<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Information to Be Included in Statements Filed Pursuant
To Rule 13d-1(a) and Amendments Thereto Filed Pursuant to Rule 13d-2(a)
(AMENDMENT NO. )*
ValueVision International Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock par value $.01 per share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
92047K107
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(CUSIP Number)
Nancy E. Barton, Esq., General Electric Capital Corporation,
260 Long Ridge Road, Stamford, Connecticut 06927 (203) 357-4000
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
April 15, 1999
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
<PAGE> 2
SCHEDULE 13D
CUSIP NO. 92047K107
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GE CAPITAL EQUITY INVESTMENTS, INC. 06-1468495
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
-0-
SHARES -----------------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
3,939.500
OWNED BY EACH -----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
-0-
PERSON -----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
3,939,500
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,939.500
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.1%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE AND THE SIGNATURE ATTESTATION.
<PAGE> 3
SCHEDULE 13D
CUSIP NO. 92047K107
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
NATIONAL BROADCASTING COMPANY, INC. 14-1682529
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
Not Applicable
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
-0-
SHARES -----------------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
3,939,500
OWNED BY EACH -----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
-0-
PERSON -----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
3,939,500
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,939,500
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.1%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE AND THE SIGNATURE ATTESTATION.
<PAGE> 4
SCHEDULE 13D
CUSIP NO. 92047K107
---------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GENERAL ELECTRIC CAPITAL CORPORATION 13-1500700
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
Not Applicable
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
-0-
SHARES -----------------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
3,939,300
OWNED BY EACH -----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
-0-
PERSON -----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
3,939,500
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Not Applicable (see 11 above)
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE AND THE SIGNATURE ATTESTATION.
<PAGE> 5
SCHEDULE 13D
CUSIP NO. 92047K107
---------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GENERAL ELECTRIC CAPITAL SERVICES, INC. 06-1109503
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
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3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
Not Applicable
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
Disclaimed (see 11 below)
SHARES -----------------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
-0-
OWNED BY EACH -----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
Disclaimed (see 11 below)
PERSON -----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
Beneficial Ownership of all Shares disclaimed by General Electric Capital
Services, Inc.
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Not Applicable (see 11 above)
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE AND THE SIGNATURE ATTESTATION.
<PAGE> 6
SCHEDULE 13D
CUSIP NO. 92047K107
---------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GENERAL ELECTRIC COMPANY 14-0689340
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
Not Applicable
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
Disclaimed (see 11 below)
SHARES -----------------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
-0-
OWNED BY EACH -----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
Disclaimed (see 11 below)
PERSON -----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
Beneficial Ownership of all Shares disclaimed by General Electric Company
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Not Applicable (see 11 above)
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE AND THE SIGNATURE ATTESTATION.
<PAGE> 7
SCHEDULE 13D
CUSIP NO. 92047K107
---------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
NATIONAL BROADCASTING COMPANY HOLDING, INC. 13-3448662
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
Not Applicable
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
Disclaimed (see 11 below)
SHARES -----------------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
-0-
OWNED BY EACH -----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
Disclaimed (see 11 below)
PERSON -----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
Beneficial Ownership of all Shares discalimed by National Broadcasting
Company Holding, Inc.
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Not Applicable (see 11 below)
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE AND THE SIGNATURE ATTESTATION.
<PAGE> 8
CUSIP 92047K107
Item 1. Security and Issuer.
The title and class of equity security to which this statement on
Schedule 13D relates is the common stock, par value $.01 per share ("Common
Stock"), of ValueVision International, Inc., a Minnesota corporation (the
"Company"). The address of the Company's principal executive offices is 6740
Shady Oak Road, Eden Prairie, Minnesota 55344-3433.
ITEM 2. Identity and Background.
This statement is filed by GE Capital Equity Investments, Inc.
("GECEI"), for and on behalf of itself, National Broadcasting Company, Inc.
("NBC"), General Electric Capital Corporation ("GE Capital"), General Electric
Capital Services, Inc. ("GECS"), National Broadcasting Company Holding, Inc
("NBC Holding") and General Electric Company ("GE"). GECEI is a wholly-owned
subsidiary of GE Capital; GE Capital is a subsidiary of GECS; NBC is a
wholly-owned subsidiary of NBC Holding and GECS and NBC Holding are wholly-owned
subsidiaries of GE. GECEI, NBC, GE Capital, GECS, NBC Holding and GE are
referred to herein collectively as the "Reporting Persons". An agreement among
the Reporting Persons with respect to the filing of this statement is attached
hereto as Exhibit 1.
GECEI is a Delaware corporation with its principal executive offices
located at 120 Long Ridge Road, Stamford, Connecticut 06927. The principal
business activities of GECEI are the making, managing and disposing of
investments in private and public companies. NBC is a Delaware corporation with
its principal executive offices located at 30 Rockefeller Plaza, New York, New
York 10112. The principal business activities of NBC are the operation of
television and cable broadcast networks and television stations. GE Capital is a
New York corporation with its principal executive offices located at 260 Long
Ridge Road, Stamford, Connecticut 06927. GE Capital, together with its
affiliates, operates primarily in the financing industry and, to a lesser
degree, in the life insurance and property/casualty insurance industries. GECS
is a Delaware corporation with its principal executive offices located at 260
Long Ridge Road, Stamford, Connecticut 06927. GECS is a holding company which
owns all the common stock of GE Capital and other subsidiaries. NBC Holding is a
Delaware corporation with its principal executive offices located at 30
Rockefeller Plaza, New York, New York 10112. NBC Holding is a holding company
which owns all the common stock of NBC. GE is a New York corporation with its
principal executive offices located at 3135 Easton Turnpike, Fairfield,
Connecticut 06431. GE engages in providing a wide variety of industrial,
commercial and consumer products and services.
The name, business address, present principal occupation or employment,
and citizenship of each director and executive officer of GECEI, NBC, GE
Capital, GECS, GE and NBC Holding are set forth on Schedules A, B, C, D, E and F
attached hereto, respectively.
Except as set forth on Schedule G hereto, during the last five years
none of the Reporting Persons, nor, to the best of their knowledge, any of their
directors or executive officers, has been (i) convicted of any criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order
<PAGE> 9
CUSIP 92047K107
enjoining future violations of, or prohibiting or mandating activities subject
to federal or state securities laws or finding any violation with respect to
such laws.
This statement is being filed while the Reporting Persons are in the
process of verifying information required herein from their respective directors
and executive officers. If the Reporting Persons obtain information concerning
such individuals which would cause a material change in the disclosure contained
herein, an amendment to this statement will be filed that will disclose such
change.
ITEM 3. Source and Amount of Funds or Other Consideration.
On March 8, 1999, the Company and GECEI entered into an Investment
Agreement, as amended by the First Amendment and Agreement dated as of April 15,
1999 (as so amended, the "Investment Agreement"), which provides for, among
other things, (i) the issuance and sale to GECEI of 5,339,500 shares of Series A
Redeemable Convertible Preferred Stock of the Company (the "Preferred Stock")
and (ii) the issuance to GECEI, pursuant to a warrant, of up to that number of
shares of Common Stock that result in GECEI (and its affiliates) beneficially
owning 39.9% of the outstanding Common Stock (the "Investment Warrant"), in each
case subject to the terms and conditions therein. The aggregate purchase price
for the 5,339,500 shares of Preferred Stock and the Investment Warrant is
$44,265,000 in cash. In addition, on March 8, 1999, the Company and NBC entered
into a Distribution and Marketing Agreement (the "Distribution Agreement"),
which provides for, among other things (i) the issuance to NBC of a warrant to
purchase up to 1,450,000 shares of Common Stock (the "Distributor Warrant") and
(ii) the issuance to NBC, from time to time and subject to the satisfaction of
certain performance targets, of warrants to purchase shares of Common Stock (the
"Performance Warrants" and, together with the Investment Warrant and the
Distributor Warrant, the "Warrants"). A copy of (a) the Investment Agreement
(including the amendment thereto) is attached hereto as Exhibit 2, (b) the
Distribution Agreement is attached hereto as Exhibit 3, (c) the Investment
Warrant is attached hereto as Exhibit 4, (d) the Distributor Warrant is attached
hereto as Exhibit 5 and (e) the Form of Performance Warrant is attached hereto
as Exhibit 6.
On April 15, 1999, the Company issued (i) to GECEI, 3,739,500 shares of
the Preferred Stock (the "Initial Preferred Shares") for cash consideration
totaling $31,000,836.69 and (ii) to NBC, the Distributor Warrant. The issuance
of the remaining 1,600,000 shares of the Preferred Stock (the "Additional
Preferred Shares" and, together with the Initial Preferred Shares, the
"Preferred Shares") for cash consideration totaling $13,264,163.31 is subject to
the approval by a majority of the total votes cast on the proposed issuance of
the Additional Preferred Shares by the Company's shareholders (the "Company
Shareholders Approval"). The source of funds used to purchase the Initial
Preferred Shares and the Investment Warrant was the working capital of GECEI. In
the event that the Company Shareholders Approval is obtained, GECEI expects to
obtain the necessary funds to purchase the Additional Preferred Shares from the
working capital of GECEI.
<PAGE> 10
CUSIP 92047K107
The powers, designations, preferences and rights of the Preferred Stock
are governed by a Certificate of Designation, filed with the Secretary of State
of the State of Minnesota on April 15, 1999, a copy of which is attached hereto
as Exhibit 7 (the "Certificate"). Pursuant to the terms of the Certificate, the
Preferred Stock ranks prior, both as to payment of dividends and as to
distributions of assets upon liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, to all of the Company's now existing
or thereafter issued Common Stock and all of the Company's now existing or
thereafter issued Junior Stock. In the event that the Company declares and pays
any dividend on the Common Stock while any shares of Preferred Stock are
outstanding, dividends will be paid on the outstanding shares of Preferred Stock
on the same basis as if such Preferred Stock had been converted to Common Stock
prior to the date fixed for determination of the holders of Common Stock
entitled to such dividend. The Preferred Stock must be redeemed by the Company
ten years after the date of issuance of the Preferred Stock (the "Preferred
Stock Issue Date") in cash at a redemption price per share equal to $8.288 (the
"Stated Value"), plus an amount in cash equal to all declared and unpaid
dividends, if any. The Preferred Stock will also be redeemable at the option of
the holder(s) thereof upon a Change of Control (as defined in the Certificate)
of the Company, at a redemption price per share equal to 100% of the Stated
Value plus declared and unpaid dividends, if any, thereon outstanding to the
redemption date. Subject to adjustment pursuant to customary anti-dilution
provisions, each full share of Preferred Stock will be convertible at the option
of the holder thereof, at any time (including upon a change of control) from the
Preferred Stock Issue Date until the close of business on the tenth business day
prior to any date fixed for redemption of such shares, into a number of fully
paid and nonassessable shares of Common Stock equal to the Stated Value of each
full share of Preferred Stock to be converted divided by a conversion price (the
"Conversion Price"), which initially will be $8.29. This description of the
Certificate is only a summary thereof and is qualified in its entirety by
reference to the Certificate, a copy of which is attached hereto as Exhibit 7.
Capitalized terms used in this paragraph and not otherwise defined shall
have the meanings ascribed to them in the Certificate.
The Investment Warrant, when exercised, will entitle the holder thereof
to receive (i) up to that number of shares that result in the Restricted Parties
(as defined in the Shareholder Agreement (as defined below)) at each time the
Investment Warrant is exercised, Beneficially Owning 39.9% of the then Adjusted
Outstanding Common Stock minus (ii) the aggregate number of shares of Common
Stock directly or indirectly sold, transferred or otherwise disposed of by all
Restricted Parties (excluding any such sale, transfer or other disposition to
any other Restricted Party) prior to and including the date of exercise. The
Investment Warrant will be exercisable at any time and from time to time from
and after the closing relating to the Additional Preferred Shares (the "Issue
Date"). Unless exercised, the Investment Warrant will automatically expire on
the fifth anniversary of the Issue Date. The price per share (the "Exercise
Price") at which Warrant Shares may be purchased upon the exercise of the
Investment Warrant will be (i) if the Warrantholder elects to purchase Warrant
Shares prior to the second anniversary of the Issue Date, equal to the greater
of (x) the average of the closing prices of a share of Common Stock for the 45
consecutive trading days ending on the trading day immediately prior to the day
on which the Election to Exercise is delivered and (y) the average of the
closing prices of a share of
<PAGE> 11
CUSIP 92047K107
Common Stock for the 150 consecutive trading days ending on the trading day
immediately prior to the day on which the Election to Exercise is delivered, in
each case subject to adjustment (the "Warrant Market Price"), but in no case
less than $12.00 (as reduced by the excess of the fair market value of the
aggregate amount of dividends and other distributions declared per share of
Common Stock over the aggregate Regular Dividends after the Issue Date and
having a record date prior to the date of exercise); or (ii) if the
Warrantholder elects to purchase Warrant Shares on or after the second
anniversary of the Issue Date, equal to the greater of (1) the Warrant Market
Price and (2) $15.00 (as reduced by the excess of the fair market value of the
aggregate amount of dividends and other distributions declared per share of
Common Stock over the aggregate Regular Dividends after the Issue Date and
having a record date prior to the date of exercise). The Investment Warrant is
not exercisable unless and until the Company Shareholders Approval is obtained.
In the event that the Company Shareholders Approval is not obtained, the
Investment Warrant will not be exercisable for any shares of Common Stock. This
description of the Investment Warrant is only a summary thereof and is qualified
in its entirety by reference to the Investment Warrant, a copy of which is
attached hereto as Exhibit 4. Capitalized terms used in this paragraph
and not otherwise defined shall have the meanings ascribed to them in the
Investment Warrant.
The Distributor Warrant vested with respect to 200,000 shares of Common
Stock on April 22, 1999 (the "Issue Date"). The Investment Warrant will vest
with respect to the remaining 1,250,000 shares of Common Stock issuable
thereunder, in equal cumulative annual installments of 125,000 shares on each
anniversary of the Issue Date over the ten year term of the Distributor Warrant.
Any unvested portion of the Distributor Warrant will immediately vest and become
fully exercisable in the event of a Change in Control as defined in the
Distributor Warrant of the Company. Each vested installment will be exercisable,
in whole or in part, by NBC (or any affiliate of NBC) for a period of five years
from the date of vesting of such installment. The Distributor Warrant will be
exercisable at a price per share equal to $8.288, subject to customary
anti-dilution adjustments. This description of the Distributor Warrant is only a
summary thereof and is qualified in its entirety by reference to the Distributor
Warrant, a copy of which is attached hereto as Exhibit 5. Capitalized terms used
in this paragraph and not otherwise defined shall have the meanings ascribed to
them in the Distributor Warrant.
ITEM 4. Purpose of Transaction.
GECEI and NBC (together, the "Investors") acquired the Preferred
Shares, the Investment Warrant and the Distributor Warrant in order to obtain a
substantial equity position in the Company. In addition, the Investors have
acquired certain rights and obligations with respect to the Company which are
contained in various related agreements that were entered into in connection
with this transaction, all of which are described in Item 6 below, filed as
exhibits hereto (as indicated in Item 6 below) and incorporated by reference
herein.
In particular, the Shareholder Agreement, dated as of April 15, 1999
(the "Shareholder Agreement"), among the Company, GECEI and NBC, sets forth
terms pertaining to, among other things, the Investors' (and certain of their
affiliates') restrictions on acquisition and disposition of the Company's
<PAGE> 12
CUSIP 92047K107
securities, voting provisions with respect to the Company's voting securities
and board and committee representation rights, all as more fully described in
Item 6 below. As described in Item 3 above, pursuant to the terms of the
Investment Agreement, if the Company Shareholders Approval is obtained the
Investors intend to purchase the 1,600,000 Additional Preferred Shares for cash
consideration totaling $13,264,163.31. Subject to the terms of the Shareholder
Agreement, the Investors may seek to acquire additional shares of Common Stock
through exercise of the Warrants. In addition, subject to the terms of the
Shareholder Agreement, while it is not the Investors' present intention to do
so, the Investors may seek to (a) acquire additional shares of Common Stock or
other securities of the Company through open market purchases, privately
negotiated transactions, a public tender offer, a merger, reorganization or
comparable transaction or otherwise or (b) acquire a material amount of the
assets of the Company. Alternatively, while it is not the Investors' present
intention to do so and the Shareholder Agreement restricts the ability of the
Investors to do so, the Investors may dispose of some or all of its interest in
the securities of the Company held by them or acquired pursuant to the exercise
of the Warrants, in the open market, in privately negotiated transactions with
third parties, through a public offering upon exercise of the registration
rights outlined in Item 6, or otherwise, depending on the course of action the
Investors pursue, market conditions and other factors. Although the foregoing
represents the range or activities that may be taken by the Investors with
respect to the Company, the possible activities of the Investors are subject to
change at any time. All such activities would be performed in compliance with
all applicable laws and regulations.
ITEM 5. Interest in Securities of the Issuer.
(a) The responses of the Reporting Persons to Rows (11) through (13) of
the cover pages of this statement on Schedule 13D are incorporated herein by
reference. As of April 15, 1999, none of the Reporting Persons owned any shares
of Common Stock of the Company. The Initial Preferred Shares are currently
convertible into an aggregate of 3,739,500 shares of Common Stock and the
Distributor Warrant is currently exercisable for 200,000 shares of Common Stock.
Accordingly, as of the date hereof GECEI and NBC, and GE Capital, by virtue of
its ownership of all the Common Stock of GECEI, may be deemed to, have joint
beneficial ownership of 3,939,500 shares of Common Stock (which 3,939,500 shares
of Common Stock does not include (i) the 1,250,000 additional shares of Common
Stock subject to the Distributor Warrant for which the Distributor Warrant is
not yet exercisable, (ii) the 1,600,000 shares of Common Stock that will be
issuable upon conversion of the Additional Preferred Shares if the Company
Shareholders Approval is obtained and the Additional Preferred Shares are issued
or (iii) any shares of Common Stock which will become issuable upon exercise of
the Investment Warrant if the Company Shareholders Approval is obtained),
representing approximately 15.1% of the outstanding shares of Common Stock
(based on the number of shares outstanding as of January 31, 1999 as reported in
the Company's Form 10-K for the fiscal year ended January 31, 1999, and assuming
the issuance of 3,739,500 shares of Common Stock upon conversion of the Initial
Preferred Shares and the exercise of the Distributor Warrant with respect to
200,000 shares of Common Stock.
Except as disclosed in this Item 5(a), none of the Reporting Persons,
nor, to the best of their knowledge, any of their directors or executive
officers, beneficially owns any shares of Common Stock of the Company.
<PAGE> 13
CUSIP 92047K107
(b) The responses of the Reporting Persons to (i) Rows (7) through (10)
of the cover pages of this statement on Schedule 13D and (ii) Item 5(a) hereof
are incorporated herein by reference. As further described in Item 6, GECEI and
NBC have entered into an oral arrangement with respect to the voting and
disposition of the Preferred Shares (and the Common Stock issuable upon the
conversion thereof) and the Initial Distributor Warrants (and the Common Stock
issuable upon the exercise thereof). Pursuant to the terms of such arrangement,
GECEI and NBC, and GE Capital, by virtue of its ownership of all the Common
Stock of GECEI, may be deemed to, have shared voting and dispositive power with
respect to the Initial Preferred Shares and the Distributor Warrant, which are
convertible or exercisable, as the case may be, for up to 5,189,500 shares of
Common Stock in the aggregate. The voting rights with respect to the Preferred
Stock is described in Item 6.
Except as disclosed in this Item 5(b), none of the Reporting Persons,
nor to the best of their knowledge, any of their directors or executive
officers, presently has the power to vote or to direct the vote or to dispose or
direct the disposition of any of the shares of Common Stock or other securities
of the Company which they may be deemed to beneficially own.
(c) Except as disclosed in Item 3 hereof, none of the Reporting
Persons, nor, to the best of their knowledge, any of their directors or
executive officers, has effected any transaction in the Common Stock of the
Company during the past 60 days.
(d) Not applicable.
(e) Not applicable.
Neither the filing of this Schedule 13D or any amendment thereto, nor
anything contained herein is intended as, or should be construed as, an
admission that GE Capital, GECS or GE is the "beneficial owner" of any shares of
Common Stock or other securities of the Company.
ITEM 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
The response to Item 3 hereof is incorporated herein by reference.
In addition to the terms of the Certificate, the Investment Warrant and
the Distributor Warrant described in Item 3 above, GECEI, NBC and the Company
have entered into the documents described below. The description of each
document below is only a summary of such document and is qualified in its
entirety by reference to such document, which is attached hereto as an exhibit.
Capitalized terms used in each such description and not otherwise defined
shall have the meanings ascribed to them in described document.
(a) Investment Agreement, dated as of March 8, 1999, as amended by the
First Amendment and Agreement, among GECEI and the Company, which
is attached hereto as Exhibit 2.
General. The Investment Agreement provides for the Company to sell the
Investor 5,339,500 shares of Preferred Stock for a cash purchase price of
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$44,265,000 and for the Company to issue the Investor the Investment Warrant to
purchase, from time to time, up to that number of shares of Common Stock that
would result in the Investor (and its affiliates) beneficially owning 39.9% of
the outstanding shares of Common Stock, in each case subject to the terms and
conditions set forth in the Investment Agreement.
The Closing Date; the Company Shareholders Approval. The Investment
Agreement (as amended) provides for the closing of the sale, purchase and
issuance of the Preferred Stock and the Investment Warrant to take place in two
parts: (i) with respect to the issuance of the Initial Preferred Shares and the
Investment Warrant, the closing took place on April 15, 1999 (the "First Closing
Date") and (ii) with respect to the issuance of the Additional Preferred Shares
that are subject to receipt of the Company Shareholders Approval, the closing
will take place within three business days following receipt of the Company
Shareholders Approval thereof and the satisfaction of certain other customary
conditions, unless otherwise agreed to by the parties (the "Second Closing Date"
and together with the First Closing Date, the "Closing Date"). If the Company
Shareholders Approval is not obtained then (A) the Additional Preferred Shares
will not be purchased by GECEI, (B) the Investment Warrant will not be
exercisable for any shares of Common Stock and (C) NBC will have the option to
terminate the Distribution Agreement (and, if NBC terminates the Distribution
Agreement, the Distributor Warrant will be canceled).
Representations and Warranties. The Investment Agreement contains
various representations and warranties of the Company to GECEI and from GECEI to
the Company.
Conduct of Business Pending Closing. The Company has agreed that,
except with the prior written consent of GECEI and except as contemplated by the
Investment Agreement, the Distribution Agreement, the Certificate, Warrants, the
Shareholder Agreement dated April 15, 1999 among GECEI, NBC and the Company (the
"Shareholder Agreement") and the Registration Rights Agreement dated April 15,
1999 among GECEI, NBC and the Company (the "Registration Rights Agreement")
(collectively, the "Transaction Documents"), prior to the vote of the Company's
shareholders with respect to the proposed issuance of the Additional Preferred
Shares and the issuance of Common Stock pursuant to the exercise of the
Investment Warrant (the "Shareholder Vote"), the Company will, and will cause
its subsidiaries to, operate their respective businesses only in the usual,
regular and ordinary manner, on a basis consistent with past practice and, to
the extent consistent with such operation, will, and will cause its subsidiaries
to, use its reasonable efforts to preserve its present business organization
intact, keep available the services of its present employees, preserve its
present business relationships and maintain all rights, privileges and
franchises necessary or desirable in the normal conduct of the Company's
businesses.
Subject to the following paragraph, the Company has further agreed
that, until the Shareholder Vote, except as contemplated by the Transaction
Documents, among other things, it will not: (i) amend its, or any of its
material subsidiaries, articles of incorporation or bylaws; (ii) issue, purchase
or redeem, or authorize or propose the issuance, purchase or redemption of, or
declare or pay any dividend with respect to, any shares of capital stock of the
Company or any class of securities convertible into, or rights, warrants or
options to
<PAGE> 15
CUSIP 92047K107
acquire, any such shares or other convertible securities; (iii) take any action
that would be prohibited by Section 3.4(a) of the Shareholder Agreement; (iv)
form any joint venture, acquire or dispose of any business or of any assets or
acquire or dispose of any minority investment in any Person, in each case other
than in the ordinary course consistent with past practices; (v) enter into any
transaction involving the merger, consolidation or sale of all or substantially
all of the assets of the Company or any of its material subsidiaries other than
a merger, consolidation or sale solely involving the Company and its
subsidiaries; (vi) file any voluntary petition for bankruptcy or receivership or
fail to oppose any other person's petition for bankruptcy or action to appoint a
receiver of the Company or any of its material subsidiaries; or (vii) authorize
any of, or commit or agree to take any of, the foregoing actions.
The foregoing covenants are subject, in certain cases, to specified
exceptions and qualifications, including without limitation, those exceptions
that are disclosed to GECEI in the written schedules delivered by the Company to
GECEI pursuant to the Investment Agreement.
Restrictions on Solicitation. The Investment Agreement limits the
Company's ability, prior to the Shareholder Vote, to solicit, initiate,
encourage or knowingly facilitate any Material Transaction Proposal (as defined
below) or participate in any discussions or negotiations regarding any Material
Transaction Proposal; provided that, in response to an unsolicited bona fide
Takeover Proposal (as defined below) the Company may, to the extent the Board
makes a good faith determination on the advice of outside legal counsel that
such action is required to comply with their fiduciary duties under applicable
law, (A) furnish information with respect to the Company and its subsidiaries to
the Person making the Takeover Proposal and discuss such information with such
Person and its representatives and (B) participate in negotiations regarding the
Takeover Proposal. The Company must promptly notify GECEI of any request for
information or of any Material Transaction Proposal, the material terms and
conditions of such request or Material Transaction Proposal and the identity of
the Person making such request or Material Transaction Proposal and must keep
GECEI fully informed on a current basis of the status and details of any such
request or Material Transaction Proposal.
The Investment Agreement provides that, prior to the Shareholder Vote,
the Board will not (i) approve or recommend or propose publicly to approve or
recommend any Material Transaction Proposal, (ii) cause or agree to cause the
Company or any of its subsidiaries to enter into any agreement relating to a
Material Transaction Proposal or (iii) withdraw or modify, in a manner adverse
to GECEI, the approval or recommendation of the Board for the transactions
contemplated by the Transaction Documents (collectively, the "Transaction").
Notwithstanding the foregoing, if the Board receives a Takeover Proposal without
having violated the conditions set forth in the paragraph above, the Board may,
to the extent it makes a good faith determination on the advice of outside legal
counsel that such action is required to comply with their fiduciary duties under
applicable law, take any action specified in clauses (i) or (ii) above with
respect to such Takeover Proposal, but in each case only after five days after
receipt by GECEI of written notice from the Company advising GECEI that the
Board has resolved to take such action.
<PAGE> 16
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As used in the Investment Agreement, "Material Transaction Proposal"
means any inquiry, proposal or offer from any Person relating to (i) the direct
or indirect acquisition or purchase of 5% or more of the assets (based on the
fair market value thereof) of the Company and its subsidiaries, taken as a
whole, or of 5% or more of any class of equity securities of the Company or any
of its subsidiaries or any tender offer or exchange offer (including by the
Company or its subsidiaries) that if consummated would result in any person
beneficially owning 5% or more of any class of equity securities of the Company
or any of its subsidiaries, or (ii) any merger, consolidation, combination, sale
of all or substantially all of the assets, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any of its
subsidiaries other than the transactions contemplated by the Investment
Agreement.
As used in the Investment Agreement, "Takeover Proposal" means any
inquiry, proposal or offer from any Person relating to (A) any of the matters
set forth in clause (i) of the definition of Material Transaction Proposal but
replacing "5%" with "50%" each place "5%" is used in such definition, (B) a sale
of all or substantially all of the assets of the Company and its subsidiaries or
(C) a merger or consolidation of the Company as a result of which the Company's
shareholders immediately prior to such transaction would not beneficially own
immediately after such transaction 50% or more of the resulting or surviving
entity (or the parent entity).
Additional Covenants of the Parties. The Investment Agreement also
contains certain additional covenants of the parties including covenants
relating to, among other things, (i) subject to adherence by GECEI to existing
confidentiality agreements, access by GECEI to, among other things, the
Company's officers, employees, properties, offices, plants and other facilities,
and all financial, operating and other data and information of the Company; (ii)
the convening by the Company of a meeting of holders of its capital stock for
the purpose of considering and taking actions to approve the Proposals; (iii)
the cooperation of the parties in connection with the release of any information
concerning the Investment Agreement or the other Transaction Documents or the
matters contemplated therein; (iv) the parties use of their respective
reasonable commercial efforts to take all actions and promptly do or cause to be
done all things necessary, proper or advisable to consummate the Transaction and
to obtain the permits, consents, authorizations, orders and approvals of, and
filings and registrations required under any Federal or state law, rule or
regulation for or in connection with the execution and delivery of Transaction
Documents and the consummation by the parties hereto of the transactions
contemplated therein; (v) the preparation and filing by the Company and GECEI of
notifications under the HSR Act in connection with the Transaction; and (vi) the
reservation of shares of Common Stock issuable upon conversion of the Preferred
Stock and the exercise of the Investment Warrant.
Second Closing Conditions.
GECEI Closing Conditions. The obligation of GECEI to purchase the
Additional Preferred Shares is subject to Company Shareholders Approval and the
satisfaction or waiver, at or prior to the Second Closing Date, of each of
the following conditions: (i) the representations and warranties of the Company
contained in the Investment Agreement and the other Transaction Documents will
be
<PAGE> 17
CUSIP 92047K107
true and correct in all material respects on and as of the date of the
Investment Agreement or the other Transaction Documents, as the case may be, and
on and as of the Second Closing Date, except (x) to the extent any such
representation or warranty is made as of a specified date, in which case such
representation or warranty shall be true and correct in all material respects on
and as of such specified date and (y) where the inaccuracy of such
representation or warranty constitutes an Excluded Breach (as defined in the
Investment Agreement); (ii) the Company will have performed in all material
respects all obligations, agreements, undertakings, covenants and conditions
required by the Investment Agreement and the other Transaction Documents to be
performed by it at or prior to the Second Closing Date; (iii) there is not in
effect any order, decree or injunction which enjoins or prohibits consummation
of the Transaction and no action, suit, investigation, arbitration or
administrative or governmental proceeding by any Governmental Entity as defined
in the Investment Agreement is pending which seeks to restrain, prohibit or
invalidate the Transaction; (iv) all permits, consents, authorizations, orders,
and approvals of, and filings and registrations required under any federal or
state law, rule or regulation for or in connection with the execution and
delivery of the Investment Agreement and the other Transaction Documents and
consummation of the Transaction will have been obtained or made and all
statutory waiting periods thereunder in respect thereof will have expired,
except where the failure to obtain or submit would not have a Material Adverse
Effect (as defined in the Investment Agreement); (v) GECEI will have received
from the Company a certificate, dated the Second Closing Date, signed by the
Chief Executive Officer of the Company or its Chief Financial Officer,
certifying that the foregoing conditions (i), (ii) and (iii) have been
satisfied.
Company Closing Conditions. The obligation of the Company to sell the
Additional Preferred Shares is subject to the receipt of the Company
Shareholders Approval, satisfaction or waiver, at or prior to the Second Closing
Date, of the each of the following conditions: (i) the representations and
warranties of GECEI contained in the Investment Agreement and the other
Transaction Documents will be true and correct in all material respects on and
as of the date of the Investment Agreement or the other Transaction Documents,
as the case may be, and on and as of the Second Closing Date, except to the
extent any such representation or warranty is made as of a specified date, in
which case such representation or warranty shall be true and correct in all
material respects on and as of such specified date; (ii) GECEI will have
performed in all material respects all obligations, agreements, undertakings,
covenants and conditions required by the Investment Agreement and the other
Transaction Documents to be performed by it at or prior to the Second Closing
Date; (iii) there is not in effect any order, decree or injunction which enjoins
or prohibits consummation of the Transaction and no action, suit, investigation,
arbitration or administrative or governmental proceeding by any Governmental
Entity is pending which seeks to restrain, prohibit or invalidate the
Transaction; (iv) all permits, consents, authorizations, orders, and approvals
of, and filings and registrations required under any federal or state law, rule
or regulation for or in connection with the execution and delivery of the
Investment Agreement and the other Transaction Documents and consummation of the
Transaction will have been obtained or made and all statutory waiting periods
thereunder in respect thereof will have expired, except where the failure to
obtain or submit would not have a Material Adverse Effect; and (v) the Company
will have received from GECEI a certificate, dated the Second Closing
<PAGE> 18
CUSIP 92047K107
Date, in form and substance reasonably satisfactory to the Company to the effect
that the foregoing conditions (i), (ii) and (iii) have been satisfied.
(b) Distribution Agreement, dated as of March 8, 1999, between NBC and
the Company, which is attached hereto as Exhibit 5.
General. The Distribution Agreement provides that NBC will have the
exclusive right to negotiate on behalf of the Company for the distribution of
its home shopping television program service and any of the Company's successor
home shopping or transactional television program service(s) ("VVTV") to
multichannel video programming distributors (each, a "Distributor") throughout
the United States. NBC will also provide promotion and affiliate marketing
services to the Company in connection with the distribution and carriage of VVTV
(collectively, the "Services"). In consideration of the Services provided by
NBC, the Company issued the Distributor Warrant (the terms of which are
described in Item 3) to NBC on April 15 and will pay NBC an annual cash fee for
each year during the Term (as defined below). As more fully described below, the
Company will be required to issue NBC the Performance Distributor Warrants to
purchase additional shares of Common Stock in the event NBC meets certain
performance targets set forth in the Distribution Agreement, based upon the
number of full time equivalent subscribers ("FTE Subscribers") provided by NBC.
The Distribution Agreement is for a term of 10 years (the "Term"), with
performance of the Services by NBC commencing on April 22, 1999 (the
"Commencement Date").
Performance Distributor Warrants. NBC has agreed to seek to deliver an
additional 10 million FTE Subscribers to the Company over the first 42 months of
the Term (the "Aggregate Performance Target"). Assuming certain performance
milestones are met above the Aggregate Performance Target, the Company will
issue Performance Distributor Warrants to NBC. Each Performance Distributor
Warrant will be exercisable at a price per share equal to the closing price of
Common Stock on the Nasdaq National Market on the trading day immediately
preceding the date NBC secures a written commitment for additional FTE
Subscribers. Each Performance Distributor Warrant will vest in equal cumulative
annual installments on the execution date of the written commitment and each
anniversary thereof throughout the base or initial term of the written
commitment; provided, however, that any unvested portion of the Performance
Distributor Warrant will immediately vest and become fully exercisable in the
event of a "change in control of the Company." Each vested installment will be
exercisable, in whole or in part, by NBC (or any affiliate of NBC) for a period
of five years from the date of vesting of such installment.
The number of shares of Common Stock issuable under a Performance
Distributor Warrant will equal (i) the product of the number of FTE Subscribers
to be added as a result of such written commitment multiplied by .80, divided by
(ii) the present value of such Performance Distributor Warrant on the date of
execution of such written commitment determined using the Black-Scholes pricing
model, using reasonably and customary assumptions taking into account the market
price of the Common Stock at the time of issuance, the term of the Performance
Distributor Warrant and a measurement of expected volatility that is reasonable
under the circumstances, multiplied by (iii) the quotient, expressed as a
decimal, of the number of years in the term of such written commitment divided
by 10, but not to exceed 1.0.
<PAGE> 19
CUSIP 92047K107
Termination Rights.
Company Right to Terminate. The Company will have the right to
terminate the Distribution Agreement at any time during the 90 day period
immediately following the twenty-fourth, thirty-sixth and forty-second full
calendar month anniversary of the Commencement Date, in each case if certain
performance targets are not met by NBC thereunder. If terminated by the Company
in such circumstances, the unvested portion of the Distributor Warrant will
expire. In addition, the Company will be entitled to a $2.5 million payment from
NBC if the Company terminates the Distribution Agreement as a result of NBC's
failure to meet the 24 month performance target.
The right of the Company to terminate the Distribution Agreement as a
result of NBC's failure to achieve any of the performance targets will terminate
and be of no further force or effect at such time that NBC reaches the Aggregate
Performance Target.
NBC Right to Terminate. NBC will have the right to terminate the
Distribution Agreement under certain circumstances, including, but not limited
to, (i) in the event that Shareholder Approval (as defined in the Investment
Agreement) is not obtained on or prior to August 31, 1999; (ii) if, prior to the
Shareholder Vote, the Company or the Board receives notice of a Material
Transaction, Takeover Transaction or a Third Party Tender Offer (as such terms
are defined in the Shareholder Agreement); (iii) in the event that (x) NBC
declines to give its consent to a Restricted Promotional Transaction, (y) the
Company enters into a Restricted Promotional Transaction (as defined in the
Distribution Agreement) at any time after the first anniversary of the date of
the Distribution Agreement, or (z) the Company enters into a transaction which
will result in a "change in control"; or (iv) in the reasonable judgment of NBC,
there has occurred a diminution in the quality of VVTV programming sufficient to
have an adverse effect on NBC's ability to distribute VVTV or the Company fails
to comply with the NBC Standards (as defined in the Distribution Agreement).
Mutual Rights to Terminate. The Company or NBC will have the right to
terminate the Distribution Agreement under certain circumstances, including, (i)
if the Company or NBC fails to pay any amount payable to the other under the
terms of the Distribution Agreement within 30 days of receipt by the other party
of written notice of such failure; (ii) in the event the Company or NBC
materially breaches any representation, warranty or covenant under the
Distribution Agreement and such breach remains uncured for a period of 30 days
following; (iii) in the event either party commences a voluntary case or
proceeding, consents to the entry of an order for relief against it for relief
in an involuntary case or proceeding or consents to the appointment of a
custodian for it or for all or substantially all of its property, makes a
general assignment for the benefit of creditors or admits in writing its
inability to pay debts generally as they become due; or (iv) in the event a
court enters an order or decree (which remains unstayed and in effect for at
least 60 days) under any bankruptcy law for all or substantially all of the
assets or order the liquidation of the assets of the Company or NBC.
<PAGE> 20
CUSIP 92047K107
(c) Shareholder Agreement, dated April 15, 1999, among GECEI, NBC and
the Company, which is attached hereto as Exhibit 8.
Corporate Governance. Under the terms of the Shareholder Agreement (and
the Certificate), the Company has agreed to expand the size of its Board to
seven directors and appoint to the Board two individuals designated by GECEI.
GECEI Designees are subject to the reasonable approval of a majority of the
members of the Board and will continue to serve as directors until the next
election of directors.
If the Company Shareholders Approval is obtained, GECEI will be
entitled to designate two individuals to be nominated to the Board so long as
the Restricted Parties (as defined in the Shareholder Agreement) continue to
beneficially own at least 50% of the number of shares of Common Stock owned by
the Investors on the date hereof. In the event the Restricted Parties'
beneficial ownership falls below such 50% threshold, GECEI will have the right
to designate one individual to the Board, so long as the Restricted Parties
continue to beneficially own at least 10% of the Adjusted Outstanding Common
Stock. As long as GECEI is entitled to designate two persons for nomination as
directors, the current Investor may assign the right to designate one of such
nominees to any other Restricted Party (such that two Restricted Parties each
have the right to designate one nominee).
If the Company Shareholders Approval is not obtained, GECEI will have
the right, so long as the Restricted Parties beneficially own at least 75% of
the Common Stock held by the Investors on the date hereof, to designate two
individuals to the Board. In the event GECEI's beneficial ownership falls below
such 75% threshold, GECEI will have the right to designate one individual to the
Board, so long as the Restricted Parties continue to beneficially own at least
50% of the Common Stock held by the Investors on the date hereof.
As long as a majority of the outstanding shares of Preferred Stock are
owned by the Restricted Parties and GECEI is otherwise entitled to designate
nominee(s) for election as director(s) of the Company, the Designee(s) (as
defined in the Shareholder's Agreement) will be elected to the Board by the
holders of the Preferred Stock voting separately as a class, as provided in the
Certificate. If the Restricted Parties no longer own a majority of the
outstanding shares of Preferred Stock (or if no shares of Preferred Stock are
outstanding) but GECEI is otherwise entitled to designate nominee(s) for
election as director(s) pursuant to the Shareholder Agreement, the Company must
nominate each Designee for election as part of the management slate that is
included in its proxy statement and must provide the same support for the
election of such Designee as it provides to other persons standing for election
as part of the management slate.
In addition, for so long as GECEI has the right to designate nominee(s)
for election as director(s) and the Company has otherwise complied with the
terms of Section 2.1 of the Shareholder Agreement, the Restricted Parties will
vote in each shareholder vote for the election of the Company's directors all of
their voting stock (other than shares of Preferred Stock that vote for directors
as a separate class from the Common Stock and other than Common Stock issued
pursuant to the conversion of Preferred Stock) as follows: (i) if there is no
bona fide proxy contest for the election of directors, in favor of the
management
<PAGE> 21
CUSIP 92047K107
slate that is included in the Company's proxy statement; or (ii) if there is a
bona fide proxy contest for the election of directors, at the election of each
Restricted Party either (x) in favor of the management slate that is included in
such proxy statement or (y) in the same proportion as all votes cast by
Disinterested Shareholders (as defined in the Shareholder Agreement).
For so long as the Restricted Parties own a majority of outstanding
Preferred Stock and the Designees are entitled to be elected to the Board of
Directors by the holders of the Preferred Stock voting separately as a class
pursuant to Section VII(b) of the Certificate, any shares of Common Stock owned
by the Restricted Parties that were issued pursuant to the conversion of shares
of Preferred Stock (but no other shares of Common Stock owned by the Restricted
Parties) will not be voted by the Restricted Parties in any shareholder vote for
the election of directors of the Company.
Board Committees. As long as GECEI has the right to designate at least
one nominee to the Board, unless otherwise agreed to by GECEI, (i) each of the
Audit Committee and Compensation Committee of the Board must contain at least
one Designee and (ii) each other committee of the Board must contain a number of
Designees (to the extent available) rounded up to the nearest whole number,
equal to the total number of directors on such committee multiplied by the
percentage of the entire Board who are Designees.
Certain Agreements.
Transactions with NBC Restricted Persons. The Company has agreed that,
without the prior written consent of GECEI and except as may be expressly
permitted by the Shareholder Agreement, it and its subsidiaries will not: (i)
issue or sell to any NBC Restricted Person (as defined below) or authorize or
propose the issuance or sale to any NBC Restricted Person of, any capital stock,
partnership or limited liability company interests or other equity securities of
the Company or any of its subsidiaries, or any options, warrants or other rights
to acquire any of the foregoing; (ii) form, enter into or join any partnership
or joint venture with, sell or dispose of any business or assets (other than
inventory and any other assets disposed of in the ordinary course consistent
with past practice) to, or make any investment in any NBC Restricted Person;
(iii) enter into any transaction involving the incurrence of indebtedness (other
than in the ordinary course consistent with past practice) involving any NBC
Restricted Person; (iv) authorize, enter into or approve any Material
Transaction (as defined in the Shareholder Agreement) with any NBC Restricted
Person or enter into any discussions or negotiations relating to any inquiry,
proposal or offer relating thereto; (v) enter into any joint marketing or
co-branding arrangement with any NBC Restricted Person, license or otherwise
grant to any NBC Restricted Person the right to utilize any trademark, tradename
or brand of the Company or any of its subsidiaries or grant to any NBC
Restricted Person any rights to have a branded presence on any of the Company's
or its subsidiaries' media or rights to cross-promote home shopping
transactions; or (vi) authorize or commit or agree to take any of the foregoing
actions.
As used in the Shareholder Agreement, "NBC Restricted Person" means any
one of the following entities: CBS Corporation, Fox Entertainment Group, Inc.,
The Walt Disney Company, Time Warner, Inc., Paxson Communications Corporation,
Viacom,
<PAGE> 22
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Inc., Yahoo!, Inc. ("Yahoo"), American Online, Inc. ("AOL"), Excite,
Inc. ("Excite"), Lycos, Inc. ("Lycos"), Infoseek Corporation ("Infoseek") or
Microsoft Corporation ("Microsoft").
The foregoing provisions will terminate at such time as GECEI is no
longer entitled to designate at least one person to be nominated for election to
the Board under the terms of the Shareholder Agreement. In addition, such
provisions will terminate with respect to Yahoo, AOL, Excite, Lycos, Infoseek
and Microsoft (the "Carve-out Entities") in the event that (i) NBC or any of its
subsidiaries or affiliates enters into a significant transaction with any
Carve-out Entity (the "Relevant Entity") that precludes NBC and its subsidiaries
from entering into a significant transaction with any one of the other Carve-out
Entities and (ii) during the period ending six months after the occurrence of an
event specified in clause (i), neither the Company nor any of its subsidiaries
has entered into an agreement providing for a significant transaction with the
Relevant Entity or its affiliate.
Certain Other Transactions. The Company has also agreed that, for so
long as GECEI is entitled to designate two persons to be nominated for election
to the Board, it and its subsidiaries will not, without the prior written
consent of the Investor, (i) issue or sell, or authorize or propose the issuance
or sale, of any capital stock of the Company or any options, warrants or other
rights to acquire capital stock of the Company, other than in the limited
circumstances set forth in the Shareholder Agreement; (ii) declare or pay any
dividends or distributions to holders of Common Stock in any fiscal quarter
exceeding in the aggregate of 5% of the market capitalization of the Company as
of the first day of such fiscal quarter, or repurchase or redeem any Common
Stock except in the limited circumstances set forth in the Shareholder
Agreement; (iii) enter into or effect any single or related series of
acquisitions of businesses or assets or investments therein, other than certain
money market instruments and trade receivables, pursuant to which the fair
market value of the aggregate purchase price paid, or investment made, by the
Company and its subsidiaries exceeds the greater of (a) $35 million, or (b) 10%
of the market capitalization of the Company at the time the Company or its
subsidiaries enter into an agreement to effect such sale, lease or other
deposition; (iv) enter into or effect any single or related series of sales,
leases or other dispositions of assets having a fair market value in excess of
the greater of (x) $35 million or (y) 10% of the Market Capitalization (as
defined in the Shareholder Agreement) of the Company at the time the Company or
its subsidiaries enter into an agreement to effect such sale, lease or other
disposition; (v) incur indebtedness for borrowed money that would cause the
Company's consolidated indebtedness to exceed the greater of (1) $40 million and
(2) an amount equal to 30% of the Company's "total capitalization;" (vi) issue
any series or class of capital stock having voting rights that are
disproportionate relating to its economic interest or having a separate class
vote on any Takeover Transaction (as defined in the Shareholder Agreement);
(vii) directly or indirectly enter into any business in which the Company and/or
its subsidiaries and/or affiliates are not engaged in on the date of the
Shareholder Agreement, except for those businesses which are ancillary,
complementary or reasonably related thereto; (viii) amend its articles of
incorporation so as to adversely affect the Restricted Parties or (ix) authorize
or commit or agree to take any of the foregoing actions.
<PAGE> 23
CUSIP 92047K107
Other Agreements. Pursuant to the Shareholder Agreement, so long as
GECEI has the right to name at least one nominee to the Board, the Company will
provide it with certain monthly, quarterly and annual financial reports and
budgets. In addition, the Company has agreed not to take actions which would
cause the Company to be in breach of or default under any of its material
contracts (or otherwise require a consent thereunder) as a result of
acquisitions of the Common Stock by the Investor or any of its affiliates. The
Company also is prohibited from taking any action that would cause any ownership
interest of certain FCC regulated entities from being attributable to GECEI, NBC
or their affiliates.
No Reinstatement of Rights. The Investor and the Company have agreed
that to the extent the Restricted Parties fail to satisfy any ownership
threshold set forth in the Shareholder Agreement such that any rights of the
Investor under the Agreement and/or obligations of the Company under the
Agreement terminate, such terminated rights and/or obligations will not be
reinstated if the Restricted Parties thereafter satisfy such ownership
threshold.
Standstill Provisions. The Shareholder Agreement provides that, during
the Standstill Period (as defined in the Shareholder Agreement) and with certain
limited exceptions, the Restricted Parties will be prohibited from, unless
specifically requested to do so in writing in advance by the Board, doing any of
the following: (i) making any asset/business purchases from the Company in
excess of 10% of the total fair market value of the Company's assets; (ii)
increasing their beneficial ownership above 39.9% of the Company's outstanding
shares of Common Stock (except under limited circumstances); (iii) making or in
any way participating in any solicitation of proxies (except under limited
circumstances); (iv) depositing any securities of the Company or any of its
subsidiaries in a voting trust; (v) forming, joining, or in any way becoming a
member of a 13D Group (as defined in the Shareholder Agreement) with respect to
any voting securities or assets of the Company or any of its subsidiaries; (vi)
arranging any financing for, or providing any financing commitment specifically
for, the purchase of any voting securities of the Company or any of its
subsidiaries; and (vii) otherwise acting, whether alone or in concert with
others, to seek to propose to the Company any tender or exchange offer, merger,
business combination, restructuring, liquidation, recapitalization or similar
transaction involving the Company or any of its subsidiaries, or nominating any
person as a director of the Company who is not nominated by the then incumbent
directors, or proposing any matter to be voted upon by the Company's
shareholders. If during the Standstill Period any inquiry has been made
regarding a Takeover Transaction or "change in control" which has not been
rejected by the Board, or the Board pursues such a transaction, or engages in
negotiations or provides information to a third party with respect to such a
transaction and the Board has not resolved to terminate such discussions, then
the Restricted Parties may propose to the Company a tender offer or business
combination proposal.
In addition, unless the Restricted Parties beneficially own less than
5% or more than 90% of the Adjusted Outstanding Common Stock, the Restricted
Parties may not sell, transfer or otherwise dispose of any of the Preferred
Stock, the Warrants or shares of Common Stock beneficially owned by such persons
except for transfers: (i) to certain affiliates who agree to be bound by the
provisions of the Shareholder Agreement; (ii) which have been consented to by
the
<PAGE> 24
CUSIP 92047K107
Company; (iii) pursuant to a Third Party Tender Offer; provided that no shares
of Common Stock may be transferred pursuant to this clause (iii) to the extent
such shares were acquired upon exercise of the Investment Warrant on or after
the date of commencement of such Third Party Tender Offer or the public
announcement by the offeror thereof or that such offeror intends to commence
such Third Party Tender Offer; (iv) pursuant to a merger, consolidation or
reorganization to which the Company is a party, (v) in a bona fide public
distribution or bona fide underwritten public offering; (vi) pursuant to Rule
144 of the Securities Act or (vii) in a private sale or pursuant to Rule 144A of
the Securities Act; provided that, in the case of any transfer pursuant to
clause (v) or (vii), such transfer does not result in, to the knowledge of the
transferor after reasonable inquiry, any other person acquiring, after giving
effect to such transfer, beneficial ownership, individually or in the aggregate
with such person's affiliates, of more than 10% of the Adjusted Outstanding
Common Stock.
The Standstill Period will terminate (subject to reinstatement under
certain circumstances) on the earliest to occur of (i) the 10 year anniversary
of the Shareholder Agreement; (ii) the entering into by the Company of an
agreement that would result in a "change in control" (subject to reinstatement);
(iii) an actual "change in control"; (iv) a Third Party Tender Offer (subject to
reinstatement) and (v) six months after the Investor can no longer designate any
nominees to the Board. Following the expiration of the Standstill Period
pursuant to clause (i) or (v) above (indefinitely in the case of clause (i) and
two years in the case of clause (v)), the Restricted Parties' beneficial
ownership position may not exceed 39.9% of the Adjusted Outstanding Common
Stock, except pursuant to issuance or exercise of any warrants or pursuant to a
Purchaser Tender Offer.
(d) Registration Rights Agreement, dated as of April 15, 1999, among
GECEI, NBC and the Company (the "Registration Rights Agreement"),
attached hereto as Exhibit 9.
Under the Registration Rights Agreement, GECEI and each other person
who becomes a Holder of Registrable Securities as defined therein will have
certain demand and "piggyback" registration rights. For purposes of this
summary, the term "Holder" is deemed to include GECEI.
Demand Registration Rights. Under the terms of the Registration Rights
Agreement, Holders may make, in the aggregate, four demands for registration
(each, a "Demand Registration"). The Company is not obligated to effect a Demand
Registration unless (i) the Holder requesting the Demand Registration is seeking
to include Registrable Securities with a market value of at least $5,000,000 as
of the close of the business day immediately preceding the date written notice
of the demand (the "Demand Notice") is given to the Company and (ii) the Demand
Notice is given at least six months after the effective date of the immediately
preceding Demand Registration or, if later, the date on which a Demand
Registration is terminated in its entirety prior to the effective date of the
applicable registration statement.
If a Holder makes a Demand Registration, the Company must provide
written notice thereof to all other Holders, if any, and must, subject to the
following sentence, include in such registration all Registrable Securities for
which the Company receives written requests for inclusion therein within 10
<PAGE> 25
CUSIP 92047K107
business days after the Company's notice is received by such Holders. If the
managing underwriter of an Underwritten Offering (as defined in the Registration
Rights Agreement) to which such Demand Registration relates advises such Holders
that the total amount of Registrable Securities that they intend to include in
the Demand Registration will, in the aggregate, materially and adversely affect
the success of the offering, then the number of Registrable Securities to be
included in the Demand Registration will, if necessary, be reduced. If the
number of Registrable Securities is reduced, the Registrable Securities of the
Holder initiating the Demand Registration will receive priority in the
Underwritten Offering to the full extent of the Registrable Securities such
Holder desires to sell. The remaining allocation available for sale will be
allocated pro rata among the other Holders on the basis of the amount of
Registrable Securities requested to be included therein by each such Holder.
Under the terms of the Registration Rights Agreement, the Company will
have the right to defer requests for Demand Registrations for a period not to
exceed 90 days if the Company determines, in the good faith exercise of the
business judgment of the Board, that such registration and offering could
materially interfere with a bona fide business or financial transaction of the
Company or would require disclosure of information, the premature disclosure of
which could materially and adversely affect the Company.
Piggyback Registration Rights. Holders are also entitled to unlimited
"piggyback" registration rights to include their Registrable Securities, subject
to certain limitations, in certain registrations initiated by the Company for
its own account, or otherwise. The Company must give Holders written notice at
least 30 days prior to the anticipated filing relating to any such proposed
offering and must offer Holders the opportunity to include in the offering the
amount of Registrable Securities as each Holder may request (a "Piggyback
Registration"). The Company must cause the managing underwriter of a proposed
Underwritten Offering to include in each such offering all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein, subject to the advice of the managing underwriter that the
total amount of securities that such Holders and the Company propose to include
in the offering will materially and adversely affect the success of the
offering. Under such advisement, the Company will include in the registration
(i) first, 100% of the Common Stock of the person or entity who requests such
registration, if any, (ii) second, 100% of the Common Stock the Company proposes
to sell and (iii) third, the number of Registrable Securities requested to be
included in such registration which, with the advice of the managing
underwriter, can be sold without having the adverse effect referred to above,
such amount to be allocated pro rata among all requesting Holders on the basis
of the relative number of Registrable Securities then held by each Holder.
The Registration Rights Agreement contains customary indemnification
and contribution provisions relating to the exercise by the Holders of their
registration rights thereunder.
(e) Other Agreements
GECEI and NBC have entered into an oral arrangement with
respect to the Preferred Shares (including the Initial Preferred Shares), the
Distributor
<PAGE> 26
CUSIP 92047K107
Warrant, the Investment Warrant, the Bonus Distributor Warrants and any shares
of Common Stock that may be issued upon the conversion or exercise of any of the
foregoing (collectively, the "Company Securities"). Pursuant to the arrangement,
GECEI and NBC have agreed to jointly exercise the power to vote and dispose of
all Company Securities.
An agreement among the Reporting Persons with respect to the filing of
this Schedule 13D and any amendments thereto is attached hereto as Exhibit 1.
Except as disclosed in this Item 6, none of the Reporting Persons, nor,
to the best of their knowledge, any of their directors or executive officers,
are parties to any contract, arrangement, understanding or relationship (legal
or otherwise) with respect to the securities of the Company.
ITEM 7. Material to Be Filed as Exhibits.
Exhibit 1 Joint Filing Agreement by and among GE Capital Equity
Investments, Inc., General Electric Capital Corporation,
General Electric Capital Services, Inc., General Electric
Company, National Broadcasting Company, Inc. and National
Broadcasting Company Holding, Inc, dated April 26, 1999.
Exhibit 2 Investment Agreement, dated as of March 8, 1999, between GE
Capital Equity Investments, Inc. and ValueVision International
Inc. and First Amendment and Agreement, dated as of April 15,
1999, between GE Capital Equity Investments Inc. and
ValueVision International, Inc.
Exhibit 3 Distribution and Marketing Agreement, dated as of March 8,
1999, between National Broadcasting Company, Inc. and
ValueVision International, Inc.
Exhibit 4 Investment Warrant of ValueVision International, Inc., dated
as of April 15, 1999, pursuant to the Investment Agreement,
Exhibit 5 Distributor Warrant of ValueVision International, Inc., dated
as of April 15, 1999, pursuant to the Distribution and
Marketing Agreement
Exhibit 6 Form of Performance Distributor Warrant of ValueVision
International, Inc., pursuant to the Distribution and
Marketing Agreement
Exhibit 7 Certificate of Designation for Series A Redeemable Convertible
Preferred Stock of ValueVision International, Inc., filed and
dated as of April 15, 1999
Exhibit 8 Shareholder Agreement, dated as of April 15, 1999, among GE
Capital Equity Investments, Inc., National Broadcasting
Company and ValueVision International, Inc.
Exhibit 9 Registration Rights Agreement, dated as of April 15, 1999,
among GE Capital Equity Investments, Inc., National
Broadcasting Company and ValueVision International, Inc.
<PAGE> 27
CUSIP 92047K107
Exhibit 10 Power of Attorney appointing Michael E. Pralle as agent and
attorney-in-fact for General Electric Company.
Exhibit 11 Power of Attorney appointing Michael E. Pralle as agent and
attorney-in-fact for General Electric Capital Services, Inc.
<PAGE> 28
CUSIP 92047K107
SIGNATURES
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ Michael E. Pralle
--------------------------------------
Name: Michael E. Pralle
Title: President
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Michael E. Pralle
--------------------------------------
Name: Michael E. Pralle
Title: Vice President
GENERAL ELECTRIC CAPITAL SERVICES, INC.
By: /s/ Michael E. Pralle
--------------------------------------
Name: Michael E. Pralle
Title: Attorney-in-fact
GENERAL ELECTRIC COMPANY
By: /s/ Michael E. Pralle
--------------------------------------
Name: Michael E. Pralle
Title: Attorney-in-fact
<PAGE> 29
NATIONAL BROADCASTING COMPANY, INC.
By: /s/ Mark Begor
----------------------------------------
Name: Mark Begor
Title: Executive Vice President
NATIONAL BROADCASTING COMPANY HOLDING, INC.
By: /s/ Mark Begor
----------------------------------------
Name: Mark Begor
Title: Treasurer
Dated: April 26, 1999
<PAGE> 30
CUSIP 92047K107
SCHEDULE A TO SCHEDULE 13D
Filed by GE Capital Equity Investments, Inc.
GE Capital Equity Investments, Inc.
Directors and Executive Officers
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ ----------------------------
<S> <C> <C>
Directors
Michael E. Pralle GE Capital Equity Investments, Inc. President, Chairman of the Board
120 Long Ridge Road
Stamford, CT 06927
Officers
Michael E. Pralle GE Capital Equity Investments, Inc. President, Chairman of the Board
120 Long Ridge Road
Stamford, CT 06927
Jonathan K. Sprole GE Capital Equity Investments, Inc. Senior Vice President,
120 Long Ridge Road General Counsel & Secretary
Stamford, CT 06927
Paul Licursi GE Capital Equity Investments, Inc. Vice President-Finance & Treasurer
120 Long Ridge Road
Stamford, CT 06927
Joseph Swezey GE Capital Equity Investments, Inc. Vice President-Controller
120 Long Ridge Road
Stamford, CT 06927
Barbara J. Gould GE Capital Equity Investments, Inc. Senior Vice President, Associate General
120 Long Ridge Road Counsel and Assistant Secretary
Stamford, CT 06927
</TABLE>
<PAGE> 31
CUSIP _______________
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ ----------------------------
<S> <C> <C>
Peter J. Muniz GE Capital Equity Investments, Inc. Vice President, Associate General Counsel and
120 Long Ridge Road Assistant Secretary
Stamford, CT 06927
Bryant Cohen GE Capital Equity Investments, Inc. Vice President-Taxes
120 Long Ridge Road
Stamford, CT 06927
</TABLE>
Each person listed above is a citizen of the United States of America.
<PAGE> 32
CUSIP _______________
SCHEDULE B TO SCHEDULE 13D
Filed by National Broadcasting Company, Inc.
National Broadcasting Company, Inc.
Directors and Executive Officers
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ ----------------------------
<S> <C> <C>
Directors
S.S. Cathcart 222 Wisconsin Avenue Retired Chairman, Illinois
Suite 103 Tool Works
Lake Forest, IL 60045
Andrea Jung Avon Products, Inc. President and Chief Operating Officer, Avon
1345 Avenue of the Americas Products, Inc.
New York, NY 10105
G.G. Michelson Federated Department Stores Former Member of the Board of Directors,
151 West 34th Street Federated Department Stores
New York, NY 10001
E.F. Murphy General Electric Company Vice Chairman of the Board and Executive
3135 Easton Turnpike Officer, General Electric Company
Fairfield, CT 06431
S. Nunn King & Spalding Partner, King & Spalding
191 Peachtree Street, N.E.
Atlanta, GA 30303
J.D. Opie General Electric Company Vice Chairman of the Board and Executive
3135 Easton Turnpike Officer, General Electric Company
Fairfield, CT 06431
R.S. Penske Penske Corporation Chairman of the Board and President, Penske
13400 Outer Drive, West Corporation
Detroit, MI 48239-4001
F.H.T. Rhodes Cornell University President Emeritus, Cornell University
3104 Snee Building
Ithaca, NY 14853
</TABLE>
<PAGE> 33
CUSIP _______________
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ ----------------------------
<S> <C> <C>
A.C. Sigler Champion International Corporation Retired Chairman of the Board and CEO and
1 Champion Plaza former Director, Champion International
Stamford, CT 06921 Corporation
D.A. Warner III J.P. Morgan & Co., Inc. and Morgan Guaranty Chairman of the Board, President, and Chief
Trust Co. Executive Officer, J.P. Morgan & Co.
60 Wall Street Incorporated and Morgan Guaranty Trust Company
New York, NY 10260
J.F. Welch, Jr. General Electric Company Chairman of the Board and Chief Executive
3135 Easton Turnpike Officer, General Electric Company
Fairfield, CT 06431
Executive Officers
John F. Welch Jr. National Broadcasting Company, Inc. Chairman
3135 Easton Turnpike
Fairfield, CT 06431
Robert C. Wright National Broadcasting Company, Inc. Chief Executive Officer & President
30 Rockefeller Plaza
New York, NY 10112
Mark Begor National Broadcasting Company, Inc. Executive Vice President
30 Rockefeller Plaza
New York, NY 10112
William Bolster CNBC, Inc. Executive Vice President
2200 Fletcher Avenue
Fort Lee, NJ 07024
</TABLE>
<PAGE> 34
CUSIP _______________
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ ----------------------------
<S> <C> <C>
Richard Cotton National Broadcasting Company, Inc. Executive Vice President
30 Rockefeller Plaza
New York, NY 10112
Duncan Ebersol National Broadcasting Company, Inc. Executive Vice President
30 Rockefeller Plaza
New York, NY 10112
Randel A. Falco National Broadcasting Company, Inc. Executive Vice President
30 Rockefeller Plaza
New York, NY 10112
Andrew Lack National Broadcasting Company, Inc. Executive Vice President
30 Rockefeller Plaza
New York, NY 10112
Donald Ohlmeyer National Broadcasting Company, Inc. Executive Vice President
3000 West Alameda Ave.
Burbank, CA 91523
Thomas Rogers National Broadcasting Company, Inc. Executive Vice President
30 Rockefeller Plaza
New York, NY 10112
Scott Sassa National Broadcasting Company, Inc. Executive Vice President
3000 West Alameda Ave.
Burbank, CA 91523
Edward Scanlon National Broadcasting Company, Inc. Executive Vice President
30 Rockefeller Plaza
New York, NY 10112
</TABLE>
<PAGE> 35
CUSIP _______________
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ ----------------------------
<S> <C> <C>
Patrick Wallace National Broadcasting Company, Inc. Executive Vice President
30 Rockefeller Plaza
New York, NY 10112
Kassie Canter National Broadcasting Company, Inc. Senior Vice President
30 Rockefeller Plaza
New York, NY 10112
</TABLE>
Each person listed above is a citizen of the United States of America except
Andrea Jung, who is a citizen of Canada.
