors. The Board of Directors may
delegate to any other officer of the Corporation the power to choose such other
officers and to prescribe their respective duties and powers.
ARTICLE V.
STOCK
SECTION 1. Form of Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate signed, in the name of the Corporation
(i) by the Chairman of the Board and Chief Executive Officer, the President and
Chief Operating Officer or a Vice President and (ii) by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation, certifying the number of shares owned by him in the Corporation.
SECTION 2. Signatures. Any or all of the signatures on the certificate
may be a facsimile, including, but not limited to, signatures of officers of the
Corporation and countersignatures of a transfer agent or registrar. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue.
SECTION 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to
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give the Corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
SECTION 4. Transfers. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these Bylaws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the certificate
or by his attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be canceled before a new certificate shall be
issued.
ARTICLE VI.
SUPERMAJORITY PROVISIONS
SECTION 1. The Corporation and the Board of Directors shall not take (or
agree to take) any action regarding the following matters (except those matters
that relate to the Federal Communications Commission and any assets subject to
its regulation, any action regarding any such matters may be taken solely by the
Executive Committee as set forth in Article III, Section 8) without the
affirmative vote of a majority, plus one, of the total number of the then
authorized Board of Directors (a "Supermajority Vote"):
(a) The merger, consolidation or other business combination by the
Corporation into or with any other entity, other than any transaction
involving only the Corporation and/or one or more directly or indirectly
wholly owned subsidiaries of the Corporation; provided, however, that the
provisions of this paragraph shall not apply to transactions which have
been approved in accordance with subparagraphs (b) or (c) below, or which
would not otherwise require approval thereunder;
(b) The acquisition (other than an acquisition covered by subparagraph
(d) below) by the Corporation of any assets or properties (including stock
or other equity interests of a third party) in one transaction or a series
of related transactions, which assets or properties have an aggregate
purchase price or value in excess of $15 million;
(c) The disposition by the Corporation of any assets or properties
(including stock or other equity interests of a third party) in one
transaction or a series of related transactions having an aggregate value
in excess of $15 million;
(d) The issuance of shares of Common Stock (as defined in the
Certificate of Incorporation) or any warrants, options or other securities
convertible into or exchangeable for such shares of Common Stock (the
"Derivative Securities") for cash, assets or other property, if such
issuance would constitute in excess of 5% of the then outstanding shares of
Common Stock (calculated on a primary basis, but assuming the conversion or
exercise of any Derivative Securities so issued);
(e) The purchase, redemption or other acquisition for value of any
shares of Common Stock or any Derivative Securities, in each case, if such
purchase, redemption or other acquisition would constitute in excess of 5%
of the then outstanding shares of Common Stock (calculated on a primary
basis, but assuming the conversion or exercise of any Derivative Securities
so purchased, redeemed or acquired);
(f) The removal of any Chief Executive Officer and the appointment of
any successor thereto;
(g) Any actions resulting in the voluntary dissolution or liquidation
of the Corporation, or the initiation of any proceedings relating to the
voluntary bankruptcy of the Corporation;
(h) Any amendment, alteration or repeal of any provision of these
Bylaws or the Certificate of Incorporation, other than any amendment to or
modification of these Bylaws or the Certificate of Incorporation which is
necessary in order to implement any action which has been otherwise
approved by a Supermajority Vote;
(i) The establishment, creation or designation of any additional class
or series of capital stock or any security having a direct or indirect
equity participation in the Corporation;
(j) The declaration or payment of any dividend on, or the making of
any distribution to holders of, any equity securities of the Corporation;
and
(k) Any amendment or modification to Article III, Section 8 or Section
9.
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EXHIBIT 4.1
================================================================================
V-L HOLDINGS CORP.
and
[NAME OF RIGHTS AGENT]
as Rights Agent
Rights Agreement
Dated as of _____________, 1998
================================================================================
<PAGE> 2
RIGHTS AGREEMENT
Agreement, dated as of _____________, 1998, between V-L
HOLDINGS CORP., a Delaware corporation (the "Company"), and [NAME OF RIGHTS
AGENT], a ___________ corporation, as Rights Agent (the "Rights Agent").
RECITALS
The Board of Directors of the Company has authorized and
declared a dividend of one right (a "Right") for each Common Share (as defined
in Section 1.6) of the Company outstanding at the close of business on
____________, 1998 (the "Record Date") and has authorized the issuance of one
Right (subject to adjustment as provided herein) with respect to each Common
Share that shall become outstanding between the Record Date and the earliest of
the Distribution Date, the Redemption Date and the Final Expiration Date (as
such terms are defined in Sections 3.1 and 7.1), each Right initially
representing the right to purchase one one-hundredth of a share of Series A
Junior Participating Preferred Stock (the "Preferred Shares") of the Company
having the rights, powers and preferences set forth in the form of Certificate
of Designations attached hereto as Exhibit A, upon the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Rights
Agreement, the following terms have the meanings indicated:
1.1 "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 15% or more of the Common Shares
of the Company then outstanding but shall not include the Company, any
Subsidiary of the Company or any employee benefit plan of the Company or of any
Subsidiary of the Company or any entity holding shares of capital stock of the
Company for or pursuant to the terms of any such plan, in its capacity as an
agent or trustee for any such plan. Notwithstanding the foregoing, no Person
shall become an "Acquiring Person" as the result of an acquisition of Common
Shares by the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by such Person
to 15% or more of the Common Shares of the Company then outstanding; PROVIDED,
HOWEVER, that if a Person shall become the Beneficial Owner of 15% or more of
the Common Shares of the Company then outstanding solely by reason of share
purchases by the Company and shall, after such share purchases by the Company,
become the Beneficial Owner of any additional Common Shares of the Company, then
such Person shall be deemed to be an "Acquiring Person." Notwithstanding the
foregoing, if the Board of Directors of the Company determines in good faith
that a Person who would otherwise be an "Acquiring Person," as defined pursuant
to the foregoing provisions of this Section 1.1, has become such inadvertently,
and such Person divests as promptly as practicable a sufficient number of Common
Shares so that such Person would no longer be an Acquiring Person, as defined
pursuant to the foregoing provisions of this Section 1.1, then such Person shall
not be deemed to be an "Acquiring Person" at any time for any purposes of this
Agreement.
1
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1.2 "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations, as in effect on the date of this Rights Agreement, under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
1.3 A Person shall be deemed the "Beneficial Owner" of and
shall be deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's
Affiliates or Associates beneficially owns, directly or indirectly (as
determined pursuant to Rule 13d-3 of the General Rules and Regulations
under the Exchange Act as in effect on the date of this Agreement);
(ii) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has (A) the right to
acquire (whether such right is exercisable immediately, or only after
the passage of time, compliance with regulatory requirements,
fulfillment of a condition or otherwise) pursuant to any agreement,
arrangement or understanding, whether or not in writing (other than
customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities), or
upon the exercise of conversion rights, exchange rights, rights (other
than the Rights), warrants or options, or otherwise; PROVIDED, HOWEVER,
that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, (1) securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such
Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange or (2) securities which such Person
or any of such Person's Affiliates or Associates may acquire, does or
do acquire or may be deemed to have the right to acquire, pursuant to
any merger or other acquisition agreement between the Company and such
Person (or one or more of his Affiliates or Associates) if such
agreement has been approved by the Board of Directors of the Company
prior to such Person's becoming an Acquiring Person; or (B) the right
to vote pursuant to any agreement, arrangement or understanding
(whether or not in writing); PROVIDED, HOWEVER, that a Person shall not
be deemed the Beneficial Owner of, or to beneficially own, any security
under this clause (B) if the agreement, arrangement or understanding to
vote such security (1) arises solely from a revocable proxy or consent
given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
rules and regulations of the Exchange Act and (2) is not also then
reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof)
with which such Person or any of such Person's Affiliates or Associates
has any agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group members with
respect to a bona fide public offering of securities), whether or not
in writing, for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy as described in the proviso to Section
1.3(ii)(B)) or disposing of any securities of the Company.
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1.4 "Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
1.5 "close of business" on any given date shall mean 5:00
p.m., New York City time, on such date; PROVIDED, HOWEVER, that if such date is
not a Business Day it shall mean 5:00 p.m., New York City time, on the next
succeeding Business Day.
1.6 "Common Shares" when used with reference to the Company
shall mean the shares of common stock, par value $.01 per share, of the Company.
"Common Shares" when used with reference to any Person other than the Company
shall mean the capital stock with the greatest voting power, or the equity
securities or other equity interest having power to control or direct the
management, of such other Person or, if such Person is a Subsidiary of another
Person, the Person or Persons which ultimately control such first-mentioned
Person, and which has issued and outstanding such capital stock, equity
securities or equity interest.
1.7 "Continuing Director" shall mean (i) any member of the
Board of Directors of the Company, while such Person is a member of the Board,
who is not an Acquiring Person, or an Affiliate or Associate of an Acquiring
Person, or an employee, director, representative, nominee or designee of any
Acquiring Person or of any such Affiliate or Associate, and was a member of the
Board prior to the time that any Person becomes an Acquiring Person or (ii) any
Person (during such period in which such Person is a member of the Board) who,
after the time that any Person becomes an Acquiring Person, becomes a member of
the Board and who is not an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, or an employee, director, representative, nominee or designee
of an Acquiring Person or of any such Affiliate or Associate, if such Person's
nomination for election or election to the Board is recommended or approved by a
majority of the Continuing Directors.
1.8 "Person" shall mean any individual, partnership, joint
venture, limited liability company, firm, corporation, unassociated association,
trust or other entity, and shall include any successor (by merger or otherwise)
of such entity.
1.9 "Shares Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, the filing of a report pursuant to Section 13(d) of the
Exchange Act or pursuant to a comparable successor statute) by the Company or an
Acquiring Person that an Acquiring Person has become such or that discloses
information which reveals the existence of an Acquiring Person.
1.10 "Subsidiary" of any Person shall mean any corporation or
other entity of which a majority of the voting power of the voting equity
securities or equity interests is owned, of record or beneficially, directly or
indirectly, by such Person.
1.11 A "Trigger Event" shall be deemed to have occurred upon
any Person becoming an Acquiring Person. Notwithstanding the foregoing, a
Trigger Event shall not be deemed to have occurred if the event causing the 15%
ownership threshold to be crossed is an acquisition of Common Shares made
pursuant to a cash tender offer made pursuant to the rules and regulations under
the Exchange Act and filed with the Securities and Exchange Commission on
Schedule 14D-1 (or any successor form) for all outstanding Common Shares not
beneficially owned by the Person making such offer (or by its Affiliates or
Associates) so long as the Board of Directors of the Company determines,
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after receiving advice from one or more investment banking firms, that such
offer is (i) at a price and on terms which are fair to stockholders (taking into
account all factors which such members of the Board deem relevant, including
without limitation, prices which could reasonably be achieved if the Company or
its assets were sold on an orderly basis designed to realize maximum value) and
(ii) otherwise in the best interests of the Company and its stockholders;
PROVIDED, HOWEVER, that there must be Continuing Directors then in office and
any such determination shall require the concurrence of a majority of such
Continuing Directors.
1.12 The following terms shall have the meanings defined for
such terms in the Sections set forth below:
Term Section
---- -------
Adjustment Shares 11.1.2
common stock equivalent 11.1.3
Company Recitals
current per share market price 11.4
Current Value 11.1.3
Distribution Date 3.1
equivalent preferred stock 11.2
Exchange Act 1.2
Exchange Consideration 27
Final Expiration Date 7.1
Nasdaq 9
Preferred Shares Recitals
Purchase Price 4
Record Date Recitals
Redemption Date 7.1
Redemption Price 23.1
Right Recitals
Right Certificate 3.1
Rights Agent Recitals
Security 11.4
Spread 11.1.3
Substitution Period 11.1.3
Summary of Rights 3.2
Trading Day 11.4
Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of the
Rights (who, in accordance with Section 3, shall prior to the Distribution Date
also be the holders of the Common Shares) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable. In the event the Company appoints one or more co-Rights
Agents, the respective duties of the Rights Agent and any coRights Agent shall
be as the Company shall determine. Contemporaneously with such appointment, if
any, the Company shall notify the Rights Agent thereof.
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Section 3. Issuance of Right Certificates.
3.1 Rights Evidenced by Share Certificates. Until the earlier
of (i) the tenth day after the Shares Acquisition Date or (ii) the tenth day
after the date of the commencement of, or first public announcement of the
intent of any Person (other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or of any Subsidiary of the Company or any
entity holding shares of capital stock of the Company for or pursuant to the
terms of any such plan, in its capacity as an agent or trustee for any such
plan) to commence, a tender or exchange offer the consummation of which would
result in any Person becoming the Beneficial Owner of Common Shares aggregating
15% or more of the then outstanding Common Shares of the Company (the earlier of
(i) and (ii) being herein referred to as the "Distribution Date," whether or not
either such date occurs prior to the Record Date), (x) the Rights (unless
earlier expired, redeemed or terminated) will be evidenced (subject to the
provisions of Section 3.2) by the certificates for Common Shares registered in
the names of the holders thereof (which certificates for Common Shares shall
also be deemed to be Right Certificates) and not by separate certificates, and
(y) the Rights (and the right to receive certificates therefor) will be
transferable only in connection with the transfer of the underlying Common
Shares. The preceding sentence notwithstanding, prior to the Distribution Date
specified therein (or such later Distribution Date as the Board of Directors of
the Company may select pursuant to this sentence), the Board of Directors of the
Company may postpone, one or more times, the Distribution Date beyond the
earlier of the dates set forth in such preceding sentence; PROVIDED, HOWEVER,
that there must be Continuing Directors then in office and any such postponement
shall require the approval of at least a majority of such Continuing Directors.
As soon as practicable after the Distribution Date, the Rights Agent will send,
by first-class, postage-prepaid mail, to each record holder of Common Shares as
of the close of business on the Distribution Date, at the address of such holder
shown on the records of the Company, one or more certificates for Rights, in
substantially the form of Exhibit B hereto (a "Right Certificate"), evidencing
one Right (subject to adjustment as provided herein) for each Common Share so
held. As of the Distribution Date, the Rights will be evidenced solely by such
Right Certificates.
3.2 Summary of Rights. On the Record Date or as soon as
practicable thereafter, the Company will send or cause to be sent a copy of a
Summary of Rights to Purchase Preferred Shares, in substantially the form
attached hereto as Exhibit C (the "Summary of Rights"), by first-class,
postage-prepaid mail, to each record holder of Common Shares as of the close of
business on the Record Date at the address of such holder shown on the records
of the Company. With respect to certificates for Common Shares outstanding as of
the close of business on the Record Date, until the Distribution Date (or the
earlier Redemption Date or Final Expiration Date), the Rights will be evidenced
by such certificates for Common Shares registered in the names of the holders
thereof together with a copy of the Summary of Rights and the registered holders
of the Common Shares shall also be registered holders of the associated Rights.
Until the Distribution Date (or the earlier Redemption Date or Final Expiration
Date), the surrender for transfer of any certificate for Common Shares
outstanding at the close of business on the Record Date, with or without a copy
of the Summary of Rights, shall also constitute the transfer of the Rights
associated with the Common Shares represented thereby.
3.3 New Certificates After Record Date. Certificates for
Common Shares which become outstanding (whether upon issuance out of authorized
but unissued Common Shares, issuance out of treasury or transfer or exchange of
outstanding Common Shares) after the Record Date but prior to the earliest of
the Distribution Date, the Redemption Date or the Final Expiration Date, shall
be deemed also to be certificates for Rights, and shall have impressed, printed,
stamped, written or otherwise affixed onto them the following legend:
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This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between V-L Holdings
Corp. and [NAME OF RIGHTS AGENT], dated as of _____________, 1998, as
the same may be amended from time to time (the "Rights Agreement"), the
terms of which are hereby incorporated herein by reference and a copy
of which is on file at the principal executive offices of V-L Holdings
Corp. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. V-L Holdings Corp.
will mail to the holder of this certificate a copy of the Rights
Agreement without charge after receipt of a written request therefor.
AS DESCRIBED IN THE RIGHTS AGREEMENT, RIGHTS WHICH ARE HELD BY OR HAVE
BEEN HELD BY ACQUIRING PERSONS OR ASSOCIATES OR AFFILIATES THEREOF (AS
DEFINED IN THE RIGHTS AGREEMENT) SHALL BECOME NULL AND VOID.
With respect to such certificates containing the foregoing legend, until the
Distribution Date (or the earlier Redemption Date or Final Expiration Date), the
Rights associated with the Common Shares represented by such certificates shall
be evidenced by such certificates (together with a copy of the Summary of
Rights), and the surrender for transfer of any such certificates shall also
constitute the transfer of the Rights associated with the Common Shares
represented thereby. In the event that the Company purchases or acquires any
Common Shares after the Record Date but prior to the Distribution Date, any
Rights associated with such Common Shares shall be deemed cancelled and retired
so that the Company shall not be entitled to exercise any Rights associated with
the Common Shares which are no longer outstanding.
Section 4. Form of Right Certificates. The Right Certificates
(and the forms of election to purchase Preferred Shares, certification and
assignment to be printed on the reverse thereof) shall be substantially the same
as Exhibit B hereto and may have such marks of identification or designation and
such legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Rights
Agreement, or as may be required to comply with any applicable law or with any
rule or regulation made pursuant thereto or with any rule or regulation of any
stock exchange or trading system on which the Rights may from time to time be
listed or quoted, or to conform to usage. Subject to the terms and conditions
hereof, the Right Certificates, whenever issued, shall be dated as of the Record
Date, and shall show the date of countersignature by the Rights Agent, and on
their face shall entitle the holders thereof to purchase such number of one
one-hundredths of a Preferred Share as shall be set forth therein at the price
per one one-hundredth of a Preferred Share set forth therein (the "Purchase
Price"), but the number of such one one-hundredths of a Preferred Share and the
Purchase Price shall be subject to adjustment as provided herein.
Section 5. Countersignature and Registration. The Right
Certificates shall be executed on behalf of the Company by its Chairman of the
Board of Directors, the Chief Executive Officer, President or any Vice
President, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal or a facsimile thereof which shall be attested by the
Secretary or any Assistant Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned by
an authorized signatory of the Rights Agent, but it shall not be necessary for
the same signatory to countersign all of the Right Certificates hereunder. No
Right Certificate shall be valid for any purpose unless so countersigned. In
case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent,
and issued and delivered by the Company with the same force and effect as though
the person who signed such Right Certificates had not ceased to be such officer
of the
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Company; and any Right Certificate may be signed on behalf of the Company by any
person who, at the actual date of the execution of such Right Certificate, shall
be a proper officer of the Company to sign such Right Certificate, although at
the date of the execution of this Rights Agreement any such person was not such
an officer.
Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office in [New York], books for registration
and transfer of the Right Certificates issued hereunder. Such books shall show
the names and addresses of the respective holders of the Right Certificates, the
number of Rights evidenced on its face by each of the Right Certificates, the
certificate number of each of the Right Certificates and the date of each of the
Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of
Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
Subject to the provisions of Section 11.1.2 and Section 14, at any time after
the close of business on the Distribution Date, and at or prior to the close of
business on the earlier of the Redemption Date or the Final Expiration Date, any
Right Certificate or Right Certificates (other than Right Certificates
representing Rights that have become void pursuant to Section 11.1.2 or that
have been exchanged pursuant to Section 27) may be transferred, split up or
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of one one-hundredths
of a Preferred Share as the Right Certificate or Right Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up or combine or exchange any Right Certificate shall make such
request in writing delivered to the Rights Agent, and shall surrender, together
with any required form of assignment and certificate duly completed, the Right
Certificate or Right Certificates to be transferred, split up or combined or
exchanged at the office of the Rights Agent designated for such purpose. Neither
the Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any such surrendered Right
Certificate or Right Certificates until the registered holder shall have
completed and signed the certificate contained in the form of assignment on the
reverse side of such Right Certificate or Right Certificates and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent shall countersign and
deliver to the person entitled thereto a Right Certificate or Right
Certificates, as the case may be, as so requested. The Company may require
payment from the holders of Right Certificates of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any transfer,
split up or combination or exchange of such Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered owner in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights.
7.1 Exercise of Rights. Subject to Section 11.1.3 and except
as otherwise provided herein, the registered holder of any Right Certificate may
exercise the Rights evidenced thereby in whole or in part at any time after the
Distribution Date upon surrender of the Right Certificate, with the form of
election to purchase and certification on the reverse side thereof duly
executed, to the Rights Agent
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at the office of the Rights Agent designated for such purpose, together with
payment of the Purchase Price for each one one-hundredth of a Preferred Share as
to which the Rights are exercised, at or prior to the earliest of (i) the close
of business on ______________, 2008 (the "Final Expiration Date"), (ii) the time
at which the Rights are redeemed as provided in Section 23 (the "Redemption
Date"), (iii) the closing of any merger or other acquisition transaction
involving the Company pursuant to an agreement of the type described in Section
1.3(ii)(A)(2), at which time the Rights are deemed terminated, or (iv) the time
at which the Rights are exchanged as provided in Section 27.
7.2 Purchase Price. The Purchase Price for each one
one-hundredth of a Preferred Share pursuant to the exercise of a Right shall
initially be $________, shall be subject to adjustment from time to time as
provided in Sections 11, 13 and 26 and shall be payable in lawful money of the
United States of America in accordance with paragraph 7.3.
7.3 Payment Procedures. Upon receipt of a Right Certificate
representing exercisable Rights, with the form of election to purchase and
certification duly executed, accompanied by payment of the Purchase Price for
the shares to be purchased and an amount equal to any applicable transfer tax
required to be paid by the holder of such Right Certificate in accordance with
Section 9, by certified or cashier's check or money order payable to the order
of the Company, the Rights Agent shall thereupon promptly (i)(A) requisition
from any transfer agent of the Preferred Shares (or make available, if the
Rights Agent is the transfer agent) certificates for the number of Preferred
Shares to be purchased and the Company hereby irrevocably authorizes its
transfer agent to comply with all such requests, or (B) if the Company shall
have elected to deposit the total number of Preferred Shares issuable upon
exercise of the Rights hereunder with a depositary agent, requisition from the
depositary agent depositary receipts representing such number of one
one-hundredths of a Preferred Share as are to be purchased (in which case
certificates for the Preferred Shares represented by such receipts shall be
deposited by the transfer agent with the depositary agent) and the Company
hereby directs the depositary agent to comply with all such requests, (ii) when
appropriate, requisition from the Company the amount of cash to be paid in lieu
of the issuance of fractional shares in accordance with Section 14, (iii)
promptly after receipt of such certificates or depositary receipts, cause the
same to be delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt, promptly deliver such cash to
or upon the order of the registered holder of such Right Certificate. In the
event that the Company is obligated to issue other securities of the Company,
pay cash and/or distribute other property pursuant to Section 11.1.3, the
Company will make all arrangements necessary so that such other securities, cash
and/or other property are available for distribution by the Rights Agent, if and
when appropriate.
7.4 Partial Exercise. In case the registered holder of any
Right Certificate shall exercise less than all the Rights evidenced thereby, a
new Right Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to the registered
holder of such Right Certificate or to his duly authorized assigns, subject to
the provisions of Section 14.
7.5 Full Information Concerning Ownership. Notwithstanding
anything in this Rights Agreement to the contrary, neither the Rights Agent nor
the Company shall be obligated to undertake any action with respect to a
registered holder of Rights upon the occurrence of any purported exercise as set
forth in this Section 7 unless the certificate contained in the form of election
to purchase set forth on the reverse side of the Right Certificate surrendered
for such exercise shall have been duly completed and signed by the registered
holder thereof and the Company shall have been provided with such additional
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evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates.
All Right Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange shall, if surrendered to the Company or to any of
its agents, be delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no
Right Certificates shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Rights Agreement. The Company shall deliver to
the Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all cancelled Right Certificates to the Company, or shall, at the written
request of the Company, destroy such cancelled Right Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock. The
Company covenants and agrees that from and after the Distribution Date it will
cause to be reserved and kept available out of its authorized and unissued
Preferred Shares (and, following the occurrence of a Trigger Event, out of its
authorized and unissued Common Shares or other securities or out of its shares
held in its treasury) the number of Preferred Shares (and, following the
occurrence of a Trigger Event, Common Shares and/or other securities) that will
be sufficient to permit the exercise in full of all outstanding Rights.
So long as the Preferred Shares (and, following the occurrence
of a Trigger Event, Common Shares and/or other securities) issuable upon the
exercise of Rights may be listed on any national securities exchange or traded
in the over-the-counter market and quoted on the National Association of
Securities Dealers, Inc. Automated Quotation System ("Nasdaq"), the Company
shall use its best efforts to cause, from and after such time as the Rights
become exercisable, all shares reserved for such issuance to be listed on such
exchange or so traded in such over-the-counter market, upon official notice of
issuance upon such exercise.
The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Preferred Shares (and, following
the occurrence of a Trigger Event, Common Shares and/or other securities)
delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such shares (subject to payment of the Purchase Price), be duly
and validly authorized and issued and fully paid and nonassessable shares.
The Company further covenants and agrees that it will pay when
due and payable any and all Federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Right Certificates
or of any Preferred Shares (or Common Shares and/or other securities, as the
case may be) upon the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax which may be payable in respect of any transfer
or delivery of Right Certificates to a person other than, or the issuance or
delivery of certificates for the Preferred Shares (or Common Shares and/or other
securities, as the case may be) in a name other than that of, the registered
holder of the Right Certificate evidencing Rights surrendered for exercise or to
issue or deliver any certificates for Preferred Shares (or Common Shares and/or
other securities, as the case may be) in a name other than that of the
registered holder upon the exercise of any Rights until any such tax shall have
been paid (any such tax being payable by the holder of such Right Certificate at
the time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
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Section 10. Preferred Shares Record Date. Each person in whose
name any certificate for Preferred Shares (or Common Shares and/or other
securities, as the case may be) is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Preferred
Shares (or Common Shares and/or other securities, as the case may be)
represented thereby on, and such certificate shall be dated, the date upon which
the Right Certificate evidencing such Rights was duly surrendered and payment of
the Purchase Price (and any applicable transfer taxes) was made; PROVIDED,
HOWEVER, that if the date of such surrender and payment is a date upon which the
Preferred Shares (or Common Shares and/or other securities, as the case may be)
transfer books of the Company are closed, such person shall be deemed to have
become the record holder of such shares (fractional or otherwise) on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Shares (or Common Shares and/or other securities, as the case may be)
transfer books of the Company are open.
Section 11. Adjustment of Purchase Price, Number of Shares or
Number of Rights. The Purchase Price, the number of shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
11.1 Post Execution Events.
11.1.1 Corporate Dividends, Reclassifications, Etc. In the
event the Company shall at any time after the date of this Rights Agreement (A)
declare a dividend on the Preferred Shares payable in Preferred Shares, (B)
subdivide the outstanding Preferred Shares, (C) combine the outstanding
Preferred Shares into a smaller number of shares or (D) issue any shares of its
capital stock in a reclassification of the Preferred Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11.1, the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of capital
stock issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock which, if such Right had
been exercised immediately prior to such date and at a time when the Preferred
Shares transfer books of the Company were open, he would have owned upon such
exercise and been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification. If an event occurs which would require an
adjustment under both Section 11.1.1 and Section 11.1.2, the adjustment provided
for in this Section 11.1.1 shall be in addition to, and shall be made prior to,
the adjustment required pursuant to, Section 11.1.2.
11.1.2 Acquiring Person Events; Triggering Events. Subject to
Sections 23.1 and 27 of this Agreement, in the event
(A) any Acquiring Person or any Associate or
Affiliate of any Acquiring Person, at any time after the date of this
Rights Agreement, directly or indirectly, shall merge into the Company
or otherwise combine with the Company and the Company shall be the
continuing or surviving corporation of such merger or combination and
the Common Shares of the Company shall remain outstanding and not
changed into or exchanged for stock or other securities of any other
Person or the Company or cash or any other property, or
(B) that a Trigger Event occurs,
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then, from and after the first occurrence of such event, each holder of a Right,
except as provided below, shall thereafter have a right to receive, upon
exercise thereof at a price per Right equal to the then current Purchase Price
multiplied by the number of one one-hundredths of a Preferred Share for which a
Right is then exercisable (without giving effect to this Section 11.1.2), in
accordance with the terms of this Rights Agreement, such number of Common Shares
as shall equal the result obtained by (x) multiplying the then current Purchase
Price by the then number of one one-hundredths of a Preferred Share for which a
Right is then exercisable (without giving effect to this Section 11.1.2) and (y)
dividing that product by 50% of the current per share market price of the Common
Shares (determined pursuant to Section 11.4) on the first of the date of the
occurrence of, or the date of the first public announcement of, one of the
events listed above in this Section 11.1.2 (the "Adjustment Shares"); PROVIDED,
HOWEVER, that if the transaction that would otherwise give rise to the foregoing
adjustment is also subject to the provisions of Section 13, then only the
provisions of Section 13 shall apply and no adjustment shall be made pursuant to
this Section 11.1.2; PROVIDED, FURTHER, that nothing contained in this Section
11.1.2 shall limit or otherwise diminish the power of the Board of Directors
(or, if applicable, the Continuing Directors) to postpone the Distribution Date
pursuant to Section 3.1 or to extend the period during which the Rights may be
redeemed pursuant to Section 23.1; PROVIDED, FURTHER, that the Purchase Price
and the number of Adjustment Shares shall thereafter be subject to further
adjustment pursuant to Section 11.1.1 hereof. Notwithstanding the foregoing,
upon the occurrence of either of the events listed above in this Section 11.1.2,
any Rights that are or were acquired or beneficially owned by (1) an Acquiring
Person or any Associate or Affiliate thereof, (2) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee after
the Acquiring Person becomes such, or (3) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Company has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect avoidance
of this Section 11.1.2, shall become void, and any holder (whether or not such
holder is an Acquiring Person or an Associate or Affiliate of an Acquiring
Person) of such Rights shall thereafter have no right to exercise such Rights
under any provision of this Rights Agreement or otherwise. The Company shall not
enter into any transaction of the type described in this Section 11.1.2 if at
the time of such transaction there are any rights, warrants, instruments or
securities outstanding or any arrangements which, as a result of the
consummation of such transaction, would eliminate or substantially diminish the
benefits intended to be afforded by the Rights. Any Right Certificate issued
pursuant to Section 3 or Section 22 that represents Rights beneficially owned
by: (1) an Acquiring Person or any Associate or Affiliate thereof, (2) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such, or (3) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of this Section 11.1.2, and any Right
Certificate issued pursuant to Section 6, 7.4 or 22 or this Section 11 upon
transfer, exchange, replacement or adjustment of any other Right Certificate
referred to in this sentence, shall contain the following legend (PROVIDED,
HOWEVER, that the Rights Agent shall not be responsible for affixing such legend
unless it has actual
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knowledge as to the foregoing circumstances or the Company has notified the
Rights Agent in writing thereof):
THE RIGHTS REPRESENTED BY THIS RIGHT CERTIFICATE ARE HELD OR
HAVE BEEN HELD BY A PERSON WHO IS OR WAS AN ACQUIRING PERSON
OR AN AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON OR A
NOMINEE THEREOF. THIS RIGHT CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY HAVE BECOME NULL AND VOID AS SPECIFIED IN
SECTION 11.1.2 OF THE RIGHTS AGREEMENT.
The Company shall use all reasonable efforts to insure that
the provisions of this Section 11.1.2 are complied with, but shall have no
liability to any holder of Right Certificates or other Person as a result of its
failure to make any determinations with respect to any Acquiring Person or its
Affiliates, Associates or transferees hereunder.
11.1.3 Insufficient Shares. In the event that upon the
occurrence of one or more of the events listed in Section 11.1.2 above there
shall not be sufficient Common Shares authorized but unissued, or held by the
Company as treasury shares, to permit the exercise in full of the Rights in
accordance with the foregoing Section 11.1.2, the Company shall take all such
action as may be necessary to authorize additional Common Shares for issuance
upon exercise of the Rights, PROVIDED, HOWEVER, that if the Company determines
that it is unable to cause the authorization of a sufficient number of
additional Common Shares, then, in the event the Rights become exercisable, the
Company, with respect to each Right and to the extent necessary and permitted by
applicable law and any agreements or instruments in effect on the date hereof to
which it is a party, shall: (A) determine the excess of (1) the value of the
Adjustment Shares issuable upon the exercise of a Right (the "Current Value"),
over (2) the Purchase Price (such excess, the "Spread") and (B) with respect to
each Right, make adequate provision to substitute for the Adjustment Shares,
upon payment of the applicable Purchase Price, (1) cash, (2) a reduction in the
Purchase Price, (3) Common Shares or other equity securities of the Company
(including, without limitation, shares, or units of shares, of preferred stock
which the Board of Directors of the Company has deemed to have the same value as
Common Shares) (each such share of preferred stock constituting a "common stock
equivalent")), (4) debt securities of the Company, (5) other assets or (6) any
combination of the foregoing having an aggregate value equal to the Current
Value, where such aggregate value has been determined by the Board of Directors
of the Company based upon the advice of a nationally recognized investment
banking firm selected by the Board of Directors of the Company; PROVIDED,
HOWEVER, that if the Company shall not have made adequate provision to deliver
value pursuant to clause (B) above within thirty (30) days following the first
occurrence of one of the events listed in Section 11.1.2 above, then the Company
shall be obligated to deliver, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, Common Shares (to the extent
available) and then, if necessary, cash, which in the aggregate are equal to the
Spread. If the Board of Directors of the Company shall determine in good faith
that it is unlikely that sufficient additional Common Shares could be authorized
for issuance upon exercise in full of the Rights, the thirty (30) day period set
forth above may be extended and re-extended to the extent necessary, but not
more than ninety (90) days following the first occurrence of one of the events
listed in Section 11.1.2 above, in order that the Company may seek stockholder
approval for the authorization of such additional shares (such period as may be
extended, the "Substitution Period"). To the extent that the Company determines
that some action need be taken pursuant to the first and/or second sentences of
this Section 11.1.3, the Company (x) shall provide that such action shall apply
uniformly to all outstanding Rights, and (y) may suspend the exercisability of
the Rights until the expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the appropriate form of
distribution to be made
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pursuant to such first sentence and to determine the value thereof. In the event
of any such suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended as well as
a public announcement at such time as the suspension is no longer in effect. For
purposes of this Section 11.1.3, the value of a Common Share shall be the
current per share market price (as determined pursuant to Section 11.4) on the
date of the first occurrence of one of the events listed in Section 11.1.2 above
and the value of any "common stock equivalent" shall be deemed to have the same
value as the Common Shares on such date.
11.2 Dilutive Rights Offering. In case the Company shall fix a
record date for the issuance of rights, options or warrants to all holders of
Preferred Shares entitling them (for a period expiring within 45 calendar days
after such record date) to subscribe for or purchase Preferred Shares (or
securities having the same rights, privileges and preferences as the Preferred
Shares ("equivalent preferred stock")) or securities convertible into Preferred
Shares or equivalent preferred stock at a price per share of Preferred Shares or
per share of equivalent preferred stock (or having a conversion or exercise
price per share, if a security convertible into or exercisable for Preferred
Shares or equivalent preferred stock) less than the current per share market
price of the Preferred Shares (as defined in Section 11.4) on such record date,
the Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of Preferred Shares
outstanding on such record date plus the number of Preferred Shares which the
aggregate offering price of the total number of Preferred Shares and/or
equivalent preferred stock to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current per share market price and the denominator of which shall be the
number of Preferred Shares outstanding on such record date plus the number of
additional Preferred Shares and/or equivalent preferred stock to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription price may be paid
in a consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights. Preferred Shares owned by or held for the account of the
Company or any Subsidiary of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such rights or
warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date had not been
fixed.
11.3 Distributions. In case the Company shall fix a record
date for the making of a distribution to all holders of the Preferred Shares
(including any such distribution made in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation) of
evidences of indebtedness, cash, securities or assets (other than a regular
periodic cash dividend at a rate not in excess of 125% of the rate of the last
regular periodic cash dividend theretofore paid or, in case regular periodic
cash dividends have not theretofore been paid, at a rate not in excess of 50% of
the average net income per share of the Company for the four quarters ended
immediately prior to the payment of such dividend, or a dividend payable in
Preferred Shares (which dividend, for purposes of this Agreement, shall be
subject to the provisions of Section 11.1.1(A) hereof)) or convertible
securities, or subscription rights or warrants (excluding those referred to in
Section 11.2), the Purchase Price to be in effect after such record date shall
be determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the current per
share market price of the Preferred Shares (as defined in Section 11.4) on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be
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<PAGE> 15
described in a statement filed with the Rights Agent) of the portion of the
cash, assets, securities or evidences of indebtedness so to be distributed or of
such subscription rights or warrants applicable to one Preferred Share and the
denominator of which shall be such current per share market price of the
Preferred Shares. Such adjustments shall be made successively whenever such a
record date is fixed; and in the event that such distribution is not so made,
the Purchase Price shall again be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed.
11.4 Current Per Share Market Value.
11.4.1 General. For the purpose of any computation hereunder,
the "current per share market price" of any security (a "Security" for the
purpose of this Section 11.4.1) on any date shall be deemed to be the average of
the daily closing prices per share of such Security for the thirty (30)
consecutive Trading Days (as such term is hereinafter defined) immediately prior
to such date; PROVIDED, HOWEVER, that in the event that the current per share
market price of the Security is determined during any period following the
announcement by the issuer of such Security of (i) a dividend or distribution on
such Security payable in shares of such Security or securities convertible into
such shares or (ii) any subdivision, combination or reclassification of such
Security, and prior to the expiration of thirty (30) Trading Days after the
ex-dividend date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in each such case, the
"current per share market price" shall be appropriately adjusted to reflect the
current market price per share equivalent of such Security. The closing price
for each day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Security is not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Security is listed or
admitted to trading or, if the Security is not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by Nasdaq or such other system then in use, or, if on any such date
the Security is not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Security selected by the Board of Directors of the Company. If on any
such date no such market maker is making a market in the Security, the fair
value of the Security on such date as determined in good faith by the Board of
Directors of the Company shall be used. The term "Trading Day" shall mean a day
on which the principal national securities exchange on which the Security is
listed or admitted to trading is open for the transaction of business or, if the
Security is not listed or admitted to trading on any national securities
exchange, a Business Day. If the Security is not publicly held or not so listed
or traded, "current per share market price" shall mean the fair value per share
as determined in good faith by the Board of Directors of the Company or, if at
the time of such determination there is an Acquiring Person, by a majority of
the Continuing Directors then in office, or if there are no Continuing
Directors, by a nationally recognized investment banking firm selected by the
Board of Directors, which shall have the duty to make such determination in a
reasonable and objective manner, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all purposes.
11.4.2 Preferred Shares. Notwithstanding Section 11.4.1, for
the purpose of any computation hereunder, the "current per share market price"
of the Preferred Shares shall be determined in the same manner as set forth
above in Section 11.4.1 (other than the last sentence thereof). If the current
per share market price of the Preferred Shares cannot be determined in the
manner described in
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<PAGE> 16
Section 11.4.1, the "current per share market price" of the Preferred Shares
shall be conclusively deemed to be an amount equal to 100 (as such number may be
appropriately adjusted for such events as stock splits, stock dividends and
recapitalizations with respect to the Common Shares occurring after the date of
this Agreement) multiplied by the current per share market price of the Common
Shares. If neither the Common Shares nor the Preferred Shares is publicly held
or so listed or traded, "current per share market price" of the Preferred Shares
shall mean the fair value per share as determined in good faith by the Board of
Directors of the Company, or, if at the time of such determination there is an
Acquiring Person, by a majority of the Continuing Directors then in office, or
if there are no Continuing Directors, by a nationally recognized investment
banking firm selected by the Board of Directors of the Company, which shall have
the duty to make such determination in a reasonable and objective manner, which
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes. For purposes of this Agreement, the
"current per share market price" of one one-hundredth of a Preferred Share shall
be equal to the "current per share market price" of one Preferred Share divided
by 100.
11.5 Insignificant Changes. No adjustment in the Purchase
Price shall be required unless such adjustment would require an increase or
decrease of at least 1% in such price. Any adjustments which by reason of this
Section 11.5 are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest one-millionth of a Preferred
Share or the nearest ten-thousandth of a Common Share, as the case may be.
11.6 Shares Other Than Preferred Shares. If as a result of an
adjustment made pursuant to Section 11.1, the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital stock of the
Company other than Preferred Shares, thereafter the number of such other shares
so receivable upon exercise of any Right shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Shares contained in Sections 11.1
through 11.3, inclusive, and the provisions of Sections 7, 9, 10 and 13 with
respect to the Preferred Shares shall apply on like terms to any such other
shares.
11.7 Rights Issued Prior to Adjustment. All Rights originally
issued by the Company subsequent to any adjustment made to the Purchase Price
hereunder shall evidence the right to purchase, at the adjusted Purchase Price,
the number of one one-hundredths of a Preferred Share purchasable from time to
time hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
11.8 Effect of Adjustments. Unless the Company shall have
exercised its election as provided in Section 11.9, upon each adjustment of the
Purchase Price as a result of the calculations made in Sections 11.2 and 11.3,
each Right outstanding immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Purchase Price, that
number of one one-hundredths of a Preferred Share (calculated to the nearest
one-millionth of a Preferred Share) obtained by (i) multiplying (x) the number
of one one-hundredths of a Preferred Share covered by a Right immediately prior
to this adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
11.9 Adjustment in Number of Rights. The Company may elect on
or after the date of any adjustment of the Purchase Price to adjust the number
of Rights, in substitution for any adjustment in the number of one
one-hundredths of a Preferred Share issuable upon the exercise of a Right. Each
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<PAGE> 17
of the Rights outstanding after such adjustment of the number of Rights shall be
exercisable for the number of one one-hundredths of a Preferred Share for which
a Right was exercisable immediately prior to such adjustment. Each Right held of
record prior to such adjustment of the number of Rights shall become that number
of Rights (calculated to the nearest ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Right Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. If Right Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11.9, the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Right Certificates on such record date Right Certificates
evidencing, subject to Section 14, the additional Rights to which such holders
shall be entitled as a result of such adjustment, or, at the option of the
Company, shall cause to be distributed to such holders of record in substitution
and replacement for the Right Certificates held by such holders prior to the
date of adjustment, and upon surrender thereof, if required by the Company, new
Right Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Right Certificates so to be distributed shall be
issued, executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Purchase Price) and shall be
registered in the names of the holders of record of Right Certificates on the
record date specified in the public announcement.
11.10 Right Certificates Unchanged. Irrespective of any
adjustment or change in the Purchase Price or the number of one one-hundredths
of a Preferred Share issuable upon the exercise of the Rights, the Right
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per share and the number of one one-hundredths of a Preferred
Share which were expressed in the initial Right Certificates issued hereunder.
11.11 Par Value Limitations. Before taking any action that
would cause an adjustment reducing the Purchase Price below one one-hundredth of
the then par value, if any, of the Preferred Shares issuable upon exercise of
the Rights, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable Preferred Shares at such adjusted
Purchase Price.
11.12 Deferred Issuance. In any case in which this Section 11
shall require that an adjustment in the Purchase Price be made effective as of a
record date for a specified event, the Company may elect to defer until the
occurrence of such event the issuing to the holder of any Right exercised after
such record date of the Preferred Shares and other capital stock or securities
of the Company, if any, issuable upon such exercise over and above the Preferred
Shares and other capital stock or securities of the Company, if any, issuable
upon such exercise on the basis of the Purchase Price in effect prior to such
adjustment; PROVIDED, HOWEVER, that the Company shall deliver to such holder a
due bill or other appropriate instrument evidencing such holder's right to
receive such additional shares upon the occurrence of the event requiring such
adjustment.
11.13 Reduction in Purchase Price. Anything in this Section 11
to the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that it in its sole discretion
shall determine to be advisable in order that any consolidation or subdivision
of the Preferred Shares,
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issuance wholly for cash of any of the Preferred Shares at less than the current
market price, issuance wholly for cash of Preferred Shares or securities which
by their terms are convertible into or exchangeable for Preferred Shares,
dividends on Preferred Shares payable in Preferred Shares or issuance of rights,
options or warrants referred to hereinabove in this Section 11, hereafter made
by the Company to holders of its Preferred Shares shall not be taxable to such
stockholders.
11.14 The Company covenants and agrees that after the
Distribution Date it will not, except as permitted by Section 23 or Section 26,
take (or permit any Subsidiary to take) any action if at the time such action is
taken it is reasonably foreseeable that such action will substantially diminish
or otherwise eliminate the benefits intended to be afforded by the Rights.
11.15 Notwithstanding anything contained in this Agreement to
the contrary, in the event that the Company shall at any time after the date
hereof and prior to the Distribution Date (i) declare or pay any dividend on the
outstanding Common Shares payable in Common Shares, (ii) effect a subdivision or
consolidation of the outstanding Common Shares (by reclassification or otherwise
than by the payment of dividends payable in Common Shares), or (iii) combine the
outstanding Common Shares into a greater or lesser number of Common Shares, then
in any such case, the number of Rights associated with each Common Share then
outstanding, or issued or delivered thereafter but prior to the Distribution
Date, shall be proportionately adjusted so that the number of Rights thereafter
associated with each Common Share following any such event shall equal the
result obtained by multiplying the number of Rights associated with each Common
Share immediately prior to such event by a fraction, the numerator of which
shall be the total number of Common Shares outstanding immediately prior to the
occurrence of the event and the denominator of which shall be the total number
of Common Shares outstanding immediately following the occurrence of such event.
The adjustments provided for in this Section 11.15 shall be made successively
whenever such a dividend is declared or paid or such a subdivision, combination
or consolidation is effected.
Section 12. Certificate of Adjusted Purchase Price or Number
of Shares. Whenever an adjustment is made as provided in Sections 11 and 13, the
Company shall (a) promptly prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent and with each transfer agent for the Common Shares or
the Preferred Shares a copy of such certificate and (c) mail a brief summary
thereof to each holder of a Right Certificate in accordance with Section 25. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained and shall not be deemed to have knowledge of
any such adjustment unless and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power.
13.1 General. In the event that, from and after the first
occurrence of a Trigger Event, directly or indirectly, (A) the Company shall
consolidate with, or merge with and into, any other Person and the Company shall
not be the continuing or surviving corporation, (B) any Person shall consolidate
with the Company, or merge with and into the Company and the Company shall be
the continuing or surviving corporation of such merger and, in connection with
such merger, all or part of the Common Shares shall be changed into or exchanged
for stock or other securities of the Company or any other Person or cash or any
other property, or (C) the Company shall sell, exchange, mortgage or otherwise
transfer (or one or more of its Subsidiaries shall sell, exchange, mortgage or
otherwise transfer), in one or more transactions, assets or earning power
aggregating 50% or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons, then, and in
each
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such case, proper provision shall be made so that (i) each holder of a Right
(except as provided in Section 11.1.2 and as otherwise provided herein) shall
thereafter have the right to receive, upon the exercise thereof at a price per
Right equal to the then current Purchase Price multiplied by the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to the first occurrence of a Trigger Event (as subsequently
adjusted pursuant to Sections 11.1.1, 11.2, 11.3, 11.8, 11.9 and 11.12), in
accordance with the terms of this Rights Agreement and in lieu of Preferred
Shares, such number of Common Shares of such other Person (including the Company
as successor thereto or as the surviving corporation) as shall be equal to the
result obtained by (x) multiplying the then current Purchase Price by the number
of one one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to the first occurrence of a Trigger Event (as subsequently
adjusted pursuant to Sections 11.1.1, 11.2, 11.3, 11.8, 11.9 and 11.12) and (y)
dividing that product by 50% of the then current per share market price of the
Common Shares of such other Person (determined pursuant to Section 11.4) on the
date of consummation of such consolidation, merger, sale or transfer; PROVIDED,
that the price per Right so payable and the number of Common Shares of such
Person so purchasable shall thereafter be adjusted in accordance with Sections
11.1.1, 11.2, 11.3, 11.8, 11.9 and 11.12 by reason of such subsequent events
covered thereby occurring in respect of such Person; (ii) the issuer of such
Common Shares shall thereafter be liable for, and shall assume, by virtue of
such consolidation, merger, sale or transfer, all the obligations and duties of
the Company pursuant to this Rights Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such issuer; and (iv) such issuer shall take
such steps (including, but not limited to, the reservation of a sufficient
number of its Common Shares in accordance with Section 9) in connection with
such consummation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
Common Shares thereafter deliverable upon the exercise of the Rights. The
Company shall not enter into any transaction of the kind referred to in this
Section 13 if at the time of such transaction there are any rights, warrants,
instruments or securities outstanding or any agreements or arrangements which,
as a result of the consummation of such transaction, would eliminate or
substantially diminish the benefits intended to be afforded by the Rights. The
Company shall not consummate any such consolidation, merger, sale or transfer
unless prior thereto the Company and such issuer shall have executed and
delivered to the Rights Agent a supplemental agreement so providing. The
provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers.
13.2 Approved Acquisitions. Notwithstanding anything contained
herein to the contrary, in the event of any merger or other acquisition
transaction involving the Company pursuant to a merger or other acquisition
agreement between the Company and any Person (or one or more of such Person's
Affiliates or Associates) which agreement has been approved by the Board of
Directors of the Company prior to any Person becoming an Acquiring Person, this
Rights Agreement and the rights of holders of Rights hereunder shall be
terminated in accordance with Section 7.1.
Section 14. Fractional Rights and Fractional Shares.
14.1 Cash in Lieu of Fractional Rights. The Company shall not
be required to issue fractions of Rights or to distribute Right Certificates
which evidence fractional Rights. In lieu of such fractional Rights, there shall
be paid to the registered holders of the Right Certificates with regard to which
such fractional Rights would otherwise be issuable an amount in cash equal to
the same fraction of the current market value of a whole Right. For the purposes
of this Section 14.1, the current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise issuable. The closing
price for any day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average
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of the closing bid and asked prices, regular way, in either case as reported in
the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange or, if
the Rights are not listed or admitted to trading on the New York Stock Exchange,
as reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange on
which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by Nasdaq or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights, the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
14.2 Cash in Lieu of Fractional Shares. The Company shall not
be required to issue fractions of Preferred Shares (other than fractions which
are integral multiples of one one-hundredth of a Preferred Share) upon exercise
of the Rights or to distribute certificates which evidence fractional Preferred
Shares (other than fractions which are integral multiples of one one-hundredth
of a Preferred Share). Fractions of Preferred Shares in integral multiples of
one one-hundredth of a Preferred Share may, at the election of the Company, be
evidenced by depositary receipts, pursuant to an appropriate agreement between
the Company and a depositary selected by it; PROVIDED, that such agreement shall
provide that the holders of such depositary receipts shall have all the rights,
privileges and preferences to which they are entitled as beneficial owners of
the Preferred Shares represented by such depositary receipts. In lieu of
fractional Preferred Shares that are not integral multiples of one one-hundredth
of a Preferred Share, the Company shall pay to the registered holders of Right
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current per share market price of one
Preferred Share. For purposes of this Section 14.2, the current per share market
price of a Preferred Share shall be the closing price of a Preferred Share (as
determined pursuant to the second sentence of Section 11.4.2) for the Trading
Day immediately prior to the date of such exercise.
14.3 Waiver of Right to Receive Fractional Rights or Shares.
The holder of a Right by the acceptance of the Rights expressly waives his right
to receive any fractional Rights or any fractional shares upon exercise of a
Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect
of this Rights Agreement, except the rights of action given to the Rights Agent
under Section 18, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce this Rights Agreement, and may institute and maintain any suit,
action or proceeding against the Company to enforce this Rights Agreement, or
otherwise enforce or act in respect of his right to exercise the Rights
evidenced by such Right Certificate in the manner provided in such Right
Certificate and in this Rights Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Rights Agreement and shall be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of, the obligations of any Person (including, without limitation, the
Company) subject to this Rights Agreement.
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Section 16. Agreement of Right Holders. Every holder of a
Right by accepting the same consents and agrees with the Company and the Rights
Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will
be transferable only in connection with the transfer of the Common
Shares;
(b) as of and after the Distribution Date, the Right
Certificates are transferable only on the registry books of the Rights
Agent if surrendered at the office of the Rights Agent designated for
such purpose, duly endorsed or accompanied by a proper instrument of
transfer with all required certifications completed; and
(c) the Company and the Rights Agent may deem and
treat the Person in whose name the Right Certificate (or, prior to the
Distribution Date, the associated Common Shares certificate) is
registered as the absolute owner thereof and of the Rights evidenced
thereby (notwithstanding any notations of ownership or writing on the
Right Certificates or the associated Common Shares certificate made by
anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a Stockholder.
No holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 24), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with the provisions
hereof.
Section 18. Concerning the Rights Agent. The Company agrees to
pay to the Rights Agent reasonable compensation for all services rendered by it
hereunder in accordance with a fee schedule to be mutually agreed upon and, from
time to time, on demand of the Rights Agent, its reasonable expenses and counsel
fees and other disbursements incurred in the administration and execution of
this Rights Agreement and the exercise and performance of its duties hereunder.
The Company also agrees to indemnify the Rights Agent for, and to hold it
harmless against, any loss, liability, or expense, incurred without negligence,
bad faith or willful misconduct on the part of the Rights Agent, for anything
done or omitted by the Rights Agent in connection with the acceptance and
administration of this Rights Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Rights Agreement in reliance upon any
Right Certificate or certificate for the Preferred Shares or the Common Shares
or for other securities of the Company, instrument of assignment or transfer,
power of attorney, endorsement, affidavit, letter, notice, instruction,
direction, consent, certificate, statement, or other paper or document believed
by it to be genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper person or persons.
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Section 19. Merger or Consolidation or Change of Name of
Rights Agent. Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust or stock transfer business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Rights Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto, PROVIDED that such corporation would
be eligible for appointment as a successor Rights Agent under the provisions of
Section 21. In case at the time such successor Rights Agent shall succeed to the
agency created by this Rights Agreement, any of the Right Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Rights Agreement.
In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Right Certificates so countersigned; and in
case at that time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such Right Certificates either
in its prior name or in its changed name; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Rights Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this Rights Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Right Certificates, by their acceptance thereof, shall be bound:
20.1 Legal Counsel. The Rights Agent may consult with legal
counsel selected by it (who may be legal counsel for the Company), and the
opinion of such counsel shall be full and complete authorization and protection
to the Rights Agent as to any action taken or omitted by it in good faith and in
accordance with such opinion.
20.2 Certificates as to Facts or Matters. Whenever in the
performance of its duties under this Rights Agreement the Rights Agent shall
deem it necessary or desirable that any fact or matter be proved or established
by the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by any one of the Chairman of the Board of Directors, the
Chief Executive Officer, the President, the Chief Financial Officer, any Vice
President, the Treasurer, the Secretary or any Assistant Treasurer or Assistant
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Rights Agreement in reliance
upon such certificate.
20.3 Standard of Care. The Rights Agent shall be liable
hereunder only for its own negligence, bad faith or willful misconduct.
20.4 Reliance on Rights Agreement and Right Certificates. The
Rights Agent shall not be liable for or by reason of any of the statements of
fact or recitals contained in this Rights Agreement
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or in the Right Certificates (except as to its countersignature thereof) or be
required to verify the same, but all such statements and recitals are and shall
be deemed to have been made by the Company only.
20.5 No Responsibility as to Certain Matters. The Rights Agent
shall not be under any responsibility in respect of the validity of this Rights
Agreement or the execution and delivery hereof (except the due execution hereof
by the Rights Agent) or in respect of the validity or execution of any Right
Certificate (except its countersignature thereof); nor shall it be responsible
for any breach by the Company of any covenant or condition contained in this
Rights Agreement or in any Right Certificate; nor shall it be responsible for
any change in the exercisability of the Rights (including the Rights becoming
void pursuant to Section 11.1.2) or any adjustment required under the provisions
of Sections 3, 11, 13, 23 or 27 or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after actual notice of any such adjustment); nor
shall it by any act hereunder be deemed to make any representation or warranty
as to the authorization or reservation of any Preferred Shares to be issued
pursuant to this Rights Agreement or any Right Certificate or as to whether any
Preferred Shares will, when so issued, be validly authorized and issued, fully
paid and nonassessable.
20.6 Further Assurance by Company. The Company agrees that it
will perform, execute, acknowledge and deliver or cause to be performed,
executed, acknowledged and delivered all such further and other acts,
instruments and assurances as may reasonably be required by the Rights Agent for
the carrying out or performing by the Rights Agent of the provisions of this
Rights Agreement.
20.7 Authorized Company Officers. The Rights Agent is hereby
authorized and directed to accept instructions with respect to the performance
of its duties hereunder from any one of the Chairman of the Board of Directors,
the Chief Executive Officer, the President, the Chief Financial Officer, any
Vice President, the Treasurer, the Secretary or any Assistant Treasurer or
Assistant Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties under this Rights Agreement, and it
shall not be liable for any action taken or suffered to be taken by it in good
faith in accordance with instructions of any such officer or for any delay in
acting while waiting for these instructions. Any application by the Rights Agent
for written instructions from the Company may, at the option of the Rights
Agent, set forth in writing any action proposed to be taken or omitted by the
Rights Agent with respect to its duties or obligations under this Rights
Agreement and the date on and/or after which such action shall be taken or
omitted. The Rights Agent shall not be liable to the Company for any action
taken or omitted in accordance with a proposal included in any such application
on or after the date specified therein (which date shall not be less than three
business days after the date any such officer actually receives such
application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking of any such action (or the effective date
in the case of omission), the Rights Agent shall have received written
instructions in response to such application specifying the action to be taken
or omitted.
20.8 Freedom to Trade in Company Securities. The Rights Agent
and any stockholder, director, officer or employee of the Rights Agent may buy,
sell or deal in any of the Rights or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not Rights Agent under this Rights Agreement.
Nothing herein shall preclude the Rights Agent from acting in any other capacity
for the Company or for any other legal entity.
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20.9 Reliance on Attorneys and Agents. The Rights Agent may
execute and exercise any of the rights or powers hereby vested in it or perform
any duty hereunder either itself or by or through its attorneys or agents, and
the Rights Agent shall not be answerable or accountable for any act, omission,
default, neglect or misconduct of any such attorneys or agents or for any loss
to the Company resulting from any such act, omission, default, neglect or
misconduct, PROVIDED that reasonable care was exercised in the selection and
continued employment thereof.
20.10 Rights Holders List. At any time and from time to time
after the Distribution Date, upon the request of the Company, the Rights Agent
shall promptly deliver to the Company a list, as of the most recent practicable
date (or as of such earlier date as may be specified by the Company), of the
holders of record of Rights.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Rights Agreement upon thirty (30) days' notice in writing mailed to the Company
and to each transfer agent of the Common Shares and/or Preferred Shares, as
applicable, by registered or certified mail. The Company shall promptly notify
the holders of the Right Certificates by first-class mail of any such
resignation. The Company may remove the Rights Agent or any successor Rights
Agent upon thirty (30) days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Shares and/or Preferred Shares, as applicable, by registered or certified
mail, and to the holders of the Right Certificates by first-class mail. If the
Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the resigning, removed, or incapacitated Rights Agent shall remit to the
Company, or to any successor Rights Agent designated by the Company, all books,
records, funds, certificates or other documents or instruments of any kind then
in its possession which were acquired by such resigning, removed or
incapacitated Rights Agent in connection with its services as Rights Agent
hereunder, and shall thereafter be discharged from all duties and obligations
hereunder. Following notice of such removal, resignation or incapacity, the
Company shall appoint a successor to such Rights Agent. If the Company shall
fail to make such appointment within a period of thirty (30) days after giving
notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Right Certificate (who shall, with such notice, submit his Right
Certificate for inspection by the Company), then the registered holder of any
Right Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a corporation organized and doing
business under the laws of the United States or of the State of New York (or any
other state of the United States so long as such corporation is authorized to do
business as a banking institution in the State of New York) in good standing,
having a principal office in the State of New York, which is authorized under
such laws to exercise stock transfer or corporate trust powers and is subject to
supervision or examination by Federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $100 million. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares and/or Preferred Shares, as applicable, and mail a notice
thereof in writing to the registered holders of the Right Certificates. Failure
to give any notice provided for in this Section 21, however, or any defect
therein,
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shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may
be.
Section 22. Issuance of New Right Certificates.
Notwithstanding any of the provisions of this Rights Agreement or of the Rights
to the contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind or
class of shares or other securities or property purchasable under the Right
Certificates made in accordance with the provisions of this Rights Agreement. In
addition, in connection with the issuance or sale of Common Shares following the
Distribution Date and prior to the redemption, exchange, termination or
expiration of the Rights, the Company (a) shall, with respect to Common Shares
so issued or sold pursuant to the exercise of stock options or under any
employee plan or arrangement, granted or awarded as of the Distribution Date, or
upon exercise, conversion or exchange of securities hereinafter issued by the
Company, and (b) may, in any other case, if deemed necessary or appropriate by
the Board of Directors of the Company, issue Right Certificates representing the
appropriate number of Rights in connection with such issuance or sale; PROVIDED,
HOWEVER, that (i) no such Right Certificate shall be issued if, and to the
extent that, the Company shall be advised by counsel that such issuance would
create a significant risk of material adverse tax consequences to the Company or
the Person to whom such Right Certificate would be issued, (ii) no such Right
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof and (iii) at the
time of a determination by the Board of Directors to cause the Company to issue
a Right Certificate under clause (b) above, there must be Continuing Directors
then in office and any such determination shall require the approval of at least
a majority of such Continuing Directors.
Section 23. Redemption.
23.1 Right to Redeem. The Board of Directors of the Company
may, at its option, at any time prior to the Shares Acquisition Date, redeem all
but not less than all of the then outstanding Rights at a redemption price of
$.01 per Right, appropriately adjusted to reflect any stock split, stock
dividend, recapitalization or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the "Redemption
Price"). Anything contained in this Rights Agreement to the contrary
notwithstanding, the Rights shall not be exercisable following a transaction or
event described in Section 11.1.2 prior to the expiration of the Company's right
of redemption hereunder.
23.2 Redemption Procedures. Immediately upon the action of the
Board of Directors of the Company ordering the redemption of the Rights, and
without any further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price for each Right so held. Within ten (10)
days after the action of the Board of Directors ordering the redemption of the
Rights, the Company shall give, or cause the Rights Agent to give, notice of
such redemption to the holders of the then outstanding Rights by mailing such
notice to all such holders at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Shares. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the method
by which the payment of the Redemption Price will be made. Neither the Company
nor any of its Affiliates or Associates may redeem, acquire or purchase for
value any Rights at any time in any manner other than that specifically set
forth in this Section 23 or in Section 27, and other than in connection with the
purchase, acquisition or redemption of Common Shares prior to the Distribution
Date.
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Section 24. Notice of Certain Events. In case the Company
shall propose at any time after the Distribution Date (a) to pay any dividend
payable in stock of any class to the holders of Preferred Shares or to make any
other distribution to the holders of Preferred Shares (other than a regular
periodic cash dividend at a rate not in excess of 125% of the rate of the last
regular periodic cash dividend theretofore paid or, in case regular periodic
cash dividends have not theretofore been paid, at a rate not in excess of 50% of
the average net income per share of the Company for the four quarters ended
immediately prior to the payment of such dividends, or a stock dividend on, or a
subdivision, combination or reclassification of the Common Shares), or (b) to
offer to the holders of Preferred Shares rights or warrants to subscribe for or
to purchase any additional Preferred Shares or shares of stock of any class or
any other securities, rights or options, or (c) to effect any reclassification
of its Preferred Shares (other than a reclassification involving only the
subdivision of outstanding Preferred Shares), or (d) to effect any consolidation
or merger into or with, or to effect any sale or other transfer (or to permit
one or more of its Subsidiaries to effect any sale or other transfer), in one or
more transactions, of 50% or more of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to, any other Person (other than
pursuant to a merger or other acquisition agreement of the type described in
Section 1.3(ii)(A)(2)), or (e) to effect the liquidation, dissolution or winding
up of the Company, or (f) to declare or pay any dividend on the Common Shares
payable in Common Shares or to effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares), then, in each such case, the Company
shall give to the Rights Agent and to each holder of a Right Certificate, in
accordance with Section 25, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of
rights or warrants, or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution, or winding up is to take place
and the date of participation therein by the holders of the Preferred Shares
and/or Common Shares, if any such date is to be fixed, and such notice shall be
so given in the case of any action covered by clause (a) or (b) above at least
ten (10) days prior to the record date for determining holders of the Preferred
Shares for purposes of such action, and in the case of any such other action, at
least ten (10) days prior to the date of the taking of such proposed action or
the date of participation therein by the holders of the Preferred Shares and/or
Common Shares, whichever shall be the earlier.
In case any event set forth in Section 11.1.2 of this Rights
Agreement shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to the Rights Agent and to each holder of a Right
Certificate, in accordance with Section 25, a notice of the occurrence of such
event, which notice shall describe the event and the consequences of the event
to holders of Rights under Section 11.1.2, and (ii) all references in this
Section 24 to Preferred Shares shall be deemed thereafter to refer to Common
Shares and/or, if appropriate, other securities.
Notwithstanding anything in this Rights Agreement to the
contrary, prior to the Distribution Date a filing by the Company with the
Securities and Exchange Commission shall constitute sufficient notice to the
holders of securities of the Company, including the Rights, for purposes of this
Rights Agreement and no other notice need be given.
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Section 25. Notices. Notices or demands authorized by this
Rights Agreement to be given or made by the Rights Agent or by the holder of any
Right Certificate to or on the Company shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Rights Agent) as follows:
V-L Holdings Corp.
[Address]
Attention:
Subject to the provisions of Section 21, any notice or demand authorized by this
Rights Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
[NAME OF RIGHTS AGENT]
[Address]
Attention:
Notices or demands authorized by this Rights Agreement to be given or made by
the Company or the Rights Agent to the holder of any Right Certificate (or,
prior to the Distribution Date, to the holder of any certificate representing
Common Shares) shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Company.
