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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 15, 1999
VALUEVISION INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA
(State or other jurisdiction of incorporation)
0-20243 41-1673770
(Commission File Number) (IRS Employer Identification No.)
6740 SHADY OAK ROAD, MINNEAPOLIS, MN 55344-3433
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 947-5200
NOT APPLICABLE
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
ValueVision International, Inc. closes on the first stage of the NBC/GE Equity
Strategic Alliance
On April 15, 1999, ValueVision International, Inc. (the "Company") closed (the
"Closing") the first stage of its strategic alliance with GE Capital Equity
Investments, Inc. ("GE Capital") and National Broadcasting Company, Inc.
("NBC"). The Company issued to GE Capital 3,739,500 shares of its Series A
Redeemable Convertible Preferred Stock (the "Preferred Stock") and a warrant
(the "Investment Warrant") to purchase up to that number of shares of the
Company's common stock, $.01 par value (the "Common Stock") that results in GE
Capital (and its affiliates) beneficially owning 39.9% of the Company's
outstanding Common Stock. The Investment Warrant cannot be exercised unless the
issuance of the shares of Common Stock thereunder is approved by shareholders of
the Company at a shareholder meeting scheduled for June 1999 (the "Shareholder
Meeting"). GE Capital paid the Company approximately $31 million for the shares
of Preferred Stock and the Investment Warrant. At the Closing, the Company also
issued to NBC a warrant (the "Distributor Warrant") to acquire 1,450,000 shares
of the Common Stock, with an exercise price of $8.288 per share and which vests
200,000 shares upon issuance, and 125,000 shares per year for ten years on each
anniversary date of the issuance. The Company and NBC are now proceeding with
the distribution and marketing agreement, pursuant to which NBC will be
responsible for all of the Company's cable and affiliate relations. At the
Shareholder Meeting, the Company's shareholders will be asked to approve, among
other things, the sale to GE Capital of an additional 1,600,000 shares of the
Preferred Stock for approximately $13 million. The second closing of this
transaction for the additional 1,600,000 shares of the Preferred Stock is
anticipated to take place shortly after the Shareholder Meeting.
(Note: The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Form 8-K contains statements that are forward-looking, such as statements
relating to the Company's success in implementing its alliance with NBC and GE
Capital and shareholder approval of certain aspects of the NBC and GE alliance.
Investors are cautioned that all forward-looking statements involve risks and
uncertainty, including the possibility that shareholders will not approve
certain aspects of the NBC and GE alliance or that implementation of the NBC and
GE alliance will not be successful. For more information on the potential
factors that could affect the Company's financial results, investors should
refer to the Company's recent filings with the Securities and Exchange
Commission, including the Company's annual report on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K.)
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
3 Certificate of Designation of Series A Redeemable Convertible
Preferred Stock.
10.1 Shareholder Agreement dated April 15, 1999 between ValueVision, GE
Capital and NBC.
10.2 ValueVision Common Stock Purchase Warrant dated April 15, 1999 issued
to GE Capital.
10.3 Registration Rights Agreement dated April 15, 1999 between ValueVision,
GE Capital and NBC.
10.4 First Amendment and Agreement dated as of April 15, 1999 to the
Investment Agreement, dated as of March 8, 1999, by and between
ValueVision and GE Capital.
10.5 ValueVision Common Stock Purchase Warrant dated as of April 15, 1999
issued to NBC.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on this 29th day of April, 1999.
VALUEVISION INTERNATIONAL, INC.
By: /s/ David T. Quinby
---------------------------------
David T. Quinby
Vice President, General
Counsel and Secretary
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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. (a) 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").
(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. (a) 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
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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.
(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.
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
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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).
(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. (i) 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
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
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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 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.
(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
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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 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
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Stock or other rights, warrants, options or convertible securities pursuant
to (a) any restricted stock or stock option plan or program of the
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 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
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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 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 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
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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 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 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
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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 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 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
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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 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. (a) 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 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
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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 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
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purpose of causing a meeting of holders of Convertible Preferred Stock to
be called pursuant to the provisions of this Section VII(b)(iii).