<PAGE> 36
CUSIP _______________
SCHEDULE C TO SCHEDULE 13D
Filed by General Electric Capital Corporation
General Electric Capital Corporation
Directors and Executive Officers
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ ----------------------------
<S> <C> <C>
Directors
Nigel D.T. Andrews General Electric Capital Corporation Executive Vice President, General Electric
260 Long Ridge Road Capital Corporation
Stamford, CT 06927
Nancy E. Barton General Electric Capital Corporation Senior Vice President, General Counsel and
260 Long Ridge Road Secretary, General Electric Capital
Stamford, CT 06927 Corporation
James R. Bunt General Electric Company Vice President and Treasurer, General
3135 Easton Turnpike Electric Company
Fairfield, CT 06431
David M. Cote General Electric Appliances President and Chief Executive Officer,
Appliance Park General Electric Appliances
Louisville, KY 40225
Dennis D. Dammerman General Electric Company Vice Chairman and Executive Officer, General
3135 Easton Turnpike Electric Company; Chairman and Chief
Fairfield, CT 06431 Executive Officer, General Electric Capital
Services, Inc.
Benjamin W. Heineman Jr. General Electric Company Senior Vice President, General Counsel and
3135 Easton Turnpike Secretary, General Electric Company
Fairfield, CT 06431
</TABLE>
<PAGE> 37
CUSIP _______________
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ ----------------------------
<S> <C> <C>
Jeffrey R. Immelt General Electric Medical Systems President and Chief Executive Officer,
3000 N. Grandview Boulevard General Electric Medical Systems
Waukesha, WI 53188
W. James McNerney, Jr. GE Aircraft Engines President and Chief Executive Officer, GE
One Neumann Way Aircraft Engines
Cincinnati, OH 45215-6301
John H. Myers GE Investment Corporation Chairman and President, GE Investment
3003 Summer Street Corporation
Stamford, CT 06904
Robert L. Nardelli General Electric Company President and Chief Executive Officer, GE
One River Road Power Systems
Schenectady, NY 12345
Denis J. Nayden General Electric Capital Corporation President and Chief Executive Officer,
260 Long Ridge Road General Electric Capital Corporation
Stamford, CT 06927
Michael A. Neal General Electric Capital Corporation Executive Vice President, General Electric
260 Long Ridge Road Capital Corporation
Stamford, CT 06927
James A. Parke General Electric Capital Corporation Executive Vice President and Chief Financial
260 Long Ridge Road Officer, General Electric Capital Corporation
Stamford, CT 06927
John M. Samuels General Electric Company Vice President and Senior Counsel, Corporate
3135 Easton Turnpike Taxes, General Electric Company
Fairfield, CT 06431
</TABLE>
<PAGE> 38
CUSIP _______________
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ ----------------------------
<S> <C> <C>
Keith S. Sherin General Electric Company Senior Vice President - Finance and Chief
3135 Easton Turnpike Financial Officer, General Electric Company
Fairfield, CT 06431
Edward D. Stewart General Electric Capital Corporation Executive Vice President, General Electric
1600 Summer Street Capital Corporation
Stamford, CT 06927
John F. Welch, Jr. General Electric Company Chairman and Chief Executive Officer, General
3135 Easton Turnpike Electric Company
Fairfield, CT 06431
Executive Officers
Denis J. Nayden General Electric Capital Corporation President and Chief Executive Officer
260 Long Ridge Road
Stamford, CT 06927
Nigel D. T. Andrews General Electric Capital Corporation Executive Vice President
260 Long Ridge Road
Stamford, CT 06927
Michael A. Neal General Electric Capital Corporation Executive Vice President
260 Long Ridge Road
Stamford, CT 06927
Edward D. Stewart General Electric Capital Corporation Executive Vice President
1600 Summer Street
Stamford, CT 06905
</TABLE>
<PAGE> 39
CUSIP _______________
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ ----------------------------
<S> <C> <C>
James A. Parke General Electric Capital Corporation Executive Vice President and Chief Financial
260 Long Ridge Road Officer
Stamford, CT 06927
Nancy E. Barton General Electric Capital Corporation Senior Vice President, General Counsel and
260 Long Ridge Road Secretary
Stamford, CT 06927
James A. Colica General Electric Capital Corporation Senior Vice President, Global Risk Management
260 Long Ridge Road
Stamford, CT 06927
Richard D'Avino General Electric Capital Corporation Senior Vice President,
777 Long Ridge Road Taxes
Stamford, CT 06927
Michael D. Fraizer General Electric Capital Corporation Senior Vice President, Insurance/Investment
6604 West Broad Street Products
Taylor Building
Richmond, VA 23230
Robert L. Lewis General Electric Capital Corporation Senior Vice President, Structured Finance
120 Long Ridge Road Group
Stamford, CT 06927
Lawrence J. Toole General Electric Capital Corporation Senior Vice President, Human Resources
260 Long Ridge Road
Stamford, CT 06927
</TABLE>
<PAGE> 40
CUSIP _______________
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ ----------------------------
<S> <C> <C>
Jeffrey S. Werner General Electric Capital Corporation Senior Vice President, Corporate Treasury and
201 High Ridge Road Global Funding Operation
Stamford, CT 06927
</TABLE>
Each person listed above is a citizen of the United States of America except
Nigel D.T. Andrews, who is a citizen of the United Kingdom.
<PAGE> 41
CUSIP _______________
SCHEDULE D TO SCHEDULE 13D
Filed by General Electric Capital Services, Inc.
General Electric Capital Services, Inc.
Directors and Executive Officers
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ -----------------------------
<S> <C> <C>
Directors
Kaj Ahlmann Employers Reinsurance Corp. Executive Vice President, General Electric
5200 Metcalf Capital Services, Inc., President and Chief
Overland Park, KS 66201 Operating Officer, Employers Reinsurance Corp.
Nigel D.T. Andrews General Electric Capital Corporation Executive Vice President, General Electric
260 Long Ridge Road Capital Corporation
Stamford, CT 06927
Nancy E. Barton General Electric Capital Corporation Senior Vice President, General Counsel and
260 Long Ridge Road Secretary
Stamford, CT 06927
James R. Bunt General Electric Company Vice President and Treasurer, General
3135 Easton Turnpike Electric Company
Fairfield, CT 06431
David M. Cote GE Appliances President and Chief Executive Officer, GE
Appliance Park Appliances
Louisville, KY 40225
Dennis D. Dammerman General Electric Company Vice Chairman and Executive Officer, General
3135 Easton Turnpike Electric Company; Chairman and Chief
Fairfield, CT 06431 Executive Officer, General Electric Capital
Services, Inc.
</TABLE>
<PAGE> 42
CUSIP _______________
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ -----------------------------
<S> <C> <C>
Benjamin W. Heineman, Jr. General Electric Company Senior Vice President, General Counsel and
3135 Easton Turnpike Secretary, General Electric Company
Fairfield, CT 06431
Jeffrey R. Immelt GE Medical Systems President and Chief Executive Officer, GE
3000 N. Grandview Blvd. Medical Systems
Waukesha, WI 53188
W. James McNerney, Jr. GE Aircraft Engines President and Chief Executive Officer, GE
One Neumann Way Aircraft Engines
Cincinnati, OH 45215-6301
John H. Myers GE Investment Corporation Chairman and President, GE Investment
3003 Summer Street Corporation
Stamford, CT 06904
Robert L. Nardelli General Electric Company President and Chief Executive Officer, GE
One River Road Power Systems
Schenectady, NY 12345
Denis J. Nayden General Electric Capital Corporation President and Chief Executive Officer,
260 Long Ridge Road General Electric Capital Corporation
Stamford, CT 06927
Michael A. Neal General Electric Capital Corporation Executive Vice President, General Electric
260 Long Ridge Road Capital Corporation
Stamford, CT 06927
James A. Parke General Electric Capital Corporation Executive Vice President and Chief Financial
260 Long Ridge Road Officer
Stamford, CT 06927
John M. Samuels General Electric Company Vice President and Senior Counsel, Corporate
3135 Easton Turnpike Taxes, General Electric Company
Fairfield, CT 06431
</TABLE>
<PAGE> 43
CUSIP _______________
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ -----------------------------
<S> <C> <C>
Keith S. Sherin General Electric Company Senior Vice President - Finance and Chief
3135 Easton Turnpike Financial Officer, General Electric Company
Fairfield, CT 06431
Edward D. Stewart General Electric Capital Corporation Executive Vice President, General Electric
1600 Summer Street Capital Corporation
Stamford, CT 06905
John F. Welch, Jr. General Electric Company Chairman and Chief Executive Officer, General
3135 Easton Turnpike Electric Company
Fairfield, CT 06431
Executive Officers
Dennis D. Dammerman General Electric Capital Services, Inc. Vice Chairman and Executive Officer, General
3135 Easton Turnpike Electric Company; Chairman of the Board and
Fairfield, CT 06431 Chief Executive Officer, General Electric
Capital Services, Inc.
Denis J. Nayden General Electric Capital Corporation President
260 Long Ridge Road See Schedule B.
Stamford, CT 06927
Kaj Ahlmann Employers Reinsurance Corp. Executive Vice President, General Electric
5200 Metcalf Capital Services, Inc., President and Chief
Overland Park, KS 66201 Operating Officer, Employers Reinsurance Corp.
Nigel D. T. Andrews General Electric Capital Corporation Executive Vice President
260 Long Ridge Road See Schedule B.
Stamford, CT 06927
</TABLE>
<PAGE> 44
CUSIP _______________
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ -----------------------------
<S> <C> <C>
Michael A. Neal General Electric Capital Corporation Executive Vice President
260 Long Ridge Road See Schedule B.
Stamford, CT 06927
Edward D. Stewart General Electric Capital Corporation Executive Vice President
1600 Summer Street See Schedule B.
Stamford, CT 06905
James A. Parke General Electric Capital Corporation Executive Vice President and Chief Financial
260 Long Ridge Road Officer
Stamford, CT 06927 See Schedule B.
Nancy E. Barton General Electric Capital Corporation Senior Vice President, General Counsel and
260 Long Ridge Road Secretary
Stamford, CT 06927 See Schedule B.
James A. Colica General Electric Capital Corporation Senior Vice President, Global Risk Management
260 Long Ridge Road See Schedule B.
Stamford, CT 06927
Richard D'Avino General Electric Capital Corporation Senior Vice President,
777 Long Ridge Road Taxes
Stamford, CT 06927 See Schedule B.
Lawrence J. Toole General Electric Capital Corporation Senior Vice President,
260 Long Ridge Road Human Resources
Stamford, CT 06927 See Schedule B.
</TABLE>
<PAGE> 45
CUSIP _______________
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ -----------------------------
<S> <C> <C>
Jeffrey S. Werner General Electric Capital Corporation Senior Vice President, Corporate Treasury and
201 High Ridge Road Global Funding Operation
Stamford, CT 06927 See Schedule B.
</TABLE>
Each person listed above is a citizen of the United States of America except:
Kaj Ahlman, who is a citizen of Denmark; and Nigel D.T. Andrews, who is a
citizen of the United Kingdom.
<PAGE> 46
CUSIP _______________
SCHEDULE E TO SCHEDULE 13D
Filed by General Electric Company
General Electric Company
Directors and Executive Officers
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ -----------------------------
<S> <C> <C>
Directors
J.I. Cash, Jr. Harvard Business School Professor of Business Administration-Graduate
Baker Library 187 School of Business Administration, Harvard
Soldiers Field University
Boston, MA 02163
S.S. Cathcart 222 Wisconsin Avenue Retired Chairman, Illinois Tool Works
Suite 103
Lake Forest, IL 60045
D.D. Dammerman General Electric Company Vice Chairman of the Board and Executive
3135 Easton Turnpike Officer, General Electric Company; Chairman
Fairfield, CT 06431 and Chief Executive Officer, General Electric
Capital Services, Inc.
P. Fresco Fiat SpA Chairman of the Board, Fiat SpA
via Nizza 250
10126 Torino, Italy
C.X. Gonzalez Kimberly-Clark de Mexico, Chairman of the Board and Chief Executive
S.A. de C.V. Officer, Kimberly-Clark de Mexico, S.A. de
Jose Luis Lagrange 103, C.V.
Tercero Piso
Colonia Los Morales
Mexico, D.F. 11510, Mexico
Andrea Jung Avon Products, Inc. President and Chief Operating Officer, Avon
1345 Avenue of the Americas Products, Inc.
New York, NY 10105
</TABLE>
<PAGE> 47
CUSIP _______________
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ -----------------------------
<S> <C> <C>
K.G. Langone Invemed Associates, Inc. Chairman, President and Chief Executive
375 Park Avenue Officer, Invemed Associates, Inc.
new York, NY 10152
G.G. Michelson Federated Department Stores Former Member of the Board of Directors,
151 West 34th Street Federated Department Stores
New York, NY 10001
E.F. Murphy General Electric Company Vice Chairman of the Board and Executive
3135 Easton Turnpike Officer, General Electric Company
Fairfield, CT 06431
S. Nunn King & Spalding Partner, King & Spalding
191 Peachtree Street, N.E.
Atlanta, GA 30303
J.D. Opie General Electric Company Vice Chairman of the Board and Executive
3135 Easton Turnpike Officer, General Electric Company
Fairfield, CT 06431
R.S. Penske Penske Corporation Chairman of the Board and President, Penske
13400 Outer Drive, West Corporation
Detroit, MI 48239-4001
F.H.T. Rhodes Cornell University President Emeritus, Cornell University
3104 Snee Building
Ithaca, NY 14853
A.C. Sigler Champion International Corporation Retired Chairman of the Board and CEO and
1 Champion Plaza former Director, Champion International
Stamford, CT 06921 Corporation
</TABLE>
<PAGE> 48
CUSIP _______________
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ -----------------------------
<S> <C> <C>
D.A. Warner III J.P. Morgan & Co., Inc. and Morgan Guaranty Chairman of the Board, President, and Chief
Trust Co. Executive Officer, J.P. Morgan & Co.
60 Wall Street Incorporated and Morgan Guaranty Trust Company
New York, NY 10260
J.F. Welch, Jr. General Electric Company Chairman of the Board and Chief Executive
3135 Easton Turnpike Officer, General Electric Company
Fairfield, CT 06431
Executive Officers
J.F. Welch, Jr. General Electric Company Chairman of the Board and Chief Executive
3135 Easton Turnpike Officer
Fairfield, CT 06431
P.D. Ameen General Electric Company Vice President and Comptroller
3135 Easton Turnpike
Fairfield, CT 06431
J.R. Bunt General Electric Company Vice President and Treasurer
3135 Easton Turnpike
Fairfield, CT 06431
D.L. Calhoun General Electric Company Senior Vice President - GE Lighting
Nela Park
Cleveland, OH 44122
W.J. Conaty General Electric Company Senior Vice President - Human Resources
3135 Easton Turnpike
Fairfield, CT 06431
D.M. Cote General Electric Company Senior Vice President - GE Appliances
3135 Easton Turnpike
Fairfield, CT 06431
</TABLE>
<PAGE> 49
CUSIP _______________
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ -----------------------------
<S> <C> <C>
D.D. Dammerman General Electric Company Vice Chairman of the Board and Executive
Officer, General Electric Company; Chairman
and Chief Executive Officer, General Electric
Capital Services, Inc.
L.S. Edelheit General Electric Company Senior Vice President - Corporate Research
P.O. Box 8 and Development
Schenectady, NY 12301
B.W. Heineman, Jr. General Electric Company Senior Vice President - General Counsel and
3135 Easton Turnpike Secretary
Fairfield, CT 06431
J.R. Immelt General Electric Company Senior Vice President - GE Medical Systems
P.O. Box 414
Milwaukee, WI 53201
G.S. Malm General Electric Company Senior Vice President - Asia
3135 Easton Turnpike
Fairfield, CT 06431
W.J. McNerney, Jr. General Electric Company Senior Vice President - GE Aircraft Engines
1 Neumann Way
Cincinnati, OH 05215
E.F. Murphy General Electric Company Vice Chairman of the Board and Executive
3135 Easton Turnpike Officer
Fairfield, CT 06431
R.L. Nardelli General Electric Company Senior Vice President - GE Power Systems
1 River Road
Schenectady, NY 12345
R.W. Nelson General Electric Company Vice President - Corporate Financial Planning
3135 Easton Turnpike and Analysis
Fairfield, CT 06431
</TABLE>
<PAGE> 50
CUSIP _______________
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ -----------------------------
<S> <C> <C>
J.D. Opie General Electric Company Vice Chairman of the Board and Executive
3135 Easton Turnpike Officer
Fairfield, CT 06431
G.M. Reiner General Electric Company Senior Vice President - Chief Information
3135 Easton Turnpike Officer
Fairfield, CT 06431
J.G. Rice General Electric Company Vice President - GE Transportation Systems
2901 East Lake Road
Erie, PA 16531
G.L. Rogers General Electric Company Senior Vice President - GE Plastics
1 Plastics Avenue
Pittsfield, MA 01201
K.S. Sherin General Electric Company Senior Vice President - Finance and Chief
3135 Easton Turnpike Financial Officer
Fairfield, CT 06431
L.G. Trotter General Electric Company Senior Vice President - GE Industrial Systems
41 Woodward Avenue
Plainville, CT 06062
</TABLE>
Each person listed above is a citizen of the United States of America except:
C.X. Gonzalez, who is a citizen of Mexico; P. Fresco, who is a citizen of Italy;
Andrea Jung, who is a citizen of Canada; and G.S. Malm, who is a citizen of
Sweden.
<PAGE> 51
CUSIP _______________
SCHEDULE F TO SCHEDULE 13D
Filed by National Broadcasting Company Holding, Inc.
National Broadcasting Company Holding, Inc.
Directors and Executive Officers
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ -----------------------------
<S> <C> <C>
Directors
J.I. Cash, Jr. Harvard Business School Professor of Business Administration-Graduate
Baker Library 187 School of Business Administration, Harvard
Soldiers Field University
Boston, MA 02163
S.S. Cathcart 222 Wisconsin Avenue Retired Chairman, Illinois
Suite 103 Tool Works
Lake Forest, IL 60045
D.D. Dammerman General Electric Company Vice Chairman of the Board and Executive
3135 Easton Turnpike Officer, General Electric Company; Chairman
Fairfield, CT 06431 and Chief Executive Officer, General Electric
Capital Services, Inc.
P. Fresco Fiat SpA Chairman of the Board, Fiat SpA
via Nizza 250
10126 Torino, Italy
C.X. Gonzalez Kimberly-Clark de Mexico, Chairman of the Board and Chief Executive
S.A. de C.V. Officer, Kimberly-Clark de Mexico, S.A. de
Jose Luis Lagrange 103, C.V.
Tercero Piso
Colonia Los Morales
Mexico, D.F. 11510, Mexico
Andrea Jung Avon Products, Inc. President and Chief Operating Officer, Avon
1345 Avenue of the Americas Products, Inc.
New York, NY 10105
</TABLE>
<PAGE> 52
CUSIP _______________
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ -----------------------------
<S> <C> <C>
G.G. Michelson Federated Department Stores Former Member of the Board of Directors,
151 West 34th Street Federated Department Stores
New York, NY 10001
E.F. Murphy General Electric Company Vice Chairman of the Board and Executive
3135 Easton Turnpike Officer, General Electric Company
Fairfield, CT 06431
S. Nunn King & Spalding Partner, King & Spalding
191 Peachtree Street, N.E.
Atlanta, GA 30303
J.D. Opie General Electric Company Vice Chairman of the Board and Executive
3135 Easton Turnpike Officer, General Electric Company
Fairfield, CT 06431
R.S. Penske Penske Corporation Chairman of the Board and President, Penske
13400 Outer Drive, West Corporation
Detroit, MI 48239-4001
F.H.T. Rhodes Cornell University President Emeritus, Cornell University
3104 Snee Building
Ithaca, NY 14853
A.C. Sigler Champion International Corporation Retired Chairman of the Board and CEO and
1 Champion Plaza former Director, Champion International
Stamford, CT 06921 Corporation
D.A. Warner III J.P. Morgan & Co., Inc. and Morgan Guaranty Chairman of the Board, President, and Chief
Trust Co. Executive Officer, J.P. Morgan & Co.
60 Wall Street Incorporated and Morgan Guaranty Trust Company
New York, NY 10260
</TABLE>
<PAGE> 53
CUSIP _______________
<TABLE>
<CAPTION>
Name Present Business Address Present Principal Occupation
- ---- ------------------------ -----------------------------
<S> <C> <C>
J.F. Welch, Jr. General Electric Company Chairman of the Board and Chief Executive
3135 Easton Turnpike Officer, General Electric Company
Fairfield, CT 06431
Executive Officers
Robert C. Wright National Broadcasting Company, Inc. Chief Executive Officer and President
30 Rockefeller Plaza
New York, NY 10112
Mark Begor National Broadcasting Company, Inc. Treasurer
30 Rockefeller Plaza
New York, NY 10112
</TABLE>
Each person listed above is a citizen of the United States of America except:
C.X. Gonzalez, who is a citizen of Mexico; P. Fresco, who is a citizen of Italy;
and Andrea Jung, who is a citizen of Canada.
<PAGE> 54
CUSIP _______________
SCHEDULE G TO SCHEDULE 13D
1. Her Majesty's Inspectorate of Pollution v. IGE Medical Systems
Limited (St. Albans Magistrates Court, St. Albans, Hertsfordshire, England, Case
No. 04/00320181)
In April 1994, IGE Medical Systems Limited ("IGEMS"), a U.K. subsidiary
of GE Medical Systems, discovered the loss of a radioactive barium source at the
Radlett, England facility. The lost source, used to calibrate nuclear camera
detectors, emits a very low level of radiation. IGEMS immediately reported the
loss as required by the U.K. Radioactive Substances Act. An ensuing
investigation, conducted in cooperation with government authorities, failed to
locate the source. On July 21, 1994, Her Majesty's Inspectorate of Pollution
(HMIP) charged IGEMS with violating the Radioactive Substances Act by failing to
comply with a condition of registration. The Act provides that a registrant like
IGEMS, which "does not comply with a limitation or condition subject to which
(it) is so registered ... shall be guilty of (a criminal) offense." Condition 7
of IGEMS' registration states that it "shall so far as is reasonably practicable
prevent ... loss of any registered source."
At the beginning of trial on February 24, 1995, IGEMS entered a guilty
plea and agreed to pay a fine of (pound)5,000 (pounds) and assessed costs of
(pound)5,754 (pounds). The prosecutor's presentation focused primarily on the
1991 change in internal IGEMS procedures and, in particular, the source logging
procedure. The prosecutor complimented IGEMS' investigation and efforts to
locate the source and advised the court that IGEMS had no previous violations of
the Radioactive Substances Act. He also told the court that the Radlett plant
had been highlighted as an exemplary facility to HMIP inspectors as part of
their training. In mitigation, IGEMS emphasized the significant infrastructure
and expense undertaken by IGEMS to provide security for radiation sources and
the significant effort and expense incurred in attempting to locate the missing
source.
<PAGE> 55
CUSIP 92047K107
EXHIBIT INDEX
Exhibit No.
ITEM 8. Material to Be Filed as Exhibits.
Exhibit 1 Joint Filing Agreement by and among GE Capital Equity
Investments, Inc., General Electric Capital Corporation,
General Electric Capital Services, Inc., General Electric
Company, National Broadcasting Company, Inc. and National
Broadcasting Company Holding, Inc, dated April 26, 1999.
Exhibit 2 Investment Agreement, dated as of March 8, 1999, between GE
Capital Equity Investments, Inc. and ValueVision International
Inc. and First Amendment and Agreement, dated as of April 15,
1999, between GE Capital Equity Investments Inc. and
ValueVision International, Inc.
Exhibit 3 Distribution and Marketing Agreement, dated as of March 8,
1999, between National Broadcasting Company, Inc. and
ValueVision International, Inc.
Exhibit 4 Investment Warrant of ValueVision International, Inc., dated
as of April 15, 1999, pursuant to the Investment Agreement,
Exhibit 5 Distributor Warrant of ValueVision International, Inc., dated
as of April 15, 1999, pursuant to the Distribution and
Marketing Agreement
Exhibit 6 Form of Performance Distributor Warrant of ValueVision
International, Inc., pursuant to the Distribution and
Marketing Agreement
Exhibit 7 Certificate of Designation for Series A Redeemable Convertible
Preferred Stock of ValueVision International, Inc., filed and
dated as of April 15, 1999
Exhibit 8 Shareholder Agreement, dated as of April 15, 1999, among GE
Capital Equity Investments, Inc., National Broadcasting
Company and ValueVision International, Inc.
Exhibit 9 Registration Rights Agreement, dated as of April 15, 1999,
among GE Capital Equity Investments, Inc., National
Broadcasting Company and ValueVision International, Inc.
Exhibit 10 Power of Attorney appointing Michael E. Pralle as agent and
attorney-in-fact for General Electric Company.
Exhibit 11 Power of Attorney appointing Michael E. Pralle as agent and
attorney-in-fact for General Electric Capital Services, Inc.
<PAGE> 1
Exhibit 1
Joint Filing Agreement
We, the signatories of the statement on Schedule 13D to which this
Agreement is attached, hereby agree that such statement is, and any amendments
thereto filed by any of us will be, filed on behalf of each of us.
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ Michael E. Pralle
------------------------------------
Name: Michael E. Pralle
Title: Attorney-in-fact
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Michael E. Pralle
------------------------------------
Name: Michael E. Pralle
Title: Attorney-in-fact
GENERAL ELECTRIC CAPITAL SERVICES, INC.
By: /s/ Michael E. Pralle
------------------------------------
Name: Michael E. Pralle
Title: Attorney-in-fact
GENERAL ELECTRIC COMPANY
By: /s/ Michael E. Pralle
------------------------------------
Name: Michael E. Pralle
Title: Attorney-in-fact
NATIONAL BROADCASTING COMPANY, INC.
By: /s/ Mark Begor
------------------------------------
Name: Mark Begor
Title: Executive Vice President
NATIONAL BROADCASTING COMPANY HOLDING, INC.
By: /s/ Mark Begor
------------------------------------
Name: Mark Begor
Title: Treasurer
<PAGE> 1
EXHIBIT 2
INVESTMENT AGREEMENT
By and Between
VALUEVISION INTERNATIONAL, INC.
AND
GE CAPITAL EQUITY INVESTMENTS, INC.
Dated as of March 8, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. Definitions 1
Section 1.1 Definitions......................................................................... 1
ARTICLE II. Authorization, Sale and Purchase
of the Securities 6
Section 2.1 Authorization; Agreement to Sell
and Purchase.......................................................... 6
Section 2.2 Closing............................................................................. 7
Section 2.3 Use of Proceeds..................................................................... 7
Section 2.4 Beneficial Ownership of Securities.................................................. 7
ARTICLE III. Representations and Warranties 8
Section 3.1 Representations and Warranties
of the Company........................................................ 8
Section 3.2 Representations and Warranties
of the Purchaser...................................................... 21
ARTICLE IV. Conduct of Business 24
Section 4.1 Conduct of the Business Pending
the Closing........................................................... 24
Section 4.2 Access to Information............................................................... 25
Section 4.3 No Solicitation..................................................................... 25
ARTICLE V. Other Agreements 27
Section 5.1 Preparation of Proxy Statement................................................. 27
Section 5.2 Shareholders Meeting........................................................... 28
Section 5.3 Public Statements.............................................................. 28
Section 5.4 Reasonable Commercial Efforts.................................................. 28
Section 5.5 HSR Act........................................................................ 29
Section 5.6 Reservation of Shares.......................................................... 29
Section 5.7 Notification of Certain Matters................................................ 29
Section 5.8 Further Assurances............................................................. 29
ARTICLE VI. Conditions Precedent 30
Section 6.1 Conditions of the Purchaser......................................................... 30
Section 6.2 Conditions of the Company........................................................... 31
</TABLE>
i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VII. Term 32
Section 7.1 Termination......................................................................... 32
Section 7.2 Effect of Termination............................................................... 33
ARTICLE VIII. Miscellaneous 33
Section 8.1 Survival of Representations and
Warranties............................................................ 33
Section 8.2 Notices............................................................................. 33
Section 8.3 Entire Agreement; Amendment......................................................... 34
Section 8.4 Counterparts........................................................................ 35
Section 8.5 Governing Law; Jurisdiction; Waiver
of Jury Trial......................................................... 35
Section 8.6 Public Announcements................................................................ 35
Section 8.7 Fees and Expenses................................................................... 35
Section 8.8 Indemnification by the Company...................................................... 35
Section 8.9 Indemnification by the Purchaser.................................................... 37
Section 8.10 Successors and Assigns;
Third Party Beneficiaries............................................. 38
Section 8.11 Arbitration......................................................................... 38
Section 8.12 Specific Performance................................................................ 39
Section 8.13 Headings, Captions and Table of Contents............................................ 39
</TABLE>
ii
<PAGE> 4
SCHEDULES
3.1(b) - Capital Stock Obligations of Material Subsidiaries
3.1(c) - Conflicts
3.1(d) - Consents and Approvals of Company
3.1(e) - Common Stock Options and Obligations
3.1(f) - SEC Filings; Claims and Liabilities
3.1(i) - Legal Proceedings
3.1(j) - Certain Changes
3.1(k) - Employee Plans
3.1(m) - Material Agreements
3.1(o) - Tax Matters
3.1(u) - FCC Licenses and Applications
3.1(x) - Brokers and Finders
3.2(c) - Consents and Approvals
4.1 - Conduct of Business
5.4 - Required Consents
EXHIBITS
A - Form of Certificate of Designation
B - Form of Warrant
C - Form of Registration Rights Agreement
D - Form of Shareholder Agreement
E - Form of Operating Agreement
iii
<PAGE> 5
Exhibit 2
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT, dated as of March 8, 1999 (this
"Agreement"), by and between ValueVision International, Inc., a Minnesota
corporation (the "Company"), and GE Capital Equity Investments, Inc., a Delaware
corporation (the "Purchaser"). Capitalized terms not otherwise defined where
used shall have the meanings ascribed thereto in Article I.
WHEREAS, Purchaser has agreed to purchase from the Company,
and the Company has agreed to sell to the Purchaser, subject to the terms and
conditions of this Agreement, shares of the Company's Series A Redeemable
Convertible Preferred Stock and Warrants to purchase Common Stock; and
WHEREAS, the Company and the Purchaser desire to set forth
certain agreements herein.
NOW THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained and intending to be
legally bound hereby, the parties hereby agree as follows:
ARTICLE I.
Definitions
Section 1.1 Definitions. As used in this Agreement, the
following terms shall have the meanings set forth below:
"Affiliate" shall mean, with respect to any Person, any other
Person that directly or indirectly controls, is controlled by, or is
under common control with, such Person. As used in this definition,
"control" (including its correlative meanings, "controlled by" and
"under common control with") shall mean the possession, directly or
indirectly, of power to direct or cause the direction of management or
policies (whether through ownership of securities or partnership or
other ownership interests, by contract or otherwise).
"Ancillary Documents" shall mean the Distribution Agreement,
Certificate of Designation, Warrants, Shareholder Agreement and the
Registration Rights Agreement.
"Beneficially Own" shall have the meaning set forth in Rule
13d-3 under the Exchange Act.
"Business Day" shall mean any day, other than a Saturday,
Sunday or a day on which commercial banks in New York, New York are
authorized or obligated by law or executive order to close.
<PAGE> 6
Investment Agreement
"Certificate of Designation" shall mean the Certificate of
Designation of the Shares of the Company, to be executed and filed with
the Secretary of State of the State of Minnesota on or prior to the
Closing Date, which shall be substantially in the form of Exhibit A
hereto.
"Closing" and "Closing Date" shall have the meanings set forth
in Section 2.2(a).
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Common Stock" shall mean the Common Stock, par value $0.01
per share, of the Company.
"Company" shall have the meaning set forth in the preamble
hereto.
"Company Plans" shall have the meaning set forth in Section
3.1(k).
"Company Subsidiary" shall mean any Subsidiary of the Company.
"Contractual Obligation" shall mean, as to any Person, any
provision of any note, bond or security issued by such Person, or of
any mortgage, indenture, deed of trust, lease, license, franchise,
contract, agreement, instrument or undertaking to which such Person is
a party or by which it or any of its property is subject.
"Distribution Agreement" shall mean the Distribution and
Marketing Agreement dated as of the date hereof between the Company and
NBC pursuant to which NBC has agreed to distribute certain programing
of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Excluded Breach" shall mean any breach of a representation or
warranty hereunder, provided that (i) the Purchaser had actual
knowledge of the event or circumstance constituting such breach on or
prior to the date hereof and (ii) the Purchaser believed, on or prior
to the date hereof, that such circumstance or event constituted a
breach of such representation or warranty hereunder.
"FCC" shall mean the Federal Communications Commission.
2
<PAGE> 7
Investment Agreement
"GAAP" shall mean generally accepted accounting principles in
the United States of America in effect from time to time.
"Governmental Entity" shall mean any nation or government, any
state or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government and any self- regulating
organization, securities exchange or securities trading system.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Intellectual Property" shall mean all material patents,
copyright registrations, mask work registrations, trademark and service
mark registrations, applications for any of the foregoing, designs,
copyrights, mask works, service marks, trade dress, trade names, secret
formulae, trade secrets, secret processes, computer programs,
confidential information and know-how.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or security
agreement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement or
any financing lease having substantially the same effect as any of the
foregoing).
"Material Adverse Effect" shall mean a material adverse effect
on (i) with respect to the Company, the assets, business condition,
results of operations or financial condition of the Company and the
Company Subsidiaries taken as a whole or (ii) with respect to any
party, the ability of such party to timely perform its obligations
under this Agreement or any Ancillary Document to which it is a party.
The dollar thresholds set forth in the definition of "Material
Agreement" shall not affect the meaning and interpretation of "Material
Adverse Effect."
"Material Agreement" shall mean any contract, lease,
restriction, agreement, instrument or commitment to which the Company
or any Company Subsidiary is a party or by which its properties are
bound (i) which provides a benefit to the Company and the Company
Subsidiaries of, or commits the Company or any Company Subsidiary to
expend, $500,000 or more (or, in the case of any agreement with any
customer of the Company or any Company Subsidiary, $50,000 or more),
(ii) which if breached by any party thereto would result in liability
or loss to the Company and the Company
3
<PAGE> 8
Investment Agreement
Subsidiaries of $500,000 or more (or in the case of any agreement with
any customer of the Company or any Company Subsidiary, $50,000 or more)
or (iii) which provides for the distributions of programming of the
Company to more than 250,000 full-time equivalent homes by any
multichannel video programming distributor, including without
limitation, by a cable television system, MATV and SMATV systems, MMDS,
TVRO and other wireline, wireless or direct broadcast satellite
delivery methods.
"Material Subsidiaries" shall mean those Subsidiaries of the
Company that constitute "significant subsidiaries" as defined in Rule
1-02 of Regulation S-X under the Securities Act.
"NBC" shall mean National Broadcasting Company, Inc., a
Delaware corporation and Affiliate of the Purchaser.
"Operating Agreement" shall mean the Memorandum of
Understanding, dated as of the date hereof, between the Company,
Purchaser and NBC which shall be substantially in the form attached as
Exhibit E hereto.
"Options" shall mean stock options to purchase Common Stock
(i) issued or issuable under the Company's 1990 Stock Option Plan, (ii)
issued or issuable under the Company's 1994 Executive Stock Option Plan
(whether or not issued) and (iii) as set forth on Schedule 3.1(e)
hereto.
"Permits" shall have the meaning set forth in Section 3.1(h).
"Permitted Liens" shall mean (i) mechanics', carriers',
repairmen's or other like Liens arising or incurred in the ordinary
course of business, (ii) Liens arising under original purchase price
conditioned sales contracts and equipment leases with third parties
entered into in the ordinary course of business consistent with past
practice, (iii) statutory Liens for Taxes not yet due and payable and
(iv) other encumbrances or restrictions or imperfections of title which
do not materially impair the continued use and operation of the assets
to which they relate.
"Person" shall mean an individual, corporation, unincorporated
association, partnership, group (as defined in Section 13(d)(3) of the
Exchange Act), trust, joint stock company, joint venture, business
trust or unincorporated organization, limited liability company, any
Governmental Entity or any other entity of whatever nature.
"Preferred Stock" shall mean the preferred stock, par value
$0.01 per share, of the Company.
4
<PAGE> 9
Investment Agreement
"Purchaser" shall mean GE Capital Equity Investments, Inc. a
Delaware corporation.
"Registration Rights Agreement" shall mean the registration
rights agreement to be executed by the Purchaser and the Company at the
Closing, which shall be substantially in the form attached as Exhibit C
hereto.
"Replacement Warrant" shall have the meaning set forth in
Section 2.4(b).
"Requirement of Law" shall mean, as to any Person, the
certificate of incorporation and by-laws or other organizational
documents of such Person, and any law, statute, order, treaty, rule or
regulation, or judgment, decree, determination or order of any
arbitrator, court or other Governmental Entity, applicable to or
binding upon such Person or any of its property.
"Restricted Party" shall have the meaning set forth in the
Shareholder Agreement.
"SEC" shall mean the United States Securities and Exchange
Commission.
"Securities" shall mean the Shares and the Warrants.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Shareholder Agreement" shall mean the Shareholder Agreement,
to be executed and delivered by the Company and the Purchaser at
Closing, which shall be substantially in the form of Exhibit D hereto.
"Shareholder Approval" shall have the meaning set forth in
Section 5.1.
"Shareholders Meeting" shall have the meaning set forth in
Section 5.2
"Shareholders Vote" shall mean the vote of the shareholders of
the Company taken at the Shareholders Meeting.
"Shares" shall have the meaning set forth in Section 2.1(a).
"Subsidiary" shall mean, as to any Person, a corporation,
partnership, limited liability company, joint venture or other entity
of which shares of stock or other
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Investment Agreement
ownership interests having ordinary voting power (other than stock or
such other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership or other
entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries,
or both, by such Person.
"Surviving Representations and Warranties" shall mean the
representations and warranties contained in Section 3.1(e)(ii) and
Section 3.1(t).
"Tax" or, collectively, "Taxes" shall mean 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. Section 1.1502-6 or comparable provisions of
state, local or foreign tax law) and including any liability for taxes
of any predecessor entity.
"Tax Returns" shall mean any return, amended return or other
report required to be filed with respect to any Tax, including
declaration of estimated tax and information returns.
"Underlying Shares" shall have the meaning set forth in
Section 3.1(e)(ii).
"Warrant" shall have the meaning set forth in Section 2.1(a),
which shall be substantially in the form of Exhibit B hereto.
"Warrants" shall mean the Warrant together with the
Replacement Warrant.
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Investment Agreement
ARTICLE II.
Authorization, Sale and Purchase of the Securities
Section 2.1 Authorization; Agreement to Sell and Purchase. (a)
Upon and subject to the terms and conditions set forth in this Agreement, the
Company has authorized the issuance and sale to Purchaser of (i) 5,339,500
shares of Series A Redeemable Convertible Preferred Stock (the "Shares") which,
in accordance with the terms and conditions set forth in the Certificate of
Designation, shall be convertible into an equal number of shares of Common Stock
(subject to adjustment under the terms of the Certificate of Designations) and
(ii) the warrant (the "Warrant") to purchase shares of Common Stock. The Shares
and the Warrants are collectively referred to as the "Securities".
(b) Upon and subject to the terms and conditions of this
Agreement, and in reliance upon the representations and warranties hereinafter
set forth, the Company agrees to issue, sell and deliver to the Purchaser at the
Closing provided for in Section 2.2 hereof, and Purchaser agrees to purchase
from the Company, the Securities for an aggregate purchase price of $44,265,000.
Section 2.2 Closing. (a) Subject to the satisfaction or waiver
of the conditions set forth in this Agreement, the purchase and sale of the
Securities pursuant to Section 2.1 (the "Closing") shall take place at the
offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York,
within three Business Days after the conditions in Sections 6.1 and 6.2 are
satisfied or waived by the Purchaser or the Company, as the case may be (the
"Closing Date"), or at such other time and place as may be mutually agreed upon
by Purchaser and the Company.
(b) At the Closing: (i) the Company shall deliver to the
Purchaser, against payment of the purchase price therefor, stock and warrant
certificates for the Securities to be sold in accordance with the provisions of
Section 2.1, registered in the name of the Purchaser or its nominee (subject to
the provisions herein and in the Ancillary Documents) and in such denominations
as the Purchaser shall specify not less than two Business Days prior to the
Closing Date; (ii) the Purchaser, in full payment for the Securities, against
delivery of the stock and warrant certificates referred to above, shall deliver
to the Company on the Closing Date immediately available funds, by wire transfer
to such account as the Company shall specify at least three Business Days prior
to the Closing Date, in the amount of the purchase price to be paid hereunder by
the Purchaser pursuant to Section 2.1(b); and (iii) each party shall take or
cause to happen such other actions, and shall execute and deliver such other
instruments or documents, as shall be required under Article VI hereof.
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Investment Agreement
Section 2.3 Use of Proceeds. The proceeds of the sale of the
Securities shall be used by the Company for general corporate purposes.
Section 2.4 Beneficial Ownership of Securities. The Company
hereby acknowledges and agrees that the Purchaser is entering into an
arrangement with NBC (and/or one of its Subsidiaries) regarding the joint voting
and control by the Purchaser and NBC (and/or one or more of their respective
Subsidiaries) of the Warrants, the Preferred Stock and the Common Stock issuable
upon exercise or conversion thereof. Therefore, both the Purchaser and NBC
(and/or one of its Subsidiaries) will be deemed to Beneficially Own such
securities and the Company hereby acknowledges and agrees to such Beneficial
Ownership arising from its issuance of such securities. In the event that NBC
and the Purchaser are no longer Affiliates of each other, the Company and
Purchaser agree that the Warrant shall immediately terminate and the Company
shall issue a new warrant to NBC or its Subsidiary (the "Replacement Warrant")
having the same terms as the Warrant, except that the provision described in
this sentence will not be contained in the Replacement Warrant. NBC or one of
its Subsidiaries will at all times own at least 50% of the economic interest in
the Replacement Warrant. The Company hereby acknowledges and agrees that NBC
shall be a third party beneficiary hereunder, entitled to the benefits of this
Section 2.4 and to enforce its provisions.
ARTICLE III.
Representations and Warranties
Section 3.1 Representations and Warranties of the Company. The
Company represents and warrants to the Purchaser as of the date hereof and as of
the Closing Date as follows:
(a) Organization and Good Standing of the Company. The Company
is a corporation duly organized, validly existing and in good standing
under the laws of the State of Minnesota and has all requisite
corporate power and authority to own, operate and lease its properties
and to carry on its businesses as they are now being conducted. The
Company is duly licensed or qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which its ownership or leasing of properties, or
the conduct of its businesses requires such licensing or qualification
and good standing, except where the failure to be so licensed or
qualified or in good standing in any such jurisdiction would not have a
Material Adverse Effect.
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Investment Agreement
(b) Organization and Good Standing of Company Subsidiaries.
The Company owns, directly or indirectly, all the shares of outstanding
capital stock of each Material Subsidiary, free and clear of all Liens,
except such Liens which do not have a Material Adverse Effect. There
are (i) no equity securities of any of the Material Subsidiaries that
are required to be issued by reason of any options, warrants, rights to
subscribe to, calls, preemptive rights or commitments of any character
whatsoever, (ii) outstanding no securities or rights convertible into
or exchangeable for shares of any capital stock of any Material
Subsidiary and (iii) no contracts, commitments, understandings or
arrangements by which any Material Subsidiary is bound to issue
additional shares of its capital stock or rights convertible into or
exchangeable for its capital stock or options, warrants or rights to
purchase or acquire any additional shares of its capital stock. Except
as set forth in Schedule 3.1(b), none of the Material Subsidiaries is
subject to any obligation (contingent or otherwise) to repurchase,
redeem or otherwise acquire or retire any of its capital stock. All of
the shares of capital stock of each of the Material Subsidiaries are
duly and validly authorized and issued, fully paid and nonassessable.
Each Material Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and has all requisite corporate power and authority to
own, operate and lease its properties and to carry on its businesses as
they are now being conducted, and is duly licensed or qualified to do
business and is in good standing in each other jurisdiction in which
its ownership or leasing of properties, or the conduct of its
businesses, requires such licensing or qualification and good standing,
except where the failure to be so licensed or qualified or in good
standing in any such jurisdiction would not have a Material Adverse
Effect.
(c) Authorization; No Conflicts. The Company has full
corporate power and authority to enter into this Agreement and the
Ancillary Documents and to perform its obligations hereunder and
thereunder. The execution, delivery and performance by the Company of
this Agreement and each Ancillary Document and the consummation of the
Company's obligations hereunder and thereunder have been duly
authorized by all necessary corporate action. This Agreement has been,
and on or prior to the Closing Date each Ancillary Document will be,
duly and validly executed and delivered by the Company. The Company's
Board of Directors has resolved to recommend that its shareholders vote
for the Shareholder Approval. This Agreement constitutes, and upon its
execution and delivery on or prior to the Closing Date, each Ancillary
Document will constitute, a valid and legally binding obligation of the
Company enforceable against the Company in accordance with its terms,
except as
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Investment Agreement
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors
generally and by general equitable principles. Except as set forth in
Schedule 3.1(c), the execution, delivery and performance of this
Agreement and the Ancillary Documents by the Company, the consummation
of the transactions by the Company contemplated hereby and thereby and
the compliance by the Company with the provisions hereof and thereof
will not conflict with, violate or result in a breach of any provision
of, require a consent, approval or notice under, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of or
accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any
Lien upon any of the properties or assets of the Company or Material
Subsidiaries under, (i) the articles of incorporation, by-laws or other
governing instrument of the Company or any Material Subsidiary, (ii)
any Contractual Obligation of the Company or any Material Subsidiary or
(iii) assuming that the filings, consents and approvals specified in
Schedule 3.1(d) have been obtained or made and any waiting period
applicable thereto has expired or been terminated, any Requirement of
Law applicable to the Company or any Material Subsidiary, except, in
the case of clauses (ii) and (iii) above, such conflicts, violations,
breaches, consents, approvals, notices, defaults, terminations,
accelerations or Liens which would not have a Material Adverse Effect.
(d) Consents. Except as set forth in Schedule 3.1(d), no
consent, approval, order or authorization of, registration, declaration
or filing with, or notice to, any Governmental Entity is required on
the part of the Company or any of its Subsidiaries in connection with
the execution and delivery by the Company of this Agreement and the
Ancillary Documents, the consummation by the Company of the
transactions contemplated hereby and thereby or the performance by the
Company of its obligations hereunder and thereunder, except for (i) the
filing of all notices, reports and other documents required by, and the
expiration of all waiting periods under, the HSR Act and the rules and
regulations promulgated by the FCC, (ii) such filings as may be
required under the blue sky laws of the various states, (iii) the
filing of the Certificate of Designation with the Secretary of State of
the State of Minnesota and (iv) such consents, approvals, orders,
authorizations, registrations, declarations, filings or notices of
which the failure to make or obtain would not have a Material Adverse
Effect.
(e) Capitalization. (i) As of the date hereof, the authorized
capital stock of the Company consists of 100,000,000 shares of
undesignated capital stock. As of the date hereof, 25,988,466 shares of
Common Stock are issued and outstanding, no shares of Common Stock are
held in treasury, and no shares of Common Stock are reserved for
issuance upon exercise of outstanding stock options except for
4,410,070 shares reserved in respect of Options. As of the
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Investment Agreement
date hereof, no shares of Preferred Stock are designated, and no shares
are issued and outstanding. All of the issued and outstanding shares of
the Company's capital stock have been duly and validly authorized and
issued and are fully paid and nonassessable and not subject to
preemptive rights.
(ii) Upon delivery of and payment for the Shares on
the Closing Date as provided herein, such Shares will be duly and
validly authorized and issued, fully paid and nonassessable and not
subject to preemptive rights, and the Purchaser will acquire good title
thereto, free and clear of all Liens (other than any Lien created by
the Purchaser). The shares of Common Stock into which the Shares are
convertible and the shares of Common Stock issuable upon exercise of
the Warrants (collectively, the "Underlying Shares") have been reserved
for issuance and, when issued upon conversion of the Shares or exercise
of the Warrants, will be duly and validly authorized and issued, fully
paid and nonassessable and not subject to preemptive rights, and the
owner of such shares will acquire good title thereto, free and clear of
all Liens (other than any Lien created by such owner).
(iii) Other than (A) the requirement to issue
warrants to purchase shares of Common Stock pursuant to the terms and
conditions of the Distribution Agreement, (B) the requirement to issue
the Shares pursuant to the terms and conditions of this Agreement, (C)
the requirement to issue the Underlying Shares, (D) the requirement to
issue shares of Common Stock pursuant to Options set forth on Schedule
3.1(e) and (E) as set forth in Schedule 3.1(e), (1) no equity
securities of the Company are or may become required to be issued by
reason of any options, warrants, rights to subscribe to, calls,
preemptive rights, or commitments of any character whatsoever, (2)
there are outstanding no securities or rights convertible into or
exchangeable for shares of any capital stock of the Company and (3)
there are no contracts, commitments, understandings or arrangements by
which the Company is or will be bound to issue additional shares of its
capital stock or securities or rights convertible into or exchangeable
for shares of its capital stock or options, warrants or rights to
purchase or acquire any additional shares of its capital stock. Except
as set forth in Schedule 3.1(e), the Company is not subject to any
obligation (contingent or otherwise) to repurchase, redeem or otherwise
acquire or retire any of its capital stock. As of the Closing Date and
after giving effect to the Closing
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Investment Agreement
(and to all transactions to be effected simultaneously therewith),
there shall be issued no class or series of Preferred Stock other than
the Shares.
(iv) Except as set forth on Schedule 3.1(e), the
Company is not a party to, and the Company has no knowledge of any,
voting trusts, proxies or any other agreements or understandings with
respect to the voting of any capital stock of the Company.
(v) Except as set forth in Schedule 3.1(e), the
Company has not granted or agreed to grant any rights relating to the
registration of its securities under applicable federal and state
securities laws, including piggyback rights.
(vi) Except as set forth on Schedule 3.1(e), the
consummation of the transactions contemplated by this Agreement will
not trigger the anti-dilution provisions or other price adjustment
mechanisms of any outstanding subscriptions, options, warrants, calls,
contracts, preemptive rights, demands, commitments, conversion rights
or other agreements or arrangements of any character or nature
whatsoever under which the Company is or may be obligated to issue or
acquire its capital stock.
(f) SEC Filings, Financial Information, Liabilities. The
Company has filed and made available to the Purchaser a true and
complete copy of each report, schedule, registration statement and
definitive proxy statement required to be filed with the SEC since
January 1, 1996 (the "SEC Documents"). Except as set forth in Schedule
3.1(f), as of their respective dates, the SEC Documents, after giving
effect to any amendments and supplements thereto filed prior to the
date hereof, complied in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, applicable
to such SEC Documents. None of the SEC Documents when filed, after
giving effect to any amendments and supplements thereto filed prior to
the date hereof, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to
form in all material respect with the applicable accounting
requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with GAAP during
the period involved (except as may be indicated in the notes thereto
or, in the case of the unaudited statements, as permitted by Form 10-Q
of the SEC, or for normal year-end adjustments) and fairly present in
all material respects the consolidated
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Investment Agreement
financial position of the Company and its consolidated Subsidiaries as
at the dates thereof and the consolidated results of their operations
and cash flows for the periods then ended. Except as set forth in
Schedule 3.1(f) and except as set forth in the SEC Documents (including
any item accounted for in the financial statements contained in the SEC
Documents or set forth in the notes thereto) as of January 31, 1998,
neither the Company nor any of its Subsidiaries had, and since such
date neither the Company nor any of its Subsidiaries has incurred, any
claims, liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) which, individually or in the
aggregate, would have a Material Adverse Effect(other than claims,
liabilities or obligations contemplated by this Agreement or the
Ancillary Documents or expressly permitted to be incurred pursuant to
this Agreement or the Ancillary Documents). In addition, since January
31, 1998, there has not been any declaration, setting aside or payment
of a dividend or other distribution with respect to shares of capital
stock of the Company or any material change in accounting methods or
practices by the Company or any of its Subsidiaries.
(g) Compliance with Applicable Law. Each of the Company and
each Material Subsidiary is and has been at all times since January 1,
1996, in compliance with all applicable Requirements of Law, other than
where the failure to be in compliance would not have a Material Adverse
Effect.
(h) Permits. Each of the Company and each of the Material
Subsidiaries has all licenses, permits, orders, approvals,
registrations, authorizations and qualifications of or with all
Governmental Entities necessary to enable it to own its properties and
conduct its businesses as presently conducted (collectively, the
"Permits"), except to the extent that the failure to have any such
Permits would not have a Material Adverse Effect. Each of the Company
and each Material Subsidiary is in compliance with the Permits, except
to the extent that the failure to be in compliance with any such
Permits would not have a Material Adverse Effect.
(i) Legal Proceedings. Except as set forth in Schedule 3.1(i),
there are no legal or administrative proceedings or arbitrations, and
no claims, actions or governmental investigations of any nature pending
against the Company or any Company Subsidiary or to which the Company
or any Company Subsidiary or any of their properties or assets is
subject, and, to the knowledge of the Company, there has not been
threatened any such proceeding, arbitration, claim, action or
governmental investigation against the Company or any of the Company
Subsidiaries, in
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Investment Agreement
each case, which would, if adversely determined, have a Material
Adverse Effect. Except as set forth in Schedule 3.1(i), neither the
Company nor any Company Subsidiary has been permanently or temporarily
enjoined or barred by any order, judgment or decree of any Governmental
Entity from engaging in or continuing any conduct or practice in
connection with the businesses conducted by the Company and the Company
Subsidiaries.
(j) Absence of Certain Changes. Except as set forth in
Schedule 3.1(j) hereto, since January 31, 1998, the businesses of the
Company and the Material Subsidiaries have been operated in the usual
and ordinary course consistent with past practice (except as disclosed
in the SEC Documents filed prior to the date hereof and the
negotiation, execution, delivery and performance of this Agreement and
the Ancillary Documents and the transactions contemplated hereby and
thereby) and there has been no event, condition or change that has had
a Material Adverse Effect.
(k) Employee Benefits. (i) Each "employee benefit plan"
(within the meaning of section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), and any other employee
plan, agreement or arrangement that is maintained or otherwise
contributed to by the Company or the Company Subsidiaries for the
benefit of their employees or with respect to which the Company or the
Company Subsidiaries has or could reasonably be expected to have any
liability (collectively, "Company Plans" as listed on Schedule 3.1(k)),
has been administered and is in compliance in all material respects
with the terms of such plan and all applicable laws, rules and
regulations. The Company is not party to any multiemployer plans.
(ii) Other than claims for benefits in the ordinary
course, there are no pending or, to the knowledge of the Company,
threatened, actions, claims or lawsuits against the Company, any of its
Subsidiaries or any Company Plan involving or arising out of any
Company Plan.
(iii) The Company and the Company Subsidiaries have
not incurred, and no event has occurred with respect to any Company
Plan which would result in, any material liability under ERISA or the
Code, including but not limited to liability resulting from a complete
or partial withdrawal from a "multiemployer plan" (as such term is
defined in section 3(37) of ERISA) or a termination of a Company Plan
which is covered by Title IV of ERISA, but which is not a multiemployer
plan.
(iv) Except as set forth in Schedule 3.1(k) hereto,
no Company Plan exists which could result in the payment to any
employee of the Company or any Company
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Investment Agreement
Subsidiary of any money or other property or rights or accelerate or
provide any other rights or benefits to any such employee as a result
of the transaction contemplated by this Agreement or the Ancillary
Documents, whether or not such payment would constitute a parachute
payment within the meaning of Section 280G of the Code.
(v) The present value of all benefit obligations
under each Company Plan which is covered by Title IV of ERISA but which
is not a multiemployer plan (based upon those assumptions used to fund
such Plans) did not, as of the last annual valuation date prior to the
date on which this representation is made or deemed made, exceed the
value of the assets of such Plan allocable to such benefit obligations.
The Company and its Subsidiaries have no material liability with
respect to "Expected Post-Retirement Benefit Obligations" within the
meaning of Statement of Financial Accounting Standards No. 106 ("FAS
106").
(l) Labor Matters. Since January 1, 1996, (i) there has been
no attempt or plan to organize any employees of the Company or any
Material Subsidiary and (ii) no strike, work-stoppage or lockout or
labor dispute between the Company or any Material Subsidiary on the one
hand and any group of employees on the other hand. To the knowledge of
the Company, no such organization effort, strike, work stoppage,
lockout or labor dispute is threatened by any group of employees of the
Company or any Material Subsidiary or is otherwise anticipated to
occur. No employee of the Company or any Material Subsidiary is the
subject of any collective bargaining agreement.
(m) Material Agreements. The Company has made available to the
Purchaser a true and correct copy of all Material Agreements. Each
Material Agreement is valid, binding, in full force and effect and
enforceable by the Company or the relevant Company Subsidiary in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors generally and by general equitable
principles. Except as disclosed in Schedule 3.1(m), the Company and the
Company Subsidiaries have performed all material obligations required
to be performed by them to date under the Material Agreements and they
are not (with or without the lapse of time or the giving of notice, or
both) in breach or default in any material respect thereunder and, to
the knowledge of the Company, no other party to any of the Material
Agreements is (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect
thereunder.
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Investment Agreement
(n) Title to Properties; Insurance. The Company and the
Material Subsidiaries have good and valid title to their respective
material properties and assets (or valid title insurance enforceable
for the fair value of such properties or assets) and all of such
material properties and assets are free of all Liens other than
Permitted Liens. The Company and the Material Subsidiaries have at all
times maintained in full force and effect property damage, liability
and other insurance with reputable insurers at levels of coverage
reasonable and customary in the applicable industry. All of the
material tangible assets of the Company and the Material Subsidiaries
are in good operating condition and repair, ordinary wear and tear
excepted and taking into account the respective ages of such assets.
The condition of all material leased personal property of the Company
and the Material Subsidiaries is consistent in all material respects
with the condition required of such property by the terms of the
applicable lease.
(o) Taxes. (i) The Company and each of its Subsidiaries have
(A) filed all federal, state, local and foreign Tax Returns and reports
required to be filed by them (taking into account all applicable
extensions) which are correct and complete in all material respects,
(B) paid or accrued all Taxes due and payable, and (C) paid all Taxes
for which a notice of assessment or collection has been received (other
than Taxes that are being contested in good faith by appropriate
proceedings and that have been reserved against in accordance with
GAAP), except in the case of clause (A), (B) or (C) for any such
filings, payments or accruals that are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect.
Except as set forth on Schedule 3.1(o), there are no audits known by
the Company to be pending or contemplated with respect to the Company's
Tax Returns. Neither the Internal Revenue Service (the "IRS") nor any
other taxing authority has asserted any claim for Taxes, or to the
knowledge of the Company, is threatening to assert any claims for
Taxes, which claims, individually or in the aggregate, are reasonably
likely to have a Material Adverse Effect. The Company 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 Material Adverse Effect. Neither the Company nor
any of its Subsidiaries has made an election under Section 341(f) of
the Code. There are no liens for Taxes upon the assets of the Company
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
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Investment Agreement
likely, individually or in the aggregate, to have a Material Adverse
Effect. No extension of a statute of limitations relating to any Taxes
is in effect with respect to the Company or any of its Subsidiaries.
(ii) Neither the Company 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 laws), other than a group the
common parent of which was the Company or any Subsidiary of the
Company.
(iii) Neither the Company 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. Section 1.1502-6 or comparable provisions of state, local
or foreign tax law) and including any liability for Taxes or any
predecessor entity, except for obligations that are not reasonably
likely, individually or in the aggregate, to have a Material Adverse
Effect.
(iv) Neither the Company 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.
(p) Environmental Matters. To the knowledge of the Company,
(i) The Company and the Company Subsidiaries hold
and are in compliance with all Environmental Permits, and are
in compliance with all applicable Environmental Laws, except
to the extent any failure to hold any such Environmental
Permit or any such noncompliance would not result in a
Material Adverse Effect;
(ii) Neither the Company nor any Company
Subsidiary has received any Environmental Claim, nor to their
knowledge is any Environmental Claim threatened, which would
result in a Material Adverse Effect;
(iii) Hazardous Materials have not been generated,
transported, treated, stored, disposed of, released or
threatened to be released by the Company or any Company
Subsidiary at, on, from or under any property or facility
currently owned, operated or otherwise used by the Company or
any Company Subsidiary, in violation of any Environmental Law,
which would result in a Material Adverse Effect;
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Investment Agreement
(iv) There are no past or present actions,
activities, events, conditions or circumstances, including
without limitation the release, threatened release, emission,
discharge, generation, treatment, storage or disposal of
Hazardous Materials by the Company or any Company Subsidiary,
that would give rise to a Material Adverse Effect;
(v) The Company and the Company Subsidiaries have
not assumed, contractually or by operation of law, any
material liabilities under any Environmental Laws;
(vi) The Company and the Company Subsidiaries have
not entered into, have not agreed to, and are not subject to
any judgment, decree, order or other similar requirement of
any governmental authority under any Environmental Laws,
including without limitation those relating to compliance with
Environmental Laws or to investigation, cleanup, remediation
or removal of Hazardous Substances; and
(vii) For purposes of this Agreement, the following
terms shall have the following meanings:
"Environmental Claim" means any written
notice, claim, demand, action, suit, complaint,
proceeding which has been served upon or delivered or
otherwise transmitted to the Company or any Company
Subsidiary, by any Person alleging material liability
or potential material liability (including without
limitation material liability or potential material
liability for investigatory costs, cleanup costs,
governmental response costs, natural resource
damages, property damage, personal injury, fines or
penalties) arising out of, relating to, based on or
resulting from (i) the presence, discharge, emission,
release or threatened release of any Hazardous
Materials at, on, from or under any property or
facility currently owned by the Company, (ii)
circumstances forming the basis of any violation or
alleged violation of any Environmental Law or
Environmental Permit, or (iii) otherwise relating to
liabilities under any Environmental Law.
"Environmental Permits" means all permits,
licenses, registrations and other governmental
authorizations required under Environmental Laws for
the Company and the Company Subsidiaries to conduct
their operations.
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Investment Agreement
"Environmental Laws" means all applicable
statutes, rules, regulations, ordinances, orders, and
decrees of any Governmental Entity relating in any
manner to contamination, pollution or protection of
human health or the environment, including the
Comprehensive Environmental Response, Compensation
and Liability Act, the Solid Waste Disposal Act, the
Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act, the Emergency Planning and
Community-Right-to-Know Act, the Safe Drinking Water
Act and similar state laws.
"Hazardous Materials" means all hazardous,
dangerous or toxic substances, wastes, materials or
chemicals, petroleum (including, but not limited to,
crude oil or any fraction thereof) and petroleum
products, pollutants, contaminants and all other
materials or substances regulated pursuant to any
Environmental Law.
(q) Intellectual Property. (i) The Company either owns,
licenses or otherwise has rights to all Intellectual Property used by
or necessary to the Company in the conduct of its business as now
conducted. No proceedings have been instituted or are pending or to the
Company's knowledge threatened that challenge the validity of the
ownership or use by the Company of such Intellectual Property, except
for such proceedings which would not have a Material Adverse Effect.
The Company knows of no infringing use or infringement of any of such
Intellectual Property by any other Person. The Company has taken such
security measures as it deems reasonably appropriate to protect the
secrecy, confidentiality and value of its trade secrets.
(r) Absence of Certain Business Practices. Neither the Company
nor any officer, employee or agent thereof, nor any other Person acting
on behalf of the Company, has, directly or indirectly, within the past
five years given or agreed to give any gift or similar benefit to any
customer, supplier, governmental employee or other Person or entity who
is or may be in a position to help or hinder the Company (or assist the
Company in connection with any actual or proposed transaction) which
(x) subjects any party or any of their respective Subsidiaries, to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding which would have a Material Adverse Effect, (y) if not given
in the past, could have had a Material Adverse Effect or (z) if not
continued in the future, could have a Material Adverse Effect.