Section 26. Supplements and Amendments. Prior to the
Distribution Date and subject to the last sentence of this Section 26, the
Company may, in its sole and absolute discretion, and the Rights Agent shall, if
the Company so directs, supplement or amend any provision of this Rights
Agreement without the approval of any holders of certificates representing
Common Shares. From and after the Distribution Date and subject to the last
sentence of this Section 26, the Company may, in its sole and absolute
discretion, and the Rights Agent shall, if the Company so directs, from time to
time supplement or amend this Rights Agreement without the approval of any
holders of Right Certificates (i) to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, (ii) to shorten or lengthen any time period
hereunder (which shortening or lengthening, after the time a Person becomes an
Acquiring Person, shall be effective only if there are Continuing Directors and
shall require the approval of at least a majority of such Continuing Directors)
or (iii) so long as the interests of the holders of the Right Certificates
(other than an Acquiring Person or an Affiliate or Associate of an Acquiring
Person) are not adversely affected thereby, to make any other changes or
provisions in regard to matters or questions arising hereunder which the Company
and the Rights Agent may deem necessary or desirable, including but not limited
to extending the Final Expiration Date; PROVIDED, HOWEVER, that the right of the
Board of Directors to extend the Distribution Date or Redemption Date shall not
require any amendment or supplement hereunder. Upon the delivery of a
certificate from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this Section
26, the Rights Agent shall execute such supplement or amendment. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Shares. Without limiting
the foregoing, at any time prior to such time as any Person becomes an Acquiring
Person, the Company and the Rights Agent may amend this Agreement to lower the
thresholds set forth in Sections 1.1 and 3.1 to not less than the greater of (i)
any percentage greater than the largest percentage of the
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outstanding Common Shares then known by the Company to be beneficially owned by
any Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any Subsidiary of the Company, or any entity
holding Common Shares for or pursuant to the terms of any such plan) and (ii)
10%.
Section 27. Exchange.
27.1 Exchange of Common Shares for Rights. The Board of
Directors of the Company may, at its option, at any time after the occurrence of
a Trigger Event, exchange Common Shares for all or part of the then outstanding
and exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 11.1.2) by exchanging that number of
Common Shares having an aggregate value equal to the Spread (with such value
being based on the current per share market price (as determined pursuant to
Section 11.4) on the date of the occurrence of a Trigger Event) per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such amount per Right being
hereinafter referred to as the "Exchange Consideration"). Notwithstanding the
foregoing, (i) the Board of Directors shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or any such Subsidiary, or
any entity holding Common Shares for or pursuant to the terms of any such plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Shares then outstanding and (ii)
the Board shall not be empowered to effect an exchange for more than that number
of Rights for which there are sufficient Common Shares authorized but unissued,
or held by the Company as treasury shares, to permit the exchange for Rights.
27.2 Exchange Procedures. Immediately upon the action of the
Board of Directors of the Company ordering the exchange for any Rights pursuant
to Section 27.1 and without any further action and without any notice, the right
to exercise such Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive that number of Common Shares equal to
the number of such Rights held by such holder multiplied by the Exchange
Consideration. The Company shall promptly give public notice of any such
exchange; PROVIDED, HOWEVER, that the failure to give, or any defect in, such
notice shall not affect the validity of such exchange. The Company promptly
shall mail a notice of any such exchange to all of the holders of such Rights at
their last addresses as they appear upon the registry books of the Rights Agent.
Any notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange will
state the method by which the exchange of the Common Shares for Rights will be
effected and, in the event of any partial exchange, the number of Rights which
will be exchanged. Any partial exchange shall be effected pro rata based on the
number of Rights (other than the Rights which have become void pursuant to the
provisions of Section 11.1.2) held by each holder of Rights.
27.3 No Fractional Shares Upon Exchange. The Company shall not
be required to issue fractions of Common Shares or to distribute certificates
which evidence fractional Common Shares. In lieu of such fractional Common
Shares, the Company shall pay to the registered holders of the Right
Certificates, with regard to which such fractional Common Shares would otherwise
be issuable, in an amount in cash equal to the same fraction of the current
market value of a whole Common Share. For the purposes of this Section 27.3, the
current market value of a whole Common Share shall be the current per share
market price (as determined pursuant to Section 11.4) for the Trading Day
immediately prior to the date of exchange pursuant to this Section 27.
27
<PAGE> 29
Section 28. Successors. All the covenants and provisions of
this Rights Agreement by or for the benefit of the Company or the Rights Agent
shall bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 29. Benefits of this Rights Agreement. Nothing in this
Rights Agreement shall be construed to give to any Person or corporation other
than the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares) any legal
or equitable right, remedy or claim under this Rights Agreement; but this Rights
Agreement shall be for the sole and exclusive benefit of the Company, the Rights
Agent and the registered holders of the Right Certificates (and, prior to the
Distribution Date, the Common Shares).
Section 30. Severability. If any term, provision, covenant or
restriction of this Rights Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Rights
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
Section 31. Governing Law. This Rights Agreement and each
Right Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
Section 32. Counterparts. This Rights Agreement may be
executed in any number of counterparts and each of such counterparts shall for
all purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.
Section 33. Descriptive Heading. Descriptive headings of the
several Sections of this Rights Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the provisions
hereof.
28
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed and their respective corporate seals to be
hereunto affixed, all as of the day and year first above written.
V-L HOLDINGS CORP.
By__________________________
Name:
Title:
[NAME OF RIGHTS AGENT]
By__________________________
Name:
Title:
S-1
<PAGE> 31
EXHIBIT A
FORM
of
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
V-L HOLDINGS CORP.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
__________________________
V-L Holdings Corp., a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation as required by Section 151 of the
General Corporation Law at a meeting duly called and held on ______________,
1998.
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Certificate
of Incorporation, the Board of Directors hereby creates a series of Preferred
Stock, par value $.01 per share (the "Preferred Stock"), of the Corporation and
hereby states the designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof as follows:
Series A Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be ________________. Such number of shares may be increased or
decreased by resolution of the Board of Directors; PROVIDED, that no decrease
shall reduce the number of shares of Series A Preferred Stock to a number less
than the number of shares then outstanding plus the number of shares reserved
for issuance upon the exercise of outstanding options, rights or warrants or
upon the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
A-1
<PAGE> 32
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar stock) ranking prior and
superior to the Series A Preferred Stock with respect to dividends, the
holders of shares of Series A Preferred Stock, in preference to the
holders of Common Stock, par value $.01 per share (the "Common Stock"),
of the Corporation, and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in
cash on the first day of March, June, September and December in each
year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Series A
Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1.00 or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share
amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series A Preferred Stock. In the
event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a
subdivision, combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the amount to which
holders of shares of Series A Preferred Stock were entitled immediately
prior to such event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution
on the Series A Preferred Stock as provided in paragraph (A) of this
Section 2 immediately after it declares a dividend or distribution on
the Common Stock (other than a dividend payable in shares of Common
Stock); provided that, in the event no dividend or distribution shall
have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1.00 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment
Date or is a date after the record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares
of Series A Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of
A-2
<PAGE> 33
Directors may fix a record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be
not more than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the number of votes per share to which
holders of shares of Series A Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number by a
fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein, in any other
Certificate of Designations creating a series of Preferred Stock or any
similar stock, or by law, the holders of shares of Series A Preferred
Stock and the holders of shares of Common Stock and any other capital
stock of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by
law, holders of Series A Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of
Series A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding
up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except
dividends paid ratably on the Series A Preferred Stock and all
such parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all
such shares are then entitled;
A-3
<PAGE> 34
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to
the Series A Preferred Stock, provided that the Corporation
may at any time redeem, purchase or otherwise acquire shares
of any such junior stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or
upon dissolution, liquidation or winding up) to the Series A
Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock, or any
shares of stock ranking on a parity with the Series A
Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board
of Directors) to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and
preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Corporation shall not permit any Subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, provided that the holders of shares of Series A
Preferred Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount to be distributed per share to holders of shares of
Common Stock, or (2) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except distributions made ratably on the Series A
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision, combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the aggregate amount to which holders of
shares of Series A Preferred Stock were entitled immediately prior to such event
under the proviso in clause (1) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common
A-4
<PAGE> 35
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that are outstanding immediately prior to
such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision,
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred Stock shall
not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank, with respect
to liquidation and the payment of dividends and the distribution of assets,
junior to all series of any other class of the Corporation's Preferred Stock,
except to the extent that any such other series specifically provides that it
shall rank on a parity with or junior to the Series A Preferred Stock.
Section 10. Amendment. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
A-5
<PAGE> 36
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Corporation by its Chairman of the Board and attested by its
Secretary this ___ day of ____________, 1998.
_____________________________
Chairman of the Board
Attest:
_______________________
Secretary
A-6
<PAGE> 37
EXHIBIT B
[Form of Right Certificate]
Certificate No. R- _______ Rights
NOT EXERCISABLE AFTER _________________, 2008 OR EARLIER IF NOTICE OF
REDEMPTION OR EXCHANGE IS GIVEN OR IF THE COMPANY IS MERGED OR ACQUIRED
PURSUANT TO AN AGREEMENT OF THE TYPE DESCRIBED IN SECTION 1.3(ii)(A)(2)
OF THE RIGHTS AGREEMENT. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF THE COMPANY, AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES (SPECIFIED IN SECTION
11.1.2 OF THE RIGHTS AGREEMENT), RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON, OR ITS AFFILIATES OR ASSOCIATES, OR ANY SUBSEQUENT
HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED
BY THIS CERTIFICATE ARE HELD OR HAVE BEEN HELD BY A PERSON WHO IS OR
WAS AN ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE OF AN ACQUIRING
PERSON OR A NOMINEE THEREOF. THIS RIGHT CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY HAVE BECOME NULL AND VOID AS SPECIFIED IN SECTION
11.1.2 OF THE RIGHTS AGREEMENT.]
Right Certificate
V-L HOLDINGS CORP.
This certifies that , or registered assigns, is the registered
owner of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of _____________, 1998, as the same may be amended from time
to time (the "Rights Agreement"), between V-L HOLDINGS CORP., a Delaware
corporation (the "Company"), and [NAME OF RIGHTS AGENT], a ________________
corporation, as Rights Agent (the "Rights Agent"), to purchase from the Company
at any time after the Distribution Date and prior to 5:00 P.M. (New York City
time) on ________________, 2008, at the offices of the Rights Agent, or its
successors as Rights Agent, designated for such purpose, one one-hundredth of a
fully paid, nonassessable share of Series A Junior Participating Preferred
Stock, par value $.01 per share (the "Preferred Shares") of the Company, at a
purchase price of $________ per one one-hundredth of a share, subject to
adjustment (the "Purchase Price"), upon presentation and surrender of this Right
Certificate with the Form of Election to Purchase and certification duly
executed. The number of Rights evidenced by this Right Certificate (and the
number of one one-hundredths of a Preferred Share which may be purchased upon
exercise thereof) set forth above, and the Purchase Price set forth above, are
the number and Purchase Price as of _____________, 1998 based on the Preferred
Shares as constituted at such date. Capitalized terms used in this Right
Certificate without definition shall have the meanings ascribed to them in the
Rights Agreement. As provided in the Rights Agreement, the Purchase Price and
the number of Preferred Shares which may be purchased upon the exercise of the
Rights evidenced by this Right Certificate are subject to modification and
adjustment upon the happening of certain events.
B-1
<PAGE> 38
This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights (including the temporary suspension of the
exercisability of such Rights under certain circumstances specified in the
Rights Agreement), obligations, duties and immunities hereunder of the Rights
Agent, the Company and the holders of the Right Certificates. Copies of the
Rights Agreement are on file at the principal offices of the Company and the
Rights Agent and are also available upon written request to the Company.
This Right Certificate, with or without other Right
Certificates, upon surrender at the offices of the Rights Agent designated for
such purpose, may be exchanged for another Right Certificate or Right
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-hundredths of a Preferred Share as
the Rights evidenced by the Right Certificate or Right Certificates surrendered
shall have entitled such holder to purchase. If this Right Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Right Certificate or Right Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the Board
of Directors may, at its option, (i) redeem the Rights evidenced by this Right
Certificate at a redemption price of $.01 per Right at any time prior to the
Shares Acquisition Date or (ii) exchange Common Shares for the Rights evidenced
by this Certificate, in whole or in part, after the occurrence of a Trigger
Event.
No fractional Preferred Shares will be issued upon the
exercise of any Right or Rights evidenced hereby, but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be
entitled to vote or receive dividends or be deemed for any purpose to be a
holder of the Preferred Shares or of any other securities of the Company which
may at any time be issuable on the exercise hereof, nor shall anything contained
in the Rights Agreement or herein be construed to confer upon the holder hereof,
as such, any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action, or
to receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
If any term, provision, covenant or restriction of the Rights
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of the Rights Agreement shall remain in full force
and effect and shall in no way be affected, impaired or invalidated.
This Right Certificate shall not be valid or binding for any
purpose until it shall have been countersigned by the Rights Agent.
B-2
<PAGE> 39
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal. Dated as of ______, 1998.
Attest: V-L HOLDINGS CORP.
By ______________________ By ___________________________
Title: Title:
Countersigned:
[NAME OF RIGHTS AGENT]
By_____________________________
Authorized Signature
B-3
<PAGE> 40
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Right Certificate.)
FOR VALUE RECEIVED__________________________________
hereby sells, assigns and transfers unto_______________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Please print name and address
of transferee)
this Right Certificate and the Rights evidenced thereby, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint Attorney, to transfer the within Right Certificate on the books of the
within-named Company, with full power of substitution.
Dated:_____________
____________________________
Signature
Signature Guaranteed:
____________________________
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
B-4
<PAGE> 41
________________________________________________________________________________
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ]
are not beneficially owned by an Acquiring Person or an Affiliate or an
Associate thereof; and
(2) after due inquiry and to the best knowledge of the
undersigned, the undersigned [ ] did [ ] did not acquire the Rights evidenced by
this Right Certificate from any person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate thereof.
Dated:____________
_________________________
Signature
B-5
<PAGE> 42
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Right Certificate.)
To: V-L HOLDINGS CORP.
The undersigned hereby irrevocably elects to exercise _______________ Rights
Preferred Shares issuable upon the exercise of such Rights (or such other
securities of the Company or of any other Person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of:
Please insert social security
or other identifying number
____________________________________________________________
(Please print name and address)
____________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
____________________________________________________________
(Please print name and address)
____________________________________________________________
Dated: __________________
__________________________
Signature
Signature Guaranteed:
________________________________
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
B-6
<PAGE> 43
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are
not beneficially owned by an Acquiring Person or an Affiliate or an Associate
thereof; and
(2) after due inquiry and to the best knowledge of the undersigned,
the undersigned [ ] did [ ] did not acquire the Rights evidenced by this Right
Certificate from any person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate thereof.
Dated:_______________
_______________________
Signature
________________________________________________________________________________
NOTICE
The signature in the foregoing Form of Assignment and Form of
Election to Purchase must conform to the name as written upon the face of this
Right Certificate in every particular, without alteration or enlargement or any
change whatsoever.
In the event the certification set forth above in the Form of
Assignment or Form of Election to Purchase is not completed, the Company will
deem the beneficial owner of the Rights evidenced by this Right Certificate to
be an Acquiring Person or an Affiliate or Associate hereof and, in the case of
an Assignment, will affix a legend to that effect on any Right Certificates
issued in exchange for this Right Certificate.
B-7
<PAGE> 44
EXHIBIT C
As described in the Rights Agreement, Rights which are held by
or have been held by Acquiring Persons or Associates or Affiliates
thereof (as defined in the Rights Agreement) shall become null and void.
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On ________________, 1998 the Board of Directors of V-L HOLDINGS
CORP. (the "Company") declared a dividend of one Right for each share of common
stock, $.01 par value (the "Common Shares"), of the Company outstanding at the
close of business on _______________, 1998 (the "Record Date"). As long as the
Rights are attached to the Common Shares, the Company will issue one Right
(subject to adjustment) with each new Common Share so that all such shares will
have attached Rights. When exercisable, each Right will entitle the registered
holder to purchase from the Company one one-hundredth of a share of Series A
Junior Participating Preferred Stock (the "Preferred Shares") at a price of
$________ per one one-hundredth of a Preferred Share, subject to adjustment (the
"Purchase Price"). The description and terms of the Rights are set forth in a
Rights Agreement, dated as of _____________, 1998, as the same may be amended
from time to time (the "Rights Agreement"), between the Company and [NAME OF
RIGHTS AGENT], as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) ten (10) days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the Common Shares or (ii) ten (10) days following
the commencement or announcement of an intention to make a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of the Common Shares (the earlier
of (i) and (ii) being called the "Distribution Date," whether or not either such
date occurs prior to the Record Date), the Rights will be evidenced, with
respect to any of the Common Share certificates outstanding as of the Record
Date, by such Common Share certificate together with a copy of this Summary of
Rights.
The Rights Agreement provides that the Board of Directors, with the
concurrence of a majority of the Continuing Directors (as defined below), may
postpone the Distribution Date and that, until the Distribution Date, the Rights
will be transferred with and only with the Common Shares. Until the Distribution
Date (or earlier redemption or expiration of the Rights), new Common Share
certificates issued after the close of business on the Record Date upon transfer
or new issuance of the Common Shares will contain a notation incorporating the
Rights Agreement by reference. Until the Distribution Date (or earlier
redemption, exchange, termination or expiration of the Rights), the surrender
for transfer of any certificates for Common Shares, with or without a copy of
this Summary of Rights, will also constitute the transfer of the Rights
associated with the Common Shares represented by such certificate. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights ("Right Certificates") will be mailed to holders of record of the
Common Shares as of the close of business on the Distribution Date and such
separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire on ______________, 2008, subject to the Company's right to
extend such date (the "Final Expiration Date"), unless earlier redeemed or
exchanged by the Company or terminated.
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Each Preferred Share purchasable upon exercise of the Rights will
be entitled to a minimum preferential quarterly dividend payment of $1.00 per
share but will be entitled to an aggregate dividend of 100 times the dividend,
if any, declared per Common Share. In the event of liquidation, the holders of
the Preferred Shares will be entitled to a minimum preferential liquidation
payment of $100 per share but will be entitled to an aggregate payment of 100
times the payment made per Common Share. Each Preferred Share will have 100
votes and will vote together with the Common Shares. Finally, in the event of
any merger, consolidation or other transaction in which Common Shares are
exchanged, each Preferred Share will be entitled to receive 100 times the amount
received per Common Share. These rights are protected by customary antidilution
provisions. Because of the nature of the Preferred Share's dividend, liquidation
and voting rights, the value of one one-hundredth of a Preferred Share
purchasable upon exercise of each Right should approximate the value of one
Common Share.
The Purchase Price payable, and the number of Preferred Shares or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe for or purchase Preferred Shares or convertible
securities at less than the current market price of the Preferred Shares or
(iii) upon the distribution to holders of the Preferred Shares of evidences of
indebtedness, cash, securities or assets (excluding regular periodic cash
dividends at a rate not in excess of 125% of the rate of the last regular
periodic cash dividend theretofore paid or, in case regular periodic cash
dividends have not theretofore been paid, at a rate not in excess of 50% of the
average net income per share of the Company for the four quarters ended
immediately prior to the payment of such dividend, or dividends payable in
Preferred Shares (which dividends will be subject to the adjustment described in
clause (i) above)) or of subscription rights or warrants (other than those
referred to above).
In the event that a Person becomes an Acquiring Person (except
pursuant to certain cash offers for all outstanding Common Shares approved by
the Board) or if the Company were the surviving corporation in a merger with an
Acquiring Person or any affiliate or associate of an Acquiring Person and the
Common Shares were not changed or exchanged, each holder of a Right, other than
Rights that are or were acquired or beneficially owned by the 15% stockholder
(which Rights will thereafter be void), will thereafter have the right to
receive upon exercise that number of Common Shares having a market value of two
times the then current Purchase Price of the Right. With certain exceptions, in
the event that the Company were acquired in a merger or other business
combination transaction or more than 50% of its assets or earning power were
sold, proper provision shall be made so that each holder of a Right shall
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction would have a market
value of two times the then current Purchase Price of the Right.
At any time after a Person becomes an Acquiring Person and prior to
the acquisition by such Acquiring Person of 50% or more of the outstanding
Common Shares, the Board of Directors may cause the Company to acquire the
Rights (other than Rights owned by an Acquiring Person which have become void),
in whole or in part, in exchange for that number of Common Shares having an
aggregate value equal to the Spread (the excess of the value of the Common
Shares issuable upon exercise of a Right after a Person becomes an Acquiring
Person over the Purchase Price) per Right (subject to adjustment).
No adjustment in the Purchase Price will be required until
cumulative adjustments require an adjustment of at least 1% in such Purchase
Price. No fractional shares will be issued and in lieu thereof,
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a payment in cash will be made based on the market price of the Preferred Shares
on the last trading date prior to the date of exercise.
The Rights may be redeemed in whole, but not in part, at a price of
$.01 per Right (the "Redemption Price") by the Board of Directors at any time
prior to the first date of public announcement that a Person has become an
Acquiring Person. Immediately upon the action of the Board of Directors of the
Company electing to redeem the Rights, the Company shall make an announcement
thereof, and upon such election, the right to exercise the Rights will terminate
and the only right of the holders of Rights will be to receive the Redemption
Price.
The term "Continuing Directors" means any member of the Board of
Directors of the Company who was a member of the Board prior to the time that
any Person becomes an Acquiring Person, and any person who is subsequently
elected to the Board if such person is recommended or approved by a majority of
the Continuing Directors. Continuing Directors do not include an Acquiring
Person, or an affiliate or associate of an Acquiring Person, or any
representative of the foregoing.
Until a Right is exercised, the holder thereof, as such, will have
no rights as a stockholder of the Company beyond those as an existing
stockholder, including, without limitation, the right to vote or to receive
dividends.
Any of the provisions of the Rights Agreement may be amended by
the Board of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the Company and the Rights Agent may amend or supplement the
Rights Agreement without the approval of any holders of Right Certificates to
cure any ambiguity, to correct or supplement any provision contained therein
which may be defective or inconsistent with any other provisions therein, to
shorten or lengthen any time period under the Rights Agreement (so long as,
under certain circumstances, a majority of Continuing Directors approve such
shortening or lengthening) or so long as the interests of the holders of Right
Certificates (other than an Acquiring Person or an affiliate or associate of an
Acquiring Person) are not adversely affected thereby, to make any other
provisions in regard to matters or questions arising thereunder which the
Company and the Rights Agent may deem necessary or desirable, including but not
limited to extending the Final Expiration Date. The Company may at any time
prior to such time as any Person becomes an Acquiring Person amend the Rights
Agreement to lower the thresholds described above to not less than the greater
of (i) any percentage greater than the largest percentage of the outstanding
Common Shares then known by the Company to be beneficially owned by any person
or group of affiliated or associated persons and (ii) 10%.
A copy of the Rights Agreement has been filed with the Securities
and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
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EXHIBIT 4.2
CERTIFICATION OF DESIGNATION
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
V-L HOLDINGS CORP.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
V-L Holdings Corp., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Company"), hereby certifies that
the following resolutions were adopted by the Board of Directors of the Company
(the "Board") and by a committee of the Board pursuant to the authority of the
Board as required by Section 151 of the Delaware General Corporation Law:
RESOLVED, that there is hereby established a series of the Series Preferred
Stock designated "Series B Convertible Preferred Stock, par value $.01 per
share", (herein referred to as "Series B Preferred Stock"), consisting of
400,000 shares, having a stated value per share equal to $.01, and having the
relative rights, designations, preferences, qualifications, privileges,
limitations, restrictions, options, conversion rights and other special or
relative rights applicable thereto as follows:
1. Dividend Provisions. The holders of shares of Series B Preferred Stock
shall be entitled to receive dividends, out of any assets legally available
therefor, in an amount per share of Series B Preferred Stock which is equal to
the product of (a) the number of shares of Common Stock into which the Series B
Preferred Stock is convertible at the time of declaration of such dividend
multiplied by (b) the aggregate per share amount of all cash dividends plus the
aggregate per share amount (based upon the fair market value at the time the
non-cash dividend or other distribution is declared or paid as determined in
good faith by the board of directors) of all non-cash dividends or other
distributions on the Common Stock of the corporation other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock of
the corporation. Such dividends shall be declared and paid contemporaneously
with the declaration and payment of the related dividend on the Common Stock.
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
corporation, either voluntary or involuntary, the holders of Series B Preferred
Stock shall be entitled to receive, prior and in preference to any distribution
of any of the assets of this corporation to the holders of Common Stock by
reason of their ownership thereof, an amount per Series B Preferred Stock share
equal to $40.00 (such amount being referred to herein as the "Premium"). If upon
the occurrence of such event, the assets and funds thus distributed amount the
holders of the Series B Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amount, then the
entire assets and funds of the corporation legally available for distribution
shall be distributed ratably among the holders of the Series B Preferred Stock
in proportion to the amount of such Stock owned by each such holder.
Notwithstanding the foregoing, if upon the occurrence of any event of
liquidation, dissolution or winding up of the corporation, the holders of the
Series B Preferred Stock would receive an aggregate amount in excess of $40.00
per share of Series B Preferred Stock if they were to convert such Series B
Preferred Stock into Common Stock, then such holders, in lieu of receiving a
distribution as a holder of Series B Preferred Stock, will be treated for the
purposes of such liquidation, dissolution or winding up as if they had
theretofore converted.
(b) After the distribution described in subsection (a) has been paid, the
remaining assets of the corporation available for distribution to shareholders
shall be distributed among the holders of Common Stock pro rata based on the
number of shares of Common Stock held by each such holder.
(c) A sale, conveyance or disposition of all or substantially all of the
assets of this corporation shall be deemed to be a liquidation, dissolution or
winding up within the meaning of this Section 2, if the holders of a
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majority of the outstanding Series B Preferred Stock elect to have such
transaction treated as a liquidation, failing which election the holders of the
Series B Preferred Stock shall receive the same treatment in such sale,
conveyance or disposition as the holders of shares of Common Stock.
3. Conversion. The holders of the Series B Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Conversion Rights. Each share of Series B Preferred Stock shall be
convertible, at the option of the holder thereof, at any time from and after the
date of issuance of such share, at the office of this corporation or any
transfer agent for the Series B Preferred Stock, into such number of fully paid
and nonassessable shares of Common Stock as is determined by dividing $40.00 per
share by the Conversion Price at the time in effect for such share. The initial
Conversion Price per share for shares of Series B Preferred Stock shall be $4.00
per share of Common Stock; provided, however, that the Conversion Price for the
Series B Preferred Stock (the "Conversion Price") shall be subject to adjustment
as set forth in subsection 3(c).
(b) Mechanics of Conversion. Before any holder of Series B Preferred Stock
shall be entitled to convert the same into shares of Common Stock, he shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the corporation or of any transfer agent for the Series B Preferred Stock,
and shall give written notice by mail, postage prepaid, to the corporation at
its principal corporate office, of the election to convert the same and shall
state therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. The corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Series B Preferred Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of whole shares of Common Stock to
which such holder shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series B Preferred Stock to be converted, and
the person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date. If the conversion is in
connection with an underwritten offer of securities registered pursuant to the
Securities Act of 1933, the conversion may, at the option of any holder
tendering Series B Preferred Stock for conversion, be conditioned upon the
closing with the underwriter of the sale of securities pursuant to such
offering, in which event the person or persons entitled to receive the Common
Stock issuable upon such conversion of the Series B Preferred Stock shall not be
deemed to have converted such Series B Preferred Stock until immediately prior
to the closing of such sale of securities.
(c) Conversion Price Adjustments of Preferred Stock. The Conversion Price
shall be subject to adjustment from time to time as follows:
(i) (A) If the corporation shall issue any Additional Stock (as defined
below) without consideration or for a consideration per share less than the
Conversion Price in effect immediately prior to the issuance of such Additional
Stock, the Conversion Price in effect immediately prior to each such issuance
shall forthwith (except as otherwise provided in this clause (i)) be reduced,
concurrently with such issue, to a price (calculated to the nearest cent)
calculated on a weighted average basis based upon the issue price, the
Conversion Price then applicable, the number of shares of Common Stock issued
and outstanding before such transaction and the number of shares of Common Stock
issuable in connection with such transaction.
(B) No reduction of the Conversion Price for the Series B Preferred Stock
shall be made in an amount less than one cent per share, provided that any
adjustments which are not required to be made by reason of this sentence shall
be carried forward and shall be either taken into account in any subsequent
adjustment made prior to three years from the date of the event giving rise to
the adjustment being carried forward, or, if no such adjustment is made, shall
be made at the end of three years from the date of the event giving rise to the
adjustment being carried forward. Except to the limited extent provided for in
subsections (E)(3) and (E)(4), no adjustment of such Conversion Price pursuant
to this subsection 3(c)(i) shall have the effect of increasing the Conversion
Price above the Conversion Price in effect immediately prior to such adjustment.
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(C) In the case of the issuance of Common Stock for cash, the consideration
shall be deemed to be the amount of cash paid therefor before deducting any
discounts, commissions or other expenses allowed, paid or incurred by the
corporation for any underwriting or otherwise in connection with the issuance
and sale thereof.
(D) In the case of the issuance of the Common Stock for a consideration in
whole or in part other than cash, the consideration other than cash shall be
deemed to be the fair value thereof as reasonably determined by the Board of
Directors, irrespective of any accounting treatment.
(E) In the case of the issuance of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities (which are not excluded from the
definition of Additional Stock), the following provisions shall apply:
1. The aggregate maximum number of shares of Common Stock deliverable upon
exercise of such options to purchase or rights to subscribe for Common Stock
shall be deemed to have been issued at the time such options or rights were
issued and for a consideration equal to the consideration (determined in the
manner provided in subsections 3(c)(i)(C) and (c)(i)(D)), if any, received by
the corporation upon the issuance of such options or rights plus the minimum
purchase price provided in such options or rights for the Common Stock covered
thereby.
2. The aggregate maximum number of shares of Common Stock deliverable upon
conversion of or in exchange for any such convertible or exchangeable securities
or upon the exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration equal to
the consideration, if any, received by the corporation for any such securities
and related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the additional consideration, if any, to be
received by the corporation upon the conversion or exchange of such securities
or the exercise of any related options or rights (the consideration in each case
to be determined in the manner provided in subsections 3(c)(i)(C) and
(c)(i)(D)).
3. In the event of any change in the number of shares of Common Stock
deliverable or any increase in the consideration payable to the corporation upon
exercise of such options or rights or upon conversion of or in exchange for such
convertible or exchangeable securities, including but not limited to a change
resulting from the antidilution provisions thereof, the Conversion Price of the
Series B Preferred Stock obtained with respect to the adjustment which was made
upon the issuance of such options, rights or securities, and any subsequent
adjustments based thereon, shall be recomputed to reflect such change, but no
further adjustment shall be made for the actual issuance of Common Stock or any
payment of such consideration upon the exercise of any such options or rights or
the conversion or exchange of such securities.
4. Upon the expiration of any such options or rights, the termination of
any such rights to convert or exchange or the expiration of any options or
rights related to such convertible or exchangeable securities, the Conversion
Price of the Series B Preferred Stock obtained with respect to the adjustment
which was made upon the issuance of such options, rights or securities or
options or rights related to such securities, and any subsequent adjustments
based thereon, shall be recomputed to reflect the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities or upon the exercise
of the options or rights related to such securities.
(ii) "Additional Stock" shall mean any shares of Common Stock issued (or
deemed to have been issued pursuant to subsection 3(c)(i)(E)) by this
corporation after the date any shares of Series B Preferred Stock are first
issued (the "Purchase Date") other than:
(A) Common Stock issued pursuant to a transaction described in subsection
3(c)(iii) hereof or pursuant to any warrants issued in connection with the sale
by the Company of the Series B Preferred Stock of issuance by the Company of
debt,
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(B) shares of Common Stock issuable or issued after the Purchase Date to
employees, directors, consultants or other persons having a business
relationship with the Company for the primary purpose of soliciting or retaining
their employment or business relationship, or
(C) Common Stock issued or issuable upon conversion of the Series B
Preferred Stock.
(iii) In the event the corporation should at any time or from time to time
after the Purchase Date fix a record date for the effectuation of a split or
subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Series B Preferred Stock shall be appropriately decreased so that
the number of shares of Common Stock issuable on conversion of each share of
such series shall be increased in proportion to such increase of outstanding
shares determined in accordance with subsection 3(c)(i)(E).
(iv) If the number of shares of Common Stock outstanding at any time after
the Purchase Date is decreased by a combination of the outstanding shares of
Common Stock, then following the record date of such combination, the Conversion
Price for the Series B Preferred Stock shall be appropriately increased so that
the number of shares of Common Stock issuable on conversion of each share of
such series shall be decreased in proportion to such decrease in outstanding
shares.
(d) Other Distributions. In the event the corporation shall declare a
distribution payable in securities of other persons, evidences of indebtedness
issued by the corporation or other persons, assets (excluding cash dividends) or
options or rights not referred to in subsection 3(c)(iii), then, in each such
case for the purpose of this subsection 3(d), the holders of the Series B
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the corporation into which their shares of Series B Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the corporation entitled to receive such distribution.
(e) Recapitalizations. If at any time or from time to time there shall be a
recapitalization of the Common Stock (other than a subdivision, combination or
merger or sale of assets transaction provided for elsewhere in this Section 3),
provision shall be made so that the holders of the Series B Preferred Stock
shall thereafter be entitled to receive upon conversion of the Series B
Preferred Stock the number of shares of stock of other securities or property of
the corporation or otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 3 with respect to the rights of the holders of the Series B
Preferred Stock after the recapitalization to the end that the provisions of
this Section 3 (including adjustment of the Conversion Price then in effect and
the number of shares purchasable upon conversion of the Series B Preferred
Stock) shall be applicable after that event as nearly equivalent as may be
practicable.
(f) No Impairment. The corporation will not, by amendment of its Restated
Certificate of Incorporation (the "Certificate") or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Series B Preferred Stock against
impairment.
(g) No Fractional Shares; Certificate as to Adjustments.
(i) No fractional shares shall be issued upon conversion of the Series B
Preferred Stock, and the number of shares of Common Stock to be issued shall be
rounded to the nearest whole share. Whether or not
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fractional shares are issuable upon such conversion shall be determined on the
basis of the total number of shares of Series B Preferred Stock the holder is at
the time converting into Common Stock and the number of shares of Common Stock
issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of the
Conversion Price of Series B Preferred Stock pursuant to this Section 3, the
corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series B Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The corporation shall, upon the written request at any
time of any holder of Series B Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price at the time in effect, and (C) the number
of shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of Series B Preferred
Stock.
(h) Notices of Record Date. In the event of any taking by the corporation
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock or any class of any other
securities or property, or to receive any other right, this corporation shall
mail to each holder of Series B Preferred Stock, at least 20 days prior to the
date specified therein, a notice specifying the date on which any such record is
to be taken for the purpose of such dividend; distribution or right, and the
amount and character of such dividend, distribution or right.
(i) Reservation of Stock Issuable Upon Conversion. This corporation shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of the Series B Preferred Stock such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series B Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series B
Preferred Stock, in addition to such other remedies as shall be available to the
holder of such Series B Preferred Stock, the corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes.
(j) Notices. Any notice required by the provisions of this Section 3 to be
given to the holders of shares of Series B Preferred Stock shall be deemed given
if deposited in the United States mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of this corporation.
4. Voting Rights. The holder of each share of Series B Preferred Stock
shall have the right to one vote for each share of Common Stock into which such
Series B Preferred Stock could then be converted (with any fractional share
determined on an aggregate conversion basis being rounded to the nearest whole
share), and with respect to such vote, such holder shall have full voting rights
and powers equal to the voting rights and powers of the holders of Common Stock,
and shall be entitled, notwithstanding any provision hereof, to notice of any
shareholders' meeting in accordance with the by-laws of this corporation, and
shall be entitled to vote, together with holders of Common Stock, with respect
to any question upon which holders of Common Stock have the right to vote.
5. Protective Provisions. So long as shares of Series B Preferred Stock are
outstanding, this corporation shall not without first obtaining the approval (by
vote or written consent) of the holders of at least 60% of the then outstanding
shares of Series B Preferred Stock (voting in accordance with Section 4 above):
(a) alter or change the rights, preferences or privileges of the shares of
Series B Preferred Stock so as to affect adversely the shares;
(b) create any new series of stock or any other securities convertible into
equity securities of the corporation having a preference over, or being on a
parity with, the Series B Preferred Stock with respect to voting, dividends,
liquidation rights or otherwise; or
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(c) do any act or thing which would result in taxation of the holders of
shares of the Series B Preferred Stock under Section 305 of the Internal Revenue
Code of 1986, as amended (or any comparable provision of the Internal Revenue
Code as hereafter from time to time amended).
6. Status of Converted Stock. In the event any shares of Series B Preferred
Stock shall be converted pursuant to Section 3 hereof, the shares so converted
shall be cancelled and shall not be reissuable by the corporation, and the
Certificate of this corporation shall be appropriately amended to affect the
corresponding reduction in the corporation's authorized capital stock.
IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf
of the Corporation by its President and attested by its Secretary this day
of , 1998.
V-L HOLDINGS CORP.
By:
[SEAL]
ATTEST:
- ---------------------------------------------------------
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EXHIBIT 5
[LATHAM & WATKINS LETTERHEAD]
March 13, 1998
Quantum Direct Corporation
6740 Shady Oak Road
Eden Prairie, Minnesota 55344-3433
Re: Registration Statement on Form S-4; Maximum of 57,994,612 shares of
Common Stock, par value $.01 per share ("Common Stock"), 81,250 shares
of Series B Convertible Preferred Stock, par value $.01 per share
("Preferred Stock") and 1,625,000 shares of Common Stock issuable upon
conversion of the Preferred Stock.
Ladies and Gentlemen:
In connection with the registration by Quantum Direct Corporation, a
Delaware corporation (the "Company"), of a maximum of 57,994,612 shares of
Common Stock and 81,250 shares of Preferred Stock (collectively, the "Shares")
and 1,625,000 shares of Common Stock issuable upon conversion of the Preferred
Stock (the "Conversion Shares"), under the Securities Act of 1933, as amended
(the "Act"), on Form S-4 filed with the Securities and Exchange Commission (the
"Commission") on March 13, 1998 (the "Registration Statement"), you have
requested our opinion with respect to the matters set forth below.
In our capacity as your counsel in connection with such registration, we
are familiar with the proceedings taken and proposed to be taken by the Company
in connection with the authorization and issuance of the Shares, and for the
purposes of this opinion, have assumed such proceedings will be timely completed
in the manner presently proposed. In addition, we have made such legal and
factual examinations and inquiries, including an examination of originals or
copies certified or otherwise identified to our satisfaction of such documents,
corporate records and instruments, as we have deemed necessary or appropriate
for purposes of this opinion.
In our examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the conformity
to authentic original documents of all documents submitted to us as copies.
We are opining herein as to the effect on the subject transaction only of
the General Corporation Law of the State of Delaware, and we express no opinion
with respect to the applicability thereto, or the effect thereon, of the laws of
any other jurisdiction or any other Delaware laws or as to any matters of
municipal law or the laws of any local agencies within any state.
Subject to the foregoing, it is our opinion that (i) the Shares to be
issued in connection with the merger of Victory Acquisition Corp. with and into
ValueVision International, Inc. (the "ValueVision Merger") and the merger of
Liberty Acquisition Corp. with and into National Media Corporation (the
"National Media Merger") have been duly authorized, and, upon the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware with
respect to the ValueVision Merger, the effectiveness of the National Media
Merger under the laws of the State of Minnesota and the issuance and delivery of
the Shares in the manner contemplated by the Registration Statement, will be
validly issued, fully paid and nonassessable, and (ii) the Conversion Shares
have been duly reserved and authorized, and, upon issuance and delivery thereof
in the manner contemplated by the Registration Statement and the Certificate of
Designation of Series B Convertible Preferred Stock of the Company will be
validly issued, fully paid and nonassessable.
We consent to your filing this opinion as an exhibit to the Registration
Statement and to the reference to our firm contained under the heading "Legal
Matters" in the Joint Proxy Statement/Prospectus included therein.
Very truly yours,
LATHAM & WATKINS
<PAGE> 1
EXHIBIT 8.1
[LATHAM & WATKINS LETTERHEAD]
March 13, 1998
ValueVision International, Inc.
6740 Shady Oak Road
Eden Prairie, Minnesota 55344-3433
Re: Registration Statement on Form S-4 of National Media Corporation and
ValueVision
International, Inc.
Ladies and Gentlemen:
You have requested our opinion as to the material United States Federal
income tax considerations applicable to the holders of ValueVision Common Stock
as a result of the merger between ValueVision International, Inc., a Minnesota
corporation (the "Company") and National Media Corporation, a Delaware
corporation (the "Merger"), as more fully described in the above-referenced
Registration Statement and the exhibits thereto filed with the Securities and
Exchange Commission (the "Registration Statement"). Capitalized terms not
defined herein have the meanings ascribed to them in the Registration Statement.
The facts as we understand them are set forth in the Registration
Statement. Based on such facts, the discussion set forth under the caption, "THE
MERGER -- Certain Federal Income Tax Consequences" in the Registration Statement
is our opinion as to the material United States federal income tax consequences
to shareholders of the Company expected to result from the receipt of Quantum
Direct Common Stock and receipt of cash pursuant to the Merger.
This opinion is based on current provisions of the Internal Revenue Code of
1986, as amended, applicable Treasury regulations promulgated thereunder, and
judicial and administrative decisions and rulings, all of which are subject to
change either prospectively or retroactively. Also, any variation or difference
from the facts as set forth in the Registration Statement and incorporated
herein might affect the conclusion stated herein.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of our name under the caption "QUESTIONS AND ANSWERS
ABOUT THE NATIONAL MEDIA/VALUEVISION MERGER" and "THE MERGER -- Certain Federal
Income Tax Consequences" in the Registration Statement.
Very truly yours,
LATHAM & WATKINS
<PAGE> 1
EXHIBIT 8.2
[DRINKER BIDDLE & REATH LLP LETTERHEAD]
March 13, 1998
National Media Corporation
Eleven Penn Center, Suite 1100
1835 Market Street
Philadelphia, Pennsylvania 19103
Ladies and Gentlemen:
We have acted as special tax counsel to National Media Corporation, a
Delaware corporation ("National Media"), in connection with the proposed
transactions (the "Merger") contemplated by the Agreement and Plan of
Reorganization and Merger dated as of January 5, 1998 (the "Merger Agreement")
by and among ValueVision International, Inc., a Minnesota Corporation, National
Media and V-L Holdings Corp., a Delaware corporation ("Parent"). In that
connection, we have participated in certain aspects of the preparation of a
Registration Statement under the Securities Act of 1933 on Form S-4 (the
"Registration Statement"), including a Joint Proxy Statement/Prospectus of
National Media and ValueVision dated March 13, 1998. Capitalized terms used but
not otherwise defined herein shall have the meanings ascribed to such terms in
the Registration Statement.
The facts as we understand them are set forth in the Registration
Statement. Based on such facts, the discussion set forth under the caption, "THE
MERGER -- Certain Federal Income Tax Consequences" in the Registration Statement
is our opinion as to the material United States federal income tax consequences
to stockholders of National Media expected to result from the receipt of
Quantum Direct Common Stock pursuant to the Merger.
This opinion is based on current provisions of the Internal Revenue Code of
1986, as amended, applicable treasury regulations promulgated thereunder, and
judicial and administrative decisions and rulings, all of which are subject to
change either prospectively or retroactively. Also, any variation or difference
from the facts as set forth in the Registration Statement and incorporated
herein might affect the conclusion stated herein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the sections captioned
"QUESTIONS AND ANSWERS ABOUT THE NATIONAL MEDIA/VALUEVISION MERGER" and "THE
MERGER -- Certain Federal Income Tax Consequences" in the Registration
Statement. In giving this consent we do not hereby admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very Truly Yours,
DRINKER BIDDLE & REATH LLP
<PAGE> 1
Exhibit 10.1
AMENDMENT TO EMPLOYMENT AGREEMENT
This AMENDMENT ("Amendment") to the EMPLOYMENT AGREEMENT by and between
VALUEVISION INTERNATIONAL, INC., a Minnesota corporation (hereinafter referred
to as "Employer") and ROBERT L. JOHANDER (hereinafter referred to as
"Employee"), dated September 1, 1993 ("Employment Agreement"), is made this 5th
day of January, 1998.
WHEREAS, in connection with the proposed merger between the
Employer and National Media Corporation, a Delaware corporation ("NMC"),
pursuant to the Agreement and Plan of Reorganization and Merger ("Merger
Agreement"), dated as of the date hereof between the Employer, NMC and V-L
Holdings Corp., a Delaware Corporation ("Parent"), the Employer and the Employee
wish to modify certain provisions of the Employment Agreement effective as of
the Effective Time, as defined in the Merger Agreement, ("Effective Time"); and
WHEREAS, the Employer and Employee further wish to amend the
Employment Agreement to reflect the changes to Employee's incentive
compensation, as provided in the Employment Agreement, that were previously
approved pursuant to resolutions adopted by the unanimous written consent of the
Board of Directors of the Employer effective July 1, 1995.
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein and for other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
1. The first sentence of Paragraph 3 of the Employment
Agreement is amended to read as follows effective as of the Effective Time:
"Employee shall serve as Chairman of the Board and Chief
Executive Officer of the Employer and Co-Chairman of the Board
of Parent and, until such time as a new Chief Executive
Officer of the Parent is hired, as Interim Chief Executive
Officer of the Parent, and shall perform such other duties as
assigned by the Board of Directors of Employer ("Board") from
time to time and shall faithfully and to the best of his
ability perform such reasonable duties and services of an
active, executive, administrative and managerial nature as
shall be specified and designated from time to time by the
Board so long as such duties are consistent with
responsibilities of executives with similar positions in the
consumer product, retail or direct marketing businesses with
total sales in excess of $100,000,000 annually."
<PAGE> 2
2. Paragraph 4(c) of the Employment Agreement shall be amended
to read in its entirety effective July 1, 1995, as follows:
"c. As incentive compensation to Employee ("Incentive
Compensation"), Employer shall grant to Employee, pursuant to
the Valuevision International, Inc. 1994 Executive Stock
Option and Compensation Plan ("Executive Plan"), two series of
Employee Stock Options to purchase its Class A Common Stock
(collectively "Options"), the first to be known as the "$8.50
Options" to be granted to Employee with an exercise price of
$8.50 each, for a total number of 375,000 shares on terms set
forth below, with an exercise period of seven years from
January 31, 1995, and the second series to be known as the
"$10.50 Options" to be granted to Employee with an exercise
price of $10.50 each, for a total number of 375,000 shares on
terms set forth below, with an exercise period of ten years
from January 1, 1995. Options shall become exercisable by
Employee on the earlier to occur of (i) January 1, 2002 and
(ii) should net income before taxes of Employer, as calculated
in accordance with generally accepted accounting principles by
the outside auditor regularly engaged by Employer ("Net
Income"), exceed the following amounts during each fiscal year
of Employer during the term hereof, the first day of the
following fiscal year thereof:
"(i) For the first fiscal year ended January 31,
1995, if Net Income is $2,000,000 or greater, Employee shall
be entitled to exercise 75,000 $8.50 Options and 75,000 $10.50
Options.
"(ii) For the second fiscal year ended January 31,
1996, if Net Income is $5,250,000 or greater, Employee shall
be entitled to exercise 75,000 $8.50 Options and 75,000 $10.50
Options.
"(iii) For third fiscal year ended January 31, 1997,
if Net Income is $8,500,000 or greater, Employee shall be
entitled to exercise 75,000 $8.50 Options and 75,000 $10.50
Options.
"(iv) For the fourth fiscal year ended January 31,
1998, if Net Income is $11,750,000 or greater, Employee shall
be entitled to exercise 75,000 $8.50 Options and 75,000 $10.50
Options.
"(v) For the fifth fiscal year ended January 31,
1999, if Net Income is $15,000,000 or greater, Employee shall
be entitled to exercise 75,000 $8.50 Options and 75,000 $10.50
Options.
"(vi) In the event that the Company fails to achieve
a Net Income Goal in any years, Employee will be able to
exercise the options attributable to such "missed" year if in
a subsequent year the Company's Net Income is greater than or
equal to such subsequent year's Net Income Goal plus the Net
Income Goal for the missed year. For example, in the event Net
Income for the fiscal year ended January 31, 1997, is
$10,500,000, Employee shall not be able to exercise Options
2
<PAGE> 3
available for the fiscal year January 31, 1995 (if Options
were not earned or purchased for the fiscal year ended January
31, 1995); however, if Net Income exceeds $13,750,000 in the
fiscal year ended January 31, 1997, Employee will be able to
exercise Options if they were not previously purchased during
the immediately preceding fiscal year ended January 31, 1996.
"(vii) Notwithstanding anything to the contrary set
forth hereinabove, the grant of the Options to Employee is
expressly subject to and contingent upon the Employer
obtaining shareholder approval of the Executive Plan pursuant
to Section 16(b)(3) of the Securities Exchange Act of 1934, as
amended. Employer shall take all actions reasonably necessary
to obtain such approval. If the Executive Plan is not approved
by the shareholders of the Employer on or before the next
annual meeting, this Employment Agreement shall be null and
void and of no effect whatsoever."
3. Bonus. The Employee shall be entitled to receive any
bonuses, whether in cash or otherwise, that may be awarded or granted to the
Employee by the Board of Directors (or an appropriate committee thereof) of the
Employer, in its sole discretion, in connection with Employee's employment
hereunder, including, without limitation, awards or grants based on the
financial performance of the Employer or made in connection with the
consummation of a corporate or financial transaction involving the Employer.
4. Indemnification. The Employer shall indemnify and hold
harmless the Employee, his executors, administrators or assigns, against any
costs or expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities or amounts paid in settlement incurred in connection with
any claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, to the fullest extent permitted under
applicable law and shall also advance expenses as incurred to the fullest extent
permitted under applicable law, provided that the Employee provides an
undertaking to repay such advances if it is ultimately determinated that he is
not entitled to such indemnification.
5. Except to the extent expressly modified by this Amendment,
the Employment Agreement shall remain in full force and effect in accordance
with its original terms. The Employment Agreement, as amended by this Amendment,
constitutes the entire agreement between the parties pertaining to the subject
matter hereof and fully supersedes any and all prior or contemporaneous
agreements or understandings between the parties hereto pertaining to the
subject matter hereof.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date first above written.
EMPLOYER: VALUEVISION INTERNATIONAL, INC.
a Minnesota corporation
By: /s/ David Quinby
Its: Vice President and General Counsel
EMPLOYEE:
/s/ Robert L. Johander
Robert L. Johander
APPROVED:
/s/ Paul D. Tosetti
Director, Compensation Committee Member
on behalf of ValueVision International, Inc.
4
<PAGE> 1
Exhibit 10.3
AMENDMENT TO EMPLOYMENT AGREEMENT
This AMENDMENT ("Amendment") to the EMPLOYMENT AGREEMENT by and between
VALUEVISION INTERNATIONAL, INC., a Minnesota corporation (hereinafter referred
to as "Employer") and NICHOLAS M. JAKSICH (hereinafter referred to as
"Employee"), dated September 1, 1993 ("Employment Agreement"), is made this 5th
day of January, 1998.
WHEREAS, in connection with the proposed merger between the
Employer and National Media Corporation, a Delaware corporation ("NMC"),
pursuant to the Agreement and Plan of Reorganization of Merger ("Merger
Agreement"), dated as of the date hereof between the Employer, NMC and V-L
HOLDINGS CORP., a Delaware Corporation ("Parent"), the Employer and the Employee
wish to modify certain provisions of the Employment Agreement effective as of
the Effective Time, as defined in the Merger Agreement, ("Effective Time"); and
WHEREAS, the Employer and Employee further wish to amend the
Employment Agreement to reflect the changes to Employee's incentive
compensation, as provided in the Employment Agreement, that were previously
approved pursuant to resolutions adopted by the unanimous written consent of the
Board of Directors of the Employer effective July 1, 1995.
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein and for other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
1. The first sentence of Paragraph 3 of the Employment
Agreement is amended to read as follows effective as of the Effective Time:
"Employee shall serve as President and Chief Operating Officer
of the Employer and the Parent and perform such other duties
as assigned by the Board of Directors of Employer ("Board")
from time to time and shall faithfully and to the best of his
ability perform such reasonable duties and services of an
active, executive, administrative and managerial nature as
shall be specified and designated from time to time by the
Board so long as such duties are consistent with
responsibilities of executives with similar positions in the
consumer product, retail or direct marketing businesses with
total sales in excess of $100,000,000 annually."
2. Paragraph 4(c) of the Employment Agreement shall be amended
to read in its entirety effective July 1, 1995, as follows:
"c. As incentive compensation to Employee ("Incentive
Compensation"), Employer shall grant to Employee, pursuant to
the Valuevision International, Inc.
<PAGE> 2
1994 Executive Stock Option and Compensation Plan ("Executive
Plan"), two series of Employee Stock Options to purchase its
Class A Common Stock (collectively "Options"), the first to be
known as the "$8.50 Options" to be granted to Employee with an
exercise price of $8.50 each, for a total number of 375,000
shares on terms set forth below, with an exercise period of
seven years from January 31, 1995, and the second series to be
known as the "$10.50 Options" to be granted to Employee with
an exercise price of $10.50 each, for a total number of
375,000 shares on terms set forth below, with an exercise
period of ten years from January 1, 1995. Options shall become
exercisable by Employee on the earlier to occur of (i) January
1, 2002, and (ii) should net income before taxes of Employer,
as calculated in accordance with generally accepted accounting
principles by the outside auditor regularly engaged by
Employer ("Net Income"), exceed the following amounts during
each fiscal year of Employer during the term hereof, the first
day of the following fiscal year thereof:
"(i) For the first fiscal year ended January 31,
1995, if Net Income is $2,000,000 or greater, Employee shall
be entitled to exercise 75,000 $8.50 Options and 75,000 $10.50
Options.
"(ii) For the second fiscal year ended January 31,
1996, if Net Income is $5,250,000 or greater, Employee shall
be entitled to exercise 75,000 $8.50 Options and 75,000 $10.50
Options.
"(iii) For third fiscal year ended January 31, 1997,
if Net Income is $8,500,000 or greater, Employee shall be
entitled to exercise 75,000 $8.50 Options and 75,000 $10.50
Options.
"(iv) For the fourth fiscal year ended January 31,
1998, if Net Income is $11,750,000 or greater, Employee shall
be entitled to exercise 75,000 $8.50 Options and 75,000 $10.50
Options.
"(v) For the fifth fiscal year ended January 31,
1999, if Net Income is $15,000,000 or greater, Employee shall
be entitled to exercise 75,000 $8.50 Options and 75,000 $10.50
Options.
"(vi) In the event that the Company fails to achieve
a Net Income Goal in any years, Employee will be able to
exercise the options attributable to such "missed" year if in
a subsequent year the Company's Net Income is greater than or
equal to such subsequent year's Net Income Goal plus the Net
Income Goal for the missed year. For example, in the event Net
Income for the fiscal year ended January 31, 1997, is
$10,500,000, Employee shall not be able to exercise Options
available for the fiscal year January 31, 1995 (if Options
were not earned or purchased for the fiscal year ended January
31, 1995); however, if Net Income exceeds $13,750,000 in the
fiscal year ended January 31, 1997, Employee will be able to
exercise Options if they were not previously purchased during
the immediately preceding fiscal year ended January 31, 1996.
2
<PAGE> 3
"(vii) Notwithstanding anything to the contrary set
forth hereinabove, the grant of the Options to Employee is
expressly subject to and contingent upon the Employer
obtaining shareholder approval of the Executive Plan pursuant
to Section 16(b)(3) of the Securities Exchange Act of 1934, as
amended. Employer shall take all actions reasonably necessary
to obtain such approval. If the Executive Plan is not approved
by the shareholders of the Employer on or before the next
annual meeting, this Employment Agreement shall be null and
void and of no effect whatsoever."
3. The following Paragraph 4(e) shall be added to the
Employment Agreement:
"(e) Stock Options. Effective immediately prior to the
Effective Time, Employer shall grant to Employee pursuant to
the Executive Plan, Stock Options to purchase 250,000 shares
of the Employer's Common Stock. The exercise price of each
share subject to any such Stock Option shall be equal to the
fair market value of such share as of the date the Stock
Option is granted. Such Stock Options shall become exercisable
to the extent of, and in installments of, one-third of such
Stock Options, commencing on January 31, 1999 and on every
anniversary date thereafter. Such installments shall be
cumulative and shall continue to vest so long as the Employee
shall continue to be employed by the Employer hereunder.
Notwithstanding the foregoing, if prior to January 31, 1999,
the average trading price of the common stock of the Parent
for any ten (10) consecutive day period exceeds an amount
equal to $8.00 per share, all of such Stock Options shall
accelerate and become immediately exercisable on the tenth day
of such period."
4. Indemnification. The Employer shall indemnify and hold
harmless the Employee, his executors, administrators or assigns, against any
costs or expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities or amounts paid in settlement incurred in connection with
any claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, to the fullest extent permitted under
applicable law and shall also advance expenses as incurred to the fullest extent
permitted under applicable law, provided that the Employee provides an
undertaking to repay such advances if it is ultimately determinated that he is
not entitled to such indemnification.
5. Except to the extent expressly modified by this Amendment,
the Employment Agreement shall remain in full force and effect in accordance
with its original terms. The Employment Agreement, as amended by this Amendment,
constitutes the entire agreement between the parties pertaining to the subject
matter hereof and fully supersedes any and all prior or contemporaneous
agreements or understandings between the parties hereto pertaining to the
subject matter hereof.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date first above written.
EMPLOYER: VALUEVISION INTERNATIONAL, INC.
a Minnesota corporation
By: /s/ David Quinby
Its: Vice President and General Counsel
EMPLOYEE:
/s/ Nicholas M. Jaksich
Nicholas M. Jaksich
APPROVED:
/s/ Paul D. Tosetti
Director, Compensation Committee Member
On Behalf of ValueVision International, Inc.
4
<PAGE> 1
Exhibit 10.11
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 5th day of January, 1998, by and between
ValueVision International, Inc., a Minnesota corporation (hereinafter referred
to as "Employer"), and Stuart R. Romenesko (hereinafter referred to as
"Employee").
WITNESSETH:
WHEREAS, Employee and Employer have agreed that Employee shall continue
as an employee of Employer following consummation of the transactions (the
"Transactions"), contemplated by that certain Agreement and Plan of
Reorganization and Merger (the "Merger Agreement") dated of even date herewith
by and among Employer, National Media Corporation ("NMC") and V-L Holdings,
Corp. ("Holdings Corp."), whereby Employer and NMC shall each become
wholly-owned subsidiaries of Holdings Corp.;
WHEREAS, Employer desires to assure itself of the services of Employee
following consummation of the Transactions and Employee desires to continue to
be employed by Employer as an employee following consummation of the
transactions on the terms and conditions set forth below, which Employee
acknowledges to constitute an increase in Employee's existing compensation
package; and
WHEREAS, Employer and Employee agree that the terms of this Agreement
shall only become effective immediately preceding consummation of the
Transactions.
NOW, THEREFORE, in consideration of the premises and mutual promises
contained in this Agreement, the parties hereto agree as follows:
1. EMPLOYMENT. Employer agrees, following consummation of the
Transactions, to continue to employ Employee and Employee agrees,
following consummation of the Transactions, to continue his employment
with Employer on the terms and conditions set forth in this Agreement.
2. TERM. The term of Employee's employment hereunder shall commence on the
Closing Date (as defined in the Merger Agreement), and shall continue
on a full-time basis for a period of twenty-four (24) months (the
"Term"). The "Employment Period" for purposes of this Agreement shall
be the period beginning on the Closing Date and ending at the time
Employee shall cease to act as an employee of Employer. In the event
the Transactions are not consummated, this Agreement shall be of no
further force or effect.
3. DUTIES. Employee shall serve as Senior Vice President, Finance and
Chief Financial Officer of Employer and shall perform the duties as
assigned by Employer, from time to time, and shall faithfully, and to
the best of his ability, perform such reasonable duties and services of
an active, executive, administrative and managerial nature as shall be
specified and designated, from time to time, by Employer. Employee
agrees to devote his full time and skills to such employment while he
is so employed, subject to a vacation allowance of not less than three
(3) weeks during each year of the term, or such additional vacation
allowance as may be granted in the sole discretion of
1
<PAGE> 2
Employer. Employer's Chief Executive Officer shall provide Employee
with a performance review at least annually.
4. COMPENSATION. Employee's compensation for the services performed under
this Agreement shall be as follows:
a. Base Salary. Employee shall receive a base salary of at
least Two Hundred Ten Thousand and No/100 Dollars ($ 210,000.00) per
year for the term of this Agreement ("Base Salary").
b. Bonus Salary. Employee may receive bonus salary ("Bonus
Salary"), from time to time, based upon Employee's job performance.
Employer's Chief Executive Officer and Employee shall establish job
performance criteria for Employee at least annually, which shall be the
basis of such Bonus Salary.
c. Automobile Allowance. Employer shall pay Employee a monthly
automobile allowance of $450.00 per month ("Auto Allowance").
d. Professional Fees. Employer shall pay all of Employee's
professional fees, including without limitation, professional
association fees and memberships, and all of Employee's continuing
accounting education fees and expenses, up to $5,000 annually
("Professional Fees").
5. OTHER BENEFITS DURING THE EMPLOYMENT PERIOD.
a. Employee shall receive all other benefits made available to
executive officers of Employer, from time to time, at its discretion
("Benefits"). It is understood and agreed that Employer may terminate
such Benefits or change any benefit programs at its sole discretion, as
they are not contractual for the term hereof.
b. Employer shall reimburse Employee for all reasonable and
necessary out-of-pocket business expenses incurred during the regular
performance of services for Employer, including, but not limited to,
entertainment and related expenses so long as Employer has received
proper documentation of such expenses from Employee.
c. Employer shall furnish Employee with such working
facilities and other services as are suitable to Employee's position
with Employer and adequate to the performance of his duties under this
Agreement.
6. TERMINATION OF EMPLOYMENT.
a. Death. In the event of Employee's death, this Agreement
shall terminate and Employee shall cease to receive Base Salary, Bonus
Salary, Auto Allowance, Professional Fees and Benefits as of the date
on which his death occurs.
b. Disability. If Employee becomes disabled such that Employee
cannot perform the essential functions of his job, and the disability
shall have continued for a period of more than one hundred twenty (120)
consecutive days, then Employer may, in its sole discretion, terminate
this
2
<PAGE> 3
Agreement and Employee shall then cease to receive Base Salary, Bonus
Salary, Auto Allowance, Professional Fees and all other Benefits, on
the date this Agreement is so terminated; provided however, Employee
shall then be entitled to such disability, medical, life insurance, and
other benefits as may be provided generally for disabled employees of
Employer when payments and benefits hereunder ceases.
c. Voluntary Termination. In the event that Employee
voluntarily terminates his employment, he shall cease to receive Base
Salary, Bonus Salary, Auto Allowance, Professional Fees and all other
Benefits as of the date of such termination.
d. Termination With Cause. Employer shall be entitled to
terminate this Agreement and Employee's employment hereunder for Cause
(as herein defined), and in the event that Employer elects to do so,
Employee shall cease to receive Base Salary, Bonus Salary, Auto
Allowance, Professional Fees and Benefits as of the date of such
termination specified by Employer. For purposes of this Agreement,
"Cause" shall mean: (i) a material act or act of fraud which results in
or is intended to result in Employee's personal enrichment at the
direct expense of Employer, including without limitation, theft or
embezzlement from Employer; (ii) public conduct by Employee
substantially detrimental to the reputation of Employer, (iii) material
violation by Employee of any Employer policy, regulation or practice;
(iv) conviction of a felony; or (v) habitual intoxication, drug use or
chemical substance use by any intoxicating or chemical substance.
Notwithstanding the forgoing, Employee shall not be deemed to have been
terminated for Cause unless and until Employee has received thirty (30)
days' prior written notice (a "Dismissal Notice") of such termination.
In the event Employee does not dispute such determination within thirty
(30) days after receipt of the Dismissal Notice, Employee shall not
have the remedies provided pursuant to Section 6.g. of this Agreement.
e. By Employee for Employer Cause. Employee may terminate this
Agreement upon thirty (30) days written notice to Employer (the
"Employee Notice") upon the occurrences without Employee's express
written consent, of any one or more of the following events, provided,
however, that Employee shall not have the right to terminate this
Agreement if Employer is able to cure such event within thirty (30)
days (ten (10) days with regard to Subsection (ii) hereof) following
delivery of such notice:
(i) Employer substantially diminishes Employee's
duties such that they are no longer of an executive nature as
contemplated by Section 3 hereof or Employer requires Employee to
relocate his offices and perform his duties hereunder more than 25
miles from Employer's current corporate offices located at 6740 Shady
Oak Road, Eden Prairie, Minnesota 55344 or
(ii) Employer materially breaches its obligations to
pay Employee as provided for herein and such failure to pay is not a
result of a good faith dispute between Employer and Employee.
f. Other. If Employer terminates this Agreement for any reason
other than as set forth in Sections 6.a, 6.b., 6.c or 6.d. above, or if
Employee terminates this Agreement
3
<PAGE> 4
pursuant to Section 6.e. above, Employer shall immediately pay Employee
in a lump sum payment, an amount equal to Base Salary, Bonus Salary,
Auto Allowance and Professional Fees which would otherwise be payable
until the end of the Term (collectively, the "Severance Payment"). In
addition, Employer shall continue to provide Employee with Benefits
until the end of the Term. For purposes of calculating Bonus Salary
payable pursuant to this Section 6.f., Employee shall receive Bonus
Salary equal to the last Bonus Salary actually paid the Employee,
prorated for the number of months to be covered by the Severance
Payment. Notwithstanding the foregoing, following a Change of Control
(as hereinafter defined), the number of months upon which the
calculation of the Severance Payment shall be based and for which
Employer shall be obligated to provide Employee with the Benefits
pursuant to this Section 6.f. shall be the greater of (i) the remaining
number of months left in the Term and (ii) eight (8) months.
g. Arbitration. In the event that Employee disputes a
determination that Cause exists for terminating his employment pursuant
to Section 6.d. of this Agreement, or Employer disputes the
determination that cause exists for Employee's termination of his
employment pursuant to Section 6.e of this Agreement, either such
disputing party may, in accordance with the Rules of the American
Arbitration Association ("AAA"), and within 30 days of receiving a
Dismissal Notice or Employee Notice, as applicable, file a petition
with the AAA for arbitration of the dispute, the costs thereof
(including legal fees and expenses) to be shared equally by the
Employer and Employee unless an order of the AAA provides otherwise.