(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.
(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;
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(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, 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 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. (a) 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.
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(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 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.
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, Secretary
- -------------------------
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SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT, dated as of April 15, 1999, among ValueVision
International, Inc., a Minnesota corporation (together with its successors, the
"Company"), and 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").
WITNESSETH:
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 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:
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).
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"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 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.
"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.
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"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 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;
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.
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<PAGE> 4
"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.
"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
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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.
"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, 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.
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"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 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.
"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.
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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 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.
(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.
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(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).
(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.
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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 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 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;
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(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 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 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
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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 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
(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
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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.
(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 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
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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 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.
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(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 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 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.
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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 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 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
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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 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
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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
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
17
<PAGE> 18
unenforceable in any respect, such 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 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 pretrial 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.
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<PAGE> 19
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 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.
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 and
President
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
19
<PAGE> 1
INVESTMENT WARRANT
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 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.
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<PAGE> 2
NO. W-1 COMMON STOCK PURCHASE WARRANT 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 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 been issued) upon exercise of this
Warrant
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<PAGE> 3
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 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
3
<PAGE> 4
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 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,
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.
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<PAGE> 5
"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.
"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.
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.
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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, 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,
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
6
<PAGE> 7
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 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:
(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
7
<PAGE> 8
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
(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.
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
8
<PAGE> 9
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.
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.
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.
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<PAGE> 10
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 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.
Section 21. Benefits of this Agreement.
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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.
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 and
President
11
<PAGE> 12
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.
12
<PAGE> 13
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.
13
<PAGE> 1
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
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
1
<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.
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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
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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
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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
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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
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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
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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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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
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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.
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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
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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.
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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
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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
21
<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:
22
<PAGE> 1
FIRST AMENDMENT AND AGREEMENT
FIRST AMENDMENT AND AGREEMENT, dated as of April 15, 1999 (this
"Amendment"), to the Investment Agreement, dated as of March 8, 1999 (the
"Investment Agreement"), by and between VALUEVISION INTERNATIONAL, INC. (the
"Company") and GE CAPITAL EQUITY INVESTMENTS, INC. (the "Purchaser").
WITNESSETH:
WHEREAS, pursuant to the terms of the Investment Agreement and the
Ancillary Documents (as defined in the Investment Agreement), the Company is
issuing to the Purchaser and its affiliates certain securities (the
"Securities");
WHEREAS, the parties have subsequently determined that shareholder approval
of the issuance a portion of the Securities is required by the rules and
regulations of the Nasdaq Stock Market (the "Nasdaq Rules"); and
WHEREAS, the Company and the Purchaser have agreed to amend the terms of
the Investment Agreement to comply with the Nasdaq Rules.
NOW, THEREFORE, the parties hereto hereby agree as follows:
I. Defined Terms. Terms defined in the Investment Agreement and used herein
shall have the meanings given to them in the Investment Agreement.
II. Amendments to Investment Agreement. The Investment Agreement shall be
amended as follows:
1. The following definition shall be added in the appropriate
alphabetical place in Section 1.1 of the Investment Agreement:
"Additional Preferred Shares" shall have the meaning set forth in
Section 2.1(a).
"Second Closing" and "Second Closing Date" shall have the meanings
set forth in Section 5.9(a).
"Second Closing Consideration" shall have the meaning set forth in
Section 2.1(b).
2. The following sentence shall be added to the end of Section 2.1(a)
of the Investment Agreement:
At the Closing, the Purchaser shall Purchase 3,739,500 shares of
Preferred Stock. The difference between 5,339,500 shares and the
3,739,500 shares of Preferred Stock purchased at the Closing (i.e.
1,600,000 shares) shall be referred to as the "Additional Preferred
Shares".
3. The following sentence shall be added to the end of Section 2.1(b)
of the Investment Agreement:
Of this amount, the Purchaser shall pay at the Closing an amount equal
to $31,000,836.69, which is (i) $44,265,000.00 minus (ii) the product of
(A) the number of Additional Preferred Shares multiplied by (B) $8.288.