(s) Proxy Statement. The Proxy Statement shall not (other than
information supplied in writing by the Purchaser
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Investment Agreement
and its Affiliates for inclusion in the Proxy Statement), on the date
the Proxy Statement is first mailed to shareholders of the Company and
at the time of the Shareholders Vote, contain any statement which, at
such time and 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
Proxy Statement 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 Shareholders'
Meeting which has become false or misleading. If at any time prior to
the Shareholders Vote any event relating to the Company or any of its
Affiliates, officers or directors should be discovered by the Company
which should be set forth in the supplement to the Proxy Statement, the
Company shall promptly inform the Purchaser.
(t) Antitakeover Statutes. The Board of Directors of the
Company has taken all actions necessary under the MBCA, including
approving the transactions contemplated by the Agreement and each of
the Ancillary 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 or any "business combination" with any Restricted Party
occurring after the date hereof. 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 any of the Ancillary Documents by the Company or to
any shares of Common Stock or Preferred Stock acquired at any time by
the Purchaser pursuant to Section 2.1 of this Agreement, the Warrant or
the warrants to be issued to NBC pursuant to the Distribution
Agreement, or upon conversion of the Preferred Stock (as applicable),
provided that the Company makes no representation or warranty regarding
Section 2.4 of this Agreement or to any assignment of the Securities or
the warrants to be issued to NBC pursuant to the Distribution Agreement
or to any securities issuable upon conversion or exercise of the
Securities or the warrants to be issued to NBC pursuant to the
Distribution Agreement. No other "fair price," "moratorium," or other
similar anti-takeover statute or regulation is applicable to the
Company or (by reason of the Company's participation therein) the
transactions contemplated by this Agreement or the Ancillary Documents.
(u) FCC Licenses and Applications. Set forth on Schedule
3.1(u) is a list of (i) all licenses relating to television stations
that are owned or operated by the Company or its Subsidiaries ("FCC
Licenses") and (ii) all applications for FCC Licenses or for television
station
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Investment Agreement
construction permits that are pending before the FCC as of the date
hereof. The FCC Licenses are the only licenses relating to television
stations that are required by applicable FCC law to be held by the
Company and its Subsidiaries in order to conduct the business of the
Company and its Subsidiaries as it is currently conducted.
(v) Year 2000 Compliance. The Company has adopted and
implemented a commercially reasonable plan to provide (x) that the
change of the year from 1999 to the year 2000 will not materially and
adversely affect the information and business systems of the Company or
its Subsidiaries and (y) that the impacts of such change on the vendors
and customers of the Company and its Subsidiaries will not have a
Material Adverse Effect. In the Company's reasonable best estimate, no
expenditures materially in excess of currently budgeted items
previously disclosed to the Purchaser will be required in order to
cause the information and business systems of the Company and its
Subsidiaries to operate properly following the change of the year 1999
to the year 2000. The Company reasonably expects that it will resolve
any material issues related to such change of the year in accordance
with the timetable set forth in such plan (and in any event on a timely
basis in order to be resolved before the year 2000). Between the date
of this Agreement and the Shareholders Meeting, the Company shall
continue to use commercially reasonable efforts to implement such plan.
(w) Subscribers. The Company has an Existing Subscriber Base
of at least 14.4 million FTE Subscribers represented by existing
carriage agreements, each of which is in full force and effect and is
the legal, valid and binding obligation of the Company, and to the
knowledge of the Company, the other parties thereto. The terms
"Existing Subscriber Base", "FTE" and "Subscriber" shall have the
meanings set forth in the Distribution Agreement.
(x) Brokers and Finders. Except as set forth in Schedule
3.1(x), neither the Company nor any Company Subsidiary has utilized any
broker, finder, placement agent or financial advisor or incurred any
liability for any fees or commissions in connection with any of the
transactions contemplated hereby or by the Ancillary Documents. The
Company is solely responsible for all fees or other amounts that may be
payable to each Person listed on Schedule 3.1(x).
Section 3.2 Representations and Warranties of the Purchaser.
The Purchaser represents and warrants to, and agrees with, the Company as
follows:
(a) Organization and Good Standing. Each of the Purchaser and
NBC is a corporation duly organized, validly
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Investment Agreement
existing and in good standing under the laws of the State of Delaware
and has the requisite power and authority to enter into this Agreement
and the Ancillary Documents to which it is a party and to carry out its
obligations hereunder and thereunder. Each of the Purchaser and NBC is
duly licensed or qualified as a foreign corporation for the transaction
of business and is in good standing under the laws of the State of New
York. In addition, NBC is duly licensed or qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it conducts
business, except where the failure to be so licensed or qualified or in
good standing in any such jurisdiction would not have a Material
Adverse Effect.
(b) Authorization; No Conflicts. The execution and delivery of
this Agreement and the Ancillary Documents to which the Purchaser or
NBC is a party and the consummation of the transactions contemplated
hereby and thereby have been authorized by all necessary corporate
action on behalf of the Purchaser and NBC, as applicable. This
Agreement has been, and on or prior to the Closing Date each of the
Ancillary Documents to which the Purchaser and NBC is a party will be,
duly and validly executed and delivered on behalf of the Purchaser or
NBC, as applicable, and this Agreement is, and upon their execution and
delivery on or prior to the Closing Date each of the Ancillary
Documents to which the Purchaser or NBC is a party will be, a valid and
binding obligation of the Purchaser or NBC, as applicable, enforceable
against it in accordance with its terms. The execution, delivery and
performance of this Agreement and the Ancillary Documents to which the
Purchaser or NBC is a party, the consummation by the Purchaser and NBC,
as applicable, of the transactions contemplated hereby and thereby and
the compliance by Purchaser or NBC, as applicable, with the provisions
hereof and thereof will not conflict with, violate or result in a
breach of any provision of, require a consent, approval or notice
under, or constitute a default (or an event, which, with notice or
lapse of time or both, would constitute a default) under, (i) any
organizational document of the Purchaser or NBC, (ii) any Contractual
Obligation of the Purchaser or NBC, or (iii) assuming that the
clearances, filings, consents and approvals specified in Schedule
3.2(c) have been obtained or made and any waiting period applicable
thereto has expired or been terminated, any Requirement of Law
applicable to the Purchaser or NBC, except, in the case of clauses (ii)
and (iii) above, such conflicts, violations, breaches, consents,
approvals, notices, defaults, terminations, accelerations or Liens
which would not have a Material Adverse Effect.
(c) Consents and Approvals. Except as set forth in Schedule
3.2(c), no consent, approval, order or
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Investment Agreement
authorization of, registration, declaration or filing with, or notice
to, any Governmental Entity is required on the part of Purchaser or NBC
in connection with the execution and delivery by Purchaser and NBC, as
applicable, of this Agreement and the Ancillary Documents to which the
Purchaser or NBC is a party, the consummation by the Purchaser and NBC,
as applicable, of the transactions contemplated hereby and thereby or
the performance by the Purchaser and NBC, as applicable, of its
obligations hereunder and thereunder, except for (i) the filing of all
notices, reports and other documents required by, and the expiration of
all waiting periods under, the HSR Act and the rules and regulations
promulgated by the FCC, and (ii) such consents, approvals, orders,
authorizations, registrations, declarations, filings or notices of
which the failure to make or obtain would not have a Material Adverse
Effect. Each of Purchaser and NBC is fully qualified under the FCC's
rules, regulations, and policies (including, but not limited to, its
television network and its multiple ownership rules) to consummate the
transactions contemplated by this Agreement and the Ancillary
Documents, and such consummation shall not cause the Company to be
deemed to be an attributable owner of, or vertically integrated with,
any cable system for purposes of any of the provisions of 47 C.F.R.
part 76, or to be deemed an "affiliate" of any cable system for
purposes of the commercial leased access rules as established in 47
C.F.R. ss. 76.970(b).
(d) Compliance with Applicable Law. Each of the Purchaser and
NBC is and has been at all times since January 1, 1996, in compliance
with all applicable Requirements of Law, other than where the failure
to be in compliance would not have a Material Adverse Effect.
(e) Proxy Statement. The information supplied in writing by
the Purchaser or NBC for inclusion in the Proxy Statement shall not, on
the date the Proxy Statement is first mailed to shareholders of the
Company and at the time of the Shareholders Vote, 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 such
statements made in the Proxy Statement 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 Shareholders' Meeting which has become false or misleading. If at
any time prior to the Shareholders Vote any event relating to the
Purchaser or NBC or any of their respective Affiliates should be
discovered by the Purchaser or NBC which should be set forth in the
supplement to the Proxy Statement, the Purchaser or NBC, as applicable,
shall promptly inform the Company.
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Investment Agreement
(f) Securities Act. The Purchaser (i) is acquiring the
Securities solely for the purpose of investment and not with a view to,
or for resale in connection with, any distribution thereof in violation
of the Securities Act; (ii) has had the opportunity to ask questions of
the officers and directors of, and has had access to information
concerning, the Company and the Securities; (iii) is an "accredited
investor" as defined in Rule 501(a) under the Securities Act; (iv) has
such knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of the
investment in the Company and the Securities; (v) has so evaluated the
merits and risks of such investment; (vi) is able to bear the economic
risk of such investment; and (vii) is able to afford a complete loss of
such investment.
(g) Brokers and Finders. The Purchaser has not utilized any
broker, finder, placement agent or financial advisor or incurred any
liability for any fees or commissions in connection with any of the
transactions contemplated hereby or by the Ancillary Documents.
ARTICLE IV.
Conduct of Business
Section 4.1 Conduct of the Business Pending the Closing. The
Company agrees that except with the prior written consent of the Purchaser and
except as may be contemplated by this Agreement or the Ancillary Documents, and
except as set forth on Schedule 4.1, prior to the Shareholders Vote, it and its
Subsidiaries shall operate their businesses only in the usual, regular and
ordinary manner, on a basis consistent with past practice and, to the extent
consistent with such operation, use its reasonable efforts to preserve its
present business organization intact, keep available the services of its present
employees, preserve its present business relationships and maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of the
Company's businesses. Without limitation of the foregoing, from the date hereof
until the Shareholders Vote, except as contemplated by this Agreement or the
Ancillary Documents, and except as set forth in Schedule 4.1 hereto, the Company
shall not:
(a) amend the articles of incorporation or bylaws of the
Company or any Material Subsidiary;
(b) issue, purchase or redeem, or authorize or propose the
issuance, purchase or redemption of, or declare or pay any dividend
with respect to, any shares of capital stock of
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Investment Agreement
the Company or any class of securities convertible into, or rights,
warrants or options to acquire, any such shares or other convertible
securities other than (i) pursuant to Options outstanding on the date
hereof and (ii) Options to be issued to officers, directors, employees
and/or consultants exercisable in an aggregate amount not exceed the
number of authorized Shares under the Company's 1990 Stock Option Plan
and the Company's 1994 Executive Stock Option Plan;
(c) except as set forth on Schedule 4.1, take any action that
would be prohibited by Section 3.4(a) of the Shareholder Agreement if
such Section were in effect and the Closing had occurred;
(d) other than in the ordinary course consistent with past
practices, form any joint venture, acquire or dispose of any business
or of any assets or acquire or dispose of any minority investment in
any Person;
(e) enter into any transaction involving the merger,
consolidation or sale of all or substantially all of the assets of the
Company or any Material Subsidiary other than any such merger,
consolidation or sale solely involving the Company and its
Subsidiaries;
(f) file any voluntary petition for bankruptcy or receivership
or fail to oppose any other person's petition for bankruptcy or action
to appoint a receiver of the Company or any Material Subsidiary; or
(g) authorize any of, or commit or agree to take any of, the
foregoing actions.
Section 4.2 Access to Information. Subject to applicable laws
and existing confidentiality agreements, the Company and its Subsidiaries shall
afford the officers, employees, auditors and other agents of the Purchaser and
NBC reasonable access during normal business hours to their officers, employees,
properties, offices, plants and other facilities, and contracts, commitments,
books and records relating thereto, and shall furnish such Persons all such
documents and such financial, operating and other data and information regarding
such businesses and Persons that are in the possession of such Person as the
Purchaser or NBC, as applicable, through their respective officers, employees or
agents may from time to time reasonably request. All such information will be
provided subject to the terms of the confidentiality agreements dated June 24,
1998 between the Company and the Purchaser and dated January 28, 1999 (as
amended February 28, 1999) between the Company and NBC.
Section 4.3 No Solicitation. (a) Prior to the Shareholders
Vote, the Company shall not, nor shall it permit any
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Investment Agreement
of its Subsidiaries to, nor shall it authorize or permit any officer, director
or employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of its Subsidiaries to, directly or
indirectly, (i) take any action to solicit, initiate, encourage or knowingly
facilitate any Material Transaction Proposal or the submission of a Material
Transaction Proposal or (ii) enter into or participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, a Material Transaction Proposal; provided that, in response to an
unsolicited bona fide Takeover Proposal, the Company may, to the extent that the
Board of Directors of the Company determines in good faith based on the advice
of outside legal counsel that such action is required to comply with their
fiduciary duties under applicable law, (A) furnish information with respect to
the Company and its Subsidiaries to the Person making such Takeover Proposal and
its representatives and discuss such information with such Person and its
representatives and (B) participate in negotiations regarding such Takeover
Proposal. The Company will promptly notify the Purchaser of receipt of any
request for information or any Material Transaction Proposal, the material terms
and conditions of such request or Material Transaction Proposal and the identity
of the Person making any such request or Material Transaction Proposal, and will
keep the Purchaser fully informed on a current basis of the status and details
of any such request or Material Transaction Proposal. The Company will
immediately cease and cause to be terminated any existing activities,
discussions and negotiations conducted heretofore with respect to any Material
Transaction Proposal.
(b) Prior to the Shareholders Vote, the Board of Directors of
the Company shall not (i) approve or recommend or propose publicly to approve or
recommend any Material Transaction Proposal, (ii) cause or agree to cause the
Company or any of its Subsidiaries to enter into any agreement (including,
without limitation, any letter of intent or agreement in principle) related to a
Material Transaction Proposal or (iii) withdraw or modify, in a manner adverse
to the Purchaser, the approval or recommendation of the Board of Directors of
the Company for the transactions contemplated by this Agreement. Notwithstanding
the foregoing, if the Board of Directors of the Company receives a Takeover
Proposal without having violated Section 4.3(a) hereof, the Board of Directors
of the Company may, to the extent it determines in good faith based on the
advice of outside legal counsel that such action is required to comply with
their fiduciary duties under applicable law, take any action specified in
clauses (i) or (ii) above with respect to such Takeover Proposal, but in each
case only at a time that is at least five (5) business days after receipt by the
Purchaser of written notice from the Company advising the Purchaser that the
Board of Directors of the Company has resolved to take such action.
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Investment Agreement
(c) As used herein, "Material Transaction Proposal" means any
inquiry, proposal or offer from any Person relating to (i) the direct or
indirect acquisition or purchase of 5% or more of the assets (based on the fair
market value thereof) of the Company and its Subsidiaries, taken as a whole, or
of 5% or more of any class of equity securities of the Company or any of its
Subsidiaries or any tender offer or exchange offer (including by the Company or
its Subsidiaries) that if consummated would result in any person beneficially
owning 5% or more of any class of equity securities of the Company or any of its
Subsidiaries, or (ii) any merger, consolidation, business combination, sale of
all or substantially all assets, recapitalization, liquidation, dissolution or
similar transaction involving the Company or any of its Subsidiaries other than
the transactions contemplated by this Agreement. As used herein, "Takeover
Proposal" means any inquiry, proposal or offer from any Person relating to (A)
any of the matters set forth in clause (i) of the definition of Material
Transaction Proposal but replacing "5%" with "50%" each place "5%" is used in
such definition, (B) a sale of all or substantially all of the assets of the
Company and its Subsidiaries or (C) a merger or consolidation of the Company as
a result of which the shareholders of the Company immediately prior to such
transaction would not beneficially own immediately after such transaction 50% or
more of the resulting or surviving entity (or the parent thereof).
ARTICLE V.
Other Agreements
Section 5.1 Preparation of Proxy Statement. (a) As soon as
practicable after the execution of this Agreement, the Company shall prepare and
cause to be filed with the SEC preliminary proxy materials (the "Proxy
Statement") for the solicitation of approval of the shareholders of the Company
of (i) the issuance by the Company of shares of Common Stock pursuant to, and
purchase of shares of Common Stock by the exercise of, the Warrants, (ii) such
other transactions contemplated hereby and pursuant to the Ancillary Documents
as may reasonably require approval of the Company's shareholders (together with
clause (i), the "Shareholder Approval"), (iii) the election of directors and
(iv) such other matters as the Company and the Purchaser may reasonably agree.
Subject to compliance by the Purchaser of its covenants in this Section 5.1, the
Company shall cause the Proxy Statement related thereto to materially comply
with applicable law and the rules and regulations promulgated by the SEC, to
respond promptly to any comments of the SEC or its staff and the Company shall
use reasonable best efforts to cause the Proxy Statement to be mailed to the
Company's shareholders as promptly as practicable. Each of the parties hereto
shall promptly furnish to the other party all
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Investment Agreement
information concerning itself, its shareholders and its Affiliates that may be
required or reasonably requested in connection with any action contemplated by
this Section 5.1. If any event relating to any party occurs, or if any party
becomes aware of any information, that should be disclosed in an amendment or
supplement to the Proxy Statement, then such party shall inform the other
thereof and shall cooperate with each other in filing such amendment or
supplement with the SEC and, if appropriate, in mailing such amendment or
supplement to the shareholders of the Company. The Proxy Statement shall include
the recommendations of the Board of Directors of the Company in favor of the
exercise of the Warrant and the transactions contemplated hereby and thereby.
(b) Each of the Company and the Purchaser agrees with respect
to the information to be supplied by such party that: (i) none of the
information to be supplied by such party or its Affiliates for inclusion in the
Proxy Statement will, at the time the Proxy Statement is mailed to the
shareholders of the Company, or as of the Shareholders Vote, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading; and (ii) as to
matters respecting such party, the Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act, and the rules and
regulations promulgated by the SEC thereunder.
Section 5.2 Shareholders Meeting. The Company shall promptly
after the date hereof take all action necessary in accordance with applicable
law and its articles of incorporation and bylaws to hold and convene a meeting
of the Company's shareholders (the "Shareholders Meeting") to provide for the
Shareholders Vote with respect to the matters subject to Shareholder Approval
and with respect to the other matters to be voted upon pursuant to Section
5.1(a). Except as required by the SEC or applicable court order, the Company
shall not postpone or adjourn (other than for the absence of a quorum) the
Shareholders Meeting without the consent of the Purchaser. The Company shall
take all other action necessary or advisable to secure the Shareholder Approval.
Notwithstanding anything to the contrary contained herein, the Shareholders
Meeting, the Shareholders Vote and the Shareholder Approval shall not be a
condition to the consummation of the Closing or the sale and purchase of the
Securities.
Section 5.3 Public Statements. Before any party or any
Affiliate of such party shall release any information concerning this Agreement
or the Ancillary Documents or the matters contemplated hereby or thereby which
is intended for or may result in public dissemination thereof, such party shall
cooperate with the other parties,
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Investment Agreement
shall furnish drafts of all documents or proposed oral statements to the other
parties, provide the other parties the opportunity to review and comment upon
any such documents or statements and shall not release or permit release of any
such information without the consent of the other parties, except to the extent
required by applicable law or the rules of any securities exchange or automated
quotation system on which its securities or those of its Affiliate are traded.
Section 5.4 Reasonable Commercial Efforts. Subject to the
terms and conditions provided in this Agreement, each party shall use reasonable
commercial efforts to take promptly, or cause to be taken, all actions, and to
do promptly, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, including
without limitation the filings and consents set forth on Schedule 5.4 hereto
(the "Required Consents") and to remove any injunctions or other impediments or
delays, legal or otherwise, in order to consummate and make effective the
transactions contemplated by this Agreement for the purpose of securing to the
parties hereto the benefits contemplated by this Agreement; provided that
notwithstanding anything to the contrary in this Agreement, no party nor any of
their Affiliates shall be required to make any disposition, including, without
limitation, any disposition of, or any agreement to hold separate, any
Subsidiary, asset or business, and no party hereto nor any of their Affiliates
shall be required to make any payment of money nor shall any party or its
Affiliates be required to comply with any condition or undertaking or take any
action which, individually or in the aggregate, would materially adversely
affect the economic benefits to such party of the transactions contemplated
hereby and the Ancillary Documents, taken as a whole or materially adversely
affect any other business of such party or its Affiliates.
Section 5.5 HSR Act. The Company and the Purchaser will each
make as promptly as practicable all filings it is required to make under the HSR
Act with regard to the transactions which are the subject of this Agreement and
each of them will take all reasonable steps within its control (including
providing information to the Federal Trade Commission and the Department of
Justice) to cause the waiting periods required by the HSR Act to be terminated
or to expire as promptly as practicable. The Company and the Purchaser will each
provide information and cooperate in all other respects to assist the other of
them in making its filings under the HSR Act.
Section 5.6 Reservation of Shares. The Company agrees to keep
reserved for issuance at all time prior to conversion of the Shares and the
exercise of the Warrants the
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Investment Agreement
aggregate number of Underlying Shares issuable upon conversion of the Shares and
the exercise of the Warrants.
Section 5.7 Notification of Certain Matters. Each party to
this Agreement shall give prompt notice to each other party of the occurrence or
non-occurrence of any event, the occurrence or non-occurrence of which is likely
to cause any condition of any party contained in Article VI of this Agreement to
not be satisfied at or prior to the Shareholders Vote; provided, however, that
the delivery of any notice pursuant to this Section 5.7 shall not limit or
otherwise affect any remedies available to the party receiving such notice. No
disclosure by any party pursuant to this Section 5.7, however, shall be deemed
to amend or supplement the disclosures set forth on the Schedules to Article III
or prevent or cure any misrepresentations, breach of warranty or breach of
covenant.
Section 5.8 Further Assurances. Each party shall execute and
deliver such additional instruments and other documents and shall take such
further actions as may be necessary or appropriate to effectuate, carry out and
comply with all of the terms of this Agreement and the transactions contemplated
hereby, including without limitation making application as soon as practicable
for all consents and approvals required in connection with the transactions
contemplated hereby and diligently pursuing the receipt of such consents and
approvals in good faith.
ARTICLE VI.
Conditions Precedent
Section 6.1 Conditions of the Purchaser. The obligation of the
Purchaser to purchase the Securities at the Closing is subject to the
satisfaction or waiver of each of the following conditions precedent at or prior
to the Closing:
(a) Representations and Warranties; Covenants. The
representations and warranties of the Company contained in this
Agreement and the Ancillary Documents shall be true and correct in all
material respects on and as of the date of this Agreement or the date
of such Ancillary Documents, as the case may be, and on and as of the
Closing Date, with the same effect as though made on and as of such
date, except (i) to the extent any such representation and warranty is
made as of a specified date, in which case such representation and
warranty shall be true and correct in all material respects on and as
of such specified date and (ii) where the inaccuracy of such
representation and warranty constitutes an Excluded Breach, and the
Company shall have performed in all material respects all obligations,
agreements, undertakings, covenants and conditions of this
30
<PAGE> 35
Investment Agreement
Agreement and the Ancillary Documents required to be performed by it at
or prior to the Closing Date.
(b) No Litigation. There shall not be in effect any order,
decree or injunction of a court or agency of competent jurisdiction
which enjoins or prohibits consummation of the transactions
contemplated hereby or in the Ancillary Documents. No action, suit,
investigation, arbitration, or administrative or governmental
proceeding by any Governmental Entity shall be pending, seeking to
restrain, prohibit or invalidate the transactions contemplated by this
Agreement, or any of the Ancillary Documents.
(c) Regulatory Approvals. All permits, consents,
authorizations, orders and approvals of, and filings and registrations
required under any Federal or state law, rule or regulation for or in
connection with the execution and delivery of this Agreement and the
Ancillary Documents and the consummation by the parties hereto of the
transactions contemplated hereby and thereby shall have been obtained
or made and all statutory waiting periods thereunder in respect thereof
shall have expired, except where the failure to obtain any permit,
consent, authorization, order or approval, or make any filing or
registration would not have a Material Adverse Effect.
(d) Company Certificate. The Company shall have delivered to
the Purchaser a certificate, dated the Closing Date, signed by its
chief executive officer or its chief financial officer, in form and
substance reasonably satisfactory to the Purchaser, to the effect that
the conditions set forth in Sections 6.1(a) and (b) have been
satisfied.
(e) Shareholder Agreement. The Shareholder Agreement shall
have been duly executed and delivered by the Company.
(f) Registration Rights Agreement. The Registration Rights
Agreement shall have been duly executed and delivered by the Company.
(g) Certificate of Designation. The Certificate of Designation
shall have been duly filed with the Secretary of State of the State of
Minnesota.
(h) Distribution Agreement. The Distribution Agreement shall
be in full force and effect and the Warrants to purchase 1,450,000
shares of Common Stock pursuant thereto shall have been issued to NBC.
31
<PAGE> 36
Investment Agreement
(i) Legal Opinion. The Purchaser shall have received from
counsel for the Company, an opinion in form and substance reasonably
acceptable to the Purchaser, addressed to the Purchaser.
Section 6.2 Conditions of the Company. The obligation of the
Company to sell the Securities at the Closing is subject to satisfaction or
waiver of each of the following conditions precedent at or prior to the Closing:
(a) Representations and Warranties; Covenants. The
representations and warranties of the Purchaser contained in this
Agreement and the Ancillary Documents shall be true and correct in all
material respects on and as of the date of this Agreement and on and as
of the Closing Date with the same effect as though made on and as of
such date, except to the extent any such representation and warranty is
made as of a specified date, in which case such representation and
warranty shall be true and correct in all material respects on and as
of such specified date, and the Purchaser shall have performed in all
material respects all obligations, agreements, undertakings, covenants
and conditions of this Agreement and the Ancillary Documents required
to be performed by it at or prior to the Closing.
(b) No Litigation. There shall not be in effect any order,
decree or injunction of a court or agency of competent jurisdiction
which enjoins or prohibits consummation of the transactions
contemplated hereby or in the Ancillary Documents. No action, suit,
investigation, arbitration, or administrative or governmental
proceeding by any Governmental Entity shall be pending, seeking to
restrain, prohibit or invalidate the transactions contemplated by this
Agreement, or any of the Ancillary Documents.
(c) Regulatory Consents. All permits, consents,
authorizations, orders and approvals of, and filings and registrations
required under Federal or state law, rule or regulation for or in
connection with the execution and delivery of this Agreement and the
Ancillary Documents and the consummation by the parties hereto of the
transactions contemplated hereby and thereby shall have been obtained
or made and all statutory waiting periods thereunder in respect thereof
shall have expired, except where the failure to obtain any permit,
consent, authorization, order or approval, or make any filing or
registration would not have a Material Adverse Effect.
(d) The Purchaser's Certificate. The Purchaser shall have
delivered to the Company a certificate, dated the Closing Date, in form
and substance reasonably satisfactory
32
<PAGE> 37
Investment Agreement
to the Company to the effect that the foregoing conditions set forth in
Sections 6.2(a) and (b) have been satisfied.
(e) Shareholder Agreement. The Shareholder Agreement shall
have been duly executed and delivered by the Purchaser.
(f) Distribution Agreement. The Distribution Agreement shall
be in full force and effect.
(g) Legal Opinion. The Company shall have received from
counsel for the Purchaser, an opinion in form and substance reasonably
acceptable to the Company, addressed to the Company.
(h) Operating Agreement. The Operating Agreement shall be in
full force and effect.
ARTICLE VII.
Term
Section 7.1 Termination. This Agreement may be terminated on
or any time prior to the Closing:
(a) by the mutual written consent of the Purchaser and the
Company; or
(b) by either the Company or Purchaser if the Closing shall
have not have occurred on or prior to August 31, 1999 (the "Termination
Date"), unless the failure of such occurrence shall be due to the
failure of the party seeking to terminate this Agreement to perform or
observe its agreements set forth herein required to be performed or
observed by such party on or before the Closing; or
(c) by the Company or the Purchaser pursuant to notice if any
Governmental Entity of competent jurisdiction shall have denied any
approval under any of the laws, rules or regulations described in
Section 3.1(d) or 3.2(c) necessary for the consummation of the
transactions contemplated hereby by a final and unappealable order.
Section 7.2 Effect of Termination. In the event of the
termination of this Agreement as provided in Section 7.1, this Agreement shall
forthwith become void, except for the obligations set forth in this Section and
in Sections 8.6 and 8.7 and there shall be no liability or obligation on the
part of the parties hereto except as otherwise provided in this Agreement. The
termination of this Agreement under Section 7.1(b) shall not
33
<PAGE> 38
Investment Agreement
relieve any party of any liability for breach of this Agreement prior to the
date of termination.
ARTICLE VIII.
Miscellaneous
Section 8.1 Survival of Representations and Warranties. All
representations and warranties made herein or in any certificates delivered in
connection with the Closing shall survive for a period of eighteen months after
the Closing, provided, however, that (a) the Surviving Representations and
Warranties shall not terminate pursuant to this Section 8.1 and shall continue
to survive indefinitely and (b) the representations and warranties in Section
3.1(o) shall survive until 30 days after the expiration of the applicable
statute of limitations relating to the taxes or other matters covered.
Section 8.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given, if
delivered personally, by telecopier or sent by overnight courier as follows:
(a) If to the Purchaser, to:
GE Capital Equity Investments, Inc.
120 Long Ridge Road
Stamford, Connecticut 06927
Attention: John Sprole
Fax: (203) 357-3047
with copies to:
National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, New York 10112
Attention: Stuart U. Goldfarb
Fax: (212) 664-7896
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Richard Capelouto
Fax: (212) 455-2502
34
<PAGE> 39
Investment Agreement
(b) If to the Company, to:
ValueVision International, Inc.
6740 Shady Oak Road
Eden Prairie, Minnesota 55344-3433
Attention: General Counsel
Fax: (612) 947-0188
With a copy to:
Latham & Watkins
633 West Fifth Street
Suite 4000
Los Angeles, CA 90071
Attention: Michael W. Sturrock
Fax: (213) 891-8763
or to such other address or addresses as shall be designated in writing. All
notices shall be effective when received.
Section 8.3 Entire Agreement; Amendment. This Agreement, the
Ancillary Documents and the documents described herein and therein or attached
or delivered pursuant hereto or thereto set forth the entire agreement between
the parties hereto with respect to the transactions contemplated by this
Agreement. Any provision of this Agreement may be amended or modified in whole
or in part at any time by an agreement in writing between the parties hereto
executed in the same manner as this Agreement. No failure on the part of any
party to exercise, and no delay in exercising, any right shall operate as a
waiver thereof nor shall any single or partial exercise by any party of any
right preclude any other or future exercise thereof or the exercise of any other
right.
Section 8.4 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to constitute an
original, but all of which together shall constitute one and the same document.
SECTION 8.5 GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL.
THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED AND PERFORMED WITHIN SUCH
STATE, AND EACH PARTY HEREBY SUBMITS TO THE JURISDICTION OF ANY STATE OR U.S.
FEDERAL COURT SITTING WITHIN THE COUNTY OF NEW YORK OR COUNTY OF HENNEPIN. THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS
AGREEMENT.
Section 8.6 Public Announcements. Each of the Company, the
Purchaser and NBC agrees to hold in strict
35
<PAGE> 40
Investment Agreement
confidence and not to disclose to others the status of any discussions or
relations among the parties with respect to the subject matter of this Agreement
or the Ancillary Documents until such time as the parties mutually agree to
publicly disclose such information or are legally obligated to disclose such
information or are obligated by applicable Nasdaq rules to disclose such
information.
Section 8.7 Fees and Expenses. Each party shall bear its own
costs and expenses incurred in connection with this Agreement and the Ancillary
Documents and the transactions contemplated hereby, including the fees and
expenses of their respective accountants and counsel.
Section 8.8 Indemnification by the Company. (a) Subject to the
provisions of Section 8.8(d), the Company agrees to indemnify and save harmless
the Purchaser and each of the respective partners, officers, directors,
employees, agents and Affiliates of the Purchaser in their respective capacities
as such (the "Purchaser Indemnitees"), from and against any and all actions,
suits, claims, proceedings, costs, damages, judgments, amounts paid in
settlement (subject to Section 8.8(b)) and expenses (including without
limitation reasonable attorneys' fees and disbursements)(collectively,
"Losses"), relating to or arising out of any inaccuracy in or breach of the
representations, warranties, covenants or agreements made by the Company herein
other than any inaccuracy or breach of any representation or warranty that
constitutes an Excluded Breach.
(b) A Purchaser Indemnitee shall give written notice to the
Company of any claim with respect to which it seeks indemnification promptly
after the discovery by such party of any matters giving rise to a claim for
indemnification; provided that the failure of any Purchaser Indemnitee to give
notice as provided herein shall not relieve the Company of its obligations under
this Section 8.8 unless and to the extent that the Company shall have been
materially prejudiced by the failure of such Purchaser Indemnitee to so notify
the Company. In case any such action, suit, claim or proceeding is brought
against a Purchaser Indemnitee, the Company shall be entitled to participate in
the defense thereof and, to the extent that it may wish, to assume the defense
thereof, with counsel reasonably satisfactory to the Purchaser, and after notice
from the Company of its election so to assume the defense thereof, the Company
will not be liable to such Purchaser Indemnitee under this Section 8.8 for any
legal or other expense subsequently incurred by such Purchaser Indemnitee in
connection with the defense thereof; provided, however, that (i) if the Company
shall elect not to assume the defense of such claim or action or (ii) if outside
legal counsel to the Purchaser Indemnitee reasonably determines that there may
be a conflict between the positions of the Company and of the Purchaser
Indemnitee in defending such claim or action, then separate counsel shall be
entitled to participate in and conduct the
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<PAGE> 41
Investment Agreement
defense, and the Company shall be liable for any legal or other expenses
reasonably incurred by the Purchaser Indemnitee in connection with the defense
(but only with respect to one such separate counsel). The Company shall not be
liable for any settlement of any action, suit, claim or proceeding effected
without its written consent; provided, however, that the Company shall not
unreasonably withhold, delay or condition its consent. The Company further
agrees that it will not, without the Purchaser Indemnitee's prior written
consent (which consent shall not be unreasonably withheld), settle or compromise
any claim or consent to entry of any judgment in respect thereof in any pending
or threatened action, suit, claim or proceeding in respect of which
indemnification may be sought hereunder unless such settlement or compromise
includes an unconditional release of the Purchaser and each other Purchaser
Indemnitee from all liability arising out of such action, suit, claim or
proceeding.
(c) The indemnification provided for in this Section 8.8 shall
be the exclusive post-Closing remedy available to the Purchaser with respect to
any inaccuracy in or breach of any representation or warranty made by the
Company in this Agreement; provided that nothing herein shall prevent the
Purchaser from pursuing any remedies legally available for fraud or fraudulent
misrepresentation. Any payment made pursuant to this Section 8.8 shall be
treated as an adjustment to the purchase price.
(d) Notwithstanding anything to the contrary in this
Agreement, the Company shall only indemnify and hold harmless the Purchaser
Indemnitees under Section 8.8(a) with respect to any Loss relating to or arising
out of any inaccuracy in or breach of any representation or warranty made by the
Company if, and only if, such Loss, together with the aggregate of all other
Losses relating to or arising out of any inaccuracy in or breach of any
representation or warranty made by the Company shall exceed $500,000, whereupon
the Company shall be liable for all such Losses up to the aggregate purchase
price set forth in Section 2.1(b) hereof.
Section 8.9 Indemnification by the Purchaser. (a) The
Purchaser agrees to indemnify and save harmless the Company and each of the
respective partners, officers, directors, employees, agents and Affiliates of
the Company in their respective capacities as such (the "Company Indemnitees")
from and against any and all Losses relating to or arising out of any inaccuracy
in or breach of the representations, warranties, covenants or agreements made by
the Purchaser herein.
(b) A Company Indemnitee shall give written notice to
Purchaser of any claim with respect to which it seeks indemnification promptly
after the discovery by such party of any matters giving rise to a claim for
indemnification; provided that the failure of any Company Indemnitee to give
notice as provided herein shall not relieve Purchaser of its obligations under
this
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<PAGE> 42
Investment Agreement
Section 8.9 unless and to the extent that Purchaser shall have been materially
prejudiced by the failure of such Company Indemnitee to so notify the Purchaser.
In case any such action, suit, claim or proceeding is brought against a Company
Indemnitee, the Purchaser shall be entitled to participate in the defense
thereof and, to the extent that it may wish, to assume the defense thereof, with
counsel reasonably satisfactory to the Company, and after notice from the
Purchaser of its election so to assume the defense thereof, the Purchaser will
not be liable to such Company Indemnitee under this Section 8.9 for any legal or
other expense subsequently incurred by such Company Indemnitee in connection
with the defense thereof; provided, however, that (i) if the Purchaser shall
elect not to assume the defense of such claim or action or (ii) if outside legal
counsel to the Company Indemnitee reasonably determines that there may be a
conflict between the positions of the Purchaser and of the Company Indemnitee in
defending such claim or action, then separate counsel shall be entitled to
participate in and conduct the defense, and the Purchaser shall be liable for
any legal or other expenses reasonably incurred by the Company Indemnitee in
connection with the defense (but only with respect to one such separate
counsel). The Purchaser shall not be liable for any settlement of any action,
suit, claim or proceeding effected without its written consent; provided,
however, that the Purchaser shall not unreasonably withhold, delay or condition
its consent. The Purchaser further agrees that it will not, without the Company
Indemnitee's prior written consent (which consent shall not be unreasonably
withheld), settle or compromise any claim or consent to entry of any judgment in
respect thereof in any pending or threatened action, suit, claim or proceeding
in respect of which indemnification may be sought hereunder unless such
settlement or compromise includes an unconditional release of the Company and
each other Company Indemnitee from all liability arising out of such action,
suit, claim or proceeding.
(c) The indemnification provided for in this Section 8.9 shall
be the exclusive post-Closing remedy available to the Company with respect to
any inaccuracy in or breach of any representation or warranty made by Purchaser
in this Agreement; provided that nothing herein shall prevent the Company from
pursuing any remedies legally available for fraud or fraudulent
misrepresentation. Any payment made pursuant to this Section 8.9 shall be
treated as an adjustment to the purchase price.
Section 8.10 Successors and Assigns; Third Party
Beneficiaries. Subject to applicable law and the following sentence, the
Purchaser may assign its rights under this Agreement in whole or in part only to
any Affiliate of the Purchaser, but no such assignment shall relieve the
Purchaser of its obligations hereunder. The Purchaser shall not assign any
rights under this Agreement to any Affiliate if (a) such assignment would cause
any representation or warranty of the Purchaser to become materially untrue or
incorrect, (b) such
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<PAGE> 43
Investment Agreement
Affiliate does not expressly assume pursuant to a document in form and substance
reasonably satisfactory to the Company all of the obligations of the Purchaser
associated with the rights proposed to be assigned or (c) such assignment would
materially delay or impair consummation of the transactions contemplated by this
Agreement or the Ancillary Documents. The Company may not assign any of its
rights or delegate any of its duties under this Agreement without the prior
written consent of the Purchaser. Any purported assignment in violation of this
Section shall be void. NBC shall be a third party beneficiary with respect to
Sections 2.1, 2.4, and any representations and warranties, covenants or
agreements herein relating to the Warrants and shall be entitled to the benefit
of such provisions.
Section 8.11 Arbitration. Any controversy, dispute or claim
arising out of, in connection with or in relation to the interpretation,
performance or breach of this Agreement, shall be determined, at the request of
any party, by arbitration in a city mutually agreeable to the parties to such
controversy, dispute or claim, or, failing such agreement, in New York, New York
or Minneapolis, Minnesota, before and in accordance with the then-existing Rules
for Commercial Arbitration of the American Arbitration Association, and any
judgment or award rendered by the arbitrator will be final, binding and
unappealable and judgment may be entered by any state or Federal court having
jurisdiction thereof. The pre-trial discovery procedures of the Federal Rules of
Civil Procedure shall apply to any arbitration under this Section 8.11. Any
controversy concerning whether a dispute is an arbitrable dispute or as to
the interpretation or enforceability of this Section 8.11 shall be determined by
the arbitrator. The arbitrator shall be a retired or former United States
District Judge or other person acceptable to each of the parties, provided such
individual has substantial professional experience with regard to corporate or
partnership legal matters. The parties intend that this agreement to arbitrate
be valid, enforceable and irrevocable.
Section 8.12 Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this Agreement
in addition to any other remedy to which they are entitled at law or in equity.
Section 8.13 Headings, Captions and Table of Contents. The
section headings, captions and table of contents contained in this Agreement are
for reference purposes only, are not part of this Agreement and shall not affect
the meaning or interpretation of this Agreement.
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<PAGE> 44
Investment Agreement
IN WITNESS WHEREOF, this Agreement has been executed by the
parties hereto or by their respective duly authorized representatives, all as of
the date first above written.
VALUEVISION INTERNATIONAL, INC.
By: /s/ Gene McCaffery
-----------------------------------
Name: Gene McCaffery
Title: Chief Executive Officer
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ James Brown
-----------------------------------
Name: James Brown
Title: Department Operations Manager
40
<PAGE> 1
Exhibit 3
DISTRIBUTION AND MARKETING AGREEMENT
DISTRIBUTION AND MARKETING AGREEMENT, dated as of March 8, 1999 (this
"Agreement"), by and between National Broadcasting Company, Inc., a Delaware
corporation ("NBC"), and ValueVision International, Inc., a Minnesota
corporation ("VVI").
WHEREAS, VVI produces and distributes the home shopping television
program service known as "ValueVision Television";
WHEREAS, subject to the terms and conditions set forth herein, VVI
desires to engage NBC to negotiate on its behalf for the distribution of its
home shopping television program service, and NBC is willing to undertake such
engagement;
WHEREAS, VVI and G.E. Capital Equity Investments, Inc. ("GEC") have
entered into an Investment Agreement of even date herewith (the "Investment
Agreement"), pursuant to which GEC has agreed to purchase (a) 5,339,500 shares
of Series A Redeemable Convertible Preferred Stock (the "Preferred Stock"), the
powers, designations, preferences and rights of which are set forth in that
certain Certificate of Designation (the "Certificate of Designation") to be
filed pursuant to the Investment Agreement, and (b) a warrant to purchase Common
Stock of the Company (the "Purchase Warrant");
WHEREAS, pursuant to the Investment Agreement, VVI and GEC have agreed
to enter into a Shareholders' Agreement in substantially the form of Exhibit D
to the Investment Agreement (the "Shareholders' Agreement"), pursuant to which
the parties thereto have provided for certain matters with respect to the
governance of VVI; and
WHEREAS, NBC and VVI desire to set forth certain agreements herein;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained and intending to be
legally bound hereby, the parties agree as follows:
Section 1. Term. This Agreement shall be for a term of 10 years (the
"Term"), which shall begin on the date of commencement (the "Commencement Date")
of performance of the Services (defined below) by NBC. The Commencement Date
shall occur as soon as practicable, but in no event more than 45 days after the
date hereof. NBC shall give VVI written confirmation of the Commencement Date.
<PAGE> 2
Section 2. The Services.
(a) NBC shall have the exclusive right to negotiate on behalf of VVI
for the distribution of the home shopping television program service of VVI
presently known as "ValueVision Television" and any successor home shopping or
transactional television program service(s) of VVI ("VVTV"), to multichannel
video programming distributors (each, a "Distributor") which operate one or more
distribution systems including, without limitation, cable television systems,
MATV and SMATV systems, MMDS, TVRO and other wireline, wireless and direct
broadcast satellite delivery methods, in all cases, whether analog or digital
(each, a "Distribution System") in the Territory (defined below), and to provide
promotion and affiliate marketing services to VVI in connection with the
distribution and carriage of VVTV (collectively, the "Services").
(b) (i) NBC shall have the exclusive right to negotiate on behalf of
VVI for the distribution of VVTV to Distributors throughout the United States
(including its territories and possessions) (the "Territory"), including the
right to include VVTV as part of a package with other program services offered
by NBC (irrespective of whether such package sets forth the cost to the
Distributor of each component of the package), including, without limitation,
such components as the program services of NBC presently known as "MSNBC" and
"CNBC", Olympics coverage and retransmission consent; provided, however, that in
the event that NBC or any affiliate of NBC enters into any agreement with any of
Home Shopping Network, Inc., QVC, Inc., Shop-At-Home, Inc. or Paxson
Communications Corporation (each, a "VVI Designated Entity") giving NBC or such
affiliate the right to negotiate on behalf of such VVI Designated Entity for the
distribution of any program service of such VVI Designated Entity, NBC shall not
be permitted to apply any portion of the Discretionary Carriage Fee (defined
below) to subsidize the carriage of such program service by any Distributor.
(ii) The parties acknowledge and agree that certain regulatory
requirements must be satisfied in order for VVTV to be carried by Distributors
in Canada and that, upon the determination by VVI in its reasonable commercial
judgment to pursue distribution of VVTV in Canada and the procurement by VVI of
rights to distribute VVTV in Canada, VVI and NBC will negotiate in good faith
the terms applicable to distribution of VVTV by NBC to Distributors in Canada.
(c) (i) In each carriage agreement for VVTV on a cable Distribution
System, NBC shall have the right, in its discretion, to agree to the payment by
VVI to the Distributor thereunder of an annual fee per full-time Subscriber
(defined below) for carriage of VVTV in such cable Distribution System (the
"Discretionary Carriage Fee"), not to exceed the maximum Discretionary Carriage
Fee then applicable, payable in equal monthly or quarterly installments,
commencing no earlier than the date of first launch of VVTV in such cable
Distribution System. The amount of the initial maximum Discretionary Carriage
Fee is set forth on SCHEDULE 2(C)(I) attached hereto.
(ii) In carriage agreements for VVTV in Distribution Systems other
than cable Distribution Systems, NBC and VVI shall negotiate in good faith the
amount of the maximum Discretionary Carriage Fee which NBC may agree will be
paid by VVI to the Distributor thereunder; provided, however, that in any
carriage agreement for VVTV on DirecTV (or any successor thereto), NBC shall
endeavor to obtain carriage of VVTV for a Discretionary Carriage Fee per year
per full-time Subscriber of up to the amount set forth as the "DirecTV
Discretionary Carriage Fee" on
2
<PAGE> 3
Schedule 2(c)(i), but shall have the right, in its discretion, to agree to the
payment by VVI of a Discretionary Carriage Fee of up to the maximum
Discretionary Carriage Fee then applicable to cable carriage agreements for
full-time Subscribers as set forth in Section 2(c)(i). The term "full time"
shall mean 24 hours per day, seven days per week.
(iii) For carriage of VVTV other than on a full-time basis, the
maximum Discretionary Carriage Fee which NBC may agree to be paid by VVI to a
Distributor shall be the product of (x) the sum of the applicable FTE Factors
set forth on Schedule 2(c)(iii) attached hereto for each hour during each day on
which VVTV is carried in the Distribution System, multiplied by (y) the maximum
Discretionary Carriage Fee then applicable to carriage agreements for full-time
Subscribers (as the same may have been adjusted as set forth in the next
succeeding paragraph). VVI shall have the right to revise the FTE Factors set
forth on Schedule 2(c)(iii) not more frequently than once in any 12-month period
for changes in its business, consistent with past practices of VVI; provided,
however, that any such change shall be subject to the prior approval of NBC,
which shall not be unreasonably withheld; and provided further, that in no event
shall any such revision of FTE Factors affect the calculation of the maximum
Discretionary Carriage Fee or the number of FTE Subscribers (defined below)
under any carriage agreement in effect as of the date of such revision.
(iv) The Discretionary Carriage Fee to be offered to any
Distribution System may be stated as (i) a fixed cash amount up to the amount of
the then-applicable maximum Discretionary Carriage Fee (as the same may have
been adjusted in accordance with the following sentence), or (ii) the greater of
a fixed cash amount up to the amount of the then-applicable maximum
Discretionary Carriage Fee (as the same may have been adjusted in accordance
with the following sentence), or an agreed percentage, based on then-applicable
standard home shopping program service industry practice (which the parties
agree is eight percent (8%) as of the date hereof), of net revenues derived by
VVI from sales of products (the "Products") in home shopping television
transactions or otherwise to Subscribers in such Distribution System.
(v) Commencing on the fifth anniversary of the Commencement Date,
the amount of the maximum Discretionary Carriage Fee applicable to full-time
Subscribers which may be offered and agreed by NBC on behalf of VVI shall
increase on such date and annually thereafter on each anniversary of the
Commencement Date at a rate equal to the annual rate of inflation in the United
States as published by the US Department of Commerce for the nearest preceding
annual period. For carriage of VVTV other than on a full-time basis, the maximum
Discretionary Carriage Fee shall be adjusted in accordance with the formula set
forth in Section 2(c)(iii).
(vi) VVI shall not be obligated to pay any amount in excess of the
then-applicable Discretionary Carriage Fee unless NBC has obtained the prior
written consent of VVI to such higher fee.
(d) VVI shall pay to NBC a one-time cash bonus (the "Fee Reduction
Bonus"), calculated in accordance with the table set forth in Schedule 2(d), in
respect of each carriage agreement for VVTV in a cable Distribution System which
provides for the payment by VVI to the Distributor thereunder of a Discretionary
Carriage Fee per year per full-time cable Subscriber not in excess of the amount
set forth on Schedule 2(d); provided, however, that NBC shall only be entitled
to receive
3
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the Fee Reduction Bonus for carriage agreements which (x) provide for cable
carriage of VVTV on a full-time basis; (y) have a term (including any automatic
renewals or extensions) of five years or more; and (z) if a periodic rate
escalation of the Discretionary Carriage Fee is included, provide for a rate
escalation which, when annualized and averaged over the term of the agreement,
is not in excess of the amount set forth in Schedule 2(d). The Fee Reduction
Bonus shall be payable by VVI to NBC upon initial rollout of VVTV in the
Distribution System or Distribution Systems which are the subject of such
carriage agreement.
Section 3. Existing Subscriber Base.
(a) (i) A "Subscriber" shall mean a household which receives VVTV in a
Distribution System. In the case of multiple dwelling units which receive VVTV
pursuant to bulk rate arrangements, the number of Subscribers shall be equal to
100% of all residential dwelling units in the multiple dwelling unit complex.
The term "Subscriber" shall not include commercial Subscribers (i.e.,
Subscribers receiving VVTV in the course of their business, including, without
limitation, commercial establishments, hospitals, nursing homes, hotels, motels,
universities, offices, bars and restaurants). One Subscriber which receives VVTV
on a full-time basis shall equal one full-time equivalent ("FTE") Subscriber.
For Distribution Systems carrying VVTV other than on a full-time basis, the
number of FTE Subscribers shall be computed by adding, for each hour during each
day on which VVTV is carried in the Distribution System, the product of (x) the
sum of the applicable FTE Factors set forth on Schedule 2(c)(i) attached hereto
for each such hour on each such day, multiplied by (y) the number of Subscribers
in the Distribution System.
(ii) The term "Existing Subscriber Base" shall mean an aggregate of
at least 14,900,000 FTE Subscribers pursuant to oral or written carriage
agreements, a correct and complete list of which is attached hereto as SCHEDULE
3(a)(ii) (the "Existing Carriage Agreements").
(b) VVI represents and warrants that, as of the date hereof, (i) each
of the Existing Carriage Agreements is in full force and effect and is the
legal, valid and binding obligation of the parties thereto, enforceable against
each of them in accordance with its terms, and in aggregate the Existing
Carriage Agreements represent substantially all of the Existing Subscriber Base,
and (ii) neither VVI nor any affiliate of VVI is in material default of or in
material breach under any material Existing Carriage Agreement nor, to the
knowledge of VVI, under any other Existing Carriage Agreement, and, to the
knowledge of VVI, there does not exist any default or breach under any Existing
Carriage Agreement by any other party thereto.
(c) NBC shall use reasonable commercial efforts to support the Existing
Subscriber Base, such as responding to inquiries by and complaints from,
providing marketing information to and generally maintaining communications with
Distributors. Notwithstanding the foregoing, in no event shall NBC be liable for
or incur any penalty as a result of any termination or cancellation affecting
all or any portion of the Existing Subscriber Base pursuant to the terms of any
agreement, arrangement or commitment for carriage of VVTV in effect on the date
hereof, or any renewal or extension thereof which is effected automatically or
at the election of VVI (or otherwise without negotiation by NBC on behalf of
VVI), including, without limitation, the Existing Carriage Agreements.
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Section 4. Marketing and Promotion.
(a) NBC shall provide VVI with an appropriate placement in its trade
show presence as the parties may mutually agree, taking into consideration the
comparative numbers of subscribers of VVTV and other program services offered by
NBC. Such presence may take the form of trade show booth signage, audio and/or
video presentations, written promotional material or other methods of
presentation, in NBC's discretion.
(b) No later than sixty days prior to the commencement of each fiscal
year of VVI, NBC and VVI shall agree upon an annual budget for direct,
out-of-pocket expenses which may be incurred by NBC for marketing and promotion
of VVTV (including, without limitation, print advertising, promotional gifts,
production of signage, audio and/or video presentations and written promotional
materials to be used by NBC). VVI shall reimburse NBC within 45 days of the date
of invoice by NBC for expenses incurred in accordance with such budget and for
which NBC provides VVI written support in reasonable detail. VVI shall have no
obligation to reimburse NBC for expenses in excess of the annual budget unless
NBC shall have obtained the written approval of VVI prior to incurring such
expenses.
Section 5. Form of Carriage Agreement. VVI and NBC shall mutually agree
upon the standard form of carriage agreement to be executed between VVI and each
Distributor for carriage of VVTV (the "Standard Agreement"). Any material
modification of the Standard Agreement which, in the reasonable judgment of VVI,
would be expected to have a material adverse effect on the business or results
of operations of VVI will require the approval of VVI, which shall not be
unreasonably withheld; provided, however, that, subject to the limitation set
forth in the foregoing clause and the limitations set forth in Section 2(c) with
respect to the Discretionary Carriage Fee, NBC shall have the right to modify or
amend the terms thereof in its reasonable commercial discretion. NBC will
endeavor to negotiate in each such carriage agreement (i) the longest term of
effectiveness which is commercially reasonable under the circumstances, and (ii)
the right of VVI to receive cross channel promotional advertising of VVTV. VVI
shall in each case have the right to approve each carriage agreement by
execution thereof, but in the event that VVI declines to execute a carriage
agreement negotiated by NBC in its reasonable commercial discretion which (x)
provides for the payment of a Discretionary Carriage Fee by VVI not in excess of
the applicable maximum Discretionary Carriage Fee, (y) provides for carriage of
VVTV in any Distribution System which does not carry VVTV on a full-time basis
as of the date the proposed carriage agreement is furnished to VVI for execution
and (z) does not modify the Standard Agreement in a manner which, in the
reasonable judgment of VVI, would be expected to have a material adverse effect
on the business or results of operations of VVI, NBC shall nonetheless be given
credit for the number of additional FTE Subscribers represented by such carriage
agreement for purposes of calculating the number of additional shares of Common
Stock, par value $0.01 per share, of VVI ("Common Stock") issuable to NBC under
an Additional Warrant (defined below) pursuant to Section 7(c) and determining
achievement of the Performance Targets by NBC pursuant to Section 8.
Section 6. Obligations of VVI.
(a) VVI shall during the Term produce "home shopping", or consumer
sales transaction-related, programming for inclusion in VVTV, at least as high
in quality as that presented on VVTV
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as of the date hereof, sufficient to run VVTV on a full-time basis and
sufficient to meet the standards of content and quality set forth in all
agreements for carriage of VVTV in effect at any time during the Term. In the
event that VVI desires to make material alterations in the VVTV service, VVI
shall use its best efforts to inform NBC of any such proposed alteration in
writing at least 60 days in advance of the implementation of such alteration;
provided, however, that the sole remedy of NBC for any failure by VVI to deliver
such notice shall be the termination right set forth in this Section 6(a). If,
in the reasonable judgment of NBC, such alteration would be expected to have a
material adverse effect on the ability of NBC to distribute VVTV, perform any of
its obligations or achieve any Performance Targets hereunder, NBC shall have the
right to terminate this Agreement at any time during the 90-day period
immediately following the date of receipt by NBC of such written notice (or, if
no written notice is given in advance, during the 90-day period immediately
following the effectiveness of such material alteration), by giving 45 days'
written notice to VVI of the effective date of such termination. As between NBC
and VVI, VVI shall be solely responsible for paying, and shall indemnify NBC and
its affiliates, and their respective directors, officers and employees against
any liability for, any and all costs of producing or acquiring programming for
inclusion in VVTV. During the Term, VVI and its affiliates shall not authorize
or permit the exploitation, distribution or exhibition of VVTV or any of its
constituent programming by any Person (defined below) other than NBC as set
forth herein, or authorize or create a programming service substantially similar
to VVTV for delivery to any Distribution System.
(b) VVI shall at all times during the Term retain a sufficient number
of employees on VVI's payroll to monitor and maintain accurate records with
respect to and ensure timely payment by VVI of fees payable to Distributors for
carriage of VVTV. Such employees will report to and be managed by an employee of
VVI, but shall provide information to and work with employees of NBC in a manner
sufficient to enable NBC to perform its obligations hereunder.
(c) VVI shall comply in all material respects with the standards and
practices of NBC applicable to programming and advertising for telecast by NBC,
a copy of which is attached hereto as Exhibit 1 (the "NBC Standards"). VVI shall
comply in all material respects (subject to any applicable period of grace or
opportunity for cure thereunder) with all truth-in-advertising, consumer credit,
consumer product safety and other laws, rules, regulations and orders applicable
to VVI or to the advertising and sale of Products, except for such failures to
comply which will not, either individually or in aggregate, have a material
adverse effect on the on the business or results of operations of VVI; provided,
however, that, in the event that any failure by VVI to comply with the NBC
Standards or any such truth-in-advertising, consumer credit, consumer product
safety or other laws, rules, regulations or orders has a material adverse effect
on the ability of NBC to distribute VVTV, perform any of its obligations or
achieve any Performance Targets hereunder, NBC shall have the right to terminate
this Agreement at any time upon 30 days' written notice to VVI. NBC shall have
no responsibility or liability with respect to any Products or the use thereof
(except as set forth in Section 15, with respect to Products supplied by NBC for
sale on VVTV), and in no event shall NBC be liable for incidental, indirect,
special or consequential damages with respect thereto.
Section 7. Consideration. In consideration of the provision of the
Services by NBC, VVI shall pay to NBC an annual fee for each year during the
Term (the "Affiliate Relations Fee"), and shall issue to NBC a warrant (the
"Warrant") to purchase up to 1,450,000 shares of Common Stock. In addition,
after the achievement by NBC of the Aggregate Performance Target (defined
below),
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NBC shall receive warrants to purchase additional shares of Common Stock (or any
securities issued by any successor to VVI into which Common Stock may be
convertible or for which Common Stock may be exchangeable, as adjusted in
accordance with any exchange ratio which may be applicable thereto) based upon
the number of FTE Subscribers to VVTV added by NBC (the "Additional Warrants").
The Warrant and each Additional Warrant shall be in substantially the form of
the Purchase Warrant, but shall contain anti-dilution provisions substantially
similar to those applicable to the Preferred Stock as set forth in the
Certificate of Designation. The Warrant and each Additional Warrant may be
assigned by NBC with the prior written consent of VVI, which shall not be
unreasonably withheld, taking into account the regulations of the Federal
Communications Commission; provided, however, that the consent of VVI shall not
have been unreasonably withheld if VVI does not approve a transfer of the
Warrant or any Additional Warrants to any VVI Designated Entity.
(a) Affiliate Relations Fee. The amount of the Affiliate Relations Fee
for the first year of the Term shall be as set forth in Schedule 7(a) attached
hereto. The Affiliate Relations Fee shall increase annually on each anniversary
of the Commencement Date during the Term at a rate equal to the annual rate of
inflation in the United States as published by the US Department of Commerce for
the nearest preceding annual period, but in no event in excess of five percent
(5%) per annum. Each annual Affiliate Relations Fee shall be payable by VVI to
NBC in twelve equal monthly installments commencing on the Commencement Date
(and, with respect to each annual increase thereafter, on each anniversary of
the Commencement Date), and on the first day of each calendar month thereafter
during the Term.
(b) Warrant. The Warrant shall vest on the Commencement Date with
respect to 200,000 shares of Common Stock, and shall vest with respect to the
remaining 1,250,000 shares of Common Stock issuable thereunder in equal
cumulative annual installments of 125,000 shares on each anniversary of the
Commencement Date; provided, however, that any unvested portion of the Warrant
shall immediately vest and become fully exercisable in the event of a Change in
Control (as that term is defined in the Shareholders' Agreement, except to the
extent it involves a Restricted Party). Each vested installment shall be
exercisable, in whole or in part, by NBC (or any affiliate of NBC) for a period
of five years from the date of vesting of such installment. The Warrant shall be
exercisable at a price per share equal to $8.288, payable in cash or by a net
exercise of shares issuable under the Warrant. The shares of Common Stock issued
upon exercise of the Warrant shall have all powers, preferences and rights
applicable to Common Stock pursuant to the articles of incorporation of VVI.
(c) Additional Warrants. (i) Following the achievement by NBC of the
Aggregate Performance Target, VVI shall issue Additional Warrants to NBC each
time NBC secures a written commitment for future rollout of VVTV, such future
rollout to commence by the terms of such written commitment within a period not
in excess of three years beginning on the date of the written commitment. The
number of shares of Common Stock issuable under each such Additional Warrant
shall be calculated as set forth in Section 7(c)(ii). Each Additional Warrant
shall be issued as promptly as practicable following execution of each such
written commitment for future rollout of VVTV, and shall be exercisable at a
price per share equal to the closing price of Common Stock on the Nasdaq
National Market on the trading day immediately preceding the date of execution
of such written commitment (irrespective of whether trading in Common Stock
occurred on such trading
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day), payable in cash or by a net exercise of shares issuable under such
Additional Warrant. Each Additional Warrant shall vest in equal cumulative
annual installments on the execution date of the written commitment and each
anniversary thereof throughout the base or initial term of the written
commitment (i.e., excluding any renewal periods or automatic extensions
thereunder); provided, however, that any unvested portion of the Warrant shall
immediately vest and become fully exercisable in the event of a Change in
Control. Each vested installment shall be exercisable, in whole or in part, by
NBC (or any affiliate of NBC) for a period of five years from the date of
vesting of such installment.
(ii) The number of shares of Common Stock issuable under an
Additional Warrant shall equal (x) the product of the number of FTE Subscribers
to be added as a result of such written commitment (irrespective of the rollout
schedule) multiplied by $0.80, divided by (y) the present value of such
Additional Warrant on the date of execution of such written commitment
determined using the Black-Scholes pricing model, using reasonable and customary
assumptions taking into account the market price of Common Stock at the time of
issuance, the term of the Additional Warrant and a measurement of expected
volatility that is reasonable under the circumstances, multiplied by (z) the
quotient, expressed as a decimal, of the number of years in the term of such
written commitment divided by 10, but not to exceed 1.0. The number of FTE
Subscribers added as a result of such written commitment shall be calculated in
accordance with the methods set forth under Section 3(a)(i), and shall include
(i) FTE Subscribers obtained as a result of an extension or renewal of an
Existing Carriage Agreement (other than an extension or renewal effected
automatically or upon the written election of VVI) which extension or renewal is
"non-terminable" (as defined below) for a period of not less than three years
from the date of such extension or renewal, and (ii) FTE Subscribers obtained by
the written amendment of any Existing Carriage Agreement which is a
month-to-month agreement as of the date hereof (each such month-to-month
Existing Carriage Agreement, an "MTM Agreement", and identified as such by an
asterisk on Schedule 3(a)(ii) attached hereto), to provide that such MTM
Agreement is non-terminable for a period of not less than three years from the
date of such written amendment. The term "non-terminable" shall mean not
terminable at the election of the Distributor during the period indicated merely
by the giving of written notice, without more, pursuant to the terms of the
written commitment or agreement. In the event that a written commitment for
future rollout does not contain a specific commitment regarding the number of
FTE Subscribers to be added but VVTV is rolled out thereunder, NBC and VVI shall
in good faith agree on the number of additional FTE Subscribers for which NBC
shall be given credit in order to calculate the number of shares of Common Stock
for which an Additional Warrant shall be issued by VVI. The shares of Common
Stock issued upon exercise of any Additional Warrant shall have all powers,
preferences and rights applicable to Common Stock pursuant to the articles of
incorporation of VVI.