Such proceeding shall also determine all other items then in dispute
between the parties relating to this Agreement, and the parties
covenant and agree that the decision of the AAA shall be final and
binding and hereby waive their rights to appeal thereof.
7. CONFIDENTIAL INFORMATION. Employee acknowledges that the confidential
information and data obtained by him during the course of his
performance under this Agreement concerning the business or affairs of
Employer, or any entity related thereto, are the property of Employer
and will be confidential to Employer. Such confidential information may
include, but is not limited to, specifications, designs, and processes,
product formulae, manufacturing, distributing, marketing or selling
processes, systems, procedures, plans, know-how, services or material,
trade secrets, devices (whether or not patented or patentable),
customer or supplier lists, price lists, financial information
including, without limitation, costs of materials, manufacturing
processes and distribution costs, business plans, prospects or
opportunities, and software and development or research work, but does
not include Employee's general business or direct marketing knowledge
(the "Confidential Information"). All the Confidential Information
shall remain the property of Employer and Employee agrees that he will
not disclose to any unauthorized persons or use for his own account or
for the benefit of any third party any of the Confidential Information
without Employer's written consent. Employee agrees to deliver to
Employer at the termination of this employment, all memoranda, notes,
plans, records, reports, video and audio tapes and any and all other
documentation (and copies thereof) relating to the business of
Employer, or any entity related thereto, which he may then possess or
have under his direct or indirect control. Notwithstanding any
provision
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herein to the contrary, the Confidential Information shall specifically
exclude information which is publicly available to Employee and others
by proper means, readily ascertainable from public sources known to
Employee at the time the information was disclosed or which is
rightfully obtained from a third party, information required to be
disclosed by law provided Employee provides notice to Employer to seek
a protective order, or information disclosed by Employee to his
attorney regarding litigation with Employer.
8. INVENTIONS AND PATENTS. Employee agrees that all inventions,
innovations or improvements in the method of conducting Employer's
business or otherwise related to Employer's business (including new
contributions, improvements, ideas and discoveries, whether patentable
or not) conceived or made by him during the Employment Period belong to
Employer. Employee will promptly disclose such inventions, innovations
and improvements to Employer and perform all actions reasonably
requested by Employer to establish and confirm such ownership.
9. NONCOMPETE AND RELATED AGREEMENTS.
a. Employee agrees that during the Noncompetition Period (as
herein defined), he will not: (i) directly or indirectly own, manage,
control, participate in, lend his name to, act as consultant or advisor
to or render services (alone or in association with any other person,
firm, corporation or other business organization; provided however,
that the parties hereto agree that this provision may not be used to
prohibit employee for working for an accounting firm which so provides
such services, so long as Employee does not specifically provide
accounting services to a Restricted Business as defined herein) for any
other person or entity engaged in the television home shopping
business, any mail order business that directly competes with Employer
or any of its affiliates by selling merchandise primarily of the type
offered in and using a similar theme as any of Employer's or its
affiliates' catalogs during the term of this Agreement or any business
which Employer (upon authorization of its board of directors) has
invested significant research and development funds or resources and
contemplates entering into during the next twelve (12) months (the
"Restricted Business"), anywhere that Employer or any of its affiliates
operates during the term of this Agreement within the continental
United States (the "Restricted Area"); (ii) have any interest directly
or indirectly in any business engaged in the Restricted Business in the
Restricted Area other than Employer (provided that nothing herein will
prevent Employee from owning in the aggregate not more than one percent
(1%) of the outstanding stock of any class of a corporation engaged in
the Restricted Business in the Restricted Area which is publicly
traded, so long as Employee has no participation in the management or
conduct of business of such corporation), (iii) induce or attempt to
induce any employee of Employer or any entity related to Employer to
leave his, her or their employ, or in any other way interfere with the
relationship between Employer or any entity related to Employer and any
other employee of Employer or any entity related to Employer, or (iv)
induce or attempt to induce any customer, supplier, franchisee,
licensee, other business relation of any member of Employer or any
entity related to Employer to cease doing business with Employer or any
entity related to Employer,
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<PAGE> 6
or in any way interfere with the relationship between any customer,
franchisee or other business relation and Employer or any entity
related to Employer, without the prior written consent of Employer. For
purposes of this Agreement, "Noncompetition Period" shall mean the
period commencing as of the Closing Date and ending on the last day of
the sixth (6th) month following the date on which Employee is
terminated during the term of this Agreement.
b. If, at the time of enforcement of any provisions of Section
9, a court of competent jurisdiction holds that the restrictions stated
therein are unreasonable under circumstances then existing, the parties
hereto agree that the maximum period, scope or geographical area
reasonable under such circumstances will be substituted for the stated
period, scope or area.
c. Employee agrees that the covenants made in this Section 9
shall be construed as an agreement independent of any other provision
of this Agreement and shall survive the termination of this Agreement.
10. TERMINATION OF EXISTING AGREEMENTS. This Agreement, effective on the
Closing Date and upon consumption of the Transactions supersedes and
preempts any prior understandings, agreements or representations,
written or oral, by or between Employee and Employer, which may have
related to the employment of Employee, Employee's Agreement Not to
Compete with Employer, or the payment of salary or other compensation
by Employer to Employee, and upon this Agreement becoming effective,
all such understandings, agreements and representations shall terminate
and shall be of no further force or effect.
11. SPECIFIC PERFORMANCE. Employee and Employer acknowledge that in the
event of a breach of this Agreement by either party, money damages
would be inadequate and the nonbreaching party would have no adequate
remedy at law. Accordingly, in the event of any controversy concerning
the rights or obligations under this Agreement, such rights or
obligations shall be enforceable in a court of equity by a decree of
specific performance. Such remedy, however, shall be cumulative and
nonexclusive and shall be in addition to any other remedy to which the
parties may be entitled.
12. SALE, CONSOLIDATION OR MERGER. In the event of a sale of the stock, or
substantially all of the stock, of Employer or Holdings Corp., or
consolidation or merger of Employer or Holdings Corp. with or into
another corporation or entity, or the sale of substantially all of the
operating assets of Employer or Holdings Corp. to another corporation,
entity or individual, Employer may assign its rights and obligations
under this Agreement to its successor-in-interest and such
successor-in-interest shall be deemed to have acquired all rights and
assumed all obligations of Employer hereunder.
13. STOCK OPTIONS. Immediately preceding the Closing (as defined in the
Merger Agreement) Employee shall be granted incentive stock options in
accordance with the Second Amended
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1990 Stock Option Plan of Employer (the "Plan") for 50,000 shares of
ValueVision International, Inc. common stock ("Stock Options") subject
to the provisions thereof and exercisable at the time or times
established by the Stock Option Agreement. The Stock Options shall vest
in equal amounts, one-third each, for the next successive three (3)
years as measured from the anniversary of the Closing Date, or such
earlier date in the sole discretion of the Employer's Chief Executive
Officer. All such Stock Options shall automatically vest upon a
termination of this Agreement prior to the end of the Term (unless
pursuant to Sections 6.c or 6.d.) or upon a Change of Control.
Notwithstanding the forgoing or anything contained in the Plan or the
Stock Option Agreement, the consummation of the Transactions shall not
be deemed a Change of Control for purposes of vesting of the Stock
Options, although any transaction in the future similar to the
Transactions involving either Employer or Holdings Corp. shall
constitute a Change of Control. In the event the Transactions are not
consummated, the Stock Options shall terminate.
14. CHANGE OF CONTROL. For purposes of this Agreement, a "Change of
Control" shall mean an event as a result of which: (i) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities and
Exchange Act of 1934 (the "Exchange Act")), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act,
except that a person shall be deemed to have "beneficial ownership" of
all securities that such person has a right to acquire, whether such
right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 20% of the total voting power of
the voting stock of either Employer or Holdings Corp. (or their
successors and assigns); (ii) Employer or Holdings Corp. consolidates
with, or merges with or into another corporation or sells, assigns,
conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any person, or any corporation
consolidates with, or merges with or into, Employer or Holdings Corp.,
in any such event pursuant to a transaction in which the outstanding
voting stock of Employer or Holdings Corp. is changed into or exchanged
for cash, securities or other property, other than any such transaction
where (A) the outstanding voting stock of Employer or Holdings Corp. is
changed into or exchanged for (x) voting stock of the surviving or
transferee corporation or (y) cash, securities (whether or not
including voting stock) or other property, and (B) the holders of the
voting stock of Employer or Holdings Corp. immediately prior to such
transaction own, directly or indirectly, not less than 80% of the
voting power of the voting stock of the surviving corporation
immediately after such transaction; or (iii) during any period of two
consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of Employer or Holdings Corp.
(together with any new directors whose election by such Board or whose
nomination for election by the stockholders of Employer or Holdings
Corp. was approved by a vote of 66-2/3% of the directors then still in
office who were either directors at the beginning of such period or
whose election ro nomination for election was previously so approved)
cease for any reason to constitute a majority of the Board of Employer
or Holdings Corp., respectively, then in office, or (iv) Employer or
Holdings Corp. is liquidated or dissolved or adopts a plan of
liquidation.
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<PAGE> 8
15. NO OFFSET - NO MITIGATION. Employee shall not be required to mitigate
damages under this Agreement by seeking other comparable employment.
The amount of any payment or benefit provided for in this Agreement,
including welfare benefits, shall not be reduced by any compensation or
benefits earned by or provided to Employee as the result of employment
by another employer.
16. WAIVER. The failure of either party to insist, in any one or more
instances, upon performance of the terms or conditions of this
Agreement shall not be construed as a waiver or relinquishment of any
right granted hereunder or of the future performance of any such term,
covenant or condition.
17. ATTORNEY'S FEES. In the event of any action for breach of, to enforce
the provisions of, or otherwise arising out of or in connection with
this Agreement, the prevailing party in such action, as determined by a
court of competent jurisdiction in such action, shall be entitled to
receive its reasonable attorney fees and costs from the other party. If
a party voluntarily dismisses an action it has brought hereunder, it
shall pay to the other party its reasonable attorney fees and costs.
18. NOTICES. Any notice to be given hereunder shall be deemed sufficient if
addressed in writing, and delivered by registered or certified mail or
delivered personally: (i) in the case of Employer, to Employer's
principal business office; and (ii) in the case of Employee, to his
address appearing on the records of Employer, or to such other address
as he may designate in writing to Employer.
19. SEVERABILITY. In the event that any provision shall be held to be
invalid or unenforceable for any reason whatsoever, it is agreed such
invalidity or unenforceability shall not affect any other provision of
this Agreement and the remaining covenants, restrictions and provisions
hereof shall remain in full force and effect and any court of competent
jurisdiction may so modify the objectionable provisions as to make it
valid, reasonable and enforceable.
20. AMENDMENT. This Agreement may be amended only by an agreement in
writing signed by the parties hereto.
21. BENEFIT. This Agreement shall be binding upon and inure to the benefit
of and shall be enforceable by and against Employee's heirs,
beneficiaries and legal representatives. It is agreed that the rights
and obligations of Employee may not be delegated or assigned except as
specifically set forth in this Agreement.
22. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of Minnesota.
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IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed as of the day, month and year first above written.
EMPLOYER: VALUEVISION INTERNATIONAL, INC.
By /s/ Robert L. Johander
------------------------------
Robert L. Johander
Its: Chief Executive Officer
EMPLOYEE: /s/ Stuart R. Romenesko
------------------------------
Stuart R. Romenesko
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<PAGE> 1
EXHIBIT 10.13
AGREEMENT
This Agreement is made the 24th day of April, 1997, between
National Media Corporation, a Delaware corporation (the "Company"), and Mark P.
Hershhorn (the "Executive").
The purpose of this Agreement is to set forth the terms of the
separation of Mark P. Hershhorn as an employee of the Company pursuant to an
Employment Agreement between the Company and Executive dated August 26, 1994, as
amended (the "Contract"). This Agreement constitutes, inter alia, 60 days' prior
written notice of termination pursuant to Section 2 of the Contract, effective
April 24, 1997, and, accordingly, Executive's employment by the Company will
terminate on June 23, 1997 (the "Termination Date").
The parties, intending to be legally bound, agree as follows:
<PAGE> 2
1. Services. Executive shall promptly vacate his office and
remove all personal belongings from the Company's premises, and return to the
Company all Company property in his possession or under his control.
Notwithstanding the continuation of his status as an employee until the
Termination Date, (a) Executive is not expected to perform any services for the
Company or any subsidiary, (b) Executive shall not enter any premises of the
Company or act in any way on behalf of the Company, all his authority being
revoked upon the execution and delivery of this Agreement, and (c) Executive
shall incur no charges for the account of or for which he will seek
reimbursement from the Company after April 24, 1997.
2. Compensation Before and After the Termination Date. The
Company will continue to pay to Executive compensation at Executive's current
Base Rate of $550,000 per annum, until the Termination Date and shall continue
to do so, as contemplated by Paragraph 9(d)(1)(i) of the Contract, from the
Termination Date through June 22, 1999, which is two years after the Termination
Date, subject to applicable withholding taxes and other legally required
deductions and subject to the provisions of Paragraph 9 (d)(1)(i) of the
Contract. If during such period Executive
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<PAGE> 3
accepts employment he might not otherwise accept under Paragraph 12(a)(1) of the
Contract, he will promptly notify the Company of such employment and provide the
Company with information about compensation to be received in connection with
such activity, so that the appropriate offsets contemplated by Paragraph
9(d)(1)(i) can be made.
3. Benefits After the Termination Date. Pursuant to the
provisions of Paragraph 9(d)(1)(ii) of the Contract, the Company shall maintain
in full force and effect, for the period through August 30, 1998, all employee
benefit plans and programs for Executive's benefit, except option plans and
Company bonus plans. It is hereby agreed that Executive shall not be entitled to
any payment pursuant to the 1995 Management Incentive Plan of the Company in
respect of the years ended March 31, 1997 or 1998.
4. Expense Reimbursement. Executive has delivered to the
Company each credit card supplied to him for his use in the conduct of the
Company's business, and will incur no charges on such credit cards after the
date hereof. The Company will process and pay in the ordinary course any
business expenses
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<PAGE> 4
submitted by the Executive which were incurred on or before April 24, 1997.
5. Automobile Allowance, Insurance, and Club Dues. The Company
will include in Executive's compensation payments solely through the Termination
Date the $800.00 per month automobile allowance provided for in the Contract,
pay premiums on the life insurance policy held by Executive's Life Insurance
Trust for periods prior to the Termination Date (and the Company shall seek no
refunds for premiums paid thereon to date), and pay club dues for periods prior
to the Termination Date. To the extent that Executive desires to continue any
such insurance coverage or club membership subsequent to the Termination Date,
it shall be Executive's responsibility to pay any such premiums or dues which
are to be paid prior to or following the Termination Date to the extent that
they relate to any period after the Termination Date.
6. The Contract. Except to the extent modified in Sections 1
through 5 of this Agreement, the Contract will remain in full force and effect
as it may apply to the Company and to Executive as an employee terminated under
Paragraph 9(c) of the
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<PAGE> 5
Contract; and Executive's obligations under Paragraph 12, "Restrictive
Covenant," are specifically confirmed.
7. Payments in Lieu. In settlement of disagreements between
the parties as to their rights and obligations under the Contract, including but
not limited to Executive's right to outplacement services, the Company will pay
to Executive, promptly after the right to revoke an acceptance of this Agreement
terminates, as provided in Paragraph 10 hereof, the sum of $25,000. The Company
intends to make withholding and deductions in respect of this payment at the
same rates as have been in the case of Executive's compensation under the
Contract.
8. Directorships and Officerships. Executive hereby confirms
his resignation as an officer and as a director of the Company, and of each
subsidiary and affiliate of the Company of which he is currently serving as a
director or officer, effective at the close of business on April 24, 1997.
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9. Releases.
a. In consideration of the payment and arrangements in this
Agreement, Executive, for himself and on behalf of each of his heirs, executors,
administrators, legal representatives and assigns, does hereby remise, release
and forever discharge the Company, and each and every of the predecessors,
successors, parents, subsidiaries, affiliates, assigns, directors, officers,
shareholders, employees or agents of the Company, both current and former (the
"Company Released Parties"), of and from every claim, demand, right of action or
cause of action whatsoever, and from all debts, obligations, costs (including
but not limited to attorney's fees), expenses, damages, losses and liabilities
whatsoever, whether known or unknown, that Executive ever had, now has, or
hereafter may have against the Company Released Parties arising out of or
relating to any matter, thing, or event occurring up to and including the date
of this Agreement, relating to the Contract or to Executive's employment by the
Company and its subsidiaries, or to his separation or to his status as a
director and officer, including claims arising under the Age Discrimination in
Employment Act, Pennsylvania Human Relations Act, and any other
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<PAGE> 7
federal, state or local statute, ordinance, rule, regulation or common-law
principle. Notwithstanding the foregoing, nothing in this section is intended to
diminish any right that Executive may have as a former officer or director under
any provisions in the Company's Certificate of Incorporation, Bylaws or in the
Contract, providing indemnification to Executive (including, to the extent there
provided but not otherwise, the payment of legal counsel fees and/or costs and
expenses incurred in connection therewith). If, notwithstanding the foregoing,
Executive makes any claim against the Company or any of its subsidiaries that
are finally determined to be with respect to the matters covered by this
paragraph, the Company shall be entitled to forfeit Executive's right to any
further payment hereunder or under the Contract.
b. In consideration of the arrangements in this Agreement,
the Company, for itself and on behalf of its successors and assigns does hereby
remise, release and forever discharge Executive and his heirs, executors,
administrators, and legal representatives (hereinafter "the Executive Released
Parties"), of and from every claim, demand, right of action or cause of action
whatsoever, and from all debts, obligations,
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<PAGE> 8
costs (including but not limited to attorney's fees), expenses, damages, losses
and liabilities whatsoever, whether known or unknown, that the Company ever had,
now has, or hereafter may have against the Executive Released Parties arising
out of or relating to any matter, thing, or event occurring up to and including
the date of this Agreement, relating to the Contract or to Executive's
employment by the Company and its subsidiaries, or to his separation or to his
status as a director and officer, including claims arising under any federal,
state or local statute, ordinance, rule, regulation or common-law principle.
10. Time Allowed to Review this Agreement. In compliance with
the Older Workers Benefit Protection Act ("OWBPA"), Executive has twenty-one
(21) days to consider this Agreement prior to signing the Agreement and is
hereby advised to consult an attorney prior to signing the Agreement. In
addition, Executive will have the right to revoke or cancel the Agreement within
seven (7) days after Executive signs the Agreement by submitting written notice
of revocation to Brian Sisko, Esq., National Media Corporation, Eleven Penn
Center, Suite 1100, 1835 Market Street, Philadelphia, PA, 19103. If Executive
signs the Agreement and does not revoke the Agreement, the Agreement will
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<PAGE> 9
become binding, irrevocable, and enforceable at the expiration of such seven (7)
day revocation period, and any rights which Executive may have under any
applicable statute will be waived. Executive is not obligated to sign this
Agreement, and refusal to do so will not jeopardize Executive's right to any
benefits to which he is already entitled.
11. Confidentiality; Cooperation.
a. Neither the Company nor Executive will issue any press
release or publish any public document or make any public statement relating to
or connected with or arising out of any matters relating to his employment by
the Company or its termination or any matters contained in this Agreement
without the prior written consent of the other as to its contents and the manner
of its presentation and publication, except as, after consultation with counsel,
either party may conclude disclosure is required by law or regulation. In
response to any inquiry as to the status of the Executive or his termination
from the Company, neither the Company nor the Executive shall respond other than
as provided for in any previously agreed to press release or other public
statement, provided, however, that the Company may confirm to third parties upon
the request of Executive the dates of Executive's employment
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<PAGE> 10
at the Company, his titles and/or compensation. Except as set out in this
paragraph the existence and contents of this Agreement shall remain entirely
confidential, except that each party may disclose to the Internal Revenue
Service and to their respective professional advisors.
b. Subsequent to the Termination Date, the Executive will
consult and cooperate with the Company, to the extent reasonably requested by
the Company, without further compensation, in respect of (A) any litigation or
claims now pending or subsequently commenced or made against the Company which
relate to the period during which the Executive was employed by the Company and
with respect to which the Executive had knowledge or involvement, and (B) the
resolution of existing or former business relationships of the Company in which
the Executive had direct involvement, on behalf of the Company, during the
period he was employed by the Company; provided. however, that (a) the Company
shall provide Executive with reasonable notice of any request for consultation
or assistance; (b) such consultation or assistance will be given at such time or
times as are reasonably convenient to both the Company and Executive and so as
to not interfere with any business
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<PAGE> 11
activity or employment of Executive; (c) the Company shall advance or reimburse
to Executive any out-of-pocket costs incurred by him in rendering such
consultation or assistance; and (d) the Executive shall be entitled to such
exoneration and indemnification with respect to such matters as is referred to
in the penultimate sentence of Section 9a hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
NATIONAL MEDIA CORPORATION
By:
-------------------------------------
Authorized Officer
-------------------------------------
Mark P. Hershhorn
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EXHIBIT 10.8
OPTION AGREEMENT
VALUEVISION INTERNATIONAL, INC.
TO
ROBERT J. KORKOWSKI
OPTION AGREEMENT made as of 3rd day of June, 1994, between ValueVision
International, Inc., a Minnesota corporation ("ValueVision"), and Robert J.
Korkowski, a director of ValueVision ("Director").
WHEREAS, ValueVision desires, by affording Director an opportunity to
purchase its shares of Class A Common Stock, $0.01 par value ("Shares"), as
provided therein, which Agreement was created to carry out the resolution of the
Board of Directors of ValueVision which grant an option to Director as
recognition of his efforts in serving on the Board of Directors of ValueVision.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Grant of Option. ValueVision hereby irrevocably grants to Director
the right and option, hereinafter called the Option, to purchase all or any part
of an aggregate of forty thousand (40,000)
<PAGE> 2
Shares (such number being subject to adjustment as provided in paragraph 7
hereof) on the terms and conditions herein set forth.
2. Purchase Price. The purchase price of the Shares covered by the
Option shall be $4.125 per Share, which price is the average between the closing
"bid" and "ask" price of one Share on the NASDAQ System on June 2, 1994, which
is the last trade date prior to the date hereof.
3. Exercise of Option. The right to exercise the Option in whole or in
part, shall be effective on or after June 3, 1995 and shall continue thereafter
until midnight, central time, June 3, 2000, except as otherwise specifically
limited herein. The purchase price of Shares acquired through exercise of any
part of the Option shall be paid in full in cash at the time of exercise.
Director, as holder of the Option, shall not have any of the rights of a
Shareholder with respect to the Shares covered by the Option except to the
extent that one or more certificates for such Shares shall be delivered to him
upon the due exercise of all or any part of the Option.
4. Non-Transferability. The Option shall not be transferable otherwise
than by will or the laws of descent and distribution, and the Option may be
exercised, during the lifetime of Director, only by Director. More particularly
(but without limiting the generality of the foregoing), the Option may not be
<PAGE> 3
assigned, transferred (except as provided above), pledged, or hypothecated in
any way, shall not be assignable by operation of law, and shall not be subject
to execution, attachment, or similar process. Any attempted assignment,
transfer, pledge, hypothecation, or other disposition of the Option contrary to
the provisions hereof, and the levy of any execution, attachment, or similar
process upon the Option shall be null and void and without effect.
5. Exercise Upon Death. If Director dies while the Option remains in
effect, the Option may be exercised (to the extent that Director shall have been
entitled to do so at the date of his death) by the legatee or legatees of
Director under his will, or by his personal representatives or distributees, at
any time within ninety (90) days after his death. Upon the expiration of such
ninety (90) day period, or, if earlier, upon the expiration date of the Option
as set forth in Paragraph 3 hereof, the Option shall become null and void.
6. Changes in Capital Structure. If all or any portion of the Option
shall be exercised subsequent to any Share dividend, split-up, recapitalization,
merger, consolidation, combination or exchange of Shares, separation,
reorganization, or liquidation occurring after the date hereof, as a result of
which Shares of any
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<PAGE> 4
class shall be issued in respect of outstanding Shares, or Shares shall be
changed into the same or a different number of Shares of the same or another
class or classes, the person or persons so exercising the Option shall receive,
for the aggregate price paid upon such exercise, the aggregate number and class
of Shares which, if Shares (as authorized at the date hereof) had been purchased
at the date hereof for the same aggregate price (on the basis of the price per
Share set forth in paragraph 2 hereof) and had not been disposed of, such person
or persons would be holding, at the time of such exercise, as a result of such
purchase and all such shared dividends, split-ups, recapitalizations, mergers,
consolidations, combinations or exchanges of Shares, separations,
reorganizations, or liquidations; provided, however, that no fractional Share
shall be issued upon any such exercise, and the aggregate price paid shall be
appropriately reduced on account of any fractional Share not issued.
7. Method of Exercising Option. Subject to the terms and conditions of
this Agreement, the Option may only be exercised by written notice to
ValueVision. Such notice shall state the election to exercise the Option and the
number of Shares in respect of which it is being exercised, and shall be signed
by the person or person so exercising the Option. Such notice shall either: (a)
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<PAGE> 5
be accompanied by payment of the full purchase price of such Shares, in which
event ValueVision shall deliver a certificate or certificates representing such
Shares as soon as practicable after the notice shall be received; or (b) fix a
date (not less than five (5) nor more than ten (10) business days from the date
such notice shall be received by ValueVision) for the payment of the full
purchase price of such Shares against delivery of a certificate or certificates
representing such Shares. Payment of such purchase price shall, in either case,
be made by certified or cashier's check payable to the order of ValueVision. All
Shares that shall be purchased upon the exercise of the Option as provided
herein shall be fully paid and non-assessable.
8. Investment Certificate and Registration. Prior to the receipt of
the certificates pursuant to the exercise of the Option granted hereunder,
Director shall agree to hold the Shares acquired by exercise of the Option
for investment and not with a view to resale or distribution thereof to the
public, and shall deliver to ValueVision a certificate to that effect. Nothing
in this Agreement shall require ValueVision to register the Option or the
Shares purchased upon the exercise of said Option.
9. General. ValueVision shall at all times during the term of the
Option reserve and keep available such number of Shares as
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will be sufficient to satisfy the requirements of this Option Agreement.
10. Prior Agreements. This Agreement supercedes all other agreements
and understandings between the parties hereto addressing the issues set forth
herein and constitutes the full and complete understandings of the parties.
IN WITNESS WHEREOF, ValueVision and Employee have executed this
Agreement as of the date first written above.
VALUEVISION INTERNATIONAL, INC.
By Robert L. Johander
----------------------------
Robert L. Johander,
Chief Executive Officer
Director:
/s/ Robert J. Korkowski
-------------------------------
Robert J. Korkowski
6
<PAGE> 1
EXHIBIT 10.20
OPTION AGREEMENT
VALUEVISION INTERNATIONAL, INC.
TO
ROBERT J. KORKOWSKI
OPTION AGREEMENT made as of the 3rd day of March, 1997, between
ValueVision International, Inc., a Minnesota corporation ("ValueVision"), Robert
J. Korkowski, a director of ValueVision ("Director").
WHEREAS, ValueVision desires, by affording Director an opportunity to
purchase its shares of Common Stock, $0.01 par value ("Shares"), as hereinafter
provided, to carry out the resolutions of the Board of Directors of ValueVision
granting an option to Director as recognition of his efforts in serving on the
Board of Directors of ValueVision.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Grant of Option. ValueVision hereby irrevocably grants to Employee
the right and option, hereinafter called the Option, to purchase all or any part
of an aggregate of thirty-seven thousand, five hundred (37,500) Shares (such
number being subject to adjustment as provided in paragraph 7 hereof) on the
terms and conditions herein set forth.
2. Purchase Price. The purchase price of the Shares covered by the
Option shall be $4.5625, which is equal to the last price on the NASDAQ System
of one share of ValueVision's Common Stock on the last trade date prior to the
date hereof day first written above.
<PAGE> 2
3. Exercise of Option. The right to exercise the Option in whole or in
part, shall be effective, except as otherwise specifically limited herein, as
follows: on the earlier of (i) the eighth anniversary of the date hereof, (ii)
one-third (1/3) each when the Common Stock has a closing (last trade) price for
twenty consecutive trading days at or above $6.25, $7.25 and $8.25,
respectively, provided that such vesting shall be limited to one-third (1/3) in
any twelve month period measured by the anniversary dates of the date of the
option grant, or (iii) when the Common Stock has a closing (last trade) price
for sixty consecutive trading days at or above $8.25. Each of the rights to
purchase Shares granted in the preceding sentence shall expire five (5) years
after the right to purchase the Shares became effective, except as otherwise
specifically limited herein. The purchase price of Shares acquired through
exercise of any part of the Option shall be paid in full in cash at the time of
exercise. Director, as holder of the Option, shall not have any of the rights of
a Shareholder with respect to the Shares covered by the Option except to the
extent that one or more certificates for such Shares shall be delivered to him
upon the due exercise of all or any part of the Option.
4. Non-Transferability. The Option shall not be transferable otherwise
than by will or the laws of descent and distribution, and the Option may be
exercised, during the lifetime of Director, only by Employee. More particularly
(but without limiting the generality of the foregoing), the Option may not be
assigned, transferred (except as provided above), pledged, or hypothecated in
any way, shall not be assignable by operation of law, and shall not be subject
to execution, attachment, or similar process. Any attempted assignment,
transfer, pledge, hypothecation, or other disposition of the Option contrary to
the provisions hereof, and the levy of any execution, attachment, or similar
process upon the Option shall be null and void and without effect.
2
<PAGE> 3
5. Exercise Upon Death. If Director dies while the Option remains in
effect, with or without cause, the Option may be exercised (to the extent that
Director shall have been entitled to do so on the day of his death) by the
legatee or legatees of Director under his will, or by his personal
representatives or distributees, at anytime within ninety (90) days after his
death. Upon the expiration of such ninety (90) day period, or, if earlier, upon
the expiration date of the Option as set forth in Paragraph 3 hereof, the Option
shall become null and void.
6. Changes in Capital Structure. If all or any portion of the Option
shall be exercised subsequent to any Share dividend, split-up, recapitalization,
merger, consolidation, combination or exchange of Shares, separation,
reorganization, or liquidation occurring after the date hereof, as a result of
which Shares of any class shall be issued in respect of outstanding Shares, or
Shares shall be changed into the same or a different number of Shares of the
same or another class or classes, the person or persons so exercising the Option
shall receive, for the aggregate price paid upon such exercise, the aggregate
number and class of Shares which, if Shares (as authorized at the date hereof)
had been purchased at the date hereof for the same aggregate price (on the basis
of the price per Share set forth in paragraph 2 hereof) and had not been
disposed of, such person or persons would be holding, at the time of such
exercise, as a result of such purchase and all such shared dividends, split-ups,
recapitalizations, mergers, consolidations, combinations or exchanges of Shares,
separations, reorganizations, or liquidations; provided, however, that no
fractional Share shall be issued upon any such exercise, and the aggregate price
paid shall be appropriately reduced on account of any fractional Share not
issued.
7. Immediate Acceleration of Options Upon Change in Control.
Notwithstanding any provision contained herein, or any other agreement relating
hereto to the contrary, the Option granted
3
<PAGE> 4
hereby will become exercisable immediately if any of the following events occur,
unless otherwise determined by the Board of Directors and a majority of the
Incumbent Members (as defined below) or unless and to the extent that the
exercise of the Option would result in the application of the provisions of
Section 280G of the Internal Revenue Code of 1986, as amended:
(a) Any person, as defined in Sections 3(a)(9) and 13(d)(3) of the
Act, becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated
pursuant to the Act) directly or indirectly, of 30% or more of combined voting
power of the Company's then outstanding securities; or
(b) The occurrence within any twelve-month period of a change in the
Board of Directors of the Company with the result that the Incumbent Members (as
defined below) do not constitute a majority of the Board of Directors.
"Incumbent Members" in respect of any twelve-month period, shall mean the
members of the Board on the date immediately preceding the commencement of such
twelve-month period, provided that any person becoming a Director during such
twelve-month period whose election or nomination for election was supported by a
majority of the Directors who, on the date of such election or nomination for
election, comprised the Incumbent Members shall be considered one of the
Incumbent Members in respect to such twelve-month period; or (c) the
shareholders of the Company approve an agreement to merge or consolidate with or
into another corporation or an agreement to sell or otherwise dispose of all or
substantially all of the Company's assets (including a plan of liquidation).
8. Method of Exercising Option. Subject to the terms and conditions of
this Agreement, the Option may only be exercised by written notice to
ValueVision. Such notice shall state the election to exercise the Option and the
number of Shares in respect of which it is being exercised, and shall be signed
by the person or person so exercising the Option. Such notice shall either: (a)
4
<PAGE> 5
be accompanied by payment of the full purchase price of such Shares, in which
event ValueVision shall deliver a certificate or certificates representing such
Shares as soon as practicable after the notice shall be received; or (b) fix a
date (not less than five (5) nor more than ten (10) business days from the date
such notice shall be received by ValueVision) for the payment of the full
purchase price of such Shares against delivery of a certificate or certificates
representing such Shares. Payment of such purchase price shall, in either case,
be made by certified or cashier's check payable to the order of ValueVision. All
Shares that shall be purchased upon the exercise of the Option as provided
herein shall be fully paid and non-assessable.
9. Investment Certificate and Registration. Prior to the receipt of the
certificates pursuant to the exercise of the Option granted hereunder, Director
shall agree to hold the Shares acquired by exercise of the Option for investment
and not with a view to resale or distribution thereof to the public, and shall
deliver to ValueVision a certificate to that effect. Nothing in this Agreement
shall require ValueVision to register the Option or the Shares purchased upon
the exercise of said Option.
10. General. ValueVision shall at all times during the term of the
Option reserve and keep available such number of Shares as will be sufficient to
satisfy the requirements of this Option Agreement. This Option shall be
construed in accordance with the laws of the State of Minnesota.
5
<PAGE> 6
IN WITNESS WHEREOF, ValueVision and Employee have executed this
Agreement as of the date first written above.
VALUEVISION INTERNATIONAL, INC.
By /s/ Robert L. Johander
------------------------------
Robert L. Johander,
Chief Executive Officer
Director:
/s/ Robert J. Korkowski
------------------------------
Director Name
<PAGE> 1
EXHIBIT 10.22
OPTION AGREEMENT
VALUEVISION INTERNATIONAL, INC.
TO
MARSHALL S. GELLER
OPTION AGREEMENT made as of 3rd day of June, 1994, between ValueVision
International, Inc., a Minnesota corporation ("ValueVision"), and Marshall S.
Geller, a director of ValueVision ("Director").
WHEREAS, ValueVision desires, by affording Director an opportunity to
purchase its shares of Class A Common Stock, $0.01 par value ("Shares"), as
provided therein, which Agreement was created to carry out the resolution of the
Board of Directors of ValueVision which grant an option to Director as
recognition of his efforts in serving on the Board of Directors of ValueVision.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Grant of Option. ValueVision hereby irrevocably grants to Director
the right and option, hereinafter called the Option, to purchase all or any part
of an aggregate of one hundred thousand
<PAGE> 2
(100000) Shares (such number being subject to adjustment as provided in
paragraph 7 hereof) on the terms and conditions herein set forth.
2. Purchase Price. The purchase price of the Shares covered by the
Option shall be $4.125 per Share, which price is the average between the closing
"bid" and "ask" price of one Share on the NASDAQ System on June 2, 1994, which
is the last trade date prior to the date hereof.
3. Exercise of Option. The right to exercise the Option in whole or in
part, shall be effective on or after June 3, 1995 and shall continue thereafter
until midnight, central time, June 3, 2000, except as otherwise specifically
limited herein. The purchase price of Shares acquired through exercise of any
part of the Option shall be paid in full in cash at the time of exercise.
Director, as holder of the Option, shall not have any of the rights of a
Shareholder with respect to the Shares covered by the Option except to the
extent that one or more certificates for such Shares shall be delivered to him
upon the due exercise of all or any part of the Option.
4. Non-Transferability. The Option shall not be transferable otherwise
than by will or the laws of descent and distribution, and the Option may be
exercised, during the lifetime of Director, only by Director. More particularly
(but without
<PAGE> 3
limiting the generality of the foregoing), the Option may not be assigned,
transferred (except as provided above), pledged, or hypothecated in any way,
shall not be assignable by operation of law, and shall not be subject to
execution, attachment, or similar process. Any attempted assignment, transfer,
pledge, hypothecation, or other disposition of the Option contrary to the
provisions hereof, and the levy of any execution, attachment, or similar process
upon the Option shall be null and void and without effect.
5. Exercise Upon Death. If Director dies while the Option remains in
effect, the Option may be exercised (to the extent that Director shall have been
entitled to do so at the date of his death) by the legatee or legatees of
Director under his will, or by his personal representatives or distributees, at
any time within ninety (90) days after his death. Upon the expiration of such
ninety (90) day period, or, if earlier, upon the expiration date of the Option
as set forth in Paragraph 3 hereof, the Option shall become null and void.
6. Changes in Capital Structure. If all or any portion of the Option
shall be exercised subsequent to any Share dividend, split-up, recapitalization,
merger, consolidation, combination or exchange of Shares, separation,
reorganization, or liquidation
3
<PAGE> 4
occurring after the date hereof, as a result of which Shares of any class shall
be issued in respect of outstanding Shares, or Shares shall be changed into the
same or a different number of Shares of the same or another class or classes,
the person or persons so exercising the Option shall receive, for the aggregate
price paid upon such exercise, the aggregate number and class of Shares which,
if Shares (as authorized at the date hereof) had been purchased at the date
hereof for the same aggregate price (on the basis of the price per Share set
forth in paragraph 2 hereof) and had not been disposed of, such person or
persons would be holding, at the time of such exercise, as a result of such
purchase and all such shared dividends, split-ups, recapitalizations, mergers,
consolidations, combinations or exchanges of Shares, separations,
reorganizations, or liquidations; provided, however, that no fractional Share
shall be issued upon any such exercise, and the aggregate price paid shall be
appropriately reduced on account of any fractional Share not issued.
7. Method of Exercising Option. Subject to the terms and conditions of
this Agreement, the Option may only be exercised by written notice to
ValueVision. Such notice shall state the election to exercise the Option and the
number of Shares in respect of which it is being exercised, and shall be signed
by the person
4
<PAGE> 5
or person so exercising the Option. Such notice shall either: (a)
be accompanied by payment of the full purchase price of such Shares, in which
event ValueVision shall deliver a certificate or certificates representing such
Shares as soon as practicable after the notice shall be received; or (b) fix a
date (not less than five (5) nor more than ten (10) business days from the date
such notice shall be received by ValueVision) for the payment of the full
purchase price of such Shares against delivery of a certificate or certificates
representing such Shares. Payment of such purchase price shall, in either case,
be made by certified or cashier's check payable to the order of ValueVision. All
Shares that shall be purchased upon the exercise of the Option as provided
herein shall be fully paid and non-assessable.
8. Investment Certificate and Registration. Prior to the
receipt of the certificates pursuant to the exercise of the Option
granted hereunder, Director shall agree to hold the Shares acquired by exercise
of the Option for investment and not with a view to resale or distribution
thereof to the public, and shall deliver to ValueVision a certificate to that
effect. Nothing in this Agreement shall require ValueVision to register the
Option or the Shares purchased upon the exercise of said Option.
5
<PAGE> 6
9. General. ValueVision shall at all times during the term of the
Option reserve and keep available such number of Shares as will be sufficient to
satisfy the requirements of this Option Agreement.
10. Prior Agreements. This Agreement supercedes all other agreements
and understandings between the parties hereto addressing the issues set forth
herein and constitutes the full and complete understandings of the parties.
IN WITNESS WHEREOF, ValueVision and Employee have executed this
Agreement as of the date first written above.
VALUEVISION INTERNATIONAL, INC.
By Robert L. Johander
-----------------------------
Robert L. Johander,
Chief Executive Officer
Director:
/s/ Marshall S. Geller
------------------------------
Marshall S. Geller
<PAGE> 1
EXHIBIT 10.24
OPTION AGREEMENT
VALUEVISION INTERNATIONAL, INC.
TO
MARSHALL S. GELLER
OPTION AGREEMENT made as of the 3rd day of March, 1997, between
ValueVision International, Inc., a Minnesota corporation ("ValueVision"),
Marshall S. Geller, a director of ValueVision ("Director").
WHEREAS, ValueVision desires, by affording Director an opportunity to
purchase its shares of Common Stock, $0.01 par value ("Shares"), as hereinafter
provided, to carry out the resolutions of the Board of Directors of ValueVision
granting an option to Director as recognition of his efforts in serving on the
Board of Directors of ValueVision.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Grant of Option. ValueVision hereby irrevocably grants to Employee
the right and option, hereinafter called the Option, to purchase all or any part
of an aggregate of thirty-seven thousand, five hundred (37,500) Shares (such
number being subject to adjustment as provided in paragraph 7 hereof) on the
terms and conditions herein set forth.
2. Purchase Price. The purchase price of the Shares covered by the
Option shall be $4.5625, which is equal to the last price on the NASDAQ System
of one share of ValueVision's Common Stock on the last trade date prior to the
date hereof day first written above.
<PAGE> 2
3. Exercise of Option. The right to exercise the Option in whole or in
part, shall be effective, except as otherwise specifically limited herein, as
follows: on the earlier of (i) the eighth anniversary of the date hereof, (ii)
one-third (1/3) each when the Common Stock has a closing (last trade) price for
twenty consecutive trading days at or above $6.25, $7.25 and $8.25,
respectively, provided that such vesting shall be limited to one-third (1/3) in
any twelve month period measured by the anniversary dates of the date of the
option grant, or (iii) when the Common Stock has a closing (last trade) price
for sixty consecutive trading days at or above $8.25. Each of the rights to
purchase Shares granted in the preceding sentence shall expire five (5) years
after the right to purchase the Shares became effective, except as otherwise
specifically limited herein. The purchase price of Shares acquired through
exercise of any part of the Option shall be paid in full in cash at the time of
exercise. Director, as holder of the Option, shall not have any of the rights of
a Shareholder with respect to the Shares covered by the Option except to the
extent that one or more certificates for such Shares shall be delivered to him
upon the due exercise of all or any part of the Option.
4. Non-Transferability. The Option shall not be transferable otherwise
than by will or the laws of descent and distribution, and the Option may be
exercised, during the lifetime of Director, only by Employee. More particularly
(but without limiting the generality of the foregoing), the Option may not be
assigned, transferred (except as provided above), pledged, or hypothecated in
any way, shall not be assignable by operation of law, and shall not be subject
to execution, attachment, or similar process. Any attempted assignment,
transfer, pledge, hypothecation, or other disposition of the Option contrary to
the provisions hereof, and the levy of any execution, attachment, or similar
process upon the Option shall be null and void and without effect.
2
<PAGE> 3
5. Exercise Upon Death. If Director dies while the Option remains in
effect, with or without cause, the Option may be exercised (to the extent that
Director shall have been entitled to do so on the day of his death) by the
legatee or legatees of Director under his will, or by his personal
representatives or distributees, at anytime within ninety (90) days after his
death. Upon the expiration of such ninety (90) day period, or, if earlier, upon
the expiration date of the Option as set forth in Paragraph 3 hereof, the Option
shall become null and void.
6. Changes in Capital Structure. If all or any portion of the Option
shall be exercised subsequent to any Share dividend, split-up, recapitalization,
merger, consolidation, combination or exchange of Shares, separation,
reorganization, or liquidation occurring after the date hereof, as a result of
which Shares of any class shall be issued in respect of outstanding Shares, or
Shares shall be changed into the same or a different number of Shares of the
same or another class or classes, the person or persons so exercising the Option
shall receive, for the aggregate price paid upon such exercise, the aggregate
number and class of Shares which, if Shares (as authorized at the date hereof)
had been purchased at the date hereof for the same aggregate price (on the basis
of the price per Share set forth in paragraph 2 hereof) and had not been
disposed of, such person or persons would be holding, at the time of such
exercise, as a result of such purchase and all such shared dividends, split-ups,
recapitalizations, mergers, consolidations, combinations or exchanges of Shares,
separations, reorganizations, or liquidations; provided, however, that no
fractional Share shall be issued upon any such exercise, and the aggregate price
paid shall be appropriately reduced on account of any fractional Share not
issued.
7. Immediate Acceleration of Options Upon Change in Control.
Notwithstanding any provision contained herein, or any other agreement relating
hereto to the contrary, the Option granted
3
<PAGE> 4
hereby will become exercisable immediately if any of the following events occur,
unless otherwise determined by the Board of Directors and a majority of the
Incumbent Members (as defined below) or unless and to the extent that the
exercise of the Option would result in the application of the provisions of
Section 280G of the Internal Revenue Code of 1986, as amended:
(a) Any person, as defined in Sections 3(a)(9) and 13(d)(3) of the Act,
becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated pursuant to
the Act) directly or indirectly, of 30% or more of combined voting power of the
Company's then outstanding securities; or
(b) The occurrence within any twelve-month period of a change in the
Board of Directors of the Company with the result that the Incumbent Members (as
defined below) do not constitute a majority of the Board of Directors.
"Incumbent Members" in respect of any twelve-month period, shall mean the
members of the Board on the date immediately preceding the commencement of such
twelve-month period, provided that any person becoming a Director during such
twelve-month period whose election or nomination for election was supported by a
majority of the Directors who, on the date of such election or nomination for
election, comprised the Incumbent Members shall be considered one of the
Incumbent Members in respect to such twelve-month period; or (c) the
shareholders of the Company approve an agreement to merge or consolidate with or
into another corporation ro an agreement to sell or otherwise dispose of all or
substantially all of the Company's assets (including a plan of liquidation).
8. Method of Exercising Option. Subject to the terms and conditions of
this Agreement, the Option may only be exercised by written notice to
ValueVision. Such notice shall state the election to exercise the Option and the
number of Shares in respect of which it is being exercised, and shall be signed
by the person or person so exercising the Option. Such notice shall either: (a)
4
<PAGE> 5
be accompanied by payment of the full purchase price of such Shares, in which
event ValueVision shall deliver a certificate or certificates representing such
Shares as soon as practicable after the notice shall be received; or (b) fix a
date (not less than five (5) nor more than ten (10) business days from the date
such notice shall be received by ValueVision) for the payment of the full
purchase price of such Shares against delivery of a certificate or certificates
representing such Shares. Payment of such purchase price shall, in either case,
be made by certified or cashier's check payable to the order of ValueVision. All
Shares that shall be purchased upon the exercise of the Option as provided
herein shall be fully paid and non-assessable.
9. Investment Certificate and Registration. Prior to the receipt of the
certificates pursuant to the exercise of the Option granted hereunder, Director
shall agree to hold the Shares acquired by exercise of the Option for investment
and not with a view to resale or distribution thereof to the public, and shall
deliver to ValueVision a certificate to that effect. Nothing in this Agreement
shall require ValueVision to register the Option or the Shares purchased upon
the exercise of said Option.
10. General. ValueVision shall at all times during the term of the
Option reserve and keep available such number of Shares as will be sufficient to
satisfy the requirements of this Option Agreement. This Option shall be
construed in accordance with the laws of the State of Minnesota.
5
<PAGE> 6
IN WITNESS WHEREOF, ValueVision and Employee have executed this
Agreement as of the date first written above.
VALUEVISION INTERNATIONAL, INC.
By /s/ Robert L. Johander
-----------------------------
Robert L. Johander,
Chief Executive Officer
Director:
/s/ Marshall Geller
-------------------------------
Director Name
<PAGE> 1
EXHIBIT 10.25
OPTION AGREEMENT
VALUEVISION INTERNATIONAL, INC.
TO
PAUL TOSETTI
OPTION AGREEMENT made effective as of the 4th day of September, 1996,
between ValueVision International, Inc., a Minnesota corporation
("ValueVision"), and PAUL TOSETTI, a director of ValueVision ("Director").
WHEREAS, ValueVision desires, by affording Director an opportunity to
purchase its shares of Common Stock, $0.01 par value ("Shares"), as provided
therein, which Agreement was created to carry out the resolution of the Board
of Directors of ValueVision which grant an option to Director as recognition of
his efforts in serving on the Board of Directors of ValueVision.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Grant of Option. ValueVision hereby irrevocably grants to
Director the right and option, hereinafter called the option, to purchase all
or any part of an aggregate of twenty five
1
<PAGE> 2
thousand (25,000) Shares (such number being subject to adjustment as provided
in paragraph 7 hereof) on the terms and conditions herein set forth.
2
<PAGE> 3
2. Purchase Price. The purchase price per share of the Shares
covered by the Option shall be $5.75 per Share, which price is equal to the
last price on the NASDAQ System of one share of ValueVision's Common Stock on
the last trade date prior to the date hereof first written above.
3. Exercise of Option. The options will vest one year from date
of grant or in a year in which the Company records net income, except such
options will not vest sooner than 12 months from date of grant. The right to
exercise the vested options in whole or in part, shall be five (5) years from
the date of vesting except as otherwise specifically limited herein. The
purchase price for shares acquired through exercise of any part of the Option
shall be paid in full in cash at the time of exercise. Director, as holder of
the Option, shall not have any of the rights of a Shareholder with respect to
the Shares covered by the Option except to the extent that one or more
certificates for such Shares shall be delivered to him upon the due exercise of
all or any part of the Option.
4. Non-Transferability. The Option shall not be transferable
otherwise than by will or the laws of descent and distribution, and the option
may be exercised, during the lifetime of Director, only by Director. More
particularly (but without limiting the generality of the foregoing), the Option
may not be
3
<PAGE> 4
assigned, transferred (except as provided above), pledged, or hypothecated in
any way, shall not be assignable by operation of law, and shall not be subject
to execution, attachment, or similar process. Any attempted assignment,
transfer, pledge, hypothecation, or other disposition of the option contrary to
the provisions hereof, and the levy of any execution, attachment, or similar
process upon the option shall be null and void and without effect.
5. Exercise Upon Death. If Director dies while the Option
remains in effect, the option may be exercised (to the extent that Director
shall have been entitled to do so at the date of his death) by the legatee or
legatees of Director under his will, or by his personal representatives or
distributees, at any time within ninety (90) days after his death. Upon the
expiration of such ninety (90) day period, or, if earlier, upon the expiration
date of the option as set forth in paragraph 3 hereof, the Option shall become
null and void.
6. Changes in Capital Structure. If all or any portion of the
Option shall be exercised subsequent to any Share dividend, split- up,
recapitalization, merger, consolidation, combination or exchange of Shares,
separation, reorganization, or liquidation occurring after the date hereof, as
a result of which Shares of any class shall be issued in respect of outstanding
Shares, or Shares shall be changed into the same or a different number of
Shares of
4
<PAGE> 5
the same or another class or classes, the person or persons so exercising the
option shall receive, for the aggregate price paid upon such exercise, the
aggregate number and class of Shares which, if Shares (as authorized at the
date hereof) had been purchased at the date hereof for the same aggregate price
(on the basis of the price per Share set forth in paragraph 2 hereof) and had
not been disposed of, such person or persons would be holding, at the time of
such exercise, as a result of such purchase and all such shared
dividends,split-ups,recapitalizations,mergers,consolidations, combinations or
exchanges of Shares, separations, reorganizations, or liquidations; provided,
however, that no fractional Share shall be issued upon any such exercise, and
the aggregate price paid shall be appropriately reduced on account of any
fractional Share not issued.
7. Method of Exercising Option. Subject to the terms and
conditions of this Agreement, the Option may only be exercised by written
notice to ValueVision. Such notice shall state the election to exercise the
option and the number of Shares in respect of which it is being exercised, and
shall be signed by the person or person so exercising the Option. Such notice
shall either: (a) be accompanied by payment of the full purchase price of such
Shares, in which event ValueVision shall deliver a certificate or certificates
representing such Shares as soon as practicable after
5
<PAGE> 6
the notice shall be received; or (b) fix a date (not less than five (5) nor
more than ten (10) business days from the date such notice shall be received by
ValueVision) for the payment of the full purchase price of such Shares against
delivery of a certificate or certificates representing such Shares. Payment of
such purchase price shall, in either case, be made by certified or cashier's
check payable to the order of ValueVision. All Shares that shall be purchased
upon the exercise of the option as provided herein shall be fully paid and
non-assessable.
8. Investment Certificate and Registration. Prior to the receipt
of the certificates pursuant to the exercise of the option granted hereunder,
Director shall agree to hold the Shares acquired by exercise of the Option for
investment and not with a view to resale or distribution thereof to the public,
and shall deliver to ValueVision a certificate to that effect.
Nothing in this Agreement shall require ValueVision to register the Option or
the Shares purchased upon the exercise of said Option.
9. General. ValueVision shall at all times during the term of
the Option reserve and keep available such number of Shares as will be
sufficient to satisfy the requirements of this option Agreement.
10. Prior Agreements. This Agreement supersedes all other
5
<PAGE> 7
agreements and understandings between the parties hereto addressing the issues
set forth herein and constitutes the full and complete understandings of the
parties.
IN WITNESS WHEREOF, ValueVision and Director have executed this
Agreement as of the date first written above.
VALUEVISION INTERNATIONAL, INC.
/s/ Robert L. Johander
---------------------------
Robert L. Johander
Chief Executive Officer
Director:
/s/ Paul D. Tosetti
---------------------------
6
<PAGE> 1
EXHIBIT 10.26
OPTION AGREEMENT
VALUEVISION INTERNATIONAL, INC.
TO
PAUL D. TOSETTI
OPTION AGREEMENT made as of the 3rd day of March, 1997, between
ValueVision International, Inc., a Minnesota corporation ("ValueVision"), Paul
D. Tosetti, a director of ValueVision ("Director").
WHEREAS, ValueVision desires, by affording Director an opportunity to
purchase its shares of Common Stock, $0.01 par value ("Shares"), as hereinafter
provided, to carry out the resolutions of the Board of Directors of ValueVision
granting an option to Director as recognition of his efforts in serving on the
Board of Directors of ValueVision.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Grant of Option. ValueVision hereby irrevocably grants to Employee
the right and option, hereinafter called the Option, to purchase all or any part
of an aggregate of seventy-five thousand (75,000) Shares (such number being
subject to adjustment as provided in paragraph 7 hereof) on the terms and
conditions herein set forth.
2. Purchase Price. The purchase price of the Shares covered by the
Option shall be $4.5625, which is equal to the last price on the NASDAQ System
of one share of ValueVision's Common Stock on the last trade date prior to the
date hereof day first written above.
<PAGE> 2
3. Exercise of Option. The right to exercise the Option in whole or in
part, shall be effective, except as otherwise specifically limited herein, as
follows: on the earlier of (i) the eighth anniversary of the date hereof, (ii)
one-third (1/3) each when the Common Stock has a closing (last trade) price for
twenty consecutive trading days at or above $6.25, $7.25 and $8.25,
respectively, provided that such vesting shall be limited to one-third (1/3) in
any twelve month period measured by the anniversary dates of the date of the
option grant, or (iii) when the Common Stock has a closing (last trade) price
for sixty consecutive trading days at or above $8.25. Each of the rights to
purchase Shares granted in the preceding sentence shall expire five (5) years
after the right to purchase the Shares became effective, except as otherwise
specifically limited herein. The purchase price of Shares acquired through
exercise of any part of the Option shall be paid in full in cash at the time of
exercise. Director, as holder of the Option, shall not have any of the rights of
a Shareholder with respect to the Shares covered by the Option except to the
extent that one or more certificates for such Shares shall be delivered to him
upon the due exercise of all or any part of the Option.
4. Non-Transferability. The Option shall not be transferable otherwise
than by will or the laws of descent and distribution, and the Option may be
exercised, during the lifetime of Director, only by Employee. More particularly
(but without limiting the generality of the foregoing), the Option may not be
assigned, transferred (except as provided above), pledged, or hypothecated in
any way, shall not be assignable by operation of law, and shall not be subject
to execution, attachment, or similar process. Any attempted assignment,
transfer, pledge, hypothecation, or other disposition of the Option contrary to
the provisions hereof, and the levy of any execution, attachment, or similar
process upon the Option shall be null and void and without effect.
2
<PAGE> 3
5. Exercise Upon Death. If Director dies while the Option remains in
effect, with or without cause, the Option may be exercised (to the extent that
Director shall have been entitled to do so on the day of his death) by the
legatee or legatees of Director under his will, or by his personal
representatives or distributees, at anytime within ninety (90) days after his
death. Upon the expiration of such ninety (90) day period, or, if earlier, upon
the expiration date of the Option as set forth in Paragraph 3 hereof, the Option
shall become null and void.
6. Changes in Capital Structure. If all or any portion of the Option
shall be exercised subsequent to any Share dividend, split-up, recapitalization,
merger, consolidation, combination or exchange of Shares, separation,
reorganization, or liquidation occurring after the date hereof, as a result of
which Shares of any class shall be issued in respect of outstanding Shares, or
Shares shall be changed into the same or a different number of Shares of the
same or another class or classes, the person or persons so exercising the Option
shall receive, for the aggregate price paid upon such exercise, the aggregate
number and class of Shares which, if Shares (as authorized at the date hereof)
had been purchased at the date hereof for the same aggregate price (on the basis
of the price per Share set forth in paragraph 2 hereof) and had not been
disposed of, such person or persons would be holding, at the time of such
exercise, as a result of such purchase and all such shared dividends, split-ups,
recapitalizations, mergers, consolidations, combinations or exchanges of Shares,
separations, reorganizations, or liquidations; provided, however, that no
fractional Share shall be issued upon any such exercise, and the aggregate price
paid shall be appropriately reduced on account of any fractional Share not
issued.
7. Immediate Acceleration of Options Upon Change in Control.
Notwithstanding any provision contained herein, or any other agreement relating
hereto to the contrary, the Option granted
3
<PAGE> 4
hereby will become exercisable immediately if any of the following events occur,
unless otherwise determined by the Board of Directors and a majority of the
Incumbent Memebers (as defined below) or unless and to the extent that the
exercise of the Option would result in the appolication of the provisions os
Section 280G of the Internal Revenue Code of 1986, as amended:
(a) Any person, as defined in Sections 3(a)(9) and 13(d)(3) of the Act,
becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated pursuant to
the Act) directly or indirectly, of 30% or more of combined voting power of the
Company's then outstanding securities; or
(b) The occurrence within any twelve-month period of a change in the
Board of Directors of the Company with the result that the Incumbent Members (as
defined below) do not constitute a majority of the Board of Directors.
"Incumbent Members" in respect of any twelve-month period, shall mean the
members of the Board on the date immediately preceding the commencement of such
twelve-month period, provided that any person becoming a Director during such
twelve-month period whose election or nomination for election was supported by a
majority of the Directors who, on the date of such election or nomination for
election, comprised the Incumbent Members shall be considered one of the
Incumbent Members in respect to such twelve-month period; or (c) the
shareholders fo the Company approve an agreement to merge or consolidate with or
into another coproration ro an agreement to sell or otherwise dispose of all or
substantially all of the Company's assets (including a plan of liquidation).
8. Method of Exercising Option. Subject to the terms and conditions of
this Agreement, the Option may only be exercised by written notice to
ValueVision. Such notice shall state the election to exercise the Option and the
number of Shares in respect of which it is being exercised, and shall be signed
by the person or person so exercising the Option. Such notice shall either: (a)
4
<PAGE> 5
be accompanied by payment of the full purchase price of such Shares, in which
event ValueVision shall deliver a certificate or certificates representing such
Shares as soon as practicable after the notice shall be received; or (b) fix a
date (not less than five (5) nor more than ten (10) business days from the date
such notice shall be received by ValueVision) for the payment of the full
purchase price of such Shares against delivery of a certificate or certificates
representing such Shares. Payment of such purchase price shall, in either case,
be made by certified or cashier's check payable to the order of ValueVision. All
Shares that shall be purchased upon the exercise of the Option as provided
herein shall be fully paid and non-assessable.
9. Investment Certificate and Registration. Prior to the receipt of the
certificates pursuant to the exercise of the Option granted hereunder, Director
shall agree to hold the Shares acquired by exercise of the Option for investment
and not with a view to resale or distribution thereof to the public, and shall
deliver to ValueVision a certificate to that effect. Nothing in this Agreement
shall require ValueVision to register the Option or the Shares purchased upon
the exercise of said Option.
10. General. ValueVision shall at all times during the term of the
Option reserve and keep available such number of Shares as will be sufficient to
satisfy the requirements of this Option Agreement. This Option shall be
construed in accordance with the laws of the State of Minnesota.
5
<PAGE> 6
IN WITNESS WHEREOF, ValueVision and Employee have executed this
Agreement as of the date first written above.
VALUEVISION INTERNATIONAL, INC.
By /s/ Robert L. Johander
---------------------------
Robert L. Johander,
Chief Executive Officer
Director:
/s/ Paul D. Tosetti
---------------------------
Director Name
<PAGE> 1
Exhibit 10.27
NON-INCENTIVE STOCK OPTION AGREEMENT
THIS NON-INCENTIVE STOCK OPTION AGREEMENT ("Agreement") is dated as of
April 28, 1997 and is by and between NATIONAL MEDIA CORPORATION, a Delaware
corporation with its principal office located at Eleven Penn Center, Suite 1100,
1835 Market Street, Philadelphia, Pennsylvania, 19103 (the "Company"), and
Constantinos I.
Costalas (the "Optionee").
The Compensation Committee of the Board of Directors of the Company
(the "Committee") has determined to grant to the Optionee an option to purchase
shares of the Company's Common Stock in order to provide the Optionee with an
added incentive to contribute to the Company's future success and prosperity.
The option granted herein shall be subject to all of the terms and conditions of
the Company's Amended and Restated Stock Option Plan, as it may be amended from
time to time hereafter (the "Plan"). Capitalized terms contained herein and not
otherwise defined shall have the meanings ascribed to such terms in the Plan.
The Option (as defined below) is hereby granted in lieu, and replacement of, (i)
that certain option to purchase 140,000 shares of the Company's Common Stock, at
a price of $12.99 per share, issued in 1995; and (ii) that certain option to
purchase 250,000 shares of Company's Common Stock, at a price of $16.375 per
share, issued in 1996. Such prior options shall be of no further force and
effect, and such options shall be once again available for reissuance under the
Plan.
Accordingly, in consideration of the premises set forth herein, and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the Company hereby grants the Optionee the option to acquire shares of the
common stock of the Company upon the following terms and conditions:
1. Grant of Option.
(a) The Company hereby grants to the Optionee the right and
option (the "Option") to purchase up to One Hundred and Ninety Five Thousand
(195,000) fully paid and non-assessable shares of common stock, par value $.01
per share, of the Company (the "Shares"), to be issued upon the exercise hereof.
(b) One third (1/3) of the Option shall vest as of the date
hereof. Assuming the Optionee remains an Eligible Participant on such dates, the
remaining portion of the Option shall vest equally on March 27, 1998 and
September 27, 1998. The Option may only be exercised as to the portions thereof
which shall have become vested as of the intended date of exercise.
(c) Subject to the vesting schedule set forth above, the
Option may be exercised during the period ("Option Period") commencing on the
date hereof and, unless sooner terminated as provided herein, expiring and
terminating at 5:00 p.m. Eastern Standard Time on the tenth (10th) anniversary
of this Agreement, at which time the Optionee shall have no further right to
purchase any Shares not then purchased. The Company shall at all times during
the term of this Agreement reserve and keep available such number of Shares as
will be sufficient to satisfy the requirements of this Agreement.
(d) It is not intended that the Option qualify as an Incentive
Stock Option within the meaning of Section 422A of the Internal Revenue Code of
1986, as amended (the "Code").
2. Exercise Price. The exercise price of the Option (the "Exercise
Price") shall be $7.00 per Share, and shall be payable by certified or bank
check payable to the order of the Company in full at the
<PAGE> 2
time of the exercise in cash or, with the consent of the Committee in its sole
discretion, by delivering (i) shares of Common Stock already owned by the
Optionee and having a fair market value (as determined under the Plan) on the
date of exercise equal to the Exercise Price, or (ii) a combination of cash and
shares of Common Stock with a fair market value equal to the Exercise Price.
3. Exercise of Option. The Optionee may exercise this Option, to the
extent then vested, to purchase Shares by providing notice to the Company by
registered or certified mail, return receipt requested, addressed to its
principal office, or by hand delivery, signed by the Optionee, indicating the
number of whole Shares which Optionee desires to purchase under the Option. The
notice shall be accompanied by payment of the Option Price therefor as specified
in Paragraph 2 above, any amounts payable pursuant to Paragraph 10 below and any
required written representation as specified pursuant to Paragraph 7 below. As
soon as practicable after the receipt of such notice of exercise, payments and
written representation, the Company shall issue to the Optionee a certificate(s)
issued in the Optionee's name evidencing the Shares purchased by the Optionee
hereunder, subject to the Company's right to require that Optionee execute such
other documents as it deems reasonably necessary.