The difference between $44,265,000.00 and the $31,000,836.69 paid by the
Purchaser at the Closing (i.e. $13,264,163.31) shall be referred to as
the "Second Closing Consideration".
4. The word "Securities" in Section 2.2 of the Investment Agreement
shall be replaced with the words "Securities (other than the Additional
Preferred Shares)" each time the word "Securities" appears in Section 2.2.
5. The first sentence of Section 5.1(a) shall be replaced with the
following sentence:
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
2
<PAGE> 2
Warrants, (ii) the issuance and sale by the Company of the Additional
Preferred Shares, (iii) such other transactions contemplated hereby and
pursuant to the Ancillary Documents as may reasonably require approval
of the Company's shareholders (together with clauses (i) and (ii), the
"Shareholder Approval"), (iv) the election of directors and (v) such
other matters as the Company and the Purchaser may reasonably agree.
6. The word "Securities" in the last sentence of Section 5.2 of the
Investment Agreement shall be replaced with the words "Securities (other
than the Additional Preferred Shares)."
7. The following sections shall be added to the end of Article V of
the Investment Agreement:
Section 5.9 Agreement to Sell and Purchase Additional Preferred
Shares. (a) If Shareholder Approval is obtained with respect to the
issuance and sale of the Additional Preferred Shares, the Company agrees
to issue and sell, and the Purchaser agrees to purchase, the Additional
Preferred Shares for an aggregate purchase price equal to the Second
Closing Consideration (the "Second Closing"). Such purchase shall occur
at such time as the Purchaser and the Company shall agree (but in no
event later than the third Business Day following the receipt of such
Shareholder Approval, unless otherwise agreed to by the parties) (the
date of such purchase, the "Second Closing Date").
(b) At the Second Closing: (i) the Company shall deliver to the
Purchaser, against payment of the Second Closing Consideration, stock
certificates for the Additional Preferred Shares to be sold in
accordance with the provisions of Section 5.9(a), 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 Second
Closing Date; and (ii) the Purchaser, in full payment for the Additional
Preferred Shares, against delivery of the stock certificates referred to
above, shall deliver to the Company on the Second Closing Date
immediately available funds, by wire transfer to such account as the
Company shall specify at least three Business Days prior to the Second
Closing Date, in the amount equal to the Second Closing Consideration.
Section 5.10 Conduct of Business Pending the Second Closing. If
Shareholder Approval is obtained with respect to the issuance and sale
of the Additional Preferred Shares, the Company shall not, prior to the
Second Closing Date, take any action specified in Section 4.1(b) hereof.
8. The first sentence of Section 3.1(e)(ii) shall be replaced with the
following sentence:
Upon delivery of and payment for the Shares on the Closing Date or the
Second Closing Date, as applicable, as provided herein, such Shares to
be purchased on the Closing Date or the Second Closing Date, as
applicable, 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).
9. The first sentence of Section 6.1 of the Investment Agreement shall
be replaced with the following sentence:
The obligation of the Purchaser to purchase the Securities (other than
the Additional Preferred Shares) at the Closing, and to purchase the
Additional Preferred Shares at the Second Closing, is subject to the
satisfaction or waiver of each of the following conditions precedent at
or prior to the Closing or Second Closing, as the case may be:
10. The words "Closing Date" in Section 6.1 of the Investment
Agreement shall be replaced with the words "Closing Date or Second Closing
Date, as the case may be," each time the word "Closing Date" appears in
Section 6.1.
3
<PAGE> 3
11. The first sentence of Section 6.2 of the Investment Agreement
shall be replaced with the following sentence:
The obligation of the Company to sell the Securities (other than the
Additional Preferred Shares) at the Closing, and to sell the Additional
Preferred Shares at the Second Closing, is subject to the satisfaction
or waiver of each of the following conditions precedent at or prior to
the Closing or Second Closing, as the case may be:
12. The words "Closing Date" in Section 6.2 of the Investment
Agreement shall be replaced with the words "Closing Date or Second Closing
Date, as the case may be," each time the word "Closing Date" appears in
Section 6.2.