Section 8. Performance Targets; VVI Right to Terminate.
(a) First Performance Target. VVI shall have the right to terminate the
Agreement at any time during the 90-day period immediately following the second
anniversary of the Commencement Date (but prior to the achievement of the
Aggregate Performance Target), in the event that NBC has failed to obtain
distribution of VVTV to six million (6,000,000) incremental FTE Subscribers over
and above the Existing Subscriber Base, whether as a result of written
commitments obtained by NBC from Distributors for future rollout of VVTV (such
future rollout to commence by the terms of
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such written commitment within a period not in excess of three years beginning
on the date of the written commitment) or actual rollout of VVTV in Distribution
Systems, or some combination thereof, measured at any time on or prior to the
second anniversary of the Commencement Date (the "First Performance Target");
provided, however, that if achievement of the First Performance Target is
measured at any time prior to the second anniversary of the Commencement Date,
any written commitments to be included in determining whether the First
Performance Target has been achieved must be non-terminable prior to such second
anniversary of the Commencement Date; and provided further, that of such six
million (6,000,000) incremental FTE Subscribers, there shall have been actual
rollout of VVTV to at least at least two million (2,000,000) incremental FTE
Subscribers in Distribution Systems at any time on or prior to the second
anniversary of the Commencement Date. In the event that NBC exceeds the First
Performance Target, the amount of any excess shall be counted toward achievement
of the Second Performance Target (defined below). VVI's right to terminate for
failure to achieve the First Performance Target may be exercised at any time
during the 90-day period immediately following such second anniversary, by
giving 45 days' written notice to NBC of the effective date of such termination
(which effective date shall occur on or before the end of such 90-day period),
and in the event of a termination by VVI during such 90-day period, NBC shall be
obligated to make a termination payment to VVI in the amount of $2,500,000 in
cash payable on the effective date of such termination.
(b) Second Performance Target. VVI shall have the right to terminate
the Agreement at any time during the 90-day period immediately following the
third anniversary of the Commencement Date (but prior to the achievement of the
Aggregate Performance Target), in the event that NBC has failed to obtain
distribution of VVTV to an aggregate of nine million (9,000,000) incremental FTE
Subscribers over and above the Existing Subscriber Base, whether as a result of
written commitments obtained by NBC from Distributors for future rollout of VVTV
(such future rollout to commence by the terms of such written commitment within
a period not in excess of three years beginning on the date of the written
commitment) or actual rollout of VVTV in Distribution Systems, or some
combination thereof, measured at any time on or prior to the third anniversary
of the Commencement Date (the "Second Performance Target"); provided, however,
that if achievement of the Second Performance Target is measured at any time
prior to the third anniversary of the Commencement Date, any written commitments
to be included in determining whether the Second Performance Target has been
achieved must be non-terminable prior to such third anniversary of the
Commencement Date. In the event that NBC exceeds the Second Performance Target,
the amount of any excess shall be counted toward achievement of the Third
Performance Target (defined below). VVI's right to terminate for failure to
achieve the Second Performance Target may be exercised at any time during the
90-day period immediately following such third anniversary, by giving 45 days'
written notice to NBC of the effective date of such termination (which effective
date shall occur on or before the end of such 90-day period).
(c) Third Performance Target. VVI shall have the right to terminate the
Agreement at any time during the 90-day period immediately following the last
calendar day of the forty-second full calendar month following the Commencement
Date (but prior to the achievement of the Aggregate Performance Target), in the
event that NBC has failed to obtain distribution of VVTV to an aggregate of ten
million (10,000,000) incremental FTE Subscribers over and above the Existing
Subscriber Base, whether as a result of written commitments obtained by NBC from
Distributors for future rollout of VVTV (such future rollout to commence by the
terms of such written commitment
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within a period not in excess of three years beginning on the date of the
written commitment) or actual rollout of VVTV in Distribution Systems, or some
combination thereof, measured at any time on or prior to such last calendar day
of the forty-second full calendar month following the Commencement Date (the
"Third Performance Target"); provided, however, that if achievement of the Third
Performance Target is measured at any time prior to such last calendar day of
the forty-second full calendar month following the Commencement Date, any
written commitments to be included in determining whether the Third Performance
Target has been achieved must be non-terminable prior to such last calendar day
of the forty-second full calendar month following the Commencement Date. VVI's
right to terminate for failure to achieve the Third Performance Target may be
exercised at any time during the 90-day period immediately following such fourth
anniversary, by giving 45 days' written notice to NBC of the effective date of
such termination (which effective date shall occur on or before the end of such
90-day period).
(d) Aggregate Performance Target. The right of VVI to terminate the
Agreement for any failure to achieve any of the First, Second or Third
Performance Targets shall terminate and be of no further force or effect at such
time that NBC obtains distribution of VVTV to an aggregate of ten million
(10,000,000) incremental FTE Subscribers over and above the Existing Subscriber
Base, whether as a result of written commitments obtained by NBC from
Distributors for future rollout of VVTV (such future rollout to commence by the
terms of such written commitment within a period not in excess of three years
beginning on the date of the written commitment) or actual rollout of VVTV in
Distribution Systems, or some combination thereof, measured at any time during
the Term (the "Aggregate Performance Target"); provided, however, that if
achievement of the Aggregate Performance Target is measured at any time prior to
the last calendar day of the forty-second full calendar month following the
Commencement Date, any written commitments to be included in determining whether
the Aggregate Performance Target has been achieved must be non-terminable prior
to such last calendar day of the forty-second full calendar month following the
Commencement Date.
(e) In determining whether NBC has achieved any Performance Target, the
number of FTE Subscribers for which NBC shall be given credit shall be
calculated in accordance with the methods set forth in Section 3(a)(i), and
shall include (i) FTE Subscribers obtained as a result of an extension or
renewal which is non-terminable for a period of not less than three years from
the date of such extension or renewal, other than an extension or renewal
effected automatically or upon the written election of VVI, of an Existing
Carriage Agreement, and (ii) FTE Subscribers obtained by the written amendment
of any MTM Agreement to provide that such MTM Agreement is non-terminable for a
period of not less than three years from the date of such written amendment. In
the event that a written commitment for future rollout does not contain a
specific commitment regarding the number of FTE Subscribers to be added but VVTV
is rolled out thereunder, NBC and VVI shall in good faith agree on the number of
incremental FTE Subscribers for which NBC shall be given credit in determining
whether NBC has achieved any Performance Target.
Section 9. NBC Rights to Terminate; Certain Remedies.
(a) In the event that the Closing (as that term is defined in the
Investment Agreement) under the Investment Agreement shall not have occurred on
or prior to August 31, 1999 for any reason other than because of a material
breach by NBC and/or GEC which causes any condition of NBC
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and/or GEC pursuant to Article VI of the Investment Agreement not to be
satisfied, NBC shall have the right to terminate this Agreement at any time
during the 90-day period immediately following such date by giving 10 days'
written notice to VVI of the effective date of such termination (which effective
date shall occur on or before the end of such 90-day period); provided, however,
that to the extent the parties to the Investment Agreement mutually agree to
extend the Termination Date (as that term is defined in the Investment
Agreement), the foregoing date of August 31, 1999 shall be extended to be
concurrent with the Termination Date.
(b) In the event that Shareholder Approval (as that term is defined in
the Investment Agreement) is not obtained on or prior to August 31, 1999 for any
reason other than because of a material breach by NBC and/or GEC which causes
any condition of NBC and/or GEC pursuant to Article VI of the Investment
Agreement not to be satisfied, NBC shall have the right to terminate this
Agreement at any time during the 90-day period immediately following the earlier
to occur of such disapproval or August 31, 1999 by giving 10 days' written
notice to VVI of the effective date of such termination (which effective date
shall occur on or before the end of such 90-day period).
(c) (i) In the event that VVI or the Board of Directors of VVI receives
notice of a Material Transaction, a Takeover Transaction or a Third Party Tender
Offer (as such terms are defined in the Shareholders' Agreement) at any time
after the date hereof but before the earlier to occur of (x) the date of the
Shareholders Meeting (as that term is defined in the Investment Agreement) and
(y) August 31, 1999, VVI shall give written notice to NBC of such acquisition
within 24 hours of the receipt of such notice of Material Transaction, Takeover
Transaction or Third Party Tender Offer, or the execution by VVI of an agreement
with respect thereto, whichever first occurs. At any time during the period
commencing on the date of receipt by NBC of such written notice and the later to
occur of (x) the date which is ten days after the date of the Shareholders
Meeting and (y) the date which is thirty days after the date of receipt by NBC
of such written notice, NBC shall have the right to elect, in its sole
discretion, to (i) continue to perform this Agreement and receive, effective
immediately upon written notice to VVI, an increased Affiliate Relations Fee for
the remainder of the Term determined as set forth in Section 9(c)(ii), or (ii)
terminate this Agreement by giving 10 days' written notice to VVI of the
effective date of such termination (which effective date shall occur on or
before the end of such 90-day period).
(ii) In the event that NBC elects to continue to perform this
Agreement and receive an increased Affiliate Relations Fee for the remainder of
the Term, such increased Affiliate Relations Fee shall be an amount equal to, at
NBC's written election in its sole discretion given to VVI on the date of such
initial election by NBC and thereafter at least 30 days prior to each
anniversary of such increase, either of (a) a fixed annual amount equal to
$5,000,000 for the first year following such increase, increasing annually
thereafter on each anniversary of such increase at a rate equal to the annual
rate of inflation in the United States as published by the US Department of
Commerce for the nearest preceding annual period, but in no event in excess of
five percent (5%) per annum; or (b) a variable annual amount equal to ten
percent (10%) of annual net profits of VVI for the year following such election,
where annual net profits shall equal annual net revenues (determined in
accordance with generally accepted accounting principles) less cost of goods
sold.
(d) (i) For a period of one year after the date hereof, VVI shall
obtain the prior written consent of NBC for any transaction involving a
"significant affiliation" with an Internet portal or
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other Person which is not an affiliate of VVI that is engaged in transactional
activity via the Internet (a "Restricted Promotional Transaction"). A
"significant affiliation" shall mean an agreement or arrangement, including
without limitation a joint venture, pursuant to which VVI grants to a Person
which is not an affiliate of VVI co-branding rights, rights to have a branded
presence on VVTV or rights to cross-promote home shopping transactions between
VVTV and an Internet portal, site or web page other than VVTV.com; provided,
however, that a significant affiliation shall not include an agreement or
arrangement entered into by VVI for the establishment of a link to VVTV.com from
a portal, site or web page in the ordinary course of business of VVI consistent
with past practice.
(ii) In the event that (x) NBC shall decline to give its consent to
a Restricted Promotional Transaction, (y) VVI shall enter into a Restricted
Promotional Transaction at any time after the first anniversary of the date
hereof, or (z) VVI shall enter into a transaction which would result in a Change
in Control, VVI shall be deemed to be in material breach of this Agreement. In
such event, NBC shall have the right to terminate this Agreement by giving 10
days' written notice to VVI of the effective date of such termination, and to
pursue all remedies available to NBC in law or in equity for a material breach
of this Agreement.
(e) NBC shall have the right to terminate this Agreement at any time
during the Term in the event that NBC delivers written notice to VVI stating
that, in the reasonable judgment of NBC, (i) there has occurred a diminution in
the quality of VVTV programming sufficient to have an adverse effect on NBC's
ability to distribute VVTV to Distribution Systems, stating with reasonable
specificity the nature of such diminution in quality, or (ii) VVI fails to
comply with the NBC Standards, and VVI fails to cure such diminution in quality
or failure to comply with the NBC Standards, within thirty days following
receipt by VVI of written notice thereof from NBC.
Section 10. Mutual Rights to Terminate. Either party shall have the
right to terminate this Agreement (i) in the event that the other party shall
fail to pay any amount payable by such other party (and which is not being
contested in good faith) within thirty days of receipt by such other party of
written notice of such failure; (ii) in the event of a material breach by the
other party of any representation, warranty or covenant under the agreement
which remains uncured for a period of thirty days following receipt by such
party of written notice of such breach; (iii) in the event that the other party
commences a voluntary case or proceeding, consents to the entry of an order for
relief against it in an involuntary case or proceeding or to the appointment of
a custodian of it or for all or substantially all of its property, makes a
general assignment for the benefit of its creditors or admits in writing its
inability to pay its debts generally as they become due, in any case within the
meaning of any bankruptcy law; or (iv) in the event that a court of competent
jurisdiction enters an order or decree under any bankruptcy law that is for
relief against the other party in an involuntary case or proceeding, appoints a
custodian of such other party for all or substantially all of its assets or
orders the liquidation of such other party, which order, decree or appointment
remains unstayed and in effect for at least 60 days.
Section 11. Termination Sole and Exclusive Remedy.
(a) The termination rights of VVI set forth herein shall be the sole
and exclusive remedy of VVI for any failure by NBC to perform its obligations
hereunder, except for the express payment and indemnification obligations of NBC
set forth herein.
12
<PAGE> 13
(b) The termination rights of NBC set forth herein shall be the sole
and exclusive remedy of NBC for any failure by VVI to perform its obligations
hereunder, except (x) for the express payment and indemnification obligations of
VVI set forth herein and (y) as otherwise set forth in Section 9.
(c) In the event of any termination by VVI pursuant to Section 8(a),
(b) or (c) or Section 10, the unvested portion of the Warrant and any Additional
Warrant shall cease to vest, but each vested installment shall continue to be
exercisable, in whole or in part, by NBC (or any affiliate of NBC) for a period
of five years from the date of vesting of such installment. In the event of any
termination by NBC pursuant to Section 9(a) or (b), the Warrant and the
Additional Warrant, whether or not vested, shall terminate and be of no further
force or effect.
Section 12. Representations and Warranties.
(a) Each party hereto represents and warrants to the other as follows:
(i) It is a corporation duly authorized, validly existing and
in good standing under the laws of the state of its incorporation, and has all
requisite corporate power and authority to own its property and carry on its
business as presently owned and carried on, including in the manner contemplated
by this Agreement, and is duly qualified to do business and is in good standing
in all jurisdictions where such qualification is necessary;
(ii) The execution and delivery by such party of this
Agreement and the performance by it of its obligations hereunder have been duly
and validly authorized by all necessary action on the part of such party;
(iii) This Agreement has been duly executed and delivered by
such party and, assuming the due execution and delivery hereof by the other
party hereto, is a valid and binding obligation of such party, enforceable
against it in accordance with its terms, except as such enforcement may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium and other
similar laws now or hereafter in effect relating to or affecting creditors'
rights generally, and (ii) general principles of equity, regardless of whether
enforcement is considered in a proceeding in equity or at law;
(iv) None of the execution and delivery by such party of this
Agreement, the consummation by such party of the transactions contemplated
hereby (but excluding the transactions contemplated by the Investment Agreement,
which are subject to the terms, conditions, covenants and agreements set forth
in the Investment Agreement) or compliance by such party with any of the
provisions hereof will (i) conflict with or result in a breach of any provision
of its certificate of incorporation or bylaws; (ii) result in a breach of, or
constitute a default under, any material contract, agreement, indenture, note or
other instrument to which it is a party or by which it is bound; (iii) require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental authority applicable to it, except for such
consents, approvals, authorizations, permits, filings and notifications which,
if not obtained or made, would not prevent the consummation of the transactions
contemplated by this Agreement or otherwise prevent it from performing in all
material respects its obligations under this Agreement; or (iv) to the knowledge
of such party, violate or conflict with any order, writ, injunction, decree,
statute, rule or regulation applicable to it, other than,
13
<PAGE> 14
in the case of clauses (i), (ii) and (iv), such breaches, violations or
conflicts, which, individually or in the aggregate, would not prevent the
consummation of the transactions contemplated hereby or otherwise prevent such
party from performing in all material respects its obligations under this
Agreement; and
(v) There is no claim, suit, arbitration, judicial action or
judicial proceeding pending or, to the knowledge of such party, threatened
against such party, nor any judgment, decree, order, injunction, writ or ruling
of any governmental authority outstanding against such party, which,
individually or in the aggregate, would be reasonably expected to prevent or
materially delay it from performing its obligations under this Agreement.
(b) VVI represents and warrants to NBC that neither VVTV nor any
material provided by VVI in connection with this Agreement, including, without
limitation, any advertising or promotional materials, will contain any material
which will libel, slander or defame any person, and neither VVTV nor any such
additional material will, when exhibited, transmitted or otherwise exploited in
accordance herewith, violate, infringe upon or give rise to any adverse claim
with respect to any contract right, common law right or any other right of any
party (including, without limitation, any copyright, trademark, literary or
dramatic right, music synchronization right or music performance right, or right
of privacy or publicity), or violate in any material respect any law, rule,
regulation or order applicable thereto.
(c) NBC represents and warrants to VVI that no advertising or
promotional material provided by NBC in connection with this Agreement will
contain any material which will libel, slander or defame any person, and such
material will not, when exhibited, transmitted or otherwise exploited in
accordance herewith, violate, infringe upon or give rise to any adverse claim
with respect to any contract right, common law right or any other right of any
party (including, without limitation, any copyright, trademark, literary or
dramatic right, music synchronization right or music performance right, or right
of privacy or publicity), or violate in any material respect any law, rule,
regulation or order applicable thereto.
(d) The representations and warranties made herein shall survive the
execution and delivery of this Agreement.
Section 13. Intellectual Property. VVI hereby grants to NBC a
non-exclusive license to use the trade names, trademarks, logos and other
identifying characteristics of or relating to VVI or VVTV during the Term in
connection with the performance of the Services by NBC.
Section 14. Insurance. VVI shall at all times during the Term maintain
with a reputable insurance company or companies (i) errors and omissions
insurance in an amount not less than $2 million combined single limit, naming
NBC and its affiliates as additional insured thereunder; and (ii) adequate
general comprehensive public liability insurance coverage against all types of
public liability (including bodily injury, property damage and personal injury),
in such amounts as are customary in accordance with sound business practices.
Such policies shall not be subject to cancellation or material modification upon
less than 30 days' prior written notice to NBC. VVI shall provide NBC with
certificates evidencing such insurance within 30 days after the date hereof.
14
<PAGE> 15
Section 15. Indemnification. Each party shall indemnify and hold the
other party and such other party's affiliates, and their officers, directors,
and employees, harmless from and against any and all claims, damages,
liabilities, costs and expenses (including, without limitation, settlement costs
and legal, accounting or other expenses incurred in connection with
investigating or defending any actual or threatened claims or actions)
(collectively, "Claims") arising out of or in connection with any breach or
alleged breach by the indemnifying party of its representations or warranties
hereunder. VVI shall indemnify, defend and hold NBC, its affiliates and their
respective officers, directors and employees harmless from and against any and
all Claims caused by, resulting from or relating to the Products or the sale or
use thereof, except with respect to Products which have been furnished by NBC or
its affiliates for sale on VVTV (in which event NBC shall indemnify, defend and
hold VVI, its affiliates and their respective officers, directors and employees
harmless from and against any and all Claims caused by, resulting from or
relating to such Products furnished by NBC or its affiliates). The party
entitled to indemnification hereunder ("Indemnified Party") shall notify the
party hereto whose indemnity hereunder is sought (the "Indemnifying Party") in
writing of the claim or action for which such indemnity applies. The
Indemnifying Party shall undertake the defense of any such claim or action and
permit the Indemnified Party to participate therein at its own expense. The
settlement of any such claim or action by an Indemnified Party without the
Indemnifying Party's prior written consent (which shall not be unreasonably
withheld) shall release the Indemnifying Party from its obligations hereunder
with respect to such claim or action so settled. The expiration or termination
of this Agreement shall not affect the continuing obligation of the parties
pursuant to this paragraph.
Section 16. Assignment. Neither this Agreement nor any of the rights or
obligations of the parties under this Agreement may be assigned, in whole or in
part, by any party without the prior written consent of the other party hereto
and the assumption by the assignee of all obligations of the assigning party in
a writing reasonably satisfactory to the non-assigning party; provided, however,
that the rights, but not the obligations, of NBC under this Agreement may be
assigned by NBC to any controlled affiliate of NBC without the prior written
consent of VVI. Subject to the forgoing provisions, this Agreement shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and permitted assigns.
Section 17. Governing Law This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts to be executed and performed in that state.
Section 18. Notices. All notices and other communications given or made
hereunder shall be in writing and shall be deemed to have been duly given or
made if delivered personally, sent by prepaid recognized overnight delivery
service or, to the extent receipt is confirmed, telecopy, to the appropriate
address or telecopy number set forth below (or at such other address or telecopy
number for a party as shall be specified by like notice by that party at least
one day prior to such change of address or number):
15
<PAGE> 16
If to VVI:
ValueVision International, Inc.
6740 Shady Oak Road
Minneapolis, Minnesota 55344
Attn: General Counsel
Telecopier: (612) 947-0188
with a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071-2007
Attn: Michael Sturrock, Esq.
Telecopier: (213) 891-8763
If to NBC:
National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, New York 10112
Attn: Stuart U. Goldfarb, Executive Vice President and Managing
Director, Worldwide Business Development
Telecopier: (212) 664-7896
with a copy to:
National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, New York 10112
Attn: Senior Corporate and Transactions Counsel
Telecopier: (212) 977-7165
Section 18. Miscellaneous.
(a) The term "Person" shall mean an individual, corporation,
unincorporated association, partnership, group (as defined in Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended), trust, joint stock company,
joint venture, business trust or unincorporated organization, limited liability
company or other entity of whatever nature.
(b) This Agreement (including the documents referred to herein and the
Schedules and Exhibits hereto) between the parties hereto, constitutes the
entire agreement of the parties with respect to the matters contemplated hereby,
and all other prior negotiations, understandings and agreements, whether written
or oral, between the parties hereto are superseded by this Agreement. This
Agreement shall not benefit or create any right, remedy or cause of action in or
on behalf of any Person other than the parties hereto and their permitted
successors and assigns, as expressly set forth herein.
16
<PAGE> 17
(c) The Schedules and Exhibits attached hereto are incorporated herein
and made a part hereof for all purposes. The term "this Agreement" means the
body of this Agreement, all other ancillary documents contemplated by this
Agreement and such Schedules and Exhibits.
(d) This Agreement may not be amended, changed or modified except by
written instrument signed by the parties hereto.
(e) If any provision or provisions of this Agreement shall be held to
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or be impaired
thereby.
(f) By entering into this Agreement the parties hereto do not intend to
become partners or joint venturers but shall for all purposes be deemed to be
independent contractors.
(g) The section headings contained in this Agreement are for reference
purposes only, are not part of this Agreement and shall not affect the meaning
or interpretation of this Agreement.
17
<PAGE> 18
IN WITNESS WHEREOF, this Agreement has been executed by the
parties hereto as of the date first above written.
NATIONAL BROADCASTING COMPANY, INC.
By: /s/ Stuart Goldfarb
--------------------------------------------
Name: Stuart Goldfarb
Title: Executive Vice President, Worldwide
Business Development
VALUEVISION INTERNATIONAL, INC.
By: /s/ Gene McCaffery
--------------------------------------------
Name: Gene McCaffery
Title: Chief Executive Officer
<PAGE> 19
Schedule 2(c)(i)
Discretionary Carriage Fee
The initial maximum Discretionary Carriage Fee in carriage agreements for VVTV
on a cable Distribution System is equal to $2.00 per year per full-time
Subscriber. This amount is subject to increase as set forth in Section 2(c)(v).
The "DirecTV Discretionary Carriage Fee" is equal to $1.50 per year per
full-time Subscriber. This amount is subject to increase as set forth in Section
2(c)(v).
S-1
<PAGE> 20
Schedule 2(c)(iii)
FTE Factors
(attached hereto)
S-2
<PAGE> 21
Schedule 2(d)
Fee Reduction Bonus
The Fee Reduction Bonus described in Section 2(d) shall be paid in respect of
each carriage agreement for VVTV in a cable Distribution System which provides
for the payment by VVI of a Discretionary Carriage Fee of $1.95 or less per year
per full-time cable Subscriber, and shall be calculated in accordance with the
following table:
<TABLE>
<CAPTION>
Average Annual
Discretionary Carriage Fee Commission per
Over Term of Agreement Full-Time Subscriber
-------------------------- --------------------
<S> <C>
< $1.50 $0.65
$1.50 - $1.60 $0.50
$1.61 - $1.70 $0.40
$1.71 - $1.80 $0.25
$1.81 - $1.90 $0.10
$1.91 - $1.95 $0.05
</TABLE>
S-3
<PAGE> 22
Schedule 3(a)(ii)
Existing Subscriber Base
Attached hereto is a schedule of the Existing Carriage Agreements representing
substantially all of the Existing Subscriber Base.
S-4
<PAGE> 23
Schedule 7(a)
Affiliate Relations Fee
The amount of the Affiliate Relations Fee shall equal $1,500,000 for the first
year of the Term.
S-5
<PAGE> 24
Exhibit 1
NBC Broadcast and Advertising Standards and Practices
<PAGE> 1
EXHIBIT 4
NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES
ISSUABLE UPON EXERCISE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAW, AND SUCH SECURITIES MAY NOT BE OFFERED,
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS OF A SHAREHOLDER AGREEMENT, DATED AS OF
THE DATE HEREOF (THE "SHAREHOLDER AGREEMENT"), AMONG VALUEVISION INTERNATIONAL,
INC., GE CAPITAL EQUITY INVESTMENTS, INC. AND NATIONAL BROADCASTING COMPANY,
INC.
THE RESTATED ARTICLES OF INCORPORATION OF THE COMPANY (AS DEFINED BELOW), AS
AMENDED, PROVIDE THAT, EXCEPT AS OTHERWISE PROVIDED BY LAW, SHARES OF STOCK IN
THE COMPANY SHALL NOT BE TRANSFERRED TO "ALIENS" UNLESS, AFTER GIVING EFFECT TO
SUCH TRANSFER, THE AGGREGATE NUMBER OF SHARES OF STOCK OWNED BY OR FOR THE
ACCOUNT OF "ALIENS" WILL NOT EXCEED 20% OF THE NUMBER OF SHARES OF OUTSTANDING
STOCK OF THE COMPANY, AND THE AGGREGATE VOTING POWER OF SUCH SHARES WILL NOT
EXCEED 20% OF THE AGGREGATE VOTING POWER OF ALL OUTSTANDING SHARES OF VOTING
STOCK OF THE COMPANY. NOT MORE THAN 20% OF THE AGGREGATE VOTING POWER OF ALL
SHARES OUTSTANDING ENTITLED TO VOTE MAY BE VOTED BY OR FOR THE ACCOUNT OF
"ALIENS." IF, NOTWITHSTANDING SUCH RESTRICTION ON TRANSFERS TO "ALIENS," THE
AGGREGATE NUMBER OF SHARES OF STOCK OWNED BY OR FOR THE ACCOUNT OF "ALIENS"
EXCEEDS 20% OF THE NUMBER OF SHARES OF OUTSTANDING STOCK OF THE COMPANY OR IF
THE AGGREGATE VOTING POWER OF SUCH SHARES EXCEEDS 20% OF THE AGGREGATE VOTING
POWER OF ALL OUTSTANDING SHARES OF VOTING STOCK OF THE COMPANY, THE COMPANY HAS
THE RIGHT TO REDEEM SHARES OF ALL CLASSES OF CAPITAL STOCK, AT THEIR THEN FAIR
MARKET VALUE, ON A PRO RATA BASIS, OWNED BY OR FOR THE ACCOUNT OF ALL "ALIENS"
IN ORDER TO REDUCE THE NUMBER OF SHARES AND/OR PERCENTAGE OF VOTING POWER HELD
BY OR FOR THE ACCOUNT OF "ALIENS" TO THE MAXIMUM NUMBER OR PERCENTAGE ALLOWED
UNDER THE RESTATED ARTICLES OF INCORPORATION, AS AMENDED, OR AS OTHERWISE
REQUIRED BY APPLICABLE FEDERAL LAW. AS USED HEREIN, "ALIENS" MEANS ALIENS AND
THEIR REPRESENTATIVES, FOREIGN GOVERNMENTS AND THEIR REPRESENTATIVES, AND
CORPORATIONS ORGANIZED UNDER THE LAW OF A FOREIGN COUNTRY, AND THEIR
REPRESENTATIVES. THE COMPANY
<PAGE> 2
Warrant
WILL FURNISH TO ANY SHAREHOLDER UPON REQUEST AND WITHOUT CHARGE, A FULL
STATEMENT OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS, AND RELATIVE RIGHTS OF
THE SHARES OF EACH CLASS OR SERIES AUTHORIZED TO BE ISSUED, SO FAR AS THEY HAVE
BEEN DETERMINED, AND THE AUTHORITY OF THE BOARD TO DETERMINE THE RELATIVE
RIGHTS AND PREFERENCES OF SUBSEQUENT CLASSES OR SERIES.
No. W-1 Warrant
COMMON STOCK PURCHASE WARRANT
Exercisable commencing April 15, 1999
Void after Expiration Time (as defined herein)
ValueVision International, Inc., a Minnesota corporation (the
"Company"), hereby certifies that, for value received, GE Capital Equity
Investments, Inc., a Delaware corporation (the "Initial Holder"), or registered
assigns (in either case, the "Warrantholder"), is the owner of a Warrant (as
defined below), which entitles the Warrantholder to purchase from time to time
from the Company a number of fully paid, duly authorized and nonassessable
shares of Common Stock, par value $0.01 per share, of the Company (the "Common
Stock") up to (i) that number of shares that result in the Restricted Parties
(as defined below), at each time this Warrant is exercised, Beneficially Owning
(as defined below) 39.9% of the then Adjusted Outstanding Common Stock (as
defined below) minus (ii) the aggregate number of shares of Common Stock
directly or indirectly sold, transferred or otherwise disposed of by all
Restricted Parties (excluding any such sale, transfer or other disposition to
any other Restricted Party) prior to and including the date of exercise (making
equitable adjustments for any conversions, reclassifications, reorganizations,
stock dividends, stock splits, reverse splits and similar events which occur
with respect to the Common Stock). This Warrant may be exercised at any time
and from time to time from and after April 15, 1999 (the "Issue Date") and
continuing up to the Expiration Time (as defined herein) at a per share
exercise price determined according to the terms and subject to the conditions
set forth in this certificate (the "Warrant Certificate"). The Warrant
evidenced by this Warrant Certificate (the "Warrant") is being issued pursuant
to an Investment Agreement, dated as of March 8, 1999 (as it may be amended,
supplemented or otherwise modified
- 2 -
<PAGE> 3
Warrant
from time to time, the "Investment Agreement"), by and between the Company and
the Initial Holder.
Section 1. Definitions. As used in this Warrant Certificate, the
following terms shall have the meanings set forth below:
"Adjusted Outstanding Common Stock" shall mean, at any time
this Warrant is exercised for the purchase of shares of Common Stock,
the total number of shares of outstanding Common Stock at such time;
provided that for purposes of such calculation (a) all shares of
Common Stock issuable upon conversion of the then outstanding
Preferred Stock shall be considered outstanding, (b) all shares of
Common Stock issuable upon exercise of the outstanding Initial
Distributor Warrants (whether such Initial Distributor Warrants are
vested or unvested) shall be considered outstanding, (c) to the extent
that Bonus Distributor Warrants have been issued and are outstanding
(and only to such extent), all shares of Common Stock issuable upon
the exercise of such issued and outstanding Bonus Distributor Warrants
(whether such Bonus Distributor Warrants are vested or unvested) shall
be considered outstanding and (d) all shares of Common Stock purchased
pursuant to such exercise of this Warrant (but not any shares of
Common Stock which may be purchased upon subsequent exercises of this
Warrant) shall be considered outstanding.
"Affiliate" shall mean, with respect to any Person, any other
Person that directly or indirectly controls, is controlled by, or is
under common control with, such Person. As used in this definition,
"control" (including its correlative meanings, "controlled by" and
"under common control with") shall mean the possession, directly or
indirectly, of power to direct or cause the direction of management or
policies (whether through ownership of securities or partnership or
other ownership interests, by contract or otherwise).
"Articles of Incorporation" shall mean the Articles of
Incorporation of the Company, as amended from time to time.
"Beneficially Own" shall have the meaning set forth in Rule
13d-3 under the Exchange Act, except that a Person shall be deemed to
"Beneficially Own" all securities that such Person has a right to
acquire, whether such right is exercisable immediately or only after
the passage of time (and without any additional conditions); provided,
however, that a Person shall not be deemed to "Beneficially Own" any
shares of Common Stock which are issuable (but have not yet
- 3 -
<PAGE> 4
Warrant
been issued) upon exercise of this Warrant or which are issuable upon
exercise of any Bonus Distributor Warrants unless and until such Bonus
Distributor Warrants are actually issued and outstanding, at which
time such Person shall be deemed to "Beneficially Own" all shares of
Common Stock which are issuable upon exercise of such Bonus
Distributor Warrants, whether or not they are vested or unvested.
"Board of Directors" shall mean the board of directors of the
Company.
"Bonus Distributor Warrants" shall mean certain warrants
issued by the Company to NBC or its designee at agreed upon times,
subject to the satisfaction of certain conditions contained therein
and in the Distribution Agreement, which warrants may be exercised by
the holder thereof to purchase Common Stock in accordance with the
terms therein.
"Business Day" shall mean any day, other than a Saturday,
Sunday or a day on which commercial banks in New York, New York are
authorized or obligated by law or executive order to close.
"Certificate of Designation" shall mean the Certificate of
Designation of the Preferred Stock, dated as of April 15, 1999,
executed and filed with the Secretary of State of the State of
Minnesota.
"Common Stock" shall have the meaning set forth in the
preamble hereto.
"Company" shall have the meaning set forth in the preamble
hereto.
"Distribution Agreement" shall mean the Distribution and
Marketing Agreement dated as of March 8, 1999 between the Company and
NBC pursuant to which NBC has agreed to distribute certain programming
of the Company, as such agreement may be amended from time to time.
"Election to Exercise" shall have the meaning set forth in
Section 4.2(a) hereof.
"Equity Securities" shall mean, with respect to any Person,
any and all common stock, preferred stock, any other class of capital
stock and partnership or limited liability company interests of such
Person or any other similar
- 4 -
<PAGE> 5
Warrant
interests of any Person that is not a corporation, partnership or
limited liability company.
"Exercise Price" shall have the meaning set forth in Section
8 hereof.
"Expiration Date" shall mean the fifth anniversary of the
Issue Date.
"Expiration Time" shall mean 5:00 P.M., New York City time,
on the Expiration Date.
"Fractional Warrant Share" shall mean any fraction of a whole
share of Common Stock issued, or issuable upon, exercise of the
Warrant.
"Governmental Entity" shall mean any federal, state or local
government or any court, administrative agency or commission or other
governmental authority or agency, domestic or foreign.
"Independent Expert" shall mean an investment banking firm
mutually acceptable to the Company and the Warrantholder.
"Initial Distributor Warrants" shall mean certain warrants to
purchase 1,450,000 shares of Common Stock issued immediately by the
Company to NBC or its designee pursuant to the Distribution Agreement,
which warrants may be exercised by the holder thereof in accordance
with the terms therein.
"Initial Holder" shall have the meaning set forth in the
preamble hereto.
"Investment Agreement" shall have the meaning set forth in
the preamble hereto.
"Issue Date" shall have the meaning set forth in the preamble
hereto.
"Market Price" shall mean, with respect to a share of Common
Stock on any day, except as set forth below in the case that the
shares of Common Stock are not publicly held or listed, the average of
the "quoted prices" of the Common Stock for 30 consecutive Trading
Days commencing 45 Trading Days before the date in question. The term
"quoted prices" of the Common Stock shall mean the last reported sale
price on that day or, in case no such reported sale takes place on
such day, the average of the last reported bid and asked
- 5 -
<PAGE> 6
Warrant
prices, regular way, on that day, in either case, as reported in the
consolidated transaction reporting system with respect to securities
quoted on Nasdaq or, if the shares of Common Stock are not quoted on
Nasdaq, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal
national securities exchange on which the shares of Common Stock are
listed or admitted to trading or, if the shares of Common Stock are
not quoted on Nasdaq and 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 on such other
nationally recognized quotation system then in use, or, if on any such
day the shares of Common Stock are not quoted on any such quotation
system, the average of the closing bid and asked prices as furnished
by a professional market maker selected by the Board of Directors
making a market in the shares of Common Stock. Notwithstanding the
foregoing, if the shares of Common Stock are not publicly held or so
listed, quoted or publicly traded, the "Market Price" means the fair
market value of a share of Common Stock, as determined in good faith
by the Board of Directors; provided, however, that if the
Warrantholder shall dispute the fair market value as determined by the
Board, the Warrantholder and the Company may retain an Independent
Expert. The determination of fair market value by the Independent
Expert shall be final, binding and conclusive on the Company and the
Warrantholder. All costs and expenses of the Independent Expert shall
be borne by the Warrantholder unless the determination of fair market
value is more favorable to such Warrantholder by 5% or more, in which
case, all such costs and expenses shall be borne by the Company.
"Nasdaq" shall mean The Nasdaq Stock Market's National Market.
"NBC" shall mean National Broadcasting Company, Inc., a
Delaware corporation and Affiliate of the Initial Holder.
"Organic Change" shall mean, with respect to any Person, any
transaction (including without limitation any recapitalization,
capital reorganization or reclassification of any class or series of
Equity Securities, any consolidation of such Person with, or merger of
such Person into, any other Person, any merger of another Person into
such Person (other than a merger which does not result in a
reclassification, conversion, exchange or cancellation of outstanding
shares of capital stock of such Person), and any sale or transfer or
lease of all or substantially all of the assets of such Person, but
not including any stock split,
- 6 -
<PAGE> 7
Warrant
combination or subdivision) pursuant to which any class or series of
Equity Securities of such Person is exchanged for, or converted into,
the right to receive other securities, cash or other property.
"Person" shall mean any individual, firm, corporation,
company, limited liability company, association, partnership, joint
venture, trust or unincorporated organization, or a government or any
agency or political subdivision thereof.
"Preferred Stock" shall mean the Series A Redeemable
Convertible Preferred Stock, par value $0.01 per share, of the Company
issued pursuant to the Certificate of Designation.
"Regular Dividends" shall mean regular quarterly dividends
not in excess of 1% of the aggregate Market Price for the shares of
capital stock receiving such dividends as of the Business Day prior to
the declaration of such dividends.
"Restricted Party" shall have the meaning set forth in the
Shareholder Agreement.
"Securities Act" shall mean the U.S. Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder.
"Shareholder Agreement" shall mean the Shareholder Agreement,
dated as of April 15, 1999 between the Company and the Initial
Purchaser, as amended, supplemented or otherwise modified from time to
time in accordance with its terms.
"Stated Value" shall mean the stated liquidation value of the
Preferred Stock as set forth in the Certificate of Designation.
"Trading Day" shall mean any day on which Nasdaq is open for
trading, or if the shares of Common Stock are not quoted on Nasdaq,
any day on which the principal national securities exchange or
national quotation system on which the shares of Common Stock are
listed, admitted to trading or quoted is open for trading, or if the
shares of Common Stock are not so listed, admitted to trading or
quoted, any Business Day.
"Warrant" shall have the meaning set forth in the preamble
hereto.
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<PAGE> 8
Warrant
"Warrant Certificate" shall have the meaning set forth in the
preamble hereto.
"Warrant Market Price" shall mean (a) in the case of Section
8(a) hereof, the greater of (i) the average of the closing prices of a
share of Common Stock for the 45 consecutive Trading Days ending on
the Trading Day immediately prior to the day on which the Election to
Exercise is delivered and (ii) the average of the closing prices of a
share of Common Stock for the 150 consecutive Trading Days ending on
the Trading Day immediately prior to the day on which the Election to
Exercise is delivered or (b) in the case of Section 8(b) hereof, the
average of the closing prices of a share of Common Stock for the 45
consecutive Trading Days ending on the Trading Day immediately prior
to the day on which the Election to Exercise is delivered; provided
that if during such 45 or 150 consecutive Trading Day period (the
"valuation period"), as applicable, there shall occur a record date
for determining holders of Common Stock entitled to receive a dividend
or distribution on the Common Stock, the amounts determined pursuant
to clauses (a)(i), (a)(ii) and/or (a)(iii) above, as applicable, shall
be reduced by subtracting the amount obtained by multiplying (a) the
value of such dividend or distribution per share of Common Stock by
(b) a fraction (i) the numerator of which shall be the number of
Trading Days from the beginning of such valuation period to and
including the record date for such dividend or distribution (but in no
event more than 30 days) and (ii) the denominator of which shall be
the number of Trading Days in such valuation period. For purposes of
the definition of Warrant Market Price, the "closing price" of a share
of Common Stock shall refer to the closing price quoted on Nasdaq or,
if shares of Common Stock are not quoted on Nasdaq, the closing price
shall be computed in accordance with the procedure set forth for such
contingency in the definition of "Market Price."
"Warrant Register" shall have meaning set forth in Section
2.2 hereof.
"Warrant Shares" shall mean the shares of Common Stock
issued, or issuable upon, exercise of this Warrant.
"Warrantholder" shall have the meaning set forth in the
preamble hereto.
Section 2. Transferability.
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<PAGE> 9
Warrant
2.1 Registration. This Warrant shall be issued only in registered
form. The Company agrees to maintain, at its office or agency, books for the
registration and transfer of the Warrant.
2.2 Transfer. This Warrant may not be directly or indirectly sold,
transferred or otherwise disposed of at any time except to one or more
Restricted Parties. Any such permitted sale or transfer shall be effected on
the books of the Company (the "Warrant Register") maintained at its principal
executive offices upon surrender of this Warrant Certificate for registration
of transfer duly endorsed by the Warrantholder or by its duly authorized
attorney or representative, or accompanied by proper evidence of succession,
assignment or authority to transfer. Upon any registration of transfer, the
Company shall execute and deliver a new Warrant Certificate to the Person
entitled thereto.
Section 3. Exchange of Warrant Certificate.
This Warrant Certificate may be exchanged for another certificate of
like tenor entitling the Warrantholder to purchase a like aggregate number of
Warrant Shares as the certificate surrendered then entitles such Warrantholder
to purchase. Any Warrantholder desiring to exchange a Warrant certificate shall
make such request in writing delivered to the Company, and shall surrender,
properly endorsed, the certificate evidencing the Warrant to be so exchanged.
Thereupon, the Company shall execute and deliver to the Person entitled thereto
a new Warrant Certificate as so requested.
Section 4. Term of Warrant; Exercise of Warrant.
4.1 Duration of Warrant. On the terms and subject to the conditions
set forth in this Warrant Certificate, the Warrantholder or any Affiliate
thereof may exercise this Warrant, in whole or in part, at any time and from
time to time after the Issue Date and before the Expiration Time. At the
Expiration Time, this Warrant shall become void, and all rights hereunder shall
thereupon cease.
4.2 Exercise of Warrant.
(a) On the terms and subject to the conditions set forth in this
Warrant Certificate, the Warrantholder or any Affiliate thereof may exercise
this Warrant, in whole or in part, by presentation to the Company of the
attached Election to Exercise (the "Election to Exercise") duly filled in and
signed,
- 9 -
<PAGE> 10
Warrant
and accompanied by payment to the Company of the Exercise Price for the
number of Warrant Shares specified in such Election to Exercise. Payment of the
aggregate Exercise Price shall be made (i) in cash in an amount equal to the
aggregate Exercise Price, (ii) by certified or official bank check in an amount
equal to the aggregate Exercise Price or (iii) by any combination of the
foregoing.
(b) On the terms and subject to the conditions set forth in
this Warrant Certificate, upon such presentation of an Election to Exercise and
payment of such aggregate Exercise Price as set forth in paragraph (a) hereof,
the Company shall promptly issue and cause to be delivered to the Warrantholder
and/or an Affiliate thereof, as applicable, a certificate or certificates (in
such name or names of the Warrantholder and/or the Affiliate(s) thereof, as
specified in the Election to Exercise) for the specified number of duly
authorized, fully paid and non-assessable Warrant Shares issuable upon
exercise, and shall deliver to the Warrantholder cash, as provided in Section
10 hereof, with respect to any Fractional Warrant Shares otherwise issuable
upon such surrender. Upon each exercise of this Warrant, the Company shall
record in its books the number of shares of Common Stock purchased by the
Warrantholder and/or such Affiliate(s).
(c) Each Person in whose name any certificate for Warrant
Shares is issued shall for all purposes be deemed to have become the holder of
record of the Warrant Shares represented thereby on the first date on which an
Election to Exercise was presented and payment of the Exercise Price and any
applicable taxes was made, irrespective of date of issue or delivery of such
certificate.
4.3 Conditions to Exercise. Each exercise of this Warrant
shall be subject to the following conditions:
(a) The shareholders of the Company shall have approved this
Warrant as provided for in the Investment Agreement; and
(b) After taking into account the number of Warrant Shares
issuable upon such exercise, the Restricted Parties in the aggregate
shall Beneficially Own no more than (i) 39.9% of the then Adjusted
Outstanding Common Stock minus (ii) the aggregate number of shares of
Common Stock directly or indirectly sold, transferred or otherwise
disposed of by all Restricted Parties (excluding any such sale,
transfer or other disposition to any other Restricted Party) prior to
and including the date of exercise (making equitable adjustments for
any conversions, reclassifications,
- 10 -
<PAGE> 11
Warrant
reorganizations, stock dividends, stock splits, reverse splits and
similar events which occur with respect to the Common Stock).
(c) The purchase of the Warrant Shares issuable upon such
exercise shall not be prohibited under applicable law.
4.4 Termination of Warrant. This Warrant shall automatically
terminate if:
(a) At the Shareholders Meeting (as defined in the
Shareholder Agreement), the shareholders of the Company shall fail to
approve this Warrant as provided in Section 4.3(a); or
(b) A Replacement Warrant (as defined in the Investment
Agreement) is issued pursuant to Section 2.4 of the Investment
Agreement.
Section 5. Payment of Taxes.
The Company shall pay any and all documentary, stamp or
similar issue or transfer taxes and other governmental charges that may be
imposed under the laws of the United States or any political subdivision or
taxing authority thereof or therein in respect of any issue or delivery of
Warrant Shares or of other securities or property deliverable upon exercise of
this Warrant or certificates representing such shares or securities (other than
income or withholding taxes imposed on the Warrantholder); provided, however,
that the Company shall not be required to pay any tax or taxes which may be
payable with respect to any transfer involving the issue of any Warrant
Certificate or any certificates for Warrant Shares in a name other than that of
the registered holder thereof, and the Company shall not be required to issue
or deliver such Warrant Certificate or certificates for Warrant Shares unless
and until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
Section 6. Mutilated or Missing Warrant.
If this Warrant Certificate is lost, stolen, mutilated or
destroyed, the Company shall issue in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant
- 11 -
<PAGE> 12
Warrant
certificate lost, stolen or destroyed, upon receipt of a proper affidavit or
other evidence reasonably satisfactory to the Company (and surrender of any
mutilated Warrant Certificate) and indemnity in form and amount reasonably
satisfactory to the Company in each instance protecting the Company, a new
Warrant Certificate of like tenor and representing an equivalent Warrant as the
Warrant Certificate so lost, stolen, mutilated or destroyed. Any such new
Warrant certificate shall constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant Certificate shall be at any time enforceable by anyone. An applicant
for such substitute Warrant Certificate shall also comply with such other
reasonable regulations and pay such other reasonable charges as the Company may
prescribe. The Warrant Certificate shall be held and owned upon the express
condition that the foregoing provisions are exclusive with respect to the
replacement of lost, stolen, mutilated or destroyed Warrant Certificate, and
shall preclude any and all other rights or remedies notwithstanding any law or
statute existing or hereafter enacted to the contrary with respect to the
replacement of negotiable instruments or other securities without their
surrender.
Section 7. Reservation of Shares.
The Company hereby agrees that there shall be reserved for
issuance and delivery upon exercise of this Warrant, free from preemptive
rights, the number of shares of authorized but unissued shares of Common Stock
as shall be required for issuance or delivery upon full exercise of this
Warrant. The Company further agrees that it will not, by amendment of its
Articles of Incorporation or through reorganization, consolidation, merger,
dissolution or sale or assets, or by any other voluntary act, avoid or seek to
avoid the observance or performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by the Company. Without
limiting the generality of the foregoing, the Company shall from time to time
take all such action that may be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
at the Exercise Price.
Section 8. Exercise Price.
The price per share (the "Exercise Price") at which Warrant
Shares shall be purchasable upon the exercise of this Warrant shall be
calculated as follows:
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<PAGE> 13
Warrant
(a) Exercise Prior to Second Anniversary. If the
Warrantholder elects to purchase Warrant Shares prior to the second
anniversary of the Issue Date, the Exercise Price shall be equal to
the greater of (i) the Warrant Market Price and (ii) $12.00 (as
reduced by the excess of the fair market value of the aggregate amount
of dividends and other distributions declared per share of Common
Stock over the aggregate Regular Dividends declared per share of
Common Stock after the date hereof and having a record date prior to
the date of exercise), in each case making equitable adjustments for
any conversions, reclassifications, reorganizations, stock dividends,
stock splits, reverse splits and similar events which occur with
respect to the Common Stock.
(b) Exercise on or after Second Anniversary. If the
Warrantholder elects to purchase Warrant Shares on or after the second
anniversary of the Issue Date, the Exercise Price shall be equal to
the greater of (i) the Warrant Market Price and (ii) $15.00 (as
reduced by the excess of the fair market value of the aggregate amount
of dividends and other distributions declared per share of Common
Stock over the aggregate Regular Dividends declared per share of
Common Stock after the date hereof and having a record date prior to
the date of exercise), in each case making equitable adjustments for
any conversions, reclassifications, reorganizations, stock dividends,
stock splits, reverse splits and similar events which occur with
respect to the Common Stock.
Section 9. Certain Events.
9.1 Notice.
In case:
(i) the Company shall declare any dividend or any
distribution of any kind or character (whether in cash, securities or
other property) on or in respect of shares of Common Stock or to the
shareholders of the Company (in their capacity as such), excluding any
regular periodic cash dividend paid out of current or retained
earnings (as such terms are used in generally accepted accounting
principles); or
(ii) the Company shall authorize the granting to the
holders of shares of Common Stock of rights to subscribe for or
purchase any shares of capital stock or of any other right; or
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<PAGE> 14
Warrant
(iii) of any reclassification of shares of Common
Stock (other than a subdivision or combination of outstanding shares
of Common Stock), or of any consolidation or merger to which the
Company is a party and for which approval of any shareholders of the
Company is required, or of the sale or transfer of all or
substantially all of the assets of the Company; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall cause to be mailed to the
Warrantholder, at their last addresses as they shall appear
upon the Warrant Register, at least 10 days prior to the
applicable record date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution or rights or, if a
record is not to be taken, the date as of which the holders
of shares of Common Stock of record to be entitled to such
dividend, distribution or rights are to be determined or (y)
the date on which such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding
up is expected to become effective, and, if applicable, the
date as of which it is expected that holders of shares of
Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities or other property
(including cash) deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution,
liquidation or winding up. 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.
9.2 Section 305.
The Company shall be entitled, but not required, to make such
reductions in the Exercise Price as it in its discretion shall determine to be
advisable, including, without limitation, in order that any dividend in or
distribution of shares of Common Stock or shares of capital stock of any class
other than Common Stock, subdivision, reclassification or combination of shares
of Common Stock, issuance of rights or warrants, or any other transaction
having a similar effect, shall not be treated as a distribution of property by
the Company to its shareholders under Section 305 of the Internal Revenue Code
of 1986, as amended, or any successor provision and shall not be taxable to
them.
- 14 -
<PAGE> 15
Warrant
9.3 Organic Change.
(a) Company Survives. Upon the consummation of an Organic
Change (other than a transaction in which the Company is not the surviving
entity), lawful provision shall be made as part of the terms of such
transaction whereby the terms of the Warrant Certificate shall be modified,
without payment of any additional consideration therefor, so as to provide that
upon exercise of this Warrant following the consummation of such Organic
Change, the Warrantholder shall have the right to purchase for the Exercise
Price the kind and amount of securities, cash and other property receivable
upon such Organic Change by a holder of the number of Warrant Shares into which
this Warrant might have been exercised immediately prior to such Organic
Change. Lawful provision also shall be made as part of the terms of the Organic
Change so that all other terms of the Warrant Certificate shall remain in full
force and effect following such an Organic Change. The provisions of this
Section 9.3(a) shall similarly apply to successive Organic Changes.
(b) Company Does Not Survive. The Company shall not enter
into an Organic Change that is a transaction in which the Company is not the
surviving entity unless lawful provision shall be made as part of the terms of
such transaction whereby the surviving entity shall issue new securities to
each Warrantholder, without payment of any additional consideration therefor,
with terms that provide that upon the exercise of this Warrant, the
Warrantholder shall have the right to purchase the kind and amount of
securities, cash and other property receivable upon such Organic Change by a
holder of the number of Warrant Shares into which this Warrant might have been
exercised immediately prior to such Organic Change.
Section 10. Fractional Interests.
The Company shall not be required to issue Fractional Warrant
Shares on the exercise of this Warrant. If Fractional Warrant Shares totaling
more than one Warrant Share in the aggregate is presented for exercise at the
same time by the Warrantholder, the number of full Warrant Shares which shall
be issuable upon exercise thereof shall be computed on the basis of the
aggregate number of Warrant Shares so purchasable upon the exercise of the
Warrants so presented. If any Fractional Warrant Share would but for the
provisions of this Section 10 be issuable on the exercise of this Warrant (or
specified portions thereof), the Company shall pay an amount in cash equal to
the fraction of a Warrant Share represented by such Fractional Warrant Share
multiplied by the Market Price on the day of such exercise.
- 15 -
<PAGE> 16
Warrant
Section 11. No Rights as Shareholder.
Nothing in this Warrant Certificate shall be construed as
conferring upon the Warrantholder or its transferees any rights as a
shareholder of the Company, including the right to vote, receive dividends,
consent or receive notices as a shareholder with respect to any meeting of
shareholders for the election of directors of the Company or any other matter.
Section 12. Cooperation; Validity of Warrant.
The Company shall use its reasonable best efforts to obtain
all such authorizations, exemptions or consents from any Governmental Entity
having jurisdiction thereof as may be necessary to enable the Company to
perform its obligations under this Warrant. In addition, upon the request of
Warrantholder, the Company will at any time during the period this Warrant is
outstanding acknowledge in writing, in form satisfactory to Warrantholder, the
continuing validity of this Warrant and the obligations of the Company
hereunder.
Section 13. Listing on Nasdaq or Securities Exchange.
The Company shall use its reasonable best efforts to list any
shares of Common Stock issuable upon exercise of this Warrant on Nasdaq or on
such other national securities exchange on which shares of Common Stock are
then listed. The Company will at its expense cause all shares of Common Stock
issued upon the exercise of this Warrant to be listed at the time of such
issuance on Nasdaq and/or such other securities exchange shares of Common Stock
are then listed on and shall maintain such listing.
Section 14. Covenant Regarding Consent.
The Company hereby covenants to use its reasonable best
efforts upon the request of the Warrantholder to seek any waivers or consents,
or to take any other action required, to effectuate the exercise of this
Warrant by any Warrantholder.
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<PAGE> 17
Warrant
Section 15. Limitation on Liability.
No provision hereof, in the absence of action by the
Warrantholder to receive shares of Common Stock, and no enumeration herein of
the rights or privileges of the Warrantholder, shall give rise to any liability
of the Warrantholder for any value subsequently assigned to the Common Stock or
as a shareholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
Section 16. Nonwaiver and Expenses.
No course of dealing or any delay or failure to exercise any
right hereunder on the part of the Warrantholder or the Company shall operate
as a waiver of such right or otherwise prejudice the Warrantholder's or the
Company's, as the case may be, rights, powers or remedies.
Section 17. Amendment.
This Warrant and any other Warrant issued hereunder may be
modified or amended or the provisions hereof waived with the written consent of
the Company and Warrantholder's possessing in excess of 50% of the aggregate
number of shares of Common Stock then receivable upon full exercise of this
Warrant whether or not then exercisable; provided that no such Warrant may be
modified or amended in a manner which is materially adverse to the Initial
Holder or any of its successors or assigns, so long as such Person is a
Warrantholder, without the prior written consent of such Person.
Section 18. Successors.
All the covenants and provisions of this Warrant Certificate
by or for the benefit of the Company or the Warrantholder shall bind and inure
to the benefit of their respective successors and permitted assigns hereunder.
Section 19. Governing Law; Choice of Forum, Etc.
The validity, construction and performance of this Warrant
Certificate shall be governed by and interpreted in accordance with, the laws
of New York. The parties hereto agree that the appropriate forum for any
disputes arising out of this Warrant Certificate solely between or among any or
all of the Company, on the one hand, and the Initial Holder and/or any
- 17 -
<PAGE> 18
Warrant
Person who has become a Warrantholder, on the other, shall be any state or U.S.
federal court sitting within the County of New York, New York or County of
Hennepin, Minnesota, and the parties hereto irrevocably consent to the
jurisdiction of such courts, and agree to comply with all requirements
necessary to give such courts jurisdiction. The parties hereto further agree
that the parties will not bring suit with respect to any disputes, except as
expressly set forth below, arising out of this Warrant Certificate for the
execution or enforcement of judgment, in any jurisdiction other than the above
specified courts. Each of the parties hereto irrevocably consents to the
service of process in any action or proceeding hereunder by the mailing of
copies thereof by registered or certified airmail, postage prepaid, if to (i)
the Company, at ValueVision International, Inc., 6740 Shady Oak Road, Eden
Prairie, MN 55344-3433, Attention: General Counsel, Fax: (612) 947-0188, or at
such other address specified by the Company in writing to the other parties,
with a copy to Latham & Watkins, 633 West Fifth Street, Suite 4000, Los
Angeles, CA 90071, Attention: Michael W. Sturrock, Fax: (213) 891-8763 and (ii)
any Warrantholder, at the address of such Warrantholder specified in the
Warrant Register. The foregoing shall not limit the rights of any party hereto
to serve process in an other manner permitted by the law or to obtain execution
of judgment in any other jurisdiction. The parties further agree, to the extent
permitted by law, that final and unappealable judgment against any of them in
any action or proceeding contemplated above shall be conclusive and may be
enforced in any other jurisdiction within or outside the United States by suit
on the judgment, a certified or exemplified copy of which shall be conclusive
evidence of the fact and the amount of indebtedness. The parties agree to waive
any and all rights that they may have to a jury trial with respect to disputes
arising out of this Agreement.
Section 20. Enforcement.
The parties agree that irreparable damage would occur in the
event that any of the provisions of this Warrant were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Warrant and to enforce specifically the
terms and provisions of this Warrant.
- 18 -
<PAGE> 19
Warrant
Section 21. Benefits of this Agreement.
Nothing in this Warrant Certificate shall be construed to
give to any Person other than the Company and the Warrantholder any legal or
equitable right, remedy or claim under this Warrant Certificate, and this
Warrant Certificate shall be for the sole and exclusive benefit of the Company
and the Warrantholder.
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<PAGE> 20
Warrant
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the date first written above.
VALUEVISION INTERNATIONAL, INC.
By: /s/ Gene McCaffery
-------------------------------------
Name: Gene McCaffery
Title: Chief Executive Officer
<PAGE> 21
Warrant
ELECTION TO EXERCISE
(To be executed upon exercise of Warrant)
To ValueVision International, Inc.:
The undersigned hereby irrevocably elects to exercise the
right represented by the within Warrant Certificate for, and to acquire
thereunder, _____ Warrant Shares, as provided for therein, and tenders herewith
payment of the aggregate $________ Exercise Price in full.
Please issue a certificate or certificates for such Warrant Shares in the name
of, and pay any cash for any Fractional Warrant Shares to (please print name,
address and social security or other identifying number)*:
Name of Warrantholder (or Affiliate):
-------------------------------------------
Address:
------------------------------------------------------------------------
------------------------------------------------------------------------
Soc. Sec. #:
---------------------------
Signature:**
-----------------------------
- ---------
* The Warrant Certificate contains restrictions on the sale and other
transfer of the Warrant evidenced by such Warrant Certificate.
** The above signature should correspond exactly with the name on the
face of this Warrant Certificate or with the name of the assignee
appearing in the assignment form below.
<PAGE> 22
Warrant
ASSIGNMENT FORM
(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Name and Address of Assignee must be Printed or Typewritten)
A Warrant to purchase Warrant Shares of the Company pursuant to the terms and
conditions therein, evidenced by the within Warrant Certificate hereby
irrevocably constituting and appointing ________________ Attorney to transfer
said Warrant on the books of the Company, with full power of substitution in
the premises.
Dated: _____________, ____
-----------------------------------------
Signature of Registered Holder*
-----------------------------------------
Signature Guaranteed: Signature of Guarantor
*The above signature must correspond exactly with the name on the face of this
Warrant Certificate.
<PAGE> 1
Exhibit 5
NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES
ISSUABLE UPON EXERCISE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAW, AND SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF
A SHAREHOLDER AGREEMENT, DATED AS OF THE DATE HEREOF, AMONG VALUEVISION
INTERNATIONAL, INC., GE CAPITAL EQUITY INVESTMENTS, INC. AND NATIONAL
BROADCASTING COMPANY, INC.
THE RESTATED ARTICLES OF INCORPORATION OF THE COMPANY (AS DEFINED BELOW), AS
AMENDED, PROVIDE THAT, EXCEPT AS OTHERWISE PROVIDED BY LAW, SHARES OF STOCK IN
THE COMPANY SHALL NOT BE TRANSFERRED TO "ALIENS" UNLESS, AFTER GIVING EFFECT TO
SUCH TRANSFER, THE AGGREGATE NUMBER OF SHARES OF STOCK OWNED BY OR FOR THE
ACCOUNT OF "ALIENS" WILL NOT EXCEED 20% OF THE NUMBER OF SHARES OF OUTSTANDING
STOCK OF THE COMPANY, AND THE AGGREGATE VOTING POWER OF SUCH SHARES WILL NOT
EXCEED 20% OF THE AGGREGATE VOTING POWER OF ALL OUTSTANDING SHARES OF VOTING
STOCK OF THE COMPANY. NOT MORE THAN 20% OF THE AGGREGATE VOTING POWER OF ALL
SHARES OUTSTANDING ENTITLED TO VOTE MAY BE VOTED BY OR FOR THE ACCOUNT OF
"ALIENS." IF, NOTWITHSTANDING SUCH RESTRICTION ON TRANSFERS TO "ALIENS," THE
AGGREGATE NUMBER OF SHARES OF STOCK OWNED BY OR FOR THE ACCOUNT OF "ALIENS"
EXCEEDS 20% OF THE NUMBER OF SHARES OF OUTSTANDING STOCK OF THE COMPANY OR IF
THE AGGREGATE VOTING POWER OF SUCH SHARES EXCEEDS 20% OF THE AGGREGATE VOTING
POWER OF ALL OUTSTANDING SHARES OF VOTING STOCK OF THE COMPANY, THE COMPANY HAS
THE RIGHT TO REDEEM SHARES OF ALL CLASSES OF CAPITAL STOCK, AT THEIR THEN FAIR
MARKET VALUE, ON A PRO RATA BASIS, OWNED BY OR FOR THE ACCOUNT OF ALL "ALIENS"
IN ORDER TO REDUCE THE NUMBER OF SHARES AND/OR PERCENTAGE OF VOTING POWER HELD
BY OR FOR THE ACCOUNT OF "ALIENS" TO THE MAXIMUM NUMBER OR PERCENTAGE ALLOWED
UNDER THE RESTATED ARTICLES OF INCORPORATION, AS AMENDED, OR AS OTHERWISE
REQUIRED BY APPLICABLE FEDERAL LAW. AS USED HEREIN, "ALIENS" MEANS ALIENS AND
THEIR REPRESENTATIVES, FOREIGN GOVERNMENTS AND THEIR REPRESENTATIVES, AND
CORPORATIONS ORGANIZED UNDER THE LAW OF A FOREIGN COUNTRY, AND THEIR
REPRESENTATIVES. THE COMPANY WILL FURNISH TO ANY SHAREHOLDER UPON REQUEST AND
WITHOUT CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS,
AND RELATIVE RIGHTS OF THE SHARES OF EACH CLASS OR SERIES AUTHORIZED TO BE
ISSUED, SO FAR AS THEY HAVE BEEN DETERMINED, AND THE AUTHORITY OF THE BOARD TO
DETERMINE THE RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT CLASSES OR SERIES.