4. Limitations on Right to Exercise. Should the Optionee cease to be an
Eligible Participant for any reason other than the Optionee's death or
disability, the Option (to the extent then vested) shall be exercisable for a
period of three months after the Optionee ceases to be an Eligible Participant
or until the expiration of the Option Period, whichever shall occur first.
5. Death or Disability of Optionee. In the event of the death or
disability of the Optionee while the Optionee is an Eligible Participant (or the
death of the Optionee within three months after the date on which the Optionee
ceases to be an Eligible Participant), any unexercised portion (whether then
vested or unvested) of the Option shall be exercisable for a period of one year
after the Optionee's death or disability or upon the expiration of the Option
Period, whichever shall occur first, and, in the event of the death of the
Optionee, shall be exercisable only by the Optionee's personal representative or
such person or persons to whom the Optionee's rights pass under the Optionee's
will or by the laws of descent and distribution.
6. Non-Transferability of Option. Except as provided in Paragraph 5
herein, the Option shall be exercisable only by the Optionee. The Optionee may
not give, grant, sell, exchange, transfer legal title, pledge, assign or
otherwise encumber or dispose of the Option herein granted or any interest
therein, otherwise than by will or the laws of the descent and distribution or,
if permitted under Rule 16b-3 promulgated under the Securities Exchange Act of
1934 and by the Committee in its sole discretion pursuant to a qualified
domestic relations order as defined in the Code or Title I of ERISA or the rules
promulgated thereunder. Upon any attempt to so transfer the Option, or upon the
levy or attachment or similar process of the Option, the Option shall
automatically become null and void.
7. Restriction on Issuance of Shares - Investment Representation. The
Optionee agrees for himself, his heirs and legatees that, unless at the time of
exercise there exists an effective registration statement under the Securities
Act of 1933 concerning the Shares issuable pursuant to the Option providing for
the issuance of such Shares to the Optionee and/or the subsequent transfer of
the Shares by Optionee, any and all Shares purchased upon the exercise of the
Option shall be acquired for investment and not for distribution. Upon the
issuance of any or all of the Shares subject to the Option, the Company, in its
discretion and in accordance with the foregoing, may require the Optionee, or
his heirs or legatees receiving such Shares, to deliver to the Company a
representation in writing, in a form satisfactory to the Board, that such Shares
are being acquired in good faith for investment and not for distribution. In
accordance with the foregoing, (i) the Company may place with its transfer agent
a "stop
2
<PAGE> 3
transfer" order with respect to such Shares and may place an appropriate
restrictive legend on the certificate(s) evidencing such Shares; and (ii) any
stock certificates issued upon the exercise of the Option may bear an
appropriate restrictive legend, if deemed necessary by the Company.
8. No Rights as Shareholder. The Optionee shall have no rights as a
shareholder of the Company in respect of the Shares as to which the Option shall
not have been exercised and payment made as herein provided.
9. No Obligation Relating to Engagement of Optionee. Nothing herein
shall obligate the Company or any of its subsidiaries to engage the Optionee,
nor shall this Agreement constitute an agreement of employment or for services,
nor confer upon the Optionee any right to continue to render services to the
Company or any of its subsidiaries or interfere in any way with the right of the
Company or any of its subsidiaries to terminate the services of the Optionee at
any time without liability to the Company or the subsidiary.
10. Taxes. The Company may make such provisions as it may deem
appropriate for the withholding of any taxes which it determines is required in
connection with any options granted under the Plan. The Company may further
require notification from the Optionee upon any disposition of Shares acquired
pursuant to the exercise of the Option.
11. Conflict between Option Agreement and Plan. In the event of any
conflicts between this Agreement and the terms and conditions of the Plan, the
terms and conditions of the Plan shall control.
12. Binding Effect. Except as herein otherwise expressly provided, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto, their legal representatives and assigns.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed wholly within the State of Delaware.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
Attest: NATIONAL MEDIA CORPORATION
- ----------------------- By: /s/ Jon W. Yoskin II
--------------------
Jon W. Yoskin II
Chairman, Compensation Committee of
the Board of Directors
/s/ Constantinos I. Costalas
----------------------------
Constantinos I. Costalas
3
<PAGE> 1
Exhibit 10.28
NON-INCENTIVE STOCK OPTION AGREEMENT
THIS NON-INCENTIVE STOCK OPTION AGREEMENT ("Agreement") is dated as of
July 10, 1997 and is by and between NATIONAL MEDIA CORPORATION, a Delaware
corporation with its principal office located at Eleven Penn Center, Suite 1100,
1835 Market Street, Philadelphia, Pennsylvania, 19103 (the "Company"), and
Frederick S. Hammer (the "Optionee").
The Compensation Committee of the Board of Directors of the Company
(the "Committee") has determined to grant to the Optionee an option to purchase
shares of the Company's Common Stock in order to provide the Optionee with an
added incentive to contribute to the Company's future success and prosperity.
The option granted herein shall be subject to all of the terms and conditions of
the Company's Amended and Restated Stock Option Plan, as it may be amended from
time to time hereafter (the "Plan"). Capitalized terms contained herein and not
otherwise defined shall have the meanings ascribed to such terms in the Plan.
Accordingly, in consideration of the premises set forth herein, and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the Company hereby grants the Optionee the option to acquire shares of the
common stock of the Company upon the following terms and conditions:
1. Grant of Option.
(a) The Company hereby grants to the Optionee the right and
option (the "Option") to purchase up to One Hundred and Seventy-five Thousand
(175,000) fully paid and non-assessable shares of common stock, par value $.01
per share, of the Company (the "Shares"), to be issued upon the exercise hereof.
(b) One quarter (1/4) of the Option shall vest as of the date
hereof. Assuming the Optionee remains an Eligible Participant on such dates, the
remaining portion of the Option shall vest equally on the 1st, 2nd and 3rd
anniversaries of the date hereof. The Option may only be exercised as to the
portions thereof which shall have become vested as of the intended date of
exercise.
(c) Subject to the vesting schedule set forth above, the
Option may be exercised during the period ("Option Period") commencing on the
date hereof and, unless sooner terminated as provided herein, expiring and
terminating at 5:00 p.m. Eastern Standard Time on the tenth (10th) anniversary
of this Agreement, at which time the Optionee shall have no further right to
purchase any Shares not then purchased. The Company shall at all times during
the term of this Agreement reserve and keep available such number of Shares as
will be sufficient to satisfy the requirements of this Agreement.
(d) It is not intended that the Option qualify as an Incentive
Stock Option within the meaning of Section 422A of the Internal Revenue Code of
1986, as amended (the "Code").
<PAGE> 2
2. Exercise Price. The exercise price of the Option (the "Exercise
Price") shall be $5.625 per Share, and shall be payable by certified or bank
check payable to the order of the Company in full at the time of the exercise in
cash or, with the consent of the Committee in its sole discretion, by delivering
(i) shares of Common Stock already owned by the Optionee and having a fair
market value (as determined under the Plan) on the date of exercise equal to the
Exercise Price, or (ii) a combination of cash and shares of Common Stock with a
fair market value equal to the Exercise Price.
3. Exercise of Option. The Optionee may exercise this Option, to the
extent then vested, to purchase Shares by providing notice to the Company by
registered or certified mail, return receipt requested, addressed to its
principal office, or by hand delivery, signed by the Optionee, indicating the
number of whole Shares which Optionee desires to purchase under the Option. The
notice shall be accompanied by payment of the Option Price therefor as specified
in Paragraph 2 above, any amounts payable pursuant to Paragraph 10 below and any
required written representation as specified pursuant to Paragraph 7 below. As
soon as practicable after the receipt of such notice of exercise, payments and
written representation, the Company shall issue to the Optionee a certificate(s)
issued in the Optionee's name evidencing the Shares purchased by the Optionee
hereunder, subject to the Company's right to require that Optionee execute such
other documents as it deems reasonably necessary.
4. Limitations on Right to Exercise. Should the Optionee cease to be an
Eligible Participant for any reason other than the Optionee's death or
disability, the Option (to the extent then vested) shall be exercisable for a
period of three months after the Optionee ceases to be an Eligible Participant
or until the expiration of the Option Period, whichever shall occur first.
5. Death or Disability of Optionee. In the event of the death or
disability of the Optionee while the Optionee is an Eligible Participant (or the
death of the Optionee within three months after the date on which the Optionee
ceases to be an Eligible Participant), any unexercised portion (whether then
vested or unvested) of the Option shall be exercisable for a period of one year
after the Optionee's death or disability or upon the expiration of the Option
Period, whichever shall occur first, and, in the event of the death of the
Optionee, shall be exercisable only by the Optionee's personal representative or
such person or persons to whom the Optionee's rights pass under the Optionee's
will or by the laws of descent and distribution.
6. Non-Transferability of Option. Except as provided in Paragraph 5
herein, the Option shall be exercisable only by the Optionee. The Optionee may
not give, grant, sell, exchange, transfer legal title, pledge, assign or
otherwise encumber or dispose of the Option herein granted or any interest
therein, otherwise than by will or the laws of the descent and distribution or,
if permitted under Rule 16b-3 promulgated under the Securities Exchange Act of
1934 and by the Committee in its sole discretion pursuant to a qualified
domestic relations order as defined in the Code or Title I of ERISA or the rules
promulgated thereunder. Upon any attempt to so transfer the Option, or upon the
levy or attachment or similar process of the Option, the Option shall
automatically become null and void.
-2-
<PAGE> 3
7. Restriction on Issuance of Shares - Investment Representation. The
Optionee agrees for himself, his heirs and legatees that, unless at the time of
exercise there exists an effective registration statement under the Securities
Act of 1933 concerning the Shares issuable pursuant to the Option providing for
the issuance of such Shares to the Optionee and/or the subsequent transfer of
the Shares by Optionee, any and all Shares purchased upon the exercise of the
Option shall be acquired for investment and not for distribution. Upon the
issuance of any or all of the Shares subject to the Option, the Company, in its
discretion and in accordance with the foregoing, may require the Optionee, or
his heirs or legatees receiving such Shares, to deliver to the Company a
representation in writing, in a form satisfactory to the Board, that such Shares
are being acquired in good faith for investment and not for distribution. In
accordance with the foregoing, (i) the Company may place with its transfer agent
a "stop transfer" order with respect to such Shares and may place an appropriate
restrictive legend on the certificate(s) evidencing such Shares; and (ii) any
stock certificates issued upon the exercise of the Option may bear an
appropriate restrictive legend, if deemed necessary by the Company.
8. No Rights as Shareholder. The Optionee shall have no rights as a
shareholder of the Company in respect of the Shares as to which the Option shall
not have been exercised and payment made as herein provided.
9. No Obligation Relating to Engagement of Optionee. Nothing herein
shall obligate the Company or any of its subsidiaries to engage the Optionee,
nor shall this Agreement constitute an agreement of employment or for services,
nor confer upon the Optionee any right to continue to render services to the
Company or any of its subsidiaries or interfere in any way with the right of the
Company or any of its subsidiaries to terminate the services of the Optionee at
any time without liability to the Company or the subsidiary.
10. Taxes. The Company may make such provisions as it may deem
appropriate for the withholding of any taxes which it determines is required in
connection with any options granted under the Plan. The Company may further
require notification from the Optionee upon any disposition of Shares acquired
pursuant to the exercise of the Option.
11. Conflict between Option Agreement and Plan. In the event of any
conflicts between this Agreement and the terms and conditions of the Plan, the
terms and conditions of the Plan shall control.
12. Binding Effect. Except as herein otherwise expressly provided, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto, their legal representatives and assigns.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed wholly within the State of Delaware.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
Attest: NATIONAL MEDIA CORPORATION
_______________________ By: /s/ Jon W. Yoskin II
-----------------------
Jon W. Yoskin II
Chairman, Compensation Committee of the Board of
Directors
/s/ Frederick S. Hammer
-------------------------
Frederick S. Hammer
-4-
<PAGE> 1
Exhibit 10.29
NON-INCENTIVE STOCK OPTION AGREEMENT
THIS NON-INCENTIVE STOCK OPTION AGREEMENT ("Agreement") is dated as of
June 18, 1997 and is by and between NATIONAL MEDIA CORPORATION, a Delaware
corporation with its principal office located at Eleven Penn Center, Suite 1100,
1835 Market Street, Philadelphia, Pennsylvania, 19103 (the "Company"), and
Frederick S. Hammer (the "Optionee").
The Compensation Committee of the Board of Directors of the Company
(the "Committee") has determined to grant to the Optionee an option to purchase
shares of the Company's Common Stock in order to provide the Optionee with an
added incentive to contribute to the Company's future success and prosperity.
The option granted herein shall be subject to all of the terms and conditions of
the Company's Amended and Restated Stock Option Plan, as it may be amended from
time to time hereafter (the "Plan"). Capitalized terms contained herein and not
otherwise defined shall have the meanings ascribed to such terms in the Plan.
The Option (as defined below) is hereby granted in lieu of, and in replacement
of, that certain option to purchase 50,000 shares of the Company's Common Stock
at a price of $16.375 per share, issued in July 1996. Such prior option shall be
of no further force and effect, and such options shall be once again available
for reissuance under the Plan.
Accordingly, in consideration of the premises set forth herein, and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the Company hereby grants the Optionee the option to acquire shares of the
common stock of the Company upon the following terms and conditions:
1. Grant of Option.
(a) The Company hereby grants to the Optionee the right and
option (the "Option") to purchase up to Twenty-five Thousand (25,000) fully paid
and non-assessable shares of common stock, par value $.01 per share, of the
Company (the "Shares"), to be issued upon the exercise hereof.
(b) Assuming the membership of Optionee on the Company's Board
of Directors on April 25, 2001, the Option to purchase the Shares shall vest on
April 25, 2001, subject to the following provisions for accelerated vesting:
assuming the membership of Optionee on the Company's Board of Directors on such
date, the Option shall vest immediately (i) in the event of a Change of Control
(as defined in the Plan); or (ii) in the event that the closing price as
reported on the New York Stock Exchange is $35.00 or more for ten (10)
consecutive trading days (subject to appropriate adjustment in the event of any
stock combination, stock split, etc.). In addition, assuming the membership of
Optionee on the Company's Board of Directors as of March 31 of the applicable
fiscal year, in the event that the Company achieves the following
earnings-per-share ratios (subject to appropriate adjustment in the event of any
stock combination, stock split, etc.) calculated cumulatively from the fiscal
year ending March 31, 1997, one-fifth of the shares underlying the Option shall
vest immediately for each fiscal year("FY"): FY1997: $.80; FY1998: $1.73;
FY1999: $2.79; and FY2000: $4.01. The Option may only be exercised as to the
portions thereof which shall have become vested as of the intended date of
exercise.
(c) Subject to the vesting schedule set forth above, the
Option may be exercised during the period ("Option Period") commencing on the
date hereof and, unless sooner terminated as provided herein, expiring and
terminating at 5:00 p.m. Eastern Standard Time on the tenth (10th) anniversary
of this Agreement, at which time the Optionee shall have no further right to
purchase any Shares not then purchased. The Company shall at all times during
the term of this Agreement reserve
<PAGE> 2
and keep available such number of Shares as will be sufficient to satisfy the
requirements of this Agreement.
(d) It is not intended that the Option qualify as an Incentive
Stock Option within the meaning of Section 422A of the Internal Revenue Code of
1986, as amended (the "Code").
2. Exercise Price. The exercise price of the Option (the "Exercise
Price") shall be $7.25 per Share, and shall be payable by certified or bank
check payable to the order of the Company in full at the time of the exercise in
cash or, with the consent of the Committee in its sole discretion, by delivering
(i) shares of Common Stock already owned by the Optionee and having a fair
market value (as determined under the Plan) on the date of exercise equal to the
Exercise Price, or (ii) a combination of cash and shares of Common Stock with a
fair market value equal to the Exercise Price.
3. Exercise of Option. The Optionee may exercise this Option, to the
extent then vested, to purchase Shares by providing notice to the Company by
registered or certified mail, return receipt requested, addressed to its
principal office, or by hand delivery, signed by the Optionee, indicating the
number of whole Shares which Optionee desires to purchase under the Option. The
notice shall be accompanied by payment of the Option Price therefor as specified
in Paragraph 2 above, any amounts payable pursuant to Paragraph 10 below and any
required written representation as specified pursuant to Paragraph 7 below. As
soon as practicable after the receipt of such notice of exercise, payments and
written representation, the Company shall issue to the Optionee a certificate(s)
issued in the Optionee's name evidencing the Shares purchased by the Optionee
hereunder, subject to the Company's right to require that Optionee execute such
other documents as it deems reasonably necessary.
4. Limitations on Right to Exercise. Should the Optionee cease to be an
Eligible Participant for any reason other than the Optionee's death or
disability, the Option (to the extent then vested) shall be exercisable for a
period of three months after the Optionee ceases to be an Eligible Participant
or until the expiration of the Option Period, whichever shall occur first.
5. Death or Disability of Optionee. In the event of the death or
disability of the Optionee while the Optionee is an Eligible Participant (or the
death of the Optionee within three months after the date on which the Optionee
ceases to be an Eligible Participant), any unexercised portion of the Option
shall be exercisable (to the extent that the Option was exercisable at the time
of the Optionee's death or disability) for a period of one year after the
Optionee's death or disability or upon the expiration of the Option Period,
whichever shall occur first, and, in the event of the death of the Optionee,
shall be exercisable only by the Optionee's personal representative or such
person or persons to whom the Optionee's rights pass under the Optionee's will
or by the laws of descent and distribution.
6. Non-Transferability of Option. Except as provided in Paragraph 5
herein, the Option shall be exercisable only by the Optionee. The Optionee may
not give, grant, sell, exchange, transfer legal title, pledge, assign or
otherwise encumber or dispose of the Option herein granted or any interest
therein, otherwise than by will or the laws of the descent and distribution or,
if permitted under Rule 16b-3 promulgated under the Securities Exchange Act of
1934 and by the Committee in its sole discretion pursuant to a qualified
domestic relations order as defined in the Code or Title I of ERISA or the rules
promulgated thereunder. Upon any attempt to so transfer the Option, or upon the
levy or attachment or similar process of the Option, the Option shall
automatically become null and void.
7. Restriction on Issuance of Shares - Investment Representation. The
Optionee agrees for himself, his heirs and legatees that, unless at the time of
exercise there exists an effective registration
2
<PAGE> 3
statement under the Securities Act of 1933 concerning the Shares issuable
pursuant to the Option providing for the issuance of such Shares to the Optionee
and/or the subsequent transfer of the Shares by Optionee, any and all Shares
purchased upon the exercise of the Option shall be acquired for investment and
not for distribution. Upon the issuance of any or all of the Shares subject to
the Option, the Company, in its discretion and in accordance with the foregoing,
may require the Optionee, or his heirs or legatees receiving such Shares, to
deliver to the Company a representation in writing, in a form satisfactory to
the Board, that such Shares are being acquired in good faith for investment and
not for distribution. In accordance with the foregoing, (i) the Company may
place with its transfer agent a "stop transfer" order with respect to such
Shares and may place an appropriate restrictive legend on the certificate(s)
evidencing such Shares; and (ii) any stock certificates issued upon the exercise
of the Option may bear an appropriate restrictive legend, if deemed necessary by
the Company.
8. No Rights as Shareholder. The Optionee shall have no rights as a
shareholder of the Company in respect of the Shares as to which the Option shall
not have been exercised and payment made as herein provided.
9. No Obligation Relating to Engagement of Optionee. Nothing herein
shall obligate the Company or any of its subsidiaries to engage the Optionee,
nor shall this Agreement constitute an agreement of employment or for services,
nor confer upon the Optionee any right to continue to render services to the
Company or any of its subsidiaries or interfere in any way with the right of the
Company or any of its subsidiaries to terminate the services of the Optionee at
any time without liability to the Company or the subsidiary.
10. Taxes. The Company may make such provisions as it may deem
appropriate for the withholding of any taxes which it determines is required in
connection with any options granted under the Plan. The Company may further
require notification from the Optionee upon any disposition of Shares acquired
pursuant to the exercise of the Option.
11. Conflict between Option Agreement and Plan. In the event of any
conflicts between this Agreement and the terms and conditions of the Plan, the
terms and conditions of the Plan shall control.
12. Binding Effect. Except as herein otherwise expressly provided, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto, their legal representatives and assigns.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed wholly within the State of Delaware.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
Attest: NATIONAL MEDIA CORPORATION
- ------------------------------ By: /s/ Jon W. Yoskin II
-----------------------
Jon W. Yoskin II
Chairman, Compensation
Committee of the
Board of Directors
Witness:
- ------------------------------- /s/ Frederick S. Hammer
------------------------
Frederick S. Hammer
4
<PAGE> 1
Exhibit 10.30
NON-INCENTIVE STOCK OPTION AGREEMENT
(Non-Plan)
THIS NON-INCENTIVE STOCK OPTION AGREEMENT ("Agreement") is dated as of
February 27, 1997 and is by and between NATIONAL MEDIA CORPORATION, a Delaware
corporation with its principal office located at Eleven Penn Center, Suite 1100,
1835 Market Street, Philadelphia, Pennsylvania, 19103 (the "Company"), and
Frederick S. Hammer (the "Optionee").
The Compensation Committee of the Board of Directors of the Company
(the "Committee") has determined to grant to the Optionee an option to purchase
shares of the Company's Common Stock in order to provide the Optionee with an
added incentive to contribute to the Company's future success and prosperity.
The option granted herein shall be issued outside of the Plan (as hereinafter
defined) in connection with the satisfaction of the Optionee's employment, but
subject to such terms and conditions as if it were issued under the Company's
Amended and Restated Stock Option Plan, as it may be amended from time to time
hereafter (the "Plan"). Capitalized terms contained herein and not otherwise
defined shall have the meanings ascribed to such terms in the Plan.
Accordingly, in consideration of the premises set forth herein, and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the Company hereby grants the Optionee the option to acquire shares of the
common stock of the Company upon the following terms and conditions:
1. Grant of Option.
(a) The Company hereby grants to the Optionee the right and
option (the "Option") to purchase up to One Hundred Thousand (100,000) fully
paid and non-assessable shares of common stock, par value $.01 per share, of the
Company (the "Shares"), to be issued upon the exercise hereof.
(b) Assuming the Optionee remains an active member of the
Company's Board of Directors on the dates set forth below, the Option to
purchase the Shares shall vest in the increments set forth below. The Option may
only be exercised as to the portion thereof which shall have become vested as of
the intended date of exercise:
(i) One-Quarter (1/4) of the Shares as of February 27, 1997;
(ii) One-Quarter (1/4) of the Shares as of February 27, 1998;
(iii) One-Quarter (1/4) of the Shares as of February 27, 1999; and
(iv) One-Quarter (1/4) of the Shares as of February 27, 2000.
(c) Subject to the vesting schedule set forth above, the
Option may be exercised during the period ("Option Period") commencing on the
date hereof and, unless sooner
<PAGE> 2
terminated as provided herein, expiring and terminating at 5:00 p.m. Eastern
Standard Time on February 27, 2007, at which time the Optionee shall have no
further right to purchase any Shares not then purchased. The Company shall at
all times during the term of this Agreement reserve and keep available such
number of Shares as will be sufficient to satisfy the requirements of this
Agreement.
(d) It is not intended that the Option qualify as an Incentive
Stock Option within the meaning of Section 422A of the Internal Revenue Code of
1986, as amended (the "Code").
2. Exercise Price. The exercise price of the Option (the "Exercise
Price") shall be $6.625 per Share, and shall be payable by certified or bank
check payable to the order of the Company in full at the time of the exercise in
cash or, with the consent of the Committee in its sole discretion, by delivering
(i) shares of Common Stock already owned by the Optionee and having a fair
market value (as determined under the Plan) on the date of exercise equal to the
Exercise Price, or (ii) a combination of cash and shares of Common Stock with a
fair market value equal to the Exercise Price.
3. Exercise of Option. The Optionee may exercise this Option, to the
extent then vested, to purchase Shares by providing notice to the Company by
registered or certified mail, return receipt requested, addressed to its
principal office, or by hand delivery, signed by the Optionee, indicating the
number of whole Shares which Optionee desires to purchase under the Option. The
notice shall be accompanied by payment of the Option Price therefor as specified
in Paragraph 2 above, any amounts payable pursuant to Paragraph 10 below and any
required written representation as specified pursuant to Paragraph 7 below. As
soon as practicable after the receipt of such notice of exercise, payments and
written representation, the Company shall issue to the Optionee a certificate(s)
issued in the Optionee's name evidencing the Shares purchased by the Optionee
hereunder, subject to the Company's right to require that Optionee execute such
other documents as it deems reasonably necessary.
4. Limitations on Right to Exercise. Should the Optionee cease to be an
Eligible Participant for any reason other than the Optionee's death or
disability, the Option (to the extent then vested) shall be exercisable for a
period of three months after the Optionee ceases to be an Eligible Participant
or until the expiration of the Option Period, whichever shall occur first.
5. Death or Disability of Optionee. In the event of the death or
disability of the Optionee while the Optionee is an Eligible Participant (or the
death of the Optionee within three months after the date on which the Optionee
ceases to be an Eligible Participant), any unexercised portion of the Option
shall be exercisable (to the extent that the Option was exercisable at the time
of the Optionee's death or disability) for a period of one year after the
Optionee's death or disability or upon the expiration of the Option Period,
whichever shall occur first, and, in the event of the death of the Optionee,
shall be exercisable only by the Optionee's personal representative or such
person or persons to whom the Optionee's rights pass under the Optionee's will
or by the laws of descent and distribution.
<PAGE> 3
6. Non-Transferability of Option. Except as provided in Paragraph 5
herein, the Option shall be exercisable only by the Optionee. The Optionee may
not give, grant, sell, exchange, transfer legal title, pledge, assign or
otherwise encumber or dispose of the Option herein granted or any interest
therein, otherwise than by will or the laws of the descent and distribution or,
if permitted under Rule 16b-3 promulgated under the Securities Exchange Act of
1934 and by the Committee in its sole discretion pursuant to a qualified
domestic relations order as defined in the Code or Title I of ERISA or the rules
promulgated thereunder. Upon any attempt to so transfer the Option, or upon the
levy or attachment or similar process of the Option, the Option shall
automatically become null and void.
7. Restriction on Issuance of Shares - Investment Representation. The
Optionee agrees for himself, his heirs and legatees that, unless at the time of
exercise there exists an effective registration statement under the Securities
Act of 1933 concerning the Shares issuable pursuant to the Option providing for
the issuance of such Shares to the Optionee and/or the subsequent transfer of
the Shares by Optionee, any and all Shares purchased upon the exercise of the
Option shall be acquired for investment and not for distribution. Upon the
issuance of any or all of the Shares subject to the Option, the Company, in its
discretion and in accordance with the foregoing, may require the Optionee, or
his heirs or legatees receiving such Shares, to deliver to the Company a
representation in writing, in a form satisfactory to the Board, that such Shares
are being acquired in good faith for investment and not for distribution. In
accordance with the foregoing, (i) the Company may place with its transfer agent
a "stop transfer" order with respect to such Shares and may place an appropriate
restrictive legend on the certificate(s) evidencing such Shares; and (ii) any
stock certificates issued upon the exercise of the Option may bear an
appropriate restrictive legend, if deemed necessary by the Company.
8. No Rights as Shareholder. The Optionee shall have no rights as a
shareholder of the Company in respect of the Shares as to which the Option shall
not have been exercised and payment made as herein provided.
9. No Obligation Relating to Engagement of Optionee. Nothing herein
shall obligate the Company or any of its subsidiaries to engage the Optionee,
nor shall this Agreement constitute an agreement of employment or for services,
nor confer upon the Optionee any right to continue to render services to the
Company or any of its subsidiaries or interfere in any way with the right of the
Company or any of its subsidiaries to terminate the services of the Optionee at
any time without liability to the Company or the subsidiary.
10. Taxes. The Company may make such provisions as it may deem
appropriate for the withholding of any taxes which it determines is required in
connection with any options granted under the Plan. The Company may further
require notification from the Optionee upon any disposition of Shares acquired
pursuant to the exercise of the Option.
11. Conflict between Option Agreement and Plan. In the event of any
conflicts between this Agreement and the terms and conditions of the Plan, the
terms and conditions of the Plan shall control.
<PAGE> 4
12. Binding Effect. Except as herein otherwise expressly provided, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto, their legal representatives and assigns.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed wholly within the State of Delaware.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
Attest: NATIONAL MEDIA CORPORATION
By: /s/ Jon W. Yoskin II
Jon W. Yoskin II
Chairman, Compensation Committee of
the Board of Directors
Witness:
By: /s/ Frederick S. Hammer
Frederick S. Hammer
<PAGE> 1
Exhibit 10.31
NON-INCENTIVE STOCK OPTION AGREEMENT
THIS NON-INCENTIVE STOCK OPTION AGREEMENT ("Agreement") is dated as of
June 18, 1997 and is by and between NATIONAL MEDIA CORPORATION, a Delaware
corporation with its principal office located at Eleven Penn Center, Suite 1100,
1835 Market Street, Philadelphia, Pennsylvania, 19103 (the "Company"), and Jon
Yoskin (the "Optionee").
The Compensation Committee of the Board of Directors of the Company
(the "Committee") has determined to grant to the Optionee an option to purchase
shares of the Company's Common Stock in order to provide the Optionee with an
added incentive to contribute to the Company's future success and prosperity.
The option granted herein shall be subject to all of the terms and conditions of
the Company's Amended and Restated Stock Option Plan, as it may be amended from
time to time hereafter (the "Plan"). Capitalized terms contained herein and not
otherwise defined shall have the meanings ascribed to such terms in the Plan.
The Option (as defined below) is hereby granted in lieu of, and in replacement
of, that certain option to purchase 50,000 shares of the Company's Common Stock
at a price of $16.375 per share, issued in July 1996. Such prior option shall be
of no further force and effect, and such options shall be once again available
for reissuance under the Plan.
Accordingly, in consideration of the premises set forth herein, and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the Company hereby grants the Optionee the option to acquire shares of the
common stock of the Company upon the following terms and conditions:
1. Grant of Option.
(a) The Company hereby grants to the Optionee the right and
option (the "Option") to purchase up to Twenty-five Thousand (25,000) fully paid
and non-assessable shares of common stock, par value $.01 per share, of the
Company (the "Shares"), to be issued upon the exercise hereof.
(b) Assuming the membership of Optionee on the Company's Board
of Directors on April 25, 2001, the Option to purchase the Shares shall vest on
April 25, 2001, subject to the following provisions for accelerated vesting:
assuming the membership of Optionee on the Company's Board of Directors on such
date, the Option shall vest immediately (i) in the event of a Change of Control
(as defined in the Plan); or (ii) in the event that the closing price as
reported on the New York Stock Exchange is $35.00 or more for ten (10)
consecutive trading days (subject to appropriate adjustment in the event of any
stock combination, stock split, etc.). In addition, assuming the membership of
Optionee on the Company's Board of Directors as of March 31 of the applicable
fiscal year, in the event that the Company achieves the following
earnings-per-share ratios (subject to appropriate adjustment in the event of any
stock combination, stock split, etc.) calculated cumulatively from the fiscal
year ending March 31, 1997, one-fifth of the shares underlying the Option shall
vest immediately for each fiscal year("FY"): FY1997: $.80; FY1998: $1.73;
FY1999: $2.79; and FY2000: $4.01. The Option
<PAGE> 2
may only be exercised as to the portions thereof which shall have become vested
as of the intended date of exercise.
(c) Subject to the vesting schedule set forth above, the
Option may be exercised during the period ("Option Period") commencing on the
date hereof and, unless sooner terminated as provided herein, expiring and
terminating at 5:00 p.m. Eastern Standard Time on the tenth (10th) anniversary
of this Agreement, at which time the Optionee shall have no further right to
purchase any Shares not then purchased. The Company shall at all times during
the term of this Agreement reserve and keep available such number of Shares as
will be sufficient to satisfy the requirements of this Agreement.
(d) It is not intended that the Option qualify as an Incentive
Stock Option within the meaning of Section 422A of the Internal Revenue Code of
1986, as amended (the "Code").
2. Exercise Price. The exercise price of the Option (the "Exercise
Price") shall be $7.25 per Share, and shall be payable by certified or bank
check payable to the order of the Company in full at the time of the exercise in
cash or, with the consent of the Committee in its sole discretion, by delivering
(i) shares of Common Stock already owned by the Optionee and having a fair
market value (as determined under the Plan) on the date of exercise equal to the
Exercise Price, or (ii) a combination of cash and shares of Common Stock with a
fair market value equal to the Exercise Price.
3. Exercise of Option. The Optionee may exercise this Option, to the
extent then vested, to purchase Shares by providing notice to the Company by
registered or certified mail, return receipt requested, addressed to its
principal office, or by hand delivery, signed by the Optionee, indicating the
number of whole Shares which Optionee desires to purchase under the Option. The
notice shall be accompanied by payment of the Option Price therefor as specified
in Paragraph 2 above, any amounts payable pursuant to Paragraph 10 below and any
required written representation as specified pursuant to Paragraph 7 below. As
soon as practicable after the receipt of such notice of exercise, payments and
written representation, the Company shall issue to the Optionee a certificate(s)
issued in the Optionee's name evidencing the Shares purchased by the Optionee
hereunder, subject to the Company's right to require that Optionee execute such
other documents as it deems reasonably necessary.
4. Limitations on Right to Exercise. Should the Optionee cease to be an
Eligible Participant for any reason other than the Optionee's death or
disability, the Option (to the extent then vested) shall be exercisable for a
period of three months after the Optionee ceases to be an Eligible Participant
or until the expiration of the Option Period, whichever shall occur first.
5. Death or Disability of Optionee. In the event of the death or
disability of the Optionee while the Optionee is an Eligible Participant (or the
death of the Optionee within three months after the date on which the Optionee
ceases to be an Eligible Participant), any unexercised portion of the Option
shall be exercisable (to the extent that the Option was exercisable at the time
of the Optionee's death or disability) for a period of one year after the
Optionee's death or disability or upon the expiration of the Option Period,
whichever shall occur
2
<PAGE> 3
first, and, in the event of the death of the Optionee, shall be exercisable only
by the Optionee's personal representative or such person or persons to whom the
Optionee's rights pass under the Optionee's will or by the laws of descent and
distribution.
6. Non-Transferability of Option. Except as provided in Paragraph 5
herein, the Option shall be exercisable only by the Optionee. The Optionee may
not give, grant, sell, exchange, transfer legal title, pledge, assign or
otherwise encumber or dispose of the Option herein granted or any interest
therein, otherwise than by will or the laws of the descent and distribution or,
if permitted under Rule 16b-3 promulgated under the Securities Exchange Act of
1934 and by the Committee in its sole discretion pursuant to a qualified
domestic relations order as defined in the Code or Title I of ERISA or the rules
promulgated thereunder. Upon any attempt to so transfer the Option, or upon the
levy or attachment or similar process of the Option, the Option shall
automatically become null and void.
7. Restriction on Issuance of Shares - Investment Representation. The
Optionee agrees for himself, his heirs and legatees that, unless at the time of
exercise there exists an effective registration statement under the Securities
Act of 1933 concerning the Shares issuable pursuant to the Option providing for
the issuance of such Shares to the Optionee and/or the subsequent transfer of
the Shares by Optionee, any and all Shares purchased upon the exercise of the
Option shall be acquired for investment and not for distribution. Upon the
issuance of any or all of the Shares subject to the Option, the Company, in its
discretion and in accordance with the foregoing, may require the Optionee, or
his heirs or legatees receiving such Shares, to deliver to the Company a
representation in writing, in a form satisfactory to the Board, that such Shares
are being acquired in good faith for investment and not for distribution. In
accordance with the foregoing, (i) the Company may place with its transfer agent
a "stop transfer" order with respect to such Shares and may place an appropriate
restrictive legend on the certificate(s) evidencing such Shares; and (ii) any
stock certificates issued upon the exercise of the Option may bear an
appropriate restrictive legend, if deemed necessary by the Company.
8. No Rights as Shareholder. The Optionee shall have no rights as a
shareholder of the Company in respect of the Shares as to which the Option shall
not have been exercised and payment made as herein provided.
9. No Obligation Relating to Engagement of Optionee. Nothing herein
shall obligate the Company or any of its subsidiaries to engage the Optionee,
nor shall this Agreement constitute an agreement of employment or for services,
nor confer upon the Optionee any right to continue to render services to the
Company or any of its subsidiaries or interfere in any way with the right of the
Company or any of its subsidiaries to terminate the services of the Optionee at
any time without liability to the Company or the subsidiary.
10. Taxes. The Company may make such provisions as it may deem
appropriate for the withholding of any taxes which it determines is required in
connection with any options granted under the Plan. The Company may further
require notification from the Optionee upon any disposition of Shares acquired
pursuant to the exercise of the Option.
3
<PAGE> 4
11. Conflict between Option Agreement and Plan. In the event of any
conflicts between this Agreement and the terms and conditions of the Plan, the
terms and conditions of the Plan shall control.
12. Binding Effect. Except as herein otherwise expressly provided, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto, their legal representatives and assigns.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed wholly within the State of Delaware.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
Attest: NATIONAL MEDIA CORPORATION
By: By: /s/ Gus Costalas
Gus Costalas
Vice Chairman
Witness:
/s/ Jon W. Yoskin II
Jon W. Yoskin II
4
<PAGE> 1
EXHIBIT 10.32
THE 1998 EQUITY PARTICIPATION PLAN
OF
V-L HOLDINGS CORP.
V-L Holdings Corp., a Delaware corporation (the "Company"), has adopted The
1998 Equity Participation Plan of V-L Holdings Corp. (the "Plan"), effective
, 1998, for the benefit of its eligible employees,
consultants and directors.
The purposes of this Plan are as follows:
(1) To provide an additional incentive for directors, key Employees (as
such term is defined below) and consultants to further the growth, development
and financial success of the Company by personally benefiting through the
ownership of Company stock and/or rights which recognize such growth,
development and financial success.
(2) To enable the Company to obtain and retain the services of directors,
key Employees and consultants considered essential to the long range success of
the Company by offering them an opportunity to own stock in the Company and/or
rights which will reflect the growth, development and financial success of the
Company.
ARTICLE 1.
DEFINITIONS
1.1. General. Wherever the following terms are used in this Plan they shall
have the meanings specified below, unless the context clearly indicates
otherwise.
1.2. Award Limit. "Award Limit" shall mean 100,000 shares of Common Stock;
provided that with respect to any Chief Executive Officer of the Company, "Award
Limit" shall mean 1,000,000 shares of Common Stock.
1.3. Board. "Board" shall mean the Board of Directors of the Company.
1.4. Change in Control. "Change in Control" shall mean a change in
ownership or control of the Company effected through either of the following
transactions:
1.4.1. 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) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange
Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities pursuant to a
tender or exchange offer made directly to the Company's stockholders which
the Board does not recommend such stockholders to accept; or
1.4.2. there is a change in the composition of the Board over a period
of thirty-six (36) consecutive months (or less) such that a majority of the
Board members (rounded up to the nearest whole number) ceases, by reason of
one or more proxy contests for the election of Board members, to be
comprised of individuals who either (i) have been Board members
continuously since the beginning of such period or (ii) 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 (i) who were still in
office at the time such election or nomination was approved by the Board.
1.5. Code. "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.6. Committee. "Committee" shall mean the Compensation Committee of the
Board, or another committee of the Board, appointed as provided in Section 9.1.
1.7. Common Stock. "Common Stock" shall mean the common stock of the
Company, par value $.01 per share, and any equity security of the Company issued
or authorized to be issued in the future, but excluding any preferred stock and
any warrants, options or other rights to purchase Common Stock. Debt securities
of the Company convertible into Common Stock shall be deemed equity securities
of the Company.
1.8. Company. "Company" shall mean V-L Holdings, Corp., a Delaware
corporation.
G-1
<PAGE> 2
1.9. Corporate Transaction. "Corporate Transaction" shall mean any of the
following stockholder-approved transactions to which the Company is a party:
1.9.1. a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State in which the Company is incorporated, form a holding
company or effect a similar reorganization as to form whereupon this Plan
and all Options are assumed by the successor entity;
1.9.2. the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions
to Section 1.9.1, above; or
1.9.3. any reverse merger in which the Company is the surviving entity
but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities are
transferred or issued to a person or persons different from those who held
such securities immediately prior to such merger.
1.10. Deferred Stock. "Deferred Stock" shall mean Common Stock awarded
under Article 7 of this Plan.
1.11. Director. "Director" shall mean a member of the Board.
1.12. Dividend Equivalent. "Dividend Equivalent" shall mean a right to
receive the equivalent value (in cash or Common Stock) of dividends paid on
Common Stock, awarded under Article 7 of this Plan.
1.13. Employee. "Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company, or of
any corporation which is a Subsidiary.
1.14. Exchange Act. "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
1.15. Fair Market Value. "Fair Market Value" of a share of Common Stock as
of a given date shall be (i) the closing price of a share of Common Stock on the
principal exchange on which shares of Common Stock are then trading, if any (or
as reported on any composite index which includes such principal exchange), on
the trading day previous to such date, or if shares were not traded on the
trading day previous to such date, then on the next preceding date on which a
trade occurred, or (ii) if Common Stock is not traded on an exchange but is
quoted on NASDAQ or a successor quotation system, the mean between the closing
representative bid and asked prices for the Common Stock on the trading day
previous to such date as reported by NASDAQ or such successor quotation system;
or (iii) if Common Stock is not publicly traded on an exchange and not quoted on
NASDAQ or a successor quotation system, the Fair Market Value of a share of
Common Stock as established by the Committee (or the Board, in the case of
Options granted to Independent Directors) acting in good faith.
1.16. Grantee. "Grantee" shall mean an Employee or consultant granted a
Performance Award, Dividend Equivalent, Stock Payment or Stock Appreciation
Right, or an award of Deferred Stock, under this Plan.
1.17. Incentive Stock Option. "Incentive Stock Option" shall mean an option
which conforms to the applicable provisions of Section 422 of the Code and which
is designated as an Incentive Stock Option by the Committee.
1.18. Independent Director. "Independent Director" shall mean a member of
the Board who is not an Employee of the Company.
1.19. Non-Qualified Stock Option. "Non-Qualified Stock Option" shall mean
an Option which is not designated as an Incentive Stock Option by the Committee.
1.20. Option. "Option" shall mean a stock option granted under Article 3 of
this Plan. An Option granted under this Plan shall, as determined by the
Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option;
provided, however, that Options granted to Independent Directors and consultants
shall be Non-Qualified Stock Options.
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1.21. Optionee. "Optionee" shall mean an Employee, consultant or
Independent Director granted an Option under this Plan.
1.22. Performance Award. "Performance Award" shall mean a cash bonus, stock
bonus or other performance or incentive award that is paid in cash, Common Stock
or a combination of both, awarded under Article 7 of this Plan.
1.23. Plan. "Plan" shall mean The 1998 Equity Participation Plan of V-L
Holdings Corp.
1.24. QDRO. "QDRO" shall mean a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.
1.25. Restricted Stock. "Restricted Stock" shall mean Common Stock awarded
under Article 6 of this Plan.
1.26. Restricted Stockholder. "Restricted Stockholder" shall mean an
Employee or consultant granted an award of Restricted Stock under Article 6 of
this Plan.
1.27. Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under the
Exchange Act, as such Rule may be amended from time to time.
1.28. Section 162(m) Participant. "Section 162(m) Participant" shall mean
any key Employee designated by the Committee as a key Employee whose
compensation for the fiscal year in which the key Employee is so designated or a
future fiscal year may be subject to the limit on deductible compensation
imposed by Section 162(m) of the Code.
1.29. Stock Appreciation Right. "Stock Appreciation Right" shall mean a
stock appreciation right granted under Article 8 of this Plan.
1.30. Stock Payment. "Stock Payment" shall mean (i) a payment in the form
of shares of Common Stock, or (ii) an option or other right to purchase shares
of Common Stock, as part of a deferred compensation arrangement, made in lieu of
all or any portion of the compensation, including without limitation, salary,
bonuses and commissions, that would otherwise become payable to a key Employee
or consultant in cash, awarded under Article 7 of this Plan.
1.31. Subsidiary. "Subsidiary" shall mean any corporation in an unbroken
chain of corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain then owns stock possessing
50 percent or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
1.32. Termination of Consultancy. "Termination of Consultancy" shall mean
the time when the engagement of an Optionee, Grantee or Restricted Stockholder
as a consultant to the Company or a Subsidiary is terminated for any reason,
with or without cause, including, but not by way of limitation, by resignation,
discharge, death or retirement; but excluding terminations where there is a
simultaneous commencement of employment with the Company or any Subsidiary. The
Committee, in its absolute discretion, shall determine the effect of all matters
and questions relating to Termination of Consultancy, including, but not by way
of limitation, the question of whether a Termination of Consultancy resulted
from a discharge for good cause, and all questions of whether particular leaves
of absence constitute Terminations of Consultancy. Notwithstanding any other
provision of this Plan, the Company or any Subsidiary has an absolute and
unrestricted right to terminate a consultant's service at any time for any
reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in writing.
1.33. Termination of Directorship. "Termination of Directorship" shall mean
the time when an Optionee who is an Independent Director ceases to be a Director
for any reason, including, but not by way of limitation, a termination by
resignation, failure to be elected, death or retirement. The Board, in its sole
and absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Directorship with respect to Independent Directors.
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1.34. Termination of Employment. "Termination of Employment" shall mean the
time when the employee-employer relationship between an Optionee, Grantee or
Restricted Stockholder and the Company or any Subsidiary is terminated for any
reason, with or without cause, including, but not by way of limitation, a
termination by resignation, discharge, death, disability or retirement; but
excluding (i) terminations where there is a simultaneous reemployment or
continuing employment of an Optionee, Grantee or Restricted Stockholder by the
Company or any Subsidiary, (ii) at the discretion of the Committee, terminations
which result in a temporary severance of the employee-employer relationship, and
(iii) at the discretion of the Committee, terminations which are followed by the
simultaneous establishment of a consulting relationship by the Company or a
Subsidiary with the former employee. The Committee, in its absolute discretion,
shall determine the effect of all matters and questions relating to Termination
of Employment, including, but not by way of limitation, the question of whether
a Termination of Employment resulted from a discharge for good cause, and all
questions of whether particular leaves of absence constitute Terminations of
Employment; provided, however, that, unless otherwise determined by the
Committee in its discretion, a leave of absence, change in status from an
employee to an independent contractor or other change in the employee-employer
relationship shall constitute a Termination of Employment if, and to the extent
that, such leave of absence, change in status or other change interrupts
employment for the purposes of Section 422(a)(2) of the Code and the then
applicable regulations and revenue rulings under said Section. Notwithstanding
any other provision of this Plan, the Company or any Subsidiary has an absolute
and unrestricted right to terminate an Employee's employment at any time for any
reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in writing.
1.35. Transactions. "Transactions" shall mean the transactions contemplated
under the Agreement and Plan of Reorganization and Merger, dated as of January
5, 1998, by and among National Media Corporation, ValueVision International Inc.
and V-L Holdings Corp.
ARTICLE 2.
SHARES SUBJECT TO PLAN
2.1 Shares Subject to Plan.
2.1.1. The shares of stock subject to Options, awards of Restricted Stock,
Performance Awards, Dividend Equivalents, awards of Deferred Stock, Stock
Payments or Stock Appreciation Rights shall be Common Stock, initially shares of
the Company's Common Stock, par value $.01 per share. The aggregate number of
such shares which may be issued upon exercise of such options or rights or upon
any such awards under the Plan shall not exceed 1,750,000. The shares of Common
Stock issuable upon exercise of such options or rights or upon any such awards
may be either previously authorized but unissued shares or treasury shares.
2.1.2. The maximum number of shares which may be subject to Options, awards
of Restricted Stock, Performance Awards, Dividend Equivalents, awards of
Deferred Stock, Stock Payments or Stock Appreciation Rights granted under the
Plan to any individual in any fiscal year of the Company shall not exceed the
Award Limit. To the extent required by Section 162(m) of the Code, shares
subject to Options which are canceled continue to be counted against the Award
Limit and if, after grant of an Option, the price of shares subject to such
Option is reduced, the transaction is treated as a cancellation of the Option
and a grant of a new Option and both the Option deemed to be canceled and the
Option deemed to be granted are counted against the Award Limit. Furthermore, to
the extent required by Section 162(m) of the Code, if, after grant of a Stock
Appreciation Right, the base amount on which stock appreciation is calculated is
reduced to reflect a reduction in the Fair Market Value of the Company's Common
Stock, the transaction is treated as a cancellation of the Stock Appreciation
Right and a grant of a new Stock Appreciation Right and both the Stock
Appreciation Right deemed to be canceled and the Stock Appreciation Right deemed
to be granted are counted against the Award Limit.
2.2. Add-back of Options and Other Rights. If any Option, or other right to
acquire shares of Common Stock under any other award under this Plan, expires or
is canceled without having been fully exercised, or is exercised in whole or in
part for cash as permitted by this Plan, the number of shares subject to such
Option or
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other right but as to which such Option or other right was not exercised prior
to its expiration, cancellation or exercise may again be optioned, granted or
awarded hereunder, subject to the limitations of Section 2.1. Furthermore, any
shares subject to Options or other awards which are adjusted pursuant to Section
10.3 and become exercisable with respect to shares of stock of another
corporation shall be considered cancelled and may again be optioned, granted or
awarded hereunder, subject to the limitations of Section 2.1. Shares of Common
Stock which are delivered by the Optionee or Grantee or withheld by the Company
upon the exercise of any Option or other award under this Plan, in payment of
the exercise price thereof, may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1. If any share of Restricted Stock is
forfeited by the Grantee or repurchased by the Company pursuant to Section 6.6
hereof, such share may again be optioned, granted or awarded hereunder, subject
to the limitations of Section 2.1. Notwithstanding the provisions of this
Section 2.2, no shares of Common Stock may again be optioned, granted or awarded
if such action would cause an Incentive Stock Option to fail to qualify as an
incentive stock option under Section 422 of the Code.
ARTICLE 3.
GRANTING OF OPTIONS
3.1. Eligibility. Any Employee or consultant selected by the Committee
pursuant to Section 3.4.1 shall be eligible to be granted an Option. Each
Independent Director of the Company shall be eligible to be granted Options at
the times and in the manner set forth in Section 3.4.4.
3.2. Disqualification for Stock Ownership. No person may be granted an
Incentive Stock Option under this Plan if such person, at the time the Incentive
Stock Option is granted, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
then existing Subsidiary or parent corporation (within the meaning of Section
422 of the Code) unless such Incentive Stock Option conforms to the applicable
provisions of Section 422 of the Code.
3.3. Qualification of Incentive Stock Options. No Incentive Stock Option
shall be granted to any person who is not an Employee.
3.4. Granting of Options.
3.4.1. The Committee shall from time to time, in its absolute discretion,
and subject to applicable limitations of this Plan:
3.4.1.1. Determine which Employees are key Employees and select from
among the key Employees or consultants (including Employees or consultants
who have previously received Options or other awards under this Plan) such
of them as in its opinion should be granted Options;
3.4.1.2. Subject to the Award Limit, determine the number of shares to
be subject to such Options granted to the selected key Employees or
consultants;
3.4.1.3. Subject to Section 3.3, determine whether such Options are to
be Incentive Stock Options or Non-Qualified Stock Options and whether such
Options are to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code; and
3.4.1.4. Determine the terms and conditions of such Options,
consistent with this Plan; provided, however, that the terms and conditions
of Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall include, but not be
limited to, such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code.
3.4.2. Upon the selection of a key Employee or consultant to be granted an
Option, the Committee shall instruct the Secretary of the Company to issue the
Option and may impose such conditions on the grant of the Option as it deems
appropriate. Without limiting the generality of the preceding sentence, the
Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition on the grant of an Option to an Employee or consultant
that the Employee or consultant surrender for cancellation some or all of the
unexercised Options, awards of Restricted Stock or Deferred Stock, Performance
Awards, Stock
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Appreciation Rights, Dividend Equivalents or Stock Payments or other rights
which have been previously granted to him under this Plan or otherwise. An
Option, the grant of which is conditioned upon such surrender, may have an
option price lower (or higher) than the exercise price of such surrendered
Option or other award, may cover the same (or a lesser or greater) number of
shares as such surrendered Option or other award, may contain such other terms
as the Committee deems appropriate, and shall be exercisable in accordance with
its terms, without regard to the number of shares, price, exercise period or any
other term or condition of such surrendered Option or other award.
3.4.3. Any Incentive Stock Option granted under this Plan may be modified
by the Committee to disqualify such option from treatment as an "incentive stock
option" under Section 422 of the Code.
3.4.4. The Board shall from time to time, in its absolute discretion, and
subject to applicable limitations of this Plan:
3.4.4.1. Select from among the Independent Directors (including
Independent Directors who have previously received Options under this Plan)
such of them as in its opinion should be granted Options;
3.4.4.2. Subject to the Award Limit, determine the number of shares to
be subject to such Options granted to the selected Independent Directors;
3.4.4.3. Subject to the provisions of Article 4, determine the terms
and conditions of such Options, consistent with this Plan.
All the foregoing Option grants authorized by this Section 3.4.4 are
subject to stockholder approval of the Plan.
ARTICLE 4.
TERMS OF OPTIONS
4.1. Option Agreement. Each Option shall be evidenced by a written Stock
Option Agreement, which shall be executed by the Optionee and an authorized
officer of the Company and which shall contain such terms and conditions as the
Committee (or the Board, in the case of Options granted to Independent
Directors) shall determine, consistent with this Plan. Stock Option Agreements
evidencing Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall contain such terms and
conditions as may be necessary to meet the applicable provisions of Section
162(m) of the Code. Stock Option Agreements evidencing Incentive Stock Options
shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.
4.2. Option Price. The price per share of the shares subject to each Option
shall be set by the Committee; provided, however, that such price shall be no
less than the par value of a share of Common Stock, unless otherwise permitted
by applicable state law, and (i) in the case of Incentive Stock Options and
Options intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code, such price shall not be less than 100% of the
Fair Market Value of a share of Common Stock on the date the Option is granted;
(ii) in the case of Incentive Stock Options granted to an individual then owning
(within the meaning of Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company or any Subsidiary
or parent corporation thereof (within the meaning of Section 422 of the Code)
such price shall not be less than 110% of the Fair Market Value of a share of
Common Stock on the date the Option is granted; and (iii) in the case of Options
granted to Independent Directors, such price shall equal 100% of the Fair Market
Value of a share of Common Stock on the date the Option is granted.
4.3. Option Term. The term of an Option shall be set by the Committee in
its discretion; provided, however, that, (i) in the case of Options granted to
Independent Directors, the term shall be ten (10) years from the date the Option
is granted, without variation or acceleration hereunder, but subject to Section
5.6, and (ii) in the case of Incentive Stock Options, the term shall not be more
than ten (10) years from the date the Incentive Stock Option is granted, or five
(5) years from such date if the Incentive Stock Option is
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granted to an individual then owning (within the meaning of Section 424(d) of
the Code) more than 10% of the total combined voting power of all classes of
stock of the Company or any Subsidiary or parent corporation thereof (within the
meaning of Section 422 of the Code). Except as limited by requirements of
Section 422 of the Code and regulations and rulings thereunder applicable to
Incentive Stock Options, the Committee may extend the term of any outstanding
Option in connection with any Termination of Employment or Termination of
Consultancy of the Optionee, or amend any other term or condition of such Option
relating to such a termination.
4.4. Option Vesting
4.4.1. The period during which the right to exercise an Option in whole or
in part vests in the Optionee shall be set by the Committee and the Committee
may determine that an Option may not be exercised in whole or in part for a
specified period after it is granted; provided, however, that Options granted to
Independent Directors shall become exercisable in cumulative annual installments
of 25% on each of the first, second, third and fourth anniversaries of the date
of Option grant, without variation or acceleration hereunder except as provided
in Section 10.3.2. At any time after grant of an Option, the Committee may, in
its sole and absolute discretion and subject to whatever terms and conditions it
selects, accelerate the period during which an Option (except an Option granted
to an Independent Director) vests.
4.4.2. No portion of an Option which is unexercisable at Termination of
Employment, Termination of Directorship or Termination of Consultancy, as
applicable, shall thereafter become exercisable, except as may be otherwise
provided by the Committee in the case of Options granted to Employees or
consultants either in the Stock Option Agreement or by action of the Committee
following the grant of the Option.
4.4.3. To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section 422 of
the Code, but without regard to Section 422(d) of the Code) are exercisable for
the first time by an Optionee during any calendar year (under the Plan and all
other incentive stock option plans of the Company and any Subsidiary) exceeds
$100,000, such Options shall be treated as Non-Qualified Options to the extent
required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking Options into account in the order in which
they were granted. For purposes of this Section 4.4.3, the Fair Market Value of
stock shall be determined as of the time the Option with respect to such stock
is granted.
4.5. Continued Employment. Nothing in this Plan or in any Stock Option
Agreement hereunder shall confer upon any Optionee any right to continue in the
employ of, or as a consultant for, the Company or any Subsidiary, or as a
director of the Company, or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which are hereby expressly reserved,
to discharge any Optionee at any time for any reason whatsoever, with or without
good cause.
ARTICLE 5.
EXERCISE OF OPTIONS
5.1. Partial Exercise. An exercisable Option may be exercised in whole or
in part. However, an Option shall not be exercisable with respect to fractional
shares and the Committee (or the Board, in the case of Options granted to
Independent Directors) may require that, by the terms of the Option, a partial
exercise can only be effective with respect to a minimum number of shares.
5.2. Manner of Exercise. All or a portion of an exercisable Option shall be
deemed exercised upon delivery of all of the following to the Secretary of the
Company or his office:
5.2.1. A written notice complying with the applicable rules
established by the Committee (or the Board, in the case of Options granted
to Independent Directors) stating that the Option, or a portion thereof, is
exercised. The notice shall be signed by the Optionee or other person then
entitled to exercise the Option or such portion;
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5.2.2. Such representations and documents as the Committee (or the
Board, in the case of Options granted to Independent Directors), in its
absolute discretion, deems necessary or advisable to effect compliance with
all applicable provisions of the Securities Act of 1933, as amended, and
any other federal or state securities laws or regulations. The Committee or
Board may, in its absolute discretion, also take whatever additional
actions it deems appropriate to effect such compliance including, without
limitation, placing legends on share certificates and issuing stop-transfer
notices to agents and registrars;
5.2.3. In the event that the Option shall be exercised pursuant to
Section 10.1 by any person or persons other than the Optionee, appropriate
proof of the right of such person or persons to exercise the Option; and
5.2.4. Full cash payment to the Secretary of the Company for the
shares with respect to which the Option, or portion thereof, is exercised.
However, the Committee (or the Board, in the case of Options granted to
Independent Directors), may in its discretion (i) allow a delay in payment
up to thirty (30) days from the date the Option, or portion thereof, is
exercised; (ii) allow payment, in whole or in part, through the delivery of
shares of Common Stock owned by the Optionee, duly endorsed for transfer to
the Company with a Fair Market Value on the date of delivery equal to the
aggregate exercise price of the Option or exercised portion thereof; (iii)
allow payment, in whole or in part, through the surrender of shares of
Common Stock then issuable upon exercise of the Option having a Fair Market
Value on the date of Option exercise equal to the aggregate exercise price
of the Option or exercised portion thereof; (iv) allow payment, in whole or
in part, through the delivery of property of any kind which constitutes
good and valuable consideration; (v) allow payment, in whole or in part,
through the delivery of a full recourse promissory note bearing interest
(at no less than such rate as shall then preclude the imputation of
interest under the Code) and payable upon such terms as may be prescribed
by the Committee or the Board; (vi) allow payment, in whole or in part,
through the delivery of a notice that the Optionee has placed a market sell
order with a broker with respect to shares of Common Stock then issuable
upon exercise of the Option, and that the broker has been directed to pay a
sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price; or (vii) allow payment through
any combination of the consideration provided in the foregoing
subparagraphs (ii), (iii), (iv), (v) and (vi). In the case of a promissory
note, the Committee (or the Board, in the case of Options granted to
Independent Directors) may also prescribe the form of such note and the
security to be given for such note. The Option may not be exercised,
however, by delivery of a promissory note or by a loan from the Company
when or where such loan or other extension of credit is prohibited by law.
5.3. Conditions to Issuance of Stock Certificates. The Company shall not
be required to issue or deliver any certificate or certificates for shares of
stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
5.3.1. The admission of such shares to listing on all stock exchanges
on which such class of stock is then listed;
5.3.2. The completion of any registration or other qualification of
such shares under any state or federal law, or under the rulings or
regulations of the Securities and Exchange Commission or any other
governmental regulatory body which the Committee or Board shall, in its
absolute discretion, deem necessary or advisable;
5.3.3. The obtaining of any approval or other clearance from any state
or federal governmental agency which the Committee (or Board, in the case
of Options granted to Independent Directors) shall, in its absolute
discretion, determine to be necessary or advisable;
5.3.4. The lapse of such reasonable period of time following the
exercise of the Option as the Committee (or Board, in the case of Options
granted to Independent Directors) may establish from time to time for
reasons of administrative convenience; and
5.3.5. The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax, which, in the
discretion of the Committee or the Board may be in the form of
consideration used by the Optionee to pay for such shares under Section
5.2.4.
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5.4. Rights as Stockholders. The holders of Options shall not be, nor have
any of the rights or privileges of, stockholders of the Company in respect of
any shares purchasable upon the exercise of any part of an Option unless and
until certificates representing such shares have been issued by the Company to
such holders.
5.5. Ownership and Transfer Restrictions. The Committee (or Board, in the
case of Options granted to Independent Directors), in its absolute discretion,
may impose such restrictions on the ownership and transferability of the shares
purchasable upon the exercise of an Option as it deems appropriate. Any such
restriction shall be set forth in the respective Stock Option Agreement and may
be referred to on the certificates evidencing such shares. The Committee may
require the Employee to give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
(i) two years from the date of granting such Option to such Employee or (ii) one
year after the transfer of such shares to such Employee. The Committee may
direct that the certificates evidencing shares acquired by exercise of an Option
refer to such requirement to give prompt notice of disposition.
5.6. Limitations on Exercise of Options Granted to Independent
Directors. No Option granted to an Independent Director may be exercised to any
extent by anyone after the first to occur of the following events:
5.6.1. The expiration of twelve (12) months from the date of the
Optionee's death;
5.6.2. the expiration of twelve (12) months from the date of the
Optionee's Termination of Directorship by reason of his permanent and total
disability (within the meaning of Section 22(e)(3) of the Code);
5.6.3. the expiration of three (3) months from the date of the
Optionee's Termination of Directorship for any reason other than such
Optionee's death or his permanent and total disability, unless the Optionee
dies within said three-month period; or
5.6.4. The expiration of ten years from the date the Option was
granted.
ARTICLE 6.
AWARD OF RESTRICTED STOCK
6.1. Award of Restricted Stock.
6.1.1. The Committee may from time to time, in its absolute discretion:
6.1.1.1. Select from among the key Employees or consultants (including
Employees or consultants who have previously received other awards under
this Plan) such of them as in its opinion should be awarded Restricted
Stock; and
6.1.2. Determine the purchase price, if any, and other terms and conditions
applicable to such Restricted Stock, consistent with this Plan.
6.1.3. The Committee shall establish the purchase price, if any, and form
of payment for Restricted Stock; provided, however, that such purchase price
shall be no less than the par value of the Common Stock to be purchased, unless
otherwise permitted by applicable state law. In all cases, legal consideration
shall be required for each issuance of Restricted Stock.
6.1.4. Upon the selection of a key Employee or consultant to be awarded
Restricted Stock, the Committee shall instruct the Secretary of the Company to
issue such Restricted Stock and may impose such conditions on the issuance of
such Restricted Stock as it deems appropriate.
6.2. Restricted Stock Agreement. Restricted Stock shall be issued only
pursuant to a written Restricted Stock Agreement, which shall be executed by the
selected key Employee or consultant and an authorized officer of the Company and
which shall contain such terms and conditions as the Committee shall determine,
consistent with this Plan.
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6.3. Consideration. As consideration for the issuance of Restricted Stock,
in addition to payment of any purchase price, the Restricted Stockholder shall
agree, in the written Restricted Stock Agreement, to remain in the employ of, or
to consult for, the Company or any Subsidiary for a period of at least one year
after the Restricted Stock is issued (or such shorter period as may be fixed in
the Restricted Stock Agreement or by action of the Committee following grant of
the Restricted Stock). Nothing in this Plan or in any Restricted Stock Agreement
hereunder shall confer on any Restricted Stockholder any right to continue in
the employ of, or as a consultant for, the Company or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any Restricted
Stockholder at any time for any reason whatsoever, with or without good cause.
6.4. Rights as Stockholders. Upon delivery of the shares of Restricted
Stock to the escrow holder pursuant to Section 6.7, the Restricted Stockholder
shall have, unless otherwise provided by the Committee, all the rights of a
stockholder with respect to said shares, subject to the restrictions in his
Restricted Stock Agreement, including the right to receive all dividends and
other distributions paid or made with respect to the shares; provided, however,
that in the discretion of the Committee, any extraordinary distributions with
respect to the Common Stock shall be subject to the restrictions set forth in
Section 6.5.
6.5. Restriction. All shares of Restricted Stock issued under this Plan
(including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Restricted Stock
Agreement, be subject to such restrictions as the Committee shall provide, which
restrictions may include, without limitation, restrictions concerning voting
rights and transferability and restrictions based on duration of employment with
the Company, Company performance and individual performance; provided, however,
that by action taken after the Restricted Stock is issued, the Committee may, on
such terms and conditions as it may determine to be appropriate, remove any or
all of the restrictions imposed by the terms of the Restricted Stock Agreement.
Restricted Stock may not be sold or encumbered until all restrictions are
terminated or expire. Unless provided otherwise by the Committee, if no
consideration was paid by the Restricted Stockholder upon issuance, a Restricted
Stockholder's rights in unvested Restricted Stock shall lapse upon Termination
of Employment or, if applicable, upon Termination of Consultancy with the
Company.