13. Except to the extent amended or modified by this Amendment or as
otherwise specified, for the avoidance of doubt, all references in the
Investment Agreement to "Preferred Stock" or "Shares" or "Securities" shall
include, and all terms and provisions relating thereto shall apply to, the
Additional Preferred Shares.
III. Condition to Effectiveness. This Amendment shall become effective on
the date on which the Company and the Purchaser shall have executed and
delivered this Amendment (the "Amendment Effective Date").
IV. General
1. Representation and Warranties of the Company. The Company
represents and warrants to the Purchaser as of the date hereof and as of
the Second Closing Date as follows:
(a) Authorization; No Conflicts. The Company has full corporate
power and authority to enter into this Amendment and to perform its
obligations hereunder. The execution, delivery and performance by the
Company of this Amendment and the consummation of the Company's
obligations hereunder have been duly authorized by all necessary
corporate action. This Amendment has been 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 Amendment constitutes a valid and legally binding obligation of the
Company enforceable against the Company 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 set
forth in Schedule 3.1(c) to the Investment Agreement, the execution,
delivery and performance of this Amendment by the Company, the
consummation of the transactions by the Company contemplated hereby and
the compliance by the Company with the provisions hereof 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) to
the Investment Agreement 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.
(b) Consents. Except as set forth in Schedule 3.1(d) to the
Investment Agreement, 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
Amendment, the consummation by the Company of the transactions
contemplated hereby or the performance by the Company of its
4
<PAGE> 4
obligations hereunder, 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.
2. Representation and Warranties of the Purchaser. The Purchaser
represents and warrants to the Company as of the date hereof and as of the
Second Closing Date as follows:
(a) Authorization; No Conflicts. The execution and delivery of this
Amendment and the consummation of the transactions contemplated hereby
have been authorized by all necessary corporate action on behalf of the
Purchaser. This Amendment has been duly and validly executed and
delivered on behalf of the Purchaser, and this Amendment is a valid and
binding obligation of the Purchaser, enforceable against it in
accordance with its terms. The execution, delivery and performance of
this Amendment, the consummation by the Purchaser of the transactions
contemplated hereby and the compliance by Purchaser with the provisions
hereof 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) to the Investment Agreement 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.
(b) Consents and Approvals. Except as set forth in Schedule 3.2(c)
to the Investment Agreement, no consent, approval, order or
authorization of, registration, declaration or filing with, or notice
to, any Governmental Entity is required on the part of Purchaser in
connection with the execution and delivery by Purchaser of this
Amendment, the consummation by the Purchaser of the transactions
contemplated hereby or the performance by the Purchaser of its
obligations hereunder, 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. The Purchaser
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
Amendment, 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. section
76.970(b).
3. Payment of Expenses. Each of the Company and the Purchaser agrees
to pay for its own out-of-pocket costs and expenses incurred in connection
with this Amendment, any other documents prepared in connection herewith
and the transactions contemplated hereby, including, without limitation,
the fees and disbursements of counsel.
4. No Other Amendments; Confirmation. Except as expressly amended,
modified and supplemented hereby, the provisions of the Investment
Agreement and the Ancillary Documents are and shall remain in full force
and effect. This Amendment shall be part of the Investment Agreement.
5. Governing Law; Counterparts. (a) This Amendment 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
5
<PAGE> 5
in any action, suit or proceeding brought to enforce or defend any rights
or remedies under this Amendment.
(b) This Amendment 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.
IN WITNESS WHEREOF, this Amendment 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 and
President
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ JAMES BROWN
------------------------------------
Name: James Brown
Title: Senior Vice President
6
<PAGE> 1
EXHIBIT 10.5
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
<PAGE> 2
Initial Distributor Warrants
RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT CLASSES OR SERIES.
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 ANBC"), 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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Initial Distributor Warrants
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
25
<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