<PAGE> 2
Initial Distributor Warrants
No. W-2 1,450,000 Warrants
COMMON STOCK PURCHASE WARRANTS
Exercisable commencing April 22, 1999
Void after Expiration Time (as defined herein)
ValueVision International, Inc., a Minnesota corporation (the
"Company"), hereby certifies that, for value received, National Broadcasting
Company, Inc., a Delaware corporation (the "Initial Holder" or "NBC"), or
registered assigns (in either case, the "Warrantholder"), is the owner of one
million four hundred and fifty thousand (1,450,000) Warrants (as defined below),
each of which entitles the Warrantholder to purchase from the Company one fully
paid, duly authorized and nonassessable share of Common Stock, par value $0.01
per share, of the Company (the "Common Stock") at any time or from time to time
subject to the terms set forth herein, commencing on April 22, 1999 (the "Issue
Date") and continuing up to the Expiration Time (as defined herein) at a per
share exercise price determined according to the terms and subject to the
conditions set forth in this certificate (the "Warrant Certificate"). The number
of shares of Common Stock issuable upon exercise of each such Warrant and the
exercise price per share of Common Stock are subject to adjustment from time to
time pursuant to the provisions of Sections 8 and 9 of this Warrant Certificate.
The Warrants evidenced by this Warrant Certificate (the "Warrants") are being
issued pursuant to a Distribution and Marketing Agreement, dated as of March 8,
1999 (as it may be amended, supplemented or otherwise modified from time to
time, the "Distribution Agreement"), by and between the Company and the Initial
Holder.
Section 1. Definitions. As used in this Warrant Certificate, the
following terms shall have the meanings set forth below:
"Additional Warrants" shall have the meaning set forth in the
Distribution Agreement.
"Affiliate" shall mean, with respect to any Person, any other Person
that directly or indirectly controls, is controlled by, or is under common
control with, such Person. As used in this definition, "control" (including
its correlative meanings, "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of power to direct or
cause the direction of management or policies (whether through ownership of
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securities or partnership or other ownership interests, by contract or
otherwise).
"Articles of Incorporation" shall mean the Articles of Incorporation
of the Company, as amended from time to time.
"Beneficially Own" shall have the meaning set forth in Rule 13d-3
under the Exchange Act, except that a Person shall be deemed to
"Beneficially Own" all securities that such Person has a right to acquire,
whether such right is exercisable immediately or only after the passage of
time (and without any additional condition), provided that a Person shall
not be deemed to "Beneficially Own" any shares of Common Stock which are
issuable upon exercise of any Additional Warrants unless and until such
Additional Warrants are actually issued and outstanding (at which time such
Person shall be deemed to Beneficially Own all shares of Common Stock which
are issuable upon exercise of such Additional Warrants, whether or not they
are vested or unvested) and, provided further, except as expressly provided
in this Agreement no Person shall be deemed to "Beneficially Own" any
securities issuable upon exercise of the Purchase Warrant unless and until
the Shareholder Approval is obtained. In the event that the Shareholder
Approval is obtained, when calculating Beneficial Ownership on any
particular date after receipt of such Shareholder Approval, the Purchase
Warrant will be deemed to represent Beneficial Ownership of the maximum
number of shares of Common Stock that could be acquired upon exercise of
the Purchase Warrant on such date.
"Board of Directors" shall mean the board of directors of the Company.
"Business Day" shall mean any day, other than a Saturday, Sunday or a
day on which commercial banks in New York, New York are authorized or
obligated by law or executive order to close.
"Change in Control" shall mean any of the following: (i) a merger,
consolidation or other business combination or transaction to which the
Company is a party if the shareholders of the Company immediately prior to
the effective date of such merger, consolidation or other business
combination or transaction, as a result of such merger, consolidation or
other business combination or transaction, do not have Beneficial Ownership
of voting securities representing 50% or more of the Total Current Voting
Power of the surviving corporation following such merger, consolidation or
other business combination or transaction; (ii) an acquisition by any
Person (other than the Restricted Parties and their Affiliates or any 13D
Group to which any of them is a member) of Beneficial Ownership of
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Initial Distributor Warrants
Voting Stock of the Company representing 25% or more of the Total Current
Voting Power of the Company, (iii) a sale of all or substantially all the
consolidated assets of the Company to any Person or Persons (other than
Restricted Parties and their Affiliates or any 13D Group to which any of
them is a member); or (iv) a liquidation or dissolution of the Company.
"Common Stock" shall have the meaning set forth in the preamble
hereto.
"Company" shall have the meaning set forth in the preamble hereto.
"Designated Entity" shall mean Home Shopping Network, Inc., QVC, Inc.,
Shop-At-Home, Inc. or Paxson Communications Corporation.
"Distribution Agreement" shall mean the Distribution and Marketing
Agreement dated as of March 8, 1999 between the Company and NBC pursuant to
which NBC has agreed to distribute certain programming of the Company, as
such agreement may be amended from time to time.
"Distribution Agreement Termination Event" shall mean a termination of
the Distribution Agreement by the Company (i) as a result of the failure of
NBC to achieve certain performance targets set forth in Sections 8(a), (b)
or (c) of the Distribution Agreement or (ii) pursuant to the Company's
right to so terminate under Section 10 of the Distribution Agreement.
"Election to Exercise" shall have the meaning set forth in Section
4.2(a) hereof.
"Equity Securities" shall mean, with respect to any Person, any and
all common stock, preferred stock, any other class of capital stock and
partnership or limited liability company interests of such Person or any
other similar interests of any Person that is not a corporation,
partnership or limited liability company.
"Exchange Act" shall mean the Securities Exchange act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exercise Price" shall have the meaning set forth in Section 8 hereof.
"Expiration Date" shall mean with respect to any Warrant represented
hereunder, the fifth anniversary of the vesting date (as set forth in
Schedule A hereto) of such Warrant.
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Initial Distributor Warrants
"Expiration Time" shall mean 5:00 P.M., New York City time, on the
Expiration Date.
"Expired" shall mean, with respect to a Warrant issued hereunder, that
such Warrant has not been exercised prior to the Expiration Date for such
Warrant.
"Fractional Warrant Share" shall mean any fraction of a whole share of
Common Stock issued, or issuable upon, exercise of the Warrants.
"GE Capital" shall mean GE Capital Equity Investments, Inc., a
Delaware corporation, together with its successors by operation of law.
"Governmental Entity" shall mean any federal, state or local
government or any court, administrative agency or commission or other
governmental authority or agency, domestic or foreign.
"Independent Expert" shall mean an investment banking firm mutually
acceptable to the Company and the Warrantholder.
"Initial Holder" shall have the meaning set forth in the preamble
hereto.
"Investment Agreement" shall mean the Investment Agreement, dated as
of March 8, 1999 (as it may be amended, supplemented or otherwise modified
from time to time), by and between the Company and GE Capital.
"Issue Date" shall have the meaning set forth in the preamble hereto.
"Market Price" shall mean, with respect to a share of Common Stock on
any day, except as set forth below in the case that the shares of Common
Stock are not publicly held or listed, the average of the "quoted prices"
of the Common Stock for 30 consecutive Trading Days commencing 45 Trading
Days before the date in question. The term "quoted prices" of the Common
Stock shall mean the last reported sale price on that day or, in case no
such reported sale takes place on such day, the average of the last
reported bid and asked prices, regular way, on that day, in either case, as
reported in the consolidated transaction reporting system with respect to
securities quoted on Nasdaq or, if the shares of Common Stock are not
quoted on Nasdaq, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal
national securities exchange on which the shares of Common Stock are listed
or admitted to trading or, if the shares of Common Stock are not quoted on
Nasdaq and not listed or admitted to
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Initial Distributor Warrants
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 on such
other nationally recognized quotation system then in use, or, if on any
such day the shares of Common Stock are not quoted on any such quotation
system, the average of the closing bid and asked prices as furnished by a
professional market maker selected by the Board of Directors making a
market in the shares of Common Stock. Notwithstanding the foregoing, if the
shares of Common Stock are not publicly held or so listed, quoted or
publicly traded, the "Market Price" means the fair market value of a share
of Common Stock, as determined in good faith by the Board of Directors;
provided, however, that if the Warrantholder shall dispute the fair market
value as determined by the Board, the Warrantholder and the Company may
retain an Independent Expert. The determination of fair market value by the
Independent Expert shall be final, binding and conclusive on the Company
and the Warrantholder. All costs and expenses of the Independent Expert
shall be borne by the Warrantholder unless the determination of fair market
value is more favorable to such Warrantholder by 5% or more, in which case,
all such costs and expenses shall be borne by the Company.
"Nasdaq" shall mean The Nasdaq Stock Market's National Market.
"NBC" shall have the meaning set forth in the preamble hereto.
"Organic Change" shall mean, with respect to any Person, any
transaction (including without limitation any recapitalization, capital
reorganization or reclassification of any class or series of Equity
Securities, any consolidation of such Person with, or merger of such Person
into, any other Person, any merger of another Person into such Person
(other than a merger which does not result in a reclassification,
conversion, exchange or cancellation of outstanding shares of capital stock
of such Person), and any sale or transfer or lease of all or substantially
all of the assets of such Person, but not including any stock split,
combination or subdivision which is the subject of Section 9.1(b)) pursuant
to which any class or series of Equity Securities of such Person is
exchanged for, or converted into the right to receive other securities,
cash or other property.
"Person" shall mean any individual, firm, corporation, company,
limited liability company, association, partnership, joint venture, trust
or unincorporated organization, or a government or any agency or political
subdivision thereof.
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Initial Distributor Warrants
"Preferred Stock" shall mean the Series A Redeemable Convertible
Preferred Stock, par value $0.01 per share, of the Company.
"Purchased Shares" shall have the meaning set forth in Section 9.1(e)
hereof.
"Purchase Warrant" shall mean the Common Stock Purchase Warrant (No.
W-1) (and any replacement(s) thereof) exercisable for up to 39.9% of the
Common Stock of the Company issued to GE Capital pursuant to the Investment
Agreement.
"Record Date" shall have the meaning set forth in Section 9.1(a)
hereof.
"Reference Date" shall have the meaning set forth in Section 9.1(d)
hereof.
"Relevant Date" shall have the meaning set forth in Section 9.1(c)
hereof.
"Restricted Parties" shall mean each of (i) NBC, its Ultimate Parent
Entity (if any), each Subsidiary of NBC and each Subsidiary of its Ultimate
Parent Entity, (ii) GE Capital, its Ultimate Parent Entity (if any), each
Subsidiary of GE Capital and each Subsidiary of its Ultimate Parent Entity
and (iii) any Affiliate of any Person that is a Restricted Party if (and
only if) such Restricted Party has the right or power (acting alone or
solely with other Restricted Parties) to either cause such Affiliate to
comply with or prevent such Affiliate from not complying with all of the
terms of this Agreement that are applicable to Restricted Parties.
"Securities Act" shall mean the U.S. Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Shareholder Agreement" shall mean the Shareholder Agreement, dated as
of the date hereof, among GE Capital, NBC and the Company.
"Shareholder Approval" shall have the meaning ascribed to such term in
the Investment Agreement.
"Subsidiary" shall mean, as to any Person, a corporation, partnership,
limited liability company, joint venture or other entity of which shares of
stock or other ownership interests having ordinary voting power (other than
stock or such other ownership interests having such power only by reason of
the happening of a contingency) to elect a majority of the board of
directors or other managers of such
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Initial Distributor Warrants
corporation, partnership or other entity are at the time owned, directly or
indirectly through one or more intermediaries (including, without
limitation, other Subsidiaries), or both, by such Person.
"13D Group" means any "group" (within the meaning of Section 13(d) of
the Exchange Act) formed for the purpose of acquiring, holding, voting or
disposing of Voting Stock.
"Total Current Voting Power" shall mean, with respect to any
corporation the total number of votes which may be cast in the election of
members of the Board of Directors of the corporation if all securities
entitled to vote in the election of such directors (excluding shares of
preferred stock that are entitled to elect directors only upon the
occurrence of customary events of default) are present and voted (it being
understood that the Preferred Stock will be included on an as converted
basis in the calculation of Total Current Voting Power of the Company).
"Trading Day" shall mean any day on which Nasdaq is open for trading,
or if the shares of Common Stock are not quoted on Nasdaq, any day on which
the principal national securities exchange or national quotation system on
which the shares of Common Stock are listed, admitted to trading or quoted
is open for trading, or if the shares of Common Stock are not so listed,
admitted to trading or quoted, any Business Day.
"Ultimate Parent Entity" shall mean, with respect to any Person (the
"Subject Person"), the Person (if any) that (i) owns, directly or
indirectly through one or more intermediaries, or both, shares of stock or
other ownership interests having ordinary voting power (other than stock or
such other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors
or other managers of the Subject Person and (ii) is not itself a Subsidiary
of any other Person or is a natural person.
"Voting Stock" shall mean shares of the Common Stock and Preferred
Stock and any other securities of the Company having the ordinary power to
vote in the election of members of the Board of Directors of the Company.
"Warrant" shall have the meaning set forth in the preamble hereto.
"Warrant Cancellation Event" shall mean that on or prior to August 31,
1999, the Closing (as defined in the Investment Agreement) under the
Investment Agreement shall not have occurred or that Shareholder Approval
shall not
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Initial Distributor Warrants
have been obtained, as set forth in Section 9(a) or 9(b) of the
Distribution Agreement.
"Warrant Certificate" shall have the meaning set forth in the preamble
hereto.
"Warrant Register" shall have meaning set forth in Section 2.2 hereof.
"Warrant Shares" shall mean the shares of Common Stock issued, or
issuable upon, exercise of the Warrants.
"Warrantholder" shall have the meaning set forth in the preamble
hereto.
Section 2. Transferability.
2.1 Registration. The Warrants shall be issued only in registered
form. The Company agrees to maintain, at its office or agency, books for the
registration and transfer of the Warrants.
2.2 Transfer. Subject to the terms and conditions of the Shareholder
Agreement, the Warrants evidenced by this Warrant Certificate may be sold or
otherwise transferred at any time (except as such sale or transfer may be
restricted pursuant to the regulations of the Federal Communications Commission,
the Securities Act or any applicable state securities laws) with the prior
written consent of the Company, which consent shall not be unreasonably
withheld; provided, however, that the consent of the Company shall not be deemed
to have been unreasonably withheld if the Company does not approve a transfer of
such Warrants to any Designated Entity. Any such sale or transfer shall be
effected on the books of the Company (the "Warrant Register") maintained at its
principal executive offices upon surrender of this Warrant Certificate for
registration of transfer duly endorsed by the Warrantholder or by its duly
authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. Upon any registration of
transfer, the Company shall execute and deliver a new Warrant Certificate or
Certificates in appropriate denominations to the Person or Persons entitled
thereto.
Section 3. Exchange of Warrant Certificate.
Any Warrant Certificate may be exchanged for another certificate or
certificates of like tenor entitling the Warrantholder to purchase a like
aggregate number of Warrant Shares as the certificate or certificates
surrendered then entitles such Warrantholder to purchase. Any Warrantholder
desiring to exchange a Warrant certificate shall make such
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Initial Distributor Warrants
request in writing delivered to the Company, and shall surrender, properly
endorsed, the certificate evidencing the Warrant to be so exchanged. Thereupon,
the Company shall execute and deliver to the Person entitled thereto a new
Warrant Certificate or Certificates as so requested.
Section 4. Term of Warrants; Exercise of Warrants.
4.1 Vesting and Duration of Warrants. Subject to the terms and
conditions set forth in this Warrant Certificate, the Warrantholder may exercise
the Warrants evidenced hereby, in whole or in part, at any time and from time to
time after the Issue Date and before the Expiration Time of such Warrants;
provided, however, that the number of Warrants which the Warrantholder will be
entitled to exercise on any date will be equal to (a) the sum of the Warrants
vested on or prior to such date pursuant to the vesting schedule attached as
Schedule A hereto minus (b) the sum of (i) the total number of Warrants
previously exercised hereunder and (ii) the total number of Warrants which have
Expired; provided, further, that (X) upon the occurrence of a Distribution
Agreement Termination Event, notwithstanding the vesting schedule set forth in
Schedule A hereto, any unvested Warrants hereunder as of such termination date
shall cease to vest, but any Warrants which have vested prior to such
termination date shall continue to be exercisable, subject to the provisions
hereunder, (Y) upon a Change in Control, notwithstanding the vesting schedule
set forth in Schedule A, hereto, any unvested Warrants hereunder shall
immediately vest and become fully exercisable, subject to the provisions
hereunder and (Z) upon the occurrence of a Warrant Cancellation Event,
notwithstanding the other provisions of this Warrant Certificate, all of the
unexercised Warrants hereunder, whether or not vested, shall terminate and
become void, and all rights hereunder with respect to such Warrants shall
thereupon cease. Any Warrant not exercised by the Expiration Time applicable to
such Warrant shall become void, and all rights hereunder with respect to such
Warrant shall thereupon cease.
4.2 Exercise of Warrant.
(a) On the terms and subject to the conditions set forth in this
Warrant Certificate, the Warrantholder may exercise the Warrants evidenced
hereby, in whole or in part, by presentation and surrender to the Company of
this Warrant Certificate together with the attached Election to Exercise (the
"Election to Exercise") duly filled in and signed, and accompanied by payment to
the Company of the Exercise Price for the number of Warrant Shares specified in
such Election to Exercise. Payment of the aggregate Exercise Price (including
payment made pursuant to a purchase under Section 9.3(a) hereof) shall be made
(i) in cash in an amount equal to the aggregate Exercise Price; (ii) by
certified or official bank check in an
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Initial Distributor Warrants
amount equal to the aggregate Exercise Price or (iii) by any combination of the
foregoing. In lieu of the above, the Warrantholder may deliver an Election to
Exercise that provides for a recapitalization exchange of Warrants for Warrant
Shares having an aggregate value equal to the excess of (x) the aggregate value
of the Warrant Shares to which the Warrants so exercised relate (based on the
determination of the Market Price of the Common Stock as of such date) over (y)
the aggregate Exercise Price of such Warrants.
(b) On the terms and subject to the conditions set forth in this
Warrant Certificate, upon such presentation of a duly executed Election to
Exercise and surrender of this Warrant Certificate and payment of such aggregate
Exercise Price as set forth in paragraph (a) hereof, the Company shall promptly
issue and cause to be delivered to the Warrantholder, or, subject to Section 2
hereunder, to such Persons as the Warrantholder may designate in writing, a
certificate or certificates (in such name or names as the Warrantholder may
designate in writing) for the specified number of duly authorized, fully paid
and non-assessable Warrant Shares issuable upon exercise, and shall deliver to
the Warrantholder cash, as provided in Section 10 hereof, with respect to any
Fractional Warrant Shares otherwise issuable upon such surrender. In the event
that the Warrants evidenced by this Warrant Certificate are exercised in part
prior to the Expiration Time applicable to such Warrants, the Company shall
issue and cause to be delivered to the Warrantholder, or, subject to Section 2
hereunder, to such Persons as the Warrantholder may designate in writing, a
certificate or certificates (in such name or names as the Warrantholder may
designate in writing) evidencing any remaining unexercised and un-Expired
Warrants.
(c) Each Person in whose name any certificate for Warrant Shares is
issued shall for all purposes be deemed to have become the holder of record of
the Warrant Shares represented thereby on the first date on which both the
Warrant Certificate evidencing the respective Warrants was surrendered, along
with a duly executed Election to Exercise, and payment of the Exercise Price and
any applicable taxes was made, irrespective of date of issue or delivery of such
certificate.
4.3 Conditions to Exercise. Each exercise of the Warrants shall be
subject to the following conditions:
(a) Such exercise shall be consistent with the terms of Section 4.1
hereof; and
(b) The purchase of the Warrant Shares issuable upon such exercise
shall not be prohibited under applicable law.
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Initial Distributor Warrants
Section 5. Payment of Taxes.
The Company shall pay any and all documentary, stamp or similar issue
or transfer taxes and other governmental charges that may be imposed under the
laws of the United States or any political subdivision or taxing authority
thereof or therein in respect of any issue or delivery of Warrant Shares or of
other securities or property deliverable upon exercise of the Warrants evidenced
by this Warrant Certificate or certificates representing such shares or
securities (other than income or withholding taxes imposed on the
Warrantholder); provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable with respect to any transfer involving the
issue of any Warrant Certificate or any certificates for Warrant Shares in a
name other than that of the registered holders thereof, and the Company shall
not be required to issue or deliver such Warrant Certificate or certificates for
Warrant Shares unless and until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
Section 6. Mutilated or Missing Warrant.
If any Warrant Certificate is lost, stolen, mutilated or destroyed,
the Company shall issue in exchange and substitution for and upon cancellation
of the mutilated Warrant Certificate, or in lieu of and substitution for the
Warrant Certificate lost, stolen or destroyed, upon receipt of a proper
affidavit or other evidence reasonably satisfactory to the Company (and
surrender of any mutilated Warrant Certificate) and indemnity in form and amount
reasonably satisfactory to the Company in each instance protecting the Company,
a new Warrant Certificate of like tenor and representing an equivalent number of
Warrants as the Warrant Certificate so lost, stolen, mutilated or destroyed. Any
such new Warrant Certificate shall constitute an original contractual obligation
of the Company, whether or not the allegedly lost, stolen, mutilated or
destroyed Warrant Certificate shall be at any time enforceable by anyone. An
applicant for such substitute Warrant Certificate shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Company may prescribe. All Warrant Certificates shall be held and owned upon the
express condition that the foregoing provisions are exclusive with respect to
the replacement of lost, stolen, mutilated or destroyed Warrant Certificates,
and shall preclude any and all other rights or remedies notwithstanding any law
or statute existing or hereafter enacted to the contrary with respect to the
replacement of negotiable instruments or other securities without their
surrender.
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Initial Distributor Warrants
Section 7. Reservation of Shares.
The Company hereby agrees that, at all times until all of the Warrants
issued hereunder (whether vested or unvested) have been exercised, Expired or
canceled, there shall be reserved for issuance and delivery upon exercise of
this Warrant, free from preemptive rights, the number of shares of authorized
but unissued shares of Common Stock as may be required at such time (adjusted
from time to time for additional vesting of Warrants as well as for cancellation
of exercised or Expired Warrants) for issuance or delivery upon exercise of the
Warrants evidenced by this Warrant Certificate. The Company further agrees that
it will not, by amendment of its Articles of Incorporation or through
reorganization, consolidation, merger, dissolution or sale or assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by the Company. Without limiting the generality of the foregoing, the
Company shall from time to time take all such action that may be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock at the Exercise Price as so adjusted.
Section 8. Exercise Price.
The price per share (the "Exercise Price") at which Warrant Shares
shall be purchasable upon the exercise of the Warrants evidenced by this Warrant
Certificate shall be $8.288, subject to adjustment pursuant to Section 9 hereof.
Section 9. Adjustment of Exercise Price and Number of Shares.
The number and kind of securities purchasable upon the exercise of the
Warrants evidenced by this Warrant Certificate and the Exercise Price thereof
shall be subject to adjustment from time to time after the date hereof upon the
happening of certain events, as follows:
9.1 Adjustments to Exercise Price. The Exercise Price shall be subject
to adjustment as follows:
(a) Stock Dividends. In case the Company shall, after the Issue Date,
pay a dividend or make a distribution on its Common Stock or on any other
class or series of capital stock of the Company which dividend or
distribution includes or is convertible (without the payment of any
consideration other than surrender of such convertible security) into
Common Stock, the Exercise Price in effect at the opening of business on
the day following the date fixed for determination of the holders of Common
Stock or capital
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Initial Distributor Warrants
stock entitled to such payment or distribution (the "Record Date") shall be
reduced by multiplying such Exercise Price by a fraction of which (A) the
numerator shall be the number of shares of Common Stock outstanding at the
close of business on the Record Date and (B) the denominator shall be the
sum of such number of shares and the total number of shares constituting or
included in such dividend or other distribution (or in the case of a
dividend consisting of securities convertible into Common Stock, the number
of shares of Common Stock into which such securities are convertible), such
reduction to become effective immediately after the opening of business on
the day following the Record Date; provided, however, that if any such
dividend or distribution is rescinded and not paid, then the Exercise Price
shall, as of the date when it is determined that such dividend or
distribution price will be rescinded, revert back to the Exercise Price in
effect prior to the adjustment made pursuant to this paragraph.
(b) Stock Splits and Reverse Splits. In case the Common Stock shall be
subdivided into a greater number of shares of Common Stock or combined into
a smaller number of shares of Common Stock, the Exercise Price in effect at
the opening of business on the day following the day upon which such
subdivision or combination becomes effective shall be adjusted so that the
holder of any Warrants thereafter surrendered for purchase of shares of
Common Stock shall be entitled to receive the number of shares of Common
Stock which such holder would have owned or been entitled to receive after
the happening of such events had such Warrants been surrendered for
exercise immediately prior to such event. Such adjustment shall become
effective at the close of business on the day upon which such subdivision
or combination becomes effective.
(c) Issuances Below Market. In case the Company shall issue or sell
(a) Common Stock, (b) rights, warrants or options entitling the holders
thereof to subscribe for or purchase shares of Common Stock or (c) any
security convertible into Common Stock, in each case at a price, or having
an exercise or conversion price, per share less than the then-current
Market Price per share of Common Stock on (x) the date of such issuance or
sale or (y) in the case of a dividend or distribution of such rights,
warrants, options or convertible securities to the holders of Common Stock,
the date fixed for determination of the holders of such Common Stock
entitled to such dividend or distribution (the date specified in clause (x)
or (y) being the "Relevant Date") (excluding any issuance for which an
appropriate and full adjustment has been made pursuant to Section 9.1(a)),
the Exercise Price shall be reduced by multiplying the Exercise Price by a
fraction of which (A) the numerator shall be the number of shares of Common
Stock outstanding at
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Initial Distributor Warrants
the open of business on the Relevant Date plus the number of shares of
Common Stock which the aggregate consideration received or receivable (I)
for the total number of shares of Common Stock, rights, warrants or options
or convertible securities so issued or sold, and (II) upon the exercise or
conversion of all such rights, warrants, options or securities, would
purchase at the then-current Market Price per share of Common Stock and (B)
the denominator shall be the number of shares of Common Stock outstanding
at the close of business on the Relevant Date plus (without duplication)
the number of shares of Common Stock subject to all such rights, warrants,
options and convertible securities, such reduction of the Exercise Price to
be effective at the opening of business on the day following the Relevant
Date; provided, however, that if any such dividend or distribution is
rescinded and not paid, then the Exercise Price shall, as of the date when
it is determined that such dividend or distribution will be rescinded,
revert back to the Exercise Price in effect prior to the adjustment made
pursuant to this paragraph. The issuance of any shares of Common Stock or
other rights, warrants, options or convertible securities pursuant to (a)
any restricted stock or stock option plan or program of the Company
involving the grant of options or rights solely to officers, directors,
employees and/or consultants of the Company or its Subsidiaries at below
the then-current Market Price per share of Common Stock (provided, that any
such options or rights were initially granted with an exercise or
conversion price of not less than 85% of the then-current Market Price per
share of Common Stock), (b) any option, warrant, right, or convertible
security outstanding as of the date hereof,(c) the terms of a firmly
committed bona fide underwritten public offering, or (d) any merger,
acquisition, consolidation, or similar transaction, shall not be deemed to
constitute an issuance or sale to which this Section 9.1(c) applies. Upon
the expiration unexercised of any rights, warrants, options or rights to
convert any convertible securities for which an adjustment has been made
pursuant to this Section 9.1(c), the adjustments shall forthwith be
reversed to effect such rate of conversion as would have been in effect at
the time of such expiration or termination had such rights, warrants,
options or rights to convertible securities, to the extent outstanding
immediately prior to such expiration or termination, never been issued.
(d) Special Dividends. Subject to the last sentence of this paragraph
(d), in case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock evidences of its indebtedness, shares of any
class or series of capital stock, cash or assets (including securities, but
excluding any shares of Common Stock, rights, warrants, options or
convertible securities for
15
<PAGE> 16
Initial Distributor Warrants
which an appropriate and full adjustment has been made pursuant to
paragraph (a) or (c) above), the Exercise Price in effect on the day
immediately preceding the date fixed for the payment of such distribution
(the date fixed for payment being referred to as the "Reference Date")
shall be reduced by multiplying such Exercise Price by a fraction of which
the numerator shall be the current Market Price per share of the Common
Stock on the Reference Date less the fair market value (as determined in
good faith by the Board of Directors, whose determination shall be mailed
to the holders of the Warrants) on the Reference Date of the portion of the
evidences of indebtedness, shares of capital stock, cash and assets so
distributed applicable to one share of Common Stock, and the denominator
shall be such current Market Price per share of the Common Stock, such
reduction to become effective immediately prior to the opening of business
on the day following the Reference Date; provided, however, that if such
dividend or distribution is rescinded and not paid, then the Exercise Price
shall, as of the date when it is determined that such dividend or
distribution will be rescinded, revert back to the Exercise Price in effect
prior to the adjustment made pursuant to this paragraph. If the Board of
Directors determines the fair market value of any distribution for purposes
of this paragraph (d) by reference to the actual or when issued trading
market for any securities comprising such distribution, it must in doing so
consider, to the extent possible, the prices in such market over the same
period used in computing the current Market Price per share of Common Stock
pursuant to this Section 9.1. Notwithstanding the foregoing, if the holders
of a majority of the outstanding unexercised and un-Expired Warrants
(whether or not vested) shall dispute the fair market determination of the
Board of Directors, an Independent Expert shall be selected to determine
the fair market value of the Common Stock as of the Reference Date, and
such Independent Expert's determination shall be final, binding and
conclusive. All costs and expenses of such Independent Expert shall be
borne by the holders of the then outstanding unexercised and un-Expired
Warrants (whether or not vested) unless the determination of fair market
value is more favorable to such holders by 5% or more, in which case, all
such costs and expenses shall be borne by the Company. For purposes of this
paragraph (d), any dividend or distribution that also includes shares of
Common Stock or rights, warrants or options to subscribe for or purchase
shares of Common Stock shall be deemed to be (1) a dividend or distribution
of the evidences of indebtedness, cash, assets or shares of capital stock
other than such shares of Common Stock or rights, warrants, options or
convertible securities (making any Exercise Price reduction required by
this subparagraph (d)) immediately followed by (2) a dividend or
distribution of such shares of Common Stock or such rights,
16
<PAGE> 17
Initial Distributor Warrants
warrants, options or convertible securities (making any further Exercise
Price reduction required by subparagraph (a) or (c) of this Section 9.1),
except (A) the Reference Date of such dividend or distribution as defined
in this subparagraph (d) shall be substituted as "the date fixed for the
determination of shareholders entitled to receive such dividend or other
distribution" and the "Relevant Date" within the meaning of subparagraphs
(a) and (c) of this Section 9.1 and (B) any shares of Common Stock included
in such dividend or distribution shall not be deemed "outstanding at the
close of business on the date fixed for such determination" within the
meaning of subparagraph (a) of this Section 9.1).
(e) Minimum Adjustment Requirement. No adjustment shall be required
unless such adjustment would result in an increase or decrease of at least
1% in the Exercise Price then subject to adjustment; provided, however,
that any adjustments that are not made by reason of this Section 9.1(e)
shall be carried forward and taken into account in any subsequent
adjustment. In case the Company shall at any time issue shares of Common
Stock by way of dividend on any stock of the Company or subdivide or
combine the outstanding shares of Common Stock, said 1% specified in the
preceding sentence (as theretofore increased or decreased, if said amount
shall have been adjusted in accordance with the provisions of this Section
9.1(e)) shall forthwith be proportionately increased in the case of such a
combination or decreased in the case of such a subdivision or stock
dividend so as appropriately to reflect the same. No adjustment to the
Exercise Price shall be required if the holders of the outstanding
unexercised and unissued Warrants (whether or not vested) receive the
dividend or distribution giving rise to such adjustment in respect of each
such Warrant.
(f) Calculations. All calculations under this Section 9.1 shall be
made to the nearest $0.01.
(g) Other Reductions in Exercise Price. The Company from time to time
may reduce the Exercise Price by any amount for any period of time if the
period is at least 20 days, the reduction is irrevocable during the period,
subject to any conditions that the Board of Directors may deem relevant,
and the Board of Directors of the Company shall have made a determination
that such reduction would be in the best interest of the Company, which
determination shall be conclusive. Whenever the Exercise Price is reduced
pursuant to the preceding sentence, the Company shall mail to the
Warrantholder a notice of the reduction at least fifteen days prior to the
date the reduced Exercise Price takes effect, and such notice shall state
the reduced Exercise Price and the period it will be in effect. If the
17
<PAGE> 18
Initial Distributor Warrants
Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend or other distribution, and
shall thereafter and before the distribution to shareholders thereof
legally abandon its plan to pay or deliver such dividend or distribution,
then thereafter no adjustment in the number of shares of Common Stock
issuable upon exercise granted by this Section 9.1 or in the Exercise Price
then in effect shall be required by reason of the taking of such record.
(i) Exercise between Record and Payment Date. Anything in this Section
9.1 to the contrary notwithstanding, in the event that a record date is
established for a dividend or distribution that gives rise to an adjustment
to the Exercise Price pursuant to this Section 9.1, if any Warrant is
exercised to purchase shares of Common Stock between such record date and
the date such dividend or distribution is paid then (x) the number of
shares of Common Stock issued at the time of such exercise will be
determined by reference to the Exercise Price as in effect without taking
into account the adjustment resulting from such dividend or distribution
and (y) on the date that such dividend or distribution is actually paid
there shall be issued in respect of such exercise such number of additional
shares of Common Stock as is necessary to reflect the Exercise Price in
effect after taking into account the adjustment resulting from the dividend
or distribution.
(j) Certificate. Whenever an adjustment in the Exercise Price is made
as required or permitted by the provisions of this Section 9.1, the Company
shall promptly file a certificate of its chief financial officer setting
forth (A) the adjusted Exercise Price as provided in this Section 9.1 and a
brief statement of the facts requiring such adjustment and the computation
thereof and (B) the number of shares of Common Stock (or portions thereof)
purchasable upon exercise of a Warrant after such adjustment in the
Exercise Price in accordance with Section 9.2 hereof and the record date
therefor, and promptly after such filing shall mail or cause to be mailed a
notice of such adjustment to each Warrantholder at his or her last address
as the same appears on the Warrant Register. Such certificate, in the
absence of manifest error, shall be conclusive and final evidence of the
correctness of such adjustment. The Company shall be entitled to rely upon
such certificate, and shall be under no duty or responsibility with respect
to any such certificate except to exhibit the same to any Warrantholder
desiring inspection thereof.
(k) Notice. In case:
(i) the Company shall declare any dividend or any distribution of
any kind or character (whether in cash,
18
<PAGE> 19
Initial Distributor Warrants
securities or other property) on or in respect of shares of Common Stock or
to the shareholders of the Company (in their capacity as such), excluding a
dividend payable in shares of Common Stock or any regular periodic cash
dividend paid out of current or retained earnings (as such terms are used
in generally accepted accounting principles); or
(ii) the Company shall authorize the granting to the holders of
shares of Common Stock of rights to subscribe for or purchase any shares of
capital stock or of any other right; or
(iii) of any reclassification of shares of Common Stock (other
than a subdivision or combination of outstanding shares of Common Stock or
a change in par value, or from par value to no par value, or from no par
value to par value), or of any consolidation or merger to which the Company
is a party and for which approval of any shareholders of the Company is
required, or of the sale or transfer of all or substantially all of the
assets of the Company; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be mailed to the Warrantholder, at their
last addresses as they shall appear upon the Warrant Register, at least 10
days prior to the applicable record date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution or rights or, if a record is not to be taken,
the date as of which the holders of shares of Common Stock of record to be
entitled to such dividend, distribution or rights are to be determined or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up is expected to become
effective, and, if applicable, the date as of which it is expected that
holders of shares of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property (including
cash) deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up. 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.
(m) Section 305. Anything in this Section 9.1 to the contrary
notwithstanding, the Company shall be entitled, but not required, to make
such reductions in the Exercise Price, in addition to those required by
this Section 9.1, as it in its discretion shall determine to be advisable,
including, without limitation, in order that any dividend in or
19
<PAGE> 20
Initial Distributor Warrants
distribution of shares of Common Stock or shares of capital stock of any
class other than Common Stock, subdivision, reclassification or combination
of shares of Common Stock, issuance of rights or warrants, or any other
transaction having a similar effect, shall not be treated as a distribution
of property by the Company to its shareholders under Section 305 of the
Internal Revenue Code of 1986, as amended, or any successor provision and
shall not be taxable to them.
9.2 Adjustments to Number of Warrant Shares.
Upon each adjustment of the Exercise Price pursuant to Section 9.1
hereof, the number of Warrant Shares purchasable upon exercise of a Warrant
outstanding prior to the effectiveness of such adjustment shall be adjusted to
the number, calculated to the nearest one-hundredth of a share, obtained by (x)
multiplying the number of Warrant Shares purchasable immediately prior to such
adjustment upon the exercise of a Warrant by the Exercise Price in effect prior
to such adjustment and (y) dividing the product so obtained by the Exercise
Price in effect after such adjustment of the Exercise Price.
9.3 Organic Change.
(a) Company Survives. Upon the consummation of an Organic Change
(other than a transaction in which the Company is not the surviving entity),
lawful provision shall be made as part of the terms of such transaction whereby
the terms of the Warrant Certificates shall be modified, without payment of any
additional consideration therefor, so as to provide that upon exercise of
Warrants following the consummation of such Organic Change, the Warrantholder
shall have the right to purchase for the Exercise Price the kind and amount of
securities, cash and other property receivable upon such Organic Change by a
holder of the number of Warrant Shares into which such Warrants might have been
exercised immediately prior to such Organic Change. Lawful provision also shall
be made as part of the terms of the Organic Change so that all other terms of
the Warrant Certificates shall remain in full force and effect following such an
Organic Change. The provisions of this Section 9.3(a) shall similarly apply to
successive Organic Changes.
(b) Company Does Not Survive. The Company shall not enter into an
Organic Change that is a transaction in which the Company is not the surviving
entity unless lawful provision shall be made as part of the terms of such
transaction whereby the surviving entity shall issue new securities to each
Warrantholder, without payment of any additional consideration therefor, with
terms that provide that upon the exercise of the Warrants, the Warrantholder
shall have the right to purchase the
20
<PAGE> 21
Initial Distributor Warrants
kind and amount of securities, cash and other property receivable upon such
Organic Change by a holder of the number of Warrant Shares into which such
Warrants might have been exercised immediately prior to such Organic Change.
9.4 Statement on Warrants. The form of Warrant Certificate need not be
changed because of any adjustment made pursuant to Section 8, Section 9.1 or
Section 9.2 hereof, and Warrants issued after such adjustment may state the same
Exercise Price and the same number of Warrant Shares as are stated in this
Warrant Certificate.
Section 10. Fractional Interests.
The Company shall not be required to issue Fractional Warrant Shares
on the exercise of the Warrants evidenced by this Warrant Certificate. If
Fractional Warrant Shares totaling more than one Warrant Share in the aggregate
is presented for exercise at the same time by the Warrantholder, the number of
full Warrant Shares which shall be issuable upon exercise thereof shall be
computed on the basis of the aggregate number of Warrant Shares so purchasable
upon the exercise of the Warrants so presented. If any Fractional Warrant Share
would but for the provisions of this Section 10 be issuable on the exercise of
this Warrant (or specified portions thereof), the Company shall pay an amount in
cash equal to the fraction of a Warrant Share represented by such Fractional
Warrant Share multiplied by the Market Price on the day of such exercise.
Section 11. No Rights as Shareholder.
Nothing in this Warrant Certificate shall be construed as conferring
upon the Warrantholder or its transferees any rights as a shareholder of the
Company, including the right to vote, receive dividends, consent or receive
notices as a shareholder with respect to any meeting of shareholders for the
election of directors of the Company or any other matter.
Section 12. Cooperation; Validity of Warrant.
The Company shall use its reasonable best efforts to obtain all such
authorizations, exemptions or consents from any Governmental Entity having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant. In addition, upon the request of Warrantholder,
the Company will at any time during the period this Warrant is outstanding
acknowledge in writing, in form satisfactory to Warrantholder, the continuing
validity of this Warrant and the obligations of the Company hereunder.
21
<PAGE> 22
Initial Distributor Warrants
Section 13. Listing on Nasdaq or Securities Exchange.
The Company shall use its reasonable best efforts to list any shares
of Common Stock issuable upon exercise of the Warrants evidenced by this Warrant
Certificate on Nasdaq or on such other national securities exchange on which
shares of Common Stock are then listed. The Company will at its expense cause
all shares of Common Stock issued upon the exercise of the Warrants evidenced by
this Warrant Certificate to be listed at the time of such issuance on Nasdaq
and/or such other securities exchange shares of Common Stock are then listed on
and shall maintain such listing.
Section 14. Covenant Regarding Consent.
The Company hereby covenants to use its reasonable best efforts upon
the request of the Warrantholder to seek any waivers or consents, or to take any
other action required, to effectuate the exercise of this Warrant by such
Warrantholder.
Section 15. Limitation on Liability.
No provision hereof, in the absence of action by the Warrantholder to
receive shares of Common Stock, and no enumeration herein of the rights or
privileges of the Warrantholder, shall give rise to any liability of the
Warrantholder for any value subsequently assigned to the Common Stock or as a
shareholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
Section 16. Nonwaiver and Expenses.
No course of dealing or any delay or failure to exercise any
right hereunder on the part of the Warrantholder or the Company shall operate as
a waiver of such right or otherwise prejudice the Warrantholder's, or the
Company's, as the case may be, rights, powers or remedies.
Section 17. Amendment.
This Warrant and all other Warrants issued hereunder may be modified
or amended or the provisions hereof waived with the written consent of the
Company and holders of Warrants exercisable for in excess of 50% of the
aggregate number of shares of Common Stock then receivable upon exercise of all
Warrants whether or not then exercisable; provided that no such Warrant may be
modified or amended in a manner which is materially adverse to the Initial
Holder or any of its successors
22
<PAGE> 23
Initial Distributor Warrants
or assigns, so long as such Person holds any Warrants or Warrant Shares, without
the prior written consent of such Person.
Section 18. Successors.
All the covenants and provisions of this Warrant Certificate by or for
the benefit of the Company or the Warrantholder shall bind and inure to the
benefit of their respective successors and permitted assigns hereunder.
Section 19. Governing Law; Choice of Forum, Etc.
The validity, construction and performance of this Warrant Certificate
shall be governed by and interpreted in accordance with, the laws of New York.
The parties hereto agree that the appropriate forum for any disputes arising out
of this Warrant Certificate solely between or among any or all of the Company,
on the one hand, and the Initial Holder and/or any Person who has become a
Warrantholder, on the other, shall be any state or U.S. federal court sitting
within the County of New York, New York or County of Hennepin, Minnesota, and
the parties hereto irrevocably consent to the jurisdiction of such courts, and
agree to comply with all requirements necessary to give such courts
jurisdiction. The parties hereto further agree that the parties will not bring
suit with respect to any disputes, except as expressly set forth below, arising
out of this Warrant Certificate for the execution or enforcement of judgment, in
any jurisdiction other than the above specified courts. Each of the parties
hereto irrevocably consents to the service of process in any action or
proceeding hereunder by the mailing of copies thereof by registered or certified
airmail, postage prepaid, if to (i) the Company, at ValueVision International,
Inc., 6740 Shady Oak Road, Eden Prairie, MN 55344-3433, Attention: General
Counsel, Fax: (612) 947-0188, or at such other address specified by the Company
in writing to the other parties, with a copy to Latham & Watkins, 633 West Fifth
Street, Suite 4000, Los Angeles, CA 90071, Attention: Michael W. Sturrock, Fax:
(213) 891-8763 and (ii) any Warrantholder, at the address of such Warrantholder
specified in the Warrant Register. The foregoing shall not limit the rights of
any party hereto to serve process in an other manner permitted by the law or to
obtain execution of judgment in any other jurisdiction. The parties further
agree, to the extent permitted by law, that final and unappealable judgment
against any of them in any action or proceeding contemplated above shall be
conclusive and may be enforced in any other jurisdiction within or outside the
United States by suit on the judgment, a certified or exemplified copy of which
shall be conclusive evidence of the fact and the amount of indebtedness. The
parties agree to waive any and all rights that they may have to a jury trial
with respect to disputes arising out of this Agreement.
23
<PAGE> 24
Initial Distributor Warrants
Section 20. Enforcement.
The parties agree that irreparable damage would occur in the event
that any of the provisions of this Warrant were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Warrant and to enforce specifically the terms and provisions of
this Warrant.
Section 21. Benefits of this Agreement.
Nothing in this Warrant Certificate shall be construed to give to any
Person other than the Company and the Warrantholder any legal or equitable
right, remedy or claim under this Warrant Certificate, and this Warrant
Certificate shall be for the sole and exclusive benefit of the Company and the
Warrantholder.
24
<PAGE> 25
Initial Distributor Warrants
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the date first written above.
VALUEVISION INTERNATIONAL, INC.
By: /s/ Gene McCaffery
------------------------------
Name: Gene McCaffery
Title: Chief Executive Officer
<PAGE> 26
ELECTION TO EXERCISE
(To be executed upon exercise of Warrants)
To ValueVision International, Inc.:
The undersigned hereby irrevocably elects to exercise the right
represented by the within Warrant Certificate for, and to acquire thereunder,
_____ Warrant Shares, as provided for therein, and tenders herewith [payment of]
[pursuant to a recapitalization exchange, of securities with a value equal to]
the $________ Exercise Price in full in the form of [COMPLETE WHERE APPLICABLE]:
[ ] cash or a certified or official bank check in the amount
of $_______ ; and/or
[ ] exchange of _____ Warrants for ____ Warrant Shares
(such Warrant Shares have an aggregate value equal to
the excess of (x) the aggregate value of the ____
Warrant Shares to which the Warrants hereby exercised
relate (based on the determination of the Market
Price pursuant to the Warrant Certificate) over (y)
the aggregate Exercise Price of the ___ Warrants
exercised hereby);
For a total Exercise Price of $_________.
If the value of the shares of the Company securities exchanged
herewith exceeds the value of the Exercise Price applied to such delivery, then
the Company shall reissue certificates representing such securities in the
amounts necessary to preserve the value of such securities not applied to the
exercise of the Warrants pursuant to this Election to Exercise.
26
<PAGE> 27
Initial Distributor Warrants
Please issue a certificate or certificates for such Warrant Shares in the name
of, and pay any cash for any Fractional Warrant Shares to (please print name,
address and social security or other identifying number)*:
Name:
-------------------------------------------------------------------
Address:
-------------------------------------------------------------------
-------------------------------------------------------------------
Soc. Sec. #:
--------------------------
AND, if such number of Warrant Shares shall not be all the shares purchasable
under the within Warrant Certificate, a new Warrant Certificate is to be issued
in the name of the undersigned for the balance remaining of the Warrant Shares
purchasable thereunder rounded up to the next higher whole number of Warrant
Shares.
Signature:**
-------------------------------
- ---------
* The Warrant Certificate contains restrictions on the sale and other
transfer of the Warrants evidenced by such Warrant Certificate.
** The above signature will correspond exactly with the name on the face
of this Warrant Certificate or with the name of the assignee appearing
in the assignment form below.
27
<PAGE> 28
ASSIGNMENT FORM
(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Name and Address of Assignee must be Printed or Typewritten)
Warrants to purchase ____ Warrant Shares of the Company, evidenced by the within
Warrant Certificate hereby irrevocably constituting and appointing
________________ Attorney to transfer said Warrants on the books of the Company,
with full power of substitution in the premises.
Dated: ,
-------------- ----
-------------------------------------
Signature of Registered Holder*
-------------------------------------
Signature Guaranteed: Signature of Guarantor
*The above signature must correspond exactly with the name on the face of this
Warrant Certificate.
28
<PAGE> 29
Schedule A
SCHEDULE OF VESTING
<TABLE>
<CAPTION>
================================================================================
Warrants Vesting
Date on Date
- -------------------------------------- -----------------------------------
<S> <C>
April 22, 1999 200,000
April 22, 2000 125,000
April 22, 2001 125,000
April 22, 2002 125,000
April 22, 2003 125,000
April 22, 2004 125,000
April 22, 2005 125,000
April 22, 2006 125,000
April 22, 2007 125,000
April 22, 2008 125,000
April 22, 2009 125,000
================================================================================
</TABLE>
29
<PAGE> 1
Exhibit 6
NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES ISSUABLE UPON EXERCISE OF THE SECURITIES REPRESENTED HEREBY
HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT
TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE TERMS OF A SHAREHOLDER AGREEMENT, DATED AS OF APRIL 14,
1999, AMONG VALUEVISION INTERNATIONAL, INC., GE CAPITAL EQUITY
INVESTMENTS, INC. AND NATIONAL BROADCASTING COMPANY, INC.
THE RESTATED ARTICLES OF INCORPORATION OF THE COMPANY (AS DEFINED
BELOW), AS AMENDED, PROVIDE THAT, EXCEPT AS OTHERWISE PROVIDED BY LAW,
SHARES OF STOCK IN THE COMPANY SHALL NOT BE TRANSFERRED TO "ALIENS"
UNLESS, AFTER GIVING EFFECT TO SUCH TRANSFER, THE AGGREGATE NUMBER OF
SHARES OF STOCK OWNED BY OR FOR THE ACCOUNT OF "ALIENS" WILL NOT EXCEED
20% OF THE NUMBER OF SHARES OF OUTSTANDING STOCK OF THE COMPANY, AND
THE AGGREGATE VOTING POWER OF SUCH SHARES WILL NOT EXCEED 20% OF THE
AGGREGATE VOTING POWER OF ALL OUTSTANDING SHARES OF VOTING STOCK OF THE
COMPANY. NOT MORE THAN 20% OF THE AGGREGATE VOTING POWER OF ALL SHARES
OUTSTANDING ENTITLED TO VOTE MAY BE VOTED BY OR FOR THE ACCOUNT OF
"ALIENS." IF, NOTWITHSTANDING SUCH RESTRICTION ON TRANSFERS TO
"ALIENS," THE AGGREGATE NUMBER OF SHARES OF STOCK OWNED BY OR FOR THE
ACCOUNT OF "ALIENS" EXCEEDS 20% OF THE NUMBER OF SHARES OF OUTSTANDING
STOCK OF THE COMPANY OR IF THE AGGREGATE VOTING POWER OF SUCH SHARES
EXCEEDS 20% OF THE AGGREGATE VOTING POWER OF ALL OUTSTANDING SHARES OF
VOTING STOCK OF THE COMPANY, THE COMPANY HAS THE RIGHT TO REDEEM SHARES
OF ALL CLASSES OF CAPITAL STOCK, AT THEIR THEN FAIR MARKET VALUE, ON A
PRO RATA BASIS, OWNED BY OR FOR THE ACCOUNT OF ALL "ALIENS" IN ORDER TO
REDUCE THE NUMBER OF SHARES AND/OR PERCENTAGE OF VOTING POWER HELD BY
OR FOR THE ACCOUNT OF "ALIENS" TO THE MAXIMUM NUMBER OR PERCENTAGE
ALLOWED UNDER THE RESTATED ARTICLES OF INCORPORATION, AS AMENDED, OR AS
OTHERWISE REQUIRED BY APPLICABLE FEDERAL LAW. AS USED HEREIN, "ALIENS"
MEANS ALIENS AND THEIR REPRESENTATIVES, FOREIGN GOVERNMENTS AND THEIR
REPRESENTATIVES, AND CORPORATIONS ORGANIZED UNDER THE LAW OF A FOREIGN
COUNTRY, AND THEIR REPRESENTATIVES. THE COMPANY WILL FURNISH TO ANY
SHAREHOLDER UPON REQUEST AND WITHOUT CHARGE, A FULL STATEMENT OF THE
DESIGNATIONS, PREFERENCES, LIMITATIONS, AND RELATIVE RIGHTS OF THE
SHARES OF EACH CLASS OR SERIES AUTHORIZED TO BE ISSUED, SO FAR AS THEY
HAVE BEEN DETERMINED, AND THE AUTHORITY OF THE BOARD TO DETERMINE THE
RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT CLASSES OR SERIES.
<PAGE> 2
Additional Warrants
No. W-___ ________ Warrants
FORM OF
COMMON STOCK PURCHASE WARRANTS
Exercisable commencing ,
Void after Expiration Time (as defined herein)
ValueVision International, Inc., a Minnesota corporation (the
"Company"), hereby certifies that, for value received, National Broadcasting
Company, Inc., a Delaware corporation (the "Initial Holder" or "NBC"), or
registered assigns (in either case, the "Warrantholder"), is the owner of ( )
Warrants (as defined below), each of which entitles the Warrantholder to
purchase from the Company one fully paid, duly authorized and nonassessable
share of Common Stock, par value $0.01 per share, of the Company (the "Common
Stock") at any time or from time to time subject to the terms set forth herein,
commencing on , (the "Issue Date") and continuing up to the Expiration Time (as
defined herein) at a per share exercise price determined according to the terms
and subject to the conditions set forth in this certificate (the "Warrant
Certificate"). The number of shares of Common Stock issuable upon exercise of
each such Warrant and the exercise price per share of Common Stock are subject
to adjustment from time to time pursuant to the provisions of Sections 8 and 9
of this Warrant Certificate. The Warrants evidenced by this Warrant Certificate
(the "Warrants") are being issued pursuant to a Distribution and Marketing
Agreement, dated as of March 8, 1999 (as it may be amended, supplemented or
otherwise modified from time to time, the "Distribution Agreement"), by and
between the Company and the Initial Holder.
Section 1. Definitions. As used in this Warrant Certificate, the
following terms shall have the meanings set forth below:
"Additional Warrants" shall have the meaning set forth in the
Distribution Agreement and shall include the Warrants hereunder.
"Affiliate" shall mean, with respect to any Person, any other
Person that directly or indirectly controls, is controlled by, or is
under common control with, such Person. As used in this definition,
"control" (including its correlative meanings, "controlled by" and
"under common
2
<PAGE> 3
Additional Warrants
control with") shall mean the possession, directly or indirectly, of
power to direct or cause the direction of management or policies
(whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise).
"Articles of Incorporation" shall mean the Articles of
Incorporation of the Company, as amended from time to time.
"Beneficially Own" shall have the meaning set forth in Rule 13d-3
under the Exchange Act, except that a Person shall be deemed to
"Beneficially Own" all securities that such Person has a right to
acquire, whether such right is exercisable immediately or only after
the passage of time (and without any additional condition), provided
that a Person shall not be deemed to "Beneficially Own" any shares of
Common Stock which are issuable upon exercise of any Additional
Warrants unless and until such Additional Warrants are actually issued
and outstanding (at which time such Person shall be deemed to
Beneficially Own all shares of Common Stock which are issuable upon
exercise of such Additional Warrants, whether or not they are vested or
unvested) and, provided further, except as expressly provided in this
Agreement no Person shall be deemed to "Beneficially Own" any
securities issuable upon exercise of the Purchase Warrant unless and
until the Shareholder Approval is obtained. In the event that the
Shareholder Approval is obtained, when calculating Beneficial Ownership
on any particular date after receipt of such Shareholder Approval, the
Purchase Warrant will be deemed to represent Beneficial Ownership of
the maximum number of shares of Common Stock that could be acquired
upon exercise of the Purchase Warrant on such date.
"Board of Directors" shall mean the board of directors of the
Company.
"Business Day" shall mean any day, other than a Saturday, Sunday or
a day on which commercial banks in New York, New York are authorized or
obligated by law or executive order to close.
"Change in Control" shall mean any of the following: (i) a merger,
consolidation or other business combination or transaction to which the
Company is a party if the shareholders of the Company immediately prior
to the effective date of such merger, consolidation or other business
combination or transaction, as a result of such merger, consolidation
or other business combination or transaction, do not have Beneficial
Ownership of voting securities representing 50% or more of the Total
Current Voting Power of the surviving corporation following such
merger, consolidation or other business combination or
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Additional Warrants
transaction; (ii) an acquisition by any Person (other than the
Restricted Parties and their Affiliates or any 13D Group to which any
of them is a member) of Beneficial Ownership of Voting Stock of the
Company representing 25% or more of the Total Current Voting Power of
the Company, (iii) a sale of all or substantially all the consolidated
assets of the Company to any Person or Persons (other than Restricted
Parties and their Affiliates or any 13D Group to which any of them is a
member); or (iv) a liquidation or dissolution of the Company.
"Common Stock" shall have the meaning set forth in the preamble
hereto.
"Company" shall have the meaning set forth in the preamble hereto.
"Designated Entity" shall mean Home Shopping Network, Inc., QVC,
Inc., Shop-At-Home, Inc. or Paxson Communications Corporation.
"Distribution Agreement" shall mean the Distribution and Marketing
Agreement dated as of March 8, 1999 between the Company and NBC
pursuant to which NBC has agreed to distribute certain programming of
the Company, as such agreement may be amended from time to time.
"Distribution Agreement Termination Event" shall mean a termination
of the Distribution Agreement by the Company (i) as a result of the
failure of NBC to achieve certain performance targets set forth in
Sections 8(a), (b) or (c) of the Distribution Agreement or (ii)
pursuant to the Company's right to so terminate under Section 10 of the
Distribution Agreement.
"Election to Exercise" shall have the meaning set forth in Section
4.2(a) hereof.
"Equity Securities" shall mean, with respect to any Person, any and
all common stock, preferred stock, any other class of capital stock and
partnership or limited liability company interests of such Person or
any other similar interests of any Person that is not a corporation,
partnership or limited liability company.
"Exchange Act" shall mean the Securities Exchange act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exercise Price" shall have the meaning set forth in Section 8
hereof.
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Additional Warrants
"Expiration Date" shall mean with respect to any Warrant
represented hereunder, the fifth anniversary of the vesting date (as
set forth in Section 4.1(a) hereof) of such Warrant.
"Expiration Time" shall mean 5:00 P.M., New York City time, on the
Expiration Date.
"Expired" shall mean, with respect to a Warrant issued hereunder,
that such Warrant has not been exercised prior to the Expiration Date
for such Warrant.
"Fractional Warrant Share" shall mean any fraction of a whole share
of Common Stock issued, or issuable upon, exercise of the Warrants.
"GE Capital" shall mean GE Capital Equity Investments, Inc., a
Delaware corporation, together with its successors by operation of law.
"Governmental Entity" shall mean any federal, state or local
government or any court, administrative agency or commission or other
governmental authority or agency, domestic or foreign.
"Independent Expert" shall mean an investment banking firm mutually
acceptable to the Company and the Warrantholder.
"Initial Holder" shall have the meaning set forth in the preamble
hereto.
"Investment Agreement" shall mean the Investment Agreement, dated
as of March 8, 1999 (as it may be amended, supplemented or otherwise
modified from time to time), by and between the Company and GE Capital.
"Issue Date" shall have the meaning set forth in the preamble
hereto.
"Market Price" shall mean, with respect to a share of Common Stock
on any day, except as set forth below in the case that the shares of
Common Stock are not publicly held or listed, the average of the
"quoted prices" of the Common Stock for 30 consecutive Trading Days
commencing 45 Trading Days before the date in question. The term
"quoted prices" of the Common Stock shall mean the last reported sale
price on that day or, in case no such reported sale takes place on such
day, the average of the last reported bid and asked prices, regular
way, on that day, in either case, as reported in the consolidated
transaction reporting system with respect to securities quoted on
Nasdaq or, if the shares of Common Stock are not quoted on Nasdaq, as
reported
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Additional Warrants
in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on
which the shares of Common Stock are listed or admitted to trading or,
if the shares of Common Stock are not quoted on Nasdaq and 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 on such other nationally recognized quotation system then
in use, or, if on any such day the shares of Common Stock are not
quoted on any such quotation system, the average of the closing bid and
asked prices as furnished by a professional market maker selected by
the Board of Directors making a market in the shares of Common Stock.
Notwithstanding the foregoing, if the shares of Common Stock are not
publicly held or so listed, quoted or publicly traded, the "Market
Price" means the fair market value of a share of Common Stock, as
determined in good faith by the Board of Directors; provided, however,
that if the Warrantholder shall dispute the fair market value as
determined by the Board, the Warrantholder and the Company may retain
an Independent Expert. The determination of fair market value by the
Independent Expert shall be final, binding and conclusive on the
Company and the Warrantholder. All costs and expenses of the
Independent Expert shall be borne by the Warrantholder unless the
determination of fair market value is more favorable to such
Warrantholder by 5% or more, in which case, all such costs and expenses
shall be borne by the Company.
"Nasdaq" shall mean The Nasdaq Stock Market's National Market.
"NBC" shall have the meaning set forth in the preamble hereto.
"Organic Change" shall mean, with respect to any Person, any
transaction (including without limitation any recapitalization, capital
reorganization or reclassification of any class or series of Equity
Securities, any consolidation of such Person with, or merger of such
Person into, any other Person, any merger of another Person into such
Person (other than a merger which does not result in a
reclassification, conversion, exchange or cancellation of outstanding
shares of capital stock of such Person), and any sale or transfer or
lease of all or substantially all of the assets of such Person, but not
including any stock split, combination or subdivision which is the
subject of Section 9.1(b)) pursuant to which any class or series of
Equity Securities of such Person is exchanged for, or converted into
the right to receive other securities, cash or other property.
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Additional Warrants
"Person" shall mean any individual, firm, corporation, company,
limited liability company, association, partnership, joint venture,
trust or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Preferred Stock" shall mean the Series A Redeemable Convertible
Preferred Stock, par value $0.01 per share, of the Company.
"Purchased Shares" shall have the meaning set forth in Section
9.1(e) hereof.
"Purchase Warrant" shall mean the Common Stock Purchase Warrant
(No. W-1) (and any replacement(s) thereof) exercisable for up to 39.9%
of the Common Stock of the Company issued to GE Capital pursuant to the
Investment Agreement.
"Record Date" shall have the meaning set forth in Section 9.1(a)
hereof.
"Reference Date" shall have the meaning set forth in Section 9.1(d)
hereof.
"Relevant Date" shall have the meaning set forth in Section 9.1(c)
hereof.
"Restricted Parties" shall mean each of (i) NBC, its Ultimate
Parent Entity (if any), each Subsidiary of NBC and each Subsidiary of
its Ultimate Parent Entity, (ii) GE Capital, its Ultimate Parent Entity
(if any), each Subsidiary of GE Capital and each Subsidiary of its
Ultimate Parent Entity and (iii) any Affiliate of any Person that is a
Restricted Party if (and only if) such Restricted Party has the right
or power (acting alone or solely with other Restricted Parties) to
either cause such Affiliate to comply with or prevent such Affiliate
from not complying with all of the terms of this Agreement that are
applicable to Restricted Parties.
"Securities Act" shall mean the U.S. Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Shareholder Agreement" shall mean the Shareholder Agreement, dated
as of the date hereof, among GE Capital, NBC and the Company.
"Shareholder Approval" shall have the meaning ascribed to such term
in the Investment Agreement.
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Additional Warrants
"Subsidiary" shall mean, as to any Person, a corporation,
partnership, limited liability company, joint venture or other entity
of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned,
directly or indirectly through one or more intermediaries (including,
without limitation, other Subsidiaries), or both, by such Person.
"Term" shall mean the base or initial term of the Written
Commitment, excluding any renewal period or automatic extensions
thereunder.
"13D Group" means any "group" (within the meaning of Section 13(d)
of the Exchange Act) formed for the purpose of acquiring, holding,
voting or disposing of Voting Stock.
"Total Current Voting Power" shall mean, with respect to any
corporation the total number of votes which may be cast in the election
of members of the Board of Directors of the corporation if all
securities entitled to vote in the election of such directors
(excluding shares of preferred stock that are entitled to elect
directors only upon the occurrence of customary events of default) are
present and voted (it being understood that the Preferred Stock will be
included on an as converted basis in the calculation of Total Current
Voting Power of the Company).