6.6. Repurchase of Restricted Stock. The Committee shall provide in the
terms of each individual Restricted Stock Agreement that the Company shall have
the right to repurchase from the Restricted Stockholder the Restricted Stock
then subject to restrictions under the Restricted Stock Agreement immediately
upon a Termination of Employment or, if applicable, upon a Termination of
Consultancy between the Restricted Stockholder and the Company, at a cash price
per share equal to the price paid by the Restricted Stockholder for such
Restricted Stock; provided, however, that provision may be made that no such
right of repurchase shall exist in the event of a Termination of Employment or
Termination of Consultancy without cause, or following a Change in Control of
the Company or because of the Restricted Stockholder's retirement, death or
disability, or otherwise.
6.7. Escrow. The Secretary of the Company or such other escrow holder as
the Committee may appoint shall retain physical custody of each certificate
representing Restricted Stock until all of the restrictions imposed under the
Restricted Stock Agreement with respect to the shares evidenced by such
certificate expire or shall have been removed.
6.8. Legend. In order to enforce the restrictions imposed upon shares of
Restricted Stock hereunder, the Committee shall cause a legend or legends to be
placed on certificates representing all shares of Restricted Stock that are
still subject to restrictions under Restricted Stock Agreements, which legend or
legends shall make appropriate reference to the conditions imposed thereby.
6.9. Provisions Applicable to Section 162(m) Participants.
6.9.1. Notwithstanding anything in the Plan to the contrary, the Committee
may grant Restricted Stock awards to a Section 162(m) Participant that vest upon
the attainment of performance targets for the Company which are related to one
or more of the following performance goals: (i) pre-tax income,
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(ii) operating income, (iii) cash flow, (iv) earnings per share, (v) return on
equity, (vi) return on invested capital or assets and (vii) cost reductions or
savings.
6.9.2. To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with respect to
Restricted Stock which may be granted to one or more Section 162(m)
Participants, no later than ninety (90) days following the commencement of any
fiscal year in question or any other designated fiscal period (or such other
time as may be required or permitted by Section 162(m) of the Code), the
Committee shall, in writing, (i) designate one or more Section 162(m)
Participants, (ii) select the performance goal or goals applicable to the fiscal
year or other designated fiscal period, (iii) establish the various targets and
bonus amounts which may be earned for such fiscal year or other designated
fiscal period and (iv) specify the relationship between performance goals and
targets and the amounts to be earned by each Section 162(m) Participant for such
fiscal year or other designated fiscal period. Following the completion of each
fiscal year or other designated fiscal period, the Committee shall certify in
writing whether the applicable performance targets have been achieved for such
fiscal year or other designated fiscal period. In determining the amount earned
by a Section 162(m) Participant, the Committee shall have the right to reduce
(but not to increase) the amount payable at a given level of performance to take
into account additional factors that the Committee may deem relevant to the
assessment of individual or corporate performance for the fiscal year or other
designated fiscal period.
6.10. Section 83(b) Election. If a Restricted Stockholder makes an election
under Section 83(b) of the Code, or any successor section thereto, to be taxed
with respect to the Restricted Stock as of the date of transfer of the
Restricted Stock rather than as of the date or dates upon which the Restricted
Stockholder would otherwise be taxable under Section 83(b) of the Code, the
Restricted Stockholder shall deliver a copy of such election to the Company
immediately after filing such election with the Internal Revenue Service.
ARTICLE 7.
PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
DEFERRED STOCK, STOCK PAYMENTS
7.1. Performance Awards. Any key Employee or consultant selected by the
Committee may be granted one or more Performance Awards. The value of such
Performance Awards may be linked to the market value, book value, net profits or
other measure of the value of Common Stock or other specific performance
criteria determined appropriate by the Committee, in each case on a specified
date or dates or over any period or periods determined by the Committee, or may
be based upon the appreciation in the market value, book value, net profits or
other measure of the value of a specified number of shares of Common Stock over
a fixed period or periods determined by the Committee. In making such
determinations, the Committee shall consider (among such other factors as it
deems relevant in light of the specific type of award) the contributions,
responsibilities and other compensation of the particular key Employee or
consultant.
7.2. Dividend Equivalents. Any key Employee or consultant selected by the
Committee may be granted Dividend Equivalents based on the dividends declared on
Common Stock, to be credited as of dividend payment dates, during the period
between the date an Option, Stock Appreciation Right, Deferred Stock or
Performance Award is granted, and the date such Option, Stock Appreciation
Right, Deferred Stock or Performance Award is exercised, vests or expires, as
determined by the Committee. Such Dividend Equivalents shall be converted to
cash or additional shares of Common Stock by such formula and at such time and
subject to such limitations as may be determined by the Committee. With respect
to Dividend Equivalents granted with respect to Options intended to be qualified
performance-based compensation for purposes of Section 162(m) of the Code, such
Dividend Equivalents shall be payable regardless of whether such Option is
exercised.
7.3. Stock Payments. Any key Employee or consultant selected by the
Committee may receive Stock Payments in the manner determined from time to time
by the Committee. The number of shares shall be determined by the Committee and
may be based upon the Fair Market Value, book value, net profits or other
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measure of the value of Common Stock or other specific performance criteria
determined appropriate by the Committee, determined on the date such Stock
Payment is made or on any date thereafter.
7.4. Deferred Stock. Any key Employee or consultant selected by the
Committee may be granted an award of Deferred Stock in the manner determined
from time to time by the Committee. The number of shares of Deferred Stock shall
be determined by the Committee and may be linked to the market value, book
value, net profits or other measure of the value of Common Stock or other
specific performance criteria determined to be appropriate by the Committee, in
each case on a specified date or dates or over any period or periods determined
by the Committee. Common Stock underlying a Deferred Stock award will not be
issued until the Deferred Stock award has vested, pursuant to a vesting schedule
or performance criteria set by the Committee. Unless otherwise provided by the
Committee, a Grantee of Deferred Stock shall have no rights as a Company
stockholder with respect to such Deferred Stock until such time as the award has
vested and the Common Stock underlying the award has been issued.
7.5. Performance Award Agreement, Dividend Equivalent Agreement, Deferred
Stock Agreement, Stock Payment Agreement. Each Performance Award, Dividend
Equivalent, award of Deferred Stock and/or Stock Payment shall be evidenced by a
written agreement, which shall be executed by the Grantee and an authorized
Officer of the Company and which shall contain such terms and conditions as the
Committee shall determine, consistent with this Plan.
7.6. Term. The term of a Performance Award, Dividend Equivalent, award of
Deferred Stock and/or Stock Payment shall be set by the Committee in its
discretion.
7.7. Exercise Upon Termination of Employment. A Performance Award, Dividend
Equivalent, award of Deferred Stock and/or Stock Payment is exercisable or
payable only while the Grantee is an Employee or consultant; provided that the
Committee may determine that the Performance Award, Dividend Equivalent, award
of Deferred Stock and/or Stock Payment may be exercised or paid subsequent to
Termination of Employment or Termination of Consultancy without cause, or
following a Change in Control of the Company, or because of the Grantee's
retirement, death or disability, or otherwise.
7.8. Payment on Exercise. Payment of the amount determined under Section
7.1 or 7.2 above shall be in cash, in Common Stock or a combination of both, as
determined by the Committee. To the extent any payment under this Article 7 is
effected in Common Stock, it shall be made subject to satisfaction of all
provisions of Section 5.3.
7.9. Consideration. In consideration of the granting of a Performance
Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment, the
Grantee shall agree, in a written agreement, to remain in the employ of, or to
consult for, the Company or any Subsidiary for a period of at least one year
after such Performance Award, Dividend Equivalent, award of Deferred Stock
and/or Stock Payment is granted (or such shorter period as may be fixed in such
agreement or by action of the Committee following such grant). Nothing in this
Plan or in any agreement hereunder shall confer on any Grantee any right to
continue in the employ of, or as a consultant for, the Company or any Subsidiary
or shall interfere with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any Grantee at any
time for any reason whatsoever, with or without good cause.
7.10. Provisions Applicable to Section 162(m) Participants.
7.10.1. Notwithstanding anything in the Plan to the contrary, the Committee
may grant any performance or incentive awards described in Article 7 to a
Section 162(m) Participant that vest or become exercisable upon the attainment
of performance targets for the Company which are related to one or more of the
following performance goals: (i) pre-tax income, (ii) operating income, (iii)
cash flow, (iv) earnings per share, (v) return on equity, (vi) return on
invested capital or assets and (vii)cost reductions or savings.
7.10.2. To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with respect to
performance or incentive awards described in Article 7 which may be granted to
one or more Section 162(m) Participants, no later than ninety (90) days
following the commencement of any fiscal year in question or any other
designated fiscal period (or such other time as
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may be required or permitted by Section 162(m) of the Code), the Committee
shall, in writing, (i) designate one or more Section 162(m) Participants, (ii)
select the performance goal or goals applicable to the fiscal year or other
designated fiscal period, (iii) establish the various targets and bonus amounts
which may be earned for such fiscal year or other designated fiscal period and
(iv) specify the relationship between performance goals and targets and the
amounts to be earned by each Section 162(m) Participant for such fiscal year or
other designated fiscal period. Following the completion of each fiscal year or
other designated fiscal period, the Committee shall certify in writing whether
the applicable performance targets have been achieved for such fiscal year or
other designated fiscal period. In determining the amount earned by a Section
162(m) Participant, the Committee shall have the right to reduce (but not to
increase) the amount payable at a given level of performance to take into
account additional factors that the Committee may deem relevant to the
assessment of individual or corporate performance for the fiscal year or other
designated fiscal period.
ARTICLE 8.
STOCK APPRECIATION RIGHTS
8.1. Grant of Stock Appreciation Rights. A Stock Appreciation Right may be
granted to any key Employee or consultant selected by the Committee. A Stock
Appreciation Right may be granted (i) in connection and simultaneously with the
grant of an Option, (ii) with respect to a previously granted Option, or (iii)
independent of an Option. A Stock Appreciation Right shall be subject to such
terms and conditions not inconsistent with this Plan as the Committee shall
impose and shall be evidenced by a written Stock Appreciation Right Agreement,
which shall be executed by the Grantee and an authorized officer of the Company.
The Committee, in its discretion, may determine whether a Stock Appreciation
Right is to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code and Stock Appreciation Right Agreements evidencing
Stock Appreciation Rights intended to so qualify shall contain such terms and
conditions as may be necessary to meet the applicable provisions of Section
162(m) of the Code. Without limiting the generality of the foregoing, the
Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition of the grant of a Stock Appreciation Right to an Employee
or consultant that the Employee or consultant surrender for cancellation some or
all of the unexercised Options, awards of Restricted Stock or Deferred Stock,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments, or other rights which have been previously granted to him under this
Plan or otherwise. A Stock Appreciation Right, the grant of which is conditioned
upon such surrender, may have an exercise price lower (or higher) than the
exercise price of the surrendered Option or other award, may cover the same (or
a lesser or greater) number of shares as such surrendered Option or other award,
may contain such other terms as the Committee deems appropriate, and shall be
exercisable in accordance with its terms, without regard to the number of
shares, price, exercise period or any other term or condition of such
surrendered Option or other award.
8.2. Coupled Stock Appreciation Rights.
8.2.1. A Coupled Stock Appreciation Right ("CSAR") shall be related to a
particular Option and shall be exercisable only when and to the extent the
related Option is exercisable.
8.2.2. A CSAR may be granted to the Grantee for no more than the number of
shares subject to the simultaneously or previously granted Option to which it is
coupled.
8.2.3. A CSAR shall entitle the Grantee (or other person entitled to
exercise the Option pursuant to this Plan) to surrender to the Company
unexercised a portion of the Option to which the CSAR relates (to the extent
then exercisable pursuant to its terms) and to receive from the Company in
exchange therefor an amount determined by multiplying the difference obtained by
subtracting the Option exercise price from the Fair Market Value of a share of
Common Stock on the date of exercise of the CSAR by the number of shares of
Common Stock with respect to which the CSAR shall have been exercised, subject
to any limitations the Committee may impose.
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8.3. Independent Stock Appreciation Rights.
8.3.1. An Independent Stock Appreciation Right ("ISAR") shall be unrelated
to any Option and shall have a term set by the Committee. An ISAR shall be
exercisable in such installments as the Committee may determine. An ISAR shall
cover such number of shares of Common Stock as the Committee may determine. The
exercise price per share of Common Stock subject to each ISAR shall be set by
the Committee. An ISAR is exercisable only while the Grantee is an Employee or
consultant; provided that the Committee may determine that the ISAR may be
exercised subsequent to Termination of Employment or Termination of Consultancy
without cause, or following a change in control of the Company, or because of
the Grantee's retirement, death or disability, or otherwise.
8.3.2. An ISAR shall entitle the Grantee (or other person entitled to
exercise the ISAR pursuant to this Plan) to exercise all or a specified portion
of the ISAR (to the extent then exercisable pursuant to its terms) and to
receive from the Company an amount determined by multiplying the difference
obtained by subtracting the exercise price per share of the ISAR from the Fair
Market Value of a share of Common Stock on the date of exercise of the ISAR by
the number of shares of Common Stock with respect to which the ISAR shall have
been exercised, subject to any limitations the Committee may impose.
8.4. Payment and Limitations on Exercise
8.4.1. Payment of the amount determined under Section 8.2.3 and 8.3.2 above
shall be in cash, in Common Stock (based on its Fair Market Value as of the date
the Stock Appreciation Right is exercised) or a combination of both, as
determined by the Committee. To the extent such payment is effected in Common
Stock it shall be made subject to satisfaction of all provisions of Section 5.3
above pertaining to Options.
8.4.2. Grantees of Stock Appreciation Rights may be required to comply with
any timing or other restrictions with respect to the settlement or exercise of a
Stock Appreciation Right, including a window-period limitation, as may be
imposed in the discretion of the Board or Committee.
8.5. Consideration. In consideration of the granting of a Stock
Appreciation Right, the Grantee shall agree, in the written Stock Appreciation
Right Agreement, to remain in the employ of, or to consult for, the Company or
any Subsidiary for a period of at least one year after the Stock Appreciation
Right is granted (or such shorter period as may be fixed in the Stock
Appreciation Right Agreement or by action of the Committee following grant of
the Restricted Stock). Nothing in this Plan or in any Stock Appreciation Right
Agreement hereunder shall confer on any Grantee any right to continue in the
employ of, or as a consultant for, the Company or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any Grantee at any
time for any reason whatsoever, with or without good cause.
ARTICLE 9.
ADMINISTRATION
9.1. Compensation Committee. The Compensation Committee (or another
committee or a subcommittee of the Board assuming the functions of the Committee
under this Plan) shall consist solely of two or more Independent Directors
appointed by and holding office at the pleasure of the Board, each of whom is
both a "non-employee director" as defined by Rule 16b-3 and an "outside
director" for purposes of Section 162(m) of the Code. Appointment of Committee
members shall be effective upon acceptance of appointment. Committee members may
resign at any time by delivering written notice to the Board. Vacancies in the
Committee may be filled by the Board.
9.2. Duties and Powers of Committee. It shall be the duty of the Committee
to conduct the general administration of this Plan in accordance with its
provisions. The Committee shall have the power to interpret this Plan and the
agreements pursuant to which Options, awards of Restricted Stock or Deferred
Stock, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments are granted or awarded, and to adopt such rules for the
administration, interpretation, and application of this Plan as are consistent
therewith and to interpret, amend or revoke any such rules. Notwithstanding the
foregoing, the full
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Board, acting by a majority of its members in office, shall conduct the general
administration of the Plan with respect to Options granted to Independent
Directors. Any such grant or award under this Plan need not be the same with
respect to each Optionee, Grantee or Restricted Stockholder. Any such
interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code. In its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under this Plan except with respect to
matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations
or rules issued thereunder, are required to be determined in the sole discretion
of the Committee.
9.3. Majority Rule; Unanimous Written Consent. The Committee shall act by a
majority of its members in attendance at a meeting at which a quorum is present
or by a memorandum or other written instrument signed by all members of the
Committee.
9.3. Compensation; Professional Assistance; Good Faith Actions. Members of
the Committee shall receive such compensation for their services as members as
may be determined by the Board. All expenses and liabilities which members of
the Committee incur in connection with the administration of this Plan shall be
borne by the Company. The Committee may, with the approval of the Board, employ
attorneys, consultants, accountants, appraisers, brokers, or other persons. The
Committee, the Company and the Company's officers and Directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee or the Board in good faith shall be final and binding upon all
Optionees, Grantees, Restricted Stockholders, the Company and all other
interested persons. No members of the Committee or Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to this Plan, Options, awards of Restricted Stock or Deferred Stock,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments, and all members of the Committee and the Board shall be fully
protected by the Company in respect of any such action, determination or
interpretation.
ARTICLE 10.
MISCELLANEOUS PROVISIONS
10.1. Not Transferable. Options, Restricted Stock awards, Deferred Stock
awards, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments under this Plan may not be sold, pledged, assigned, or
transferred in any manner other than by will or the laws of descent and
distribution or pursuant to a QDRO, unless and until such rights or awards have
been exercised, or the shares underlying such rights or awards have been issued,
and all restrictions applicable to such shares have lapsed. No Option,
Restricted Stock award, Deferred Stock award, Performance Award, Stock
Appreciation Right, Dividend Equivalent or Stock Payment or interest or right
therein shall be liable for the debts, contracts or engagements of the Optionee,
Grantee or Restricted Stockholder or his successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence.
During the lifetime of the Optionee or Grantee, only he may exercise an
Option or other right or award (or any portion thereof) granted to him under the
Plan, unless it has been disposed of pursuant to a QDRO. After the death of the
Optionee or Grantee, any exercisable portion of an Option or other right or
award may, prior to the time when such portion becomes unexercisable under the
Plan or the applicable Stock Option Agreement or other agreement, be exercised
by his personal representative or by any person empowered to do so under the
deceased Optionee's or Grantee's will or under the then applicable laws of
descent and distribution.
10.2. Amendment, Suspension or Termination of this Plan. Except as
otherwise provided in this Section 10.2, this Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at
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any time or from time to time by the Board or the Committee. However, without
approval of the Company's stockholders given within twelve months before or
after the action by the Board or the Committee, no action of the Board or the
Committee may, except as provided in Section 10.3, increase the limits imposed
in Section 2.1 on the maximum number of shares which may be issued under this
Plan or modify the Award Limit, and no action of the Board or the Committee may
be taken that would otherwise require stockholder approval as a matter of
applicable law, regulation or rule. No amendment, suspension or termination of
this Plan shall, without the consent of the holder of Options, Restricted Stock
awards, Deferred Stock awards, Performance Awards, Stock Appreciation Rights,
Dividend Equivalents or Stock Payments, alter or impair any rights or
obligations under any Options, Restricted Stock awards, Deferred Stock awards,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments theretofore granted or awarded, unless the award itself otherwise
expressly so provides. No Options, Restricted Stock, Deferred Stock, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments may be
granted or awarded during any period of suspension or after termination of this
Plan, and in no event may any Incentive Stock Option be granted under this Plan
after the first to occur of the following events:
10.2.1. The expiration of ten years from the date the Plan is adopted
by the Board; or
10.2.2. The expiration of ten years from the date the Plan is approved
by the Company's stockholders under Section 10.4.
10.3. Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events.
10.3.1. Subject to Section 10.3.4, in the event that the Committee (or the
Board, in the case of Options granted to Independent Directors)determines that
any dividend or other distribution (whether in the form of cash, Common Stock,
other securities, or other property), recapitalization, reclassification, stock
split, reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase, liquidation, dissolution, or sale, transfer,
exchange or other disposition of all or substantially all of the assets of the
Company (including, but not limited to, a Corporate Transaction), or exchange of
Common Stock or other securities of the Company, issuance of warrants or other
rights to purchase Common Stock or other securities of the Company, or other
similar corporate transaction or event, in the Committee's sole discretion (or
in the case of Options granted to Independent Directors, the Board's sole
discretion), affects the Common Stock such that an adjustment is determined by
the Committee to be appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan
or with respect to an Option, Restricted Stock award, Performance Award, Stock
Appreciation Right, Dividend Equivalent, Deferred Stock award or Stock Payment,
then the Committee (or the Board, in the case of Options granted to Independent
Directors) shall, in such manner as it may deem equitable, adjust any or all of
10.3.1.1. the number and kind of shares of Common Stock (or other
securities or property) with respect to which Options, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments may be
granted under the Plan, or which may be granted as Restricted Stock or
Deferred Stock (including, but not limited to, adjustments of the
limitations in Section 2.1 on the maximum number and kind of shares which
may be issued and adjustments of the Award Limit),
10.3.1.2. the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Options, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents, or Stock Payments, and in
the number and kind of shares of outstanding Restricted Stock or Deferred
Stock, and
10.3.1.3. the grant or exercise price with respect to any Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment.
10.3.2. Subject to Sections 10.3.2.7 and 10.3.4, in the event of any
Corporate Transaction or other transaction or event described in Section 10.3.1
or any unusual or nonrecurring transactions or events affecting the Company, any
affiliate of the Company, or the financial statements of the Company or any
affiliate, or of changes in applicable laws, regulations, or accounting
principles, the Committee (or the Board, in the case of Options granted to
Independent Directors) in its discretion is hereby authorized to take any one or
more of the following actions whenever the Committee (or the Board, in the case
of Options granted to Independent
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Directors) determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to any option, right or other
award under this Plan, to facilitate such transactions or events or to give
effect to such changes in laws, regulations or principles:
10.3.2.1. In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may provide, either by
the terms of the agreement or by action taken prior to the occurrence of
such transaction or event and either automatically or upon the Optionee's
request, for either the purchase of any such Option, Performance Award,
Stock Appreciation Right, Dividend Equivalent, or Stock Payment, or any
Restricted Stock or Deferred Stock for an amount of cash equal to the
amount that could have been attained upon the exercise of such option,
right or award or realization of the Optionee's rights had such option,
right or award been currently exercisable or payable or fully vested or the
replacement of such option, right or award with other rights or property
selected by the Committee (or the Board, in the case of Options granted to
Independent Directors) in its sole discretion;
10.3.2.2. In its sole and absolute discretion, the Committee (or the
Board, in the case of Options granted to Independent Directors) may
provide, either by the terms of such Option, Performance Award, Stock
Appreciation Right, Dividend Equivalent, or Stock Payment, or Restricted
Stock or Deferred Stock or by action taken prior to the occurrence of such
transaction or event that it cannot be exercised after such event;
10.3.2.3. In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may provide, either by
the terms of such Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent, or Stock Payment, or Restricted Stock or Deferred
Stock or by action taken prior to the occurrence of such transaction or
event, that for a specified period of time prior to such transaction or
event, such option, right or award shall be exercisable as to all shares
covered thereby, notwithstanding anything to the contrary in (i) Section
4.4 or (ii) the provisions of such Option, Performance Award, Stock
Appreciation Right, Dividend Equivalent, or Stock Payment, or Restricted
Stock or Deferred Stock;
10.3.2.4. In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may provide, either by
the terms of such Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent, or Stock Payment, or Restricted Stock or Deferred
Stock or by action taken prior to the occurrence of such transaction or
event, that upon such event, such option, right or award be assumed by the
successor or survivor corporation, or a parent or subsidiary thereof, or
shall be substituted for by similar options, rights or awards covering the
stock of the successor or survivor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of shares
and prices; and
10.3.2.5. In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may make adjustments in
the number and type of shares of Common Stock (or other securities or
property) subject to outstanding Options, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents, or Stock Payments, and in the
number and kind of outstanding Restricted Stock or Deferred Stock and/ or
in the terms and conditions of (including the grant or exercise price), and
the criteria included in, outstanding options, rights and awards and
options, rights and awards which may be granted in the future.
10.3.2.6. In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide either by the
terms of a Restricted Stock award or Deferred Stock award or by action
taken prior to the occurrence of such event that, for a specified period of
time prior to such event, the restrictions imposed under a Restricted Stock
Agreement or a Deferred Stock Agreement upon some or all shares of
Restricted Stock or Deferred Stock may be terminated, and, in the case of
Restricted Stock, some or all shares of such Restricted Stock may cease to
be subject to repurchase under Section 6.6 or forfeiture under Section 6.5
after such event.
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<PAGE> 18
10.3.2.7. None of the foregoing discretionary actions taken under this
Section 10.3.2 shall be permitted with respect to Options granted under
Section 3.4.4 to Independent Directors to the extent that such discretion
would be inconsistent with the applicable exemptive conditions of Rule
16b-3. In the event of a Change in Control or a Corporate Transaction, to
the extent that the Board does not have the ability under Rule 16b-3 to
take or to refrain from taking the discretionary actions set forth in
Section 10.3.2.3 above, each Option granted to an Independent Director
shall be exercisable as to all shares covered thereby upon such Change in
Control or during the five days immediately preceding the consummation of
such Corporate Transaction and subject to such consummation,
notwithstanding anything to the contrary in Section 4.4 or the vesting
schedule of such Options. In the event of a Corporate Transaction, to the
extent that the Board does not have the ability under Rule 16b-3 to take or
to refrain from taking the discretionary actions set forth in Section
10.3.2.2 above, no Option granted to an Independent Director may be
exercised following such Corporate Transaction unless such Option is, in
connection with such Corporate Transaction, either assumed by the successor
or survivor corporation (or parent or subsidiary thereof) or replaced with
a comparable right with respect to shares of the capital stock of the
successor or survivor corporation (or parent or subsidiary thereof).
10.3.3. Subject to Section 10.3.4 and 10.8, the Committee (or the Board, in
the case of Options granted to Independent Directors) may, in its discretion,
include such further provisions and limitations in any Option, Performance
Award, Stock Appreciation Right, Dividend Equivalent, or Stock Payment, or
Restricted Stock or Deferred Stock agreement or certificate, as it may deem
equitable and in the best interests of the Company.
10.3.4. With respect to Options, Stock Appreciation Rights and performance
or incentive awards described in Article 7 which are granted to Section 162(m)
Participants and are intended to qualify as performance-based compensation under
Section 162(m)(4)(C), no adjustment or action described in this Section 10.3 or
in any other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause the Plan to violate Section 422(b)(1) of the
Code or would cause such option or stock appreciation right to fail to so
qualify under Section 162(m)(4)(C), as the case may be, or any successor
provisions thereto. Furthermore, no such adjustment or action shall be
authorized to the extent such adjustment or action would result in short-swing
profits liability under Section 16 or violate the exemptive conditions of Rule
16b-3 unless the Committee (or the Board, in the case of Options granted to
Independent Directors) determines that the option or other award is not to
comply with such exemptive conditions. The number of shares of Common Stock
subject to any option, right or award shall always be rounded to the next whole
number.
10.4. Approval of Plan by Stockholders. This Plan will be submitted for the
approval of the Company's stockholders within twelve months after the date of
the Board's initial adoption of this Plan. Options, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments may be granted and
Restricted Stock or Deferred Stock may be awarded prior to such stockholder
approval, provided that such Options, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments shall not be exercisable and such
Restricted Stock or Deferred Stock shall not vest prior to the time when this
Plan is approved by the stockholders, and provided further that if such approval
has not been obtained at the end of said twelve-month period, all Options,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments previously granted and all Restricted Stock or Deferred Stock
previously awarded under this Plan shall thereupon be canceled and become null
and void.
10.5. Tax Withholding. The Company shall be entitled to require payment in
cash or deduction from other compensation payable to each Optionee, Grantee or
Restricted Stockholder of any sums required by federal, state or local tax law
to be withheld with respect to the issuance, vesting or exercise of any Option,
Restricted Stock, Deferred Stock, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment. The Committee (or the Board, in the case
of Options granted to Independent Directors) may in its discretion and in
satisfaction of the foregoing requirement allow such Optionee, Grantee or
Restricted Stockholder to elect to have the Company withhold shares of Common
Stock otherwise issuable under such Option or other award (or allow the return
of shares of Common Stock) having a Fair Market Value equal to the sums required
to be withheld.
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<PAGE> 19
10.6. Loans. The Committee may, in its discretion, extend one or more loans
to key Employees in connection with the exercise or receipt of an Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment granted under this Plan, or the issuance of Restricted Stock or Deferred
Stock awarded under this Plan. The terms and conditions of any such loan shall
be set by the Committee.
10.7. Forfeiture Provisions. Pursuant to its general authority to determine
the terms and conditions applicable to awards under the Plan, the Committee (or
the Board, in the case of Options granted to Independent Directors) shall have
the right (to the extent consistent with the applicable exemptive conditions of
Rule 16b-3) to provide, in the terms of Options or other awards made under the
Plan, or to require the recipient to agree by separate written instrument, that
(i) any proceeds, gains or other economic benefit actually or constructively
received by the recipient upon any receipt or exercise of the award, or upon the
receipt or resale of any Common Stock underlying such award, must be paid to the
Company, and (ii) the award shall terminate and any unexercised portion of such
award (whether or not vested) shall be forfeited, if (a) a Termination of
Employment, Termination of Consultancy or Termination of Directorship occurs
prior to a specified date, or within a specified time period following receipt
or exercise of the award, or (b) the recipient at any time, or during a
specified time period, engages in any activity in competition with the Company,
or which is inimical, contrary or harmful to the interests of the Company, as
further defined by the Committee (or the Board, as applicable).
10.8. Limitations Applicable to Section 16 Persons and Performance-Based
Compensation. Notwithstanding any other provision of this Plan, this Plan, and
any Option, Performance Award, Stock Appreciation Right, Dividend Equivalent or
Stock Payment granted, or Restricted Stock or Deferred Stock awarded, to any
individual who is then subject to Section 16 of the Exchange Act, shall be
subject to any additional limitations set forth in any applicable exemptive rule
under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of
the Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, the Plan, Options, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents, Stock Payments,
Restricted Stock and Deferred Stock granted or awarded hereunder shall be deemed
amended to the extent necessary to conform to such applicable exemptive rule.
Furthermore, notwithstanding any other provision of this Plan, any Option, Stock
Appreciation Right or performance or incentive award described in Article 7
which is granted to a Section 162(m) Participant and is intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall be subject to any additional limitations set forth in Section 162(m) of
the Code (including any amendment to Section 162(m) of the Code) or any
regulations or rulings issued thereunder that are requirements for qualification
as performance-based compensation as described in Section 162(m)(4)(C) of the
Code, and this Plan shall be deemed amended to the extent necessary to conform
to such requirements.
10.9. Effect of Plan Upon Options and Compensation Plans. The adoption of
this Plan shall not affect any other compensation or incentive plans in effect
for the Company or any Subsidiary. Nothing in this Plan shall be construed to
limit the right of the Company (i) to establish any other forms of incentives or
compensation for Employees, Directors or Consultants of the Company or any
Subsidiary or (ii) to grant or assume options or other rights otherwise than
under this Plan in connection with any proper corporate purpose including but
not by way of limitation, the grant or assumption of options in connection with
the acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, partnership, limited liability
company, firm or association.
10.10. Compliance with Laws. This Plan, the granting and vesting of
Options, Restricted Stock awards, Deferred Stock awards, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments under this
Plan and the issuance and delivery of shares of Common Stock and the payment of
money under this Plan or under Options, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments granted or Restricted Stock or
Deferred Stock awarded hereunder are subject to compliance with all applicable
federal and state laws, rules and regulations (including but not limited to
state and federal securities law and federal margin requirements) and to such
approvals by any listing, regulatory or governmental authority as may, in the
opinion of counsel for the Company, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall be subject to such
restrictions, and the person acquiring such securities shall, if requested by
the Company, provide such
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<PAGE> 20
assurances and representations to the Company as the Company may deem necessary
or desirable to assure compliance with all applicable legal requirements. To the
extent permitted by applicable law, the Plan, Options, Restricted Stock awards,
Deferred Stock awards, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments granted or awarded hereunder shall be deemed
amended to the extent necessary to conform to such laws, rules and regulations.
10.11. Titles. Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of this Plan.
10.12. Governing Law. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.
* * *
I hereby certify that the foregoing Plan was duly adopted by the Board of
Directors of on , 1998.
Executed on this day of , 1998.
Secretary
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<PAGE> 1
EXHIBIT 10.34
OPTION AGREEMENT
VALUEVISION INTERNATIONAL, INC.
TO
_________________________
OPTION AGREEMENT made as of the_____ day of___________, ____, between
ValueVision International, Inc., a Minnesota corporation ("ValueVision"),
and_____________________, an employee of
ValueVision ("Employee").
WHEREAS, ValueVision desires, by affording Employee an opportunity to
purchase its shares of Common Stock, $0.01 par value ("Shares"), reserved under
and pursuant to the Second Amended ValueVision International 1990 Stock Option
Plan, as amended, ("Plan"), as hereinafter provided, to carry out the
resolutions of the Board of Directors of ValueVision granting an option to
Employee as partial compensation for his efforts on behalf of ValueVision as its
employee.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
<PAGE> 2
1. Grant of Option. ValueVision hereby irrevocably grants to Employee
the right and option, hereinafter called the Option, to purchase all or any part
of an aggregate of____________ (__,000) Shares (such number being subject to
adjustment as provided in paragraph 7 hereof) on the terms and conditions herein
set forth. This grant is intended to qualify as an Incentive Stock Option
pursuant to the Plan.
2. Purchase Price. The purchase price of the Shares covered by the
Option shall be $______, which is equal to the last price on the NASDAQ System
of one share of ValueVision's Common Stock on the last trade date prior to the
date hereof day first written above.
3. Exercise of Option. The right to exercise the Option in whole or in
part, shall be effective, except as otherwise specifically limited herein, as
follows: on and after _________ ____, Employee may purchase up to__,000 Shares;
on and after _________, ____, Employee may purchase up to an additional __,000
Shares; and on and after __________, ____, Employee may purchase up to an
additional __,000 Shares. Each of the rights to purchase Shares granted in the
preceding sentence shall expire five (5) years after the right to purchase the
Shares became effective, except as otherwise specifically limited herein. The
purchase price of Shares acquired through exercise of any part of the Option
shall be paid in full in cash at the time of exercise. Employee,
<PAGE> 3
as holder of the Option, shall not have any of the rights of a Shareholder with
respect to the Shares covered by the Option except to the extent that one or
more certificates for such Shares shall be delivered to him upon the due
exercise of all or any part of the Option.
4. Non-Transferability. The Option shall not be transferable otherwise
than by will or the laws of descent and distribution, and the Option may be
exercised, during the lifetime of Employee, only by Employee. More particularly
(but without limiting the generality of the foregoing), the Option may not be
assigned, transferred (except as provided above), pledged, or hypothecated in
any way, shall not be assignable by operation of law, and shall not be subject
to execution, attachment, or similar process. Any attempted assignment,
transfer, pledge, hypothecation, or other disposition of the Option contrary to
the provisions hereof, and the levy of any execution, attachment, or similar
process upon the Option shall be null and void and without effect.
5. Exercise Upon Termination. If Employee ceases to serve as an
employee of ValueVision, while the Option remains in effect, whether as a result
of resignation or termination, with or without cause, the Option may be
exercised (to the extent that Employee
3
<PAGE> 4
shall have been entitled to do so on the last day in which he served as an
employee of ValueVision) by Employee at anytime within ninety (90) days of the
day in which he ceased to serve as an employee of ValueVision. Upon the
expiration of such ninety (90) day period, or, if earlier, upon the expiration
date of the Option as set forth in Paragraph 3 hereof, the Option shall become
null and void.
6. Exercise Upon Death. If Employee dies while the Option remains in
effect, the Option may be exercised (to the extent that Employee shall have been
entitled to do so at the date of his death) by the legatee or legatees of
Employee under his will, or by his personal representatives or distributees, at
any time within ninety (90) days after his death. Upon the expiration of such
ninety (90) day period, or, if earlier, upon the expiration date of the Option
as set forth in paragraph 3 hereof, the Option shall become null and void.
7. Changes in Capital Structure. If all or any portion of the Option
shall be exercised subsequent to any Share dividend, split-up, recapitalization,
merger, consolidation, combination or exchange of Shares, separation,
reorganization, or liquidation occurring after the date hereof, as a result of
which Shares of any class shall be issued in respect of outstanding Shares, or
Shares
4
<PAGE> 5
shall be changed into the same or a different number of Shares of the same or
another class or classes, the person or persons so exercising the Option shall
receive, for the aggregate price paid upon such exercise, the aggregate number
and class of Shares which, if Shares (as authorized at the date hereof) had been
purchased at the date hereof for the same aggregate price (on the basis of the
price per Share set forth in paragraph 2 hereof) and had not been disposed of,
such person or persons would be holding, at the time of such exercise, as a
result of such purchase and all such shared dividends, split-ups,
recapitalizations, mergers, consolidations, combinations or exchanges of Shares,
separations, reorganizations, or liquidations; provided, however, that no
fractional Share shall be issued upon any such exercise, and the aggregate price
paid shall be appropriately reduced on account of any fractional Share not
issued.
8. Method of Exercising Option. Subject to the terms and
conditions of this Agreement, the Option may only be exercised by
written notice to ValueVision. Such notice shall state the election to exercise
the Option and the number of Shares in respect of which it is being exercised,
and shall be signed by the person or person so exercising the Option. Such
notice shall either: (a) be accompanied by payment of the full purchase price of
such
5
<PAGE> 6
Shares, in which event ValueVision shall deliver a certificate or certificates
representing such Shares as soon as practicable after the notice shall be
received; or (b) fix a date (not less than five (5) nor more than ten (10)
business days from the date such notice shall be received by ValueVision) for
the payment of the full purchase price of such Shares against delivery of a
certificate or certificates representing such Shares. Payment of such purchase
price shall, in either case, be made by certified or cashier's check payable to
the order of ValueVision. All Shares that shall be purchased upon the exercise
of the Option as provided herein shall be fully paid and non-assessable.
9. Investment Certificate and Registration. Prior to the receipt of the
certificates pursuant to the exercise of the Option granted hereunder, Employee
shall agree to hold the Shares acquired by exercise of the Option for investment
and not with a view to resale or distribution thereof to the public, and shall
deliver to ValueVision a certificate to that effect. Nothing in this Agreement
shall require ValueVision to register the Option or the Shares purchased upon
the exercise of said Option.
10. General. ValueVision shall at all times during the term
of the Option reserve and keep available such number of Shares as
will be sufficient to satisfy the requirements of this Option
6
<PAGE> 7
Agreement. This Option shall be construed in accordance with the laws of the
State of Minnesota.
IN WITNESS WHEREOF, ValueVision and Employee have executed this
Agreement as of the date first written above.
VALUEVISION INTERNATIONAL, INC.
By
--------------------------------
Robert L. Johander,
Chief Executive Officer
Employee:
----------------------------------
Employee Name
7
<PAGE> 1
Exhibit 10.39
PROMISSORY NOTE
$25,000.00 Eden Prairie, Minnesota
December 31, 1997
FOR VALUE RECEIVED, the undersigned, Robert L. Johander, promises to
pay to ValueVision International, Inc. (the "Company") at 6740 Shady Oak Road,
Eden Prairie, MN 55344, or at such other places as the holder hereof may from
time to time designate in writing the principal sum of TWENTY-FIVE THOUSAND AND
NO/100 DOLLARS ($25,000.00) in lawful money of the United States of America,
with interest thereon from the date hereof at an annual interest rate equal to
SIX AND 7/8 PERCENT (6.875%) which will be compounded annually.
All outstanding principal and accrued interest shall be due and payable
in full at the term of the note which will be no later than December 31, 1998
(the "Due Date"). Earlier repayment will be required: (1) from proceeds of the
sale of the Company Shares (as hereinafter defined) pledged as collateral in
excess of the Third Party Loans (as hereinafter defined) or (2) in the event
that the undersigned voluntarily terminates his employment with the Company. The
undersigned reserves the right to repay all or any part of the indebtedness
evidenced hereby without penalty. No payment or principal or interest shall be
due or demanded prior to the Due Date.
As collateral for the note, the undersigned hereby pledges the proceeds
from the sale of all the Common Stock, $.01 par value of the Company owned
directly by the undersigned (the "Company Shares"), to the extent such proceeds
exceed the amount of loans from third parties to the undersigned (the "Third
Pary Loans") for which the Company Shares are pledged.
If, in the opinion of the holder of this Note, it becomes necessary to
employ counsel to collect or to enforce this Note, the maker hereof agrees to
pay, to the extent permitted by law, all of the costs, charges, disbursements
and reasonable attorney's fees incurred by the holder hereof in collecting or
enforcing this Note.
The maker hereby waives presentment for payment, demand, protest,
notice of nonpayment, and protest of nonpayment.
IN WITNESS WHEREOF, this instrument has been duly executed by the maker
this 31st day of December, 1997.
By: /s/ Robert L. Johander
------------------------------
Robert L. Johander
<PAGE> 1
Exhibit 10.40
PROMISSORY NOTE
$140,000.00 Eden Prairie, Minnesota
April 24, 1997
FOR VALUE RECEIVED, the undersigned, Robert L. Johander, promises to
pay to ValueVision International, Inc. (the "Company") at 6740 Shady Oak Road,
Eden Prairie, MN 55344, or at such other places as the holder hereof may from
time to time designate in writing the principal sum of ONE HUNDRED FORTY
THOUSAND AND NO/100 DOLLARS ($140,000.00) in lawful money of the United States
of America, with interest thereon from the date hereof at an annual interest
rate equal to SIX AND 7/8 PERCENT (6.875%) which will be compounded annually.
All outstanding principal and accrued interest shall be due and payable
in full at the term of the note which will be no later than April 23, 1998 (the
"Due Date"). Earlier repayment will be required: (1) from proceeds of the sale
of the Company Shares (as hereinafter defined) pledged as collateral in excess
of the Third Party Loans (as hereinafter defined) or (2) in the event that the
undersigned voluntarily terminates his employment with the Company. The
undersigned reserves the right to repay all or any part of the indebtedness
evidenced hereby without penalty. No payment or principal or interest shall be
due or demanded prior to the Due Date.
As collateral for the note, the undersigned hereby pledges the proceeds
from the sale of all the Common Stock, $.01 par value of the Company owned
directly by the undersigned (the "Company Shares"), to the extent such proceeds
exceed the amount of loans from third parties to the undersigned (the "Third
Pary Loans") for which the Company Shares are pledged.
If, in the opinion of the holder of this Note, it becomes necessary to
employ counsel to collect or to enforce this Note, the maker hereof agrees to
pay, to the extent permitted by law, all of the costs, charges, disbursements
and reasonable attorney's fees incurred by the holder hereof in collecting or
enforcing this Note.
The maker hereby waives presentment for payment, demand, protest,
notice of nonpayment, and protest of nonpayment.
IN WITNESS WHEREOF, this instrument has been duly executed by the maker
this 24th day of April, 1997.
By: /s/ Robert L. Johander
----------------------------
Robert L. Johander
<PAGE> 1
Exhibit 10.41
PROMISSORY NOTE
$35,000.00 Eden Prairie, Minnesota
April 29, 1997
FOR VALUE RECEIVED, the undersigned, Robert L. Johander, promises to
pay to ValueVision International, Inc. (the "Company") at 6740 Shady Oak Road,
Eden Prairie, MN 55344, or at such other places as the holder hereof may from
time to time designate in writing the principal sum of THIRY-FIVE THOUSAND AND
NO/100 DOLLARS ($35,000.00) in lawful money of the United States of America,
with interest thereon from the date hereof at an annual interest rate equal to
SIX AND 7/8 PERCENT (6.875%) which will be compounded annually.
All outstanding principal and accrued interest shall be due and payable
in full at the term of the note which will be no later than April 28, 1998 (the
"Due Date"). Earlier repayment will be required: (1) from proceeds of the sale
of the Company Shares (as hereinafter defined) pledged as collateral in excess
of the Third Party Loans (as hereinafter defined) or (2) in the event that the
undersigned voluntarily terminates his employment with the Company. The
undersigned reserves the right to repay all or any part of the indebtedness
evidenced hereby without penalty. No payment or principal or interest shall be
due or demanded prior to the Due Date.
As collateral for the note, the undersigned hereby pledges the proceeds
from the sale of all the Common Stock, $.01 par value of the Company owned
directly by the undersigned (the "Company Shares"), to the extent such proceeds
exceed the amount of loans from third parties to the undersigned (the "Third
Pary Loans") for which the Company Shares are pledged.
If, in the opinion of the holder of this Note, it becomes necessary to
employ counsel to collect or to enforce this Note, the maker hereof agrees to
pay, to the extent permitted by law, all of the costs, charges, disbursements
and reasonable attorney's fees incurred by the holder hereof in collecting or
enforcing this Note.
The maker hereby waives presentment for payment, demand, protest,
notice of nonpayment, and protest of nonpayment.
IN WITNESS WHEREOF, this instrument has been duly executed by the maker
this 29th day of April, 1997.
By: /s/ Robert L. Johander
--------------------------
Robert L. Johander
<PAGE> 1
Exhibit 10.42
PROMISSORY NOTE
$58,000.00 Eden Prairie, Minnesota
May 2, 1997
FOR VALUE RECEIVED, the undersigned, Robert L. Johander, promises to
pay to ValueVision International, Inc. (the "Company") at 6740 Shady Oak Road,
Eden Prairie, MN 55344, or at such other places as the holder hereof may from
time to time designate in writing the principal sum of FIFTY-EIGHT THOUSAND AND
NO/100 DOLLARS ($58,000.00) in lawful money of the United States of America,
with interest thereon from the date hereof at an annual interest rate equal to
SIX AND 7/8 PERCENT (6.875%) which will be compounded annually.
All outstanding principal and accrued interest shall be due and payable
in full at the term of the note which will be no later than May 1, 1998 (the
"Due Date"). Earlier repayment will be required: (1) from proceeds of the sale
of the Company Shares (as hereinafter defined) pledged as collateral in excess
of the Third Party Loans (as hereinafter defined) or (2) in the event that the
undersigned voluntarily terminates his employment with the Company. The
undersigned reserves the right to repay all or any part of the indebtedness
evidenced hereby without penalty. No payment or principal or interest shall be
due or demanded prior to the Due Date.
As collateral for the note, the undersigned hereby pledges the proceeds
from the sale of all the Common Stock, $.01 par value of the Company owned
directly by the undersigned (the "Company Shares"), to the extent such proceeds
exceed the amount of loans from third parties to the undersigned (the "Third
Pary Loans") for which the Company Shares are pledged.
If, in the opinion of the holder of this Note, it becomes necessary to
employ counsel to collect or to enforce this Note, the maker hereof agrees to
pay, to the extent permitted by law, all of the costs, charges, disbursements
and reasonable attorney's fees incurred by the holder hereof in collecting or
enforcing this Note.
The maker hereby waives presentment for payment, demand, protest,
notice of nonpayment, and protest of nonpayment.
IN WITNESS WHEREOF, this instrument has been duly executed by the maker
this 2nd day of May, 1997.
By: /s/ Robert L. Johander
------------------------
Robert L. Johander
<PAGE> 1
Exhibit 10.43
PROMISSORY NOTE
$15,000.00 Eden Prairie, Minnesota
May 13, 1997
FOR VALUE RECEIVED, the undersigned, Robert L. Johander, promises to
pay to ValueVision International, Inc. (the "Company") at 6740 Shady Oak Road,
Eden Prairie, MN 55344, or at such other places as the holder hereof may from
time to time designate in writing the principal sum of FIFTEEN THOUSAND AND
NO/100 DOLLARS ($15,000.00) in lawful money of the United States of America,
with interest thereon from the date hereof at an annual interest rate equal to
SIX AND 7/8 PERCENT (6.875%) which will be compounded annually.
All outstanding principal and accrued interest shall be due and payable
in full at the term of the note which will be no later than May 12, 1998 (the
"Due Date"). Earlier repayment will be required: (1) from proceeds of the sale
of the Company Shares (as hereinafter defined) pledged as collateral in excess
of the Third Party Loans (as hereinafter defined) or (2) in the event that the
undersigned voluntarily terminates his employment with the Company. The
undersigned reserves the right to repay all or any part of the indebtedness
evidenced hereby without penalty. No payment or principal or interest shall be
due or demanded prior to the Due Date.
As collateral for the note, the undersigned hereby pledges the proceeds
from the sale of all the Common Stock, $.01 par value of the Company owned
directly by the undersigned (the "Company Shares"), to the extent such proceeds
exceed the amount of loans from third parties to the undersigned (the "Third
Pary Loans") for which the Company Shares are pledged.
If, in the opinion of the holder of this Note, it becomes necessary to
employ counsel to collect or to enforce this Note, the maker hereof agrees to
pay, to the extent permitted by law, all of the costs, charges, disbursements
and reasonable attorney's fees incurred by the holder hereof in collecting or
enforcing this Note.
The maker hereby waives presentment for payment, demand, protest,
notice of nonpayment, and protest of nonpayment.
IN WITNESS WHEREOF, this instrument has been duly executed by the maker
this 13th day of May, 1997.
By:/s/Robert L. Johander
--------------------------
Robert L. Johander
o:\board\johan5.not
<PAGE> 1
Exhibit 10.44
PROMISSORY NOTE
$50,000.00 Eden Prairie, Minnesota
March 21, 1997
FOR VALUE RECEIVED, the undersigned, Robert L. Johander, promises to
pay to ValueVision International, Inc. (the "Company") at 6740 Shady Oak Road,
Eden Prairie, MN 55344, or at such other places as the holder hereof may from
time to time designate in writing the principal sum of FIFTY THOUSAND AND NO/100
DOLLARS ($50,000.00) in lawful money of the United States of America, with
interest thereon from the date hereof at an annual interest rate equal to SIX
AND 7/8 PERCENT (6.875%) which will be compounded annually.
All outstanding principal and accrued interest shall be due and payable
in full at the term of the note which will be no later than March 20, 1998 (the
"Due Date"). Earlier repayment will be required: (1) from proceeds of the sale
of the Company Shares (as hereinafter defined) pledged as collateral in excess
of the Third Party Loans (as hereinafter defined) or (2) in the event that the
undersigned voluntarily terminates his employment with the Company. The
undersigned reserves the right to repay all or any part of the indebtedness
evidenced hereby without penalty. No payment or principal or interest shall be
due or demanded prior to the Due Date.
As collateral for the note, the undersigned hereby pledges the proceeds
from the sale of all the Common Stock, $.01 par value of the Company owned
directly by the undersigned (the "Company Shares"), to the extent such proceeds
exceed the amount of loans from third parties to the undersigned (the "Third
Pary Loans") for which the Company Shares are pledged.
If, in the opinion of the holder of this Note, it becomes necessary to
employ counsel to collect or to enforce this Note, the maker hereof agrees to
pay, to the extent permitted by law, all of the costs, charges, disbursements
and reasonable attorney's fees incurred by the holder hereof in collecting or
enforcing this Note.
The maker hereby waives presentment for payment, demand, protest,
notice of nonpayment, and protest of nonpayment.
IN WITNESS WHEREOF, this instrument has been duly executed by the maker
this 21st day of March, 1997.
By: /s/ Robert L. Johander
-----------------------------
Robert L. Johander
<PAGE> 1
Exhibit 10.45
TERM PROMISSORY NOTE
$500,000 November 20, 1995
FOR VALUE RECEIVED Nicholas M. Jaksich, an unmarried individual
resident of Minnesota (the "Maker") hereby promises to pay to the order of
ValueVision International, Inc. ("ValueVision"), a Minnesota corporation, at
6740 Shady Oak Road, Minneapolis, MN 55344-3433, or at such other place as the
holder hereof may from time to time designate in writing, the principal sum of
Five Hundred Thousand and no/100 Dollars ($500,000), together with accrued
interest thereon from the date hereof at an annual rate of interest equal to
five and seven-eighths percent (5-7/8%) per annum as follows:
All principal, interest and any other amounts owing under the Mortgage
shall be due and payable in full on November 20, 1996, except for
otherwise provided herein. Interest shall accrue monthly on the unpaid
principal balance.
The Maker hereby waives presentment for payment, demand, protest,
notice of protest, notice of dishonor and notice of nonpayment of this
Promissory Note.
Notwithstanding anything to the contrary herein, the Maker understands
and agrees that the entire unpaid principal balance of this Promissory Note
together with all accrued interest thereon shall become immediately due and
payable in full if Nicholas M. Jaksich ceases to be employed by ValueVision,
whether by resignation, involuntary termination, death, disability or otherwise.
This Promissory Note is secured by a security interest in certain
shares of common stock of ValueVision that were pledged by the Maker pursuant to
that certain Collateral Pledge Agreement dated of even date herewith (the
"Pledge Agreement") and by that certain Mortgage on certain real property
located at 6400 Parkwood Road, Edina Minnesota 55436, Lot 1, Block 1, Parkwood
Knolls in Hennepin County (the "Property") of even date herewith (the
"Mortgage"). Any default under the Pledge Agreement or Mortgage shall also
constitute a default hereunder.
If the Maker fails to pay any sum which is required to be paid
hereunder on the due date thereof or defaults under the terms of the Mortgage or
the Pledge Agreement or any other obligation to any third party that is secured
by the Property or transfers any interest in the Property encumbered by the
Mortgage, the holder of this Promissory Note shall have the right, upon any such
event, to declare the entire indebtedness evidenced by this Promissory Note to
be immediately due and payable in full. The Maker agrees to pay all costs of
collecting this Promissory Note including, but not limited to, attorneys' fees
and legal expenses if any payment due hereunder is not made when due (whether by
acceleration or otherwise) or any other default hereunder occurs, whether suit
is commenced or not, including costs and expenses in litigation, bankruptcy or
insolvency proceedings together with interest on any such costs from the date
paid at the rate provided for in this Promissory Note.
<PAGE> 2
The Maker of this Promissory Note shall have right to prepay all or any
part of the principal balance hereunder at any time prior to maturity without
penalty.
The Maker hereby consents to the personal jurisdiction of the state and
federal courts located in the State of Minnesota in connection with any
controversy related in any way to this Promissory Note or any security or
guarantee for this Promissory Note and waives any argument that venue in such
quorums is not convenient, and agrees that any litigation initiated by the Maker
against the payee or any other holder of this Promissory Note relating in any
way to this Promissory Note or any security or guarantee for this Promissory
Note shall be venued in either the District Court of Hennepin County, Minnesota
or the United States District Court, District of Minnesota, Fourth Division.
No waiver of any right or remedy under this Promissory Note shall be
valid unless in a writing executed by the holder of this Promissory Note and any
such waiver shall be effective only in the specific instance and for the
specific purpose given. All rights and remedies of the holder of this Promissory
Note shall be cumulative and may be exercised singly, concurrently or
successively.
This Promissory Note shall be construed and interpreted in accordance
with the laws of the State of Minnesota.
/s/ Nicholas M. Jaksich
----------------------------------
Nicholas M. Jaksich, an individual
"Maker"
<PAGE> 1
Exhibit 10.46
MORTGAGE REGISTRY TAX DUE HEREON:
$1,150.00
THIS INDENTURE, Made this 20th day of November, 1995, between Nicholas
M. Jaksich, a single person, Mortgagor (whether one or more), and ValueVision
International, Inc., 6740 Shady Oak Road, Minneapolis, Minnesota 55344-3433 a
corporation under the laws of Minnesota, Mortgagee,
WITNESSETH, That the Mortgagor, in consideration of the sum of Five
Hundred Thousand and no/100 ($500,000.00) DOLLARS, to the Mortgagor in hand paid
by the Mortgagee, the receipt whereof is hereby acknowledged, does hereby convey
unto the Mortgagee, Forever, all of the land located in the County of Hennepin,
and State of Minnesota, described as follows:
Lot 1, Block 1, Parkwood Knolls
together with all hereditaments and appurtenances belonging thereto (the
Property).
TO HAVE AND TO HOLD THE SAME, to the Mortgagee forever. The Mortgagor
covenants with Mortgagee as follows: That Mortgagor is lawfully seized of the
Property and has good right to convey the same; that the Property is free from
all encumbrances, except as follows: a mortgage in favor of First Bank, National
Association in the principal amount of $200,000.00; that the Mortgagee shall
quietly enjoy and posses the same; and that the Mortgagor will Warrant and
Defend the title to the same against all lawful claims not hereinbefore
specifically excepted.
PROVIDED, NEVERTHELESS; That if the Mortgagor shall pay to the
Mortgagee the sum of Five Hundred Thousand and no/100 ($500,000.00) DOLLARS,
according to the terms of a promissory note of even date herewith (the Note),
the final payment being due and payable on November 20, 1996 with interest at
the rate of 5-7/8 percent per annum, and shall repay to the Mortgagee, at the
times and with interest as specified, all sums advanced in protecting the lien
of this Mortgage, in payment of taxes on the Property, insurance premiums
covering buildings thereon, principal or interest on any prior liens, expenses
and attorney's fees herein provided for and sums advanced for any other purpose
authorized herein, and shall keep and perform all the covenants and agreements
herein contained, then this Mortgage shall be null and void, and shall be
released at the Mortgagor's expense.
AND THE MORTGAGOR covenants with the Mortgagee as follows:
1. to pay the principal sum of money and interest as specified in the
Note;
2. to pay all taxes and assessments now due or that may hereafter become
liens against the Property before penalty attaches thereto;
3. to keep all buildings, improvements and fixtures now or later located
on or a part of the Property insured against loss by fire, extended
coverage perils, vandalism, malicious mischief and, if applicable,
steam boiler explosion, for at least the amount of full replacement
value at all times while any amount remains unpaid under this Mortgage.
If any of the buildings, improvements or fixtures are located in a
federally designated flood prone area, and if flood insurance is
available for that area, Mortgagor shall procure and maintain flood
insurance in amounts reasonably satisfactory to the Mortgagee. Each
insurance policy shall contain a loss payable clause in favor of the
Mortgagee affording all rights and privileges customarily provided
under the so-called standard mortgage clause. In the event of damage to
the Property by fire or other casualty, the Mortgagor shall promptly
give notice of such damage to the Mortgagee and the insurance company.
The insurance shall be issued by an insurance
2
<PAGE> 2
company or companies licensed to do business in the State of Minnesota
and acceptable to the Mortgagee. The insurance policies shall provide
for not less than ten days written notice to the Mortgagee before
cancellation, non-renewal, termination, or change in coverage, and the
Mortgagor shall deliver to the Mortgagee a duplicate original or
certificate of such insurance policies.
4. to pay, when due, both principal and interest of all prior liens or
encumbrances, if any, and to keep the Property free and clear of all
other prior liens or encumbrances;
5. to commit or permit no waste on the Property and to keep it in good
repair;
6. to complete forthwith any improvements which may hereafter be under
course of construction on the Property, and;
7. to pay any other expenses and attorney's fees incurred by the Mortgagee
by reason of litigation with any third party for the protection of the
lien of this Mortgage.
In case of failure to pay said taxes and assessments, prior liens or
encumbrances, expenses and attorney's fees as above specified, or to insure said
buildings, improvements, and fixtures and deliver the policies as aforesaid, the
Mortgagee may pay such taxes, assessments, prior liens, expenses and attorney's
fees and interest thereon, or obtain such insurance, and the sums so paid shall
bear interest from the date of such payment at the same rate set forth in the
Note, and shall be impressed as an additional lien upon the Property and be
immediately due and payable from the Mortgagor to the Mortgagee and this
Mortgage shall from date thereof secure the repayment of such advances with
interest.
In case of default in any of the foregoing covenants, the Mortgagor
confers upon the Mortgagee the option of declaring the unpaid balance of the
Note and the interest accrued thereon, together with all sums advanced
hereunder, immediately due and payable without notice, and hereby authorizes and
empowers the Mortgagee to foreclose this Mortgage by judicial proceedings or to
sell the Property at public auction and convey the same to the purchaser in fee
simple in accordance with the statute, and out of the moneys arising from such
sale to retain all sums secured hereby, with interest and all legal costs and
charges of such foreclosure and the maximum attorney's fee permitted by law,
which costs, charges and fees the Mortgagor herein agrees to pay.
The Mortgagor and the Mortgagee further covenant and agree as follows:
1. Mortgagor shall be furnished a conformed copy of the Note and of this
Mortgage at the time of execution or after recordation hereof.
2. Upon default of any covenant or agreement by Mortgagor under the terms
of the Note or this Mortgage, Mortgagee prior to foreclosure shall mail
notice to Mortgagor as provided herein specifying: (a) the nature of
the default by the Mortgagor; (b) the action required to cure such
default; (c) a date, not less than thirty (30) days from the date the
notice is mailed to Mortgagor by which such default must be cured; and
(d) that failure to cure such default on or before the date specified
in the notice may result in acceleration of the sums secured by this
Mortgage and sale of the Property. The notice shall further inform
Mortgagor of the right to reinstate after acceleration and the right to
bring a court action to assert the non-existence of a default or any
other defense of the Mortgagor to acceleration and sale.
3. In addition to any notice required under applicable law to be given to
another manner, (a) any notice to the Mortgagor provided for in this
Mortgage shall be given by mailing such notice by certified mail
addressed to the Mortgagor at the Property address or at such other
address as the Mortgagor may designate by notice in writing to the
Mortgagee as provided herein, and (b) any notice to the Mortgagee shall
be given by certified mail, return receipt requested, to Mortgagee at
the following address: 6470 Shady Oak Road, Minneapolis, Minnesota
55344-3433, Attention: Stuart R.
<PAGE> 3
Romenesko or to such other address as Mortgagee may designate by notice
in writing to the Mortgagor as provided herein. Any notice provided for
in this Mortgage shall be deemed to have been given to Mortgagor or
Mortgagee when given in the manner designated herein.
The terms of this Mortgage shall run with the Property and bind the
parties hereto and their successors in interest.
IN TESTIMONY WHEREOF, the Mortgagor has hereunto set its hand the day
and year first above written.
MORTGAGOR
/s/ Nicholas M. Jaksic
------------------------------------------
Nicholas M. Jaksich
State of Minnesota )
)ss
County of Hennepin )
The foregoing instrument was acknowledged before me this day of November,
1995, by Nicholas M. Jaksich, a single person.
/s/ Barbara E. Claridge
--------------------------------------------
Signature of Notary Public or Other Official
This Instrument was Drafted by (Name and Address):
MASLON EDELMAN BORMAN & BRAND
a Professional Limited Liability Partnership
3300 Norwest Center
90 S. 7th Street
Minneapolis, MN 55402-4140
FAILURE TO RECORD OR FILE THIS
MORTGAGE MAY GIVE OTHER PARTIES PRIORITY
OVER THIS MORTGAGE.
<PAGE> 1
Exhibit 10.47
MORTGAGE SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT, is made and entered into as of this ___
day of November, 1997, by and among LASALLE BANK F.S.B. ("LaSalle") and
VALUEVISION INTERNATIONAL, INC., a Minnesota corporation ("ValueVision").
WITNESSETH:
WHEREAS, Nicholas M. Jaksich ("Mr. Jaksich") has executed and delivered
that certain Residential Mortgage dated November 20, 1995 in favor of
ValueVision (the "ValueVision Mortgage"), pursuant to which ValueVision has been
granted a mortgage lien in and to the real property legally described on Exhibit
A attached hereto, (the "Real Property") which Mortgage was duly filed of record
on January 22, 1996 in the office of the Hennepin County Recorder as Document
No. 6528593; and
WHEREAS, Mr. Jaksich has further executed and delivered that certain
Mortgage dated November __, 1997, in favor of LaSalle (the "Lasalle Mortgage"),
pursuant to which LaSalle has been granted a mortgage lien in and to the Real
Property, which Mortgage was duly filed of record in the office of the Hennepin
County Registrar of Titles on ____________, as Document No. _________ and in the
office of the Hennepin County Recorder on ____________, as Document No.
__________; and
WHEREAS, the parties hereto mutually desire that the ValueVision
Mortgage shall be junior and subordinate to the LaSalle Mortgage.
NOW, THEREFORE, in consideration of the foregoing premises, and for
other good and valuation consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. Subordination of the ValueVision Mortgage. ValueVision hereby
acknowledges and agrees that notwithstanding the order in
which the ValueVision Mortgage and the LaSalle Mortgage have
or will be recorded and notwithstanding the relative
priorities of the ValueVision Mortgage and the LaSalle
Mortgage pursuant to applicable law, the ValueVision Mortgage,
the liens created by said agreement and all of the right,
title and interest of ValueVision in and to the Real Property
shall be subordinate and junior in all respects to the LaSalle
Mortgage, the lien created by the LaSalle Mortgage and all
right, title and interest of LaSalle in and to the Real
Property.
2. Miscellaneous. This Agreement shall remain in effect until all
of the agreements subject hereto have been satisfied, released
or terminated. This Agreement shall be governed by and
construed in accordance with the laws of the State of
Minnesota. This Agreement may be executed in any number of
counterparts, each of which when
<PAGE> 2
executed and delivered shall be an original, but such
counterparts shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Subordination
Agreement to be duly executed and delivered as of the day and year first above
written.
LASALLE BANK F.S.B.
By
--------------------------------------
Its
--------------------------------
VALUEVISION INTERNATIONAL, INC.,
a Minnesota corporation
By
--------------------------------------
Its
--------------------------------
STATE OF ______________ )
) ss.
COUNTY OF _____________ )
The foregoing instrument was acknowledged before me this __
day of November, 1997, by _____________________, the _________________, of
LaSalle Bank F.S.B., for and on behalf of said corporation.
-----------------------------------
Notary Public
STATE MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this __
day of November, 1997, by David T. Quinby, the Vice President and General
Counsel of ValueVision International, a Minnesota corporation, for and on behalf
of said corporation.