"Trading Day" shall mean any day on which Nasdaq is open for
trading, or if the shares of Common Stock are not quoted on Nasdaq, any
day on which the principal national securities exchange or national
quotation system on which the shares of Common Stock are listed,
admitted to trading or quoted is open for trading, or if the shares of
Common Stock are not so listed, admitted to trading or quoted, any
Business Day.
"Ultimate Parent Entity" shall mean, with respect to any Person
(the "Subject Person"), the Person (if any) that (i) owns, directly or
indirectly through one or more intermediaries, or both, shares of stock
or other ownership interests having ordinary voting power (other than
stock or such other ownership interests having such power only by
reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of the Subject Person and (ii) is
not itself a Subsidiary of any other Person or is a natural person.
"Voting Stock" shall mean shares of the Common Stock and Preferred
Stock and any other securities of the Company having the ordinary power
to vote in the election of members of the Board of Directors of the
Company.
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Additional Warrants
"VVTV" shall mean the home shopping television program service of
the Company presently known as "ValueVision Television" and any
successor home shopping or transactional television program services of
the Company.
"Warrant" shall have the meaning set forth in the preamble hereto.
"Warrant Cancellation Event" shall mean that on or prior to August
31, 1999, the Closing (as defined in the Investment Agreement) under
the Investment Agreement shall not have occurred or that Shareholder
Approval shall not have been obtained, as set forth in Section 9(a) or
9(b) of the Distribution Agreement.
"Warrant Certificate" shall have the meaning set forth in the
preamble hereto.
"Warrant Register" shall have meaning set forth in Section 2.2
hereof.
"Warrant Shares" shall mean the shares of Common Stock issued, or
issuable upon, exercise of the Warrants.
"Warrantholder" shall have the meaning set forth in the preamble
hereto.
"Written Commitment" shall mean the written commitment, dated ,
between NBC and , for the rollout of VVTV, a copy of which is attached
as Annex A hereto.
Section 2. Transferability.
2.1 Registration. The Warrants shall be issued only in registered
form. The Company agrees to maintain, at its office or agency, books for the
registration and transfer of the Warrants.
2.2 Transfer. Subject to the terms and conditions of the
Shareholder Agreement, the Warrants evidenced by this Warrant Certificate may be
sold or otherwise transferred at any time (except as such sale or transfer may
be restricted pursuant to the regulations of the Federal Communications
Commission, the Securities Act or any applicable state securities laws) with the
prior written consent of the Company, which consent shall not be unreasonably
withheld; provided, however, that the consent of the Company shall not be deemed
to have been unreasonably withheld if the Company does not approve a transfer of
such Warrants to any
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<PAGE> 10
Additional Warrants
Designated Entity. Any such sale or transfer shall be effected on the books of
the Company (the "Warrant Register") maintained at its principal executive
offices upon surrender of this Warrant Certificate for registration of transfer
duly endorsed by the Warrantholder or by its duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. Upon any registration of transfer, the Company shall
execute and deliver a new Warrant Certificate or Certificates in appropriate
denominations to the Person or Persons entitled thereto.
Section 3. Exchange of Warrant Certificate.
Any Warrant Certificate may be exchanged for another certificate or
certificates of like tenor entitling the Warrantholder to purchase a like
aggregate number of Warrant Shares as the certificate or certificates
surrendered then entitles such Warrantholder to purchase. Any Warrantholder
desiring to exchange a Warrant certificate shall make such request in writing
delivered to the Company, and shall surrender, properly endorsed, the
certificate evidencing the Warrant to be so exchanged. Thereupon, the Company
shall execute and deliver to the Person entitled thereto a new Warrant
Certificate or Certificates as so requested.
Section 4. Term of Warrants; Exercise of Warrants.
4.1 Vesting and Duration of Warrants.
(a) The Warrants shall vest in ( ) equal cumulative installments,
with the first installment vesting on the date of execution of the Written
Commitment, and the remaining ( ) installments vesting on each anniversary
thereof for the Term of the Written Commitment.
(b) Subject to the terms and conditions set forth in this Warrant
Certificate, the Warrantholder may exercise the Warrants evidenced hereby, in
whole or in part, at any time and from time to time after the Issue Date and
before the Expiration Time of such Warrants; provided, however, that the number
of Warrants which the Warrantholder will be entitled to exercise on any date
will be equal to (a) the sum of the Warrants vested on or prior to such date
pursuant to the terms of Section 4.1(a) hereof minus (b) the sum of (i) the
total number of Warrants previously exercised hereunder and (ii) the total
number of Warrants which have Expired; provided, further, that (X) upon the
occurrence of a Distribution Agreement Termination Event, notwithstanding the
vesting schedule set forth in Section 4.1(a) hereof, any unvested Warrants
hereunder as of such termination date shall cease to vest, but any Warrants
which have vested prior to such termination date shall continue to be
exercisable,
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Additional Warrants
subject to the provisions hereunder, (Y) upon a Change in Control,
notwithstanding the vesting schedule set forth in Section 4.1(a) hereof, any
unvested Warrants hereunder shall immediately vest and become fully exercisable,
subject to the provisions hereunder and (Z) upon the occurrence of a Warrant
Cancellation Event, notwithstanding the other provisions of this Warrant
Certificate, all of the unexercised Warrants hereunder, whether or not vested,
shall terminate and become void, and all rights hereunder with respect to such
Warrants shall thereupon cease. Any Warrant not exercised by the Expiration Time
applicable to such Warrant shall become void, and all rights hereunder with
respect to such Warrant shall thereupon cease.
4.2 Exercise of Warrant.
(a) On the terms and subject to the conditions set forth in this
Warrant Certificate, the Warrantholder may exercise the Warrants evidenced
hereby, in whole or in part, by presentation and surrender to the Company of
this Warrant Certificate together with the attached Election to Exercise (the
"Election to Exercise") duly filled in and signed, and accompanied by payment to
the Company of the Exercise Price for the number of Warrant Shares specified in
such Election to Exercise. Payment of the aggregate Exercise Price (including
payment made pursuant to a purchase under Section 9.3(a) hereof) shall be made
(i) in cash in an amount equal to the aggregate Exercise Price; (ii) by
certified or official bank check in an amount equal to the aggregate Exercise
Price or (iii) by any combination of the foregoing. In lieu of the above, the
Warrantholder may deliver an Election to Exercise that provides for a
recapitalization exchange of Warrants for Warrant Shares having an aggregate
value equal to the excess of (x) the aggregate value of the Warrant Shares to
which the Warrants so exercised relate (based on the determination of the Market
Price of the Common Stock as of such date) over (y) the aggregate Exercise Price
of such Warrants.
(b) On the terms and subject to the conditions set forth in this
Warrant Certificate, upon such presentation of a duly executed Election to
Exercise and surrender of this Warrant Certificate and payment of such aggregate
Exercise Price as set forth in paragraph (a) hereof, the Company shall promptly
issue and cause to be delivered to the Warrantholder, or, subject to Section 2
hereunder, to such Persons as the Warrantholder may designate in writing, a
certificate or certificates (in such name or names as the Warrantholder may
designate in writing) for the specified number of duly authorized, fully paid
and non-assessable Warrant Shares issuable upon exercise, and shall deliver to
the Warrantholder cash, as provided in Section 10 hereof, with respect to any
Fractional Warrant Shares otherwise issuable upon such surrender. In the event
that the Warrants evidenced by this Warrant Certificate are exercised in part
prior to the Expiration Time applicable to such Warrants, the Company
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Additional Warrants
shall issue and cause to be delivered to the Warrantholder, or, subject to
Section 2 hereunder, to such Persons as the Warrantholder may designate in
writing, a certificate or certificates (in such name or names as the
Warrantholder may designate in writing) evidencing any remaining unexercised and
un-Expired Warrants.
(c) Each Person in whose name any certificate for Warrant Shares is
issued shall for all purposes be deemed to have become the holder of record of
the Warrant Shares represented thereby on the first date on which both the
Warrant Certificate evidencing the respective Warrants was surrendered, along
with a duly executed Election to Exercise, and payment of the Exercise Price and
any applicable taxes was made, irrespective of date of issue or delivery of such
certificate.
4.3 Conditions to Exercise. Each exercise of the Warrants shall be
subject to the following conditions:
(a) Such exercise shall be consistent with the terms of Section 4.1
hereof; and
(b) The purchase of the Warrant Shares issuable upon such exercise
shall not be prohibited under applicable law.
Section 5. Payment of Taxes.
The Company shall pay any and all documentary, stamp or similar
issue or transfer taxes and other governmental charges that may be imposed under
the laws of the United States or any political subdivision or taxing authority
thereof or therein in respect of any issue or delivery of Warrant Shares or of
other securities or property deliverable upon exercise of the Warrants evidenced
by this Warrant Certificate or certificates representing such shares or
securities (other than income or withholding taxes imposed on the
Warrantholder); provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable with respect to any transfer involving the
issue of any Warrant Certificate or any certificates for Warrant Shares in a
name other than that of the registered holders thereof, and the Company shall
not be required to issue or deliver such Warrant Certificate or certificates for
Warrant Shares unless and until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
Section 6. Mutilated or Missing Warrant.
If any Warrant Certificate is lost, stolen, mutilated or destroyed,
the Company shall issue in exchange and
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Additional Warrants
substitution for and upon cancellation of the mutilated Warrant Certificate, or
in lieu of and substitution for the Warrant Certificate lost, stolen or
destroyed, upon receipt of a proper affidavit or other evidence reasonably
satisfactory to the Company (and surrender of any mutilated Warrant Certificate)
and indemnity in form and amount reasonably satisfactory to the Company in each
instance protecting the Company, a new Warrant Certificate of like tenor and
representing an equivalent number of Warrants as the Warrant Certificate so
lost, stolen, mutilated or destroyed. Any such new Warrant Certificate shall
constitute an original contractual obligation of the Company, whether or not the
allegedly lost, stolen, mutilated or destroyed Warrant Certificate shall be at
any time enforceable by anyone. An applicant for such substitute Warrant
Certificate shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company may prescribe. All Warrant
Certificates shall be held and owned upon the express condition that the
foregoing provisions are exclusive with respect to the replacement of lost,
stolen, mutilated or destroyed Warrant Certificates, and shall preclude any and
all other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement of negotiable
instruments or other securities without their surrender.
Section 7. Reservation of Shares.
The Company hereby agrees that, at all times until all of the
Warrants issued hereunder (whether vested or unvested) have been exercised,
Expired or canceled, there shall be reserved for issuance and delivery upon
exercise of this Warrant, free from preemptive rights, the number of shares of
authorized but unissued shares of Common Stock as may be required at such time
(adjusted from time to time for additional vesting of Warrants as well as for
cancellation of exercised or Expired Warrants) for issuance or delivery upon
exercise of the Warrants evidenced by this Warrant Certificate. The Company
further agrees that it will not, by amendment of its Articles of Incorporation
or through reorganization, consolidation, merger, dissolution or sale or assets,
or by any other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be observed
or performed hereunder by the Company. Without limiting the generality of the
foregoing, the Company shall from time to time take all such action that may be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock at the Exercise Price as so adjusted.
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Additional Warrants
Section 8. Exercise Price.
The price per share (the "Exercise Price") at which Warrant Shares
shall be purchasable upon the exercise of the Warrants evidenced by this Warrant
Certificate shall be $ , subject to adjustment pursuant to Section 9 hereof.
-----
Section 9. Adjustment of Exercise Price and Number of Shares.
The number and kind of securities purchasable upon the exercise of
the Warrants evidenced by this Warrant Certificate and the Exercise Price
thereof shall be subject to adjustment from time to time after the date hereof
upon the happening of certain events, as follows:
9.1 Adjustments to Exercise Price. The Exercise Price shall be
subject to adjustment as follows:
(a) Stock Dividends. In case the Company shall, after the Issue
Date, pay a dividend or make a distribution on its Common Stock or on
any other class or series of capital stock of the Company which
dividend or distribution includes or is convertible (without the
payment of any consideration other than surrender of such convertible
security) into Common Stock, the Exercise Price in effect at the
opening of business on the day following the date fixed for
determination of the holders of Common Stock or capital stock entitled
to such payment or distribution (the "Record Date") shall be reduced by
multiplying such Exercise Price by a fraction of which (A) the
numerator shall be the number of shares of Common Stock outstanding at
the close of business on the Record Date and (B) the denominator shall
be the sum of such number of shares and the total number of shares
constituting or included in such dividend or other distribution (or in
the case of a dividend consisting of securities convertible into Common
Stock, the number of shares of Common Stock into which such securities
are convertible), such reduction to become effective immediately after
the opening of business on the day following the Record Date; provided,
however, that if any such dividend or distribution is rescinded and not
paid, then the Exercise Price shall, as of the date when it is
determined that such dividend or distribution price will be rescinded,
revert back to the Exercise Price in effect prior to the adjustment
made pursuant to this paragraph.
(b) Stock Splits and Reverse Splits. In case the Common Stock shall
be subdivided into a greater number of shares of Common Stock or
combined into a smaller number of shares of Common Stock, the Exercise
Price in effect at the opening of business on the day following the day
upon which
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Additional Warrants
such subdivision or combination becomes effective shall be adjusted so
that the holder of any Warrants thereafter surrendered for purchase of
shares of Common Stock shall be entitled to receive the number of
shares of Common Stock which such holder would have owned or been
entitled to receive after the happening of such events had such
Warrants been surrendered for exercise immediately prior to such event.
Such adjustment shall become effective at the close of business on the
day upon which such subdivision or combination becomes effective.
(c) Issuances Below Market. In case the Company shall issue or sell
(a) Common Stock, (b) rights, warrants or options entitling the holders
thereof to subscribe for or purchase shares of Common Stock or (c) any
security convertible into Common Stock, in each case at a price, or
having an exercise or conversion price, per share less than the
then-current Market Price per share of Common Stock on (x) the date of
such issuance or sale or (y) in the case of a dividend or distribution
of such rights, warrants, options or convertible securities to the
holders of Common Stock, the date fixed for determination of the
holders of such Common Stock entitled to such dividend or distribution
(the date specified in clause (x) or (y) being the "Relevant Date")
(excluding any issuance for which an appropriate and full adjustment
has been made pursuant to Section 9.1(a)), the Exercise Price shall be
reduced by multiplying the Exercise Price by a fraction of which (A)
the numerator shall be the number of shares of Common Stock outstanding
at the open of business on the Relevant Date plus the number of shares
of Common Stock which the aggregate consideration received or
receivable (I) for the total number of shares of Common Stock, rights,
warrants or options or convertible securities so issued or sold, and
(II) upon the exercise or conversion of all such rights, warrants,
options or securities, would purchase at the then-current Market Price
per share of Common Stock and (B) the denominator shall be the number
of shares of Common Stock outstanding at the close of business on the
Relevant Date plus (without duplication) the number of shares of Common
Stock subject to all such rights, warrants, options and convertible
securities, such reduction of the Exercise Price to be effective at the
opening of business on the day following the Relevant Date; provided,
however, that if any such dividend or distribution is rescinded and not
paid, then the Exercise Price shall, as of the date when it is
determined that such dividend or distribution will be rescinded, revert
back to the Exercise Price in effect prior to the adjustment made
pursuant to this paragraph. The issuance of any shares of Common Stock
or other rights, warrants, options or convertible securities pursuant
to (a) any restricted stock or stock option plan or program of the
Company involving the grant of options or rights solely to officers,
directors,
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Additional Warrants
employees and/or consultants of the Company or its Subsidiaries at
below the then-current Market Price per share of Common Stock
(provided, that any such options or rights were initially granted with
an exercise or conversion price of not less than 85% of the
then-current Market Price per share of Common Stock), (b) any option,
warrant, right, or convertible security outstanding as of the date
hereof,(c) the terms of a firmly committed bona fide underwritten
public offering, or (d) any merger, acquisition, consolidation, or
similar transaction, shall not be deemed to constitute an issuance or
sale to which this Section 9.1(c) applies. Upon the expiration
unexercised of any rights, warrants, options or rights to convert any
convertible securities for which an adjustment has been made pursuant
to this Section 9.1(c), the adjustments shall forthwith be reversed to
effect such rate of conversion as would have been in effect at the time
of such expiration or termination had such rights, warrants, options or
rights to convertible securities, to the extent outstanding immediately
prior to such expiration or termination, never been issued.
(d) Special Dividends. Subject to the last sentence of this
paragraph (d), in case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock evidences of its
indebtedness, shares of any class or series of capital stock, cash or
assets (including securities, but excluding any shares of Common Stock,
rights, warrants, options or convertible securities for which an
appropriate and full adjustment has been made pursuant to paragraph (a)
or (c) above), the Exercise Price in effect on the day immediately
preceding the date fixed for the payment of such distribution (the date
fixed for payment being referred to as the "Reference Date") shall be
reduced by multiplying such Exercise Price by a fraction of which the
numerator shall be the current Market Price per share of the Common
Stock on the Reference Date less the fair market value (as determined
in good faith by the Board of Directors, whose determination shall be
mailed to the holders of the Warrants) on the Reference Date of the
portion of the evidences of indebtedness, shares of capital stock, cash
and assets so distributed applicable to one share of Common Stock, and
the denominator shall be such current Market Price per share of the
Common Stock, such reduction to become effective immediately prior to
the opening of business on the day following the Reference Date;
provided, however, that if such dividend or distribution is rescinded
and not paid, then the Exercise Price shall, as of the date when it is
determined that such dividend or distribution will be rescinded, revert
back to the Exercise Price in effect prior to the adjustment made
pursuant to this paragraph. If the Board of Directors determines the
fair market value of any distribution for purposes of this
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<PAGE> 17
Additional Warrants
paragraph (d) by reference to the actual or when issued trading market
for any securities comprising such distribution, it must in doing so
consider, to the extent possible, the prices in such market over the
same period used in computing the current Market Price per share of
Common Stock pursuant to this Section 9.1. Notwithstanding the
foregoing, if the holders of a majority of the outstanding unexercised
and un-Expired Warrants (whether or not vested) shall dispute the fair
market determination of the Board of Directors, an Independent Expert
shall be selected to determine the fair market value of the Common
Stock as of the Reference Date, and such Independent Expert's
determination shall be final, binding and conclusive. All costs and
expenses of such Independent Expert shall be borne by the holders of
the then outstanding unexercised and un-Expired Warrants (whether or
not vested) unless the determination of fair market value is more
favorable to such holders by 5% or more, in which case, all such costs
and expenses shall be borne by the Company. For purposes of this
paragraph (d), any dividend or distribution that also includes shares
of Common Stock or rights, warrants or options to subscribe for or
purchase shares of Common Stock shall be deemed to be (1) a dividend or
distribution of the evidences of indebtedness, cash, assets or shares
of capital stock other than such shares of Common Stock or rights,
warrants, options or convertible securities (making any Exercise Price
reduction required by this subparagraph (d)) immediately followed by
(2) a dividend or distribution of such shares of Common Stock or such
rights, warrants, options or convertible securities (making any further
Exercise Price reduction required by subparagraph (a) or (c) of this
Section 9.1), except (A) the Reference Date of such dividend or
distribution as defined in this subparagraph (d) shall be substituted
as "the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution" and the "Relevant Date"
within the meaning of subparagraphs (a) and (c) of this Section 9.1 and
(B) any shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of business
on the date fixed for such determination" within the meaning of
subparagraph (a) of this Section 9.1).
(e) Minimum Adjustment Requirement. No adjustment shall be required
unless such adjustment would result in an increase or decrease of at
least 1% in the Exercise Price then subject to adjustment; provided,
however, that any adjustments that are not made by reason of this
Section 9.1(e) shall be carried forward and taken into account in any
subsequent adjustment. In case the Company shall at any time issue
shares of Common Stock by way of dividend on any stock of the Company
or subdivide or combine the outstanding shares of Common Stock, said 1%
specified in the preceding
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<PAGE> 18
Additional Warrants
sentence (as theretofore increased or decreased, if said amount shall
have been adjusted in accordance with the provisions of this Section
9.1(e)) shall forthwith be proportionately increased in the case of
such a combination or decreased in the case of such a subdivision or
stock dividend so as appropriately to reflect the same. No adjustment
to the Exercise Price shall be required if the holders of the
outstanding unexercised and unissued Warrants (whether or not vested)
receive the dividend or distribution giving rise to such adjustment in
respect of each such Warrant.
(f) Calculations. All calculations under this Section 9.1 shall be
made to the nearest $0.01.
(g) Other Reductions in Exercise Price. The Company from time to
time may reduce the Exercise Price by any amount for any period of time
if the period is at least 20 days, the reduction is irrevocable during
the period, subject to any conditions that the Board of Directors may
deem relevant, and the Board of Directors of the Company shall have
made a determination that such reduction would be in the best interest
of the Company, which determination shall be conclusive. Whenever the
Exercise Price is reduced pursuant to the preceding sentence, the
Company shall mail to the Warrantholder a notice of the reduction at
least fifteen days prior to the date the reduced Exercise Price takes
effect, and such notice shall state the reduced Exercise Price and the
period it will be in effect. If the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution, and shall thereafter and
before the distribution to shareholders thereof legally abandon its
plan to pay or deliver such dividend or distribution, then thereafter
no adjustment in the number of shares of Common Stock issuable upon
exercise granted by this Section 9.1 or in the Exercise Price then in
effect shall be required by reason of the taking of such record.
(i) Exercise between Record and Payment Date. Anything in this
Section 9.1 to the contrary notwithstanding, in the event that a record
date is established for a dividend or distribution that gives rise to
an adjustment to the Exercise Price pursuant to this Section 9.1, if
any Warrant is exercised to purchase shares of Common Stock between
such record date and the date such dividend or distribution is paid
then (x) the number of shares of Common Stock issued at the time of
such exercise will be determined by reference to the Exercise Price as
in effect without taking into account the adjustment resulting from
such dividend or distribution and (y) on the date that such dividend or
distribution is actually paid there shall be issued in respect of such
exercise such number of
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<PAGE> 19
Additional Warrants
additional shares of Common Stock as is necessary to reflect the
Exercise Price in effect after taking into account the adjustment
resulting from the dividend or distribution.
(j) Certificate. Whenever an adjustment in the Exercise Price is
made as required or permitted by the provisions of this Section 9.1,
the Company shall promptly file a certificate of its chief financial
officer setting forth (A) the adjusted Exercise Price as provided in
this Section 9.1 and a brief statement of the facts requiring such
adjustment and the computation thereof and (B) the number of shares of
Common Stock (or portions thereof) purchasable upon exercise of a
Warrant after such adjustment in the Exercise Price in accordance with
Section 9.2 hereof and the record date therefor, and promptly after
such filing shall mail or cause to be mailed a notice of such
adjustment to each Warrantholder at his or her last address as the same
appears on the Warrant Register. Such certificate, in the absence of
manifest error, shall be conclusive and final evidence of the
correctness of such adjustment. The Company shall be entitled to rely
upon such certificate, and shall be under no duty or responsibility
with respect to any such certificate except to exhibit the same to any
Warrantholder desiring inspection thereof.
(k) Notice. In case:
(i) the Company shall declare any dividend or any distribution
of any kind or character (whether in cash, securities or other
property) on or in respect of shares of Common Stock or to the
shareholders of the Company (in their capacity as such), excluding a
dividend payable in shares of Common Stock or any regular periodic cash
dividend paid out of current or retained earnings (as such terms are
used in generally accepted accounting principles); or
(ii) the Company shall authorize the granting to the holders of
shares of Common Stock of rights to subscribe for or purchase any
shares of capital stock or of any other right; or
(iii) of any reclassification of shares of Common Stock (other
than a subdivision or combination of outstanding shares of Common Stock
or a change in par value, or from par value to no par value, or from no
par value to par value), or of any consolidation or merger to which the
Company is a party and for which approval of any shareholders of the
Company is required, or of the sale or transfer of all or substantially
all of the assets of the Company; or
(iv) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company;
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<PAGE> 20
Additional Warrants
then the Company shall cause to be mailed to the Warrantholder, at
their last addresses as they shall appear upon the Warrant Register, at
least 10 days prior to the applicable record date hereinafter
specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution or rights or, if a
record is not to be taken, the date as of which the holders of shares
of Common Stock of record to be entitled to such dividend, distribution
or rights are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and, if
applicable, the date as of which it is expected that holders of shares
of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property (including cash)
deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up. 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.
(m) Section 305. Anything in this Section 9.1 to the contrary
notwithstanding, the Company shall be entitled, but not required, to
make such reductions in the Exercise Price, in addition to those
required by this Section 9.1, as it in its discretion shall determine
to be advisable, including, without limitation, in order that any
dividend in or distribution of shares of Common Stock or shares of
capital stock of any class other than Common Stock, subdivision,
reclassification or combination of shares of Common Stock, issuance of
rights or warrants, or any other transaction having a similar effect,
shall not be treated as a distribution of property by the Company to
its shareholders under Section 305 of the Internal Revenue Code of
1986, as amended, or any successor provision and shall not be taxable
to them.
9.2 Adjustments to Number of Warrant Shares.
Upon each adjustment of the Exercise Price pursuant to Section
9.1 hereof, the number of Warrant Shares purchasable upon exercise of a Warrant
outstanding prior to the effectiveness of such adjustment shall be adjusted to
the number, calculated to the nearest one-hundredth of a share, obtained by (x)
multiplying the number of Warrant Shares purchasable immediately prior to such
adjustment upon the exercise of a Warrant by the Exercise Price in effect prior
to such adjustment and (y) dividing the product so obtained by the Exercise
Price in effect after such adjustment of the Exercise Price.
20
<PAGE> 21
Additional Warrants
9.3 Organic Change.
(a) Company Survives. Upon the consummation of an Organic
Change (other than a transaction in which the Company is not the surviving
entity), lawful provision shall be made as part of the terms of such transaction
whereby the terms of the Warrant Certificates shall be modified, without payment
of any additional consideration therefor, so as to provide that upon exercise of
Warrants following the consummation of such Organic Change, the Warrantholder
shall have the right to purchase for the Exercise Price the kind and amount of
securities, cash and other property receivable upon such Organic Change by a
holder of the number of Warrant Shares into which such Warrants might have been
exercised immediately prior to such Organic Change. Lawful provision also shall
be made as part of the terms of the Organic Change so that all other terms of
the Warrant Certificates shall remain in full force and effect following such an
Organic Change. The provisions of this Section 9.3(a) shall similarly apply to
successive Organic Changes.
(b) Company Does Not Survive. The Company shall not enter into
an Organic Change that is a transaction in which the Company is not the
surviving entity unless lawful provision shall be made as part of the terms of
such transaction whereby the surviving entity shall issue new securities to each
Warrantholder, without payment of any additional consideration therefor, with
terms that provide that upon the exercise of the Warrants, the Warrantholder
shall have the right to purchase the kind and amount of securities, cash and
other property receivable upon such Organic Change by a holder of the number of
Warrant Shares into which such Warrants might have been exercised immediately
prior to such Organic Change.
9.4 Statement on Warrants. The form of Warrant Certificate need
not be changed because of any adjustment made pursuant to Section 8, Section 9.1
or Section 9.2 hereof, and Warrants issued after such adjustment may state the
same Exercise Price and the same number of Warrant Shares as are stated in this
Warrant Certificate.
Section 10. Fractional Interests.
The Company shall not be required to issue Fractional Warrant
Shares on the exercise of the Warrants evidenced by this Warrant Certificate. If
Fractional Warrant Shares totaling more than one Warrant Share in the aggregate
is presented for exercise at the same time by the Warrantholder, the number of
full Warrant Shares which shall be issuable upon exercise thereof shall be
computed on the basis of the aggregate number of Warrant Shares so purchasable
upon the exercise of the Warrants so presented. If any Fractional Warrant Share
would but for the provisions of
21
<PAGE> 22
Additional Warrants
this Section 10 be issuable on the exercise of this Warrant (or specified
portions thereof), the Company shall pay an amount in cash equal to the fraction
of a Warrant Share represented by such Fractional Warrant Share multiplied by
the Market Price on the day of such exercise.
Section 11. No Rights as Shareholder.
Nothing in this Warrant Certificate shall be construed as
conferring upon the Warrantholder or its transferees any rights as a shareholder
of the Company, including the right to vote, receive dividends, consent or
receive notices as a shareholder with respect to any meeting of shareholders for
the election of directors of the Company or any other matter.
Section 12. Cooperation; Validity of Warrant.
The Company shall use its reasonable best efforts to obtain all
such authorizations, exemptions or consents from any Governmental Entity having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant. In addition, upon the request of Warrantholder,
the Company will at any time during the period this Warrant is outstanding
acknowledge in writing, in form satisfactory to Warrantholder, the continuing
validity of this Warrant and the obligations of the Company hereunder.
Section 13. Listing on Nasdaq or Securities Exchange.
The Company shall use its reasonable best efforts to list any
shares of Common Stock issuable upon exercise of the Warrants evidenced by this
Warrant Certificate on Nasdaq or on such other national securities exchange on
which shares of Common Stock are then listed. The Company will at its expense
cause all shares of Common Stock issued upon the exercise of the Warrants
evidenced by this Warrant Certificate to be listed at the time of such issuance
on Nasdaq and/or such other securities exchange shares of Common Stock are then
listed on and shall maintain such listing.
Section 14. Covenant Regarding Consent.
The Company hereby covenants to use its reasonable best efforts
upon the request of the Warrantholder to seek any waivers or consents, or to
take any other action required, to effectuate the exercise of this Warrant by
such Warrantholder.
22
<PAGE> 23
Additional Warrants
Section 15. Limitation on Liability.
No provision hereof, in the absence of action by the
Warrantholder to receive shares of Common Stock, and no enumeration herein of
the rights or privileges of the Warrantholder, shall give rise to any liability
of the Warrantholder for any value subsequently assigned to the Common Stock or
as a shareholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
Section 16. Nonwaiver and Expenses.
No course of dealing or any delay or failure to exercise any
right hereunder on the part of the Warrantholder or the Company shall operate as
a waiver of such right or otherwise prejudice the Warrantholder's, or the
Company's, as the case may be, rights, powers or remedies.
Section 17. Amendment.
This Warrant and all other Warrants issued hereunder may be
modified or amended or the provisions hereof waived with the written consent of
the Company and holders of Warrants exercisable for in excess of 50% of the
aggregate number of shares of Common Stock then receivable upon exercise of all
Warrants whether or not then exercisable; provided that no such Warrant may be
modified or amended in a manner which is materially adverse to the Initial
Holder or any of its successors or assigns, so long as such Person holds any
Warrants or Warrant Shares, without the prior written consent of such Person.
Section 18. Successors.
All the covenants and provisions of this Warrant Certificate by
or for the benefit of the Company or the Warrantholder shall bind and inure to
the benefit of their respective successors and permitted assigns hereunder.
Section 19. Governing Law; Choice of Forum, Etc.
The validity, construction and performance of this Warrant
Certificate shall be governed by and interpreted in accordance with, the laws of
New York. The parties hereto agree that the appropriate forum for any disputes
arising out of this Warrant Certificate solely between or among any or all of
the Company, on the one hand, and the Initial Holder and/or any Person who has
become a Warrantholder, on the other, shall be any state or U.S. federal court
sitting within the County of New York, New York or County of Hennepin,
Minnesota, and the parties
23
<PAGE> 24
Additional Warrants
hereto irrevocably consent to the jurisdiction of such courts, and agree to
comply with all requirements necessary to give such courts jurisdiction. The
parties hereto further agree that the parties will not bring suit with respect
to any disputes, except as expressly set forth below, arising out of this
Warrant Certificate for the execution or enforcement of judgment, in any
jurisdiction other than the above specified courts. Each of the parties hereto
irrevocably consents to the service of process in any action or proceeding
hereunder by the mailing of copies thereof by registered or certified airmail,
postage prepaid, if to (i) the Company, at ValueVision International, Inc., 6740
Shady Oak Road, Eden Prairie, MN 55344-3433, Attention: General Counsel, Fax:
(612) 947-0188, or at such other address specified by the Company in writing to
the other parties, with a copy to Latham & Watkins, 633 West Fifth Street, Suite
4000, Los Angeles, CA 90071, Attention: Michael W. Sturrock, Fax: (213) 891-8763
and (ii) any Warrantholder, at the address of such Warrantholder specified in
the Warrant Register. The foregoing shall not limit the rights of any party
hereto to serve process in an other manner permitted by the law or to obtain
execution of judgment in any other jurisdiction. The parties further agree, to
the extent permitted by law, that final and unappealable judgment against any of
them in any action or proceeding contemplated above shall be conclusive and may
be enforced in any other jurisdiction within or outside the United States by
suit on the judgment, a certified or exemplified copy of which shall be
conclusive evidence of the fact and the amount of indebtedness. The parties
agree to waive any and all rights that they may have to a jury trial with
respect to disputes arising out of this Agreement.
Section 20. Enforcement.
The parties agree that irreparable damage would occur in the
event that any of the provisions of this Warrant were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Warrant and to enforce specifically the
terms and provisions of this Warrant.
Section 21. Benefits of this Agreement.
Nothing in this Warrant Certificate shall be construed to give
to any Person other than the Company and the Warrantholder any legal or
equitable right, remedy or claim under this Warrant Certificate, and this
Warrant Certificate shall be for the sole and exclusive benefit of the Company
and the Warrantholder.
24
<PAGE> 25
Additional Warrants
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the date first written above.
VALUEVISION INTERNATIONAL, INC.
By:
------------------------------
Name:
Title:
25
<PAGE> 26
Additional Warrants
ELECTION TO EXERCISE
(To be executed upon exercise of Warrants)
To ValueVision International, Inc.:
The undersigned hereby irrevocably elects to exercise the right
represented by the within Warrant Certificate for, and to acquire thereunder,
_____ Warrant Shares, as provided for therein, and tenders herewith [payment of]
[pursuant to a recapitalization exchange, of securities with a value equal to]
the $________ Exercise Price in full in the form of [COMPLETE WHERE APPLICABLE]:
[ ] cash or a certified or official bank check in the amount of
$_______ ; and/or
[ ] exchange of _____ Warrants for ____ Warrant Shares (such
Warrant Shares have an aggregate value equal to the excess of
(x) the aggregate value of the ____ Warrant Shares to which the
Warrants hereby exercised relate (based on the determination of
the Market Price pursuant to the Warrant Certificate) over (y)
the aggregate Exercise Price of the ___ Warrants exercised
hereby);
For a total Exercise Price of $_________.
If the value of the shares of the Company securities exchanged herewith
exceeds the value of the Exercise Price applied to such delivery, then the
Company shall reissue certificates representing such securities in the amounts
necessary to preserve the value of such securities not applied to the exercise
of the Warrants pursuant to this Election to Exercise.
26
<PAGE> 27
Please issue a certificate or certificates for such Warrant Shares in the name
of, and pay any cash for any Fractional Warrant Shares to (please print name,
address and social security or other identifying number)*:
Name:
----------------------------------------------------------------------
Address:
----------------------------------------------------------------------
----------------------------------------------------------------------
Soc. Sec. #:
------------------------------
AND, if such number of Warrant Shares shall not be all the shares purchasable
under the within Warrant Certificate, a new Warrant Certificate is to be issued
in the name of the undersigned for the balance remaining of the Warrant Shares
purchasable thereunder rounded up to the next higher whole number of Warrant
Shares.
Signature:**
-----------------------------------
- ---------
* The Warrant Certificate contains restrictions on the sale and other
transfer of the Warrants evidenced by such Warrant Certificate.
** The above signature must correspond exactly with the name on the face
of this Warrant Certificate or with the name of the assignee appearing
in the assignment form below.
27
<PAGE> 28
ASSIGNMENT FORM
(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Name and Address of Assignee must be Printed or Typewritten)
Warrants to purchase ____ Warrant Shares of the Company, evidenced by the within
Warrant Certificate hereby irrevocably constituting and appointing
________________ Attorney to transfer said Warrants on the books of the Company,
with full power of substitution in the premises.
Dated: ,
------------- ----
---------------------------------------
Signature of Registered Holder*
---------------------------------------
Signature Guaranteed: Signature of Guarantor
*The above signature must correspond exactly with the name on the face of this
Warrant Certificate.
28
<PAGE> 29
Additional Warrants
Annex A
[Attach Written Commitment]
29
<PAGE> 1
Exhibit 7
VALUEVISION INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION
OF
SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK
Pursuant to Section 302A.401 of the Minnesota Business Corporation
Act, ValueVision International, Inc., a Minnesota corporation (the
"Corporation"), hereby certifies that the following resolutions were duly
adopted by its Board of Directors on March 8, 1999 to set forth the powers,
designations, preferences and relative, participating, optional or other rights
of its Redeemable Convertible Preferred Stock:
RESOLVED, that, pursuant to the authority granted to the Board of
Directors in the Articles of Incorporation, there is hereby created, and the
Corporation is hereby authorized to issue, a series of Preferred Stock (as
defined in the Articles of Incorporation) having the following powers,
designations, preferences and rights:
I. Designation of Series and Number of Shares. This series of the
Preferred Stock shall be designated the "Series A Redeemable Convertible
Preferred Stock" (the "Convertible Preferred Stock") and shall consist of
5,339,500 shares, par value $.01 per share. The stated value of the Convertible
Preferred Stock shall be $8.288 per share (the "Stated Value"). The number of
shares of Convertible Preferred Stock may be decreased from time to time, as
such shares are converted or redeemed as provided herein, by a resolution of the
Board of Directors filed with the Secretary of State of the State of Minnesota.
II. Rank. All shares of Convertible Preferred Stock shall rank prior,
both as to payment of dividends and as to distributions of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, to all of the Corporation's now or hereafter issued Common Stock,
par value $0.01 per share ("Common Stock"), and to all of the Corporation's now
existing or hereafter issued capital stock which by its terms ranks junior to
the Convertible Preferred Stock both as to the payment of dividends and as to
distributions of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, when and if issued (the Common
Stock and any such other capital stock being herein referred to as "Junior
Stock").
<PAGE> 2
Certificate of Designation
(b) No payment on account of the purchase, redemption, retirement or other
acquisition of shares of Junior Stock or any class or series of the
Corporation's capital stock which by its terms ranks junior to the Convertible
Preferred Stock as to distributions of assets upon liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary (the Junior
Stock and any such other class or series of the Corporation's capital stock
being herein referred to as "Junior Liquidation Stock"), shall be made directly
or indirectly by the Corporation unless and until all the Convertible Preferred
Stock shall have been converted into Common Stock or redeemed as provided for
herein or otherwise reacquired by the Corporation.
III. Dividends. In the event that the Corporation declares and pays
any dividend on the Common Stock while any shares of Convertible Preferred Stock
are outstanding, dividends shall be paid on the outstanding shares of
Convertible Preferred Stock on the same basis as if such Convertible Preferred
Stock had been converted to Common Stock pursuant to Section VI hereof prior to
the date fixed for determination of the holders of Common Stock entitled to such
dividend. Holders of Convertible Preferred Stock will not be entitled to any
dividends, whether payable in cash, property or stock, in excess of the
dividends provided for herein. Such dividends shall be payable to holders of
record at the close of business on the date specified by the Board of Directors
(or, to the extent permitted by applicable law, a duly authorized committee
thereof) at the time such dividend is declared (the "Dividend Payment
Date")(with such record date and Dividend Payment Date being the same as the
record date and dividend payment date, respectively, of the Common Stock), in
preference to dividends on the Junior Stock and any other capital stock of the
Corporation which by its terms ranks junior as to dividends to the Convertible
Preferred Stock (the Junior Stock and any such other class or series of the
Corporation's capital stock being herein referred to as "Junior Dividend
Stock"). All dividends paid with respect to shares of Convertible Preferred
Stock pursuant to this Section III shall be paid pro rata to the holders
entitled thereto.
(b) No dividend or other distribution, other than dividends payable
solely in shares of Junior Stock, shall be declared, paid or set apart for
payment on shares of Junior Dividend Stock, unless and until all accrued and
unpaid dividends on the Convertible Preferred Stock shall have been paid or
declared and set apart for payment and, to the extent required by paragraph
III(a), the related dividend is declared and paid on the Convertible Preferred
Stock.
2
<PAGE> 3
Certificate of Designation
(c) No dividends shall be declared, paid or set apart for payment on
shares of any class or series of the Corporation's capital stock whether now
existing or hereafter issued which by its terms ranks, as to dividends, on a
parity with the Convertible Preferred Stock (any such class or series of the
Corporation's capital stock being herein referred to as "Parity Dividend Stock")
for any period unless dividends have been, or contemporaneously are, paid or
declared and set apart for payment on the Convertible Preferred Stock. No
dividends shall be paid on Parity Dividend Stock except on dates on which
dividends are paid on the Convertible Preferred Stock. All dividends paid or
declared and set apart for payment on the Convertible Preferred Stock and any
Parity Dividend Stock shall be paid or declared and set apart for payment pro
rata so that the amount of dividend paid or declared and set apart for payment
per share on the Convertible Preferred Stock and the Parity Dividend Stock on
any date shall in all cases bear to each other the same ratio that accrued and
unpaid dividends on the Convertible Preferred Stock and the Parity Dividend
Stock bear to each other.
IV. Liquidation Preference. In the event of a liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the holders
of the then outstanding shares of Convertible Preferred Stock shall be entitled
to receive out of the assets of the Corporation available for distribution to
shareholders an amount in cash equal to the Stated Value for each share
outstanding, plus an amount equal to the dividends accrued and unpaid, if any,
on such shares on the date of final distribution to such holders without
interest before any payment shall be made or any assets distributed to the
holders of shares of Junior Liquidation Stock. The entire assets of the
Corporation available for distribution to holders of Convertible Preferred Stock
and any class or series of the Corporation's capital stock which by its terms
ranks on a parity with the Convertible Preferred Stock as to distributions of
assets upon liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary (any such class or series of the Corporation's capital
stock being herein referred to as "Parity Liquidation Stock") shall be
distributed ratably among the holders of the Convertible Preferred Stock and any
Parity Liquidation Stock in proportion to the respective preferential amounts
(including accrued and unpaid dividends, if any) to which each is entitled (but
only to the extent of such preferential amounts). After payment in full of the
liquidation preferences of the shares of the Convertible Preferred Stock, the
holders of such shares shall not be entitled to any further participation in any
distribution of assets by the Corporation.
3
<PAGE> 4
Certificate of Designation
V. Redemption.
(a) Mandatory Redemption. On the tenth anniversary of the date of
issuance of the Convertible Preferred Stock (the "Issue Date"), the Corporation
shall redeem for cash, out of any source of funds legally available therefor,
all of the outstanding shares of Convertible Preferred Stock, at a redemption
price equal to 100% of the Stated Value per share, plus an amount in cash equal
to all declared and unpaid dividends, if any, thereon outstanding to the
redemption date.
(b) Redemption Upon Change in Control. Upon the occurrence of a Change
in Control, the Convertible Preferred Stock shall be redeemable at the option of
the holders thereof, in whole or in part, at a redemption price per share equal
to 100% of the Stated Value plus declared and unpaid dividends, if any, thereon
outstanding to the redemption date. The Corporation shall redeem the number of
shares specified in the holders' notices of election to redeem pursuant to
Section V(c)(ii) hereof on the date fixed for redemption. A "Change of Control"
shall mean (i) the consummation by the Corporation of a merger, consolidation or
other business combination in a transaction or series of transactions as a
result of which the holders of the Common Stock immediately prior to such
transaction or series of transactions will hold less than 50% of the voting
power of all outstanding voting securities of the surviving entity, (ii) the
consummation of a sale or other disposition in one or more transactions by the
Corporation or its subsidiaries of all or substantially all of the Corporation's
consolidated assets other than among the Corporation and its subsidiaries, (iii)
the acquisition by any person or entity, together with its affiliates (as
defined in Rule 12b-2 under the Exchange Act of 1934, as amended (the "Exchange
Act")), or any other group (as defined in Section 13(d) of the Exchange Act),
including through the formation of any such group or the affiliation of any such
persons or entities other than any Restricted Party (as defined in the
Shareholder Agreement) or an Affiliate thereof or any 13D Group (as defined in
the Shareholder Agreement) of which any of them is a member, of beneficial
ownership of a majority of the voting power of all the then outstanding voting
securities of the Corporation entitled to vote generally in the election of
directors or (iv) Continuing Directors no longer constitute a majority of the
Board of Directors of the Corporation. For purposes of this paragraph (b),
"Continuing Directors" shall mean (i) each director who is a member of the Board
of Directors of the Corporation on the date hereof and (ii) each other director
whose initial nomination as a director was approved by a majority of the
Continuing Directors as of the time of such nomination (including, without
limitation, director designees of the Restricted Parties pursuant to the
Shareholder Agreement).
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Certificate of Designation
(c) Procedure for Mandatory Redemption. In the event that the
Corporation shall redeem shares of Convertible Preferred Stock pursuant to
Section V(a) hereof, notice of such redemption shall be mailed by first-class
mail, postage prepaid, and mailed not less than 30 days nor more than 90 days
prior to the redemption date to the holders of record of the shares to be
redeemed at their respective addresses as they shall appear in the records of
the Corporation; provided, however, that failure to give such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
proceeding for the redemption of any shares so to be redeemed except as to the
holder to whom the Corporation has failed to give such notice or except as to
the holder to whom notice was defective. Each such notice shall state: (A) the
redemption date; (B) the number of shares of Convertible Preferred Stock to be
redeemed; (C) the redemption price; (D) the place or places where certificates
for such shares are to be surrendered for payment of the redemption price (which
place shall be the principal place of business of the Corporation); and (E) that
the holder's right to convert such shares into shares of Common Stock shall
terminate on the close of business on the tenth business day preceding such
redemption date.
(d) Procedure for Change in Control Redemption. If a Change in Control
should occur, then, in any one or more of such events the Corporation shall give
written notice by first-class mail, postage prepaid, to each holder of
Convertible Preferred Stock at its address as it appears in the records of the
Corporation, which notice shall describe such Change in Control and shall state
the date on which the Change in Control is expected to take place, and shall be
mailed within 10 business days following the occurrence of the Change in
Control. Such notice shall also set forth (in addition to the information
required by the next succeeding paragraph): (A) each holder's right to require
the Corporation to redeem shares of Convertible Preferred Stock held by such
holder as a result of such Change in Control; (B) the redemption price; (C) the
optional redemption date (which date shall be no earlier than 30 days and no
later than 90 days from the date of such Change in Control); (D) the procedures
to be followed by such holder in exercising its right of redemption, including
the place or places where certificates for such shares are to be surrendered for
payment of the redemption price (which place shall be the principal place of
business of the Corporation); and (E) that the holder's right to convert such
shares into shares of Common Stock shall terminate on the close of business on
the tenth business day preceding such redemption date with respect to any shares
of Convertible Preferred Stock with respect to which the holder thereof has
exercised its right to require the Corporation to redeem pursuant to Section
V(d). In the event a holder of shares of Convertible Preferred Stock shall elect
to require the Corporation to redeem any or all of such shares of Convertible
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Certificate of Designation
Preferred Stock, such holder shall deliver, within 20 days of the mailing to it
of the Corporation's notice described in this Section V(c)(ii), a written notice
stating such holder's election and specifying the number of shares to be
redeemed pursuant to Section V(b) hereof.
(ii) In the case of any redemption pursuant to Section V(b) hereof,
the notice by the Corporation shall describe the Change in Control, including a
description of the Surviving Person and, if applicable, the effect of the Change
in Control on the Common Stock. The notice shall be accompanied by (A) the
consolidated balance sheet of the Corporation and its Subsidiaries as of the end
of the most recent fiscal year of the Corporation for which such information is
available and the related consolidated statements of operations and cash flows
for such fiscal year, in each case setting forth the comparative figures for the
preceding fiscal year, accompanied by an opinion of independent public
accountants of nationally recognized standing selected by the Corporation as to
the fair presentation in accordance with generally accepted accounting
principles of such financial statements, and (B) a consolidated balance sheet of
the Corporation and its Subsidiaries as of the end of the most recent fiscal
quarter of the Corporation for which such information is available and the
related consolidated statements of operations and cash flows for such quarter
and for the portion of the Corporation's fiscal year ended at the end of such
fiscal quarter, in each case setting forth in comparative form the figures for
the corresponding quarter and the corresponding portion of the Corporation's
preceding fiscal year. For so long as the Corporation is subject to the periodic
reporting requirements of the Exchange Act and makes timely filings thereunder,
the delivery requirements of the preceding sentence shall be satisfied by the
Corporation's most current report, schedule, registration statement, definitive
proxy statement or other document on file with the United States Securities and
Exchange Commission.
(e) Notice by the Corporation having been mailed as provided in
Section V(c) hereof, or notice of election having been mailed by the holders as
provided in Section V(d) hereof, and provided that on or before the applicable
redemption date funds necessary for such redemption shall have been set aside by
the Corporation, separate and apart from its other funds, in trust for the pro
rata benefit of the holders of the shares so called for or entitled to
redemption, so as to be and to continue to be available therefor, then, from and
after the redemption date (unless the Corporation defaults in the payment of the
redemption price, in which case such rights shall continue until the redemption
price is paid), such shares shall no longer be
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Certificate of Designation
deemed to be outstanding and shall not have the status of shares of Convertible
Preferred Stock, and all rights of the holders thereof as shareholders of the
Corporation (except the right to receive the applicable redemption price and any
accrued and unpaid dividends, if any, from the Corporation and the right to
convert such shares into shares of Common Stock, which shall continue until the
close of business on the tenth business day preceding the date of redemption in
accordance with Section VI hereof) shall cease. Upon surrender of the
certificates for any shares so redeemed (properly endorsed or assigned for
transfer, if the Board of Directors of the Corporation shall so require and a
notice by the Corporation shall so state), such shares shall be redeemed by the
Corporation at the applicable redemption price as aforesaid. In case fewer than
all the shares represented by any such certificate are redeemed, a new
certificate or certificates shall be issued representing the unredeemed shares
without cost to the holder thereof.
VI. Conversion.
(a) Conversion. Subject to adjustments as provided herein, each full
share of Convertible Preferred Stock shall be convertible at the option of the
holder thereof, at any time (including upon a Change of Control) from the Issue
Date until the close of business on the tenth business day prior to any date
fixed for redemption of such share as herein provided, into a number of fully
paid and nonassessable shares of Common Stock equal to the Stated Value of each
full share of the Convertible Preferred Stock to be converted divided by a
conversion price (the "Conversion Price"), which initially shall be $8.288.
(b) Conversion Procedures. (i) Any holder of shares of Convertible
Preferred Stock desiring to convert any or all of such shares into Common Stock
shall surrender the certificate or certificates evidencing such shares of
Convertible Preferred Stock at the principal office of the Corporation, as
transfer agent (in such capacity, the "Transfer Agent") for the Convertible
Preferred Stock which certificate or certificates, if the Corporation shall so
require, shall be duly endorsed to the Corporation or in blank, or accompanied
by proper instruments of transfer to the Corporation or in blank, accompanied by
irrevocable written notice to the Corporation that the holder elects, as of the
date of surrender of such Convertible Preferred Stock, to convert such shares of
Convertible Preferred Stock and specifying the name or names (with address or
addresses) in which a certificate or certificates evidencing shares of Common
Stock are to be issued. Any transfer taxes shall be paid in accordance with
Section XI hereof.
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Certificate of Designation
(ii) The Corporation shall, as soon as practicable after such
surrender of certificates evidencing shares of Convertible Preferred Stock
accompanied by the written notice and compliance with any other conditions
herein contained, deliver at such office of the Transfer Agent to the holder for
whose account such shares of Convertible Preferred Stock were so surrendered, or
to the nominee of such entity, certificates evidencing the number of full shares
of Common Stock to which such holder shall be entitled as aforesaid, together
with a cash adjustment in respect of any fraction of a share of Common Stock as
hereinafter provided. Such conversion shall be deemed to have been made as of
the date of the surrender of certificates evidencing shares of Convertible
Preferred Stock accompanied by the written notice and compliance with any other
conditions herein contained and the entity or entities entitled to receive the
Common Stock deliverable upon conversion of such Convertible Preferred Stock
shall be treated for all purposes as the record holder or holders of such Common
Stock on such date (the "Conversion Date"). The holder of record of any share of
Convertible Preferred Stock on any record date for the holders entitled to
receive any dividend or distribution in respect of the Convertible Preferred
Stock will be entitled to receive such dividend or distribution on the date
specified for payment thereof notwithstanding that such share of Convertible
Preferred Stock may be converted prior to such payment's date but after such
record date.
(c) Adjustment of Conversion Price. The Conversion Price at which a
share of Convertible Preferred Stock is convertible into Common Stock shall be
subject to adjustment from time to time as follows:
(i) In case the Corporation shall, after the Issue Date, pay a
dividend or make a distribution on its Common Stock or on any other class
or series of capital stock of the Corporation which dividend or
distribution includes or is convertible (without the payment of any
consideration other than surrender of such convertible security) into
Common Stock, the Conversion Price in effect at the opening of business on
the day following the date fixed for determination of the holders of Common
Stock or capital stock entitled to such payment or distribution (the
"Record Date") shall be reduced by multiplying such Conversion Price by a
fraction of which (A) the numerator shall be the number of shares of Common
Stock outstanding at the close of business on the Record Date and (B) the
denominator shall be the sum of such number of shares and the total number
of shares constituting or included in such dividend or other distribution
(or in the case of a dividend consisting of securities convertible into
Common Stock, the number of shares of Common Stock into which such
securities are
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Certificate of Designation
convertible), such reduction to become effective immediately after the
opening of business on the day following the Record Date ; provided,
however, that if any such dividend or distribution is rescinded and not
paid, then the Conversion Price shall, as of the date when it is determined
that such dividend or distribution price will be rescinded, revert back to
the Conversion Price in effect prior to the adjustment made pursuant to
this paragraph.
(ii) In case the Corporation shall issue or sell (a) Common Stock, (b)
rights, warrants or options entitling the holders thereof to subscribe for
or purchase shares of Common Stock or (c) any security convertible into
Common Stock, in each case at a price, or having an exercise or conversion
price, per share less than the then-current Market Price per share of
Common Stock on (x) the date of such issuance or sale or (y) in the case of
a dividend or distribution of such rights, warrants, options or convertible
securities to the holders of Common Stock, the date fixed for determination
of the holders of such Common Stock entitled to such dividend or
distribution (the date specified in clause (x) or (y) being the "Relevant
Date") (excluding any issuance for which an appropriate and full adjustment
has been made pursuant to the preceding subparagraph (i)), the Conversion
Price shall be reduced by multiplying the then-current Conversion Price by
a fraction of which (A) the numerator shall be the number of shares of
Common Stock outstanding at the open of business on the Relevant Date plus
the number of shares of Common Stock which the aggregate consideration
received or receivable (I) for the total number of shares of Common Stock,
rights, warrants or options or convertible securities so issued or sold,
and (II) upon the exercise or conversion of all such rights, warrants,
options or securities, would purchase at the then-current Market Price per
share of Common Stock and (B) the denominator shall be the number of shares
of Common Stock outstanding at the close of business on the Relevant Date
plus (without duplication) the number of shares of Common Stock subject to
all such rights, warrants, options and convertible securities, such
reduction of the Conversion Price to be effective at the opening of
business on the day following the Relevant Date; provided, however, that if
any such dividend or distribution is rescinded and not paid, then the
Conversion Price shall, as of the date when it is determined that such
dividend or distribution will be rescinded, revert back to the Conversion
Price in effect prior to the adjustment made pursuant to this paragraph.
The issuance of any shares of Common Stock or other rights, warrants,
options or convertible securities pursuant to (a) any restricted stock or
stock option plan or program of the
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Certificate of Designation
Corporation involving the grant of options or rights solely to officers,
directors, employees and/or consultants of the Corporation or its
Subsidiaries at below the then-current Market Price per share of Common
Stock (provided, that any such options or rights were initially granted
with an exercise or conversion price of not less than 85% of the
then-current Market Price per share of Common Stock), (b) any option,
warrant, right, or convertible security outstanding as of the date
hereof,(c) the terms of a firmly committed bona fide underwritten public
offering, or (d) any merger, acquisition, consolidation, or similar
transaction, shall not be deemed to constitute an issuance or sale to which
this clause (ii) applies. Upon the expiration unexercised of any rights,
warrants, options or rights to convert any convertible securities for which
an adjustment has been made pursuant to this clause (ii), the adjustments
shall forthwith be reversed to effect such rate of conversion as would have
been in effect at the time of such expiration or termination had such
rights, warrants, options or rights to convertible securities, to the
extent outstanding immediately prior to such expiration or termination,
never been issued.
(iii) In case the Common Stock shall be subdivided into a greater
number of shares of Common Stock or combined into a smaller number of
shares of Common Stock, the Conversion Price in effect at the opening of
business on the day following the day upon which such subdivision or
combination becomes effective shall be adjusted so that the holder of any
shares of Convertible Preferred Stock thereafter surrendered for conversion
into shares of Common Stock shall be entitled to receive the number of
shares of Common Stock which such holder would have owned or been entitled
to receive after the happening of such events had such shares of
Convertible Preferred Stock been surrendered for conversion immediately
prior to such event. Such adjustment shall become effective at the close of
business on the day upon which such subdivision or combination becomes
effective.
(iv) Subject to the last sentence of this subparagraph (iv), in case
the Corporation shall, by dividend or otherwise, distribute to all holders
of its Common Stock evidences of its indebtedness, shares of any class or
series of capital stock, cash or assets (including securities, but
excluding any shares of Common Stock, rights, warrants, options or
convertible securities for which an appropriate and full adjustment has
been made pursuant to subparagraph (i) or (ii) above), the Conversion Price
in effect on the day immediately preceding the date fixed for the payment
of
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Certificate of Designation
such distribution (the date fixed for payment being referred to as the
"Reference Date") shall be reduced by multiplying such Conversion Price by
a fraction of which the numerator shall be the current Market Price per
share of the Common Stock on the Reference Date less the fair market value
(as determined in good faith by the Board of Directors, whose determination
shall be mailed to the holders of the Convertible Preferred Stock) on the
Reference Date of the portion of the evidences of indebtedness, shares of
capital stock, cash and assets so distributed applicable to one share of
Common Stock, and the denominator shall be such current Market Price per
share of the Common Stock, such reduction to become effective immediately
prior to the opening of business on the day following the Reference Date;
provided, however, that if such dividend or distribution is rescinded and
not paid, then the Conversion Price shall, as of the date when it is
determined that such dividend or distribution will be rescinded, revert
back to the Conversion Price in effect prior to the adjustment made
pursuant to this paragraph. If the Board of Directors determines the fair
market value of any distribution for purposes of this subparagraph (iv) by
reference to the actual or when issued trading market for any securities
comprising such distribution, it must in doing so consider, to the extent
possible, the prices in such market over the same period used in computing
the current Market Price per share of Common Stock pursuant to this Section
VI(c). Notwithstanding the foregoing, if the holders of a majority of the
outstanding Convertible Preferred Stock shall dispute the fair market
determination of the Board of Directors, an investment banking firm (an
"Independent Expert") mutually agreeable to the Corporation and such
majority holders shall be selected to determine the fair market value of
the Common Stock as of the Reference Date, and such Independent Expert's
determination shall be final, binding and conclusive. All costs and
expenses of such Independent Expert shall be borne by the holders of the
then outstanding Convertible Preferred Stock unless the determination of
fair market value is more favorable to such holders by 5% or more, in which
case, all such costs and expenses shall be borne by the Corporation. For
purposes of this subparagraph (iv), any dividend or distribution that also
includes shares of Common Stock or rights, warrants or options to subscribe
for or purchase shares of Common Stock shall be deemed to be (1) a dividend
or distribution of the evidences of indebtedness, cash, assets or shares of
capital stock other than such shares of Common Stock or rights, warrants,
options or convertible securities (making any Conversion Price reduction
required by this subparagraph (iv)) immediately followed by (2) a dividend
or distribution of
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Certificate of Designation
such shares of Common Stock or such rights, warrants, options or
convertible securities (making any further Conversion Price reduction
required by subparagraph (i) or (ii) of this Section VI(c)), except (A) the
Reference Date of such dividend or distribution as defined in this
subparagraph (iv) shall be substituted as "the date fixed for the
determination of shareholders entitled to receive such dividend or other
distribution" and the "Relevant Date" within the meaning of subparagraphs
(i) and (ii) of this Section VI(c) and (B) any shares of Common Stock
included in such dividend or distribution shall not be deemed "outstanding
at the close of business on the date fixed for such determination" within
the meaning of subparagraph (i) of this Section VI(c)).
(v) No adjustment in the Conversion Price shall be required if (A) the
holders of the outstanding Convertible Preferred Stock receive the dividend
or distribution otherwise giving rise to such adjustment or (B) such
adjustment would require an increase or decrease of less than 1% in the
Conversion Price; provided, however, that any adjustments which by reason
of this subparagraph (v)(B) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment or in any
conversion pursuant to this Section VI.
(vi) Whenever the Conversion Price is adjusted as herein provided:
(1) the Corporation shall compute the adjusted Conversion Price
and shall prepare a certificate signed by the Chief Financial Officer
of the Corporation setting forth the adjusted Conversion Price and
showing in reasonable detail the facts upon which such adjustment is
based, and such certificate shall forthwith be filed with the Transfer
Agent for the Convertible Preferred Stock; and
(2) as soon as reasonably practicable after the adjustment, the
Corporation shall mail to all record holders of Convertible Preferred
Stock at their last address as they shall appear upon the stock
transfer books of the Corporation a notice stating that the Conversion
Price has been adjusted and setting forth the adjusted Conversion
Price.
(vii) The Corporation from time to time may reduce the Conversion
Price by any amount for any period of time if the period is at least 20
days, the reduction is irrevocable during the period, subject to any
conditions that the Board
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Certificate of Designation
of Directors may deem relevant, and the Board of Directors of the
Corporation shall have made a determination that such reduction would be in
the best interest of the Corporation, which determination shall be
conclusive. Whenever the Conversion Price is reduced pursuant to the
preceding sentence, the Corporation shall mail to holders of record of the
Convertible Preferred Stock a notice of the reduction at least fifteen days
prior to the date the reduced Conversion Price takes effect, and such
notice shall state the reduced Conversion Price and the period it will be
in effect. If the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
shareholders thereof legally abandon its plan to pay or deliver such
dividend or distribution, then thereafter no adjustment in the number of
shares of Common Stock issuable upon exercise of the right of conversion
granted by this paragraph (c) or in the Conversion Price then in effect
shall be required by reason of the taking of such record.
(viii) Anything in this Section VI(c) to the contrary notwithstanding,
in the event that a record date is established for a dividend or
distribution that gives rise to an adjustment to the Conversion Price
pursuant to this Section VI(c), if any share of Convertible Preferred Stock
is converted into shares of Common Stock between such record date and the
date such dividend or distribution is paid then (x) the number of shares of
Common Stock issued at the time of such conversion will be determined by
reference to the Conversion Price as in effect without taking into account
the adjustment resulting from such dividend or distribution and (y) on the
date that such dividend or distribution is actually paid there shall be
issued in respect of such conversion such number of additional shares of
Common Stock as is necessary to reflect the Conversion Price in effect
after taking into account the adjustment resulting from the dividend or
distribution.
(d) No Fractional Shares. No fractional shares of Common Stock shall
be issued upon conversion of Convertible Preferred Stock. If more than one
certificate evidencing shares of Convertible Preferred Stock shall be
surrendered for conversion at such time by the holder, the number of full shares
issuable upon conversion thereof shall be computed on the basis of the aggregate
number of shares of Convertible Preferred Stock so surrendered. Instead of any
fractional share of Common Stock that would otherwise be issuable to a holder
upon conversion of any shares of Convertible Preferred Stock, the Corporation
shall pay a cash adjustment in respect of such fractional share in an
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Certificate of Designation
amount equal to the fraction of the then-current Market Price per share of
Common Stock on the day of conversion or, if the day of conversion is not a
Trading Day, on the next preceding Trading Day.
(e) Reclassification, Consolidation, Merger or Sale of Assets. In the
event that the Corporation shall be a party to any transaction pursuant to which
the Common Stock is converted into the right to receive other securities, cash
or other property (including without limitation any capitalization or
reclassification of the Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination of the Common Stock), any consolidation of the
Corporation with, or merger of the Corporation into, any other entity, any
merger of another entity into the Corporation (other than a merger which does
not result in a reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock), any sale or transfer of all or
substantially all of the assets of the Corporation or any share exchange), then
lawful provisions shall be made as part of the terms of such transaction whereby
the holder of each share of Convertible Preferred Stock then outstanding shall
have the right thereafter to convert such share only into the kind and amount of
securities, cash and other property receivable upon such transaction by a holder
of the number of shares of Common Stock into which such share of Convertible
Preferred Stock might have been converted immediately prior to such transaction.
The Corporation or the entity formed by such consolidation or resulting from
such merger or which acquires such shares or which acquires the Corporation's
shares, as the case may be, shall make provisions in its certificate or articles
of incorporation or other constituting document to establish such right.
Adjustments for events subsequent to the effective date of such a consolidation,
merger, sale or transfer of assets shall be as nearly equivalent as may be
reasonably practicable to the adjustments provided for herein. In any such
event, effective provisions shall be made in the certificate or articles of
incorporation of the resulting or surviving corporation, in any contract of
sale, conveyance, lease, transfer or otherwise so that the provisions set forth
herein for the protection of the rights of the holder of Convertible Preferred
Stock shall thereafter continue to be applicable, and any such resulting or
surviving corporation shall expressly assume the obligation to pay dividends and
deliver, upon conversion, such shares of common stock, other securities, or cash
as set forth herein. The above provisions shall similarly apply to successive
transactions of the foregoing type.
(f) Reservation of Shares, Etc. The Corporation shall at all times
reserve and keep available, free from preemptive
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Certificate of Designation
rights, out of its authorized and unissued stock, solely for the purpose of
effecting the conversion of the Convertible Preferred Stock, such number of
shares of its Common Stock as shall from time to time be sufficient to permit
the conversion of all shares of Convertible Preferred Stock from time to time
outstanding. Without limitation of the foregoing, the Corporation shall from
time to time, in accordance with the laws of the State of Minnesota, in good
faith and as expeditiously as practicable endeavor to cause the authorized
number of shares of Common Stock to be increased if at any time the number of
shares of authorized and unissued Common Stock shall not be sufficient to permit
the conversion of all the then outstanding shares of Convertible Preferred
Stock.
If any shares of Common Stock required to be reserved for purposes of
conversion of the Convertible Preferred Stock hereunder require registration
with or approval of any governmental authority under any Federal or State law
before such shares may be issued upon conversion, the Corporation will in good
faith and as expeditiously as possible endeavor to cause such shares to be duly
registered or approved as the case may be. If the Common Stock is listed on any
national securities exchange, the Corporation will, prior to the issuance of
shares of Common Stock upon conversion of the Convertible Preferred Stock, if
permitted by the rules of such exchange, list and keep listed on such exchange,
upon official notice of issuance, all shares of Common Stock issuable upon
conversion of the Convertible Preferred Stock, for so long as the Common Stock
continues to be so listed.
(g) Prior Notice of Certain Events. In case:
(i) the Corporation shall (1) declare any dividend (or any other
distribution) on its Common Stock, other than (A) a dividend payable in
shares of Common Stock or (B) a dividend payable in cash out of its
retained earnings other than any special or nonrecurring or other
extraordinary dividend or (2) declare or authorize a redemption or
repurchase of in excess of 5% of the then outstanding shares of Common
Stock;
(ii) the Corporation shall authorize the granting to all holders of
Common Stock of rights or warrants to subscribe for or purchase any shares
of stock of any class or series or of any other rights or warrants;
(iii) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a change in
par value, or from par value to no par value, or from no par value to par
value), or of any
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Certificate of Designation
consolidation or merger to which the Corporation is a party and for which
approval of any shareholders of the Corporation shall be required, or of
the sale of all or substantially all of the assets of the Corporation or of
any share exchange whereby the Common Stock is converted into other
securities, cash or other property;
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation; or
(v) of any other event which would require an adjustment to the
Conversion Price under subparagraph VI(c);
then the Corporation shall cause to be filed with the Transfer Agent for the
Convertible Preferred Stock, and shall cause to be mailed to the holders of
record of the Convertible Preferred Stock, at their last addresses as they shall
appear upon the stock transfer books of the Corporation, at least ten days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record (if any) is to be taken for the purpose
of such dividend, distribution, redemption, repurchase, or grant of rights or
warrants or, if a record is not to be taken, the date as of which the holders of
Common Stock of record to be entitled to such dividend, distribution,
redemption, repurchase, rights or warrants are to be determined or (y) the date
on which such reclassification, consolidation, merger, sale, transfer, share
exchange, dissolution, liquidation, winding up or other event is expected to
become effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation,
winding up or other event (but no failure to mail such notice or any defect
therein or in the mailing thereof shall affect the validity of the corporate
action required to be specified in such notice).
(h) Definitions. The following definitions shall apply to terms used
in this Section VI:
(i) "Closing Price" of any security on any day shall mean the last
reported sale price regular way on such day or, in case no such sale takes
place on such day, the average of the reported closing bid and asked prices
regular way of such security in each case as reported in the consolidated
transaction reporting system with respect to securities quoted on Nasdaq
or, if the shares of such security are not quoted on Nasdaq, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national
16
<PAGE> 17
Certificate of Designation
securities exchange on which the shares of such security are listed or
admitted to trading or, if the shares of such security are not quoted on
Nasdaq and 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 on such other nationally recognized quotation
system then in use, or, if on any such day the shares of such security are
not quoted on any such quotation system, the average of the closing bid and
asked prices as furnished by a professional market maker selected by the
Board of Directors making a market in the shares of such security.
Notwithstanding the foregoing, if the shares of such security are not
publicly held or so listed, quoted or publicly traded, the "Closing Price"
means the fair market value of a share of such security, as determined in
good faith by the Board of Directors, provided, however, that if the
holders of a majority of outstanding Convertible Preferred Stock shall
dispute the fair market value as determined by the Board, such majority
holders and the Corporation may retain an Independent Expert. The
determination of fair market value by the Independent Expert shall be
final, binding and conclusive. All costs and expenses of the Independent
Expert shall be borne by the holders of the outstanding Convertible
Preferred Stock unless the determination of fair market value is more
favorable to such holders by 5% or more, in which case, all such costs and
expenses shall be borne by the Corporation.
(ii) "Market Price" with respect to a share of Common Stock on any day
means, except as set forth below in the case that the shares of Common
Stock are not publicly held or listed, the average of the "quoted prices"
of the Common Stock for 30 consecutive Trading Days commencing 45 Trading
Days before the date in question; provided that if during such 30
consecutive Trading Day period (the "valuation period"), there shall occur
a record date for determining holders of Common Stock entitled to receive a
dividend or distribution on the Common Stock, the "Market Price" shall be
reduced by subtracting the amount obtained by multiplying (a) the value of
such dividend or distribution per share of Common Stock by (b) a fraction
(i) the numerator of which shall be the number of Trading Days from the
beginning of such valuation period to and including the record date for
such dividend or distribution and (ii) the denominator of which shall be
the number of Trading Days in such valuation period. The term "quoted
prices" of the Common Stock shall mean the last reported sale price on that
day or, in case no such reported sale takes place on such day, the average
of the last reported bid and asked prices, regular way, on that day, in
either case, as reported in the consolidated
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<PAGE> 18
Certificate of Designation
transaction reporting system with respect to securities quoted on Nasdaq
or, if the shares of Common Stock are not quoted on Nasdaq, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which
the shares of Common Stock are listed or admitted to trading or, if the
shares of Common Stock are not quoted on Nasdaq and 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 on such
other nationally recognized quotation system then in use, or, if on any
such day the shares of Common Stock are not quoted on any such quotation
system, the average of the closing bid and asked prices as furnished by a
professional market maker selected by the Board of Directors making a
market in the shares of Common Stock. Notwithstanding the foregoing, if the
shares of Common Stock are not publicly held or so listed, quoted or
publicly traded, the "Market Price" means the fair market value of a share
of Common Stock, as determined in good faith by the Board of Directors
provided, however, that if the holders of a majority of outstanding
Convertible Preferred Stock shall dispute the fair market value as
determined by the Board, such majority holders and the Corporation may
retain an Independent Expert. The determination of fair market value by the
Independent Expert shall final, binding and conclusive. All costs and
expenses of the Independent Expert shall be borne by the holders of the
then outstanding Convertible Preferred Stock unless the determination of
fair market value is more favorable to such holders by 5% or more, in which
case, all such costs and expenses shall be borne by the Corporation.
(iii) "Nasdaq" shall mean the National Association of Securities
Dealers Automatic Quotation System.
(iv) "Trading Day" shall mean a day on which securities are traded on
the national securities exchange or quotation system or in the
over-the-counter market used to determine the Closing Price.
VII. Voting Rights. General. Subject to Section XI(d) and except as
set forth below or as otherwise from time to time required by law, the holders
of shares of Convertible Preferred Stock shall vote as a class together with the
holders of the Common Stock on all matters with respect to which the holders of
Common Stock have the right to vote. In connection with any right to vote, each
share of Convertible Preferred Stock shall be entitled to a number of votes
which is equal to the whole number of shares of Common Stock that could be
obtained upon conversion of one share of Convertible Preferred Stock at
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<PAGE> 19
Certificate of Designation
the Conversion Price applicable on the record date set with respect to such
vote. Any shares of Convertible Preferred Stock owned, directly or indirectly,
by any entity of which the Corporation owns, directly or indirectly, a majority
of the shares entitled to vote for directors shall not have voting rights
hereunder and shall not be counted in determining the presence of a quorum.
(b) Voting Rights for Directors.
(i) On the Issue Date, the number of directors constituting the Board
of Directors shall, without further action, be increased to seven. For so
long as the Restricted Parties (as defined in the Shareholders Agreement
(as defined below)) own a majority of the outstanding shares of Convertible
Preferred Stock and the Investor (as defined in the Shareholder Agreement)
is entitled to designate at least one nominee (a "Designee") for election
to the Board of Directors of the Corporation pursuant to Section 2.1 of the
Shareholder Agreement, subject to Section XI(d), the holders of the
outstanding shares of Convertible Preferred Stock shall have the right,
voting separately as a class and to the exclusion of the holders of all
other classes of stock of the Corporation, to (A) initially elect two
directors (who are reasonably acceptable to the Corporation) and (B)
thereafter, as long as the Investor is entitled to designate at least one
Designee for election to the Board of Directors pursuant to Section 2.1 of
the Shareholder Agreement, elect that number of directors equal to the
number of Designees that the Investor is entitled to so designate (with
each Designee being reasonably acceptable to the Corporation if such
Designee has not previously been a member of the Board of Directors). For
as long as the holders of Convertible Preferred Stock voting separately as
a class are entitled to elect one or more directors pursuant to this
Section VII(b)(i), holders of the outstanding Convertible Preferred Stock
shall not be entitled to vote in the election of any other directors of the
Corporation.
(ii) The right to elect directors as described in Section VII(b)(i)
hereof may be exercised initially either at a special meeting of the
holders of Convertible Preferred Stock, called as hereinafter provided in
Section VII(b)(iii) hereof, at any annual meeting of shareholders held for
the purpose of electing directors, or by the written consent of the holders
of Convertible Preferred Stock without a meeting pursuant to Section
302A.441 of the Minnesota Business Corporation Act and thereafter at such
annual meeting (or by written consent in lieu thereof). For so long as the
Restricted Parties own a majority of the outstanding shares
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<PAGE> 20
Certificate of Designation
of Convertible Preferred Stock and the Investor is entitled to designate at
least one Designee for election to the Board of Directors of the
Corporation pursuant to Section 2.1 of the Shareholder Agreement and
subject to Section XI(d) hereof, such voting right shall continue until
such time as all outstanding shares of Convertible Preferred Stock shall
have been redeemed or otherwise retired. If the Restricted Parties own less
than a majority of the outstanding shares of Convertible Preferred Stock or
if the Investor is no longer entitled to designate at least one Designee
for election to the Board of Directors pursuant to Section 2.1 of the
Shareholder Agreement, the holders of the Convertible Preferred Stock
shall, in any election of directors, vote as a single class together with
the holders of the Common Stock for the election of directors and each
share of Convertible Preferred Stock will be entitled to the number of
votes determined pursuant to Section VII(a).
(iii) The Secretary of the Corporation may, and upon the written
request of the holders of record of at least 10% of the outstanding shares
of Convertible Preferred Stock (addressed to the Secretary of the
Corporation at the principal office of the Corporation) shall, call a
special meeting of the holders of Convertible Preferred Stock for the
election (and, if applicable, removal) of the directors to be elected by
them as herein provided. Such call shall be made by notice to each holder
by first-class mail, postage prepaid at its address as it appears in the
records of the Corporation, and such notice shall be mailed at least 10
days but no more than 20 days before the date of the special meeting, or as
required by law. Such meeting shall be held at the earliest practicable
date upon the notice required for special meetings of shareholders at the
place designated by the Secretary of the Corporation. If such meeting shall
not be called by a proper officer of the Corporation within 15 days after
receipt of such written request by the Secretary of the Corporation, then
the holders of record of at least 10% of the shares of Convertible
Preferred Stock then outstanding may call such meeting at the expense of
the Corporation, and such meeting may be called by such holders upon the
notice required for special meetings of shareholders and shall be held at
the place designated in such notice. Any holder of Convertible Preferred
Stock that would be entitled to vote at any such meeting shall have access
to the stock books of the Corporation for the purpose of causing a meeting
of holders of Convertible Preferred Stock to be called pursuant to the
provisions of this Section VII(b)(iii).
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<PAGE> 21
Certificate of Designation
(iv) At any meeting held for the purpose of electing directors at
which the holders of Convertible Preferred Stock shall have the right to
elect directors as a class as provided in this Section VII(b), the presence
in person or by proxy of the holders of a majority of the then outstanding
shares of Convertible Preferred Stock shall be required and be sufficient
to constitute a quorum of such class for the election of directors by such
class. At any such meeting or adjournment thereof, (x) the absence of a
quorum of the holders of Convertible Preferred Stock shall not prevent the
election of directors other than the directors to be elected by the holders
of Convertible Preferred Stock as a class, and the absence of a quorum or
quorums of the holders of capital stock entitled to elect such other
directors shall not prevent the election of the directors to be elected by
the holders of Convertible Preferred Stock, and (y) in the absence of a
quorum of the holders of Convertible Preferred Stock, a majority of the
holders of Convertible Preferred Stock present in person or by proxy shall
have the power to adjourn the meeting for the election of directors which
such holders are entitled to elect as a class, from time to time, without
notice (except as required by law) other than announcement at the meeting,
until a quorum shall be present.
(v) Except as provided in Section XI(d) hereof and this paragraph (v),
the term of office of any director elected by the holders of Convertible
Preferred Stock pursuant to Section VII(b)(i) hereof shall terminate upon
the expiration of his term and the election of his successor. Directors
elected by the holders of Convertible Preferred Stock pursuant to Section
VII(b) may be removed with or without cause by the holders of a majority of
the outstanding shares of Convertible Preferred Stock and shall not
otherwise be subject to removal other than upon election of their successor
or the Convertible Preferred Stock voting separately as a class no longer
being entitled to elect directors as provided herein.
(vi) For so long as the holders of Convertible Preferred Stock are
entitled, voting separately as a class, to elect at least one member of the
Board of Directors and the Restricted Parties own a majority of the
outstanding Convertible Preferred Stock, in case of a vacancy occurring in
the office of any director so elected pursuant to Section VII(b)(i) hereof,
the holders of a majority of the Convertible Preferred Stock then
outstanding may, at a special meeting of the holders or by written consent
as provided above, elect a successor to hold office for the unexpired term
of such director.
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Certificate of Designation
(vii) Unless otherwise agreed to by the holders of a majority of the
outstanding shares of Convertible Preferred Stock, for so long as the
holders of Convertible Preferred Stock are entitled, voting separately as a
class, to elect at least one member of the Board of Directors and the
Restricted Parties own a majority of the outstanding Convertible Preferred
Stock, (A) the number of directors constituting the Board of Directors
shall remain at seven, (B) each of the Audit Committee and the Compensation
Committee of the Board of Directors shall contain at least one director
elected by the holders of Convertible Preferred Stock and (C) with respect
to each other committee of the Board of Directors, the percentage of
directors on such committee designated by the holders of Convertible
Preferred Stock shall, at all times, be at least equal to the percentage of
the Board of Directors elected by the holders of Convertible Preferred
Stock; provided, that, if under applicable law, such committee can only be
comprised of disinterested directors, then the provisions of this clause
(C) shall not apply to the holders of the Convertible Preferred Stock
unless each director so designated by such holders is a disinterested
director for purposes of such committee.
(c) Class Voting. So long as any shares of the Corporation's
Convertible Preferred Stock are outstanding the Corporation shall not, without
the affirmative vote or consent of the holders of at least a majority of all
outstanding shares of the Corporation's Convertible Preferred Stock, voting or
consenting separately as a class without regard to series:
(i) create any class of stock that by its terms ranks senior to or on
a parity with the Convertible Preferred Stock as to dividends or upon
liquidation, dissolution or winding up of the Corporation or increase the
authorized number of shares of, or issue any additional shares of or any
securities convertible into shares of, or reclassify any Junior Stock into
shares of, any such class;
(ii) alter or change any of the provisions of the Corporation's
Articles of Incorporation (whether by merger, consolidation or other
business combination with another person or by any other means) so as to
adversely affect the relative rights and preferences of any outstanding
Convertible Preferred Stock of the Corporation; provided, however, that
neither (A) the creation, amendment or reclassification of any class of
stock that following such creation, amendment or reclassification by its
terms ranks junior to shares of Convertible Preferred Stock of the
Corporation as to dividends and upon liquidation,
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<PAGE> 23
Certificate of Designation
dissolution or winding up, nor (B) an increase in the authorized number of
shares of any such class, nor (C) any merger, consolidation or other
business combination subject to the provisions of paragraph VI(e), shall
give rise to any such voting right;
(iii) issue any additional shares of Convertible Preferred Stock.
(d) Additional Class Voting. Unless otherwise agreed to by the holders
of a majority of the outstanding shares of Convertible Preferred Stock, for so
long as the Restricted Parties own a majority of the outstanding shares of
Convertible Preferred Stock, the Corporation shall not, without the express
written consent of the holders of a majority of the shares of Preferred Stock,
take any action, requiring the approval of the "Investor" pursuant to Sections
3.2, 3.3 or 3.4 of the Shareholder Agreement. The provisions of this paragraph
(d) will terminate with respect to such Sections 3.2, 3.3 or 3.4, as applicable,
when the obligations of the Corporation under such Sections terminate under the
Shareholder Agreement.
VIII. Status of Acquired Shares. For purposes hereof, all shares of
Convertible Preferred Stock owned, directly or indirectly, by any entity of
which the Corporation owns, directly or indirectly, a majority of the shares
entitled to vote for directors shall be deemed not outstanding. Shares of
Convertible Preferred Stock redeemed by the Corporation, received upon
conversion pursuant to Section VI or otherwise acquired by the Corporation shall
be restored to the status of authorized but unissued shares of capital stock,
without designation as to series, and, subject to the other provisions hereof,
may thereafter be issued, but not as shares of Convertible Preferred Stock.
IX. Modification and Waiver. The Corporation may not, without the
consent of each holder affected thereby, (a) change the stated redemption date
of the Convertible Preferred Stock, (b) reduce the Stated Value or liquidation
preference of, or dividend on, the Convertible Preferred Stock, (c) change the
place or currency of payment of the Stated Value or liquidation preference of,
or dividend on, the Convertible Preferred Stock or (d) reduce the percentage of
outstanding Convertible Preferred Stock necessary to modify or amend the terms
thereof or to grant waivers in respect thereto.
X. Severability of Provisions. Whenever possible, each provision
hereof shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable
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Certificate of Designation
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity, without invalidating or otherwise adversely affecting the
remaining provisions hereof. If a court of competent jurisdiction should
determine that a provision hereof would be valid or enforceable if a period of
time were extended or shortened or a particular percentage were increased or
decreased, then such court may make such change as shall be necessary to render
the provision in question effective and valid under applicable law.
XI. Miscellaneous. Transfer Taxes. The Corporation shall pay any and
all stock transfer and documentary stamp taxes that may be payable in respect of
any issuance of delivery of shares of Convertible Preferred Stock or shares of
Common Stock or other securities issued on account of Convertible Preferred
Stock pursuant hereto or certificates or instruments evidencing such shares or
securities. The Corporation shall not, however, be required to pay any such tax
which may be payable in respect of any transfer involved in the issuance or
delivery of shares of Convertible Preferred Stock or Common Stock or other
securities in a name other than that in which the shares of Convertible
Preferred Stock with respect to which such shares or other securities are issued
or delivered were registered, or in respect of any payment to any entity with
respect to any such shares or securities other than a payment to the registered
holder thereof, and shall not be required to make any such issuance, delivery or
payment unless and until the entity otherwise entitled to such issuance,
delivery or payment has paid to the Corporation the amount of any such tax or
has established, to the satisfaction of the Corporation, that such tax has been
paid or is not payable.
(b) Failure to Designate Shareholder or Payee. In the event that a
holder of shares of Convertible Preferred Stock shall not by written notice
designate the name in which shares of Common Stock to be issued upon conversion
of such shares should be registered or to whom payment upon redemption of shares
of Convertible Preferred Stock should be made, or the address to which the
certificates or instruments evidencing such shares or such payment should be
sent, the Corporation shall be entitled to register such shares and or such
payment in the name of the holder of such Convertible Preferred Stock as shown
on the records of the Corporation and to send the certificates or instruments
evidencing such shares or such payment, to the address of such holder shown on
the records of the Corporation.
(c) Registration Rights Agreement. Reference is made to the
Registration Rights Agreement, dated on or about April 15, 1999 (as the same may
be amended, supplemented or modified from time to time pursuant to the terms
thereof, the "Registration
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Certificate of Designation
Rights Agreement"), among the Corporation, the Investor and National
Broadcasting Company, Inc. So long as any shares of Convertible Preferred Stock
constitute "Registrable Securities" as defined in the Registration Rights
Agreement, each holder shall be entitled to the rights granted by the
Corporation thereunder and shall be bound by the restrictions therein.
(d) Shareholder Agreement. Reference is made to the Shareholder
Agreement, dated on or about April 15, 1999 (as the same may be amended,
supplemented or modified from time to time pursuant to the terms thereof, the
"Shareholder Agreement"), among the Corporation, the Investor and National
Broadcasting Company, Inc. The Convertible Preferred Stock shall be subject to
the terms and conditions set forth in the Shareholder Agreement, including
without limitation, the voting, transfer and standstill restrictions set forth
therein.
(e) Documents on File. Copies of each of the Registration Rights
Agreement and Shareholder Agreement shall be kept on file at the principal place
of business of the Corporation at 6740 Shady Oak Road, Eden Prairie, MN
55344-3433.
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Certificate of Designation
IN WITNESS WHEREOF, ValueVision International, Inc. has caused this
Certificate of Designation to be signed on its behalf by Gene McCaffery, its
President, and David T. Quinby, its Secretary, this 15th day of April, 1999.
VALUEVISION INTERNATIONAL, INC.
By: /s/ Gene McCaffery
-----------------------------
Name: Gene McCaffery
Title: President
ATTEST:
/s/ David T. Quinby
- -----------------------------
David T. Quinby, Secretary
<PAGE> 1
Exhibit 8
SHAREHOLDER AGREEMENT
dated as of April 15, 1999
among
ValueVision International, Inc.
GE Capital Equity Investments, Inc.
and
National Broadcasting Company, Inc.
<PAGE> 2
Exhibit 8
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT, dated as of April 15, 1999, among
ValueVision International, Inc., a Minnesota corporation (together with its
successors, the "Company"), GE Capital Equity Investments, Inc., a Delaware
corporation (together with its successors, "GE Capital Equity Investments") and
National Broadcasting Company, Inc., a Delaware corporation (together with its
successors, "NBC").
W I T N E S S E T H :
WHEREAS, the Company and GE Capital Equity Investments have
entered into an Investment Agreement dated as of March 8, 1999, as amended by
the First Amendment and Agreement, dated as of the date hereof (as amended, the
"Investment Agreement"), pursuant to which the Investor (as defined below) has
agreed to purchase shares of Series A Redeemable Convertible Preferred Stock
(the "Preferred Stock") and a warrant to purchase Common Stock of the Company
(the "Purchase Warrant");
WHEREAS; the Company and NBC, an Affiliate of the Investor as
of the date hereof, have entered into the Distribution Agreement (as defined
below), pursuant to which the Company has agreed to issue to NBC or its designee
(i) warrants to purchase 1,450,000 shares of Common Stock of the Company (the
"Initial Distributor Warrants") and (ii) at agreed upon times and subject to the
satisfaction of certain conditions contained therein, additional warrants to
purchase Common Stock of the Company (the "Bonus Distributor Warrants"); and
WHEREAS, the parties hereto deem it in their best interests
and in the best interests of the Company to provide for certain matters with
respect to the governance of the Company and desire to enter into this Agreement
in order to effectuate that purpose.
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto hereby agree as follows:
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<PAGE> 3
Shareholder Agreement
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 Definitions. As used in this Agreement,
the following terms shall have the meanings set forth below:
"Adjusted Outstanding Common Stock" shall mean, at any time,
the total number of shares of outstanding Common Stock at such time;
provided that for purposes of such calculation (a) all shares of Common
Stock issuable upon conversion of the then outstanding Preferred Stock
shall be considered outstanding, (b) all shares of Common Stock
issuable upon exercise of the outstanding Initial Distributor Warrants
(whether such Initial Distributor Warrants are vested or unvested)
shall be considered outstanding, (c) to the extent that Bonus
Distributor Warrants have been issued and are outstanding (and only to
such extent), all shares of Common Stock issuable upon the exercise of
such issued and outstanding Bonus Distributor Warrants (whether such
Bonus Distributor Warrants are vested or unvested) shall be considered
outstanding and (d) if Shareholder Approval has been obtained(and only
in such case) the maximum number of shares of Common Stock then
issuable upon exercise of the Purchase Warrant shall be considered
outstanding.
"Affiliate" shall mean, with respect to any Person, any other
Person that directly or indirectly controls, is controlled by, or is
under common control with, such Person. As used in this definition,
"control" (including its correlative meanings, "controlled by" and
"under common control with") shall mean the possession, directly or
indirectly, of power to direct or cause the direction of management or
policies (whether through ownership of securities or partnership or
other ownership interests, by contract or otherwise).
"Agreement" shall mean this Agreement as in effect on the date
hereof and as hereafter from time to time amended, modified or
supplemented in accordance with the terms hereof.
"Beneficially Own" shall have the meaning set forth in Rule
13d-3 under the Exchange Act, except that a Person shall be deemed to
"Beneficially Own" all securities that such Person has a right to
acquire, whether such right is exercisable immediately or only after
the passage of time (and without any additional condition), provided
that a Person shall not be deemed to "Beneficially Own" any shares of
Common Stock which are issuable upon exercise of any
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<PAGE> 4
Shareholder Agreement
Bonus Distributor Warrants unless and until such Bonus Distributor
Warrants are actually issued and outstanding (at which time such Person
shall be deemed to Beneficially Own all shares of Common Stock which
are issuable upon exercise of such Bonus Distributor Warrants, whether
or not they are vested or unvested)and, provided further, except as
expressly provided in this Agreement no Person shall be deemed to
"Beneficially Own" any securities issuable upon exercise of the
Purchase Warrant unless and until the Shareholder Approval is obtained.
In the event that the Shareholder Approval is obtained, when
calculating Beneficial Ownership on any particular date after receipt
of such Shareholder Approval, the Purchase Warrant will be deemed to
represent Beneficial Ownership of the maximum number of shares of
Common Stock that could be acquired upon exercise of the Purchase
Warrant on such date.
"Board of Directors" shall mean the Board of Directors of the
Company as from time to time hereafter constituted.
"Business Day" shall mean any day, other than a Saturday,
Sunday or a day on which commercial banks in New York, New York are
authorized or obligated by law or executive order to close.
"Certificate of Designation" shall mean the Certificate of
Designation of the Preferred Stock, filed with the Secretary of State
of the State of Minnesota on or prior to the date hereof.
"Change in Control of the Company" shall mean any of the
following: (i) a merger, consolidation or other business combination or
transaction to which the Company is a party if the shareholders of the
Company immediately prior to the effective date of such merger,
consolidation or other business combination or transaction, as a result
of such merger, consolidation or other business combination or
transaction, do not have Beneficial Ownership of voting securities
representing 50% or more of the Total Current Voting Power of the
surviving corporation following such merger, consolidation or other
business combination or transaction; (ii) an acquisition by any Person
(other than the Restricted Parties and their Affiliates or any 13D
Group to which any of them is a member) of Beneficial Ownership of
Voting Stock of the Company representing 25% or more of the Total
Current Voting Power of the Company, (iii) a sale of all or
substantially all the consolidated assets of the Company to any Person
or Persons (other than Restricted Parties and their Affiliates or any
13D Group to which any of them is a member); or (iv) a liquidation or
dissolution of the Company.
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<PAGE> 5
Shareholder Agreement
"Common Stock" shall mean the common stock, par value $0.01
per share, of the Company and any securities of the Company into which
such Common Stock may be reclassified, exchanged or converted.
"Company" shall have the meaning set forth in the
preamble hereto.
"Designee" shall have the meaning set forth in Section
2.1(d).
"Disinterested Shareholders" shall mean any shareholder of the
Company who is not a Restricted Party or an Affiliate of a Restricted
Party or a member of a 13D Group in which a Restricted Party or an
Affiliate of a Restricted Party is also a member.
"Distribution Agreement" shall mean the Distribution and
Marketing Agreement dated March 8, 1999 between the Company and NBC
pursuant to which NBC has agreed to distribute certain programing of
the Company, as such agreement may be amended from time to time.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
"GAAP" shall mean generally accepted accounting principles in
the United States of America in effect from time to time.
"GE Capital" shall mean General Electric Capital Corporation,
a New York corporation, together with its successors by operation of
law.
"Independent Expert" shall mean an investment banking firm
mutually acceptable to the Company and the Investor.
"Investor" shall mean GE Capital Equity Investments, a
wholly-owned Subsidiary of GE Capital as of the date hereof and an
Affiliate of NBC as of the date hereof, together with its permitted
assigns pursuant to Section 5.6.
"Investment Agreement" shall have the meaning set forth in the
recitals hereto, as such agreement may be amended from time to time.
"Investor Tender Offer" shall mean a bona fide public tender
offer subject to the provisions of Regulation 14d under the Exchange
Act, by a Restricted Party (or any 13D Group that includes a Restricted
Party) to purchase or
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<PAGE> 6
Shareholder Agreement
exchange for cash or other consideration any Voting Stock and which
consists of an offer to acquire 100% of the Total Current Voting Power
of the Company then in effect (other than Voting Stock owned by
Restricted Parties or any Affiliate of a Restricted Party) and is
conditioned (which condition may not be waived) on a majority of the
shares of Voting Stock held by Disinterested Shareholders being
tendered and not withdrawn with respect to such offer.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or security
agreement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement or
any financing lease having substantially the same effect as any of the
foregoing).
"Market Capitalization" shall mean the aggregate Market Price
of the outstanding capital stock of the Company.
"Market Price" shall mean, with respect to a share of capital
stock on any day, except as set forth below in the case that the shares
of such capital stock are not publicly held or listed, the average of
the "quoted prices" of such capital stock for 30 consecutive Trading
Days commencing 45 Trading Days before the date in question. The term
"quoted prices" of capital stock shall mean the last reported sale
price on that day or, in case no such reported sale takes place on such
day, the average of the last reported bid and asked prices, regular
way, on that day, in either case, as reported in the consolidated
transaction reporting system with respect to securities quoted on
Nasdaq or, if shares of such capital stock are not quoted on Nasdaq, as
reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities
exchange on which shares of such capital stock are listed or admitted
to trading or, if shares of such capital stock are not quoted on Nasdaq
and 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 on such other nationally recognized
quotation system then in use, or, if on any such day shares of such
capital stock are not quoted on any such quotation system, the average
of the closing bid and asked prices as furnished by a professional
market maker selected by the Board of Directors making a market in the
shares of such capital stock. Notwithstanding the foregoing, if shares
of such capital stock are not publicly held or so listed, quoted or
publicly traded, the "Market Price" shall mean the fair market value of
a share of such capital stock, as determined in good faith by the Board
of Directors;
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Shareholder Agreement
provided, however, that if the Investor shall dispute the fair market
value as determined by the Board of Directors, the Investor and the
Company shall retain an Independent Expert. The determination of fair
market value by the Independent Expert shall be final, binding and
conclusive on the Company and the Investor. All costs and expenses of
the Independent Expert shall be borne by the Investor unless the
determination of fair market value is more favorable to such Investor
by 5% or more, in which case, all such costs and expenses shall be
borne by the Company.
"Material Agreement" shall mean any contract, lease,
restriction, agreement, instrument or commitment to which the Company
or any Subsidiary of the Company is a party or by which its properties
are bound (i) which provides a benefit to the Company or any of its
Subsidiaries of, or commits the Company or any Subsidiary of the
Company to expend, $500,000 or more (or, in the case of any agreement
with any customer of the Company or any Company Subsidiary of the
Company, $50,000 or more), (ii) which if breached by any party thereto
would result in liability or loss to the Company and its Subsidiaries
of $500,000 or more (or in the case of any agreement with any customer
of the Company or any Subsidiary of the Company, $50,000 or more)
or(iii) which provides for the distribution of programming of the
Company to more than 250,000 full-time equivalent homes by any
multichannel video programming distributor, including without
limitation, by a cable television system, MATV and SMATV systems, MMDS,
TVRO and other wireline, wireless or direct broadcast satellite
delivery methods.
"Material Subsidiaries" shall mean those Subsidiaries of the
Company that constitute "significant subsidiaries" as defined in Rule
1-02 of Regulation S-X under the Securities Act.
"Material Transaction" shall mean (i) the direct or indirect
acquisition or purchase of 5% or more of the assets (based on the fair
market value thereof) of the Company and its Subsidiaries, taken as a
whole, or of 5% or more of any class of equity securities of the
Company or any of its Subsidiaries or any tender offer or exchange
offer (including by the Company or its Subsidiaries) that if
consummated would result in any person beneficially owning 5% or more
of any class of equity securities of the Company or any of its
Subsidiaries, or (ii) any merger, consolidation, business combination,
sale of all or substantially all assets, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any of its
Subsidiaries other than the transactions contemplated by the Investment
Agreement or this Agreement.
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Shareholder Agreement
"NBC" shall mean National Broadcasting Company, Inc., a
Delaware corporation and Affiliate of the Investor as of the date
hereof and a wholly-owned Subsidiary of General Electric Company as of
the date hereof, together with its successors by operation of law
"NBC Restricted Person" shall mean each of the Persons listed
on Annex A hereto together with their respective Affiliates.
"Options" shall mean stock options to purchase Common
Stock.
"Permitted Liens" shall mean (i) mechanics', carriers',
repairmen's or other like Liens arising or incurred in the ordinary
course of business, (ii) Liens arising under original purchase price
conditioned sales contracts and equipment leases with third parties
entered into in the ordinary course of business consistent with past
practice, (iii) statutory Liens for Taxes not yet due and payable and
(iv) other encumbrances or restrictions or imperfections of title which
do not materially impair the continued use and operation of the assets
to which they relate.
"Person" shall mean an individual, corporation, unincorporated
association, partnership, group (as defined in Section 13(d)(3) of the
Exchange Act), trust, joint stock company, joint venture, business
trust or unincorporated organization, limited liability company, any
governmental entity or any other entity of whatever nature.
"Preferred Stock" shall mean the Series A Redeemable
Convertible Preferred Stock, par value $0.01 per share, of the Company.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement dated as of the date hereof between the Company and
the Investor, as it may be amended from time to time.
"Representatives" shall mean, with respect to any Person, such
Person's directors, officers, employees, agents and other
representatives acting in such capacity.
"Restricted Parties" shall mean each of (i) NBC, its Ultimate
Parent Entity (if any), each Subsidiary of NBC and each Subsidiary of
its Ultimate Parent Entity, (ii) GE Capital, its Ultimate Parent Entity
(if any), each Subsidiary of GE Capital and each Subsidiary of its
Ultimate Parent Entity and (iii) any Affiliate of any Person that is
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Shareholder Agreement
a Restricted Party if (and only if) such Restricted Party has the right
or power (acting alone or solely with other Restricted Parties) to
either cause such Affiliate to comply with or prevent such Affiliate
from not complying with all of the terms of this Agreement that are
applicable to Restricted Parties.
"SEC" shall mean the United States Securities and
Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Shareholder Approval" shall mean the approval at the
Shareholder Meeting by the Company's shareholders of the Purchase
Warrant.
"Shareholders Meeting" shall mean the meeting of shareholders
of Company, which meeting the Company shall hold and convene promptly
after the date hereof in order to vote on certain matters including,
but not limited to, the Purchase Warrant.
"Shareholders Vote" shall mean the vote of the shareholders of
the Company taken at the Shareholders Meeting.
"Standstill Limit" means Beneficial Ownership of 39.9%
of the Adjusted Outstanding Common Stock.
"Standstill Period" shall mean the period beginning on the
date hereof and ending on the occurrence of a Standstill Termination
Event, provided that the Standstill Period shall recommence immediately
upon the occurrence of a Standstill Reinstatement Event.
"Standstill Reinstatement Event" shall mean the occurrence of
any of the following (a) the Standstill Period has terminated pursuant
to clause (iii) of the definition of "Standstill Termination Event" and
such Third Party Tender Offer is withdrawn or terminated (without
having been consummated) at any time during which an Investor Tender
Offer is not then pending (unless the party that commenced such
Investor Tender Offer determines to terminate such Investor Tender
Offer in accordance with Section 4.1(f), in which event a Standstill
Reinstatement Event shall occur at the time of such termination), or
(b) the Standstill Period has terminated pursuant to clause (iv) of the
definition of "Standstill Termination Event" due to a Change of Control
identified in clause (ii) of the definition thereof and,
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Shareholder Agreement
within twelve months after the occurrence of such Change in Control,
the Person whose Beneficial Ownership of Voting Stock triggered such
Change of Control no longer Beneficially Owns 25% or more of the Total
Current Voting Power of the Company or (c) the Standstill Period has
terminated pursuant to clause (ii) of the definition of "Standstill
Termination Event," the relevant agreement that would have otherwise
resulted in a Change of Control has been terminated without a Change of
Control having occurred and subsequent to the occurrence of such
Standstill Termination Event but prior to the termination of such
agreement (x) the Restricted Parties have not acquired actual ownership
of Voting Stock representing in the aggregate a majority of the Total
Current Voting Power of the Company, (y) no Restricted Party has made
any proposal or offer to the Company regarding a Takeover Proposal
(other than any such proposal or offer that has been withdrawn by the
party making such proposal or offer or is no longer being pursued) and
(z) no Restricted Party has commenced any tender or exchange offer that
is pending when such agreement is terminated and that, if completed,
would result in the Restricted Parties having actual ownership of
Voting Stock representing in the aggregate a majority of the Total
Current Voting Power of the Company. Notwithstanding the foregoing, a
Standstill Reinstatement Event will not occur if prior to the
occurrence of the event specified in clause (a), (b) or (c) above that
would otherwise result in a Standstill Reinstatement Event, another
Standstill Termination Event occurs for which there has not been a
related Standstill Reinstatement Event.
"Standstill Revised Limit" shall mean the percentage of the
Adjusted Outstanding Common Stock Beneficially Owned by the Restricted
Parties as of the occurrence of a Standstill
Reinstatement Event.
"Standstill Termination Event" shall mean the earliest to
occur of the following: (i) the tenth anniversary of the date of this
Agreement, (ii) the date the Company enters into an agreement relating
to a transaction that if consummated will result in a Change in Control
of the Company, (iii) a Third Party Tender Offer, (iv) any Change in
Control of the Company occurs, or (v) the six month anniversary of the
date on which the Investor is no longer entitled to designate any
nominees to the Board of Directors pursuant to Section 2.1; provided,
that the Standstill Period will be immediately reinstated upon the
occurrence of a Standstill Reinstatement Event; provided further that,
upon a Standstill Reinstatement Event, if the Standstill Revised Limit
is greater than the Standstill Limit, then the Standstill Revised Limit
and not the Standstill Limit shall
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Shareholder Agreement
thereafter be deemed the Standstill Limit for all purposes
hereunder.
"Subsidiary" shall mean, as to any Person, a corporation,
partnership, limited liability company, joint venture or other entity
of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned,
directly or indirectly through one or more intermediaries (including,
without limitation, other Subsidiaries), or both, by such Person.
"Takeover Transaction" shall mean (A) any of the matters set
forth in clause (i) of the definition of Material Transaction but
replacing "5%" with "50%" each place "5%" is used in such definition,
(B) a sale of all or substantially all of the assets of the Company and
its Subsidiaries or (C) a merger or consolidation of the Company.
"Third Party Tender Offer" shall mean a bona fide public offer
subject to the provisions of Regulation 14D under the Exchange Act, by
a Person (which is not made by and does not include any of the Company,
a Restricted Party or any Affiliate of any of them or any 13D Group
that includes the Company, a Restricted Party or any Affiliate of them)
to purchase or exchange for cash or other consideration any Voting
Stock and which consists of an offer to acquire 25% or more of the then
Total Current Voting Power of the Company.
"13D Group" means any "group" (within the meaning of Section
13(d) of the Exchange Act) formed for the purpose of acquiring,
holding, voting or disposing of Voting Stock.
"Total Current Voting Power" shall mean, with respect to any
corporation the total number of votes which may be cast in the election
of members of the Board of Directors of the corporation if all
securities entitled to vote in the election of such directors
(excluding shares of preferred stock that are entitled to elect
directors only upon the occurrence of customary events of default) are
present and voted (it being understood that the Preferred Stock will be
included on an as converted basis in the calculation of Total Current
Voting Power of the Company).
"Transfer" shall have the meaning set forth in Section
4.2.
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Shareholder Agreement
"Ultimate Parent Entity" shall mean, with respect to any
Person (the "Subject Person"), the Person (if any) that (i) owns,
directly or indirectly through one or more intermediaries, or both,
shares of stock or other ownership interests having ordinary voting
power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of the Subject
Person and (ii) is not itself a Subsidiary of any other Person or is a
natural person.
"Voting Stock" shall mean shares of the Common Stock and
Preferred Stock and any other securities of the Company having the
ordinary power to vote in the election of members of the Board of
Directors of the Company.
"Warrants" shall mean the Purchase Warrant, the Initial
Distributor Warrants and the Bonus Distributor Warrants.
ARTICLE II
CORPORATE GOVERNANCE
Section 2.1 Board of Directors.
(a) The Company shall immediately expand the size of the Board
of Directors to seven directors and, pursuant to the terms of the Certificate of
Designation, appoint to the Board of Directors two individuals designated by the
Investor as the holder of a majority of the outstanding shares of Preferred
Stock. The directors designated by the Investor shall be subject to the
reasonable approval of a majority of the members of the Board of Directors and
shall continue to serve as directors until the next election of directors.
(b) If the Shareholder Approval is obtained, (i) as long as
the Restricted Parties continue to Beneficially Own an aggregate number of
shares of Common Stock equal to or greater than 50% of the number of shares of
Common Stock which the Restricted Parties Beneficially Own on the date hereof
(making equitable adjustments for any conversions, reclassifications,
reorganizations, stock dividends, stock splits, reverse splits and similar
events which occur with respect to the Common Stock), the Investor shall be
entitled to designate two individuals to be nominated to the Board of Directors
or (ii) if the condition in clause (i) of this paragraph (b) is not satisfied,
then as long as the Restricted Parties shall continue to Beneficially Own at
least 10% of the Adjusted Outstanding Common Stock, the Investor shall be
entitled to designate one individual to be nominated to the Board of Directors.
For purpose of clause (i) above, the
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Shareholder Agreement
Preferred Stock and the Purchase Warrant will be treated as outstanding and
exercisable as of the date hereof.
(c) If the Shareholder Approval is not obtained, (i) as long
as the Restricted Parties continue to Beneficially Own an aggregate number of
shares of Common Stock equal to or greater than 75% of the number of shares of
Common Stock which the Restricted Parties Beneficially Own on the date hereof
(making equitable adjustments for any conversions, reclassifications,
reorganizations, stock dividends, stock splits, reverse splits and similar
events which occur with respect to the Common Stock), the Investor shall be
entitled to designate two individuals to be nominated to the Board of Directors
or (ii) if the condition in clause (i) of this paragraph (c) is not satisfied,
then as long as the Restricted Parties shall continue to Beneficially Own an
aggregate number of shares of Common Stock equal to or greater than 50% of the
number of shares of Common Stock which the Restricted Parties Beneficially Own
on the date hereof (making equitable adjustments for any conversions,
reclassifications, reorganizations, stock dividends, stock splits, reverse
splits and similar events which occur with the respect to Common Stock), the
Investor shall be entitled to designate one individual to be nominated to the
Board of Directors. For purposes of this paragraph (c), the Purchase Warrant
will not be deemed to be outstanding on the date hereof.
(d) Any individual so designated by the Investor pursuant to
paragraphs (b) or (c) of this Section 2.1 (each a "Designee") that has not
previously served as a member of the Board of Directors shall be subject to the
reasonable approval of a majority of the members of the Board of Directors.
(e) As long as a majority of the outstanding shares of
Preferred Stock are owned by the Restricted Parties and the Investor is
otherwise entitled to designate nominee(s) for election as director(s) pursuant
to Section 2.1, the Designee(s) will be elected to the Board of Directors by the
holders of the Preferred Stock voting separately as a class, as provided in the
Certificate of Designation. If the Restricted Parties no longer own a majority
of the outstanding shares of Preferred Stock (or no shares of Preferred Stock
are outstanding) but the Investor is otherwise entitled to designate nominee(s)
for election as director(s) pursuant to Section 2.1, the Company shall nominate
each such Designee for election as a director as part of the management slate
that is included in the proxy statement (or consent solicitation or similar
document) of the Company relating to the election of directors, and shall
provide the same support for the election of each such Designee as it provides
to other persons standing for election as directors of the Company as part of
the Company's management slate.
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Shareholder Agreement
(f) Subject to applicable law, in the event that any Designee
on the Board of Directors shall cease to serve as a director for any reason
(other than the failure of the shareholders of the Company to elect such person
as director), the vacancy resulting therefrom shall be filled by another
Designee.
(g) For the avoidance of doubt, nothing in this Section 2.1 or
elsewhere in this Agreement is intended to prohibit the Restricted Parties from
nominating and electing a majority of the members of the Board of Directors if
the Restricted Parties have actual ownership of Voting Stock representing in the
aggregate a majority of the Total Current Voting Power and the Standstill Period
is no longer in effect.
(h) For as long as the Investor can designate nominee(s) for
election as director(s) pursuant to Section 2.1 and the Company has otherwise
complied with the terms of this Section 2.1, the Restricted Parties will vote
(or execute a written consent in lieu of) in each shareholder vote (or written
consent in lieu of) for the election of directors of the Company all of their
Voting Stock (other than shares of Preferred Stock that vote for directors as a
separate class from the Common Stock and other than the Common Stock issued
pursuant to the conversion of the Preferred Stock) (i) if there is no bona fide
proxy contest for the election of directors, in favor of the management slate
that is included in the proxy statement (or consent solicitation or similar
document) of the Company relating to the election of directors or (ii) if there
is a bona fide proxy contest for the election of directors, at the election of
each Restricted Party either (x) in favor of the management slate that is
included in the proxy statement (or consent solicitation or other similar
document) of the Company relating to the election of directors or (y) in the
same proportion as all votes cast by Disinterested Shareholders. The Restricted
Parties' obligations hereunder will terminate on the earlier to occur of (A) the
termination of the Standstill Period, or (B) the five year anniversary of the
date hereof.
(i) As long as the Investor is entitled to designate two
persons for nomination as directors, the then current Investor may assign
pursuant to Section 5.6 the right to designate pursuant to the terms and
conditions hereof one of such nominees to any other Restricted Party (such that
two Restricted Parties each have the right to designate one nominee; it being
understood that in such a case for all purposes of this Agreement where rights
or obligations of the Investor or the Restricted Parties are determined by the
number of nominees the Investor is entitled to designate, the Investor will be
deemed to have the right to designate two nominees).
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Shareholder Agreement
(j) For so long as the Restricted Parties own a majority of
outstanding Preferred Stock and the Designees are entitled to be elected to the
Board of Directors by the holders of the Preferred Stock voting separately as a
class pursuant to Section VII(b) of the Certificate of Designation, any shares
of Common Stock owned by the Restricted Parties that were issued pursuant to the
conversion of shares of Preferred Stock (but no other shares of Common Stock
owned by the Restricted Parties) shall not be voted by the Restricted Parties in
any shareholder vote (or written consent in lieu thereof) for the election of
directors of the Company.
Section 2.2 Board Committees. As long as the Investor has the
right to designate at least one nominee to the Board of Directors, unless
otherwise agreed to by the Investor, (a) each of the Audit Committee and the
Compensation Committee of the Board of Directors shall contain at least one
Designee and (b) each other committee of the Board of Directors shall contain a
number of Designees (to the extent available), rounded upward to the nearest
whole number, equal to the total number of directors on such committee
multiplied by the percentage of the entire Board of Directors who are Designees.
Section 2.3 Reimbursement of Expenses; Attendance at Board
Meetings; Indemnification. The Company will reimburse each Designee that serves
as a director for all reasonable costs and expenses (including travel expenses)
incurred in connection with such director's attendance at meetings of the Board
or any committee of the Board upon which such director serves. The Company will
not pay such director annual fees and fees for attending Board or committee
meetings. The Company shall indemnify each such director to the same extent it
indemnifies its other directors pursuant to its organizational documents and
applicable law.
Section 2.4 Consultation and Other Rights. As long as the
Investor has the right to designate at least one nominee to the Board of
Directors, it shall have: (i) the right to examine the books and records of the
Company and (ii) the right to have its representative consult with the Company's
executive officers regarding business strategies, operating priorities and other
major corporate issues.
ARTICLE III
CERTAIN AGREEMENTS
Section 3.1 Financial Statements and Other Reports.
As long as the Investor has the right to designate at least one
person to be nominated for election to the Board of Directors
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Shareholder Agreement
pursuant to Section 2.1, the Company will deliver, or cause to be
delivered to the Investor:
(a) between 30 days prior to and 60 days after the end of each
fiscal year, a budget (on a monthly basis) for the Company and its
Subsidiaries for the following fiscal year (including consolidating and
consolidated statements of operations);
(b) as soon as available and in any event within 45 days after
the end of each month, consolidating and consolidated statements of
operations of the Company and its Subsidiaries for such month and for
the period from the beginning of the current fiscal year to the end of
such month and a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such period and setting forth, in each
case, in comparative form, figures for the corresponding month and
period in the preceding fiscal year and the budget for such month and
for the period from the beginning of the current fiscal year to the end
of such month, all in reasonable detail and certified by an authorized
financial officer of the Company as fairly presenting in all material
respects the financial condition and results of operations of the
Company and its Subsidiaries on a consolidated basis in accordance with
GAAP;
(c) as soon as practicable and in any event within 45 days
after the end of each fiscal quarter of the Company, consolidating and
consolidated statements of operations and cash flow of the Company and
its Subsidiaries for such quarter and for the period from the beginning
of the current fiscal year to the end of such quarter and a
consolidated balance sheet of the Company and its Subsidiaries as at
the end of such quarter, setting forth, in each case, in comparative
form, figures for the corresponding quarter in the preceding fiscal
year and the budget for such quarter, all in reasonable detail, and
certified by an authorized financial officer of the Company as fairly
presenting in all material respects the financial condition and results
of operations of the Company and its Subsidiaries on a consolidated
basis in accordance with GAAP;
(d) as soon as available and in any event within 120 days
after the end of each fiscal year, consolidating and consolidated
statements of operations, shareholders' equity and cash flow of the
Company and its Subsidiaries for such fiscal year, and the related
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as at the end of such fiscal year, setting forth, in each
case, in comparative form, corresponding consolidated and
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Shareholder Agreement
consolidating figures from the preceding fiscal year, all in reasonable
detail and accompanied (i) in the case of such consolidated statements
and balance sheet of the Company, by an opinion thereon of independent
certified public accountants of recognized national standing (which
shall be generally recognized as one of the "Big Five" independent
public accounting firms), which opinion shall state that such
consolidated financial statements fairly present the consolidated
financial condition and results of operations of the Company and its
Subsidiaries as at the end of, and for, such fiscal year in accordance
with GAAP, and (ii) in the case of such consolidating statements and
balance sheets, by a certificate of an authorized financial officer of
the Company, which certificate shall state that such consolidating
financial statements fairly present, in all material respects, the
respective individual unconsolidated financial condition and results of
operations of the Company and of each of its Subsidiaries, in each case
in accordance with GAAP, consistently applied, as at the end of, and
for, such fiscal year;
(e) promptly upon transmission thereof to the shareholders of
the Company generally or to any other security holder of the Company,
including, without limitation, any holder of debt, copies of all
financial statements, notices, certificates, annual reports and proxy
statements so transmitted;
(f) promptly upon receipt thereof, a copy of each other report
submitted to the Company or any of its Subsidiaries by independent
accountants in connection with any annual, interim or special audit of
the books of the Company or any of its Subsidiaries made by such
accountants, or any management letters or similar document submitted to
the Company or any of its Subsidiaries by such accountants;
(g) promptly upon any material revision to the budgets
referred to in paragraph (a) above, such monthly budgets, as revised;
(h) promptly upon any officer of the Company obtaining
knowledge thereof, notice of any event of default under any credit
agreement, loan agreement or indenture that the Company is party to;
and
(i) with reasonable promptness, such other information and
data with respect to the Company or any of its Subsidiaries as the
Investor may reasonably request.
Section 3.2 Certain Transactions with NBC Restricted
Persons. (a) The Company agrees for the benefit of the
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Shareholder Agreement
Restricted Parties that except with the prior written consent of the Investor
and except as may be expressly permitted by this Agreement, the Company and its
Subsidiaries shall not, directly or indirectly:
(i) issue or sell to any NBC Restricted Person, or
authorize or propose the issuance or sale to any NBC Restricted Person
of, any capital stock, partnership or limited liability company
interests or other equity securities of the Company or any Subsidiary
of the Company or any options, warrants or other rights (including,
without limitation, any convertible or exchangeable securities) to
acquire, any such capital stock, partnership or limited liability
interests or other equity securities;
(ii) form, enter into or join any partnership or joint
venture with, sell or dispose of any business or any assets (other than
inventory and any other assets disposed of in the ordinary course
consistent with past practice of such business) to, or make any
investment in any NBC Restricted Person;
(iii) enter into any transaction involving the incurrence
of indebtedness (other than in the ordinary course of business
consistent with past practice) involving any NBC Restricted Person;
(iv) authorize, enter into or approve any Material
Transaction with any NBC Restricted Person or enter into any
discussions or negotiations relating to any inquiry, proposal or offer
relating thereto;
(v) enter into any joint marketing or co-branding
arrangement with any NBC Restricted Person, license or otherwise grant
to any NBC Restricted Person the right to utilize any trademark,
tradename or brand of the Company or any Subsidiary of the Company or
grant to any NBC Restricted Person any rights to have a branded
presence on any media of the Company or its Subsidiaries or rights to
cross-promote home shopping transactions; or
(vi) authorize or commit or agree to take any of the
foregoing actions.
(b) The provisions of this Section 3.2 shall terminate
and be of no further force or effect at such time as the Investor is no longer
entitled to designate at least one person to be nominated for election to the
Board of Directors pursuant to Section 2.1. In addition, the provisions of this
Section 3.2 shall terminate and be of no further force or effect with respect to
those NBC Restricted Persons (and their Affiliates) set forth
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Shareholder Agreement
on Annex B hereto (collectively, the "Annex B Entities") in the event that (i)
NBC or any of its Subsidiaries or Affiliates enters into a significant
transaction with any Annex B Entity (the "Relevant Entity") that precludes NBC
and its Subsidiaries from entering into a significant transaction with any one
of the other Annex B Entities and (ii) during the period ending six months after
the occurrence of an event specified in clause (i), neither the Company nor any
of its Subsidiaries has entered into an agreement providing for a significant
transaction with the Relevant Entity or its Affiliate.
Section 3.3 Certain Other Transactions.
For as long as the Investor is entitled to designate two
persons to be nominated for election to the Board of Directors pursuant to
Section 2.1, the Company agrees that except with the prior written consent of
the Investor, the Company and its Subsidiaries shall not, directly or
indirectly:
(a) issue or sell, or authorize or propose the issuance or
sale, of any capital stock of the Company, or any options, warrants or
other rights (including, without limitation, any convertible or
exchangeable securities) to acquire capital stock of the Company other
than (i) pursuant to Options outstanding on the date hereof or issued
pursuant to clause (ii) below, (ii) Options to be issued to officers,
directors, employees or consultants of the Company pursuant to any plan
or arrangement approved by the Company's shareholders, (iii) upon
conversion of the Preferred Stock outstanding on the date hereof or
pursuant to the Warrants, (iv) the issuance of Common Stock and other
Voting Stock in an aggregate amount not to exceed (x) during any twelve
month period 15% of the Total Voting Power of the Company as of the
first day of such twelve month period and (y) during any twenty-four
month period 25% of the Total Voting Power of the Company as of the
first day of such twenty-four month period, provided that no issuance
will be made to any Person pursuant to this clause (iv) who, together
with its Affiliates, to the knowledge of the Company after reasonable
inquiry, would Beneficially Own securities representing 10% or more of
the Total Voting Power of the Company following such issuance and (v)
issuances of non-voting capital stock that does not violate the terms
of the Preferred Stock;
(b) declare or pay any dividends or distributions to holders
of Common Stock in any fiscal quarter exceeding in the aggregate 5% of
the Market Capitalization of the Company as of the first day of such
fiscal quarter or repurchase or redeem any Common Stock except (i)
repurchases and redemption of Common Stock from officers, directors,
employees or consultants of the Company and its Subsidiaries
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Shareholder Agreement
and (ii) repurchases and redemptions of Common Stock in any fiscal
quarter that, when aggregated with all distributions and dividends on
the Common Stock in such fiscal quarter, do not exceed 5% of the Market
Capitalization of the Company as of the first day of such fiscal
quarter;
(c) enter into or effect any single or related series of
acquisitions of businesses or assets or investments therein (including,
without limitation, forming, entering into or joining any joint
venture), other than money market instruments and trade receivables,
pursuant to which the fair market value of the aggregate purchase price
paid, or investment made, by the Company and its Subsidiaries will
exceed the greater of (x) $35 million or (y) 10% of the Market
Capitalization of the Company at the time the Company or its
Subsidiaries enter into an agreement to effect such acquisition or
investment;
(d) enter into or effect any single or related series of
sales, leases or other dispositions of assets having a Fair Market
Value in excess of the greater of (x) $35 million or (y) 10% of the
Market Capitalization of the Company at the time the Company or its
Subsidiaries enter into an agreement to effect such sale, lease or
other disposition;
(e) incur indebtedness for borrowed money that would cause the
Company's consolidated indebtedness to exceed the greater of (x) $40
million and (y) an amount equal to 30% of the Company's total
capitalization; for purposes of this clause (e) "total capitalization"
means the sum of consolidated shareholders equity and consolidated
indebtedness;
(f) issue any series or class of capital stock having (i)
voting rights that are disproportionate relating to its economic
interest or (ii) a separate class vote on any Takeover Transaction;
(g) enter into any business, either directly or indirectly,
except for those businesses in which the Company and/or its
Subsidiaries and/or its Affiliates are engaged in on the date hereof
and those businesses which are ancillary, complementary or reasonably
related thereto;
(h) amend the Articles of Incorporation so as to adversely
affect the Restricted Parties (it being understood that increases in
the authorized capital stock of the Company and/or creation of a
staggered Board of Directors will not be deemed to adversely affect the
Restricted Parties); or
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Shareholder Agreement
(i) authorize or commit or agree to take any of the foregoing
actions.
Section 3.4 Other Covenants. (a) The Company agrees that
except with the prior written consent of the Investor and except as otherwise
expressly permitted by this Agreement, it and its Subsidiaries shall not,
directly or indirectly:
(i) adopt any shareholders rights plan, or amend any of its
organizational documents or enter into any Material Agreement with a
third party or issue any capital stock or other securities, the
provisions of which, upon the acquisition of all of the outstanding
Common Stock or any portion thereof by any Restricted Party would be
violated or breached, or which would require a consent, approval or
notice thereunder, or which would result in a default thereof (or an
event which, with notice or lapse of time or both, would constitute a
default), or which would result in the termination thereof or
accelerate the performance required thereby, or would result in a right
of termination or acceleration thereunder, or result in the creation of
any Lien (except Permitted Liens) upon any of the properties or assets
of the Company or Material Subsidiaries thereunder or disadvantage the
Restricted Parties relative to other shareholders on the basis of the
size of their shareholdings or otherwise restrict or impede the ability
of the Restricted Parties to acquire additional shares of Voting Stock
or dispose of such Voting Stock in any manner permitted by Section 4.2
to any Restricted Party or to any Person that would Beneficially Own
(together with such Person's Ultimate Parent Entity, Subsidiaries and
Affiliates) less than 10% of the Adjusted Outstanding Common Stock;
(ii) Take any action that would cause any ownership interest
in any of the following to be attributable to any Restricted Party for
purposes of FCC regulations: (i) a U.S. broadcast radio or television
station, (ii) a U.S. cable television system, (iii) a U.S. "daily
newspaper" (as such term is defined in Section 73.3555 of the rules and
regulations of the Federal Communications Commission, as the same may
be amended from time to time), (iv) any U.S. communications facility
operated pursuant to a license granted by the Federal Communications
Commission ("FCC") and subject to the provisions of Section 310(b) of
the Communications Act of 1934, as amended, or (v) any other business
which is subject to FCC regulations under which the ownership of a
Person may be subject to limitation or restriction as a result of the
interest in such business being attributed to such Person.
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Shareholder Agreement
(b) The provisions of Section 3.4(a)(i) shall terminate and be
of no further force or effect at such time as the Investor is no longer entitled
to designate at least one person to be nominated for election to the Board of
Directors pursuant to Section 2.1.
Section 3.5 Houston Station. The Company and its Subsidiaries
shall use all commercially reasonable efforts to dispose of their interests in
KVVV-TV Channel 57 Baytown, Texas as soon as practicable.
Section 3.6 No Reinstatement of Rights. Anything in this
Agreement to the contrary notwithstanding, to the extent the Restricted Parties
fail to satisfy any ownership threshold set forth herein so that any rights of
the Investor under this Agreement and/or obligations of the Company under this
Agreement terminate, such terminated rights and/or obligations will not be
reinstated if the Restricted Parties thereafter satisfy such ownership
threshold.
ARTICLE IV
STANDSTILL AGREEMENTS
Section 4.1 Standstill Agreement.
(a) During the Standstill Period (and during the Standstill
Period only), no Restricted Party will, directly or indirectly, nor will it
authorize or direct any of its Representatives to (and will take appropriate
action against such Representatives to discourage), in each case unless
specifically requested to do so in writing in advance by the Board of Directors:
(i) acquire or agree, offer, seek or propose to acquire, or
cause to be acquired, ownership of any assets or businesses of the
Company or any of its Subsidiaries having a fair market value in excess
of 10% of the fair market value of all of the Company's and its
Subsidiaries' assets, or any rights or options to acquire any such
ownership (including from a third party);
(ii) acquire or agree, offer, seek or propose to acquire, or
cause to be acquired, Beneficial Ownership of any Common Stock of the
Company or any of its Subsidiaries, or any options, warrants or other
rights (including, without limitation, any convertible or exchangeable
securities) to acquire any such Voting Stock, in any case other than
the Preferred Stock, the Warrants and any Voting Stock issuable upon
conversion or exercise of the Preferred Stock or
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Shareholder Agreement
Warrants; provided, however, that after the Shareholder Meeting (or if
earlier August 31, 1999) the Restricted Parties may acquire or agree,
offer, seek or propose to acquire, or cause to be acquired, shares of
Voting Stock of the Company (or any convertible or exchangeable
securities) to acquire any such Voting Stock if such acquisition would
not increase the Restricted Parties' aggregate Beneficial Ownership of
shares of Common Stock to more than the Standstill Limit (other than
due to the issuance of additional Bonus Distributor Warrants; provided
that if the issuance of additional Bonus Distributor Warrants results
in the Restricted Parties' aggregate Beneficial Ownership of shares of
Common Stock exceeding the Standstill Limit, then at any time during
the Standstill Period (and only during the Standstill Period) when the
Standstill Limit is so exceeded, the Restricted Parties shall not
exercise any Bonus Distributor Warrants unless (A) such exercise occurs
during the six months prior to the expiration or termination of such
Bonus Distributor Warrants or (B) immediately upon such exercise, the
Restricted Parties' aggregate actual ownership of outstanding shares of
Common Stock would not exceed 39.9% of the total outstanding shares of
Common Stock, treating as outstanding and actually owned for such
purpose shares of Common Stock issuable upon conversion of the
Preferred Stock or upon the exercise of the Initial Distributor
Warrants, but no shares of Common Stock issuable upon exchange or
conversion of any other rights, warrants, options or other securities).