-----------------------------------
Notary Public
-2-
<PAGE> 3
EXHIBIT A
(Legal Description of Real Estate)
The Real Property situated in the State of Minnesota, County of Hennepin and
legally described as follows:
Lot 1, Block 1, Parkwood Knolls
<PAGE> 1
Exhibit 10.48
Promissory Note
$50,000 Eden Prairie, Minnesota
May 15, 1995
FOR VALUE RECEIVED, the undersigned, Nicholas M. Jaksich, promises to
pay to ValueVision International, Inc. (the "Company") at 6740 Shady Oak Road,
Eden Prairie, Minnesota 55344, or at such other places as the holder hereof may
from time to time designate in writing, the principal sum of FIFTY THOUSAND
DOLLARS ($50,000) in lawful money of the United States of America, with interest
thereon from the date hereof at an annual interest rate equal to SIX AND EIGHT
TENTHS PERCENT (6.80%) which will be compounded annually.
All outstanding principal and accrued interest shall e due and payable
in full at the term of the Note which will be no later than May 15, 1997 (the
"Due Date"). Earlier repayment will be required: (1) From proceeds of the sale
of the stock pledged as collateral or (2) in the event that Nicholas Jaksich
voluntarily terminates his employment with the Company. Nicholas Jaksich
reserves the right to prepay all or any part of the indebtedness evidenced
hereby without penalty. No payment of principal or interest shall be due or
demanded prior to the Due Date.
As collateral for the Note, Nicholas Jaksich hereby pledges common
stock currently owned totally 25,000 shares and will use all proceeds from the
sale of his current ValueVision International, Inc., common stock to first pay
off this Note to the extent available.
If, in the opinion of the holder of this Note, it becomes necessary to
employ counsel to collect or to enforce this Note, the maker hereof agrees to
pay, to the extent permitted by the law, all of the costs, charges,
disbursements and reasonable attorney's fees incurred by the holder hereof in
collecting or enforcing this Note.
The maker hereby waives presentment for payment, demand, protest,
notice of nonpayment, and protest of nonpayment.
IN WITNESS WHEREOF, this instrument has been duly executed by the maker
this 15th day of May, 1995.
By /s/ Nicholas M. Jaksich
-------------------
Nicholas M. Jaksich
<PAGE> 1
EXHIBIT 10.52
ASSET AND STOCK PURCHASE AND OPTION GRANT AGREEMENT
DATED AS OF NOVEMBER 14, 1997
BY AND AMONG
VALUEVISION INTERNATIONAL, INC.;
VVI SEATTLE, INC.;
VVILPTV, INC.;
VVI SPOKANE, INC.;
VVI TALLAHASSEE, INC.
AND
PAXSON COMMUNICATIONS CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
SECTION 1 CERTAIN DEFINITIONS............................................................ 2
1.1 Terms Defined in this Section.................................................. 2
1.2 Terms Defined Elsewhere in this Agreement...................................... 5
SECTION 2 PURCHASE AND SALE OF ASSETS AND STOCK.......................................... 7
2.1 Agreement to Sell and Buy Assets............................................... 7
2.2 Agreement to Sell and Buy Shares............................................... 7
2.3 Excluded Assets................................................................ 8
2.4 Purchase Price................................................................. 8
2.5 Working Capital Credits and Payment............................................ 9
(a) Prorations............................................................ 9
(b) Expenses and Revenues Not Prorated.................................... 10
(c) Manner of Determining Prorations and Credits.......................... 10
(d) Payments at Closing With Respect to Working Capital Credits........... 11
(e) Payments to Reflect Final Determination of Working Capital
Credits............................................................... 11
2.6 Assumption of Liabilities and Obligations...................................... 12
SECTION 3 OPTION......................................................................... 12
3.1 Grant.......................................................................... 12
3.2 Spokane Option Exercise........................................................ 12
3.3 Tallahassee Option Exercise.................................................... 13
3.4 Exercise Price................................................................. 13
3.5 Determination of Fair Market Value............................................. 13
SECTION 4 REPRESENTATIONS AND WARRANTIES OF SELLERS...................................... 13
4.1 Organization, Standing, and Authority.......................................... 13
4.2 Authorization and Binding Obligation........................................... 13
4.3 Absence of Conflicting Agreements.............................................. 14
4.4 Governmental Licenses.......................................................... 14
4.5 Real Property.................................................................. 15
4.6 Tangible Personal Property..................................................... 15
4.7 Assumed Contracts.............................................................. 15
4.8 Consents....................................................................... 15
4.9 Intangibles.................................................................... 15
4.10 Financial Statements........................................................... 15
4.11 Insurance...................................................................... 16
4.12 Reports........................................................................ 16
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C> <C>
4.13 Labor Relations................................................................ 16
4.14 Taxes.......................................................................... 16
4.15 Claims and Legal Actions....................................................... 16
4.16 Compliance with Licenses....................................................... 16
4.17 Conduct of Business in Ordinary Course......................................... 16
4.18 Transactions with Affiliates................................................... 17
4.19 No Broker...................................................................... 17
4.20 Title to Shares................................................................ 17
4.21 Delivery of Channel 51 Agreement............................................... 17
4.22 Disclaimer of Warranties....................................................... 17
SECTION 5 REPRESENTATIONS AND WARRANTIES OF BUYER........................................ 18
5.1 Organization, Standing, and Authority.......................................... 18
5.2 Authorization and Binding Obligation........................................... 18
5.3 Absence of Conflicting Agreements.............................................. 18
5.4 Licensee Qualifications........................................................ 18
5.5 No Broker...................................................................... 19
5.6 Investment Representation...................................................... 19
5.7 Acknowledgment of "As-Is-Where-Is" Sale........................................ 19
SECTION 6 OPERATIONS OF THE STATIONS PRIOR TO CLOSING.................................... 19
6.1 Generally...................................................................... 19
6.2 Contracts...................................................................... 20
6.3 Disposition of Assets.......................................................... 20
6.4 Encumbrances................................................................... 20
6.5 Licenses....................................................................... 20
6.6 Obligations.................................................................... 20
6.7 Exclusivity.................................................................... 20
6.8 Access to Information.......................................................... 21
6.9 Maintenance of Assets.......................................................... 21
6.10 Insurance...................................................................... 22
6.11 Consents....................................................................... 22
6.12 Books and Records.............................................................. 22
6.13 Notification................................................................... 22
6.14 Financial Information.......................................................... 22
6.15 Compliance with Laws........................................................... 22
SECTION 7 SPECIAL COVENANTS AND AGREEMENTS............................................... 22
7.1 FCC Consents................................................................... 22
7.2 Control of the Stations........................................................ 23
7.3 Risk of Loss................................................................... 24
7.4 Confidentiality................................................................ 24
7.5 Cooperation.................................................................... 24
7.6 Access to Books and Records.................................................... 25
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
7.7 [Intentionally omitted]........................................................ 25
7.8 HSR Act Filing................................................................. 25
7.9 [Intentionally omitted]........................................................ 25
7.10 [Intentionally omitted]........................................................ 25
7.11 [Intentionally omitted]........................................................ 25
7.12 Sales Tax Filings.............................................................. 25
7.13 Accounts Receivable............................................................ 25
(a) Collection............................................................ 25
(b) Payments to ValueVision............................................... 26
(c) Further Obligations................................................... 26
7.14 No Inconsistent Action......................................................... 26
7.15 VVI Spokane and VVI Tallahassee................................................ 26
7.16 Channel 51 Agreement........................................................... 26
7.17 Control of Spokane Application and Tallahassee Application
Proceedings.................................................................... 27
SECTION 8 CONDITIONS TO OBLIGATIONS OF BUYER AND SELLERS AT
CLOSING........................................................................ 27
8.1 Conditions to Obligations of Buyer............................................. 27
(a) FCC Consents.......................................................... 27
(b) Final Orders.......................................................... 27
(c) HSR Act............................................................... 27
(d) Deliveries............................................................ 28
(e) Judgments............................................................. 28
8.2 Conditions to Obligations of Sellers........................................... 28
(a) Representations and Warranties........................................ 28
(b) Covenants and Conditions.............................................. 28
(c) Deliveries............................................................ 28
(d) FCC Consents.......................................................... 28
(e) HSR Act............................................................... 28
(f) Judgments............................................................. 28
SECTION 9 CLOSING AND CLOSING DELIVERIES................................................. 28
9.1 Closing........................................................................ 28
(a) Closing Date.......................................................... 28
(b) Closing Place......................................................... 29
9.2 Deliveries by Sellers.......................................................... 29
(a) [Intentionally omitted]............................................... 29
(b) Conveyancing Documents................................................ 29
(c) Working Capital Payments.............................................. 29
(d) Estoppel Certificates and Lessor's Consents ........................... 29
(e) Consents.............................................................. 29
(f) Certificate........................................................... 29
</TABLE>
- iii -
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
(g) Licenses, Contracts, Business Records, Etc............................ 30
9.3 Deliveries by Buyer............................................................ 30
(a) Purchase Price........................................................ 30
(b) Working Capital Payment............................................... 30
(c) Assumption Agreements................................................. 30
(d) Certificate........................................................... 30
SECTION 10 TERMINATION.................................................................... 30
10.1 Termination by Sellers......................................................... 30
(a) Conditions............................................................ 30
(b) Judgments............................................................. 30
(c) Upset Date............................................................ 31
(d) Breach................................................................ 31
(e) Buyer's Wrongful Failure To Close..................................... 31
10.2 Termination by Buyer........................................................... 31
(a) Conditions............................................................ 31
(b) Judgments............................................................. 31
(c) Intentionally omitted................................................. 31
(d) Material Contracts.................................................... 31
(e) Upset Date............................................................ 31
10.3 Escrow Deposit; Rights on Termination.......................................... 31
10.4 Specific Performance........................................................... 32
10.5 No Special Damages............................................................. 32
SECTION 11 INDEMNIFICATION................................................................ 33
11.1 Indemnification by Sellers..................................................... 33
11.2 Indemnification by Buyer....................................................... 33
11.3 Procedure for Indemnification................................................. 33
SECTION 12 [Intentionally omitted]........................................................ 34
SECTION 13 MISCELLANEOUS.................................................................. 34
13.1 Fees and Expenses.............................................................. 34
13.2 Notices........................................................................ 35
13.3 Arbitration.................................................................... 35
13.4 Benefit and Binding Effect..................................................... 36
13.5 Further Assurances............................................................. 37
13.6 GOVERNING LAW.................................................................. 37
13.7 Headings....................................................................... 37
13.8 Gender and Number.............................................................. 37
13.9 Entire Agreement............................................................... 37
</TABLE>
- iv -
<PAGE> 6
<TABLE>
<S> <C> <C> <C>
13.10 Waiver of Compliance: Consents................................................. 37
13.11 Counterparts................................................................... 37
13.12 Survival of Representations and Warranties..................................... 38
</TABLE>
- v -
<PAGE> 7
ASSET AND STOCK PURCHASE AND OPTION GRANT AGREEMENT
This ASSET AND STOCK PURCHASE AND OPTION GRANT AGREEMENT (the
"Agreement") is dated as of November 14, 1997, by and among VALUEVISION
INTERNATIONAL INC., a Minnesota corporation ("ValueVision"); VVI SEATTLE, INC.
("VVI Seattle"), a Minnesota corporation; VVILPTV, INC., a Minnesota corporation
("VVILP"); VVI SPOKANE, INC., a Minnesota corporation ("VVI Spokane"); VVI
TALLAHASSEE, INC., a Minnesota corporation ("VVI Tallahassee") and PAXSON
COMMUNICATIONS CORPORATION, a Delaware corporation ("Buyer").
PRELIMINARY STATEMENT
WHEREAS, VVI Seattle is the licensee of television station KBGE-TV,
Bellevue, Washington ("Station KBGE-TV") pursuant to licenses issued by the
Federal Communications Commission (the "FCC") and the owner of certain assets
used in the operation of Station KBGE- TV; and
WHEREAS, VVILP is the licensee of low power television station K43EK,
Portland, Oregon ("Channel 43") pursuant to licenses issued by the FCC and the
owner of certain assets used in the operation of Channel 43; and
WHEREAS, VVILP has entered into an asset purchase agreement dated
November 10, 1997 with Television Interests Company, Inc. (the "Channel 51
Agreement"), pursuant to which VVILP has agreed to purchase from Television
Interests Company, Inc. the license and the assets of low power television
station W51BU, in Indianapolis, Indiana ("Channel 51"); and
WHEREAS, VVI Spokane is an applicant for a television construction
permit to construct Channel 34 in Spokane, Washington, pursuant to FCC File
Number BPCT-961001XT (the "Spokane Application"); and
WHEREAS, VVI Tallahassee is an applicant for a television construction
permit to construct Channel 24 in Tallahassee, Florida, pursuant to FCC File
Number BPCT-960405LU (the "Tallahassee Application"); and
WHEREAS, VVI Seattle, VVILP, VVI Spokane and VVI Tallahassee are
wholly-owned subsidiaries of ValueVision; and
WHEREAS, VVI Seattle desires to sell the assets used or held for use in
the operation of Station KBGE-TV to Buyer, and Buyer desires to purchase such
assets, for the consideration and on the terms and conditions herein provided;
and
WHEREAS, VVILP desires to sell the assets used or held for use in the
operation of Channel 43 to Buyer, and Buyer desires to purchase such assets, for
the consideration and on the terms and conditions herein provided; and
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WHEREAS, VVILP desires to sell the assets used or held for use in the
operation of Channel 51, which assets shall be acquired pursuant to the closing
of the Channel 51 Agreement (the "Channel 51 Closing"), to Buyer and Buyer
desires to purchase such assets, for the consideration and on the terms and
conditions herein provided; and
WHEREAS, ValueVision desires to sell 49% of the issued and outstanding
shares of the capital stock of VVI Spokane to Buyer (the "VVI Spokane Shares"),
and Buyer desires to purchase the VVI Spokane Shares for the consideration and
on the terms herein provided; and
WHEREAS, ValueVision desires to grant to Buyer an option (the "Spokane
Option") to purchase all, but not less than all, of the remaining 51% of the
issued and outstanding shares of VVI Spokane to Buyer (the "Spokane Option
Shares") and Buyer desires to acquire the Spokane Option, for the consideration
and on the terms herein provided; and
WHEREAS, ValueVision desires to sell 49% of the issued and outstanding
shares of the capital stock of VVI Tallahassee to Buyer (the "VVI Tallahassee
Shares"; together with the VVI Spokane Shares at times herein, the "Shares"),
and Buyer desires to purchase the VVI Tallahassee Shares for the consideration
and on the terms herein provided; and
WHEREAS, ValueVision desires to grant to Buyer an option (the
"Tallahassee Option"; together with the Spokane Option, the "Options") to
purchase all, but not less than all, of the remaining 51% of the issued and
outstanding shares of VVI Tallahassee to Buyer (the "Tallahassee Option Shares";
together with the Spokane Option Shares, the "Option Shares") and Buyer desires
to acquire the Tallahassee Option, for the consideration and on the terms herein
provided; and
WHEREAS, each of ValueVision, VVI Seattle, and VVILP is each sometimes
hereinafter referred to as a "Seller," and together they are hereinafter
sometimes referred to as "Sellers."
AGREEMENTS
In consideration of the above recitals and of the mutual agreements and
covenants contained in this Agreement, the parties hereto, intending to be bound
legally, agree as follows:
SECTION 1 CERTAIN DEFINITIONS.
1.1 Terms Defined in this Section. The following terms, as used in this
Agreement, shall have the meanings set forth in this Section:
"Affiliate" means "affiliate" as defined in Rule 12b-2 promulgated
under the Exchange Act.
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"Assets" means the assets to be sold, transferred, or otherwise
conveyed to Buyer under this Agreement, as specified in Section 2.1.
"Assumed Contracts" means (a) all Material Contracts, (b) any other
Contract listed on Schedule 4.7 with respect to which Sellers are able to obtain
and deliver to Buyer at or prior to the Closing any Consent required for the
assignment of such Contract to Buyer, (c) contracts entered into prior to the
date of this Agreement with advertisers for the sale of advertising time or
production services for cash at rates consistent with past practices, (d) any
Contracts entered into by any Seller between the date of this Agreement and the
Closing Date that Buyer agrees in writing to assume, and (e) other contracts
entered into by any Seller between the date of this Agreement and the Closing
Date in compliance with Section 6.2.
"Closing" means the consummation of the transactions contemplated by
this Agreement in accordance with the provisions of Section 9.
"Closing Date" means the date on which the Closing occurs, as
determined pursuant to Section 9.
"Consents" means the consents, permits, or approvals of government
authorities and other third parties necessary to transfer the Assets, the
Shares, and the Options to Buyer or otherwise to consummate the transactions
contemplated by this Agreement, including consents to the assignment of the
Assumed Contracts.
"Contracts" means all contracts, leases, non-governmental licenses, and
other agreements (including leases for personal or real property and employment
agreements), written or oral (including any amendments and other modifications
thereto) to which any Seller is a party or that are binding upon any Seller and
that relate to or affect the Assets, the Shares, the Options or the conduct of
the business or operations of any of the Stations, and (a) that are in effect on
the date of this Agreement or (b) that are entered into by any Seller between
the date of this Agreement and the Closing Date; provided, however, that
"Contracts" shall not include any programming agreements.
"Effective Time" means 12:01 a.m., Eastern time, on the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means First Union National Bank.
"Escrow Agreement" means the Escrow Agreement to be entered into among
Buyer, ValueVision, and the Escrow Agent in accordance with Section 10.3.
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
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"Excluded Assets" means the assets described in Section 2.2(a) through
(h) of this Agreement.
"Exercise Price" has the meaning set forth in Section 3.4.
"Fair Market Value" means, as of the date of determination, the cash
price at which a willing seller would sell, and a willing buyer would buy, each
being apprised of all relevant facts and neither acting under compulsion, in an
arm's length negotiated transaction with an unaffiliated third party without
time constraints.
"FCC Consent" means action or actions by the FCC granting its consent
to the assignment of all the FCC Licenses to Buyer, as contemplated by this
Agreement.
"FCC Licenses" means all Licenses issued by the FCC to Sellers in
connection with the existing or currently authorized business or operations of
the Stations.
"Final Order" means an action by the FCC that has not been reversed,
stayed, enjoined, set aside, annulled, or suspended, and with respect to which
no requests are pending for administrative or judicial review, reconsideration,
appeal, or stay, and the time for filing any such requests and the time for the
FCC to set aside the action on its own motion have expired.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Intangibles" means all copyrights, trademarks, trade names, service
marks, service names, licenses, patents, permits, jingles, proprietary
information, technical information and data, machinery and equipment warranties,
and other similar intangible property rights and interests (and any goodwill
associated with any of the foregoing) applied for, issued to, or owned by any
Seller or under which any Seller is licensed or franchised and that are used or
useful in connection with the conduct of the business or operations of the
Stations, together with any additions thereto between the date of this Agreement
and the Closing Date.
"Licenses" means all licenses, permits, construction permits, and other
authorizations issued by the FCC, the Federal Aviation Administration, or any
other federal, state, or local governmental authorities to any Seller, currently
in effect and used or useful in connection with the conduct of the business or
operations of the Stations, together with any additions thereto between the date
of this Agreement and the Closing Date.
"Material Contracts" means those Assumed Contracts that are designated
on Schedule 4.7 as "Material Contracts."
"Permitted Encumbrances" means (a) liens for current taxes not yet due
and payable, (b) easements, covenants, conditions, and restrictions that are
disclosed on Schedule 4.5, and (c) other easements, covenants, conditions, and
restrictions of record that affect any Real
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Property and do not have a material adverse effect on the use of such Real
Property in the conduct of the business or operations of the Stations or
materially detract from the value of such Real Property in the conduct of the
business or operations of the Stations.
"Person" means an individual, corporation, association, partnership,
joint venture, joint stock company, trust, estate, limited liability company,
limited liability partnership, governmental entity, or other entity or
organization.
"Purchase Price" means the purchase price specified in Section 2.3.
"Real Property" means all interests in real property, including fee
estates, leaseholds and subleaseholds, purchase options, easements, licenses,
rights to access, and rights of way, and all buildings and other improvements
thereon, owned or held by any Seller, that are used or useful in connection with
the conduct of the business or operations of the Stations.
"Securities Act" means the Securities Act of 1933, as amended.
"Stations" means Station KBGE-TV, Channel 43, and, at all times
subsequent to the Channel 51 Closing, Channel 51.
"Tangible Personal Property" means all machinery, equipment, tools,
vehicles, furniture, leasehold improvements, office equipment, plant, inventory,
spare parts, and other tangible personal property owned or held by any Seller
that is used or useful in connection with the conduct of the business or
operations of the Stations, together with any additions thereto between the date
of this Agreement and the Closing Date.
"Transferee" means any Person to whom Buyer or its successors in
interest transfers all or any part of its ownership interest in or sells all or
substantially all of the assets of Station KBGE-TV, except in a transaction
authorized by Section 13.4(a)(ii) of this Agreement.
1.2 Terms Defined Elsewhere in this Agreement. For purposes of this
Agreement, the following terms have the meanings set forth in the Sections
indicated:
Term Section
- ---- -------
Acceptable Power Level Section 7.1(f)
Agreement Preliminary Statement
Buyer Preliminary Statement
Buyer's Working Capital Credits Section 2.4(a)
Channel 51 Agreement Preliminary Closing
Channel 51 Closing Preliminary Statement
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Claimant Section 11.3(a)
Collection Period Section 7.13(a)
DOJ Section 7.8
FCC Preliminary Statement
Financial Statements Section 4.10
FTC Section 7.8
In A Material Way Section 9.2(f)
Indemnifying Party Section 11.3
Options Preliminary Statement
Option Shares Preliminary Statement
Seller Preliminary Statement
Sellers' Working Capital Credits Section 2.4(a)
Shares Preliminary Statement
Spokane Application Preliminary Statement
Spokane Option Preliminary Statement
Spokane Option Exercise Date Section 3.2
Spokane Option Expiration Date Section 3.2
Spokane Option Shares Preliminary Statement
Station KBGE-TV Preliminary Statement
Stations' Receivables Section 7.13(a)
Tallahassee Application Preliminary Statement
Tallahassee Option Preliminary Statement
Tallahassee Option Exercise Date Section 3.3
Tallahassee Option Expiration Date Section 3.3
Tallahassee Option Shares Preliminary Statement
ValueVision Preliminary Statement
VVILP Preliminary Statement
VVI Seattle Preliminary Statement
VVI Spokane Preliminary Statement
VVI Spokane Shares Preliminary Statement
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VVI Tallahassee Preliminary Statement
VVI Tallahassee Shares Preliminary Statement
Working Capital Credits Section 2.4(a)
301 Application Section 7.1(c)
302 Application Section 2.3(a)
SECTION 2 PURCHASE AND SALE OF ASSETS AND STOCK.
2.1 Agreement to Sell and Buy Assets. Subject to the terms and
conditions set forth in this Agreement, Sellers hereby agree to sell, transfer,
convey, assign, and deliver to Buyer on the Closing Date (and ValueVision agrees
to cause each other Seller to sell, transfer, convey, assign, and deliver to
Buyer on the Closing Date), and Buyer agrees to purchase, all of each Seller's
right, title, and interest in the tangible and intangible assets used or useful
in connection with the conduct of the business or operations of the Stations,
together with any additions thereto between the date of this Agreement and the
Closing Date, but excluding the assets described in Section 2.3, free and clear
of any claims, liabilities, security interests, mortgages, liens, pledges,
conditions, charges, covenants, easements, restrictions, encroachments, leases,
or encumbrances of any nature (except for Permitted Encumbrances), including the
following:
(a) The Tangible Personal Property;
(b) The Real Property;
(c) The Licenses;
(d) The Assumed Contracts;
(e) The Intangibles and all intangible assets of any Seller
relating to the operation of the Stations that are not specifically included
within the Intangibles, including the goodwill of the Stations, if any;
(f) All of each Seller's proprietary information, technical
information and data, machinery and equipment warranties, maps, computer discs
and tapes, plans, diagrams, blueprints, and schematics, including filings with
the FCC relating to the business and operation of the Stations;
(g) All choses in action of any Seller relating to the
ownership or operations of the Stations to the extent they relate to the period
after the Effective Time; and
(h) Copies of all books and records relating to the business
or operations of the Stations, including executed copies of the Assumed
Contracts, and all records required by the FCC to be kept by the Stations.
2.2 Agreement to Sell and Buy Shares. Subject to the terms and
conditions set forth in this Agreement, ValueVision hereby agrees to sell,
transfer, convey, assign, and deliver to
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Buyer on the Closing Date, and Buyer agrees to purchase, all of ValueVision's
right, title, and interest in the Shares and all choses in action of ValueVision
relating to the ownership thereof to the extent they relate to the period after
the Effective Time.
2.3 Excluded Assets. The Assets shall exclude the following:
(a) [Intentionally omitted.]
(b) Any Seller's cash or cash equivalents on hand as of the
Closing and any Seller's interest in its bank accounts;
(c) Any insurance policies, promissory notes, amounts due from
employees, bonds, letters of credit, certificates of deposit, other similar
items, or deposits or prepaid items (except to the extent that Sellers receive a
Working Capital Credit for any such deposit or prepaid item pursuant to Section
2.5(a)), and any cash surrender value in regard thereto;
(d) Any pension, profit-sharing, or employee benefit plans,
including any Seller's interest in any welfare plan, pension plan, or benefit
arrangement;
(e) Any collective bargaining agreements;
(f) All tax returns and supporting materials, all original
financial statements and supporting materials, all books and records that any
Seller is required by law to retain, and all records of any Seller relating to
the sale of the Assets and the Shares;
(g) Any interest in and to any refunds of federal, state, or
local franchise, income, or other taxes for periods prior to the Closing Date;
and
(h) All accounts receivable, prepaids, and deposits of Sellers
as of the Closing Date and any intercompany accounts between the Sellers or any
Affiliates thereof.
2.4 Purchase Price.
(a) Subject to Sections 2.4(b)-(g) below, the aggregate
purchase price for the Assets, the Shares, and the Options (the "Purchase
Price") shall be Thirty-Five Million Dollars ($35,000,000), payable as follows:
(i) Twenty-Five Million Dollars ($25,000,000) in cash by wire transfer of
immediately available funds at Closing, plus (ii) Ten Million Dollars
($10,000,000) in cash by wire transfer of immediately available funds within
thirty (30) days of the earlier of (A) the date on which Buyer files or is
required to file FCC Form 302 (License Application) for Station KBGE-TV (the
"302 Application"), as provided in Section 7.1(f) below, or (B) the Improved
Coverage Date (as defined in Section 7.1(d)). The Purchase Price shall be
allocated among the Assets (allocable to each of the Stations), the respective
Shares, and each of the Options as set forth on Schedule 2.4 to this Agreement.
(b) In the event that Sellers are unable to obtain the FCC
Consents required to transfer to Buyer the FCC Licenses pertaining to Channel
43, or the Consent identified as item 1 on Schedule 4.3 hereto, there shall be a
decrease in the Purchase Price equal to the allocated purchase price for the
portion of the Assets allocable to Channel 43 as set forth on Schedule 2.4.
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(c) In the event that Sellers are unable to obtain the FCC
Consents required to transfer to Buyer the FCC Licenses pertaining to Channel
51, or the Consent identified as item 2 on Schedule 4.3 hereto, there shall be a
decrease in the Purchase Price equal to the allocated purchase price for the
portion of the Assets allocable to Channel 51 as set forth on Schedule 2.4.
(d) In the event that the FCC concludes or the parties
reasonably determine that transfer of the VVI Spokane Shares to Buyer at Closing
would jeopardize the Spokane Application, there shall be a decrease in the
Purchase Price equal to the allocated purchase price for the VVI Spokane Shares
as set forth on Schedule 2.4.
(e) In the event that the FCC concludes or the parties
reasonably determine that transfer of the VVI Tallahassee Shares to Buyer at
Closing would jeopardize the Tallahassee Application, there shall be a decrease
in the Purchase Price equal to the allocated purchase price for the VVI
Tallahassee Shares as set forth on Schedule 2.4.
(f) In the event that the FCC concludes or the parties
reasonably determine that ValueVision's grant of the Spokane Option to Buyer at
Closing would jeopardize the Spokane Application, there shall be a decrease in
the Purchase Price equal to the allocated purchase price for the Spokane Option
as set forth on Schedule 2.4.
(g) In the event that the FCC concludes or the parties
reasonably determine that ValueVision's grant of the Tallahassee Option to Buyer
at Closing would jeopardize the Tallahassee Application, there shall be a
decrease in the Purchase Price equal to the allocated purchase price for the
Tallahassee Option as set forth on Schedule 2.4.
(h) In the event of an adjustment to the Purchase Price
pursuant to Sections 2.4(b), (c), (d), (e), (f) or (g), the parties to this
Agreement shall be relieved of any obligation hereunder to transfer or acquire
only that portion or portions of the Assets, the Shares, or the Options, as the
case may be, to which such adjustment (or adjustments) relates.
2.5 Working Capital Credits and Payment.
(a) Prorations. All revenues and expenses arising from the
ownership of the Shares and the operation of the Stations, including tower
rental, business and license fees, utility charges, real and personal property
taxes and assessments levied against the Assets, property and equipment rentals,
applicable copyright or other fees, sales and service charges, taxes (except for
taxes arising from the transfer of the Assets and the Shares under this
Agreement), and similar prepaid and deferred items, shall be prorated between
Buyer and Sellers in accordance with the principle that Sellers shall receive
all revenues and shall be responsible for all expenses, costs, and liabilities
allocable to the ownership of the Shares and the operations of the Stations for
the period prior to the Effective Time, and Buyer shall receive all revenues and
shall be responsible for all expenses, costs, and obligations allocable to the
ownership of the Shares and the operations of the Stations for the period after
the Effective Time, subject to Section 2.5(b). To effectuate the proration of
expenses and revenues pursuant to this Section 2.5(a), but subject to Section
2.5(b), Sellers shall receive a credit equal to the amount of any expenses,
costs, or liabilities that are paid or incurred by Sellers and are allocable to
the ownership of the Shares and the operations of the Stations for the period
after the Effective Time plus the amount of any revenues that are received by
Buyer, and are allocable to the ownership of the Shares and the
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operations of the Stations for the period before the Effective Time, and Buyer
shall receive a credit equal to the amount of any expenses, costs, or
liabilities that are paid or incurred by Buyer and are allocable to the
ownership of the Shares and the operations of the Stations for the period before
the Effective Time plus the amount of any revenues that are received by Sellers
and are allocable to the ownership of the Shares and the operations of the
Stations for the period after the Effective Time. The credits to Sellers
pursuant to this Section 2.5(a) are referred to as "Sellers' Working Capital
Credits," the credits to Buyer pursuant to this Section 2.5(a) are referred to
as "Buyer's Working Capital Credits," and Sellers' Working Capital Credits and
Buyer's Working Capital Credits are referred to collectively as the "Working
Capital Credits."
(b) Expenses and Revenues Not Prorated.
(1) There shall be no proration of, and Sellers shall
remain solely liable with respect to, liabilities and obligations arising under
any Contracts not included in the Assumed Contracts and any other obligation or
liability not being assumed by Buyer in accordance with Section 2.6.
(2) Buyer shall receive a credit pursuant to Section
2.5(a) to the extent that Buyer assumes any liability under any Assumed Contract
to refund (or to credit against payments otherwise due) any security deposit or
similar prepayment paid to any Seller by any lessee or other third party.
(3) No proration shall be made in favor of either
Sellers or Buyer for any difference between the value of the goods or services
to be received by the Stations under their trade or barter agreements as of the
Effective Time and the value of any advertising time remaining to be run by the
Stations as of the Effective Time.
(4) There shall be no proration of earned vacation
time or other employee compensation. Sellers shall be solely responsible for the
payment of all compensation and commissions owed to the Stations' employees up
to the Effective Time. Buyer may, as of the Effective Time, employ those
employees of the Stations as Buyer may elect on terms and conditions determined
by Buyer.
(5) There shall be no proration of music license fees
(ASCAP, BMI, SESAC, etc.); Sellers shall be responsible for filing and paying
all music license fees due and payable as of the Effective Time, and Buyer shall
be responsible for filing and paying all such fees after the Effective Time.
(c) Manner of Determining Prorations and Credits. The
prorations and Working Capital Credits required by Section 2.5(a) shall be
determined finally in accordance with the following procedures:
(1) ValueVision, on behalf of Sellers, shall prepare
and deliver to Buyer not later than five (5) days before the Closing Date a
preliminary settlement statement which shall set forth ValueVision's good faith
estimate of the Working Capital Credits, taking into account all prorations
under Section 2.5(a). The preliminary settlement statement (A) shall contain all
information reasonably necessary to determine the Working Capital Credits,
taking into account all prorations under Section 2.5(a), to the extent such
prorations can be determined
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or estimated as of the date of the preliminary settlement statement, and such
other information as may be reasonably requested by Buyer, and (B) shall be
certified by ValueVision to be true and complete to ValueVision's knowledge as
of the date thereof.
(2) Not later than sixty (60) days after the Closing
Date, Buyer shall deliver to ValueVision a statement setting forth Buyer's
determination of the Working Capital Credits pursuant to Section 2.5(a). Buyer's
statement (A) shall contain all information reasonably necessary to determine
the Working Capital Credits, taking into account all prorations under Section
2.5(a), and such other information as may be reasonably requested by
ValueVision, and (B) shall be certified by Buyer to be true and complete to
Buyer's knowledge as of the date thereof. If ValueVision disputes the amount of
the Working Capital Credits determined by Buyer, it shall deliver to Buyer
within thirty (30) days after its receipt of Buyer's statement a statement
setting forth its determination of the amount of the Working Capital Credits. If
ValueVision notifies Buyer of its acceptance of Buyer's statement, or if
ValueVision fails to deliver its statement within the thirty-day period
specified in the preceding sentence, Buyer's determination of the Working
Capital Credits shall be conclusive and binding on Sellers as of the last day of
the thirty-day period.
(3) If ValueVision disputes the amount of the Working
Capital Credits determined by Buyer, Buyer and ValueVision shall use good faith
efforts to resolve any dispute involving the determination of the Working
Capital Credits as expeditiously as practicable.
(d) Payments at Closing With Respect to Working Capital
Credits. At Closing:
(1) Sellers shall pay or cause to be paid to or for
the account of Buyer, by wire transfer, the amount, if any, by which Buyer's
Working Capital Credits exceed Sellers' Working Capital Credits, each as
estimated in ValueVision's preliminary settlement statement pursuant to Section
2.5(c)(1).
(2) Buyer shall pay or cause to be paid to or for the
account of Sellers, by wire transfer, the amount, if any, by which Sellers'
Working Capital Credits exceed Buyer's Working Capital Credits, each as
estimated in ValueVision's preliminary settlement statement pursuant to Section
2.5(c)(1).
(e) Payments to Reflect Final Determination of Working Capital
Credits. Within five (5) business days after the date on which the Working
Capital Credits are finally determined pursuant to Section 2.5(c):
(1) Sellers shall pay or cause to be paid to or for
the account of Buyer, by wire transfer, the amount, if any, by which the sum of
the amount of Buyer's Working Capital Credits, as finally determined pursuant to
Section 2.5(c), plus the amount of any payment made by Buyer pursuant to Section
2.5(d)(2) exceeds the sum of amount of Sellers' Working Capital Credits, as
finally determined pursuant to Section 2.5(c), plus the amount of any payment
made by Sellers pursuant to Section 2.5(d)(1).
(2) Buyer shall pay or cause to be paid to or for the
account of Sellers, by wire transfer, the amount, if any, by which the sum of
the amount of Sellers' Working Capital
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Credits, as finally determined pursuant to Section 2.5(c), plus the amount of
any payment made by Sellers pursuant to Section 2.5(d)(1) exceeds the sum of
amount of Buyer's Working Capital Credits, as finally determined pursuant to
Section 2.5(c), plus the amount of any payment made by Buyer pursuant to Section
2.5(d)(2).
2.6 Assumption of Liabilities and Obligations. As of the Closing Date,
Buyer shall assume and undertake to pay, discharge, and perform all obligations
and liabilities of Sellers under the Licenses and the Assumed Contracts to the
extent that either (a) the obligations and liabilities relate to the time after
the Effective Time or (b) Buyer received a Working Capital Credit therefor under
Section 2.5(a) as a result of the proration of such obligations and liabilities.
Buyer shall not assume any other obligations or liabilities of any Seller,
including (i) any obligations or liabilities under any Contract (including any
film or programming license agreement) not included in the Assumed Contracts,
(ii) any obligations or liabilities under the Assumed Contracts relating to the
period prior to the Effective Time except insofar as Buyer receives a Working
Capital Credit therefor under Section 2.5(a), (iii) any claims, litigation, or
proceedings relating to the operation of the Stations prior to the Closing,
whether asserted or filed before or after the Effective Time, (iv) any
obligations or liabilities of any Seller under any management incentive,
employee pension, retirement, or other benefit plans, (v) any obligations or
liabilities of any Seller under any collective bargaining agreements, (vi) any
obligation to any employee of the Stations for severance benefits, vacation
time, or sick leave accrued prior to the Closing Date, (vii) any credit
agreements, note purchase agreements, indentures, or other financing
arrangements, other than leases or agreements listed on Schedule 4.7 and
included in the Assumed Contracts, (viii) any agreements entered into other than
in the ordinary course of business of the Stations, or (ix) any obligations or
liabilities caused by, arising out of, or resulting from any action or omission
of any Seller prior to the Closing, and all such obligations and liabilities
shall remain and be the obligations and liabilities solely of Sellers.
SECTION 3 OPTION.
3.1 Grant. Subject to Sections 2.4(f) and (g), ValueVision shall grant
to Buyer at Closing (a) the Spokane Option to purchase the Spokane Option Shares
and (b) the Tallahassee Option to purchase the Tallahassee Option Shares.
3.2 Spokane Option Exercise. Buyer may exercise the Spokane Option to
purchase the Spokane Option Shares only by giving written notice to ValueVision
of its election to exercise said Spokane Option no earlier than (a) thirty (30)
days after the later to occur of (i) the Closing and (ii) the date on which FCC
action on the Spokane Application has become a Final Order (the "Spokane Option
Exercise Date"), and no later than (b) ninety (90) days after the Spokane Option
Exercise Date (the "Spokane Option Expiration Date"). If Buyer shall not have
timely exercised the Spokane Option on or before the Spokane Option Expiration
Date, the Spokane Option shall automatically be and become null and void and of
no further force or effect. Such notice shall specify a date not more than
thirty (30) days after any necessary FCC approval shall have become a Final
Order, on which the closing of the Spokane Option shall occur and Buyer shall
pay to ValueVision an amount of cash, by wire transfer of immediately available
funds, equal to the Exercise Price for the Spokane Option.
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3.3 Tallahassee Option Exercise. Buyer may exercise the Tallahassee
Option to purchase the Tallahassee Option Shares only by giving written notice
to ValueVision of its election to exercise said Tallahassee Option no earlier
than (a) thirty (30) days after the later to occur of (i) the Closing and (ii)
the date on which FCC action on the Tallahassee Application has become a Final
Order (the "Tallahassee Option Exercise Date"), and no later than (b) ninety
(90) days after the Tallahassee Option Exercise Date (the "Tallahassee Option
Expiration Date"). If Buyer shall not have timely exercised the Tallahassee
Option on or before the Tallahassee Option Expiration Date, the Tallahassee
Option shall automatically be and become null and void and of no further force
or effect. Such notice shall specify a date not more than thirty (30) days after
any necessary FCC approval shall have become a Final Order, on which the closing
of the Tallahassee Option shall occur and Buyer shall pay to ValueVision an
amount of cash, by wire transfer of immediately available funds, equal to the
Exercise Price for the Tallahassee Option.
3.4 Exercise Price. The Exercise Price for the Spokane Option shall be
the Fair Market Value of the Spokane Option Shares on the date Buyer gives
ValueVision written notice of its election to exercise the Spokane Option. The
Exercise Price for the Tallahassee Option shall be the Fair Market Value of the
Tallahassee Option Shares on the date Buyer gives ValueVision written notice of
its election to exercise the Tallahassee Option.
3.5 Determination of Fair Market Value. The Fair Market Value of the
Option Shares shall be determined (a) by mutual agreement of ValueVision and
Buyer or (b) if no such agreement is reached, within ten (10) days of the
relevant date of determination, by arbitration pursuant to Section 13.3 of this
Agreement.
SECTION 4 REPRESENTATIONS AND WARRANTIES OF SELLERS.
Sellers, jointly and severally, represent and warrant to Buyer
as follows:
4.1 Organization, Standing, and Authority. Each of the Sellers, VVI
Spokane, and VVI Tallahassee is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Minnesota. Each Seller is
duly qualified to conduct business as a foreign corporation in each state in
which the nature of its business or the ownership of its assets requires it to
be so qualified. Schedule 4.1 sets forth the states in which the Sellers are
qualified to conduct business relevant to the ownership and operation of the
Assets and the Stations. Each Seller has all requisite corporate power and
authority (a) to own, lease, and use the Assets as now owned, leased, and used
by it, (b) to conduct the business and operations of the Stations as now
conducted, and (c) to execute and deliver this Agreement and the documents
contemplated hereby, and to perform and comply with all of the terms, covenants,
and conditions to be performed and complied with by such Seller hereunder and
thereunder. In addition, ValueVision has all requisite corporate power and
authority to transfer to Buyer the Shares and the Options. ValueVision owns,
directly or indirectly, all of the issued and outstanding shares of each Seller
(other than ValueVision), VVI Spokane and VVI Tallahassee.
4.2 Authorization and Binding Obligation. The execution, delivery, and
performance of this Agreement by each Seller have been duly authorized by all
necessary actions on the part of such Seller. This Agreement has been duly
executed and delivered by each Seller and
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constitutes the legal, valid, and binding obligation of each Seller, enforceable
against it in accordance with its terms except as the enforceability of this
Agreement may be affected by bankruptcy, insolvency, or similar laws affecting
creditors rights generally and by judicial discretion in the enforcement of
equitable remedies.
4.3 Absence of Conflicting Agreements. Subject to obtaining the
governmental Consents provided for in Section 7.1 and Section 7.8 and the other
Consents listed on Schedule 4.3, the execution, delivery, and performance of
this Agreement and the documents contemplated hereby (with or without the giving
of notice, the lapse of time, or both): (a) do not require the consent of any
third party; (b) will not conflict with any provision of the Articles of
Incorporation or By-Laws of any Seller, VVI Spokane or VVI Tallahassee; (c) will
not conflict with, result in a breach of, or constitute a default under, any
law, judgment, order, ordinance, injunction, decree, rule, regulation, or ruling
of any court or governmental instrumentality; (d) will not conflict with,
constitute grounds for termination of, result in a breach of, constitute a
default under, or accelerate or permit the acceleration of any performance
required by the terms of, any agreement (including the Channel 51 Agreement),
instrument, license, or permit to which any Seller, VVI Spokane or VVI
Tallahassee is a party or by which any Seller, VVI Spokane or VVI Tallahassee
may be bound legally; and (e) will not create any claim, liability, mortgage,
lien, pledge, condition, charge, or encumbrance of any nature upon any of the
Shares or the Assets.
4.4 Governmental Licenses.
(a) Schedule 4.4(a) includes a true and complete list of the
Licenses. Sellers have made available to Buyer true and complete copies of the
Licenses (including any amendments and other modifications thereto). The
Licenses have been validly issued, and the Seller designated as such on Schedule
4.4(a) is the authorized legal holder thereof. The Licenses listed on Schedule
4.4(a) comprise all licenses, permits, and other authorizations required from
the FCC and, to each Seller's knowledge, from any other governmental or
regulatory authority for the lawful conduct in all material respects of the
business and operations of the Stations in the manner and to the full extent
they are now conducted, and none of the Licenses is subject to any unusual or
special restriction or condition that could reasonably be expected to limit the
full operation of the Stations as now operated. Sellers have no reason to
believe that, under existing law, rules, regulations, policies, and procedures
of the FCC, any of the Licenses would not be renewed by the FCC or other
granting authority in the ordinary course. Except as set forth in Schedule
4.4(a), the Licenses are in full force and effect. Sellers have timely paid to
the FCC all annual regulatory fees payable with respect to the FCC Licenses.
(b) Schedule 4.4(b) includes a true and complete list, to each
Seller's knowledge, of (i) all cable television systems that carry the signals
of the Stations, (ii) all retransmission consent and other similar agreements
entered into by any Seller with respect to the Stations, and (iii) all cable
television systems to which either Seller has delivered a must carry notice or
retransmission consent notice in accordance with Section 4 of the Cable
Television Consumer Protection and Competition Act of 1992 and the rules and
regulations of the FCC promulgated thereunder.
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4.5 Real Property. Schedule 4.5 contains a complete and accurate
description of all Real Property (including street address, legal description
(where known), owner, and Sellers' use thereof), and all claims, liabilities,
security interests, mortgages, liens, pledges, conditions, charges, covenants,
easements, restrictions, encroachments, leases, or encumbrances known to any
Seller.
4.6 Tangible Personal Property. Schedule 4.6 lists all material items
of Tangible Personal Property, to the best of Sellers' knowledge without
inquiry. Except as described in Schedule 4.6, one of the Sellers, as designated
on Schedule 4.6, owns and has good title to each item of Tangible Personal
Property and none of the Tangible Personal Property owned by any Seller is
subject to any security interest, mortgage, pledge, conditional sales agreement,
or other lien or encumbrance, except for liens for current taxes not yet due and
payable.
4.7 Assumed Contracts. Schedule 4.7 is a true and complete list of all
Assumed Contracts except contracts with advertisers for production or the sale
of advertising time on the Stations for cash at rates consistent with past
practices and that may be canceled by Sellers without penalty on not more than
thirty (30) days' notice. Sellers have delivered to Buyer true and complete
copies of all written Assumed Contracts and true and complete written
descriptions of all oral Assumed Contracts (including any amendments and other
modifications to such Contracts). Schedule 4.7 also includes a schedule
summarizing as of the date of such schedule all contracts with advertisers for
production or the sale of advertising time on the Stations. Except for the need
to obtain the Consents listed on Schedule 4.3, the Seller that is a party to
each Assumed Contract has full legal power and authority to assign its rights
under such Assumed Contracts to Buyer in accordance with this Agreement, and
such assignment will not affect the validity, enforceability, or continuation of
such Assumed Contract.
4.8 Consents. Except for the governmental Consents provided for in
Section 7.1 and Section 7.8 and the other Consents described in Schedule 4.3, to
each Seller's knowledge, no consent, approval, permit, or authorization of, or
declaration to, or filing with any governmental or regulatory authority or any
other third party is required to consummate this Agreement and the transactions
contemplated hereby or to permit Sellers to assign or transfer the Assets, the
Shares, and the Options to Buyer.
4.9 Intangibles. Schedule 4.9 is a true and complete list of all
Intangibles (exclusive of Licenses listed in Schedule 4.4(a)) that are used in
the conduct of the business and operations of the Stations as now conducted.
Sellers have made available to Buyer copies of all documents establishing or
evidencing the Intangibles listed on Schedule 4.9. There is no claim or action
pending, or to the knowledge of any Seller threatened, relating to the Stations
with respect to any actual or alleged infringement by any Seller upon any
trademark, trade name, service mark, service name, copyright, patent, patent
application, know-how, method, or process owned by any other Person.
4.10 Financial Statements. Sellers have furnished Buyer with true and
complete copies of the unaudited financial statements of Station KBGE-TV
containing balance sheets as of January 31, 1997, and August 31, 1997, and a
statement of operations for the seven (7) months ended August 31, 1997
(collectively, the "Financial Statements").
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<PAGE> 22
4.11 Insurance. Schedule 4.11 is a true and complete list of all
insurance policies of any Seller that insure any part of the Assets or the
business of the Stations. All policies of insurance listed in Schedule 4.11 are
in full force and effect.
4.12 Reports. All reporting requirements of the FCC and, to each
Seller's knowledge, any other governmental authority with respect to the
Stations have been complied with by Sellers in all material respects.
4.13 Labor Relations. No labor union or other collective bargaining
unit represents or claims to represent any of the employees of the Stations. To
each Seller's knowledge, there is no union campaign being conducted to solicit
cards from employees to authorize a union to request a National Labor Relations
Board certification election with respect to any employees at the Station.
4.14 Taxes. Each Seller has filed or caused to be filed all federal,
state, county, local, or city tax returns that are required to be filed with
respect to the ownership and operation of the Stations. ValueVision has filed or
caused to be filed all federal, state, county, local or city tax returns that
are required to be filed with respect to the ownership of the shares of capital
stock of VVI Spokane and VVI Tallahassee. Each Seller has paid or caused to be
paid all taxes shown on those returns or on any tax assessment received by it to
the extent that such taxes have become due. There are no legal, administrative,
or tax proceedings pursuant to which any Seller is or could be made liable for
any taxes, penalties, interest, or other charges, the liability for which could
extend to Buyer as transferee of the business of the Stations or as transferee
of the Shares, and no event has occurred that could impose on Buyer any
transferee liability for any taxes, penalties, or interest due or to become due
from any Seller.
4.15 Claims and Legal Actions. Except as disclosed on Schedule 4.15 and
except for any FCC rulemaking proceedings generally affecting the television
broadcasting industry and not particular to any Seller, there is no claim, legal
action, counterclaim, suit, arbitration, or other legal, administrative, or tax
proceeding, nor any order, decree, or judgment, in progress or pending, or to
the knowledge of any Seller threatened, against or relating to any Seller with
respect to its ownership of the Shares or its ownership or operation of any
Station or otherwise relating to the Shares, the Options, the Assets or the
business or operations of the Stations, nor does any Seller know of any basis
for the same.
4.16 Compliance with Licenses. Each Seller has complied in all material
respects with the Licenses.
4.17 Conduct of Business in Ordinary Course. With respect to Station
KBGE-TV and Channel 43, since August 31, 1997, and with respect to Channel 51,
since the date of the Channel 51 Closing, the Sellers have or will have
conducted the business and operations of each Station only in the ordinary
course and, except as disclosed in Schedule 4.17:
(a) No Station has suffered any material damage, destruction,
or loss affecting any assets or transferred any material assets used or useful
in the conduct of the business of the Station;
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<PAGE> 23
(b) No Station has suffered any material write-down of the
value of any Assets; and
(c) No Station has transferred or granted any right under, or
entered into any settlement regarding the breach or infringement of, any
license, patent, copyright, trademark, trade name, franchise, or similar right,
or modified any existing right relating to any Station.
4.18 Transactions with Affiliates. Except as set forth on Schedule
4.18, no Seller has been involved in any business arrangement or relationship
relating to any Station with any Affiliate of any Seller (other than another
Seller), and no Affiliate of any Seller (other than another Seller) owns any
property or right, tangible or intangible, that is used in the business of the
Stations.
4.19 No Broker. Except as set forth on Schedule 4.19, no Seller has
employed, nor obligated itself or Buyer to compensate, any finder, broker,
advisor or similar Person in connection with the transactions contemplated by
this Agreement.
4.20 Title to Shares. ValueVision is the holder of record and owns
beneficially that number of shares of the capital stock of each of VVI Spokane
and VVI Tallahassee set forth on Schedule 4.20, free and clear of all liens.
That number of shares of the capital stock of each of VVI Spokane and VVI
Tallahassee set forth on Schedule 4.20 represents all of the issued and
outstanding capital stock of each of VVI Spokane and VVI Tallahassee.
ValueVision has delivered to Buyer true and complete copies of the charter and
bylaws for each of VVI Spokane and VVI Tallahassee. The authorized capital
structure of VVI Spokane is as follows: 10,000 shares of capital stock, par
value $.01 per share, of which 1,000 shares are issued and outstanding. The
authorized capital structure of VVI Tallahassee is as follows: 10,000 shares of
capital stock, par value $.01 per share, of which 1,000 shares are issued and
outstanding. At the Closing, ValueVision will deliver to Buyer good and
marketable title to the Shares, free and clear of any lien, security interest,
mortgage, pledge, conditional sales agreement or other encumbrance. Other than
this Agreement, none of the Shares are subject to any voting trust agreement or
other contract, agreement, arrangement, commitment or understanding.
4.21 Delivery of Channel 51 Agreement. ValueVision has delivered to
Buyer a true and complete copy of the Channel 51 Agreement. To the best
knowledge of ValueVision, the representations and warranties of VVILP contained
in the Channel 51 Agreement are true and correct in all material respects as of
the date hereof.
4.22 Disclaimer of Warranties. Except for the foregoing representations
and warranties specifically set forth in Section 4.1 through Section 4.21 of
this Agreement and the representations and warranties in the certificate
delivered by Sellers pursuant to Section 9.2(f), the Assets, the Shares, and the
Options are being transferred by Sellers to Buyer on an "as-is- where-is" basis
without any representation or warranty, all other representations and warranties
of any kind, either express or implied, including warranties of fitness, being
hereby expressly disclaimed.
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SECTION 5 REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Sellers as follows:
5.1 Organization, Standing, and Authority. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and, except as otherwise not required due to Sections 2.4(b)-(h), on
the Closing Date, Buyer (or its wholly owned subsidiary or subsidiaries, to be
designated by Buyer prior to Closing) will be duly qualified to conduct business
in the States of Florida, Washington, Indiana, and Oregon. Buyer has all
requisite corporate power and authority to execute and deliver this Agreement
and the documents contemplated hereby, and to perform and comply with all of the
terms, covenants, and conditions to be performed and complied with by it
hereunder and thereunder.
5.2 Authorization and Binding Obligation. The execution, delivery, and
performance of this Agreement by Buyer has been duly authorized by all necessary
actions on the part of Buyer. This Agreement has been duly executed and
delivered by Buyer and constitutes the legal, valid, and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms except as the
enforceability of this Agreement may be affected by bankruptcy, insolvency, or
similar laws affecting creditors' rights generally and by judicial discretion in
the enforcement of equitable remedies.
5.3 Absence of Conflicting Agreements. Subject to obtaining the
governmental Consents provided for in Section 7.1 and Section 7.8 and the other
Consents listed on Schedule 5.3, the execution, delivery, and performance by
Buyer of this Agreement and the documents contemplated hereby (with or without
the giving of notice, the lapse of time, or both): (a) do not require the
consent of any third party; (b) will not conflict with the Certificate of
Incorporation or By-Laws of Buyer; (c) will not conflict with, result in a
breach of, or constitute a default under, any law, judgment, order, injunction,
decree, rule, regulation, or ruling of any court or governmental
instrumentality; or (d) will not conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, or accelerate
or permit the acceleration of any performance required by the terms of, any
agreement, instrument, license, or permit to which Buyer is a party or by which
Buyer may be bound legally, such that Buyer could not acquire the Assets, the
Shares, or the Options, operate the Assets, or could not perform its obligations
hereunder.
5.4 Licensee Qualifications. To Buyer's knowledge, there is no fact
that would, under the Communications Act of 1934, as amended, and the rules and
regulations of the FCC, each as in effect on the date of this Agreement,
disqualify Buyer from being the licensee of any Station. Buyer has sufficient
net liquid assets on hand or available from committed sources to consummate the
transactions contemplated by this Agreement and to operate the Stations for
three (3) months after Closing and is otherwise financially qualified under the
Communications Act of 1934, as amended, and the rules and regulations of the
FCC, each as in effect on the date of this Agreement, to be the licensee of the
Stations.
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5.5 No Broker. Except as set forth in Schedule 5.5, Buyer has not
employed, nor obligated itself or any Seller to compensate, any finder, broker,
advisor or similar Person in connection with the transactions contemplated by
this Agreement.
5.6 Investment Representation. Buyer is acquiring the Shares and the
Options, and, if Buyer exercises the Options, Buyer will acquire the Option
Shares, for Buyer's own account for investment and not as a nominee or agent for
any other Person. Buyer does not intend to distribute or resell such securities
or any part thereof in any transactions that would be in violation of the
securities laws of the United States or any state thereof. Buyer is an
"accredited investor" within the meaning of Rule 501 under the Securities Act.
5.7 Acknowledgment of "As-Is-Where-Is" Sale. Buyer acknowledges and
agrees that it is purchasing and accepting the Assets, the Shares, and the
Options, and, if Buyer exercises the Options, will purchase and accept the
Option Shares, on an "as-is-where-is" basis, except for the representations and
warranties specifically set forth in Section 4.1 through Section 4.21 of this
Agreement and the representations and warranties in the certificate delivered by
Sellers pursuant to Section 9.2(f). To the fullest extent permitted by law,
Buyer hereby unconditionally and irrevocably waives and releases any and all
actual or potential claims that it might have against any Seller regarding any
form of warranty, express or implied, of any kind or type, including warranties
of fitness, relating to or in connection with the purchase of the Assets, the
Shares and the Options, other than the representations and warranties
specifically set forth in Section 4.1 through Section 4.21 of this Agreement and
the representations and warranties in the certificate delivered by Sellers
pursuant to Section 9.2(f). This waiver and release is, to the fullest extent
permitted by law, absolute, complete, total, and unlimited in every way and
includes, to the fullest extent permitted by law, a waiver and release of
express warranties (other than the representations and warranties specifically
set forth in Section 4.1 through Section 4.21 of this Agreement and the
representations and warranties in the certificate delivered by Sellers pursuant
to Section 9.2(f)), implied warranties, warranties of fitness for a particular
use, warranties of merchantability, warranties of habitability, claims based on
apparent or latent defects or deficiencies, whether now or hereafter existing,
and strict liability rights and claims of every kind and type (including claims
regarding defects that were not or are not discoverable and all other extant or
later created or conceived of strict liability or strict liability-type claims
and rights).
SECTION 6 OPERATIONS OF THE STATIONS PRIOR TO CLOSING.
Between the date of this Agreement and the Closing Date, Sellers shall
comply, and ValueVision shall cause each Seller to comply, with the covenants in
this Section 6 with respect to the Stations owned by Sellers:
6.1 Generally. Except as otherwise provided in this Agreement, Sellers
shall operate the Stations diligently in the ordinary course of business in
accordance with past practices (except where such conduct would conflict with
the following covenants or with Sellers' other obligations under this
Agreement).
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6.2 Contracts. Sellers will not amend or terminate any Material
Contract (or waive any material right thereunder), or enter into any contract or
commitment relating to the Stations, the Assets, the Shares, or the Options or
incur any obligation (including obligations relating to the borrowing of money
or the guaranteeing of indebtedness and obligations arising from the amendment
of any existing Contract, regardless whether such Contract is a Material
Contract) that will be binding on Buyer after Closing, except for (a) cash time
sales agreements and production agreements made in the ordinary course of
business consistent with Sellers' past practices, and (b) other contracts
(excluding film or programming license agreements and trade or barter
agreements) entered into in the ordinary course of business consistent with
Sellers' past practices that do not involve consideration, in the aggregate, in
excess of $25,000 measured at Closing. Prior to the Closing Date, Sellers shall
deliver to Buyer a list of all Contracts entered into between the date of this
Agreement and the Closing Date and shall make available to Buyer copies of such
Contracts.
6.3 Disposition of Assets. No Seller shall sell, assign, lease, or
otherwise transfer or dispose of any assets that are used or useful in
connection with the conduct of the business or operations of the Stations,
except for (a) dispositions of assets in connection with the acquisition of
replacement property of equivalent kind and value and (b) the assignment and
transfer of assets and liabilities between Sellers.
6.4 Encumbrances. No Seller shall create, assume, or permit to exist
any claim, liability, security interest, mortgage, lien, pledge, condition,
charge, covenant, easement, restriction, encroachment, lease, or encumbrance of
any nature upon the Shares or the Assets, except for (a) liens disclosed on
Schedule 4.5, Schedule 4.6 or Schedule 4.20 that will be removed prior to the
Closing Date, and (b) Permitted Encumbrances.
6.5 Licenses. No Seller shall cause or permit, by any act or failure to
act, any of the Licenses required to be listed on Schedule 4.4 to expire or to
be revoked, suspended, or modified, or take any action that could reasonably be
expected to cause the FCC or any other governmental authority to institute
proceedings for the suspension, revocation, or material adverse modification of
any of the Licenses. Sellers shall use reasonable efforts to prosecute (a) any
applications to any governmental authority necessary for the operation of the
Stations and (b) any must-carry proceedings described on Schedule 6.5.
6.6 Obligations. Sellers shall pay all obligations relating to the
Stations as they become due, consistent with past practices, so that all such
obligations shall be current as of the Closing Date.
6.7 Exclusivity.
(a) Neither any Seller nor any officer, director,
representative, or agent of any Seller shall, directly or indirectly, (i)
solicit, initiate, or encourage the submission of any proposal or offer relating
to (A) any liquidation, dissolution, or recapitalization of any Seller, (B) any
merger or consolidation of any Seller with any other Person, (C) any acquisition
or purchase of securities or assets by any Person from any Seller, or (D) any
similar transaction or business combination involving any Seller, or (ii)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner
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any effort or attempt by any Person to do or seek any of the foregoing. Sellers
shall notify Buyer as soon as practicable if any Person makes any proposal with
respect to any of the foregoing.
(b) Section 6.7(a) shall not apply to any action by any Seller
or any officer, director, representative, or agent of any Seller with respect to
(i) the assignment and transfer by any Seller of all its assets and liabilities
to another Seller, or (ii) so long as ValueVision's ability to perform its
obligations under this Agreement is not adversely affected, any recapitalization
of ValueVision, any merger or consolidation of ValueVision with any other
Person, or any acquisition or purchase of securities or assets (other than the
Assets) by any Person from ValueVision.
6.8 Access to Information.
(a) Each Seller shall give Buyer and its counsel, accountants,
engineers, and other authorized representatives reasonable access to the Assets
and to all other books, records, and documents relating to the Shares and the
Stations for the purpose of audit and inspection, and will furnish or cause to
be furnished to Buyer or its authorized representatives all information with
respect to the affairs and business of the Stations that Buyer may reasonably
request (including any financial reports and operations reports produced with
respect to the affairs and business of VVI Spokane, VVI Tallahassee and the
Stations, a list of all employees of the Stations and a description of their
base compensation).
(b) Without limiting the generality of the foregoing, Sellers
shall give Buyer and its counsel, accountants, and other authorized
representatives reasonable access to Sellers' financial records relating to the
operations of the Stations and the Stations' employees, counsel, accountants,
and other representatives for the purpose of preparing and auditing such
financial statements as Buyer determines, in its reasonable judgment, are
required or advisable to comply with federal or state securities laws and the
rules and regulations of securities markets as a result of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby. Sellers agree to provide financial statements concerning the operations
of the Stations, reviewed by Sellers' accountants, containing reasonably
requested customary representations; provided, however, that the parties hereto
agree that Buyer shall have no right under any circumstance to delay the Closing
or terminate this Agreement on account of the information contained in any such
financial statement or the inability of Sellers or their accountants in good
faith to make any representation requested by Buyer. The preparation and
auditing of any financial statements pursuant to this Section 6.8(b) shall be at
Buyer's sole cost and expense.
6.9 Maintenance of Assets. Sellers shall maintain all of the Assets in
their condition on the date of this Agreement (ordinary wear and tear excepted),
and use, operate, and maintain all of the Assets in a reasonable manner. Sellers
shall maintain inventories of spare parts and expendable supplies at levels
consistent with past practices. If any insured or indemnified loss, damage,
impairment, confiscation, or condemnation of or to any of the Assets occurs,
Sellers shall repair, replace, or restore the Assets to their prior condition as
soon thereafter as possible, and Sellers shall use the proceeds of any claim
under any property damage insurance policy or other recovery solely to repair,
replace, or restore any of the Assets that are lost, damaged, impaired, or
destroyed.
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6.10 Insurance. Sellers shall maintain the existing insurance policies
on the Stations and the Assets.
6.11 Consents. Sellers shall use their respective reasonable efforts to
obtain all Consents, without any change in the terms or conditions of any
Assumed Contract or License that could reasonably be expected to be less
advantageous to Buyer than those pertaining under the Assumed Contract or
License as in effect on the date of this Agreement. Sellers shall request
estoppel certificates from the lessors of all leasehold and subleasehold
interests included in the Real Property, consents of such lessors to the
collateral assignment by Buyer to its lenders of such leasehold and subleasehold
interests, and estoppel certificates of contracting parties to all Material
Contracts. Sellers shall promptly advise Buyer of any difficulties experienced
in obtaining any of the Consents and of any conditions proposed, considered, or
requested for any of the Consents.
6.12 Books and Records. Each Seller shall maintain its books and
records relating to each Station, VVI Spokane and VVI Tallahassee in accordance
with past practices.
6.13 Notification. Sellers shall promptly notify Buyer in writing of
any material change in any of the information contained in Sellers'
representations and warranties contained in Section 4 of this Agreement.
6.14 Financial Information. Sellers shall furnish to Buyer within
forty-five (45) days after the end of each month ending between the date of this
Agreement and the Closing Date a statement of income and expense and a balance
sheet for and as of the end of such month for Station KBGE-TV. All financial
information delivered by Sellers to Buyer pursuant to this Section shall be
prepared from the books and records of Sellers in accordance with generally
accepted accounting principles consistently applied, shall accurately reflect
the books, records, and accounts of the Stations, shall be complete and correct
in all material respects, and shall present fairly the financial condition of
the Stations as at their respective dates and the results of operations for the
periods then ended.
6.15 Compliance with Laws. Each Seller shall comply in all material
respects with all laws, rules, and regulations applicable or relating to the
ownership of the Shares and the ownership and operation of the Stations.
SECTION 7 SPECIAL COVENANTS AND AGREEMENTS.
7.1 FCC Consents.
(a) The assignment of the FCC Licenses in connection with the
purchase and sale of the Assets pursuant to this Agreement shall be subject to
the prior consent and approval of the FCC.
(b) Within five (5) business days after the date of this
Agreement, Sellers and/or Buyer, as the case may be, shall (i) prepare and file
with the FCC appropriate applications for all FCC Consents that may be
necessary; (ii) to the extent necessary, use its best efforts to file all
applications for FCC Consent necessary to consummate the Channel 51 Closing; and
(iii)
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unless such amendments have already been filed, file with the FCC appropriate
application amendments to designate VVI Spokane as the applicant for the Spokane
Application and VVI Tallahassee as the applicant for the Tallahassee
Application. The parties shall prosecute the foregoing applications with all
reasonable diligence and otherwise use their reasonable efforts to obtain a
grant of the applications, as expeditiously as practicable. Each party agrees to
comply with any condition imposed on it by the FCC Consent. Without limitation
of the foregoing, Buyer agrees to divest any interest and terminate or modify
any time brokerage or other agreement as may be required by FCC rules,
regulations, and policies (now or as they may hereafter be modified) to permit
Buyer to acquire the Stations.