Notwithstanding the foregoing, during the Standstill Period, the holder
of a Warrant will not disclaim Beneficial Ownership of such Warrant and
for as long as the Purchase Warrant is outstanding and exercisable, no
Restricted Party will acquire actual ownership of any shares of Common
Stock other than (x) through exercise of the Warrants or conversion of
the Preferred Stock and (y) other acquisitions of shares of Common
Stock at a price per share equal to or greater than the applicable
price set forth in Section 8(a)(ii) of the Purchase Warrant (during the
period prior to the second anniversary of the Issue Date under the
Warrant) or Section 8(b)(ii) of the Purchase Warrant (during the period
on and after the second anniversary of such Issue Date and prior to the
fifth anniversary of such Issue Date).
(iii) make, or in any way participate in, any "solicitation"
of "proxies" (as such terms are used in the proxy rules of the SEC)
with respect to the voting of any securities of the Company or any of
its Subsidiaries, provided that the limitation contained in this clause
(iii) shall not apply to any Takeover Transaction to be voted on by the
Company's shareholders that is not instituted or proposed by any
Restricted Party or any Affiliate of a
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Shareholder Agreement
Restricted Party or any 13D Group of which any Restricted
Party or any Affiliate of a Restricted Party is a member;
(iv) deposit any securities of the Company or any of its
Subsidiaries in a voting trust or subject any such securities to any
arrangement or agreement with any Person (other than one or more
Restricted Parties);
(v) form, join, or in any way become a member of a 13D Group
with respect to any voting securities of the Company or any of its
Subsidiaries (other than a "group" consisting solely of Restricted
Parties);
(vi) arrange any financing for, or provide any financing
commitment specifically for, the purchase of any voting securities or
securities convertible or exchangeable into or exercisable for any
voting securities or assets of the Company or any of its Subsidiaries,
except for such assets as are then being offered for sale by the
Company or such Subsidiary;
(vii) otherwise act, whether alone or in concert with others,
to seek to propose to the Company any tender or exchange offer, merger,
business combination, restructuring, liquidation, recapitalization or
similar transaction involving the Company or any of its Subsidiaries,
or nominate any person as a director of the Company who is not
nominated by the then incumbent directors, or propose any matter to be
voted upon by the shareholders of the Company; provided that the
Restricted Entities may nominate directors in accordance with Section
2.1 and, provided further, the provisions of this clause (vii) will not
prohibit or restrict any Restricted Party from entering into any
agreement, arrangement or understanding relating to the Transfer of any
securities in accordance with Section 4.2 or engaging in an discussion
or negotiations relating to any potential Transfer of any securities in
accordance with Section 4.2;
(viii) solicit, initiate, encourage or knowingly or
intentionally facilitate the taking of any action by any Affiliate of a
Restricted Party (that is not itself a Restricted Party) that would be
prohibited by this Section 4.1 if that Affiliate were a Restricted
Party; or
(ix) publicly announce or disclose any intention, plan or
arrangement inconsistent with the foregoing.
(b) In addition, during the Standstill Period (and only during
the Standstill Period), no Restricted Party will, nor will they authorize or
direct any of their respective
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Shareholder Agreement
Representatives to, take any action that they reasonably believe based on the
advice of outside counsel would require the Company to make a public
announcement regarding any of the matters set forth in Section 4.1(a) (other
than in connection with the transactions contemplated by the Investment
Agreement).
(c) If, at any time during the Standstill Period, (i) any
Person other than a Restricted Party or any Affiliate thereof or any 13D Group
of which any Restricted Party is a member has made any inquiry, proposal or
offer relating to a Takeover Transaction or Change in Control of the Company
which has not been rejected by the Board of Directors, (ii) the Board of
Directors has determined to pursue a Takeover Transaction or other Change in
Control of the Company and the Board of Directors has not resolved to stop
pursuing such Takeover Transaction or other Change in Control of the Company or
(iii) the Board of Directors or the Company has engaged in any discussions or
negotiations with, or provided any information to, any Person other than a
Restricted Party or any Affiliate thereof or any 13D Group of which any
Restricted Party is a member with respect to a potential Takeover Transaction or
other Change in Control of the Company or any potential inquiry, proposal or
offer relating thereto and the Board of Directors has not resolved to terminate
all such discussions, negotiations and provision of information, then, for so
long as such condition continues to apply, the limitation on the actions
described in clause (a)(vii) above shall not be applicable to the Restricted
Parties (but all other provisions of this Agreement will, subject to Section
4.1(d), continue to apply).
(d) Anything in this Section 4.1 to the contrary
notwithstanding, this Section 4.1 shall not prohibit or restrict any of the
following: (x) actions taken by the Investor's nominees on the Board of
Directors in such capacity, (y) the exercise by the Restricted Parties of their
voting rights (i.e., their right to vote their shares but not their right to
make nominations, to the extent prohibited by this Agreement, or take other
related actions otherwise prohibited by this Section 4.1) with respect to any
shares of Voting Stock they Beneficially Own and (z) any disclosure pursuant to
Section 13(d) of the Exchange Act which a Restricted Party reasonably believes,
based on the advice of outside counsel, is required in connection with any
action taken by a Restricted Party pursuant to Section 4.1(c).
(e) Following the expiration of the Standstill Period pursuant
to clause (i) of the definition of Standstill Termination Event and for two
years following the expiration of the Standstill Period pursuant to clause (v)
of the definition of Standstill Termination Event, no Restricted Party will
purchase or otherwise acquire any shares of Common Stock if such acquisition
would increase the Restricted Parties' aggregate
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Shareholder Agreement
Beneficial Ownership of shares of Common Stock to more than 39.9% of the
Adjusted Outstanding Common Stock except (x) increases in Beneficial Ownership
resulting from issuance of the Warrants or the exercise of the Warrants or (y)
pursuant to a Purchaser Tender Offer.
(f) If the Standstill Period terminates pursuant to clause
(iii) of the definition of "Standstill Termination Event" and the subject Third
Party Tender Offer is terminated at any time during which an Investor Tender
Offer is then pending, unless otherwise agreed by the Company, the Restricted
Party that commenced such Investor Tender Offer (the "Tendering Restricted
Party") will not complete such Investor Tender Offer until at least the sixth
business day after the termination of such Third Party Tender Offer. If, within
two business days after termination of the subject Third Party Tender Offer, the
Company requests in writing that the Tendering Restricted Party terminate its
Investor Tender Offer and by the end of the second business day after the
receipt of such request the Tendering Restricted Party has not terminated its
Investor Tender Offer, then the provisions of Section 3.4(a)(i) shall no longer
prohibit the Company from amending its then existing shareholders rights plan or
adopting a shareholders rights plan that could be triggered by the Restricted
Parties if (and, only if) they subsequently acquired Beneficial Ownership of
additional Voting Securities that would increase the Restricted Parties'
aggregate Beneficial Ownership of shares of Common Stock to more than the
Standstill Limit (determined for these purposes as if a Standstill Reinstatement
Event had occurred on such date) other than as a result of the acquisition of
Beneficial Ownership of additional shares of Common Stock upon the issuance or
exercise of additional Bonus Distributer Warrants.
Section 4.2 Transfer Restrictions.
(a) Unless the Restricted Parties Beneficially Own in the
aggregate less than 5% of the Adjusted Outstanding Common Stock or until the
Restricted Parties Beneficially Own in the aggregate at least 90% of the
Adjusted Outstanding Common Stock, the Restricted Parties shall not, directly or
indirectly, sell, transfer or otherwise dispose of (collectively, "Transfer")
any of the Preferred Stock, Warrants or shares of Common Stock Beneficially
Owned by such Persons, except for Transfers: (i) to Restricted Parties or to
Affiliates who agree to be Restricted Parties bound by the provisions of this
Agreement, (ii) which have been consented to by the Company, (iii) pursuant to a
Third Party Tender Offer, provided that the Restricted Parties may not Transfer
pursuant to this clause (iii) any shares of Common Stock acquired upon exercise
of the Purchase Warrant on or after the date of commencement of such Third Party
Tender Offer or the public announcement by the offeror thereof or that such
offeror
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Shareholder Agreement
intends to commence such Third Party Tender Offer, (iv) pursuant to a merger,
consolidation or reorganization to which the Company is a party, (v) in a bona
fide public distribution or bona fide underwritten public offering, (vi)
pursuant to Rule 144 of the Securities Act or (vii) in a private sale or
pursuant to Rule 144A of the Securities Act; provided that, in the case of any
Transfer pursuant to clause (v) or (vii), such Transfer does not result in, to
the knowledge of the Restricted Parties after reasonable inquiry, any other
Person acquiring, after giving effect to such Transfer, Beneficial Ownership,
individually or in the aggregate with such Person's Ultimate Parent Entity,
Subsidiaries and Affiliates, of more than 10% of the Adjusted Outstanding Common
Stock.
(b) Subject to the provisions of Section 4.2(a), if any
Restricted Party decides to dispose of any of the Preferred Stock (or the Common
Stock issuable upon conversion of the Preferred Stock) or the Warrants (or the
Common Stock issuable upon exercise of the Warrants), each Restricted Party
understands and agrees that it may do so only pursuant to an effective
registration statement under the Securities Act or pursuant to an exemption from
registration under the Securities Act. Each Restricted Party agrees to the
imprinting, so long as appropriate, of substantially the following legends on
certificates representing any of the securities referenced in the preceding
sentence:
NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES ISSUABLE UPON EXERCISE OF THE SECURITIES REPRESENTED HEREBY
HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT
TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE TERMS OF A SHAREHOLDER AGREEMENT, DATED AS OF APRIL 15,
1999, AMONG VALUEVISION INTERNATIONAL, INC., GE CAPITAL EQUITY
INVESTMENTS, INC., AND NATIONAL BROADCASTING COMPANY, INC.
THE RESTATED ARTICLES OF INCORPORATION OF THE COMPANY, AS AMENDED,
PROVIDE THAT, EXCEPT AS OTHERWISE PROVIDED BY LAW, SHARES OF STOCK IN
THE COMPANY SHALL NOT BE TRANSFERRED TO "ALIENS" UNLESS, AFTER GIVING
EFFECT TO SUCH TRANSFER, THE AGGREGATE NUMBER OF SHARES OF STOCK OWNED
BY OR FOR THE ACCOUNT OF "ALIENS" WILL NOT EXCEED 20% OF THE NUMBER OF
SHARES OF OUTSTANDING STOCK OF THE COMPANY, AND THE
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Shareholder Agreement
AGGREGATE VOTING POWER OF SUCH SHARES WILL NOT EXCEED 20% OF THE
AGGREGATE VOTING POWER OF ALL OUTSTANDING SHARES OF VOTING STOCK OF THE
COMPANY. NOT MORE THAN 20% OF THE AGGREGATE VOTING POWER OF ALL SHARES
OUTSTANDING ENTITLED TO VOTE MAY BE VOTED BY OR FOR THE ACCOUNT OF
"ALIENS." IF, NOTWITHSTANDING SUCH RESTRICTION ON TRANSFERS TO
"ALIENS," THE AGGREGATE NUMBER OF SHARES OF STOCK OWNED BY OR FOR THE
ACCOUNT OF "ALIENS" EXCEEDS 20% OF THE NUMBER OF SHARES OF OUTSTANDING
STOCK OF THE COMPANY OR IF THE AGGREGATE VOTING POWER OF SUCH SHARES
EXCEEDS 20% OF THE AGGREGATE VOTING POWER OF ALL OUTSTANDING SHARES OF
VOTING STOCK OF THE COMPANY, THE COMPANY HAS THE RIGHT TO REDEEM SHARES
OF ALL CLASSES OF CAPITAL STOCK, AT THEIR THEN FAIR MARKET VALUE, ON A
PRO RATA BASIS, OWNED BY OR FOR THE ACCOUNT OF ALL "ALIENS" IN ORDER TO
REDUCE THE NUMBER OF SHARES AND/OR PERCENTAGE OF VOTING POWER HELD BY
OR FOR THE ACCOUNT OF "ALIENS" TO THE MAXIMUM NUMBER OR PERCENTAGE
ALLOWED UNDER THE RESTATED ARTICLES OF INCORPORATION, AS AMENDED, OR AS
OTHERWISE REQUIRED BY APPLICABLE FEDERAL LAW. AS USED HEREIN, "ALIENS"
MEANS ALIENS AND THEIR REPRESENTATIVES, FOREIGN GOVERNMENTS AND THEIR
REPRESENTATIVES, AND CORPORATIONS ORGANIZED UNDER THE LAW OF A FOREIGN
COUNTRY, AND THEIR REPRESENTATIVES. THE COMPANY WILL FURNISH TO ANY
SHAREHOLDER UPON REQUEST AND WITHOUT CHARGE, A FULL STATEMENT OF THE
DESIGNATIONS, PREFERENCES, LIMITATIONS, AND RELATIVE RIGHTS OF THE
SHARES OF EACH CLASS OR SERIES AUTHORIZED TO BE ISSUED, SO FAR AS THEY
HAVE BEEN DETERMINED, AND THE AUTHORITY OF THE BOARD TO DETERMINE THE
RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT CLASSES OR SERIES.
The first legend set forth above shall be removed if and when
(i) the securities represented by such certificate are disposed of pursuant to
an effective registration statement under the Securities Act or (ii) the
Investor delivers to the Company an opinion of counsel reasonably acceptable to
the Company to the effect that such legends are no longer necessary.
Section 4.3 Certain Permitted Transactions and Communications.
Notwithstanding the foregoing, this Agreement shall not prohibit (i) the
acquisition or holding of securities or rights in the ordinary course of
business by any employee benefit plan whose trustees, investment managers or
similar advisors are not Affiliates of any Restricted Party, (ii) the
consummation of any transaction expressly provided for in the Investment
Agreement or the Operating Agreement including the acquisition and/or exercise
of the Warrants or any purchase of shares of Common Stock upon conversion of
Preferred Stock or (iii) officers and employees of the Restricted Parties from
communicating with officers of the Company or its Affiliates on matters related
to or governed by the Distribution Agreement, the
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Shareholder Agreement
Operating Agreement or other operational matters, or the Restricted Parties from
communicating with the Board of Directors, the Chairman of the Board of
Directors, the Chief Executive Officer or the Chief Financial Officer of the
Company, so long as such communication is conveyed in confidence, does not
require public disclosure by the Restricted Parties or, in the reasonable belief
(based on the advice of outside counsel) of the Restricted Party making such
communication, by the Company, and is not intended to (A) elicit, and, in the
reasonable belief (based on the advice of outside counsel) of the Restricted
Party making such communication, does not require the issuance of, a public
response by the Company or (B) otherwise circumvent the provisions of Section
4.1.
ARTICLE V
Miscellaneous
Section 5.1 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given, if
delivered personally, by telecopier or sent by overnight courier as follows:
(a) If to the Investor, to:
GE Capital Equity Investments, Inc.
120 Long Ridge Road
Stamford, CT 06927
Attention: John Sprole
Fax: (203) 357-3047
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Richard Capelouto
Fax: (212) 455-2502
(b) If to NBC, to:
National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, New York 10112
Attention: Stuart U. Goldfarb, Executive Vice
President and Managing Director,
Worldwide Business Development
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Shareholder Agreement
Fax: (212) 664-7896
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Richard Capelouto
Fax: (212) 455-2502
(c) If to the Company, to:
ValueVision International, Inc.
6740 Shady Oak Road
Eden Prairie, MN 55344-3433
Attention: General Counsel
Fax: (612) 947-0188
With a copy to:
Latham & Watkins
633 West Fifth Street
Suite 4000
Los Angeles, CA 90071
Attention: Michael W. Sturrock
Fax: (213) 891-8763
or to such other address or addresses as shall be designated in writing. All
notices shall be effective when received.
Section 5.2 Entire Agreement; Amendment. This Agreement sets
forth the entire agreement between the parties hereto with respect to the
transactions contemplated by this Agreement. Any provision of this Agreement may
be amended or modified in whole or in part at any time by an agreement in
writing between the parties hereto executed in the same manner as this
Agreement. No failure on the part of any party to exercise, and no delay in
exercising, any right shall operate as a waiver thereof nor shall any single or
partial exercise by any party of any right preclude any other or future exercise
thereof or the exercise of any other right.
Section 5.3 Severability. In the event that any one or more of
the provisions contained in this Agreement or in any other instrument referred
to herein, shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such
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Shareholder Agreement
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement or any other such instrument.
Section 5.4 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to constitute an
original, but all of which together shall constitute one and the same document.
Section 5.5 Governing Law; Jurisdiction; Waiver of Jury Trial.
This Agreement shall be governed and construed in accordance with the laws of
the State of New York applicable to contracts executed and performed within such
state, and each party hereby submits to the jurisdiction of any state or U.S.
federal court sitting within the County of New York, New York or the County of
Hennepin, Minnesota. The parties hereto waive all right to trial by jury in any
action, suit or proceeding brought to enforce or defend any rights or remedies
under this Agreement.
Section 5.6 Successors and Assigns; Third Party Beneficiaries.
Subject to applicable law, (i) GE Capital Equity Investments may assign its
rights under this Agreement in whole or in part only to a Restricted Party, but
no such assignment shall relieve GE Capital Equity Investments of its
obligations hereunder unless GE Capital Equity Investments' obligations
hereunder are assumed by NBC and/or GE Capital in a written agreement reasonably
acceptable to the Company delivered to the Company (in which case GE Capital
Equity Investments will be released from its obligations hereunder except for
its obligations as a Restricted Party to comply with the terms hereof) and (ii)
NBC may assign its rights under this Agreement in whole or in part only to a
Restricted Party, but no such assignment shall relieve NBC of its obligations
hereunder unless NBC's obligations hereunder are assumed by GE Capital in a
written agreement reasonably acceptable to the Company delivered to the Company
(in which case NBC will be released from its obligations hereunder except for
its obligations as a Restricted Party to comply with the terms hereof). The
Company may not assign any of its rights or delegate any of its duties under
this Agreement without the prior written consent of the Investor. Any purported
assignment in violation of this Section shall be void. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any Person
other than the Restricted Parties (who shall be third party beneficiaries of
this Agreement entitled to the benefit of, and to enforce, its terms) and the
Company and their respective successors, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision herein contained.
This Agreement and all conditions and provisions hereof are intended to be for
the sole and exclusive benefit of the Restricted Parties and the Company and
their respective successors, and for the benefit of no other Person. No
purchaser of Preferred Stock, Warrants or Common
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Shareholder Agreement
Stock from a Restricted Party (other than another Restricted Party) shall be
deemed to be a successor or assignee by reason merely of such purchase.
Section 5.7 Arbitration. Any controversy, dispute or claim
arising out of, in connection with or in relation to the interpretation,
performance or breach of this Agreement, shall be determined, at the request of
any party, by arbitration in a city mutually agreeable to the parties to such
controversy, dispute or claim before and in accordance with the then-existing
Rules for Commercial Arbitration of the American Arbitration Association, and
any judgment or award rendered by the arbitrator will be final, binding and
unappealable and judgment may be entered by any state or Federal court having
jurisdiction thereof. The pre-trial discovery procedures of the Federal Rules of
Civil Procedure shall apply to any arbitration under this Section 5.7. Any
controversy concerning whether a dispute is an arbitrable dispute or as to the
interpretation or enforceability of this Section 5.7 shall be determined by the
arbitrator. The arbitrator shall be a retired or former United States District
Judge or other person acceptable to each of the parties, provided such
individual has substantial professional experience with regard to corporate or
partnership legal matters. The parties intend that this agreement to arbitrate
be valid, enforceable and irrevocable.
Section 5.8 Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this Agreement
in addition to any other remedy to which they are entitled at law or in equity.
Section 5.9 Headings, Captions and Table of Contents. The
section headings, captions and table of contents contained in this Agreement are
for reference purposes only, are not part of this Agreement and shall not affect
the meaning or interpretation of this Agreement.
Section 5.10 Confidentiality. The provisions of Sections 1, 2
and 8 of the confidentiality agreement dated June 24, 1998 between the Company
and the Investor (the "Investor Confidentiality Agreement") shall continue and
be in full force and effect and apply to each Restricted Party as if it were the
Investor until the later to occur of the termination of the Distribution
Agreement and termination of the Investor's rights to designate at least one
director for nomination to the Board of Directors of the Company pursuant to
Section 2.1. All other
-31-
<PAGE> 33
Shareholder Agreement
provisions of the Investor Confidentiality Agreement and the confidentiality
agreement dated January 28, 1999 (as amended on February 28, 1999) between the
Company and NBC are hereby terminated.
-32-
<PAGE> 34
Shareholder Agreement
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto or by their respective duly authorized representatives, all as of the
date first above written.
VALUEVISION INTERNATIONAL, INC.
By: /s/ Gene McCaffery
------------------------------------
Name: Gene McCaffery
Title: Chief Executive Officer
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ James Brown
------------------------------------
Name: James Brown
Title: Senior Vice President
NATIONAL BROADCASTING COMPANY, INC.
By: /s/ Stuart Goldfarb
------------------------------------
Name: Stuart Goldfarb
Title: Executive Vice President,
Worldwide Business Development
-33-
<PAGE> 35
Shareholder Agreement
ANNEX A
NBC RESTRICTED PERSONS
CBS
Fox
Disney
Time Warner
Paxson
Viacom
Yahoo
AOL
Excite
Lycos
Infoseek
Microsoft
-34-
<PAGE> 36
Shareholder Agreement
ANNEX B
ANNEX B ENTITIES
Yahoo
AOL
Excite
Lycos
Infoseek
Microsoft
-35-
<PAGE> 1
Exhibit 9
Registration Rights Agreement
between
GE Capital Equity Investments, Inc.
and
ValueVision International, Inc.
Dated as of April 15, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Section 1. Definitions............................................................2
Section 2. Demand Registration....................................................3
(a) Requests for Registration by Holders...............................3
(b) Filing and Effectiveness...........................................4
(c) Priority on Demand Registration....................................5
(d) Postponement of Demand Registration................................5
Section 3. Piggyback Registration.................................................5
(a) Right to Piggyback.................................................5
(b) Priority on Piggyback Registrations................................6
Section 4. Restrictions on Sale by Holders........................................6
Section 5. Registration Procedures................................................7
Section 6. Registration Expenses.................................................13
Section 7. Indemnification.......................................................14
(a) Indemnification by the Company....................................14
(b) Indemnification by Holders........................................14
(c) Conduct of Indemnification Proceedings............................15
(d) Contribution......................................................16
Section 8. Underwritten Registrations............................................16
Section 9. Miscellaneous.........................................................17
(a) Remedies..........................................................17
(b) Amendments and Waivers............................................17
(c) Notices...........................................................17
(e) Successors and Assigns............................................18
(f) Counterparts......................................................19
(g) Headings..........................................................19
</TABLE>
- i -
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
(h) Governing Law.....................................................19
(i) Severability......................................................19
(j) Entire Agreement..................................................19
</TABLE>
- ii -
<PAGE> 4
Exhibit 9
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of April 15, 1999, by and between ValueVision International,
Inc., a Minnesota corporation (together with is successors and assigns, the
"Company"), GE Capital Equity Investments, Inc., a Delaware corporation
(together with its successors and assigns, the "Purchaser"), National
Broadcasting Company, Inc., a Delaware corporation (together with its successors
and assigns, "NBC"), and each other person who becomes a Holder hereunder.
RECITALS
WHEREAS, pursuant to an Investment Agreement dated as of March 8, 1999
(the "Investment Agreement") between the Company and the Purchaser, the
Purchaser is purchasing shares of Series A Redeemable Convertible Preferred
Stock of the Company, par value $0.01 per share (including any securities into
which such preferred stock may be or has been converted or exchanged in any
merger, consolidation or reclassification, the "Preferred Stock"), that are
convertible into Common Stock of the Company, par value $0.01 per share (the
"Common Stock"); and
WHEREAS, pursuant to the Investment Agreement the Purchaser is
purchasing warrants to purchase shares of Common Stock; and
WHEREAS, pursuant to the Distribution Agreement (as defined below), the
Purchaser, NBC or an Affiliate thereof will, under certain terms and conditions
specified therein, receive warrants to purchase shares of Common Stock (together
with warrants received under the Investment Agreement, the "Warrants"); and
WHEREAS, the Company's shares of Common Stock are registered with the
SEC and quoted on the Nasdaq Stock Market; and
WHEREAS, to induce the Purchaser to execute and deliver the Investment
Agreement and NBC to execute and deliver the Distribution Agreement, the Company
has agreed to provide to the Holders (as defined below) certain registration
rights under the Securities Act; and
WHEREAS, the execution and delivery of this agreement by the parties
hereto is a condition to the closing of the transactions contemplated by the
Investment Agreement.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein and in the Investment Agreement, and other valuable
consideration, the receipt and sufficiency of
2
<PAGE> 5
Registration Rights Agreement
which is hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. Definitions. For purposes of this Agreement, the following
capitalized terms have the following meanings:
"Common Stock": The Common Stock of the Company and any securities into
which such common stock may be or has been converted or exchanged in any merger,
consolidation or reclassification.
"Distribution Agreement": The Distribution and Marketing Agreement
dated as of March 8, 1999 between the Company and NBC pursuant to which NBC has
agreed to distribute certain programming of the Company, as such agreement may
be amended, supplemented or otherwise modified from time to time.
"Holders": Each Restricted Party (as defined in the Shareholder
Agreement) that from time to time owns Registrable Securities and each of their
permitted transferees pursuant to Section 9(e) who agree to be bound by the
provisions of this Agreement in accordance with said section.
"Prospectus": The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement and all other amendments and supplements to such
prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such prospectus.
"Registrable Securities": All shares of Common Stock (i) held from time
to time by the Holders who are Restricted Parties (the "Restricted Party Common
Stock") or (ii) held by Holders who are not Restricted Parties (but only to the
extent that such Common Stock previously constituted Restricted Party Common
Stock or Common Stock described in clause (iii) below) or (iii) issued or
issuable upon the conversion of Preferred Stock into Common Stock or (iv) issued
or issuable upon the exercise of Warrants, excluding shares of Common Stock that
have been disposed of by a Holder pursuant to a Registration Statement relating
to the sale thereof that has become effective under the Securities Act or
pursuant to Rule 144 or Rule 145 under the Securities Act. Registrable
Securities shall also include any shares of the Common Stock or other securities
(or shares of Common Stock underlying such other securities) that may be
received by the Holders (x) as a result of a stock dividend on or stock split of
Registrable Securities or (y) on account of Registrable Securities in a
recapitalization of or other transaction involving the Company.
2
<PAGE> 6
Registration Rights Agreement
"Registration Statement": Any registration statement of the Company
under the Securities Act that covers any of the Registrable Securities pursuant
to the provisions of this Agreement, including the related Prospectus, any
preliminary prospectus, all amendments and supplements to such registration
statement (including post-effective amendments), all exhibits and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
"SEC": The Securities and Exchange Commission.
"Securities Act": The Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
"Shareholder Agreement": The Shareholder Agreement, dated as of the
date hereof, between the Company and the Purchaser, as such agreement may be
amended, supplemented or otherwise modified from time to time.
"Underwritten Offering": A distribution, registered pursuant to the
Securities Act, in which securities of the Company are sold to the public
through one or more underwriters.
Section 2. Demand Registration.
(a) Requests for Registration by Holders. Subject to the terms and
conditions of the Shareholder Agreement, at any time and from time to time,
subject to the conditions set forth in this Agreement: (i) one or more Holders
will have the right, by written notice delivered to the Company (a "Demand
Notice"), to require the Company to register Registrable Securities under and in
accordance with the provisions of the Securities Act (a "Demand Registration"),
provided that the Holders may not make in the aggregate more than four (4)
Demand Registrations under this Agreement; provided, further, that: (i) no such
Demand Registration may be required unless the Holders requesting such Demand
Registration provide to the Company a certificate (the "Authorizing
Certificate"), seeking to include Registrable Securities in such Demand
Registration with a market value of at least $5,000,000 (calculated based on the
closing sale price of such securities on the principal securities exchange where
such securities are listed on the business day immediately preceding the date of
the Demand Notice) as of the date the Demand Notice is given; and (ii) no Demand
Notice may be given prior to six (6) months after the effective date of the
immediately preceding Demand Registration or, if later, the date on which a
registration pursuant to this Section 2 is terminated in its entirety prior to
the effective date of the applicable registration statement. The Authorizing
Certificate shall set forth (A) the name of each Holder signing such Authorizing
Certificate, (B) the number of Registrable Securities held by each such Holder,
and, if different, the number of Registrable Securities such Holder has elected
to have registered, and (C)
3
<PAGE> 7
Registration Rights Agreement
the intended methods of disposition of the Registrable Securities.
Notwithstanding the foregoing, a good faith decision by a Holder to withdraw
Registrable Securities from registration will not affect the Company's
obligations hereunder even if the amount remaining to be registered has a market
value of less than $5,000,000 (calculated as aforesaid), provided that: (1) such
continuing registration shall constitute a Demand Registration, (2) the
withdrawing Holder reimburses the Company for any registration and filing fees
(including any fees payable to the National Association of Securities Dealers,
Inc. or any successor organization) it has incurred with respect to the
withdrawn Registrable Securities (unless all Registrable Securities are
withdrawn, in which case the withdrawing Holder(s) shall reimburse the Company
for all costs and expenses incurred by it in connection with the registration of
such Registrable Securities) and (3) such Holder (or the other Holders
participating in the subject registration) did not include the withdrawn
Registrable Securities as a means of circumventing the $5,000,000 threshold
described above. Subject to compliance with clause (2) of the preceding proviso,
a registration that is terminated in its entirety prior to the effective date of
the applicable registration statement will not constitute a Demand Registration.
(b) Filing and Effectiveness. The Company will file a Registration
Statement relating to any Demand Registration as promptly as practicable (but in
any event within 90 days) following the date on which the Demand Notice is given
and will use all reasonable efforts to cause the same to be declared effective
by the SEC as soon as practicable thereafter. If any Demand Registration is
requested to be effected as a shelf registration pursuant to Rule 415 under the
Securities Act by the Holders demanding such Demand Registration, the Company
will keep the Registration Statement filed in respect thereof effective for a
period of six (6) months from the date on which the SEC declares such
Registration Statement effective (subject to extension pursuant to Section 5) or
such shorter period that will terminate when all Registrable Securities covered
by such Registration Statement have been sold pursuant to such Registration
Statement.
Within ten (10) business days after receipt of such Demand Notice, the
Company will serve written notice thereof (the "Notice") to all other Holders
and will, subject to the provisions of Section 2(c), include in such
registration all Registrable Securities with respect to which the Company
receives written requests for inclusion therein within ten (10) business days
after receipt of the Notice by the applicable Holder. Subject to the proviso at
the end of Section 2(a), the Holder will be permitted to withdraw in good faith
all or part of the Registrable Securities from a Demand Registration at any time
prior to the effective date of such Demand Registration, in which event the
Company will promptly amend or, if applicable, withdraw the related Registration
Statement.
4
<PAGE> 8
Registration Rights Agreement
(c) Priority on Demand Registration. If Registrable Securities are to
be registered pursuant to a Demand Registration, the Company shall provide
written notice to the other Holders and will permit all such Holders who request
to be included in the Demand Registration to include any or all Registrable
Securities held by such Holders in such Demand Registration. Notwithstanding the
foregoing, if the managing underwriter or underwriters of an Underwritten
Offering to which such Demand Registration relates advises the Holders that the
total amount of Registrable Securities that such Holders intend to include in
such Demand Registration is in the aggregate such as to materially and adversely
affect the success of such offering, then the number of Registrable Securities
to be included in such Demand Registration will, if necessary, be reduced and
there will be included in such underwritten offering the number of Registrable
Securities that, in the opinion of such managing underwriter or underwriters,
can be sold without materially and adversely affecting the success of such
Underwritten Offering. The Registrable Securities of the Holder or Holders
initiating the Demand Registration shall receive priority in such Underwritten
Offering to the full extent of the Registrable Securities such Holder or Holders
desire to sell (unless these securities would materially and adversely affect
the success of such offering, in which case the number of such Holder's
Registrable Securities included in the offering shall be reduced to the extent
necessary) and the remaining allocation available for sale, if any, shall be
allocated pro rata among the other Holders on the basis of the amount of
Registrable Securities requested to be included therein by each such Holder.
(d) Postponement of Demand Registration. The Company will be entitled
to postpone the filing period of any Demand Registration for a reasonable period
of time not in excess of 90 calendar days if the Company determines, in the good
faith exercise of the business judgment of its Board of Directors, that such
registration and offering could materially interfere with a bona fide business
or financing transaction of the Company or would require disclosure of
information, the premature disclosure of which could materially and adversely
affect the Company. If the Company postpones the filing of a Registration
Statement, it will promptly notify the Holders in writing (i) when the events or
circumstances permitting such postponement have ended and (ii) that the decision
to postpone was made by the Board of Directors of the Company in accordance with
this Section 2(d).
Section 3. Piggyback Registration.
(a) Right to Piggyback. If at any time the Company proposes to file a
Registration Statement, whether or not for sale for the Company's own account,
on a form and in a manner that would also permit registration of Registrable
Securities, the Company shall give to Holders holding Registrable Securities,
written notice of such proposed filing at least thirty (30) days before the
anticipated filing. The notice referred to in the
5
<PAGE> 9
Registration Rights Agreement
preceding sentence shall offer Holders the opportunity to register such amount
of Registrable Securities as each Holder may request (a "Piggyback
Registration"). Subject to Section 3(b), the Company will include in each such
Piggyback Registration all Registrable Securities with respect to which the
Company has received written requests for inclusion therein. Subject to clause
(2) of the proviso at the end of Section 2(a), the Holders will be permitted to
withdraw all or part of the Registrable Securities from a Piggyback Registration
at any time prior to the effective date of such Piggyback Registration.
Notwithstanding the foregoing, the Company will not be obligated to
effect any registration of Registrable Securities under this Section 3 as a
result of the registration of any of its securities solely in connection with
mergers, acquisitions, exchange offers, dividend reinvestment and share purchase
plans offered solely to current holders of the Common Stock, rights offerings or
option or other employee benefit plans.
(b) Priority on Piggyback Registrations. The Company will cause the
managing underwriter or underwriters of a proposed Underwritten Offering to
permit Holders holding Registrable Securities requested to be included in the
registration for such offering to include therein all such Registrable
Securities requested to be so included on the same terms and conditions as any
securities of the Company included therein (other than the indemnification by
the Holders, which will be limited as set forth in Section 7 hereof).
Notwithstanding the foregoing, if the managing underwriter or underwriters of
such Underwritten Offering advises the Holders to the effect that the total
amount of securities that such Holders and the Company propose to include in
such Underwritten Offering is such as to materially and adversely affect the
success of such offering, then the Company will include in such registration (i)
first, 100% of the Common Stock of the Person who requests such registration, if
any, (ii) second, 100% of the Common Stock the Company proposes to sell, and
(iii) third, to the extent of the number of Registrable Securities requested to
be included in such registration which, with the advice of such managing
underwriter, can be sold without having the adverse effect referred to above,
the number of Registrable Securities which the Holders have requested to be
included in such registration, such amount to be allocated pro rata among all
requesting Holders on the basis of the relative number of Registrable Securities
then held by each such Holder.
Section 4. Restrictions on Sale by Holders. Each Holder agrees, if such
Holder is so requested (pursuant to a timely written notice) by the managing
underwriter or underwriters in an Underwritten Offering, not to effect any
public sale or distribution of any of the Company's securities of such class or
securities convertible or exchangeable into such class (except as part of such
underwritten offering), including a sale pursuant to Rule 144 under the
Securities Act, during the 15-calendar day
6
<PAGE> 10
Registration Rights Agreement
period prior to, and during the 90-calendar day period beginning on, the closing
date of such Underwritten Offering.
Section 5. Registration Procedures. In connection with the Company's
registration obligations pursuant to Sections 2 and 3, the Company will effect
such registrations to permit the sale of such Registrable Securities in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto the Company will as expeditiously as possible, and in each case
to the extent applicable (it being understood that the obligations of the
Company in clauses (a), (b), (d), (h), (j), (k), (l), (n) and (q) of this
Section 5 will be subject to the first sentence of Section 3(b) and, except as
provided in Section 3(b), the Holders will not have any right to effect an
underwritten public offering under Section 3):
(a) Prepare and file with the SEC a Registration Statement or
Registration Statements on any appropriate form under the Securities Act
available for the sale of the Registrable Securities by the holders thereof
in accordance with the intended method or methods of distribution thereof,
and cause each such Registration Statement to become effective and remain
effective as provided herein; provided, however, that before filing a
Registration Statement or Prospectus or any amendments or supplements
thereto (including documents that would be incorporated or deemed to be
incorporated therein by reference) the Company will furnish to the Holders
holding Registrable Securities covered by such Registration Statement, not
more than one counsel chosen by Holders holding a majority of the
Registrable Securities being registered ("Special Counsel") and the
managing underwriters, if any, copies of all such documents proposed to be
filed, which documents will be subject to the review of such Holders, such
Special Counsel and such underwriters, and the Company will not file any
such Registration Statement or amendment thereto or any Prospectus or any
supplement thereto (excluding such documents that, upon filing, will be
incorporated or deemed to be incorporated by reference therein) to which
the Holders holding a majority of the Registrable Securities covered by
such Registration Statement or the managing underwriter, if any, shall
reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the applicable periods
specified in Section 2; cause the related Prospectus to be supplemented by
any required Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement during the applicable period in
7
<PAGE> 11
Registration Rights Agreement
accordance with the intended methods of disposition by the sellers thereof
set forth in such Registration Statement as so amended or in such
Prospectus as so supplemented.
(c) Notify the selling Holders and the managing underwriters, if any,
promptly, and (if requested by any such person) confirm such notice in
writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has
become effective, (ii) of any request by the SEC or any other federal or
state governmental authority for amendments or supplements to a
Registration Statement or related Prospectus or for additional information,
(iii) of the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that purpose, (iv) if at
any time the representations and warranties of the Company contained in any
agreement contemplated by Section 5(n) (including any underwriting
agreement) cease to be true and correct in any material respect, (v) of the
receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (vi) of the occurrence of
any event that makes any statement made in such Registration Statement or
related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in a Registration Statement, Prospectus
or any such document so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading and, in the case of the Prospectus, it
will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and (vii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
(d) Use every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement, or the lifting of
any suspension of the qualification (or exemption from qualification) of
any of the Registrable Securities for sale in any jurisdiction, at the
earliest possible moment.
(e) If requested by the managing underwriters, if any, or Holders
holding a majority of the Registrable Securities being registered, (i)
promptly incorporate in a
8
<PAGE> 12
Registration Rights Agreement
Prospectus supplement or post-effective amendment such information as the
managing underwriters, if any, and such Holders agree should be included
therein as may be required by applicable law and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as
soon as practicable after the Company has received notification of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment; provided, however, that the Company will not be required to take
any actions under this Section 5(e) that are not, in the opinion of counsel
for the Company, in compliance with applicable law.
(f) Furnish to each selling Holder and each managing underwriter, if
any, without charge, at least one conformed copy of the Registration
Statement and any post-effective amendment thereto, including financial
statements (but excluding schedules, all documents incorporated or deemed
incorporated therein by reference and all exhibits, unless requested in
writing by such holder or underwriter).
(g) Deliver to each selling Holder and the underwriters, if any,
without charge as many copies of the Prospectus or Prospectuses relating to
such Registrable Securities (including each preliminary prospectus) and any
amendment or supplement thereto as such persons may reasonably request;
and, subject to the last paragraph of this Section 5, the Company hereby
consents to the use of such Prospectus or each amendment or supplement
thereto by each of the selling Holders and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered
by such Prospectus or any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, to
register or qualify or cooperate with the selling Holders, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions within the United States
as any seller or underwriter reasonably requests in writing; use all
reasonable efforts to keep such registration or qualification (or exemption
therefrom) effective during the period the applicable Registration
Statement is required to be kept effective and do any and all other acts or
things necessary or advisable to enable the disposition in each such
jurisdiction of the Registrable Securities covered by the applicable
Registration Statement; provided, however, that the Company will not be
required to (i) qualify to do business in any jurisdiction where it is not
then so qualified or (ii) take any action that would subject it to
9
<PAGE> 13
Registration Rights Agreement
taxation or service of process in any such jurisdiction where it is not
then so subject.
(i) Cooperate with the selling Holders and the managing underwriters,
if any, to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and enable such Registrable
Securities to be in such denominations and registered in such names as the
managing underwriters, if any, shall request at least two business days
prior to any sale of Registrable Securities to the underwriters.
(j) Use all reasonable efforts to cause the Registrable Securities
covered by the applicable Registration Statement to be registered with or
approved by such other governmental agencies or authorities within the
United States except as may be required solely as a consequence of the
nature of any selling Holder's business, in which case the Company will
cooperate in all reasonable respects with the filing of such Registration
Statement and the granting of such approvals as may be necessary to enable
the seller or sellers thereof or the underwriters, if any, to consummate
the disposition of such Registrable Securities.
(k) Upon the occurrence of any event contemplated by Section 5(c)(vi)
or 5(c)(vii), prepare a supplement or post-effective amendment to each
Registration Statement or a supplement to the related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the
Registrable Securities being sold thereunder, such Prospectus will not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(l) If requested by Holders holding a majority of the Registrable
Securities covered by such Registration Statement or the managing
underwriters, if any, use its best efforts to cause all Registrable
Securities covered by such Registration Statement to be (i) listed on each
securities exchange, if any, on which securities issued by the Company of
the same class are then listed or, if no such securities issued by the
Company are then so listed, on the New York Stock Exchange or another
national securities exchange if the securities qualify to be so listed or
(ii) authorized to be quoted on the National Association of Securities
Dealers Automated Quotation System ("Nasdaq") or the National Market System
of Nasdaq, if the securities qualify to be so quoted.
(m) As needed, (i) engage an appropriate transfer agent and provide
the transfer agent with printed
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<PAGE> 14
Registration Rights Agreement
certificates for the Registrable Securities in a form eligible for deposit
with The Depository Trust Company and (ii) provide a CUSIP number for the
Registrable Securities.
(n) Enter into such customary agreements (including, in the event of
an Underwritten Offering, an underwriting agreement in form, scope and
substance as is customary in underwritten offerings) and take all such
other commercially reasonable and customary actions in connection therewith
(including those reasonably requested by the Holders holding a majority of
the Registrable Securities being sold or, in the event of an Underwritten
Offering, those reasonably requested by the managing underwriters) in order
to facilitate the disposition of such Registrable Securities and in such
connection, but only where an underwriting agreement is entered into in
connection with an underwritten registration, (i) make such representations
and warranties to the underwriters with respect to the businesses of the
Company and its subsidiaries, the Registration Statement, Prospectus and
documents incorporated by reference or deemed incorporated by reference
therein, if any, in each case, in form, substance and scope as are
customarily made by issuers to underwriters in underwritten offerings and
confirm the same if and when requested; (ii) obtain opinions of counsel to
the Company and updates thereof, which counsel and opinions (in form, scope
and substance) shall be reasonably satisfactory to the managing
underwriters, if any, addressed to each of the underwriters covering the
matters customarily covered in opinions requested in underwritten offerings
and such other matters as may be reasonably requested by such underwriters;
(iii) use reasonable efforts to obtain "comfort" letters and updates
thereof from the independent certified public accountants of the Company
(and, if necessary, any other certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data is, or is required to be,
included in the Registration Statement), addressed to each of the
underwriters, such letters to be in customary form and covering matters of
the type customarily covered in "comfort" letters in connection with
underwritten offerings; and (iv) deliver such documents and certificates as
may be reasonably requested by the managing underwriters, if any, to
evidence the continued validity of the representations and warranties of
the Company and its subsidiaries made pursuant to clause (i) above and to
evidence compliance with any customary conditions contained in the
underwriting agreement entered into by the Company. The foregoing actions
will be taken in connection with each closing under such underwriting
agreement as and to the extent required thereunder.
(o) Make available for reasonable inspection during normal business
hours by a representative of the
11
<PAGE> 15
Registration Rights Agreement
Holders holding Registrable Securities being sold, any underwriter
participating in any disposition of Registrable Securities, and any
attorney or accountant retained by such selling Holders or underwriter, all
financial and other records, pertinent corporate documents and properties
of the Company and its subsidiaries, and cause the officers, directors and
employees of the Company and its subsidiaries to supply all information
reasonably requested by any such representative, underwriter, attorney or
accountant in connection with such Registration Statement; provided,
however, that any records, information or documents that are designated by
the Company in writing as confidential at the time of delivery of such
records, information or documents will be kept confidential by such persons
unless (i) such records, information or documents are in the public domain
or otherwise publicly available, (ii) disclosure of such records,
information or documents is required by court or administrative order or is
necessary to respond to inquiries of regulatory authorities, or (iii)
disclosure of such records, information or documents, in the reasonable
opinion of counsel to such person, is otherwise required by law (including,
without limitation, pursuant to the requirements of the Securities Act).
(p) Comply with all applicable rules and regulations of the SEC and
make generally available to its security holders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 45 calendar days after the end of any 12-month period (or 90
calendar days after the end of any 12-month period if such period is a
fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm commitment or
best efforts underwritten offering, or (ii) if not sold to underwriters in
such an offering, commencing on the first day of the first fiscal quarter
of the Company, after the effective date of a Registration Statement, which
statements shall cover such 12-month period.
(q) In connection with any Underwritten Offering, cause appropriate
members of management to cooperate and participate on a reasonable basis in
the underwriters' "road show" conferences related to such offering.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding the distribution of such Registrable Securities as the
Company may, from time to time, reasonably request in writing, and the Company
may exclude from such registration the Registrable Securities of any seller who
unreasonably fails to furnish such information within a reasonable time after
receiving such request.
12
<PAGE> 16
Registration Rights Agreement
Each Holder will be deemed to have agreed by virtue of its acquisition
of Registrable Securities that, upon receipt of any notice from the Company of
the occurrence of any event of the kind described in Section 5(c)(ii),
5(c)(iii), 5(c)(v), 5(c)(vi) or 5(c)(vii) ("Suspension Notice"), such Holder
will forthwith discontinue disposition of such Registrable Securities covered by
such Registration Statement or Prospectus (a "Black-Out") until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 5(k), or until it is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and such Holder has
received copies of any additional or supplemental filings that are incorporated
or deemed to be incorporated by reference in such Prospectus. Except as
expressly provided herein, there shall be no limitation with regard to the
number of Suspension Notices that the Company is entitled to give hereunder;
provided, however, that in no event shall the aggregate number of days the
Holders are subject to Black-Out during any period of 12 consecutive months
exceed 180 days.
Section 6. Registration Expenses. Subject to clause (2) of the proviso at
the end of section 2(a), all fees and expenses incident to the performance of or
compliance with this Agreement by the Company will be borne by the Company
whether or not any of the Registration Statements become effective. Such fees
and expenses will include, without limitation, (i) all registration and filing
fees (including, without limitation, fees and expenses for compliance with
securities or "blue sky" laws), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable Securities in a
form eligible for deposit with The Depository Trust Company and of printing a
reasonable number of prospectuses if the printing of such prospectuses is
requested by the Holders holding a majority of the Registrable Securities
included in any Registration Statement), (iii) messenger, telephone and delivery
expenses incurred by the Company, (iv) fees and disbursements of counsel for the
Company incurred by the Company, (v) fees and disbursements of all independent
certified public accountants referred to in Section 5(n)(iii) (including the
expenses of any special audit and "comfort" letter required by or incident to
such performance) incurred by the Company, (vi) Securities Act liability
insurance, if any, and (vii) fees and expenses of Special Counsel retained by
the Holders in connection with the registration and sale of their Registrable
Securities (which counsel will be selected by the Holders of a majority of the
Registrable Securities being sold), provided that any such fees and expenses of
Special Counsel in excess of $20,000 for any offering will not be reimbursed by
the Company. In addition, the Company will pay internal expenses (including
without limitation all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the securities to
be registered on any securities exchange on which securities of the same class
issued by the
13
<PAGE> 17
Registration Rights Agreement
Company are then listed and the fees and expenses of any person, including
special experts, retained by the Company. In no event, however, will the Company
be responsible for any underwriting discount or selling commission with respect
to any sale of Registrable Securities pursuant to this Agreement, and the
Holders shall be responsible on a pro rata basis for any taxes of any kind
(including, without limitation, transfer taxes) with respect to any disposition,
sale or transfer of Registrable Securities and for any legal, accounting and
other expenses incurred by them in connection with any Registration Statement.
Section 7. Indemnification.
(a) Indemnification by the Company. The Company will, without
limitation as to time, indemnify and hold harmless, to the fullest extent
permitted by law, each Holder holding Registrable Securities registered pursuant
to this Agreement, the officers, directors and agents and employees of each of
them, each person who controls such a Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of any such controlling person, from and against
all losses, claims, damages, liabilities, costs (including without limitation
the costs of investigation and attorneys' fees) and expenses (collectively,
"Losses"), as incurred, arising out of or based upon any untrue or alleged
untrue statement of a material fact contained in any Registration Statement,
Prospectus or form of Prospectus or in any amendment or supplement thereto or in
any preliminary prospectus, or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar and
to the extent as the same are based upon information furnished in writing to the
Company by such Holder for use therein; provided, however, that the Company will
not be liable to any Holder to the extent that any such Losses arise out of or
are based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Registration Statement, Prospectus or preliminary
prospectus if either (A) (i) such Holder failed to send or deliver a copy of the
Prospectus with or prior to the delivery of written confirmation of the sale by
such Holder of a Registrable Security to the person asserting the claim from
which such Losses arise and (ii) the Prospectus would have corrected such untrue
statement or alleged untrue statement or such omission or alleged omission; or
(B) such untrue statement or alleged untrue statement, omission or alleged
omission is corrected in an amendment or supplement to the Prospectus previously
furnished by or on behalf of the Company with copies of the Prospectus, and such
Holder thereafter fails to deliver such Prospectus as so amended or supplemented
prior to or concurrently with the sale of a Registrable Security to the person
asserting the claim from which such Losses arise.
14
<PAGE> 18
Registration Rights Agreement
(b) Indemnification by Holders. In connection with any Registration
Statement in which a Holder is participating, such Holder will furnish to the
Company in writing such information as the Company reasonably requests for use
in connection with any Registration Statement, Prospectus or preliminary
prospectus and will indemnify, to the fullest extent permitted by law, the
Company, its directors and officers, agents and employees, each person who
controls the Company (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, agents or
employees of such controlling persons, from and against all Losses arising out
of or based upon any untrue statement of a material fact contained in any
Registration Statement, Prospectus or preliminary prospectus or arising out of
or based upon any omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, to the extent, but only
to the extent, that such untrue statement or omission is contained in any
information so furnished in writing by such Holder to the Company for use in
such Registration Statement, Prospectus or preliminary prospectus and was relied
upon by the Company in the preparation of such Registration Statement,
Prospectus or preliminary prospectus. In no event will the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the
proceeds (net of payment of all expenses) received by such Holder upon the sale
of the Registrable Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any person shall become
entitled to indemnity hereunder (an "indemnified party"), such indemnified party
shall give prompt notice to the party from which such indemnity is sought (the
"indemnifying party") of any claim or of the commencement of any action or
proceeding with respect to which such indemnified party seeks indemnification or
contribution pursuant hereto; provided, however, that the failure to so notify
the indemnifying party will not relieve the indemnifying party from any
obligation or liability except to the extent that the indemnifying party has
been prejudiced materially by such failure. All reasonable fees and expenses
(including any reasonable fees and expenses incurred in connection with
investigating or preparing to defend such action or proceeding) will be paid to
the indemnified party (provided appropriate documentation for such expenses is
also submitted with such notice), as incurred, within five calendar days of
written notice thereof to the indemnifying party (regardless of whether it is
ultimately determined that an indemnified party is not entitled to
indemnification hereunder). The indemnifying party will not consent to entry of
any judgment or enter into any settlement or otherwise seek to terminate any
action or proceeding in which any indemnified party is or could be a party and
as to which indemnification or contribution could be sought by such indemnified
party under this Section 7, unless such judgment, settlement or other
termination includes as an unconditional term thereof the giving by the claimant
or
15
<PAGE> 19
Registration Rights Agreement
plaintiff to such indemnified party of a release, in form and substance
reasonably satisfactory to the indemnified party, from all liability in respect
of such claim or litigation for which such indemnified party would be entitled
to indemnification hereunder.
(d) Contribution. If the indemnification provided for in this Section 7
is unavailable to an indemnified party under Section 7(a) or 7(b) in respect of
any Losses or is insufficient to hold such indemnified party harmless, then each
applicable indemnifying party, in lieu of indemnifying such indemnified party,
will, severally but not jointly, contribute to the amount paid or payable by
such indemnified party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party or
indemnifying parties, on the one hand, and such indemnified party, on the other
hand, in connection with the actions, statements or omissions that resulted in
such Losses as well as any other relevant equitable considerations. The relative
fault of such indemnifying party or indemnifying parties, on the one hand, and
such indemnified party, on the other hand, will be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or related to information supplied by,
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses will be deemed to include any legal or other fees or expenses
incurred by such party in connection with any action or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 7(d), an indemnifying party that
is a selling Holder will not be required to contribute any amount in excess of
the amount by which the total price at which the Registrable Securities sold by
such indemnifying party and distributed to the public were offered to the public
exceeds the amount of any damages that such indemnifying party has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
The indemnity, contribution and expense reimbursement obligations of
the Company hereunder will be in addition to any liability the Company may
otherwise have hereunder or otherwise. The provisions of this Section 7 will
survive so long as
16
<PAGE> 20
Registration Rights Agreement
Registrable Securities remain outstanding, notwithstanding any permitted
transfer of the Registrable Securities by any Holder thereof or any termination
of this Agreement.
Section 8. Underwritten Registrations. If any of the Registrable
Securities included in any Demand Registration are to be sold in an Underwritten
Offering, the Holders holding a majority of the Registrable Securities included
in the Demand Notice may select an investment banker or investment bankers and
manager or managers to manage the Underwritten Offering, provided that such
investment banker or bankers is (are) reasonably acceptable to the Company. If
any Piggyback Registration is an Underwritten Offering, the Company will have
the exclusive right to select the investment banker or investment bankers and
managers to administer the offering. The Company agrees that, in connection with
any Underwritten Offering hereunder, it shall undertake to offer customary
indemnification to the participating underwriters.
Section 9. Miscellaneous.
(a) Remedies. In the event of a breach by a party of its obligations
under this Agreement, each other party, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. Each party
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of any provision of this Agreement and
hereby further agrees that, in the event of any action for specific performance
in respect of such breach, it will waive the defense that a remedy at law would
be adequate.
(b) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented without the prior written consent of the
Company, and Holders holding in excess of 50% of the Registrable Securities in
respect of which Registrable Securities are issuable.
(c) Notices. Except as set forth below, all notices and other
communications provided for or permitted hereunder shall be in writing and shall
be deemed to have been duly given if delivered personally or sent by telex or
telecopier, registered or certified mail (return receipt requested), postage
prepaid or courier or overnight delivery service to the Company at the following
address and to a Holder at the address set forth on his or her signature page to
this Agreement (or at such other address for any party as shall be specified by
like notice, provided that notices of a change of address shall be effective
only upon receipt thereof):
17
<PAGE> 21
Registration Rights Agreement
If to the Company: ValueVision International, Inc.
6740 Shady Oak Road
Eden Prairie, MN 55344-3433
Attention: General Counsel
Telecopy: (612) 947-0188
With a copy to:
Latham & Watkins
633 West Fifth Street
Suite 4000
Los Angeles, CA 90071
Attention: Michael W. Sturrock
Telecopy: (213) 891-8763
If to the GE Capital Equity Investments, Inc.
Purchaser or NBC: 120 Long Ridge Road
Stamford, CT 06927
Attention: John Sprole
Telecopy: (203) 357-3047
With copies to:
National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, New York 10112
Attn: Stuart U. Goldfarb, Executive Vice
President and Managing Director, Worldwide
Business Development
Telecopy: (212) 664-7896
and
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: Richard Capelouto
Telecopy: (212) 455-2502
(d) Merger or Consolidation of the Company. If the Company is a party
to any merger or consolidation pursuant to which the Preferred Stock or
Registrable Securities are converted into or exchanged for securities or the
right to receive securities of any other person ("Conversion Securities"), the
issuer of such Conversion Securities shall assume (in a writing delivered to all
Holders) all obligations of the Company hereunder. The Company will not effect
any merger or consolidation described in the immediately preceding sentence
18
<PAGE> 22
Registration Rights Agreement
unless the issuer of the Conversion Securities complies with this Section 9(d).
(e) Successors and Assigns. Subject to the terms and conditions of the
Shareholder Agreement, (i) any transferee of all or a portion of the Preferred
Stock or Registrable Securities and (ii) any Restricted Party that holds
Registrable Securities shall become a Holder hereunder to the extent it agrees
in writing to be bound by all of the provisions applicable hereunder to the
transferring Holder (such acknowledgment being evidenced by execution of a
Counterpart and Acknowledgment substantially in the form of Exhibit A). Subject
to the requirements of this Section 9(e), this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the parties hereto.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed will be deemed to be an original and all of which taken
together will constitute one and the same instrument.
(g) Headings. The headings in this Agreement are for convenience of
reference only and will not limit or otherwise affect the meaning.
(h) Governing Law. This agreement will be governed by and construed in
accordance with the laws of the State of New York, as applied to contracts made
and performed within the State of New York, without regard to principles of
conflict of laws.
(i) 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 set forth herein will remain in full force and effect and will in
no way be affected, impaired or invalidated, and the parties hereto will use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
(j) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be the complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein, with respect to such subject matter. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
19
<PAGE> 23
Registration Rights Agreement
[Signature page follows]
20
<PAGE> 24
Registration Rights Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
VALUEVISION INTERNATIONAL, INC.
By: /s/ Gene Mccaffery
-----------------------------------------
Name: Gene McCaffery
Title: Chief Executive Officer
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ James Brown
-----------------------------------------
Name: James Brown
Title: Senior Vice President
NATIONAL BROADCASTING COMPANY, INC.
By: /s/ Stuart Goldfarb
-----------------------------------------
Name: Stuart Goldfarb
Title: Executive Vice President,
Worldwide Business Development
<PAGE> 25
Registration Rights Agreement
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
COUNTERPART AND ACKNOWLEDGMENT
TO: The Company
RE: The Registration Rights Agreement (the
"Agreement") dated as of _______, 1999, by
and among the Company and the Holders (as
defined in the Agreement)
The undersigned hereby agrees to be bound by the terms of the Agreement
as a party to the Agreement, and shall be entitled to all benefits of the
Holders (as defined in the Agreement) and shall be subject to all obligations
and restrictions of the Holders pursuant to the Agreement, as fully and
effectively as though the undersigned had executed a counterpart of the
Agreement together with the other parties to the Agreement. The undersigned
hereby acknowledges having received and reviewed a copy of the Agreement.
DATED this day of ,
----- ------------ ------
By:
Title:
Number of
Shares of
Registrable Securities:
<PAGE> 1
CUSIP _______________
Exhibit 10
POWER OF ATTORNEY
The undersigned, General Electric Company, a New York corporation
(hereinafter referred to as the "Corporation") does hereby make, constitute and
appoint the persons listed below as the Corporation's true and lawful agent and
attorney-in-fact (hereinafter referred to as the "Attorney") to act either
together or alone in the name and on behalf of the Corporation for and with
respect to the matters hereinafter described.
Name of Attorney: Joan C. Amble
Nancy E. Barton
Jeffrey S. Werner
Michael A. Gaudino
J. Gordon Smith
Michael E. Praille
Paul J. Licursi
Each Attorney shall have the power and authority to do the following:
To execute and deliver any Schedule 13D, Schedule 13G or Forms 3, 4 and
5 or any amendments thereto required to be filed with the Securities
and Exchange Commission under the Securities Exchange Act of 1934 on
behalf of the Corporation with regard to any securities owned by
General Electric Capital Services, Inc., General Electric Capital
Corporation or any of their subsidiaries.
And, in connection with the foregoing, to execute and deliver all
documents, acknowledgements, consents and other agreements and to take such
further action as may be necessary or convenient for the Corporation in order to
more effectively carry out the intent and purpose of the foregoing.
Agreements, commitments, documents, instruments, and other writings
executed by the Attorney in accordance with the terms hereof shall be binding
upon the Corporation without attestation and without affixation of the seal of
the Corporation. The Power of Attorney conferred hereby shall not be delegable
by any Attorney. The Attorney shall serve without compensation for acting in the
capacity of agent and attorney-in-fact hereunder.
Unless sooner revoked by the Corporation, this Power of Attorney shall
be governed under the laws of the State of New York and the authority of the
Attorney hereunder shall terminate on March 31, 2000.
<PAGE> 2
IN WITNESS WHEREOF, the Corporation has caused this Power of Attorney
to be executed, attested and its corporate seal to be affixed pursuant to
authority granted by the Corporation's board of directors, as of the 30th day of
April, 1998.
General Electric Company
By: /s/ Philip D. Ameen
-------------------------------
Philip D. Ameen,
Vice President
Attest:
/s/ Robert E. Healing
- ------------------------------------
Robert E. Healing,
Attesting Secretary
<PAGE> 1
EXHIBIT 11
POWER OF ATTORNEY
The undersigned, General Electric Capital Services, Inc., a Delaware
corporation (hereinafter referred to as the "Corporation") does hereby make,
constitute and appoint the persons listed below as the Corporation's true and
lawful agent and attorney-in-fact (hereinafter referred to as the "Attorney") to
act either together or alone in the name and on behalf of the Corporation for
and with respect to the matters hereinafter described.
Name of Attorney: J. Gordon Smith
Michael E. Praille
Paul J. Licursi
Michael A. Gaudino
Each Attorney shall have the power and authority to do the following:
To execute and deliver any Schedule 13D, Schedule 13G or Forms 3, 4 and 5 or any
amendments thereto required to be filed with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 on behalf of the
Corporation with regard to any securities owned by the Corporation, General
Electric Capital Corporation or any of their subsidiaries.
And, in connection with the foregoing, to execute and deliver all
documents, acknowledgements, consents and other agreements and to take such
further action as may be necessary or convenient for the Corporation in order to
more effectively carry out the intent and purpose of the foregoing.
Agreements, commitments, documents, instruments, and other writings
executed by the Attorney in accordance with the terms hereof shall be binding
upon the Corporation without attestation and without affixation of the seal of
the Corporation. The Power of Attorney conferred hereby shall not be delegable
by any Attorney. The Attorney shall serve without compensation for acting in the
capacity of agent and attorney-in-fact hereunder.
Unless revoked by the Corporation, this Power of Attorney shall be
governed under the laws of the State of New York and the authority of the
Attorney hereunder shall terminate on March 31, 2000.
<PAGE> 2
CUSIP _______________
IN WITNESS WHEREOF, the Corporation has caused this Power of Attorney
to be executed, attested and its corporate seal to be affixed pursuant to
authority granted by the Corporation's board of directors, as of the 30th day of
April, 1998.
General Electric Capital Services, Inc.
By: /s/ Nancy E. Barton
----------------------------------------
Nancy E. Barton,
Senior Vice President
Attest:
/s/ Brian T. McAnaney
- ------------------------------------
Brian T. McAnaney,
Assistant Secretary