(c) In accordance with Section 73.3517(a) of the FCC's rules,
Buyer, at its sole expense, shall prepare and, as soon as is reasonably
practicable after the date of this Agreement, shall file with the FCC a
contingent Form 301 construction permit application for Station KBGE-TV (the
"301 Application"). The 301 Application shall be prepared in accordance with FCC
rules, regulations, and policies and sound engineering practices, and Buyer
shall use its best efforts to obtain FCC approval thereof. Buyer shall also make
reasonable efforts to prepare and file promptly any amendments to such 301
Application as may be requested by the FCC or as may be necessary to secure FCC
approval for a site having an Acceptable Power Level.
(d) If Buyer's 301 Application is denied by the FCC, Buyer
shall be under no further obligation to seek the approval of the FCC for a
construction permit application for Station KBGE-TV; provided, however, that if
Buyer or any Transferee shall file any Form 301 application that would improve
the predicted coverage of Station KBGE-TV at an Acceptable Power Level within
twenty (20) years of the date of this Agreement, Buyer or such Transferee shall
pay to Sellers the portion of the Purchase Price payable to Sellers pursuant to
Section 2.4(a)(ii) of this Agreement within fifteen (15) business days of the
date such application is granted (the "Improved Coverage Date"); and provided
further that Buyer and its successors in interest hereby irrevocably and
unconditionally guarantee to Sellers the obligations of any Transferee pursuant
to this Section 7.1(d).
(e) For purposes of this Section 7.1, the requirement of an
Acceptable Power Level shall be deemed to be satisfied by any grant of authority
(i) of a site located within a radius of five (5) miles or less from the
building currently known as Columbia SeaFirst Center, situated at 701 Fifth
Avenue, Seattle, Washington (the "Seafirst Building") having an effective
radiated power level of not less than 500,000 watts or (ii) of a site located
more than five (5) miles from the Seafirst Building having an effective radiated
power level of not less than 1,500,000 watts.
(f) Buyer, at its sole expense, shall prepare and within 180
days after the Closing Date or the grant of the 301 Application, whichever is
later, file with the FCC the 302 Application for Station KBGE-TV.
(g) Time shall be deemed to be of the essence with respect to
each of Buyer's obligations sets forth in this Section 7.1.
7.2 Control of the Stations. Prior to Closing, Buyer shall not,
directly or indirectly, control, supervise, direct, or attempt to control,
supervise, or direct, the operations of any
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Station; such operations, including complete control and supervision of all of
the Stations' programs, employees, and policies, shall be the sole
responsibility of Sellers (or their current licensee, as the case may be) until
the Closing.
7.3 Risk of Loss.
(a) The risk of any loss, damage or impairment, confiscation,
or condemnation of any of the Assets from any cause shall be borne by Sellers at
all times prior to the completion of the Closing, except that Buyer will be
required to purchase the Assets notwithstanding any such loss, damage or
impairment, confiscation, or condemnation if the conditions contained in Section
8.1 to the obligations of Buyer at the Closing are nonetheless satisfied.
(b) In the event of any damage or destruction of the Assets
described above, if the damaged or destroyed Assets have not been restored or
replaced prior to the Closing Date, Sellers shall deliver to Buyer all insurance
proceeds received in connection with such damage or destruction of the Assets to
the extent of the costs and expenses arising in connection with such restoration
and replacement.
7.4 Confidentiality. (a) Except as necessary for the consummation of
the transactions contemplated by this Agreement, including Buyer's obtaining of
financing related hereto, and except as and to the extent required by law,
including disclosure requirements of federal or state securities laws and rules
and regulations of securities markets, each party will keep confidential any
information obtained from any other party in connection with the transactions
contemplated by this Agreement. If this Agreement is terminated, each party will
return to any other party that furnished it with information in connection with
the transactions contemplated by this Agreement all such information.
(b) No party shall publish any press release or make any other
public announcement concerning this Agreement or the transactions contemplated
hereby without the prior written consent of each other party, which shall not be
withheld unreasonably; provided, however, that nothing contained in this
Agreement shall prevent any party, after notification to each other party, from
making any filings with governmental authorities that, in its judgment, may be
required or advisable in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
7.5 Cooperation. Each party hereto shall cooperate fully with each
other party and their respective counsel and accountants in connection with any
actions required to be taken as part of their respective obligations under this
Agreement, and the parties hereto shall execute such other documents as may be
necessary and desirable to the implementation and consummation of this
Agreement, and otherwise use their reasonable efforts to consummate the
transactions contemplated hereby and to fulfill their obligations under this
Agreement. Notwithstanding the foregoing, and except as otherwise expressly
provided in this Agreement, (a) Buyer shall have no obligation to expend funds
to obtain any of the Consents (other than any fee payable to the FCC in
connection with the filing of the applications for FCC Consents, the 301
Application, and the 302 Application, and any fee imposed by the FTC in
connection with filings made pursuant to the HSR Act, in each case to the extent
provided in Section 13.1, and
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any expenses necessary to file and prosecute successfully the 301 Application
and the 302 Application), and (b) Sellers shall have no obligation to expend
funds to obtain any of the Consents (other than any fee payable to the FCC in
connection with the filing of the applications for FCC Consent or for the
amendments to the Spokane Application and the Tallahassee Application set forth
in Section 7.1(b)(iii), and any fee imposed by the FTC in connection with
filings made pursuant to the HSR Act, in each case to the extent provided in
Section 13.1).
7.6 Access to Books and Records. Each Seller shall provide Buyer access
and the right to copy for a period of two (2) years from the Closing Date any
books and records relating to the Shares and the Assets but not included in the
Assets. Buyer shall provide Sellers access and the right to copy for a period of
two (2) years after the Closing Date any books and records relating to the
Assets that are included in the Assets.
7.7 [Intentionally omitted].
7.8 HSR Act Filing. ValueVision and Buyer agree to (a) file, or cause
to be filed, with the U.S. Department of Justice ("DOJ") and Federal Trade
Commission ("FTC") all filings, if any, that are required in connection with the
transactions contemplated hereby under the HSR Act within forty-five (45) days
of the date of this Agreement; (b) submit to the other party, prior to filing,
their respective HSR Act filings to be made hereunder, and to discuss with the
other any comments the reviewing party may have; (c) cooperate with each other
in connection with such HSR Act filings, which cooperation shall include
furnishing the other with any information or documents that may be reasonably
required in connection with such filings; (d) promptly file, after any request
by the FTC or DOJ, any information or documents requested by the FTC or DOJ; and
(e) furnish each other with any correspondence from or to, and notify each other
of any other communications with, the FTC or DOJ that relates to the
transactions contemplated hereunder, and to the extent practicable, to permit
each other to participate in any conferences with the FTC or DOJ.
7.9 [Intentionally omitted].
7.10 [Intentionally omitted].
7.11 [Intentionally omitted].
7.12 Sales Tax Filings. Sellers shall continue to file state sales tax
returns with respect to the Stations and, to the extent necessary, the Shares in
accordance with all applicable legal requirements and shall concurrently deliver
copies of all such returns to Buyer.
7.13 Accounts Receivable.
(a) Collection. At the Closing, Sellers shall designate Buyer as
their agent to collect any accounts receivable of Sellers in existence on the
Closing Date and arising from the sale of advertising time by the Stations prior
to the Closing Date (the "Stations' Receivables"). Buyer shall use reasonable
efforts to collect the Stations' Receivables during the "Collection Period,"
which shall be the period beginning on the Closing Date and ending on the last
day of the fourth calendar month beginning after the Closing Date. Buyer shall
not be obligated to use any extraordinary efforts to collect any of the
Stations' Receivables or to refer any of the Stations' Receivables to a
collection agency or attorney for collection, and Buyer shall not make
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any such referral or compromise, nor settle or adjust the amount of any of the
Stations' Receivables, except with the approval of ValueVision. Sellers and
their respective representatives and agents may undertake to collect any of the
Stations' Receivables during the Collection Period so long as Sellers first
notify and consult with Buyer concerning Sellers' proposed collection efforts.
(b) Payments to ValueVision. On or before the twentieth day
after the end of each full calendar month during the Collection Period, Buyer
shall furnish to ValueVision (i) a list of the amounts collected before the end
of such month with respect to the Stations' Receivables, and (ii) the amount
collected during such month with respect to the Stations' Receivables. On or
before the twentieth day after the end of the Collection Period, Buyer shall
furnish ValueVision with a list of all of the Stations' Receivables that remain
uncollected at the end of the Collection Period.
(c) Further Obligations. After the expiration of the
Collection Period, Buyer shall have no further obligation hereunder other than
to make the payment under Section 7.13(b) and to remit to ValueVision any
payments with respect to any of the Stations' Receivables that Buyer
subsequently receives, and any Seller itself may act to collect any of the
Stations' Receivables that remain uncollected without restriction.
7.14 No Inconsistent Action. Between the date of this Agreement and the
date on which Buyer has fulfilled all of its obligations under Sections 2.4 and
7.1 of this Agreement, no party shall take any action that is inconsistent with
its obligations under this Agreement in any material respect or that could
reasonably be expected to hinder or delay the consummation of any of the
transactions contemplated by this Agreement. Between the date of this Agreement
and the Closing Date, Buyer shall not take any action that would disqualify
Buyer from being the licensee of the Stations under the Communications Act of
1934, as amended, and the rules and regulations of the FCC, each as in effect on
the date of this Agreement, and Buyer shall further comply with its obligations
set forth in Section 7.1(b) of this Agreement with respect to any future
modifications in FCC rules, regulations, and policies.
7.15 VVI Spokane and VVI Tallahassee. Between the date of this
Agreement and the completion of the Closing, ValueVision shall not (a) split,
combine, divide, distribute, or reclassify any shares of the capital stock of
VVI Spokane or VVI Tallahassee, declare, pay, or set aside for payment any
dividend or other distribution in respect of the capital stock of VVI Spokane or
VVI Tallahassee, or directly or indirectly, redeem, purchase, or otherwise
acquire any shares of the capital stock of VVI Spokane or VVI Tallahassee; (b)
issue, sell, pledge, dispose of, encumber, or deliver (whether through the
issuance or granting of any options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any stock of any class or any securities
convertible into or exercisable or exchangeable for shares of stock of any class
of VVI Spokane or VVI Tallahassee (other than the issuance of certificates in
replacement of lost certificates); or (c) change or amend the charter documents
or bylaws of VVI Spokane or VVI Tallahassee.
7.16 Channel 51 Agreement. ValueVision will not waive any material
right relating to the Assets related to Channel 51 or the Channel 51 Agreement
without the prior written consent of Buyer. ValueVision will not terminate the
Channel 51 Agreement. ValueVision will not
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amend or modify the Channel 51 Agreement in any material respect without the
prior written consent of Buyer. ValueVision shall comply with the terms of the
Channel 51 Agreement and shall use commercially reasonable efforts to enforce
its rights under the Channel 51 Agreement. ValueVision shall (a) as soon as
practicable after the time of receipt or delivery by ValueVision, deliver to
Buyer copies of all notices and other documents received or delivered by
ValueVision under the Channel 51 Agreement, (b) notify Buyer promptly upon
learning of any material breach or default under the Channel 51 Agreement, and
(c) notify Buyer promptly of any amendment or modification to the Channel 51
Agreement or any waiver by ValueVision of any of its rights or of any of the
obligations of Television Interests Company, Inc. under the Channel 51
Agreement.
7.17 Control of Spokane Application and Tallahassee Application
Proceedings. No Seller shall transfer any assets to VVI Spokane or VVI
Tallahassee, or cause VVI Spokane or VVI Tallahassee, or cause VVI Spokane or
VVI Tallahassee to assume any liabilities, after the date of this Agreement
unless such transfer or assumption is necessary or desirable in the reasonable
judgment of ValueVision in connection with the Spokane Application or the
Tallahassee Application. ValueVision shall not permit VVI Spokane or VVI
Tallahassee to dismiss either such application without the consent of Buyer,
which consent shall not be unreasonably withheld. Notwithstanding the foregoing,
the parties hereto agree that (a) if Buyer shall acquire the VVI Spokane Shares
or the Spokane Option at the Closing, Sellers shall not enter into any
settlement agreement with any competing applicants for the facilities requested
in the Spokane Application without the prior written consent of Buyer, which
shall not be unreasonably withheld, conditioned or delayed; and (b) if Buyer
shall acquire the VVI Tallahassee Shares or the Tallahassee Option at the
Closing, Sellers shall not enter into any settlement agreement with any
competing applicants for the facilities requested in the Tallahassee Application
without the prior written consent of Buyer, which shall not be unreasonably
withheld, conditioned or delayed.
SECTION 8 CONDITIONS TO OBLIGATIONS OF BUYER AND SELLERS AT
CLOSING.
8.1 Conditions to Obligations of Buyer. All obligations of Buyer at the
Closing are subject to the fulfillment prior to or at the Closing Date of each
of the following conditions, any of which (except for the grant of FCC Consents
and with respect to the HSR Act) may be waived by Buyer in writing:
(a) FCC Consents. Except as otherwise provided by Section 2.4, all
of the FCC Consents shall have been granted.
(b) Final Orders. The FCC Consents, to the extent such are
granted, shall have become Final Orders.
(c) HSR Act. The waiting period under the HSR Act shall have
expired or been terminated without action by the DOJ or the FTC to prevent the
Closing.
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(d) Deliveries. Sellers shall have made or stand willing to make
all the deliveries to Buyer set forth in Sections 9.2(b), (c), (e) and (f).
(e) Judgments. There shall not be in effect any judgment, decree,
or order that will prevent or make unlawful the Closing.
8.2 Conditions to Obligations of Sellers. All obligations of Sellers at
the Closing are subject to the fulfillment prior to or at the Closing Date of
each of the following conditions, any of which (except for the requirement of
FCC Consents and with respect to the HSR Act) may be waived by ValueVision in
writing:
(a) Representations and Warranties. All representations and
warranties of Buyer contained in this Agreement shall be true and complete in
all material respects at and as of the Closing Date as though made at and as of
that time, and Sellers shall have received a certificate, executed on behalf of
Buyer by an authorized officer, to that effect.
(b) Covenants and Conditions. Buyer shall have performed and
complied in all material respects with all covenants, agreements, and conditions
required by this Agreement to be performed or complied with by it prior to or on
the Closing Date, and Sellers shall have received a certificate, executed on
behalf of Buyer by an authorized officer, to that effect.
(c) Deliveries. Buyer shall have made or stand willing to make all
the deliveries set forth in Section 9.3.
(d) FCC Consents. Except as otherwise provided by Section 2.4, all
of the FCC Consents shall have been granted.
(e) HSR Act. The waiting period under the HSR Act shall have
expired or been terminated without action by the DOJ or the FTC to prevent the
Closing.
(f) Judgments. There shall not be in effect any judgment, decree,
or order that would prevent or make unlawful the Closing.
SECTION 9 CLOSING AND CLOSING DELIVERIES.
9.1 Closing.
(a) Closing Date.
(1) Except as provided in the following sentence or
as otherwise agreed to by Buyer and ValueVision, but subject to Section
9.1(a)(2), the Closing shall take place at 10:00 a.m. on a date, to be set by
Buyer on at least five (5) days' written notice to ValueVision, which shall be
not later than ten (10) business days following the date upon which the last FCC
Consent has become a Final Order. Except as otherwise agreed to by Buyer and
ValueVision, but subject to Section 9.1(a)(2), if Buyer fails to specify the
date for Closing pursuant to the preceding sentence prior to the fifth business
day after the date upon which the last FCC Consent has become a Final Order, the
Closing shall take place on the tenth business day after the date upon which the
last FCC Consent has become a Final Order.
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(2) Notwithstanding Section 9.1(a)(1), if on the date
that, but for this Section 9.1(a)(2), would be the Closing Date pursuant to
Section 9.1(a)(1), the certificate provided to Buyer under Section 9.2(f)
discloses, or the Buyer has notified Sellers in writing that it has determined
that, any representation or warranty of Sellers contained in this Agreement is
not true and complete In A Material Way, or that Sellers have failed to comply
with their obligations and covenants to be performed under this Agreement In A
Material Way, then (A) Sellers shall take any actions necessary or appropriate
to make such representation or warranty true and complete or to comply with such
obligations and covenants, and (B) the Closing shall be postponed for such
period as is required to cure the conditions warranting such postponement.
(b) Closing Place. The Closing shall be held at the offices of Dow,
Lohnes & Albertson, PLLC in Washington, D.C., or any other place that is agreed
upon by Buyer and ValueVision.
9.2 Deliveries by Sellers. Prior to or on the Closing Date, Sellers
shall deliver to Buyer the following, in form and substance reasonably
satisfactory to Buyer and its counsel:
(a) [Intentionally omitted]
(b) Conveyancing Documents. Duly executed bills of sale, motor
vehicle titles, stock certificates, stock powers, assignments, and other
transfer documents that are sufficient to vest good title to all of the Assets,
the Shares, and the Options in the name of Buyer, free and clear of all claims,
liabilities, security interests, mortgages, liens, pledges, conditions, charges,
covenants, easements, restrictions, encroachments, leases, or encumbrances of
any nature.
(c) Working Capital Payment. Any payment required to be made by
Sellers pursuant to Section 2.5(d)(1).
(d) Estoppel Certificates and Lessor's Consents. Any estoppel
certificates and consents of lessors that Sellers shall have obtained pursuant
to Section 6.11.
(e) Consents. A manually executed copy of any instrument evidencing
receipt of any Consent.
(f) Certificate. A certificate, dated as of the Closing Date,
executed on behalf of each Seller by an authorized officer, certifying that,
except as specifically stated in such certificate, (1) the representations and
warranties of Sellers contained in this Agreement are true and complete in all
material respects as of the Closing Date as though made on and as of that date,
and (2) each Seller has in all material respects performed and complied with all
of its obligations, covenants, and agreements set forth in this Agreement to be
performed and complied with on or prior to the Closing Date; provided, however,
that if such certificate shall disclose, or Buyer shall notify Sellers in
writing prior to the Closing Date that Buyer has determined that, any
representation or warranty of Sellers contained in this Agreement is not true
and complete as of the Closing Date In A Material Way, or that Sellers have
failed to comply with their obligations and covenants to be performed under this
Agreement as of the Closing Date In A Material Way, Buyer may elect to delay the
Closing until such representation or warranty is made materially true and
complete or such obligation or covenant is complied with in all
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material respects, as the case may be, and Buyer's sole remedy hereunder shall
be the remedy of specific performance to compel Sellers to make such
representation or warranty materially true and complete or such obligation or
covenant to be complied with in all material respects. For purposes of this
Agreement, "In A Material Way" shall mean that an expenditure in excess of
$100,000.00 is reasonably estimated to be required to make such representation
or warranty materially true and complete or to materially comply with such
obligation or covenant.
(g) Licenses, Contracts, Business Records, Etc. Copies of all
Licenses, Assumed Contracts, blueprints, schematics, working drawings, plans,
projections, engineering records, and all files and records used by any Seller
in connection with its operation of the Stations and included in the Assets.
9.3 Deliveries by Buyer. Prior to or on the Closing Date, Buyer shall
deliver to Sellers the following, in form and substance reasonably satisfactory
to Sellers and their counsel:
(a) Purchase Price. The Purchase Price as provided in Section 2.4.
(b) Working Capital Payment. Any payment required to be made by
Buyer pursuant to Section 2.5(d)(2).
(c) Assumption Agreements. Appropriate assumption agreements
pursuant to which Buyer shall assume and undertake to perform each Seller's
obligations under the Licenses and Assumed Contracts to the extent provided in
Section 2.5.
(d) Certificate. A certificate, dated as of the Closing Date,
executed on behalf of Buyer by an authorized officer, certifying that, except as
specifically stated in such certificate, (1) the representations and warranties
of Buyer contained in this Agreement are true and complete in all material
respects as of the Closing Date as though made on and as of that date, and (2)
Buyer has in all material respects performed and complied with all of its
obligations, covenants, and agreements set forth in this Agreement to be
performed and complied with on or prior to the Closing Date.
SECTION 10 TERMINATION.
10.1 Termination by Sellers. This Agreement may be terminated by
Sellers and the purchase and sale of the Assets, the Shares, and the Options
abandoned, if Sellers are not then in material default under this Agreement,
upon written notice to Buyer, upon the occurrence of any of the following:
(a) Conditions. If on the date that would otherwise be the Closing
Date any of the conditions precedent to the obligations of Sellers set forth in
this Agreement have not been satisfied or waived in writing by Sellers.
(b) Judgments. If there shall be in effect on the date that would
otherwise be the Closing Date any judgment, decree, or order that would prevent
or make unlawful the Closing.
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(c) Upset Date. If the Closing shall not have occurred on or prior
to November 14, 1998; provided, however, that Sellers shall not be entitled to
terminate this Agreement pursuant to this Section 10.1(c) if (a) the Closing
shall not have occurred on or prior to November 14, 1998, as a result of the
intentional breach of this Agreement by Sellers or (b) the Closing has been
postponed beyond November 14, 1998 pursuant to Section 9.1(a)(2), but only for
such period as is required to cure the condition warranting such postponement.
(d) Breach. If Buyer is in breach in any material respect of any of
its representations, warranties, or covenants under this Agreement.
(e) Buyer's Wrongful Failure To Close. If Buyer wrongfully fails to
close the purchase and sale of the Assets, the Shares, and the Options on the
Closing Date for any reason, including without limitation, Buyer's failure to
use good faith efforts to satisfy the conditions to Buyer's obligations set
forth in Section 8.1 or to make the deliveries required by Section 9.3.
10.2 Termination by Buyer. This Agreement may be terminated by Buyer
and the purchase and sale of the Shares, the Options and the Assets abandoned,
if Buyer is not then in material default under this Agreement, upon written
notice to Sellers, upon the occurrence of any of the following:
(a) Conditions. If on the date that would otherwise be the Closing
Date, any of the conditions precedent to the obligations of Buyer set forth in
this Agreement have not been satisfied or waived in writing by Buyer.
(b) Judgments. If there shall be in effect on the date that would
otherwise be the Closing Date, any judgment, decree, or order that would prevent
or make unlawful the Closing.
(c) Intentionally omitted.
(d) Material Contracts. If Sellers shall not have obtained and
delivered to Buyer, within ninety (90) days after the date of this Agreement,
with respect to the Material Contracts identified as items 3-7 on Schedule 4.7
hereto, any Consent required for the assignment to Buyer of such Material
Contract, without any change in the terms or conditions of such Material
Contract that could reasonably be expected to be less advantageous to Buyer than
those pertaining under the Material Contract as in effect on the date of this
Agreement; provided, however, that Buyer may only terminate this Agreement
pursuant to this Section 10.2(d) by delivering written notice to ValueVision
within seven (7) days after the end of such ninety-day period if such Consent
has not been delivered to Buyer.
(e) Upset Date. If Closing shall not have occurred on or prior to
November 14, 1998; provided, however, that Buyer shall not be entitled to
terminate this Agreement pursuant to this Section 10.2(e) if (a) the Closing
shall not have occurred on or prior to November 14, 1998, as a result of the
intentional breach of this Agreement by Buyer or (b) the Closing has been
postponed beyond November 14, 1998 pursuant to Section 9.1(a)(2), but only for
such period as is required to cure the condition warranting such postponement.
10.3 Escrow Deposit; Rights on Termination. Simultaneously with the
execution and delivery of this Agreement, Buyer has deposited with the Escrow
Agent the amount of Three
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Million Dollars ($3,000,000.00) in accordance with the Escrow Agreement. All
funds and documents deposited with the Escrow Agent shall be held and disbursed
in accordance with the terms of the Escrow Agreement and the following
provisions:
(a) At the Closing, Buyer and ValueVision shall jointly instruct
the Escrow Agent to disburse all amounts held by the Escrow Agent pursuant to
the Escrow Agreement, including any interest or other proceeds from the
investment of funds held by the Escrow Agent, to or at the direction of
ValueVision.
(b) If this Agreement is terminated pursuant to Section 10.1(a),
(b), (c) or (d) by Sellers or pursuant to Section 10.2 by Buyer, Buyer and
ValueVision shall jointly instruct the Escrow Agent to disburse all amounts held
by the Escrow Agent pursuant to the Escrow Agreement, including any interest or
other proceeds from the investment of funds held by the Escrow Agent, to or at
the direction of Buyer.
(c) If this Agreement is terminated by Sellers pursuant to Section
10.1(e), Buyer and ValueVision shall jointly instruct the Escrow Agent to
promptly pay or cause to be paid to Sellers the sum of Three Million Dollars
($3,000,000.00), which amount shall be liquidated damages and shall constitute
full payment and the exclusive remedy for any damages suffered by Sellers by
reason of such event. Any remaining amounts held by the Escrow Agent pursuant to
the Escrow Agreement, including any interest or other proceeds from the
investment or funds held by the Escrow Agent shall be disbursed to or at the
direction of Buyer. The parties hereto agree in advance that actual damages
would be difficult to ascertain and that the sum of Three Million Dollars
($3,000,000.00) is a fair and equitable amount to reimburse Sellers for damages
sustained due to such event. Nothing in this Section 10.3 shall operate to limit
Sellers' rights at law or in equity with respect to any breach of this Agreement
by Buyer other than Buyer's obligation to close on the Closing Date.
(d) Termination of this Agreement by Buyer pursuant to Section 10.2
shall be without liability or obligation on the part of any Seller.
10.4 Specific Performance. The parties recognize that if any Sellers
breach this Agreement and refuse to perform under the provisions of this
Agreement, monetary damages alone would not be adequate to compensate Buyer for
its injury. Buyer shall therefore be entitled to obtain specific performance of
the terms of this Agreement, which shall be Buyer's exclusive remedy hereunder.
If any action is brought by Buyer to enforce this Agreement, each Seller shall
waive the defense that there is an adequate remedy at law.
10.5 No Special Damages. No party to this Agreement shall be entitled
to any special, incidental, or consequential damages as a result of the breach
of this Agreement by any other party to this Agreement.
- 32 -
<PAGE> 39
SECTION 11 INDEMNIFICATION.
11.1 Indemnification by Sellers. After the Closing, and regardless of
any investigation made at any time by or on behalf of Buyer or any information
Buyer may have, each Seller hereby agrees, jointly and severally, to indemnify
and hold Buyer and its officers, directors, employees, and representatives
harmless against and with respect to, and shall reimburse Buyer and its
officers, directors, employees, and representatives for:
(a) Any and all losses, liabilities, or damages resulting from the
operation or ownership of the Stations prior to the Closing, including any
liabilities arising under the Licenses or the Assumed Contracts that relate to
events occurring prior the Closing Date, or resulting from any other obligations
of any Seller that are not assumed by Buyer pursuant to this Agreement,
including any liabilities arising at any time under any Contract that is not
included in the Assumed Contracts;
(b) Any loss, liability, obligation, or cost resulting from any
agreement with any finder, broker, advisor, or similar Person retained by or on
behalf of any Seller relating to the transactions contemplated by this
Agreement;
(c) Any and all out-of-pocket costs and expenses, including
reasonable legal fees and expenses, incident to any action, suit, proceeding,
claim, demand, assessment, or judgment incident to the foregoing or incurred in
investigating or attempting to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity.
11.2 Indemnification by Buyer. After the Closing, and regardless of any
investigation made at any time by or on behalf of any Seller or any information
any Seller may have, Buyer hereby agrees, to indemnify and hold each Seller and
its officers, directors, employees, and representatives harmless against and
with respect to, and shall reimburse each Seller and its officers, directors,
employees, and representatives for:
(a) Any and all obligations of such Seller assumed by Buyer
pursuant to this Agreement;
(b) Any and all losses, liabilities, or damages resulting from the
operation or ownership of the Stations after the Closing;
(c) Any loss, liability, obligation, or cost resulting from any
agreement with any finder, broker, advisor, or similar Person retained by or on
behalf of Buyer relating to the transactions contemplated by this Agreement; and
(d) Any and all out-of-pocket costs and expenses, including
reasonable legal fees and expenses, incident to any action, suit, proceeding,
claim, demand, assessment, or judgment incident to the foregoing or incurred in
investigating or attempting to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity.
11.3 Procedure for Indemnification. The procedure for indemnification
shall be as follows:
- 33 -
<PAGE> 40
(a) The party claiming indemnification (the "Claimant") shall
promptly give notice to the party from which indemnification is claimed (the
"Indemnifying Party") of any claim, whether between the parties or brought by a
third party, specifying in reasonable detail the factual basis for the claim.
(b) With respect to claims solely between the parties, following
receipt of notice from the Claimant of a claim, the Indemnifying Party shall
have thirty (30) days to make such investigation of the claim as the
indemnifying Party deems necessary or desirable. For the purposes of such
investigation, the Claimant agrees to make available to the Indemnifying Party
and its authorized representatives the information relied upon by the Claimant
to substantiate the claim. If the Claimant and the Indemnifying Party agree at
or prior to the expiration of the thirty-day period (or any mutually agreed upon
extension thereof) to the validity and amount of such claim, the Indemnifying
Party shall immediately pay to the Claimant the full amount of the claim. If the
Claimant and the Indemnifying Party do not agree within the thirty-day period
(or any mutually agreed upon extension thereof), the Claimant may seek
appropriate remedy at law or equity or under the arbitration provisions of this
Agreement, as applicable.
(c) With respect to any claim by a third party as to which the
Claimant is entitled to indemnification under this Agreement, if the
Indemnifying Party notifies the Claimant in writing within ten (10) days of its
receipt of notice from the Claimant of the third-party claim that the
Indemnifying Party acknowledges its potential liability to the Claimant under
this Agreement, the Indemnifying Party shall have the right at its own expense,
to participate in or assume control of the defense of such claim, and the
Claimant shall cooperate fully with the Indemnifying Party, subject to
reimbursement for actual out-of-pocket expenses incurred by the Claimant as the
result of a request by the Indemnifying Party. If the Indemnifying Party elects
to assume control of the defense of any third-party claim, the Claimant shall
have the right to participate in the defense of such claim at its own expense.
If the Indemnifying Party fails timely to notify the Claimant in writing that
the Indemnifying Party acknowledges its potential liability to the Claimant
under this Agreement or if the Indemnifying Party does not elect to assume
control or otherwise participate in the defense of any third-party claim, the
Indemnifying Party shall be bound by the results obtained by the Claimant with
respect to such claim.
(d) If a claim, whether between the parties or by a third party,
requires immediate action, the parties will make every effort to reach a
decision with respect thereto as expeditiously as possible.
SECTION 12 [Intentionally omitted]
SECTION 13 MISCELLANEOUS.
13.1 Fees and Expenses. ValueVision and Buyer shall each pay one-half
of any filing fees, transfer taxes, recordation taxes, sales taxes, document
stamps, or other charges levied by any governmental entity in connection with
the transactions contemplated by this Agreement, including any fees payable to
the FCC in connection with the filing of the applications for FCC
- 34 -
<PAGE> 41
Consents and the fee imposed by the FTC in connection with filings made pursuant
to the HSR Act. Except as otherwise provided in this Agreement, each party shall
pay its own expenses incurred in connection with the authorization, preparation,
execution, and performance of this Agreement, including all fees and expenses of
counsel, accountants, agents and representatives, and each party shall be
responsible for all fees or commissions payable to any finder, broker, advisor,
or similar Person retained by or on behalf of such party.
13.2 Notices. All notices, demands, and requests required or permitted
to be given under the provisions of this Agreement shall be (a) in writing, (b)
delivered by telecopier, by personal delivery, by commercial delivery service,
or by registered or certified mail, return receipt requested, (c) deemed to have
been given on the date on which the telecopy is confirmed, the date of personal
delivery, or the date set forth in the records of the delivery service or on the
return receipt, as applicable, and (d) addressed as follows:
If to any Seller: ValueVision International, Inc.
6740 Shady Oak Road
Eden Prairie, Minnesota 55344
Attention: Robert L. Johander
Telecopier: 1-612-947-0188
With copies to: Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037-1420
Attention: M. Carolyn Cox
Telecopier: 1-202-663-6363
If to Buyer: Paxson Communications Corporation
601 Clearwater Park Road
West Palm Beach, Florida 33401
Attention: Lowell W. Paxson, Chairman
Telecopier: 1-561-655-9424
With a copy to: Dow, Lohnes & Albertson
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, D.C. 20036-1802
Attention: John R. Feore, Jr.
Telecopier: 1-202-776-2222
or to any other or additional Persons and addresses as the parties may from time
to time designate in a writing delivered in accordance with this Section 13.2.
13.3 Arbitration. Except as otherwise provided to the contrary below,
any dispute arising out of or related to this Agreement that Sellers and Buyer
are unable to resolve by themselves shall be settled by arbitration in
Washington, D.C., by a panel of three arbitrators.
- 35 -
<PAGE> 42
Sellers and Buyer shall each designate one disinterested arbitrator, and the two
arbitrators so designated shall select the third arbitrator. The persons
selected as arbitrators need not be professional arbitrators, and persons such
as lawyers, accountants, brokers, and bankers shall be acceptable. Before
undertaking to resolve the dispute, each arbitrator shall be duly sworn
faithfully and fairly to hear and examine the matters in controversy and to make
a just award according to the best of his or her understanding. The arbitration
hearing shall be conducted in accordance with the commercial arbitration rules
for large cases of the American Arbitration Association. The written decision of
a majority of the arbitrators shall be final and binding on all Sellers and
Buyer. The costs and expenses of the arbitration proceeding shall be assessed
between Sellers and Buyer in a manner to be decided by a majority of the
arbitrators, and the assessment shall be set forth in the decision and award of
the arbitrators. Judgment on the award, if it is not paid within thirty (30)
days, may be entered in any court having jurisdiction over the matter. No action
at law or suit in equity based upon any claim arising out of or related to this
Agreement shall be instituted in any court by any Seller or Buyer against any
other party except (a) an action to compel arbitration pursuant to this Section
13.3, (b) an action to enforce the award of the arbitration panel rendered in
accordance with this Section, or (c) a suit for specific performance pursuant to
Section 10.5.
13.4 Benefit and Binding Effect. (a) No party may assign any of its
rights, interests or obligations under this Agreement without the prior written
consent of the other parties hereto, except that (i) without the consent of any
Seller, Buyer may collaterally assign its rights, interests and obligations
under this Agreement to its lenders, (ii) without the consent of any Seller,
Buyer may assign its rights, interests and obligations under this Agreement to a
wholly owned subsidiary or subsidiaries of Buyer, and (iii) without the consent
of Buyer, any Seller may assign its rights, interests and obligations under this
Agreement to ValueVision in connection with the assignment of all its assets and
liabilities to ValueVision. If any Seller assigns all its assets to the other or
to ValueVision as contemplated by the preceding sentence and, in connection
therewith, ValueVision assumes all obligations and liabilities of such Seller
under this Agreement, Buyer and Sellers agree to amend this Agreement so as to
eliminate such Seller as a party hereto and to reflect the assumption by
ValueVision of all obligations and liabilities of Seller under this Agreement.
This Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns. If Buyer assigns its rights,
interests and obligations under this Agreement to a wholly owned subsidiary or
subsidiaries, Buyer shall contemporaneously execute in writing a guarantee of
such party's or parties' obligations hereunder.
(b) Upon notice by either Seller or Buyer that an assignment
permitted by Section 13.4(a) has occurred, the other party shall enter into an
Amended and Restated Asset and Stock Purchase and Option Grant Agreement to
reflect the new parties hereto as a result of such assignment; provided that the
other party shall not condition its execution of such Amended and Restated Asset
and Stock Purchase and Option Grant Agreement upon the modification or inclusion
of any provision therein. The other party shall execute any such Amended and
Restated Asset and Stock Purchase and Option Grant Agreement within two (2)
business days of
- 36 -
<PAGE> 43
presentation of same by Sellers or Buyer, as the case may be, and any failure or
refusal to do so shall be a material breach of this Agreement.
13.5 Further Assurances. The parties shall take any actions and execute
any other documents that may be necessary or desirable to the implementation and
consummation of this Agreement, including, in the case of Sellers, any
additional deeds, bills of sale, stock powers, or other transfer documents that,
in the reasonable opinion of Buyer, may be necessary to ensure, complete, and
evidence the full and effective transfer of the Assets, the Shares, and the
Options to Buyer pursuant to this Agreement.
13.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED, AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO
THE CHOICE OF LAW PROVISIONS THEREOF).
13.7 Headings. The headings in this Agreement are included for ease of
reference only and shall not control or affect the meaning or construction of
the provisions of this Agreement.
13.8 Gender and Number. Words used in this Agreement, regardless of the
gender and number specifically used, shall be deemed and construed to include
any other gender, masculine, feminine, or neuter, and any other number, singular
or plural, as the context requires.
13.9 Entire Agreement. This Agreement, the Escrow Agreement, the
schedules, hereto, and all documents, certificates, and other documents to be
delivered by the parties pursuant hereto, collectively represent the entire
understanding and agreement between Buyer and Sellers with respect to the
subject matter of this Agreement. This Agreement supersedes all prior
negotiations among Buyer and Sellers and cannot be amended, supplemented, or
changed except by an agreement in writing that makes specific reference to this
Agreement and that is signed by the party against which enforcement of any such
amendment, supplement, or modification is sought.
13.10 Waiver of Compliance: Consents. Except as otherwise provided in
this Agreement, any failure of any of the parties to comply with any obligation,
representation, warranty, covenant, agreement, or condition in this Agreement
may be waived by the party entitled to the benefits thereof only by a written
instrument signed by the party granting such waiver, but such waiver or failure
to insist upon strict compliance with such obligation, representation, warranty,
covenant, agreement, or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. Whenever this Agreement
requires or permits consent by or on behalf of any party hereto, such consent
shall be given in writing in a manner consistent with the requirements for a
waiver of compliance as set forth in this Section 12.10.
13.11 Counterparts. This Agreement may be signed in counterparts with
the same effect as if the signature on each counterpart were upon the same
instrument.
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<PAGE> 44
13.12 Survival of Representations and Warranties. The representations
and warranties of the parties hereto shall be deemed to be continuing
representations and warranties and shall survive the Closing and shall expire on
the first anniversary of the Closing Date.
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<PAGE> 45
IN WITNESS WHEREOF, this Agreement has been executed by Sellers and
Buyer as of the date first written above.
VALUEVISION INTERNATIONAL, INC.
By:/s/ Robert L. Johander
----------------------------
Name: Robert L. Johander
--------------------------
Title: Chief Executive Officer
-------------------------
VVI SEATTLE, INC.
By:/s/ Robert L. Johander
----------------------------
Name: Robert L. Johander
--------------------------
Title: Chief Executive Officer
-------------------------
VVILPTV, INC.
By:/s/ Robert L. Johander
----------------------------
Name: Robert L. Johander
--------------------------
Title: Chief Executive Officer
-------------------------
VVI SPOKANE, INC.
By:/s/ Robert L. Johander
----------------------------
Name: Robert L. Johander
--------------------------
Title: Chief Executive Officer
-------------------------
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<PAGE> 46
VVI TALLAHASSEE, INC.
By:/s/ Robert L. Johander
----------------------------
Name: Robert L. Johander
--------------------------
Title: Chief Executive Officer
-------------------------
PAXSON COMMUNICATIONS CORPORATION
By: /s/ Lowell W. Paxson
----------------------------
Name: Lowell W. Paxson
--------------------------
Title: Chairman
-------------------------
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<PAGE> 1
EXHIBIT 10.53(a)
FIRST AMENDMENT
This FIRST AMENDMENT TO ASSET AND STOCK PURCHASE AND OPTION GRANT
AGREEMENT ("First Amendment") is made and entered into as of February 27, 1998,
by and among ValueVision International, Inc., a Minnesota corporation
("ValueVision"); VVI Seattle, Inc., a Minnesota corporation ("VVI Seattle");
VVILPTV, Inc., a Minnesota corporation ("VVILP" and together with ValueVision
and VVI Seattle, the "Sellers" and each individually a "Seller"); VVI Spokane,
Inc., a Minnesota corporation ("VVI Spokane"); VVI Tallahassee, Inc., a
Minnesota corporation ("VVI Tallahassee"), and Paxson Communications
Corporation, a Delaware corporation ("Buyer").
PRELIMINARY STATEMENT
WHEREAS, the parties hereto have entered into that certain Asset and Stock
Purchase and Option Grant Agreement (the "Purchase Agreement"), dated as of
November 14, 1997, pursuant to which and subject to the terms and conditions
thereof the Sellers desire to sell certain assets, shares, and an option to
Buyer, and Buyer desires to purchase such assets, shares and an option from
Sellers, for the consideration and on the terms and conditions therein provided;
WHEREAS, the parties now desire to make certain amendments and
modifications to the Purchase Agreement; and
WHEREAS, capitalized terms used herein and not otherwise defined shall
have the meaning set forth in the Purchase Agreement.
AGREEMENT
In consideration of the above recitals and of the mutual agreements and
covenants contained in this Agreement, the parties hereto, intending to be
bound legally, agree that the Purchase Agreement shall be amended as follows:
1. Spokane Option and Spokane Option Shares. The parties hereto hereby
agree that ValueVision shall not sell to Buyer at Closing the VVI Spokane
Shares and the Spokane Option.
2. Purchase Price. The first sentence of Section 2.4(a) of the Purchase
Agreement shall be deleted in its entirety and replaced with the following:
"Subject to Sections 2.4(b), (c), (e) and (g) below, the aggregate
purchase price for the Assets, the VVI Tallahassee Shares, and the
Tallahassee Option (the "Purchase Price") shall be Thirty-Four Million
Four Hundred Eight-Four Thousand Dollars ($34,484,000), payable as
follows: (i) Twenty-Four Million Four Hundred Eight-Four Thousand
Dollars ($24,484,000) in cash by wire transfer of immediately available
funds at Closing, plus (ii) Ten Million Dollars ($10,000,000) in cash
by wire transfer within thirty (30) days of the earliest of (A) March 31,
1998, if Buyer shall not have filed the
<PAGE> 2
301 Application on or before March 31, 1998, pursuant to Section 7.1(c);
(B) the date on which Buyer files or is required to File Form 302
(License Application) for Station KBGE-TV (the "302 Application"), as
provided in Section 7.1(f) below; or (C) the Improved Coverage Date (as
defined in Section 7.1(d))."
3. To reflect the amendment in Section 2 hereof, Schedule 2.4 to the
Purchase Agreement is hereby deleted and replaced with the Schedule 2.4
attached hereto.
4. Sections 2.4(d) and 2.4(f) of the Purchase Agreement is hereby
deleted in their entirety.
5. Section 3 of the Purchase Agreement is hereby deleted in its entirety
and replaced with the following:
3.1 Grant. ValueVision shall grant to Buyer at Closing the
Tallahassee Option to purchase the Tallahassee Option Shares.
3.2 Tallahassee Option Exercise. Buyer may exercise the Tallahassee
Option to purchase the Tallahassee Option Shares only by giving written
notice of ValueVision of its election to exercise the Tallahassee Option
(the "Notice of Election") no earlier than thirty (30) days after a
construction permit has been granted by the FCC (the "Construction
Permit") in connection with the Tallahassee Application (the "Tallahassee
Option Exercise Date") and no later than ninety (90) days after the
Tallahassee Option Exercise Date, as the same may be extended as set forth
below (the "Tallahassee Option Expiration Date") (the period during which
the Tallahassee Option is exercisable by Buyer shall be referred to herein
as the "Option Exercise Period"). Such Notice of Election shall be
accompanied by payment of One Hundred Thousand Dollars ($100,000) to
ValueVision in cash, by wire transfer of immediately available funds or by
certified or cashier's check. To the extent that Buyer is not permitted to
actually exercise the Tallahassee Option on the first day of the Option
Exercise Period pursuant to applicable FCC rules and regulations, the
Option Exercise Period shall begin on the first day on which Buyer is
permitted under applicable FCC rules and regulations to actually exercise
the Tallahassee Option and shall expire 90 days thereafter; provided,
however, that the $100,000 payment referred to above shall nevertheless be
paid no later than 120 days after the grant of the Construction Permit if
the Option Exercise Period is extended as provided above; and provided
further that in no event shall the Option Exercise Period be extended
beyond the original expiration date of the Construction Permit. If Buyer
shall not have timely exercised the Tallahassee Option on or before the
Tallahassee Option Expiration Date as such date may have been extended as
provided above or shall not have timely made the $100,000 payment as
provided above, the Tallahassee Option shall automatically be and become
null and void and of no further force or effect. Such notice shall specify
a date not more than thirty (30) days after any necessary FCC approval
shall have become a Final Order, on which the closing of the Tallahassee
Option shall occur and Buyer shall pay on such closing date to ValueVision
an amount of cash, by wire
2
<PAGE> 3
transfer of immediately available funds, equal to the Exercise Price for
the Tallahassee Option.
3.3 Exercise Price. The Exercise Price for the Tallahassee Option
shall be the Fair Market Value of the Tallahassee Option Shares on the date
Buyer gives ValueVision written notice of its election to exercise the
Tallahassee Option.
3.4 Determination of Fair Market Value. The Fair Market Value of the
Tallahassee Option Shares shall be determined (a) by mutual agreement of
ValueVision and Buyer or (b) if no such agreement is reached within ten
(10) days of the relevant date of determination, by arbitration pursuant to
Section 13.3 of this Agreement.
6. The first sentence of Section 7.1(c) of the Purchase Agreement shall
be deleted in its entirety and replaced with the following:
"Buyer, at its sole expense, shall prepare and shall, on or before
March 31, 1998, file with the FCC a Form 301 construction permit
application for Station KBGE-TV (the "301 Application")."
7. Section 7.17 of the Purchase Agreement shall be amended to delete any
and all references to the Spokane Application, VVI Spokane, the VVI Spokane
Shares, and the Spokane Option.
8. Start of Programming. Subject to satisfaction of all of the terms and
conditions set forth in the Purchase Agreement, the Closing Date shall be
deemed to occur on February 27, 1998 for all purposes of the Purchase
Agreement, provided, however, that Buyer shall begin programming the Stations
at 12:01 a.m. on February 28, 1998 and up until such time, Sellers shall
continue to provide its programming to the Stations.
9. Section 13.4(a) shall be deleted in its entirety, inserting the
following in lieu thereof:
13.4 Benefits and Binding Effect. (a) No party may assign any of its
rights, interests or obligations under this Agreement without the prior
written consent of the other parties hereto, except that (i) without the
consent of any Seller, Buyer may assign its rights and interests (but not
its obligations) under this Agreement to a Qualified Intermediary, as such
term is defined under Treasury Regulation section 1.103(k)-I(g) for
purposes of effecting a like-kind exchange under section 1031 of the
Internal Revenue Code of 1986, as amended and applicable Treasury
Regulations, (ii) without the consent of any Seller, Buyer may collaterally
assign its rights, interests and obligations under this Agreement to its
lenders, (iii) without the consent of any Seller, Buyer may assign its
rights, interests and obligations under this Agreement to a wholly owned
subsidiary or subsidiaries of Buyer, and (iv) without the consent of Buyer,
any Seller may assign its rights, interests and obligations under this
Agreement to ValueVision in connection with the assignment of all its
assets and liabilities to ValueVision. If any Seller assigns all its assets
to the other or to ValueVision as contemplated by the preceding sentence
and, in
3
<PAGE> 4
connection therewith, ValueVision assumes all obligations and liabilities
of such Seller under this Agreement, Buyer and Sellers agrees to amend this
Agreement so as to eliminate such Seller as a party hereto and to reflect
the assumption by ValueVision of all obligations and liabilities of Seller
under this Agreement. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted
assigns. If Buyer assigns its rights, interests and obligations under this
Agreement to a wholly owned subsidiary or subsidiaries, Buyers shall
contemporaneously execute in writing a guarantee of such party's or
parties' obligations hereunder.
10. Miscellaneous.
a. Other Provisions. Except where inconsistent with the express terms of
this First Amendment, all provisions of the Purchase Agreement as originally
entered into shall remain in full force and effect.
b. Governing Law. This First Amendment shall be governed, construed, and
enforced in accordance with the laws of the State of Delaware (without regard
to the choice of law provisions thereof).
c. Rules of Construction. The rules of construction set forth in the
Purchase Agreement shall apply to this First Amendment.
d. Successors and Assigns. This First Amendment shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns.
e. Further Assurances. The parties shall take any actions and execute
any other documents that may be reasonably necessary or desirable to the
implementation and consummation of this First Amendment.
[SIGNATURE PAGES FOLLOW]
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
Purchase Agreement to be executed on their behalf all as of the day and year
first above mentioned.
VALUEVISION INTERNATIONAL, INC.
By: ___________________________
Name: _________________________
Title: ________________________
VVI SEATTLE, INC.
By: ___________________________
Name: _________________________
Title: ________________________
VVILPTV, INC.
By: ___________________________
Name: _________________________
Title: ________________________
VVI SPOKANE, INC.
By: ___________________________
Name: _________________________
Title: ________________________
5
<PAGE> 6
VVI TALLAHASSEE, INC.
By: ___________________________
Name: _________________________
Title: ________________________
PAXSON COMMUNICATIONS
CORPORATION
By: ___________________________
Name: _________________________
Title: ________________________
6
<PAGE> 1
Exhibit 10.68
No. ________
VOID AFTER 5:00 P.M. NEW YORK CITY
TIME ON SEPTEMBER 17, 2002
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY
NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS
OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
Right to Purchase Shares of
Common Stock,
par value $.01 per share
Date: September 18, 1997
REVISED
NATIONAL MEDIA CORPORATION
STOCK PURCHASE WARRANT - C
THIS CERTIFIES THAT, for value received, or its registered
assigns, is entitled to purchase from NATIONAL MEDIA CORPORATION, a corporation
organized under the laws of the State of Delaware (the "COMPANY"), at any time
or from time to time during the period specified in Section 2 hereof, ( )
fully paid and nonassessable shares of the Company's common stock, par value
$.01 per share (the "COMMON STOCK"), at an exercise price per share (the
"EXERCISE PRICE") equal to $6.82. The Exercise Price shall be adjustable as
provided in paragraph 4, and shall be further adjustable as follows: the
Exercise Price otherwise applicable shall remain in effect until the Adjustment
Date, on and after which date the Exercise Price shall be lowest of (x) 101% of
the closing bid price of the Common Stock on June 1, 1998, (y) 101% of the
closing bid price of the Common Stock on the first trading day after the Merger
Termination Date provided for in the Merger Agreement, or (z) the Exercise Price
of the close of business on the trading date immediately preceding the
Adjustment Date, and further provided that upon the consummation of the
transactions contemplated by the Merger Agreement, the adjustment to the
Exercise Price provided for in the foregoing clauses (x), (y) and (z) shall be
nullified and voided, and the Exercise Price shall be readjusted to $6.82 per
share (or to such other price as would have been in effect had the price
adjustment referred to in subparagraphs (x) through (z) above not taken place so
long as such other price was not adjusted as a result of the execution and
delivery of the Merger Agreement and the other Transaction Documents (as defined
in the Merger Agreement) and the consummation of the transactions contemplated
thereby or the public announcement of any of the foregoing). The number of
shares of Common Stock purchasable hereunder (the "WARRANT SHARES") and the
Exercise Price are subject to adjustment as provided in Section 4 hereof. The
term "WARRANTS" means this Warrant and the other warrants of the Company issued
pursuant to that certain Securities Purchase Agreement, dated as of the date
hereof, by and among the Company and the other signatories thereto (the
"SECURITIES PURCHASE AGREEMENT"). This Warrant revises the terms of the warrants
originally issued pursuant to the Securities Purchase Agreement, and is issued
pursuant to the
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<PAGE> 2
Redemption and Consent Agreement The "REDEMPTION AND CONSENT AGREEMENT") dated
January 5, 1998 among the Company and the signatories thereto.
This Warrant is subject to the following terms, provisions, and
conditions:
1. Manner of Exercise; Issuance of Certificates; Payment for
Shares. Subject to the provisions hereof, including, without limitation, the
limitations contained in Section 7 hereof, this Warrant may be exercised by the
holder hereof, in whole or in part, by the surrender of this Warrant, together
with a completed exercise agreement in the form attached hereto (the "EXERCISE
AGREEMENT"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company, of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) if the holder is permitted to
effect a Cashless Exercise (as defined in Section 11(c) hereof) pursuant to
Section 11(c) hereof, delivery to the Company of a written notice of an election
to effect a Cashless Exercise for the Warrant Shares specified in the Exercise
Agreement. The Warrant Shares so purchased shall be deemed to be issued to the
holder hereof, as the record owner of such shares, as of the close of business
on the date on which this Warrant shall have been surrendered, the completed
Exercise Agreement shall have been delivered, and payment shall have been made
for such shares as set forth above or, if such date is not a business date, on
the next succeeding business date. Certificates for the Warrant Shares so
purchased, representing the aggregate number of shares specified in the Exercise
Agreement, shall be delivered to the holder hereof within a reasonable time, not
exceeding two (2) business days, after this Warrant shall have been so exercised
(the "DELIVERY PERIOD"). The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of such holder or such other name as shall be designated by such
holder. If this Warrant shall have been exercised only in part, then, unless
this Warrant has expired, the Company shall, at its expense, at the time of
delivery of such certificates, deliver to the holder a new Warrant representing
the number of shares with respect to which this Warrant shall not then have been
exercised.
If, at any time, a holder of this Warrant submits this Warrant, an
Exercise Agreement and payment to the Company of the Exercise Price for each of
the Warrant Shares specified in the Exercise Agreement, and the Company fails
for any reason to deliver, on or prior to the fourth business day following the
expiration of the Delivery Period for such exercise, the number of shares of
Common Stock to which the holder is entitled upon such exercise (an "EXERCISE
DEFAULT"), then the Company shall pay to the holder payments ("EXERCISE DEFAULT
PAYMENTS") for an Exercise Default in the amount of (a) (N/365), multiplied by
(b) the amount by which the Market Price (as defined in Section 4(l) below) on
the date the Exercise Agreement giving rise to the Exercise Default is
transmitted in accordance with Section 1 (the "EXERCISE DEFAULT DATE") exceeds
the Exercise Price, multiplied by (c) the number of shares of Common Stock the
Company failed to so deliver in such Exercise Default, multiplied by (d) .24,
where N = the number of days from the Exercise Default Date to the date that the
Company effects the full exercise of this Warrant which gave rise to the
Exercise Default. The accrued Exercise Default Payment for each calendar month
shall be paid in cash or shall be convertible into Common Stock at the Exercise
Price, at the holder's option, as follows:
a. In the event holder elects to take such payment in
cash, cash payment shall be made to holder by the fifth (5th) day of the month
following the month in which it has accrued; and
b. In the event holder elects to take such payment in
Common Stock, the holder may convert such payment amount into Common Stock (in
accordance with the terms contained in Article IV of the Certificate of
Designations, Preferences and Rights (the "CERTIFICATE OF DESIGNATION")
governing the Company's Series C Convertible Preferred Stock (the "SERIES C
PREFERRED STOCK")) or, if no Series C Preferred Stock is outstanding, in
accordance with Article IV of the Certificate of Designations, Preferences and
Rights (the "D CERTIFICATE OF DESIGNATION" governing the Company's Series D
Convertible Preferred Stock, (the "SERIES D PREFERRED STOCK"), at the lower of
the Exercise
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<PAGE> 3
Price or the Market Price (as defined in Section 4(l)) (as in effect at the time
of conversion) at any time after the fifth (5th) day of the month following the
month in which it has accrued.
Nothing herein shall limit the holder's right to pursue actual
damages for the Company's failure to maintain a sufficient number of authorized
shares of Common Stock as required pursuant to the terms of Section 3(b) or to
otherwise issue shares of Common Stock upon exercise of this Warrant in
accordance with the terms hereof, and each holder shall have the right to pursue
all remedies available at law or in equity (including a decree of specific
performance and/or injunctive relief).
2. Period of Exercise.
a. This Warrant is immediately exercisable, at any time
or from time to time on or after September 18, 1997, the date of initial
issuance of this Warrant (the "ISSUE DATE"), and before 5:00 p.m., New York City
time on, September 17, 2002 (the "EXERCISE PERIOD").
3. Certain Agreements of the Company. The Company hereby
covenants and agrees as follows:
a. Shares to be Fully Paid. All Warrant Shares will,
upon issuance in accordance with the terms of this Warrant, be validly issued,
fully paid, and nonassessable and free from all taxes, liens, claims and
encumbrances.
b. Reservation of Shares. During the Exercise Period,
the Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise in full of this Warrant (without giving effect
to the limitations on exercise set forth in Section 7(g) hereof).
c. Listing. The Company shall promptly secure the
listing of the shares of Common Stock issuable upon exercise of this Warrant
upon each national securities exchange or automated quotation system, if any,
upon which shares of Common Stock are then listed or become listed (subject to
official notice of issuance upon exercise of this Warrant) and shall maintain,
so long as any other shares of Common Stock shall be so listed, such listing of
all shares of Common Stock from time to time issuable upon the exercise of this
Warrant; and the Company shall so list on each national securities exchange or
automated quotation system, as the case may be, and shall maintain such listing
of, any other shares of capital stock of the Company issuable upon the exercise
of this Warrant if and so long as any shares of the same class shall be listed
on such national securities exchange or automated quotation system.
d. Certain Actions Prohibited. The Company will not, by
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may reasonably be requested by the holder of
this Warrant in order to protect the exercise privilege of the holder of this
Warrant against dilution or other impairment, consistent with the tenor and
purpose of this Warrant. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, and (ii) will take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant.
e. Successors and Assigns. This Warrant will be binding
upon any entity succeeding to the Company by merger, consolidation, or
acquisition of all or substantially all of the Company's assets.
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<PAGE> 4
4. Antidilution Provisions. During the Exercise Period, the
Exercise Price and the number of Warrant Shares issuable hereunder and for which
this Warrant is then exercisable pursuant to Section 2 hereof shall be subject
to adjustment from time to time as provided in this Section 4.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
or down to the nearest cent.
a. Adjustment of Exercise Price. Except as otherwise
provided in Sections 4(c) and 4(e) hereof, if and whenever during the Exercise
Period the Company issues or sells, or in accordance with Section 4(b) hereof is
deemed to have issued or sold, any shares of Common Stock for no consideration
or for a consideration per share less than the Dilutive Market Price (as
hereinafter defined) on the date of issuance (a "DILUTIVE ISSUANCE"), then
effective immediately upon the Dilutive Issuance, the Exercise Price will be
adjusted in accordance with the following formula:
E' = E x O + P/M
-------
CSDO
where:
E' = the adjusted Exercise Price;
E = the then current Exercise Price;
M = the then current Dilutive Market Price (as
defined in Section 4(1));
O = the number of shares of Common Stock
outstanding immediately prior to the
Dilutive Issuance;
P = the aggregate consideration, calculated as
set forth in Section 4(b) hereof, received
by the Company upon such Dilutive Issuance;
and
CSDO = the total number of shares of Common Stock
Deemed Outstanding (as defined in Section
4(l)) immediately after the Dilutive
Issuance.
b. Effect on Exercise Price of Certain Events. For
purposes of determining the adjusted Exercise Price under Section 4(a) hereof,
the following will be applicable:
i. Issuance of Rights or Options. If the
Company in any manner issues or grants any warrants, rights or options, whether
or not immediately exercisable, to subscribe for or to purchase Common Stock or
other securities exercisable, convertible into or exchangeable for Common Stock
("CONVERTIBLE SECURITIES") (such warrants, rights and options to purchase Common
Stock or Convertible Securities are hereinafter referred to as "OPTIONS") and
the price per share for which Common Stock is issuable upon the exercise of such
Options is less than the Market Price on the date of issuance ("BELOW MARKET
OPTIONS"), then the maximum total number of shares of Common Stock issuable upon
the exercise of all such Below Market Options (assuming full exercise,
conversion or exchange of Convertible Securities, if applicable) will, as of the
date of the issuance or grant of such Below Market Options, be deemed to be
outstanding and to have been issued and sold by the Company for such price per
share. For purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon the exercise of such Below Market Options" is
determined by dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the issuance or granting of all such Below
Market Options, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise of all such Below Market
Options, plus, in the case of Convertible Securities issuable upon the exercise
of such Below Market Options, the minimum aggregate amount of additional
consideration payable upon the exercise, conversion or exchange thereof at the
time such Convertible Securities first become exercisable, convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise of all such Below Market Options (assuming full
conversion of Convertible Securities, if applicable). No further adjustment to
the Exercise Price will be made upon the actual issuance of such Common Stock
upon the exercise of such Below Market Options or upon the exercise, conversion
or exchange of Convertible Securities issuable upon exercise of such Below
Market Options.
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<PAGE> 5
ii. Issuance of Convertible Securities.
(A) If the Company in any manner issues
or sells any Convertible Securities, whether or not immediately convertible
(other than where the same are issuable upon the exercise of Options) and the
price per share for which Common Stock is issuable upon such exercise,
conversion or exchange (as determined pursuant to Section 4(b)(ii)(B) if
applicable) is less than the Market Price on the date of issuance, then the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of all such Convertible Securities will, as of the date
of the issuance of such Convertible Securities, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon such exercise, conversion or exchange" is determined by
dividing (i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or sale of all such Convertible Securities, plus
the minimum aggregate amount of additional consideration, if any, payable to the
Company upon the exercise, conversion or exchange thereof at the time such
Convertible Securities first become exercisable, convertible or exchangeable, by
(ii) the maximum total number of shares of Common Stock issuable upon the
exercise, conversion or exchange of all such Convertible Securities. No further
adjustment to the Exercise Price will be made upon the actual issuance of such
Common Stock upon exercise, conversion or exchange of such Convertible
Securities.
(B) If the Company in any manner issues
or sells any Convertible Securities with a fluctuating conversion or exercise
price or exchange ratio to any person or entity other than the holder hereof (a
"VARIABLE RATE CONVERTIBLE SECURITY"), then the price per share for which Common
Stock is issuable upon such exercise, conversion or exchange for purposes of the
calculation contemplated by Section 4(b)(ii)(A) shall be deemed to be the lowest
price per share which would be applicable (assuming all holding period and other
conditions to any discounts contained in such Convertible Security have been
satisfied) if the Market Price on the date of issuance of such Convertible
Security was 75% of the Market Price on such date (the "ASSUMED VARIABLE MARKET
PRICE"). Further, if the Market Price at any time or times thereafter is less
than or equal to the Assumed Variable Market Price last used for making any
adjustment under this Section 4 with respect to any Variable Rate Convertible
Security, the Exercise Price in effect at such time shall be readjusted to equal
the Exercise Price which would have resulted if the Assumed Variable Market
Price at the time of issuance of the Variable Rate Convertible Security had been
75% of the Market Price existing at the time of the adjustment required by this
sentence.
iii. Change in Option Price or Conversion Rate.
If there is a change at any time in (i) the amount of additional consideration
payable to the Company upon the exercise of any Options; (ii) the amount of
additional consideration, if any, payable to the Company upon the exercise,
conversion or exchange of any Convertible Securities; or (iii) the rate at which
any Convertible Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change will be
readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold.
iv. Treatment of Expired Options and Unexercised
Convertible Securities. If, in any case, the total number of shares of Common
Stock issuable upon exercise of any Option or upon exercise, conversion or
exchange of any Convertible Securities is not, in fact, issued and the rights to
exercise such Option or to exercise, convert or exchange such Convertible
Securities shall have expired or terminated, the Exercise Price then in effect
will be readjusted to the Exercise Price which would have been in effect at the
time of such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such expiration or
termination (other than in respect of the actual number of shares of Common
Stock issued upon exercise or conversion thereof), never been issued.
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<PAGE> 6
v. Calculation of Consideration Received. If
any Common Stock, Options or Convertible Securities are issued, granted or sold
for cash, the consideration received therefor for purposes of this Warrant will
be the amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or sale.
In case any Common Stock, Options or Convertible Securities are issued or sold
for a consideration part or all of which shall be other than cash, the amount of
the consideration other than cash received by the Company will be the fair
market value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the Company
will be the Market Price thereof as of the date of receipt. In case any Common
Stock, Options or Convertible Securities are issued in connection with any
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair market value of
such portion of the net assets and business of the non-surviving corporation as
is attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair market value of any consideration other than cash or
securities will be determined in good faith by an investment banker or other
appropriate expert of national reputation selected by the Company and reasonably
acceptable to the holder hereof, with the costs of such appraisal to be borne by
the Company.
vi. Exceptions to Adjustment of Exercise Price.
No adjustment to the Exercise Price will be made (i) upon the exercise of any
warrants, options or convertible securities issued and outstanding on the Issue
Date and set forth on Schedule 3(c) of the Securities Purchase Agreement in
accordance with the terms of such securities as of such date; (ii) upon the
grant or exercise of any stock or options which may hereafter be granted or
exercised under any employee benefit plan of the Company now existing or to be
implemented in the future, so long as the issuance of such stock or options is
approved by a majority of the non-employee members of the Board of Directors of
the Company or a majority of the members of a committee of non-employee
directors established for such purpose; (iii) upon the issuance of any shares of
Series C Preferred Stock or Warrants issued or issuable in accordance with terms
of the Securities Purchase Agreement; (iv) upon conversion of the Series C
Preferred Stock or exercise of the Warrants issued pursuant to the Stock
Purchase Agreement; (v) upon the issuance of any share of Series D Preferred
Stock or warrants issued or issuable in accordance with the Redemption and
Consent Agreement; (vi) upon the issuance of Common Stock upon conversion of the
Series D Preferred Stock or exercise of the warrants issued pursuant to the
Redemption and Consent Agreement; or (vii) as a result of the execution and
delivery of the Merger Agreement and the other Transaction Documents (as defined
therein) and the consummation of the transactions contemplated thereby.
c. Subdivision or Combination of Common Stock. If the
Company, at any time during the Exercise Period, subdivides (by any stock split,
stock dividend, recapitalization, reorganization, reclassification or otherwise)
its shares of Common Stock into a greater number of shares, then, after the date
of record for effecting such subdivision, the Exercise Price in effect
immediately prior to such subdivision will be proportionately reduced. If the
Company, at any time during the Exercise Period, combines (by reverse stock
split, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a smaller number of shares, then, after the date of
record for effecting such combination, the Exercise Price in effect immediately
prior to such combination will be proportionately increased.
d. Adjustment in Number of Shares. Upon each adjustment
of the Exercise Price pursuant to the provisions of this Section 4, the number
of shares of Common Stock issuable upon exercise of this Warrant and for which
this Warrant is or may become exercisable shall be adjusted by multiplying a
number equal to the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock issuable or for which this
Warrant is or may become exercisable (as applicable) upon exercise of this
Warrant immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.
e. Consolidation, Merger or Sale. In case of any
consolidation of the Company with, or merger of the Company into any other
corporation, or in case of any sale or conveyance of all or
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<PAGE> 7
substantially all of the assets of the Company other than in connection with a
plan of complete liquidation of the Company at any time during the Exercise
Period, then as a condition of such consolidation, merger or sale or conveyance,
adequate provision will be made whereby the holder of this Warrant will have the
right to acquire and receive upon exercise of this Warrant in lieu of the shares
of Common Stock immediately theretofore acquirable upon the exercise of this
Warrant, such shares of stock, securities, cash or assets as were issued or
payable with respect to or in exchange for the number of shares of Common Stock
immediately theretofore acquirable and receivable upon exercise of this Warrant
had such consolidation, merger or sale or conveyance not taken place. In any
such case, the Company will make appropriate provision to insure that the
provisions of this Section 4 hereof will thereafter be applicable as nearly as
may be in relation to any shares of stock or securities thereafter deliverable
upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Warrant and the obligations to
deliver to the holder of this Warrant such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the holder may be entitled to
acquire.
f. Distribution of Assets. In case the Company shall
declare or make any distribution of its assets (or rights to acquire its assets)
to holders of Common Stock as a partial liquidating dividend, stock repurchase
by way of return of capital or otherwise (including any dividend or distribution
to the Company's shareholders of cash or shares (or rights to acquire shares) of
capital stock of a subsidiary) (a "DISTRIBUTION"), at any time during the
Exercise Period, then the holder of this Warrant shall be entitled upon exercise
of this Warrant for the purchase of any or all of the shares of Common Stock
subject hereto, to receive the amount of such assets (or rights) which would
have been payable to the holder had such holder been the holder of such shares
of Common Stock on the record date for the determination of shareholders
entitled to such Distribution.
g. Notice of Adjustment. Upon the occurrence of any
event which requires any adjustment of the Exercise Price, then, and in each
such case, the Company shall give notice thereof to the holder of this Warrant,
which notice shall state the Exercise Price resulting from such adjustment and
the increase or decrease in the number of Warrant Shares purchasable at such
price upon exercise, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based. Such calculation
shall be certified by the chief financial officer of the Company.
h. Minimum Adjustment of Exercise Price. No adjustment
of the Exercise Price shall be made in an amount of less than 1% of the Exercise
Price in effect at the time such adjustment is otherwise required to be made,
but any such lesser adjustment shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
i. No Fractional Shares. No fractional shares of Common
Stock are to be issued upon the exercise of this Warrant, but the Company shall
pay a cash adjustment in respect of any fractional share which would otherwise
be issuable in an amount equal to the same fraction of the Market Price of a
share of Common Stock on the date of such exercise.
j. Other Notices. In case at any time:
i. the Company shall declare any dividend upon
the Common Stock payable in shares of stock of any class or make any other
distribution (other than dividends or distributions payable in cash out of
retained earnings consistent with the Company's past practices with respect to
declaring dividends and making distributions) to the holders of the Common
Stock;
ii. the Company shall offer for subscription pro
rata to the holders of the Common Stock any additional shares of stock of any
class or other rights;
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<PAGE> 8
iii. there shall be any capital reorganization of
the Company, or reclassification of the Common Stock, or consolidation or merger
of the Company with or into, or sale of all or substantially all of its assets
to, another corporation or entity; or
iv. there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable estimate thereof by the Company)
when the same shall take place. Such notice shall also specify the date on which
the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization, re
classification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii), (iii)
and (iv) above.
k. Certain Events. If, at any time during the Exercise
Period, any event occurs of the type contemplated by the adjustment provisions
of this Section 4 but not expressly provided for by such provisions, the Company
will give notice of such event as provided in Section 4(g) hereof, and the
Company's Board of Directors will make an appropriate adjustment in the Exercise
Price and the number of shares of Common Stock acquirable upon exercise of this
Warrant so that the rights of the holder shall be neither enhanced nor
diminished by such event.
l. Certain Definitions.
i. "COMMON STOCK DEEMED OUTSTANDING" shall mean
the number of shares of Common Stock actually outstanding (not including shares
of Common Stock held in the treasury of the Company), plus (x) in the case of
any adjustment required by Section 4(a) resulting from the issuance of any
Options, the maximum total number of shares of Common Stock issuable upon the
exercise of the Options for which the adjustment is required (including any
Common Stock issuable upon the conversion of Convertible Securities issuable
upon the exercise of such Options), and (y) in the case of any adjustment
required by Section 4(a) resulting from the issuance of any Convertible
Securities, the maximum total number of shares of Common Stock issuable upon the
exercise, conversion or exchange of the Convertible Securities for which the
adjustment is required, as of the date of issuance of such Convertible
Securities, if any.
ii. "DILUTIVE MARKET PRICE," as of any date, (i)
means the closing sale price for the shares of Common Stock as reported on the
New York Stock Exchange for the trading day immediately preceding such date, or
(ii) if the New York Stock Exchange is not the principal trading market for the
shares of Common Stock, the closing sale prices on the principal trading market
for the Common Stock for the trading day immediately preceding such date, or
(iii) if market value cannot be calculated as of such date on any of the
foregoing bases, the Dilutive Market Price shall be the average fair market
value as reasonably determined by an investment banking firm selected by the
Company and reasonably acceptable to the holder, with the costs of the appraisal
to be borne by the Company. The manner of determining the Dilutive Market Price
of the Common Stock set forth in the foregoing definition shall apply with
respect to any other security in respect of which a determination as to market
value must be made hereunder.
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<PAGE> 9
iii. "MARKET PRICE," as of any date, (i) means
the volume weighted average sale price for the shares of Common Stock as
reported on the New York Stock Exchange for the trading day immediately
preceding such date, or (ii) if the New York Stock Exchange is not the principal
trading market for the shares of Common Stock, the volume weighted average sale
prices on the principal trading market for the Common Stock for the trading day
immediately preceding such date, or (iii) if market value cannot be calculated
as of such date on any of the foregoing bases, the Market Price shall be the
average fair market value as reasonably determined by an investment banking firm
selected by the Company and reasonably acceptable to the holder, with the costs
of the appraisal to be borne by the Company. The manner of determining the
Market Price of the Common Stock set forth in the foregoing definition shall
apply with respect to any other security in respect of which a determination as
to market value must be made hereunder.
iv. "COMMON STOCK," for purposes of this Section
4, includes the Common Stock and any additional class of stock of the Company
having no preference as to dividends or distributions on liquidation, provided
that the shares purchasable pursuant to this Warrant shall include only Common
Stock in respect of which this Warrant is exercisable, or shares resulting from
any subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 4(e) hereof, the stock or other securities or
property provided for in such Section.
v. "ADJUSTMENT DATE" means the earliest to
occur of (w) June 1, 1998, (x) the date it is publicly announced that
ValueVision International, Inc. ("VVI") is unwilling to proceed with the
transactions contemplated by the Merger Agreement on the terms set forth
therein; (y) the Merger Termination Date as defined in the Merger Agreement, or
(z) the date on which demand is made upon the Corporation for payment of
principal pursuant to the Demand Note issued by the Corporation to VVI pursuant
to the Merger Agreement; provided, however, that the date set forth in
subparagraph (w) above shall be extended to August 31, 1998 if on or before the
close of business on June 1, 1998 the Corporation and VVI shall deliver to each
of the holders of the Warrants who are parties to the Redemption and Consent
Agreement, and their permitted transferees, a certification executed by the
chief executive officer of each of the Corporation and VVI to the effect that
all conditions precedent to completion of the transactions contemplated by the
Merger Agreement have been satisfied or waived except only the consent required
pursuant to Section 6.1(c) of the Merger Agreement.
vi. "MERGER AGREEMENT" means that certain
Agreement and Plan of Reorganization and Merger dated as of January 5, 1998
among the Corporation, ValueVision International, Inc., and V-L Holdings Corp.
5. Issue Tax. The issuance of certificates for Warrant Shares
upon the exercise of this Warrant shall be made without charge to the holder of
this Warrant or such shares for any issuance tax or other costs in respect
thereof, provided that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and delivery
of any certificate in a name other than the holder of this Warrant.
6. No Rights or Liabilities as a Shareholder. This Warrant shall
not entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the holder hereof to purchase Warrant Shares, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the Exercise Price or as a shareholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
7. Transfer, Exchange, Redemption and Replacement of Warrant.
a. Restriction on Transfer. This Warrant and the rights
granted to the holder hereof are transferable, in whole or in part, upon
surrender of this Warrant, together with a properly executed assignment in the
form attached hereto, at the office or agency of the Company referred to in
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<PAGE> 10
Section 7(e) below, provided, however, that any transfer or assignment shall be
subject to the conditions set forth in Section 7(f) and (g) hereof and to the
provisions of Sections 2(f) and 2(g) of the Securities Purchase Agreement. Until
due presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Section 8 hereof are assignable only in
accordance with the provisions of that certain Registration Rights Agreement,
dated as of the date hereof, by and among the Company and the other signatories
thereto (the "REGISTRATION RIGHTS AGREEMENT").
b. Warrant Exchangeable for Different Denominations.
This Warrant is exchange able, upon the surrender hereof by the holder hereof at
the office or agency of the Company referred to in Section 7(e) below, for new
Warrants of like tenor of different denominations representing in the aggregate
the right to purchase the number of shares of Common Stock which may be
purchased hereunder, each of such new Warrants to represent the right to
purchase such number of shares as shall be designated by the holder hereof at
the time of such surrender.
c. Replacement of Warrant. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of any such loss, theft, or
destruction, upon delivery of an indemnity agreement reasonably satisfactory in
form and amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at its expense, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
d. Cancellation; Payment of Expenses. Upon the surrender
of this Warrant in connection with any transfer, exchange, or replacement as
provided in this Section 7, this Warrant shall be promptly canceled by the
Company. The Company shall pay all taxes (other than securities transfer taxes)
and all other expenses (other than legal expenses, if any, incurred by the
Holder or transferees) and charges payable in connection with the preparation,
execution, and delivery of Warrants pursuant to this Section 7. The Company
shall indemnify and reimburse the holder of this Warrant for all costs and
expenses (including legal fees) incurred by such holder in connection with the
enforcement of its rights hereunder.
e. Warrant Register. The Company shall maintain, at its
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the holder hereof), a register for this Warrant, in
which the Company shall record the name and address of the person in whose name
this Warrant has been issued, as well as the name and address of each transferee
and each prior owner of this Warrant.
f. Exercise or Transfer Without Registration. If, at the
time of the surrender of this Warrant in connection with any exercise, transfer,
or exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange, (i)
that the holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such exercise, transfer, or exchange may be
made without registration under the Securities Act and under applicable state
securities or blue sky laws, (ii) that the holder or transferee execute and
deliver to the Company an investment letter in form and substance acceptable to
the Company and (iii) that the transferee be an "ACCREDITED INVESTOR" as defined
in Rule 501(a) promulgated under the Securities Act; provided that no such
opinion, letter, status as an "accredited investor" shall be required in
connection with a transfer pursuant to Rule 144 under the Securities Act.
g. Additional Restrictions on Exercise or Transfer.
Notwithstanding anything contained herein to the contrary, unless the holder
hereof delivers a waiver in accordance with the last sentence of this Section
7(g), in no event shall the holder hereof exercise Warrants to the extent that
(a)
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<PAGE> 11
the number of shares of Common Stock beneficially owned by such holder and
its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unexercised portion of the
Warrants or the unexercised or unconverted portion of any other securities of
the Company (including the Series C Preferred Stock, the Series D Preferred
Stock, and the warrants issued pursuant to the Redemption and Consent Agreement)
subject to a limitation on conversion or exercise analogous to the limitation
contained herein) and (b) the number of shares of Common Stock issuable upon
exercise of the Warrants (or portion thereof) with respect to which the
determination described herein is being made, would result in beneficial
ownership by such holder and its affiliates of more than 4.9% of the outstanding
shares of Common Stock. For purposes of the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder,
except as otherwise provided in clause (a) hereof. Except as provided in the
immediately succeeding sentence, the restrictions contained in this Section 7(g)
may not be amended without the consent of the holder of this Warrant and the
holders of a majority of the Company's then outstanding Common Stock. The holder
hereof may waive the restrictions set forth in this Section 7(g) by written
notice to the Company upon not less than sixty one (61) days prior notice (with
such waiver taking effect only upon the expiration of such sixty one (61) day
notice period).
8. Registration Rights. The initial holder of this Warrant (and
certain assignees thereof) is entitled to the benefit of such registration
rights in respect of the Warrant Shares as are set forth in the Registration
Rights Agreement, including the right to assign such rights to certain
assignees, as set forth therein.
9. Notices. Any notices required or permitted to be given under
the terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier, or by confirmed telecopy, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
National Media Corporation
Eleven Penn Center
1835 Market Street
Suite 1100
Philadelphia, PA 19103
Telecopy: (215) 988-4869
Attn: Robert N. Verratti, Chief Executive Officer, and
Attn: Brian J. Sisko, Senior Vice President and General Counsel
If to the holder, at such address as such holder shall have provided in writing
to the Company, or at such other address as such holder furnishes by notice
given in accordance with this Section 9.
10. Governing Law; Jurisdiction. This Warrant shall be governed by
and construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Company
irrevocably consents to the jurisdiction of the United States federal courts and
state courts located in the State of Delaware in any suit or proceeding based on
or arising under this Agreement and irrevocably agrees that all claims in
respect of such suit or proceeding may be determined in such courts. The Company
irrevocably waives any objection to the laying of venue and the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The Company
further agrees that service of process upon the Company mailed by certified or
registered mail shall be deemed in every respect effective service of process
upon the Company in any such suit or proceeding. Nothing herein shall affect the
holder's right to serve process in any other manner permitted by law. The
Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
-11-
<PAGE> 12
11. Miscellaneous.
a. Amendments. This Warrant and any provision hereof may
only be amended by an instrument in writing signed by the Company and the holder
hereof.
b. Descriptive Headings. The descriptive headings of the
several Sections of this Warrant are inserted for purposes of reference only,
and shall not affect the meaning or construction of any of the provisions
hereof.
c. Cashless Exercise. Notwithstanding anything to the
contrary contained in this Warrant, if the resale of the Warrant Shares by the
holder is not then registered pursuant to an effective registration statement
under the Securities Act, this Warrant may be exercised at any time after the
first anniversary of the Issue Date until the end of the Exercise Period, by
presentation and surrender of this Warrant to the Company at its principal
executive offices with a written notice of the holder's intention to effect a
cashless exercise, including a calculation of the number of shares of Common
Stock to be issued upon such exercise in accordance with the terms hereof (a
"CASHLESS EXERCISE"). In the event of a Cashless Exercise, in lieu of paying the
Exercise Price in cash, the holder shall surrender this Warrant for that number
of shares of Common Stock determined by multiplying the number of Warrant Shares
to which it would otherwise be entitled by a fraction, the numerator of which
shall be the difference between the Market Price of a share of the Common Stock
on the date of exercise and the Exercise Price, and the denominator of which
shall be such Market Price per share of Common Stock.
d. Business Day. For purposes of this Warrant, the term
"business day" means any day, other than a Saturday or Sunday or a day on which
banking institutions in the State of New York are authorized or obligated by
law, regulation or executive order to close.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
NATIONAL MEDIA CORPORATION
By:_________________________________
Name:_____________________________
Title:______________________________
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<PAGE> 13
FORM OF EXERCISE AGREEMENT
(TO BE EXECUTED BY THE HOLDER IN ORDER TO EXERCISE THE WARRANT)
To: National Media Corporation
Eleven Penn Center
1835 Market Street
Suite 1100
Philadelphia, PA 19103
Telecopy: (215) 988-4869
Attn: Robert N. Verratti, and
Attn: Brian J. Sisko
The undersigned hereby irrevocably exercises the right to purchase
_____________ shares of the Common Stock of National Media Corporation, a
corporation organized under the laws of the State of Delaware (the "COMPANY"),
evidenced by the attached Warrant, and herewith makes payment of the Exercise
Price with respect to such shares in full, all in accordance with the conditions
and provisions of said Warrant.
i. The undersigned agrees not to offer, sell, transfer or
otherwise dispose of any Common Stock obtained on exercise of the Warrant,
except under circumstances that will not result in a violation of the Securities
Act of 1933, as amended, or any state securities laws, and agrees that the
following legend may be affixed to the stock certificate for the Common Stock
hereby subscribed for if resale of such Common Stock is not registered or if
Rule 144 is unavailable:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR THE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY
NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS
OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
ii. The undersigned requests that stock certificates for such
shares be issued, and a Warrant representing any unexercised portion hereof be
issued, pursuant to the Warrant in the name of the Holder and delivered to the
undersigned at the address set forth below:
Dated:_________________ _____________________________________
Signature of Holder
_____________________________________
Name of Holder (Print)
Address:
_____________________________________
_____________________________________
_____________________________________
<PAGE> 14
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:
Name of Assignee Address No of Shares
- ---------------- ------- ------------
, and hereby irrevocably constitutes and appoints ______________
________________________ as agent and attorney-in-fact to transfer said Warrant
on the books of the within-named corporation, with full power of substitution in
the premises.
Dated: _____________________, ____,
In the presence of
____________________________
Name: ____________________________
Signature: _______________________
Title of Signing Officer or Agent (if any):
___________________________
Address: ________________________
___________________________
Note: The above signature should
correspond exactly with the name on
the face of the within Warrant.C
<PAGE> 1
Exhibit 10.69
No. __________
VOID AFTER 5:00 P.M. NEW YORK CITY
TIME ON JANUARY 4, 2003
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
APPLICABLE SECURITIES LAWS OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO
AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
Right to Purchase _____ Shares of
Common Stock,
par value $.01 per share
Date: January 5, 1998
NATIONAL MEDIA CORPORATION
STOCK PURCHASE WARRANT-D
THIS CERTIFIES THAT, for value received, __________________________ or its
registered assigns, is entitled to purchase from NATIONAL MEDIA CORPORATION, a
corporation organized under the laws of the State of Delaware (the "Company"),
at any time or from time to time during the period specified in Section 2
hereof, _______________________________________________________________________
(__________) fully paid and nonassessable shares of the Company's common stock,
par value $.01 per share (the "Common Stock"), at an initial exercise price per
share (the "Exercise Price") equal to $6.82. The Exercise Price shall be
adjustable as provided in paragraph 4, and shall be further adjustable as
follows: the Exercise Price otherwise applicable shall remain in effect until
the Adjustment Date, on and after which date the Exercise Price shall be lowest
of (x) 101% of the closing bid price of the Common Stock on June 1, 1998, (y)
101% of the closing bid price of the Common Stock on the first trading day after
the Merger Termination Date provided for in the Merger Agreement, or (z) the
Exercise Price of the close of business on the trading date immediately
preceding the Adjustment Date, and further provided that upon the consummation
of the transactions contemplated by the Merger Agreement, the adjustment to the
Exercise Price provided for in the foregoing clauses (x), (y) and (z) shall be
nullified and voided, and the Exercise Price shall be readjusted to $6.82 per
share, (or to such other price as would have been in effect had the price
adjustment referred to in subparagraphs (x) through (z) above not taken place as
long as such other price was not adjusted as a result of the execution and
delivery of the Merger Agreement and the other Transaction Documents (as defined
in the Merger Agreement) and the consummation of the transactions contemplated
thereby or the public announcement of any of the foregoing). The number of
shares of Common Stock purchasable hereunder (the "WARRANT SHARES") and the
Exercise Price are subject to adjustment as provided in Section 4 hereof. The
term "WARRANTS" means this Warrant and the other warrants of the company issued
pursuant to that certain redemption and Consent Agreement, dated as of the date
hereof, by and among the Company and the other signatories thereto (the
"REDEMPTION AND CONSENT AGREEMENT").
This Warrant is subject to the following terms, provisions, and conditions:
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<PAGE> 2
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions hereof, including, without limitation, the limitations
contained in Section 7 hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "EXERCISE
AGREEMENT"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company, of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) if the holder is permitted to
effect a Cashless Exercise (as defined in Section 11(c) hereof) pursuant to
Section 11(c) hereof, delivery to the Company of a written notice of an election
to effect a Cashless Exercise for the Warrant Shares specified in the Exercise
Agreement. The Warrant Shares so purchased shall be deemed to be issued to the
holder hereof, as the record owner of such shares, as of the close of business
on the date on which this Warrant shall have been surrendered, the completed
Exercise Agreement shall have been delivered, and payment shall have been made
for such shares as set forth above or, if such date is not a business date, on
the next succeeding business date. Certificates for the Warrant Shares so
purchased, representing the aggregate number of shares specified in the Exercise
Agreement, shall be delivered to the holder hereof within a reasonable time, not
exceeding two (2) business days, after this Warrant shall have been so exercised
(the "DELIVERY PERIOD"). The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of such holder or such other name as shall be designated by such
holder. If this Warrant shall have been exercised only in part, then, unless
this Warrant has expired, the Company shall, at its expense, at the time of
delivery of such certificates, deliver to the holder a new Warrant representing
the number of shares with respect to which this Warrant shall not then have been
exercised.
If, at any time, a holder of this Warrant submits this Warrant, an Exercise
Agreement and payment to the Company of the Exercise Price for each of the
Warrant Shares specified in the Exercise Agreement, and the Company fails for
any reason to deliver, on or prior to the fourth business day following the
expiration of the Delivery Period for such exercise, the number of shares of
Common Stock to which the holder is entitled upon such exercise (an "EXERCISE
DEFAULT"), then the Company shall pay to the holder payments ("EXERCISE DEFAULT
PAYMENTS") for an Exercise Default in the amount of (a) (N/365), multiplied by
(b) the amount by which the Market Price (as defined in Section 4(l) below) on
the date the Exercise Agreement giving rise to the Exercise Default is
transmitted in accordance with Section 1 (the "EXERCISE DEFAULT DATE") exceeds
the Exercise Price, multiplied by (c) the number of shares of Common Stock the
Company failed to so deliver in such Exercise Default, multiplied by (d) .24,
where N - the number of days from the Exercise Default Date to the date that the
Company effects the full exercise of this Warrant which gave rise to the
Exercise Default. The accrued Exercise Default Payment for each calendar month
shall be paid in cash or shall be convertible into Common stock at the Exercise
Price, at the holder's option, as follows:
a. In the event holder elects to take such payment in cash, cash
payment shall be made to holder by the fifth (5th) day of the month following
the month in which it has accrued: and
b. In the event holder elects to take such payment in Common Stock,
the holder may convert such payment amount into Common Stock (in accordance with
the terms contained in Article IV of the Certificate of Designations,
Preferences and Rights (the "C CERTIFICATE OF DESIGNATION") governing the
Company's Series C Convertible Preferred Stock (the "SERIES C PREFERRED STOCK")
or, if no Series C Preferred Stock is outstanding, in accordance with Article IV
of the Certificate of Designations, Preferences and Rights (the "D CERTIFICATE
OF DESIGNATION" governing the Company's Series D Convertible Preferred Stock,
(the "SERIES D PREFERRED STOCK"), at the lower of the Exercise Price of the
Market Price (as defined in Section 4(l)) (as in effect at the time of
conversion) at any time after the fifth (5th) day of the month following the
month in which it has accrued.
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<PAGE> 3
Nothing herein shall limit the holder's right to pursue actual damages for
the Company's failure to maintain a sufficient number of authorized shares of
Common Stock as required pursuant to the terms of Section 3(b) or to otherwise
issue shares of Common Stock upon exercise of this Warrant in accordance with
the terms hereof, and each holder shall have the right to pursue all remedies
available at law or in equity (including a decree of specific performance
and/or injunctive relief).
2. Period of Exercise.
a. This Warrant is immediately exercisable, at any time or from
time to time on or after January 5, 1998, the date of initial issue of this
Warrant (the "Issue Date"), and before 5:00 p.m., New York City time on January
4, 2003 (the "Exercise Period").
3. Certain Agreements of the Company. The Company hereby covenants and
agrees as follows:
a. Shares to be Fully Paid. All Warrant Shares will, upon issuance
in accordance with the terms of this Warrant, be validly issued, fully paid,
and nonassessable and free from all taxes, liens, claims and encumbrances.
b. Reservation of Shares. During the Exercise Period, the Company
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise in full of this Warrant (without giving effect to the
limitations on exercise set forth in Section 7(g) hereof).
c. Listing. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed or become listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all shares of Common
Stock from time to time issuable upon the exercise of this Warrant; and the
Company shall so list on each national securities exchange or automated
quotation system, as the case may be, and shall maintain such listing of, any
other shares of capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed on such
national securities exchange or automated quotation system.
d. Certain Actions Prohibited. The Company will not, by amendment
of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed by it hereunder, but will at all times
in good faith assist in the carrying out of all the provisions of this Warrant
and in the taking of all such action as may reasonably be requested by the
holder of this Warrant in order to protect the exercise privilege of the holder
of this Warrant against dilution or other impairment, consistent with the tenor
and purpose of this Warrant. Without limiting the generality of the foregoing,
the Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, and (ii) will take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant.
e. Successors and Assigns. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of
all or substantially all of the Company's assets.
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<PAGE> 4
4. Antidilution Provisions. During the Exercise Period, the Exercise Price
and the number of Warrant Shares issuable hereunder and for which this Warrant
is then exercisable pursuant to Section 2 hereof shall be subject to adjustment
from time to time as provided in this Section 4.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
or down to the nearest cent.
a. Adjustment of Exercise Price. Except as otherwise provided in
Sections 4(c) and 4(e) hereof, if and whenever during the Exercise Period the
Company issues or sells, or in accordance with Section 4(b) hereof is deemed to
have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share less than the Dilutive Market Price (as hereinafter
defined) on the date of issuance (a "DILUTIVE ISSUANCE"), then effective
immediately upon the Dilutive Issuance, the Exercise Price will be adjusted in
accordance with the following formula:
E(1) = E x O + P/M
---------
CSDO
where:
E(1) = the adjusted Exercise Price;
E = the then current Exercise Price;
M = the then current Dilutive Market Price (as defined in Section
4(1));
O = the number of shares of Common Stock outstanding immediately
prior to the Dilutive Issuance;
P = the aggregate consideration, calculated as set forth in
Section 4(b) hereof, received by the Company upon such
Dilutive Issuance; and
CSDO = the total number of shares of Common Stock Deemed Outstanding
(as defined in Section 4(l)) immediately after the Dilutive
Issuance.
b. Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Section 4(a) hereof, the following
will be applicable:
i. Issuance of Rights or Options. If the Company in any manner
issues or grants any warrants, rights or options, whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other securities
exercisable, convertible into or exchangeable for Common Stock ("CONVERTIBLE
SECURITIES")(such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "OPTIONS") and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price on the date of issuance ("BELOW MARKET OPTIONS"),
then the maximum total number of shares of Common Stock issuable upon the
exercise of all such Below Market Options (assuming full exercise, conversion
or exchange of Convertible Securities, if applicable) will, as of the date of
the issuance or grant of such Below Market Options, be deemed to be outstanding
and to have been issued and sold by the Company for such price per share. For
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon the exercise of such Below Market Options" is determined by
dividing (i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or granting of all such Below Market Options,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of all such Below Market Options, plus, in the
case of Convertible Securities issuable upon the exercise of such Below Market
Options, the minimum aggregate amount of additional consideration payable upon
the exercise, conversion or exchange thereof at the time such Convertible
Securities first become exercisable, convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the exercise of
all such Below Market Options (assuming full conversion of Convertible
Securities, if applicable). No further adjustment to the Exercise Price will be
made upon the actual issuance of such Common Stock upon the exercise of such
-4-
<PAGE> 5
Below Market Options or upon the exercise, conversion or exchange of
Convertible Securities issuable upon exercise of such Below Market Options.
ii. Issuance of Convertible Securities.
(A) If the Company in any manner issues or sells any Convertible
Securities, whether or not immediately convertible (other than where the same
are issuable upon the exercise of Options) and the price per share for which
Common Stock is issuable upon such exercise, conversion or exchange (as
determined pursuant to Section 4(b)(ii)(B) if applicable) is less than the
Market Price on the date of issuance, then the maximum total number of shares of
Common Stock issuable upon the exercise, conversion or exchange of all such
Convertible Securities will, as of the date of the issuance of such Convertible
Securities, be deemed to be outstanding and to have been issued and sold by the
Company for such price per share. For the purposes of the preceding sentence,
the "price per share for which Common Stock is issuable upon such exercise,
conversion or exchange" is determined by dividing (i) the total amount, if any,
received or receivable by the Company as consideration for the issuance or sale
of all such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise,
conversion or exchange thereof at the time such Convertible Securities first
become exercisable, convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise, conversion or
exchange of all such Convertible Securities. No further adjustment to the
Exercise Price will be made upon the actual issuance of such Common Stock upon
exercise, conversion or exchange of such Convertible Securities.
(B) If the Company in any manner issues or sells any Convertible
Securities with a fluctuating conversion or exercise price or exchange ratio to
any person or entity other than the holder hereof (a "VARIABLE RATE CONVERTIBLE
SECURITY"), then the price per share for which Common Stock is issuable upon
such exercise, conversion or exchange for purposes of the calculation
contemplated by Section 4(b)(ii)(A) shall be deemed to be the lowest price per
share which would be applicable (assuming all holding period and other
conditions to any discounts contained in such Convertible Security have been
satisfied) if the Market Price on the date of issuance of such Convertible
Security was 75% of the Market Price on such date (the "ASSUMED VARIABLE MARKET
PRICE"). Further, if the Market Price at any time or times thereafter is less
than or equal to the Assumed Variable Market Price last used for making any
adjustment under this Section 4 with respect to any Variable Rate Convertible
Security, the Exercise Price in effect at such time shall be readjusted to equal
the Exercise Price which would have resulted if the Assumed Variable Market
Price at the time of issuance of the Variable Rate Convertible Security had been
75% of the Market Price existing at the time of the adjustment required by this
sentence.
iii. Change in Option Price or Conversion Rate. If there is a change
at any time in (i) the amount of additional consideration payable to the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the exercise, conversion or
exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change will be
readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion rate, as the case may
be, at the time initially granted, issued or sold.
iv. Treatment of Expired Options and Unexercised Convertible
Securities. If, in any case, the total number of shares of Common Stock
issuable upon exercise of any Option or upon exercise, conversion or exchange
of any Convertible Securities is not, in fact, issued and the rights to
exercise such Option or to exercise, convert or exchange such Convertible
Securities shall have expired or terminated, the Exercise Price then in effect
will be readjusted to the Exercise Price which would have been in effect at the
time of such expiration or termination had such Option or Convertible
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<PAGE> 6
Securities, to the extent outstanding immediately prior to such expiration or
termination (other than in respect of the actual number of shares of Common
Stock issued upon exercise or conversion thereof), never been issued.
v. Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the amount
received by the Company therefor, before deduction of reasonable commissions,
underwriting discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance, grant or sale. In
case any Common Stock, Options or Convertible Securities are issued or sold for
a consideration part or all of which shall be other than cash, the amount of
the consideration other than cash received by the Company will be the fair
market value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the Company
will be the Market Price thereof as of the date of receipt. In case any Common
Stock, Options or Convertible Securities are issued in connection with any
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair market value of
such portion of the net assets and business of the non-surviving corporation as
is attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair market value of any consideration other than cash or
securities will be determined in good faith by an investment banker or other
appropriate expert of national reputation selected by the Company and
reasonably acceptable to the holder hereof, with the costs of such appraisal to
be borne by the Company.
vi. Exceptions to Adjustment of Exercise Price. No adjustment to
the Exercise Price will be made (i) upon the exercise of any warrants, options
or convertible securities issued and outstanding on September 18, 1997, and set
forth in Schedule 3(c) of that certain Securities Purchase Agreement dated as
of September 4, 1997 among the Company and the other signatories thereto (the
"Securities Purchase Agreement"), in accordance with the terms of such
securities as of such date; (ii) upon the grant or exercise of any stock or
options which may hereafter be granted or exercised under any employee benefit
plan of the Company now existing or to be implemented in the future, so long as
the issuance of such stock or options is approved by a majority of the
non-employee members of the Board of Directors of the Company or a majority of
the members of a committee of non-employee directors established for such
purposes; (iii) upon the issuance of any shares of Series D Preferred Stock or
Warrants issued or issuable pursuant to the terms of the Redemption and Consent
Agreement; (iv) upon the issuance of Common stock upon conversion of the Series
C Preferred Stock or the Series D Preferred Stock or exercise of the Warrants
and the warrants issued pursuant to the Securities Purchase Agreement; and (v)
as a result of the execution and delivery of the Merger Agreement and the other
Transaction Documents (as defined in the Merger Agreement) and the consummation
of the transactions contemplated thereby.
c. Subdivision or Combination of Common Stock. If the Company, at any
time during the Exercise Period, subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company, at
any time during the Exercise Period, combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) its share of
Common Stock into a smaller number of shares, then, after the date of record
for effecting such combination, the Exercise Price in effect immediately prior
to such combination will be proportionately increased.
d. Adjustment in Number of Shares. Upon each adjustment of the Exercise
Price pursuant to the provisions of this Section 4, the number of shares of
Common stock issuable upon exercise of this Warrant and for which this Warrant
is or may become exercisable shall be adjusted by multiplying a number equal to
the Exercise Price in effect immediately prior to such adjustment by the number
of shares of Common Stock issuable or for which this Warrant is or may become
exercisable (as
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<PAGE> 7
applicable) upon exercise of this Warrant immediately prior to such adjustment
and dividing the product so obtained by the adjusted Exercise Price.
e. Consolidation, Merger or Sale. In cash of any consolidation of
the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company at any time during the Exercise Period, then as a condition of such
consolidation, merger or sale or conveyance, adequate provision will be made
whereby the holder of this Warrant will have the right to acquire and receive
upon exercise of this Warrant in lieu of the shares of Common Stock immediately
theretofore acquirable upon the exercise of this Warrant, such shares of stock,
securities, cash or assets as were issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of this Warrant had such consolidation,
merger or sale or conveyance not taken place. In any such case, the Company will
make appropriate provision to insure that the provisions of this Section 4
hereof will thereafter be applicable as nearly as may be in relation to any
shares of stock or securities thereafter deliverable upon the exercise of this
Warrant. The Company will not effect any consolidation, merger or sale or
conveyance unless prior to the consummation thereof, the successor corporation
(if other than the Company) assumes by written instrument the obligations under
this Warrant and the obligations to deliver to the holder of this Warrant such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, the holder may be entitled to acquire.
f. Distribution of Assets. In case the Company shall declare or
make any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a partial liquidating dividend, stock repurchase by way of
return of capital or otherwise (including any dividend or distribution to the
Company's shareholders of cash or shares (or rights to acquire shares) of
capital stock of a subsidiary) (a "Distribution"), at any time during the
Exercise Period, then the holder of this Warrant shall be entitled upon exercise
of this Warrant for the purchase of any or all of the shares of Common Stock
subject hereto, to receive the amount of such assets (or rights) which would
have been payable to the holder had such holder been the holder of such shares
of Common Stock on the record date for the determination of shareholders
entitled to such Distribution.
g. Notice of Adjustment. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be certified
by the chief financial officer of the Company.
h. Minimum Adjustment of Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
i. No Fractional Shares. No fractional shares of Common Stock are
to be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.
j. Other Notices. In case at any time:
i. the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other distribution (other
than dividends or distributions payable in cash out of retained earnings
consistent with the Company's past practices with
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<PAGE> 8
respect to declaring dividends and making distributions) to the holders of the
Common Stock;
ii. the Company shall offer for subscription pro rata to the holders
of the Common Stock any additional shares of stock of any class or other rights;
iii. there shall be any capital reorganization of the Company, or
reclassification of the Common Stock, or consolidation or merger of the Company
with or into, or sale of all or substantially all of its assets to, another
corporation or entity; or
iv. there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a
record shall be taken for determining the holders of Common Stock entitled to
receive any such dividend, distribution, or subscription rights or for
determining the holders of Common Stock entitled to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, notice of the date (or, if not then known, a reasonable estimate
thereof by the Company) when the same shall take place. Such notice shall also
specify the date on which the holders of Common Stock shall be entitled to
receive such dividend, distribution, or subscription rights or to exchange
their Common Stock for stock or other securities or property deliverable upon
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, or winding-up, as the case may be. Such notice shall
be given at least 30 days prior to the record date or the date on which the
Company's books are closed in respect thereto. Failure to give any such notice
or any defect therein shall not affect the validity of the proceedings referred
to in clauses (i), (ii), (iii) and (iv) above.
k. Certain Events. If, at any time during the Exercise Period, any event
occurs of the type contemplated by the adjustment provisions of this Section 4
but not expressly provided for by such provisions, the Company will give notice
of such event as provided in Section 4(g) hereof, and the Company's Board of
Directors will make an appropriate adjustment in the Exercise Price and the
number of shares of Common Stock acquirable upon exercise of this Warrant so
that the rights of the holder shall be neither enhanced nor diminished by such
event.
l. Certain Definitions.
i. "COMMON STOCK DEEMED OUTSTANDING" shall mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) in the case of any
adjustment required by Section 4(a) resulting from the issuance of any Options,
the maximum total number of shares of Common Stock issuable upon the exercise
of the Options for which the adjustment is required (including any Common Stock
issuable upon the conversion of Convertible Securities issuable upon the
exercise of such Options), and (y) in the case of any adjustment required by
Section 4(a) resulting from the issuance of any Convertible Securities, the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of the Convertible Securities for which the adjustment
is required, as of the date of issuance of such Convertible Securities, if any.
ii. "DILUTIVE MARKET PRICE." as of any date, (i) means the closing
sale price for the shares of Common Stock as reported on the New York Stock
Exchange for the trading day immediately preceding such date, or (ii) if the New
York Stock Exchange is not the principal trading market for the shares of Common
Stock, the closing sale prices on the principal trading market for the Common
Stock for the trading day immediately preceding such date, or (iii) if market
value cannot be calculated as of such date on any of the foregoing bases, the
Dilutive Market Price shall be the average fair market value as reasonably
determined by an investment banking firm selected by the Company and
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<PAGE> 9
reasonably acceptable to the holder, with the costs of the appraisal to be
borne by the Company. The manner of determining the Dilutive Market Price of
the Common Stock set forth in the foregoing definition shall apply with respect
to any other security in respect of which a determination as to market value
must be made hereunder.
iii. "MARKET PRICE," as of any date, (i) means the volume weighted
average sale price for the shares of Common Stock as reported on the New York
Stock Exchange for the trading day immediately preceding such date, or (ii) if
the New York Stock Exchange is not the principal trading market for the shares
of Common Stock, the volume weighted average sale prices on the principal
trading market for the Common Stock for the trading day immediately preceding
such date, or (iii) if market value cannot be calculated as of such date on any
of the foregoing bases, the Market Price shall be the average fair market value
as reasonably determined by an investment banking firm selected by the Company
and reasonably acceptable to the holder, with the costs of the appraisal to be
borne by the Company. The manner of determining the Market Price of the Common
Stock set forth in the foregoing definition shall apply with respect to any
other security in respect of which a determination at to market value must be
made hereunder.
iv. "COMMON STOCK," for purposes of this Section 4, includes the
Common Stock and any additional class of stock of the Company having no
preference as to dividends or distributions on liquidation, provided that the
shares purchasable pursuant to this Warrant shall include only Common Stock in
respect of which this Warrant is exercisable, or shares resulting from any
subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 4(e) hereof, the stock or other securities or
property provided for in such Section.
v. "ADJUSTMENT DATE" means the earliest to occur of (w) June 1,
1998, (x) the date it is publicly announced that ValueVision International,
Inc. ("VVI") is unwilling to proceed with the transactions contemplated by the
"Merger Agreement" on the terms set forth therein; (y) the Merger Termination
Date as defined in the Merger Agreement, or (z) the date on which demand is
made upon the Corporation for payment of principal pursuant to the Demand Note
issued by the Corporation to VVI pursuant to the Merger Agreement; provided,
however, that the date set forth in subparagraph (w) above shall be extended to
August 31, 1998 if on or before the close of business on June 1, 1998 the
Corporation and VVI shall deliver to each of the holders of the Warrants who
are parties to the Redemption and Consent Agreement, and their permitted
transferees, a certification executed by the chief executive officer of each of
the Corporation and VVI to the effect that all conditions precedent to
completion of the transactions contemplated by the Merger Agreement have been
satisfied or waived except only the consent required pursuant to Section 6.1(c)
of the Merger Agreement.
vi. "MERGER AGREEMENT" means that certain Agreement and Plan of
Reorganization and Merger dated as of January 5, 1998 among the Corporation,
ValueVision International, Inc., and V-L Holdings Corp.
5. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. No Rights of Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the holder hereof to purchase Warrant Shares, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the Exercise Price or as a shareholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
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<PAGE> 10
7. Transfer, Exchange, Redemption and Replacement of Warrant.
a. Restriction on Transfer. This Warrant and the rights granted to
the holder hereof are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Section 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Section (f) and (g) hereof and to the provisions
of Sections 2(f) and 2(g) of the Redemption and Consent Agreement. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notices to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Section 8 hereof are assignable only in
accordance with the provisions of that certain Registration Rights Agreement
dated as of September 4, 1997, as amended by Amendment No. 1 to the
Registration Rights Agreement dated as of the date hereof, by and among the
Company and the other signatories thereto (the "REGISTRATION RIGHTS AGREEMENT").
b. Warrant Exchangeable for Different Denominations. This Warrant
is exchangeable, upon the surrender hereof by the holder hereof at the office
or agency of the Company referred to in Section 7(e) below, for new Warrants of
like tenor of different denominations representing in the aggregate the right
to purchase the number of shares of Common Stock which may be purchased
hereunder, each of such new Warrants to represent the right to purchase such
number of shares as shall be designated by the holder hereof at the time of
such surrender.
c. Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount
to the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
d. Cancellation: Payment of Expenses. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided
in this Section 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all
other expenses (other than the legal expenses, if any, incurred by the Holder
or transferees) and charges payable in connection with the preparation,
execution, and delivery of Warrants pursuant to this Section 7. The Company
shall indemnify and reimburse the holder of this Warrant for all costs and
expenses (including legal fees) incurred by such holder in connection with the
enforcement of its rights hereunder.
e. Warrant Register. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in
which the Company shall record the name and address of the person in whose name
this Warrant has been issued, as well as the name and address of each
transferee and each prior owner of this Warrant.
f. Exercise or Transfer Without Registration. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the
Securities Act and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such exercise, transfer, or
exchange, (i) that the holder or transferee of this Warrant, as the case may
be, furnish to the Company a written opinion of counsel (which opinion shall be
in form, substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such exercise, transfer, or exchange may be
made without registration under the Securities Act and under applicable state
securities or blue sky laws, (ii) that the holder or transferee execute and
deliver to the Company an
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<PAGE> 11
investment letter in form and substance acceptable to the Company and (iii)
that the transferee be an "accredited investor" as defined in Rule 501(a)
promulgated under the Securities Act; provided that no such opinion, letter,
status as an "accredited investor" shall be required in connection with a
transfer pursuant to Rule 144 under the Securities Act.
g. Additional Restrictions on Exercise or Transfer. Notwithstanding
anything contained herein to the contrary, unless the holder hereof delivers a
waiver in accordance with the last sentence of this Section 7(g), in no event
shall the holder hereof exercise Warrants to the extent that (a) the number of
shares of Common Stock beneficially owned by such holder and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unexercised portion of the Warrants or the
unexercised or unconverted portion of any other securities of the Company
(including the Series C Preferred Stock, the Series D Preferred Stock and
including the Warrants issued pursuant to that certain Stock Purchase Agreement
among the Company and the other signatories thereto dated September 4, 1998)
subject to a limitation on conversion or exercise analogous to the limitation
contained herein) and (b) the number of shares of Common Stock issuable upon
exercise of the Warrants (or portion thereof) with respect to which the
determination described herein is being made, would result in beneficial
ownership by such holder and its affiliates of more than 4.9% of the outstanding
shares of Common Stock. For purposes of the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder,
except as otherwise provided in clause (a) hereof. Except as provided in the
immediately succeeding sentence, the restrictions contained in this Section 7(g)
may not be amended without the consent of the holder of this Warrant and the
holders of a majority of the Company's then outstanding Common Stock. The holder
hereof may waive the restrictions set forth in this Section 7(g) by written
notice to the Company upon not less than sixty one (61) days prior notice (with
such waiver taking effect only upon the expiration of such sixty one (61) day
notice period).
8. Registration Rights. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in the Registration Rights
Agreement, including the right to assign such rights to certain assignees, as
set forth therein.
9. Notices. Any notices required or permitted to be given under the
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier, or by confirmed telecopy, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
National Media Corporation
Eleven Penn Center
1835 Market Street
Suite 1100
Philadelphia, PA 19103
Telecopy: (215) 988-4869
Attn: Robert N. Verratti, Chief Executive Officer, and
Attn: Brian J. Sisko, Senior Vice President and General Counsel
If to the holder, at such address as such holder shall have provided in writing
to the Company, or at such other address as such holder furnishes by notice
given in accordance with this Section 9.
10. Governing Law; Jurisdiction. This Warrant shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Company
irrevocably consents to the jurisdiction of the United States federal
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<PAGE> 12
courts and state courts located in the State of Delaware in any suit or
proceeding based on or arising under this Agreement and irrevocably agrees that
all claims in respect of such suit or proceeding may be determined in such
courts. The Company irrevocably waives any objection to the laying of venue and
the defense of an inconvenient forum to the maintenance of such suit or
proceeding. The Company further agrees that service of process upon the Company
mailed by certified or registered mail shall be deemed in every respect
effective service of process upon the Company in any such suit or proceeding.
Nothing herein shall affect the holder's right to serve process in any other
manner permitted by law. The Company agrees that a final non-appealable judgment
in any such suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner.
11. Miscellaneous.
a. Amendments. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the holder hereof.
b. Description Headings. The descriptive headings of the several
Sections of this Warrant are inserted for purposes of reference only, and shall
not affect the meaning or construction of any of the provisions hereof.
c. Cashless Exercise. Notwithstanding anything to the contrary
contained in this Warrant, if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement under the
Securities Act, this Warrant may be exercised at any time after the first
anniversary of the Issue Date until the end of the Exercise Period, by
presentation and surrender of this Warrant to the Company at its principal
executive offices with a written notice of the holder's intention to effect a
cashless exercise, including a calculation of the number of shares of Common
Stock to be issued upon such exercise in accordance with the terms hereof (a
"CASHLESS EXERCISE"). In the event of a Cashless Exercise, in lieu of paying the
Exercise Price in cash, the holder shall surrender this Warrant for that number
of shares of Common Stock determined by multiplying the number of Warrant Shares
to which it would otherwise be entitled by a fraction, the numerator of which
shall be the difference between the Market Price of a share of the Common Stock
on the date of exercise and the Exercise Price, and the denominator of which
shall be such Market Price per share of Common Stock.
d. Business Day. For purposes of this Warrant, the term "business
day" means any day, other than a Saturday or Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law,
regulation or executive order to close.
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<PAGE> 13
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
NATIONAL MEDIA CORPORATION
By: ____________________________________
Name: __________________________________
Title: _________________________________
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<PAGE> 14
FORM OF EXERCISE AGREEMENT
(To be Executed by the Holder in order to Exercise the Warrant)
To: National Media Corporation
Eleven Penn Center
1835 Market Street
Suite 1100
Philadelphia, PA 19103
Telecopy: (215) 988-4869
Attn: Robert N. Verratti, and
Attn: Brian J. Sisko
The Undersigned hereby irrevocably exercises the right to purchase
___________ shares of the Common Stock of National Media Corporation, a
corporation organized under the laws of the State of Delaware (the "Company"),
evidenced by the attached Warrant, and herewith makes payment of the Exercise
Price with respect to such shares in full, all in accordance with the conditions
and provisions of said Warrant.
i. The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of
1933, as amended, or any state securities laws, and agrees that the following
legend may be affected to the stock certificate for the Common Stock hereby
subscribed for if resale of such Common Stock is not registered or if Rule 144
is unavailable.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE
SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED,
SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
(a) The undersigned requests that stock certificates for such shares be
issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the Holder and delivered to the
undersigned at the address set forth below:
Dated:
---------------- ------------------------------
Signature of Holder
------------------------------
Name of Holder (Print)
Address
------------------------------
------------------------------
------------------------------
<PAGE> 15
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth hereinbelow, to:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
, and hereby irrevocably constitutes and appoints ___________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated: , ,
-------------- -----
In the presence of
- --------------------------
Name:
----------------------,-------,
Signature:
---------------------------------
Title of Signing Officer or Agent (if any):
----------------------------------
Address:
----------------------------------
----------------------------------
Note: The above signature should
correspond exactly with the name on
the face of the within Warrant.
<PAGE> 1
EXHIBIT 10.70
AMENDMENT NO. 1 TO
REGISTRATION RIGHTS AGREEMENT
AMENDMENT NO. 1, dated ____________, 1998, (the "Amended Agreement") to
the REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT"), dated as of September 4,
1997, by and among NATIONAL MEDIA CORPORATION, a corporation organized under the
laws of the State of Delaware, with headquarters located at Eleven Penn Center,
1835 Market Street, Suite 1100, Philadelphia, Pennsylvania 19103 (the
"COMPANY"), V-L HOLDING CORP., a corporation organized under the laws of the
State of Delaware, and the undersigned (together with affiliates, the "INITIAL
INVESTORS").
In consideration of the premises and the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Initial Investors hereby
agree that the Agreement be amended as follows:
1. The recitals to the Agreement are amended in their entirety to
read as follows:
"WHEREAS:
"A. In connection with the Securities Purchase
Agreement dated September 4, 1997 by and between the Company
and the Initial Investors (the "SECURITIES PURCHASE
AGREEMENT"), the Company issued to the Initial Investors (i)
shares of its Series C Convertible Preferred Stock (the "C
PREFERRED STOCK") that are convertible into shares of the
Company's common stock, par value $.01 per share (the "COMMON
STOCK"), upon the terms and subject to the limitations and
conditions set forth in the Certificate of Designations,
Rights and Preferences with respect to such C Preferred Stock
(the "C CERTIFICATE OF DESIGNATION") and (ii) warrants (the
"WARRANTS") to acquire shares of Common Stock;
"B. In connection with the Redemption and
Consent Agreement dated as of January 5, 1998, among the
Company, the Initial Investors and ValueVision International,
Inc. (the "REDEMPTION AND CONSENT AGREEMENT"), the Company has
issued to the Initial Investors, in exchange for the C
Preferred Stock, newly issued shares of its Series D
Convertible Preferred Stock (the "PREFERRED STOCK") that are
also convertible into shares of the Company's Common Stock,
upon the terms and subject to the limitations and conditions
set forth in the Certificate of Designations, Rights and
Preferences with respect to such Preferred Stock (the
"CERTIFICATE OF DESIGNATION") and (ii) warrants (the "NEW
WARRANTS") to acquire shares of Common Stock. The Warrants and
the New Warrants are collectively referred to herein as the
"Warrants".
"C. To induce the Initial Investors to execute
and deliver the Redemption and Consent Agreement, the Company
has agreed to extend the registration rights provided in the
Agreement to the Common Stock issuable upon conversion of the
Preferred Stock and upon the exercise of the New Warrants."
"D. V-L Holdings Corp. is being made a party
hereto for the purpose of assuming the obligations of the
Company under the Agreement and this Amended Agreement
following the Closing of the Merger (as defined below)."
2. The term "Common Stock" shall have the meaning set forth above
in the Recitals, provided that upon the closing of the merger (the "Merger")
between the Company and ValueVision International, Inc. pursuant to the
Agreement and Plan of Reorganization and Merger dated January 5, 1998, "Common
Stock" shall thereafter mean the "common stock, par value $.01 per share of V-L
Holdings Corp., a Delaware corporation."
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<PAGE> 2
The term "Company" shall have the meaning set forth above in
the Preamble, provided that upon the closing of the Merger, "Company" shall
thereafter mean V-L Holdings Corp.
3. Paragraph 1.a(iii) of the Agreement is hereby amended to read
in its entirety as follows:
"(iii) "REGISTRABLE SECURITIES" means shares of
Common Stock issuable upon the conversion of the Preferred
Stock (the "CONVERSION SHARES") and the shares of Common Stock
issuable upon exercise of the Warrants and the New Warrants
(collectively the "WARRANT SHARES") (including any Conversion
Shares issuable with respect to Conversion Default Payments
under the Certificate of Designation or in redemption of the
Preferred Stock and any Warrant Shares issuable with respect
to Exercise Default Payments under the Warrants) and any
shares of capital stock issued or issuable, from time to time
(with any adjustments), as a distribution on or in exchange
for or otherwise with respect to any of the foregoing;
provided that upon the redemption of all of the Preferred
Stock by the Company at the closing of the Merger, the term
"Registrable Securities" shall thereafter not include any
Conversion Shares."
4. The first five lines of paragraph 2.(a) of the Agreement are
amended in their entirety to read as follows:
"(a) Mandatory Registration. The Company has
prepared and filed with the SEC on a timely basis Registration
Statements on Form S-3, each of which has become effective
covering the resale of at least 7,000,000 Registrable. . ."
5. The first six lines of paragraph 2.b are amended in their
entirety to read as follows:
"(b) Payments by the Company. If, after the
Registration Statement has been declared effective by the SEC,
sales of all the Registrable. . ."
6. The last sentence of paragraph 3.c is hereby deleted.
7. The first four lines of paragraph 4.a are amended in their
entirety to read as follows:
"The Company shall keep the Registration Statement
referred to in Section 2(a) effective pursuant to Rule 415 at
all. . ."
8. Section 12.e of the Agreement is amended in its entirety to
read as follows:
"This Amended Agreement, the Agreement, the
Securities Purchase Agreement, the Redemption and Consent
Agreement, the Warrants and the New Warrants (including all
schedules and exhibits thereto) constitute the entire
agreement among the parties hereto with respect to the subject
matter hereof and thereof. This Agreement, the Amended
Agreement, the Securities Purchase Agreement, the Redemption
and Consent Agreement, the Warrants and the New Warrants
supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof and
thereof."
9. The undersigned parties hereby agree that any provisions in
the Agreement that relate to any failure or delay by the Company in preparing
and filing with the SEC a registration statement covering the Registrable
Securities or to have such Registration Statement declared effective (but not
the provisions relating to maintaining the effectiveness of the Registration
Statement) shall be deemed to be inapplicable as a result of the filing and
effectiveness of the Registration Statement described in Section 2(a) of the
Agreement, as amended. The undersigned parties hereby further agree that
notwithstanding anything to the contrary in the Agreement or in this Amended
Agreement, the Initial Investors hereby consent to and waive any claims,
benefits or rights with respect to, the failure of the Company to have a
Registration Statement covering the Registrable Shares effective during the 120
days following the closing of the Merger; provided, however, that such consent
and waiver are contingent upon a Registration Statement being filed by the
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<PAGE> 3
Company with the SEC within thirty days after the closing of the Merger, and
being declared effective by the SEC within one hundred twenty days after the
closing of the Merger.
10. To the extent that there are any inconsistent provisions
between this Amended Agreement and the Agreement, the terms of the Amended
Agreement shall control, and such inconsistent provision in the Agreement is
hereby superseded by the Amended Agreement. In all other respects, the Agreement
is hereby confirmed and, as amended hereby, remains in full force and effect.
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<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this Amended Agreement to
be duly executed as of the date first above written.
NATIONAL MEDIA CORPORATION V-L HOLDINGS CORP.
By:_______________________ By:_______________________
Name:_____________________ Name:_____________________
Its:______________________ Its:______________________
INITIAL INVESTORS:
CAPITAL VENTURES INTERNATIONAL RGC INTERNATIONAL INVESTORS, LDC
By: Heights Capital Management, By: Rose Glen Capital Management, L.P.
its authorized agent Investment Manager
By:_______________________ By: RGC General Partner Corp.,
Name:_____________________ General Partner
Its:______________________
By:______________________
Name:____________________
Its:_____________________
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<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
SUBSIDIARIES OF QUANTUM DIRECT CORPORATION
1. ValueVision International, Inc., a Minnesota corporation
2. National Media Corporation, a Delaware corporation
3. Beautiful Images, Inc., a Delaware corporation
4. Business Publications, Inc., a Delaware corporation
5. Catalog Ventures, Inc., a Minnesota corporation
6. Dignity Prestige Sdn Bhd, a Malaysia corporation
7. DirectAmerica Corporation, a Delaware corporation
8. Multi-Media Distribution Center, Inc., a Delaware corporation
9. Nancy Langston & Associates, Inc., a Delaware corporation
10. National Media Holdings, Inc., a Delaware corporation
11. National Media Marketing Corporation, a Delaware corporation
12. National Media Media Corp., a Delaware corporation
13. NPA Realty Corp., a New York corporation
14. Packer Capital, Inc., a Minnesota corporation
15. Positive Response Media, Inc., a California corporation
16. Positive Response Seminars, Inc., a California corporation
17. Positive Response Telemarketing, Inc., a California corporation
18. Positive Response Television, Inc., a Delaware corporation
19. PRDISC, Inc., a California corporation
20. Prestige Marketing International Limited, a New Zealand corporation
21. Prestige Marketing Limited, a New Zealand corporation
22. Quantum Asia, a Hong Kong joint venture
23. Quantum Far East Ltd., a New Zealand corporation
24. Quantum International Japan Company Ltd.,a Japanese corporation
25. Quantum International Limited, a United Kingdom corporation
26. Quantum Marketing International, Inc., a Delaware corporation
27. Quantum Marketing Mexico S.A. de C.V., a Mexico corporation
28. Quantum North America, Inc., a Delaware corporation
29. Quantum Polska Sp. Z.o.o., a Poland corporation
30. Quantum Productions AG, a Switzerland corporation
31. Suzanne Paul Holdings Pty Limited, an Australian corporation
32. Suzanne Paul (Australia) Pty Limited, an Australia corporation
33. Telemall Shopping Pty Ltd., an Australia corporation
34. ValueVision Acquisition I Corp., a Minnesota corporation
35. ValueVision Direct Marketing Company, Inc., a Minnesota corporation
36. VVI Baytown, Inc., a Minnesota corporation
37. VVI Fulfillment Center, Inc., a Minnesota corporation
38. VVI Seattle, Inc., a Minnesota corporation
39. VVILPTV, Inc., a Minnesota corporation
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement on Form S-4 of our report dated
March 31, 1997, included in ValueVision International, Inc.'s Form 10-K for the
year ended January 31, 1997, and to all references to our firm included in this
Registration Statement.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
March 12, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and
"National Media Summary Historical Financial Data" in the Registration Statement
(Form S-4, No. 333- ) and related Prospectus of National Media Corporation
and ValueVision International, Inc. and to the incorporation by reference
therein of our report dated July 14, 1997, with respect to the consolidated
financial statements and schedule of National Media Corporation included in its
Annual Report (Form 10-K) for the year ended March 31, 1997, filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
March 12, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF LEHMAN BROTHERS, INC.
We hereby consent to the inclusion in the Joint Prospectus/Proxy
Solicitation Statement forming part of this Registration Statement on Form S-4
of Quantum Direct Corporation. ("Parent") relating to the proposed merger
involving National Media Corporation and ValueVision International, Inc. of our
opinion attached as Appendix B thereto and to the reference to such opinion and
to our firm therein. In giving such consent, we do not admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933 and the rules and regulations of the Securities and
Exchange Commission issued thereunder and we do not thereby admit that we are
experts with respect to any part of the Registration Statement under the meaning
of the term "experts" as used in the Securities Act of 1933.
Lehman Brothers, Inc.
By: /s/ Paul G. Parker
------------------------------------
<PAGE> 1
EXHIBIT 23.4
CONSENT OF BEAR, STEARNS & CO. INC.
We hereby consent to the inclusion in the Joint Proxy Statement/Prospectus
forming part of this Registration Statement on Form S-4 of Quantum Direct
Corporation relating to the proposed merger involving National Media Corporation
and ValueVision International, Inc. of our opinion attached as Appendix C
thereto. In addition, we hereby consent to the description of and reference to
such opinion therein, and reference to our firm therein. In giving such
consents, we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933 and the rules
and regulations of the Securities and Exchange Commission issued thereunder.
March 13, 1998
Bear, Stearns & Co. Inc.
By: /s/ James Carroll
------------------------------------
<PAGE> 1
EXHIBIT 99.1
CONSENT OF CONSTANTINOS I. COSTALAS
I hereby consent to the use of my name in the Registration
Statement on Form S-4 of Quantum Direct Corporation and any amendment thereto,
as the same appears therein under the caption "The Combined Company--Directors
and Executive Officers" with respect to my becoming a director of Quantum Direct
Corporation.
March 12, 1998
/s/ Constantinos I. Costalas
-------------------------------------
Constantinos I. Costalas
<PAGE> 1
EXHIBIT 99.2
CONSENT OF ALBERT R. DOWDEN
I hereby consent to the use of my name in the Registration
Statement on Form S-4 of Quantum Direct Corporation and any amendment thereto,
as the same appears therein under the caption "The Combined Company--Directors
and Executive Officers" with respect to my becoming a director of Quantum Direct
Corporation.
March 12, 1998
/s/ Albert R. Dowden
-------------------------------------
Albert R. Dowden
<PAGE> 1
EXHIBIT 99.3
CONSENT OF MARSHALL S. GELLER
I hereby consent to the use of my name in the Registration
Statement on Form S-4 of Quantum Direct Corporation and any amendment thereto,
as the same appears therein under the caption "The Combined Company--Directors
and Executive Officers" with respect to my becoming a director of Quantum Direct
Corporation.
March 12, 1998
/s/ Marshall S. Geller
------------------------------------
Marshall S. Geller
<PAGE> 1
EXHIBIT 99.4
CONSENT OF FREDERICK S. HAMMER
I hereby consent to the use of my name in the Registration
Statement on Form S-4 of Quantum Direct Corporation and any amendment thereto,
as the same appears therein under the caption "The Combined Company--Directors
and Executive Officers" with respect to my becoming a director of Quantum Direct
Corporation.
March 12, 1998
/s/ Frederick S. Hammer
------------------------------------
Frederick S. Hammer
<PAGE> 1
EXHIBIT 99.5
CONSENT OF NICHOLAS M. JAKSICH
I hereby consent to the use of my name in the Registration
Statement on Form S-4 of Quantum Direct Corporation and any amendment thereto,
as the same appears therein under the caption "The Combined Company--Directors
and Executive Officers" with respect to my becoming a director of Quantum Direct
Corporation.
March 12, 1998
/s/ Nicholas M. Jaksich
------------------------------------
Nicholas M. Jaksich
<PAGE> 1
EXHIBIT 99.6
CONSENT OF ROBERT L. JOHANDER
I hereby consent to the use of my name in the Registration
Statement on Form S-4 of Quantum Direct Corporation and any amendment thereto,
as the same appears therein under the caption "The Combined Company--Directors
and Executive Officers" with respect to my becoming a director of Quantum Direct
Corporation.
March 12, 1998
/s/ Robert L. Johander
------------------------------------
Robert L. Johander
<PAGE> 1
EXHIBIT 99.7
CONSENT OF ROBERT J. KORKOWSKI
I hereby consent to the use of my name in the Registration
Statement on Form S-4 of Quantum Direct Corporation and any amendment thereto,
as the same appears therein under the caption "The Combined Company--Directors
and Executive Officers" with respect to my becoming a director of Quantum Direct
Corporation.
March 12, 1998
/s/ Robert J. Korkowski
-----------------------------------
Robert J. Korkowski
<PAGE> 1
EXHIBIT 99.8
CONSENT OF PAUL D. TOSETTI
I hereby consent to the use of my name in the Registration
Statement on Form S-4 of Quantum Direct Corporation and any amendment thereto,
as the same appears therein under the caption "The Combined Company--Directors
and Executive Officers" with respect to my becoming a director of Quantum Direct
Corporation.
March 12, 1998
/s/ Paul D. Tosetti
------------------------------------
Paul D. Tosetti
<PAGE> 1
EXHIBIT 99.9
CONSENT OF ROBERT N. VERRATTI
I hereby consent to the use of my name in the Registration
Statement on Form S-4 of Quantum Direct Corporation and any amendment thereto,
as the same appears therein under the caption "The Combined Company--Directors
and Executive Officers" with respect to my becoming a director of Quantum Direct
Corporation.
March 12, 1998
/s/ Robert N. Verratti
------------------------------------
Robert N. Verratti
<PAGE> 1
EXHIBIT 99.10
CONSENT OF JON W. YOSKIN II
I hereby consent to the use of my name in the Registration
Statement on Form S-4 of Quantum Direct Corporation and any amendment thereto,
as the same appears therein under the caption "The Combined Company--Directors
and Executive Officers" with respect to my becoming a director of Quantum Direct
Corporation.
March 12, 1998
/s/ Jon W. Yoskin II
------------------------------------
Jon W. Yoskin II
